What changed in this filing

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Item 1. Financial Statements

2022-04-28 compared with 2021-10-28 · 110 added, 162 removed, 292 unchanged (48% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

As of September 30, 2021 and December 31, 2020

As of March 31, 2022 and December 31, 2021

(in thousands, except share and per share amounts)

September 30,

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, 33,760,940 and 33,350,633 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

Common stock, $ 0.01 par value, 100,000,000 shares authorized, 33,038,361 and 33,760,940 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital

5 unchanged sentences

Unaudited Condensed Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, 2021 and 2020

For the Three Months Ended March 31, 2022 and 2021

(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

( 2,203,187 )

( 1,718,545 )

Cost of land sales and other revenues

Total homebuilding cost of revenues

( 2,227,183 )

( 1,737,142 )

Financial services costs

Selling, general and administrative

Loss on debt extinguishment

Inventory impairment and other

Other income (expense)

6 unchanged sentences

Unaudited Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2021 and 2020

For the Three Months Ended March 31, 2022 and 2021

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Operating activities

3 unchanged sentences

Fair value of mortgage loans held for sale and other

Loss on debt extinguishment

Inventory impairment and other

Deferred income taxes

10 unchanged sentences

Purchases of property and equipment

Proceeds from secured note receivable and other

Other investing activities

Net cash used in investing activities

2 unchanged sentences

Payments on revolving credit facilities

Proceeds from issuance of senior notes due 2029

Extinguishment of senior notes due 2025

Proceeds from issuance of insurance premium notes and other

Principal payments on insurance notes payable

Debt issuance costs

Net payments on mortgage repurchase facilities

Withholding of common stock upon vesting of restricted stock units

Principal payments on insurance premium notes and other

Net (payments) proceeds for mortgage repurchase facilities

Withholding of common stock upon vesting of stock-based compensation awards

Repurchases of common stock under stock repurchase program

Dividend payments

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

Net (decrease) increase

Cash and cash equivalents and Restricted cash

2 unchanged sentences

Supplemental cash flow disclosure

Cash paid for income taxes

Cash (refunds) paid for income taxes

Cash and cash equivalents and Restricted cash

5 unchanged sentences

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

For the Three and Nine Months Ended September 30, 2021 and 2020

For the Three Months Ended March 31, 2022 and 2021

(in thousands)

For the Three Months Ended September 30, 2021 and 2020

Additional Paid-In Capital

1 unchanged sentence

Total Stockholders'

Balance at June 30, 2021

Stock-based compensation expense

Cash dividends declared

Balance at September 30, 2021

Balance at June 30, 2020

Stock-based compensation expense

Balance at September 30, 2020

For the Nine Months Ended September 30, 2021 and 2020

Additional Paid-In Capital

Retained Earnings

Total Stockholders'

Balance at December 31, 2021

Vesting of restricted stock units

Withholding of common stock upon vesting of restricted stock units

Vesting of stock-based compensation awards

Withholding of common stock upon vesting of stock-based compensation awards

Repurchases of common stock

Stock-based compensation expense

Cash dividends declared

Balance at September 30, 2021

Cash dividends declared and dividend equivalents

Balance at March 31, 2022

Balance at December 31, 2020

Vesting of restricted stock units

Withholding of common stock upon vesting of restricted stock units

Vesting of stock-based compensation awards

Withholding of common stock upon vesting of stock-based compensation awards

Stock-based compensation expense

Balance at September 30, 2020

Balance at March 31, 2021

See Notes to Unaudited Condensed Consolidated Financial Statements

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2021

March 31, 2022

Basis of Presentation

6 unchanged sentences

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

We now have six states where both Century brands have a presence, and we believe there are more opportunities for increased penetration within our over 45 high-growth markets to enable both brands to benefit from increased scale and enhanced operational efficiencies.

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, primarily to our homebuyers, have been identified as our Financial Services segment.

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.

6 unchanged sentences

The condensed consolidated financial statements include the accounts of the Company, as well as all subsidiaries in which we have a controlling interest, and variable interest entities for which the Company is deemed to be the primary beneficiary.

We currently do not have any variable interest entities in which we are deemed the primary beneficiary.

We do not have any variable interest entities in which we are deemed the primary beneficiary.

All intercompany accounts and transactions have been eliminated.

2 unchanged sentences

Accordingly, actual results could differ from those estimates.

Recently Adopted Accounting Standards

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

2019-12, “ Income Taxes (Topic 740) :

Simplifying the Accounting for Income Taxes” (“ASU 2019-12”).

