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): July 31, 2019

 

 

Taylor Morrison Home Corporation

(Exact name of registrant as specified in its charter)

 

Delaware   001-35873   83-2026677
(State or other jurisdiction
of incorporation)
  (Commission
File Number)
  (IRS Employer
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)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Name of each class

 

Trading

Symbol(s)

 

Name of each exchange

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 July 31, 2019, Taylor Morrison Home Corporation (the “Company”) issued a press release setting forth its financial results for its second quarter ended June 30, 2019. 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 (the “Exchange Act”), or to be incorporated by reference into filings under the Securities Act of 1933, as amended (the “Securities Act”).

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit
No.

  

Description

99.1    Press release issued July 31, 2019 by Taylor Morrison Home Corporation and furnished pursuant to Item 2.02, “Results of Operations and Financial Condition.”

 

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: July 31, 2019

 

2

Exhibit 99.1

 

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  News Release
  CONTACT: Investor Relations
  Taylor Morrison Home Corporation
 

(480) 734-2060

investor@taylormorrison.com

Taylor Morrison Reports Second Quarter Closings of 2,594, an increase of 30% over the prior year quarter, and Diluted Earnings per Share of $0.76

SCOTTSDALE, Ariz., July 31, 2019 –– Taylor Morrison Home Corporation (NYSE: TMHC) today reported second quarter total revenue of $1.3 billion and GAAP home closings gross margin, inclusive of capitalized interest, of 18.0 percent, leading to diluted earnings per share of $0.76.

Second Quarter 2019 Highlights:

 

   

Net sales orders were 2,810, a 20% increase over the prior year quarter

 

   

Home closings were 2,594, a 30% increase over the prior year quarter

 

   

Total revenue was $1.3 billion, a 29% increase over the prior year quarter

 

   

GAAP home closings gross margin was 18.0%, which was flat to compared to the prior year quarter

 

   

SG&A as a percent of home closings revenue was 10.1%, compared to 10.5% during the prior year quarter

 

   

Net income was $82 million, up 38% over the prior year quarter, with diluted earnings per share of $0.76

“We continued the momentum experienced at the end of the first quarter, which led us to exceeding expectations in our key operating metrics for the second quarter,” said Sheryl Palmer, Chairman and CEO of Taylor Morrison.

Today the Company is also announcing its entry into the single-family build-to-rent community space through a partnership with Christopher Todd Communities. “With more than 16 million single-family rental homes in the U.S. today and only five percent of that share represented by new home production, it signals an early and exciting time for this new growing segment,” shared Palmer. “We believe this strategic partnership with Christopher Todd Communities and their established platform is in clear alignment with our focus to address affordability in our markets and serve more customers who desire the product and lifestyle of a single-family community while balancing finances, flexibility and maintenance-free living. This relationship advances our demand-side diversification while leveraging what we do every day in our core business—acquiring and developing land and quality production. What’s more, this strategy will allow us to further increase the velocity of community deliveries and we expect to enhance our time and cost-efficient production process with proven and standardized specifications and a concentrated production line building process creating a rapid land-to-lease-up pipeline.”


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For the second quarter, net sales orders were 2,810. Average community count was 357, which resulted in an average monthly sales pace per community of 2.6 for the quarter. The Company ended the quarter with 5,051 units in backlog, a year-over-year increase of 7 percent, with a sales value of approximately $2.5 billion.

“Closings totaled 2,594 for the quarter, representing a 30 percent increase over the same period last year,” added Palmer. “The inventory sales environment was particularly strong during the quarter, driving our closings results above the high end of our guidance for the period. Even with the increased inventory sales in the quarter we achieved lower incentive levels than the prior year quarter, which led to a GAAP home closings gross margin of 18 percent.”

“We believe our success and strong results that we’ve seen so far this year are largely due to the hard work that the entire team has put into the integration of AV Homes following the acquisition,” said Palmer. “I’m proud to share that the heavy lifting required for the integration is complete and we are now operating as one company. This has been achieved sooner than anticipated and with the integration work and negotiations complete, we are pleased to be able to take our total synergy estimate up to $50 million on an annualized basis.”

