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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2019
Commitments and Contingencies [Abstract] |
Commitments and Contingencies Disclosure [Text Block] | Commitments and Contingencies Warranty Our warranty reserves are included in Other Liabilities in the Company’s Consolidated Balance Sheets, as further explained in Note 1 to our Consolidated Financial Statements. A summary of warranty activity for the years ended December 31, 2019, 2018 and 2017 is as follows:
| Year Ended December 31,
(In thousands) | 2019 |  | 2018 |  | 2017
Warranty reserves, beginning of period | $ | 26,459 |  |  | $ | 26,133 |  |  | $ | 27,732 |
Warranty expense on homes delivered during the period | 14,685 |  |  | 13,456 |  |  | 11,677 |
Changes in estimates for pre-existing warranties | 2,165 |  |  | 4,746 |  |  | 2,614 |
Charges related to stucco-related claims | — |  |  | — |  | (a) | 8,500 |
Settlements made during the period | (16,889 | ) |  | (17,876 | ) |  | (24,390 | )
Warranty reserves, end of period | $ | 26,420 |  |  | $ | 26,459 |  |  | $ | 26,133 |
(a) | This represents charges of $1.0 million for additional stucco-related repair costs, net of $1.0 million of recoveries for past stucco-related claims during 2018.
We have received claims related to stucco installation from homeowners in certain of our communities in our Tampa and Orlando, Florida markets and have been named as a defendant in legal proceedings initiated by certain of such homeowners. These claims primarily relate to homes built prior to 2014 which have second story elevations with frame construction. During 2015 through 2018, we recorded an aggregate total of $28.4 million of warranty charges for stucco-related repair costs, net of recoveries, for (1) homes in our Florida communities that we had identified as needing repair but had not yet completed the repair and (2) estimated repair costs for homes in our Florida communities that we had not yet identified as needing repair but that may require repair in the future. Stucco-related recoveries are reflected in our financial statements in the period the reimbursement is received. During 2019, our on-going review of stucco-related data described below did not result in any additional stucco-related charges. During 2019, we received a total of $1.1 million of recoveries that were recorded directly to income as they related to past stucco-related claims and we had no current charge. The remaining reserve for both known repair costs and an estimate of future costs of stucco-related repairs at December 31, 2019 included within our warranty reserve was $4.5 million. We believe that this amount is sufficient to cover both known and estimated future repair costs as of December 31, 2019. Our remaining stucco-related reserve is gross of any recoveries. Our review of the stucco-related issues in our Florida communities is ongoing. Our estimate of future costs of stucco-related repairs is based on our judgment, various assumptions and internal data. Due to the degree of judgment and the potential for variability in our underlying assumptions and data, as we obtain additional information, we may revise our estimate, including to reflect additional estimated future stucco-related repairs costs, which revision could be material. We continue to investigate the extent to which we may be able to further recover a portion of our stucco repair and claims handling costs from other sources, including our direct insurers, the subcontractors involved with the construction of the homes and their insurers. As of December 31, 2019, we are unable to estimate any additional amount that we believe is probable of recovery from these sources and, as noted above, we have not recorded a receivable for recoveries nor included an estimated amount of recoveries in determining our stucco-related warranty reserve. Performance Bonds and Letters of Credit The Company provides standby letters of credit and completion bonds for development work in progress, deposits on land and lot purchase agreements and miscellaneous deposits. At December 31, 2019, the Company had outstanding approximately $235.4 million of completion bonds and standby letters of credit, some of which were issued to various local governmental entities that expire at various times through November 2027. Included in this total are: (1) $159.1 million of performance and maintenance bonds and $56.5 million of performance letters of credit that serve as completion bonds for land development work in progress (letters of credit represent potential commitments and generally expire within one or two years); (2) $12.7 million of financial letters of credit, of which $12.2 million represent deposits on land and lot purchase agreements; and (3) $7.1 million of financial bonds. The development agreements under which we are required to provide completion bonds or letters of credit are generally not