UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2022
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-35873
TAYLOR MORRISON HOME CORPORATION
(Exact name of registrant as specified in its Charter)
Delaware | 83-2026677 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| ||||||||
incorporation or organization) | Identification No.) |
4900 N. Scottsdale Road, Suite 2000 | 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)
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 | ||||||||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨Yes
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ý No ¨Yes
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.
Large Accelerated Filer | ☒ | Accelerated filer | ☐ | |||||||||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||||||||||||||||
Emerging growth company | ☐ |
|
|
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No ýNo
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class | Outstanding as of October 25, 2023 | |
Common stock, $0.00001 par value | 107,448,537 |
TAYLOR MORRISON HOME CORPORATION
TABLE OF CONTENTS
| ||||||
|
|
TAYLOR MORRISON HOME CORPORATION 10-Q
1
ITEM 1. FINANCIAL STATEMENTS
PART I — FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, 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 | ||||||||||||
Goodwill | 663,197 | 663,197 | ||||||||||||
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 | ||||||||||||
Total liabilities | $ | 4,190,160 | $ | 4,756,795 | ||||||||||
COMMITMENTS AND CONTINGENCIES (Note 13) | ||||||||||||||
Stockholders’ Equity | ||||||||||||||
Total stockholders’ equity | 4,403,466 | 3,970,982 | ||||||||||||
Total liabilities and stockholders’ equity | $ | 8,593,626 | $ | 8,727,777 |
|
| September 30, |
|
| December 31, |
| ||
Assets |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 613,811 |
|
| $ | 724,488 |
|
Restricted cash |
|
| 765 |
|
|
| 2,147 |
|
Total cash, cash equivalents, and restricted cash |
|
| 614,576 |
|
|
| 726,635 |
|
Real estate inventory: |
|
|
|
|
|
| ||
Owned inventory |
|
| 5,479,987 |
|
|
| 5,346,905 |
|
Consolidated real estate not owned |
|
| 423 |
|
|
| 23,971 |
|
Total real estate inventory |
|
| 5,480,410 |
|
|
| 5,370,876 |
|
Land deposits |
|
| 206,258 |
|
|
| 263,356 |
|
Mortgage loans held for sale |
|
| 241,749 |
|
|
| 346,364 |
|
Lease right of use assets |
|
| 76,463 |
|
|
| 90,446 |
|
Prepaid expenses and other assets, net |
|
| 305,581 |
|
|
| 265,392 |
|
Other receivables, net |
|
| 188,723 |
|
|
| 191,504 |
|
Investments in unconsolidated entities |
|
| 329,634 |
|
|
| 282,900 |
|
Deferred tax assets, net |
|
| 67,656 |
|
|
| 67,656 |
|
Property and equipment, net |
|
| 262,671 |
|
|
| 202,398 |
|
Goodwill |
|
| 663,197 |
|
|
| 663,197 |
|
Total assets |
| $ | 8,436,918 |
|
| $ | 8,470,724 |
|
Liabilities |
|
|
|
|
|
| ||
Accounts payable |
| $ | 272,830 |
|
| $ | 269,761 |
|
Accrued expenses and other liabilities |
|
| 487,262 |
|
|
| 490,253 |
|
Lease liabilities |
|
| 86,401 |
|
|
| 100,174 |
|
Customer deposits |
|
| 380,544 |
|
|
| 412,092 |
|
Estimated development liabilities |
|
| 42,271 |
|
|
| 43,753 |
|
Senior notes, net |
|
| 1,468,255 |
|
|
| 1,816,303 |
|
Loans payable and other borrowings |
|
| 332,177 |
|
|
| 361,486 |
|
Revolving credit facility borrowings |
|
| — |
|
|
| — |
|
Mortgage warehouse borrowings |
|
| 191,645 |
|
|
| 306,072 |
|
Liabilities attributable to consolidated real estate not owned |
|
| 423 |
|
|
| 23,971 |
|
Total liabilities |
| $ | 3,261,808 |
|
| $ | 3,823,865 |
|
COMMITMENTS AND CONTINGENCIES (Note 13) |
|
|
|
|
|
| ||
Stockholders’ equity |
|
|
|
|
|
| ||
Total stockholders’ equity |
|
| 5,175,110 |
|
|
| 4,646,859 |
|
Total liabilities and stockholders’ equity |
| $ | 8,436,918 |
|
| $ | 8,470,724 |
|
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
2
ITEM 1. FINANCIAL STATEMENTS
TAYLOR MORRISON HOME CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts, unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
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 | ||||||||||||||||||||||
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 | ||||||||||||||||||||||
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) | ||||||||||||||||||||||
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 |
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| |||||
Home closings revenue, net |
| $ | 1,611,883 |
|
| $ | 1,983,775 |
|
| $ | 5,221,225 |
|
| $ | 5,511,204 |
|
Land closings revenue |
|
| 14,291 |
|
|
| 14,225 |
|
|
| 31,439 |
|
|
| 66,651 |
|
Financial services revenue |
|
| 40,045 |
|
|
| 27,749 |
|
|
| 117,108 |
|
|
| 98,419 |
|
Amenity and other revenue |
|
| 9,326 |
|
|
| 8,895 |
|
|
| 28,194 |
|
|
| 56,517 |
|
Total revenue |
|
| 1,675,545 |
|
|
| 2,034,644 |
|
|
| 5,397,966 |
|
|
| 5,732,791 |
|
Cost of home closings |
|
| 1,238,999 |
|
|
| 1,438,164 |
|
|
| 3,980,749 |
|
|
| 4,084,748 |
|
Cost of land closings |
|
| 13,572 |
|
|
| 11,571 |
|
|
| 30,620 |
|
|
| 50,139 |
|
Financial services expenses |
|
| 23,128 |
|
|
| 20,395 |
|
|
| 70,618 |
|
|
| 66,092 |
|
Amenity and other expenses |
|
| 8,128 |
|
|
| 6,574 |
|
|
| 25,010 |
|
|
| 39,264 |
|
Total cost of revenue |
|
| 1,283,827 |
|
|
| 1,476,704 |
|
|
| 4,106,997 |
|
|
| 4,240,243 |
|
Gross margin |
|
| 391,718 |
|
|
| 557,940 |
|
|
| 1,290,969 |
|
|
| 1,492,548 |
|
Sales, commissions and other marketing costs |
|
| 98,797 |
|
|
| 94,692 |
|
|
| 304,591 |
|
|
| 279,950 |
|
General and administrative expenses |
|
| 68,994 |
|
|
| 52,357 |
|
|
| 205,904 |
|
|
| 189,905 |
|
Net (income)/loss from unconsolidated entities |
|
| (1,934 | ) |
|
| 1,180 |
|
|
| (7,049 | ) |
|
| 2,986 |
|
Interest (income)/expense, net |
|
| (5,782 | ) |
|
| 4,382 |
|
|
| (12,013 | ) |
|
| 13,823 |
|
Other expense/(income), net |
|
| 2,968 |
|
|
| 5,751 |
|
|
| 6,683 |
|
|
| (4,720 | ) |
Loss/(gain) on extinguishment of debt, net |
|
| 269 |
|
|
| (71 | ) |
|
| 269 |
|
|
| (13,542 | ) |
Income before income taxes |
|
| 228,406 |
|
|
| 399,649 |
|
|
| 792,584 |
|
|
| 1,024,146 |
|
Income tax provision |
|
| 57,960 |
|
|
| 90,418 |
|
|
| 196,005 |
|
|
| 243,300 |
|
Net income before allocation to non-controlling interests |
|
| 170,446 |
|
|
| 309,231 |
|
|
| 596,579 |
|
|
| 780,846 |
|
Net loss/(income) attributable to non-controlling interests |
|
| 245 |
|
|
| 548 |
|
|
| (235 | ) |
|
| (3,377 | ) |
Net income available to Taylor Morrison Home Corporation |
| $ | 170,691 |
|
| $ | 309,779 |
|
| $ | 596,344 |
|
| $ | 777,469 |
|
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
| $ | 1.57 |
|
| $ | 2.75 |
|
| $ | 5.48 |
|
| $ | 6.63 |
|
Diluted |
| $ | 1.54 |
|
| $ | 2.72 |
|
| $ | 5.40 |
|
| $ | 6.56 |
|
Weighted average number of shares of common stock: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
|
| 108,837 |
|
|
| 112,701 |
|
|
| 108,827 |
|
|
| 117,242 |
|
Diluted |
|
| 110,622 |
|
|
| 113,780 |
|
|
| 110,536 |
|
|
| 118,438 |
|
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
3
ITEM 1. FINANCIAL STATEMENTS
TAYLOR MORRISON HOME CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data, unaudited)
For the three 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 – 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 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 77,951 | — | 1,512 | — | — | — | — | — | 1,512 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of restricted stock units, net of shares withheld for tax(1) | 2,757 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common stock | (4,213,256) | — | — | 4,213,256 | (104,999) | — | — | — | (104,999) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock compensation expense | — | — | 5,333 | — | — | — | — | — | 5,333 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 |
For the three months ended September 30, 2023
|
| Common Stock |
|
| Additional |
|
| Treasury Stock |
|
| Stockholders' Equity |
| ||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Retained |
|
| Accumulated |
|
| Non- |
|
| Total |
| |||||||||
Balance – June 30, 2023 |
|
| 109,443,784 |
|
| $ | 1 |
|
| $ | 3,051,377 |
|
|
| 51,506,248 |
|
| $ | (1,140,706 | ) |
| $ | 3,167,268 |
|
| $ | 359 |
|
| $ | 17,014 |
|
| $ | 5,095,313 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 170,691 |
|
|
| — |
|
|
| (245 | ) |
|
| 170,446 |
|
Exercise of stock options and issuance of restricted stock units, net(1) |
|
| 164,510 |
|
|
| — |
|
|
| 3,649 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,649 |
|
Repurchase of common stock |
|
| (2,169,657 | ) |
|
| — |
|
|
| — |
|
|
| 2,169,657 |
|
|
| (100,000 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (100,000 | ) |
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| 5,702 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,702 |
|
Balance – September 30, 2023 |
|
| 107,438,637 |
|
| $ | 1 |
|
| $ | 3,060,728 |
|
|
| 53,675,905 |
|
| $ | (1,240,706 | ) |
| $ | 3,337,959 |
|
| $ | 359 |
|
| $ | 16,769 |
|
| $ | 5,175,110 |
|
For the three 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 – 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) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common stock | (3,309,196) | — | — | 3,309,196 | (91,659) | — | — | — | (91,659) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock compensation expense | — | — | 4,793 | — | — | — | — | — | 4,793 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 |
For the three months ended September 30, 2022
|
| Common Stock |
|
| Additional |
|
| Treasury Stock |
|
| Stockholders' Equity |
| ||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Retained |
|
| Accumulated |
|
| Non- |
|
| Total |
| |||||||||
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 |
|
Exercise of stock options and issuance of restricted stock units, net(1) |
|
| 80,708 |
|
|
| — |
|
|
| 1,512 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,512 |
|
Repurchase of common stock |
|
| (4,213,256 | ) |
|
| — |
|
|
| — |
|
|
| 4,213,256 |
|
|
| (104,999 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (104,999 | ) |
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| 5,333 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,333 |
|
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 |
|
TAYLOR MORRISON HOME CORPORATION 10-Q
4
ITEM 1. FINANCIAL STATEMENTS
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 |
For the nine months ended September 30, 2023
|
| Common Stock |
|
| Additional |
|
| Treasury Stock |
|
| Stockholders' Equity |
| ||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Retained |
|
| Accumulated |
|
| Non- |
|
| Total |
| |||||||||
Balance – December 31, 2022 |
|
| 107,995,262 |
|
| $ | 1 |
|
| $ | 3,025,489 |
|
|
| 51,396,923 |
|
| $ | (1,137,138 | ) |
| $ | 2,741,615 |
|
| $ | 359 |
|
| $ | 16,533 |
|
| $ | 4,646,859 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 596,344 |
|
|
| — |
|
|
| 235 |
|
|
| 596,579 |
|
Exercise of stock options and issuance of restricted stock units, net(1) |
|
| 1,722,357 |
|
|
| — |
|
|
| 16,733 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16,733 |
|
Repurchase of common stock |
|
| (2,278,982 | ) |
|
| — |
|
|
| — |
|
|
| 2,278,982 |
|
|
| (103,568 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (103,568 | ) |
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| 18,506 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 18,506 |
|
Changes in non-controlling interests of consolidated joint ventures |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| 1 |
|
Balance – September 30, 2023 |
|
| 107,438,637 |
|
| $ | 1 |
|
| $ | 3,060,728 |
|
|
| 53,675,905 |
|
| $ | (1,240,706 | ) |
| $ | 3,337,959 |
|
| $ | 359 |
|
| $ | 16,769 |
|
| $ | 5,175,110 |
|
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 |
For the nine months ended September 30, 2022
|
| Common Stock |
|
| Additional |
|
| Treasury Stock |
|
| Stockholders' Equity |
| ||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Retained |
|
| Accumulated |
|
| Non- |
|
| Total |
| |||||||||
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 and issuance of restricted stock units, net(1) |
|
| 615,469 |
|
|
| — |
|
|
| 779 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 779 |
|
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 |
|
5
ITEM 1. FINANCIAL STATEMENTS
TAYLOR MORRISON HOME CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
Nine Months Ended September 30, | ||||||||||||||
2022 | 2021 | |||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||
Net income before allocation to non-controlling interests | $ | 780,846 | $ | 399,665 | ||||||||||
Adjustments to reconcile net income to net cash provided by/(used in) operating activities: | ||||||||||||||
Net loss/(income) from unconsolidated entities | 2,986 | (9,269) | ||||||||||||
Stock compensation expense | 17,474 | 15,128 | ||||||||||||
Gain on extinguishment of debt, net | (13,542) | — | ||||||||||||
Gain on land transfers | (14,508) | — | ||||||||||||
Distributions of earnings from unconsolidated entities | 5,318 | 9,050 | ||||||||||||
Depreciation and amortization | 25,448 | 29,726 | ||||||||||||
Operating lease expense | 20,543 | 12,167 | ||||||||||||
Debt issuance costs amortization | 1,574 | 355 | ||||||||||||
Change in Urban Form assets due to sale | 11,675 | — | ||||||||||||
Land held for sale write-downs | — | 4,590 | ||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||
Real estate inventory and land deposits | (610,346) | (678,809) | ||||||||||||
Mortgages held for sale, prepaid expenses and other assets | 245,633 | (216,121) | ||||||||||||
Customer deposits | 41,707 | 209,290 | ||||||||||||
Accounts payable, accrued expenses and other liabilities | (82,578) | 97,129 | ||||||||||||
Income taxes payable | 27,757 | 23,554 | ||||||||||||
Net cash provided by/(used in) operating activities | 459,987 | (103,545) | ||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||
Purchase of property and equipment | (22,478) | (15,698) | ||||||||||||
Distributions of capital from unconsolidated entities | 95,517 | 14,237 | ||||||||||||
Investments of capital into unconsolidated entities | (91,846) | (31,843) | ||||||||||||
Investments in equity securities | — | (10,000) | ||||||||||||
Net cash used in investing activities | (18,807) | (43,304) | ||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||
Increase in loans payable and other borrowings | 33,495 | 103,805 | ||||||||||||
Repayments on loans payable and other borrowings | (50,761) | (89,635) | ||||||||||||
Borrowings on revolving credit facilities | 182,548 | 126,692 | ||||||||||||
Repayments on revolving credit facilities | (214,077) | — | ||||||||||||
Borrowings on mortgage warehouse facilities | 1,783,748 | 2,287,791 | ||||||||||||
Repayments on mortgage warehouse facilities | (2,051,300) | (2,179,395) | ||||||||||||
Repayments on senior notes | (264,935) | — | ||||||||||||
