SecProbe.io

CORRESP
1
filename1.htm

Response Letter

 September 20, 2013

Securities and Exchange Commission

 Division of Corporation
Finance

 100 F Street, N.E.

 Washington, D.C. 20549

Attention:

 Leland Benton

 Craig E. Slivka

Re:
LGI Homes, Inc.

Registration Statement on Form S-1

Filed August 28, 2013

CIK No. 0001580670

 Ladies and Gentlemen:

Set forth below are the responses of LGI Homes, Inc. (the “Company”) to the comments contained in the letter from the staff (the
“Staff”) of the Securities and Exchange Commission, dated September 11, 2013, with respect to the above-captioned submission.

Concurrently with the submission of this letter, the Company has filed publicly its Amendment No. 1 to Registration Statement on Form S-1
(the “Registration Statement”) via EDGAR. For your convenience, five marked copies of the Registration Statement will be hand delivered to you to facilitate your review.

For your convenience, the Company has repeated in italics the comments and requests for additional information as set forth in the
Staff’s comment letter. The Company’s response to each comment or request is set forth immediately below the text of the applicable comment or request. Capitalized terms used but not defined in this letter shall have the meanings assigned
to such terms in the Registration Statement.

 General

1.
We have read your response to comment 33 from our letter dated August 6, 2013 as well as your related revised disclosures. We note that you continue to present results of operations and other financial and
operational data throughout this prospectus which aggregates the historical results/data of your predecessor and the LGI/GTIS Joint Ventures. We do not believe your use of this aggregated data in the context of discussing your business and using
this data when using terms like “we”, “our”, and “ours” as you have done in many sections of the prospectus including but not limited to Our Company, Our Competitive Strengths, Our Business and Management’s
Discussion and Analysis of Financial Condition and Results of Operations is not appropriate. We note that it is unclear whether your predecessor or your joint ventures own various properties, or even whether the employees that you discuss in your
Business section are employees of your predecessor or of your joint ventures. Please ensure that references to the “company,” “registrant” or “us,” “we,” or “our” refer to the true predecessor
entity. Further the Explanatory Note definition of terms is confusing and should be removed or revised. We have the following further comments in this regard:

 Securities and Exchange Commission

September 20, 2013

  Page
 2

•

You disclose that you believe the presentation of certain aggregated financial data provides investors with a meaningful comparison of your results of operations and is necessary for investors to understand your
financial condition and results of operations. However, we note that aggregated financial information is not related to the results of operations of your predecessor, the entity for which the information throughout your prospectus should be based.
In this regard, we specifically note that:

•

The information you provide in your audited financial statements as well as in response to prior comment 68, indicates that you did not consolidate the LGI/GTIS Joint Ventures because, in part, other parties shared
in the power to direct the activities of the LGI/GTIS Joint Ventures that most significantly impact their economic performance. It therefore is not appropriate to provide financial data which implies that you had such power; and

•

The information you have provided under the section, “Factors Affecting Comparability” on page 69 further highlights why the presentation of aggregated information is not appropriate.

•

Please remove all discussions of results of operations and other financial and operational data which have provided on an aggregated basis. To the extent you believe the presentation of certain financial and
operational data may be meaningful on a pro forma basis, please ensure that information is presented in the context of your current pro forma financial information; and

•

Please revise your disclosures throughout the prospectus, including, but not limited to, results of operations and other financial and operational data presented under Our Company, Our Competitive Strengths, Our
Business and Management’s Discussion and Analysis of Financial Condition and Results of Operations to present and discuss this information as it relates to your predecessor.

Response:

 The Company acknowledges the Staff’s
comment and has revised the Registration Statement to remove results of operations and other financial and operational data presented on an aggregate basis.

Public Homebuilder Peers, page ii

2.
Please clarify whether you face competition primarily from public companies. If not, please revise your prospectus throughout to make this clear, placing statements about public peer companies into this larger
context and revising the prominence of this definition.

 Securities and Exchange Commission

September 20, 2013

  Page
 3

 Response:

The Company acknowledges the Staff’s comment and has revised the Registration Statement to clarify that the Company primarily faces competition from its
public homebuilder peers; while in certain of its markets, the Company also faces competition from certain private homebuilders. Please see pages ii, one and 139 of the Registration Statement.

