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 ~~September 30, 2017~~March 31, 2023


☐o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File ~~Number~~Number: 001-36491

Century Communities, Inc.

(Exact name of registrant as specified in its charter)


Delaware		68-0521411
(State ofor other jurisdiction of ‎incorporation or organization)		(I.R.S. Employer ~~identification~~‎Identification No.)

8390 East Crescent Parkway, Suite 650 ‎Greenwood Village, ~~Colorado~~CO		80111
(Address of principal executive offices)		(Zip ~~code)~~Code)

(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	New York Stock Exchange

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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ 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
~~Non-accelerated filer~~	~~☐ (Do not check if a smaller reporting company)~~	~~Smaller reporting company~~	☐
		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 ~~October 25, 2017, 27,573,183~~April 21, 2023, 32,025,879 shares of common stock, par value ~~0.01~~$0.01 per share, of the registrant were outstanding.

Table of Contents

CENTURY COMMUNITIES, INC.

FORM 10-Q

For the ~~three and nine months ended September 30, 2017~~Three Months Ended March 31, 2023

Index


	Page No.
PART I – FINANCIAL INFORMATION
Item 1. ~~Unaudited Condensed Consolidated~~ Financial Statements
~~Unaudited~~ Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2023 (unaudited) and December 31, ~~2016~~2022 (audited)	3
Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and ~~Nine Months ended September 30, 2017 and 2016~~2022	4
Unaudited Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months ~~ended September 30, 2017~~Ended March 31, 2023 and ~~2016~~ 2022	5
Unaudited Condensed Consolidated Statements of Stockholders' Equity for the Three Months Ended March 31, 2023 and 2022	6
Notes to the Unaudited Condensed Consolidated Financial Statements ~~– September 30, 2017~~	67
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2417
Item 3. Quantitative and Qualitative Disclosures About Market Risk	3836
Item 4. Controls and Procedures	3836
PART II – OTHER INFORMATION
Item 1. Legal Proceedings	3937
Item 1A. Risk Factors	3937
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3937
Item 3. Defaults Upon Senior Securities	3937
Item 4. Mine Safety Disclosures	3937
Item 5. Other Information	3937
Item 6. Exhibits	4038
Signatures	42
	39

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Century Communities, Inc.

~~Unaudited~~ Condensed Consolidated Balance Sheets

As of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016~~2022

~~(in thousands, except share amounts)~~

September 30,

December 31,

2017

2016
Assets

Cash and cash equivalents

$
58,522

$
29,450
Cash held in escrow

42,262

20,044
Accounts receivable

20,810

5,729
Inventories

1,352,989

857,885
Mortgage loans held for sale

30,071

—
Prepaid expenses and other assets

62,362

40,457
Property and equipment, net

13,658

11,412
Investment in unconsolidated subsidiaries

20,677

18,275
Deferred tax asset, net

6,403

—
Amortizable intangible assets, net

1,889

2,911
Goodwill

21,365

21,365
Total assets

$
1,631,008

$
1,007,528
Liabilities and stockholders' equity

Liabilities:

Accounts payable

$
16,810

$
15,708
Accrued expenses and other liabilities

157,705

62,314
Deferred tax liability, net

—

1,782
Senior notes payable

776,016

259,088
Revolving line of credit

—

195,000
Mortgage repurchase facility

27,465

—
Total liabilities

977,996

533,892
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, 27,259,199 and 21,620,544 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively

273

216
Additional paid-in capital

501,786

355,567
Retained earnings

150,953

117,853
Total stockholders' equity

653,012

473,636
Total liabilities and stockholders' equity

$
1,631,008

$
1,007,528

~~See Notes to Unaudited Condensed Consolidated Financial Statements~~

~~Table of Contents~~

~~Century Communities, Inc.~~

~~Unaudited Condensed Consolidated Statements of Operations~~

~~For the Three and Nine Months Ended September 30, 2017and 2016~~

(in thousands, except share and per share amounts)



	March 31,		December 31,
	2023		2022
Assets	(unaudited)		(audited)
Cash and cash equivalents	$	405,722	$	296,724
Cash held in escrow		12,691		56,569
Accounts receivable		52,787		52,797
Inventories		2,741,187		2,830,645
Mortgage loans held for sale		155,732		203,558
Prepaid expenses and other assets		260,505		250,535
Property and equipment, net		33,019		31,688
Deferred tax assets, net		20,939		20,856
Goodwill		30,395		30,395
Total assets	$	3,712,977	$	3,773,767
Liabilities and stockholders' equity
Liabilities:
Accounts payable	$	106,525	$	106,926
Accrued expenses and other liabilities		258,412		299,588
Notes payable		1,026,615		1,019,412
Revolving line of credit		—		—
Mortgage repurchase facilities		149,784		197,626
Total liabilities		1,541,336		1,623,552
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, 32,025,785 and 31,772,791 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		320		318
Additional paid-in capital		580,489		584,803
Retained earnings		1,590,832		1,565,094
Total stockholders' equity		2,171,641		2,150,215
Total liabilities and stockholders' equity	$	3,712,977	$	3,773,767

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016
Revenues

Homebuilding revenues

Home sales revenues

$
374,935

$
248,075

$
888,942

$
686,335
Land sales and other revenues

1,826

5,338

6,216

10,816

376,761

253,413

895,158

697,151
Financial services revenue

2,955

—

4,697

—
Total revenues

379,716

253,413

899,855

697,151
Homebuilding Cost of Revenues

Cost of home sales revenues

(311,365)

(197,650)

(727,577)

(549,886)
Cost of land sales and other revenues

(2,104)

(5,420)

(4,994)

(9,433)

(313,469)

(203,070)

(732,571)

(559,319)
Financial services costs

(2,450)

—

(4,648)

—
Selling, general, and administrative

(46,165)

(30,944)

(113,597)

(87,512)
Acquisition expense

(7,205)

(53)

(8,645)

(466)
Equity in income of unconsolidated subsidiaries

3,716

—

7,648

—
Other income

1,013

385

2,274

1,403
Income before income tax expense

15,156

19,731

50,316

51,257
Income tax expense

(5,686)

(6,389)

(17,216)

(16,790)
Net income

$
9,470

$
13,342

$
33,100

$
34,467

Earnings per share:

Basic

$
0.37

$
0.63

$
1.42

$
1.63
Diluted

$
0.37

$
0.63

$
1.41

$
1.62
Weighted average common shares outstanding:

Basic

25,445,552

20,673,521

23,038,390

20,643,682
Diluted

25,726,137

20,822,066

23,275,320

20,731,930

See Notes to Unaudited Condensed Consolidated Financial Statements

Table of Contents

Century Communities, Inc.

Unaudited Condensed Consolidated Statements of ~~Cash Flows~~Operations

For the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022

(in thousands,) except share and per share amounts)



	Three Months Ended March 31,
	2023		2022
Revenues
Homebuilding revenues
Home sales revenues	$	735,600	$	988,415
Land sales and other revenues		1,535		1,630
Total homebuilding revenues		737,135		990,045
Financial services revenues		15,855		26,305
Total revenues		752,990		1,016,350
Homebuilding cost of revenues
Cost of home sales revenues		(601,385)		(709,073)
Cost of land sales and other revenues		—		(846)
Total homebuilding cost of revenues		(601,385)		(709,919)
Financial services costs		(10,781)		(15,154)
Selling, general and administrative		(98,313)		(101,639)
Other income (expense)		1,498		(862)
Income before income tax expense		44,009		188,776
Income tax expense		(10,698)		(46,280)
Net income	$	33,311	$	142,496

Earnings per share:
Basic	$	1.04	$	4.25
Diluted	$	1.04	$	4.20
Weighted average common shares outstanding:
Basic		31,914,414		33,530,610
Diluted		32,117,082		33,942,234

Nine Months Ended September 30,

2017

2016
Operating activities

Net income

$
33,100

$
34,467
Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization

5,073

4,215
Stock-based compensation expense

6,521

5,058
Deferred income taxes

(2,766)

(3,807)
Distribution of income from unconsolidated subsidiaries

5,246

—
Equity in income of unconsolidated subsidiaries

(7,648)

—
(Gain) loss on disposition of assets

202

(468)
Changes in assets and liabilities:

Cash held in escrow

(22,218)

(15,932)
Accounts receivable

(7,493)

389
Inventories

(95,065)

(85,560)
Prepaid expenses and other assets

(16,637)

(11,189)
Accounts payable

(8,026)

7,172
Accrued expenses and other liabilities

9,027

4,255
Mortgage loans held for sale

(30,071)

—
Net cash used in operating activities

(130,755)

(61,400)
Investing activities

Purchases of property and equipment

(5,867)

(6,375)
Business combination net of acquired cash

(77,457)

—
Proceeds from sale of assets

52

1,302
Proceeds from sale of South Carolina operations

17,074

—
Proceeds from secured note receivable

76

73
Net cash used in investing activities

(66,122)

(5,000)
Financing activities

Borrowings under revolving credit facilities

75,000

145,000
Payments on revolving credit facilities

(270,000)

(90,000)
Proceeds from issuance of senior notes

523,000

—
Proceeds from issuance of insurance premium notes

—

11,612
Principal payments on notes payable

(4,735)

(7,582)
Repayment of debt assumed in business combination

(151,919)

—
Debt issuance costs

(3,731)

(1,156)
Net proceeds from mortgage credit facility

27,465

—
Net proceeds from issuances of common stock

35,010

—
Repurchases of common stock upon vesting of restricted stock awards

(4,141)

(1,014)
Repurchases of common stock under our stock repurchase program

—

(2,393)
Net cash provided by financing activities

225,949

54,467
Net decrease in cash and cash equivalents

$
29,072

$
(11,933)
Cash and cash equivalents

Beginning of period

29,450

29,287
End of period

$
58,522

$
17,354
Supplemental cash flow disclosure

Cash paid for income taxes

$
21,657

$
20,557

See Notes to Unaudited Condensed Consolidated Financial Statements

Table of Contents

Century Communities, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2023 and 2022

(in thousands)


	Three Months Ended March 31,
	2023		2022
Operating activities
Net income	$	33,311	$	142,496
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,292		2,606
Stock-based compensation expense		5,360		4,064
Fair value of mortgage loans held for sale and other		205		4,443
Abandonment of lot option contracts		638		875
Deferred income taxes		(83)		(33)
Loss on disposition of assets		198		384
Changes in assets and liabilities:
Cash held in escrow		43,878		7,085
Accounts receivable		10		(4,106)
Inventories		90,152		(222,863)
Mortgage loans held for sale		48,241		144,361
Prepaid expenses and other assets		8,247		(28,959)
Accounts payable		(401)		6,841
Accrued expenses and other liabilities		(41,714)		52,239
Net cash provided by operating activities		191,334		109,433
Investing activities
Purchases of property and equipment		(4,820)		(5,841)
Expenditures related to development of rental properties		(16,268)		—
Other investing activities		152		750
Net cash used in investing activities		(20,936)		(5,091)
Financing activities
Borrowings under revolving credit facilities		—		141,500
Payments on revolving credit facilities		—		(141,500)
Borrowing under construction loan agreements		7,137		—
Proceeds from issuance of insurance premium notes and other		3,032		16,863
Principal payments on insurance premium notes and other		(3,364)		(5,235)
Net payments for mortgage repurchase facilities		(47,842)		(138,848)
Withholding of common stock upon vesting of stock-based compensation awards		(9,880)		(12,138)
Repurchases of common stock under stock repurchase program		—		(62,377)
Dividend payments		(7,365)		(6,657)
Other financing activities		—		(34)
Net cash used in financing activities		(58,282)		(208,426)
Net increase (decrease)	$	112,116	$	(104,084)
Cash and cash equivalents and Restricted cash
Beginning of period		308,492		322,241
End of period	$	420,608	$	218,157
Supplemental cash flow disclosure
Cash paid (refunds) for income taxes	$	—	$	(893)
Cash and cash equivalents and Restricted cash
Cash and cash equivalents	$	405,722	$	209,046
Restricted cash (Note 5)		14,886		9,111
Cash and cash equivalents and Restricted cash	$	420,608	$	218,157

See Notes to Unaudited Condensed Consolidated Financial Statements

Table of Contents

~~September 30, 2017~~

Century Communities, Inc.

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

For the Three Months Ended March 31, 2023 and 2022

(in thousands)


	Common Stock
	Shares	Amount		Additional Paid-In Capital		Retained Earnings		Total Stockholders' Equity
Balance at December 31, 2022	31,773	$	318	$	584,803	$	1,565,094	$	2,150,215
Vesting of stock-based compensation awards	412		4		(4)		—		—
Withholding of common stock upon vesting of stock-based compensation awards	(159)		(2)		(9,878)		—		(9,880)
Stock-based compensation expense	—		—		5,360		—		5,360
Cash dividends declared and dividend equivalents	—		—		208		(7,573)		(7,365)
Net income	—		—		—		33,311		33,311
Balance at March 31, 2023	32,026	$	320	$	580,489	$	1,590,832	$	2,171,641


Balance at December 31, 2021	33,761	$	338	$	697,845	$	1,066,325	$	1,764,508
Vesting of stock-based compensation awards	480		5		(5)		—		—
Withholding of common stock upon vesting of stock-based compensation awards	(190)		(3)		(12,135)		—		(12,138)
Repurchases of common stock	(1,013)		(10)		(62,367)		—		(62,377)
Stock-based compensation expense	—		—		4,064		—		4,064
Cash dividends declared and dividend equivalents	—		—		79		(6,736)		(6,657)
Other	—		—		(34)		—		(34)
Net income	—		—		—		142,496		142,496
Balance at March 31, 2022	33,038	$	330	$	627,447	$	1,202,085	$	1,829,862

See Notes to Unaudited Condensed Consolidated Financial Statements

‎

Table of Contents

Century Communities, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2023

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 ~~metropolitan areas in the States of California, Colorado, Georgia, Nevada, North Carolina, South Carolina, Tennessee, Texas, Utah, and Washington.~~18 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 Century Complete brands. Our Century Communities brand targets a wide range of buyer profiles including: entry-level, first and second time move-up, and lifestyle homebuyers, and provides our homebuyers with the ability to personalize their homes through certain option and upgrade opportunities. Our Century Complete brand targets entry-level homebuyers, primarily sells homes through retail studios and the internet, and generally provides no option or upgrade opportunities.

Our homebuilding operations are organized into the following ~~four~~five reportable ~~segments based on the geographic regions in which we operate:~~segments: West, Mountain, Texas, Southeast, and ~~Southeast. Additionally, our~~Century Complete. Our indirect wholly-owned subsidiaries, Inspire Home Loans Inc., Parkway Title, LLC, and ~~Parkway Title,~~IHL Home Insurance Agency, LLC, which provide mortgage, title, and ~~title~~insurance services, respectively, primarily to our ~~home buyers, respectively,~~homebuyers, have been identified as our Financial Services ~~operating~~ segment.

~~On August 4, 2017, we acquired UCP, Inc. (which we refer to as “UCP”).~~ ~~UCP~~Additionally, our wholly owned subsidiary, Century Living, LLC, is ~~a homebuilder and land developer with expertise~~engaged in ~~residential land acquisition,~~the development, ~~and entitlement, as well as home design,~~ construction and ~~sales, with operations~~management of multi-family rental properties, primarily in ~~the States of California, Washington, North Carolina, South Carolina and Tennessee.~~ The merger was unanimously approved by the board of directors of both the Company and UCP and was also approved by UCP stockholders on August 1, 2017. In connection with the merger, each share of UCP Class A common stock outstanding immediately prior to the closing was converted into $5.32Colorado. Century Living, LLC is included in ~~cash and 0.2309 of a newly issued share of~~ our common stock. Approximately 4.2 million shares of our common stock were issued in connection with the merger and $97.7 million was paid in cash. Our operating results presented herein include the operations of UCP from the period beginning on August 4, 2017 through September 30, 2017.Corporate segment.

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 ~~its~~our financial position and results of ~~operations.~~operations for the periods presented. 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, ~~2016,~~2022, which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~2022 that was filed with the SEC on February ~~15, 2017.~~2, 2023.

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 do not have any variable interest entities in which we are deemed the primary beneficiary. All intercompany accounts and transactions have been eliminated.

~~Mortgage Loans Held for Sale~~

We use best efforts commitments with various investors to mitigate the risk associated with mortgage loans held for sale. Best efforts commitments which fix the forward sales price that will be realized in the secondary market are used to eliminate our interest rate and price risks. These best effort commitments are considered derivative instruments under ASC 815, “Derivatives and Hedging,” however, we do not have any derivative instruments designated as hedging instruments as of September 30, 2017. Substantially all of the loans originated by us and their related servicing rights are sold in the secondary mortgage market within a short period of time after origination, generally within 30 days. In accordance with ASC 825, “Financial Instruments” we use the fair value option to record residential mortgage loans available-for-sale at the price they are committed to be sold under the best efforts commitments.

Expected gains and losses from the sale of our loans held for sale are included in the measurement of written loan commitments that are accounted for at fair value through Financial Services revenues at the time of commitment. As of September 30, 2017, mortgage loans available-for-sale had an aggregate fair value of $30.1 million and an aggregate outstanding principal balance of $28.7 million. The net gain resulting from changes in fair value of the best efforts commitments and mortgage loans held in inventory totaled $0.8 million and $1.4 million for the three and nine months ended September 30, 2017, respectively. Realized net gains from the sale of mortgages during the three and nine months ended September 30, 2017 were $0.5 million and $0.6 million, respectively, and have been included in Financial Services revenues.

~~Table of Contents~~

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.

~~Reclassification~~

Certain items on the Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2016 have been reclassified to conform to our current presentation. We have included “Golf course and other revenue” with “Land sales and other revenues”; we have included “Cost of golf course and other revenue” with “Cost of land sales and other revenues”; and we have combined “Interest income,” “Interest expense,” and “Gain on disposition of assets” into “Other income (expense)” in our current presentation. We have also adjusted prior period segment information to conform to the current period presentation, see detail in “2. Reporting Segments.”

~~Recently Issued Accounting Standards~~

~~In August~~ ~~2015, the Financial Accounting Standards Board (which we refer to as “FASB”) issued ASU 2015-14, “~~Revenue from Contracts with Customers (Topic 606).” ASU 2015-14 defers the effective date of ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” and will be effective for the Company beginning on January 1, 2018, including interim reporting periods within that period. Early adoption is permitted as of annual reporting periods beginning after December 15, 2016. We plan to adopt ASU 2015-14 on January 1, 2018 under the modified retrospective approach. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements and disclosures, and have been involved in industry specific discussions on the treatment of certain items. We have evaluated our home sales contracts in each of our regions and have determined that there will not be a material impact on the amount or timing in recording home sales revenues as a result of adopting ASU 2015-14. We are continuing to evaluate the accounting treatment of other aspects of our business that may be affected by our adoption of ASU 2015-14.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. ASU 2016-02 is effective for the Company beginning January 1, 2019 and interim periods within the annual periods. We are currently evaluating the impact ASU 2016-02 will have on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for the Company beginning January 1, 2017 and interim periods within the annual periods. We have adopted this standard and as a result have realized excess tax benefits of $1.1 million, which is included as a reduction to “Income tax expense” in our Condensed Consolidated Statements of Operations. Our calculation of earnings per share was also modified to reflect a change to exclude excess tax benefits from assumed proceeds in our computation of diluted shares outstanding under the treasury method. We have elected to continue to estimate forfeitures in recognizing the expense for our equity awards. Employee taxes paid by withholding shares on vesting of stock compensation are classified as a financing activity in our Condensed Consolidated Statements of Cash Flows.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments.” ASU 2016-15 consists of eight provisions that provide guidance on the classification of certain cash receipts and cash payments in the statement of cash flows. ASU 2016-15 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2017. We do not believe that ASU 2016-15 will have a material effect on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” ASU 2017-04 requires only a one-step quantitative impairment test, whereby a goodwill impairment loss will be measured as the excess of a reporting unit’s carrying amount over its fair value. It eliminates Step 2 of the current two-step goodwill impairment test. ASU 2017-04 is effective for annual reporting periods in fiscal years beginning after December 15, 2019 and early adoption is permitted. We elected to early adopt ASU 2017-04 for the reporting period beginning January 1, 2017. Our adoption of ASU 2017-04 has not had a material effect on our condensed consolidated financial statements.

2. Reporting Segments

Our homebuilding operations are engaged in the development, design, construction, marketing and sale of single-family attached and detached homes in ~~10 states, which are aggreated into four regions, each of which~~18 states. We build and sell homes under our Century Communities and Century Complete brands. Our Century Communities brand is managed by ~~one~~geographic location, and each of our ~~regional presidents.~~four geographic regions offers a wide range of buyer profiles including: entry-level, first and second time move-up, and lifestyle homebuyers, and provides our homebuyers with the ability to personalize their homes through certain option and upgrade selections. Each of our ~~homebuilding divisions~~four geographic regions is considered ana separate operating ~~segment, but~~segment. Our Century Complete brand targets entry-level homebuyers, primarily sells homes through retail studios and the internet, and generally provides no option or upgrade selections. Our Century Complete brand currently has ~~been aggregated into reportable segments defined by our~~operations in 11 states and it is considered a separate operating segment.

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~~regional structure as each region has similar economic characteristics~~The management of our four Century Communities geographic regions and ~~housing products. After our acquisition of UCP, Inc. management was reorganized to report to regional managers, who in turn report directly~~Century Complete reports to our chief operating decision makers (which we refer to as “CODMs”), the Co-Chief Executive Officers of our Company. The CODMs review the results of our operations, including total revenue and income before income tax expense to determine profitability ~~at the regional level.~~and to allocate resources. Accordingly, we have ~~broken~~presented our homebuilding operations ~~into~~as the following five reportable segments:

West (California and Washington)

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

Texas

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

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

Commencing in the first quarter of 2023, our Century Complete operations in Texas were realigned and are now managed under our Texas segment. Accordingly, we have presented segment information under this new basis as of and for the three months ended March 31, 2023, and we have restated the corresponding segment information for those segments ~~based on~~as of December 31, 2022 and for the ~~geographic markets in which we operate:~~three months ended March 31, 2022.

~~West (Southern California, Central Valley, Bay Area and Washington)~~

~~Mountain (Colorado, Nevada and Utah)~~

~~Texas (Houston, San Antonio and Austin)~~

~~Southeast (Georgia, North Carolina and Tennessee)~~

We have ~~also~~ identified our Financial Services operations, which provide mortgage, title, and ~~title~~insurance services to our homebuyers, as a ~~fifth~~sixth reportable segment. Our Corporate operations are a ~~nonoperating~~non-operating segment, as ~~it serves~~our Corporate operations 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 ~~accounting~~legal departments. ~~We have adjusted prior period segment information to conform to~~

Additionally, our wholly owned subsidiary, Century Living, LLC, is engaged in the ~~current period presentation.~~development, construction and management of multi-family rental properties, primarily in Colorado. Century Living, LLC is included in our Corporate segment.

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




	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2017		2016		2017		2016		2023		2022
Revenue:
West	$	73,684	$	—	$	73,684	$	—	$	129,081	$	262,710
Mountain		157,224		141,043		443,526		353,649		246,275		281,360
Texas		36,757		30,036		111,997		106,179		89,532		138,563
Southeast		109,096		82,334		265,951		237,323		87,126		149,600
Century Complete										185,121		157,812
Financial Services		2,955		—		4,697		—		15,855		26,305
Corporate		—		—		—		—		—		—
Total revenue	$	379,716	$	253,413	$	899,855	$	697,151	$	752,990	$	1,016,350

Income (loss) before income tax expense:
West	$	5,259	$	—	$	5,259	$	—	$	7,973	$	71,242
Mountain		19,101		18,995		56,137		47,234		27,808		56,999
Texas		2,166		(288)		6,407		2,138		3,673		22,837
Southeast		6,001		7,848		16,609		21,827		11,966		30,865
Century Complete										13,950		22,425
Financial Services		505		—		(192)		—		5,074		11,151
Corporate		(17,876)		(6,824)		(33,904)		(19,942)		(26,435)		(26,743)
Total income before income tax expense	$	15,156	$	19,731	$	50,316	$	51,257	$	44,009	$	188,776

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



	September 30,		December 31,		March 31,		December 31,
	2017		2016		2023		2022
West	$	302,816	$	—	$	632,820	$	665,827
Mountain		571,124		541,657		1,017,045		1,122,892
Texas		186,840		138,392		506,763		508,862
Southeast		394,918		262,448		420,158		415,887
Century Complete						339,254		376,131
Financial Services		38,010		—		321,703		372,284
Corporate		137,300		65,031		475,234		311,884
Total assets	$	1,631,008	$	1,007,528	$	3,712,977	$	3,773,767

Corporate assets primarily include certain cash and cash equivalents, ~~our investment in unconsolidated subsidiaries,~~certain property and equipment, costs associated with development of multi-family rental properties, prepaid insurance, and deferred financing costs on our revolving line of credit.

