What changed in this filing

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Item 1. Financial Statements

2021-04-29 compared with 2020-10-29 · 119 added, 144 removed, 275 unchanged (49% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

As of September 30, 2020 and December 31, 2019

(in thousands, except share amounts)

September 30,

As of March 31, 2021 and December 31, 2020

(in thousands, except share and per share amounts)

Cash and cash equivalents

14 unchanged sentences

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

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

Common stock, $ 0.01 par value, 100,000,000 shares authorized, 33,708,286 and 33,350,633 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital

5 unchanged sentences

Unaudited Condensed Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, 2020 and 2019

For the Three Months Ended March 31, 2021 and 2020

(in thousands, except share and per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Homebuilding revenues

6 unchanged sentences

Cost of home sales revenues

( 1,718,545 )

( 1,407,519 )

Cost of land sales and other revenues

Total homebuilding cost of revenues

( 1,737,142 )

( 1,413,634 )

Financial services costs

Selling, general and administrative

Loss on debt extinguishment

Inventory impairment and other

7 unchanged sentences

Unaudited Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2020 and 2019

For the Three Months Ended March 31, 2021 and 2020

( in thousands )

Nine Months Ended September 30,

Three Months Ended March 31,

Operating activities

2 unchanged sentences

Stock-based compensation expense

Fair value of loans held for sale and other

Loss on debt extinguishment

Fair value of mortgage loans held for sale and other

Inventory impairment and other

16 unchanged sentences

Payments on revolving credit facilities

( 1,108,500 )

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 payments on mortgage repurchase facilities

Net proceeds from issuances of common stock

Net proceeds (payments) on mortgage repurchase facilities

Withholding of common stock upon vesting of restricted stock units

Repurchases of common stock under stock repurchase program

Net cash (used in) provided by financing activities

Net cash provided by financing activities

Cash and cash equivalents and Restricted cash

10 unchanged sentences

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

For the Three and Nine Months Ended September 30, 2020 and 2019

For the Three Months Ended March 31, 2021 and 2020

( in thousands )

Three Months Ended September 30, 2020 and 2019

Additional Paid-In Capital

1 unchanged sentence

Total Stockholders'

Balance at June 30, 2020

Stock-based compensation expense

Balance at September 30, 2020

Balance at June 30, 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 September 30, 2019

Nine Months Ended September 30, 2020 and 2019

Additional Paid-In Capital

Retained Earnings

Total Stockholders'

Balance at December 31, 2020

2 unchanged sentences

Stock-based compensation expense

Balance at September 30, 2020

Balance at March 31, 2021

Balance at December 31, 2019

Issuance of common stock

Repurchase of common stock

Vesting of restricted stock units

1 unchanged sentence

Stock-based compensation expense

Balance at September 30, 2019

Balance at March 31, 2020

See Notes to Unaudited Condensed Consolidated Financial Statements

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Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2020

March 31, 2021

Basis of Presentation

Century Communities, Inc.

(which we refer to as “we,” “CCS,” or the “Company”), together with its subsidiaries, is engaged in the development, design, construction, marketing and sale of single-family attached and detached homes in metropolitan areas in 17 states.

In many of our projects, in addition to building homes, we are responsible for the entitlement and development of the underlying land.

1 unchanged sentence

Our Century Communities brand targets a wide range of buyer profiles including:

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

entry-level, 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 opportunities.

Our Century Complete brand targets entry-level homebuyers, primarily sells homes through retail studios and the internet, and provides no option or upgrade opportunities.

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

West, Mountain, Texas, Southeast, and Century Complete.

Additionally, our indirect wholly owned subsidiaries, Inspire Home Loans, Inc., Parkway Title, LLC, and IHL Home Insurance Agency, LLC, which provide mortgage, title, and insurance services, respectively, to our homebuyers, have been identified as our Financial Services segment.

Additionally, our indirect wholly-owned subsidiaries, Inspire Home Loans, Inc., Parkway Title, LLC, and IHL Home Insurance Agency, LLC, which provide mortgage, title, and insurance services, respectively, primarily to our homebuyers, have been identified as our Financial Services segment.

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

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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.

As of the date of this filing and throughout the third quarter of 2020, we are and were able to build and sell homes in all of our markets .

As of the date of this filing and throughout the first quarter of 2021, we are and were able to build and sell homes in all of our markets .

Principles of Consolidation

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Recently Adopted Accounting Standards

Financial Instruments - 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.

Internal-Use Software

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force) .

This update is intended to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement by providing guidance for determining when the arrangement includes a software license.

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

Recently Issued Accounting Standards

In December 2019, the FASB issued ASU No.

