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What changed in BEAZER HOMES USA INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of BEAZER HOMES USA INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+262 added−267 removedSource: 10-K (2023-11-16) vs 10-K (2022-11-10)

Top changes in BEAZER HOMES USA INC's 2023 10-K

262 paragraphs added · 267 removed · 196 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

50 edited+11 added−14 removed40 unchanged
Biggest changeFiscal Year Ended September 30, 2022 2021 2020 ($ in thousands) Closings Average Selling Price Closings Average Selling Price Closings Average Selling Price West 2,833 $ 468.7 2,945 $ 377.0 3,206 $ 368.2 East 1,080 514.4 1,185 477.6 1,045 455.7 Southeast 843 497.2 1,157 390.2 1,241 370.8 Total Company 4,756 $ 484.1 5,287 $ 402.4 5,492 $ 385.5 As of September 30, 2022 2021 2020 Units in Backlog Dollar Value in Backlog (in millions) Units in Backlog Dollar Value in Backlog (in millions) Units in Backlog Dollar Value in Backlog (in millions) West 1,257 $ 711.6 1,653 $ 736.0 1,365 $ 493.7 East 410 223.7 611 302.0 624 301.1 Southeast 424 209.6 522 246.0 520 200.5 Total Company 2,091 $ 1,144.9 2,786 $ 1,284.0 2,509 $ 995.3 ASP in backlog (in thousands) $ 547.5 $ 460.9 $ 396.7 5 Markets and Product Description We evaluate a number of factors in determining which geographic markets to enter and remain in as well as which consumer segments to target with our homebuilding activities.
Biggest changeAs of September 30, 2023 2022 2021 Units in Backlog Dollar Value in Backlog (in millions) Units in Backlog Dollar Value in Backlog (in millions) Units in Backlog Dollar Value in Backlog (in millions) West 1,033 $ 535.3 1,257 $ 711.6 1,653 $ 736.0 East 323 174.7 410 223.7 611 302.0 Southeast 355 176.3 424 209.6 522 246.0 Total Company 1,711 $ 886.4 2,091 $ 1,144.9 2,786 $ 1,284.0 ASP in backlog (in thousands) $ 518.0 $ 547.5 $ 460.9 Construction We typically act as the general contractor for the construction of our new home communities.
In response to the changing needs of consumers, our sales operations continue to improve our virtual sales tools to connect with our customers online, including a 24/7 chatbot feature, self-guided tours to allow homebuyers to tour models privately, safely, and outside of normal business hours, and self-service appointments to help customers schedule an appointment with ease and speed.
In response to the changing needs of consumers, our sales operations continue to improve our virtual sales tools to connect with our customers online, including a 24/7 chatbot feature, self-guided tours to allow homebuyers to tour models privately and safely, outside of normal business hours, and self-service appointments to help customers schedule an appointment with ease and speed.
Our project development activities are controlled by our operating divisions whose employees supervise the construction of each new home community by coordinating the activities of independent subcontractors and suppliers, subjecting their work to quality and cost controls and ensuring compliance with zoning and building codes. We specify that quality, durable materials be used in the construction of our homes.
Our project development activities are controlled by our operating divisions whose employees supervise the construction of each new home community by coordinating the activities of independent subcontractors and suppliers, subjecting their work to quality and cost controls and ensuring compliance with zoning and building codes. We specify that quality and durable materials be used in the construction of our homes.
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, these seasonal patterns may be impacted or reduced by a variety of factors, including periods of economic downturn, which result in decreased revenues and closings.
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, these seasonal patterns may be impacted or reduced by a variety of factors, including periods of economic downturn, which may result in decreased revenues and closings.
We sometimes use various sales incentives in order to attract homebuyers. The use of incentives depends largely on local economic and competitive market conditions. 6 Depending on market conditions, we also at times begin construction on a number of homes for which no signed sales contract exists, known as “speculative” or “spec” homes.
We sometimes use various sales incentives in order to attract homebuyers. The use of incentives depends largely on local economic and competitive market conditions. Depending on market conditions, we also at times begin construction on a number of homes for which no signed sales contract exists, known as “speculative” or “spec” homes.
Although none of our employees are covered by collective bargaining agreements, at times certain of the independent subcontractors engaged by us may be represented by labor unions or may be subject to collective bargaining arrangements. 11 A safe and healthy working environment for our employees at every level of our organization is our highest priority.
Although none of our employees are covered by collective bargaining agreements, at times certain of the independent subcontractors engaged by us may be represented by labor unions or may be subject to collective bargaining arrangements. A safe and healthy working environment for our employees at every level of our organization is our highest priority.
We use the results of these reviews to re-allocate our investments generally to those markets where we believe we can maximize our profitability and return on capital. We maintain the flexibility to alter our product mix within a given market, depending on market conditions.
We use the results of these reviews to re-allocate our investments generally to those markets where we believe we can maximize our profitability and return on capital. 4 We maintain the flexibility to alter our product mix within a given market, depending on market conditions.
Operational Overview Corporate Operations We perform the following functions at our corporate office to promote standardization and operational excellence: • evaluate and select geographic markets; • allocate capital resources for land acquisitions; • maintain and develop relationships with lenders and capital markets to create and maintain access to financial resources; • maintain and develop relationships with national product vendors; • perform various centralized functions including accounting, finance, purchasing, legal, risk, planning/design, and marketing activities to support our field operations; • operate and manage information systems and technology support operations; and • monitor the operations of our divisions and partners.
Operational Overview Corporate Operations We perform the following functions at our corporate office to promote standardization and operational excellence: • evaluate and select geographic markets; • allocate capital resources for land acquisitions; 5 • maintain and develop relationships with lenders and capital markets to create and maintain access to financial resources; • maintain and develop relationships with national product vendors; • perform various centralized functions including accounting, finance, purchasing, legal, risk, planning/design, and marketing activities to support our field operations; • operate and manage information systems and technology support operations; and • monitor the operations of our divisions and trade partners.
Department of Energy’s Zero Energy Ready Home program, and have a gross HERS ® index score (before any benefit of renewable energy production) of 45 or less.
Department of Energy’s Zero Energy Ready Home program and have a HERS ® index score (before any benefit of renewable energy production) of 45 or less.
In addition, we center our employee experience on engagement and work-life balance by offering a broad range of company-paid benefits and compensation packages, such as a 12-week parental leave and flexible time off program (with no accrual or maximum time away from work).
In addition, we center our employee experience on engagement and work-life balance by offering a broad range of company-paid benefits and compensation packages, such as a 12-week parental leave and an unlimited flexible time off program (with no accrual or maximum time away from work).
Option Agreements We acquire certain lots by means of option agreements from various sellers and developers, including land banking entities. Option agreements generally require the payment of a cash deposit or issuance of a letter of credit or surety bond for the right to acquire lots during a specified period of time at a fixed or variable price.
Option Agreements We acquire certain lots by means of option agreements from various sellers and developers, including land banking entities. Option agreements generally require the payment of a cash deposit or issuance of a letter of credit or surety bond for the right to acquire lots during a specified period of time at a specified price.
Furthe rmore, the SEC maintains a website that contains reports, proxy statements, information statements and other information regarding issuers, including us, that file electronically with the SEC at www.sec.gov. In addition, many of our corporate governance documents are available on our website at www.beazer.com.
The SEC maintains a website that contains reports, proxy statements, information statements and other information regarding issuers, including us, that file electronically with the SEC at www.sec.gov. In addition, many of our corporate governance documents are available on our website at www.beazer.com.
We utilize our experience within our geographic markets and the breadth of our product line to vary regional product offerings to reflect changing market conditions. We strive to respond to market conditions and to capitalize on the opportunities for advantageous land acquisitions in desirable locations.
We utilize our experience within our geographic markets and the breadth of our product line to vary regional product offerings in response to changing market conditions. We strive to respond to market conditions and to capitalize on the opportunities for advantageous land acquisitions in desirable locations.
Please see Note 9 of notes to the consolidated financial statements in this Form 10-K for additional information. Customer Financing As previously mention ed, we do not provide mortgage origination services.
Please see Note 8 of the notes to the consolidated financial statements in this Form 10-K for additional information. Customer Financing As previously mention ed, we do not provide mortgage origination services.
We compete in 17 geog raphic markets across the United States in part to reduce our exposure to any particular regional economy. Within these markets, we build homes in a variety of new home communities. We continually review our 17 markets based on aggregate demographic information, land prices and availability, competitive dynamics, and our own operating results.
We compete in the above listed geog raphic markets across the United States in part to reduce our exposure to any particular regional economy. Within these markets, we build homes in a variety of new home communities. We continually review our markets based on aggregate demographic information, land prices and availability, competitive dynamics, and our own operating results.
We select land for purchase based upon a variety of factors, including: • internal and external demographic and marketing studies; • suitability for development during the time period of one to five years from the beginning of the development process to the last closing; • financial review as to the feasibility of the proposed project, including profit margins and returns on capital employed; • the ability to secure governmental approvals and entitlements; • environmental and legal due diligence; • competition in the area; 7 • proximity to local traffic corridors, job centers, and other amenities; and • management's judgment of the real estate market and economic trends and our experience in a particular market.
We select land for purchase based upon a variety of factors, including but not limited to: • internal and external demographic and marketing studies; • suitability for development during the time period of generally one to five years from the beginning of the development process to the last closing; • financial review as to the feasibility of the proposed project, including profit margins and returns on capital employed; • the ability to secure governmental approvals and entitlements; • environmental and legal due diligence; • competition in the area; • proximity to local traffic corridors, job centers, and other amenities; and • management's judgment of the real estate market and economic trends and our experience in a particular market.
This begins with our health and safety audit system, which is designed to assist our employees in locating resources tailored for their specific employment responsibilities. We also conduct various safety-related inspections and training programs, such as daily visual inspections of our jobsites, weekly written safety inspections and bi-weekly “toolbox” talks with our trade partners.
This begins with our health and safety audit system, which is designed to assist our employees in locating resources tailored for their specific employment responsibilities. We also conduct various safety-related inspections and training programs, such as daily visual inspections of our job sites, weekly written safety inspections and bi-weekly “toolbox” talks with our trade partners.
In addition, material prices may fluctuate due to various factors, including demand or supply shortages and the price of certain commodities, which may be beyond the control of us or our vendors. When it is economically advantageous, we enter into regional and national supply contracts with certain of our vendors.
In a ddition, material prices may fluctuate due to various factors, including demand or supply shortages and the price of certain commodities, which may be beyond the control of us or our vendors. When it is economically advantageous, we enter into regional and national supply contracts with certain of our vendors.
Under option agreements, purchase of the underlying properties is contingent upon satisfaction of certain requirements by us and the sellers. Our liability under option agreements is generally limited to forfeiture of the non-refundable deposits, letters of credit or surety bonds, and other non-refundable amounts incurred, which totaled approximately $142.4 million as of September 30, 2022.
Under option agreements, purchase of the underlying properties is contingent upon satisfaction of certain requirements by us and the sellers. Our liability under option agreements is generally limited to forfeiture of the non-refundable deposits, letters of credit or surety bonds, and other non-refundable amounts incurred, which totaled $165.4 million as of September 30, 2023.
Gatherings – In 2016, Gatherings ® by Beazer Homes was officially introduced across several markets within Beazer's geographic footprint through age restricted condominiums. We strive to provide extraordinary value, a strong commitment to customer service, and a quality, lower-maintenance home for those seeking a 55+ lifestyle.
Gatherings – In 2016, Gatherings ® by Beazer Homes was officially introduced across several markets within Beazer's geographic footprint through age restricted condominiums. We strive to provide extraordinary value, a strong commitment to customer service, and a quality, lower-maintenance home for those seeking to l ive in 55+ active adult communities .
Our practice is to build, decorate, furnish, and landscape model homes for each community we build and maintain on-site sales offices. As of September 30, 2022, we maintained and owned 215 model homes.
Our practice is to build, decorate, furnish, and landscape model homes for each community we build and maintain on-site sales offices. As of September 30, 2023, we maintained and owned 242 model homes.
The total remaining purchase price, net of cash deposits, committed under all land option agreements was $827.6 million as of September 30, 2022. We expect to exercise, subject to market conditions and seller satisfaction of contract terms, substantially all of our opt ion agreements.
The total remaining purchase price, net of cash deposits, committed under all land option agreements was $949.4 million as of September 30, 2023. We expect to exercise, subject to market conditions and seller satisfaction of contract terms, substantially all of our opt ion agreements.
Our objective is to provide our customers with homes that incorporate extraordinary value and quality, at affordable prices, while seeking to maximize our return on invested capital over the course of a housing cycle. Beazer Homes USA, Inc. was incorporated in Delaware in 1993.
Our objective is to provide our customers with homes that incorporate extraordinary value and quality, at affordable prices, while seeking to maximize our investment returns over the course of a housing cycle. Beazer Homes USA, Inc. was incorporated in Delaware in 1993.
When available in certain markets, we also buy finished lots that are ready for home construction. During our fiscal 2022 and 2021, we continued to pursue land acquisition opportunities and develop our land positions, spending approximately $418.5 million and $440.8 million, respectively, for land acquisition and $155.1 million and $154.7 million, respectively, for land development.
When available in certain markets, we also buy finished lots that are ready for home construction. During our fiscal 2023 and 2022, we continued to pursue land 6 acquisition opportunities and develop our land positions, spending $384.2 million and $418.5 million, respectively, for land acquisition and $188.8 million and $155.1 million, respectively, for land development.
We believe that we maintain positive and productive relationships with our suppliers and subcontractors. Warranty Program We currently provide a limited warranty ranging from one to two years covering workmanship and materials per our defined standards. In addition, we provide a limited warranty for up to ten years covering only certain defined structural element failures.
We believe that we maintain positive and productive relationships with our suppliers and subcontractors. Warranty Program We currently provide a limited warranty ranging from one to two years covering workmanship and materials per our defined standards.
As of September 30, 2022, women made up approximately 40.7% of our workforce and 31.5% of our managerial employees, with ethnic and racial minorities making up approximately 23.7% of our workforce and 15.2% of our managerial employees. Charitable Giving Across our Company, our team members are committed to supporting causes that make a difference.
As of September 30, 2023 , women made up approximately 43.7% of our workforce and 33.0% of our managerial employees, with ethnic and racial minorities making up approximately 26.0% of our workforce and 16.6% of our managerial employees. Charitable Giving Across our Company, our team members are committed to supporting causes that make a difference.
We are also committed to building an inclusive culture in which everyone feels welcome, respected, safe and valued. As we continue to progress in this area, we are reaching across all facets of our functional and operational areas. For example, in 2020, we implemented an ongoing inclusion and diversity learning program that is completed quarterly by every employee.
We are also committed to building an inclusive culture in which everyone feels welcome, respected, safe and valued. As we continue to progress in this area, we are reaching across all facets of our functional and operational areas through our bi-annual inclusion and diversity learning program.
Business Strategy We continue to execute against our long-term balanced growth strategy, which we define as the expansion of earnings at a faster rate than our revenue growth, supported by a less-leveraged and return-driven capital structure.
Information on our website is not a part of this Form 10-K and shall not be deemed incorporated by reference. Long-Term Business Strategy We continue to execute against our long-term balanced growth strategy, which we define as the expansion of earnings at a faster rate than our revenue growth, supported by a less-leveraged and return-driven capital structure.
