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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2021
OR
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from                       to                      .
Commission file number 001-36126      

LGI HOMES, INC.

(Exact name of registrant as specified in its charter)
Delaware46-3088013
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1450 Lake Robbins Drive,Suite 430, The Woodlands,Texas77380
(Address of principal executive offices)(Zip code)
(281)
362-8998
(Registrants Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareLGIHNASDAQ Global Select Market
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    No  
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      No  
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 definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company

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      No  

As of October 29, 2021, there were 24,273,191 shares of the registrant’s common stock, par value $0.01 per share, outstanding.


TABLE OF CONTENTS
   


Page


3

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

LGI HOMES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
 
 September 30,December 31,
 20212020
ASSETS
Cash and cash equivalents$46,717 $35,942 
Accounts receivable49,171 115,939 
Real estate inventory1,908,135 1,569,489 
Pre-acquisition costs and deposits50,267 37,213 
Property and equipment, net13,364 3,618 
Other assets66,272 44,882 
Deferred tax assets, net7,613 6,986 
Goodwill12,018 12,018 
Total assets$2,153,557 $1,826,087 
LIABILITIES AND EQUITY
Accounts payable$35,455 $13,676 
Accrued expenses and other liabilities116,234 135,008 
Notes payable666,094 538,398 
Total liabilities817,783 687,082 
COMMITMENTS AND CONTINGENCIES
EQUITY
Common stock, par value $0.01, 250,000,000 shares authorized, 26,941,222 shares issued and 24,273,191 shares outstanding as of September 30, 2021 and 26,741,554 shares issued and 24,983,561 shares outstanding as of December 31, 2020
269 267 
Additional paid-in capital286,709 270,598 
Retained earnings1,252,619 934,277 
Treasury stock, at cost, 2,668,031 shares and 1,757,993 shares, respectively
(203,823)(66,137)
Total equity1,335,774 1,139,005 
Total liabilities and equity$2,153,557 $1,826,087 









See accompanying notes to the consolidated financial statements.
4


LGI HOMES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share data)

 
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Home sales revenues$751,608 $534,202 $2,249,073 $1,470,531 
Cost of sales549,319 398,971 1,642,756 1,110,763 
Selling expenses39,871 35,470 127,450 98,193 
General and administrative24,480 22,320 72,479 62,422 
   Operating income137,938 77,441 406,388 199,153 
Loss on extinguishment of debt13,314  13,976  
Other income, net(2,370)(374)(6,979)(2,148)
Net income before income taxes126,994 77,815 399,391 201,301 
Income tax provision 26,444 (11,189)81,049 13,834 
Net income$100,550 $89,004 $318,342 $187,467 
Earnings per share:
Basic$4.10 $3.55 $12.85 $7.45 
Diluted$4.05 $3.52 $12.72 $7.40 
Weighted average shares outstanding:
Basic24,508,134 25,089,424 24,766,260 25,162,162 
Diluted24,824,320 25,257,053 25,030,161 25,328,555 























See accompanying notes to the consolidated financial statements.
5



LGI HOMES, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(In thousands, except share data)

 
Common StockAdditional Paid-In CapitalRetained EarningsTreasury StockTotal Equity
SharesAmount
BALANCE—December 31, 202026,741,554 $267 $270,598 $934,277 $(66,137)$1,139,005 
Net income— — — 99,658 — 99,658 
Restricted stock units granted for accrued annual bonuses— — 272 — — 272 
Stock repurchase— — — — (25,827)(25,827)
Compensation expense for equity awards— — 3,422 — — 3,422 
Stock issued under employee incentive plans167,089 2 2,106 — — 2,108 
BALANCE— March 31, 202126,908,643 $269 $276,398 $1,033,935 $(91,964)$1,218,638 
Net income— — — 118,134 — 118,134 
Stock repurchase— — — — (55,776)(55,776)
Compensation expense for equity awards— — 3,395 — — 3,395 
Stock issued under employee incentive plans18,050  2,015 — — 2,015 
BALANCE— June 30, 202126,926,693 $269 $281,808 $1,152,069 $(147,740)$1,286,406 
Net income— — — 100,550 — 100,550 
Stock repurchase— — — — (56,083)(56,083)
Compensation expense for equity awards— — 3,352 — — 3,352 
Stock issued under employee incentive plans14,529  1,549 — — 1,549 
BALANCE— September 30, 202126,941,222 $269 $286,709 $1,252,619 $(203,823)$1,335,774 










See accompanying notes to the consolidated financial statements.