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2019-12, “ Income Taxes (Topic 740) :

1 unchanged sentence

The standard simplifies the accounting for income taxes, eliminates certain exceptions, and clarifies certain aspects of ASC 740 to promote consistency among reporting entities.

ASU 2019-12 is effective for us beginning January 1, 2021.

We do not expect this standard to have a material effect on the consolidated financial statements and related disclosures.

We adopted this standard on January 1, 2021 with no material effect on the condensed consolidated financial statements and related disclosures.

Reporting Segments

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Our Century Communities brand is managed by geographic location, and each of our four geographic regions targets a wide range of buyer profiles including:

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.

entry-level, 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.

Each of our four geographic regions is considered a separate operating segment.

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 Century Complete brand targets entry-level homebuyers, primarily sells homes through retail studios and the internet, and provides no option or upgrade selections.

Our Century Complete brand currently has operations in 11 states and is managed separately from our four geographic regions.

Accordingly, it is considered a separate operating segment.

The management of our four geographic regions and Century Complete reports to our chief operating decision makers (which we refer to as “CODMs”), the Co-Chief Executive Officers of our Company.

The management of our four Century Communities geographic regions and Century Complete reports to our chief operating decision makers (which we refer to as “CODMs”), the Co-Chief Executive Officers of our Company.

The CODMs review the results of our operations, including total revenue and income before income tax expense to determine profitability and to allocate resources.

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Century Complete

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Total income before income tax expense

The following table summarizes total assets by operating segment (in thousands):

September 30,

The following table summarizes total assets by segment (in thousands):

Century Complete

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Inventories included the following (in thousands):

September 30,

Homes under construction

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Inspire is a full-service mortgage lender and primarily originates mortgage loans for our homebuyers.

Inspire sells substantially all of the loans it originates either as whole loans, or with servicing retained, in the secondary mortgage market within a short period of time after origination, generally within 30 days.

Inspire sells substantially all of the loans it originates either as whole loans, or with servicing rights retained, in the secondary mortgage market within a short period of time after origination, generally within 30 days.

Inspire primarily finances these loans using its mortgage repurchase facilities.

Mortgage loans in process for which interest rates were committed to borrowers totaled approximately $ 193.1 million and $ 37.6 million at September 30, 2020 and December 31, 2019, respectively, and carried a weighted average interest rate of approximately

2.9 % and 3.9 %, respectively.

As of September 30, 2020 and December 31, 2019, Inspire had mortgage loans held for sale with an aggregate fair value of $ 187.5 million and $ 185.2 million, respectively, and an aggregate outstanding principal balance of $ 179.9 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 statements of operations.

Mortgage loans in process for which interest rates were committed to borrowers totaled approximately $ 219.6 million and $ 172.3 million at March 31, 2021 and December 31, 2020, respectively, and carried a weighted average interest rate of approximately 3.2 % and 2.8 %, respectively .

As of March 31, 2021 and December 31, 2020, Inspire had mortgage loans held for sale

with an aggregate fair value of $ 303.4 million and $ 282.6 million, respectively, and an aggregate outstanding principal balance of $ 295.2 million and $ 269.6 million, respectively.

Our net gains on the sale of mortgage loans were $ 22.9 million and $ 11.6 million for the three months ended March 31, 2021 and 2020, respectively, and are included in the financial services revenue on the condensed consolidated statements of operations.

Interest rate risks related to these obligations are typically mitigated by the preselling of loans to investors or through our interest rate hedging program.

Mortgage loans in process for which interest rates were committed to borrowers, 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 statements of operations.

Management believes carrying loans held-for-sale and the derivative instruments used to economically hedge them at fair value improves financial reporting by more accurately reflecting the underlying transaction.

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Prepaid expenses and other assets included the following (in thousands):

September 30,

Prepaid insurance

Lot option and escrow deposits

Performance deposits

Deferred financing costs on revolving line of credit, net

3 unchanged sentences

Other assets and prepaid expenses

Derivative assets

Mortgage loans held for investment

Derivative assets and mortgage servicing rights

Total prepaid expenses and other assets

2 unchanged sentences

Accrued expenses and other liabilities included the following (in thousands):

September 30,

Earnest money deposits

2 unchanged sentences

Land development and home construction accruals

Liability for product financing arrangements

Accrued interest

1 unchanged sentence

Income taxes payable

Derivative liability

Other accrued liabilities

1 unchanged sentence

Estimated future direct warranty costs are accrued and charged to cost of home sales revenues in the period when the related home sales revenues are recognized.

