12. Other Liabilities

At June 30, 2012 and December 31, 2011, other liabilities were as follows:


	June 30, 2012		December 31, 2011
	(In thousands)
Completed operations	$	117,129	$	109,390
Warranty reserves		16,346		17,358
Deferred revenue		26,886		20,329
Provisions for closed homes/communities		8,842		13,156
Deposits		16,569		7,766
Legal reserves		7,146		5,824
Accrued interest		8,086		8,122
Accrued compensation and benefits		3,805		2,109
Distributions payable		3,073		3,344
Deficit Distributions (see Note 8)		846		928
Other		7,368		11,325

Total other liabilities	$	216,096	$	199,651

Completed Operations

Reserves for completed operations primarily represent claims for property damage to completed homes and projects outside of our one-to-two year warranty period. Specific terms and conditions of completed operations warranties vary depending on the market in which homes are closed and can range to 12 years. Expenses and liabilities are recorded for potential completed operations claims based upon aggregated loss experience, which includes an estimate of completed operations claims incurred but not reported, and is actuarially estimated using individual case-basis valuations and statistical analysis. From August 1, 2001 to July 31, 2009, completed operations claims are insured with third-party insurance carriers. Commencing August 1, 2009, completed operations claims are insured with affiliate insurance carriers.

For the three and six months ended June 30, 2012 and 2011, changes in completed operations were as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(In thousands)
Insured completed operations
Balance, beginning of the period	$	103,980		$	116,939		$	109,390		$	102,860
Reserves provided		17,517			2,518			18,908			1,174
Insurance purchased		0			0			0			16,520
Claims paid		(4,368	)		(4,354	)		(11,169	)		(5,451	)

Balance, end of the period		117,129			115,103			117,129			115,103

Self-insured completed operations
Balance, beginning of the period		0			0			0			15,613
Reserves provided		0			0			0			907
Insurance purchased		0			0			0			(16,520	)

Balance, end of the period		0			0			0			0

Total completed operations	$	117,129		$	115,103		$	117,129		$	115,103

Reserves provided for self-insured completed operations are included in cost of sales. Reserves provided for insured completed operations are offset by changes in insurance receivables (see Note 6), however, premiums paid for insured completed operations are included in cost of sales. For actual completed operations claims and estimates of completed operations claims incurred but not reported, we estimate and record insurance receivables under applicable policies when recovery is probable. At June 30, 2012 and December 31, 2011, insurance receivables were $117.1 million and $109.4 million, respectively.

Expenses, liabilities and receivables related to these claims are subject to a high degree of variability due to uncertainties such as trends in completed operations claims related to our markets and products built, claim settlement patterns and insurance industry practices. Although considerable variability is inherent in such estimates, we believe reserves for completed operations claims are adequate.

Warranty Reserve

We offer a limited one or two year warranty for our homes. Specific terms and conditions of these warranties vary depending on the market in which homes are closed. We estimate warranty costs to be incurred and record a liability and an expense to cost of sales when home revenue is recognized. We also include in our warranty reserve uncovered losses related to completed operations coverage, which approximates 12.5% of the total property damage. Factors affecting warranty liability include number of homes closed, historical and anticipated warranty claims, and cost per claim. We periodically assess adequacy of our warranty liabilities and adjust amounts as necessary.

For the three and six months ended June 30, 2012 and 2011, changes in warranty liability were as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(In thousands)
Balance, beginning of the period	$	16,660		$	15,103		$	17,358		$	16,238
Provision for warranties		1,668			3,353			3,143			3,442
Warranty costs paid		(1,982	)		(3,118	)		(4,155	)		(4,342	)

Balance, end of the period	$	16,346		$	15,338		$	16,346		$	15,338

Deferred Revenue

Deferred revenue represents deferred profit on transactions in which an insufficient down payment was received or a future performance, passage of time or event is required. At June 30, 2012 and December 31, 2011, deferred revenue primarily represents the PIC Transaction described below.

Completed operations claims were previously insured through PIC for policy years August 1, 2001 to July 31, 2007. In December 2009, PIC entered into a series of novation and reinsurance transactions (the “PIC Transaction”).

First, PIC entered into a novation agreement with JFSCI to novate its deductible reimbursement obligations related to its workers’ compensation and general liability risks at September 30, 2009, and its completed operations claims from August 1, 2005 to July 31, 2007. Concurrently, JFSCI entered into insurance arrangements with unrelated third-party insurance carriers to insure these programs. As a result of this novation, the $19.2 million gain was deferred in these consolidated financial statements and will be recognized as income (expense) when related claims are paid or actuarial estimates are adjusted. At June 30, 2012 and December 31, 2011, the remaining deferred revenue was $17.3 million and $15.6 million, respectively. For the three and six months ended June 30, 2012, we recognized $(2.3) million and $(1.7) million, respectively, of this deferral as expense, which was included in other (expense) income, net. For the three and six months ended June 30, 2011, we recognized $0.8 million and $0.9 million, respectively, of this deferral as income, which was included in other (expense) income, net.

Second, PIC entered into reinsurance agreements with various unrelated reinsurers that reinsured 100% of the completed operations claims coverage from August 1, 2001 to July 31, 2005. As a result of the reinsurance, the $15.6 million gain was deferred in these consolidated financial statements and will be recognized as income (expense) when the related claims are paid or actuarial estimates are adjusted. At June 30, 2012 and December 31, 2011, the remaining deferred revenue was $6.8 million and $1.1 million, respectively. For the three and six months ended June 30, 2012, we recognized $(5.9) million and $(5.7) million, respectively, of this deferral as expense, which was included in other (expense) income, net. For the three and six months ended June 30, 2011, we recognized $(1.6) million and $(1.5) million, respectively, of this deferral as expense, which was included in other (expense) income, net.

The increase in deferred revenue, and resultant expense, for the three and six months ended June 30, 2012 was the result of an increase in the actuary’s estimate of ultimate losses to be paid on these policies based on trends in completed operations claims related to our markets and products built, claim settlement patterns and insurance industry practices. However, at June 30, 2012, the estimated ultimate loss to be paid under these policies does not exceed the policy limits under the novation and reinsurance transactions.

Distributions Payable

In December 2011, our consolidated joint venture, Vistancia, LLC, sold its remaining interest in an unconsolidated joint venture. As a result of the sale, no other assets of Vistancia, LLC economically benefit the former non-controlling interest of Vistancia, LLC and the Company recorded the remaining $3.3 million distribution payable to the former non-controlling interest, which is paid $0.1 million quarterly. At June 30, 2012, the distribution payable was $3.1 million.