Supplemental Guarantor Information | 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. 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 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 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 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 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 |