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 September 30, 2022

OR

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

For the transition period from                      to                     

Commission File Number: 001-35873  

TAYLOR MORRISON HOME CORPORATION

(Exact name of registrant as specified in its Charter)

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

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

(480) 840-8100

(Registrant’s telephone number, including area code)

N/A

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.00001 par value	TMHC	New York Stock Exchange

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

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

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

Large Accelerated Filer	☒	Accelerated filer	☐
Non-accelerated filer	¨	Smaller reporting company	☐
Emerging growth company	☐

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

Act. ¨ 

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

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

Class	Outstanding as of October 26, 2022
Common stock, $0.00001 par value	108,346,617

TAYLOR MORRISON HOME CORPORATION

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements of Taylor Morrison Home Corporation (Unaudited)	2
Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	2
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021	3
Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021	4
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	6
Notes to the Unaudited Condensed Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3. Quantitative and Qualitative Disclosures About Market Risk	38
Item 4. Controls and Procedures	39
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	40
Item 1A. Risk Factors	40
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3. Defaults Upon Senior Securities	40
Item 4. Mine Safety Disclosures	40
Item 5. Other Information	40
Item 6. Exhibits	41
SIGNATURES	42

1

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TAYLOR MORRISON HOME CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, unaudited)

	September 30, 2022		December 31, 2021
Assets
Cash and cash equivalents	$	329,244	$	832,821
Restricted cash	578		3,519
Total cash, cash equivalents, and restricted cash	329,822		836,340
Owned inventory	5,904,344		5,444,207
Consolidated real estate not owned	54,733		55,314
Total real estate inventory	5,959,077		5,499,521
Land deposits	290,340		229,535
Mortgage loans held for sale	161,264		467,534
Derivative assets	23,832		2,110
Lease right of use assets	82,226		85,863
Prepaid expenses and other assets, net	188,671		314,986
Other receivables, net	214,282		150,864
Investments in unconsolidated entities	306,081		171,406
Deferred tax assets, net	151,240		151,240
Property and equipment, net	223,594		155,181
Goodwill	663,197		663,197
Total assets	$	8,593,626	$	8,727,777
Liabilities
Accounts payable	$	264,190	$	253,348
Accrued expenses and other liabilities	456,632		525,209
Lease liabilities	91,554		96,172
Income taxes payable	27,757		—
Customer deposits	527,412		485,705
Estimated development liabilities	37,958		38,923
Senior notes, net	2,173,798		2,452,322
Loans payable and other borrowings	409,791		404,386
Revolving credit facility borrowings	—		31,529
Mortgage warehouse borrowings	146,335		413,887
Liabilities attributable to consolidated real estate not owned	54,733		55,314
Total liabilities	$	4,190,160	$	4,756,795
COMMITMENTS AND CONTINGENCIES (Note 13)
Stockholders’ Equity
Total stockholders’ equity	4,403,466		3,970,982
Total liabilities and stockholders’ equity	$	8,593,626	$	8,727,777

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements

2

TAYLOR MORRISON HOME CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts, unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Home closings revenue, net	$	1,983,775	$	1,772,495	$	5,511,204	$	4,780,304
Land closings revenue	14,225		42,228		66,651		79,174
Financial services revenue	27,749		38,046		98,419		119,503
Amenity and other revenue	8,895		5,982		56,517		16,862
Total revenue	2,034,644		1,858,751		5,732,791		4,995,843
Cost of home closings	1,438,164		1,397,319		4,084,748		3,838,602
Cost of land closings	11,571		36,439		50,139		68,604
Financial services expenses	20,395		26,202		66,092		76,136
Amenity and other expenses	6,574		6,341		39,264		16,907
Total cost of revenue	1,476,704		1,466,301		4,240,243		4,000,249
Gross margin	557,940		392,450		1,492,548		995,594
Sales, commissions and other marketing costs	94,692		97,185		279,950		280,697
General and administrative expenses	52,357		70,425		189,905		201,975
Net loss/(income) from unconsolidated entities	1,180		(1,482)		2,986		(9,269)
Interest expense, net	4,382		710		13,823		594
Other expense/(income), net	5,751		47		(4,720)		1,067
Gain on extinguishment of debt, net	(71)		—		(13,542)		—
Income before income taxes	399,649		225,565		1,024,146		520,530
Income tax provision	90,418		53,098		243,300		120,865
Net income before allocation to non-controlling interests	309,231		172,467		780,846		399,665
Net loss/(income) attributable to non-controlling interests	548		(4,333)		(3,377)		(9,363)
Net income available to Taylor Morrison Home Corporation	$	309,779	$	168,134	$	777,469	$	390,302
Earnings per common share
Basic	$	2.75	$	1.35	$	6.63	$	3.07
Diluted	$	2.72	$	1.34	$	6.56	$	3.02
Weighted average number of shares of common stock:
Basic	112,701		124,378		117,242		127,217
Diluted	113,780		125,770		118,438		129,043

