UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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ý☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 20172022
OR
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¨☐ | 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 Registrantregistrant as specified in its Charter)
| | 90-0907433 | | | | | | |
Delaware | | 83-2026677 |
(State or other jurisdiction of incorporation or organization)
| | (I.R.S. Employer Identification No.)
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4900 N. Scottsdale Road, Suite 2000 Scottsdale, Arizona
| | 85251 |
Scottsdale, | Arizona | | |
(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)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | |
Common Stock, $0.00001 par value | TMHC | New York Stock Exchange | | |
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Indicate by check mark whether the Registrant: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, a 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.
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Large Accelerated Filer | | ☒ | | Accelerated filer | | ☐ |
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Non-accelerated filer | | ¨ | | Smaller reporting company | | ☐ |
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Large accelerated filer | | ¨ | | Accelerated filer | | ý |
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Non-accelerated filer (Do not check if a smaller reporting company) | | ¨ | | Smaller reporting company | | ¨ |
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| | | | 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.
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Class | | Outstanding as of October 26, 2022 |
Common stock, $0.00001 par value | | 108,346,617 |
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Class | | Outstanding as of November 1, 2017 |
Class A common stock, $0.00001 par value | | 72,364,924 |
Class B common stock, $0.00001 par value | | 47,193,672 |
TAYLOR MORRISON HOME CORPORATION
TABLE OF CONTENTS
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TAYLOR MORRISON HOME CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts, unaudited)
| | | | | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 |
Assets | | | | |
Cash and cash equivalents | | $ | 329,244 | | | $ | 832,821 | |
Restricted cash | | 578 | | | 3,519 | |
Total cash, cash equivalents, and restricted cash | | 329,822 | | | 836,340 | |
| | | | |
Owned inventory | | 5,904,344 | | | 5,444,207 | |
Consolidated real estate not owned | | 54,733 | | | 55,314 | |
Total real estate inventory | | 5,959,077 | | | 5,499,521 | |
Land deposits | | 290,340 | | | 229,535 | |
Mortgage loans held for sale | | 161,264 | | | 467,534 | |
Derivative assets | | 23,832 | | | 2,110 | |
Lease right of use assets | | 82,226 | | | 85,863 | |
Prepaid expenses and other assets, net | | 188,671 | | | 314,986 | |
Other receivables, net | | 214,282 | | | 150,864 | |
Investments in unconsolidated entities | | 306,081 | | | 171,406 | |
Deferred tax assets, net | | 151,240 | | | 151,240 | |
Property and equipment, net | | 223,594 | | | 155,181 | |
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Goodwill | | 663,197 | | | 663,197 | |
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Total assets | | $ | 8,593,626 | | | $ | 8,727,777 | |
Liabilities | | | | |
Accounts payable | | $ | 264,190 | | | $ | 253,348 | |
Accrued expenses and other liabilities | | 456,632 | | | 525,209 | |
Lease liabilities | | 91,554 | | | 96,172 | |
Income taxes payable | | 27,757 | | | — | |
Customer deposits | | 527,412 | | | 485,705 | |
Estimated development liabilities | | 37,958 | | | 38,923 | |
Senior notes, net | | 2,173,798 | | | 2,452,322 | |
Loans payable and other borrowings | | 409,791 | | | 404,386 | |
Revolving credit facility borrowings | | — | | | 31,529 | |
Mortgage warehouse borrowings | | 146,335 | | | 413,887 | |
Liabilities attributable to consolidated real estate not owned | | 54,733 | | | 55,314 | |
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Total liabilities | | $ | 4,190,160 | | | $ | 4,756,795 | |
COMMITMENTS AND CONTINGENCIES (Note 13) | | | | |
Stockholders’ Equity | | | | |
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Total stockholders’ equity | | 4,403,466 | | | 3,970,982 | |
Total liabilities and stockholders’ equity | | $ | 8,593,626 | | | $ | 8,727,777 | |
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| | September 30, 2017 | | December 31, 2016 |
Assets | | | | |
Cash and cash equivalents | | $ | 264,862 |
| | $ | 300,179 |
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Restricted cash | | 1,315 |
| | 1,633 |
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Total cash, cash equivalents, and restricted cash | | 266,177 |
| | 301,812 |
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Owned inventory | | 3,240,664 |
| | 3,010,967 |
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Real estate not owned under option agreements | | 3,107 |
| | 6,252 |
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Total real estate inventory | | 3,243,771 |
| | 3,017,219 |
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Land deposits | | 50,879 |
| | 37,233 |
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Mortgage loans held for sale | | 107,665 |
| | 233,184 |
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Derivative assets | | 2,037 |
| | 2,291 |
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Prepaid expenses and other assets, net | | 72,546 |
| | 73,425 |
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Other receivables, net | | 98,948 |
| | 115,246 |
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Investments in unconsolidated entities | | 184,817 |
| | 157,909 |
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Deferred tax assets, net | | 215,666 |
| | 206,634 |
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Property and equipment, net | | 6,229 |
| | 6,586 |
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Intangible assets, net | | 2,395 |
| | 3,189 |
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Goodwill | | 66,198 |
| | 66,198 |
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Total assets | | $ | 4,317,328 |
| | $ | 4,220,926 |
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Liabilities | | | | |
Accounts payable | | $ | 146,263 |
| | $ | 136,636 |
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Accrued expenses and other liabilities | | 190,384 |
| | 209,202 |
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Income taxes payable | | 15,019 |
| | 10,528 |
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Customer deposits | | 185,604 |
| | 111,573 |
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Senior notes, net | | 1,239,211 |
| | 1,237,484 |
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Loans payable and other borrowings | | 161,798 |
| | 150,485 |
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Revolving credit facility borrowings | | — |
| | — |
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Mortgage warehouse borrowings | | 61,292 |
| | 198,564 |
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Liabilities attributable to real estate not owned under option agreements | | 3,107 |
| | 6,252 |
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Total liabilities | | 2,002,678 |
| | 2,060,724 |
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COMMITMENTS AND CONTINGENCIES (Note 16) | |
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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 |
| | — |
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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 |
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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 | | — |
| | — |
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Additional paid-in capital | | 1,142,210 |
| | 384,709 |
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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 | ) |
Retained earnings | | 297,402 |
| | 228,613 |
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Accumulated other comprehensive loss | | (17,989 | ) | | (17,989 | ) |
Total stockholders’ equity attributable to Taylor Morrison Home Corporation | | 1,374,002 |
| | 551,810 |
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Non-controlling interests – joint ventures | | 1,858 |
| | 1,525 |
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Non-controlling interests – Principal Equityholders | | 938,790 |
| | 1,606,867 |
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Total stockholders’ equity | | 2,314,650 |
| | 2,160,202 |
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Total liabilities and stockholders’ equity | | $ | 4,317,328 |
| | $ | 4,220,926 |
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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)
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| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
Home closings revenue, net | | $ | 1,983,775 | | | $ | 1,772,495 | | | $ | 5,511,204 | | | $ | 4,780,304 | |
Land closings revenue | | 14,225 | | | 42,228 | | | 66,651 | | | 79,174 | |
Financial services revenue | | 27,749 | | | 38,046 | | | 98,419 | | | 119,503 | |
Amenity and other revenue | | 8,895 | | | 5,982 | | | 56,517 | | | 16,862 | |
Total revenue | | 2,034,644 | | | 1,858,751 | | | 5,732,791 | | | 4,995,843 | |
Cost of home closings | | 1,438,164 | | | 1,397,319 | | | 4,084,748 | | | 3,838,602 | |
Cost of land closings | | 11,571 | | | 36,439 | | | 50,139 | | | 68,604 | |
Financial services expenses | | 20,395 | | | 26,202 | | | 66,092 | | | 76,136 | |
Amenity and other expenses | | 6,574 | | | 6,341 | | | 39,264 | | | 16,907 | |
Total cost of revenue | | 1,476,704 | | | 1,466,301 | | | 4,240,243 | | | 4,000,249 | |
Gross margin | | 557,940 | | | 392,450 | | | 1,492,548 | | | 995,594 | |
Sales, commissions and other marketing costs | | 94,692 | | | 97,185 | | | 279,950 | | | 280,697 | |
General and administrative expenses | | 52,357 | | | 70,425 | | | 189,905 | | | 201,975 | |
Net loss/(income) from unconsolidated entities | | 1,180 | | | (1,482) | | | 2,986 | | | (9,269) | |
Interest expense, net | | 4,382 | | | 710 | | | 13,823 | | | 594 | |
Other expense/(income), net | | 5,751 | | | 47 | | | (4,720) | | | 1,067 | |
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Gain on extinguishment of debt, net | | (71) | | | — | | | (13,542) | | | — | |
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Income before income taxes | | 399,649 | | | 225,565 | | | 1,024,146 | | | 520,530 | |
Income tax provision | | 90,418 | | | 53,098 | | | 243,300 | | | 120,865 | |
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Net income before allocation to non-controlling interests | | 309,231 | | | 172,467 | | | 780,846 | | | 399,665 | |
Net loss/(income) attributable to non-controlling interests | | 548 | | | (4,333) | | | (3,377) | | | (9,363) | |
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Net income available to Taylor Morrison Home Corporation | | $ | 309,779 | | | $ | 168,134 | | | $ | 777,469 | | | $ | 390,302 | |
Earnings per common share | | | | | | | | |
Basic | | $ | 2.75 | | | $ | 1.35 | | | $ | 6.63 | | | $ | 3.07 | |
Diluted | | $ | 2.72 | | | $ | 1.34 | | | $ | 6.56 | | | $ | 3.02 | |
Weighted average number of shares of common stock: | | | | | | | | |
Basic | | 112,701 | | | 124,378 | | | 117,242 | | | 127,217 | |
Diluted | | 113,780 | | | 125,770 | | | 118,438 | | | 129,043 | |
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| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Home closings revenue, net | | $ | 886,249 |
| | $ | 812,185 |
| | $ | 2,526,830 |
| | $ | 2,271,154 |
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Land closings revenue | | 4,299 |
| | 27,418 |
| | 11,419 |
| | 44,957 |
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Mortgage operations revenue | | 17,479 |
| | 13,814 |
| | 47,362 |
| | 36,951 |
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Total revenues | | 908,027 |
| | 853,417 |
| | 2,585,611 |
| | 2,353,062 |
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Cost of home closings | | 721,637 |
| | 658,507 |
| | 2,062,437 |
| | 1,852,724 |
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Cost of land closings | | 3,002 |
| | 8,179 |
| | 7,869 |
| | 20,497 |
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Mortgage operations expenses | | 12,070 |
| | 7,877 |
| | 30,874 |
| | 22,594 |
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Total cost of revenues | | 736,709 |
| | 674,563 |
| | 2,101,180 |
| | 1,895,815 |
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Gross margin | | 171,318 |
| | 178,854 |
| | 484,431 |
| | 457,247 |
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Sales, commissions and other marketing costs | | 61,476 |
| | 58,277 |
| | 178,609 |
| | 165,300 |
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General and administrative expenses | | 33,374 |
| | 29,944 |
| | 100,396 |
| | 91,078 |
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Equity in income of unconsolidated entities | | (2,787 | ) | | (1,646 | ) | | (6,943 | ) | | (4,734 | ) |
Interest income, net | | (135 | ) | | (47 | ) | | (314 | ) | | (149 | ) |
Other expense, net | | 415 |
| | 1,935 |
| | 828 |
| | 8,602 |
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Income before income taxes | | 78,975 |
| | 90,391 |
| | 211,855 |
| | 197,150 |
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Income tax provision | | 24,282 |
| | 31,707 |
| | 65,631 |
| | 66,698 |
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Net income before allocation to non-controlling interests | | 54,693 |
| | 58,684 |
| | 146,224 |
| | 130,452 |
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Net income attributable to non-controlling interests — joint ventures | | (427 | ) | | (376 | ) | | (625 | ) | | (856 | ) |
Net income before non-controlling interests — Principal Equityholders | | 54,266 |
| | 58,308 |
| | 145,599 |
| | 129,596 |
|
Net income attributable to non-controlling interests — Principal Equityholders | | (21,390 | ) | | (43,471 | ) | | (76,810 | ) | | (96,261 | ) |
Net income available to Taylor Morrison Home Corporation | | $ | 32,876 |
| | $ | 14,837 |
| | $ | 68,789 |
| | $ | 33,335 |
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Earnings per common share | | | | | | | | |
Basic | | $ | 0.45 |
| | $ | 0.49 |
| | $ | 1.21 |
| | $ | 1.07 |
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Diluted | | $ | 0.45 |
| | $ | 0.49 |
| | $ | 1.21 |
| | $ | 1.07 |
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Weighted average number of shares of common stock: | | | | | | | | |
Basic | | 72,471 |
| | 30,427 |
| | 56,791 |
| | 31,300 |
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Diluted | | 121,183 |
| | 120,103 |
| | 120,991 |
| | 120,870 |
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See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
TAYLOR MORRISON HOME CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMESTOCKHOLDERS’ EQUITY
(In thousands, except share data, unaudited)
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For the three months ended September 30, 2022 |
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| | Common Stock | | | | Additional Paid-in Capital | | Treasury Stock | | Stockholders' Equity |
| | Shares | | Amount | | | | | | Amount | | Shares | | Amount | | Retained Earnings | | Accumulated Other Comprehensive Income | | Non-controlling Interest | | | | Total Stockholders’ Equity |
Balance – June 30, 2022 | | 113,640,725 | | | $ | 1 | | | | | | | $ | 3,008,619 | | | 45,556,244 | | | $ | (991,276) | | | $ | 2,156,505 | | | $ | 689 | | | $ | 19,357 | | | | | $ | 4,193,895 | |
Net income | | — | | | — | | | | | | | — | | | — | | | — | | | 309,779 | | | — | | | (548) | | | | | 309,231 | |
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Exercise of stock options | | 77,951 | | | — | | | | | | | 1,512 | | | — | | | — | | | — | | | — | | | — | | | | | 1,512 | |
Issuance of restricted stock units, net of shares withheld for tax(1) | | 2,757 | | | — | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | | | — | |
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Repurchase of common stock | | (4,213,256) | | | — | | | | | | | — | | | 4,213,256 | | | (104,999) | | | — | | | — | | | — | | | | | (104,999) | |
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Stock compensation expense | | — | | | — | | | | | | | 5,333 | | | — | | | — | | | — | | | — | | | — | | | | | 5,333 | |
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Distributions to non-controlling interests of consolidated joint ventures | | — | | | — | | | | | | | — | | | — | | | — | | | — | | | — | | | (1,515) | | | | | (1,515) | |
Changes in non-controlling interests of consolidated joint ventures | | — | | | — | | | | | | | — | | | — | | | — | | | — | | | — | | | 9 | | | | | 9 | |
Balance – September 30, 2022 | | 109,508,177 | | | $ | 1 | | | | | | | $ | 3,015,464 | | | 49,769,500 | | | $ | (1,096,275) | | | $ | 2,466,284 | | | $ | 689 | | | $ | 17,303 | | | | | $ | 4,403,466 | |
(1) Dollar amount represents the value of shares withheld for taxes.
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For the three months ended September 30, 2021 | | | | | | | | | | | | | | | | | | | | |
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| | Common Stock | | | | Additional Paid-in Capital | | Treasury Stock | | Stockholders' Equity |
| | Shares | | Amount | | | | | | Amount | | Shares | | Amount | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Non-controlling Interest | | | | Total Stockholders’ Equity |
Balance – June 30, 2021 | | 125,910,318 | | | $ | 1 | | | | | | | $ | 2,977,269 | | | 32,167,192 | | | $ | (624,615) | | | $ | 1,247,957 | | | $ | (1,166) | | | $ | 69,403 | | | | | $ | 3,668,849 | |
Net income | | — | | | — | | | | | | | — | | | — | | | — | | | 168,134 | | | — | | | 4,333 | | | | | 172,467 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Exercise of stock options | | 276,595 | | | — | | | | | | | 5,778 | | | — | | | — | | | — | | | — | | | — | | | | | 5,778 | |
Issuance of restricted stock units, net of shares withheld for tax(1) | | 8,789 | | | — | | | | | | | (13) | | | — | | | — | | | — | | | — | | | — | | | | | (13) | |
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Repurchase of common stock | | (3,309,196) | | | — | | | | | | | — | | | 3,309,196 | | | (91,659) | | | — | | | — | | | — | | | | | (91,659) | |
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Stock compensation expense | | — | | | — | | | | | | | 4,793 | | | — | | | — | | | — | | | — | | | — | | | | | 4,793 | |
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Distributions to non-controlling interests of consolidated joint ventures | | — | | | — | | | | | | | — | | | — | | | — | | | — | | | — | | | (14,311) | | | | | (14,311) | |
Changes in non-controlling interests of consolidated joint ventures | | — | | | — | | | | | | | — | | | — | | | — | | | — | | | — | | | (8) | | | | | (8) | |
Balance – September 30, 2021 | | 122,886,506 | | | $ | 1 | | | | | | | $ | 2,987,827 | | | 35,476,388 | | | $ | (716,274) | | | $ | 1,416,091 | | | $ | (1,166) | | | $ | 59,417 | | | | | $ | 3,745,896 | |
(1) Dollar amount represents the value of shares withheld for taxes.
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| | 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 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
For the nine months ended September 30, 2022 |
| | | | | | | | | | | | | | | | | | |
| | Common Stock | | | | Additional Paid-in Capital | | Treasury Stock | | Stockholders' Equity |
| | Shares | | Amount | | | | | | Amount | | Shares | | Amount | | Retained Earnings | | Accumulated Other Comprehensive Income | | Non-controlling Interest | | | | Total Stockholders’ Equity |
Balance – December 31, 2021 | | 121,833,649 | | | $ | 1 | | | | | | | $ | 2,997,211 | | | 36,828,559 | | | $ | (760,863) | | | $ | 1,688,815 | | | $ | 689 | | | $ | 45,129 | | | | | $ | 3,970,982 | |
Net income | | — | | | — | | | | | | | — | | | — | | | — | | | 777,469 | | | — | | | 3,377 | | | | | 780,846 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Exercise of stock options | | 209,940 | | | — | | | | | | | 4,424 | | | — | | | — | | | — | | | — | | | — | | | | | 4,424 | |
Issuance of restricted stock units, net of shares withheld for tax(1) | | 405,529 | | | — | | | | | | | (3,645) | | | — | | | — | | | — | | | — | | | — | | | | | (3,645) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Repurchase of common stock | | (12,940,941) | | | — | | | | | | | — | | | 12,940,941 | | | (335,412) | | | — | | | — | | | — | | | | | (335,412) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Stock compensation expense | | — | | | — | | | | | | | 17,474 | | | — | | | — | | | — | | | — | | | — | | | | | 17,474 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Distributions to non-controlling interests of consolidated joint ventures | | — | | | — | | | | | | | — | | | — | | | — | | | — | | | — | | | (30,443) | | | | | (30,443) | |
Changes in non-controlling interests of consolidated joint ventures | | — | | | — | | | | | | | — | | | — | | | — | | | — | | | — | | | (760) | | | | | (760) | |
Balance – September 30, 2022 | | 109,508,177 | | | $ | 1 | | | | | | | $ | 3,015,464 | | | 49,769,500 | | | $ | (1,096,275) | | | $ | 2,466,284 | | | $ | 689 | | | $ | 17,303 | | | | | $ | 4,403,466 | |
(1) Dollar amount represents the value of shares withheld for taxes.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
For the nine months ended September 30, 2021 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | Common Stock | | | | Additional Paid-in Capital | | Treasury Stock | | Stockholders' Equity |
| | Shares | | Amount | | | | | | Amount | | Shares | | Amount | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Non-controlling Interest | | | | Total Stockholders’ Equity |
Balance – December 31, 2020 | | 129,476,914 | | | $ | 1 | | | | | | | $ | 2,926,773 | | | 25,884,756 | | | $ | (446,856) | | | $ | 1,025,789 | | | $ | (1,166) | | | $ | 89,209 | | | | | $ | 3,593,750 | |
Net income | | — | | | — | | | | | | | — | | | — | | | — | | | 390,302 | | | — | | | 9,363 | | | | | 399,665 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Exercise of stock options | | 908,221 | | | — | | | | | | | 18,212 | | | — | | | — | | | — | | | — | | | — | | | | | 18,212 | |
Issuance of restricted stock units, net of shares withheld for tax(1) | | 388,798 | | | — | | | | | | | (4,870) | | | — | | | — | | | — | | | — | | | — | | | | | (4,870) | |
Warrant Exercises | | 1,704,205 | | | — | | | | | | | 32,584 | | | — | | | — | | | — | | | — | | | — | | | | | 32,584 | |
Repurchase of common stock | | (8,565,933) | | | — | | | | | | | — | | | 8,565,933 | | | (236,831) | | | — | | | — | | | — | | | | | (236,831) | |
Common stock surrendered in connection with warrant exercise | | (1,025,699) | | | — | | | | | | | — | | | 1,025,699 | | | (32,587) | | | — | | | — | | | — | | | | | (32,587) | |
Stock compensation expense | | — | | | — | | | | | | | 15,128 | | | — | | | — | | | — | | | — | | | — | | | | | 15,128 | |
Distributions to non-controlling interests of consolidated joint ventures | | — | | | — | | | | | | | — | | | — | | | — | | | — | | | — | | | (39,155) | | | | | (39,155) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Balance – September 30, 2021 | | 122,886,506 | | | $ | 1 | | | | | | | $ | 2,987,827 | | | 35,476,388 | | | $ | (716,274) | | | $ | 1,416,091 | | | $ | (1,166) | | | $ | 59,417 | | | | | $ | 3,745,896 | |
(1) Dollar amount represents the value of shares withheld for taxes.
