8-K
Taylor Morrison Home Corp (TMHC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): February 10, 2021
Taylor Morrison Home Corporation
(Exact name of registrant as specified in its charter)
| Delaware | 001-35873 | 83-2026677 |
|---|---|---|
| (State or other jurisdiction<br>of incorporation) | (Commission<br>File Number) | (IRS Employer<br>Identification No.) |
4900 N. Scottsdale Road, Suite 2000
Scottsdale, Arizona 85251
(Address of principal executive offices and zip code)
(480) 840-8100
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Securities registered pursuant to Section 12(b) of the Act:
| Name of each class | Trading<br> <br>Symbol(s) | Name of each exchange<br> <br>on which registered |
|---|---|---|
| Common Stock, $0.00001 par value | TMHC | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On February 10, 2021, Taylor Morrison Home Corporation (the “Company”) issued a press release setting forth its financial results for its fourth quarter and fiscal year ended December 31, 2020. A copy of the Company’s press release is attached as Exhibit 99.1 to this report. The Company does not intend for this Item 2.02 or Exhibit 99.1 to be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended or otherwise subject to the liabilities of that section, nor shall they be deemed to be incorporated by reference into filings under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit<br>No. | Description |
|---|---|
| 99.1 | Press release issued February 10, 2021 by Taylor Morrison Home Corporation and furnished pursuant to Item 2.02, “Results of Operations and Financial Condition.” |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
1
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Taylor Morrison Home Corporation | |
|---|---|
| By: | /s/ Darrell C. Sherman |
| Name: | Darrell C. Sherman |
| Title: | Executive Vice President, Chief Legal Officer and Secretary |
Date: February 10, 2021
2
EX-99.1
Exhibit 99.1
News Release
| CONTACT: Investor Relations |
|---|
| (480) 734-2060 |
| investor@taylormorrison.com |
Taylor Morrison Reports Fourth Quarter 2020 Results, Including 31% Year-Over-Year Growth to 3.4 Net SalesOrders per Community
SCOTTSDALE, Ariz., Feb. 10, 2021 –– Taylor Morrison Home Corporation (NYSE: TMHC), the nation’s fifth largest homebuilder, today announced financial results for the fourth quarter ended Dec. 31, 2020. The Company reported net income of $94 million, or $0.72 per diluted share, up 41 percent from the prior-year period. Adjusted net income was $115 million, or $0.87 per diluted share, after excluding transaction-related expenses and other unusual items.
The Company’s fourth quarter included the following results, as compared to the prior-year quarter:
| • | Monthly absorptions increased 31 percent to 3.4 net sales orders per community, among the highest levels in<br>its public company history. |
|---|---|
| • | Total revenue increased six percent to $1.6 billion. |
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| • | GAAP home closings gross margin increased 410 basis points to 18.3 percent. |
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| • | Adjusted home closings gross margin, exclusive of purchase accounting and other charges, increased 110 basis<br>points to 19.0 percent. |
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| • | SG&A as a percentage of home closings revenue declined 40 basis points to 9.6 percent.<br> |
| --- | --- |
“Our fourth quarter results reflect the vibrant housing market and the initial traction we are seeing as a combined organization following our acquisition of William Lyon Homes one year ago,” said Sheryl Palmer, Taylor Morrison Chairman and CEO. “We drove 46 percent year-over-year growth in net sales orders, a 110 basis point sequential improvement in our home closings gross margin and ended the year with a company-record backlog of more than 8,400 homes valued at over $4.2 billion.”
“Following years of strategic growth into one of the country’s leading homebuilders with deep penetration across our markets and a well-balanced product portfolio that serves the needs of today’s homebuyers, our top priority in 2021 is demonstrating the financial and operational benefits of our enhanced scale through an unrelenting focus on operational effectiveness and capital efficiency. We are committed to driving improved returns that are reflective of our market depth, efficient homebuilding operations and valuable land portfolio, and expect 2021 to be a pivotal year for our organization.”
