FinanceLooker

Excrept from filing document 2024-09-30

The aggregate market value of the registrant s Common Stock held by non affiliates of the registrant as of March 31 2024 based on the closing sale price per share as reported by the New York Stock Exchange on such
Portions of the registrant s Proxy Statement for the registrant s 2024 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10 K to the extent stated herein The Proxy Statement will be filed within 120 days of the registrant s fiscal year ended September 30 2024
This Annual Report on Form 10 K Form 10 K contains forward looking statements These forward looking statements represent our expectations or beliefs concerning future events or results and it is possible that such events or results described in this Form 10 K will not occur or be achieved These forward looking statements can generally be identified by the use of statements that include words such as outlook may will strategy believe expect anticipate intend plan
These forward looking statements involve risks uncertainties and other factors many of which are outside of our control that could cause actual events or results to differ materially from the results discussed in the forward looking statements including among other things the matters discussed in this Form 10 K in the section captioned
of this Form 10 K for the fiscal year ended September 30 2024 These factors are not intended to be an all inclusive list of risks and uncertainties that may affect the operations performance development and results of our business but instead are the risks that we currently perceive as potentially being material Such factors may include
economic changes nationally and in local markets including increases in the number of foreclosures and wage levels both of which are outside our control and may impact consumer confidence and affect the affordability of and demand for the homes we sell
elevated mortgage interest rates for prolonged periods as well as further increases to and reduced availability of mortgage financing due to among other factors additional actions by the Federal Reserve to address inflation
our ability to raise debt and or equity capital due to factors such as limitations in the capital markets including market volatility adverse credit market conditions and financial institution disruptions and our ability to otherwise meet our ongoing liquidity needs which could cause us to fail to meet the terms of our covenants and other requirements under our various debt instruments and therefore trigger an acceleration of a significant portion or all of our outstanding debt obligations including the impact of any downgrades of our credit ratings or reduction in our liquidity levels
changes in tax laws or otherwise regarding the deductibility of mortgage interest expenses and real estate taxes including those resulting from regulatory guidance and interpretations issued with respect thereto such as the IRS s guidance regarding heightened qualification requirements for federal credits for building energy efficient homes
terrorist acts protests and civil unrest political uncertainty including as a result of the 2024 election cycle acts of war or other factors over which the Company has no control such as the conflict between Russia and Ukraine the conflict in Gaza and other conflicts in the Middle East
potential delays or increased costs in obtaining necessary permits as a result of changes to or complying with laws regulations or governmental policies and possible penalties for failure to comply with such laws regulations or governmental policies including those related to the environment
the impact of information technology failures cybersecurity issues or data security breaches including cybersecurity incidents deploying evolving artificial intelligence tools and incidents impacting third party service providers that we depend on to conduct our business
the impact of governmental regulations on homebuilding in key markets such as regulations limiting the availability of water and electricity including availability of electrical equipment such as transformers and meters and
the success of our ESG initiatives including our ability to meet our goal that by the end of 2025 every home we start will be Zero Energy Ready as well as the success of any other related partnerships or pilot programs we may enter into in order to increase the energy efficiency of our homes and prepare for a Zero Energy Ready future
Any forward looking statement including any statement expressing confidence regarding future outcomes speaks only as of the date on which such statement is made and except as required by law we undertake no obligation to update any forward looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events New factors emerge from time to time and it is not possible to predict all such factors
We are a geographically diversified homebuilder with active operations in 13 states within three geographic regions in the United States the West East and Southeast Our homes are designed to appeal to homeowners at different price points across various demographic segments and are generally offered for sale in advance of their construction Our objective is to provide our customers with homes that incorporate 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 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 Information on our website is not a part of this Form 10 K and shall not be deemed incorporated by reference
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
We know that our buyers have many choices when purchasing a home Beazer Homes is a builder of choice for homebuyers who recognize the built in value of a new home Through our three strategic differentiators discussed below we deliver quality homes with energy efficiency for real savings improved indoor air quality for healthier living and superior comfort that homebuyers will appreciate long after they move in We take pride in offering customers unmatched value throughout the entire homebuilding experience
Most of our buyers need to arrange financing in order to purchase a new home Unlike many of our major competitors we have no ownership or other interest in a mortgage company which allows us to partner with our customers to help them get the most competitive interest rates fees and service levels available 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 from Choice Lenders and other lenders side by side
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 and in the primary baths Offering these pre designed floor plan alternatives allows us to offer fewer plans which improves efficiency and reduces cost w
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 giving our homeowners more quality and more comfort from the moment they move in and saving them money every month We deliver these benefits through our people materials and process Some examples of these benefits are as follows
We remain dedicated to continually enhancing the energy efficiency of our homes in support of our industry first pledge that by the end of calendar year 2025 every new home we start will be Zero Energy Ready which means it will meet the requirements of the
of our fiscal fourth quarter new home starts being built to Zero Energy Ready standards Notably Beazer Homes has now certified more Zero Energy Ready homes to the DOE s Single Family National Program requirements than any other home builder
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
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 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 In determining our product mix we consider demographic trends demand for a particular type of product product affordability consumer preferences land availability margins timing and the economic strength of the market Depending o
n the market we attempt to address one or more of the following categories of home buyers entry level move up or 55 Within these buyer groups we have developed detailed targeted buyer profiles based on demographic and psychographic data
including information about marital and family status employment age affluence special interests media consumption and distance moved Although we offer a selection of amenities and home customization options we generally do not build custom homes In all of our home offerings we attempt to increase customer satisfaction by incorporating quality and energy efficient materials distinctive design features convenient locations and competitive prices
We make extensive use of digital and traditional marketing vehicles and other promotional activities including our website www beazer com real estate listing sites digital advertising including search engine marketing and display advertising social media video brochures direct marketing and out of home advertising including billboards and signage located in the immediate areas of our developments as well as additional activities In connection with these marketing vehicles we have registered or applied for registration of trademarks and Internet domain names including Beazer Homes
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
ntinuously innovating within our model homes to provide a unique memorable and hands on experience including digital kiosks interactive site maps plans interactive magnetic floor plan boards interactive cutaway homes interactive Surprising Performance rooms signage and more The selection of interio
Our homes are customarily sold through commissioned new home sales counselors who work from sales offices located in the model homes used in the community as well as through independent brokers Our new home counselors are available to assist prospective homebuyers by providing them with floor plans pricing information tours of model homes the community s unique selling proposition detailed explanations of our differentiators as discussed above and associated savings opportunities Sales personnel are trained internally through a structured training program focused on sales techniques product familiarity competitive products in the area construction schedules and Company policies around compliance resulting in a sales force with extensive knowledge of our operating policies and housing products Sales personnel must be licensed real estate agents where required by law
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 This speculative inventory satisfies demand by providing near ready or move in ready homes targeted at relocated personnel and others who require a completed home
We allocate capital resources in a manner consistent with our overall business strategy We will vary our capital allocation based on market conditions results of operations and other factors Capital commitments are determined through consultation among executive and operational personnel who play an important role in ensuring that new investments are consistent with our strategy Financial controls are also maintained through the centralization and standardization of accounting and finance activities policies and procedures
The development and construction of each of our communities is managed by our operating divisions each of which is led by a regional market leader and or an area president who reports to our Chief Executive Officer Within our operating divisions our field teams are equipped with the skills needed to complete the functions of land acquisition land entitlement land development home construction local marketing sales warranty service and certain purchasing and planning design functions However the accounting and accounts payable functions of our field operations are concentrated in our national accounting center which we consider to be part of our corporate operations
Generally the land we acquire is purchased only after necessary entitlements have been obtained so that we have the right to begin development or construction as market conditions dictate The term entitlements refers to subdivision approvals development agreements tentative maps or recorded plats depending on the jurisdiction in which the land is located Entitlements generally give a developer the right to obtain building permits upon compliance with conditions that are usually within the developer s control Although entitlements are ordinarily obtained prior to the purchase of land we are still required to obtain a variety of other governmental approvals and permits during the development process In limited circumstances we will purchase property without all necessary entitlements where we have identified an opportunity to build on such property in a manner consistent with our strategy
We generally purchase land or obtain an option to purchase land which in either case requires certain site improvements prior to home construction Where required we then undertake or the grantor of the option then undertakes in the case of land under option the development activities through contractual arrangements with local developers general contractors and or subcontractors which include site planning and engineering as well as constructing roads water sewer and utility infrastructures drainage and recreatio
nal facilities and other amenities In some transactions land bankers take title to the land at closing subject to agreements which obligate us to perform all development activities which may be reimbursed by the land bankers with respect to the land and provide us with an option to purchase the finished lots When available in certain markets we also buy finished lots that
are ready for home construction During our fiscal 2024 and 2023 we continued to pursue land acquisition opportunities and develop our land positions spending 507 8 million and 384 2 million respectively for land acquisition and 268 7 million and 188 8 million respectively for land development
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
to forfeiture of the non refundable deposits letters of credit or surety bonds and other non refundable amounts incurred which totaled 227 8 million as of September 30 2024 The total remaining purchase price net of cash deposits committed under all land option agreements was 1 46 billion as of September 30 2024
ion agreements 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
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 2024 2023 and 2022 Refer to Management s Discussion and Analysis of Results of Operations and Financial Condition
We typically act as the general contractor for the construction of our new home communities 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 Our subcontractors follow design plans prepared by architects and engineers who are retained or directly employed by us and whose designs are geared to the local market and staying current with changing home design trends as well as expanding our focus on engineering without sacrificing value for our customers
Agreements with our subcontractors and materials suppliers are generally entered into after a competitive bidding process during which we obtain information from prospective subcontractors and vendors with respect to their financial condition and ability to perform their agreements with us in accordance with the specifications we provide Subcontractors typically are retained on a project by project basis to complete construction at a fixed price We do not maintain significant inventories of construction materials except for materials
being utilized for homes under construction We have numerous suppliers of raw materials and services used in our business While such materials and services generally have been and continue to be available from time to time supply chain disruptions may occur due to material and labor shortages such as the widespread supply chain disruptions we experienced throughout fiscal 2022 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 We believe that we maintain positive and productive relationships with our suppliers and subcontractors
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 certain defined structural element failures
Our homebuilding work is performed by subcontractors who typically must agree to indemnify us with regard to their work and provide certificates of insurance demonstrating that they have met our insurance requirements and have named us as an additional insured under their policies Therefore many claims relating to workmanship and materials that result in warranty spending are the primary responsibility of these subcontractors
In addition we maintain third party insurance subject to applicable self insured retentions for most construction defects that we encounter in the normal course of business We believe that our warranty and litigation accruals and third party insurance are adequate to cover the ultimate resolution of our potential liabilities associated with known and anticipated warranty and construction defect related claims and litigation However there can be no assurance that the terms and limitations of the limited warranty will be effective against claims made by homebuyers that we will be able to renew our insurance coverage or renew it at reasonable rates that we will not be liable for damages the cost of repairs and or the expense of litigation surrounding possible construction defects soil subsidence or building related claims or that claims will not arise out of events or circumstances not covered by insurance and or not subject to effective indemnification agreements with our subcontractors Please see