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 | | | | | | | | | | | | | | | | |
| | 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 |
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 |
|
Net income | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 68,789 |
| | — |
| | 625 |
| | 76,810 |
| | 146,224 |
|
Exchange of New TMM Units and corresponding number of Class B Common Stock | | 191,333 |
| | — |
| | (191,333 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Cancellation of forfeited New TMM Units and corresponding number of Class B Common Stock | | — |
| | — |
| | (1,592 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Exercise of stock options | | 265,167 |
| | — |
| | — |
| | — |
| | 4,791 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 4,791 |
|
Issuance of restricted stock units, net of shares withheld for tax | | 59,765 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (307 | ) | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (307 | ) |
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 | ) |
Share based compensation | | — |
| | — |
| | — |
| | — |
| | 4,921 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 5,306 |
| | 10,227 |
|
Changes in non-controlling interests of consolidated joint ventures | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (292 | ) | | — |
| | (292 | ) |
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 |
|
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, | | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | | 2022 | | 2021 |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | CASH FLOWS FROM OPERATING ACTIVITIES: | | | | |
Net income before allocation to non-controlling interests | | $ | 146,224 |
| | $ | 130,452 |
| Net income before allocation to non-controlling interests | | $ | 780,846 | | | $ | 399,665 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |
| |
| |
Equity in income of unconsolidated entities | | (6,943 | ) | | (4,734 | ) | |
Adjustments to reconcile net income to net cash provided by/(used in) operating activities: | | Adjustments to reconcile net income to net cash provided by/(used in) operating activities: | |
Net loss/(income) from unconsolidated entities | | Net loss/(income) from unconsolidated entities | | 2,986 | | | (9,269) | |
Stock compensation expense | | 10,227 |
| | 8,959 |
| Stock compensation expense | | 17,474 | | | 15,128 | |
Gain on extinguishment of debt, net | | Gain on extinguishment of debt, net | | (13,542) | | | — | |
Gain on land transfers | | Gain on land transfers | | (14,508) | | | — | |
Distributions of earnings from unconsolidated entities | | 4,666 |
| | 2,538 |
| Distributions of earnings from unconsolidated entities | | 5,318 | | | 9,050 | |
Depreciation and amortization | | 2,994 |
| | 3,000 |
| Depreciation and amortization | | 25,448 | | | 29,726 | |
Operating lease expense | | Operating lease expense | | 20,543 | | | 12,167 | |
Debt issuance costs amortization | | 2,864 |
| | 2,888 |
| Debt issuance costs amortization | | 1,574 | | | 355 | |
Contingent consideration | | 766 |
| | 3,520 |
| |
Deferred income taxes | | (9,032 | ) | | (969 | ) | |
Change in Urban Form assets due to sale | | Change in Urban Form assets due to sale | | 11,675 | | | — | |
| Land held for sale write-downs | | Land held for sale write-downs | | — | | | 4,590 | |
| Changes in operating assets and liabilities: | |
| |
| Changes in operating assets and liabilities: | |
Real estate inventory and land deposits | | (243,343 | ) | | (103,758 | ) | Real estate inventory and land deposits | | (610,346) | | | (678,809) | |
Mortgages held for sale, prepaid expenses and other assets | | 141,813 |
| | 76,281 |
| Mortgages held for sale, prepaid expenses and other assets | | 245,633 | | | (216,121) | |
Customer deposits | | 74,031 |
| | 44,780 |
| Customer deposits | | 41,707 | | | 209,290 | |
Accounts payable, accrued expenses and other liabilities | | 4,017 |
| | (9,415 | ) | Accounts payable, accrued expenses and other liabilities | | (82,578) | | | 97,129 | |
Income taxes payable | | 4,491 |
| | (11,119 | ) | Income taxes payable | | 27,757 | | | 23,554 | |
Net cash provided by operating activities | | 132,775 |
| | 142,423 |
| |
Net cash provided by/(used in) operating activities | | Net cash provided by/(used in) operating activities | | 459,987 | | | (103,545) | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | | |
Purchase of property and equipment | | (1,843 | ) | | (934 | ) | Purchase of property and equipment | | (22,478) | | | (15,698) | |
Payments for business acquisitions | | — |
| | (52,819 | ) | |
| Distributions of capital from unconsolidated entities | | 4,223 |
| | 3,546 |
| Distributions of capital from unconsolidated entities | | 95,517 | | | 14,237 | |
Investments of capital into unconsolidated entities | | (28,854 | ) | | (24,509 | ) | Investments of capital into unconsolidated entities | | (91,846) | | | (31,843) | |
Net cash (used in) investing activities | | (26,474 | ) | | (74,716 | ) | |
Investments in equity securities | | Investments in equity securities | | — | | | (10,000) | |
Net cash used in investing activities | | Net cash used in investing activities | | (18,807) | | | (43,304) | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | |
Increase in loans payable and other borrowings | | 8,644 |
| | 55,720 |
| Increase in loans payable and other borrowings | | 33,495 | | | 103,805 | |
Repayments of loans payable and other borrowings | | (11,305 | ) | | (65,075 | ) | |
Borrowings on revolving credit facility | | — |
| | 255,000 |
| |
Payments on revolving credit facility | | — |
| | (155,000 | ) | |
Borrowings on mortgage warehouse | | 567,922 |
| | 782,001 |
| |
Repayment on mortgage warehouse | | (705,194 | ) | | (874,279 | ) | |
Payment of contingent consideration | | — |
| | (3,100 | ) | |
Repayments on loans payable and other borrowings | | Repayments on loans payable and other borrowings | | (50,761) | | | (89,635) | |
Borrowings on revolving credit facilities | | Borrowings on revolving credit facilities | | 182,548 | | | 126,692 | |
Repayments on revolving credit facilities | | Repayments on revolving credit facilities | | (214,077) | | | — | |
Borrowings on mortgage warehouse facilities | | Borrowings on mortgage warehouse facilities | | 1,783,748 | | | 2,287,791 | |
Repayments on mortgage warehouse facilities | | Repayments on mortgage warehouse facilities | | (2,051,300) | | | (2,179,395) | |
| Repayments on senior notes | | Repayments on senior notes | | (264,935) | | | — | |
| Proceeds from stock option exercises | | 4,791 |
| | — |
| Proceeds from stock option exercises | | 4,424 | | | 18,212 | |
Proceeds from issuance of shares from secondary offerings | | 882,306 |
| | — |
| |
Repurchase of shares from principal equity holders | | (884,403 | ) | | — |
| |
| Payment of principal portion of finance lease | | Payment of principal portion of finance lease | | (1,340) | | | (1,325) | |
Repurchase of common stock, net | | (4,098 | ) | | (28,543 | ) | Repurchase of common stock, net | | (335,412) | | | (236,831) | |
Payment of taxes related to net share settlement of equity awards | | (307 | ) | | — |
| Payment of taxes related to net share settlement of equity awards | | (3,645) | | | (5,494) | |
Distributions to non-controlling interests of consolidated joint ventures, net | | (292 | ) | | (60 | ) | |
Net cash (used in) financing activities | | (141,936 | ) | | (33,336 | ) | |
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS | | $ | (35,635 | ) | | $ | 34,371 |
| |
Cash and distributions to non-controlling interests of consolidated joint ventures, net | | Cash and distributions to non-controlling interests of consolidated joint ventures, net | | (30,443) | | | (36,095) | |
Net cash used in financing activities | | Net cash used in financing activities | | (947,698) | | | (12,275) | |
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | | NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | | $ | (506,518) | | | $ | (159,124) | |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period | | 301,812 |
| | 127,468 |
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period | | 836,340 | | | 534,109 | |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period | | $ | 266,177 |
| | $ | 161,839 |
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period | | $ | 329,822 | | | $ | 374,985 | |
SUPPLEMENTAL CASH FLOW INFORMATION: | |
| |
| SUPPLEMENTAL CASH FLOW INFORMATION: | | | | |
Income taxes paid, net | | $ | (70,172 | ) | | $ | (78,786 | ) | |
Income tax payments | | Income tax payments | | $ | (176,683) | | | $ | (96,753) | |
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES: | |
| |
| SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES: | | | | |
Change in loans payable issued to sellers in connection with land purchase contracts | | $ | 55,151 |
| | $ | 55,720 |
| Change in loans payable issued to sellers in connection with land purchase contracts | | $ | 184,458 | | | $ | 174,297 | |
Change in inventory not owned | | $ | (3,145 | ) | | $ | (7,309 | ) | Change in inventory not owned | | $ | (581) | | | $ | (64,344) | |
Original accrual of contingent consideration for business combinations
| | $ | — |
| | $ | 380 |
| |
Investments of land in unconsolidated joint ventures, net | | Investments of land in unconsolidated joint ventures, net | | $ | 146,649 | | | $ | — | |
| Net non-cash distributions from non-controlling interests | | Net non-cash distributions from non-controlling interests | | $ | — | | | $ | (3,060) | |
| Common stock surrendered in connection with warrant exercises | | Common stock surrendered in connection with warrant exercises | | $ | — | | | $ | 32,587 | |
Common stock issued in connection with warrant exercises | | Common stock issued in connection with warrant exercises | | $ | — | | | $ | (32,584) | |
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 subsidiaries (together 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. AsWe operate in the states of September 30, 2017, we operated in Arizona, California, Colorado, Florida, Georgia, Illinois,Nevada, North and South Carolina, Oregon, Texas, and Texas. Our Company servesWashington. We provide an assortment of homes across a wide range of price points to appeal to an array of consumer groups from coastgroups. We design, build and sell single and multi-family detached and attached homes in traditionally high growth markets for entry level, move-up and resort lifestyle (formerly referred to coast, including first time, move-up, luxury, and 55 plusas 55-plus active lifestyle) buyers. Our homebuilding company operates under our Taylor Morrison and Darling Homes brand names. Our business is organized into multiple homebuilding operating components, and a mortgage operating component, all of which are managed as four reportable segments: East, Central, West, and Mortgage Operations. 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 siteland development. Our Mortgage Operations reportable segment provideshomebuilding segments operate under our Taylor Morrison, Darling Homes Collection by Taylor Morrison, and Esplanade brand names. We operate a “Build-to-Rent” homebuilding business where we serve as a land acquirer, developer, and homebuilder. In addition, we develop and construct multi-use properties consisting of commercial space, retail, and multi-family properties under the “Urban Form” brand. We also have operations which provide financial services to customers through our wholly owned mortgage subsidiary, operating as Taylor Morrison Home Funding, LLCInc. (“TMHF”), and title services through our wholly owned title services subsidiary, Inspired Title Services, LLC (“Inspired Title”), and homeowner’s insurance policies through our insurance agency, Taylor Morrison Insurance Services, LLC (“TMIS”).
During the quarter ended March 31, 2017, we realigned our Our business is organized into multiple homebuilding operating divisions within our existing segments based on geographic locationcomponents, and management's long term strategic plans. As a result,financial services component, all historical periods presented in the segment information have been reclassified to give effect to this segment realignment.of which are managed as four reportable segments: East, Central, West, and Financial Services.
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 Annual Report on Form 10-K for the year ended December 31, 2021 (the “Annual Report”). In the opinion of management, the accompanying Unauditedunaudited 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 shownWe consolidate certain joint ventures in U.S. dollars. Assets and liabilities recorded in foreign currencies are translated ataccordance with Accounting Standards Codification (“ASC”) Topic 810, Consolidation. The loss/income from the exchange ratepercentage of the joint ventures not owned by us is presented as “Net loss/income attributable to non-controlling interests” 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 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 interest 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. Refer to Note 11- Stockholders' Equity for discussion regarding our equity offering transactions during the nine months ended September 30, 2017.
Reclassifications - Prior period amounts for cash, cash equivalents, and restricted cash on theunaudited 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 unaudited Condensed Consolidated Financial Statements and these accompanying notes. Significant estimates include real estate development costs to complete, valuation of real estate, valuation of acquired assets,goodwill, valuation of goodwill,development liabilities, 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 EquityholdersGoodwill — Immediately prior to our IPO, as partThe excess of the Reorganization Transactions,purchase price of a business acquisition over the existing holdersnet fair value 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,assets acquired and liabilities assumed is exchangeable into one share of our Class A Common Stockcapitalized as goodwill in accordance with ASC Topic 350, Intangibles — Goodwill and Other.ASC 350 requires that goodwill and intangible assets that do not have finite lives not be amortized, but rather assessed for impairment at least annually or more frequently if certain impairment indicators are present. We perform our annual impairment test during the termsfourth quarter or whenever impairment indicators are present. We did not perform an impairment test during the third quarter of 2022 as indicators of impairment were not present.
Real Estate Inventory — 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 home closings at the time of home closing using the specific identification method. Land acquisition, development, interest, and real estate taxes are allocated to homes and units generally using the relative sales value method. Generally, all overhead costs relating to purchasing, vertical construction of a home, and construction utilities are considered overhead costs and allocated on a per unit basis. 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.
The life cycle of a typical community generally ranges from two to five years, commencing with the acquisition of unentitled or entitled land, continuing through the land development phase and concluding with the sale, construction and delivery of homes. Actual community duration will vary based on the size of the Exchange Agreement, dated as of April 9, 2013, amongcommunity, the Company, New TMMsales absorption rate 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 Stockwhether we purchased was equalthe property as raw land or as finished lots.
We capitalize qualifying interest costs 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 transactionsinventory during the nine months ended September 30, 2017.development and construction periods. Capitalized interest is charged to cost of home closings when the related inventory is charged to cost of home closings.
Real Estate Inventory —WeWe 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 communityon a community-level basis during each reporting period. If indicators of impairment are present for a community, we first perform an undiscounted cash flow analysis is generally prepared in order to determine if the carrying value of the assets in that community exceeds the expectedestimated undiscounted cash flows. Generally, if the carrying value of the assets exceeds their estimated undiscounted cash flows, then the assets are deemed to bepotentially impaired, and are recorded atrequiring a fair value as of the assessment.analysis. Our determination of fair value is primarily based on a discounted cash flow model which includes projections and estimates relating to sales prices, construction costs, sales pace, and other factors. However, fair value can be determined through other methods, such as appraisals, contractual purchase offers, and other third party opinions of value. 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, 20172022 and 2016,2021, 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. We refer to such communities as long-term strategic assets. The decision may be based on financial and/or operational metrics as determined by us. If we decide to cease development, 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 long-term strategic 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 September 30, 2022 and December 31, 2021, we had no inactive projects.
In the ordinary course of business, we enter into various option agreements to acquire lots in staged takedowns which may require a significant cash deposit. We are not legally obligated to purchase the balance of the lots, but would forfeit any existing deposits and could be subject to financial and other penalties if the lots are not purchased. Real estate not owned under these agreements is reflected in Consolidated real estate not owned with a corresponding liability in Liabilities attributable to consolidated real estate not owned in the unaudited Condensed Consolidated Balance Sheets.
Land held for sale — 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. Land is considered held for sale once management intends to actively sell a parcel within the next 12 months or the parcel is under contract to sell. Land held for sale is recorded at the lower of cost or fair value less costs to sell. In determining the value of land held for sale, we consider recent offers received, prices for land in recent comparable sales transactions, and other factors. We record fair value adjustments for land held for sale within Cost of land closings on the unaudited Condensed Consolidated Statements of Operations.
Land banking arrangements — We have land purchase agreements with various land sellers. As a method of acquiring land in staged takedowns, while limiting risk and minimizing the use of funds from our available cash or other financing sources, we may transfer our right under certain specific performance agreements to entities owned by third parties (“land banking arrangements”). These entities use equity contributions from their owners and/or incur debt to finance the acquisition and development of the land. The entities grant us an option to acquire lots in staged takedowns. In consideration for this option, we make a non-refundable deposit. We are not legally obligated to purchase the balance of the lots, but would forfeit any existing deposits and could be subject to financial and other penalties if the lots were not purchased. We do not have an ownership interest in these entities or title to their assets and do not guarantee their liabilities. These land banking arrangements help us manage the financial and market risk associated with land holdings.
Investments in Consolidated and Unconsolidated Entities
Consolidated Entities— In the ordinary course of business, we enter into land purchase contracts, lot option contracts and land banking arrangements in order to procure land or lots for the construction of homes. Such 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. In accordance with ASC Topic 810, Consolidation, we have concluded that when we enter into these agreements to acquire land or lots and pay a non-refundable deposit, a Variable Interest Entity (“VIE”) may be created because we are deemed to have provided subordinated financial support that will absorb some or all of an entity’s expected losses if they occur. If we are the primary beneficiary of the VIE, we will consolidate the VIE and reflect such assets and liabilities as Consolidated real estate not owned within our real estate inventory balance in the unaudited Condensed Consolidated Balance Sheets.
Unconsolidated Joint Ventures — We use the equity method of accounting for entities over which we exercise significant influence but do not have a controlling interest over the operating and financial policies of the investee. For unconsolidated entities in which we function as the managing member, we have evaluated the rights held by our joint venture partners and determined that the partners have substantive participating rights that preclude the presumption of control. Our share of net earnings or losses is included in Net income/loss from unconsolidated entities when earned and distributions are credited against our investment in the joint venture when received. These joint ventures are recorded in Investments in unconsolidated entities on the unaudited Condensed Consolidated Balance Sheets.
We evaluate our investments in unconsolidated entities for indicators of impairment.impairment semi-annually. 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, if any, is the excess of the investment’sinvestment'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 for us 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 believeswe believe that the decline in the fair value of the investment is temporary, then no impairment is recorded. We did not record anyrecorded no material impairment charges related to the investments in unconsolidated entities for the three and nine months ended September 30, 20172022 and 2021.
Revenue Recognition — We recognize revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”). The standard's core principle requires an entity to recognize revenue when it transfers promised goods or 2016.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.
Revenue RecognitionHome and land closings revenue
HomeUnder Topic 606, the following steps are applied to determine the proper home closings revenue net — Homeand 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. For our home sales transactions, we have one contract, with one performance obligation, with each customer to build and deliver the home purchased (or develop and deliver 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 usingrecognized when closings have occurred, the completed-contract methodbuyer 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 possessionownership are transferred to the buyer, and we have no significant continuing involvement with the home, riskproperty, 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 agentescrow. 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 vendorsany 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, if any, is transferredreasonably assured, and we have no continuing involvement with the property, which is generally upon the close of escrow.
Amenity and other revenue
We own and operate certain amenities such as golf courses, club houses, and fitness centers, which require us to provide club members with access to the buyer, therefacilities in exchange for the payment of club dues. We collect club dues and other fees from the club members, which are invoiced on a monthly basis. Revenue from our golf club operations is no significant continuing involvement,also included in amenity and
other revenue. Amenity and other revenue also includes revenue from the buyer has demonstrated sufficient investment in the property sold. If the buyer has not made an adequate investment in the property, the profit on such sales is deferred until these conditions are met.sale of assets which include multi-use properties as part of our Urban Form operations.
Financial services revenue
Mortgage operations revenue —and hedging activity related to financial services are not within the scope of Topic 606. Loan origination fees (including title fees, points, and closing costs) are recognized at the time the related real estate transactions are completed, which is 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,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 operationsFinancial services revenue/expenses is theare realized and unrealized gains and losslosses from hedging instruments.
Recently Issued Accounting Pronouncements — In January 2017,March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2017-04, Intangibles - GoodwillAccounting Standards Update (“ASU”) 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients for applying U.S. GAAP to contracts affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The guidance was effective beginning March 12, 2020 and Other (Topic 350): Simplifyingentities may elect to apply the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 eliminates Step 2 fromamendments prospectively through December 31, 2022. The use of LIBOR is primarily limited to our financial services mortgage warehouse facilities and our Revolving Credit Facilities. Our warehouse facilities have been modified to directly replace the goodwill impairment test. Thisreference rate and did not change will allow an entitythe amount or timing of contractual cash flows. As such, we have elected the use of the practical expedient and treated such modification as a continuation of the debt agreement. Our Revolving Credit Facilities provide the option to avoid calculatingcontinue the implied fair valueuse of goodwill by assigning the fair value of a reporting unit to all ofLIBOR until 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 theexpiration. The adoption of ASU 2017-04 will have2020-04 has not had a material impact on our condensed consolidated financial statements and disclosures.unaudited Condensed Consolidated Financial Statements.
