Warranty Accrual

Our homes are sold with limited third-party warranties. We record accruals for general and structural warranty claims, as well as accruals for known, unusual warranty-related expenditures. Our warranty accruals are recorded based upon historical payment experience in an amount estimated to be adequate to cover expected costs of materials and outside labor during warranty periods. The determination of the warranty accrual rate for closed homes and the evaluation of our warranty accrual balance at period end are based on an internally developed analysis that includes known facts and interpretations of circumstances, including, among other things, our trends in historical warranty payment levels and warranty payments for claims not considered to be normal and recurring.

Our warranty accrual is included in accrued liabilities in the homebuilding section of our consolidated balance sheets and adjustments to our warranty accrual are recorded as an increase or reduction to home cost of sales in the homebuilding section of our consolidated statements of operations and comprehensive income.

The table set forth below summarizes accrual, adjustment and payment activity related to our warranty accrual for the three and six months ended June 30, 2016 and 2015. For the three and six months ended June 30, 2016 we recorded adjustments of $0.3 million and $3.2 million, respectively, to increase our warranty accrual primarily due to higher than expected recent warranty related expenditures. For the same periods in the prior year, we reduced our warranty reserve by $0.2 million.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
	(Dollars in thousands)
Balance at beginning of period	$	16,852		$	17,761		$	15,328		$	18,346
Expense provisions		2,305			1,329			3,757			2,444
Cash payments		(2,190	)		(1,624	)		(5,105	)		(3,324	)
Adjustments		250			(213	)		3,237			(213	)
Balance at end of period	$	17,217		$	17,253		$	17,217		$	17,253