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 March 31, 2020

or

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

Commission File Number 001-36491

Century Communities, Inc.

(Exact name of registrant as specified in its charter)

Delaware	68-0521411
(State or other jurisdiction of ‎incorporation or organization)	(I.R.S. Employer ‎Identification No.)
8390 East Crescent Parkway, Suite 650 ‎Greenwood Village, CO	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	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, 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 April 23, 2020, 33,332,501 shares of common stock, par value $0.01 per share, were outstanding.  

CENTURY COMMUNITIES, INC.

FORM 10-Q

For the Three Months Ended March 31, 2020

Index

	Page No.
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019	3
Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019	4
Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019	5
Unaudited Condensed Consolidated Statements of Stockholders' Equity for the Three Months Ended March 31, 2020 and 2019	6
Notes to the Unaudited Condensed Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3. Quantitative and Qualitative Disclosures About Market Risk	33
Item 4. Controls and Procedures	33
PART II – OTHER INFORMATION
Item 1. Legal Proceedings	34
Item 1A. Risk Factors	34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3. Defaults Upon Senior Securities	36
Item 4. Mine Safety Disclosures	36
Item 5. Other Information	36
Item 6. Exhibits	37
Signatures	38

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PART I – FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS.

Century Communities, Inc.

Condensed Consolidated Balance Sheets

As of March 31, 2020 and December 31, 2019

(in thousands, except share amounts)

	March 31,		December 31,
	2020		2019
Assets	(Unaudited)
Cash and cash equivalents	$	450,973	$	55,436
Cash held in escrow		22,497		35,308
Accounts receivable		23,087		27,438
Inventories		2,074,509		1,995,549
Mortgage loans held for sale		141,846		185,246
Prepaid expenses and other assets		121,017		124,008
Property and equipment, net		35,004		35,998
Deferred tax assets, net		11,110		10,589
Goodwill		30,395		30,395
Total assets	$	2,910,438	$	2,499,967
Liabilities and stockholders' equity
Liabilities:
Accounts payable	$	40,170	$	84,794
Accrued expenses and other liabilities		230,875		213,975
Notes payable		899,166		896,704
Revolving line of credit		521,900		68,700
Mortgage repurchase facilities		133,794		174,095
Total liabilities		1,825,905		1,438,268
Stockholders' equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none outstanding		—		—
Common stock, $0.01 par value, 100,000,000 shares authorized, 33,319,125 and 33,067,375 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively		333		331
Additional paid-in capital		681,060		684,354
Retained earnings		403,140		377,014
Total stockholders' equity		1,084,533		1,061,699
Total liabilities and stockholders' equity	$	2,910,438	$	2,499,967

See Notes to Unaudited Condensed Consolidated Financial Statements

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Century Communities, Inc.

Unaudited Condensed Consolidated Statements of Operations

For the Three Months Ended March 31, 2020 and 2019

(in thousands, except share and per share amounts)

	Three Months Ended March 31,
	2020		2019
Revenues
Homebuilding revenues
Home sales revenues	$	572,710	$	523,302
Land sales and other revenues		20,104		1,355
Total homebuilding revenues		592,814		524,657
Financial services revenue		9,795		8,400
Total revenues		602,609		533,057
Homebuilding cost of revenues
Cost of home sales revenues		(470,526)		(433,757)
Cost of land sales and other revenues		(14,167)		(614)
Total homebuilding cost of revenues		(484,693)		(434,371)
Financial services costs		(9,586)		(6,829)
Selling, general and administrative		(73,619)		(68,936)
Inventory impairment		(781)		—
Other income (expense)		158		76
Income before income tax expense		34,088		22,997
Income tax expense		(7,962)		(5,880)
Net income	$	26,126	$	17,117
Earnings per share:
Basic	$	0.79	$	0.57
Diluted	$	0.78	$	0.56
Weighted average common shares outstanding:
Basic		33,207,928		30,203,243
Diluted		33,476,444		30,444,276

See Notes to Unaudited Condensed Consolidated Financial Statements

4

Century Communities, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2020 and 2019

