What changed in this filing

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Item 1. Financial Statements

2020-07-29 compared with 2020-04-30 · 124 added, 232 removed, 292 unchanged (55% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

As of March 31, 2020 and December 31, 2019

As of June 30, 2020 and December 31, 2019

(in thousands, except share amounts)

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Preferred stock, $ 0.01 par value, 50,000,000 shares authorized, none outstanding

Common stock, $ 0.01 par value, 100,000,000 shares authorized, 33,319,125 and 33,067,375 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively

Common stock, $ 0.01 par value, 100,000,000 shares authorized, 33,350,633 and 33,067,375 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

Additional paid-in capital

5 unchanged sentences

Unaudited Condensed Consolidated Statements of Operations

For the Three Months Ended March 31, 2020 and 2019

For the Three and Six Months Ended June 30, 2020 and 2019

(in thousands, except share and per share amounts)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Homebuilding revenues

6 unchanged sentences

Cost of home sales revenues

( 1,091,181 )

Cost of land sales and other revenues

Total homebuilding cost of revenues

( 1,107,732 )

Financial services costs

Selling, general and administrative

Inventory impairment

Other income (expense)

Loss on debt extinguishment

Inventory impairment and other

Other expense

Income before income tax expense

5 unchanged sentences

Unaudited Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2020 and 2019

For the Six Months Ended June 30, 2020 and 2019

( in thousands )

Three Months Ended March 31,

Six Months Ended June 30,

Operating activities

Adjustments to reconcile net income to net cash used in operating activities:

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization

Stock-based compensation expense

Fair value of loans held for sale and other

Loss on debt extinguishment

Inventory impairment and other

4 unchanged sentences

Accounts receivable

Mortgage loans held for sale

Prepaid expenses and other assets

1 unchanged sentence

Accrued expenses and other liabilities

Mortgage loans held for sale

Net cash used in operating activities

Net cash provided by (used in) operating activities

Investing activities

5 unchanged sentences

Payments on revolving credit facilities

Principal payments on notes payable

Proceeds from insurance notes payable

Proceeds from issuance of senior notes due 2027

Extinguishment of senior notes due 2022

Proceeds from issuance of insurance premium notes and other

Principal payments on insurance notes payable

Debt issuance costs

Net proceeds from mortgage repurchase facilities

Repurchases of common stock upon vesting of stock-based compensation

Net proceeds from issuances of common stock

Withholding of common stock upon vesting of restricted stock units

Repurchases of common stock under stock repurchase program

Net cash provided by financing activities

Net cash provided by (used in) financing activities

Net increase (decrease)

Cash and cash equivalents and Restricted cash

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Unaudited Condensed Consolidated Statements of Stockholders’ Equity

For the Three Months Ended March 31, 2020 and 2019

For the Three and Six Months Ended June 30, 2020 and 2019

( in thousands )

Three Months Ended June 30, 2020 and 2019

Additional Paid-In Capital

1 unchanged sentence

Total Stockholders'

Balance at December 31, 2019

Repurchases of common stock

Balance at March 31, 2020

Issuance of common stock

Vesting of restricted stock units

1 unchanged sentence

Stock-based compensation expense

Balance at June 30, 2020

Balance at March 31, 2019

Issuance of common stock

Vesting of restricted stock units

Withholding of common stock upon vesting of restricted stock units

Stock-based compensation expense

Balance at June 30, 2019

Six Months Ended June 30, 2020 and 2019

Additional Paid-In Capital

Retained Earnings

Total Stockholders Equity

Total Stockholders'

Balance at December 31, 2019

Repurchases of common stock

Issuance of common stock

Vesting of restricted stock units

1 unchanged sentence

Stock-based compensation expense

Balance at March 31, 2019

Balance at June 30, 2020

Balance at December 31, 2018

Issuance of common stock

Repurchase of common stock

Vesting of restricted stock units

Withholding of common stock upon vesting of restricted stock units

Stock-based compensation expense

Balance at June 30, 2019

See Notes to Unaudited Condensed Consolidated Financial Statements

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2020

June 30, 2020

Basis of Presentation

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first time, first and second time move up, and lifestyle homebuyers, and provides our homebuyers with the ability to personalize their homes through certain option and upgrade selections.

