UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2019March 31, 2020
or
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 001-36491
Century Communities, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 68-0521411 | |
(State or other jurisdiction of | (I.R.S. Employer | |
8390 East Crescent Parkway, Suite 650 | 80111 | |
(Address of principal executive offices) | (Zip | |
(Registrant’s telephone number, including area code): (303) 770-8300
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common stock, par value $0.01 per share | CCS |
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer | x | Accelerated Filer | o | |||
Non-accelerated Filer | o | Smaller Reporting Company | o | |||
Emerging Growth Company | ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
On July 25, 2019, 30,438,505April 23, 2020, 33,332,501 shares of common stock, par value $0.01 per share, were outstanding.
CENTURY COMMUNITIES, INC.
FORM 10-Q
For the Three and Six Months Ended June 30, 2019March 31, 2020
Index
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Century Communities, Inc.
Condensed Consolidated Balance Sheets
As of June 30, 2019March 31, 2020 and December 31, 20182019
(in thousands, except share amounts)
June 30, | December 31, | March 31, | December 31, | |||||||||
2019 | 2018 | 2020 | 2019 | |||||||||
Assets | (unaudited) | (Unaudited) | ||||||||||
Cash and cash equivalents | $ | 31,704 | $ | 32,902 | $ | 450,973 | $ | 55,436 | ||||
Cash held in escrow | 25,838 | 24,344 | 22,497 | 35,308 | ||||||||
Accounts receivable | 15,999 | 13,464 | 23,087 | 27,438 | ||||||||
Inventories | 2,009,769 | 1,848,243 | 2,074,509 | 1,995,549 | ||||||||
Mortgage loans held for sale | 122,085 | 114,074 | 141,846 | 185,246 | ||||||||
Prepaid expenses and other assets | 123,343 | 138,717 | 121,017 | 124,008 | ||||||||
Property and equipment, net | 33,469 | 33,258 | 35,004 | 35,998 | ||||||||
Deferred tax assets, net | 13,335 | 13,763 | 11,110 | 10,589 | ||||||||
Amortizable intangible assets, net | 4,436 | 5,095 | ||||||||||
Goodwill | 30,395 | 30,395 | 30,395 | 30,395 | ||||||||
Total assets | $ | 2,410,373 | $ | 2,254,255 | $ | 2,910,438 | $ | 2,499,967 | ||||
Liabilities and stockholders' equity | ||||||||||||
Liabilities: | ||||||||||||
Accounts payable | $ | 97,043 | $ | 89,907 | $ | 40,170 | $ | 84,794 | ||||
Accrued expenses and other liabilities | 212,750 | 213,157 | 230,875 | 213,975 | ||||||||
Notes payable | 890,606 | 784,777 | 899,166 | 896,704 | ||||||||
Revolving line of credit | 212,000 | 202,500 | 521,900 | 68,700 | ||||||||
Mortgage repurchase facilities | 100,745 | 104,555 | 133,794 | 174,095 | ||||||||
Total liabilities | 1,513,144 | 1,394,896 | 1,825,905 | 1,438,268 | ||||||||
Stockholders' equity: | ||||||||||||
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none outstanding | — | — | ||||||||||
Common stock, $0.01 par value, 100,000,000 shares authorized, 30,438,505 and 30,154,791 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively | 304 | 302 | ||||||||||
Preferred stock, $0.01 par value, 50,000,000 shares authorized, NaN 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 | 333 | 331 | ||||||||||
Additional paid-in capital | 600,293 | 595,037 | 681,060 | 684,354 | ||||||||
Retained earnings | 296,632 | 264,020 | 403,140 | 377,014 | ||||||||
Total stockholders' equity | 897,229 | 859,359 | 1,084,533 | 1,061,699 | ||||||||
Total liabilities and stockholders' equity | $ | 2,410,373 | $ | 2,254,255 | $ | 2,910,438 | $ | 2,499,967 | ||||
See Notes to Unaudited Condensed Consolidated Financial Statements
Century Communities, Inc.
Unaudited Condensed Consolidated Statements of Operations
For the Three and Six Months Ended June 30,March 31, 2020 and 2019and 2018
(in thousands, except share and per share amounts)
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended March 31, | |||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2020 | 2019 | ||||||||||||||
Revenues | |||||||||||||||||||
Homebuilding revenues | |||||||||||||||||||
Home sales revenues | $ | 608,636 | $ | 522,164 | $ | 1,131,938 | $ | 916,995 | $ | 572,710 | $ | 523,302 | |||||||
Land sales and other revenues | 1,399 | 1,714 | 2,754 | 3,174 | 20,104 | 1,355 | |||||||||||||
610,035 | 523,878 | 1,134,692 | 920,169 | ||||||||||||||||
Total homebuilding revenues | 592,814 | 524,657 | |||||||||||||||||
Financial services revenue | 9,915 | 8,014 | 18,315 | 13,571 | 9,795 | 8,400 | |||||||||||||
Total revenues | 619,950 | 531,892 | 1,153,007 | 933,740 | 602,609 | 533,057 | |||||||||||||
Homebuilding cost of revenues | |||||||||||||||||||
Cost of home sales revenues | (503,928) | (427,197) | (937,685) | (746,780) | (470,526) | (433,757) | |||||||||||||
Cost of land sales and other revenues | (877) | (1,040) | (1,491) | (1,917) | (14,167) | (614) | |||||||||||||
(504,805) | (428,237) | (939,176) | (748,697) | ||||||||||||||||
Total homebuilding cost of revenues | (484,693) | (434,371) | |||||||||||||||||
Financial services costs | (7,747) | (5,385) | (14,576) | (9,781) | (9,586) | (6,829) | |||||||||||||
Selling, general and administrative | (75,217) | (63,634) | (144,153) | (120,156) | (73,619) | (68,936) | |||||||||||||
Loss on debt extinguishment | (10,832) | — | (10,832) | — | |||||||||||||||
Acquisition expense | — | (165) | — | (338) | |||||||||||||||
Equity in income of unconsolidated subsidiaries | — | 11,681 | — | 14,849 | |||||||||||||||
Inventory impairment | (781) | — | |||||||||||||||||
Other income (expense) | (519) | 350 | (443) | (8) | 158 | 76 | |||||||||||||
Income before income tax expense | 20,830 | 46,502 | 43,827 | 69,609 | 34,088 | 22,997 | |||||||||||||
Income tax expense | (5,335) | (13,309) | (11,215) | (16,397) | (7,962) | (5,880) | |||||||||||||
Net income | $ | 15,495 | $ | 33,193 | $ | 32,612 | $ | 53,212 | $ | 26,126 | $ | 17,117 | |||||||
Earnings per share: | |||||||||||||||||||
Basic | $ | 0.51 | $ | 1.11 | $ | 1.08 | $ | 1.79 | $ | 0.79 | $ | 0.57 | |||||||
Diluted | $ | 0.51 | $ | 1.10 | $ | 1.07 | $ | 1.77 | $ | 0.78 | $ | 0.56 | |||||||
Weighted average common shares outstanding: | |||||||||||||||||||
Basic | 30,341,628 | 29,901,791 | 30,272,818 | 29,709,728 | 33,207,928 | 30,203,243 | |||||||||||||
Diluted | 30,568,848 | 30,170,689 | 30,506,945 | 30,003,276 | 33,476,444 | 30,444,276 | |||||||||||||
See Notes to Unaudited Condensed Consolidated Financial Statements
Century Communities, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
For the SixThree Months Ended June 30,March 31, 2020 and 2019 and 2018
(in thousands)
Six Months Ended June 30, | Three Months Ended March 31, | |||||||||||
2019 | 2018 | 2020 | 2019 | |||||||||
Operating activities | ||||||||||||
Net income | $ | 32,612 | $ | 53,212 | $ | 26,126 | $ | 17,117 | ||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||||||
Depreciation and amortization | 6,196 | 5,512 | 3,415 | 3,074 | ||||||||
Stock-based compensation expense | 7,468 | 6,323 | 1,685 | 3,534 | ||||||||
Loss on debt extinguishment | 10,832 | — | ||||||||||
Inventory impairment and other | 781 | — | ||||||||||
Deferred income taxes | 428 | (989) | (521) | 172 | ||||||||
Distributions from unconsolidated subsidiaries | — | 7,432 | ||||||||||
Equity in income of unconsolidated subsidiaries | — | (14,849) | ||||||||||
(Gain) loss on disposition of assets | 526 | 230 | ||||||||||
Loss on disposition of assets | 330 | 358 | ||||||||||
Changes in assets and liabilities: | ||||||||||||
Cash held in escrow | (1,495) | (5,897) | 12,811 | (320) | ||||||||
Accounts receivable | (2,535) | (6,199) | 4,349 | 1,028 | ||||||||
Inventories | (121,734) | (124,863) | (60,930) | (69,106) | ||||||||
Prepaid expenses and other assets | (5,041) | (2,404) | 2,000 | (2,659) | ||||||||
Accounts payable | 7,137 | 22,260 | (44,624) | (15,831) | ||||||||
Accrued expenses and other liabilities | (18,428) | (15,634) | (1,198) | (11,296) | ||||||||
Mortgage loans held for sale | (8,965) | (5,026) | 43,400 | 14,529 | ||||||||
Net cash provided by (used in) operating activities | (92,999) | (80,892) | ||||||||||
Net cash used in operating activities | (12,376) | (59,400) | ||||||||||
Investing activities | ||||||||||||
Purchases of property and equipment | (6,274) | (7,534) | (2,686) | (3,270) | ||||||||
Business combinations net of acquired cash | — | (28,036) | ||||||||||
Other investing activities | 59 | 322 | 59 | (14) | ||||||||
Net cash provided by (used in) investing activities | (6,215) | (35,248) | ||||||||||
Net cash used in investing activities | (2,627) | (3,284) | ||||||||||
Financing activities | ||||||||||||
Borrowings under revolving credit facilities | 767,600 | 305,000 | 678,000 | 288,800 | ||||||||
Payments on revolving credit facilities | (758,100) | (175,000) | (224,800) | (204,300) | ||||||||
Proceeds from issuance of senior notes due 2027 | 500,000 | — | ||||||||||
Extinguishment of senior notes due 2022 | (391,942) | — | ||||||||||
Extinguishments of debt assumed in business combination | — | (94,231) | ||||||||||
Debt issuance costs | (5,728) | (3,521) | ||||||||||
Proceeds from issuance of insurance premium notes and other | 9,301 | — | ||||||||||
Principal payments on insurance notes payable | (17,586) | — | ||||||||||
Principal payments on notes payable | (2,043) | (7,716) | ||||||||||
Proceeds from insurance notes payable | 4,137 | 9,301 | ||||||||||
Net proceeds from mortgage repurchase facilities | (3,805) | 4,679 | (40,302) | (13,689) | ||||||||
Net proceeds from issuances of common stock | 2,663 | 14,309 | ||||||||||
Repurchases of common stock upon vesting of stock based compensation | (3,434) | (4,788) | ||||||||||
Repurchases of common stock under our stock repurchase program | (1,439) | — | ||||||||||
Net cash provided by (used in) financing activities | 97,530 | 46,448 | ||||||||||
Net increase (decrease) | $ | (1,684) | $ | (69,692) | ||||||||
Repurchases of common stock upon vesting of stock-based compensation | (4,977) | (3,166) | ||||||||||
Repurchases of common stock under stock repurchase program | — | (1,439) | ||||||||||
Net cash provided by financing activities | 410,015 | 67,791 | ||||||||||
Net increase | $ | 395,012 | $ | 5,107 | ||||||||
Cash and cash equivalents and Restricted cash | ||||||||||||
Beginning of period | 36,441 | 93,713 | 58,522 | 36,441 | ||||||||
End of period | $ | 34,757 | $ | 24,021 | $ | 453,534 | $ | 41,548 | ||||
Supplemental cash flow disclosure | ||||||||||||
Cash paid for income taxes | $ | 13,111 | $ | 26,323 | $ | — | $ | — | ||||
Cash and cash equivalents and Restricted cash | ||||||||||||
Cash and cash equivalents | $ | 31,704 | $ | 19,482 | $ | 450,973 | $ | 38,115 | ||||
Restricted cash (Note 6) | 3,053 | 4,539 | ||||||||||
Restricted cash (Note 5) | 2,561 | 3,433 | ||||||||||
Cash and cash equivalents and Restricted cash | $ | 34,757 | $ | 24,021 | $ | 453,534 | $ | 41,548 | ||||
See Notes to Unaudited Condensed Consolidated Financial Statements
Century Communities, Inc.
Unaudited Condensed Consolidated Statements of Stockholders’ Equity
For the Three and Six Months Ended June 30,March 31, 2020 and 2019 and 2018
(in thousands)
Three Months Ended June 30, 2019 and 2018
Common Stock | ||||||||||||||
Shares | Amount | Additional Paid-In Capital | Retained Earnings | Total Stockholders' Equity | ||||||||||
Balance at December 31, 2019 | 33,067 | $ | 331 | $ | 684,354 | $ | 377,014 | $ | 1,061,699 | |||||
Repurchases of common stock | — | — | — | — | — | |||||||||
Vesting of restricted stock units | 412 | 4 | (4) | — | — | |||||||||
Withholding of common stock upon vesting of restricted stock units | (160) | (2) | (4,975) | — | (4,977) | |||||||||
Stock-based compensation expense | — | — | 1,685 | — | 1,685 | |||||||||
Net income | — | — | — | 26,126 | 26,126 | |||||||||
Balance at March 31, 2020 | 33,319 | $ | 333 | $ | 681,060 | $ | 403,140 | $ | 1,084,533 | |||||
Common Stock | Common Stock | |||||||||||||||||||||||||||
Shares | Amount | Additional Paid-In Capital | Retained Earnings | Total Stockholders' Equity | Shares | Amount | Additional Paid-In Capital | Retained Earnings | Total Stockholders Equity | |||||||||||||||||||
Balance at March 31, 2019 | 30,304 | $ | 303 | $ | 593,966 | $ | 281,137 | $ | 875,406 | |||||||||||||||||||
Issuance of common stock | 100 | 1 | 2,662 | — | 2,663 | |||||||||||||||||||||||
Balance at December 31, 2018 | 30,155 | $ | 302 | $ | 595,037 | $ | 264,020 | $ | 859,359 | |||||||||||||||||||
Repurchases of common stock | (83) | — | (1,438) | — | (1,438) | |||||||||||||||||||||||
Vesting of restricted stock units | 35 | — | (268) | — | (268) | 367 | 3 | (3) | — | — | ||||||||||||||||||
Withholding of common stock upon vesting of restricted stock units | (135) | (2) | (3,164) | — | (3,166) | |||||||||||||||||||||||
Stock-based compensation expense | — | — | 3,933 | — | 3,933 | — | — | 3,534 | — | 3,534 | ||||||||||||||||||
Net income | — | — | — | 15,495 | 15,495 | — | — | — | 17,117 | 17,117 | ||||||||||||||||||
Balance at June 30, 2019 | 30,439 | $ | 304 | $ | 600,293 | $ | 296,632 | $ | 897,229 | |||||||||||||||||||
Balance at March 31, 2018 | 29,790 | $ | 298 | $ | 569,536 | $ | 187,584 | $ | 757,418 | |||||||||||||||||||
Issuance of common stock | 320 | 3 | 9,284 | — | 9,287 | |||||||||||||||||||||||
Vesting of restricted stock units | 9 | — | — | 1 | 1 | |||||||||||||||||||||||
Stock-based compensation expense | — | — | 3,807 | — | 3,807 | |||||||||||||||||||||||
Net income | — | — | — | 33,193 | 33,193 | |||||||||||||||||||||||
Balance at June 30, 2018 | 30,119 | $ | 301 | $ | 582,627 | $ | 220,778 | $ | 803,706 | |||||||||||||||||||
Balance at March 31, 2019 | 30,304 | $ | 303 | $ | 593,966 | $ | 281,137 | $ | 875,406 | |||||||||||||||||||
Six Months Ended June 30, 2019 and 2018
Common Stock | ||||||||||||||
Shares | Amount | Additional Paid-In Capital | Retained Earnings | Total Stockholders' Equity | ||||||||||
Balance at December 31, 2018 | 30,155 | $ | 302 | $ | 595,037 | $ | 264,020 | $ | 859,359 | |||||
Issuance of common stock | 100 | 1 | 2,662 | — | 2,663 | |||||||||
Repurchase of common stock | (83) | (1) | (1,438) | — | (1,439) | |||||||||
Vesting of restricted stock units | 267 | 2 | (3,436) | — | (3,434) | |||||||||
Stock-based compensation expense | — | — | 7,468 | — | 7,468 | |||||||||
Net income | — | — | — | 32,612 | 32,612 | |||||||||
Balance at June 30, 2019 | 30,439 | $ | 304 | $ | 600,293 | $ | 296,632 | $ | 897,229 | |||||
Balance at December 31, 2017 | 29,503 | $ | 295 | $ | 566,790 | $ | 168,148 | $ | 735,233 | |||||
Adoption of ASC 606 | — | — | — | (582) | (582) | |||||||||
Issuance of common stock | 776 | 6 | 14,302 | — | 14,308 | |||||||||
Repurchase of common stock | (160) | — | (4,788) | — | (4,788) | |||||||||
Stock-based compensation expense | — | — | 6,323 | — | 6,323 | |||||||||
Net income | — | — | — | 53,212 | 53,212 | |||||||||
Balance at June 30, 2018 | 30,119 | $ | 301 | $ | 582,627 | $ | 220,778 | $ | 803,706 | |||||
See Notes to Unaudited Condensed Consolidated Financial Statements
Century Communities, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
June 30, 2019March 31, 2020
1. 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 the States of Alabama, Arizona, California, Colorado, Florida, Georgia, Indiana, Iowa, Michigan, Nevada, North Carolina, Ohio, South Carolina, Tennessee, Texas, Utah, and Washington.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. We build and sell homes under our Century Communities and Wade Jurney HomesCentury Complete brands. 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, formerly referred to as Wade Jurney Homes, brand solely 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 homebuilding operations are organized into the following five5 reportable segments: West, Mountain, Texas, Southeast, and Wade Jurney Homes.Century Complete. Additionally, our indirect wholly-ownedwholly 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 home buyershomebuyers have been identified as our Financial Services segment.segment
On June 14, 2018, we acquired the remaining 50% ownership interest in WJH, LLC (which we refer to as “WJH” or “Wade Jurney Homes”) for $37.5 million. WJH specializes in providing single family homes for first time buyers. On the acquisition date, WJH had operations in Alabama, Florida, Georgia, North Carolina and South Carolina..
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. Securities and Exchange Commission (which we refer to as the “SEC”). 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. Interim results of operations are not necessarily indicative of the results that may be achieved for the full year. 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, 2018,2019, which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 20182019 that was filed with the SEC on February 13, 2019.7, 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. 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.
Principles of Consolidation
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. All intercompany accounts and transactions have been eliminated.
Use of Estimates
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.
Recently Adopted Accounting Standards
LeasesFinancial Instruments - Credit Losses
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326). The Financial Accounting Standards Board (which we refer to as “FASB”) issued Accounting Standards Codification (ASC) 842, Leases (which we refer to as “ASC 842”) which requiresstandard changes the recognition of leaseaccounting for credit losses for most financial assets and lease liabilities by lesseescertain other instruments. Credit losses which have historically been accounted for most leases. ASC 842 is effective for the Company beginning January 1, 2019 and interim periods within the annual period. We adopted ASC 842 under a modified retrospective approach using the option to apply the transition provisions on the effective date January 1, 2019. The modified retrospective approach allows the Company to carry forward our historical lease classification, and to present historical periods under legacy lease accounting guidance. The Company’s leases primarily consist of leases for office space, and computer and office equipment where we are the lessee.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. We adopted this standard on January 1, 2020 with no material effect on the consolidated financial statements and related disclosures.
ASC 842 includes several practical expedients which we elected upon adoption including to (a) not reassess the lease classification for any expired or existing leases and (b) not reassess whether previously capitalized initial direct costs qualify for capitalization under ASC 842. Additionally, we elected to utilize hindsight when determining the lease term.
The adoptionInternal-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 ASC 842 resultedthe 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 establishment ofarrangement includes a right of use asset of $17.7 million and a lease liability of $18.7 millionsoftware license. We adopted this standard on our condensed consolidated balance sheet as of January 1, 2019. The adoption of ASC 842 did not impact stockholders’ equity.2020 with no material effect on the consolidated financial statements and related disclosures.
Recently Issued Accounting Standards
In June 2016,December 2019, the FASB issued Accounting Standards Update (ASU) 2016-13, No. 2019-12, “Financial Instruments—Credit LossesIncome Taxes (Topic 326):740)Measurement: 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 Credit Losses on Financial Instruments (which we referASC 740 to as “ASU 2016-13”), which changes the impairment model for most financial assets and certain other instruments.promote consistency among reporting entities. ASU 2016-13 changes the probable threshold for initial recognition of a credit loss in current GAAP to a model that reflects an entity’s current estimate of all expected credit losses. ASU 2016-132019-12 is effective for our interim and annual reporting periodsus beginning January 1, 2020.2021. We are currently evaluatingdo not expect this standard to have a material effect on the impact of ASU 2016-13 on our consolidated financial statements.
statements and related disclosures.