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. 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, |
| | 2022 | | 2021 | | 2022 | | 2021 |
Numerator: | | | | | | | | |
Net income available to TMHC | | $ | 309,779 | | | $ | 168,134 | | | $ | 777,469 | | | $ | 390,302 | |
Denominator: | | | | | | | | |
Weighted average shares – basic | | 112,701 | | | 124,378 | | | 117,242 | | | 127,217 | |
Restricted stock units | | 629 | | | 796 | | | 659 | | | 833 | |
Stock Options | | 450 | | | 596 | | | 537 | | | 756 | |
Warrants | | — | | | — | | | — | | | 237 | |
Weighted average shares – diluted | | 113,780 | | | 125,770 | | | 118,438 | | | 129,043 | |
Earnings per common share – basic: | | | | | | | | |
Net income available to Taylor Morrison Home Corporation | | $ | 2.75 | | | $ | 1.35 | | | $ | 6.63 | | | $ | 3.07 | |
Earnings per common share – diluted: | | | | | | | | |
Net income available to Taylor Morrison Home Corporation | | $ | 2.72 | | | $ | 1.34 | | | $ | 6.56 | | | $ | 3.02 | |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Numerator: | | | | | | | | |
Net income available to TMHC – basic | | $ | 32,876 |
| | $ | 14,837 |
| | $ | 68,789 |
| | $ | 33,335 |
|
Net income attributable to non-controlling interest – Principal Equityholders | | 21,390 |
| | 43,471 |
| | 76,810 |
| | 96,261 |
|
Loss fully attributable to public holding company | | 136 |
| | 19 |
| | 288 |
| | 191 |
|
Net income – diluted | | $ | 54,402 |
| | $ | 58,327 |
| | $ | 145,887 |
| | $ | 129,787 |
|
Denominator: | | | | | | | | |
Weighted average shares – basic (Class A) | | 72,471 |
| | 30,427 |
| | 56,791 |
| | 31,300 |
|
Weighted average shares – Principal Equityholders’ non-controlling interest (Class B) | | 47,253 |
| | 89,053 |
| | 62,842 |
| | 89,089 |
|
Restricted stock units | | 1,121 |
| | 522 |
| | 1,026 |
| | 463 |
|
Stock Options | | 338 |
| | 101 |
| | 332 |
| | 18 |
|
Weighted average shares – diluted | | 121,183 |
| | 120,103 |
| | 120,991 |
| | 120,870 |
|
Earnings per common share – basic: | | | | | | | | |
Net income available to Taylor Morrison Home Corporation | | $ | 0.45 |
| | $ | 0.49 |
| | $ | 1.21 |
| | $ | 1.07 |
|
Earnings per common share – diluted: | | | | | | | | |
Net income available to Taylor Morrison Home Corporation | | $ | 0.45 |
| | $ | 0.49 |
| | $ | 1.21 |
| | $ | 1.07 |
|
We excluded a totalThe above calculations of weighted average of 1,685,938shares exclude 1,560,934 and 1,602,509 outstanding1,470,941 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, 20172022, respectively, and 2016,1,218,781 and 1,063,586 anti-dilutive stock options and unvested RSUs for the three and nine months ended September 30, 2021, respectively.
The shares
5.4. REAL ESTATE INVENTORY AND LAND DEPOSITS
Inventory consists of the following (in thousands):
| | | | | | | | | | | | | | |
| | As of |
| | September 30, 2022 | | December 31, 2021 |
Real estate developed and under development | | $ | 3,787,988 | | | $ | 3,895,681 | |
Real estate held for development or held for sale (1) | | 44,177 | | | 70,305 | |
Operating communities (2) | | 1,881,718 | | | 1,309,551 | |
Capitalized interest | | 190,461 | | | 168,670 | |
Total owned inventory | | 5,904,344 | | | 5,444,207 | |
Consolidated real estate not owned | | 54,733 | | | 55,314 | |
Total real estate inventory | | $ | 5,959,077 | | | $ | 5,499,521 | |
|
| | | | | | | | |
| | As of |
| | September 30, 2017 | | December 31, 2016 |
Real estate developed and under development | | $ | 2,171,670 |
| | $ | 2,074,651 |
|
Real estate held for development or held for sale (1) | | 143,585 |
| | 183,638 |
|
Operating communities (2) | | 825,946 |
| | 650,036 |
|
Capitalized interest | | 99,463 |
| | 102,642 |
|
Total owned inventory | | 3,240,664 |
| | 3,010,967 |
|
Real estate not owned under option agreements | | 3,107 |
| | 6,252 |
|
Total real estate inventory | | $ | 3,243,771 |
| | $ | 3,017,219 |
|
(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 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.homes.
The development status of our land inventory is as follows (dollars in thousands):
|
| | | | | | | | | | | | | | |
| | As of |
| | September 30, 2017 | | December 31, 2016 |
| | 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 |
|
Partially developed | | 5,526 |
| | 526,904 |
| | 8,037 |
| | 501,496 |
|
Finished | | 12,828 |
| | 1,426,683 |
| | 11,318 |
| | 1,336,709 |
|
Long-term strategic assets | | 893 |
| | 12,201 |
| | 1,489 |
| | 16,182 |
|
Total | | 27,169 |
| | $ | 2,315,255 |
| | 27,986 |
| | $ | 2,258,289 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of | | |
| | September 30, 2022 | | December 31, 2021 | | |
| | Owned Lots | | Book Value of Land and Development | | Owned Lots | | Book Value of Land and Development | | | | |
Homebuilding owned lots | | | | | | | | | | | | |
Undeveloped | | 15,238 | | | $ | 517,929 | | | 17,671 | | | $ | 636,385 | | | | | |
Under development | | 11,345 | | | 1,051,698 | | | 11,446 | | | 964,353 | | | | | |
Finished | | 19,874 | | | 2,257,495 | | | 18,896 | | | 2,266,309 | | | | | |
| | | | | | | | | | | | |
Total homebuilding owned lots | | 46,457 | | | 3,827,122 | | | 48,013 | | | 3,867,047 | | | | | |
Other assets(1) | | — | | | 5,043 | | | 5,298 | | | 98,939 | | | | | |
Total owned lots | | 46,457 | | | $ | 3,832,165 | | | 53,311 | | | $ | 3,965,986 | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Land Deposits — We provide deposits related to(1)The remaining book value of land options and land purchase contracts, which are capitalized when paid and classifieddevelopment as land deposits until the associated property is purchased.
As of September 30, 2017 and2022 relates to parcels of commercial assets which are. excluded from the owned lots presented in the table.
The homebuilding owned lots presented above as of December 31 2016, we had2021 have been recast as a result of an operational change in classification in the rightcurrent period. Undeveloped lots are those where no phase specific development work has commenced. Under development lots include land where phase specific development has commenced. Finished lots are fully developed for which vertical construction can commence. Our current classification allows for multi-phase or master planned communities to purchase 7,049be presented in more than one lot status based on their development compared to our prior process which grouped all phases of a multi-phase or master planned community into one category based on the phase that was most developed. We believe this operational change provides better transparency into lot status and 7,583 lots underthe book value of such lots.
We have land option purchase contracts, respectively, for an aggregate purchase price of $520.8 millionland banking arrangements and $542.6 million as of September 30, 2017 and December 31, 2016, respectively.other controlled lot agreements. We do not have title to the properties, and the property owner and its creditors generally only have no recourse against us in the Company. Asform of September 30, 2017retaining any non-refundable deposits. We are also not legally obligated to purchase the balance of the lots. Deposits related to these lots are capitalized when paid and December 31, 2016,classified as Land deposits until the associated property is purchased. The table below presents a summary of our controlled lots for the following periods (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of |
| | September 30, 2022 | | December 31, 2021 |
| | Controlled Lots | | Purchase Price | | Land Deposit (1) | | Controlled Lots | | Purchase Price | | Land Deposit (1) |
Homebuilding controlled lots | | | | | | | | | | | | |
Land option purchase contracts | | 7,193 | | | $ | 474,383 | | | $ | 57,919 | | | 8,360 | | | $ | 507,161 | | | $ | 57,554 | |
Land banking arrangements | | 6,982 | | | 1,037,293 | | | 154,502 | | | 5,731 | | | 749,813 | | | 117,721 | |
Other controlled lots | | 19,520 | | | 1,197,006 | | | 64,618 | | | 14,671 | | | 1,338,284 | | | 38,505 | |
Total controlled lots | | 33,695 | | | $ | 2,708,682 | | | $ | 277,039 | | | 28,762 | | | $ | 2,595,258 | | | $ | 213,780 | |
(1) Land deposits are non-refundable and represent exposure to loss related to our option contracts with third parties, and unconsolidated entities, consistand land banking arrangements.. In addition, at September 30, 2022 and December 31, 2021 we had refundable deposits of non-refundable option deposits totaling $50.9$13.3 million and $37.2$15.7 million respectively, in land deposits related to land options and land purchase contracts.respectively.
Capitalized Interest — Interest capitalized, incurred and amortized is as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
Interest capitalized - beginning of period | | $ | 185,364 | | | $ | 180,520 | | | $ | 168,670 | | | $ | 163,780 | |
Interest incurred and capitalized(1) | | 38,871 | | | 37,991 | | | 119,415 | | | 116,126 | |
Interest amortized to cost of home closings | | (33,774) | | | (37,951) | | | (97,624) | | | (99,346) | |
Interest capitalized - end of period | | $ | 190,461 | | | $ | 180,560 | | | $ | 190,461 | | | $ | 180,560 | |
(1) Excludes Interest expense, net on the unaudited Condensed Consolidated Statement of Operations as such amounts are not capitalizable.
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Interest capitalized - beginning of period | | $ | 100,490 |
| | $ | 111,063 |
| | $ | 102,642 |
| | $ | 105,148 |
|
Interest incurred | | 20,762 |
| | 21,851 |
| | 62,187 |
| | 66,296 |
|
Interest amortized to cost of home closings | | (21,789 | ) | | (21,502 | ) | | (65,366 | ) | | (60,032 | ) |
Interest capitalized - end of period | | $ | 99,463 |
| | $ | 111,412 |
| | $ | 99,463 |
| | $ | 111,412 |
|
6.5. INVESTMENTS IN CONSOLIDATED AND UNCONSOLIDATED ENTITIES
Unconsolidated Entities
We have investments in a number of joint ventures with related and unrelated third parties, with ownership interests up to 50.0%.parties. These entities are generally involved in real estate development, homebuilding, andBuild-to-Rent, and/or mortgage lending activities. SomeThe primary activity of thesethe real estate development joint ventures develop land for the sole useis development and sale of thelots to joint venture participants, including us, and others develop land for sale to the joint venture participants and topartners and/or 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.
During the three and nine months ended September 30, 2022, we transferred land at fair value as part of an initial investment in existing unconsolidated joint ventures . In accordance with ASC 606 this was considered a transfer as we have no continuing involvement and the joint venture obtained title, physical possession, maintains risks and rewards of the property and has accepted the property. Included in Other expense/(income), net on the unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 is a gain of $0.8 million and $14.5 million, respectively, related to land transfers and represents the difference between the fair value and carrying value of the land at the time of contribution.
Summarized, unaudited combined financial information of unconsolidated entities that are accounted for by the equity method isare as follows (in thousands):
| | | | As of | | As of |
| | September 30, 2017 | | December 31, 2016 | | September 30, 2022 | | December 31, 2021 |
Assets: | | | | | Assets: | | | | |
Real estate inventory | | $ | 736,746 |
| | $ | 614,441 |
| Real estate inventory | | $ | 717,667 | | | $ | 414,687 | |
Other assets | | 122,036 |
| | 171,216 |
| Other assets | | 132,990 | | | 118,990 | |
Total assets | | $ | 858,782 |
| | $ | 785,657 |
| Total assets | | $ | 850,657 | | | $ | 533,677 | |
Liabilities and owners’ equity: | | | | | Liabilities and owners’ equity: | | | | |
Debt | | $ | 298,347 |
| | $ | 277,934 |
| Debt | | $ | 137,386 | | | $ | 167,842 | |
Other liabilities | | 25,585 |
| | 22,603 |
| Other liabilities | | 31,961 | | | 16,245 | |
Total liabilities | | 323,932 |
| | 300,537 |
| Total liabilities | | 169,347 | | | 184,087 | |
Owners’ equity: | | | | | Owners’ equity: | | | | |
TMHC | | 184,817 |
| | 157,909 |
| TMHC | | 306,081 | | | 171,406 | |
Others | | 350,033 |
| | 327,211 |
| Others | | 375,229 | | | 178,184 | |
Total owners’ equity | | 534,850 |
| | 485,120 |
| Total owners’ equity | | 681,310 | | | 349,590 | |
Total liabilities and owners’ equity | | $ | 858,782 |
| | $ | 785,657 |
| Total liabilities and owners’ equity | | $ | 850,657 | | | $ | 533,677 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
Revenues | | $ | 25,495 | | | $ | 21,833 | | | $ | 150,062 | | | $ | 101,458 | |
Costs and expenses | | (27,310) | | | (16,647) | | | (145,238) | | | (73,705) | |
(Loss)/income of unconsolidated entities | | $ | (1,815) | | | $ | 5,186 | | | $ | 4,824 | | | $ | 27,753 | |
TMHC’s share in (loss)/income of unconsolidated entities | | $ | (1,180) | | | $ | 1,482 | | | $ | (2,986) | | | $ | 9,269 | |
Distributions to TMHC from unconsolidated entities | | $ | 10,006 | | | $ | 2,945 | | | $ | 100,835 | | | $ | 23,287 | |
Consolidated Entities
We have several joint ventures for the purpose of real estate development and homebuilding activities, which we have determined to be VIEs. As the managing member, we oversee the daily operations and have the power to direct the activities of the VIEs, or joint ventures. For this specific subset of joint ventures, based upon the allocation of income and loss per the applicable joint venture agreements and certain performance guarantees, we have potentially significant exposure to the risks and rewards of the joint ventures. Therefore, we are the primary beneficiary of these joint venture VIEs, and these entities are consolidated.
As of September 30, 2022, the assets of the consolidated joint ventures totaled $273.0 million, of which $35.3 million was cash and cash equivalents, $62.6 million was owned inventory and $125.3 million was fixed assets. The fixed asset balance is held for sale as of September 30, 2022. As of December 31, 2021, the assets of the consolidated joint ventures totaled $291.8 million, of which $22.3 million was cash and cash equivalents, $147.6 million was owned inventory and $74.3 million was fixed assets. The liabilities of the consolidated joint ventures totaled $159.2 million and $165.1 million as of September 30, 2022 and December 31, 2021, respectively, and were primarily comprised of notes payable, accounts payable and accrued liabilities.
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Revenues | | $ | 60,020 |
| | $ | 45,219 |
| | $ | 147,273 |
| | $ | 94,881 |
|
Costs and expenses | | (47,505 | ) | | (38,618 | ) | | (118,546 | ) | | (78,838 | ) |
Income of unconsolidated entities | | $ | 12,515 |
| | $ | 6,601 |
| | $ | 28,727 |
| | $ | 16,043 |
|
TMHC’s share in income of unconsolidated entities | | $ | 2,787 |
| | $ | 1,646 |
| | $ | 6,943 |
| | $ | 4,734 |
|
Distributions from unconsolidated entities | | $ | 2,098 |
| | $ | 2,755 |
| | $ | 8,889 |
| | $ | 6,084 |
|
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 September 30, 2022 | | As of December 31, 2021 |
Real estate development costs to complete | | $ | 9,597 |
| | $ | 15,156 |
| Real estate development costs to complete | | $ | 42,384 | | | $ | 49,833 | |
Compensation and employee benefits | | 53,065 |
| | 63,802 |
| Compensation and employee benefits | | 113,877 | | | 166,272 | |
Self-insurance and warranty reserves | | 51,536 |
| | 50,550 |
| Self-insurance and warranty reserves | | 139,991 | | | 141,839 | |
Interest payable | | 24,454 |
| | 17,233 |
| Interest payable | | 35,112 | | | 48,551 | |
Property and sales taxes payable | | 11,486 |
| | 17,231 |
| Property and sales taxes payable | | 31,648 | | | 29,384 | |
Other accruals | | 40,246 |
| | 45,230 |
| Other accruals | | 93,620 | | | 89,330 | |
Total accrued expenses and other liabilities | | $ | 190,384 |
| | $ | 209,202 |
| Total accrued expenses and other liabilities | | $ | 456,632 | | | $ | 525,209 | |
Self-Insurance and Warranty Reserves – We accrue for the expected costs associated with theour limited one year warranty, deductibles and self-insured amounts under our various insurance policies within Beneva Indemnity Company ("Beneva"(“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, |
2022 | | 2021 | | 2022 | | 2021 |
Reserve - beginning of period | $ | 137,491 | | | $ | 116,121 | | | $ | 141,839 | | | $ | 118,116 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Additions to reserves | 2,514 | | | 19,459 | | | 34,917 | | | 50,244 | |
Cost of claims incurred | (3,541) | | | (19,313) | | | (43,743) | | | (54,245) | |
Changes in estimates to pre-existing reserves | 3,527 | | | 279 | | | 6,978 | | | 2,431 | |
| | | | | | | |
Reserve - end of period | $ | 139,991 | | | $ | 116,546 | | | $ | 139,991 | | | $ | 116,546 | |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Reserve - beginning of period | | $ | 54,084 |
| | $ | 44,342 |
| | $ | 50,550 |
| | $ | 43,098 |
|
Additions to reserves | | 6,403 |
| | 8,902 |
| | 17,446 |
| | 19,685 |
|
Costs and claims incurred | | (8,203 | ) | | (5,173 | ) | | (18,131 | ) | | (17,720 | ) |
Change in estimates to existing reserves | | (748 | ) | | (1,590 | ) | | 1,671 |
| | 1,418 |
|
Reserve - end of period | | $ | 51,536 |
| | $ | 46,481 |
| | $ | 51,536 |
| | $ | 46,481 |
|
8.7. DEBT
Total debt consists of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of |
| | September 30, 2022 | | December 31, 2021 |
| | Principal | | Unamortized Debt Issuance (Costs)/Premium | | Carrying Value | | Principal | | Unamortized Debt Issuance (Costs)/Premium | | Carrying Value |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
5.875% Senior Notes due 2023(1) | | $ | 350,000 | | | $ | (307) | | | $ | 349,693 | | | $ | 350,000 | | | $ | (733) | | | $ | 349,267 | |
| | | | | | | | | | | | |
5.625% Senior Notes due 2024 | | 350,000 | | | (763) | | | 349,237 | | | 350,000 | | | (1,166) | | | 348,834 | |
| | | | | | | | | | | | |
5.875% Senior Notes due 2027 | | 500,000 | | | (3,655) | | | 496,345 | | | 500,000 | | | (4,243) | | | 495,757 | |
6.625% Senior Notes due 2027 | | 35,040 | | | 1,789 | | | 36,829 | | | 300,000 | | | 17,718 | | | 317,718 | |
5.75% Senior Notes due 2028 | | 450,000 | | | (3,341) | | | 446,659 | | | 450,000 | | | (3,814) | | | 446,186 | |
5.125% Senior Notes due 2030 | | 500,000 | | | (4,965) | | | 495,035 | | | 500,000 | | | (5,440) | | | 494,560 | |
Senior Notes subtotal | | $ | 2,185,040 | | | $ | (11,242) | | | $ | 2,173,798 | | | $ | 2,450,000 | | | $ | 2,322 | | | $ | 2,452,322 | |
Loans payable and other borrowings | | 409,791 | | | — | | | 409,791 | | | 404,386 | | | — | | | 404,386 | |
$1 Billion Revolving Credit Facility(2) | | — | | | — | | | — | | | — | | | — | | | — | |
$100 Million Revolving Credit Facility(2) | | — | | | — | | | — | | | 31,529 | | | — | | | 31,529 | |
Mortgage warehouse borrowings | | 146,335 | | | — | | | 146,335 | | | 413,887 | | | — | | | 413,887 | |
Total debt | | $ | 2,741,166 | | | $ | (11,242) | | | $ | 2,729,924 | | | $ | 3,299,802 | | | $ | 2,322 | | | $ | 3,302,124 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | As of |
| | September 30, 2017 | | December 31, 2016 |
| | 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 |
|
5.875% Senior Notes due 2023, unsecured | | 350,000 |
| | 3,143 |
| | 346,857 |
| | 350,000 |
| | 3,569 |
| | 346,431 |
|
5.625% Senior Notes due 2024, unsecured | | 350,000 |
| | 3,454 |
| | 346,546 |
| | 350,000 |
| | 3,858 |
| | 346,142 |
|
Senior Notes subtotal | | 1,250,000 |
| | 10,789 |
| | 1,239,211 |
| | 1,250,000 |
| | 12,516 |
| | 1,237,484 |
|
Loans payable and other borrowings | | 161,798 |
| | — |
| | 161,798 |
| | 150,485 |
| | — |
| | 150,485 |
|
Revolving Credit Facility | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Mortgage warehouse borrowings | | 61,292 |
| | — |
| | 61,292 |
| | 198,564 |
| | — |
| | 198,564 |
|
Total Senior Notes and bank financing | | $ | 1,473,090 |
| | $ | 10,789 |
| | $ | 1,462,301 |
| | $ | 1,599,049 |
| | $ | 12,516 |
| | $ | 1,586,533 |
|
(1)As of September 30, 2022, notice of full redemption for the entire outstanding principal amount of the notes was issued. The full notice of redemption states that the entire outstanding principal amount of the 2023 Notes will be redeemed on October 31, 2022 at a redemption price equal to 100.000% of the aggregate principal amount of the 2023 Notes to be redeemed plus the applicable premium (as defined in the indenture governing the 2023 Notes) and accrued and unpaid interest through the redemption date.