3. ~~Business Combinations~~Inventories

On August 4, 2017, we acquired UCP, Inc. UCP is a homebuilder and land developer with expertise in residential land acquisition, development and entitlement, as well as home design, construction and sales, with operations in the States of California, Washington, North Carolina, South Carolina and Tennessee. The merger was unanimously approved by the board of directors of both the Company

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and UCP and was also approved by UCP stockholders on August 1, 2017. In connection with the merger, each share of UCP Class A common stock outstanding immediately prior to the closing was converted into $5.32 in cash and 0.2309 of a newly issued share of our common stock. ~~No fractional shares were issued in connection with the merger, and UCP stockholders received cash in lieu of any fractional shares.~~ Approximately 4.2 million shares of our common stock were issued in connection with the merger and $97.7 million was paid in cash. Outstanding UCP restricted stock units were also converted into an aggregate of 0.2 million of Century Communities restricted stock units pursuant to the merger. We determined that the total fair value of these awards was $6.2 million, of which $1.1 million was attributable to services performed by UCP employees prior to the merger and, as such, was included as consideration. During the three and nine months ended September 30, 2017, we incurred $7.2 million and $8.6 million, respectively, in acquisition related expenses, presented as “Acquisition expense” on the Unaudited Condensed Consolidated Statement of Operations. Total consideration of $206.6 million inclusive of cash acquired of $20.2 million for this merger is summarized as follows (in thousands, except per share amount):


~~UCP Shares (including noncontrolling interest) as of August 4, 2017~~		~~18,085~~
~~Cash paid per share~~	$	~~5.32~~
~~Cash consideration~~	$	~~96,213~~
~~UCP Shares (including noncontrolling interest) as of August 4, 2017~~		~~18,085~~
~~Exchange ratio~~		~~0.2309~~
~~Number of CCS shares issued~~		~~4,176~~
~~Closing price of Century Communities Stock on August 4, 2017~~	$	~~25.80~~
~~Consideration attributable to common stock~~	$	~~107,737~~
~~Cash paid for fractional shares~~	$	~~1,508~~
~~Total replacement award value~~	$	~~1,149~~
~~Total consideration in cash and equity~~	$	~~206,607~~

The acquired assets consisted of approximately 4,199 owned lots within 43 total communities in California, Washington, North Carolina, South Carolina and Tennessee. The 4,199 lots included 346 homes in backlog and 59 model homes. 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.

~~The following table summarizes the initial estimate of the fair value of assets acquired and liabilities assumed as of the acquisition date (in thousands):~~


~~Cash and cash equivalents~~	$	~~20,264~~
~~Accounts receivable~~		~~7,671~~
~~Inventories~~		~~400,011~~
~~Prepaid expenses and other assets~~		~~6,988~~
~~Property and equipment, net~~		~~717~~
~~Deferred tax asset, net~~		~~5,419~~
~~Total assets~~	$	~~441,070~~

~~Accounts payable~~	$	~~10,712~~
~~Accrued expenses and other liabilities~~		~~70,832~~
~~Notes payable and revolving loan agreement~~		~~152,919~~
~~Total liabilities~~		~~234,463~~
~~Purchase price/Net equity~~	$	~~206,607~~

Acquired inventories consist of both acquired land and work in process inventories. We determined the estimate of fair value for acquired land inventory with the assistance of a third-party appraiser primarily using a forecasted cash flow approach for the development, marketing, and sale of each community acquired. Significant assumptions included in our estimate include future per lot development costs, construction and overhead costs, mix of products sold in each community, as well as average sales price, and absorption rates. 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~~

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efforts. The stage of production, as of the acquisition date, ranged from recently started lots to fully completed single family residences. We estimated a market participant would require a gross margin ranging from 3% to 20% based upon the stage of production of the individual lot. The purchase price accounting reflected in the accompanying financial statements is preliminary and is based upon estimates and assumptions that are subject to change within the measurement period (up to one year from the acquisition date). The measurement period remains open pending the completion of valuation procedures related to the acquired assets and assumed liabilities.

On August 17, 2017, we sold BMCH South Carolina, LLC, a subsidiary of UCP, Inc. that was recently acquired as part of our acquisition of UCP, Inc., to a third party for approximately $17.1 million. Accordingly, the estimated fair value of the acquired assets of BMCH South Carolina, LLC was determined to be equal to the disposal price given the proximity of the two transactions.

~~We determined that UCP’s carrying costs approximated fair value for all other acquired assets and assumed liabilities.~~

UCP’s results of operations, which include homebuilding revenues of $77.6 million and net income of $5.6 million, are included in the accompanying consolidated statements of operations for the period from August 4, 2017 through September 30, 2017. Net income includes adjustments for inventory and acquisition expenses.

Unaudited pro forma income before tax expense for the three and nine months ended September 30, 2017 and 2016 gives effect to including the results of the acquisition of UCP as of January 1, 2017 and 2016, respectively. Unaudited pro forma income before tax expense adjusts the operating results of UCP to reflect the additional costs that would have been recorded assuming the fair value adjustments had been applied as of the beginning of the period presented and excludes acquisition expense incurred related to the transaction (in thousands, except share and per share information):

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016
Revenues
$
416,223

$
347,153

$
1,142,371

$
941,953

Income before tax expense
$
24,604

$
22,303

$
69,950

$
55,052
Tax expense

(10,731)

(6,270)

(23,878)

(16,476)
Net income
$
13,873

$
16,033

$
46,072

$
38,576
Less: Undistributed earnings allocated to participating securities

(72)

(242)

(352)

(734)
Numerator for basic and diluted pro forma EPS
$
13,801

$
15,791

$
45,720

$
37,842

Pro forma weighted average shares-basic

27,034,192

24,849,375

26,342,362

24,819,536
Pro forma weighted average shares-diluted

27,314,776

24,997,920

26,579,292

24,907,783

Pro forma basic EPS
$
0.51

$
0.64

$
1.74

$
1.52
Pro forma diluted EPS
$
0.51

$
0.63

$
1.72

$
1.52

~~4. Inventories~~

Inventories included the following (in thousands):



	September 30,		December 31,		March 31,		December 31,
	2017		2016		2023		2022
Homes under construction	$	897,402	$	455,454	$	1,115,524	$	1,213,919
Land and land development		415,375		373,496		1,559,679		1,554,951
Capitalized interest		40,212		28,935		65,984		61,775
Total inventories	$	1,352,989	$	857,885	$	2,741,187	$	2,830,645

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 either as loans with servicing rights released, or with servicing rights retained, in the secondary mortgage market within a short period of time after origination, generally within 30 days. Inspire primarily finances these loans using its mortgage repurchase facilities.

As of March 31, 2023 and December 31, 2022, Inspire had mortgage loans held for sale with an aggregate fair value of $155.7 million and $203.6 million, respectively, and an aggregate outstanding principal balance of $153.8 million and $202.0 million, respectively. Net gains on the sale of mortgage loans were $1.8 million and $10.4 million for the three months ended March 31, 2023 and 2022, respectively. The loss from the change in fair value for mortgage loans held for sale was nominal for the three months ended March 31, 2023 and was $9.7 million for the three months ended March 31, 2022. Mortgage loans held for sale and mortgage servicing rights are carried at fair value, with gains and losses from the changes in fair value reflected in financial services revenue on our condensed consolidated statements of operations. Management believes carrying mortgage 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. Net gains and losses from the sale of mortgage loans held for sale, which are recognized based upon the difference between the sales proceeds and carrying value of the related loans upon sale, are also included in financial services revenue on our condensed consolidated statements of operations.

Mortgage loans in process for which interest rates were locked by borrowers, or interest rate lock commitments, totaled approximately $98.9 million and $68.1 million at March 31, 2023 and December 31, 2022, respectively, and carried a weighted average interest rate of approximately 5.6% and 6.1%, respectively. Interest rate risks related to these obligations are typically mitigated by the preselling of loans to investors or through our interest rate hedging program. Derivative instruments used to economically hedge our market and interest rate risk are carried at fair value. Derivative instruments typically include interest rate lock commitments and forward commitments on mortgage-backed securities. Changes in fair value of these derivatives as well as any gains or losses upon settlement are reflected in financial services revenue on our condensed consolidated statements of operations. Refer to Note 13 – Fair Value Disclosures for further information regarding our derivative instruments.

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5. Prepaid Expenses and Other Assets

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

September 30,

December 31,

2017

2016
Prepaid insurance

$
8,327

$
12,236
Lot option and escrow deposits

26,873

12,320
Performance deposits

5,732

1,544
Deferred financing costs revolving line of credit, net

2,030

2,637
Restricted cash

6,850

1,505
Secured note receivable

2,772

2,850
Golf course, net

5,294

5,857
Other

4,484

1,508
Total prepaid expenses and other assets

$
62,362

$
40,457


	March 31,		December 31,
	2023		2022
Prepaid insurance	$	28,921	$	31,716
Lot option and escrow deposits		42,364		48,354
Performance deposits		12,835		12,626
Restricted cash ⁽¹⁾		14,886		11,768
Multi-family rental properties under construction		73,475		56,615
Mortgage loans held for investment at fair value		20,078		18,875
Mortgage loans held for investment at amortized cost		6,420		6,574
Mortgage servicing rights		23,901		24,164
Derivative assets		3,082		1,958
Other assets and prepaid expenses		34,543		37,885
Total prepaid expenses and other assets	$	260,505	$	250,535

~~6. Investment in Unconsolidated Subsidiaries~~

~~On November 1, 2016, we acquired a 50% ownership~~(1)Restricted cash consists of ~~WJH LLC (which we refer~~restricted cash related to ~~as “WJH”), which is the successor to Wade Jurney Homes, Inc. and Wade Jurney of Florida, Inc.,~~land development, earnest money deposits for ~~$15.0 million, of which $1.0 million is~~home sale contracts held by the Company for potential indemnification claims for a period of 18 months following the closing. WJH primarily targets first-time homebuyers in the Southeastern United States. As a result of the transaction, we own 50% of WJHthird parties as required by various jurisdictions, and ~~Wade Jurney Jr., an individual, owns the~~certain compensating balances associated with our mortgage repurchase facilities and other 50% interest. Each party contributed an additional $3.0 million in capital to WJH upon its formation and we incurred $0.1 million in related acquisition costs. The Company and Wade Jurney Jr. share responsibility for all of WJH’s strategic decisions, with Wade Jurney Jr. continuing to manage the day-to-day operations under the existing operating model. Our investment in WJH is treated as an unconsolidated investment under the equity method of accounting. financing obligations.

As of September 30, 2017, our investment in WJH was $20.7 million and we recognized $3.7 million and $7.6 million of equity in income of unconsolidated subsidiaries during the three and nine months ended September 30, 2017, respectively. During the three and nine months ended September 30, 2017, we received operating distributions from WJH of $1.4 million and $5.2 million, respectively.

6. Accrued Expenses and Other Liabilities

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



	September 30,		December 31,		March 31,		December 31,
	2017		2016		2023		2022
Earnest money deposits	$	15,086	$	7,304	$	16,749	$	17,903
Warranty reserve		8,850		2,479		12,331		13,136
Self-insurance reserve						19,076		16,998
Accrued compensation costs		13,949		12,603		33,107		80,415
Land development and home construction accruals		66,119		31,486		130,610		128,483
Liability for product financing arrangement		21,893		—
Accrued interest		14,936		3,039		13,753		10,670
Income taxes payable		—		783		677		—
Other		16,872		4,620
Derivative liabilities						1,692		1,526
Other accrued liabilities						30,417		30,457
Total accrued expenses and other liabilities	$	157,705	$	62,314	$	258,412	$	299,588

117. Warranties

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~~8. 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 condensed 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~~a model that incorporates historical payment trends and adjust the amounts recorded, if necessary. Based on ~~favorable~~ warranty payment trends relative to our estimates at the time of home closing, we reduced our warranty reserve by ~~$0.9~~$0.5 million and ~~$1.2~~$0.6 million during the three ~~and nine~~ months ended ~~September 30, 2017, respectively, which is~~March 31, 2023 and 2022, respectively. These adjustments are included ~~as a reduction to~~in cost of ~~homes~~home sales revenues on our condensed consolidated ~~statement~~statements of operations.

~~The following table summarizes the changes~~ Changes in our warranty accrual for the three months ended March 31, 2023 and 2022 are detailed in the table below (in thousands):



	Three Months Ended March 31,
	2023		2022
Beginning balance	$	13,136	$	13,343
Warranty expense provisions		1,829		1,902
Payments		(2,176)		(1,185)
Warranty adjustment		(458)		(557)
Ending balance	$	12,331	$	13,503

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8. Self-Insurance Reserve

We maintain general liability insurance coverage, including coverage for certain construction defects. These insurance policies protect us against a portion of the risk of loss from claims, subject to certain self-insured per occurrence and aggregate retentions, deductibles, and available policy limits. In circumstances where we have elected to retain a higher portion of the overall risk for construction defect claims in return for a lower initial premium, we reserve for the estimated costs that we will incur that are above our coverage limits or that are not covered by our insurance policies. The reserve is recorded on an undiscounted basis at the time revenue is recognized for each home closing. Amounts accrued, which are included in accrued expenses and other liabilities on the consolidated balance sheets, are based on third party actuarial analyses that are primarily based on industry data and partially on our historical claims, which include estimates of claims incurred but not yet reported. Adjustments to estimated reserves are recorded in the period in which the change in estimate occurs. Our self-insurance liability is presented on a gross basis without consideration of insurance recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any. Estimates of insurance recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any, are recorded as receivables when such recoveries are considered probable. During the three months ended March 31, 2023 and 2022, we recorded no change to our self-insurance reserve. Any adjustments are included in cost of home sales revenues on our condensed consolidated statements of operations.

Changes in our self-insurance reserve for incurred but not reported construction defect claims for the three months ended March 31, 2023 and 2022 are detailed in the table below (in thousands):



	Three Months Ended March 31,
	2023		2022
Beginning balance	$	16,998	$	5,103
Self-insurance expense provisions		2,115		2,372
Payments		(37)		—
Self-insurance adjustment		—		—
Ending balance	$	19,076	$	7,475

9. Debt

Our outstanding debt obligations included the following as of March 31, 2023 and December 31, 2022 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016
Beginning balance

$
3,057

$
2,754

$
2,479

$
2,622
Warranty reserve assumed in business combination

6,202

—

6,202

—
Warranty expense provisions

1,245

686

2,827

2,078
Payments

(710)

(554)

(1,458)

(1,194)
Warranty adjustment

(944)

(291)

(1,200)

(911)
Ending balance

$
8,850

$
2,595

$
8,850

$
2,595


	March 31,		December 31,
	2023		2022
3.875% senior notes, due August 2029⁽¹⁾	$	495,077	$	494,884
6.750% senior notes, due May 2027⁽¹⁾		496,598		496,394
Other financing obligations⁽²⁾		34,940		28,134
Notes payable		1,026,615		1,019,412
Revolving line of credit		—		—
Mortgage repurchase facilities		149,784		197,626
Total debt	$	1,176,399	$	1,217,038

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

~~9. Notes Payable~~⁽²⁾As of March 31, 2023, other financing obligations included $20.4 million related to insurance premium notes and certain secured borrowings, as well as $14.5 million outstanding under the construction loan agreements. As of December 31, 2022, other financing obligations included $20.7 million related to insurance premium notes and certain secured borrowings, as well as $7.4 million outstanding under the construction loan agreements.

Construction Loan Agreements

On March 17, 2023, a wholly owned subsidiary of Century Living, LLC entered into a construction loan agreement with UMB Bank, N.A., and certain wholly owned subsidiaries of Century Living, LLC, are party to construction loan agreements entered into during 2022 with PNC Bank, National Association and U.S. Bank National Association, a national banking association, d/b/a Housing Capital Company (which along with UMB Bank, N.A., we collectively refer to as “the lenders”), respectively. The three construction loan agreements collectively provide that we may borrow up to $187.6 million from the lenders for purposes of construction of multi-family projects in Colorado, with advances made by the lenders upon the satisfaction of certain conditions. Borrowings under the construction loan agreements bear interest at various rates, including a fixed rate, and floating interest rates per annum equal to the Secured Overnight Financing Rate (which we refer to as “SOFR”) and the Bloomberg Short-term Bank Yield Index, plus an applicable margin. The outstanding principal balances and all accrued and unpaid interest is due on varying maturity dates through March 17, 2028, with certain of the construction loan agreements allowing for the option to extend the maturity dates for a period of 12 months if certain conditions

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are satisfied. The construction loan agreements contain customary affirmative and negative covenants (including covenants related to construction completion, and limitations on the use of loan proceeds, transfers of land, equipment, and improvements), as well as customary events of default.

As of March 31, 2023, $14.5 million was outstanding under the construction loan agreements, with borrowings bearing a weighted average interest rate of 6.778% during the three months ended March 31, 2023, and we were in compliance with all covenants thereunder.

Revolving Line of Credit

~~6.875% senior notes~~

In ~~May 2014,~~2021, we ~~completed~~entered into a ~~private offering of $200.0 million in aggregate principal amount of senior unsecured notes due 2022~~Second Amended and Restated Credit Agreement (which we refer to as the ~~“Initial Senior Notes”~~“Second A&R Credit Agreement”) in reliance on Rule 144A and Regulation S under the Securities Act of 1933, as amended (which we refer to as the “Securities Act”). The Initial Senior Notes were issued under the Indenture, dated as of May 5, 2014, among the Company, our subsidiary guarantors party thereto, and U.S Bank National Association, as trustee (which we refer to as the “May 2014 Indenture,” as it may be supplemented or amended from time to time). The Initial Senior Notes were issued at a price equal to 99.239% of their principal amount, and we received net proceeds of approximately $193.3 million. In February 2015, we completed an offer to exchange $200.0 million in aggregate principal amount of our 6.875% senior notes due 2022, which are registered under the Securities Act (which we refer to as the “Initial Exchange Notes”), for all of the Initial Senior Notes. The terms of the Initial Exchange Notes are identical in all material respects to the Initial Senior Notes, except that the Initial Exchange Notes are registered under the Securities Act and the transfer restrictions, registration rights, and additional interest provisions that were applicable to the Initial Senior Notes do not apply to the Initial Exchange Notes.

In April 2015, we completed a private offering of an additional $60 million in aggregate principal amount of our 6.875% senior notes due 2022 (which we refer to as the “April 2015 Senior Notes”) in reliance on Rule 144A and Regulation S under the Securities Act. The April 2015 Senior Notes were issued at a price equal to 98.26% of their principal amount, and we received net proceeds of approximately $58.5 million. The April 2015 Senior Notes were additional notes issued under the May 2014 Indenture pursuant to which the Initial Exchange Notes were issued. In October 2015, we completed an offer to exchange $60.0 million in aggregate principal amount of our 6.875% senior notes due 2022, which are registered under the Securities Act (which we refer to as the “October 2015 Exchange Notes”), for all of the April 2015 Senior Notes. The terms of the October 2015 Exchange Notes are identical in all material respects to the April 2015 Senior Notes, except that the October 2015 Exchange Notes are registered under the Securities Act and the transfer restrictions, registration rights, and additional interest provisions that were applicable to the April 2015 Senior Notes do not apply to the October 2015 Exchange Notes.

In January 2017, we completed a private offering of an additional $125 million in aggregate principal amount of our 6.875% senior notes due 2022 (which we refer to as the “January 2017 Senior Notes”) in reliance on Rule 144A and Regulation S under the Securities Act. The January 2017 Senior Notes were issued at a price equal to 102.00% of their principal amount, and we received net proceeds of approximately $125.4 million. The January 2017 Senior Notes were additional notes issued under the May 2014 Indenture pursuant to which the Initial Exchange Notes and the October 2015 Exchange Notes were issued. In April 2017, we completed an offer to exchange $125.0 million in aggregate principal amount of our 6.875% senior notes due 2022, which are registered under the Securities Act (which we refer to as the “April 2017 Exchange Notes”), for all of the January 2017 Senior Notes. The terms of the April 2017 Exchange Notes are identical in all material respects to the January 2017 Senior Notes, except that the April 2017 Exchange Notes are registered under the Securities Act and the transfer restrictions, registration rights, and additional interest provisions that were applicable to the January 2017 Senior Notes do not apply to the April 2017 Exchange Notes.

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The Initial Exchange Notes, October 2015 Exchange Notes, and April 2017 Exchange Notes (which we refer to collectively, as the “Existing 6.875% Notes”) will be treated as a single series of notes under the May 2014 Indenture, and will vote as a single class of notes for all matters submitted to a vote of holders under the May 2014 Indenture.

The Existing 6.875% Notes are unsecured senior obligations which are guaranteed on an unsecured senior basis by certain of our current and future subsidiaries. The Existing 6.875% Notes contain certain restrictive covenants on issuing future secured debt and other transactions. The aggregate principal balance of the Existing 6.875% Notes is due May 2022, with interest only payments due semi-annually in May and November of each year.

~~As of September 30, 2017, the aggregate amount outstanding on the Existing 6.875% Notes was $378.9 million.~~

~~5.875% senior notes~~

In May 2017, we completed a private offering of $400 million in aggregate principal amount of our 5.875% Senior Notes due 2025 (which we refer to as the “May 2017 Senior Notes”) in reliance on Rule 144A and Regulation S under the Securities Act. The May 2017 Senior Notes were issued under the Indenture, dated as of May 12, 2017, among the Company, our subsidiary guarantors party thereto, and U.S Bank National Association, as trustee (which we refer to as the “May 2017 Indenture,” as it may be supplemented or amended from time to time). The May 2017 Senior Notes were issued at a price equal to 100.00% of their principal amount, and we received net proceeds of approximately $395.5 million.

~~As of September 30, 2017, we had $394.9 million outstanding on the May 2017 Senior Notes.~~

~~Other financing obligations~~

As of September 30, 2017, we had four insurance premium notes with an outstanding balance totaling $2.3 million. Two of these notes mature in December 2017 and the other two mature in February 2018. These insurance premium notes bear interest at a rate of 3.88%, 3.98%, 6.23%, and 6.23%, respectively. During the nine months ended September 30, 2017, we repaid one insurance premium note with an outstanding balance of $0.1 million. As of December 31, 2016, we had an aggregate of $6.0 million of outstanding insurance premium notes.

~~Revolving line of credit~~

~~On October 21, 2014, we entered into a credit agreement~~ with Texas Capital Bank, National Association, as Administrative Agent and L/C Issuer, and the lenders ~~from time to time~~ party ~~thereto~~thereto. The Second A&R Credit Agreement, which amended and restated our prior Amended and Restated Credit Agreement, provides us with a senior unsecured revolving line of credit (which ~~as modified as described below,~~ we refer to as the ~~“Credit Agreement”~~“revolving line of credit”). of up to $800.0 million, and unless terminated earlier, will mature on April 30, 2026. The ~~Credit Agreement provided us with a~~ revolving line of credit includes a $250.0 million sublimit for standby letters of ~~up to $120 million (which, as modified as described below, we refer to as the “Revolving Credit Facility”).~~

credit. Under the terms of the Second A&R Credit Agreement, ~~we were~~the Company is entitled to request an increase in the size of the ~~Revolving Credit Facility~~revolving line of credit by an amount not exceeding ~~$80~~$200.0 million. If the existing lenders elect not to provide the full amount of a requested increase, we may invite one or more other lender(s) to become a party to the Credit Agreement, subject to the approval of the Administrative Agent and L/C Issuer. The Credit Agreement includes a letter of credit sublimit of $20 million. TheOur obligations under the ~~Revolving~~Second A&R Credit ~~Facility were~~Agreement are guaranteed by certain of our subsidiaries.