Some examples of these benefits are as follows: • Our homes are built to the latest ENERGY STAR ® standards, and we provide buyers with an energy rating for their home, completed by a qualified third-party rating company. Used homes typically have a HERS ® index score (on a scale in which a lower score is better) of 130.
We deliver these benefits through our people, materials, and process. Some examples of these benefits are as follows: 3 • Our homes are built to the latest ENERGY STAR ® standards, and we provide buyers with an energy rating (HERS ® index score) for their home, completed by a qualified third-party rating company.
In order to provide homes to homebuyers qualifying for Federal Housing Administration (FHA)-insured or Veterans Affairs (VA)-guaranteed mortgages, we must construct homes in compliance with FHA and VA regulations. These laws and regulations include provisions regarding operating procedures, investments, lending, and privacy disclosures and premiums.
In order to provide homes to homebuyers qualifying for Federal Housing Administration (FHA)-insured or Veterans Affairs (VA)-guaranteed mortgages, we must construct homes in compliance with FHA and VA regulations.
The content on our website is available for information purposes only and is not a part of and shall not be deemed incorporated by reference in this Form 10-K. 12
Each of these documents is also available in print to any stockholder who requests it. 10 The content on our website is available for information purposes only and is not a part of and shall not be deemed incorporated by reference in this Form 10-K. 11
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.
In addition, we provide a limited warranty for up to ten years covering only certain defined structural element failures. 8 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.
For every Beazer community, we identify Choice Lenders, who are selected for their ability to provide a comprehensive array of products and programs, meet our high customer service standards and willingness to compete to earn our customer’s business. We then provide our customers with an industry-leading online comparison tool that helps them easily compare multiple mortgage offers side-by-side.
For every Beazer community, we identify Choice Lenders, who are selected for their ability to provide a comprehensive array of products and programs, meet our high customer service standards, and their willingness to compete to earn our customer’s business.
We have also increased our focus on employee wellness by expanding our program options to include a number of webinars, online classes, and virtual support groups.
We have also increased our focus on employee wellness by expanding our program options to include a number of webinars, online classes, and virtual support groups. We believe that our employees are critical to our continued growth and success, and competition for qualified personnel is intense across our footprint.
Specifically, our Audit, Finance, Compensation, and Nominating/Corporate Governance Committee Charters, our Corporate Governance Guidelines and Code of Business Conduct and Ethics are available. Each of these documents is also available in print to any stockholder who requests it.
Specifically, our Audit, Finance, Compensation, and Nominating/Corporate Governance Committee Charters, our Corporate Governance Guidelines and Code of Business Conduct and Ethics are available.
Unlike many of our peers, we have no ownership interest in any lender and are able to promote competition among lenders on behalf of our customers through our Mortgage Choice program.
Unlike many of our peers, we have no ownership interest in any lender and are able to promote competition among lenders on behalf of our customers through our Mortgage Choice program. Approximately 88% of our fiscal 2023 customers elected to finance a portion of their home purchase. Competition The development and sale of residential properties is highly competitive and fragmented.
We believe that our employees are critical to our continued growth and success, and competition for qualified personnel is intense across our footprint. To remain competitive, we continue to focus on attracting and retaining qualified employees and providing them with comprehensive training and continuous development.
To remain competitive, we continue to focus on attracting and retaining qualified employees and providing them with comprehensive training and continuous development.
As of September 30, 2022, the average new Beazer home has a gross HERS ® index score o f 54. • Beazer is the first national builder to publicly commit to ensuring that by the end of 2025 every home we build will be N et Zero Energy Ready, which means that every home will meet the requirements of both the Environmental Protection Agency’s ENERGY STAR program and the U.S.
For the year ended September 30, 2023, new Beazer homes had an average HERS ® index score of 49. • Beazer is the first national builder to publicly commit to ensuring that by the end of 2025 every home we start will be Zero Energy Ready, which means that every home will meet the requirement of the U.S.
In some states, we are required to be registered as a licensed contractor and comply with applicable rules and regulations. Also, in various states, our new home counselors are required to be licensed real estate agents and to comply with the laws and regulations applicable to real estate agents.
Also, in various states, our new home counselors are required to be licensed real estate agents and to comply with the laws and regulations applicable to real estate agents. Failure to comply with any of these laws or regulations, where applicable, could result in loss of licensing and a restriction of our business activities in the applicable jurisdiction.
This strategy provides us with the flexibility to reduce leverage and increase return of capital, or increase investment in land and other operating assets in response to changing market conditions. We remain committed to this strategy, which is designed to increase shareholder value by improving our r eturn on assets while reducing operational risk and debt.
This strategy provides us with the flexibility to reduce leverage through debt reduction, increase return of capital to investors through stock repurchases, or increase investment in land and other operating assets in response to changing market conditions.
Charity Title Agency donates 100% of its net profits to charity. During the year ended September 30, 2022 , Charity Title Agency made $1.5 million charitable contributions to Beazer Charity Foundation, our Company's philanthropic arm. Beazer Charity Foundation is a non-profit entity that provides donations to unrelated national and local non-profits and is managed by current employees of the Company.
Charity Title Agency donates 100% of its net profits to charity. During the fiscal year ended September 30, 2023 , Charity Title Ag ency made charitable contributions totaling $2.5 million to Beazer Charity Foundation, our Company's philanthropic arm.
Our principal executive offices are located at 1000 Abernathy Road, Suite 260, Atlanta, Georgia 30328, and our main telephone number is (770) 829-3700. We also provide information about our company, including active communities, through our Internet website located at www.beazer.com. Information on our website is not a part of this Form 10-K and shall not be deemed incorporated by reference.
Our principal executive offices are located at 2002 Summit Blvd NE, 15th Floor, Atlanta, GA 30319, and our main telephone number is (770) 829-3700. We also provide information about our company, including active communities, through our Internet website located at www.beazer.com.
Environmental Protection Agency, homes built to earn the Indoor airPLUS qualification have features to reduce mold, moisture, carbon monoxide, toxic chemicals and more. • Each new Beazer home also comes equipped with powerful technologies, including Category 6 ethernet wiring (Cat6), a centralized network panel and immediate internet connectivity via a LTE Wi-Fi router. 4 Reportable Business Segments Our active homebuilding operations consist of the design, sale, and construction of single-family and multi-family homes in the following geographic regions, which represent our reportable segments: Segment/State Market(s) West: Arizona Phoenix California Placer County, Riverside County, Sacramento County, San Diego County, Tulare County Nevada Las Vegas Texas Dallas/Ft.
Reportable Business Segments Our active homebuilding operations consist of the design, sale, and construction of single-family and multi-family homes in the following geographic regions, which represent our reportable segments: Segment/State Market(s) West: Arizona Phoenix California Placer County, Riverside County, Sacramento County, San Diego County, San Bernadino County, Tulare County Nevada Las Vegas Texas Dallas/Ft.
Worth, Houston, San Antonio East: Indiana Indianapolis Maryland/Delaware Anne Arundel County, Baltimore County, Howard County, Sussex County Tennessee Nashville Virginia Fairfax County, Loudoun County, Prince William County, Stafford County Southeast: Florida Orlando, Tampa Georgia Atlanta, Savannah North Carolina Raleigh/Durham South Carolina Charleston, Myrtle Beach The following tables summarize certain operating information of our reportable segments, including number of homes closed, the average selling price (ASP) for the periods presented, and units and dollar value in backlog as of September 30, 2022, 2021 and 2020.
Worth, Houston, San Antonio East: Indiana Indianapolis Maryland/Delaware Anne Arundel County, Baltimore County, Howard County, Sussex County Tennessee Nashville Virginia Fairfax County, Loudoun County, Prince William County, Stafford County Southeast: Florida Orlando Georgia Atlanta North Carolina Raleigh/Durham South Carolina Charleston, Myrtle Beach Markets and Product Description We evaluate a number of factors in determining which geographic markets to enter and remain in as well as which consumer segments to target with our homebuilding activities.
All Beazer homes are designed and built to provide Surprising Performance, which means more quality, comfort, and savings. We deliver these benefits through our people, materials, and process.
Surprising Performance – We place an emphasis on building high-quality homes and delivering outstanding customer experience. Our team is hyper-focused on including premium materials and high-caliber construction processes designed to increase performance and efficiency. All Beazer homes are designed and built to provide Surprising Performance, which means more quality, comfort, and savings.
Offering these pre-designed floor plan alternatives allows us to offer fewer different plans, which improves efficiency and reduce costs while creating living areas that match an individual buyer's lifestyle. Surprising Performance – We place an emphasis on building high-quality homes and delivering outstanding customer experience.
For example, buyers of to-be-built homes can typically choose between two different configurations in the kitchen/great room and in the primary bedroom/bathroom. Offering these pre-designed floor plan alternatives allows us to offer fewer plans, which improves efficiency and reduces cost w hile creating living areas that match an individual buyer's lifestyle.
As of September 30, 2022, we have approved communities representing 714 potential future sales, and we have sold 456 Gatherings branded homes since 2016.
In addition to condominiums, the Gatherings ® brand also includes town homes, villas, duets, and single-family homes. As of September 30, 2023, we have approved communities representing 854 potential future sales.
Failure to comply with any of these laws or regulations, where applicable, could result in loss of licensing and a restriction of our business activities in the applicable jurisdiction. Human Capital Resources As of September 30, 2022, we empl oyed 1,129 persons, of whom 272 were sales and marketing personnel and 294 w ere construction personnel.
Human Capital Resources As of September 30, 2023, we empl oyed 1,067 persons, of whom 277 were sales and marketing personnel and 240 w ere construction personnel.
Choice Plans ® – Every family lives in their home differently, which is why we created Choice Plans. Choice Plans provide our buyers with more floor plan flexibility at no additional cost. For example, buyers of to-be-built homes can typically choose between two different configurations in the kitchen/great room and in the primary bedroom/bathroom at no additional cost.
We then provide our customers with an industry-leading online comparison tool that helps them easily compare multiple mortgage offers from Choice Lenders and other lenders side-by-side. Choice Plans ® – Every family lives in their home differently, which is why we created Choice Plans. Choice Plans provide our buyers with more floor plan flexibility at no additional cost.
For fiscal 2023, our objectives include investing strategically in our land position, upholding operating margin, activating new communities, reducing cycle time, and delivering extraordinary customer experience. 3 Differentiating Beazer Homes We know that our buyers have many choices when purchasing a home.
Differentiating Beazer Homes We know that our buyers have many choices when purchasing a home.
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Our objectives at the beginning of fiscal 2022 included growing our lot position through land spending and increased use of lot option agreements, improving profitability while reducing our total debt below $1.0 billion, delivering extraordinary customer experience, and encouraging employee well-being.
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We remain committed to this balanced growth strategy, which is designed to increase shareholder value b y improving our return on assets while reducing operational risk and debt.
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We have successfully achieved our goals as following: • As of September 30, 2022, our land position included 25,170 controlled lots, up 14.5% from 21,987 a year ago.
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For fiscal 2024, we are working towards three multi-year strategic goals as part of our balanced growth strategy: • reaching more than 200 active communities by the end of fiscal 2026, • reducing our net debt to net capitalization ratio to below 30% by the end of fiscal 2026, and • fulfilling our commitment that by the end of the calendar year 2025 every home we start will be Zero Energy Ready, which is discussed further below.
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Through expansion of our use of lot option agreements, 54.6% of our total active lots were under option agreements as of September 30, 2022 compared to 46.6% a year ago. • For fiscal 2022, we recorded net income of $220.7 million, or $7.17 per diluted share, compared to net income of $122.0 million, or $4.01 per diluted share, for fiscal 2021.
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According to the Residential Energy Services Network (RESNET), the developer of the HERS ® index, used homes typically have a HERS ® index score (on a scale in which a lower score is better) of 130, while on average new homes built to energy codes have a weighted national HERS score equivalent of 73.
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Adjusted EBITDA was $370.1 million in fiscal 2022, compared to $262.7 million in the prior year, an increase of $107.4 million, or 40.9%. Over the past five years, we have achieved a compound annual growth rate (CAGR) of 15.7% for Adjusted EBITDA. • We have successfully reached our deleveraging goal of reducing total debt to below $1.0 billion.
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With a Zero Energy Ready home, net zero energy consumption can be achieved if a properly sized renewable energy system is attached. • We also build Indoor airPLUS qualified homes under the EPA Indoor airPLUS program, which include features to reduce contaminants that lead to poor indoor air quality such as mold, moisture, carbon monoxide, toxic chemicals and more.
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During fiscal 2022, we repurchased $24.4 million of our Senior Notes and retired our Senior Unsecured Term Loan by repaying the final $50.0 million. As of September 30, 2022, we had outstanding debt of $983.4 million .
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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.
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During fiscal 2022, we also repurchased $8.2 million of outstanding common stock. • In April 2022, Beazer Homes was ranked first among construction companies in Newsweek's inaugural list of America's Most Trusted Companies 2022, which were identified based on an independent survey of approximately 50,000 U.S. residents who rated companies they knew from the perspective of customers, investors and employees.
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The following table summarizes land controlled by us by reportable segment as of September 30, 2023: Lots Owned Lots with Homes Under Construction (a) Finished Lots Lots Under Development Lots Held for Future Development Lots Held for Sale Total Lots Owned Total Lots Under Contract Total Lots Controlled West Arizona 95 240 223 — — 558 366 924 California 294 178 380 — 15 867 837 1,704 Nevada 208 360 180 66 — 814 455 1,269 Texas 877 1,242 1,596 — 297 4,012 6,575 10,587 Total West 1,474 2,020 2,379 66 312 6,251 8,233 14,484 East Indiana 79 180 131 — — 390 989 1,379 Maryland/Delaware 127 273 409 — 4 813 907 1,720 New Jersey — — — 117 — 117 — 117 Tennessee 156 133 477 — — 766 1,102 1,868 Virginia 93 80 — — — 173 238 411 Total East 455 666 1,017 117 4 2,259 3,236 5,495 Southeast Florida 172 91 273 — — 536 1,277 1,813 Georgia 110 135 338 — — 583 941 1,524 North Carolina 43 33 580 21 — 677 134 811 South Carolina 151 278 862 68 34 1,393 669 2,062 Total Southeast 476 537 2,053 89 34 3,189 3,021 6,210 Total 2,405 3,223 5,449 272 350 11,699 14,490 26,189 (a) This category represents lots upon which construction of a home has commenced, including model homes.
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This award demonstrated recognition for our efforts to create and sustain a strong reputation among employees, shareholders, customers and other partners.
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The following table summarizes the dollar value of our land under development, land held for future development, and land 7 held for sale by reportable segment as of September 30, 2023: in thousands Land Under Development Land Held for Future Development Land Held for Sale West $ 507,784 $ 3,483 $ 14,702 East 192,683 10,888 3,201 Southeast 170,273 5,508 676 Total $ 870,740 $ 19,879 $ 18,579 Backlog Backlog reflects the number of homes for which the Company has entered into a sales contract with a customer but has not yet delivere d the home.
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With a Net Zero Energy Ready home, homeowners will be able to achieve net zero energy consumption by attaching a properly sized renewable energy system. • In fiscal 2022, we began designing and building to Indoor airPLUS standards. A program of the U.S.
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Ending backlog represents the number of homes in backlog from the previous period plus the number of net new orders (new orders less cancellations) generated during the current period minus the number of homes closed during the current period. The following table summarizes units and dollar value in backlog by reportable segment as of September 30, 2023, 2022 and 2021.
