Company Quick10K Filing
Quick10K
LGI Homes
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$69.35 23 $1,590
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-08-06 Earnings, Regulation FD, Exhibits
8-K 2019-05-07 Earnings, Regulation FD, Exhibits
8-K 2019-05-02 Shareholder Vote
8-K 2019-01-03 Officers, Exhibits
8-K 2018-11-16 Officers, Exhibits
8-K 2018-11-09 Other Events, Exhibits
8-K 2018-11-06 Earnings, Regulation FD, Exhibits
8-K 2018-10-23 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-08-07 Earnings, Regulation FD, Exhibits
8-K 2018-07-06 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-06-29 Enter Agreement, Other Events, Exhibits
8-K 2018-06-21 Regulation FD, Other Events, Exhibits
8-K 2018-06-21 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-05-29 Enter Agreement, Leave Agreement, Off-BS Arrangement, Exhibits
8-K 2018-05-03 Shareholder Vote
TXT Textron 11,830
HOV Hovnanian Enterprises 2,380
TPC Tutor Perini 856
FPH Five Point Holdings 619
FTSV Forty Seven 585
ACLS Axcelis 567
VAPO Vapotherm 335
MNLO Menlo Therapeutics 163
ANDV Andeavor 0
AFOM All For One Media 0
LGIH 2019-06-30
Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 6. Exhibits
EX-31.1 a063019ex311.htm
EX-31.2 a063019ex312.htm
EX-32.1 a063019ex321.htm
EX-32.2 a063019ex322.htm

LGI Homes Earnings 2019-06-30

LGIH 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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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 June 30, 2019
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)

Delaware
 
46-3088013
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
 
 
 
1450 Lake Robbins Drive,
Suite 430,
The Woodlands,
Texas
 
77380
(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 class
 
Trading symbol(s)
 
Name of each exchange on which registered
Common Stock, par value $0.01 per share
 
LGIH
 
NASDAQ 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 filer
 
Accelerated filer
Non-accelerated filer
 
Smaller 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 August 2, 2019, there were 22,939,883 shares of the registrant’s common stock, par value $0.01 per share, outstanding.


Table of Contents

TABLE OF CONTENTS
   



 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 


3

Table of Contents

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LGI HOMES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
 
 
 
June 30,
 
December 31,
 
 
2019
 
2018
ASSETS
 

 
 
Cash and cash equivalents
 
$
37,555

 
$
46,624

Accounts receivable
 
43,207

 
42,836

Real estate inventory
 
1,328,699

 
1,228,256

Pre-acquisition costs and deposits
 
45,991

 
45,752

Property and equipment, net
 
1,429

 
1,432

Other assets
 
15,146

 
15,765

Deferred tax assets, net
 
2,015

 
2,790

Goodwill and intangible assets, net
 
12,018

 
12,018

Total assets
 
$
1,486,060

 
$
1,395,473

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Accounts payable
 
$
22,562

 
$
9,241

Accrued expenses and other liabilities
 
73,340

 
76,555

Notes payable
 
664,923

 
653,734

Total liabilities
 
760,825

 
739,530

 
 
 
 
 
COMMITMENTS AND CONTINGENCIES
 

 

EQUITY
 
 
 
 
Common stock, par value $0.01, 250,000,000 shares authorized, 23,978,883 shares issued and 22,939,883 shares outstanding as of June 30, 2019 and 23,746,385 shares issued and 22,707,385 shares outstanding as of December 31, 2018
 
240

 
237

Additional paid-in capital
 
246,888

 
241,988

Retained earnings
 
496,163

 
431,774

Treasury stock, at cost, 1,039,000 shares
 
(18,056
)
 
(18,056
)
Total equity
 
725,235

 
655,943

Total liabilities and equity
 
$
1,486,060

 
$
1,395,473








See accompanying notes to the consolidated financial statements.

4

Table of Contents


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

 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Home sales revenues
 
$
461,830

 
$
419,847

 
$
749,424

 
$
698,871

 
 
 
 
 
 
 
 
 
Cost of sales
 
350,519

 
310,082

 
571,809

 
519,847

Selling expenses
 
33,890

 
29,301

 
60,681

 
52,250

General and administrative
 
18,980

 
18,302

 
37,418

 
33,742

   Operating income
 
58,441

 
62,162

 
79,516

 
93,032

Loss on extinguishment of debt
 
169

 
365

 
169

 
540

Other income, net
 
(2,263
)
 
(874
)
 
(2,882
)
 
(1,406
)
Net income before income taxes
 
60,535

 
62,671

 
82,229

 
93,898

Income tax provision
 
14,480

 
15,063

 
17,840

 
18,988

Net income
 
$
46,055

 
$
47,608

 
$
64,389

 
$
74,910

Earnings per share:
 
 
 
 
 
 
 
 
Basic
 
$
2.01

 
$
2.11

 
$
2.82

 
$
3.34

Diluted
 
$
1.82

 
$
1.90

 
$
2.55

 
$
3.01

 
 

 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
22,926,156

 
22,616,085

 
22,835,920

 
22,403,266

Diluted
 
25,357,396

 
25,000,647

 
25,226,062

 
24,884,628




















See accompanying notes to the consolidated financial statements.

5

Table of Contents


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

 
 
 
Common Stock
 
Additional Paid-In Capital
 
Retained Earnings
 
Treasury Stock
 
Total Equity
 
 
Shares
 
Amount
BALANCE—December 31, 2018
 
23,746,385

 
$
237

 
$
241,988

 
$
431,774

 
$
(18,056
)
 
$
655,943

Net income
 

 

 

 
18,334

 

 
18,334

Issuance of restricted stock units in settlement of accrued bonuses
 

 

 
217

 

 

 
217

Compensation expense for equity awards
 

 

 
1,783

 

 

 
1,783

Stock issued under employee incentive plans
 
218,345

 
2

 
647

 

 

 
649

BALANCE— March 31, 2019
 
23,964,730

 
$
239

 
$
244,635

 
$
450,108

 
$
(18,056
)
 
$
676,926

Net income
 

 

 

 
46,055

 

 
46,055

Compensation expense for equity awards
 

 

 
1,639

 

 

 
1,639

Stock issued under employee incentive plans
 
14,153

 
1

 
614

 

 

 
615

BALANCE— June 30, 2019
 
23,978,883

 
$
240

 
$
246,888

 
$
496,163

 
$
(18,056
)
 
$
725,235


 
 
Common Stock
 
Additional Paid-In Capital
 
Retained Earnings
 
Treasury Stock
 
Total Equity
 
 
Shares
 
Amount
BALANCE—December 31, 2017
 
22,845,580

 
$
228

 
$
229,680

 
$
276,488

 
$
(16,550
)
 
$
489,846

Net income
 

 

 

 
27,302

 

 
27,302

Issuance of shares in settlement of Convertible Notes
 
486,679

 
5

 
(475
)
 

 

 
(470
)
Issuance of restricted stock units in settlement of accrued bonuses
 

 

 
181

 

 

 
181

Compensation expense for equity awards
 

 

 
1,351

 

 

 
1,351

Stock issued under employee incentive plans
 
282,887

 
3

 
697

 

 

 
700

BALANCE— March 31, 2018
 
23,615,146

 
$
236

 
$
231,434

 
$
303,790

 
$
(16,550
)
 
$
518,910

Net income
 

 

 

 
47,608

 

 
47,608

Compensation expense for equity awards
 

 

 
1,419

 

 

 
1,419

Stock issued under employee incentive plans
 
17,845

 

 
745

 

 

 
745

BALANCE— June 30, 2018
 
23,632,991

 
$
236

 
$
233,598

 
$
351,398

 
$
(16,550
)
 
$
568,682



See accompanying notes to the consolidated financial statements.

6

Table of Contents


LGI HOMES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
 
 
Six Months Ended June 30,
 
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
Net income
 
$
64,389

 
$
74,910

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
 
326

 
366

Loss on extinguishment of debt
 
169

 
530

Compensation expense for equity awards
 
3,422

 
2,770

Deferred income taxes
 
775

 
(95
)
Changes in assets and liabilities:
 
 
 
 
Accounts receivable
 
(371
)
 
12,960

Real estate inventory
 
(99,671
)
 
(143,449
)
Pre-acquisition costs and deposits
 
(239
)
 
(10,696
)
Other assets
 
5,936

 
3,028

Accounts payable
 
13,321

 
7,873

Accrued expenses and other liabilities
 
(6,950
)
 
(43,867
)
Net cash used in operating activities
 
(18,893
)
 
(95,670
)
Cash flows from investing activities:
 
 
 
 
Purchases of property and equipment
 
(323
)
 
(367
)
Net cash used in investing activities
 
(323
)
 
(367
)
Cash flows from financing activities:
 
 
 
 
Proceeds from notes payable
 
79,750

 
120,000

Payments on notes payable
 
(68,800
)
 
(40,038
)
Loan issuance costs
 
(2,067
)
 
(3,923
)
Proceeds from sale of stock, net of offering expenses
 
1,264

 
1,445

Payment for earnout obligation
 

 
(132
)
Net cash provided by financing activities
 
10,147

 
77,352

Net decrease in cash and cash equivalents
 
(9,069
)
 
(18,685
)
Cash and cash equivalents, beginning of period
 
46,624

 
67,571

Cash and cash equivalents, end of period
 
$
37,555

 
$
48,886








See accompanying notes to the consolidated financial statements.

7

Table of Contents

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”, “us,” “we,” 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 and West Virginia.
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, 2018. 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 June 30, 2019, and for the three and six months ended June 30, 2019 and 2018, 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.
Recently Adopted Accounting Standards
On January 1, 2019, we adopted the Financial Accounting Standards Board (the “FASB”) Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), which amends the existing standards for lease accounting, requiring lessees to recognize most leases on their balance sheets and disclose key information about leasing arrangements. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than one year. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.
We adopted the new standard with a modified retrospective transition approach, so financial information is not updated for periods prior to January 1, 2019. Pursuant to the adoption of the new standard, we elected the practical expedients upon transition that do not require us to reassess existing contracts to determine if they contain leases under the new definition of a lease, or to reassess historical lease classification or initial direct costs.We also elected the practical expedient to not separate lease and non-lease components for new leases after adoption of the new standard.
The adoption of Topic 842 is accounted for as a change in accounting principle in conformity with FASB Accounting Standards Codification (“ASC”) 250, “Accounting Changes and Error Corrections.” As a result of the adoption, the most significant changes are related to the recognition of new ROU assets and lease liabilities of $5.4 million as of January 1, 2019 on the balance sheet for office operating leases. The Company's existing material leases are all considered operating leases under the new leasing standard and as a result, no adjustment to retained earnings was required.
Recently Issued Accounting Pronouncements
In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820) Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”), which modifies the disclosure requirements of fair value measurements. ASU 2018-13 is effective for us beginning January 1, 2020. Certain disclosures are required to be applied on a retrospective basis and others on a prospective basis. We are currently evaluating the impact that adoption of this guidance will have on our financial statement disclosures.

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In January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment.” (“ASU 2017-04”), which removes the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for us beginning January 1, 2020, with early adoption permitted, and applied prospectively. We do not expect ASU 2017-04 to have a material impact on our 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 June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Retail home sales revenues
 
$
443,450

 
$
392,320

 
$
724,915

 
$
664,358

Other
 
18,380

 
27,527

 
24,509

 
34,513

Total home sales revenues
 
$
461,830

 
$
419,847

 
$
749,424

 
$
698,871


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 June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Central
 
$
189,894

 
$
181,967

 
$
314,091

 
$
289,465

Northwest
 
78,996

 
85,233

 
115,250

 
142,406

Southeast
 
77,820

 
60,369

 
130,234

 
105,477

Florida
 
48,187

 
55,018

 
77,099

 
97,461

West
 
66,933

 
37,260

 
112,750

 
64,062

Total home sales revenues
 
$
461,830

 
$
419,847

 
$
749,424

 
$
698,871


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.
Our other revenues are composed of our wholesale home sales under our LGI Homes brand and Terrata Homes brand in existing markets. 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.

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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):
 
 
June 30,
 
December 31,
 
 
2019
 
2018
Land, land under development and finished lots
 
$
783,014

 
$
736,402

Information centers
 
25,618

 
21,179

Homes in progress
 
297,466

 
149,506

Completed homes
 
222,601

 
321,169

Total real estate inventory
 
$
1,328,699

 
$
1,228,256


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 and net of expected reimbursements of 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 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.

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4.     ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued and other liabilities consist of the following (in thousands):
 
 
June 30,
 
December 31,
 
 
2019
 
2018
Retentions and development payable
 
$
19,290

 
$
18,899

Accrued compensation, bonuses and benefits
 
10,651

 
14,263

Accrued interest
 
12,178

 
12,339

Taxes payable
 
6,403

 
10,773

Inventory related obligations
 
5,648

 
7,041

Lease Liability
 
5,317

 

Warranty reserve
 
3,050

 
2,950

Other
 
10,803

 
10,290

Total accrued expenses and other liabilities
 
$
73,340

 
$
76,555


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.
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 June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Warranty reserves, beginning of period
 
$
3,000

 
$
2,600

 
$
2,950

 
$
2,450

Warranty provision
 
879

 
695

 
1,974

 
1,683

Warranty expenditures
 
(829
)
 
(495
)
 
(1,874
)
 
(1,333
)
Warranty reserves, end of period
 
$
3,050

 
$
2,800

 
$
3,050

 
$
2,800


5.     NOTES PAYABLE
Revolving Credit Agreement
On May 6, 2019, we entered into that certain Fourth Amended and Restated Credit Agreement (the “Credit Agreement”) with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent. The Credit Agreement has substantially similar terms and provisions to our third amended and restated credit agreement entered into in May 2018 with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent (the “2018 Credit Agreement”) but, among other things, provides for, a revolving credit facility of $550.0 million, which can be increased at our request by up to $100.0 million if the lenders make additional commitments, subject to the terms and conditions of the Credit Agreement.
The Credit Agreement matures on May 31, 2022. Before each anniversary of the Credit Agreement, we may request a one-year extension of the maturity date. The Credit Agreement is guaranteed by each of our subsidiaries that have gross assets of $0.5 million or more. As of June 30, 2019, the borrowing base under the Credit Agreement was $852.7 million, of which borrowings, including the Convertible Notes (as defined below) and the Senior Notes (as defined below), of $675.0 million were outstanding, $9.2 million of letters of credit were outstanding and $167.1 million was available to borrow under the Credit Agreement, net of deferred purchase price obligations.
Interest is paid monthly on borrowings under the Credit Agreement at LIBOR plus 2.75%. The Credit Agreement applicable margin for LIBOR loans ranges from 2.35% to 2.75% based on our leverage ratio. At June 30, 2019, LIBOR was 2.40%.

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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 June 30, 2019, we were in compliance with all of the covenants contained in the Credit Agreement.
Convertible Notes
We issued $85.0 million aggregate principal amount of our 4.25% Convertible Notes due 2019 (the “Convertible Notes”) in November 2014 pursuant to an exemption from the registration requirements afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The Convertible Notes mature on November 15, 2019. Interest on the Convertible Notes is payable semi-annually in arrears on May 15 and November 15 of each year at a rate of 4.25%. When the Convertible Notes were issued, the fair value of $76.5 million was recorded to notes payable. $5.5 million of the remaining proceeds was recorded to additional paid in capital to reflect the equity component and the remaining $3.0 million was recorded as a deferred tax liability. The carrying amount of the Convertible Notes is being accreted to face value over the term to maturity. As of June 30, 2019, we have $70.0 million aggregate principal amount of Convertible Notes outstanding.
Prior to May 15, 2019, the Convertible Notes were convertible only upon satisfaction of any of the specified conversion events. On or after May 15, 2019 and until the close of business on November 14, 2019 (the business day immediately preceding the stated maturity date of the Convertible Notes), the holders of the Convertible Notes can convert their Convertible Notes at any time at their option. Upon the election of a holder of Convertible Notes to convert their Convertible Notes, we may settle the conversion of the Convertible Notes using any combination of cash and shares of our common stock. It is our intent, and belief that we have the ability, to settle in cash the conversion of any Convertible Notes that the holders elect to convert. The initial conversion rate of the Convertible Notes is 46.4792 shares of our common stock for each $1,000 principal amount of Convertible Notes, which represents an initial conversion price of approximately $21.52 per share of our common stock. The conversion rate is subject to adjustments upon the occurrence of certain specified events.
On July 6, 2018, concurrently with the offering of the Senior Notes, we entered into that certain First Supplemental Indenture, dated as of July 6, 2018, among us, our subsidiaries that guarantee our obligations under the 2018 Credit Agreement (the “Subsidiary Guarantors”) and Wilmington Trust, National Association, as trustee, which supplements the indenture governing the Convertible Notes, pursuant to which (i) the subordination provisions in the indenture governing the Convertible Notes were eliminated, (ii) each Subsidiary Guarantor agreed (A) to, concurrently with the issuance of the Senior Notes, fully and unconditionally guarantee the Convertible Notes to the same extent that such Subsidiary Guarantor is guaranteeing the Senior Notes and (B) that such Subsidiary Guarantor’s guarantee of the Convertible Notes ranks equally with such Subsidiary Guarantor’s guarantee of the Senior Notes and (iii) the Company agreed to not, directly or indirectly, incur any indebtedness in the form of, or otherwise become liable in respect of, any notes or other debt securities issued pursuant to an indenture or note purchase agreement (including the Senior Notes) unless such indebtedness is equal with or contractually subordinated to the Convertible Notes in right of payment.

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Senior Notes Offering
On July 6, 2018, we issued $300.0 million aggregate principal amount of the Senior Notes in an offering to persons reasonably believed to be qualified institutional buyers in the United States pursuant to Rule 144A under the Securities Act and to certain non-U.S. persons in transactions outside the United States pursuant to Regulation S under the Securities Act. Interest on the Senior Notes accrues at a rate of 6.875% per annum, payable semi-annually in arrears on January 15 and July 15 of each year, commencing on January 15, 2019, and the Senior Notes mature on July 15, 2026. Terms of the Senior Notes are governed by an indenture and supplemental indenture, each dated as of July 6, 2018, among us, the Subsidiary Guarantors and Wilmington Trust, National Association, as trustee.
We received net proceeds from the offering of the Senior Notes of approximately $296.2 million, after deducting the initial purchasers’ discounts of $2.3 million and commissions and offering expenses of $1.5 million. The net proceeds from the offering were used to repay a portion of the borrowings under the 2018 Credit Agreement.
Notes payable consist of the following (in thousands):
 
 
June 30, 2019
 
December 31, 2018
Notes payable under the Credit Agreement ($550.0 million revolving credit facility at June 30, 2019) maturing on May 31, 2022; interest paid monthly at LIBOR plus 2.75%; net of debt issuance costs of approximately $5.0 million and $3.7 million at June 30, 2019 and December 31, 2018, respectively
 
$
299,974

 
$
290,131

4.25% Convertible Notes due November 15, 2019; interest paid semi-annually at 4.25%; net of debt issuance costs of approximately $0.2 million and $0.4 million at June 30, 2019 and December 31, 2018, respectively; and approximately $0.6 million and $1.3 million in unamortized discount at June 30, 2019 and December 31, 2018, respectively
 
69,256

 
68,251

6.875% Senior Notes due July 15, 2026; interest paid semi-annually at 6.875%; net of debt issuance costs of approximately $2.4 million and $2.5 at June 30, 2019 and December 31, 2018, respectively; and approximately $1.9 million and $2.1 million in unamortized discount at June 30, 2019 and December 31, 2018, respectively
 
295,693

 
295,352

Total notes payable
 
$
664,923

 
$
653,734


Capitalized Interest
Interest activity, including other financing costs, for notes payable for the periods presented is as follows (in thousands):
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Interest incurred
 
$
12,108

 
$
8,787

 
$
23,525

 
$
15,980

Less: Amounts capitalized
 
(12,108
)
 
(8,787
)
 
(23,525
)
 
(15,980
)
Interest expense
 
$

 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
Cash paid for interest
 
$
6,199

 
$
8,100

 
$
21,032

 
$
13,269


Included in interest incurred was amortization of deferred financing costs for notes payable and amortization of Convertible Notes and Senior Notes discounts of $1.0 million and $1.4 million for the three months ended June 30, 2019 and 2018, respectively, and $2.1 million and $2.2 million for the six months ended June 30, 2019 and 2018, respectively.
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 six months ended June 30, 2019, our effective tax rate of 21.7% is higher than the Federal statutory rate primarily as a result of the deductions related to non-deductible salaries related to Section 162(m) of the Internal Revenue Code of 1986,

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as amended, and an increase in rate for state income taxes, net of the federal benefit payments, offset by the deductions in excess of compensation cost (“windfalls”) for share-based payments.
Income taxes paid were $21.4 million and $20.8 million for the three months ended June 30, 2019 and 2018, respectively. Income taxes paid were $21.6 million and $63.7 million for the six months ended June 30, 2019 and 2018, respectively.
7.     EQUITY
Shelf Registration Statement
We have an effective shelf registration statement on Form S-3 (Registration No. 333-227012), registering the offering and sale of an indeterminate amount of debt securities, guarantees of debt securities, preferred stock, common stock, warrants, depositary shares, purchase contracts and units that include any of these securities, that was filed on August 24, 2018 with the Securities and Exchange Commission.
8.     EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share for the three and six months ended June 30, 2019 and 2018:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Numerator (in thousands):
 
 
 
 
 
 
 
 
Net Income (Numerator for basic and dilutive earnings per share)
 
$
46,055

 
$
47,608

 
$
64,389

 
$
74,910

Denominator:
 
 
 
 
 
 
 
 
       Basic weighted average shares outstanding
 
22,926,156

 
22,616,085

 
22,835,920

 
22,403,266

       Effect of dilutive securities:
 
 
 
 
 
 
 
 
Convertible Notes - treasury stock method
 
2,242,933

 
2,166,333

 
2,153,777

 
2,191,836

         Stock-based compensation units
 
188,307

 
218,229

 
236,365

 
289,526

       Diluted weighted average shares outstanding
 
25,357,396

 
25,000,647

 
25,226,062

 
24,884,628

 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
2.01

 
$
2.11

 
$
2.82

 
$
3.34

Diluted earnings per share
 
$
1.82

 
$
1.90

 
$
2.55

 
$
3.01

Antidilutive non-vested restricted stock units excluded from calculation of diluted earnings per share
 
1,379

 
2,871

 
11,268

 
13,118


In accordance with ASC 260-10, Earnings Per Share, we calculated the dilutive effect of the Convertible Notes using the treasury stock method, since we have the intent and ability to settle the principal amount of the outstanding Convertible Notes in cash. Under the treasury stock method, the Convertible Notes have a dilutive impact on diluted earnings per share to the extent that the average market price of our common stock for a reporting period exceeds the conversion price of $21.52 per share. During the three and six months ended June 30, 2019 and 2018, the average market price of our common stock exceeded the conversion price of $21.52 per share.

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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”):
 
 
Six Months Ended June 30,
 
 
2019
 
2018
 
 
Shares
 
Weighted Average Grant Date Fair Value
 
Shares
 
Weighted Average Grant Date Fair Value
Beginning balance
 
171,055

 
$
39.04

 
175,100

 
$
27.66

   Granted
 
48,830

 
$
57.00

 
38,546

 
$
64.06

   Vested
 
(42,686
)
 
$
22.22

 
(35,968
)
 
$
15.51

   Forfeited
 
(6,641
)
 
$
46.69

 
(4,993
)
 
$
33.79

Ending balance
 
170,558

 
$
48.12

 
172,685

 
$
38.14


We recognized $0.6 million and $0.5 million of stock-based compensation expense related to outstanding RSUs for the three months ended June 30, 2019 and 2018, respectively. We recognized $1.1 million and $0.9 million of stock-based compensation expense related to outstanding RSUs for the six months ended June 30, 2019 and 2018, 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 June 30, 2019, we had unrecognized compensation cost of $4.8 million related to unvested RSUs, which is expected to be recognized over a weighted average period of 2.1 years.
Performance-Based Restricted Stock Units
The Compensation Committee of our Board of Directors 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 the 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 six months ended June 30, 2019:
Period Granted
 
Performance Period
 
Target PSUs Outstanding at December 31, 2018
 
Target PSUs Granted
 
Target PSUs Vested
 
Target PSUs Forfeited
 
Target PSUs Outstanding at June 30, 2019
 
Weighted Average Grant Date Fair Value
2016
 
2016 - 2018
 
83,656

 

 
(83,656
)
 

 

 
$
21.79

2017
 
2017 - 2019
 
108,247

 

 

 
(3,477
)
 
104,770

 
$
31.64

2018
 
2018 - 2020
 
61,898

 

 

 
(1,858
)
 
60,040

 
$
64.60

2019
 
2019 - 2021
 

 
83,367

 

 
(2,125
)
 
81,242

 
$
56.49

Total
 
 
 
253,801

 
83,367

 
(83,656
)
 
(7,460
)
 
246,052

 
 

At June 30, 2019, management estimates that the recipients will receive approximately 100%, 100% and 196% of the 2019, 2018 and 2017 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 $0.9 million of total stock-based compensation expense related to outstanding PSUs for each of the three months ended June 30, 2019 and 2018. We recognized $2.1 million and $1.8 million of total stock-based compensation expense related to outstanding PSUs for the six months ended June 30, 2019 and 2018, respectively. PSUs granted in 2016 vested on March 15, 2019 at 200% of the target amount, and 167,312 shares of our common stock were issued upon such vesting. At June 30, 2019, we had unrecognized compensation cost of $7.6 million, based on the probable amount, related to unvested PSUs, which is expected to be recognized over a weighted average period of 2.1 years.

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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 and accounts payable, approximate their carrying amounts due to the short-term nature of these instruments. As of June 30, 2019, our revolving credit facility’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 Convertible Notes and the Senior Notes listed below, 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 convertible notes and senior notes within the homebuilding industry (Level 2 measurement).
The following table below shows the level and measurement of liabilities at June 30, 2019 and December 31, 2018 (in thousands):
 
 
 
 
June 30, 2019
 
December 31, 2018
 
 
Fair Value Hierarchy
 
Carrying Value
 
Estimated Fair Value (1)
 
Carrying Value
 
Estimated Fair Value (1)
Convertible Notes
 
Level 2
 
$
69,256

 
$
69,618

 
$
68,251

 
$
67,787

Senior Notes
 
Level 2
 
$
295,693

 
$
321,946

 
$
295,352

 
$
296,905

(1)
Excludes the fair value of the equity component of the Convertible Notes. See the “Convertible Notes” section within Note 5 for further details.
11.    RELATED PARTY TRANSACTIONS
Land Purchases from Affiliates
As of June 30, 2019, we have two land purchase contracts to purchase a total of 198 finished lots in Pasco County and Manatee County, Florida from affiliates of one of our directors for a total base purchase price of approximately $6.9 million. The lots will be purchased in takedowns, subject to annual price escalation ranging from 3% to 6% per annum, and may provide for additional payments to the seller at the time of sale to the homebuyer. We have a $0.7 million non-refundable deposit at June 30, 2019 related to these land purchase contracts. We anticipate the first closing on the Pasco County contract to occur in the second half of 2019 and first closing on the Manatee County contract to occur in 2020.

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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):
 
 
June 30, 2019
 
December 31, 2018
Land deposits and option payments
 
$
42,658

 
$
40,015

Commitments under the land purchase contracts if the purchases are consummated
 
$
745,518

 
$
776,224

Lots under land purchase contracts
 
23,215

 
22,820


As of June 30, 2019 and December 31, 2018, approximately $30.3 million and $25.2 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
As described in the “Recently Adopted Accounting Standards” section within Note 1, as of January 1, 2019, we adopted the provisions of ASU 2016-02 and recognized lease obligations and associated 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 $5.1 million as of June 30, 2019. Lease obligations, as included in accrued expenses and other liabilities on the consolidated balance sheets, were $5.3 million as of June 30, 2019.
Operating lease cost, as included in general and administrative expense in our consolidated statements of operations, for the three and six months ended June 30, 2019 was $0.3 million and $0.6 million, respectively. Cash paid for amounts included in the measurement of lease liabilities for operating leases during the three and six months ended June 30, 2019 was $0.3 million and $0.6 million, respectively. As of June 30, 2019, the weighted-average discount rate was 5.74% and our weighted-average remaining life was 7.9 years. The Company does not have any significant lease contracts that have not yet commenced at June 30, 2019.

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The table below shows the future minimum payments under non-cancelable operating leases at June 30, 2019 (in thousands):
Year Ending December 31,
 
Operating leases
2019
 
$
481

2020
 
927

2021
 
926

2022
 
799

2023
 
722

Thereafter
 
2,838

Total
 
6,693

Lease amount representing interest
 
(1,376
)
Present value of lease liabilities
 
$
5,317


Bonding and Letters of Credit    
We have outstanding letters of credit and performance and surety bonds totaling $91.5 million (including $9.2 million of letters of credit issued under the Credit Agreement) and $77.5 million at June 30, 2019 and December 31, 2018, 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.
13.     SEGMENT INFORMATION
Beginning in the fourth quarter of 2018, we changed our reportable segments to Central, Northwest, Southeast, Florida, and West. These segments reflect the way the Company evaluates its business performance and manages its operations. Prior period information has been restated for corresponding items of our segment information.
We operate one principal homebuilding business that is organized and reports by division. We have seven operating segments (our Central, Midwest, Northwest, Southeast, Mid-Atlantic, Florida, and West divisions) that we aggregate into five reportable segments at June 30, 2019: our Central, Northwest, Southeast, Florida, and West divisions. The Central division is our largest division and comprised approximately 42% and 41% of total home sales revenues for the six months ended June 30, 2019 and 2018, respectively.
In accordance with ASC Topic 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.
The seven operating segments qualify as our five reportable segments. 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 June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 
 
 
 
 
 
 
Central
 
$
189,894

 
$
181,967

 
$
314,091

 
$
289,465

Northwest
 
78,996

 
85,233

 
115,250

 
142,406

Southeast
 
77,820

 
60,369

 
130,234

 
105,477

Florida
 
48,187

 
55,018

 
77,099

 
97,461

West
 
66,933

 
37,260

 
112,750

 
64,062

Total home sales revenues
 
$
461,830

 
$
419,847

 
$
749,424

 
$
698,871

 
 
 
 
 
 
 
 
 
Net income (loss) before income taxes:
 
 
 
 
 
 
 
 
Central
 
$
32,593

 
$
33,537

 
$
47,240

 
$
48,843

Northwest
 
11,853

 
12,868

 
15,229

 
19,130

Southeast
 
5,745

 
7,599

 
6,160

 
11,926

Florida
 
4,552

 
7,585

 
5,767

 
11,557

West
 
7,230

 
3,114

 
10,337

 
4,895

Corporate (1)
 
(1,438
)
 
(2,032
)
 
(2,504
)
 
(2,453
)
Total net income (loss) before income taxes
 
$
60,535

 
$
62,671

 
$
82,229

 
$
93,898

(1)
The Corporate amount 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.
 
 
June 30, 2019
 
December 31, 2018
Assets:
 
 
 
 
Central
 
$
548,289

 
$
569,409

Northwest
 
224,960

 
200,443

Southeast
 
364,634

 
300,758

Florida
 
128,558

 
106,398

West
 
171,575

 
161,514

Corporate (1)
 
48,044

 
56,951

Total assets
 
$
1,486,060

 
$
1,395,473

(1)
As of June 30, 2019, the Corporate balance consists primarily of cash, prepaid insurance, ROU assets and prepaid expenses.

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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For purposes of this Management’s Discussion and Analysis of Financial Condition and Results of Operation, references to “we,” “our,” “us” or similar terms refer to LGI Homes, Inc. and its subsidiaries.
Business Overview
We are engaged in the design, construction and sale of new homes in the following markets:
West
 
Northwest
 
Central
 
Midwest
 
Florida
 
Southeast
 
Mid-Atlantic
Phoenix, AZ
 
Seattle, WA
 
Houston, TX
 
Minneapolis, MN
 
Tampa, FL
 
Atlanta, GA
 
Washington, D.C.
Tucson, AZ
 
Portland, OR
 
Dallas/Ft. Worth, TX
 
 
 
Orlando, FL
 
Charlotte, NC/SC
 
 
Albuquerque, NM
 
Denver, CO
 
San Antonio, TX
 
 
 
Fort Myers, FL
 
Nashville, TN
 
 
Sacramento, CA
 
Colorado Springs, CO
 
Austin, TX
 
 
 
Jacksonville, FL
 
Raleigh, NC
 
 
Las Vegas, NV
 
 
 
Oklahoma City, OK
 
 
 
Fort Pierce, FL
 
Wilmington, NC
 
 
 
 
 
 
 
 
 
 
 
 
Winston-Salem, NC
 
 
 
 
 
 
 
 
 
 
 
 
Birmingham, AL
 
 
Our management team has been in the residential land development business since the mid-1990s. Since commencing home building operations in 2003, we have constructed and closed over 32,000 homes. During the six months ended June 30, 2019, we had 3,172 home closings, compared to 3,059 home closings during the six months ended June 30, 2018.
We sell homes under the LGI Homes and Terrata Homes brands. Our 93 active communities at June 30, 2019 included four Terrata Homes communities.
Recent Developments
On May 6, 2019, we entered into that certain Fourth 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 and has substantially similar terms and provisions to the 2018 Credit Agreement and provides for a $550.0 million revolving credit facility, which can be increased at the request of the Company by up to $100.0 million, subject to the terms and conditions of the Credit Agreement. See Note 5 - Notes Payable for more information regarding the Credit Agreement.
Key Results
Key financial results as of and for the three months ended June 30, 2019, as compared to the three months ended June 30, 2018, were as follows:
Home sales revenues increased 10.0% to $461.8 million from $419.8 million.
Homes closed increased 7.1% to 1,944 homes from 1,815 homes.
Average sales price of our homes increased 2.7% to $237,567 from $231,321.
Gross margin as a percentage of home sales revenues decreased to 24.1% from 26.1%.
Adjusted gross margin (non-GAAP) as a percentage of home sales revenues decreased to 26.3% from 27.7%.
Net income before income taxes decreased <