Our Century Complete brand, formerly referred to as Wade Jurney Homes, targets first time homebuyers, primarily sells homes through retail studios and the internet, and provides no option or upgrade selections.

On February 6, 2020 we announced the rebranding of Wade Jurney Homes to Century Complete.

Our Century Complete brand targets first time homebuyers, primarily sells homes through retail studios and the internet, and provides no option or upgrade selections.

Our homebuilding operations are organized into the following five reportable segments:

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The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S.

generally accepted accounting principles (which we refer to as “GAAP”) for interim financial statements and pursuant to the rules and regulations of the U.S.

generally accepted accounting principles (which we refer to as “GAAP”) and pursuant to the rules and regulations of the U.S.

Securities and Exchange Commission (which we refer to as the “SEC”).

In the o pinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair presentation of our financial position and results of operations.

Interim results of operations are not necessarily indicative of the results that may be achieved for the full year.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair presentation of our financial position and results of operations for the periods presented.

Interim results of operations are not necessarily indicative of the results that may be achieved for the full year, particularly in light of the novel coronavirus (“COVID-19”) pandemic and measures intended to mitigate the spread.

The financial statements and related notes do not include all information and footnotes required by GAAP and should be read in conjunction with the consolidated financial statements for the year ended December 31, 2019, which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 that was filed with the SEC on February 7, 2020.

The recent outbreak of the novel coronavirus COVID-19, which was declared a pandemic by the World Health Organization on March 11, 2020, has led to adverse impacts on the U.S.

The COVID-19 pandemic has led to adverse impacts on the U.S.

and global economies and created uncertainty regarding potential impacts to our operations and customer demand.

Through late April, there is still significant uncertainty regarding the duration and severity of the disruption caused by this pandemic.

Commencing in March 2020, numerous state and local municipalities issued public health orders with varying expiration dates requiring the closure of nonessential businesses, as well as ordering individuals to stay at home and/or shelter in place whenever possible.

General exceptions to shelter in place orders are essential services and critical businesses.

As of the date of this filing, other than the state of Michigan and certain municipalities within the Bay Area market of Northern California, construction and sale of residential real estate has been determined to be an essential business, and accordingly our operations have been generally exempted from these applicable health orders.

These public health orders generally exempted the sale and construction of new homes, other than a small portion of our operations, which had to cease operations in early April.

During the latter half of the second quarter of 2020, state and local municipalities in the majority of our markets began to lift the most stringent of the public health restrictions and numerous nonessential businesses were allowed to reopen.

However, recent increases in COVID-19 positive cases throughout the United States during the later weeks of June and into July of 2020 have resulted in the slowing or altering of “re-opening” plans in numerous states, including many in which we conduct business.

As of the date of this filing, we are able to build and sell homes in all of our markets .

Principles of Consolidation

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The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Accordingly, actual results could differ from those estimates.

Accordingly, actual results could differ from those estimates, particularly given the uncertainties associated with the ongoing COVID-19 pandemic.

Recently Adopted Accounting Standards

Financial Instruments - Credit Losses

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) .

The standard changes the accounting for credit losses for most financial assets and certain other instruments.

Credit losses which have historically been accounted for on an

incurred loss basis will now be accounted for using an estimate of lifetime expected credit losses.

This will generally result in earlier recognition of allowances for credit losses.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326) .

The standard changes the accounting for credit losses for most financial assets and certain

other instruments.

Credit losses that have historically been accounted for on an incurred loss basis are now accounted for using an estimate of lifetime expected credit losses.

This generally results in earlier recognition of allowances for credit losses.

We adopted this standard on January 1, 2020 with no material effect on the consolidated financial statements and related disclosures.

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Recently Issued Accounting Standards

In December 2019, the FASB issued Accounting Standards Update No.

In December 2019, the FASB issued ASU No.

2019-12, “ Income Taxes (Topic 740) :

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The following table summarizes total revenue and income before income tax expense by segment (in thousands ):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Century Complete

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Inspire primarily finances these loans using its mortgage repurchase facilities.

