Taylor Morrison Home Earnings 2021-03-31

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

tmhc-20210331

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended March 31, 2021


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

For the transition period from to

Commission File Number: 001-35873

TAYLOR MORRISON HOME CORPORATION

(Exact name of registrant as specified in its Charter)


Delaware						83-2026677
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


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

(480) 840-8100

(Registrant’s telephone number, including area code)

N/A

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

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

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

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

Large Accelerated Filer

☒

Accelerated filer

☐

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange

Act. ¨

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

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


Class						Outstanding as of April 29, 2021
Common stock, $0.00001 par value						128,956,458

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TAYLOR MORRISON HOME CORPORATION

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			Page
PART I. FINANCIAL INFORMATION

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

Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020			2

Condensed Consolidated Statements of Operations for the three month periods ended March 31, 2021 and 2020			3

Condensed Consolidated Statements of Comprehensive Income/(l oss) for the three month periods ended March 31, 2021 and 2020			4

Condensed Consolidated Statement of Stockholders’ Equity for the three month periods ended March 31, 2021 and 2020			5

Condensed Consolidated Statements of Cash Flows for the three month periods ended March 31, 2021 and 2020			6

Notes to the Unaudited Condensed Consolidated Financial Statements			7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			24

Item 3. Quantitative and Qualitative Disclosures About Market Risk			39

Item 4. Controls and Procedures			40

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			41

Item 1A. Risk Factors			41

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			41

Item 3. Defaults Upon Senior Securities			41

Item 4. Mine Safety Disclosures			41

Item 5. Other Information			41

Item 6. Exhibits			42

SIGNATURES			43

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TAYLOR MORRISON HOME CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, unaudited)


	March 31, 2021		December 31, 2020
Assets
Cash and cash equivalents	$	392,500	$	532,843
Restricted cash	976		1,266
Total cash, cash equivalents, and restricted cash	393,476		534,109

Owned inventory	5,567,328		5,209,653
Consolidated real estate not owned	57,857		122,773
Total real estate inventory	5,625,185		5,332,426
Land deposits	124,469		125,625
Mortgage loans held for sale	243,250		201,177
Derivative assets	7,894		5,294
Lease right of use assets	69,435		73,222
Prepaid expenses and other assets, net	243,363		242,744
Other receivables, net	105,915		96,241
Investments in unconsolidated entities	136,105		127,955
Deferred tax assets, net	238,078		238,078
Property and equipment, net	125,118		97,927

Goodwill	663,197		663,197

Total assets	$	7,975,485	$	7,737,995
Liabilities
Accounts payable	$	258,349	$	215,047
Accrued expenses and other liabilities	390,301		430,067
Lease liabilities	79,572		83,240
Income taxes payable	46,184		12,841
Customer deposits	421,838		311,257
Estimated development liability	40,233		40,625
Senior notes, net	2,452,354		2,452,365
Loans payable and other borrowings	392,400		348,741
Revolving credit facility borrowings	—		—
Mortgage warehouse borrowings	180,833		127,289
Liabilities attributable to consolidated real estate not owned	57,857		122,773

Total liabilities	$4,319,921		$4,144,245
COMMITMENTS AND CONTINGENCIES (Note 15)
Stockholders’ Equity










Total stockholders’ equity	3,655,564		3,593,750
Total liabilities and stockholders’ equity	$	7,975,485	$	7,737,995

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements

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TAYLOR MORRISON HOME CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts, unaudited)


	Three Months Ended March 31,
	2021		2020
Home closings revenue, net	$	1,363,429	$	1,264,640
Land closings revenue	4,889		22,939
Financial services revenue	44,065		28,039
Amenity and other revenue	5,429		30,081
Total revenue	1,417,812		1,345,699
Cost of home closings	1,110,242		1,070,503
Cost of land closings	4,027		27,132
Financial services expenses	23,999		20,647
Amenity and other expenses	5,103		29,661
Total cost of revenue	1,143,371		1,147,943
Gross margin	274,441		197,756
Sales, commissions and other marketing costs	85,952		86,327
General and administrative expenses	61,553		50,526
Equity in income of unconsolidated entities	(5,661)		(2,426)
Interest income, net	(119)		(560)
Other expense, net	975		6,290
Transaction expenses	—		86,374


