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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General Overview

Our principal business is residential homebuilding and the development of lifestyle communities with operations across 11 states. 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 55-plus active lifestyle (formerly referred to as active adult) buyers. We operate under various brand names including Taylor Morrison, Darling Homes Collection by Taylor Morrison, and Esplanade. We also have an exclusive partnership with Christopher Todd Communities in our “Build-to-Rent” business. (Refer to Item 1. Business for additional discussion regarding Build-to-Rent.) In addition, we develop and construct multi-use properties consisting of commercial space, retail, and multi-family properties under the Urban Form brand name. 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, as follows:

Central Austin, Dallas, Denver, and Houston

Annual Overview and Business Strategy

The COVID-19 pandemic continues to impact the national economy, our industry, and various areas within our operations; however, the demand for housing during 2021 remained strong. We believe strong demand is, in part, attributable to an increase in families working and learning from home as well as other economic factors such as low interest rates. There has been an increase in the need for indoor space and outdoor living. Furthermore, we have noted people have left several major cities throughout the United States in search for homes in more suburban areas on the outskirts of cities, which are areas in which we typically build. We experienced price appreciation in our markets and utilized price increases to meter our net sales orders pace. Interest rates have remained low and our buyer profile has remained strong, driving demand even further.

We are still impacted by various economic challenges, such as lingering underemployment concerns, stagnation in real wages and real or perceived personal wealth, inflation, national and global economic uncertainty and uncertainty around the interest rate environment. As it relates to COVID-19, we are also challenged by shortages in the labor supply and supply chain delays. The United States continues to struggle with rolling outbreaks of the virus and its variants and the effects of COVID-19 could continue to impact our financial condition and results of operations. Due to uncertainty surrounding this ongoing public health crisis and its continued impact on the U.S. economy, we cannot fully predict either the near-term or long-term effects that the pandemic will have on our business. Although we experienced strong financial and operational performance during 2021, the duration and magnitude of the impact of the COVID-19 pandemic remains unknown, and could adversely affect our business in future periods.

We continue to allocate capital and manage our land portfolio to acquire assets that have attractive characteristics, including good access to schools, shopping, recreation and transportation facilities. In connection with our overall land inventory management and investment process, our management team reviews these considerations, as well as other financial metrics, in order to decide the highest and best use of our capital.

We intend to maintain a consistent approach to land positioning within our regions, markets and communities in the foreseeable future in an effort to concentrate a greater amount of our land inventory in attractive areas. We also intend to continue to combine our land development expertise with our homebuilding operations to increase the flexibility of our business and to optimize our margin performance. From time to time, we may sell land in our communities if we believe it is best for our overall strategy and operations. We do not expect such sales to have a significant effect on our overall results, but they may impact our overall gross margins.

Factors Affecting Comparability of Results

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For the year ended December 31, 2020, and 2019, we recognized $127.2 million and $10.7 million of Transaction Expenses, respectively, on the Consolidated Statement of Operations. Transaction expenses relating to the acquisition of WLH were incurred in both 2020 and 2019, while transaction expenses relating to our acquisition of AV Homes, Inc. (“AV Homes”) were only incurred in 2019. For the year ended December 31, 2021, we did not incur such costs.

For the years ended December 31, 2020 and 2019, we recognized $10.2 million and $5.8 million of expense relating to losses on extinguishment of debt, respectively. For the year ended December 31, 2021, we did not incur a loss on extinguishment of debt.

For the years ended December 31, 2020 and 2019, we recognized $9.6 million and $8.9 million in inventory impairment charges. Impairment charges are recorded to Cost of home closings or Cost of land closings on the Consolidated Statement of Operations. For the year ended December 31, 2021, no such impairment charges were incurred.

As of December 31, 2019, our assets in Chicago were held for sale and as a result we adjusted the fair value of the assets within this division to the lower of fair value (less costs to sell) or net book value. In addition, we wrote off other components of the operations in accordance with the guidance set forth in Accounting Standards Codification (“ASC”) Topic 360, Property, Plant, and Equipment. For the year ended December 31, 2019, total impacts to the Consolidated Statement of Operations include the following: Cost of home closings impact of $0.7 million, Cost of land closings impact of $9.9 million, Sales, commissions and other marketing costs impact of $0.4 million, General and administrative expenses impact of $1.1 million and Other expense, net impact of $1.2 million. For the years ended December 31, 2021 and 2020, we did not have material fair value adjustments relating to assets reclassified as held for sale.

For the year ended December 31, 2019, we recognized an incremental $43.1 million of warranty charges and $6.8 million of legal costs related to warranty charges in our Central region, due to a construction defect issue which was isolated to one specific community. Although we believe we have identified substantially all homes impacted by the issue, it is reasonably possible that the estimated liability will change as a result of our evaluation of potential changes in the estimated repair costs and the number of homes impacted.For the years ended December 31, 2021 and 2020, we did not incur or recognize any incremental warranty or legal charges relating to this or other defect issues.

Critical Accounting Policies and Estimates

General

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions, impacting our reported results of operations and financial condition.

Certain accounting policies involve significant judgments and assumptions by management, which have a material impact on the carrying value of assets and liabilities and the recognition of income and expenses. The estimates and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances. The significant accounting policies that management believes are the most critical to aid in fully understanding and evaluating our reported financial results are critical accounting policies and are described below.

Revenue Recognition

Revenue is recognized in accordance with ASC Topic 606, Revenue from Contracts with Customers. 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 ASC 606, the following steps are applied to determine the proper home closings revenue and land closings revenue recognition: (1) identify the contract(s) with our customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5)

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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 a home. 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 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 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 and are recognized at the time the related real estate transactions are completed, 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 generally 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 is the realized and unrealized gains and losses from hedging instruments, which is not material to the consolidated financial results.

Real Estate Inventory Valuation and Costing

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 sales 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 our materials procurement process, the vertical construction of a home, and construction utilities are considered overhead costs and are 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 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 the 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 lives 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 sales when the related inventory is charged to cost of sales.

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fair value as of the assessment date. 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.

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.

In the ordinary course of business, we enter into various specific performance agreements to acquire lots.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 Consolidated Balance Sheets. 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 return for a 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. 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.

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 we intend to actively sell a parcel 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 Consolidated Statement of Operations.

Insurance Costs, Self-Insurance Reserves and Warranty Reserves

We have certain deductible limits for each of our policies under our workers’ compensation, automobile, and general liability insurance policies, and we record warranty expense and liabilities for the estimated costs of potential claims for construction defects. The excess liability limits are aggregated annually and applied in excess of automobile liability, employer’s liability under workers compensation and general liability policies. We also generally require our subcontractors and design professionals to indemnify us and provide evidence of insurance for liabilities arising from their work, subject to certain limitations. We are the parent of Beneva Indemnity Company (“Beneva”), which provides insurance coverage for construction defects discovered up to ten years following the close of a home, coverage for premise operations risk, and from time to time, property damage. We accrue for the expected costs associated with the deductibles and self-insured amounts under our various insurance policies based on historical claims, estimates for claims incurred but not reported, and potential for recovery of costs from insurance and other sources. The estimates are subject to significant variability due to factors, such as claim settlement patterns, litigation trends, and the extended period of time in which a construction defect claim might be made after the closing of a home.

We offer a one-year limited warranty to cover various defects in workmanship or materials, a two-year limited warranty on certain systems (such as electrical or cooling systems), and a ten-year limited warranty on structural defects. In addition, any outstanding warranties which were offered by our acquired companies are also honored. Warranty reserves are established as homes close in an amount estimated to be adequate to cover expected costs of materials and outside labor during warranty periods. Our warranty is not considered a separate deliverable in the sales arrangement since it is not priced apart from the home; therefore, it is accounted for in accordance with ASC Topic 450, Contingencies, which states that warranties that are not separately priced are generally accounted for by accruing the estimated costs to fulfill the warranty obligation. The amount

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of revenue related to the product is recognized in full upon the delivery of the home if all other criteria for revenue recognition have been met. As a result, we accrue the estimated costs to fulfill the warranty obligation at the time a home closes, as a component of Cost of home closings on the Consolidated Statements of Operations.

Our loss reserves for self-insured claims covered under Beneva are based on factors that include an actuarial study for structural, historical and anticipated claims, trends related to similar product types, number of home closings, and geographical areas. We also provide third-party warranty coverage on homes where required by Federal Housing Administration or Veterans Administration lenders. We regularly review the reasonableness and adequacy of our reserves and make adjustments to the balance of the preexisting reserves to reflect changes in trends and historical data as information becomes available. Self-insurance and warranty reserves are included in Accrued expenses and other liabilities in the Consolidated Balance Sheets.

We have not made any material changes in our methodology or significant assumptions used to establish our warranty reserves during these periods. In the event of a specific claim such as a construction defect for a community, we adjust our reserves accordingly, taking into consideration items such as the number of homes affected, the costs associated with each repair and the effectiveness of the repairs. Due to the degree of judgment required in making these estimates and the inherent uncertainty in potential outcomes, it is reasonably possible that actual costs could differ from those recorded and such differences could be material, resulting in a change in future estimated reserves.

