Financial Data and Key Metrics Changes - For 2019, adjusted net income was $323 million, and adjusted diluted earnings per share was $2.98, while GAAP net income was $255 million and diluted earnings per share was $2.35 [33] - Total revenues for the year were nearly $4.8 billion, with homebuilding revenues exceeding $4.6 billion, marking a year-over-year increase of just over 12% [33] - The company delivered 9,964 closings, nearly 14% higher than the previous year, and achieved a gross margin of 18.2% when adjusted for unusual charges [31][35] Business Line Data and Key Metrics Changes - The company reported a sales pace of 2.5 for the year, with Q4 sales orders up 42% year-over-year, and a sales pace of 2.6 for Q4, the strongest in company history [12][31] - Financial services generated approximately $93 million in revenue for the year, with a gross profit of about $42 million, achieving the highest profit per unit in company history during Q4 [36] Market Data and Key Metrics Changes - The company ended the year with 4,711 units in backlog, representing a sales value of approximately $2.3 billion, which is a 13% increase in units and a 9% increase in sales value compared to the previous year [42] - The entry-level consumer segment saw the highest sales pace during Q4, with all consumer segments experiencing at least a 50% increase in sales orders [16] Company Strategy and Development Direction - The company is optimistic about the market landscape, citing strong economic indicators such as low unemployment and rising personal income, which contribute to consumer confidence [11] - The acquisition of William Lyon Homes is seen as transformational, allowing the company to increase scale in existing markets and enter new ones, while enhancing entry-level exposure [19][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the integration of William Lyon Homes and the anticipated benefits from previous acquisitions, emphasizing the importance of having the right people and effective communication during the integration process [90][94] - The company plans to provide annual guidance on the combined business during the first quarter call in late April, with expectations for continued growth in the build-to-rent strategy [47][53] Other Important Information - The company was named America's most trusted homebuilder for the fifth consecutive year and recognized as one of the best places to work by Glassdoor [56][57] - The company is expanding its build-to-rent strategy into additional markets, including Dallas, Charlotte, and Orlando, with plans for continued growth in this area [53][54] Q&A Session Summary Question: Thoughts on the new organizational structure and SG&A targets - Management confirmed that long-term goals for SG&A leverage remain unchanged, with expectations for flat to slightly improved performance as integration progresses [71][72] Question: Pricing strategy in light of strong order growth - Management indicated that there is still pricing power across all segments, particularly in entry-level markets, while being cautious not to overextend [76][77] Question: Share repurchase strategy post-acquisition - Management stated that share repurchases are part of the overall strategy, but will wait until after the acquisition closes to seek new authorization [80] Question: Brand positioning in the entry-level market - Management highlighted a focus on serving both affordable first-time buyers and professional first-time buyers, with an expected increase in entry-level market penetration post-acquisition [84][85] Question: Integration challenges and success factors - Management emphasized the importance of having the right team and effective communication during the integration process, drawing on lessons learned from previous acquisitions [90][94]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Presents Taylor Morrison Home Corporation's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, with detailed notes on accounting policies [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of September 30, 2019, shows total assets of $5.34 billion, a slight increase from $5.26 billion at year-end 2018, driven by real estate inventory growth, with liabilities stable and equity increasing to $2.49 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | **Total Assets** | **$5,339,860** | **$5,264,441** | | Total cash, cash equivalents, and restricted cash | $223,796 | $331,859 | | Total real estate inventory | $4,253,674 | $3,980,565 | | **Total Liabilities** | **$2,853,882** | **$2,845,706** | | Senior notes, net | $1,634,176 | $1,653,746 | | **Total Stockholders' Equity** | **$2,485,978** | **$2,418,735** | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q3 2019 total