On July 31, 2015, we entered into a First Modification Agreement with Texas Capital Bank, National Association, as Administrative Agent, the lenders party thereto, and our subsidiary guarantors party thereto, which modified the Credit Agreement. The First Modification Agreement, among other things, (i) increased the Revolving Credit Facility from $120 million to $200 million, (ii) extended the maturity date of the Revolving Credit Facility from October 21, 2017 to October 21, 2018, (iii) admitted Bank of America, N.A. as a new lender under the Revolving Credit Facility, and ( iv) increased the amount of the increase in the size of the Revolving Credit Facility that we had the option to request, from time to time, from an amount not exceeding $80 million to an amount not exceeding $100 million, subject to the terms and conditions of the First Modification Agreement and the Credit Agreement.

On December 22, 2015, we entered into a Second Modification Agreement with Texas Capital Bank, National Association, as Administrative Agent, the lenders party thereto, and our subsidiary guarantors party thereto, which further modified the Credit Agreement. The Second Modification Agreement, among other things, (i) increased the Revolving Credit Facility from $200 million to $300 million, and (ii) admitted Compass Bank, an Alabama Banking Corporation, and U.S. Bank National Association as new lenders under the Revolving Credit Facility.

On August 19, 2016, we entered into a Third Modification Agreement with Texas Capital Bank, National Association, as Administrative Agent, the lenders party thereto, and our subsidiary guarantors party thereto, which further modified the Credit Agreement. The Third Modification Agreement, among other things, (i) increased the Revolving Credit Facility from $300 million to $380 million through our exercise of $80 million of the accordion feature of the Credit Agreement, (ii) admitted Citibank, N.A. and Flagstar Bank, FSB as new

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lenders under the Revolving Credit Facility, (iii) increased certain lenders’ respective commitments to the Revolving Credit Facility, and (iv) extended the term of the Revolving Credit Facility by one year to mature on October 21, 2019.

On February 24, 2017, we entered into a Commitment Increase Agreement with Texas Capital Bank, National Association, as Administrative Agent, Flagstar Bank, FSB (which we refer to as “Flagstar”), and our subsidiary guarantors party thereto. The Commitment Increase Agreement supplements the Credit Agreement, and (i) increased the Revolving Credit Facility from $380 million to $400 million through our exercise of the remaining $20 million of the accordion feature of the Credit Agreement, and (ii) increased Flagstar’s commitment to the Credit Facility.

Unless terminated earlier, the principal amount under the Revolving Credit Facility, together with all accrued unpaid interest and other amounts owing thereunder, if any, will be payable in full on October 21, 2019, the maturity date of the Revolving Credit Facility. Borrowings under the Revolving Credit Facility bear interest at a floating rate equal to the London Interbank Offered Rate plus an applicable margin between 2.75% and 3.25% per annum, or, in the Administrative Agent’s discretion, a base rate plus an applicable margin between 1.75% and 2.25% per annum. The “applicable margins” described above are determined by a schedule based on our leverage ratio, as defined in the Credit Agreement. The 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 Credit Facility.

~~The~~A&R 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. ~~The~~On December 21, 2022, we entered into a First Modification Agreement with Texas Capital Bank (formerly known as Texas Capital Bank, National Association), as Administrative Agent, amending the Second A&R Credit Agreement ~~also requires us~~pursuant to ~~maintain~~which, effective January 3, 2023, all existing borrowings using an interest rate based on a LIBOR reference rate had the interest rate replaced with one based on an adjusted term SOFR reference rate, which equals the greater of (i) ~~a leverage ratio of not more than 1.75 to 1.0 as~~0.50% or (ii) the one-month quotation of the ~~last day~~secured overnight financing rate administered by the Federal Reserve Bank of any fiscal quarter, based upon our and our subsidiaries’ (on a consolidated basis) ratio of debt to tangible net worth, (ii) an interest coverage ratio of not less than 1.50 to 1.0 for any four fiscal quarter period, based upon our and our subsidiaries’ (on a consolidated basis) ratio of EBITDA to cash interest expense, (iii) a consolidated tangible net worth of not less than the sum of $250 million,New York, plus 50% of the net proceeds of any issuances of equity interests by us and the guarantors of the Revolving Credit Facility, plus 50% of the amount of our and our subsidiaries’ consolidated net income, (iv) liquidity of not less than $25 million, and (v) a risk asset ratio of not more than 1.25 to 1.0, based upon the ratio of the book value of all risk assets owned by us and our subsidiaries to our tangible net worth. 0.10%.

As of ~~September 30, 2017,~~March 31, 2023 and December 31, 2022, no amounts were outstanding under the revolving line of credit, respectively, and we were in compliance with all covenants under the Second A&R Credit Agreement.

~~As of September 30, 2017, we did not have any amounts outstanding under the Credit Agreement.~~

Mortgage Repurchase ~~Facility~~Facilities – Financial Services

~~On April 10, 2017,~~

Inspire ~~Home Loans Inc.~~is a party to mortgage warehouse facilities with Comerica Bank and J.P. Morgan, and formerly Wells Fargo, (since the agreement with Wells Fargo was terminated during the three months ended March 31, 2023) (which ~~we refer to as “Inspire”), an indirect wholly-owned subsidiary of the Company, entered into a Master Repurchase Agreement (which~~facilities we refer to as the ~~“Master Repurchase Agreement”~~“repurchase facilities”) ~~with Branch Banking and Trust Company, as the buyer thereunder (which we refer to as the “Buyer”). The Master Repurchase Agreement provides~~, which provide Inspire with ~~a revolving mortgage loan~~uncommitted repurchase ~~facility~~facilities of up to ~~$25~~an aggregate of $200.0 million ~~(which we refer to~~ as ~~the “Repurchase Facility”). The primary purpose~~ of the Repurchase Facility is to provide financing and liquidity to Inspire by facilitating purchase transactions in which Inspire transfers eligible loans to the Buyer, and the Buyer transfers funds, subject to a simultaneous agreementMarch 31, 2023, secured by the ~~Seller to repurchase from the Buyer such eligible~~mortgage loans (i) upon written notice to the Buyer by Inspire, (ii) on a prescribed date in the future, (iii) upon the occurrence of prescribed events, or (iv) on the Termination Date (as defined below). The purchase transactions are based on and subject to the terms and conditions set forth in the Master Repurchase Agreement. The maximum aggregate amount of the Buyer’s commitment to fund purchase transactions under the Repurchase Facility is $25 million (which we refer to as the “Commitment”), subject to certain sublimits. The Repurchase Facility and the Buyer’s Commitment thereunder expires on the earlier of (i) April 9, 2018, and (ii) the date when the Buyer’s Commitment is terminated pursuant to the Master Repurchase Agreement or by operation of law (which we refer to as the “Termination Date”).

~~On September 15, 2017, Inspire entered into a second Master Repurchase Facility (which we refer to as the “Second Master Repurchase Agreement”) with J.P. Morgan Chase Bank, N.A. as the buyer~~financed thereunder. The ~~Second Master Repurchase Agreement provides Inspire with~~repurchase facilities have varying short term maturity dates through December 21, 2023 and bear a ~~revolving mortgage loan repurchase facility~~weighted average interest rate of ~~up to $35 million (which we refer to as~~6.38% during the ~~“Second Repurchase Facility”). The purpose of the Second Repurchase Facility is similar to the purpose outlined above for the Repurchase Facility.~~ three months ended March 31, 2023.

Amounts outstanding under the ~~Repurchase Facility and Second Repurchase Facility~~repurchase facilities are not guaranteed by us or any of our ~~subsidiaries. Each of~~subsidiaries, and the ~~Master Repurchase Agreement and Second Master Repurchase Agreement contains~~agreements contain various affirmative and negative covenants applicable to Inspire that are customary for arrangements of this type. As of ~~September 30, 2017,~~March 31, 2023 and December 31, 2022, we had $149.8 million and $197.6 million outstanding under the repurchase facilities, respectively, and were in compliance with all covenants ~~under each~~thereunder.

10. Interest on Senior Notes and Revolving Line of ~~the Repurchase Facility~~Credit

Interest on our senior notes and ~~Second Repurchase Facility.~~

AsRevolving Line of September 30, 2017, there was an aggregate $27.5 million outstanding under both the Master Repurchase Agreement and Second Master Repurchase Agreement, and such outstanding amount was collateralized by the mortgage loans held for sale.

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~~10. Interest~~

~~Interest~~Credit is capitalized to inventories while the related communities are being actively developed and until homes are completed. As our qualifying assets exceeded our outstanding debt during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, we capitalized all interest costs incurred on these facilities during these ~~periods, except for interest incurred on capital leases of equipment related to our golf course operations.~~periods.

Our interest costs ~~are~~were as follows (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2017		2016		2017		2016		2023		2022
Interest capitalized beginning of period	$	35,668		26,577	$	28,935		21,533		61,775		53,379
Interest capitalized during period		13,338		6,743		31,902		19,772		14,016		14,019
Less: capitalized interest in cost of sales		(8,794)		(5,192)		(20,625)		(13,177)		(9,807)		(12,146)
Interest capitalized end of period	$	40,212		28,128	$	40,212		28,128		65,984		55,252

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11. 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 ~~2017~~2023 estimated annual effective tax rate, before discrete items, of ~~36.3%~~25.0% is driven by our blended federal and state statutory rate of ~~37.8%~~24.6%, ~~which is partially offset by net estimated benefits of 1.5% primarily from additional~~and certain permanent differences between GAAP and tax, including disallowed deductions for ~~tax related to domestic production activities~~executive compensation and estimated federal energy home credits for the current year home deliveries, which benefited our rate by 3.2%. This benefit was partially offset by non-deductible acquisition costs associated with our acquisition of UCP, Inc., along with other items which increased our rate by 1.7%. Our estimated annual rate of 36.3% was also benefited by discrete items for excess tax benefits related to share based awards that vested during the nine months ended September 30, 2017, resultingcombined resulted in a ~~total tax rate~~net increase of ~~34.2%~~0.4%.

For the three months ended ~~September 30, 2017~~March 31, 2023, our estimated annual rate of 25.0% was benefitted by discrete items which had a net impact of decreasing our rate by 0.7%, including excess tax benefits for vested stock-based compensation.

Our estimated annual rate for the three months ended March 31, 2023 of 25.0% increased by 260 basis points as compared to our effective tax rate for the year ended December 31, 2022 of 22.4%. The increase in our estimated rate is a result of the enactment of the Inflation Reduction Act of 2022 during the third quarter of 2022, which modified the energy efficient home credit beginning with homes closed on or after January 1, 2023 and ~~2016,~~provided for more stringent energy standards than previous periods.

For the three months ended March 31, 2023 and 2022, we recorded income tax expense of ~~$5.7~~$10.7 million and ~~$6.4~~$46.3 million, respectively. ~~For the nine months ended September 30, 2017 and 2016, we recorded income tax expense of $17.2 million and $16.8 million, respectively.~~

12. Fair Value Disclosures

~~Accounting Standards Codification Topic 820,~~

Fair ~~Value Measurement, defines~~value measurements are used for the Company’s mortgage loans held for sale, mortgage loans held for investment, mortgage servicing rights, interest rate lock commitments and other derivative instruments on a recurring basis. We also utilize fair value asmeasurements on a non-recurring basis for inventories and intangible assets when events and circumstances indicate that the ~~price that would be received for selling an asset or paid~~carrying value is not recoverable. The fair value hierarchy and its application to ~~transfer a liability in an orderly transaction between market participants at measurement date and requires~~the Company’s assets and liabilities ~~carried at fair value to be classified and disclosed in the following three categories:~~is as follows:

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 the measurement date.

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

Derivative assets and liabilities – Derivative assets are associated with interest rate lock commitments and investor commitments on loans and derivative liabilities are associated with forward commitments. Fair value is based on market prices for similar instruments.

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

Mortgage servicing rights - The fair value of the mortgage servicing rights is calculated using third-party valuations. The key assumptions, which are generally unobservable inputs, used in the valuation of the mortgage servicing rights include mortgage prepayment rates, discount rates and cost to service.

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

The following outlines the Company’s assets and liabilities measured at fair value on a recurring basis at March 31, 2023 and December 31, 2022, respectively (in thousands):


			March 31,		December 31,
	Balance Sheet Classification	Hierarchy	2023		2022

Mortgage loans held for sale	Mortgage loans held for sale	Level 2	$	155,732	$	203,558
Mortgage loans held for investment at fair value ⁽¹⁾	Prepaid expenses and other assets	Level 3	$	20,078	$	18,875
Derivative assets	Prepaid expenses and other assets	Level 2	$	3,082	$	1,958
Mortgage servicing rights ⁽²⁾	Prepaid expenses and other assets	Level 3	$	23,901	$	24,164
Derivative liabilities	Accrued expenses and other liabilities	Level 2	$	1,692	$	1,526

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

⁽²⁾The unobservable inputs used in the valuation of the mortgage servicing rights include mortgage prepayment rates, discount rates and cost to service, which were 8.1%, 9.0%, and $0.073 per year per loan, respectively, as of March 31, 2023, and 7.6%, 9.0%, and $0.072 per year per loan, respectively, as of December 31, 2022. The high and low end of the range of unobservable inputs used in the valuation did not result in a significant change to the fair value measurement.

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

September 30, 2017

December 31, 2016

Hierarchy

Carrying

Fair Value

Carrying

Fair Value
Secured notes receivable(1)

Level 2

$
2,772

$
2,766

$
2,850

$
2,828
Mortgage loans held for sale(2)

Level 2

$
30,071

$
30,071

$
—

$
—

6.875% senior notes(3)

Level 2

$
378,901

$
398,512

$
253,089

$
260,090
5.875 % senior notes (3)

Level 2

$
394,851

$
395,850

$
—

$
—
Revolving line of credit(4)

Level 2

$
—

$
—

$
195,000

$
195,000
Insurance premium notes(4)

Level 2

$
2,264

$
2,264

$
5,999

$
5,999
Mortgage repurchase facilities(4)

Level 2

$
27,465

$
27,465

$
—

$
—


	Three Months Ended March 31,
Mortgage servicing rights		2023		2022
Beginning of period	$	24,164	$	13,701
Originations		1,045		3,406
Settlements		(151)		(305)
Changes in fair value		(1,157)		1,248
End of period	$	23,901	$	18,050

	Three Months Ended March 31,
Mortgage loans held-for-investment at fair value		2023		2022
Beginning of period	$	18,875	$	10,631
Transfers from loans held for sale		1,434		3,926
Settlements		—		(529)
Reduction in unpaid principal balance		(104)		(54)
Changes in fair value		(127)		(19)
End of period	$	20,078	$	13,955

For the financial assets and liabilities that the Company does not reflect at fair value, the following present both their respective carrying value and fair value at March 31, 2023 and December 31, 2022, respectively (in thousands).

⁽¹⁾

~~Estimated fair value of the secured notes received was based on cash flow models discounted at market interest rates that considered the underlying risks of the note.~~



		March 31, 2023				December 31, 2022

	Hierarchy	Carrying		Fair Value		Carrying		Fair Value
Cash and cash equivalents	Level 1	$	405,722	$	405,722	$	296,724	$	296,724
3.875% senior notes ⁽¹⁾⁽²⁾	Level 2	$	495,077	$	425,000	$	494,884	$	395,000
6.750% senior notes ⁽¹⁾⁽²⁾	Level 2	$	496,598	$	492,500	$	496,394	$	477,500
Revolving line of credit⁽³⁾	Level 2	$	—	$	—	$	—	$	—
Other financing obligations⁽³⁾⁽⁴⁾	Level 3	$	34,940	$	34,940	$	28,134	$	28,134
Mortgage repurchase facilities⁽³⁾	Level 2	$	149,784	$	149,784	$	197,626	$	197,626

⁽²⁾

~~The mortgage loans held for sale are carried at fair value as of September 30, 2017, which was based on quoted market prices for those committed mortgage loans.~~

⁽³⁾

~~Estimated fair value of the senior notes as of September 30, 2017 and December 31, 2016 incorporated recent trading activity in inactive markets.~~

⁽⁴⁾

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

⁽²⁾Carrying amounts include any associated unamortized deferred financing costs, premiums and discounts. As of March 31, 2023, these amounts totaled $4.9 million and $3.4 million for the 3.875% senior notes and 6.750% senior notes, respectively. As of December 31, 2022, these amounts totaled $5.1 million and $3.6 million for the 3.875% senior notes and 6.750% senior notes, respectively.

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

~~The carrying amount of cash and cash equivalents~~ approximates fair ~~value.~~ value due to short-term nature and interest rate terms.

⁽⁴⁾Other financing obligations included $20.4 million related to insurance premium notes and certain secured borrowings that generally bore interest rates ranging from 2.40% to 6.40%, and $14.5 million related to outstanding borrowings on the construction loan agreements that bore a weighted average interest rate of 6.778% during the period ended March 31, 2023. Other financing obligations included $20.7 million related to insurance premium notes and certain secured borrowings that generally bore interest rates ranging from 2.40% to 5.84%, and $7.4 million related to outstanding borrowings on the construction loan agreements that bore a weighted average interest rate of 5.634% during the period ended December 31, 2022.

Non-financial assets and liabilities include items such as inventory and ~~long-lived assets~~property and equipment that are measured at fair value when acquired and ~~resulting from impairment,~~as a result of impairments, if deemed necessary.No impairment charges were recorded in the three months ended March 31, 2023 and 2022. When impairment charges are recognized, the estimated fair value of communities are determined through a discounted cash flow approach utilizing Level 3 inputs. Changes in our cash flow projections in future periods related to these communities may change our conclusions on the recoverability of inventory in the future.

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13. Stock-Based Compensation

During the three months ended ~~September 30, 2017,~~March 31, 2023 and 2022, we granted restricted stock units (which we refer to as “RSUs”) covering 0.2 million and 0.2 million shares of ~~restricted~~common stock, ~~units~~respectively, with a ~~weighted average~~ grant date fair value of ~~$20.36~~$62.61 and $64.37 per share, ~~which~~respectively, that primarily vest over a ~~two or five~~three year period from the grant date. These awards were issued in connection with our acquisition of UCP Inc., to UCP employees as replacement awards for the restricted stock units they held with UCP prior to the acquisition. period.

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023, we did not grant performance share units (which we refer to as “PSUs”). During the three months ended March 31, 2022, we granted PSUs covering up to 0.5 million shares of ~~restricted~~common stock, ~~units~~assuming maximum level of performance, with a ~~weighted average~~ grant date fair value of ~~$21.64~~$55.93 per share ~~which~~that are subject to both service and performance vesting conditions. The quantity of shares that will ultimately vest ~~over~~for the PSUs ranges from 0% to up to 250% of a ~~one~~targeted number of shares for each participant and will be determined based on an achievement of a three year adjusted pre-tax income performance goal. During the three months ended March 31, 2023 and 2022, we issued 0.3 million and 0.3 million shares of common stock, respectively, upon the vesting and settlement of PSUs that were granted in previous periods. Approximately 0.6 million shares will vest from 2024 to ~~five year period from~~2025 if the ~~grant date.~~ defined maximum performance targets are met, and no shares will vest if the defined minimum performance targets are not met.

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

As of September 30, 2017

Restricted Stock Awards

Restricted Stock Units

Total
Unvested awards/units

139

732

871
Unrecognized compensation cost

$
909

$
9,323

$
10,232
Period to recognize compensation cost

0.4 years

2.1 years

1.9 years (average)


	As of March 31, 2023
Unvested units		770
Unrecognized compensation cost	$	24,436
Weighted-average years to recognize compensation cost		1.90

During the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, we recognized stock-based compensation expense of ~~$2.6~~$5.4 million and ~~$1.6 million, respectively. During the nine months ended September 30, 2017 and 2016, we recognized stock-based compensation of $6.5 million and $5.1~~$4.1 million, respectively. Stock-based compensation expense is included in selling, general, and administrative expense on our condensed consolidated statements of operations.

14. Stockholders’ Equity

~~Our~~

The Company’s authorized capital stock consists of 100.0 million shares of common stock, par value $0.01 per share, and 50.0 million shares of preferred stock, par value $0.01 per share. As of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, there were ~~27.3~~32.0 million and ~~21.6~~31.8 million shares of common stock issued and outstanding, respectively, ~~inclusive of the restricted common stock issued.~~

~~We issued 29.2 thousand~~ and ~~0.2 million~~no shares of ~~common~~preferred stock ~~related to~~outstanding.

On May 4, 2022, the vesting of restricted stock awards during the three and nine months ended September 30, 2017, respectively, under our First Amended & Restated 2013 Long-Term Incentive Plan. At our 2017 annual meeting of stockholders held on May 10, 2017, our stockholders approved the adoption of the Century Communities, Inc. 2022 Omnibus Incentive Plan (which we refer to as the “2022 Incentive Plan”), which replaced the Century Communities, Inc. Amended and Restated 2017 Omnibus Incentive Plan (which we refer to as our “2017 Incentive Plan”)~~, which replaced our First Amended & Restated 2013 Long-Term~~. Under the 2022 Incentive ~~Plan. We had reserved a total~~Plan, 3.1 million shares of ~~1.8 million~~common stock are available for issuance to eligible participants, plus 51.2 thousand 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~~

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~~it became effective. As of September 30, 2017, approximately 1.2 million shares remain~~that remained available for issuance under the 2017 Incentive ~~Plan. We also~~Plan and any shares subject to awards outstanding under the 2017 Incentive Plan that are subsequently forfeited, cancelled, expire or otherwise terminate without the issuance of such shares. During the three months ended March 31, 2023 and 2022, we issued ~~4.2~~0.4 million and 0.5 million shares of common stock, respectively, related to the vesting and settlement of RSUs and PSUs. As of March 31, 2023, approximately 2.9 million shares of common stock remained available for issuance under the 2022 Incentive Plan.

The following table sets forth cash dividends declared by our Board of Directors to holders of record of our common stock ~~in connection with our acquisition~~during the three months ended March 31, 2023 and 2022, respectively (in thousands, except per share information):



			Three Months ended March 31, 2023
			Cash Dividends Declared and Paid
Declaration Date	Record Date	Paid Date	Per Share		Amount
February 8, 2023	March 1, 2023	March 15, 2023	$	$0.23	$	7,365

			Three Months ended March 31, 2022
			Cash Dividends Declared and Paid
Declaration Date	Record Date	Paid Date	Per Share		Amount
February 16, 2022	March 2, 2022	March 16, 2022	$	0.20	$	6,657

Under the 2022 Incentive Plan and the previous 2017 Incentive Plan, at the discretion of ~~UCP Inc.,~~the Compensation Committee of the Board of Directors, RSUs and PSUs granted under the plan have the right to earn dividend equivalents, which entitles the holders of such RSUs and PSUs to additional RSUs and PSUs equal to the same dividend value per share as ~~discussed in Note 3.~~holders of common stock. Dividend equivalents are subject to the same vesting and other terms and conditions as the underlying RSUs and PSUs.

~~On November 7, 2016, we entered into~~

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We are party to a Distribution Agreement with J.P. Morgan Securities LLC, BofA Securities, Inc., Wells Fargo Securities, LLC, and Fifth Third Securities, Inc. (which we refer to as the “Distribution Agreement”) ~~with J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Citigroup Global Markets Inc. (which~~, as sales agents pursuant to which we ~~refer to collectively as the “Sales Agents”), relating to our common stock. Under the Distribution Agreement, we are authorized to~~may offer and sell shares of our common stock having an aggregate offering price of up to ~~$50.0~~$100.0 million from time to time through any of ~~our Sales Agents~~the sales agents party thereto in ~~“at~~“at-the-market” offerings, in accordance with the ~~market” offerings. On August 9, 2017, we entered into a second~~terms and conditions set forth in the Distribution Agreement. The Distribution Agreement ~~(which we refer~~will remain in full force and effect until terminated by either party pursuant to as the ~~“Second Distribution Agreement”)~~terms of the agreement or such date that the maximum offering amount has been sold in accordance with the ~~Sales Agents, pursuant to~~terms of the agreement. We did not sell or issue any shares of our common stock during the three months ended March 31, 2023 and 2022, and as of March 31, 2023, all $100.0 million remained available for sale.

We authorized a stock repurchase program in 2018, under which we may ~~offer and sell from time to time~~repurchase up to ~~$100.0~~4.5 million ~~in “at the market” offerings.~~shares of our outstanding common stock. During the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023, we ~~sold and issued~~did not repurchase any shares of common stock. During the three months ended March 31, 2022, an aggregate of ~~0.4 million and 1.4~~1.0 million shares of our common stock were repurchased for a total purchase price of approximately $62.4 million at a weighted average price of $61.52 per share. The maximum number of shares available to be repurchased under the ~~Distribution Agreement~~stock repurchase program as of March 31, 2023 was 1,508,169 shares.