Proceeds from stock option exercises | 4,424 | 18,212 | ||||||||||||
Payment of principal portion of finance lease | (1,340) | (1,325) | ||||||||||||
Repurchase of common stock, net | (335,412) | (236,831) | ||||||||||||
Payment of taxes related to net share settlement of equity awards | (3,645) | (5,494) | ||||||||||||
Cash and distributions to non-controlling interests of consolidated joint ventures, net | (30,443) | (36,095) | ||||||||||||
Net cash used in financing activities | (947,698) | (12,275) | ||||||||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | $ | (506,518) | $ | (159,124) | ||||||||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period | 836,340 | 534,109 | ||||||||||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period | $ | 329,822 | $ | 374,985 | ||||||||||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||||||||
Income tax payments | $ | (176,683) | $ | (96,753) | ||||||||||
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||||||||
Change in loans payable issued to sellers in connection with land purchase contracts | $ | 184,458 | $ | 174,297 | ||||||||||
Change in inventory not owned | $ | (581) | $ | (64,344) | ||||||||||
Investments of land in unconsolidated joint ventures, net | $ | 146,649 | $ | — | ||||||||||
Net non-cash distributions from non-controlling interests | $ | — | $ | (3,060) | ||||||||||
Common stock surrendered in connection with warrant exercises | $ | — | $ | 32,587 | ||||||||||
Common stock issued in connection with warrant exercises | $ | — | $ | (32,584) |
| Nine Months Ended September 30, |
| ||||||
| 2023 |
|
| 2022 |
| |||
Cash Flows from Operating Activities |
|
|
|
|
|
| ||
Net income before allocation to non-controlling interests |
| $ | 596,579 |
|
| $ | 780,846 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
| ||
Net (income)/loss from unconsolidated entities |
|
| (7,049 | ) |
|
| 2,986 |
|
Stock compensation expense |
|
| 18,506 |
|
|
| 17,474 |
|
Loss/(gain) on extinguishment of debt, net |
|
| 269 |
|
|
| (13,542 | ) |
Gain on land transfers |
|
| — |
|
|
| (14,508 | ) |
Distributions of earnings from unconsolidated entities |
|
| 7,377 |
|
|
| 5,318 |
|
Depreciation and amortization |
|
| 23,717 |
|
|
| 25,448 |
|
Operating lease expense |
|
| 19,271 |
|
|
| 20,543 |
|
Debt issuance costs amortization |
|
| 2,574 |
|
|
| 1,574 |
|
Change in Urban Form assets due to sale |
|
| — |
|
|
| 11,675 |
|
Inventory impairments |
|
| 11,791 |
|
|
| — |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
| ||
Real estate inventory and land deposits |
|
| (87,776 | ) |
|
| (610,346 | ) |
Mortgage loans held for sale, prepaid expenses and other assets |
|
| 24,081 |
|
|
| 245,633 |
|
Customer deposits |
|
| (31,548 | ) |
|
| 41,707 |
|
Accounts payable, accrued expenses and other liabilities |
|
| (27,231 | ) |
|
| (82,578 | ) |
Income taxes payable |
|
| — |
|
|
| 27,757 |
|
Net cash provided by operating activities |
|
| 550,561 |
|
|
| 459,987 |
|
Cash Flows from Investing Activities: |
|
|
|
|
|
| ||
Purchase of property and equipment |
|
| (47,042 | ) |
|
| (22,478 | ) |
Distributions of capital from unconsolidated entities |
|
| 733 |
|
|
| 95,517 |
|
Investments of capital into unconsolidated entities |
|
| (47,795 | ) |
|
| (91,846 | ) |
Net cash used in investing activities |
|
| (94,104 | ) |
|
| (18,807 | ) |
Cash Flows from Financing Activities |
|
|
|
|
|
| ||
Increase in loans payable and other borrowings |
|
| 2,426 |
|
|
| 33,495 |
|
Repayments on loans payable and other borrowings |
|
| (18,367 | ) |
|
| (50,761 | ) |
Borrowings on revolving credit facilities |
|
| — |
|
|
| 182,548 |
|
Repayments on revolving credit facilities |
|
| — |
|
|
| (214,077 | ) |
Borrowings on mortgage warehouse facilities |
|
| 2,203,261 |
|
|
| 1,783,748 |
|
Repayments on mortgage warehouse facilities |
|
| (2,317,688 | ) |
|
| (2,051,300 | ) |
Repayments on senior notes |
|
| (350,000 | ) |
|
| (264,935 | ) |
Proceeds from stock option exercises and issuance of restricted stock units, net |
|
| 16,733 |
|
|
| 779 |
|
Payment of principal portion of finance lease |
|
| (1,313 | ) |
|
| (1,340 | ) |
Repurchase of common stock, net |
|
| (103,568 | ) |
|
| (335,412 | ) |
Cash and distributions to non-controlling interests of consolidated joint ventures, net |
|
| — |
|
|
| (30,443 | ) |
Net cash used in financing activities |
|
| (568,516 | ) |
|
| (947,698 | ) |
Net Increase/Decrease in Cash and Cash Equivalents and Restricted Cash |
| $ | (112,059 | ) |
| $ | (506,518 | ) |
Cash, Cash Equivalents, and Restricted Cash — Beginning of period |
|
| 726,635 |
|
|
| 836,340 |
|
Cash, Cash Equivalents, and Restricted Cash — End of period |
| $ | 614,576 |
|
| $ | 329,822 |
|
Supplemental Cash Flow Information |
|
|
|
|
|
| ||
Income tax payments |
| $ | (154,267 | ) |
| $ | (176,683 | ) |
Supplemental Non-Cash Investing and Financing Activities: |
|
|
|
|
|
| ||
Change in loans payable issued to sellers in connection with land purchase contracts |
| $ | 126,903 |
|
| $ | 184,458 |
|
Change in inventory not owned |
| $ | (23,548 | ) |
| $ | (581 | ) |
Investments of land in unconsolidated joint ventures, net |
| $ | — |
|
| $ | 146,649 |
|
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
6
ITEM 1. FINANCIAL STATEMENTS
TAYLOR MORRISON HOME CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS
Description of the Business — Taylor Morrison Home Corporation “TMHC”(“TMHC”), through its subsidiaries (together with TMHC referred to herein as “we,” “our,” “the Company” and “us”), owns and operates a residential homebuilding business and is a developer of lifestyle communities.land developer. We operate in the states of Arizona, California, Colorado, Florida, Georgia, Nevada, North and South Carolina, Oregon, Texas, and Washington. We provide an assortment of homes across a wide range of price points to appeal to an array of consumer groups. 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 as 55-plus active lifestyle)resort-lifestyle buyers. We are the general contractors for all real estate projects and retain subcontractors for home construction and land development. Our homebuilding segments operate under our various brand names including Taylor Morrison, Darling Homes Collection by Taylor Morrison, and Esplanade brand names.Esplanade. We operatealso have a “Build-to-Rent” homebuilding business where we serve as a land acquirer, developer, and homebuilder.which operates under the Yardly brand name. In addition, we develop and construct multi-use properties consisting of commercial space, retail, and multi-family properties under the “Urban Form”Urban Form brand. We also have operations which provide financial services to customers through our wholly owned mortgage subsidiary, Taylor Morrison Home Funding, Inc.INC (“TMHF”), title services through our wholly owned title services subsidiary, Inspired Title Services, LLC (“Inspired Title”), and homeowner’s insurance policies through our wholly owned insurance agency, Taylor Morrison Insurance Services, LLC (“TMIS”). Our business is organized into multiple homebuilding operating components, and a financial services component, all of which are managed as four reportable segments: East, Central, West, and Financial Services.
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 Annual Report on Form 10-K for the year ended December 31, 20212022 (the “Annual Report”). Certain prior year amounts have been reclassified to conform to current year presentation. In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements include all normal and recurring adjustments that are considered necessary for the fair presentation of our results for the interim periods presented. Results for interim periods are not necessarily indicative of results to be expected for a full fiscal year.
Joint Ventures -We consolidate certain joint ventures in accordance with Accounting Standards Codification (“ASC”) Topic810,, Consolidation.The loss/income from the percentage of the joint venture not owned by us is presented as “Net income attributable to non-controlling interests” on the unaudited Condensed Consolidated Statement of Operations. The equity from the percentage of the joint ventures not owned by us is presented as “Net loss/income attributable to non-controlling“Non-controlling interests” on the unaudited Condensed Consolidated StatementsStatement of Operations.Stockholders’ Equity. The balance of Non-Controlling interests will fluctuate from period to period as a result of activities within the respective joint ventures which may include the allocation of income or losses, distributions or contributions associated with the partners within the joint venture.
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, valuation of goodwill, valuation of 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.
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
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
TAYLOR MORRISON HOME CORPORATION 10-Q
7
ITEM 1. FINANCIAL STATEMENTS
community duration will vary based on the size of the community, the sales absorption rate and whether we purchased the property as raw land or as finished lots.
We assess the recoverability of our inventory in accordance with the provisions of ASC Topic 360, Property, Plant, and Equipment. We review our real estate inventory for indicators of impairment on a community-level basis during each reporting period. If indicators of impairment are present for a community, an undiscounted cash flow analysis is generally prepared in order to determine if the carrying value of the assets in that community exceeds the estimated undiscounted cash flows. Generally, if the carrying value of the assets exceeds their estimated undiscounted cash flows, the assets are potentially impaired, requiring a fair value 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, 2023, we recorded $11.8 million of inventory impairment relating to one of our communities in our West reporting segment. For the three and nine months ended September 30, 2022, and 2021, we recorded no inventory impairment charges were recorded.to our real estate inventory. Impairments are recorded to Cost of home closings or Cost of land closings on the Consolidated Statement of Operations.
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.holdings which are not included in the unaudited Condensed Consolidated Balance Sheets.
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 risksrisk 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
TAYLOR MORRISON HOME CORPORATION 10-Q
8
ITEM 1. FINANCIAL STATEMENTS
deposit, we evaluate if a Variable Interest Entity (“VIE”) mayshould be created becauseif 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 ourand Liabilities attributable to consolidated real estate inventory balancenot owned, respectively, 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 on the unaudited Condensed Consolidated Statement of Operations 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.Sheets when received.
Revenue Recognition — We recognize revenueRevenue is recognized 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 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.
Home and land closings revenue
Under Topic 606, the following steps are applied to determine the proper home closings revenue and land closings revenue recognition: (1) we identify the contract(s) with our customer; (2) we identify the performance obligations in the contract; (3) we determine the transaction price; (4) we allocate the transaction price to the performance obligations in the contract; and (5) we recognize revenue when (or as) we satisfy the performance obligation. For ourobligation(s) are satisfied. 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 the recognition of home and land sales revenue:
We own and operate certain amenities such as golf courses, club houses,clubhouses, and fitness centers, which require us to provide club members with access to the facilities 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 also included in amenity and
Financial services revenue
Mortgage operations 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 theGenerally, loans TMHF originates are sold to third party investors within a short period of time, on a
TAYLOR MORRISON HOME CORPORATION 10-Q
9
ITEM 1. FINANCIAL STATEMENTS
non-recourse basis. Gains and losses from the sale of mortgages are recognized in accordance with ASC Topic 860-20, Sales of Financial Assets. TMHF does not have continuing involvement with the transferred assets; therefore, we derecognize the mortgage loans at time of sale, and based on the difference between the selling price and carrying value of the related loans upon sale, recordingrecord a gain/loss on sale in the period of sale. Also included in Financial services revenue/expenses are realized and unrealized gains and losses from hedging instruments.
Basic earnings per common share is computed by dividing net income available to TMHC by the weighted average number of shares of Common Stock (as defined in Note 10) outstanding during the period. Diluted earnings per share gives effect to the potential dilution that could occur if all outstanding dilutive equity awards to issue shares of 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 |
|
| Nine Months Ended |
| |||||||||||
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| |||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income available to TMHC |
| $ | 170,691 |
|
| $ | 309,779 |
|
| $ | 596,344 |
|
| $ | 777,469 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average shares – basic |
|
| 108,837 |
|
|
| 112,701 |
|
|
| 108,827 |
|
|
| 117,242 |
|
Restricted stock units |
|
| 940 |
|
|
| 629 |
|
|
| 895 |
|
|
| 659 |
|
Stock Options |
|
| 845 |
|
|
| 450 |
|
|
| 814 |
|
|
| 537 |
|
Weighted average shares – diluted |
|
| 110,622 |
|
|
| 113,780 |
|
|
| 110,536 |
|
|
| 118,438 |
|
Earnings per common share – basic: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income available to Taylor Morrison Home Corporation |
| $ | 1.57 |
|
| $ | 2.75 |
|
| $ | 5.48 |
|
| $ | 6.63 |
|
Earnings per common share – diluted: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income available to Taylor Morrison Home Corporation |
| $ | 1.54 |
|
| $ | 2.72 |
|
| $ | 5.40 |
|
| $ | 6.56 |
|
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 |
The above calculations of weighted average shares - diluted exclude 1,560,934353,947 and 1,470,941282,124 of anti-dilutive stock options and unvested restricted stock units (“RSUs”) for the three and nine months ended September 30, 2022,2023, respectively, and 1,218,7811,560,934 and 1,063,5861,470,941 of anti-dilutive stock options and unvested RSUs for the three and nine months ended September 30, 2021,2022, respectively.