“After exceeding our deleveraging targets over the last twelve months, we now expect to build on the positive momentum and further reduce our net debt-to-capitalization to the low-30 percent range by the end of 2021. Equipped with strong operating cash flow and $1.3 billion in liquidity, we have the financial flexibility to achieve our capital allocation priorities to enhance the long-term value of our company by investing in our core homebuilding business and growing build-to-rent operations, reducing our net debt and returning excess capital to shareholders via share repurchases,” said Dave Cone, Executive Vice President and Chief Financial Officer.
Business Highlights (All comparisons are of the current quarter to the prior-year quarter, unless otherwise indicated.)
Homebuilding
| • | Net sales orders increased 46 percent to 3,724, driven by strength across geographies and consumer segments.<br> |
|---|---|
| • | Monthly absorptions increased 31 percent to 3.4 net sales orders per community, tied with the second highest<br>level in the company’s public history behind only last quarter’s record sales pace of 3.8. |
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| • | Average community count increased 11 percent to 368, although this was down six percent from 393 in the<br>third quarter of 2020 due to accelerated close-outs of existing communities from strong sales activity that outpaced new community openings. Management currently anticipates modest community growth beginning in late 2022 before a more meaningful<br>increase in 2023. |
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| • | Home closings revenue increased five percent to $1.5 billion, driven by a seven percent increase in average<br>sales price to approximately $483,000, partially offset by a two percent decline in closings. |
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| • | GAAP home closings gross margin increased 410 basis points to 18.3 percent. |
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| • | After excluding the impact of purchase accounting and other charges, adjusted home closings gross margin<br>increased 110 basis points to 19.0 percent. |
| --- | --- |
| • | SG&A as a percentage of home closings revenue decreased 40 basis points to 9.6 percent.<br> |
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| • | The Company had 8,403 units in backlog, up 78 percent, with a sales value of $4.2 billion, up<br>86 percent. |
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Land Portfolio
| • | The Company invested $370 million in land and development during the quarter and $1.4 billion during<br>the year. |
|---|---|
| • | Total homebuilding lot supply equaled approximately 70,000, of which 69 percent was owned and 31 percent was<br>controlled. Based on trailing twelve-month home closings, this represented 5.5 years of total supply and 3.8 years of owned supply. |
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Financial Services
| • | The financial services’ capture rate increased to 85 percent in the fourth quarter from 80 percent<br>in the fourth quarter of 2019, reaching the highest level in our company history. |
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Balance Sheet
| • | At quarter end, total available liquidity equaled approximately $1.3 billion, including $533 million of<br>unrestricted cash and $736 million of undrawn capacity on the Company’s $800 million corporate revolver. |
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| • | The net debt-to-capitalization<br>ratio declined 290 basis points sequentially to 38.7 percent from 41.6 percent at the end of the third quarter. |
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| • | The company currently anticipates its net<br>debt-to-capitalization ratio to fall further to the low-30 percent range by year-end<br>2021 versus its prior expectation of high-30 percent. |
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Business Outlook
First Quarter 2021
| • | Average active community count is expected to be approximately 360 to 365 |
|---|---|
| • | Home closings are expected to be between 2,850 to 2,950 |
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| • | GAAP home closings gross margin is expected to be in the<br>mid-18 percent range |
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| • | Effective tax rate is expected to be approximately 23.0 percent |
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| • | Diluted share count is expected to be approximately 131 million |
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Full Year 2021
| • | Average active community count is expected to be approximately 360 to 365 |
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| • | Home closings are expected to be between 14,500 to 15,000 |
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| • | GAAP home closings gross margin is expected to be about 19 percent |
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| • | SG&A as a percentage of home closings revenue is expected to be in the<br>mid-9 percent range |
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| • | Effective tax rate is expected to be approximately 23.0 percent |
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| • | Diluted share count is expected to be approximately 130 million |
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| • | Land and development spend is expected to be approximately $2.0 billion |
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Annual Financial Comparison
| ( in thousands) | ||
|---|---|---|
| 2019 | 2020 vs. 2019 | |
| Total Revenue | $4,762,059 | 28.7% |
| Home Closings Revenue | $4,623,484 | 26.8% |
| Home Closings Gross Margin | $786,627 | 24.1% |
| 17.0% | 40 bps decrease | |
| Adjusted Home Closings Gross Margin | $839,357 | 25.7% |
| 18.2% | 20 bps decrease | |
| SG&A | $490,271 | 16.7% |
| % of Home Closings Revenue | 10.6% | 80 bps leverage |
All values are in US Dollars.
