8-K
Taylor Morrison Home Corp (TMHC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): April 29, 2021
Taylor Morrison Home Corporation
(Exact name of registrant as specified in its charter)
| Delaware | 001-35873 | 83-2026677 |
|---|---|---|
| (State or other jurisdiction<br>of incorporation) | (Commission<br>File Number) | (IRS Employer<br>Identification No.) |
4900 N. Scottsdale Road, Suite 2000
Scottsdale, Arizona 85251
(Address of principal executive offices and zip code)
(480) 840-8100
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Securities registered pursuant to Section 12(b) of the Act:
| Name of each class | Trading<br> <br>Symbol(s) | Name of each exchange<br> <br>on which registered |
|---|---|---|
| Common Stock, $0.00001 par value | TMHC | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
Item 2.02 Results of Operations and Financial Condition.
On April 29, 2021, Taylor Morrison Home Corporation (the “Company”) issued a press release setting forth its financial results for its first quarter ended March 31, 2021. A copy of the Company’s press release is attached as Exhibit 99.1 to this report. The Company does not intend for this Item 2.02 or Exhibit 99.1 to be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended or otherwise subject to the liabilities of that section, nor shall they be deemed to be incorporated by reference into filings under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit<br>No. | Description |
|---|---|
| 99.1 | Press release issued April 29, 2021 by Taylor Morrison Home Corporation and furnished pursuant to Item 2.02, “Results of Operations and Financial Condition.” |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
1
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Taylor Morrison Home Corporation | |
|---|---|
| By: | /s/ Darrell C. Sherman |
| Name: | Darrell C. Sherman |
| Title: | Executive Vice President, Chief Legal Officer and Secretary |
Date: April 29, 2021
2
EX-99.1
Exhibit 99.1
News Release
| CONTACT: Investor Relations |
|---|
| (480) 734-2060 |
| investor@taylormorrison.com |
Taylor Morrison Reports First Quarter 2021 Results, Including 42% Year-Over-Year Growth to 4.3 Net Sales Orders perCommunity
SCOTTSDALE, Ariz., Apr. 29, 2021 –– Taylor Morrison Home Corporation (NYSE: TMHC), the nation’s fifth largest homebuilder, announced results for the first quarter ended March 31, 2021. Reported net income of $98 million, or $0.75 per diluted share, compared to a reported net loss of $31 million, or $0.26 per diluted share, in the first quarter of 2020.
The Company’s first quarter included the following results, as compared to the prior-year quarter:
| • | Net sales orders increased 30 percent to 4,492. |
|---|---|
| • | Monthly absorptions increased 42 percent to 4.3 net sales orders per community, a company record high.<br> |
| --- | --- |
| • | Home closings gross margin increased 320 basis points to 18.6 percent. |
| --- | --- |
| • | Backlog increased 54 percent to 10,074 sold homes with a sales value of $5.3 billion, up 70 percent.<br> |
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| • | Homebuilding lot supply increased four percent to approximately 73,000 total lots owned and controlled.<br> |
| --- | --- |
| • | Controlled lots as a percentage of total supply increased approximately 400 basis points to 32 percent.<br> |
| --- | --- |
“Our first quarter results, which included strong year-over-year improvement in many of our key operating metrics, reflect the initial benefits of our enhanced scale and local market depth as we continue to execute our strategic plan,” said Sheryl Palmer, Taylor Morrison Chairman and CEO. “We achieved a record absorption level of 4.3 net orders per community—a more than 40 percent year-over-year gain—despite taking steps to maximize our margin opportunity and align sales and production paces, reflecting the resiliency of the current demand environment and strength of our consumer-centric product offerings.”
“During the quarter, we successfully ramped our construction starts pace by over 70 percent and raised pricing in excess of inflationary costs amid the supply-side pressures facing our industry, positioning us for strong closings and margin expansion in the back half of the year. As a result, we are raising our 2021 gross margin guidance to the low-19 percent range and reaffirming our closings expectation of 14,500 to 15,000 deliveries,” said Dave Cone, Executive Vice President and Chief Financial Officer. “Based on our outlook for strong cash flow generation, we remain on track to achieve our targeted net debt-to-capital ratio in the low-30 percent range by year-end and expect further deleveraging in 2022.”