Amounts accrued, which are included in accrued expenses and other liabilities on the consolidated balance sheets, are based upon historical experience rates.

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 did no t reduce our warranty reserve during the three months ended September 30, 2020, and reduced our warranty reserve by $ 0.6 million during the three months ended September 30, 2019.

We reduced our warranty reserve by $ 1.3 million and $ 0.4 million during the nine months ended September 30, 2020 and 2019, respectively.

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

Amounts accrued, which are included in accrued expenses and other liabilities on the condensed consolidated balance sheets, are based upon historical experience rates.

We subsequently assess the adequacy of our warranty accrual on a quarterly basis through a 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 $ 1.8 million and $ 1.1 million

during the three months ended March 31, 2021 and 2020, respectively.

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

Changes in our warranty accrual for the three months ended March 31, 2021 and 2020 are detailed in the table below (in thousands) :

Three Months Ended March 31,

Beginning balance

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Ending balance

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

September 30,

Our outstanding debt obligations included the following as of March 31, 2021 and December 31, 2020 (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, at the Administrative Agent’s discretion, a base rate plus an applicable margin between 1.60 % and 2.10 % per annum.

As of September 30, 2020 and December 31, 2019, we had no amounts and $ 68.7 million outstanding under the credit facility, respectively, 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, 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, 2021 and December 31, 2020, no amounts were outstanding under the credit facility and we were in compliance with all covenants.

Mortgage Repurchase Facilities – Financial Services

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Morgan, and Wells Fargo, respectively.

The mortgage warehouse lines of credit (which we refer to as the “repurchase facilities”) provide Inspire with uncommitted repurchase facilities of up to an aggregate of $ 275 million, secured by the mortgage loans financed thereunder.

The mortgage warehouse lines of credit (which we refer to as the “repurchase facilities”), which were increased in 2020, provide Inspire with uncommitted repurchase facilities of up to $ 350 million as of March 31, 2021, secured by the mortgage loans financed thereunder.

The repurchase facilities have varying short term maturity dates through December 31, 2021 and bear a weighted average interest rate of 2.68 %.

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 September 30, 2020 and December 31, 2019, we had $ 173.4 million and $ 174.1 million outstanding under these repurchase facilities, respectively, and were in compliance with all covenants thereunder.

During the three months ended September 30, 2020 and 2019, we incurred interest expense on the repurchase facilities of $ 0.8 million and $ 0.6 million, respectively, which are included in financial services costs on our condensed consolidated statements of operations.

During the nine months ended September 30, 2020 and 2019, we incurred interest expense on the repurchase facilities of $ 2.0 million and $ 2.1 million, respectively.

As of March 31, 2021 and December 31, 2020, we had $ 285.1 million and $ 259.1 million outstanding under these repurchase facilities, respectively, and were in compliance with all covenants thereunder.

During the three months ended March 31, 2021 and 2020, we incurred interest expense on the repurchase facilities of $ 0.8 million and $ 0.7 million, respectively, which are included in financial services costs on our condensed consolidated statements of operations.

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 and nine months ended September 30, 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 three months ended March 31, 2021 and 2020, 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 September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Interest capitalized beginning of period

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Our 2021 estimated annual effective tax rate of 23.6 % is driven by our blended federal and state statutory rate of 24.7 %, and certain other permanent differences between GAAP and tax which decreased our rate by 1.1 %.

For the nine months ended September 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 September 30, 2020 and 2019, we recorded income tax expense of $ 15.1 million and $ 7.8 million, respectively.

For the nine months ended September 30, 2020 and 2019, we recorded income tax expense of $ 34.7 million and $ 19.0 million, respectively .

For the three months ended March 31, 2021, our estimated annual rate of 23.6 % was impacted by discrete items which had a net impact of decreasing our rate by 1.2 %, including excess tax benefits for vested stock-based compensation.

For the three months ended March 31, 2021 and 2020, we recorded income tax expense of $ 29.4 million and $ 8.0 million, respectively.

Fair Value Disclosures

Accounting Standards Codification Topic 820, Fair Value Measurement , defines fair value as the price that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and requires assets and liabilities carried at fair value to be classified and disclosed in the following three categories:

Fair value measurements are used for the Company’s mortgage loans held for sale, mortgage loans held for investment, mortgage servicing rights, interest rate lock commitments and other derivative instruments on a recurring basis.

We also utilize fair value measurements on a non-recurring basis for inventories, and intangible assets when events and circumstances indicate that the carrying value is not recoverable.

The fair value hierarchy and its application to the Company’s assets and liabilities is as follows:

Level 1 – Quoted prices for identical instruments in active markets.

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and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets at measurement date.

