Accrued Expenses

Accrued expenses at July 31, 2015 and October 31, 2014 consisted of the following (amounts in thousands):



	July 31, 2015		October 31, 2014
Land, land development, and construction	$	108,971	$	124,816
Compensation and employee benefits	118,379		118,607
Self-insurance	118,572		100,407
Warranty	79,005		86,282
Interest	35,017		33,993
Commitments to unconsolidated entities	5,241		3,293
Other	114,083		114,079
	$	579,268	$	581,477

Prior to the third quarter of fiscal 2014, we received stucco-related claims in certain completed communities located in Pennsylvania and Delaware, which are in our Mid-Atlantic region. During the third quarter of fiscal 2014, the rate of claims increased. Through the third quarter of fiscal 2014, we believed that our warranty accruals, self-insurance accruals, and liability insurance were adequate to cover our cost of repairs for those claims. The rate of claims continued to increase during the fourth quarter of fiscal 2014. In response, we undertook a comprehensive review of homes in completed communities built during fiscal 2003 through fiscal 2009 in Pennsylvania and Delaware. Our review revealed that additional stucco-related repairs will likely be needed in certain communities. As of October 31, 2014, we estimated our potential liability for known and unknown claims to be approximately $54.0 million, of which we expect to recover approximately 40% from our outside insurance carriers. In addition to previously recognized warranty and self-insurance accruals, we recognized a $25.0 million additional charge in the fourth quarter of fiscal 2014 for estimated repair costs. Our review included an analysis of the number of claims received, our inspection to date of homes, an estimate of the number of homes we expect to repair and the extent of such repairs, and the amount of warranty and self-insurance reserves already recorded. We continue to review our potential liability for these claims, and we believe that at July 31, 2015, our existing reserves and insurance were sufficient. We will continue to review and analyze these claims as they are submitted, and, due to the degree of judgment required and the potential for variability in our underlying assumptions, our actual future costs could differ from those estimated. The above charge was included in “Cost of revenues” in our Consolidated Statements of Operations and Comprehensive Income included in our Annual Report on Form 10-K for the year ended October 31, 2014.

We have received construction claims brought by three related multifamily community associations in the West region alleging issues with design and construction and damage to exterior common area elements. We believe we have coverage under multiple owner-controlled insurance policies with deductibles or self-insured retention requirements that vary from policy year to policy year. Our review of these matters is ongoing, and, due to the degree of judgment required, the potential for variability in our underlying assumptions, and the availability of insurance coverage, our actual future costs could differ from our estimates. Based on our current evaluation of these claims, we recorded a charge of $5.8 million in the third quarter of fiscal 2015, which is included in “Cost of revenues” in our Condensed Consolidated Statements of Operations and Comprehensive Income.

We do not believe that any resolution of the above matters in excess of the amounts currently accrued would be material to our financial condition.

We accrue for expected warranty costs at the time each home is closed and title and possession are transferred to the home buyer. Warranty costs are accrued based upon historical experience. The table below provides, for the periods indicated, a reconciliation of the changes in our warranty accrual (amounts in thousands):



	Nine months ended July 31,						Three months ended July 31,
	2015			2014			2015			2014
Balance, beginning of period	$	86,282		$	43,819		$	83,057		$	52,579
Additions – homes closed during the period	13,200			12,272			4,947			4,970
Addition – Shapell liabilities acquired				11,044						1,800
Increase in accruals for homes closed in prior years	1,763			2,003			454			581
Charges incurred	(22,240		)	(14,911		)	(9,453		)	(5,703		)
Balance, end of period	$	79,005		$	54,227		$	79,005		$	54,227