Income/(loss) before income taxes	131,741		(28,775)
Income tax provision	29,298		781







Net income/(loss) before allocation to non-controlling interests	102,443		(29,556)
Net income attributable to non-controlling interests — joint ventures	(4,422)		(1,875)


Net income/(loss) available to Taylor Morrison Home Corporation	$	98,021	$	(31,431)
Earnings/(loss) per common share
Basic	$	0.76	$	(0.26)
Diluted	$	0.75	$	(0.26)
Weighted average number of shares of common stock:
Basic	128,883		121,908
Diluted	131,246		121,908

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements

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TAYLOR MORRISON HOME CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands, unaudited)


	Three Months Ended March 31,
	2021		2020
Income/(loss) before non-controlling interests, net of tax	$	102,443	$	(29,556)


Post-retirement benefits adjustments, net of tax	—		(13)
Comprehensive income/(loss)	102,443		(29,569)
Comprehensive income attributable to non-controlling interests — joint ventures	(4,422)		(1,875)

Comprehensive income/(loss) available to Taylor Morrison Home Corporation	$	98,021	$	(31,444)

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

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TAYLOR MORRISON HOME CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(In thousands, except share data, unaudited)


For the three months ended March 31, 2021

	Common Stock			Additional Paid-in Capital	Treasury Stock			Stockholders' Equity
	Shares	Amount			Amount		Shares	Amount		Retained Earnings		Accumulated Other Comprehensive Loss		Non-controlling Interest - Joint Venture		Total Stockholders’ Equity
Balance – December 31, 2020	129,476,914	$	1		$	2,926,773	25,884,756	$	(446,856)	$	1,025,789	$	(1,166)	$	89,209	$	3,593,750
Net income	—	—			—		—	—		98,021		—		4,422		102,443

Exercise of stock options	349,675	—			6,320		—	—		—		—		—		6,320
Issuance of restricted stock units, net of shares withheld for tax(1)	357,213	—			(4,664)		—	—		—		—		—		(4,664)

Repurchase of common stock	(1,447,309)	—			—		1,447,309	(38,418)		—		—		—		(38,418)
Stock compensation expense	—	—			5,682		—	—		—		—		—		5,682


Distributions to non-controlling interests of consolidated joint ventures	—	—			—		—	—		—		—		(7,961)		(7,961)
Changes in non-controlling interests of consolidated joint ventures	—	—			—		—	—		—		—		(1,588)		(1,588)
Balance – March 31, 2021	128,736,493	$	1		$	2,934,111	27,332,065	$	(485,274)	$	1,123,810	$	(1,166)	$	84,082	$	3,655,564

(1) Dollar amount represents the value of shares withheld for taxes.


For the three months ended March 31, 2020


	Common Stock			Additional Paid-in Capital	Treasury Stock			Stockholders' Equity
	Shares	Amount			Amount		Shares	Amount		Retained Earnings		Accumulated Other Comprehensive Income		Non-controlling Interest - Joint Venture		Total Stockholders’ Equity
Balance – December 31, 2019	105,851,285	$	1		$	2,097,995	19,943,432	$	(343,524)	$	782,350	$	884	$	8,006	$	2,545,712
Net (loss)/ income	—	—			—		—	—		(31,431)		—		1,875		(29,556)
Other comprehensive loss	—				—					—		(13)		—		(13)
Exercise of stock options	250,149	—			4,548		—	—		—		—		—		4,548
Issuance of restricted stock units, net of shares withheld for tax(1)	602,418	—			(7,075)		—	—		—		—		—		(7,075)
Issuance of equity in connection with business combinations	28,327,290	—			849,920		—	—		—		—		—		849,920
Repurchase of common stock	(5,436,479)	—			—		5,436,479	(90,163)		—		—		—		(90,163)
Stock compensation expense	—	—			11,896		—	—		—		—		—		11,896
Stock compensation expense related to WLH acquisition	—	—			5,107		—	—		—		—		—		5,107
WLH equity award accelerations due to change in control	—	—			8,421		—	—		—		—		—		8,421
Distributions to non-controlling interests of consolidated joint ventures	—	—			—		—	—		—		—		6,735		6,735
Changes in non-controlling interests of consolidated joint ventures	—	—			—		—	—		—		—		117,509		117,509
Balance – March 31, 2020	129,594,663	$	1		$	2,970,812	25,379,911	$	(433,687)	$	750,919	$	871	$	134,125	$	3,423,041