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In addition to condominiums, the Gatherings ® brand also includes town homes, villas, duets, and single-family homes. Our Dallas, Houston, Las Vegas, Maryland, Atlanta, and Orlando markets are actively selling Gatherings homes, while development is currently underway in Virginia and additional sites in Maryland.
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These laws and regulations include provisions regarding operating procedures, investments, lending, and privacy disclosures and premiums. 9 In some states, we are required to be registered as a licensed contractor and comply with applicable rules and regulations.
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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. 8 The following table summarizes land controlled by us by reportable segment as of September 30, 2022: Lots Owned Lots with Homes Under Construction (a) Finished Lots Lots Under Development Lots Held for Future Development Lots Held for Sale Total Lots Owned Total Lots Under Contract Total Lots Controlled West Arizona 280 59 296 — — 635 767 1,402 California 333 90 757 — 59 1,239 657 1,896 Nevada 162 232 400 66 — 860 859 1,719 Texas 996 1,129 1,637 — 408 4,170 5,231 9,401 Total West 1,771 1,510 3,090 66 467 6,904 7,514 14,418 East Indiana 134 133 171 — — 438 589 1,027 Maryland/Delaware 187 373 207 — — 767 1,081 1,848 New Jersey — — — 117 — 117 — 117 Tennessee 149 114 467 — — 730 1,473 2,203 Virginia 42 157 — — — 199 309 508 Total East 512 777 845 117 — 2,251 3,452 5,703 Southeast Florida 130 241 104 — — 475 935 1,410 Georgia 155 202 353 — — 710 320 1,030 North Carolina 76 51 294 21 — 442 358 800 South Carolina 259 443 272 68 34 1,076 733 1,809 Total Southeast 620 937 1,023 89 34 2,703 2,346 5,049 Total 2,903 3,224 4,958 272 501 11,858 13,312 25,170 (a) This category represents lots upon which construction of a home has commenced, including model homes. 9 The following table summarizes the dollar value of our land under development, land held for future development, and land held for sale by reportable segment as of September 30, 2022: in thousands Land Under Development Land Held for Future Development Land Held for Sale West $ 429,491 $ 3,483 $ 14,998 East 171,900 10,888 — Southeast 129,791 5,508 676 Corporate and unallocated (a) 8 — — Total $ 731,190 $ 19,879 $ 15,674 Construction We typically act as the general contractor for the construction of our new home communities.
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In 2021, we introduced our Inclusion, Diversity, and Belonging statement and three-year roadmap, including our skills-first hiring approach. The skills-first approach has led to stronger representation of women and ethnic and racial minorities in our workforce.
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Approximately 92% of our fiscal 2022 customers elected to finance a portion of their home purchase. 10 Competition The development and sale of residential properties is highly competitive and fragmented.
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Beazer Charity Foundation is a non-profit entity that provides donations to unrelated national and local non-profits and is managed by current employees of the Company. Available Information Our Internet website address is www.beazer.com.
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Upon the onset of the COVID-19 pandemic, we established a cross-functional taskforce and deployed enhanced IT resources to facilitate new processes and procedures to keep our teams informed with the most up to date information and create new work protocols to ensure the continued safety and health of our stakeholders, as well as the continuation of our business operations.
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Available Information Our Internet website address is www.beazer.com.
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The public may also read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 100 F Street N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the S EC at 1-800-SEC-0330.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

44 edited+15 added−19 removed88 unchanged
Biggest changeIn addition, our substantial indebtedness could adversely affect our financial condition, limit our growth and make it more difficult for us to satisfy our debt obligations. Our senior notes, revolving credit facilities, letter of credit facilities and certain other debt impose certain restrictions and obligations on us.
Biggest changeOur Senior Notes, Senior Unsecured Revolving Credit Facility, letter of credit facilities and certain other debt impose significant restrictions and obligations on us. Restrictions on our ability to borrow could adversely affect our liquidity. In addition, our indebtedness could adversely affect our financial condition, limit our growth and make it more difficult for us to satisfy our debt obligations.
Our quarterly results of operations may continue to fluctuate in the future as a result of a variety of both national and local factors, including, among others: • the timing of home closings and land sales; • our ability to continue to acquire additional land or secure option agreements to acquire land on acceptable terms; • conditions of the real estate market in areas where we operate and of the general economy; • inventory impairments or other material write-downs; • raw material and labor shortages; • seasonal home buying patterns; and • other changes in operating expenses, including the cost of labor and raw materials, personnel and general economic conditions.
Our quarterly results of operations may continue to fluctuate in the future as a result of a variety of both national and local factors, including, among others: • the timing of home closings and land sales; • our ability to continue to acquire additional land or secure option agreements to acquire land on acceptable terms; • conditions of the real estate market in areas where we operate and of the general economy; 19 • inventory impairments or other material write-downs; • raw material and labor shortages; • seasonal home buying patterns; and • other changes in operating expenses, including the cost of labor and raw materials, personnel and general economic conditions.
In February 2022, our stockholders approved an extension of these protective provisions in our certificate of incorporation and the rights agreement, which as a result are scheduled to expire on November 2025. Any extension of these protective provisions and our entry into a new rights agreement will require additional approval by our stockholders.
In February 2022, our stockholders approved an extension of these protective provisions in our certificate of incorporation and the rights agreement, which as a result are scheduled to expire in November 2025. Any extension of these protective provisions and our entry into a new rights agreement will require additional approval by our stockholders.
Along with an increase in cancellations of home purchase contracts, if there are prolonged government restrictions on our business and our customers, and/or an extended economic recession, we could be unable to produce revenues and cash flows sufficient to conduct our business; meet the terms of our covenants and other requirements under the Secured Revolving Credit Facility, our senior notes, and the related indenture, and/or mortgages and land contracts due to land sellers and other loans; service our outstanding debt.
Along with an increase in cancellations of home purchase contracts, if there are prolonged government restrictions on our business and our customers, and/or an extended economic recession, we could be unable to produce revenues and cash flows sufficient to conduct our business; meet the terms of our covenants and other requirements under the Unsecured Revolving Credit Facility, our senior notes, and the related indenture, and/or mortgages and land contracts due to land sellers and other loans; service our outstanding debt.
Government mandates, standards and regulations enacted in response to these projected climate change impacts could result in restrictions on land development in certain areas or increased energy, transportation, and raw material costs that may adversely affect our financial condition and results of operations. 17 We are subject to extensive government regulation, which could cause us to incur significant liabilities or restrict our business activities.
Government mandates, standards and regulations enacted in response to these projected climate change impacts could result in restrictions on land development in certain areas or increased energy, transportation, and raw material costs that may adversely affect our financial condition and results of operations. 15 We are subject to extensive government regulation, which could cause us to incur significant liabilities or restrict our business activities.
We cannot guarantee that the requisite stockholder approvals will be obtained. In addition, neither the protective provisions nor the rights agreement offer a complete solution, and an ownership change may occur even if the protective provisions of our charter are extended and a new rights agreement is approved upon expiration.
We cannot guarantee that the requisite stockholder approvals will be obtained. In addition, neither the protective provisions nor the rights agreement offers a complete solution, and an ownership change may occur even if the protective provisions of our charter are extended and a new rights agreement is approved upon expiration.
If we cannot effectively recover from our subcontractors or their carriers, we may suffer even greater losses. 18 A builder's ability to recover against any available insurance policy depends upon the continued solvency and financial strength of the insurance carrier that issued the policy.
If we cannot effectively recover from our subcontractors or their carriers, we may suffer even greater losses. 16 A builder's ability to recover against any available insurance policy depends upon the continued solvency and financial strength of the insurance carrier that issued the policy.
Increases in interest rat es increase the costs of owning a home and have adversely affected the purchasing power of consumers and lower demand for the homes we sell, which could result in a decrease in our revenues and earnings and adversely affect our financial condition.
Increases in interest rat es increase the costs of owning a home, adversely affect the purchasing power of consumers, and lower demand for the homes we sell, which could result in a decrease in our revenues and earnings and adversely affect our financial condition.
Operational, Legal and Regulatory Risks Inflation may adversely affect us by increasing costs beyond what we can recover through price increases. Inflation can adversely affect us by increasing costs of land, materials, and labor. In addition, inflation is often accompanied by higher interest rates.
Operational, Legal and Regulatory Risks Inflation may adversely affect us by increasing costs beyond what we can recover through price increases. Inflation can adversely affect us by increasing c osts of land, materials, and labor. In addition, inflation is often accompanied by higher interest rates.
To the extent that hurricanes, tornadoes, severe storms, heavy or prolonged precipitation, earthquakes, droughts, floods, wildfires or other natural disasters or similar events occur, our homes under construction or our building lots in such states could be damaged or destroyed, which may result in losses exceeding our insurance coverage.
To the extent that hurricanes, tornadoes, severe storms, heavy or prolonged precipitation, earthquakes, droughts, floods, wildfires or other natural disasters or similar events occur, our homes under construct ion or our building lots in such states could be damaged or destroyed, which may result in losses exceeding our insurance coverage.
In an inflationary environment, depending on homebuilding industry and other economic conditions, we may be unable to raise home p rices enough to keep up with the rate of inflation, which would reduce our profit margins.
In an inflationary environment, depending on homebuilding industry and other economic conditions, we may be unable to raise home prices enough to keep up with the rate of inflation, which would reduce our profit margins.
We historically have experienced, and expect to continue to experience, variability in home sales and earnings on a quarterly basis. As a result of such variability, our historical performance may not be a meaningful indicator of future results.
We experience fluctuations and variability in our operating results on a quarterly basis and, as a result, our historical performance may not be a meaningful indicator of future results. We historically have experienced, and expect to continue to experience, variability in home sales and earnings on a quarterly basis.
The price and volume volatility of our common stock may be affected by: • factors influencing home purchases, such as higher interest rates and availability of home mortgage loans, credit criteria applicable to prospective borrowers, ability to sell existing residences and homebuyer sentiment in general; • the operating and securities price performance of companies that investors consider comparable to us; • operating results that vary from the expectations of securities analysts and investors; • announcements of strategic developments, acquisitions and other material events by us or our competitors; and • changes in global financial markets and global economies and general market conditions, such as inflation, interest rates, commodity and equity prices and the value of financial assets. 21 Our ability to raise funds through the issuance of equity or otherwise use our common stock as consideration is impacted by the price of our common stock.
The price and volume volatility of our common stock may be affected by: • factors influencing home purchases, such as higher interest rates and availability of home mortgage loans, credit criteria applicable to prospective borrowers, ability to sell existing residences and homebuyer sentiment in general; • the operating and securities price performance of companies that investors consider comparable to us; • operating results that vary from the expectations of securities analysts and investors; • announcements of strategic developments, acquisitions and other material events by us or our competitors; and • changes in global financial markets and global economies and general market conditions, such as inflation, interest rates, commodity and equity prices and the value of financial assets.
While we do not have any customer or direct supplier relationships in either country, the current military conflict, and related sanctions, as well as export controls or actions that may be initiated by nations (e.g., potential cyberattacks, disruption of energy flows, etc.) and other potential uncertainties could adversely affect our supply chain by causing shortages or increases in costs for materials necessary to construct homes and/or increases to the price of gasoline and other fuels.
While we do not have any customer or direct supplier relationships in Russia, Ukraine, or the Middle East, the current military conflicts, and related sanctions, as well as export controls or actions that may be initiated by nations (e.g., potential cyberattacks, disruption of energy flows, etc.) and other potential uncertainties could adversely affect our supply chain by causing shortages or increases in costs for materials necessary to construct homes and/or increases to the price of gasoline and other fuels.
Shortages of materials can be due to certain disruptions, such as natural disasters, civil or political unrest and conflicts (such as the ongoing conflict between Russia and Ukraine), trade disputes, difficulties in production or delivery or health issues like the COVID-19 pandemic.
Shortages of materials can be due to certain disruptions, such as natural disasters, civil or political unrest and conflicts, trade disputes, difficulties in production or delivery or health issues like the COVID-19 pandemic.
If these or other lenders’ borrowing standards are tightened and/or the federal government were to reduce or eliminate these mortgage loan programs (including due to any failure of lawmakers to agree on a budget or appropriation legislation to fund relevant programs or operations), it would likely make it more difficult for our customers to obtain acceptable financing, which would, in turn, adversely affect our business, financial condition and results of operations. 13 Mortgage interest expense and real estate taxes represent significant costs of homeownership.
If these or other lenders’ borrowing standards are tightened and/or the federal government were to reduce or eliminate these mortgage loan programs (including due to any failure of lawmakers to agree on a budget or appropriation legislation to fund relevant programs or operations), it would likely make it more difficult for our customers to obtain acceptable financing, which would, in turn, adversely affect our business, financial condition and results of operations.
Therefore, when there are changes in federal or state income tax laws that eliminate or substantially limit the income tax deductions relating to these expenses, the after-tax costs of owning a new home can increase signifi cantly.
Mortgage interest expenses and real estate taxes represent significant costs of homeownership. Therefore, when there are changes in federal or state income tax laws that eliminate or substantially limit the income tax deductions relating to these expenses, the after-tax costs of owning a new home can increase signifi cantly.
Inefficient or ineffective allocation of capital could adversely affect our operating results and/or stockholder value. Our goal is to allocate capital to maximize our overall long-term returns.
Inefficient or ineffective allocation of capital could adversely affect our operating results and/or stockholder value. Our goal is to allocate capital to maximize our overall long-term returns. This includes growing our land position and growing our active communities.
Such a circumstance could, among other things, exhaust our available liquidity (and ability to access liquidity sources) and/or trigger an acceleration to pay a significant portion or all of our then-outstanding debt obligations, which we may be unable to do. The market value of our land and/or homes may decline, leading to impairments or other charges and reduced profitability.
Such a circumstance could, among other things, exhaust our available liquidity (and ability to access liquidity sources) and/or trigger an acceleration to pay a significant portion or all of our then-outstanding debt obligations, which we may be unable to do.
However, we experienced an “ownership change” under Section 382 as of January 12, 2010. As a result of this previous “ownership change” for purposes of Section 382, our ability to use certain net operating loss carryforwards, tax credits and built-in losses or deductions in existence prior to the ownership change was limited by Section 382.
As a result of this previous “ownership change” for purposes of Section 382, our ability to use certain net operating loss carryforwards, tax credits and built-in losses or deductions in existence prior to the ownership change was limited by Section 382. We cannot predict or control the occurrence or timing of another ownership change in the future.
Given the inflation rates in fiscal year 2022, we have experienced, and continue to experience, increases in the prices of land, labor, and materials. 15 An increase in cancellation rates will negatively impact our business and could lead to imprecise estimates related to homes to be delivered in the future (backlog).
Given the inflation over the past two years, we have experienced, and may continue to experience, increases in the prices of land, labor, and materials. 13 An increase in cancellation rates will negatively impact ou r business and could lead to imprecise estimates related to homes to be delivered in the future (backlog).
Our substantial indebtedness could have important consequences to us and the holders of our securities, including, among other things: • causing us to be unable to satisfy our obligations under our debt agreements; • causing us to pay higher interest rates upon refinancing indebtedness if interest rates rise; • making us more vulnerable to adverse general economic and industry conditions; • making it difficult to fund future working capital, land purchases, acquisitions, capital expenditures, share repurchases, general corporate or other activities; and • causing us to be limited in our flexibility in planning for, or reacting to, changes in our business.