(2)The $1 Billion Revolving Credit Facility Agreement together with the $100 Million Revolving Credit Facility Agreement, the “Revolving Credit Facilities”
2021
Debt Instruments
Excluding the debt instruments discussed below, the terms governing all other debt instruments listed in the table above have not substantially changed from the year ended December 31, 2021. For information regarding such instruments, refer to Note 8 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2021. As of September 30, 2022, we were in compliance with all of the covenants in the debt instruments listed in the table above.
6.625% Senior Notes due 2027
On April 16, 2013,
Following our exchange offer in the first quarter of 2020 (the “Exchange Offer”), whereby Taylor Morrison Communities, Inc (“TM Communities”) offered to exchange any and all outstanding senior notes issued by William Lyon Homes (“WLH”), we issued $550.0had $290.4 million aggregate principal amount of 5.25%6.625% Senior Notes due 20212027 issued by TM Communities (the “2021“2027 6.625% TM Communities Notes”) and $9.6 million aggregate principal amount of 6.625% Senior Notes due 2027 issued by WLH (the “2027 6.625% WLH Notes” and together with the 2027 6.625% TM Communities Notes, the “2027 6.625% Senior Notes”).
The 2021 Senior2027 6.625% TM Communities Notes mature on April 15, 2021. The 2021 Senior Notesare obligations of TM Communities and are guaranteed by TMM Holdings,Taylor Morrison Home III Corporation, Taylor Morrison Holdings, Inc., Taylor Morrison Communities II, Inc. and their homebuilding subsidiaries (collectively, the “Guarantors”), which are.
In connection with the consummation of the Exchange Offer, WLH entered into a supplemental indenture to eliminate substantially 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 forcovenants in 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 Senior2027 6.625% WLH Notes, contains customary events of default. If we do not applyincluding the net cash proceeds of certain asset sales within specified deadlines, we will be requiredrequirements to offer to repurchasepurchase such notes upon a change of control, and to eliminate certain other restrictive provisions and events that constitute an “Event of Default” in such indenture.
On June 13, 2022, TM Communities announced a cash tender offer to purchase any and all of the 2021 Senior$290.4 million outstanding aggregate principal amount of the 2027 6.625% TM Communities Notes (the “Tender Offer”), which expired July 12, 2022. As of June 30, 2022, TM Communities had purchased $264.1 million of the 2027 6.625% TM Communities Notes pursuant to the Tender Offer using cash on hand and borrowings on our $1 Billion Revolving Credit Facility at par (plusa price equal to 100% of the principal amount, plus accrued and unpaid interest) with such proceeds. We are also requiredinterest up to, offer to repurchasebut excluding, the 2021 Seniorsettlement date. As a result of the Tender Offer, we recorded a total net gain on extinguishment of debt of approximately $13.5 million on the unaudited Condensed Consolidated Statements of Operations for the nine months ended September 30, 2022. During the three months ended September 30, 2022,
TM Communities repurchased an additional $0.8 million of the 2027 6.625% TM Communities Notes at a price equal to 101%97% of theirthe principal amount, resulting in a total of $265.0 million in aggregate principal amount of outstanding 2027 6.625% TM Communities Notes being repurchased pursuant to the Tender Offer.
In connection with the Tender Offer, TM Communities also solicited consents from holders of the 2027 6.625% TM Communities Notes to amend the indenture governing such notes to, among other things, eliminate substantially all of the restrictive covenants of the indenture (the “Proposed Amendments”). As of June 27, 2022, TM Communities had received the requisite consents to effect the Proposed Amendments and, as a result, a supplemental indenture was executed to effect the Proposed Amendments, which became effective on June 29, 2022.
The remaining 2027 6.625% Senior Notes mature on July 15, 2027. On or after July 15, 2022, the remaining 2027 6.625% Senior Notes are redeemable at a price equal to 103.313% of principal (plus accrued and unpaid interest) upon certain change of control events.
The 2021. On or after July 15, 2023, the 2027 6.625% Senior Notes are redeemable at scheduled redemption prices, currently at 102.625%,a price equal to 102.208% of their principal amount (plus accrued and unpaid interest).
There are no financial maintenance covenants for On or after July 31, 2024, 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 20232027 6.625% Senior Notes are guaranteed byredeemable at a price equal to a 101.104% of principal (plus accrued and unpaid interest). On or after July 15, 2025, 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 2023remaining 2027 6.625% 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 parof principal (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.
Billion Revolving Credit Facility
On September 9, 2022, we entered into an agreement to exercise the accordion feature under our existing Amended and Restated Credit Agreement (the “Credit Agreement”) increasing the aggregate commitments from $800.0 million to $1.0 billion. The commitments established have the same terms and conditions as the existing commitments under the Credit Agreement.
Our $500.0 million$1 Billion Revolving Credit Facility has a maturity date of March 11, 2027. We had no outstanding borrowings under our $1Billion Revolving Credit Facility matures on April 12, 2019. Theas of September 30, 2022 and December 31, 2021.
As of September 30, 2022 and December 31, 2021, we had $3.8 million and $1.1 million, respectively, of unamortized debt issuance costs relating to our $1 Billion Revolving Credit Facility, is guaranteed bywhich are included in Prepaid expenses and other assets, net, on the same Guarantors that guaranteeunaudited Condensed Consolidated Balance Sheets. As of September 30, 2022 and December 31, 2021, we had $61.2 million and $58.7 million, respectively, of utilized letters of credit, resulting in $938.8 million and $741.3 million, respectively, of availability under the 2021, 2023 and 2024 Senior Notes.$1 Billion Revolving Credit Facility.
The $1 Billion 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, currently of at least $1.6$2.8 billion. The financial covenants would be in effect for any fiscal quarter during which any (a) loans under the $1 Billion 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 $1 Billion Revolving Credit Facility in an aggregate amount greater than $40.0 million or unreimbursed letters of credit issued under the $1 Billion 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 $1 Billion 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.
The $1 Billion Revolving Credit Facility contains certain restrictive covenants including limitations on incurrence of liens, the payment of 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 $1 Billion 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, 2017,2022, we were in compliance with all of the covenants under the $1 Billion Revolving Credit Facility.
Mortgage Warehouse Borrowings
The following is a summary of our mortgage warehouse borrowings (in thousands):
|
| | | | | | | | | | | | | | |
| | As of September 30, 2017 |
Facility | | Amount Drawn | | Facility Amount | | Interest Rate | | Expiration Date | | Collateral (1) |
Flagstar | | $ | 2,703 |
| | $ | 20,000 |
| | LIBOR + 2.5% | | 30 days written notice | | Mortgage Loans |
Comerica | | 23,290 |
| | 50,000 |
| | LIBOR + 2.25% | | November 16, 2017 | | Mortgage Loans |
J.P. Morgan | | 35,299 |
| | 100,000 |
| | LIBOR + 2.375% | | September 26, 2018 | | Mortgage Loans and Pledged Cash |
Total | | $ | 61,292 |
| | $ | 170,000 |
| | |
| | | | | | | | | | |
| | As of December 31, 2016 |
Facility | | Amount Drawn | | Facility Amount | | Interest Rate | | Expiration Date | | Collateral (1) |
Flagstar | | $ | 37,093 |
| | $ | 55,000 |
| | LIBOR + 2.5% | | 30 days written notice | | Mortgage Loans |
Comerica | | 57,875 |
| | 85,000 |
| | LIBOR + 2.25% | | November 16, 2017 | | Mortgage Loans |
J.P. Morgan | | 103,596 |
| | 125,000 |
| | LIBOR + 2.375% to 2.5% | | September 26, 2017 | | Mortgage Loans and Pledged Cash |
Total | | $ | 198,564 |
| | $ | 265,000 |
| | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of September 30, 2022 |
Facility | | Amount Drawn | | Facility Amount | | Interest Rate(1) | | Expiration Date | | Collateral (2) |
Warehouse A | | $ | 24,612 | | | $ | 60,000 | | | Daily SOFR + 1.70% | | On Demand | | Mortgage Loans |
Warehouse B | | 20,578 | | | 75,000 | | | BSBY 1M + 1.65% | | On Demand | | Mortgage Loans |
Warehouse C | | 37,671 | | | 75,000 | | | Term SOFR + 1.65% | | On Demand | | Mortgage Loans and Restricted Cash |
Warehouse D | | 26,177 | | | 70,000 | | | Daily SOFR + 1.50% | | September 6, 2023 | | Mortgage Loans |
Warehouse E | | 37,297 | | | 70,000 | | | Term SOFR + 1.60% | | On Demand | | Mortgage Loans |
Total | | $ | 146,335 | | | $ | 350,000 | | | |
| | | | | | | | | | |
| | As of December 31, 2021 |
Facility | | Amount Drawn | | Facility Amount | | Interest Rate(3) | | Expiration Date | | Collateral (2) |
Warehouse A | | $ | 12 | | | $ | 10,000 | | | LIBOR + 1.75% | | On Demand | | Mortgage Loans |
Warehouse B | | 86,409 | | | 150,000 | | | LIBOR + 1.75% | | On Demand | | Mortgage Loans |
Warehouse C | | 116,601 | | | 250,000 | | | LIBOR + 2.05% | | On Demand | | Mortgage Loans and Restricted Cash |
Warehouse D | | 105,065 | | | 150,000 | | | LIBOR + 1.65% | | November 20, 2022 | | Mortgage Loans |
Warehouse E | | 105,800 | | | 200,000 | | | LIBOR + 1.50% | | On Demand | | Mortgage Loans |
Total | | $ | 413,887 | | | $ | 760,000 | | | |
(1) As of September 30, 2022, our warehouse borrowings transitioned from LIBOR to the Secured Overnight Financing Rate (SOFR), and the Bloomberg Short-Term Bank Yield Index (BSBY).
(2) The mortgage warehouse borrowings outstanding as of September 30, 20172022 and December 31, 20162021 were collateralized by a) $107.7$161.3 million and $233.2$467.5 million, respectively, of mortgage loans held for sale, which comprisedcomprise the balance of mortgage loans held for sale, and b) approximately $1.3$0.6 million and $1.6$3.5 million, respectively, of cash which are included inis restricted cash in the accompanyingon our unaudited Condensed Consolidated Balance Sheets.
(3) Subject to certain interest rate floors.
Loans Payable and Other Borrowings
Loans payable and other borrowings as of September 30, 20172022 and December 31, 20162021 consist of project-level debt due to various land sellers and seller financing notes from current and prior year acquisitions.financial institutions for specific projects. Project-level debt is generally secured by the land that was acquired and the principal payments generally coincide with corresponding project lot salesclosings or a principal reduction schedule. Loans payable bear interest at rates that ranged from 0% to 8% at each of September 30, 20172022 and December 31, 2016. We impute interest for loans with no stated interest rates.2021.
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 and liabilities 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 FacilityFacilities 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 usingour Equity Security Investment in a Monte Carlo simulation model under the option pricing method. As the measurement of the contingent considerationpublic company is based primarily on significant inputs not observableupon quoted prices for identical assets in the market, it represents a Level 3 measurement.an active market. 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, 2017,2022, when compared to December 31, 2016.2021.
The carrying value and fair value of our financial instruments are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | September 30, 2022 | | December 31, 2021 | | |
(Dollars in thousands) | | Level in Fair Value Hierarchy | | Carrying Value | | Estimated Fair Value | | Carrying Value | | Estimated Fair Value | | |
Description: | | | | | | | | | | | | |
Mortgage loans held for sale | | 2 | | $ | 161,264 | | | $ | 161,264 | | | $ | 467,534 | | | $ | 467,534 | | | |
IRLCs | | 3 | | (12,792) | | | (12,792) | | | 2,110 | | | 2,110 | | | |
MBSs | | 2 | | 23,832 | | | 23,832 | | | (449) | | | (449) | | | |
| | | | | | | | | | | | |
Mortgage warehouse borrowings | | 2 | | 146,335 | | | 146,335 | | | 413,887 | | | 413,887 | | | |
Loans payable and other borrowings | | 2 | | 409,791 | | | 409,791 | | | 404,386 | | | 404,386 | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
5.875% Senior Notes due 2023 (1) | | 2 | | 349,693 | | | 350,476 | | | 349,267 | | | 365,890 | | | |
| | | | | | | | | | | | |
5.625% Senior Notes due 2024 (1) | | 2 | | 349,237 | | | 342,675 | | | 348,834 | | | 372,750 | | | |
| | | | | | | | | | | | |
5.875% Senior Notes due 2027 (1) | | 2 | | 496,345 | | | 465,625 | | | 495,757 | | | 560,000 | | | |
6.625% Senior Notes due 2027 (1) | | 2 | | 36,829 | | | 33,736 | | | 317,718 | | | 315,750 | | | |
5.75% Senior Notes due 2028(1) | | 2 | | 446,659 | | | 394,362 | | | 446,186 | | | 502,875 | | | |
5.125% Senior Notes due 2030(1) | | 2 | | 495,035 | | | 403,605 | | | 494,560 | | | 550,000 | | | |
| | | | | | | | | | | | |
$100 Million Revolving Credit Facility | | 2 | | — | | | — | | | 31,529 | | | 31,529 | | | |
Equity Security | | 1 | | 1,210 | | | 1,210 | | | 6,400 | | | 6,400 | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | |
| | | | September 30, 2017 | | December 31, 2016 |
(Dollars in thousands) | | 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 |
|
Derivative assets | | 2 | | 2,037 |
| | 2,037 |
| | 2,291 |
| | 2,291 |
|
Mortgage warehouse borrowings | | 2 | | 61,292 |
| | 61,292 |
| | 198,564 |
| | 198,564 |
|
Loans payable and other borrowings | | 2 | | 161,798 |
| | 161,798 |
| | 150,485 |
| | 150,485 |
|
5.25% Senior Notes due 2021 (1) | | 2 | | 545,808 |
| | 564,465 |
| | 544,911 |
| | 563,750 |
|
5.875% Senior Notes due 2023 (1) | | 2 | | 346,857 |
| | 371,000 |
| | 346,431 |
| | 355,250 |
|
5.625% Senior Notes due 2024 (1) | | 2 | | 346,546 |
| | 364,000 |
| | 346,142 |
| | 353,500 |
|
Revolving Credit Facility | | 2 | | — |
| | — |
| | — |
| | — |
|
Contingent consideration liability | | 3 | | 5,358 |
| | 5,358 |
| | 17,200 |
| | 17,200 |
|
(1)Carrying value for Senior Notes, as presented, includes unamortized debt issuance costs.costs and premiums. 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 our inventories measured at fair value on a nonrecurring basis as of December 31, 2016.
|
| | | | | | |
(Dollars in thousands) | | | | |
Description: | Level in Fair Value Hierarchy | | | Fair Value at December 31, 2016 |
Inventories (1) | 3 | | | $ | 3,778 |
|
(1) 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
OurThe effective tax rate for the three and nine months ended September 30, 20172022 was 30.7%22.6% and 31.0%23.8%, respectively, compared to 35.1%23.5% and 33.8%23.2%, respectively, for the same periods in 2016, respectively.2021. For both the three and nine months ended September 30, 20172022 and 2016,2021 the effective tax rate differed from the U.S. federal statutory income tax rate primarily due to state income taxes, non-deductible executive compensation, excess tax benefits related to stock-based compensation and special deductions and credits relating to homebuilding activities, uncertain tax positions, and discrete tax adjustments related toactivities.
certain deferred tax assets and liabilities.
At both September 30, 20172022 and December 31, 2016, we had $12.9 million and $7.8 million of cumulative gross2021, there were no unrecognized tax benefits, respectively. All unrecognized tax benefits, if recognized, would affect our effective tax rate. We had $0.9 million and $0.4 million of gross interest and penalties related to unrecognized tax positions accrued as of September 30, 2017 and December 31, 2016, respectively.benefits.
11.10. STOCKHOLDERS’ EQUITY
Capital Stock — Holders
The Company’s authorized capital stock consists 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 months ended September 30, 2017, 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 with400,000,000 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 Equityholderscommon stock, par value $0.00001 per share (the “Common Stock”), and Additional paid-in capital on the Condensed Consolidated Balance Sheets to reflect the change in ownership. The aggregate number of partnership units and corresponding50,000,000 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.preferred stock, par value $0.00001 per share.
The following is a summary of the completed sales of our Class A Common Stock in registered public offerings.
|
| | | | | | |
(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 |
|
The components and respective voting power of outstanding TMHC Common Stock including the effects of the secondary offerings at September 30, 2017 are as follows:
|
| | | | | | |
| | Shares Outstanding | | Percentage |
Class A Common Stock | | 72,307,299 |
| | 60.5 | % |
Class B Common Stock | | 47,249,127 |
| | 39.5 | % |
Total | | 119,556,426 |
| | 100 | % |
Stock Repurchase Program
On September 18, 2017, ourMay 31, 2022, the Board of Directors authorized an extensiona new stock repurchase program which permits the Company to repurchase up to $500.0 million of the Company's Common Stock until December 31, 2023. The new stock repurchase program through December 31, 2018 and increasedreplaced the amount available for repurchasesCompany’s prior $250.0 million repurchase program, which had been scheduled to expire on June 30, 2024. Repurchases under the new program may occur from time to a maximum total amount of $100.0 million of the Company’s Class A Common Stock intime through open market purchases, privately negotiated transactions or other transactions. The timing, manner, price and amount of any common stock repurchase program is subject torepurchases will be determined by us in our discretion and will depend on a variety of factors, including prevailing market conditions, and other considerations, including our liquidity, the terms
of our debt instruments, statutorylegal requirements, planned land investment and development spending, acquisition and other investment opportunities and ongoing capital requirements. DuringThe program does not require us to repurchase any specific number of shares of common stock, and the threeprogram may be suspended, extended, modified or discontinued at any time.
The following table summarizes share repurchase activity for the periods presented:
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(Dollars in thousands) | 2022 | | 2021 | | 2022 | | 2021 |
Amount available for repurchase — beginning of period | $ | 425,000 | | | $ | 191,659 | | | $ | 230,413 | | | $ | 86,831 | |
Amount cancelled from expired or unused authorizations | — | | | — | | | (75,000) | | | — | |
Additional amount authorized for repurchase | — | | | — | | | 500,000 | | | 250,000 | |
| | | | | | | |
Amount repurchased | (104,999) | | | (91,659) | | | (335,412) | | | (236,831) | |
Amount available for repurchase — end of period | $ | 320,001 | | | $ | 100,000 | | | $ | 320,001 | | | $ | 100,000 | |
| | | | | | | |
The Company repurchased 4,213,256 and nine months ended
September 30, 2017, we repurchased 195,824 for $4.1 million . During12,940,941 shares under the share repurchase program during the three and nine months ended September 30, 2016, we2022, respectively. The number of shares repurchased 247,366were 3,309,196 and 1,918,999 for $3.8 million8,565,933 during the three and $28.5 million, respectively. As ofnine months ended September 30, 2017, there was $95.9 million available to be used for repurchases.2021, respectively.
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"“Plan”). The Plan
was most recently amended and restated in May 2017.2022. The Plan provides for the grant of stock options, RSUsrestricted stock units
(“RSUs”), performance-based restricted stock units (“PRSUs”), and other equity-based awards deliverable in shares of our Class A
Common Stock. As of September 30, 2017,2022, we had an aggregate of 8,989,8605,534,816 shares of Class A Common Stock available for future
grants under the Plan.
