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Taylor Morrison Home Corp : Taylor Morrison Reports First Quarter 2013 Financial Summary

05/14/2013 | 04:05pm US/Eastern

  • Net income of $24.3 million increased 136%
  • U.S. net sales orders increased 68% and U.S. backlog revenue increased 150%
  • Home closing revenue increased 66%
  • Adjusted homebuilding gross margin increased 340 basis points to 23.4%

Taylor Morrison Home Corporation (NYSE: TMHC) announced today financial results for the first quarter ended March 31, 2013. Our results for the first quarter represent the combined results of our subsidiaries Taylor Morrison Communities, Inc. and Monarch Communities Inc. (collectively "the Company"). Net income for the quarter was $24.3 million, compared to net income of $10.3 million for the first quarter of 2012.

"We started the year in a position of strength, with a 136% increase in net income, continuing our track record of solid financial performance and adding to our trend of more than three consecutive years of profitability," said Sheryl Palmer, President and CEO. "We are pleased to demonstrate continued quarter-over-quarter improvements in key operational and financial metrics. The results we're releasing today are the manifestation of years of preparation and demonstrate the value around the Company's land strategy during the downturn. Our opportunistic land strategy continues to be conscious and calculated and the foundation of our success."

Net sales orders increased 52% to 1,681 in the first quarter of 2013 as compared to 1,106 in the first quarter of last year. Net sales orders in the Company's U.S. operations increased 68%, partially offset by a 29% sales order decline in its Canadian operations. As expected, community count increased 31% to 167 from 124 in the first quarter of last year, primarily due to our acquisition of Darling Homes based in Texas. The Company's overall monthly absorption pace increased to 3.4 net sales orders per community in the first quarter of 2013 compared to 3.0 for the first quarter of 2012.

The Company's sales order backlog of homes under contract increased 45% to 3,872 homes with a sales value of $1.4 billion at March 31, 2013 compared with 2,669 homes with a sales value of $884 million as of March 31, 2012. The Company's U.S. backlog of homes under contract increased 109% to 2,506 homes with a sales value of $993 million at March 31, 2013 compared with 1,199 homes with a sales value of $398 million at March 31, 2012. The first quarter 2013 cancellation rate, representing cancelled sales orders divided by gross sales orders, was 11% in both the first quarter of 2012 and 2013.

Home closings revenue totaled $366.8 million in the first quarter of 2013, an increase of 66%, benefiting from a 63% increase in homes closed to 1,012 during the quarter. Gross profit margin on home closings in the first quarter of 2013 improved to 21.2%, compared to 17.6% in the first quarter of 2012. Adjusted gross profit margin on home closings in the first quarter 2013, excluding interest expense, improved 340 basis points to 23.4% compared to 20.0% for the first quarter 2012.

For the first quarter, the Company's mortgage and title operations reported gross profit of $2.4 million. The mortgage capture rate for the Company's U.S. operations for the quarter was 81%.

Selling, general and administrative expenses were $46.3 million, or 12.6% of home closing revenues for the 2013 first quarter compared to $32.4 million, or 14.7% of home closing revenues for the first quarter of 2012. Equity in income of unconsolidated entities, which represents the Company's investments in home building joint ventures, was $3.2 million in both the first quarter of 2012 and 2013.

The Company ended the first quarter of 2013 with $251.2 million of cash, including $13.2 million of restricted cash. Homebuilding inventories at the end of the 2013 first quarter totaled $1.7 billion. The Company owned and controlled approximately 45,100 lots at March 31, 2013 compared with approximately 31,000 lots at March 31, 2012.

Financing Activities

On April 12, 2013, we completed our initial public offering ("IPO") and sold 28,572,000 shares at $22.00 per share for a total of $628.5 million. Subsequent to the offering, the underwriters exercised their over-allotment option of 4,285,800 shares at $22.00 per share for $94.3 million. Approximately $204.3 million of the proceeds from the IPO were used to redeem $189.6 million of the 7.75% senior notes due 2020, issued by two of our subsidiaries at a price equal to 103.875% their principal amount, plus accrued and unpaid interest. The remainder of the IPO proceeds was used to purchase equity interests from the principal equity holders and pay IPO-related fees.

Concurrent with the IPO, our 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, two of our subsidiaries issued $550 million aggregate principal amount of 5.25% senior notes due 2021, the proceeds of which will be used for general corporate purposes.

Earnings Conference Call

A conference call to discuss our first quarter 2013 earnings will be held at 4:30 p.m. Eastern Time on Tuesday, May 14, 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 30 days. A replay of the conference call will also be available later today by calling (888) 843-7419 or (630) 652-3042 and entering 3477 4239# as the confirmation number.

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: 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 filed with the Securities and Exchange Commission (SEC) under the heading "Risk Factors." Such registration statement has not yet been declared effective by the SEC and does not constitute an offer to sell or the solicitation of an offer to buy any of the securities described therein.

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 from first-time buyers and move-up families to luxury and active adult customers. Taylor Morrison divisions operate in Arizona, California, Colorado, Florida and Texas. Darling Homes serves move-up families and luxury homebuyers in Texas. Monarch, Canada's oldest homebuilder builds homes for first-time buyers and move-up families 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.