Investments in Unconsolidated Entities and Variable Interest Entities (VIEs)

We are involved in joint ventures with independent third parties for real estate development, homebuilding and mortgage lending activities. 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 they have substantive participating rights that preclude the presumption of control. For these unconsolidated joint ventures, our share of net earnings or losses is included in Equity in income of 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 Consolidated Balance Sheets.

We evaluate our investments in unconsolidated joint ventures for indicators of impairment. 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, our intent and ability to recover our investment in the unconsolidated entity, financial condition and long-term prospects of the unconsolidated 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.

In the ordinary course of business, we enter into land and lot option purchase contracts in order to procure land or lots for the construction of homes. Lot option 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 an option or purchase agreement to acquire land or lots and pay a non-refundable deposit, a 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 in our Consolidated Financial Statements and reflect such assets and liabilities as real estate not owned under option agreements within our inventory balance in the Consolidated Balance Sheets.

Valuation of Deferred Tax Assets

We account for income taxes using the asset and liability method, which requires that deferred tax assets and liabilities be recognized based on future tax consequences of both temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the changes are

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enacted. Changes in existing federal and state tax laws and corporate income tax rates could affect future tax results and the realization of deferred tax assets over time.

In accordance with ASC Topic 740-10, Income Taxes, we evaluate our deferred tax assets by tax jurisdiction, including the benefit from net operating loss (“NOL”) carryforwards by tax jurisdiction, to determine if a valuation allowance is required. Companies must assess, using significant judgments, whether a valuation allowance should be established based on the consideration of all available evidence using a “more likely than not” standard with significant weight being given to evidence that can be objectively verified. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the length of statutory carryforward periods, experience with operating losses and experience of utilizing tax credit carryforwards and tax planning alternatives. We have not made any material changes in our methodology used to establish our valuation allowance during these periods. If a specific event or transaction were to occur that impacts our valuation allowance, we would reassess the evidence and adjust the allowance accordingly.

Although management believes our valuation allowance is reasonable, no assurance can be given that the final tax outcome of these matters will not be different from our current valuation of our deferred tax assets and it is reasonably possible that such differences could be material, resulting in a change in future valuations.

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Results of Operations

The following table sets forth our results of operations for the periods presented:

Year Ended December 31,

(Dollars in thousands, except per share information) 2021 2020 2019

Statements of Operations Data:

Loss on extinguishment of debt, net — 10,247 5,806

Home closings gross margin 20.3 % 16.6 % 17.0 %

Average sales price per home closed $ 524 $ 468 $ 464

Effective income tax rate 20.9 % 23.0 % 20.9 %

Earnings per common share -

Non-GAAP Measures

In addition to the results reported in accordance with GAAP, we have provided information in this annual report relating to: (i) adjusted income before income taxes and related margin, (ii) adjusted net income and adjusted earnings per share, (iii) net homebuilding debt to capitalization ratio, (iv) adjusted home closings gross margin, and (v) EBITDA and adjusted EBITDA.

Adjusted income before income taxes (and related margin) is a non-GAAP financial measure that reflects our income before income taxes excluding the impact of inventory impairment charges, transaction expenses and loss on extinguishment of debt, net. Adjusted net income and adjusted earnings per share are non-GAAP financial measures that reflect the net income available to the Company excluding the impact of inventory impairment charges, transaction expenses, loss on extinguishment of debt, net and the tax impact due to such adjustments. Net homebuilding debt to capitalization ratio is a non-GAAP financial measure we calculate by dividing (i) total debt, before unamortized debt issuance premiums/discounts, net, and mortgage warehouse borrowings, net of unrestricted cash and cash equivalents, by (ii) total capitalization (the sum of net homebuilding

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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 inventory impairment charges. EBITDA and Adjusted EBITDA are non-GAAP financial measures that measure performance by adjusting net income before allocation to non-controlling interests to exclude interest expense/(income), net, amortization of capitalized interest, income taxes, depreciation and amortization (EBITDA), non-cash compensation expense, transaction expenses, inventory impairment charges, and loss on extinguishment of debt, if any. Beginning with the third quarter of fiscal 2021, we are no longer excluding purchase accounting adjustments from these non-GAAP financial measures, and prior period measures have been recast to remove this adjustment.

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. 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. 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. EBITDA and Adjusted EBITDA provide an indicator of general economic performance that is not affected by fluctuations in interest expense or effective tax rates, levels of depreciation or amortization, or unusual items.

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

Year Ended December 31,

(Dollars in thousands, except per share data) 2021 2020

Inventory impairment charges — 9,611

Loss on extinguishment of debt, net — 10,247

Tax impact due to above non-GAAP reconciling items — (27,980)

Adjusted earnings per common share - Basic $ 5.26 $ 2.84

Adjusted earnings per common share - Diluted $ 5.18 $ 2.81

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Adjusted Income Before Income Taxes and Related Margin

Year Ended December 31,

Inventory impairment charges — 9,611

Loss on extinguishment of debt, net — 10,247

Income before income taxes margin 11.5% 5.3%

Adjusted income before income taxes margin 11.5% 7.7%

EBITDA and Adjusted EBITDA Reconciliation

Twelve Months Ended December 31,

Net income before allocation to non-controlling interests $ 682,367 $ 249,527

Interest expense/(income), net 3,792 (1,606)

Depreciation and amortization 8,138 7,152

Inventory impairment charges — 9,611

Loss on extinguishment of debt, net — 10,247

EBITDA as a percentage of total revenues 13.7% 7.3%

Adjusted EBITDA as a percentage of total revenues 13.9% 10.1%

Adjusted Home Closings Gross Margin

Twelve Months EndedDecember 31,

Inventory impairment charges — 9,611

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Net Homebuilding Debt to Capitalization Ratio

(Dollars in thousands) As of December 31, 2021 As ofDecember 31, 2020

Less unamortized debt issuance premium, net 2,322 2,365

Net homebuilding debt to capitalization ratio 34.1 % 38.7 %

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The following tables and related discussion set forth key operating and financial data for our operations as of and for the fiscal years ended December 31, 2021 and 2020. For similar operating and financial data and discussion of our fiscal 2020 results compared to our fiscal 2019 results, refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, which was filed with the SEC on February 24, 2021, and is incorporated herein by reference.

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

The results for the years ended December 31, 2021 and 2020 were impacted by various macro economic conditions. During the second half of 2020, demand for housing increased at a nationwide level as uncertainty of the impact of COVID-19 abated. In addition, interest rates declined, offering greater affordability, which added to the increased demand. Throughout 2021, we experienced market-wide supply chain disruptions, trade labor shortages, and increasing costs related to materials. The strong demand for housing has allowed us to put into place pricing strategies that partially mitigated cost increases. The average selling price for net sales orders, backlog, and homes closed increased for the year ended December 31, 2021 compared to the same period in the prior year. However, the supply chain delays and labor shortages have extended our build cycle times. Additional information for each metric is provided below.

Average Active Selling Communities(1)

Year Ended December 31,

(1) Beginning in the first quarter of 2022, we will provide ending active selling communities in lieu of average active selling communities. We believe the revised presentation is better aligned with management of the business and market conditions.

Average active selling communities for the year ended December 31, 2021 decreased by 13.5% when compared to the same period in the prior year. The decrease was primarily attributable to early community close outs resulting from the strong housing demand experienced throughout 2021 compared to 2020 causing active selling communities to sell out.

Net Sales Orders

Year Ended December 31,

(Dollars in thousands ) Net Sales Orders(1) Sales Value(1) Average Selling Price

(1) Net sales orders and sales value represent the number and dollar value, respectively, of new sales contracts executed with customers, net of cancellations.

The number of net sales orders decreased by 4.4% while net sales value increased by 19.0% for the year ended December 31, 2021, compared to the same period in the prior year. The decrease in net sales orders was primarily a result of decreases in average active selling community count and strategically limiting sales releases to better optimize profitability amid significant supply chain constraints which have extended build cycle times. An increase in average selling price of 24.4% to reflect market appreciation and partially offset rising costs was the primary driver for the increase in sales value.

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Sales Order Cancellations

Year Ended December 31,

Cancellation Rate (1)

Total Company 6.5 % 12.4 %

(1) Cancellation rate represents the number of canceled sales orders divided by gross sales orders.

The total company cancellation rate decreased to 6.5% from 12.4% for the year ended December 31, 2021, compared to the prior year. The decrease in cancellations was due to steady demand to secure housing as a result of low inventory levels, low interest rates and price appreciation.

Sales Order Backlog

As of December 31,

(1) Sales order backlog represents homes under contract for which revenue has not yet been recognized at the end of the period (including homes sold but not yet started). Some of the contracts in our sales order backlog are subject to contingencies including mortgage loan approval and buyers selling their existing homes, which can result in future cancellations.

Total backlog units and total sales value increased by 8.5% and 36.2% at December 31, 2021, respectively, compared to December 31, 2020. The increase in backlog units was primarily due to extended build cycle times as a result of significant supply chain constraints and labor shortages throughout 2021. In addition, a steady demand environment combined with a 25.6% increase in average selling price led to the increase in total sales value.