revenue increased to $1.11 billion from $1.04 billion, driven by home closings, but net income decreased to $67.0 million from $93.6 million due to debt extinguishment loss and higher tax provision, resulting in diluted EPS of $0.63 Q3 2019 vs Q3 2018 Performance (in thousands, except per share data) | Metric | Q3 2019 | Q3 2018 | | :--- | :--- | :--- | | Total Revenue | $1,105,105 | $1,036,379 | | Gross Margin | $211,074 | $198,999 | | Income Before Income Taxes | $90,421 | $100,865 | | Net Income Available to TMHC | $67,012 | $93,568 | | Diluted EPS | $0.63 | $0.83 | Nine Months Ended 2019 vs 2018 Performance (in thousands, except per share data) | Metric | Nine Months 2019 | Nine Months 2018 | | :--- | :--- | :--- | | Total Revenue | $3,295,623 | $2,769,540 | | Gross Margin | $616,888 | $520,812 | | Income Before Income Taxes | $268,512 | $239,388 | | Net Income Available to TMHC | $199,994 | $196,446 | | Diluted EPS | $1.84 | $1.73 | [Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly improved to $153.4 million for the nine months ended September 30, 2019, while financing activities used $254.3 million, leading to a net cash decrease of $108.1 million and period-end cash of $223.8 million Cash Flow Summary (Nine Months Ended, in thousands) | Cash Flow Activity | Sep 30, 2019 | Sep 30, 2018 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $153,377 | $55,996 | | Net Cash from Investing Activities | ($7,147) | $4,270 | | Net Cash from Financing Activities | ($254,293) | ($252,396) | | **Net Decrease in Cash** | **($108,063)** | **($192,130)** | | **Cash at End of Period** | **$223,796** | **$383,373** | - The primary use of cash in financing activities for the nine months ended September 30, 2019, was the repurchase of common stock (**$157.4 million**) and net repayments on senior notes and mortgage warehouse borrowings[23](index=23&type=chunk) [Notes to the Unaudited Condensed Consolidated Financial Statements](index=15&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes detail the company's accounting policies and financial statement components, covering business description, AV Homes acquisition, revenue recognition, real estate inventory, debt, stock-based compensation, and segment reporting across homebuilding and financial services - The company's business is organized into four reportable segments: East, Central, West, and Financial Services. The homebuilding segments operate under the Taylor Morrison and Darling Homes brand names[27](index=27&type=chunk) - The company finalized the purchase price allocation for the AV Homes acquisition during Q3 2019, with real estate inventory valued at **$782.4 million** and goodwill at **$83.2 million**[50](index=50&type=chunk)[51](index=51&type=chunk) - During the nine months ended September 30, 2019, the company repurchased **8,389,348 shares** of common stock, fully utilizing its **$100 million** stock repurchase authorization[107](index=107&type=chunk) - In 2019, the company redeemed its 5.25% Senior Notes due 2021 and 6.625% Senior Notes due 2022, issuing new 5.875% Senior Notes due 2027 and 5.75% Senior Notes due 2028. This resulted in a total loss on extinguishment of debt of **$5.8 million** for the nine-month period[67](index=67&type=chunk)[69](index=69&type=chunk)[78](index=78&type=chunk)[82](index=82&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q3 and nine-month 2019 financial performance, highlighting increased sales orders and home closings driven by the AV Homes acquisition, but noting net income decline due to lower gross margins, debt extinguishment costs, and higher tax rates, alongside liquidity and debt management [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Q3 2019 total revenue grew 7% to $1.1 billion with an 8.6% increase in home closings and a 39.4% surge in net sales orders, though gross margin compressed to 18.5% and net income fell to $67.0 million due to debt extinguishment and higher taxes Q3 2019 Key Performance Indicators | Metric | Q3 2019 | Q3 2018 | % Change | | :--- | :--- | :--- | :--- | | Net Sales Orders (units) | 2,540 | 1,822 | 39.4% | | Home Closings (units) | 2,296 | 2,115 | 8.6% | | Total Revenue | $1.1 billion | $1.04 billion | 6.6% | | Home Closings Gross Margin % | 18.5% | 18.9% | (0.4) p.p. | | Net Income | $67.0 million | $93.6 million | (28.2)% | | Diluted EPS | $0.63 | $0.83 | (24.1)% | - The increase in net sales orders was primarily driven by additional active selling communities from the AV Homes acquisition, with the East region seeing a **63.5%** increase in orders[146](index=146&type=chunk)[147](index=147&type=chunk) - The total company sales order cancellation rate for Q3 2019 improved to **11.8%** from **13.6%** in Q3 2018, indicating stabilization