“Combined with remarkable strength in the housing market, our focus on operational excellence and capital efficiency is expected to drive our returns on equity to the mid-teens range in 2021 followed by further expansion in 2022 as we begin to fully capture the synergies from our multiple acquisitions, core strategies and digital innovations. To the latter point, we recently expanded our suite of virtual selling tools with the launch of our industry-first to-be-built online home configuration and reservation system. Our innovative digital capabilities allow us to serve our customers even more efficiently while empowering them to take control of their homebuying journey on their own terms,” said Palmer.
Business Highlights (All comparisons are of the current quarter to the prior-year quarter, unless otherwise indicated.)
Homebuilding
| • | Net sales orders increased 30 percent to 4,492, driven by strength across geographies and consumer segments.<br> |
|---|---|
| • | Monthly absorptions increased 42 percent to 4.3 net sales orders per community, a company record high.<br> |
| --- | --- |
| • | Average community count decreased nine percent to 345 due to accelerated close-outs of existing communities from strong<br>sales activity that outpaced new community openings. |
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| • | Home closings revenue increased eight percent to $1.4 billion, driven by a nearly six percent increase in average<br>sales price to approximately $483,000 and a two percent increase in closings to 2,821. |
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| • | Home closings gross margin increased 320 basis points to 18.6 percent, driven by operational improvement and the burn-off of transaction-related impacts in the prior-year quarter. |
| --- | --- |
| • | SG&A as a percentage of home closings revenue was flat at 10.8 percent. |
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| • | Backlog of sold homes at quarter end was 10,074 units, up 54 percent, with a sales value of $5.3 billion, up<br>70 percent. |
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Land Portfolio
| • | The Company invested $552 million in land acquisition and development. |
|---|---|
| • | Total homebuilding lot supply equaled approximately 73,000, up four percent. |
| --- | --- |
| • | Controlled lots as a percentage of total lots was 32 percent, up from 28 percent in the prior-year quarter to<br>the highest level since the third quarter of 2018. |
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| • | Based on trailing twelve-month home closings, the lot position represented 5.8 years of total supply and 4.0 years of<br>owned supply. |
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Financial Services
| • | Mortgage capture rate increased to 85 percent from 75 percent in the prior-year quarter and was tied with the<br>company record high of 85 percent in the fourth quarter of 2020. |
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Balance Sheet
| • | At quarter end, total available liquidity equaled approximately $1.1 billion, including $393 million of<br>unrestricted cash and $748 million of undrawn capacity on the Company’s $800 million corporate revolver. |
|---|---|
| • | Net homebuilding debt-to-capital equaled<br>40.1 percent. The Company continues to anticipate its net debt-to-capital ratio to decline to the low-30 percent range<br>by the end of 2021 and further in 2022. |
| --- | --- |
| • | During the first quarter, the Company repurchased a total of 1.4 million of its outstanding shares for<br>$38 million at an average share price of $26.54. |
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Business Outlook
Second Quarter 2021
| • | Average active community count is expected to be approximately 330 |
|---|---|
| • | Home closings are expected to be between 3,200 to 3,400 |
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| • | GAAP home closings gross margin is expected to be generally flat sequentially in the<br>mid-18 percent range |
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| • | Effective tax rate is expected to be approximately 23.0 percent |
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| • | Diluted share count is expected to be approximately 130 million |
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Full Year 2021
| • | Average active community count is expected to be approximately 330 |
|---|---|
| • | Home closings are expected to be between 14,500 to 15,000 |
| --- | --- |
| • | GAAP home closings gross margin is expected to be in the low-19 percent range<br> |
| --- | --- |
| • | SG&A as a percentage of home closings revenue is expected to be in the mid-nine<br>percent range |
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| • | Effective tax rate is expected to be approximately 23.0 percent |
| --- | --- |
| • | Diluted share count is expected to be approximately 130 million |
| --- | --- |
| • | Land and development spend is expected to be approximately $2.0 billion |
| --- | --- |
Quarterly Financial Comparison
| ($ in thousands) | Q1 2021 | Q1 2020 | Q1 2021 vs. Q1 2020 |
|---|---|---|---|
| Total Revenue | $1,417,812 | $1,345,699 | 5.4% |
| Home Closings Revenue | $1,363,429 | $1,264,640 | 7.8% |
| Home Closings Gross Margin | $253,187 | $194,137 | 30.4% |
| 18.6% | 15.4% | 320 bps increase | |
| Adjusted Home Closings Gross Margin | $253,187 | $222,503 | 13.8% |
| 18.6% | 17.6% | 100 bps increase | |
| SG&A | $147,505 | $136,853 | 7.8% |
| % of Home Closings Revenue | 10.8% | 10.8% | No change |
Earnings Webcast
A public webcast to discuss the first quarter 2021 earnings will be held later today at 8:30 a.m. Eastern time. The participant dial-in is 1 (855) 470-8731 and the passcode is 4452459. More information can be found on the Company’s investor relations website at investors.taylormorrison.com. A webcast replay will also be available on the site later today and will be available for one year from the date of the original earnings call.