“SG&A as a percentage of homebuilding revenue came in at 10.1 percent, which represented 40 basis points of leverage when compared to second quarter 2018, and the addition of AV Homes is providing further top-line leverage,” said Dave Cone, Executive Vice President and Chief Financial Officer. “Given our success in holding gross margins flat to last year and the SG&A leverage we gained, EBT margin came in at 8.7 percent for the quarter. This represents about 60 basis points of improvement when compared to Q2 2018. This was despite about $4 million of AV transaction expenses and debt extinguishment charges hitting during the quarter.”

Homebuilding inventories were $4.1 billion at the end of the quarter, including 6,523 homes in inventory, compared to 5,599 homes in inventory at the end of the prior year quarter. Homes in inventory at the end of the quarter consisted of 3,834 sold units, 495 model homes and 2,194 inventory units, of which 440 were finished.

The Company finished the quarter with $197 million in cash and a net homebuilding debt to capitalization ratio of 43.0%. As of June 30, 2019, Taylor Morrison owned or controlled approximately 54,000 lots, representing 5.3 years of supply based on a trailing twelve months of closings including a full year of AV, and the Company is focused on securing land for 2021 and beyond.


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Share repurchase activity during second quarter 2019 included 3.8 million shares acquired for about $76 million, or an average repurchase price of $19.92. This activity exhausted the outstanding $100 million authorization and no additional authorization is currently in place. Since the acquisition of AV Homes, the Company has acquired 16.9 million shares for $296 million, or an average price of $17.51. This is nearly double the amount of shares that were issued for the transaction and below the price of the shares issued to complete the deal.

The Company has also recently completed two senior notes offerings. In early June, the Company completed a $500 million offering with an interest rate of 5.875%. These proceeds, along with cash on hand, were used to redeem the $550 million of 2021 senior notes that were previously outstanding. In mid-July, the Company offered $450 million of notes with a 5.75% interest rate. These proceeds will be used to redeem the $400 million of 2022 senior notes outstanding. These transactions ensure that all senior debt outstanding for the Company now have an interest rate below 6.0% and they push the nearest senior note maturity out to 2023.

 

Quarterly Financial Comparison

      

($ thousands)

      
     Q2 2019     Q2 2018     Q2 2019 vs. Q2 2018  

Total Revenue

   $ 1,265,426     $ 980,828       29.0

Home Closings Revenue

   $ 1,232,261     $ 956,565       28.8

Home Closings Gross Margin

   $ 222,192     $ 172,044       29.1
     18.0     18.0     Flat  

SG&A

% of Home Closings Revenue

   $ 124,817     $ 100,065       24.7
     10.1     10.5     40 bps leverage  

Third Quarter and Full Year 2019 Business Outlook

Third Quarter 2019:

 

   

Average active community count is expected to be between 345 and 355

 

   

Home closings are expected to be between 2,200 and 2,400

 

   

GAAP home closings gross margin, inclusive of capitalized interest and purchase accounting, is expected to be in the mid-to-high 17 percent range

 

   

Effective tax rate is expected to be about 25.5 percent

 

   

Diluted share count is expected to be about 107 million

Full Year 2019:

 

   

Average active community count is expected to be between 350 and 360

 

   

Monthly absorption pace is expected to be consistent with 2018 performance

 

   

Home closings are expected to be between 9,600 and 10,100


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GAAP home closings gross margin, inclusive of capitalized interest and purchase accounting, is expected to be in the high 17 percent range

 

   

SG&A as a percentage of home closings revenue is expected to be in the low 10 percent range

 

   

Income from unconsolidated joint ventures is expected to be about $8 million

 

   

Land and development spend is expected to be approximately $1.2 billion

 

   

Effective tax rate is expected to be about 25 percent

 

   

Diluted share count is expected to be about 108 million


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Earnings Webcast

A public webcast to discuss the second quarter 2019 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 7316268. 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 a leading national homebuilder and developer that has been recognized as the 2016, 2017, 2018 and 2019 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 (including as a result of recent extreme weather 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; higher cancellation rates; 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 mortgage operations and title services business; the loss of any of our


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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; the inherent uncertainty associated with financial or other projections; and risks related to the integration of Taylor Morrison and AV Homes and the ability to recognize the anticipated benefits from the combination of Taylor Morrison and AV Homes. In addition, other such risks and uncertainties may be found in our most recent annual report on Form 10-K 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.


