テイラーモリソンホームの四半期報告

Large Accelerated Filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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Table of Contents

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 June 30, 2023


☐	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 ☒ 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 ☒ 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.

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 ☒

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 July 26, 2023
Common stock, $0.00001 par value		109,448,089

Table of Contents

TAYLOR MORRISON HOME CORPORATION

TABLE OF CONTENTS



Part I		FINANCIAL INFORMATION
	2	ITEM 1.	Financial Statements of Taylor Morrison Home Corporation (Unaudited)
	2		Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022
	3		Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022
	4		Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022
	6		Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022
	7		Notes to the Unaudited Condensed Consolidated Financial Statements
	21	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	33	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk
	34	ITEM 4.	Controls and Procedures


Part II		OTHER INFORMATION
	35	ITEM 1.	Legal Proceedings
	35	ITEM 1A.	Risk Factors
	36	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds
	36	ITEM 3.	Defaults Upon Senior Securities
	36	ITEM 4.	Mine Safety Disclosures
	36	ITEM 5.	Other Information
	38	ITEM 6.	Exhibits

	39	SIGNATURES

TAYLOR MORRISON HOME CORPORATION 10-Q

Table of Contents

ITEM 1. FINANCIAL STATEMENTS

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TAYLOR MORRISON HOME CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, unaudited)


	June 30, 2023		December 31, 2022
Assets
Cash and cash equivalents	$	1,227,264	$	724,488
Restricted cash		765		2,147
Total cash, cash equivalents, and restricted cash		1,228,029		726,635
Real estate inventory:
Owned inventory		5,232,853		5,346,905
Consolidated real estate not owned		892		23,971
Total real estate inventory		5,233,745		5,370,876
Land deposits		207,946		263,356
Mortgage loans held for sale		287,001		346,364
Lease right of use assets		80,578		90,446
Prepaid expenses and other assets, net		261,070		265,392
Other receivables, net		189,455		191,504
Investments in unconsolidated entities		306,265		282,900
Deferred tax assets, net		67,656		67,656
Property and equipment, net		223,847		202,398
Goodwill		663,197		663,197
Total assets	$	8,748,789	$	8,470,724
Liabilities
Accounts payable	$	281,583	$	269,761
Accrued expenses and other liabilities		462,032		490,253
Lease liabilities		89,310		100,174
Income taxes payable		3,012		—
Customer deposits		380,724		412,092
Estimated development liabilities		42,352		43,753
Senior notes, net		1,817,457		1,816,303
Loans payable and other borrowings		326,216		361,486
Mortgage warehouse borrowings		249,898		306,072
Liabilities attributable to consolidated real estate not owned		892		23,971
Total liabilities	$	3,653,476	$	3,823,865
COMMITMENTS AND CONTINGENCIES (Note 13)
Stockholders’ equity
Total stockholders’ equity		5,095,313		4,646,859
Total liabilities and stockholders’ equity	$	8,748,789	$	8,470,724

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements

TAYLOR MORRISON HOME CORPORATION 10-Q

Table of Contents

ITEM 1. FINANCIAL STATEMENTS

TAYLOR MORRISON HOME CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts, unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Home closings revenue, net	$	1,996,747		$	1,883,020		$	3,609,342		$	3,527,429
Land closings revenue		12,628			36,816			17,148			52,426
Financial services revenue		41,914			35,471			77,063			70,670
Amenity and other revenue		9,275			39,716			18,868			47,622
Total revenue		2,060,564			1,995,023			3,722,421			3,698,147
Cost of home closings		1,514,237			1,381,610			2,741,750			2,646,584
Cost of land closings		12,703			24,204			17,048			38,568
Financial services expenses		25,342			21,483			47,490			45,697
Amenity and other expenses		8,597			26,246			16,882			32,690
Total cost of revenue		1,560,879			1,453,543			2,823,170			2,763,539
Gross margin		499,685			541,480			899,251			934,608
Sales, commissions and other marketing costs		113,034			96,135			205,794			185,258
General and administrative expenses		70,649			69,407			136,910			137,549
Net (income)/loss from unconsolidated entities		(3,186	)		3,637			(5,115	)		1,806
Interest (income)/expense, net		(5,120	)		5,189			(6,231	)		9,441
Other expense/(income), net		8,549			(11,014	)		3,715			(10,472	)
Gain on extinguishment of debt, net		—			(13,471	)		—			(13,471	)
Income before income taxes		315,759			391,597			564,178			624,497
Income tax provision		80,854			98,443			138,045			152,882
Net income before allocation to non-controlling interests		234,905			293,154			426,133			471,615
Net income attributable to non-controlling interests		(303	)		(2,167	)		(480	)		(3,925	)
Net income available to Taylor Morrison Home Corporation	$	234,602		$	290,987		$	425,653		$	467,690
Earnings per common share
Basic	$	2.15		$	2.47		$	3.91		$	3.91
Diluted	$	2.12		$	2.45		$	3.85		$	3.87
Weighted average number of shares of common stock:
Basic		109,210			117,932			108,822			119,550
Diluted		110,856			118,931			110,466			120,796

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements

TAYLOR MORRISON HOME CORPORATION 10-Q

Table of Contents

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 June 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 – 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
Net income		—		—		—		—		—			234,602		—		303		234,905
Exercise of stock options and issuance of restricted stock units, net(1)		409,672		—		8,591		—		—			—		—		—		8,591
Stock compensation expense		—		—		5,271		—		—			—		—		—		5,271
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

(1)

Dollar amount includes $8.9 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 June 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 – March 31, 2022		120,365,390		$	1	$	3,002,809		38,776,746	$	(818,892	)	$	1,865,518	$	689	$	44,673		$	4,094,798
Net income		—			—		—		—		—			290,987		—		2,167			293,154
Exercise of stock options and issuance of restricted stock units, net(1)		54,833			—		532		—		—			—		—		—			532
Repurchase of common stock		(6,779,498	)		—		—		6,779,498		(172,384	)		—		—		—			(172,384	)
Stock compensation expense		—			—		5,278		—		—			—		—		—			5,278
Distributions to non-controlling interests of consolidated joint ventures		—			—		—		—		—			—		—		(27,176	)		(27,176	)
Changes in non-controlling interests of consolidated joint ventures		—			—		—		—		—			—		—		(307	)		(307	)
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

(1)

Dollar amount includes $0.6 million of stock options exercised netted with the value of shares withheld for taxes on the issuance of restricted stock units.

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ITEM 1. FINANCIAL STATEMENTS

For the six months ended June 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		—			—		—		—		—			425,653		—		480		426,133
'Exercise of stock options and issuance of restricted stock units, net(1)		1,557,847			—		13,084		—		—			—		—		—		13,084
Repurchase of common stock		(109,325	)		—		—		109,325		(3,568	)		—		—		—		(3,568	)
Stock compensation expense		—			—		12,804		—		—			—		—		—		12,804
Changes in non-controlling interests of consolidated joint ventures		—			—		—		—		—			—		—		1		1
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

(1)

Dollar amount includes $22.4 million of stock options exercised netted with the value of shares withheld for taxes on the issuance of restricted stock units.

For the six months ended June 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		—			—		—			—		—			467,690		—		3,925			471,615
Exercise of stock options and issuance of restricted stock units, net(1)		534,761			—		(733	)		—		—			—		—		—			(733	)
Repurchase of common stock		(8,727,685	)		—		—			8,727,685		(230,413	)		—		—		—			(230,413	)
Stock compensation expense		—			—		12,141			—		—			—		—		—			12,141
Distributions to non-controlling interests of consolidated joint ventures		—			—		—			—		—			—		—		(28,928	)		(28,928	)
Changes in non-controlling interests of consolidated joint ventures		—			—		—			—		—			—		—		(769	)		(769	)
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

(1)

Dollar amount includes $2.9 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

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ITEM 1. FINANCIAL STATEMENTS

TAYLOR MORRISON HOME CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)


	Six Months Ended June 30,
	2023			2022
Cash Flows from Operating Activities
Net income before allocation to non-controlling interests	$	426,133		$	471,615
Adjustments to reconcile net income to net cash provided by operating activities:
Net (income)/loss from unconsolidated entities		(5,115	)		1,806
Stock compensation expense		12,804			12,141
Gain on extinguishment of debt, net		—			(13,471	)
Gain on land transfers		—			(13,700	)
Distributions of earnings from unconsolidated entities		5,534			4,252
Depreciation and amortization		14,478			17,758
Operating lease expense		13,512			13,632
Debt issuance costs amortization		1,744			544
Change in Urban Form assets due to sale		—			11,675
Changes in operating assets and liabilities:
Real estate inventory and land deposits		169,462			(667,846	)
Mortgage loans held for sale, prepaid expenses and other assets		46,618			305,465
Customer deposits		(31,368	)		94,240
Accounts payable, accrued expenses and other liabilities		(49,703	)		(44,476	)
Income taxes payable		3,012			1,855
Net cash provided by operating activities		607,111			195,490
Cash Flows from Investing Activities:
Purchase of property and equipment		(21,045	)		(12,801	)
Distributions of capital from unconsolidated entities		350			86,576
Investments of capital into unconsolidated entities		(24,134	)		(69,582	)
Net cash (used in)/provided by investing activities		(44,829	)		4,193
Cash Flows from Financing Activities
Increase in loans payable and other borrowings		2,426			29,877
Repayments on loans payable and other borrowings		(15,346	)		(45,226	)
Borrowings on revolving credit facilities		—			182,548
Repayments on revolving credit facilities		—			(64,077	)
Borrowings on mortgage warehouse facilities		1,503,098			1,193,232
Repayments on mortgage warehouse facilities		(1,559,272	)		(1,427,564	)
Repayments on senior notes		—			(264,111	)
Proceeds from stock option exercises and issuance of restricted stock units, net		13,084			(733	)
Payment of principal portion of finance lease		(1,310	)		(1,335	)
Repurchase of common stock, net		(3,568	)		(230,413	)
Cash and distributions to non-controlling interests of consolidated joint ventures, net		—			(28,928	)
Net cash used in financing activities		(60,888	)		(656,730	)
Net Increase/Decrease in Cash and Cash Equivalents and Restricted Cash	$	501,394		$	(457,047	)
Cash, Cash Equivalents, and Restricted Cash — Beginning of period		726,635			836,340
Cash, Cash Equivalents, and Restricted Cash — End of period	$	1,228,029		$	379,293
Supplemental Cash Flow Information
Income tax payments	$	(78,877	)	$	(112,167	)
Supplemental Non-Cash Investing and Financing Activities:
Change in loans payable issued to sellers in connection with land purchase contracts	$	84,445		$	159,637
Change in inventory not owned	$	(23,079	)	$	15,503
Investments of land in unconsolidated joint ventures, net	$	—		$	143,206

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

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ITEM 1. FINANCIAL STATEMENTS

TAYLOR MORRISON HOME CORPORATION

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS

Description of the Business — Taylor Morrison Home Corporation (“TMHC”), 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-lifestyle buyers. We are the general contractors for all real estate projects and retain subcontractors for home construction and land development. Our homebuilding segments operate under our various brand names including Taylor Morrison, Darling Homes Collection by Taylor Morrison, and Esplanade. 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, 2022 (the “Annual Report”). Certain prior year amounts have been reclassified to conform to current year presentation. In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements include all normal and recurring adjustments that are considered necessary for the fair presentation of our results for the interim periods presented. Results for interim periods are not necessarily indicative of results to be expected for a full fiscal year.

Joint Ventures - We consolidate certain joint ventures in accordance with Accounting Standards Codification (“ASC”) 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 Statement of 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 Statement of Stockholders’ Equity. The balance of Non-Controlling interests will fluctuate from period to period as a result of activities within the respective joint ventures which may include the allocation of income or losses, distributions or contributions associated with the partners within the joint venture.

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

Real Estate Inventory — Inventory consists of raw land, land under development, homes under construction, completed homes, and model homes, all of which are stated at cost. In addition to direct carrying costs, we also capitalize interest, real estate taxes, and related development costs that benefit the entire community, such as field construction supervision and related direct overhead. Home vertical construction costs are accumulated and charged to Cost of home closings at the time of home closing using the specific identification method. Land acquisition, development, interest, and real estate taxes are allocated to homes and units generally using the relative sales value method. Generally, all overhead costs relating to purchasing, vertical construction of a home, and construction utilities are considered overhead costs and allocated on a per unit basis. These costs are capitalized to inventory from the point development begins to the point construction is completed. Changes in estimated 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. Actual 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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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 six months ended June 30, 2023 and 2022, no impairment charges to our real estate inventory 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. 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 June 30, 2023 and December 31, 2022, we had no inactive projects.

In the ordinary course of business, we enter into various option agreements to acquire lots in staged takedowns which may require a significant cash deposit. We are not legally obligated to purchase the balance of the lots, but would forfeit any existing deposits and could be subject to financial and other penalties if the lots are not purchased. Real estate not owned under these agreements is reflected in Consolidated real estate not owned with a corresponding liability in Liabilities attributable to consolidated real estate not owned in the unaudited Condensed Consolidated Balance Sheets.

Land held for sale — In some locations where we act as a developer, we occasionally purchase land that includes commercially zoned parcels or areas designated for school or government use, which we typically sell to commercial developers or municipalities, as applicable. We also sell residential lots or land parcels to manage our land and lot supply on larger tracts of land. Land is considered held for sale once management intends to actively sell a parcel within the next 12 months or the parcel is under contract to sell. Land held for sale is recorded at the lower of cost or fair value less costs to sell. In determining the value of land held for sale, we consider recent offers received, prices for land in recent comparable sales transactions, and other factors. We record fair value adjustments for land held for sale within Cost of land closings on the unaudited Condensed Consolidated Statements of Operations.

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

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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 determined that the partners have substantive participating rights that preclude the presumption of control. Our share of net earnings or losses is included in Net income/loss from unconsolidated entities on the unaudited Condensed Consolidated Statement of Operations when earned and distributions are credited against our Investments in unconsolidated entities on the unaudited Condensed Consolidated 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 million impairment charge related to an investment in one of our unconsolidated entities for the three and six months ended June 30, 2022. No such charges were recorded for the three or six months ended June 30, 2023.

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 sales 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 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 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, and based on the difference between the selling price and carrying value of the related loans upon sale, record a gain/loss on sale in the period of sale.

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Also included in Financial services revenue/expenses are 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 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 statement of operations in the period in which they occur.

3. EARNINGS PER SHARE

Basic earnings per common share is computed by dividing net income available to TMHC by the weighted average number of shares of 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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Numerator:
Net income available to TMHC	$	234,602	$	290,987	$	425,653	$	467,690
Denominator:
Weighted average shares – basic		109,210		117,932		108,822		119,550
Restricted stock units		804		513		863		667
Stock Options		842		486		781		579
Weighted average shares – diluted		110,856		118,931		110,466		120,796
Earnings per common share – basic:
Net income available to Taylor Morrison Home Corporation	$	2.15	$	2.47	$	3.91	$	3.91
Earnings per common share – diluted:
Net income available to Taylor Morrison Home Corporation	$	2.12	$	2.45	$	3.85	$	3.87

The above calculations of weighted average shares - diluted exclude 347,052 and 267,531 of anti-dilutive stock options and unvested restricted stock units (“RSUs”) for the three and six months ended June 30, 2023, respectively, and 2,176,897 and 1,462,766 of anti-dilutive stock options and RSUs for the three and six months ended June 30, 2022, respectively.

4. REAL ESTATE INVENTORY AND LAND DEPOSITS

Inventory consists of the following (in thousands):


	As of
	June 30, 2023		December 31, 2022
Real estate developed and under development	$	3,613,811	$	3,607,227
Real estate held for development or held for sale (1)		56,035		43,314
Total owned		3,669,846		3,650,541
Operating communities (2)		1,371,703		1,506,241
Capitalized interest		191,304		190,123
Total owned inventory		5,232,853		5,346,905
Consolidated real estate not owned		892		23,971
Total real estate inventory	$	5,233,745	$	5,370,876

(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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ITEM 1. FINANCIAL STATEMENTS

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


	As of
	June 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		13,585	$	453,893		14,985	$	522,594
Under development		8,671		924,530		10,716		1,106,751
Finished		19,154		2,289,534		18,366		2,018,062
Total homebuilding owned lots		41,410		3,667,957		44,067		3,647,407
Other assets(1)		—		1,889		—		3,134
Total owned lots		41,410	$	3,669,846		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 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 summary of our controlled lots for the following periods (dollars in thousands):


	As of
	June 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		5,946	$	455,581	$	38,547		6,582	$	428,612	$	47,678
Land banking arrangements		6,816		991,636		145,817		7,369		1,057,065		156,653
Other controlled lots		18,272		923,510		19,667		16,891		956,712		50,218
Total controlled lots		31,034	$	2,370,727	$	204,031		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, and land banking arrangements.. In addition, at June 30, 2023 and December 31, 2022 we had refundable deposits of $3.9 million and $8.8 million respectively.