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, |
| December 31, |
| ||||
Real estate developed and under development |
| $ | 3,758,671 |
|
| $ | 3,607,227 |
|
Real estate held for development or held for sale (1) |
|
| 46,528 |
|
|
| 43,314 |
|
Total owned |
|
| 3,805,199 |
|
|
| 3,650,541 |
|
Operating communities (2) |
|
| 1,487,591 |
|
|
| 1,506,241 |
|
Capitalized interest |
|
| 187,197 |
|
|
| 190,123 |
|
Total owned inventory |
|
| 5,479,987 |
|
|
| 5,346,905 |
|
Consolidated real estate not owned |
|
| 423 |
|
|
| 23,971 |
|
Total real estate inventory |
| $ | 5,480,410 |
|
| $ | 5,370,876 |
|
TAYLOR MORRISON HOME CORPORATION 10-Q
10
ITEM 1. FINANCIAL STATEMENTS
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 | ||||||||||||||||||||||||||||||||
| As of |
| ||||||||||||||
| September 30, 2023 |
|
| December 31, 2022 |
| |||||||||||
| Owned Lots |
|
| Book Value |
|
| Owned Lots |
|
| Book Value |
| |||||
Homebuilding owned lots |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Undeveloped |
|
| 15,204 |
|
| $ | 483,845 |
|
|
| 14,985 |
|
| $ | 522,594 |
|
Under development |
|
| 8,281 |
|
|
| 943,792 |
|
|
| 10,716 |
|
|
| 1,106,751 |
|
Finished |
|
| 19,423 |
|
|
| 2,375,673 |
|
|
| 18,366 |
|
|
| 2,018,062 |
|
Total homebuilding owned lots |
|
| 42,908 |
|
|
| 3,803,310 |
|
|
| 44,067 |
|
|
| 3,647,407 |
|
Other assets(1) |
|
| — |
|
|
| 1,889 |
|
|
| — |
|
|
| 3,134 |
|
Total owned lots |
|
| 42,908 |
|
| $ | 3,805,199 |
|
|
| 44,067 |
|
| $ | 3,650,541 |
|
We have land option purchase contracts, land banking arrangements and other controlled lot agreements. We do not have title to the properties, and the property owner and its creditors generally only have recourse against us in the form of retaining 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 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, 2023 |
|
| December 31, 2022 |
| |||||||||||||||||||
| Controlled Lots |
|
| Purchase Price |
|
| Land Deposits (1) |
|
| Controlled Lots |
|
| Purchase Price |
|
| Land Deposits (1) |
| |||||||
Homebuilding controlled lots |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Land option purchase contracts |
|
| 7,971 |
|
| $ | 691,072 |
|
| $ | 44,704 |
|
|
| 6,582 |
|
| $ | 428,612 |
|
| $ | 47,678 |
|
Land banking arrangements |
|
| 6,199 |
|
|
| 877,021 |
|
|
| 135,821 |
|
|
| 7,369 |
|
|
| 1,057,065 |
|
|
| 156,653 |
|
Other controlled lots |
|
| 17,299 |
|
|
| 1,119,355 |
|
|
| 22,962 |
|
|
| 16,891 |
|
|
| 956,712 |
|
|
| 50,218 |
|
Total controlled lots |
|
| 31,469 |
|
| $ | 2,687,448 |
|
| $ | 203,487 |
|
|
| 30,842 |
|
| $ | 2,442,389 |
|
| $ | 254,549 |
|
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 |
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 |
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| |||||
Interest capitalized - beginning of period |
| $ | 191,304 |
|
| $ | 185,364 |
|
| $ | 190,123 |
|
| $ | 168,670 |
|
Interest incurred and capitalized(1) |
|
| 28,270 |
|
|
| 38,871 |
|
|
| 94,452 |
|
|
| 119,415 |
|
Interest amortized to cost of home closings |
|
| (32,377 | ) |
|
| (33,774 | ) |
|
| (97,378 | ) |
|
| (97,624 | ) |
Interest capitalized - end of period |
| $ | 187,197 |
|
| $ | 190,461 |
|
| $ | 187,197 |
|
| $ | 190,461 |
|
5. INVESTMENTS IN CONSOLIDATED AND UNCONSOLIDATED ENTITIES
Unconsolidated Entities
We have investments in a number of joint ventures with third parties. These entities are generally involved in real estate development, homebuilding, Build-to-Rent, and/or mortgage lending activities. The primary activity of the real estate development joint ventures is development and sale of lots to joint venture partners 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.
TAYLOR MORRISON HOME CORPORATION 10-Q
11
ITEM 1. FINANCIAL STATEMENTS
Summarized, 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.
| As of |
| ||||||
| September 30, |
|
| December 31, |
| |||
Assets: |
|
|
|
|
|
| ||
Real estate inventory |
| $ | 895,627 |
|
| $ | 749,942 |
|
Other assets |
|
| 161,331 |
|
|
| 146,770 |
|
Total assets |
| $ | 1,056,958 |
|
| $ | 896,712 |
|
Liabilities and owners’ equity: |
|
|
|
|
|
| ||
Debt |
| $ | 286,941 |
|
| $ | 238,263 |
|
Other liabilities |
|
| 40,086 |
|
|
| 31,824 |
|
Total liabilities |
| $ | 327,027 |
|
| $ | 270,087 |
|
Owners’ equity: |
|
|
|
|
|
| ||
TMHC |
| $ | 329,634 |
|
| $ | 282,900 |
|
Others |
|
| 400,297 |
|
|
| 343,725 |
|
Total owners’ equity |
| $ | 729,931 |
|
| $ | 626,625 |
|
Total liabilities and owners’ equity |
| $ | 1,056,958 |
|
| $ | 896,712 |
|
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| |||||
Revenues |
| $ | 44,010 |
|
| $ | 25,495 |
|
| $ | 95,647 |
|
| $ | 150,062 |
|
Costs and expenses |
|
| (37,810 | ) |
|
| (27,310 | ) |
|
| (76,575 | ) |
|
| (145,238 | ) |
Net income/(loss) from unconsolidated entities |
| $ | 6,200 |
|
| $ | (1,815 | ) |
| $ | 19,072 |
|
| $ | 4,824 |
|
TMHC’s share in net income/(loss) of unconsolidated entities |
| $ | 1,934 |
|
| $ | (1,180 | ) |
| $ | 7,049 |
|
| $ | (2,986 | ) |
Distributions to TMHC from unconsolidated entities |
| $ | 2,226 |
|
| $ | 10,006 |
|
| $ | 8,110 |
|
| $ | 100,835 |
|
As of | ||||||||||||||
September 30, 2022 | December 31, 2021 | |||||||||||||
Assets: | ||||||||||||||
Real estate inventory | $ | 717,667 | $ | 414,687 | ||||||||||
Other assets | 132,990 | 118,990 | ||||||||||||
Total assets | $ | 850,657 | $ | 533,677 | ||||||||||
Liabilities and owners’ equity: | ||||||||||||||
Debt | $ | 137,386 | $ | 167,842 | ||||||||||
Other liabilities | 31,961 | 16,245 | ||||||||||||
Total liabilities | 169,347 | 184,087 | ||||||||||||
Owners’ equity: | ||||||||||||||
TMHC | 306,081 | 171,406 | ||||||||||||
Others | 375,229 | 178,184 | ||||||||||||
Total owners’ equity | 681,310 | 349,590 | ||||||||||||
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 |
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 thesethe entities are consolidated.
Accrued expenses and other liabilities consist of the following (in thousands):
| As of |
|
| As of |
| |||
Real estate development costs to complete |
| $ | 43,838 |
|
| $ | 53,155 |
|
Compensation and employee benefits |
|
| 119,193 |
|
|
| 112,294 |
|
Self-insurance and warranty reserves |
|
| 170,236 |
|
|
| 161,675 |
|
Interest payable |
|
| 24,645 |
|
|
| 37,434 |
|
Property and sales taxes payable |
|
| 35,000 |
|
|
| 30,046 |
|
Other accruals |
|
| 94,350 |
|
|
| 95,649 |
|
Total accrued expenses and other liabilities |
| $ | 487,262 |
|
| $ | 490,253 |
|
TAYLOR MORRISON HOME CORPORATION 10-Q
12
ITEM 1. FINANCIAL STATEMENTS
As of September 30, 2022 | As of December 31, 2021 | |||||||||||||
Real estate development costs to complete | $ | 42,384 | $ | 49,833 | ||||||||||
Compensation and employee benefits | 113,877 | 166,272 | ||||||||||||
Self-insurance and warranty reserves | 139,991 | 141,839 | ||||||||||||
Interest payable | 35,112 | 48,551 | ||||||||||||
Property and sales taxes payable | 31,648 | 29,384 | ||||||||||||
Other accruals | 93,620 | 89,330 | ||||||||||||
Total accrued expenses and other liabilities | $ | 456,632 | $ | 525,209 |
Self-Insurance and Warranty Reserves – We accrue for the expected costs associated with our limited warranty, deductibles and self-insured amountsexposure under our various insurance policies within Beneva Indemnity Company (“Beneva”), a wholly owned subsidiary. A summary of the changes in our reserves are as follows (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
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 |
|
| Nine Months Ended |
| |||||||||||
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| |||||
Reserve - beginning of period |
| $ | 160,326 |
|
| $ | 137,491 |
|
| $ | 161,675 |
|
| $ | 141,839 |
|
Additions to reserves |
|
| 28,076 |
|
|
| 2,514 |
|
|
| 67,411 |
|
|
| 34,917 |
|
Cost of claims incurred |
|
| (18,795 | ) |
|
| (3,541 | ) |
|
| (62,622 | ) |
|
| (43,743 | ) |
Changes in estimates to pre-existing reserves |
|
| 629 |
|
|
| 3,527 |
|
|
| 3,772 |
|
|
| 6,978 |
|
Reserve - end of period |
| $ | 170,236 |
|
| $ | 139,991 |
|
| $ | 170,236 |
|
| $ | 139,991 |
|
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, 2023 |
|
| December 31, 2022 |
| |||||||||||||||||||
| Principal |
|
| Unamortized |
|
| Carrying |
|
| Principal |
|
| Unamortized |
|
| Carrying |
| |||||||
5.625% Senior Notes due 2024(1) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 350,000 |
|
|
| (628 | ) |
|
| 349,372 |
|
5.875% Senior Notes due 2027 |
|
| 500,000 |
|
|
| (2,867 | ) |
|
| 497,133 |
|
|
| 500,000 |
|
|
| (3,459 | ) |
|
| 496,541 |
|
6.625% Senior Notes due 2027(2) |
|
| 27,070 |
|
|
| 1,094 |
|
|
| 28,164 |
|
|
| 27,070 |
|
|
| 1,310 |
|
|
| 28,380 |
|
5.75% Senior Notes due 2028 |
|
| 450,000 |
|
|
| (2,709 | ) |
|
| 447,291 |
|
|
| 450,000 |
|
|
| (3,183 | ) |
|
| 446,817 |
|
5.125% Senior Notes due 2030 |
|
| 500,000 |
|
|
| (4,333 | ) |
|
| 495,667 |
|
|
| 500,000 |
|
|
| (4,807 | ) |
|
| 495,193 |
|
Senior Notes subtotal |
| $ | 1,477,070 |
|
| $ | (8,815 | ) |
| $ | 1,468,255 |
|
| $ | 1,827,070 |
|
| $ | (10,767 | ) |
| $ | 1,816,303 |
|
Loans payable and other borrowings |
|
| 332,177 |
|
|
| — |
|
|
| 332,177 |
|
|
| 361,486 |
|
|
| — |
|
|
| 361,486 |
|
$1 Billion Revolving Credit Facility(3)(4) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
$100 Million Revolving Credit Facility(3)(4) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Mortgage warehouse borrowings |
|
| 191,645 |
|
|
| — |
|
|
| 191,645 |
|
|
| 306,072 |
|
|
| — |
|
|
| 306,072 |
|
Total debt |
| $ | 2,000,892 |
|
| $ | (8,815 | ) |
| $ | 1,992,077 |
|
| $ | 2,494,628 |
|
| $ | (10,767 | ) |
| $ | 2,483,861 |
|
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, 2021.2022. For information regarding such instruments, refer to Note 8 - Debt to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2021.Report. As of September 30, 2022,2023, we were in compliance with all of the covenants in the debt instruments listed in the table above.
5.625
$
Our $1$1 Billion RevolvingRevolving Credit Facility has a maturity date of March 11, 2027. 2027. We had no outstanding borrowings under our $1$1 Billion Revolving Credit Facility as of September 30, 20222023 and December 31, 2021.2022.
TAYLOR MORRISON HOME CORPORATION 10-Q
13
ITEM 1. FINANCIAL STATEMENTS
respectively, of utilized letters of credit, resulting in $938.8$929.6 million and $741.3$930.8 million, respectively, of availability under the $1$1 Billion Revolving Credit Facility.