Quarterly Financial Comparison
| ( in thousands) | ||
|---|---|---|
| Q4 2019 | Q4 2020 vs. Q4 2019 | |
| Total Revenue | $1,466,436 | 6.2% |
| Home Closings Revenue | $1,418,232 | 4.9% |
| Home Closings Gross Margin | $201,343 | 35.4% |
| 14.2% | 410 bps increase | |
| Adjusted Home Closings Gross Margin | $254,073 | 11.2% |
| 17.9% | 110 bps increase | |
| SG&A | $142,472 | 0.5% |
| % of Home Closings Revenue | 10.0% | 40 bps leverage |
All values are in US Dollars.
Earnings Webcast
A public webcast to discuss the fourth quarter 2020 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 8817967. 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 the nation’s fifth largest homebuilder and developer based in Scottsdale, Arizona, that has been recognized as America’s Most Trusted^®^ Home Builder for six years running (2016-2021). Operating under a family of brands including Taylor Morrison, Darling Homes, William Lyon Signature Home and Christopher Todd Communities built by Taylor Morrison, we serve consumer groups coast to coast, from first-time to move-up, luxury and 55-plus buyers. Our unwavering pledge to sustainability, our communities and our team—outlined in the 2019 Environmental, Social and Governance (ESG) Report—extends to designing thoughtful living experiences homeowners can be proud of for generations to come.
For more information about Taylor Morrison, Darling Homes and William Lyon Signature, 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 financial, operating and performance 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: the scale and scope of the COVID-19 (coronavirus) outbreak and resulting pandemic; changes in general and local economic conditions; slowdowns or severe downturns in the housing market; homebuyers’ ability to obtain suitable financing; increases in interest rates, taxes or government fees; shortages in, disruptions of and cost of labor; higher cancellation rates of existing agreements of sale; 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; 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 at competitive prices; decreases in the market value of our land inventory; new or changing government regulations and legal challenges; our compliance with environmental laws and regulations regarding climate change; our ability to sell mortgages we originate and claims on loans sold to third parties; governmental regulation applicable to our financial services and title services business; the loss of any of our important commercial lender 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; 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 substantial debt and the agreements governing such debt, including restrictive covenants contained in such agreements; our ability to access the capital markets; the risks associated with maintaining effective internal controls over financial reporting; provisions in our charter and bylaws that may delay or prevent an acquisition by a third party; and our ability to effectively manage our expanded operations.
In addition, other such risks and uncertainties may be found in our most recent annual report on Form 10-K and our subsequent quarterly reports 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.
