(Mark One)
| | | | | |
☒x
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
September 30, 2023March 31, 2024
| | | | | |
☐o
| 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
CORPORATIONCORPORATION
(Exact name of registrant as specified in its Charter)
| | | | | |
Delaware | | 83-2026677 |
Delaware
|
| 83-2026677
|
(State or other jurisdiction of
incorporation or organization)
|
| Identification No.)
|
| | | | | |
4900 N. Scottsdale Road,, Suite 2000 |
| 85251 |
Scottsdale,, Arizona | | Arizona
|
|
(Address of principal executive offices) |
| (Zip Code) |
(480)
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
| 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: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 ☒x Noo☐ 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 ☒x No ☐o
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 | x | ☒
|
| Accelerated filer | o | ☐
|
|
|
|
|
Non-accelerated filer | o | ☐
|
| Smaller reporting company | o | ☐
|
|
|
|
|
|
|
|
Emerging growth company | o | | ☐
|
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐o Nox☒
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 April 30, 2024 |
Common stock, $0.00001 par value | | 105,764,423 | 107,448,537
|
TAYLOR MORRISON HOME CORPORATION
TAYLOR MORRISON HOME CORPORATION 10-Q
1
ITEM 1. FINANCIAL STATEMENTS
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TAYLOR MORRISON HOME CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
| | | | | | | | |
| | September 30, 2023 | | | December 31, 2022 | |
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 | |
| | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
Assets | | | |
Cash and cash equivalents | $ | 554,287 | | | $ | 798,568 | |
Restricted cash | 3,105 | | | 8,531 | |
Total cash | 557,392 | | | 807,099 | |
Real estate inventory: | | | |
Owned inventory | 5,841,924 | | | 5,473,828 | |
Consolidated real estate not owned | 143,429 | | | 71,618 | |
Total real estate inventory | 5,985,353 | | | 5,545,446 | |
Land deposits | 199,043 | | | 203,217 | |
Mortgage loans held for sale | 216,633 | | | 193,344 | |
Lease right of use assets | 72,900 | | | 75,203 | |
Prepaid expenses and other assets, net | 287,507 | | | 290,925 | |
Other receivables, net | 189,771 | | | 184,518 | |
Investments in unconsolidated entities | 369,982 | | | 346,192 | |
Deferred tax assets, net | 67,825 | | | 67,825 | |
Property and equipment, net | 300,740 | | | 295,121 | |
Goodwill | 663,197 | | | 663,197 | |
Total assets | $ | 8,910,343 | | | $ | 8,672,087 | |
Liabilities | | | |
Accounts payable | $ | 276,093 | | | $ | 263,481 | |
Accrued expenses and other liabilities | 459,095 | | | 549,074 | |
Lease liabilities | 81,138 | | | 84,999 | |
Income taxes payable | 45,848 | | | — | |
Customer deposits | 357,657 | | | 326,087 | |
Estimated development liabilities | 27,416 | | | 27,440 | |
Senior notes, net | 1,469,135 | | | 1,468,695 | |
Loans payable and other borrowings | 441,190 | | | 394,943 | |
Revolving credit facility borrowings | — | | | — | |
Mortgage warehouse borrowings | 183,174 | | | 153,464 | |
Liabilities attributable to consolidated real estate not owned | 143,429 | | | 71,618 | |
Total liabilities | $ | 3,484,175 | | | $ | 3,339,801 | |
COMMITMENTS AND CONTINGENCIES (Note 13) | | | |
Stockholders’ equity | | | |
Total stockholders’ equity | 5,426,168 | | | 5,332,286 | |
Total liabilities and stockholders’ equity | $ | 8,910,343 | | | $ | 8,672,087 | |
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
TAYLOR MORRISON HOME CORPORATION 10-Q
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, | |
| | 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 | |
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
Home closings revenue, net | $ | 1,636,255 | | | $ | 1,612,595 | | | | | |
Land closings revenue | 7,225 | | | 4,520 | | | | | |
Financial services revenue | 46,959 | | | 35,149 | | | | | |
Amenity and other revenue | 9,313 | | | 9,593 | | | | | |
Total revenue | 1,699,752 | | | 1,661,857 | | | | | |
Cost of home closings | 1,243,209 | | | 1,227,513 | | | | | |
Cost of land closings | 5,202 | | | 4,345 | | | | | |
Financial services expenses | 25,143 | | | 22,148 | | | | | |
Amenity and other expenses | 9,353 | | | 8,285 | | | | | |
Total cost of revenue | 1,282,907 | | | 1,262,291 | | | | | |
Gross margin | 416,845 | | | 399,566 | | | | | |
Sales, commissions and other marketing costs | 102,600 | | | 92,760 | | | | | |
General and administrative expenses | 67,564 | | | 66,261 | | | | | |
Net income from unconsolidated entities | (2,751) | | | (1,929) | | | | | |
Interest income, net | (43) | | | (1,111) | | | | | |
Other expense/(income), net | 595 | | | (4,834) | | | | | |
| | | | | | | |
Income before income taxes | 248,880 | | | 248,419 | | | | | |
Income tax provision | 57,719 | | | 57,191 | | | | | |
Net income before allocation to non-controlling interests | 191,161 | | | 191,228 | | | | | |
Net income attributable to non-controlling interests | (891) | | | (177) | | | | | |
Net income | $ | 190,270 | | | $ | 191,051 | | | | | |
Earnings per common share: | | | | | | | |
Basic | $ | 1.79 | | | $ | 1.76 | | | | | |
Diluted | $ | 1.75 | | | $ | 1.74 | | | | | |
Weighted average number of shares of common stock: | | | | | | | |
Basic | 106,457 | | 108,429 | | | | |
Diluted | 108,564 | | 110,053 | | | | |
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
TAYLOR MORRISON HOME CORPORATION 10-Q
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, 2023March 31, 2024
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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, 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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-in Capital | | Treasury Stock | | Stockholders' Equity |
| Shares | | Amount | | Amount | | Shares | | Amount | | Retained Earnings | | Accumulated Other Comprehensive Income | | Non- Controlling Interests | | Total Stockholders’ Equity |
Balance – December 31, 2023 | 106,917,636 | | $ | 1 | | | $ | 3,068,597 | | | 54,211,879 | | $ | (1,265,097) | | | $ | 3,510,544 | | | $ | 896 | | | $ | 17,345 | | | $ | 5,332,286 | |
Net income | — | | — | | | — | | | — | | — | | | 190,270 | | | — | | | 891 | | | 191,161 | |
Exercise of stock options and issuance of restricted stock units, net(1) | 633,766 | | — | | | (10,856) | | | — | | — | | | — | | | — | | | — | | | (10,856) | |
Repurchase of common stock | (1,491,485) | | — | | | — | | | 1,491,485 | | (91,649) | | | — | | | — | | | — | | | (91,649) | |
Stock compensation expense | — | | — | | | 5,483 | | | — | | — | | | — | | | — | | | — | | | 5,483 | |
Distributions to non-controlling interests of consolidated joint ventures
| — | | — | | | — | | | — | | — | | | — | | | — | | | (257) | | | (257) | |
| | | | | | | | | | | | | | | | | |
Balance – March 31, 2024 | 106,059,917 | | $ | 1 | | | $ | 3,063,224 | | | 55,703,364 | | $ | (1,356,746) | | | $ | 3,700,814 | | | $ | 896 | | | $ | 17,979 | | | $ | 5,426,168 | |
(1)Dollar amount includes $3.7$4.0 million of stock options exercised netted with the value of shares withheld for taxes on the issuance of restricted stock units.
For the three months ended September 30, 2022March 31, 2023
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-in Capital | | Treasury Stock | | Stockholders' Equity |
| Shares | | Amount | | Amount | | Shares | | Amount | | Retained Earnings | | Accumulated Other Comprehensive Income | | Non- Controlling Interests | | Total Stockholders’ Equity |
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 | — | | — | | | — | | | — | | — | | | 191,051 | | | — | | | 177 | | | 191,228 | |
Exercise of stock options and issuance of restricted stock units, net(1) | 1,148,175 | | — | | | 4,493 | | | — | | — | | | — | | | — | | | — | | | 4,493 | |
Repurchase of common stock | (109,325) | | — | | | — | | | 109,325 | | (3,568) | | | — | | | — | | | — | | | (3,568) | |
Stock compensation expense | — | | — | | | 7,533 | | | — | | — | | | — | | | — | | | — | | | 7,533 | |
| | | | | | | | | | | | | | | | | |
Changes in non-controlling interests of consolidated joint ventures | — | | — | | | — | | | — | | — | | | — | | | — | | | 1 | | | 1 | |
Balance – March 31, 2023 | 109,034,112 | | $ | 1 | | | $ | 3,037,515 | | | 51,506,248 | | $ | (1,140,706) | | | $ | 2,932,666 | | | $ | 359 | | | $ | 16,711 | | | $ | 4,846,546 | |
(1)Dollar amount includes $1.5$13.5 million of stock options exercised netted with the value of shares withheld for taxes on the issuance of restricted stock units.
TAYLOR MORRISON HOME CORPORATION 10-Q
4
Table of Contents
ITEM 1. FINANCIAL STATEMENTS
For the nine months ended September 30, 2023
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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, 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 | |
(1)Dollar amount includes $26.1 million of stock options exercised netted with the value of shares withheld for taxes on the issuance of restricted stock units.
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 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 | |
(1)Dollar amount includes $4.4 million of stock options exercised netted with the value of shares withheld for taxes on the issuance of restricted stock units.
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
TAYLOR MORRISON HOME CORPORATION 10-Q
4
ITEM 1. FINANCIAL STATEMENTS
TAYLOR MORRISON HOME CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
| | | | | | | | |
| | 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 | |
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2024 | | 2023 |
Cash Flows from Operating Activities | | | |
Net income before allocation to non-controlling interests | $ | 191,161 | | | $ | 191,228 | |
Adjustments to reconcile net income to net cash (used in)/provided by operating activities: | | | |
Net income from unconsolidated entities | (2,751) | | | (1,929) | |
Stock compensation expense | 5,483 | | | 7,533 | |
| | | |
| | | |
Distributions of earnings from unconsolidated entities | 2,897 | | | 847 | |
Depreciation and amortization | 10,250 | | | 7,087 | |
Operating lease expense | 5,903 | | | 7,144 | |
Debt issuance costs amortization | 741 | | | 868 | |
| | | |
| | | |
Changes in operating assets and liabilities: | | | |
Real estate inventory and land deposits | (363,923) | | | 51,596 | |
Mortgage loans held for sale, prepaid expenses and other assets | (35,783) | | | 190,202 | |
Customer deposits | 31,570 | | | 1,993 | |
Accounts payable, accrued expenses and other liabilities | (22,133) | | | (112,097) | |
Income taxes payable | 45,848 | | | 2,977 | |
Net cash (used in)/provided by operating activities | $ | (130,737) | | | $ | 347,449 | |
Cash Flows from Investing Activities: | | | |
Purchase of property and equipment | (9,111) | | | (13,807) | |
Distributions of capital from unconsolidated entities | — | | | 350 | |
Investments of capital into unconsolidated entities | (23,936) | | | (11,123) | |
Net cash used in investing activities | $ | (33,047) | | | $ | (24,580) | |
Cash Flows from Financing Activities | | | |
Increase in loans payable and other borrowings | — | | | 2,425 | |
Repayments on loans payable and other borrowings | (11,544) | | | (7,377) | |
| | | |
| | | |
Borrowings on mortgage warehouse facilities | 713,090 | | | 634,404 | |
Repayments on mortgage warehouse facilities | (683,380) | | | (794,142) | |
| | | |
Changes in stock option exercises and issuance of restricted stock units, net | (10,856) | | | 4,493 | |
Payment of principal portion of finance lease | (1,327) | | | (1,305) | |
Repurchase of common stock, net | (91,649) | | | (3,568) | |
| | | |
Cash and distributions to non-controlling interests of consolidated joint ventures | (257) | | | — | |
Net cash used in financing activities | $ | (85,923) | | | $ | (165,070) | |
Net Decrease/Increase in Cash and Cash Equivalents and Restricted Cash | $ | (249,707) | | | $ | 157,799 | |
Cash, Cash Equivalents, and Restricted Cash — Beginning of period | 807,099 | | | 726,635 | |
Cash, Cash Equivalents, and Restricted Cash — End of period | $ | 557,392 | | | $ | 884,434 | |
Supplemental Cash Flow Information | | | |
Income tax refunds | $ | 120 | | | $ | 1,943 | |
Supplemental Non-Cash Investing and Financing Activities: | | | |
Change in loans payable issued to sellers in connection with land purchase contracts | $ | 100,453 | | | $ | 39,865 | |
Change in inventory not owned | $ | 71,811 | | | $ | (21,676) | |
| | | |
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
TAYLOR MORRISON HOME CORPORATION 10-Q
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ITEM 1. FINANCIAL STATEMENTS
TAYLOR MORRISON HOME CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Description of the Business — Taylor Morrison Home Corporation (“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 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-lifestyleresort- lifestyle buyers. We are the general contractors for all real estate projects and retainengage 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. We also have a “Build-to-Rent” homebuilding business 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 brand. We also have operations which provide financial services to customers through our wholly owned mortgage subsidiary, Taylor Morrison Home Funding, INC (“TMHF”), title services through our wholly owned title services subsidiary, Inspired Title Services, LLC (“Inspired Title”), and homeowner’s insurance policies through our 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation — The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 20222023 (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 Statementsconsolidated 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”) Topic 810, Consolidation. The 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 Statementconsolidated statement of Operations.operations. The equity from the percentage of the joint ventures not owned by us is presented as “Non-controlling interests” on the unaudited Condensed Consolidated Statementconsolidated statement of Stockholders’ Equity.stockholders’ equity. The balance of Non-Controllingnon-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 and 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 Statementsconsolidated financial statements and these accompanying notes. Significant estimates include real estate development costs to complete, valuation of real estate, valuation of acquired assets,goodwill, valuation of goodwill, valuation ofestimated 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 costs to be incurred in a community are generally allocated to the remaining lots on a prospective basis.