6

LGI HOMES, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(In thousands, except share data)

Common StockAdditional Paid-In CapitalRetained EarningsTreasury StockTotal Equity
SharesAmount
BALANCE—December 31, 201926,398,409 $264 $252,603 $610,382 $(18,056)$845,193 
Net income— — — 42,839 — 42,839 
Restricted stock units granted for accrued annual bonuses— — 222 — — 222 
Stock repurchase— — — — (31,335)(31,335)
Compensation expense for equity awards— — 1,853 — — 1,853 
Stock issued under employee incentive plans282,065 2 831 — — 833 
BALANCE— March 31, 202026,680,474 $266 $255,509 $653,221 $(49,391)$859,605 
Net income— — — 55,624 — 55,624 
Compensation expense for equity awards— — 2,613 — — 2,613 
Stock issued under employee incentive plans14,705 1 939 — — 940 
BALANCE— June 30, 202026,695,179 $267 $259,061 $708,845 $(49,391)$918,782 
Net income— — — 89,004 — 89,004 
Compensation expense for equity awards— — 3,926 — — 3,926 
Stock issued under employee incentive plans11,275  958 — — 958 
BALANCE— September 30, 202026,706,454 $267 $263,945 $797,849 $(49,391)$1,012,670 











See accompanying notes to the consolidated financial statements.
7


LGI HOMES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
Nine Months Ended September 30,
 20212020
Cash flows from operating activities:
Net income$318,342 $187,467 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization832 509 
Loss on extinguishment of debt13,976  
Gain on disposal of assets(880) 
Compensation expense for equity awards10,169 8,392 
Deferred income taxes(627)(832)
Changes in assets and liabilities:
Accounts receivable66,768 (5,627)
Real estate inventory(286,619)(48,781)
Pre-acquisition costs and deposits(6,328)2,299 
Other assets(10,702)(33,917)
Accounts payable20,556 18,727 
Accrued expenses and other liabilities(24,400)(15,256)
Net cash provided by operating activities101,087 112,981 
Cash flows from investing activities:
Purchases of property and equipment(1,641)(1,161)
Investment in unconsolidated entities(1,324)(1,125)
Payment for business acquisitions(66,864) 
Net cash used in investing activities(69,829)(2,286)
Cash flows from financing activities:
Proceeds from notes payable1,076,419 203,056 
Payments on notes payable(944,000)(275,000)
Redemption Premium(10,314) 
Loan issuance costs(10,572)(2,155)
Proceeds from sale of stock, net of offering expenses5,670 2,729 
Stock repurchase(137,686)(31,335)
Net cash used in financing activities(20,483)(102,705)
Net increase in cash and cash equivalents10,775 7,990 
Cash and cash equivalents, beginning of period35,942 38,345 
Cash and cash equivalents, end of period$46,717 $46,335 





See accompanying notes to the consolidated financial statements.
8

LGI HOMES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.     ORGANIZATION AND BASIS OF PRESENTATION
Organization and Description of the Business
LGI Homes, Inc., a Delaware corporation (the “Company”, “we,” “us,” or “our”), is engaged in the development of communities and the design, construction and sale of new homes in Texas, Arizona, Florida, Georgia, New Mexico, Colorado, North Carolina, South Carolina, Washington, Tennessee, Minnesota, Oklahoma, Alabama, California, Oregon, Nevada, West Virginia, Virginia and Pennsylvania.
Basis of Presentation
The unaudited consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. The accompanying unaudited consolidated financial statements include all adjustments that are of a normal recurring nature and necessary for the fair presentation of our results for the interim periods presented. Results for interim periods are not necessarily indicative of results to be expected for the full year.
The accompanying unaudited financial statements as of September 30, 2021, and for the three and nine months ended September 30, 2021 and 2020, include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
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 financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates, and these differences could have a significant impact on the financial statements.
2.     REVENUES
Revenue Recognition
Revenues from home sales are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Revenues from home sales are recorded at the time each home sale is closed, title and possession are transferred to the customer and we have no significant continuing involvement with the home. Home sales discounts and incentives granted to customers, which are related to the customers’ closing costs that we pay on the customers’ behalf, are recorded as a reduction of revenue in our consolidated financial statements of operations.
The following table presents our home sales revenues disaggregated by revenue stream (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Retail home sales revenues$650,041 $515,221 $1,990,439 $1,369,130 
Wholesale home sales revenues101,567 18,981 258,634 101,401 
Total home sales revenues$751,608 $534,202 $2,249,073 $1,470,531 