Taylor Morrison Home Corporation
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts, unaudited)
| Three Months EndedDecember 31, | Twelve Months EndedDecember 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Home closings revenue, net | $ | 1,487,434 | $ | 1,418,232 | $ | 5,863,652 | $ | 4,623,484 | ||||
| Land closings revenue | 25,028 | 12,690 | 65,269 | 27,081 | ||||||||
| Financial services revenue | 40,040 | 30,698 | 155,827 | 92,815 | ||||||||
| Amenity and other revenue | 5,000 | 4,816 | 44,572 | 18,679 | ||||||||
| Total revenues | 1,557,502 | 1,466,436 | 6,129,320 | 4,762,059 | ||||||||
| Cost of home closings | 1,214,834 | 1,216,889 | 4,887,757 | 3,836,857 | ||||||||
| Cost of land closings | 21,796 | 23,453 | 64,432 | 32,871 | ||||||||
| Financial services expenses | 23,260 | 14,491 | 88,910 | 51,086 | ||||||||
| Amenity and other expense | 5,016 | 4,401 | 44,002 | 17,155 | ||||||||
| Total cost of revenues | 1,264,906 | 1,259,234 | 5,085,101 | 3,937,969 | ||||||||
| Gross margin | 292,596 | 207,202 | 1,044,219 | 824,090 | ||||||||
| Sales, commissions and other marketing costs | 95,116 | 93,611 | 377,496 | 320,420 | ||||||||
| General and administrative expenses | 48,089 | 48,861 | 194,879 | 169,851 | ||||||||
| Equity in income of unconsolidated entities | (2,298 | ) | (1,526 | ) | (11,176 | ) | (9,509 | ) | ||||
| Interest income, net | (362 | ) | (423 | ) | (1,606 | ) | (2,673 | ) | ||||
| Other expense, net | 15,668 | 8,718 | 23,092 | 7,226 | ||||||||
| Transaction expenses | 17,293 | 4,201 | 127,170 | 10,697 | ||||||||
| Loss on extinguishment of debt, net | — | — | 10,247 | 5,806 | ||||||||
| Income before income taxes | 119,090 | 53,760 | 324,117 | 322,272 | ||||||||
| Income tax provision/(benefit) | 22,428 | (949 | ) | 74,590 | 67,358 | |||||||
| Net income before allocation to non-controlling<br>interests | 96,662 | 54,709 | 249,527 | 254,914 | ||||||||
| Net income attributable to non-controlling interests -<br>joint ventures | (2,243 | ) | (51 | ) | (6,088 | ) | (262 | ) | ||||
| Net income available to Taylor Morrison Home Corporation | $ | 94,419 | $ | 54,658 | $ | 243,439 | $ | 254,652 | ||||
| Earnings per common share | ||||||||||||
| Basic | $ | 0.73 | $ | 0.52 | $ | 1.90 | $ | 2.38 | ||||
| Diluted | $ | 0.72 | $ | 0.51 | $ | 1.88 | $ | 2.35 | ||||
| Weighted average number of shares of common stock: | ||||||||||||
| Basic | 129,891 | 105,835 | 127,812 | 106,997 | ||||||||
| Diluted | 132,052 | 107,406 | 129,170 | 108,289 |
Taylor Morrison Home Corporation
Condensed Consolidated Balance Sheets
(In thousands)
| December 31, 2020 | December 31,2019 | |||
|---|---|---|---|---|
| Assets | ||||
| Cash and cash equivalents | $ | 532,843 | $ | 326,437 |
| Restricted cash | 1,266 | 2,135 | ||
| Total cash, cash equivalents, and restricted cash | 534,109 | 328,572 | ||
| Owned inventory | 5,209,653 | 3,967,359 | ||
| Consolidated real estate not owned | 122,773 | 19,185 | ||
| Total real estate inventory | 5,332,426 | 3,986,544 | ||
| Land deposits | 125,625 | 39,810 | ||
| Mortgage loans held for sale | 201,177 | 190,880 | ||
| Derivative assets | 5,294 | 2,099 | ||
| Lease right of use assets | 73,222 | 36,663 | ||
| Prepaid expenses and other assets, net | 242,744 | 86,152 | ||
| Other receivables, net | 96,241 | 70,447 | ||
| Investments in unconsolidated entities | 127,955 | 128,759 | ||
| Deferred tax assets, net | 238,078 | 140,466 | ||
| Property and equipment, net | 97,927 | 85,866 | ||
| Goodwill | 663,197 | 149,428 | ||