About Taylor Morrison
Headquartered in Scottsdale, Arizona, Taylor Morrison operates under our family of brands—including Taylor Morrison, Esplanade, Darling Homes, William Lyon Signature Series, and Christopher Todd Communities built by Taylor Morrison. We serve a wide array of consumers from coast to coast, including first-time, move-up, luxury and 55-plus active lifestyle buyers. From 2016-2021, Taylor Morrison has been recognized as America’s Most Trusted^®^ Builder by Lifestory Research. Our unwavering pledge to sustainability, our communities and our team is highlighted in our 2020 Environmental, Social and Governance (ESG) Report.
For more information about Taylor Morrison, please visit www.taylormorrison.com.
Forward-Looking Statements
This earnings summary includes “forward-looking statements.” These statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities, as well as those of the markets we serve or intend to serve, to differ materially from those expressed in, or implied by, these statements. You can identify these statements by the fact that they do not relate to matters of a strictly factual or historical nature and generally discuss or relate to forecasts, estimates or other expectations regarding future events. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “may,” “can,” “could,” “might,” “will” and similar expressions identify forward-looking statements, including statements related to expected financial, operating and performance results, planned transactions, planned objectives of management, future developments or conditions in the industries in which we participate and other trends, developments and uncertainties that may affect our business in the future.
Such risks, uncertainties and other factors include, among other things: the scale and scope of the COVID-19 (coronavirus) outbreak and resulting pandemic; changes in general and local economic conditions; slowdowns or severe downturns in the housing market; homebuyers’ ability to obtain suitable financing; increases in interest rates, taxes or government fees; shortages in, disruptions of and cost of labor; higher cancellation rates of existing agreements of sale; competition in our industry; any increase in unemployment or underemployment; inflation or deflation; the seasonality of our business; our ability to obtain additional performance, payment and completion surety bonds and letters of credit; significant home warranty and construction defect claims; our reliance on subcontractors; failure to manage land acquisitions, inventory and development and construction processes; availability of land and lots at competitive prices; decreases in the market value of our land inventory; new or changing government regulations and legal challenges; our compliance with environmental laws and regulations regarding climate change; our ability to sell mortgages we originate and claims on loans sold to third parties; governmental regulation applicable to our financial services and title services business; the loss of any of our important commercial lender relationships; our ability to use deferred tax assets; raw materials and building supply shortages and price fluctuations; our concentration of significant operations in certain geographic areas; risks associated with our unconsolidated joint venture arrangements; information technology failures and data security breaches; costs to engage in and the success of future growth or expansion of our operations or acquisitions or disposals of businesses; costs associated with our defined benefit and defined contribution pension schemes; damages associated with any major health and safety incident; our ownership, leasing or occupation of land and the use of hazardous materials; existing or future litigation, arbitration or other claims; negative publicity or poor relations with the residents of our communities; failure to recruit, retain and develop highly skilled, competent people; utility and resource shortages or rate fluctuations; constriction of the capital markets; risks related to our substantial debt and the agreements governing such debt, including restrictive covenants contained in such agreements; our ability to access the capital markets; the risks associated with maintaining effective internal controls over financial reporting; provisions in our charter and bylaws that may delay or prevent an acquisition by a third party; and our ability to effectively manage our expanded operations.
In addition, other such risks and uncertainties may be found in our most recent annual report on Form 10-K and our subsequent quarterly reports filed with the Securities and Exchange Commission (SEC) as such factors may be updated from time to time in our periodic filings with the SEC. We undertake no duty to update any forward-looking statement, whether as a result of new information, future events or changes in our expectations, except as required by applicable law.