ed we do not provide mortgage origination services 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 85
The development and sale of residential properties is highly competitive and fragmented We compete for residential sales on the basis of a number of interrelated factors including location reputation amenities design quality and price with numerous large and small homebuilders including many homebuilders with nationwide operations and greater financial resources and or lower costs than us We also compete for residential sales with individual resales of existing homes and available rental housing
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 Through our three strategic differentiators discussed above our product offerings strive to provide extraordinary value at an affordable price with intentional focus on Millennials and Baby Boomers because they are the two largest demographic groups of potential home buyers
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 by a variety of factors including periods of market volatility and changes in mortgage interest rates which may result in increased or decreased new orders and or revenues and closings that are outside of the normal ranges typically realized on account of seasonality
As part of our due diligence process for land acquisitions we often use third party environmental consultants to investigate potential environmental risks and we require disclosures representations and warranties from land sellers regarding environmental risks We also take steps prior to our acquisition of the land to gain reasonable assurance as to the precise scope of any remediation work required and the costs associated with removal site restoration and or monitoring To the extent contamination or other environmental issues have occurred in the past we will attempt to recover restoration costs from third parties such as the generators of hazardous waste land sellers or others in the prior chain of title and or their insurers
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 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
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 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 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 To remain competitive we continue to focus on attracting and retaining qualified employees and providing them with comprehensive training and continuous development 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
We are also deeply committed to fostering an inclusive culture where everyone feels welcome respected safe and valued As we continue to advance in this area we are reaching across all functional and operational areas through our bi annual Inclusion and Diversity Learning Program and our employee driven storytelling platform which empowers our teams to share and learn from one
another s lived experiences Our skills first approach remains instrumental in driving stronger representation of women ethnic and racial minorities throughout our workforce As of September 30 2024 women made up approximately 43 6 of our workforce and 31 6 of our managerial employees with ethnic and racial minorities making up approximately 28 0 of our workforce and 17 8 of our managerial employees
Across our Company our team members are committed to supporting causes that make a difference From local service activities to Company wide initiatives giving back is a central element of our culture championed by passionate employees and embraced by partners who share our commitment to have a positive impact on the communities we serve
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
Our Internet website address is www beazer com Our annual reports on Form 10 K quarterly reports on Form 10 Q current reports on Form 8 K and amendments to those reports filed or furnished pursuant to section 13 a or 15 d of the Securities Exchange Act are available free of charge through our website as soon as reasonably practicable after we electronically file with or furnish them to the Securities and Exchange Commission SEC and are available in print to any stockholder who requests a printed copy We also use our website as a means of disclosing additional information including for complying with our disclosure obligations under the SEC s Regulation FD Fair Disclosure 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
In addition many of our corporate governance documents are available on our website at www beazer com Specifically our Audit Finance and Development Human Capital and 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
Investing in our common stock involves a high degree of risk You should carefully consider the following risk factors as well as other information in this Form 10 K before deciding whether to invest in shares of our common stock The occurrence of any of the events described below could harm our business financial condition results of operations and growth prospects In such an event the trading price of our common stock may decline and you may lose all or part of your investment
A number of conditions that affect demand for the homes we sell are outside of our control Many of these conditions such as interest rates inflation employment levels wage levels and governmental actions also impact consumer confidence upon which our business is highly dependent
Negative changes in national and regional economic conditions as well as local economic conditions where we conduct our operations may result in more caution on the part of homebuyers and consequently fewer home purchases Demand during the second half of fiscal 2023 remained relatively steady as homebuyers faced a higher rate environment and a lack of supply of existing homes In fiscal 2024 the new home sales environment continued to be affordability challenged and demand is highly sensitive to fluctuations in mortgage rates These economic conditions are out of our control and affect buyer sentiment and behavior and the demand for the homes we sell These conditions also impact consumer confidence upon which our business is highly dependent Adverse changes in any of these conditions could decrease demand and pricing for our homes or result in customer cancellations of pending contracts which could adversely affect the number of home sales we make or reduce home prices either of which could result in a decrease in our revenues and earnings and adversely affect our financial condition and results of operations
During downturns in the homebuilding industry housing markets across the United States may experience an oversupply of both new and resale home inventory an increase in foreclosures reduced levels of consumer demand for new homes increased cancellation rates aggressive price competition among homebuilders and increased incentives for home sales 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 most 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 In addition reductions in mortgage availability or increases in the effective costs of owning a home could prevent our customers from buying our homes and adversely affect our business and financial results
Most of the purchasers of our homes finance their acquisition with mortgage financing In the last few years the Federal Reserve raised interest rates multiple times in response to concerns about inflation and economic uncertainties and it may raise them again Despite the September 2024 reduction in interest rates future increases in interest rates could directly impact mortgage rates and increase the costs of owning a home which could adversely affect the purchasing power of consumers Elevated mortgage rates for prolonged periods could lower demand for the homes we sell resulting in a decrease in our revenues and earnings and adversely affect our financial condition
The availability of mortgage financing is significantly influenced by governmental entities such as the Federal Housing Administration Veteran s Administration and Government National Mortgage Association and government sponsored enterprises known as Fannie Mae and Freddie Mac 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
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 significantly For example the Tax Cuts and Jobs Act which was enacted in December 2017 includes provisions that impose significant limitations with respect to these income tax deductions Under this legislation through the end of 2025 the annual deduction for real estate property taxes and state and local income or sales taxes has been limited to a combined amount of 10 000 5 000 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
Inflation can adversely affect us by increasing costs of land materials and labor In addition inflation is often accompanied by higher interest rates 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
Competition in the homebuilding industry is intense and there are relatively low barriers to entry into our business Increased competition could hurt our business as it could prevent us from acquiring attractive parcels of land on which to build homes or make such acquisitions more expensive hinder our market share expansion and lead to pricing pressures on our homes that may adversely impact our margins and revenues If we are unable to successfully compete our financial results could suffer and our ability to service our debt could be adversely affected Our competitors may independently develop land and construct housing units that are superior or substantially similar to our products Furthermore many of our competitors have substantially greater financial resources less leverage and lower costs of funds and operations than we do Many of these competitors also have longstanding relationships with subcontractors and suppliers in the markets in which we operate We currently build in several of the top markets in the nation and therefore we expect to continue to face additional competition from new entrants into our markets
Our backlog reflects the number and value of homes for which we have entered into a sales contract with a customer but have not yet delivered the home Although these sales contracts typically require a cash deposit and generally do not make the sale contingent on the sale of the customer s existing home in some cases a customer may cancel the contract and receive a complete or partial refund of the deposit as a result of local laws or as a matter of our business practices If industry or economic conditions deteriorate or if mortgage financing becomes less accessible more homebuyers may have an incentive to cancel their contracts with us even where they might be entitled to no refund or only a partial refund rather than complete the pur
chase While cancellation rates during fiscal 2024 have remained in line with our normal historical range significant cancellations have had and could again in the future have a material adverse effect on o
ur 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 There is an inherent imprecision in these metrics based on an evaluation of qualitative factors during the transaction cycle
The homebuilding industry is highly competitive for suitable land and the risk inherent in purchasing and developing land increases as consumer demand for housing increases The availability of finished and partially finished developed lots and undeveloped land for purchase that meet our investment criteria depends on a number of factors outside our control including land availability in general competition with other homebuilders and land buyers inflation in land prices zoning allowable housing density the ability to obtain building permits and other regulatory requirements Should suitable lots or land become less available the number of homes we may be able to build and sell could be reduced and the cost of land could increase perhaps substantially which could adversely impact our financial condition and results of operations
As competition for suitable land increases the cost of acquiring both finished and undeveloped lots and the cost of developing owned land could rise and the availability of suitable land at acceptable prices may decline which could adversely impact our financial results The availability of suitable land assets could also affect the success of our land acquisition strategy and ultimately our long term strategic goals by impacting our ability to increase the number of actively selling communities grow our revenues and margins and achieve or maintain profitability
We incur many costs even before we begin to build homes in a community Depending on the stage of development a land parcel is in when we acquire it these may include costs of preparing land finishing and entitling lots installing roads sewers water systems and other utilities taxes and other costs related to ownership of the land on which we plan to build homes 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
The climates and geology of many of the states in which we operate present increased risks of natural disasters 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 Natural disasters can also lead to increased competition for subcontractors which can delay our progress even after the event has concluded 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 These risks could adversely affect our business financial condition and results of operations
The residential construction industry experiences price fluctuations and shortages in labor and materials from time to time Shortages in labor can be due to shortages in qualified trades people changes in immigration laws and trends in labor migration lack of availability of adequate utility infrastructure and services or our need to rely on local subcontractors who may not be adequately capitalized or insured 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 a pandemic Labor and material shortages can be more severe during periods of strong demand for housing or during periods in which the markets where we operate experience natural disasters such as hurricanes or flooding as discussed more fully above Pricing for labor and materials can be affected by the factors discussed above changes in energy prices and various other national regional and local economic and political factors For example government imposed tariffs and trade regulations on imported building supplies have and in the future could have significant impacts on the cost to construct our homes Additionally in 2023 Florida enacted legislation that will impose more stringent immigrant eligibility requirements This legislation or similar legislation if adopted in other jurisdictions in which we operate could result in labor shortages that could materially affect our operations Such measures limit our ability to control costs which if we are not able to successfully offset such increased costs through higher sales prices could adversely affect our margins on the homes we build
We may incur additional operating expenses or longer construction cycle times due to compliance programs or fines penalties and remediation costs pertaining to environmental regulations within our markets Additionally any violations of such regulations could harm our reputation thereby negatively impacting our financial condition and results of operations
We are subject to a variety of local state and federal statutes ordinances rules and regulations concerning the protection of health and the environment The particular environmental laws that apply to any given community vary greatly according to the location of the community site the site s environmental conditions and the present and former use of the site Environmental laws may result in delays may cause us to implement time consuming and expensive compliance programs and may prohibit or severely restrict development in certain environmentally sensitive regions or areas From time to time the United States Environmental Protection Agency EPA and similar federal or state agencies review homebuilders compliance with environmental laws and may levy fines and penalties for failure to strictly comply with applicable environmental laws or impose additional requirements for future compliance as a result of past failures 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 particular our communities in California and Phoenix are especially susceptible to restrictive government regulations and environmental laws particularly surrounding water usage