There can be no assurance that we will be able to obtain any waivers or amendments that may become necessary in the event of a future default situation without significant additional cost or at all. 17 Our indebtedness could have important consequences to us and the holders of our securities, including, among other things: • causing us to be unable to satisfy our obligations under our debt agreements; • causing us to pay higher interest rates upon refinancing indebtedness if interest rates rise; • making us more vulnerable to adverse general economic and industry conditions; • making it difficult to fund future working capital, land purchases, acquisitions, capital expenditures, share repurchases, general corporate or other activities; and • causing us to be limited in our flexibility in planning for, or reacting to, changes in our business.
This could result in our recognizing charges in future periods, which may be material, for inventory impairments or land option agreement abandonments, or both, related to our inventory assets. 14 Should the adverse impacts described above (or others that are currently unknown) occur, whether individually or collectively, we would expect to experience, among other things, decreases in our net new orders, home closings, average selling prices, revenues, and profitability, and such impacts could be material to our consolidated financial statements.
Should the adverse impacts described above (or others that are currently unknown) occur, whether individually or collectively, we would expect to experience, among other things, decreases in our net new orders, home closings, average selling prices, revenues, and profitability, and such impacts could be material to our consolidated financial statements.
Global economic and political instability and conflicts, such as the conflict between Russia and Ukraine, could adversely affect our business, financial condition or results of operations. Our business could be adversely affected by unstable economic and political conditions within the United States and foreign jurisdictions and geopolitical conflicts, such as the conflict between Russia and Ukraine.
Our business could be adversely affected by unstable economic and political conditions within the United States and foreign jurisdictions and geopolitical conflicts, such as the conflict between Russia and Ukraine and the conflict in Gaza.
Our certificate of incorporation prohibits certain transfers of our common stock that could result in an ownership change. In additio n, we are party to a rights agreement intended to act as a deterrent to any person desiring to acquire 4.95% or more of our common stock.
In additio n, we are party to a rights agreement intended to act as a deterrent to any person desiring to acquire 4.95% or more of our common stock.
We cannot predict or control the occurrence or timing of another ownership change in the future. If another ownership change were to occur, the limitations imposed by Section 382 could result in a material amount of our net operating loss carryforwards and tax credits expiring unused and, therefore, significantly impair the future value of our deferred tax assets.
If another ownership change were to occur, the limitations imposed by Section 382 could result in a material amount of our net operating loss carryforwards and tax credits expiring unused and, therefore, significantly impair the future value of our deferred tax assets. Our certificate of incorporation prohibits certain transfers of our common stock that could result in an ownership change.
Our inability to utilize our limited pre-ownership change net operating loss carryforwards, tax credits and recognized built-in losses or deductions, or the occurrence of a future ownership change and resulting additional limitations to these tax attributes, could have a material adverse effect on our financial condition, results of operations, and cash flows.
Our inability to utilize our limited pre-ownership change net operating loss carryforwards, tax credits and recognized built-in losses or deductions, or the occurrence of a future ownership change and resulting additional limitations to these tax attributes, could have a material adverse effect on our financial condition, results of operations, and cash flows. 18 We could experience a reduction in home sales and revenues due to our inability to acquire and develop land for our communities if we are unable to obtain reasonably priced financing.
Any net operating losses created during or after our fiscal 2019 may be carried forward indefinitely; however, the loss can only be utilized to offset 80% of taxable income generated in a tax year. Built-in losses, if and when recognized, generally will result in tax losses that may then be deducted or carried forward.
Net operating losses and tax credits generally may be carried forward for a 20-year period to offset future earnings and reduce our federal income tax liability. Any net operating losses created during or after our fiscal 2019 may be carried forward indefinitely; however, the loss can only be utilized to offset 80% of taxable income generated in a tax year.
While, to date, we have not had a significant cybersecurity breach or attack that had a material impact on our business or results of operations, there can be no assurance that our efforts to maintain the security and integrity of these types of IT networks and related systems will be effective or that attempted security breaches or disruptions would not be successful or damaging. 19 Financial and Liquidity Risks Our access to capital and our ability to obtain additional financing could be affected by any downgrade of our credit ratings, as well as limitations in the capital markets or adverse credit market conditions.
While, to date, we have not had a significant cybersecurity breach or attack that had a material impact on our business or results of operations, there can be no assurance that our efforts to maintain the security and integrity of these types of IT networks and related systems will be effective or that attempted security breaches or disruptions would not be successful or damaging.
Our Senior Notes, Secured Revolving Credit Facility, Senior Unsecured Revolving Credit Facility, letter of credit facilities and certain other debt impose significant restrictions and obligations on us. Restrictions on our ability to borrow could adversely affect our liquidity.
Our senior notes, revolving credit facility, letter of credit facilities and certain other debt impose certain restrictions and obligations on us.
Any such actions taken with respect to us may increase our costs or harm our reputation. Further, we expect that increasingly stringent requirements will be imposed on homebuilders in the future. Environmental regulations can also have an adverse impact on the availability and price of certain raw materials such as lumber.
Any such actions taken with respect to us may increase our costs or harm our reputation. Further, we expect that increasingly stringent requirements will be imposed on homebuilders in the future.
In the event of a downturn, we would likely experience a material reduction in revenues and margins and our financial condition as well as our results of operations could be adversely affected. Because almost all of our customers require mortgage financing, increases in interest rates would likely negatively affect the affordability of the homes we sell.
In the event of a downturn, we would likely experience a material reduction in revenues and margins and our financial condition as well as our results of operations could be adversely affected.
In addition, through the end of 2025, the deduction for mortgage interest will generally only be available with respect to acquisition indebtedness that does not exceed $750,000 ($375,000 in the case of a separate return filed by a married individual).
In addition, through the end of 2025, the deduction for mortgage interest will generally only be available with respect to acquisition indebtedness that does not exceed $750,000 ($375,000 in the case of a separate return filed by a married individual). 12 If we are unsuccessful in competing against our competitors, our market share could decline or our growth could be impeded and, as a result, our financial condition and results of operations could suffer.
For example, the cancellation rate increased significantly from the low teens in the first half of the fiscal year to 17.0% in fiscal third quarter and 32.8% in fiscal fourth quarter, resulting in a cancellation rate for the year ended September 30, 2022 was 17.6%, up from 11.1% in the prior year.
For example, cancellation rates increased significantly from the low teens in the first half of fiscal year 2022 to 17.0% and 32.8% in the third and fourth quarters of fiscal 2022, respectively.
Natural disasters can also lead to increased competition for subcontractors, which can delay our progress even after the event has conc luded. Additionally, and as discussed above, increased competition for skilled labor can lead to cost overruns, as we may have to incentivize the impacted region’s limited trade base to work on our homes.
Additionally, and as discussed above, increased competition for skilled labor can lead to cost overruns, as we may have to incentivize the impacted region’s limited trade base to work on our homes. Finally, natural disasters and other related events may also temporarily impact demand, as buyers are not as willing to shop for new homes during or after the event.
If the rate at which we sell and deliver homes slows, or if we delay the opening of new home communities, we may incur additional pre-construction costs, and it may take longer for us to recover our costs, which could adversely affect our profitability and results of operations. 16 We could experience a reduction in home sales and revenues due to our inability to acquire and develop land for our communities if we are unable to obtain reasonably priced financing.
If the rate at which we sell and deliver homes slows, or if we delay the opening of new home communities, we may incur additional pre-construction costs, and it may take longer for us to recover our costs, which could adversely affect our profitability and results of operations. 14 Natural disasters and other related events could result in delays in land development or home construction, increase our costs or decrease demand in the impacted areas.
These rules generally operate by focusing on changes in the ownership among shareholders owning, directly or indirectly, 5% or more of the company's common stock (including changes involving a shareholder becoming a 5% shareholder) or any change in ownership arising from a new issuance of stock or share repurchases by the company. 20 We currently have an immaterial amount of "built-in losses" in our assets, i.e., an excess tax basis over current fair market value, which may result in tax losses as such assets are sold.
These rules generally operate by focusing on changes in the ownership among shareholders owning, directly or indirectly, 5% or more of the company's common stock (including changes involving a shareholder becoming a 5% shareholder) or any change in ownership arising from a new issuance of stock or share repurchases by the company.
A low stock price may adversely impact our ability to reduce our financial leverage, as measured by the ratio of total debt to total capital. Continued high levels of leverage or significant increases may adversely affect our credit ratings and make it more difficult for us to access additional capital.
Continued high levels of leverage or significant increases may adversely affect our credit ratings and make it more difficult for us to access additional capital. These factors may limit our ability to implement our operating and growth plans.
There is an inherent imprecision in these metrics based on an evaluation of qualitative factors during the transaction cycle. Supply shortages and other risks related to the demand for skilled labor and building materials could increase costs, delay deliveries and could adversely affect our financial condition and results of operations.
Supply shortages and other r isks related to the demand for skilled labor and building materials could increase costs, delay deliveries and could adversely affect our financial condition and results of operations. The residential construction industry experiences price fluctuations and shortages in labor and materials from time to time.
Significant cancellations have had, and could have, a material adverse effect on our business as a result of lost sales revenue and the accumulation of unsold housing inventory. It is important to note that both backlog and cancellation metrics are operational, rather than accounting data, and should be used only as a general gauge to evaluate our performance.
It is important to note that both backlog and cancellation metrics are operational, rather than accounting data, and should be used only as a general gauge to evaluate our performance. There is an inherent imprecision in these metrics based on an evaluation of qualitative factors during the transaction cycle.
These factors may limit our ability to implement our operating and growth plans. We experience fluctuations and variability in our operating results on a quarterly basis and, as a result, our historical performance may not be a meaningful indicator of future results.
As a result of such variability, our historical performance may not be a meaningful indicator of future results.
If we are unsuccessful in competing against our competitors, our market share could decline or our growth could be impeded and, as a result, our financial condition and results of operations could suffer. Competition in the homebuilding industry is intense, and there are relatively low barriers to entry into our business.
Competition in the homebuilding industry is intense, and there are relatively low barriers to entry into our business.
These economic uncertainties are out of our control and affect buyer sentiment and behavior, as well as the affordability of, and demand for, the homes we sell. These conditions also impact consumer confidence, upon which our business is highly dependent.
Towards the end of September 2023, interest rates began to rise again with mortgage interest rates reaching a two-decade high, which further strained affordability. T hese economic uncertainties are out of our control and affect buyer sentiment and behavior, as well as the affordability of, and demand for, the homes we sell.
For example, in fiscal 2017 and 2018, Hurricanes Harvey, Irma and Florence disrupted our operations in Texas, Florida, North Carolina and South Carolina, which resulted in temporary reductions in sales and closings. In fiscal 2022, Hurricane Ian disrupted our operations in Florida, which resulted in temporary reductions in sales and closings.
For example, in fiscal 2022, Hurricane Ian disrupted our operations in Florida, which resulted in temporary reductions in sales and closings. Natural disasters can also lead to increased competition for subcontractors, which can delay our progress even after the event has conc luded.
Removed
While housing market conditions remained robust and demand remained strong during the first half of fiscal 2022, during the second half of fiscal 2022, housing demand weakened due to a sharp increase in mortgage rates, the substantial increase in home prices experienced over the past two years, significant inflation in the broader economy, stock market volatility, and other macro-economic conditions, which have negatively impacted buyer sentiment and behavior.
Added
Demand during the second half of fiscal 2022 was negatively impacted by steep increases in interest rates from January to November 2022, as well as inflation, an uncertain economic outlook, and other macro-economic conditions. Due to these factors, housing market conditions during the first quarter of fiscal 2023 were challenging.
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There also continues to be meaningful discussion around certain proposed tax legislation contemplated by the Biden administration, including increasing the U.S. corporate tax rate, as well as long standing discussions within the Organization for Economic Co-operation and Development (“OECD”).
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Since the second quarter of fiscal 2023, interest rates have been less volatile, allowing homebuyers time to absorb the higher rate environment. As a result, demand and homebuyer traffic improved, and the housing market began to stabilize.
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It is unclear at this time which of these proposals, if any, may be enacted and how these various provisions will interact on a local, country and global scale.
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These conditions also impact consumer confidence, upon which our business is highly dependent.
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We believe changes such as these adversely impact or, in case of the proposed tax legislation, could adversely impact the demand for and sales prices of homes in certain markets, including parts of California, Maryland, and Virginia, and therefore could adversely affect our business, financial condition and results of operations.
Added
Because almost all of our customers require mortgage financing, elevated mortgage interest rates for prolonged periods and further increases in interest rates would likely negatively affect the affordability of the homes we sell.
Removed
While general economic conditions have improved and our operations have since normalized, we are uncertain of the potential full magnitude or duration of the business and economic impacts from the unprecedented public health effort to contain and combat the spread of COVID-19, which include, among other things, significant volatility in financial markets and a sharp decrease in the value of equity securities, including our common stock.
Added
This could result in our recognizing charges in future periods, which may be material, for inventory impairments or land option agreement abandonments, or both, related to our inventory assets.
Removed
We regularly acquire land for replacement and expansion of our land inventory within our existing and new markets. The market value of land, building lots and housing inventories can fluctuate significantly as a result of changing market conditions.
Added
Cancellation rates remained elevated through the first quarter of fiscal year 2023, but have since decreased (16.5% in the fourth quarter of fiscal 2023) and returned to a level within our normal historical range as buyers began to adjust to the higher rate environment.
Removed
While we employ measures to manage inventory risk, we may not be able to adequately insulate our operations from a severe drop in inventory values. As a result, we may incur impairment charges or have to sell land at a loss.
Added
Nevertheless, si gnificant cancellations have had, and could again in the future have, a material adverse effect on our business as a result of lost sales revenue and the accumulation of unsold housing inventory.
Removed
For example, during the second quarter of fiscal 2019, we recognized impairments of $110.0 million on projects in progress and $38.6 million on land held for sale.
Added
The climates and geology of many of the states in which we operate present increased risks of natural disasters.
Removed
In addition, when market conditions are such that land values are not appreciating, option agreements previously entered into may become less desirable, at which time we may elect to forgo deposits and pre-acquisition costs and terminate the agreements, which could result in abandonment charges.
Added
These risks could adversely affect our business, financial condition, and results of operations. Global economic and political instability and conflicts could adversely affect our business, financial condition or results of operations.
Removed
Material impairment charges, abandonment charges or other write-downs of assets could adversely affect our financial condition and results of operations. Negative publicity or poor relations with the residents of our communities could negatively impact sales, which could cause our revenues or results of operations to decline.
Added
For example, in November 2022, pursuant to the Global Warming Solutions Act of 2006 (AB32), the California Air Resources Board released a final scoping plan that, among other things, proposes to eliminate the installation of natural gas-powered appliances in favor of electric appliances in new residential construction effective in 2026.
Removed
Unfavorable media related to our industry, company, brands, marketing, personnel, operations, business performance, or prospects may affect our stock price and the performance of our business, regardless of its accuracy or inaccuracy. Our success in maintaining, extending and expanding our brand image depends on our ability to adapt to a rapidly changing media environment.
Added
Further, in August 2021, the California Energy Commission (“CEC”) adopted updates to California’s energy code that, among other things, establish electric-ready requirements for electric heating, cooking and vehicle charging effective January 1, 2023 for new permit applications. Environmental regulations can also have an adverse impact on the availability and price of certain raw materials such as lumber.