in the mortgage rate environment[150](index=150&type=chunk)[151](index=151&type=chunk) - The decrease in net income was largely attributable to a higher effective tax rate (**25.9%** vs **6.4%** in Q3 2018) and a **$3.6 million** loss on extinguishment of debt[175](index=175&type=chunk)[176](index=176&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2019, the company maintained a strong liquidity position of $739.4 million, with operating activities generating $153.4 million in cash, while financing activities included new senior note issuances, common stock repurchases, and subsequent repayment of the 364-Day Credit Agreement Liquidity Position (in thousands) | Component | Sep 30, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Cash (excluding Restricted) | $222,049 | $329,645 | | Revolving Credit Facility Availability | $517,388 | $537,685 | | **Total Liquidity** | **$739,437** | **$867,330** | - Net cash from operating activities improved to **$153.4 million** for the nine months ended Sep 30, 2019, compared to **$56.0 million** in the prior year period, mainly due to lower spending on real estate inventory[181](index=181&type=chunk) - The company actively managed its debt profile by redeeming the 2021 and 2022 Senior Notes and issuing new notes due in 2027 and 2028[187](index=187&type=chunk)[188](index=188&type=chunk) - On October 1, 2019, the company repaid its **$200.0 million** 364-Day Credit Agreement using funds from its Revolving Credit Facility[131](index=131&type=chunk)[139](index=139&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate fluctuations, with 88% of debt fixed-rate, and a hypothetical 1% increase in rates on variable-rate debt would increase annual interest expense by approximately $2.6 million - As of September 30, 2019, **88%** of the company's debt carried a fixed interest rate, while **12%** was variable rate[224](index=224&type=chunk) - A **1%** increase in interest rates would result in an estimated **$2.6 million** annual increase in interest expense based on the variable-rate debt balance at September 30, 2019[227](index=227&type=chunk) [Item 4. Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2019, excluding AV Homes' internal controls, with no material changes to internal control over financial reporting during the quarter - The company's principal executive and financial officers concluded that disclosure controls and procedures were effective as of September 30, 2019[229](index=229&type=chunk) - The evaluation of internal controls excluded the recently acquired AV Homes, which represented **9.4%** of consolidated total assets and **15.4%** of consolidated homebuilding revenues for the quarter[229](index=229&type=chunk) - No material changes were made to the internal control over financial reporting during the third quarter of 2019[230](index=230&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal claims in the normal course of business, but management does not anticipate a material adverse impact on financial position, results of operations, or cash flows - The company is subject to various legal claims and regulatory matters in the ordinary course of business[232](index=232&type=chunk) - Management believes that the resolution of pending legal matters will not have a material adverse impact on the company's financial condition or results[232](index=232&type=chunk) [Item 1A. Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K, which investors should consider - No material changes to the risk factors disclosed in the Annual Report have occurred during the period[233](index=233&type=chunk) [Item 6. Exhibits](index=54&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including merger agreements, corporate governance documents, debt indentures, and CEO/CFO certifications - Key exhibits filed include the indenture for the **5.75%** Senior Notes due 2028 and CEO/CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906[239](index=239&type=chunk)

Financial Data and Key Metrics Changes - For Q3 2019, net income was $67 million, with earnings per share (EPS) at $0.63. Excluding debt extinguishment losses, adjusted EPS was $0.65. Total revenues exceeded $1.1 billion, marking a 7% increase from the same quarter last year [20][21][30] - Home closings gross margin, including capitalized interest, was 18.5%, exceeding guidance due to efficiencies of scale [21][24] - The effective tax rate for the quarter was 25.9%, higher than the previous year due to favorable tax initiatives in Q3 2018 [24] Business Line Data and Key Metrics Changes - The company recorded 2,540 net orders, a 39% increase year-over-year, with September orders up over 60% compared to the previous year [8][11] - Average community count was 346, leading to