| Total assets | $ | 7,737,995 | $ | 5,245,686 |
| Liabilities | ||||
| Accounts payable | $ | 215,047 | $ | 164,580 |
| Accrued expenses and other liabilities | 430,067 | 325,368 | ||
| Lease liabilities | 83,240 | 42,317 | ||
| Income taxes payable | 12,841 | 3,719 | ||
| Customer deposits | 311,257 | 167,328 | ||
| Estimated development liability | 40,625 | 36,705 | ||
| Senior notes, net | 2,452,365 | 1,635,008 | ||
| Loans payable and other borrowings | 348,741 | 182,531 | ||
| Revolving credit facility borrowings | — | — | ||
| Mortgage warehouse borrowings | 127,289 | 123,233 | ||
| Liabilities attributable to consolidated real estate not owned | 122,773 | 19,185 | ||
| Total liabilities | $ | 4,144,245 | $ | 2,699,974 |
| Stockholders’ Equity | ||||
| Total stockholders’ equity | 3,593,750 | 2,545,712 | ||
| Total liabilities and stockholders’ equity | $ | 7,737,995 | $ | 5,245,686 |
Homes Closed and Home Closings Revenue, Net:
| Three Months Ended December 31, | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Homes Closed | Home Closings Revenue, Net | Average Selling Price | ||||||||||||||||
| ($ in thousands) | 2020 | 2019 | Change | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||
| East | 1,152 | 1,652 | (30.3)% | $ | 494,497 | $ | 653,420 | (24.3)% | $ | 429 | $ | 396 | 8.3% | |||||
| Central | 757 | 840 | (9.9) | 348,764 | 402,786 | (13.4) | 461 | 480 | (4.0) | |||||||||
| West | 1,173 | 644 | 82.1 | 644,174 | 362,026 | 77.9 | 549 | 562 | (2.3) | |||||||||
| Total | 3,082 | 3,136 | (1.7)% | $ | 1,487,435 | $ | 1,418,232 | 4.9% | $ | 483 | $ | 452 | 6.9% | |||||
| Twelve Months Ended December 31, | ||||||||||||||||||
| Homes Closed | Home Closings Revenue, Net | Average Selling Price | ||||||||||||||||
| ($ in thousands) | 2020 | 2019 | Change | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||
| East | 4,450 | 4,715 | (5.6)% | $ | 1,856,580 | $ | 1,912,179 | (2.9)% | $ | 417 | $ | 406 | 2.7% | |||||
| Central | 3,548 | 2,784 | 27.4 | 1,618,978 | 1,327,197 | 22.0 | 456 | 477 | (4.4) | |||||||||
| West | 4,526 | 2,465 | 83.6 | 2,388,094 | 1,384,108 | 72.5 | 528 | 562 | (6.0) | |||||||||
| Total | 12,524 | 9,964 | 25.7% | $ | 5,863,652 | $ | 4,623,484 | 26.8% | $ | 468 | $ | 464 | 0.9% | |||||
| Net Sales Orders: | ||||||||||||||||||
| Three Months Ended December 31, | ||||||||||||||||||
| Net Sales Orders | Sales Value | Average Selling Price | ||||||||||||||||
| ($ in thousands) | 2020 | 2019 | Change | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||
| East | 1,384 | 1,282 | 8.0% | $ | 656,541 | $ | 509,633 | 28.8% | $ | 474 | $ | 398 | 19.1% | |||||
| Central | 824 | 639 | 29.0 | 429,287 | 304,901 | 40.8 | 521 | 477 | 9.2 | |||||||||
| West | 1,516 | 631 | 140.3 | 877,024 | 344,045 | 154.9 | 579 | 545 | 6.2 | |||||||||
| Total | 3,724 | 2,552 | 45.9% | $ | 1,962,852 | $ | 1,158,579 | 69.4% | $ | 527 | $ | 454 | 16.1% | |||||
| Twelve Months Ended December 31, | ||||||||||||||||||
| Net Sales Orders | Sales Value | Average Selling Price | ||||||||||||||||
| ($ in thousands) | 2020 | 2019 | Change | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||
| East | 5,469 | 4,893 | 11.8% | $ | 2,385,530 | $ | 1,979,100 | 20.5% | $ | 436 | $ | 404 | 7.9% | |||||
| Central | 3,866 | 3,019 | 28.1 | 1,828,183 | 1,434,406 | 27.5 | 473 | 475 | (0.4) | |||||||||
| West | 5,733 | 2,605 | 120.1 | 3,098,862 | 1,405,357 | 120.5 | 541 | 539 | 0.4 | |||||||||
| Total | 15,068 | 10,517 | 43.3% | $ | 7,312,575 | $ | 4,818,863 | 51.7% | $ | 485 | $ | 458 | 5.9% | |||||