(1) Dollar amount represents the value of shares withheld for taxes.

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

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TAYLOR MORRISON HOME CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)



	Three Months Ended March 31,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) before allocation to non-controlling interests	$	102,443	$	(29,556)
Adjustments to reconcile net income to net cash (used in)/provided by operating activities:
Equity in income of unconsolidated entities	(5,661)		(2,426)
Stock compensation expense	5,682		17,002

Distributions of earnings from unconsolidated entities	3,162		1,489
Depreciation and amortization	9,636		8,601
Operating lease expense	3,969		3,752
Debt issuance costs/(premium) amortization	118		(406)

Land held for sale write-downs	—		4,347


Changes in operating assets and liabilities:
Real estate inventory and land deposits	(356,519)		73,261
Mortgages held for sale, prepaid expenses and other assets	(85,270)		1,535
Customer deposits	110,581		32,516
Accounts payable, accrued expenses and other liabilities	34,208		(37,422)
Income taxes payable	33,343		(592)
Net cash (used in)/provided by operating activities	(144,308)		72,101
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(7,824)		(6,031)
Payments for business acquisitions, net of cash acquired	—		(209,446)
Distributions of capital from unconsolidated entities	7,451		6,713
Investments of capital into unconsolidated entities	(13,102)		(3,042)
Net cash used in investing activities	(13,475)		(211,806)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in loans payable and other borrowings	36,868		18,205
Repayments of loans payable and other borrowings	(27,580)		(32,726)
Borrowings on revolving credit facility	—		695,000
Repayments on revolving credit facility	—		(210,000)
Borrowings on mortgage warehouse	697,398		432,488
Repayments on mortgage warehouse	(643,854)		(446,555)

Repayments on senior notes	—		(50,000)
Payment of deferred financing costs	—		(3)

Proceeds from stock option exercises	6,320		4,548



Payment of principle portion of finance lease	(1,325)		(1,325)
Repurchase of common stock, net	(38,418)		(90,163)
Payment of taxes related to net share settlement of equity awards	(5,288)		(7,075)
Changes and (distributions to)/contributions to non-controlling interests of consolidated joint ventures, net	(6,971)		10,171
Net cash provided by financing activities	17,150		322,565
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH	$	(140,633)	$	182,860
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period	534,109		328,572
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period	$	393,476	$	511,432
SUPPLEMENTAL CASH FLOW INFORMATION:
Income tax refund, net	$	4,592	$	325
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
Change in loans payable issued to sellers in connection with land purchase contracts	$	82,378	$	20,189
Change in inventory not owned	$	(64,916)	$	(22,281)


Issuance of common stock in connection with business acquisition	$	—	$	867,284
Net non-cash (distributions)/contributions from non-controlling interests	$	(990)	$	6,697
Non-cash portion of loss on debt extinguishment	$	—	$	1,723

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

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TAYLOR MORRISON HOME CORPORATION