(in thousands)

	Three Months Ended March 31,
	2020		2019
Operating activities
Net income	$	26,126	$	17,117
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		3,415		3,074
Stock-based compensation expense		1,685		3,534
Inventory impairment and other		781		—
Deferred income taxes		(521)		172
Loss on disposition of assets		330		358
Changes in assets and liabilities:
Cash held in escrow		12,811		(320)
Accounts receivable		4,349		1,028
Inventories		(60,930)		(69,106)
Prepaid expenses and other assets		2,000		(2,659)
Accounts payable		(44,624)		(15,831)
Accrued expenses and other liabilities		(1,198)		(11,296)
Mortgage loans held for sale		43,400		14,529
Net cash used in operating activities		(12,376)		(59,400)
Investing activities
Purchases of property and equipment		(2,686)		(3,270)
Other investing activities		59		(14)
Net cash used in investing activities		(2,627)		(3,284)
Financing activities
Borrowings under revolving credit facilities		678,000		288,800
Payments on revolving credit facilities		(224,800)		(204,300)
Principal payments on notes payable		(2,043)		(7,716)
Proceeds from insurance notes payable		4,137		9,301
Net proceeds from mortgage repurchase facilities		(40,302)		(13,689)
Repurchases of common stock upon vesting of stock-based compensation		(4,977)		(3,166)
Repurchases of common stock under stock repurchase program		—		(1,439)
Net cash provided by financing activities		410,015		67,791
Net increase	$	395,012	$	5,107
Cash and cash equivalents and Restricted cash
Beginning of period		58,522		36,441
End of period	$	453,534	$	41,548
Supplemental cash flow disclosure
Cash paid for income taxes	$	—	$	—
Cash and cash equivalents and Restricted cash
Cash and cash equivalents	$	450,973	$	38,115
Restricted cash (Note 5)		2,561		3,433
Cash and cash equivalents and Restricted cash	$	453,534	$	41,548

See Notes to Unaudited Condensed Consolidated Financial Statements

‎

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Century Communities, Inc.

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

For the Three Months Ended March 31, 2020 and 2019

(in thousands)

	Common Stock
	Shares	Amount		Additional Paid-In Capital		Retained Earnings		Total Stockholders' Equity
Balance at December 31, 2019	33,067	$	331	$	684,354	$	377,014	$	1,061,699
Repurchases of common stock	—		—		—		—		—
Vesting of restricted stock units	412		4		(4)		—		—
Withholding of common stock upon vesting of restricted stock units	(160)		(2)		(4,975)		—		(4,977)
Stock-based compensation expense	—		—		1,685		—		1,685
Net income	—		—		—		26,126		26,126
Balance at March 31, 2020	33,319	$	333	$	681,060	$	403,140	$	1,084,533

	Common Stock
	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
Repurchases of common stock	(83)		—		(1,438)		—		(1,438)
Vesting of restricted stock units	367		3		(3)		—		—
Withholding of common stock upon vesting of restricted stock units	(135)		(2)		(3,164)		—		(3,166)
Stock-based compensation expense	—		—		3,534		—		3,534
Net income	—		—		—		17,117		17,117
Balance at March 31, 2019	30,304	$	303	$	593,966	$	281,137	$	875,406

See Notes to Unaudited Condensed Consolidated Financial Statements

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Century Communities, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2020

1. Basis of Presentation

Century Communities, Inc. (which we refer to as “we,” “CCS,” or the “Company”), together with its subsidiaries, is engaged in the development, design, construction, marketing and sale of single-family attached and detached homes in metropolitan areas in 17 states. In many of our projects, in addition to building homes, we are responsible for the entitlement and development of the underlying land.  We build and sell homes under our Century Communities and Century Complete brands. Our Century Communities brand targets a wide range of buyer profiles including: first time, first and second time move up, and lifestyle homebuyers, and provides our homebuyers with the ability to personalize their homes through certain option and upgrade selections. Our Century Complete brand, formerly referred to as Wade Jurney Homes, targets first time homebuyers, primarily sells homes through retail studios and the internet, and provides no option or upgrade selections. On February 6, 2020 we announced the rebranding of Wade Jurney Homes to Century Complete. Our homebuilding operations are organized into the following five reportable segments: West, Mountain, Texas, Southeast, and Century Complete. 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 homebuyers have been identified as our Financial Services 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 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, 2019, which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 that was filed with the SEC on February 7, 2020.