Taylor Morrison Home Corporation
CondensedConsolidated Statements of Operations
(In thousands, except per share amounts, unaudited)
| Three Months EndedMarch 31, | |||||
|---|---|---|---|---|---|
| 2021 | 2020 | ||||
| Home closings revenue, net | $ | 1,363,429 | $ | 1,264,640 | |
| Land closings revenue | 4,889 | 22,939 | |||
| Financial services revenue | 44,065 | 28,039 | |||
| Amenity and other revenue | 5,429 | 30,081 | |||
| Total revenues | 1,417,812 | 1,345,699 | |||
| Cost of home closings | 1,110,242 | 1,070,503 | |||
| Cost of land closings | 4,027 | 27,132 | |||
| Financial services expenses | 23,999 | 20,647 | |||
| Amenity and other expense | 5,103 | 29,661 | |||
| Total cost of revenues | 1,143,371 | 1,147,943 | |||
| Gross margin | 274,441 | 197,756 | |||
| Sales, commissions and other marketing costs | 85,952 | 86,327 | |||
| General and administrative expenses | 61,553 | 50,526 | |||
| Equity in income of unconsolidated entities | (5,661) | (2,426) | |||
| Interest income, net | (119) | (560) | |||
| Other expense, net | 975 | 6,290 | |||
| Transaction expenses | — | 86,374 | |||
| Income/(loss) before income taxes | 131,741 | (28,775) | |||
| Income tax provision | 29,298 | 781 | |||
| Net income /(loss) before allocation to non-controlling<br>interests | 102,443 | (29,556) | |||
| Net income attributable to non-controlling interests - joint<br>ventures | (4,422) | (1,875) | |||
| Net income/(loss) available to Taylor Morrison Home Corporation | $ | 98,021 | $ | (31,431 | ) |
| Earnings/(loss) per common share | |||||
| Basic | $ | 0.76 | $ | (0.26) | |
| Diluted | $ | 0.75 | $ | (0.26) | |
| Weighted average number of shares of common stock: | |||||
| Basic | 128,883 | 121,908 | |||
| Diluted | 131,246 | 121,908 |
Taylor Morrison Home Corporation
Condensed Consolidated Balance Sheets
(In thousands)
| March 31, 2021 | December 31,2020 | |||
|---|---|---|---|---|
| Assets | ||||
| Cash and cash equivalents | $ | 392,500 | $ | 532,843 |
| Restricted cash | 976 | 1,266 | ||
| Total cash, cash equivalents, and restricted cash | 393,476 | 534,109 | ||
| Owned inventory | 5,567,328 | 5,209,653 | ||
| Consolidated real estate not owned | 57,857 | 122,773 | ||
| Total real estate inventory | 5,625,185 | 5,332,426 | ||
| Land deposits | 124,469 | 125,625 | ||
| Mortgage loans held for sale | 243,250 | 201,177 | ||
| Derivative assets | 7,894 | 5,294 | ||
| Lease right of use assets | 69,435 | 73,222 | ||
| Prepaid expenses and other assets, net | 243,363 | 242,744 | ||
| Other receivables, net | 105,915 | 96,241 | ||
| Investments in unconsolidated entities | 136,105 | 127,955 | ||
| Deferred tax assets, net | 238,078 | 238,078 | ||
| Property and equipment, net | 125,118 | 97,927 | ||
| Goodwill | 663,197 | 663,197 | ||
| Total assets | $ | 7,975,485 | $ | 7,737,995 |
| Liabilities | ||||
| Accounts payable | $ | 258,349 | $ | 215,047 |
| Accrued expenses and other liabilities | 390,301 | 430,067 | ||
| Lease liabilities | 79,572 | 83,240 | ||
| Income taxes payable | 46,184 | 12,841 | ||
| Customer deposits | 421,838 | 311,257 | ||
| Estimated development liability | 40,233 | 40,625 | ||
| Senior notes, net | 2,452,354 | 2,452,365 | ||
| Loans payable and other borrowings | 392,400 | 348,741 | ||