2. Reporting Segments
Our homebuilding operations are engaged in the development, design, construction, marketing and sale of single-family attached and detached homes in 17 states. We build and sell homes under our Century Communities and Wade Jurney HomesCentury Complete brands. Our Century Communities brand is managed by geographic location, and each of our four4 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. Each of our four geographic regions is considered a separate operating segment. Our Wade Jurney HomesCentury Complete brand solely targets first time homebuyers, primarily sells homes through retail studios and the internet, and provides no option or upgrade selections. Our Wade Jurney HomesCentury Complete brand currently has operations in eleven11 states and is managed separately from our four geographic regions, accordingly,regions. Accordingly, it is considered a separate operating segment.
The management of our four geographic regions and Wade Jurney HomesCentury 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. Accordingly, we have presented our homebuilding operations as the following five5 reportable segments:
West (California and Washington)
Mountain (Colorado, Nevada and Utah)
Texas
Southeast (Georgia, North Carolina, South Carolina and Tennessee)
Wade Jurney HomesCentury Complete (Alabama, Arizona, Florida, Georgia, Indiana, Iowa, 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. Our Corporate segment isoperations are a non-operating segment, as it servesthey 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)thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
Revenue: | ||||||||||||
West | $ | 135,226 | $ | 129,218 | $ | 247,346 | $ | 248,139 | ||||
Mountain | 179,410 | 180,523 | 339,076 | 326,016 | ||||||||
Texas | 61,522 | 63,545 | 112,008 | 101,573 | ||||||||
Southeast | 124,814 | 125,346 | 237,626 | 219,195 | ||||||||
Wade Jurney Homes | 109,063 | 25,246 | 198,636 | 25,246 | ||||||||
Financial Services | 9,915 | 8,014 | 18,315 | 13,571 | ||||||||
Corporate | — | — | — | — | ||||||||
Total revenue | $ | 619,950 | $ | 531,892 | $ | 1,153,007 | $ | 933,740 | ||||
Income (loss) before income tax expense: | ||||||||||||
West | $ | 9,973 | $ | 12,022 | $ | 18,621 | $ | 21,890 | ||||
Mountain | 22,526 | 25,319 | 41,834 | 43,242 | ||||||||
Three Months Ended March 31, | |||||||||||||||||
2020 | 2019 | ||||||||||||||||
Revenue: | |||||||||||||||||
West | $ | 131,887 | $ | 112,120 | |||||||||||||
Mountain | 171,152 | 159,666 | |||||||||||||||
Texas | 5,587 | 4,972 | 9,336 | 6,780 | 60,164 | 50,486 | |||||||||||
Southeast | 4,649 | 9,149 | 10,388 | 13,830 | 131,502 | 112,812 | |||||||||||
Wade Jurney Homes | 8,318 | (186) | 12,291 | (186) | |||||||||||||
Century Complete | 98,109 | 89,573 | |||||||||||||||
Financial Services | 9,795 | 8,400 | |||||||||||||||
Corporate | — | — | |||||||||||||||
Total revenue | $ | 602,609 | $ | 533,057 | |||||||||||||
Income (loss) before income tax expense: | |||||||||||||||||
West | $ | 15,341 | $ | 8,648 | |||||||||||||
Mountain | 18,498 | 19,308 | |||||||||||||||
Texas | 5,484 | 3,749 | |||||||||||||||
Southeast | 8,308 | 5,739 | |||||||||||||||
Century Complete | 780 | 3,973 | |||||||||||||||
Financial Services | 2,168 | 2,629 | 3,739 | 3,790 | 209 | 1,590 | |||||||||||
Corporate | (32,391) | (7,403) | (52,382) | (19,737) | (14,532) | (20,010) | |||||||||||
Total income before income tax expense | $ | 20,830 | $ | 46,502 | $ | 43,827 | $ | 69,609 | $ | 34,088 | $ | 22,997 | |||||
The following table summarizes total assets by operating segment (in thousands):
June 30, | December 31, | March 31, | December 31, | |||||||||
2019 | 2018 | 2020 | 2019 | |||||||||
West | $ | 570,149 | $ | 502,381 | $ | 634,491 | $ | 610,248 | ||||
Mountain | 644,291 | 621,757 | 707,925 | 635,201 | ||||||||
Texas | 225,283 | 209,550 | 233,247 | 232,887 | ||||||||
Southeast | 446,148 | 448,681 | 425,309 | 441,818 | ||||||||
Wade Jurney | 269,115 | 204,925 | ||||||||||
Century Complete | 233,394 | 244,827 | ||||||||||
Financial Services | 160,709 | 146,710 | 223,109 | 254,282 | ||||||||
Corporate | 94,678 | 120,251 | 452,963 | 80,704 | ||||||||
Total assets | $ | 2,410,373 | $ | 2,254,255 | $ | 2,910,438 | $ | 2,499,967 | ||||
Corporate assets primarily include certain cash and cash equivalents, certain property and equipment, prepaid insurance, and deferred financing costs on our revolving line of credit.
3. Business Combinations
WJH, LLC - Wade Jurney Homes
On June 14, 2018, we acquired the remaining 50% ownership interest in WJH for $37.5 million, whereby WJH became a 100% owned subsidiary of the Company. We initially acquired a 50% ownership interest in WJH in November 2016 as part of a joint venture, which was accounted for under the equity method of accounting. Our Wade Jurney Homes brand solely targets first time homebuyers in markets which are traditionally underserved by new homebuilders, sells homes through retail studios and the internet, and provides no option or upgrade selections. The acquired assets primarily include homes under construction that are in various stages of completion and are geographically dispersed. We determined that the fair value of the gross assets acquired was not concentrated in a single identifiable asset or group of similar identifiable assets. As the acquired assets and processes have the ability to create outputs in the form of revenue from the sale of single family residences, we concluded that the acquisition represents a business combination. We incurred $0.4 million in acquisition costs.
Authoritative guidance on accounting for business combinations requires that an acquirer re-measure its previously held equity interest in the acquisition at its acquisition date fair value and recognize the resulting gain or loss in earnings. As such, we valued our previously held equity interest in WJH at June 14, 2018 at $35.6 million, which was inclusive of an estimated discount for lack of control of $1.9 million, and recognized a gain of $7.2 million during the three months ended June 30, 2018.
The following table outlines the total consideration transferred, inclusive of cash acquired and the fair value of our previously held equity interest (in thousands):
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The following table summarizes our estimates of the assets acquired and liabilities assumed as of the acquisition date (in thousands):
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Acquired inventories consist primarily of work in process inventories. We estimated the fair value of acquired work in process inventories based upon the stage of production of each unit and a gross margin that we believe a market participant would require to complete the remaining development and requisite selling efforts. The stage of production, as of the acquisition date, ranged from recently started lots to fully completed single family residences. Amortizable intangible assets include acquired trade names and a non-compete agreement, which were estimated to have fair values of $3.3 million and $0.3 million, respectively, and are amortized over 10 years and 2 years, respectively.
The Company determined that WJH’s carrying costs approximated fair value for all other acquired assets and assumed liabilities.
WJH’s results of operations for the three and six months ended June 30, 2019, which include homebuilding revenues of $109.1 million and $198.6 million, respectively, and income before tax of $8.3 million and $12.3 million, respectively, are included in our accompanying condensed consolidated statement of operations. From the acquisition date, WJH’s results of operations include homebuilding revenues of $25.2 million, and loss before tax of $0.2 million for the three and six months ended June 30, 2018.
Pro Forma Financial Information
Pro forma revenue and income before tax expense for the three and six months ended June 30, 2018 give effect to the results of the acquisition of WJH. The effect of the WJH acquisition is reflected as though the acquisition date was as of January 1, 2018. Unaudited pro forma income before tax expense adjusts the operating results of WJH to reflect the additional costs that would have been recorded assuming the fair value adjustments had been applied as of the beginning of the year preceding the year of the acquisition and excludes acquisition expense incurred related to the transactions.
Three Months Ended June 30, 2018 | Six Months Ended June 30, 2018 | ||||
Total revenues | $ | 604,120 | $ | 1,084,131 | |
Income before tax expense | $ | 43,912 | $ | 63,184 | |
Income tax expense | (10,978) | (15,795) | |||
Net income | $ | 32,934 | $ | 47,389 | |
Less: Undistributed earnings allocated to participating securities | (3) | (59) | |||
Numerator for basic and diluted pro forma EPS | $ | 32,931 | $ | 47,330 | |
Pro forma weighted average shares-basic | 29,901,791 | 29,709,728 | |||
Pro forma weighted average shares-diluted | 30,170,689 | 30,003,276 | |||
Pro forma basic EPS | $ | 1.10 | $ | 1.59 | |
Pro forma diluted EPS | $ | 1.09 | $ | 1.58 | |
4.3. Inventories
Inventories included the following (in thousands):
June 30, | December 31, | March 31, | December 31, | |||||||||
2019 | 2018 | 2020 | 2019 | |||||||||
Homes under construction | $ | 1,088,075 | $ | 1,073,682 | $ | 1,119,989 | $ | 1,091,576 | ||||
Land and land development | 858,626 | 720,719 | 883,683 | 836,904 | ||||||||
Capitalized interest | 63,068 | 53,842 | 70,837 | 67,069 | ||||||||
Total inventories | $ | 2,009,769 | $ | 1,848,243 | $ | 2,074,509 | $ | 1,995,549 | ||||
5.4. Financial Services
Our Financial Services are principally comprised of our mortgage lending operations, Inspire Home Loans, Inc. (which we refer to as “Inspire”). Inspire is a full-service mortgage lender and primarily originates mortgage loans for our homebuyers. Inspire sells substantially all of the loans it originates and their related servicing rights in the secondary mortgage market within a short period of time after origination, generally within 30 days. Inspire primarily finances these loans underusing its mortgage repurchase facilities. Mortgage loans in process for which interest rates were committed to borrowers totaled approximately $51.6$125.0 million and $26.2$37.6 million at June 30, 2019March 31, 2020 and December 31, 2018,2019, respectively, and carried a weighted average interest rate of approximately 4.0%3.4%, and 4.7%3.9%,
respectively. As of June 30, 2019March 31, 2020 and December 31, 2018,2019, Inspire had mortgage loans held for sale with an aggregate fair value of $122.1$141.8 million and $114.1$185.2 million, respectively, and an aggregate outstanding principal balance of $116.4$137.8 million and $108.0$179.3 million, respectively. Interest rate risks related to these obligations are 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, 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. 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.them at fair value improves financial reporting by more accurately reflecting the underlying transaction. Refer to Note 11 – Fair Value Disclosures for further information regarding our derivative instruments.
6.5. Prepaid Expenses and Other Assets
Prepaid expenses and other assets included the following (in thousands):
June 30, | December 31, | March 31, | December 31, | |||||||||
2019 | 2018 | 2020 | 2019 | |||||||||
Prepaid insurance | $ | 28,032 | $ | 20,226 | $ | 27,497 | $ | 26,175 | ||||
Lot option and escrow deposits | 50,326 | 51,038 | 43,637 | 48,810 | ||||||||
Right of use assets | 17,538 | 18,854 | ||||||||||
Performance deposits | 6,502 | 4,552 | 5,776 | 6,299 | ||||||||
Deferred financing costs revolving line of credit, net | 3,878 | 4,155 | 4,231 | 4,574 | ||||||||
Restricted cash | 3,053 | 3,539 | ||||||||||
Secured note receivable | 2,672 | 4,947 | ||||||||||
Right of use assets | 16,760 | — | ||||||||||
Insurance receivable and other | 12,120 | 50,260 | ||||||||||
Restricted cash(1) | 2,561 | 3,085 | ||||||||||
Secured notes receivable | 2,571 | 2,602 | ||||||||||
Other assets and prepaid expenses | 7,714 | 8,633 | ||||||||||
Mortgage loans held for investment and derivative assets | 9,349 | 4,768 | ||||||||||
Amortizable intangible assets, net | 143 | 208 | ||||||||||
Total prepaid expenses and other assets | $ | 123,343 | $ | 138,717 | $ | 121,017 | $ | 124,008 | ||||
11(1)Restricted cash consists of earnest money deposits for home sale contracts held by third parties as required by various jurisdictions, and certain pledge balances associated with our mortgage repurchase facilities.
7.6. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities included the following (in thousands):
June 30, | December 31, | March 31, | December 31, | |||||||||
2019 | 2018 | 2020 | 2019 | |||||||||
Earnest money deposits | $ | 13,310 | $ | 13,990 | $ | 15,898 | $ | 10,592 | ||||
Warranty reserve | 9,768 | 7,970 | 9,727 | 9,731 | ||||||||
Accrued compensation costs | 21,817 | 29,770 | 16,322 | 30,888 | ||||||||
Land development and home construction accruals | 124,380 | 77,748 | 126,930 | 110,284 | ||||||||
Lease liabilities - operating leases | 18,065 | 19,306 | ||||||||||
Accrued interest | 15,372 | 15,636 | 17,323 | 14,562 | ||||||||
Lease liabilities - operating leases | 17,466 | — | ||||||||||
Liability for product financing arrangements and other | 10,637 | 68,043 | ||||||||||
Income taxes payable | 2,453 | 329 | ||||||||||
Liability for product financing arrangement and other | 24,157 | 18,283 | ||||||||||
Total accrued expenses and other liabilities | $ | 212,750 | $ | 213,157 | $ | 230,875 | $ | 213,975 | ||||
8.7. Warranties
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. We increasedBased on warranty payment trends relative to our estimates at the time of home closing, we reduced our warranty reserve by $202$1.1 million and increased our reserve by $22 thousand during the three months ended June 30,March 31, 2020 and 2019, compared to a $115 thousand decrease during the same period in 2018. We increased our warranty reserve by $224 thousand during the six months ended June 30, 2019, compared to a $160 thousand decrease during the same period in 2018. These adjustments arerespectively, which is 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, 2020 and 2019 are detailed in the table below (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended March 31, | ||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2020 | 2019 | |||||||||||||
Beginning balance | $ | 8,633 | $ | 8,961 | $ | 7,970 | $ | 8,531 | $ | 9,731 | $ | 7,970 | ||||||
Warranty reserve assumed in business combination | — | 397 | — | 397 | ||||||||||||||
Warranty expense provisions | 2,107 | 1,787 | 3,768 | 3,221 | 1,777 | 1,661 | ||||||||||||
Payments | (1,174) | (761) | (2,194) | (1,720) | (689) | (1,020) | ||||||||||||
Warranty adjustment | 202 | (115) | 224 | (160) | (1,092) | 22 | ||||||||||||
Ending balance | $ | 9,768 | $ | 10,269 | $ | 9,768 | $ | 10,269 | $ | 9,727 | $ | 8,633 | ||||||
9.8. Debt
Our outstanding debt obligations included the following as of June 30, 2019March 31, 2020 and December 31, 20182019 (in thousands):
June 30, | December 31, | |||||
2019 | 2018 | |||||
6.750% senior notes, due May 2027(1) | $ | 494,329 | $ | — | ||
5.875% senior notes, due July 2025(1) | 395,767 | 395,415 | ||||
6.875% senior notes, due May 2022(1) | — | 380,567 | ||||
Insurance premium notes and other financing obligations | 510 | 8,795 | ||||
Senior notes payable | 890,606 | 784,777 | ||||
Revolving line of credit, due April 2022 | 212,000 | 202,500 | ||||
Mortgage repurchase facility | 100,745 | 104,555 | ||||
Total debt | $ | 1,203,351 | $ | 1,091,832 | ||
March 31, | December 31, | |||||
2020 | 2019 | |||||
6.750% senior notes, due May 2027(1) | $ | 494,499 | $ | 494,307 | ||
5.875% senior notes, due July 2025(1) | 396,296 | 396,120 | ||||
Other financing obligations | 8,371 | 6,277 | ||||
Notes payable | 899,166 | 896,704 | ||||
Revolving line of credit, due April 2023 | 521,900 | 68,700 | ||||
Mortgage repurchase facilities | 133,794 | 174,095 | ||||
Total debt | $ | 1,554,860 | $ | 1,139,499 | ||
(1) The carrying value of senior notes reflects the impact of premiums, discounts, and issuance costs that are amortized to interest cost over the respective terms of the senior notes.
Issuance of 6.750% Senior Notes Due 2027
In May 2019, the Company completed a private offering of $500.0 million aggregate principal amount of the Company’s 6.750% Senior Notes due 2027 (the “2027 Notes”) in reliance on Rule 144A and Regulation S under the Securities Act of 1933. The 2027 Notes were issued under the Indenture, dated as of May 23, 2019, among the Company, our subsidiary guarantors party thereto, and U.S. Bank National Association, as trustee (which we refer to as the “May 2019 Indenture,” as it may be supplemented or amended from time to time). The 2027 Notes were issued at 100% of their principal amount and we received net proceeds of $494.3 million. The 2027 Notes contain certain restrictive covenants on issuing future secured debt and other transactions. The aggregate principal balance of the 2027 Notes is due June 2027, with interest only payments due semi-annually in June and December of each year, beginning on December 1, 2019.
In connection with this issuance, the Company deferred $5.7 million of issuance costs, which is presented in the notes payable line item of the condensed consolidated balance sheet.
Extinguishment of 6.875% Senior Notes Due 2022
During the three months ended June 30, 2019, the Company extinguished $385.0 million in outstanding principal of our 6.875% Senior Notes due 2022 (the “2022 Notes”). The extinguishment was the result of two separate transactions whereby a tender offer validly tendered $189.3 million of the 2022 Notes on March 23, 2019 and the remaining $195.7 million was redeemed in accordance with the Indenture agreement on June 10, 2019. The transaction resulted in a loss of $10.8 million, which is presented in loss on debt extinguishment in the consolidated statement of operations.
Revolving Line of Credit
We are party to an Amended and Restated Credit Agreement with Texas Capital Bank, National Association, as Administrative Agent and L/C Issuer, the lenders party thereto and certain of our subsidiaries, which, as amended most recently on February 12,December 13, 2019, provides us with a revolving line of credit of up to $640.0 million, and unless terminated earlier, will mature on April 30, 2022.2023. Under the terms of the Amended and Restated Credit Agreement, we may request a twelve-month extension of the maturity date. Our obligations under the Amended and Restated Credit Agreement are guaranteed by certain of our subsidiaries. The Amended and Restated Credit Agreement contains customary affirmative and negative covenants (including limitations on our ability to grant liens, incur additional debt, pay dividends, redeem our common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions), as well as customary events of default. 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 June 30, 2019,March 31, 2020, we had $212.0$521.9 million outstanding under the credit facility and were in compliance with all covenants.
Mortgage Repurchase Facilities – Financial Services
On May 4, 2018, and September 14, 2018, and August 1, 2019, Inspire entered into mortgage warehouse facilities, with Comerica Bank, and J.P. 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 $160$225 million, secured by the mortgage loans financed thereunder. 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 June 30, 2019,March 31, 2020, we had $100.7$133.8 million outstanding under these repurchase facilities and were in compliance with all covenants thereunder. No assurance can be provided, however, that we will remain in compliance with the covenants or have continued access to these facilities or substitute or replacement facilities in an amount sufficient to fund our mortgage lending business.
During the three months ended June 30,March 31, 2020 and 2019, and 2018, we incurred interest expense on ourthe repurchase facilities of $0.9$0.7 million and $0.3$0.6 million, respectively, which are included in financial services costs on our condensed consolidated statements of operations. During the six months ended June 30, 2019 and 2018, we incurred interest expense on our repurchase facilities of $1.5 million and $0.5 million, respectively.
9. Interest
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 six months ended June 30,March 31, 2020 and 2019, and 2018, 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 June 30, | Six Months Ended June 30, | Three Months Ended March 31, | ||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2020 | 2019 | |||||||||||||
Interest capitalized beginning of period | $ | 59,121 | $ | 46,160 | $ | 53,842 | $ | 41,762 | $ | 67,069 | $ | 53,842 | ||||||
Interest capitalized during period | 18,602 | 13,920 | 36,467 | 27,277 | 17,453 | 17,866 | ||||||||||||
Less: capitalized interest in cost of sales | (14,655) | (12,284) | (27,241) | (21,243) | (13,685) | (12,587) | ||||||||||||
Interest capitalized end of period | $ | 63,068 | $ | 47,796 | $ | 63,068 | $ | 47,796 | $ | 70,837 | $ | 59,121 | ||||||
11.
10. Income Taxes
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 20192020 estimated annual effective tax rate of 27.1%23.7% is driven by our blended federal and state statutory rate of 24.9%25.4%, and certain other permanent differences between GAAP and tax which increaseddecreased our rate by 2.2%1.7%.
For the sixthree months ended June 30, 2019March 31, 2020, our estimated annual rate of 27.1%23.7% was impacted by discrete items which had a net impact of decreasing our rate by 1.6%0.3%, including excess tax benefits for vested stock-based compensation.
For the three months ended June 30,March 31, 2020 and 2019, and 2018, we recorded income tax expense of $5.3$8.0 million and $13.3 million, respectively. For the six months ended June 30, 2019 and 2018, we recorded income tax expense of $11.2 million and $16.4$5.9 million, respectively.
12.11. 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:
Level 1 — Quoted prices for identical instruments in active markets.
Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are inactive; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets at measurement date.