 Mortgage loans held for sale – Fair value is based on quoted market prices for committed mortgage loans.

 Derivative assets and liabilities – Derivative assets and liabilities are related to our financial services segment and f air value is based on market prices for similar instruments.

Level 3 – Valuations derived from techniques where one or more significant inputs or significant value drivers are unobservable in active markets at measurement date.

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

September 30, 2020

December 31, 2019

Secured notes receivable (1)

 Mortgage servicing rights - The fair value of the mortgage servicing rights is calculated using third-party valuations.

The key assumptions, which are generally unobservable inputs, used in the valuation of the mortgage servicing rights include mortgage prepayment rates, discount rates and delinquency rates.

 Mortgage loans held for investment – The fair value of mortgage loans held for investment is calculated based on Level 3 analysis which incorporates information including the value of underlying collateral, from markets where there is little observable trading activity.

The following outlines the Company’s assets and liabilities measured at fair value on a recurring basis at March 31, 2021 and December 31, 2020, and the changes in the fair value of the Level 3 assets during the three months ended March 31, 2021 and 2020, respectively:

Balance Sheet Classification

Mortgage loans held for sale

Mortgage loans held for investment

Prepaid expenses and other assets

Derivative assets

Prepaid expenses and other assets

Mortgage servicing rights (1)

Prepaid expenses and other assets

Derivative liabilities

Accrued expenses and other liabilities

(1) The unobservable inputs used in the valuation of the mortgage servicing rights include mortgage prepayment rates, discount rates and delinquency rates, which were 8.0 %, 9.8 %, and 0.4 %, respectively.

The following table represents the reconciliation of the beginning and ending balance for the Level 3 recurring fair value measurements:

Three Months Ended March, 31

Mortgage servicing rights:

Beginning of year

Disposals/settlements

Changes in fair value

Three Months Ended March, 31

Mortgage loans held-for-investment

Beginning of year

Disposals/settlements

Reduction in unpaid principal balance

Changes in fair value

For the financial assets and liabilities that the Company does not reflect at fair value, the following present both their respective carrying value and fair value at March 31, 2021 and December 31, 2020, respectively.

March 31, 2021

December 31, 2020

Cash and cash equivalents

Secured notes receivable (1)

5.875 % senior notes (2)(3)

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Other financing obligations (4)(5)

Derivative liabilities (3)

Mortgage repurchase facilities (4)

1 unchanged sentence

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.

(3) Derivative instruments are carried at fair value and based on market prices for similar instruments and are related to our financial services segment.

Changes in fair value are reflected in financial services revenue on the condensed consolidated statements of operations.

Derivative assets are presented within prepaid expenses and other assets on the condensed consolidated balance sheets.

Derivative liabilities are presented within accrued expenses and other liabilities on the condensed consolidated balance sheets.

(2) Estimated fair value of the senior notes is based on recent trading activity in inactive markets.

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

As of September 30, 2020, these amounts totaled $ 5.3 million and $ 3.4 million for the 6.750 % senior notes and 5.875 % senior notes, respectively.

As of March 31, 2021, these amounts totaled $ 5.0 million and $ 3.0 million for the 6.750 % senior notes and 5.875 % senior notes, respectively.

As of December 31, 2020, these amounts totaled $ 5.2 million and $ 3.2 million for the 6.750 % senior notes and 5.875 % senior notes, respectively.

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

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

During the nine months ended September 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, and $ 0.9 million of impairment charges related to one community in our Texas segment which was recorded during the three months ended June 30, 2020.

No impairment charges were recorded in the three months ended September 30, 2020.

(5) Insurance premium notes included in other financing obligations bore interest rates ranging from 3.200 % to 3.240 % during the period ended March 31, 2021 and during the period ended December 31, 2020.

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.

No impairment charges were recorded in the three months ended March 31, 2021.

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.

Accordingly, we recognized an impairment charge of $ 0.8 million to reflect the estimated fair value of the community of $ 1.5 million.

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

This inventory impairment was incurred in the Century Complete segment.

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

Changes in our cash flow projections in future periods related to these communities 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 as a result of impairments, if deemed necessary.

Stock-Based Compensation

During the three months ended September 30, 2020 and 2019, we did no t grant any restricted stock units (which we refer to as “RSUs”) or performance share units (which we refer to as “PSUs”).

During the nine months ended September 30, 2020 and 2019, we granted RSUs covering 0.4 million and 0.6 million shares of common stock, respectively, with a grant date fair value of $ 30.43 per share and $ 23.85 per share, respectively, that vest over a three year period.