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Taylor Morrison Home Corporation

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts, unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2019     2018     2019     2018  

Home closings revenue, net

   $ 1,232,261     $ 956,565     $ 2,132,142     $ 1,689,524  

Land closings revenue

     5,858       7,997       9,971       13,165  

Financial services revenue

     22,819       16,266       38,863       30,472  

Amenity and other revenue

     4,488       —         9,542       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     1,265,426       980,828       2,190,518       1,733,161  

Cost of home closings

     1,010,069       784,521       1,745,866       1,379,427  

Cost of land closings

     3,792       6,444       6,484       10,725  

Financial services expenses

     13,045       11,152       23,766       21,196  

Amenity and other expense

     4,746       —         8,588       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenues

     1,031,652       802,117       1,784,704       1,411,348  

Gross margin

     233,774       178,711       405,814       321,813  

Sales, commissions and other marketing costs

     82,615       64,604       150,044       118,302  

General and administrative expenses

     42,202       35,461       78,656       68,778  

Equity in income of unconsolidated entities

     (3,561     (4,017     (5,880     (7,263

Interest income, net

     (958     (276     (1,291     (619

Other (income)/expense, net

     (489     3,654       (1,881     4,092  

Transaction expenses

     1,750       —         5,879       —    

Loss on Extinguishment of Debt

     2,196       —         2,196       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     110,019       79,285       178,091       138,523  

Income tax provision

     28,131       19,993       44,922       31,699  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income before allocation to non-controlling interests

     81,888       59,292       133,169       106,824  

Net income attributable to non-controlling interests - joint ventures

     (37     (140     (187     (269
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income before non-controlling interests

     81,851       59,152       132,982       106,555  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to non-controlling interests

     —         (474     —         (3,133
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to Taylor Morrison Home Corporation

   $ 81,851     $ 58,678     $ 132,982     $ 103,422  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per common share

        

Basic

   $ 0.77     $ 0.53     $ 1.23     $ 0.94  

Diluted

   $ 0.76     $ 0.52     $ 1.21     $ 0.93  

Weighted average number of shares of common stock:

        

Basic

     106,238       111,347       108,363       110,508  

Diluted

     107,232       113,482       109,479       115,400  


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Taylor Morrison Home Corporation

Condensed Consolidated Balance Sheets

(In thousands)

 

     June 30,
2019
     December 31,
2018
 

Assets

     

Cash and cash equivalents

   $ 196,529      $ 329,645  

Restricted cash

     1,698        2,214  
  

 

 

    

 

 

 

Total cash, cash equivalents, and restricted cash

     198,227        331,859  

Owned inventory

     4,073,123        3,965,306  

Real estate not owned

     30,464        15,259  
  

 

 

    

 

 

 

Total real estate inventory

     4,103,587        3,980,565  

Land deposits

     54,214        57,929  

Mortgage loans held for sale

     124,805        181,897  

Derivative assets

     3,055        1,838  

Operating lease right of use assets

     33,399        —    

Prepaid expenses and other assets, net

     79,794        98,225  

Other receivables, net

     68,500        86,587  

Investments in unconsolidated entities

     129,518        140,541  

Deferred tax assets, net

     145,076        145,076  

Property and equipment, net

     84,630        86,736  

Intangible assets, net

     851        1,072  

Goodwill

     152,116        152,116  
  

 

 

    

 

 

 

Total assets

   $ 5,177,772      $ 5,264,441  
  

 