The $1$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 $2.8$3.2 billion. The financial covenants would be in effect for any fiscal quarter during which any (a) loans under the $1$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$1 Billion Revolving Credit Facility in an aggregate amount greater than $40.0$40.0 million or unreimbursed letters of credit issued under the $1$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$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$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$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, 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 |
| As of September 30, 2023 | |||||||||||||
Facility |
| Amount |
|
| Facility |
|
| Interest |
| Expiration |
| Collateral (1) | ||
Warehouse A |
| $ | 39,294 |
|
| $ | 60,000 |
|
| Daily SOFR + 1.70% |
| on Demand |
| Mortgage Loans |
Warehouse B(2) |
|
| — |
|
|
| — |
|
| N/A |
| N/A |
| N/A |
Warehouse C |
|
| 51,990 |
|
|
| 100,000 |
|
| Term SOFR + 1.65% |
| on Demand |
| Mortgage Loans & Pledged Cash |
Warehouse D |
|
| 42,938 |
|
|
| 100,000 |
|
| Daily SOFR + 1.50% |
| September 4, 2024 |
| Mortgage Loans |
Warehouse E |
|
| 57,423 |
|
|
| 100,000 |
|
| Term SOFR + 1.60% |
| on Demand |
| Mortgage Loans |
Total |
| $ | 191,645 |
|
| $ | 360,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
| As of December 31, 2022 | |||||||||||||
Facility |
| Amount |
|
| Facility |
|
| Interest |
| Expiration |
| Collateral (1) | ||
Warehouse A |
| $ | 29,066 |
|
| $ | 60,000 |
|
| Daily SOFR + 1.70% |
| on Demand |
| Mortgage Loans |
Warehouse B |
|
| 94,258 |
|
|
| 150,000 |
|
| BSBY 1M + 1.65% |
| on Demand |
| Mortgage Loans |
Warehouse C |
|
| 53,607 |
|
|
| 75,000 |
|
| Term SOFR + 1.65% |
| on Demand |
| Mortgage Loans & Pledged Cash |
Warehouse D |
|
| 83,259 |
|
|
| 140,000 |
|
| Daily SOFR + 1.50% |
| September 6, 2023 |
| Mortgage Loans |
Warehouse E |
|
| 45,882 |
|
|
| 70,000 |
|
| Term SOFR + 1.60% |
| on Demand |
| Mortgage Loans |
Total |
| $ | 306,072 |
|
| $ | 495,000 |
|
|
|
|
|
|
|
Loans Payable and Other Borrowings Loans payable and other borrowings as of September 30, TAYLOR MORRISON HOME CORPORATION 10-Q 14 ITEM 1. FINANCIAL STATEMENTS 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. 20222023 and December 31, 20212022 consist of project-level debt due to various land sellers and 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 closings or a principal reduction schedule. Loans payable bear interest at rates that ranged from 0%0% to 8%9% and 0% to 8% at each of September 30, 20222023 and December 31, 2021.2022, respectively. We impute interest for loans with no stated interest rates.The fair value of derivativeDerivative assets and liabilities includesinclude 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,loans, quoted MBS prices and the172022,2023, when compared to December 31, 2021.
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, 2023 |
|
| December 31, 2022 |
| |||||||||||
(Dollars in thousands) |
| Level in Fair |
| Carrying |
|
| Estimated |
|
| Carrying |
|
| Estimated |
| ||||
Description: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Mortgage loans held for sale |
| 2 |
| $ | 241,749 |
|
| $ | 241,749 |
|
| $ | 346,364 |
|
| $ | 346,364 |
|
IRLCs |
| 3 |
|
| (5,408 | ) |
|
| (5,408 | ) |
|
| 2,386 |
|
|
| 2,386 |
|
MBSs |
| 2 |
|
| 7,125 |
|
|
| 7,125 |
|
|
| 1,090 |
|
|
| 1,090 |
|
Mortgage warehouse borrowings |
| 2 |
|
| 191,645 |
|
|
| 191,645 |
|
|
| 306,072 |
|
|
| 306,072 |
|
Loans payable and other borrowings |
| 2 |
|
| 332,177 |
|
|
| 332,177 |
|
|
| 361,486 |
|
|
| 361,486 |
|
5.625% Senior Notes due 2024 (1)(2) |
| 2 |
|
| — |
|
|
| — |
|
|
| 349,372 |
|
|
| 347,375 |
|
5.875% Senior Notes due 2027 (2) |
| 2 |
|
| 497,133 |
|
|
| 473,860 |
|
|
| 496,541 |
|
|
| 480,060 |
|
6.625% Senior Notes due 2027 (2) |
| 2 |
|
| 28,164 |
|
|
| 24,972 |
|
|
| 28,380 |
|
|
| 26,123 |
|
5.75% Senior Notes due 2028 (2) |
| 2 |
|
| 447,291 |
|
|
| 419,589 |
|
|
| 446,817 |
|
|
| 421,358 |
|
5.125% Senior Notes due 2030 (2) |
| 2 |
|
| 495,667 |
|
|
| 437,940 |
|
|
| 495,193 |
|
|
| 434,330 |
|
Equity Security |
| 1 |
|
| 460 |
|
|
| 460 |
|
|
| 460 |
|
|
| 460 |
|
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:
(Dollars in thousands) |
| Level in Fair |
|
| As of |
|
| As of |
| |||
Description: |
|
|
|
|
|
|
|
|
| |||
Real estate inventories |
|
| 3 |
|
| $ | 19,263 |
|
| $ | 48,360 |
|
9. INCOME TAXES
The effective tax rate for the three and nine months ended September 30, 20222023 was 22.6%25.4% and 23.8%24.7%, respectively, compared to 23.5%22.6% and 23.2%23.8%, respectively, for the same periods in 2021. 2022.
For both the three and nine months ended September 30, 20222023 and 20212022, 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
TAYLOR MORRISON HOME CORPORATION 10-Q
15
ITEM 1. FINANCIAL STATEMENTS
compensation, and special deductions and credits relatingrelated to homebuilding activities.
The Inflation Reduction Act also created a 15% corporate alternative minimum tax. The corporate alternative minimum tax had no impact on our consolidated financial statements for the three and nine months ended September 30, 2022 and2023.
There were no unrecognized tax benefits as of September 30, 2023 or December 31, 2021, there were no unrecognized tax benefits.2022.
Capital Stock
Stock Repurchase Program
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| |||||||||||
(Dollars in thousands) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Amount available for repurchase — beginning of period |
| $ | 275,570 |
|
| $ | 425,000 |
|
| $ | 279,138 |
|
| $ | 230,413 |
|
Amount cancelled from expired or unused authorizations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (75,000 | ) |
Additional amount authorized for repurchase |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 500,000 |
|
Amount repurchased |
|
| (100,000 | ) |
|
| (104,999 | ) |
|
| (103,568 | ) |
|
| (335,412 | ) |
Amount available for repurchase — end of period |
| $ | 175,570 |
|
| $ | 320,001 |
|
| $ | 175,570 |
|
| $ | 320,001 |
|
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 4,213,2562,169,657 and 12,940,9412,278,982 shares underduring the share repurchase programthree and nine months ended September 30, 2023, respectively. The Company repurchased 4,213,256 and 12,940,941 shares during the three and nine months ended September 30, 2022, respectively.
The numberInflation Reduction Act was enacted on August 16, 2022 and includes a one percent excise tax on the net repurchase of shares repurchased were 3,309,196company stock. This act was effective as of January 1, 2023 and 8,565,933 duringdid not have a material impact on our financial statements for the three and nine months ended September 30, 2021, respectively.2023. We will continue to assess the impact it may have on our financial results.
Equity-Based Compensation
In April 2013, we adopted the Taylor Morrison Home Corporation 2013 Omnibus Equity Award Plan (the “Plan”). The Plan
| RSUs and PRSUs |
|
| Stock Options |
| |||||||||||
| Units |
|
| Weighted Average |
|
| Units |
|
| Weighted |
| |||||
Balance at September 30, 2023 |
|
| 1,490,914 |
|
| $ | 30.26 |
|
|
| 2,265,448 |
|
| $ | 26.80 |
|
TAYLOR MORRISON HOME CORPORATION 10-Q
16
ITEM 1. FINANCIAL STATEMENTS
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 |
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 |
|
| Nine Months Ended |
| |||||||||||
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| |||||
Restricted stock units (1) |
| $ | 4,615 |
|
| $ | 4,215 |
|
| $ | 15,502 |
|
| $ | 14,133 |
|
Stock options |
|
| 1,087 |
|
|
| 1,118 |
|
|
| 3,004 |
|
|
| 3,341 |
|
Total stock compensation |
| $ | 5,702 |
|
| $ | 5,333 |
|
| $ | 18,506 |
|
| $ | 17,474 |
|
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
East | Atlanta, Charlotte, Jacksonville, Naples, Orlando, Raleigh, Sarasota, and Tampa | ||||
Central | Austin, Dallas, Denver, and Houston | ||||
West | Bay Area, Las Vegas, Phoenix, Portland, Sacramento, Seattle, and Southern California | ||||
Financial Services | Taylor Morrison Home Funding, Inspired Title Services, and Taylor Morrison Insurance Services |
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 |
| Three Months Ended September 30, 2023 |
| ||||||||||||||||||||||
| East |
|
| Central |
|
| West |
|
| Financial |
|
| Corporate |
|
| Total |
| |||||||
Total revenue |
| $ | 582,557 |
|
| $ | 433,610 |
|
| $ | 615,817 |
|
| $ | 40,045 |
|
| $ | 3,516 |
|
| $ | 1,675,545 |
|
Gross margin |
|
| 158,096 |
|
|
| 109,481 |
|
|
| 106,103 |
|
|
| 16,917 |
|
|
| 1,121 |
|
|
| 391,718 |
|
Selling, general and administrative expenses |
|
| (42,957 | ) |
|
| (37,712 | ) |
|
| (45,442 | ) |
|
| 91 |
|
|
| (41,771 | ) |
|
| (167,791 | ) |
Net (loss)/income from unconsolidated entities |
|
| — |
|
|
| (81 | ) |
|
| 341 |
|
|
| 1,671 |
|
|
| 3 |
|
|
| 1,934 |
|
Interest and other (expense)/income, net (2) |
|
| (425 | ) |
|
| (2,380 | ) |
|
| (2,929 | ) |
|
| — |
|
|
| 8,548 |
|
|
| 2,814 |
|
Loss on extinguishment of debt, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (269 | ) |
|
| (269 | ) |
Income/(loss) before income taxes |
| $ | 114,714 |
|
| $ | 69,308 |
|
| $ | 58,073 |
|
| $ | 18,679 |
|
| $ | (32,368 | ) |
| $ | 228,406 |
|
| Three Months Ended September 30, 2022 |
| ||||||||||||||||||||||
| East |
|
| Central |
|
| West |
|
| Financial Services |
|
| Corporate |
|
| 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 (expense)/income, 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 |
|
TAYLOR MORRISON HOME CORPORATION 10-Q
17
ITEM 1. FINANCIAL STATEMENTS
| Nine Months Ended September 30, 2023 |
| ||||||||||||||||||||||
| East |
|
| Central |
|
| West |
|
| Financial |
|
| Corporate |
|
| Total |
| |||||||
Total revenue |
| $ | 1,933,434 |
|
| $ | 1,521,829 |
|
| $ | 1,815,980 |
|
| $ | 117,108 |
|
| $ | 9,615 |
|
| $ | 5,397,966 |
|
Gross margin |
|
| 526,968 |
|
|
| 381,279 |
|
|
| 333,843 |
|
|
| 46,490 |
|
|
| 2,389 |
|
|
| 1,290,969 |
|
Selling, general and administrative expenses |
|
| (133,908 | ) |
|
| (120,058 | ) |
|
| (133,027 | ) |
|
| — |
|
|
| (123,502 | ) |
|
| (510,495 | ) |
Net (loss)/income from unconsolidated entities |
|
| — |
|
|
| (63 | ) |
|
| (67 | ) |
|
| 7,205 |
|
|
| (26 | ) |
|
| 7,049 |
|
Interest and other (expense)/income, net(2) |
|
| (2,773 | ) |
|
| (5,241 | ) |
|
| (2,157 | ) |
|
| — |
|
|
| 15,501 |
|
|
| 5,330 |
|
Loss on extinguishment of debt, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (269 | ) |
|
| (269 | ) |
Income/(loss) before income taxes |
| $ | 390,287 |
|
| $ | 255,917 |
|
| $ | 198,592 |
|
| $ | 53,695 |
|
| $ | (105,907 | ) |
| $ | 792,584 |
|
| Nine Months Ended September 30, 2022 |
| ||||||||||||||||||||||
| East |
|
| Central |
|
| West |
|
| Financial |
|
| Corporate |
|
| 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 (loss)/income 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, 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 |
| As of September 30, 2023 |
| ||||||||||||||||||||||
| East |
|
| Central |
|
| West |
|
| Financial Services |
|
| Corporate |
|
| Total |
| |||||||
Real estate inventory and land deposits |
| $ | 1,942,255 |
|
| $ | 1,157,825 |
|
| $ | 2,586,588 |
|
| $ | — |
|
| $ | — |
|
| $ | 5,686,668 |
|
Investments in unconsolidated entities |
|
| 56,652 |
|
|
| 121,549 |
|
|
| 86,047 |
|
|
| 5,283 |
|
|
| 60,103 |
|
|
| 329,634 |
|
Other assets |
|
| 158,361 |
|
|
| 233,570 |
|
|
| 595,521 |
|
|
| 339,649 |
|
|
| 1,093,515 |
|
|
| 2,420,616 |
|
Total assets |
| $ | 2,157,268 |
|
| $ | 1,512,944 |
|
| $ | 3,268,156 |
|
| $ | 344,932 |
|
| $ | 1,153,618 |
|
| $ | 8,436,918 |
|
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 |
Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||||||||||||||||
East | Central | West | Financial Services | Corporate and Unallocated(1) | Total | |||||||||||||||||||||||||||||||||
Total revenue | $ | 1,606,603 | $ | 1,110,399 | $ | 2,158,251 | $ | 119,503 | $ | 1,087 | $ | 4,995,843 | ||||||||||||||||||||||||||
Gross margin | 336,542 | 212,076 | 404,093 | 43,367 | (484) | 995,594 | ||||||||||||||||||||||||||||||||
Selling, general and administrative expenses | (128,402) | (92,225) | (137,384) | — | (124,661) | (482,672) | ||||||||||||||||||||||||||||||||
Net (loss)/income from unconsolidated entities | — | (85) | 2,139 | 7,225 | (10) | 9,269 | ||||||||||||||||||||||||||||||||
Interest and other income/(expense), net (2) | (328) | (1,694) | (1,165) | — | 1,526 | (1,661) | ||||||||||||||||||||||||||||||||
Income/(loss) before income taxes | $ | 207,812 | $ | 118,072 | $ | 267,683 | $ | 50,592 | $ | (123,629) | $ | 520,530 |
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 |
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 |
| As of December 31, 2022 |
| ||||||||||||||||||||||
| East |
|
| Central |
|
| West |
|
| Financial |
|
| Corporate |
|
| Total |
| |||||||
Real estate inventory and land deposits |
| $ | 1,820,765 |
|
| $ | 1,359,805 |
|
| $ | 2,453,662 |
|
| $ | — |
|
| $ | — |
|
| $ | 5,634,232 |
|
Investments in unconsolidated entities |
|
| 46,629 |
|
|
| 104,070 |
|
|
| 80,310 |
|
|
| 5,283 |
|
|
| 46,608 |
|
|
| 282,900 |
|
Other assets |
|
| 216,816 |
|
|
| 251,727 |
|
|
| 613,029 |
|
|
| 431,535 |
|
|
| 1,040,485 |
|
|
| 2,553,592 |
|
Total assets |
| $ | 2,084,210 |
|
| $ | 1,715,602 |
|
| $ | 3,147,001 |
|
| $ | 436,818 |
|
| $ | 1,087,093 |
|
| $ | 8,470,724 |
|
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 $1.2$1.3 billion as of September 30, 20222023 and $1.2 billion as of December 31, 2021.2022. 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, 20222023 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 creditorsproperty
TAYLOR MORRISON HOME CORPORATION 10-Q
18
Table of the property Contents
ITEM 1. FINANCIAL STATEMENTS
owner and its creditors 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, thedeposits. The aggregate purchase price offor land under these contracts was $1.5$1.6 billion at September 30, 2023 and $1.3$1.5 billion respectively.at December 31, 2022.