During the nine months ended September 30, 2020 and 2019, we also granted PSUs covering up to 0.3 million and 0.3 million shares of common stock, respectively, assuming maximum level of performance, with a grant date fair value of $ 26.38 per share and $ 22.01 per share, respectively.

During the three months ended March 31, 2021 and 2020, we granted restricted stock units (which we refer to as “RSUs”) covering 0.2 million and 0.3 million shares of common stock, respectively, with a grant date fair value of $ 52.74 per share and $ 31.19 per share, respectively, that vest over a three year period.

During the three months ended March 31, 2021 we also granted performance share units (which we refer to as “PSUs”) covering up to 0.2 million shares of common stock, assuming maximum level of performance, with a grant date fair value of $ 58.28 per share.

We did not grant any PSUs during the three months ended March 31, 2020.

Granted PSUs are subject to both service and performance vesting conditions.

The quantity of shares that will ultimately vest for 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.

Approximately 0.8 million shares will vest if the defined maximum performance targets are met, and no shares will vest if the defined minimum performance targets are not met.

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

As of September 30, 2020

As of March 31, 2021

Unvested units

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Remaining period to recognize compensation cost

During the three months ended September 30, 2020 and 2019, we recognized stock-based compensation expense of $ 5.8 million and $ 3.9 million, respectively.

During the nine months ended September 30, 2020 and 2019, we recognized stock-based compensation expense of $ 14.4 million and $ 11.4 million, respectively.

During the three months ended March 31, 2021 and 2020, we recognized stock-based compensation expense of $ 3.0 million and $ 1.7 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 September 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 30 thousand, and we recorded a cumulative catch-up adjustment to increase stock-based compensation expense of $ 0.6 million ($ 0.4 million net of tax), or $ 0.02 per basic share and $ 0.01 per diluted share for the three and nine months ended September 30, 2020, respectively.

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

As of March 31, 2021, and December 31, 2020 there were 33.7 million and 33.4 million shares of common stock issued and outstanding, respectively, and no shares of preferred stock outstanding.

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 0.5 million and 0.3 million shares of common stock related to the vesting of RSUs during the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, approximately 1.0 million shares of common stock remained available for issuance under the Amended 2017 Incentive Plan.

We issued 0.6 million and 0.4 million shares of common stock related to the vesting of RSUs during the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, approximately 0.7 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 $ 100.0 million available for sale as of September 30, 2020.

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

During the three and nine months ended September 30, 2019, we sold and issued an aggregate of 0.8 million and 0.9 million shares, respectively, of our common stock under the previous distribution agreement, which provided gross proceeds of $ 23.7 million and $ 26.5 million, respectively, and in connection with such sales, paid total commissions and fees to the sales agents of $ 0.6 million and $ 0.7 million, respectively .

This Distribution Agreement, which superseded and replaced a prior similar distribution agreement, had all $ 100.0 million available for sale as of March 31, 2021.

We did no t sell or issue any shares of our common stock during the three months ended March 31, 2021 and 2020, respectively.

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 .

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 nine months ended September 30, 2020, we did no t repurchase any shares of common stock.

During the three and nine months ended September 30, 2019, we repurchased 83,000 shares of common stock under this program for approximately $ 1.4 million.

During the three months ended March 31, 2021 and 2020, we did not repurchase any shares of common stock.

The maximum number of shares available to be purchased under the stock repurchase program as of March 31, 2021 was 3,812,939 shares.

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 and nine months ended September 30, 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 months ended March 31, 2021 and 2020 (in thousands, except share and per share information):

Three Months Ended

Nine Months Ended

September 30,

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

We excluded 0.8 million and 0.6 million common stock unit equivalents from diluted earnings per share during the three months ended March 31, 2021 and 2020, respectively, related to the PSUs for which performance conditions remained unsatisfied.

Commitments and Contingencies

1 unchanged sentence

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 September 30, 2020, and December 31, 2019, we had $ 360.1 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.

As of March 31, 2021, and December 31, 2020, we had $ 441.2 million and $ 402.7 million, respectively, in letters of credit and performance bonds issued and outstanding.

Legal Proceedings

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

It is the opinion of our management that if the claims have merit, parties other than the Company would be, at least in part, liable for the claims, and the eventual outcome of these claims will not have a material adverse effect upon our consolidated financial condition, results of operations, or cash flows.

1 unchanged sentence

Under various insurance policies, we have the ability to recoup costs in excess of applicable self-insured retentions.

Estimates of such amounts are recorded in other assets when recovery is probable.

Estimates of such amounts are recorded in other assets on our condensed consolidated balance sheet when recovery is probable.

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.

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