UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2017~~March 31, 2018



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-35873

TAYLOR MORRISON HOME CORPORATION

(Exact name of Registrant as specified in its Charter)



Delaware		90-0907433
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



4900 N. Scottsdale Road, Suite 2000 Scottsdale, Arizona		85251
(Address of principal executive offices)		(Zip Code)

(480) 840-8100

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	¨ý	Accelerated filer	ý¨

Non-accelerated filer (Do not check if a smaller reporting company)	¨	Smaller reporting company	¨

		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. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Class		Outstanding as of ~~November 1, 2017~~May 2, 2018
Class A common stock, $0.00001 par value		~~72,364,924~~111,308,197
Class B common stock, $0.00001 par value		~~47,193,672~~868,921

TAYLOR MORRISON HOME CORPORATION

TABLE OF CONTENTS



	Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements of Taylor Morrison Home Corporation (Unaudited)	2

Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017	2

Condensed Consolidated Statements of Operations for the three month period ended March 31, 2018 and ~~nine month periods ended September 30,~~ 2017 ~~and 2016~~	3

Condensed Consolidated Statements of Comprehensive Income for the three month period ended March 31, 2018 and ~~nine month periods ended September 30,~~ 2017 ~~and 2016~~	4

Condensed Consolidated Statement of Stockholders’ Equity for the ~~nine~~three month period ended ~~September 30, 2017~~March 31, 2018	5

Condensed Consolidated Statements of Cash Flows for the ~~nine~~three month period ended ~~September 30,~~March 31, 2018 and 2017 ~~and 2016~~	6

Notes to the Unaudited Condensed Consolidated Financial Statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2422

Item 3. Quantitative and Qualitative Disclosures About Market Risk	3835

Item 4. Controls and Procedures	3936

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	4037

Item 1A. Risk Factors	4037

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4037

Item 3. Defaults Upon Senior Securities	4037

Item 4. Mine Safety Disclosures	4037

Item 5. Other Information	4037

Item 6. Exhibits	4138

SIGNATURES	4240

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TAYLOR MORRISON HOME CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts, unaudited)


	September 30, 2017			December 31, 2016			March 31, 2018			December 31, 2017
Assets
Cash and cash equivalents	$	264,862		$	300,179		$	287,970		$	573,925
Restricted cash	1,315			1,633			1,318			1,578
Total cash, cash equivalents, and restricted cash	266,177			301,812			289,288			575,503
Owned inventory	3,240,664			3,010,967			3,064,520			2,956,709
Real estate not owned under option agreements	3,107			6,252			2,010			2,527
Total real estate inventory	3,243,771			3,017,219			3,066,530			2,959,236
Land deposits	50,879			37,233			61,961			49,768
Mortgage loans held for sale	107,665			233,184			93,019			187,038
Derivative assets	2,037			2,291			2,453			1,584
Prepaid expenses and other assets, net	72,546			73,425			56,971			72,334
Other receivables, net	98,948			115,246			91,830			94,488
Investments in unconsolidated entities	184,817			157,909			196,695			192,364
Deferred tax assets, net	215,666			206,634			118,032			118,138
Property and equipment, net	6,229			6,586			39,044			7,112
Intangible assets, net	2,395			3,189			1,866			2,130
Goodwill	66,198			66,198			66,198			66,198
Total assets	$	4,317,328		$	4,220,926		$	4,083,887		$	4,325,893
Liabilities
Accounts payable	$	146,263		$	136,636		$	142,789		$	140,165
Accrued expenses and other liabilities	190,384			209,202			154,533			201,540
Income taxes payable	15,019			10,528			14,057			4,525
Customer deposits	185,604			111,573			169,823			132,529
Senior notes, net	1,239,211			1,237,484			1,240,362			1,239,787
Loans payable and other borrowings	161,798			150,485			123,161			139,453
Revolving credit facility borrowings	—			—			—			—
Mortgage warehouse borrowings	61,292			198,564			41,522			118,822
Liabilities attributable to real estate not owned under option agreements	3,107			6,252			2,010			2,527
Total liabilities	2,002,678			2,060,724			1,888,257			1,979,348
COMMITMENTS AND CONTINGENCIES (Note 16)
COMMITMENTS AND CONTINGENCIES (Note 15)
Stockholders’ Equity
Class A common stock, $0.00001 par value, 400,000,000 shares authorized, 75,356,556 and 33,340,291 shares issued, 72,307,299 and 30,486,858 shares outstanding as of September 30, 2017 and December 31, 2016, respectively	1			—
Class B common stock, $0.00001 par value, 200,000,000 shares authorized, 47,249,127 and 88,942,052 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively	—			1
Preferred stock, $0.00001 par value, 50,000,000 shares authorized, no shares issued and outstanding as of September 30, 2017 and December 31, 2016	—			—
Class A common stock, $0.00001 par value, 400,000,000 shares authorized, 114,357,454 and 85,449,253 shares issued, 111,308,197 and 82,399,996 shares outstanding as of March 31, 2018 and December 31, 2017, respectively							1			1
Class B common stock, $0.00001 par value, 200,000,000 shares authorized, 868,921 and 37,179,616 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively							—			—
Preferred stock, $0.00001 par value, 50,000,000 shares authorized, no shares issued and outstanding as of March 31, 2018 and December 31, 2017							—			—
Additional paid-in capital	1,142,210			384,709			1,873,932			1,341,873
Treasury stock at cost; 3,049,257 and 2,853,433 shares as of September 30, 2017 and December 31, 2016, respectively	(47,622		)	(43,524		)
Treasury stock at cost, 3,049,257 shares as of March 31, 2018 and December 31, 2017							(47,622		)	(47,622		)
Retained earnings	297,402			228,613			366,749			319,833
Accumulated other comprehensive loss	(17,989		)	(17,989		)	(17,968		)	(17,968		)
Total stockholders’ equity attributable to Taylor Morrison Home Corporation	1,374,002			551,810			2,175,092			1,596,117
Non-controlling interests – joint ventures	1,858			1,525			1,347			1,663
Non-controlling interests – Principal Equityholders	938,790			1,606,867
Non-controlling interests							19,191			748,765
Total stockholders’ equity	2,314,650			2,160,202			2,195,630			2,346,545
Total liabilities and stockholders’ equity	$	4,317,328		$	4,220,926		$	4,083,887		$	4,325,893

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements

TAYLOR MORRISON HOME CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts, unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2018			2017
Home closings revenue, net	$	886,249		$	812,185		$	2,526,830		$	2,271,154		$	732,959		$	751,485
Land closings revenue	4,299			27,418			11,419			44,957			5,168			3,356
Mortgage operations revenue	17,479			13,814			47,362			36,951
Financial services revenue													14,206			14,249
Total revenues	908,027			853,417			2,585,611			2,353,062			752,333			769,090
Cost of home closings	721,637			658,507			2,062,437			1,852,724			594,906			616,295
Cost of land closings	3,002			8,179			7,869			20,497			4,281			2,400
Mortgage operations expenses	12,070			7,877			30,874			22,594
Financial services expenses													10,044			8,702
Total cost of revenues	736,709			674,563			2,101,180			1,895,815			609,231			627,397
Gross margin	171,318			178,854			484,431			457,247			143,102			141,693
Sales, commissions and other marketing costs	61,476			58,277			178,609			165,300			53,698			55,617
General and administrative expenses	33,374			29,944			100,396			91,078			33,318			33,128
Equity in income of unconsolidated entities	(2,787		)	(1,646		)	(6,943		)	(4,734		)	(3,246		)	(1,085		)
Interest income, net	(135		)	(47		)	(314		)	(149		)	(343		)	(90		)
Other expense, net	415			1,935			828			8,602
Other expense/(income), net													437			(351		)
Income before income taxes	78,975			90,391			211,855			197,150			59,238			54,474
Income tax provision	24,282			31,707			65,631			66,698			11,706			18,873
Net income before allocation to non-controlling interests	54,693			58,684			146,224			130,452			47,532			35,601
Net income attributable to non-controlling interests — joint ventures	(427		)	(376		)	(625		)	(856		)
Net (income)/loss attributable to non-controlling interests — joint ventures													(129		)	9
Net income before non-controlling interests — Principal Equityholders	54,266			58,308			145,599			129,596			47,403			35,610
Net income attributable to non-controlling interests — Principal Equityholders	(21,390		)	(43,471		)	(76,810		)	(96,261		)	(2,470		)	(24,134		)
Net income available to Taylor Morrison Home Corporation	$	32,876		$	14,837		$	68,789		$	33,335		$	44,933		$	11,476
Earnings per common share
Basic	$	0.45		$	0.49		$	1.21		$	1.07		$	0.42		$	0.30
Diluted	$	0.45		$	0.49		$	1.21		$	1.07		$	0.41		$	0.30
Weighted average number of shares of common stock:
Basic	72,471			30,427			56,791			31,300			107,195			38,554
Diluted	121,183			120,103			120,991			120,870			114,767			120,478

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements

TAYLOR MORRISON HOME CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, unaudited)

Three Months Ended September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Income before non-controlling interests, net of tax $ 54,693
$ 58,684
$ 146,224
$ 130,452
Other comprehensive loss, net of tax:
Post-retirement benefits adjustments, net of tax —
—
—
(447 )
Other comprehensive loss, net of tax —
—
—
(447 )
Comprehensive income 54,693
58,684
146,224
130,005
Comprehensive income attributable to non-controlling interests — joint ventures (427 ) (376 ) (625 ) (856 )
Comprehensive income attributable to non-controlling interests — Principal Equityholders (21,390 ) (43,471 ) (76,810 ) (95,932 )
Comprehensive income available to Taylor Morrison Home Corporation $ 32,876
$ 14,837
$ 68,789
$ 33,217



	Three Months Ended March 31,
	2018			2017
Income before non-controlling interests, net of tax	$	47,532		35,601
Comprehensive (income)/loss attributable to non-controlling interests — joint ventures	(129		)	9
Comprehensive income attributable to non-controlling interests — Principal Equityholders	(2,470		)	(24,134	)
Comprehensive income available to Taylor Morrison Home Corporation	$	44,933		11,476

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

TAYLOR MORRISON HOME CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(In thousands, except share data, unaudited)


	Common Stock																																									Common Stock
	Class A						Class B							Additional Paid-in Capital				Treasury Stock						Stockholders' Equity																		Class A					Class B						Additional Paid-in Capital				Treasury Stock						Stockholders' Equity
	Shares			Amount			Shares			Amount				Amount				Shares		Amount				Retained Earnings			Accumulated Other Comprehensive Loss				Non-controlling Interest - Joint Venture				Non-controlling Interest - Principal Equityholders				Total Stockholders’ Equity			Shares		Amount			Shares			Amount			Amount				Shares		Amount				Retained Earnings			Accumulated Other Comprehensive Loss				Non-controlling Interest - Joint Venture				Non-controlling Interests⁽¹⁾				Total Stockholders’ Equity
Balance – December 31, 2016	30,486,858			$	—		88,942,052			$	1			$	384,709			2,853,433		$	(43,524	)		$	228,613		$	(17,989	)		$	1,525			$	1,606,867			$	2,160,202
Balance – December 31, 2017																																										82,399,996		$	1		37,179,616			$	—		$	1,341,873			3,049,257		$	(47,622	)		$	319,833		$	(17,968	)		$	1,663			$	748,765			$	2,346,545
Cumulative-effect adjustment to Retained Earnings related to adoption of ASU No. 2014-09 (see Note 2)																																																															1,983															1,983
Net income	—			—			—			—				—				—		—				68,789			—				625				76,810				146,224			—		—			—			—			—				—		—				44,933			—				129				2,470				47,532
Exchange of New TMM Units and corresponding number of Class B Common Stock	191,333			—			(191,333	)		—				—				—		—				—			—				—				—				—			15,000		—			(15,000	)		—			1,265				—		—				—			—				—				(1,265		)		—
Cancellation of forfeited New TMM Units and corresponding number of Class B Common Stock	—			—			(1,592	)		—				—				—		—				—			—				—				—				—
TMHC repurchase and cancellation of New TMM Units from Principal Equityholders																																										—		—			(7,588,771	)		—			(201,775		)		—		—				—			—				—				—				(201,775		)
Exercise of stock options	265,167			—			—			—				4,791				—		—				—			—				—				—				4,791			37,060		—			—			—			580				—		—				—			—				—				—				580
Issuance of restricted stock units, net of shares withheld for tax	59,765		—	—		—	—		—	—			—	(307		)	—	—	—	—			—	—		—	—			—	—			—	—			—	(307		)	149,217	—	—		—	—		—	—		—	(1,482		)	—	—	—	—			—	—		—	—			—	—			—	—			—	(1,482		)
Repurchase of common stock	(195,824	)		—			—			—				—				195,824		(4,098		)		—			—				—				—				(4,098		)
Exchange of (repurchase) of B shares from secondary offerings	41,500,000			1			—			—				748,096				—		—				—			—				—				—				748,097
Repurchase of New TMM Units from principal equityholders	—			—			(41,500,000	)		(1		)		—				—		—				—			—				—				(750,193		)		(750,194		)
Exchange of B shares from secondary offerings																																										28,706,924		—			—			—			730,112				—		—				—			—				—				—				730,112
Repurchase of New TMM Units from Principal Equityholders																																										—		—			(28,706,924	)		—			—				—		—				—			—				—				(730,963		)		(730,963		)
Share based compensation	—			—			—			—				4,921				—		—				—			—				—				5,306				10,227			—		—			—			—			3,359				—		—				—			—				—				184				3,543
Changes in non-controlling interests of consolidated joint ventures	—			—			—			—				—				—		—				—			—				(292		)		—				(292		)	—		—			—			—			—				—		—				—			—				(445		)		—				(445		)
Balance – September 30, 2017	72,307,299			$	1		47,249,127			$	—			$	1,142,210			3,049,257		$	(47,622	)		$	297,402		$	(17,989	)		$	1,858			$	938,790			$	2,314,650
Balance – March 31, 2018																																										111,308,197		$	1		868,921			$	—		$	1,873,932			3,049,257		$	(47,622	)		$	366,749		$	(17,968	)		$	1,347			$	19,191			$	2,195,630

⁽¹⁾As of March 31, 2018, our Principal Equityholders' had 0.0% ownership and the remaining Non-controlling Interest relates to management and director ownership. Refer to Note 10 - Stockholders' Equity for discussion regarding our equity offering transactions during the three months ended March 31, 2018.

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

TAYLOR MORRISON HOME CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income before allocation to non-controlling interests	$	146,224		$	130,452		$	47,532		$	35,601
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in income of unconsolidated entities	(6,943		)	(4,734		)	(3,246		)	(1,085		)
Stock compensation expense	10,227			8,959			3,543			3,012
Distributions of earnings from unconsolidated entities	4,666			2,538			541			1,336
Depreciation and amortization	2,994			3,000			5,015			1,071
Debt issuance costs amortization	2,864			2,888			878			955
Contingent consideration	766			3,520			146			223
Deferred income taxes	(9,032		)	(969		)	106			—
Changes in operating assets and liabilities:
Real estate inventory and land deposits	(243,343		)	(103,758		)	(120,004		)	(47,099		)
Mortgages held for sale, prepaid expenses and other assets	141,813			76,281			78,862			130,789
Customer deposits	74,031			44,780			37,294			40,178
Accounts payable, accrued expenses and other liabilities	4,017			(9,415		)	(59,494		)	(33,747		)
Income taxes payable	4,491			(11,119		)	9,532			16,677
Net cash provided by operating activities	132,775			142,423			705			147,911
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(1,843		)	(934		)	(2,695		)	(275		)
Payments for business acquisitions	—			(52,819		)
Distributions of capital from unconsolidated entities	4,223			3,546			492			403
Investments of capital into unconsolidated entities	(28,854		)	(24,509		)	(2,118		)	(14,561		)
Net cash (used in) investing activities	(26,474		)	(74,716		)	(4,321		)	(14,433		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in loans payable and other borrowings	8,644			55,720			1,823			—
Repayments of loans payable and other borrowings	(11,305		)	(65,075		)	(2,884		)	(2,622		)
Borrowings on revolving credit facility	—			255,000
Payments on revolving credit facility	—			(155,000		)
Borrowings on mortgage warehouse	567,922			782,001			145,925			190,424
Repayment on mortgage warehouse	(705,194		)	(874,279		)	(223,225		)	(319,842		)
Payment of contingent consideration	—			(3,100		)	(265		)	—
Proceeds from stock option exercises	4,791			—			580			411
Proceeds from issuance of shares from secondary offerings	882,306			—			767,116			418,106
Repurchase of shares from principal equity holders	(884,403		)	—
Repurchase of common stock, net	(4,098		)	(28,543		)
TMHC repurchase and cancellation of New TMM Units from principal equityholders							(201,775		)
Repurchase of shares from principal equityholders							(767,967		)	(418,936		)
Payment of taxes related to net share settlement of equity awards	(307		)	—			(1,482		)	(282		)
Distributions to non-controlling interests of consolidated joint ventures, net	(292		)	(60		)	(445		)	(390		)
Net cash (used in) financing activities	(141,936		)	(33,336		)	(282,599		)	(133,131		)
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS	$	(35,635	)	$	34,371		$	(286,215	)	$	347
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period	301,812			127,468			575,503			301,812
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period	$	266,177		$	161,839		$	289,288		$	302,159
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid, net	$	(70,172	)	$	(78,786	)	$	(2,069	)	$	(2,195	)
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
Change in loans payable issued to sellers in connection with land purchase contracts	$	55,151		$	55,720		$	7,829		$	20,381
Change in inventory not owned	$	(3,145	)	$	(7,309	)	$	(517	)	$	(1,570	)
Original accrual of contingent consideration for business combinations	$	—		$	380
Change in Prepaid expenses and other assets, net due to adoption of ASU 2014-09							$	(32,004	)	$	—
Change in Property and equipment, net due to adoption of ASU 2014-09							$	32,004		$	—

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

TAYLOR MORRISON HOME CORPORATION

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS

Organization and Description of the Business - Taylor Morrison Home Corporation ~~(referred~~“TMHC” through its subsidaries (with TMHC referred to herein as ~~“TMHC,”~~ “we,” “our,” “the Company” and “us”), ~~through its divisions and segments,~~ owns and operates a residential homebuilding business and is a developer of lifestyle communities. As of ~~September 30, 2017,~~March 31, 2018, we operated in the states of Arizona, California, Colorado, Florida, Georgia, Illinois, North and South Carolina, and Texas. Our Company serves a wide array of consumer groups from coast to coast, including first time, move-up, luxury, and ~~55 plus buyers.~~active adult. Our homebuilding company operates under our Taylor Morrison and Darling Homes brand names. Our business is organized into multiple homebuilding operating components, and a financial services component (formerly called our mortgage operating ~~component,~~component), all of which are managed as four reportable segments: East, Central, West, and ~~Mortgage Operations.~~Financial Services. The communities in our homebuilding segments offer single family attached and detached homes. We are the general contractors for all real estate projects and retain subcontractors for home construction and site development. Our ~~Mortgage Operations~~Financial Services reportable segment provides ~~financial~~our customers with mortgage services ~~to customers~~ through our wholly owned mortgage subsidiary, operating as Taylor Morrison Home Funding, LLC (“TMHF”), and title services through our wholly owned title services subsidiary, Inspired Title Services, LLC (“Inspired Title”).