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):
June 30, 2019 | December 31, 2018 | ||||||||||||||
Hierarchy | Carrying | Fair Value | Carrying | Fair Value | |||||||||||
Secured notes receivable(1) | Level 2 | $ | 2,672 | $ | 2,603 | $ | 4,947 | $ | 4,830 | ||||||
Mortgage loans held for sale(2) | Level 2 | $ | 122,085 | $ | 122,085 | $ | 114,074 | $ | 114,074 | ||||||
6.750% senior notes(3) (5) | Level 2 | $ | 494,329 | $ | 505,000 | $ | — | $ | — | ||||||
6.875% senior notes(3) (5) | Level 2 | $ | — | $ | — | $ | 380,567 | $ | 372,488 | ||||||
5.875 % senior notes (3) (5) | Level 2 | $ | 395,767 | $ | 400,500 | $ | 395,415 | $ | 356,000 | ||||||
3.278% insurance premium notes(4) | Level 2 | $ | 510 | $ | 510 | $ | 6,475 | $ | 6,475 | ||||||
Revolving line of credit(4) | Level 3 | $ | 212,000 | $ | 212,000 | $ | 202,500 | $ | 202,500 | ||||||
Other financing obligation(4) | Level 2 | $ | — | $ | — | $ | 2,320 | $ | 2,320 | ||||||
Mortgage repurchase facilities(4) | Level 2 | $ | 100,745 | $ | 100,745 | $ | 104,555 | $ | 104,555 | ||||||
March 31, 2020 | December 31, 2019 | |||||||||||||
Hierarchy | Carrying | Fair Value | Carrying | Fair Value | ||||||||||
Secured notes receivable(1) | Level 2 | $ | 2,571 | $ | 2,522 | $ | 2,602 | $ | 2,545 | |||||
Mortgage loans held for sale(2) | Level 2 | $ | 141,846 | $ | 141,846 | $ | 185,246 | $ | 185,246 | |||||
Derivative assets(3) | Level 2 | $ | 2,962 | $ | 2,962 | $ | 1,382 | $ | 1,382 | |||||
5.875% senior notes(4)(5) | Level 2 | $ | 396,296 | $ | 335,520 | $ | 396,120 | $ | 415,680 | |||||
6.750% senior notes(4)(5) | Level 2 | $ | 494,499 | $ | 414,700 | $ | 494,307 | $ | 537,500 | |||||
Revolving line of credit(6) | Level 3 | $ | 521,900 | $ | 521,900 | $ | 68,700 | $ | 68,700 | |||||
Other financing obligations(6)(7) | Level 2 | $ | 8,371 | $ | 8,371 | $ | 6,277 | $ | 6,277 | |||||
Derivative liabilities(3) | Level 2 | $ | 3,159 | $ | 3,159 | $ | 147 | $ | 147 | |||||
Mortgage repurchase facilities(6) | Level 2 | $ | 133,794 | $ | 133,794 | $ | 174,095 | $ | 174,095 | |||||
(1)
(1)Estimated fair value of the secured notes receivable was based on cash flow models discounted at market interest rates thatwhich considered the underlying risks of the note.
(2)The mortgage loans held for sale are carried at fair value, which wasis based on quoted market prices for those committed mortgage loans.
(3)Derivative instruments are carried at fair value and based on market prices for similar instruments. Changes in fair value are reflected in financial services revenue on the condensed consolidated statement 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.
(4)Estimated fair value of the senior notes incorporatedis based on recent trading activity in inactive markets.
(4)Carrying amount approximates fair value due to short-term nature and interest rate terms.
(5)Carrying amounts include any associated unamortized deferred financing costs, premiums and discounts. As of June 30, 2019March 31, 2020, these amounts totaled $5.7$5.5 million and $4.2$3.7 million for the 6.750% senior notes and 5.875% senior notes, respectively. As of December 31, 2018,2019, these amounts totaled $4.4$5.7 million and $4.6$3.9 million for the 6.875% 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. 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 impairments was primarily incurred in the Century Complete segment.
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 in a business combination. Long-lived assets determined to be impaired are measured at fair value.and resulting from impairment, if deemed necessary.
13.
12. Stock-Based Compensation
During the sixthree months ended June 30, 2019,March 31, 2020, we 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 $22.01 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 200% or 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. During the six months ended June 30, 2019, we also granted restricted stock units (which we refer to as “RSUs”) covering 0.60.3 million shares of common stock with a grant date fair value of $23.85$31.19 per share that vest over a three year period. During the three months ended March 31, 2020 we did 0t 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 maximumtarget level of performance, are as follows (in thousands, except years):
As of | |||
Unvested units |
| ||
Unrecognized compensation cost | $ |
| |
Period to recognize compensation cost |
| ||
During the three months ended June 30,March 31, 2020 and 2019, and 2018, we recognized stock-based compensation expense of $3.9$1.7 million and $3.8 million, respectively. During the six months ended June 30, 2019 and 2018, we recognized stock-based compensation expense of $7.5 million and $6.3$3.5 million, respectively. Stock-based compensation expense is included in selling, general, and administrative expense on our condensed consolidated statements of operations.
14.13. 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 June 30, 2019March 31, 2020, and December 31, 2018,2019, there were 30.433.3 million and 30.233.1 million shares of common stock issued and outstanding, respectively.
On May 10, 2017, our stockholders approved the adoption of the Century Communities, Inc. 2017 Omnibus Incentive Plan (which we refer to as our “2017 Incentive Plan”), which replaced our First Amended & Restated 2013 Long-Term Incentive Plan. We had reserved a total of 1.8 million shares of our common stock for issuance under our First Amended & Restated 2013 Long-Term Incentive Plan, of which approximately 0.6 million shares rolled over into the 2017 Incentive Plan when it became effective. On May 8, 2019, our stockholders approved an amendedthe Century Communities, Inc. Amended and restatedRestated 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 our common stock related to the vesting
of RSUs during the sixthree months ended June 30,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.
On July 3, 2018,November 27, 2019, we entered into a Distribution Agreement with J.P. Morgan Securities LLC, BofA Securities, Inc., Citigroup Global Markets Inc., and Merrill Lynch, Pierce, Fenner & Smith Incorporated,Fifth Third Securities, Inc. (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. 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 $69.9all $100 million available for sale as of June 30, 2019. During the three and six months ended June 30, 2019, we sold and issued an aggregate of 0.1 millionMarch 31, 2020. We did 0t sell or issue any shares of our common stock under the 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.Duringduring the three and six months ended June 30, 2018, we sold and issued an aggregate of 0.3 million and 0.5 million shares of our common stock under a prior Distribution Agreement, which provided proceeds of $9.6 million and $14.6 million, respectively, and, in connection with such sales, paid total commissions and fees toMarch 31, 2020 or the Sales Agents of $0.2 million and $0.3 million respectively. three months ended March 31, 2019. 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.
15
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 not 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.
15.14. Earnings Per Share
We use the two-class method of calculating EPS, where applicable, as our previously issued non-vested restricted stock awards had non-forfeitable rights to dividends and, accordingly, represent a participating security. The two-class method is an earnings allocation method under which EPS is calculated for each class of common stock and participating security considering both dividends declared (or accumulated) and participation rights in undistributed earnings as if all such earnings had been distributed during the period. We use the treasury stock method to calculate the dilutive effect ofearnings per share as our currently issued non-vested RSUs and PSUs as these awards do not have participating rights.
The following table sets forth the computation of basic and diluted EPS for the three and six months ended June 30,March 31, 2020 and 2019 and 2018 (in thousands, except share and per share information):
Three Months Ended | Six Months Ended | Three Months Ended | ||||||||||||||||
June 30, | June 30, | March 31, | ||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2020 | 2019 | |||||||||||||
Numerator | ||||||||||||||||||
Net income | $ | 15,495 | $ | 33,193 | $ | 32,612 | $ | 53,212 | $ | 26,126 | $ | 17,117 | ||||||
Less: Undistributed earnings allocated to participating securities | — | (3) | — | (67) | ||||||||||||||
Net income allocable to common stockholders | $ | 15,495 | $ | 33,190 | $ | 32,612 | $ | 53,145 | ||||||||||
Denominator | ||||||||||||||||||
Weighted average common shares outstanding - basic | 30,341,628 | 29,901,791 | 30,272,818 | 29,709,728 | 33,207,928 | 30,203,243 | ||||||||||||
Dilutive effect of restricted stock units | 227,220 | 268,898 | 234,127 | 293,548 | 268,516 | 241,033 | ||||||||||||
Weighted average common shares outstanding - diluted | 30,568,848 | 30,170,689 | 30,506,945 | 30,003,276 | 33,476,444 | 30,444,276 | ||||||||||||
Earnings per share: | ||||||||||||||||||
Basic | $ | 0.51 | $ | 1.11 | $ | 1.08 | $ | 1.79 | $ | 0.79 | $ | 0.57 | ||||||
Diluted | $ | 0.51 | $ | 1.10 | $ | 1.07 | $ | 1.77 | $ | 0.78 | $ | 0.56 | ||||||
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 common unit equivalents from diluted earnings per share during the three and six months ended June 30, 2019 related to the PSUs granted during the periods. We excluded 0.3 million common unit equivalents from diluted earnings per share during the three and six months ended June 30, 2018March 31, 2020 and 2019, respectively, related to the PSUs granted during the periods.for which performance conditions remain unsatisfied.
16.15. Commitments and Contingencies
Letters of Credit and Performance Bonds
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 June 30, 2019,March 31, 2020, and December 31, 2018,2019, we had $294.3$343.7 million and $289.8$344.1 million, respectively, in letters of credit and performance bonds issued and outstanding.
Litigation
We are subject to claims and lawsuits that arise primarily in the ordinary course of business, which consist primarily of construction defect 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. When we believe that a loss is probable and estimable, we record a charge to selling, general, and administrative expense on our condensed consolidated statements of operations for our estimated loss.
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. As of December 31, 2018, substantially all of the amounts reflected in Insurance receivable and other were related to construction claims, which were settled and amounts collected under the applicable insurance policies during the quarter ended June 30, 2019.
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.
17. Leases
Under ASC 842, the Company determines if a contract is or contains a lease at inception or modification of a contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration.
Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset.
We primarily enter into operating leases for the right to use office space, and computer and office equipment, which have lease terms that generally range from 1 to 7 years and often include one or more options to renew. We include renewal terms in the lease term when it is reasonably certain that we will exercise the option. For leases entered into after January 1, 2019, we establish a right of use asset and a lease liability at the commencement date of the lease based on the present value of future minimum lease payments. As the rate implicit in each lease is not readily determinable, we utilize our incremental borrowing rate in determining the present value of future minimum payments. Our incremental borrowing rate is determined based on information available at the commencement date. We account for the lease components and non-lease components as a single lease component. As of June 30, 2019, the Company had $16.8 million and $17.5 million recognized as a right of use asset and lease liability, respectively, which are presented on the consolidated balance sheet within prepaid expenses and other assets and accrued expenses and other liabilities, respectively. The Company has entered into various short-term operating leases, primarily for marketing billboards, with an initial term of twelve months or less. These leases are not recorded on the Company's condensed consolidated balance sheet.
Under both ASC 840 and ASC 842, operating lease expense is recognized on a straight-line basis over the lease term and was $1.3 million and $0.9 million for the three months ended June 30, 2019 and 2018, respectively. Operating lease expense was $2.7 million and $1.7 million for the six months ended June 30, 2019 and 2018, respectively.
Information related to the Company’s right of use asset and lease liability were as follows (in thousands):
Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | ||||||
Cash paid for operating lease liabilities | $ | 1,374 | $ | 2,746 | |||
Right-of-use assets obtained in exchange for new operating lease obligations | $ | 545 | $ | 1,392 | |||
Weighted-average remaining lease term | 4.28 years | 4.34 years | |||||
Weighted-average discount rate | 6.42 | % | 6.42 | % | |||
Maturities of lease liabilities as of June 30, 2019 were as follows (in thousands):
Due in 12 month period ended June 30, | |||
2020 | $ | 5,200 | |
2021 | 5,001 | ||
2022 | 3,772 | ||
2023 | 2,931 | ||
2024 | 2,068 | ||
Thereafter | 1,015 | ||
Total | 19,987 | ||
Less: discount | (2,521) | ||
Total lease liabilities | $ | 17,466 |
18.16. 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 | ||||||||||||||||||||||||||||||
Supplemental Condensed Consolidated Balance Sheet | As of March 31, 2020 (in thousands) | |||||||||||||||||||||||||||||
As of June 30, 2019 (in thousands) | ||||||||||||||||||||||||||||||
Guarantor | Non Guarantor | Elimination | Consolidated | Guarantor | Non Guarantor | Elimination | Consolidated | |||||||||||||||||||||||
Century | Subsidiaries | Subsidiaries | Entries | Century | Century | Subsidiaries | Subsidiaries | Entries | Century | |||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 5,252 | — | 26,902 | (450) | $ | 31,704 | $ | 401,069 | 6,404 | 43,500 | — | $ | 450,973 | ||||||||||||||||
Cash held in escrow | — | 25,838 | — | — | 25,838 | — | 22,497 | — | — | 22,497 | ||||||||||||||||||||
Accounts receivable | 5,418 | 10,626 | (45) | — | 15,999 | 8,000 | 13,684 | 19,003 | (17,600) | 23,087 | ||||||||||||||||||||
Investment in consolidated subsidiaries | 1,979,614 | — | — | (1,979,614) | — | 2,097,867 | — | — | (2,097,867) | — | ||||||||||||||||||||
Inventories | — | 2,009,769 | — | — | 2,009,769 | — | 2,074,509 | — | — | 2,074,509 | ||||||||||||||||||||
Mortgage loans held for sale | — | — | 122,085 | — | 122,085 | — | — | 141,846 | — | 141,846 | ||||||||||||||||||||
Prepaid expenses and other assets | 10,421 | 103,075 | 9,847 | — | 123,343 | 9,449 | 95,096 | 16,472 | — | 121,017 | ||||||||||||||||||||
Deferred tax assets, net | 13,335 | — | — | — | 13,335 | 11,110 | — | — | — | 11,110 | ||||||||||||||||||||
Property and equipment, net | 14,145 | 18,447 | 877 | — | 33,469 | 15,240 | 18,595 | 1,169 | — | 35,004 | ||||||||||||||||||||
Amortizable intangible assets, net | — | 4,436 | — | — | 4,436 | |||||||||||||||||||||||||
Goodwill | — | 30,395 | — | — | 30,395 | — | 30,395 | — | — | 30,395 | ||||||||||||||||||||
Total assets | $ | 2,028,185 | $ | 2,202,586 | $ | 159,666 | $ | (1,980,064) | $ | 2,410,373 | $ | 2,542,735 | $ | 2,261,180 | $ | 221,990 | $ | (2,115,467) | $ | 2,910,438 | ||||||||||
Liabilities and stockholders’ equity | ||||||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||
Accounts payable | $ | 694 | 96,107 | 692 | (450) | $ | 97,043 | $ | 588 | 38,963 | 619 | — | $ | 40,170 | ||||||||||||||||
Accrued expenses and other liabilities | 28,166 | 174,819 | 9,765 | — | 212,750 | 44,919 | 189,848 | 13,708 | (17,600) | 230,875 | ||||||||||||||||||||
Notes payable | 890,096 | 510 | — | — | 890,606 | 890,795 | 8,371 | — | — | 899,166 | ||||||||||||||||||||
Revolving line of credit | 212,000 | — | — | — | 212,000 | 521,900 | — | — | — | 521,900 | ||||||||||||||||||||
Mortgage repurchase facilities | — | — | 100,745 | — | 100,745 | — | — | 133,794 | — | 133,794 | ||||||||||||||||||||
Total liabilities | 1,130,956 | 271,436 | 111,202 | (450) | 1,513,144 | 1,458,202 | 237,182 | 148,121 | (17,600) | 1,825,905 | ||||||||||||||||||||
Stockholders’ equity: | 897,229 | 1,931,150 | 48,464 | (1,979,614) | 897,229 | 1,084,533 | 2,023,998 | 73,869 | (2,097,867) | 1,084,533 | ||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 2,028,185 | $ | 2,202,586 | $ | 159,666 | $ | (1,980,064) | $ | 2,410,373 | $ | 2,542,735 | $ | 2,261,180 | $ | 221,990 | $ | (2,115,467) | $ | 2,910,438 | ||||||||||
Supplemental Condensed Consolidated Balance Sheet | Supplemental Condensed Consolidated Balance Sheet | |||||||||||||||||||||||||||||
As of December 31, 2018 (in thousands) | As of December 31, 2019 (in thousands) | |||||||||||||||||||||||||||||
Guarantor | Non Guarantor | Elimination | Consolidated | Guarantor | Non Guarantor | Elimination | Consolidated | |||||||||||||||||||||||
Century | Subsidiaries | Subsidiaries | Entries | Century | Century | Subsidiaries | Subsidiaries | Entries | Century | |||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 2,183 | 2,101 | 28,618 | — | $ | 32,902 | $ | 1,577 | — | 53,859 | — | $ | 55,436 | ||||||||||||||||
Cash held in escrow | — | 24,344 | — | — | 24,344 | — | 35,308 | — | — | 35,308 | ||||||||||||||||||||
Accounts receivable | 6,117 | 7,424 | (77) | — | 13,464 | 15,363 | 12,327 | (252) | — | 27,438 | ||||||||||||||||||||
Investment in consolidated subsidiaries | 1,827,456 | — | — | (1,827,456) | — | 1,996,703 | — | — | (1,996,703) | — | ||||||||||||||||||||
Inventories | — | 1,848,243 | — | — | 1,848,243 | — | 1,995,549 | — | — | 1,995,549 | ||||||||||||||||||||
Mortgage loans held for sale | — | — | 114,074 | — | 114,074 | — | — | 185,246 | — | 185,246 | ||||||||||||||||||||
Prepaid expenses and other assets | 51,177 | 85,224 | 2,316 | — | 138,717 | 9,539 | 101,321 | 13,148 | — | 124,008 | ||||||||||||||||||||
Deferred tax assets, net | 13,763 | — | — | — | 13,763 | 10,589 | — | — | — | 10,589 | ||||||||||||||||||||
Property and equipment, net | 13,274 | 18,989 | 995 | — | 33,258 | 15,256 | 19,614 | 1,128 | — | 35,998 | ||||||||||||||||||||
Amortizable intangible assets, net | — | 5,095 | — | — | 5,095 | |||||||||||||||||||||||||
Goodwill | — | 30,395 | — | — | 30,395 | — | 30,395 | — | — | 30,395 | ||||||||||||||||||||
Total assets | $ | 1,913,970 | $ | 2,021,815 | $ | 145,926 | $ | (1,827,456) | $ | 2,254,255 | $ | 2,049,027 | $ | 2,194,514 | $ | 253,129 | $ | (1,996,703) | $ | 2,499,967 | ||||||||||
Liabilities and stockholders’ equity | ||||||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||
Accounts payable | $ | 623 | 88,627 | 657 | — | $ | 89,907 | $ | (13) | 83,853 | 954 | — | $ | 84,794 | ||||||||||||||||
Accrued expenses and other liabilities | 75,506 | 131,548 | 6,103 | — | 213,157 | 28,214 | 173,403 | 12,358 | — | 213,975 | ||||||||||||||||||||
Notes payable | 775,982 | 8,795 | — | — | 784,777 | 890,427 | 6,277 | — | — | 896,704 | ||||||||||||||||||||
Revolving line of credit | 202,500 | — | — | — | 202,500 | 68,700 | — | — | — | 68,700 | ||||||||||||||||||||
Mortgage repurchase facilities | — | — | 104,555 | — | 104,555 | — | — | 174,095 | — | 174,095 | ||||||||||||||||||||
Total liabilities | 1,054,611 | 228,970 | 111,315 | — | 1,394,896 | 987,328 | 263,533 | 187,407 | — | 1,438,268 | ||||||||||||||||||||
Stockholders’ equity: | 859,359 | 1,792,845 | 34,611 | (1,827,456) | 859,359 | 1,061,699 | 1,930,981 | 65,722 | (1,996,703) | 1,061,699 | ||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 1,913,970 | $ | 2,021,815 | $ | 145,926 | $ | (1,827,456) | $ | 2,254,255 | $ | 2,049,027 | $ | 2,194,514 | $ | 253,129 | $ | (1,996,703) | $ | 2,499,967 | ||||||||||
Supplemental Condensed Consolidated Statement of Operations | |||||||||||||||
For the Three Months Ended March 31, 2020 (in thousands) | |||||||||||||||
Guarantor | Non Guarantor | Elimination | Consolidated | ||||||||||||
Century | Subsidiaries | Subsidiaries | Entries | CCS | |||||||||||
Revenues | |||||||||||||||
Homebuilding revenues | |||||||||||||||
Home sales revenues | $ | — | $ | 572,710 | $ | — | $ | — | $ | 572,710 | |||||
Land sales and other revenues | — | 20,104 | — | — | 20,104 | ||||||||||
Total homebuilding revenues | — | 592,814 | — | — | 592,814 | ||||||||||
Financial services revenue | — | — | 9,795 | — | 9,795 | ||||||||||
Total revenues | — | 592,814 | 9,795 | — | 602,609 | ||||||||||
Homebuilding cost of revenues | |||||||||||||||