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS

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 developer of lifestyle communities. We operate in the states of Arizona, California, Colorado, Florida, Georgia, Nevada, North and South Carolina, Oregon, Texas, and Washington. Our Company serves a wide array of consumer groups from coast to coast, including first time, move-up, luxury, and active adult. Our homebuilding segments operate under our Taylor Morrison, Darling Homes, and William Lyon Signature brand names. 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. The communities in our homebuilding segments generally offer single and multi-family attached and detached homes. We are the general contractors for all real estate projects and retain subcontractors for home construction and land development. We have an exclusive partnership with Christopher Todd Communities, a growing Phoenix-based developer of innovative, luxury rental communities to operate a “Build-to-Rent” homebuilding business. We serve as a land acquirer, developer, and homebuilder while Christopher Todd Communities provides community design and property management consultation. We also operate Urban Form Development, LLC (“Urban Form”), which primarily develops and constructs multi-use properties consisting of commercial space, retail, and multi-family units. Our Financial Services segment provides financial services to customers through our wholly owned mortgage subsidiary, operating as Taylor Morrison Home Funding, LLC (“TMHF”), title services through our wholly owned title services subsidiary, Inspired Title Services, LLC (“Inspired Title”), and homeowner’s insurance policies through our insurance agency, Taylor Morrison Insurance Services, LLC (“TMIS”).

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, 2020 (the “Annual Report”). In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements include all normal and recurring adjustments that are considered necessary for the fair presentation of our results for the interim periods presented. Results for interim periods are not necessarily indicative of results to be expected for a full fiscal year.

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 - joint ventures” on the Condensed Consolidated Statements of Operations.

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

Goodwill — The excess of the purchase price of a business acquisition over the net fair value of assets acquired and liabilities assumed is capitalized as goodwill in accordance with ASC Topic 350, Intangibles — Goodwill and Other. ASC 350 requires that goodwill and intangible assets that do not have finite lives not be amortized, but rather assessed for impairment at least annually or more frequently if certain impairment indicators are present. We perform our annual impairment test during the fourth quarter or whenever impairment indicators are present. We did not perform an impairment test during the first quarter of 2021 as indicators of impairment were not present as of March 31, 2021.

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 sales 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 our materials procurement process, vertical construction of a home, and construction utilities are considered overhead costs and allocated on a per unit

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basis. These costs are capitalized to inventory from the point development begins to the point construction is completed. Changes in estimated costs to be incurred in a community are generally allocated to the remaining lots on a prospective basis. For those communities that have been temporarily closed or development has been discontinued, we do not allocate interest or other costs to the community’s inventory until activity resumes. Such costs are expensed as incurred.

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

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, we first perform an undiscounted cash flow analysis to determine if the carrying value of the assets in that community exceeds the expected undiscounted cash flows. Generally, if the carrying value of the assets exceeds their estimated undiscounted cash flows, then the assets are deemed to be impaired and are recorded at fair value as of the assessment date. 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. 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 months ended March 31, 2021 and 2020, no impairment charges were recorded.

In certain cases, we may elect to cease development and/or marketing of an existing community if we believe the economic performance of the community would be maximized by deferring development for a period of time to allow for market conditions to improve. We refer to such communities as long-term strategic assets. The decision may be based on financial and/or operational metrics as determined by us. If we decide to cease development, we will evaluate the project for impairment and then cease future development and marketing activity until such a time when we believe that market conditions have improved and economic performance can be maximized. Our assessment of the carrying value of our long-term strategic assets typically includes subjective estimates of future performance, including the timing of when development will recommence, the type of product to be offered, and the margin to be realized. In the future, some of these inactive communities may be re-opened while others may be sold. As of March 31, 2021 and December 31, 2020, we had one inactive project in our East region with a carrying value of $13.5 million.

We have land purchase agreements with various land sellers. As a method of acquiring land in staged takedowns, while limiting risk and minimizing the use of funds from our available cash or other financing sources, we may transfer our right under certain specific performance agreements to entities owned by third parties (“land banking arrangements”). These entities use equity contributions from their owners and/or incur debt to finance the acquisition and development of the land. The entities grant us an option to acquire lots in staged takedowns. In consideration for this option, we make a non-refundable deposit of 15% to 25% of the total purchase price. We are not legally obligated to purchase the balance of the lots, but would forfeit any existing deposits and could be subject to financial and other penalties if the lots were not purchased. We do not have an ownership interest in these entities or title to their assets and do not guarantee their liabilities. These land banking arrangements help us manage the financial and market risk associated with land holdings.