Regulatory requirements could cause us to incur significant liabilities and operating expenses and could restrict our business activities We are subject to local state and federal statutes and rules regulating among other things certain developmental matters building and site design the availability of water and matters concerning the protection of health safety and the environment Our operating costs may be increased by governmental regulations such as building permit allocation ordinances and impact and other fees and taxes which may be imposed to defray the cost of providing certain governmental services and improvements Other governmental regulations such as building moratoriums and no growth or slow growth initiatives may be adopted in communities that have developed rapidly which may cause delays in new home communities or otherwise restrict our business activities resulting in reductions in our revenues Any delay or refusal from government agencies to grant us necessary licenses permits and approvals could have an adverse effect on our financial condition and results of operations
In recent years we along with many other companies have been subject to increased focus and scrutiny from regulators investors employees and customers and other stakeholders regarding sustainability efforts including compliance with evolving disclosure requirements For example the SEC has issued final rules that would require expanded disclosures related to climate change Although these rules are currently stayed pending judicial review if implemented as proposed these rules would significantly increase our climate related disclosure obligations The State of California has also enacted legislation that will require large U S companies doing business in California to make broad based climate related disclosures and other states are also considering similar measures We are assessing our obligations under these proposed and enacted rules and expect that compliance could require substantial effort in the future Standards for tracking and reporting on sustainability matters including climate related matters have also not been harmonized Changes to these standards could require adjustments to our accounting or operational policies as well as updates to our existing systems to meet these reporting obligations We will therefore likely need to be prepared to contend with overlapping yet distinct climate related disclosure approaches frameworks and requirements
Our 2023 Sustainability Report is available on our website If our sustainability practices or disclosures do not meet or are perceived not to meet evolving regulatory investor and other stakeholder expectations and standards our reputation our ability to attract or retain employees and our attractiveness as an investment or business partner could be negatively affected Similarly our failure or perceived failure to pursue or fulfill any sustainability focused goals targets or objectives to comply with ethical environmental or other standards regulations or expectations or to satisfy various reporting standards with respect to these matters within the timelines we announce or at all could adversely affect our business or reputation as well as expose us to government enforcement actions and private litigation While we monitor a broad range of sustainability matters we cannot be certain that we will manage such matters successfully or that we will successfully meet the expectations of regulators investors employees customers and other stakeholders
As a homebuilder we have been and continue to be subject to construction defect product liability and home warranty claims including moisture intrusion and related claims arising in the ordinary course of business These claims are common to the homebuilding industry and can be costly
With respect to certain general liability exposures including construction defect claims product liability claims and related claims assessment of claims and the related liability and reserve estimation process is highly judgmental due to the complex nature of these exposures and unique circumstances of each claim Furthermore once claims are asserted for construction defects it can be difficult to determine the extent to which the assertion of these claims will expand geographically Although we have obtained insurance for construction defect claims such policies may not be available or adequate to cover liability for damages the cost of repairs and or the expense of litigation Current and future claims may arise out of events or circumstances not covered by insurance and not subject to effective indemnification agreements with our subcontractors
We may be subject to civil litigation regarding claims made by homebuyers We cannot predict or determine the timing or final outcome of such lawsuits or the effect that any adverse determinations the lawsuits may have on us An unfavorable determination in any of the lawsuits could result in the payment by us of substantial monetary damages that may not be covered by insurance Further the legal costs associated with the lawsuits and the amount of time required to be spent by management and the Board of Directors on these matters even if we are ultimately successful could have a material adverse effect on our business financial condition and results of operations In addition to expenses incurred to defend the Company in these matters under Delaware law and our bylaws we may have an obligation to indemnify our current and former officers and directors in relation to these matters We have obligations to advance legal fees and expenses to directors and certain officers
Our insurance carriers may seek to rescind or deny coverage with respect to such lawsuits or we may not have sufficient coverage under our insurance policies If the insurance companies are successful in rescinding or denying coverage or if we do not have sufficient coverage under our policies our business financial condition and results of operations could be materially adversely affected
Our operating expenses could increase if we are required to pay higher insurance premiums or litigation costs for various claims which could negatively impact our financial condition and results of operations Additionally our insurance policies may not offset our entire expense due to limitation in coverages amounts payable under the policies or other related restrictions
The costs of insuring against construction defect product liability and director and officer claims are substantial Increasingly in recent years lawsuits including class action lawsuits have been filed against builders asserting claims of personal injury and property damage Our insurance may not cover all of the claims including personal injury claims or such coverage may become prohibitively expensive If we are not able to obtain adequate insurance against these claims we may experience losses that could negatively impact our financial condition and results of operations as well as our cash flows
Historically builders have recovered from subcontractors and their insurance carriers a significant portion of the construction defect liabilities and costs of defense that the builders have incurred However insurance coverage available to subcontractors for construction defects is becoming increasingly expensive and the scope of coverage is restricted If we cannot effectively recover from our subcontractors or their carriers we may suffer even greater losses
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 Many of the states in which we build homes have lengthy statutes of limitations and or repose applicable to claims for construction defects To the extent that any carrier providing insurance coverage to us or our subcontractors becomes insolvent or experiences financial difficulty in the future we may be unable to recover on those policies thereby negatively impacting our financial condition and results of operations
Our future success depends upon our ability to attract train and retain skilled personnel including officers and directors If we are unable to retain our key employees or attract train or retain other skilled personnel in the future it could hinder our business strategy and impose additional costs of identifying and training new individuals Competition for qualified personnel in all of our operating markets as well as within our corporate operations is intense
We use information technology and other computer resources to perform important operational and marketing activities and to maintain our business records Certain of these resources are provided to us and or maintained by third party service providers pursuant to agreements that specify certain security and service level standards Presently we employ a limited array of both traditional and generative artificial intelligence AI solutions for certain functions for our operations It is conceivable that we might integrate further AI solutions into our information systems in the future potentially assuming a more critical role in our operations over time AI programs can incur significant costs and demand substantial expertise for development pose challenges in setup and management and necessitate periodic updates Competitors or other entities may integrate AI into their information systems and business operations more swiftly or effectively than us potentially impairing our competitive edge and negatively impacting our financial performance
Our computer systems including our back up systems and portable electronic devices and those of our third party providers are subject to damage or interruption from power outages computer and telecommunication failures computer viruses security breaches including malware and phishing cyberattacks natural disasters usage errors by our employees or contractors and other related risks As part of our normal business activities we collect and store certain confidential information including information about employees homebuyers customers vendors and suppliers This information is entitled to protection under a number of regulatory regimes We share some of this information with third parties who assist us with certain aspects of our business A significant and extended disruption of or breach of security related to our computer systems and back up systems may result in business disruption damage our reputation and cause us to lose customers sales and revenue result in the unintended misappropriation of proprietary personal and confidential information and require us to incur significant expense to remediate or otherwise resolve these issues including financial obligations to third parties fines penalties regulatory proceedings and private litigation with potentially large costs and other competitive disadvantages Additionally the techniques and sophistication used to conduct cyber attacks and breaches of information systems frequently change For example the deployment of evolving AI tools used to identify vulnerabilities and create more deceptive phishing attempts have the potential to not be recognized until such attacks are launched or have been in place for a period of time A significant cybersecurity breach or attack could have 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 business could be adversely affected by unstable economic and political conditions within the United States including the 2024 election cycle and foreign jurisdictions and geopolitical conflicts such as the conflict between Russia and Ukraine the conflict in Gaza and other conflicts in the Middle East 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 In addition such events could cause higher interest rates inflation or general economic uncertainty which could negatively impact our business partners employees or customers or otherwise adversely impact our business
Adverse developments such as terrorist attacks against the United States or any outbreak or escalation of hostilities between the United States and or any foreign power may cause disruption to the economy our Company our employees and our customers which could negatively impact our financial condition and results of operations
Our business could be materially and adversely disrupted by an epidemic or pandemic or similar public threat or fear of such an event and the measures that international federal state and local governments agencies law enforcement and or health authorities implement to address it
An epidemic pandemic or similar serious public health issue and the measures undertaken by governmental authorities to address it could significantly disrupt or prevent us from operating our business in the ordinary course for an extended period and thereby and or along with any associated economic and or social instability or distress have a material adverse impact on our financial condition and results of operations
If a public health emergency were to emerge we could experience material disruptions in our operating environment impairing our ability to sell and build homes in a typical manner or at all due to among other things increased costs or decreased supply of building materials reduced availability of subcontractors employees and other talent as a result of infections or recommended self quarantining or governmental mandates to direct production activities to support public health efforts 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
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 financial condition and results of operations 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 or meet the terms of our covenants and other requirements under our various debt obligations including but not limited to the Senior Unsecured Revolving Credit Facility indentures for our senior and junior notes land contracts due to land sellers and other loans 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
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
The Company s credit rating and ratings on our senior notes and our current credit condition affect among other things our ability to access new capital especially debt Negative changes in these ratings may result in more stringent covenants and higher interest rates under the terms of our indentures or of any new debt If our credit ratings are lowered or rating agencies issue adverse commentaries in the future it could have a material adverse effect on our business financial condition results of operations and liquidity In particular a weakening of our financial condition including a significant increase in our leverage or decrease in our profitability or cash flows could adversely affect our ability to obtain necessary funds result in a credit rating downgrade or change in outlook or otherwise increase our cost of borrowing
Our 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 Senior Notes Senior Unsecured Revolving Credit Facility letter of credit facilities and certain other debt impose certain restrictions and obligations on us Under certain of these instruments we must comply with defined covenants that limit our ability to among other things incur additional indebtedness engage in certain asset sales make certain types of restricted payments engage in transactions with affiliates and create liens on our assets Failure to comply with certain of these covenants could result in an event of default under the applicable instrument Any such event of default could negatively impact other covenants or lead to cross defaults under certain of our other debt agreements 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
In addition subject to the restrictions of our existing debt instruments we may incur additional indebtedness If new debt is added to our current debt levels the related risks that we now face could intensify Our growth plans and our ability to make payments of principal or interest on or to refinance our indebtedness will depend on our future operating performance and our ability to enter into additional debt and or equity financings If we are unable to generate sufficient cash flows in the future to service our debt we may be required to refinance all or a portion of our existing debt to sell assets or to obtain additional financing We may not be able to do any of the foregoing on terms acceptable to us if at all
The tax benefits of our pre ownership change net operating loss carryforwards and built in losses were substantially limited since we experienced an ownership change as defined in Section 382 of the Internal Revenue Code and portions of our deferred income tax asset have been written off since they were not fully realizable Any subsequent ownership change should it occur could have a further impact on these tax attributes
Section 382 of the Internal Revenue Code contains rules that limit the ability of a company that undergoes an ownership change which is generally defined as any change in ownership of more than 50 of its common stock over a three year period to utilize its net operating loss carryforwards tax credits and certain built in losses or deductions as of the ownership change date that are recognized during the five year period after the ownership change 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
