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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 March 31, 2022
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 1-35796
_____________________________________________________________________________________________ 

tph-20220331_g1.jpg 
Tri Pointe Homes, Inc.
(Exact Name of Registrant as Specified in Its Charter)
 _____________________________________________________________________________________________ 
Delaware 61-1763235
(State or other Jurisdiction of
Incorporation or Organization)
 (I.R.S. Employer
Identification No.)
_____________________________________________________________________________________________ 
940 Southwood Blvd, Suite 200
Incline Village, Nevada 89451
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (775413-1030
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
____________________________________________________________________________________________________ 
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 shareTPHNew York Stock Exchange
    Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated 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  
103,440,702 shares of the registrant's common stock were issued and outstanding as of April 13, 2022.



EXPLANATORY NOTE
As used in this quarterly report on Form 10-Q, references to “Tri Pointe”, “the Company”, “we”, “us”, or “our” (including in the consolidated financial statements and related notes thereto in this annual report on Form 10-Q) refer to Tri Pointe Homes, Inc., a Delaware corporation, and its consolidated subsidiaries.





TRI POINTE HOMES, INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX
March 31, 2022
 
Page
Number
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.

- 2 -


PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements

TRI POINTE HOMES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
 
March 31, 2022December 31, 2021
(unaudited)
Assets
Cash and cash equivalents$412,703 $681,528 
Receivables116,749 116,996 
Real estate inventories3,288,347 3,054,743 
Investments in unconsolidated entities122,366 118,095 
Goodwill and other intangible assets, net156,603 156,603 
Deferred tax assets, net57,096 57,096 
Other assets160,208 151,162 
Total assets$4,314,072 $4,336,223 
Liabilities  
Accounts payable$76,015 $84,854 
Accrued expenses and other liabilities490,877 466,013 
Loans payable250,000 250,504 
Senior notes, net1,088,050 1,087,219 
Total liabilities1,904,942 1,888,590 
Commitments and contingencies (Note 13)
Equity
Stockholders’ equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized; no
   shares issued and outstanding as of March 31, 2022 and
   December 31, 2021, respectively
  
Common stock, $0.01 par value, 500,000,000 shares authorized;
   104,980,860 and 109,644,474 shares issued and outstanding at
  March 31, 2022 and December 31, 2021, respectively
1,050 1,096 
Additional paid-in capital 91,077 
Retained earnings2,407,184 2,355,448 
Total stockholders’ equity2,408,234 2,447,621 
Noncontrolling interests896 12 
Total equity2,409,130 2,447,633 
Total liabilities and equity$4,314,072 $4,336,223 
 
See accompanying condensed notes to the unaudited consolidated financial statements.

- 3 -


TRI POINTE HOMES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except share and per share amounts)
 
Three Months Ended March 31,
20222021
Homebuilding:
Home sales revenue$725,251 $716,675 
Land and lot sales revenue1,597 1,523 
Other operations revenue644 663 
Total revenues727,492 718,861 
Cost of home sales530,660 545,356 
Cost of land and lot sales475 153 
Other operations expense646 624 
Sales and marketing32,239 40,460 
General and administrative48,456 41,349 
Homebuilding income from operations115,016 90,919 
Equity in loss of unconsolidated entities(55)(13)
Other income, net273 108 
Homebuilding income before income taxes115,234 91,014 
Financial Services:
Revenues8,752 2,105 
Expenses5,308 1,407 
Equity in income of unconsolidated entities46 2,691 
Financial services income before income taxes3,490 3,389 
Income before income taxes118,724 94,403 
Provision for income taxes(30,225)(23,601)
Net income88,499 70,802 
Net income attributable to noncontrolling interests(1,021) 
Net income available to common stockholders$87,478 $70,802 
Earnings per share  
Basic$0.82 $0.59 
Diluted$0.81 $0.59 
Weighted average shares outstanding
Basic107,326,911 119,355,252 
Diluted108,197,485 120,086,573 
 
See accompanying condensed notes to the unaudited consolidated financial statements.

- 4 -


TRI POINTE HOMES, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(unaudited)
(in thousands, except share amounts)
 
Number of
Shares of Common
Stock (Note 1)
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Total
Stockholders’
Equity
Noncontrolling
Interests
Total
Equity
Balance at December 31, 2021109,644,474 $1,096 $91,077 $2,355,448 $2,447,621 $12 $2,447,633 
Net income— — — 87,478 87,478 1,021 88,499 
Shares issued under share-based awards631,622 6 23 — 29 — 29 
Minimum tax withholding paid on behalf of employees for restricted stock units— — (9,076)— (9,076)— (9,076)
Stock-based compensation expense— — 5,272 — 5,272 — 5,272 
Share repurchases(5,295,236)(52)(123,038)— (123,090)— (123,090)
Distributions to noncontrolling interests, net— — — — — (382)(382)
Net effect of consolidations of VIE's— — — — — 245 245 
Reclass the negative APIC to retained earnings— — 35,742 (35,742)— —  
Balance at March 31, 2022104,980,860 $1,050 $ $2,407,184 $2,408,234 $896 $2,409,130 
Number of
Shares of Common
Stock (Note 1)
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Total
Stockholders'
Equity
Noncontrolling
Interests
Total
Equity
Balance at December 31, 2020121,882,778 $1,219 $345,137 $1,886,181 $2,232,537 $12 $2,232,549 
Net income— — — 70,802 70,802 — 70,802 
Shares issued under share-based awards601,025 6 2,811 — 2,817 — 2,817 
Minimum tax withholding paid on behalf of employees for restricted stock units— — (4,622)— (4,622)— (4,622)
Stock-based compensation expense— — 3,656 — 3,656 — 3,656 
Share repurchases(3,659,561)(37)(65,391)— (65,428)— (65,428)
Balance at March 31, 2021118,824,242 $1,188 $281,591 $1,956,983 $2,239,762 $12 $2,239,774 

See accompanying condensed notes to the unaudited consolidated financial statements.