Mortgage loans in process for which interest rates were committed to borrowers totaled approximately $ 125.0 million and $ 37.6 million at March 31, 2020 and December 31, 2019, respectively, and carried a weighted average interest rate of approximately 3.4 %, and 3.9 %,

respectively.

As of March 31, 2020 and December 31, 2019, Inspire had mortgage loans held for sale with an aggregate fair value of $ 141.8 million and $ 185.2 million, respectively, and an aggregate outstanding principal balance of $ 137.8 million and $ 179.3 million, respectively.

Mortgage loans in process for which interest rates were committed to borrowers totaled approximately $ 124.3 million and $ 37.6 million at June 30, 2020 and December 31, 2019, respectively, and carried a weighted average interest rate of approximately 3.8 % and 3.9 %, respectively.

As of June 30, 2020 and December 31, 2019, Inspire had mortgage loans held for sale with an aggregate fair value of

$ 219.6 million and $ 185.2 million, respectively, and an aggregate outstanding principal balance of $ 210.3 million and $ 179.3 million, respectively.

Mortgage loans held-for-sale, including the rights to service the mortgage loans, as well as the derivative instrument used to economically hedge our interest rate risk, which are typically forward commitments on mortgage backed securities, are carried at fair value and changes in fair value are reflected in financial services revenue on the condensed consolidated statement of operations.

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Lot option and escrow deposits

Right of use assets

Performance deposits

Deferred financing costs revolving line of credit, net

Deferred financing costs on revolving line of credit, net

Restricted cash (1)

Secured notes receivable

Secured note receivable

Right of use assets

Other assets and prepaid expenses

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Land development and home construction accruals

Lease liabilities - operating leases

Accrued interest

Lease liabilities - operating leases

Income taxes payable

Liability for product financing arrangement and other

Liability for product financing arrangements and other

Total accrued expenses and other liabilities

2 unchanged sentences

We subsequently assess the adequacy of our warranty accrual on a quarterly basis through an internal model that incorporates historical payment trends and adjust the amounts recorded, if necessary.

Based on warranty payment trends relative to our estimates at the time of home closing, we reduced our warranty reserve by $ 1.1 million and increased our reserve by $ 22 thousand during the three months ended March 31, 2020 and 2019, respectively, which is included in cost of home sales

revenues on our consolidated statements of operations.

Changes in our warranty accrual for the three months ended March 31, 2020 and 2019 are detailed in the table below (in thousands) :

Three Months Ended March 31,

Based on warranty payment trends relative to our estimates at the time of home closing, we reduced our warranty reserve by $ 0.2 million and increased our reserve by $ 0.2 million during the three months ended June 30, 2020 and 2019, respectively.

We reduced our warranty reserve by $ 1.3 million during the six months ended June 30, 2020, compared to a $ 0.2 million increase during the same period in 2019.

adjustments are included in cost of home sales revenues on our consolidated statements of operations.

Changes in our warranty accrual for the three and six months ended June 30, 2020 and 2019 are detailed in the table below (in thousands) :

Three Months Ended June 30,

Six Months Ended June 30,

Beginning balance

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Ending balance

Our outstanding debt obligations included the following as of March 31, 2020 and December 31, 2019 (in thousands):

Our outstanding debt obligations included the following as of June 30, 2020 and December 31, 2019 (in thousands):

6.750 % senior notes, due May 2027 (1)

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These covenants are measured as defined in the Amended and Restated Credit Agreement and are reported to the lenders quarterly.

Borrowings under the Amended and Restated Credit Agreement bear interest at a floating rate equal to the adjusted Eurodollar Rate plus an applicable margin between 2.60 % and 3.10 % per annum, or, in the Administrative Agent’s discretion, a base rate plus an applicable margin between 1.60 % and 2.10 % per annum.

As of March 31, 2020, we had $ 521.9 million outstanding under the credit facility and were in compliance with all covenants.

Borrowings under the Amended and Restated Credit Agreement bear interest at a floating rate equal to the adjusted Eurodollar Rate plus an applicable margin between 2.60 % and 3.10 % per annum, or, at the Administrative Agent’s discretion, a base rate plus an applicable margin between 1.60 % and 2.10 % per annum.