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

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

Reporting Segments

1 unchanged sentence

We build and sell homes under our Century Communities and Century Complete brands.

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

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

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 entry-level homebuyers, primarily sells homes through retail studios and the

internet, and generally provides no option or upgrade selections.

Our Century Complete brand targets entry-level homebuyers, primarily sells homes through retail studios and the internet, and generally 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.

5 unchanged sentences

 Mountain (Arizona, Colorado, Nevada, and Utah)

 Southeast (Georgia, North Carolina, South Carolina, Tennessee, and Florida)

 Southeast (Florida, Georgia, North Carolina, South Carolina, and Tennessee)

 Century Complete (Alabama, Arizona, Florida, Georgia, Indiana, Kentucky, Michigan, North Carolina, Ohio, South Carolina, and Texas)

We have also identified our Financial Services operations, which provide mortgage, title, and insurance services to our homebuyers, as a sixth reportable segment.

We have identified our Financial Services operations, which provide mortgage, title, and insurance services to our homebuyers, as a sixth reportable segment.

Our Corporate operations are a non-operating segment, as they serve to support our homebuilding, and to a lesser extent our Financial Services operations, through functions, such as our executive, finance, treasury, human resources, accounting and legal departments.

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

6 unchanged sentences

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

September 30,

Century Complete

2 unchanged sentences

Inventories included the following (in thousands):

September 30,

Homes under construction

6 unchanged sentences

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 loans with servicing rights released, or with servicing rights 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 loans with servicing rights released, 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 locked by borrowers, or interest rate lock commitments, totaled approximately $ 171.0 million and $ 172.3 million at September 30, 2021 and December 31, 2020, respectively, and carried a weighted average interest rate of approximately 3.1 % and 2.8 %, respectively .

As of September 30, 2021 and December 31, 2020, Inspire had mortgage loans held for sale with an aggregate fair value of $ 223.4 million and $ 282.6 million, respectively, and an aggregate outstanding principal balance of $ 216.4 million and $ 269.6 million, respectively.

Our net gains on the sale of mortgage loans were $ 23.4 million and $ 26.3 million for the three months ended September 30, 2021 and 2020, respectively, and were $ 70.2 million and $ 53.9 million for the nine months ended September 30, 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 program to economically hedge interest rates.

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 instruments 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.

Mortgage loans in process for which interest rates were locked by borrowers, or interest rate lock commitments, totaled approximately $ 230.7 million and $ 164.3 million at March 31, 2022 and December 31, 2021, respectively, and carried a weighted average interest rate of approximately 4.4 % and 3.3 %, respectively .

As of March 31, 2022 and December 31, 2021, Inspire had mortgage loans held for sale with an aggregate fair value of $ 199.0 million and $ 353.1 million, respectively, and an aggregate outstanding principal balance of $ 197.6 million and $ 342.0 million, respectively.

Our net gains on the sale of mortgage loans were $ 0.7 million and $ 18.0 million for the three months ended March 31, 2022 and 2021, 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 held for sale, including the rights to service the mortgage loans, mortgage loans in process for which interest rates were committed to the borrowers (referred to as “interest rate lock commitments”), as well as the derivative instruments used to economically hedge our interest rate risk, which are typically forward commitments on mortgage-backed securities and interest rate lock commitments, are carried at fair value.

Management believes carrying loans held for sale at fair value improves financial reporting by mitigating volatility in reported earnings caused by measuring the fair value of the loans and the derivative instruments used to economically hedge them.

Gains and losses from the changes in fair value are reflected in financial services revenue on the condensed consolidated statements of operations.

Losses from the change in fair value for mortgage loans held for sale were $ 9.7 million and $ 4.9 million for the three months ended March 31, 2022 and 2021, respectively .

Refer to Note 11 – Fair Value Disclosures for further information regarding our derivative instruments .

1 unchanged sentence

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

September 30,

Prepaid insurance

3 unchanged sentences

Restricted cash (1)

Secured note receivable

Right of use assets

6 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

7 unchanged sentences

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 $ 2.5 million during the three months ended September 30, 2021, and did not reduce our warranty reserve during the three months ended September 30, 2020.

We reduced our warranty reserve by $ 4.7 million and $ 1.3 million during the nine months ended September 30, 2021 and 2020, respectively.