Cost of home sales revenues | — | (470,526) | — | — | (470,526) | ||||||||||
Cost of land sales and other revenues | — | (14,167) | — | — | (14,167) | ||||||||||
Total homebuilding cost of revenues | — | (484,693) | — | — | (484,693) | ||||||||||
Financial services costs | — | — | (9,586) | — | (9,586) | ||||||||||
Selling, general and administrative | (13,475) | (60,144) | — | — | (73,619) | ||||||||||
Inventory impairment | — | (781) | — | — | (781) | ||||||||||
Equity in earnings from consolidated subsidiaries | 35,428 | — | — | (35,428) | — | ||||||||||
Other income (expense) | 326 | (304) | 136 | — | 158 | ||||||||||
Income before income tax expense | 22,279 | 46,892 | 345 | (35,428) | 34,088 | ||||||||||
Income tax expense | 3,847 | (11,723) | (86) | — | (7,962) | ||||||||||
Net income | $ | 26,126 | $ | 35,169 | $ | 259 | $ | (35,428) | $ | 26,126 | |||||
Supplemental Condensed Consolidated Statement of Operations | |||||||||||||||
For the Three Months Ended March 31, 2019 (in thousands) | |||||||||||||||
Guarantor | Non Guarantor | Elimination | Consolidated | ||||||||||||
Century | Subsidiaries | Subsidiaries | Entries | Century | |||||||||||
Revenues | |||||||||||||||
Homebuilding revenues | |||||||||||||||
Home sales revenues | $ | — | $ | 523,302 | $ | — | $ | — | $ | 523,302 | |||||
Land sales and other revenues | — | 1,355 | — | — | 1,355 | ||||||||||
Total homebuilding revenues | — | 524,657 | — | — | 524,657 | ||||||||||
Financial services revenue | — | — | 8,400 | — | 8,400 | ||||||||||
Total revenues | — | 524,657 | 8,400 | — | 533,057 | ||||||||||
Homebuilding cost of revenues | |||||||||||||||
Cost of home sales revenues | — | (433,757) | — | — | (433,757) | ||||||||||
Cost of land sales and other revenues | — | (614) | — | — | (614) | ||||||||||
Total homebuilding cost of revenues | — | (434,371) | — | — | (434,371) | ||||||||||
Financial services costs | — | — | (6,829) | — | (6,829) | ||||||||||
Selling, general and administrative | (18,655) | (50,281) | — | — | (68,936) | ||||||||||
Equity in earnings from consolidated subsidiaries | 31,163 | — | — | (31,163) | — | ||||||||||
Other income (expense) | 101 | (45) | 20 | — | 76 | ||||||||||
Income before income tax expense | 12,609 | 39,960 | 1,591 | (31,163) | 22,997 | ||||||||||
Income tax expense | 4,508 | (9,990) | (398) | — | (5,880) | ||||||||||
Net income | $ | 17,117 | $ | 29,970 | $ | 1,193 | $ | (31,163) | $ | 17,117 | |||||
Supplemental Condensed Consolidated Statement of Operations | |||||||||||||||
For the Three Months Ended June 30, 2019 (in thousands) | |||||||||||||||
Guarantor | Non Guarantor | Elimination | Consolidated | ||||||||||||
Century | Subsidiaries | Subsidiaries | Entries | Century | |||||||||||
Revenues | |||||||||||||||
Homebuilding revenues | |||||||||||||||
Home sales revenues | $ | — | 608,636 | — | — | $ | 608,636 | ||||||||
Land sales and other revenues | — | 1,399 | — | — | 1,399 | ||||||||||
— | 610,035 | — | — | 610,035 | |||||||||||
Financial services revenue | — | — | 9,915 | 9,915 | |||||||||||
Total revenues | — | 610,035 | 9,915 | — | 619,950 | ||||||||||
Homebuilding cost of revenues | |||||||||||||||
Cost of home sales revenues | — | (503,928) | — | — | (503,928) | ||||||||||
Cost of land sales and other revenues | — | (877) | — | — | (877) | ||||||||||
— | (504,805) | — | — | (504,805) | |||||||||||
Financial services costs | — | — | (7,747) | (7,747) | |||||||||||
Selling, general and administrative | (18,813) | (56,404) | — | — | (75,217) | ||||||||||
Loss on debt extinguishment | (10,832) | (10,832) | |||||||||||||
Acquisition expense | — | — | — | — | — | ||||||||||
Equity in earnings from consolidated subsidiaries | 38,508 | — | — | (38,508) | — | ||||||||||
Equity in income of unconsolidated subsidiaries | — | — | — | — | — | ||||||||||
Other income (expense) | (869) | 302 | 48 | — | (519) | ||||||||||
Income before income tax expense | 7,994 | 49,128 | 2,216 | (38,508) | 20,830 | ||||||||||
Income tax expense | 7,501 | (12,281) | (555) | — | (5,335) | ||||||||||
Net income | $ | 15,495 | $ | 36,847 | $ | 1,661 | $ | (38,508) | $ | 15,495 | |||||
Supplemental Condensed Consolidated Statement of Cash Flows | |||||||||||||||
For the Three Months Ended March 31, 2020 (in thousands) | |||||||||||||||
Guarantor | Non Guarantor | Elimination | Consolidated | ||||||||||||
Century | Subsidiaries | Subsidiaries | Entries | Century | |||||||||||
Net cash provided by/(used in) operating activities | $ | (652) | $ | (33,043) | $ | 21,319 | $ | — | $ | (12,376) | |||||
Net cash provided by/(used in) investing activities | $ | (48,079) | $ | (1,670) | $ | (146) | $ | 47,268 | $ | (2,627) | |||||
Financing activities | |||||||||||||||
Borrowings under revolving credit facilities | $ | 678,000 | — | — | — | $ | 678,000 | ||||||||
Payments on revolving credit facilities | (224,800) | — | — | — | (224,800) | ||||||||||
Principal payments on notes payable | — | (2,043) | — | — | (2,043) | ||||||||||
Proceeds from insurance notes payable | — | 4,137 | — | — | 4,137 | ||||||||||
Net proceeds from mortgage repurchase facilities | — | — | (40,302) | — | (40,302) | ||||||||||
Repurchases of common stock upon vesting of stock-based compensation | (4,977) | — | — | — | (4,977) | ||||||||||
Repurchases of common stock under our stock repurchase program | — | — | — | — | — | ||||||||||
Payments from (and advances to) parent/subsidiary | — | 39,379 | 7,889 | (47,268) | — | ||||||||||
Net cash provided by/(used in) financing activities | $ | 448,223 | $ | 41,473 | $ | (32,413) | $ | (47,268) | $ | 410,015 | |||||
Net increase (decrease) | $ | 399,492 | $ | 6,760 | $ | (11,240) | $ | — | $ | 395,012 | |||||
Cash and cash equivalents and restricted cash | |||||||||||||||
Beginning of period | $ | 1,577 | 341 | 56,604 | — | $ | 58,522 | ||||||||
End of period | $ | 401,069 | $ | 7,101 | $ | 45,364 | $ | — | $ | 453,534 | |||||
Cash and cash equivalents | $ | 401,069 | 6,404 | 43,500 | — | $ | 450,973 | ||||||||
Restricted Cash | — | 697 | 1,864 | — | 2,561 | ||||||||||
Cash and cash equivalents and Restricted cash | $ | 401,069 | $ | 7,101 | $ | 45,364 | $ | — | $ | 453,534 | |||||
Supplemental Condensed Consolidated Statement of Operations | |||||||||||||||
For the Three Months Ended June 30, 2018 (in thousands) | |||||||||||||||
Guarantor | Non Guarantor | Elimination | Consolidated | ||||||||||||
Century | Subsidiaries | Subsidiaries | Entries | Century | |||||||||||
Revenues | |||||||||||||||
Homebuilding revenues | |||||||||||||||
Home sales revenues | $ | — | $ | 522,164 | $ | — | $ | — | $ | 522,164 | |||||
Land sales and other revenues | — | 1,714 | — | — | 1,714 | ||||||||||
— | 523,878 | — | — | 523,878 | |||||||||||
Financial services revenue | — | — | 8,014 | — | 8,014 | ||||||||||
Total revenues | — | 523,878 | 8,014 | — | 531,892 | ||||||||||
Homebuilding cost of revenues | |||||||||||||||
Cost of home sales revenues | — | (427,197) | — | — | (427,197) | ||||||||||
Cost of land sales and other revenues | — | (1,040) | — | — | (1,040) | ||||||||||
— | (428,237) | — | — | (428,237) | |||||||||||
Financial services costs | — | — | (5,385) | — | (5,385) | ||||||||||
Selling, general and administrative | (18,154) | (45,480) | — | — | (63,634) | ||||||||||
Acquisition expense | (165) | — | — | — | (165) | ||||||||||
Equity in earnings from consolidated subsidiaries | 34,555 | — | — | (34,555) | — | ||||||||||
Equity in income of unconsolidated subsidiaries | 11,681 | — | — | — | 11,681 | ||||||||||
Other income (expense) | (22) | 372 | — | — | 350 | ||||||||||
Income before income tax expense | 27,895 | 50,533 | 2,629 | (34,555) | 46,502 | ||||||||||
Income tax expense | 5,298 | (17,687) | (920) | — | (13,309) | ||||||||||
Net income | $ | 33,193 | $ | 32,846 | $ | 1,709 | $ | (34,555) | $ | 33,193 | |||||
Supplemental Condensed Consolidated Statement of Cash Flows | |||||||||||||||
For the Three Months Ended March 31, 2019 (in thousands) | |||||||||||||||
Guarantor | Non Guarantor | Elimination | Consolidated | ||||||||||||
Century | Subsidiaries | Subsidiaries | Entries | Century | |||||||||||
Net cash provided by/(used in) operating activities | $ | (36,731) | $ | (36,216) | $ | 13,547 | $ | — | $ | (59,400) | |||||
Net cash provided by/(used in) investing activities | (44,704) | $ | (2,031) | $ | 67 | $ | 43,384 | $ | (3,284) | ||||||
Financing activities | — | ||||||||||||||
Borrowings under revolving credit facilities | $ | 288,800 | — | — | — | $ | 288,800 | ||||||||
Payments on revolving credit facilities | (204,300) | — | — | — | (204,300) | ||||||||||
Principal payments on notes payable | — | (7,716) | — | — | (7,716) | ||||||||||
Proceeds from insurance notes payable | — | 9,301 | — | — | 9,301 | ||||||||||
Net proceeds from mortgage repurchase facilities | — | — | (13,689) | — | (13,689) | ||||||||||
Repurchases of common stock upon vesting of stock-based compensation | (3,166) | — | — | — | (3,166) | ||||||||||
Repurchases of common stock under our stock repurchase program | (1,439) | — | — | — | (1,439) | ||||||||||
Payments from (and advances to) parent/subsidiary | — | 36,890 | 6,494 | (43,384) | — | ||||||||||
Net cash provided by/(used in) financing activities | $ | 79,895 | $ | 38,475 | $ | (7,195) | $ | (43,384) | $ | 67,791 | |||||
Net increase (decrease) | $ | (1,540) | $ | 228 | $ | 6,419 | $ | — | $ | 5,107 | |||||
Cash and cash equivalents and restricted cash | |||||||||||||||
Beginning of period | $ | 2,183 | 4,006 | 30,252 | — | $ | 36,441 | ||||||||
End of period | $ | 643 | $ | 4,234 | $ | 36,671 | $ | — | $ | 41,548 | |||||
Cash and cash equivalents | $ | 643 | 2,596 | 34,876 | — | $ | 38,115 | ||||||||
Restricted Cash | — | 1,638 | 1,795 | — | 3,433 | ||||||||||
Cash and cash equivalents and Restricted cash | $ | 643 | $ | 4,234 | $ | 36,671 | $ | — | $ | 41,548 | |||||
Supplemental Condensed Consolidated Statement of Operations | |||||||||||||||
For the Six Months Ended June 30, 2019 (in thousands) | |||||||||||||||
Guarantor | Non Guarantor | Elimination | Consolidated | ||||||||||||
Century | Subsidiaries | Subsidiaries | Entries | Century | |||||||||||
Revenues | |||||||||||||||
Homebuilding revenues | |||||||||||||||
Home sales revenues | $ | — | 1,131,938 | — | — | $ | 1,131,938 | ||||||||
Land sales and other revenues | — | 2,754 | — | — | 2,754 | ||||||||||
— | 1,134,692 | — | — | 1,134,692 | |||||||||||
Financial services revenue | — | — | 18,315 | 18,315 | |||||||||||
Total revenues | — | 1,134,692 | 18,315 | — | 1,153,007 | ||||||||||
Homebuilding cost of revenues | |||||||||||||||
Cost of homes sales revenues | — | (937,685) | — | — | (937,685) | ||||||||||
Cost of land sales and other revenues | — | (1,491) | — | — | (1,491) | ||||||||||
— | (939,176) | — | — | (939,176) | |||||||||||
Financial services costs | — | — | (14,576) | — | (14,576) | ||||||||||
Selling, general and administrative | (37,467) | (106,686) | — | — | (144,153) | ||||||||||
Loss on debt extinguishment | (10,832) | — | — | — | (10,832) | ||||||||||
Acquisition expense | — | — | — | — | — | ||||||||||
Equity in earnings from consolidated subsidiaries | 69,671 | — | — | (69,671) | — | ||||||||||
Equity in income from unconsolidated subsidiaries | — | — | — | — | — | ||||||||||
Other income (expense) | (768) | 257 | 68 | — | (443) | ||||||||||
Income before income tax expense | 20,604 | 89,087 | 3,807 | (69,671) | 43,827 | ||||||||||
Income tax expense | 12,008 | (22,271) | (952) | — | (11,215) | ||||||||||
Net income | $ | 32,612 | $ | 66,816 | $ | 2,855 | $ | (69,671) | $ | 32,612 | |||||
Supplemental Condensed Consolidated Statement of Operations | |||||||||||||||
For the Six Months Ended June 30, 2018 (in thousands) | |||||||||||||||
Guarantor | Non Guarantor | Elimination | Consolidated | ||||||||||||
Century | Subsidiaries | Subsidiaries | Entries | Century | |||||||||||
Revenues | |||||||||||||||
Homebuilding revenues | |||||||||||||||
Home sales revenues | $ | — | 916,995 | — | — | $ | 916,995 | ||||||||
Land sales and other revenues | — | 3,174 | — | — | 3,174 | ||||||||||
— | 920,169 | — | — | 920,169 | |||||||||||
Financial services revenue | — | — | 13,571 | — | 13,571 | ||||||||||
Total revenues | — | 920,169 | 13,571 | — | 933,740 | ||||||||||
Homebuilding cost of revenues | |||||||||||||||
Cost of homes sales revenues | — | (746,780) | — | — | (746,780) | ||||||||||
Cost of land sales and other revenues | — | (1,917) | — | — | (1,917) | ||||||||||
— | (748,697) | — | — | (748,697) | |||||||||||
Financial services costs | — | — | (9,781) | — | (9,781) | ||||||||||
Selling, general and administrative | (33,616) | (86,540) | — | — | (120,156) | ||||||||||
Acquisition expense | (338) | — | — | — | (338) | ||||||||||
Equity in earnings from consolidated subsidiaries | 65,837 | — | — | (65,837) | — | ||||||||||
Equity in income from unconsolidated subsidiaries | 14,849 | — | — | — | 14,849 | ||||||||||
Other income (expense) | (255) | 247 | — | — | (8) | ||||||||||
Income before income tax expense | 46,477 | 85,179 | 3,790 | (65,837) | 69,609 | ||||||||||
Income tax expense | 6,735 | (22,146) | (986) | — | (16,397) | ||||||||||
Net income | $ | 53,212 | $ | 63,033 | $ | 2,804 | $ | (65,837) | $ | 53,212 | |||||
Supplemental Condensed Consolidated Statement of Cash Flows | |||||||||||||||
For the Six Months Ended June 30, 2019 (in thousands) | |||||||||||||||
Guarantor | Non Guarantor | Elimination | Consolidated | ||||||||||||
Century | Subsidiaries | Subsidiaries | Entries | Century | |||||||||||
Net cash provided by/(used in) operating activities | $ | (60,874) | (23,182) | (8,493) | (450) | $ | (92,999) | ||||||||
Net cash provided by/(used in) investing activities | $ | (45,677) | (4,115) | 118 | 43,459 | $ | (6,215) | ||||||||
Financing activities | |||||||||||||||
Borrowings under revolving credit facilities | $ | 767,600 | — | — | — | $ | 767,600 | ||||||||
Payments on revolving credit facilities | (758,100) | — | — | — | (758,100) | ||||||||||
Proceeds from the issuance of senior notes due 2027 | 500,000 | — | — | — | 500,000 | ||||||||||
Extinguishment of senior notes due 2022 | (391,942) | — | — | — | (391,942) | ||||||||||
Debt issuance costs | (5,728) | — | — | — | (5,728) | ||||||||||
Proceeds from the issuance of insurance premium notes and other | — | 9,301 | — | — | 9,301 | ||||||||||
Principal payments on insurance notes payable | — | (17,586) | — | — | (17,586) | ||||||||||
Net proceeds from mortgage repurchase facilities | — | — | (3,805) | — | (3,805) | ||||||||||
Net proceeds from issuances of common stock | 2,663 | — | — | — | 2,663 | ||||||||||
Repurchases of common stock upon vesting of stock based compensation | (3,434) | — | — | — | (3,434) | ||||||||||
Repurchases of common stock under our stock repurchase program | (1,439) | — | — | — | (1,439) | ||||||||||
Payments from (and advances to) parent/subsidiary | — | 32,462 | 10,997 | (43,459) | — | ||||||||||
Net cash provided by (used in) financing activities | $ | 109,620 | $ | 24,177 | $ | 7,192 | $ | (43,459) | $ | 97,530 | |||||
Net increase (decrease) | $ | 3,069 | $ | (3,120) | $ | (1,183) | $ | (450) | $ | (1,684) | |||||
Cash and cash equivalents and Restricted cash | |||||||||||||||
Beginning of period | $ | 2,183 | 4,006 | 30,252 | — | $ | 36,441 | ||||||||
End of period | $ | 5,252 | $ | 886 | $ | 29,069 | $ | (450) | $ | 34,757 | |||||
Cash and cash equivalents | $ | 5,252 | — | 26,902 | (450) | $ | 31,704 | ||||||||
Restricted Cash | — | 886 | 2,167 | — | 3,053 | ||||||||||
Cash and cash equivalents and Restricted cash | $ | 5,252 | $ | 886 | $ | 29,069 | $ | (450) | $ | 34,757 | |||||
Supplemental Condensed Consolidated Statement of Cash Flows | |||||||||||||||
For the Six Months Ended June 30, 2018 (in thousands) | |||||||||||||||
Guarantor | Non Guarantor | Elimination | Consolidated | ||||||||||||
Century | Subsidiaries | Subsidiaries | Entries | Century | |||||||||||
Net cash provided by/(used in) operating activities | $ | (28,930) | (43,880) | (963) | (7,119) | $ | (80,892) | ||||||||
Net cash provided by/(used in) investing activities | $ | (68,490) | (163,120) | (152) | 196,514 | $ | (35,248) | ||||||||
Financing activities | |||||||||||||||
Borrowings under revolving credit facilities | $ | 305,000 | — | — | — | $ | 305,000 | ||||||||
Payments on revolving credit facilities | (175,000) | — | — | — | (175,000) | ||||||||||
Extinguishments of debt assumed in business combination | (94,231) | — | — | — | (94,231) | ||||||||||
Debt issuance costs | (3,521) | — | — | — | (3,521) | ||||||||||
Repurchases of common stock upon vesting of stock based compensation | (4,788) | — | — | — | (4,788) | ||||||||||
Payments from (and advances to) parent/subsidiary | (583) | 189,959 | 7,138 | (196,514) | — | ||||||||||
Net proceeds from mortgage repurchase facilities | — | — | 4,679 | — | 4,679 | ||||||||||
Net proceeds from issuances of common stock | 14,309 | — | — | — | 14,309 | ||||||||||
Net cash provided by (used in) financing activities | $ | 41,186 | $ | 189,959 | $ | 11,817 | $ | (196,514) | $ | 46,448 | |||||
Net increase (decrease) | $ | (56,234) | $ | (17,041) | $ | 10,702 | $ | (7,119) | $ | (69,692) | |||||
Cash and cash equivalents and Restricted cash | |||||||||||||||
Beginning of period | $ | 56,234 | 28,044 | 9,435 | — | $ | 93,713 | ||||||||
End of period | $ | — | $ | 11,003 | $ | 20,137 | $ | (7,119) | $ | 24,021 | |||||
Cash and cash equivalents | $ | — | 8,343 | 18,258 | (7,119) | $ | 19,482 | ||||||||
Restricted Cash | — | 2,660 | 1,879 | — | 4,539 | ||||||||||
Cash and cash equivalents and Restricted cash | $ | — | $ | 11,003 | $ | 20,137 | $ | (7,119) | $ | 24,021 | |||||
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Some of the statements included in this Quarterly Report on Form 10-Q (which we refer to as this “Form 10-Q”) constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, forecasts, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events and results of operations could differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “will,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or, the negative of such terms and other comparable terminology.terminology and the use of future dates. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors.
The forward-looking statements included in this Form 10-Q reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from those expressed in any forward-looking statement. Statements regarding the following subjects, among others, may be forward-looking and subject to risks and uncertainties including among others:
the impact of the COVID-19 pandemic on our business operations
economic changes either nationally or in the markets in which we operate, including declines in employment, volatility of mortgage interest rates and inflation;
a downturn in the homebuilding industry, including a reduction in demand or a decline in real estate values or market conditions resulting in impairment of our assets;
changes in assumptions used to make industry forecasts;forecasts or trends affecting housing demand or prices;
continued volatility and uncertainty in the credit markets and broader financial markets;
our future operating results and financial condition;
our business operations;
changes in our business and investment strategy;
availability of land to acquire, and our ability to acquire such land on favorable terms or at all;
availability, terms and deployment of capital;
availability or cost of mortgage financing or an increase in the number of foreclosures in the market;
shortages of or increased prices for labor, land or raw materials used in housing construction;
delays in land development or home construction resulting from adverse weather conditions or other events outside our control;
impact of construction defect, product liability, and/or home warranty claims, including the adequacy of accruals and the applicability and sufficiency of our insurance coverage;
changes in, or the failure or inability to comply with, governmental laws and regulations;
the timing of receipt of regulatory approvals and the opening of projects;
the impact and cost of compliance with evolving environmental laws and regulations and third-party challenges to required permits and other approvals;
the degree and nature of our competition;
our leverage, debt service obligations and exposure to changes in interest rates;
our ability to successfully integrate the acquired businessescontinue to fund and realize projected cost savings and other benefits;succeed in our mortgage lending business;
availability of qualified personnel and our ability to retain our key personnel;
taxation and tax policy changes, tax rate changes, new tax laws, new or revised tax law interpretations or guidance, including as a result of the Tax Cuts and Jobs Act;guidance; and
changes in GAAP.
