UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

or

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

Commission File Number 001-36491

Century Communities, Inc.

(Exact name of registrant as specified in its charter)

Delaware	68-0521411
(State or other jurisdiction of ‎incorporation or organization)	(I.R.S. Employer ‎Identification No.)
8390 East Crescent Parkway, Suite 650 ‎Greenwood Village, Colorado	80111
(Address of principal executive offices)	(Zip 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	NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	x	Accelerated Filer	o
Non-accelerated Filer	o	Smaller Reporting Company	o
		Emerging Growth Company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x

On July 25, 2019, 30,438,505 shares of common stock, par value $0.01 per share, were outstanding.  

CENTURY COMMUNITIES, INC.

FORM 10-Q

For the Three and Six Months Ended June 30, 2019

Index

	Page No.
PART I
Item 1. Unaudited Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018	3
Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2019 and 2018	4
Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018	5
Unaudited Condensed Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended June 30, 2019 and 2018	6
Notes to the Unaudited Condensed Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3. Quantitative and Qualitative Disclosures About Market Risk	38
Item 4. Controls and Procedures	38
PART II
Item 1. Legal Proceedings	39
Item 1A. Risk Factors	39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3. Defaults Upon Senior Securities	39
Item 4. Mine Safety Disclosures	39
Item 5. Other Information	39
Item 6. Exhibits	40
Signatures	42

2

PART I

ITEM 1.     FINANCIAL STATEMENTS.

Century Communities, Inc.

Condensed Consolidated Balance Sheets

As of June 30, 2019 and December 31, 2018

(in thousands, except share amounts)

	June 30,		December 31,
	2019		2018
Assets	(unaudited)
Cash and cash equivalents	$	31,704	$	32,902
Cash held in escrow		25,838		24,344
Accounts receivable		15,999		13,464
Inventories		2,009,769		1,848,243
Mortgage loans held for sale		122,085		114,074
Prepaid expenses and other assets		123,343		138,717
Property and equipment, net		33,469		33,258
Deferred tax assets, net		13,335		13,763
Amortizable intangible assets, net		4,436		5,095
Goodwill		30,395		30,395
Total assets	$	2,410,373	$	2,254,255
Liabilities and stockholders' equity
Liabilities:
Accounts payable	$	97,043	$	89,907
Accrued expenses and other liabilities		212,750		213,157
Notes payable		890,606		784,777
Revolving line of credit		212,000		202,500
Mortgage repurchase facilities		100,745		104,555
Total liabilities		1,513,144		1,394,896
Stockholders' equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none outstanding		—		—
Common stock, $0.01 par value, 100,000,000 shares authorized, 30,438,505 and 30,154,791 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively		304		302
Additional paid-in capital		600,293		595,037
Retained earnings		296,632		264,020
Total stockholders' equity		897,229		859,359
Total liabilities and stockholders' equity	$	2,410,373	$	2,254,255

See Notes to Unaudited Condensed Consolidated Financial Statements

3

Century Communities, Inc.

Unaudited Condensed Consolidated Statements of Operations

For the Three and Six Months Ended June 30, 2019 and 2018

(in thousands, except share and per share amounts)

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Revenues
Homebuilding revenues
Home sales revenues	$	608,636	$	522,164	$	1,131,938	$	916,995
Land sales and other revenues		1,399		1,714		2,754		3,174
		610,035		523,878		1,134,692		920,169
Financial services revenue		9,915		8,014		18,315		13,571
Total revenues		619,950		531,892		1,153,007		933,740
Homebuilding cost of revenues
Cost of home sales revenues		(503,928)		(427,197)		(937,685)		(746,780)
Cost of land sales and other revenues		(877)		(1,040)		(1,491)		(1,917)
		(504,805)		(428,237)		(939,176)		(748,697)
Financial services costs		(7,747)		(5,385)		(14,576)		(9,781)
Selling, general and administrative		(75,217)		(63,634)		(144,153)		(120,156)
Loss on debt extinguishment		(10,832)		—		(10,832)		—
Acquisition expense		—		(165)		—		(338)
Equity in income of unconsolidated subsidiaries		—		11,681		—		14,849
Other income (expense)		(519)		350		(443)		(8)
Income before income tax expense		20,830		46,502		43,827		69,609
Income tax expense		(5,335)		(13,309)		(11,215)		(16,397)
Net income	$	15,495	$	33,193	$	32,612	$	53,212
Earnings per share:
Basic	$	0.51	$	1.11	$	1.08	$	1.79
Diluted	$	0.51	$	1.10	$	1.07	$	1.77
Weighted average common shares outstanding:
Basic		30,341,628		29,901,791		30,272,818		29,709,728
Diluted		30,568,848		30,170,689		30,506,945		30,003,276

See Notes to Unaudited Condensed Consolidated Financial Statements

4

Century Communities, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2019 and 2018

(in thousands)