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


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Interest capitalized - beginning of period	$	196,607		$	177,969		$	190,123		$	168,670
Interest incurred and capitalized(1)		32,049			40,815			66,182			80,544
Interest amortized to cost of home closings		(37,352	)		(33,420	)		(65,001	)		(63,850	)
Interest capitalized - end of period	$	191,304		$	185,364		$	191,304		$	185,364

(1)

Excludes Interest expense, net on the unaudited Condensed Consolidated Statement of Operations 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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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
	June 30, 2023		December 31, 2022
Assets:
Real estate inventory	$	833,192	$	749,942
Other assets		168,072		146,770
Total assets	$	1,001,264	$	896,712
Liabilities and owners’ equity:
Debt	$	277,282	$	238,263
Other liabilities		44,792		31,824
Total liabilities	$	322,074	$	270,087
Owners’ equity:
TMHC	$	306,265	$	282,900
Others		372,925		343,725
Total owners’ equity	$	679,190	$	626,625
Total liabilities and owners’ equity	$	1,001,264	$	896,712


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Revenues	$	32,100		$	94,166		$	51,637		$	124,567
Costs and expenses		(24,067	)		(94,086	)		(38,766	)		(119,016	)
Net income from unconsolidated entities	$	8,033		$	80		$	12,871		$	5,551
TMHC’s share in net income/(loss) of unconsolidated entities	$	3,186		$	(3,637	)	$	5,115		$	(1,806	)
Distributions to TMHC from unconsolidated entities	$	4,687		$	88,770		$	5,884		$	90,828

Consolidated Entities

We have several joint ventures for the purpose of real estate development and homebuilding activities, which we have determined to be VIEs. As the managing member, we oversee the daily operations and have the power to direct the activities of the VIEs, or joint ventures. For this specific subset of joint ventures, based upon the allocation of income and loss per the applicable joint venture agreements and certain performance guarantees, we have potentially significant exposure to the risks and rewards of the joint ventures. Therefore, we are the primary beneficiary of these joint venture VIEs, and the entities are consolidated.

As of June 30, 2023, the assets of the consolidated joint ventures totaled $273.9 million, of which $23.9 million was cash and cash equivalents, $75.9 million was owned inventory and $123.0 million was fixed assets (primarily related to Urban Form). The majority of the fixed asset balance which was previously classified as held for sale, has been reclassified as held for investment as of June 30, 2023. As of December 31, 2022, the assets of the consolidated joint ventures totaled $277.6 million, of which $38.9 million was cash and cash equivalents, $72.0 million was owned inventory and $123.2 million was fixed assets. The liabilities of the consolidated joint ventures totaled $149.1 million and $155.5 million as of June 30, 2023 and December 31, 2022, respectively, and were primarily comprised of notes payable, accounts payable and accrued liabilities.

6. ACCRUED EXPENSES AND OTHER LIABILITIES

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


	As of June 30, 2023		As of December 31, 2022
Real estate development costs to complete	$	50,915	$	53,155
Compensation and employee benefits		91,333		112,294
Self-insurance and warranty reserves		160,326		161,675
Interest payable		37,064		37,434
Property and sales taxes payable		24,233		30,046
Other accruals		98,161		95,649
Total accrued expenses and other liabilities	$	462,032	$	490,253

TAYLOR MORRISON HOME CORPORATION 10-Q

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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 June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Reserve - beginning of period	$	158,222		$	140,970		$	161,675		$	141,839
Additions to reserves		24,887			23,519			39,334			32,403
Cost of claims incurred		(23,318	)		(27,729	)		(43,826	)		(40,202	)
Changes in estimates to pre-existing reserves		535			731			3,143			3,451
Reserve - end of period	$	160,326		$	137,491		$	160,326		$	137,491

7. DEBT

Total debt consists of the following (in thousands):


	As of
	June 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		350,000		(359	)		349,641		350,000		(628	)		349,372
5.875% Senior Notes due 2027		500,000		(3,063	)		496,937		500,000		(3,459	)		496,541
6.625% Senior Notes due 2027(1)		27,070		1,166			28,236		27,070		1,310			28,380
5.75% Senior Notes due 2028		450,000		(2,867	)		447,133		450,000		(3,183	)		446,817
5.125% Senior Notes due 2030		500,000		(4,490	)		495,510		500,000		(4,807	)		495,193
Senior Notes subtotal	$	1,827,070	$	(9,613	)	$	1,817,457	$	1,827,070	$	(10,767	)	$	1,816,303
Loans payable and other borrowings		326,216		—			326,216		361,486		—			361,486
$1 Billion Revolving Credit Facility(2)(3)		—		—			—		—		—			—
$100 Million Revolving Credit Facility(2)(3)		—		—			—		—		—			—
Mortgage warehouse borrowings		249,898		—			249,898		306,072		—			306,072
Total debt	$	2,403,184	$	(9,613	)	$	2,393,571	$	2,494,628	$	(10,767	)	$	2,483,861

(1)

Unamortized Debt Issuance (Cost)/Premium for such notes is reflective of fair value adjustments as a result of purchase accounting.

(2)

Unamortized debt issuance costs are included in the Prepaid expenses and other assets, net on the Condensed Consolidated Balance Sheets.

(3)

The $1 Billion Revolving Credit Facility Agreement together with the $100 Million Revolving Credit Facility Agreement, the “Revolving Credit Facilities”.

Debt Instruments

Excluding the debt instruments discussed below, the terms governing all other debt instruments listed in the table above have not substantially changed from the year ended December 31, 2022. For information regarding such instruments, refer to Note 8 - Debt to the Consolidated Financial Statements in our Annual Report. As of June 30, 2023, we were in compliance with all of the covenants in the debt instruments listed in the table above.

$1 Billion Revolving Credit Facility

Our $1 Billion Revolving Credit Facility has a maturity date of March 11, 2027. We had no outstanding borrowings under our $1 Billion Revolving Credit Facility as of June 30, 2023 and December 31, 2022.

As of June 30, 2023 and December 31, 2022, we had $3.3 million and $3.8 million, respectively, of unamortized debt issuance costs relating to our $1 Billion Revolving Credit Facility, which are included in Prepaid expenses and other assets, net, on the unaudited Condensed Consolidated Balance Sheets. As of June 30, 2023 and December 31, 2022, we had $71.9 million and $69.2 million, respectively, of utilized letters of credit, resulting in $928.1 million and $930.8 million, respectively, of availability under the $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.

TAYLOR MORRISON HOME CORPORATION 10-Q

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ITEM 1. FINANCIAL STATEMENTS

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 June 30, 2023, we were in compliance with all of the covenants under the $1 Billion Revolving Credit Facility.

Mortgage Warehouse Borrowings

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

As of June 30, 2023

Facility

Amount
Drawn

Facility
Amount

Interest
Rate

Expiration
Date

Collateral (1)

Warehouse A

51,735

60,000

Daily SOFR + 1.70%

on Demand

Mortgage Loans

Warehouse B(2)

18,446

75,000

BSBY 1M + 1.65%

on Demand

Mortgage Loans

Warehouse C

60,512

100,000

Term SOFR + 1.65%

on Demand

Mortgage Loans & Pledged Cash

Warehouse D(3)

57,835

70,000

Daily SOFR + 1.50%

September 6, 2023

Mortgage Loans

Warehouse E

61,370

70,000

Term SOFR + 1.60%

on Demand

Mortgage Loans

Total

249,898

375,000

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

(1)

The mortgage warehouse borrowings outstanding as of June 30, 2023 and December 31, 2022 were collateralized by $287.0 million and $346.4 million, respectively, of mortgage loans held for sale, which comprise the balance of mortgage loans held for sale, and approximately $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 will discontinue providing mortgage warehouse facility financing to the industry in general. However, the line will not be terminated until all loans are sold or transferred. We expect to replace the liquidity provided by Warehouse B by expanding the size of other facilities, and do not believe the termination of Warehouse B will have a significant impact on our liquidity or mortgage operations.

(3)

We intend on renewing this warehouse facility upon expiration.

Loans Payable and Other Borrowings

Loans payable and other borrowings as of June 30, 2023 and December 31, 2022 consist of project-level debt due to various land sellers and financial institutions for specific projects. Project-level debt is generally secured by the land that was acquired and the principal payments generally coincide with corresponding project lot closings or a principal reduction schedule. Loans payable bear interest at rates that ranged from 0% to 9% and 0% to 8% at each of June 30, 2023 and December 31, 2022, respectively. We impute interest for loans with no stated interest rates.

TAYLOR MORRISON HOME CORPORATION 10-Q

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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 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 June 30, 2023, when compared to December 31, 2022.

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


		June 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	$	287,001		$	287,001		$	346,364	$	346,364
IRLCs	3		(77	)		(77	)		2,386		2,386
MBSs	2		1,166			1,166			1,090		1,090
Mortgage warehouse borrowings	2		249,898			249,898			306,072		306,072
Loans payable and other borrowings	2		326,216			326,216			361,486		361,486
5.625% Senior Notes due 2024 (1)	2		349,641			347,375			349,372		347,375
5.875% Senior Notes due 2027 (1)	2		496,937			491,095			496,541		480,060
6.625% Senior Notes due 2027 (1)	2		28,236			26,778			28,380		26,123
5.75% Senior Notes due 2028 (1)	2		447,133			435,119			446,817		421,358
5.125% Senior Notes due 2030 (1)	2		495,510			461,745			495,193		434,330
Equity Security	1		460			460			460		460

(1)

Carrying value for 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.

Fair value measurements are used for inventories on a nonrecurring basis when events and circumstances indicate that their carrying value is not recoverable. The following table presents the fair value for our inventories measured at fair value on a nonrecurring basis:


(Dollars in thousands)	Level in Fair Value Hierarchy		As of December 31, 2022
Description:
Real estate inventories		3	$	48,360

As of June 30, 2023, the fair value for such inventories was not determined as there were no events and circumstances that indicated their carrying value was not recoverable.

9. INCOME TAXES

The effective tax rate for the three and six months ended June 30, 2023 was 25.6% and 24.5%, respectively, compared to 25.1% and 24.5%, respectively, for the same periods in 2022.

For the three months ended June 30, 2023 the effective tax rate differed from the U.S. federal statutory income tax rate primarily due to state income taxes, non-deductible executive compensation, excess tax benefits related to stock-based compensation, and amounts attributable to non-controlling interests in joint ventures.

TAYLOR MORRISON HOME CORPORATION 10-Q

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ITEM 1. FINANCIAL STATEMENTS

For the six months ended June 30, 2023, the effective tax rate differed from the U.S. federal statutory income tax rate primarily due to state income taxes, excess tax benefits related to stock-based compensation, non-deductible executive compensation, and special deductions and credits relating to homebuilding activities. The effective tax rate benefited from the extension of the federal §45L energy-efficient homes tax credits. The tax credit provisions were extended and modified by the Inflation Reduction Act ("IRA") enacted in August 2022 and applies to homes closed in 2022-2032.

For the three and six months ended June 30, 2022 the effective tax rate differed from the U.S. federal statutory income tax rate primarily due to state income taxes, non-deductible executive compensation, excess tax benefits related to stock-based compensation and special deductions and credits relating to prior homebuilding activities.

The IRA also created a 15% corporate alternative minimum tax. The corporate alternative minimum tax had no material impact on our consolidated financial statements for the three and six months ended June 30, 2023.

There were no unrecognized tax benefits as of June 30, 2023 or December 31, 2022.

10. STOCKHOLDERS’ EQUITY

Capital Stock

The Company’s authorized capital stock consists of 400,000,000 shares of common stock, par value $0.00001 per share (the “Common Stock”), and 50,000,000 shares of preferred stock, par value $0.00001 per share.

Stock Repurchase Program

The following table summarizes share repurchase activity for the periods presented:


	Three Months Ended June 30,					Six Months Ended June 30,
(Dollars in thousands)	2023		2022			2023			2022
Amount available for repurchase — beginning of period	$	275,570	$	172,384		$	279,138		$	230,413
Amount cancelled from expired or unused authorizations		—		(75,000	)		—			(75,000	)
Additional amount authorized for repurchase		—		500,000			—			500,000
Amount repurchased		—		(172,384	)		(3,568	)		(230,413	)
Amount available for repurchase — end of period	$	275,570	$	425,000		$	275,570		$	425,000

The Company repurchased no shares for the three months ended June 30, 2023 and 109,325 shares during the six months ended June 30, 2023. The Company repurchased 6,779,498 and 8,727,685 shares during the three and six months ended June 30, 2022, respectively.

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 six months ended June 30, 2023. 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 June 30, 2023, we had an aggregate of 5,123,541 shares of Common Stock available for future grants under the Plan.

TAYLOR MORRISON HOME CORPORATION 10-Q

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ITEM 1. FINANCIAL STATEMENTS

The following table provides the outstanding balance of RSUs, PRSUs, and stock options as of June 30, 2023:


	Restricted Stock Units (time and performance)				Stock Options
	Units		Weighted Average Grant Date Fair Value		Units		Weighted Average Exercise Price Per Share
Balance at June 30, 2023		1,489,690	$	30.20		2,429,418	$	26.50

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 Statements of Operations (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Restricted stock units (1)	$	4,212	$	4,137	$	10,887	$	9,918
Stock options		1,059		1,141		1,917		2,223
Total stock compensation	$	5,271	$	5,278	$	12,804	$	12,141

(1)

Includes compensation expense related to time-based RSUs and PRSUs.

At June 30, 2023 and December 31, 2022, the aggregate unrecognized value of all outstanding stock-based compensation awards was approximately $38.4 million and $27.1 million, respectively.

12. REPORTING SEGMENTS

We have multiple homebuilding operating components which are engaged in the business of acquiring and developing land, constructing homes, marketing and selling 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.

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

Segment information is as follows (in thousands):


	Three Months Ended June 30, 2023
	East			Central			West			Financial Services			Corporate and Unallocated(1)			Total
Total revenue	$	740,064		$	623,207		$	652,257		$	41,914		$	3,122		$	2,060,564
Gross margin		203,165			160,485			119,113			16,572			350			499,685
Selling, general and administrative expenses		(47,904	)		(45,390	)		(47,101	)		(91	)		(43,197	)		(183,683	)
Net income/(loss) from unconsolidated entities		—			100			(173	)		3,259			—			3,186
Interest and other (expense)/income, net (2)		(1,136	)		(1,520	)		(3,007	)		—			2,234			(3,429	)
Income/(loss) before income taxes	$	154,125		$	113,675		$	68,832		$	19,740		$	(40,613	)	$	315,759

(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.

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ITEM 1. FINANCIAL STATEMENTS


	Three Months Ended June 30, 2022
	East			Central			West			Financial Services		Corporate and Unallocated(1)			Total
Total revenue	$	635,862		$	457,512		$	832,274		$	35,471	$	33,904		$	1,995,023
Gross margin		174,535			117,356			222,687			13,988		12,914			541,480
Selling, general and administrative expenses		(44,589	)		(33,499	)		(42,374	)		—		(45,080	)		(165,542	)
Net (loss)/income from unconsolidated entities		—			(39	)		(5,793	)		2,195		—			(3,637	)
Interest and other income/(expense), net (2)		10,110			(1,076	)		(3,703	)		—		494			5,825
Gain on extinguishment of debt, net		—			—			—			—		13,471			13,471
Income/(loss) before income taxes	$	140,056		$	82,742		$	170,817		$	16,183	$	(18,201	)	$	391,597

(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.


	Six Months Ended June 30, 2023
	East			Central			West			Financial Services			Corporate and Unallocated(1)			Total
Total revenue	$	1,350,877		$	1,088,219		$	1,200,162		$	77,063		$	6,100		$	3,722,421
Gross margin		368,872			271,798			227,741			29,573			1,267			899,251
Selling, general and administrative expenses		(90,951	)		(82,346	)		(87,585	)		(91	)		(81,731	)		(342,704	)
Net income/(loss) from unconsolidated entities		—			19			(408	)		5,534			(30	)		5,115
Interest and other (expense)/income, net(2)		(2,348	)		(2,861	)		772			—			6,953			2,516
Income/(loss) before income taxes	$	275,573		$	186,610		$	140,520		$	35,016		$	(73,541	)	$	564,178

(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.