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TRI POINTE HOMES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
 
 Three Months Ended March 31,
 20222021
Cash flows from operating activities:  
Net income$88,499 $70,802 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:  
Depreciation and amortization5,285 7,130 
Equity in loss (income) of unconsolidated entities, net9 (2,677)
Deferred income taxes, net 3,136 
Amortization of stock-based compensation5,272 3,656 
Charges for impairments and lot option abandonments766 213 
Returns on investments in unconsolidated entities, net2,253 3,183 
Changes in assets and liabilities:  
Real estate inventories(233,238)(104,701)
Receivables247 (17,814)
Other assets(1,622)5,967 
Accounts payable(8,839)39,213 
Accrued expenses and other liabilities25,254 22,096 
Net cash (used in) provided by operating activities(116,114)30,204 
Cash flows from investing activities:
Purchases of property and equipment(12,547)(5,684)
(Investments in) returns of unconsolidated entities, net(7,141)6,083 
Net cash (used in) provided by investing activities(19,688)399 
Cash flows from financing activities:
Repayment of debt(504) 
Distributions to noncontrolling interests(382) 
Proceeds from issuance of common stock under share-based awards29 2,817 
Minimum tax withholding paid on behalf of employees for share-based awards(9,076)(4,622)
Share repurchases(123,090)(65,428)
Net cash used in financing activities(133,023)(67,233)
Net decrease in cash and cash equivalents(268,825)(36,630)
Cash and cash equivalents–beginning of period681,528 621,295 
Cash and cash equivalents–end of period$412,703 $584,665 
 
See accompanying condensed notes to the unaudited consolidated financial statements.

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TRI POINTE HOMES, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 

1.    Organization, Basis of Presentation and Summary of Significant Accounting Policies

Organization
Tri Pointe is engaged in the design, construction and sale of innovative single-family attached and detached homes across ten states, including Arizona, California, Colorado, Maryland, Nevada, North Carolina, South Carolina, Texas, Virginia and Washington, and the District of Columbia.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They should be read in conjunction with our consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021. In the opinion of management, all adjustments consisting of normal recurring adjustments, necessary for a fair presentation with respect to interim financial statements, have been included. The results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year ending December 31, 2022 due to seasonal variations and other factors, such as the effects of COVID-19 and its potential impacts on our future results.
The consolidated financial statements include the accounts of Tri Pointe Homes and its wholly owned subsidiaries, as well as other entities in which Tri Pointe Homes has a controlling interest and variable interest entities (“VIEs”) in which Tri Pointe Homes is the primary beneficiary. The noncontrolling interests as of March 31, 2022 and December 31, 2021 represent the outside owners’ interests in the Company’s consolidated entities. All significant intercompany accounts have been eliminated upon consolidation.
Unless the context otherwise requires, the terms “Tri Pointe”, “the Company”, “we”, “us”, and “our” used herein refer to Tri Pointe Homes, Inc., a Delaware corporation, and its consolidated subsidiaries.
Use of Estimates
The preparation of these financial statements requires our management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosures of contingent 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 our estimates.
Revenue Recognition
We recognize revenue in accordance with Accounting Standards Topic 606 (“ASC 606”), Revenue from Contracts with Customers. Under ASC 606, we apply the following steps to determine the timing and amount of revenue to recognize: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation.
Home sales revenue
We generate the majority of our total revenues from home sales, which consists of our core business operation of building and delivering completed homes to homebuyers. Home sales revenue and related profit is generally recognized when title to and possession of the home are transferred to the homebuyer at the home closing date. Our performance obligation to deliver the agreed-upon home is generally satisfied in less than one year from the original contract date. Included in home sales revenue are forfeited deposits, which occur when homebuyers cancel home purchase contracts that include a nonrefundable deposit. Both revenue from forfeited deposits and deferred revenue resulting from uncompleted performance obligations existing at the time we deliver new homes to our homebuyers are immaterial.
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Land and lot sales revenue
Historically, we have generated land and lot sales revenue from a small number of transactions, although in some periods we have realized a significant amount of revenue and gross margin. We do not expect our future land and lot sales revenue to be material, but we still consider these sales to be an ordinary part of our business, thus meeting the definition of contracts with customers. Similar to our home sales, revenue from land and lot sales is typically fully recognized when the land and lot sales transactions are consummated, at which time no further performance obligations are left to be satisfied. Some of our historical land and lot sales have included future profit participation rights. We will recognize future land and lot sales revenue in the periods in which all closing conditions are met, subject to the constraint on variable consideration related to profit participation rights, if such rights exist in the sales contract.
Other operations revenue
The majority of our homebuilding other operations revenue relates to a ground lease included in our West segment. We are responsible for making lease payments to the landowner, and we collect sublease payments from the buyers of the buildings. This ground lease is accounted for in accordance with ASC Topic 842, Leases. We do not recognize a material profit on this ground lease.
Financial services revenues
Tri Pointe Solutions is a reportable segment and is comprised of our Tri Pointe Connect mortgage financing operations, Tri Pointe Assurance title and escrow services operations, and Tri Pointe Advantage property and casualty insurance agency operations.
Mortgage financing operations
Tri Pointe Connect was formed as a joint venture with an established mortgage lender. The joint venture acts as a preferred mortgage loan broker to our homebuyers in all of the markets in which we operate, generating income from fees paid by third party lenders for the successful funding and closing of loans for homebuyers that originate through Tri Pointe Connect. From inception and through the fiscal year ended December 31, 2021, Tri Pointe Connect was accounted for under the equity method of accounting where we recorded a percentage of income earned by Tri Pointe Connect based on our ownership percentage in this joint venture. Under the equity method of accounting, Tri Pointe Connect activity appeared as equity in income of unconsolidated entities under the Financial Services section of our consolidated statements of operations. Beginning in the fiscal year ended December 31, 2022, Tri Pointe Connect is fully consolidated under the Financial Services section of our consolidated statements of operations, with the noncontrolling interest recorded on the consolidated statements of operations as net income attributable to noncontrolling interests.
Title and escrow services operations
Tri Pointe Assurance provides title examinations for our homebuyers in the Carolinas and Colorado and both title examinations and escrow services for our homebuyers in Arizona, Texas, Maryland, Nevada and Virginia. Tri Pointe Assurance is a wholly owned subsidiary of Tri Pointe and acts as a title agency for First American Title Insurance Company. Revenue from our title and escrow services operations is fully recognized at the time of the consummation of the home sales transaction, at which time no further performance obligations are left to be satisfied. Tri Pointe Assurance revenue is included in the Financial Services section of our consolidated statements of operations.
Property and casualty insurance agency operations
Tri Pointe Advantage is a wholly owned subsidiary of Tri Pointe and provides property and casualty insurance agency services that help facilitate the closing process in all of the markets in which we operate. The total consideration for these services, including renewal options, is estimated upon the issuance of the initial insurance policy, subject to constraint. Tri Pointe Advantage revenue is included in the Financial Services section of our consolidated statements of operations.
Recently Issued Accounting Standards Not Yet Adopted
No recent accounting pronouncements or changes in accounting pronouncements have been issued or adopted since those discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 that are of material significance, or have potential material significance, to the Company.