a sales pace of 2.4, compared to 2.2 in Q3 2018 [9] - Financial services generated approximately $23 million in revenue, with a mortgage capture rate of 77%, up from 71% in the same quarter last year [22] Market Data and Key Metrics Changes - The East region led sales orders with nearly 64% growth, while all three regions experienced at least 20% growth [8] - Phoenix market saw closings up over 30% for the fourth consecutive quarter, with sales up more than 20% for the fifth consecutive quarter [32] - Dallas market showed signs of improvement after a period of pricing challenges, indicating a recovery trend [33] Company Strategy and Development Direction - The company is focused on integrating M&A activities to maximize value creation and efficiencies, particularly following the AV Homes acquisition [13][14] - A build-to-rent strategy is being implemented, with initial investments not exceeding $25 million for 2019, and vertical construction expected to begin in 2020 [16][17] - The company aims to enhance its brand positioning and digital presence, including a new website and marketing initiatives to improve customer engagement [38][42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in consumer sentiment, citing rising incomes, a strong stock market, and low unemployment as positive indicators [15] - The company anticipates a strong Q4 and beyond, with expectations for continued order growth and market stability despite potential interest rate increases [14][50] - Management noted that the integration of legacy AV communities has been successful, contributing to overall performance [69] Other Important Information - The company ended the quarter with approximately $740 million in total available liquidity, with a net debt to capital ratio of 42.7% [28][29] - Land and development spending for the year is expected to be around $1.2 billion, including $25 million for build-to-rent activities [32][95] Q&A Session Summary Question: Consumer mindset and demand outlook - Management noted that consumers are feeling confident, with increased foot traffic and web engagement, despite some concerns about potential interest rate increases [50] Question: Community count and growth expectations - Management indicated that community count is expected to be in the low 330s for Q4, with a gradual ramp-up anticipated in 2020 [52][53] Question: Scale benefits and gross margins - Management highlighted benefits from scale in land purchasing and production, contributing to improved gross margins [58] Question: Active adult demand and political backdrop - Management expressed confidence in active adult demand, particularly in Florida, and noted that political noise is becoming less impactful on consumer sentiment [86] Question: Pricing strategies and community performance - Management confirmed that price increases are being seen across all consumer segments, with a focus on strategic pricing in new communities [93]

Taylor Morrison Home Corporation (NYSE:TMHC) Q2 2019 Earnings Conference Call July 31, 2019 8:30 AM ET Company Participants Jason Lenderman - Vice President, Investor Relations, and Treasury Sheryl Palmer - Chairman and Chief Executive Officer Dave Cone - Executive Vice President and Chief Financial Officer Conference Call Participants Ivy Zelman - Zelman and Associates Carl Reichardt - BTIG Scott Schrier - Citi Michael Rehaut - JP Morgan Jack Micenko - SIG Mike Dahl - RBC Capital Markets Kristina Chew - B ...

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, 2019 OR (Exact name of Registrant as specified in its Charter) (State or other jurisdiction of incorporation or organization) 4900 N. Scottsdale Road, Suite 2000 85251 Scottsdale, Arizona (Address of principal executive offices) (Zip Code) Delaware 83-2026677 (I.R.S. Emp ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Table of Contents For the transition period from to Commission File Number: 001-35873 TAYLOR MORRISON HOME CORPORATION (Exact name of Registrant as specified in its Charter) (State or other ...

Part I [Business](index=4&type=section&id=Item%201.%20Business) Taylor Morrison, a major US homebuilder and land developer, operates across nine states, offering diverse homes and financial services through its East, Central, West, and Financial Services segments, focusing on strategic growth and capital optimization - The company is one of the largest public homebuilders in the U.S., operating in Arizona, California, Colorado, Florida, Georgia, Illinois, North Carolina, South Carolina, and Texas[13](index=13&type=chunk)[14](index=14&type=chunk) - Operations are managed across four reportable segments: East, Central, West, and Financial Services[14](index=14&type=chunk) - Recent growth includes the strategic acquisition of AV Homes, Inc. on October 2, 2018, expanding its footprint in Florida, the Carolinas, Arizona, and Texas[14](index=14&type=chunk) - The company's long-term strategy is built on four pillars: reinvesting in core operations, pursuing M&A growth, optimizing debt, and returning cash to shareholders[29](index=29&type=chunk) [2018 Highlights and Recent Developments](index=5&type=section&id=Item%201.