(3)


	Six Months Ended June 30, 2022
	East			Central			West			Financial Services		Corporate and Unallocated(1)			Total
Total revenue	$	1,160,983		$	828,247		$	1,602,484		$	70,670	$	35,763		$	3,698,147
Gross margin		300,226			191,364			404,218			24,973		13,827			934,608
Selling, general and administrative expenses		(84,915	)		(62,939	)		(85,893	)		—		(89,060	)		(322,807	)
Net income/(loss) from unconsolidated entities		—			46			(6,105	)		4,253		0			(1,806	)
Interest and other income/(expense), net(2)		9,678			(2,936	)		(5,669	)		—		(42	)		1,031
Gain on extinguishment of debt, net		—			—			—			—		13,471			13,471
Income/(loss) before income taxes	$	224,989		$	125,535		$	306,551		$	29,226	$	(61,804	)	$	624,497

(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 June 30, 2023
	East		Central		West		Financial Services		Corporate and Unallocated(1)		Total
Real estate inventory and land deposits	$	1,811,595	$	1,153,486	$	2,476,610	$	—	$	—	$	5,441,691
Investments in unconsolidated entities		49,359		114,867		82,656		5,283		54,100		306,265
Other assets		164,370		231,157		600,774		373,674		1,630,858		3,000,833
Total assets	$	2,025,324	$	1,499,510	$	3,160,040	$	378,957	$	1,684,958	$	8,748,789

(1)

Includes the assets from our Build-To-Rent and Urban Form operations.


	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

(1)

Includes the assets from our Build-To-Rent and Urban Form operations.

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ITEM 1. FINANCIAL STATEMENTS

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 billion as of June 30, 2023 and $1.2 billion as of December 31, 2022. Although significant development and construction activities have been completed related to these site improvements, the bonds are generally not released until all development and construction activities are completed. We do not believe that it is probable that any outstanding bonds as of June 30, 2023 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 property 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. At June 30, 2023 and December 31, 2022, the aggregate purchase price for land under these contracts was $1.4 billion and $1.5 billion, respectively.

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 June 30, 2023 and December 31, 2022, our legal accruals were $19.0 million and $20.6 million, respectively. We accrue for such matters based on the facts and circumstances specific to each matter and revise these estimates as the matters evolve. In such cases, there may exist an exposure to loss in excess of any amounts currently accrued. Predicting the ultimate resolution of the pending matters, the related timing, or the eventual loss associated with these matters is inherently difficult. Accordingly, the liability arising from the ultimate resolution of any matter may exceed the estimate reflected in the recorded reserves relating to such matter. While the outcome of such contingencies cannot be predicted with certainty, we do not believe that the resolution of such matters will have a material adverse impact on our results of operations, financial position, or cash flows.

On April 26, 2017, a class action complaint was filed in the Circuit Court of the Tenth Judicial Circuit in and for Polk County, Florida by Norman Gundel, William Mann, and Brenda Taylor against Avatar Properties, Inc. (an acquired AV Homes entity), generally alleging that our collection of club membership fees in connection with the use of one of our amenities in our East homebuilding segment violates various laws relating to homeowner associations and other Florida-specific laws. The class action complaint seeks an injunction to prohibit future collection of club membership fees. On November 2, 2021, the trial court determined that the club membership fees were improper and that plaintiffs were entitled to $35.0 million in fee reimbursements. We appealed the court’s ruling to the Sixth District Court of Appeal on November 29, 2021, and 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 since filed a notice to invoke the discretionary review of the Florida Supreme Court.

Plaintiffs have agreed to continue to pay club membership fees pending the outcome of the appeal 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.

While the ultimate outcome and the costs associated with litigation are inherently uncertain and difficult to predict, in evaluating the potential outcomes, we believe the more likely outcome is that we win the appeal to the Florida Supreme Court. This belief is based on our review 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.

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 $89.3 million and $100.2 million as of June 30, 2023 and December 31, 2022, respectively. We recorded lease expense of approximately $6.4 million and $13.5 million for the three and six months ended June 30, 2023, and $6.7 million and $13.6 million for the three and six months ended June 30, 2022, within General and administrative expenses on our unaudited Condensed Consolidated Statement of Operations.

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ITEM 1. FINANCIAL STATEMENTS

14. MORTGAGE HEDGING ACTIVITIES

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


	As of
	June 30, 2023					December 31, 2022
(Dollars in thousands)	Fair Value			Notional Amount (1)		Fair Value		Notional Amount (1)
IRLCs	$	(77	)	$	280,235	$	2,386	$	375,030
MBSs		1,166			478,887		1,090		504,000
Total	$	1,089				$	3,476

(1)

The notional amounts in the table above include mandatory and best effort mortgages, that have been locked and approved.

Total commitments to originate loans approximated $307.4 million and $419.6 million as of June 30, 2023 and December 31, 2022, respectively. This amount represents the commitments to originate loans that have been locked and approved by underwriting. The notional amounts in the table above includes mandatory and best effort loans that have been locked and approved by underwriting.

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

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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, 2022 (“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.

Business Overview

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. Our business as of June 30, 2023 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 June 30, 2023, we employed approximately 2,700 full-time equivalent persons. Of these, approximately 2,300 were engaged in corporate and homebuilding operations, and the remaining approximately 400 were engaged in financial services.

Factors Affecting Comparability of Results

For the three and six months ended June 30, 2022, we recognized a $13.7 million gain on land transfers relating to our unconsolidated joint ventures which is included in Other expense/(income), net on the Condensed Consolidated Statements of Operations. In addition, for the three and six months ended June 30, 2022, we recognized a $13.5 million net gain on extinguishment of debt relating to our partial redemption of the 6.625% Senior Notes due 2027 which is included in Gain on extinguishment of debt, net on our Condensed Consolidated Statements of Operations.

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

We did not recognize similar gains for the three or six months ended June 30, 2023.

Second Quarter 2023 Highlights (all comparisons are of the current quarter to the prior year quarter, unless otherwise indicated):

•

Closings increased 3% to 3,125 homes at an average price of $639,000, which generated home closings revenue of $2.0 billion.

•

Home closings gross margin declined 240 basis points year over year but increased 30 basis points sequentially to 24.2%.

•

Net sales orders increased 18% to 3,023, driven by a monthly absorption pace of 3.1 per community versus 2.6 a year ago.

•

Ended the quarter with approximately 72,000 homebuilding lots owned and controlled, representing 5.8 years of total supply, of which 3.3 years was owned.

•

Total liquidity reached an all-time high of $2.3 billion.

•

Homebuilding debt-to-capitalization declined to 29.7% on a gross basis and 15.4% net of $1.2 billion of unrestricted cash.

•

The Company’s credit rating was upgraded by Moody’s to Ba2 from Ba3 with a Stable outlook.

•

Book value per share increased 30% to $45.96.

Results of Operations

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


	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2023			2022			2023			2022
Statements of Operations Data:
Home closings revenue, net	$	1,996,747		$	1,883,020		$	3,609,342		$	3,527,429
Land closings revenue		12,628			36,816			17,148			52,426
Financial services revenue		41,914			35,471			77,063			70,670
Amenity and other revenue		9,275			39,716			18,868			47,622
Total revenue		2,060,564			1,995,023			3,722,421			3,698,147
Cost of home closings		1,514,237			1,381,610			2,741,750			2,646,584
Cost of land closings		12,703			24,204			17,048			38,568
Financial services expenses		25,342			21,483			47,490			45,697
Amenity and other expenses		8,597			26,246			16,882			32,690
Total cost of revenue		1,560,879			1,453,543			2,823,170			2,763,539
Gross margin		499,685			541,480			899,251			934,608
Sales, commissions and other marketing costs		113,034			96,135			205,794			185,258
General and administrative expenses		70,649			69,407			136,910			137,549
Net (income)/loss from unconsolidated entities		(3,186	)		3,637			(5,115	)		1,806
Interest (income)/expense, net		(5,120	)		5,189			(6,231	)		9,441
Other expense/(income), net		8,549			(11,014	)		3,715			(10,472	)
Gain on extinguishment of debt, net		—			(13,471	)		—			(13,471	)
Income before income taxes		315,759			391,597			564,178			624,497
Income tax provision		80,854			98,443			138,045			152,882
Net income before allocation to non-controlling interests		234,905			293,154			426,133			471,615
Net income attributable to non-controlling interests		(303	)		(2,167	)		(480	)		(3,925	)
Net income available to Taylor Morrison Home Corporation	$	234,602		$	290,987		$	425,653		$	467,690
Home closings gross margin		24.2	%		26.6	%		24.0	%		25.0	%
Sales, commissions and other marketing costs as a percentage of home closings revenue, net		5.7	%		5.1	%		5.7	%		5.3	%
General and administrative expenses as a percentage of home closings revenue, net		3.5	%		3.7	%		3.8	%		3.9	%

Non-GAAP Measures

In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”), we 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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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/losses on land transfers and extinguishment of debt, net, and in the case of adjusted net income and adjusted earnings per common share, the tax impact due to such items. EBITDA and Adjusted EBITDA are non-GAAP financial measures that measure performance by adjusting net income before allocation to non-controlling interests to exclude, as applicable, interest expense/(income), net, amortization of capitalized interest, income taxes, depreciation and amortization (EBITDA), non-cash compensation expense, if any, inventory impairment charges, impairment of investment in unconsolidated entities, pre-acquisition abandonment charges, gains/losses on land transfers and extinguishment of debt, net. Net homebuilding debt to capitalization ratio is a non-GAAP financial measure we calculate by dividing (i) total debt, plus unamortized debt issuance cost/(premium), net, and less mortgage warehouse borrowings, net of unrestricted cash and cash equivalents (“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.

A reconciliation of (i) adjusted net income and adjusted earnings per common share, (ii) adjusted income before income taxes and related margin, (iii) EBITDA and adjusted EBITDA and (iv) net homebuilding debt to capitalization ratio to the comparable GAAP measures is presented below. Because the company did not experience any material adjustments applicable to adjusted home closings gross margin during the periods presented that would cause such measure to differ from the comparable GAAP measure, such measure has not been separately presented herein.

Adjusted Net Income and Adjusted Earnings Per Common Share


	Three Months Ended June 30,
(Dollars in thousands, except per share data)	2023		2022
Net income available to TMHC	$	234,602	$	290,987
Gain on land transfers		—		(13,700	)
Gain on extinguishment of debt, net		—		(13,471	)
Tax impact due to above non-GAAP reconciling items		—		6,749
Adjusted net income	$	234,602	$	270,565
Basic weighted average number of shares		109,210		117,932
Adjusted earnings per common share - Basic	$	2.15	$	2.29
Diluted weighted average number of shares		110,856		118,931
Adjusted earnings per common share - Diluted	$	2.12	$	2.27

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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 June 30,
(Dollars in thousands)	2023			2022
Income before income taxes	$	315,759		$	391,597
Gain on land transfers		—			(13,700	)
Gain on extinguishment of debt, net		—			(13,471	)
Adjusted income before income taxes	$	315,759		$	364,426
Total revenue	$	2,060,564		$	1,995,023
Income before income taxes margin		15.3	%		19.6	%
Adjusted income before income taxes margin		15.3	%		18.3	%

EBITDA and Adjusted EBITDA Reconciliation


	Three Months Ended June 30,
(Dollars in thousands)	2023			2022
Net income before allocation to non-controlling interests	$	234,905		$	293,154
Interest (income)/expense, net		(5,120	)		5,189
Amortization of capitalized interest		37,352			33,420
Income tax provision		80,854			98,443
Depreciation and amortization		1,540			1,442
EBITDA	$	349,531		$	431,648
Non-cash compensation expense		5,271			5,278
Gain on land transfers		—			(13,700	)
Gain on extinguishment of debt, net		—			(13,471	)
Adjusted EBITDA	$	354,802		$	409,755
Total revenue	$	2,060,564		$	1,995,023
Net income before allocation to non-controlling interests as a percentage of total revenue		11.4	%		14.7	%
EBITDA as a percentage of total revenue		17.0	%		21.6	%
Adjusted EBITDA as a percentage of total revenue		17.2	%		20.5	%

Net Homebuilding Debt to Capitalization Ratio Reconciliation


(Dollars in thousands)	As of June 30, 2023			As of March 31, 2023			As of June 30, 2022
Total debt	$	2,393,571		$	2,301,878		$	2,950,744
Plus: unamortized debt issuance cost, net		9,613			10,193			11,891
Less: mortgage warehouse borrowings	$	(249,898	)		(146,334	)		(179,555	)
Total homebuilding debt	$	2,153,286		$	2,165,737		$	2,783,080
Total equity		5,095,313			4,846,546			4,193,895
Total capitalization	$	7,248,599		$	7,012,283		$	6,976,975
Total homebuilding debt to capitalization ratio		29.7	%		30.9	%		39.9	%
Total homebuilding debt	$	2,153,286		$	2,165,737		$	2,783,080
Less: cash and cash equivalents		(1,227,264	)		(877,717	)		(378,340	)
Net homebuilding debt	$	926,022		$	1,288,020		$	2,404,740
Total equity		5,095,313			4,846,546			4,193,895
Total capitalization	$	6,021,335		$	6,134,566		$	6,598,635
Net homebuilding debt to capitalization ratio		15.4	%		21.0	%		36.4	%

Three and six months ended June 30, 2023 compared to three and six months ended June 30, 2022

Our results continue to be impacted by various macroeconomic conditions. Demand for housing increased significantly beginning in the second half of 2020 and, simultaneously, the industry experienced significant labor and supply shortages. As a result, we saw market price appreciation across many of our markets as well as an increase in housing costs and extended build cycle times. At a macro level, inflation continued to rise and the Federal Reserve took action to slow inflation by increasing interest rates. We believe the increase in mortgage interest rates created affordability constraints for some consumers and reduced overall consumer confidence. While the three and six months ended June 30, 2022 benefited from the increased housing demand and significant price appreciation, the results in more recent quarters were negatively impacted. During the second half of 2022, our net sales orders began to slow which also negatively impacted sales order backlog and our cancellations increased. In response, we began to adjust pricing, primarily by offering finance incentives, as well as home discounts and other pricing reductions. These pricing adjustments helped to drive an increase in sales orders and a gradual normalization in cancellations beginning in 2023. Operational information related to each period is presented below:

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

Ending Active Selling Communities


	As of June 30,				Change
	2023		2022
East		103		117		(12.0	)%
Central		103		104		(1.0	)%
West		121		102		18.6	%
Total		327		323		1.2	%

The total ending active selling communities increased by 1.2% at June 30, 2023 compared to June 30, 2022. The increase in the West was due to several master planned community openings, which was partially offset by community closeouts in the East region.

Net Sales Orders


	Three Months Ended June 30,
	Net Sales Orders (1)							Sales Value (1)							Average Selling Price
(Dollars in thousands)	2023		2022		Change			2023		2022		Change			2023		2022		Change
East		1,047		1,121		(6.6	)%	$	582,944	$	730,495		(20.2	)%	$	557	$	652		(14.6	)%
Central		808		642		25.9	%		489,142		443,146		10.4	%		605		690		(12.3	)%
West		1,168		791		47.7	%		782,046		610,932		28.0	%		670		772		(13.2	)%
Total		3,023		2,554		18.4	%	$	1,854,132	$	1,784,573		3.9	%	$	613	$	699		(12.3	)%


	Six Months Ended June 30,
	Net Sales Orders (1)							Sales Value (1)							Average Selling Price
(Dollars in thousands)	2023		2022		Change			2023		2022		Change			2023		2022		Change
East		2,126		2,148		(1.0	)%	$	1,227,463	$	1,336,705		(8.2	)%	$	577	$	622		(7.2	)%
Central		1,482		1,529		(3.1	)%		873,972		1,026,426		(14.9	)%		590		671		(12.1	)%
West		2,269		1,931		17.5	%		1,538,390		1,506,663		2.1	%		678		780		(13.1	)%
Total		5,877		5,608		4.8	%	$	3,639,825	$	3,869,794		(5.9	)%	$	619	$	690		(10.3	)%

(1)

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

Net sales orders increased 18.4% for the three months ended June 30, 2023 and 4.8% for the six months ended June 30, 2023, compared to the same periods in the prior year, respectively. The increase in net sales orders was primarily driven by our West region as a result of new community openings. Average selling prices decreased for both the three and six months ended June 30, 2023 compared to the same periods in the prior year as a result of an increase in our pricing incentives and/or discounts in certain markets. Total sales value increased 3.9% for the three months ended June 30, 2023 compared to the same period in the prior year due to the increase in net sales orders more than offsetting the decrease in the average selling price; however for the six months ended June 30, 2023, total sales value decreased by 5.9% as the decrease in average selling prices more than offset the increase in net sales orders.

Sales Order Cancellations


	Cancellation Rate(1)
	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
East		7.3	%		7.8	%		8.5	%		6.4	%
Central		15.8	%		13.2	%		17.1	%		9.5	%
West		11.3	%		12.9	%		13.6	%		9.8	%
Total Company		11.2	%		10.8	%		12.8	%		8.5	%

(1)

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

The total company cancellation rate increased for the three and six months ended June 30, 2023 compared to the same periods in the prior year. We believe cancellations have increased over the past several quarters due to increases in mortgage interest rates and buyer apprehensions given elevated macroeconomic uncertainty and affordability constraints for some consumers.