During the three months ended March 31, 2023 and ~~Second Distribution Agreement, respectively, which provided net proceeds~~2022, shares of ~~$10.0~~common stock at a total cost of $9.9 million and ~~$34.6~~$12.1 million, respectively, were netted and surrendered as payment for minimum statutory withholding obligations in connection with ~~such sales, paid total commissions~~the vesting of outstanding stock-based compensation awards. Shares surrendered by the participants in accordance with the applicable award agreements and ~~fees to the Sales Agents~~plan are deemed repurchased and retired by us but are not part of ~~$0.2 million and $0.7 million, respectively.~~our publicly announced share repurchase programs.

15. Earnings Per Share

We use the two-class method of calculating earnings per share (which we refer to as “EPS”) as our non-vested restricted stock awards have 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 of~~earnings per share as our ~~restricted stock units as the restricted stock units~~currently issued non-vested RSUs and PSUs do not have participating rights.

The following table sets forth the computation of basic and diluted EPS for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 (in thousands, except share and per share information):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,				Three Months Ended March 31,
	2017		2016		2017		2016		2023		2022
Numerator
Net income	$	9,470	$	13,342	$	33,100	$	34,467	$	33,311	$	142,496
Less: Undistributed earnings allocated to participating securities		(52)		(241)		(289)		(785)
Net income allocable to common stockholders	$	9,418	$	13,101	$	32,811	$	33,682
Denominator
Weighted average common shares outstanding - basic		25,445,552		20,673,521		23,038,390		20,643,682		31,914,414		33,530,610
Dilutive effect of restricted stock units		280,585		148,545		236,930		88,248
Dilutive effect of stock-based compensation awards										202,668		411,624
Weighted average common shares outstanding - diluted		25,726,137		20,822,066		23,275,320		20,731,930		32,117,082		33,942,234
Earnings per share:
Basic	$	0.37	$	0.63	$	1.42	$	1.63	$	1.04	$	4.25
Diluted	$	0.37	$	0.63	$	1.41	$	1.62	$	1.04	$	4.20

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 ~~did not have any~~excluded 0.5 million and 0.6 million common stock unit equivalents ~~to exclude~~ from diluted earnings per share during each of the three ~~and nine~~ months ended ~~September 30, 2017.~~March 31, 2023 and 2022, respectively, related to the PSUs for which performance conditions remained unsatisfied.

16. Commitments and Contingencies

Letters of Credit and Performance Bonds

In the normal course of business, ~~the Company posts~~we post letters of credit and performance and other bonds primarily related to our land development performance obligations with local municipalities. As of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, we had ~~$70.1~~$570.8 million and ~~$70.1~~$574.8 million, respectively, in letters of credit and performance and other bonds issued and outstanding.

~~Litigation~~

~~The Company is~~Legal Proceedings

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~~ on our condensed consolidated statements of operations for our estimated loss.

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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 on our condensed consolidated balance sheet when recovery is probable.

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

~~17. Supplemental Guarantor Information~~

The Existing 6.875% Notes and the May 2017 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 as “Guarantors”).

Each of the May 2014 Indenture governing the Existing 6.875% Notes, and the May 2017 Indenture governing the May 2017 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.

As the guarantees were made in connection with the February 2015 exchange offer for the Initial Exchange Notes, the October 2015 exchange offer for the October 2015 Exchange Notes, the April 2017 exchange offer for the April 2017 Exchange Notes, and the issuance of the May 2017 Senior Notes, 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.

~~Table of Contents~~

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

Supplemental Condensed Consolidated Balance Sheet

As of September 30, 2017 (in thousands)

Guarantor

Non Guarantor

Elimination

Consolidated

CCS

Subsidiaries

Subsidiaries

Entries

CCS
Assets

Cash and cash equivalents

$
35,881

$
16,278

$
6,363

$
—

$
58,522
Cash held in escrow

—

41,740

522

—

42,262
Accounts receivable

11,306

9,312

192

—

20,810
Investment in consolidated subsidiaries

1,382,958

—

—

(1,382,958)

—
Inventories

—

1,352,989

—

—

1,352,989
Mortgage loans held for sale

—

—

30,071

—

30,071
Prepaid expenses and other assets

2,859

59,129

374

—

62,362
Deferred tax asset, net

6,403

—

—

—

6,403
Property and equipment, net

2,409

10,760

489

—

13,658
Investment in unconsolidated subsidiaries

20,677

—

—

20,677
Amortizable intangible assets, net

—

1,889

—

—

1,889
Goodwill

—

21,365

—

—

21,365
Total assets

$
1,462,493

$
1,513,462

$
38,011

$
(1,382,958)

$
1,631,008
Liabilities and stockholders’ equity

Liabilities:

Accounts payable

$
(17)

$
16,707

$
120

$
—

$
16,810
Accrued expenses and other liabilities

35,746

121,251

708

—

157,705
Notes payable

773,752

2,264

—

—

776,016
Revolving line of credit

—

—

—

—

—
Mortgage repurchase facility

—

—

27,465

—

27,465
Total liabilities

809,481

140,222

28,293

—

977,996
Stockholders’ equity:

653,012

1,373,240

9,718

(1,382,958)

653,012
Total liabilities and stockholders’ equity

$
1,462,493

$
1,513,462

$
38,011

$
(1,382,958)

$
1,631,008

~~Table of Contents~~

Supplemental Condensed Consolidated Balance Sheet

As of December 31, 2016 (in thousands)

Guarantor

Non Guarantor

Elimination

Consolidated

CCS

Subsidiaries

Subsidiaries

Entries

CCS
Assets

Cash and cash equivalents

$
14,637

$
8,646

$
6,167

$
—

$
29,450
Cash held in escrow

—

20,044

—

—

20,044
Accounts receivable

2,980

2,749

—

—

5,729
Investment in consolidated subsidiaries

884,665

—

—

(884,665)

—
Inventories

—

857,885

—

—

857,885
Prepaid expenses and other assets

14,628

25,662

167

—

40,457
Property and equipment, net

1,166

10,224

22

—

11,412
Investment in unconsolidated subsidiaries

18,275

—

18,275
Amortizable intangible assets, net

—

2,911

—

—

2,911
Goodwill

—

21,365

—

—

21,365
Total assets

$
936,351

$
949,486

$
6,356

$
(884,665)

$
1,007,528
Liabilities and stockholders’ equity

Liabilities:

Accounts payable

$
257

$
15,575

$
(124)

$
—

$
15,708
Accrued expenses and other liabilities

12,587

49,697

30

—

62,314
Deferred tax liability

1,782

—

—

—

1,782
Senior and other notes payable

253,089

5,999

—

—

259,088
Revolving line of credit

195,000

—

—

—

195,000
Total liabilities

462,715

71,271

(94)

—

533,892
Stockholders’ equity:

473,636

878,215

6,450

(884,665)

473,636
Total liabilities and stockholders’ equity

$
936,351

$
949,486

$
6,356

$
(884,665)

$
1,007,528

Supplemental Condensed Consolidated Statement of Operations

For the Three Months Ended September 30, 2017 (in thousands)

Guarantor

Non Guarantor

Elimination

Consolidated

CCS

Subsidiaries

Subsidiaries

Entries

CCS
Revenues

Homebuilding revenues

Home sales revenues

$
—

$
374,935

$
—

$
—

$
374,935
Land sales and other revenues

—

1,826

—

—

1,826

—

376,761

—

—

376,761
Financial services revenue

—

—

2,955

—

2,955
Total revenues

—

376,761

2,955

—

379,716
Homebuilding cost of revenues

Cost of homes sales revenues

—

(311,365)

—

—

(311,365)
Cost of land sales and other revenues

—

(2,104)

—

—

(2,104)

—

(313,469)

—

—

(313,469)
Financial services costs

—

—

(2,450)

—

(2,450)
Selling, general and administrative

(13,342)

(32,823)

—

—

(46,165)
Acquisition expense

(7,205)

—

—

—

(7,205)
Equity in earnings from consolidated subsidiaries

20,470

—

—

(20,470)

—
Equity in income of unconsolidated subsidiaries

3,716

—

—

—

3,716
Other income (expense)

495

518

—

—

1,013
Income before income tax expense

4,134

30,987

505

(20,470)

15,156
Income tax expense

5,336

(10,845)

(177)

��
—

(5,686)
Net income

$
9,470

$
20,142

$
328

$
(20,470)

$
9,470

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Supplemental Condensed Consolidated Statement of Operations

For the Three Months Ended September 30, 2016 (in thousands)

Guarantor

Non Guarantor

Elimination

Consolidated

CCS

Subsidiaries

Subsidiaries

Entries

CCS
Revenues

Homebuilding revenues

Home sales revenues

$
—

$
248,075

$
—

$
—

$
248,075
Land sales and other revenues

—

5,338

—

—

5,338

—

253,413

—

—

253,413
Financial services revenue

—

—

—

—

—
Total revenues

—

253,413

—

—

253,413
Homebuilding cost of revenues

Cost of homes sales revenues

—

(197,650)

—

—

(197,650)
Cost of land sales and other revenues

—

(5,420)

—

—

(5,420)

—

(203,070)

—

—

(203,070)
Financial services costs

—

—

—

—

—
Selling, general and administrative

(6,846)

(24,098)

—

—

(30,944)
Acquisition expense

(53)

—

—

—

(53)
Equity in earnings from consolidated subsidiaries

17,303

—

—

(17,303)

—
Other income (expense)

10

375

—

—

385
Income before income tax expense

10,414

26,620

—

(17,303)

19,731
Income tax expense

2,928

(9,317)

—

—

(6,389)
Net income

$
13,342

$
17,303

$
—

$
(17,303)

$
13,342

Supplemental Condensed Consolidated Statement of Operations

For the Nine Months Ended September 30, 2017 (in thousands)

Guarantor

Non Guarantor

Elimination

Consolidated

CCS

Subsidiaries

Subsidiaries

Entries

CCS
Revenues

Homebuilding revenues

Home sales revenues

$
—

$
888,942

$
—

$
—

$
888,942
Land sales and other revenues

—

6,216

—

—

6,216

—

895,158

—

—

895,158
Financial services revenue

—

—

4,697

—

4,697
Total revenues

—

895,158

4,697

—

899,855
Homebuilding cost of revenues

Cost of homes sales revenues

—

(727,577)

—

—

(727,577)
Cost of land sales and other revenues

—

(4,994)

—

—

(4,994)

—

(732,571)

—

—

(732,571)
Financial services costs

—

—

(4,648)

—

(4,648)
Selling, general and administrative

(30,876)

(82,721)

—

—

(113,597)
Acquisition expense

(8,645)

—

—

—

(8,645)
Equity in earnings from consolidated subsidiaries

52,869

—

—

(52,869)

—
Equity in income of unconsolidated subsidiaries

7,648

—

—

—

7,648
Other income (expense)

852

1,386

36

—

2,274
Income before income tax expense

21,848

81,252

85

(52,869)

50,316
Income tax expense

11,252

(28,438)

(30)

—

(17,216)
Net income

$
33,100

$
52,814

$
55

$
(52,869)

$
33,100

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Supplemental Condensed Consolidated Statement of Operations

For the Nine Months Ended September 30, 2016 (in thousands)

Guarantor

Non Guarantor

Elimination

Consolidated

CCS

Subsidiaries

Subsidiaries

Entries

CCS
Revenues

Homebuilding revenues

Home sales revenues

$
—

$
686,335

$
—

$
—

$
686,335
Land sales and other revenues

—

10,816

—

—

10,816

—

697,151

—

—

697,151
Financial services revenue

—

—

—

—

—
Total revenues

—

697,151

—

—

697,151
Homebuilding cost of revenues

Cost of homes sales revenues

—

(549,886)

—

—

(549,886)
Cost of land sales and other revenues

—

(9,433)

—

—

(9,433)

—

(559,319)

—

—

(559,319)
Financial services costs

—

—

—

—

—
Selling, general and administrative

(18,323)

(69,189)

—

—

(87,512)
Equity in earnings from consolidated subsidiaries

45,514

—

—

(45,514)

—
Acquisition expense

(466)

—

—

—

(466)
Other income (expense)

24

1,379

—

—

1,403
Income before income tax expense

26,749

70,022

—

(45,514)

51,257
Income tax expense

7,718

(24,508)

—

—

(16,790)
Net income

$
34,467

$
45,514

$
—

$
(45,514)

$
34,467

Supplemental Condensed Consolidated Statement of Cash Flows

For the Nine Months Ended September 30, 2017 (in thousands)

Guarantor

Non Guarantor

Elimination

Consolidated

CCS

Subsidiaries

Subsidiaries

Entries

CCS
Net cash provided by/(used in) operating activities

$
(8,164)

$
(92,577)

$
(30,014)

$
—

$
(130,755)
Net cash used in investing activities

$
(434,617)

$
(63,905)

$
(467)

$
432,867

$
(66,122)
Financing activities

Borrowings under revolving credit facilities

$
75,000

$
—

$
—

$
—

$
75,000
Payments on revolving credit facilities

(270,000)

—

—

—

(270,000)
Proceeds from issuance of senior notes

523,000

—

—

—

523,000
Repyment of debt assumed in business combination

—

(151,919)

—

—

(151,919)
Principal payments on notes payable

—

(4,735)

—

—

(4,735)
Debt issuance costs

(3,731)

—

—

—

(3,731)
Repurchases of common stock upon vesting of restricted stock awards

(4,141)

—

—

—

(4,141)
Payments from (and advances to) parent/subsidiary

108,887

320,768

3,212

(432,867)

—
Net proceeds from mortgage credit facility

—

—

27,465

—

27,465
Net proceeds from issuances of common stock

35,010

—

—

—

35,010
Net cash provided by financing activities

$
464,025

$
164,114

$
30,677

$
(432,867)

$
225,949
Net decrease in cash and cash equivalents

$
21,244

$
7,632

$
196

$
—

$
29,072
Cash and cash equivalents

Beginning of period

$
14,637

$
8,646

$
6,167

$
—

$
29,450
End of period

$
35,881

$
16,278

$
6,363

$
—

$
58,522

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Supplemental Condensed Consolidated Statement of Cash Flows

For the Nine Months Ended September 30, 2016 (in thousands)

Guarantor

Non Guarantor

Elimination

Consolidated

CCS

Subsidiaries

Subsidiaries

Entries

CCS
Net cash provided by/(used in) operating activities

$
(17,969)

$
(43,431)

$
—

$
—

$
(61,400)
Net cash used in investing activities

$
(42,791)

$
(4,685)

$
—

$
42,476

$
(5,000)
Financing activities

Borrowings under revolving credit facilities

$
145,000

$
—

$
—

$
—

$
145,000
Payments on revolving credit facilities

(90,000)

—

—

—

(90,000)
Proceeds from insurance notes payable

—

11,612

—

—

11,612
Principal payments on notes payable

—

(7,582)

—

—

(7,582)
Debt issuance costs

(1,156)

—

—

—

(1,156)
Repurchases of common stock under our stock repurchase program

(2,393)

—

—

—

(2,393)
Repurchases of common stock upon vesting of restricted stock awards

(1,014)

—

—

—

(1,014)
Payments from (and advances to) parent/subsidiary

—

42,476

—

(42,476)

—
Net cash provided by financing activities

$
50,437

$
46,506

$
—

$
(42,476)

$
54,467
Net decrease in cash and cash equivalents

$
(10,323)

$
(1,610)

$
—

$
—

$
(11,933)
Cash and cash equivalents

Beginning of period

$
22,002

$
7,285

$
—

$

$
29,287
End of period

$
11,679

$
5,675

$
—

$
—

$
17,354

~~18. Subsequent Events~~

On October 31, 2017, we acquired substantially all the assets and operations and assumed certain liabilities of Sundquist Homes and affiliates, a homebuilder with operations in greater Seattle, Washington for approximately $51.5 million in cash. The acquired assets include owned and controlled land, homes under construction and model homes. 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.

~~The following table summarizes our preliminary estimates of the fair value of the assets acquired and liabilities assumed as of the acquisition date:~~


~~Inventories~~	$	~~57,277~~
~~Prepaid expenses and other assets~~		~~1,050~~
~~Property and equipment, net~~		~~142~~
~~Total assets~~	$	~~58,469~~

~~Accounts payable~~	$	~~4,716~~
~~Accrued expenses and other liabilities~~		~~2,253~~
~~Total liabilities~~		~~6,969~~
~~Purchase price/Net equity~~	$	~~51,500~~

The purchase price accounting reflected above is preliminary and is based upon estimates and assumptions that are subject to change within the measurement period (up to one year from the acquisition date). The measurement period remains open pending the completion of valuation procedures related to the acquired assets and assumed liabilities.

~~Table of Contents~~

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~~“potential,” “outlook,” 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:~~

~~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 decline in real estate values or market conditions resulting in impairment of our assets;~~

~~changes in assumptions used to make industry forecasts;~~

~~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 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 degree and nature of our competition;~~

~~our leverage and debt service obligations;~~

~~our ability to successfully integrate the acquired businesses and realize projected cost savings and other benefits from our merger transaction with UCP, Inc.;~~

~~availability of qualified personnel and our ability to retain our key personnel; and~~

~~changes in GAAP.~~

forward-looking and subject to risks and uncertainties including among others:

~~The forward-looking~~economic changes, either nationally or in the markets in which we operate, including increased interest rates and the resulting impact on the accessibility of mortgage loans to homebuyers, persistent inflation, and decreased employment levels;

shortages of or increased prices for labor, land or raw materials used in housing construction and resource shortages;

a downturn in the homebuilding industry, including a reduction in demand or a decline in real estate values or market conditions resulting in an adverse impact on our business, operating results and financial condition, including an impairment of our assets;

changes in assumptions used to make industry forecasts, population growth rates or trends affecting housing demand or prices;

volatility and uncertainty in the credit markets and broader financial markets and the impact on such markets and our ability to access them in the event of a threatened or actual U.S. sovereign default;

our future business operations, operating results and financial condition, and changes in our business and investment strategy;

availability and price 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;

delays in land development or home construction resulting from adverse weather conditions or other events outside our control;

delays in completion of projects, land development or home construction, or reduced consumer demand for housing resulting from significant weather conditions and natural disasters in the geographic areas where we operate;

the 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 municipal, utility and other regulatory approvals and the opening of projects and construction and completion of our homes;

the impact and cost of compliance with evolving environmental, health and safety and other laws and regulations and third-party challenges to required permits and other approvals and potential legal liability in connection therewith;

the degree and nature of our competition;

our leverage, debt service obligations and exposure to changes in interest rates and our ability to refinance our debt when needed or on favorable terms;

our ability to continue to fund and succeed in our mortgage lending business and the additional risks involved in that business;

availability of qualified personnel and contractors and our ability to retain key personnel and contractor relationships;

our ability to pay dividends in the future; and

taxation and tax policy changes, tax rate changes, new tax laws, new or revised tax law interpretations or guidance.

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 ~~II,~~I, Item 1A. Risk Factors” in ~~this~~our Annual Report on Form ~~10-Q,~~10-K, and other risks and uncertainties detailed in

Table of Contents

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 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”~~“our,” “Century” or the “Company” refer to Century Communities, Inc., a Delaware corporation, and, unless the context otherwise requires, its subsidiaries and affiliates.

~~Table~~The following discussion and analysis of ~~Contents~~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, 2022. 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.

Business

~~Overview~~

~~We are~~Century is engaged in the development, design, construction, marketing and sale of single-family attached and detached homes in ~~metropolitan areas in California, Colorado, Georgia, Nevada, North Carolina, South Carolina, Tennessee, Texas, Utah, and Washington.~~18 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 Century Complete brands.

Our Century Communities brand offers a wide range of buyer profiles including: entry-level, first and second time move-up, and lifestyle homebuyers, and provides our homebuyers with the ability to personalize their homes through certain option and upgrade opportunities. Our Century Complete brand targets entry-level homebuyers, primarily sells homes through retail studios and the internet, and generally provides no option or upgrade opportunities.

Our homebuilding operations are organized into the following ~~four~~five reportable ~~segments based on the geographic regions in which we operate:~~segments: West, Mountain, Texas, Southeast, and the Southeast. Additionally, our indirect wholly-owned subsidiaries Inspire Home Loans Inc. and Parkway Title, LLC, which provide mortgage and title services to our home buyers, respectively, have been identified as our Financial Services operating segment.

~~On August 4, 2017, we acquired UCP, Inc.~~ UCP is a homebuilder and land developer with expertise in residential land acquisition, development and entitlement, as well as home design, construction and sales, with operations in the States of California, Washington, North Carolina, South Carolina and Tennessee. The merger was unanimously approved by the board of directors of both the Company and UCP, and was also approved by UCP stockholders on August 1, 2017. In connection with the merger, each share of UCP Class A common stock outstanding immediately prior to the closing was converted into $5.32 in cash and 0.2309 of a newly issued share of our common stock. Approximately 4.2 million shares of our common stock were issued in connection with the merger and $97.7 million was paid in cash. Outstanding UCP restricted stock units were also converted into an aggregate of 0.2 million of Century Communities restricted stock units pursuant to the merger. We determined that the total fair value of these awards was $6.2 million, of which $1.1 million was attributable to services performed by UCP employees prior to the merger and, as such, was included as consideration. Because the closing of the merger occurred during the quarter ended September 30, 2017, the discussion included under “Results of Operations” below includes results of UCP only for the period from August 4, 2017 through September 30, 2017. ~~We have adjusted prior period consolidated and segment information, where applicable, to conform to the current period presentation.~~

~~Results of Operations~~

During the three months ended September 30, 2017, we delivered 968 homes, with an average sales price of $387.3 thousand. During the same period, we generated approximately $374.9 million in home sales revenues, approximately $15.2 million in income before income tax expense, and approximately $9.5 million in net income.

During the nine months ended September 30, 2017, we delivered 2,329 homes, with an average sales price of $381.7 thousand. During the same period, we generated approximately $888.9 million in home sales revenues, approximately $50.3 million in income before income tax expense, and approximately $33.1 million in net income.

For the three and nine months ended September 30, 2017, our new home contracts, net of cancelations, totaled 914 and 2,892, respectively, a 45.5% and 26.2% increase over the same periods in 2016, respectively. As of September 30, 2017, we had a backlog of 1,664 sold but unclosed homes, a 67.7% increase as compared to September 30, 2016, representing approximately $689.3 million in sales value, an 81.0% increase as compared to September 30, 2016.