Based on warranty payment trends relative to our estimates at the time of home closing, we reduced our warranty reserve by $ 0.6 million and $ 1.8 million during the three months ended March 31, 2022 and 2021, 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 and nine months ended September 30, 2021 and 2020 are detailed in the table below (in thousands) :

Three Months Ended September 30,

Nine Months Ended September 30,

Changes in our warranty accrual for the three months ended March 31, 2022 and 2021 are detailed in the table below (in thousands) :

Three Months Ended March 31,

Beginning balance

2 unchanged sentences

Ending balance

Our outstanding debt obligations included the following as of September 30, 2021 and December 31, 2020 (in thousands):

September 30,

Our outstanding debt obligations included the following as of March 31, 2022 and December 31, 2021 (in thousands):

3.875 % senior notes, due August 2029 (1)

6.750 % senior notes, due May 2027 (1)

5.875 % senior notes, due July 2025 (1)

Other financing obligations

3 unchanged sentences

(1) The carrying value of senior notes reflects the impact of premiums, discounts, and issuance costs that are amortized to interest expense over the respective terms of the senior notes.

Issuance of 3.875% Senior Notes Due 2029

In August 2021, we completed a private offering of $ 500.0 million aggregate principal amount of our 3.875 % Senior Notes due 2029 (the “2029 Notes”) in reliance on Rule 144A and Regulation S under the Securities Act of 1933.

The 2029 Notes were issued under an Indenture, dated as of August 23, 2021, among the Company, our subsidiary guarantors party thereto, and U.S.

Bank National Association, as trustee (which we refer to as the “August 2021 Indenture,” as it may be supplemented or amended from time to time).

The 2029 Notes were issued at 100% of their principal amount and we received proceeds of $ 493.8 million, net of $ 6.2 million in issuance costs.

The August 2021 Indenture contains certain restrictive covenants on issuing future secured debt and other transactions.

The aggregate principal balance of the 2029 Notes is due August 2029, with interest only payments due semi-annually in February and August of each year, beginning on February 15, 2022.

Redemption and Extinguishment of 5.875% Senior Notes Due 2025

During the three months ended September 30, 2021 we redeemed $ 400.0 million in outstanding principal of our 5.875 % Senior Notes due 2025 at a redemption price equal to 102.938 % of the principal amount, plus accrued and unpaid interest, totaling $ 414.8 million.

The redemption was conditioned upon our prior consummation of the offering and issuance of the 2029 Notes.

The redemption transaction resulted in a loss on debt extinguishment of $ 14.5 million in the condensed consolidated statement of operations.

Revolving Line of Credit

On May 21, 2021, we entered into a Second Amended and Restated Credit Agreement (the “Second A&R Credit Agreement”) with Texas Capital Bank, National Association, as Administrative Agent and L/C Issuer, and the lenders party thereto.

The Second A&R Credit Agreement, which amended and restated our prior Amended and Restated Credit Agreement , provides us with a senior unsecured revolving line of credit (the “Credit Facility”) of up to $ 800 million, and unless terminated earlier, will mature on April 30, 2026 .

On May 21, 2021, we entered into a Second Amended and Restated Credit Agreement (which we refer to as the “Second A&R Credit Agreement”) with Texas Capital Bank, National Association, as Administrative Agent and L/C Issuer, and the lenders party thereto.

The Second A&R Credit Agreement, which amended and restated our prior Amended and Restated Credit Agreement , provides us with

a senior unsecured revolving line of credit (which we refer to as the “Credit Facility”) of up to $ 800 million, and unless terminated earlier, will mature on April 30, 2026.

The Credit Facility includes a $ 250.0 million sublimit for standby letters of credit.

3 unchanged sentences

Borrowings under the Second A&R Credit Agreement bear interest at a floating rate equal to the adjusted Eurodollar Rate plus an applicable margin between 2.05 % and 2.65 % per annum, and if made available in the Administrative Agent’s discretion, a base rate plus an applicable margin between 1.05 % and 1.65 % per annum.

As of September 30, 2021 and December 31, 2020, no amounts were outstanding under the Credit Facility, and we were in compliance with all covenants.

As of March 31, 2022 and December 31, 2021, no amounts were outstanding under the Credit Facility, and we were in compliance with all covenants.

Mortgage Repurchase Facilities – Financial Services

1 unchanged sentence

Morgan, and Wells Fargo, respectively.

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 $ 275 million as of September 30, 2021, 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 $ 325 million as of March 31, 2022, secured by the mortgage loans financed thereunder.

The Repurchase Facilities have varying short term maturity dates through August 23, 2022 and bear a weighted average interest rate of 2.17 %.