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

Sales Order Backlog


	As of June 30,
	Sold Homes in Backlog (1)							Sales Value							Average Selling Price
(Dollars in thousands)	2023		2022		Change			2023		2022		Change			2023		2022		Change
East		2,477		3,333		(25.7	)%	$	1,626,635	$	2,119,850		(23.3	)%	$	657	$	636		3.3	%
Central		1,532		2,874		(46.7	)%		1,009,441		1,948,678		(48.2	)%		659		678		(2.8	)%
West		2,156		2,715		(20.6	)%		1,458,395		2,030,972		(28.2	)%		676		748		(9.6	)%
Total		6,165		8,922		(30.9	)%	$	4,094,471	$	6,099,500		(32.9	)%	$	664	$	684		(2.9	)%

(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 30.9% and 32.9% at June 30, 2023 compared to June 30, 2022, respectively. The sold homes in backlog at June 30, 2022 reflected the strong selling market from 2021 and first half of 2022 along with extended cycle times. The sold homes in backlog at June 30, 2023 reflected home closings outpacing net sales orders for the trailing twelve months primarily as a result of improved cycle times.

Home Closings Revenue


	Three Months Ended June 30,
	Homes Closed							Home Closings Revenue, Net							Average Selling Price
(Dollars in thousands)	2023		2022		Change			2023		2022		Change			2023		2022		Change
East		1,228		1,097		11.9	%	$	732,279	$	613,176		19.4	%	$	596	$	559		6.6	%
Central		936		778		20.3	%		612,630		457,006		34.1	%		655		587		11.6	%
West		961		1,157		(16.9	)%		651,838		812,838		(19.8	)%		678		703		(3.6	)%
Total		3,125		3,032		3.1	%	$	1,996,747	$	1,883,020		6.0	%	$	639	$	621		2.9	%


	Six Months Ended June 30,
	Homes Closed							Home Closings Revenue, Net							Average Selling Price
(Dollars in thousands)	2023		2022		Change			2023		2022		Change			2023		2022		Change
East		2,232		2,034		9.7	%	$	1,333,890	$	1,119,172		19.2	%	$	598	$	550		8.7	%
Central		1,667		1,442		15.6	%		1,076,025		825,582		30.3	%		645		573		12.6	%
West		1,767		2,324		(24.0	)%		1,199,427		1,582,675		(24.2	)%		679		681		(0.3	)%
Total		5,666		5,800		(2.3	)%	$	3,609,342	$	3,527,429		2.3	%	$	637	$	608		4.8	%

The number of homes closed and home closings revenue, net increased by 3.1% and 6.0% for the three months ended June 30, 2023, compared to the same period in the prior year, respectively. The increases are primarily driven by the East and Central regions which experienced longer cycle times during 2022, moving closings to the first half of 2023. Several markets in these regions also experienced market appreciation in the prior year which increased the average selling price and home closings revenue, net.

The number of homes closed decreased by 2.3% for the six months ended June 30, 2023 compared to the same period in the prior year, primarily due to less sales order backlog and an increase in cancellations in the current year period compared to the prior year period. Average selling price increased by 4.8% as a result of sales price appreciation which more than offset the impact of the decrease of homes closed, resulting in an overall increase in home closing revenue, net of 2.3% for the six months ended June 30, 2023, compared to the same period in the prior year.

Land Closings Revenue


	Three Months Ended June 30,
(Dollars in thousands)	2023		2022		Change
East	$	2,051	$	17,310	$	(15,259	)
Central		10,577		506		10,071
West		—		19,000		(19,000	)
Total	$	12,628	$	36,816	$	(24,188	)


	Six Months Ended June 30,
(Dollars in thousands)	2023		2022		Change
East	$	4,954	$	30,751	$	(25,797	)
Central		12,194		2,665		9,529
West		—		19,010		(19,010	)
Total	$	17,148	$	52,426	$	(35,278	)

TAYLOR MORRISON HOME CORPORATION 10-Q

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

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. The prior year had certain large non-routine land transactions, which were not experienced during 2023. The land closings revenue in the East for the three and six months ended June 30, 2022 was due to the sale of certain commercial assets as well as the sale of residential lots in our Florida market. The land closing revenue in the West for the three and six months ended June 30, 2022 was due to the sale of a certain project in our Oregon market.

Amenity and Other Revenue


	Three Months Ended June 30,
(Dollars in thousands)	2023		2022		Change
East	$	5,734	$	5,376	$	358
Central		—		—		—
West		419		436		(17	)
Corporate		3,122		33,904		(30,782	)
Total	$	9,275	$	39,716	$	(30,441	)


	Six Months Ended June 30,
(Dollars in thousands)	2023		2022		Change
East	$	12,033	$	11,060	$	973
Central		—		—		—
West		735		799		(64	)
Corporate		6,100		35,763		(29,663	)
Total	$	18,868	$	47,622	$	(28,754	)

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 three and six months ended June 30, 2022 is due to the sale of an asset relating to our Urban Form operations.

Home Closings Gross Margin


	Three Months Ended June 30,
	East						Central						West						Consolidated
(Dollars in thousands)	2023			2022			2023			2022			2023			2022			2023			2022
Home closings revenue, net	$	732,279		$	613,176		$	612,630		$	457,006		$	651,838		$	812,838		$	1,996,747		$	1,883,020
Cost of home closings		528,792			445,587			452,799			339,768			532,646			596,255			1,514,237			1,381,610
Home closings gross margin	$	203,487		$	167,589		$	159,831		$	117,238		$	119,192		$	216,583		$	482,510		$	501,410
Home closings gross margin %		27.8	%		27.3	%		26.1	%		25.7	%		18.3	%		26.6	%		24.2	%		26.6	%


	Six Months Ended June 30,
	East						Central						West						Consolidated
(Dollars in thousands)	2023			2022			2023			2022			2023			2022			2023			2022
Home closings revenue, net	$	1,333,890		$	1,119,172		$	1,076,025		$	825,582		$	1,199,427		$	1,582,675		$	3,609,342		$	3,527,429
Cost of home closings		965,237			827,534			805,028			634,825			971,485			1,184,225			2,741,750			2,646,584
Home closings gross margin	$	368,653		$	291,638		$	270,997		$	190,757		$	227,942		$	398,450		$	867,592		$	880,845
Home closings gross margin %		27.6	%		26.1	%		25.2	%		23.1	%		19.0	%		25.2	%		24.0	%		25.0	%

Consolidated home closings gross margin decreased to 24.2% from 26.6% for the three months ended June 30, 2023, compared to the same period in the prior year and decreased to 24.0% from 25.0% for the six months ended June 30, 2023 compared to the same period in the prior year. The West region experienced a decrease in home closings gross margin for both the three and six month periods ended June 30, 2023 compared to the same periods in the prior year as a result of pricing incentives and discounts above the company average. These pricing incentives and discounts were partially offset by limited price appreciation across several divisions in the region. The increases in home closings gross margin in the East and Central regions for both the three and six month periods ended June 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).

TAYLOR MORRISON HOME CORPORATION 10-Q

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

Financial Services

The following is a summary for the periods presented of our financial services income before income taxes as well as supplemental data:


	Three Months Ended June 30,							Six Months Ended June 30,
(Dollars in thousands)	2023		2022		Change			2023		2022		Change
Mortgage services revenue	$	30,945	$	25,786		20.0	%	$	56,548	$	53,500		5.7	%
Title services and other revenues		10,969		9,685		13.3	%		20,515		17,170		19.5	%
Total financial services revenue		41,914		35,471		18.2	%		77,063		70,670		9.0	%
Financial services net income from unconsolidated entities		3,259		2,195		48.5	%		5,534		4,253		30.1	%
Total revenue		45,173		37,666		19.9	%		82,597		74,923		10.2	%
Financial services expenses		25,342		21,483		18.0	%		47,490		45,697		3.9	%
Financial services income before income taxes	$	19,831	$	16,183		22.5	%	$	35,107	$	29,226		20.1	%
Total originations:
Number of Loans		2,018		1,595		26.5	%		3,549		3,177		11.7	%
Principal	$	968,590	$	718,133		34.9	%	$	1,686,869	$	1,406,799		19.9	%


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Supplemental data:
Average FICO score		753			755			754			754
Funded origination breakdown:
Government (FHA,VA,USDA)		20	%		17	%		18	%		17	%
Other agency		75	%		77	%		77	%		78	%
Total agency		95	%		94	%		95	%		95	%
Non-agency		5	%		6	%		5	%		5	%
Total funded originations		100	%		100	%		100	%		100	%

Total financial services revenue increased by 18.2% and 9.0% for the three and six months ended June 30, 2023 compared to the same periods in the prior year, respectively, primarily due to an increase in mortgage originations as well as an increase in the average amount borrowed per loan.

Sales, Commissions and Other Marketing Costs

Sales, commissions and other marketing costs, as a percentage of home closings revenue, net, increased to 5.7% from 5.1% and to 5.7% from 5.3% for the three and six months ended June 30, 2023 compared to the same periods in the prior year. The increase was primarily due to an increase in external commissions costs as well as increased advertising costs in an effort to generate sales interest.

General and Administrative Expenses

General and administrative expenses as a percentage of home closings revenue, net, decreased to 3.5% from 3.7% and to 3.8% from 3.9% for the three and six months ended June 30, 2023 compared to the same periods in the prior year. The decrease was primarily due to the increase in home closings revenue, net, while general and administrative expenses remained relatively consistent due to operational efficiencies.

Net (Income)/Loss from Unconsolidated Entities

Net income from unconsolidated entities was $3.2 million and $5.1 million for the three and six months ended June 30, 2023, respectively, while net loss from unconsolidated entities was $3.6 million and $1.8 million for the three and six months ended June 30, 2022, respectively. Our joint ventures relating to our financial services segment experienced an increase in income for the six months ended June 30, 2023 compared to the same period in the prior year. In addition, the three and six months ended June 30, 2022 included impairment for one of our unconsolidated joint ventures.

TAYLOR MORRISON HOME CORPORATION 10-Q

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

Interest (Income)/Expense, Net

Interest income, net was $5.1 million and $6.2 million for the three and six months ended June 30, 2023, respectively, and interest expense, net was $5.2 million and $9.4 million for the three and six months ended June 30, 2022 . The net interest income for the three and six months ended June 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 $8.5 million and $3.7 million for the three and six months ended June 30, 2023, respectively, and other income, net was $11.0 million and $10.5 million for the three and six months ended June 30, 2022, respectively. The net expense in the current period was primarily related to an increase in self-insurance reserves for the first half of the year. For the three and six months ended June 30, 2022, net other income was primarily related to gains on land transferred at fair value as part of investments in two joint ventures with third parties.

Gain on Extinguishment of Debt, Net

Gain on extinguishment of debt, net was $13.5 million for the three and six months ended June 30, 2022. This gain is due to the tender offer and purchase of our 6.625% Senior Notes due 2027 in June 2022. We had no such gains for the three and six months ended June 30, 2023.

Income Tax Provision

The effective tax rate for the three and six months ended June 30, 2023 was 25.6% and 24.5%, respectively, compared to 25.1% and 24.5%, respectively, for the same periods in 2022.

Net Income

Net income and diluted earnings per share for the three months ended June 30, 2023 was $234.6 million and $2.12, respectively. Net income and diluted earnings per share for the three months ended June 30, 2022 was $291.0 million and $2.45, 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 marketing expenses and other expenses.

TAYLOR MORRISON HOME CORPORATION 10-Q

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

Liquidity and Capital Resources

Liquidity

We finance our operations through the following:


• Cash generated from operations;		• Mortgage warehouse facilities;
• Borrowings under our Revolving Credit Facilities;		• Project-level real estate financing (including non-recourse loans, land banking, and joint ventures); and
• Our various series of senior notes;		• Performance, payment and completion surety bonds, and letters of credit.

Cash 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.

During the first half of 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 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)	June 30, 2023			December 31, 2022
Total cash and cash equivalents, excluding restricted cash	$	1,227,264		$	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		(71,877	)		(69,249	)
Revolving Credit Facilities availability		1,028,123			1,030,751
Total liquidity	$	2,255,387		$	1,755,239

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 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.

Cash Flow Activities

Operating Cash Flow Activities

Our net cash provided by operating activities was $607.1 million for the six months ended June 30, 2023, compared to $195.5 million for the six months ended June 30, 2022. The increase in cash provided by operating activities is primarily driven by a decrease in spend on real estate inventory and land deposits partially offset by reduced cash provided by mortgages held for sale.

Investing Cash Flow Activities

Net cash used in investing activities was $44.8 million for the six months ended June 30, 2023, compared to net cash provided by investing activities of $4.2 million for the six months ended June 30, 2022. The increase in cash used in investing activities was primarily due to a net investment of $23.8 million of capital into unconsolidated entities in the six months ended June 30, 2023 compared to a net distribution of $17.0 million of capital from unconsolidated entities in the prior year period.

TAYLOR MORRISON HOME CORPORATION 10-Q

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

Financing Cash Flow Activities

Net cash used in financing activities was $60.9 million for the six months ended June 30, 2023, compared to $656.7 million for the six months ended June 30, 2022. The decrease in cash used in financing activities was primarily due to lower net repayments on our Revolving Credit Facilities and mortgage warehouse facilities during the six months ended June 30, 2023 compared to the same period in the prior year as well as repayment of senior notes during the six months ended June 30, 2022 combined with significantly lower repurchases of Common Stock during the six months ended June 30, 2023 compared to the same period in the prior year.

Debt Instruments

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 Statements included in this quarterly report.

Off-Balance Sheet Arrangements as of June 30, 2023

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 six months ended June 30, 2023 and 2022, total cash contributions to unconsolidated joint ventures were $24.1 million and $69.6 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 exposure with respect to such contracts are generally limited to the forfeiture of the related non-refundable cash deposits and/or letters of credit provided to obtain the options. At June 30, 2023 and December 31, 2022, the aggregate purchase price for land under these contracts was $1.4 billion and $1.5 billion, respectively.

Seasonality

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


• the timing of the introduction and start of construction of new projects;		• mix of homes closed;
• the timing of sales;		• construction timetables;
• the timing of closings of homes, lots and parcels;		• the cost and availability of materials and labor; and
• the timing of receipt of regulatory approvals for development and construction;		• weather conditions in the markets in which we build.

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


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

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

Inflation

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

Critical Accounting Policies and Estimates

There have been no significant changes to our critical accounting policies and estimates during the six months ended June 30, 2023 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

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our operations are interest rate sensitive. We monitor our exposure to changes in interest rates and incur both fixed rate and variable rate debt. At June 30, 2023, approximately 90% of our debt was fixed rate and 10% was variable rate. None of our market sensitive instruments were entered into for trading purposes. For fixed rate debt, changes in interest rates generally affect the fair value of the debt instrument, but not our earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not impact the fair value of the debt instrument but may affect our future earnings and cash flows, and may also impact our variable rate borrowing costs, which principally relate to any borrowings under our Revolving Credit Facilities and to borrowings by TMHF under its various mortgage warehouse facilities. As of June 30, 2023, 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 $128.1 million of additional availability for letters of credit under our $1 Billion Revolving Credit Facility as of June 30, 2023 (giving effect to $71.9 million of letters of credit outstanding as of such date).

The London Interbank Offered Rate (“LIBOR”) was the primary basis for determining interest payments on borrowings under each of our mortgage warehouse facilities and our Revolving Credit Facilities. On March 5, 2021, ICE Benchmark Administration (“IBA”) confirmed it would cease publication of Overnight, 1, 3, 6 and 12 month US Dollar LIBOR settings immediately following the LIBOR publication on June 30, 2023. The Alternative Reference Rates Committee, which was convened by the Federal Reserve Board and the New York Federal Reserve, has identified the Secured Overnight Financing Rate (“SOFR”) as the recommended risk-free alternative rate for US Dollar LIBOR. In response to the planned discontinuation of LIBOR, our warehouse facilities agreements for facilities A, C, D, and E as well as our Revolving Credit Facilities have been restructured to begin using SOFR as the basis for determining interest rates. The agreement for warehouse facility B was restructured to use the Bloomberg Short-Term Bank Yield Index (“BSBY”) as the primary basis for determining interest payments. The BSBY index is a proprietary index calculated daily as a credit sensitive supplement to manage the spread between funding costs and earned interest on loans. At this time, it is not possible to predict the full effect that the anticipated discontinuance of LIBOR, or the establishment of alternative reference rates such as SOFR and BSBY, will have on us or our borrowing costs. SOFR and BSBY are relatively new reference rates and their composition and characteristics are not the same as LIBOR. Given the limited history of these rates and potential volatility as compared to other benchmark or market rates, the future performance of these rates cannot be predicted based on historical performance. The consequences of using SOFR and BSBY could include an increase in the cost of our variable rate indebtedness.