%20Business%20-%202018%20Highlights%20and%20Recent%20Developments) In 2018, the company achieved significant financial and operational milestones, including $4.2 billion revenue, the AV Homes acquisition, increased home closings, and a $2.1 billion sales backlog 2018 Financial Highlights | Metric | Value | Change vs. 2017 | | :--- | :--- | :--- | | Total Revenue | $4.2 billion | +8.8% | | Home Closings Revenue | $4.1 billion | +8.3% | | Net Income | $210.5 million | +19.1% | | Diluted EPS | $1.83 | +24.5% | | Adjusted Net Income | $305.5 million | N/A | | Adjusted Diluted EPS | $2.65 | N/A | - Completed the acquisition of AV Homes for total consideration of **$534.9 million** on October 2, 2018[24](index=24&type=chunk) - Completed a holding company reorganization on October 26, 2018, to simplify its capital and tax structure[24](index=24&type=chunk) 2018 Operational Highlights | Metric | Value | | :--- | :--- | | Home Closings (YoY Growth) | 9.1% | | Average Sales Price | $470,000 | | Sales Order Backlog (Year-End) | $2.1 billion | | Lots Owned and Controlled (Year-End) | ~57,000 | [Land and Development Strategies](index=7&type=section&id=Item%201.%20Business%20-%20Land%20and%20Development%20Strategies) The company utilizes a disciplined, centralized land investment strategy, significantly increasing owned and controlled lots to 56,840 with a $2.9 billion book value by year-end 2018, largely due to 2018 acquisitions Owned and Controlled Lots by Segment (as of Dec 31) | Segment | 2018 | 2017 | | :--- | :--- | :--- | | East | 32,556 | 18,772 | | Central | 12,929 | 11,727 | | West | 11,355 | 7,313 | | **Total** | **56,840** | **37,812** | Book Value of Owned Lots by Development Status (as of Dec 31, 2018) | Development Status | Owned Lots | Book Value (in thousands) | | :--- | :--- | :--- | | Raw land | 9,653 | $461,387 | | Partially developed | 12,036 | $756,376 | | Finished lots | 21,975 | $1,677,527 | | **Total** | **43,664** | **$2,895,290** | [Homes in Inventory](index=8&type=section&id=Item%201.%20Business%20-%20Homes%20in%20Inventory) As of December 31, 2018, the company's homes in inventory increased to 6,959 units, comprising backlog, models, and units for sale, with a notable rise in completed units available Homes in Inventory by Status (as of Dec 31) | Status | 2018 | 2017 | | :--- | :--- | :--- | | Homes in Backlog | 4,158 | 3,496 | | Models | 486 | 390 | | Inventory to be Sold | 2,315 | 1,433 | | **Total** | **6,959** | **5,319** | - The company expects to deliver substantially all homes in its December 31, 2018 backlog during 2019[38](index=38&type=chunk) [Financial Services](index=11&type=section&id=Item%201.%20Business%20-%20Financial%20Services) The company's financial services, TMHF and Inspired Title, provide mortgage and title services to support home sales, with TMHF operating as an independent mortgage banker selling loans on the secondary market - The strategic purpose of TMHF is to use mortgage finance as a sales tool, ensure a consistent customer experience, and manage the quality and timing of the sales order backlog[62](index=62&type=chunk)[70](index=70&type=chunk) - TMHF operates as an FHA Full Eagle lender and sells originated loans on the secondary market, releasing servicing rights, which minimizes long-term credit risk[63](index=63&type=chunk) [Risk Factors](index=14&type=section&id=Item%201A.%20Risk%20Factors) The company faces substantial risks from the cyclical homebuilding market, economic conditions, operational challenges, financial constraints including debt and land impairments, and extensive regulatory and environmental compliance - The business is cyclical and highly sensitive to changes in economic conditions, including interest rates, employment levels, and consumer confidence, which can impact demand and home prices[80](index=80&type=chunk) - A substantial majority of homebuyers require financing; changes in mortgage availability, such as tightening standards or reduced government support (Fannie Mae, Freddie Mac, FHA), could adversely affect sales[87](index=87&type=chunk)[88](index=88&type=chunk) - The company faces risks from labor shortages, increased labor costs, and reliance on subcontractors, which can cause construction delays and cost overruns[95](index=95&type=chunk)[117](index=117&type=chunk) - The market value of