| Revolving credit facility borrowings | — | — | ||
| Mortgage warehouse borrowings | 180,833 | 127,289 | ||
| Liabilities attributable to consolidated real estate not owned | 57,857 | 122,773 | ||
| Total liabilities | $ | 4,319,921 | $ | 4,144,245 |
| Stockholders’ Equity | ||||
| Total stockholders’ equity | 3,655,564 | 3,593,750 | ||
| Total liabilities and stockholders’ equity | $ | 7,975,485 | $ | 7,737,995 |
Homes Closed and Home Closings Revenue, Net:
| Three Months Ended March 31, | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Homes Closed | Home Closings Revenue, Net | Average Selling Price | ||||||||||||||||
| ($ in thousands) | 2021 | 2020 | Change | 2021 | 2020 | Change | 2021 | 2020 | Change | |||||||||
| East | 1,052 | 985 | 6.8% | $ | 445,885 | $ | 395,716 | 12.7% | $ | 424 | $ | 402 | 5.5 % | |||||
| Central | 691 | 819 | (15.6) | 320,177 | 373,024 | (14.2) | 463 | 455 | 1.8 | |||||||||
| West | 1,078 | 957 | 12.6 | 597,367 | 495,900 | 20.5 | 554 | 518 | 6.9 | |||||||||
| Total | 2,821 | 2,761 | 2.2% | $ | 1,363,429 | $ | 1,264,640 | 7.8% | $ | 483 | $ | 458 | 5.5 % |
Net Sales Orders:
| Three Months Ended March 31, | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net Sales Orders | Sales Value | Average Selling Price | ||||||||||||||||
| ($ in thousands) | 2021 | 2020 | Change | 2021 | 2020 | Change | 2021 | 2020 | Change | |||||||||
| East | 1,777 | 1,361 | 30.6% | $ | 878,584 | $ | 561,544 | 56.5% | $ | 494 | $ | 413 | 19.6 % | |||||
| Central | 1,072 | 906 | 18.3 | 583,482 | 424,063 | 37.6 | 544 | 468 | 16.2 | |||||||||
| West | 1,643 | 1,199 | 37.0 | 1,010,767 | 632,243 | 59.9 | 615 | 527 | 16.7 | |||||||||
| Total | 4,492 | 3,466 | 29.6% | $ | 2,472,833 | $ | 1,617,850 | 52.8% | $ | 550 | $ | 467 | 17.8 % |
Sales Order Backlog:
| As of March 31, | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Sold Homes in Backlog | Sales Value | Average Selling Price | ||||||||||||||||
| ($ in thousands) | 2021 | 2020 | Change | 2021 | 2020 | Change | 2021 | 2020 | Change | |||||||||
| East | 3,560 | 2,193 | 62.3% | $ | 1,753,135 | $ | 957,313 | 83.1% | $ | 492 | $ | 437 | 12.6 % | |||||
| Central | 2,779 | 2,167 | 28.2 | 1,463,453 | 1,041,983 | 40.4 | 527 | 481 | 9.6 | |||||||||
| West | 3,735 | 2,205 | 69.4 | 2,120,260 | 1,132,436 | 87.2 | 568 | 514 | 10.5 | |||||||||
| Total | 10,074 | 6,565 | 53.5% | $ | 5,336,848 | $ | 3,131,732 | 70.4% | $ | 530 | $ | 477 | 11.1 % |
Average Active Selling Communities:
| Three Months Ended<br>March 31, | ||||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | Change | ||||
| East | 129 | 144 | (10.4) % | |||
| Central | 106 | 134 | (20.9) | |||
| West | 110 | 100 | 10.0 | |||
| Total | **** | 345 | **** | 378 | **** | (8.7) % |
Reconciliation of Non-GAAP Financial Measures
In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”), we have provided information in this press release relating to: (i) adjusted income before income taxes and related margin, (ii) EBITDA and adjusted EBITDA, (iii) adjusted net income and adjusted earnings per share, (iv) net homebuilding debt to capitalization ratio, (v) adjusted home closings gross margin and (vi) adjusted financial services gross margin.