~~During the quarter ended March 31, 2017, we realigned our homebuilding operating divisions within our existing segments based on geographic location and management's long term strategic plans.~~ As a result of the completion of our initial public offering (“IPO”) on April 12, 2013 and a series of transactions pursuant to a Reorganization Agreement dated as of April 9, 2013, TMHC was formed and became the owner and general partner of TMM Holdings II Limited Partnership (“New TMM”), our direct subsidiary. New TMM was formed by a consortium of investors comprised of affiliates of TPG Global, LLC (the “TPG Entities” or “TPG”), investment funds managed by Oaktree Capital Management, L.P. (“Oaktree”) or their respective subsidiaries (together, the “Oaktree Entities”), and affiliates of JH Investments, Inc. (“JH” and together with the TPG Entities and Oaktree Entities, the “Principal Equityholders” and, following JH's February 2017 sale of its equity interest in us, the “Remaining Principal Equityholders” ).

Since January 2017, we have completed seven public offerings for an aggregate of 80.2 million shares of our Class A Common Stock, using all ~~historical periods presented~~of the net proceeds therefrom to repurchase our Principal Equityholders' indirect interest in TMHC. In January 2018, we also purchased an additional 7.6 million shares of our Class B Common Stock from our Principal Equityholders. As a result of these offerings and repurchases, the Principal Equityholders no longer held any ownership in the ~~segment information have been reclassified~~Company as of March 31, 2018. Refer to ~~give effect to this segment realignment.~~Note 10. Stockholders' Equity for discussion regarding our equity offering transactions.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation — The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in our ~~2016~~2017 Annual Report on Form 10-K (the “Annual Report”). In the opinion of management, the accompanying Unaudited Condensed Consolidated Financial Statements include all normal and recurring adjustments that are considered necessary for the fair presentation of our results for the interim periods presented. Results for interim periods are not necessarily indicative of results to be expected for a full fiscal year.

~~Unless otherwise stated, amounts are shown~~Non-controlling interests –During the three months ended March 31, 2018, we completed sales of our Class A Common Stock in ~~U.S. dollars. Assets~~registered public offerings, totaling 28.7 million shares. We used all of the net proceeds from the public offerings to purchase partnership units in New TMM (“New TMM Units”) along with shares of our Class B Common Stock, held by our Remaining Principal Equityholders. In addition, in a series of transactions following each public offering, the Company purchased 3.8 million shares of Class B common stock directly from our Remaining Principal Equityholders on both January 8, 2018 and ~~liabilities recorded in foreign currencies are translated at the exchange rate~~January 17, 2018, for an aggregate total of 7.6 million shares purchased. As a result of all net proceeds being distributed to our Remaining Principal Equityholders, we adjusted Non-controlling interests and Additional paid-in capital on the balance sheet date, and revenues and expenses are translated at average rates of exchange prevailing during the period. Translation adjustments resulting from this process are recorded to accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets and Condensed Consolidated Statement of ~~Stockholders’ Equity.~~

~~Non-controlling interests~~ ~~– In connection with a series of transactions consummated at~~Stockholders' Equity to reflect the time of the Company’s IPO (the “Reorganization Transactions”), the Company became the sole owner of the general partner of TMM Holdings II Limited Partnership (“New TMM”). As the sole owner of the general partner of New TMM, the Company exercises exclusive and complete control over New TMM. Consequently, the Company consolidates New TMM and records a non-controlling interestchange in the Condensed Consolidated Balance Sheets for the economic interests in New TMM, that are directly or indirectly held by a consortium of investors comprised of affiliates of TPG Global, LLC (the “TPG Entities” or “TPG”), investment funds managed by Oaktree Capital Management, L.P. (“Oaktree”) or their respective subsidiaries (the “Oaktree Entities”), and affiliates of JH Investments, Inc. (“JH” and together with the TPG Entities and Oaktree Entities, the “Principal Equityholders”) or by members of management and members of the Board of Directors.ownership. Refer to Note ~~11-~~10- Stockholders' Equity for discussion regarding our equity offering transactions during the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2018.

~~Reclassifications~~Joint Ventures - ~~Prior period amounts for cash, cash equivalents, and restricted cash~~We consolidate certain joint ventures in accordance with Accounting Standards Codification (“ASC”) Topic 810, "“Consolidation.” The income from the percentage of the joint venture not owned by us in presented as “Net income attributable to non-controlling interests - joint ventures” on the ~~Condensed~~ Consolidated Statements of Cash Flows have been reclassified to conform with current period financial statement presentation as a result of adopting Accounting Standards Update ("ASU") 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash.Operations.

Use of Estimates — The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Significant estimates include real estate development costs to complete, valuation of real estate, valuation of acquired assets, valuation of goodwill, valuation of equity awards, valuation allowance on deferred tax assets and reserves for warranty and self-insured risks. Actual results could differ from those estimates.

~~Non-controlling Interests – Principal Equityholders~~ — Immediately prior to our IPO, as part of the Reorganization Transactions, the existing holders of limited partnership interests of TMM Holdings Limited Partnership (“TMM Holdings”) exchanged their limited partnership interests for limited partnership interests of New TMM (“New TMM Units”). For each New TMM Unit received in the exchange, the holders of New TMM Units also received a corresponding number of shares of our Class B Common Stock (the “Class B Common Stock”). Our Class B Common Stock has voting rights but no economic rights. One share of Class B Common Stock, together with one New TMM Unit, is exchangeable into one share of our Class A Common Stock in accordance with the terms of the Exchange Agreement, dated as of April 9, 2013, among the Company, New TMM and the holders of Class B Common Stock and New TMM Units.

During the nine months ended September 30, 2017, we completed multiple sales of our Class A Common Stock in registered public offerings, totaling 41.5 million shares. We used all of the net proceeds from the public offerings to purchase partnership units in New TMM, our direct subsidiary, along with shares of our Class B Common Stock, held by our Principal Equityholders. As a result of all net proceeds being distributed to our Principal Equityholders, we adjusted Non-controlling interests - Principal Equityholders and Additional paid-in capital on the Condensed Consolidated Balance Sheets and Condensed Consolidated Statement of Stockholders' Equity to reflect the change in ownership. The aggregate number of partnership units and corresponding shares of Class B Common Stock we purchased was equal to the number of shares of Class A Common Stock sold in the public offerings. Refer to ~~Note 11- Stockholders' Equity~~ ~~for discussion regarding our equity offering transactions during the nine months ended September 30, 2017.~~

Real Estate Inventory ~~—We~~— Inventory consists of raw land, land under development, homes under construction, completed homes, and model homes, all of which are stated at cost. In addition to direct carrying costs, we also capitalize interest, real estate taxes, and related development costs that benefit the entire community, such as field construction supervision and related direct overhead. Home vertical construction costs are accumulated and charged to cost of sales at the time of home closing using the specific identification method. Land acquisition, development, interest, real estate taxes and overhead are allocated to homes and units using the relative sales value method. These costs are capitalized to inventory from the point development begins to the point construction is completed. Changes in estimated costs to be incurred in a community are generally allocated to the remaining lots on a prospective basis. For those communities that have been temporarily closed or development has been discontinued, we do not allocate interest or other costs to the community’s inventory until activity resumes. Such costs are expensed as incurred.

We capitalize qualifying interest costs to inventory during the development and construction periods. Capitalized interest is charged to cost of sales when the related inventory is delivered or when the related inventory is charged to cost of sales.

We assess the recoverability of our ~~land~~ inventory in accordance with the provisions of ASC Topic 360, Property, Plant, and Equipment. We review our real estate inventory for indicators of impairment by community during each reporting period. If indicators of impairment are present for a community, we first perform an undiscounted cash flow analysis to determine if the carrying value of the assets in that community exceeds the expected undiscounted cash flows. Generally, if the carrying value of the assets exceeds their estimated undiscounted cash flows, then the assets are deemed to be impaired and are recorded at fair value as of the ~~assessment.~~assessment date. Our determination of fair value is based on a discounted cash flow model which includes projections and estimates relating to sales prices, construction costs, sales pace, and other factors. Changes in these expectations may lead to a change in the outcome of our impairment analysis, and actual results may also differ from our assumptions. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2018 and 2017, ~~and 2016,~~ no impairment charges were recorded.

In certain cases, we may elect to cease development and/or marketing of an existing community if we believe the economic performance of the community would be maximized by deferring development for a period of time to allow for market conditions to improve. The decision may be based on financial and/or operational metrics as determined by us. If we decide to cease developing a project, we will evaluate the project for impairment and then cease future development and marketing activity until such a time when we believe that market conditions have improved and economic performance can be maximized. Our assessment of the carrying value of our assets typically includes subjective estimates of future performance, including the timing of when development will recommence, the type of product to be offered, and the margin to be realized. In the future, some of these inactive communities may be re-opened while others may be sold. As of March 31, 2018 and December 31, 2017, we had two inactive projects with a carrying value of $7.3 million and $10.7 million, respectively, in the West homebuilding segment. There were no inactive projects in our Central or East homebuilding segments as of March 31, 2018 or December 31, 2017.

In the ordinary course of business, we enter into various specific performance agreements to acquire lots. Real estate not owned under these agreements is consolidated into real estate inventory with a corresponding liability in liabilities attributable to real estate not owned under option agreements in the Condensed Consolidated Balance Sheets.

Investments in Unconsolidated Entities —We evaluate our investments in unconsolidated entities for indicators of impairment. A series of operating losses of an investee or other factors may indicate that a decrease in value of our investment in the unconsolidated entity has occurred which is other-than-temporary. The amount of impairment recognized is the excess of the investment’s carrying amount over its estimated fair value. Additionally, we consider various qualitative factors to determine if a decrease in the value of the investment is other-than-temporary. These factors include age of the venture, stage in its life cycle, our intent and ability to recover our investment in the unconsolidated entity, financial condition and long-term prospects of the unconsolidated entity, short-term liquidity needs of the unconsolidated entity, trends in the general economic environment of the land, entitlement status of the land held by the unconsolidated entity, overall projected returns on investment, defaults under contracts with third parties (including bank debt), recoverability of the investment through future

cash flows and relationships with the other partners. If the Company believes that the decline in the fair value of the investment is temporary, then no impairment is recorded. We did not record any impairment charges for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2018 or ~~2016.~~2017.

Revenue Recognition

Topic 606

In January 2018, we adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which provides new guidance for revenue recognition and elected to use the modified retrospective approach to account for prior periods. The standard's core principle requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. The new guidance does not materially impact our home closings revenue, net, land closings revenue or financial services revenue based on our current operations, customer contracts, and policies. However, the following changes were made to conform to the new guidance:

Forfeited customer deposits were previously classified as Other expense/(income), net on the condensed consolidated statement of operations. Under Topic 606, these are now considered revenue and recorded in Home closings revenue, net — as of January 1, 2018. Prior period balances for forfeited customer deposits were not reclassified and are not material to the condensed consolidated financial statements.

Certain costs related to sales offices and model homes were previously capitalized and presented within Prepaid expenses and other assets, net on the condensed consolidated balance sheet and amortized through Sales, commissions and other marketing costs on the condensed consolidated statement of operations. Beginning January 1, 2018, these costs have been reclassified to Property and equipment, net on the condensed consolidated balance sheet and depreciated through Sales, commissions and other marketing costs on the condensed consolidated statement of operations. A total of $32.0 million of sales office and model homes costs were reclassified from Prepaid expenses and other assets to Property and equipment as of January 1, 2018. As we elected the modified retrospective approach to account for prior periods, the balance of any capitalized sales office and model home costs required to be expensed under Topic 606 was recorded as an adjustment to beginning retained earnings in the first quarter of 2018 and reflected as an approximate $2.0 million cumulative effect adjustment to retained earnings in the condensed consolidated statement of stockholders' equity.

Home and land closings revenue

Under Topic 606, the following steps are applied to determine the proper home closings revenue and land closings revenue recognition: (1) we identify the contract(s) with our customer; (2) we identify the performance obligations in the contract; (3) we determine the transaction price; (4) we allocate the transaction price to the performance obligations in the contract; and (5) we recognize revenue when (or as) we satisfy the performance obligation. We have one contract, with one performance obligation, with each customer to build and deliver the home purchased (or develop and deliver land). We have only one performance obligation, to deliver a completed home (or developed land). Based on the application of the five steps, the following summarizes the timing and manner of home and land sales revenue:

Revenue from closings of residential real estate is ~~recorded using~~recognized when closings have occurred, the ~~completed-contract method~~buyer has made the required minimum down payment, obtained necessary financing, the risks and rewards of ~~accounting at the time each home is delivered, title and possession~~ownership are transferred to the buyer, and we have no ~~significant~~ continuing involvement with the ~~home, risk~~property, which is generally upon the close of ~~loss has transferred, the buyer has demonstrated sufficient investment in the property, and the receivable, if any, from the homeowner or escrow agent~~escrow. Revenue is ~~not subject to future subordination.~~

We typically grant our homebuyers certain sales incentives, including cash discounts, incentives on options included in the home, option upgrades, and seller-paid financing or closing costs. Incentives and discounts are accounted for as a reduction in the sales price of the home and home closings revenue is shownreported net of ~~discounts. We also receive rebates from certain vendors~~any discounts and ~~these rebates are accounted for as a reduction to cost of home closings.~~incentives.

~~Land closings revenue~~ — Revenue from land sales is recognized when a significant down payment is received, title passes and collectability of the receivable is ~~transferred to the buyer, there is~~reasonably assured, and we have no ~~significant~~ continuing involvement ~~and the buyer has demonstrated sufficient investment in~~with the property, ~~sold. If~~which is generally upon the ~~buyer has not made an adequate investment in the property, the profit on such sales is deferred until these conditions are met.~~close of escrow.

Financial services revenue

Mortgage operations ~~revenue~~ —and hedging activity related to financial services are not within the scope of Topic 606 and therefore there was no change to our accounting policies related to such activities. Loan origination fees (including title fees, points, and closing costs) are recognized at the time the related real estate transactions are completed, usually upon the close of escrow. All of the loans TMHF originates are sold to third party investors within a short period of time, on a non-recourse basis. Gains and losses from the sale of mortgages are recognized in accordance with ASC Topic 860-20, Sales of Financial Assets. TMHF does not have continuing involvement with the transferred assets, therefore, we derecognize the mortgage loans at time of sale, based on the difference between the selling price and carrying value of the related loans upon sale, recording a gain/loss on sale in the period of sale. Also included in ~~mortgage operations~~financial services revenue/expenses is the realized and unrealized gains and ~~loss~~losses from hedging instruments.

Recently Issued Accounting Pronouncements — In ~~January 2017,~~February 2016, the Financial Accounting Standards Board (“FASB”) ~~issued ASU No. 2017-04,~~ ~~Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~ (“ASU 2017-04”). ASU 2017-04 eliminates Step 2 from the goodwill impairment test. This change will allow an entity to avoid calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination, thus reducing the cost and complexity of evaluating goodwill for impairment. This amendment will be effective for us in our fiscal year beginning January 1, 2020. We do not believe the adoption of ASU 2017-04 will have a material impact on our condensed consolidated financial statements and disclosures.

~~In January 2017, the FASB issued ASU 2017-01,~~ ~~Business Combinations (Topic 805): Clarifying the Definition of a Business~~ ("ASU 2017-01"). ASU 2017-01 provides clarification on the definition of a business by providing a screen to determine when a set of assets is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set of assets is not a business. This screen is expected to reduce the number of transactions that need to be further evaluated. This amendment will be effective for us in our fiscal year beginning January 1, 2018. As ASU 2017-01 is not retroactive, we do not believe such guidance will have a significant impact on our condensed consolidated financial statements and disclosures. Once adopted, we will evaluate the impact ASU 2017-01 will have on our condensed consolidated financial statements and disclosures in the event of future acquisitions.

~~In February 2016, the FASB~~ issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 primarily impacts off-balance sheet operating leases and will require such leases, with the exception of short-term leases, to be recorded on the balance sheet. Lessor accounting is not significantly impacted by the new guidance, however certain updates were made to align lessee and lessor treatment. ASU 2016-02 will be effective for us in our fiscal year beginning January 1, 2019. The guidance requires a modified retrospective approach for all existing leases at the date of initial adoption. We do not believe the adoption of ASU 2016-02 will have a material impact on our condensed consolidated financial statements and disclosures.

~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~ (“ASU 2014-09”), which provides guidance for revenue recognition. ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets and supersedes the revenue recognition requirements in ASC Topic 605, ~~Revenue Recognition, and most industry-specific guidance. This ASU also supersedes some cost guidance included in ASC Subtopic 605-35,~~ ~~Revenue Recognition-Construction-Type and Production-Type Contracts~~. The standard’s core principle is that an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. In doing so, entities will generally need to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 has been deferred and will be effective beginning January 1, 2018 and, at that time, we will adopt the new standard under the modified retrospective approach.

We do not believe the adoption of this pronouncement will have a material impact on our condensed consolidated financial statements and disclosures. We will have new disclosures as required by the new standard. We believe the guidance relating to the cost to obtain a contract component of the new standard will have an impact on our condensed consolidated financial statements and disclosures. We also believe the adoption of this pronouncement will not materially affect our post-adoption revenue recognition since we have limited circumstances where we have separate performance obligations within our contracts.

3. ~~BUSINESS COMBINATIONS~~

On January 8, 2016, we acquired Acadia Homes, an Atlanta based homebuilder, for total consideration of $83.6 million (including $19.7 million of seller financing holdbacks and contingent consideration). In accordance with ASC Topic 805~~, Business Combinations~~, all material assets and liabilities, including contingent consideration were measured and recognized at fair value as of the date of the acquisition to reflect the purchase price paid, which resulted in goodwill for the transaction.

Unaudited pro forma results of the business combination as if Acadia Homes had been acquired on January 1, 2016 have not been provided as they are immaterial to the total Company's consolidated results of operations.

We determined the estimated fair value of real estate inventory on a community-by-community basis primarily using the sales comparison and income approaches. The sales comparison approach was used for all inventory in process. The income approach derives a value using a discounted cash flow for income-producing real property. This approach was used exclusively for finished lots. The income approach using discounted cash flows was also used to value lot option contracts acquired. These estimated cash flows and ultimate valuation are significantly affected by the discount rate, estimates related to expected average selling prices and sales incentives, expected sales paces and cancellation rates, expected land development and construction timelines, and anticipated land development, construction, and overhead costs, all of which may vary significantly between communities.

The Company has completed a final allocation of purchase price as of the acquisition date for Acadia Homes. The following is a summary of the fair value of assets acquired, liabilities assumed, and liabilities created:

(In thousands) Acadia Homes
Acquisition Date January 8, 2016
Assets acquired
Real estate inventory $ 76,152
Land deposits 984
Prepaid expenses and other assets 816
Property and equipment 204
Goodwill ⁽¹⁾
8,500
Total assets $ 86,656

Less liabilities assumed
Accrued expenses and other liabilities $ 2,562
Customer deposits 463
Net assets acquired $ 83,631

⁽¹⁾~~Goodwill is fully deductible for tax purposes. The goodwill was allocated to our East homebuilding segment.~~

4. EARNINGS PER SHARE

Basic earnings per common share is computed by dividing net income available to TMHC by the weighted average number of shares of Class A Common Stock outstanding during the period. Diluted earnings per share gives effect to the potential dilution that could occur if all shares of Class B Common Stock and their corresponding New TMM Units were exchanged for shares of Class A Common Stock and if all outstanding dilutive equity awards to issue shares of Class A Common Stock were exercised or settled.