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The following table presents our home sales revenues disaggregated by geography, based on our determined reportable segments in Note 13 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Central$287,878 $186,909 $924,591 $520,608 
Southeast146,166 130,131 442,431 347,155 
Northwest148,515 91,138 372,903 249,455 
West90,592 62,935 252,553 182,012 
Florida78,457 63,089 256,595 171,301 
Total home sales revenues$751,608 $534,202 $2,249,073 $1,470,531 
Home Sales Revenues
We generate revenues primarily by delivering move-in ready entry-level and move-up spec homes sold under our LGI Homes brand and our luxury series spec homes sold under our Terrata Homes brand.
Retail homes sold under both our LGI Homes brand and Terrata Homes brand focus on providing move-in ready homes with standardized features within favorable markets that meet certain demographic and economic conditions. Our LGI Homes brand primarily markets to entry-level or first-time homebuyers, while our Terrata Homes brand primarily markets to move-up homebuyers.
Wholesale homes are primarily sold under a bulk sales agreement and focus on providing move-in ready homes with standardized features to real estate investors that will ultimately use the single-family homes as rental properties.
Performance Obligations
Our contracts with customers include a single performance obligation to transfer a completed home to the customer. We generally determine selling price per home on the expected cost plus margin. Our contracts contain no significant financing terms as customers who finance do so through a third party. Performance obligations are satisfied at a moment in time when the home is complete and control of the asset is transferred to the customer at closing. Home sales proceeds are generally received from the title company within a few business days after closing.
Sales and broker commissions are incremental costs incurred to obtain a contract with a customer that would not have been incurred if the contract had not been obtained. Sales and broker commissions are expensed upon fulfillment of a home closing. Advertising costs are costs to obtain a contract that would have been incurred regardless of whether the contract was obtained and are recognized as an expense when incurred. Sales and broker commissions and advertising costs are recorded within sales and marketing expense presented in our consolidated statements of operations as selling expenses.
3.     REAL ESTATE INVENTORY
Our real estate inventory consists of the following (in thousands):
September 30,December 31,
20212020
Land, land under development and finished lots$1,211,693 $981,838 
Information centers27,427 30,201 
Homes in progress581,348 337,364 
Completed homes87,667 220,086 
Total real estate inventory$1,908,135 $1,569,489 
Inventory is stated at cost unless the carrying amount is determined not to be recoverable, in which case the affected inventory is written down to fair value.
Land, development and other project costs, including interest and property taxes incurred during development and home construction, net of expected reimbursable development costs, are capitalized to real estate inventory. Land development and other common costs that benefit the entire community, including field construction supervision and related direct overhead, are allocated to individual lots or homes, as appropriate. The costs of lots are transferred to homes in progress when home construction begins. Home construction costs and related carrying charges are allocated to the cost of individual homes using the specific identification method. Costs that are not specifically identifiable to a home are allocated on a pro rata basis, which
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we believe approximates the costs that would be determined using an allocation method based on relative sales values since the individual lots or homes within a community are similar in value. Inventory costs for completed homes are expensed to cost of sales as homes are closed. Changes to estimated total development costs subsequent to initial home closings in a community are generally allocated to the remaining unsold lots and homes in the community on a pro rata basis.
The life cycle of a community generally ranges from two to five years, commencing with the acquisition of land, continuing through the land development phase and concluding with the construction and sale of homes. A constructed home is used as the community information center during the life of the community and then sold. Actual individual community lives will vary based on the size of the community, the sales absorption rate and whether the property was purchased as raw land or finished lots.
Interest and financing costs incurred under our debt obligations, as more fully discussed in Note 5, are capitalized to qualifying real estate projects under development and homes under construction.
On May 6, 2021, we acquired certain real estate assets owned by KenRoe Inc. and its affiliated entities, including R Home LLC and Paxmar Land Development (collectively, “KenRoe”), and assumed certain related liabilities. As a result of the KenRoe acquisition, we expanded our Minnesota presence in the Minneapolis market. We acquired approximately 100 homes under construction and more than 3,000 owned and controlled lots. The total purchase price for the KenRoe assets, primarily consisting of inventory, was approximately $27.3 million in cash, subject to certain potential post-closing adjustments. The acquisition is accounted for in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). Our purchase accounting for KenRoe as of September 30, 2021 is preliminary and we expect to complete the working capital adjustment and valuation of the tangible assets, intangible assets and liabilities assumed as of the acquisition date within one year from the acquisition date.
On July 14, 2021, we acquired the real estate assets of Buffington Homebuilding Group, Ltd. (“Buffington”) and assumed certain related liabilities. The total purchase price for the Buffington assets, primarily consisting of inventory, was approximately $39.1 million in cash, subject to certain potential post-closing adjustments. This acquisition further expands our land position in the Austin, Texas market. The acquired assets include over 100 homes under construction, and more than 500 owned and controlled lots. The acquisition is accounted for in accordance with ASC 805. Our purchase accounting for Buffington as of September 30, 2021 is preliminary and we expect to complete the working capital adjustment and valuation of the tangible assets, intangible assets and liabilities assumed as of the acquisition date within one year from the acquisition date.