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
We establish liabilities for legal claims and regulatory matters when such matters are both probable of occurring and any potential loss iscan be reasonably estimable.estimated. At September 30, 20222023 and December 31, 2021,2022, our legal accruals were $20.5$19.1 million and $21.7$20.6 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. Predicting the ultimate resolution of the pending matters, the related timing, or the eventual 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.matter. 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.
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 trial court determined that the club membership fees were improper and that plaintiffs were entitled to $35.0$35.0 million in fee reimbursements. We appealed the court’s ruling to the SecondSixth District Court of Appeal on November 29, 2021, and ason June 23, 2023 the District Court affirmed the trial court judgment in a split decision, with three separate opinions. Recognizing the potential “far-reaching effects on homeowners associations throughout the State,” the District Court certified a question of September 30, 2022, our appeal remains pending. great public importance to the Florida Supreme Court. We have since filed a notice to invoke the discretionary review of the Florida Supreme Court.
Plaintiffs have agreed to continue to pay club membership fees pending the outcome of the appeal.appeal to the Florida Supreme Court. We believe, based on our assessment and the opinion of external legal counsel, that the court’strial and District Court’s legal interpretation constitutes legal error and the courtcourts 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 outcome 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.appeal to the Florida Supreme Court. This belief is based on our review of the legal merit of the judgement,judgment and the opinions of the trial and District Courts, 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 to the Florida Supreme Court and will have zero liability.
As of | ||||||||||||||||||||||||||
September 30, 2022 | December 31, 2021 | |||||||||||||||||||||||||
(Dollars in thousands) | Fair Value | Notional Amount (1) | Fair Value | Notional Amount (1) | ||||||||||||||||||||||
IRLCs | $ | (12,792) | $ | 651,953 | $ | 2,110 | $ | 158,299 | ||||||||||||||||||
MBSs | 23,832 | 596,000 | (449) | 407,000 | ||||||||||||||||||||||
Total | $ | 11,040 | $ | 1,661 |
| As of |
| ||||||||||||||
| September 30, 2023 |
|
| December 31, 2022 |
| |||||||||||
(Dollars in thousands) |
| Fair Value |
|
| Notional Amount (1) |
|
| Fair Value |
|
| Notional Amount (1) |
| ||||
IRLCs |
| $ | (5,408 | ) |
| $ | 332,421 |
|
| $ | 2,386 |
|
| $ | 375,030 |
|
MBSs |
|
| 7,125 |
|
|
| 479,000 |
|
|
| 1,090 |
|
|
| 504,000 |
|
Total |
| $ | 1,717 |
|
|
|
|
| $ | 3,476 |
|
|
|
|
TAYLOR MORRISON HOME CORPORATION 10-Q
19
ITEM 1. FINANCIAL STATEMENTS
Total commitments to originate loans approximated $716.6$359.9 million and $173.7$419.6 million as of September 30, 20222023 and December 31, 2021,2022, respectively. This amount represents the commitments to originate loans that have been locked and approved by underwriting. The notional amounts in the table above includes 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, placing contractual limits on the amount of unsecured credit extended to any single counterparty, and 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.
TAYLOR MORRISON HOME CORPORATION 10-Q
20
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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.
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 the Company's Annual Report on Form 10-K for the year ended December 31, 20212022 (“Annual Report”) and in our subsequent filings with the U.S. Securities and Exchange Commission (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.
Business Overview
Our principal business is residential homebuilding and the development of lifestyle communities with operations geographically focused in Arizona, California, Colorado, Florida, Georgia, Nevada, North and South Carolina, Oregon, Texas, and Washington.across 11 states. We serveprovide an assortment of homes across a wide range of price points to appeal to an array of consumer groups from coast to coast, including entry-level, move-up,groups. We design, build and resort lifestyle (formerly referred to as 55-plus active lifestyle) buyers, buildingsell single and multi-family detached and attached homes in traditionally high growth markets for entry level, move-up, and detached homes. Our homebuilding company operatesresort-lifestyle buyers. We operate under ourvarious brand names including Taylor Morrison, Darling Homes Collection by Taylor Morrison, and Esplanade brand names.Esplanade. We operatealso have a “Build-to-Rent” homebuilding business wherewhich operates under the Yardly brand name. In addition, we serve as a land acquirer, developer,develop and homebuilder. We also operate Urban Form Development, LLC (“Urban Form”), which primarily develops and constructsconstruct multi-use properties consisting of commercial space, retail, and multi-family units.properties under the Urban Form brand name. We also have operations which provide financial services to customers through our wholly owned mortgage subsidiary, Taylor Morrison Home Funding, INC (“TMHF”),TMHF, title services through our wholly owned title services subsidiary, Inspired Title, Services, LLC (“Inspired Title”), and homeowner’s insurance policies through our wholly owned insurance agency, Taylor Morrison Insurance Services, LLC (“TMIS”). Our business asTMIS. As of September 30, 20222023, our business is organized into multiple homebuilding operating components, and a financial services component, all of which are managed as four reportable segments: East, Central, West and Financial Services, as follows:
East |
| Atlanta, Charlotte, Jacksonville, Naples, Orlando, Raleigh, Sarasota, and Tampa | ||||||
Central | Austin, Dallas, Denver, and Houston | |||||||
West |
| Bay Area, Las Vegas, Phoenix, Portland, Sacramento, Seattle, and Southern California | ||||||
Financial Services |
| Taylor Morrison Home Funding, Inspired Title Services, and Taylor Morrison Insurance Services |
For the three months ended September 30, 2023 we recognized $11.8 million in inventory impairment. Impairments are recorded to Cost of home closings on the unaudited Condensed Consolidated Statement of Operations. For the three and nine months ended September 30, 2022, no inventory impairment was incurred.
TAYLOR MORRISON HOME CORPORATION 10-Q
21
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the three and nine months ended September 30, 2023 we recognized a $0.3 million net loss on extinguishment of debt relating to our redemption of the 2024Senior Notes. For the three and nine months ended September 30, 2022, we recognized a $0.1 million and $13.5 million net gain on extinguishment of debt relating to our partial redemption of our 6.625% Senior Notes due 2027. Such losses and gains are included in Loss/(gain) on extinguishment of debt, net on our unaudited Condensed Consolidated Statements of Operations.
For the three and nine months ended September 30, 2022, 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 unaudited Condensed Consolidated Statements of Operations. In addition, forNo such gains were recognized in 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 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 20222023 Highlights (all comparisons are of the current quarter to the prior year quarter, unless otherwise indicated):
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 | ||||||||||||||||||||||
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 | % | ||||||||||||||||||
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||
(Dollars in thousands) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Statements of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Home closings revenue, net |
| $ | 1,611,883 |
|
| $ | 1,983,775 |
|
| $ | 5,221,225 |
|
| $ | 5,511,204 |
|
Land closings revenue |
|
| 14,291 |
|
|
| 14,225 |
|
|
| 31,439 |
|
|
| 66,651 |
|
Financial services revenue |
|
| 40,045 |
|
|
| 27,749 |
|
|
| 117,108 |
|
|
| 98,419 |
|
Amenity and other revenue |
|
| 9,326 |
|
|
| 8,895 |
|
|
| 28,194 |
|
|
| 56,517 |
|
Total revenue |
|
| 1,675,545 |
|
|
| 2,034,644 |
|
|
| 5,397,966 |
|
|
| 5,732,791 |
|
Cost of home closings |
|
| 1,238,999 |
|
|
| 1,438,164 |
|
|
| 3,980,749 |
|
|
| 4,084,748 |
|
Cost of land closings |
|
| 13,572 |
|
|
| 11,571 |
|
|
| 30,620 |
|
|
| 50,139 |
|
Financial services expenses |
|
| 23,128 |
|
|
| 20,395 |
|
|
| 70,618 |
|
|
| 66,092 |
|
Amenity and other expenses |
|
| 8,128 |
|
|
| 6,574 |
|
|
| 25,010 |
|
|
| 39,264 |
|
Total cost of revenue |
|
| 1,283,827 |
|
|
| 1,476,704 |
|
|
| 4,106,997 |
|
|
| 4,240,243 |
|
Gross margin |
|
| 391,718 |
|
|
| 557,940 |
|
|
| 1,290,969 |
|
|
| 1,492,548 |
|
Sales, commissions and other marketing costs |
|
| 98,797 |
|
|
| 94,692 |
|
|
| 304,591 |
|
|
| 279,950 |
|
General and administrative expenses |
|
| 68,994 |
|
|
| 52,357 |
|
|
| 205,904 |
|
|
| 189,905 |
|
Net (income)/loss from unconsolidated entities |
|
| (1,934 | ) |
|
| 1,180 |
|
|
| (7,049 | ) |
|
| 2,986 |
|
Interest (income)/expense, net |
|
| (5,782 | ) |
|
| 4,382 |
|
|
| (12,013 | ) |
|
| 13,823 |
|
Other expense/(income), net |
|
| 2,968 |
|
|
| 5,751 |
|
|
| 6,683 |
|
|
| (4,720 | ) |
Loss/(gain) on extinguishment of debt, net |
|
| 269 |
|
|
| (71 | ) |
|
| 269 |
|
|
| (13,542 | ) |
Income before income taxes |
|
| 228,406 |
|
|
| 399,649 |
|
|
| 792,584 |
|
|
| 1,024,146 |
|
Income tax provision |
|
| 57,960 |
|
|
| 90,418 |
|
|
| 196,005 |
|
|
| 243,300 |
|
Net income before allocation to non-controlling interests |
|
| 170,446 |
|
|
| 309,231 |
|
|
| 596,579 |
|
|
| 780,846 |
|
Net income attributable to non-controlling interests |
|
| 245 |
|
|
| 548 |
|
|
| (235 | ) |
|
| (3,377 | ) |
Net income available to Taylor Morrison Home Corporation |
| $ | 170,691 |
|
| $ | 309,779 |
|
| $ | 596,344 |
|
| $ | 777,469 |
|
Home closings gross margin |
|
| 23.1 | % |
|
| 27.5 | % |
|
| 23.8 | % |
|
| 25.9 | % |
Sales, commissions and other marketing costs as a percentage of |
|
| 6.1 | % |
|
| 4.8 | % |
|
| 5.8 | % |
|
| 5.1 | % |
General and administrative expenses as a percentage of home |
|
| 4.3 | % |
|
| 2.6 | % |
|
| 3.9 | % |
|
| 3.4 | % |
TAYLOR MORRISON HOME CORPORATION 10-Q
22
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Non-GAAP Measures
These non-GAAP financial measures should be considered in addition to, rather than as a substitute for, the comparable U.S. GAAP financial measures of our operating performance or liquidity. Although other companies in the homebuilding industry may report similar information, their definitions may differ. We urge investors to understand the methods used by other companies to calculate similarly-titled non-GAAP financial measures before comparing their measures to ours.Adjusted Net Income and Adjusted Earnings Per Common Share Three Months Ended September 30, (Dollars in thousands, except per share data) 2022 2021 Net income available to TMHC $ 309,779 $ 168,134 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
A reconciliation of (i) adjusted net income and adjusted earnings per common share, (ii) adjusted income before income taxes and related margin, (iii) adjusted home closings gross margin, (iv) EBITDA and adjusted EBITDA and (v) net homebuilding debt to capitalization ratio to the comparable GAAP measures is presented below.