The following table provides the outstanding balance of time-based and performance based RSUs and stock options as of September 30, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Restricted Stock Units (time and performance) | | Stock Options | | |
| | Units | | Weighted Average Grant Date Fair Value | | Units | | Weighted Average Exercise Price Per Share | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Balance at September 30, 2022 | | 1,618,601 | | | $ | 27.34 | | | 3,397,097 | | | $ | 23.24 | | | | | |
The following table provides information regarding the amount and components of stock-based compensation expense, all of which is included in generalGeneral and administrative expenses in the accompanyingunaudited Condensed Consolidated Statements of Operations (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
Restricted stock units (1) | | $ | 4,215 | | | $ | 3,746 | | | $ | 14,133 | | | $ | 12,108 | |
Stock options | | 1,118 | | | 1,047 | | | 3,341 | | | 3,020 | |
| | | | | | | | |
Total stock compensation | | $ | 5,333 | | | $ | 4,793 | | | $ | 17,474 | | | $ | 15,128 | |
| | | | | | | | |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Restricted stock units (1) | | $ | 2,157 |
| | $ | 1,810 |
| | $ | 6,348 |
| | $ | 4,948 |
|
Stock options | | 1,162 |
| | 1,056 |
| | 3,308 |
| | 3,074 |
|
New TMM units | | 58 |
| | 176 |
| | 571 |
| | 937 |
|
Total stock compensation | | $ | 3,377 |
| | $ | 3,042 |
| | $ | 10,227 |
| | $ | 8,959 |
|
(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, 20172022 and December 31, 2016,2021, the aggregate unrecognized value of all outstanding stock-based compensation awards was approximately $23.4$32.3 million and $18.8$26.5 million, respectively.
Restricted Stock Units – The following table summarizes the time-based RSU and performance-based RSU activity for the nine months ended September 30, 2017:
|
| | | | | | | |
| | Shares | | Weighted Average Grant Date Fair Value |
Balance at December 31, 2016 | | 1,358,701 |
| | $ | 13.39 |
|
Granted | | 647,354 |
| | 18.06 |
|
Vested | | (78,221 | ) | | 17.43 |
|
Forfeited | | (53,892 | ) | | 13.95 |
|
Balance at September 30, 2017 | | 1,873,942 |
| | $ | 14.82 |
|
During the three and nine months ended September 30, 2017, we issued 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 to 33% of the RSUs 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 on the first anniversary of the grant date.
Additionally, we issued 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 months ended September 30, 2017:
|
| | | | | | | |
| | Shares | | Weighted Average Exercise Price Per Share |
Outstanding at December 31, 2016 | | 2,431,347 |
| | $ | 17.09 |
|
Granted | | 790,651 |
| | 19.05 |
|
Exercised | | (265,167 | ) | | 18.07 |
|
Canceled/Forfeited | | (74,811 | ) | | 18.01 |
|
Outstanding at September 30, 2017 | | 2,882,020 |
| | $ | 17.52 |
|
Options exercisable at September 30, 2017 | | 933,259 |
| | $ | 19.63 |
|
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, 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. 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 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 |
|
(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. 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. 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 months ended September 30, 2017, we engaged in multiple equity offering transactions with our principal equityholders. Refer to Note 11 - 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. 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 |
| | 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 | | — |
| | 27,968 |
| | (27,968 | ) | | — |
|
Balance, end of period | | $ | 2,061 |
| | $ | (51,959 | ) | | $ | 31,909 |
| | $ | (17,989 | ) |
|
| | | | | | | | | | | | | | | | |
| | 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.
15.12. 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. The activity from our Build-to-Rent and Urban Form operations are included in our Corporate segment. We also have a mortgage and titlefinancial 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,Jacksonville, Naples, Orlando, Raleigh, Southwest FloridaSarasota, and Tampa |
Central | Austin, Dallas, Denver, and Houston (both include a Taylor Morrison division and a Darling Homes division) and Denver |
West | Bay Area, Las Vegas, Phoenix, Portland, Sacramento, Seattle, and Southern California |
Mortgage OperationsFinancial Services | Taylor Morrison Home Funding, and Inspired Title Services, and Taylor Morrison Insurance Services
|
Segment information is as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2022 |
| | East | | Central | | West | | Financial Services | | Corporate and Unallocated(1) | | Total |
Total revenue | | $ | 649,058 | | | $ | 522,846 | | | $ | 831,409 | | | $ | 27,749 | | | $ | 3,582 | | | $ | 2,034,644 | |
| | | | | | | | | | | | |
Gross margin | | 176,015 | | | 141,076 | | | 231,100 | | | 7,354 | | | 2,395 | | | 557,940 | |
Selling, general and administrative expenses | | (42,126) | | | (32,589) | | | (39,193) | | | — | | | (33,141) | | | (147,049) | |
Net (loss)/income from unconsolidated entities | | — | | | (86) | | | (899) | | | 546 | | | (741) | | | (1,180) | |
Interest and other income/(expense), net(2) | | (4,180) | | | (1,325) | | | (4,065) | | | — | | | (563) | | | (10,133) | |
Gain on extinguishment of debt, net | | — | | | — | | | — | | | — | | | 71 | | | 71 | |
Income/(loss) before income taxes | | $ | 129,709 | | | $ | 107,076 | | | $ | 186,943 | | | $ | 7,900 | | | $ | (31,979) | | | $ | 399,649 | |
(1) Includes the activity from our Build-To-Rent and Urban Form operations.
(2) Interest and other income/(expense), net includes pre-acquisition write-offs of terminated projects.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2021 |
| | East | | Central | | West | | Financial Services | | Corporate and Unallocated (1) | | Total |
Total revenue | | $ | 571,879 | | | $ | 401,948 | | | $ | 846,082 | | | $ | 38,046 | | | $ | 796 | | | $ | 1,858,751 | |
| | | | | | | | | | | | |
Gross margin | | 129,234 | | | 78,292 | | | 173,062 | | | 11,844 | | | 18 | | | 392,450 | |
Selling, general and administrative expenses | | (43,439) | | | (31,325) | | | (48,627) | | | — | | | (44,219) | | | (167,610) | |
Net (loss)/income from unconsolidated entities | | — | | | (15) | | | 143 | | | 1,354 | | | — | | | 1,482 | |
Interest and other income/(expense), net (2) | | (419) | | | (803) | | | 254 | | | — | | | 211 | | | (757) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Income/(loss) before income taxes | | $ | 85,376 | | | $ | 46,149 | | | $ | 124,832 | | | $ | 13,198 | | | $ | (43,990) | | | $ | 225,565 | |
(1) Includes the activity from our Build-To-Rent and Urban Form operations.
(2) Interest and other income/(expense), net includes pre-acquisition write-offs of terminated projects.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Nine Months Ended September 30, 2022 |
| | East | | Central | | West | | Financial Services | | Corporate and Unallocated(1) | | Total |
Total revenue | | $ | 1,810,041 | | | $ | 1,351,093 | | | $ | 2,433,893 | | | $ | 98,419 | | | $ | 39,345 | | | $ | 5,732,791 | |
| | | | | | | | | | | | |
Gross margin | | 476,241 | | | 332,440 | | | 635,318 | | | 32,327 | | | 16,222 | | | 1,492,548 | |
Selling, general and administrative expenses | | (127,041) | | | (95,527) | | | (125,086) | | | — | | | (122,201) | | | (469,855) | |
Net income/(loss) from unconsolidated entities | | — | | | (40) | | | (7,004) | | | 4,799 | | | (741) | | | (2,986) | |
Interest and other income/(expense), net(2) | | 5,498 | | | (4,262) | | | (9,734) | | | — | | | (605) | | | (9,103) | |
Gain on extinguishment of debt, net | | — | | | — | | | — | | | — | | | 13,542 | | | 13,542 | |
Income/(loss) before income taxes | | $ | 354,698 | | | $ | 232,611 | | | $ | 493,494 | | | $ | 37,126 | | | $ | (93,783) | | | $ | 1,024,146 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 |
|
(1) Includes the activity from our Build-To-Rent and Urban Form operations.
(2) Interest and other income/(expense), net includes pre-acquisition write-offs of terminated projects.
| | | | Three Months Ended September 30, 2016 | | | Nine Months Ended September 30, 2021 |
| | East | | Central | | West | | Mortgage Operations | | Corporate and Unallocated | | Total | | East | | Central | | West | | Financial Services | | Corporate and Unallocated(1) | | Total |
Total revenues | | $ | 288,639 |
| | $ | 273,095 |
| | $ | 277,869 |
| | $ | 13,814 |
| | $ | — |
| | $ | 853,417 |
| |
Total revenue | | Total revenue | | $ | 1,606,603 | | | $ | 1,110,399 | | | $ | 2,158,251 | | | $ | 119,503 | | | $ | 1,087 | | | $ | 4,995,843 | |
| | | | | | | | | | | | | |
Gross margin | | 70,026 |
| | 51,267 |
| | 51,624 |
| | 5,937 |
| | — |
| | 178,854 |
| Gross margin | | 336,542 | | | 212,076 | | | 404,093 | | | 43,367 | | | (484) | | | 995,594 | |
Selling, general and administrative expenses | | (26,866 | ) | | (24,842 | ) | | (18,507 | ) | | — |
| | (18,006 | ) | | (88,221 | ) | Selling, general and administrative expenses | | (128,402) | | | (92,225) | | | (137,384) | | | — | | | (124,661) | | | (482,672) | |
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 | ) | |
Net (loss)/income from unconsolidated entities | | Net (loss)/income from unconsolidated entities | | — | | | (85) | | | 2,139 | | | 7,225 | | | (10) | | | 9,269 | |
Interest and other income/(expense), net (2) | | Interest and other income/(expense), net (2) | | (328) | | | (1,694) | | | (1,165) | | | — | | | 1,526 | | | (1,661) | |
| Income/(loss) before income taxes | | $ | 42,032 |
| | $ | 25,608 |
|
| $ | 33,598 |
|
| $ | 6,805 |
|
| $ | (17,652 | ) |
| $ | 90,391 |
| Income/(loss) before income taxes | | $ | 207,812 | | | $ | 118,072 | | | $ | 267,683 | | | $ | 50,592 | | | $ | (123,629) | | | $ | 520,530 | |
(1) Includes the activity from our Build-To-Rent and Urban Form operations.
(2) Interest and other income/(expense), net includes pre-acquisition write-offs of terminated projects. |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of September 30, 2022 |
| | East | | Central | | West | | Financial Services | | Corporate and Unallocated(1) | | Total |
Real estate inventory and land deposits | | $ | 2,039,049 | | | $ | 1,538,310 | | | $ | 2,672,058 | | | $ | — | | | $ | — | | | $ | 6,249,417 | |
Investments in unconsolidated entities | | 46,629 | | | 92,884 | | | 119,752 | | | 4,673 | | | 42,143 | | | 306,081 | |
Other assets | | 168,229 | | | 245,508 | | | 610,596 | | | 278,890 | | | 734,905 | | | 2,038,128 | |
Total assets | | $ | 2,253,907 | | | $ | 1,876,702 | | | $ | 3,402,406 | | | $ | 283,563 | | | $ | 777,048 | | | $ | 8,593,626 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2016 |
| | East | | Central | | West | | Mortgage Operations | | Corporate and Unallocated | | Total |
Total revenues | | $ | 737,550 |
| | $ | 767,825 |
| | $ | 810,736 |
| | $ | 36,951 |
| | $ | — |
| | $ | 2,353,062 |
|
| | | | | | | | | | | | |
Gross margin | | 161,437 |
| | 138,647 |
| | 142,806 |
| | 14,357 |
| | — |
| | 457,247 |
|
Selling, general and administrative expenses | | (76,027 | ) | | (71,727 | ) | | (54,276 | ) | | — |
| | (54,348 | ) | | (256,378 | ) |
Equity in income of unconsolidated entities | | 440 |
| | 110 |
| | 1,303 |
| | 2,881 |
| | — |
| | 4,734 |
|
Interest and other (expense)/income, net | | (3,821 | ) | | (3,140 | ) | | (250 | ) | | 14 |
| | (1,256 | ) | | (8,453 | ) |
Income/(loss) before income taxes | | $ | 82,029 |
| | $ | 63,890 |
| | $ | 89,583 |
| | $ | 17,252 |
| | $ | (55,604 | ) | | $ | 197,150 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 |
|
(1) Includes corporate cash and the assets from our Build-To-Rent and Urban Form operations.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of December 31, 2021 |
| | East | | Central | | West | | Financial Services | | Corporate and Unallocated (1) | | Total |
Real estate inventory and land deposits | | $ | 1,781,948 | | | $ | 1,282,024 | | | $ | 2,665,084 | | | $ | — | | | $ | — | | | $ | 5,729,056 | |
Investments in unconsolidated entities | | — | | | 87,600 | | | 79,531 | | | 4,275 | | | — | | | 171,406 | |
Other assets | | 196,126 | | | 221,906 | | | 588,520 | | | 559,233 | | | 1,261,530 | | | 2,827,315 | |
Total assets | | $ | 1,978,074 | | | $ | 1,591,530 | | | $ | 3,333,135 | | | $ | 563,508 | | | $ | 1,261,530 | | | $ | 8,727,777 | |
(1) Includes corporate cash and the assets from our Build-To-Rent and Urban Form operations.
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | As of December 31, 2016 |
| | East | | Central | | West | | Mortgage Operations | | Corporate and Unallocated | | Total |
Real estate inventory and land deposits | | $ | 1,110,340 |
| | $ | 829,354 |
| | $ | 1,114,758 |
| | $ | — |
| | $ | — |
| | $ | 3,054,452 |
|
Investments in unconsolidated entities | | 25,923 |
| | 30,146 |
| | 98,625 |
| | 3,215 |
| | — |
| | 157,909 |
|
Other assets | | 80,320 |
| | 139,383 |
| | 43,304 |
| | 269,131 |
| | 476,427 |
| | 1,008,565 |
|
Total assets | | $ | 1,216,583 |
| | $ | 998,883 |
| | $ | 1,256,687 |
| | $ | 272,346 |
| | $ | 476,427 |
| | $ | 4,220,926 |
|
16.13. 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 million and $302.8 million$1.2 billion as of September 30, 20172022 and December 31, 2016, respectively.2021. 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 letters of credit or surety bonds as of September 30, 20172022 will be drawn upon.
Purchase Commitments —We are subject to the usual obligations associated with entering into contracts (including land option contracts and land banking arrangements) for the purchase, development, and sale of real estate in the routine conduct of our business. We have a number of land purchase option contracts and land banking agreements, generally through cash deposits, for the right to purchase land or lots at a future point in time with predetermined terms. We do not have title to the property and the creditors of the property owner generally have no recourse. Our obligations with respect to such 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, 2022 and December 31, 2021, the aggregate purchase price of these contracts was $1.5 billion and $1.3 billion, respectively.
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, title and insurance agency operations, safety and other 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, 20172022 and December 31, 2016,2021, our legal accruals were $2.7$20.5 million and $4.4$21.7 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 predictPredicting the ultimate resolution of the pending matters, the related timing or the eventual loss.loss associated with these matters is inherently difficult. Accordingly, the liability arising from the ultimate resolution of any matter may exceed the estimate reflected in the recorded reserves relating to such matters. 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,
On April 26, 2017, a class action complaint was filed in the Circuit Court of the Tenth Judicial Circuit in and for Polk County, Florida by Norman Gundel, William Mann, and Brenda Taylor against Avatar Properties, Inc. (an acquired AV Homes entity), generally alleging that our collection of club membership fees in connection with the use of one of our amenities in our East homebuilding segment violates various laws relating to homeowner associations and other Florida-specific laws. The class action complaint seeks an injunction to prohibit future collection of club membership fees. On November 2, 2021, the court determined that the club membership fees were improper and that plaintiffs were entitled to $35.0 million in fee reimbursements. We appealed the court’s ruling to the extentSecond District Court of Appeal on November 29, 2021, and as of September 30, 2022, our appeal remains pending. Plaintiffs have agreed to continue to pay club membership fees pending the liability arising fromoutcome of the appeal. We believe, based on our assessment and the opinion of external legal counsel, that the court’s legal interpretation constitutes legal error and the court incorrectly ruled on this matter. In accordance with ASC Topic 450, Contingencies, we evaluated the range of loss and the likelihood of each potential amount of loss within the range. While the ultimate resolutionoutcome and the costs associated with litigation are inherently uncertain and difficult to predict, in evaluating the potential outcomes, we believe the more likely outcome is that we win the appeal. This belief is based on our review of any matter exceeds the estimates reflectedlegal merit of the judgement, as well as the opinion of external legal counsel. Accordingly, in assessing the range of possible loss, we believe the more likely outcome is that we win on appeal and will have zero liability.
Leases — Our leases primarily consist of office space, construction trailers, model home leasebacks, a ground lease, equipment, and storage units. We assess each of these contracts to determine whether the arrangement contains a lease as defined by ASC 842, Leases. Lease obligations were $91.6 million and $96.2 million as of September 30, 2022 and December 31, 2021, respectively. We recorded reserves relating to such matter, we could incur additional charges that could be significant.lease expense of approximately $6.9 million and $20.5 million for the three and nine months ended September 30, 2022, and $4.2 million and $12.2 million for the three and nine months ended September 30, 2021, respectively, within General and administrative expenses on our unaudited Condensed Consolidated Statement of Operations.
17.14. 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 operationsFinancial Services revenue/expenses on the statementunaudited Condensed Consolidated Statements of operations and other comprehensive income.Operations. 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 | | September 30, 2022 | | December 31, 2021 |
(Dollars in thousands) | | Fair Value | | Notional Amount | | Fair Value | | Notional Amount | (Dollars in thousands) | | Fair Value | | Notional Amount (1) | | Fair Value | | Notional Amount (1) |
IRLCs | | $ | 1,752 |
| | $ | 75,739 |
| | $ | 1,987 |
| | $ | 61,655 |
| IRLCs | | $ | (12,792) | | | $ | 651,953 | | | $ | 2,110 | | | $ | 158,299 | |
MBSs | | 285 |
| | 101,000 |
| | 304 |
| | 97,000 |
| MBSs | | 23,832 | | | 596,000 | | | (449) | | | 407,000 | |
Total | | $ | 2,037 |
| | | | $ | 2,291 |
| | | Total | | $ | 11,040 | | | $ | 1,661 | | |
(1) The notional amounts in the table above include mandatory and best effort mortgages, that have been locked and approved.
Total commitments to originate loans approximated $119.7$716.6 million and $173.7 million as of September 30, 2017.2022 and December 31, 2021, respectively. This amount represents the commitments to originate loans for both best efforts and mandatory loans that have been locked and approved by underwriting. The notional amountamounts in the table above includes only mandatory and best effort 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
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 unaudited 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 and operations 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 ourthe Company's Annual Report on Form 10-K for the year ended December 31, 2016 (the “Annual2021 (“Annual Report”) filedand in our subsequent filings with the U.S. Securities and Exchange Commission (“SEC”(the “SEC”). Although we believe that these forward-looking statements are based upon reasonable assumptions and currently available information, you should be aware that many factors, including those described under the heading “Risk Factors” in the Annual Report and in our subsequent filings with the SEC, 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 geographically focused in Arizona, California, Colorado, Florida, Georgia, Illinois,Nevada, North and South Carolina, Oregon, Texas, and Texas. Our Company servesWashington. We serve a wide array of consumer groups from coast to coast, including first time,entry-level, move-up, luxury and 55 plus buyers.resort lifestyle (formerly referred to as 55-plus active lifestyle) buyers, building single and multi-family attached and detached homes. Our homebuilding businesscompany operates under our Taylor Morrison, and Darling Homes Collection by Taylor Morrison, and Esplanade brand names. We operate a “Build-to-Rent” homebuilding business where we serve as a land acquirer, developer, and homebuilder. We also operate Urban Form Development, LLC (“Urban Form”), which primarily develops and constructs multi-use properties consisting of commercial space, retail, and multi-family units. We have operations which provide financial services to customers through our wholly owned mortgage subsidiary, Taylor Morrison Home Funding, INC (“TMHF”), title services through our wholly owned title services subsidiary, Inspired Title Services, LLC (“Inspired Title”), and homeowner’s insurance policies through our insurance agency, Taylor Morrison Insurance Services, LLC (“TMIS”). Our business as of September 30, 2022 is organized into multiple homebuilding operating components, and a mortgage operatingfinancial services component, all of which are managed as four reportable segments: East, Central, West and Mortgage Operations,Financial Services, as follows:
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| | | | | | | |
East | | Atlanta, Charlotte, Chicago,Jacksonville, Naples, Orlando, Raleigh, Southwest FloridaSarasota, and Tampa |
Central | | Austin, Dallas, Denver, and Houston (both include a Taylor Morrison division and a Darling Homes division), and Denver |
West | | Bay Area, Las Vegas, Phoenix, Portland, Sacramento, Seattle, and Southern California |
Mortgage OperationsFinancial Services | | Taylor Morrison Home Funding, (“TMHF”) and Inspired Title Services, LLC (“Inspired Title”) and Taylor Morrison Insurance Services
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DuringCommunity development includes the quarter ended March 31, 2017,acquisition and development of land, which may include obtaining significant planning and entitlement approvals and completing construction of off-site and on-site utilities and infrastructure. We generally operate as community developers, but in some communities we realignedoperate solely as merchant builders, in which case we acquire fully entitled and developed lots. We remain disciplined in our underwriting to acquire land where we see opportunities to drive
profitable growth over the full cycle, with the land acquisitions we are approving today largely expected to impact deliveries in the next 24 to 48 months.