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements

3

TAYLOR MORRISON HOME CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data, unaudited)

For the three months ended September 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 – June 30, 2022	113,640,725	$	1	$	3,008,619	45,556,244	$	(991,276)	$	2,156,505	$	689	$	19,357	$	4,193,895
Net income	—	—		—		—	—		309,779		—		(548)		309,231
Exercise of stock options	77,951	—		1,512		—	—		—		—		—		1,512
Issuance of restricted stock units, net of shares withheld for tax(1)	2,757	—		—		—	—		—		—		—		—
Repurchase of common stock	(4,213,256)	—		—		4,213,256	(104,999)		—		—		—		(104,999)
Stock compensation expense	—	—		5,333		—	—		—		—		—		5,333
Distributions to non-controlling interests of consolidated joint ventures	—	—		—		—	—		—		—		(1,515)		(1,515)
Changes in non-controlling interests of consolidated joint ventures	—	—		—		—	—		—		—		9		9
Balance – September 30, 2022	109,508,177	$	1	$	3,015,464	49,769,500	$	(1,096,275)	$	2,466,284	$	689	$	17,303	$	4,403,466

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

For the three months ended September 30, 2021
	Common Stock			Additional Paid-in Capital		Treasury Stock			Stockholders' Equity
	Shares	Amount		Amount		Shares	Amount		Retained Earnings		Accumulated  Other Comprehensive Loss		Non-controlling Interest		Total Stockholders’ Equity
Balance – June 30, 2021	125,910,318	$	1	$	2,977,269	32,167,192	$	(624,615)	$	1,247,957	$	(1,166)	$	69,403	$	3,668,849
Net income	—	—		—		—	—		168,134		—		4,333		172,467
Exercise of stock options	276,595	—		5,778		—	—		—		—		—		5,778
Issuance of restricted stock units, net of shares withheld for tax(1)	8,789	—		(13)		—	—		—		—		—		(13)
Repurchase of common stock	(3,309,196)	—		—		3,309,196	(91,659)		—		—		—		(91,659)
Stock compensation expense	—	—		4,793		—	—		—		—		—		4,793
Distributions to non-controlling interests of consolidated joint ventures	—	—		—		—	—		—		—		(14,311)		(14,311)
Changes in non-controlling interests of consolidated joint ventures	—	—		—		—	—		—		—		(8)		(8)
Balance – September 30, 2021	122,886,506	$	1	$	2,987,827	35,476,388	$	(716,274)	$	1,416,091	$	(1,166)	$	59,417	$	3,745,896

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

4

For the nine months ended September 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	—	—		—		—	—		777,469		—		3,377		780,846
Exercise of stock options	209,940	—		4,424		—	—		—		—		—		4,424
Issuance of restricted stock units, net of shares withheld for tax(1)	405,529	—		(3,645)		—	—		—		—		—		(3,645)
Repurchase of common stock	(12,940,941)	—		—		12,940,941	(335,412)		—		—		—		(335,412)
Stock compensation expense	—	—		17,474		—	—		—		—		—		17,474
Distributions to non-controlling interests of consolidated joint ventures	—	—		—		—	—		—		—		(30,443)		(30,443)
Changes in non-controlling interests of consolidated joint ventures	—	—		—		—	—		—		—		(760)		(760)
Balance – September 30, 2022	109,508,177	$	1	$	3,015,464	49,769,500	$	(1,096,275)	$	2,466,284	$	689	$	17,303	$	4,403,466