Adjusted Net Income and Adjusted Earnings Per Common Share
| Three Months Ended September 30, |
| ||||||
(Dollars in thousands, except per share data) |
| 2023 |
|
| 2022 |
| ||
Net income available to TMHC |
| $ | 170,691 |
|
| $ | 309,779 |
|
Inventory impairments |
|
| 11,791 |
|
|
| — |
|
Gain on land transfers to joint ventures |
|
| — |
|
|
| (808 | ) |
Loss/(gain) on extinguishment of debt, net |
|
| 269 |
|
|
| (71 | ) |
Tax impact due to above non-GAAP reconciling items |
|
| (3,060 | ) |
|
| 205 |
|
Adjusted net income |
| $ | 179,691 |
|
| $ | 309,105 |
|
Basic weighted average number of shares |
|
| 108,837 |
|
|
| 112,701 |
|
Adjusted earnings per common share - Basic |
| $ | 1.65 |
|
| $ | 2.74 |
|
Diluted weighted average number of shares |
|
| 110,622 |
|
|
| 113,780 |
|
Adjusted earnings per common share - Diluted |
| $ | 1.62 |
|
| $ | 2.72 |
|
TAYLOR MORRISON HOME CORPORATION 10-Q
23
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 | ||||||||||
Gain on land transfers | (808) | — | ||||||||||||
Gain on extinguishment of debt, net | (71) | — | ||||||||||||
Adjusted income before income taxes | $ | 398,770 | $ | 225,565 | ||||||||||
Total revenue | $ | 2,034,644 | $ | 1,858,751 | ||||||||||
Income before income taxes margin | 19.6 | % | 12.1 | % | ||||||||||
Adjusted income before income taxes margin | 19.6 | % | 12.1 | % |
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 | ||||||||||||
Gain on land transfers | (808) | — | ||||||||||||
Gain on extinguishment of debt, net | (71) | — | ||||||||||||
Adjusted EBITDA | $ | 443,743 | $ | 271,183 | ||||||||||
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 | % |
Adjusted Income Before Income Taxes and Related Margin
| Three Months Ended September 30, |
| ||||||
(Dollars in thousands) |
| 2023 |
|
| 2022 |
| ||
Income before income taxes |
| $ | 228,406 |
|
| $ | 399,649 |
|
Inventory impairments |
|
| 11,791 |
|
|
| — |
|
Gain on land transfers to joint ventures |
|
| — |
|
|
| (808 | ) |
Loss/(gain) on extinguishment of debt, net |
|
| 269 |
|
|
| (71 | ) |
Adjusted income before income taxes |
| $ | 240,466 |
|
| $ | 398,770 |
|
Total revenue |
| $ | 1,675,545 |
|
| $ | 2,034,644 |
|
Income before income taxes margin |
|
| 13.6 | % |
|
| 19.6 | % |
Adjusted income before income taxes margin |
|
| 14.4 | % |
|
| 19.6 | % |
Adjusted Home Closings Gross Margin
|
| |||||||
|
| Three Months Ended |
| |||||
(Dollars in thousands) |
| 2023 |
|
| 2022 |
| ||
Home closings revenue |
| $ | 1,611,883 |
|
| $ | 1,983,775 |
|
Cost of home closings |
| $ | 1,238,999 |
|
| $ | 1,438,164 |
|
Home closings gross margin |
| $ | 372,884 |
|
| $ | 545,611 |
|
Inventory impairments |
|
| 11,791 |
|
|
| — |
|
Adjusted home closings gross margin |
| $ | 384,675 |
|
| $ | 545,611 |
|
Home closings gross margin as a percentage of home closings revenue |
|
| 23.1 | % |
|
| 27.5 | % |
Adjusted home closings gross margin as a percentage of home closings revenue |
|
| 23.9 | % |
|
| 27.5 | % |
EBITDA and Adjusted EBITDA Reconciliation
|
| Three Months Ended September 30, |
| |||||
(Dollars in thousands) |
| 2023 |
|
| 2022 |
| ||
Net income before allocation to non-controlling interests |
| $ | 170,446 |
|
| $ | 309,231 |
|
Interest (income)/expense, net |
|
| (5,782 | ) |
|
| 4,382 |
|
Amortization of capitalized interest |
|
| 32,377 |
|
|
| 33,774 |
|
Income tax provision |
|
| 57,960 |
|
|
| 90,418 |
|
Depreciation and amortization |
|
| 2,728 |
|
|
| 1,484 |
|
EBITDA |
| $ | 257,729 |
|
| $ | 439,289 |
|
Non-cash compensation expense |
|
| 5,702 |
|
|
| 5,333 |
|
Inventory impairments |
|
| 11,791 |
|
|
| — |
|
Gain on land transfers to joint ventures |
|
| — |
|
|
| (808 | ) |
Loss/(gain) on extinguishment of debt, net |
|
| 269 |
|
|
| (71 | ) |
Adjusted EBITDA |
| $ | 275,491 |
|
| $ | 443,743 |
|
Total revenue |
| $ | 1,675,545 |
|
| $ | 2,034,644 |
|
Net income before allocation to non-controlling interests as a percentage of |
|
| 10.2 | % |
|
| 15.2 | % |
EBITDA as a percentage of total revenue |
|
| 15.4 | % |
|
| 21.6 | % |
Adjusted EBITDA as a percentage of total revenue |
|
| 16.4 | % |
|
| 21.8 | % |
TAYLOR MORRISON HOME CORPORATION 10-Q
24
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 | |||||||||||
Net homebuilding debt to capitalization ratio | 34.0 | % | 36.4 | % | 41.1 | % |
Net Homebuilding Debt to Capitalization Ratio Reconciliation
(Dollars in thousands) |
| As of |
|
| As of |
|
| As of |
| |||
Total debt |
| $ | 1,992,077 |
|
| $ | 2,393,571 |
|
| $ | 2,729,924 |
|
Plus: unamortized debt issuance cost, net |
|
| 8,815 |
|
|
| 9,613 |
|
|
| 11,242 |
|
Less: mortgage warehouse borrowings |
| $ | (191,645 | ) |
|
| (249,898 | ) |
|
| (146,335 | ) |
Total homebuilding debt |
| $ | 1,809,247 |
|
| $ | 2,153,286 |
|
| $ | 2,594,831 |
|
Total equity |
|
| 5,175,110 |
|
|
| 5,095,313 |
|
|
| 4,403,466 |
|
Total capitalization |
| $ | 6,984,357 |
|
| $ | 7,248,599 |
|
| $ | 6,998,297 |
|
Total homebuilding debt to capitalization ratio |
|
| 25.9 | % |
|
| 29.7 | % |
|
| 37.1 | % |
|
|
|
|
|
|
|
|
|
| |||
Total homebuilding debt |
| $ | 1,809,247 |
|
| $ | 2,153,286 |
|
| $ | 2,594,831 |
|
Less: cash and cash equivalents |
|
| (613,811 | ) |
|
| (1,227,264 | ) |
|
| (329,244 | ) |
Net homebuilding debt |
| $ | 1,195,436 |
|
| $ | 926,022 |
|
| $ | 2,265,587 |
|
Total equity |
|
| 5,175,110 |
|
|
| 5,095,313 |
|
|
| 4,403,466 |
|
Total capitalization |
| $ | 6,370,546 |
|
| $ | 6,021,335 |
|
| $ | 6,669,053 |
|
Net homebuilding debt to capitalization ratio |
|
| 18.8 | % |
|
| 15.4 | % |
|
| 34.0 | % |
Three and nine months ended September 30, 20222023 compared to three and nine months ended September 30, 2021
Demand for housing has fluctuated the three and nine months ended September 30, 2022 and 2021 were impacted by variouslast several years partially as a result of macro economic conditions. Fromconditions relating to inflation, increasing mortgage interest rates, and industry constraints relating to labor and supply shortages. We believe these events had a series of impacts on us including affordability constraints for some consumers and reduced overall consumer confidence which led to an increase in cancellation rates and reduced sales during the prior year. To mitigate these impacts we began to adjust pricing, primarily by offering finance incentives, as well as home discounts and other pricing reductions during the second half of 2020 through2022. These pricing adjustments and incentives helped drive an increase in sales orders and a gradual normalization in cancellations beginning in 2023. However, the first quarter of 2022, demand for housing increased nationwide. Subsequently, multiple increasesrecent increase 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, forduring 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 us2023 began to utilize pricing strategies that mitigated increases in costs. The average sales price for 2022negatively impact our net sales orders backlog, and homes closed all increased compared toin 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 strategylatter half of selling spec homes, which allows the homes to be further along the cycle time before releasing them to be sold. quarter. Operational information related to each period is presented below:
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 | % |
| As of September 30, |
|
| Change |
| |||||||
|
| 2023 |
|
| 2022 |
|
|
|
| |||
East |
|
| 107 |
|
|
| 118 |
|
|
| (9.3 | )% |
Central |
|
| 94 |
|
|
| 105 |
|
|
| (10.5 | )% |
West |
|
| 124 |
|
|
| 103 |
|
|
| 20.4 | % |
Total |
|
| 325 |
|
|
| 326 |
|
|
| (0.3 | )% |
The total ending active selling communities decreased by one at September 30, 2023 compared to September 30, 2022. The increase in the West was due to several master planned community openings, which was offset by community closeouts in the East and Central regions.
Net Sales Orders
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) | % |
| Three Months Ended September 30, |
| ||||||||||||||||||||||||||||||||||
| Net Sales Orders (1) |
|
| Sales Value (1) |
|
| Average Selling Price |
| ||||||||||||||||||||||||||||
(Dollars in thousands) |
| 2023 |
|
| 2022 |
|
| Change |
|
| 2023 |
|
| 2022 |
|
| Change |
|
| 2023 |
|
| 2022 |
|
| Change |
| |||||||||
East |
|
| 940 |
|
|
| 1,041 |
|
|
| (9.7 | )% |
| $ | 559,524 |
|
| $ | 640,093 |
|
|
| (12.6 | )% |
| $ | 595 |
|
| $ | 615 |
|
|
| (3.3 | )% |
Central |
|
| 641 |
|
|
| 450 |
|
|
| 42.4 | % |
|
| 374,224 |
|
|
| 267,681 |
|
|
| 39.8 | % |
|
| 584 |
|
|
| 595 |
|
|
| (1.8 | )% |
West |
|
| 1,011 |
|
|
| 578 |
|
|
| 74.9 | % |
|
| 680,666 |
|
|
| 372,223 |
|
|
| 82.9 | % |
|
| 673 |
|
|
| 644 |
|
|
| 4.5 | % |
Total |
|
| 2,592 |
|
|
| 2,069 |
|
|
| 25.3 | % |
| $ | 1,614,414 |
|
| $ | 1,279,997 |
|
|
| 26.1 | % |
| $ | 623 |
|
| $ | 619 |
|
|
| 0.6 | % |
TAYLOR MORRISON HOME CORPORATION 10-Q
25
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
| Nine Months Ended September 30, |
| ||||||||||||||||||||||||||||||||||
| Net Sales Orders (1) |
|
| Sales Value (1) |
|
| Average Selling Price |
| ||||||||||||||||||||||||||||
(Dollars in thousands) |
| 2023 |
|
| 2022 |
|
| Change |
|
| 2023 |
|
| 2022 |
|
| Change |
|
| 2023 |
|
| 2022 |
|
| Change |
| |||||||||
East |
|
| 3,066 |
|
|
| 3,189 |
|
|
| (3.9 | )% |
| $ | 1,786,988 |
|
| $ | 1,976,798 |
|
|
| (9.6 | )% |
| $ | 583 |
|
| $ | 620 |
|
|
| (6.0 | )% |
Central |
|
| 2,123 |
|
|
| 1,979 |
|
|
| 7.3 | % |
|
| 1,248,196 |
|
|
| 1,294,106 |
|
|
| (3.5 | )% |
|
| 588 |
|
|
| 654 |
|
|
| (10.1 | )% |
West |
|
| 3,280 |
|
|
| 2,509 |
|
|
| 30.7 | % |
|
| 2,219,056 |
|
|
| 1,878,886 |
|
|
| 18.1 | % |
|
| 677 |
|
|
| 749 |
|
|
| (9.6 | )% |
Total |
|
| 8,469 |
|
|
| 7,677 |
|
|
| 10.3 | % |
| $ | 5,254,240 |
|
| $ | 5,149,790 |
|
|
| 2.0 | % |
| $ | 620 |
|
| $ | 671 |
|
|
| (7.6 | )% |
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 | % |
Sales Order Cancellations
Cancellation Rate(1) | |||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
East | 9.2 | % | 5.6 | % | 7.3 | % | 5.5 | % | |||||||||||||||
Central | 22.5 | % | 7.5 | % | 12.8 | % | 6.7 | % | |||||||||||||||
West | 20.2 | % | 7.4 | % | 12.7 | % | 6.4 | % | |||||||||||||||
Total Company | 15.6 | % | 6.7 | % | 10.6 | % | 6.1 | % |
| Cancellation Rate(1) |
| ||||||||||||||
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| |||||||||||
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| |||||
East |
|
| 8.0 | % |
|
| 9.2 | % |
|
| 8.2 | % |
|
| 7.3 | % |
Central |
|
| 14.9 | % |
|
| 22.5 | % |
|
| 16.3 | % |
|
| 12.8 | % |
West |
|
| 12.1 | % |
|
| 20.2 | % |
|
| 13.1 | % |
|
| 12.7 | % |
Total Company |
|
| 11.4 | % |
|
| 15.6 | % |
|
| 12.3 | % |
|
| 10.6 | % |
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) |
| 2023 |
|
| 2022 |
|
| Change |
|
| 2023 |
|
| 2022 |
|
| Change |
|
| 2023 |
|
| 2022 |
|
| Change |
| |||||||||
East |
|
| 2,421 |
|
|
| 3,256 |
|
|
| (25.6 | )% |
| $ | 1,613,188 |
|
| $ | 2,121,673 |
|
|
| (24.0 | )% |
| $ | 666 |
|
| $ | 652 |
|
|
| 2.1 | % |
Central |
|
| 1,464 |
|
|
| 2,489 |
|
|
| (41.2 | )% |
|
| 960,269 |
|
|
| 1,694,111 |
|
|
| (43.3 | )% |
|
| 656 |
|
|
| 681 |
|
|
| (3.7 | )% |
West |
|
| 2,233 |
|
|
| 2,196 |
|
|
| 1.7 | % |
|
| 1,523,545 |
|
|
| 1,579,937 |
|
|
| (3.6 | )% |
|
| 682 |
|
|
| 719 |
|
|
| (5.1 | )% |
Total |
|
| 6,118 |
|
|
| 7,941 |
|
|
| (23.0 | )% |
| $ | 4,097,002 |
|
| $ | 5,395,721 |
|
|
| (24.1 | )% |
| $ | 670 |
|
| $ | 679 |
|
|
| (1.3 | )% |
Home Closings Revenue
TAYLOR MORRISON HOME CORPORATION 10-Q
26
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 | % |
Nine 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 | 3,152 | 3,464 | (9.0) | % | $ | 1,757,444 | $ | 1,564,206 | 12.4 | % | $ | 558 | $ | 452 | 23.5 | % | ||||||||||||||||||||||||||||||||||||||||
Central | 2,277 | 2,246 | 1.4 | 1,347,828 | 1,101,681 | 22.3 | 592 | 491 | 20.6 | |||||||||||||||||||||||||||||||||||||||||||||||