subject to a required completion date and only require that the improvements are in place in phases as houses are built and sold. In locations where development has progressed, the amount of development work remaining to be completed is typically less than the remaining amount of bonds or letters of credit due to timing delays in obtaining release of the bonds or letters of credit. Land Option Contracts and Other Similar Contracts In the ordinary course of business, the Company enters into land option or purchase agreements for which we generally pay non-refundable deposits. Pursuant to these land option agreements, the Company provides a deposit to the seller as consideration for the right to purchase land at different times in the future, usually at predetermined prices. In accordance with ASC 810, we analyze our land option or purchase agreements to determine whether the corresponding land sellers are VIEs and, if so, whether we are the primary beneficiary, using an analysis similar to that described above. Although we do not have legal title to the optioned land, ASC 810 requires a company to consolidate a VIE if the company is determined to be the primary beneficiary. In cases where we are the primary beneficiary, even though we do not have title to such land, we are required to consolidate these purchase/option agreements and reflect such assets and liabilities in our Consolidated Inventory not Owned in our Consolidated Balance Sheets. At both December 31, 2019 and 2018, we have concluded that we were not the primary beneficiary of any VIEs from which we are purchasing land under option or purchase agreements. In addition, we evaluate our land option or purchase agreements to determine for each contract if (1) a portion or all of the purchase price is a specific performance requirement, or (2) the amount of deposits and prepaid acquisition and development costs exceed certain thresholds relative to the remaining purchase price of the lots. If either is the case, then the remaining purchase price of the lots (or the specific performance amount, if applicable) is recorded as an asset and liability in Consolidated Inventory Not Owned (as further described below) on our Consolidated Balance Sheets. Other than as described below in “Consolidated Inventory Not Owned,” the Company currently believes that its maximum exposure as of December 31, 2019 related to our land option agreements is equal to the amount of the Company’s outstanding deposits and prepaid acquisition costs, which totaled $50.0 million, including cash deposits of $28.5 million, prepaid acquisition costs of $5.7 million, letters of credit of $12.2 million and $3.6 million of other non-cash deposits. At December 31, 2019, the Company also had options and contingent purchase agreements to acquire land and developed lots with an aggregate purchase price of approximately $685.0 million. Purchase of properties under these agreements is contingent upon satisfaction of certain requirements by the Company and the sellers. Consolidated Inventory Not Owned and Related Obligation At December 31, 2019 and December 31, 2018, Consolidated Inventory Not Owned was $7.9 million and $19.3 million, respectively. At December 31, 2019 and 2018, the corresponding liability of $7.9 million and $19.3 million, respectively, has been classified as Obligation for Consolidated Inventory Not Owned on the Consolidated Balance Sheets. The decrease in this balance from December 31, 2018 is related primarily to a decrease in the number of land purchase agreements that had deposits and prepaid acquisition and development costs that exceeded certain thresholds resulting in the remaining purchase price of the lots to be recorded in inventory not owned, partially offset by an increase in the aggregate purchase amount of land contracts with specific performance requirements. Legal Matters In addition to the legal proceedings related to stucco, the Company and certain of its subsidiaries have been named as defendants in certain other legal proceedings which are incidental to our business. While management currently believes that the ultimate resolution of these other legal proceedings, individually and in the aggregate, will not have a material effect on the Company’s financial position, results of operations and cash flows, such legal proceedings are subject to inherent uncertainties. The Company has recorded a liability to provide for the anticipated costs, including legal defense costs, associated with the resolution of these other legal proceedings. However, the possibility exists that the costs to resolve these legal proceedings could differ from the recorded estimates and, therefore, have a material effect on the Company’s net income for the periods in which they are resolved. At December 31, 2019 and 2018, we had $0.7 million and $0.4 million reserved for legal expenses, respectively.

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