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

For the nine months ended September 30, 2021
	Common Stock			Additional Paid-in Capital		Treasury Stock			Stockholders' Equity
	Shares	Amount		Amount		Shares	Amount		Retained Earnings		Accumulated  Other Comprehensive Loss		Non-controlling Interest		Total Stockholders’ Equity
Balance – December 31, 2020	129,476,914	$	1	$	2,926,773	25,884,756	$	(446,856)	$	1,025,789	$	(1,166)	$	89,209	$	3,593,750
Net income	—	—		—		—	—		390,302		—		9,363		399,665
Exercise of stock options	908,221	—		18,212		—	—		—		—		—		18,212
Issuance of restricted stock units, net of shares withheld for tax(1)	388,798	—		(4,870)		—	—		—		—		—		(4,870)
Warrant Exercises	1,704,205	—		32,584		—	—		—		—		—		32,584
Repurchase of common stock	(8,565,933)	—		—		8,565,933	(236,831)		—		—		—		(236,831)
Common stock surrendered in connection with warrant exercise	(1,025,699)	—		—		1,025,699	(32,587)		—		—		—		(32,587)
Stock compensation expense	—	—		15,128		—	—		—		—		—		15,128
Distributions to non-controlling interests of consolidated joint ventures	—	—		—		—	—		—		—		(39,155)		(39,155)
Balance – September 30, 2021	122,886,506	$	1	$	2,987,827	35,476,388	$	(716,274)	$	1,416,091	$	(1,166)	$	59,417	$	3,745,896

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

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

5

TAYLOR MORRISON HOME CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

	Nine Months Ended September 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income before allocation to non-controlling interests	$	780,846	$	399,665
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
Net loss/(income) from unconsolidated entities	2,986		(9,269)
Stock compensation expense	17,474		15,128
Gain on extinguishment of debt, net	(13,542)		—
Gain on land transfers	(14,508)		—
Distributions of earnings from unconsolidated entities	5,318		9,050
Depreciation and amortization	25,448		29,726
Operating lease expense	20,543		12,167
Debt issuance costs amortization	1,574		355
Change in Urban Form assets due to sale	11,675		—
Land held for sale write-downs	—		4,590
Changes in operating assets and liabilities:
Real estate inventory and land deposits	(610,346)		(678,809)
Mortgages held for sale, prepaid expenses and other assets	245,633		(216,121)
Customer deposits	41,707		209,290
Accounts payable, accrued expenses and other liabilities	(82,578)		97,129
Income taxes payable	27,757		23,554
Net cash provided by/(used in) operating activities	459,987		(103,545)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(22,478)		(15,698)
Distributions of capital from unconsolidated entities	95,517		14,237
Investments of capital into unconsolidated entities	(91,846)		(31,843)
Investments in equity securities	—		(10,000)
Net cash used in investing activities	(18,807)		(43,304)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in loans payable and other borrowings	33,495		103,805
Repayments on loans payable and other borrowings	(50,761)		(89,635)
Borrowings on revolving credit facilities	182,548		126,692
Repayments on revolving credit facilities	(214,077)		—
Borrowings on mortgage warehouse facilities	1,783,748		2,287,791
Repayments on mortgage warehouse facilities	(2,051,300)		(2,179,395)
Repayments on senior notes	(264,935)		—
Proceeds from stock option exercises	4,424		18,212
Payment of principal portion of finance lease	(1,340)		(1,325)
Repurchase of common stock, net	(335,412)		(236,831)
Payment of taxes related to net share settlement of equity awards	(3,645)		(5,494)
Cash and distributions to non-controlling interests of consolidated joint ventures, net	(30,443)		(36,095)
Net cash used in financing activities	(947,698)		(12,275)
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH	$	(506,518)	$	(159,124)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period	836,340		534,109
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period	$	329,822	$	374,985
SUPPLEMENTAL CASH FLOW INFORMATION:
Income tax payments	$	(176,683)	$	(96,753)
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
Change in loans payable issued to sellers in connection with land purchase contracts	$	184,458	$	174,297
Change in inventory not owned	$	(581)	$	(64,344)
Investments of land in unconsolidated joint ventures, net	$	146,649	$	—
Net non-cash distributions from non-controlling interests	$	—	$	(3,060)
Common stock surrendered in connection with warrant exercises	$	—	$	32,587
Common stock issued in connection with warrant exercises	$	—	$	(32,584)