Adjusted income before income taxes (and related margin) is a non-GAAP financial measure that reflects our income/(loss) before income taxes excluding the impact of purchase accounting adjustments and financial services operating loss related to the acquisition of William Lyon Homes (“WLH”) and transaction expenses. EBITDA and Adjusted EBITDA are non-GAAP financial measures that measure performance by adjusting net income/(loss) before allocation to non-controlling interests to exclude interest income/(expense), net, amortization of capitalized interest, income taxes, depreciation and amortization (EBITDA), non-cash compensation expense, if any, purchase accounting adjustments and financial services operating loss relating to the acquisition of WLH and transaction expenses. Adjusted net income and adjusted earnings per share are non-GAAP financial measures that reflect the net income/(loss) available to the Company excluding the impact of purchase accounting adjustments and financial services operating loss relating to the acquisition of WLH and, transaction expenses and the tax impact due to such items. Net homebuilding debt to capitalization ratio is a non-GAAP financial measure we calculate by dividing (i) total debt, less unamortized debt issuance costs/premiums and mortgage warehouse borrowings, net of unrestricted cash and cash equivalents, by (ii) total capitalization (the sum of net homebuilding debt and total stockholders’ equity). Adjusted home closings gross margin is a non-GAAP financial measure based on GAAP home closings gross margin (which is inclusive of capitalized interest), excluding purchase accounting adjustments relating to the acquisition of WLH. Adjusted financial services gross margin is a non-GAAP financial measure calculated based on GAAP financial services margin, excluding financial services operating loss related to the acquisition of WLH.
Management uses these non-GAAP financial measures to evaluate our performance on a consolidated basis, as well as the performance of our regions, and to set targets for performance-based compensation. We also use the ratio of net homebuilding debt to total capitalization as an indicator of overall leverage and to evaluate our performance against other companies in the homebuilding industry. A reconciliation of our forward-looking net homebuilding debt to capitalization ratio to the most directly comparable GAAP financial measure cannot be provided without unreasonable effort because of the inherent difficulty of accurately forecasting the occurrence and financial impact of the adjusting items necessary for such reconciliation that have not yet occurred, are out of our control, or cannot be reasonably predicted. In the future, we may include additional adjustments in the above-described non-GAAP financial measures to the extent we deem them appropriate and useful to management and investors.
We believe that adjusted income before income taxes and related margin, adjusted net income and adjusted earnings per share, as well as EBITDA and adjusted EBITDA, are useful for investors in order to allow them to evaluate our operations without the effects of various items we do not believe are characteristic of our ongoing operations or performance and also because such metrics assist both investors and management in analyzing and benchmarking the performance and value of our business. Adjusted EBITDA also provides an indicator of general economic performance that is not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization, or unusual items. Because we use the ratio of net homebuilding debt to total capitalization to evaluate our performance against other companies in the homebuilding industry, we believe this measure is also relevant and useful to investors for that reason. We believe that adjusted home closings gross margin is useful to investors because it allows investors to evaluate the performance of our homebuilding operations without the varying effects of items or transactions we do not believe are characteristic of our ongoing operations or performance. Similarly, we believe that adjusted financial services gross margin is useful to investors because it allows investors to evaluate the performance of our financial services business without the varying effects of items or transactions we do not believe are characteristic of our ongoing operations or performance.
These non-GAAP financial measures should be considered in addition to, rather than as a substitute for, the comparable U.S. GAAP financial measures of our operating performance or liquidity. Although other companies in the homebuilding industry may report similar information, their definitions may differ. We urge investors to understand the methods used by other companies to calculate similarly-titled non-GAAP financial measures before comparing their measures to ours.