Summary, page one

 Our Company, page one

3.
We note the supplemental information you have provided for your statements on pages one, five, 63, 137, and 144, that you offer “superior value.” It is unclear how the information you have provided supports
this statement. Please provide us with support for this statement or remove it.

 Response:

The Company acknowledges the Staff’s comment and revised the Summary and Business sections of the Registration Statement accordingly. Please see pages
one, five, 66, 139 and 146 of the Registration Statement.

4.
We note your response to comment eight of our letter dated August 6, 2013. Please revise your statements on pages two, four, five, 138, 142, and 144 to make more apparent the distance between metropolitan
centers and your communities. Your current language, with the ambiguous word “proximity,” could be read to imply that your communities are located much closer to the urban centers of your various markets than they actually are.

 Response:

 The Company
acknowledges the Staff’s comment and revised the Summary and Business sections of the Registration Statement accordingly. Please see pages two, four, five, 140, 144 and 146 of the Registration Statement.

5.
Please similarly revise your references to your “strong land position.” You state that the company’s statement is based on the fact that it has seven years of land supply. The phrase “strong land
position” does not read as a statement of the size of your potential inventory, but rather a qualitative statement regarding the land your hold and its desirability.

Response:

 The Company acknowledges the Staff’s
comment and revised the Summary and Business sections of the Registration Statement accordingly. Please see pages five, 67, 139 and 146 of the Registration Statement.

 Securities and Exchange Commission

September 20, 2013

  Page
 4

 Our Competitive Strengths, page three

6.
We re-issue comment nine of our letter dated August 6, 2013. Your summary still appears unbalanced, as does your Business section. In addition, your statement on page four that “[if] housing demand and
population growth slows in [the states in which you operate], [you] may not realize a competitive advantage as a result of the markets in which we focus” is unclear. As you only compete in these markets, slowing housing demand and population
growth would affect all of your competitors.

 Response:

The Company acknowledges the Staff’s comment and has revised the Summary and Business sections of the Registration Statement accordingly. Please see pages
three, four, 141, 142, 144 and 145 of the Registration Statement.

 Unaudited Pro Forma Financial Information, page 49

General

7.
Please address the following comments as they relate to your pro forma financial information presented on pages F-3 through F-13. Since the information presented on pages F-3 through F-13 and pages 49 through 59
appear duplicative, please consider presenting this pro forma financial information only once.

 Response:

The Company acknowledges the Staff’s comment and has also addressed the comments below as they relate to the pro forma financial information presented on
pages F-3 - F-17 of the Registration Statement. In light of the following factors, the Company prefers to present the pro forma financial information in both the non-financial statement pages and in the financial statement pages of the Registration
Statement. The Company believes that since pro forma information is referred to throughout the prospectus, including the full pro forma financial information in both the body of the prospectus and in the financial pages will make it easier for
potential investors to find the information. In addition, the Company believes that certain potential investors prefer to have the information in the body of the prospectus, while other potential investors prefer to have the information in the
financial pages.

8.
Where you have more than one pro forma adjustment impacting a line item in your pro forma financial statements, please provide additional information so that a reader can fully understand the nature of the adjustment
and how such adjustment was calculated. For instance, please disclose the components that make up the $1,983 adjustment to deferred tax liabilities, net as of June 30, 2013. While you have referenced notes (b) and (d), we note that the
fourth bullet in note (b) discusses a $31,000 deferred tax liability adjustment and note (d) discusses a $26,000 net deferred income tax liability. These two adjustments do not equate to the $1,983 adjustment nor do these footnotes explain
how such adjustments were calculated.

 Response:

The Company acknowledges the Staff’s comment and has revised the notes to the pro forma financial statements to assign a note reference to each of the
items discussed in the notes to the unaudited pro forma financial statements. In addition, the Company believes it has provided sufficient information to assist the reader in understanding the nature and amounts of the pro forma adjustments. The
Company also clarified how the pro forma amounts were calculated. Please see pages 53 - 62 and F-7 to F-17 of the Registration Statement.