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. ActualTAYLOR MORRISON HOME CORPORATION 10-Q
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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.
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ITEM 1. FINANCIAL STATEMENTS
We capitalize qualifying interest costs to inventory during the development and construction periods. Capitalized interest is charged to Cost of home closings when the related inventory is charged to Cost of home closings.
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,March 31, 2024 and 2023, we recorded $11.8 million of inventoryno impairment relating to one of our communities in our West reporting segment. For the three and nine months ended September 30, 2022, we recorded charges were recorded.no inventory impairment to our real estate inventory. Impairments are recorded to Cost of home closings or Cost of land closings on the Consolidated Statement of Operations.
In certain cases, we may elect to cease development and/or marketing of an existing community if we believe the economic performance of the community would be maximized by deferring development for a period of time to allow for market conditions to improve. We refer to such communities as long-term strategic assets. The decision may be based on financial and/or operational metrics as determined by us. For those communities that have been temporarily closed or development has been discontinued, we do not allocate interest or other costs to the community's inventory until activity resumes. Such costs are expensed as incurred. In addition, if we decide to cease development, we will evaluate the project for impairment and then cease future development and marketing activity until such a time when we believe that market conditions have improved and economic performance can be maximized. Our assessment of the carrying value of our long-term strategic assets typically includes estimates of future performance, including the timing of when development will recommence, the type of product to be offered, and the margin to be realized. In the future, some of these inactive communities may be re-opened while others may be sold. As of
September 30, 2023March 31, 2024 and December 31,
2022,2023, we had no
inactive projects.In the ordinary course of business, we enter into various option agreements to acquire lots in staged takedowns which may require a significant cash deposit. We are not legally obligated to purchase the balance of the lots, but would forfeit any existing deposits and could be subject to financial and other penalties if the lots are not purchased. Real estate not owned under these agreements is reflected in Consolidated real estate not owned with a corresponding liability in Liabilities attributable to consolidated real estate not owned in the unaudited Condensed Consolidated Balance Sheets.
long-term strategic assets.
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.it meets all criteria in accordance with ASC 360 Property, Plant and Equipment. 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 recordFor the three months ended March 31, 2024 and 2023, we had no material fair value adjustments for land held for sale within Cost of land closings on the unaudited Condensed Consolidated Statements of Operations.sale. 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 immediate 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. We incur interest expense on these arrangements. Interest is based on remaining lots to be purchased and is capitalized for the percentage of lots in each project actively under development, with the remainder expensed and included in Interest income, net on the Condensed consolidated statements of operations. The entities grant us an option to acquire lots in staged takedowns. In consideration for this option, we make a non-significant and non-refundable cash deposit. We are not legally obligated to purchase the balance of the lots, but would forfeit any existing deposits and could be subject to financial and other penalties if the lots were not purchased. We do not have an ownership interest in these entities or title to their assets and do not guarantee their liabilities. As such, these entities are not consolidated. These land banking arrangements help us manage the financial and market risk associated with land holdings which are not included in the unaudited Condensed Consolidated Balance Sheets.consolidated balance sheets.
Investments in Consolidated and Unconsolidated Entities
Consolidated Entities — In the ordinary course of business, we enter into land purchase contracts, lot option contracts and land banking arrangements in order to procure land or lots for the construction of homes. Such contracts enable us to control significant lot positions with a minimal initial capital investment and substantially reduce the risk associated with land ownership and development. In accordance with ASC Topic 810, Consolidation, when we enter into agreements to acquire land or lots and pay a non-refundableTAYLOR MORRISON HOME CORPORATION 10-Q
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deposit, we evaluate if a Variable Interest Entity (“VIE”) should be created if 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 consolidate the VIE and reflect such assets and liabilities as Consolidated real estate not owned and Liabilities attributable to consolidated real estate not owned, respectively, in the unaudited Condensed Consolidated Balance Sheets.consolidated balance sheets.
Unconsolidated Joint Ventures — We use the equity method of accounting for entities 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
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ITEM 1. FINANCIAL STATEMENTS
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/lossincome from unconsolidated entities on the unaudited Condensed
Consolidated Statementconsolidated statements of
Operationsoperations when earned and distributions are credited against our Investments in unconsolidated entities on the unaudited Condensed
Consolidated Balance Sheetsconsolidated balance sheets when received.
We evaluate our investments in unconsolidated entities for indicators of impairment semi-annually. A series of operating losses of an investee or other factors may indicate that a decrease in value of our investment in the unconsolidated entity has occurred which is other-than-temporary. The amount of impairment recognized, if any, is the excess of the investment's carrying amount over its estimated fair value. Additionally, we consider various qualitative factors to determine if a decrease in the value of the investment is other-than-temporary. These factors include age of the venture, stage in its life cycle, intent and ability for us to recover our investment in the entity, financial condition and long-term prospects of the entity, short-term liquidity needs of the unconsolidated entity, trends in the general economic environment of the land, entitlement status of the land held by the unconsolidated entity, overall projected returns on investment, defaults under contracts with third parties (including bank debt), recoverability of the investment through future cash flows and relationships among the entity's partners. If we believe that the decline in the fair value of the investment is temporary, then no impairment is recorded. We recorded a $3.5 millionno impairment chargecharges related to an investmentthe investments in one of our unconsolidated entities for the nine months ended September 30, 2022. No such charges were recorded for the three months ended September 30,2022 orMarch 31, 2024 and 2023.
Treasury Stock — We account for treasury stock, including the three and nine months ended September 30, 2023.shares repurchased as part of our Accelerated Share Repurchase program ("ASR"), in accordance with ASC Topic 505-30, Equity—Treasury Stock. Repurchased shares are reflected as a reduction in stockholders' equity. Refer to Note 10 - Stockholders' Equity for additional discussion regarding the ASR.
Revenue Recognition — Revenue 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 home closings revenue and land closings revenue recognition: (1) identify the contract(s) with our customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the performance obligation(s) are satisfied. Our home sales transactions, 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 salesclosings revenue:
•Revenue from closings of residential real estate is recognized when the buyer has made the required minimum down payment, obtained necessary financing, the risks and rewards of ownership are transferred to the buyer, and we have no continuing involvement with the property, which is generally upon the close of escrow. Revenue is reported net of any discounts and incentives.
•Revenue from land sales is recognized when a significant down payment is received, title passes and collectability of the receivable, if any, is reasonably assured, and we have no continuing involvement with the property, which is generally upon the close of escrow.
Amenity and other revenue
We own and operate certain amenities such as golf courses, 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 club members, which are invoiced on a monthly basis. Revenue from our golf club operations is also included in amenity and other revenue. Amenity and other revenue also includes revenue from the sale of assets from our Urban Form
operations and Build-to-Rent operations.
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. Generally, loans TMHF originates are sold to third party investors within a short period of time, on aTAYLOR MORRISON HOME CORPORATION 10-Q
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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, recordrecording a gain/loss on sale in the period of sale. Also included in Financial services revenue/expenses areis the realized and unrealized gains and losses from hedging instruments. ASC Topic 815-25, Derivatives and Hedging, requires that all hedging instruments be recognized as assets or liabilities on
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ITEM 1. FINANCIAL STATEMENTS
the balance sheet at their fair value. We do not meet the criteria for hedge accounting; therefore, we account for these instruments as free-standing derivatives, with changes in fair value recognized in Financial services revenue/expenses on the statementstatements of operations in the period in which they occur.
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
, which is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 requires all public entities to report segment information in accordance with Topic 280. The guidance will be effective for the annual reporting period ending December 31, 2024 but entities may early adopt. We are currently evaluating the effect of adopting the new guidance on our consolidated financial statements and related disclosures.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 September 30, | | | Nine Months Ended September 30, | |
| | 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 March 31, | | |
| 2024 | | 2023 | | | | |
Numerator: | | | | | | | |
Net income | $ | 190,270 | | | $ | 191,051 | | | | | |
Denominator: | | | | | | | |
Weighted average shares – basic | 106,457 | | | 108,429 | | | | | |
Restricted stock units | 1,112 | | | 913 | | | | | |
Stock Options | 995 | | | 711 | | | | | |
Weighted average shares – diluted | 108,564 | | | 110,053 | | | | | |
Earnings per common share – basic: | | | | | | | |
Net income | $ | 1.79 | | | $ | 1.76 | | | | | |
Earnings per common share – diluted: | | | | | | | |
Net income | $ | 1.75 | | | $ | 1.74 | | | | | |
The above calculations of weighted average shares - diluted exclude 353,947138,521 and 282,124664,145 of anti-dilutive stock options and unvested performance and non-performance restricted stock units (“RSUs”("RSUs") for the three and nine months ended September 30,March 31, 2024 and 2023, respectively,respectively.
In addition, 155,757 shares relating to our ASR (refer to Note 10 - Stockholders' Equity) were also anti-dilutive and 1,560,934 and 1,470,941 of anti-dilutive stock options and RSUsexcluded from the above for the three and nine months ended September 30, 2022, respectively.March 31, 2024. There were no ASR transactions in 2023.
TAYLOR MORRISON HOME CORPORATION 10-Q
9
ITEM 1. FINANCIAL STATEMENTS
4. REAL ESTATE INVENTORY AND LAND DEPOSITS
Inventory consists of the following (in thousands):
| | | | | | | | |
| | As of | |
| | September 30, 2023 | |
| December 31, 2022 | |
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 | |
following: | | | | | | | | | | | |
| As of |
(Dollars in thousands) | March 31, 2024 | | December 31, 2023 |
Real estate developed and under development | $ | 4,076,312 | | | $ | 3,855,534 | |
Real estate held for development or held for sale (1) | 46,312 | | | 29,317 | |
Total land inventory | 4,122,624 | | | 3,884,851 | |
Operating communities (2) | 1,542,078 | | | 1,414,528 | |
Capitalized interest | 177,222 | | | 174,449 | |
Total owned inventory | 5,841,924 | | | 5,473,828 | |
Consolidated real estate not owned | 143,429 | | | 71,618 | |
Total real estate inventory | $ | 5,985,353 | | | $ | 5,545,446 | |
(1)Real estate held for development or held for sale includes properties which are not in active production.
(2)Operating communities consist of all vertical construction costs relating to homes in progress and completed homes.
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Table of Contents
ITEM 1. FINANCIAL STATEMENTS
The development status of our land inventory is as follows (dollars in thousands):
| | | | | | | | | | | | | | | | |
| | As of | |
| | September 30, 2023 | | | December 31, 2022 | |
| | Owned Lots | | | Book Value of Land Developed and Under Development | | | Owned Lots | | | Book Value of Land Developed and Under Development | |
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 | |
(1)The remaining book value of land and development relates to parcels of commercial assets which are. excluded from the homebuilding owned lots presented in the table.
Undeveloped lots are those where no phase specific development work has commenced. Under development lots include land where phase specific development has commenced. Finished lots are fully developed. This classification allows for multi-phase or master planned communities to be presented in more than one lot status based on their development.
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
A summary of ourowned and controlled lots for the following periods (dollarsis as follows:
| | | | | | | | | | | |
| As of |
(Dollars in thousands) | March 31, 2024 | | December 31, 2023 |
Owned lots: | | | |
Undeveloped | 13,321 | | | 13,418 | |
Under development | 9,708 | | | 8,848 | |
Finished | 12,177 | | | 11,811 | |
Total owned lots | 35,206 | | | 34,077 | |
Controlled lots: | | | |
Land option purchase contracts | 8,145 | | | 8,621 | |
Land banking arrangements | 5,995 | | | 5,818 | |
Other controlled lots(1) | 24,836 | | | 23,846 | |
Total controlled lots | 38,976 | | | 38,285 | |
Total owned and controlled lots | 74,182 | | | 72,362 | |
Homes in inventory | 8,578 | | | 7,867 | |
(1) Other controlled lots include single transaction take-downs and lots from our portion of unconsolidated JVs.
Lots which have started vertical construction have been excluded from total owned lots. Controlled lots represent lots 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 | |
(1)Land deposits are non-refundable and represent exposure to loss related to our contracts with third parties, unconsolidated entities, andwhich we have a contractual right, generally through an option contract or land banking arrangements.arrangement as well as paid a land deposit to a seller for an underlying real estate asset. Homes in inventory include any lots with vertical construction.
TAYLOR MORRISON HOME CORPORATION 10-Q
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. In addition, at September 30, 2023 and December 31, 2022 we had refundable depositsTable of $2.8 million and $8.8 million respectively.ContentsITEM 1. FINANCIAL STATEMENTS
Capitalized Interest — Interest capitalized, incurred and amortized is as follows (in thousands):
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | 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 | |
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
Interest capitalized - beginning of period | $ | 174,449 | | | $ | 190,123 | | | | | |
Interest incurred and capitalized(1) | 26,398 | | | 34,133 | | | | | |
Interest amortized to cost of home closings | (23,625) | | | (27,649) | | | | | |
Interest capitalized - end of period | $ | 177,222 | | | $ | 196,607 | | | | | |
(1)Excludes Interest (income)/expense,income, net on the unaudited Condensed Consolidated Statementconsolidated statements of Operationsoperations as such amounts are not capitalizable.