The following is a summary of the components of basic and diluted earnings per share (in thousands, except per share amounts):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2017		2016		2017		2016		2018		2017
Numerator:
Net income available to TMHC – basic	$	32,876	$	14,837	$	68,789	$	33,335	$	44,933	$	11,476
Net income attributable to non-controlling interest – Principal Equityholders	21,390		43,471		76,810		96,261		2,470		24,134
Loss fully attributable to public holding company	136		19		288		191		165		27
Net income – diluted	$	54,402	$	58,327	$	145,887	$	129,787	$	47,568	$	35,637
Denominator:
Weighted average shares – basic (Class A)	72,471		30,427		56,791		31,300		107,195		38,554
Weighted average shares – Principal Equityholders’ non-controlling interest (Class B)	47,253		89,053		62,842		89,089		5,849		81,015
Restricted stock units	1,121		522		1,026		463		1,126		703
Stock Options	338		101		332		18		597		206
Weighted average shares – diluted	121,183		120,103		120,991		120,870		114,767		120,478
Earnings per common share – basic:
Net income available to Taylor Morrison Home Corporation	$	0.45	$	0.49	$	1.21	$	1.07	$	0.42	$	0.30
Earnings per common share – diluted:
Net income available to Taylor Morrison Home Corporation	$	0.45	$	0.49	$	1.21	$	1.07	$	0.41	$	0.30

We excluded a total weighted average of ~~1,685,938~~481,705 and ~~1,602,509~~1,847,982 outstanding anti-dilutive stock options and unvested restricted stock units (“RSUs”) ~~and 1,926,836 and 1,578,969 outstanding stock options and unvested RSUs~~ from the calculation of earnings per share for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2018 and 2017, ~~and 2016,~~ respectively.

The shares of Class B Common Stock have voting rights but do not have economic rights or rights to dividends or distributions on liquidation and, therefore, are not participating securities. Accordingly, Class B Common Stock is not included in basic earnings per share.

5.4. REAL ESTATE INVENTORY AND LAND DEPOSITS

Inventory consists of the following (in thousands):


	As of				As of
	September 30, 2017		December 31, 2016		March 31, 2018		December 31, 2017
Real estate developed and under development	$	2,171,670	$	2,074,651	$	2,140,110	$	2,130,263
Real estate held for development or held for sale⁽¹⁾	143,585		183,638		54,591		76,552
Operating communities ⁽²⁾	825,946		650,036		774,485		659,398
Capitalized interest	99,463		102,642		95,334		90,496
Total owned inventory	3,240,664		3,010,967		3,064,520		2,956,709
Real estate not owned under option agreements	3,107		6,252		2,010		2,527
Total real estate inventory	$	3,243,771	$	3,017,219	$	3,066,530	$	2,959,236

⁽¹⁾ Real estate held for development or held for sale includes properties which are not in active production. This includes raw land recently purchased or awaiting entitlement, ~~future phases of current projects that will be developed as prior phases sell out~~properties where we have ceased development and/or marketing, and long-term strategic assets.

⁽²⁾ Operating communities consist of all vertical construction costs relating to homes in progress and completed homes for all active production of inventory.

The development status of our land inventory is as follows (dollars in thousands):


	As of						As of
	September 30, 2017			December 31, 2016			March 31, 2018			December 31, 2017
	Owned Lots	Book Value of Land and Development		Owned Lots	Book Value of Land and Development		Owned Lots	Book Value of Land and Development		Owned Lots	Book Value of Land and Development
Raw	7,922	$	349,467	7,142	$	403,902	6,954	$	344,248	7,703	$	338,642
Partially developed	5,526	526,904		8,037	501,496		5,849	366,160		5,811	543,200
Finished	12,828	1,426,683		11,318	1,336,709		12,504	1,477,031		11,644	1,314,243
Long-term strategic assets	893	12,201		1,489	16,182		706	7,262		763	10,730
Total	27,169	$	2,315,255	27,986	$	2,258,289	26,013	$	2,194,701	25,921	$	2,206,815

Land Deposits — We provide deposits related to land options and land purchase contracts, which are capitalized when paid and classified as land deposits until the associated property is purchased.

As of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, we had the right to purchase ~~7,049~~4,144 and ~~7,583~~5,037 lots under land option purchase contracts, respectively, for an aggregate purchase price of ~~$520.8~~$362.5 million and ~~$542.6~~$405.3 million, ~~as of September 30, 2017 and December 31, 2016,~~ respectively. We do not have title to the properties, and the creditors generally have no recourse against the Company. As of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, our exposure to loss related to our option contracts with third parties and unconsolidated entities ~~consist~~consisted of non-refundable ~~option~~ deposits totaling ~~$50.9~~$57.4 million and ~~$37.2~~$49.8 million, respectively, in land deposits related to land options and land purchase contracts.

Capitalized Interest — Interest capitalized, incurred and amortized is as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2018			2017
Interest capitalized - beginning of period	$	100,490		$	111,063		$	102,642		$	105,148		$	90,496		$	102,642
Interest incurred	20,762			21,851			62,187			66,296			19,686			20,714
Interest amortized to cost of home closings	(21,789		)	(21,502		)	(65,366		)	(60,032		)	(14,848		)	(20,297		)
Interest capitalized - end of period	$	99,463		$	111,412		$	99,463		$	111,412		$	95,334		$	103,059

6.5. INVESTMENTS IN UNCONSOLIDATED ENTITIES

We have investments in a number of joint ventures with related and unrelated third parties, with ownership interests up to 50.0%. These entities are generally involved in real estate development, homebuilding ~~and~~and/or mortgage lending activities. Some of these joint ventures develop land for the sole use of the joint venture participants, including us, and others develop

land for sale to the joint venture participants and to unrelated builders. Our share of the joint venture profit relating to lots we purchase from the joint ventures is deferred until homes are delivered by us and title passes to a homebuyer.

Summarized, unaudited combined financial information of unconsolidated entities that are accounted for by the equity method is as follows (in thousands):


	As of				As of
	September 30, 2017		December 31, 2016		March 31, 2018		December 31, 2017
Assets:
Real estate inventory	$	736,746	$	614,441	$	623,476	$	627,841
Other assets	122,036		171,216		146,557		138,341
Total assets	$	858,782	$	785,657	$	770,033	$	766,182
Liabilities and owners’ equity:
Debt	$	298,347	$	277,934	$	184,760	$	193,770
Other liabilities	25,585		22,603		26,031		27,556
Total liabilities	323,932		300,537		210,791		221,326
Owners’ equity:
TMHC	184,817		157,909		196,695		192,364
Others	350,033		327,211		362,547		352,492
Total owners’ equity	534,850		485,120		559,242		544,856
Total liabilities and owners’ equity	$	858,782	$	785,657	$	770,033	$	766,182


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2018			2017
Revenues	$	60,020		$	45,219		$	147,273		$	94,881		$	59,074		$	22,994
Costs and expenses	(47,505		)	(38,618		)	(118,546		)	(78,838		)	(47,332		)	(20,104		)
Income of unconsolidated entities	$	12,515		$	6,601		$	28,727		$	16,043		$	11,742		$	2,890
TMHC’s share in income of unconsolidated entities	$	2,787		$	1,646		$	6,943		$	4,734		$	3,246		$	1,085
Distributions from unconsolidated entities	$	2,098		$	2,755		$	8,889		$	6,084		$	1,033		$	1,739

7.6. ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following (in thousands):


	As of September 30, 2017		As of December 31, 2016		As of March 31, 2018		As of December 31, 2017
Real estate development costs to complete	$	9,597	$	15,156	$	9,474	$	14,815
Compensation and employee benefits	53,065		63,802		32,515		72,352
Self-insurance and warranty reserves	51,536		50,550		50,336		51,010
Interest payable	24,454		17,233		24,441		17,125
Property and sales taxes payable	11,486		17,231		7,675		12,294
Other accruals	40,246		45,230		30,092		33,944
Total accrued expenses and other liabilities	$	190,384	$	209,202	$	154,533	$	201,540

Self-Insurance and Warranty Reserves – We accrue for the expected costs associated with ~~the~~our limited ~~one year~~ warranty, deductibles and self-insured amounts under our various insurance policies within Beneva Indemnity Company ("Beneva"), a wholly owned subsidiary. A summary of the changes in our reserves are as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2018			2017
Reserve - beginning of period	$	54,084		$	44,342		$	50,550		$	43,098		$	51,010		$	50,550
Additions to reserves	6,403			8,902			17,446			19,685			5,043			4,299
Costs and claims incurred	(8,203		)	(5,173		)	(18,131		)	(17,720		)	(5,060		)	(3,335		)
Change in estimates to existing reserves	(748		)	(1,590		)	1,671			1,418			(657		)	902
Reserve - end of period	$	51,536		$	46,481		$	51,536		$	46,481		$	50,336		$	52,416

8.7. DEBT

Total debt consists of the following (in thousands):


	As of												As of
	September 30, 2017						December 31, 2016						March 31, 2018						December 31, 2017
	Principal		Unamortized Debt Issuance Costs		Carrying Value		Principal		Unamortized Debt Issuance Costs		Carrying Value		Principal		Unamortized Debt Issuance Costs		Carrying Value		Principal		Unamortized Debt Issuance Costs		Carrying Value
5.25% Senior Notes due 2021, unsecured	$	550,000	$	4,192	$	545,808	$	550,000	$	5,089	$	544,911	$	550,000	$	3,593	$	546,407	$	550,000	$	3,892	$	546,108
5.875% Senior Notes due 2023, unsecured	350,000		3,143		346,857		350,000		3,569		346,431		350,000		2,860		347,140		350,000		3,002		346,998
5.625% Senior Notes due 2024, unsecured	350,000		3,454		346,546		350,000		3,858		346,142		350,000		3,185		346,815		350,000		3,319		346,681
Senior Notes subtotal	1,250,000		10,789		1,239,211		1,250,000		12,516		1,237,484		1,250,000		9,638		1,240,362		1,250,000		10,213		1,239,787
Loans payable and other borrowings	161,798		—		161,798		150,485		—		150,485		123,161		—		123,161		139,453		—		139,453
Revolving Credit Facility(1)	—		—		—		—		—		—		—		—		—		—		—		—
Mortgage warehouse borrowings	61,292		—		61,292		198,564		—		198,564		41,522		—		41,522		118,822		—		118,822
Total Senior Notes and bank financing	$	1,473,090	$	10,789	$	1,462,301	$	1,599,049	$	12,516	$	1,586,533
Total Senior Notes and other financing													$	1,414,683	$	9,638	$	1,405,045	$	1,508,275	$	10,213	$	1,498,062

⁽¹⁾The Revolving Credit Facility included $2.9 million and $2.0 million of unamortized debt issuance costs as of March 31, 2018 and December 31, 2017, respectively, which is presented in Prepaid expenses and other assets, net on the consolidated balance sheets. As of March 31, 2018 and December 31, 2017, we had $52.2 million and $47.1 million, respectively, of utilized letters of credit, resulting in $447.8 million and $452.9 million, respectively, of availability on the Revolving Credit Facility.

2021 Senior Notes

On April 16, 2013, we issued $550.0 million aggregate principal amount of 5.25% Senior Notes due 2021 (the “2021 Senior Notes”).

The 2021 Senior Notes mature on April 15, 2021. The 2021 Senior Notes are guaranteed by TMM Holdings Limited Partnership (“TMM Holdings”), Taylor Morrison Holdings, Inc., Taylor Morrison Communities II, Inc. and their homebuilding subsidiaries (collectively, the “Guarantors”), which are all subsidiaries directly or indirectly of TMHC. The 2021 Senior Notes and the related guarantees are senior unsecured obligations and are not subject to registration rights. The indenture for the 2021 Senior Notes contains covenants that limit (i) the making of investments, (ii) the payment of dividends and the redemption of equity and junior debt, (iii) the incurrence of additional indebtedness, (iv) asset dispositions, (v) mergers and similar corporate transactions, (vi) the incurrence of liens, (vii) prohibitions on payments and asset transfers among the issuers and restricted subsidiaries and (viii) transactions with affiliates, among others. The indenture governing the 2021 Senior Notes contains customary events of default. If we do not apply the net cash proceeds of certain asset sales within specified deadlines, we will be required to offer to repurchase the 2021 Senior Notes at par (plus accrued and unpaid interest) with such proceeds. We are also required to offer to repurchase the 2021 Senior Notes at a price equal to 101% of their aggregate principal amount (plus accrued and unpaid interest) upon certain change of control events.

The 2021 Senior Notes are redeemable at scheduled redemption prices, currently at 102.625%, of their principal amount (plus accrued and unpaid interest).

There are no financial maintenance covenants for the 2021 Senior Notes.

2023 ~~Senior Notes and Redemption of 2020~~ Senior Notes

On April 16, 2015, we issued $350.0 million aggregate principal amount of 5.875% Senior Notes due 2023 (the “2023 Senior Notes”). The 2023 Senior Notes and the related guarantees are senior unsecured obligations and are not subject to registration rights.

The 2023 Senior Notes mature on April 15, 2023. The 2023 Senior Notes are guaranteed by the same Guarantors that guarantee the 2021 Senior Notes. The indenture governing the 2023 Senior Notes contains covenants that limit our ability to incur debt secured by liens and enter into certain sale and leaseback transactions. The indenture governing the 2023 Senior Notes contains events of default that are similar to those contained in the indenture governing the 2021 Senior Notes. The change of control provisions in the indenture governing the 2023 Senior Notes are similar to those contained in the indenture governing the 2021 Senior Notes, but a credit rating downgrade must occur in connection with the change of control before the repurchase offer requirement is triggered for the 2023 Senior Notes.

Prior to January 15, 2023, the 2023 Senior Notes are redeemable at a price equal to 100% plus a “make-whole” premium for payments through January 15, 2023 (plus accrued and unpaid interest). Beginning January 15, 2023, the 2023 Senior Notes are redeemable at par (plus accrued and unpaid interest).

There are no financial maintenance covenants for the 2023 Senior Notes.

2024 Senior Notes

On March 5, 2014, we issued $350.0 million aggregate principal amount of 5.625% Senior Notes due 2024 (the “2024 Senior Notes”).

The 2024 Senior Notes mature on March 1, 2024. The 2024 Senior Notes are guaranteed by the same Guarantors that guarantee the 2021 and 2023 Senior Notes. The 2024 Senior Notes and the related guarantees are senior unsecured obligations and are not subject to registration rights. The indenture governing the 2024 Senior Notes contains covenants that limit our ability to incur debt secured by liens and enter into certain sale and leaseback transactions similar to the 2023 Senior Notes. The indenture governing the 2024 Senior Notes contains events of default that are similar to those contained in the indenture governing the 2021 and 2023 Senior Notes. The change of control provisions in the indenture governing the 2024 Senior Notes are similar to those contained in the indenture governing the 2023 Senior Notes.

Prior to December 1, 2023, the 2024 Senior Notes are redeemable at a price equal to 100% plus a “make-whole” premium for payments through December 1, 2023 (plus accrued and unpaid interest). Beginning on December 1, 2023, the 2024 Senior Notes are redeemable at par (plus accrued and unpaid interest).

There are no financial maintenance covenants for the 2024 Senior Notes.

Revolving Credit Facility

~~Our~~On January 26, 2018, we amended our $500.0 million Revolving Credit Facility ~~matures on~~to extend the maturity date from April 12, ~~2019.~~2019 to January 26, 2022. Other immaterial changes were also made to the structure of the Revolving Credit Facility. The Revolving Credit Facility is guaranteed by the same Guarantors that guarantee the 2021, 2023 and 2024 Senior Notes.

The Revolving Credit Facility contains certain “springing” financial covenants, requiring us and our subsidiaries to comply with a maximum debt to capitalization ratio of not more than 0.60 to 1.00 and a minimum consolidated tangible net worth level of at least ~~$1.6~~$1.7 billion. The financial covenants would be in effect for any fiscal quarter during which any (a) loans under the Revolving Credit Facility are outstanding during the last day of such fiscal quarter or on more than five separate days during such fiscal quarter or (b) undrawn letters of credit (except to the extent cash collateralized) issued under the Revolving Credit Facility in an aggregate amount greater than $40.0 million or unreimbursed letters of credit issued under the Revolving Credit Facility are outstanding on the last day of such fiscal quarter or for more than five consecutive days during such fiscal quarter. For purposes of determining compliance with the financial covenants for any fiscal quarter, the Revolving Credit Facility provides that we may exercise an equity cure by issuing certain permitted securities for cash or otherwise recording cash contributions to our capital that will, upon the contribution of such cash to the borrower, be included in the calculation of consolidated tangible net worth and consolidated total capitalization. The equity cure right is exercisable up to twice in any period of four consecutive fiscal quarters and up to five times overall.

default, subject to applicable grace periods, including for nonpayment of principal, interest or other amounts, violation of covenants (including financial covenants, subject to the exercise of an equity cure), incorrectness of representations and warranties in any material respect, cross default and cross acceleration, bankruptcy, material monetary judgments, ERISA events with material adverse effect, actual or asserted invalidity of material guarantees and change of control. As of ~~September 30, 2017,~~March 31, 2018, we were in compliance with all of the covenants under the Revolving Credit Facility.

Mortgage Warehouse Borrowings

The following is a summary of our mortgage warehouse borrowings (in thousands):


	As of September 30, 2017							As of March 31, 2018
Facility	Amount Drawn		Facility Amount		Interest Rate	Expiration Date	Collateral ⁽¹⁾	Amount Drawn		Facility Amount		Interest Rate	Expiration Date	Collateral ⁽¹⁾
Flagstar	$	2,703	$	20,000	LIBOR + 2.5%	30 days written notice	Mortgage Loans	$	3,022	$	39,000	LIBOR + 2.25%	30 days written notice	Mortgage Loans
Comerica	23,290		50,000		LIBOR + 2.25%	November 16, 2017	Mortgage Loans	7,864		50,000		LIBOR + 2.25%	On Demand	Mortgage Loans
J.P. Morgan	35,299		100,000		LIBOR + 2.375%	September 26, 2018	Mortgage Loans and Pledged Cash	30,636		100,000		LIBOR + 2.375%	September 24, 2018	Mortgage Loans and Restricted Cash
Total	$	61,292	$	170,000				$	41,522	$	189,000

	As of December 31, 2016							As of December 31, 2017
Facility	Amount Drawn		Facility Amount		Interest Rate	Expiration Date	Collateral ⁽¹⁾	Amount Drawn		Facility Amount		Interest Rate	Expiration Date	Collateral ⁽¹⁾
Flagstar	$	37,093	$	55,000	LIBOR + 2.5%	30 days written notice	Mortgage Loans	$	12,990	$	39,000	LIBOR + 2.25%	30 days written notice	Mortgage Loans
Comerica	57,875		85,000		LIBOR + 2.25%	November 16, 2017	Mortgage Loans	41,447		85,000		LIBOR + 2.25%	On Demand	Mortgage Loans
J.P. Morgan	103,596		125,000		LIBOR + 2.375% to 2.5%	September 26, 2017	Mortgage Loans and Pledged Cash	64,385		125,000		LIBOR + 2.375%	September 24, 2018	Mortgage Loans and Restricted Cash
Total	$	198,564	$	265,000				$	118,822	$	249,000

⁽¹⁾ The mortgage warehouse borrowings outstanding as of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 were collateralized by a) ~~$107.7~~$93.0 million and ~~$233.2~~$187.0 million, respectively, of mortgage loans held for sale, which comprised the balance of mortgage loans held for sale and b) approximately $1.3 million and $1.6 million, respectively, of cash which are included in restricted cash in the accompanying Condensed Consolidated Balance Sheets.