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 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 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 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 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 currently prohibits certain transfers of our common stock that could result in an ownership change In addition we are currently 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 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 Neither the protective provisions nor the rights agreement offers a complete solution and an ownership change may still occur Additionally the protective provisions of our certificate of incorporation may not be enforceable against all stockholders and may not prevent all stock transfers that have the potential to cause a Section 382 ownership shift and the rights agreement may deter but ultimately may not block all transfers of our common stock that might result in an ownership change
The realization of all or a portion of our deferred income tax assets including net operating loss carryforwards and tax credits is dependent upon the generation of future income during the statutory carryforward periods 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
The homebuilding industry is capital intensive and homebuilding requires significant up front expenditures to acquire land and to begin development Accordingly we incur substantial indebtedness to finance our homebuilding activities If internally generated funds are not sufficient we would seek additional capital in the form of equity or debt financing from a variety of potential sources including additional bank financing and or securities offerings The amount and types of indebtedness that we may incur are limited by the terms of our existing debt In addition the availability of borrowed funds especially for land acquisition and construction financing may be greatly reduced nationally and the lending community may require increased amounts of equity to be invested in a project by borrowers in connection with both new loans and the extension of existing loans The credit and capital markets have continued to experience significant volatility If we are required to seek additional financing to fund our operations the volatility in these markets may restrict our flexibility to access such financing If we are not successful in obtaining sufficient capital to fund our planned capital and other expenditures we may be unable to acquire land for our housing developments thereby limiting our anticipated growth and community count Additionally if we cannot obtain additional financing to fund the purchase of land under our option agreements we may incur contractual penalties and fees
Our goal is to allocate capital to maximize our overall long term returns This includes growing profitability improving balance sheet efficiency and generating returns above our cost of capital In addition from time to time we may engage in bond repurchases to reduce our indebtedness and return value to our stockholders through share repurchases If we do not properly allocate our capital we may fail to produce optimal financial results and we may experience a reduction in stockholder value including increased volatility in our stock price
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 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
We maintain a cybersecurity program designed to detect identify classify and mitigate cybersecurity and other data security threats as part of our efforts to protect and maintain the confidentiality and security of homebuyer customer employee vendor and supplier information and non public information about the Company which has been strategically integrated into our enterprise risk management program to promote a company wide culture of cyber risk awareness The foundation of our cybersecurity program is based on the National Institute of Standards and Technology NIST Cybersecurity Framework which includes a set of controls to prevent detect and respond to cybersecurity and other data security threats and incidents
provide mandatory annual security and privacy awareness training along with monthly phishing simulations to all of our employees These trainings and simulations are designed to ensure employees are well versed in the behaviors and requirements necessary to safeguard the Company s information resources and
We have a dedicated team of employees managing our cybersecurity program and initiatives led by the Company s Chief Information Security Officer who reports to our Chief Information Officer and brings over 20 years of experience in senior leadership roles leading information security and technology teams across private and public companies The team works directly in consultation with internal and external advisors to execute our cybersecurity strategies
Pursuant to our cybersecurity program potential cybersecurity threats are classified by risk levels and threat mitigation efforts are typically prioritized based on those risk classifications while focus also remains on maintaining the resiliency of our information systems In the event we identify a potential cybersecurity issue we have defined procedures for responding to such issues including procedures that address when and how to engage with Company management the Board of Directors other stakeholders and law enforcement
Our Board of Directors has ultimate oversight responsibility for risks relating to our cybersecurity program In addition the Audit Committee assists the Board of Directors in monitoring our cybersecurity and data security risk exposures and compliance with the Company s cybersecurity program and regularly makes inquiries of the Company s management team internal auditors and independent auditors regarding these risk exposures and compliance matters We have also established an IT Committee which is an ad hoc committee comprised of at least two members of the Board of Directors The IT Committee is responsible for advising and assisting the Board of Directors in overseeing the Company s customer relationship management and enterprise resource planning software and technology and regularly meets with the Company s management team with respect to these initiatives
Conducting our businesses involves the collection storage use disclosure processing transfer and other handling of a wide variety of information including personally identifiable information for various purposes Like other companies that process a wide variety of information our information technology systems networks and infrastructure and technology have been and may in the future be vulnerable to cybersecurity attacks and other data security threats These types of attacks are constantly evolving may be difficult to detect quickly and often are not recognized until after they have been launched against a target While to date we have not had a significant cybersecurity breach or attack that has had a material impact on our business strategy results of operations or financial condition 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 For more information about these and other cybersecurity risks faced by us see Part 1 Item 1A Risk Factors
Due to the nature of our business significant amounts of property are held by us as inventory in the ordinary course of our homebuilding operations See Note 4 of notes to the consolidated financial statements in this Form 10 K for a further discussion of our inventory
In the normal course of business we and certain of our subsidiaries are subject to various lawsuits We cannot predict or determine the timing or final outcome of these lawsuits or the effect that any adverse findings or determinations in pending lawsuits may have on us In addition an estimate of possible loss or range of loss if any cannot presently be made with respect to certain of these pending matters An unfavorable determination in pending lawsuits could result in the payment by us of substantial monetary damages that may not be fully covered by insurance Further the legal costs associated with the lawsuits and the amount of time required to be spent by management and our Board of Directors on these matters even if we are ultimately successful could have a material adverse effect on our financial condition results of operations or cash flows
on the New York Stock Exchange NYSE under the symbol BZH On November 8 2024 the last reported sales price of the Company s common stock on the NYSE was 33 48 and we had approximately 187 stockholders of record and 31 050 227 shares of common stock outstanding
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 2024 2023 or 2022 The Board of Directors will periodically reconsider the declaration of dividends assuming payment of dividends is not limited under our
indentures The reinstatement of quarterly dividends the amount of such dividends and the form in which the dividends are paid cash or stock will depend upon our financial condition results of operations and other factors that the Board of Directors deems relevant
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 2024 all of which have been approved by our stockholders
The following graph illustrates the cumulative total stockholder return on Beazer Homes common stock for the last five fiscal years through September 30 2024 as compared to the S P 500 Index and the S P 500 Homebuilding Index The graph assumes an investment of 100 at September 30 2019 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 Stockholder returns over the indicated period are based on historical data and should not be considered indicative of future stockholder returns
The following discussion and analysis of our financial condition and results of operations is intended to help the reader understand our Company business operations and present business environment and is provided as a supplement to and should be read together with the sections entitled Risk Factors
In addition the statements in this discussion and analysis regarding industry outlook our expectations regarding the performance of our business anticipated financial results liquidity and the other non historical statements are forward looking statements These forward looking statements are subject to numerous risks and uncertainties including but not limited to the risks and uncertainties described in Forward Looking Statements and in Risk Factors above Our actual results may differ materially from those contained in or implied by any forward looking statements
At the outset of fiscal 2024 mortgage rates fluctuated at high levels with a notable peak in October 2023 which led to subdued housing market activity As the first fiscal quarter progressed mortgage rates began to decline gradually influenced by the expectations of future interest rate reductions by the Federal Reserve Entering the second fiscal quarter we began to see the benefit of the mortgage rate reductions as homebuyer traffic and demand improved We observed healthy demand and sales pace during the spring selling season even as mortgage rates continued to modestly fluctuate However as we progressed through the second half of fiscal 2024 despite the downward trend in mortgage rates many potential buyers remained hesitant amid uncertainty surrounding future interest rate cuts and economic expectations
Home affordability remains a concern and a central risk to our industry s outcomes We continue to adjust prices and features to align with the current market including offering incentives We also continue to refine our product offerings by adjusting home sizes and specification levels to address pricing and affordability concerns across each of our markets
the long term outlook of the housing market anchored by supply and demand factors at a macroeconomic level The shortfalls in new home production over the past decade have contributed to an underproduction of housing in the country and demand for housing remains resilient characterized by low unemployment and wage growth although still limited by affordability and mortgage rate volatility
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
In line with our balanced growth strategy during fiscal 2023 we established a set of multi year strategic goals that would allow us to create significant value for our shareholders Specifically our three multi year strategic goals
In March 2024 we successfully refinanced our remaining outstanding 2025 Notes of 197 9 million through the issuance of 250 0 million of Senior Notes due 2031 and extended the maturity of our Senior Unsecured Revolving Credit Facility With a strong balance sheet and ample liquidity we believe we are well equipped to navigate the evolving market dynamics as we continue to make strides in reducing our net debt to net capitalization ratio
of our home starts being built to Zero Energy Ready standards during the quarter ended September 30 2024 Notably Beazer Homes has now certified more Zero Energy Ready homes to the DOE s Single Family National Program requirements than any other home builder We believe these homes should command a premium compared to our previous series driven by their innovative designs superior quality and durable construction
As we look to fiscal 2025 we expect to take further steps to achieve our multi year strategic goals by continuing to position our business for durable long term growth while focusing on the appropriate balance between pursuing growth opportunities controlling risk and maintaining a strong liquidity position
Our fiscal 2024 marks the fourth consecutive year of year over year growth in land position as we build a strong foundation to meet our active community count growth Excluding land held for future development and land held for sale lots we controlled 27 904 active lots up 9 1 from the prior year The majority of the growth in controlled lots was through the usage of lot option agreements which allow us to position for future growth while providing the flexibility to respond to market conditions As of September 30 2024 we had 16 125 lots or 57 8 of our total active lots under option agreements as compared to 14 490 lots or 56 7 of our total active lots under option agreements as of September 30 2023
The expanded average active community count allowed us to deliver higher net new orders year over year despite a decline in sales pace to 2 4 orders per community per month during the year ended September 30 2024 due to elevated mortgage rates and affordability challenges
SG A expense was 266 4 million for the fiscal year ended September 30 2024 up 5 2 compared to prior year primarily due to higher commissions expense and higher sales and marketing costs as we continue to grow community count
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 by a variety of factors including periods of market volatility and changes in mortgage interest rates which may result in increased or decreased new orders and or revenues and closings that are outside of the normal ranges typically realized on account of seasonality
ng impairments abandonments and interest amortized to cost of sales homebuilding gross margin was 21 1 23 1 and 26 3 for the fiscal years ended September 30 2024 2023 and 2022 respectively Please see the Homebuilding Gross Profit and Gross Margin section below for a reconciliation of homebuilding gross profit and the related gross margin excluding impairments and abandonments and interest amortized to cost of sales non GAAP measures to homebuilding gross profit and gross margin the most directly comparable GAAP measure
Calculated as tax expense for the period divided by income from continuing operations Our income tax expenses are not always directly correlated to the amount of pre tax income for the associated period due to a variety of factors including but not limited to the impact of tax credits and permanent differences Our tax credits are predominantly due to the energy efficiency of our homes and historically were valued at 2 000 per single family home The Inflation Reduction Act increased these credits to 2 500 or 5 000 per single family home meeting Energy Star or Zero Energy Ready qualifications respectively As we work towards our goal of building 100 Zero Energy Ready homes we expect our energy efficiency tax credits to shift increasingly towards 5 000 per single family home in the current and future years
Reconciliation of Net Income GAAP measure to Adjusted EBITDA Non GAAP measure is provided for each period discussed below 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 This non GAAP financial measure 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 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
We previously held a minority interest in a technology company specializing in digital marketing for new home communities which was sold during the quarter ended March 31 2024 In exchange for the previously held investment we received cash in escrow along with a minority partnership interest in the acquiring company which was recorded within other assets in our consolidated balance sheets The resulting gain of 8 6 million from this transaction was recognized in other income net on our consolidated statement of operations The Company believes excluding this one time gain from Adjusted EBITDA provides a better reflection of the Company s performance as this item is not representative of our core operations