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.
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Table of Contents
ITEM 1. FINANCIAL STATEMENTS
Summarized, unaudited condensed combined financial information of unconsolidated entities that are accounted for by the equity method are as follows (in thousands):
| | | | | | | | |
| | As of | |
| | September 30, 2023 | | | December 31, 2022 | |
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 September 30, | | | Nine Months Ended September 30, | |
| | 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 |
| March 31, 2024 | | December 31, 2023 |
Assets: | | | |
Real estate inventory | $ | 1,011,378 | | | $ | 952,223 | |
Other assets | 242,828 | | | 182,517 | |
Total assets | $ | 1,254,206 | | | $ | 1,134,740 | |
Liabilities and owners’ equity: | | | |
Debt | $ | 369,954 | | | $ | 317,224 | |
Other liabilities | 63,622 | | | 50,739 | |
Total liabilities | $ | 433,576 | | | $ | 367,963 | |
Owners’ equity: | | | |
TMHC | $ | 369,982 | | | $ | 346,192 | |
Others | 450,648 | | | 420,585 | |
Total owners’ equity | $ | 820,630 | | | $ | 766,777 | |
Total liabilities and owners’ equity | $ | 1,254,206 | | | $ | 1,134,740 | |
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
Revenues | $ | 73,767 | | | $ | 19,536 | | | | | |
Costs and expenses | (66,643) | | | (14,699) | | | | | |
Net income from unconsolidated entities | $ | 7,124 | | | $ | 4,837 | | | | | |
TMHC’s share in net income of unconsolidated entities | $ | 2,751 | | | $ | 1,929 | | | | | |
Distributions to TMHC from unconsolidated entities | $ | 2,897 | | | $ | 1,197 | | | | | |
Consolidated Entities
We have several
As of March 31, 2024, assets of the consolidated joint ventures
for the purposetotaled $266.8 million, of
which $35.9 million was cash and cash equivalents, $66.7 million was owned real estate
developmentinventory, and
homebuilding activities, which we have determined$120.8 million was property and equipment, net (primarily related to
be VIEs. As the managing member, we oversee the daily operations and have the power to direct the activitiesUrban Form). The majority of the
VIEs, or joint ventures. For this specific subsetproperty and equipment, net balance is held for investment as 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 the entities are consolidated.March 31, 2024. As of September 30,December 31, 2023, the assets of the consolidated joint ventures totaled $278.0$265.2 million, of which $27.9$29.8 million was cash and cash equivalents, $78.7$70.2 million was owned real estate inventory, and $122.0$121.3 million was fixed assets (primarily related to Urban Form). The majority of the fixed asset balance which was classified as held for sale as of December 31, 2022, was reclassified as held for investment during the second quarter of 2023. As of December 31, 2022, the assets of the consolidated joint ventures totaled $277.6 million, of which $38.9 million was cashproperty and cash equivalents, $72.0 million was owned inventory and $123.2 million was fixed assets.equipment, net. The liabilities of the consolidated joint ventures totaled $149.0$124.1 million and $155.5$133.8 million as of September 30, 2023
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ITEM 1. FINANCIAL STATEMENTS
March 31, 2024 and December 31, 2022,2023, respectively, and were primarily comprised of loans payable and other borrowings, accounts payable and accrued expenses and other liabilities.
6. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following (in thousands):
| | | | | | | | | | | |
| As of |
| March 31, 2024 | | December 31, 2023 |
Real estate development costs to complete | $ | 45,723 | | | $ | 46,114 | |
Compensation and employee benefits | 77,393 | | | 149,095 | |
Self-insurance and warranty reserves | 186,948 | | | 184,448 | |
Interest payable | 26,039 | | | 31,042 | |
Property and sales taxes payable | 29,442 | | | 30,887 | |
Other accruals | 93,550 | | | 107,488 | |
Total accrued expenses and other liabilities | $ | 459,095 | | | $ | 549,074 | |
| | | | | | | | |
| | As of September 30, 2023 | | | As of December 31, 2022 | |
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 | |
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Table of Contents
ITEM 1. FINANCIAL STATEMENTS
Self-Insurance and Warranty Reserves – We accrue for the expected costs associated with our limited warranty, deductibles and self-insured exposure under our various insurance policies within Beneva Indemnity Company (“Beneva”), a wholly owned subsidiary. A summary of the changes in reserves are as follows (in thousands):
|
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | 2023 | | | 2022 | | | 2023 | | | 2022 | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| 2024 | |
| 2024 | |
| 2024 | |
Reserve - beginning of period | |
Reserve - beginning of period | |
Reserve - beginning of period | | $ | 160,326 | | | $ | 137,491 | | | $ | 161,675 | | | $ | 141,839 | |
Additions to reserves | | | 28,076 | | | | 2,514 | | | | 67,411 | | | | 34,917 | |
Additions to reserves | |
Additions to reserves | |
Cost of claims incurred | |
Cost of claims incurred | |
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 | |
Changes in estimates to pre-existing reserves | |
Changes in estimates to pre-existing reserves | |
Reserve - end of period | | $ | 170,236 | | | $ | 139,991 | | | $ | 170,236 | | | $ | 139,991 | |
Reserve - end of period | |
Reserve - end of period | |
Due to the degree of judgment required in making these estimates and the inherent uncertainty in potential outcomes, it is reasonably possible that actual costs could differ from those reserved and such differences could be material, resulting in a change in future estimated reserves.
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ITEM 1. FINANCIAL STATEMENTS
7. DEBT
Total debt consists of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | |
| | As of | |
| | September 30, 2023 | | | December 31, 2022 | |
| | Principal | | | Unamortized Debt Issuance (Costs)/ Premium | | | Carrying Value | | | Principal | | | Unamortized Debt Issuance (Costs)/ Premium | | | Carrying Value | |
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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of |
| March 31, 2024 | | December 31, 2023 |
| Principal | | Unamortized Debt Issuance (Costs)/ Premium | | Carrying Value | | Principal | | Unamortized Debt Issuance (Costs)/ Premium | | Carrying Value |
5.875% Senior Notes due 2027 | 500,000 | | | (2,476) | | | 497,524 | | | 500,000 | | | (2,672) | | | 497,328 | |
6.625% Senior Notes due 2027 | 27,070 | | | 950 | | | 28,020 | | | 27,070 | | | 1,022 | | | 28,092 | |
5.75% Senior Notes due 2028 | 450,000 | | | (2,394) | | | 447,606 | | | 450,000 | | | (2,551) | | | 447,449 | |
5.125% Senior Notes due 2030 | 500,000 | | | (4,015) | | | 495,985 | | | 500,000 | | | (4,174) | | | 495,826 | |
Senior Notes subtotal | $ | 1,477,070 | | | $ | (7,935) | | | $ | 1,469,135 | | | $ | 1,477,070 | | | $ | (8,375) | | | $ | 1,468,695 | |
Loans payable and other borrowings | 441,190 | | | — | | | 441,190 | | | 394,943 | | | — | | | 394,943 | |
$1 Billion Revolving Credit Facility(1)(2) | — | | | — | | | — | | | — | | | — | | | — | |
$100 Million Revolving Credit Facility(1)(2) | — | | | — | | | — | | | — | | | — | | | — | |
Mortgage warehouse borrowings | 183,174 | | | — | | | 183,174 | | | 153,464 | | | — | | | 153,464 | |
Total debt | $ | 2,101,434 | | | $ | (7,935) | | | $ | 2,093,499 | | | $ | 2,025,477 | | | $ | (8,375) | | | $ | 2,017,102 | |
(1)On September 1, 2023, the 5.625% Senior Notes due 2024 (the "2024 Senior Notes") were redeemed in full.
(2)Unamortized Debt Issuance (Cost)/Premium for such notes is reflective of fair value adjustments as a result of purchase accounting.
(3)Unamortized debt issuance costs are included in the Prepaid expenses and other assets, net on the Condensed Consolidated Balance Sheets.
consolidated balance sheets.(4)(2) The $1$1 Billion Revolving Credit Facility Agreement together with the $100$100 Million Revolving Credit Facility Agreement, the “Revolving Credit Facilities”.
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, 2022.2023. For information regarding such instruments, refer to Note 8 - Debt to the Consolidated Financial Statements in our Annual Report. As of September 30, 2023,March 31, 2024, we were in compliance with all of the covenants in the debt instruments listed in the table above.
5.625% Senior Notes due 2024
Our 2024 Senior Notes were redeemed in full on September
$1
2023 using cash on hand at a price equal to 100%, plus the accrued and unpaid interest up to, but excluding, the redemption date. As a result of the redemption of the 2024 Senior Notes, we recorded a net loss on extinguishment of debt of $0.3 million for the three months ended September 30, 2023 to Loss/(gain) on extinguishment of debt, net, on the Condensed Consolidated Statement of Operations, which included the write-off of net unamortized deferred financing fees.$1 Billion Revolving Credit Facility
Our $1$1 Billion Revolving 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, 2023March 31, 2024 and December 31, 2022.2023.
As of
September 30, 2023March 31, 2024 and December 31,
2022,2023, we had
$3.1$2.7 million and $3.8$2.9 million, respectively, of unamortized debt issuance costs relating to our $1$1 Billion Revolving Credit Facility, which are included in Prepaid expenses and other assets, net, on the unaudited Condensed Consolidated Balance Sheets.consolidated balance sheets. As of September 30, 2023March 31, 2024 and December 31, 2022,2023, we had $70.4$59.9 million and $69.2$61.2 million,TAYLOR MORRISON HOME CORPORATION 10-Q
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Table of Contents
ITEM 1. FINANCIAL STATEMENTS
respectively, of utilized letters of credit, resulting in $929.6$940.1 million and $930.8$938.8 million, respectively, of availability under the $1$1 Billion Revolving Credit Facility.
The $1 Billion Revolving Credit Facility contains certain “springing” financial covenants, requiring us and our subsidiaries to comply with a maximum debt to capitalization ratio of not more than 0.60 to 1.00 and a minimum consolidated tangible net worth level, currently of at least $3.2 billion. The financial covenants would be in effect for any fiscal quarter during which any (a) loans under the $1 Billion Revolving Credit Facility are outstanding during the last day of such fiscal quarter or on more than five separate days during such fiscal quarter or (b) undrawn letters of credit (except to the extent cash collateralized) issued under the $1 Billion Revolving Credit Facility in an aggregate amount greater than $40.0 million or unreimbursed letters of credit issued under the $1 Billion Revolving Credit Facility are outstanding on the last day of such fiscal quarter or for more than five consecutive days during such fiscal quarter. For purposes of determining compliance with the financial covenants for any fiscal quarter, the $1 Billion Revolving Credit Facility provides that we may exercise an equity cure by issuing certain permitted securities for cash or otherwise recording cash contributions to our capital that will, upon the contribution of such cash, be included in the calculation of consolidated tangible net worth and consolidated total capitalization. The equity cure right is exercisable up to twice in any period of four consecutive fiscal quarters and up to five times overall.
The $1 Billion Revolving Credit Facility contains certain restrictive covenants including limitations on incurrence of liens, the payment of dividends and other distributions, asset dispositions and investments in entities that are not guarantors, limitations on prepayment of subordinated indebtedness and limitations on fundamental changes. The $1 Billion Revolving Credit Facility contains customary events of default, subject to applicable grace periods, including for nonpayment of principal, interest or other amounts, violation of covenants (including financial covenants, subject to the exercise of an equity cure), incorrectness of representations and warranties in any material respect, cross default and cross acceleration, bankruptcy, material monetary judgments, ERISA events with material adverse effect, actual or asserted invalidity of material guarantees and change of control.
As of September 30, 2023,March 31, 2024, we were in compliance with all of the covenants under the $1$1 Billion Revolving Credit Facility.
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ITEM 1. FINANCIAL STATEMENTS
Mortgage Warehouse Borrowings
The following is a summary of our mortgage warehouse borrowings (in thousands):
| | | | | | | | | | | | | | |
| | As of September 30, 2023 |
Facility | | Amount Drawn | | | Facility Amount | | | Interest Rate | | Expiration Date | | 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 Drawn | | | Facility Amount | | | Interest Rate | | Expiration Date | | 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 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of March 31, 2024 |
Facility | | Amount Drawn | | Facility Amount | | Interest Rate(2) | | Expiration Date | | Collateral (1) |
Warehouse A | | $ | — | | | $ | 60,000 | | | Term SOFR + 1.70% | | on Demand | | Mortgage Loans |
Warehouse C | | 59,603 | | | 100,000 | | | Term SOFR + 1.50% | | on Demand | | Mortgage Loans |
Warehouse D | | 60,511 | | | 100,000 | | | Daily SOFR + 1.50% | | September 4, 2024 | | Mortgage Loans |
Warehouse E | | 63,060 | | | 100,000 | | | Term SOFR + 1.60% | | on Demand | | Mortgage Loans |
Total | | $ | 183,174 | | | $ | 360,000 | | | | | | | |
| | | | | | | | | | |
| | As of December 31, 2023 |
Facility | | Amount Drawn | | Facility Amount | | Interest Rate(2) | | Expiration Date | | Collateral (1) |
Warehouse A | | $ | 13,477 | | | $ | 60,000 | | | Term SOFR + 1.70% | | on Demand | | Mortgage Loans |
Warehouse C | | 25,567 | | | 100,000 | | | Term SOFR + 1.65% | | on Demand | | Mortgage Loans |
Warehouse D | | 56,745 | | | 100,000 | | | Daily SOFR + 1.50% | | September 4, 2024 | | Mortgage Loans |
Warehouse E | | 57,675 | | | 100,000 | | | Term SOFR + 1.60% | | on Demand | | Mortgage Loans |
Total | | $ | 153,464 | | | $ | 360,000 | | | | | | | |
(1)The mortgage warehouse borrowings outstanding as of September 30, 2023March 31, 2024 and December 31, 20222023 were collateralized by $241.7$216.6 million and $346.4$193.3 million, respectively, of mortgage loans held for sale, which comprise the balance of mortgage loans held for sale, and approximately $sale.0.8 million and $2.1 million, respectively, of restricted cash on our unaudited Condensed Consolidated Balance Sheets.