West | 3,421 | 3,706 | (7.7) | 2,405,932 | 2,114,417 | 13.8 | 703 | 571 | 23.1 | |||||||||||||||||||||||||||||||||||||||||||||||
Total | 8,850 | 9,416 | (6.0) | % | $ | 5,511,204 | $ | 4,780,304 | 15.3 | % | $ | 623 | $ | 508 | 22.6 | % |
| Three Months Ended September 30, |
| ||||||||||||||||||||||||||||||||||
| Homes Closed |
|
| Home Closings Revenue, Net |
|
| Average Selling Price |
| ||||||||||||||||||||||||||||
(Dollars in thousands) |
| 2023 |
|
| 2022 |
|
| Change |
|
| 2023 |
|
| 2022 |
|
| Change |
|
| 2023 |
|
| 2022 |
|
| Change |
| |||||||||
East |
|
| 996 |
|
|
| 1,118 |
|
|
| (10.9 | )% |
| $ | 572,971 |
|
| $ | 638,270 |
|
|
| (10.2 | )% |
| $ | 575 |
|
| $ | 571 |
|
|
| 0.7 | % |
Central |
|
| 709 |
|
|
| 835 |
|
|
| (15.1 | )% |
|
| 423,396 |
|
|
| 522,247 |
|
|
| (18.9 | )% |
|
| 597 |
|
|
| 625 |
|
|
| (4.5 | )% |
West |
|
| 934 |
|
|
| 1,097 |
|
|
| (14.9 | )% |
|
| 615,516 |
|
|
| 823,258 |
|
|
| (25.2 | )% |
|
| 659 |
|
|
| 750 |
|
|
| (12.1 | )% |
Total |
|
| 2,639 |
|
|
| 3,050 |
|
|
| (13.5 | )% |
| $ | 1,611,883 |
|
| $ | 1,983,775 |
|
|
| (18.7 | )% |
| $ | 611 |
|
| $ | 650 |
|
|
| (6.0 | )% |
| Nine Months Ended September 30, |
| ||||||||||||||||||||||||||||||||||
| Homes Closed |
|
| Home Closings Revenue, Net |
|
| Average Selling Price |
| ||||||||||||||||||||||||||||
(Dollars in thousands) |
| 2023 |
|
| 2022 |
|
| Change |
|
| 2023 |
|
| 2022 |
|
| Change |
|
| 2023 |
|
| 2022 |
|
| Change |
| |||||||||
East |
|
| 3,228 |
|
|
| 3,152 |
|
|
| 2.4 | % |
| $ | 1,906,862 |
|
| $ | 1,757,444 |
|
|
| 8.5 | % |
| $ | 591 |
|
| $ | 558 |
|
|
| 5.9 | % |
Central |
|
| 2,376 |
|
|
| 2,277 |
|
|
| 4.3 | % |
|
| 1,499,420 |
|
|
| 1,347,828 |
|
|
| 11.2 | % |
|
| 631 |
|
|
| 592 |
|
|
| 6.6 | % |
West |
|
| 2,701 |
|
|
| 3,421 |
|
|
| (21.0 | )% |
|
| 1,814,943 |
|
|
| 2,405,932 |
|
|
| (24.6 | )% |
|
| 672 |
|
|
| 703 |
|
|
| (4.4 | )% |
Total |
|
| 8,305 |
|
|
| 8,850 |
|
|
| (6.2 | )% |
| $ | 5,221,225 |
|
| $ | 5,511,204 |
|
|
| (5.3 | )% |
| $ | 629 |
|
| $ | 623 |
|
|
| 1.0 | % |
The number of homes closed and home closings revenue, net decreased by 8.3%13.5% and 6.0%,18.7% for the three months ended September 30, 2023, and 6.2% and 5.3% for the nine months ended September 30, 2022, respectively, while home closings revenue, net increased by 11.9% and 15.3%, for the three and nine months ended September 30, 2022, respectively,2023 compared to the same periods in the prior year, respectively. The decreases are primarily driven by slower starts and fewer net sales orders 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 closings revenue, net is a result of sales price appreciation which caused average selling prices to increase by 22.0% and 22.6%decreases for the three and nine months ended September 30, 2023 were partially offset by increases in the East and Central regions which experienced longer cycle times during 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) |
Nine Months Ended September 30, | ||||||||||||||||||||
(Dollars in thousands) | 2022 | 2021 | Change | |||||||||||||||||
East | $ | 36,482 | $ | 27,643 | $ | 8,839 | ||||||||||||||
Central | 3,265 | 8,718 | (5,453) | |||||||||||||||||
West | 26,904 | 42,813 | (15,909) | |||||||||||||||||
Total | $ | 66,651 | $ | 79,174 | $ | (12,523) |
| Three Months Ended September 30, |
| ||||||||||
(Dollars in thousands) |
| 2023 |
|
| 2022 |
|
| Change |
| |||
East |
| $ | 4,077 |
|
| $ | 5,732 |
|
| $ | (1,655 | ) |
Central |
|
| 10,214 |
|
|
| 599 |
|
|
| 9,615 |
|
West |
|
| — |
|
|
| 7,894 |
|
|
| (7,894 | ) |
Total |
| $ | 14,291 |
|
| $ | 14,225 |
|
| $ | 66 |
|
| Nine Months Ended September 30, |
| ||||||||||
(Dollars in thousands) |
| 2023 |
|
| 2022 |
|
| Change |
| |||
East |
| $ | 9,030 |
|
| $ | 36,482 |
|
| $ | (27,452 | ) |
Central |
|
| 22,409 |
|
|
| 3,265 |
|
|
| 19,144 |
|
West |
|
| — |
|
|
| 26,904 |
|
|
| (26,904 | ) |
Total |
| $ | 31,439 |
|
| $ | 66,651 |
|
| $ | (35,212 | ) |
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. Land and lot sales occur at various intervals and
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 |
| Three Months Ended September 30, |
| ||||||||||
(Dollars in thousands) |
| 2023 |
|
| 2022 |
|
| Change |
| |||
East |
| $ | 5,509 |
|
| $ | 5,056 |
|
| $ | 453 |
|
Central |
|
| — |
|
|
| — |
|
|
| — |
|
West |
|
| 301 |
|
|
| 257 |
|
|
| 44 |
|
Corporate |
|
| 3,516 |
|
|
| 3,582 |
|
|
| (66 | ) |
Total |
| $ | 9,326 |
|
| $ | 8,895 |
|
| $ | 431 |
|
TAYLOR MORRISON HOME CORPORATION 10-Q
27
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
| Nine Months Ended September 30, |
| ||||||||||
(Dollars in thousands) |
| 2023 |
|
| 2022 |
|
| Change |
| |||
East |
| $ | 17,542 |
|
| $ | 16,115 |
|
| $ | 1,427 |
|
Central |
|
| — |
|
|
| — |
|
|
| — |
|
West |
|
| 1,037 |
|
|
| 1,057 |
|
|
| (20 | ) |
Corporate |
|
| 9,615 |
|
|
| 39,345 |
|
|
| (29,730 | ) |
Total |
| $ | 28,194 |
|
| $ | 56,517 |
|
| $ | (28,323 | ) |
Several of our communities operate amenities such as golf courses, club houses, and fitness centers. We provide club members access to the amenity facilities and other services in exchange for club dues and fees. Our Corporate region also includes the activity relating to 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 MarginThree 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 Home closings gross margin % 27.9 % 22.7 % 27.0 % 19.6 % 27.5 % 20.9 % 27.5 % 21.2 %
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 | ||||||||||||||||||||||||||||||||||
Home closings gross margin % | 26.7 | % | 20.9 | % | 24.6 | % | 19.4 | % | 26.0 | % | 19.0 | % | 25.9 | % | 19.7 | % | ||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, |
| ||||||||||||||||||||||||||||||
| East |
|
| Central |
|
| West |
|
| Consolidated |
| |||||||||||||||||||||
(Dollars in thousands) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Home closings revenue, net |
| $ | 572,971 |
|
| $ | 638,270 |
|
| $ | 423,396 |
|
| $ | 522,247 |
|
| $ | 615,516 |
|
| $ | 823,258 |
|
| $ | 1,611,883 |
|
| $ | 1,983,775 |
|
Cost of home closings |
|
| 414,752 |
|
|
| 460,137 |
|
|
| 314,978 |
|
|
| 381,181 |
|
|
| 509,269 |
|
|
| 596,846 |
|
|
| 1,238,999 |
|
|
| 1,438,164 |
|
Home closings gross margin |
| $ | 158,219 |
|
| $ | 178,133 |
|
| $ | 108,418 |
|
| $ | 141,066 |
|
| $ | 106,247 |
|
| $ | 226,412 |
|
| $ | 372,884 |
|
| $ | 545,611 |
|
Home closings gross margin % |
|
| 27.6 | % |
|
| 27.9 | % |
|
| 25.6 | % |
|
| 27.0 | % |
|
| 17.3 | % |
|
| 27.5 | % |
|
| 23.1 | % |
|
| 27.5 | % |
| Nine Months Ended September 30, |
| ||||||||||||||||||||||||||||||
| East |
|
| Central |
|
| West |
|
| Consolidated |
| |||||||||||||||||||||
(Dollars in thousands) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Home closings revenue, net |
| $ | 1,906,862 |
|
| $ | 1,757,444 |
|
| $ | 1,499,420 |
|
| $ | 1,347,828 |
|
| $ | 1,814,943 |
|
| $ | 2,405,932 |
|
| $ | 5,221,225 |
|
| $ | 5,511,204 |
|
Cost of home closings |
|
| 1,379,990 |
|
|
| 1,287,670 |
|
|
| 1,120,006 |
|
|
| 1,016,006 |
|
|
| 1,480,753 |
|
|
| 1,781,072 |
|
|
| 3,980,749 |
|
|
| 4,084,748 |
|
Home closings gross margin |
| $ | 526,872 |
|
| $ | 469,774 |
|
| $ | 379,414 |
|
| $ | 331,822 |
|
| $ | 334,190 |
|
| $ | 624,860 |
|
| $ | 1,240,476 |
|
| $ | 1,426,456 |
|
Home closings gross margin % |
|
| 27.6 | % |
|
| 26.7 | % |
|
| 25.3 | % |
|
| 24.6 | % |
|
| 18.4 | % |
|
| 26.0 | % |
|
| 23.8 | % |
|
| 25.9 | % |
Consolidated home closings gross margin increased 630 basis pointsdecreased to 23.1% from 27.5% for the three months ended September 30, 2022,2023, compared to 21.2%the same period in the prior year period and 620 basis pointsdecreased to 23.8% from 25.9% for the nine months ended September 30, 2022,2023 compared to 19.7%the same period in the prior year. The decreases in home closings gross margin for the three months ended September 30, 2023 compared to the same period in the prior year period. is primarily as a result of pricing incentives and discounts in all of our segments. In addition, one community in our West region was impacted by inventory impairment as a result of a change in scope directly related to recently changing municipality requirements. Adjusting for inventory impairment, the West's home closings gross margin was 19.2% and consolidated was 23.9% for the three months ended September 30, 2023.
The increases in home closings gross margin in the East and Central regions for both the three and nine months ended September 30, 20222023 compared to the same periods in the prior year are as a result of price appreciation in several of the markets at the time the homes were sold (late 2021 and 2022). The decrease in home closings gross margin in our West region for the nine months ended September 30, 2023 compared to the same period in the prior year is a reflectionresult of the pricing power in excessincentives and discounts which were above the company average for the first half of inflationary cost pressure, operational enhancements,the current year as well as the inventory impairment noted above. Adjusting for such impairment, the West's home closings gross margin was 19.1% and acquisition synergies. In addition, we strategically metered sales releases to better manage supply chain and labor constraints inconsolidated was 24.0% for the earlier partnine months ended September 30, 2023.
TAYLOR MORRISON HOME CORPORATION 10-Q
28
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Services
The following is a summary for the periods presented of our financial services income before income taxes as well as supplemental data:
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 | % |
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||||||||||
(Dollars in thousands) |
| 2023 |
|
| 2022 |
|
| Change |
|
| 2023 |
|
| 2022 |
|
| Change |
| ||||||
Mortgage services revenue |
| $ | 31,089 |
|
| $ | 18,291 |
|
|
| 70.0 | % |
| $ | 87,637 |
|
| $ | 71,792 |
|
|
| 22.1 | % |
Title services and other revenues |
|
| 8,956 |
|
|
| 9,458 |
|
|
| (5.3 | )% |
|
| 29,471 |
|
|
| 26,627 |
|
|
| 10.7 | % |
Total financial services revenue |
|
| 40,045 |
|
|
| 27,749 |
|
|
| 44.3 | % |
|
| 117,108 |
|
|
| 98,419 |
|
|
| 19.0 | % |
Financial services net income from unconsolidated entities |
|
| 1,671 |
|
|
| 546 |
|
|
| 206.0 | % |
|
| 7,205 |
|
|
| 4,799 |
|
|
| 50.1 | % |
Total revenue |
|
| 41,716 |
|
|
| 28,295 |
|
|
| 47.4 | % |
|
| 124,313 |
|
|
| 103,218 |
|
|
| 20.4 | % |
Financial services expenses |
|
| 23,128 |
|
|
| 20,395 |
|
|
| 13.4 | % |
|
| 70,618 |
|
|
| 66,092 |
|
|
| 6.8 | % |
Financial services income before income taxes |
| $ | 18,588 |
|
| $ | 7,900 |
|
|
| 135.3 | % |
| $ | 53,695 |
|
| $ | 37,126 |
|
|
| 44.6 | % |
Total originations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Number of Loans |
|
| 1,742 |
|
|
| 1,551 |
|
|
| 12.3 | % |
|
| 5,291 |
|
|
| 4,728 |
|
|
| 11.9 | % |
Principal |
| $ | 813,929 |
|
| $ | 701,323 |
|
|
| 16.1 | % |
| $ | 2,500,799 |
|
| $ | 2,108,122 |
|
|
| 18.6 | % |
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| |||||
Supplemental data: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Average FICO score |
|
| 753 |
|
|
| 752 |
|
|
| 754 |
|
|
| 753 |
|
Funded origination breakdown: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Government (FHA,VA,USDA) |
|
| 20 | % |
|
| 18 | % |
|
| 18 | % |
|
| 17 | % |
Other agency |
|
| 76 | % |
|
| 75 | % |
|
| 77 | % |
|
| 77 | % |
Total agency |
|
| 96 | % |
|
| 93 | % |
|
| 95 | % |
|
| 94 | % |
Non-agency |
|
| 4 | % |
|
| 7 | % |
|
| 5 | % |
|
| 6 | % |
Total funded originations |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
Total financial services revenue decreasedincreased by 27.1%44.3% and 17.6%19.0% for the three and nine months ended September 30, 20222023 compared to the same periods in the prior year, respectively. The decreaseincreases are primarily due to an increase in total financial services revenue was a result of lower home mortgage originations, and lower home closings during the periods.
