Company: SDHC
Filing Date: 2025-05-14
Form Type: 10-Q
Source: 0001982518-25-000020
Chunk: 78

Company: Smith Douglas Homes Corp.
Filing Date: 2025-05-14
Form: 10-Q
Item: Part I, Item 8
Chunk 78
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2 ‑ Valuation is determined from quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar instruments in markets that are not active, or by model‑based techniques in which all significant inputs are observable in the market;•Level 3 ‑ Valuation is derived from model‑based techniques in which at least one significant input is unobservable and based on the Company’s own estimates about the assumptions that market participants would use to value the asset or liability.A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company’s assessment of the significance of particular inputs to those fair value measurements requires judgment and considers factors specific to each asset or liability.The Company’s financial instruments measured or disclosed at fair value are summarized below. The summary excludes cash and cash equivalents, receivables and accounts payable, all of which had fair values approximating their carrying values due to the liquid nature and short maturities of these instruments.  Fair Value (In Thousands)Asset or LiabilityFair Value HierarchyMarch 31,2025December 31,2024Disclosed at fair value:   Borrowings under Credit FacilityLevel 2$40,000 $— Seller note payableLevel 2$2,648 $3,060 The carrying value of the borrowings under the Credit Facility approximates fair value due to variable rate terms that approximate market rates.The carrying value of the seller note payable approximates fair value because the interest rate on the note approximates market rates as of March 31, 2025 and December 31, 2024.

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Note 7 ‑ Warranty reserves:A summary of the activity in the Company’s warranty liability account is as follows (in thousands): Three months ended March 31, 20252024Balance, beginning of period$3,622 $2,839 Additions to reserves from new home closings449 382 Warranty claims(104)(143)Adjustments to pre‑existing reserves(244)(100)Balance, end of period$3,723 $2,978 

Note 8 ‑ Leases:

The Company leases certain office space and equipment for use in its operations. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. Some leases contain renewal options and, in accordance with ASC Topic 842, Leases, the lease term includes those renewals only to the extent