4.     ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued and other liabilities consist of the following (in thousands):
September 30,December 31,
20212020
Taxes payable$7,818 $26,181 
Real estate inventory development and construction payable42,048 29,938 
Accrued compensation, bonuses and benefits19,105 28,579 
Accrued interest4,263 10,853 
Inventory related obligations6,331 4,515 
Lease liability4,844 5,287 
Warranty reserve7,150 5,350 
Contract deposits16,122 17,151 
Other8,553 7,154 
Total accrued expenses and other liabilities$116,234 $135,008 
Inventory Related Obligations
We own lots in certain communities in Arizona, Florida and Texas that have Community Development Districts or similar utility and infrastructure development special assessment programs that allocate a fixed amount of debt service associated with development activities to each lot. This obligation for infrastructure development is attached to the land, which is typically payable over a 30-year period and is ultimately assumed by the homebuyer when home sales are closed. Such obligations represent a non-cash cost of the lots.

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Estimated Warranty Reserve
We typically provide homebuyers with a one-year warranty on the house and a ten-year limited warranty for major defects in structural elements such as framing components and foundation systems.
Changes to our warranty accrual are as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Warranty reserves, beginning of period$6,550 $3,950 $5,350 $3,500 
Warranty provision2,424 1,284 8,409 4,108 
Warranty expenditures(1,824)(1,084)(6,609)(3,458)
Warranty reserves, end of period$7,150 $4,150 $7,150 $4,150 

5.     NOTES PAYABLE
Revolving Credit Agreement
On April 28, 2021, we entered into that certain Fifth Amended and Restated Credit Agreement with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent (the “Credit Agreement”), which amends and restates that certain Fourth Amended and Restated Credit Agreement, dated as of May 6, 2019 (as amended, the “2020 Credit Agreement”). The Credit Agreement (a) increases the commitments to $850.0 million, (b) allows the Company to increase the commitments by up to $100.0 million, subject to terms and conditions, (c) extends the maturity to April 28, 2025 for all lenders, (d) increases the sublimit for letters of credit to $50.0 million, (e) adds unrestricted cash in excess of $10.0 million as a component of the borrowing base and removes certain exclusions from the borrowing base, (f) reduces the applicable margin for LIBOR loans to a range of 1.45% to 2.10%, based on our leverage ratio, (g) reduces the LIBOR floor to 0.50%, (h) increases the minimum tangible net worth requirement to $850.0 million plus 75% of the net proceeds of equity issuances after December 31, 2020 and 50% of consolidated earnings for each quarter ending after March 31, 2021 and (i) provides for a “hardwired” transition from LIBOR loan pricing that is intended to be economically neutral to the Company; otherwise, the Credit Agreement is on substantially the same terms as the 2020 Credit Agreement.
As of September 30, 2021, the borrowing base under the Credit Agreement was $1.1 billion, of which borrowings, including the 2029 Senior Notes (as defined herein), of $679.0 million were outstanding, $8.3 million of letters of credit were outstanding and $459.6 million was available to borrow under the Credit Agreement.
Interest is paid monthly on borrowings at LIBOR plus 1.45%. The Credit Agreement applicable margin for LIBOR loans ranges from 1.45% to 2.10% based on our leverage ratio. At September 30, 2021, LIBOR was 0.08%; however, the Credit Agreement has a 0.50% LIBOR floor.
The Credit Agreement contains various financial covenants, including a minimum tangible net worth, a leverage ratio, a minimum liquidity amount and an EBITDA to interest expense ratio. The Credit Agreement contains various covenants that, among other restrictions, limit the amount of our additional debt and our ability to make certain investments. At September 30, 2021, we were in compliance with all of the covenants contained in the Credit Agreement.
Senior Notes Offerings
On June 28, 2021, we issued $300.0 million aggregate principal amount of our 4.000% Senior Notes due 2029 (the “2029 Senior Notes”) in an offering to persons reasonably believed to be qualified institutional buyers in the United States pursuant to Rule 144A (“Rule 144A”) under the Securities Act of 1933, as amended (the “Securities Act”), and to certain non-U.S. persons in transactions outside the United States pursuant to Regulation S (“Regulation S”) under the Securities Act. Interest on the 2029 Senior Notes accrues at a rate of 4.000% per annum, payable semi-annually in arrears on January 15 and July 15 of each year, commencing on January 15, 2022. The 2029 Senior Notes mature on July 15, 2029. Terms of the 2029 Senior Notes are governed by an Indenture, dated as of July 6, 2018, and Third Supplemental Indenture thereto, dated as of June 28, 2021, as may be supplemented from time to time, among us, our subsidiaries that guarantee our obligations under the Credit Agreement and Wilmington Trust, National Association, as trustee.
On July 6, 2018, we issued $300.0 million aggregate principal amount of our 6.875% Senior Notes due 2026 (the “2026 Senior Notes”) in an offering to persons reasonably believed to be qualified institutional buyers in the United States pursuant to Rule 144A and to certain non-U.S. persons in transactions outside the United States pursuant to Regulation S. On July 15, 2021, we redeemed all of the outstanding 2026 Senior Notes, which resulted in the principal payment of $300.0 million and a redemption premium of $10.3 million. Additionally, we expensed $3.0 million of deferred financing costs and discounts that
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were being previously amortized in association with the 2026 Senior Notes. We financed the redemption of the 2026 Senior Notes with a portion of the net proceeds from the offering of the 2029 Senior Notes, together with cash on hand.
Notes payable consist of the following (in thousands):
September 30, 2021December 31, 2020
Notes payable under the Credit Agreement ($850.0 million revolving credit facility at September 30, 2021) maturing on April 28, 2025; interest paid monthly at LIBOR plus 1.45%.
$379,041 $246,621 
4.000% Senior Notes due July 15, 2029; interest paid semi-annually at 4.000%.
300,000  
6.875% Senior Notes due July 15, 2026; interest paid semi-annually at 6.875%.
 300,000 
Net discount and debt issuance costs(12,947)(8,223)
Total notes payable$666,094 $538,398 