As of June 30, 2020, we had no amounts outstanding under the credit facility and were in compliance with all covenants.

Mortgage Repurchase Facilities – Financial Services

3 unchanged sentences

Amounts outstanding under the repurchase facilities are not guaranteed by us or any of our subsidiaries and the agreements contain various affirmative and negative covenants applicable to Inspire that are customary for arrangements of this type.

As of March 31, 2020, we had $ 133.8 million outstanding under these repurchase facilities and were in compliance with all covenants thereunder.

During the three months ended March 31, 2020 and 2019, we incurred interest expense on the repurchase facilities of $ 0.7 million and $ 0.6 million, respectively, which are included in financial services costs on our condensed consolidated statements of operations.

As of June 30, 2020, we had $ 197.5 million outstanding under these repurchase facilities and were in compliance with all covenants thereunder.

During the three months ended June 30, 2020 and 2019, we incurred interest expense on the repurchase facilities of $ 0.5 million and $ 0.9 million, respectively, which are included in financial services costs on our condensed consolidated statements of operations.

During the six months ended June 30, 2020 and 2019, we incurred interest expense on the repurchase facilities of $ 1.3 million and $ 1.5 million, respectively.

Interest is capitalized to inventories while the related communities are being actively developed and until homes are completed.

As our qualifying assets exceeded our outstanding debt during the three months ended March 31, 2020 and 2019, we capitalized all interest costs incurred during these periods, except for interest incurred on our mortgage repurchase facilities.

As our qualifying assets exceeded our outstanding debt during the six months ended June 30, 2020 and 2019, we capitalized all interest costs incurred during these periods, except for interest incurred on our mortgage repurchase facilities.

Our interest costs are as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Interest capitalized beginning of period

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Our 2020 estimated annual effective tax rate of 23.4 % is driven by our blended federal and state statutory rate of 25.6 %, and certain other permanent differences between GAAP and tax which decreased our rate by 2.2 %.

For the three months ended March 31, 2020, our estimated annual rate of 23.7 % was impacted by discrete items which had a net impact of decreasing our rate by 0.3 %, including excess tax benefits for vested stock-based compensation .

For the three months ended March 31, 2020 and 2019, we recorded income tax expense of $ 8.0 million and $ 5.9 million, respectively.

For the six months ended June 30, 2020, our estimated annual rate of 23.4 % was impacted by discrete items which had a net impact of decreasing our rate by 0.1 %, including excess tax benefits for vested stock-based compensation .

For the three months ended June 30, 2020 and 2019, we recorded income tax expense of $ 11.7 million and $ 5.3 million, respectively.

For the six months ended June 30, 2020 and 2019, we recorded income tax expense of $ 19.6 million and $ 11.2 million, respectively .

Fair Value Disclosures

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The following table presents carrying values and estimated fair values of financial instruments (in thousands):

March 31, 2020

June 30, 2020

December 31, 2019

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(1) Estimated fair value of the secured notes receivable was based on cash flow models discounted at market interest rates which considered the underlying risks of the note.

In May 2020, the maturity of the secured note receivable was extended by one year to May of 2021.

(2) The mortgage loans held for sale are carried at fair value, which is based on quoted market prices for committed mortgage loans.

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(5) Carrying amounts include any associated unamortized deferred financing costs, premiums and discounts.

As of March 31, 2020, these amounts totaled $ 5.5 million and $ 3.7 million for the 6.750 % senior notes and 5.875 % senior notes, respectively.

As of June 30, 2020, these amounts totaled $ 5.4 million and $ 3.5 million for the 6.750 % senior notes and 5.875 % senior notes, respectively.

As of December 31, 2019, these amounts totaled $ 5.7 million and $ 3.9 million for the 6.750 % senior notes and 5.875 % senior notes, respectively.

(6) Carrying amount approximates fair value due to short-term nature and interest rate terms.

(7) Insurance premium notes including in other financing obligations bore interest rates ranging from 3.278 % to 3.240 % during the periods ending March 31, 2020 and December 31, 2019.