| Sales Order Backlog: | ||||||||||||||||||
| As of December 31, | ||||||||||||||||||
| Sold Homes in Backlog | Sales Value | Average Selling Price | ||||||||||||||||
| ($ in thousands) | 2020 | 2019 | Change | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||
| East | 2,835 | 1,816 | 56.1% | $ | 1,320,436 | $ | 791,485 | 66.8% | $ | 466 | $ | 436 | 6.9% | |||||
| Central | 2,398 | 1,655 | 44.9 | 1,200,149 | 839,004 | 43.0 | 500 | 507 | (1.4) | |||||||||
| West | 3,170 | 1,240 | 155.6 | 1,706,861 | 644,459 | 164.9 | 538 | 520 | 3.5 | |||||||||
| Total | 8,403 | 4,711 | 78.4% | $ | 4,227,446 | $ | 2,274,948 | 85.8% | $ | 503 | $ | 483 | 4.1% |
Average Active Selling Communities:
| Three Months EndedDecember 31, | Twelve Months EndedDecember 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||
| East | 139 | 152 | (8.6)% | 145 | 159 | (8.8)% | ||||||
| Central | 113 | 124 | (8.9) | 124 | 134 | (7.5) | ||||||
| West | 116 | 57 | 103.5 | 117 | 58 | 101.7 | ||||||
| Total | **** | 368 | **** | 333 | **** | 10.5% | **** | 386 | **** | 351 | **** | 10.0% |
Reconciliation of Non-GAAP Financial Measures
In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”), we have provided information in this press release relating to: (i) adjusted income before income taxes and related margin, (ii) EBITDA and adjusted EBITDA, (iii) adjusted net income and adjusted earnings per share, (iv) net homebuilding debt to capitalization ratio, and (v) adjusted home closings gross margin.
Adjusted income before income taxes (and related margin) is a non-GAAP financial measure that reflects our income before income taxes excluding the impact of purchase accounting adjustments related to the acquisition of William Lyon Homes (“WLH”), transaction expenses, loss on extinguishment of debt, inventory impairment and warranty charges and legal costs relating thereto and the write-off of our Chicago operations, as applicable. EBITDA and Adjusted EBITDA are non-GAAP financial measures that measure performance by adjusting net income before allocation to non-controlling interests to exclude interest income/(expense), net, amortization of capitalized interest, income taxes, depreciation and amortization (EBITDA), non-cash compensation expense, if any, purchase accounting adjustments relating to the acquisition of WLH, transaction expenses, loss on extinguishment of debt, inventory impairment and warranty charges and legal costs relating thereto and the write-off of our Chicago operations, as applicable. Adjusted net income and adjusted earnings per share are non-GAAP financial measures that reflect the net income available to the Company excluding the impact of purchase accounting adjustments relating to the acquisition of WLH, transaction expenses, loss on extinguishment of debt, inventory impairment and warranty charges and legal costs relating thereto, the write-off of our Chicago operations and the tax impact due to such adjustments, as applicable. Net homebuilding debt to capitalization ratio is a non-GAAP financial measure we calculate by dividing (i) total debt, less unamortized debt issuance costs/premiums 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). Adjusted home closings gross margin is a non-GAAP financial measure based on GAAP home closings gross margin (which is inclusive of capitalized interest), excluding purchase accounting adjustments relating to the acquisition of WLH and inventory impairment and warranty charges, as applicable.