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, 2021 and December 31, 2020, we had $ 211.6 million and $ 259.1 million outstanding under these repurchase facilities, respectively, and were in compliance with all covenants thereunder.

During the three months ended September 30, 2021 and 2020, we incurred interest expense on the repurchase facilities of $ 0.4 million and $ 0.8 million, respectively, which are included in financial services costs on our condensed consolidated statements of operations.

During the nine months ended September 30, 2021 and 2020, we incurred interest expense on the repurchase facilities of $ 1.8 million and $ 2.0 million, respectively.

As of March 31, 2022 and December 31, 2021, we had $ 193.0 million and $ 331.9 million outstanding under the Repurchase Facilities, respectively, and were in compliance with all covenants thereunder.

During the three months ended March 31, 2022 and 2021, we incurred interest expense on the Repurchase Facilities of $ 0.4 million and $ 0.8 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, 2021 and 2020, 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, 2022 and 2021, we capitalized all interest costs incurred during these periods, except for interest incurred on our Repurchase Facilities.

Our interest costs were as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Interest capitalized beginning of period

3 unchanged sentences

At the end of each interim period we are required to estimate our annual effective tax rate for the fiscal year and to use that rate to provide for income taxes for the current year-to-date reporting period.

Our 2021 estimated annual effective tax rate, before discrete items, of 23.4 % is driven by our blended federal and state statutory rate of 24.8 %, and certain permanent differences between GAAP and tax, including disallowed deductions for executive compensation and estimated federal energy credits for current year home deliveries, which decreased our rate by 1.4 %.

For the nine months ended September 30, 2021, our estimated annual rate of 23.4 % was impacted by discrete items which had a net impact of decreasing our rate by 1.2 %, including federal energy tax credits claimed on prior year home deliveries in excess of previous estimates and excess tax benefits for vested stock-based compensation.

For the three months ended September 30, 2021 and 2020, we recorded income tax expense of $ 31.8 million and $ 15.1 million, respectively.

For the nine months ended September 30, 2021 and 2020, we recorded income tax expense of $ 95.4 million and $ 34.7 million, respectively.

Our 2022 estimated annual effective tax rate, before discrete items, of 25.5 % is driven by our blended federal and state statutory rate of 24.7 %, and certain permanent differences between GAAP and tax, including disallowed deductions for executive compensation which increased our rate by 0.8 %.

For the three months ended March 31, 2022, our estimated annual rate of 25.5 % was impacted by discrete items which had a net impact of decreasing our rate by 1.0 %, including excess tax benefits for vested stock-based compensation and federal energy tax credits claimed on prior year home deliveries in excess of previous estimates .

Our estimated annual rate for the three months ended March 31, 2022 of 25.5 % increased by 330 basis points as compared to our effective tax rate for the year ended December 31, 2021 of 22.2 %.

The increase in our estimated rate is driven by the expiration of the

Energy Efficient Home Credit on December 31, 2021.

The Energy Efficient Home Credit provided a $2,000 tax credit for each home delivered that met the energy saving and certification requirements under the statute.

For the three months ended March 31, 2022 and 2021, we recorded income tax expense of $ 46.3 million and $ 29.4 million, respectiv ely.

Fair Value Disclosures

6 unchanged sentences

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

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

 Derivative assets and liabilities – Derivative assets are interest rate lock commitments and derivative liabilities are associated with forward commitments and investor commitments on loans.

Fair 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 the measurement date.

2 unchanged sentences

 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 September 30, 2021 and December 31, 2020, respectively (in thousands):

September 30,

The following outlines the Company’s assets and liabilities measured at fair value on a recurring basis at March 31, 2022 and December 31, 2021, respectively (in thousands):

Balance Sheet Classification

9 unchanged sentences

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 cost to service, which were 8.8 %, 9.9 %, and $ 0.085 per year per loan, respectively as of September 30, 2021, and 10.4 %, 9.8 %, and $ 0.084 per year per loan, respectively, as of December 31, 2020.

(1) The unobservable inputs used in the valuation of the mortgage loans held for investment include, among other items, the value of underlying collateral, from markets where there is little observable trading activity.

(2) The unobservable inputs used in the valuation of the mortgage servicing rights include mortgage prepayment rates, discount rates and cost to service, which were 7.1 %, 9.9 %, and $ 0.090 per year per loan, respectively as of March 31, 2022, and 8.5 %, 9.9 %, and $ 0.085 per year per loan, respectively, as of December 31, 2021.