Capitalized Interest
Interest activity, including other financing costs, for notes payable for the periods presented is as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Interest incurred$6,091 $8,885 $21,863 $28,303 
Less: Amounts capitalized(6,091)(8,885)(21,863)(28,303)
Interest expense$ $ $ $ 
Cash paid for interest$11,772 $13,122 $26,264 $31,822 
Included in interest incurred was amortization of deferred financing costs and discounts for notes payable of $0.8 million for each of the three months ended September 30, 2021 and 2020, and $2.2 million for each of the nine months ended September 30, 2021 and 2020.
6.     INCOME TAXES
We file U.S. and state income tax returns in jurisdictions with varying statutes of limitations. The statute of limitations with regards to our federal income tax filings is three years. The statute of limitations for our state tax jurisdictions is three to four years depending on the jurisdiction. In the normal course of business, we are subject to tax audits in various jurisdictions, and such jurisdictions may assess additional income taxes. We do not expect the outcome of any audit to have a material effect on our consolidated financial statements; however, audit outcomes and the timing of audit adjustments are subject to significant uncertainty.
For the three and nine months ended September 30, 2021, our effective tax rates of 20.8% and 20.3%, respectively, are lower than the Federal statutory rate primarily as a result of the federal energy efficient homes tax credit and excess compensation cost for share-based payments, partially offset by an increase in the rate for state income taxes, net of the federal benefit payments.
Income taxes paid were $36.0 million and $46.6 million for the three months ended September 30, 2021 and 2020, respectively. Income taxes paid were $99.7 million and $65.5 million for the nine months ended September 30, 2021 and 2020, respectively.

7.     EQUITY
Stock Repurchase Program
In November 2018, we announced that our Board of Directors (the “Board”) authorized a stock repurchase program, pursuant to which we may purchase up to $50.0 million of shares of our common stock through open market transactions, privately negotiated transactions or otherwise in accordance with applicable laws. In October 2020, the Board approved an increase in our stock repurchase program by an additional $300.0 million. During the three months ended September 30, 2021, we repurchased 358,817 shares of our common stock for $56.1 million to be held as treasury stock. During the nine months
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ended September 30, 2021, we repurchased 910,038 shares of our common stock for $137.7 million to be held as treasury stock. A total of 1,668,031 shares of our common stock has been repurchased since our stock repurchase program commenced. As of September 30, 2021, we may purchase up to $162.7 million of shares of our common stock under our stock repurchase program. The timing, amount and other terms and conditions of any repurchases of shares of our common stock under our stock repurchase program will be determined by our management at its discretion based on a variety of factors, including the market price of our common stock, corporate considerations, general market and economic conditions and legal requirements. Our stock repurchase program may be modified, discontinued or suspended at any time.
8.     EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2021 and 2020:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Numerator (in thousands):
Net income (Numerator for basic and dilutive earnings per share)$100,550 $89,004 $318,342 $187,467 
Denominator:
       Basic weighted average shares outstanding24,508,134 25,089,424 24,766,260 25,162,162 
       Effect of dilutive securities:
         Stock-based compensation units316,186 167,629 263,901 166,393 
       Diluted weighted average shares outstanding24,824,320 25,257,053 25,030,161 25,328,555 
Basic earnings per share$4.10 $3.55 $12.85 $7.45 
Diluted earnings per share$4.05 $3.52 $12.72 $7.40 
Antidilutive non-vested restricted stock units excluded from calculation of diluted earnings per share553 131 3,629 1,561 