Home Closings Revenue

Year Ended December 31,

The number of homes closed and home closings revenue, net increased by 9.4% and 22.3%, respectively, for the year ended December 31, 2021, compared to the prior year. The increase in homes closed was primarily due to steady demand for housing in the latter half of 2020 and throughout 2021. In addition, supply chain delays and trade labor shortages during this timeframe extended build cycle times pushing expected fourth quarter 2020 closings into early 2021 and some anticipated fourth quarter 2021 closings into early 2022. Geographical and product mix along with rising sales prices led to an increase in homes closings revenue, net for the year ended December 31, 2021 compared to the prior year.

Land Closings Revenue

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Year Ended December 31,

We generally purchase land and lots with the intent to build and sell homes. However, 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 or if we determine certain properties no longer fit our strategic plans. Land and lot sales occur at various intervals and varying degrees of profitability. Therefore, the revenue and gross margin from land closings will fluctuate from period to period, depending on market conditions and opportunities. Land closings revenue was $99.4 million and $65.3 million, respectively, for the years ended December 31, 2021 and 2020. The increase in land closings revenue in the West for the year ended December 31, 2021, compared to the same period in the prior year was due to the sale of certain projects in our Oregon, Washington and Arizona markets.

Amenity and Other Revenue

Year Ended December 31,

Central — — —

Several of our communities operate amenities such as golf courses, club houses, and fitness centers. We provide club members access to the amenity facilities and other services in exchange for club dues and fees. Our Corporate region includes the activity relating to our Urban Form operations which primarily develops and constructs multi-use properties consisting of commercial space, retail, and multi-family units. During the year ended December 31, 2021, Urban Form sold a property in our Oregon market which resulted in the increase in amenity and other revenue for our Corporate region.

Segment Home Closings Gross Margins and Adjusted Gross Margins

The following table sets forth a reconciliation of adjusted home closings gross margin to GAAP home closings gross margin on a segment basis (see “Non-GAAP Measures” above for additional information about our use of non-GAAP measures).

For the Year Ended December 31,

East Central West Total

Inventory impairment charges — 9,611 — — — — — 9,611

Home closings gross margin increased 370 basis points to 20.3% for the year ended December 31, 2021, compared to 16.6% in the prior year. The increase is a reflection of operational enhancements, acquisition synergies and pricing power in excess

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of inflationary cost pressure. Consumer confidence, low inventory levels, and low interest rates, as well as market appreciation of resale homes, led to the ability to increase average selling prices amid the large cost increases experienced in 2021. We also strategically metered our sales to maximize profits and create margin protection as build cycle times extended due to supply chain disruptions and trade labor shortages.

Financial Services

Our Financial Services segment provides mortgage lending through our subsidiary, TMHF, title services through our subsidiary, Inspired Title, and homeowner's insurance policies through our insurance agency, TMIS. The following is a summary for the periods presented of financial services income before income taxes as well as supplemental data:

Year Ended December 31,

(In thousands, except the number of loan originations) 2021 2020 Change

Financial services transaction expenses — 8,970 (100.0) %

Financial services income before income taxes $ 71,411 $ 68,417 4.4 %

Total originations:

Year EndedDecember 31,

Supplemental data:

Funded origination breakdown:

Government (FHA, VA, USDA) 17 % 17 %

Other agency 80 % 79 %

Total agency 97 % 96 %

Non-agency 3 % 4 %

Total funded originations 100 % 100 %

Total financial services revenue increased by 5.6% for the year ended December 31, 2021, compared to the prior year. The increase in financial services revenue was primarily due to increased home closings and an increase in the capture rate compared to the prior year.

Sales, Commissions and Other Marketing Costs

Sales, commissions and other marketing costs, as a percentage of home closings revenue, net, decreased to 5.6% from 6.4% for the year ended December 31, 2021, compared to the prior year. The decrease was primarily driven by leverage from an increase in home closings revenue, net as well as sustained leverage in our sales and marketing functions.

General and Administrative Expenses

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General and administrative expenses as a percentage of home closings revenue, net, increased to 3.7% from 3.3% for the year ended December 31, 2021, compared to the prior year. The increase was primarily due to the normalization in spend in the current year as employees returned to the office, resumed travel, and incurred various expenses that had been reduced in 2020 in response to the COVID-19 pandemic.

Equity in Income of Unconsolidated Entities

Equity in income of unconsolidated entities was consistent for the years ended December 31, 2021 and 2020, respectively.

Interest Expense/(Income), net

Interest expense/(income), net was $3.8 million in expense and $1.6 million in income for the years ended December 31, 2021 and 2020, respectively. Interest expense/(income), net includes interest earned on cash balances offset by interest incurred but not capitalized on our long-term debt and other borrowings, such as the Land Banking transactions entered into in 2021.

Other Expense, net

Other expense, net for the year ended December 31, 2021 and 2020 was $23.8 million and $23.1 million, respectively. In the prior year, this mainly consisted of pre-acquisition costs on projects we are no longer pursuing. In the current year, this mainly consisted of Insurance Loss Expense.

Transaction expenses

We had no transaction expenses for the year ended December 31, 2021, while transaction expenses were $127.2 million for the year ended December 31, 2020. Transaction expenses for the prior year consisted of acquisition related costs from the acquisition of WLH, which included investment banking fees, severance, compensation, legal fees, expenses relating to credit facility paydowns and terminations, and other various integration costs.

Loss on Extinguishment of Debt, Net

We had no losses on extinguishment of debt for the year ended December 31, 2021, while loss on extinguishment of debt was $10.2 million for the year ended December 31, 2020. During the year ended December 31, 2020, we redeemed the entire principal amount of the 2023 6.00% Senior Notes as well as the 2025 5.875% Senior Notes, and as a result of the early redemption, we recorded a total net loss of $10.2 million.

Income Tax Provision

Our effective tax rate was 20.9% and 23.0% for the years ended December 31, 2021 and December 31, 2020, respectively. Our effective rate for both years was affected by a number of factors including state income taxes, energy tax credits relating to homebuilding activities, and tax benefits from the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) which contains a number of economic relief provisions in response to the COVID-19 pandemic. The effective tax rate for the year ended December 31, 2021 was favorably impacted by income attributable to non-controlling interests. The effective tax rate for the year ended December 31, 2020 was unfavorably impacted by certain expenses related to the acquisition of WLH which were not deductible for tax purposes.

Net Income

Net income before allocation to non-controlling interests and diluted earnings per share for the year ended December 31, 2021 were $682.4 million and $5.18, respectively. Net income before allocation to non-controlling interests and diluted earnings per share for the year ended December 31, 2020 were $249.5 million and $1.88, respectively. The increases in net income and diluted earnings per share in the current year compared to the prior year was primarily attributable to higher home closings revenues, net, and higher gross margin dollars. In addition, 2020 included loss on the extinguishment of debt and transaction expenses related to the acquisition of WLH which negatively impacted net income and earnings per share.

Liquidity and Capital Resources

Liquidity

We finance our operations through the following:

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•Cash generated from operations;

•Borrowings under our Revolving Credit Facilities;

•Our various series of Senior Notes;

•Mortgage warehouse facilities;

•Project-level real estate financing (including non-recourse loans, land banking, and joint ventures); and

•Performance, payment and completion surety bonds, and letters of credit.

Cash flows for each of our communities depend on the status of the development cycle, and can differ substantially from reported earnings. Early stages of development or expansion require significant cash expenditures for land acquisitions, on and off-site development, construction of model homes, general landscaping and other amenities. Because these costs are a component of our inventory and are not recognized in our statement of operations until a home closes, we incur significant cash outflows prior to recognition of earnings.

The table below summarizes our total cash and liquidity as of the dates indicated (in thousands):

As of December 31,

$100 Million Revolving Credit Facility 100,000 —

$100 Million Revolving Credit Facility borrowings outstanding (31,529) —

We believe we have adequate capital resources from cash generated from operations and sufficient access to external financing sources from borrowings under our Revolving Credit Facilities to conduct our operations for the next twelve months. Beyond the next twelve months, our primary demand for funds will be for payments of our long-term debt as it becomes due, land purchases, lot development, home and amenity construction, long-term capital investments, investments in our joint ventures, and repurchases of common stock. We believe we will generate sufficient cash from our operations to meet the demands for such payments, however we may also access the capital markets to obtain additional liquidity through debt and equity offerings or refinance debt to secure capital for such long-term demands.

Material Cash Requirements

We have various contractual obligations with commitments to pay third parties, including but not limited to our debt facilities, land purchase and land banking contracts, and leases. These obligations impact our liquidity and capital resource needs and are presented in the table below. Our short-term demands are cash requirements for the next twelve months and long-term demands are cash requirements beyond twelve months.

Cash Requirements

(Dollars in thousands) Totals Short-Term Demands Long-Term Demands

(1) Estimated interest expense amounts for debt outstanding at the respective contractual interest rates, the weighted average of which was 4.9% as of December 31, 2021.

In addition to our contractual obligations, we also have forecasted operational cash outlays on items such as future land purchases or common stock repurchases, to maintain our strategic growth and returns to our investors. Management expects to

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invest over $2.0 billion in land acquisition and development during the next twelve months. As of December 31, 2021 we had approximately $230.4 million remaining on our share repurchase authorization, which expires on June 30, 2024.

Cash Flow Activities

Operating Cash Flow Activities

Our net cash provided by operating activities was $0.4 billion for the year ended December 31, 2021 compared to $1.1 billion for the year ended December 31, 2020. The decrease in cash provided by operating activities was primarily attributable an increase in real estate inventory and land deposits, mortgages held for sale, prepaid expenses and other assets, which was partially offset by an increase in net income due to additional homes closed and the increase in the accounts payable and accrued expenses for the year ended December 31, 2021 compared to 2020.

Investing Cash Flow Activities

Net cash used in investing activities was $74.3 million for the year ended December 31, 2021 compared to $312.8 million for the year ended December 31, 2020. The decrease in cash used in investing activities for the year ended December 31, 2021 reflects the acquisition of WLH which occurred in 2020.

Financing Cash Flow Activities

Net cash used in financing activities was $0.2 million for the year ended December 31, 2021 compared to $604.9 million for the year ended December 31, 2020. The decrease in cash used in financing activities was primarily due to our repayments of the 2023 6.00% Senior Notes and 2025 5.875% Senior Notes for the year ended December 31, 2020. In addition, our net borrowings on mortgage warehouse increased for the year ended December 31, 2021 compared to the year ended December 31, 2020.

Debt Instruments

For information regarding our debt instruments, including the terms governing our Senior Notes and our Revolving Credit Facilities, see Note 8 - Debt in the Notes to the Consolidated Financial Statements included in this annual report.

Financial Guarantees

The following table summarizes our letters of credit and surety bonds as of the dates indicated:

As of December 31,

Total outstanding letters of credit and surety bonds $ 1,181,340 $ 981,822

(1) As of December 31, 2021 and 2020, there was $200.0 million total capacity of letters of credit available under our Revolving Credit Facility.

Off-Balance Sheet Arrangements as of December 31, 2021

Investments in Land Development and Homebuilding Joint Ventures or Unconsolidated Entities

We participate in strategic land development and homebuilding joint ventures with related and unrelated third parties. The use of these entities, in some instances, enables us to acquire land to which we could not otherwise obtain access, or could not obtain access on terms that are as favorable. Our partners in these joint ventures historically have been land owners/developers, other homebuilders and financial or strategic partners. Joint ventures with land owners/developers have given us access to sites owned or controlled by our partners. Joint ventures with other homebuilders have provided us with the ability to bid jointly with our partners for large or expensive land parcels. Joint ventures with financial partners have allowed us to combine our homebuilding expertise with access to our partners’ capital.

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In certain of our unconsolidated joint ventures, we enter into loan agreements, whereby one of our subsidiaries will provide the lenders with customary guarantees, including completion, indemnity and environmental guarantees subject to usual non-recourse terms.

For the years ended December 31, 2021 and 2020, total cash contributed to unconsolidated joint ventures was $75.0 million and $36.1 million, respectively.

The following is a summary of investments in unconsolidated joint ventures:

As of December 31,

Land Option Contracts and Land Banking Agreements

We are subject to the usual obligations associated with entering into contracts (including land option contracts and land banking arrangements) for the purchase, development, and sale of real estate in our routine business. We have a number of land purchase option contracts and land banking agreements, generally through cash deposits, for the right to purchase land or lots at a future point in time with predetermined terms. We do not have title to the property and the creditors generally have no recourse. Our obligations with respect to such contracts are generally limited to the forfeiture of the related non-refundable cash deposits and/or letters of credit provided to obtain the options. At December 31, 2021 and 2020, the aggregate purchase price of these contracts was $1.3 billion and $0.8 billion, respectively.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our operations are interest rate sensitive. We monitor our exposure to changes in interest rates and incur both fixed rate and variable rate debt. At December 31, 2021, 86.5% of our debt was fixed rate and 13.5% was variable rate. None of our market sensitive instruments were entered into for trading purposes. For fixed rate debt, changes in interest rates generally affect the fair value of the debt instrument, but not our earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not impact the fair value of the debt instrument but may affect our future earnings and cash flows, and may also impact our variable rate borrowing costs, which principally relate to any borrowings under our Revolving Credit Facilities and to any borrowings by TMHF under its various warehouse facilities. As of December 31, 2021, we had $31.5 million outstanding borrowings under our $100 Million Revolving Credit Facility. We had $809.7 million of additional availability for borrowings under the Revolving Credit Facilities including $141.3 million of additional availability for letters of credit under our $800 Million Revolving Credit Facility as of December 31, 2021 (giving effect to $58.7 million of letters of credit outstanding as of such date). We are required to offer to purchase substantially all of our outstanding senior unsecured notes, as described in Note 8, Debt, at 101% of their aggregate principal amount upon the occurrence of specified change of control events. Other than in those circumstances, we do not have an obligation to prepay fixed rate debt prior to maturity and, as a result, we would not expect interest rate risk and changes in fair value to have a significant impact on our cash flows related to our fixed rate debt until such time as we are required to refinance, repurchase or repay such debt.

The following table sets forth principal payments by scheduled maturity and effective weighted average interest rates and estimated fair value of our debt obligations as of December 31, 2021. The interest rate for our variable rate debt includes the interest rate on our mortgage warehouse facilities. Because the mortgage warehouse facilities are secured by certain mortgage loans held for sale which are typically sold within approximately 20-30 days, its outstanding balance is included as a variable rate maturity in the most current period presented.

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Expected Maturity Date FairValue

Weighted average interest rate (1) 3.2 % 5.1 % 5.6 % 3.2 % 3.2 % 5.7 % 5.4 % — %

Average interest rate 1.6 % — % — % — % — % — % 1.6 % — %

(1) Represents the coupon rate of interest on the full principal amount of the debt.

(2) Based upon the amount of variable rate debt at December 31, 2021, and holding the variable rate debt balance constant, each 1% increase in interest rates would increase the interest incurred by us by approximately $4.5 million per year.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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TAYLOR MORRISON HOME CORPORATION

PageNumber

Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) 52

Consolidated Balance Sheets 54

Consolidated Statements of Operations 55

Consolidated Statements of Comprehensive Income 56

Consolidated Statements of Stockholders’ Equity 57

Consolidated Statements of Cash Flows 58

Notes to the Consolidated Financial Statements 60

Separate combined financial statements of our unconsolidated joint venture investments have been omitted because, if considered in the aggregate, they would not constitute a significant subsidiary as defined by Rule 3-09 of Regulation S-X.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Taylor Morrison Home Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Taylor Morrison Home Corporation and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Real Estate Inventory Valuation— Refer to Notes 2 and 4 to the financial statements

Critical Audit Matter Description

Inventory consists of land, land under development, homes under construction, completed homes and model homes, all of which are stated at cost. Management evaluates its real estate inventory for indicators of impairment by community during each reporting period. If indicators of impairment are present for a community, management first performs an undiscounted cash flow analysis to determine if a fair value analysis is required to be performed. The Company’s undiscounted cash flow analysis includes projections and estimates relating to sales prices, construction costs, sales pace, and other factors. Changes in these expectations may lead to a change in the outcome of the Company’s impairment analysis, and actual results may also differ from management’s assumptions.

Given the subjectivity in determining whether further impairment analysis is required for a community, management exercises significant judgment when reviewing the indicators of impairment and the undiscounted cash flow analyses, as applicable.

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Accordingly, auditing management’s judgments regarding the identification of impairment indicators and the key assumptions used in the undiscounted cash flow analyses involved especially subjective auditor judgment.

How the Critical Audit Matter Was Addressed in the Audit

We tested the operating effectiveness of controls over management’s impairment indicator analysis, including controls over key inputs into the analysis such as management’s forecast, and controls over management’s review of any undiscounted cash flows analyses for communities identified with impairment indicators.

We evaluated the reasonableness of management’s impairment indicator analysis by evaluating management's process for identifying impairment indicators, including thresholds used for investigation, and whether management appropriately considered all potential indicators. We also conducted an independent analysis to determine whether additional factors were present during the period, that may indicate that a fair value analysis is required to be performed. Additionally, to test management’s ability to develop estimates, we compared actual results for homes closed in the current year to prior projections for these same homes before closing and investigated variances.

If applicable, we evaluated the reasonableness of the key projections and estimates used in management’s undiscounted cash flow analyses by comparing the assumptions to historical information. For any communities without historical information available, we compared management’s estimates to historical estimates for similar communities, taking into consideration factors such as location, size, and type of community. We also inquired with management regarding trends and changing market conditions that were incorporated into management’s undiscounted cash flow projections in addition to consulting third-party analyst reports and projections that could identify factors that could affect a community’s recoverability.

/s/ DELOITTE & TOUCHE LLP

Phoenix, Arizona

February 23, 2022

We have served as the Company's auditor since 2011.

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TAYLOR MORRISON HOME CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

December 31,

Assets

Total cash, cash equivalents, and restricted cash 836,340 534,109

Real estate inventory:

Liabilities

Income taxes payable — 12,841

Revolving credit facility borrowings 31,529 —

Liabilities attributable to consolidated real estate not owned 55,314 122,773

COMMITMENTS AND CONTINGENCIES (Note 14)

Stockholders’ Equity

Accumulated other comprehensive income/(loss) 689 (1,166)

Non-controlling interests — joint ventures 45,129 89,209

See accompanying Notes to the Consolidated Financial Statements

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TAYLOR MORRISON HOME CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

Year Ended December 31,

Loss on extinguishment of debt, net — 10,247 5,806

Earnings per common share

Weighted average number of shares of common stock:

See accompanying Notes to the Consolidated Financial Statements

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TAYLOR MORRISON HOME CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

Year Ended December 31,

Post-retirement benefits adjustments, net of tax 1,855 (2,050) (1,117)

See accompanying Notes to the Consolidated Financial Statements

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TAYLOR MORRISON HOME CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

Common Stock AdditionalPaid-inCapital Treasury Stock Stockholders' Equity

Other comprehensive loss — — — — — — (1,117) — (1,117)

Stock compensation expense — — 14,763 — — — — — 14,763

Other comprehensive loss — — — — — — (2,050) — (2,050)

Stock compensation expense — — 27,023 — — — — — 27,023

Stock compensation expense related to WLH acquisition — — 5,106 — — — — — 5,106

Other comprehensive income — — — — — — 1,855 — 1,855

Stock compensation expense — — 19,943 — — — — — 19,943

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

See accompanying Notes to the Consolidated Financial Statements

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TAYLOR MORRISON HOME CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

For the Year ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Debt issuance costs/(premium) amortization 539 (1,852) 1,173

Inventory impairment charges — 9,611 9,384

Land held for sale impairments 4,663 4,347 —

Chicago assets held for sale valuation adjustments — — 9,942

Change in Urban Form assets due to sale 20,440 — —

Changes in operating assets and liabilities:

CASH FLOWS FROM INVESTING ACTIVITIES:

Payments for business acquisitions, net of cash acquired — (279,048) —

Investments of capital into unconsolidated entities (74,976) (36,058) (12,766)

Payments to acquire investments and securities (10,000) — —

CASH FLOWS FROM FINANCING ACTIVITIES:

Payment of deferred financing costs — (6,351) (11,603)

Payment of principle portion of finance lease (1,345) (1,325) —

Payment to acquire non-controlling interests — (35,668) —

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SUPPLEMENTAL CASH FLOW INFORMATION:

SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:

Non-cash portion of loss on debt extinguishment $ — $ 1,723 $ —

Common stock surrendered in connection with warrant exercise $ 32,587 $ — $ —

Common stock issued in connection with warrant exercise $ (32,584) $ — $ —

See accompanying Notes to the Consolidated Financial Statements

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TAYLOR MORRISON HOME CORPORATION

NOTES TO THE 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 55-plus active lifestyle (formerly referred to as active adult) 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. We also have an exclusive partnership with Christopher Todd Communities, a growing Phoenix-based developer of innovative, luxury rental communities to operate a “Build-to-Rent” homebuilding business. We serve as a land acquirer, developer, and homebuilder while Christopher Todd Communities provides community design and property management consultation. 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 Consolidated Financial Statements have been prepared in accordance with GAAP, include the accounts of TMHC and its consolidated subsidiaries, other entities where we have a controlling financial interest, and certain consolidated variable interest entities. Intercompany balances and transactions have been eliminated in consolidation.

We consolidate certain joint ventures in accordance with Accounting Standards Codification (“ASC”) Topic810, Consolidation. The income from the percentage of the joint venture not owned by us is presented as “Net income attributable to non-controlling interests - joint ventures” on the Consolidated Statements of Operations. The assets, liabilities and equity from the percentage of the joint venture not owned by us is presented as “Non-controlling interests - joint ventures” on the Consolidated Balance Sheets and Consolidated Statements of Stockholders’ Equity.

Business Combinations — Acquisitions are accounted for in accordance with ASC Topic 805-10, Business Combinations. In connection with our 2020 acquisition of William Lyon Homes, Inc. (“WLH”), we determined we obtained control of a business and inputs, processes and outputs in exchange for cash and equity consideration. All material assets and liabilities were measured and recognized at fair value as of the date of the acquisition to reflect the purchase price paid, which resulted in goodwill. Refer to Note 16 - Business Combinations for further information regarding the purchase price allocation and related acquisition accounting.

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 consolidated financial statements and accompanying notes. Significant estimates include real estate development costs to complete, valuation of real estate, valuation of acquired assets, 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.

Concentration of Credit Risk — Financial instruments that potentially subject us to concentrations of credit risk are primarily cash and cash equivalents and mortgage receivables. Cash and cash equivalents include amounts on deposit with financial institutions in the U.S. that are in excess of the Federal Deposit Insurance Corporation federally insured limits of up to $250,000. Of the different types of mortgage receivables, there was no concentration of mortgage receivables with any one customer for the year ended December 31, 2021. No losses have been experienced to date.

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In addition, the Company is exposed to credit risk to the extent that borrowers may fail to meet their contractual obligations. This risk is mitigated by collateralizing the property sold to the buyer with a mortgage, and entering into forward commitments to sell our mortgage loans held for sale, generally within 30 days of origination.

Cash and Cash Equivalents — Cash and cash equivalents consist of cash on hand, demand deposits with financial institutions, and investments with original maturities of 90 days or less. At December 31, 2021, the majority of our cash and cash equivalents were invested in both highly liquid and high-quality money market funds or on deposit with major financial institutions.

Restricted Cash — For the years ended December 31, 2021 and 2020 restricted cash consisted of cash pledged to collateralize mortgage credit lines and cash held in escrow deposits.

Leases —We recognize leases in accordance with ASC Topic 842, Leases. Our operating leases primarily consist of office space, construction trailers, model home leasebacks, and equipment or storage units. Certain of our leases offer the option to renew or to increase rental square footage. The execution of such options are at our discretion and may result in a lease modification. Operating and finance leases are recorded in Lease right of use asset and Lease liabilities on the Consolidated Balance Sheets.

A summary of our leases is shown below:

Operating Leases Finance Leases

As of December 31, As of December 31,

Weighted average discount rate 5.9 % 6.1 % 5.8 % 7.3 % 7.3 % 5.8 %

Weighted average remaining lease term (in years) 4.1 5.2 6.0 86.9 87.9 2.0

Payments on lease liabilities $ 20.7 $ 16.8 $ 9.4 $ 1.3 $ 1.3 $ —

The future minimum lease payments required under our leases as of December 31, 2021 are as follows (dollars in thousands):

(1)Includes a 90 year land lease.

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 sales 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 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.

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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 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 usually prepared in order to determine if the carrying value of the assets in that community exceeds the 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 year ended December 31, 2021, we recorded no impairment charges. For the year ended December 31, 2020, we recorded $9.6 million of impairment charges, all of which related to our East reporting segment. For the year ended December 31, 2019, we recorded $8.9 million of impairment charges, of which $2.0 million and $6.9 million related to our East and Central reporting segments, respectively. Impairment charges are recorded to Cost of home closings or Cost of land closings on the Consolidated Statement of Operations.

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 Consolidated Statement 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 ownership interest in these entities or title to assets and do not guarantee their liabilities. These land banking arrangements help us manage the financial and market risk associated with land holdings.

Land Deposits — We make deposits related to land option contracts, land banking, and land purchase contracts. Non-refundable deposits are recorded as real estate inventory in the accompanying Consolidated Balance Sheets at the time the deposit is applied to the acquisition price of the land based on the terms of the underlying agreements. To the extent the deposits are non-refundable, they are charged to other expense if the land acquisition process is terminated or no longer determined probable.

Mortgage Loans Held for Sale — Mortgage loans held for sale consist of mortgages due from buyers of Taylor Morrison homes that are financed through our mortgage finance subsidiary, TMHF. Mortgage loans held for sale are carried at fair value,

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which is calculated using observable market information, including pricing from actual market transactions, investor commitment prices, or broker quotations. The fair value for mortgage loans held for sale covered by investor commitments is generally based on commitment prices. The fair value for mortgage loans held for sale not committed to be purchased by an investor is generally based on current delivery prices using best execution pricing.

Derivative Assets — We are exposed to interest rate risk for interest rate lock commitments (“IRLCs”) and originated mortgage loans held for sale until those loans are sold in the secondary market. The price risk related to changes in the fair value of IRLCs and mortgage loans held for sale not committed to be purchased by investors are subject to change primarily due to changes in market interest rates. We manage the interest rate and price risk associated with our outstanding IRLCs and mortgage loans held for sale not committed to be purchased by investors by entering into hedging instruments such as forward loan sales commitments and mandatory delivery commitments. We expect these instruments will experience changes in fair value inverse to changes in the fair value of the IRLCs and mortgage loans held for sale not committed to investors, thereby reducing earnings volatility. Best effort sale commitments are also executed for certain loans at the time the IRLC is locked with the borrower. The fair value of the best effort IRLC and mortgages receivable are valued using the commitment price to the investor. We take into account various factors and strategies in determining what portion of the IRLCs and mortgage loans held for sale to economically hedge. ASC Topic 815-25, Derivatives and Hedging, requires that all hedging instruments be recognized as assets or liabilities on the balance sheet at their fair value. We do not meet the criteria for hedge accounting; therefore, we account for these instruments as free-standing derivatives, with changes in fair value recognized in Financial services revenue/expenses on the statement of operations in the period in which they occur.

Prepaid Expenses and Other Assets, net — Prepaid expenses and other assets, net consist of the following:

As of December 31,

Total prepaid expenses and other assets, net $ 314,986 $ 242,744

Prepaid expenses consist primarily of sales commissions, prepaid rent, impact fees and the unamortized issuance costs for the Revolving Credit Facilities. Prepaid sales commissions are recorded on pre-closing sales activities, which are recognized on the ultimate closing of the units to which they relate. Other assets consist primarily of various operating and escrow deposits, pre-acquisition costs, rebate receivables, income tax receivable, and other deferred costs. Build-to-rent and Urban Form assets consist primarily of land and development costs relating to projects under construction.

Other Receivables, net — Other receivables primarily consist of amounts expected to be recovered from various community development, municipality, and utility districts and utility deposits. Allowances are maintained for potential losses based on historical experience, present economic conditions, and other factors considered relevant. Allowances are recorded in other expense, net, when it becomes likely that some amount will not be collectible. Other receivables are written off when it is determined that collection efforts will no longer be pursued. Allowances at December 31, 2021 and 2020 were immaterial.

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 reduces the risk 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 consolidate the VIE and reflect such assets and liabilities as Consolidated real estate not owned within our real estate inventory balance in the 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

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earnings or losses is included in Equity in income of 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 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 impairment charges related to investments in unconsolidated entities for the years ended December 31, 2021, 2020 or 2019.

Income Taxes — We account for income taxes in accordance with ASC Topic 740, Income Taxes. Deferred tax assets and liabilities are recorded based on future tax consequences of temporary differences between the amounts reported for financial reporting purposes and the amounts deductible for income tax purposes, and are measured using enacted tax rates expected to apply in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the changes are enacted.

We periodically assess our deferred tax assets, including the benefit from net operating losses, to determine if a valuation allowance is required. A valuation allowance is established when, based upon available evidence, it is more likely than not that all or a portion of the deferred tax assets will not be realized. Realization of the deferred tax assets is dependent upon, among other matters, taxable income in prior years available for carryback, estimates of future income, tax planning strategies, and reversal of existing temporary differences.

Property and Equipment, net — Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is generally computed using the straight-line basis over the estimated useful lives of the assets as follows:

Buildings: 20 – 40 years

Building and leasehold improvements: 10 years or remaining life of building/lease term if less than 10 years

Information systems: over the term of the license

Furniture, fixtures and computer and equipment: 5 – 7 years

Model and sales office improvements: lesser of 3 years or the life of the community

Maintenance and repair costs are expensed as incurred.

Depreciation expense was $7.5 million, $6.3 million, and $4.8 million, respectively, for the years ended December 31, 2021, 2020, and 2019. Depreciation expense is recorded in General and administrative expenses in the Consolidated Statements of Operations.

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. For the years ended December 31, 2021, 2020 and 2019 there was no impairment of goodwill. For the year ended December 31, 2020, there was an addition to goodwill of $513.8 million related to the WLH acquisition.

Insurance Costs, Self-Insurance Reserves and Warranty Reserves — We have certain deductible limits for each of our policies under our workers’ compensation, automobile, and general liability insurance policies, and we record warranty expense and liabilities for the estimated costs of potential claims for construction defects. The excess liability is aggregated annually and applied in excess of automobile liability, employer’s liability under workers compensation and general liability policies. We also generally require our subcontractors and design professionals to indemnify us and provide evidence of insurance for liabilities arising from their work, subject to certain limitations. We are the parent of Beneva Indemnity Company (“Beneva”), which provides insurance coverage for construction defects discovered up to ten years following the close of a home, coverage

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for premise operations risk, and property damage. We accrue for the expected costs associated with the deductibles and self-insured amounts under our various insurance policies based on historical claims, estimates for claims incurred but not reported, and potential for recovery of costs from insurance and other sources. The estimates are subject to significant variability due to factors, such as claim settlement patterns, litigation trends, and the extended period of time in which a construction defect claim might be made after the closing of a home.

We offer a one year limited warranty to cover various defects in workmanship or materials, two year limited warranty on certain systems (such as electrical or cooling systems), and a ten year limited warranty on structural defects. Warranty reserves are established as homes close in an amount estimated to be adequate to cover expected costs of materials and outside labor during warranty periods. Our warranty is not considered a separate deliverable in the sales arrangement since it is not priced apart from the home, therefore, it is accounted for in accordance with ASC Topic 450, Contingencies, which states that warranties that are not separately priced are generally accounted for by accruing the estimated costs to fulfill the warranty obligation. The amount of revenue related to the product is recognized in full upon the delivery of the home if all other criteria for revenue recognition have been met. As a result, we accrue the estimated costs to fulfill the warranty obligation at the time a home closes, as a component of Cost of home closings on the Consolidated Statements of Operations.

Our loss reserves for structural defects (maintained by Beneva) are based on factors that include an actuarial study for structural, historical and anticipated claims, trends related to similar product types, number of home closings, and geographical areas. We also provide third-party warranty coverage on homes where required by Federal Housing Administration or Veterans Administration lenders. We regularly review the reasonableness and adequacy of our reserves and make adjustments to the balance of the preexisting reserves to reflect changes in trends and historical data as information becomes available. Self-insurance and warranty reserves are included in Accrued expenses and other liabilities in the Consolidated Balance Sheets.

Stock Based Compensation — We have stock options, performance-based restricted stock units and non-performance-based restricted stock units, which we account for in accordance with ASC Topic 718-10, Compensation — Stock Compensation. The fair value for stock options is measured and estimated on the date of grant using the Black-Scholes option pricing model and recognized evenly over the vesting period of the options. Performance-based restricted stock units are measured using the closing price on the date of grant and expensed using a probability of attainment calculation which determines the likelihood of achieving the performance targets. Non-performance-based restricted stock units are time-based awards and measured using the closing price on the date of grant and are expensed ratably over the vesting period.

Employee Benefit Plans — We maintain a defined contribution plan pursuant to Section 401(k) of the IRC (“401(k) Plan”). Each eligible employee may elect to make before-tax contributions up to the current tax limits. We match 100% of employees’ voluntary contributions up to 3% of eligible compensation, and 50% for each dollar contributed between 3% and 5% of eligible compensation. We contributed $11.3 million, $4.7 million, and $10.7 million to the 401(k) Plan for the twelve months ended December 31, 2021, 2020, and 2019, respectively. During the year ended December 31, 2020, the employee match portion of the plan was paused for one quarter as part of our efforts to reduce spending during the early onset of the COVID-19 pandemic.

Treasury Stock — We account for treasury stock in accordance with ASC Topic 505-30, Equity - Treasury Stock. Repurchased shares are reflected as a reduction in stockholders' equity and subsequent sale of repurchased shares are recognized as a change in equity. When factored into our weighted average calculations for purposes of earnings per share, the number of repurchased shares is based on the settlement date. To date, we have not sold any treasury stock.

Revenue Recognition — Revenue is recognized in accordance with ASC Topic 606, Revenue from Contracts with Customers. 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) identify the contract(s) with our customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) 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. Based on the application of the five steps, the following summarizes the timing and manner of home and land sales revenue:

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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 club members, which are invoiced on a monthly basis. Revenue from our golf club operations is included in amenity and 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 is the realized and unrealized gains and losses from hedging instruments.

Advertising Costs — We expense advertising costs as incurred. For the years ended December 31, 2021, 2020, and 2019, advertising costs were $30.4 million, $31.9 million, and $32.0 million, respectively. Such costs are included in General and administrative expenses on the Consolidated Statements of Operations.

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. We are currently evaluating the effect of adopting the new guidance on our consolidated financial statements and related disclosures.

In December 2019, FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. We adopted ASU 2019-12 as of January 1, 2021, but this pronouncement did not have a material impact on our consolidated financial statements and disclosures.

3. EARNINGS PER SHARE

Basic earnings per 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:

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Year Ended December 31,

Numerator:

Denominator:

Earnings per common share — basic:

Net income available to Taylor Morrison Home Corporation $ 5.26 $ 1.90 $ 2.38

Earnings per common share — diluted:

Net income available to Taylor Morrison Home Corporation $ 5.18 $ 1.88 $ 2.35

The above calculations of weighted average shares exclude 1,030,282, 2,335,006, and 2,394,703 outstanding anti-dilutive stock options and unvested performance and non-performance restricted stock units for the years ended December 31, 2021, 2020, and 2019, respectively.

4. REAL ESTATE INVENTORY AND LAND DEPOSITS

Inventory consists of the following:

As of December 31,

Real estate held for development or held for sale (1) 70,305 110,954

(1) Real estate held for development or held for sale includes properties which are not in active production. This includes raw land recently purchased or awaiting entitlement, and, if applicable, long-term strategic assets.

(2) Operating communities consist of all vertical construction costs relating to homes in progress and completed homes for all active inventory.

The development status of our land inventory is as follows:

As of December 31,

Long-term strategic assets — — 158 13,462

(1) The decrease in book value of land and development relates to the sale of parcels of commercial assets which are excluded from the owned lots presented in the table.

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Land Deposits — We provide deposits related to land option contracts and land purchase contracts, which are capitalized when paid and classified as Land deposits.

As of December 31, 2021 and 2020, we had the right to purchase approximately 8,360 and 7,449 lots under option purchase contracts, respectively, for an aggregate purchase price of $507.2 million and $485.4 million, respectively. We do not have title to these properties, and the creditors generally have no recourse against us. As of December 31, 2021 and 2020, our exposure to loss related to option contracts with third parties and unconsolidated entities consisted of non-refundable deposits totaling $97.6 million and $65.3 million, respectively.

As of December 31, 2021 and 2020, we had the right to purchase 5,731 and 2,426 lots under land banking arrangements for an aggregate purchase price of $749.8 million and $275.0 million, respectively. We are not legally obligated to purchase the balance of the lots. As of December 31, 2021 and 2020, our exposure to loss related to non-refundable deposits on land banking arrangements totaled $117.7 million and $60.3 million, respectively.

Capitalized Interest — Interest capitalized, incurred and amortized is as follows:

Year Ended December 31,

5. INVESTMENTS IN CONSOLIDATED AND UNCONSOLIDATED ENTITIES

Unconsolidated Entities — We have investments in a number of joint ventures with third parties. These entities are generally involved in real estate development, homebuilding and/or mortgage lending activities. These real estate development joint ventures primary activity is development and sale of lots to joint venture partners and/or unrelated builders. Our share of the joint venture profit relating to lots we purchase from the joint ventures is deferred until homes are delivered by us and title passes to a homebuyer.

Summarized, unaudited combined financial information of unconsolidated entities that are accounted for by the equity method is as follows (in thousands):

As of December 31,

Assets:

Liabilities and owners’ equity:

Owners’ equity:

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Year Ended December 31,

TMHC's share in income of unconsolidated entities $ 11,130 $ 11,176 $ 9,509

Consolidated Entities — We have several joint ventures for the purpose of real estate development and homebuilding activities, which we have determined to be VIEs. As the managing member, we oversee the daily operations and have the power to direct the activities of the VIEs, or joint ventures. For this specific subset of joint ventures, based upon the allocation of income and loss per the applicable joint venture agreements and certain performance guarantees, we have potentially significant exposure to the risks and rewards of the joint ventures. Therefore, we are the primary beneficiary of these VIEs and the entities are consolidated.

As of December 31, 2021, the assets of the consolidated joint ventures totaled $291.8 million, of which $22.3 million was cash and cash equivalents and $147.6 million was owned inventory. As of December 31, 2020, the assets of the consolidated joint ventures totaled $389.2 million, of which $25.8 million was cash and cash equivalents and $320.4 million was owned inventory. The liabilities of the consolidated joint ventures totaled $165.1 million and $216.4 million as of December 31, 2021 and December 31, 2020, respectively, and were primarily comprised of notes payable, accounts payable and accrued liabilities.

6. ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following:

As of December 31,

Real estate development costs to complete $ 49,833 $ 38,935

Total accrued expenses and other liabilities $ 525,209 $ 430,067

Self-Insurance and Warranty Reserves — We accrue for the expected costs associated with our limited warranty and self-insured amounts under our various insurance policies within Beneva, a wholly owned subsidiary. A summary of the changes in our reserves are as follows:

Year Ended December 31,

Net additions to reserves due to WLH acquisition — 9,984 —

(1) Changes in estimates to pre-existing reserves for the year ended December 31, 2019 included a $43.1 million adjustment for a construction defect reserve related to warranty remediation isolated to one specific community in the Central region. The reserve estimate is based on assumptions, including but not limited to the number of homes affected, the costs associated with each repair, and the effectiveness of the repairs. Due to the degree of judgement required in making these estimates and the inherent uncertainty in potential outcomes, it is reasonably possible that actual costs could differ from those recorded and such differences could be material, resulting in a change in future estimated reserves.

7. ESTIMATED DEVELOPMENT LIABILITIES

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Estimated development liabilities consists primarily of estimated future utilities improvements in Poinciana, Florida and Rio Rico, Arizona for home sites previously sold, in most cases prior to 1980. The estimated development liability is reduced by actual expenditures and is evaluated and adjusted, as appropriate, to reflect management’s estimate of potential completion costs. At December 31, 2021 and 2020, these liabilities are based on third-party engineer cost estimate reports which reflect the estimated completion costs. Future increases or decreases of costs for construction, material and labor, as well as other land development and utilities infrastructure costs, may have a significant effect on the estimated development liability.

8. DEBT

Total debt consists of the following:

As of December 31,

$800 Million Revolving Credit Facility(2) — — — — — —

(1) Unamortized Debt Issuance (Cost)/Premium for such notes is reflective of fair value adjustments as a result of purchase accounting estimates.

(2) Unamortized debt issuance costs are included in the Prepaid expenses and other assets, net on the Consolidated Balance Sheets.

(3) The $100 Million Revolving Credit Facility was entered into during the third quarter of 2021 and relates to our Build-to-Rent operations.

Senior Notes

All of our senior notes (the “Senior Notes”) described below and the related guarantees are senior unsecured obligations and are not subject to registration rights. The indentures governing our senior notes (except for the remaining 2027 6.625% WLH Notes, as described below) contain covenants that limit our ability to incur debt secured by liens and enter into certain sale and leaseback transactions and contain customary events of default. None of the indentures for the senior notes have financial maintenance covenants. As of December 31, 2021, we were in compliance with all of the covenants under the Senior Notes.

5.875% Senior Notes due 2023

On April 16, 2015, Taylor Morrison Communities, Inc (“TM Communities”) issued $350.0 million aggregate principal amount of 5.875% Senior Notes due 2023 (the “2023 5.875% Senior Notes”), which mature on April 15, 2023. The 2023 5.875% Senior Notes are guaranteed by Taylor Morrison Home III Corporation, Taylor Morrison Holdings, Inc. and their homebuilding subsidiaries (collectively, the “Guarantors”). We are required to offer to repurchase the 2023 5.875% Senior Notes at a price equal to 101% of their aggregate principal amount (plus accrued and unpaid interest) upon certain change of control events where there is a credit rating downgrade that occurs in connection with the change of control.

Prior to January 15, 2023, the 2023 5.875% Senior Notes are redeemable at a price equal to 100% plus a “make-whole” premium for payments through January 15, 2023 (plus accrued and unpaid interest). Beginning January 15, 2023, the 2023 5.875% Senior Notes are redeemable at par (plus accrued and unpaid interest).

5.625% Senior Notes due 2024

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On March 5, 2014, TM Communities issued $350.0 million aggregate principal amount of 5.625% Senior Notes due 2024 (the “2024 Senior Notes”), which mature on March 1, 2024. The 2024 Senior Notes are guaranteed by the Guarantors. The change of control provisions in the indenture governing the 2024 Senior Notes are similar to those contained in the indentures governing our other Senior Notes.

Prior to December 1, 2023, the 2024 Senior Notes are redeemable at a price equal to 100% plus a “make-whole” premium for payments through December 1, 2023 (plus accrued and unpaid interest). Beginning on December 1, 2023, the 2024 Senior Notes are redeemable at par (plus accrued and unpaid interest).

5.875% Senior Notes due 2027

On June 5, 2019, TM Communities issued $500.0 million aggregate principal amount of 5.875% Senior Notes due 2027 (the “2027 5.875% Senior Notes”), which mature on June 15, 2027. The 2027 5.875% Senior Notes are guaranteed by the Guarantors. The change of control provisions in the indenture governing the 2027 5.875% Senior Notes are similar to those contained in the indentures governing our other Senior Notes.

Prior to March 15, 2027, the 2027 5.875% Senior Notes are redeemable at a price equal to 100% plus a “make-whole” premium for payments through March 15, 2027 (plus accrued and unpaid interest). Beginning on March 15, 2027, the 2027 5.875% Senior Notes are redeemable at par (plus accrued and unpaid interest).

6.625% Senior Notes due 2027

Following our exchange offer in the first quarter of 2020, whereby TM Communities offered to exchange any and all outstanding senior notes issued by WLH, we had $290.4 million aggregate principal amount of 6.625% Senior Notes due 2027 issued by TM Communities (the “2027 6.625% TM Communities Notes”) and $9.6 million aggregate principal amount of 6.625% Senior Notes due 2027 issued by WLH (the “2027 6.625% WLH Notes” and together with the 2027 6.625% TM Communities Notes, the “2027 6.625% Senior Notes”) (the Exchange Offer). The 2027 6.625% TM Communities Notes are obligations of TM Communities and are guaranteed by the Guarantors. The change of control provisions in the indenture governing the 2027 6.625% TM Communities Notes are similar to those contained in the indentures governing our other Senior Notes. In connection with the consummation of the exchange offer, WLH entered into a supplemental indenture to eliminate

substantially all of the covenants in the indenture governing the 2027 6.625% WLH Notes, including the requirements to offer

to purchase such notes upon a change of control, and to eliminate certain other restrictive provisions and events that constitute

an “Event of Default” in such indenture.