In our homebuilding operating divisions withinoperations, we either directly, or indirectly through our existing segments based on geographic location and management's long term strategic plans. Assubcontractors, purchase the significant materials necessary to construct a result, all historical periods presented in the segment information have been reclassified to give effect to this segment realignment.
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 developmenthome such as drywall, cement, steel, lumber, insulation and the construction costsother building materials. While these materials are generally widely available from a variety of the homessources, from time to time we sell.
Our Mortgage Operations reportable segment provides 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% 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 result of the storms, we estimate that 130 home closings were pushed out of the third quarter of 2017, reducing our homebuilding revenueexperience material shortages on a period over period comparative basis.
Actual storm remediation costs incurred inlocalized basis which can substantially increase 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 onprice for such materials and labor, as these resources become constrained, which will add to our construction inventory costs.process can be slowed.
Third Quarter 2017 Highlights:
As of September 30, 2022, we employed approximately 3,000 full-time equivalent persons. Of these, approximately 2,550 were engaged in corporate and homebuilding operations, and the remaining approximately 450 were engaged in financial services.
Key financial results as
Factors Affecting Comparability of and forResults
For the three and nine months ended September 30, 2017, as compared2022, we recognized a $0.8 million and $14.5 million gain on land transfers relating to our unconsolidated joint ventures, respectively, which is included in Other expense/(income), net on the same periodunaudited Condensed Consolidated Statements of Operations. In addition, for the three and nine months ended September 30, 2022, we recognized a $71 thousand and $13.5 million net gain on extinguishment of debt relating to our partial redemption of our 6.625% Senior Notes due 2027 which is included in 2016,Gain on extinguishment of debt, net on our unaudited Condensed Consolidated Statements of Operations. We did not incur such costs for the three or nine months ended September 30, 2021.
Third Quarter 2022 Highlights (all comparisons are as follows:
Home closings were 1,842, a 6% increase fromof the current quarter to the prior year quarter, unless otherwise indicated):
Total•Home closings revenue was $908 million, a 6% increase from the prior year quarterincreased 12 percent to $2.0 billion.
GAAP home•Home closings gross margin inclusiveimproved 630 basis points to 27.5 percent.
•SG&A as a percentage of capitalized interest, was 18.6%home closings revenue improved 210 basis points to 7.4 percent.
Net income•Homebuilding lot supply increased three percent to approximately 80,000 owned and controlled homesites.
•Controlled lots as a percentage of total lot supply increased approximately 600 basis points to 42 percent.
•Repurchased 4.2 million shares outstanding for the quarter was $54 million with diluted earnings per share$105 million.
•Return on equity improved 1,300 basis points to 25.8 percent.
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
Results of Operations
The following table sets forth our results of operations for the periods presented:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
(Dollars in thousands) | | 2022 | | 2021 | | 2022 | | 2021 |
Statements of Operations Data: | | | | | | | | |
Home closings revenue, net | | $ | 1,983,775 | | | $ | 1,772,495 | | | $ | 5,511,204 | | | $ | 4,780,304 | |
Land closings revenue | | 14,225 | | | 42,228 | | | 66,651 | | | 79,174 | |
Financial services revenue | | 27,749 | | | 38,046 | | | 98,419 | | | 119,503 | |
Amenity and other revenue | | 8,895 | | | 5,982 | | | 56,517 | | | 16,862 | |
Total revenue | | 2,034,644 | | | 1,858,751 | | | 5,732,791 | | | 4,995,843 | |
Cost of home closings | | 1,438,164 | | | 1,397,319 | | | 4,084,748 | | | 3,838,602 | |
Cost of land closings | | 11,571 | | | 36,439 | | | 50,139 | | | 68,604 | |
Financial services expenses | | 20,395 | | | 26,202 | | | 66,092 | | | 76,136 | |
Amenity and other expenses | | 6,574 | | | 6,341 | | | 39,264 | | | 16,907 | |
Gross margin | | 557,940 | | | 392,450 | | | 1,492,548 | | | 995,594 | |
Sales, commissions and other marketing costs | | 94,692 | | | 97,185 | | | 279,950 | | | 280,697 | |
General and administrative expenses | | 52,357 | | | 70,425 | | | 189,905 | | | 201,975 | |
Net loss/(income) from unconsolidated entities | | 1,180 | | | (1,482) | | | 2,986 | | | (9,269) | |
Interest expense, net | | 4,382 | | | 710 | | | 13,823 | | | 594 | |
Other expense/(income), net | | 5,751 | | | 47 | | | (4,720) | | | 1,067 | |
| | | | | | | | |
Gain on extinguishment of debt, net | | (71) | | | — | | | (13,542) | | | — | |
| | | | | | | | |
Income before income taxes | | 399,649 | | | 225,565 | | | 1,024,146 | | | 520,530 | |
Income tax provision | | 90,418 | | | 53,098 | | | 243,300 | | | 120,865 | |
| | | | | | | | |
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| | | | | | | | |
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| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Net income before allocation to non-controlling interests | | 309,231 | | | 172,467 | | | 780,846 | | | 399,665 | |
Net loss/(income) attributable to non-controlling interests — joint ventures | | 548 | | | (4,333) | | | (3,377) | | | (9,363) | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Net income available to Taylor Morrison Home Corporation | | $ | 309,779 | | | $ | 168,134 | | | $ | 777,469 | | | $ | 390,302 | |
Home closings gross margin | | 27.5 | % | | 21.2 | % | | 25.9 | % | | 19.7 | % |
| | | | | | | | |
Sales, commissions and other marketing costs as a percentage of home closings revenue, net | | 4.8 | % | | 5.5 | % | | 5.1 | % | | 5.9 | % |
General and administrative expenses as a percentage of home closings revenue, net | | 2.6 | % | | 4.0 | % | | 3.4 | % | | 4.2 | % |
| | | | | | | | |
Non-GAAP Measures
In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”), we have provided information in this quarterly report relating to: (i) adjusted net income and adjusted earnings per common share, (ii) adjusted income before income taxes and related margin, (iii) EBITDA and adjusted EBITDA and (iv) net homebuilding debt to capitalization ratio.
Adjusted net income, adjusted earnings per common share and adjusted income before income taxes and related margin are non-GAAP financial measures that reflect the net income/(loss) available to the Company excluding the impact of gains on land transfers and extinguishment of debt, net, and in the case of adjusted net income and adjusted earnings per common share, the tax impact due to such items. EBITDA and Adjusted EBITDA are non-GAAP financial measures that measure performance by adjusting net income before allocation to non-controlling interests to exclude interest expense/(income), net, amortization of capitalized interest, income taxes, depreciation and amortization (EBITDA), non-cash compensation expense, if any, gains on land transfers and extinguishment of debt, net. Net homebuilding debt to capitalization ratio is a non-GAAP financial measure we calculate by dividing (i) total debt, plus unamortized debt issuance cost/(premium), net, and less mortgage warehouse borrowings, net of unrestricted cash and cash equivalents, by (ii) total capitalization (the sum of net homebuilding debt and total stockholders’ equity).
Management uses these non-GAAP financial measures to evaluate our performance on a consolidated basis, as well as the performance of our regions, and to set targets for performance-based compensation. We also use the ratio of net homebuilding
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| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2017 | | Nine Months Ended September 30, 2017 |
(Dollars in thousands) | | 2017 | | 2016 | | 2017 | | 2016 |
Statements of Operations Data: | | | | | | | | |
Home closings revenue, net | | $ | 886,249 |
| | $ | 812,185 |
| | $ | 2,526,830 |
| | $ | 2,271,154 |
|
Land closings revenue | | 4,299 |
| | 27,418 |
| | 11,419 |
| | 44,957 |
|
Mortgage operations revenue | | 17,479 |
| | 13,814 |
| | 47,362 |
| | 36,951 |
|
Total revenues | | 908,027 |
| | 853,417 |
| | 2,585,611 |
| | 2,353,062 |
|
Cost of home closings | | 721,637 |
| | 658,507 |
| | 2,062,437 |
| | 1,852,724 |
|
Cost of land closings | | 3,002 |
| | 8,179 |
| | 7,869 |
| | 20,497 |
|
Mortgage operations expenses | | 12,070 |
| | 7,877 |
| | 30,874 |
| | 22,594 |
|
Gross margin | | 171,318 |
| | 178,854 |
| | 484,431 |
| | 457,247 |
|
Sales, commissions and other marketing costs | | 61,476 |
| | 58,277 |
| | 178,609 |
| | 165,300 |
|
General and administrative expenses | | 33,374 |
| | 29,944 |
| | 100,396 |
| | 91,078 |
|
Equity in income of unconsolidated entities | | (2,787 | ) | | (1,646 | ) | | (6,943 | ) | | (4,734 | ) |
Interest income, net | | (135 | ) | | (47 | ) | | (314 | ) | | (149 | ) |
Other expense, net | | 415 |
| | 1,935 |
| | 828 |
| | 8,602 |
|
Income before income taxes | | 78,975 |
| | 90,391 |
| | 211,855 |
| | 197,150 |
|
Income tax provision | | 24,282 |
| | 31,707 |
| | 65,631 |
| | 66,698 |
|
Net income before allocation to non-controlling interests | | 54,693 |
| | 58,684 |
| | 146,224 |
| | 130,452 |
|
Net income attributable to non-controlling interests – joint ventures | | (427 | ) | | (376 | ) | | (625 | ) | | (856 | ) |
Net income before non-controlling interests – Principal Equityholders | | 54,266 |
| | 58,308 |
| | 145,599 |
| | 129,596 |
|
Net income from continuing operations attributable to non-controlling interests – Principal Equityholders | | (21,390 | ) | | (43,471 | ) | | (76,810 | ) | | (96,261 | ) |
Net income available to Taylor Morrison Home Corporation | | $ | 32,876 |
| | $ | 14,837 |
| | $ | 68,789 |
| | $ | 33,335 |
|
Home closings gross margin | | 18.6 | % | | 18.9 | % | | 18.4 | % | | 18.4 | % |
Sales, commissions and other marketing costs as a percentage of home closings revenue | | 6.9 | % | | 7.2 | % | | 7.1 | % | | 7.3 | % |
General and administrative expenses as a percentage of home closings revenue | | 3.8 | % | | 3.7 | % | | 4.0 | % | | 4.0 | % |
Average sales price per home closed | | $ | 481 |
| | $ | 468 |
| | $ | 474 |
| | $ | 459 |
|
debt to total capitalization as an indicator of overall leverage and to evaluate our performance against other companies in the homebuilding industry. In the future, we may include additional adjustments in the above-described non-GAAP financial measures to the extent we deem them appropriate and useful to management and investors.
We believe that adjusted net income, adjusted earnings per common share, adjusted income before income taxes and related margin, as well as EBITDA and adjusted EBITDA, are useful for investors in order to allow them to evaluate our operations without the effects of various items we do not believe are characteristic of our ongoing operations or performance and also because such metrics assist both investors and management in analyzing and benchmarking the performance and value of our business. Adjusted EBITDA also provides an indicator of general economic performance that is not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization, or unusual items. Because we use the ratio of net homebuilding debt to total capitalization to evaluate our performance against other companies in the homebuilding industry, we believe this measure is also relevant and useful to investors for that reason.
These non-GAAP financial measures should be considered in addition to, rather than as a substitute for, the comparable U.S. GAAP financial measures of our operating performance or liquidity. Although other companies in the homebuilding industry may report similar information, their definitions may differ. We urge investors to understand the methods used by other companies to calculate similarly-titled non-GAAP financial measures before comparing their measures to ours. | | | | | | | | | | | | | | | | | | | | |
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Adjusted Net Income and Adjusted Earnings Per Common Share | | | | | | |
| | Three Months Ended September 30, | | | | | | |
(Dollars in thousands, except per share data) | | 2022 | | 2021 | | | | | | |
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Net income available to TMHC | | $ | 309,779 | | | $ | 168,134 | | | | | | | |
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Gain on land transfers | | (808) | | | — | | | | | | | |
Gain on extinguishment of debt, net | | (71) | | | — | | | | | | | |
Tax impact due to above non-GAAP reconciling items | | 205 | | | — | | | | | | | |
Adjusted net income | | $ | 309,105 | | | $ | 168,134 | | | | | | | |
| | | | | | | | | | |
Basic weighted average number of shares | | 112,701 | | | 124,378 | | | | | | | |
Adjusted earnings per common share - Basic | | $ | 2.74 | | | $ | 1.35 | | | | | | | |
| | | | | | | | | | |
Diluted weighted average number of shares | | 113,780 | | | 125,770 | | | | | | | |
Adjusted earnings per common share - Diluted | | $ | 2.72 | | | $ | 1.34 | | | | | | | |
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Adjusted Income Before Income Taxes and Related Margin |
| | Three Months Ended September 30, |
(Dollars in thousands) | | 2022 | | 2021 |
Income before income taxes | | $ | 399,649 | | | $ | 225,565 | |
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| | | | |
Gain on land transfers | | (808) | | | — | |
Gain on extinguishment of debt, net | | (71) | | | — | |
Adjusted income before income taxes | | $ | 398,770 | | | $ | 225,565 | |
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Total revenue | | $ | 2,034,644 | | | $ | 1,858,751 | |
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Income before income taxes margin | | 19.6 | % | | 12.1 | % |
Adjusted income before income taxes margin | | 19.6 | % | | 12.1 | % |
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EBITDA and Adjusted EBITDA Reconciliation |
| | Three Months Ended September 30, |
(Dollars in thousands) | | 2022 | | 2021 |
Net income before allocation to non-controlling interests | | $ | 309,231 | | | $ | 172,467 | |
Interest expense, net | | 4,382 | | | 710 | |
Amortization of capitalized interest | | 33,774 | | | 37,951 | |
Income tax provision | | 90,418 | | | 53,098 | |
Depreciation and amortization | | 1,484 | | | 2,164 | |
EBITDA | | $ | 439,289 | | | $ | 266,390 | |
Non-cash compensation expense | | 5,333 | | | 4,793 | |
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Gain on land transfers | | (808) | | | — | |
Gain on extinguishment of debt, net | | (71) | | | — | |
Adjusted EBITDA | | $ | 443,743 | | | $ | 271,183 | |
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Total revenue | | $ | 2,034,644 | | | $ | 1,858,751 | |
Net income before allocation to non-controlling interests as a percentage of total revenue | | 15.2 | % | | 9.3 | % |
EBITDA as a percentage of total revenue | | 21.6 | % | | 14.3 | % |
Adjusted EBITDA as a percentage of total revenue | | 21.8 | % | | 14.6 | % |
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Net Homebuilding Debt to Capitalization Ratio Reconciliation | | |
(Dollars in thousands) | As of September 30, 2022 | | As of June 30, 2022 | | As of September 30, 2021 |
Total debt | $ | 2,729,924 | | | $ | 2,950,744 | | | $ | 3,221,569 | |
Plus: unamortized debt issuance cost/(premium), net | 11,242 | | | 11,891 | | | (2,333) | |
Less: mortgage warehouse borrowings | (146,335) | | | (179,555) | | | (235,685) | |
Total homebuilding debt | $ | 2,594,831 | | | $ | 2,783,080 | | | $ | 2,983,551 | |
Less: cash and cash equivalents | (329,244) | | | (378,340) | | | (373,407) | |
Net homebuilding debt | $ | 2,265,587 | | | $ | 2,404,740 | | | $ | 2,610,144 | |
Total equity | 4,403,466 | | | 4,193,895 | | | 3,745,896 | |
Total capitalization | $ | 6,669,053 | | | $ | 6,598,635 | | | $ | 6,356,040 | |
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Net homebuilding debt to capitalization ratio | 34.0 | % | | 36.4 | % | | 41.1 | % |
Three and Nine Months Endednine months ended September 30, 2017 Compared2022 compared to Threethree and Nine Months Endednine months ended September 30, 20162021
Average Active Selling Communities
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| | | | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | 2016 | | Change |
East | | 130 |
| | 132 |
| | (1.5 | )% |
Central | | 118 |
| | 116 |
| | 1.7 |
|
West | | 45 |
| | 61 |
| | (26.2 | ) |
Total | | 293 |
| | 309 |
| | (5.2 | )% |
|
| | | | | | | | | |
| | 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 communitiesThe results for the three and nine months ended September 30, 20172022 and 2021 were impacted by various macro economic conditions. From the second half of 2020 through the first quarter of 2022, demand for housing increased nationwide. Subsequently, multiple increases in mortgage interest rates beginning in March 2022 have caused buyer apprehension and affordability concerns, resulting in an increase in cancellations. We believe these have impacted us throughout the year, however the multiple increases in interest rates by the Federal Reserve in recent months impacted our net sales orders and cancellations, for the three months ended September 30, 2022 in particular. The overall strong demand for housing in the prior year and first half of 2022 allowed us to utilize pricing strategies that mitigated increases in costs. The average sales price for 2022 net sales orders, backlog, and homes closed all increased compared to the prior year. We continue to experience market-wide supply chain disruptions, trade labor shortages, and high costs related to materials due to inflationary impacts. However, these supply chain delays and labor shortages have extended our build cycle times. To combat this, several markets have shifted to a strategy of selling spec homes, which allows the homes to be further along the cycle time before releasing them to be sold. Operational information related to each period is presented below:
Ending Active Selling Communities
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| | As of September 30, 2022 | | As of June 30, 2022 | | Change |
East | | 118 | | | 117 | | | 0.9 | % |
Central | | 105 | | | 104 | | | 1.0 | |
West | | 103 | | | 102 | | | 1.0 | |
Total | | 326 | | | 323 | | | 0.9 | % |
Net Sales Orders
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| | Three Months Ended September 30, |
| | Net Sales Orders (1) | | Sales Value (1) | | Average Selling Price |
(Dollars in thousands) | | 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
East | | 1,041 | | | 1,279 | | | (18.6) | % | | $ | 640,093 | | | $ | 742,449 | | | (13.8) | % | | $ | 615 | | | $ | 580 | | | 6.0 | % |
Central | | 450 | | 921 | | (51.1) | | | 267,681 | | | 577,477 | | | (53.6) | | | 595 | | | 627 | | | (5.1) | |
West | | 578 | | 1,172 | | (50.7) | | | 372,223 | | | 840,963 | | | (55.7) | | | 644 | | | 718 | | | (10.3) | |
Total | | 2,069 | | | 3,372 | | | (38.6) | % | | $ | 1,279,997 | | | $ | 2,160,889 | | | (40.8) | % | | $ | 619 | | | $ | 641 | | | (3.4) | % |
(1) Net sales orders and sales value represent the number and dollar value, respectively, of new sales contracts executed with customers, net of cancellations.
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| | Nine Months Ended September 30, |
| | Net Sales Orders (1) | | Sales Value (1) | | Average Selling Price |
(Dollars in thousands) | | 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
East | | 3,189 | | | 4,358 | | | (26.8) | % | | $ | 1,976,798 | | | $ | 2,334,431 | | | (15.3) | % | | $ | 620 | | | $ | 536 | | | 15.7 | % |
Central | | 1,979 | | | 2,843 | | | (30.4) | | | 1,294,106 | | | 1,661,934 | | | (22.1) | | | 654 | | | 585 | | | 11.8 | |
West | | 2,509 | | | 4,085 | | | (38.6) | | | 1,878,886 | | | 2,680,460 | | | (29.9) | | | 749 | | | 656 | | | 14.2 | |
Total | | 7,677 | | | 11,286 | | | (32.0) | % | | $ | 5,149,790 | | | $ | 6,676,825 | | | (22.9) | % | | $ | 671 | | | $ | 592 | | | 13.3 | % |
Net sales orders and sales value decreased by 5.2%38.6% and 5.1%40.8%, for the three months ended September 30, 2022, and 32.0% and 22.9%, for the nine months ended September 30, 2022, respectively, when compared to the same periods in the prior year. TheWe believe the decreases were primarily driven by our West region, whichthe result of the change in economic conditions and home buyer apprehensions due to rising mortgage interest rates and inflationary pressures. We experienced higher sales orders resulting inprice appreciation over recent quarters driving 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 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 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.
Net Sales Orders
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| | 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 | % |
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| | Nine 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 | | 2,923 |
| | 2,388 |
| | 22.4 | % | | $ | 1,132,839 |
| | $ | 919,861 |
| | 23.2 | % | | $ | 388 |
| | $ | 385 |
| | 0.8 | % |
Central | | 1,826 |
| | 1,599 |
| | 14.2 |
| | 864,797 |
| | 753,454 |
| | 14.8 |
| | 474 |
| | 471 |
| | 0.6 |
|
West | | 1,813 |
| | 1,816 |
| | (0.2 | ) | | 1,088,661 |
| | 1,012,717 |
| | 7.5 |
| | 600 |
| | 558 |
| | 7.5 |
|
Total | | 6,562 |
| | 5,803 |
| | 13.1 | % | | $ | 3,086,297 |
| | $ | 2,686,032 |
| | 14.9 | % | | $ | 470 |
| | $ | 463 |
| | 1.5 | % |
(1) Net sales orders represent the number and dollar value of new sales contracts executed with customers, net of cancellations.