Removed
Adverse publicity or negative commentary on social media outlets could hurt operating results, as consumers might avoid or protest brands that receive bad press or negative reviews. Negative publicity may result in a decrease in our operating results.
Added
Financial and Liquidity Risks Our access to capital and our ability to obtain additional financing could be affected by any downgrade of our credit ratings, as well as limitations in the capital markets or adverse credit market conditions.
Removed
In addition, residents of communities we develop may look to us to resolve issues or disputes that may arise in connection with the operation or development of their communities. Efforts made by us to resolve these issues or disputes could be deemed unsatisfactory by the affected residents, and subsequent actions by these residents could adversely affect sales or our reputation.
Added
We currently have an immaterial amount of "built-in losses" in our assets, i.e., an excess tax basis over current fair market value, which may result in tax losses as such assets are sold. Those "built-in losses" could become significant in the future if market conditions worsen and our inventory is impaired.
Removed
The residential construction industry experiences price fluctuations and shortages in labor and materials from time to time.
Added
Built-in losses, if and when recognized, generally will result in tax losses that may then be deducted or carried forward. However, we experienced an “ownership change” under Section 382 as of January 12, 2010.
Removed
Natural disasters and other related events could result in delays in land development or home construction, increase our costs or decrease demand in the impacted areas. The climates and geology of many of the states in which we operate, including California, Florida, Georgia, North Carolina, South Carolina, Tennessee, Texas and certain mid-Atlantic states, present increased risks of natural disasters.
Added
Our ability to raise funds through the issuance of equity or otherwise use our common stock as consideration is impacted by the price of our common stock. A low stock price may adversely impact our ability to reduce our financial leverage, as measured by the ratio of total debt to total capital.
Removed
Finally, natural disasters and other related events may also temporarily impact demand, as buyers are not as willing to shop for new homes during or after the event. These risks could adversely affect our business, financial condition, and results of operations.
Removed
There can be no assurance that we will be able to obtain any waivers or amendments that may become necessary in the event of a future default situation without significant additional cost or at all.
Removed
Those "built-in losses" could become significant in the future if market conditions worsen and our inventory is impaired. Net operating losses and tax credits generally may be carried forward for a 20-year period to offset future earnings and reduce our federal income tax liability.
Removed
This includes spending on capital projects, such as developing strategic businesses (e.g., the launch of our Gatherings ® business in 2016 to meet the needs of the growing 55 plus segment) and acquiring other homebuilders with the potential to strengthen our industry position.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties As of September 30, 2022, we had under lease appro ximately 32,000 square feet of office space in Atlanta, Georgia to house our corporate headquarters. We also lease and own an aggregate of approxima tely 158,000 and 4,500 s quare feet of office space, respectively, for our divisional and other corporate operations at various locations.
Biggest changeItem 2. Properties As of September 30, 2023, we had under lease appro ximately 23,600 square feet of office space in Atlanta, Georgia to house our corporate headquarters. We also lease and own an aggregate of approxima tely 160,000 and 4,500 s quare feet of office space, respectively, for our divisional operations at various locations.
See Note 5 of notes to the consolidated financial statements in this Form 10-K for a further discussion of our inventory.
See Note 4 of notes to the consolidated financial statements in this Form 10-K for a further discussion of our inventory.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIn 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.
Biggest changeIn 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 pending lawsuits could result in the payment by us of substantial monetary damages that may not be fully covered by insurance.
For a discussion of our legal proceedings, see Note 9 of the notes to our consolidated financial statements in this Form 10-K. Item 4. Mine Safety Disclosures Not applicable. 22 PART II
For a discussion of our legal proceedings, see Note 8 of the notes to our consolidated financial statements in this Form 10-K. Item 4. Mine Safety Disclosures Not applicable. 20 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+1 added−3 removed1 unchanged
Biggest changeSecurities Authorized for Issuance under Equity Compensation Plans The following table provides information about the Company's shares of common stock that may be issued under our existing equity compensation plans as of September 30, 2022, all of which have been approved by our stockholders: Plan Category Number of Common Shares to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights Number of Common Shares Remaining Available for Future Issuance Under Equity Compensation Plans Equity compensation plans approved by stockholders 27,507 $14.31 1,487,202 Issuer Purchases of Equity Securities The following table summarizes the Company's common stock repurchases during the fourth fiscal quarter of 2022: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program (a) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program July 1, 2022 - July 31, 2022 — $ — — $ 47,467,968 August 1, 2022 - August 31, 2022 244,957 $ 14.69 244,957 $ 43,870,670 September 1, 2022 - September 30, 2022 149,903 $ 13.54 149,903 $ 41,840,522 (a) In May 2022, the Company's Board of Directors approved a new share repurchase program that authorizes the Company to repurchase up to $50.0 million of its outstanding common stock.
Biggest changeSecurities Authorized for Issuance under Equity Compensation Plans The following table provides information about the Company's shares of common stock that may be issued under our existing equity compensation plans as of September 30, 2023, all of which have been approved by our stockholders: Plan Category Number of Common Shares to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights Number of Common Shares Remaining Available for Future Issuance Under Equity Compensation Plans Equity compensation plans approved by stockholders 13,575 $9.61 810,940 Issuer Purchases of Equity Securities None. 21 Performance Graph The following graph illustrates the cumulative total stockholder return on Beazer Homes' common stock for the last five fiscal years through September 30, 2023 as compared to the S&P 500 Index and the S&P 500 Homebuilding Index.
Dividends The indentures u nder which our senior notes were issued contain certain restrictive covenants, including limitations on the payment of dividends. There were no dividends paid during our fiscal 2022, 2021 or 2020. The Board of Directors will periodically reconsider the declaration of dividends, assuming payment of dividends is not limited under our indentures.
Dividends The indentures u nder which our senior notes were issued contain certain restrictive covenants, including limitations on the payment of dividends. There were no dividends paid during our fiscal 2023, 2022 or 2021. The Board of Directors will periodically reconsider the declaration of dividends, assuming payment of dividends is not limited under our indentures.
Stockholder returns over the indicated period are based on historical data and should not be considered indicative of future stockholder return.
Stockholder returns over the indicated period are based on historical data and should not be considered indicative of future stockholder returns.
The comparison assumes an investment of $100 at September 30, 2018 in Beazer Homes' common stock and in each of the benchmark indices specified, assumes that all dividends were reinvested, and accounts for the impact of any stock splits, where applicable.
The graph assumes an investment of $100 at September 30, 2018 in Beazer Homes' common stock and in each of the benchmark indices specified, assumes that all dividends were reinvested, and accounts for the impact of any stock splits, where applicable.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The Company lists its common stock on the New York Stock Exchange (NYSE) under the symbol “BZH.” On November 7, 2022, the last reported sales price of the Co mpany's common stock on the NYSE was $11.21, and we had approximately 207 stockholders of record and 30,880,138 shares of common stock outstanding.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The Company lists its common stock on the New York Stock Exchange (NYSE) under the symbol “BZH.” On November 13, 2023, the last reported sales price of the Co mpany's common stock on the NYSE was $28.44, and we had approximately 194 stockholders of record and 31,322,989 shares of common stock outstanding.
Removed
As part of this new program, the C ompany repurchased 570 thousand shares of its common stock for $8.2 million at an average price per share of $14.33 during the year ended September 30, 2022 through open market transactions. All shares have been retired upon repurchase.
Added
Comparison of Five Year Cumulative Total Return Assuming $100 Investment as of September 30, 2018 September 30, 2018 2019 2020 2021 2022 2023 u Beazer Homes USA, Inc. $ 100.00 $ 141.90 $ 125.71 $ 164.28 $ 92.09 $ 237.20 g S&P 500 Index $ 100.00 $ 104.25 $ 120.05 $ 156.07 $ 131.92 $ 160.44 p S&P 500 Homebuilding Index $ 100.00 $ 129.43 $ 174.31 $ 195.80 $ 159.96 $ 258.59 Item 6. [Reserved] 22
Removed
The repurchase program has no expiration date. 23 Performance Graph The following graph illustrates the cumulative total stockholder return on Beazer Homes' common stock for the last five fiscal years through September 30, 2022 as compared to the S&P 500 Index and the S&P 500 Homebuilding Index.
Removed
Fiscal Year Ended September 30, 2018 2019 2020 2021 2022 u Beazer Homes USA, Inc. 56.03 79.51 70.44 92.05 51.60 g S&P 500 Index 117.91 122.93 141.55 184.02 155.55 p S&P 500 Homebuilding Index 96.65 125.09 168.52 189.24 154.60 Item 6. [Reserved] 24

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

90 edited+39 added−35 removed46 unchanged
Biggest changeThe following table reconciles our net income (loss) to Adjusted EBITDA for the periods presented: Fiscal Year Ended September 30, in thousands 2022 2021 2020 2019 2018 Net income (loss) $ 220,704 $ 122,021 $ 52,226 $ (79,520) $ (45,375) Expense (benefit) from income taxes 53,267 21,501 17,664 (37,245) 94,373 Interest amortized to home construction and land sales expenses and capitalized interest impaired 72,058 87,290 95,662 108,941 93,113 Interest expense not qualified for capitalization — 2,781 8,468 3,109 5,325 EBIT 346,029 233,593 174,020 (4,715) 147,436 Depreciation and amortization 13,360 13,976 15,640 14,759 13,807 EBITDA 359,389 247,569 189,660 10,044 161,243 Stock-based compensation expense 8,478 12,167 10,036 10,526 10,258 (Gain) loss on extinguishment of debt (309) 2,025 — 24,920 27,839 Inventory impairments and abandonments (a) 2,524 853 2,111 134,711 4,988 Litigation settlement in discontinued operations — 120 1,260 — — Restructuring and severance expenses — (10) 1,317 — — Joint venture impairment and abandonment charges — — — — 341 Adjusted EBITDA $ 370,082 $ 262,724 $ 204,384 $ 180,201 $ 204,669 (a) In periods during which we impaired certain of our inventory assets, capitalized interest that is impaired is included in the line above titled "Interest amortized to home construction and land sales expenses and capitalized interest impaired." 28 Homebuilding Operations Data The following table summarizes new orders and cancellation rates by reportable segment for the periods presented: New Orders, net Cancellation Rates 2022 2021 2020 22 v 21 21 v 20 2022 2021 2020 West 2,437 3,233 3,589 (24.6) % (9.9) % 18.4 % 12.0 % 16.5 % East 879 1,172 1,328 (25.0) % (11.7) % 16.2 % 9.6 % 14.5 % Southeast 745 1,159 1,376 (35.7) % (15.8) % 16.3 % 10.2 % 15.1 % Total 4,061 5,564 6,293 (27.0) % (11.6) % 17.6 % 11.1 % 15.8 % Net new orders for the y ear ended September 30, 2022 decreased to 4,061, down 27.0% from the year ended September 30, 2021.
Biggest changeThe following table reconciles our net income (loss) to Adjusted EBITDA for the periods presented: Fiscal Year Ended September 30, in thousands 2023 2022 2021 2020 2019 Net income (loss) $ 158,611 $ 220,704 $ 122,021 $ 52,226 $ (79,520) Expense (benefit) from income taxes 23,936 53,267 21,501 17,664 (37,245) Interest amortized to home construction and land sales expenses and capitalized interest impaired 68,489 72,058 87,290 95,662 108,941 Interest expense not qualified for capitalization — — 2,781 8,468 3,109 EBIT 251,036 346,029 233,593 174,020 (4,715) Depreciation and amortization 12,198 13,360 13,976 15,640 14,759 EBITDA 263,234 359,389 247,569 189,660 10,044 Stock-based compensation expense 7,275 8,478 12,167 10,036 10,526 Loss (gain) on extinguishment of debt 546 (309) 2,025 — 24,920 Inventory impairments and abandonments (a) 641 2,524 853 2,111 134,711 Litigation settlement in discontinued operations — — 120 1,260 — Restructuring and severance expenses 335 — (10) 1,317 — Adjusted EBITDA $ 272,031 $ 370,082 $ 262,724 $ 204,384 $ 180,201 (a) In periods during which we impaired certain of our inventory assets, capitalized interest that is impaired is included in the line above titled "Interest amortized to home construction and land sales expenses and capitalized interest impaired." Reconciliation of Total Debt to Total Capitalization Ratio to Net Debt to Net Capitalization Ratio Reconciliation of net debt to net capitalization ratio (a non-GAAP financial measure) to total debt to total capitalization ratio, the most directly comparable GAAP measure, is provided for each period below.
Financing Activities Net cash used in financing activities was $88.7 million for the fiscal year ended September 30, 2022 primarily driven by repayment of the Senior Unsecured Term Loan (the Term Loan), repurchases of a portion of our 2025 and 2027 Senior Notes, common stock repurchases under our share repurchase program, and tax payments for stock-based compensation awards vesting.
Net cash used in financing activities was $88.7 million during the fiscal year ended September 30, 2022, primarily driven by repayment of the Senior Unsecured Term Loan (the Term Loan), repurchases of a portion of our 2025 and 2027 Senior Notes, common stock repurchases under our share repurchase program, and tax payments for stock-based compensation awards vesting.
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, or other similar facility arrangements, in each case with the same or other financial institutions, or allow any such facilities to mature or expire.
In addition, as necessary or desirable, we may adjust or amend the terms of and/or expand the capacity of the Unsecured Facility, or enter into additional letter of credit 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.
Listed below are those policies that we believe are critical and require the use of complex judgment in their application. 38 Inventory Valuation - Projects in Progress Projects in progress inventory includes homes under construction and land under development grouped together as communities.
Listed below are those policies that we believe are critical and require the use of complex judgment in their application. Inventory Valuation - Projects in Progress Projects in progress inventory includes homes under construction and land under development grouped together as communities.
Supplemental Guarantor Information As discussed in Note 8 of the notes to the consolidated financial statements in this Form 10-K, 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.
Supplemental Guarantor Information As discussed in Note 7 of the notes to the consolidated financial statements in this Form 10-K, 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 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. 32 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.
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. 31 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.
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 8 of the notes to the consolidated financial statements in this Form 10-K for additional details related to our borrowings.
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 consolidated financial statements in this Form 10-K for additional details related to our borrowings.
(b) Interest on variable rate obligations is based on rates effective as of September 30, 2022. (c) Based on its current inventory of uncertain tax positions and tax carryforward attributes, the Company does not expect a cash settlement of unrecognized tax benefits related to uncertain tax positions in future years.
(b) Interest on variable rate obligations is based on rates effective as of September 30, 2023. (c) Based on its current inventory of uncertain tax positions and tax carryforward attributes, the Company does not expect a cash settlement of unrecognized tax benefits related to uncertain tax positions in future years.
The indentures under which our Senior Notes were issued contain certain restrictive covenants, including limitations on our payment of dividends. There were no dividends paid during our fiscal years ended September 30, 2022, 2021 or 2020.
The indentures under which our Senior Notes were issued contain certain restrictive covenants, including limitations on our payment of dividends. There were no dividends paid during our fiscal years ended September 30, 2023, 2022 or 2021.
If those changes resulted in significant and sustained reduction in our pre-tax earnings or our utilization of existing tax carryforwards, it is likely such changes would have a material impact on our financial condition or results of operations.
If those changes resulted in significant and sustained reductions in our pre-tax earnings or our utilization of existing tax carryforwards, it is likely such changes would have a material impact on our financial condition or results of operations.
Income tax expense in our fiscal 2022, 2021 and 2020 primarily resulted from income generated in the fiscal year and permanent book/tax differences, partially offset by the generation of additional federal tax credits.