During the three months ended March 31, 2020, we determined that inventory with a carrying value before impairment of $ 2.3 million within one community was not recoverable.

(7) Insurance premium notes including in other financing obligations bore interest rates ranging from 3.278 % to 3.240 % during the periods ending June 30, 2020 and December 31, 2019, which approximated prevailing market rates for similar obligations at each period.

During the three months ended June 30, 2020, we determined that inventory with a carrying value before impairment of $ 6.6 million within one community in our Texas segment was not recoverable.

Accordingly, we recognized an impairment charge of $ 0.9 million to reflect the estimated fair value of the community of $ 5.7 million.

The estimated fair value of the community was determined through a discounted cash flow approach utilizing Level 3 inputs.

This inventory impairments was primarily incurred in the Century Complete segment.

During the six months ended June 30, 2020, total impairment charges of $ 1.7 million were recorded, which includes $ 0.8 million of impairment charges related to one community in our Century Complete segment which was recorded during the three months ended March 31, 2020.

The estimated fair value of communities are determined through a discounted cash flow approach utilizing Level 3 inputs.

Because the full magnitude and duration of the COVID-19 pandemic is uncertain and difficult to predict, changes in our cash flow projections may change our conclusions on the recoverability of inventory in the future.

The carrying amount of cash and cash equivalents approximates fair value.

Non-financial assets and liabilities include items such as inventory and property and equipment that are measured at fair value when acquired and resulting from impairment, if deemed necessary.

Non-financial assets and liabilities include items such as inventory and property and equipment that are measured at fair value when acquired and as a result of impairments, if deemed necessary.

Stock-Based Compensation

During the three months ended March 31, 2020, we granted restricted stock units (which we refer to as “RSUs”) covering 0.3 million shares of common stock with a grant date fair value of $ 31.19 per share that vest over a three year period.

During the three months ended March 31, 2020 we did no t grant any additional performance share units (which we refer to as “PSUs”), however our recognition of stock based expense associated with previously granted PSU awards was updated to reflect probable financial results as they relate to the performance goals of the awards.

Accordingly, our estimate of the number of shares which will ultimately vest under our PSU awards decreased by 0.3 million, and we recorded a cumulative catch-up adjustment to decrease stock-based compensation expense of $ 2.4 million .

A summary of our outstanding RSUs and PSUs, assuming target level of performance, are as follows (in thousands, except years):

As of March 31, 2020

During the three and six months ended June 30, 2020, we granted restricted stock units (which we refer to as “RSUs”) covering 0.1 million and 0.4 million shares of common stock, respectively, with a grant date fair value of $ 27.64 and $ 30.44 per share, respectively, that vest over a three year period.

During the three and six months ended June 30, 2020, we also granted performance share units (which we refer to as “PSUs”) covering up to 0.3 million shares of common stock, assuming maximum level of performance, with a grant date fair value of $ 26.38 per share that are subject to both service and performance vesting conditions.

The quantity of shares that will vest under the PSUs ranges from 0 % to 250 % of a targeted number of shares for each participant and will be determined based on an achievement of a three year pre-tax income performance goal.

A summary of our outstanding RSUs and PSUs, assuming current estimated level of performance achievement, are as follows (in thousands, except years):

As of June 30, 2020

Unvested units

Unrecognized compensation cost

Period to recognize compensation cost

During the three months ended March 31, 2020 and 2019, we recognized stock-based compensation expense of $ 1.7 million and $ 3.5 million, respectively.

Remaining period to recognize compensation cost

During the three months ended June 30, 2020 and 2019, we recognized stock-based compensation expense of $ 6.9 million and $ 3.9 million, respectively.

During the six months ended June 30, 2020 and 2019, we recognized stock-based compensation expense of $ 8.6 million and $ 7.5 million, respectively.

Stock-based compensation expense is included in selling, general, and administrative expense on our condensed consolidated statements of operations.

During the three months ended June 30, 2020, we updated our recognition of stock-based compensation expense associated with previously granted PSU awards to reflect probable financial results as they relate to the performance goals of the awards.