Reconciliation of total debt to total capitalization ratio GAAP measure to net debt to net capitalization ratio non GAAP measure is provided for each period below Management believes that net debt to net capitalization ratio is useful in understanding the leverage employed in our operations and as an indicator of our ability to obtain financing This non GAAP financial measure 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
ear ended September 30 2024 increased to 4 221 up 9 2 from the year ended September 30 2023 The increase in net new orders was driven primarily by an increase in average active community count from 125 in the prior year to 144 partially offset by a decrease in sales pace from 2 6 orders per community per month in the prior year to 2 4
Net new orders for the year ended September 30 2024 was 2 753 up 22 7 from the year ended September 30 2023 The increase in net new orders compared to the prior year was driven by a 24 0 increase in average active community count from 75 in the prior year to 93 while sales pace remained flat year over year at 2 5 orders per community
Net new orders for the year ended September 30 2024 was 912 up 6 2 from the year ended September 30 2023 The increase in net new orders compared to the prior year was driven by a 25 0 increase in average active community count from 24 in the prior year to 30 partially offset by a 16 7 decrease in sales pace from 3 0 orders per community per month in the prior year to 2 5
Net new orders for the year ended September 30 2024 was 556 down 27 1 from the year ended September 30 2023 The decrease in net new orders compared to the prior year was driven by a 16 0 decrease in average active co
mmunity count from 25 in the prior year to 21 and a 12 0 decrease in sales pace from 2 5 orders per community per month in the prior year to 2 2 The decrease in sales pace was due to a softening in demand in various sub markets due to affordability challenges
vered the home The aggregate dollar value of homes in backlog as of September 30 2024 decreased 10 1 compared to the prior year due to a 13 4 decrease in backlog units partially offset by a 3 8 increase in the ASP of homes in backlog The decrease in backlog units was due to closings exceeding net new orders for the year ended
Homebuilding revenue increased by 12 1 for the fiscal year ended September 30 2024 compared to the prior fiscal year due to a 14 3 increase in closings partially offset by a 1 9 decrease in ASP The year over year increase in closings in the West segment was primarily due to higher community count higher volume of spec homes that sold and closed within the current year and improved construction cycle times for fiscal 2024 compared to fiscal 2023
Homebuilding revenue decreased by 3 9 for the fiscal year ended September 30 2024 compared to the prior fiscal year due to a 2 7 decrease in closings as well as a 1 2 decrease in ASP The year over year decrease in closings in the East segment was primarily due to lower beginning backlog partially offset by
Homebuilding revenue decreased by 10 4 for the fiscal year ended September 30 2024 compared to the prior fiscal year due to a 14 8 decrease in closings partially offset by a 5 1 increase in ASP The year over year decrease in closings in the Southeast segment is primarily due to lower beginning backlog
The following tables present our homebuilding HB gross profit and gross margin by reportable segment and in total In addition such amounts are presented excluding inventory impairments and abandonments and interest amortized to cost of sales COS Homebuilding gross profit is defined as homebuilding revenue less home cost of sales which includes land and land development costs home construction costs capitalized interest indirect costs of construction estimated warranty costs closing costs and inventory impairments and abandonment charges
Reconciliation of homebuilding gross profit and homebuilding gross margin GAAP measures to homebuilding gross profit and the related gross margin excluding impairments and abandonments and interest amortized to cost of sales non GAAP measures is provided for each period discussed below Management believes that this information assists investors in comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies respective level of impairments and level of debt 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
Corporate and unallocated includes amortization of capitalized interest capitalization and amortization of indirect costs related to homebuilding activities as well as capitalized interest and capitalized indirect costs impaired in order to reflect projects in progress assets at fair value when applicable
Our homebuilding gross profit decreased by 24 5 million to 413 6 million for the fiscal year ended September 30 2024 compared to 438 1 million in the prior year The decrease in homebuilding gross profit was primarily driven by a decrease in gross margin of 190 basis points to 18 0 partially offset by an increase in homebuilding revenue of 94 6 million 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 1 4 million and interest amortized to homebuilding cost of sales which decreased by 0 8 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 When excluding the impact of impairments and abandonment charges and interest amortized to homebuilding cost of sales homebuilding gross profit decreased by 24 0 million compared to the prior year while homebuilding gross margin decreased by 200 basis points to 21 1 The year over year decrease in gross margin for the fiscal
Compared to the prior fiscal year homebuilding gross profit decreased by 0 9 million due to lower gross margin partially offset by an increase in homebuilding revenue Homebuilding gross margin excluding impairments and abandonments decreased to 21 3 down from 23 8 in the prior year The decrease in gross margin was primarily driven by changes in product and community mix and an increase in closing cost incentives
Compared to the prior fiscal year homebuilding gross profit decreased by 15 6 million due to a decrease in homebuilding revenue and lower gross margin Homebuilding gross margin excluding impairments and abandonments decreased to 18 1 down from 20 5 in the prior year The decrease in gross margin was primarily driven by changes in product and community mix an increase in price concessions and an increase in closing cost incentives
Compared to the prior fiscal year homebuilding gross profit decreased by 13 0 million due to a decrease in homebuilding revenue and lower gross margin Homebuilding gross margin excluding impairments and abandonments decreased to 22 0 down from 22 9 in the prior year The decrease in gross margin was primarily driven by changes in product and community mix and an increase in closing cost incentives
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 non GAAP financial measures These measures should not be considered alternatives to homebuilding gross profit and gross margin determined in accordance with GAAP as an indicator of operating performance
In particular the magnitude and volatility of non cash inventory 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 Homebuilding metrics excluding these charges as well as interest amortized to cost of sales and other similar presentations by analysts and other companies are frequently used to assist investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies respective level of impairments and levels of debt Management believes these non GAAP measures enable holders of our securities to better understand the cash implications of our operating performance and our ability to service our debt obligations as they currently exist and as additional indebtedness is incurred in the future These measures are also useful internally helping management to compare operating results and to measure cash available for discretionary spending
In a given period our reported gross profit is generated from both communities previously impaired and communities not previously impaired In addition as indicated above certain gross profit amounts arise from recoveries of prior period costs including warranty items that are not directly tied to communities generating revenue in the period Home closings from communities previously impaired would in most instances generate very low or negative gross margins prior to the impact of the previously recognized impairment Gross margin for each home closing is higher for a particular community after an impairment because the carrying value of the underlying land was previously reduced to the present value of future cash flows as a result of the impairment leading to lower cost of sales at the home closing This improvement in gross margin resulting from one or more prior impairments is frequently referred to in the aggregate as the impairment turn or flow back of impairments within the reporting period The amount of this impairment turn may exceed the gross margin for an individual impaired asset if the gross margin for that asset prior to the impairment would have been negative The extent to which this impairment turn is greater than the reported gross margin for the individual asset is related to the specific historical cost basis of that individual asset
The asset valuations that result from our impairment calculations are based on discounted cash flow analyses and are not derived by simply applying prospective gross margins to individual communities As such impaired communities may have gross margins that are somewhat higher or lower than the gross margins for unimpaired communities The mix of home closings in any particular quarter varies to such an extent that comparisons between previously impaired and never impaired communities would not be a reliable way to ascertain profitability trends or to assess the accuracy of previous valuation estimates In addition since any amount of impairment turn is tied to individual lots in specific communities it will vary considerably from period to period As a result of these factors we review the impairment turn impact on gross margin on a trailing 12 month basis rather than a quarterly basis as a way of considering whether our impairment calculations are resulting in gross margins for impaired communities that are comparable to our unimpaired communities For fiscal 2024 our homebuilding
gross margin was 18 0 and excluding interest and inventory impairments and abandonments it was 21 1 For the same period homebuilding gross margin was as follows in those communities that have previously been impaired which represented 88 homes and 2 0 of total closings during fiscal 2024
Land sales relate to land and lots sold that do not fit within our homebuilding programs or strategic plans We also have other revenue related to title examinations provided for our homebuyers in certain markets The following tables summarize our land sales and other revenue and related gross profit by reportable segment for the periods presented
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
land sales and other revenue increased by 343 8 to 37 2 million and land sales and other gross profit increased by 133 5 to 10 7 million compared to the prior year Year over year fluctuations on land sales and other revenue are primarily driven by the timing and volume of land and lot sales closings Land sales and other gross profit are primarily impacted by the profitability of individual land and lot sale transactions as well as the volume of our title examinations operations Future land and lot sales will depend on a variety of factors including local market conditions individual community performance and changing strategic plans
Includes amortization of capitalized interest capitalization and amortization of indirect costs impairment of capitalized interest and capitalized indirect costs when applicable expenses related to numerous shared services functions that benefit all segments but are not allocated to the operating segments reported above including information technology treasury corporate finance legal branding and national marketing and certain other amounts that are not allocated to our operating segments
Our corporate and unallocated results include amortization of capitalized interest capitalization and amortization of indirect costs impairment of capitalized interest and capitalized indirect costs expenses for various shared services functions that benefit all segments but are not allocated including information technology treasury corporate finance legal branding and national marketing and certain other amounts that are not allocated to our operating segments For the fiscal year ended September 30 2024 corporate and unallocated net expenses decreased by 5 7 million from the prior fiscal year primarily due
Below operating income we had the following noteworthy year over year fluctuations for the fiscal year ended September 30 2024 compared to the prior year Specifically within other income net 1 we recognized a gain on sale of investment of 8 6 million during the year ended September 30 2024 compared to no such transaction in the prior year period See the Reconciliation of Net Income GAAP to Adjusted EBITDA Non GAAP section above for further discussion on this transaction and 2 we recognized higher investment income year over year due to changes in fair value of our deferred compensation plan assets and higher distributions of income from unconsolidated entities during the year ended September 30 2024 compared to the prior year
income tax expense from continuing operations of 24 0 million and 53 3 million for our fiscal years ended September 30 2023 and 2022 respectively Income tax expense in our fiscal 2024 2023 and 2022 primarily resulted from income generated in the fiscal year and permanent book tax differences partially offset by the generation of additional federal tax credits Refer to Note 1
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 Our short term and long term liquidity depends primarily upon our level of net income working capital management cash accounts receivable accounts payable and other liabilities and available credit facilities
Net cash used in operating activities was 137 5 million for the fiscal year ended September 30 2024 The primary drivers of operating cash flows are typically cash earnings and changes in inventory levels including land acquisition and development spending Net cash used in operating activities during the period was primarily driven by an increase in inventory of 282 1 million resulting from land acquisition land development and house construction spending to support continued growth and a net increase in non inventory working capital of 30 2 million partially offset by income before income taxes of 159 1 million which included 15 7 million of non cash charges
Net cash provided by operating activities was 178 1 million for the fiscal year ended September 30 2023 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
Net cash used in investing activities for the fiscal year ended September 30 2024 was 30 0 million primarily driven by capital expenditures for model homes and information systems infrastructure and investments in securities
Net cash used in investing activities for the fiscal year ended September 30 2023 was 29 7 million primarily driven by capital expenditures for model homes and information systems infrastructure and investments in securities
Net cash provided by financing activities was 23 9 million for the fiscal year ended September 30 2024 primarily driven by inflows from the issuance of the 2031 Notes partially offset by outflows from redemption of our 2025 Notes debt issuance costs related to the 2031 Notes and extension of the term of our Unsecured Facility see Note 7 repurchases of common stock and tax payments for stock based compensation awards vesting
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 Notes debt issuance costs for the Unsecured Facility and tax payments for stock based compensation awards vesting
As of September 30 2024 our liquidity position consisted of 203 9 million in cash and cash equivalents and 300 0 million of remaining capacity under the Unsecured Facility compared to 345 6 million in cash and cash equivalents and 265 0 million of remaining capacity under the Unsecured Facility as of September 30 2023 Meanwhile we invested 776 5 million and 573 1 million in land acquisition and land development during the fiscal years ended September 30 2024 and September 30 2023 respectively
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
At times we may also engage in capital markets bank loans project debt or other financial transactions including the repurchase of debt or potential new issuances of debt or equity securities to support our business needs The amounts involved in these transactions if any may be material In addition as necessary or desirable we may adjust or amend the terms of and or expand the capacity of the 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
We generally fulfill our short term cash requirements with cash generated from our operations and available borrowings Additionally our Unsecured Facility provides working capital and letter of credit capacity of 300 0 million which includes a letter of credit capacity of 100 0 million