~~Table of Contents~~

~~The following table summarizes our results of operation for the three and nine months ended September 30, 2017 and 2016.~~

(in thousands, except per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(unaudited)

Consolidated Statements of Operations:

Revenue

Home sales revenues

$
374,935

$
248,075

$
888,942

$
686,335

Land sales revenues

1,826

5,338

6,216

10,816

376,761

253,413

895,158

697,151

Financial services revenue

2,955

—

4,697

—

Total revenues

379,716

253,413

899,855

697,151

Homebuilding cost of revenues

Cost of home sales revenues

(311,365)

(197,650)

(727,577)

(549,886)

Cost of land sales and other revenues

(2,104)

(5,420)

(4,994)

(9,433)

(313,469)

(203,070)

(732,571)

(559,319)

Financial services costs

(2,450)

—

(4,648)

—

Selling, general, and administrative

(46,165)

(30,944)

(113,597)

(87,512)

Acquisition expense

(7,205)

(53)

(8,645)

(466)

Equity in income of unconsolidated subsidiaries

3,716

—

7,648

—

Other income (expense)

1,013

385

2,274

1,403

Income before income tax expense

15,156

19,731

50,316

51,257

Income tax expense

(5,686)

(6,389)

(17,216)

(16,790)

Net income

$
9,470

$
13,342

$
33,100

$
34,467

Earnings per share:

Basic

$
0.37

$
0.63

$
1.42

$
1.63

Diluted

$
0.37

$
0.63

$
1.41

$
1.62

Adjusted diluted earnings per share(1)

$
0.73

$
0.63

$
1.87

$
1.65

Other Operating Information (dollars in thousands):

Number of homes delivered

968

706

2,329

2,013

Average sales price of homes delivered

$
387.3

$
351.4

$
381.7

$
341.0

Homebuilding gross margin percentage

17.0
%

20.3
%

18.2
%

19.9
%
Adjusted homebuilding gross margin excluding interest and purchase price accounting for acquired work in process inventory (1)

21.0
%

22.5
%

21.2
%

21.8
%
Cancellation rate

24
%

22
%

19
%

19
%
Backlog at end of period, number of homes

1,664

992

1,664

992

Backlog at end of period, aggregate sales value

$
689,338

$
380,926

$
689,338

$
380,926

Average sales price of homes in backlog

$
414.3

$
384.0

$
414.3

$
384.0

Net new home contracts

914

628

2,892

2,291

Selling communities at period end

107

87

107

87

Average selling communities

102

90

92

91

Total owned and controlled lot inventory

31,996

17,203

31,996

17,203

Adjusted EBITDA(1)

$
32,451

$
26,441

$
83,233

$
68,971

Net debt to net capital(1)

51.8
%

47.6
%

51.8
%

47.6
%

~~(1)~~ ~~Non-GAAP financial measure.~~

~~Table of Contents~~

~~Results of Operations by Operating Segment~~

~~(dollars in thousands)~~

New Homes Delivered

Average Sales Price of Homes Delivered

Home Sales Revenues

Income before Income Tax

Three Months Ended September 30,

Three Months Ended September 30,

Three Months Ended September 30,

Three Months Ended September 30,

2017

2016

2017

2016

2017

2016

2017

2016
West

151

—

$
488.0

$
—

$
73,684

$
—

$
5,259

$
—
Mountain

375

344

$
417.3

$
408.0

156,482

140,356

19,101

18,995
Texas

90

64

$
397.5

$
396.6

35,772

25,385

2,166

(288)
Southeast

352

298

$
309.7

$
276.3

108,997

82,334

6,001

7,848
Financial Services

—

—

$
—

$
—

—

—

505

—
Corporate

—

—

$
—

$
—

—

—

(17,876)

(6,824)
Total

968

706

$
387.3

$
351.4

$
374,935

$
248,075

$
15,156

$
19,731

New Homes Delivered

Average Sales Price of Homes Delivered

Home Sales Revenues

Income before Income Tax

Nine Months Ended September 30,

Nine Months Ended September 30,

Nine Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

2017

2016

2017

2016
West

151

—

$
488.0

$
—

$
73,684

$
—

$
5,259

$
—
Mountain

1,046

854

$
421.1

$
410.7

440,451

350,742

56,137

47,234
Texas

266

252

$
409.6

$
390.0

108,955

98,270

6,407

2,138
Southeast

866

907

$
307.0

$
261.7

265,852

237,323

16,609

21,827
Financial Services

—

—

$
—

$
—

—

—

(192)

—
Corporate

—

—

$
—

$
—

—

—

(33,904)

(19,942)
Total

2,329

2,013

$
381.7

$
341.0

$
888,942

$
686,335

$
50,316

$
51,257

~~West~~

In our West segment, for the three and nine months ended September 30, 2017, our income before income tax increased by $5.3 million in both periods, to $5.3 million. We acquired the entirety of our operations in the West operating segment in conjunction with our acquisition of UCP, Inc. as discussed above. During the period from August 4, 2017 through September 30, 2017, we delivered 151 new homes with an average price of $488.0 thousand and generated $73.7 million in home sales revenues in the West.

~~Mountain~~

In our Mountain segment, for the three and nine months ended September 30, 2017, our income before income tax increased by $0.1 million and $8.9 million, respectively, to $19.1 million and $56.1 million, respectively, as compared to $19.0 million and $47.2 million, for the same periods in 2016, respectively. This increase is related to an increase in the number of homes delivered and an increase in the average selling price of those homes during the periods, year over year.

~~Texas~~

In our Texas segment, for the three and nine months ended September 30, 2017, our income before income tax increased by $2.5 million and $4.3 million, respectively, to $2.2 million and $6.4 million, respectively, as compared to $(0.3) million and $2.1 million, for the same periods in 2016, respectively. This increase is related to an increase in the number of homes delivered and an increase in the average selling price of those homes during the periods, year over year.

~~Southeast~~

In our Southeast segment, for the three and nine months ended September 30, 2017, our income before income tax decreased by $1.8 million and $5.2 million, respectively, to $6.0 million and $16.6 million, respectively, as compared to $7.8 million and $21.8 million, for the same periods in 2016, respectively. The number of homes delivered, home sales revenue and average selling price all increased in our Southeast segment year over year. However, as we have recently started operations in North Carolina and Tennessee, our selling,

~~Table of Contents~~

general and administrative expenses have increased in those states when operations commenced, and as such we have net loss in those states driving the income before income tax to decrease year over year for our Southeast segment.

~~Financial Services~~

Complete. Our indirect wholly-owned subsidiaries, Inspire Home Loans Inc., Parkway Title, LLC, and ~~Parkway Title,~~IHL Home Insurance Agency, LLC, which provide mortgage, title, and ~~title~~insurance services, respectively, primarily to our ~~home buyers, respectively,~~homebuyers, have been identified as our Financial Services ~~operating~~ segment. Additionally, our wholly owned subsidiary, Century Living, LLC, is engaged in the development, construction and management of multi-family rental properties, primarily in Colorado. During the quarter ended March 31, 2023, our Century Living operations were engaged in construction on three multi-family projects in Colorado, which commenced in 2022. Century Living, LLC is included in our Corporate segment.

While we offer homes that appeal to a broad range of entry-level, move-up, and lifestyle homebuyers, our offerings are heavily weighted towards providing affordable housing options in each of our homebuyer segments. Additionally, we prefer building move-in-ready homes over built-to-order homes, which we believe allows for a faster construction process, advantageous pricing with subcontractors, and shortened time period from home sale to home delivery, thus allowing us to more appropriately price the homes and deploy our capital. Of the 1,912 homes delivered during the first quarter of 2023, approximately 89% of our deliveries were made to entry-level homebuyers that were below the Federal Housing Administration-insured mortgage limits and approximately 98% of homes delivered were built as move-in ready homes.

Overview

Despite experiencing challenging market conditions as compared to the prior year period, we generated solid results during the first quarter of 2023 and believe that we are well positioned to operate in this more normalized higher interest rate environment. The Federal Reserve’s ongoing federal funds interest rate increases to mitigate inflation considerably impacted the U.S. housing market. Beginning in the second quarter of 2022 and continuing through the first quarter of 2023, we experienced a decline in sales pace across our markets, resulting in a decrease of 31.3% in our net new home contracts for the three months ended March 31, 2023 as compared to the same period in 2022. This decrease in our sales pace was consistent with trends seen in the overall housing market, as increased mortgage interest rates, rising inflation, and macro-economic uncertainty caused demand for home sales to decrease from the historically strong market conditions experienced since the second quarter of 2020. Even with these challenges, we are encouraged by trends in demand, as during the first quarter of 2023, we experienced cancellation rates of a combined 18%, with a 16% cancellation rate for Century Communities and a 20% cancellation rate for Century Complete, which represents a significant reduction from cancellation rates we experienced in the latter half of 2022.

We ~~began providing~~continue to focus our strategy on more near-term completions, as economic uncertainty has led a majority of our recent homebuyers to seek homes with near-term completion schedules, allowing them to lock in interest rates closer to a home closing. Further, in response

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to the significant mortgage ~~services~~rate increases experienced in the latter half of 2022, and to maintain sales momentum, we have increased incentive offerings across our communities, including discounts on options and upgrades and financing incentives, which resulted in downward pressure to our ~~customers~~homebuilding gross margin during the first quarter of 2023. We expect we will continue to experience downward pressure to our homebuilding gross margins during the first half of 2023 compared to the prior year period, impacted by elevated construction costs during the first and second quarters of 2022 when the homes were started, as well as incentives. We have also taken steps to reduce our fixed costs in light of the overall market, including a reduction in staff during the first quarter of 2023.

During the first quarter of 2023, our direct construction costs on our starts decreased by approximately 11% as compared to the high point of our direct construction costs during the second quarter of ~~2017. Substantially all~~2022. Further, the severity of the ~~loans we originate are sold~~labor and raw material shortages and municipal and utility delays have continued to moderate for completed homes that were started in the ~~secondary~~second half of 2022, and we expect cycle times to continue to decline in future quarters.

We anticipate the homebuilding markets in each of our operating segments will continue to be tied to both the macro-economic environment and the local economy. We believe future demand for our homes is uncertain as future economic and market ~~within~~conditions are uncertain, in particular with respect to inflation; the impact of recent and anticipated future increases to the federal funds interest rate by the Federal Reserve; interest rates; availability and cost of mortgage loans to homebuyers; financial markets, credit and mortgage markets; the extent to which and how long government monetary directives, actions, and economic relief efforts will impact the U.S. economy, consumer confidence; wage growth; household formations; levels of new and existing homes for sale; prevailing home and rental prices; availability and cost of land, labor and construction materials; demographic trends; housing demand; and other factors, including those described elsewhere in this Form 10-Q. Specifically, the recent rise in interest rates increases the costs of owning a ~~short period~~home and adversely affects the purchasing power of ~~time after~~ our customers. Increased interest rates also could decrease homebuyer confidence and hinder not only demand for our homes, but also our ability to realize our backlog. A decrease in demand for our homes or an increase in cancellations due to increased interest rates or otherwise would adversely affect our operating results in future periods, including our net sales, home deliveries, gross margin, origination ~~generally within 30 days.~~ volume of and revenues from our Financial Services segment, and net income. As a result, our past performance may not be indicative of our future results.

Despite future macro-economic uncertainty, especially in relation to the higher interest rate environment, we believe we are well-positioned to benefit from the ongoing shortage of both new and resale homes available for purchase in our key markets and the favorable demographics that support the need for new affordable housing. We believe our operations are well-positioned to withstand volatility in future market conditions as a result of our product offerings which both span the home buying segment and focus on affordable price points, and our current and future inventories of attractive land positions. We have continued to focus on maintaining an appropriate balance of home and land inventories in relation to anticipated future demand, as well as prudent leverage, and, as a result, we believe we are well positioned to continue to execute on our strategy in order to optimize stockholder returns.

Results of Operations

During the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023, we ~~originated~~generated $44.0 million in income before income tax expense, as compared to $188.8 million in the prior year period, and ~~closed 157 loans and 228 loans, respectively, with total principal~~net income of ~~$51.0~~$33.3 million, ~~and $73.7~~or $1.04 per diluted share, as compared to $142.5 million, ~~respectively. As of September 30, 2017, we have 43 loans~~or $4.20 per share, in ~~backlog with total principal of $13.6 million.~~

~~Corporate~~

the prior year period. During the three ~~and nine~~ months ended ~~September 30, 2017, our Corporate segment~~March 31, 2023, we generated ~~losses~~total revenues of ~~$17.9~~$753.0 million and ~~$33.9~~home sales revenues of $735.6 million, ~~respectively,~~ as compared to ~~losses~~$1.0 billion and $988.4 million, respectively, in the prior year period. During the three months ended March 31, 2023, we delivered 1,912 homes with an average sales price of ~~$6.8~~$384.7 thousand, as compared to 2,348 homes delivered with an average sales price of $421.0 in the prior year period.

We ended the first quarter of 2023 with no amounts outstanding under our revolving line of credit, $405.7 million of cash and cash equivalents, $12.7 million of cash held in escrow, a homebuilding debt to capital ratio of 31.8%, and a net homebuilding debt to net capital ratio of 21.5%. During the three months ended March 31, 2023, we paid quarterly cash dividends to our stockholders of $0.23 per share, a 15% increase from the previous quarterly dividend of $0.20 per share.

During the three months ended March 31, 2023, we generated financial services revenue of $15.9 million, representing a decrease of 39.7% as compared to the prior year period, driven by a reduced number of mortgages originated, as well as reduced margins on loans sold to third parties.

Our Century Living operations are engaged in construction on three multi-family projects in Colorado, which commenced in 2022, comprising over 900 units, which we anticipate will be available for leasing beginning in the second half of 2023 and into 2024.

‎

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The following table summarizes our results of operations for the three months ended March 31, 2023 and 2022.


(in thousands, except per share amounts)	Three Months Ended March 31,						Increase (Decrease)
	2023			2022			Amount			%
Consolidated Statements of Operations:
Revenues
Home sales revenues	$	735,600		$	988,415		$	(252,815)		(25.6)	%
Land sales and other revenues		1,535			1,630			(95)		(5.8)	%
Total homebuilding revenues		737,135			990,045			(252,910)		(25.5)	%
Financial services revenues		15,855			26,305			(10,450)		(39.7)	%
Total revenues		752,990			1,016,350			(263,360)		(25.9)	%
Homebuilding cost of revenues
Cost of home sales revenues		(601,385)			(709,073)			107,688		(15.2)	%
Cost of land sales and other revenues		—			(846)			846		(100.0)	%
		(601,385)			(709,919)			108,534		(15.3)	%
Financial services costs		(10,781)			(15,154)			4,373		(28.9)	%
Selling, general, and administrative		(98,313)			(101,639)			3,326		(3.3)	%
Other income (expense)		1,498			(862)			2,360		(273.8)	%
Income before income tax expense		44,009			188,776			(144,767)		(76.7)	%
Income tax expense		(10,698)			(46,280)			35,582		(76.9)	%
Net income	$	33,311		$	142,496		$	(109,185)		(76.6)	%
Earnings per share:
Basic	$	1.04		$	4.25		$	(3.21)		(75.5)	%
Diluted	$	1.04		$	4.20		$	(3.16)		(75.2)	%
Adjusted diluted earnings per share⁽¹⁾	$	1.04		$	4.20		$	(3.16)		(75.2)	%
Other Operating Information (dollars in thousands):
Number of homes delivered		1,912			2,348			(436)		(18.6)	%
Average sales price of homes delivered	$	384.7		$	421.0		$	(36.3)		(8.6)	%
Homebuilding gross margin percentage⁽²⁾		18.2	%		28.3	%		(10.1)	%	(35.7)	%
Adjusted homebuilding gross margin excluding interest and inventory impairment ⁽¹⁾		19.6	%		29.5	%		(9.9)	%	(33.6)	%
Backlog at end of period, number of homes		1,920			5,247			(3,327)		(63.4)	%
Backlog at end of period, aggregate sales value	$	713,612		$	2,170,865		$	(1,457,253)		(67.1)	%
Average sales price of homes in backlog	$	371.7		$	413.7		$	(42.0)		(10.2)	%
Net new home contracts		2,022			2,944			(922)		(31.3)	%
Selling communities at period end		234			197			37		18.8	%
Average selling communities		223			198			25		12.6	%
Total owned and controlled lot inventory		51,614			85,577			(33,963)		(39.7)	%
Adjusted EBITDA⁽¹⁾	$	54,744		$	203,663		$	(148,919)		(73.1)	%
Adjusted income before income tax expense⁽¹⁾	$	44,009		$	188,776		$	(144,767)		(76.7)	%
Adjusted net income⁽¹⁾	$	33,311		$	142,496		$	(109,185)		(76.6)	%
Net homebuilding debt to net capital ⁽¹⁾		21.5	%		29.3	%		(7.8)	%	(26.6)	%

⁽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 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 impairment charges, if applicable. No impairment charges were recorded for the three months ended March 31, 2023 and 2022.

‎

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Results of Operations by Segment

Commencing in the first quarter of 2023, our Century Complete operations in Texas were realigned and are now managed under our Texas segment. Accordingly, we have presented segment information under this new basis for the three months ended March 31, 2023, and we have restated the corresponding segment information for those segments for the three months ended March 31, 2022.

(dollars in thousands)


	New Homes Delivered				Average Sales Price of Homes Delivered				Home Sales Revenues				Income before Income Tax Expense
	Three Months Ended March 31,				Three Months Ended March 31,				Three Months Ended March 31,				Three Months Ended March 31,
	2023		2022		2023		2022		2023		2022		2023		2022
West		203		396	$	634.9	$	663.5	$	128,894	$	262,732	$	7,973	$	71,242
Mountain		455		514		539.8		546.0		245,594		280,655		27,808		56,999
Texas		327		423		273.5		326.8		89,434		138,237		3,673		22,837
Southeast		198		366		439.0		408.4		86,929		149,477		11,966		30,865
Century Complete		729		649		253.4		242.4		184,749		157,314		13,950		22,425
Financial Services		—		—		—		—		—		—		5,074		11,151
Corporate		—		—		—		—		—		—		(26,435)		(26,743)
Total		1,912		2,348	$	384.7	$	421.0	$	735,600	$	988,415	$	44,009	$	188,776

West

During the three months ended March 31, 2023, our West segment generated income before income tax expense of $8.0 million, an 88.8% decrease over the prior year period, which was primarily driven by a decrease in home sales revenue of $133.8 million and ~~$19.9 million, for~~a decrease of 2,093 basis points in the ~~same periods in 2016, respectively.~~percentage of income before income tax expense to home sales revenues. The ~~increase in expenses~~revenue decrease during the three months ended ~~September 30, 2017~~March 31, 2023 was primarily attributed to the following: (1) an increase in acquisition expenses of $7.2 million, and (2) an increase of $4.9 million in our compensation related expenses, including non-cash expenses for share based payments and an increasedriven by a 48.7% decrease in the number of ~~employees after our acquisition of UCP, Inc., partially offset by net decreases~~homes delivered, and a 4.3% decrease in ~~other selling and general administrative expenses and an increase in equity in income from unconsolidated subsidiaries.~~the average sales price per home. The increase in expenses during the nine months ended September 30, 2017 was primarily attributed to the following: (1) an increase in acquisition expenses of $8.2 million, (2) an increase of $8.0 million in our compensation related expenses, including non-cash expenses for share based payments and an increasedecrease in the number of ~~employees after~~homes delivered was primarily driven by fewer homes available for delivery given a decrease in home starts during the latter half of 2022, and a 30.2% decrease in monthly absorption rate. The average sales price decrease was driven by the mix of deliveries and pricing to market within individual communities. The decrease in the percentage of income before income tax expense to home sales revenue was primarily a result of (1) decreased revenue on a partially fixed cost base and (2) decreased gross margins on home sales.

Mountain

During the three months ended March 31, 2023, our ~~acquisition~~Mountain segment generated income before income tax expense of ~~UCP, Inc., (3)~~$27.8 million, a 51.2% decrease over the prior year period, which was primarily driven by a decrease in home sales revenue of $35.1 million and a decrease of 899 basis points in the percentage of income before income tax expense to home sales revenues. The revenue decrease during the three months ended March 31, 2023 was primarily driven by an 11.5% decrease in the number of homes delivered and a 1.1% decrease in the average sales price per home. The decrease in the number of homes delivered was primarily driven by fewer homes available for delivery given a decrease in home starts during the latter half of 2022, and a 50.0% decrease in monthly absorption rate. The average sales price decrease was driven by the mix of deliveries and pricing to market within individual communities. The decrease in the percentage of income before income tax expense to home sales revenue was primarily a result of (1) decreased revenue on a partially fixed cost base and (2) decreased gross margins on home sales.

Texas

During the three months ended March 31, 2023, our Texas segment generated income before income tax expense of $3.7 million, an 83.9% decrease over the prior year period, which was primarily driven by a decrease in home sales revenue of $48.8 million and a decrease of 1,241 basis points in the percentage of income before income tax expense to home sales revenues. The revenue decrease during the three months ended March 31, 2023 was primarily driven by a 22.7% decrease in the number of homes delivered and a 16.3% decrease in the average sales price per home. The decrease in the number of homes delivered was primarily driven by fewer homes available for delivery given a decrease in home starts during the latter half of 2022, and a 37.5% decrease in monthly absorption rate. The average sales price decrease was driven by the mix of deliveries and pricing to market within individual communities. The decrease in the percentage of income before income tax expense to home sales revenue was primarily a result of (1) decreased revenue on a partially fixed cost base and (2) decreased gross margins on home sales.

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Southeast

During the three months ended March 31, 2023, our Southeast segment generated income before income tax expense of $12.0 million, a 61.2% decrease over the prior year period, which was primarily driven by a decrease in home sales revenue of $62.5 million and a decrease of 688 basis points in the percentage of income before income tax expense to home sales revenues. The revenue decrease was primarily driven by a 45.9% decrease in the number of homes delivered, and partially offset by a 7.5% increase in the average sales price per home. The decrease in the number of ~~$2.1~~homes delivered was primarily driven by fewer homes available for delivery given a decrease in home starts during the latter half of 2022, and a 53.2% decrease in monthly absorption rate. The average sales price increase was driven by the mix of deliveries within individual communities. The decrease in the percentage of income before income tax expense to home sales revenue was primarily a result of (1) decreased revenue on a partially fixed cost base and (2) decreased gross margins on home sales.

Century Complete

During the three months ended March 31, 2023, our Century Complete segment generated income before income tax expense of $14.0 million, a 37.8% decrease over the prior year period, which was primarily driven by a decrease of 670 basis points in ~~information technology related expenses,~~the percentage of income before income tax expense to home sales revenues, and ~~(4) an increase of $0.9 million in legal costs,~~ partially offset by an increase in ~~equity~~home sales revenue of $27.4 million. The decrease in the percentage of income ~~from unconsolidated subsidiaries.~~ before income tax expense to home sales revenue was primarily a result of decreased gross margins on home sales. The revenue increase was primarily driven by a 12.3% increase in the number of homes delivered, as well as a 4.5% increase in the average sales price per home. The increase in the number of homes delivered was driven by an increase in selling communities as compared to the prior year period, and a larger number of homes under construction at the beginning of the period as compared to the prior year period. The average sales price increase was driven by the mix of deliveries within individual communities.

Financial Services

Our Financial Services segment originates mortgages for primarily our homebuyers, and as such, performance typically correlates to the number of homes delivered. Our Financial Services segment generated income before income tax of $5.1 million for the three months ended March 31, 2023, a 54.5% decrease over the prior year period. This decrease was primarily the result of a $10.5 million decrease in financial services revenue during the three months ended March 31, 2023 compared to the prior year period, primarily driven by (1) a 34.9% decrease in the number of mortgages originated during the three months ended March 31, 2023, and (2) reduced margins on loans sold to third parties period over period.

The following table presents selected operational data for our Financial Services segment in relation to our loan origination activities (dollars in thousands):


	Three Months Ended March 31,
	2023			2022
Total originations:
Number of loans		989			1,520
Principal	$	343,081		$	552,056
Capture rate of Century homebuyers		66	%		77	%
Century Communities		72	%		81	%
Century Complete		56	%		64	%
Average FICO score		724			732
Century Communities		729			739
Century Complete		713			708

Loans sold to third parties:
Number of loans sold		1,139			1,959
Principal	$	389,810		$	692,064

Corporate

During the three months ended March 31, 2023, our Corporate segment generated a loss of $26.4 million, remaining consistent with a loss of $26.7 million during the same period in 2022.

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Homebuilding Gross Margin

(dollars in thousands)

Homebuilding gross margin represents home sales revenues less cost of home sales ~~revenues.~~revenues and inventory impairment. Our homebuilding gross margin percentage, which represents homebuilding gross margin divided by home sales revenues, decreased ~~during~~to 18.2% for the three ~~and nine~~ months ended ~~September 30, 2017 to 17.0% and 18.2%, respectively~~, March 31, 2023, as compared to ~~20.3% and 19.9%,~~28.3% for the ~~same~~three months ended March 31, 2022. This decrease was driven by deliveries in the first quarter of 2023 that carried both higher incentives and elevated construction costs due to homes commencing construction during high costs periods in ~~2016, respectively. The decrease is primarily driven by higher interest expense in cost~~2022, both of ~~sales as a result~~which we expect to continue to adversely impact our gross margins through the first half of ~~higher average debt balances outstanding in 2017 as compared to 2016, and as a result of the increased costs recognized for home sales related to purchase accounting.~~ 2023.

~~Table of Contents~~

In the following table, we calculate our homebuilding gross margin, ~~adjusting for~~as adjusted to exclude inventory impairment, if applicable, and interest in cost of home sales revenues.



	Three Months Ended March 31,
	2023		%		2022		%

Home sales revenues	$	735,600	100.0	%	$	988,415	100.0	%
Cost of home sales revenues		(601,385)	(81.8)	%		(709,073)	(71.7)	%
Inventory impairment		—	—	%		—	—	%
Homebuilding gross margin		134,215	18.2	%		279,342	28.3	%
Add: Inventory impairment		—	—	%		—	—	%
Add: Interest in cost of home sales revenues		9,807	1.3	%		12,146	1.2	%
Adjusted homebuilding gross margin excluding interest and inventory impairment ⁽¹⁾	$	144,022	19.6	%	$	291,488	29.5	%

⁽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 ~~purchase price accounting for acquired work~~other information under “Non-GAAP Financial Measures.” An analysis of any non-GAAP financial measure should be used in ~~process inventory.~~conjunction with results presented in accordance with GAAP.