We are required to offer to purchase all of our outstanding senior unsecured notes, as described in Note 7- Debt to the Unaudited Condensed Consolidated Financial Statements included in this quarterly report, at 101% of their aggregate principal amount plus accrued and unpaid interest upon the occurrence of specified change of control events. Other than in those circumstances, we do not have an obligation to prepay fixed rate debt prior to maturity and, as a result, we would not expect interest rate risk and changes in fair value to have a significant impact on our cash flows related to our fixed rate debt until such time as we are required to refinance, repurchase or repay such debt.

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 June 30, 2023. 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	$	69.3		$	479.1		$	71.5		$	35.3		$	540.6		$	957.5		$	2,153.3		$	2,088.3
Weighted average interest rate(1)		2.7	%		4.8	%		2.7	%		2.7	%		5.5	%		5.6	%		5.2	%
Variable Rate Debt(2)	$	249.9		$	—		$	—		$	—		$	—		$	—		$	249.9		$	249.9
Weighted average interest rate		6.7	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%		6.7	%

(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 June 30, 2023, and holding the variable rate debt balance constant, each 1% increase in interest rates would increase the interest incurred by us by approximately $2.5 million per year.

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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’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, as of June 30, 2023 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 June 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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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.

ITEM 1A. RISK FACTORS

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

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PART II — OTHER INFORMATION

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

On May 31, 2022, 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. As of June 30, 2023, we had approximately $275.6 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. We did not repurchase any of our Common Stock during the three months ended June 30, 2023.

Any stock repurchase program is subject to prevailing market conditions and other considerations, including our liquidity, the terms of our debt instruments, statutory requirements, planned land investment and development spending, acquisition and other investment opportunities and ongoing capital requirements. The program does not require us to repurchase any specific number of shares of Common Stock, and the program may be suspended, extended, modified or discontinued at any time.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

As previously disclosed, Taylor Morrison Home Corporation (the “Company”) appointed Curt VanHyfte as the Company’s Interim Chief Financial Officer effective May 1, 2023. On July 24, 2023, the Board of Directors of the Company (the “Board”) approved Mr. VanHyfte’s appointment as Executive Vice President and Chief Financial Officer, on a permanent basis, effective immediately.

Mr. VanHyfte, 55, joined the Company in connection with the Company’s acquisition of William Lyon Homes (“WLH”) in February 2020, and has served as Interim Chief Financial Officer since the May 2023. Prior to serving as Interim Chief Financial Officer, Mr. VanHyfte served as the Company’s West Area President since November 2020. In such role, he was responsible for overseeing and driving operational excellence and growth for Western markets, including those in Arizona, California, Washington and Oregon. While at WLH from 2019 to 2020, Mr. VanHyfte served as Division President of the Arizona division, where he led overall homebuilding operations in the Phoenix market. Prior to joining WLH, Mr. VanHyfte served at M/I Homes, Inc. as Area President, Chicago Division, responsible for homebuilding operations in the area. During his nearly 30-year career in homebuilding, he has held division, regional and national roles in finance and spent time as a Division President in Chicago, St. Louis, Houston and Phoenix for several homebuilders. Mr. VanHyfte earned a B.S. in accounting with a minor in business management from St. John’s University in Minnesota.

In connection with Mr. VanHyfte’s appointment, the Compensation Committee of the Board of Directors (the “Committee”) approved an Amended and Restated Employment Agreement for Mr. VanHyfte, dated as of July 24, 2023 and effective as of such date (the “Employment Agreement”). Pursuant to the terms of the Employment Agreement, Mr. VanHyfte employment with the Company will continue in effect until terminated by the Company or by Mr. VanHyfte, and Mr. VanHyfte will be entitled to receive (i) an annual base salary of $550,000, retroactive to May 1, 2023; (ii) a target annual cash bonus award equal to 150% of Mr. VanHyfte’s base salary pursuant the Company’s annual bonus plan; and (iii) equity-based compensation awards under the Taylor Morrison Home Corporation 2013 Omnibus Equity Award Plan (the “2013 Omnibus Plan”), as determined by the Board or Committee in its sole discretion.

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PART II — OTHER INFORMATION

In addition, in connection with his appointment as Chief Financial Officer, the Committee granted the following equity awards to Mr. VanHyfte, effective July 31, 2023: (i) stock options with a grant date fair value of $48,000 and an exercise price per share equal to the closing price of a share of Common Stock on the grant date, which shall vest over a four-year period, with approximately 25% of the stock options granted vesting on each of the first, second, third, and fourth anniversaries of the grant date, subject to continued employment through the applicable vesting date; (ii) service-based restricted stock units (“RSUs”) with a grant date fair value of $96,000, which shall vest over a three-year period, with approximately 33 1/3% of the RSUs granted vesting on each of the first, second and third anniversaries of the grant date, subject to continued employment through the applicable vesting date; and (iii) performance-based restricted stock units with a grant date fair value of $96,000, 50% of which shall vest based on the Company’s return on net assets and a relative TSR modifier and 50% of which vest based on the Company’s revenue and a relative TSR modifier, in each case, as measured over a three-year performance period ending December 31, 2025.

Under the Employment Agreement, upon a termination of Mr. VanHyfte’s employment without “cause” or a resignation for “good reason” (each as defined in the Employment Agreement and referred to herein as a “Qualifying Termination”), in addition to receiving his unpaid base salary, benefits, vacation pay, reimbursable expenses, and annual bonus earned but not paid in respect of a prior year, Mr. VanHyfte would be entitled to receive, subject to execution of a release of claims, (a) severance payments equal to a multiple of 1.5 times the sum of his base salary and the higher of his target bonus or average annual bonus paid in or payable in respect of (whichever results in a higher average) the three completed calendar years that preceded the date of termination payable over an 18-month period, (b) a 12-month COBRA subsidy, (c) a prorated annual bonus for the year of termination, based on actual performance, and (d) up to 12 months of outplacement assistance. However, if such termination occurs at any time (x) following the execution of a definitive agreement with a third party that, if consummated, would result in a “change in control” (as defined in the 2013 Omnibus Plan), but before such transaction is consummated (and subject to such consummation) or (y) within 24 months following a “change in control” (each, a “CIC Qualifying Termination”) then Mr. VanHyfte would be entitled to (i) a lump sum payment equal to a multiple of 2.0 times the sum of his base salary and the higher of his target bonus or average annual bonus paid in or payable in respect of (whichever results in a higher average) the three completed calendar years that preceded the date of termination; and (ii) a prorated portion of the annual profit sharing program bonus payable with respect to the calendar year in which such termination occurs, determined on a daily basis, based solely on the actual level of achievement of the applicable performance goals for such year, and payable if and when annual profit sharing program bonuses are paid to other senior executives of the Company with respect to such year.

With respect to equity awards, the Employment Agreement provides that Mr. VanHyfte’s time-based equity awards will vest in full upon a CIC Qualifying Termination or upon Mr. VanHyfte’s death or disability. For equity awards subject to a performance condition, upon a change in control, all performance goals applicable to awards that vest based on both the completion of a period of service and the satisfaction of a performance condition will be deemed achieved at the “target” level, and Mr. VanHyfte will be eligible to vest in the performance award on the last date of the applicable service period, subject to his continued employment. However, if Mr. VanHyfte experiences a CIC Qualifying Termination, then he will vest in the performance award on the date of termination (or the date of the change in control, if later). In the event of Mr. VanHyfte’s death or disability, then Mr. VanHyfte (or his beneficiary) will remain eligible to vest in a pro-rated portion of his unvested performance awards based on a fraction, the numerator of which is the number of completed months in the applicable performance period at the time of such termination and the denominator of which is the number of months in the applicable performance period, multiplied by the number of shares of common stock which are finally determined to be earned and subject to the performance award following the completion of the performance period. The portion of each performance award eligible to vest shall be based on actual results for the applicable performance period and shall be determined in accordance with the terms of the applicable award agreement(s).

The Employment Agreement includes restrictive covenants pertaining to confidential information, nondisparagement and intellectual property, as well as covenants relating to non-solicitation of employees and non-solicitation of customers and suppliers during the term of employment and surviving for two years following the end of the term of employment.

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ITEM 6. EXHIBITS


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*†		Form of Omnibus Amendment to Restricted Stock Unit Agreements and Employee Nonqualified Option Award Agreements under the Taylor Morrison Home Corporation 2013 Omnibus Equity Award Plan
10.2*†		Amended and Restated Employment Agreement, dated April 25, 2023, between Taylor Morrison, Inc. and Louis Steffens
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.
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 June 30, 2023, formatted in inline XBRL (and contained in Exhibit 101).

* Filed herewith

** Furnished herewith

† Management contract or compensatory plan in which directors and/or executive officers are eligible to participate.

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

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		TAYLOR MORRISON HOME CORPORATION
		Registrant
DATE:	July 26, 2023
		/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
		Chief Accounting Officer (Principal Accounting Officer)

TAYLOR MORRISON HOME CORPORATION 10-Q

EX-10.1 2 tmhc-ex10_1.htm EX-10.1 EX-10.1

Exhibit 10.1

FORM OF
OMNIBUS AMENDMENT TO RESTRICTED STOCK UNIT AGREEMENTS AND EMPLOYEE NONQUALIFIED OPTION AWARD AGREEMENTS UNDER THE TAYLOR MORRISON HOME CORPORATION 2013 OMNIBUS EQUITY AWARD PLAN (“AMENDMENT”)

WHEREAS, Taylor Morrison Home Corporation (the “Company”), a Delaware corporation, previously granted to certain equity award recipients (each, a “Participant”) awards of (i) restricted stock units and/or (ii) stock options relating to the Company’s Common Stock under the Company’s 2013 Omnibus Equity Award Plan (as amended, restated, or modified from time to time, the “Plan”);

WHEREAS, the Compensation Committee of the Company’s Board of Directors (the “Committee”) has the authority to establish the terms and conditions of awards under the Plan, and to make certain amendments with respect thereto;

WHEREAS, the Participants currently outstanding agreements with respect to previous awards of restricted stock units and stock options under the Plan include (i) each agreement covering an award of restricted stock units that vest based on both the completion of a period of service and the satisfaction of a performance condition (each such award, a “Performance-Based RSU” and each such agreement, a “Performance-Based RSU Agreement”), (ii) each agreement covering an award of restricted stock units that vest based on the completion of a period of service, only (each such award, a “Time-Based RSU” and each such agreement, a “Time-Based RSU Agreement”), and (iii) each agreement covering an award of stock options that vest based on the completion of a period of service (each such award, a “Time-Based Option” and each such agreement, a “Time- Based Option Agreement,” and together with the Performance-Based RSU Agreements and Time-Based RSU Agreements, the “Award Agreements”);

WHEREAS, the Award Agreements currently provide for certain vesting enhancements upon the occurrence of a Participant’s “Retirement” as defined therein;

WHEREAS, the Committee has determined to amend the definition of “Retirement” under the Award Agreements to include both voluntary and involuntary terminations of employment that meet the other requirements of such definition; and

WHEREAS, capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Plan or the Award Agreements, as applicable.

NOW, THEREFORE, effective as of May 25, 2023 (the “Amendment Date”), the Company hereby amends Award Agreements as follows:

Amendment to Retirement Definition. The defined term “Retirement” in each Award Agreement, to the extent such term was included in such Award Agreement immediately prior to the Amendment Date, is hereby amended to replace the words “voluntary termination of his or her Employment” with the words “termination of his or her Employment for any reason (other than for Cause)”.

No Change to Other Requirements for Retirement. The other prongs of the “Retirement” definition as set forth in the Award Agreements (including, without limitation, the requirements with respect to (i) no existence of grounds for a “Cause” termination, (ii) attainment of Retirement Age and required years of Employment and (iii) Retirement occurring at least 12 months following the Date of Grant) shall not be affected by this Amendment.

Remainder of Award Agreements. Except as specifically set forth in this Amendment, all other provisions of the Award Agreements shall remain in full force and effect as originally set forth therein. By executing this Amendment, the Company neither waives nor relinquishes any right which arose under or that relates to the terms of the Award Agreements prior to this Amendment.

Construction. On and after the date that this Amendment is effective, each reference to the Award Agreements shall mean and be a reference to each such Award Agreement as amended hereby, and this Amendment and each such Award Agreement shall be read together and construed as a single instrument.

[signature page follows]

IN WITNESS WHEREOF, the Company has executed this Amendment as set forth below.

TAYLOR MORRISON HOME CORPORATION

By:

Name: Sheryl D. Palmer

Date:

EX-10.2 3 tmhc-ex10_2.htm EX-10.2 EX-10.2

Exhibit 10.2

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

Title: Chairman & Chief Executive Officer This Amended and Restated Employment Agreement (the “Agreement”), entered into on April 25, 2023, is made by and between Louis Steffens (the “Executive”) and Taylor Morrison, Inc., a Delaware corporation (the “Company”), and shall be effective on May 1, 2023 (the “Effective Date”).

RECITALS

It is the desire of the Company to assure itself of the continued services of the Executive by continuing to engage the Executive to perform services under the terms hereof.

The Executive desires to continue to provide services to the Company and to Taylor Morrison Home Corporation, a Delaware corporation and the indirect parent of the Company (including any successor parent, “TMHC”) on the terms herein provided.

The Executive and the Company are parties to that certain Amended and Restated Employment Agreement effective as of October 26, 2021, as amended by that certain First Amendment to the Amended and Restated Employment Agreement, effective as of July 26, 2022 (as amended, the “Prior Agreement”).

This Agreement is intended to supersede any prior agreements or understandings, whether formal or informal, between the Executive and the Company or any of its Affiliates (as defined below), including the Prior Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below, the parties hereto agree as follows:

Certain Definitions.

(a)

“Accountants” shall have the meaning set forth in Section 11(b).

(b)

“Accrued Obligations” shall have the meaning set forth in Section 5(a).

(c)

“Action” shall have the meaning set forth in Section 9.

(d)

“Affiliate” shall have meaning ascribed thereto in the Equity Plan.

(e)

“Agreement” shall have the meaning set forth in the preamble hereto.

(f)

“Annual Base Salary” shall have the meaning set forth in Section 3(a).

(g)

“Annual Bonus” shall have the meaning set forth in Section 3(b).

(h)

“Board” shall mean the Board of Directors of TMHC.

(i)

The Company shall have “Cause” to terminate the Executive’s employment pursuant to Section 4(a)(iii) hereunder upon: (i) a material breach by the Executive of this Agreement, any award agreement executed by the Executive and issued under the Equity Plan or any policy of the Company or its Affiliates; provided, that, the Company shall permit the Executive up to fifteen (15) days after notice from the Company to cure such breach if reasonably susceptible to cure; (ii) the Executive’s gross negligence or willful misconduct, which is injurious to the Company or any of its Affiliates; provided, that, the Company shall permit the Executive up to fifteen (15) days after notice from the Company to cure such breach if reasonably susceptible to cure; or (iii) the Executive’s conviction of, or guilty plea (or plea of nolo contendere) or confession to, a felony or other crime involving dishonesty, fraud, breach of any fiduciary obligation to the Board or any equity holder of TMHC, or unethical business conduct.

(j)

“280G Change in Control” shall have the meaning set forth in Section 11(a).

(k)

“Change in Control” shall have the meaning set forth in the Equity Plan.

(l)

“Code” shall mean the Internal Revenue Code of 1986, as amended.

(m)

“Company” shall, except as otherwise provided in Sections 6 and 7, have the meaning set forth in the preamble hereto.

(n)

“Confidential Information” shall have the meaning set forth in Section 7(a).

(o)

“Date of Termination” shall mean (i) if the Executive’s employment is terminated by the Executive’s death, the date of the Executive’s death, or (ii) if the Executive’s employment is terminated pursuant to Section 4(a)(ii)-(vi), the date specified or otherwise effective pursuant to Section 4(b).

(p)

“Disability” shall mean the disability of the Executive caused by any physical or mental injury, illness or incapacity as a result of which the Executive has been unable to effectively perform the essential functions of the Executive’s duties for a continuous period of at least one hundred eighty (180) days. If any question shall arise as to whether a Disability exists, the Executive may, and at the request of the Company shall, submit to a medical examination by a physician selected by the Company to determine whether a Disability exists and such determination shall for the purposes of this Agreement be conclusive of the issue. If such question shall arise and the Executive shall fail to submit to such medical examination, the Company’s determination of the issue shall be binding on the Executive.

(q)

“Effective Date” shall have the meaning set forth in the preamble hereto.

(r)

“Equity Plan” shall mean the Taylor Morrison Home Corporation 2013 Omnibus Equity Award Plan, as amended from time to time, or any successor plan thereto.

(s)

“Excise Tax” shall have the meaning set forth in Section 11(a).

(t)

“Executive” shall have the meaning set forth in the preamble hereto.