We have also entered into a number of stand alone letter of credit agreements with banks secured with cash or certificates of deposit These combined facilities provide for letter of credit needs collateralized by either cash or assets of the Company
In the future we may from time to time seek to continue to retire or purchase our outstanding debt through cash repurchases or in exchange for other debt securities in open market purchases privately negotiated transactions or otherwise In addition any material variance from our projected operating results could require us to obtain additional equity or debt financing There can be no assurance that we will be able to complete any of these transactions in the future on favorable terms or at all See Note 7 of the notes to the consolidated financial statements in this Form 10 K for additional details related to our borrowings
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 guarantees are full and unconditional Summarized financial information is not presented for Beazer Homes USA Inc and the guarantor subsidiaries on a combined basis as the assets liabilities and results of operations of the combined issuer and guarantors of the guaranteed security are not materially different than corresponding amounts presented in the consolidated financial statements of the parent company
Our credit ratings are periodically reviewed by rating agencies In June 2024 S P reaffirmed the Company s corporate credit rating of B and reaffirmed the Company s outlook of stable In October 2024 Moody s reaffirmed the Company s issuer corporate family rating of B1 and reaffirmed the Company s outlook of stable In addition our Senior Notes have a rating of B and B1 per S P and Moody s respectively These ratings and our current credit condition affect among other things our ability to access new capital 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 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 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 May 2022 the Company s Board of Directors approved a share repurchase program that authorizes the Company to repurchase up to 50 0 million of its outstanding common stock The repurchase program has no expiration date During the fiscal year ended September 30 2024 the Company repurchased 455 thousand shares of its common stock for 12 9 million at an average price per share of 28 41 through open market transactions All shares have been retired upon repurchase As of September 30 2024 the remaining availability of the share repurchase program was 28 9 million
No share repurchases were made during fiscal year 2023 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
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 2024 2023 or 2022
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 issuance of an irrevocable letter of credit or surety bond for the right to acquire lots during a specified period of time at a specified price In recent years we have focused on increasing our lot option agreement usage to minimize risk as we grow our land position As of September 30 2024 we controlled 28 538 lots which includes 272 lots of land held for future development and 362 lots of land held for sale Of the 27 904 total active lots we controlled 16 125 of these lots or 57 8 through option agreements as compared to 14 490 active lots controlled or 56 7 of our total active lots through option agreements as of September 30 2023 Lot option agreements allow us to position for future growth while providing the flexibility to respond to market conditions by renegotiating the terms of the options prior to exercise or terminating the agreement
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 227 8 million as of September 30 2024 The total remaining purchase price net of cash deposits committed under all options was 1 46 billion as of September 30 2024 Subject to market conditions and our liquidity we may further expand our use of option agreements to supplement our
We expect to exercise subject to market conditions and seller satisfaction of contract terms most of our option agreements Various factors some of which are beyond our control such as market conditions weather conditions and the timing of the completion of development activities will have a significant impact on the timing of option exercises or whether lot options will be exercised at all
We have historically funded the exercise of lot options with operating cash flows We expect these sources to continue to be adequate to fund anticipated future option exercises Therefore we do not anticipate that the exercise of our lot options will have a material adverse effect on our liquidity
our related obligations with respect to such developments The amount of such obligations outstanding at any time varies in accordance with our pending development activities In the event any such bonds or letters of credit are drawn upon we would be obligated to reimburse the issuer of such bonds or letters of credit We had outstanding letters of credit and surety bonds of 36 4 million and 332 2 million respectively as of September 30 2024 primarily related to our obligations to local governments to construct roads and
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 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 2024
Our critical accounting policies require the use of judgment in their application and in certain cases require estimates of inherently uncertain matters Although our accounting policies are in compliance with accounting principles generally accepted in the United States of America GAAP a change in the facts and circumstances of the underlying transactions could significantly change the application of the accounting policies and the resulting financial statement impact Listed below are those policies that we believe are critical and require the use of complex judgment in their application
Projects in progress inventory includes homes under construction and land under development grouped together as communities Generally upon the commencement of land development activities it may take three to five years depending on among other things the size of the community and its sales pace to fully develop sell construct and close all the homes in a typical community Projects in progress are stated at cost unless facts and circumstances indicate that the carrying value of the assets may not be recoverable
We assess our projects in progress inventory for indicators of impairment at the community level on a quarterly basis We evaluate among other things the average sales price and margins on recent home closings homes in backlog and expected future home sales for each community If indicators of impairment are present for a community with more than ten homes remaining to close we perform a recoverability test by comparing the expected undiscounted cash flows for the community to 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
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 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 To address these risks we consider home price and construction cost appreciation in future years for certain communities that are expected to be selling for more than a year and or if the market has typically exhibited high levels of price volatility Absent these assumptions on cost and sales price appreciation we believe the long term cash flow analysis would be unrealistic Finally we also ensure that the pace of sales and closings used in our undiscounted cash flow analyses are reasonable by considering seasonal variations in sales and closings our development schedules and what we have achieved historically and by comparing to those achieved by our competitors for comparable communities
The fair value of the community is estimated based on the present value of the estimated future cash flows using discount rates commensurate with the risk associated with the underlying community The discount rate used may be different for each community The factors considered when determining an appropriate discount rate for a community include among others 1 community specific factors such as product types development stage and expected duration of the project and the competitive factors influencing the sales performance of the community and 2 local market factors such as employment levels consumer confidence and the existing supply of new and used homes for sale The assumptions used in the determination of fair value of projects in progress communities are based on factors known to us at the time such estimates are made and our expectations of future operations and market conditions Due to uncertainties in the estimation process the significant volatility in market conditions the long life cycles of many communities and potential changes in our strategy related to certain communities actual results could differ significantly from our estimates
The adequacy of our warranty reserves is based on historical experience and management s estimate of the costs to remediate any claims Our review includes a quarterly analysis of the historical data and trends in warranty expense by division An analysis by division allows us to consider market specific factors such as our warranty experience the number of home closings the prices of homes product mix and other data in estimating our warranty reserves In addition our analysis also factors in the existence of any non recurring or community specific warranty matters that might not be contemplated in our historical data and trends
At September 30 2024 our warranty reserve was 12 7 million reflecting an accrual range of 0 3 to 1 1 of total revenue recognized for each home closed depending on our loss history in the division in which the home was built
Our estimation process is discussed in Note 8 of notes to the consolidated financial statements in this Form 10 K 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
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 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 In our assessment appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets 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
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 Changes in existing tax laws or rates could affect actual tax results and future business results may affect the amount of deferred tax liabilities or the valuation of deferred tax assets over time Our analysis includes several scenarios with both increases and decreases in our estimates of operating income across future periods Routine or cyclical reductions in our pre tax earnings would not have changed our assessment of our ability to utilize various tax carryforwards In addition to various company specific factors we consider several positive and negative external factors that may impact our estimates These factors may include broad economic considerations such as mortgage interest rates the relative health of the U S economy and employment levels as well as industry or market specific factors such as housing supply and demand outlook
In fiscal 2024 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 The negative factors included the overall health of the broader economy elevated mortgage interest rates and softening housing demand due to affordability challenges
Our accounting for deferred tax consequences represents our best estimate of future events It is possible there will be changes that are not anticipated in our current estimates 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 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
We are exposed to a number of market risks in the ordinary course of business Our primary market risk exposure relates to fluctuations in interest rates We do not believe that our exposure in this area is material to our cash flows or results of operations
As of September 30 2024 we had variable rate debt outstanding totaling 76 4 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 estimated fair value of our fixed rate debt as of September 30 2024 was 976 5 million compared to a carrying amount of 948 9 million 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 976 5 million to 1 02 billion as of September 30 2024
Beazer Homes USA Inc we us our Beazer Beazer Homes or the Company is a geographically diversified homebuilder with active operations in 13 states within three geographic regions in the United States the West East and Southeast
Our homes are designed to appeal to homeowners at different price points across various demographic segments and are generally offered for sale in advance of their construction Our objective is to provide our customers with homes that incorporate extraordinary value at an affordable price delivered through our three strategic differentiators of Mortgage Choice Choice
The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America GAAP and present the consolidated financial position income stockholders equity and cash flows of Beazer Homes USA Inc and its consolidated subsidiaries Intercompany transactions and balances have been eliminated in consolidation Our net income is equivalent to our comprehensive income so we have not
Our fiscal year 2024 began on October 1 2023 and ended on September 30 2024 Our fiscal year 2023 began on October 1 2022 and ended on September 30 2023 Our fiscal year 2022 began on October 1 2021 and ended on September 30 2022
The preparation of financial statements in conformity with GAAP requires management to make informed estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes Accordingly actual results could differ from these estimates
We consider highly liquid investments with maturities of three months or less when acquired to be cash equivalents As of September 30 2024 the majority of our cash and cash equivalents were on demand deposits with major banks These assets were valued at par and had no withdrawal restrictions Restricted cash includes cash restricted by state law or a contractual requirement including cash collateral for our outstanding cash secured letters of credit refer to Note 7
Accounts receivable include receivables from municipalities related to the development of utilities or other infrastructure land banker reimbursements to be received related to land development costs rebates to be received from our suppliers escrow proceeds to be received from title companies associated with closed homes and other miscellaneous receivables Generally we receive cash from title companies within a few days of the home being closed We regularly review our receivable balances for collectability and record an allowance for expected credit losses
Owned inventory includes land acquisition costs land development costs home construction costs capitalized interest real estate taxes direct overhead costs and capitalized indirect costs incurred during land development and home construction and common costs that benefit the entire community less impairments if any Land acquisition land development and other common costs both incurred and estimated to be incurred are allocated to individual lots on a pro rata basis and the cost of individual lots is transferred to homes under construction when home construction begins Changes in estimated land and other common costs to be incurred in a community are generally allocated to the remaining lots on a prospective basis Home construction costs are accumulated on a per home basis Cost of home closings includes the specific construction costs of the home and the allocated lot costs Refer to Note 4 for further discussion of our inventory balance
Projects in progress inventory includes homes under construction and land under development grouped together as communities Generally upon the commencement of land development activities it may take three to five years depending on among other things the size of the community and its sales pace to fully develop sell construct and close all the homes in a typical community Projects in progress are stated at cost unless facts and circumstances indicate that the carrying value of the assets may not be recoverable
We assess our projects in progress inventory for indicators of impairment at the community level on a quarterly basis We evaluate among other things the average sales price and margins on recent home closings homes in backlog and expected future home sales for each community If indicators of impairment are present for a community with more than ten homes remaining to close we perform a recoverability test by comparing the expected undiscounted cash flows for the community to its carrying value This undiscounted cash flow analysis requires important assumptions including among other things the current and future home sale prices margins and the pace of closings to occur in the future 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
