Company: SDHC
Filing Date: 2025-05-14
Form Type: 10-Q
Source: 0001982518-25-000020
Chunk: 28

Company: Smith Douglas Homes Corp.
Filing Date: 2025-05-14
Form: 10-Q
Item: Part I, Item 1
Chunk 28
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 is not required to be consolidated under the variable interest model, the Company considers whether such contracts should be accounted for as financing arrangements. Lot option contracts that may be considered financing arrangements include those entered into with third‑party land banks or developers in conjunction with such third parties acquiring a specific land parcel(s) on the Company’s behalf, at the Company’s direction, and those with other landowners where the Company or its designee makes improvements to the optioned land parcel(s) during the applicable option period. For these lot option contracts, the Company records the remaining purchase price of the associated land parcel(s) in inventory in its consolidated balance sheets with a corresponding financing obligation if the Company determines that it is effectively compelled to exercise the option to purchase the land parcel(s). In making this determination with respect to a land option contracts, the Company considers the non‑refundable deposit(s), any capitalized pre‑acquisition costs and additional costs associated with abandoning the contract. As a result of such evaluations of lot option contracts, no lot option contracts were determined to be financing arrangements for which the remaining purchase price should be recorded as a financing obligation in the accompanying unaudited condensed consolidated balance sheets.

During the three months ended March 31, 2025, the Company recognized a lot option contract abandonment charge of $0.7 million in the Central reporting segment, which is included within other expense (income), net in the accompanying unaudited condensed consolidated statements of income. No lot option contract abandonment charges were recognized during the three months ended March 31, 2024. 

Note 4 ‑ Investments in unconsolidated entities:

The Company has non‑controlling equity interests in various entities for which the Company applies the equity method of accounting. As of March 31, 2025, the Company had equity method investments in two entities engaged in the development and sale of lots, one entity engaged in providing mortgage broker services to our homebuyers, and one entity engaged in providing title insurance services to our homebuyers. The Company’s proportionate share of the entities’ income was approximately $0.2 million and $0.2 million during the three months ended March 31, 2025 and 2024, respectively. The entities distributed approximately $0.3 million and $0.2 million to the Company during the three months ended March 31, 2025 and 2024, respectively. The Company did not contribute any amounts to the entities during the three months ended March 31, 2024 and contributed