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

6

TAYLOR MORRISON HOME CORPORATION

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS

Description of the Business — Taylor Morrison Home Corporation “TMHC” through its subsidiaries (together with TMHC referred to herein as “we,” “our,” “the Company” and “us”), owns and operates a residential homebuilding business and is a developer of lifestyle communities. We operate in the states of Arizona, California, Colorado, Florida, Georgia, Nevada, North and South Carolina, Oregon, Texas, and Washington. 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 (formerly referred to as 55-plus active 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 Taylor Morrison, Darling Homes Collection by Taylor Morrison, and Esplanade brand names. We operate a “Build-to-Rent” homebuilding business where we serve as a land acquirer, developer, and homebuilder. 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 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, 2021 (the “Annual Report”). In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements include all normal and recurring adjustments that are considered necessary for the fair presentation of our results for the interim periods presented. Results for interim periods are not necessarily indicative of results to be expected for a full fiscal year.

We consolidate certain joint ventures in accordance with Accounting Standards Codification (“ASC”) Topic 810, Consolidation. The loss/income from the percentage of the joint ventures not owned by us is presented as “Net loss/income attributable to non-controlling interests” on the unaudited Condensed Consolidated Statements of Operations.

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

Goodwill — The excess of the purchase price of a business acquisition over the net fair value of assets acquired and liabilities assumed is capitalized as goodwill in accordance with ASC Topic 350, Intangibles — Goodwill and Other. ASC 350 requires that goodwill and intangible assets that do not have finite lives not be amortized, but rather assessed for impairment at least annually or more frequently if certain impairment indicators are present. We perform our annual impairment test during the fourth quarter or whenever impairment indicators are present. We did not perform an impairment test during the third quarter of 2022 as indicators of impairment were not present.

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

7

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

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.

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 nine months ended September 30, 2022 and 2021, no impairment charges were recorded.

In certain cases, we may elect to cease development and/or marketing of an existing community if we believe the economic performance of the community would be maximized by deferring development for a period of time to allow for market conditions to improve. We refer to such communities as long-term strategic assets. The decision may be based on financial and/or operational metrics as determined by us. If we decide to cease development, we will evaluate the project for impairment and then cease future development and marketing activity until such a time when we believe that market conditions have improved and economic performance can be maximized. Our assessment of the carrying value of our long-term strategic assets typically includes subjective estimates of future performance, including the timing of when development will recommence, the type of product to be offered, and the margin to be realized. In the future, some of these inactive communities may be re-opened while others may be sold. As of September 30, 2022 and December 31, 2021, 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.

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Investments in Consolidated and Unconsolidated Entities

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

Unconsolidated Joint Ventures — We use the equity method of accounting for entities over which we exercise significant influence but do not have a controlling interest over the operating and financial policies of the investee. For unconsolidated entities in which we function as the managing member, we have evaluated the rights held by our joint venture partners and determined that 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 when earned and distributions are credited against our investment in the joint venture when received. These joint ventures are recorded in Investments in unconsolidated entities on the unaudited Condensed Consolidated Balance Sheets.

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 with the other partners. If we believe that the decline in the fair value of the investment is temporary, then no impairment is recorded. We recorded no material impairment charges related to the investments in unconsolidated entities for the three and nine months ended September 30, 2022 and 2021.

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

Home and land closings revenue

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

•Revenue from closings of residential real estate is recognized when closings have occurred, the buyer has made the required minimum down payment, obtained necessary financing, the risks and rewards of ownership are transferred to the buyer, and we have no continuing involvement with the property, which is generally upon the close of escrow. Revenue is reported net of any discounts and incentives.       