Loans Payable and Other Borrowings

Loans payable and other borrowings as of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 consist of project-level debt due to various land sellers and seller financing notes from current and prior year acquisitions. Project-level debt is generally secured by the land that was acquired and the principal payments generally coincide with corresponding project lot sales or a principal reduction schedule. Loans payable bear interest at rates that ranged from 0% to 8% at ~~September 30, 2017~~each of March 31, 2018 and December 31, ~~2016.~~2017. We impute interest for loans with no stated interest rates.

9.8. FAIR VALUE DISCLOSURES

We have adopted ASC Topic 820, Fair Value Measurements, for valuation of financial instruments. ASC Topic 820 provides a framework for measuring fair value under GAAP, expands disclosures about fair value measurements, and establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of the fair value hierarchy are summarized as follows:

Level 1 — Fair value is based on quoted prices for identical assets or liabilities in active markets.

Level 2 — Fair value is determined using quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active or are directly or indirectly observable.

Level 3 — Fair value is determined using one or more significant inputs that are unobservable in active markets at the measurement date, such as a pricing model, discounted cash flow, or similar technique.

The fair value of our mortgage loans held for sale is derived from negotiated rates with partner lending institutions. The fair value of derivative assets includes interest rate lock commitments (“IRLCs”) and mortgage backed securities (“MBS”). The fair value of IRLCs is based on the value of the underlying mortgage loan, quoted MBS prices and the probability that the mortgage loan will fund within the terms of the IRLCs. We estimate the fair value of the forward sales commitments based on quoted MBS prices. The fair value of our mortgage warehouse borrowings, loans payable and other borrowings and the borrowings under our Revolving Credit Facility approximate carrying value due to their short term nature and variable interest rate terms. The fair value of our Senior Notes is derived from quoted market prices by independent dealers in markets that are not active. The fair value of the contingent consideration liability related to previous acquisitions was estimated using a Monte Carlo simulation model under the option pricing method. As the measurement of the contingent consideration is based primarily on significant inputs not observable in the market, it represents a Level 3 measurement. There were no changes to or transfers between the levels of the fair value hierarchy for any of our financial instruments as of ~~September 30, 2017,~~March 31, 2018, when compared to December 31, ~~2016.~~2017.

The carrying value and fair value of our financial instruments are as follows:


		September 30, 2017				December 31, 2016					March 31, 2018				December 31, 2017
(Dollars in thousands)	Level in Fair Value Hierarchy	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value		Level in Fair Value Hierarchy	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Description:
Mortgage loans held for sale	2	$	107,665	$	107,665	$	233,184	$	233,184	2	$	93,019	$	93,019	$	187,038	$	187,038
Derivative assets	2	2,037		2,037		2,291		2,291
Derivative assets, net										2	2,026		2,026		1,352		1,352
Mortgage warehouse borrowings	2	61,292		61,292		198,564		198,564		2	41,522		41,522		118,822		118,822
Loans payable and other borrowings	2	161,798		161,798		150,485		150,485		2	123,161		123,161		139,453		139,453
5.25% Senior Notes due 2021 ⁽¹⁾	2	545,808		564,465		544,911		563,750		2	546,407		554,785		546,108		561,000
5.875% Senior Notes due 2023 ⁽¹⁾	2	346,857		371,000		346,431		355,250		2	347,140		361,270		346,998		369,705
5.625% Senior Notes due 2024 ⁽¹⁾	2	346,546		364,000		346,142		353,500		2	346,815		349,895		346,681		366,205
Revolving Credit Facility	2	—		—		—		—		2	—		—		—		—
Contingent consideration liability(2)	3	5,358		5,358		17,200		17,200		3	—		—		5,328		5,328

⁽¹⁾ Carrying value for Senior Notes, as presented, includes unamortized debt issuance costs. Debt issuance costs are not factored into the fair value calculation for the Senior Notes.

Fair value measurements are used for inventories on a nonrecurring basis when events and circumstances indicate that their carrying value is not recoverable. The following table presents the fair value for⁽²⁾ All payments related to our ~~inventories measured at fair value on a nonrecurring basis~~contingent consideration liability were paid as of ~~December~~March 31, ~~2016.~~

(Dollars in thousands)
Description: Level in
Fair Value
Hierarchy Fair Value at December 31, 2016
Inventories ⁽¹⁾
3 $ 3,778

⁽¹⁾2018. ~~During the year ended December 31, 2016, we recorded $3.5 million of impairment charges.~~

~~As of September 30, 2017, the fair value for such inventories was not determined as there were no events and circumstances that indicated their carrying value was not recoverable.~~

~~10.~~9. INCOME TAXES

We recorded income tax expense of $11.7 million and $18.9 million for the three months ended March 31, 2018 and March 31, 2017, respectively. Our effective tax rate for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2018 was ~~30.7% and 31.0%~~19.8%, ~~respectively,~~ compared to ~~35.1% and 33.8%~~34.6% for the same ~~periods~~period in ~~2016, respectively. For the three and nine months ended September 30, 2017 and 2016, the~~2017. The effective tax rate ~~differed~~for the first quarter of 2018 was favorably impacted from the ~~U.S.~~extension of federal ~~statutory~~ income tax credits for building energy-efficient homes and the impacts of tax reform. The effective tax rate ~~primarily due~~for the three month period ended March 31, 2018 was favorably impacted by the reduction in the federal corporate tax rate from 35% to ~~state income taxes, special deductions~~21% as a result of the Tax Cuts and ~~credits relating to homebuilding activities, uncertain tax positions, and discrete tax adjustments related to~~Jobs Act (the “Tax Act”) which became effective January 1, 2018.

~~certain~~In accordance with Staff Accounting Bulletin No. 118 (“SAB 118”), the Company recorded provisional tax expense in the fourth quarter of 2017 related to the write-down of our existing deferred tax assets and ~~liabilities.~~the mandatory deemed repatriation of foreign earnings related to the sale of our Canadian business in 2015. As of March 31, 2018, we have not recorded any adjustments related to these estimates. Adjustments to these provisional estimates may be necessary in future periods due to changes in our interpretation of the Tax Act, the issuance of additional guidance by various regulatory bodies, and actions the Company has taken as a result of the Tax Act. We expect our final accounting for the Tax Act under SAB 118 to be completed in the third quarter of 2018, upon the filing of our 2017 income tax returns.

At ~~September 30, 2017~~both March 31, 2018 and December 31, ~~2016, we had $12.9 million and $7.8 million of~~2017, cumulative gross unrecognized tax benefits ~~respectively. All~~were $12.9 million. If the unrecognized tax benefits ifas of March 31, 2018 were to be recognized, approximately $10.3 million would affect our effective tax rate. We had ~~$0.9~~$1.1 million and ~~$0.4~~$1.0 million of gross interest and penalties related to unrecognized tax positions accrued as of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively.

~~11.~~10. STOCKHOLDERS’ EQUITY

Capital Stock — Holders of Class A Common Stock and Class B Common Stock are entitled to one vote for each share held on all matters submitted to stockholders for their vote or approval. The holders of Class A Common Stock and Class B Common Stock vote together as a single class on all matters submitted to stockholders for their vote or approval, except with respect to the amendment of certain provisions of the amended and restated Certificate of Incorporation that would alter or change the powers, preferences or special rights of the Class B Common Stock so as to affect them adversely. Such amendments must be approved by a majority of the votes entitled to be cast by the holders of the shares affected by the amendment, voting as a separate class, or as otherwise required by applicable law. The voting power of the outstanding Class B Common Stock (expressed as a percentage of the total voting power of all Common Stock) is equal to the percentage of partnership interests in New TMM not held directly or indirectly by TMHC.

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2018, we completed ~~multiple~~ sales of our Class A Common Stock in registered public offerings. We used all of the net proceeds from these public offerings to purchase partnership units in New TMM, our direct subsidiary, along with shares of our Class B Common Stock, held by our Principal Equityholders. As a result of net proceeds being distributed to our Principal Equityholders, we adjusted Non-controlling interests - Principal Equityholders and Additional paid-in capital on the Condensed Consolidated Balance Sheets to reflect the change in ownership. The aggregate number of partnership units and corresponding shares of Class B Common Stock we purchased was equal to the number of shares of Class A Common Stock sold in the public offerings.

The following is a summary of the completed sales of our Class A Common Stock in registered public ~~offerings.~~offerings for the three months ended March 31, 2018:

(Shares presented in thousands)
Closing date Number of shares Net purchase price per share
February 6, 2017 11,500
$ 18.2875
March 27, 2017 10,000
20.7800
May 5, 2017 10,000
23.1200
June 27, 2017 10,000
23.3000

⁽¹⁾ The January 17, 2018 offering consisted of 17.7 million shares of Class A common stock offered by the Company and 1.5 million shares offered directly by our Principal Equityholder, TPG.

In addition, in a series of transactions following each public offering, the Company purchased 3.8 million shares of Class B common stock directly from our Remaining Principal Equityholders on both January 8, 2018 and January 17, 2018 at the same respective net purchase price per share, for an aggregate total of 7.6 million shares purchased.

As a result of these transactions, our Principal Equityholders no longer have any remaining investment in us. The components and respective voting power of outstanding TMHC Common Stock, including the effects of the secondary offerings, at ~~September 30, 2017~~March 31, 2018 are as follows:


	Shares Outstanding	Percentage		Shares Outstanding	Percentage
Class A Common Stock	72,307,299	60.5	%	111,308,197	99.2	%
Class B Common Stock(1)	47,249,127	39.5	%	868,921	0.8	%
Total	119,556,426	100	%	112,177,118	100	%

⁽¹⁾ The remaining 0.8% of Class B Common Stock is held by certain current and former members of management and directors.

Stock Repurchase Program

On ~~September 18, 2017,~~January 3, 2018, our Our Board of Directors authorized an extension of the Company's stock repurchase program through December 31, 2018 and increased the amount available for repurchases under the program to a maximum total amount of ~~$100.0~~$200.0 million of the Company’s ~~Class A~~ Common Stock in open market purchases, privately negotiated transactions or other transactions. The stock repurchase program is subject to prevailing market conditions and other considerations, including our liquidity, the terms of our debt instruments, statutory requirements, planned land investment and development spending, acquisition and other investment opportunities and ongoing capital requirements. ~~During~~On January 8, 2018 we purchased $100.0 million of Common Stock. On January 17, 2018 we purchased an additional $101.8 million, however the ~~three~~stock repurchase program was not reduced by such purchase and ~~nine months ended~~

September 30, 2017, we repurchased 195,824 for $4.1 million . During the three and nine months ended September 30, 2016, we repurchased 247,366 and 1,918,999 for $3.8 million and $28.5 million, respectively.such authorization remained in effect thereafter. As of ~~September 30, 2017,~~March 31, 2018 there was $95.9 million available to be used for repurchases. During the three months ended March 31, 2017 there were no shares repurchased.

~~12.~~11. STOCK BASED COMPENSATION

Equity-Based Compensation

In April 2013, we adopted the Taylor Morrison Home Corporation 2013 Omnibus Equity Award Plan (the "Plan"). The Plan was most recently amended and restated in May 2017. The Plan provides for the grant of stock options, RSUs and other equity-based awards deliverable in shares of our Class A Common Stock. As of ~~September 30, 2017,~~March 31, 2018, we had an aggregate of ~~8,989,860~~8,036,873 shares of Class A Common Stock available for future grants under the Plan.

The following table provides information regarding the amount and components of stock-based compensation expense, all of which is included in general and administrative expenses in the accompanying Condensed Consolidated Statements of Operations (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2017		2016		2017		2016		2018		2017
Restricted stock units ⁽¹⁾	$	2,157	$	1,810	$	6,348	$	4,948	$	2,302	$	1,897
Stock options	1,162		1,056		3,308		3,074		1,241		958
New TMM units	58		176		571		937		—		157
Total stock compensation	$	3,377	$	3,042	$	10,227	$	8,959	$	3,543	$	3,012

⁽¹⁾Includes compensation expense related to time-based RSUs and performance-based RSUs. Outstanding performance-based RSUs reflected in the table above are reported at target level of performance.

At ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, the aggregate unrecognized value of all outstanding stock-based compensation awards was approximately ~~$23.4~~$33.5 million and ~~$18.8~~$19.8 million, respectively.

Restricted Stock Units – The following table summarizes the time-based RSU and performance-based RSU activity for the ~~nine~~three months ended ~~September 30, 2017:~~March 31, 2018:


	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Balance at December 31, 2016	1,358,701		$	13.39
Balance at December 31, 2017					1,889,559		$	14.84
Granted	647,354		18.06		531,940		24.25
Vested	(78,221	)	17.43		(211,014	)	14.87
Forfeited(1)	(53,892	)	13.95		(182,762	)	16.88
Balance at September 30, 2017	1,873,942		$	14.82
Balance at March 31, 2018					2,027,723		$	17.02

⁽¹⁾Forfeitures on time-based RSUs are a result of terminations of employment, while forfeitures on performance-based RSUs are a result of failing to attain certain goals as outlined in our stock based compensation awards.

During the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2018, we ~~issued~~granted time-based RSU awards and performance-based RSU awards to certain employees and members of the Board of Directors of the Company.

Our time-based RSUs consist of awards that settle in shares of Class A Common Stock and have been awarded to our employees and members of our Board of Directors. Vesting of these RSUs is subject to continued employment with TMHC or an affiliate, or continued service on the Board of Directors, through the applicable vesting dates. Time-based RSUs granted to

employees generally ~~become vested with respect~~vest ratably over a three to ~~33% of the RSUs~~four year period, based on ~~the second, third, and fourth anniversaries of~~ the grant date. Time-based RSUs granted to members of the Board of Directors generally ~~become vested~~vest on the first anniversary of the grant date.

Additionally, we ~~issued~~granted performance-based RSUs to certain employees of the Company. These awards will vest in full based on the achievement of certain performance goals over a three-year performance period, subject to the employee’s continued employment through the date the Compensation Committee certifies the applicable level of performance achieved and will be settled in shares of our Class A Common Stock. The number of shares that may be issued in settlement of the performance-based RSUs to the award recipients may be greater or lesser than the target award amount depending on actual performance achieved as compared to the performance targets set forth in the awards.

Stock Options – The following table summarizes the stock option activity for the ~~nine~~three months ended ~~September 30, 2017:~~March 31, 2018:


	Shares		Weighted Average Exercise Price Per Share		Shares		Weighted Average Exercise Price Per Share
Outstanding at December 31, 2016	2,431,347		$	17.09
Outstanding at December 31, 2017					2,854,213		$	17.50
Granted	790,651		19.05		707,184		23.87
Exercised	(265,167	)	18.07		(37,060	)	15.64
Canceled/Forfeited	(74,811	)	18.01		(34,250	)	18.98
Outstanding at September 30, 2017	2,882,020		$	17.52
Options exercisable at September 30, 2017	933,259		$	19.63
Outstanding at March 31, 2018					3,490,087		$	18.80
Options exercisable at March 31, 2018					1,393,153		$	18.18

Options granted to employees vest and become exercisable ratably on the second, third, fourth and fifth anniversary of the date of grant. Options granted to members of the Board of Directors vest and become exercisable ratably on the first, second and third anniversary of the date of grant. Vesting of the options is subject to continued employment with TMHC or an affiliate, or continued service on the Board of Directors, through the applicable vesting dates, and options expire within ten years from the date of grant.

New TMM Units – Certain members of management and certain members of the Board of Directors were issued Class M partnership units in TMM Holdings. Those units were subject to both time and performance vesting conditions.

Pursuant to the ~~Reorganization Transactions,~~reorganization transactions in connection with our IPO, the time-vesting Class M Units in TMM Holdings were exchanged for New TMM Units with vesting terms substantially the same as the Class M Units surrendered for exchange. One New TMM Unit together with a corresponding share of Class B Common Stock is exchangeable for one share of Class A Common Stock. As of December 31, 2017, all New TMM Units were vested. The shares of Class B Common Stock/New TMM Units held by members of management and members of our Board of Directors as of ~~September 30, 2017~~March 31, 2018 were as follows:

Class B Shares/New
TMM Units

Weighted
Average Grant Date
Fair Value
Balance at December 31, 2016 1,146,357
$ 5.58
Exchanges ⁽¹⁾
(191,333 ) 5.36
Forfeited ⁽²⁾
(1,592 ) 8.52
Balance at September 30, 2017 ⁽³⁾
953,432
$ 5.62



	Class B Shares/New TMM Units		Weighted Average Grant Date Fair Value
Balance at December 31, 2017	883,921		$	5.24
Exchanges ⁽¹⁾	(15,000	)	8.04
Balance at March 31, 2018	868,921		$	5.19

⁽¹⁾Exchanges during the period represent the exchange of a vested New TMM Unit along with the corresponding share of Class B Common Stock for a newly issued share of Class A Common Stock.

⁽²⁾Awards forfeited during the period represent the unvested portion of New TMM Unit awards for employees who have terminated employment with the Company and for which the New TMM Unit and the corresponding Class B Share have been canceled.

⁽³⁾ ~~The number of vested and unexchanged New TMM Units as of~~ ~~September 30, 2017 was 931,462.~~

~~13.~~12. RELATED-PARTY TRANSACTIONS

From time to time, we may engage in transactions with entities or persons that are affiliated with ~~us or one or more of the Principal Equityholders.~~us. Such transactions with related parties are typically conducted in the normal course of operations and are generally executed at arm’s length, as they are entered into at terms comparable to those entered into with unrelated third parties. For the ~~nine~~three months ended ~~September 30,~~March 31, 2018 and 2017, we engaged in multiple equity offering transactions with our ~~principal equityholders.~~former Principal Equityholders. Refer to Note 1110 - Stockholders' Equity for discussion regarding such transactions. During the nine months ended September 30, 2017, we entered into a contract to purchase 140 home lots in Tustin, California for a total purchase price of $30.0 million from Intracorp Companies, which is owned and controlled by a member of the Board of Directors. For the three and nine months ended September 30, 2016 there were no related-party transactions.

~~14.~~13. ACCUMULATED OTHER COMPREHENSIVE INCOME

The table below provides the components of accumulated other comprehensive income (loss) (“AOCI”) for the periods presented (in thousands). ~~There was no activity in the three months ended September 30, 2017 and 2016, therefore they are not presented.~~


	Nine Months Ended September 30, 2017											Three Months Ended March 31, 2018
	Total Post- Retirement Benefits Adjustments		Foreign Currency Translation Adjustments			Non-controlling Interest - Principal Equityholders Reclassification			Total			Total Post- Retirement Benefits Adjustments		Foreign Currency Translation Adjustments			Non-controlling Interest - Principal Equityholders Reclassification			Total
Balance, beginning of period	$	2,061	$	(79,927	)	$	59,877		$	(17,989	)	$	2,082	$	(45,205	)	$	25,155		$	(17,968	)
Gross amounts reclassified within accumulated other comprehensive income	—		27,968			(27,968		)	—			—		25,155			(25,155		)	—
Balance, end of period	$	2,061	$	(51,959	)	$	31,909		$	(17,989	)	$	2,082	$	(20,050	)	$	—		$	(17,968	)

Nine Months Ended September 30, 2016

Total Post-
Retirement
Benefits
Adjustments

Foreign
Currency
Translation
Adjustments

Non-controlling
Interest - Principal
Equityholders
Reclassification
Total
Balance, beginning of period $ 2,305
$ (79,927 ) $ 59,625
$ (17,997 )
Other comprehensive income before reclassifications (447 ) —
—
(447 )
Other comprehensive income, net of tax $ (447 ) $ —
$ —
$ (447 )
Gross amounts reclassified within accumulated other comprehensive income —
—
329
329
Balance, end of period $ 1,858
$ (79,927 ) $ 59,954
$ (18,115 )

~~Reclassifications for the amortization of the employee retirement plans are included in selling, general and administrative expense in the accompanying Condensed Consolidated Statements of Operations.~~



	Three Months Ended March 31, 2017
	Total Post- Retirement Benefits Adjustments		Foreign Currency Translation Adjustments			Non-controlling Interest - Principal Equityholders Reclassification			Total
Balance, beginning of period	$	2,061	$	(79,927	)	$	59,877		$	(17,989	)
Gross amounts reclassified within accumulated other comprehensive income	—		16,479			(16,479		)	—
Balance, end of period	$	2,061	$	(63,448	)	$	43,398		$	(17,989	)

~~15.~~14. REPORTING SEGMENTS

We have multiple homebuilding operating components which are engaged in the business of acquiring and developing land, constructing homes, marketing and selling those homes, and providing warranty and customer service. We aggregate our homebuilding operating components into three reporting segments, East, Central, and West, based on similar long-term economic characteristics. We also have a ~~mortgage and title~~financial services reporting segment. We have no inter-segment sales as all sales are to external customers.