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2.    Segment Information
We operate two principal businesses: homebuilding and financial services.
Effective January 15, 2021, we consolidated our six regional homebuilding brands into one unified name, Tri Pointe Homes, under which we continue to acquire and develop land and construct and sell single-family detached and attached homes. In accordance with ASC Topic 280, Segment Reporting, in determining the most appropriate reportable segments, we considered similar economic and other characteristics, including product types, average selling prices, gross profits, production processes, suppliers, subcontractors, regulatory environments, land acquisition results, and underlying demand and supply. Based upon these factors and in consideration of the geographical layout of our homebuilding markets, we have identified three homebuilding reporting segments, and as a result of such change, beginning in the quarter ended March 31, 2021, our homebuilding segments are reported under the following hierarchy:
West region: Arizona, California, Nevada and Washington
Central region: Colorado and Texas
East region: District of Columbia, Maryland, North Carolina, South Carolina and Virginia
Our Tri Pointe Solutions financial services operation is a reportable segment and is comprised of our Tri Pointe Connect mortgage financing operations, our Tri Pointe Assurance title and escrow services operations, and our Tri Pointe Advantage property and casualty insurance agency operations. For further details, see Note 1, Organization, Basis of Presentation and Summary of Significant Accounting Policies.
Corporate is a non-operating segment that develops and implements company-wide strategic initiatives and provides support to our homebuilding reporting segments by centralizing certain administrative functions, such as marketing, legal, accounting, treasury, insurance, internal audit and risk management, information technology and human resources, to benefit from economies of scale. Our Corporate non-operating segment also includes general and administrative expenses related to operating our corporate headquarters. All of the expenses incurred by Corporate are allocated to each of the homebuilding reporting segments based on their respective percentage of revenues.
The reportable segments follow the same accounting policies used for our consolidated financial statements, as described in Note 1, Organization, Basis of Presentation and Summary of Significant Accounting Policies. Operational results of each reportable segment are not necessarily indicative of the results that would have been achieved had the reportable segment been an independent, stand-alone entity during the periods presented.

Total revenues and income before income taxes for each of our reportable segments were as follows (in thousands):
Three Months Ended March 31,
20222021
Revenues
West $530,496 $540,046 
Central137,097 121,118 
East59,899 57,697 
Total homebuilding revenues727,492 718,861 
Financial services8,752 2,105 
Total$736,244 $720,966 
Income before taxes
West$100,557 $79,577 
Central12,951 9,697 
East1,726 1,740 
Total homebuilding income before income taxes115,234 91,014 
Financial services3,490 3,389 
Total$118,724 $94,403 
 
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Total real estate inventories and total assets for each of our reportable segments, as of the date indicated, were as follows (in thousands):
March 31, 2022December 31, 2021
Real estate inventories
West$2,356,701 $2,242,314 
Central601,577 543,097 
East330,069 269,332 
Total$3,288,347 $3,054,743 
Total assets(1)
West$2,631,573 $2,505,237 
Central724,994 674,862 
East382,985 328,014 
Corporate519,834 781,265 
Total homebuilding assets4,259,386 4,289,378 
Financial services54,686 46,845 
Total$4,314,072 $4,336,223 
__________
(1)    Total assets as of March 31, 2022 and December 31, 2021 includes $139.3 million of goodwill, with $125.4 million included in the West segment, $8.3 million included in the Central segment and $5.6 million included in the East segment. Total Corporate assets as of March 31, 2022 and December 31, 2021 includes our Tri Pointe Homes trade name. For further details on goodwill and our intangible assets, see Note 8, Goodwill and Other Intangible Assets.