 
TMM Holdings Limited Partnership
Consolidated Statements of Operations

(in thousands except per unit data, unaudited)

   
Three Months Three Months
Ended Ended
3/31/2013 3/31/2012
 
Home closing revenue $ 366,769 $ 220,903
Land closing revenue 8,854 15,240
Mortgage operations revenue   5,889     3,283  
Total revenues 381,512 239,426
 
Cost of home closings 288,831 182,108
Cost of land closings 7,644 11,491
Mortgage operations expenses   3,491     2,029  
Total cost of revenues 299,966 195,628
 
Gross margin 81,546 43,798
 
Sales, commissions and other marketing costs 25,942 14,776
General and administrative expenses 20,344 17,633
Equity in net income of unconsolidated entities (3,158 ) (3,180 )
Interest income, net (486 ) (63 )
Indemnification income (1,710 ) (1,636 )
Other expense, net   742       211  
Income before income taxes 39,872 16,057
Income tax provision   15,535       5,498  
Net income 24,337 10,559
Income attributable to noncontrolling interests   (78 )     (262 )
Net income attributable to Owners $ 24,259     $ 10,297  
 
TMM Holdings Limited Partnership
Consolidated Balance Sheets

(in thousands, unaudited)

   
March 31, December 31,
2013 2012
Assets
Cash and cash equivalents $ 237,963 $ 300,567
Restricted cash 13,206 13,683
Real estate inventory 1,737,849 1,633,050
Land deposits 29,595 28,724
Loans receivable 43,997 48,685
Mortgage receivables 40,055 84,963
Tax indemnification receivable 109,231 107,638
Prepaid expenses and other assets, net 118,174 101,427
Other receivables, net 50,561 48,951
Investments in unconsolidated entities 77,469 74,465
Deferred tax assets, net 274,723 274,757
Property and equipment, net 6,162 6,423
Intangible assets, net 24,124 17,954
Goodwill   14,594       15,526  
Total assets $ 2,777,703     $ 2,756,813  
 
Liabilities
Accounts payable $ 92,883 $ 98,647
Accrued expenses and other liabilities 184,681 213,413
Income taxes payable 116,142 111,513
Customer deposits 99,777 82,038
Mortgage borrowings 37,351 80,360
Loans payable and other borrowings 256,696 215,968
Revolving credit facility borrowings 88,000 50,000
Senior notes   681,318       681,541  
Total liabilities 1,556,847 1,533,480
 
Equity
Net owners' equity 1,255,804 1,231,050
Accumulated other comprehensive loss   (42,810 )     (34,365 )
Total owners' equity 1,212,994 1,196,685
Non controlling interests   7,862       26,648  
Total equity   1,220,856       1,223,333  
Total liabilities and equity $ 2,777,703     $ 2,756,813  
 

TMM Holdings Limited Partnership

Segment Data

(Dollars in thousands)

(Unaudited)

   
Three months ended Three months ended
Homes Closed: March 31, 2013 March 31, 2012
    Avg. Sales     Avg. Sales
Homes   Value   Price Homes   Value   Price
East 544 $191,379 $ 352 275 $82,582 $ 300
West 363 129,696 357 187 64,787 346
Canada 105   45,694   435 159   73,534   462
Subtotal 1,012 366,769 $ 362 621 220,903 $ 356
Unconsolidated joint ventures (A) 27   8,927   331 39   11,770   306
Total 1,039 375,696 $ 362 660 232,673 $ 353
 

(A) Includes only our proportionate share of unconsolidated joint ventures.

   
Three months ended Three months ended
Net Sales Orders: March 31, 2013 March 31, 2012
Homes   Value   Homes   Value
East 1,010   $365,957 527   $162,694
West 539 228,847 394 123,498
Canada 132   60,661   185   73,627
Subtotal 1,681 655,465 1,106 359,819
Unconsolidated joint ventures (B) 15   6,847   55   10,551
Total 1,696 662,312 1,161 370,370
 

(B) Includes only our proportionate share of unconsolidated joint ventures.

   
As of As of
Sales Order Backlog: March 31, 2013 March 31, 2012
Homes   Value   Homes   Value
East 1,668   $651,117 719   $250,094
West 838 342,097 480 147,784
Canada 1,366   428,812   1,470   486,087
Subtotal 3,872 $1,422,026 2,669 $883,965
Unconsolidated joint ventures (C) 895   305,807   1,010   341,257
Total 4,767 $1,727,833 3,679 $1,225,222
 

(C) Includes our proportionate share of unconsolidated joint ventures.

 
Three months ended
Average Active Selling Communities: March 31,
2013   2012
East 120.8   74.3
West 31.5 35.0
Canada 14.8   15.0
Subtotal 167.1 124.3
Unconsolidated joint ventures (D) 4.7   7.0
Subtotal 171.8 131.3
 

(D) Represents the average number of total communities in which our joint ventures were actively selling over such time period.

 

Reconciliation of Non-GAAP Financial Measures

The below measure is non-GAAP financial measures and other companies may calculate such non-GAAP measures differently. Due to the significance of the GAAP components excluded, such measures should not be considered in isolation or as an alternative to operating performance measures prescribed by GAAP. We urge investors to understand the methods used by other companies to calculate these measures and any adjustments thereto before comparing our measure to those of such other companies.

The following table sets forth a reconciliation between our home closings gross margin and our adjusted home closings gross margin. Adjusted gross margins are non-GAAP financial measures calculated based on gross margins, excluding impairments and capitalized interest amortization.

     
Three months ended
Home Closings Gross Margin: March 31,
($ in thousands) 2013   2012
Home closings revenue $366,769   $220,903
Home closings cost of revenue 288,831   182,108
Home closings gross margin 77,938 38,795
Capitalized interest amortization 7,865   5,324
Adjusted home closings gross margin $85,803   $44,119
Home closings gross margin% 21.2% 17.6%
Adjusted Home closings gross margin % 23.4% 20.0%
 

Taylor Morrison Home Corporation
Calvin Boyd, Investor Relations
(480) 734-2060
investor@taylormorrison.com


© Business Wire 2013
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