During the quarter ended March 31, 2017, we realigned our homebuilding operating divisions within our existing segments based on geographic location and management's long term strategic plans. As a result, all historical periods presented in the segment information have been reclassified to give effect to this segment realignment.

Our reporting segments are as follows:



East	Atlanta, Charlotte, Chicago, Orlando, Raleigh, Southwest Florida and Tampa
Central	Austin, Dallas and Houston (both include a Taylor Morrison division and a Darling Homes division), and Denver
West	Bay Area, Phoenix, Sacramento and Southern California
~~Mortgage Operations~~Financial Services	Taylor Morrison Home Funding, LLC (“TMHF”) and Inspired Title Services, LLC (“Inspired Title”)

Segment information is as follows (in thousands):

Three Months Ended September 30, 2017
East Central West
Mortgage
Operations

Corporate
and
Unallocated
Total
Total revenues $ 312,539
$ 256,842
$ 321,167
$ 17,479
$ —
$ 908,027

Gross margin 63,188
47,797
54,924
5,409
—
171,318
Selling, general and administrative expenses (28,469 ) (25,108 ) (19,087 ) —
(22,186 ) (94,850 )
Equity in income of unconsolidated entities —
693
924
1,170
—
2,787
Interest and other (expense)/income, net (7 ) (87 ) 46
—
(232 ) (280 )
Income/(loss) before income taxes $ 34,712
$ 23,295
$ 36,807
$ 6,579
$ (22,418 ) $ 78,975

Three Months Ended September 30, 2016
East Central West
Mortgage
Operations

Corporate
and
Unallocated
Total
Total revenues $ 288,639
$ 273,095
$ 277,869
$ 13,814
$ —
$ 853,417

Gross margin 70,026
51,267
51,624
5,937
—
178,854
Selling, general and administrative expenses (26,866 ) (24,842 ) (18,507 ) —
(18,006 ) (88,221 )
Equity in income of unconsolidated entities 132
331
319
864
—
1,646
Interest and other (expense)/income, net (1,260 ) (1,148 ) 162
4
354
(1,888 )
Income/(loss) before income taxes $ 42,032
$ 25,608

$ 33,598

$ 6,805

$ (17,652 )
$ 90,391

Nine Months Ended September 30, 2017
East Central West
Mortgage
Operations

Corporate
and
Unallocated
Total
Total revenues $ 896,258
$ 730,659
$ 911,332
$ 47,362
$ —
$ 2,585,611

Gross margin 185,534
133,418
148,991
16,488
—
484,431
Selling, general and administrative expenses (84,975 ) (72,533 ) (56,994 ) —
(64,503 ) (279,005 )
Equity in income of unconsolidated entities —
751
1,526
4,666
—
6,943
Interest and other (expense)/income, net (220 ) 171
(146 ) —
(319 ) (514 )
Income/(loss) before income taxes $ 100,339
$ 61,807
$ 93,377
$ 21,154
$ (64,822 ) $ 211,855


	Nine Months Ended September 30, 2016																	Three Months Ended March 31, 2018
	East			Central			West			Mortgage Operations		Corporate and Unallocated			Total			East			Central			West			Financial Services		Corporate and Unallocated			Total
Total revenues	$	737,550		$	767,825		$	810,736		$	36,951	$	—		$	2,353,062		$	284,807		$	214,113		$	239,207		$	14,206	$	—		$	752,333

Gross margin	161,437			138,647			142,806			14,357		—			457,247			52,289			40,627			46,024			4,162		—			143,102
Selling, general and administrative expenses	(76,027		)	(71,727		)	(54,276		)	—		(54,348		)	(256,378		)	(28,634		)	(22,280		)	(15,565		)	—		(20,537		)	(87,016		)
Equity in income of unconsolidated entities	440			110			1,303			2,881		—			4,734			111			381			1,095			1,659		—			3,246
Interest and other (expense)/income, net	(3,821		)	(3,140		)	(250		)	14		(1,256		)	(8,453		)	(478		)	(108		)	20			—		472			(94		)
Income/(loss) before income taxes	$	82,029		$	63,890		$	89,583		$	17,252	$	(55,604	)	$	197,150		$	23,288		$	18,620		$	31,574		$	5,821	$	(20,065	)	$	59,238

As of September 30, 2017
East Central West
Mortgage
Operations

Corporate
and
Unallocated
Total
Real estate inventory and land deposits $ 1,236,731
$ 906,024
$ 1,151,895
$ —
$ —
$ 3,294,650
Investments in unconsolidated entities 27,593
32,695
120,914
3,615
—
184,817
Other assets 58,004
126,162
51,277
153,728
448,690
837,861
Total assets $ 1,322,328
$ 1,064,881
$ 1,324,086
$ 157,343
$ 448,690
$ 4,317,328



	Three Months Ended March 31, 2017
	East			Central			West			Financial Services		Corporate and Unallocated			Total
Total revenues	$	263,665		$	206,257		$	284,919		$	14,249	$	—		$	769,090

Gross margin	53,358			37,208			45,580			5,547		—			141,693
Selling, general and administrative expenses	(27,169		)	(21,492		)	(19,053		)	—		(21,031		)	(88,745		)
Equity in income of unconsolidated entities	—			(168		)	(83		)	1,336		—			1,085
Interest and other (expense)/income, net	(84		)	(344		)	(125		)	—		994			441
Income/(loss) before income taxes	$	26,105		$	15,204		$	26,319		$	6,883	$	(20,037	)	$	54,474



	As of March 31, 2018
	East		Central		West		Financial Services		Corporate and Unallocated		Total
Real estate inventory and land deposits	$	1,179,356	$	889,004	$	1,060,131	$	—	$	—	$	3,128,491
Investments in unconsolidated entities	29,510		33,798		128,654		4,733		—		196,695
Other assets	67,778		103,231		44,551		143,083		400,058		758,701
Total assets	$	1,276,644	$	1,026,033	$	1,233,336	$	147,816	$	400,058	$	4,083,887


	As of December 31, 2016												As of December 31, 2017
	East		Central		West		Mortgage Operations		Corporate and Unallocated		Total		East		Central		West		Financial Services		Corporate and Unallocated		Total
Real estate inventory and land deposits	$	1,110,340	$	829,354	$	1,114,758	$	—	$	—	$	3,054,452	$	1,150,918	$	818,431	$	1,039,655	$	—	$	—	$	3,009,004
Investments in unconsolidated entities	25,923		30,146		98,625		3,215		—		157,909		29,316		32,874		126,559		3,615		—		192,364
Other assets	80,320		139,383		43,304		269,131		476,427		1,008,565		85,753		124,593		53,492		225,641		635,046		1,124,525
Total assets	$	1,216,583	$	998,883	$	1,256,687	$	272,346	$	476,427	$	4,220,926	$	1,265,987	$	975,898	$	1,219,706	$	229,256	$	635,046	$	4,325,893

~~16.~~15. COMMITMENTS AND CONTINGENCIES

Letters of Credit and Surety Bonds — We are committed, under various letters of credit and surety bonds, to perform certain development and construction activities and provide certain guarantees in the normal course of business. Outstanding letters of credit and surety bonds under these arrangements totaled ~~$317.8~~$341.9 million and ~~$302.8~~$331.7 million as of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively. Although significant development and construction activities have been completed related to these site improvements, the bonds are generally not released until all development and construction activities are completed. We do not believe that it is probable that any outstanding bonds as of ~~September 30, 2017~~March 31, 2018 will be drawn upon.

Legal Proceedings — We are involved in various litigation and legal claims in the normal course of our business operations, including actions brought on behalf of various classes of claimants. We are also subject to a variety of local, state, and federal laws and regulations related to land development activities, house construction standards, sales practices, mortgage lending operations, employment practices, and protection of the environment. As a result, we are subject to periodic examination or inquiry by various governmental agencies that administer these laws and regulations. We establish liabilities for legal claims and regulatory matters when such matters are both probable of occurring and any potential loss is reasonably estimable. At ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, our legal accruals were ~~$2.7~~$1.6 million and ~~$4.4~~$2.3 million, respectively. We accrue for such matters based on the facts and circumstances specific to each matter and revise these estimates as the matters evolve. In such cases, there may exist an exposure to loss in excess of any amounts currently accrued. In view of the inherent difficulty of predicting the outcome of these legal and regulatory matters, we generally cannot predict the ultimate resolution of the pending matters, the related timing or the eventual loss. While the outcome of such contingencies cannot be predicted with certainty, we do not believe that the resolution of such matters will have a material adverse impact on our results of operations, financial position, or cash flows. However, to the extent the liability arising from the ultimate resolution of any matter exceeds the estimates reflected in the recorded reserves relating to such matter, we could incur additional charges that could be significant.

~~17.~~16. MORTGAGE HEDGING ACTIVITIES

We enter into IRLCs to originate residential mortgage loans held for sale, at specified interest rates and within a specified period of time (generally between 30 and 60 days), with customers who have applied for a loan and meet certain credit and underwriting criteria. These IRLCs meet the definition of a derivative and are reflected on the balance sheet at fair value with changes in fair value recognized in ~~mortgage operations~~Financial Services revenue/expenses on the ~~statement~~statements of operations and other comprehensive income. Unrealized gains and losses on the IRLCs, reflected as derivative assets or liabilities, are measured based on the fair value of the underlying mortgage loan, quoted Agency MBS prices, estimates of the fair value of the mortgage servicing rights (“MSRs”) and the probability that the mortgage loan will fund within the terms of the IRLC, net of commission expense and broker fees. The fair value of the forward loan sales commitment and mandatory delivery commitments being used to hedge the IRLCs and mortgage loans held for sale not committed to be purchased by investors are based on quoted Agency MBS prices.

The following summarizes derivative instrument assets (liabilities) as of the periods presented:


	As of								As of
	September 30, 2017				December 31, 2016				March 31, 2018					December 31, 2017
(Dollars in thousands)	Fair Value		Notional Amount		Fair Value		Notional Amount		Fair Value			Notional Amount		Fair Value			Notional Amount
IRLCs	$	1,752	$	75,739	$	1,987	$	61,655	$	2,453		$	121,416	$	1,584		$	73,817
MBSs	285		101,000		304		97,000		(427		)	125,000		(232		)	118,078
Total	$	2,037			$	2,291			$	2,026				$	1,352

Total commitments to originate loans approximated ~~$119.7~~$132.1 million and $80.0 million as of ~~September 30, 2017. This amount represents~~March 31, 2018 and December 31, 2017, respectively. The fair value and notional amounts represent the commitments to originate loans for both best efforts and ~~mandatory loans that have been locked and approved by underwriting. The notional amount in the table above includes only~~ mandatory loans that have been locked and approved by underwriting.

We have exposure to credit loss in the event of contractual non-performance by our trading counterparties in derivative instruments that we use in our rate risk management activities. We manage this credit risk by selecting only counterparties that we believe to be financially strong, spreading the risk among multiple counterparties, by placing contractual limits on the amount of unsecured credit extended to any single counterparty, and by entering into netting agreements with counterparties, as appropriate. Commitments to originate loans do not necessarily reflect future cash requirements as some commitments are expected to expire without being drawn upon.

~~18. SUBSEQUENT EVENTS~~

On October 12, 2017 we completed the purchase of 112 acres of land in South Carolina for $10.5 million. The land was purchased from IOTA Doby Bridge, LLC which is managed and partly owned by Gibralter Capital and Asset Managment, LLC, a fund managed by one of our principal equityholders, Oaktree Capital.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For purposes of this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the terms “the Company,” “we,” “us,” or “our” refer to Taylor Morrison Home Corporation (“TMHC”) and its subsidiaries. The Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our condensed consolidated financial statements included elsewhere in this quarterly report.

Forward-Looking Statements

This quarterly report includes certain forward-looking statements within the meaning of the federal securities laws regarding, among other things, our or management’s intentions, plans, beliefs, expectations or predictions of future events, which are considered forward-looking statements. You should not place undue reliance on those statements because they are subject to numerous uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy. These statements often include words such as “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “can,” “could,” “might,” “project” or similar expressions. These statements are based upon assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors that we believe are appropriate under the circumstances. As you read this quarterly report, you should understand that these statements are not guarantees of performance or results. They involve known and unknown risks, uncertainties and assumptions, including

those described under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017 (the “Annual Report”) filed with the Securities and Exchange Commission (“SEC”). Although we believe that these forward-looking statements are based upon reasonable assumptions, you should be aware that many factors, including those described under the heading “Risk Factors” in the Annual Report, could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements.

Our forward-looking statements made herein are made only as of the date of this quarterly report. We expressly disclaim any intent, obligation or undertaking to update or revise any forward-looking statements made herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based, except as required by applicable law.

Business Overview

Our principal business is residential homebuilding and the development of lifestyle communities with operations in Arizona, California, Colorado, Florida, Georgia, Illinois, North Carolina and Texas. Our Company serves a wide array of consumer groups from coast to coast, including first time, move-up, luxury and ~~55 plus buyers.~~active adult. Our homebuilding business operates under our Taylor Morrison and Darling Homes brand names. Our business is organized into multiple homebuilding operating components, and a financial services component (formerly called our mortgage operating ~~component,~~component), all of which are managed as four reportable segments: East, Central, West and ~~Mortgage Operations,~~Financial Services, as follows:



East		Atlanta, Charlotte, Chicago, Orlando, Raleigh, Southwest Florida and Tampa
Central		Austin, Dallas and Houston (both include a Taylor Morrison division and a Darling Homes division), and Denver
West		Bay Area, Phoenix, Sacramento and Southern California
~~Mortgage Operations~~Financial Services		Taylor Morrison Home Funding, LLC (“TMHF”) and Inspired Title Services, LLC (“Inspired Title”)

We offer single family attached and detached homes, and revenue is recognized when the homes are completed and delivered to the buyers. Our primary costs are the acquisition of land in various stages of development and the construction costs of the homes we sell.

Our ~~Mortgage Operations~~Financial Services reportable segment provides our customers with mortgage services ~~to customers~~ through our wholly owned mortgage subsidiary, TMHF, and title services through our wholly owned title services subsidiary, Inspired Title. Revenues from loan origination are recognized at the time the related real estate transactions are completed, usually upon the close of escrow.

Recent Developments

During the third quarter of 2017, our results of operations were affected by two hurricanes, Harvey and Irma, which primarily impacted our divisional operations in Houston and certain areas of Florida. As a result, approximately 40%three months ended March 31, 2018, we completed sales of our communities were closed for at least a week and land development and construction were delayed by approximately two to three weeks, putting downward pressure on sales and absorption pace for the third quarter. As a resultClass A Common Stock in registered public offerings, totaling 28.7 million shares. We used all of the ~~storms, we estimate that 130 home closings were pushed out~~net proceeds from the public offerings to purchase partnership units (“New TMM Units”) in TMM Holdings II Limited Partnership (“New TMM”), our direct subsidiary, along with shares of our Class B Common Stock, held by affiliates of TPG Global, LLC (“TPG”) and investment funds managed by Oaktree Capital Managment, L.P. or their respective subsidiaries (“Oaktree” and, together with TPG, the ~~third quarter~~“Remaining Principal Equitholders”). In addition, in a series of ~~2017, reducing~~transactions following each public offering, the Company purchased 3.8 million shares of Class B common stock directly from our ~~homebuilding revenue~~Remaining Principal Equityholders on ~~a period over period comparative basis.~~both January 8, 2018 and January 17, 2018 for an aggregate total of 7.6 million shares purchased. As of March 31, 2018, neither TPG, Oaktree, nor affiliates of JH Investments, Inc. (“JH” and, together with TPG and Oaktree, the “Principal Equityholders” had any remaining investment in us.

Actual storm remediation costs incurred in the third quarter of 2017 were immaterial, however, additional costs are expected to be incurred in the fourth quarter and early part of 2018. We believe most of these costs will be covered by insurance. We also expect the storms to have a future impact on materials and labor, as these resources become constrained, which will add to our construction inventory costs.