Adjusted Net Income and Adjusted Earnings Per Share
| Three Months Ended<br>March 31, | |||||
|---|---|---|---|---|---|
| ($ in thousands, except per share data) | 2021 | 2020 | |||
| Net income/(loss) available to TMHC | $ | 98,021 | $ | (31,431 | ) |
| William Lyon Homes related purchase accounting adjustments | — | 32,717 | |||
| William Lyon Homes financial services operating loss | — | 3,666 | |||
| Transaction expenses | — | 86,374 | |||
| Tax impact due to above non-GAAP reconciling items | — | (20,880 | ) | ||
| Adjusted net income | $ | 98,021 | $ | 70,446 | |
| Basic weighted average shares | 128,883 | 121,908 | |||
| Adjusted earnings per common share - Basic | $ | 0.76 | $ | 0.58 | |
| Diluted weighted average shares | 131,246 | 123,200 | |||
| Adjusted earnings per common share - Diluted | $ | 0.75 | $ | 0.57 |
Adjusted Income Before Income Taxes and Related Margin
| Three Months EndedMarch 31, | ||||
|---|---|---|---|---|
| ($ in thousands) | 2021 | 2020 | ||
| Income/(loss) before income taxes | $ | 131,741 | $ | (28,775) |
| William Lyon Homes related purchase accounting adjustments | — | 32,717 | ||
| William Lyon Homes financial services operating loss | — | 3,666 | ||
| Transaction expenses | — | 86,374 | ||
| Adjusted income before income taxes | $ | 131,741 | $ | 93,982 |
| Total revenues | $ | 1,417,812 | $ | 1,345,699 |
| Income before income taxes margin | **** | 9.3% | **** | (2.1)% |
| Adjusted income before income taxes margin | **** | 9.3% | **** | 7.0% |
Adjusted Home Closings Gross Margin
| Three Months Ended<br>March 31, | ||||||
|---|---|---|---|---|---|---|
| ($ in thousands) | 2021 | 2020 | ||||
| Home closings revenue | $ | 1,363,429 | $ | 1,264,640 | ||
| Cost of home closings | $ | 1,110,242 | $ | 1,070,503 | ||
| Home closings gross margin | $ | 253,187 | $ | 194,137 | ||
| William Lyon Homes homebuilding related purchase accounting adjustments | — | 28,366 | ||||
| Adjusted home closings gross margin | $ | 253,187 | $ | 222,503 | ||
| Home closings gross margin as a percentage of home closings revenue | 18.6 | % | 15.4 | % | ||
| Adjusted home closings gross margin as a percentage of home closings revenue | 18.6 | % | 17.6 | % |
| Adjusted Financial Services Gross Margin | ||||
|---|---|---|---|---|
| Three Months Ended<br>March 31, | ||||
| (Dollars in thousands) | 2021 | 2020 | ||
| Financial services revenue | $ | 44,065 | $ | 28,039 |
| Financial services expenses | 23,999 | 20,647 | ||
| Financial services margin | $ | 20,066 | $ | 7,392 |
| William Lyon Homes financial services operating loss | — | 3,666 | ||
| Adjusted financial services margin | $ | 20,066 | $ | 11,058 |
EBITDA and Adjusted EBITDA Reconciliation
| Three Months Ended<br>March 31, | ||||
|---|---|---|---|---|
| ($ in thousands) | 2021 | 2020 | ||
| Net income/(loss) before allocation to non-controllinginterests | $ | 102,443 | $ | (29,556) |
| Interest income, net | (119) | (560) | ||
| Amortization of capitalized interest | 27,325 | 24,298 | ||
| Income tax provision/(benefit) | 29,298 | 781 | ||
| Depreciation and amortization | 1,910 | 1,929 | ||
| EBITDA | $ | 160,857 | $ | (3,108) |
| Non-cash compensation expense | 5,682 | 11,896 | ||
| William Lyon Homes related purchase accounting adjustments | — | 32,717 | ||
| William Lyon Homes financial services operating loss | — | 3,666 | ||
| Transaction expenses | — | 86,374 | ||
| Adjusted EBITDA | $ | 166,539 | $ | 131,545 |
| Total revenues | $ | 1,417,812 | $ | 1,345,699 |
| EBITDA as a percentage of total revenues | **** | 11.3% | **** | (0.2)% |
| Adjusted EBITDA as a percentage of total revenues | **** | 11.7% | **** | 9.8% |
Net Homebuilding Debt to Capitalization Ratio Reconciliation
| ($ in thousands) | As of<br>March 31, 2021 | As of<br>December 31, 2020 | ||||
|---|---|---|---|---|---|---|
| Total debt | $ | 3,025,587 | $ | 2,928,395 | ||
| Less unamortized debt issuance premiums, net | 2,354 | 2,365 | ||||
| Less mortgage warehouse borrowings | 180,833 | 127,289 | ||||
| Total homebuilding debt | $ | 2,842,400 | $ | 2,798,741 | ||
| Less cash and cash equivalents | 392,500 | 532,843 | ||||
| Net homebuilding debt | $ | 2,449,900 | $ | 2,265,898 | ||
| Total equity | 3,655,564 | 3,593,750 | ||||
| Total capitalization | $ | 6,105,464 | $ | 5,859,648 | ||
| Net homebuilding debt to capitalization ratio | **** | 40.1 | % | **** | 38.7 | % |