•Revenue from land sales is recognized when a significant down payment is received, title passes and collectability of the receivable, if any, is reasonably assured, and we have no continuing involvement with the property, which is generally upon the close of escrow.

Amenity and other revenue

We own and operate certain amenities such as golf courses, club houses, and fitness centers, which require us to provide club members with access to the facilities in exchange for the payment of club dues. We collect club dues and other fees from the club members, which are invoiced on a monthly basis. Revenue from our golf club operations is also included in amenity and

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other revenue. Amenity and other revenue also includes revenue from the sale of assets which include multi-use properties as part of our Urban Form operations.

Financial services revenue

Mortgage operations and hedging activity related to financial services are not within the scope of Topic 606. Loan origination fees (including title fees, points, and closing costs) are recognized at the time the related real estate transactions are completed, which is usually upon the close of escrow. All of the loans TMHF originates are sold to third party investors within a short period of time, on a non-recourse basis. Gains and losses from the sale of mortgages are recognized in accordance with ASC Topic 860-20, Sales of Financial Assets. TMHF does not have continuing involvement with the transferred assets; therefore, we derecognize the mortgage loans at time of sale, based on the difference between the selling price and carrying value of the related loans upon sale, recording a gain/loss on sale in the period of sale. Also included in Financial services revenue/expenses are realized and unrealized gains and losses from hedging instruments.

Recently Issued Accounting Pronouncements — In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients for applying U.S. GAAP to contracts affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The guidance was effective beginning March 12, 2020 and entities may elect to apply the amendments prospectively through December 31, 2022. The use of LIBOR is primarily limited to our financial services mortgage warehouse facilities and our Revolving Credit Facilities. Our warehouse facilities have been modified to directly replace the reference rate and did not change the amount or timing of contractual cash flows. As such, we have elected the use of the practical expedient and treated such modification as a continuation of the debt agreement. Our Revolving Credit Facilities provide the option to continue the use of LIBOR until its expiration. The adoption of ASU 2020-04 has not had a material impact on our unaudited Condensed Consolidated Financial Statements.

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 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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Numerator:
Net income available to TMHC	$	309,779	$	168,134	$	777,469	$	390,302
Denominator:
Weighted average shares – basic	112,701		124,378		117,242		127,217
Restricted stock units	629		796		659		833
Stock Options	450		596		537		756
Warrants	—		—		—		237
Weighted average shares – diluted	113,780		125,770		118,438		129,043
Earnings per common share – basic:
Net income available to Taylor Morrison Home Corporation	$	2.75	$	1.35	$	6.63	$	3.07
Earnings per common share – diluted:
Net income available to Taylor Morrison Home Corporation	$	2.72	$	1.34	$	6.56	$	3.02

The above calculations of weighted average shares exclude 1,560,934 and 1,470,941 anti-dilutive stock options and unvested restricted stock units (“RSUs”) for the three and nine months ended September 30, 2022, respectively, and 1,218,781 and 1,063,586 anti-dilutive stock options and unvested RSUs for the three and nine months ended September 30, 2021, respectively.

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4. REAL ESTATE INVENTORY AND LAND DEPOSITS

Inventory consists of the following (in thousands):

	As of
	September 30, 2022		December 31, 2021
Real estate developed and under development	$	3,787,988	$	3,895,681
Real estate held for development or held for sale (1)	44,177		70,305
Operating communities (2)	1,881,718		1,309,551
Capitalized interest	190,461		168,670
Total owned inventory	5,904,344		5,444,207
Consolidated real estate not owned	54,733		55,314
Total real estate inventory	$	5,959,077	$	5,499,521

(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.

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

	As of
	September 30, 2022			December 31, 2021
	Owned Lots	Book Value of Land and Development		Owned Lots	Book Value of Land and Development
Homebuilding owned lots
Undeveloped	15,238	$	517,929	17,671	$	636,385
Under development	11,345	1,051,698		11,446	964,353
Finished	19,874	2,257,495		18,896	2,266,309
Total homebuilding owned lots	46,457	3,827,122		48,013	3,867,047
Other assets(1)	—	5,043		5,298	98,939
Total owned lots	46,457	$	3,832,165	53,311	$	3,965,986