~~Third~~First Quarter ~~2017~~2018 Highlights:

Key financial results as of and for the three months ended ~~September 30, 2017, as compared to the same period in 2016,~~March 31, 2018 are as follows:

Sales per outlet were 2.8

Net sales orders were 2,443

Home closings were ~~1,842, a 6% increase from the prior year quarter~~1,547

Total revenue was ~~$908~~$752 million ~~a 6% increase from the prior year quarter~~

~~GAAP home~~Home closings gross margin, inclusive of capitalized interest, was ~~18.6%~~18.8%

Net income ~~for the quarter~~ was ~~$54~~$47 million with diluted earnings per share of ~~$0.45~~

~~Backlog units at the end of the quarter were 4,359 with a sales value of $2.1 billion, a 13% increase from the prior year quarter~~

$0.41

Results of Operations

The following table sets forth our results of operations for the periods presented:


	Three Months Ended September 30, 2017						Nine Months Ended September 30, 2017						Three Months Ended March 31,
(Dollars in thousands)	2017			2016			2017			2016			2018			2017
Statements of Operations Data:
Home closings revenue, net	$	886,249		$	812,185		$	2,526,830		$	2,271,154		$	732,959		$	751,485
Land closings revenue	4,299			27,418			11,419			44,957			5,168			3,356
Mortgage operations revenue	17,479			13,814			47,362			36,951
Financial services revenue													14,206			14,249
Total revenues	908,027			853,417			2,585,611			2,353,062			752,333			769,090
Cost of home closings	721,637			658,507			2,062,437			1,852,724			594,906			616,295
Cost of land closings	3,002			8,179			7,869			20,497			4,281			2,400
Mortgage operations expenses	12,070			7,877			30,874			22,594
Financial services expenses													10,044			8,702
Gross margin	171,318			178,854			484,431			457,247			143,102			141,693
Sales, commissions and other marketing costs	61,476			58,277			178,609			165,300			53,698			55,617
General and administrative expenses	33,374			29,944			100,396			91,078			33,318			33,128
Equity in income of unconsolidated entities	(2,787		)	(1,646		)	(6,943		)	(4,734		)	(3,246		)	(1,085		)
Interest income, net	(135		)	(47		)	(314		)	(149		)	(343		)	(90		)
Other expense, net	415			1,935			828			8,602
Other expense/(income), net													437			(351		)
Income before income taxes	78,975			90,391			211,855			197,150			59,238			54,474
Income tax provision	24,282			31,707			65,631			66,698			11,706			18,873
Net income before allocation to non-controlling interests	54,693			58,684			146,224			130,452			47,532			35,601
Net income attributable to non-controlling interests – joint ventures	(427		)	(376		)	(625		)	(856		)
Net (income)/loss attributable to non-controlling interests — joint ventures													(129		)	9
Net income before non-controlling interests – Principal Equityholders	54,266			58,308			145,599			129,596			47,403			35,610
Net income from continuing operations attributable to non-controlling interests – Principal Equityholders	(21,390		)	(43,471		)	(76,810		)	(96,261		)	(2,470		)	(24,134		)
Net income available to Taylor Morrison Home Corporation	$	32,876		$	14,837		$	68,789		$	33,335		$	44,933		$	11,476
Home closings gross margin	18.6		%	18.9		%	18.4		%	18.4		%	18.8		%	18.0		%
Sales, commissions and other marketing costs as a percentage of home closings revenue	6.9		%	7.2		%	7.1		%	7.3		%	7.3		%	7.4		%
General and administrative expenses as a percentage of home closings revenue	3.8		%	3.7		%	4.0		%	4.0		%	4.5		%	4.4		%
Average sales price per home closed	$	481		$	468		$	474		$	459		$	474		$	461

Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2018 Compared to Three ~~and Nine~~ Months Ended ~~September 30, 2016~~March 31, 2017

Average Active Selling Communities


	Three Months Ended September 30,				Three Months Ended March 31,
	2017	2016	Change		2018	2017	Change
East	130	132	(1.5	)%	124	125	(0.8	)%
Central	118	116	1.7		115	116	(0.9	)
West	45	61	(26.2	)	49	57	(14.0	)
Total	293	309	(5.2	)%	288	298	(3.4	)%

Nine Months Ended September 30,
2017 2016 Change
East 127
131
(3.1 )%
Central 118
118
—
West 51
63
(19.0 )
Total 296
312
(5.1 )%

Average active selling communities for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2018 decreased by ~~5.2% and 5.1%, respectively,~~3.4% when compared to the same ~~periods~~period in the prior year. The ~~decreases were~~decrease was primarily driven by our West region, which experienced higher sales orders resulting in an increase in the number of close outs in the three months ended September 30, 2017, compared to the prior year. For the nine months ended September 30, 2017, the decrease in average active selling communities was also due to higher than expected ~~net~~ sales ~~orders~~pace in the ~~first and second quarters of 2017, resulting in an increase in community close outs. The timing of new community openings in our East region and higher than expected net sales order pace also~~current year which led to increased community close-outs in the three and nine months ended September 30, 2017. During the period from October 2016 to September 2017, we closed approximately 70 communities and opened approximately 50 communities throughout the Company.close outs.

Net Sales Orders

Three Months Ended September 30,

Net Sales Orders ⁽¹⁾

Sales Value ⁽¹⁾
Average Selling Price
(Dollars in thousands) 2017 2016 Change 2017 2016 Change 2017 2016 Change
East 777
795
(2.3 )% $ 302,795
$ 302,363
0.1 % $ 390
$ 380
2.6 %
Central 521
550
(5.3 ) 247,084
261,971
(5.7 ) 474
476
(0.4 )
West 463
605
(23.5 ) 300,815
354,281
(15.1 ) 650
586
10.9
Total 1,761
1,950
(9.7 )% $ 850,694
$ 918,615
(7.4 )% $ 483
$ 471
2.5 %


	Nine Months Ended September 30,																Three Months Ended March 31,
	Net Sales Orders ⁽¹⁾				Sales Value ⁽¹⁾						Average Selling Price						Net Sales Orders ⁽¹⁾				Sales Value ⁽¹⁾						Average Selling Price
(Dollars in thousands)	2017	2016	Change		2017		2016		Change		2017		2016		Change		2018	2017	Change		2018		2017		Change		2018		2017		Change
East	2,923	2,388	22.4	%	$	1,132,839	$	919,861	23.2	%	$	388	$	385	0.8	%	1,000	1,050	(4.8	)%	$	416,802	$	412,043	1.2	%	$	417	$	392	6.4	%
Central	1,826	1,599	14.2		864,797		753,454		14.8		474		471		0.6		755	628	20.2		373,506		289,055		29.2		495		460		7.6
West	1,813	1,816	(0.2	)	1,088,661		1,012,717		7.5		600		558		7.5		688	747	(7.9	)	426,636		430,527		(0.9	)	620		576		7.6
Total	6,562	5,803	13.1	%	$	3,086,297	$	2,686,032	14.9	%	$	470	$	463	1.5	%	2,443	2,425	0.7	%	$	1,216,944	$	1,131,625	7.5	%	$	498	$	467	6.6	%

⁽¹⁾Net sales orders represent the number and dollar value of new sales contracts executed with customers, net of cancellations.

East:

The average selling price of net sales orders increased by 6.4%, while the number of net sales orders decreased by ~~2.3%~~4.8%, ~~while the sales value of homes remained relatively flat,~~ for the three months ended ~~September 30, 2017~~March 31, 2018 compared to the prior year. ~~The~~Our markets in Florida continued to experience favorable demand with an increase in net sales orders especially in active adult communities. However, the increase in Florida was offset by a decrease in units ~~for~~in our other markets in the ~~three months ended September 30, 2017 is~~East region due to certain new community openings being shifted to future periods.

~~primarily driven by an interruption to the business in our Florida markets as a result of a hurricane that occurred during the period.~~ Central:

The number of net sales orders and sales value of homes increased by ~~22.4%~~20.2% and 23.2%, respectively, for the nine months ended September 30, 2017 compared to the prior year period. Our markets in Florida continued to experience favorable demand especially in active adult communities; however, the increase in units and sales value for the nine months ended September 30, 2017 compared to the prior year is primarily driven by other divisions in the East region, particularly in our Atlanta market where demand for first-time homebuyer communities with lower average selling prices remains high.

~~Central:~~

~~The number of sales orders and sales value of homes decreased by 5.3% and 5.7%~~29.2%, respectively, for the three months ended ~~September 30, 2017~~March 31, 2018 compared to the prior year. ~~The decrease~~Certain new communities in ~~units and sales value for~~ the ~~three months ended September 30, 2017 is primarily driven by an interruption~~Central region contributed to the ~~business in our Houston market as a result of a hurricane that occurred during the period. The~~higher number of sales orders and sales value of homes increased by 14.2% and 14.8%, respectively, for the nine months ended September 30, 2017. A significant portion of the increase in units and sales value for the nine months ended September 30, 2017 reflects the improvement in the ~~Houston market from~~current year quarter. Product and geographic mix among all divisions within the ~~prior year's soft economic environment. Other markets within this~~ region ~~continue to strengthen their performance and~~also contributed to the overall increase in ~~units~~net homes sold and ~~dollars for the segment as well.~~average selling prices resulting in higher sales value.

West:

The average selling price of net sales orders increased by ~~10.9% and 7.5%~~7.6%, ~~respectively, for~~while the three and nine months ended September 30, 2017 compared to the prior year. The markets in this region are showing continued strength as evidenced by an increase in sales pace for both the three and nine months ended September 30, 2017. The number of net sales orders ~~and sales value of homes~~ decreased by ~~23.5% and 15.1%~~7.9%, ~~respectively,~~ for the three months ended ~~September 30, 2017~~March 31, 2018 compared to the prior year ~~which is~~period. The decrease in ~~line with expectations, considering the increased focus on turn times and as result of~~units was due to the increase in the number of community close outs which limited our product availability. The ~~value~~current year had an increase in community openings compared to the same period in the prior year, however, they occurred later in the quarter, resulting in a shift in timing of ~~net~~ sales ~~orders increased by 7.5% for the nine months ended September 30, 2017, while the number of homes sold remained relatively flat.~~to future periods.

Sales Order Cancellations


	Cancellation Rate⁽¹⁾								Cancellation Rate⁽¹⁾
	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2017		2016		2017		2016		2018		2017
East	11.8	%	13.5	%	10.1	%	12.2	%	10.5	%	10.3	%
Central	14.4		12.8		12.2		15.4		9.0		11.4
West	11.1		15.1		11.6		13.2		7.8		11.5
Total Company	12.4	%	13.7	%	11.1	%	13.4	%	9.3	%	10.9	%

⁽¹⁾Cancellation rate represents the number of canceled sales orders divided by gross sales orders.

~~Favorable~~We believe favorable market conditions coupled with increased demand for new housing and a rising interest rate environment has led to a lower Total Company cancellation ~~rates across all of our regions~~rate for the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2018, compared to the prior year period. In addition, our use of prequalification criteria through TMHF and robust earnest money deposits helped us manage our cancellation rate across the Company compared to the prior year period.

Sales Order Backlog


	As of September 30,																As of March 31,
	Sold Homes in Backlog ⁽¹⁾				Sales Value						Average Selling Price						Sold Homes in Backlog ⁽¹⁾				Sales Value						Average Selling Price
(Dollars in thousands)	2017	2016	Change		2017		2016		Change		2017		2016		Change		2018	2017	Change		2018		2017		Change		2018		2017		Change
East	1,905	1,478	28.9	%	$	774,001	$	608,840	27.1	%	$	406	$	412	(1.5	)%	1,813	1,589	14.1	%	$	781,273	$	676,054	15.6	%	$	431	$	425	1.4	%
Central	1,272	1,202	5.8		653,415		612,840		6.6		514		510		0.8		1,372	1,162	18.1		675,944		589,305		14.7		493		507		(2.8	)
West	1,182	1,175	0.6		697,790		650,197		7.3		590		553		6.7		1,207	1,176	2.6		728,056		660,024		10.3		603		561		7.5
Total	4,359	3,855	13.1	%	$	2,125,206	$	1,871,877	13.5	%	$	488	$	486	0.4	%	4,392	3,927	11.8	%	$	2,185,273	$	1,925,383	13.5	%	$	498	$	490	1.6	%

⁽¹⁾ Sales order backlog represents homes under contract for which revenue has not yet been recognized at the end of the period (including homes sold but not yet started). Some of the contracts in our sales order backlog are subject to contingencies including mortgage loan approval and buyers selling their existing homes, which can result in cancellations.

Total backlog units and total sales value increased by ~~13.1%~~11.8% and 13.5% at ~~September 30, 2017~~March 31, 2018, respectively, compared to ~~September 30, 2016, respectively.~~March 31, 2017. The increase in backlog units ~~and total sales value~~ is primarily a result of ~~the combination~~a shift in timing of ~~increased~~closings to a future period and strong sales orders ~~and~~during the fourth quarter of 2017. In addition, higher average selling ~~price~~prices and lower cancellation ~~rates.~~rates resulted in higher sales value compared to the prior year.

Home Closings Revenue


	Three Months Ended September 30,																Three Months Ended March 31,
	Homes Closed				Home Closings Revenue, Net						Average Selling Price						Homes Closed				Home Closings Revenue, Net						Average Selling Price
(Dollars in thousands)	2017	2016	Change		2017		2016		Change		2017		2016		Change		2018	2017	Change		2018		2017		Change		2018		2017		Change
East	776	677	14.6	%	$	311,526	$	273,928	13.7	%	$	401	$	405	(1.0	)%	700	682	2.6	%	$	284,436	$	263,101	8.1	%	$	406	$	386	5.2	%
Central	531	548	(3.1	)	253,556		263,852		(3.9	)	478		481		(0.6	)	434	424	2.4		213,465		203,465		4.9		492		480		2.5
West	535	512	4.5		321,167		274,405		17.0		600		536		11.9		413	524	(21.2	)	235,058		284,919		(17.5	)	569		544		4.6
Total	1,842	1,737	6.0	%	$	886,249	$	812,185	9.1	%	$	481	$	468	2.8	%	1,547	1,630	(5.1	)%	$	732,959	$	751,485	(2.5	)%	$	474	$	461	2.8	%

Nine Months Ended September 30,
Homes Closed Home Closings Revenue, Net Average Selling Price
(Dollars in thousands) 2017 2016 Change 2017 2016 Change 2017 2016 Change
East 2,238
1,874
19.4 % $ 891,740
$ 722,814
23.4 % $ 398
$ 386
3.1 %
Central 1,512
1,566
(3.4 ) 723,758
748,712
(3.3 ) 479
478
0.2
West 1,585
1,504
5.4
911,332
799,628
14.0
575
532
8.1
Total 5,335
4,944
7.9 % $ 2,526,830
$ 2,271,154
11.3 % $ 474
$ 459
3.3 %

East:

The number of homes closed increased by ~~14.6%~~2.6% and ~~19.4%, respectively,~~home closings revenue, net increased by 8.1% for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2018 compared to the prior year. ~~Home closings revenue, net increased by 13.7% and 23.4%, respectively, for the same comparative periods.~~ Our Florida markets were the primary drivers ~~for~~of the increase in both units and dollars as a result of ~~increased net sales during~~continued favorable homebuyer reception of our products and communities in those markets. Although the region experienced an overall increase in units, delays from Hurricane Irma in 2017 continued to negatively impact the timing of home closings in the first ~~half~~quarter of 2018. All markets within Florida experienced in increase in average selling price which contributed to the ~~year. In addition, other divisions in the East region continued to gain momentum in the number of homes closed~~region's overall 5.2% increase for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2018 compared to the prior year. Certain economic market improvements, as well as a continued favorable homebuyer reception of newer products and newer communities throughout the region, contributed to the increase in net home closings revenue.

Central:

For the three and nine months ended September 30, 2017 we experienced a decrease in both homes closed and home closings revenue, net, partially as a result of the hurricane that occurred during the period in Houston, which pushed some closings to future periods.

~~West:~~

The number of homes closed increased by ~~4.5% and 5.4% for the three and nine months ended September 30, 2017,~~2.4% and home ~~closing~~closings revenue, net increased by ~~17.0% and 14.0%, respectively,~~4.9% for the three months ended March 31, 2018 compared to the prior year. The increase in units was partially as a result of the expansion of our Taylor Morrison brand in our Dallas market, leading to an increase in the number of communities and home closings in the current year period compared to the same ~~comparative periods.~~period in the prior year. Although the region experienced an overall increase in units, delays from Hurricane Harvey in 2017 continued to negatively impact the timing of home closings in the first quarter of 2018.

West:

We saw a decrease in both home closings and home closings revenue, net for the three months ended March 31, 2018 compared to prior year. The ~~increases~~decreases are primarily driven by ~~strong sales~~a decline in ~~our Phoenix division and markets within Northern California which continue to experience strong consumer demand~~product availability as a result of ~~increased job growth~~fewer active communities in ~~those areas.~~

the prior periods when the sales occurred. Average selling price of homes closed remained strong as evidenced by a 4.6% increase for the three months ended March 31, 2018 compared to the prior year.

Land Closings Revenue


	Three Months Ended September 30,							Three Months Ended March 31,
(Dollars in thousands)	2017		2016		Change			2018		2017		Change
East	$	1,013	$	14,711	$	(13,698	)	$	371	$	564	$	(193	)
Central	3,286		9,243		(5,957		)	647		2,792		(2,145		)
West	—		3,464		(3,464		)	4,150		—		4,150
Total	$	4,299	$	27,418	$	(23,119	)	$	5,168	$	3,356	$	1,812

Nine Months Ended September 30,
(Dollars in thousands) 2017 2016 Change
East $ 4,518
$ 14,736
$ (10,218 )
Central 6,901
19,113
(12,212 )
West —
11,108
(11,108 )
Total $ 11,419
$ 44,957
$ (33,538 )

We generally purchase land and lots with the intent to build and sell homes. However, in some locations where we act as a

developer, we occasionally purchase land that includes commercially zoned parcels or areas designated for school or

government use, which we typically sell to commercial developers or municipalities, as applicable. We also sell residential lots

or land parcels to manage our land and lot supply on larger tracts of land. As a developer, we may include land sales in our

underwriting strategies in many of our master plan communities where we may mitigate risk, enhance our returns or pursue

opportunities allowing access to new land positions. Land and lot sales occur at various intervals and varying degrees of

profitability. Therefore, the revenue and gross margin from land closings will fluctuate from period to period, depending upon

market opportunities. The ~~prior year period included sales of legacy~~increase in land that we had held for either appreciation or tax purposes. As of the third quarter of 2016, the tax holding period for certain land assets expired, creating certain tax benefits, thus resulting in our significant land salesclosings revenue in the ~~prior year.~~

West region is due to the sale of certain long-term strategic assets in the current year quarter.

Segment Home Closings Gross Margin


	Three Months Ended September 30,																								Three Months Ended March 31,
	East						Central						West						Consolidated						East						Central						West						Consolidated
(Dollars in thousands)	2017			2016			2017			2016			2017			2016			2017			2016			2018			2017			2018			2017			2018			2017			2018			2017
Home closings revenue, net	$	311,526		$	273,928		$	253,556		$	263,852		$	321,167		$	274,405		$	886,249		$	812,185		$	284,436		$	263,101		$	213,465		$	203,465		$	235,058		$	284,919		$	732,959		$	751,485
Cost of home closings	248,455			216,049			206,939			217,526			266,243			224,932			721,637			658,507			232,199			209,818			173,094			167,138			189,613			239,339			594,906			616,295
Home closings gross margin	63,071			57,879			46,617			46,326			54,924			49,473			164,612			153,678			52,237			53,283			40,371			36,327			45,445			45,580			138,053			135,190
Home closings gross margin %	20.2		%	21.1		%	18.4		%	17.6		%	17.1		%	18.0		%	18.6		%	18.9		%	18.4		%	20.3		%	18.9		%	17.9		%	19.3		%	16.0		%	18.8		%	18.0		%

	Nine Months Ended September 30,
	East						Central						West						Consolidated
(Dollars in thousands)	2017			2016			2017			2016			2017			2016			2017			2016
Home closings revenue, net	$	891,740		$	722,814		$	723,758		$	748,712		$	911,332		$	799,628		$	2,526,830		$	2,271,154
Cost of home closings	707,614			573,493			592,482			616,418			762,341			662,813			2,062,437			1,852,724
Home closings gross margin	184,126			149,321			131,276			132,294			148,991			136,815			464,393			418,430
Home closings gross margin %	20.6		%	20.7		%	18.1		%	17.7		%	16.3		%	17.1		%	18.4		%	18.4		%

East:

Home closings gross margin percentage ~~remained flat for the nine months ended September 30, 2017 compared to the same period in 2016 and~~ decreased to ~~20.2%~~18.4% from ~~21.1%~~20.3% for the three months ended ~~September 30, 2017 and 2016.~~March 31, 2018 compared to the prior year. The primary driver for ~~these decreases~~this decrease is due to geographic and product mix within the East region as well as increased land and development costs in several of our ~~divisions~~markets, partially offset by higher average selling prices and an increase in ~~the East region.~~rebates from our regional and national vendor program leading to a decrease in costs of home closings.

Central:

Home closings gross margin percentage increased to ~~18.4%~~18.9% from ~~17.6%~~17.9% for the three months ended ~~September 30, 2017~~March 31, 2018 compared to prior year. Several markets within the Central region experienced an increase in rebates from our regional and ~~2016, respectively,~~national vendor program, which contributed to the decrease in costs of home closings and ~~to 18.1% from 17.7% for the nine months ended September 30, 2017 and 2016, respectively. The~~ increase ~~is primarily due to~~in home closings gross margin. In addition, geographical mix within the ~~region.~~region resulted in higher average selling prices during the current quarter compared to the same quarter in the prior year.