United States generally accepted accounting principles (which we refer to as “GAAP”).
Forward-looking statements are based on our beliefs, assumptions and expectations of future events, taking into account all information currently available to us. Forward-looking statements are not guarantees of future events or of our performance. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. Some of these events and factors are described above and in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K, and other risks and uncertainties detailed in this report, including “Part II, Item 1A. Risk Factors”, and our other reports and filings with the SEC. If a change occurs, our business, financial condition, liquidity, cash flows and results of operations may vary materially from those expressed in or implied by our forward-looking statements. New risks and uncertainties arise over time, and it is not possible for us to predict the occurrence of those matters or the manner in which they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result
revise any forward-looking statements, whether as a result of new information, future events or otherwise. Therefore, you should not rely on these forward-looking statements as of any date subsequent to the date of this Form 10-Q.
As used in this Form 10-Q, references to “we,” “us,” “our”, “Century” or the “Company” refer to Century Communities, Inc., a Delaware corporation, and, unless the context otherwise requires, its subsidiaries and affiliates.
The following discussion and analysis of our financial condition and results of operations is intended to help the reader understand our Company, business, operations and present business environment and is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the related notes to those statements included elsewhere in this Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Cautionary Note About Forward-Looking Statements” and the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.2019. We use certain non-GAAP financial measures that we believe are important for purposes of comparison to prior periods. This information is also used by our management to measure the profitability of our ongoing operations and analyze our business performance and trends. Some of the numbers included herein have been rounded for the convenience of presentation.
Overview
Century is engagedengaged in the development, design, construction, marketing and sale of single-family attached and detached homes in the States of Alabama, Arizona, California, Colorado, Florida, Georgia, Indiana, Iowa, Michigan, Nevada, North Carolina, Ohio, South Carolina, Tennessee, Texas, Utah, and Washington.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. We build and sell homes under our Century Communities and Wade Jurney HomesCentury Complete brands. 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 Wade Jurney HomesCentury Complete brand solely targets first time homebuyers primarily sells homes through retail studios and over the internet and provides no option or upgrade selections. Our homebuilding operations are organized into the following five reportable segments: West, Mountain, Texas, Southeast, and Wade Jurney Homes.Century Complete. Additionally, our indirect wholly-ownedwholly 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 home buyers have been identified as our Financial Services segment.
On February 6, 2020, in order to better align with our Century brand, we announced the rebranding of our Wade Jurney Homes brand to Century Complete. We believe this rebranding will assist in showcasing the value proposition to potential buyers.
We build and sell an extensive range of home types across a variety of price points.
Potential Impact of COVID-19 Pandemic
The recent outbreak of the novel coronavirus, COVID-19, which was declared a pandemic by the World Health Organization on March 11, 2020, has created significant volatility, disruption, and uncertainty. It has resulted in government restrictions, such as “stay-at-home” or “shelter-in-place” directives, quarantines, travel advisories and social distancing, leading to the closure of businesses and causing weakened economic conditions that will likely worsen and may ultimately result in an economic slowdown or recession. These actions have begun to adversely impact and will likely continue to adversely impact Century directly and indirectly.
In response to the pandemic and these government restrictions, Century has shifted our sales process to offer additional virtual online tours and appointments and, where permitted, appointment-only in-person meetings that comply with social distancing and other health and safety requirements and protocols. We have limited our construction and other operations to those that are authorized under the various applicable governmental orders and shifted our corporate and other office functions to work remotely. 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 exempt from the applicable health orders. We are uncertain as to how long these restrictions will remain in place and whether the COVID-19 public health effort will be intensified to further restrict our business. While these circumstances did not materially adversely affect our first quarter 2020 financial results, they have begun to negatively impact our business, including our ability to develop, construct, market and sell homes, and beginning in April 2020, have begun to negatively impact and will likely continue to negatively impact our revenues and other operating results.
The adverse effect of the COVID-19 pandemic on the broader economy has negatively impacted and will likely continue to negatively impact demand for new homes. Continued demand for Century homes is uncertain but is unlikely to return quickly to the record levels that we experienced prior to the pandemic in light of anticipated higher unemployment rates, decreased consumer confidence, decreased availability of credit, and other factors. This impact on demand for our homes will likely adversely affect our operating results in future periods, although, we cannot reasonably estimate the amount or duration of the impact at this time. In addition, a decline in our home building operations will have a direct effect on the origination volume of and revenues from our Financial Services segment.
Results of Operations
During the three and six months ended June 30, 2019,March 31, 2020, we delivered 1,967 and 3,6301,864 homes, respectively, with an average sales price of $309.4 thousand and $311.8 thousand, respectively.$307.2 thousand. These deliveries represent increasesan increase of 42.1% and 56.1%12.1%, respectively, as compared to the three and six months ended June 30, 2018.March 31, 2019. During the same periods,three months ended March 31, 2020, we generated approximately $608.6 million and $1,131.9$572.7 million in home sales revenues, respectively, approximately $20.8 million and $43.8$34.1 million in income before income tax expense, respectively, and approximately $15.5$26.1 million and $32.6 million, respectively, in net income.
For the three and six months ended June 30, 2019,March 31, 2020, our new home contracts, net of cancelations, totaled 2,182 and 4,040, respectively,2,388, a 41.4% and 38.3%28.5% increase over the same respective periodsperiod in 2018.2019. As of June 30, 2019,March 31, 2020, we had a backlog of 2,5912,594 homes, a 19.0% decrease9.2% increase as compared to June 30, 2018,March 31, 2019, representing approximately $784.2$861.1 million in sales value, a 20.6% decrease19.9% increase as compared to June 30, 2018.March 31, 2019.
The following table summarizes our results of operations for the three and six months ended June 30, 2019March 31, 2020 and 2018.2019.
(in thousands, except per share amounts) | Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended March 31, | Increase (Decrease) | ||||||||||||||||||||||||||||||
2020 | 2019 | Amount | % | |||||||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||||||||
Consolidated Statements of Operations: | ||||||||||||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||||||
Home sales revenues | $ | 608,636 | $ | 522,164 | $ | 1,131,938 | $ | 916,995 | $ | 572,710 | $ | 523,302 | $ | 49,408 | 9.4 | % | ||||||||||||||||||
Land sales revenues | 1,399 | 1,714 | 2,754 | 3,174 | 20,104 | 1,355 | 18,749 | 1,383.7 | % | |||||||||||||||||||||||||
610,035 | 523,878 | 1,134,692 | 920,169 | 592,814 | 524,657 | 68,157 | 13.0 | % | ||||||||||||||||||||||||||
Financial services revenue | 9,915 | 8,014 | 18,315 | 13,571 | 9,795 | 8,400 | 1,395 | 16.6 | % | |||||||||||||||||||||||||
Total revenues | 619,950 | 531,892 | 1,153,007 | 933,740 | 602,609 | 533,057 | 69,552 | 13.0 | % | |||||||||||||||||||||||||
Homebuilding cost of revenues | ||||||||||||||||||||||||||||||||||
Cost of home sales revenues | (503,928) | (427,197) | (937,685) | (746,780) | (470,526) | (433,757) | (36,769) | 8.5 | % | |||||||||||||||||||||||||
Cost of land sales and other revenues | (877) | (1,040) | (1,491) | (1,917) | (14,167) | (614) | (13,553) | 2,207.3 | % | |||||||||||||||||||||||||
(504,805) | (428,237) | (939,176) | (748,697) | (484,693) | (434,371) | (50,322) | 11.6 | % | ||||||||||||||||||||||||||
Financial services costs | (7,747) | (5,385) | (14,576) | (9,781) | (9,586) | (6,829) | (2,757) | 40.4 | % | |||||||||||||||||||||||||
Selling, general, and administrative | (75,217) | (63,634) | (144,153) | (120,156) | (73,619) | (68,936) | (4,683) | 6.8 | % | |||||||||||||||||||||||||
Loss on debt extinguishment | (10,832) | — | (10,832) | — | ||||||||||||||||||||||||||||||
Acquisition expense | — | (165) | — | (338) | ||||||||||||||||||||||||||||||
Equity in income of unconsolidated subsidiaries | — | 11,681 | — | 14,849 | ||||||||||||||||||||||||||||||
Inventory impairment | (781) | — | (781) | NM | ||||||||||||||||||||||||||||||
Other income (expense) | (519) | 350 | (443) | (8) | 158 | 76 | 82 | 107.9 | % | |||||||||||||||||||||||||
Income before income tax expense | 20,830 | 46,502 | 43,827 | 69,609 | 34,088 | 22,997 | 11,091 | 48.2 | % | |||||||||||||||||||||||||
Income tax expense | (5,335) | (13,309) | (11,215) | (16,397) | (7,962) | (5,880) | (2,082) | 35.4 | % | |||||||||||||||||||||||||
Net income | $ | 15,495 | $ | 33,193 | $ | 32,612 | $ | 53,212 | $ | 26,126 | $ | 17,117 | $ | 9,009 | 52.6 | % | ||||||||||||||||||
Earnings per share: | ||||||||||||||||||||||||||||||||||
Basic | $ | 0.51 | $ | 1.11 | $ | 1.08 | $ | 1.79 | $ | 0.79 | $ | 0.57 | $ | 0.22 | 38.60 | % | ||||||||||||||||||
Diluted | $ | 0.51 | $ | 1.10 | $ | 1.07 | $ | 1.77 | $ | 0.78 | $ | 0.56 | $ | 0.22 | 39.29 | % | ||||||||||||||||||
Adjusted diluted earnings per share(1) | $ | 0.77 | $ | 1.21 | $ | 1.38 | $ | 1.98 | $ | 0.80 | $ | 0.60 | $ | 0.20 | 33.33 | % | ||||||||||||||||||
Other Operating Information (dollars in thousands): | ||||||||||||||||||||||||||||||||||
Number of homes delivered | 1,967 | 1,384 | 3,630 | 2,325 | 1,864 | 1,663 | 201 | 12.1 | % | |||||||||||||||||||||||||
Average sales price of homes delivered | $ | 309.4 | $ | 377.3 | $ | 311.8 | $ | 394.4 | $ | 307.2 | $ | 314.7 | $ | (7.5) | (2.4) | % | ||||||||||||||||||
Homebuilding gross margin percentage | 17.2 | % | 18.2 | % | 17.2 | % | 18.6 | % | ||||||||||||||||||||||||||
Homebuilding gross margin percentage(2) | 17.7 | % | 17.1 | % | 0.6 | % | 3.5 | % | ||||||||||||||||||||||||||
Adjusted homebuilding gross margin excluding interest and purchase price accounting for acquired work in process inventory (1) | 19.6 | % | 22.3 | % | 19.7 | % | 22.7 | % | 20.2 | % | 19.8 | % | 0.4 | % | 1.9 | % | ||||||||||||||||||
Backlog at end of period, number of homes | 2,591 | 3,199 | 2,591 | 3,199 | 2,594 | 2,376 | 218 | 9.2 | % | |||||||||||||||||||||||||
Backlog at end of period, aggregate sales value | $ | 784,152 | $ | 987,253 | $ | 784,152 | $ | 987,253 | $ | 861,116 | $ | 718,443 | $ | 142,673 | 19.9 | % | ||||||||||||||||||
Average sales price of homes in backlog | $ | 302.6 | $ | 308.6 | $ | 302.6 | $ | 308.6 | $ | 332.0 | $ | 302.3 | $ | 29.7 | 9.8 | % | ||||||||||||||||||
Net new home contracts | 2,182 | 1,543 | 4,040 | 2,921 | 2,388 | 1,858 | 530 | 28.5 | % | |||||||||||||||||||||||||
Selling communities at period end | 125 | 120 | 125 | 120 | ||||||||||||||||||||||||||||||
Average selling communities | 124 | 119 | 127 | 119 | ||||||||||||||||||||||||||||||
Selling communities at period end (3) | 126 | 125 | 1 | 0.8 | % | |||||||||||||||||||||||||||||
Average selling communities (3) | 128 | 129 | (1) | (0.8) | % | |||||||||||||||||||||||||||||
Total owned and controlled lot inventory | 37,193 | 38,644 | 37,193 | 38,644 | 35,831 | 37,932 | (2,101) | (5.5) | % | |||||||||||||||||||||||||
Adjusted EBITDA(1) | $ | 49,439 | $ | 70,930 | $ | 89,835 | $ | 113,196 | $ | 51,806 | $ | 40,397 | $ | 11,409 | 28.2 | % | ||||||||||||||||||
Adjusted income before income tax expense(1) | $ | 31,662 | $ | 48,611 | $ | 56,383 | $ | 79,161 | $ | 34,869 | $ | 24,721 | $ | 10,148 | 41.1 | % | ||||||||||||||||||
Adjusted net income(1) | $ | 23,560 | $ | 36,459 | $ | 41,955 | $ | 59,370 | $ | 26,725 | $ | 18,400 | $ | 8,325 | 45.2 | % | ||||||||||||||||||
Net homebuilding debt to net capital (1) | 46.6 | % | 51.8 | % | (5.2) | % | (10.0) | % | ||||||||||||||||||||||||||
NM – Not Meaningful
(1) This is a non-GAAP financial measure and should not be used as a substitute for the Company’s operating results prepared in accordance with GAAP. See the reconciliations to the most comparable GAAP measure and other information under “ - Non-GAAP“Non-GAAP Financial Measures.” An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP.
(2) Homebuilding gross margin percentage is inclusive of a $0.8 million inventory impairment included within inventory impairment and other on our consolidated financial statements.
(3) As Century Complete does not sell homes by community, but through studios and other methods, that segment is excluded from the count of selling communities.
Results of Operations by Segment
(dollars in thousands)
New Homes Delivered | Average Sales Price of Homes Delivered | Home Sales Revenues | Income before Income Tax | New Homes Delivered | Average Sales Price of Homes Delivered | Home Sales Revenues | Income before Income Tax | |||||||||||||||||||||||||||||||||||||||||||
Three Months Ended June 30, | Three Months Ended June 30, | Three Months Ended June 30, | Three Months Ended June 30, | Three Months Ended March 31, | Three Months Ended March 31, | Three Months Ended March 31, | Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||||||||||||
West | 255 | 213 | $ | 529.9 | $ | 606.8 | $ | 135,115 | $ | 129,249 | $ | 9,973 | $ | 12,022 | 233 | 200 | $ | 543.2 | $ | 560.3 | $ | 126,562 | $ | 112,064 | $ | 15,341 | $ | 8,648 | ||||||||||||||||||||||
Mountain | 411 | 421 | $ | 433.9 | $ | 425.4 | 178,351 | 179,099 | 22,526 | 25,319 | 396 | 367 | $ | 395.3 | $ | 432.2 | 156,532 | 158,631 | 18,498 | 19,308 | ||||||||||||||||||||||||||||||
Texas | 213 | 206 | $ | 288.7 | $ | 307.7 | 61,490 | 63,380 | 5,587 | 4,972 | 244 | 166 | $ | 246.5 | $ | 303.7 | 60,139 | 50,418 | 5,484 | 3,749 | ||||||||||||||||||||||||||||||
Southeast | 360 | 379 | $ | 346.2 | $ | 330.3 | 124,617 | 125,191 | 4,649 | 9,149 | 368 | 335 | $ | 357.1 | $ | 336.2 | 131,402 | 112,616 | 8,308 | 5,739 | ||||||||||||||||||||||||||||||
WJH | 728 | 165 | $ | 149.8 | $ | 153.0 | 109,063 | 25,245 | 8,318 | (186) | ||||||||||||||||||||||||||||||||||||||||
Century Complete | 623 | 595 | $ | 157.4 | $ | 150.5 | 98,075 | 89,573 | 780 | 3,973 | ||||||||||||||||||||||||||||||||||||||||
Financial Services | — | — | $ | — | $ | — | — | — | 2,168 | 2,629 | — | — | $ | — | $ | — | — | — | 209 | 1,590 | ||||||||||||||||||||||||||||||
Corporate | — | — | $ | — | $ | — | — | — | (32,391) | (7,403) | — | — | $ | — | $ | — | — | — | (14,532) | (20,010) | ||||||||||||||||||||||||||||||
Total | 1,967 | 1,384 | $ | 309.4 | $ | 377.3 | $ | 608,636 | $ | 522,164 | $ | 20,830 | $ | 46,502 | 1,864 | 1,663 | $ | 307.2 | $ | 314.7 | $ | 572,710 | $ | 523,302 | $ | 34,088 | $ | 22,997 | ||||||||||||||||||||||
New Homes Delivered | Average Sales Price of Homes Delivered | Home Sales Revenues | Income before Income Tax | |||||||||||||||||||||||||||||||||||||||||||||||
Six Months Ended June 30, | Six Months Ended June 30, | Six Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||||||||||||||||||||
West | 455 | 413 | $ | 543.3 | $ | 600.9 | $ | 247,179 | $ | 248,169 | $ | 18,621 | $ | 21,890 | ||||||||||||||||||||||||||||||||||||
Mountain | 778 | 764 | $ | 433.1 | $ | 423.2 | 336,982 | 323,359 | 41,834 | 43,242 | ||||||||||||||||||||||||||||||||||||||||
Texas | 379 | 314 | $ | 295.3 | $ | 322.2 | 111,908 | 101,167 | 9,336 | 6,780 | ||||||||||||||||||||||||||||||||||||||||
Southeast | 695 | 669 | $ | 341.3 | $ | 327.4 | 237,233 | 219,055 | 10,388 | 13,830 | ||||||||||||||||||||||||||||||||||||||||
WJH | 1,323 | 165 | $ | 150.1 | $ | 153.0 | 198,636 | 25,245 | 12,291 | (186) | ||||||||||||||||||||||||||||||||||||||||
Financial Services | — | — | $ | — | $ | — | — | — | 3,739 | 3,790 | ||||||||||||||||||||||||||||||||||||||||
Corporate | — | — | $ | — | $ | — | — | — | (52,382) | (19,737) | ||||||||||||||||||||||||||||||||||||||||
Total | 3,630 | 2,325 | $ | 311.8 | $ | 394.4 | $ | 1,131,938 | $ | 916,995 | $ | 43,827 | $ | 69,609 | ||||||||||||||||||||||||||||||||||||
West
In our West segment, for the three and six months ended June 30, 2019,March 31, 2020, our income before income tax decreasedincreased by $2.0$6.7 million, and $3.3 million, respectively, to $10.0 million and $18.6 million, respectively.$15.3 million. During the three and six months ended June 30, 2019,March 31, 2020, we delivered 255233 homes, and 455 homes, respectively, with an average sales price of $529.9$543.2 thousand, and $543.3 thousand, respectively, and generated $135.1 million and $247.2$126.6 million in home sales revenue, respectively, in the West. Our operating margins in the West were impactedrevenue. Income before income tax increased during the three and six months ended June 30, 2019 byMarch 31, 2020 primarily due to an increase in deliveries of 13% and the geographic mixbenefit of deliveries.non-recurring land sales.
Mountain
In our Mountain segment, for the three and six months ended June 30, 2019,March 31, 2020, our income before income tax decreased by $2.8$0.8 million, and $1.4 million, respectively, to $22.5 million and $41.8 million, respectively.$18.5 million. The decrease of income before income tax for the three and six months ended June 30, 2019March 31, 2020 is primarily related to the geographic mix of deliveries and increased incentives.decrease in home sales revenue which was driven by a decrease in our average sales price.
Texas
In our Texas segment, for the three and six months ended June 30, 2019,March 31, 2020, our income before income tax increased by $0.6$1.7 million, and $2.6to $5.5 million, respectively, to $5.6 million and $9.3 million, respectively, as compared $5.0 million and $6.8$3.8 million for the same periodsperiod in 2018.2019. The increase in income before income tax is primarily related to increasesa 47% increase in the number of homes delivered during the three and six months ended June 30, 2019March 31, 2020 as compared to the same periodsperiod in 2018,2019, which was partially offset by a decrease in the average sales price as we continued toour shift our focus towards first time homebuyers.
Southeast
In our Southeast segment, for the three and six months ended June 30, 2019,March 31, 2020, our income before income tax decreasedincreased by $4.5$2.6 million, and $3.4to $8.3 million, respectively, to $4.6 million and $10.4 million, respectively, as compared to $9.1 million and $13.8$5.7 million for the same periodsperiod in 2018.2019. The decreaseincrease in income before income tax for the three and six months ended June 30, 2019March 31, 2020 is primarily related to increasesthe increase in our incentives across our markets.
Wade Jurney HomesCentury Complete
On June 14, 2018, we acquired the remaining 50% ownership interest in WJH for $37.5 million. For the three and six months ended June 30, 2019,March 31, 2020, we delivered 728623 homes, and 1,323 homes, respectively, with an average price of $149.8$157.4 thousand, and $150.1 thousand, respectively, and generated $109.1 million and $198.6$98.1 million in home sales revenues in our WJH segment, respectively.revenues. Our income before income tax for the three and six months ended June 30, 2019March 31, 2020 was $8.3$0.8 million, as compared to $4.0 million for the same period in 2019. The decrease in income before income tax is primarily attributable to increase in certain fixed costs and $12.3$0.8 million respectively.in one-time inventory impairment charges during the three months ended March 31, 2020.