 Securities and Exchange Commission

September 20, 2013

  Page
 5

 Unaudited Pro Forma Financial Information, page 49

9.
We note your response to prior comment 21. We have the following comments on your revised pro forma financial information.

•

You disclose that your pro forma statements of operations for the six months ended June 30, 2013 and the year ended December 31, 2012 do not reflect an increase in the cost of sales associated with the step
up of the real estate inventory since the step up does not have a continuing impact on the results of your operations due to the short term (less than one year) impact on your financial performance. Please note that the short term nature of the
impact does not make the adjustment non-recurring. As such, please revise your pro forma statement of operations to reflect the increase in cost of sales related to the step-up of the real estate inventory;

Response:

 The Company acknowledges the Staff’s
comment and continues to believe that a pro forma adjustment in the statement of operations to reflect an increase in the cost of sales associated with the step up of the real estate inventory does not provide additional meaningful disclosure to
assist investors’ understanding of the impact of the GTIS Transaction.

 The Company considered the guidance in the Division of Corporate Finance
– Financial Reporting Manual, Topic 3230.4, which states that pro forma adjustments should give effect to events that are expected to have a continuing impact. Further, it states that material non-recurring charges or credits and related tax
effects which result directly from the transaction and which will be included in the income of the registrant within the next 12 months following the transaction should not be included in the pro forma income statement, but should be disclosed in a
note to clearly indicate that they were not included.

 The concept of “continuing impact” also was the subject of recent SEC staff remarks at
the 2012 AICPA Conference on Current SEC and PCAOB Developments (2012 AICPA Conference), where the Company understands that SEC staff members clarified that the historical 12-month rule of thumb to evaluate the continuing impact criterion continues
to be appropriate. Notwithstanding the 12-month rule of thumb, the Company understands there may be limited circumstances where it would be appropriate to reflect a pro forma adjustment for items that affect the pro forma income statement for a
period of less than 12 months and the evaluation will depend on the individual facts and circumstances. Included below is an excerpt from the minutes of the March 2013 meeting with SEC Regulations Committee and the SEC staff:

The Committee noted that at the 2012 AICPA Conference, the Division’s staff noted that there appeared to be a handful of items where the
twelve month rule of thumb used to evaluate the continuing impact criterion may not work very well and that for those items, the staff was considering whether the use of a more than one time view of continuing impact may better reflect the outcomes
of transactions to which pro forma effect is being given.

 Securities and Exchange Commission

September 20, 2013

  Page
 6

 Todd Hardiman confirmed that the Division’s staff has not issued additional guidance. He
reiterated the encouragement provided at the 2012 AICPA Conference for registrants to contact the Division of Corporation Finance’s Office of Chief Accountant if they have a live fact pattern where the different views of what constitutes
continuing impact would have a material impact to their pro forma financial statements.

 For the reasons discussed below, the Company believes that a pro
forma adjustment to reflect an increase in historical cost of sales does not meet the continuing impact criterion. The Company believes that its approach is consistent with the guidance in the Financial Reporting Manual and given both (1) the
frequency of inventory turnover and (2) that there is no direct relationship between the inventory reflected on the balance sheet at June 30, 2013 compared to the inventory reflected on the balance sheet as of January 1, 2012 or
inventory reflected through cost of sales for completed home sales during 2012. The Company also believes that it has included appropriate disclosure that quantifies the amount of the inventory step up and that the step up has not been included as a
pro forma adjustment to historical cost of sales.

 As noted in Note (c) of the Notes to the Unaudited Pro forma Balance Sheet at pages 54 and F-8 of
the Registration Statement, the $7.1 million of the $7.2 million step up to the cost basis of the joint ventures’ combined real estate inventory is expected to be reflected in cost of sales over the 12-month period following the transaction
date. The remaining $75,000 will be recognized in the following year. The timing of these adjustments to cost of sales was estimated based on the forecasted sale of homes in the respective communities. Of the $7.2 million step-up amount,
approximately $6.2 million is attributable to homes in progress, completed homes and sales offices and the remainder of $1 million is attributable to finished lots. The Company believes the forecast is rea