(u)

“Full Payment” shall have the meaning set forth in Section 11(a).

(v)

The Executive shall have “Good Reason” to resign from employment pursuant to Section 4(a)(v) in the event that any of the following actions are taken by the Company or any of its Affiliates without the Executive’s consent: (i) any material diminution in the nature or status of the Executive’s title, duties, responsibilities or authority, (ii) any material diminution in the Executive’s Annual Base Salary or Target Bonus, other than a decrease in base salary or bonus opportunity that is contemplated by this Agreement or that applies to a similarly situated class of employees of the Company or its Affiliates, or (iii) a material breach of the Company’s obligations under this Agreement; provided, however, that none of the events described in the foregoing clauses shall constitute Good Reason unless the Executive has notified the Company in writing describing the events that constitute Good Reason within ninety (90) days following the first occurrence of such events and then only if the Company fails to cure such events within thirty (30) days after the Company’s receipt of such written notice, and the Executive shall have terminated the Executive’s employment with the Company promptly following the expiration of such cure period.

(w)

“Inventions” shall have the meaning set forth in Section 7(c).

(x)

“Notice of Termination” shall have the meaning set forth in Section 4(b).

(y)

“Person” shall mean an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.

(z)

“Proprietary Rights” shall have the meaning set forth in Section 7(c).

(aa)

“Reduced Payment” shall have the meaning set forth in Section 11(a).

(ab)

“Section 409A” shall have the meaning set forth in Section 10(a).

(ac)

“Severance Payments” shall have the meaning set forth in Section 5(b)(i).

(ad)

“Severance Period” shall have the meaning set forth in Section 5(b)(i).

(ae)

“Target Bonus” shall have the meaning set forth in Section 3(b).

(af)

“Term” shall have the meaning set forth in Section 2(b).

(ag)

“TMHC” shall have the meaning set forth in the preamble hereto.

(ah)

“Transaction Payment” shall have the meaning set forth in Section 11(a).

(ai)

“Transition Date” shall mean the earlier of (i) the Company’s appointment of a permanent Chief Financial Officer to succeed Executive or (ii) June 30, 2023.

Employment.

(a)

In General. The Company shall continue to employ the Executive, and the Executive shall continue in the employ of the Company, for the period set forth in Section 2(b), in the position set forth in Section 2(c), and upon the other terms and conditions herein provided.

(b)

Term of Employment. The term of employment (the “Term”) under this Agreement shall be for the period beginning on the Effective Date and ending on the Date of Termination. For purposes of clarity, from the date of the execution of this Agreement until the Effective Date, the terms of the Executive’s employment shall be governed by the Prior Agreement.

(c)

Position and Duties.

(i)

Position. During the Term, the Executive shall serve as Executive Vice President of Strategic and Operational Initiatives of the Company and TMHC, with duties, responsibilities and authority customary for such position and as may be reasonably assigned by the Board or the Chief Executive Officer of TMHC from time to time. Such duties, responsibilities and authority may include services for one or more subsidiaries or Affiliates of the Company. The Executive shall report to the Chief Executive Officer of TMHC. The Executive agrees to observe and comply with the Company’s and its Affiliates’ rules and policies as adopted from time to time. The Executive shall devote the Executive’s full business time, skill, attention and best efforts to the performance of the Executive’s duties hereunder; provided, however, that the Executive shall be entitled to manage the Executive’s personal, financial and legal affairs, or reasonably engage in charitable endeavors, so long as such activities do not interfere with the Executive’s performance of the Executive’s duties and responsibilities to the Company and its Affiliates as provided hereunder, are not in conflict with the business interests of the Company or its Affiliates and do not otherwise compete with the business of the Company or its Affiliates. For the avoidance of doubt, except as specifically provided in this Section 2(c), during the Term, the Executive shall not be permitted to become engaged in or render services for any Person other than the Company and its Affiliates without the consent of the Board.

(ii)

Principal Office. During the Term, the principal place of the Executive’s employment shall be at his home office within the continental United States where Executive resides from time to time. The Executive shall perform the Executive’s duties and responsibilities to the Company at such principal place of employment and at such other location(s) to which the Company may reasonably require the Executive to travel for Company business purposes.

Compensation and Related Matters.

(a)

Annual Base Salary. During the Term, the Executive shall receive a base salary at a rate of: (i) six-hundred and fifty thousand dollars ($650,000) per annum from the date hereof until the Transition Date; and (ii) five hundred twenty five thousand dollars ($525,000) per annum from the Transition Date through the conclusion of the Term, in each case, which shall be paid in accordance with the customary payroll practices of the Company, subject to review and adjustment in accordance with the Company’s or TMHC’s compensation policies and practices, overall financial condition and other business factors (the “Annual Base Salary”).

(b)

Annual Bonus. With respect to each calendar year that ends during the Term, the Executive shall be eligible to receive an annual cash bonus (the “Annual Bonus”) under TMHC’s annual bonus program, with a target Annual Bonus amount equal to one hundred fifty percent (150%) of the Annual Base Salary (the “Target Bonus”). The Executive’s actual Annual Bonus for a given year, if any, shall be determined by the Board (or a subcommittee thereof) on the basis of the Executive’s, the Company’s and/or TMHC’s attainment of objective financial and/or other subjective or objective criteria established by the Board (or a subcommittee thereof). Each such Annual Bonus shall be payable at such time and in such manner that annual bonuses are paid to other senior executives of the Company after results have been determined for the calendar year to which the Annual Bonus, if any, relates. Notwithstanding the foregoing, except as expressly provided in Section 5 hereof, no Annual Bonus shall be payable with respect to any calendar year unless the Executive remains continuously employed with the Company through the date of payment of such Annual Bonus.

(c)

Benefits. During the Term, the Executive shall be entitled to participate in the employee benefit plans, programs and arrangements of the Company now (or, to the extent determined by the Company, hereafter) in effect, subject to and in accordance with their terms, including pension benefits and medical and welfare benefits, as such benefit plans, programs or arrangements may be amended or terminated from time to time in accordance with their terms.

(d)

Vacation, Sick Leave and Holidays. During the Term, the Executive shall be entitled to paid vacation, paid sick leave and paid holidays in accordance with applicable laws and the Company’s policies in force from time to time.

(e)

Equity.

(i)

Eligibility. During the Term, the Executive shall be eligible to receive equity-based compensation awards under the Equity Plan from time to time, as determined by the Board (or a subcommittee thereof) in its sole discretion.

(ii)

Vesting of Performance-Based Equity Awards. Notwithstanding anything to the contrary contained in the Equity Plan or any award agreement issued thereunder:

(A)

Change in Control. Upon a Change in Control, the performance period (or term of similar meaning) applicable to any equity-based compensation awarded to the Executive under the Equity Plan that vests in whole or in part upon the achievement of one or more performance goals (“Performance Awards”), whether granted prior to, on or after the date hereof, shall end on the date of the Change in Control, and the Executive shall be eligible to vest in all such Performance Awards on the last date of the service period applicable to each such Performance Award (the “Vesting Date”), with all applicable performance goals deemed achieved at the “target” level, subject to the Executive’s continued employment through such Vesting Date; provided, however, that if the Executive is terminated without Cause pursuant to Section 4(a)(iv) or resigns with Good Reason pursuant to Section 4(a)(v), in each case at any time (x) following the execution of a definitive agreement with a third party that, if consummated, would result in a Change in Control, but before such transaction is consummated (and subject to such consummation), or (y) within twenty-four (24) months following a Change in Control ((x) or (y), as applicable, a “CIC Qualifying Termination”), then the Executive shall remain eligible to vest in such Performance Awards as described in this sentence, but the Vesting Date shall occur on the date of such CIC Qualifying Termination (or, if later, the date of such Change in Control).

For the avoidance of doubt, the Vesting Date shall be deemed to be the “Determination Date” (or term of similar meaning, if applicable), as defined in the applicable award agreement(s) pursuant to which such Performance Awards were granted under the Equity Plan.

(B)

Death or Disability. If the Executive’s employment is terminated due to the Executive’s death or Disability prior to the vesting of any then-outstanding Performance Awards, whether granted prior to, on or after the date hereof, the Executive or the Executive’s beneficiary shall remain eligible to vest in a pro-rated portion of each such Performance Award based on a fraction, the numerator of which is the number of completed months in the applicable performance period (or term of similar meaning) at the time of such termination and the denominator of which is the number of months in the applicable performance period, multiplied by the number of shares of common stock which are finally determined to be earned and subject to the Performance Award following the completion of the performance period. The portion of each Performance Award eligible to vest shall be based on actual results for the applicable performance period and shall be determined in accordance with the terms of the applicable award agreement(s) pursuant to which such Performance Awards were granted under the Equity Plan. Such Performance Awards shall vest under the terms of the applicable award agreement as if the Executive had remained in service through the applicable vesting date and performance certification date for each such Performance Award.

(iii)

Vesting of Time-Based Equity Awards. Notwithstanding anything to the contrary contained in the Equity Plan or any award agreement issued thereunder:

(A)

Change in Control. If the Executive is terminated in a CIC Qualifying Termination, then the Executive shall vest in full in any equity-based compensation awarded to the Executive under the Equity Plan (other than Performance Awards), whether granted prior to, on or after the date hereof, on the date of such CIC Qualifying Termination (or, if later, the date of the applicable Change in Control).

(B)

Death or Disability. If the Executive’s employment is terminated due to the Executive’s death or Disability, then the Executive shall vest in full in any equity-based compensation awarded to the Executive under the Equity Plan (other than Performance Awards), whether granted prior to, on or after the date hereof, as of the relevant Date of Termination.

(f)

Expenses. During the Term, the Company shall reimburse the Executive for all reasonable travel and other business expenses incurred by the Executive in the performance of the Executive’s duties to the Company, in accordance with the Company’s expense reimbursement policies and procedures.

(g)

No Additional Compensation. Except as otherwise provided herein, the Executive shall not be entitled to any additional compensation for service as a member of the Board (or any subcommittee thereof) or other positions or titles the Executive may hold with any subsidiary or Affiliate of the Company to the extent the Executive is so appointed.

Termination. The Executive’s employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances:

(a)

Circumstances.

(i)

Death. The Executive’s employment hereunder shall terminate upon the Executive’s death.

(ii)

Disability. If the Executive has incurred a Disability, the Company may give the Executive written notice of its intention to terminate the Executive’s employment. In that event, the Executive’s employment with the Company shall terminate effective on the later of the thirtieth (30th) day after receipt of such notice by the Executive and the date specified in such notice; provided, that within the thirty (30) day period following receipt of such notice, the Executive shall not have returned to full-time performance of the Executive’s duties hereunder.

(iii)

Termination with Cause. The Company may terminate the Executive’s employment with Cause.

(iv)

Termination without Cause. The Company may terminate the Executive’s employment without Cause.

(v)

Resignation with Good Reason. The Executive may resign from the Executive’s employment with Good Reason.

(vi)

Resignation without Good Reason. The Executive may resign from the Executive’s employment without Good Reason upon not less than sixty (60) days’ advance written notice to the Board.

(b)

Notice of Termination. Any termination of the Executive’s employment by the Company or by the Executive under this Section 4 (other than termination pursuant to Section 4(a)(i)) shall be communicated by a written notice to the other party hereto (i) indicating the specific termination provision in this Agreement relied upon, (ii) except with respect to a termination pursuant to Section 4(a)(iv) or (vi), setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (iii) specifying a Date of Termination as provided herein (a “Notice of Termination”). If the Company delivers a Notice of Termination under Section 4(a)(ii), the Date of Termination shall be at least thirty (30) days following the date of such notice; provided, however, that such notice need not specify a Date of Termination, in which case the Date of Termination shall be determined pursuant to Section 4(a)(ii). If the Company delivers a Notice of Termination under Section 4(a)(iii) or 4(a)(iv), the Date of Termination shall be, in the Company’s sole discretion, the date on which the Executive receives such notice or any subsequent date selected by the Company.

If the Executive delivers a Notice of Termination under Section 4(a)(v), the Date of Termination shall be at least thirty (30) days following the date of such notice; provided, however, that the Company may, in its sole discretion, accelerate the Date of Termination to any date that occurs following the Company’s receipt of such notice, without changing the characterization of such termination as voluntary, even if such date is prior to the date specified in such notice and without having to pay any compensation or benefits for the balance of such notice period. The failure by the Company or the Executive to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Cause or Good Reason shall not waive any right of the Company or the Executive hereunder or preclude the Company or the Executive from asserting such fact or circumstance in enforcing the Company’s or the Executive’s rights hereunder.

(c)

Termination of All Positions. Upon termination of the Executive’s employment for any reason, the Executive agrees to resign, as of the Date of Termination or such other date requested by the Company, from all positions on the Board and all committees thereof (and, if applicable, from the board of directors or similar governing bodies (and all committees thereof) of all other Affiliates of the Company) and from all other positions and offices that the Executive then holds with the Company and its subsidiaries and Affiliates. The Executive agrees to promptly execute such documents as the Company, in its sole discretion, shall reasonably deem necessary to effect such resignations.

Company Obligations upon Termination of Employment.

(a)

In General. Subject to Section 10(b), upon termination of the Executive’s employment for any reason, the obligations of the Company to pay or provide the Executive with compensation and benefits under Section 3 shall cease, and the Company shall have no further obligations to provide compensation or benefits to the Executive hereunder, except the Executive (or the Executive’s estate) shall be entitled to receive (i) any amount of the Executive’s Annual Base Salary earned through the Date of Termination not theretofore paid, (ii) any amount arising from the Executive’s participation in, or benefits under, any employee benefit plans, programs or arrangements under Section 3(c) (other than severance plans, programs or arrangements) or the Equity Plan (subject to the terms and conditions of the Equity Plan and any applicable award agreement thereunder, as modified by Section 3(e)(ii) or (iii) herein), which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements including, where applicable, any death and disability benefits, (iii) any accrued vacation pay owed to the Executive pursuant to Section 3(d), (iv) any expenses owed to the Executive under Section 3(f), and (v) subject to the Executive’s (or the Executive’s estate’s) satisfaction of the Release Requirement (as defined below), any Annual Bonus for the year prior to the year in which the Date of Termination occurred that was earned but not yet paid (the “Accrued Obligations”). Notwithstanding anything to the contrary, upon a termination with Cause or a resignation without Good Reason, the Accrued Obligations shall not include the amount set forth in clause (v) of the preceding sentence.

(b)

Termination without Cause or Resignation with Good Reason. Subject to Section 10(b) and subject to the Executive’s continued compliance with the covenants contained in Sections 6 and 7, if the Company terminates the Executive’s employment without Cause pursuant to Section 4(a)(iv) or if the Executive resigns from employment with Good Reason pursuant to Section 4(a)(v), the Company shall, in addition to the Accrued Obligations:

(i)

pay to the Executive an aggregate amount equal to the product of (A) one and a half (1.5), and (B) the sum of the Annual Base Salary and the higher of (1) the Target Bonus and (2) the average of the Annual Bonuses paid in or payable in respect of (whichever results in the higher average) the three (3) completed calendar years that precede the Date of Termination, in equal installments in accordance with the Company’s customary payroll practices during the eighteen (18)-month period (the “Severance Period”) beginning on the Date of Termination and ending on the earlier to occur of (A) the expiration of the Severance Period and (B) the first date that the Executive violates any covenant contained in Section 6 and 7 (the “Severance Payments”); provided, however, that if such termination occurs on or after the Transition Date, then the aggregate Severance Payments shall instead be equal to the Executive’s Annual Base Salary in effect on the date of termination and the Severance Period shall be reduced to 12 months; and provided further, however, that if such termination is a CIC Qualifying Termination (regardless of whether occurring before, on or following the Transition Date), then (x) the aggregate Severance Payments shall instead be equal to the product of (A) two (2.0) and (B) the sum of the Annual Base Salary and the higher of (1) the Target Bonus and (2) the average of the Annual Bonuses paid in or payable in respect of (whichever results in the higher average) the three (3) completed calendar years that precede the Date of Termination, and (y) such Severance Payments shall instead be payable in a single lump sum on the Company’s first regular payroll date that follows the sixtieth (60th) day following the Date of Termination;

(ii)

subject to the Executive’s timely election of (and continued eligibility for) continued health coverage pursuant to the federal law known as “COBRA,” the Company shall pay, during the twelve (12)-month period following the Date of Termination (or until the Executive becomes eligible for comparable coverage under the health plans of a successor employer, if earlier) (the “COBRA Period”), the applicable COBRA premiums for the Executive and any eligible dependents who participated in the Company’s health plan as of immediately prior to the Date of Termination; provided, that in the event the Company would be subject to any excise tax under Section 4980D of the Code or other penalty or liability pursuant to the provisions of the Patient Protection and Affordable Care Act of 2010 (as amended from time to time) or other applicable law (or to the extent such COBRA subsidy is not permitted under the terms of the applicable benefit plan or applicable law), and in lieu of providing the COBRA subsidy described above, the Company shall instead pay to the Executive a fully taxable monthly cash payment in an amount such that, after payment by the Executive of all taxes on such payment, the Executive retains an amount equal to the applicable COBRA premiums for such month (or the last month in which COBRA coverage was available to the Executive), with such monthly payment being made on the last day of each month for the remainder of the COBRA Period. For the avoidance of doubt, the Executive’s health benefit coverage from the Company during the COBRA Period shall run concurrent with the health continuation coverage period mandated by Section 4980B of the Code;

(iii)

pay the Executive a prorated portion of the Annual Bonus payable with respect to the calendar year in which such termination occurs, determined on a daily basis, based solely on the actual level of achievement of the applicable performance goals for such year, and payable if and when annual bonuses are paid to other senior executives of the Company with respect to such year;

(iv)

provide the Executive with up to twelve (12) months of outplacement assistance through the Company’s then-current outplacement vendor (or, if no such vendor exists, through an outplacement vendor of the Company’s choice); and

(v)

if such termination is a CIC Qualifying Termination, then the Company shall pay the Executive a prorated portion of the annual profit sharing program bonus payable with respect to the calendar year in which such termination occurs, determined on a daily basis, based solely on the actual level of achievement of the applicable performance goals for such year, and payable if and when annual profit sharing program bonuses are paid to other senior executives of the Company with respect to such year;

provided, however, that notwithstanding the foregoing, (A) the amounts payable to the Executive under this Section 5(b) shall be contingent upon and subject to the Executive’s execution and non-revocation of a general waiver and release of claims agreement (the “Release”) in the Company’s customary form attached hereto as Exhibit A (and the expiration of any applicable revocation period), on or prior to the sixtieth (60th) day following the Date of Termination (the “Release Requirement”); and (B) any installment payments pursuant to this Section 5(b) shall commence on the first payroll period following the effective date of such Release, and the initial installment shall include a lump-sum payment of all amounts accrued under this Section 5(b) from the Date of Termination through the date of such initial payment.

