Taylor Morrison(TMHC) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Presents unaudited condensed consolidated financial statements for the periods ended June 30, 2022, and 2021 Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Total cash, cash equivalents, and restricted cash | $379,293 | $836,340 | | Total real estate inventory | $6,046,368 | $5,499,521 | | Total assets | $8,650,223 | $8,727,777 | | Liabilities & Equity | | | | Senior notes, net | $2,173,998 | $2,452,322 | | Total liabilities | $4,456,328 | $4,756,795 | | Total stockholders' equity | $4,193,895 | $3,970,982 | | Total liabilities and stockholders' equity | $8,650,223 | $8,727,777 | Condensed Consolidated Statements of Operations Statements of Operations Highlights (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $1,995,023 | $1,719,280 | $3,698,147 | $3,137,092 | | Gross margin | $541,480 | $328,703 | $934,608 | $603,144 | | Income before income taxes | $391,597 | $163,224 | $624,497 | $294,965 | | Net income available to TMHC | $290,987 | $124,147 | $467,690 | $222,168 | | Diluted EPS | $2.45 | $0.95 | $3.87 | $1.70 | Condensed Consolidated Statements of Cash Flows Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Cash Flow Category | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by/(used in) operating activities | $195,490 | $(97,594) | | Net cash provided by/(used in) investing activities | $4,193 | $(22,034) | | Net cash used in financing activities | $(656,730) | $(46,360) | | Net decrease in cash | $(457,047) | $(165,988) | Notes to the Unaudited Condensed Consolidated Financial Statements - The company operates a residential homebuilding and community development business across 11 states, serving various buyer segments and offering financial services[24] Total Real Estate Inventory (in thousands) | Inventory Category | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total owned inventory | $5,975,551 | $5,444,207 | | Consolidated real estate not owned | $70,817 | $55,314 | | Total real estate inventory | $6,046,368 | $5,499,521 | - In June 2022, the company purchased $264.1 million of its 6.625% Senior Notes due 2027 through a cash tender offer, resulting in a net gain on debt extinguishment of approximately $13.5 million[64] - A new stock repurchase program of up to $500.0 million was authorized on May 31, 2022, and during Q2 2022, the company repurchased 6.8 million shares for $172.4 million[86][87] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Analyzes financial performance for Q2 2022, highlighting revenue growth and margin expansion amid market challenges - Key highlights for Q2 2022 include a 15% increase in home closings revenue to $1.9 billion and a 750 basis point improvement in gross margin to 26.6%[114] - Net sales orders for Q2 2022 decreased 25.4% to 2,554 units, attributed to rising mortgage rates and inflation, partially offset by a 17.1% increase in average selling price[133][134] - The sales order cancellation rate more than doubled to 10.8% in Q2 2022 from 5.2% in Q2 2021, driven by higher interest rates and extended build times[135] - Home closings gross margin increased to 26.6% in Q2 2022 from 19.1% in Q2 2021, reflecting strong pricing power that outpaced cost pressures[141] Total Liquidity (in thousands) | Component | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total cash, excluding restricted cash | $378,340 | $832,821 | | Revolving credit facilities availability | $683,686 | $809,733 | | Total liquidity | $1,062,026 | $1,642,554 | Quantitative and Qualitative Disclosures About Market Risk Details the company's exposure to market risks, primarily interest rate risk from its variable-rate debt - The company's operations are sensitive to interest rates, with approximately 89% of its debt being fixed-rate as of June 30, 2022, limiting the impact of rate changes[167] - A hypothetical 1% increase in interest rates would increase annual interest incurred on variable-rate debt by approximately $3.3 million[169] Controls and Procedures Confirms the effectiveness of disclosure controls and procedures with no material changes to internal controls - The company's principal executive and financial officers concluded that disclosure controls and procedures were effective as of June 30, 2022[171] - There were no material changes in the company's internal control over financial reporting during the quarter ended June 30, 2022[172] PART II. OTHER INFORMATION Legal Proceedings Discloses a key class action lawsuit regarding club membership fees, for which a $35.0 million judgment is under appeal - For details on legal proceedings, the report refers to Note 13 in the Notes to the Consolidated Financial Statements[174] Risk Factors States no material changes to risk factors previously disclosed in the Annual Report on Form 10-K - There have been no material changes to the risk factors set forth in the company's Annual Report[175] Unregistered Sales of Equity Securities and Use of Proceeds Details common stock repurchases in Q2 2022 and the authorization of a new $500 million program Share Repurchases in Q2 2022 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2022 | 833,421 | $26.86 | | May 2022 | 2,746,436 | $27.31 | | June 2022 | 3,199,641 | $23.44 | | Total | 6,779,498 | N/A | - On May 31, 2022, the Board of Directors authorized a new stock repurchase program of up to $500.0 million, effective through December 31, 2023[177] Other Information Discloses amendments to executive employment agreements regarding bonus payments after a change in control - On July 26, 2022, the company amended employment agreements for its named executive officers to provide for a prorated annual bonus payment in the event of a "Change in Control Qualifying Termination"[182] Exhibits Lists all exhibits filed with the Form 10-Q, including required executive certifications - A list of exhibits filed with the report is provided, including officer certifications under Sarbanes-Oxley Sections 302 and 906[184]