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. A reconciliation of our forward-looking net homebuilding debt to capitalization ratio to the most directly comparable GAAP financial measure cannot be provided without unreasonable effort because of the inherent difficulty of accurately forecasting the occurrence and financial impact of the adjusting items necessary for such reconciliation that have not yet occurred, are out of our control, or cannot be reasonably predicted. 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 that adjusted income before income taxes and related margin, adjusted net income and adjusted earnings per share, as well as EBITDA and adjusted EBITDA, are useful for investors in order to allow them to evaluate our operations without the effects of various items we do not believe are characteristic of our ongoing operations or performance and also because such metrics assist 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 unusual items. 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. We believe that adjusted home closings gross margin is useful to investors because it allows investors to evaluate the performance of our homebuilding operations without the varying effects of items or transactions we do not believe are characteristic of our ongoing operations or performance.
These non-GAAP financial measures 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 Net Income and Adjusted Earnings Per Share
| Three Months EndedDecember 31, | Twelve Months EndedDecember 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ($ in thousands, except per share data) | 2020 | 2019 | 2020 | 2019 | ||||||||
| Net income available to TMHC | $ | 94,419 | $ | 54,658 | $ | 243,439 | $ | 254,652 | ||||
| William Lyon Homes related purchase accounting adjustments | 300 | — | 74,068 | — | ||||||||
| Inventory impairment charges | 9,611 | 8,928 | 9,611 | 8,928 | ||||||||
| Transaction expenses | 17,293 | 4,201 | 127,170 | 10,697 | ||||||||
| Loss on extinguishment of debt, net | — | — | 10,247 | 5,806 | ||||||||
| Warranty charge | — | 43,133 | — | 43,133 | ||||||||
| Write-off Chicago operations | — | 13,285 | — | 13,285 | ||||||||
| Legal cost relating to warranty charge | — | 6,800 | — | 6,800 | ||||||||
| Tax impact due to above non-GAAP reconciling<br>items | (6,224 | ) | (17,632 | ) | (46,120 | ) | (20,578 | ) | ||||
| Adjusted net income | $ | 115,399 | $ | 113,373 | $ | 418,415 | $ | 322,723 | ||||
| Basic weighted average shares | 129,891 | 105,835 | 127,812 | 106,997 | ||||||||
| Adjusted earnings per common share - Basic | $ | 0.89 | $ | 1.07 | $ | 3.27 | $ | 3.02 | ||||
| Diluted weighted average shares | 132,052 | 107,406 | 129,170 | 108,289 | ||||||||
| Adjusted earnings per common share - Diluted | $ | 0.87 | $ | 1.06 | $ | 3.24 | $ | 2.98 |
Adjusted Income Before Income Taxes and Related Margin
| Three Months EndedDecember 31, | Twelve Months EndedDecember 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| ($ in thousands) | 2020 | 2019 | 2020 | 2019 | ||||
| Income before income taxes | $ | 119,090 | $ | 53,760 | $ | 324,117 | $ | 322,272 |
| William Lyon Homes related purchase accounting adjustments | 300 | — | 74,068 | — | ||||
| Inventory impairment charges | 9,611 | 8,928 | 9,611 | 8,928 | ||||
| Transaction expenses | 17,293 | 4,201 | 127,170 | 10,697 | ||||
| Loss on extinguishment of debt, net | — | — | 10,247 | 5,806 | ||||
| Warranty charge | — | 43,133 | — | 43,133 | ||||
