Commitments and Contingencies |
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| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies | Commitments and Contingencies
Legal—The Company is currently involved in various legal actions and proceedings that arise from time to time and may be subject to similar or other legal and/or regulatory actions in the future. The Company is currently unable to estimate the likelihood of
an unfavorable result in any such proceeding that could have a material adverse effect on the Company’s results of operations, financial position, or liquidity.
In the fourth quarter of 2021, three insurers paid $14.9 million on behalf of the Company and others to settle a wrongful death suit. The insurers contend they are entitled to seek reimbursement from the Company for some or all of such amounts, which the Company disputes. During October 2023, one of the insurers filed a lawsuit in Superior Court of the State of California, county of Orange, entitled Ironshore Specialty Insurance Company v Landsea Holding Corporation, et al., seeking reimbursement and the two other insurers subsequently asserted reimbursement claims in the lawsuit. However, at this time the Company is unable to predict the outcome of the insurers’ claims against the Company or estimate the amount of any potential damages associated therewith.
Performance Obligations—In the ordinary course of business, and as part of the entitlement and development process, the Company’s subsidiaries are required to provide performance bonds to assure completion of certain public facilities. The Company had $121.1 million and $125.0 million of performance bonds outstanding as of March 31, 2025 and December 31, 2024, respectively.
Warranty—Estimated future direct warranty reserve and general liability costs are accrued and charged to cost of sales in the period when the related homebuilding revenues are recognized. Changes in the Company’s warranty reserve and general liability are detailed in the table below:
Operating Leases—The Company primarily enters into operating leases for the right to use office space, model homes, and computer and office equipment, which have remaining lease terms that range from less than 1 year up to 7 years and often include one or more options to renew. The weighted average remaining lease term as of March 31, 2025 and December 31, 2024 was 4.6 and 4.5 years, respectively. Renewal terms are included in the lease term when it is reasonably certain the option will be exercised.
During March 2025 and throughout 2024, the Company sold model homes and immediately leased them back. The 2025 sales generated home sales revenue of $2.0 million and cost of sales of $1.7 million during the three months ended March 31, 2025. No home sales revenue or costs were recognized during the three months ended March 31, 2024. These model homes are leased back for terms typically ranging from 3 to 36 months. The Company determined that control of the model homes transferred to the buyer and, as a result, each of the transactions qualified as a sale. All of the leases from the transaction are accounted for as operating leases and applicable right-of-use assets and lease liabilities were recorded in the accompanying consolidated balance sheets.
The Company establishes a right-of-use asset and lease liability based on the present value of future minimum lease payments at the commencement date of a lease, or, if subsequently modified, the date of modification for active leases. As the rate implicit in each lease is not readily determinable, the Company’s incremental borrowing rate is used in determining the present value of future minimum payments as of the commencement date. The weighted average rate as of March 31, 2025 and December 31, 2024 was 8.1%. Lease components and non-lease components are accounted for as a single lease component. As of March 31, 2025, the Company had $22.9 million and $24.1 million recognized as a right-of-use asset and lease liability, respectively, which are presented on the consolidated balance sheets within other assets and accrued expenses and other liabilities, respectively. As of December 31, 2024, the Company had $23.4 million and $24.5 million recognized as a right-of-use asset and lease liability, respectively.
Operating lease expense for the three months ended March 31, 2025 was $0.8 million and is included in general and administrative expenses on the consolidated statements of operations. Operating lease expense for the three months ended March 31, 2024 was $0.8 million.
Future minimum payments under the non-cancelable operating leases in effect at March 31, 2025 were as follows (dollars in thousands):
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| Commitments and Contingencies | Commitments and Contingencies
Legal—The Company is currently involved in various legal actions and proceedings that arise from time to time and may be subject to similar or other legal and/or regulatory actions in the future. The Company is currently unable to estimate the likelihood of
an unfavorable result in any such proceeding that could have a material adverse effect on the Company’s results of operations, financial position, or liquidity.
In the fourth quarter of 2021, three insurers paid $14.9 million on behalf of the Company and others to settle a wrongful death suit. The insurers contend they are entitled to seek reimbursement from the Company for some or all of such amounts, which the Company disputes. During October 2023, one of the insurers filed a lawsuit in Superior Court of the State of California, county of Orange, entitled Ironshore Specialty Insurance Company v Landsea Holding Corporation, et al., seeking reimbursement and the two other insurers subsequently asserted reimbursement claims in the lawsuit. However, at this time the Company is unable to predict the outcome of the insurers’ claims against the Company or estimate the amount of any potential damages associated therewith.
Performance Obligations—In the ordinary course of business, and as part of the entitlement and development process, the Company’s subsidiaries are required to provide performance bonds to assure completion of certain public facilities. The Company had $121.1 million and $125.0 million of performance bonds outstanding as of March 31, 2025 and December 31, 2024, respectively.
Warranty—Estimated future direct warranty reserve and general liability costs are accrued and charged to cost of sales in the period when the related homebuilding revenues are recognized. Changes in the Company’s warranty reserve and general liability are detailed in the table below:
Operating Leases—The Company primarily enters into operating leases for the right to use office space, model homes, and computer and office equipment, which have remaining lease terms that range from less than 1 year up to 7 years and often include one or more options to renew. The weighted average remaining lease term as of March 31, 2025 and December 31, 2024 was 4.6 and 4.5 years, respectively. Renewal terms are included in the lease term when it is reasonably certain the option will be exercised.
During March 2025 and throughout 2024, the Company sold model homes and immediately leased them back. The 2025 sales generated home sales revenue of $2.0 million and cost of sales of $1.7 million during the three months ended March 31, 2025. No home sales revenue or costs were recognized during the three months ended March 31, 2024. These model homes are leased back for terms typically ranging from 3 to 36 months. The Company determined that control of the model homes transferred to the buyer and, as a result, each of the transactions qualified as a sale. All of the leases from the transaction are accounted for as operating leases and applicable right-of-use assets and lease liabilities were recorded in the accompanying consolidated balance sheets.
The Company establishes a right-of-use asset and lease liability based on the present value of future minimum lease payments at the commencement date of a lease, or, if subsequently modified, the date of modification for active leases. As the rate implicit in each lease is not readily determinable, the Company’s incremental borrowing rate is used in determining the present value of future minimum payments as of the commencement date. The weighted average rate as of March 31, 2025 and December 31, 2024 was 8.1%. Lease components and non-lease components are accounted for as a single lease component. As of March 31, 2025, the Company had $22.9 million and $24.1 million recognized as a right-of-use asset and lease liability, respectively, which are presented on the consolidated balance sheets within other assets and accrued expenses and other liabilities, respectively. As of December 31, 2024, the Company had $23.4 million and $24.5 million recognized as a right-of-use asset and lease liability, respectively.
Operating lease expense for the three months ended March 31, 2025 was $0.8 million and is included in general and administrative expenses on the consolidated statements of operations. Operating lease expense for the three months ended March 31, 2024 was $0.8 million.
Future minimum payments under the non-cancelable operating leases in effect at March 31, 2025 were as follows (dollars in thousands):
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