West:

Home closings gross margin percentage ~~decreased~~increased to ~~17.1%~~19.3% from ~~18.0%~~16.0% for the three months ended ~~September 30, 2017 and 2016 respectively, and~~March 31, 2018 compared to ~~16.3% from 17.1%, for~~ the ~~nine months ended September 30, 2017 and 2016, respectively.~~prior year. The ~~decrease~~increase is ~~primarily~~partially due to product mix contributing to higher average selling prices during the current quarter, as well as larger rebates from our regional and ~~an increase~~national vendor program across several markets within the West region. In addition, home closings in the prior year quarter had higher land ~~and development~~ costs ~~of the homes closed~~resulting in ~~2017 compared to those closed in 2016.~~lower margins.

~~Mortgage Operations~~Financial Services

Our ~~Mortgage Operations~~Financial Services segment provides mortgage lending through our subsidiary, TMHF, and title services through our subsidiary, Inspired Title. The following ~~details the number of loans closed, net income per closed loan, the aggregate value and capture rate on our loans~~is a summary for the ~~following periods:~~periods presented of financial services income before income taxes as well as supplemental data:




	Three Months Ended March 31,
(In thousands, except loan originations)	2018		2017		Change
Mortgage operations revenue	$	12,319	$	12,657	(2.7	)%
Mortgage operations revenue - Other	473		375		26.1	%
Title services revenue	1,414		1,217		16.2	%
Total financial services revenue	14,206		14,249		(0.3	)%
Financial services equity in income of unconsolidated entities	1,659		1,336		24.2	%
Total revenue	15,865		15,585		1.8	%
Financial services expenses	10,044		8,702		15.4	%
Financial services income before income taxes	$	5,821	$	6,883	(15.4	)%
Total originations:
Loans	916		946		(3.2	)%
Principal	$	317,336	$	319,100	(0.6	)%



	Three Months Ended March 31,
	2018		2017
Supplemental data:
Average FICO score	747		743
Funded origination breakdown:
Government (FHA,VA,USDA)	15	%	20	%
Other agency	71	%	65	%
Total agency	86	%	85	%
Non-agency	14	%	15	%
Total funded originations	100	%	100	%

Closed
Loans
Profit Per Closed Loan
Aggregate
Loan Volume
(in millions)
Capture Rate Average FICO
Three Months Ended September 30, 2017 1,102
$ 5,088
$ 374.1
76 % 745
Three Months Ended September 30, 2016 1,068
$ 4,598
$ 357.0
81 % 744

Closed
Loans Profit Per Closed Loan Aggregate
Loan Volume
(in millions) Capture Rate Average FICO
Nine Months Ended September 30, 2017 3,162
$ 5,324
$ 1,075.0
76 % 744
Nine Months Ended September 30, 2016 2,965
$ 4,626
$ 992.0
80 % 743

~~Our net income per closed loan increased~~Financial services revenue remained relatively flat for ~~both~~ the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2018 compared to the ~~same periods in~~three months ended March 31, 2017. Mortgage operations revenue decreased slightly to $12.3 million for the ~~prior year~~first quarter of 2018 compared to $12.7 million for the first quarter of 2017 primarily due to ~~the increase~~a decrease in the ~~average loan amount which is a result of the increase in average selling price~~number of homes closed. ~~The increase in net income per closed loan is also partially attributable to improvements in~~In addition, the ~~gain on sale of loans due to better investor pricing from our mandatory loan commitments model.~~

~~Our~~competition within the mortgage ~~capture rate represents~~operations business continues to increase as the ~~percentage of our homes sold~~consumer demand shifts from refinancing loans to a home purchaser that utilized a mortgage and for which the borrower obtained such mortgage from TMHF or one of our preferred third party lenders. The decrease in capture rate for both the three and nine months ended September 30, 2017 compared to the same periods in the prior year is primarily due to increased competitionloans for new home ~~mortgages.~~purchases, which is resulting in reduced net income.

Sales, Commissions and Other Marketing Costs

Sales, commissions and other marketing costs, as a percentage of home closings revenue, net, decreased to ~~6.9%~~7.3% from ~~7.2% and to 7.1% from 7.3% respectively,~~7.4% for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2018 compared to the same ~~periods~~period in ~~2016.~~2017. This decrease is primarily ~~a result of efficient marketing~~driven by efficiencies we achieved and ~~advertising. In addition, the prior year period had higher sales and marketing costs~~maintained as a result of previous investments we made in our ~~acquired divisions~~sales and ~~an increase in new communities which typically have incremental startup costs during their early stages.~~

marketing functions.

General and Administrative Expenses

General and administrative expenses as a percentage of home closings revenue, net, ~~remained relatively flat~~increased to 4.5% from 4.4% for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2018 compared to the same ~~periods~~period in 2017. The slight increase was attributable to the decrease in home closings revenue, net in the ~~prior year.~~current period. We continue to utilize our scalable platform, providing leverage with existing infrastructure in an effort to maintain stable operating costs.

Equity in Income of Unconsolidated Entities

Equity in income of unconsolidated entities was ~~$2.8~~$3.2 million and ~~$1.6~~$1.1 million for the three months ended ~~September 30,~~March 31, 2018 and 2017, ~~and 2016, respectively, and $6.9 million and $4.7 million for the nine months ended September 30, 2017 and 2016,~~ respectively. The increase is primarily due to increased activity in our ~~increase in active unconsolidated joint ventures. We had six active~~homebuilding unconsolidated joint ventures ~~at September 30, 2017 compared to five active unconsolidated joint ventures at September 30, 2016.~~as they mature in their life cycle.

Interest Income, Net

Interest income, net was ~~$135~~$343 thousand and ~~$47~~$90 thousand for the three months ended ~~September 30,~~March 31, 2018 and 2017, ~~and 2016, respectively, and $314 thousand and $149 thousand for the nine months ended September 30, 2017 and 2016,~~ respectively. Interest income, net includes interest earned on cash balances offset by interest incurred but not capitalized on our long-term debt and other borrowings.

Other ~~Expense,~~Expense/(Income), Net

Other ~~expense,~~expense/(income), net ~~was $0.4 million and $1.9 million,~~ for the three months ended ~~September 30,~~March 31, 2018 and 2017 ~~and 2016, respectively, and $0.8~~was expense of $0.4 million and ~~$8.6~~income of $0.4 million, ~~for the nine months ended September 30, 2017 and 2016,~~ respectively. The ~~three and nine months ended September 30, 2016 included higher accruals for contingent consideration relating~~expense in the current year relates primarily to ~~our acquisitions during 2016, earn out accruals for our previous Darling Homes acquisition, and~~ pre-acquisition costs on abandoned land projects. The income in the prior year relates to an increase in the number of recoveries from our captive insurance claims.

Income Tax Provision

~~Our effective tax rate for the three and nine months ended September 30, 2017 was 30.7% and 31%, respectively, compared to 35.1% and 33.8% for the same periods in 2016, respectively.~~ The effective tax rate for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2018 was based on the U.S. federal statutory income tax rate and was affected primarily by state income taxes, changes in valuation allowances, and certain deductions and credits relating to homebuilding activities. The effective tax rate for the three month period ended March 31, 2018 was favorably impacted by ~~discrete tax adjustments related to certain deferred tax assets and liabilities and federal energy tax credits earned from building energy efficient homes, which were recorded~~the permanent reduction in the ~~current period but are associated with homes closed prior~~federal corporate tax rate from 35% to ~~2017.~~21% as a result of the Tax Cuts and Jobs Act (“Tax Act”), the relevant provisions of which became effective on January 1, 2018. Refer to Note 9 - Income Taxes for additional information.

Net Income

Net income before allocation to Principal Equityholders and diluted earnings per share for the three months ended ~~September 30, 2017~~March 31, 2018 was ~~$54.3~~$47.4 million and ~~$0.45,~~$0.41, respectively. Net income before allocation to Principal Equityholders and diluted earnings per share for the three months ended ~~September 30, 2016~~March 31, 2017 was ~~$58.3~~$35.6 million and ~~$0.49,~~$0.30, respectively. The ~~decrease~~increase in net income and earnings per share from the prior year is attributable to ~~lower~~higher gross margin dollars due to higher ~~costs of goods sold~~average selling prices as well as ~~lower land sale gross margin during the three months ended September 30, 2017. However, these decreases~~a decrease in ~~gross margin were partially offset by~~our income tax provision due to a lower effective tax rate for the three months ended ~~September 30, 2017~~March 31, 2018 compared to the same period in the prior year.

Liquidity and Capital Resources

Liquidity

We finance our operations through the following:

Borrowings under our Revolving Credit Facility (as defined below);

Our various series of Senior Notes (as defined below);

Mortgage warehouse facilities;

Project-level financing (including non-recourse loans);

Performance, payment and completion surety bonds, and letters of credit; and

Cash generated from operations.

We believe that we can fund our current and foreseeable liquidity needs for the next 12 months from:

Cash generated from operations; and

Borrowings under our Revolving Credit Facility.

We may also access the capital markets to obtain additional liquidity through debt and equity offerings on an opportunistic basis. Our principal uses of capital for the ~~nine~~three months ended ~~September 30,~~March 31, 2018 and 2017 ~~and 2016~~ were land purchases, lot development, home construction, operating expenses, payment of debt service, income taxes, investments in joint ventures, ~~stock repurchases,~~ and the payment of various liabilities. In addition, all net proceeds from our ~~four~~ equity offerings during the ~~nine~~three months ended ~~September 30,~~March 31, 2018 and 2017, were used to purchase partnership units in New TMM ~~our direct subsidiary,~~ along with shares of our Class B common stock, held by our Principal Equityholders. For the three months ended March 31, 2018, capital was also used to purchase partnership units in New TMM shares and shares of our Class B Common Stock from our Remaining Principal Equityholders.

Cash flows for each of our communities depend on the status of the development cycle, and can differ substantially from reported earnings. Early stages of development or expansion require significant cash expenditures for land acquisitions, on and off-site development, construction of model homes, general landscaping and other amenities. Because these costs are a component of our inventory and are not recognized in our statement of operations until a home closes, we incur significant cash outflows prior to recognition of earnings.

The table below summarizes our total cash and liquidity as of the dates indicated (in thousands):


	As of						As of
(Dollars in thousands)	September 30, 2017			December 31, 2016			March 31, 2018			December 31, 2017
Total Cash, excluding Restricted Cash	$	264,862		$	300,179
Total Cash, including Restricted Cash							$	289,288		$	575,503

Total Revolving Credit Facility	500,000			500,000			500,000			500,000
Letters of Credit Outstanding	(33,158		)	(31,903		)	(52,206		)	(47,126		)
Revolving Credit Facility Borrowings Outstanding	—			—			—			—
Revolving Credit Facility Availability	466,842			468,097			447,794			452,874

Total Liquidity	$	731,704		$	768,276		$	737,082		$	1,028,377

Cash Flow Activities

Operating Cash Flow Activities

Our net cash provided by operating activities was ~~$132.8~~$0.7 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 compared to ~~$142.4~~$147.9 million provided by operating activities for the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2017. The primary driver of the decrease in cash provided by operating activities in the current period is increased spending on real estate inventory and land deposits and a decrease in homes closed coupled with an increase in sales backlog driving higher inventory balances, partially offset by ~~an increase in the number of homes closed,~~a lower effective tax rate resulting in higher net ~~income and an increase in customer deposits as a result of higher sales volume.~~income.

Investing Cash Flow Activities

Net cash used in investing activities was ~~$26.5~~$4.3 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2018, as compared to net cash used in investing activities of ~~$74.7~~$14.4 million for the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2017. The primary driver of the change between periods was higher investments of capital into our unconsolidated joint ventures in the ~~2016 acquisition of Acadia Homes for $52.8 million.~~prior year period.

Financing Cash Flow Activities

Net cash used in financing activities was ~~$141.9~~$282.6 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2018, as compared to net cash used in financing activities of ~~$33.3~~$133.1 million for the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2017. The cash used in financing activities in ~~2017 and 2016~~2018 was primarily attributable to ~~repayments on the mortgage warehouse lines exceeding borrowings stemming~~repurchases of New TMM Units from ~~the seasonal decline~~our Remaining Principal Equityholders as part of our secondary equity offerings completed in mortgage receivables, offset by net borrowings on the Revolving Credit Facility in the prior year. As of September 30, 2017, we did not have any borrowings outstanding under our Revolving Credit Facility.January.

Debt Instruments

Senior Notes:

The following table summarizes our outstanding senior unsecured notes (collectively, the “Senior Notes”) as of ~~September 30, 2017.~~March 31, 2018.



(Dollars in thousands)	Date Issued	Principal Amount		Initial Offering Price		Interest Rate		Original Net Proceeds		Original Debt Issuance Cost
Senior Notes due 2021	April 16, 2013	550,000		100.0	%	5.250	%	541,700		8,300
Senior Notes due 2023	April 16, 2015	350,000		100.0	%	5.875	%	345,500		4,500
Senior Notes due 2024	March 5, 2014	350,000		100.0	%	5.625	%	345,300		4,700
Total		$	1,250,000					$	1,232,500	$	17,500

2021 Senior Notes

On April 16, 2013, we issued $550.0 million aggregate principal amount of 5.25% Senior Notes due 2021 (the “2021 Senior Notes”).

The 2021 Senior Notes mature on April 15, 2021. The 2021 Senior Notes are guaranteed by TMM Holdings Limited Partnership (“TMM Holdings”), Taylor Morrison Holdings, Inc., Taylor Morrison Communities II, Inc. and their homebuilding subsidiaries (collectively, the “Guarantors”) which are all subsidiaries directly or indirectly of TMHC. The 2021 Senior Notes and the related guarantees are senior unsecured obligations and are not subject to registration rights. The indenture for the 2021 Senior Notes contains covenants that limit (i) the making of investments, (ii) the payment of dividends and the redemption of equity and junior debt, (iii) the incurrence of additional indebtedness, (iv) asset dispositions, (v) mergers and similar corporate transactions, (vi) the incurrence of liens, (vii) prohibitions on payments and asset transfers among the issuers and restricted subsidiaries and (viii) transactions with affiliates, among others. The indenture governing the 2021 Senior Notes contains customary events of default. If we do not apply the net cash proceeds of certain asset sales within specified deadlines, we will be required to offer to repurchase the 2021 Senior Notes at par (plus accrued and unpaid interest) with such proceeds. We are also required to offer to repurchase the 2021 Senior Notes at a price equal to 101% of their aggregate principal amount (plus accrued and unpaid interest) upon certain change of control events.

The 2021 Senior Notes are redeemable at scheduled redemption prices, currently at 102.625%, of their principal amount (plus accrued and unpaid interest).

There are no financial maintenance covenants for the 2021 Senior Notes.

2023 ~~Senior Notes and Redemption of 2020~~ Senior Notes

There are no financial maintenance covenants for the 2023 Senior Notes.

2024 Senior Notes

On March 5, 2014, we issued $350.0 million aggregate principal amount of 5.625% Senior Notes due 2024 (the “2024 Senior Notes”).

There are no financial maintenance covenants for the 2024 Senior Notes.

TMHC Compared to TMM Holdings

TMM Holdings is a parent guarantor of certain of our debt facilities. The financial information of TMHC is substantially identical to the financial performance and operations of TMM Holdings except for certain SEC and regulatory fees which are attributable to TMHC.

Revolving Credit Facility

~~Our~~On January 26, 2018, we amended our $500.0 millionRevolving Credit Facility ~~matures on~~to extend the maturity date from April 12, ~~2019.~~2019 to January 26, 2022. Other immaterial changes were also made to the structure of the Revolving Credit Facility. The Revolving Credit Facility is guaranteed by the same Guarantors that guarantee the 2021, 2023, and 2024 Senior Notes.

The Revolving Credit Facility contains certain restrictive covenants including limitations on incurrence of liens, dividends and other distributions, asset dispositions and investments in entities that are not guarantors, limitations on prepayment of subordinated indebtedness and limitations on fundamental changes. The Revolving Credit Facility contains customary events of default, subject to applicable grace periods, including for nonpayment of principal, interest or other amounts, violation of covenants (including financial covenants, subject to the exercise of an equity cure), incorrectness of representations and warranties in any material respect, cross default and cross acceleration, bankruptcy, material monetary judgments, ERISA events with material adverse effect, actual or asserted invalidity of material guarantees and change of control. As of ~~September 30, 2017,~~March 31, 2018, we were in compliance with all of the covenants under the Revolving Credit Facility.

Mortgage Warehouse Borrowings

The following is a summary of our mortgage ~~subsidiary~~ warehouse borrowings:


(Dollars in thousands)	As of September 30, 2017							As of March 31, 2018
Facility	Amount Drawn		Facility Amount		Interest Rate	Expiration Date	Collateral ⁽¹⁾	Amount Drawn		Facility Amount		Interest Rate	Expiration Date	Collateral ⁽¹⁾
Flagstar	$	2,703	$	20,000	LIBOR + 2.5%	30 days written notice	Mortgage Loans	$	3,022	$	39,000	LIBOR + 2.25%	30 days written notice	Mortgage Loans
Comerica	23,290		50,000		LIBOR + 2.25%	November 16, 2017⁽²⁾	Mortgage Loans	7,864		50,000		LIBOR + 2.25%	On Demand	Mortgage Loans
J.P. Morgan	35,299		100,000		LIBOR + 2.375%	September 26, 2018	Mortgage Loans and Pledged Cash	30,636		100,000		LIBOR + 2.375%	September 24, 2018	Mortgage Loans and Restricted Cash
Total	$	61,292	$	170,000				$	41,522	$	189,000

⁽²⁾ ~~We expect to renew the Comerica facility during the fourth quarter of 2017.~~

Loans Payable and Other Borrowings

Loans payable and other borrowings as of ~~September 30, 2017~~March 31, 2018 consist of project-level debt due to various land sellers and seller financing notes from current and prior year acquisitions. Project-level debt is generally secured by the land that was acquired and the principal payments generally coincide with corresponding project lot sales or a principal reduction schedule. Loans payable bear interest at rates that ranged from 0% to 8% at ~~September 30, 2017~~each of March 31, 2018 and December 31, ~~2016.~~2017. We impute interest for loans with no stated interest rates.

Letters of Credit, Surety Bonds and Financial Guarantees

The following table summarizes our letters of credit and surety bonds as of the dates indicated:


	As of				As of
(Dollars in thousands)	September 30, 2017		December 31, 2016		March 31, 2018		December 31, 2017
Letters of credit ⁽¹⁾	$	33,158	$	31,903	$	52,206	$	47,126
Surety bonds	284,617		270,943		289,684		284,617
Total outstanding letters of credit and surety bonds	$	317,775	$	302,846	$	341,890	$	331,743

⁽¹⁾ As of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, there was $160 million and $200 million respectively, total capacity of letters of credit available under our Revolving Credit Facility.

Off-Balance Sheet Arrangements as of ~~September 30, 2017~~March 31, 2018

Investments in Land Development and Homebuilding Joint Ventures or Unconsolidated Entities

We participate in strategic land development and homebuilding joint ventures with related and unrelated third parties. The use of these entities, in some instances, enables us to acquire land to which we could not otherwise obtain access, or could not obtain access on terms that are as favorable. Our partners in these joint ventures historically have been land owners/developers, other homebuilders and financial or strategic partners. Joint ventures with land owners/developers have given us access to sites owned or controlled by our partners. Joint ventures with other homebuilders have provided us with the ability to bid jointly with our partners for large or expensive land parcels. Joint ventures with financial partners have allowed us to combine our homebuilding expertise with access to our partners’ capital.

In certain of our unconsolidated joint ventures, we enter into loan agreements, whereby one of our subsidiaries will provide the lenders with customary guarantees, including completion, indemnity and environmental guarantees subject to usual non-recourse terms.

