Business Combinations

12 Months Ended

Dec. 31, 2016

Business Combinations [Abstract]

Business Combinations

BUSINESS COMBINATIONS

On January 8, 2016, we acquired Acadia Homes, an Atlanta based homebuilder, for total consideration of $83.6 million (including $19.7 million of seller financing holdbacks and contingent consideration). We acquired JEH Homes, an Atlanta based homebuilder, on April 30, 2015 and the Charlotte, Raleigh and Chicago divisions of Orleans Homes on July 21, 2015 for combined total consideration of $233.7 million (including seller financing and contingent consideration). In accordance with ASC Topic 805, Business Combinations, all material assets and liabilities, including contingent consideration were measured and recognized at fair value as of the date of the acquisition to reflect the purchase price paid, which resulted in goodwill for each transaction.

We determined the estimated fair value of real estate inventory on a community-by-community basis primarily using the sales comparison and income approaches. The sales comparison approach was used for all inventory in process. The income approach derives a value using a discounted cash flow for income-producing real property. This approach was used exclusively for finished lots. The income approach using discounted cash flows was also used to value lot option contracts acquired. These estimated cash flows and ultimate valuation are significantly affected by the discount rate, estimates related to expected average selling prices and sales incentives, expected sales paces and cancellation rates, expected land development and construction timelines, and anticipated land development, construction, overhead costs and may vary significantly between communities.

2016 Acquisition

For Acadia Homes, the Company performed a final allocation of purchase price as of the acquisition date. The following is a summary of the fair value of assets acquired, liabilities assumed, and liabilities created:

(Dollars in thousands)	Acadia Homes
Acquisition Date	January 8, 2016
Assets acquired
Real estate inventory	$	76,152
Land deposits	984
Prepaid expenses and other assets	816
Property and equipment	204
Goodwill(1)	8,500
Total assets	$	86,656
Less liabilities assumed
Accrued expenses and other liabilities	$	2,562
Customer deposits	463
Net assets acquired	$	83,631

⁽¹⁾Goodwill is fully deductible for tax purposes. The goodwill was allocated to our East homebuilding segment.

2015 Acquisitions

For JEH Homes and the divisions of Orleans Homes, the Company performed a final allocation of purchase price as of each acquisition date. The following is a summary of the fair value of assets acquired, liabilities assumed, and liabilities created:

(Dollars in thousands)	JEH Homes		Orleans Homes		Total
Acquisition Date	April 30, 2015		July 21, 2015
Assets acquired
Real estate inventory	$	55,559	$	140,602	$	196,161
Land deposits	—		2,236		2,236
Prepaid expenses and other assets	1,301		2,436		3,737
Property and equipment	395		623		1,018
Goodwill(1)	9,125		25,198		34,323
Total assets	$	66,380	$	171,095	$	237,475
Less liabilities assumed
Accrued expenses and other liabilities	$	—	$	2,700	$	2,700
Customer deposits	—		1,081		1,081
Net assets acquired	$	66,380	$	167,314	$	233,694

⁽¹⁾Goodwill is fully deductible for tax purposes. We allocated $27.8 million and $6.5 million of goodwill to our East and West homebuilding segments, respectively.

Unaudited Pro Forma Results of Business Combinations

The following unaudited pro forma information for the years presented include the combined results of operations of our acquisitions. Our acquisition of Acadia Homes is presented as if it had been completed on January 1, 2015 and our acquisitions of JEH Homes and the Charlotte, Chicago, and Raleigh divisions of Orleans Homes as if both acquisitions had been completed on January 1, 2014. The pro forma results are presented for informational purposes only and do not purport to be indicative of the results of operations or future results that would have been achieved if the acquisitions had taken place one year prior to their respective acquisition years. The pro forma information combines the historical results of the Company with the historical results of each of our acquisitions for the periods presented.

The unaudited pro forma results for the years presented include adjustments to move transaction costs to the year prior to their acquisition. In addition, the unaudited pro forma results do not give effect to any synergies, operating efficiencies or other costs savings that may result from the acquisitions. Earnings per share utilizesnet income from continuing operations and total weighted average Class A and Class B shares. The pro forma amounts are based on available information and certain assumptions that we believe are reasonable.

Pro forma presentation for the 2016 acquisition ⁽¹⁾ 

	As Adjusted for the Year Ended December 31,
(Dollars in thousands except per share data)	2016		2015
Pro forma total revenues	$	3,550,029	$	3,054,664
Pro forma net income from continuing operations	$	207,304	$	170,456
Pro forma earnings per share from continuing operations available to TMHC - Basic and Diluted	$	1.70	$	1.39

⁽¹⁾ The pro forma results above only give effect to the Acadia acquisition.

Pro forma presentation for the 2015 acquisitions⁽¹⁾ 

	As Adjusted for the Year Ended December 31,
(Dollars in thousands except per share data)	2015		2014
Pro forma total revenues	$	3,091,766	$	2,923,241
Pro forma net income from continuing operations	$	181,122	$	240,385
Pro forma earnings per share from continuing operations available to TMHC - Basic and Diluted	$	1.48	$	1.97

⁽¹⁾ The pro forma results above only give effect to the acquisitions of JEH and divisions of Orleans Homes.