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9.    STOCK-BASED COMPENSATION
Non-performance Based Restricted Stock Units
The following table summarizes the activity of our time-vested restricted stock units (“RSUs”):
Nine Months Ended September 30,
20212020
SharesWeighted Average Grant Date Fair ValueSharesWeighted Average Grant Date Fair Value
Beginning balance 142,738 $62.54 162,686 $50.84 
   Granted25,124 $141.96 48,926 $61.25 
   Vested(35,503)$63.23 (55,259)$32.51 
   Forfeited(6,205)$73.62 (3,000)$56.74 
Ending balance126,154 $77.61 153,353 $60.65 
We recognized $0.8 million and $0.9 million of stock-based compensation expense related to outstanding RSUs for each of the three months ended September 30, 2021 and 2020, respectively. We recognized $2.5 million and $2.6 million of stock-based compensation expense related to outstanding RSUs for each of the nine months ended September 30, 2021 and 2020, respectively. Generally, the RSUs cliff vest on the third anniversary of the grant date and can only be settled in shares of our common stock. At September 30, 2021, we had unrecognized compensation cost of $4.5 million related to unvested RSUs, which is expected to be recognized over a weighted average period of 2.0 years.
Performance-Based Restricted Stock Units
The Compensation Committee of the Board has granted awards of performance-based RSUs (“PSUs”) under the Amended and Restated LGI Homes, Inc. 2013 Equity Incentive Plan to certain members of senior management based on three-year performance cycles. The PSUs provide for shares of our common stock to be issued based on the attainment of certain performance metrics over the applicable three-year periods. The number of shares of our common stock that may be issued to the recipients for the PSUs range from 0% to 200% of the target amount depending on actual results as compared to the target performance metrics. The terms of the PSUs provide that the payouts will be capped at 100% of the target number of PSUs granted if absolute total stockholder return is negative during the performance period, regardless of EPS performance; this market condition applies for amounts recorded above target. The compensation expense associated with the PSU grants is determined using the derived grant date fair value, based on a third-party valuation analysis, and expensed over the applicable period. The PSUs vest upon the determination date for the actual results at the end of the three-year period and require that the recipients continue to be employed by us through the determination date. The PSUs can only be settled in shares of our common stock.
The following table summarizes the activity of our PSUs for the nine months ended September 30, 2021:
Period GrantedPerformance PeriodTarget PSUs Outstanding at December 31, 2020Target PSUs GrantedTarget PSUs VestedTarget PSUs ForfeitedTarget PSUs Outstanding at September 30, 2021Weighted Average Grant Date Fair Value
20182018 - 202060,040 — (60,040)—  $64.60 
20192019 - 202181,242 — — — 81,242 $56.49 
20202020 - 202288,538 — — — 88,538 $59.81 
2021 2021 - 2023— 46,027 — — 46,027 $141.00 
Total229,820 46,027 (60,040) 215,807 
At September 30, 2021, management estimates that the recipients will receive approximately 185%, 200% and 200% of the 2021, 2020 and 2019 target number of PSUs, respectively, at the end of the applicable three-year performance cycle based on projected performance compared to the target performance metrics. We recognized $2.3 million and $1.3 million of total stock-based compensation expense related to outstanding PSUs for the three months ended September 30, 2021 and 2020, respectively. We recognized $6.7 million and $3.7 million of total stock-based compensation expense related to outstanding PSUs for the nine months ended September 30, 2021 and 2020, respectively. The 2018 - 2020 performance period PSUs vested
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and issued on March 15, 2021 at 200% of the target number. At September 30, 2021, we had unrecognized compensation cost of $13.8 million, based on the probable amount, related to unvested PSUs, which is expected to be recognized over a weighted average period of 2.0 years.
10.    FAIR VALUE DISCLOSURES
ASC Topic 820, Fair Value Measurements (“ASC 820”), defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date” within an entity’s principal market, if any. The principal market is the market in which the reporting entity would sell the asset or transfer the liability with the greatest volume and level of activity, regardless of whether it is the market in which the entity will ultimately transact for a particular asset or liability or if a different market is potentially more advantageous. Accordingly, this exit price concept may result in a fair value that differs from the transaction price or market price of the asset or liability.
ASC 820 provides a framework for measuring fair value under GAAP, expands disclosures about fair value measurements and establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of the fair value hierarchy are summarized as follows:
Level 1 - Fair value is based on quoted prices in active markets for identical assets or liabilities.
Level 2 - Fair value is determined using significant observable inputs, generally either quoted prices in active markets for
similar assets or liabilities, or quoted prices in markets that are not active.
Level 3 - Fair value is determined using one or more significant inputs that are unobservable in active markets at the
measurement date, such as a pricing model, discounted cash flow or similar technique.