Investments in Consolidated and Unconsolidated Entities

Consolidated Entities — In the ordinary course of business, we enter into land purchase contracts, lot option contracts and land banking arrangements in order to procure land or lots for the construction of homes. Such contracts enable us to control significant lot positions with a minimal initial capital investment and substantially reduce the risks associated with land ownership and development. In accordance with ASC Topic 810, Consolidation, we have concluded that when we enter into these agreements to acquire land or lots and pay a non-refundable deposit, a Variable Interest Entity (“VIE”) may be created because we are deemed to have provided subordinated financial support that will absorb some or all of an entity’s expected losses if they occur. If we are the primary beneficiary of the VIE, we will consolidate the VIE in our Condensed Consolidated Financial Statements and reflect such assets and liabilities as Consolidated real estate not owned within our real estate inventory balance and Liabilities attributable to consolidated real estate not owned, respectively in the Consolidated Balance Sheets.

Unconsolidated Joint Ventures — We use the equity method of accounting for entities over which we exercise significant influence but do not have a controlling interest over the operating and financial policies of the investee. For unconsolidated entities in which we function as the managing member, we have evaluated the rights held by our joint venture partners and determined that they have substantive participating rights that preclude the presumption of control. Our share of net earnings or losses is included in Equity in income of unconsolidated entities when earned and distributions are credited against our investment in the joint venture when received. 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 third party. These joint ventures are recorded in Investments in unconsolidated entities on the Consolidated Balance Sheets.

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We evaluate our investments in unconsolidated entities for indicators of impairment at least semi-annually, or whenever indicators of impairment are present. A series of operating losses of an investee or other factors may indicate that a decrease in value of our investment in the unconsolidated entity has occurred which is other-than-temporary. The amount of impairment recognized is the excess of the investment’s carrying amount over its estimated fair value. Additionally, we consider various qualitative factors to determine if a decrease in the value of the investment is other-than-temporary. These factors include age of the venture, stage in its life cycle, 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 with the other partners. If we believe that the decline in the fair value of the investment is temporary, then no impairment is recorded. We did not record any impairment charges for the three months ended March 31, 2021 and 2020.

Prepaid Expenses and Other Assets, Net — Prepaid expenses consist of sales commissions, unamortized model home costs, such as design fees and furniture, and the unamortized issuance costs for the Revolving Credit Facility. Other assets consist of various operating and escrow deposits, pre-acquisition costs, and other deferred costs. Build-to-rent assets consist of land and development costs relating to our projects under construction. Urban Form assets consist primarily of land and development costs relating to projects under construction.

Revenue Recognition — We recognize revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”). The standard's core principle requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services.

Home and land closings revenue

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

•Revenue from closings of residential real estate is recognized when closings have occurred, 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, club houses, and fitness centers, which require us to provide club members with access to the facilities in exchange for the payment of club dues. We collect club dues and other fees from the club members, which are invoiced on a monthly basis. Revenue from our golf club operations is also included in amenity and other revenue. Amenity and other revenue also includes revenue from the sale of assets which include multi-use properties as part of our Urban Form 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. All of the loans TMHF originates are sold to third party investors within a short period of time, on a non-recourse basis. Gains and losses from the sale of mortgages are recognized in accordance with ASC Topic 860-20, Sales of Financial Assets. TMHF does not have continuing involvement with the transferred assets; therefore, we derecognize the mortgage loans at time of sale, based on the difference between the selling price and carrying value of the related loans upon sale, recording a gain/loss on sale in the period of sale. Also included in Financial services revenue/expenses are realized and unrealized gains and losses from hedging instruments.

Recently Issued Accounting Pronouncements — In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is

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intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. We adopted ASU 2019-12 as of January 1, 2021, but this pronouncement did not have a material impact on our consolidated financial statements and disclosures.