The high and low end of the range of unobservable inputs used in the valuation did not result in a significant change to the fair value measurement.

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

Three Months Ended September 30,

Nine Months Ended September 30,

The following table represents the reconciliation of the beginning and ending balance for the Level 3 recurring fair value measurements, with gains and losses from the changes in fair value reflected in financial services revenue on the condensed consolidated statements of operations (in thousands):

Three Months Ended March 31,

Mortgage servicing rights

Beginning of period

Disposals/settlements

Changes in fair value

End of period

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Mortgage loans held-for-investment

Beginning of period

Disposals/settlements

Transfers from loans held for sale

Reduction in unpaid principal balance

1 unchanged sentence

End of period

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 September 30, 2021 and December 31, 2020, respectively (in thousands).

September 30, 2021

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, 2022 and December 31, 2021, respectively (in thousands).

March 31, 2022

December 31, 2021

Cash and cash equivalents

Secured notes receivable (1)

3.875 % senior notes (1)(2)

6.750 % senior notes (1)(2)

6.750 % senior notes (2)(3)

Revolving line of credit (3)

1 unchanged sentence

Mortgage repurchase facilities (3)

(1) During the three months ended September 30, 2021, the secured note receivable was paid in full at $ 2.4 million.

Prior year estimated fair value of the secured note receivable was based on cash flow models discounted at market interest rates which considered the underlying risks of the note.

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

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

As of September 30, 2021, these amounts totaled $ 6.1 million and $ 4.6 million for the 3.875 % senior notes and 6.750 % senior notes, respectively.

As of March 31, 2022, these amounts totaled $ 5.7 million and $ 4.2 million for the 3.875 % senior notes and 6.750 % senior notes, respectively.

As of December 31, 2021, these amounts totaled $ 5.9 million and $ 4.4 million for the 6.750 % senior notes and 5.875 % senior notes, respectively.

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

(5) Insurance premium notes included in other financing obligations bore interest rates ranging from 2.990 % to 3.240 % during the period ended September 30, 2021 and from 3.200 % to 3.240 % during the period ended December 31, 2020.

(4) Other financing obligations included insurance premium notes and certain secured borrowings and generally bore interest rates ranging from 2.40 % to 3.24 % during the period ended March 31, 2022 and from 2.99 % to 3.24 % during the period ended December 31, 2021.

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 September 30, 2021 and 2020, respectively.

Nominal impairment charges were recorded during the nine months ended September 30, 2021, and we recognized impairment charges of $ 1.7 million during the nine months ended September 30, 2020.

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

No impairment charges were recorded in the three months ended March 31, 2022 and 2021, respectively.

When impairment charges are recognized, 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.

Stock-Based Compensation

During the nine months ended September 30, 2021, we granted restricted stock units (which we refer to as “RSUs”) covering 0.2 million shares of common stock, respectively, with a grant date fair value of $ 53.40 per share, that primarily vest over a three year period.

During the nine months ended September 30, 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.

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 the current estimated level of performance achievement, are as follows (in thousands, except years):

As of September 30, 2021

During the three months ended March 31, 2022 and 2021, we granted performance share units (which we refer to as “PSUs”) covering up to 0.5 million and 0.2 million shares of common stock, respectively, assuming maximum level of performance, with a grant date fair value of $ 55.93 and $ 58.28 per share, respectively, that are subject to both service and performance vesting conditions.

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

During the three months ended March 31, 2022 and 2021, we issued 0.3 million and 0.3 million shares of common stock, respectively, upon the vesting and settlement of PSUs that were granted in previous periods.

Approximately 0.9 million shares will vest in 2022 to 2024 if the defined maximum performance targets are met, and no shares will vest if the defined minimum performance targets are not met.

During the three months ended March 31, 2022 and 2021, we granted restricted stock units (which we refer to as “RSUs”) covering 0.2 million and 0.2 million shares of

common stock, respectively, with a grant date fair value of $ 64.37 and $ 52.74 per share, respectively, that primarily vest over a three year period.

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

As of March 31, 2022

Unvested units

1 unchanged sentence

Weighted-average period to recognize compensation cost

During the three months ended September 30, 2021 and 2020, we recognized stock-based compensation expense of $ 3.5 million and $ 5.8 million, respectively.

During the nine months ended September 30, 2021 and 2020, we recognized stock-based compensation expense of $ 10.8 million and $ 14.4 million, respectively.