(2)Beginning October 1, 2023, the lender for Warehouse B discontinued providing mortgage warehouse facility financings to the industry in general. We terminated the facility on August 17, 2023. The facility amounts for Warehouses D and E were expanded to offset the loss of liquidity from Warehouse B.
Secured Overnight Financing Rate ("SOFR")
Loans Payable and Other Borrowings
Loans payable and other borrowings as of September 30, 2023March 31, 2024 and December 31, 20222023 consist of project-level debt due to various land sellers and financial institutions for specific projects.communities. 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 9%10% and 0%0% to 8%9% at each of September 30, 2023March 31, 2024 and December 31, 2022,2023, respectively. We impute interest for loans with no stated interest rates.
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ITEM 1. FINANCIAL STATEMENTS
8. FAIR VALUE DISCLOSURES
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. Derivative assets and liabilities include interest rate lock commitments (“IRLCs”) and mortgage backed securities (“MBS”). The fair value of IRLCs is based on the value of the underlying mortgage loans, quoted MBS prices and the probability that the mortgage loan will fund within the terms of the IRLCs. We estimate the fair value of the forward sales commitments based on quoted MBS prices. The fair value of our mortgage warehouse borrowings, loans payable and other borrowings, and the borrowings under our Revolving Credit Facilities approximate carrying value due to their short term nature and variable interest rate terms. The fair value of our Senior Notessenior notes is derived from quoted market prices by independent dealers in markets that are not active. The fair value of our Equity Security Investment in a public company is based upon quoted prices for identical assets in an active market. There were no changes to or transfers between the levels of the fair value hierarchy for any of our financial instruments as of September 30, 2023,March 31, 2024, when compared to December 31, 2022.2023.
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ITEM 1. FINANCIAL STATEMENTS
The carrying value and fair value of our financial instruments are as follows:
| | | | | | | | | | | | | | | | | | |
| | | | September 30, 2023 | | | December 31, 2022 | |
(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 | | $ | 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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | March 31, 2024 | | December 31, 2023 |
(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 | | $ | 216,633 | | | $ | 216,633 | | | $ | 193,344 | | | $ | 193,344 | |
IRLCs | 3 | | (795) | | | (795) | | | 1,489 | | | 1,489 | |
MBSs | 2 | | (2,039) | | | (2,039) | | | (5,055) | | | (5,055) | |
Mortgage warehouse borrowings | 2 | | 183,174 | | | 183,174 | | | 153,464 | | | 153,464 | |
Loans payable and other borrowings | 2 | | 441,190 | | | 441,190 | | | 394,943 | | | 394,943 | |
5.875% Senior Notes due 2027 (1) | 2 | | 497,524 | | | 498,790 | | | 497,328 | | | 502,500 | |
6.625% Senior Notes due 2027 (1) | 2 | | 28,020 | | | 26,393 | | | 28,092 | | | 26,529 | |
5.75% Senior Notes due 2028 (1) | 2 | | 447,606 | | | 446,103 | | | 447,449 | | | 451,571 | |
5.125% Senior Notes due 2030 (1) | 2 | | 495,985 | | | 475,805 | | | 495,826 | | | 483,690 | |
| | | | | | | | | |
(1)On September 1, 2023, the 2024 Senior Notes were redeemed in full.
(2)Carrying value for Senior Notes,senior notes, as presented, includes unamortized debt issuance costs and premiums. Debt issuance costs are not factored into the fair value calculation for the Senior Notes.senior notes.
Fair value measurements are used for inventories on a nonrecurring basis when events and circumstances indicate that their carrying value is not recoverable. The following table presents the fair value forof our inventories measured at fairMarch 31, 2024 and December 31, 2023 was not determined as there were no events or circumstances that indicated their carrying value on a nonrecurring basis:was not recoverable.
| | | | | | | | | | | | |
(Dollars in thousands) | | Level in Fair Value Hierarchy | | | As of September 30, 2023 | | | As of December 31, 2022 | |
Description: | | | | | | | | | |
Real estate inventories | | | 3 | | | $ | 19,263 | | | $ | 48,360 | |
The effective tax rate for the three
and nine months ended
September 30, 2023March 31, 2024 was
25.4% and 24.7%23.2%, respectively, compared to 22.6% and 23.8%, respectively,23.0% for the same periodsperiod in 2022.2023. For the three and nine months ended September 30, 2023 and 2022,March 31, 2024, 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 state income taxes, excess tax benefits related to stock-based
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ITEM 1. FINANCIAL STATEMENTS
compensation, and special deductions and credits related to homebuilding activities. The Inflation Reduction Act, enacted in August 2022, extended Internal Revenue Code ("IRC") §45L energy efficient homebuilding tax credits and applies to homes closed in 2022-2032.
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.
There were no unrecognized tax benefits as of September 30, 2023March 31, 2024 or December 31, 2022.2023.
The Company’s authorized capital stock consists of
400,000,000 shares of common stock, par value $0.00001$0.00001 per share (the “Common Stock”), and 50,000,000 shares of preferred stock, par value $0.00001$0.00001 per share.
Stock Repurchase Program
On December 15, 2023 the Board of Directors authorized a renewal of the Company's then-existing stock repurchase program which permits the repurchase up to $500 million of the Company’s common stock through December 31, 2025. Repurchases under the program may occur from time to time through open market purchases, privately negotiated transactions or other transactions.
On March 5, 2024, using the availability under our stock repurchase program, we entered into an ASR agreement and paid $50.0 million to receive an initial delivery of 705,343 shares of our common stock in accordance with the ASR agreement with a third-party financial institution. The final settlement of the ASR is expected to occur no later than the third quarter of 2024, at which time, a volume-weighted average price calculation over the term of the ASR agreement will be used to determine the final number of shares to be delivered. We accounted for the ASR as a common stock repurchase and a forward contract indexed to our own common stock. We determined that the equity classification criteria was met for the forward contract; therefore, it was not accounted for as a derivative instrument.
The following table summarizes share repurchase activity for the periods presented:
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| | | | | | | | | | | | | | | | |
| | 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 | |
The CompanyITEM 1. FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
(Dollars in thousands) | 2024 | | 2023 | | | | |
Amount available for repurchase — beginning of period | $ | 494,489 | | | $ | 279,138 | | | | | |
| | | | | | | |
| | | | | | | |
Amount repurchased(1) | (91,649) | | | (3,568) | | | | | |
Amount available for repurchase — end of period | $ | 402,840 | | | $ | 275,570 | | | | | |
(1) This amount includes $50.0 million of accelerated share repurchase.
We repurchased
2,169,657a total of 1,491,485 and 2,278,982109,325 shares during the three and nine months ended September 30, 2023, respectively. The Company repurchased 4,213,256March 31, 2024 and 12,940,941 shares during the three and nine months ended September 30, 2022, respectively.2023.
The Inflation Reduction Act was enacted on August 16, 2022 and includes a one percent excise tax on the net repurchase of company stock. This act was effective as of January 1, 2023 and did not have a material impact on our financial statements for the three and nine months ended September 30, 2023.March 31, 2024. We will continue to assess the impact it may have on our financial results.
11. STOCK BASED COMPENSATION
Equity-Based Compensation
In April 2013, we adopted the Taylor Morrison Home Corporation 2013 Omnibus Equity Award Plan (the “Plan”). The Plan was most recently amended and restated in May 2022. The Plan provides for the grant of stock options, RSUs, performance-based restricted stock units (“PRSUs”), and other equity-based awards deliverable in shares of our Common Stock. As of September 30, 2023,March 31, 2024, we had an aggregate of 5,117,2224,898,061 shares of Common Stock available for future grants under the Plan.
The following table provides the outstanding balance of RSUs, PRSUs, and stock options as of September 30, 2023:
| | | | | | | | | | | | | | | | |
| | RSUs and PRSUs | | | Stock Options | |
| | Units | | | Weighted Average Grant Date Fair Value | | | Units | | | Weighted Average Exercise Price Per Share | |
Balance at September 30, 2023 | | | 1,490,914 | | | $ | 30.26 | | | | 2,265,448 | | | $ | 26.80 | |
March 31, 2024:
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ITEM 1. FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | |
| RSUs and PRSUs | | Stock Options |
| Number of Units | | Weighted Average Grant Date Fair Value | | Number of Options | | Weighted Average Exercise Price Per Share |
Balance at March 31, 2024 | 1,337,595 | | $ | 37.72 | | | 2,236,404 | | $ | 28.44 | |
The following table provides information regarding the amount and components of stock-based compensation expense, all of which is included in General and administrative expenses in the unaudited Condensed
Consolidated Statementsconsolidated statements of
Operationsoperations (in thousands):
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | 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 | |
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
Restricted stock units (1) | $ | 4,772 | | | $ | 6,675 | | | | | |
Stock options | 711 | | | 858 | | | | | |
Total stock compensation | $ | 5,483 | | | $ | 7,533 | | | | | |
(1)Includes compensation expense related to time-based RSUs and PRSUs.
At September 30, 2023March 31, 2024 and December 31, 2022,2023, the aggregate unrecognized value of all outstanding stock-based compensation awards was approximately $32.9$45.2 million and $27.1$26.5 million, respectively.
12.
OPERATING AND REPORTING SEGMENTS
We have multiple homebuilding operating components which are engaged in the business of acquiring and developing land, constructing homes, marketing and selling homes, and providing warranty and customer service. We aggregate our homebuilding operating components into three reporting segments, East, Central, and West, based on similar long-term economic characteristics. The activity from our Build-to-Rent and Urban Form operations are included in our Corporate segment. We also have a Financial Services reporting segment. We have no inter-segment sales as all sales are to external customers.
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ITEM 1. FINANCIAL STATEMENTS
Our reporting segments are 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 |
Operating results for each segment may not be indicative of the results for such segment had it been an independent, stand-alone entity. Segment information is as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2023 | |
| | East | | | Central | | | West | | | Financial Services | | | Corporate and Unallocated(1) | | | 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 March 31, 2024 |
| East | | Central | | West | | Financial Services | | Corporate and Unallocated(1) | | Total |
Total revenue | $ | 547,311 | | | $ | 478,490 | | | $ | 622,829 | | | $ | 46,959 | | | $ | 4,163 | | | $ | 1,699,752 | |
Gross margin | 145,888 | | | 124,231 | | | 123,664 | | | 21,816 | | | 1,246 | | | 416,845 | |
Selling(2), general and administrative expenses | (46,201) | | | (39,393) | | | (44,748) | | | — | | | (39,822) | | | (170,164) | |
Net (loss)/income from unconsolidated entities | — | | | (41) | | | (26) | | | 2,897 | | | (79) | | | 2,751 | |
Interest and other (expense)/income, net(3) | (827) | | | (2,415) | | | (3,518) | | | 730 | | | 5,478 | | | (552) | |
| | | | | | | | | | | |
Income/(loss) before income taxes | $ | 98,860 | | | $ | 82,382 | | | $ | 75,372 | | | $ | 25,443 | | | $ | (33,177) | | | $ | 248,880 | |
(1)Includes the activity from our Build-To-Rent and Urban Form operations.
(2) Includes sales, commissions, and other marketing costs.
(3) Interest and other (expense)/income, net includes pre-acquisition write-offs ofon terminated projects.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 |
| East | | Central | | West | | Financial Services | | Corporate and Unallocated(1) | | Total |
Total revenue | $ | 610,813 | | | $ | 465,011 | | | $ | 547,906 | | | $ | 35,149 | | | $ | 2,978 | | | $ | 1,661,857 | |
Gross margin | 165,707 | | | 111,313 | | | 108,627 | | | 13,001 | | | 918 | | | 399,566 | |
Selling(2), general and administrative expenses | (43,047) | | | (36,956) | | | (40,484) | | | — | | | (38,534) | | | (159,021) | |
Net (loss)/income from unconsolidated entities | — | | | (82) | | | (235) | | | 2,275 | | | (29) | | | 1,929 | |
Interest and other (expense)/income, net(3) | (1,212) | | | (1,341) | | | 3,779 | | | — | | | 4,719 | | | 5,945 | |
| | | | | | | | | | | |
Income/(loss) before income taxes | $ | 121,448 | | | $ | 72,934 | | | $ | 71,687 | | | $ | 15,276 | | | $ | (32,926) | | | $ | 248,419 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 (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 | |
(1)Includes the activity from our Build-To-Rent and Urban Form operations.
(2) Includes sales, commissions, and other marketing costs.