Three Months Ended September 30,

2017

%

2016

%

Home sales revenues

$
374,935

100.0
%

$
248,075

100.0
%
Cost of home sales revenues

(311,365)

(83.0)
%

(197,650)

(79.7)
%
Gross margin from home sales

63,570

17.0
%

50,425

20.3
%
Add: Interest in cost of home sales revenues

8,794

2.3
%

5,192

2.1
%
Adjusted homebuilding gross margin excluding interest

72,364

19.3
%

55,617

22.4
%
Add: Purchase price accounting for acquired work in process inventory(1)

6,214

1.7
%

100

0.0
%
Adjusted homebuilding gross margin excluding interest and purchase price accounting for acquired work in process inventory

$
78,578

21.0
%

$
55,717

22.5
%

Nine Months Ended September 30,

2017

%

2016

%

Home sales revenues

$
888,942

100.0
%

$
686,335

100.0
%
Cost of home sales revenues

(727,577)

(81.8)
%

(549,886)

(80.1)
%
Gross margin from home sales

161,365

18.2
%

136,449

19.9
%
Add: Interest in cost of home sales revenues

20,625

2.3
%

13,177

1.9
%
Adjusted homebuilding gross margin excluding interest

181,990

20.5
%

149,626

21.8
%
Add: Purchase price accounting for acquired work in process inventory(1)

6,331

0.7
%

318

0.0
%
Adjusted homebuilding gross margin excluding interest and purchase price accounting for acquired work in process inventory

$
188,321

21.2
%

$
149,944

21.8
%

~~(1)Non-GAAP financial measure.~~

For the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023, our adjusted homebuilding gross margin percentage excluding inventory impairment and interest in cost of home sales revenues, ~~and purchase price accounting for acquired work in process inventory, our adjusted homebuilding gross margin percentage~~ was ~~21.0% and 21.2%, respectively,~~19.6% as compared to ~~22.5% and 21.8%,~~29.5% for the same ~~periods~~period in ~~2016, respectively.~~2022. We believe the above information is meaningful as it isolates the impact that indebtedness, inventory impairment (if applicable), and acquisitions (if applicable) have on our homebuilding gross margin and allows for comparability of our homebuilding gross margins to previous periods and our ~~competitors.~~ competitors.

Selling, General and Administrative Expense



(dollars in thousands)
	Three Months Ended September 30,						Increase				Three Months Ended March 31,						Increase
	2017			2016			Amount		%		2023			2022			Amount		%
Selling, general and administrative	$	(46,165)		$	(30,944)		$	(15,221)	49.2	%	$	98,313		$	101,639		$	(3,326)	(3.3)	%
As a percentage of homes sales revenue		(12.3)	%		(12.5)	%

	Nine Months Ended September 30,						Increase
	2017			2016			Amount		%
Selling, general and administrative	$	(113,597)		$	(87,512)		$	(26,085)	29.8	%
As a percentage of homes sales revenue		(12.8)	%		(12.8)	%
As a percentage of home sales revenue												13.4	%		10.3	%

Our selling, general and administrative ~~costs increased $15.2~~expense decreased $3.3 million for the three months ended ~~September 30, 2017~~March 31, 2023 as compared to the ~~same period in 2016. The increase~~three months ended March 31, 2022. This decrease was primarily attributable to ~~the following: (1)~~a $3.0 million decrease in internal and external commission expense, as well as a $1.7 million decrease in salaries and wages due to decreased headcount, and partially offset by an increase ~~of $3.4 million~~ in ~~commission expense resulting from~~expenses in numerous areas to support our homebuilding operations. As a ~~51% increase in~~percentage of home sales ~~revenues, (2) an increase of $8.1 million in~~revenue, our compensation-related expenses, including incentive compensation associated with our acquisition of UCP, Inc. (3) an increase of $1.6 million in advertising expenses, and (4) a net increase of $2.0 million related to individually insignificant changes in other corporate expenses, including rent, information technology, insurance and legal.

~~Our~~ selling, general and administrative ~~costs~~expense increased ~~$26.1 million for~~310 basis points during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 as compared to the ~~same period in 2016. The increase was primarily attributable to the following: (1) an increase of $5.7 million in commission expense~~

~~Table of Contents~~

resulting from a 30% increase in home sales revenues, (2) an increase of $13.5 million in our compensation-related expenses, including incentive compensation associated with our acquisition of UCP, Inc. (3) an increase of $1.6 million in advertising expenses, (4) an increase of $1.0 million in information technology related costs, (5) an increase of $1.3 million in rent, insurance and office related costs, (6) an increase of $0.5 million in legal costs and (7) a net increase of $2.4 million related to individually insignificant changes in other corporate expenses.

~~Other Income (Expense)~~

~~For the~~ three ~~and nine~~ months ended ~~September 30, 2017, other income (expense) increased~~March 31, 2022, driven primarily by decreased revenue on a partially fixed cost base.

Income Tax Expense

At the end of each interim period, we are required to ~~$1.0 million and $2.3 million, respectively, from $0.4 million and $1.4 million,~~estimate our annual effective tax rate for the ~~same periods in 2016, respectively. The increases were related~~fiscal year and to ~~increases in interest and other~~use that rate to provide for income ~~partially offset by decreases in gain (loss) on disposition of assets.~~

~~Equity in Income from Unconsolidated Subsidiaries~~

~~As of September 30, 2017, our investment in WJH was $20.7 million and we recognized $3.7 million and $7.6 million of equity in income of unconsolidated subsidiaries during~~taxes for the three and nine months ended September 30, 2017, respectively. During the three and nine months ended September 30, 2017, we received operating distributions from WJH of $1.4 million and $5.2 million, respectively.

~~Income Tax Expense~~

current year-to-date reporting period. Our ~~2017~~2023 estimated annual effective tax rate, before discrete items, of ~~36.3%~~25.0% is driven by our blended federal and state statutory rate of ~~37.8%~~24.6%, ~~which is partially offset by net estimated benefits of 1.5% primarily from additional~~and certain permanent differences between GAAP and tax, including disallowed deductions for ~~tax related to domestic production activities~~executive compensation and estimated federal energy home credits for the current year home deliveries, which benefited our rate by 3.2%. This benefit was partially offset by non-deductible acquisition costs associated with our acquisition of UCP, Inc., along with other items which increased our rate by 1.7%. Our estimated annual rate of 36.3% was also benefited by discrete items for excess tax benefits related to share based awards that vested during the nine months ended September 30, 2017, resultingcombined resulted in a ~~total tax rate~~net increase of ~~34.2%~~0.4%.

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For the three months ended March 31, 2023 and 2022, we recorded income tax expense of ~~$5.7~~$10.7 million and ~~$6.4~~$46.3 million, respectively. ~~For~~

Segment Assets

Commencing in the ~~nine months ended September 30, 2017~~first quarter of 2023, our Century Complete operations in Texas were realigned and ~~2016,~~are now managed under our Texas segment. Accordingly, we ~~recorded income tax expense~~have presented segment information under this new basis as of ~~$17.2 million~~March 31, 2023, and ~~$16.8 million, respectively~~we have restated the corresponding segment information for those segments as of December 31, 2022.

(dollars in thousands)

~~Segment Assets~~


	September 30,		December 31,			Increase (Decrease)			March 31,		December 31			Increase (Decrease)
	2017		2016			Amount	Change		2023		2022			Amount	Change
West	$	302,816	$	—	$	302,816	NM		$	632,820	$	665,827	$	(33,007)	(5.0)	%
Mountain		571,124		541,657		29,467	5.4	%		1,017,045		1,122,892		(105,847)	(9.4)	%
Texas		186,840		138,392		48,448	35.0	%		506,763		508,862		(2,099)	(0.4)	%
Southeast		394,918		262,448		132,470	50.5	%		420,158		415,887		4,271	1.0	%
Century Complete										339,254		376,131		(36,877)	(9.8)	%
Financial Services		38,010		—		38,010	NM			321,703		372,284		(50,581)	(13.6)	%
Corporate		137,300		65,031		72,269	111.1	%		475,234		311,884		163,350	52.4	%
Total assets	$	1,631,008	$	1,007,528	$	623,480	61.9	%	$	3,712,977	$	3,773,767	$	(60,790)	(1.6)	%

Total assets decreased slightly to $3.7 billion as of March 31, 2023 as compared to December 31, 2022, primarily as a result of changes in our inventory balances within our homebuilding segments related to timing of home and land development construction activities, and a decrease in Financial Services assets primarily related to a decrease in mortgage loans held for sale period over period. These decreases were partially offset by an increase in our Corporate assets, primarily driven by increases in cash and cash equivalents and increases related to Century Living.

Lots owned and controlled


Lots owned and	September 30, 2017			December 31, 2016			% Change
controlled	Owned	Controlled	Total	Owned	Controlled	Total	Owned		Controlled		Total
													March 31, 2023			December 31, 2022			% Change
													Owned	Controlled	Total	Owned	Controlled	Total	Owned		Controlled		Total

West	3,542	2,630	6,172	—	—	—	NM		NM		NM		4,279	763	5,042	4,433	509	4,942	(3.5)	%	49.9	%	2.0	%
Mountain	4,291	5,068	9,359	4,354	2,959	7,313	(1.4)	%	71.3	%	28.0	%	10,314	2,325	12,639	10,845	1,566	12,411	(4.9)	%	48.5	%	1.8	%
Texas	2,223	4,795	7,018	1,356	3,420	4,776	63.9	%	40.2	%	46.9	%	7,578	3,217	10,795	7,432	3,876	11,308	2.0	%	(17.0)	%	(4.5)	%
Southeast	4,790	4,657	9,447	2,953	3,254	6,207	62.2	%	43.1	%	52.2	%	5,610	3,658	9,268	5,576	5,733	11,309	0.6	%	(36.2)	%	(18.0)	%
Century Complete													3,585	10,285	13,870	3,826	9,323	13,149	(6.3)	%	10.3	%	5.5	%
Total	14,846	17,150	31,996	8,663	9,633	18,296	71.4	%	78.0	%	74.9	%	31,366	20,248	51,614	32,112	21,007	53,119	(2.3)	%	(3.6)	%	(2.8)	%

~~NM – Not Meaningful~~

Of our total lots owned and controlled as of ~~September 30, 2017, 46.4%~~March 31, 2023, 60.8% were owned and ~~53.6%~~39.2% were controlled, as compared to ~~47.3%~~60.5% owned and ~~52.7%~~39.5% controlled as of December 31, ~~2016.~~2022.

Total assets increased by $623.5 million, or 61.9%, to $1.6 billion at September 30, 2017. The increase is related to the increase in assets from our acquisition of UCP, Inc., from increased cash balances from our debt offerings completed during 2017, as well as the increased investments in most of our operating segments.

~~Table of Contents~~

Other Homebuilding Operating Data

Commencing in the first quarter of 2023, our Century Complete operations in Texas were realigned and are now managed under our Texas segment. Accordingly, we have presented segment information under this new basis as of and for the three months ended March 31, 2023, and we have restated the corresponding segment information for those segments as of and for the three months ended March 31, 2022.

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Net new home contracts


	Three Months Ended					Nine Months Ended					Three Months Ended
Net new home contracts	September 30,		Increase			September 30,		Increase
											March 31,		Increase (Decrease)
	2017	2016	Amount	% Change		2017	2016	Amount	% Change		2023	2022	Amount	% Change
West	114	—	114	NM		114	—	114	NM		343	417	(74)	(17.7)	%
Mountain	373	266	107	40.2	%	1,290	984	306	31.1	%	333	586	(253)	(43.2)	%
Texas	133	81	52	64.2	%	360	271	89	32.8	%	475	496	(21)	(4.2)	%
Southeast	294	281	13	4.6	%	1,128	1,036	92	8.9	%	242	409	(167)	(40.8)	%
Century Complete											629	1,036	(407)	(39.3)	%
Total	914	628	286	45.5	%	2,892	2,291	601	26.2	%	2,022	2,944	(922)	(31.3)	%

~~NM – Not Meaningful~~

Net new home contracts (new home contracts net of cancellations) for the three months ended ~~September 30, 2017 increased~~March 31, 2023 decreased by ~~286~~922 homes, or ~~45.5%~~31.3%, to ~~914,~~2,022 as compared to ~~628~~2,944 for the ~~same period in 2016. Net new home contracts for the nine~~three months ended ~~September 30, 2017 increased by 601 homes, or 26.2%, to 2,892,~~March 31, 2022. Beginning in the second quarter of 2022 and continuing through the first quarter of 2023, we experienced a decline in home sales pace across our markets as compared to ~~2,291 for the same period~~prior year periods. The decrease in ~~2016. The increase in our~~ net new home contracts was primarily driven by ~~our acquisition~~the reduced number of ~~UCP, Inc. as well as overall positive market conditions in~~homes available for sale and the ~~markets in which we operate.~~impact on demand for new homes from increased interest rates, inflation, and macro-economic uncertainty.

Monthly absorption rate

Our overall monthly “absorption rate” (the rate at which home orders are contracted, net of cancelations) for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 by segment are included in the ~~table~~tables below:


	Three Months Ended September 30,		Increase			Three Months Ended March 31,		Increase (Decrease)
	2017	2016	Amount	% Change		2023	2022	Amount	% Change
West	5.2	-	5.2	NM		4.4	6.3	(1.9)	(30.2)	%
Mountain	3.8	2.3	1.5	65.2	%	2.8	5.6	(2.8)	(50.0)	%
Texas	1.8	1.1	0.7	63.6	%	4.5	7.2	(2.7)	(37.5)	%
Southeast	2.6	3.2	(0.6)	(18.8)	%	2.9	6.2	(3.3)	(53.2)	%
Century Complete						2.0	3.6	(1.6)	(44.4)	%
Total	3.2	2.3	0.9	39.1	%	2.9	5.0	(2.1)	(42.0)	%

	Nine Months Ended September 30,		Increase
	2017	2016	Amount	% Change
West	5.2	-	5.2	NM
Mountain	4.3	4.1	0.2	4.9	%
Texas	1.8	1.7	0.1	5.9	%
Southeast	3.6	3.9	(0.3)	(7.7)	%
Total	3.5	3.6	(0.1)	(2.8)	%

~~NM – Not Meaningful~~

~~Our~~During the three months ended March 31, 2023, our absorption rate ~~increased~~decreased by ~~39.1%~~42.0% to ~~3.2~~2.9 per month, as compared to the same period in 2022. Beginning in the second quarter of 2022 and ~~decreased by 2.8%~~continuing through the first quarter of 2023, we experienced a decline in sales pace across our markets compared to ~~3.5 per month,~~prior year periods. The decrease in sales pace was consistent with trends seen in the overall housing market, as increased mortgage interest rates, inflation, and macro-economic uncertainty caused demand to decrease from the historically strong market conditions experienced since the second quarter of 2020. Even with these challenges, during the three ~~and nine~~ months ended ~~September 30, 2017, respectively, as compared to 2.3 per month~~March 31, 2023, we experienced cancellation rates of a combined 18%, with a 16% cancellation rate for Century Communities and ~~3.6 per month~~a 20% cancellation rate for Century Complete, which represents a significant reduction from cancellation rates we experienced in the ~~same periods in 2016, respectively. The increase in absorption rate is attributable to the strong homebuilding environment as a result~~latter half of ~~positive economic trends across our markets.~~ 2022.

Selling communities at period end



Selling communities at period end	As of September 30,		Increase/(Decrease)
						As of March 31,		Increase/(Decrease)
	2017	2016	Amount	% Change		2023	2022	Amount	% Change

West	10	—	10	NM		26	22	4	18.2	%
Mountain	33	35	(2)	(5.7)	%	40	35	5	14.3	%
Texas	24	23	1	4.3	%	35	23	12	52.2	%
Southeast	40	29	11	37.9	%	28	22	6	27.3	%
Century Complete						105	95	10	10.5	%
Total	107	87	20	23.0	%	234	197	37	18.8	%

~~NM – Not Meaningful~~

Our selling communities increased by 37 communities to ~~107~~234 communities at ~~September 30, 2017~~March 31, 2023 as compared to ~~87 communities~~197 at ~~September 30, 2016. The~~March 31, 2022. This increase ~~is attributable to our acquisition~~was a result of ~~UCP, Inc.~~ new community openings since the end of the prior year period.

3125

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Backlog

(dollars in thousands)



	As of March 31,
	2023					2022					% Change

	Homes	Dollar Value		Average Sales Price		Homes	Dollar Value		Average Sales Price		Homes		Dollar Value		Average Sales Price

West	220	$	133,249	$	605.7	545	$	412,519	$	756.9	(59.6)	%	(67.7)	%	(20.0)	%
Mountain	319		152,521		478.1	1,117		641,820		574.6	(71.4)	%	(76.2)	%	(16.8)	%
Texas	303		95,464		315.1	564		188,648		334.5	(46.3)	%	(49.4)	%	(5.8)	%
Southeast	249		110,864		445.2	756		356,413		471.4	(67.1)	%	(68.9)	%	(5.6)	%
Century Complete	829		221,514		267.2	2,265		571,465		252.3	(63.4)	%	(61.2)	%	5.9	%
Total / Weighted Average	1,920	$	713,612	$	371.7	5,247	$	2,170,865	$	413.7	(63.4)	%	(67.1)	%	(10.2)	%

As of September 30,
Backlog

2017

2016

% Change

Homes

Dollar Value

Average Sales Price

Homes

Dollar Value

Average Sales Price

Homes

Dollar Value

Average Sales Price

West

290

$
161,013

$
555.2

—

$
—

$
—

NM

NM

NM

Mountain

573

247,876

432.6

421

183,605

436.1

36.1
%

35.0
%

(0.8)
%
Texas

245

101,125

412.8

159

74,098

466.0

54.1
%

36.5
%

(11.4)
%
Southeast

556

179,324

322.5

412

123,224

299.1

35.0
%

45.5
%

7.8
%
Total / Weighted Average

1,664

$
689,338

$
414.3

992

$
380,927

$
384.0

67.7
%

81.0
%

7.9
%

~~NM – Not Meaningful~~

‎

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 ~~September 30, 2017,~~March 31, 2023, we had ~~1,664~~1,920 homes in backlog with a total value of ~~$689.4~~$713.6 million, which represents ~~an increase~~decreases of ~~67.7%~~63.4% and ~~81.0%~~67.1%, respectively, as compared to ~~September 30, 2016. The increase~~5,247 homes in backlog ~~and~~with a total value of $2.2 billion at March 31, 2022. The decrease in backlog dollar value is primarily attributable to ~~our acquisition of UCP, Inc. as well as~~ the ~~increase~~decrease in backlog units, and in part due to a 10.2% decrease in the ~~demand for new homes in the communities in which we have historically operated. The increase in~~ average sales price of homes in ~~backlog is driven~~backlog.

Supplemental Guarantor Information

Our 6.750% senior notes due 2027 (which we collectively refer to as our “2027 Notes”) and our 3.875% senior notes due 2029 (which we collectively refer to as our “2029 Notes” and together with the 2027 Notes, the “Senior Notes”) are our unsecured senior obligations and are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by ~~increases in most~~substantially all of our ~~markets~~direct and indirect wholly-owned operating subsidiaries (which we refer to collectively as “Guarantors”). Our subsidiaries associated with our Financial Services operations (referred to as “Non-Guarantors”) do not guarantee the Senior Notes. The guarantees are senior unsecured obligations of the Guarantors that rank equal with all existing and future senior debt of the Guarantors and senior to all subordinated debt of the Guarantors. The guarantees are effectively subordinated to any secured debt of the Guarantors. As of March 31, 2023, Century Communities, Inc. had outstanding $1.0 billion in total principal amount of Senior Notes.

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 ~~result~~Guarantor in compliance with applicable provisions of ~~pricing strength due~~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 ~~positive market trends~~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.

If a guarantor were to become a debtor in a case under the US Bankruptcy Code, a court may decline to enforce its guarantee of the Senior Notes. This may occur when, among other factors, it is found that the guarantor originally received less than fair consideration for the guarantee and the guarantor would be rendered insolvent by enforcement of the guarantee. On the basis of historical financial information, operating history and other factors, we believe that each of the guarantors, after giving effect to the issuance of its guarantee of the Senior Notes when the guarantee was issued, was not insolvent and did not and has not incurred debts beyond its ability to pay

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such debts as they mature. The Company cannot predict, however, what standard a court would apply in making these determinations or that a court would agree with our conclusions in this regard.

Only the 2027 Notes and the related guarantees are registered securities under the Securities Act of 1933, as amended (the “Securities Act”). The offer and sale of the 2029 Notes and the related guarantees were not and will not be registered under the Securities Act or the securities laws of any other jurisdiction and instead were issued in reliance upon an exemption from such registration. Unless they are subsequently registered under the Securities Act, neither the 2029 Notes nor the related guarantees may be offered and sold only in transactions that are exempt from the registration requirements under the Securities Act and the applicable securities laws of any other jurisdiction.

The Guarantors’ condensed supplemental financial information is presented in this report as if the Senior Note guarantees existed during the periods presented pursuant to applicable SEC rules and guidance. 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.

The following summarized financial information is presented for Century Communities, Inc. and the Guarantor Subsidiaries on a combined basis after eliminating intercompany transactions and balances among Century Communities, Inc. and the Guarantor Subsidiaries, as well as ~~product mix towards higher priced communities.~~ their investment in, and equity in earnings from Non-Guarantor Subsidiaries.

~~Supplemental Pro Forma Information~~Century Communities, Inc. and Guarantor Subsidiaries

~~To aid readers with 2017 over 2016 comparability for the entire merged business, we are also including limited supplemental pro forma information below.~~


Summarized Balance Sheet Data (in thousands)	March 31, 2023		December 31, 2022

Assets
Cash and cash equivalents	$	303,208	$	191,541
Cash held in escrow		12,691		56,569
Accounts receivable		46,870		46,326
Inventories		2,741,187		2,830,645
Prepaid expenses and other assets		203,259		193,824
Property and equipment, net		32,726		31,326
Deferred tax assets, net		20,939		20,856
Goodwill		30,395		30,395
Total assets	$	3,391,275	$	3,401,482
Liabilities and stockholders’ equity
Liabilities:
Accounts payable	$	105,436	$	105,727
Accrued expenses and other liabilities		281,921		310,330
Notes payable		1,026,615		1,019,412
Revolving line of credit		—		—
Total liabilities		1,413,972		1,435,469
Stockholders’ equity:		1,977,303		1,966,013
Total liabilities and stockholders’ equity	$	3,391,275	$	3,401,482


Summarized Statements of Operations Data (in thousands)	Three Months Ended		Year Ended
	March 31, 2023		December 31, 2022

Total homebuilding revenues	$	737,135	$	4,410,483
Total homebuilding cost of revenues		(601,385)		(3,315,994)
Selling, general and administrative		(98,313)		(430,742)
Inventory impairment		—		(10,149)
Other income (expense)		1,018		(15,894)
Income before income tax expense		38,455		637,704
Income tax expense		(9,348)		(142,986)
Net income	$	29,107	$	494,718

‎

Three Months Ended September 30,
(dollars in thousands)

2017

2016

Pro Forma Home sales revenues

Pro Forma Net new home contracts

Pro Forma Deliveries

Pro Forma Average sales price

Pro Forma Home sales revenues

Pro Forma Net new home contracts

Pro Forma Deliveries

Pro Forma Average sales price
West

$
106,547

150

201

$
530.1

$
79,500

161

155

$
512.9
Mountain

156,482

373

375

$
417.3

140,356

266

344

$
408.0
Texas

35,772

133

90

$
397.5

25,385

81

64

$
396.6
Southeast

115,596

309

370

$
312.4

92,674

367

342

$
271.0
Total

$
414,397

965

1,036

$
400.0

$
337,915

875

905
-
$
373.4

Nine Months Ended September 30,

2017

2016

Pro Forma Home sales revenues

Pro Forma Net new home contracts

Pro Forma Deliveries

Pro Forma Average sales price

Pro Forma Home sales revenues

Pro Forma Net new home contracts

Pro Forma Deliveries

Pro Forma Average sales price
West

$
279,315

587

560

$
498.8

$
204,273

502

413

$
494.6
Mountain

440,451

1403

1046

$
421.1

350,742

984

854

$
410.7
Texas

108,955

360

266

$
409.6

98,270

271

252

$
390.0
Southeast

306,938

1128

1010

$
303.9

272,530

1235

1057

$
257.8
Total

$
1,135,659

3,478

2,882

$
394.1

$
925,815

2,992

2,576

$
359.4

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Critical Accounting Policies

Critical accounting estimates are those that we believe are both significant and ~~that~~ 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, ~~2016,~~2022, filed with the SEC on February ~~15, 2017,~~2, 2023, in the section entitled “Management’s Discussion and Analysis of Financial Condition

~~Table of Contents~~

and Results of Operations—~~Significant~~Critical Accounting Policies.” We have had no significant changes in our critical accounting policies from those described therein, other than those related to our Mortgage loans held for sale, as discussed in “Note 1. Basis of Presentation.”