3.    Earnings Per Share
The following table sets forth the components used in the computation of basic and diluted earnings per share (in thousands, except share and per share amounts):
 Three Months Ended March 31,
 20222021
Numerator:  
Net income available to common stockholders$87,478 $70,802 
Denominator:  
Basic weighted-average shares outstanding107,326,911 119,355,252 
Effect of dilutive shares: 
Stock options and unvested restricted stock units870,574 731,321 
Diluted weighted-average shares outstanding108,197,485 120,086,573 
Earnings per share  
Basic$0.82 $0.59 
Diluted$0.81 $0.59 
Antidilutive stock options and unvested restricted stock units not included in diluted earnings per share2,405,692 2,397,962 
  

4.    Receivables
Receivables consisted of the following (in thousands):
March 31, 2022December 31, 2021
Escrow proceeds and other accounts receivable, net$52,991 $53,096 
Warranty insurance receivable (Note 13)63,758 63,900 
Total receivables$116,749 $116,996 
- 10 -



Receivables are evaluated for collectability and allowances for potential losses are established or maintained on applicable receivables based on an expected credit loss approach. Receivables were net of allowances for doubtful accounts of $472,000 as of both March 31, 2022 and December 31, 2021.
 

5.    Real Estate Inventories
Real estate inventories consisted of the following (in thousands):
March 31, 2022December 31, 2021
Real estate inventories owned:
Homes completed or under construction$1,491,849 $1,222,468 
Land under development1,185,105 1,187,485 
Land held for future development139,333 200,362 
Model homes218,227 202,693 
Total real estate inventories owned3,034,514 2,813,008 
Real estate inventories not owned:
Land purchase and land option deposits253,833 241,735 
Total real estate inventories not owned253,833 241,735 
Total real estate inventories$3,288,347 $3,054,743 
 
Homes completed or under construction is comprised of costs associated with homes in various stages of construction and includes direct construction and related land acquisition and land development costs. Land under development primarily consists of land acquisition and land development costs, which include capitalized interest and real estate taxes, associated with land undergoing improvement activity. Land held for future development principally reflects land acquisition and land development costs related to land where development activity has not yet begun or has been suspended, but is expected to occur in the future. The decrease in land held for future development as of March 31, 2022 compared to December 31, 2021 is attributable to a project located in San Jose, California in our West segment that was transferred to land under development.
Real estate inventories not owned represents deposits related to land purchase and land and lot option agreements, as well as consolidated inventory held by variable interest entities. For further details, see Note 7, Variable Interest Entities.
Interest incurred, capitalized and expensed were as follows (in thousands):
 Three Months Ended March 31,
 20222021
Interest incurred$28,553 $21,179 
Interest capitalized(28,553)(21,179)
Interest expensed$ $ 
Capitalized interest in beginning inventory$173,563 $182,228 
Interest capitalized as a cost of inventory28,553 21,179 
Interest previously capitalized as a cost of
inventory, included in cost of sales
(17,065)(20,678)
Capitalized interest in ending inventory$185,051 $182,729 
 
Interest is capitalized to real estate inventory during development and other qualifying activities. During all periods presented, we capitalized all interest incurred to real estate inventory in accordance with ASC Topic 835, Interest, as our qualified assets exceeded our debt. Interest that is capitalized to real estate inventory is included in cost of home sales or cost of land and lot sales as related units or lots are delivered. Interest that is expensed as incurred is included in other (expense) income, net.
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Real Estate Inventory Impairments and Land Option Abandonments
Real estate inventory impairments and land and lot option abandonments and pre-acquisition charges consisted of the following (in thousands):
 Three Months Ended March 31,
 20222021
Real estate inventory impairments$ $ 
Land and lot option abandonments and pre-acquisition charges766 213 
Total$766 $213 
 
Impairments of real estate inventory relate primarily to projects or communities that include homes completed or under construction. Within a project or community, there may be individual homes or parcels of land that are currently held for sale. Impairment charges recognized as a result of adjusting individual held-for-sale assets within a community to estimated fair value less cost to sell are also included in the total impairment charges.
In addition to owning land and residential lots, we also have option agreements to purchase land and lots at a future date. We have option deposits and capitalized pre-acquisition costs associated with the optioned land and lots. When the economics of a project no longer support acquisition of the land or lots under option, we may elect not to move forward with the acquisition. Option deposits and capitalized pre-acquisition costs associated with the assets under option may be forfeited at that time. 
Real estate inventory impairments and land option abandonments are recorded in cost of home sales and cost of land and lot sales on the consolidated statements of operations.
  

6.    Investments in Unconsolidated Entities

As of March 31, 2022, we held equity investments in twelve active homebuilding partnerships or limited liability companies. Our participation in these entities may be as a developer, a builder, or an investment partner. Our ownership percentage varies from 7% to 50%, depending on the investment, with no controlling interest held in any of these investments. During the three months ended March 31, 2022, a reconsideration event under ASC 810 occurred for our Tri Pointe Connect joint venture, which required us to reassess whether the joint venture is a variable interest entity (“VIE”) and, if so, whether the Company is the primary beneficiary. This mortgage financing joint venture was accounted for as an equity-method investment as of December 31, 2021. Based on the reassessment performed during the three months ended March 31, 2022, this joint venture was deemed to be a VIE and the Company was identified as the primary beneficiary of the VIE. For further details, see Note 7, Variable Interest Entities.
Unconsolidated Financial Information
Aggregated assets, liabilities and operating results of the entities we account for as equity-method investments are provided below. Because our ownership interest in these entities varies, a direct relationship does not exist between the information presented below and the amounts that are reflected on our consolidated balance sheets as our investments in unconsolidated entities or on our consolidated statements of operations as equity in income of unconsolidated entities.
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Assets and liabilities of unconsolidated entities (in thousands):
 