Financial Services
Our indirect wholly-ownedwholly 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 home buyers have been identified as our Financial Services segment. Substantially all of the loans we originate are sold in the secondary market within a short period of time after origination, generally within 30 days. During the three and six months ended June 30, 2019,March 31, 2020, income before income tax remained relatively consistentdecreased $1.4 million to $0.2 million compared to the same periodsperiod during 2018.2019. The decrease was primarily the result of $3.0 million non-cash, unrealized loss related to our hedging activity, partially offset by a $1.4 million overall increase in financial services revenue.
Corporate
During the three and six months ended June 30, 2019,March 31, 2020, our Corporate segment generated losses of $32.4$14.5 million, and $52.4 million, respectively, as compared to losses of $7.4 million and $19.7$20.0 million for the same periodsperiod in 2018.2019. The increasedecrease in expenses during the three months ended June 30, 2019March 31, 2020 was primarily attributed to the following: (1) a loss on debt extinguishment$4.6 million decrease in salaries and wages related to lower bonus and performance share expense accruals, and (2) a decrease in legal costs of $10.8 million during the current period, (2) prior period income from equity in unconsolidated subsidiaries of $11.7 million, and (3) nominal increases in numerous items associated with our increased scale. The increase in expenses during the six months ended June 30, 2019 was primarily attributed to the following: (1) a loss on debt extinguishment of $10.8 million during the current period, (2) prior period income from equity in unconsolidated subsidiaries of $14.8 million and (3) nominal increases in numerous items associated with our increased scale.$0.8 million.
Homebuilding Gross Margin
(dollars in thousands)
Homebuilding gross margin represents home sales revenues less cost of home sales revenues. Our homebuilding gross margin percentage, which represents homebuilding gross margin divided by home sales revenues, decreasedincreased during the three and six months ended June 30, 2019March 31, 2020 to 17.2%, 17.7% as compared to 18.2% and 18.6%, respectively,17.1% for the same periodsperiod in 2018. The decreases are2019, which was primarily related to the geographic mixdriven by a 0.6% decrease in cost of closings between periods and higher incentives throughout our markets.home sales revenues.
In the following table, we calculate our homebuilding gross margin, as adjusted to exclude inventory impairment, interest in cost of home sales revenues, and purchase price accounting for acquired work in process inventory.
Three Months Ended June 30, | ||||||||||||||||||||||||
Three Months Ended March 31, | ||||||||||||||||||||||||
2019 | % | 2018 | % | 2020 | % | 2019 | % | |||||||||||||||||
Home sales revenues | $ | 608,636 | 100.0 | % | $ | 522,164 | 100.0 | % | $ | 572,710 | 100.0 | % | $ | 523,302 | 100.0 | % | ||||||||
Cost of home sales revenues | (503,928) | (82.8) | % | (427,197) | (81.8) | % | (470,526) | (82.2) | % | (433,757) | (82.9) | % | ||||||||||||
Inventory impairment | (781) | (0.1) | % | — | — | % | ||||||||||||||||||
Gross margin from home sales | 104,708 | 17.2 | % | 94,967 | 18.2 | % | 101,403 | 17.7 | % | 89,545 | 17.1 | % | ||||||||||||
Add: Inventory impairment | 781 | 0.1 | % | — | — | % | ||||||||||||||||||
Add: Interest in cost of home sales revenues | 14,655 | 2.4 | % | 12,284 | 2.4 | % | 13,685 | 2.4 | % | 12,587 | 2.4 | % | ||||||||||||
Adjusted homebuilding gross margin excluding interest | 119,363 | 19.6 | % | 107,251 | 20.5 | % | ||||||||||||||||||
Adjusted homebuilding gross margin excluding interest and inventory impairment | 115,869 | 20.2 | % | 102,132 | 19.5 | % | ||||||||||||||||||
Add: Purchase price accounting for acquired work in process inventory | — | — | % | 9,163 | 1.8 | % | — | — | % | 1,724 | 0.3 | % | ||||||||||||
Adjusted homebuilding gross margin excluding interest and purchase price accounting for acquired work in process inventory | $ | 119,363 | 19.6 | % | $ | 116,414 | 22.3 | % | ||||||||||||||||
Adjusted homebuilding gross margin excluding interest, inventory impairment and purchase price accounting for acquired work in process inventory | $ | 115,869 | 20.2 | % | $ | 103,856 | 19.8 | % | ||||||||||||||||
Six Months Ended June 30, | ||||||||||||||||||||||||
2019 | % | 2018 | % | |||||||||||||||||||||
Home sales revenues | $ | 1,131,938 | 100.0 | % | $ | 916,995 | 100.0 | % | ||||||||||||||||
Cost of home sales revenues | (937,685) | (82.8) | % | (746,780) | (81.4) | % | ||||||||||||||||||
Gross margin from home sales | 194,253 | 17.2 | % | 170,215 | 18.6 | % | ||||||||||||||||||
Add: Interest in cost of home sales revenues | 27,241 | 2.4 | % | 21,243 | 2.3 | % | ||||||||||||||||||
Adjusted homebuilding gross margin excluding interest | 221,494 | 19.6 | % | 191,458 | 20.9 | % | ||||||||||||||||||
Add: Purchase price accounting for acquired work in process inventory | 1,724 | 0.2 | % | 16,433 | 1.8 | % | ||||||||||||||||||
Adjusted homebuilding gross margin excluding interest and purchase price accounting for acquired work in process inventory | $ | 223,218 | 19.7 | % | $ | 207,891 | 22.7 | % | ||||||||||||||||
(1)This non-GAAP financial measure should not be used as a substitute for the Company’s operating results in accordance with GAAP. See the reconciliations to the most comparable GAAP measure and other information under “—Non-GAAP Financial Measures.” An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP.
For the three and six months ended June 30, 2019,March 31, 2020, excluding impairment, interest in cost of home sales revenues and purchase price accounting for acquired work in process inventory, our adjusted homebuilding gross margin percentage was 19.6% and 19.7%, respectively,20.2% as compared to 22.3%, and 22.7%, respectively,19.8% for the same periodsperiod in 2018. The decreases primarily related to the geographic mix of closings between periods, continued cost pressure, and higher incentives throughout our markets.2019. We believe the above information is meaningful as it isolates the impact that inventory impairment, indebtedness and acquisitions have on our homebuilding gross margin and allows for comparability of our homebuilding gross margins to previous periods and our competitors.
Selling, General and Administrative Expense
(dollars in thousands) | ||||||||||||||||||||||||||||||
Three Months Ended June 30, | Increase | Three Months Ended March 31, | Increase | |||||||||||||||||||||||||||
2019 | 2018 | Amount | % | 2020 | 2019 | Amount | % | |||||||||||||||||||||||
Selling, general and administrative | $ | (75,217) | $ | (63,634) | $ | (11,583) | 18.2 | % | $ | (73,619) | $ | (68,936) | $ | (4,683) | 6.8 | % | ||||||||||||||
As a percentage of home sales revenue | 12.4 | % | 12.2 | % | (12.9) | % | (13.2) | % | ||||||||||||||||||||||
Six Months Ended June 30, | Increase | |||||||||||||||||||||||||||||
2019 | 2018 | Amount | % | |||||||||||||||||||||||||||
Selling, general and administrative | $ | (144,153) | $ | (120,156) | $ | (23,997) | 20.0 | % | ||||||||||||||||||||||
As a percentage of homes sales revenue | 12.7 | % | 13.1 | % | ||||||||||||||||||||||||||
Our selling, general and administrative expense increased $11.6$4.7 million for the three months ended June 30, 2019March 31, 2020 as compared to the same period in 2018.2019. The increase was primarily attributable to the following: (1) an increase of $3.9$3.1 million in commission expense resulting from a 16.6%due to the 9.4% increase in home sales revenues, and our acquisition of WJH, (2) an increase of $3.4$0.7 million in our compensation-relatedfranchise tax expenses, including incentive compensation associated with higher headcount to support our growth, and (3) an increase of $0.7
million in advertisinglegal costs, and (4) nominal increases in numerous items associated with our increased scale throughout selling, general and administrative to support our growth as well as settlements during the period.expense.
Our selling, general and administrative expense increased $24.0 million for the six months ended June 30, 2019 as compared to the same period in 2018. The increase was primarily attributable to the following: (1) an increase
Income Tax Expense
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 20192020 estimated annual effective tax rate of 27.1%23.7% is driven by our blended federal and state statutory rate of 24.9%25.4%, and certain other permanent differences between GAAP and tax which increaseddecreased our rate by 2.2%1.7%.
For the three months ended June 30, 2019,March 31, 2020, our estimated annual rate of 27.1%23.7% was impacted by discrete items which had a net impact of decreasing our rate by 1.7%0.3%, including excess tax benefits for vested stock-based compensation.
For the three months ended June 30,March 31, 2020 and 2019, and 2018, we recorded income tax expense of $5.3$8.0 million and $13.3 million, respectively.
For the six months ended June 30, 2019, our estimated annual rate of 27.1% was impacted by discrete items which had a net impact of decreasing our rate by 1.6%, including excess tax benefits for vested stock-based compensation. For the six months ended June 30, 2019 and 2018, we recorded income tax expense of $11.2 million and $16.4$5.9 million, respectively.
Segment Assets
(Dollars in thousands)
June 30, | December 31, | Increase (Decrease) | March 31, | December 31, | Increase (Decrease) | |||||||||||||||||||
2019 | 2018 | Amount | Change | 2020 | 2019 | Amount | % Change | |||||||||||||||||
West | $ | 570,149 | $ | 502,381 | $ | 67,768 | 13.5 | % | $ | 634,491 | $ | 610,248 | $ | 24,243 | 4.0 | % | ||||||||
Mountain | 644,291 | 621,757 | 22,534 | 3.6 | % | 707,925 | 635,201 | 72,724 | 11.4 | % | ||||||||||||||
Texas | 225,283 | 209,550 | 15,733 | 7.5 | % | 233,247 | 232,887 | 360 | 0.2 | % | ||||||||||||||
Southeast | 446,148 | 448,681 | (2,533) | (0.6) | % | 425,309 | 441,818 | (16,509) | (3.7) | % | ||||||||||||||
WJH | 269,115 | 204,925 | 64,190 | 31.3 | % | |||||||||||||||||||
Century Complete | 233,394 | 244,827 | (11,433) | (4.7) | % | |||||||||||||||||||
Financial Services | 160,709 | 146,710 | 13,999 | 9.5 | % | 223,109 | 254,282 | (31,173) | (12.3) | % | ||||||||||||||
Corporate | 94,678 | 120,251 | (25,573) | (21.3) | % | 452,963 | 80,704 | 372,259 | 461.3 | % | ||||||||||||||
Total assets | $ | 2,410,373 | $ | 2,254,255 | $ | 156,118 | 6.9 | % | $ | 2,910,438 | $ | 2,499,967 | $ | 410,471 | 16.4 | % | ||||||||
Lots owned and | June 30, 2019 | December 31, 2018 | % Change | March 31, 2020 | December 31, 2019 | % Change | ||||||||||||||||||||||||||||||||||||
controlled | Owned | Controlled | Total | Owned | Controlled | Total | Owned | Controlled | Total | Owned | Controlled | Total | Owned | Controlled | Total | Owned | Controlled | Total | ||||||||||||||||||||||||
West | 3,310 | 1,846 | 5,156 | 3,457 | 1,790 | 5,247 | (4.3) | % | 3.1 | % | (1.7) | % | 3,243 | 1,340 | 4,583 | 3,133 | 1,413 | 4,546 | 3.5 | % | (5.2) | % | 0.8 | % | ||||||||||||||||||
Mountain | 5,011 | 5,559 | 10,570 | 5,335 | 5,641 | 10,976 | (6.1) | % | (1.5) | % | (3.7) | % | 6,983 | 4,552 | 11,535 | 4,771 | 7,949 | 12,720 | 46.4 | % | (42.7) | % | (9.3) | % | ||||||||||||||||||
Texas | 3,829 | 1,384 | 5,213 | 3,943 | 2,616 | 6,559 | (2.9) | % | (47.1) | % | (20.5) | % | 3,066 | 2,075 | 5,141 | 3,326 | 2,278 | 5,604 | (7.8) | % | (8.9) | % | (8.3) | % | ||||||||||||||||||
Southeast | 4,730 | 2,566 | 7,296 | 4,828 | 2,808 | 7,636 | (2.0) | % | (8.6) | % | (4.5) | % | 4,200 | 3,062 | 7,262 | 4,160 | 3,827 | 7,987 | 1.0 | % | (20.0) | % | (9.1) | % | ||||||||||||||||||
Wade Jurney Homes | 3,325 | 5,633 | 8,958 | 3,447 | 4,054 | 7,501 | (3.5) | % | 38.9 | % | 19.4 | % | ||||||||||||||||||||||||||||||
Century Complete | 3,360 | 3,950 | 7,310 | 3,324 | 4,761 | 8,085 | 1.1 | % | (17.0) | % | (9.6) | % | ||||||||||||||||||||||||||||||
Total | 20,205 | 16,988 | 37,193 | 21,010 | 16,909 | 37,919 | (3.8) | % | 0.5 | % | (1.9) | % | 20,852 | 14,979 | 35,831 | 18,714 | 20,228 | 38,942 | 11.4 | % | (25.9) | % | (8.0) | % | ||||||||||||||||||
Of our total lots owned and controlled as of June 30, 2019, 54.3%March 31, 2020, 58.2% were owned and 45.7%41.8% were controlled, as compared to 55.4%48.1% owned and 44.6%51.2% controlled as of December 31, 2018.2019.
Total assets increased by $156.1$410.7 million, or 6.9%16.4%, to $2.4$2.9 billion at June 30, 2019March 31, 2020 as compared to December 31, 2018.2019. The increase is driven by investments in inventory during the period.period in addition to a $395.5 million increase in cash and cash equivalents.
Other Homebuilding Operating Data
Three Months Ended | Six Months Ended | Three Months Ended | ||||||||||||||||||||||||||
Net new home contracts | June 30, | Increase | June 30, | Increase (Decrease) | March 31, | Increase | ||||||||||||||||||||||
2019 | 2018 | Amount | % Change | 2019 | 2018 | Amount | % Change | 2020 | 2019 | Amount | % Change | |||||||||||||||||
West | 329 | 186 | 143 | 76.9 | % | 532 | 402 | 130 | 32.3 | % | 336 | 203 | 133 | 65.5 | % | |||||||||||||
Mountain | 417 | 460 | (43) | (9.3) | % | 871 | 1,005 | (134) | (13.3) | % | 614 | 454 | 160 | 35.2 | % | |||||||||||||
Texas | 244 | 194 | 50 | 25.8 | % | 473 | 343 | 130 | 37.9 | % | 333 | 229 | 104 | 45.4 | % | |||||||||||||
Southeast | 411 | 559 | (148) | (26.5) | % | 756 | 1,027 | (271) | (26.4) | % | 516 | 345 | 171 | 49.6 | % | |||||||||||||
WJH | 781 | 144 | 637 | NM | 1,408 | 144 | 1,264 | NM | ||||||||||||||||||||
Century Complete | 589 | 627 | (38) | (6.1) | % | |||||||||||||||||||||||
Total | 2,182 | 1,543 | 639 | 41.4 | % | 4,040 | 2,921 | 1,119 | 38.3 | % | 2,388 | 1,858 | 530 | 28.5 | % | |||||||||||||
NM – Not Meaningful
Net new home contracts (new home contracts net of cancellations) for the three months ended June 30, 2019March 31, 2020 increased by 639530 homes, or 41.4%28.5%, to 2,182,2,388, compared to 1,5431,858 for the same period in 2018. Net new home contracts for the six months ended June 30, 2019 increased by 1,119 homes, or 38.3%, to 4,040, compared to 2,921 for the same period in 2018.2019. The increase in our net new home contracts during these periods was primarily driven by stronger sales in our acquisition of WJH.West, Mountain, Texas, and Southeast regions.
Our overall monthly “absorption rate” (the rate at which home orders are contracted, net of cancelations) for the three and six months ended June 30, 2019March 31, 2020 by segment are included in the tables below:
Three Months Ended June 30, | Increase (Decrease) | Three Months Ended March 31, | Increase | |||||||||||||||
2019 | 2018 | Amount | % Change | 2020 | 2019 | Amount | % Change | |||||||||||
West | 5.5 | 5.2 | 0.3 | 5.8 | % | 5.3 | 3.2 | 2.1 | 65.6 | % | ||||||||
Mountain | 3.3 | 4.9 | (1.6) | (32.7) | % | 5.4 | 3.5 | 1.9 | 54.3 | % | ||||||||
Texas | 3.9 | 2.7 | 1.2 | 44.4 | % | 4.3 | 3.8 | 0.5 | 13.2 | % | ||||||||
Southeast | 3.3 | 3.5 | (0.2) | (5.7) | % | 4.2 | 2.8 | 1.4 | 50.0 | % | ||||||||
WJH | N/A | N/A | N/A | N/A | ||||||||||||||
Century Complete | NM | NM | NM | NM | % | |||||||||||||
Total | 3.7 | 3.9 | (0.2) | (5.1) | % | 4.8 | 3.3 | 1.5 | 45.5 | % | ||||||||
Six Months Ended June 30, | Increase | |||||||||||||||||
2019 | 2018 | Amount | % Change | |||||||||||||||
West | 4.4 | 5.6 | (1.2) | (21.4) | % | |||||||||||||
Mountain | 3.5 | 5.4 | (1.9) | (35.2) | % | |||||||||||||
Texas | 3.8 | 2.4 | 1.4 | 58.3 | % | |||||||||||||
Southeast | 3.0 | 3.2 | (0.2) | (6.3) | % | |||||||||||||
WJH | N/A | N/A | N/A | N/A | ||||||||||||||
Total | 3.5 | 3.9 | (0.4) | (10.3) | % | |||||||||||||
N/ANM – Not ApplicableMeaningful
Our absorption rates decreasedincreased by 5.1%45.5% to 3.74.8 per month during the three months ended June 30, 2019,March 31, 2020, as compared to the same period in 2018. Our absorptions moderated primarily due2019. The increase in absorption rate is attributable to the timing of community openings instrong homebuilding market and economic trends across our Mountain region.markets that we experienced during the three months ended March 31, 2020 prior to the COVID-19 pandemic.
Our absorption rates decreased by 10.3% to 3.5 per month during the six months ended June 30, 2019, as compared to the same period in 2018. Our absorptions moderated primarily due to the timing of community openings in our Mountain region.
Selling communities at period end | As of June 30, | Increase/(Decrease) | As of March 31, | Increase/(Decrease) | ||||||||||||||||
2019 | 2018 | Amount | % Change | 2020 | 2019 | Amount | % Change | |||||||||||||
West | 20 | 12 | 8 | 66.7 | % | 21 | 21 | — | — | % | ||||||||||
Mountain | 42 | 31 | 11 | 35.5 | % | 38 | 43 | (5) | (11.6) | % | ||||||||||
Texas | 21 | 24 | (3) | (12.5) | % | 26 | 20 | 6 | 30.0 | % | ||||||||||
Southeast | 42 | 53 | (11) | (20.8) | % | 41 | 41 | — | — | % | ||||||||||
Wade Jurney Homes | N/A | N/A | N/A | N/A | ||||||||||||||||
Century Complete | N/A | N/A | N/A | N/A | ||||||||||||||||
Total | 125 | 120 | 5 | 4.2 | % | 126 | 125 | 1 | 0.8 | % | ||||||||||
N/A – Not Applicable
Our selling communities increased to 125128 communities at June 30, 2019March 31, 2020 as compared to 120125 at June 30, 2018.March 31, 2019. As WJHCentury Complete does not sell homes by community, but through studios and other methods, there are no communities or absorptions presented for that segment.
Backlog
(Dollars in thousands)
As of June 30, | As of March 31, | |||||||||||||||||||||||||||||||||||||||||||||||||
2019 | 2018 | % Change | 2020 | 2019 | % Change | |||||||||||||||||||||||||||||||||||||||||||||
Homes | Dollar Value | Average Sales Price | Homes | Dollar Value | Average Sales Price | Homes | Dollar Value | Average Sales Price | Homes | Dollar Value | Average Sales Price | Homes | Dollar Value | Average Sales Price | Homes | Dollar Value | Average Sales Price | |||||||||||||||||||||||||||||||||
West | 295 | $ | 146,071 | $ | 495.2 | 259 | $ | 150,619 | $ | 581.5 | 13.9 | % | (3.0) | % | (14.8) | % | 305 | $ | 158,853 | $ | 520.8 | 221 | $ | 113,639 | $ | 514.2 | 38.0 | % | 39.8 | % | 1.3 | % | ||||||||||||||||||
Mountain | 494 | 214,673 | 434.6 | 696 | 307,825 | 442.1 | (29.1) | % | (30.3) | % | (1.7) | % | 591 | 251,199 | $ | 425.0 | 488 | 215,296 | $ | 440.9 | 21.1 | % | 16.7 | % | (3.6) | % | ||||||||||||||||||||||||
Texas | 275 | 83,172 | 302.4 | 244 | 88,458 | 362.5 | 12.7 | % | (6.0) | % | (16.6) | % | 364 | 98,767 | $ | 271.3 | 244 | 82,934 | $ | 339.9 | 49.2 | % | 19.1 | % | (20.2) | % | ||||||||||||||||||||||||
Southeast | 531 | 187,306 | 352.7 | 738 | 242,378 | 328.4 | (28.0) | % | (22.7) | % | 7.4 | % | 661 | 239,012 | $ | 361.6 | 480 | 160,833 | $ | 335.1 | 37.7 | % | 48.6 | % | 7.9 | % | ||||||||||||||||||||||||
Wade Jurney Homes | 996 | 152,930 | 153.5 | 1,262 | 197,973 | 156.9 | (21.1) | % | (22.8) | % | (2.2) | % | ||||||||||||||||||||||||||||||||||||||
Century Complete | 673 | 113,285 | $ | 168.3 | 943 | 145,743 | $ | 154.6 | (28.6) | % | (22.3) | % | 8.9 | % | ||||||||||||||||||||||||||||||||||||
Total / Weighted Average | 2,591 | $ | 784,152 | $ | 302.6 | 3,199 | $ | 987,253 | $ | 308.6 | (19.0) | % | (20.6) | % | (1.9) | % | 2,594 | $ | 861,116 | $ | 332.0 | 2,376 | $ | 718,443 | $ | 302.3 | 9.2 | % | 19.9 | % | 9.8 | % | ||||||||||||||||||
Backlog reflects the number of homes, net of actual cancellations experienced during the period, for which we have entered into a sales contract with a customer but for which we have not yet delivered the home. At June 30, 2019,March 31, 2020, we had 2,5912,594 homes in backlog with a total value of $784.2$861.1 million, which represents a decreasean increase of 19.0%9.2% and 20.6%19.9%, respectively, as compared to June 30, 2018.March 31, 2019. The decreaseincrease in backlog dollar value is primarily attributable to the increases in backlog units and a decrease9.8% increase in the number of homes in backlog.backlog average sales price.