Accordingly, our estimate of the number of shares which will ultimately vest under our PSU awards increased by 0.2 million, and we recorded a cumulative catch-up adjustment to increase stock-based compensation expense of $ 2.9 million ($ 2.2 million net of tax), or $ 0.07 per share (basic and diluted) for the three months ended June 30, 2020.

Stockholders’ Equity

Our authorized capital stock consists of 100.0 million shares of common stock, par value $ 0.01 per share, and 50.0 million shares of preferred stock, par value $ 0.01 per share.

As of March 31, 2020, and December 31, 2019, there were 33.3 million and 33.1 million shares of common stock issued and outstanding, respectively.

As of June 30, 2020, and December 31, 2019, there were 33.4 million and 33.1 million shares of common stock issued and outstanding, respectively.

On May 10, 2017, our stockholders approved the adoption of the Century Communities, Inc.

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Amended and Restated 2017 Omnibus Incentive Plan (which we refer to as our “Amended 2017 Incentive Plan”), which increased the number of shares of our common stock authorized for issuance under the 2017 Incentive Plan by an additional 1.631 million shares.

We issued 0.4 million and 0.4 million shares of common stock related to the vesting

of RSUs during the three months ended March 31, 2020 and 2019, respectively.

As of March 31, 2020, approximately 1.7 million shares of common stock remained available for issuance under the Amended 2017 Incentive Plan.

We issued 0.5 million and 0.4 million shares of common stock related to the vesting of RSUs during the six months ended June 30, 2020 and 2019, respectively.

As of June 30, 2020, approximately 1.1 million shares of common stock remained available for issuance under the Amended 2017 Incentive Plan.

On November 27, 2019, we entered into a Distribution Agreement with J.P.

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(which we refer to as the “Distribution Agreement”), as sales agents pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $ 100.0 million from time to time through any of the sales agents party thereto in “at-the-market” offerings, in accordance with the terms and conditions set forth in the Distribution Agreement.

This Distribution Agreement, which superseded and replaced a prior similar Distribution Agreement, had all $ 100 million available for sale as of March 31, 2020.

We did no t sell or issue any shares of our common stock during the three months ended March 31, 2020 or the three months ended March 31, 2019.

This Distribution Agreement, which superseded and replaced a prior similar Distribution Agreement, had all $ 100.0 million available for sale as of June 30, 2020.

We did no t sell or issue any shares of our common stock during the three and six months ended June 30, 2020.

During the three and six months ended June 30, 2019, we sold and issued an aggregate of 0.1 million shares of our common stock under the previous Distribution Agreement, which provided proceeds of $ 2.7 million, and in connection with such sales, paid total commissions and fees to the sales agents of $ 0.1 million .

The Distribution Agreement will remain in full force and effect until terminated by either party pursuant to the terms of the agreement or such date that the maximum offering amount has been sold in accordance with the terms of the agreement .

In November 2018, we authorized a stock repurchase program, under which we may repurchase up to 4,500,000 shares of our outstanding common stock.

During the three months ended March 31, 2020 we did no t repurchase any shares of common stock while during the three months ended March 31, 2019, we repurchased 83,000 shares of common stock under this program for approximately $ 1.4 million.

On November 6, 2018, we authorized a stock repurchase program, under which we may repurchase up to 4,500,000 shares of our outstanding common stock.

During the three and six months ended June 30, 2020, we did no t repurchase any shares of common stock;

while, during the three and six months ended June 30, 2019, we repurchased 83,000 shares of common stock under this program for approximately $ 1.4 million.

Earnings Per Share

We use the treasury stock method to calculate earnings per share as our currently issued non-vested RSUs and PSUs do not have participating rights.

The following table sets forth the computation of basic and diluted EPS for the three months ended March 31, 2020 and 2019 (in thousands, except share and per share information):

The following table sets forth the computation of basic and diluted EPS for the three and six months ended June 30, 2020 and 2019 (in thousands, except share and per share information):

Three Months Ended

Six Months Ended

Weighted average common shares outstanding - basic

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Stock-based awards are excluded from the calculation of diluted EPS in the event they are subject to unsatisfied performance conditions or are antidilutive.