3. BUSINESS COMBINATIONS

In accordance with ASC Topic 805, Business Combinations, all assets acquired and liabilities assumed from our acquisition of William Lyon Homes (“WLH”) on February 6, 2020 were measured and recognized at fair value as of the date of the acquisition to reflect the purchase price paid. Upon finalization, total purchase consideration of the WLH acquisition was $1.1 billion, consisting of multiple components: (i) cash of $157.8 million, (ii) the issuance of approximately 28.3 million shares of TMHC Common Stock with a value of $773.9 million, (iii) the repayment of $160.8 million of borrowings under WLH's Revolving Credit Facility, and (iv) the conversion of WLH issued equity instruments consisting of restricted stock units, restricted stock awards, options and warrants to TMHC awards and warrants with a value of $24.1 million.

We determined the estimated fair value of real estate inventory on a community-level basis, using a reasonable range of market comparable gross margins based on the inventory geography and product type. These estimates are significantly impacted by assumptions related to expected average home selling prices and sales incentives, expected sales paces and cancellation rates, expected land development and construction timelines, and anticipated land development, construction, and overhead costs. Such estimates were made for each individual community and varied significantly between communities. We believe our estimates and assumptions are reasonable.

The following is a summary of the final fair value of assets acquired and liabilities assumed.


(Dollars in thousands)
Acquisition Date	February 6, 2020
Assets acquired
Real estate inventory	$	2,069,323

Prepaid expenses and other assets(1)	265,729
Deferred tax assets, net	148,193

Goodwill(2)	513,768
Total assets	$	2,997,013

Less liabilities assumed
Accrued expenses and other liabilities	$	457,365

Total debt	1,306,578
Non-controlling interest	116,157
Net assets acquired	$	1,116,913

(1) Includes cash acquired.

(2) Goodwill is not deductible for tax purposes. We allocated $465.6 million and $48.2 million of goodwill to the West and Central homebuilding segments, respectively.

Unaudited Pro Forma Results of Business Combinations

The following unaudited pro forma information for the period presented includes the results of operations of our acquisition of WLH as if it had been completed on January 1, 2019. The pro forma results are presented for informational purposes only and do not purport to be indicative of the results of operations or future results that would have been achieved if the acquisition had taken place one year prior to the acquisition year. The pro forma information combines the historical results of the Company with the historical results of WLH for the periods presented.

The unaudited pro forma results do not give effect to any synergies, operating efficiencies, or other costs savings that may result from the acquisition, or other significant non-reoccurring expenses or transactions that do not have a continuing impact. Earnings per share utilizes pro forma net income available to TMHC and total weighted average shares of common stock. The pro forma amounts are based on available information and certain assumptions that we believe are reasonable.

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	For the three months ended March 31,
(Dollars in thousands except per share data)	2020 (Pro forma)
Total revenue	$	1,432,797

Net income before allocation to non-controlling interests	$	9,027
Net income attributable to non-controlling interests — joint ventures	(988)
Net income available to TMHC	$	8,039

Weighted average shares - Basic	133,643
Weighted average shares - Diluted	134,935

Earnings per share - Basic	$	0.06
Earnings per share - Diluted	$	0.06

For the three months ended March 31, 2020, total revenue on the condensed consolidated statement of operations included $282.6 million of revenues and loss before income taxes included loss of $31.7 million from WLH since the date of acquisition.

4. EARNINGS PER SHARE

Basic earnings per common share is computed by dividing net income/(loss) available to TMHC by the weighted average number of shares of Common Stock 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 March 31,
	2021		2020(1)
Numerator:
Net income/(loss) available to TMHC	$	98,021	$	(31,431)



Denominator:
Weighted average shares – basic	128,883		121,908

Restricted stock units	975		—
Stock Options	844		—
Warrants	544		—
Weighted average shares – diluted	131,246		121,908
Earnings/(loss) per common share – basic:
Net income/(loss) available to Taylor Morrison Home Corporation	$	0.76	$	(0.26)
Earnings/(loss) per common share – diluted:
Net income/(loss) available to Taylor Morrison Home Corporation	$	0.75	$	(0.26)

(1) Due to a loss for the three months ended March 31, 2020, no incremental shares associated with (1) restricted stock units, (2) stock options and (3) warrants were included because the effect would be antidilutive.