During the three months ended March 31, 2022 and 2021, we recognized stock-based compensation expense of $ 4.1 million and $ 3.0 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, 2021, and December 31, 2020 there were 33.8 million and 33.4 million shares of common stock issued and outstanding, respectively, and no shares of preferred stock outstanding.

As of March 31, 2022 and December 31, 2021, there were 33.0 million and 33.8 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 1.6 million shares.

We issued 0.7 million and 0.5 million shares of common stock related to the vesting of RSUs during the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021, approximately 0.7 million shares of common stock remained available for issuance under the Amended 2017 Incentive Plan.

We issued 0.5 million and 0.6 million shares of common stock related to the vesting and settlement of RSUs and PSUs during the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, approximately 0.3 million shares of common stock remained available for issuance under the Amended 2017 Incentive Plan.

On May 19, 2021, our Board of Directors announced the approval of the initiation of a quarterly cash dividend.

The following table sets forth cash dividends declared by our Board of Directors to holders of record of our common stock during the three months ended March 31, 2022 (in thousands, except per share information):

Cash Dividends Declared

Declaration Date

February 16, 2022

March 2, 2022

March 16, 2022

Under the Amended 2017 Incentive Plan, at the discretion of the Compensation Committee of the Board of Directors, RSUs and PSUs granted under the plan have the right to earn dividend equivalents, which entitles the holders of such RSUs and PSUs to additional RSUs and PSUs equal to the same dividend value per share as holders of common stock.

Dividend equivalents are subject to the same vesting and other terms and conditions as the underlying RSUs and PSUs.

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

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This Distribution Agreement, which superseded and replaced a prior similar distribution agreement, and was amended in July 2021 to acknowledge our filing of a new registration statement on Form S-3 registering the issuance and sale of shares of our common stock under the Distribution Agreement and replace Citigroup Global Markets Inc.

with Wells Fargo Securities, LLC as a sales agent, had all $ 100.0 million available for sale as of September 30, 2021.

We did no t sell or issue any shares of our common stock during the three and nine months ended September 30, 2021 and 2020, respectively.

with Wells Fargo Securities, LLC as a sales agent, had all $ 100.0 million available for sale as of March 31, 2022.

We did no t sell or issue any shares of our common stock during the three months ended March 31, 2022 and 2021, 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, 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 September 30, 2021 was 3,812,939 shares.

On May 19, 2021, our Board of Directors announced the approval of the initiation of a quarterly cash dividend.

The following table sets forth cash dividends declared by our Board of Directors to holders of record of our common stock during the nine months ended September 30, 2021 (in thousands, except per share information):

Cash Dividends Declared

Declaration Date

June 16, 2021

August 18, 2021

September 1, 2021

September 15, 2021

During the three months ended March 31, 2022, an aggregate of 1.0 million shares were repurchased for a total purchase price of approximately $ 62.4 million and a weighted average price of $ 61.52 per share.

During the three months ended

March 31, 2021 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, 2022 was 2,799,552 shares.

During the three months ended March 31, 2022 and 2021, shares of common stock at a total cost of $ 12.1 million and $ 12.2 million, respectively, were netted and surrendered as payment for minimum statutory withholding obligations in connection with the vesting of outstanding stock-based compensation awards.

Shares surrendered by the participants in accordance with the applicable award agreements and plan are deemed repurchased and retired by us but are not part of publicly announced share repurchase programs.

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, 2021 and 2020 (in thousands, except share and per share information):

Three Months Ended September 30,

Nine Months Ended September 30,

The following table sets forth the computation of basic and diluted EPS for the three months ended March 31, 2022 and 2021 (in thousands, except share and per share information):

Three Months Ended March 31,

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 0.2 million common stock unit equivalents from diluted earnings per share during each of the three and nine months ended September 30, 2021 and 2020 related to the PSUs for which performance conditions remained unsatisfied.

We excluded 0.6 million and 0.8 million common stock unit equivalents from diluted earnings per share during each of the three months ended March 31, 2022 and 2021, respectively, related to the PSUs for which performance conditions remained unsatisfied .

Commitments and Contingencies

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

As of September 30, 2021, and December 31, 2020, we had $ 484.9 million and $ 402.7 million, respectively, in letters of credit and performance and other bonds issued and outstanding.

As of March 31, 2022 and December 31, 2021, we had $ 528.9 million and $ 492.5 million, respectively, in letters of credit and performance and other bonds issued and outstanding.

Legal Proceedings

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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