	Six Months Ended June 30,
	2019		2018
Operating activities
Net income	$	32,612	$	53,212
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		6,196		5,512
Stock-based compensation expense		7,468		6,323
Loss on debt extinguishment		10,832		—
Deferred income taxes		428		(989)
Distributions from unconsolidated subsidiaries		—		7,432
Equity in income of unconsolidated subsidiaries		—		(14,849)
(Gain) loss on disposition of assets		526		230
Changes in assets and liabilities:
Cash held in escrow		(1,495)		(5,897)
Accounts receivable		(2,535)		(6,199)
Inventories		(121,734)		(124,863)
Prepaid expenses and other assets		(5,041)		(2,404)
Accounts payable		7,137		22,260
Accrued expenses and other liabilities		(18,428)		(15,634)
Mortgage loans held for sale		(8,965)		(5,026)
Net cash provided by (used in) operating activities		(92,999)		(80,892)
Investing activities
Purchases of property and equipment		(6,274)		(7,534)
Business combinations net of acquired cash		—		(28,036)
Other investing activities		59		322
Net cash provided by (used in) investing activities		(6,215)		(35,248)
Financing activities
Borrowings under revolving credit facilities		767,600		305,000
Payments on revolving credit facilities		(758,100)		(175,000)
Proceeds from issuance of senior notes due 2027		500,000		—
Extinguishment of senior notes due 2022		(391,942)		—
Extinguishments of debt assumed in business combination		—		(94,231)
Debt issuance costs		(5,728)		(3,521)
Proceeds from issuance of insurance premium notes and other		9,301		—
Principal payments on insurance notes payable		(17,586)		—
Net proceeds from mortgage repurchase facilities		(3,805)		4,679
Net proceeds from issuances of common stock		2,663		14,309
Repurchases of common stock upon vesting of stock based compensation		(3,434)		(4,788)
Repurchases of common stock under our stock repurchase program		(1,439)		—
Net cash provided by (used in) financing activities		97,530		46,448
Net increase (decrease)	$	(1,684)	$	(69,692)
Cash and cash equivalents and Restricted cash
Beginning of period		36,441		93,713
End of period	$	34,757	$	24,021
Supplemental cash flow disclosure
Cash paid for income taxes	$	13,111	$	26,323
Cash and cash equivalents and Restricted cash
Cash and cash equivalents	$	31,704	$	19,482
Restricted cash (Note 6)		3,053		4,539
Cash and cash equivalents and Restricted cash	$	34,757	$	24,021

See Notes to Unaudited Condensed Consolidated Financial Statements

‎

5

Century Communities, Inc.

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

For the Three and Six Months Ended June 30, 2019 and 2018

(in thousands)

Three Months Ended June 30, 2019 and 2018

	Common Stock
	Shares	Amount		Additional Paid-In Capital		Retained Earnings		Total Stockholders' Equity
Balance at March 31, 2019	30,304	$	303	$	593,966	$	281,137	$	875,406
Issuance of common stock	100		1		2,662		—		2,663
Vesting of restricted stock units	35		—		(268)		—		(268)
Stock-based compensation expense	—		—		3,933		—		3,933
Net income	—		—		—		15,495		15,495
Balance at June 30, 2019	30,439	$	304	$	600,293	$	296,632	$	897,229
Balance at March 31, 2018	29,790	$	298	$	569,536	$	187,584	$	757,418
Issuance of common stock	320		3		9,284		—		9,287
Vesting of restricted stock units	9		—		—		1		1
Stock-based compensation expense	—		—		3,807		—		3,807
Net income	—		—		—		33,193		33,193
Balance at June 30, 2018	30,119	$	301	$	582,627	$	220,778	$	803,706

Six Months Ended June 30, 2019 and 2018

	Common Stock
	Shares	Amount		Additional Paid-In Capital		Retained Earnings		Total Stockholders' Equity
Balance at December 31, 2018	30,155	$	302	$	595,037	$	264,020	$	859,359
Issuance of common stock	100		1		2,662		—		2,663
Repurchase of common stock	(83)		(1)		(1,438)		—		(1,439)
Vesting of restricted stock units	267		2		(3,436)		—		(3,434)
Stock-based compensation expense	—		—		7,468		—		7,468
Net income	—		—		—		32,612		32,612
Balance at June 30, 2019	30,439	$	304	$	600,293	$	296,632	$	897,229
Balance at December 31, 2017	29,503	$	295	$	566,790	$	168,148	$	735,233
Adoption of ASC 606	—		—		—		(582)		(582)
Issuance of common stock	776		6		14,302		—		14,308
Repurchase of common stock	(160)		—		(4,788)		—		(4,788)
Stock-based compensation expense	—		—		6,323		—		6,323
Net income	—		—		—		53,212		53,212
Balance at June 30, 2018	30,119	$	301	$	582,627	$	220,778	$	803,706