Sales, Commissions and Other Marketing Costs
Sales, commissions and other marketing costs, as a percentage of home closings revenue, net, decreasedincreased to 4.8%6.1% from 5.5%,4.8% and to 5.1%5.8% from 5.9%5.1% for the three and nine months ended September 30, 2022, respectively,2023 compared to the same periods in the prior year. The decreaseincrease was primarily driven by leveragedue to an increase in controllableexternal commissions costs and increased advertising costs in an effort to generate sales and marketing costs.
General and Administrative Expenses
General and administrative expenses as a percentage of home closings revenue, net, decreasedincreased to 2.6%4.3% from 4.0%2.6% and to 3.9% from 3.4% for the three and nine months ended September 30, 2023 compared to the same periods in the prior year. The increase was primarily due to the decrease in home closings revenue, net, along with an increase in payroll related expenses.
Net (Income)/Loss from 4.2%Unconsolidated Entities
Net income from unconsolidated entities was $1.9 million and $7.0 million for the three and nine months ended September 30, 2023, respectively, while net loss from unconsolidated entities was $1.2 million and $3.0 million for the three and nine months ended September 30, 2022, respectively,respectively. Our joint ventures relating to our financial services segment experienced an increase in income for the three and nine months ended September 30, 2023 compared to the same periodsperiod in the prior year. The decrease was primarily due to the increase in home closings revenue, along with decreases in general and administrative expenses.
TAYLOR MORRISON HOME CORPORATION 10-Q
29
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Interest (Income)/Expense, Net
Interest income, net was $5.8 million and $12.0 million for the three and nine months ended September 30, 2023, respectively, and interest expense, net was $4.4 million and $13.8 million for the three and nine months ended September 30, 2022 . The net interest income for the three and nine months ended September 30, 2023 was primarily due to yield returns.
Other expense, net was $3.0 million and $6.7 million for the three and nine months ended September 30, 2023, respectively, and 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 three and nine months ended September 30, 2022. Other2022, respectively. The net expense netin the current year was $47.0 thousand and $1.1 millionprimarily related to an increase in self-insurance reserves for the same periods infirst three quarters of the prior year, respectively.year. For the three months ended September 30, 2022, net other expense was primarilylargely related to the write-offwrite off of pre-acquisition costs during the period, and forperiod. For the nine months ended September 30, 2022, net other income was primarily related to $14.5 million in gains 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 the time of transfer.
Income Tax Provision
The effective tax rate for the three and nine months ended September 30, 20222023 was 25.4% and 24.7%, respectively, compared to 22.6% and 23.8%, compared to 23.5% and 23.2%, respectively, for the same periods in the prior year. 2022.
For both the three and nine months ended September 30, 2023 and 2022, and September 30, 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 relatingrelated to homebuilding activities.
The Inflation Reduction Act also created a 15% corporate alternative minimum tax. The corporate alternative minimum tax had no impact on our consolidated financial statements for the three and nine months ended September 30, 2023.
Net Income
Net income available to TMHC and diluted earnings per share for the three months ended September 30, 2023 were $170.7 million and $1.54, respectively. Net income available to TMHC and diluted earnings per share for the three months ended September 30, 2022 waswere $309.8 million and $2.72, respectively. Net income and diluted earnings per share for the three months ended September 30, 2021 was $168.1 million and $1.34, respectively. The increasesdecreases in net income and diluted earnings per share from the prior year were primarily attributable to lower gross margin, combined with higher home closing revenue, netsales commissions and other marketing costs and higher gross margin dollars.
Liquidity and Capital Resources
Liquidity
• Cash generated from operations; | • Mortgage warehouse facilities; | |
• Borrowings under our Revolving Credit Facilities; | • Project-level real estate financing (including non-recourse loans, land banking, and joint ventures); and | |
• Our various series of senior notes; | • Performance, payment and completion surety bonds, and letters of credit. |
•
Cash generated from operations;
TAYLOR MORRISON HOME CORPORATION 10-Q
30
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
During 2023, several bank failures led to significant disruptions to the banking system and financial market volatility. While we announced thatmaintained no accounts at any failed banks, substantially all of our indirect wholly owned subsidiary, Taylor Morrison Communities, Inc. issued a noticecash currently on deposit with other major financial institutions exceeds insured limits. We limit exposure relating to our short-term financial instruments by diversifying these financial instruments among various counterparties, which consist 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 willmajor financial institutions. Generally, deposits may 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)demand 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, 2023 |
|
| December 31, 2022 |
| ||
Total cash and cash equivalents, excluding restricted cash |
| $ | 613,811 |
|
| $ | 724,488 |
|
$1 Billion Revolving Credit Facility availability |
|
| 1,000,000 |
|
|
| 1,000,000 |
|
$100 Million Revolving Credit Facility availability |
|
| 100,000 |
|
|
| 100,000 |
|
Letters of credit outstanding |
|
| (70,426 | ) |
|
| (69,249 | ) |
Revolving Credit Facilities availability |
|
| 1,029,574 |
|
|
| 1,030,751 |
|
Total liquidity |
| $ | 1,643,385 |
|
| $ | 1,755,239 |
|
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. months. 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, payments of ongoing operating expenses, 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 $550.6 million for the nine months ended September 30, 2023, compared to $460.0 million for the nine months ended September 30, 2022, compared to $103.5 million of cash used in operating activities for the nine months ended September 30, 2021.2022. The year-over-year increase in cash provided by operating activities is primarily driven by an increase in net income and a significant 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 inspend on real estate inventory and deposits;land deposits during the nine months ended September 30, 2023 compared to the same period in the prior year partially offset by reduced cash provided by mortgages held for sale and an increaselower net income in customer deposits.
Net cash used in investing activities was $94.1 million for the nine months ended September 30, 2023, compared to $18.8 million for the nine months ended September 30, 2022, compared to $43.3 million of cash used in investing activities for the nine months ended September 30, 2021.2022. The decreaseincrease in cash used in investing activities was primarily due to an increasea net investment of $47.1 million of capital into unconsolidated entities in the nine months ended September 30, 2023 compared to a net distribution of $3.7 million of capital distributions from unconsolidated entities partially offset by increased investments in new unconsolidated entities during the prior year period.
Net cash used in financing activities was $568.5 million for the nine months ended September 30, 2023, compared to $947.7 million for the nine months ended September 30, 2022, compared to $12.3 million for the nine months ended September 30, 2021.2022. The increasedecrease in cash used in financing activities was primarily due to lower net repayments on our mortgage warehouse facilities, loans payable and other borrowings, senior notes Revolving Credit Facilities, and mortgage warehouse facilities during the nine months ended September 30, 2023 compared to the same period in the prior year as well as significantly lower repurchases of common stock.
For information regarding our debt instruments, including the terms governing our Senior Notessenior notes and our Revolving Credit Facilities, see Note 7 - Debt to the Unaudited Condensed Consolidated Financial Statements included in this quarterly report.
TAYLOR MORRISON HOME CORPORATION 10-Q
31
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Off-Balance Sheet Arrangements as of September 30, 2022
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. Our 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.
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 our routine 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 to the Company. Our obligationsexposure 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, theThe aggregate purchase price for land under these contracts was $1.6 billion at September 30, 2023 and $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; | • mix of homes closed; | |
• the timing of sales; | • construction timetables; | |
• the timing of closings of homes, lots and parcels; | • the cost and availability of materials and labor; and | |
• the timing of receipt of regulatory approvals for development and construction; | • weather conditions in the markets in which we build. | |
• the condition of the real estate market and general economic conditions in the areas in which we operate; |
the timing of the introduction and start of construction of new projects;
•the timing of project sales;
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 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.
TAYLOR MORRISON HOME CORPORATION 10-Q
32
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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, 20222023 compared to those disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report.
TAYLOR MORRISON HOME CORPORATION 10-Q
33
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, 2022,2023, approximately 95%90% of our debt was fixed rate and 5%10% 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 FacilityFacilities and to borrowings by TMHF under its various mortgage warehouse facilities. As of September 30, 2022,2023, we had no outstanding borrowings under our $1 Billion Revolving Credit Facility or our $100 Million Revolving Credit Facility.Facilities. We had approximately $1.0 billion of additional availability for borrowings under the Revolving Credit Facilities including $138.8$129.6 million of additional availability for letters of credit under our $1 Billion Revolving Credit Facility as of September 30, 20222023 (giving effect to $61.2$70.4 million of letters of credit outstanding as of such date).
The London Interbank Offered Rate (“LIBOR”) was historically the primary basis for determining interest payments on borrowings under each of our mortgage warehouse facilities and our Revolving Credit Facilities. On March 5, 2021, ICE Benchmark Administration (“IBA”) confirmed it would cease publication ofno longer publishes the Overnight, 1, 3, 6 and 12 month US Dollar LIBOR settings immediately following the LIBOR publication on June 30, 2023.LIBOR. 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.rates. 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 areis a relatively new reference ratesrate and theirits composition and characteristics are not the same as LIBOR. Given the limited history of these ratesthis rate and potential volatility as compared to other benchmark or market rates, the future performance of these ratesthis rate cannot be predicted based on historical performance. The consequences of using SOFR and BSBY could include an increase in the cost of our variable rate indebtedness.
We are required to offer to purchase all of our outstanding senior unsecured notes, as described in Note 7,7- Debt Debt to the unauditedUnaudited 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.
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 | % |
| Expected Maturity Date |
|
|
|
| |||||||||||||||||||||||||||
(In millions, except percentage data) |
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| 2027 |
|
| Thereafter |
|
| Total |
|
| Fair |
| ||||||||
Fixed Rate Debt |
| $ | 54.1 |
|
| $ | 141.7 |
|
| $ | 75.7 |
|
| $ | 44.6 |
|
| $ | 543.1 |
|
| $ | 950.0 |
|
| $ | 1,809.2 |
|
| $ | 1,688.5 |
|
Weighted average interest rate(1) |
|
| 3.0 | % |
|
| 3.0 | % |
|
| 3.0 | % |
|
| 3.0 | % |
|
| 5.5 | % |
|
| 5.6 | % |
|
| 5.1 | % |
|
|
| |
Variable Rate Debt(2) |
| $ | 191.6 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 191.6 |
|
| $ | 191.6 |
|
Weighted average interest rate |
|
| 6.9 | % |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6.9 | % |
|
|
|
TAYLOR MORRISON HOME CORPORATION 10-Q
34
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
WeAs of the end of the period covered by this quarterly report, 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”)),. Based on this evaluation, as of September 30, 2022. Based on this evaluation,2023 our principal executive officer, principal financialfinancial officer and principal accounting officer concluded that as of September 30, 2022, the Company'sour disclosure controls and procedures were effective in alerting them in a timely manner to accomplish their objectives atmaterial information required to be disclosed in our periodic and other reports filed with the reasonable assurance level.SEC.
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, 20222023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
TAYLOR MORRISON HOME CORPORATION 10-Q
35
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information required with respect to this item can be found in Note 13 - Commitments and Contingencies under “Legal Proceedings” in the Notes to the unauditedUnaudited Condensed Consolidated Financial Statements included in this quarterly report.
There have been no material changes to the risk factors set forth in Part I, Item 1A of our Annual Report. These risk factors may materially affect our business, financial condition or results of operations. You should carefully consider the risk factors set forth in our Annual Report and the other information set forth elsewhere in this quarterly report. You should be aware that these risk factors and other information may not describe every risk facing our Company.
TAYLOR MORRISON HOME CORPORATION 10-Q
36
PART II — OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, AND USE OF PROCEEDS,
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 |
Period |
| Total |
|
| Average price paid |
|
| Total number of shares |
|
| Approximate dollar |
| ||||
July 1 to July 31, 2023 |
|
| — |
|
| $ | — |
|
|
| — |
|
| $ | 275,570 |
|
August 1 to August 31, 2023 |
|
| 1,032,911 |
|
|
| 46.52 |
|
|
| 1,032,911 |
|
|
| 227,523 |
|
September 1 to September 30, 2023 |
|
| 1,136,746 |
|
|
| 45.70 |
|
|
| 1,136,746 |
|
|
| 175,570 |
|
Total |
|
| 2,169,657 |
|
|
|
|
|
| 2,169,657 |
|
|
|
|
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,Common Stock, and the program may be suspended, extended, modified or discontinued at any time.
None.
None.
None.
TAYLOR MORRISON HOME CORPORATION 10-Q
37
ITEM 6. EXHIBITS
ITEM 6. EXHIBITS
No. | ||||||||
Exhibit No. | Description | |||||||
3.1 | ||||||||
3.2 | ||||||||
10.1*† | ||||||||
31.1* |
| |||||||
31.2* |
| |||||||
32.1** |
| |||||||
32.2** |
| |||||||
101.INS* |
| Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | ||||||
101.SCH* |
| Inline XBRL Taxonomy Extension Schema Document. | ||||||
101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document. | ||||||
101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase Document. | ||||||
101.LAB* |
| Inline XBRL Taxonomy Extension Label Linkbase Document. | ||||||
101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document. | ||||||
104 | ||||||||
Cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, |
* Filed herewith
** Furnished herewith
† Management contract or compensatory plan in which directors and/or executive officers are eligible to participate.
TAYLOR MORRISON HOME CORPORATION 10-Q
38
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| TAYLOR MORRISON HOME CORPORATION | ||||||||||
| Registrant | ||||||||||
DATE: | October |
| |||||||||
| /s/ Sheryl D. Palmer | ||||||||||
| Sheryl D. Palmer | ||||||||||
| Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer) | ||||||||||
| /s/ | ||||||||||
|
| Curt VanHyfte | |||||||||
| Executive Vice President and Chief Financial Officer (Principal Financial Officer) | ||||||||||
| /s/ Joseph Terracciano | ||||||||||
| Joseph Terracciano | ||||||||||
| Chief Accounting Officer (Principal Accounting Officer) |
TAYLOR MORRISON HOME CORPORATION 10-Q
39