We excluded 0.6 million and 0.3 million common unit equivalents from diluted earnings per share during the three months ended March 31, 2020 and 2019, respectively, related to the PSUs for which performance conditions remain unsatisfied.

We excluded 0.8 million and 0.6 million common unit equivalents from diluted earnings per share during the three and six months ended June 30, 2020 and 2019, respectively, related to the PSUs for which performance conditions remain unsatisfied.

Commitments and Contingencies

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In the normal course of business, we post letters of credit and performance bonds related to our land development performance obligations with local municipalities.

As of March 31, 2020, and December 31, 2019, we had $ 343.7 million and $ 344.1 million, respectively, in letters of credit and performance bonds issued and outstanding.

As of June 30, 2020, and December 31, 2019, we had $ 335.9 million and $ 344.1 million, respectively, in letters of credit and performance bonds issued and outstanding.

We are subject to claims and lawsuits that arise primarily in the ordinary course of business, which consist primarily of construction defect claims.

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We do not believe that the ultimate resolution of any claims and lawsuits will have a material adverse effect upon our consolidated financial position, results of operations, or cash flows.

Supplemental Guarantor Information

Our 5.875 % senior notes due 2025 and 6.750 % senior notes due 2027 (which we collectively refer to as our “Senior Notes ”) are our unsecured senior obligations and are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by substantially all of our direct and indirect wholly-owned operating subsidiaries (which we refer to collectively as “Guarantors”).

In addition, our former 6.875 % senior notes due 2022 which were extinguished during the second quarter of 2019, were our unsecured senior obligations and were fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by the Guarantors.

Each of the indentures governing our Senior Notes provides that the guarantees of a Guarantor will be automatically and unconditionally released and discharged:

(1) upon any sale, transfer, exchange or other disposition (by merger, consolidation or otherwise) of all of the equity interests of such Guarantor after which the applicable Guarantor is no longer a “Restricted Subsidiary” (as defined in the respective indentures ), which sale, transfer, exchange or other disposition does not constitute an “Asset Sale” (as defined in the respective indentures ) or is made in compliance with applicable provisions of the applicable indenture ;

(2) upon any sale, transfer, exchange or other disposition (by merger, consolidation or otherwise) of all of the assets of such Guarantor, which sale, transfer, exchange or other disposition does not constitute an Asset Sale or is made in compliance with applicable provisions of the applicable indenture ;

provided, that after such sale, transfer, exchange or other disposition, such Guarantor is an “Immaterial Subsidiary” (as defined in the respective indentures );

(3) unless a default has occurred and is continuing, upon the release or discharge of such Guarantor from its guarantee of any indebtedness for borrowed money of the Company and the Guarantors so long as such Guarantor would not then otherwise be required to provide a guarantee pursuant to the applicable indenture ;

provided that if such Guarantor has incurred any indebtedness in reliance on its status as a Guarantor in compliance with applicable provisions of the applicable Indenture, such Guarantor’s obligations under such indebtedness, as the case may be, so incurred are satisfied in full and discharged or are otherwise permitted to be incurred by a Restricted Subsidiary (other than a Guarantor) in compliance with applicable provisions of the applicable Indenture;

(4) upon the designation of such Guarantor as an “Unrestricted Subsidiary” (as defined in the respective Indentures), in accordance with the applicable indenture ;

(5) if the Company exercises its legal defeasance option or covenant defeasance option under the applicable indenture or if the obligations of the Company and the Guarantors are discharged in compliance with applicable provisions of the applicable indenture , upon such exercise or discharge;

or (6) in connection with the dissolution of such Guarantor under applicable law in accordance with the applicable indenture .

The indenture governing our former 6.875 % senior notes due 2022 contained a similar provision.

As the guarantees were made in connection with exchange offers effected in February 2015, October 2015 and April 2017 and the issuance of the 5.875 % senior notes due 2025 and of the 6.750 % senior notes due 2027 , the Guarantors’ condensed financial information is presented as if the guarantees existed during the periods presented.

If any Guarantors are released from the guarantees in future periods, the changes are reflected prospectively.