The 2027 6.625% Senior Notes mature on July 15, 2027. Prior to July 15, 2022, the 2027 6.625% Senior Notes may be redeemed in whole or in part at a redemption price equal to 100% of the principal amount plus a “make-whole” premium, and accrued and unpaid interest, if any, to, but not including, the redemption date. On or after July 15, 2022, the 2027 6.625% Senior Notes are redeemable at a price equal to 103.313% of principal (plus accrued and unpaid interest). On or after July 15, 2023, the 2027 6.625% Senior Notes are redeemable at a price equal to 102.208% of principal (plus accrued and unpaid interest). On or after July 31, 2024, the 2027 6.625% Senior Notes are redeemable at a price equal to 101.104% of principal (plus accrued and unpaid interest). On or after July 15, 2025, the 2027 6.625% Senior Notes are redeemable at a price equal to 100% of principal (plus accrued and unpaid interest).

In addition, at any time prior to July 15, 2022, we may at the option on one or more occasions, redeem the 2027 6.625% Senior Notes (including any additional notes that may be issues in the future under the 2027 6.625% Senior Notes Indenture) in an aggregate principal amount not to exceed 40% of the aggregate principal amount of the 2027 6.625% Senior Notes at a redemption price (expressed as a percentage of principal amount) of 106.625%, plus accrued and unpaid interest, if any, to, but not including, the redemption date, with an amount equal to the net cash proceeds from one or more equity offerings.

5.75% Senior Notes due 2028

On August 1, 2019, TM Communities issued $450.0 million aggregate principal amount of 5.75% Senior Notes due 2028 (the “2028 Senior Notes”), which mature on January 15, 2028. The 2028 Senior Notes are guaranteed by the same Guarantors that guarantee our other Senior Notes. The change of control provisions in the indenture governing the 2028 Senior Notes are similar to those contained in the indentures governing our other Senior Notes.

Prior to October 15, 2027, the 2028 Senior Notes are redeemable at a price equal to 100% plus a “make-whole” premium for payments through October 15, 2027 (plus accrued and unpaid interest). Beginning on October 15, 2027, the 2028 Senior Notes are redeemable at par (plus accrued and unpaid interest).

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5.125% Senior Notes due 2030 and Redemption of the 2023 6.00% Senior Notes and Redemption of the 2025 Senior Notes

In July, 2020, we partially redeemed $266.9 million of our 6.00% Senior Notes due 2023 (the “2023 6.00% Senior Notes”) and $333.1 million of our 5.875% Senior Notes due 2025 (the “2025 Senior Notes”) using the net proceeds from the issuance of $500.0 million aggregate principal amount of 5.125% Senior Notes due 2030 (the “2030 Senior Notes”). In September 2020, we redeemed the remaining $83.1 million and $103.8 million of 2023 6.00% Senior Notes and 2025 Senior Notes, respectively, using cash on hand. For the 2023 6.00% Senior Notes, the redemption price was equal to 100% of the principal amount, plus a make-whole premium of 0.11% plus 50 basis points, plus accrued and unpaid interest to, but excluding the redemption date. For the 2025 Senior Notes, the redemption price was equal to 102.938% of the principal amount, plus accrued and unpaid interest to, but excluding the redemption date. As a result of the early redemption of the 2023 and 2025 Senior Notes, we recorded a total net loss on extinguishment of debt of approximately $10.2 million in Loss on extinguishment of debt, net in the Consolidated Statement of Operations for the year ended December 31, 2020.

The 2030 Senior Notes mature on August 1, 2030. The Senior Notes are guaranteed by the same Guarantors that guarantee our other Senior Notes. The change of control provisions in the indenture governing the 2030 Senior Notes are similar to those contained in the indentures governing our other Senior Notes.

Prior to February 1, 2030, the 2030 Senior Notes are redeemable at a price equal to 100.0% plus a “make-whole” premium for payments through February 1, 2030 (plus accrued and unpaid interest). Beginning on February 1, 2030, the 2030 Senior Notes are redeemable at par (plus accrued and unpaid interest).

$800 Million Revolving Credit Facility

Our $800 Million Revolving Credit Facility matures on February 6, 2024 and is guaranteed by the Guarantors.

As of December 31, 2021, our $800 Million Revolving Credit Facility included $1.1 million of unamortized debt issuance costs and $58.7 million of utilized letters of credit, resulting in $741.3 million availability. As of December 31, 2020, our $800 Million Revolving Credit Facility included $1.6 million of unamortized debt issuance costs and $64.3 million of utilized letters of credit, resulting in $735.7 million of availability. Unamortized debt issuance costs are included in Prepaid expenses and other assets, net on the Consolidated Balance Sheets.

The $800 Million Revolving Credit Facility contains certain “springing” financial covenants, requiring us and our subsidiaries to comply with a maximum debt to capitalization ratio of not more than 0.60 to 1.00 and a minimum consolidated tangible net worth level of at least $2.4 billion. The financial covenants would be in effect for any fiscal quarter during which any (a) loans under the $800 Million Revolving Credit Facility are outstanding during the last day of such fiscal quarter or on more than five separate days during such fiscal quarter or (b) undrawn letters of credit (except to the extent cash collateralized) issued under the $800 Million Revolving Credit Facility in an aggregate amount greater than $40.0 million or unreimbursed letters of credit issued under the $800 Million Revolving Credit Facility are outstanding on the last day of such fiscal quarter or for more than five consecutive days during such fiscal quarter. For purposes of determining compliance with the financial covenants for any fiscal quarter, the $800 Million Revolving Credit Facility provides that we may exercise an equity cure by issuing certain permitted securities for cash or otherwise recording cash contributions to our capital that will, upon the contribution of such cash to the borrower, be included in the calculation of consolidated tangible net worth and consolidated total capitalization. The equity cure right is exercisable up to twice in any period of four consecutive fiscal quarters and up to five times overall.

The $800 Million Revolving Credit Facility contains certain restrictive covenants including limitations on incurrence of liens, dividends and other distributions, asset dispositions and investments in entities that are not guarantors, limitations on prepayment of subordinated indebtedness and limitations on fundamental changes. The $800 Million Revolving Credit Facility contains customary events of default, subject to applicable grace periods, including for nonpayment of principal, interest or other amounts, violation of covenants (including financial covenants, subject to the exercise of an equity cure), incorrectness of representations and warranties in any material respect, cross default and cross acceleration, bankruptcy, material monetary judgments, ERISA events with material adverse effect, actual or asserted invalidity of material guarantees and change of control.

As of December 31, 2021, we were in compliance with all of the covenants under the $800 Million Revolving Credit Facility.

$100 Million Revolving Credit Facility

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This facility is specific to our Build-to-Rent operations. On September 17, 2021, we entered into a $100 Million Revolving Credit Facility, which matures on September 17, 2024 and is guaranteed by the Guarantors (the $100 Million Revolving Credit Agreement together with the $800 Million Revolving Credit Agreement, the "Revolving Credit Facilities").

As of December 31, 2021, we had $0.7 million of unamortized debt issuance costs relating to our $100 Million Revolving

Credit Facility, which are included in Prepaid expenses and other assets, net, on the Consolidated Balance Sheets.

As of December 31, 2021 we had no utilized letters of credit, resulting in $68.5 million of availability under the $100 Million

Revolving Credit Facility.

The $100 Million Revolving Credit Facility contains certain “springing” financial covenants, requiring us and our subsidiaries

to comply with a maximum debt to capitalization ratio of not more than 0.60 to 1.00 and a minimum consolidated tangible net

worth level of at least $2.4 billion. The financial covenants would be in effect for any fiscal quarter during which any (a) loans

under the $100 Million Revolving Credit Facility are outstanding during the last day of such fiscal quarter or on more than five

separate days during such fiscal quarter or (b) undrawn letters of credit (except to the extent cash collateralized) issued under

the $100 Million Revolving Credit Facility in an aggregate amount greater than $$40.0 million or unreimbursed letters of credit

issued under the $100 Million Revolving Credit Facility are outstanding on the last day of such fiscal quarter or for more than

five consecutive days during such fiscal quarter. For purposes of determining compliance with the financial covenants for any

fiscal quarter, the $100 Million Revolving Credit Facility provides that we may exercise an equity cure by issuing certain

permitted securities for cash or otherwise recording cash contributions to our capital that will, upon the contribution of such

cash to the borrower, be included in the calculation of consolidated tangible net worth and consolidated total capitalization. The

equity cure right is exercisable up to twice in any period of four consecutive fiscal quarters and up to five times overall.

The $100 Million Revolving Credit Facility includes the same restrictive covenants as are included in the $800 Million

Revolving Credit Facility, described above. As of December 31, 2021, we were in compliance with all of the covenants under

the $100 Million Revolving Credit Facility

Mortgage Warehouse Borrowings

The following is a summary of our mortgage subsidiary warehouse borrowings:

(Dollars in thousands) December 31, 2021

Warehouse A $ 12 $ 10,000 LIBOR + 1.75% On Demand Mortgage Loans

Warehouse A $ 40,958 $ 55,000 LIBOR + 1.75% On Demand Mortgage Loans

(1) Subject to certain interest rate floors.

TMHC US Equity

TMHC · 10-K · period ended 2021-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

TMHC US Equity☆

TMHC · 10-K · period ended 2021-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

TMHC US Equity