The recent outbreak of the novel coronavirus COVID-19, which was declared a pandemic by the World Health Organization on March 11, 2020, has led to adverse impacts on the U.S. and global economies and created uncertainty regarding potential impacts to our operations and customer demand. Through late April, there is still significant uncertainty regarding the duration and severity of the disruption caused by this pandemic.

Commencing in March 2020 numerous state and local municipalities issued public health orders with varying expiration dates requiring the closure of nonessential businesses, as well as ordering individuals to stay at home and/or shelter in place whenever possible.  General exceptions to shelter in place orders are essential services and critical businesses. As of the date of this filing, other than the state of Michigan and certain municipalities within the Bay Area market of Northern California, construction and sale of residential real estate has been determined to be an essential business, and accordingly our operations have been generally exempted from these applicable health orders.

Principles of Consolidation

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

Use of Estimates

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

Recently Adopted Accounting Standards

Financial Instruments - Credit Losses

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326). The standard changes the accounting for credit losses for most financial assets and certain other instruments. Credit losses which have historically been accounted for on an

7

incurred loss basis will now be accounted for using an estimate of lifetime expected credit losses. This will generally result in earlier recognition of allowances for credit losses. We adopted this standard on January 1, 2020 with no material effect on the consolidated financial statements and related disclosures.

Internal-Use Software

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force). This update is intended to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement by providing guidance for determining when the arrangement includes a software license. We adopted this standard on January 1, 2020 with no material effect on the consolidated financial statements and related disclosures.

Recently Issued Accounting Standards

In December 2019, the FASB issued Accounting Standards Update No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). The standard simplifies the accounting for income taxes, eliminates certain exceptions, and clarifies certain aspects of ASC 740 to promote consistency among reporting entities. ASU 2019-12 is effective for us beginning January 1, 2021. We do not expect this standard to have a material effect on the consolidated financial statements and related disclosures.

2. Reporting Segments

Our homebuilding operations are engaged in the development, design, construction, marketing and sale of single-family attached and detached homes in 17 states. We build and sell homes under our Century Communities and Century Complete 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 Century Complete brand targets first time homebuyers, primarily sells homes through retail studios and the internet, and provides no option or upgrade selections. Our Century Complete brand currently has operations in 11 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 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 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

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

Century Complete (Alabama, Arizona, Florida, Georgia, Indiana, Iowa, Michigan, North Carolina, Ohio, South Carolina, and Texas)

We have also identified our Financial Services operations, which provide mortgage, title, and insurance services to our homebuyers, as a sixth reportable segment. Our Corporate operations are a non-operating segment, as they serve to support our homebuilding, and to a lesser extent our financial services operations, through functions, such as our executive, finance, treasury, human resources, accounting and legal departments. The following table summarizes total revenue and income before income tax expense by segment (in thousands): 

‎

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	Three Months Ended March 31,
	2020		2019
Revenue:
West	$	131,887	$	112,120
Mountain		171,152		159,666
Texas		60,164		50,486
Southeast		131,502		112,812
Century Complete		98,109		89,573
Financial Services		9,795		8,400
Corporate		—		—
Total revenue	$	602,609	$	533,057
Income (loss) before income tax expense:
West	$	15,341	$	8,648
Mountain		18,498		19,308
Texas		5,484		3,749
Southeast		8,308		5,739
Century Complete		780		3,973
Financial Services		209		1,590
Corporate		(14,532)		(20,010)
Total income before income tax expense	$	34,088	$	22,997

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

	March 31,		December 31,
	2020		2019
West	$	634,491	$	610,248
Mountain		707,925		635,201
Texas		233,247