March 31, 2022December 31, 2021
Assets
Cash$38,822 $35,966 
Receivables10,191 8,359 
Real estate inventories409,185 359,324 
Other assets2,756 534 
Total assets$460,954 $404,183 
Liabilities and equity
Accounts payable and other liabilities$110,242 $73,675 
Company’s equity122,366 118,095 
Outside interests’ equity228,346 212,413 
Total liabilities and equity$460,954 $404,183 
 
Results of operations from unconsolidated entities (in thousands):
 Three Months Ended March 31,
 20222021
Net sales$5,323 $7,809 
Other operating expense(5,444)(3,848)
Net income $(121)$3,961 
Company’s equity in income of unconsolidated entities$(9)$2,678 
  

7.    Variable Interest Entities
Land and Lot Option Agreements
In the ordinary course of business, we enter into land and lot option agreements in order to procure land and residential lots for future development and the construction of homes. The use of such land and lot option agreements generally allows us to reduce the risks associated with direct land ownership and development, and reduces our capital and financial commitments. Pursuant to these land and lot option agreements, we generally provide a deposit to the seller as consideration for the right to purchase land at different times in the future, usually at predetermined prices. These deposits are recorded as land purchase and land option deposits under real estate inventories not owned on the accompanying consolidated balance sheets.
We analyze each of our land and lot option agreements and other similar contracts under the provisions of ASC 810, Consolidation to determine whether the land seller is a VIE and, if so, whether we are the primary beneficiary. Although we do not have legal title to the underlying land, if we are determined to be the primary beneficiary of the VIE, we will consolidate the VIE in our financial statements and reflect its assets as real estate inventory not owned included in our real estate inventories, its liabilities as debt (nonrecourse) held by VIEs in accrued expenses and other liabilities and the net equity of the VIE owners as noncontrolling interests on our consolidated balance sheets. In determining whether we are the primary beneficiary, we consider, among other things, whether we have the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance. Such activities would include, among other things, determining or limiting the scope or purpose of the VIE, selling or transferring property owned or controlled by the VIE, or arranging financing for the VIE.
Creditors of the entities with which we have land and lot option agreements have no recourse against us. The maximum exposure to loss under our land and lot option agreements is generally limited to non-refundable option deposits and any capitalized pre-acquisition costs. In some cases, we have also contracted to complete development work at a fixed cost on behalf of the landowner and budget shortfalls and savings will be borne by us. Additionally, we have entered into land banking arrangements which require us to complete development work even if we terminate the option to procure land or lots.
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The following provides a summary of our interests in land and lot option agreements (in thousands):
 March 31, 2022December 31, 2021
DepositsRemaining
Purchase
Price
Consolidated
Inventory
Held by VIEs
DepositsRemaining
Purchase
Price
Consolidated
Inventory
Held by VIEs
Unconsolidated VIEs$225,172 $1,402,974 N/A$211,835 $1,507,304 N/A
Other land option agreements28,661 225,361 N/A29,900 319,646 N/A
Total$253,833 $1,628,335 $ $241,735 $1,826,950 $ 
 
Unconsolidated VIEs represent land option agreements that were not consolidated because we were not the primary beneficiary. Other land option agreements were not with VIEs.
In addition to the deposits presented in the table above, our exposure to loss related to our land and lot option contracts consisted of capitalized pre-acquisition costs of $14.1 million and $17.9 million as of March 31, 2022 and December 31, 2021, respectively. These pre-acquisition costs are included in real estate inventories as land under development on our consolidated balance sheets.
Tri Pointe Connect Joint Venture
During the three months ended March 31, 2022, a reconsideration event under ASC 810 occurred for our Tri Pointe Connect joint venture that gave us the ability to direct the activities of the joint venture that most significantly affect the entity’s economic performance. Based on our reassessment, we concluded that the mortgage financing joint venture is a VIE and we are the primary beneficiary based on our controlling financial interest. As a result, beginning in January 2022, the joint venture is accounted for as a consolidated VIE. As of March 31, 2022, the accompanying consolidated balance sheets include the assets, liabilities and noncontrolling interests of this VIE. As of March, 31, 2022, the carrying value of the VIE’s assets was $6.0 million, which was primarily included in other assets, $5.2 million of liabilities was included in accrued expenses and other liabilities and $0.8 million was included in noncontrolling interests in the accompanying consolidated balance sheets.
  

8.    Goodwill and Other Intangible Assets
As of March 31, 2022 and December 31, 2021, $139.3 million of goodwill is included in goodwill and other intangible assets, net on each of the consolidated balance sheets, which was recorded in connection with our merger with Weyerhaeuser Real Estate Company (“WRECO”) in 2014.
We have one intangible asset as of March 31, 2022, comprised of a Tri Pointe Homes trade name resulting from the acquisition of WRECO in 2014, which has an indefinite useful life.
Goodwill and other intangible assets consisted of the following (in thousands):
March 31, 2022December 31, 2021
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Goodwill$139,304 $— $139,304 $139,304 $— $139,304 
Trade names27,979 (10,680)17,299 27,979 (10,680)17,299 
Total$167,283 $(10,680)$156,603 $167,283 $(10,680)$156,603 
 
In October 2020, in conjunction with the announcement of our move to a single brand, Tri Pointe Homes, we modified the useful life of the former Maracay trade name which expired in June 2021. The intangible asset related to the Maracay trade name was fully amortized during 2021. Amortization expense related to this intangible asset was $963,000 for the three-month period ended March 31, 2021. Amortization of this intangible was charged to sales and marketing expense. Our $17.3 million indefinite life intangible asset related to the Tri Pointe Homes trade name is not amortizing. All trade names and goodwill are evaluated for impairment on an annual basis or more frequently if indicators of impairment exist.