The above calculations of weighted average shares excludes 811,658 and 2,547,953 anti-dilutive stock options and unvested restricted stock units (“RSUs”) for the three months ended March 31, 2021 and 2020, respectively.

5. REAL ESTATE INVENTORY AND LAND DEPOSITS

Inventory consists of the following (in thousands):

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	As of
	March 31, 2021		December 31, 2020
Real estate developed and under development	$	4,036,364	$	3,862,785
Real estate held for development or held for sale (1)	129,384		110,954
Operating communities (2)	1,227,406		1,072,134
Capitalized interest	174,174		163,780
Total owned inventory	5,567,328		5,209,653
Real estate not owned	57,857		122,773
Total real estate inventory	$	5,625,185	$	5,332,426

(1) Real estate held for development or held for sale includes properties which are not in active production. This includes raw land recently purchased or awaiting entitlement, and, if applicable, long-term strategic assets.

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

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


	As of
	March 31, 2021			December 31, 2020
	Owned Lots	Book Value of Land and Development		Owned Lots	Book Value of Land and Development
Raw(1)	11,107	$	373,805	12,330	$	356,681
Partially developed	21,285	1,256,035		19,495	1,215,419
Finished	22,693	2,522,446		21,396	2,388,177
Long-term strategic assets	158	13,462		158	13,462
Total	55,243	$	4,165,748	53,379	$	3,973,739

(1) Commercial assets are included in number of owned lots and book value of land and development.

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

As of March 31, 2021 and December 31, 2020, we had the right to purchase 7,373 and 7,449 lots under land option purchase contracts, respectively, for an aggregate purchase price of $519.8 million and $485.4 million, respectively. We do not have title to the properties, and the creditors generally have no recourse against us. As of March 31, 2021 and December 31, 2020, our exposure to loss related to our option contracts with third parties and unconsolidated entities consisted of non-refundable deposits totaling $92.5 million and $65.3 million, respectively.

We also have various land banking arrangements. As of March 31, 2021 and December 31, 2020, we had the right to purchase 1,476 lots and 2,426 lots under such land agreements for an aggregate purchase price of $137.7 million and $275.0 million, respectively. We are not legally obligated to purchase the balance of the lots. As of March 31, 2021 and December 31, 2020, our exposure to loss related to deposits on land banking arrangements totaled $32.0 million and $60.3 million, respectively.

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


	Three Months Ended March 31,
	2021		2020
Interest capitalized - beginning of period	$	163,780	$	115,593
Interest incurred	37,719		37,575
Interest amortized to cost of home closings	(27,325)		(24,298)
Interest capitalized - end of period	$	174,174	$	128,870

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6. INVESTMENTS IN CONSOLIDATED AND UNCONSOLIDATED ENTITIES

Unconsolidated Entities

We have investments in a number of joint ventures with third parties, with ownership interests up to 50.0%. These entities are generally involved in real estate development, homebuilding and/or mortgage lending activities. Some of these joint ventures develop land for the sole use of the joint venture participants, including us, and others develop land for sale to both the joint venture participants and to unrelated builders. Our share of the joint venture profit relating to lots we purchase from the joint ventures is deferred until homes are delivered by us and title passes to a homebuyer.

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


	As of
	March 31, 2021		December 31, 2020
Assets:
Real estate inventory	$	332,427	$	342,451
Other assets	145,209		133,903
Total assets	$	477,636	$	476,354
Liabilities and owners’ equity:
Debt	$	178,483	$	183,911
Other liabilities	18,903		21,215
Total liabilities	197,386		205,126
Owners’ equity:
TMHC	136,105		127,955
Others	144,145		143,273
Total owners’ equity	280,250		271,228
Total liabilities and owners’ equity	$	477,636	$	476,354


	Three Months Ended March 31,
	2021		2020
Revenues	$	49,880	$	48,972
Costs and expenses	(34,157)		(41,494)
Income of unconsolidated entities	$	15,723	$	7,478
TMHC’s share in income of unconsolidated entities	$	5,661	$	2,426
Distributions to TMHC from unconsolidated entities	$	10,613	$