See Notes to Unaudited Condensed Consolidated Financial Statements

6

Century Communities, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2019

1. Basis of Presentation

Century Communities, Inc. (which we refer to as “we,” “CCS,” or the “Company”), together with its subsidiaries, is engaged in the development, design, construction, marketing and sale of single-family attached and detached homes in the States of Alabama, Arizona, California, Colorado, Florida, Georgia, Indiana, Iowa, Michigan, Nevada, North Carolina, Ohio, South Carolina, Tennessee, Texas, Utah, and Washington. In many of our projects, in addition to building homes, we are responsible for the entitlement and development of the underlying land.  We build and sell homes under our Century Communities and Wade Jurney Homes brands. Our Century Communities brand targets a wide range of buyer profiles including: first time, first and second time move up, and lifestyle homebuyers, and provides our homebuyers with the ability to personalize their homes through certain option and upgrade selections. Our Wade Jurney Homes brand solely targets first time homebuyers, sells homes through retail studios and the internet, and provides no option or upgrade selections. Our homebuilding operations are organized into the following five reportable segments: West, Mountain, Texas, Southeast, and Wade Jurney Homes. Additionally, our indirect wholly-owned subsidiaries, Inspire Home Loans, Inc., Parkway Title, LLC, and IHL Home Insurance Agency, LLC, which provide mortgage, title and insurance services, respectively, to our home buyers have been identified as our Financial Services segment.

On June 14, 2018, we acquired the remaining 50% ownership interest in WJH, LLC (which we refer to as “WJH” or “Wade Jurney Homes”) for $37.5 million. WJH specializes in providing single family homes for first time buyers. On the acquisition date, WJH had operations in Alabama, Florida, Georgia, North Carolina and South Carolina.

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (which we refer to as “GAAP”) for interim financial statements and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (which we refer to as the “SEC”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair presentation of our financial position and results of operations. Interim results of operations are not necessarily indicative of the results that may be achieved for the full year. The financial statements and related notes do not include all information and footnotes required by GAAP and should be read in conjunction with the consolidated financial statements for the year ended December 31, 2018, which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 that was filed with the SEC on February 13, 2019.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company, as well as all subsidiaries in which we have a controlling interest, and variable interest entities for which the Company is deemed to be the primary beneficiary. We currently do not have any variable interest entities in which we are deemed the primary beneficiary. All intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates.

Recently Adopted Accounting Standards

Leases

The Financial Accounting Standards Board (which we refer to as “FASB”) issued Accounting Standards Codification (ASC) 842, Leases (which we refer to as “ASC 842”) which requires the recognition of lease assets and lease liabilities by lessees for most leases.  ASC 842 is effective for the Company beginning January 1, 2019 and interim periods within the annual period.  We adopted ASC 842 under a modified retrospective approach using the option to apply the transition provisions on the effective date January 1, 2019. The modified retrospective approach allows the Company to carry forward our historical lease classification, and to present historical periods under legacy lease accounting guidance. The Company’s leases primarily consist of leases for office space, and computer and office equipment where we are the lessee.

7

ASC 842 includes several practical expedients which we elected upon adoption including to (a) not reassess the lease classification for any expired or existing leases and (b) not reassess whether previously capitalized initial direct costs qualify for capitalization under ASC 842. Additionally, we elected to utilize hindsight when determining the lease term.

The adoption of ASC 842 resulted in the establishment of a right of use asset of $17.7 million and a lease liability of $18.7 million on our condensed consolidated balance sheet as of January 1, 2019. The adoption of ASC 842 did not impact stockholders’ equity.

Recently Issued Accounting Standards

In June 2016, the FASB issued Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (which we refer to as “ASU 2016-13”), which changes the impairment model for most financial assets and certain other instruments. ASU 2016-13 changes the probable threshold for initial recognition of a credit loss in current GAAP to a model that reflects an entity’s current estimate of all expected credit losses. ASU 2016-13 is effective for our interim and annual reporting periods beginning January 1, 2020. We are currently evaluating the impact of ASU 2016-13 on our 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 17 states. We build and sell homes under our Century Communities and Wade Jurney Homes brands. Our Century Communities brand is managed by geographic location, and each of our four geographic regions targets a wide range of buyer profiles including: first time, first and second time move up, and lifestyle homebuyers, and provides our homebuyers with the ability to personalize their homes through certain option and upgrade selections. Each of our four geographic regions is considered a separate operating segment. Our Wade Jurney Homes brand solely targets first time homebuyers, sells homes through retail studios and the internet, and provides no option or upgrade selections. Our Wade Jurney Homes brand currently has operations in eleven states and is managed separately from our four geographic regions, accordingly, it is considered a separate operating segment.

The management of our four geographic regions and Wade Jurney Homes reports to our chief operating decision makers (which we refer to as “CODMs”), the Co-Chief Executive Officers of our Company. The CODMs review the results of our operations, including total revenue and income before income tax expense to determine profitability and to allocate resources. Accordingly, we have presented our homebuilding operations as the following five reportable segments:

West (California and Washington)

Mountain (Colorado, Nevada and Utah)

Texas