We utilize fair value measurements to account for certain items and account balances within our consolidated financial statements. Fair value measurements may also be utilized on a nonrecurring basis, such as for the impairment of long-lived assets. The fair value of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and certain accrued liabilities approximate their carrying amounts due to the short-term nature of these instruments. As of September 30, 2021, the Credit Agreement’s carrying value approximates market value since it has a floating interest rate, which increases or decreases with market interest rates and our leverage ratio.
In order to determine the fair value of the 2029 Senior Notes and the 2026 Senior Notes, the future contractual cash flows are discounted at our estimate of current market rates of interest, which were determined based upon the average interest rates of similar senior notes within the homebuilding industry (Level 2 measurement).
The following table below shows the level and measurement of liabilities at September 30, 2021 and December 31, 2020 (in thousands):
September 30, 2021December 31, 2020
Fair Value HierarchyCarrying ValueEstimated Fair ValueCarrying ValueEstimated Fair Value
2029 Senior Notes (1)
Level 2$300,000 $300,920 $ $ 
2026 Senior Notes (2)
Level 2
$ $ $300,000 $340,388 
(1)On June 28, 2021, we completed an offering of $300.0 million aggregate principal amount of the 2029 Senior Notes. See Note 5 for more details regarding this offering.
(2)On July 15, 2021, we redeemed all of the outstanding 2026 Senior Notes. See Note 5 for more details regarding the redemption.
11.    RELATED PARTY TRANSACTIONS
Land Purchases from Affiliates
We did not complete any land purchase contracts with affiliates during the three months ended September 30, 2021. During the nine months ended September 30, 2021, we completed a land purchase contract to purchase a total of 110 finished lots in Pasco County, Florida from an affiliate of one of our directors for a total base purchase price of approximately $4.0 million. The lots were purchased in takedowns, subject to a maximum price escalation of 6% per annum, and may provide for additional payments to the seller at the time of sale to the homebuyer. In August 2019, we purchased our first takedown of 58 lots under the Pasco County contract for a base purchase price of approximately $2.1 million. In April 2021, we purchased the remaining land in a takedown of 52 lots under the Pasco County contract for a base purchase price of approximately $1.9 million.
During the nine months ended September 30, 2021, we completed a land purchase contract to purchase a total of 25 finished lots in Burnet County, Texas from an affiliate of a family member of our chief executive officer for a total base purchase price of approximately $2.5 million.
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12.     COMMITMENTS AND CONTINGENCIES
Contingencies
In the ordinary course of doing business, we are subject to claims or proceedings from time to time relating to the purchase, development and sale of real estate and homes and other aspects of our homebuilding operations. Management believes that these claims include usual obligations incurred by real estate developers and residential home builders in the normal course of business. In the opinion of management, these matters will not have a material effect on our consolidated financial position, results of operations or cash flows.
We have provided unsecured environmental indemnities to certain lenders and other counterparties. In each case, we have performed due diligence on the potential environmental risks including obtaining an independent environmental review from outside environmental consultants. These indemnities obligate us to reimburse the guaranteed parties for damages related to environmental matters. There is no term or damage limitation on these indemnities; however, if an environmental matter arises, we may have recourse against other previous owners. In the ordinary course of doing business, we are subject to regulatory proceedings from time to time related to environmental and other matters. In the opinion of management, these matters will not have a material effect on our consolidated financial position, results of operations or cash flows.
Land Deposits
We have land purchase contracts, generally through cash deposits, for the right to purchase land or lots at a future point in time with predetermined terms. We do not have title to the property, and obligations with respect to the land purchase contracts are generally limited to the forfeiture of the related nonrefundable cash deposits. The following is a summary of our land purchase deposits included in pre-acquisition costs and deposits (in thousands, except for lot count):
September 30, 2021December 31, 2020
Land deposits and option payments$46,324 $34,097 
Commitments under the land purchase contracts if the purchases are consummated$1,047,124 $663,006 
Lots under land purchase contracts43,338 26,236 
As of September 30, 2021 and December 31, 2020, approximately $25.1 million and $24.0 million, respectively, of the land deposits are related to purchase contracts to deliver finished lots that are refundable under certain circumstances, such as feasibility or specific performance, and secured by mortgages or letters of credit or guaranteed by the seller or its affiliates.
Lease Obligations
We recognize lease obligations and associated right-of-use (“ROU”) assets for our existing non-cancelable leases. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We have non-cancelable operating leases primarily associated with our corporate and regional office facilities.  Operating lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the terms. Variable lease costs such as common area costs and property taxes are expensed as incurred. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The lease term may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. ROU assets, as included in other assets on the consolidated balance sheets, were $4.6 million and $4.9 million at September 30, 2021 and December 31, 2020, respectively. Lease obligations, as included in accrued expenses and other liabilities on the consolidated balance sheets, were $4.8 million and $5.3 million at September 30, 2021 and December 31, 2020, respectively.