Supplemental Pro Forma Information
The supplemental pro forma information below presents pro forma combined financial and operating data reflecting the WJH acquisition as if it had occurred on January 1, 2018. The selected condensed combined pro forma data combines the historical home sales revenues, net new home contracts, new homes delivered and average sales price of homes delivered of Century and WJH. The pro forma information is for informational purposes only and supplements our condensed consolidated financial statements prepared in accordance with US GAAP. We believe that the pro forma information is useful as it provides additional information given the significant impact of the acquisition, and a reflection of how the combined business performed year over year that is not readily discernible from the actual year over year comparison. The pro forma information below does not purport to reflect the results of operations that would have occurred if WJH had been acquired on January 1, 2018, nor does the pro forma information purport to represent the results of operations of the Company for any future dates or periods.
(dollars in thousands) | Three Months Ended June 30, 2018 | ||||||||
Pro Forma Home sales revenues | Pro Forma Net new home contracts | Pro Forma Deliveries | Pro Forma Average sales price | ||||||
Pro forma Century Communities | $ | 594,392 | 2,119 | 1,860 | $ | 319.6 | |||
Six Months Ended June 30, 2018 | |||||||||
Pro Forma Home sales revenues | Pro Forma Net new home contracts | Pro Forma Deliveries | Pro Forma Average sales price | ||||||
Pro forma Century Communities | $ | 1,067,386 | 4,335 | 3,318 | $ | 321.7 | |||
Critical Accounting Policies
Critical accounting estimates are those that we believe are both significant and require us to make difficult, subjective or complex judgments, often because we need to estimate the effect of inherently uncertain matters. We base our estimates and judgments on historical experiences and various other factors that we believe to be appropriate under the circumstances. Actual results may differ from these estimates, and the estimates included in our financial statements might be impacted if we used different assumptions or conditions. A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the fiscal year ended December 31,
2018, 2019, filed with the SEC on February 13, 2019,7, 2020, in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies.”
Liquidity and Capital Resources
Overview
Our principal uses of capital for the three and six months ended June 30, 2019March 31, 2020 were our land purchases, land development, home construction, and the payment of routine liabilities. We use funds generated by operations, available borrowings under our revolving line of credit, facility, and from time to time proceeds from sales of common stock, including under our current at-the-market facility, and debt securities to fund our short term working capital obligations and fund our purchases of land, as well as land development and home construction activities.
Cash flows for each of our communities depend on the stage in the development cycle and can differ substantially from reported earnings. Early stages of development or expansion require significant cash outlays for land acquisitions, entitlements and other approvals, and construction of model homes, roads, utilities, general landscaping and other amenities. Because these costs are a component of our inventory and are not recognized in our statements of operations until a home closes, we incur significant cash outlays prior to our recognition of earnings. In the later stages of community development, cash inflows may significantly exceed earnings reported for financial statement purposes, as the cash outflow associated with home and land construction was previously incurred. From a liquidity standpoint,
In light of the current COVID-19 pandemic, we have taken certain measures to ensure we are actively acquiringpositioned with cash flow and developing lotsliquidity to endure an extended period of lower demand, should it arise. Specifically, we have reduced starting construction on unsold homes in our markets to maintainCentury Complete segment, and growwith few exceptions eliminated them in our lot supply and active selling communities. As we continue to expand our business, we expect that our cash outlays for land purchases and land development to grow our lot inventoryCentury Communities brand. We will continue to exceedstart construction on pre-sold homes where we have appropriate deposits and loan approvals. Additionally, we have terminated a number of pending land acquisitions and we have successfully extended expected closing dates. We have also slowed or stopped our cash generated by operations.land
development activities and instituted a variety of actions designed to reduce our operating expenses including a reduction in the size of our workforce through a targeted layoff in April 2020.
Our Financial Services operations use funds generated from operations, and availability under our mortgage repurchase facilities to finance operations including originations of mortgage loans to our homebuyers.
Under our shelf registration statement, which we filed with the SEC in July 2018 and was automatically effective upon filing, we have the ability to access the debt and equity capital markets in an aggregate offering amount of upregistered transactions from time to $869 million,time and as needed as part of our ongoing financing strategy and subject to market conditions. Of this amount,In November 2019, we filed a prospectus supplement to offer up to $100 million may be offeredunder the shelf registration statement under our at-the-market distribution agreement referred to below.facility described below.
We believe that we will be able to fund our current and foreseeable liquidity needs with our cash on hand, cash generated from operations, and cash expected to be available from our revolving line of credit facility or through accessing debt or equity capital, as needed.
Issuance of 6.750% Senior Notes Due 2027
In May 2019, the Company completed a private offering of $500.0 million aggregate principal amountneeded, although no assurance can be provided that such additional debt or equity capital will be available or on acceptable terms, especially in light of the Company’s 6.750% Senior Notes due 2027 (the “2027 Notes”) in reliance on Rule 144A and Regulation S under the Securities Act of 1933. The 2027 Notes were issued under the Indenture, dated as of May 23, 2019, among the Company, our subsidiary guarantors party thereto, and U.S. Bank National Association, as trustee (which we refer to as the “May 2019 Indenture,” as it may be supplemented or amended from time to time). The 2027 Notes were issued at 100% of their principal amount and we received net proceeds of $494.3 million. The aggregate principal balance of the 2027 Notes is due June 2027, with interest only payments due semi-annually in June and December of each year, beginning on December 1, 2019.current COVID-19 pandemic.
In connection with this issuance, the Company deferred $5.7 million of issuance costs, which is presented in the notes payable line item of the condensed consolidated balance sheet.
Extinguishment of 6.875% Senior Notes Due 2022
During the three months ended June 30, 2019, the Company extinguished $385.0 million in outstanding principal of our 6.875% Senior Notes due 2022 (the “2022 Notes”). The extinguishment was the result of two separate transactions whereby a tender offer validly tendered $189.3 million of the 2022 Notes on March 23, 2019 and the remaining $195.7 million was redeemed in accordance with the Indenture agreement on June 10, 2019. The transaction resulted in a loss of $10.8 million, which is presented in loss on debt extinguishment in the consolidated statement of operations.
Revolving Line of Credit Facility
We are party to an Amended and Restated Credit Agreement with Texas Capital Bank, National Association, as Administrative Agent and L/C Issuer, the lenders party thereto and certain of our subsidiaries, which, as amended most recently on February 12,December 13, 2019, provides us with a revolving line of credit of up to $640.0 million, and unless terminated earlier, will mature on April 30, 2022.2023. Under the terms
of the Amended and Restated Credit Agreement, we may request a twelve-month extension of the maturity date. Our obligations under the Amended and Restated Credit Agreement are guaranteed by certain of our subsidiaries. The Amended and Restated Credit Agreement contains customary affirmative and negative covenants (including limitations on our ability to grant liens, incur additional debt, pay dividends, redeem our common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions), as well as customary events of default. 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 June 30, 2019,March 31, 2020, we had $212.0$521.9 million outstanding under the credit facility with $118.1 million in availability, and were in compliance with all covenants. Given the uncertainty surrounding the COVID-19 pandemic, the Company increased its borrowing during the first quarter of 2020 as a proactive measure in order to expand financial flexibility during this period of potential business disruption.
At
Mortgage Repurchase Facilities – Financial Services
On May 4, 2018, September 14, 2018, and August 1, 2019, Inspire entered into mortgage warehouse facilities, with Comerica Bank, J.P. Morgan, and Wells Fargo, respectively. The mortgage warehouse lines of credit (which we refer to as the Market“repurchase facilities”) provide Inspire with uncommitted repurchase facilities of up to an aggregate of $225 million, secured by the mortgage loans financed thereunder. 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.
At-the-Market Offerings
On July 3, 2018,November 27, 2019, we entered into a Distribution Agreement with J.P. Morgan Securities LLC, BofA Securities, Inc., Citigroup Global Markets Inc., and Merrill Lynch, Pierce, Fenner & Smith Incorporated,Fifth Third Securities, Inc. (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. 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 $69.9all $100 million available for sale as of June 30, 2019. During the three and six months ended June 30, 2019, we sold and issued an aggregate of 0.1 millionMarch 31, 2020. We did not sell or issue any shares of our common stock under the 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.Duringduring the three and six months ended June 30, 2018, we sold and issued an aggregate of 0.3 million and 0.5 million shares of our common stock under a prior Distribution Agreement, which provided proceeds of $9.6 million and $14.6 million, respectively, and, in connection with such sales, paid total commissions and fees toMarch 31, 2020 or the Sales Agents of $0.2 million and $0.3 million respectively. three months ended March 31, 2019. 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 agreementagreement.
Mortgage Repurchase Facility and Mortgage Warehouse Line of Credit – Financial Services
On May 4, 2018 and September 14, 2018 Inspire entered into mortgage warehouse facilities, with Comerica Bank and J.P. Morgan, respectively. The mortgage warehouse lines of credit (which we refer to as the “Repurchase Facilities”) provide Inspire with uncommitted repurchase facilities of up to $160 million, secured by the mortgage loans financed thereunder. 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 June 30, 2019, we had $100.7 million outstanding under these Repurchase Facilities and were in compliance with all covenants thereunder. No assurance can be provided, however, that we will remain in compliance with the covenants or have continued access to these facilities or substitute or replacement facilities in an amount sufficient to fund our mortgage lending business.
Letters of Credit and Performance Bonds
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 June 30, 2019March 31, 2020, and December 31, 2018,2019, we had $294.3$343.7 million and $289.8$344.1 million, respectively, in letters of credit and performance bonds issued and outstanding. Although significant development and construction activities have been completed related to the improvements at these sites, the letters of credit and performance bonds are not generally released until all development and construction activities are completed.
Debt
Our outstanding debt obligations included the following as of June 30, 2019March 31, 2020 and December 31, 20182019 (in thousands):
June 30, | December 31, | |||||
2019 | 2018 | |||||
6.750% senior notes, due May 2027(1) | $ | 494,329 | $ | — | ||
5.875% senior notes, due July 2025(1) | 395,767 | 395,415 | ||||
6.875% senior notes, due May 2022(1) | — | 380,567 | ||||
Insurance premium notes and other financing obligations | 510 | 8,795 | ||||
Senior notes payable | 890,606 | 784,777 | ||||
Revolving line of credit, due April 2022 | 212,000 | 202,500 | ||||
Mortgage repurchase facility | 100,745 | 104,555 | ||||
Total debt | $ | 1,203,351 | $ | 1,091,832 | ||
March 31, | December 31, | |||||
2020 | 2019 | |||||
6.750% senior notes, due May 2027(1) | $ | 494,499 | $ | 494,307 | ||
5.875% senior notes, due July 2025(1) | 396,296 | 396,120 | ||||
Other financing obligations | 8,371 | 6,277 | ||||
Notes payable | 899,166 | 896,704 | ||||
Revolving line of credit, due April 2023 | 521,900 | 68,700 | ||||
Mortgage repurchase facilities | 133,794 | 174,095 | ||||
Total debt | $ | 1,554,860 | $ | 1,139,499 | ||
(1) The carrying value of senior notes reflects the impact of premiums, discounts, and issuance costs that are amortized to interest cost over the respective terms of the senior notes.
A summary of our debt obligations is included in Note 1211 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2018,2019, filed with the SEC on February 13, 2019. For further information regarding our second quarter 2019 issuance of the 6.750% Senior Notes due 2027 and the extinguishment of our 6.875% Senior Notes due 2022, refer to Note 9 - Debt in Part I, Item 1 of this report.7, 2020.
Stock Repurchase Program
On November 6, 2018, our Board of Directors authorized a stock repurchase program, under which we may repurchase up to 4,500,000 shares of our outstanding common stock. The shares may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal securities laws. The actual manner, timing, amount and value of repurchases under the stock repurchase program will be determined by management at its discretion and will depend on a number of factors, including the market price of our common stock, trading volume, other capital management objectives and opportunities, applicable legal requirements, and general market and economic conditions.
We intend to finance any stock repurchases through available cash and our revolving credit facility. Repurchases also may be made under a trading plan under Rule 10b5-1 under the Securities Exchange Act of 1934, which would permit shares to be repurchased when we otherwise may be precluded from doing so because of self-imposed trading blackout periods or other regulatory restrictions. There is no guarantee as to the number of shares that will be repurchased, and theThe stock repurchase program has no expiration date and may be extended, suspended or discontinued by our Board of Directors at any time without notice at our discretion. All shares of common stock repurchased under the program will be cancelled and returned to the status of authorized but unissued shares of common stock.
No shares were repurchased during the three months ended March 31, 2020. During the sixthree months ended June 30,March 31, 2019, an aggregate of 83,000 shares were repurchased for a total purchase price of approximately $1.4 million or an average of $17.14 per share. NoThe maximum number of shares were repurchased duringthat may yet be purchased under the three months ended June 30, 2019 and the three and six months ended June 30, 2018.stock repurchase program as of March 31, 2020 is 3,812,939.
Cash Flows—SixThree Months Ended June 30, 2019March 31, 2020 Compared to the SixThree Months Ended June 30, 2018March 31, 2019
For the sixthree months ended June 30,March 31, 2020 and 2019, and 2018, the comparison of cash flows is as follows:
Our primary sources of cash flows from operations are from the sale of single family attached and detached homes and mortgages. Our primary uses of cash flows from operations is the acquisition of land and expenditures associated with the construction of our single family attached and detached homes and the origination of mortgages held for sale. During the sixthree months ended June 30,March 31, 2020 and 2019, and 2018, we used $93.0$12.5 million and $80.9$59.4 million in cash from operations, respectively. The decrease in cash used in operations is primarily a result of a $9.0 million increase in net income and a
respectively. The increase in cash used from operations is primarily a result of acomparatively favorable decrease in net income of $20.6 millionchanges in assets and liabilities for the sixthree months ended June 30, 2019March 31, 2020 as compared to the sixthree months ended June 30, 2018, partially offset by a loss on debt extinguishment of $10.8 million during the six months ended June 30, 2019.March 31, 2019.
Net cash used in investing activities decreased to $6.2$2.5 million during the sixthree months ended June 30, 2019,March 31, 2020, compared to $35.2$3.3 million used during the same period in 2018.2019. The decrease was primarily related to our purchaseless purchases of the remaining 50% ownership interest in WJH last year.property and equipment.
Net cash provided by financing activities was $97.5$410.0 million during the sixthree months ended June 30, 2019,March 31, 2020, compared to $46.4$67.8 million during the same period in 2018. This2019. The increase was primarily attributable to a $368.7 million increase in net proceeds received fromborrowings under our revolving line of credit during the issuance ofthree months ended March 31, 2020 as compared to the 2027 Notes and proceeds from insurance notes payable,same period in 2019, partially offset by a decrease$26.6 million increase in net draws onpayments under our revolving credit facility.mortgage repurchase facilities.
As of June 30, 2019,March 31, 2020, our cash and cash equivalents and restricted cash balance was $34.8$453.5 million.
Off-Balance Sheet Arrangements
In the ordinary course of business, we enter into land purchase contracts in order to procure lots for the construction of our homes. We are subject to customary obligations associated with entering into contracts for the purchase of land and improved lots. These purchase contracts typically require a cash deposit, and the purchase of properties under these contracts is generally contingent upon satisfaction of certain requirements, including obtaining applicable property and development entitlements. We also utilize option contracts with land sellers and others as a method of acquiring land in staged takedowns, to help us manage the financial and market risk associated with land holdings, and to reduce the use of funds from our corporate financing sources. Option contracts generally require payment by useus of a non-refundable deposit for the right to acquire lots over a specified period of time at pre-determined prices. Our obligations with respect to purchase contracts and option contracts are generally limited to the forfeiture of the related non-refundable cash deposits. As of June 30, 2019,March 31, 2020, we had outstanding purchase contracts and option contracts for 16,98814,979 lots totaling $371.6with a total purchase price of approximately $647.0 million and had $41.4$36.1 million of non-refundable cash deposits pertaining to land option contracts. While our performance, including the timing and amount of purchase, if any, under these outstanding purchase and option contracts is subject to change, we currently anticipate performing on 50% to 60% of the purchase and option contracts during the next twelve months, with performance on the remaining purchase and option contracts occurring in future periods, if at all.
Our utilization of land option contracts is dependent on, among other things, the availability of land sellers willing to enter into option takedown arrangements, the availability of capital to financial intermediaries to finance the development of optioned lots, general housing market conditions, and local market dynamics. Options may be more difficult to procure from land sellers in strong housing markets and are more prevalent in certain geographic regions.
We post letters of credit and performance bonds related to our land development performance obligations, with local municipalities. As of June 30, 2019March 31, 2020, and December 31, 2018,2019, we had $294.3$343.7 million and $289.8$344.1 million, respectively, in letters of credit and performance bonds issued and outstanding. We anticipate that the obligations secured by these performance bonds and letters of credit generally will be performed in the ordinary course of business.
Non-GAAP Financial Measures
In this Form 10-Q, we use certain non-GAAP financial measures, including EBITDA, Adjusted EBITDA, net debt to net capital, and adjusted net earnings per diluted common shares. These non-GAAP financial measures are presented to provide investors additional information to facilitate the comparison of our past and present operations. We believe these non-GAAP financial measures provide useful information to investors because they are used to evaluate our performance on a comparable year-over-year basis. These non-GAAP financial measures are not in accordance with, or an alternative for, GAAP measures and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive or standard set of accounting rules or principles. Accordingly, the calculation of our non-GAAP financial measures may differ from the definitions of other companies using the same or similar names limiting, to some extent, the usefulness of such measures for comparison purposes. Non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with our financial results as determined in accordance with GAAP. These measures should only be used to evaluate our financial results in conjunction with the corresponding GAAP measures. Accordingly, we qualify our use of non-GAAP financial information in a statement when non-GAAP financial information is presented.
EBITDA and Adjusted EBITDA
The following table presents EBITDA and adjustedAdjusted EBITDA for the three and six months ended June 30, 2019March 31, 2020, and 2018.2019. Adjusted EBITDA is a non-GAAP financial measure we use as a supplemental measure in evaluating operating performance. We define adjustedAdjusted EBITDA as consolidated net income before (i) income tax expense, (ii) interest in cost of home sales revenues, (iii) other interest
expense, (iv) loss on debt extinguishment, (v) inventory impairment and other, (vi) depreciation and amortization expense, (v) loss on debt extinguishment, and (vi)(vii) adjustments resulting from the application of purchase accounting for acquired work in process inventory related to business combinations and purchase price accounting for investment in unconsolidated subsidiaries, and (vii) acquisition expense.combinations. We believe adjustedAdjusted EBITDA provides an indicator of general economic performance that is not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization, and items considered to be non-recurring. Accordingly, our management believes that this measurement is useful for comparing general operating performance from period to period. Adjusted EBITDA should be considered in addition to, and not as a substitute for, consolidated net income in accordance with GAAP as a measure of performance. Our presentation of adjustedAdjusted EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items. Our adjustedAdjusted EBITDA is limited as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.GAAP.
