Warranty Accrual

Our homes are sold with limited

third

-party warranties and, under our agreement with the issuer of the

third

-party warranties, we are responsible for performing all of the work for the

first

two

years of the warranty coverage and paying for substantially all of the work required to be performed during years

three

through

ten

of the warranties. We record accruals for general and structural warranty claims, as well as accruals for known, unusual warranty-related expenditures. Our warranty accrual is 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

months ended

March 31, 2019

and

2018.

For the

three

months ended

March 31, 2019

and

2018,

we recorded adjustments to increase our warranty accrual by

$0.9

million and

$3.1

million, respectively. The adjustments recorded during the

three

months ended

March 31, 2019

related to homes with structural related issues, while the adjustments recorded during the

three

months ended

March 31, 2018

were due to higher than expected general warranty related expenditures.

	Three Months Ended
	March 31,
	2019			2018
	(Dollars in thousands)
Balance at beginning of period	$	28,262		$	21,909
Expense provisions		3,348			2,598
Cash payments		(2,493	)		(2,500	)
Adjustments		875			3,106
Balance at end of period	$	29,992		$	25,113