Note 7 - Inventories

9 Months Ended

Sep. 30, 2014

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

7.             Inventories

The following table sets forth, by reportable segment, information relating to our homebuilding inventories:

	September 30,		December 31,
	2014		2013
	(Dollars in thousands)
Housing Completed or Under Construction:
West	$	411,524	$	270,778
Mountain		238,187		194,101
East		186,809		171,821
Subtotal		836,520		636,700
Land and Land Under Development:
West		459,218		459,512
Mountain		261,493		211,526
East		133,966		103,923
Subtotal		854,677		774,961
Total Inventories	$	1,691,197	$	1,411,661

Our inventories are primarily associated with communities where we intend to construct and sell homes on the land, including models and unsold started homes. Costs capitalized to land and land under development primarily include: (1) land costs; (2) land development costs; (3) entitlement costs; (4) capitalized interest; (5) engineering fees; and (6) title insurance, real property taxes and closing costs directly related to the purchase of the land parcel. Components of housing completed or under construction primarily include: (1) land costs transferred from land and land under development; (2) direct construction costs associated with a house; (3) real property taxes, engineering fees, permits and other fees; (4) capitalized interest; and (5) indirect construction costs, which include field construction management salaries and benefits, utilities and other construction related costs. Land costs are transferred from land and land under development to housing completed or under construction at the point in time that construction of a home on an owned lot begins.

In accordance with ASC 360, Property, Plant, and Equipment (“ASC 360”), homebuilding inventories are carried at cost unless events and circumstances indicate that the carrying value of the underlying subdivision may not be recoverable. We evaluate inventories for impairment at each quarter end on a subdivision level basis as each such subdivision represents the lowest level of identifiable cash flows. In making this determination, we review, among other things, the following for each subdivision:

• actual and trending “Operating Margin” (which is defined as home sale revenues less home cost of sales and all direct incremental costs associated with the home closing, including sales commissions) for homes closed;

• estimated future undiscounted cash flows and Operating Margin;

• forecasted Operating Margin for homes in backlog;

• actual and trending net and gross home orders;

• base sales price and home sales incentive information for homes closed, homes in backlog and homes available for sale;

• market information for each sub-market, including competition levels, home foreclosure levels, the size and style of homes currently being offered for sale and lot size; and

• known or probable events indicating that the carrying value may not be recoverable.

If events or circumstances indicate that the carrying value of our inventory may not be recoverable, assets are reviewed for impairment by comparing the undiscounted estimated future cash flows from an individual subdivision to its carrying value. If the undiscounted future cash flows are less than the subdivision’s carrying value, the carrying value of the subdivision is written down to its then estimated fair value. We generally determine the estimated fair value of each subdivision by determining the present value of the estimated future cash flows at discount rates that are commensurate with the risk of the subdivision under evaluation. We recognized no inventory impairments during the three months ended September 30, 2014. For the nine months ended September 30, 2014, we recorded $0.9 million of inventory impairment charges related to two projects in our East segment. We recognized $0.4 million in impairments for the three and nine months ended September 30, 2013.