The assumptions used in the determination of fair value of projects in progress communities are based on factors known to us at the time such estimates are made and our expectations of future operations and market conditions The fair value of the community is estimated using the present value of the estimated future cash flows using discount rates commensurate with the risk associated with the underlying community Should the estimates or expectations used in determining estimated fair values deteriorate in the future we may be required to recognize additional impairment charges and write offs related to these assets and such amounts could be material
Land held for future development consists of communities for which construction and development activities are expected to occur in the future or have been idled All applicable carrying costs such as interest and real estate taxes are expensed as incurred Land held for future development is stated at cost unless facts and circumstances indicate that the carrying value of the assets may not be recoverable such as the future enactment of a development plan or the occurrence of outside events We evaluate the potential plans for each community in land held for future development if changes in facts and circumstances occur that would give rise to a more detailed analysis for a change in the status of a community
Land held for sale includes land and lots that do not fit within our homebuilding programs or strategic plans in certain markets We record land held for sale at the lower of the asset s carrying value or fair value less costs to sell net realizable value Land is classified as held for sale when the following criteria are met
We evaluate the net realizable value of a land held for sale asset when indicators of impairment are present In determining the fair value of the assets less cost to sell we consider factors including current sales prices for comparable assets in the area recent market analysis studies appraisals any recent legitimate offers and listing prices of similar properties If the current carrying value of the asset exceeds the estimated fair value less cost to sell the asset is impaired and written down to its estimated fair value less cost to sell
Due to uncertainties in the estimation process it is reasonably possible that actual results could differ from the estimates used in our analysis Our assumptions about land sales prices require significant judgment because the market is highly sensitive to changes in economic conditions We calculate the estimated fair values of land held for sale based on current market conditions and assumptions made by management which may differ materially from actual results and may result in additional impairments if market conditions deteriorate
In addition to purchasing land directly we utilize lot option agreements that enable us to defer acquiring portions of properties owned by third parties and unconsolidated entities until we have determined whether to exercise our lot option The majority of our lot option agreements require a non refundable cash deposit or issuance of an irrevocable letter of credit or surety bond based on a percentage of the purchase price of the land for the right to acquire lots during a specified period at a specified price Purchase of the properties under these agreements is contingent upon satisfaction of certain requirements by us and the sellers Under lot option agreements our liability is generally limited to forfeiture of the non refundable deposits letters of credit or surety bonds and other non refundable amounts incurred If the Company cancels a lot option agreement the cancellation would result in a write off of the related deposits and pre acquisition costs but would not expose the Company to the overall risks or losses of the applicable entity we are purchasing from We expect to exercise subject to market conditions and seller satisfaction of contract terms most of our remaining option agreements 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
ASC 810 if the entity holding the land under option is a VIE the Company s deposit represents a variable interest in that entity ASC 810 requires a company to consolidate a VIE if the company is determined to be the primary beneficiary To determine whether we are the primary beneficiary of the VIE we first evaluate whether we have the ability to control the activities of the VIE that most significantly impact its economic performance Such activities include but are not limited to 1 the ability to determine the budget and scope of land development work if any 2 the ability to control financing decisions for the VIE 3 the ability to acquire additional land into the VIE or dispose of land in the VIE not under contract with Beazer and 4 the ability to change or amend the existing option agreement with the VIE If we are not determined to control such activities we are not considered the primary beneficiary of the VIE and thus do not consolidate the VIE If we do have the ability to control such activities we will continue our analysis by determining if we are expected to absorb a potentially significant amount of the VIE s losses or if no party absorbs the majority of such losses if we will benefit from potentially a significant amount of the VIE s expected gains
If we are the primary beneficiary of the VIE we will consolidate the VIE even though creditors of the VIE have no recourse against the Company For those we consolidate we record the remaining contractual purchase price under the applicable lot option agreement net of option deposits already paid to consolidated inventory not owned with an offsetting increase to obligations related to consolidated inventory not owned on our consolidated balance sheets Also to reflect the total purchase price of this inventory on a consolidated basis we present the related option deposits as consolidated inventory not owned No VIEs required consolidation as of September 2024 and 2023 because we have determined that we were not the primary beneficiary of any VIEs
The Company has the option to perform a qualitative or quantitative assessment to determine whether the fair value of a reporting unit exceeds its carrying value Qualitative factors may include but are not limited to economic conditions industry and market considerations cost factors overall financial performance of the reporting unit and other entity and reporting unit specific events If after assessing these qualitative factors the Company determines it is more likely than not that the fair value of the reporting unit is less than the carrying value then a quantitative assessment is performed
The fair value of the reporting unit is estimated using a combination of the income approach utilizing the discounted cash flow method and the market approach utilizing readily available market valuation multiples If the estimated fair value of the reporting unit is less than its carrying value an impairment will be recognized for the amount by which the carrying amount exceeds the reporting unit s fair value Determining the fair value of a reporting unit under the quantitative goodwill impairment assessment requires the Company to make estimates and assumptions regarding future operating results cash flows including timing discount rates expected growth rates capital expenditures and cost of capital similar to those a market participant would use to assess fair value We also make certain assumptions about future economic conditions and other data Many of the factors used in assessing fair value are outside the control of management and these assumptions and estimates may change in future periods
Our other assets principally include prepaid expenses assets related to our deferred compensation plan refer to Note 14 for a discussion of our deferred compensation plan investment securities unamortized debt issuance costs on our Senior Unsecured Revolving Credit Facility and certificates of deposit used to secure our stand alone letters of credit facilities refer to Note 7 for a discussion of our credit facilities
Our other liabilities principally include accrued compensations and benefits accrued interest on our outstanding borrowings customer deposits warranty reserves litigation accruals income tax liabilities and other accruals related to our operations Refer to Note 11 for details of our other liabilities
Our provision for income taxes is comprised of taxes that are currently payable and deferred taxes that relate to temporary differences between financial reporting carrying values and tax bases of assets and liabilities Deferred tax assets and liabilities result from deductible or taxable amounts in future years when such assets and liabilities are recovered or settled and are measured using the enacted tax rates and laws that are expected to be in effect when the assets and liabilities are recovered or settled We include any estimated interest and penalties on tax related matters in income taxes payable We recognize the effect of income tax positions only if those positions are more likely than not of being sustained Recognized income tax positions are measured at the largest amount that is greater than 50 likely of being realized We record interest and penalties related to unrecognized tax benefits in income tax expense within our consolidated statements of operations Changes in recognition of measurement are recorded in the period in which the change in judgment occurs Refer to Note 12 for a detailed discussion of our tax provision deferred tax assets and valuation allowance
Our income tax receivable for fiscal 2022 included the refundable portion of our alternative minimum tax AMT credit We received payment of 9 2 million AMT credit refund as well as interest payment of 0 4 million during our fiscal 2023
Homebuilding revenue is reported net of discounts and is generally recognized when title to and possession of the home is transferred to the buyer at the closing date The performance obligation to deliver the home is generally satisfied in less than one year from the original contract date Home sale contract assets consist of cash from home closings held by title companies in escrow for our benefit typically for less than five days and are considered accounts receivable Contract liabilities include customer deposits related to sold but undelivered homes and totaled 18 7 million and 27 6 million as of
Land sales revenue relates to land that does not fit within our homebuilding programs or strategic plans Land sales typically require cash consideration on the closing date which is generally when performance obligations are satisfied We also provide title examinations for our homebuyers in certain markets Revenues associated with our title operations are recognized when closing services are rendered and title insurance policies are issued both of which generally occur as each home is closed
Home construction expenses include the specific construction costs of the home and the allocated lot costs land acquisition land development and other common costs are allocated to individual lots on a pro rata basis based on the number of lots remaining to close within the community All home closing costs are charged to home construction expenses in the period when the revenues from home closing are recognized
Sales discounts and incentives include discounts on home prices discounts on home building options and option upgrades and seller paid financing or closing costs including rate buydowns Home price discounts and option discounts are accounted for as a reduction in the sale price of the home thereby decreasing the amount of revenue we recognize on that closing All other sales incentives are recognized as a cost of selling the home and are included in home construction expenses
of total revenue recognized for each home closed Additional warranty costs are charged to home construction expenses as necessary based on management s estimate of the costs to remediate existing claims See Note 8 for a more detailed discussion of warranty costs and related reserves
15 1 million and 14 4 million for our fiscal years 2024 2023 and 2022 respectively were expensed as incurred and were included in general and administrative G A expenses in the consolidated statements of operations
Certain of our assets are required to be recorded at fair value on a recurring basis for example the fair value of our deferred compensation plan assets is based on quoted market prices Level 1 or market corroborated inputs Level 2 Certain of our assets are required to be recorded at fair value on a non recurring basis when events and circumstances indicate
that the carrying value may not be recovered Level 3 For example we review our long lived assets including inventory for recoverability when factors indicate an impairment may exist but no less than quarterly Fair value is based on estimated cash flows discounted for market risks associated with the long lived assets The fair value of certain of our financial instruments approximates their carrying amounts due to the short maturity of these assets and liabilities or the variable interest rates on such obligations The fair value of our publicly held debt is generally estimated based on quoted bid prices for these instruments
Level 2 Certain of our other financial liabilities are estimated by discounting scheduled cash flows through maturity or using market rates currently being offered on loans with similar terms and credit quality See Note 9 for additional discussion of our fair value measurements
We use the Black Scholes option pricing model to value our stock option grants Restricted stock awards with market conditions are valued using the Monte Carlo valuation method Other restricted stock awards without market conditions are valued based on the market price of the Company s common stock on the date of the grant
In addition we reflect the benefits of tax deductions in excess of recognized compensation cost as an operating cash outflow Compensation cost arising from all stock based compensation awards is recognized as expense using the straight line method over the vesting period and is included in G A in our consolidated statements of operations See Note 15 for additiona
ASU 2023 07 expands public entities segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss an amount and description of its composition for other segment items and interim disclosures of a reportable segment s profit or loss and assets
ASU 2023 07 will be effective for our fiscal year ending September 30 2025 and for our interim periods starting in our first quarter of fiscal 2026 Early adoption is permitted and the amendments in this update are required to be applied on a retrospective basis The Company is currently evaluating the impact that the adoption of ASU 2023 07 may have on our consolidated financial statements and disclosures
ASU 2023 09 is intended to enhance the transparency and decision usefulness of income tax disclosures The amendments in ASU 2023 09 address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information ASU 2023 09 will be effective for our fiscal year ending September 30 2026 Early adoption is permitted and the amendments in this update should be applied on a prospective basis The Company is currently evaluating the impact that the adoption of ASU 2023 09 may have on our consolidated financial statements and disclosures
ASU 2024 03 requires disclosure of additional information about specific expense categories in the notes to the financial statements ASU 2024 03 will be effective for our fiscal year ending September 30 2028 Early adoption is permitted and the amendments in this update should be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements The Company is currently evaluating the impact that the adoption of ASU 2024 03 may have on our consolidated financial statements and disclosures
The following table presents supplemental disclosure of non cash and cash activity as well as a reconciliation of total cash balances between the consolidated balance sheets and consolidated statements of cash flows for the periods presented
Represents the derecognition of investment in unconsolidated entities associated with the carrying value of previously held interest in Imagine Homes upon the acquisition of substantially all of the assets of Imagine Homes during the quarter ended June 30 2022
Homes under construction include homes substantially finished and ready for delivery and homes in various stages of construction including costs of the underlying lot direct construction costs and capitalized indirect costs
As of September 30 2024 we had 2 315 homes under construction including 1 154 spec homes totaling 360 9 million 827 in process spec homes totaling 231 4 million and 327 finished spec homes totaling 129 5 million As of September 30 2023 we had 2 163 homes under construction including 779 spec homes totaling 218 0 million 645 in process spec homes totaling 162 0 million and 134 finished spec homes totaling 56 0 million
t consists principally of land acquisition land development and other common costs These land related costs are allocated to individual lots on a pro rata basis and the lot costs are transferred to homes under construction when home construction begins for the respective lots Certain of the fully developed lots in this category are reserved by a customer deposit or sales contract