land inventory is subject to decline, which could lead to significant impairment charges and write-downs, adversely affecting results of operations[123](index=123&type=chunk)[124](index=124&type=chunk) - Extensive government regulations concerning zoning, environmental laws, and development fees can delay projects, increase costs, and limit homebuilding activities[126](index=126&type=chunk)[131](index=131&type=chunk) - The company has substantial debt (**$2.2 billion** as of Dec 31, 2018), and restrictive covenants in its debt agreements may limit its ability to pursue business strategies[176](index=176&type=chunk)[179](index=179&type=chunk) [Unresolved Staff Comments](index=30&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - None[191](index=191&type=chunk) [Properties](index=30&type=section&id=Item%202.%20Properties) The company leases its Scottsdale, Arizona corporate headquarters and approximately 34 other division offices and design centers, with land details provided in Item 1 - The corporate headquarters in Scottsdale, Arizona is leased, covering approximately **27,000 square feet** with a lease expiration in April 2023[194](index=194&type=chunk) - The company has approximately **34 other leases** for its division offices and design centers[194](index=194&type=chunk) [Legal Proceedings](index=31&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in routine legal claims, accruing liabilities when probable and estimable, and management anticipates no material adverse impact on financial results - The company is subject to litigation and regulatory inquiries common in the homebuilding, land development, and mortgage lending industries[195](index=195&type=chunk) - Liabilities for legal claims are accrued when a loss is probable and the amount can be reasonably estimated. Management does not currently expect pending matters to have a material adverse impact[195](index=195&type=chunk) [Mine Safety Disclosures](index=31&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[196](index=196&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=32&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's Class A Common Stock trades on the NYSE, does not pay cash dividends, and repurchased 8.5 million shares in Q4 2018 under an extended stock repurchase program - The company's Class A Common Stock trades on the New York Stock Exchange under the symbol "TMHC"[199](index=199&type=chunk) - The company does not currently pay cash dividends and anticipates retaining all available funds for business operations and expansion[204](index=204&type=chunk) - On November 21, 2018, the Board of Directors authorized an additional **$100 million** for the stock repurchase program and extended it through December 31, 2019[205](index=205&type=chunk) Share Repurchases (Q4 2018) | Period | Shares Purchased | Average Price Paid | | :--- | :--- | :--- | | Oct 2018 | 2,862,235 | $16.25 | | Nov 2018 | 2,986,571 | $16.22 | | Dec 2018 | 2,656,021 | $16.55 | | **Total Q4** | **8,504,827** | N/A | [Selected Financial Data](index=33&type=section&id=Item%206.%20Selected%20Financial%20Data) Over five years, the company demonstrated consistent growth in revenue and home closings, with total revenue reaching $4.2 billion and assets $5.3 billion by 2018, despite fluctuating net income due to one-time events Selected Financial Data (2014-2018) | (in thousands) | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | $4,227,393 | $3,885,290 | $3,550,029 | $2,976,820 | $2,708,432 | | **Net Income** | $210,480 | $176,650 | $206,563 | $229,045 | $267,501 | | **Diluted EPS** | $1.83 | $1.47 | $1.69 | $1.85 | $2.17 | | **Total Assets** | $5,264,441 | $4,325,893 | $4,220,926 | $4,122,447 | $4,111,798 | | **Total Debt** | $2,209,596 | $1,498,062 | $1,586,533 | $1,668,425 | $1,715,791 | Selected Operating Data (2014-2018) | Metric | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Home Closings (units)** | 8,760 | 8,032 | 7,369 | 6,311 | 5,642 | | **Net Sales Orders (units)** | 8,400 | 8,397 | 7,504 | 6,681 | 5,728 | | **Backlog Value (end of period, in thousands)** | $2,079,569 | $1,702,071 | $1,531,910 | $1,392,973 | $1,099,767 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong 2018 performance with $4.2 billion revenue and increased home closings, noting impacts from the AV Homes acquisition, reorganization, and a warranty charge, while highlighting strong liquidity and increased debt for strategic investments - The housing market continues to be driven by positive factors like low unemployment and strong home values, but challenges include underemployment and interest rate uncertainty[216](index=216&type=chunk) - Comparability of results is impacted by several significant 2018 events: the AV Homes