| Write-off Chicago operations | — | 13,285 | — | 13,285 | ||||
| Legal cost relating to warranty charge | — | 6,800 | — | 6,800 | ||||
| Adjusted income before income taxes | $ | 146,294 | $ | 130,107 | $ | 545,213 | $ | 410,921 |
| Total revenues | $ | 1,557,502 | $ | 1,466,436 | $ | 6,129,320 | $ | 4,762,059 |
| Income before income taxes margin | **** | 7.6% | **** | 3.7% | **** | 5.3% | **** | 6.8% |
| Adjusted income before income taxes margin | **** | 9.4% | **** | 8.9% | **** | 8.9% | **** | 8.6% |
Adjusted Home Closings Gross Margin
| Three Months Ended<br>December 31, | Twelve Months EndedDecember 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| ($ in thousands) | 2020 | 2019 | 2020 | 2019 | ||||
| Home closings revenue | $ | 1,487,434 | $ | 1,418,232 | $ | 5,863,652 | $ | 4,623,484 |
| Cost of home closings | $ | 1,214,834 | $ | 1,216,889 | $ | 4,887,757 | $ | 3,836,857 |
| Home closings gross margin | $ | 272,600 | $ | 201,343 | $ | 975,895 | $ | 786,627 |
| William Lyon Homes homebuilding related purchase accounting adjustments | 300 | — | 69,717 | — | ||||
| Inventory impairment charges^(1)^ | 9,611 | 9,384 | 9,611 | 9,384 | ||||
| Warranty charge | — | 43,346 | — | 43,346 | ||||
| Adjusted home closings gross margin | $ | 282,511 | $ | 254,073 | $ | 1,055,223 | $ | 839,357 |
| Home closings gross margin as a percentage of home closings revenue | 18.3% | 14.2% | 16.6% | 17.0% | ||||
| Adjusted home closings gross margin as a percentage of home closings revenue | 19.0% | 17.9% | 18.0% | 18.2% | ||||
| ^(1)^ | 2019 includes $0.5 million of impairment relating to our Chicago operations<br>write-off. | |||||||
| --- | --- |
EBITDA and Adjusted EBITDA Reconciliation
| Three Months EndedDecember 31, | ||||
|---|---|---|---|---|
| ($ in thousands) | 2020 | 2019 | ||
| Net income before allocation to non-controllinginterests | $ | 96,662 | $ | 54,709 |
| Interest income, net | (362) | (423) | ||
| Amortization of capitalized interest | 28,612 | 30,614 | ||
| Income tax provision/(benefit) | 22,428 | (949) | ||
| Depreciation and amortization | 2,042 | 1,436 | ||
| EBITDA | $ | 149,382 | $ | 85,387 |
| Non-cash compensation expense | 4,869 | 3,827 | ||
| William Lyon Homes related purchase accounting adjustments | 300 | — | ||
| Inventory impairment charges | 9,611 | 8,928 | ||
| Transaction expenses | 17,293 | 4,201 | ||
| Warranty charge | — | 43,133 | ||
| Write off of Chicago operations | — | 13,285 | ||
| Legal cost relating to warranty charge | — | 6,800 | ||
| Adjusted EBITDA | $ | 181,455 | $ | 165,561 |
| Total revenues | $ | 1,557,502 | $ | 1,466,436 |
| EBITDA as a percentage of total revenues | **** | 9.6% | **** | 5.8% |
| Adjusted EBITDA as a percentage of total revenues | **** | 11.7% | **** | 11.3% |
Net Homebuilding Debt to Capitalization Ratio Reconciliation
| ($ in thousands) | As ofDecember 31, 2020 | As ofSeptember 30, 2020 | ||
|---|---|---|---|---|
| Total debt | $ | 2,928,395 | $ | 3,180,072 |
| Less unamortized debt issuance premiums, net | 2,365 | 2,526 | ||
| Less mortgage warehouse borrowings | 127,289 | 109,593 | ||
| Total homebuilding debt | $ | 2,798,741 | $ | 3,067,953 |
| Less cash and cash equivalents | 532,843 | 547,916 | ||
| Net homebuilding debt | $ | 2,265,898 | $ | 2,520,037 |
| Total equity | 3,593,750 | 3,542,135 | ||
| Total capitalization | $ | 5,859,648 | $ | 6,062,172 |
| Net homebuilding debt to capitalization ratio | **** | 38.7% | **** | 41.6% |