Price	25.33	EPS	2
Shares	109	P/E	13
MCap	2,751	P/FCF	18
Net Debt	1,907	EBIT	278
TEV	4,658	TEV/EBIT	17
TTM 2019-09-30, in MM, except price, ratios

10-Q	2021-03-31	Filed 2021-04-29
10-K	2020-12-31	Filed 2021-02-24
10-Q	2020-09-30	Filed 2020-11-02
10-Q	2020-06-30	Filed 2020-08-06
10-Q	2020-03-31	Filed 2020-05-11
10-K	2019-12-31	Filed 2020-02-19
10-Q	2019-09-30	Filed 2019-10-30
10-Q	2019-06-30	Filed 2019-08-01
10-Q	2019-03-31	Filed 2019-05-01
10-K	2018-12-31	Filed 2019-02-20
10-Q	2018-09-30	Filed 2018-10-31
10-Q	2018-06-30	Filed 2018-08-01
10-Q	2018-03-31	Filed 2018-05-02
10-K	2017-12-31	Filed 2018-02-21
10-Q	2017-09-30	Filed 2017-11-02
10-Q	2017-06-30	Filed 2017-08-02
10-Q	2017-03-31	Filed 2017-04-27
10-K	2016-12-31	Filed 2017-02-21
10-Q	2016-09-30	Filed 2016-11-02
10-Q	2016-06-30	Filed 2016-08-03
10-Q	2016-03-31	Filed 2016-05-04
10-K	2015-12-31	Filed 2016-02-25
10-Q	2015-09-30	Filed 2015-11-04
10-Q	2015-06-30	Filed 2015-08-05
10-Q	2015-03-31	Filed 2015-05-07
10-K	2014-12-31	Filed 2015-02-27
10-Q	2014-09-30	Filed 2014-11-05
10-Q	2014-06-30	Filed 2014-08-05
10-Q	2014-03-31	Filed 2014-05-07
10-K	2013-12-31	Filed 2014-02-24
10-Q	2013-09-30	Filed 2013-11-13
10-Q	2013-06-30	Filed 2013-08-14
10-Q	2013-03-31	Filed 2013-05-15

8-K	2020-10-28
8-K	2020-09-03
8-K	2020-07-30
8-K	2020-07-22
8-K	2020-07-08
8-K	2020-07-08
8-K	2020-05-28
8-K	2020-05-06
8-K	2020-04-08
8-K	2020-02-28
8-K	2020-02-06
8-K	2020-02-06
8-K	2020-02-05
8-K	2020-01-31
8-K	2020-01-30
8-K	2020-01-27
8-K	2020-01-23
8-K	2020-01-17
8-K	2020-01-03
8-K	2019-12-18
8-K	2019-12-05
8-K	2019-12-05
8-K	2019-11-05
8-K	2019-11-05
8-K	2019-10-30
8-K	2019-08-01
8-K	2019-07-31
8-K	2019-07-18
8-K	2019-07-18
8-K	2019-06-05
8-K	2019-05-29
8-K	2019-05-21
8-K	2019-05-01
8-K	2019-03-11
8-K	2019-02-13
8-K	2019-02-01
8-K	2018-11-21
8-K	2018-10-31
8-K	2018-10-15
8-K	2018-10-02
8-K	2018-09-19
8-K	2018-08-01
8-K	2018-07-18
8-K	2018-06-29
8-K	2018-06-14
8-K	2018-06-07
8-K	2018-06-07
8-K	2018-05-30
8-K	2018-05-02
8-K	2018-02-07
8-K	2018-01-26
8-K	2018-01-11
8-K	2018-01-11
8-K	2018-01-03

EX-31.1	tmhc-033121xex311.htm
EX-31.2	tmhc-033121xex312.htm
EX-32.1	tmhc-033121xex321.htm
EX-32.2	tmhc-033121xex322.htm

TMHC 10Q Quarterly Report

Taylor Morrison Home Earnings 2021-03-31