Operating lease cost, as included in general and administrative expense in our consolidated statements of operations, was $0.5 million and $0.4 million for the three months ended September 30, 2021 and 2020, respectively. Operating lease cost, as included in general and administrative expense in our consolidated statements of operations, was $1.3 million and $1.2 million for the nine months ended September 30, 2021 and 2020, respectively. Cash paid for amounts included in the measurement of lease liabilities for operating leases during the nine months ended September 30, 2021 and 2020 was $1.2 million and $0.7 million, respectively. As of September 30, 2021, the weighted-average discount rate was 5.20% and our weighted-average remaining life was 4.3 years. We do not have any significant lease contracts that have not yet commenced at September 30, 2021.
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The table below shows the future minimum payments under non-cancelable operating leases at September 30, 2021 (in thousands):
Year Ending December 31,Operating leases
2021$346 
20221,218 
20231,061 
2024818 
2025698 
Thereafter1,664 
Total5,805 
Lease amount representing interest(961)
Present value of lease liabilities$4,844 
Bonding and Letters of Credit    
We have outstanding letters of credit and performance and surety bonds totaling $199.7 million (including $8.3 million of letters of credit issued under the Credit Agreement) and $143.8 million at September 30, 2021 and December 31, 2020, respectively, related to our obligations for site improvements at various projects. Management does not believe that draws upon the letters of credit, surety bonds or financial guarantees if any, will have a material effect on our consolidated financial position, results of operations or cash flows.
Investment in Unconsolidated Entities
In 2019, we became a limited partner in a real estate investment fund with a maximum $30.0 million commitment. The term of the commitment is eight years and includes renewals of up to two additional years. Additionally, during the nine months ended September 30, 2021, we entered into a joint venture with a mortgage lender. As of September 30, 2021 and December 31, 2020, we have a total of $5.3 million and $3.9 million, respectively, within other assets on the balance sheet relating to our investment in this real estate investment fund and this mortgage joint venture. Contributions into the unconsolidated entities are for the use of investing in certain real estate transactions and residential mortgage services, respectively.
13.     SEGMENT INFORMATION
We operate one principal homebuilding business that is organized and reports by division. We have seven operating segments (our Central, Midwest, Southeast, Mid-Atlantic, Northwest, West, and Florida divisions) that we aggregate into five qualifying reportable segments at September 30, 2021: our Central, Southeast, Northwest, West, and Florida divisions. These segments reflect the way the Company evaluates its business performance and manages its operations. The Central division is our largest division and comprised approximately 41.1% and 35.4% of total home sales revenues for the nine months ended September 30, 2021 and 2020, respectively.
In accordance with ASC 280, Segment Reporting, operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision-makers (“CODMs”) in deciding how to allocate resources and in assessing performance. The CODMs primarily evaluate performance based on the number of homes closed, gross margin and average sales price per home closed.
In determining the most appropriate reportable segments, we consider operating segments’ economic and other characteristics, including home floor plans, average selling prices, gross margin percentage, geographical proximity, production construction processes, suppliers, subcontractors, regulatory environments, customer type and underlying demand and supply. Each operating segment follows the same accounting policies and is managed by our management team. We have no inter-segment sales, as all sales are to external customers. Operating results for each segment may not be indicative of the results for such segment had it been an independent, stand-alone entity for the periods presented.
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Financial information relating to our reportable segments was as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Revenues:
Central$287,878 $186,909 $924,591 $520,608 
Southeast146,166 130,131 442,431 347,155 
Northwest148,515 91,138 372,903 249,455 
West90,592 62,935 252,553 182,012 
Florida78,457 63,089 256,595 171,301 
Total home sales revenues$751,608 $534,202 $2,249,073 $1,470,531 
Net income (loss) before income taxes:
Central$55,793 $32,845 $180,467 $86,694 
Southeast27,142 17,280 77,644 42,063 
Northwest34,124 15,940 83,773 40,945 
West13,279 6,883 38,598 19,101 
Florida11,937 6,608 37,518 17,001 
Corporate (1)
(15,281)(1,741)(18,609)(4,503)
Total net income before income taxes$126,994 $77,815 $399,391 $201,301 
(1)The Corporate balance consists primarily of general and administration unallocated costs for various shared service functions, as well as our warranty reserve and loss on extinguishment of debt. Actual warranty expenses are reflected within the reportable segments.
September 30, 2021December 31, 2020
Assets:
Central$808,278 $708,087 
Southeast410,024 401,725 
Northwest317,866 252,098 
West335,046 228,186 
Florida193,009 157,169 
Corporate (1)
89,334