Liquidity and Capital Resources

~~Overview~~

Overview

Our liquidity, consisting of our cash and cash equivalents and cash held in escrow and revolving line of credit availability, was $1.2 billion as of March 31, 2023 and December 31, 2022.

Our principal uses of capital for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 were ~~the acquisition of UCP, Inc.,~~our land purchases, land development, home construction, and the payment of routine liabilities. ~~We used funds generated by operations, bond offerings, and available borrowings under our Credit Agreement to meet our short-term working capital requirements.~~

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 not recognized in our ~~statement~~consolidated 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, we ~~are currently actively acquiring~~continue to acquire and ~~developing~~develop lots in our markets ~~to maintain~~when they meet our current investment criteria.

Short-term Liquidity and grow our lot supply and active selling communities. As we continue to expand our business, we expect that cash outlays for land purchases and land development to grow our lot inventory could exceed our cashCapital Resources

We use funds generated by ~~operations.~~

~~Covenant Compliance~~

On October 21, 2014, we entered into a credit agreement with Texas Capital Bank, National Association, as Administrative Agent and L/C Issuer, and the lenders from time to time party thereto (which, as modified as described below, we refer to as the “Credit Agreement”). The Credit Agreement provides the Company with aoperations, available borrowings under our revolving line of credit ~~(which, as modified as described below, we refer~~facility, and proceeds from issuances of debt or equity, including our at-the-market facility, to ~~as the “Revolving Credit Facility”)~~fund our short term working capital obligations and fund our purchases of up to $120 million. Under the terms of the Credit Agreement, we are entitled to request an increase in the size of the Revolving Credit Facility by an amount not exceeding $80 million. If the existing lenders elect not to provide the full amount of a requested increase, we may invite one or more other lender(s) to become a party to the Credit Agreement, subject to the approval of the Administrative Agent and L/C Issuer. The Credit Agreement includes a letter of credit sublimit of $20 million. The obligations under the Revolving Credit Facility are guaranteed by certain of our subsidiaries.

On July 31, 2015, we entered into a First Modification Agreement with Texas Capital Bank, National Association, as Administrative Agent, the lenders party thereto, and our subsidiary guarantors party thereto, which modified the Credit Agreement. The First Modification Agreement, among other things, (i) increased the Revolving Credit Facility from $120 million to $200 million, (ii) extended the maturity date of the Revolving Credit Facility from October 21, 2017 to October 21, 2018, (iii) admitted Bank of America, N.A. as a new lender under the Revolving Credit Facility, and (iv) increased the amount of the increase in the size of the Revolving Credit Facility that we had the option to request, from time to time, from an amount not exceeding $80 million to an amount not exceeding $100 million, subject to the terms and conditions of the First Modification Agreement and the Credit Agreement.

On August 19, 2016, we entered into a Third Modification Agreement with Texas Capital Bank, National Association, as Administrative Agent, the lenders party thereto, and our subsidiary guarantors party thereto, which further modified the Credit Agreement. The Third Modification Agreement, among other things, (i) increased the Revolving Credit Facility from $300 million to $380 million, (ii) admitted Citibank, N.A. and Flagstar Bank, FSB as new lenders under the Revolving Credit Facility, (iii) increased certain lenders’ respective commitments to the Revolving Credit Facility, and (iv) extended the term of the Revolving Credit Facility by one year to mature in October 2019.

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~~million through our exercise of the remaining $20 million of the accordion feature of the Credit Agreement, and (ii) increased Flagstar’s commitment to the Credit Facility.~~

The Credit Agreement contains customary affirmative and negative covenants (including limitations on the Company’s ability to grant liens, incur additional debt, pay dividends, redeem its common stock, make certain investments, and engage in certain merger, consolidation or asset sale transactions),land, as well as ~~customary events~~land development, home construction activities, and other cash needs.

Our Financial Services operations use funds generated from operations, and availability under our mortgage repurchase facilities to finance its operations including originations of ~~default. The Credit Agreement also requires~~mortgage loans to our homebuyers.

Our Century Living operations use excess cash from our operations, as well as project specific secured financing under construction loan agreements to fund development of multi-family projects.

We believe that we will be able to fund our current liquidity needs for at least the ~~Company~~next twelve months with our cash on hand, cash generated from operations, and cash expected to ~~maintain (i)~~be available from our revolving line of credit or through accessing debt or equity capital, as needed or appropriate, although no assurance can be provided that such additional debt or equity capital will be available or on acceptable terms based on the macro-economy and market conditions at the time. In a leverage ratio of not more than 1.75 to 1.0 as of the last day of any fiscal quarter, based upon the ratio of debt to tangible net worth of the Company and its subsidiaries on a consolidated basis, (ii) anhigher interest ~~coverage ratio of not less than 1.50 to 1.0 for any four fiscal quarter period, based upon the ratio of EBITDA to cash~~rate environment, we may incur additional interest expense on borrowings that bear floating interest rates, such as our revolving line of the Company and its subsidiaries on a consolidated basis, (iii) a consolidated tangible net worth of not less than the sum of $250 million, plus 50% of the net proceeds of any issuances of equity interests of the Company and the guarantors of the Revolving Credit Facility, plus 50% of the amount of consolidated net income of the Company and its subsidiaries, (iv) liquidity of not less than $25 million, and (v) a risk asset ratio of not more than 1.25 to 1.0, based upon the ratio of the book value of all risk assets owned by the Company and its subsidiaries on a consolidated basis to the Company’s tangible net worth.

~~As of September 30, 2017, we were in compliance with all covenants under the Credit Agreement.~~

~~ATM Program~~

On November 7, 2016, we entered into a Distribution Agreement (which we refer to as the “Distribution Agreement”) with J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Citigroup Global Markets Inc. (which we refer to collectively as the “Sales Agents”), relating to our common stock. Under the Distribution Agreement,credit. We believe we are ~~authorized~~well positioned from a cash and liquidity standpoint to ~~offer~~operate in an uncertain environment, and ~~sell shares~~to pursue other ways to properly deploy capital to enhance returns, which may include taking advantage of strategic opportunities as they arise.

Long-term Liquidity and Capital Resources

Beyond the next twelve months, we believe that our principal uses of capital will be land and inventory purchases and other expenditures, as well as principal and interest payments on our long-term debt obligations. We believe that we will be able to fund our long-term liquidity needs with cash generated from operations and cash expected to be available from our revolving line of credit or through accessing debt or equity capital, as needed or appropriate, although no assurance can be provided that such additional debt or equity capital will be available, or on favorable terms, especially in light of rising interest rates. In a higher interest rate environment, we may incur additional interest expense on borrowings that bear floating interest rates, such as under our revolving line of credit, repurchase facilities, and construction loan agreements. To the extent these sources of capital are insufficient to meet our needs, we may also conduct additional public or private offerings of our ~~common stock having an aggregate offering price~~securities, refinance debt, or dispose of upcertain assets to ~~$50.0 million from time~~fund our operating activities and capital needs.

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Material Cash Requirements

In the normal course of business, we enter into contracts and commitments that obligate us to ~~time through any of~~make payments in the future. These obligations impact our Sales Agents in “at the market” offerings. On August 9, 2017, we entered into a second Distribution Agreement (which we refer to as the “Second Distribution Agreement”) with the Sales Agents, pursuant to which we may offershort-term and ~~sell from time to time up to $100.0 million in “at the market” offerings. During~~long-term liquidity and capital resource needs. For the three months ended September 30, 2017, we sold and issued an aggregate of 0.4 million shares of our common stock under the Distribution Agreement, which provided net proceeds of $8.9 million, and, in connection with such sales, paid total commissions and feesMarch 31, 2023, there were no material changes to the ~~Sales Agents of $0.2 million. During the three months ended September 30, 2017,~~contractual obligations we ~~sold and issued an aggregate of 47.4 thousand shares of~~previously disclosed in our common stock under the Second Distribution Agreement, which provided net proceeds of $1.1 million, and, in connection with such sales, paid total commissions and fees to the Sales Agents of $23.5 thousand.

~~Mortgage Repurchase Facility – Financial Services~~

On April 10, 2017, Inspire Home Loans Inc. (which we refer to as “Inspire”), an indirect wholly-owned subsidiary of the Company, entered into a Master Repurchase Agreement (which we refer to as the “Master Repurchase Agreement”) with Branch Banking and Trust Company, as the buyer thereunder (which we refer to as the “Buyer”). The Master Repurchase Agreement provides Inspire with a revolving mortgage loan repurchase facility of up to $25 million (which we refer to as the “Repurchase Facility”). The primary purpose of the Repurchase Facility is to provide financing and liquidity to Inspire by facilitating purchase transactions in which Inspire transfers eligible loans to the Buyer, against the transfer of funds by the Buyer, subject to a simultaneous agreement by the Seller to repurchase from the Buyer such eligible loans (i) upon written notice to the Buyer by Inspire, (ii)Annual Report on a prescribed date in the future, (iii) upon the occurrence of prescribed events, or (iv) on the Termination Date (as defined below). The purchase transactions are based on and subject to the terms and conditions set forth in the Master Repurchase Agreement. The maximum aggregate amount of the Buyer’s commitment to fund purchase transactions under the Repurchase Facility is $25 million (which we refer to as the “Commitment”), subject to certain sublimits. The Repurchase Facility and the Buyer’s Commitment thereunder expires on the earlier of (i) April 9, 2018, and (ii) the date when the Buyer’s Commitment is terminated pursuant to the Master Repurchase Agreement or by operation of law (which we refer to as the “Termination Date”).

On September 15, 2017, Inspire entered into a second Master Repurchase Facility (which we refer to as the “Second Master Repurchase Agreement”) with J.P. Morgan Chase Bank, N.A. as the buyer thereunder. The Second Master Repurchase Agreement provides Inspire with a revolving mortgage loan repurchase facility of up to $35 million (which we refer to as the “Second Repurchase Facility”). The purpose of the Second Repurchase Facility is similar to the purpose outlined aboveForm 10-K for the ~~Repurchase Facility. Amounts outstanding under~~fiscal year ended December 31, 2022 that was filed with the Repurchase Facility and Second Repurchase Facility are not guaranteed by us or any of our subsidiaries. Each of the Master Repurchase Agreement and Second Master Repurchase Agreement contains various affirmative and negative covenants applicable to Inspire that are customary for arrangements of this type. As of September 30, 2017, we were in compliance with all covenants under each of the Master Repurchase Agreement and the Second Repurchase Agreement.SEC on February 2, 2023.

As of September 30, 2017, there was an aggregate of $27.5 million outstanding under the Master Repurchase Agreement and Second Master Repurchase Agreement, which is presented as Mortgage Repurchase Facility in our Condensed Consolidated Balance Sheets. The amount outstanding under the Master Repurchase Agreement and the Second Master Repurchase Agreement was collateralized by $30.1 million of mortgage loans held for sale.

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~~Cash Flows—Nine Months Ended September 30, 2017 Compared to the Nine Months Ended September 30, 2016~~

~~For the nine months ended September 30, 2017 and 2016, the comparison of cash flows is as follows:~~

Net cash used in operating activities increased to $130.8 million during the nine months ended September 30, 2017 from net cash used of $61.4 million during the same period in 2016. The increase in cash used in operations was primarily a result of a net outflow associated with inventories of $95.1 million during the nine months ended September 30, 2017, compared to a net outflow of $85.6 million during the same period in 2016. The outflow in 2017 was driven by our investment in inventories through the purchase of 8,512 lots, including those acquired through our acquisition of UCP, Inc. during the nine months ended September 30, 2017, as well as 2,811 homes under construction as of September 30, 2017. These outflows were offset by cash inflows associated with 2,329 home deliveries during the nine months ended September 30, 2017. We had net cash used in working capital items including cash held in escrow, accounts receivable, prepaid expenses and other assets, accounts payable, accrued expenses and other liabilities, and mortgage loans held for sale of $75.4 million for the nine months ended September 30, 2017, as compared to cash used of $15.3 million for the same period in 2016.

Net cash used in investing activities was $66.1 million during the nine months ended September 30, 2017, compared to $5.0 million used during the same period in 2016. The increase relates to our acquisition of UCP Inc., which resulted in cash outflows, net of cash acquired, totaling $77.5 million, and decreased proceeds from sale of assets, partially offset the sale of our South Carolina operations which generated cash proceeds of $17.1 million, as a decrease in purchases of property and equipment during the nine months ended September 30, 2017 as compared to the same period in 2016.

Net cash provided by financing activities was $225.9 million during the nine months ended September 30, 2017, compared to $54.5 million during the same period in 2016. The increase in cash provided by financing activities is primarily attributed to cash proceeds from issuance of senior notes totaling $523.0 million, the net proceeds received from the sale of common stock totaling $35.0 million and net proceeds from our mortgage repurchase facility of $27.5 million, partially offset by an increase in net payments on our Revolving Credit Facility totaling $250.0 million, a decrease in proceeds received from issuance of insurance premium notes totaling $11.6 million, and an increase of debt issuance costs of $2.6 million.

~~As of September 30, 2017, our cash balance was $58.5 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. Purchase and option contracts for the purchase of land enable us to defer acquiring portions of properties owned by third parties until we have determined whether to exercise our option, which may serve to reduce our financial risks associated with long-term land holdings. These purchase contracts typically require a cash deposit, and the purchase of ~~land~~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. ~~These~~Option contracts generally require payment by us of a non-refundable deposit for the right to acquire lots over a specified period of time ~~or in bulk at a point in time,~~ at pre-determined prices. We generally have the right at our discretion to terminate our obligations under both purchase contracts and these contracts by forfeiting our cash deposit with no further financial responsibility to the land seller. Our obligations with respect to ~~the~~purchase contracts and option contracts are generally limited to the forfeiture of the related non-refundable cash deposits.

As of ~~September 30, 2017,~~March 31, 2023, we had outstanding purchase contracts and option contracts for ~~17,150~~20,248 lots totaling ~~$754.1~~approximately $897.4 million and we had ~~$11.2~~$42.4 million of deposits for land contracts, of which $21.8 were non-refundable cash deposits pertaining to land contracts. ~~While~~For contracts for which cash deposits were non-refundable, and subject to the terms of the outstanding contracts continuing to meet our investment criteria, we currently anticipate performing on the majority of our purchase and option contracts during the next 24 months. 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~~and dependent on ~~60% to 70% of the purchase and option contracts during the next twelve months, with performance on the remaining purchase and option contacts occurring in~~ future ~~periods.~~

market conditions. Our utilization of land option contracts is dependent on, among other things, the availability of land sellers ~~and others~~ 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.

Outstanding Debt Obligations and Debt Service Requirements

One of our principal liquidity needs is the payment of principal and interest on our outstanding indebtedness. Our outstanding indebtedness is described in detail in Note 9 – Debt in the Notes to the Consolidated Financial Statements. We are required to meet certain covenants, and as of March 31, 2023, we were in compliance with all such covenants and requirements under the agreements governing our revolving line of credit, mortgage repurchase facilities, and construction loan agreements. See Note 9 – Debt in the Notes to the Consolidated Financial Statements for further detail.

Our outstanding debt obligations included the following as of March 31, 2023 and December 31, 2022 (in thousands):



	March 31,		December 31,
	2023		2022
3.875% senior notes, due August 2029⁽¹⁾	$	495,077	$	494,884
6.750% senior notes, due May 2027⁽¹⁾		496,598		496,394
Other financing obligations⁽²⁾		34,940		28,134
Notes payable		1,026,615		1,019,412
Revolving line of credit		—		—
Mortgage repurchase facilities		149,784		197,626
Total debt	$	1,176,399	$	1,217,038

⁽¹⁾The carrying value of the 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.

⁽²⁾As of March 31, 2023, other financing obligations included $20.4 million related to insurance premium notes and certain secured borrowings, as well as $14.5 million outstanding under the construction loan agreements, as described below. As of December 31, 2022, other financing obligations included $20.7 million related to insurance premium notes and certain secured borrowings, as well as $7.4 million outstanding under the construction loan agreements.

We may from time to time seek to refinance or increase our outstanding debt or retire or purchase our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may or may not be material during any particular reporting period.

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Letters of Credit and Performance Bonds

In the normal course of business, we post letters of credit and performance and other bonds primarily related to our land development performance obligations with local municipalities. As of ~~September 30, 2017,~~March 31, 2023 and December 31, ~~2016,~~2022, we had ~~$70.1~~$570.8 million and ~~$70.1~~$574.8 million, respectively, in letters of credit and

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performance and other bonds issued and outstanding. ~~We anticipate that~~Although significant development and construction activities have been completed related to the ~~obligations secured by~~improvements at these ~~performance bonds and~~sites, the letters of credit and performance and other bonds are not generally released until all development and construction activities are completed.

Construction Loan Agreements

Revolving Line of Credit

On May 21, 2021, we entered into a Second Amended and Restated Credit Agreement (which we refer to as the “Second A&R Credit Agreement”) with Texas Capital Bank, National Association, as Administrative Agent and L/C Issuer, and the lenders party thereto. The Second A&R Credit Agreement provides us with a senior unsecured revolving line of credit (which we refer to as the “revolving line of credit”) of up to $800.0 million, and unless terminated earlier, will mature on April 30, 2026. The revolving line of credit includes a $250.0 million sublimit for standby letters of credit. Under the terms of the Second A&R Credit Agreement, we are entitled to request an increase in the size of the revolving line of credit by an amount not exceeding $200 million. Our obligations under the Second A&R Credit Agreement are guaranteed by certain of our subsidiaries. The Second A&R 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. On December 21, 2022, we entered into a First Modification Agreement with Texas Capital Bank, as Administrative Agent, amending the Second A&R Credit Agreement pursuant to which, effective January 3, 2023, all existing borrowings using an interest rate based on a LIBOR reference rate had the interest rate replaced with one based on an adjusted term SOFR reference rate, which equals the greater of (i) 0.50% or (ii) the one-month quotation of the secured overnight financing rate administered by the Federal Reserve Bank of New York, plus 0.10%.

As of March 31, 2023, no amounts were outstanding under our revolving line of credit and were in compliance with all covenants under the Second A&R Credit Agreement.

Mortgage Repurchase Facilities – Financial Services

Inspire is party to mortgage warehouse facilities with Comerica Bank and J.P. Morgan, and formerly Wells Fargo (since the agreement with Wells Fargo was terminated during the three months ended March 31, 2023) (which facilities we refer to as the “repurchase facilities”), which provide Inspire with uncommitted repurchase facilities of up to an aggregate of $200.0 million as of March 31, 2023, secured by the mortgage loans financed thereunder. The repurchase facilities have varying short term maturity dates through December 21, 2023 and bear a weighted average interest rate of 6.38% during the three months ended March 31, 2023.

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, 2023 and December 31, 2022, we had $149.8 million and $197.6 million outstanding under the repurchase facilities, respectively, and were in compliance with all covenants thereunder.

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At-the-Market Offerings

We are party to a Distribution Agreement with J.P. Morgan Securities LLC, BofA Securities, Inc., Wells Fargo Securities, LLC and 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, in accordance with the terms and conditions set forth in the Distribution Agreement. 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. We did not sell or issue any shares of our common stock during the three months ended March 31, 2023 and 2022, respectively, and as of March 31, 2023, all $100.0 million remained available for sale.

Stock Repurchase Program

Our Board of Directors authorized a stock repurchase program in 2018, under which we may repurchase up to 4.5 million 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 ~~performed~~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, applicable tax effects including the 1% excise tax recently instituted under the Inflation Reduction Act of 2022, and general market and economic conditions.

We intend to finance any stock repurchases through available cash and our revolving line of credit. 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. The 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.

During the three months ended March 31, 2023, we did not repurchase any shares of our common stock. During the three months ended March 31, 2022, an aggregate of 1.0 million shares of our common stock were repurchased for a total purchase price of approximately $62.4 million at a weighted average price of $61.52 per share. The maximum number of shares available to be repurchased under the stock repurchase program as of March 31, 2023 was 1,508,169 shares.

Dividends

The following table sets forth cash dividends declared by our Board of Directors to holders of record of our common stock during the three months ended March 31, 2023 and 2022, respectively (in thousands, except per share information):



			Three Months ended March 31, 2023
			Cash Dividends Declared and Paid
Declaration Date	Record Date	Paid Date	Per Share		Amount
February 8, 2023	March 1, 2023	March 15, 2023	$	$0.23	$	7,365

			Three Months ended March 31, 2022
			Cash Dividends Declared and Paid
Declaration Date	Record Date	Paid Date	Per Share		Amount
February 16, 2022	March 2, 2022	March 16, 2022	$	0.20	$	6,657

The declaration and payment of future cash dividends on our common stock, whether at current levels or at all, are at the discretion of our Board of Directors and depend upon, among other things, our expected future earnings, cash flows, capital requirements, access to external financing, debt structure and any adjustments thereto, operational and financial investment strategy and general financial condition, as well as general business conditions.

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Cash Flows— Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

For the three months ended March 31, 2023 and 2022, 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 are 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. Net cash provided by operating activities was $191.3 million during the three months ended March 31, 2023 as compared to $109.4 million during the quarter ended March 31, 2022. The increase in cash provided by operations is primarily a result of a reduction in inventories as a result of reduced land acquisition spend and expenditures associated with the construction of homes during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. This reduction was offset by (1) a decrease in net income of $109.2 million and (2) a reduction in our mortgage loans held for sale of $48.2 million during the three months ended March 31, 2023, as compared to a reduction in mortgage loans held for sale of $144.4 million during the three months ended March 31, 2022.

Net cash used in investing activities increased to $20.9 million during the three months ended March 31, 2023, compared to $5.1 million used during the three months ended March 31, 2022. The increase was primarily related to $16.3 million in expenditures related to the development, construction, and management of multi-family rental properties by our wholly owned subsidiary, Century Living.

Net cash used in financing activities decreased to $58.3 million during the three months ended March 31, 2023, compared to $208.4 million used during the three months ended March 31, 2022. The decrease in cash used in financing activities was primarily attributable to (1) a $91.0 million decrease in net payments on the repurchase facilities in the ~~ordinary course~~first three months of ~~business.~~2023 and (2) $62.4 million of repurchases of common stock during the first three months of 2022, as compared to no repurchases of common stock for the first three months of 2023.

As of March 31, 2023, our cash and cash equivalents and restricted cash balance was $420.6 million, as compared to $308.5 million as of December 31, 2022.

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Non-GAAP Financial Measures

In this Form 10-Q, we use certain non-GAAP financial measures, including EBITDA, Adjusted EBITDA, net homebuilding debt to net capital, adjusted net income and adjusted diluted earnings per share. 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 ~~adjusted~~EBITDA and Adjusted EBITDA for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016.~~2022. Adjusted EBITDA is a non-GAAP financial measure we use as a supplemental measure in evaluating operating performance. We define ~~adjusted~~Adjusted EBITDA as ~~consolidated~~ net income before (i) income tax expense, (ii) interest in cost of home sales revenues, (iii) other interest expense (income), (iv) depreciation and amortization expense, (v) loss on debt extinguishment (if applicable), and ~~(v) adjustments resulting from the application of purchase accounting for acquired work in process~~(vi) inventory ~~related to business combinations.~~ impairment (if applicable). We believe ~~adjusted~~Adjusted 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 ~~adjusted~~Adjusted EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items. Our ~~adjusted~~Adjusted 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.