9.    Other Assets
Other assets consisted of the following (in thousands):
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March 31, 2022December 31, 2021
Prepaid expenses$15,135 $11,797 
Refundable fees and other deposits5,741 6,611 
Development rights, held for future use or sale1,192 1,192 
Deferred loan costs—loans payable5,111 5,412 
Operating properties and equipment, net58,751 51,489 
Lease right-of-use assets73,337 73,727 
Other941 934 
Total$160,208 $151,162 


10.    Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consisted of the following (in thousands):
March 31, 2022December 31, 2021
Accrued payroll and related costs$21,344 $59,419 
Warranty reserves (Note 13)
103,034 103,976 
Estimated cost for completion of real estate inventories102,589 107,702 
Customer deposits73,547 55,156 
Income tax liability to Weyerhaeuser199 199 
Accrued income taxes payable65,123 34,894 
Accrued interest22,926 6,189 
Other tax liability1,435 3,306 
Lease liabilities77,136 77,264 
Other23,544 17,908 
Total$490,877 $466,013 


11.    Senior Notes and Loans Payable
Senior Notes
The Company’s outstanding senior notes (together, the “Senior Notes”) consisted of the following (in thousands):
March 31, 2022December 31, 2021
5.875% Senior Notes due June 15, 2024
$450,000 $450,000 
5.250% Senior Notes due June 1, 2027
300,000 300,000 
5.700% Senior Notes due June 15, 2028
350,000 350,000 
Discount and deferred loan costs(11,950)(12,781)
Total$1,088,050 $1,087,219 
 
In June 2020, Tri Pointe issued $350 million aggregate principal amount of 5.700% Senior Notes due 2028 (the “2028 Notes”) at 100.00% of their aggregate principal amount. Net proceeds of this issuance were $345.2 million, after debt issuance costs and discounts. The 2028 Notes mature on June 15, 2028 and interest is paid semiannually in arrears on June 15 and December 15 of each year until maturity.
In June 2017, Tri Pointe issued $300 million aggregate principal amount of 5.250% Senior Notes due 2027 (the “2027 Notes”) at 100.00% of their aggregate principal amount. Net proceeds of this issuance were $296.3 million, after debt issuance costs and discounts. The 2027 Notes mature on June 1, 2027 and interest is paid semiannually in arrears on June 1 and December 1 of each year until maturity.
Tri Pointe and its wholly owned subsidiary, Tri Pointe Homes Holdings, Inc., are co-issuers of the $450 million aggregate principal amount 5.875% Senior Notes due 2024 (the “2024 Notes”). The 2024 Notes were issued at 98.15% of their
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aggregate principal amount. The net proceeds from the offering of the 2024 Notes was $429.0 million, after debt issuance costs and discounts. The 2024 Notes mature on June 15, 2024, with interest payable semiannually in arrears on June 15 and December 15 of each year until maturity.
As of March 31, 2022, there were $9.6 million of capitalized debt financing costs, included in senior notes, net on our consolidated balance sheet, related to the Senior Notes that will amortize over the lives of the Senior Notes. Accrued interest related to the Senior Notes was $18.8 million and $3.2 million as of March 31, 2022 and December 31, 2021, respectively.
Loans Payable
The Company’s outstanding loans payable consisted of the following (in thousands):
March 31, 2022December 31, 2021
Term loan facility$250,000 $250,000 
Seller financed loans 504 
Total$250,000 $250,504 
On June 10, 2021, we entered into a Second Modification Agreement (the “Modification”) to our Second Amended and Restated Credit Agreement dated as of March 29, 2019. The Modification, among other things, (i) increases the maximum amount of the revolving credit facility (the “Revolving Facility”) under the Credit Agreement from $600.0 million to $650.0 million and (ii) extends the maturity date of both the Revolving Facility and term loan facility (the “Term Facility”) under the Credit Agreement to June 10, 2026; provided that the maturity date for $45.0 million of commitments under the Revolving Facility and $30.0 million of loans under the Term Facility, respectively, were not extended and remain scheduled to mature on March 29, 2023. We may increase the Credit Facility to not more than $1 billion in the aggregate, at our request, upon satisfaction of specified conditions. The Revolving Facility contains a sublimit of $100 million for letters of credit. We may borrow under the Revolving Facility in the ordinary course of business to repay senior notes and fund our operations, including our land acquisition, land development and homebuilding activities. Borrowings under the Revolving Facility will be governed by, among other things, a borrowing base. Interest rates on borrowings under the Revolving Facility will be based on either a daily Eurocurrency base rate or a Eurocurrency rate, in either case, plus a spread ranging from 1.25% to 1.90%, depending on the Company’s leverage ratio. Interest rates on borrowings under the Term Facility will be based on either a daily Eurocurrency base rate or a Eurocurrency rate, in either case, plus a spread ranging from 1.10% to 1.85%, depending on the Company’s leverage ratio.
As of March 31, 2022, we had no outstanding debt under the Revolving Facility and there was $568.0 million of availability after considering the borrowing base provisions and outstanding letters of credit. As of March 31, 2022, we had $250 million outstanding debt under the Term Facility with an interest rate of 1.33%. As of March 31, 2022, there were $5.1 million of capitalized debt financing costs, included in other assets on our consolidated balance sheet, related to the Credit Facility that will amortize over the remaining term of the Credit Facility. Accrued interest, including loan commitment fees, related to the Credit Facility was $286,000 and $570,000 as of March 31, 2022 and December 31, 2021, respectively.
At March 31, 2022 and December 31, 2021, we had outstanding letters of credit of $82.0 million and $48.9 million, respectively. These letters of credit were issued to secure various financial obligations. We believe it is not probable that any outstanding letters of credit will be drawn upon.
Interest Incurred
During the three months ended March 31, 2022 and 2021, the Company incurred interest of $28.6 million and $21.2 million, respectively, related to all debt during the period. Included in interest incurred are amortization of deferred financing and Senior Note discount costs of $1.1 million for both the three months ended March 31, 2022 and 2021, respectively. Accrued interest related to all outstanding debt at March 31, 2022 and December 31, 2021 was $22.9 million and $6.2 million, respectively. 
Covenant Requirements
The Senior Notes contain covenants that restrict our ability to, among other things, create liens or other encumbrances, enter into sale and leaseback transactions, or merge or sell all or substantially all of our assets. These limitations are subject to a number of qualifications and exceptions.
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Under the Credit Facility, the Company is required to comply with certain financial covenants, including those relating to consolidated tangible net worth, leverage, liquidity or interest coverage, and a spec unit inventory test. The Credit Facility also requires that at least 97.0% of consolidated tangible net worth must be attributable to the Company and its guarantor subsidiaries, subject to certain grace periods.
The Company was in compliance with all applicable financial covenants as of March 31, 2022 and December 31, 2021.