We have determined that separate, full financial statements of the Guarantors would not be material to investors, and accordingly, supplemental financial information is presented below:

Supplemental Condensed Consolidated Balance Sheet

As of March 31, 2020 ( in thousands )

Non Guarantor

Cash and cash equivalents

Cash held in escrow

Accounts receivable

Investment in consolidated subsidiaries

( 2,097,867 )

Mortgage loans held for sale

Prepaid expenses and other assets

Deferred tax assets, net

Property and equipment, net

( 2,115,467 )

Liabilities and stockholders’ equity

Accounts payable

Accrued expenses and other liabilities

Notes payable

Revolving line of credit

Mortgage repurchase facilities

Total liabilities

Stockholders’ equity:

( 2,097,867 )

Total liabilities and stockholders’ equity

( 2,115,467 )

Supplemental Condensed Consolidated Balance Sheet

As of December 31, 2019 ( in thousands )

Non Guarantor

Cash and cash equivalents

Cash held in escrow

Accounts receivable

Investment in consolidated subsidiaries

( 1,996,703 )

Mortgage loans held for sale

Prepaid expenses and other assets

Deferred tax assets, net

Property and equipment, net

( 1,996,703 )

Liabilities and stockholders’ equity

Accounts payable

Accrued expenses and other liabilities

Notes payable

Revolving line of credit

Mortgage repurchase facilities

Total liabilities

Stockholders’ equity:

( 1,996,703 )

Total liabilities and stockholders’ equity

( 1,996,703 )

Supplemental Condensed Consolidated Statement of Operations

For the Three Months Ended March 31, 2020 ( in thousands )

Non Guarantor

Homebuilding revenues

Home sales revenues

Land sales and other revenues

Total homebuilding revenues

Financial services revenue

Total revenues

Homebuilding cost of revenues

Cost of home sales revenues

Cost of land sales and other revenues

Total homebuilding cost of revenues

Financial services costs

Selling, general and administrative

Inventory impairment

Equity in earnings from consolidated subsidiaries

Other income (expense)

Income before income tax expense

Income tax expense

Supplemental Condensed Consolidated Statement of Operations

For the Three Months Ended March 31, 2019 ( in thousands )

Non Guarantor

Homebuilding revenues

Home sales revenues

Land sales and other revenues

Total homebuilding revenues

Financial services revenue

Total revenues

Homebuilding cost of revenues

Cost of home sales revenues

Cost of land sales and other revenues

Total homebuilding cost of revenues

Financial services costs

Selling, general and administrative

Equity in earnings from consolidated subsidiaries

Other income (expense)

Income before income tax expense

Income tax expense

Supplemental Condensed Consolidated Statement of Cash Flows

For the Three Months Ended March 31, 2020 ( in thousands )

Non Guarantor

Net cash provided by/(used in) operating activities

Net cash provided by/(used in) investing activities

Financing activities

Borrowings under revolving credit facilities

Payments on revolving credit facilities

Principal payments on notes payable

Proceeds from insurance notes payable

Net proceeds from mortgage repurchase facilities

Repurchases of common stock upon vesting of stock-based compensation

Repurchases of common stock under our stock repurchase program

Payments from (and advances to) parent/subsidiary

Net cash provided by/(used in) financing activities

Net increase (decrease)

Cash and cash equivalents and restricted cash

Beginning of period

End of period

Cash and cash equivalents

Restricted Cash

Cash and cash equivalents and Restricted cash

Supplemental Condensed Consolidated Statement of Cash Flows

For the Three Months Ended March 31, 2019 ( in thousands )

Non Guarantor

Net cash provided by/(used in) operating activities

Net cash provided by/(used in) investing activities

Financing activities

Borrowings under revolving credit facilities

Payments on revolving credit facilities

Principal payments on notes payable

Proceeds from insurance notes payable

Net proceeds from mortgage repurchase facilities

Repurchases of common stock upon vesting of stock-based compensation

Repurchases of common stock under our stock repurchase program

Payments from (and advances to) parent/subsidiary

Net cash provided by/(used in) financing activities

Net increase (decrease)

Cash and cash equivalents and restricted cash

Beginning of period

End of period

Cash and cash equivalents

Restricted Cash

Cash and cash equivalents and Restricted cash

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements