UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________________________________________________________

FORM 10-Q

_____________________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, ~~2021~~2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-12822

_____________________________________________________________

BEAZER HOMES USA, INC.

(Exact name of registrant as specified in its charter)

_____________________________________________________________


Delaware						58-2086934
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


1000 Abernathy Road, Suite 260, Atlanta, Georgia						30328
(Address of principal executive offices)						(Zip Code)

(770) 829-3700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	BZH	New York Stock Exchange

_____________________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes ☒ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of common stock outstanding as of April ~~26, 2021~~25, 2022: ~~31,294,139~~31,457,627

Table of Contents

BEAZER HOMES USA, INC.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION			2
Item 1. Financial Statements			2
Condensed Consolidated Balance Sheets as of March 31, ~~2021~~2022 and September 30, ~~2020~~2021 (Unaudited)			2
Condensed Consolidated Statements of Operations for the three and six months ended March 31, ~~2021~~2022 and ~~2020~~2021 (Unaudited)			3
Condensed Consolidated Statements of Stockholders' Equity for the three and six months ended March 31, ~~2021~~2022 and ~~2020~~2021 (Unaudited)			4
Condensed Consolidated Statements of Cash Flows for the six months ended March 31, ~~2021~~2022 and ~~2020~~2021 (Unaudited)			6
Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
Item 3. Quantitative and Qualitative Disclosures About Market Risk			4544
Item 4. Controls and Procedures			4544
Item 5. Other Information			4645

PART II. OTHER INFORMATION			4645
Item 1. Legal Proceedings			4645
Item 1A. Risk Factors			4645
Item 6. Exhibits			4645

SIGNATURES			4746

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BEAZER HOMES USA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


in thousands (except share and per share data)	in thousands (except share and per share data)	March 31, 2021		September 30, 2020		in thousands (except share and per share data)	March 31, 2022		September 30, 2021
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	355,533	$	327,693	Cash and cash equivalents	$	163,905	$	246,715
Restricted cash	Restricted cash	18,162		14,835		Restricted cash	33,343		27,428
Accounts receivable (net of allowance of $298 and $358, respectively)		17,158		19,817
Accounts receivable (net of allowance of $290 and $290, respectively)						Accounts receivable (net of allowance of $290 and $290, respectively)	24,289		25,685
Income tax receivable	Income tax receivable	9,203		9,252		Income tax receivable	9,866		9,929

Owned inventory	Owned inventory	1,383,616		1,350,738		Owned inventory	1,676,972		1,501,602

Investments in unconsolidated entities	Investments in unconsolidated entities	4,114		4,003		Investments in unconsolidated entities	4,667		4,464
Deferred tax assets, net	Deferred tax assets, net	213,624		225,143		Deferred tax assets, net	190,876		204,766
Property and equipment, net	Property and equipment, net	21,989		22,280		Property and equipment, net	23,168		22,885
Operating lease right-of-use assets	Operating lease right-of-use assets	12,719		13,103		Operating lease right-of-use assets	11,301		12,344
Goodwill	Goodwill	11,376		11,376		Goodwill	11,376		11,376
Other assets	Other assets	8,077		9,240		Other assets	10,241		11,616
Total assets	Total assets	$	2,055,571	$	2,007,480	Total assets	$	2,160,004	$	2,078,810
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade accounts payable	Trade accounts payable	$	150,632	$	132,192	Trade accounts payable	$	147,257	$	133,391
Operating lease liabilities	Operating lease liabilities	14,603		15,333		Operating lease liabilities	12,912		14,154
Other liabilities	Other liabilities	133,568		135,983		Other liabilities	147,583		152,351

Total debt (net of debt issuance costs of $9,980 and $10,891, respectively)		1,123,001		1,130,801
Total debt (net of debt issuance costs of $8,151 and $8,983, respectively)						Total debt (net of debt issuance costs of $8,151 and $8,983, respectively)	1,049,895		1,054,030
Total liabilities	Total liabilities	1,421,804		1,414,309		Total liabilities	1,357,647		1,353,926
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock (par value $0.01 per share, 5,000,000 shares authorized, 0 shares issued)		0		0
Common stock (par value $0.001 per share, 63,000,000 shares authorized, 31,289,296 issued and outstanding and 31,012,326 issued and outstanding, respectively)		31		31
Preferred stock (par value $0.01 per share, 5,000,000 shares authorized, no shares issued)						Preferred stock (par value $0.01 per share, 5,000,000 shares authorized, no shares issued)	—		—
Common stock (par value $0.001 per share, 63,000,000 shares authorized, 31,457,627 issued and outstanding and 31,294,198 issued and outstanding, respectively)						Common stock (par value $0.001 per share, 63,000,000 shares authorized, 31,457,627 issued and outstanding and 31,294,198 issued and outstanding, respectively)	31		31
Paid-in capital	Paid-in capital	860,537		856,466		Paid-in capital	864,074		866,158
Accumulated deficit	Accumulated deficit	(226,801)		(263,326)		Accumulated deficit	(61,748)		(141,305)

Total stockholders’ equity	Total stockholders’ equity	633,767		593,171		Total stockholders’ equity	802,357		724,884
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	2,055,571	$	2,007,480	Total liabilities and stockholders’ equity	$	2,160,004	$	2,078,810

See accompanying notes to condensed consolidated financial statements.

Table of Contents

BEAZER HOMES USA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		March 31,				March 31,					March 31,				March 31,
in thousands (except per share data)	in thousands (except per share data)	2021		2020		2021		2020		in thousands (except per share data)	2022		2021		2022		2021
Total revenue	Total revenue	$	549,889	$	489,413	$	978,428	$	907,217	Total revenue	$	508,506	$	549,889	$	962,655	$	978,428
Home construction and land sales expenses	Home construction and land sales expenses	451,963		410,568		804,744		765,235		Home construction and land sales expenses	387,821		451,963		744,570		804,744
Inventory impairments and abandonments	Inventory impairments and abandonments	0		0		465		0		Inventory impairments and abandonments	935		—		935		465
Gross profit	Gross profit	97,926		78,845		173,219		141,982		Gross profit	119,750		97,926		217,150		173,219
Commissions	Commissions	20,884		18,744		37,391		34,809		Commissions	16,578		20,884		32,391		37,391
General and administrative expenses	General and administrative expenses	39,741		40,050		77,717		79,749		General and administrative expenses	45,530		39,741		83,297		77,717
Depreciation and amortization	Depreciation and amortization	3,683		3,627		6,805		7,054		Depreciation and amortization	3,031		3,683		5,912		6,805

Operating income	Operating income	33,618		16,424		51,306		20,370		Operating income	54,611		33,618		95,550		51,306
Equity in income of unconsolidated entities	Equity in income of unconsolidated entities	186		147		111		134		Equity in income of unconsolidated entities	163		186		451		111
Loss on extinguishment of debt		(563)		0		(563)		0
Other expense, net		(894)		(1,786)		(2,346)		(3,126)
Loss on extinguishment of debt, net										Loss on extinguishment of debt, net	(164)		(563)		(164)		(563)
Other income (expense), net										Other income (expense), net	140		(894)		271		(2,346)
Income from continuing operations before income taxes	Income from continuing operations before income taxes	32,347		14,785		48,508		17,378		Income from continuing operations before income taxes	54,750		32,347		96,108		48,508
Expense from income taxes	Expense from income taxes	7,704		4,170		11,829		3,959		Expense from income taxes	10,072		7,704		16,535		11,829
Income from continuing operations	Income from continuing operations	24,643		10,615		36,679		13,419		Income from continuing operations	44,678		24,643		79,573		36,679
Loss from discontinued operations, net of tax	Loss from discontinued operations, net of tax	(115)		(1)		(154)		(59)		Loss from discontinued operations, net of tax	(6)		(115)		(16)		(154)
Net income	Net income	$	24,528	$	10,614	$	36,525	$	13,360	Net income	$	44,672	$	24,528	$	79,557	$	36,525
Weighted average number of shares:
Weighted-average number of shares:										Weighted-average number of shares:
Basic	Basic	29,953		29,868		29,862		29,808		Basic	30,594		29,953		30,464		29,862
Diluted	Diluted	30,215		29,975		30,150		30,078		Diluted	30,823		30,215		30,772		30,150

Basic income (loss) per share:	Basic income (loss) per share:									Basic income (loss) per share:
Continuing operations	Continuing operations	$	0.82	$	0.36	$	1.23	$	0.45	Continuing operations	$	1.46	$	0.82	$	2.61	$	1.23
Discontinued operations	Discontinued operations	0		0		(0.01)		0		Discontinued operations	—		—		—		(0.01)
Total	Total	$	0.82	$	0.36	$	1.22	$	0.45	Total	$	1.46	$	0.82	$	2.61	$	1.22
Diluted income (loss) per share:	Diluted income (loss) per share:									Diluted income (loss) per share:
Continuing operations	Continuing operations	$	0.81	$	0.35	$	1.22	$	0.45	Continuing operations	$	1.45	$	0.81	$	2.59	$	1.22
Discontinued operations	Discontinued operations	0		0		(0.01)		0		Discontinued operations	—		—		—		(0.01)
Total	Total	$	0.81	$	0.35	$	1.21	$	0.45	Total	$	1.45	$	0.81	$	2.59	$	1.21

See accompanying notes to condensed consolidated financial statements.

Table of Contents

BEAZER HOMES USA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)


		Three Months Ended March 31, 2021																Three Months Ended March 31, 2022
		Common Stock			Paid-in Capital				Accumulated Deficit									Common Stock				Paid-in Capital				Accumulated Deficit
in thousands	in thousands	Shares	Amount								Total		in thousands		Shares				Amount					Total
Balance as of December 31, 2020		31,254	$	31			$	857,360			$	(251,329)				$	606,062
Balance as of December 31, 2021																Balance as of December 31, 2021		31,460		$	31			$	861,648			$	(106,420)			$	755,259
Net income and comprehensive income	Net income and comprehensive income	—	—		—				24,528				24,528			Net income and comprehensive income		—		—						44,672				44,672
Stock-based compensation expense	Stock-based compensation expense	—	—		2,549				—				2,549			Stock-based compensation expense		1		—		2,424				—				2,424
Exercises of stock options		51	—		628				—				628
Stock option exercises																Stock option exercises		—		—		4				—				4

Forfeiture and other settlements of restricted stock	Forfeiture and other settlements of restricted stock	(16)	—		0				—				0			Forfeiture and other settlements of restricted stock		(3)		—		—				—				—
Common stock redeemed for tax liability																Common stock redeemed for tax liability		—		—		(2)				—				(2)

Balance as of March 31, 2021		31,289	$	31	$	860,537			$	(226,801)			$	633,767

Balance as of March 31, 2022																Balance as of March 31, 2022		31,458		$	31	$	864,074			$	(61,748)			$	802,357

Six Months Ended March 31, 2021
Common Stock Paid-in Capital Accumulated Deficit
in thousands Shares Amount Total
Balance as of September 30, 2020 31,012 $ 31 $ 856,466 $ (263,326) $ 593,171
Net income and comprehensive income — — — 36,525 36,525
Stock-based compensation expense — — 6,060 — 6,060
Exercises of stock options 168 — 631 — 631
Shares issued under employee stock plans, net 411 — — — —
Forfeiture and other settlements of restricted stock (16) — 0 — 0
Common stock redeemed for tax liability (286) — (2,620) — (2,620)
Balance as of March 31, 2021 31,289 $ 31 $ 860,537 $ (226,801) $ 633,767

~~See accompanying notes to condensed consolidated financial statements.~~


	Six Months Ended March 31, 2022
	Common Stock			Paid-in Capital		Accumulated Deficit
in thousands	Shares	Amount						Total
Balance as of September 30, 2021	31,294	$	31	$	866,158	$	(141,305)	$	724,884
Net income and comprehensive income	—	—		—		79,557		79,557
Stock-based compensation expense	—	—		4,532		—		4,532
Stock option exercises	1	—		4		—		4
Shares issued under employee stock plans, net	517	—		—		—		—
Forfeiture and other settlements of restricted stock	(47)	—		—		—		—
Common stock redeemed for tax liability	(307)	—		(6,620)		—		(6,620)


Balance as of March 31, 2022	31,458	$	31	$	864,074	$	(61,748)	$	802,357

Table of Contents

BEAZER HOMES USA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

Three Months Ended March 31, 2020
Common Stock Paid-in Capital Accumulated Deficit
in thousands Shares Amount Total
Balance as of December 31, 2019 31,383 $ 31 $ 852,055 $ (312,806) $ 539,280
Net income and comprehensive income — — — 10,614 10,614
Stock-based compensation expense — — 899 — 899
Exercises of stock options 3 — 31 — 31
Shares issued under employee stock plans, net 7 — — — —
Forfeiture and other settlements of restricted stock (10) — — — —
Common stock redeemed for tax liability (1) — (15) — (15)
Share repurchases (362) 0 (3,327) — (3,327)
Balance as of March 31, 2020 31,020 $ 31 $ 849,643 $ (302,192) $ 547,482



	Three Months Ended March 31, 2021
	Common Stock			Paid-in Capital		Accumulated Deficit
in thousands	Shares	Amount						Total
Balance as of December 31, 2020	31,254	$	31	$	857,360	$	(251,329)	$	606,062
Net income and comprehensive income	—	—		—		24,528		24,528
Stock-based compensation expense	—	—		2,549		—		2,549
Stock option exercises	51	—		628		—		628

Forfeiture and other settlements of restricted stock	(16)	—		—		—		—


Balance as of March 31, 2021	31,289	$	31	$	860,537	$	(226,801)	$	633,767


		Six Months Ended March 31, 2020																Six Months Ended March 31, 2021
		Common Stock			Paid-in Capital				Accumulated Deficit									Common Stock				Paid-in Capital				Accumulated Deficit
in thousands	in thousands	Shares	Amount								Total		in thousands		Shares				Amount					Total
Balance as of September 30, 2019		30,933	$	31			$	854,275			$	(315,552)				$	538,754
Balance as of September 30, 2020																Balance as of September 30, 2020		31,012		$	31			$	856,466			$	(263,326)			$	593,171
Net income and comprehensive income	Net income and comprehensive income	—	—		—				13,360				13,360			Net income and comprehensive income		—		—		—				36,525				36,525
Stock-based compensation expense	Stock-based compensation expense	—	—		3,210				—				3,210			Stock-based compensation expense		—		—		6,060				—				6,060
Exercises of stock options		50	—		204				—				204
Stock option exercises																Stock option exercises		168		—		631				—				631
Shares issued under employee stock plans, net	Shares issued under employee stock plans, net	581	—		—				—				—			Shares issued under employee stock plans, net		411		—		—				—				—
Forfeiture and other settlements of restricted stock	Forfeiture and other settlements of restricted stock	(11)	—		(2,058)				—				(2,058)			Forfeiture and other settlements of restricted stock		(16)		—		—				—				—
Common stock redeemed for tax liability	Common stock redeemed for tax liability	(171)	—		(2,661)				—				(2,661)			Common stock redeemed for tax liability		(286)		—		(2,620)				—				(2,620)
Share repurchases		(362)	0		(3,327)				—				(3,327)

Balance as of March 31, 2020		31,020	$	31	$	849,643			$	(302,192)			$	547,482

Balance as of March 31, 2021																Balance as of March 31, 2021		31,289		$	31	$	860,537			$	(226,801)			$	633,767

See accompanying notes to condensed consolidated financial statements.

Table of Contents

BEAZER HOMES USA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Six Months Ended					Six Months Ended
		March 31,					March 31,
in thousands	in thousands	2021		2020		in thousands	2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	36,525	$	13,360	Net income	79,557		$	36,525
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Adjustments to reconcile net income to net cash used in operating activities:						Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	Depreciation and amortization	6,805		7,054		Depreciation and amortization	5,912		6,805
Stock-based compensation expense	Stock-based compensation expense	6,060		3,210		Stock-based compensation expense	4,532		6,060
Inventory impairments and abandonments	Inventory impairments and abandonments	465		0		Inventory impairments and abandonments	935		465

Deferred and other income tax expense	Deferred and other income tax expense	11,786		3,942		Deferred and other income tax expense	16,531		11,786

Gain on sale of fixed assets	Gain on sale of fixed assets	(170)		(111)		Gain on sale of fixed assets	(159)		(170)
Change in allowance for doubtful accounts	Change in allowance for doubtful accounts	(60)		5		Change in allowance for doubtful accounts	—		(60)

Equity in income from unconsolidated entities		(111)		(134)
Equity in income of unconsolidated entities						Equity in income of unconsolidated entities	(451)		(111)
Cash distributions of income from unconsolidated entities	Cash distributions of income from unconsolidated entities	0		56		Cash distributions of income from unconsolidated entities	248		—
Loss on extinguishment of debt, net	Loss on extinguishment of debt, net	563		0		Loss on extinguishment of debt, net	164		563
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Decrease in accounts receivable	Decrease in accounts receivable	2,719		5,816		Decrease in accounts receivable	1,396		2,719
Decrease in income tax receivable	Decrease in income tax receivable	49		315		Decrease in income tax receivable	—		49
Increase in inventory	Increase in inventory	(31,231)		(89,162)		Increase in inventory	(174,225)		(31,231)
Decrease in other assets	Decrease in other assets	1,327		3,063		Decrease in other assets	1,109		1,327
Increase in trade accounts payable	Increase in trade accounts payable	18,440		6,086		Increase in trade accounts payable	13,866		18,440
(Decrease) increase in other liabilities		(3,028)		587
Decrease in other liabilities						Decrease in other liabilities	(7,545)		(3,028)

Net cash provided by (used in) operating activities		50,139		(45,913)
Net cash (used in) provided by operating activities						Net cash (used in) provided by operating activities	(58,130)		50,139
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(6,514)		(5,478)		Capital expenditures	(6,195)		(6,514)
Proceeds from sale of fixed assets	Proceeds from sale of fixed assets	170		136		Proceeds from sale of fixed assets	159		170

Net cash used in investing activities	Net cash used in investing activities	(6,344)		(5,342)		Net cash used in investing activities	(6,036)		(6,344)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Repayment of debt	Repayment of debt	(10,212)		(1,150)		Repayment of debt	(6,113)		(10,212)

Repayment of borrowings from credit facility		0		(95,000)
Borrowings from credit facility		0		345,000

Debt issuance costs	Debt issuance costs	(427)		0		Debt issuance costs	—		(427)

Repurchase of common stock		0		(3,327)

Tax payments for stock-based compensation awards	Tax payments for stock-based compensation awards	(2,620)		(2,661)		Tax payments for stock-based compensation awards	(6,620)		(2,620)
Stock option exercises and other financing activities		631		(1,854)
Stock option exercises						Stock option exercises	4		631

Net cash (used in) provided by financing activities		(12,628)		241,008
Net increase in cash, cash equivalents, and restricted cash		31,167		189,753
Net cash used in financing activities						Net cash used in financing activities	(12,729)		(12,628)
Net (decrease) increase in cash, cash equivalents, and restricted cash						Net (decrease) increase in cash, cash equivalents, and restricted cash	(76,895)		31,167
Cash, cash equivalents, and restricted cash at beginning of period	Cash, cash equivalents, and restricted cash at beginning of period	342,528		122,794		Cash, cash equivalents, and restricted cash at beginning of period	274,143		342,528
Cash, cash equivalents, and restricted cash at end of period	Cash, cash equivalents, and restricted cash at end of period	$	373,695	$	312,547	Cash, cash equivalents, and restricted cash at end of period	$	197,248	$	373,695

See accompanying notes to condensed consolidated financial statements.

Table of Contents

BEAZER HOMES USA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Description of Business

Beazer Homes USA, Inc. (“we,” “us,” “our,” “Beazer,” “Beazer Homes” and the “Company”) is a geographically diversified homebuilder with active operations in 13 states within 3 geographic regions in the United States: the West, East, and Southeast.

Our homes are designed to appeal to homeowners at different price points across various demographic segments and are generally offered for sale in advance of their construction. Our objective is to provide our customers with homes that incorporate exceptional value and quality, while seeking to maximize our return on invested capital over the course of a housing cycle.

For an additional description of our business, refer to Item 1 within our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2020 (2020~~2021 (2021 Annual Report).

(2) Basis of Presentation and Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. The unaudited condensed consolidated financial statements do not include all of the information and disclosures required by GAAP for complete financial statements. As such, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's ~~2020~~2021 Annual Report. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation have been included in the accompanying unaudited condensed consolidated financial statements. The results of the Company's consolidated operations presented herein for the three and six months ended March 31, ~~2021~~2022 are not necessarily indicative of the results to be expected for the full fiscal year due to seasonal variations in our operations and other ~~factors, such as the effects of the coronavirus (“COVID-19”) pandemic and its influence on our future results.~~factors.

Basis of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Beazer Homes USA, Inc. and its consolidated subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. Our net income is equivalent to our comprehensive income, so we have not presented a separate statement of comprehensive income.

In the past, we have discontinued homebuilding operations in various markets. Results from certain of these exited markets are reported as discontinued operations in the accompanying unaudited condensed consolidated statements of operations for all periods presented (see Note 16 for a further discussion of our discontinued operations).

Our fiscal year 2022 began on October 1, 2021 and ends on September 30, 2022. Our fiscal year 2021 began on October 1, 2020 and ~~ends~~ended on September 30, 2021. ~~Our fiscal year 2020 began on October 1, 2019 and ended on September 30, 2020.~~

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make informed estimates and judgments that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Accordingly, actual results could differ from these estimates.

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Share Repurchase Program

During the first quarter of fiscal 2019, the Company's Board of Directors approved a share repurchase program that authorizes the Company to repurchase up to $50.0 million of its outstanding common stock. As part of this program, the Company repurchased common stock during fiscal 2019 and 2020 through open market transactions, 10b5-1 plans, and accelerated share repurchase (ASR) agreements. All shares have been retired upon repurchase. The aggregate reduction to stockholders’ equity related to share repurchases ~~during~~during the fiscal year ended September 30, 2020 and September 30, 2019 was $3.3 million and $34.6 million, respectively.

~~NaN~~ No share repurchases were made during fiscal year 2021 or the ~~three and~~ six months ended March 31, ~~2021.~~2022. As of March 31, ~~2021,~~2022, the remaining availability of the share repurchase program was $12.0 million.

~~Inventory Valuation~~

Inventory assets are assessed for recoverability no less than quarterly in accordance with the policies described in Notes 2 and 5 to the audited consolidated financial statements within our 2020 Annual Report. Homebuilding inventories that are accounted for as held for development (projects in progress) include land and home construction assets grouped together as communities. Homebuilding inventories held for development are stated at cost (including home construction costs, direct overhead costs, capitalized indirect costs, capitalized interest, real estate taxes and allocated lot costs) unless facts and circumstances indicate that the carrying value

Table of the assets may not be recoverable. For communities that have been idled (land held for future development), all applicable carrying costs, such as interest and real estate taxes, are expensed as incurred, and the inventory is stated at cost unless facts and circumstances indicate that the carrying value of the assets may not be recoverable. We record land held for sale at the lower of the carrying value or fair value less costs to sell.Contents

Revenue Recognition

We recognize revenue upon the transfer of promised goods to our customers in an amount that reflects the consideration to which we expect to be entitled by applying the following five-step process specified in ~~Accounting Standards Codification~~ASC Topic ~~606.~~606, Revenue from Contracts with Customers.

•Identify the contract(s) with a customer

•Identify the performance obligations

•Determine the transaction price

•Allocate the transaction price

•Recognize revenue when the performance obligations are met

The following table presents our total revenue disaggregated by revenue stream:


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		March 31,				March 31,					March 31,				March 31,
in thousands	in thousands	2021		2020		2021		2020		in thousands	2022		2021		2022		2021
Homebuilding revenue	Homebuilding revenue	$	547,417	$	487,986	$	971,646	$	905,385	Homebuilding revenue	$	507,208	$	547,417	$	953,937	$	971,646
Land sales and other revenue	Land sales and other revenue	2,472		1,427		6,782		1,832		Land sales and other revenue	1,298		2,472		8,718		6,782
Total revenue (a)	Total revenue (a)	$	549,889	$	489,413	$	978,428	$	907,217	Total revenue (a)	$	508,506	$	549,889	$	962,655	$	978,428

(a) Please see Note 15 for total revenue disaggregated by reportable segment.

Homebuilding revenue

Homebuilding revenue is reported net of any discounts and incentives and is generally recognized when title to and possession of the home are transferred to the buyer at the closing date. The performance obligation to deliver the home is generally satisfied in less than one year from the original contract date. Home sale contract assets consist of cash from home closings held by title companies in escrow for our benefit, typically for less than five days, and are considered accounts receivable. Contract liabilities include customer deposits related to sold but undelivered homes and ~~totaled $27.3~~totaled $38.4 million and ~~$18.9~~$28.5 million as of March 31, ~~2021~~2022 and September 30, ~~2020,~~2021, respectively. Of the customer liabilities outstanding as of September 30, ~~2020, $6.9~~2021, $7.5 million and ~~$15.2~~$17.7 million ~~were~~was recognized in revenue during the three and six months ended March 31, ~~2021~~2022 upon closing of the related homes.

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Land sales and other revenue

Land sales revenue relates to land that does not fit within our homebuilding programs and strategic plans. Land sales typically require cash consideration on the closing date, which is generally when performance obligations are satisfied. We also provide title examinations for our homebuyers in certain markets. Revenues associated with our title operations are recognized as closing services are rendered and title insurance policies are issued, both of which generally occur as each home is closed.

Recent Accounting Pronouncements

Reference Rate Reform. In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04). ASU 2020-04 provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. This guidance is effective beginning on March 12, 2020, and all entities may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the effect of adopting the new guidance on its consolidated financial statements and related disclosures.

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(3) Supplemental Cash Flow Information

The following table presents supplemental disclosure of non-cash and cash activity as well as a reconciliation of total cash balances between the condensed consolidated balance sheets and condensed consolidated statements of cash flows for the periods presented:


		Six Months Ended					Six Months Ended
		March 31,					March 31,
in thousands	in thousands	2021		2020		in thousands	2022		2021
Supplemental disclosure of non-cash activity:	Supplemental disclosure of non-cash activity:					Supplemental disclosure of non-cash activity:

Beginning operating lease right-of-use assets (ASC 842 adoption)(a)		$	0	$	13,895
Beginning operating lease liabilities (ASC 842 adoption)(a)		0		16,028

Increase in operating lease right-of-use assets(a)	Increase in operating lease right-of-use assets(a)	1,453		3,064		Increase in operating lease right-of-use assets(a)	$	626	$	1,453
Increase in operating lease liabilities(a)	Increase in operating lease liabilities(a)	1,453		3,064		Increase in operating lease liabilities(a)	626		1,453
Supplemental disclosure of cash activity:	Supplemental disclosure of cash activity:					Supplemental disclosure of cash activity:
Interest payments	Interest payments	$	37,412	$	28,731	Interest payments	$	34,649	$	37,412
Income tax payments	Income tax payments	143		2		Income tax payments	2,578		143
Tax refunds received	Tax refunds received	49		315		Tax refunds received	—		49
Reconciliation of cash, cash equivalents, and restricted cash:	Reconciliation of cash, cash equivalents, and restricted cash:					Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents	Cash and cash equivalents	$	355,533	$	294,265	Cash and cash equivalents	$	163,905	$	355,533
Restricted cash	Restricted cash	18,162		18,282		Restricted cash	33,343		18,162
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	373,695	$	312,547	Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	197,248	$	373,695

(a) ~~On October 1, 2019, we adopted Accounting Standards Update (ASU) No. 2016-02,~~ ~~Leases~~Represents leases renewed or additional leases commenced during the six ~~(ASU 2016-02)~~months ended March 31, 2022 and ~~related amendments, collectively codified in ASC 842,~~ ~~Leases~~ (ASC 842). Upon adoption of ASC 842, we recorded net operating lease right-of-use (ROU) assets of $13.9 million and operating lease liabilities of $16.0 million. Existing prepaid rent and accrued rent were recorded as an offset to the gross operating lease ROU assets.March 31, 2021.

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(4) Investments in Unconsolidated Entities

Unconsolidated Entities

As of March 31, ~~2021,~~2022, the Company participated in certain joint ventures and had investments in unconsolidated entities in which it had less than a controlling interest. The following table presents the Company's investment in these unconsolidated entities as well as the total equity and outstanding borrowings of these unconsolidated entities as of March 31, ~~2021~~2022 and September 30, ~~2020:~~2021:


in thousands	in thousands	March 31, 2021		September 30, 2020		in thousands	March 31, 2022		September 30, 2021
Investment in unconsolidated entities	Investment in unconsolidated entities	$	4,114	$	4,003	Investment in unconsolidated entities	$	4,667	$	4,464
Total equity of unconsolidated entities	Total equity of unconsolidated entities	7,009		7,079		Total equity of unconsolidated entities	7,491		7,316
Total outstanding borrowings of unconsolidated entities	Total outstanding borrowings of unconsolidated entities	13,497		8,807		Total outstanding borrowings of unconsolidated entities	15,549		12,708

Equity in income from unconsolidated entity activities included in income from continuing operations is as follows for the periods presented:


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		March 31,				March 31,					March 31,				March 31,
in thousands	in thousands	2021		2020		2021		2020		in thousands	2022		2021		2022		2021

Equity in income of unconsolidated entities	Equity in income of unconsolidated entities	$	186	$	147	$	111	$	134	Equity in income of unconsolidated entities	$	163	$	186	$	451	$	111

For the ~~three and~~ six months ended March 31, ~~2021~~2022 and ~~2020,~~2021, there were 0no impairments related to investments in unconsolidated entities.

Guarantees

Historically, the Company's joint ventures typically obtained secured acquisition, development, and construction financing. In addition, the Company and its joint venture partners provided varying levels of guarantees of debt and other debt-related obligations for these unconsolidated entities. However, as of March 31, ~~2021~~2022 and September 30, ~~2020,~~2021, the Company had 0no outstanding guarantees or other debt-related obligations related to our investments in unconsolidated entities.

The Company and its joint venture partners generally provide unsecured environmental indemnities to land development joint venture project lenders. These indemnities obligate the Company to reimburse the project lenders for claims related to environmental matters for which they are held responsible. During the three and six months ended March 31, ~~2021~~2022 and ~~2020,~~2021, the Company was not required to make any payments related to environmental indemnities.

In assessing the need to record a liability for these guarantees, the Company considers its historical experience in being required to perform under the guarantees, the fair value of the collateral underlying these guarantees, and the financial condition of the applicable unconsolidated entities. In addition, the fair value of the collateral of unconsolidated entities is monitored to ensure that the related borrowings do not exceed the specified percentage of the value of the property securing the borrowings. As of March 31, ~~2021,~~2022, no liability was recorded for the contingent aspects of any guarantees that were determined to be reasonably possible but not probable.

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(5) Owned Inventory

The components of our owned inventory are as follows as of March 31, ~~2021~~2022 and September 30, ~~2020:~~2021:


in thousands	in thousands	March 31, 2021		September 30, 2020		in thousands	March 31, 2022		September 30, 2021
Homes under construction	Homes under construction	$	653,137	$	525,021	Homes under construction	$	838,139	$	648,283
Development projects in progress		517,037		589,763
Land under development						Land under development	619,385		648,404
Land held for future development	Land held for future development	23,068		28,531		Land held for future development	19,879		19,879
Land held for sale	Land held for sale	8,851		12,622		Land held for sale	14,167		9,179
Capitalized interest	Capitalized interest	113,414		119,659		Capitalized interest	112,686		106,985
Model homes	Model homes	68,109		75,142		Model homes	72,716		68,872
Total owned inventory	Total owned inventory	$	1,383,616	$	1,350,738	Total owned inventory	$	1,676,972	$	1,501,602

Homes under construction include homes substantially finished and ready for delivery and homes in various stages of construction, including ~~the cost~~costs of the underlying ~~lot. We ha~~lot, direct construction costs and capitalized indirect costs~~d 87 (with a cost of $26.2 million) and~~ ~~133 (with a cost of $42.2 million) substantially completed homes that were not subject to a sales contract (spec homes) as~~. As of March 31, ~~2021~~2022, we had 3,568 homes under construction, including 775 spec homes totaling $157.2 million (725 in-process spec homes totaling $139.0 million, and 50 finished spec homes totaling $18.2 million). As of September 30, ~~2020, respectively.~~2021, we had 2,912 homes under construction, including 576 spec homes totaling $116.4 million (542 in-process spec units totaling $105.2 million, and 34 finished spec units totaling $11.2 million).

~~Development projects in progress consist~~Land under development consists principally of land acquisition, land development and other common costs. These land related costs are allocated to individual lots on a pro-rata basis, and the lot costs are transferred to homes under construction when home construction begins for the respective lots. Certain of the fully developed lots in this category are reserved by a customer deposit or sales contract.

Land held for future development consists of communities for which construction and development activities are expected to occur in the future or have been idled and are stated at cost unless facts and circumstances indicate that the carrying value of the assets may not be recoverable. All applicable carrying costs, such as interest and real estate taxes, are expensed as incurred.

Land held for sale includes land and lots that do not fit within our homebuilding programs and strategic plans in certain markets, and land is classified as held for sale once certain criteria are met (refer to Note 2 to the audited consolidated financial statements within our ~~2020~~2021 Annual Report). These assets are recorded at the lower of the carrying value or fair value less costs to ~~sell.~~sell (net realizable value).

The amount of interest we are able to capitalize depends on our qualified inventory balance, which considers the status of our inventory holdings. Our qualified inventory balance includes the majority of our homes under construction and land under development ~~projects in progress~~ but excludes land held for future development and land held for sale (see Note 6 for additional information on capitalized interest).

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Total owned inventory by reportable segment is presented in the table below as of March 31, ~~2021~~2022 and September 30, ~~2020:~~2021:

in thousands
Projects in
Progress (a)
Land Held for Future Development Land Held for Sale Total Owned
Inventory
March 31, 2021
West Segment $ 649,686 $ 3,483 $ 1,475 $ 654,644
East Segment 264,031 14,077 2,433 280,541
Southeast Segment 273,017 5,508 4,943 283,468
Corporate and unallocated (b)
164,963

0 0 164,963
Total $ 1,351,697 $ 23,068 $ 8,851 $ 1,383,616
September 30, 2020
West Segment $ 627,986 $ 3,483 $ 4,516 $ 635,985
East Segment 241,799 14,077 3,702 259,578
Southeast Segment 266,905 10,971 4,404 282,280
Corporate and unallocated (b)
172,895 0 0 172,895
Total $ 1,309,585 $ 28,531 $ 12,622 $ 1,350,738


in thousands	Projects in Progress (a)		Land Held for Future Development		Land Held for Sale		Total Owned Inventory
March 31, 2022
West	$	876,616	$	3,483	$	11,726	$	891,825
East	294,345		10,888		—		305,233
Southeast	301,079		5,508		2,441		309,028
Corporate and unallocated (b)	170,886		—		—		170,886
Total	$	1,642,926	$	19,879	$	14,167	$	1,676,972
September 30, 2021
West	$	781,036	$	3,483	$	4,478	$	788,997
East	264,991		10,888		584		276,463
Southeast	269,738		5,508		4,117		279,363
Corporate and unallocated (b)	156,779		—		—		156,779
Total	$	1,472,544	$	19,879	$	9,179	$	1,501,602

(a) Projects in progress include homes under construction, land under development, ~~projects in progress,~~ capitalized interest, and model home categories from the preceding table.

(b) Projects in progress amount includes capitalized interest and indirect costs that are maintained within our Corporate and unallocated segment.

Inventory Impairments

~~When conducting~~Inventory assets are assessed for recoverability periodically in accordance with the policies described in Notes 2 and 5 to the audited consolidated financial statements within our ~~community level review~~2021 Annual Report.

The following table presents, by reportable segment, our total impairment and abandonment charges for the ~~recoverability~~periods presented:



	Three Months Ended March 31,				Six Months Ended March 31,
in thousands	2022		2021		2022		2021






Land Held for Sale:
West	$	440	$	—	$	440	$	—



Total impairment charges on land held for sale	$	440	$	—	$	440	$	—
Abandonments:
West	$	12	$	—	$	12	$	—
East	—		0		—		465
Southeast	483		—		483		—

Total abandonments charges	$	495	$	—	$	495	$	465






Total impairment and abandonment charges	$	935	$	—	$	935	$	465

Projects in Progress Impairments

Projects in progress inventory includes homes under construction and land under development grouped together as communities. Projects in progress are stated at cost unless facts and circumstances indicate that the carrying value of ~~inventory related to~~the assets may not be recoverable.

We assess our projects in progress ~~we consider both qualitative and quantitative factors to establish~~inventory for indicators of impairment at the community level on a quarterly ~~“watch list”~~basis. If indicators of ~~communities. Each~~impairment are present for a community ~~is evaluated qualitatively and quantitatively to determine if there are factors driving the low profitability levels. Communities~~ with more than 10 homes remaining to close, ~~with potential indicators of impairment resulting from this initial evaluation are subjected to additional financial and operational reviews that consider~~we perform a recoverability test by comparing the competitive environment and other factors contributing to gross margins below our specified threshold. Our assumptions about future home sales prices and absorption rates require significant judgment because the residential homebuilding industry is cyclical and is highly sensitive to changes in economic conditions. For certain communities, it may be prudent to reduce sales prices or further increase sales incentives in response to a variety of factors, including competitive market conditions in those specific submarkets for the product and locations of these communities. For communities where the current competitive and market dynamics indicate that assets may not be recoverable, a formal impairment analysis is performed. The formal impairment analysis consists of both qualitative competitive market analyses and quantitative analyses reflecting market and asset specific information. The quantitative analyses compare the projected futureexpected undiscounted cash flows for ~~each such~~the community ~~with~~to its ~~current~~ carrying value. If the aggregate undiscounted cash flows ~~from our quantitative analyses~~ are in excess of the carrying value, the asset is considered to be recoverable and is not impaired. If the carrying value exceeds the aggregate undiscounted cash flows, ~~are less than the carrying value,~~ we perform a discounted cash flow analysis to determine the fair value of the ~~community.~~community, and impairment charges are recorded if the fair value of the community's inventory is less than its carrying value.

We performed our quarterly inventory impairment assessment for the quarter ended March 31, 2021 taking into consideration the qualitative and quantitative factors discussed above, and determined that no community required a formal impairment analysis (projected cash flow analysis).

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No project in progress ~~impairment charges~~impairments were recognized during the three and six months ended March 31, 2022 and 2021, ~~and 2020,~~ respectively. ~~However, because~~

Land Held for Sale Impairments

We evaluate the ~~full magnitude and duration~~net realizable value of ~~the COVID-19 pandemic is uncertain and difficult to predict, changes in our cash flow projections may change our conclusions on the recoverability~~a land held for sale asset when indicators of inventory in the future, and we may recognize charges in future periods for inventory impairments related to our current inventory assets. Any such charges could be material to our consolidated financial statements.

impairment are present. Impairments on land held for sale generally represent write downs of these properties to net realizable value based on sales contracts, letters of intent, current market conditions, and recent comparable land sale transactions, as applicable. Absent an executed sales contract, our assumptions related to land sales prices require significant judgment because the real estate market is highly sensitive to changes in economic conditions, and our estimates of sale prices could differ significantly from actual results. ~~There were no~~

We recognized $0.4 million land held for sale ~~impairment charges~~impairments during the three and six months ended March 31, 2022 related to one held for sale community in the West segment. No land held for sale impairments were recognized during the three and six months ended March 31, ~~2021 and~~ ~~2020, respectively.~~2021.

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Abandonments

From time-to-time, we may determine to abandon lots or not exercise certain option contracts that are not projected to produce adequate results or no longer fit with our long-term strategic plan. Additionally, in certain limited instances, we are forced to abandon lots due to seller non-performance, or permitting or other regulatory issues that do not allow us to build on those lots. If we intend to abandon or walk away from a property, we record an abandonment charge to earnings for the deposit amount and any related capitalized costs in the period such decision is made. ~~During the quarter ended December 31, 2020, we~~

We recognized $0.5 million abandonment charges during the three and six months ended March 31, 2022 related to one under contract deal in the ~~East reportable~~West segment ~~related to 1~~and one under contract ~~land acquisition~~ deal in the Southeast segment that we decided to terminate. ~~There were 0 such~~During the three months ended March 31, 2021, no abandonment charges ~~during~~were recognized. During the ~~quarter ended March 31, 2021 or the three and~~ six months ended March 31, ~~2020.~~2021, w

e recognized $0.5 million abandonment charges in the East segment related to one under contract deal that we decided to terminate.

Lot Option Agreements ~~and Variable Interest Entities (VIE)~~

~~As previously discussed,~~In addition to purchasing land directly, we ~~also have access to land inventory through~~utilize lot option ~~contracts, which generally~~agreements that enable us to defer acquiring portions of properties owned by third parties and unconsolidated entities until we have determined whether to exercise our lot option. The majority of our lot option ~~contracts~~agreements require a non-refundable cash deposit or irrevocable letter of credit based on a percentage of the purchase price of the land for the right to acquire lots during a specified period ~~of time~~ at a specified price. ~~Under lot option contracts, purchase~~Purchase of the properties under these agreements is contingent upon satisfaction of certain requirements by us and the sellers. ~~Our~~Under lot option agreements, our liability ~~under option contracts~~ is generally limited to forfeiture of the non-refundable deposits, letters of credit and other non-refundable amounts incurred. If the Company cancels a lot option agreement, it would result in a write-off of the related deposits and pre-acquisition costs, but would not expose the Company to the overall risks or losses of the applicable entity we are purchasing from. We expect to exercise, subject to market conditions and seller satisfaction of contract terms, most of our remaining option contracts. Various factors, some of which are beyond our control, such as market conditions, weather conditions, and the timing of the completion of development activities, will have a significant impact on the timing of option exercises or whether lot options will be exercised at all.

The following table provides a summary of our interests in lot option agreements as of March 31, ~~2021~~2022 and September 30, ~~2020:~~2021:


in thousands	in thousands	Deposits & Non-refundable Pre-acquisition Costs Incurred		Remaining Obligation		in thousands	Deposits & Non-refundable Pre-acquisition Costs Incurred (a)		Remaining Obligation, Net of Deposits
As of March 31, 2021
As of March 31, 2022						As of March 31, 2022

Unconsolidated lot option agreements	Unconsolidated lot option agreements	$	93,346	$	567,424	Unconsolidated lot option agreements	$	131,971	$	772,584

As of September 30, 2020
As of September 30, 2021						As of September 30, 2021

Unconsolidated lot option agreements	Unconsolidated lot option agreements	$	75,921	$	395,133	Unconsolidated lot option agreements	$	114,688	$	676,149

(a) Amount is included as a component of land under development within our owned inventory in the condensed consolidated balance sheet.

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(6) Interest

Interest capitalized during the three and six months ended March 31, ~~2021~~2022 and ~~2020~~2021 was limited by the balance of inventory eligible for capitalization. The following table presents certain information regarding interest for the periods presented:


		Three Months Ended March 31,				Six Months Ended March 31,					Three Months Ended March 31,				Six Months Ended March 31,
in thousands	in thousands	2021		2020		2021		2020		in thousands	2022		2021		2022		2021
Capitalized interest in inventory, beginning of period	Capitalized interest in inventory, beginning of period	$	119,148	$	137,010	$	119,659	$	136,565	Capitalized interest in inventory, beginning of period	$	110,516	$	119,148	$	106,985	$	119,659
Interest incurred	Interest incurred	19,345		22,271		39,247		43,827		Interest incurred	18,253		19,345		36,564		39,247

Interest expense not qualified for capitalization and included as other expense (a)	Interest expense not qualified for capitalization and included as other expense (a)	(969)		(1,928)		(2,569)		(3,370)		Interest expense not qualified for capitalization and included as other expense (a)	—		(969)		—		(2,569)
Capitalized interest amortized to home construction and land sales expenses (b)	Capitalized interest amortized to home construction and land sales expenses (b)	(24,110)		(22,660)		(42,923)		(42,329)		Capitalized interest amortized to home construction and land sales expenses (b)	(16,083)		(24,110)		(30,863)		(42,923)
Capitalized interest in inventory, end of period	Capitalized interest in inventory, end of period	$	113,414	$	134,693	$	113,414	$	134,693	Capitalized interest in inventory, end of period	$	112,686	$	113,414	$	112,686	$	113,414

(a) The amount of interest capitalized depends on the qualified inventory balance, which considers the status of the Company's inventory holdings. Qualified inventory balance includes the majority of homes under construction and land under development ~~projects in progress~~ but excludes land held for future development and land held for sale.

(b) Capitalized interest amortized to home construction and land sales expenses varies based on the number of homes closed during the period and land sales, if any, as well as other factors.

1314

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(7) Borrowings

The Company's debt, net of unamortized debt issuance costs consisted of the following as of March 31, ~~2021~~2022 and September 30, ~~2020:~~2021:


in thousands	in thousands	Final Maturity Date	March 31, 2021		September 30, 2020		in thousands	Maturity Date	March 31, 2022		September 30, 2021
Senior Unsecured Term Loan (Term Loan)		September 2022	$	100,000	$	100,000
Senior Unsecured Term Loan							Senior Unsecured Term Loan	September 2022	$	50,000	$	50,000
6 3/4% Senior Notes (2025 Notes)	6 3/4% Senior Notes (2025 Notes)	March 2025	229,555		229,555		6 3/4% Senior Notes (2025 Notes)	March 2025	229,555		229,555
5 7/8% Senior Notes (2027 Notes)	5 7/8% Senior Notes (2027 Notes)	October 2027	384,255		394,000		5 7/8% Senior Notes (2027 Notes)	October 2027	357,255		363,255
7 1/4% Senior Notes (2029 Notes)	7 1/4% Senior Notes (2029 Notes)	October 2029	350,000		350,000		7 1/4% Senior Notes (2029 Notes)	October 2029	350,000		350,000

Unamortized debt issuance costs	Unamortized debt issuance costs		(9,979)		(10,891)		Unamortized debt issuance costs		(8,151)		(8,983)
Total Senior Notes, net	Total Senior Notes, net		1,053,831		1,062,664		Total Senior Notes, net		978,659		983,827
Junior Subordinated Notes (net of unamortized accretion of $31,603 and $32,636, respectively)		July 2036	69,170		68,137
Junior Subordinated Notes (net of unamortized accretion of $29,536 and $30,570, respectively)							Junior Subordinated Notes (net of unamortized accretion of $29,536 and $30,570, respectively)	July 2036	71,236		70,203

Revolving Credit Facility	Revolving Credit Facility	February 2023	0		0		Revolving Credit Facility	February 2024	—		—

Total debt, net	Total debt, net		$	1,123,001	$	1,130,801	Total debt, net		$	1,049,895	$	1,054,030

Secured Revolving Credit Facility

The Secured Revolving Credit Facility (the Facility) provides working capital and letter of credit capacity of $250.0 million. The Facility is currently with 4 lenders. For additional discussion of the Facility, refer to Note 8 to the audited consolidated financial statements within our ~~2020~~2021 Annual Report.

On October 8, 2020, the Company executed a Ninth Amendment to the Facility. The Ninth Amendment (1) extended the termination date of the Facility from February 15, 2022 to February 15, 2023; (2) permits the maximum aggregate amount of commitments under the Credit Agreement to be increased to up to $300.0 million pursuant to one or more additional incremental increases, subject to the approval of any lenders providing such increases; and (3) revises the minimum liquidity covenant such that if the interest coverage ratio is greater than or equal to 1.00 to 1.00 and the housing collateral ratio is greater than or equal to 1.75 to 1.00, the Company is required to maintain minimum liquidity of $50.0 million; and in all other cases, the Company is required to maintain minimum liquidity of $100.0 million.

As of March 31, 2022 and September 30, 2021, 0no borrowings and 0no letters of credit were outstanding under the Facility, resulting in ~~$250.0~~a remaining capacity of $250.0 million ~~remaining capacity. As of September 30, 2020, 0 borrowings and 0 letters of credit were outstanding under the Facility.~~. The Facility requires compliance with certain covenants, including negative covenants and financial covenants. As of March 31, ~~2021,~~2022, the Company believes it was in compliance with all such covenants.

Senior Unsecured Term Loan

On September 9, 2019, the Company entered into a term loan agreement, which provides for a Senior Unsecured Term Loan (the Term Loan). The principal balance as of March 31, ~~2021~~2022 was ~~$100.0~~$50.0 million. The Term Loan (1) will mature in September 2022, with the remaining $50.0 million annual repayment ~~installments~~installment due in ~~September 2021 and~~ September 2022; (2) bears interest at a fixed rate of 4.875%; and (3) includes an option to prepay, subject to certain conditions and the payment of certain premiums. The Term Loan contains covenants generally consistent with the covenants contained in the Facility. As of March 31, ~~2021,~~2022, the Company believes it was in compliance with all such covenants.

Letter of Credit Facilities

The Company has entered into stand-alone, cash-secured letter of credit agreements with banks to maintain pre-existing letters of credit and to provide for the issuance of new letters of credit (in addition to the letters of credit issued under the Facility). As of March 31, ~~2021~~2022 and September 30, ~~2020,~~2021, the Company had letters of credit outstanding under these additional facilities of $~~12.4~~26.4 million and ~~$12.7~~$21.8 million, respectively, all of which were secured by cash collateral in restricted ~~accounts.~~accounts totaling $26.1 million and $22.3 million, respectively. The Company may enter into additional arrangements to provide additional letter of credit capacity.

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In May 2018, the Company entered into a reimbursement agreement, which provides for the issuance of performance letters of credit, and an unsecured credit agreement that provides for the issuance of up to $50.0 million of ~~standby~~standby letters of credit to backstop the Company's obligations under the reimbursement agreement (collectively, the "Bilateral Facility"). ~~On June 17, 2020, the Company executed an Amendment No. 1 to the~~The Bilateral Facility ~~that extends the termination date of the agreement from June 10, 2021 to~~will terminate on June 10, 2022. As of March 31, ~~2021,~~2022, the total stated amount of performance letters of credit issued under the reimbursement agreement ~~was~~was $~~24.7~~8.2 million (and the stated amount of the backstop standby letter of credit issued under the credit agreement was $40.0 million~~$40.0 million)~~). The Company may enter into additional arrangements to provide greater letter of credit capacity.

Senior Notes

The Company's Senior Notes are unsecured obligations ranking pari passu with all other existing and future senior indebtedness. Substantially all of the Company's significant subsidiaries are full and unconditional guarantors of the Senior Notes and are jointly and severally liable for obligations under the Senior Notes and the Facility. Each guarantor subsidiary is a 100% owned subsidiary of Beazer Homes.

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All unsecured Senior Notes rank equally in right of payment with all existing and future senior unsecured obligations, senior to all of the Company's existing and future subordinated indebtedness and effectively subordinated to the Company's existing and future secured indebtedness, including indebtedness under the Facility, if outstanding, to the extent of the value of the assets securing such indebtedness. The unsecured Senior Notes and related guarantees are structurally subordinated to all indebtedness and other liabilities of all of the Company's subsidiaries that do not guarantee these notes but are fully and unconditionally guaranteed jointly and severally on a senior basis by the Company's wholly-owned subsidiaries party to each applicable indenture.

The Company's Senior Notes are issued under indentures that contain certain restrictive covenants which, among other things, restrict our ability to pay dividends, repurchase our common stock, incur certain types of additional indebtedness, and make certain investments. Compliance with the Senior Note covenants does not significantly impact the Company's operations. The Company believes it was in compliance with the covenants contained in the indentures of all of its Senior Notes as of March 31, ~~2021.~~2022.

During the three and six months ended March 31, ~~2021,~~2022, we repurchased ~~$9.7~~$6.0 million of our outstanding 2027 Notes using cash on hand, resulting in a loss on extinguishment of debt of ~~$0.6~~$0.2 million.

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For additional redemption features, refer to the table below that summarizes the redemption terms of our Senior Notes:

Senior Note Description

Issuance Date

Maturity Date

Redemption Terms

6 3/4% Senior Notes

March 2017

March 2025

On or prior to March 15, 2020, we may redeem up to 35% of the aggregate principal amount of the 2025 Notes with the net cash proceeds of certain equity offerings at a redemption price equal to 106.750% of the principal amount, plus accrued and unpaid interest to, but excluding, the redemption date, provided at least 65% of the aggregate principal amount of the 2025 Notes originally issued remains outstanding immediately after such redemption.

Callable at any time prior to March 15, 2020, in whole or in part, at a redemption price equal to 100.000% of the principal amount, plus a customary make-whole premium; on or after March 15, 2020, callable at a redemption price equal to 105.063% of the principal amount; on or after March 15, 2021, callable at a redemption price equal to 103.375% of the principal amount; on or after March 15, 2022, callable at a redemption price equal to 101.688% of the principal amount; on or after March 15, 2023, callable at a redemption price equal to 100.000% of the principal amount, plus, in each case, accrued and unpaid interest.

5 7/8% Senior Notes

October 2017

October 2027

On or prior to October 15, 2022, we may redeem up to 35% of the aggregate principal amount of the 2027 Notes with the net cash proceeds of certain equity offerings at a redemption price equal to 105.875% of the principal amount, plus accrued and unpaid interest to, but excluding, the redemption date, provided at least 65% of the aggregate principal amount of the 2027 Notes originally issued remains outstanding immediately after such redemption.

Callable at any time prior to October 15, 2022, in whole or in part, at a redemption price equal to 100.000% of the principal amount, plus a customary make-whole premium; on or after October 15, 2022, callable at a redemption price equal to 102.938% of the principal amount; on or after October 15, 2023, callable at a redemption price equal to 101.958% of the principal amount; on or after October 15, 2024, callable at a redemption price equal to 100.979% of the principal amount; on or after October 15, 2025, callable at a redemption price equal to 100.000% of the principal amount, plus, in each case, accrued and unpaid interest.

7 1/4% Senior Notes

September 2019

October 2029

On or prior to October 15, 2022, we may redeem up to 35% of the aggregate principal amount of the 2029 Notes with the net cash proceeds of certain equity offerings at a redemption price equal to 107.250% of the principal amount, plus accrued and unpaid interest to, but excluding, the redemption date, provided at least 65% of the aggregate principal amount of the 2029 Notes originally issued remains outstanding immediately after such redemption.

Callable at any time prior to October 15, 2024, in whole or in part, at a redemption price equal to 100.000% of the principal amount, plus a customary make-whole premium; on or after October 15, 2024, callable at a redemption price equal to 103.625% of the principal amount; on or after October 15, 2025, callable at a redemption price equal to 102.417% of the principal amount; on or after October 15, 2026, callable at a redemption price equal to 101.208% of the principal amount; on or after October 15, 2027, callable at a redemption price equal to 100.000% of the principal amount, plus, in each case, accrued and unpaid interest.

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Junior Subordinated Notes

The Company's unsecured junior subordinated notes (Junior Subordinated Notes) mature on July 30, 2036 and have an aggregate principal balance of $100.8 million as of March 31, ~~2021.~~2022. The securities have a floating interest rate as defined in the Junior Subordinated Notes Indentures, ~~which~~which was a weighted-average of ~~3.84%~~3.87% as of March 31, ~~2021.~~2022. The obligations relating to these notes are subordinated to the Facility and the Senior Notes. In January 2010, the Company restructured $75.0 million of these notes and recorded them at their then estimated fair value. Over the remaining life of the ~~Junior Subordinated Notes,~~restructured notes, we will increase their carrying value until this carrying value equals the face value of the notes. As of March 31, ~~2021,~~2022, the unamortized accretion was ~~$31.6~~$29.5 million and will be amortized over the remaining life of the restructured notes. The remaining $25.8 million of these notes are subject to the terms of the original agreement, have a floating interest rate equal to three-month LIBOR plus 2.45% per annum, resetting quarterly, and are redeemable in whole or in part at par value. The material terms of the $75.0 million restructured notes are identical to the terms of the original agreement except that the floating interest rate is subject to a a floor of 4.25% and a cap of 9.25%. In addition, beginning on June 1, 2012, the Company has the option to redeem the $75.0 million principal balance in whole or in part at 75% of par value; beginning on June 1, 2022, the redemption price will increase by 1.785% annually. As of March 31, ~~2021,~~2022, the Company believes it was in compliance with all covenants under the Junior Subordinated Notes.

(8) Operating Leases

The Company leases certain office space and equipment under operating leases for use in our operations. We recognize operating lease expense on a straight-line basis over the lease term. Certain of our lease agreements include one or more options to renew. The exercise of lease renewal options is generally at our discretion. Variable lease expense primarily relates to maintenance and other monthly expense that do not depend on an index or rate.

We determine if an arrangement is a lease at contract inception. Lease and non-lease components are accounted for as a single component for all leases. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the expected lease term, which includes optional renewal periods if we determine it is reasonably certain that the option will be exercised. As our leases do not provide an implicit rate, the discount rate used in the present value calculation represents our incremental borrowing rate determined using information available at the commencement date.

Operating lease expense is included as a component of general and administrative expenses in our condensed consolidated statements of operations. Sublease income and variable lease expenses are de minimis. For the three and six months ended March 31, 2022 and 2021, ~~we recorded~~ operating lease expense ~~of $1.1 million~~ and ~~$2.2 million, respectively. Cash~~cash payments on lease liabilities ~~during the three and six months ended March 31, 2021 totaled $1.1 million and $2.5 million, respectively. Sublease income and variable lease expenses are de minimis.~~were as follows:

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	Three Months Ended March 31,				Six Months Ended March 31,
in thousands	2022		2021		2022		2021
Operating lease expense	$	979	$	1,085	$	1,978	$	2,173
Cash payments on lease liabilities	$	1,090	$	1,167	$	2,176	$	2,519

At March 31, 2022 and 2021, the weighted-average remaining lease term and discount rate were as follows:


~~Weighted-average remaining lease term~~									~~5.0 years~~
~~Weighted-average discount rate~~									~~4.76%~~


	As of March 31,
	2022	2021
Weighted-average remaining lease term	4.6 years	5.0 years
Weighted-average discount rate	4.42%	4.76%

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The following is a maturity analysis of the annual undiscounted cash flows reconciled to the carrying value of the operating lease liabilities as of March 31, ~~2021:~~2022:


Fiscal Years Ending September 30,	Fiscal Years Ending September 30,			Fiscal Years Ending September 30,
in thousands	in thousands			in thousands
2021 (a)		$	2,225
2022		4,053
2022 (a)				2022 (a)	$	2,158
2023	2023	3,254		2023	3,719
2024	2024	2,121		2024	2,601
2025	2025	1,824		2025	2,257
2026				2026	1,643
Thereafter	Thereafter	3,000		Thereafter	1,928
Total lease payments ~~(b)~~	Total lease payments ~~(b)~~	16,477		Total lease payments ~~(b)~~	14,306
Less: Imputed interest	Less: Imputed interest	1,874		Less: Imputed interest	1,394
Total operating lease liabilities	Total operating lease liabilities	$	14,603	Total operating lease liabilities	$	12,912

(a) Remaining lease payments are for the period beginning April 1, ~~2021~~2022 through September 30, ~~2021.~~2022.

~~(b)~~ ~~Lease payments excludes~~ ~~$1.3 million~~ legally binding minimum lease payments for office leases signed but not yet commenced at March 31, 2021. The related ROU asset and operating lease liability are not reflected on the Company's condensed consolidated balance sheet as of March 31, 2021.

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(9) Contingencies

Beazer Homes and certain of its subsidiaries have been and continue to be named as defendants in various construction defect claims, complaints, and other legal actions. The Company is subject to the possibility of loss contingencies related to these defects as well as others arising from its business. In determining loss contingencies, we consider the likelihood of loss and our ability to reasonably estimate the amount of such loss. An estimated loss is recorded when it is considered probable that a liability has been incurred and the amount of loss can be reasonably estimated.

Warranty Reserves

We currently provide a limited warranty ranging from one to two years covering workmanship and materials per our defined quality standards. In addition, we provide a limited warranty for up to ten years covering only certain defined structural element failures.

Our homebuilding work is performed by subcontractors who typically must agree to indemnify us with regard to their work and provide certificates of insurance demonstrating that they have met our insurance requirements and have named us as an additional insured under their policies. Therefore, many claims relating to workmanship and materials that result in warranty spending are the primary responsibility of these subcontractors. ~~In addition, we maintain insurance coverage related to our construction efforts that can result in recoveries of warranty and construction defect costs above certain specified limits.~~

Warranty reserves are included in other liabilities within the condensed consolidated balance sheets, and the provision for warranty accruals is included in home construction expenses in the condensed consolidated statements of operations. Reserves covering anticipated warranty expenses are recorded for each home closed. Management assesses the adequacy of warranty reserves each reporting period based on historical experience and the expected costs to remediate potential claims. Our review includes a quarterly analysis of the historical data and trends in warranty expense by division. ~~Such~~An analysis ~~considers~~by division allows us to consider market-specific factors such as warranty experience, the number of home closings, the prices of homes, product mix, and other data in estimating warranty reserves. In addition, the analysis also contemplates the existence of any non-recurring or community-specific warranty-related matters that might not be included in historical data and ~~trends.~~trends that may need to be separately estimated based on management's judgment of the ultimate cost of repair for that specific issue. While estimated warranty liabilities are adjusted each reporting period based on the results of our quarterly analyses, we may not accurately predict actual warranty costs, which could lead to significant changes in the reserve.

In addition, we maintain third-party insurance, subject to applicable self-insured retentions, for most construction defects that we encounter in the normal course of business. We believe that our warranty and litigation accruals and third-party insurance are adequate to cover the ultimate resolution of our potential liabilities associated with known and anticipated warranty and construction defect related claims and litigation. However, there can be no assurance that the terms and limitations of the limited warranty will be effective against claims made by homebuyers; that we will be able to renew our insurance coverage or renew it at reasonable rates; that we will not be liable for damages, the cost of repairs, and/or the expense of litigation surrounding possible construction defects, soil subsidence, or building related claims; or that claims will not arise out of events or circumstances not covered by insurance and/or not subject to effective indemnification agreements with our subcontractors.

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Changes in warranty reserves are as follows for the periods presented:


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		March 31,				March 31,					March 31,				March 31,
in thousands	in thousands	2021		2020		2021		2020		in thousands	2022		2021		2022		2021
Balance at beginning of period	Balance at beginning of period	$	12,616	$	12,646	$	13,052	$	13,388	Balance at beginning of period	$	12,743	$	12,616	$	12,931	$	13,052
Accruals for warranties issued (a)	Accruals for warranties issued (a)	2,783		2,707		5,037		4,372		Accruals for warranties issued (a)	2,811		2,783		5,183		5,037
Changes in liability related to warranties existing in prior periods		(57)		(1,151)		320		(1,084)
Net changes in liability related to warranties existing in prior periods										Net changes in liability related to warranties existing in prior periods	(512)		(57)		22		320
Payments made	Payments made	(2,921)		(2,144)		(5,988)		(4,618)		Payments made	(2,361)		(2,921)		(5,455)		(5,988)
Balance at end of period	Balance at end of period	$	12,421	$	12,058	$	12,421	$	12,058	Balance at end of period	$	12,681	$	12,421	$	12,681	$	12,421

(a) Accruals for warranties issued are a function of the number of home closings in the period, the selling prices of the homes closed, and the rates of accrual per home estimated as a percentage of the selling price of the home.

Insurance Recoveries

The Company has insurance policies that provide for the reimbursement of certain warranty costs incurred above specified thresholds for each period covered. Amounts recorded for anticipated insurance recoveries are reflected within the condensed consolidated statements of income as a reduction of home construction expenses. Amounts not yet received from our insurer are recorded on a gross basis, without any reduction for the associated warranty expense, within accounts receivable on our condensed consolidated balance sheets.

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Litigation

In the normal course of business, we and certain of our subsidiaries are subject to various ~~lawsuits.~~ lawsuits and have been named as defendants in various claims, complaints, and other legal actions, most relating to construction defects, moisture intrusion, and product liability. Certain of the liabilities resulting from these actions are covered in whole or in part by insurance.

We cannot predict or determine the timing or final outcome of these lawsuits or the effect that any adverse findings or determinations in pending lawsuits may have on us. In addition, an estimate of possible loss or range of loss, if any, cannot presently be made with respect to certain of these pending matters. An unfavorable determination in any of the pending lawsuits could result in the payment by us of substantial monetary damages that may not be fully covered by insurance. Further, the legal costs associated with the lawsuits and the amount of time required to be spent by management and our Board of Directors on these matters, even if we are ultimately successful, could have a material adverse effect on our financial condition, results of operations, or cash flows.

~~Claims Related to Inventory Impairment Charges.~~ During the quarter ended March 31, 2019, we recognized inventory impairment charges related to 15 communities in California, all of which were previously land held for future development assets. Related to these inventory impairment charges, on June 5, 2019, a putative class action lawsuit was filed against Beazer Homes USA, Inc. and certain of our officers in the U.S. District Court for the Southern District of New York. The proposed class consisted of all persons and entities that acquired our securities between August 1, 2014 and May 2, 2019. On October 18, 2019, the plaintiffs filed a notice of voluntary dismissal of this case, and the Court subsequently entered an order dismissing the case.

Beginning June 25, 2019, several shareholder derivative lawsuits relating to the same inventory impairment charges discussed above were filed against Beazer Homes USA, Inc., certain of our officers and members of our Board of Directors in the U.S. District Court for the Northern District of Georgia. The plaintiffs in these cases allege breaches of fiduciary duty, unjust enrichment and violations of the federal securities laws. These federal actions have been consolidated into a single derivative action. Additionally, a substantially similar derivative action has been filed in the Superior Court of Fulton County, Georgia. The plaintiffs in each of these actions seek, among other things, monetary damages, disgorgement of profits and attorneys’ and experts’ fees, but do not specify any specific amounts. On October 5, 2020, the Court granted a motion to dismiss the consolidated federal action but provided the plaintiffs an opportunity to attempt to amend their complaint. An amended complaint was filed in late October, and a motion to dismiss was filed thereafter. On March 30, 2021, the Court granted the motion to dismiss and dismissed the plaintiffs’ claims with prejudice. This decision remains subject to the plaintiffs' appellate rights.

~~Other Matters~~

We and certain of our subsidiaries have been named as defendants in various claims, complaints, and other legal actions, most relating to construction defects, moisture intrusion, and product liability. Certain of the liabilities resulting from these actions are covered in whole or in part by insurance. In our opinion, based on our current assessment, the ultimate resolution of these matters will not have a material adverse effect on our financial condition, results of operations, or cash flows.

We have an accrual of ~~$4.2~~$8.5 million and ~~$5.0~~$8.3 million in other liabilities on our condensed consolidated balance sheets related to litigation ~~and other~~ matters ~~excluding warranty,~~ as of March 31, ~~2021~~2022 and September 30, ~~2020,~~2021, respectively.

Surety Bonds and Letters of Credit

We had outstanding letters of credit and surety bonds of ~~approximately~~ ~~$37.1~~$34.6 million and $~~249.9~~272.6 million, respectively, as of March 31, ~~2021,~~2022, related principally to our obligations to local governments to construct roads and other improvements in various developments.

(10) Fair Value Measurements

As of the dates presented, we had assets on our condensed consolidated balance sheets that were required to be measured at fair value on a recurring or non-recurring basis. We use a fair value hierarchy that requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value as follows:

•Level 1 – Quoted prices in active markets for identical assets or liabilities;

•Level 2 – Inputs other than quoted prices included in Level 1 that are observable either directly or indirectly through corroboration with market data; and

•Level 3 – Unobservable inputs that reflect our own estimates about the assumptions market participants would use in pricing the asset or liability.

~~Certain of our assets are required to be recorded at fair value on a recurring basis. The fair value of our deferred compensation plan assets is based on market-corroborated inputs (Level 2).~~

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Certain of our assets are required to be recorded at fair value on a non-recurring basis when events and circumstances indicate that the carrying value of these assets may not be recovered. We review our long-lived assets, including inventory, for recoverability when factors indicate an impairment may exist, but no less than quarterly. Fair value on assets deemed to be impaired is determined based upon the type of asset being evaluated. Fair value of our owned inventory assets, when required to be calculated, is further discussed within ~~Notes 2 and~~Note 5. ~~The fair value of our investments in unconsolidated entities is determined primarily using a discounted cash flow model to value the underlying net assets of the respective entities.~~ Due to the substantial use of unobservable inputs in valuing the assets on a non-recurring basis, they are classified within Level 3.

During the three and six months ended March 31, ~~2021 and~~ ~~2020~~2022, we recognized 0$0.4 million impairments on land held for sale. No impairments on projects in ~~process~~progress or land held for ~~sale.~~sale were recognized during the the three and six months ended March 31, 2021.

Determining within which hierarchical level an asset or liability falls requires significant judgment. We evaluate our hierarchy disclosures each quarter.

The following table presents the period-end balances of our assets measured at fair value on a recurring basis and the ~~impairment-date~~impairment date fair value of certain assets measured at fair value on a non-recurring basis for each hierarchy level. These balances represent only those assets whose carrying values were adjusted to fair value during the periods presented:


in thousands	in thousands	Level 1		Level 2		Level 3			Total		in thousands	Level 1		Level 2		Level 3			Total
As of March 31, 2021
As of March 31, 2022											As of March 31, 2022

Deferred compensation plan assets (a)	Deferred compensation plan assets (a)	$	0	$	2,610	$	0		$	2,610	Deferred compensation plan assets (a)	$	—	$	3,020	$	—		$	3,020

As of September 30, 2020
Land held for sale (b)											Land held for sale (b)	$	—	$	—	$	250	(c)	$	250
As of September 30, 2021											As of September 30, 2021
Deferred compensation plan assets (a)	Deferred compensation plan assets (a)	$	0	$	2,339	$	0		$	2,339	Deferred compensation plan assets (a)	$	—	$	2,730	$	—		$	2,730

Land held for sale (b)		0		0		6,240		(c)	6,240

(a) Measured at fair value on a recurring ~~basis.~~basis using market-corroborated inputs.

(b)Measured at fair value on a non-recurring basis, ~~including the capitalized interest and indirect costs related~~refer to ~~the asset.~~Note 5 for further discussion.

(c)Amount represents the impairment-date fair value of the land held for sale assets that were impaired during the period indicated.

The fair value of cash and cash equivalents, restricted cash, accounts receivable, trade accounts payable, other liabilities, and amounts due under the Facility (if outstanding) approximate their carrying amounts due to the short maturity of these assets and liabilities. When outstanding, obligations related to land not owned under option agreements approximate fair value.

The following table presents the carrying value and estimated fair value of certain other financial liabilities as of March 31, ~~2021~~2022 and September 30, ~~2020:~~2021:


		As of March 31, 2021				As of September 30, 2020					As of March 31, 2022				As of September 30, 2021
in thousands	in thousands	Carrying Amount (a)		Fair Value		Carrying Amount (a)		Fair Value		in thousands	Carrying Amount (a)		Fair Value		Carrying Amount (a)		Fair Value
Senior Notes and Term Loan (b)	Senior Notes and Term Loan (b)	$	1,053,831	$	1,127,303	$	1,062,664	$	1,098,117	Senior Notes and Term Loan (b)	$	978,659	$	981,144	$	983,827	$	1,046,965
Junior Subordinated Notes (c)	Junior Subordinated Notes (c)	69,170		69,170		68,137		68,137		Junior Subordinated Notes (c)	71,236		71,236		70,203		70,203
Total	Total	$	1,123,001	$	1,196,473	$	1,130,801	$	1,166,254	Total	$	1,049,895	$	1,052,380	$	1,054,030	$	1,117,168

(a) Carrying amounts are net of unamortized debt issuance costs oror accretion.

(b) The estimated fair value for our publicly-held Senior Notes and the Term Loan have been determined using quoted market rates (Level 2).

(c) Since there is no trading market for our Junior Subordinated Notes, the fair value of these notes is estimated by discounting scheduled cash flows through maturity (Level 3). The discount rate is estimated using market rates currently being offered on loans with similar terms and credit quality. Judgment is required in interpreting market data to develop these estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we could realize in a current market exchange.

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(11) Income Taxes

Income Tax Provision

The Company's income tax provision for quarterly interim periods is based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent, or unusual items. Income tax expense from continuing operations was $10.1 million and $16.5 million for the three and six months ended March 31, 2022, compared to $7.7 million and $11.8 million for the three and six months ended March 31, ~~2021, compared to $4.2 million and $4.0 million~~2021. Income tax expense for the ~~three and~~ six months ended March 31, ~~2020.~~2022 was substantially driven by (1) income from continuing operations, partially offset by (2) the completion of work necessary to claim an additional $6.2 million in energy efficiency tax credits related to homes closed in prior fiscal years, and (3) the discrete impact related to stock-based compensation expense as a result of current period activity. Income tax expense for the six months ended March 31, 2021 was substantially driven by (1) income from continuing operations, and (2) the discrete impact related to stock-based compensation expense as a result of current period activity. Income tax expense for the six months ended March 31, 2020 was primarily driven by (1) income from continuing operations, partially offset by (2) the completion of work necessary to claim an additional $0.8 million in tax credits related to prior fiscal years, and (3) the discrete impact related to stock-based compensation expense as a result of current period activity.

Deferred Tax Assets and Liabilities

The Company continues to evaluate its deferred tax assets each period to determine if a valuation allowance is required based on whether it is more likely than not that some portion of these deferred tax assets will not be realized. As of March 31, ~~2021, managemen~~t2022, management concluded that it is more likely than not that a substantial portion of our deferred tax assets will be realized. As part of our analysis, we considered both positive and negative factors that impact profitability and whether those factors would lead to a change in the estimate of our deferred tax assets that may be realized in the future. As we continue to monitor the impacts of the COVID-19 pandemic on our business, any sustained or prolonged reductions in future earnings periods may change our conclusions on whether we are more likely than not to realize portions of our deferred tax assets. At this time, our conclusions on the valuation allowance and Internal Revenue Code Section 382 limitations related to our deferred tax as~~sets~~assets remain consistent with the determinations we made during the period ended September 30, ~~2020,~~2021, and such conclusions are based on similar company specific and industry factors to those discussed in Note 13 to the audited consolidated financial statements within our ~~2020~~2021 Annual Report.

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(12) Stock-based Compensation

Stock-based compensation expense is included in general and administrative expenses in the condensed consolidated statements of operations. Following is a summary of stock-based compensation expense related to stock options and restricted stock awards for the three and six months ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively.


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		March 31,				March 31,					March 31,				March 31,
in thousands	in thousands	2021		2020		2021		2020		in thousands	2022		2021		2022		2021
Stock-based compensation expense	Stock-based compensation expense	$	2,549	$	899	$	6,060	$	3,210	Stock-based compensation expense	$	2,424	$	2,549	$	4,532	$	6,060

Stock Options

Following is a summary of stock option activity for the six months ended March 31, ~~2021:~~2022:


		Six Months Ended				Six Months Ended
		March 31, 2021				March 31, 2022
		Shares	Weighted Average Exercise Price			Shares	Weighted Average Exercise Price
Outstanding at beginning of period	Outstanding at beginning of period	392,465	$	15.47	Outstanding at beginning of period	114,259	$	17.89

Granted					Granted	236	16.58
Exercised	Exercised	(167,435)	13.03		Exercised	(788)	12.32

Expired					Expired	(86,000)	19.11

Outstanding at end of period	Outstanding at end of period	225,030	$	17.81	Outstanding at end of period	27,707	$	14.26
Exercisable at end of period	Exercisable at end of period	218,528	$	18.05	Exercisable at end of period	27,471	$	14.24

As of both March 31, ~~2021~~2022 and September 30, ~~2020,~~2021, there was less than $0.1 million of total unrecognized compensation costs related to unvested stock ~~options were less than $0.1 million.~~options. The costs remaining ~~costs~~ as of March 31, ~~2021~~2022 are expected to be recognized over a weighted-average period of ~~0.59~~1.94 years.

Restricted Stock Awards

During the six months ended March 31, ~~2021,~~2022, the Company issued time-based and performance-based restricted stock awards. The time-based restricted shares granted to our non-employee directors vest on the first anniversary of the grant, while the time-based restricted shares granted to our executive officers and other employees generally vest ratably over two to three years from the date of grant. Performance-based restricted share awards vest subject to the achievement of performance and market conditions over a three-year performance period.

Following is a summary of restricted stock activity for the six months ended March 31, ~~2021:~~2022:


		Six Months Ended March 31, 2021				Six Months Ended March 31, 2022
		Performance-Based Restricted Shares	Time-Based Restricted Shares	Total Restricted Shares		Performance-Based Restricted Shares	Time-Based Restricted Shares	Total Restricted Shares
Beginning of period	Beginning of period	796,024	610,130	1,406,154	Beginning of period	738,155	486,574	1,224,729
Granted (a)	Granted (a)	164,296	246,550	410,846	Granted (a)	269,617	246,844	516,461
Vested	Vested	(222,165)	(278,411)	(500,576)	Vested	(552,417)	(279,277)	(831,694)
Forfeited	Forfeited	0	(15,490)	(15,490)	Forfeited	(18,158)	(28,298)	(46,456)
End of period	End of period	738,155	562,779	1,300,934	End of period	437,197	425,843	863,040

(a) Each of our ~~performance-based restricted share represents~~performance shares represent a contingent right to receive one share of the Company's common stock if vesting is satisfied at the end of the three-year performance period. Our performance stock award plans provide that any performance shares earned in excess of the target number of performance shares issued may be settled in cash or additional shares at the discretion of the Compensation Committee. In November ~~2020,~~2021, we issued ~~60,930~~177,759 shares earned above target level based on the performance level achieved under the fiscal ~~2018~~2019 performance-based award plan.

As of March 31, ~~2021~~2022 and September 30, ~~2020,~~2021, total unrecognized compensation costs related to unvested restricted stock awards was ~~$10.4~~$10.7 million and ~~$9.0~~$7.2 million, respectively. The costs remaining ~~costs~~ as of March 31, ~~2021~~2022 are expected to be recognized over a weighted average period of ~~1.70 years.~~1.87 years.

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(13) Earnings Per Share

Basic income (loss) per share is calculated by dividing net income (loss) by the weighted-average number of shares outstanding during the period. Diluted income (loss) per share adjusts the basic income (loss) per share for the effects of any potentially dilutive securities in periods in which the Company has net income and such effects are dilutive under the treasury stock method.

Following is a summary of the components of basic and diluted income ~~(loss)~~ per share for the periods presented:


		Three Months Ended March 31,				Six Months Ended March 31,					Three Months Ended March 31,				Six Months Ended March 31,
in thousands, except per share data		2021		2020		2021		2020
in thousands (except per share data)										in thousands (except per share data)	2022		2021		2022		2021
Numerator:	Numerator:									Numerator:
Income from continuing operations	Income from continuing operations	$	24,643	$	10,615	$	36,679	$	13,419	Income from continuing operations	$	44,678	$	24,643	$	79,573	$	36,679
Loss from discontinued operations, net of tax	Loss from discontinued operations, net of tax	(115)		(1)		(154)		(59)		Loss from discontinued operations, net of tax	(6)		(115)		(16)		(154)
Net income	Net income	$	24,528	$	10,614	$	36,525	$	13,360	Net income	$	44,672	$	24,528	$	79,557	$	36,525

Denominator:	Denominator:									Denominator:
Basic weighted-average shares	Basic weighted-average shares	29,953		29,868		29,862		29,808		Basic weighted-average shares	30,594		29,953		30,464		29,862
Dilutive effect of restricted stock awards	Dilutive effect of restricted stock awards	231		97		262		250		Dilutive effect of restricted stock awards	222		231		300		262
Dilutive effect of stock options	Dilutive effect of stock options	31		10		26		20		Dilutive effect of stock options	7		31		8		26
Diluted weighted-average shares (a)	Diluted weighted-average shares (a)	30,215		29,975		30,150		30,078		Diluted weighted-average shares (a)	30,823		30,215		30,772		30,150

Basic income (loss) per share:	Basic income (loss) per share:									Basic income (loss) per share:
Continuing operations	Continuing operations	$	0.82	$	0.36	$	1.23	$	0.45	Continuing operations	$	1.46	$	0.82	$	2.61	$	1.23
Discontinued operations	Discontinued operations	0		0		(0.01)		0		Discontinued operations	—		—		—		(0.01)
Total	Total	$	0.82	$	0.36	$	1.22	$	0.45	Total	$	1.46	$	0.82	$	2.61	$	1.22

Diluted income (loss) per share:	Diluted income (loss) per share:									Diluted income (loss) per share:
Continuing operations	Continuing operations	$	0.81	$	0.35	$	1.22	$	0.45	Continuing operations	$	1.45	$	0.81	$	2.59	$	1.22
Discontinued operations	Discontinued operations	0		0		(0.01)		0		Discontinued operations	—		—		—		(0.01)
Total	Total	$	0.81	$	0.35	$	1.21	$	0.45	Total	$	1.45	$	0.81	$	2.59	$	1.21

(a) The following potentially dilutive shares were excluded from the calculation of diluted income (loss) per share as a result of their anti-dilutive effect.


		Three Months Ended March 31,		Six Months Ended March 31,			Three Months Ended March 31,		Six Months Ended March 31,
in thousands	in thousands	2021	2020	2021	2020	in thousands	2022	2021	2022	2021
Stock options	Stock options	177	360	214	227	Stock options	13	177	31	214
Time-based restricted stock	Time-based restricted stock	13	284	121	52	Time-based restricted stock	188	13	—	121

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(14) Other Liabilities

Other liabilities include the following as of March 31, ~~2021~~2022 and September 30, ~~2020:~~2021:


in thousands	in thousands	March 31, 2021		September 30, 2020		in thousands	March 31, 2022		September 30, 2021

Customer deposits						Customer deposits	$	38,394	$	28,526
Accrued compensations and benefits	Accrued compensations and benefits	$	35,775	$	50,246	Accrued compensations and benefits	37,355		54,606
Customer deposits		27,316		18,937
Accrued interest	Accrued interest	23,539		23,870		Accrued interest	22,680		22,835
Warranty reserve	Warranty reserve	12,421		13,052		Warranty reserve	12,681		12,931

Litigation accruals	Litigation accruals	4,169		4,981		Litigation accruals	8,517		8,325
Income tax liabilities		717		584

Other	Other	29,631		24,313		Other	27,956		25,128
Total	Total	$	133,568	$	135,983	Total	$	147,583	$	152,351

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(15) Segment Information

We currently operate in 13 states that are grouped into 3 homebuilding segments based on geography. Revenues from our homebuilding segments are derived from the sale of homes that we construct and from land and lot sales. Our reportable segments have been determined on a basis that is used internally by management for evaluating segment performance and resource allocations. We have considered the applicable aggregation criteria and have combined our homebuilding operations into 3 reportable segments as follows:

West: Arizona, California, Nevada, and Texas

East: Delaware, Indiana, Maryland, New Jersey(a), Tennessee, and Virginia

Southeast: Florida, Georgia, North Carolina, and South Carolina

(a) During our fiscal 2015, we made the decision that we would not continue to reinvest in new homebuilding assets in our New Jersey division; therefore, it is no longer considered an active operation. However, it is included in this listing because the segment information below continues to include New Jersey.

Management’s evaluation of segment performance is based on segment operating income. Operating income for our homebuilding segments is defined as homebuilding and land sales and other revenue less home construction, land development, and land sales expense, commission expense, depreciation and amortization, and certain G&A expenses that are incurred by or allocated to our homebuilding segments. The accounting policies of our segments are those described in Note 2 to the consolidated financial statements within our ~~2020~~2021 Annual Report.

The following tables contain our revenue, operating income, and depreciation and amortization by segment for the periods presented:


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		March 31,				March 31,					March 31,				March 31,
in thousands	in thousands	2021		2020		2021		2020		in thousands	2022		2021		2022		2021
Revenue	Revenue									Revenue
West	West	$	278,720	$	267,731	$	515,600	$	522,129	West	$	303,492	$	278,720	$	561,158	$	515,600
East	East	153,571		110,941		251,535		188,981		East	128,935		153,571		247,104		251,535
Southeast	Southeast	117,598		110,741		211,293		196,107		Southeast	76,079		117,598		154,393		211,293
Total revenue	Total revenue	$	549,889	$	489,413	$	978,428	$	907,217	Total revenue	$	508,506	$	549,889	$	962,655	$	978,428

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Three Months Ended Six Months Ended
March 31, March 31,
in thousands 2021 2020 2021 2020
Operating income
West $ 42,488 $ 33,223 $ 75,791 $ 63,554
East 22,449 11,513 33,817 16,834
Southeast 15,074 8,814 25,382 11,970
Segment total 80,011 53,550 134,990 92,358
Corporate and unallocated (a)
(46,393) (37,126) (83,684) (71,988)
Total operating income $ 33,618 $ 16,424 $ 51,306 $ 20,370


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		March 31,				March 31,					March 31,				March 31,
in thousands	in thousands	2021		2020		2021		2020		in thousands	2022		2021		2022		2021
Depreciation and amortization
Operating income										Operating income
West	West	$	1,936	$	1,851	$	3,473	$	3,659	West	$	58,103	$	42,488	$	100,827	$	75,791
East	East	575		551		1,046		1,105		East	24,072		22,449		43,931		33,817
Southeast	Southeast	676		700		1,271		1,240		Southeast	10,007		15,074		18,207		25,382

Segment total	Segment total	3,187		3,102		5,790		6,004		Segment total	92,182		80,011		162,965		134,990
Corporate and unallocated (a)	Corporate and unallocated (a)	496		525		1,015		1,050		Corporate and unallocated (a)	(37,571)		(46,393)		(67,415)		(83,684)
Total depreciation and amortization		$	3,683	$	3,627	$	6,805	$	7,054
Total operating income										Total operating income	$	54,611	$	33,618	$	95,550	$	51,306

(a) Corporate and unallocated operating loss includes amortization of capitalized interest, movement in capitalized indirect costs, expenses related to numerous shared services functions that benefit all segments but are not allocated to the operating segments reported above, including information technology, treasury, corporate finance, legal, branding and national marketing, and other amounts that are not allocated to our operating segments.

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	Three Months Ended				Six Months Ended
	March 31,				March 31,
in thousands	2022		2021		2022		2021
Depreciation and amortization
West	$	1,810	$	1,936	$	3,409	$	3,473
East	367		575		802		1,046
Southeast	374		676		773		1,271

Segment total	2,551		3,187		4,984		5,790
Corporate and unallocated (a)	480		496		928		1,015
Total depreciation and amortization	$	3,031	$	3,683	$	5,912	$	6,805

(a) Corporate and unallocated depreciation and amortization represents depreciation and amortization related to assets held by our corporate functions that benefit all segments.

The following table presents capital expenditures by segment for the periods presented:


		Six Months Ended					Six Months Ended
		March 31,					March 31,
in thousands	in thousands	2021		2020		in thousands	2022		2021
Capital Expenditures
Capital expenditures						Capital expenditures
West	West	$	3,066	$	2,667	West	$	3,275	$	3,066
East	East	1,001		1,136		East	253		1,001
Southeast	Southeast	378		1,310		Southeast	595		378

Corporate and unallocated	Corporate and unallocated	2,069		365		Corporate and unallocated	2,072		2,069
Total capital expenditures	Total capital expenditures	$	6,514	$	5,478	Total capital expenditures	$	6,195	$	6,514

The following table presents assets by segment as of March 31, ~~2021~~2022 and September 30, ~~2020:~~2021:


in thousands	in thousands	March 31, 2021		September 30, 2020		in thousands	March 31, 2022		September 30, 2021
Assets	Assets					Assets
West	West	$	678,720	$	658,909	West	$	921,217	$	819,317
East	East	288,933		267,050		East	314,973		286,133
Southeast	Southeast	299,024		301,827		Southeast	324,914		296,581
Corporate and unallocated (a)	Corporate and unallocated (a)	788,894		779,694		Corporate and unallocated (a)	598,900		676,779
Total assets	Total assets	$	2,055,571	$	2,007,480	Total assets	$	2,160,004	$	2,078,810

(a) Primarily consists of cash and cash equivalents, restricted cash, deferred taxes, capitalized interest and indirect costs, and other items that are not allocated to the segments.

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(16) Discontinued Operations

We continually review each of our markets in order to refine our overall investment strategy and to optimize capital and resource allocations in an effort to enhance our financial position and to increase stockholder value. This review entails an evaluation of both external market factors and our position in each market and over time has resulted in the decision to discontinue certain of our homebuilding operations.

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We have classified the results of operations of our discontinued operations separately in the accompanying condensed consolidated statements of operations for all periods presented. There were no material assets or liabilities related to our discontinued operations as of March 31, ~~2021~~2022 or September 30, ~~2020.~~2021. Discontinued operations were not segregated in the condensed consolidated statements of cash flows. Therefore, amounts for certain captions in the condensed consolidated statements of cash flows will not agree with the respective data in the condensed consolidated statements of operations. The results of our discontinued operations in the condensed consolidated statements of operations for the periods presented were as follows:


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		March 31,				March 31,					March 31,				March 31,
in thousands	in thousands	2021		2020		2021		2020		in thousands	2022		2021		2022		2021
Total revenue		$	0	$	0	$	0	$	0

Home construction and land sales expenses	Home construction and land sales expenses	121		(16)		119		(15)		Home construction and land sales expenses	—		121		(5)		119

Gross (loss) profit		(121)		16		(119)		15
Gross profit (loss)										Gross profit (loss)	—		(121)		5		(119)

General and administrative expenses	General and administrative expenses	26		16		78		90		General and administrative expenses	7		26		25		78

Operating loss		(147)		0		(197)		(75)

Other expense, net		0		(1)		0		(1)

Loss from discontinued operations before income taxes	Loss from discontinued operations before income taxes	(147)		(1)		(197)		(76)		Loss from discontinued operations before income taxes	(7)		(147)		(20)		(197)
Benefit from income taxes	Benefit from income taxes	(32)		0		(43)		(17)		Benefit from income taxes	(1)		(32)		(4)		(43)
Loss from discontinued operations, net of tax	Loss from discontinued operations, net of tax	$	(115)	$	(1)	$	(154)	$	(59)	Loss from discontinued operations, net of tax	$	(6)	$	(115)	$	(16)	$	(154)

(17) Subsequent Events

On April 27, 2022, the Company entered into an agreement to acquire substantially all of the assets of Imagine Homes, a private San Antonio-based homebuilder. For the past 16 years, Beazer has held a one-third ownership stake in Imagine Homes. The acquisition will expand Beazer's Texas footprint, which already includes the Dallas and Houston markets.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview and Outlook

Market Conditions

During the second quarter of fiscal 2022, demand remained strong despite the geopolitical environment and increasing affordability concerns. The ~~demand~~affordability of homes has come under pressure as both prices for new and existing homes and mortgage interest rates increase. These affordability concerns have not yet had a significant impact on the demand or sales pace for our homes currently but are likely to impact demand in the future. We attribute the current strength in demand to the robust employment market which is ~~dependent on a variety of demographic and economic factors, including job and~~leading to meaningful wage growth, ~~household formation, consumer confidence,~~a demographic shift towards homeownership amplified by the pandemic and a multimillion unit housing deficit that has accumulated over the past decade.

We believe home affordability is the most significant risk to our industry's outcomes. Our strategies to help mitigate this risk include: (1) our Mortgage Choice platform which eliminates the typical mortgage ~~financing,~~subsidiary middleman and ~~overall housing~~allows us to partner with our customers to help them get the most competitive interest rates, fees, and service levels available; (2) our Choice PlansTM which allow customers to select from a list of structural options at no additional cost; and (3) the Surprising Performance our homes are designed to deliver as they are all built to meet or exceed the latest ENERGY STAR® standards and reduce home energy costs. In relation to future communities, our underwriting continues to incorporate higher than currently available mortgage rates to enable us to assess future affordability. ~~Prior~~

Like many other homebuilders, we continue to experience production challenges due to supply chain disruptions and tightness in labor markets, which was exacerbated by the ~~onset~~Omicron variant of the COVID-19 ~~pandemic, broad economic factors including rising levels of household formation, a constrained supply of new~~pandemic. These disruptions have resulted in elongated construction cycle times and ~~used homes,~~decreased backlog conversion. In response, we are proactively managing our sales pace and ~~low mortgage rates by historical standards, contributed~~lot releases to ~~improving~~better align with our production capacity. We continue to work with our trade partners to resolve these issues, but we do not expect conditions ~~for new home sales.~~

~~The COVID-19 pandemic has led~~ to ~~significant volatility~~significantly improve in the ~~housing market. While~~near term. However, the ~~economic recovery following containment and mitigation measures of COVID-19 is still ongoing, demand for new homes~~strength in our markets ~~remains strong. We believe this is the result of low interest rates~~has allowed us to pass on most cost increases through increased prices, helping to protect our margins and short supply of homes, together with what may be a desire by many people to move out of crowded urban areas into new homes in the suburbs. Although mortgage interest rates have increased during the current quarter, they are still considered low by historical standards and affordability currently remains strong. We believe these factors will continue to support demand through fiscal 2021. The strong demand has also contributed to a rise in home prices to offset increases in labor, lumber and other direct building costs.

Despite this, the magnitude and duration of the COVID-19 pandemic remains unknown. If economic conditions deteriorate, we may experience material declines in our net new orders, closings, revenues, cash flow and/or profitability in fiscal 2021, compared to the corresponding prior-year periods, and compared to our expectations. In addition, if conditions in the overall housing market or in a specific market worsen in the future beyond our current expectations, if future changes in our business strategy significantly affect any key assumptions used in our projections of future cash flows, or if there are material changes in any of the other items we consider in assessing recoverability, we may recognize charges in future periods for inventory impairments related to our current inventory assets. Any such charges could be material to our consolidated financial statements. For further discussion of the potential impacts on our business from the COVID-19 pandemic, see Part I, Item 1A – Risk Factors within our 2020 Annual Report.

~~Overview of Results for Our Fiscal Second Quarter~~

~~Reflecting on the current market conditions discussed above and our operating strategy, during the second quarter of fiscal~~ ~~2021, we made improvements in net new orders, sales pace, homes in backlog, closings, homebuilding gross margin, and net income as compared to the second quarter of fiscal 2020.~~

~~Profitability~~

~~For the quarter ended March 31, 2021, we recorded net income from c~~ontinuing operations of $24.6 million, or diluted earnings per share of $0.81, compared to net income from continuing operations of $10.6 million, or diluted earnings per share of $0.35, in the second quarter of fiscal 20~~20. The increase in profitability was primarily driven by higher revenue, homebuilding gross margin and improved SG&A leverage.~~profitability.

Balanced Growth Strategy

We continue to execute against our balanced growth strategy, which we define as the expansion of earnings at a faster rate than our revenue growth, supported by a less-leveraged capital structure. This strategy provides us with flexibility to ~~increase return on capital,~~ reduce leverage, or increase investment in land and other operating assets, or repurchase shares in response to changing market conditions. ~~Over the last ten years, our balanced growth strategy has led to significant improvements in profitability without asset growth. Beginning in~~Our priorities for fiscal ~~2021, we have begun allocating more capital~~2022 are to grow our ~~total~~ lot position by increasing land spend and ~~generate higher operating margins by delivering higher margin homes~~our use of land option agreements, improve profitability while reducing our total debt below $1.0 billion, deliver an extraordinary customer experience and ~~maximizing overhead leverage.~~ encourage employee well-being.

Overview of Results for Our Fiscal Second Quarter

The following is a summary of our performance against certain key operating and financial metrics during the ~~current period:~~quarter ended March 31, 2022:

•During the quarter ended March 31, 2022, sales per community per month was 3.6 compared to 4.7 in the prior year quarter, and our net new orders were 1,291, down 30.4% from 1,854 in the prior year quarter. Sales per community per month was ~~4.7 and~~ 3.3 ~~for th~~an~~e quarter ended March 31, 2021 and 2020, respectively.~~ The increase in sales pace is reflective of the high demand for new homes primarily driven by low interest rates, short supply of homes, and consumers' reassessment of living arrangements. Sales per community per month wasd 3.8 ~~and 2.9~~ for the trailing 12 months ended March 31, 2022 and 2021, respectively. We believe our sales pace has been strong by historical standards and ~~2020, respectively.~~will remain robust throughout fiscal 2022. Given the high demand and construction cycle time constraints, we have deliberately limited sales in a number of our communities to better align sales pace with production capacity, to manage lot supply, to ensure a positive customer experience and to maximize margins.

•During the quarter ended March 31, 2022, our average active community count of 119 was down 9.2% from 131 in the prior year quarter. This is in part due to strong sales pace experienced during fiscal 2021 as well as the temporary reduction in land spend during fiscal 2020 and the first half of 2021. We are working to grow community counts by increasing investments in new communities. We invested $132.6 million and $97.3 million in land acquisition and land development during the quarters ended March 31, 2022 and March 31, 2021, respectively.

•As of March 31, 2022, our land position includes 23,516 controlled lots, up 24.7% from 18,851 as of March 31, 2021. Excluding land held for future development and land held for sale lots, we controlled 22,728 active lots, up 24.7% from the prior year quarter. As of March 31, 2022, we had 11,551 lots, or 50.8% of our total active lots, under option contracts as compared to 8,381 lots, or 46.0% of our total active lots, under option contracts as of March 31, 2021.

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•During the quarter ended March 31, 2021, our net new orders increased to 1,854, up 11.6% from the prior year quarter, while our average active community count of 131 was down 21.6% from the prior year quarter. We ended the quarter with a lower active community count in part due to the strong sales pace we have experienced since the fourth fiscal quarter of 2020 through the current quarter. We are working to grow community counts by investing in new communities. We continue to evaluate strategic opportunities to purchase land within our geographic footprint, balancing our desire to reduce leverage with land acquisition strategies that maximize the efficiency of capital employed. Through expansion of our use of lot option contracts, as of March 31, 2021, we controlled 8,381 lots, or 46.0% of our total active lots, through option contracts with land developers and land bankers, as compared to 5,554 lots controlled, or 29.6% of our total active lots, through option contracts as of March 31, 2020.

•Aggregated dollar value of homes in backlog as of March 31, ~~2021~~2022 was ~~$1,386.4~~$1,583.5 million, up ~~54.9%~~14.2% compared to athe prior year ~~earlier.~~ quarter.~~As a result of our strong sales pace, we~~ We ended the quarter with ~~3,303~~3,121 homes in backlog, ~~up 48.1%~~down 5.5% compared to athe prior year ~~earlier.~~quarter. Benefiting from pricing power in most markets, the average selling price (ASP) in backlog as of March 31, 2022 has risen to $507.4 thousand, up 20.9% versus the prior year quarter.

•Our ASP for homes closed during the quarter ended March 31, 2022 was $470.5 thousand, up 19.3% from $394.4 thousand in the prior year quarter. The year-over-year increase in ASP on closings was impacted primarily by price appreciation due to strong demand and limited supply of homes. On average, we anticipate that our ASP will continue to increase in the near-term as indicated by the ASP for homes in backlog as of March 31, ~~2021 has risen 4.6% versus the prior year quarter to $419.7 thousand.~~2022.

•Homebuilding gross margin for the quarter ended March 31, ~~2021~~2022 was ~~17.8%~~23.5%, up from ~~16.1%~~17.8% in the prior year quarter. Homebuilding gross margin excluding impairments, ~~and~~ abandonments, and interest for the quarter ended March 31, ~~2021~~2022 was ~~22.2%~~26.8%, up from ~~20.8%~~22.2% in the prior year ~~quarter. With our strong sales paces and strong backlog, we believe opportunities remain for continued~~quarter. Our homebuilding gross margin ~~expansion through maximizing revenue while reducing costs~~has been favorably impacted by ~~simplifying our product offerings,~~the strong demand and price appreciation, although cost pressures ~~from lumber~~ and ~~other direct materials costs~~the availability of labor may temper gross margin expansion in the future.

•SG&A for the quarter ended March 31, ~~2021~~2022 was ~~11.0%~~12.2% of total revenue, ~~down~~up from ~~12.0%~~11.0% a year earlier. The increase in SG&A as a percentage of total revenue was primarily due to decreases in closings and revenue as a result of construction cycle time extension. The dollar amount of SG&A increased by $1.5 million, or 2.4%, compared to the prior year quarter primarily due to increased personnel expense. We remain focused on improving overhead cost management in relation to our revenue gr~~owth, contributing to our balanced growth strategy.~~owth.

Seasonal and Quarterly Variability

Our homebuilding operating cycle historically has reflected escalating new order activity in the second and third fiscal quarters and increased closings in the third and fourth fiscal quarters. However, ~~we have observed~~these seasonal patterns may be impacted or reduced by a ~~shift from our typical seasonal trend in the past year due to the impact~~variety of ~~the COVID-19 pandemic.~~factors. Accordingly, our financial results for the three and six months ended March 31, ~~2021~~2022 may not be indicative of our full year ~~results, particularly in light of the COVID-19 pandemic.~~

~~Commitment to Environmental, Social and Governance (ESG) Matters~~

In April 2021, we received the 2021 ENERGY STAR® Partner of the Year—Sustained Excellence Award from the U.S. Environmental Protection Agency and the U.S. Department of Energy for the sixth consecutive year. The Sustained Excellence Award represents the highest honor bestowed under the ENERGY STAR® program and underscores our commitment to improve energy efficiency. Our focus for fiscal 2021 is not only about positioning us for future growth but also involves another important part of our operations, namely our commitment to ESG matters. Although we believe we have been a leader among the public homebuilders in ESG for some time, we are taking a number of important steps forward in fiscal 2021. As described in our most recent proxy statement filed on December 18, 2020 (2020 Proxy Statement), we are the first national builder to publicly commit to ensuring each home we build is Net Zero Energy Ready (defined below), and we have committed to reach this objective by the end of 2025. We calculate the energy performance of our homes using the industry standard Home Energy Rating System (HERS), which measures energy efficiency on an easy to understand scale: the lower the number, the more energy efficient the home. Net Zero Energy Ready means that every home we build will have a gross HERS index score (before any benefit of renewable energy production) of 45 or less, and homeowners will be able to achieve net zero energy by attaching a properly sized renewable energy system. We have been among the most efficient public builders from a HERS perspective. We believe our commitment to Net Zero Energy Ready will continue to keep the energy-efficiency of the homes we build well ahead of other new homes built to code. Further, we have incorporated HERS environmental achievement goals into our fiscal 2021 long-term incentive compensation awards to demonstrate our commitment to Net Zero Energy Ready. Refer to our 2020 Proxy Statement for further discussions on our ESG initiatives.results.

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RESULTS OF CONTINUING OPERATIONS:

The following table summarizes certain key income statement metrics for the periods presented:


		Three Months Ended						Six Months Ended							Three Months Ended						Six Months Ended
		March 31,						March 31,							March 31,						March 31,
$ in thousands	$ in thousands	2021			2020			2021			2020			$ in thousands	2022			2021			2022			2021
Revenue:	Revenue:													Revenue:
Homebuilding	Homebuilding	$	547,417		$	487,986		$	971,646		$	905,385		Homebuilding	$	507,208		$	547,417		$	953,937		$	971,646
Land sales and other	Land sales and other	2,472			1,427			6,782			1,832			Land sales and other	1,298			2,472			8,718			6,782
Total	Total	$	549,889		$	489,413		$	978,428		$	907,217		Total	$	508,506		$	549,889		$	962,655		$	978,428
Gross profit:	Gross profit:													Gross profit:
Homebuilding	Homebuilding	$	97,456		$	78,744		$	172,293		$	141,852		Homebuilding	$	119,402		$	97,456		$	212,706		$	172,293
Land sales and other	Land sales and other	470			101			926			130			Land sales and other	348			470			4,444			926
Total	Total	$	97,926		$	78,845		$	173,219		$	141,982		Total	$	119,750		$	97,926		$	217,150		$	173,219
Gross margin:	Gross margin:													Gross margin:
Homebuilding		17.8		%	16.1		%	17.7		%	15.7		%
Homebuilding (a)														Homebuilding (a)	23.5		%	17.8		%	22.3		%	17.7		%
Land sales and other	Land sales and other	19.0		%	7.1		%	13.7		%	7.1		%	Land sales and other	26.8		%	19.0		%	51.0		%	13.7		%
Total	Total	17.8		%	16.1		%	17.7		%	15.7		%	Total	23.5		%	17.8		%	22.6		%	17.7		%
Commissions	Commissions	$	20,884		$	18,744		$	37,391		$	34,809		Commissions	$	16,578		$	20,884		$	32,391		$	37,391
General and administrative expenses (G&A)	General and administrative expenses (G&A)	$	39,741		$	40,050		$	77,717		$	79,749		General and administrative expenses (G&A)	$	45,530		$	39,741		$	83,297		$	77,717
SG&A (commissions plus G&A) as a percentage of total revenue	SG&A (commissions plus G&A) as a percentage of total revenue	11.0		%	12.0		%	11.8		%	12.6		%	SG&A (commissions plus G&A) as a percentage of total revenue	12.2		%	11.0		%	12.0		%	11.8		%
G&A as a percentage of total revenue	G&A as a percentage of total revenue	7.2		%	8.2		%	7.9		%	8.8		%	G&A as a percentage of total revenue	9.0		%	7.2		%	8.7		%	7.9		%
Depreciation and amortization	Depreciation and amortization	$	3,683		$	3,627		$	6,805		$	7,054		Depreciation and amortization	$	3,031		$	3,683		$	5,912		$	6,805
Operating income	Operating income	$	33,618		$	16,424		$	51,306		$	20,370		Operating income	$	54,611		$	33,618		$	95,550		$	51,306
Operating income as a percentage of total revenue	Operating income as a percentage of total revenue	6.1		%	3.4		%	5.2		%	2.2		%	Operating income as a percentage of total revenue	10.7		%	6.1		%	9.9		%	5.2		%
Effective tax rate ~~(a)~~(b)	Effective tax rate ~~(a)~~(b)	23.8		%	28.2		%	24.4		%	22.8		%	Effective tax rate ~~(a)~~(b)	18.4		%	23.8		%	17.2		%	24.4		%
Equity in income of unconsolidated entities		$	186		$	147		$	111		$	134
Loss on extinguishment of debt		$	(563)		$	—		$	(563)		$	—
Inventory impairments and abandonments														Inventory impairments and abandonments	$	935		$	—		$	935		$	465

Loss on extinguishment of debt, net														Loss on extinguishment of debt, net	$	(164)		$	(563)		$	(164)		$	(563)

(a)Excluding impairments, abandonments, and interest amortized to cost of sales, homebuilding gross margin was 26.8% and 22.2% for the three months ended March 31, 2022 and 2021, respectively, and 25.6% and 22.2% for the six months ended March 31, 2022 and 2021, respectively. Please see "Homebuilding Gross Profit and Gross Margin" section below for a reconciliation of homebuilding gross profit and the related gross margin excluding impairments and abandonments and interest amortized to cost of sales to homebuilding gross profit and gross margin, the most directly comparable GAAP measure.

(b) Calculated as tax expense for the period divided by income from continuing operations. Due to a variety of factors, including the impact of discrete tax items on our effective tax rate, our income tax expense is notnot always directly correlated to the amount of pre-tax income for the associated periods. For the three and six months ended March 31, 2022, our effective tax rate was impacted by, among other factors, $3.0 million and $6.2 million of energy efficiency tax credits claimed, respectively, compared to less than $0.1 million

of such credits claimed during the three and six months ended March 31, 2021.

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EBITDA: Reconciliation of Net Income to Adjusted EBITDA

Reconciliation of Adjusted EBITDA to total company net income, the most directly comparable GAAP measure, is provided for each period discussed below. Management believes that Adjusted EBITDA assists investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies' respective capitalization, tax position, and level of impairments. These EBITDA measures should not be considered alternatives to net income determined in accordance with GAAP as an indicator of operating performance.

The following table reconciles our net income to Adjusted EBITDA for the periods presented:


		Three Months Ended March 31,						Six Months Ended March 31,						LTM Ended March 31,(a)							Three Months Ended March 31,						Six Months Ended March 31,						LTM Ended March 31, (a)
in thousands	in thousands	2021		2020		21 vs 20		2021		2020		21 vs 20		2021		2020		21 vs 20		in thousands	2022		2021		22 vs 21		2022		2021		22 vs 21		2022		2021		22 vs 21
Net income	Net income	$	24,528	$	10,614	$	13,914	$	36,525	$	13,360	$	23,165	$	75,391	$	27,391	$	48,000	Net income	$	44,672	$	24,528	$	20,144	$	79,557	$	36,525	$	43,032	$	165,053	$	75,391	$	89,662
Expense from income taxes	Expense from income taxes	7,672		4,170		3,502		11,786		3,942		7,844		25,508		8,789		16,719		Expense from income taxes	10,071		7,672		2,399		16,531		11,786		4,745		26,246		25,508		738
Interest amortized to home construction and land sales expenses and capitalized interest impaired	Interest amortized to home construction and land sales expenses and capitalized interest impaired	24,110		22,660		1,450		42,923		42,329		594		96,256		101,496		(5,240)		Interest amortized to home construction and land sales expenses and capitalized interest impaired	16,083		24,110		(8,027)		30,863		42,923		(12,060)		75,230		96,256		(21,026)
Interest expense not qualified for capitalization	Interest expense not qualified for capitalization	969		1,928		(959)		2,569		3,370		(801)		7,667		5,640		2,027		Interest expense not qualified for capitalization	—		969		(969)		—		2,569		(2,569)		212		7,667		(7,455)
EBIT	EBIT	57,279		39,372		17,907		93,803		63,001		30,802		204,822		143,316		61,506		EBIT	70,826		57,279		13,547		126,951		93,803		33,148		266,741		204,822		61,919
Depreciation and amortization	Depreciation and amortization	3,683		3,627		56		6,805		7,054		(249)		15,391		16,143		(752)		Depreciation and amortization	3,031		3,683		(652)		5,912		6,805		(893)		13,083		15,391		(2,308)
EBITDA	EBITDA	60,962		42,999		17,963		100,608		70,055		30,553		220,213		159,459		60,754		EBITDA	73,857		60,962		12,895		132,863		100,608		32,255		279,824		220,213		59,611
Stock-based compensation expense	Stock-based compensation expense	2,549		899		1,650		6,060		3,210		2,850		12,886		9,442		3,444		Stock-based compensation expense	2,424		2,549		(125)		4,532		6,060		(1,528)		10,639		12,886		(2,247)
Loss on extinguishment of debt	Loss on extinguishment of debt	563		—		563		563		—		563		563		25,136		(24,573)		Loss on extinguishment of debt	164		563		(399)		164		563		(399)		1,626		563		1,063
Inventory impairments and abandonments (b)	Inventory impairments and abandonments (b)	—		—		—		465		—		465		2,576		—		2,576		Inventory impairments and abandonments (b)	935		—		935		935		465		470		1,323		2,576		(1,253)

Restructuring and severance expenses	Restructuring and severance expenses	—		—		—		(10)		—		(10)		1,307		—		1,307		Restructuring and severance expenses	—		—		—		—		(10)		10		—		1,307		(1,307)

Litigation settlement in discontinued operations	Litigation settlement in discontinued operations	120		—		120		120		—		120		1,380		—		1,380		Litigation settlement in discontinued operations	—		120		(120)		—		120		(120)		—		1,380		(1,380)

Adjusted EBITDA	Adjusted EBITDA	$	64,194	$	43,898	$	20,296	$	107,806	$	73,265	$	34,541	$	238,925	$	194,037	$	44,888	Adjusted EBITDA	$	77,380	$	64,194	$	13,186	$	138,494	$	107,806	$	30,688	$	293,412	$	238,925	$	54,487

(a) ~~“LTM”~~"LTM" indicates amounts for the trailing 12 months.

(b) In periods during which we impaired certain of our inventory assets, capitalized interest that is impaired is included in the line above titled ~~“Interest~~"Interest amortized to home construction and land sales expenses and capitalized interest impaired.”"

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Homebuilding Operations Data

The following table summarizes new orders and cancellation rates by reportable segment for the periods presented:


		Three Months Ended March 31,									Three Months Ended March 31,
		New Orders, net				Cancellation Rates					New Orders, net				Cancellation Rates
		2021	2020	21 vs 20		2021		2020			2022	2021	22 vs 21		2022		2021
West	West	1,116	953	17.1	%	9.4	%	16.4	%	West	832	1,116	(25.4)	%	12.1	%	9.4	%
East	East	357	351	1.7	%	12.3	%	13.5	%	East	284	357	(20.4)	%	9.8	%	12.3	%
Southeast	Southeast	381	357	6.7	%	9.7	%	16.2	%	Southeast	175	381	(54.1)	%	16.3	%	9.7	%
Total	Total	1,854	1,661	11.6	%	10.0	%	15.8	%	Total	1,291	1,854	(30.4)	%	12.2	%	10.0	%

		Six Months Ended March 31,									Six Months Ended March 31,
		New Orders, net				Cancellation Rates					New Orders, net				Cancellation Rates
		2021	2020	21 vs 20		2021		2020			2022	2021	22 vs 21		2022		2021
West	West	1,898	1,690	12.3	%	11.6	%	16.0	%	West	1,487	1,898	(21.7)	%	12.4	%	11.6	%
East	East	677	584	15.9	%	10.6	%	14.0	%	East	520	677	(23.2)	%	11.7	%	10.6	%
Southeast	Southeast	721	638	13.0	%	9.9	%	14.9	%	Southeast	425	721	(41.1)	%	11.1	%	9.9	%
Total	Total	3,296	2,912	13.2	%	11.0	%	15.4	%	Total	2,432	3,296	(26.2)	%	12.0	%	11.0	%

Net new orders for the quarter ended March 31, ~~2021 increased~~2022 decreased to ~~1,854, up 11.6%~~1,291, down 30.4% from the quarter ended March 31, ~~2020.~~2021. Net new orders for the six months ended March 31, ~~2021 increased~~2022 decreased to ~~3,296, up 13.2%~~2,432, down 26.2% from the six months ended March 31, ~~2020. The increase~~2021. For the quarter ended March 31, 2022, the decrease in net new orders compared to the prior year quarter was driven primarily by ~~an increase~~a 23.4% decrease in ~~absorption rate~~sales pace from ~~3.3~~4.7 sales per community per month in the prior year quarter to ~~4.7,~~3.6 and a 9.2% decrease in ~~cancellation rates~~active community count from ~~15.8%~~131 in the prior year quarter to ~~10.0%. For the three~~119. We are working to grow community count by investing in new communities, and ~~six months ended~~we are also ~~March 31, 2021, all three~~deliberately limiting sales in a number of our ~~reportable segments experienced~~communities to better align sales pace ~~increases, while average active community count decreased across all reportable segments.~~with production capacity, to manage lot supply, to ensure a positive customer experience and to maximize margins.

The table below summarizes backlog units by reportable segment as well as the aggregate dollar value and ASP of homes in backlog as of March 31, ~~2021~~2022 and ~~2020:~~2021:


		As of March 31,							As of March 31,
		2021		2020		21 vs 20			2022		2021		22 vs 21
Backlog Units:	Backlog Units:							Backlog Units:
West	West	1,864		1,243		50.0	%	West	1,872		1,864		0.4	%
East	East	757		498		52.0	%	East	634		757		(16.2)	%
Southeast	Southeast	682		490		39.2	%	Southeast	615		682		(9.8)	%
Total	Total	3,303		2,231		48.1	%	Total	3,121		3,303		(5.5)	%
Aggregate dollar value of homes in backlog (in millions)	Aggregate dollar value of homes in backlog (in millions)	$	1,386.4	$	895.0	54.9	%	Aggregate dollar value of homes in backlog (in millions)	$	1,583.5	$	1,386.4	14.2	%
ASP in backlog (in thousands)	ASP in backlog (in thousands)	$	419.7	$	401.2	4.6	%	ASP in backlog (in thousands)	$	507.4	$	419.7	20.9	%

Backlog reflects the number of homes for which the Company has entered into a sales contract with a customer but has not yet delivered the home. Homes in backlog ~~are generally~~have historically been delivered within three to six months following commencement of construction. Ongoing supply chain disruptions, including the availability of certain materials and construction labor, has led to extended construction cycle times. As a result, we are experiencing increased construction cycle times by an average of two to three months across our markets compared to the prior year. The aggregate dollar value of homes in backlog as of March 31, ~~2021~~2022 increased ~~54.9%~~14.2% compared to March 31, ~~2020~~2021 due to a ~~4.6%~~20.9% increase in the ASP of homes in backlog, ~~and~~partially offset by a ~~48.1% increase~~5.5% decrease in backlog units. ~~The increase in backlog units was primarily due to beginning the quarter with more units in backlog as well as the aforementioned increase in sales pace and net new orders.~~

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Homebuilding Revenue, Average Selling Price, and Closings

The table below summarizes homebuilding revenue, ASP of our homes closed, and closings by reportable segment for the periods presented:


		Three Months Ended March 31,																	Three Months Ended March 31,
		Homebuilding Revenue						Average Selling Price						Closings					Homebuilding Revenue						Average Selling Price						Closings
$ in thousands	$ in thousands	2021		2020		21 vs 20		2021		2020		21 vs 20		2021	2020	21 vs 20		$ in thousands	2022		2021		22 vs 21		2022		2021		22 vs 21		2022	2021	22 vs 21
West	West	$	277,843	$	267,231	4.0	%	$	367.0	$	363.6	0.9	%	757	735	3.0	%	West	$	302,887	$	277,843	9.0	%	$	455.5	$	367.0	24.1	%	665	757	(12.2)	%
East	East	151,993		110,011		38.2	%	473.5		468.1		1.2	%	321	235	36.6	%	East	128,424		151,993		(15.5)	%	509.6		473.5		7.6	%	252	321	(21.5)	%
Southeast	Southeast	117,581		110,744		6.2	%	379.3		360.7		5.2	%	310	307	1.0	%	Southeast	75,897		117,581		(35.5)	%	471.4		379.3		24.3	%	161	310	(48.1)	%
Total	Total	$	547,417	$	487,986	12.2	%	$	394.4	$	382.1	3.2	%	1,388	1,277	8.7	%	Total	$	507,208	$	547,417	(7.3)	%	$	470.5	$	394.4	19.3	%	1,078	1,388	(22.3)	%

		Six Months Ended March 31,																	Six Months Ended March 31,
		Homebuilding Revenue						Average Selling Price						Closings					Homebuilding Revenue						Average Selling Price						Closings
$ in thousands	$ in thousands	2021		2020		21 vs 20		2021		2020		21 vs 20		2021	2020	21 vs 20		$ in thousands	2022		2021		22 vs 21		2022		2021		22 vs 21		2022	2021	22 vs 21
West	West	$	510,783	$	521,629	(2.1)	%	$	365.1	$	365.0	—	%	1,399	1,429	(2.1)	%	West	$	559,379	$	510,783	9.5	%	$	441.2	$	365.1	20.8	%	1,268	1,399	(9.4)	%
East	East	249,957		187,656		33.2	%	459.5		439.5		4.6	%	544	427	27.4	%	East	242,711		249,957		(2.9)	%	488.4		459.5		6.3	%	497	544	(8.6)	%
Southeast	Southeast	210,906		196,100		7.6	%	377.3		367.9		2.6	%	559	533	4.9	%	Southeast	151,847		210,906		(28.0)	%	457.4		377.3		21.2	%	332	559	(40.6)	%
Total	Total	$	971,646	$	905,385	7.3	%	$	388.3	$	379.0	2.5	%	2,502	2,389	4.7	%	Total	$	953,937	$	971,646	(1.8)	%	$	454.9	$	388.3	17.2	%	2,097	2,502	(16.2)	%

For the three and six months ended March 31, ~~2021,~~2022, homebuilding revenue ~~increased~~decreased primarily as a result of a decrease in closings, partially offset by an increase in ~~ASP and closings.~~ ASP.

The increase in ASP ~~changes were impacted primarily by~~across all segments was attributed to price appreciation due to inflation, strong demand, and short supply of ~~homes, as well as~~homes. In the East segment, ASP changes were also impacted by a change in mix of closings between ~~geographies,~~ products and among communities within ~~each individual market~~the markets as compared to the prior year period. On average, we anticipate that our ASP will continue to increase in the near-term as indicated by the ASP for homes in backlog as of March 31, ~~2021.~~2022.

~~For the~~ ~~three and sixmonths ended March 31, 2021, the large increases in closings in our East segments were the results of higher units in beginning backlog for fiscal 2021 as compared to fiscal 2020.~~

~~For the six months ended March 31, 2021, the year-over-year~~The decrease in closings ~~for the West segment~~ was primarily due to ~~the Dallas market, which had less units~~a decrease in ~~beginning~~ backlog ~~for fiscal 2021 relative~~conversion rates as a result of longer construction cycle times compared to the ~~beginning of fiscal 2020 as well as weather disruptions which delayed closings during~~prior year quarter. Among the three reportable segments, the Southeast segment has experienced the highest increase in construction cycle times by an average of 3.2 months, ~~ended March 31, 2021.~~resulting in a significant decrease in backlog conversion rates and closings.

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Homebuilding Gross Profit and Gross Margin

The following tables present our homebuilding (HB) gross profit and gross margin by reportable segment and in total. In addition, such amounts are presented excluding inventory impairments and abandonments and interest amortized to cost of sales (COS). Homebuilding gross profit is defined as homebuilding revenue less home cost of sales (which includes land and land development costs, home construction costs, capitalized interest, indirect costs of construction, estimated warranty costs, closing costs, and inventory impairment and abandonment charges).

Three Months Ended March 31, 2021
$ in thousands HB Gross
Profit HB Gross
Margin Impairments &
Abandonments
(I&A) HB Gross
Profit w/o
I&A HB Gross
Margin w/o
I&A Interest
Amortized to
COS (Interest) HB Gross Profit
w/o I&A and
Interest HB Gross Margin
w/o I&A and
Interest
West $ 65,595 23.6 % $ — $ 65,595 23.6 % $ — $ 65,595 23.6 %
East 33,569 22.1 % — 33,569 22.1 % — 33,569 22.1 %
Southeast 25,287 21.5 % — 25,287 21.5 % — 25,287 21.5 %
Corporate & unallocated (a)
(26,995) — (26,995) 24,110 (2,885)
Total homebuilding $ 97,456 17.8 % $ — $ 97,456 17.8 % $ 24,110 $ 121,566 22.2 %
Three Months Ended March 31, 2020
$ in thousands HB Gross
Profit HB Gross
Margin Impairments &
Abandonments
(I&A) HB Gross
Profit w/o
I&A HB Gross
Margin w/o
I&A Interest
Amortized to
COS
(Interest) HB Gross Profit
w/o I&A and
Interest HB Gross Margin
w/o I&A and
Interest
West $ 56,805 21.3 % $ — $ 56,805 21.3 % $ — $ 56,805 21.3 %
East 21,956 20.0 % — 21,956 20.0 % — 21,956 20.0 %
Southeast 20,654 18.7 % — 20,654 18.7 % — 20,654 18.7 %
Corporate & unallocated (a)
(20,671) — (20,671) 22,660 1,989
Total homebuilding $ 78,744 16.1 % $ — $ 78,744 16.1 % $ 22,660 $ 101,404 20.8 %

Six Months Ended March 31, 2021
$ in thousands HB Gross
Profit HB Gross
Margin Impairments &
Abandonments
(I&A) HB Gross
Profit w/o
I&A HB Gross
Margin w/o
I&A Interest
Amortized to
COS
(Interest) HB Gross Profit
w/o I&A and
Interest HB Gross Margin
w/o I&A and
Interest
West $ 118,469 23.2 % $ — $ 118,469 23.2 % $ — $ 118,469 23.2 %
East 53,434 21.4 % 465 53,899 21.6 % — 53,899 21.6 %
Southeast 45,109 21.4 % — 45,109 21.4 % — 45,109 21.4 %
Corporate & unallocated (a)
(44,719) — (44,719) 42,670 (2,049)
Total homebuilding $ 172,293 17.7 % $ 465 $ 172,758 17.8 % $ 42,670 $ 215,428 22.2 %
Six Months Ended March 31, 2020
$ in thousands HB Gross
Profit HB Gross
Margin Impairments &
Abandonments
(I&A) HB Gross
Profit w/o
I&A HB Gross
Margin w/o
I&A Interest
Amortized to
COS
(Interest) HB Gross Profit
w/o I&A and
Interest HB Gross Margin
w/o I&A and
Interest
West $ 108,914 20.9 % $ — $ 108,914 20.9 % $ — $ 108,914 20.9 %
East 35,848 19.1 % — 35,848 19.1 % — 35,848 19.1 %
Southeast 34,114 17.4 % — 34,114 17.4 % — 34,114 17.4 %
Corporate & unallocated (a)
(37,024) — — (37,024) 42,329 5,305
Total homebuilding $ 141,852 15.7 % $ — $ 141,852 15.7 % $ 42,329 $ 184,181 20.3 %

~~(a)~~ ~~Corporate~~Reconciliation of homebuilding gross profit and ~~unallocated includes capitalized~~the related gross margin excluding impairments and abandonments and interest amortized to HB cost of sales to homebuilding gross profit and ~~indirect costs capitalized~~gross margin, the most directly comparable GAAP measure, is provided for each period discussed below. Management believes that this information assists investors in comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies' respective level of impairments and ~~amortized related~~level of debt. These measures should not be considered alternatives to ~~HB cost~~homebuilding gross profit and gross margin determined in accordance with GAAP as an indicator of ~~sales.~~operating performance.


	Three Months Ended March 31, 2022
$ in thousands	HB Gross Profit		HB Gross Margin		Impairments & Abandonments (I&A)		HB Gross Profit excluding I&A		HB Gross Margin excluding I&A		Interest Amortized to COS (Interest)		HB Gross Profit excluding I&A and Interest		HB Gross Margin excluding I&A and Interest
West	$	81,849	27.0	%	$	12	$	81,861	27.0	%	$	—	$	81,861	27.0	%
East	33,673		26.2	%			33,673		26.2	%	—		33,673		26.2	%
Southeast	17,510		23.1	%	483		17,993		23.7	%	—		17,993		23.7	%
Corporate & unallocated (a)	(13,630)				—		(13,630)				16,083		2,453
Total homebuilding	$	119,402	23.5	%	$	495	$	119,897	23.6	%	$	16,083	$	135,980	26.8	%

	Three Months Ended March 31, 2021
$ in thousands	HB Gross Profit		HB Gross Margin		Impairments & Abandonments (I&A)		HB Gross Profit excluding I&A		HB Gross Margin excluding I&A		Interest Amortized to COS (Interest)		HB Gross Profit excluding I&A and Interest		HB Gross Margin excluding I&A and Interest
West	$	65,595	23.6	%	$	—	$	65,595	23.6	%	$	—	$	65,595	23.6	%
East	33,569		22.1	%	—		33,569		22.1	%	—		33,569		22.1	%
Southeast	25,287		21.5	%	—		25,287		21.5	%	—		25,287		21.5	%
Corporate & unallocated (a)	(26,995)				—		(26,995)				24,110		(2,885)
Total homebuilding	$	97,456	17.8	%	$	—	$	97,456	17.8	%	$	24,110	$	121,566	22.2	%

Table of Contents


	Six Months Ended March 31, 2022
$ in thousands	HB Gross Profit		HB Gross Margin		Impairments & Abandonments (I&A)		HB Gross Profit excluding I&A		HB Gross Margin excluding I&A		Interest Amortized to COS (Interest)		HB Gross Profit excluding I&A and Interest		HB Gross Margin excluding I&A and Interest
West	$	144,776	25.9	%	$	12	$	144,788	25.9	%	$	—	$	144,788	25.9	%
East	59,207		24.4	%	—		59,207		24.4	%	—		59,207		24.4	%
Southeast	33,545		22.1	%	483		34,028		22.4	%	—		34,028		22.4	%
Corporate & unallocated (a)	(24,822)				—		(24,822)				30,863		6,041
Total homebuilding	$	212,706	22.3	%	$	495	$	213,201	22.3	%	$	30,863	$	244,064	25.6	%

	Six Months Ended March 31, 2021
$ in thousands	HB Gross Profit		HB Gross Margin		Impairments & Abandonments (I&A)		HB Gross Profit excluding I&A		HB Gross Margin excluding I&A		Interest Amortized to COS (Interest)		HB Gross Profit excluding I&A and Interest		HB Gross Margin excluding I&A and Interest
West	$	118,469	23.2	%	$	—	$	118,469	23.2	%	$	—	$	118,469	23.2	%
East	53,434		21.4	%	465		53,899		21.6	%	—		53,899		21.6	%
Southeast	45,109		21.4	%	—		45,109		21.4	%	—		45,109		21.4	%
Corporate & unallocated (a)	(44,719)		—		—		(44,719)				42,670		(2,049)
Total homebuilding	$	172,293	17.7	%	$	465	$	172,758	17.8	%	$	42,670	$	215,428	22.2	%

(a) Corporate and unallocated includes capitalized interest and capitalized indirect costs expensed to homebuilding cost of sale related to homes closed, as well as capitalized interest and capitalized indirect costs impaired in order to reflect projects in progress assets at fair value.

Three Months Ended March 31, 2022 as compared to 2021

Our homebuilding gross profit increased by ~~$18.7~~$21.9 million to ~~$97.5~~$119.4 million for the three months ended March 31, ~~2021,~~2022, compared to ~~$78.7~~$97.5 million in the prior year quarter. The increase in homebuilding gross profit was primarily driven by ~~growth in homebuilding revenue of $59.4 million, and~~ an increase in gross margin of ~~170~~570 basis points to ~~17.8%.~~23.5%, partially offset by a decrease in homebuilding revenue of $40.2 million. However, as shown in the tables above, the comparability of our gross profit and gross margin was ~~modestly~~ impacted by impairment and abandonment charges which increased by $0.5 million, and interest amortized to homebuilding cost of sales which ~~increased~~decreased by ~~$1.5~~$8.0 million period-over-period (refer to Note 5 and Note 6 of the notes to the condensed consolidated financial statements in this Form 10-Q for additional details). When excluding the impact of impairment and ~~abandonments~~abandonment charges and interest amortized to homebuilding cost of sales, homebuilding gross profit increased by ~~$20.2~~$14.4 million compared to the prior year quarter, while homebuilding gross margin increased by ~~140~~460 basis points ~~percent~~ to ~~22.2%~~26.8%. The year-over-year improvement in gross margin for the three months ended March 31, 2022 was primarily driven by lower sales incentives and pricing increases, although cost pressures and the availability of labor may temper gross margin expansion in the future.

West Segment: Compared to the prior year quarter, homebuilding gross profit increased by $16.3 million due to the increase in homebuilding revenue and higher gross margin. Homebuilding gross margin, excluding impairments and abandonments, increased to 27.0%, up from 23.6% in the prior year quarter. The increase in gross margin was driven primarily by lower sales incentives and pricing increases.

East Segment: Compared to the prior year quarter, homebuilding gross profit increased slightly by $0.1 million due to higher gross margin, partially offset by a decrease in homebuilding revenue. Homebuilding gross margin, excluding impairments and abandonments, increased to 26.2%, up from 22.1% in the prior year quarter. The increase in gross margin was driven primarily by lower sales incentives and pricing increases.

Southeast Segment: Compared to the prior year quarter, homebuilding gross profit decreased by $7.8 million due to a decrease in homebuilding revenue, partially offset by higher gross margin. Homebuilding gross margin, excluding impairments and abandonments, increased to 23.7%, up from 21.5% in the prior year quarter. The increase in gross margin was driven primarily by lower sales incentives and pricing increases.

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Six Months Ended March 31, 2022 as compared to 2021

Our homebuilding gross profit increased by ~~$30.4~~$40.4 million to ~~$172.3~~$212.7 million for the six months ended March 31, ~~2021, compared to $141.9~~2022, from $172.3 million in the prior year ~~quarter.~~period. The increase in ~~homebuilding~~ gross profit was primarily driven by ~~growth in homebuilding revenue of $66.3 million, and~~ an increase in gross margin of ~~200~~460 basis points to ~~17.7%.~~22.3%, partially offset by a decrease in homebuilding revenue of $17.7 million. However, ~~as shown in~~similar to the ~~tables~~three-month period discussed above, the comparability of our gross profit and gross margin for the six-month period was ~~modestly~~ impacted by ~~impairments~~impairment and abandonment charges which increased by ~~$0.5~~less than $0.1 million, and interest amortized to homebuilding cost of sales which ~~increased~~decreased by ~~$0.3~~$11.8 million period-over-period (refer to Note 5 and Note 6 of the notes to the condensed consolidated financial statements in this Form 10-Q for additional details). When excluding the impact of impairment and ~~abandonments~~abandonment charges and interest amortized to homebuilding cost of sales, homebuilding gross profit increased by ~~$31.2~~$28.6 million compared to the prior year ~~quarter,~~period, while homebuilding gross margin increased by ~~190~~340 basis points ~~percent~~ to ~~22.2%~~25.6%.

The year-over-year improvement in gross margin for the ~~three and~~ six months ended March 31, ~~2021 is~~2022 was primarily driven by lower sales incentives and pricing increases, although cost pressures and the availability of labor may temper gross margin expansion in the future.

West Segment: Compared to the prior year period, homebuilding gross profit increased by $26.3 million due to the increase in homebuilding revenue and higher gross margin. Homebuilding gross margin, excluding impairments and abandonments, increased to 25.9%, up from 23.2% in the prior year period. The increase in gross margin was driven primarily by lower sales incentives and pricing increases.

East Segment: Compared to the prior year period, homebuilding gross profit increased by $5.8 million due to higher gross margin, partially offset by a decrease in homebuilding revenue. Homebuilding gross margin, excluding impairments and abandonments, increased to 24.4%, up from 21.6% in the prior year period. The increase in gross margin was driven primarily by lower sales incentives and pricing increases.

Southeast Segment: Compared to the prior year period, homebuilding gross profit decreased by $11.6 million due to a decrease in homebuilding revenue, partially offset by higher gross margin. Homebuilding gross margin, excluding impairments and abandonments, increased to 22.4%, up from 21.4% in the prior year period. The increase in gross margin was driven primarily by lower sales incentives and pricing increases.

Measures of homebuilding gross profit and gross margin after excluding inventory impairments and abandonments, interest amortized to cost of sales, and other non-recurring items are not GAAP financial measures. These measures should not be considered alternatives to homebuilding gross profit and gross margin determined in accordance with GAAP as an indicator of operating performance.

In particular, the magnitude and volatility of non-cash inventory impairment and abandonment charges for the Company and other homebuilders have been significant historically and, as such, have made financial analysis of our industry more difficult. Homebuilding metrics excluding these charges, as well as interest amortized to cost of sales and other similar presentations by analysts and other companies, are frequently used to assist investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies' respective level of impairments and levels of debt. Management believes these non-GAAP measures enable holders of our securities to better understand the cash implications of our operating performance and our ability to service our debt obligations as they currently exist and as additional indebtedness is incurred in the future. These measures are also useful internally, helping management to compare operating results and to measure cash available for discretionary spending.

In a given period, our reported gross profit is generated from both communities previously impaired and communities not previously impaired. In addition, as indicated above, certain gross profit amounts arise from recoveries of prior period costs, including warranty items that are not directly tied to communities generating revenue in the period. Home closings from communities previously impaired would, in most instances, generate very low or negative gross margins prior to the impact of the previously recognized impairment. Gross margin for each home closing is higher for a particular community after an impairment because the carrying value of the underlying land was previously reduced to the present value of future cash flows as a result of the impairment, leading to lower cost of sales at the home closing. This improvement in gross margin resulting from one or more prior impairments is frequently referred to in the aggregate as the “impairment turn” or “flow-back” of impairments within the reporting period. The amount of this impairment turn may exceed the gross margin for an individual impaired asset if the gross margin for that asset prior to the impairment would have been negative. The extent to which this impairment turn is greater than the reported gross margin for the individual asset is related to the specific historical cost basis of that individual asset.

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The asset valuations that result from our impairment calculations are based on discounted cash flow analyses and are not derived by simply applying prospective gross margins to individual communities. As such, impaired communities may have gross margins that are somewhat higher or lower than the gross margins for unimpaired communities. The mix of home closings in any particular quarter varies to such an extent that comparisons between previously impaired and never impaired communities would not be a reliable way to ascertain profitability trends or to assess the accuracy of previous valuation estimates. In addition, since any amount of impairment turn is tied to individual lots in specific communities, it will vary considerably from period to period. As a result of these factors, we review the impairment turn impact on gross margin on a trailing 12-month basis rather than a quarterly basis as a way of considering whether our impairment calculations are resulting in gross margins for impaired communities that are comparable to our unimpaired communities. For the trailing 12-month period ended March 31, 2022, our homebuilding gross margin was ~~17.3% and excluding~~21.0%. Excluding interest and inventory impairments and abandonments, itour homebuilding gross margin for the trailing 12-month period ended March 31, 2022 was ~~21.8%~~24.6%. For the same trailing 12-month period, homebuilding gross margin was as follows in those communities that have previously been impaired, which represented ~~9.3%~~6.0% of total closings during this period:


Homebuilding Gross Margin from previously impaired communities:
Pre-impairment turn gross margin	~~3.4~~10.6	%
Impact of interest amortized to COS related to these communities	~~4.3~~3.1	%
Pre-impairment turn gross margin, excluding interest amortization	~~7.7~~13.7	%
Impact of impairment turns	~~17.2~~16.5	%
Gross margin (post impairment turns), excluding interest amortization	~~24.9~~30.2	%

For a further discussion of our impairment policies, refer to ~~Notes 2 and~~Note 5 of the notes to the condensed consolidated financial statements in this Form 10-Q.

Land Sales and Other Revenue and Gross Profit

Land sales relate to land and lots sold that do not fit within our homebuilding programs and strategic plans. We also have other revenue related to title examinations provided for our homebuyers in certain markets. The following tables summarize our land sales and other revenue and related gross profit by reportable segment for the periods presented:


		Land Sales and Other Revenue						Land Sales and Other Gross Profit							Land Sales and Other Revenue						Land Sales and Other Gross Profit
		Three Months Ended March 31,						Three Months Ended March 31,							Three Months Ended March 31,						Three Months Ended March 31,
in thousands	in thousands	2021		2020		21 vs 20		2021		2020		21 vs 20		in thousands	2022		2021		22 vs 21		2022		2021		22 vs 21
West	West	$	877	$	500	$	377	$	312	$	20	$	292	West	$	605	$	877	$	(272)	$	15	$	312	$	(297)
East	East	1,578		930		648		142		84		58		East	511		1,578		(1,067)		199		142		57
Southeast	Southeast	17		(3)		20		16		(3)		19		Southeast	182		17		165		134		16		118
Corporate and unallocated (a)		—		—		—		—		—		—

Total	Total	$	2,472	$	1,427	$	1,045	$	470	$	101	$	369	Total	$	1,298	$	2,472	$	(1,174)	$	348	$	470	$	(122)

		Land Sales and Other Revenues						Land Sales and Other Gross Profit
		Six Months Ended March 31,						Six Months Ended March 31,
in thousands		2021		2020		21 vs 20		2021		2020		21 vs 20
West		$	4,817	$	500	$	4,317	$	1,019	$	20	$	999
East		1,578		1,325		253		142		101		41
Southeast		387		7		380		73		9		64
Corporate and unallocated (a)		—		—		—		(308)		—		(308)
Total		$	6,782	$	1,832	$	4,950	$	926	$	130	$	796


	Land Sales and Other Revenue						Land Sales and Other Gross Profit (Loss)
	Six Months Ended March 31,						Six Months Ended March 31,
in thousands	2022		2021		22 vs 21		2022		2021		22 vs 21
West	$	1,779	$	4,817	$	(3,038)	$	493	$	1,019	$	(526)
East	4,393		1,578		2,815		3,606		142		3,464
Southeast	2,546		387		2,159		345		73		272
Corporate and unallocated (a)	—		—		—		—		(308)		308
Total	$	8,718	$	6,782	$	1,936	$	4,444	$	926	$	3,518

(a) Corporate and unallocated includes capitalized interest and capitalized indirect costs expensed to land cost of sale related to land ~~sold.~~sold, as well as capitalized interest and capitalized indirect costs impaired in order to reflect land held for sale assets at net realizable value.

To further support our efforts to ~~reduce leverage,~~improve capital efficiency, we continued to focus on closing a number of land sales in the three and six months ended March 31, ~~2021~~2022 for land positions that did not fit within our strategic plans. Future land and lot sales will depend on a variety of factors, including local market conditions, individual community performance, and changing strategic plans.

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Operating Income

The table below summarizes operating income by reportable segment for the periods presented:


		Three Months Ended March 31,						Six Months Ended March 31,							Three Months Ended March 31,						Six Months Ended March 31,
in thousands	in thousands	2021		2020		21 vs 20		2021		2020		21 vs 20		in thousands	2022		2021		22 vs 21		2022		2021		22 vs 21
West	West	$	42,488	$	33,223	$	9,265	$	75,791	$	63,554	$	12,237	West	$	58,103	$	42,488	$	15,615	$	100,827	$	75,791	$	25,036
East	East	22,449		11,513		10,936		33,817		16,834		16,983		East	24,072		22,449		1,623		43,931		33,817		10,114
Southeast	Southeast	15,074		8,814		6,260		25,382		11,970		13,412		Southeast	10,007		15,074		(5,067)		18,207		25,382		(7,175)

Corporate and unallocated (a)	Corporate and unallocated (a)	(46,393)		(37,126)		(9,267)		(83,684)		(71,988)		(11,696)		Corporate and unallocated (a)	(37,571)		(46,393)		8,822		(67,415)		(83,684)		16,269
Operating income	Operating income	$	33,618	$	16,424	$	17,194	$	51,306	$	20,370	$	30,936	Operating income	$	54,611	$	33,618	$	20,993	$	95,550	$	51,306	$	44,244

(a) Corporate and unallocated includes amortization of capitalized interest, capitalization and amortization of indirect costs, impairment of capitalized interest and capitalized indirect costs, expenses related to numerous shared services functions that benefit all segments but are not allocated to the operating segments, and certain other amounts that are not allocated to our operating segments.

Our operating income increased by ~~$17.2~~$21.0 million to $54.6 million for the three months ended March 31, 2022, compared to operating income of $33.6 million for the three months ended March 31, 2021, ~~compared to operating income of $16.4 million for the three months ended March 31, 2020,~~ driven primarily by the previously discussed increase in gross profit, partially offset by an increase of $1.5 million, or 2.4%, in SG&A ~~costs compared~~expense primarily due to ~~the prior year quarter. While SG&A costs~~ increased ~~slightly compared to the prior year quarter,~~personnel expense. SG&A as a percentage of total revenue ~~decreased~~increased by ~~100~~120 basis points ~~year-over-year~~quarter-over-quarter from ~~12.0%~~11.0% to ~~11.0%~~.12.2% primarily due to decreases in closings and revenue as a result of construction cycle time extension.

~~For~~Our operating income increased by $44.2 million to $95.6 million for the six months ended March 31, ~~2021, operating income increased by~~ ~~$30.9 million~~ ~~to $51.3 million,~~2022, compared to operating income of ~~$20.4~~$51.3 million for the six months ended March 31, ~~2020,~~2021, driven primarily by the previously discussed increase in gross profit. Dollar amount of SG&A ~~costs~~ remained relatively flat year-over-year, ~~while~~ SG&A as a percentage of total revenue ~~decreased~~increased by 8020 basis points year-over-year from ~~12.6%~~11.8% to ~~11.8%.~~12.0% primarily due to decreases in closings and revenue as a result of construction cycle time extension.

~~Below operating income, we had two noteworthy year-over-year fluctuations for the six months ended~~Three Months Ended March 31, 2021 as follows: (1) we experienced a decline in other expense, net, primarily attributable to a year-over-year decrease in interest expense not qualified for capitalization; and (2) we recorded a loss on extinguishment of debt of ~~$0.6 million~~ ~~during the current year~~2022 as compared to ~~no such loss in the prior year period. See Note 6 and Note 7 of the notes to our condensed consolidated financial statements in this Form 10-Q for a further discussion of these items.~~

~~Three Months Ended March 31,~~ 2021 ~~as compared to 2020~~

West ~~Segment:~~Segment Homebuilding revenue increased by 4.0% for the three months ended March 31, 2021 compared to the prior year quarter due to a 3.0% increase in closings and a 0.9% increase in ASP. Compared to the prior year quarter, homebuilding gross profit increased by $8.8 million due to the increase in homebuilding revenue and higher gross margin. Homebuilding gross margin increased to 23.6%, up from 21.3% in the prior year quarter. : The ~~increase in gross margin was driven primarily by lower sales incentives and pricing increases.~~ ~~The $9.3~~$15.6 million increase in operating income compared to the prior year quarter was primarily due to the increase in gross profit previously discussed, and lower SGcommissions expense despite higher homebuilding revenue as we reduce our reliance on external agents given the favorable sales environment. These increases to operating income were partially offset by higher G&A expenses and higher sales and marketing expenses in the segment.

East Segment: Homebuilding revenue increased by 38.2% for the three months ended March 31, 2021 compared to the prior year quarter due to a 36.6% increase in closings and an 1.2% increase in ASP. Compared to the prior year quarter, homebuilding gross profit increased by $11.6 million due to the increase in homebuilding revenue and higher gross margin. Homebuilding gross margin increased from 20.0% to 22.1%. The ~~increase in gross margin was driven primarily by lower sales incentives and pricing increases. The $10.9~~$1.6 million increase in operating income compared to the prior year quarter was primarily due to the increase in gross profit previously discussed and lower commissions expense on lower homebuilding revenue. These increases to operating income were partially offset by ~~slightly~~ higher SGG&A expenses and higher sales and marketing expenses in the segment.

Southeast Segment: Homebuilding revenue increased by 6.2% for the three months ended March 31, 2021 compared to the prior year quarter due to a 1.0% increase in closings and a 5.2% increase in ASP. Compared to the prior year quarter, homebuilding gross profit increased by $4.6The $5.1 million due to the increase in homebuilding revenue and higher gross margin. Homebuilding gross margin increased from 18.7% to 21.5% compared to the prior year quarter. The increase in gross margin was primarily driven by lower sales incentives and pricing increases. The increasedecrease in operating income ~~of $6.3 million~~ compared to the prior year quarter was primarily due to the ~~increase~~decrease in gross profit previously discussed and higher G&A expenses. These decreases to operating income were partially offset by lower ~~SG&A~~commissions expense on lower homebuilding revenue and lower sales and marketing expenses in the segment.

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Corporate and Unallocated: Our Corporate and unallocated results include amortization of capitalized interest, capitalization and amortization of indirect costs, impairment of capitalized interest and capitalized indirect costs, expenses for various shared services functions that benefit all segments but are not allocated, including information technology, treasury, corporate finance, legal, branding and national marketing, and certain other amounts that are not allocated to our operating segments. For the three months ended March 31, ~~2021,~~2022, corporate and unallocated net expenses ~~increased~~decreased by ~~$9.3~~$8.8 million from the prior year quarter primarily due to ~~an increase in the proportion~~lower amortization of capitalized interest and capitalized indirect costs ~~expensed~~ to cost of sales, ~~quarter-over-quarter, higher amortization of capitalized interest to cost of sales due to higher closings, and~~partially offset by higher G&A costs.

Six Months Ended March 31, ~~2021~~2022 as compared to ~~2020~~2021

West Segment: Homebuilding revenue decreased by 2.1% for the six months ended March 31, 2021 compared to the six months ended March 31, 2020 primarily due to a 2.1% decrease in closings. Compared to the prior year period, homebuilding gross profit increased by $9.6 million due to the increase in homebuilding gross margin. Homebuilding gross margin increased to 23.2%, up from 20.9%% in the prior year period. The ~~increase in gross margin was driven primarily by lower sales incentives and pricing increases.~~ ~~The $12.2~~$25.0 million increase in operating income compared to the prior year period was primarily due to the increase in gross profit previously discussed, and lower SGcommissions expense despite higher homebuilding revenue as we reduced our reliance on external agents given the favorable sales environment. These increases to operating income were partially offset by higher G&A expenses and higher sales and marketing expenses in the segment.

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East Segment: Homebuilding revenue increased by 33.2% for the six months ended March 31, 2021 compared to the six months ended March 31, 2020 primarily due to a 27.4% increase in closings and a 4.6% increase in ASP. Compared to the prior year period, homebuilding gross profit increased by $17.6 million due to the increase in homebuilding revenue and higher gross margin. Homebuilding gross margin, excluding abandonment, increased to 21.6%, up from 19.1% in the prior year period. The ~~increase in gross margin was driven primarily by lower sales incentives and pricing increases. The $17.0~~$10.1 million increase in operating income compared to the prior year period was primarily due to the increase in gross profit previously discussed, lower commissions expense on lower homebuilding revenue, and lower sales and marketing expenses. These increases to operating income were partially offset by ~~slightly~~ higher SGG&A expenses in the segment.

Southeast Segment: Homebuilding revenue increased by 7.6% for the six months ended March 31, 2020 compared to the six months ended March 31, 2020 due to a 4.9% increase in closings and a 2.6% increase in ASP. Compared to the prior year period, homebuilding gross profit increased by $11.0The $7.2 million due to the increase in homebuilding revenue and higher gross margin. Homebuilding gross margin increase to 21.4% from 17.4%. The increase in gross margin was driven primarily by lower sales incentives and pricing increases. The $13.4 million increasedecrease in operating income compared to the prior year period was primarily due to the ~~increase~~decrease in gross profit previously discussed, partially offset by lower commissions expense on lower homebuilding revenue, lower sales and marketing expenses and lower SGG&A expenses in the segment.

Corporate and Unallocated: For the six months ended March 31, ~~2021,~~2022, corporate and unallocated net ~~expenses increased~~costs decreased by ~~$11.7~~$16.3 million ~~from~~ over the prior year ~~period~~period. The decrease was primarily due to ~~an increase in the proportion~~lower amortization of capitalized interest and capitalized indirect costs ~~expensed~~ to cost of sales, ~~period-over-period and~~partially offset by higher G&A costs.

Below operating income, we had one noteworthy year-over-year fluctuations for the six months ended March 31, 2022 compared to the prior period. Specifically, we experienced a decline in other expense, net, primarily attributable to a year-over-year decrease in interest expense not qualified for capitalization. See Note 6 of the notes to our condensed consolidated financial statements in this Form 10-Q for a further discussion of these items.

Income Taxes

Our income tax assets and liabilities and related effective tax rate are affected by various factors, the most significant of which is the valuation allowance recorded against a portion of our deferred tax assets. Due to the effect of our valuation allowance adjustments beginning in fiscal 2008, a comparison of our annual effective tax rates must consider the changes in our valuation allowance. ~~As such,~~In addition, our effective tax ~~rates have~~rate is also impacted by a variety of factors, including, but not ~~been meaningful metrics, as~~limited to, tax credits and permanent differences. As such, our income tax expense/benefit ~~was not~~is not always directly correlated to the amount of ~~pretax~~pre-tax income or loss for the associated periods. Beginning in fiscal 2016, the Company began using an annualized effective tax rate in interim periods to determine its income tax benefit/expense, which we believe more closely correlates with our periodic pretax income or loss. The annualized effective tax rate will continue to be impacted by discrete tax items.

~~Our current fiscal year-to-date~~We recognized income tax expense ~~was primarily driven by income tax expense on earnings~~ from continuing ~~operations. The~~operations of $10.1 million and $16.5 million for the three and six months ended March 31, 2022, respectively, compared to $7.7 million and $11.8 million for the three and six months ended March 31, 2021, respectively. Income tax expense for the six months ended March 31, ~~2020~~2022 was primarily driven by income tax expense on earnings from continuing operations, partially offset by the generation of additional federal tax ~~credits. Ref~~ercredits and the discrete tax benefits related to stock-based compensation activity in the quarter. Income tax expense for the six months ended March 31, 2021 was primarily driven by income tax expense on earnings from continuing operations and the discrete tax expense related to stock-based compensation activity in the quarter. Refer to Note 11 of the notes to the condensed consolidated financial statements included in this Form 10-Q for further discussion of our income taxes.

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Liquidity and Capital Resources

Our sources of liquidity include, but are not limited to, cash from operations, proceeds from Senior Notes, ~~our Secured Revolving Credit~~the Facility ~~(the Facility)~~ and other bank borrowings, the issuance of equity and equity-linked securities, and other external sources of funds. Our short-term and long-term liquidity depends primarily upon our level of net income, working capital management (cash, accounts receivable, accounts payable and other liabilities), and available credit facilities.

~~Cash,~~Net changes in cash, cash equivalents, and restricted cash ~~increased~~are as follows for the periods presented:

Six Months Ended March 31,
in thousands 2021 2020
Cash provided by (used in) operating activities $ 50,139 $ (45,913)
Cash used in investing activities (6,344) (5,342)
Cash (used in) provided by financing activities (12,628) 241,008
Net increase in cash, cash equivalents, and restricted cash $ 31,167 $ 189,753


	Six Months Ended March 31,
in thousands	2022		2021
Cash (used in) provided by operating activities	$	(58,130)	$	50,139
Cash used in investing activities	(6,036)		(6,344)
Cash used in financing activities	(12,729)		(12,628)
Net (decrease) increase in cash, cash equivalents, and restricted cash	$	(76,895)	$	31,167

Operating Activities

Net cash ~~provided by~~used in operating activities was ~~$50.1~~$58.1 million for the six months ended March 31, ~~2021.~~2022. The primary drivers of operating cash flows are typically cash earnings and changes in inventory levels, including land acquisition and development spending. Net cash ~~provided by~~used in operating activities during the period was primarily driven by an increase in inventory of $174.2 million resulting from land acquisition, land development, and house construction spending to support continued growth. This was partially offset by cash inflows from income before income taxes of $96.1 million, which included $11.2 million of non-cash charges and and a net decrease in non-inventory working capital balances of $8.8 million.

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Net cash provided by operating activities was $50.1 million for the six months ended March 31, 2021, primarily driven by income before income taxes of $48.3 million, which included $13.5 million of non-cash charges, and a net decrease in non-inventory working capital balances of $19.5 million, partially offset by an increase in inventory of $31.2 million resulting from land acquisition, land development, and house construction spending to support continued growth.

Net cash used in operating activities was $45.9 million for the six months ended March 31, 2020, primarily driven by an increase in inventory of $89.2 million resulting from land acquisition, land development, and house construction spending to support continued growth, partially offset by a net decrease in non-inventory working capital balances of $15.9 million, and income from continuing operations before income taxes of $17.3 million, which included $10.1 million of non-cash charges.

Investing Activities

Net cash used in investing activities ~~was $6.3 million~~ for ~~the~~the six months ended March 31, 2022 and March 31, 2021was $6.0 million and $6.3 million, respectively, primarily driven in both periods by capital expenditures for model homes and information systems infrastructure.

Financing Activities

Net cash used in ~~investing~~financing activities ~~was $5.3 million~~ for the six months ended March 31, ~~2020 primarily driven by capital expenditures for model homes.~~

~~Financing Activities~~

~~Net cash used in financing activities~~2022 and March 31, 2021 was $12.7 million and $12.6 million, ~~for the six months ended March 31, 2021~~respectively, primarily driven by the repurchase of a portion of our 2027 Senior Notes, and tax payments for stock-based compensation awards vesting.

Net cash provided by financing activities was $241.0 million for the six months ended March 31, 2020 driven by net borrowings under the Facility, partially offset by common stock repurchases under our share repurchase program, tax payments for stock-based compensation awards vesting, cash settlement of performance-based restricted stock, and repayment of other miscellaneous borrowings.

Financial Position

As of March 31, ~~2021,~~2022, our liquidity position consisted of ~~$355.5~~$163.9 million in cash and cash equivalents and $250.0 million of remaining capacity under the Facility.

~~The unprecedented public health~~While we believe we possess sufficient liquidity, we are mindful of potential short-term or seasonal requirements for enhanced liquidity that may arise to operate and ~~governmental efforts to contain the COVID-19 pandemic have created significant uncertainty as to general economic and housing market conditions for 2021 and beyond.~~grow our business. As of the date of this report, we believe we have adequate capital resources and sufficient access to external financing sources to satisfy our current and reasonably anticipated requirements for funds to conduct our operations and meet other needs in the ordinary course of our business.

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During this time, we may also engage in capital markets, bank loan, project debt or other financial transactions, including the repurchase of debt or potential new issuances of debt or equity securities to support our business needs. The amounts involved in these transactions, if any, may be material. In addition, as necessary or desirable, we may adjust or amend the terms of and/or expand the capacity of the Facility, or enter into additional letter of credit ~~facilities,~~facilities, or other similar facility arrangements, in each case with the same or other financial institutions, or allow any such facilities to mature or expire. However, with the uncertainty surrounding the COVID-19 pandemic, our ability to engage in such transactions may be constrained by volatile or tight economic, capital, credit and financial market conditions, as well as lender interest and capacity and our liquidity, leverage and net worth. Accordingly, we can provide no assurance as to the successful completion of, or the operational limitations arising from, any one or series of such transactions. For further discussion of the potential impacts from the COVID-19 pandemic on our capital resources and liquidity, see Part I, Item 1A – Risk Factors within our 2020 Annual Report..

Debt

We generally fulfill our short-term cash requirements with cash generated from our operations and available borrowings. Additionally, our Secured Revolving Credit Facility ~~(the Facility)~~ provides working capital and letter of credit capacity of $250.0 million. As of March 31, ~~2021,~~2022, no borrowings and no letters of credit were outstanding under the Facility, resulting in $250.0 million remaining capacity.

We have also entered into a number of stand-alone, cash secured letter of credit agreements with banks. These combined facilities provide for letter of credit needs collateralized by either cash or assets of the Company. We currently have ~~$12.4~~$26.4 million of outstanding letters of credit under these facilities, which are secured by cash collateral that is maintained in restricted accounts totaling ~~$12.9 million~~.$26.1 million.

To provide greater letter of credit capacity, the Company has also entered into a reimbursement agreement, which provides for the issuance of performance letters of credit, and an unsecured credit agreement that provides for the issuance of up to $50.0 million of standby letters of credit to backstop the Company's obligations under the reimbursement agreement (collectively, the "Bilateral Facility"). As of March 31, ~~2021,~~2022, the total stated amount of performance letters of credit issued under the reimbursement agreement was ~~$24.7~~$8.2 million (and the stated amount of the backstop standby letter of credit issued under the credit agreement was $40.0 million).

In the future, we may from time to time seek to continue to retire or purchase our outstanding debt through cash repurchases or in exchange for other debt securities, in open market purchases, privately-negotiated transactions, or otherwise. In addition, any material variance from our projected operating results could require us to obtain additional equity or debt financing. There can be no assurance that we will be able to complete any of these transactions in the future on favorable terms or at all. See Note 7 of the notes to the condensed consolidated financial statements in this Form 10-Q for additional details related to our borrowings.

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Supplemental Guarantor Information

As discussed in Note 7 of the notes to the condensed consolidated financial statements in this Form 10-Q, the Company's obligations to pay principal and interest under certain debt agreements are guaranteed on a joint and several basis by substantially all of the Company's subsidiaries. Some of the immaterial subsidiaries do not guarantee the Senior Notes. The guarantees are full and unconditional.

The following summarized financial information is presented for Beazer Homes USA, Inc. and the guarantor subsidiaries on a combined basis after elimination of intercompany transactions between entities in the combined group and amounts related to investments in any subsidiary that is a non-guarantor.


							As of
in thousands	in thousands	As of March 31, 2021		As of September 30, 2020		in thousands	March 31, 2022		September 30, 2021
Due from non-guarantor subsidiary						Due from non-guarantor subsidiary	$	2,196	$	1,532
Total assets	Total assets	$	2,053,259	$	2,006,611	Total assets	$	3,647,670	$	2,075,518
Due from non-guarantor subsidiary		$	819	$	417
Total liabilities	Total liabilities	$	1,415,446	$	1,414,105	Total liabilities	$	1,357,175	$	1,353,734


		Six Months Ended		Six Months Ended			Six Months Ended March 31,
in thousands	in thousands	March 31, 2021		March 31, 2020		in thousands	2022		2021
Total revenues	Total revenues	$	977,686	$	907,217	Total revenues	$	960,907	$	977,686
Gross profit	Gross profit	$	172,740	$	141,982	Gross profit	$	215,865	$	172,740
Income from continuing operations	Income from continuing operations	$	36,403	$	13,419	Income from continuing operations	$	79,096	$	36,403
Net income	Net income	$	36,251	$	13,378	Net income	$	79,080	$	36,251

Credit Ratings

Our credit ratings are periodically reviewed by rating agencies. In ~~March~~June 2021, S&P upgraded the Company’s corporate rating to a B from a B- and reaffirmed the Company's positive outlook. In August 2021, Moody's ~~reaffirmed~~upgraded the Company's issuer corporate family rating offrom B3 to B2 and revised the Company's outlook from positive to ~~positive. In October 2020, S&P revised the Company’s outlook to positive and reaffirmed the Company’s corporate credit rating of B-.~~stable. These ratings and our current credit condition affect, among other things, our ability to access new capital. Negative changes to these ratings may result in more stringent covenants and higher interest rates under the terms of any new debt. Our credit ratings could be lowered, or rating agencies could issue adverse commentaries in the future, which could have a material adverse effect on our business, financial condition, results of operations, and liquidity. In particular, a weakening of our financial condition, including any further increase in our leverage or decrease in our profitability or cash flows, could adversely affect our ability to obtain necessary funds, could result in a credit rating downgrade or change in outlook, or could otherwise increase our cost of borrowing.

Stock Repurchases and Dividends Paid

The indentures under which our Senior Notes were issued contain certain restrictive covenants, including limitations on the payment of dividends. There were no dividends paid during the three and six months ended March 31, ~~2021~~2022 or ~~2020.~~2021.

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Off-Balance Sheet Arrangements and Aggregate Contractual Commitments

Lot Option ~~Contracts~~Agreements

~~We historically have attempted~~In addition to purchasing land directly, we control a portion of our land supply through lot option ~~contracts.~~agreements. In recent years, we have focused on increasing our lot option agreement usage to minimize risk as we grow our land position. As of March 31, ~~2021,~~2022, we controlled ~~18,851~~23,516 lots, which includes ~~366~~272 lots of land held for future development and ~~255~~516 lots of land held for sale. Of the total active ~~18,230~~22,728 lots, we owned ~~54.0%~~49.2%, or ~~9,849~~11,177 of these lots, and the remaining ~~8,381~~11,551 of these lots, or ~~46.0%~~50.8%, were under option contracts, primarily through lot option agreements with land developers and land bankers, which generally require the payment of cash or the posting of a letter of credit for the right to acquire lots during a specified period of time at a certain price. In comparison, we controlled ~~5,554~~8,381 lots, or ~~29.6%~~46.0% of our total active lot position, through option contracts as of March 31, ~~2020.~~2021. As a result of the flexibility that these options provide us, upon a change in market conditions, ~~(as we are currently experiencing as a result of the COVID-19 pandemic),~~ we may renegotiate the terms of the options prior to exercise or terminate the agreement. Under option contracts, purchase of the properties is contingent upon satisfaction of certain requirements by us and the sellers, and our liability is generally limited to forfeiture of the non-refundable deposits and other non-refundable amounts incurred, which totaled approximately ~~$93.3~~$132.0 million as of March 31, ~~2021.~~2022. The total remaining purchase price, net of cash deposits, committed under all options was ~~$567.4~~$772.6 million as of March 31, ~~2021.~~2022. Based on market conditions and our liquidity, we may further expand our use of option agreements to supplement our owned inventory supply.

We expect to exercise, subject to market conditions and seller satisfaction of contract terms, most of our option contracts. Various factors, some of which are beyond our control, such as market conditions, weather conditions, and the timing of the completion of development activities, will have a significant impact on the timing of option exercises or whether lot options will be exercised at all.

We have historically funded the exercise of lot options with operating cash flows. We expect these sources to continue to be adequate to fund anticipated future option exercises. Therefore, we do not anticipate that the exercise of our lot options will have a material adverse effect on our liquidity.

Investments in Unconsolidated Entities

Occasionally, we use legal entities in which we have less than a controlling interest. We enter into the majority of these arrangements with land developers, other homebuilders, and financial partners to acquire attractive land positions, to manage our risk profile, and to leverage our capital base. The underlying land positions are developed into finished lots for sale to the unconsolidated entity’s members or other third parties. We account for our interest in unconsolidated entities under the equity method.

Historically, we and our partners have provided varying levels of guarantees of debt or other obligations of our unconsolidated entities. As of March 31, ~~2021,~~2022, we had no repayment guarantees outstanding related to the debt of our unconsolidated entities. See Note 4 of the notes to the condensed consolidated financial statements in this Form 10-Q for more information.

Letters of Credit and Surety Bonds

In connection with the development of our communities, we are frequently required to provide performance, maintenance, and other bonds and letters of credit in support of our related obligations with respect to such developments. The amount of such obligations outstanding at any time varies in accordance with our pending development activities. In the event any such bonds or letters of credit are drawn upon, we would be obligated to reimburse the issuer of such bonds or letters of credit. ~~As of March 31, 2021, we~~We had outstanding letters of credit and surety bonds of ~~approximately $37.1 million and $249.9~~$34.6 million, and $272.6 million, respectively, as of March 31, 2022, primarily related to our obligations to local governments to construct roads and other improvements in various developments.

~~Derivative Instruments and Hedging Activities~~

We are exposed to fluctuations in interest rates. From time-to-time, we may enter into derivative agreements to manage interest costs and hedge against risks associated with fluctuating interest rates. However, as of March 31, 2021, we were not a party to any such derivative agreements. We do not enter into or hold derivatives for trading or speculative purposes.

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Critical Accounting Policies and Estimates

Our critical accounting policies require the use of judgment in their application and in certain cases require estimates of inherently uncertain matters. Although our accounting policies are in compliance with accounting principles generally accepted in the United States of America (GAAP), a change in the facts and circumstances of the underlying transactions could significantly change the application of the accounting policies and the resulting financial statement impact. It is also possible that other professionals applying reasonable judgment to the same set of facts and circumstances could reach a different conclusion. As disclosed in our ~~2020~~2021 Annual Report, our most critical accounting policies relate to inventory valuation ~~(projects~~of projects in progress, ~~land held for future development, and land held for sale), revenue recognition,~~ warranty reserves, and income tax valuation ~~allowances and ownership changes.~~allowances. There have been no significant changes to our critical accounting policies and estimates during the six months ended March 31, ~~2021~~2022 as compared to those described in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations included in our ~~2020~~2021 Annual Report on Form 10-K.

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (Form 10-Q) contains forward-looking statements. These forward-looking statements represent our expectations or beliefs concerning future events or results, and it is possible that such events or results described in this Form 10-Q will not occur or be achieved. These forward-looking statements can generally be identified by the use of statements that include words such as “estimate,” “project,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will,” "outlook," “goal,” “target” or other similar words or phrases.

These forward-looking statements involve risks, uncertainties and other factors, many of which are outside of our control, that could cause actual ~~events or~~ results to differ materially from the ~~events or~~ results discussed in the forward-looking statements, including, among other things, the matters discussed in this Form 10-Q in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Additional information about factors that could lead to material changes is contained in Part I, Item 1A— Risk Factors of our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2020.~~2021. These factors are not intended to be an all-inclusive list of risks and uncertainties that may affect the operations, performance, development and results of our business, but instead are the risks that we currently perceive as potentially being material. Such factors may include:

•the cyclical ~~nature~~nature of the homebuilding industry and a potential deterioration in homebuilding industry conditions;

•ecincreases in mortgage interest rates and reduced availability of mortgage financing due to, among other factors, recent and likely continued actions by the Federal Reserve to address sharp increases in inflation;

•~~onomic~~other economic changes nationally orand in local markets, including changes in consumer confidence, wage levels, declines in employment levels, ~~inflation~~ and ~~governmental actions that are out~~an increase in the number of foreclosures, each of which is outside our control and ~~affect~~affects the affordability of, and demand for, the homes we sell;

•~~the~~ potential negative ~~impact~~impacts of the COVID-19 pandemic, which, in addition to exacerbating each of the risks listed above and below, may include a significant decrease in demand for our homes or consumer confidence generally with respect to purchasing a home, an inability to sell and build homes in a typical manner or at all, increased costs or decreased supply of building materials, including lumber, or the availability of subcontractors, housing inspectors, and other third-parties we rely on to support our operations, and recognizing charges in future periods, which may be material, for goodwill impairments, inventory impairments and/or land option contract abandonments;

•supply chain challenges negatively impacting our homebuilding production, including shortages of raw materials and other critical components such as windows, doors, and appliances;

•shortages of or increased ~~prices~~costs for labor ~~land or raw materials~~ used in housing production, and the level of quality and craftsmanship provided by ~~our subcontractors;~~such labor;

•the availability and cost of land and the risks associated with the future value of our inventory, such as asset impairment charges we took on select California assets during the second quarter of fiscal 2019;

•factors affecting margins, such as decreased land values underlying land option agreements, increased land development costs in communities under development or delays or difficulties in implementing initiatives to reduce our production and overhead cost structure;

•our ability to raise debt and/or equity capital, due to factors such as limitations in the capital markets (including market volatility) or adverse credit market conditions, and our ability to otherwise meet our ongoing liquidity needs (which could cause us to fail to meet the terms of our covenants and other requirements under our various debt instruments and therefore trigger an acceleration of a significant portion or all of our outstanding debt obligations), including the impact of any downgrades of our credit ratings or reduction in our liquidity levels;

•market perceptions regarding any capital raising initiatives we may undertake (including future issuances of equity or debt capital);

•terrorist acts, protests and civil unrest, political uncertainty, natural disasters, acts of war or other factors over which the Company has ~~little or~~ no control;

•inaccurate estimates related to homes to be delivered in the future (backlog) ~~are imprecise,~~, as they are subject to various cancellation risks that cannot be fully controlled;

•~~increases in mortgage interest rates, increased disruption in the availability of mortgage financing,~~ changes in tax laws or otherwise regarding the deductibility of mortgage interest expenses and real estate ~~taxes or an increased number of foreclosures;~~taxes;

•increased competition or delays in reacting to changing consumer preferences in home design;

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•natural disasters or other related events that could result in delays in land development or home construction, increase our costs or decrease demand in the impacted areas;

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•the potential recoverability of our deferred tax assets;

•increases in corporate tax rates;

•potential delays or increased costs in obtaining necessary permits as a result of changes to, or complying with, laws, regulations or governmental policies, and possible penalties for failure to comply with such laws, regulations or governmental policies, including those related to the environment;

•the results of litigation or government proceedings and fulfillment of any related obligations;

•the impact of construction defect and home warranty claims;

•the cost and availability of insurance and surety bonds, as well as the sufficiency of these instruments to cover potential losses incurred;

•the impact of information technology failures, cybersecurity issues or data security breaches; or

•the impact of governmental regulations on homebuilding in key markets, ~~of governmental~~such as regulations limiting the availability of ~~water.~~water; and

•the success of our Environmental, Social, and Governance (ESG) initiatives, including our ability to meet our goal that every home we build will be Net Zero Energy Ready by 2025 as well as the success of any other related partnerships or pilot programs we may enter into in order to increase the energy efficiency of our homes and prepare for a Net Zero future.

Any forward-looking statement, including any statement expressing confidence regarding future outcomes, speaks only as of the date on which such statement is made and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible to predict all such factors.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to a number of market risks in the ordinary course of business. Our primary market risk exposure relates to fluctuations in interest rates. We do not believe that our exposure in this area is material to our cash flows or results of operations. As of March 31, ~~2021,~~2022, we had variable rate debt outstanding totaling approximately ~~$69.2~~$71.2 million. A one percent increase in the interest rate for these notes would result in an increase of our interest expense by approximately $1.0 million over the next twelve-month period. The estimated fair value of our fixed-rate debt as of March 31, ~~2021~~2022 was ~~$1.13~~$0.98 billion, compared to a carrying amount of ~~$1.05~~$0.98 billion. The effect of a hypothetical one-percentage point decrease in our estimated discount rates would increase the estimated fair value of the fixed rate debt instruments from $~~1.13~~0.98 billion to ~~$1.19~~$1.03 billion as of March 31, ~~2021.~~2022.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this report, an evaluation was performed based on criteria established in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Act). Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of March 31, ~~2021~~2022 at a reasonable assurance level.

Attached as exhibits to this Quarterly Report on Form 10-Q are certifications of our CEO and CFO, which are required by Rule 13a-14 of the Act. This Disclosure Controls and Procedures section includes information concerning management’s evaluation of disclosure controls and procedures referred to in those certifications and should be read in conjunction with the certifications of the CEO and CFO.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the quarter ended March 31, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ~~We have not experienced any material impact to our internal control over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic.~~

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Item 5. Other Information

None.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For a discussion of our legal proceedings, see Note 9 of the notes to our condensed consolidated financial statements in this Form 10-Q.

Item 1A. Risk Factors

There have been no material changes to the risk factors we previously disclosed in our Annual Report on Form 10-K for the year ended September 30, ~~2020.~~2021.

Item 6. Exhibits


22			List of Guarantor Subsidiaries (~~incorporated~~ (incorporated herein by reference to Exhibit 22 of the Company's Form ~~10-~~Q 10-K filed on ~~July 30, 2020~~)November 10, 2021)

31.1			Certification of Chief Executive Officer pursuant to 17 CFR 240.13a-14 promulgated under Section 302 of the Sarbanes-Oxley Act of 2002.

31.2			Certification of Chief Financial Officer pursuant to 17 CFR 240.13a-14 promulgated under Section 302 of the Sarbanes-Oxley Act of 2002.

32.1			Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2			Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS			Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH			Inline XBRL Taxonomy Extension Schema Document

101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document

104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:

April ~~29, 2021~~28, 2022

Beazer Homes USA, Inc.

By:

/s/ David I. Goldberg

Name:

David I. Goldberg

Senior Vice President and
Chief Financial Officer

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	Three Months Ended March 31, 2020
	Common Stock			Paid-in Capital		Accumulated Deficit
in thousands	Shares	Amount						Total
Balance as of December 31, 2019	31,383	$	31	$	852,055	$	(312,806)	$	539,280
Net income and comprehensive income	—	—		—		10,614		10,614
Stock-based compensation expense	—	—		899		—		899
Exercises of stock options	3	—		31		—		31
Shares issued under employee stock plans, net	7	—		—		—		—
Forfeiture and other settlements of restricted stock	(10)	—		—		—		—
Common stock redeemed for tax liability	(1)	—		(15)		—		(15)
Share repurchases	(362)	0		(3,327)		—		(3,327)
Balance as of March 31, 2020	31,020	$	31	$	849,643	$	(302,192)	$	547,482