12.    Fair Value Disclosures
Fair Value Measurements
ASC Topic 820, Fair Value Measurements and Disclosures, defines “fair value” as the price that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at measurement date and requires assets and liabilities carried at fair value to be classified and disclosed in the following three categories:
Level 1—Quoted prices for identical instruments in active markets
Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are inactive; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets at measurement date
Level 3—Valuations derived from techniques where one or more significant inputs or significant value drivers are unobservable in active markets at measurement date
Fair Value of Financial Instruments
A summary of assets and liabilities at March 31, 2022 and December 31, 2021, related to our financial instruments, measured at fair value on a recurring basis, is set forth below (in thousands):
March 31, 2022December 31, 2021
HierarchyBook ValueFair ValueBook ValueFair Value
Senior Notes(1)
Level 2$1,097,671 $1,110,625 $1,097,428 $1,199,825 
Term loan(2)
Level 2$250,000 $250,000 $250,000 $250,000 
Seller financed loans(3)
Level 2$ $ $504 $504 
 __________
(1)The book value of the Senior Notes is net of discounts, excluding deferred loan costs of $9.6 million and $10.2 million as of March 31, 2022 and December 31, 2021, respectively. The estimated fair value of the Senior Notes at March 31, 2022 and December 31, 2021 is based on quoted market prices.
(2)The estimated fair value of the Term Loan Facility as of March 31, 2022 and December 31, 2021 approximated book value due to the variable interest rate terms of this loan.
(3)The estimated fair value of our seller financed loan as of December 31, 2021 approximated book value due to the short term nature of these loans.

At March 31, 2022 and December 31, 2021, the carrying value of cash and cash equivalents and receivables approximated fair value due to their short-term nature and variable interest rate terms.
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Fair Value of Nonfinancial Assets
Nonfinancial assets include items such as real estate inventories and long-lived assets that are measured at fair value on a nonrecurring basis when events and circumstances indicating the carrying value is not recoverable. The following table presents impairment charges and the remaining net fair value for nonfinancial assets that were measured during the periods presented (in thousands):
Three Months Ended March 31, 2022Year Ended December 31, 2021
HierarchyImpairment
Charge
Fair Value
Net of
Impairment
Impairment
Charge
Fair Value
Net of
Impairment
Real estate inventories(1)
Level 3$ $ $19,600 $27,300 
 __________
(1)Fair value of real estate inventories, net of impairment charges represents only those assets whose carrying values were adjusted to fair value in the respective periods presented,