East:
The number of net sales orders decreased by 2.3%, while the sales value of homes remained relatively flat, for the three months ended September 30, 2017 compared to the prior year. The decrease in units for the three months ended September 30, 2017 is
primarily driven by an interruption to the business in our Florida markets as a result of a hurricane that occurred during the period. The number of net sales orders and sales value of homes increased by 22.4% and 23.2%, respectively,price for the nine months ended September 30, 20172022 compared to the prior year period. Our marketssame period 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%, respectively, foryear. However, during the three months ended September 30, 20172022 we began offering pricing incentives or discounts in certain markets which caused the overall average selling price to decrease for the quarter compared to the prior year. The decrease in units and sales value for the three months ended September 30, 2017 is primarily driven by an interruption to the business in our Houston market as a result of a hurricane that occurred during the period. The 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 improvementsame quarter in the Houston market from the prior year's soft economic environment. Other markets within this region continue to strengthen their performance and contributed to the overall increase in units and dollars for the segment as well.
West:
The average selling price increased by 10.9% and 7.5%, respectively, for 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 sales orders and sales value of homes decreased by 23.5% and 15.1%, respectively, for the three months ended September 30, 2017 compared to the prior year which is in line with expectations, considering the increased focus on turn times and as result of the increase in the number close outs which limited our product availability. The value 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.
Sales Order Cancellations
| | | | | | | | | | | | Cancellation Rate(1) |
| | Cancellation Rate(1)
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | |
| | 2017 | | 2016 | | 2017 | | 2016 | | 2022 | | 2021 | | 2022 | | 2021 |
East | | 11.8 | % | | 13.5 | % | | 10.1 | % | | 12.2 | % | East | 9.2 | % | | 5.6 | % | | 7.3 | % | | 5.5 | % |
Central | | 14.4 |
| | 12.8 |
| | 12.2 |
| | 15.4 |
| Central | 22.5 | % | | 7.5 | % | | 12.8 | % | | 6.7 | % |
West | | 11.1 |
| | 15.1 |
| | 11.6 |
| | 13.2 |
| West | 20.2 | % | | 7.4 | % | | 12.7 | % | | 6.4 | % |
Total Company | | 12.4 | % | | 13.7 | % | | 11.1 | % | | 13.4 | % | Total Company | 15.6 | % | | 6.7 | % | | 10.6 | % | | 6.1 | % |
(1) Cancellation rate represents the number of canceled sales orders divided by gross sales orders.
Favorable market conditions coupled withThe total company cancellation rate increased demand for new housing has led to lower cancellation rates across all of our regions for the three and nine months ended September 30, 2017.2022 compared to the same periods in the prior year. This increase in cancellations is due to increases in mortgage interest rates, buyer apprehensions, and other macro economic conditions such as inflation.
Sales Order Backlog
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of September 30, |
| | Sold Homes in Backlog (1) | | Sales Value | | Average Selling Price |
(Dollars in thousands) | | 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
East | | 3,256 | | | 3,729 | | | (12.7) | % | | $ | 2,121,673 | | | $ | 2,090,661 | | | 1.5 | % | | $ | 652 | | | $ | 561 | | | 16.2 | % |
Central | | 2,489 | | | 2,995 | | | (16.9) | | | 1,694,111 | | | 1,760,401 | | | (3.8) | | | 681 | | | 588 | | | 15.8 | |
West | | 2,196 | | | 3,549 | | | (38.1) | | | 1,579,937 | | | 2,272,904 | | | (30.5) | | | 719 | | | 640 | | | 12.3 | |
Total | | 7,941 | | | 10,273 | | | (22.7) | % | | $ | 5,395,721 | | | $ | 6,123,966 | | | (11.9) | % | | $ | 679 | | | $ | 596 | | | 13.9 | % |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of September 30, |
| | Sold Homes in Backlog (1) | | Sales Value | | Average Selling Price |
(Dollars in thousands) | | 2017 | | 2016 | | Change | | 2017 | | 2016 | | Change | | 2017 | | 2016 | | Change |
East | | 1,905 |
| | 1,478 |
| | 28.9 | % | | $ | 774,001 |
| | $ | 608,840 |
| | 27.1 | % | | $ | 406 |
| | $ | 412 |
| | (1.5 | )% |
Central | | 1,272 |
| | 1,202 |
| | 5.8 |
| | 653,415 |
| | 612,840 |
| | 6.6 |
| | 514 |
| | 510 |
| | 0.8 |
|
West | | 1,182 |
| | 1,175 |
| | 0.6 |
| | 697,790 |
| | 650,197 |
| | 7.3 |
| | 590 |
| | 553 |
| | 6.7 |
|
Total | | 4,359 |
| | 3,855 |
| | 13.1 | % | | $ | 2,125,206 |
| | $ | 1,871,877 |
| | 13.5 | % | | $ | 488 |
| | $ | 486 |
| | 0.4 | % |
(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 sold homes in backlog units and total sales value increaseddecreased by 13.1%22.7% and 13.5%11.9% at September 30, 2017 compared to2022 and September 30, 2016,2021, respectively. The decrease in sold homes in backlog is primarily the result of a decrease in net sales as well as an increase in cancellations. Despite a lower number of sold homes in backlog units and total sales value, is primarilythe average selling price of homes in backlog increased by 13.9% as a result of sales price appreciation over the combinationpast several quarters.
Home Closings Revenue
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | Homes Closed | | Home Closings Revenue, Net | | Average Selling Price |
(Dollars in thousands) | | 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
East | | 1,118 | | | 1,167 | | | (4.2) | % | | $ | 638,270 | | | $ | 554,995 | | | 15.0 | % | | $ | 571 | | | $ | 476 | | | 20.0 | % |
Central | | 835 | | | 764 | | | 9.3 | | | 522,247 | | | 398,762 | | | 31.0 | | | 625 | | | 522 | | | 19.7 | |
West | | 1,097 | | | 1,396 | | | (21.4) | | | 823,258 | | | 818,738 | | | 0.6 | | | 750 | | | 586 | | | 28.0 | |
Total | | 3,050 | | | 3,327 | | | (8.3) | % | | $ | 1,983,775 | | | $ | 1,772,495 | | | 11.9 | % | | $ | 650 | | | $ | 533 | | | 22.0 | % |
| | | | Three Months Ended September 30, | | | Nine Months Ended September 30, |
| | 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 | (Dollars in thousands) | | 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
East | | 776 |
| | 677 |
| | 14.6 | % | | $ | 311,526 |
| | $ | 273,928 |
| | 13.7 | % | | $ | 401 |
| | $ | 405 |
| | (1.0 | )% | East | | 3,152 | | | 3,464 | | | (9.0) | % | | $ | 1,757,444 | | | $ | 1,564,206 | | | 12.4 | % | | $ | 558 | | | $ | 452 | | | 23.5 | % |
Central | | 531 |
| | 548 |
| | (3.1 | ) | | 253,556 |
| | 263,852 |
| | (3.9 | ) | | 478 |
| | 481 |
| | (0.6 | ) | Central | | 2,277 | | | 2,246 | | | 1.4 | | | 1,347,828 | | | 1,101,681 | | | 22.3 | | | 592 | | | 491 | | | 20.6 | |
West | | 535 |
| | 512 |
| | 4.5 |
| | 321,167 |
| | 274,405 |
| | 17.0 |
| | 600 |
| | 536 |
| | 11.9 |
| West | | 3,421 | | | 3,706 | | | (7.7) | | | 2,405,932 | | | 2,114,417 | | | 13.8 | | | 703 | | | 571 | | | 23.1 | |
Total | | 1,842 |
| | 1,737 |
| | 6.0 | % | | $ | 886,249 |
| | $ | 812,185 |
| | 9.1 | % | | $ | 481 |
| | $ | 468 |
| | 2.8 | % | Total | | 8,850 | | | 9,416 | | | (6.0) | % | | $ | 5,511,204 | | | $ | 4,780,304 | | | 15.3 | % | | $ | 623 | | | $ | 508 | | | 22.6 | % |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 increaseddecreased by 14.6%8.3% and 19.4%6.0%, respectively, for the three and nine months ended September 30, 2017 compared to the prior year. Home2022, respectively, while home closings revenue, net increased by 13.7%11.9% and 23.4%15.3%, respectively, for the same comparative periods. Our Florida markets were the primary drivers for both units and dollars as a result of increased net sales during the first half of the year. In addition, other divisions in the East region continued to gain momentum in the number of homes closed for the nine months ended September 30, 2017, 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, and2022, respectively, compared to the same periods in the prior year. The decrease in the number of homes closed is primarily due to an increase in cancellations in the current year periods compared to the prior year periods. The increase in home closingclosings revenue, net increased by 17.0% and 14.0%, respectively, for the same comparative periods. The increases are primarily driven by strong sales in our Phoenix division and markets within Northern California which continue to experience strong consumer demand asis a result of increased job growth in those areas.sales price appreciation which caused average selling prices to increase by 22.0% and 22.6% for the three and nine months ended September 30, 2022, respectively.
Land Closings Revenue
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
(Dollars in thousands) | | 2022 | | 2021 | | Change |
East | | $ | 5,732 | | | $ | 11,987 | | | $ | (6,255) | |
Central | | 599 | | | 3,186 | | | (2,587) | |
West | | 7,894 | | | 27,055 | | | (19,161) | |
Total | | $ | 14,225 | | | $ | 42,228 | | | $ | (28,003) | |
| | | | Three Months Ended September 30, | | | Nine Months Ended September 30, |
(Dollars in thousands)
| | 2017 | | 2016 | | Change | (Dollars in thousands) | | 2022 | | 2021 | | Change |
East | | $ | 1,013 |
| | $ | 14,711 |
| | $ | (13,698 | ) | East | | $ | 36,482 | | | $ | 27,643 | | | $ | 8,839 | |
Central | | 3,286 |
| | 9,243 |
| | (5,957 | ) | Central | | 3,265 | | | 8,718 | | | (5,453) | |
West | | — |
| | 3,464 |
| | (3,464 | ) | West | | 26,904 | | | 42,813 | | | (15,909) | |
Total | | $ | 4,299 |
| | $ | 27,418 |
| | $ | (23,119 | ) | Total | | $ | 66,651 | | | $ | 79,174 | | | $ | (12,523) | |
|
| | | | | | | | | | | | |
| | 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 and our land management strategy. The land closings revenue in the East for the
market opportunities. Thenine months ended September 30, 2022 was due to the sale of certain commercial assets as well as the sale of residential lots in our Florida market. In the prior year, period included salesthe land closings revenue in the West for the three months ended September 30, 2021 was due to the sale of legacy 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 resultingprojects in our significantOregon market while the land sales in the prior year.
Segment Home Closings Gross Margin
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | East | | Central | | West | | Consolidated |
(Dollars in thousands) | | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
Home closings revenue, net | | $ | 311,526 |
| | $ | 273,928 |
| | $ | 253,556 |
| | $ | 263,852 |
| | $ | 321,167 |
| | $ | 274,405 |
| | $ | 886,249 |
| | $ | 812,185 |
|
Cost of home closings | | 248,455 |
| | 216,049 |
| | 206,939 |
| | 217,526 |
| | 266,243 |
| | 224,932 |
| | 721,637 |
| | 658,507 |
|
Home closings gross margin | | 63,071 |
| | 57,879 |
| | 46,617 |
| | 46,326 |
| | 54,924 |
| | 49,473 |
| | 164,612 |
| | 153,678 |
|
Home closings gross margin % | | 20.2 | % | | 21.1 | % | | 18.4 | % | | 17.6 | % | | 17.1 | % | | 18.0 | % | | 18.6 | % | | 18.9 | % |
| | | | | | | | | | | | | | | | |
| | 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 flatrevenue for the nine months ended September 30, 2017 compared2021 also includes project sales in our Washington and Arizona markets.
Amenity and Other Revenue
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
(Dollars in thousands) | | 2022 | | 2021 | | Change |
East | | $ | 5,056 | | | $ | 4,897 | | | $ | 159 | |
Central | | — | | | — | | | — | |
West | | 257 | | | 289 | | | (32) | |
Corporate | | 3,582 | | | 796 | | | 2,786 | |
Total | | $ | 8,895 | | | $ | 5,982 | | | $ | 2,913 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| | Nine Months Ended September 30, |
(Dollars in thousands) | | 2022 | | 2021 | | Change |
East | | $ | 16,115 | | | $ | 14,754 | | | $ | 1,361 | |
Central | | — | | | — | | | — | |
West | | 1,057 | | | 1,021 | | | 36 | |
Corporate | | 39,345 | | | 1,087 | | | 38,258 | |
Total | | $ | 56,517 | | | $ | 16,862 | | | $ | 39,655 | |
Several of our communities operate amenities such as golf courses, club houses, and fitness centers. We provide club members access to the same periodamenity facilities and other services in 2016exchange for club dues and decreasedfees. Our Corporate region also includes the activity relating to 20.2% from 21.1%our Build-To-Rent and Urban Form operations. The increase in amenity and other revenue in Corporate for the nine months ended September 30, 2022 is due to the sale of an asset relating to our Urban Form operations.
Home Closings Gross Margin | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | East | | Central | | West | | Consolidated |
(Dollars in thousands) | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
Home closings revenue, net | | $ | 638,270 | | | $ | 554,995 | | | $ | 522,247 | | | $ | 398,762 | | | $ | 823,258 | | | $ | 818,738 | | | $ | 1,983,775 | | | $ | 1,772,495 | |
Cost of home closings | | 460,137 | | | 428,908 | | | 381,181 | | | 320,783 | | | 596,846 | | | 647,628 | | | 1,438,164 | | | 1,397,319 | |
Home closings gross margin | | $ | 178,133 | | | $ | 126,087 | | | $ | 141,066 | | | $ | 77,979 | | | $ | 226,412 | | | $ | 171,110 | | | $ | 545,611 | | | $ | 375,176 | |
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| | | | | | | | | | | | | | | | |
Home closings gross margin % | | 27.9 | % | | 22.7 | % | | 27.0 | % | | 19.6 | % | | 27.5 | % | | 20.9 | % | | 27.5 | % | | 21.2 | % |
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| | Nine Months Ended September 30, |
| | East | | Central | | West | | Consolidated |
(Dollars in thousands) | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
Home closings revenue, net | | $ | 1,757,444 | | | $ | 1,564,206 | | | $ | 1,347,828 | | | $ | 1,101,681 | | | $ | 2,405,932 | | | $ | 2,114,417 | | | $ | 5,511,204 | | | $ | 4,780,304 | |
Cost of home closings | | 1,287,670 | | | 1,238,056 | | | 1,016,006 | | | 888,162 | | | 1,781,072 | | | 1,712,384 | | | 4,084,748 | | | 3,838,602 | |
Home closings gross margin | | $ | 469,774 | | | $ | 326,150 | | | $ | 331,822 | | | $ | 213,519 | | | $ | 624,860 | | | $ | 402,033 | | | $ | 1,426,456 | | | $ | 941,702 | |
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| | | | | | | | | | | | | | | | |
Home closings gross margin % | | 26.7 | % | | 20.9 | % | | 24.6 | % | | 19.4 | % | | 26.0 | % | | 19.0 | % | | 25.9 | % | | 19.7 | % |
| | | | | | | | | | | | | | | | |
Home closings gross margin increased 630 basis points to 27.5% for the three months ended September 30, 2017 and 2016. The primary driver for these decreases is due2022, compared to increased land and development costs in several of our divisions21.2% in the East region.
Central:
Home closings gross margin percentage increasedprior year period and 620 basis points to 18.4% from 17.6% for the three months ended September 30, 2017 and 2016, respectively, and to 18.1% from 17.7%25.9% for the nine months ended September 30, 2017 and 2016, respectively.2022, compared to 19.7% in the prior year period. The increase is primarily due to geographical mix within the region.
West:
Home closings gross margin percentage decreased to 17.1% from 18.0%increases for both the three months ended September 30, 2017 and 2016 respectively, and to 16.3% from 17.1%, for the nine months ended September 30, 20172022 is a reflection of pricing power in excess of inflationary cost pressure, operational enhancements, and 2016, respectively. The decrease is primarily dueacquisition synergies. In addition, we strategically metered sales releases to product mixbetter manage supply chain and an increaselabor constraints in land and development coststhe earlier part of the homes closed in 2017 compared to those closed in 2016.2022.
Mortgage OperationsFinancial Services
Our Mortgage Operations 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 loansis a summary for the following periods:periods presented of our financial services income before income taxes as well as supplemental data:
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| | | | | | | | | | | | | | | | |
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, |
(Dollars in thousands) | | | | | | 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
Financial services revenue | | | | | | $ | 18,291 | | | $ | 29,721 | | | (38.5) | % | | $ | 71,792 | | | $ | 96,756 | | | (25.8) | % |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Title services and other revenue | | | | | | 9,458 | | | 8,325 | | | 13.6 | | | 26,627 | | | 22,747 | | | 17.1 | |
Total financial services revenue | | | | | | 27,749 | | | 38,046 | | | (27.1) | % | | 98,419 | | | 119,503 | | | (17.6) | % |
Financial services net income from unconsolidated entities | | | | | | 546 | | | 1,354 | | | (59.7) | | | 4,799 | | | 7,225 | | | (33.6) | |
Total revenue | | | | | | 28,295 | | | 39,400 | | | (28.2) | | | 103,218 | | | 126,728 | | | (18.6) | |
Financial services expenses | | | | | | 20,395 | | | 26,202 | | | (22.2) | | | 66,092 | | | 76,136 | | | (13.2) | |
| | | | | | | | | | | | | | | | |
Financial services income before income taxes | | | | | | $ | 7,900 | | | $ | 13,198 | | | (40.1) | % | | $ | 37,126 | | | $ | 50,592 | | | (26.6) | % |
| | | | | | | | | | | | | | | | |
Total originations: | | | | | | | | | | | | | | | | |
Number of Loans | | | | | | 1,551 | | | 2,254 | | | (31.2) | % | | 4,728 | | | 6,718 | | | (29.6) | % |
Principal | | | | | | $ | 701,323 | | | $ | 900,404 | | | (22.1) | % | | $ | 2,108,122 | | | $ | 2,621,103 | | | (19.6) | % |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
Supplemental data: | | | | | | | | |
Average FICO score | | 752 | | | 752 | | | 753 | | | 751 | |
Funded origination breakdown: | | | | | | | | |
Government (FHA,VA,USDA) | | 18 | % | | 17 | % | | 17 | % | | 18 | % |
Other agency | | 75 | % | | 79 | % | | 77 | % | | 79 | % |
Total agency | | 93 | % | | 96 | % | | 94 | % | | 97 | % |
Non-agency | | 7 | % | | 4 | % | | 6 | % | | 3 | % |
Total funded originations | | 100 | % | | 100 | % | | 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 increasedTotal financial services revenue decreased by 27.1% and 17.6% for both the three and nine months ended September 30, 20172022 compared to the same periods in the prior year, primarily due to the increaserespectively. The decrease in the average loan amount which istotal financial services revenue was a result of lower home mortgage originations and lower home closings during the increase in average selling priceperiods.
Our mortgage capture rate represents the percentage of our homes sold 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 competition for new home mortgages.
Sales, Commissions and Other Marketing Costs
Sales, commissions and other marketing costs, as a percentage of home closings revenue, net, decreased to 6.9%4.8% from 7.2%5.5%, and to 7.1%5.1% from 7.3% respectively,5.9% for the three and nine months ended September 30, 20172022, respectively, compared to the same periods in 2016. This decrease is primarily a result of efficient marketing and advertising. In addition, the prior year period had higheryear. The decrease was primarily driven by leverage in controllable sales and marketing costs as a result of our acquired divisions and an increase in new communities which typically have incremental startup costs during their early stages.costs.
General and Administrative Expenses
General and administrative expenses as a percentage of home closings revenue, net, remained relatively flatdecreased to 2.6% from 4.0% and to 3.4% from 4.2% for the three and nine months ended September 30, 2017,2022, respectively, compared to the same periods in the prior year. We continueThe decrease was primarily due to utilize our scalable platform, providing leveragethe increase in home closings revenue, along with existing infrastructuredecreases in an effort to maintain stable operating costs.general and administrative expenses.
Equity in Income ofNet Loss/(Income) from Unconsolidated Entities
Equity in income ofWe had a net loss from unconsolidated entities was $2.8of $1.2 million and $1.6net income from unconsolidated entities of $1.5 million for the three months ended September 30, 20172022 and 2016, respectively,2021, respectively. We also had a net loss of $3.0 million and $6.9net income of $9.3 million for the nine months ended September 30, 2022 and 2021, respectively. Net loss/(income) generated from unconsolidated entities is dependent on the number of joint venture investments and the stage of our investment. We recently made several new investments in unconsolidated joint ventures which have yet to yield returns.
Other Expense/(Income), Net
Other expense, net was $5.8 million for the three months ended September 30, 2022 and other income, net was $4.7 million for the nine months ended September 30, 20172022. Other expense, net was $47.0 thousand and 2016,$1.1 million for the same periods in the prior year, respectively. The increase isFor the three months ended September 30, 2022, other expense was primarily duerelated to our increasethe write-off of pre-acquisition costs during the period, and for the nine months ended September 30, 2022 other income was primarily related to $14.5 million in active unconsolidated joint ventures. We had six active unconsolidatedgains on land transferred at fair value as part of investments in two new joint ventures with third parties. The gain on land transferred represents the difference between the fair value and carrying value of the land at September 30, 2017 compared to five active unconsolidated joint ventures at September 30, 2016.the time of transfer.
Interest Income,Gain on Extinguishment of Debt, Net
Interest income,
Gain on extinguishment of debt, net was $135 thousand and $47$71 thousand for the three months ended September 30, 20172022 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, Net
Other expense, net was $0.4 million and $1.9 million, for the three months ended September 30, 2017 and 2016, respectively, and $0.8 million and $8.613.5 million for the nine months ended September 30, 20172022. This gain is due to the Tender Offer and 2016, respectively. The threepurchase of our 6.625% Senior Notes due 2027 which was primarily executed in June 2022 and nine months ended September 30, 2016 included higher accruals for contingent consideration relating to our acquisitions during 2016, earn out accruals for our previous Darling Homes acquisition, and pre-acquisition costs on abandoned land projects.finalized in July 2022.
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, 20172022 was favorably impacted by discrete22.6% and 23.8%, compared to 23.5% and 23.2%, respectively, for the same periods in the prior year. For both the three and nine months ended September 30, 2022 and September 30, 2021 the effective tax adjustmentsrate differed from the U.S. federal statutory income tax rate primarily due to state income taxes, non-deductible executive compensation, excess tax benefits related to certain deferred tax assetsstock-based compensation and liabilitiesspecial deductions and federal energy tax credits earned from building energy efficient homes, which were recorded in the current period but are associated with homes closed priorrelating to 2017.homebuilding activities.
Net Income
Net income before allocation to Principal Equityholders and diluted earnings per share for the three months ended September 30, 20172022 was $54.3$309.8 million and $0.45,$2.72, respectively. Net income before allocation to Principal Equityholders and diluted earnings per share for the three months ended September 30, 20162021 was $58.3$168.1 million and $0.49,$1.34, respectively. The decreaseincreases in net income and diluted earnings per share from the prior year iswere primarily attributable to lowerhigher home closing revenue, net and higher gross margin due to higher costs of goods sold as well as lower land sale gross margin during the three months ended September 30, 2017. However, these decreases in gross margin were partially offset by a lower effective tax rate for the three months ended September 30, 2017 compared to the same period in the prior year.dollars.
Liquidity and Capital Resources
Liquidity
We finance our operations through the following:
•Cash generated from operations;
•Borrowings under our Revolving Credit Facility (as defined below);Facilities;
•Our various series of Senior Notes (as defined below);Notes;
•Mortgage warehouse facilities;
•Project-level real estate financing (including non-recourse loans)loans, land banking, and joint ventures); and
•Performance, payment and completion surety bonds, and letters of credit; andcredit.
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 months ended September 30, 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 months ended September 30, 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. 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.
On September 28, 2022, we announced that our indirect wholly owned subsidiary, Taylor Morrison Communities, Inc. issued a notice of full redemption for the entire outstanding principal amount of the 5.875% Senior Notes due 2023 (the “2023 Notes”). The full notice of redemption states that the entire outstanding principal amount of the 2023 Notes will be redeemed on October 31, 2022 at a redemption price equal to 100.000% of the aggregate principal amount of the 2023 Notes to be redeemed plus the applicable premium (as defined in the indenture governing the 2023 Notes) and accrued and unpaid interest through the redemption date.
The table below summarizes our total cash and liquidity as of the dates indicated (in thousands):
| | | | | | | | | | | | | | |
| | As of |
(Dollars in thousands) | | September 30, 2022 | | December 31, 2021 |
Total cash, excluding restricted cash | | $ | 329,244 | | | $ | 832,821 | |
$1 Billion Revolving Credit Facility | | 1,000,000 | | | 800,000 | |
$100 Million Revolving Credit Facility | | 100,000 | | | 100,000 | |
Letters of credit outstanding | | (61,242) | | | (58,738) | |
$1 Billion Revolving Credit Facility borrowings outstanding | | — | | | — | |
$100 Million Revolving Credit Facility borrowings outstanding | | — | | | (31,529) | |
Revolving Credit Facilities availability | | 1,038,758 | | | 809,733 | |
Total liquidity | | $ | 1,368,002 | | | $ | 1,642,554 | |
|
| | | | | | | | |
| | As of |
(Dollars in thousands) | | September 30, 2017 | | December 31, 2016 |
Total Cash, excluding Restricted Cash | | $ | 264,862 |
| | $ | 300,179 |
|
| | | | |
Total Revolving Credit Facility | | 500,000 |
| | 500,000 |
|
Letters of Credit Outstanding | | (33,158 | ) | | (31,903 | ) |
Revolving Credit Facility Borrowings Outstanding | | — |
| | — |
|
Revolving Credit Facility Availability | | 466,842 |
| | 468,097 |
|
| | | | |
Total Liquidity | | $ | 731,704 |
| | $ | 768,276 |
|
We believe we have adequate capital resources from cash generated from operations and sufficient access to external financing sources from borrowings under our Revolving Credit Facilities to conduct our operations for the next twelve months, including the redemption of our 2023 Notes mentioned above. Beyond the next twelve months, our primary demand for funds will be for payments of our long-term debt as it becomes due, land purchases, lot development, home and amenity construction, long-term capital investments, investments in our joint ventures, and repurchases of common stock. We believe we will generate sufficient cash from our operations to meet the demands for such payments, however we may also access the capital markets to obtain additional liquidity through debt and equity offerings or refinance debt to secure capital for such long-term demands.
Cash Flow Activities
Operating Cash Flow Activities
Our net cash provided by operating activities was $132.8$460.0 million for the nine months ended September 30, 20172022, compared to $142.4$103.5 million provided byof cash used in operating activities for the nine months ended September 30, 2016.2021. The primary driver of the decreaseyear-over-year increase in cash provided by operating activities is primarily driven by an increase in the current period is increased spending onnet income and a decrease in mortgage loans held for sale as a result of fewer home mortgage originations. These increases were partially offset by a decrease in accounts payable, accrued expenses and other liabilities; an increase in real estate inventory and land deposits, partially offset by an increase in the number of homes closed, resulting in higher net incomedeposits; and an increase in customer deposits as a result of higher sales volume.deposits.
Investing Cash Flow Activities
Net cash used in investing activities was $26.5$18.8 million for the nine months ended September 30, 2017, as2022, compared to net$43.3 million of cash used in investing activities of $74.7 million for the nine months ended September 30, 2016.2021. The primary driver ofdecrease in cash used in investing activities was primarily due to an increase in capital distributions from unconsolidated entities, partially offset by increased investments in new unconsolidated entities during the change between periods was the 2016 acquisition of Acadia Homes for $52.8 million.period.
Financing Cash Flow Activities
Net cash used in financing activities was $141.9$947.7 million for the nine months ended September 30, 2017, as2022, compared to net cash used in financing activities of $33.3$12.3 million for the nine months ended September 30, 2016.2021. The increase in cash used in financing activities in 2017 and 2016 was primarily attributabledue to repayments on thesenior notes, Revolving Credit Facilities, and mortgage warehouse lines exceeding borrowings stemming from the seasonal decline in mortgage receivables, offset by net borrowings on the Revolving Credit Facility in the prior year. Asfacilities as well as repurchases of September 30, 2017, we did not have any borrowings outstanding under our Revolving Credit Facility.common stock.
Debt Instruments
Senior Notes:
The following table summarizesFor information regarding our outstanding senior unsecured notes (collectively,debt instruments, including the “Senior Notes”) as of September 30, 2017.
|
| | | | | | | | | | | | | | | | | | | | |
(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, 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 2021terms governing our 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 Credit Facilities, see Note 7 - Debtto 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.
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 $500.0 millionRevolving Credit Facility matures on April 12, 2019. 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 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, beUnaudited Condensed Consolidated Financial Statements 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.this quarterly report.
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, 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 |
Facility | | Amount Drawn | | Facility Amount | | Interest Rate | | Expiration Date | | Collateral (1) |
Flagstar | | $ | 2,703 |
| | $ | 20,000 |
| | LIBOR + 2.5% | | 30 days written notice | | Mortgage Loans |
Comerica | | 23,290 |
| | 50,000 |
| | LIBOR + 2.25% | | November 16, 2017 (2) | | Mortgage Loans |
J.P. Morgan | | 35,299 |
| | 100,000 |
| | LIBOR + 2.375% | | September 26, 2018 | | Mortgage Loans and Pledged Cash |
Total | | $ | 61,292 |
|
| $ | 170,000 |
| | | | | | |
(1) The mortgage warehouse borrowings outstanding as of September 30, 2017 and December 31, 2016 were collateralized by a) $107.7 million and $233.2 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.
(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 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 and December 31, 2016. 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 |
(Dollars in thousands) | | September 30, 2017 | | December 31, 2016 |
Letters of credit (1) | | $ | 33,158 |
| | $ | 31,903 |
|
Surety bonds | | 284,617 |
| | 270,943 |
|
Total outstanding letters of credit and surety bonds | | $ | 317,775 |
| | $ | 302,846 |
|
(1)As of September 30, 2017 and December 31, 2016, there was $200 million total capacity of letters of credit available under our Revolving Credit Facility.
Off-Balance Sheet Arrangements as of September 30, 20172022
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 ofOur participation with 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. For example, in April 2022, we established a joint venture with Värde Partners (“Värde”), a leading global alternative investment firm, to develop rental properties as a part of our Build-To-Rent program. The venture includes $850 million in equity commitments, funded 60 percent by Värde and 40 percent by the Company. The venture provides Värde with the exclusive opportunity to invest in the acquisition and development of Build-To-Rent projects identified by the Company that meet the venture's investment guidelines.
In certain of our unconsolidated joint ventures, wethe joint ventures enter into loan agreements, whereby we or one of our subsidiaries will provide the joint venture lenders with customary guarantees, including completion, indemnity and environmental guarantees subject to usual non-recourse terms.
For the nine months ended, September 30, 2017,2022 and 2021, total net capital invested incash contributions to unconsolidated joint ventures was $28.9 million.were $91.8 million and $31.8 million, respectively.
Land Purchase and Land Option Contracts and Land Banking Agreements
We enterare subject to the usual obligations associated with entering into contracts (including land option contracts and land banking arrangements) for the purchase, development, and sale of real estate in our routine business. We have a number of land purchase and option contracts and land banking agreements, generally through cash deposits, for the right to procurepurchase land or lots forat a future point in time with predetermined terms. We do not have title to the constructionproperty and the creditors of homes in the ordinary course of business. Lot option contracts enable usproperty owner generally have no recourse 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, we had outstanding land purchase and lot option contracts of $520.8 million. We are obligated to close the transaction under our land purchase contracts. However, ourCompany. Our obligations with respect to the optionsuch 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, we had non-refundable deposits totaling $50.9 million.2022 and December 31, 2021, the aggregate purchase price for land under these contracts was $1.5 billion and $1.3 billion, respectively.
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 and Estimates
There have been no significant changes to our critical accounting policies and estimates during the nine months ended September 30, 2017 as2022 compared to those we disclosed in Management’sManagement'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, 2017,2022, approximately 96%95% of our debt was fixed rate and 4%5% 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, 2017,2022, we had no outstanding borrowings under our $1 Billion Revolving Credit Facility or our $100 Million Revolving Credit Facility. We had $466.8 million$1.0 billion of additional availability for borrowings and $166.8under the Credit Facilities including $138.8 million of additional availability for letters of credit under our $1 Billion Revolving Credit Facility as of September 30, 2022 (giving effect to $33.2$61.2 million of letters of credit outstanding as of such date). Our
The London Interbank Offered Rate (“LIBOR”) was the primary basis for determining interest payments on borrowings under each of our warehouse facilities and our Revolving Credit Facilities. On March 5, 2021, Senior NotesICE Benchmark Administration (“IBA”) confirmed it would cease publication of Overnight, 1, 3, 6 and 12 month US Dollar LIBOR settings immediately following the LIBOR publication on June 30, 2023. The Alternative Reference Rates Committee, which was convened by the Federal Reserve Board and the New York Federal Reserve, has identified the Secured Overnight Financing Rate (“SOFR”) as the recommended risk-free alternative rate for US Dollar LIBOR. In response to the planned discontinuation of LIBOR, our warehouse facilities agreements for facilities A, C, D, and E as well as our Revolving Credit Facilities have been restructured to begin using SOFR as the primary basis for determining interest payments. The agreement for warehouse facility B was also restructured to use the Bloomberg Short-Term Bank Yield Index (“BSBY”) as the primary basis for determining interest payments. The BSBY index is a proprietary index calculated daily as a credit sensitive supplement to manage the spread between funding costs and earned interest on loans. At this time, it is not possible to predict the full effect that the anticipated discontinuance of LIBOR, or the establishment of alternative reference rates such as SOFR and BSBY, will have on us or our borrowing costs. SOFR and BSBY are subjectrelatively new reference rates and their composition and characteristics are not the same as LIBOR. Given the limited history of these rates and potential volatility as compared to a requirement that we offer to purchase such notes at par with certain proceedsother benchmark or market rates, the future performance of asset sales (tothese rates cannot be predicted based on historical performance. The consequences of using SOFR and BSBY could include an increase in the extent not otherwise applied in accordance with the indenture governing such notes). cost of our variable rate indebtedness.
We are also required to offer to purchase all of our outstanding Senior Notessenior unsecured notes, as described in Note 7, Debt to the unaudited Condensed Consolidated Financial Statements included in this quarterly report, at 101% of their aggregate principal amount plus accrued and unpaid interest 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 flowspayments by scheduled maturity and effective weighted average interest rates and estimated fair value of our debt obligations as of September 30, 2017.2022. 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.
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| | Expected Maturity Date | | Fair Value |
(In millions, except percentage data) | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter | | Total | |
Fixed Rate Debt(1) | | $ | 461.3 | | | $ | 151.4 | | | $ | 416.0 | | | $ | 43.5 | | | $ | 27.2 | | | $ | 1,495.5 | | | $ | 2,594.9 | | | $ | 2,400.3 | |
Weighted average interest rate(2) | | 5.0 | % | | 3.0 | % | | 5.2 | % | | 3.0 | % | | 3.0 | % | | 5.6 | % | | 5.2 | % | | |
Variable Rate Debt(3) | | $ | 146.3 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 146.3 | | | $ | 146.3 | |
Weighted average interest rate | | 3.6 | % | | — | | | — | | | — | | | — | | | — | | | 3.6 | % | | |
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| | Expected Maturity Date | | Fair Value |
(In millions, except percentage data) | | 2017 | | 2018 | | 2019 | | 2020 | | 2021 | | Thereafter | | Total | |
Fixed Rate Debt | | $ | 47.5 |
| | $ | 61.8 |
| | $ | 40.5 |
| | $ | 5.5 |
| | $ | 552.6 |
| | $ | 703.9 |
| | $ | 1,411.8 |
| | $ | 1,461.3 |
|
Weighted average interest rate(1) | | 3.5 | % | | 3.5 | % | | 3.5 | % | | 3.5 | % | | 5.5 | % | | 5.5 | % | | 5.3 | % | | |
Variable Rate Debt(2) | | $ | 61.3 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 61.3 |
| | $ | 61.3 |
|
Weighted average interest rate | | 3.3 | % | | — | % | | — | % | | — | % | | — | % | | — | % | | 3.3 | % | | |
(1) Fixed Rate Debt includes our 5.875% Senior Notes due 2023. As discussed in Note 7 to the unaudited Condensed Consolidated Financial Statements, these will be redeemed on October 31, 2022 and is presented in the table above with a 2022 expected maturity date.(1)(2)Represents the coupon rate of interest on the full principal amount of the debt.
(2)(3) Based upon the amount of variable rate debt outstanding at September 30, 2017,2022, 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$1.5 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, 2017.2022. Based on this evaluation, our principal executive officer, principal financialfinancial officer and principal accounting officer concluded that, as of September 30, 2017,2022, the Company’sCompany'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) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 20172022 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 involvedThe information required with respect to this item can be found in various litigationNote 13 - Commitments and legal claimsContingencies under “Legal Proceedings” 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,Notes to the extent the liability arising from the ultimate resolution of any matter exceeds the estimates reflectedunaudited Condensed Consolidated Financial Statements included in the recorded reserves relating to such matter, we could incur additional charges that could be significant.this report.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors set forth in Part I, Item 1A.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 PurchasesThe table below sets forth information regarding repurchases by the Company of Equity Securities
Duringits Common Stock during the three months ended September 30, 2017,2022.
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Period | 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) |
July 1 to July 31, 2022 | — | | | $ | — | | | — | | | $ | 425,000 | |
August 1 to August 31, 2022 | 1,176,756 | | | 27.26 | | | 1,176,756 | | | 392,925 | |
September 1 to September 30, 2022 | 3,036,500 | | | 24.02 | | | 3,036,500 | | | 320,001 | |
Total | 4,213,256 | | | | | 4,213,256 | | | |
On May 31, 2022, we repurchased the following number of shares ofannounced that our Class A Common Stock:
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| 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 |
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(a) Our Board of Directors hashad authorized the repurchase of up to $100.0$500.0 million of the Company’s Class ACompany's Common Stock through December 31, 20182023. Repurchases of the Company's Common Stock under the new program will occur from time to time, if at all, in open market purchases, privately negotiated transactions or other transactions. The
Any 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. The program does not require us to repurchase any specific number of shares of common stock, and the program may be suspended, extended, modified or discontinued at any time.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
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Exhibit No. | | Description |
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Exhibit
No. 3.1 | | Description |
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3.1 | | |
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3.2 | | |
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10.1*† | | |
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10.2*† | | |
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10.3*† | | |
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10.4 | | Additional Facilities Assumption Agreement, dated as of September 9, 2022, by and among the Borrower, Taylor Morrison Home III Corporation, Taylor Morrison Holdings, Inc., Taylor Morrison Finance, Inc., the subsidiaries of the Borrower party thereto as guarantors, the lenders party thereto, the issuing banks party thereto and Citibank, N.A., as issuing bank and administrative agent (incorporated herein by reference)reference to Exhibit 10.1 to Taylor Morrison Home Corporation’s Current Report on Form 8-K, filed on September 13, 2022). |
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31.1* | | |
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31.2* | | |
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32.1** | | |
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32.2** | | |
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101.INS101.INS* | | Inline XBRL Instance Document.Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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101.SCH101.SCH* | | Inline XBRL Taxonomy Extension Schema Document. |
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101.CAL101.CAL* | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.DEF101.DEF* | | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
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101.LAB101.LAB* | | Inline XBRL Taxonomy Extension Label Linkbase Document. |
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101.PRE101.PRE* | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
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104.1* | | Cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in inline XBRL (and contained in Exhibit 101). |
* Filed herewith
** Furnished herewith
† Management contract or compensatory plan in which directors and/or executive officers are eligible to participate.
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 other than 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.
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| | | | | | | | | | |
| | | TAYLOR MORRISON HOME CORPORATION |
| | | Registrant |
DATE: | November 1, 2017October 26, 2022 | | |
| | | /s/ Sheryl D. Palmer
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| | | Sheryl D. Palmer |
| | | Chairman Presidentof the Board of Directors and Chief Executive Officer (Principal Executive Officer)
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| | |
| | | /s/ C. David Cone
Louis Steffens |
| | | C. David ConeLouis Steffens |
| | | Executive Vice President and Chief Financial Officer (Principal Financial Officer)
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| | |
| | | /s/ Joseph Terracciano
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| | | Joseph Terracciano |
| | | Chief Accounting Officer
(Principal Accounting Officer)
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EXHIBIT INDEX
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Exhibit
No. | | Description | /s/ Joseph Terracciano |
| | | Joseph Terracciano |
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101.INS | | XBRL Instance Document. |
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101.SCH | | XBRL Taxonomy Extension Schema Document. |
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101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document. |
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101.LAB | | XBRL Taxonomy Extension Label Linkbase Document. |
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101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document. (Principal Accounting Officer) |
* Filed herewith