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
2019 | 2018 | % Change | 2019 | 2018 | % Change | 2020 | 2019 | % Change | |||||||||||||||||||||||||||||
Net income | $ | 15,495 | $ | 33,193 | (53.3) | % | $ | 32,612 | $ | 53,212 | (38.7) | % | $ | 26,126 | $ | 17,117 | 52.6 | % | |||||||||||||||||||
Income tax expense | 5,335 | 13,309 | (59.9) | % | 11,215 | 16,397 | (31.6) | % | 7,962 | 5,880 | 35.4 | % | |||||||||||||||||||||||||
Interest in cost of home sales revenues | 14,655 | 12,284 | 19.3 | % | 27,241 | 21,243 | 28.2 | % | 13,685 | 12,587 | 8.7 | % | |||||||||||||||||||||||||
Interest expense (income) | — | — | N/M | 15 | 1 | N/M | (163) | 15 | (1,186.7) | % | |||||||||||||||||||||||||||
Depreciation and amortization expense | 3,122 | 2,786 | 12.1 | % | 6,196 | 5,512 | 12.4 | % | 3,415 | 3,074 | 11.1 | % | |||||||||||||||||||||||||
EBITDA | 38,607 | 61,572 | (37.3) | % | 77,279 | 96,365 | (19.8) | % | 51,025 | 38,673 | 31.9 | % | |||||||||||||||||||||||||
Loss on debt extinguishment | 10,832 | — | N/M | 10,832 | — | N/M | |||||||||||||||||||||||||||||||
Inventory impairment | 781 | — | NM | ||||||||||||||||||||||||||||||||||
Purchase price accounting for acquired work in process inventory | — | 9,163 | (100.0) | % | 1,724 | 16,433 | (89.5) | % | — | 1,724 | NM | ||||||||||||||||||||||||||
Purchase price accounting for investment in unconsolidated subsidiaries outside basis | — | 30 | N/M | — | 60 | N/M | |||||||||||||||||||||||||||||||
Acquisition expense | — | 165 | N/M | — | 338 | N/M | |||||||||||||||||||||||||||||||
Adjusted EBITDA | $ | 49,439 | $ | 70,930 | (30.3) | % | $ | 89,835 | $ | 113,196 | (20.6) | % | $ | 51,806 | $ | 40,397 | 28.2 | % | |||||||||||||||||||
NM – Not Meaningful
Net Homebuilding Debt to Net Capital
The following table presents our ratio of net homebuilding debt to net capital, which is a non-GAAP financial measure. We calculate this by dividing net homebuilding debt (senior notes(notes payable and borrowingborrowings under our revolving line of credit less cash held in escrow and cash equivalents and cash held in escrow)equivalents) by net capital (net homebuilding debt plus total stockholders’ equity). The most directly comparable GAAP measure is the ratio of debt to total capital. We believe the ratio of net homebuilding debt to net capital is a relevant and useful financial measure to investors in understanding the leverage employed in our operations and as an indicator of our ability to obtain external financing.financing.
June 30, | December 31, | March 31, | December 31, | |||||||||
2019 | 2018 | 2020 | 2019 | |||||||||
Total homebuilding debt | $ | 1,102,606 | $ | 987,277 | $ | 1,421,066 | $ | 965,404 | ||||
Total stockholders' equity | 897,229 | 859,359 | 1,084,533 | 1,061,699 | ||||||||
Total capital | $ | 1,999,835 | $ | 1,846,636 | $ | 2,505,599 | $ | 2,027,103 | ||||
Debt to capital | 55.1% | 53.5% | ||||||||||
Homebuilding debt to capital | 56.7% | 47.6% | ||||||||||
Total homebuilding debt | $ | 1,102,606 | $ | 987,277 | $ | 1,421,066 | $ | 965,404 | ||||
Cash and cash equivalents | (31,704) | (32,902) | (450,973) | (55,436) | ||||||||
Cash held in escrow | (25,838) | (24,344) | (22,497) | (35,308) | ||||||||
Net homebuilding debt | 1,045,064 | 930,031 | $ | 947,596 | $ | 874,660 | ||||||
Total stockholders' equity | 897,229 | 859,359 | 1,084,533 | 1,061,699 | ||||||||
Net capital | $ | 1,942,293 | $ | 1,789,390 | $ | 2,032,129 | $ | 1,936,359 | ||||
Net homebuilding debt to net capital | 53.8% | 52.0% | 46.6% | 45.2% | ||||||||
Adjusted Diluted Earnings per Common Share
Adjusted diluted earningsDiluted Earnings per shareCommon Share (which we refer to as “Adjusted Diluted EPS”) is a non-GAAP financial measure that we believe is useful to management, investors and other users of our financial information in evaluating our operating results and understanding our operating trends without the effect of certain non-recurring items. We believe excluding certain non-recurring items provides more comparable assessment of our financial results from period to period. Adjusted Diluted EPS is calculated by excluding loss on debt
extinguishment, gain on previously held interest in WJH and the effect of acquisition costs and purchase price accounting for acquired work in process from the calculation of reported earnings per share.EPS.
Three Months Ended | Six Months Ended | Three Months Ended | |||||||||||||||||
June 30, | June 30, | March 31, | |||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2020 | 2019 | ||||||||||||||
Numerator | |||||||||||||||||||
Net income | $ | 15,495 | $ | 33,193 | $ | 32,612 | $ | 53,212 | $ | 26,126 | $ | 17,117 | |||||||
Less: Undistributed earnings allocated to participating securities | — | (3) | — | (67) | |||||||||||||||
Net income allocable to common stockholders | $ | 15,495 | $ | 33,190 | $ | 32,612 | $ | 53,145 | |||||||||||
Denominator | |||||||||||||||||||
Weighted average common shares outstanding - basic | 30,341,628 | 29,901,791 | 30,272,818 | 29,709,728 | 33,207,928 | 30,203,243 | |||||||||||||
Dilutive effect of restricted stock units | 227,220 | 268,898 | 234,127 | 293,548 | 268,516 | 241,033 | |||||||||||||
Weighted average common shares outstanding - diluted | 30,568,848 | 30,170,689 | 30,506,945 | 30,003,276 | 33,476,444 | 30,444,276 | |||||||||||||
Earnings per share: | |||||||||||||||||||
Basic | $ | 0.51 | $ | 1.11 | $ | 1.08 | $ | 1.79 | $ | 0.79 | $ | 0.57 | |||||||
Diluted | $ | 0.51 | $ | 1.10 | $ | 1.07 | $ | 1.77 | $ | 0.78 | $ | 0.56 | |||||||
Adjusted Earnings per share | |||||||||||||||||||
Adjusted earnings per share | |||||||||||||||||||
Numerator | |||||||||||||||||||
Income before income tax expense | $ | 20,830 | $ | 46,502 | $ | 43,827 | $ | 69,609 | $ | 34,088 | $ | 22,997 | |||||||
Loss on debt extinguishment | 10,832 | — | 10,832 | — | |||||||||||||||
Inventory impairment and other | 781 | - | |||||||||||||||||
Purchase price accounting for acquired work in process inventory | — | 9,163 | 1,724 | 16,433 | - | 1,724 | |||||||||||||
Gain on previously held interest in WJH | — | (7,219) | — | (7,219) | |||||||||||||||
Acquisition expense | — | 165 | — | 338 | |||||||||||||||
Adjusted income before income tax expense | 31,662 | 48,611 | 56,383 | 79,161 | 34,869 | 24,721 | |||||||||||||
Adjusted income tax expense(1) | (8,102) | (12,152) | (14,428) | (19,790) | (8,144) | (6,321) | |||||||||||||
Adjusted net income | 23,560 | 36,459 | 41,955 | 59,370 | 26,725 | 18,400 | |||||||||||||
Less: Adjusted undistributed earnings allocated to participating securities | — | (3) | — | (74) | |||||||||||||||
Adjusted net income allocable to common stockholders | $ | 23,560 | $ | 36,456 | $ | 41,955 | $ | 59,296 | |||||||||||
Denominator - Diluted | 30,568,848 | 30,170,689 | 30,506,945 | 30,003,276 | 33,476,444 | 30,444,276 | |||||||||||||
Adjusted diluted earnings per share | $ | 0.77 | $ | 1.21 | $ | 1.38 | $ | 1.98 | $ | 0.80 | $ | 0.60 | |||||||
(1)The tax rate used in calculating adjusted net income for the three and six months ended June 30,March 31, 2020 and March 31, 2019 was our GAAP tax rate of 25.6%. For the three23.4% and six months ended June 30, 2018, the tax rate utilized was 25% which was inclusive of our estimated annual rate of 26.5% offset by the estimated annual benefit associated with federal energy credits related to homes delivered in prior years.25.6%, respectively.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Interest Rates
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our Amended and Restated Credit Agreement 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. The “applicable margins” described above are determined by a schedule based on the leverage ratio of the Company, as defined in the Amended and Restated Credit Agreement. The Amended and Restated Credit Agreement also provides for fronting fees and letter of credit fees payable to the L/C Issuer and commitment fees payable to the Administrative Agent equal to 0.20% of the unused portion of the revolving line of credit.
For fixed rate debt, such as our senior notes, changes in interest rates generally affect the fair value of the debt instrument, but not our earnings or cash flows.
In our Financial Services business, we utilize mortgage-backed securities, forward commitments, option contracts and investor commitments to protect the value of rate-locked commitments and loans held-for-sale from fluctuations in mortgage-related interest rates. To mitigate interest risk associated with loans held-for-sale, we use derivative financial instruments to hedge our exposure to risk from the time a borrower locks a loan until the time the loan is securitized. We also hedge our interest rate exposure through entering into interest rate swap futures.
Inflation
Our homebuilding operations can be adversely impacted by inflation, primarily from higher land, financing, labor, material and construction costs. In addition, inflation can lead to higher mortgage rates, which can significantly affect the affordability of mortgage financing to homebuyers. While we attempt to pass on cost increases to customers through increased prices, when weak housing market conditions exist, we are often unable to offset cost increases with higher selling prices.
Seasonality
Historically, the homebuilding industry experiences seasonal fluctuations in quarterly operating results and capital requirements. We typically experience the highest new home order activity during the spring, although this activity is also highly dependent on the number of active selling communities, timing of new community openings and other market factors. Since it typically takes four to eight months to construct a new home, we deliver more homes in the second half of the year as spring and summer home orders convert to home deliveries. Because of this seasonality, home starts, construction costs and related cash outflows have historically been highest in the second and third quarters, and the majority of cash receipts from home deliveries occurs during the second half of the year. We expect this seasonal pattern to continue over the long term, although it may be affected by volatility in the homebuilding industry.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our co-principal executive officers and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined under Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (which we refer to as the “Exchange Act”)) as of June 30, 2019,March 31, 2020, the end of the period covered by this Form 10-Q. Based on this evaluation, our co-principal executive officers and principal financial officer concluded that our disclosure controls and procedures were effective as of June 30, 2019March 31, 2020 in providing reasonable assurance that information required to be disclosed by us in the reports that we file or furnish under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
During the financial statement close for the quarter ended March 31, 2020, the substantial majority of accounting and finance employees worked remotely due to the COVID-19 pandemic. All internal control over financial reporting continued as in the past, but with certain necessary documentation changes in light of the remote working environment. There were no other changes during the secondfirst quarter of 20192020 in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Because of the nature of the homebuilding business, we and certain of our subsidiaries and affiliates have been named as defendants in various claims, complaints and other legal actions arising in the ordinary course of business. In the opinion of our management, the outcome of these ordinary course matters will not have a material adverse effect upon our financial condition, results of operations or cash flows.
ITEM 1A. RISK FACTORS.
There have been no material changes to the risk factors we previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 20182019 that was filed with the SEC on February 13, 2019.7, 2020, other than one new risk factor and the four revised risk factors below.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.The global novel strain of coronavirus (COVID-19) pandemic has begun to adversely impact and will likely continue to adversely impact our business, operating results and financial condition.
None.The global COVID-19 pandemic has created significant volatility, disruption and uncertainty. It has resulted in government restrictions, such as “stay-at-home” or “shelter-in-place” directives, quarantines, travel advisories and social distancing, leading to the closure of businesses and causing weakened economic conditions that will likely worsen and may ultimately result in an economic slowdown or recession. These actions have begun to adversely impact and will likely continue to adversely impact Century directly and indirectly.
In response to the pandemic and these government restrictions, Century has shifted our sales process to offer additional virtual online tours and appointments and, where permitted, appointment-only in-person meetings that comply with social distancing and other health and safety requirements and protocols. We have limited our construction and other operations to those that are authorized under the various applicable governmental orders and shifted our corporate and other office functions to work remotely. As of the date of this filing, other than the State of Michigan and certain counties 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 exempt from the applicable health orders. We are uncertain as to how long these restrictions will remain in place and whether the COVID-19 public health effort will be intensified to further restrict our business. While these circumstances did not materially adversely affect our first quarter 2020 financial results, they have begun to negatively impact our business, including our ability to develop, construct, market and sell homes, and beginning in April 2020, have begun to negatively impact and will likely continue to negatively impact our revenues and other operating results.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.The adverse effect of the COVID-19 pandemic on the broader economy has negatively impacted and will likely continue to negatively impact demand for new homes. Continued demand for Century homes is uncertain but is unlikely to return quickly to the record levels that we experienced prior to the pandemic in light of anticipated higher unemployment rates, decreased consumer confidence, decreased availability of credit, and other factors. This impact on demand for our homes will likely adversely affect our operating results in future periods. In addition, a decline in our home building operations will have a direct effect on the origination volume of and revenues from our Financial Services segment.
None.The COVID-19 pandemic may have other adverse effects on our business, operating results and financial condition, including:
costs incurred as a result of necessary actions and preparedness plans to help ensure the health and safety of our employees and continued operations, including remote working accommodations, enhanced cleaning processes, and protocols designed to implement appropriate social distancing practices;
ITEM 4. MINE SAFETY DISCLOSURES.availability of employees, their ability to conduct work away from normal working locations and/or under revised work environment protocols, as well as the general willingness of employees to come to and perform work;
Not applicable.an increase in our use of sales incentives and concessions, which could adversely affect our margins;
an increase in customer cancellations of home purchase contracts;
ITEM 5.OTHER INFORMATION.deteriorating individual credit quality and an increase in default rates on mortgage loans we originated which may expose us to repurchase obligations or other liabilities, reduce our ability to sell or finance the loans we originate or on less favorable terms, lead us to impose stricter loan qualification standards, or result in us no longer being able to offer financing terms that are attractive to potential buyers;
None.
one or more of our suppliers or subcontractors may experience financial distress, cancel, postpone or delay orders, be unable to perform under a contract, file for bankruptcy protection, go out of business, or suffer disruptions in their business or we may need to offer special payment terms or relief to our suppliers and subcontractors, subjecting us heightened credit risk;
increased costs and delays in the completion of our development projects;
decreased land acquisitions and the termination or modification of option contracts to conserve our cash resources;
potential future restructuring, impairment and other charges, which may be material, for inventory impairments or land option contract abandonments, or both;
potential disruption and volatility in the global capital and credit markets, which could adversely affect our ability to access lending, capital markets, and other sources of liquidity when needed and on reasonable terms and costs, or the ability of potential homebuyers to obtain suitable financing, especially if mortgage loan underwriting criteria tighten or default rates increase; and
our ability to comply with the financial covenants in our debt agreements if a material or extended economic downturn occurs.
We are uncertain of the potential full magnitude or duration of the business and economic impacts from the COVID-19 pandemic. This inherent uncertainty, due in part to rapidly changing governmental directives, public health challenges and progress, and market reactions thereto, makes it challenging for our management to estimate the future performance of our business and plan accordingly. The full extent to which the COVID-19 pandemic will impact our business will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 and the actions to contain it or treat its impact. Should the potential adverse impacts described above (or others that are currently unknown) occur, whether individually or collectively, we would expect to experience, among other things, decreases in our homes delivered, average selling prices, net new home contracts, revenues and profitability.
Finally, the impacts from the COVID-19 pandemic and efforts to contain it have heightened the risks in certain of the other risk factors described in our Annual Report Form 10-K for the year ended December 31, 2019.
We are subject to demand fluctuations in the housing industry. Reductions in demand for our homes will adversely affect our business, results of operations, and financial condition.
Demand for our homes is subject to fluctuations, often due to factors outside of our control. In a housing market downturn when demand for our homes decreases, our revenues and results of operations are typically adversely affected; we may have significant inventory impairments and other write-offs; our gross margins may decline significantly from historical levels; and we may incur substantial losses from operations. At any particular time, we cannot predict whether housing market conditions existing at that time will continue. For example, while rising interest rates and tightening affordability created an industry-wide deceleration in housing growth during the second half of 2018 and into 2019, this deceleration reversed during the remainder of 2019 due in part to reduced mortgage rates. More recently, as a result of the COVID-19 pandemic, beginning in mid-March 2020, we began to experience a decrease in demand for our homes which is unlikely to return quickly to the record levels that we experienced prior to the pandemic in light of anticipated higher unemployment rates, decreased consumer confidence, decreased availability of credit, and other factors, including those described elsewhere in this report.
Adverse changes in general economic conditions typically reduce the demand for our homes which may result in a material adverse effect on our business, results of operations and financial condition.
The residential homebuilding industry is cyclical and is highly sensitive to changes in local and general economic conditions that are outside our control, including:
consumer confidence, levels of employment, job growth, spending levels, wage and personal income growth, personal indebtedness levels, and household debt-to-income levels of potential homebuyers;
the availability and cost of financing for homebuyers or restrictive mortgage standards, including private and federal mortgage financing programs and federal, state, and provincial regulation of lending practices;
real estate taxes and federal and state income tax provisions, including provisions for the deduction of mortgage interest payments;
U.S. and global financial system and credit markets, including short- and long-term interest rates and inflation;
housing demand from population growth, household formations, new home buying catalysts (such as marriage and children), second home buying catalysts (such as retirement), home sale catalysts (such as an aging population), demographic changes (including immigration levels and trends in urban and suburban migration), generational shifts, or otherwise, or perceptions regarding the strength of the housing market, and home price appreciation and depreciation resulting therefrom;
competition from other real estate investors with significant capital, including other real estate operating companies and developers, institutional investment funds and companies solely focused on single family rentals; and
the supply of new or existing homes, including foreclosures, and other housing alternatives, such as apartments and other residential rental property, and the aging of existing housing inventory.
In the event these economic and business factors occur, we could experience a decline in the demand and pricing for our homes, an increase in customer cancellations, an increase in selling concessions and downward pressure on the market value of our inventory, which could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations and increase the risk for asset impairments. The current COVID-19 pandemic has led to weakened economic conditions that ultimately may result in an economic slowdown or recession. A significant or sustained downturn in the homebuilding market would likely have an adverse effect on our business and results of operations for multiple years.
In addition, an important segment of our customer base consists of first- and second-time move-up buyers, who often purchase homes subject to contingencies related to the sale of their existing homes. If these potential buyers face difficulties in selling their homes, whether due to periods of weak economic conditions, oversupply, high interest rates, restrictive mortgage standards or otherwise, our sales may be adversely affected. Moreover, we may need to reduce our sales prices and offer greater incentives to buyers to compete for sales that may result in reduced margins.
Furthermore, deployments of U.S. military personnel to foreign regions, terrorist attacks, other acts of violence or threats to national security and any corresponding response by the United States or others, related domestic or international instability or civil unrest may cause an economic slowdown in the markets where we operate, which could adversely affect our business.
Increases in unemployment or underemployment typically lead to reduced demand for our homes and an increase in the number of loan delinquencies and property repossessions, which could have an adverse impact on our business and results of operations.
In the United States, the unemployment rate was 3.5% as of the end of December 2019, according to the U.S. Bureau of Labor Statistics. As a result of impacts from the COVID-19 pandemic and efforts to contain it, the unemployment rate increased to 4.4% as of the end of March 2020 and is anticipated to increase further in April 2020. People who are not employed, are underemployed or are concerned about the loss of their jobs are less likely to purchase new homes, may be forced to try to sell the homes they own and may face difficulties in making required mortgage payments. Therefore, an increase in unemployment or underemployment may lead to an increase in the number of loan delinquencies and property repossessions and have an adverse impact on our business by both reducing the demand for the homes we build and increasing the supply of homes for sale, which would also likely adversely affect our Financial Services business, which is dependent upon the sale of our homes. In addition, an increase in unemployment or underemployment may result in increased default rates on mortgage loans we originated, which could expose us to repurchase obligations or other liabilities, reduce our ability to sell or finance the loans we originate or require us to sell or finance the loans we originate on less favorable terms, lead us to impose stricter loan qualification standards, or result in us no longer being able to offer financing terms that are attractive to potential buyers, all of which would adversely affect our Financial Services business.
Our Financial Services segment will likely be adversely affected by reduced demand for our homes or by a slowdown in mortgage refinancing.
Approximately 98.3% of the mortgage loans made by our Financial Services segment in 2019 were made to buyers of homes we built. Therefore, a decrease in the demand for our homes would adversely affect the revenues of this segment of our business. As a result of the COVID-19 pandemic, beginning in mid-March 2020, we began to experience a decrease in demand for our homes and is unlikely to return quickly to the record levels that we experienced prior to the pandemic in light of anticipated higher unemployment rates, decreased consumer confidence, decreased availability of credit, and other factors, including those described elsewhere in this report. We expect this decrease in demand to adversely affect the revenues of our Financial Services segment beginning with our second quarter of 2020.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5.OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
The following exhibits are either filed herewith or incorporated herein by reference:
Item No. | Description | |
3.1 | ||
3.2 | ||
3.3 | ||
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31.1 | ||
31.2 | ||
31.3 | ||
32.1 | ||
32.2 | ||
32.3 |
101.INS | Inline XBRL Instance Document (The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document) | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document (filed herewith) | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith) | |
101.DEF | Inline XBRL Taxonomy Definition Linkbase Document (filed herewith) | |
101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document (filed herewith) | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith) |
104
Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Century Communities, Inc. | |||||
Date: | By: | /s/ Dale Francescon | |||
Dale Francescon | |||||
Chairman of the Board and Co-Chief Executive Officer (Co-Principal Executive Officer) | |||||
Date: | By: | /s/ Robert J. Francescon | |||
Robert J. Francescon | |||||
Co-Chief Executive Officer and President (Co-Principal Executive Officer) | |||||
Date: | By: | /s/ David Messenger | |||
David Messenger | |||||
Chief Financial Officer (Principal Financial Officer) | |||||
Date: | By: | /s/ J. Scott Dixon | |||
J. Scott Dixon | |||||
Chief Accounting Officer (Principal Accounting Officer) | |||||