13.    Commitments and Contingencies
Legal Matters
Lawsuits, claims and proceedings have been and may be instituted or asserted against us in the normal course of business, including actions brought on behalf of various classes of claimants. We are also subject to local, state and federal laws and regulations related to land development activities, house construction standards, sales practices, employment practices, environmental protection and financial services. As a result, we are subject to periodic examinations or inquiry by agencies administering these laws and regulations.
We record a reserve for potential legal claims and regulatory matters when they are probable of occurring and a potential loss is reasonably estimable. We accrue for these matters based on facts and circumstances specific to each matter and revise these estimates when necessary. In view of the inherent difficulty of predicting outcomes of legal claims and related contingencies, we generally cannot predict their ultimate resolution, related timing or eventual loss. Accordingly, it is possible that the ultimate outcome of any matter, if in excess of a related accrual or if no accrual was made, could be material to our financial statements. For matters as to which the Company believes a loss is probable and reasonably estimable, we had zero legal reserves as of March 31, 2022 and December 31, 2021, respectively.
Warranty
Warranty reserves are accrued as home deliveries occur. Our warranty reserves on homes delivered will vary based on product type and geographic area and also depending on state and local laws. The warranty reserve is included in accrued expenses and other liabilities on our consolidated balance sheets and represents expected future costs based on our historical experience over previous years. Estimated warranty costs are charged to cost of home sales in the period in which the related home sales revenue is recognized.
We maintain general liability insurance designed to protect us against a portion of our risk of loss from warranty and construction defect-related claims. We also generally require our subcontractors and design professionals to indemnify us for liabilities arising from their work, subject to various limitations. However, such indemnity is significantly limited with respect to certain subcontractors that are added to our general liability insurance policy. 
Our warranty reserve and related estimated insurance recoveries are based on actuarial analysis that uses our historical claim and expense data, as well as industry data to estimate these overall costs and related recoveries. Key assumptions used in developing these estimates include claim frequencies, severities and resolution patterns, which can occur over an extended period of time. Our warranty reserve may also include an estimate of future fit and finish warranty claims to the extent not contemplated in the actuarial analysis. These estimates are subject to variability due to the length of time between the delivery of a home to a homebuyer and when a warranty or construction defect claim is made, and the ultimate resolution of such claim; uncertainties regarding such claims relative to our markets and the types of product we build; and legal or regulatory actions and/or interpretations, among other factors. Due to the degree of judgment involved and the potential for variability in these underlying assumptions, our actual future costs could differ from those estimated. There can be no assurance that the terms and limitations of the limited warranty will be effective against claims made by homebuyers, that we will be able to renew our insurance coverage or renew it at reasonable rates, that we will not be liable for damages, cost of repairs, and/or the expense of litigation surrounding possible construction defects, soil subsidence or building related claims or that claims will not arise out
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of uninsurable events or circumstances not covered by insurance and not subject to effective indemnification agreements with certain subcontractors.
We also record expected recoveries from insurance carriers based on actual insurance claims made and actuarially determined amounts that depend on various factors, including the above-described reserve estimates, our insurance policy coverage limits for the applicable policy years and historical recovery rates. Because of the inherent uncertainty and variability in these assumptions, our actual insurance recoveries could differ significantly from amounts currently estimated. Outstanding warranty insurance receivables were $63.8 million and $63.9 million as of March 31, 2022 and December 31, 2021, respectively. Warranty insurance receivables are recorded in receivables on the accompanying consolidated balance sheets.
Warranty reserve activity consisted of the following (in thousands):
 
 Three Months Ended March 31,
 20222021
Warranty reserves, beginning of period$103,976 $94,475 
Warranty reserves accrued4,721 6,514 
Warranty expenditures(5,663)(6,196)
Warranty reserves, end of period$103,034 $94,793 
 
Performance Bonds
We obtain surety bonds in the normal course of business to ensure completion of certain infrastructure improvements of our projects. The beneficiaries of the bonds are various municipalities. As of March 31, 2022 and December 31, 2021, the Company had outstanding surety bonds totaling $642.4 million and $693.2 million, respectively. As of March 31, 2022 and December 31, 2021, our estimated cost to complete obligations related to these surety bonds was $424.5 million and $497.5 million, respectively.
Lease Obligations
Under ASC 842 we recognize a right-of-use lease asset and a lease liability for contracts deemed to contain a lease at the inception of the contract. Our lease population is fully comprised of operating leases, which are now recorded at the net present value of future lease obligations existing at each balance sheet date. At the inception of a lease, or if a lease is subsequently modified, we determine whether the lease is an operating or financing lease. Key estimates involved with ASC 842 include the discount rate used to measure our future lease obligations and the lease term, where considerations include renewal options and intent to renew. Lease right-of-use assets are included in other assets and lease liabilities are included in accrued expenses and other liabilities on our consolidated balance sheet.
Operating Leases
We lease certain property and equipment under non-cancelable operating leases. Office leases are for terms of up to ten years and generally provide renewal options. In most cases, we expect that, in the normal course of business, leases that expire will be renewed or replaced by other leases. Equipment leases are typically for terms of three to four years.
Ground Leases
In 1987, we obtained two 55-year ground leases of commercial property that provided for three renewal options of ten years each and one 45-year renewal option. We exercised the three 10-year extensions on one of these ground leases to extend the lease through 2071. The commercial buildings on these properties have been sold and the ground leases have been sublet to the buyers.
For one of these leases, we are responsible for making lease payments to the landowner, and we collect sublease payments from the buyers of the buildings. This ground lease has been subleased through 2041 to the buyers of the commercial buildings. For the second lease, the buyers of the buildings are responsible for making lease payments directly to the landowner, however, we have guaranteed the performance of the buyers/lessees. See below for additional information on leases (dollars in thousands):
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Three Months Ended March 31, 2022Three Months Ended March 31, 2021
Lease Cost
Operating lease cost (included in SG&A expense)$2,499 $2,481 
Ground lease cost (included in other operations expense)644 624 
Sublease income, operating leases  
Sublease income, ground leases (included in other operations revenue)(635)(633)
Net lease cost$2,508 $2,472 
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating lease cash flows (included in operating cash flows)$3,381 $2,788 
Ground lease cash flows (included in operating cash flows)$663 $635 
Right-of-use assets obtained in exchange for new operating lease liabilities$83 $3,006 
March 31, 2022December 31, 2021
Weighted-average discount rate:
Operating leases4.6 %4.6 %
Ground leases10.2 %10.2 %
Weighted-average remaining lease term (in years):
Operating leases7.37.1
Ground leases46.046.1
The future minimum lease payments under our operating leases are as follows (in thousands):
Property, Equipment and Other Leases
Ground Leases (1)
Remaining in 2022$6,203 $2,428 
20239,079 3,237 
20247,680 3,237 
20257,092 3,237 
20266,395