(3) Interest and other (expense)/income, net includes pre-acquisition write-offs ofon terminated projects. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of March 31, 2024 |
| East | | Central | | West | | Financial Services | | Corporate and Unallocated(1) | | Total |
Real estate inventory and land deposits | $ | 2,172,523 | | | $ | 1,205,995 | | | $ | 2,805,878 | | | $ | — | | | $ | — | | | $ | 6,184,396 | |
Investments in unconsolidated entities | 63,628 | | | 132,007 | | | 98,491 | | | 5,483 | | | 70,373 | | | 369,982 | |
Other assets | 164,058 | | | 221,082 | | | 596,523 | | | 320,556 | | | 1,053,746 | | | 2,355,965 | |
Total assets | $ | 2,400,209 | | | $ | 1,559,084 | | | $ | 3,500,892 | | | $ | 326,039 | | | $ | 1,124,119 | | | $ | 8,910,343 | |
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ITEM 1. FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2023 | |
| | East | | | Central | | | West | | | Financial Services | | | Corporate and Unallocated(1) | | | 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 | |
(1)Includes the activity from our Build-To-Rent and Urban Form operations
(2)Interest and other (expense)/income, net includes pre-acquisition write-offs of terminated projects.
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2022 | |
| | East | | | Central | | | West | | | Financial Services | | | Corporate and Unallocated(1) | | | Total | |
Total revenue | | $ | 1,810,041 | | | $ | 1,351,093 | | | $ | 2,433,893 | | | $ | 98,419 | | | $ | 39,345 | | | $ | 5,732,791 | |
Gross margin | | | 476,241 | | | | 332,440 | | | | 635,318 | | | | 32,327 | | | | 16,222 | | | | 1,492,548 | |
Selling, general and administrative expenses | | | (127,041 | ) | | | (95,527 | ) | | | (125,086 | ) | | | — | | | | (122,201 | ) | | | (469,855 | ) |
Net (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 | |
(1)Includes the activity from our Build-To-Rent and Urban Form operations.
(2)Interest and other income/(expense), net includes pre-acquisition write-offs of terminated projects.
| | | | | | | | | | | | | | | | | | | | | | | | |
| | As of September 30, 2023 | |
| | East | | | Central | | | West | | | Financial Services | | | Corporate and Unallocated(1) | | | 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 | |
(1)Includes the assets from our Build-To-Rent and Urban Form operations.
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Table of Contents | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of December 31, 2022 | |
| | East | | | Central | | | West | | | Financial Services | | | Corporate and Unallocated(1) | | | 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 | |
ITEM 1. FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2023 |
| East | | Central | | West | | Financial Services | | Corporate and Unallocated(1) | | Total |
Real estate inventory and land deposits | $ | 1,909,084 | | | $ | 1,181,014 | | | $ | 2,658,565 | | | $ | — | | | $ | — | | | $ | 5,748,663 | |
Investments in unconsolidated entities | 63,628 | | | 125,610 | | | 88,219 | | | 5,483 | | | 63,252 | | | 346,192 | |
Other assets | 177,739 | | | 214,685 | | | 616,210 | | | 298,451 | | | 1,270,147 | | | 2,577,232 | |
Total assets | $ | 2,150,451 | | | $ | 1,521,309 | | | $ | 3,362,994 | | | $ | 303,934 | | | $ | 1,333,399 | | | $ | 8,672,087 | |
(1)Includes the assets from our Build-To-Rent and Urban Form operations.
13. COMMITMENTS AND CONTINGENCIES
Letters of Credit and Surety Bonds — We are committed, under various letters of credit and surety bonds, to perform certain development and construction activities and provide certain guarantees in the normal course of business. Outstanding letters of credit and surety bonds under these arrangements totaled $1.3$1.3 billion as of September 30, 2023March 31, 2024 and $1.2 billion as of December 31, 2022.2023. Although significant development and construction activities have been completed related to these site improvements, the bonds are generally not released until all development and construction activities are completed. We do not believe that it is probable that any outstanding bonds as of September 30, 2023March 31, 2024 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 propertyTAYLOR MORRISON HOME CORPORATION 10-Q
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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. The aggregate purchase price for land under these contracts was $1.6$1.5 billion at September 30, 2023March 31, 2024 and $1.5 billion at December 31, 2022.2023.
Legal Proceedings — We are involved in various litigation and legal claims in the normal course of business, including actions brought on behalf of various classes of claimants. We are also subject to a variety of local, state, and federal laws and regulations related to land development activities, house construction standards, sales practices, mortgage lending operations, employment practices, and protection of the environment. As a result, we are subject to periodic examination or inquiry by various governmental agencies that administer these laws and regulations.
We establish liabilities for legal claims and regulatory matters when such matters are both probable of occurring and any potential loss can be reasonably estimated. At
September 30, 2023March 31, 2024 and December 31,
2022,2023, our legal accruals were
$19.1$23.2 million and $20.6$26.2 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 reservesaccrued liabilities relating to such 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)
("Avatar"), 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.laws (the "Solivita litigation"). The class action complaint
seekssought 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 Sixth District Court of Appeal on November 29, 2021, and onthe plaintiffs agreed to continue to pay club membership fees pending the outcome of the appeal. On 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 great public importance to the Florida Supreme Court. We have sinceCourt, and we filed a notice to invoke the discretionary review of the Florida Supreme Court. On November 2, 2023, the Florida Supreme Court declined to exercise jurisdiction.
Following the Florida Supreme Court’s decision, we paid $64.7 million to the plaintiffs during the quarter ended December 31, 2023, which included the amount of the trial court’s judgment, club membership fees received during the pendency of our appeal, pre-judgment interest and post-judgment interest. We expect to incur additional costs with respect to the plaintiff’s legal fees and costs; however, such amount cannot be reasonably estimated. Plaintiffs have agreedalso asserted claims for additional pre-judgment interest, for which we believe we have substantial defenses. Hearings on the plaintiff's pre-judgment interest and legal fees have been scheduled for the third quarter of 2024.
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ITEM 1. FINANCIAL STATEMENTS
After reviewing our amenity arrangements in our Florida communities to continuedetermine whether such arrangements might subject the Company to liability in light of the outcome of the Solivita litigation described above, we identified one additional community with similar claims. On August 13, 2020, Slade Chelbian, a resident of our Bellalago community in Kissimmee, Florida, filed a purported class action suit against Avatar, AV Homes, Inc. and Taylor Morrison Home Corporation in the Circuit Court of the Ninth Circuit in and for Osceola County, Florida, generally alleging that Avatar cannot earn profits from community members for use of club amenities where membership in the club is mandatory for all residents and failure to pay club membership fees could result in the foreclosure of their homes by Avatar. On February 25, 2022, the court stayed the action pending the outcomeresolution of the Solivita litigation. Following the resolution of the Solivita appeal, the court held a case management conference wherein the court scheduled a class certification hearing for the fourth quarter of 2024, but no class has been certified to the Florida Supreme Court. We believe, based on our assessment and the opinion of external legal counsel, that the trial and District Court’s legal interpretation constitutes legal error and the courts 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.date. While the ultimate outcome and the costs associated with litigation are inherently uncertain and difficult to predict, we have recorded an accrual for our estimated liability for this matter, which is reflected in evaluating the potential outcomes, we believe the more likely outcome is that we win the appeal to the Florida Supreme Court. This belief is based on our reviewlegal accruals as of the legal merit of the 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.March 31, 2024.
Leases — Our leases primarily consist of office space, construction trailers, model home leasebacks, a ground lease, equipment, and storage units. We assess each of these contracts to determine whether the arrangement contains a lease as defined by ASC 842, Leases. Lease obligations were $86.4$81.1 million and $100.2$85.0 million as of September 30, 2023March 31, 2024 and December 31, 2022,2023, respectively. We recorded lease expense of approximately $5.8 million and $19.3$5.9 million for the three and nine months ended September 30, 2023,March 31, 2024, and $6.9 million and $20.5$7.1 million for the three and nine months ended September 30, 2022,March 31, 2023, within General and administrative expenses on our unaudited Condensed Consolidated Statementconsolidated statements of Operationsoperations..
14. MORTGAGE HEDGING ACTIVITIES
The following summarizes derivative instrument assets (liabilities) as of the periods presented:
| | | | | | | | | | | | | | | | |
| | 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 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| As of |
| March 31, 2024 | | December 31, 2023 |
(Dollars in thousands) | Fair Value | | Notional Amount (1) | | Fair Value | | Notional Amount (1) |
IRLCs | $ | (795) | | | $ | 271,291 | | | $ | 1,489 | | | $ | 219,129 | |
MBSs | (2,039) | | | 481,000 | | | (5,055) | | | 285,000 | |
Total | $ | (2,834) | | | | | $ | (3,566) | | | |
(1)The notional amounts in the table above include mandatory and best effort mortgages, that have been locked and approved.
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ITEM 1. FINANCIAL STATEMENTS
Total commitments to originate loans approximated
$359.9$291.8 million and $419.6$242.6 million as of September 30, 2023March 31, 2024 and December 31, 2022,2023, 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.
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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.
Forward-Looking Statements
This quarterly report includes certain forward-looking statements within the meaning of the federal securities laws regarding, among other things, our 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,
20222023 (“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.
Our forward-looking statements made herein are made only as of the date of this quarterly report. We expressly disclaim any intent, obligation or undertaking to update or revise any forward-looking statements made herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based, except as required by applicable law.
Our principal business is residential homebuilding and the development of lifestyle communities with operations across 11 states. 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 buyers. We operate under various brand names including Taylor Morrison, Darling Homes Collection by Taylor Morrison, and Esplanade. We also have a “Build-to-Rent” homebuilding business 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 brand name. We also have operations which provide financial services to customers through our wholly owned mortgage subsidiary, TMHF, title services through our wholly owned title services subsidiary, Inspired Title, and homeowner’s insurance policies through our wholly owned insurance agency, TMIS.
As of September 30, 2023, ourOur 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 |
As of September 30, 2023,March 31, 2024, we employed approximately 2,7002,900 full-time equivalent persons. Of these, approximately 2,3002,500 were engaged in corporate and homebuilding operations, and the remaining approximately 400 were engaged in financial services.
Recent Developments
Factors Affecting Comparability
On April 29, 2024, using cash on hand, we acquired the assets of
ResultsFor the three months ended September 30, 2023 we recognized $11.8 million in inventory impairment. Impairments are recordedPyatt Builders, a privately-held Indianapolis based homebuilder, including access 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.
approximately 1,500 homebuilding lots. The entrance into Indianapolis further diversifies
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the three
our geographic footprint and nine months ended September 30, 2023 we recognized a $0.3 million net loss on extinguishment of debt relating towill be incorporated into our redemptionCentral region. The fair value of the 2024Senior Notes. Forassets acquired will be determined during the threequarter ended June 30, 2024 and nine months ended September 30, 2022, we recognized a $0.1 million and $13.5 million net gain on extinguishment of debt relating toreflected in 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.balance sheet at that time.
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 which is included in Other expense/(income), net on the unaudited Condensed Consolidated Statements of Operations. No such gains were recognized in the current year.
ThirdFirst Quarter 20232024 Highlights (all comparisons are of the current quarter to the prior year quarter, unless otherwise indicated):
•Net sales orders increased 29% to 3,686, driven by a monthly absorption pace of 3.7 per community versus 2.9 a year ago
•Home closings revenue of $1.6 billion, driven by 2,6392,731 home closings at an average price of $611,000.
$599,000
•GAAP Home closings gross margin of 23.1% and 23.9% excluding inventory impairment.
24.0% •Net sales orders of 2,592, driven by a monthly absorption pace of 2.7 per community versus 2.1 a year ago.
•74,00074,182 homebuilding lots owned and controlled, at quarter end, representing 6.16.5 years of total supply, of which 3.53.1 years was owned.
owned•Repurchased 1.5 million common shares for $92 million
•Homebuilding debt-to-capitalizationdebt to capitalization of 25.9%26.1% on a gross basis and 18.8%20.1% net of $614$554 million of unrestricted cash. Total liquidity was $1.6 billion.
cash
•Credit rating upgraded by S&P Global to BB+ from BB with a Stable outlook.
Total liquidity of $1.6 billion •
Book value per share increased 21% year over year to $46.78.
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) | | 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 home closings revenue, net | | | 6.1 | % | | | 4.8 | % | | | 5.8 | % | | | 5.1 | % |
General and administrative expenses as a percentage of home closings revenue, net | | | 4.3 | % | | | 2.6 | % | | | 3.9 | % | | | 3.4 | % |
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
(Dollars in thousands) | 2024 | | 2023 | | | | |
Statements of Operations Data: | | | | | | | |
Home closings revenue, net | $ | 1,636,255 | | | $ | 1,612,595 | | | | | |
Land closings revenue | 7,225 | | | 4,520 | | | | | |
Financial services revenue | 46,959 | | | 35,149 | | | | | |
Amenity and other revenue | 9,313 | | | 9,593 | | | | | |
Total revenue | 1,699,752 | | | 1,661,857 | | | | | |
Cost of home closings | 1,243,209 | | | 1,227,513 | | | | | |
Cost of land closings | 5,202 | | | 4,345 | | | | | |
Financial services expenses | 25,143 | | | 22,148 | | | | | |
Amenity and other expenses | 9,353 | | | 8,285 | | | | | |
Total cost of revenue | 1,282,907 | | | 1,262,291 | | | | | |
Gross margin | 416,845 | | | 399,566 | | | | | |
Sales, commissions and other marketing costs | 102,600 | | | 92,760 | | | | | |
General and administrative expenses | 67,564 | | | 66,261 | | | | | |
Net income from unconsolidated entities | (2,751) | | | (1,929) | | | | | |
Interest income, net | (43) | | | (1,111) | | | | | |
Other expense/(income), net | 595 | | | (4,834) | | | | | |
| | | | | | | |
Income before income taxes | 248,880 | | | 248,419 | | | | | |
Income tax provision | 57,719 | | | 57,191 | | | | | |
Net income before allocation to non-controlling interests | 191,161 | | | 191,228 | | | | | |
Net income attributable to non-controlling interests | (891) | | | (177) | | | | | |
Net income | $ | 190,270 | | | $ | 191,051 | | | | | |
Home closings gross margin | 24.0 | % | | 23.9 | % | | | | |
Sales, commissions and other marketing costs as a percentage of home closings revenue, net | 6.3 | % | | 5.8 | % | | | | |
General and administrative expenses as a percentage of home closings revenue, net | 4.1 | % | | 4.1 | % | | | | |
In addition to the results reported in accordance with GAAP, we generally provide our investors with supplemental information relating to: (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.