(dollars in thousands)


	Three Months Ended September 30,							Nine Months Ended September 30,							Three Months Ended March 31,
	2017		2016		% Change			2017		2016		% Change			2023		2022		% Change
Net income	$	9,470	$	13,342		(29.0)	%	$	33,100	$	34,467		(4.0)	%	$	33,311	$	142,496		(76.6)	%
Income tax expense		5,686		6,389		(11.0)	%		17,216		16,790		2.5	%		10,698		46,280		(76.9)	%
Interest in cost of home sales revenues		8,794		5,192		69.4	%		20,625		13,177		56.5	%		9,807		12,146		(19.3)	%
Interest expense		1		—		NM			3		4		(25.0)	%
Interest expense (income)																(2,364)		135		NM	%
Depreciation and amortization expense		2,256		1,418		59.1	%		5,073		4,215		20.4	%		3,292		2,606		26.3	%
EBITDA		26,207		26,341		(0.5)	%		76,017		68,653		10.7	%		54,744		203,663		(73.1)	%
Purchase price accounting for acquired work in process inventory		6,214		100		6,113.8	%		6,331		318		1,890.9	%
Purchase price accounting for investment in unconsolidated subsidiaries outside basis		30		—		NM			885		—		NM
Inventory impairment																—		—		NM
Adjusted EBITDA	$	32,451	$	26,441		22.7	%	$	83,233	$	68,971		20.7	%	$	54,744	$	203,663		(73.1)	%

NM – Not Meaningful

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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 ~~(notes payable~~(homebuilding debt less cash and ~~revolving line of credit less~~cash equivalents, and cash held in ~~escrow and cash and cash equivalents)~~escrow) by net capital (net homebuilding debt plus total stockholders’ equity). Homebuilding debt is our total debt minus our outstanding borrowings under our construction loan agreements and our repurchase facilities. 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.

(dollars in thousands)


	September 30,		December 31,		March 31,		December 31,
	2017		2016		2023		2022
Total debt	$	803,481	$	454,088
Notes payable					$	1,026,615	$	1,019,412
Revolving line of credit						—		—
Construction loan agreements						(14,526)		(7,389)
Total homebuilding debt						1,012,089		1,012,023
Total stockholders' equity		653,012		473,636		2,171,641		2,150,215
Total capital	$	1,456,493	$	927,724	$	3,183,730	$	3,162,238
Debt to capital		55.2%		48.9%
Homebuilding debt to capital						31.8%		32.0%

Total debt	$	803,481	$	454,088
Total homebuilding debt					$	1,012,089	$	1,012,023
Cash and cash equivalents		(58,522)		(29,450)		(405,722)		(296,724)
Cash held in escrow		(42,262)		(20,044)		(12,691)		(56,569)
Net debt		702,697		404,594
Net homebuilding debt						593,676		658,730
Total stockholders' equity		653,012		473,636		2,171,641		2,150,215
Net capital	$	1,355,709	$	878,230	$	2,765,317	$	2,808,945

Net debt to net capital		51.8%		46.1%
Net homebuilding debt to net capital						21.5%		23.5%

‎

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Adjusted Net Income and Adjusted Diluted Earnings per ~~Common~~ Share

Adjusted ~~Diluted Earnings~~net income and adjusted diluted earnings per ~~Common Share~~share (which we refer to as “Adjusted ~~Diluted~~ EPS”) ~~is a~~are non-GAAP financial ~~measure~~measures that we believe isare 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. We define adjusted net income as consolidated net income before (i) income tax expense, (ii) inventory impairment, if applicable (iii) restructuring costs, if applicable and (iv) loss on debt extinguishment, if applicable, less adjusted income tax expense, calculated using our estimated annual effective tax rate after discrete items for the applicable period. Adjusted ~~Diluted~~ EPS is calculated by ~~excluding~~dividing adjusted net income by weighted average common shares – diluted.

(in thousands, except share and per share information)


	Three Months Ended March 31,
	2023		2022
Numerator
Net income	$	33,311	$	142,496
Denominator
Weighted average common shares outstanding - basic		31,914,414		33,530,610
Dilutive effect of stock-based compensation awards		202,668		411,624
Weighted average common shares outstanding - diluted		32,117,082		33,942,234
Earnings per share:
Basic	$	1.04	$	4.25
Diluted	$	1.04	$	4.20

Adjusted earnings per share
Numerator
Net income	$	33,311	$	142,496
Income tax expense		10,698		46,280
Income before income tax expense		44,009		188,776
Inventory impairment		—		—
Adjusted income before income tax expense		44,009		188,776
Adjusted income tax expense⁽¹⁾		(10,698)		(46,280)
Adjusted net income	$	33,311	$	142,496

Denominator - Diluted		32,117,082		33,942,234

Adjusted diluted earnings per share	$	1.04	$	4.20

⁽¹⁾The tax rates used in calculating adjusted net income for the ~~effect~~three months ended March 31, 2023 and 2022 were 24.3% and 24.5%, respectively, which are reflective of ~~acquisition costs and purchase price accounting~~our GAAP tax rates for ~~acquired work in process from~~ the ~~calculation of reported EPS.~~applicable periods.

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016
Numerator

Net income

$
9,470

$
13,342

$
33,100

$
34,467
Less: Undistributed earnings allocated to participating securities

(52)

(241)

(289)

(785)
Net income allocable to common stockholders

$
9,418

$
13,101

$
32,811

$
33,682
Denominator

Weighted average common shares outstanding - basic

25,445,552

20,673,521

23,038,390

20,643,682
Dilutive effect of restricted stock units

280,585

148,545

236,930

88,248
Weighted average common shares outstanding - diluted

25,726,137

20,822,066

23,275,320

20,731,930
Earnings per share:

Basic

$
0.37

$
0.63

$
1.42

$
1.63
Diluted

$
0.37

$
0.63

$
1.41

$
1.62

Adjusted Earnings per share

Numerator

Income before income tax expense

$
15,156

$
19,731

$
50,316

$
51,257
Purchase price accounting for acquired work in process inventory

6,214

100

6,331

318
Acquisition expense

7,205

53

8,645

466
Adjusted income before income tax expense

28,575

19,884

65,292

52,041
Income tax expense(1)

(9,801)

(6,439)

(21,350)

(17,047)
Adjusted net income

18,774

13,445

43,942

34,994
Less: Undistributed earnings allocated to participating securities

(104)

(243)

(384)

(797)
Adjusted net income allocable to common stockholders

$
18,670

$
13,202

$
43,558

$
34,197

Denominator - Diluted

25,726,137

20,822,066

23,275,320

20,731,930

Adjusted diluted earnings per share

$
0.73

$
0.63

$
1.87

$
1.65

⁽¹⁾

The tax rate used in calculating adjusted net income was 34.3% and 32.7% for the three and nine months ended September 30, 2017, respectively. The tax rate used is reflective of our GAAP tax rate for the three and nine months ended September 30, 2017 of 37.5% and 34.2%, respectively, adjusted for certain acquisition costs which are not deductible for tax.

‎

Table of Contents

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 Second A&R Credit ~~Agreement, which was~~Agreement and construction loan agreements.

On December 21, 2022, we entered into a First Modification Agreement with Texas Capital Bank (formerly known as Texas Capital Bank, National Association), as Administrative Agent, amending the Second A&R Credit Agreement. Per the First Modification Agreement, effective January 3, 2023, all existing borrowings using an interest rate based on ~~October 21, 2014. Future borrowings~~a LIBOR reference rate had the interest rate replaced with one based on an adjusted term SOFR reference rate, which equals the greater of (i) 0.50% or (ii) the one-month quotation of the secured overnight financing rate administered by the Federal Reserve Bank of New York, plus 0.10%.

Borrowings under the ~~Credit Agreement~~construction loan agreements bear interest at various rates, including a fixed rate, and floating ~~rate~~interest rates per annum equal to the ~~London Interbank Offered Rate~~SOFR and the Bloomberg Short-term Bank Yield Index, plus an applicable ~~margin between 2.75% and 3.25% per annum, or,~~margin.

For fixed rate debt, such as our senior notes, changes in interest rates generally affect the Administrative Agent’s discretion, a base rate plus an applicable margin between 1.75% and 2.25% per annum. The “applicable margins” described above are determined by a schedule based on the leverage ratiofair value of the ~~Company, as defined in~~debt instrument, but not our earnings or cash flows. As interest rates increase, the ~~Credit Agreement. The 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%~~fair value of the ~~unused portion~~debt instrument will decrease.

Our Financial Services business utilizes mortgage backed securities forward commitments, option contracts and investor commitments to protect the value of ~~the Revolving Credit Facility.~~ ~~Under our current policies,~~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 ~~do not~~typically use ~~interest rate~~ derivative financial instruments to ~~manage~~hedge our exposure to ~~changes in~~risk from the time a borrower locks a loan until the time the loan is securitized. We also typically hedge our interest ~~rates.~~rate exposure through entering into interest rate swap futures.

~~Inflation~~

Inflation

Our homebuilding operations ~~can~~have been and may continue to be adversely impacted by inflation, primarily from higher land, financing, labor, material, and construction costs. In addition, inflation ~~can~~has led and could continue to lead to higher mortgage rates, which ~~can~~has and could continue to significantly affect the affordability of mortgage financing to ~~homebuyers. While~~homebuyers and lead to weakened demand for our homes, as well as increased cancellations compared to prior year periods. Inflation remained elevated during the three months ended March 31, 2023 compared to the prior year period, and the Federal Reserve continued to raise the federal funds interest rate during the first quarter of 2023, which continued to impact interest rates on 30-year fixed mortgages. Due to higher mortgage rates, we ~~attempt~~were no longer able to ~~pass on~~offset cost increases ~~to customers through increased~~with higher home selling prices ~~when~~in the first quarter of 2023 and if weak housing market conditions ~~exist,~~continue we ~~are often~~will likely continue to be unable to offset cost increases with higher home selling ~~prices.~~prices in the future.

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 historically has taken four to eight months to construct a new home, we typically 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 our cash receipts from home deliveries occurs during the second half of the year. We expect this seasonal pattern, especially with respect to sales, to return this year after being obscured by the COVID-driven sales boom that began in 2020 and continued until the interest rate led softening in the second half of 2022, and to continue over the long term, although it may be affected by volatility in the homebuilding industry, supply chain challenges, and changes in demand for our homes.

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 ~~September 30, 2017,~~March 31, 2023, 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 ~~September 30, 2017~~March 31, 2023 in providing reasonable assurance that information required to be disclosed by us in the reports that we file or ~~furnish~~submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Table of Contents

Changes in Internal Control over Financial Reporting

~~During~~

There were no changes during the ~~nine months ended September 30, 2017, we completed~~first quarter of 2023 in our ~~acquisition of UCP, Inc. and we are in the process of integrating UCP, Inc. into our overall~~ internal control over financial reporting ~~process.~~(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

~~Table of Contents~~

~~PART~~ II

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~~

We hereby disclose the following revised risk ~~factors we previously disclosed~~factor described in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~2022 that was filed with the SEC on February ~~15, 2017.~~2, 2023.

Global economic and political instability and conflicts could adversely affect our business, financial condition or results of operations.

The global economic slowdown, inflation, rising interest rates and the prospects for recession, as well as recent and potential future disruptions in access to bank deposits or lending commitments due to bank failure, could materially and adversely affect our liquidity, our business, financial condition and results of operations. The recent closures of Silicon Valley Bank and Signature Bank and their placement into receivership with the Federal Deposit Insurance Corporation (“FDIC”) created bank-specific and broader financial institution liquidity risk and concerns. Although the Department of the Treasury, the Federal Reserve, and the FDIC jointly released a statement that depositors at Silicon Valley Band and Signature Bank would have access to their funds, even those in excess of the standard FDIC insurance limits, future adverse developments with respect to specific financial institutions or the broader financial services industry may lead to market-wide liquidity shortages. The failure of any bank with which we do business could reduce the amount of cash we have available for our operations or delay our ability to access such funds. Any such failure may increase the possibility of a sustained deterioration of financial market liquidity, or illiquidity at clearing, cash management and/or custodial financial institutions. In the event we have a commercial relationship with a bank that has failed or is otherwise distressed, we may experience delays or other issues in meeting our financial obligations. If other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our cash and cash equivalents and investments may be threatened and could have a material adverse effect on our business and financial condition.

Additionally, our business could be adversely affected by unstable economic and political conditions within the United States and foreign jurisdictions and geopolitical conflicts, such as the conflict between Russia and Ukraine. While we do not have any customer or direct supplier relationships in either country, the current military conflict, and related sanctions, as well as export controls or actions that may be initiated by nations (e.g., potential cyber attacks, disruption of energy flows, etc.) and other potential uncertainties could adversely affect our supply chain by causing shortages or increases in costs for materials necessary to construct homes and/or increases to the price of gasoline and other fuels. In addition, such events could cause higher interest rates, inflation or general economic uncertainty, which could negatively impact our business partners, employees or customers, or otherwise adversely impact our business.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

During the three months ended September 30, 2017, certain of our employees surrendered approximately 44,220 shares of our common stock owned by them to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted shares of common stock issued under our First Amended & Restated 2013 Long-Term Incentive Plan. The following table summarizes the repurchases that occurred during the three months ended September 30, 2017:

Total number of shares purchased

Average price paid per share

Total number of shares purchased as part of publicly announced plans or programs

Maximum number of shares that may yet be purchased under the plans or programs
July

Purchased 7/1 through 7/31

29,022

$
25.90

N/A

N/A
August

Purchased 7/1 through 7/31

-

-

N/A

N/A
September

Purchased 9/1 through 9/30

15,198

24.00

N/A

N/A
Total

44,220

$
25.25

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

~~None.~~

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5.OTHER INFORMATION.

~~None.~~

Not applicable.
‎

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ITEM 6. EXHIBITS.

The following exhibits are either filed herewith or incorporated herein by reference:

Item No.		Description
~~2.1~~3.1		Agreement and Plan of Merger, dated as of April 10, 2017, by and among the Company, Casa Acquisition Corp., and UCP, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 11, 2017)*
~~3.1~~		Certificate of Incorporation of ~~the Company,~~Century Communities, Inc., as amended (incorporated by reference to Exhibit 3.1 to the initial filing of ~~the Company’s~~Century Communities, Inc.’s Registration Statement on Form S-1, filed with the SEC on May 5, ~~2014)~~2014 (File No. 333-195678))
3.2		Amended and Restated Bylaws of ~~the Company (incorporated by reference to Exhibit 3.2 to the initial filing of the Company’s Registration Statement on Form S-1, filed with the SEC on May 5, 2014)~~
~~3.3~~		~~Amendment to the Bylaws of the Company, adopted and~~Century Communities, Inc., effective ~~on April 10, 2017~~November 9, 2022 (incorporated by reference to Exhibit 3.1 to ~~the Company’s~~Century Communities, Inc.’s Current Report on Form 8-K filed with the SEC on ~~April 11, 2017)~~November 10, 2022 (File No. 001-36491)).
~~4.1~~22.1		~~Indenture (including form~~List of 5.875% Senior Notes Due 2025), dated as of May 12, 2017, among the Company, the Guarantors party thereto, and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the SEC on May 12, 2017)Guarantor Subsidiaries (filed herewith)
~~10.1~~31.1		Master Repurchase Agreement, dated as of April 10, 2017, by and between Inspire Home Loans Inc. and Branch Banking and Trust Company (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 13, 2017)
~~10.2†~~		~~Century Communities, Inc. 2017 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on May 12, 2017)~~
~~10.3†~~		Form of Employee Restricted Stock Unit Award Agreement for use with the Century Communities, Inc. 2017 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on May 12, 2017)
~~10.4†~~		Form of Non-Employee Director Restricted Stock Unit Award Agreement for use with the Century Communities, Inc. 2017 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on May 12, 2017)
~~10.5~~		Registration Rights Agreement, dated as of May 12, 2017, by and among the Company, the Guarantors party thereto, and J.P. Morgan Securities LLC, on behalf of the initial purchasers (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on May 12, 2017)
~~31.1~~		Certification of the Co-Principal Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended (filed herewith)
31.2		Certification of the Co-Principal Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended (filed herewith)
31.3		Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended (filed herewith)
32.1		Certification of the Co-Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.2		Certification of the Co-Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.3		Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
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)

~~Table of Contents~~

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 (formatted in Inline XBRL and contained in Exhibit 101)

*~~Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to supplementally furnish copies of any of the omitted schedules upon request by the SEC.~~
‎

†~~Management contract or compensatory plan or arrangement.~~

Table of Contents

SIGNATURES

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this ~~Quarterly Report on Form 10-Q~~report to be signed on its behalf by the undersigned thereunto duly authorized.

				Century Communities, Inc.
	~~Century Communities, Inc.~~


Date: April 26, 2023	By:	/s/ Dale Francescon
~~Date: November 2, 2017~~	~~By:~~	~~/s/~~ Dale Francescon
		~~Dale Francescon~~
			Chairman of the Board and Co-Chief Executive Officer
(Co-Principal Executive Officer)

Date: ~~November 2, 2017~~April 26, 2023	By:	/s/ Robert J. Francescon
		Robert J. Francescon
		Co-Chief Executive Officer and President
		(Co-Principal Executive Officer)


Date: ~~November 2, 2017~~April 26, 2023	By:	/s/ David Messenger
		David Messenger
		Chief Financial Officer
		(Principal Financial Officer)


Date: ~~November 2, 2017~~April 26, 2023	By:	/s/ J. Scott Dixon
		J. Scott Dixon
		Assistant Chief ~~Accounting~~Financial Officer
		(Principal Accounting Officer)

4239


		As of September 30, 2017
	Restricted Stock Awards		Restricted Stock Units		Total
Unvested awards/units		139		732		871
Unrecognized compensation cost	$	909	$	9,323	$	10,232
Period to recognize compensation cost		0.4 years		2.1 years		1.9 years (average)



	Supplemental Condensed Consolidated Balance Sheet
	As of September 30, 2017 (in thousands)
			Guarantor		Non Guarantor		Elimination		Consolidated
	CCS		Subsidiaries		Subsidiaries		Entries		CCS
Assets
Cash and cash equivalents	$	35,881	$	16,278	$	6,363	$	—	$	58,522
Cash held in escrow		—		41,740		522		—		42,262
Accounts receivable		11,306		9,312		192		—		20,810
Investment in consolidated subsidiaries		1,382,958		—		—		(1,382,958)		—
Inventories		—		1,352,989		—		—		1,352,989
Mortgage loans held for sale		—		—		30,071		—		30,071
Prepaid expenses and other assets		2,859		59,129		374		—		62,362
Deferred tax asset, net		6,403		—		—		—		6,403
Property and equipment, net		2,409		10,760		489		—		13,658
Investment in unconsolidated subsidiaries		20,677		—		—				20,677
Amortizable intangible assets, net		—		1,889		—		—		1,889
Goodwill		—		21,365		—		—		21,365
Total assets	$	1,462,493	$	1,513,462	$	38,011	$	(1,382,958)	$	1,631,008
Liabilities and stockholders’ equity
Liabilities:
Accounts payable	$	(17)	$	16,707	$	120	$	—	$	16,810
Accrued expenses and other liabilities		35,746		121,251		708		—		157,705
Notes payable		773,752		2,264		—		—		776,016
Revolving line of credit		—		—		—		—		—
Mortgage repurchase facility		—		—		27,465		—		27,465
Total liabilities		809,481		140,222		28,293		—		977,996
Stockholders’ equity:		653,012		1,373,240		9,718		(1,382,958)		653,012
Total liabilities and stockholders’ equity	$	1,462,493	$	1,513,462	$	38,011	$	(1,382,958)	$	1,631,008


	Supplemental Condensed Consolidated Balance Sheet
	As of December 31, 2016 (in thousands)
			Guarantor		Non Guarantor		Elimination		Consolidated
	CCS		Subsidiaries		Subsidiaries		Entries		CCS
Assets
Cash and cash equivalents	$	14,637	$	8,646	$	6,167	$	—	$	29,450
Cash held in escrow		—		20,044		—		—		20,044
Accounts receivable		2,980		2,749		—		—		5,729
Investment in consolidated subsidiaries		884,665		—		—		(884,665)		—
Inventories		—		857,885		—		—		857,885
Prepaid expenses and other assets		14,628		25,662		167		—		40,457
Property and equipment, net		1,166		10,224		22		—		11,412
Investment in unconsolidated subsidiaries		18,275		—						18,275
Amortizable intangible assets, net		—		2,911		—		—		2,911
Goodwill		—		21,365		—		—		21,365
Total assets	$	936,351	$	949,486	$	6,356	$	(884,665)	$	1,007,528
Liabilities and stockholders’ equity
Liabilities:
Accounts payable	$	257	$	15,575	$	(124)	$	—	$	15,708
Accrued expenses and other liabilities		12,587		49,697		30		—		62,314
Deferred tax liability		1,782		—		—		—		1,782
Senior and other notes payable		253,089		5,999		—		—		259,088
Revolving line of credit		195,000		—		—		—		195,000
Total liabilities		462,715		71,271		(94)		—		533,892
Stockholders’ equity:		473,636		878,215		6,450		(884,665)		473,636
Total liabilities and stockholders’ equity	$	936,351	$	949,486	$	6,356	$	(884,665)	$	1,007,528


		Supplemental Condensed Consolidated Statement of Operations
	For the Three Months Ended September 30, 2017 (in thousands)
				Guarantor		Non Guarantor		Elimination		Consolidated
		CCS		Subsidiaries		Subsidiaries		Entries		CCS
Revenues
Homebuilding revenues
Home sales revenues		$	—	$	374,935	$	—	$	—	$	374,935
Land sales and other revenues			—		1,826		—		—		1,826
			—		376,761		—		—		376,761
Financial services revenue			—		—		2,955		—		2,955
Total revenues			—		376,761		2,955		—		379,716
Homebuilding cost of revenues
Cost of homes sales revenues			—		(311,365)		—		—		(311,365)
Cost of land sales and other revenues			—		(2,104)		—		—		(2,104)
			—		(313,469)		—		—		(313,469)
Financial services costs			—		—		(2,450)		—		(2,450)
Selling, general and administrative			(13,342)		(32,823)		—		—		(46,165)
Acquisition expense			(7,205)		—		—		—		(7,205)
Equity in earnings from consolidated subsidiaries			20,470		—		—		(20,470)		—
Equity in income of unconsolidated subsidiaries			3,716		—		—		—		3,716
Other income (expense)			495		518		—		—		1,013
Income before income tax expense			4,134		30,987		505		(20,470)		15,156
Income tax expense			5,336		(10,845)		(177)	��	—		(5,686)
Net income		$	9,470	$	20,142	$	328	$	(20,470)	$	9,470


		Supplemental Condensed Consolidated Statement of Operations
	For the Nine Months Ended September 30, 2017 (in thousands)

				Guarantor		Non Guarantor		Elimination		Consolidated
		CCS		Subsidiaries		Subsidiaries		Entries		CCS
Revenues
Homebuilding revenues
Home sales revenues		$	—	$	888,942	$	—	$	—	$	888,942
Land sales and other revenues			—		6,216		—		—		6,216
			—		895,158		—		—		895,158
Financial services revenue			—		—		4,697		—		4,697
Total revenues			—		895,158		4,697		—		899,855
Homebuilding cost of revenues
Cost of homes sales revenues			—		(727,577)		—		—		(727,577)
Cost of land sales and other revenues			—		(4,994)		—		—		(4,994)
			—		(732,571)		—		—		(732,571)
Financial services costs			—		—		(4,648)		—		(4,648)
Selling, general and administrative			(30,876)		(82,721)		—		—		(113,597)
Acquisition expense			(8,645)		—		—		—		(8,645)
Equity in earnings from consolidated subsidiaries			52,869		—		—		(52,869)		—
Equity in income of unconsolidated subsidiaries			7,648		—		—		—		7,648
Other income (expense)			852		1,386		36		—		2,274
Income before income tax expense			21,848		81,252		85		(52,869)		50,316
Income tax expense			11,252		(28,438)		(30)		—		(17,216)
Net income		$	33,100	$	52,814	$	55	$	(52,869)	$	33,100


	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs
July
Purchased 7/1 through 7/31	29,022	$	25.90	N/A		N/A
August
Purchased 7/1 through 7/31	-		-	N/A		N/A
September
Purchased 9/1 through 9/30	15,198		24.00	N/A		N/A
Total	44,220	$	25.25