acquisition, corporate reorganization costs (**$50.9 million**), a warranty charge (**$39.3 million**), and purchase accounting adjustments[219](index=219&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk) - The 2017 results were significantly impacted by the Tax Cuts and Jobs Act, which resulted in a one-time tax expense of **$61.0 million**[223](index=223&type=chunk)[225](index=225&type=chunk) Adjusted vs. GAAP Net Income (2018) | (in thousands) | GAAP | Adjusted (Non-GAAP) | | :--- | :--- | :--- | | Income before income taxes | $273,516 | $369,105 | | Net income available to TMHC | $206,364 | $299,760 | | Diluted EPS | $1.83 | $2.65 | [Results of Operations (2018 vs 2017)](index=44&type=section&id=Item%207.%20MD%26A%20-%20Results%20of%20Operations%20(2018%20vs%202017)) In 2018, total revenue increased 8.8% to $4.2 billion, driven by higher home closings, while sales order backlog grew 22.2% to $2.1 billion, and gross margin declined to 17.1% due to a warranty charge and other factors Net Sales Orders (2018 vs 2017) | Metric | 2018 | 2017 | % Change | | :--- | :--- | :--- | :--- | | Net Homes Sold | 8,400 | 8,397 | 0.0% | | Sales Value (in thousands) | $4,096,021 | $3,929,351 | +4.2% | | Average Selling Price (in thousands) | $488 | $468 | +4.3% | Home Closings Revenue (2018 vs 2017) | Metric | 2018 | 2017 | % Change | | :--- | :--- | :--- | :--- | | Homes Closed | 8,760 | 8,032 | +9.1% | | Revenue (in thousands) | $4,115,216 | $3,799,061 | +8.3% | | Average Selling Price (in thousands) | $470 | $473 | -0.6% | Home Closings Gross Margin % by Segment (2018 vs 2017) | Segment | 2018 | 2017 | | :--- | :--- | :--- | | East | 17.0% | 20.6% | | Central | 14.0% | 18.4% | | West | 19.9% | 16.7% | | **Total** | **17.1%** | **18.6%** | - The decrease in the Central region's gross margin was primarily driven by a significant warranty charge recorded in the fourth quarter of 2018[278](index=278&type=chunk) [Results of Operations (2017 vs 2016)](index=49&type=section&id=Item%207.%20MD%26A%20-%20Results%20of%20Operations%20(2017%20vs%202016)) In 2017, total revenue grew 9.4% to $3.9 billion, with increased home closings and improved gross margin to 18.6%, though net income was impacted by a $61.0 million Tax Act expense, raising the effective tax rate to 50.3% Net Sales Orders (2017 vs 2016) | Metric | 2017 | 2016 | % Change | | :--- | :--- | :--- | :--- | | Net Homes Sold | 8,397 | 7,504 | +11.9% | | Sales Value (in thousands) | $3,929,351 | $3,481,752 | +12.9% | | Average Selling Price (in thousands) | $468 | $464 | +0.9% | Home Closings Revenue (2017 vs 2016) | Metric | 2017 | 2016 | % Change | | :--- | :--- | :--- | :--- | | Homes Closed | 8,032 | 7,369 | +9.0% | | Revenue (in thousands) | $3,799,061 | $3,425,521 | +10.9% | | Average Selling Price (in thousands) | $473 | $465 | +1.7% | Home Closings Gross Margin % by Segment (2017 vs 2016) | Segment | 2017 | 2016 | | :--- | :--- | :--- | | East | 20.6% | 20.2% | | Central | 18.4% | 18.0% | | West | 16.7% | 16.6% | | **Total** | **18.6%** | **18.2%** | - The effective tax rate for 2017 was **50.3%** compared to **34.3%** in 2016, primarily due to a **$57.4 million** charge for revaluing deferred tax assets and a **$3.6 million** charge for mandatory repatriation of foreign earnings under the Tax Act[321](index=321&type=chunk)[322](index=322&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=Item%207.%20MD%26A%20-%20Liquidity%20and%20Capital%20Resources) The company's liquidity decreased to $867.3 million by year-end 2018 due to acquisitions and share repurchases, with total debt at $2.2 billion, including $1.65 billion in senior notes, and a net homebuilding debt to capitalization ratio of 41.9% Liquidity Summary (as of Dec 31) | (in thousands) | 2018 | 2017 | | :--- | :--- | :--- | | Total Cash | $329,645 | $573,925 | | Revolving Credit Facility Availability | $537,685 | $452,874 | | **Total Liquidity** | **$867,330** | **$1,026,799** | - Net cash provided by operating activities decreased to **$135.6 million** in 2018 from **$386.2 million** in 2017, mainly due to increased spending on real estate inventory[332](index=332&type=chunk) - Net cash used in financing activities was **$219.5 million** in 2018, primarily for repurchases of equity from former principal equityholders and common stock, partially offset by borrowings for the AV Homes acquisition[335](index=335&type=chunk) Senior Notes Outstanding (as of Dec 31, 2018) | Series | Principal Amount (in millions) | Interest Rate | Maturity Date | | :--- | :--- | :--- | :--- | | 2021 Notes | $550.0 | 5.250% | April 2021 | | 2022 Notes | $400.0 | 6.625% | May 2022 | | 2023 Notes | $350.0 | 5.875% | April 2023 | | 2024 Notes | $350.0 | 5.625% | March 2024 | | **Total** | **$1,650.0** | | | [Quantitative