(c)

Survival. The expiration or termination of the Term shall not impair the rights or obligations of any party hereto, which shall have accrued prior to such expiration or termination.

(d)

No Other Severance. The Executive expressly acknowledges that any severance payments and benefits under this Section 5 are in lieu of any other payments or benefits that the Executive may otherwise be eligible to receive under any Company plan, policy or program providing for severance, separation pay or salary continuation payments or benefits.

Non-Competition; Non-Solicitation; Non-Hire.

(a)

Survival of Restrictive Covenants Agreement. Notwithstanding anything to the contrary set forth herein, the Restrictive Covenants Agreement, by and between the Company and the Executive, dated as of December 15, 2011, shall survive and remain in full force and effect following the Effective Date, and is incorporated by reference as though fully set forth herein.

(b)

Non-Solicitation of Customers and Suppliers. The Executive agrees that the Company’s relationships with its customers and suppliers are solely the assets and property of the Company, and therefore the Executive agrees that at any time during the Executive’s employment and for a period of two (2) years following termination of the Executive’s employment with the Company for any reason, the Executive shall not directly or through others solicit or attempt to solicit any of the Company’s customers and/or suppliers for the purpose of providing products or services competitive to those offered by the Company. For purposes of this Section 6(b), the terms “customer” and “supplier” shall also include prospective customers and suppliers of the Company.

(c)

Non-Solicitation of Employees. The Executive agrees that the Company has invested substantial time and effort in assembling and training its present staff of personnel. Accordingly, the Executive agrees that at any time during the Executive’s employment and for a period of two (2) years following termination of the Executive’s employment with the Company for any reason, the Executive will not directly or indirectly induce or solicit, or seek to induce or solicit, on behalf of the Executive or other persons or entities any of the Company’s employees to leave employment with the Company if such employee was employed by the Company during the last six (6) months of the Executive’s employment.

(d)

Company Defined. As used in this Section 6, the term “Company” shall include the Company and any direct or indirect subsidiaries and Affiliates thereof and any successors thereto.

Non-Disclosure of Confidential Information; Non-Disparagement; Intellectual Property.

(a)

Non-Disclosure of Confidential Information; Return of Property.

(i)

Confidential Information. Except as required in the faithful performance of the Executive’s duties hereunder, during the Term and in perpetuity thereafter, the Executive shall maintain in confidence and shall not directly, indirectly or otherwise, use, disseminate, disclose or publish, or use for the Executive’s benefit or the benefit of any Person, any confidential or proprietary information or trade secrets of or relating to the Company or any of its Affiliates, including, without limitation, information with respect to the Company’s or any of its Affiliates’ operations, protocols, processes, products, inventions, business practices, finances, principals, vendors, suppliers, customers, potential customers, marketing methods, costs, prices, contractual relationships, regulatory status, compensation paid to employees or other terms of employment (“Confidential Information”), or deliver to any Person any document, record, notebook, computer program or similar repository of or containing any such Confidential Information; provided, that the Executive’s good faith performance of the Executive’s duties and responsibilities for the Company and its Affiliates during employment shall not be deemed a breach of this Section 7(a). Upon the Executive’s termination of employment for any reason, the Executive shall promptly deliver to the Company all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents or any other documents concerning the Company’s or any of its Affiliates’ Confidential Information, customers, business plans, marketing strategies, products or processes. The Executive may respond to a lawful and valid subpoena or other legal process but shall give the Company the earliest possible notice thereof, shall, as much in advance of the return date as possible, make available to the Company and its counsel the documents and other information sought and shall assist such counsel in resisting or otherwise responding to such process.

(ii)

Permissible Disclosure of Confidential Information. Notwithstanding anything to the contrary contained herein, nothing in this Agreement shall prohibit the Executive from reporting possible violations of federal law or regulation to or otherwise cooperating with or providing information requested by any governmental agency or entity, including, but not limited to, the Department of Justice, the Securities and Exchange Commission, the Congress and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation.

The Executive does not need the prior authorization of the Company to make any such reports or disclosures and the Executive is not required to notify the Company that the Executive has made such reports or disclosures.

(b)

Non-Disparagement. The Executive shall not, at any time during the Executive’s employment and following the Executive’s termination of employment for any reason, make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage or be damaging to the Company, its subsidiaries or Affiliates or their respective officers, directors, employees, advisors, businesses or reputations. Notwithstanding the foregoing, nothing in this Agreement shall preclude the Executive from making truthful statements that are required by applicable law, regulation or legal process.

(c)

Intellectual Property Rights.

(i)

Inventions and Proprietary Rights. The Executive agrees that the results and proceeds of the Executive’s services for the Company or its subsidiaries or Affiliates (including, but not limited to, any trade secrets, products, services, processes, know-how, designs, developments, innovations, analyses, drawings, reports, techniques, formulas, methods, developmental or experimental work, improvements, discoveries, inventions, ideas, source and object codes, programs, matters of a literary, musical, dramatic or otherwise creative nature, writings and other works of authorship) resulting from services performed while an employee of the Company and any works in progress, whether or not patentable or registrable under copyright or similar statutes, that were made, developed, conceived or reduced to practice or learned by the Executive, either alone or jointly with others (collectively, “Inventions”), shall be works-made-for-hire and the Company (or, if applicable or as directed by the Company, any of its subsidiaries or Affiliates) shall be deemed the sole owner throughout the universe of any and all trade secret, patent, copyright and other intellectual property rights (collectively, “Proprietary Rights”) of whatsoever nature therein, whether or not now or hereafter known, existing, contemplated, recognized or developed, with the right to use the same in perpetuity in any manner the Company determines in its sole discretion, without any further payment to the Executive whatsoever. If, for any reason, any of such results and proceeds shall not legally be a work-made-for-hire and/or there are any Proprietary Rights which do not accrue to the Company (or, as the case may be, any of its subsidiaries or Affiliates) under the immediately preceding sentence, then the Executive hereby irrevocably assigns and agrees to assign any and all of the Executive’s right, title and interest thereto, including, without limitation, any and all Proprietary Rights of whatsoever nature therein, whether or not now or hereafter known, existing, contemplated, recognized or developed, to the Company (or, if applicable or as directed by the Company, any of its subsidiaries or Affiliates), and the Company or such subsidiaries or Affiliates shall have the right to use the same in perpetuity throughout the universe in any manner determined by the Company or such subsidiaries or Affiliates without any further payment to the Executive whatsoever. As to any Invention that the Executive is required to assign, the Executive shall promptly and fully disclose to the Company all information known to the Executive concerning such Invention. The Executive hereby waives and quitclaims to the Company any and all claims, of any nature whatsoever, that the Executive now or may hereafter have for infringement of any Proprietary Rights assigned hereunder to the Company.

(ii)

Executive Assistance. The Executive agrees that, from time to time, as may be requested by the Company and at the Company’s sole cost and expense, the Executive shall do any and all things that the Company may reasonably deem useful or desirable to establish or document the Company’s exclusive ownership throughout the United States of America or any other country of any and all Proprietary Rights in any such Inventions, including, without limitation, the execution of appropriate copyright and/or patent applications or assignments. To the extent the Executive has any Proprietary Rights in the Inventions that cannot be assigned in the manner described above, the Executive unconditionally and irrevocably waives the enforcement of such Proprietary Rights. This Section 7(c) is subject to and shall not be deemed to limit, restrict or constitute any waiver by the Company of any Proprietary Rights of ownership to which the Company may be entitled by operation of law by virtue of the Executive’s employment with the Company. The Executive further agrees that, from time to time, as may be requested by the Company and at the Company’s sole cost and expense, the Executive shall assist the Company in every proper and lawful way to obtain and from time to time enforce Proprietary Rights relating to Inventions in any and all countries. To this end, the Executive shall execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights and the assignment thereof. In addition, the Executive shall execute, verify and deliver assignments of such Proprietary Rights to the Company or its designees. The Executive’s obligation to assist the Company with respect to Proprietary Rights relating to such Inventions in any and all countries shall continue beyond the termination of the Executive’s employment with the Company.

(iii)

Permissible Disclosure of Trade Secrets. Notwithstanding anything to the contrary contained herein, the Executive shall not be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that is made: (A) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney; and (B) solely for the purpose of reporting or investigating a suspected violation of law; or is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. If the Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, the Executive may disclose the Company’s trade secrets to the Executive’s attorney and use the trade secret information in the court proceeding if the Executive: (1) files any document containing the trade secret under seal; and (2) does not disclose the trade secret, except pursuant to court order.

(d)

Company Defined. As used in this Section 7, the term “Company” shall include the Company and any direct or indirect subsidiaries and Affiliates thereof and any successors thereto.

Indemnification. The Executive shall be entitled to indemnification in accordance with the terms of that certain Indemnification Agreement, by and among TMHC and the Executive, dated as of October 26, 2021, which is incorporated by reference as though fully set forth herein.

Cooperation. The Executive agrees that during and after the Executive’s employment with the Company, the Executive shall assist the Company and its Affiliates in the defense of any claims or potential claims that may be made or threatened to be made against the Company or any of its Affiliates in any action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise, that are not adverse to the Executive (each, an “Action”), and shall assist the Company and its Affiliates in the prosecution of any claims that may be made by the Company or any of its Affiliates in any Action, to the extent that such claims may relate to the Executive’s employment or the period of the Executive’s employment by the Company and its Affiliates.

The Executive agrees, unless precluded by law, to promptly inform the Company if the Executive is asked to participate (or otherwise become involved) in any such Action. The Executive also agrees, unless precluded by law, to promptly inform the Company if the Executive is asked to assist in any investigation (whether governmental or otherwise) of the Company or any of its Affiliates (or their actions) to the extent that such investigation may relate to the Executive’s employment or the period of the Executive’s employment by the Company, regardless of whether a lawsuit has then been filed against the Company or any of its Affiliates with respect to such investigation. The Company or one of its Affiliates shall reimburse the Executive for all of the Executive’s reasonable out-of-pocket expenses associated with such cooperation following the Executive’s Date of Termination; provided, that any such cooperation occurring after the termination of the Executive’s employment shall be scheduled to the extent reasonably practicable so as not to unreasonably interfere with the Executive’s business or personal affairs.

10.

Section 409A of the Code.

(a)

General. The parties hereto acknowledge and agree that, to the extent applicable, this Agreement shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A of the Code and the Department of Treasury Regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date (“Section 409A”). Notwithstanding any provision of this Agreement to the contrary, in the event that the Company determines that any amounts payable hereunder will be taxable currently to the Executive under Section 409A(a)(1)(A) of the Code and related Department of Treasury guidance, the Company and the Executive shall cooperate in good faith to (i) adopt such amendments to this Agreement and appropriate policies and procedures, including amendments and policies with retroactive effect, that they mutually determine to be necessary or appropriate to preserve the intended tax treatment of the benefits provided by this Agreement, to preserve the economic benefits of this Agreement and to avoid less favorable accounting or tax consequences for the Company, and/or (ii) take such other actions as mutually determined to be necessary or appropriate to exempt the amounts payable hereunder from Section 409A or to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes thereunder; provided, however, that this Section 10(a) does not create an obligation on the part of the Company to modify this Agreement and does not guarantee that the amounts payable hereunder will not be subject to interest or penalties under Section 409A, and in no event whatsoever shall the Company or any of its Affiliates be liable for any additional tax, interest or penalties that may be imposed on the Executive as a result of Section 409A or any damages for failing to comply with Section 409A.

(b)

Special Rules.

Notwithstanding any provision to the contrary in this Agreement: (i) no amount shall be payable pursuant to Section 5 unless the termination of the Executive’s employment constitutes a “separation from service” within the meaning of Section 1.409A-1(h) of the Department of Treasury Regulations; (ii) if the Executive is deemed at the time of the Executive’s separation from service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, to the extent that delayed commencement of any portion of the termination benefits to which the Executive is entitled under this Agreement (after taking into account all exclusions applicable to such termination benefits under Section 409A), including, without limitation, any portion of the additional compensation awarded pursuant to Section 5, is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of the Executive’s termination benefits shall not be provided to the Executive prior to the earlier of (A) the expiration of the six (6)-month period measured from the date of the Executive’s “separation from service” with the Company (as such term is defined in the Department of Treasury Regulations issued under Section 409A) and (B) the date of the Executive’s death; provided, that upon the earlier of such dates, all payments deferred pursuant to this Section 10(b)(ii) shall be paid to the Executive in a lump sum, and any remaining payments due under this Agreement shall be paid as otherwise provided herein; (iii) the determination of whether the Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of the Executive’s separation from service shall be made by the Company in accordance with the terms of Section 409A and applicable guidance thereunder (including, without limitation, Section 1.409A-1(i) of the Department of Treasury Regulations and any successor provision thereto); (iv) for purposes of Section 409A, the Executive’s right to receive installment payments pursuant to Section 5 shall be treated as a right to receive a series of separate and distinct payments; and (v) to the extent that any reimbursement of expenses or in-kind benefits constitutes “deferred compensation” under Section 409A, (A) such reimbursement or benefit shall be provided no later than December 31 of the year following the year in which the expense was incurred, (B) the amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year, (C) the amount of any in-kind benefits provided in one year shall not affect the amount of in-kind benefits provided in any other year and (D) the right to any benefits or reimbursements or in-kind benefits may not be liquidated or exchanged for any other benefit. Neither the Executive nor any of the Executive’s creditors or beneficiaries shall have the right to subject any “deferred compensation” under Section 409A payable under this Agreement to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Except as permitted under Section 409A, any “deferred compensation” under Section 409A payable to the Executive or for the Executive’s benefit may not be reduced by, or offset against, any amount owing by the Executive to the Company or any of its Affiliates.

11.

Section 280G of the Code.

(a)

If there is a change of ownership or effective control or change in the ownership of a substantial portion of the assets of a corporation (within the meaning of Section 280G of the Code) (a “280G Change in Control”) and any payment or benefit (including payments and benefits pursuant to this Agreement) that the Executive would receive from the Company, TMHC or otherwise (“Transaction Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Company shall cause to be determined, before any amounts of the Transaction Payment are paid to the Executive, which of the following two alternative forms of payment would result in the Executive’s receipt, on an after-tax basis, of the greater amount of the Transaction Payment notwithstanding that all or some portion of the Transaction Payment may be subject to the Excise Tax: (A) payment in full of the entire amount of the Transaction Payment (a “Full Payment”), or (B) payment of only a part of the Transaction Payment so that the Executive receives the largest payment possible without the imposition of the Excise Tax (a “Reduced Payment”). For purposes of determining whether to make a Full Payment or a Reduced Payment, the Company shall cause to be taken into account all applicable federal, state and local income and employment taxes and the Excise Tax (all computed at the highest applicable marginal rate, net of the maximum reduction in federal income taxes which could be obtained from a deduction of such state and local taxes).