For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2018, total net capital invested in unconsolidated joint ventures was ~~$28.9~~$2.1 million.

Land Purchase and Land Option Contracts

We enter into land purchase and option contracts to procure land or lots for the construction of homes in the ordinary course of business. Lot option contracts enable us to control significant lot positions with a minimal initial capital investment and

substantially reduce the risks associated with land ownership and development. As of ~~September 30, 2017,~~March 31, 2018, we had outstanding land purchase and lot option contracts of ~~$520.8~~$362.5 million. We are obligated to close the transaction under our land purchase contracts. However, our obligations with respect to the option contracts are generally limited to the forfeiture of the related non-refundable cash deposits and/or letters of credit provided to obtain the options. At ~~September 30, 2017,~~March 31, 2018, we had non-refundable deposits totaling ~~$50.9~~$57.4 million.

Seasonality

Our business is seasonal. We have historically experienced, and in the future expect to continue to experience, variability in our results on a quarterly basis. We generally have more homes under construction, close more homes and have greater revenues and operating income in the third and fourth quarters of the year. Therefore, although new home contracts are obtained throughout the year, a higher portion of our home closings occur during the third and fourth calendar quarters. Our revenue therefore may fluctuate significantly on a quarterly basis, and we must maintain sufficient liquidity to meet short-term operating requirements. Factors expected to contribute to these fluctuations include:

the timing of the introduction and start of construction of new projects;

the timing of project sales;

the timing of closings of homes, lots and parcels;

the timing of receipt of regulatory approvals for development and construction;

the condition of the real estate market and general economic conditions in the areas in which we operate;

mix of homes closed;

construction timetables;

the prevailing interest rates and the availability of financing, both for us and for the purchasers of our homes;

the cost and availability of materials and labor; and

weather conditions in the markets in which we build.

As a result of seasonal activity, our quarterly results of operations and financial position are not necessarily representative of the results we expect for the full year.

Inflation

We and the homebuilding industry in general may be adversely affected during periods of high inflation, primarily because of higher land, financing, labor and construction material costs. In addition, higher mortgage interest rates can significantly affect the affordability of permanent mortgage financing to prospective homebuyers. We attempt to pass through to our customers increases in our costs through increased sales prices. However, during periods of soft housing market conditions, we may not be able to offset our cost increases with higher selling prices.

Critical Accounting Policies

In January 2018, we adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which provides new guidance for revenue recognition and elected to use the modified retrospective approach to account for prior periods. Refer to Note 2 - Summary of Significant Accounting Policies for additional discussion. There have been no other significant changes to our critical accounting policies during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 as compared to those we disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our operations are interest rate sensitive. We monitor our exposure to changes in interest rates and incur both fixed rate and variable rate debt. At ~~September 30, 2017,~~March 31, 2018, approximately ~~96%~~97% of our debt was fixed rate and 4%3% was variable rate. None of our market sensitive instruments were entered into for trading purposes. For fixed rate debt, changes in interest rates generally affect the fair value of the debt instrument, but not our earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not impact the fair value of the debt instrument but may affect our future earnings and cash flows, and may also impact our variable rate borrowing costs, which principally relate to any borrowings under our Revolving Credit Facility and borrowings by TMHF under its various warehouse facilities. As of ~~September 30, 2017,~~March 31, 2018, we had no outstanding borrowings under our Revolving Credit Facility. We had ~~$466.8~~$447.8 million of additional availability for borrowings and ~~$166.8~~$107.8 million of additional availability for letters of credit (giving effect to ~~$33.2~~$52.2 million of letters of credit outstanding as of such date). Our 2021 Senior Notes are subject to a requirement that we offer to purchase such notes at par with certain proceeds of asset sales (to the extent not otherwise applied in accordance with the indenture governing such notes). We are also required to offer to purchase all of our outstanding Senior Notes at 101% of their aggregate principal amount upon the occurrence of specified change of control events. Other than in those circumstances, we do not have an obligation to prepay fixed rate debt prior to maturity and, as a result, we would not expect interest rate risk and changes in fair value to have a significant impact on our cash flows related to our fixed rate debt until such time as we are required to refinance, repurchase or repay such debt.

We are not materially exposed to interest rate risk associated with TMHF’s mortgage loan origination business because at the time any loan is originated, TMHF has identified the investor who will agree to purchase the loan on the interest rate terms that are locked in with the borrower at the time the loan is originated.

The following table sets forth principal cash flows by scheduled maturity and effective weighted average interest rates and estimated fair value of our debt obligations as of ~~September 30, 2017.~~March 31, 2018. The interest rate for our variable rate debt represents the weighted average interest rate on our borrowings under our mortgage warehouse facilities. Because the mortgage warehouse facilities are secured by certain mortgage loans held for sale which are typically sold within approximately 20 - 30 days, its outstanding balance is included as a variable rate maturity in the most current period presented.


	Expected Maturity Date																					Fair Value		Expected Maturity Date																					Fair Value
(In millions, except percentage data)	2017			2018			2019			2020			2021			Thereafter			Total			Fair Value		2018			2019			2020			2021			2022			Thereafter			Total			Fair Value
Fixed Rate Debt	$	47.5		$	61.8		$	40.5		$	5.5		$	552.6		$	703.9		$	1,411.8		$	1,461.3	$	65.2		$	42.3		$	7.0		$	554.3		$	4.3		$	700.0		$	1,373.1		$	1,389.1
Weighted average interest rate⁽¹⁾	3.5		%	3.5		%	3.5		%	3.5		%	5.5		%	5.5		%	5.3		%			3.5		%	3.5		%	3.5		%	5.5		%	3.5		%	5.5		%	5.3		%
Variable Rate Debt⁽²⁾	$	61.3		$	—		$	—		$	—		$	—		$	—		$	61.3		$	61.3	$	41.5		-			-			-			-			-			$	41.5		$	41.5
Weighted average interest rate	3.3		%	—		%	—		%	—		%	—		%	—		%	3.3		%			3.6		%	-			-			-			-			-			3.6		%

⁽¹⁾ Represents the coupon rate of interest on the full principal amount of the debt.

⁽²⁾ Based upon the amount of variable rate debt outstanding at ~~September 30, 2017,~~March 31, 2018, and holding the variable rate debt balance constant, each 1% increase in interest rates would increase the interest incurred by us by approximately ~~$0.6~~$0.4 million per year.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our principal executive officer, principal financial officer and principal accounting officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of ~~September 30, 2017.~~March 31, 2018. Based on this evaluation, our principal executive officer, principal financial officer and principal accounting officer concluded that, as of ~~September 30, 2017,~~March 31, 2018, the Company’s disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended ~~September 30, 2017~~March 31, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in various litigation and legal claims in the normal course of our business operations, including actions brought on behalf of various classes of claimants. We are also subject to a variety of local, state, and federal laws and regulations related to land development activities, house construction standards, sales practices, mortgage lending operations, employment practices, and protection of the environment. As a result, we are subject to periodic examination or inquiry by various governmental agencies that administer these laws and regulations. We establish liabilities for legal claims and regulatory matters when such matters are both probable of occurring and any potential loss is reasonably estimable. We accrue for such matters based on the facts and circumstances specific to each matter and revise these estimates as the matters evolve. In such cases, there may exist an exposure to loss in excess of any amounts currently accrued. In view of the inherent difficulty of predicting the outcome of these legal and regulatory matters, we generally cannot predict the ultimate resolution of the pending matters, the related timing or the eventual loss. While the outcome of such contingencies cannot be predicted with certainty, we do not believe that the resolution of such matters will have a material adverse impact on our results of operations, financial position, or cash flows. However, to the extent the liability arising from the ultimate resolution of any matter exceeds the estimates reflected in the recorded reserves relating to such matter, we could incur additional charges that could be significant.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors set forth in Part I, Item 1A. of our Annual Report. These risk factors may materially affect our business, financial condition or results of operations. You should carefully consider the risk factors set forth in our Annual Report and the other information set forth elsewhere in this quarterly report. You should be aware that these risk factors and other information may not describe every risk facing our Company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~Issuer Purchases of Equity Securities~~

~~During the three months ended September 30, 2017, we repurchased the following number of shares of our Class A Common Stock:~~

None.

Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs
Approximate dollar value of shares that may yet be purchased under the plans or programs (in thousands) ^(a)

July 1 to July 31, 2017 —
$ —
—
$ 56,427
August 1 to August 31, 2017 —
$ —
—
$ 56,427
September 1 to September 30, 2017 195,824
$ 20.93
195,824
$ 95,898
Total 195,824
195,824

^(a) Our Board of Directors has authorized the repurchase of up to $100.0 million of the Company’s Class A Common Stock through December 31, 2018 in open market purchases, privately negotiated transactions or other transactions. The stock repurchase program is subject to prevailing market conditions and other considerations, including our liquidity, the terms of our debt instruments, planned land investment and development spending, acquisition and other investment opportunities and ongoing capital requirements.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS



Exhibit No.		Description

3.1		Amended and Restated Certificate of Incorporation (included as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on April 15, 2013, and incorporated herein by reference).

3.2		Amended and Restated By-laws (included as Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed on April 15, 2013, and incorporated herein by reference).

10.1		Amendment No. 5, dated as of January 26, 2018, to the Second Amended and Restated Credit Agreement, dated as of July 13, 2011 (as amended and restated as of April 13, 2012, thereafter amended as of August 15, 2012 and December 27, 2012, as further amended and restated as of April 12, 2013 and thereafter amended as of January 15, 2014, December 22, 2014 and April 24, 2015), by and among Taylor Morrison Communities, Inc., TMM Holdings Limited Partnership, Taylor Morrison Holdings II, Inc., Taylor Morrison Communities II, Inc., Taylor Morrison Holdings, Inc., Taylor Morrison Finance, Inc., the lenders party thereto and Credit Suisse AG, as administrative agent for the lenders (included as Exhibit 10.9(d) to Taylor Morrison Home Corporation’s Annual report on Form 10-K for the fiscal year ended December 31, 2017, filed on February 21, 2018, and incorporated herein by reference).

10.2		Purchase Agreement, dated as of January 3, 2018, by and among Taylor Morrison Home Corporation and certain sellers named in Schedule I thereto (included as Exhibit 10.1 to Taylor Morrison Home Corporation’s Current Report on Form 8-K, filed on January 8, 2018, and incorporated herein by reference).

10.3		Purchase Agreement, dated as of January 3, 2018, by and among Taylor Morrison Home Corporation and certain sellers named in Schedule I thereto (included as Exhibit 10.2 to Taylor Morrison Home Corporation’s Current Report on Form 8-K, filed on January 8, 2018, and incorporated herein by reference).

10.4		Purchase Agreement, dated as of January 11, 2018, by and among Taylor Morrison Home Corporation and certain sellers named in Schedule I thereto (included as Exhibit 10.1 to Taylor Morrison Home Corporation’s Current Report on Form 8-K, filed on January 17, 2018, and incorporated herein by reference).

10.5		Purchase Agreement, dated as of January 11, 2018, by and among Taylor Morrison Home Corporation and certain sellers named in Schedule I thereto (included as Exhibit 10.2 to Taylor Morrison Home Corporation’s Current Report on Form 8-K, filed on January 17, 2018, and incorporated herein by reference).

10.6		Second Amendment to the Amended and Restated Agreement of Exempted Limited Partnership of TMM Holdings II Limited Partnership, dated January 11, 2018 (included as Exhibit 10.3 to Taylor Morrison Home Corporation’s Current Report on Form 8-K, filed on January 17, 2018, and incorporated herein by reference).

31.1*		Certification of Sheryl D. Palmer, Chief Executive Officer, pursuant to Section 302 of the Sarbanes–Oxley Act of 2002.

31.2*		Certification of C. David Cone, Chief Financial Officer, pursuant to Section 302 of the Sarbanes–Oxley Act of 2002.

32.1*		Certification of Sheryl D. Palmer, Chief Executive Officer, pursuant to Section 906 of the Sarbanes–Oxley Act of 2002.

32.2*		Certification of C. David Cone, Chief Financial Officer, pursuant to Section 906 of the Sarbanes–Oxley Act of 2002.

101.INS		XBRL Instance Document.

101.SCH		XBRL Taxonomy Extension Schema Document.

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

* Filed herewith

~~SIGNATURES~~

~~Pursuant~~The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the ~~requirements~~terms of the ~~Securities Exchange Act~~agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of ~~1934,~~ the ~~registrant has duly caused this report to be signed on its behalf by~~relevant agreement or document and may not describe the ~~undersigned thereunto duly authorized.~~



		~~TAYLOR MORRISON HOME CORPORATION~~
		~~Registrant~~
~~DATE:~~	~~November 1, 2017~~
		~~/s/ Sheryl D. Palmer~~
		~~Sheryl D. Palmer~~
		~~Chairman, President and Chief Executive Officer~~ ~~(Principal Executive Officer)~~

		~~/s/ C. David Cone~~
		~~C. David Cone~~
		~~Executive Vice President and Chief Financial Officer~~ ~~(Principal Financial Officer)~~

		~~/s/ Joseph Terracciano~~
		~~Joseph Terracciano~~
		~~Chief Accounting Officer~~ ~~(Principal Accounting Officer)~~

actual state of affairs as of the date they were made or at any other time

EXHIBIT INDEX



Exhibit No.		Description

3.1		Amended and Restated Certificate of Incorporation (included as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on April 15, 2013, and incorporated herein by reference).

3.2		Amended and Restated By-laws (included as Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed on April 15, 2013, and incorporated herein by reference).

10.1		Amendment No. 5, dated as of January 26, 2018, to the Second Amended and Restated Credit Agreement, dated as of July 13, 2011 (as amended and restated as of April 13, 2012, thereafter amended as of August 15, 2012 and December 27, 2012, as further amended and restated as of April 12, 2013 and thereafter amended as of January 15, 2014, December 22, 2014 and April 24, 2015), by and among Taylor Morrison Communities, Inc., TMM Holdings Limited Partnership, Taylor Morrison Holdings II, Inc., Taylor Morrison Communities II, Inc., Taylor Morrison Holdings, Inc., Taylor Morrison Finance, Inc., the lenders party thereto and Credit Suisse AG, as administrative agent for the lenders (included as Exhibit 10.9(d) to Taylor Morrison Home Corporation’s Annual report on Form 10-K for the fiscal year ended December 31, 2017, filed on February 21, 2018, and incorporated herein by reference).

10.2		Purchase Agreement, dated as of January 3, 2018, by and among Taylor Morrison Home Corporation and certain sellers named in Schedule I thereto (included as Exhibit 10.1 to Taylor Morrison Home Corporation’s Current Report on Form 8-K, filed on January 8, 2018, and incorporated herein by reference).

10.3		Purchase Agreement, dated as of January 3, 2018, by and among Taylor Morrison Home Corporation and certain sellers named in Schedule I thereto (included as Exhibit 10.2 to Taylor Morrison Home Corporation’s Current Report on Form 8-K, filed on January 8, 2018, and incorporated herein by reference).

10.4		Purchase Agreement, dated as of January 11, 2018, by and among Taylor Morrison Home Corporation and certain sellers named in Schedule I thereto (included as Exhibit 10.1 to Taylor Morrison Home Corporation’s Current Report on Form 8-K, filed on January 17, 2018, and incorporated herein by reference).

10.5		Purchase Agreement, dated as of January 11, 2018, by and among Taylor Morrison Home Corporation and certain sellers named in Schedule I thereto (included as Exhibit 10.2 to Taylor Morrison Home Corporation’s Current Report on Form 8-K, filed on January 17, 2018, and incorporated herein by reference).

10.6		Second Amendment to the Amended and Restated Agreement of Exempted Limited Partnership of TMM Holdings II Limited Partnership, dated January 11, 2018 (included as Exhibit 10.3 to Taylor Morrison Home Corporation’s Current Report on Form 8-K, filed on January 17, 2018, and incorporated herein by reference).

31.1*		Certification of Sheryl D. Palmer, Chief Executive Officer, pursuant to Section 302 of the Sarbanes–Oxley Act of 2002.

31.2*		Certification of C. David Cone, Chief Financial Officer, pursuant to Section 302 of the Sarbanes–Oxley Act of 2002.

32.1*		Certification of Sheryl D. Palmer, Chief Executive Officer, pursuant to Section 906 of the Sarbanes–Oxley Act of 2002.

32.2*		Certification of C. David Cone, Chief Financial Officer, pursuant to Section 906 of the Sarbanes–Oxley Act of 2002.

101.INS		XBRL Instance Document.

101.SCH		XBRL Taxonomy Extension Schema Document.

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

* Filed herewith

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time

SIGNATURES

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 thereunto duly authorized.



		TAYLOR MORRISON HOME CORPORATION
		Registrant
DATE:	May 2, 2018
		/s/ Sheryl D. Palmer
		Sheryl D. Palmer
		Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer)

		/s/ C. David Cone
		C. David Cone
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)

		/s/ Joseph Terracciano
		Joseph Terracciano
		Chief Accounting Officer (Principal Accounting Officer)

4340



(In thousands)	Acadia Homes
Acquisition Date	January 8, 2016
Assets acquired
Real estate inventory	$	76,152
Land deposits	984
Prepaid expenses and other assets	816
Property and equipment	204
Goodwill ⁽¹⁾	8,500
Total assets	$	86,656

Less liabilities assumed
Accrued expenses and other liabilities	$	2,562
Customer deposits	463
Net assets acquired	$	83,631



	Three Months Ended September 30, 2017
	East			Central			West			Mortgage Operations		Corporate and Unallocated			Total
Total revenues	$	312,539		$	256,842		$	321,167		$	17,479	$	—		$	908,027

Gross margin	63,188			47,797			54,924			5,409		—			171,318
Selling, general and administrative expenses	(28,469		)	(25,108		)	(19,087		)	—		(22,186		)	(94,850		)
Equity in income of unconsolidated entities	—			693			924			1,170		—			2,787
Interest and other (expense)/income, net	(7		)	(87		)	46			—		(232		)	(280		)
Income/(loss) before income taxes	$	34,712		$	23,295		$	36,807		$	6,579	$	(22,418	)	$	78,975



	Three Months Ended September 30, 2016
	East			Central			West			Mortgage Operations		Corporate and Unallocated			Total
Total revenues	$	288,639		$	273,095		$	277,869		$	13,814	$	—		$	853,417

Gross margin	70,026			51,267			51,624			5,937		—			178,854
Selling, general and administrative expenses	(26,866		)	(24,842		)	(18,507		)	—		(18,006		)	(88,221		)
Equity in income of unconsolidated entities	132			331			319			864		—			1,646
Interest and other (expense)/income, net	(1,260		)	(1,148		)	162			4		354			(1,888		)
Income/(loss) before income taxes	$	42,032		$	25,608		$	33,598		$	6,805	$	(17,652	)	$	90,391



	Closed Loans	Profit Per Closed Loan		Aggregate Loan Volume (in millions)		Capture Rate		Average FICO
Three Months Ended September 30, 2017	1,102	$	5,088	$	374.1	76	%	745
Three Months Ended September 30, 2016	1,068	$	4,598	$	357.0	81	%	744



	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans or programs (in thousands) ^(a)
July 1 to July 31, 2017	—	$	—	—	$	56,427
August 1 to August 31, 2017	—	$	—	—	$	56,427
September 1 to September 30, 2017	195,824	$	20.93	195,824	$	95,898
Total	195,824			195,824

(Shares presented in thousands)

Closing date

Number of shares

Net sale price per share

January 8, 2018

January 17, 2018 ⁽¹⁾