Income tax expense in our fiscal 2023, 2022 and 2021 primarily resulted from income generated in the fiscal year and permanent book/tax differences, partially offset by the generation of additional federal tax credits.
The nature and amounts of the various tax attributes comprising our deferred tax assets are discussed in Note 13 of notes to the consolidated financial statements in this Form 10-K.
The nature and amounts of the various tax attributes comprising our deferred tax assets are discussed in Note 12 of notes to the consolidated financial statements in this Form 10-K.
At September 30, 2022, our warranty reserve was $13.9 million, reflecting an accrual range of 0.3% to 1.0% of total revenue recognized for each home closed depending on our loss history in the division in which the home was built.
At September 30, 2023, our warranty reserve was $13.0 million, reflecting an accrual range of 0.3% to 1.0% of total revenue recognized for each home closed depending on our loss history in the division in which the home was built.
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.
Our credit ratings could be lowered, or rating agencie s could issue adverse commentaries in the future, which could have a material adverse effect on our business, financial condition, results of operations, and liquidity.
A ten basis point increase in our warranty reserve rate would have increased our accrual and corresponding cost of sales by $2.5 million as of September 30, 2022. There were no material changes in assumptions in calculating our reserve balance for the year ended September 30, 2022 .
A ten basis point increase in our warranty reserve rate would have increased our accrual and corresponding cost of sales by $2.3 million as of September 30, 2023. There were no material changes in assumptions in calculating our reserve balance for the year ended September 30, 2023 .
Judgment is required in estimating valuation allowances for deferred tax assets. The realization of a deferred tax asset ultimately depends on the existence of sufficient taxable income in either the carryback or carryforward periods under tax law. We assess the need for valuation allowances for deferred tax assets based on more-likely-than-not realization threshold criteria.
The realization of a deferred tax asset ultimately depends on the existence of sufficient taxable income in either the carryback or carryforward periods under tax law. We assess the need for valuation allowances for deferred tax assets based on more-likely-than-not realization threshold criteria.
However, as shown in the tables above, the comparability of our gross profit and gross margin was modestly impacted by impairments and abandonment charges which increased by $0.2 million and interest amortized to homebuilding cost of sales which decreased by $15.4 million year-over-year (refer to Note 5 and Note 6 of the notes to the consolidated financial statements in this Form 10-K for additional details).
However, as shown in the tables above, the comparability of our gross profit and gross margin was modestly impacted by impairments and abandonment charges which decreased by $0.5 million and interest amortized to homebuilding cost of sales which decreased by $3.1 million year-over-year (refer to Note 4 and Note 5 of the notes to the consolidated financial statements in this Form 10-K for additional details).
Refer to Note 13 of the notes to the consolidated financial statements in this Form 10-K for a further discussion of our income taxes. 34 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 Facility (the Facility) and other bank borrowings, the issuance of equity and equity-linked securities, and other external sources of funds.
Refer to Note 12 of the notes to the consolidated financial statements in this Form 10-K for a further discussion of our income taxes. 33 Liquidity and Capital Resources Our sources of liquidity include, but are not limited to, cash from operations, proceeds from Senior Notes, our Senior Unsecured Revolving Credit Facility (the Unsecured Facility) and other bank borrowings, the issuance of equity and equity-linked securities, and other external sources of funds.
Income Taxes We recognized income tax expense from continuing operations of $53.3 million for the fiscal year ended September 30, 2022 , compared to income tax expense from continuing operations of $21.5 million and $18.0 million for our fiscal years ended September 30, 2021 and 2020, respectively.
Income Taxes We recognized income tax expense from continuing operations of $24.0 million for the fiscal year ended September 30, 2023, compared to income tax expense from continuing operations of $53.3 million and $21.5 million for our fiscal years ended September 30, 2022 and 2021, respectively.
Please see Note 13 of the notes to our consolidated financial statements in this Form 10-K for details of significant items that impact our effective tax rate. 27 Reconciliation of Net Income (Loss) to Adjusted EBITDA Reconciliation of Adjusted EBITDA to total company net income (loss), the most directly comparable GAAP measure, is provided for each period discussed below.
Please see Note 12 of the notes to our consolidated financial statements in this Form 10-K for details of significant items that impact our effective tax rate. 26 Reconciliation of Net Income (Loss) to Adjusted EBITDA Reconciliation of Adjusted EBITDA (a non-GAAP financial measure) to total company net income (loss), the most directly comparable GAAP measure, is provided for each period discussed below.
See Note 13 of the notes to the consolidated financial statements in this Form 10-K for additional information regarding the Company's unrecognized tax benefits related to uncertain tax positions as of September 30, 2022.
See Note 12 of the notes to the consolidated financial statements in this Form 10-K for additional information regarding the Company's unrecognized tax benefits related to uncertain tax positions as of September 30, 2023.
In fiscal 2022, our conclusions about our ability to more likely than not realize all of our federal and certain state tax attributes remain consistent with our prior determinations. We considered positive factors including significant increases in our current earnings, interest savings from our debt reduction strategies, shortage in housing supply, and our backlog.
In fiscal 2023, our conclusions about our ability to more likely than not realize all of our federal and certain state tax attributes remain consistent with our prior determinations. We considered positive factors including our recent earnings levels, interest savings from our debt reduction strategies, shortage in housing supply, and our backlog.
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, is provided for each period discussed below.
Reconciliation of homebuilding gross profit and the related gross margin excluding impairments and abandonments and interest amortized to cost of sales (each a non-GAAP financial measure) to their most directly comparable GAAP measures is provided for each period discussed below.
Investing Activities Net cash used in investing activities for the fiscal year ended September 30, 2022 and 2021 was $14.7 million and 14.2 million, respectively, primarily driven in both periods by capital expenditures for model homes and information systems infrastructure.
Net cash used in investing activities for the fiscal year ended September 30, 2022 was 14.7 million, primarily driven by capital expenditures for model homes and information systems infrastructure.
For the same period, homebuilding gross margin was as follows in those communities that have previously been impaired, which represented 3.4% of total closings during fiscal 2022: Homebuilding Gross Margin from previously impaired communities: Pre-impairment turn gross margin 11.3 % Impact of interest amortized to COS related to these communities 2.4 % Pre-impairment turn gross margin, excluding interest amortization 13.7 % Impact of impairment turns 19.3 % Gross margin (post impairment turns), excluding interest amortization 33.0 % For further discussion of our impairment policies, refer to Note 2 and Note 5 of the notes to consolidated financial statements in this Form 10-K.
For the same period, homebuilding gross margin was as follows in those communities that have previously been impaired, which represented 87 homes and 2.0% of total closings during fiscal 2023: Homebuilding Gross Margin from previously impaired communities: Pre-impairment turn gross margin (3.7) % Impact of interest amortized to COS related to these communities 2.7 % Pre-impairment turn gross margin, excluding interest amortization (1.0) % Impact of impairment turns 23.8 % Gross margin (post impairment turns), excluding interest amortization 22.8 % For further discussion of our impairment policies, refer to Note 2 and Note 4 of the notes to consolidated financial statements in this Form 10-K.
We had outstanding letters of credit and surety bonds of $35.2 million an d $279.6 million , respectivel y, as of September 30, 2022, primarily related to our obligations to local governments to construct roads and other improvements in various developments.
We had outstanding letters of credit and surety bonds of $31.2 million an d $254.2 million , respectivel y, as of September 30, 2023, primarily related to our obligations to local governments to construct roads and other improvements in various developments.
Net cash provided by operating activities during the period was primarily driven by income before income taxes of $274.0 million, which included $24.0 million of non-cash charges, a net decrease in non-inventory working capital of $14.5 million, partially offset by an increase in inventory of $231.4 million resulting from land acquisition, land development, and house construction spending to support continued growth.
Net cash provided by operating activities was $81.1 million for the fiscal year ended September 30, 2022, primarily driven by income before income taxes of $274.0 million, which included $24.0 million of non-cash charges, a net decrease in non-inventory working capital of $14.5 million, partially offset by an increase in inventory of $231.4 million resulting from land acquisition, land development, and house construction spending to support continued growth.
The total remaining purchase price, net of cash deposits, committed under all options was $827.6 million as of September 30, 2022. Subject to market conditions and our liquidity, we plan to further expand our use of option agreements to supplement our owned inventory supply.
The total remaining purchase price, net of cash deposits, committed under all options was $949.4 million as of September 30, 2023. Subject to market conditions and our liquidity, we may further expand our use of option agreements to supplement our owned inventory supply.
The decrease in net new orders was driven primarily by a decrease in average active community count from 127 in the prior year to 120, a decrease in sales pace from 3.7 sales per community per month in the prior year to 2.8, and an increase in cancellation rates from 11.1% in the prior year to 17.6% .
The decrease in net new orders was driven primarily by a decrease in sales pace from 2.8 sales per community per month in the prior year to 2.6 and an increase in cancellation rates from 17.6% in the prior year to 20.3%, partially offset by an increase in average active community count from 120 in the prior year to 125.
West Segment: The $72.7 million increase in operating income compared to the prior year was primarily due to the increase in gross profit previously discussed, partially offset by higher commissions expense on higher homebuilding revenue, higher sales and marketing expenses, and higher other G&A expenses in the segment.
West Segment: The $48.1 million decrease in operating income compared to the prior year was primarily due to the decrease in gross profit previously discussed and higher sales and marketing expenses and other G&A expenses, partially offset by lower commissions expense on lower revenue in the segment.
The aggregate reduction to stockholders’ equity related to share repurchases duri ng the fiscal years ended September 30, 2022 and 2020 was $8.2 million and $3.3 million, respectively. As of September 30, 2022 , the remaining availability of the new share repurchase program was $41.8 million. The repurchase program has no expiration date.
The aggregate reduction to stockholders’ equity related to share repurchases duri ng the fiscal year ended September 30, 2022 was $8.2 million. As of September 30, 2023 , the remaining availability of the share repurchase program was $41.8 million. The repurchase program has no expiration date.
East Segment: The $17.5 million increase in operating income compared to the prior year was primarily due to the increase in gross profit previously discussed and lower commissions expense on lower homebuilding revenue in the segment. This increase to operating income is partially offset by higher sales and marketing expenses and higher other G&A expenses in the segment.
East Segment: The $37.1 million decrease in operating income compared to the prior year was primarily due to the decrease in gross profit previously discussed and higher sales and marketing expenses, partially offset by lower commissions expense on lower revenue, and lower other G&A expenses in the segment.
Under option agreements, 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 $142.4 million as of September 30, 2022.
Under option agreements, 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, letters of credit or surety bonds, and other non-refundable amounts incurred, which totaled $165.4 million as of September 30, 2023.
The table below summarizes backlog units by reportable segment as well as the aggregate dollar value and ASP of homes in backlog as of September 30, 2022, 2021 and 2020: As of September 30, 2022 2021 2020 22 v 21 21 v 20 Backlog Units: West 1,257 1,653 1,365 (24.0) % 21.1 % East 410 611 624 (32.9) % (2.1) % Southeast 424 522 520 (18.8) % 0.4 % Total 2,091 2,786 2,509 (24.9) % 11.0 % Aggregate dollar value of homes in backlog (in millions) $ 1,144.9 $ 1,284.0 $ 995.3 (10.8) % 29.0 % ASP in backlog (in thousands) $ 547.5 $ 460.9 $ 396.7 18.8 % 16.2 % 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.
The table below summarizes backlog units by reportable segment as well as the aggregate dollar value and ASP of homes in backlog as of September 30, 2023, 2022 and 2021: As of September 30, 2023 2022 2021 23 v 22 22 v 21 Backlog Units: West 1,033 1,257 1,653 (17.8) % (24.0) % East 323 410 611 (21.2) % (32.9) % Southeast 355 424 522 (16.3) % (18.8) % Total 1,711 2,091 2,786 (18.2) % (24.9) % Aggregate dollar value of homes in backlog (in millions) $ 886.4 $ 1,144.9 $ 1,284.0 (22.6) % (10.8) % ASP in backlog (in thousands) $ 518.0 $ 547.5 $ 460.9 (5.4) % 18.8 % 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.
This assessment considers, among other matters, (1) the nature, frequency and severity of any current and cumulative losses; (2) forecasts of future profitability; (3) the duration of statutory carryforward periods; (4) our experience with operating loss and tax credit carryforwards not expiring unused; (5) the Section 382 limitation on our ability to carryforward pre-ownership change net operating losses; (6) recognized built-in losses or deductions; and (7) tax planning alternatives.
This assessment considers, among other matters, (1) the nature, frequency and severity of any current and cumulative losses; (2) forecasts of future profitability; (3) the duration of statutory carryforward periods; (4) our experience with operating loss and tax credit carryforwards not expiring unused; (5) the Section 382 limitation on our ability to carryforward pre-ownership change net operating losses; (6) recognized built-in losses or deductions; and (7) tax planning alternatives. 38 Our assessment of the need for the valuation of deferred tax assets includes assessing the likely future tax consequences of events that have been recognized in our financial statements or tax returns.
Our effective tax rate was impacted by, among other factors, tax credits of $12.1 million, $12.1 million and $0.9 million for the fiscal years ended September 30, 2022, 2021 and 2020, respectively.
For the fiscal years ended September 30, 2023, 2022 and 2021, our effective tax rate was impacted by, among other factors, tax credits of $20.3 mil lion, $12.1 million, and $12.1 million, respectively.
This newly authorized program replaced the prior share repurchase program authorized in the first quarter of fiscal 2019 of up to $50.0 million of common stock repurchases, pursuant to which $12.0 million of the capacity remained prior to the replacement of the program.
This share repurchase program replaced the prior share repurchase program, authorized in the first quarter of fiscal 2019 of up to $50.0 million of common stock repurchases, pursuant to which $12.0 million of the capacity remained prior to the replacement of the program. No share repurchases were made during fiscal years 2023 and 2021 .
The following ta bles present new order and closings data for the periods presented: New Orders (Net of Cancellations) 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total 2022 1,141 1,291 925 704 4,061 2021 1,442 1,854 1,199 1,069 5,564 2020 1,251 1,661 1,372 2,009 6,293 Closings 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total 2022 1,019 1,078 1,043 1,616 4,756 2021 1,114 1,388 1,378 1,407 5,287 2020 1,112 1,277 1,366 1,737 5,492 26 RESULTS OF CONTINUING OPERATIONS The following table summarizes certain key income statement metrics for the periods presented: Fiscal Year Ended September 30, $ in thousands 2022 2021 2020 Revenue: Homebuilding $ 2,302,520 $ 2,127,700 $ 2,116,910 Land sales and other 14,468 12,603 10,167 Total $ 2,316,988 $ 2,140,303 $ 2,127,077 Gross profit (loss): Homebuilding $ 532,149 $ 401,720 $ 348,110 Land sales and other 5,358 2,535 (470) Total $ 537,507 $ 404,255 $ 347,640 Gross margin: Homebuilding (a) 23.1 % 18.9 % 16.4 % Land sales and other (b) 37.0 % 20.1 % (4.6) % Total 23.2 % 18.9 % 16.3 % Commissions $ 74,336 $ 80,125 $ 82,507 General and administrative expenses (G&A) $ 177,320 $ 163,285 $ 170,386 SG&A (commissions plus G&A) as a percentage of total revenue 10.9 % 11.4 % 11.9 % G&A as a percentage of total revenue 7.7 % 7.6 % 8.0 % Depreciation and amortization $ 13,360 $ 13,976 $ 15,640 Operating income $ 272,491 $ 146,869 $ 79,107 Operating income as a percentage of total revenue 11.8 % 6.9 % 3.7 % Effective tax rate (c) 19.4 % 15.0 % 25.2 % Inventory impairments and abandonments $ 2,963 $ 853 $ 2,903 Gain (loss) on extinguishment of debt, net $ 309 $ (2,025) $ — (a) Excludi ng impairments, abandonments, and interest amortized to cost of sales, homebuilding gross margin was 26.3%, 23.0% and 21.0% for the fiscal years ended September 30, 2022, 2021 and 2020, respectively.
The following ta bles present new order and closings data for the periods presented: New Orders (Net of Cancellations) 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total 2023 482 1,181 1,200 1,003 3,866 2022 1,141 1,291 925 704 4,061 2021 1,442 1,854 1,199 1,069 5,564 Closings 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total 2023 833 1,063 1,117 1,233 4,246 2022 1,019 1,078 1,043 1,616 4,756 2021 1,114 1,388 1,378 1,407 5,287 25 RESULTS OF CONTINUING OPERATIONS The following table summarizes certain key income statement metrics for the periods presented: Fiscal Year Ended September 30, $ in thousands 2023 2022 2021 Revenue: Homebuilding $ 2,198,400 $ 2,302,520 $ 2,127,700 Land sales and other 8,385 14,468 12,603 Total $ 2,206,785 $ 2,316,988 $ 2,140,303 Gross profit: Homebuilding $ 438,120 $ 532,149 $ 401,720 Land sales and other 4,575 5,358 2,535 Total $ 442,695 $ 537,507 $ 404,255 Gross margin: Homebuilding (a) 19.9 % 23.1 % 18.9 % Land sales and other (b) 54.6 % 37.0 % 20.1 % Total 20.1 % 23.2 % 18.9 % Commissions $ 73,450 $ 74,336 $ 80,125 General and administrative expenses (G&A) $ 179,794 $ 177,320 $ 163,285 SG&A (commissions plus G&A) as a percentage of total revenue 11.5 % 10.9 % 11.4 % G&A as a percentage of total revenue 8.1 % 7.7 % 7.6 % Depreciation and amortization $ 12,198 $ 13,360 $ 13,976 Operating income $ 177,253 $ 272,491 $ 146,869 Operating income as a percentage of total revenue 8.0 % 11.8 % 6.9 % Effective tax rate (c) 13.1 % 19.4 % 15.0 % Inventory impairments and abandonments $ 641 $ 2,963 $ 853 (Loss) gain on extinguishment of debt, net $ (546) $ 309 $ (2,025) (a) Excludi ng impairments, abandonments, and interest amortized to cost of sales, homebuilding gross margin was 23.1%, 26.3% and 23.0% for the fiscal years ended September 30, 2023, 2022 and 2021, respectively.
Net changes in cash, cash equivalents, and restricted cash are as follows for the periods presented: in thousands 2022 2021 2020 Cash provided by operating activities $ 81,074 $ 31,656 $ 289,095 Cash used in investing activities (14,709) (14,189) (10,164) Cash used in financing activities (88,680) (85,852) (59,197) Net (decrease) increase in cash, cash equivalents, and restricted cash $ (22,315) $ (68,385) $ 219,734 Operating Activities Net cash provided by operating activities was $81.1 million for the fiscal year ended September 30, 2022.
Net changes in cash, cash equivalents, and restricted cash are as follows for the periods presented: in thousands 2023 2022 2021 Net cash provided by operating activities $ 178,057 $ 81,074 $ 31,656 Net cash used in investing activities (29,670) (14,709) (14,189) Net cash used in financing activities (13,926) (88,680) (85,852) Net increase (decrease) in cash, cash equivalents, and restricted cash $ 134,461 $ (22,315) $ (68,385) Operating Activities Net cash provided by operating activities was $178.1 million for the fiscal year ended September 30, 2023.
For fiscal 2022, our homebuilding gross margin was 23.1% and excluding interest and inventory impairments and abandonments, it was 26.3%.
For fiscal 2023, our homebuilding gross margin was 19.9% and excluding interest and inventory impairments and abandonments, it was 23.1%.
Southeast Segment: Th e $11.1 million increase in operating income compared to the prior year was primarily due to the increase in gross profit previously discussed and lower commissions expense on lower homebuilding revenue. This increase to operating income is partially offset by higher sales and marketing expenses and higher other G&A expenses in the segment.
Southeast Segment: Th e $11.4 million decrease in operating income compared to the prior year was primarily due to the decrease in gross profit previously discussed, partially offset by lower sales and marketing expenses and lower other G&A expenses in the segment.
Future land and lot sales will depend on a variety of factors, including local market conditions, individual community performance, and changing strategic plans. 33 Operating Income The table below summarizes operating income by reportable segment for the periods presented: Fiscal Year Ended September 30, in thousands 2022 2021 2020 22 v 21 21 v 20 West $ 253,961 $ 181,303 $ 161,786 $ 72,658 $ 19,517 East 102,146 84,630 56,319 17,516 28,311 Southeast 68,726 57,581 40,746 11,145 16,835 Corporate and Unallocated (a) (152,342) (176,645) (179,744) 24,303 3,099 Operating income $ 272,491 $ 146,869 $ 79,107 $ 125,622 $ 67,762 (a) 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.
Future land and lot sales will depend on a variety of factors, including local market conditions, individual community performance, and changing strategic plans. 32 Operating Income The table below summarizes operating income by reportable segment for the periods presented: Fiscal Year Ended September 30, in thousands 2023 2022 2021 23 v 22 22 v 21 West $ 205,850 $ 253,961 $ 181,303 $ (48,111) $ 72,658 East 65,021 102,146 84,630 (37,125) 17,516 Southeast 57,326 68,726 57,581 (11,400) 11,145 Corporate and Unallocated (a) (150,944) (152,342) (176,645) 1,398 24,303 Operating income $ 177,253 $ 272,491 $ 146,869 $ (95,238) $ 125,622 (a) 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.
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. 37 Investments in Unconsolidated Entities Occasionally, we use legal entities in which we have less than a controlling interest.
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.
When excluding the impact of impairments and abandonment charges and interest amortized to homebuilding cost of sales, homebuilding gross profit increased by $115.3 million compared to the prior year while homebuilding gross margin increased by 330 basis points to 26.3%.
When excluding the impact of impairments and abandonment charges and interest amortized to homebuilding cost of sales, homebuilding gross profit decreased by $97.6 million compared to the prior year while homebuilding gross margin decreased by 320 basis points to 23.1%.
Homebuilding gross margin excluding impairments, abandonments, and interest for the fiscal year ended September 30, 2022 was 26.3% , up from 23.0% in the prior year.
Homebuilding gross margin excluding impairments, abandonments, and interest for the fiscal year ended September 30, 2023 was 23.1%, down fr om 26.3% in the prior year.
The following tables summarize our land sales and other revenue and related gross profit (loss) by reportable segment for the periods presented: $ in thousands Land Sales and Other Revenue 2022 2021 2020 22 v 21 21 v 20 West $ 3,783 $ 8,370 $ 2,762 (54.8) % 203.0 % East 5,149 3,846 1,457 33.9 % 164.0 % Southeast 5,536 387 5,948 1,330.5 % (93.5) % Total $ 14,468 $ 12,603 $ 10,167 14.8 % 24.0 % $ in thousands Land Sales and Other Gross Profit (Loss) 2022 2021 2020 22 v 21 21 v 20 West $ 734 $ 2,330 $ 417 (68.5) % 458.8 % East 4,206 440 111 855.9 % 296.4 % Southeast 984 73 200 1,247.9 % (63.5) % Corporate and unallocated (a) (566) (308) (1,198) (83.8) % 74.3 % Total $ 5,358 $ 2,535 $ (470) 111.4 % 639.4 % (a) Includes capitalized interest and capitalized indirect costs expensed to land cost of sale related to land sold, as well as capitalized interest and capitalized indirect costs impaired in order to reflect land held for sale assets at net realizable value.
The following tables summarize our land sales and other revenue and related gross profit (loss) by reportable segment for the periods presented: $ in thousands Land Sales and Other Revenue 2023 2022 2021 23 v 22 22 v 21 West $ 4,945 $ 3,783 $ 8,370 30.7 % (54.8) % East 2,365 5,149 3,846 (54.1) % 33.9 % Southeast 1,075 5,536 387 (80.6) % 1,330.5 % Total $ 8,385 $ 14,468 $ 12,603 (42.0) % 14.8 % $ in thousands Land Sales and Other Gross Profit (Loss) 2023 2022 2021 23 v 22 22 v 21 West $ 2,989 $ 734 $ 2,330 307.2 % (68.5) % East 736 4,206 440 (82.5) % 855.9 % Southeast 850 984 73 (13.6) % 1,247.9 % Corporate and unallocated (a) — (566) (308) 100.0 % (83.8) % Total $ 4,575 $ 5,358 $ 2,535 (14.6) % 111.4 % (a) Includes capitalized interest and capitalized indirect costs expensed to land cost of sale related to land sold, as well as capitalized interest and capitalized indirect costs impaired in order to reflect land held for sale assets at net realizable value.
Excluding land held for future development and land held for sale lots, we controlled 24,397 active lots, up 13.9% from the prior year.
Excluding land held for future development and land held for sale lots, we controlled 25,567 active lots, up 4.8% from the prior year.
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 thousands Fiscal Year Ended September 30, 2022 HB Gross Profit (Loss) HB Gross Margin Impairments & Abandonments (I&A) HB Gross Profit (Loss) excluding I&A HB Gross Margin excluding I&A Interest Amortized to COS (Interest) HB Gross Profit (Loss) excluding I&A and Interest HB Gross Margin excluding I&A and Interest West $ 353,370 26.6 % $ 289 $ 353,659 26.6 % $ — $ 353,659 26.6 % East 137,937 24.8 % 143 138,080 24.9 % — 138,080 24.9 % Southeast 104,341 24.9 % 663 105,004 25.1 % — 105,004 25.1 % Corporate & unallocated (a) (63,499) — (63,499) 71,619 8,120 Total homebuilding $ 532,149 23.1 % $ 1,095 $ 533,244 23.2 % $ 71,619 $ 604,863 26.3 % $ in thousands Fiscal Year Ended September 30, 2021 HB Gross Profit (Loss) HB Gross Margin Impairments & Abandonments (I&A) HB Gross Profit (Loss) 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 $ 270,671 24.4 % $ — $ 270,671 24.4 % $ — $ 270,671 24.4 % East 125,928 22.2 % 465 126,393 22.3 % — 126,393 22.3 % Southeast 98,525 21.8 % 388 98,913 21.9 % — 98,913 21.9 % Corporate & unallocated (a) (93,404) — (93,404) 87,037 (6,367) Total homebuilding $ 401,720 18.9 % $ 853 $ 402,573 18.9 % $ 87,037 $ 489,610 23.0 % $ in thousands Fiscal Year Ended September 30, 2020 HB Gross Profit (Loss) HB Gross Margin Impairments & Abandonments (I&A) HB Gross Profit (Loss) 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 $ 258,675 21.9 % $ 923 $ 259,598 22.0 % $ — $ 259,598 22.0 % East 98,446 20.7 % 82 98,528 20.7 % — 98,528 20.7 % Southeast 87,935 19.1 % 641 88,576 19.2 % — 88,576 19.2 % Corporate & unallocated (a) (96,946) — (96,946) 94,844 (2,102) Total homebuilding $ 348,110 16.4 % $ 1,646 $ 349,756 16.5 % $ 94,844 $ 444,600 21.0 % (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. 31 Our homebuilding gross profit increased by $130.4 million to $532.1 million for the fiscal year ended September 30, 2022, compared to $401.7 million in the prior year.
These non-GAAP financial measures may not be comparable to other similarly titled measures of other companies and should not be considered in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP. $ in thousands Fiscal Year Ended September 30, 2023 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 $ 307,240 23.8 % $ 487 $ 307,727 23.8 % $ — $ 307,727 23.8 % East 103,102 20.5 % 154 103,256 20.5 % — 103,256 20.5 % Southeast 92,212 22.9 % — 92,212 22.9 % — 92,212 22.9 % Corporate & unallocated (a) (64,434) — (64,434) 68,489 4,055 Total homebuilding $ 438,120 19.9 % $ 641 $ 438,761 20.0 % $ 68,489 $ 507,250 23.1 % $ in thousands Fiscal Year Ended September 30, 2022 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 $ 353,370 26.6 % $ 289 $ 353,659 26.6 % $ — $ 353,659 26.6 % East 137,937 24.8 % 143 138,080 24.9 % — 138,080 24.9 % Southeast 104,341 24.9 % 663 105,004 25.1 % — 105,004 25.1 % Corporate & unallocated (a) (63,499) — (63,499) 71,619 8,120 Total homebuilding $ 532,149 23.1 % $ 1,095 $ 533,244 23.2 % $ 71,619 $ 604,863 26.3 % $ in thousands Fiscal Year Ended September 30, 2021 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 $ 270,671 24.4 % $ — $ 270,671 24.4 % $ — $ 270,671 24.4 % East 125,928 22.2 % 465 126,393 22.3 % — 126,393 22.3 % Southeast 98,525 21.8 % 388 98,913 21.9 % — 98,913 21.9 % Corporate & unallocated (a) (93,404) — (93,404) 87,037 (6,367) Total homebuilding $ 401,720 18.9 % $ 853 $ 402,573 18.9 % $ 87,037 $ 489,610 23.0 % (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. 30 Our homebuilding gross profit decreased by $94.0 million to $438.1 million for the fiscal year ended September 30, 2023, compared to $532.1 million in the prior year.
Debt We generally fulfill our short-term cash requirements with cash generated from our operations and available borrowings. Additionally, our Secured Revolving Credit Facility provides working capital and letter of credit capacity of $250.0 million.
Debt We generally fulfill our short-term cash requirements with cash generated from our operations and available borrowings. Additionally, our Unsecured Facility provides borrowing capacity of $265.0 million, which includes a letter of credit capacity of $100.0 million.
For the fiscal year ended September 30, 2022, corporate and unallocated net expenses decreased by $24.3 million from the prior fiscal year, primarily due to l ower amortization of capitalized interest and capitalized indirect costs to cost of sales, partially offset by higher G&A costs.
For the fiscal year ended September 30, 2023, corporate and unallocated net expenses decreased by $1.4 million from the prior fiscal year, primarily due to l ower amortization of capitalized interest to cost of sales on lower homebuilding revenue as well as lower G&A costs.
During the year ended September 30, 2020, the Company repurchased approximately 362 thousand shares of its common stock for $3.3 million at an average price per share of $9.20 through open market transactions, including 10b5-1 plans. All shares have been retired upon repurchase.
During the fiscal year ended September 30, 2022, the Company repurchased 570 thousand shares of its common stock for $8.2 million at an average price per share of $14.33 through open market transactions. All shares have been retired upon repurchase.
Net cash used in financing activities was $85.9 million during the fiscal year ended September 30, 2021 primarily driven by installment payment of the Senior Unsecured Term Loan (the Term Loan), partial extinguishment of our 2027 Senior Notes, the payment of cash for debt issuance costs, and tax payments for stock-based compensation awards vesting.
Financing Activities Net cash used in financing activities was $13.9 million for the fiscal year ended September 30, 2023, primarily driven by the repurchases of a portion of our 2025 Senior Notes, debt issuance costs for the Unsecured Facility (see Note 7), and tax payments for stock-based compensation awards vesting.
The aggregate dollar value o f homes in backlog as of September 30, 2022 decreased 10.8% compared to the prior year due to a 24.9% decrease in backlog units, partially offset by an 18.8% increase in the ASP of homes in backlog. 29 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: Homebuilding Revenue Average Selling Price $ in thousands 2022 2021 2020 22 v 21 21 v 20 2022 2021 2020 22 v 21 21 v 20 West $ 1,327,770 $ 1,110,208 $ 1,180,577 19.6 % (6.0) % $ 468.7 $ 377.0 $ 368.2 24.3 % 2.4 % East 555,598 565,989 476,167 (1.8) % 18.9 % 514.4 477.6 455.7 7.7 % 4.8 % Southeast 419,152 451,503 460,166 (7.2) % (1.9) % 497.2 390.2 370.8 27.4 % 5.2 % Total $ 2,302,520 $ 2,127,700 $ 2,116,910 8.2 % 0.5 % $ 484.1 $ 402.4 $ 385.5 20.3 % 4.4 % Closings 2022 2021 2020 22 v 21 21 v 20 West 2,833 2,945 3,206 (3.8) % (8.1) % East 1,080 1,185 1,045 (8.9) % 13.4 % Southeast 843 1,157 1,241 (27.1) % (6.8) % Total 4,756 5,287 5,492 (10.0) % (3.7) % The increase in homebuilding revenue for fiscal 2022 as compared to fiscal 2021 is the result of an increase in ASP, partially offset by a decrease in closings.
The decrease in backlog units was primarily due to lower beginning backlog and lower net new orders year-over-year. 28 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: Homebuilding Revenue Average Selling Price $ in thousands 2023 2022 2021 23 v 22 22 v 21 2023 2022 2021 23 v 22 22 v 21 West $ 1,292,060 $ 1,327,770 $ 1,110,208 (2.7) % 19.6 % $ 523.5 $ 468.7 $ 377.0 11.7 % 24.3 % East 503,479 555,598 565,989 (9.4) % (1.8) % 532.2 514.4 477.6 3.5 % 7.7 % Southeast 402,861 419,152 451,503 (3.9) % (7.2) % 484.2 497.2 390.2 (2.6) % 27.4 % Total $ 2,198,400 $ 2,302,520 $ 2,127,700 (4.5) % 8.2 % $ 517.8 $ 484.1 $ 402.4 7.0 % 20.3 % Closings 2023 2022 2021 23 v 22 22 v 21 West 2,468 2,833 2,945 (12.9) % (3.8) % East 946 1,080 1,185 (12.4) % (8.9) % Southeast 832 843 1,157 (1.3) % (27.1) % Total 4,246 4,756 5,287 (10.7) % (10.0) % West Segment: Homebuilding revenue decreased by 2.7% for the fiscal year ended September 30, 2023 compared to the prior fiscal year due to a 12.9% decrease in closings, partially offset by a 11.7% increase in ASP.
For those communities whose carrying values exceed the aggregate undiscounted cash flows, we perform a discounted cash flow analysis to determine the fair value of the community, and impairment charges are recorded if the fair value of the community's inventory is less than its carrying value.
For those communities whose carrying values exceed the aggregate undiscounted cash flows, we perform a discounted cash flow analysis to determine the fair value of the community, and impairment charges are recorded if the fair value of the community's inventory is less than its carrying value. 37 There is uncertainty associated with preparing the undiscounted cash flow analyses because future market conditions will almost certainly be different, either better or worse, than current conditions.
Our operating income increased by $125.6 million to $272.5 million for the year ended September 30, 2022, compared to operating income of $146.9 million for year ended September 30, 2021 , primarily driven by the previously discussed increase in gross profit, partially offset by an increase in SG&A expense.
Our operating income decreased by $95.2 million to $177.3 million for the year ended September 30, 2023, compared to operating income of $272.5 million for year ended September 30, 2022 , primarily driven by the previously discussed decrease in gross profit, as well as an increase in SG&A expense.
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.
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 long-term liquidity needs for funds to conduct our operations and meet other needs in the ordinary course of our business, however, we are continually reviewing our capital resources to determine whether we can meet our short- and long-term goals, and we may require additional capital to do so.
The risk of over or under-stating any of the important cash flow variables is greater with longer-lived communities and within markets that have historically experienced greater home price volatility.
Significant valuation assumptions include expected pace of closings, average sales price, expected costs for land development, direct construction, overhead, and interest. The risk of over or under-stating any of the important cash flow variables is greater with longer-lived communities and within markets that have historically experienced greater home price volatility.
The increase in homebuilding gross profit was primarily driven by an increase in homebuilding revenue of $174.8 million and an increase in gross margin of 420 basis points to 23.1%.
The decrease in homebuilding gross profit was primarily driven by a decrease in homebuilding revenue of $104.1 million and a decrease in gross margin of 320 basis points to 19.9%.
In particular, the magnitude and volatility of non-cash inventory impairments 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.
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 impairments 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.
Net cash provided by operating activities was $31.7 million during the fiscal year ended September 30, 2021, primarily driven by income before income taxes of $143.5 million, which included $28.1 million of non-cash charges, a net decrease in non-inventory working capital of $7.6 million, and a decrease in inventory of $147.5 million as a result of home sales, partially offset by land acquisition, land development, and house construction spending to support continued growth.
Net cash provided by operating activities during the period was primarily driven by income before income taxes of $182.5 million, which included $21.8 million of non-cash charges, partially offset by a net increase in non-inventory working capital of $11.5 million and an increase in inventory of $14.7 million resulting from land acquisition, land development, and house construction spending to support continued growth.
Our assessment of the need for the valuation of deferred tax assets includes assessing the likely future tax consequences of events that have been recognized in our financial statements or tax returns. We base our estimate of deferred tax assets and liabilities on current tax laws and rates and, in certain cases, business plans and other expectations about future outcomes.
We base our estimate of deferred tax assets and liabilities on current tax laws and rates and, in certain cases, business plans and other expectations about future outcomes.
Financial Position As of September 30, 2022, we had $459.1 million of available liquidity, including $214.6 million in cash and cash equivalents and $244.5 million of remaining capacity under our $250.0 million Secured Revolving Credit Facility , which was subsequently replaced and expanded by the new $265.0 million Senior Unsecured Revolving Credit Facility as noted above.
Financial Position As of September 30, 2023, our liquidity position consisted of $345.6 million in cash and cash equivalents and $265.0 million of remaining capacity under the Unsecured Facility, compared to $214.6 million in cash and cash equivalents and $244.5 million of remaining capacity under the Secured Revolving Credit Facility as of September 30, 2022.
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 grow our business.
Meanwhile, we invested $573.1 million and $573.6 million in land acquisition and land development during fiscal years ended September 30, 2023 and September 30, 2022, respectively. 34 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 grow our business.
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.
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. 35 Stock Repurchases and Dividends Paid In May 2022 , the Company's Board of Directors approved a new share repurchase program that authorizes the Company to repurchase up to $50.0 million of its outstanding common stock.
(b) Calculated as land sales and other gross profit (loss) divided by land sales and other revenue. ( c) Calculated as tax expense for the period divided by income from continuing operations. Due to a variety of factors, our income tax expense is not always directly correlated to the amount of pre-tax income for the associated periods.
(b) Calculated as land sales and other gross profit divided by land sales and other revenue. ( c) Calculated as tax expense for the period divided by income from continuing operations.
See Note 8 of the notes to the consolidated financial statements in this Form 10-K for additional details related to the New Unsecured Facility. 35 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.
See Note 7 and Note 18 of the notes to the consolidated financial statements in this Form 10-K for further discussion. We have also entered into a number of stand-alone letter of credit agreements with banks, secured with cash or certificates of deposit.
In July 2022, S&P reaffirmed the Company’s corporate credit rating of B and the Company's positive outlook. In October 2022, Moody's upgraded the ratings for our senior unsecured notes from B3 to B2, reaffirmed the Company's issuer corporate family rating of B2 and returned the Company's outlook from stable to positive.
Credit Ratings Our credit ratings are periodically reviewed by rating agencies. In August 2023, S&P upgraded the Company’s corporate credit rating of B to B+, updated the Company's outlook from positive to stable, and upgraded the rating for our senior unsecured notes from B to B+.
We believe, however, that the long-term housing market outlook remains positive, supported by a demographic shift towards homeownership, robust employment market, and a multimillion unit housing deficit that has accumulated over the past decade. We are focused on making the necessary adjustments to adapt to the weak demand environment.
While we expect uncertainty in market conditions to persist for some time, we believe the long-term housing market outlook remains positive, supported by a demographic shift towards homeownership and a multimillion unit housing deficit that has accumulated over the past decade.
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, these seasonal patterns may be impacted or reduced by a variety of factors, including periods of economic downturn, which result in decreased revenues and closings.
However, these seasonal patterns may be impacted or reduced by a variety of factors, including periods of economic downturn, which may result in decreased revenues and closings.
Homebuilding gross margin, excluding impairments and abandonments, increased to 24.9%, up from 22.3% in the prior year. The increase in gross margin was driven primarily by lower sales incentives and pricing increases. Southeast Segment: Compared to the prior fiscal year, homebuilding gross profit increased by $5.8 million due to higher gross margin, partially offset by a decrease in homebuilding revenue.
Southeast Segment: Compared to the prior fiscal year, homebuilding gross profit decreased by $12.1 million due to a decrease in homebuilding revenue and lower gross margin. Homebuilding gross margin, excluding impairments and abandonments, decreased to 22.9%, down from 25.1% in the prior year.
The dollar amount of SG&A increased by $8.2 million, or 3.4%, primarily due to increased personnel expense. Additionally, SG&A as a percentage of total revenue decreased year-over-year by 50 basis points from 11.4% to 10.9% primarily due to the increase in homebuilding revenue.
The dollar amount of SG&A increased by $1.6 million, or 0.6%, primarily due to higher sales and marketing costs, partially offset by lower commissions expense on lower revenue. Additionally, SG&A as a percentage of total revenue increased year-over-year by 60 basis points from 10.9% to 11.5% primarily due to the decrease in homebuilding revenue.
Overview of Results for Our Fiscal 2022 The following is a summary of our performance against certain key operating and financial metrics during fiscal 2022: • During the year ended September 30, 2022, sales per community per month was 2.8 compared to 3.7 in the prior year, and our net new orders were 4,061, down 27.0% from 5,564 in the prior year.
Our long-term strategic business objectives include increasing active communities to more than 200 by the end of fiscal 2026, reducing our net debt to net capitalization ratio to below 30% by the end of fiscal 2026 , and reaching our target of 100% Zero Energy Ready starts by the end of the calendar year 2025. 23 Overview of Results for Our Fiscal 2023 The following is a summary of our performance against certain key operating and financial metrics during fiscal 2023: • During the fiscal year ended September 30, 2023, sales per community per month was 2.6 compared to 2.8 in the prior year, and our net new orders were 3,866, down 4.8% from 4,061 in the prior year.
While we believe that our current warranty reserves are adequate, there can be no assurances that historical data and trends will accurately predict our actual warranty costs or that future developments might not lead to a significant change in the reserve. 39 Income Taxes - Valuation Allowance The carrying amounts of deferred tax assets are reduced by a valuation allowance if an assessment of their components indicates that it is more likely than not that all or some portion of these assets will not be realized.
Income Taxes - Valuation Allowance The carrying amounts of deferred tax assets are reduced by a valuation allowance if an assessment of their components indicates that it is more likely than not that all or some portion of these assets will not be realized. Judgment is required in estimating valuation allowances for deferred tax assets.
These ratings and our current credit condition affect, among other things, our ability to access new capital. Negative changes to th ese ratings may result in more stringent covenants and higher interest rates under the terms of any new debt.
These ratings are not recommendations to buy, sell or hold debt securities. Negative changes to these ratings may result in more stringent covenants and higher interest rates under the terms of any new debt.
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.
The decrease in gross margin was primarily driven by an increase in price concessions, and closing cost incentives including rate buydowns, as well as changes in product mix. 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.
Homebuilding gross margin, excluding impairments and abandonments, increased to 26.6%, up from 24.4% in the prior year. The increase in gross margin was driven primarily by lower sales incentives and pricing increases. East Segment: Compared to the prior fiscal year, homebuilding gross profit increased by $12.0 million due to higher gross margin, partially offset by a decrease in homebuilding revenue.
West Segment: Compared to the prior fiscal year, homebuilding gross profit decreased by $46.1 million due to the decrease in homebuilding revenue and lower gross margin. Homebuilding gross margin, excluding impairments and abandonments, decreased to 23.8%, down from 26.6% in the prior year.
In fiscal 2023, we plan to continue to invest in land strategically and increase our use of lot option agreements to position ourselves for long-term growth, while focusing on the appropriate balance between pursuing growth opportunities, controlling risk and maintaining a strong liquidity position.
During fiscal 2023, our total stockholders' equity of $1.1 billion exceeded the outstanding balance of our total debt for the first time in over 15 years. As we look to fiscal 2024, we continue to position our business for longer-term growth, while focusing on the appropriate balance between pursuing growth opportunities, controlling risk, and maintaining a strong liquidity position.
Of the 24,397 total active lots, we owned 11,085, or 45.4%, of these lots and the remaining 13,312 of these lots, or 54.6%, were under option agreements, 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 or surety bond for the right to acquire lots during a specified period of time at a certain pric e.
Off-Balance Sheet Arrangements and Aggregate Contractual Commitments Lot Option Agreements In addition to purchasing land directly, we control a portion of our land supply 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 or surety bond for the right to acquire lots during a specified period of time at a specified price.
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 (loss) determined in accordance with GAAP as an indicator of operating performance.
Management believes that Adjusted EBITDA assists investors in understanding and comparing core operating results and underlying business trends by eliminating many of the differences in companies' respective capitalization, tax position, level of impairments, and other non-recurring items.
A s of September 30, 2022 , we had 13,312 lots, or 54.6% of our total active lots, under option agreements as compared to 9,992 lots controlled, or 46.6% of our total active lots, under option agreements as of September 30, 2021. • ASP for homes closed during the year ended September 30, 2022 was $484.1 thousand, up 20.3% from $402.4 thousand in the prior year.
As of September 30, 2023, we had 14,490 lots, or 56.7% of our total active lots, under option agreements as compared to 13,312 lots, or 54.6% of our total active lots, under option agreements as of September 30, 2022. • SG&A for the fiscal year ended September 30, 2023 was 11.5% o f total revenue compared with 10.9% a year earlier.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of September 30, 2022, we had variable-rate debt outstanding, totaling approximately $72.3 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.
Biggest changeAs of September 30, 2023, we had variable rate debt outstanding, totaling $74.3 million. A one percent increase in the interest rate for these notes would result in an increase in our interest expense of approximately $1.0 million over the next twelve-month period.
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 $753.3 million to $784.2 million as of September 30, 2022. 40
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 $858.5 million to $889.1 million as of September 30, 2023. 39
The estimated fair value of our fixed rate debt as of September 30, 2022 was $753.3 million, compared to a carrying value of $911.2 million.
The estimated fair value of our fixed rate debt as of September 30, 2023 was $858.5 million, compared to a carrying amount of $903.7 million.

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