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21
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Adjusted net income, adjusted earnings per common share and adjusted income before income taxes and related margin are non-GAAP financial measures that reflect the net income/(loss) available to the Company, excluding to the extent applicable in a given period, the impact of inventory impairment charges, impairment of investment in unconsolidated entities, pre-acquisition abandonment charges, gains/lossesgain/loss on land transfers to joint ventures and extinguishment of debt, net, and legal settlements the Company deems not to be in the ordinary course of business and in the case of adjusted net income and adjusted earnings per common share, the tax impact due to such items.
EBITDA and Adjusted EBITDA are non-GAAP financial measures that measure performance by adjusting net income before allocation to non-controlling interests to exclude, as applicable, interest expense/(income), net, amortization of capitalized interest, income taxes, depreciation and amortization (EBITDA), and non-cash compensation expense, if any, inventory impairment charges, impairment of investmentinvestments in unconsolidated entities, pre-acquisition abandonment charges, gains/lossesgain/loss on land transfers to joint ventures, and extinguishment of debt, net. net, and legal settlements that the Company deems not to be in the ordinary course of business, in each case, as applicable in a given period.
Net homebuilding debt to capitalization ratio is a non-GAAP financial measure we calculate by dividing (i) total debt, plus unamortized debt issuance cost/(premium), net, and less mortgage warehouse borrowings, net of unrestricted cash and cash equivalents (“net homebuilding debt”), by (ii) total capitalization (the sum of net homebuilding debt and total stockholders’ equity).
Adjusted home closings gross margin is a non-GAAP financial measure based on GAAP home closings gross margin (which is inclusive of capitalized interest), excluding inventory impairment charges.
Management uses these non-GAAP financial measures to evaluate our performance on a consolidated basis, as well as the performance of our regions, and to set targets for performance-based compensation. We also use the ratio of net homebuilding debt to total capitalization as an indicator of overall leverage and to evaluate our performance against other companies in the homebuilding industry. In the future, we may include additional adjustments in the above-described non-GAAP financial measures to the extent we deem them appropriate and useful to management and investors.
We believe that
adjusted net income, adjusted earnings per common share, adjusted income before income taxes and related margin, as well as EBITDA and adjusted EBITDA are useful for investors in order to allow them to evaluate our operations without the effects of various items we do not believe are characteristic of our ongoing operations or performance and also because such metrics assist both investors and management in analyzing and benchmarking the performance and value of our business. Adjusted EBITDA also provides an indicator of general economic performance that is not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization, or unusual items. Because we use the ratio of net homebuilding debt to total capitalization to evaluate our performance against other companies in the homebuilding industry, we believe this measure is also relevant and useful to investors for that reason.
We believe that adjusted home closings gross margin is useful to investors because it allows investors to evaluate the performance of our homebuilding operations without the varying effects of items or transactions we do not believe are characteristic of our ongoing operations or performance.
These non-GAAP financial measures should be considered in addition to, rather than as a substitute for, the comparable U.S. GAAP financial measures of our operating performance or liquidity. Although other companies in the homebuilding industry may report similar information, their definitions may differ. We urge investors to understand the methods used by other companies to calculate similarly-titled non-GAAP financial measures before comparing their measures to ours.
Because the company did not experience any material adjustments applicable to (i) adjusted net income and adjusted earnings per common share,share; (ii) adjusted income before income taxes and related margin,margin; or (iii) adjusted home closings gross margin (iv)during the periods presented that would cause such measures to differ from the comparable GAAP measures, such measures have not been separately presented herein.
A reconciliation of (i) EBITDA and adjusted EBITDA and
(v)(ii) 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
22
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) | | 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 September 30, | |
(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 total revenue | | | 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 | % |
| | | | | | | | | | | |
| Three Months Ended March 31, |
(Dollars in thousands) | 2024 | | 2023 |
Net income before allocation to non-controlling interests | $ | 191,161 | | | $ | 191,228 | |
Interest income, net | (43) | | | (1,111) | |
Amortization of capitalized interest | 23,625 | | | 27,649 | |
Income tax provision | 57,719 | | | 57,191 | |
Depreciation and amortization | 3,138 | | | 1,790 | |
EBITDA | $ | 275,600 | | | $ | 276,747 | |
Non-cash compensation expense | 5,483 | | | 7,533 | |
| | | |
| | | |
| | | |
Adjusted EBITDA | $ | 281,083 | | | $ | 284,280 | |
Total revenue | $ | 1,699,752 | | | $ | 1,661,857 | |
Net income before allocation to non-controlling interests as a percentage of total revenue | 11.2 | % | | 11.5 | % |
EBITDA as a percentage of total revenue | 16.2 | % | | 16.7 | % |
Adjusted EBITDA as a percentage of total revenue | 16.5 | % | | 17.1 | % |
Net Homebuilding Debt to Capitalization Ratio Reconciliation
| | | | | | | | | | | | | | | | | |
| As of |
(Dollars in thousands) | March 31, 2024 | | December 31, 2023 | | March 31, 2023 |
Total debt | $ | 2,093,499 | | | $ | 2,017,102 | | | $ | 2,301,878 | |
Plus: unamortized debt issuance cost, net | 7,935 | | | 8,375 | | | 10,193 | |
Less: mortgage warehouse borrowings | (183,174) | | | (153,464) | | | (146,334) | |
Total homebuilding debt | $ | 1,918,260 | | | $ | 1,872,013 | | | $ | 2,165,737 | |
Total stockholders' equity | 5,426,168 | | | 5,332,286 | | | 4,846,546 | |
Total capitalization | $ | 7,344,428 | | | $ | 7,204,299 | | | $ | 7,012,283 | |
Total homebuilding debt to capitalization ratio | 26.1 | % | | 26.0 | % | | 30.9 | % |
Total homebuilding debt | 1,918,260 | | | 1,872,013 | | | 2,165,737 | |
Less: cash and cash equivalents | (554,287) | | | (798,568) | | | (877,717) | |
Net homebuilding debt | $ | 1,363,973 | | | $ | 1,073,445 | | | $ | 1,288,020 | |
Total stockholders' equity | $ | 5,426,168 | | | $ | 5,332,286 | | | $ | 4,846,546 | |
Total capitalization | $ | 6,790,141 | | | $ | 6,405,731 | | | $ | 6,134,566 | |
Net homebuilding debt to capitalization ratio | 20.1 | % | | 16.8 | % | | 21.0 | % |
Three months ended March 31, 2024 compared to three months ended March 31, 2023
Ending Active Selling Communities
| | | | | | | | | | | | | | | | | |
| As of March 31, | | Change |
| 2024 | | 2023 | | |
East | 113 | | | 106 | | | 6.6 | % |
Central | 93 | | | 98 | | | (5.1) | % |
West | 125 | | | 120 | | | 4.2 | % |
Total | 331 | | | 324 | | | 2.2 | % |
The total ending active selling communities increased by seven outlets at March 31, 2024 when compared to March 31, 2023. The increase is primarily due to the timing of community openings, which were partially offset by community close-outs.
TAYLOR MORRISON HOME CORPORATION 10-Q
23
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, 2023 | | | As of June 30, 2023 | | | As of September 30, 2022 | |
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, 2023 compared to three and nine months ended September 30, 2022
Demand for housing has fluctuated the last several years partially as a result of macro economic conditions 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 2022. These pricing adjustments and incentives helped drive an increase in sales orders and a gradual normalization in cancellations beginning in 2023. However, the recent increase in mortgage interest rates during the three months ended September 30, 2023 began to negatively impact our net sales orders in the latter half of the quarter. Operational information related to each period is presented below:
Ending Active Selling Communities
| | | | | | | | | | | | |
| | 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) | | 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
Table of Contents
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 | )% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| Net Sales Orders (1) | | Sales Value (1) | | Average Selling Price |
(Dollars in thousands) | 2024 | | 2023 | | Change | | 2024 | | 2023 | | Change | | 2024 | | 2023 | | Change |
East | 1,295 | | 1,079 | | 20.0 | % | | $ | 776,861 | | | $ | 644,519 | | | 20.5 | % | | $ | 600 | | | $ | 597 | | | 0.5 | % |
Central | 904 | | 674 | | 34.1 | % | | 478,419 | | | 384,830 | | | 24.3 | % | | 529 | | | 571 | | | (7.4) | % |
West | 1,487 | | 1,101 | | 35.1 | % | | 984,483 | | | 756,344 | | | 30.2 | % | | 662 | | | 687 | | | (3.6 | %) |
Total | 3,686 | | 2,854 | | 29.2 | % | | $ | 2,239,763 | | | $ | 1,785,693 | | | 25.4 | % | | $ | 608 | | | $ | 626 | | | (2.9 | %) |
(1)Net sales orders and sales value represent the number and dollar value, respectively, of new sales contracts executed with customers, net of cancellations.cancellations.
Net sales orders
and sales value increased
25.3%29.2% and 25.4% for the three months ended
September 30, 2023 and 10.3% for the nine months ended September 30, 2023,March 31, 2024, compared to the same
periodsperiod in the prior year, respectively.
BeginningThe increases were primarily the result of strong sales in
third quarter of 2022,certain, larger communities and fewer cancellations across all segments which we believe
is as a result of improved buyer confidence, coupled with stabilizing interest rates. We continue to offer our
net sales were negatively impacted by the change in economic conditionsbuyers various incentives, discounts, and
home buyer apprehensions due to rising mortgage interest rates and inflationary pressures. However, as both mortgage rates and inflationary pressures were relatively stable in the first half of the year along with our offering of pricing incentives or discounts, net sales improved. In addition, lower cancellation rates for the three months ended September 30, 2023 compared to the same quarter in the prior yearfinancing programs which further contributed to the increase in net sales orders.
However, during the three months ended September 30, 2023, mortgage interest rates increased again and our net sales orders began to slow during the second half of the quarter. Average selling prices
remained relatively flatdecreased by 2.9% for three months ended
September 30, 2023, but decreased for the nine months ended September 30, 2023March 31, 2024, compared to the same
periodsperiod in the prior year as a result of an increase in our
pricing incentives and/or discounts in certain markets.
Sales Order Cancellations
| | | | | | | | | | | | | | | | |
| | 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 | % |
| | | | | | | | | | | | | | | |
| Cancellation Rate(1) |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
East | 5.8 | % | | 9.3 | % | | | | |
Central | 8.6 | % | | 18.0 | % | | | | |
West | 7.1 | % | | 15.8 | % | | | | |
Total Company | 7.0 | % | | 14.0 | % | | | | |
(1)Cancellation rate represents the number of canceled sales orders divided by gross sales orders.
The total company cancellation rate decreased for the three months ended
September 30, 2023, but increased for the nine months ended September 30, 2023 compared to the same periods in the prior year. Our cancellations began increasing during the third quarter of 2022 which we believe was due to increasing mortgage interest rates and buyer apprehensions given the elevated macroeconomic uncertainty and affordability constraints for some consumers. As mortgage interest rates have stabilized we believe buyers' confidence has improved and we experienced a decrease in our cancellations for the quarter asMarch 31, 2024, compared to the same period in the prior year.
We believe the decrease in cancellations is due to improved buyer confidence as a result of stabilizing macro economic factors such as mortgage interest rates and inflation.
Sales Order Backlog
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 | )% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| Sold Homes in Backlog (1) | | Sales Value | | Average Selling Price |
(Dollars in thousands) | 2024 | | 2023 | | Change | | 2024 | | 2023 | | Change | | 2024 | | 2023 | | Change |
East | 2,433 | | 2,658 | | (8.5) | % | | $ | 1,715,398 | | | $ | 1,775,970 | | | (3.4) | % | | $ | 705 | | | $ | 668 | | | 5.5 | % |
Central | 1,371 | | 1,660 | | (17.4) | % | | 870,550 | | | 1,132,928 | | | (23.2) | % | | 635 | | | 682 | | | (6.9) | % |
West | 2,440 | | 1,949 | | 25.2 | % | | 1,662,190 | | | 1,328,187 | | | 25.1 | % | | 681 | | | 681 | | | — | % |
Total | 6,244 | | 6,267 | | (0.4) | % | | $ | 4,248,138 | | | $ | 4,237,085 | | | 0.3 | % | | 680 | | | 676 | | | 0.6 | % |
(1)Sales order backlog represents homes under contract for which revenue has not yet been recognized at the end of the period (including homes sold but not
yet started). Some of the contracts in our sales order backlog are subject to contingencies including mortgage loan approval and buyers selling their existing
homes, which can result in cancellations.
Total sold homes in backlog
and total sales value decreased by 23.0% and 24.1%remained relatively flat at
September 30, 2023March 31, 2024 compared to
September 30, 2022, respectively.March 31, 2023. The
sold homesdecrease in units in the East is primarily due to unique bulk sale transactions to investors during the first quarter of the prior year that were in backlog at
September 30, 2022 reflected the strong selling market from 2021 and first half of 2022 along with extended cycle times.March 31, 2023. The
sold homesdecrease in backlog
at September 30, 2023 reflected home closings outpacing net sales orders forunits in the
trailing twelve monthsCentral region is primarily
as a result of
improvedfaster cycle
times.Home Closings Revenue
times and an increase in the number of homes closed in the three months ended March 31, 2024, compared to the same period in the prior year. The increase in backlog units in the West is due to an improvement in the cancellation rate and more active selling communities, partially offset by an increase in the number of homes closed in the three months ended March 31, 2024, compared to the same period in the prior year.