If a Reduced Payment is made, the reduction in payments and/or benefits will occur in the following order: (1) first, reduction of cash payments, in reverse order of scheduled payment date (or if necessary, to zero), (2) then, reduction of non-cash and non-equity benefits provided to the Executive, on a pro rata basis (or if necessary, to zero) and (3) then, cancellation of the acceleration of vesting of equity award compensation in the reverse order of the date of grant of the Executive’s equity awards.

(b)

Unless the Executive and the Company otherwise agree in writing, any determination required under this section shall be made in writing by the Company’s independent public accountants (the “Accountants”), whose determination shall be conclusive and binding upon the Executive and the Company for all purposes. For purposes of making the calculations required by this section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Accountants shall provide detailed supporting calculations to the Company and the Executive as requested by the Company or the Executive. The Executive and the Company shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 11.

12.

Assignment and Successors. The Company may assign its rights and obligations under this Agreement to any of its Affiliates, and shall require any successor to all or substantially all the assets of the Company, by merger or otherwise, to assume this Agreement in the same manner and to the same extent that the Company would have been required to perform it if no such succession had taken place. The Company may assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Company and its Affiliates. The Executive may not assign the Executive’s rights or obligations under this Agreement to any individual or entity. This Agreement shall be binding upon and inure to the benefit of the Company and the Executive and their respective successors, assigns, personnel, legal representatives, executors, administrators, heirs, distributees, devisees and legatees, as applicable. In the event of the Executive’s death following a termination of the Executive’s employment, all unpaid amounts otherwise due the Executive (including under Section 5) shall be paid to the Executive’s estate.

13.

Governing Law. This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of Arizona, without reference to the principles of conflicts of law of Arizona or any other jurisdiction, and where applicable, the laws of the United States.

14.

Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

15.

Notices. Any notice, request, claim, demand, document and other communication hereunder to any party hereto shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by nationally recognized overnight courier, or certified or registered mail, postage prepaid, to the following address (or at any other address as any party hereto shall have specified by notice in writing to the other party hereto):

(a)

If to the Company:

Taylor Morrison, Inc.
4900 N. Scottsdale Road
Suite 2000
Scottsdale, AZ 85251
Attention: General Counsel

(b)

If to the Executive, at the Executive’s most recent address on the payroll records of the Company.

16.

Counterparts. This Agreement may be executed in several counterparts (including by facsimile transmission or electronic image scan (PDF)), each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

17.

Entire Agreement. The terms of this Agreement (together with any other agreements and instruments contemplated hereby or referred to herein) is intended by the parties hereto to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement (including, without limitation, the Prior Agreement). The parties hereto further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative or other legal proceeding to vary the terms of this Agreement.

18.

Amendments; Waivers. This Agreement may not be modified, amended or terminated except by an instrument in writing signed by the Executive and a duly authorized officer of Company (other than the Executive) that expressly identifies the amended provision of this Agreement. By an instrument in writing similarly executed and similarly identifying the waived compliance, the Executive or a duly authorized officer of the Company may waive compliance by the other party or parties with any provision of this Agreement that such other party was or is obligated to comply with or perform; provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure to comply or perform. No failure to exercise and no delay in exercising any right, remedy or power hereunder shall preclude any other or further exercise of any other right, remedy or power provided herein or by law or in equity.

19.

No Inconsistent Actions. The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement. Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.

20.

Construction. This Agreement shall be deemed drafted equally by both of the parties hereto. Its language shall be construed as a whole and according to its fair meaning. Any presumption or principle that the language is to be construed against any party shall not apply. The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation.

Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary. Also, unless the context clearly indicates to the contrary: (a) the plural includes the singular, and the singular includes the plural; (b) “and” and “or” are each used both conjunctively and disjunctively; (c) “any,” “all,” “each,” or “every” means “any and all,” and “each and every”; (d) “includes” and “including” are each “without limitation”; and (e) “herein,” “hereof,” “hereunder,” and other similar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection.

21.

Dispute Resolution. The parties understand and agree that except as otherwise expressly provided in this Agreement, any claim of any nature whatsoever, including those arising out of or connected with the Executive’s employment with the Company, including but not limited to wrongful termination, breach of contract, defamation, and claims of discrimination (including age, disability, sex, religion, national origin, race, color, etc.), harassment or retaliation whether under federal, state or local laws, regulations, or Executive Orders, common law, or in equity, shall be decided by submission to final and binding arbitration in Scottsdale, Arizona. The arbitrator shall be a retired or former state or federal court judge. The parties further agree that the performance of the Executive’s duties as contemplated by this Agreement involves commerce. This arbitration provision shall be governed by the Federal Arbitration Act. The arbitrator shall apply the law (including applicable filing limitations periods and exhaustion of administrative remedies) to the same extent and with same force and effect as would an Arizona court or a federal court sitting in Arizona. The arbitration shall be pursuant to rules and procedures adopted by the Company, and failing such adoption, the Federal Rules of Civil Procedure. Judgment shall be final upon the award rendered by the arbitrator and may be entered in any court having jurisdiction thereof, and each of the parties shall be responsible for its respective legal fees and expenses. The parties further understand and agree that actions seeking temporary injunctions are hereby excluded from arbitration and, therefore, may be sought in a court of appropriate jurisdiction without resort to arbitration, even though resolution of the underlying claim must be submitted to arbitration.

EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION OR OTHER PROCEEDING INSTITUTED BY OR AGAINST SUCH PARTY IN RESPECT OF ITS RIGHTS OR OBLIGATIONS HEREUNDER.

22.

Enforcement. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable, this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision were never a part of this Agreement, and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

23.

Withholding. The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local and foreign withholding and other taxes and charges that the Company is required to withhold.

The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.

24.

Employee Representations. The Executive represents, warrants and covenants that (a) the Executive has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein and has entered into this Agreement freely based on the Executive’s own judgment, (b) the Executive has the full right, authority and capacity to enter into this Agreement and perform the Executive’s obligations hereunder, (c) the Executive is not bound by any agreement that conflicts with or prevents or restricts the full performance of the Executive’s duties and obligations to the Company hereunder during or after the Term and (d) the execution and delivery of this Agreement shall not result in any breach or violation of, or a default under, any existing obligation, commitment or agreement to which the Executive is subject.

[signature page follows]

The parties have executed this Agreement as of the date first written above.

TAYLOR MORRISON, INC.

By: /s/ Sheryl D. Palmer

Sheryl D. Palmer
Chairman of the Board of Directors and
Chief Executive Officer
(Principal Executive Officer)

LOUIS STEFFENS

By: : /s/ Louis Steffens This Release of Claims is provided by me, the undersigned, pursuant to the Amended and Restated Employment Agreement between me and Taylor Morrison, Inc., dated as of April 25, 2023 (the “Employment Agreement”).

[Signature Page to Taylor Morrison Amended and Restated Employment Agreement]

EXHIBIT A

Form of Release of Claims

All capitalized terms used in this Release of Claims, but not defined herein, shall have the meaning ascribed to those terms in the Employment Agreement.

In consideration of the pay and benefits to be provided to me in connection with the termination of my employment, as set forth in Section 5(a)(v) [and (b)] of the Employment Agreement (the “Severance Payments”), which are conditioned upon my signing (and not revoking) this Release of Claims and to which I am not otherwise entitled, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, I, on my own behalf and on behalf of my heirs, executors, beneficiaries and personal representatives, successors and assigns, and all others connected with or claiming through me (collectively, the “Releasors”), hereby release and forever discharge the Company and TMHC, and their subsidiaries and other Affiliates and all of their respective past, present and future officers, directors, shareholders, parents, employees, agents, general and limited partners, members, managers, joint venturers, trustees, employee benefit plans and their administrators and fiduciaries, representatives, agents, predecessors, successors and assigns, and all others connected with any of them, both individually and in their official capacities (collectively, the “Released Parties”), from any and all causes of action, rights and claims, of any nature or type, known or unknown, fixed or contingent, in law or in equity, which I have had in the past, now have, or might now have, through the date of my signing of this Release of Claims, including, but not limited to, any such causes of action, rights or claims in any way resulting from, arising out of or connected with my employment by or other relationship with the Released Parties or the termination of that employment and/or relationship or pursuant to any federal, state or local law, regulation or other requirement (including, without limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act (“ADEA,” a law which prohibits discrimination on the basis of age), the Older Workers Benefit Protection Act, the National Labor Relations Act, the Civil Rights Act of 1991, the Americans with Disabilities Act of 1990, the Employee Retirement Income Security Act of 1974, the Family and Medical Leave Act, the Worker Adjustment Retraining and Notification Act and similar state laws, the Equal Pay Act, the Fair Labor Standards Act, the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, the Arizona Wage Act, the Arizona Equal Pay Act, the Arizona Employment Protection Act, the Arizona Civil Rights Act, the Arizona Occupational Health and Safety Act, the Arizona Right to Work Act, the Arizona Drug Testing of Employees Act, the Arizona Medical Marijuana Act, the Arizona criminal code, the Americans with Disabilities Act, and any other federal, state and local laws relating to discrimination on the basis of age, sex or other protected class, express or implied breach of contract, wrongful discharge, defamation, intentional infliction of emotional distress, and any related claims for attorneys’ fees and costs, each as amended from time to time); provided, that nothing herein shall release any claim arising after the effective date of the termination of my employment.

Excluded from the scope of this Release of Claims are: (i) any rights of indemnification or contribution that I have pursuant to Section 8 of the Employment Agreement, the articles of incorporation or by-laws of the Company, TMHC or any of their subsidiaries, (ii) any right I have to the Severance Payments, (iii) vested rights to benefits under employee benefit plans of the Company, TMHC or their subsidiaries and (iv) rights that cannot be released as a matter of law (collectively, “Unreleased Claims”).

A-1

I acknowledge and agree that this Release of Claims may be pleaded as a full defense to any action, suit, arbitration or other proceeding covered by the terms hereof which is or may be initiated by any of the Releasors.

I acknowledge that neither I nor any of the Releasors has filed any complaint, charge, claim or proceeding against any of the Released Parties before any local, state, federal or foreign agency, court, arbitrator, mediator, arbitration or mediation panel or other body (each individually, a “Proceeding”). I represent that I am not aware of any basis on which such a Proceeding could reasonably be instituted, except as I have expressly disclosed to the Company in writing. I (i) acknowledge that I shall not initiate or cause to be initiated on my behalf, and shall not participate in, any Proceeding (except with respect to an Unreleased Claim), except as required by law, and (ii) waive any right that I may have to benefit in any manner from any relief (whether monetary or otherwise) arising out of any Proceeding, including any Proceeding conducted by the Equal Employment Opportunity Commission (“EEOC”). Further, I understand that, by executing this Release of Claims, I shall be limiting the availability of certain remedies that I may have against the Company and limiting also my ability to pursue certain claims against the Released Parties. Notwithstanding the above, nothing in Section 1 of this Release of Claims shall prevent me from (a) initiating or causing to be initiated on my behalf any complaint, charge, claim or proceeding against the Company before any local, state or federal agency, court or other body challenging the validity of the waiver of my claims under ADEA contained in Section 1 of this Release of Claims (but no other portion of such waiver), or (b) initiating or participating in an investigation or proceeding conducted by the EEOC.

I represent and warrant that I have returned to the Company any and all Confidential Information and other property of the Company and its Affiliates that I had in my possession, custody or control on the date my employment with the Company terminated and that I have retained no such property. Without limiting the foregoing, I also represent and warrant that I have retained no copy of any such documents, materials or information.

In signing this Release of Claims, I acknowledge that I have had a reasonable amount of time to consider the terms of this Release of Claims and that I am signing this Release of Claims voluntarily and with a full understanding of its terms. I acknowledge my understanding that I may not sign this Release of Claims prior to the termination of my employment, but that I may consider the terms of this Release of Claims for up to [twenty-one (21)][forty-five (45)] days (or such longer period as the Company may specify in order to render this Release of Claims fully effective) from the date I receive this Release of Claims. I also acknowledge that I am advised by the Company, TMHC and their Affiliates to seek the advice of an attorney prior to signing this Release of Claims and that I have, in fact, consulted with an attorney prior to signing this Release of Claims; that I have had sufficient time to consider this Release of Claims and to consult with an attorney, if I wished to do so, or to consult with any other person of my choosing before signing; and that I am signing this Release of Claims voluntarily and with a full understanding of its terms.

A-2

I further acknowledge that, in signing this Release of Claims, I have not relied on any promises or representations, express or implied, that are not set forth expressly herein. I understand that I may revoke this Release of Claims at any time within seven (7) days of the date of my signing by written notice to the Company in accordance with Section 15 of the Employment Agreement and that neither the Company nor any other person is obligated to provide any of the Severance Payments to me until eight (8) days have passed since my signing of this Release of Claims without my having revoked this Release of Claims. If I revoke this Release of Claims, I shall be deemed not to have accepted the terms of this Release of Claims, and no action shall be required of any of the Released Parties under any section of this Release of Claims.

I acknowledge and agree that I continue to be bound by the provisions of Sections 6, 7, and 9 of the Employment Agreement, which shall survive my termination of employment with the Company and remain in full force and effect in accordance with their terms. On the date of my termination, the Company hereby agrees to use reasonable efforts to advise its executive officers not to make any statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, regarding me that are disparaging or damaging to my reputation.

This Release of Claims does not constitute an admission of liability or wrongdoing of any kind by the Company or me.

In accordance with Section 4(c) of the Employment Agreement, I hereby resign from all positions on the Board and all committees thereof (and, if applicable, from the board of directors or similar governing bodies (and all committees thereof) of all other Affiliates of the Company) and from all other positions and offices that I hold with the Company and its subsidiaries and Affiliates. I agree to promptly execute such further documents as the Company, in its sole discretion, shall reasonably deem necessary to effect the foregoing.

10.

The provisions of this Release of Claims shall be binding upon my heirs, executors, administrators, legal representatives and assigns. A failure of any of the Released Parties to insist on strict compliance with any provision of this Release of Claims shall not be deemed a waiver of such provision or any other provision hereof. If any provision of this Release of Claims is determined to be so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable, and in the event that any provision is determined to be entirely unenforceable, such provision shall be deemed severable, such that all other provisions of this Release of Claims shall remain valid and binding upon me. For the avoidance of doubt, each of the Released Parties shall be a third-party beneficiary to this Release of Claims and shall be entitled to enforce this Release of Claims in accordance with its terms.

11.

With respect to the matters herein stated as the subject of release, I do hereby waive and relinquish any and all rights which I may have under the laws of the State of Arizona.

12.

This Release of Claims shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of Arizona, without reference to the principles of conflicts of law of Arizona or any other jurisdiction, and where applicable, the laws of the United States.

* * * * * Intending to be legally bound, I have signed this Release of Claims as of the date written below.

A-3

A-4

Signature:

(not to be executed until termination of employment)

Name (please print):

Date Signed:

Acknowledged:

TAYLOR MORRISON, INC.

By:

Name:

Title:

A-5

EX-31.1 4 tmhc-ex31_1.htm EX-31.1 EX-31.1

EXHIBIT 31.1

CEO CERTIFICATION

PURSUANT TO SECTION 302 OF THE

SARBANES – OXLEY ACT OF 2002

I, Sheryl D. Palmer, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarterly period ended June 30, 2023 of Taylor Morrison Home Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 26, 2023


By:		/s/ Sheryl D. Palmer
		Sheryl D. Palmer
		Chairman of the Board of Directors and Chief Executive Officer
		Taylor Morrison Home Corporation

EX-31.2 5 tmhc-ex31_2.htm EX-31.2 EX-31.2

EXHIBIT 31.2

CFO CERTIFICATION

PURSUANT TO SECTION 302 OF THE

SARBANES – OXLEY ACT OF 2002

I, Curt VanHyfte, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarterly period ended June 30, 2023 of Taylor Morrison Home Corporation;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 26, 2023


By:		/s/ Curt VanHyfte
		Curt VanHyfte
		Executive Vice President and Chief Financial Officer
		Taylor Morrison Home Corporation

EX-32.1 6 tmhc-ex32_1.htm EX-32.1 EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Taylor Morrison Home Corporation (the “Company”) for the period ending June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sheryl D. Palmer, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


July 26, 2023		/s/ Sheryl D. Palmer
		Sheryl D. Palmer
		Chairman of the Board of Directors and Chief Executive Officer
		Taylor Morrison Home Corporation

EX-32.2 7 tmhc-ex32_2.htm EX-32.2 EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Taylor Morrison Home Corporation (the “Company”) for the period ending June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Curt VanHyfte, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


July 26, 2023		/s/ Curt VanHyfte
		Curt VanHyfte
		Executive Vice President and Chief Financial Officer
		Taylor Morrison Home Corporation