and Qualitative Disclosures About Market Risk](index=60&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate sensitivity, with 85% fixed-rate debt, and a 1% rate increase would raise annual interest expense by $3.3 million on variable-rate debt - The company's operations are sensitive to interest rate changes. At December 31, 2018, **85.0%** of debt was fixed rate and **15.0%** was variable rate[372](index=372&type=chunk) - For variable rate debt, a hypothetical **1% increase** in interest rates would increase annual interest incurred by approximately **$3.3 million**, based on the debt balance at December 31, 2018[377](index=377&type=chunk) - The mortgage loan origination business (TMHF) is not materially exposed to interest rate risk because loans are hedged or sold to investors with locked-in interest rates at the time of origination[373](index=373&type=chunk) [Financial Statements and Supplementary Data](index=61&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2018, including balance sheets, income statements, and cash flows, along with Deloitte & Touche LLP's unqualified audit report - The Report of Independent Registered Public Accounting Firm, Deloitte & Touche LLP, provides an unqualified opinion on the financial statements, stating they are presented fairly in all material respects in conformity with U.S. GAAP[381](index=381&type=chunk) Key Balance Sheet Items (as of Dec 31) | (in thousands) | 2018 | 2017 | | :--- | :--- | :--- | | Total Assets | $5,264,441 | $4,325,893 | | Total Liabilities | $2,845,706 | $1,979,348 | | Total Stockholders' Equity | $2,418,735 | $2,346,545 | Key Income Statement Items (Year Ended Dec 31) | (in thousands) | 2018 | 2017 | | :--- | :--- | :--- | | Total Revenue | $4,227,393 | $3,885,290 | | Gross Margin | $738,193 | $738,929 | | Income Before Income Taxes | $273,516 | $355,656 | | Net Income Available to TMHC | $206,364 | $91,220 | [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=104&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants regarding accounting and financial disclosure - None[599](index=599&type=chunk) [Controls and Procedures](index=104&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management and independent auditors concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2018, excluding the recently acquired AV Homes - Management concluded that disclosure controls and procedures were effective as of December 31, 2018[600](index=600&type=chunk)[601](index=601&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2018, based on the COSO 2013 framework[604](index=604&type=chunk) - The assessment of internal controls excluded the recently acquired AV Homes, which represented **18.2%** of consolidated total assets and **5.5%** of consolidated homebuilding revenues for 2018[604](index=604&type=chunk)[608](index=608&type=chunk) - The independent registered public accounting firm, Deloitte & Touche LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting[606](index=606&type=chunk) [Other Information](index=106&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[615](index=615&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Executive Compensation, and Other Matters](index=107&type=section&id=Items%2010-14) Information for Items 10-14, covering directors, executive compensation, security ownership, and related transactions, is incorporated by reference from the company's 2019 definitive proxy statement - Information for Item 10 (Directors, Executive Officers and Corporate Governance) is incorporated by reference from the 2019 Proxy Statement[617](index=617&type=chunk) - Information for Item 11 (Executive Compensation) is incorporated by reference from the 2019 Proxy Statement[618](index=618&type=chunk) - Information for Item 12 (Security Ownership), Item 13 (Certain Relationships and Related Transactions), and Item 14 (Principal Accounting Fees and Services) is incorporated by reference from the 2019 Proxy Statement[621](index=621&type=chunk)[622](index=622&type=chunk)[623](index=623&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=108&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits filed with the Form 10-K, including key agreements, corporate documents, and required CEO and CFO certifications - Lists key agreements filed as exhibits, including the merger agreement for the AV Homes acquisition and indentures for the company's various series of Senior Notes[625](index=625&type=chunk) - Includes required certifications by the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[631](index=631&type=chunk) [Form 10-K Summary](index=113&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company provides no summary for this item - None[635](index=635&type=chunk)