TAYLOR MORRISON HOME CORPORATION 10-Q
24
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) | | 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
Home Closings Revenue
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| Homes Closed | | Home Closings Revenue, Net | | Average Selling Price |
(Dollars in thousands) | 2024 | | 2023 | | Change | | 2024 | | 2023 | | Change | | 2024 | | 2023 | | Change |
East | 933 | | 1,004 | | (7.1) | % | | $ | 541,730 | | C | $ | 601,611 | | | (10.0) | % | | $ | 581 | | | $ | 599 | | | (3.0 | %) |
Central | 832 | | 731 | | 13.8 | % | | 472,032 | | | 463,394 | | | 1.9 | % | | 567 | | | 634 | | | (10.6) | % |
West | 966 | | 806 | | 19.9 | % | | 622,493 | | | 547,590 | | | 13.7 | % | | 644 | | | 679 | | | (5.2) | % |
Total | 2,731 | | 2,541 | | 7.5 | % | | $ | 1,636,255 | | | $ | 1,612,595 | | | 1.5 | % | | 599 | | | 635 | | | (5.7) | % |
Home closings revenue, net increased by 1.5% as a result of a 7.5% increase in the number of homes closed,
and home closings revenue, net decreasedpartially offset by
13.5% and 18.7%a 5.7% decrease in average selling price for the three months ended
September 30, 2023, and 6.2% and 5.3% for the nine months ended September 30, 2023March 31, 2024, compared to the same
periods in the prior year, respectively. The decreases are primarily driven by slower starts and fewer net sales ordersperiod in the prior year. The
decreases for the nine months ended September 30, 2023 were partially offset by increasesincrease in the
East and Central regions which experienced longernumber of homes closed is primarily due to improved cycle times
during 2022, moving closingsacross various markets. In addition, the number of quick-move-in homes which sold and closed within the same quarter was higher in the first quarter of the current year compared to the
first half of 2023. Several markets in these regions also experienced market appreciationsame period in the prior
year which increased theyear. The decrease in average selling price
andis as a result of home closings
revenue, net.mix in addition to higher incentives for the three months ended March 31, 2024, compared to the same period in the prior year.
Land Closings Revenue
| | | | | | | | | | | | |
| | 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 | ) |
| | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
(Dollars in thousands) | 2024 | | 2023 | | Change |
East | $ | 767 | | | $ | 2,903 | | | $ | (2,136) | |
Central | 6,458 | | | 1,617 | | | 4,841 | |
West | — | | | — | | | — | |
Total | $ | 7,225 | | | $ | 4,520 | | | $ | 2,705 | |
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 varying degrees of profitability. Therefore, the revenue and gross margin from land closings will fluctuate from period to period, depending upon market opportunities and our land management strategy. Land closings revenue for the three months ended March 31, 2024 and 2023 was mainly due to lot sales in our Texas markets within our Central region. The prior year hadalso included lots sales in certain large land transactions, which were not experienced during 2023. The landFlorida markets within our East region.Home Closings Gross Margin | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| East | | Central | | West | | Consolidated |
(Dollars in thousands) | 2024 | | 2023 | | 2024 | | 2023 | | 2024 | | 2023 | | 2024 | | 2023 |
Home closings revenue, net | $ | 541,730 | | | $ | 601,611 | | | $ | 472,032 | | | $ | 463,394 | | | $ | 622,493 | | | $ | 547,590 | | | $ | 1,636,255 | | | $ | 1,612,595 | |
Cost of home closings | 395,328 | | | 436,446 | | | 349,161 | | | 352,229 | | | 498,720 | | | 438,838 | | | 1,243,209 | | | 1,227,513 | |
Home closings gross margin | $ | 146,402 | | | $ | 165,165 | | | $ | 122,871 | | | $ | 111,165 | | | $ | 123,773 | | | $ | 108,752 | | | $ | 393,046 | | | $ | 385,082 | |
Home closings gross margin % | 27.0 | % | | 27.5 | % | | 26.0 | % | | 24.0 | % | | 19.9 | % | | 19.9 | % | | 24.0 | % | | 23.9 | % |
Consolidated home closings revenuegross margin increased 10 basis points to 24.0% for the three months ended March 31, 2024, compared to 23.9% in the comparable prior year period. The East forregion decreased by 50 basis points as a result of closing product mix and an increase in the nine months ended September 30, 2022 wasamount of pricing incentives. The 200 basis point increase in the Central region is primarily due to the saleclosing product mix which included more closings in certain larger communities with higher gross margins. The West region remained flat due to mix of certain commercial assets as well as the sale of residential lotsmore homes closed in our Florida market. The landcommunities with lower home closings revenuegross margin in the West for the nine months ended September 30, 2022 was duecurrent year compared to the sale of a certain project in our Oregon market.prior year which was offset by lower pricing incentives.Amenity and Other Revenue
| | | | | | | | | | | | |
| | 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
25
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 amenity and other revenue in Corporate for the nine months ended September 30, 2022 is due to the sale of an asset relating to our Urban Form operations.
Home Closings Gross Margin
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | |
| | East | | | Central | | | West | | | Consolidated | |
(Dollars in thousands) | | 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 decreased to 23.1% from 27.5% for the three months ended September 30, 2023, compared to the same period in the prior year and decreased to 23.8% from 25.9% for the nine months ended September 30, 2023 compared to 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 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 the nine months ended September 30, 2023 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 result of the pricing incentives and discounts which were above the company average for the first half of 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 consolidated was 24.0% for the nine months ended September 30, 2023.
TAYLOR MORRISON HOME CORPORATION 10-Q
28
Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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) | | 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 September 30, | | | Nine Months Ended September 30, | |
| | 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 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
(Dollars in thousands) | 2024 | | 2023 | | Change | | | | | | |
Mortgage services revenue | $ | 37,272 | | | $ | 25,603 | | | 45.6 | % | | | | | | |
Title services and other revenues | 9,687 | | | 9,546 | | | 1.5 | % | | | | | | |
Total financial services revenue | 46,959 | | | 35,149 | | | 33.6 | % | | | | | | |
Financial services net income from unconsolidated entities | 2,897 | | | 2,275 | | | 27.3 | % | | | | | | |
Total revenue | 49,856 | | | 37,424 | | | 33.2 | % | | | | | | |
Financial services expenses | 25,143 | | | 22,148 | | | 13.5 | % | | | | | | |
Financial services income before income taxes | $ | 24,713 | | | $ | 15,276 | | | 61.8 | % | | | | | | |
Total originations: | | | | | | | | | | | |
Number of Loans | 1,896 | | | 1,531 | | | 23.8 | % | | | | | | |
Principal | $ | 876,572 | | | $ | 718,279 | | | 22.0 | % | | | | | | |
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
Supplemental data: | | | | | | | |
Average FICO score | 751 | | 756 | | | | |
Funded origination breakdown: | | | | | | | |
Government (FHA,VA,USDA) | 21.9 | % | | 15.5 | % | | | | |
Other agency | 75.3 | % | | 79.8 | % | | | | |
Total agency | 97.2 | % | | 95.3 | % | | | | |
Non-agency | 2.8 | % | | 4.7 | % | | | | |
Total funded originations | 100.0 | % | | 100.0 | % | | | | |
Total financial services revenue increased by
44.3% and 19.0%33.6% for the three
and nine months ended
September 30, 2023March 31, 2024 compared to the same
periodsperiod in the prior
year, respectively.year. The
increases are primarily due toincrease in total financial services revenue was a result of an increase in mortgage originations
the average amount borrowed per loan, as well asand the revenue earned on the sale of loans.
Sales, Commissions and Other Marketing Costs
Sales, commissions and other marketing costs, as a percentage of home closings revenue, net, increased to
6.1%6.3% from
4.8% and to 5.8%
from 5.1% for the three
and nine months ended
September 30, 2023March 31, 2024 compared to the same
periodsperiod in the prior year. The increase was primarily due to an increase in external commissions costs and
increased advertising costs in an effort to
generatemaintain sales
traffic, along with a decrease in home closings revenue, net.traffic.
General and Administrative Expenses
General and administrative expenses as a percentage of home closings revenue, net,
increased to 4.3% from 2.6% and to 3.9% from 3.4%remained flat for the three
and nine months ended
September 30, 2023March 31, 2024 compared to the same
periodsperiod in the prior
year. The increase was primarily dueyear as a result of our continuous efforts to
the decrease in home closings revenue, net, along with an increase in payroll related expenses.maintain stable operating costs.
Net
(Income)/LossIncome from Unconsolidated Entities
Net income from unconsolidated entities was $1.9$2.8 million and $7.0$1.9 million for the three and nine months ended September 30,March 31, 2024 and 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. Our joint ventures relating to our financial services segment experienced an increase in income for the three and nine months ended September 30, 2023March 31, 2024 compared to the same period in the prior year. In addition,
Interest Income, Net
Interest income, net was $43.0 thousand and $1.1 million for the
ninethree months ended
September 30, 2022 included impairment charges for oneMarch 31, 2024 and 2023, respectively. Interest income, net includes interest earned on cash balances offset by interest incurred but not capitalized on our debt relating to land banking arrangements. The decrease in interest income, net was primarily due to an increase in the amount of
our unconsolidated joint ventures.non-capitalizable interest expense relating to such land banking arrangements.
TAYLOR MORRISON HOME CORPORATION 10-Q
26
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Interest
Other Expense/(Income)
/Expense,, Net
Interest income,
Other expense/(income), net was
$5.8$0.6 million
and $12.0 millionof expense for the three
and nine months ended
September 30, 2023, respectively,March 31, 2024 and
interest expense, net was $4.4$4.8 million
and $13.8 million for the three and nine months ended September 30, 2022 . The net interestof income for the three
and nine months ended
September 30, 2023 was primarily due to higher cash balances and an increase in the interest rates earned on such balances.Other Expense/(Income), Net
Other expense, net was $3.0 million and $6.7 million for the three and nine months ended September 30, 2023, respectively, andMarch 31, 2023. The other expense, net was $5.8 million and other income, net was $4.7 million for the three and nine months ended September 30, 2022, respectively. The net expense in the current yearperiod was primarily related to an increase in self-insurance reserves for the first three quarters of the year. For the three months ended September 30, 2022, net other expense was largely related to the write off of pre-acquisition costs during the period. For the nine months ended September 30, 2022, netcosts. The other income, wasnet in the prior year period primarily related to gainsa recovery on land transferred at fair valuea previously written-off deposit as part of investments in two joint ventures with third parties.
Loss/(Gain) on Extinguishment of Debt, Net
Loss on extinguishment of debt, net was $0.3 million for the three and nine months ended September 30, 2023, while gain on extinguishment of debt, net was $0.1 million and $13.5 million for the three and nine months ended September 30, 2022. The loss for the three and nine months ended September 30, 2023 was due to the redemption of our 2024 Senior Notes in September 2023. This gain for the three and nine months ended September 30, 2022 was due to the tender offer and purchase of our 6.625% Senior Notes due 2027 in June 2022, which we completed in July of 2022.
well as other income earned from non-core operations.
The effective tax rate for the three
and nine months ended
September 30, 2023March 31, 2024 was
25.4% and 24.7%23.2%,
respectively, compared to
22.6% and 23.8%, respectively,23.0% for the same
periodsperiod in
2022.2023. For the three and nine months ended September 30, 2023 and 2022, March 31, 2024, 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 state income taxes, excess tax benefits related to stock-based compensation, and special deductions and credits related to homebuilding activities. The Inflation Reduction Act, enacted in August 2022, extended IRC §45L energy efficient homebuilding
Our income tax credits and applies to homes closed in 2022-2032.The Inflation Reduction Act also created a 15% corporate alternative minimum tax. The corporate alternative minimum tax had no impact on our consolidated financial statementsrate for the threefirst quarter of 2024 was slightly greater than the same period last year, primarily due to a reduction of non-controlling interest and nine months ended September 30, 2023homebuilding credits offset by favorable excess tax benefits from share-based compensation.
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 were $309.8 million and $2.72, respectively. The decreases in net income and diluted earnings per share from the prior year were primarily attributable to lower gross margin, combined with higher sales commissions and other marketing costs and higher general and administrative expenses.
Liquidity and Capital Resources
We finance our operations through the following:
| | | | | |
•Cash generated from operations; |
| •Mortgage warehouse facilities;
|
•Borrowings under our Revolving Credit Facilities; •Our various series of senior notes; |
| •Mortgage warehouse 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 flows for each of our communities depend on the status of the development cycle and can differ substantially from reported earnings. Early stages of development or expansion require significant cash expenditures for land acquisitions, on and off-site development, construction of model homes, general landscaping and other amenities. Because these costs are a component of our inventory and are not recognized in our statement of operations until a home closes, we incur significant cash outflows prior to recognition of earnings.
TAYLOR MORRISON HOME CORPORATION 10-Q
30
Table of Contents
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 maintained no accounts at any failed banks, substantially
Substantially all of our cash 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 major financial institutions. Generally, deposits may be redeemed on demand and are maintained with financial institutions with reputable credit.