 

    

 

 

 

Liabilities

     

Accounts payable

   $ 162,055      $ 151,586  

Accrued expenses and other liabilities

     242,712        266,686  

Operating lease liabilities

     36,590        —    

Income taxes payable

     1,272        —    

Customer deposits

     172,951        165,432  

Estimated development liability

     36,883        37,147  

Senior notes, net

     1,599,239        1,653,746  

Loans payable and other borrowings

     212,897        225,497  

Revolving credit facility borrowings

     200,000        200,000  

Mortgage warehouse borrowings

     79,458        130,353  

Liabilities attributable to real estate not owned

     30,464        15,259  
  

 

 

    

 

 

 

Total liabilities

   $ 2,774,521      $ 2,845,706  
  

 

 

    

 

 

 

Stockholders’ Equity

     

Total stockholders’ equity

     2,403,251        2,418,735  
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 5,177,772      $ 5,264,441  
  

 

 

    

 

 

 


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Homes Closed and Home Closings Revenue, Net

 

     Three Months Ended June 30,  
     Homes Closed     Home Closings Revenue, Net     Average Selling Price  
(Dollars in thousands)    2019      2018      Change     2019      2018      Change     2019      2018      Change  

East

     1,180        875        34.9   $ 476,144      $ 356,351        33.6   $ 404      $ 407        (0.7 )% 

Central

     746        617        20.9       361,893        294,236        23.0       485        477        1.7  

West

     668        500        33.6       394,224        305,978        28.8       590        612        (3.6
  

 

 

    

 

 

      

 

 

    

 

 

            

Total

     2,594        1,992        30.2   $ 1,232,261      $ 956,565        28.8   $ 475      $ 480        (1.0 )% 
  

 

 

    

 

 

      

 

 

    

 

 

            

 

     Six Months Ended June 30,  
     Homes Closed     Home Closings Revenue, Net     Average Selling Price  
(Dollars in thousands)    2019      2018      Change     2019      2018      Change     2019      2018      Change  

East

     2,034        1,575        29.1   $ 824,313      $ 640,787        28.6   $ 405      $ 407        (0.5 )% 

Central

     1,291        1,051        22.8       614,457        507,701        21.0       476        483        (1.4

West

     1,207        913        32.2       693,372        541,036        28.2       574        593        (3.2
  

 

 

    

 

 

      

 

 

    

 

 

            

Total

     4,532        3,539        28.1   $ 2,132,142      $ 1,689,524        26.2   $ 470      $ 477        (1.5 )% 
  

 

 

    

 

 

      

 

 

    

 

 

            

Net Sales Orders:

 

     Three Months Ended June 30,  
     Net Sales Orders     Sales Value     Average Selling Price  
(Dollars in thousands)    2019      2018      Change     2019      2018      Change     2019      2018      Change  

East

     1,315        894        47.1   $ 533,931      $ 390,007        36.9   $ 406      $ 436        (6.9 )% 

Central

     820        832        (1.4     398,770        393,236        1.4       486        473        2.7  

West

     675        616        9.6       360,295        396,123        (9.0     534        643        (17.0
  

 

 

    

 

 

      

 

 

    

 

 

            

Total

     2,810        2,342        20.0   $ 1,292,996      $ 1,179,366        9.6   $ 460      $ 504        (8.7 )% 
  

 

 

    

 

 

      

 

 

    

 

 

            

 

     Six Months Ended June 30,  
     Net Sales Orders     Sales Value     Average Selling Price  
(Dollars in thousands)    2019      2018      Change     2019      2018      Change     2019      2018      Change  

East

     2,450        1,894        29.4   $ 1,006,267      $ 806,809        24.7   $ 411      $ 426        (3.5 )% 

Central

     1,621        1,587        2.1       769,092        766,742        0.3       474        483        (1.9

West

     1,354        1,304        3.8       730,179        822,759        (11.3     539        631        (14.6
  

 

 

    

 

 

      

 

 

    

 

 

            