The table below summarizes our total cash and liquidity as of the dates indicated (in thousands):
| | | | | | | | |
| | 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 | |
| | | | | | | | | | | |
| As of |
(Dollars in thousands) | March 31, 2024 | | December 31, 2023 |
Total cash, excluding restricted cash | $ | 554,287 | | | $ | 798,568 | |
$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 | (59,894) | | | (61,181) | |
Revolving Credit Facilities availability | 1,040,106 | | | 1,038,819 | |
Total liquidity | $ | 1,594,393 | | | $ | 1,837,387 | |
We believe we have adequate capital resources from cash generated from operations and sufficient access to external financing sources under our Revolving Credit Facilities to conduct our operations for the next twelve 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
TAYLOR MORRISON HOME CORPORATION 10-Q
27
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
demands.
As part of our operations, we may also from time to time purchase our outstanding debt or equity through open market purchases, privately negotiated transactions or otherwise. Purchases or retirement of debt and/or purchases or equity, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Operating Cash Flow Activities
Our net cash used in operating activities was $130.7 million for the three months ended March 31, 2024, compared to net cash provided by operating activities was $550.6of $347.4 million for the ninethree months ended September 30, 2023, compared to $460.0 million for the nine months ended September 30, 2022.March 31, 2023. The increasechange in cash provided byused in operating activities is primarily driven by a significant decreasedue to an increase spend in spend on real estate inventory and land deposits duringas well as our mortgage loans held for sale. For the ninethree months ended September 30, 2023 compared to the same period in the prior year partially offset by reduced cash provided by mortgagesMarch 31, 2024, our mortgage loans held for sale and lower net incomebalance increased, while for the three months ended March 31, 2023, our mortgage loans held for sale balance decreased, resulting in the current year.a cash inflow.
Investing Cash Flow Activities
Net cash used in investing activities was $94.1$33.0 million for the ninethree months ended September 30, 2023,March 31, 2024, compared to $18.8$24.6 million for the ninethree months ended September 30, 2022.March 31, 2023. The increase in cash used in investing activities was primarily due to a net investment of $47.1 millionan increase in investments of capital into unconsolidated entities in the nine months ended September 30, 2023 compared to a net distribution of $3.7 million of capital from unconsolidated entities in the prior year period.entities.
Financing Cash Flow Activities
Net cash used in financing activities was
$568.5$85.9 million for the
ninethree months ended
September 30, 2023,March 31, 2024, compared to
$947.7$165.1 million for the
ninethree months ended
September 30, 2022.March 31, 2023. The decrease in cash used in financing activities was primarily due to
lower net repayments on our mortgage warehouse facilities
loans payable and otherwhich had net borrowings
senior notes and mortgage warehouse facilitiesin the first quarter of 2024 compared to net repayments during the
ninesame period in the prior year. This was partially offset by higher repurchases of common stock, including our accelerated share repurchase program, during the three months ended
September 30, 2023March 31, 2024 compared to the same period in the prior
year as well as significantly lower repurchases of Common Stock during the nine months ended September 30, 2023 compared to the same period in the prior year.
For information regarding our debt instruments, including the terms governing our senior notes and our Revolving Credit Facilities, see Note 7 - Debt to the Unaudited Condensed Consolidated Financial Statementsconsolidated financial statements included in this quarterly report.TAYLOR MORRISON HOME CORPORATION 10-Q
31
Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Off-Balance Sheet Arrangements as of
September 30, 2023March 31, 2024
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.
In certain of our unconsolidated joint ventures, the joint ventures enter into loan agreements, whereby we or one of our subsidiaries will provide the joint venture lenders with customary guarantees, including completion, indemnity and environmental guarantees subject to usual non-recourse terms.
For the
ninethree months ended
September 30,March 31, 2024 and 2023,
and 2022, total cash
contributions toinvestments of capital into unconsolidated joint ventures were
$47.8$23.9 million and
$91.8$11.1 million, respectively.
Land Option Contracts and Land Banking Agreements
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 exposureobligations 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. The aggregate purchase price for land under these contracts was $1.6 billion at September 30, 2023 and $1.5 billion at March 31, 2024 and December 31, 2022.2023.
TAYLOR MORRISON HOME CORPORATION 10-Q
28
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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; |
| |
|
| •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; | • | mix of homes closed; •construction timetables; •the cost and availability of materials and labor; and •weather conditions in the markets in which we build. |
As a result of seasonal activity, our quarterly results of operations and financial position are not necessarily representative of the results we expect for the full year.
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
customersbuyers 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
Table of Contents
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
ninethree months ended
September 30, 2023March 31, 2024 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
29
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET 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, 2023,March 31, 2024, approximately
90%91% of our debt was fixed rate and
10%9% 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 Facilities and to borrowings by TMHF under its various mortgage warehouse facilities. As of
September 30, 2023,March 31, 2024, we had no outstanding borrowings under our Revolving Credit Facilities. We had approximately $1.0 billion of additional availability for borrowings under the Revolving Credit Facilities including
$129.6$140.1 million of additional availability for letters of credit under our $1 Billion Revolving Credit Facility as of
September 30, 2023March 31, 2024 (giving effect to
$70.4$59.9 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
Our mortgage warehouse facilities
and our Revolving Credit Facilities. ICE Benchmark Administration (“IBA”) no longer publishes the Overnight, 1, 3, 6 and 12 month US Dollar 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 usinguse SOFR as the basis for determining interest rates.
At this time, it is not possible to predict the full effect that the discontinuance of LIBOR, or the establishment of alternative reference rates such as SOFR, will have on us or our borrowing costs. SOFR is a relatively new reference rate and its composition and characteristics are not the same as LIBOR. Given the limited history of this rate and potential volatility as compared to other benchmark or market rates, the future performance of this rate cannot be predicted based on historical performance. The consequences of using SOFR 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
7-8 - Debt
to the Unaudited Condensed Consolidated Financial Statements included in this quarterly report,our Annual 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.
The following table sets forth principal payments by scheduled maturity and effective weighted average interest rates and estimated fair value of our debt obligations as of
September 30, 2023.March 31, 2024. The interest rate for our variable rate debt represents the interest rate on our mortgage warehouse facilities. Because the mortgage warehouse facilities are secured by certain mortgage loans held for sale which are typically sold within approximately 20 - 30 days, its outstanding balance is included as a variable rate maturity in the most current period presented.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Expected Maturity Date | | | | |
(In millions, except percentage data) | | 2023 | | | 2024 | | | 2025 | | | 2026 | | | 2027 | | | Thereafter | | | Total | | | Fair Value | |
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 | % | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Expected Maturity Date | | |
(In millions, except percentage data) | 2024 | | 2025 | | 2026 | | 2027 | | 2028 | | Thereafter | | Total | | Fair Value |
Fixed Rate Debt | $ | 176.3 | | | $ | 132.3 | | | $ | 84.7 | | | $ | 562.7 | | | $ | 458.1 | | | $ | 504.2 | | | $ | 1,918.3 | | | $1,888.3 |
Weighted average interest rate(1) | 3.6 | % | | 3.6 | % | | 3.6 | % | | 5.5 | % | | 5.6 | % | | 5.6 | % | | 5.1 | % | | |
Variable Rate Debt(2) | $ | 183.2 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 183.2 | | | $183.2 |
Weighted average interest rate | 6.9 | % | | — | % | | — | % | | — | % | | — | % | | — | % | | 6.9 | % | | |
(1)Represents the coupon rate of interest on the full principal amount of the debt.
(2)Based upon the amount of variable rate debt outstanding at September 30, 2023,March 31, 2024, and holding the variable rate debt balance constant, each 1% increase in interest rates would increase the interest incurred by us by approximately $1.9$1.8 million per year.
TAYLOR MORRISON HOME CORPORATION 10-Q
30
ITEM 4. CONTROLS AND PROCEDURES
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As 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’sour 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”)).amended. Based on this evaluation, as of
September 30, 2023March 31, 2024 our principal executive officer, principal financial officer and principal accounting officer concluded that our disclosure controls and procedures were effective in alerting them in a timely manner to material information required to be disclosed in our periodic and other reports filed with the SEC.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended
September 30, 2023March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
TAYLOR MORRISON HOME CORPORATION 10-Q
31
PART II — OTHER INFORMATION
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 Unaudited 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
32
PART II — OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS
AND ISSUER PURCHASES OF EQUITY SECURITIES
On
May 31, 2022,December 15, 2023, we announced that our Board of Directors had authorized the repurchase of up to $500.0 million of the Company's Common Stock through December 31,
2023.2025. As of
September 30, 2023,March 31, 2024, we had approximately
$175.6$402.8 million of available capacity remaining under the repurchase program. Repurchases of the Company's Common Stock under the program will occur from time to time, if at all, in open market purchases, privately negotiated transactions or other
transactions.The table below sets forth information regarding repurchases by the Company of it's Common Stock during the three months ended September 30, 2023.
| | | | | | | | | | | | | | | | |
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, 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 | | | | |
Anytransactions. The stock repurchase program is subject to prevailing market conditions and other considerations, including our liquidity, the terms of our debt instruments, statutorylegal requirements, planned land investment and development spending, acquisition and other investment opportunities and ongoing capital requirements. The program does not require usthe Company to repurchase any specific number of shares of Common Stock, and the program may be suspended, extended, modified or discontinued at any time. The table below sets forth information regarding repurchases by the Company of it's Common Stock during the three months ended March 31, 2024.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
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) |
January 1 to January 31, 2024 | | 461,801 | | | 51.78 | | | 461,801 | | | $ | 470,578 | |
February 1 to February 29, 2024 | | 166,829 | | | 52.62 | | | 166,829 | | | 461,799 | |
March 1 to March 31, 2024(1) | | 862,855 | | | 56.74 | | | 862,855 | | | 402,840 | |
Total | | 1,491,485 | | 54.74 | | | 1,491,485 | | $ | 402,840 | |
(1) In March 2024, the Company entered into an accelerated share repurchase agreement (the “ASR Agreement”) in which the Company paid a third-party financial institution $50 million and received an initial delivery of 705,343 shares of Common Stock, representing 80% of the transaction value based on the Company's closing share price on March 5, 2024. The total number of shares that the Company will ultimately repurchase under the ASR Agreement and the average purchase price per share will be determined based on the volume-weighted average price of the Common Stock during the term of the ASR Agreement, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR Agreement. Final settlement of the ASR Agreement is expected to occur no later than the third quarter of 2024.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. MINE SAFETY DISCLOSURES
ITEM 5. OTHER INFORMATION
On March 15, 2024, Lyon Shareholder 2012, LLC and the William Harwell Lyon Separate Property Trust dated 07/28/2000 adopted a trading plan intended to satisfy the affirmative defense of Rule 10b5‑1(c) of the Securities Exchange Act of 1934. William H. Lyon, a member of our Board of Directors, is manager of Lyon Shareholder 2012, LLC and trustee of the William Harwell Lyon Separate Property Trust dated 07/28/2000. Such trading plan provides for an aggregate sale of up to 2,735,000 shares of the Common Stock, less shares of Common Stock sold under prior 10b5-1 trading plans previously adopted by such entities, between June 14, 2024 and June 3, 2025.
During the three months ended March 31, 2024 none of the Company’s other directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) adopted, terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).
TAYLOR MORRISON HOME CORPORATION 10-Q
33
PART II — OTHER INFORMATION
ITEM 5.02 DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS
On April 24, 2024, Louis Steffens, our Executive Vice President of Strategic and Operational Initiatives and Former Chief Financial Officer, informed the Company of his decision to retire from the Company effective April 30, 2024.
TAYLOR MORRISON HOME CORPORATION 10-Q
34
| | | | | |
Exhibit No. | | Description |
| Exhibit
No.
|
Description
|
|
|
|
3.1 |
| Amended and Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 30, 2019). |
| |
| |
3.2 |
| Amended and Restated By-laws (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on March 7, 2023). |
| 10.1*†
|
Amended and Restated Employment Agreement, dated July 24, 2023, between Taylor Morrison, Inc. and Curt VanHyfte
|
| |
31.1* |
| Certification of Sheryl D. Palmer, Chief Executive Officer, pursuant to Section 302 of the Sarbanes–Oxley Act of 2002. |
| |
| |
31.2* |
| Certification of Curt VanHyfte, Chief Financial Officer, pursuant to Section 302 of the Sarbanes–Oxley Act of 2002. |
| |
| |
32.1** |
| Certification of Sheryl D. Palmer, Chief Executive Officer, pursuant to Section 906 of the Sarbanes–Oxley Act of 2002. |
| |
| |
32.2** |
| Certification of Curt VanHyfte, Chief Financial Officer, pursuant to Section 906 of the Sarbanes–Oxley Act of 2002. |
| |
| |
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. Document With Embedded Linkbase Documents |
| 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, 2023,March 31, 2024, formatted in inline XBRL (and contained in Exhibit 101). |
| |
**Furnished herewith† Management contract or compensatory plan in which directors and/or executive officers are eligible to participate.
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them other than for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
TAYLOR MORRISON HOME CORPORATION 10-Q
35
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.
authorized. | | | | | | | | |
|
|
| TAYLOR MORRISON HOME CORPORATION |
|
|
| Registrant |
DATE: | October 25, 2023April 30, 2024
| |
|
|
|
| /s/ Sheryl D. Palmer |
|
|
| Sheryl D. Palmer |
|
|
| Chairman of the Board of Directors and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
|
| /s/ Curt VanHyfte |
|
|
| Curt VanHyfte |
|
|
| Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
|
|
| /s/ Joseph Terracciano |
|
|
| Joseph Terracciano |
|
|
| (Principal Accounting Officer)
|
TAYLOR MORRISON HOME CORPORATION 10-Q
39
36