Total

     5,425        4,785        13.4   $ 2,505,538      $ 2,396,310        4.6   $ 462      $ 501        (7.8 )% 
  

 

 

    

 

 

      

 

 

    

 

 

            

Sales Order Backlog:

 

     As of June 30,  
     Sold Homes in Backlog     Sales Value     Average Selling Price  
(Dollars in thousands)    2019      2018      Change     2019      2018      Change     2019      2018      Change  

East

     2,054        1,832        12.1   $ 906,518      $ 825,231        9.9   $ 441      $ 450        (2.0 )% 

Central

     1,750        1,587        10.3       886,430        778,782        13.8       507        491        3.3  

West

     1,247        1,323        (5.7     660,017        820,175        (19.5     529        620        (14.7
  

 

 

    

 

 

      

 

 

    

 

 

            

Total

     5,051        4,742        6.5   $ 2,452,965      $ 2,424,188        1.2   $ 486      $ 511        (4.9 )% 
  

 

 

    

 

 

      

 

 

    

 

 

            

Average Active Selling Communities:

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2019      2018      Change     2019      2018      Change  

East

     161        121        33.1     167        123        35.8

Central

     137        124        10.5       140        119        17.6  

West

     59        52        13.5       59        50        18.0  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total

     357        297        20.2     366        292        25.3
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 


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Reconciliation of Non-GAAP Financial Measures

The following tables set forth reconciliations of: (i) adjusted income before income taxes and the related margin, (ii) EBITDA and adjusted EBITDA to net income before allocation to non-controlling interests, and (iii) net homebuilding debt to total capitalization ratio.

Adjusted income before income taxes is a non-GAAP financial measure that reflects our income before income taxes excluding the impact of significant and unusual transactions, which in the quarter were transaction expenses related to our acquisition of AV Homes, and loss on extinguishment of debt. Adjusted EBITDA is a non-GAAP financial measure that measures performance by adjusting net income 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. Net homebuilding debt to capitalization is a non-GAAP financial measure 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).

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. 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, 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 metric assists 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.

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.


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Adjusted Income Before Income Taxes Margin

 

     Three Months Ended June 30,  
(Dollars in thousands)    2019     2018  

Income before income taxes

   $ 110,019     $ 79,285  

Transaction expenses

     1,750       —    

Loss on extinguishment of debt

   $ 2,196     $ —    
  

 

 

   

 

 

 

Adjusted income before income taxes

   $ 113,965     $ 79,285  
  

 

 

   

 

 

 

Total revenues

   $ 1,265,426     $ 980,828  

Income before income taxes margin (EBT Margin)

     8.7     8.1

Adjusted income before income taxes margin

     9.0     8.1

Adjusted EBITDA Reconciliation

 

     Three Months Ended June 30,  
(Dollars in thousands)    2019      2018  

Net income before allocation to non-controlling interests

   $ 81,888      $ 59,292  

Interest income, net

     (958      (276

Amortization of capitalized interest

     24,076        19,770  

Income tax provision

     28,131        19,993  

Depreciation and amortization

     531        993  
  

 

 

    

 

 

 

EBITDA

   $ 133,668      $ 99,772  

Non-cash compensation expense

     3,826        2,747  
  

 

 

    

 

 

 

Adjusted EBITDA

   $ 137,494      $ 102,519  
  

 

 

    

 

 

 

Net Homebuilding Debt to Capitalization Ratio Reconciliation

 

(Dollars in thousands)    As of
June 30, 2019
 

Total debt

   $ 2,091,594  

Less unamortized debt issuance premium, net

     (761

Less mortgage warehouse borrowings

     79,458  
  

 

 

 

Total homebuilding debt

   $ 2,012,897  

Less cash and cash equivalents

     196,529  
  

 

 

 

Net homebuilding debt

   $ 1,816,368  

Total equity

     2,403,251  
  

 

 

 

Total capitalization

   $ 4,219,619  
  

 

 

 

Net homebuilding debt to capitalization ratio

     43.0