Land held for future development consists of communities for which construction and development activities are expected to occur in the future or have been idled and are stated at cost unless facts and circumstances indicate that the carrying value of the assets may not be recoverable All applicable carrying costs such as interest and real estate taxes are expensed as incurred
Land held for sale includes land and lots that do not fit within our homebuilding programs or strategic plans in certain markets and land is classified as held for sale once certain criteria are met refer to Note 2 These assets are recorded at the lower of the carrying value or fair value less costs to sell net realizable value
The amount of interest we are able to capitalize depends on our qualified inventory balance which considers the status of our inventory holdings Our qualified inventory balance includes the majority of our homes under construction and land under development but excludes land held for future development and land held for sale see Note 5 for additional information on capitalized interest
We assess our projects in progress inventory for indicators of impairment at the community level on a quarterly basis If indicators of impairment are present for a community with more than ten homes remaining to close we perform a recoverability test by comparing the expected undiscounted cash flows for the community to its carrying value If the aggregate undiscounted cash flows are in excess of the carrying value the asset is considered to be recoverable and is not impaired If the carrying value exceeds the aggregate undiscounted cash flows 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
Impairments on land held for sale generally represent write downs of these properties to net realizable value based on sales contracts letters of intent current market conditions and recent comparable land sale transactions as applicable Absent an executed sales contract our assumptions related to land sales prices require significant judgment because the real estate market is highly sensitive to changes in economic conditions and our estimates of sale prices could differ significantly from actual results
During the fiscal year ended September 30 2022 we recognized 1 9 million land held for sale impairment charges related to two held for sale communities in the West segment The fair value of land held for sale inventory is measured on a nonrecurring basis and has been determined using unobservable inputs Level 3 The impairment date fair value of land held for sale assets that were impaired during the fiscal year ended September 30 2022 was 0 9 million Refer to Note 9 for further discussion on fair value measurements and fair value hierarchy
From time to time we may determine to abandon lots or not exercise certain option agreements that are not projected to produce adequate results or no longer fit with our long term strategic plan Additionally in certain limited instances we are forced to abandon lots due to seller non performance permitting or other regulatory issues that do not allow us to build on those lots If we intend to abandon or walk away from a property we record an abandonment charge to earnings for the non refundable deposit amount and any related capitalized costs in the period such decision is made During the fiscal years ended September 30 2024 2023 and 2022 we recognized 2 0 million 0 6 million and 1 1 million in abandonment charges respectively As we grow our business in the years ahead the dollar value of abandonment charges may also grow
Interest capitalized during the fiscal years ended September 30 2024 2023 and 2022 was based upon the balance of inventory eligible for capitalization The following table presents certain information regarding interest for the periods presented
The Senior Unsecured Revolving Credit Facility Unsecured Facility provides working capital and letter of credit borrowing capacity of 300 0 million The 300 0 million capacity includes a letter of credit facility of up to
The Company has the right from time to time to request to increase the size of the commitments under the Unsecured Facility by up to 100 0 million for a maximum of 400 0 million In March 2024 the Company executed an amendment to extend the termination date Termination Date from October 13 2026 to March 15 2028 The Company may borrow repay and reborrow amounts under the Unsecured Facility until the Termination Date
Substantially all of the Company s significant subsidiaries are full and unconditional guarantors of the Unsecured Facility and are jointly and severally liable for obligations under the Unsecured Facility
secured with cash or certificates of deposit to maintain pre existing letters of credit and to provide for the issuance of new letters of credit in addition to the letters of credit issued under the Unsecured Facility
As of September 30 2024 and 2023 the Company had letters of credit outstanding under these additional facilities of 36 4 million and 31 2 million respectively The Company may enter into additional arrangements to provide additional letter of credit capacity
The Company s Senior Notes are unsecured obligations that rank equally in right of payment with all existing and future senior unsecured obligations senior to all of the Company s existing and future subordinated indebtedness and effectively subordinated to the Company s future secured indebtedness to the extent of the value of the assets securing such indebtedness Substantially all of the Company s significant subsidiaries are full and unconditional guarantors of the Senior Notes and are jointly and severally liable for obligations under the Senior Notes Each guarantor subsidiary is a wholly owned subsidiary of Beazer Homes The Senior Notes and related guarantees are structurally subordinated to all indebtedness and other liabilities of all of the Company s subsidiaries that do not guarantee these notes
The Company s Senior Notes are issued under indentures that contain certain restrictive covenants which among other things restrict our ability to pay dividends repurchase our common stock incur certain types of additional indebtedness and make certain investments Compliance with the Senior Note covenants does not significantly impact the Company s operations The Company beli
In March 2024 we issued and sold 250 0 million aggregate principal amount of the 2031 Notes at par before underwriting and other issuance costs through a private placement to qualified institutional buyers Interest on the 2031 Notes is payable semiannually and began in September 2024 The 2031 Notes will mature in March 2031 The covenants related to the 2031 Notes are substantially consistent with our other Senior Notes
During the fiscal year ended September 30 2024 we also repurchased 4 3 million and redeemed the remaining 197 9 million of our outstanding 2025 Notes using cash on hand and proceeds from the issuance of the 2031 Notes resulting in a loss on extinguishment of debt of 0 4 million The Company terminated cancelled and discharged all of its obligations under the 2025 Notes as of March 31 2024
During the fiscal year ended September 30 2022 we repurchased 6 0 million of our outstanding 2027 Notes and 18 4 million of our outstanding 2025 Notes using cash on hand resulting in a gain on extinguishment of debt of 0 3 million
Callable at any time prior to October 15 2022 in whole or in part at a redemption price equal to 100 000 of the principal amount plus a customary make whole premium on or after October 15 2022 callable at a redemption price equal to 102 938 of the principal amount on or after October 15 2023 callable at a redemption price equal to 101 958 of the principal amount on or after October 15 2024 callable at a redemption price equal to 100 979 of the principal amount on or after October 15 2025 callable at a redemption price equal to 100 000 of the principal amount plus in each case accrued and unpaid interest
Callable at any time prior to October 15 2024 in whole or in part at a redemption price equal to 100 000 of the principal amount plus a customary make whole premium on or after October 15 2024 callable at a redemption price equal to 103 625 of the principal amount on or after October 15 2025 callable at a redemption price equal to 102 417 of the principal amount on or after October 15 2026 callable at a redemption price equal to 101 208 of the principal amount on or after October 15 2027 callable at a redemption price equal to 100 000 of the principal amount plus in each case accrued and unpaid interest
On or prior to March 15 2027 we may redeem up to 35 of the aggregate principal amount of the 2031 Notes with the net cash proceeds of certain equity offerings at a redemption price equal to 107 500 of the principal amount plus accrued and unpaid interest to but excluding the redemption date provided at least 65 of the aggregate principal amount of the 2031 Notes originally issued remains outstanding immediately after such redemption
Callable at any time prior to March 15 2027 in whole or in part at a redemption price equal to 100 000 of the principal amount plus a customary make whole premium on or after March 15 2027 callable at a redemption price equal to 103 750 of the principal amount on or after March 15 2028 callable at a redemption price equal to 101 875 of the principal amount on or after March 15 2029 callable at a redemption price equal to 100 000 of the principal amount plus in each case accrued and unpaid interest
ecured junior subordinated notes Junior Subordinated Notes mature on July 30 2036 and have an aggregate principal balance of 100 8 million as of September 30 2024 The securities have a floating interest rate as defined in the Junior Subordinated Notes Indentures which was a weighted average of
as of September 30 2024 The obligations relating to these notes are subordinated to the Unsecured Facility and the Senior Notes In January 2010 the Company restructured 75 0 million of these notes Restructured Notes and recorded them at their then estimated fair value Over the remaining life of the Restructured Notes we will increase their carrying value until this carrying value equals the face value of the notes As of September 30 2024 the unamortized accretion was
and will be amortized over the remaining life of the Restructured Notes The remaining 25 8 million of the Junior Subordinated Notes are subject to the terms of the original agreement have a floating interest rate equal to a three month LIBOR on and prior to June 30 2023 plus 2 45 per annum or three month SOFR on and after July 1 2023 plus 2 71 per annum resetting quarterly and are redeemable in whole or in part at par value The material terms of the
Restructured Notes are identical to the terms of the original agreement except that the floating interest rate is subject to a floor of 4 25 and a cap of 9 25 In addition beginning on June 1 2012 the Company has the option to redeem the
Beazer Homes and certain of its subsidiaries have been and continue to be named as defendants in various construction defect claims complaints and other legal actions The Company is subject to the possibility of loss contingencies related to these alleged defects as well as others arising from its business In determining loss contingencies we consider the likelihood of loss and our ability to reasonably estimate the amount of such loss An estimated loss is recorded when it is considered probable that a liability has been incurred and the amount of loss can be reasonably estimated
We currently provide a limited warranty ranging from one to two years covering workmanship and materials per our defined quality standards In addition we provide a limited warranty for up to ten years covering certain defined structural element failures
Our homebuilding work is performed by subcontractors who typically must agree to indemnify us with regard to their work and provide certificates of insurance demonstrating that they have met our insurance requirements and have named us as an additional insured under their policies Therefore many claims relating to workmanship and materials that result in warranty spending are the primary responsibility of these subcontractors
Warranty reserves are included in other liabilities within the consolidated balance sheets and the provision for warranty accruals is included in home construction expenses in the consolidated statements of operations Reserves covering anticipated warranty expenses are recorded for each home closed which are a function of the number of home closings in the period the selling prices of the homes closed and the rates of accrual per home estimated as a percentage of the selling price of the home Management assesses the adequacy of warranty reserves each reporting period based on historical experience and the expected costs to remediate potential claims Our review includes a quarterly analysis of the historical data and trends in warranty expense by division An analysis by division allows us to consider market specific factors such as warranty experience the number of home closings the selling prices of homes product mix and other data in estimating warranty reserves In addition the analysis also contemplates the existence of any non recurring or community specific warranty related matters that might not be included in historical data and trends that may need to be separately estimated based on management s judgment of the ultimate cost of repair for that specific issue While estimated warranty liabilities are adjusted each reporting period based on the results of our quarterly analyses we may not accurately predict actual warranty costs which could lead to significant changes in the reserve
In addition we maintain third party insurance subject to applicable self insured retentions for most construction defects that we encounter in the normal course of business We believe that our warranty and litigation accruals and third party insurance are adequate to cover the ultimate resolution of our potential liabilities associated with known and anticipated warranty and construction defect related claims and litigation However there can be no assurance that the terms and limitations of the limited warranty will be effective against claims made by homebuyers that we will be able to renew our insurance coverage or renew it at reasonable rates that we will not be liable for damages the cost of repairs and or the expense of litigation surrounding possible construction defects soil subsidence or building related claims or that claims will not arise out of events or circumstances not covered by insurance and or not subject to effective indemnification agreements with our subcontractors
The Company has insurance policies that provide for the reimbursement of certain warranty costs incurred above specified thresholds for each period covered Amounts recorded for anticipated insurance recoveries are reflected within the consolidated statements of operations as a reduction of home construction expenses if applicable Amounts not yet received from our insurer are recorded on a gross basis without any reduction for the associated warranty expense within accounts receivable on our consolidated balance sheets if applicable
In the normal course of business we and certain of our subsidiaries are subject to various lawsuits and have been named as defendants in various claims complaints and other legal actions most relating to construction defects moisture intrusion and product liability Certain of the liabilities resulting from these actions are covered in whole or in part by insurance
We cannot predict or determine the timing or final outcome of these lawsuits or the effect that any adverse findings or determinations in pending lawsuits may have on us In addition an estimate of possible loss or range of loss if any cannot presently be made with respect to certain of these pending matters An unfavorable determination in pending lawsuits could result in the payment by us of substantial monetary damages that may not be fully covered by insurance Further the legal costs associated with the lawsuits and the amount of time required to be spent by management and our Board of Directors on these matters even if we are ultimately successful could have a material adverse effect on our financial condition results of operations or cash flows
As of the dates presented we had assets on our consolidated balance sheets that were required to be measured at fair value on a recurring or non recurring basis We use a fair value hierarchy that requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value as follows
Certain of our assets are required to be recorded at fair value on a non recurring basis when events and circumstances indicate that the carrying value of these assets may not be recoverable We review our long lived assets including inventory for recoverability when factors indicate an impairment may exist but no less than quarterly The fair value of assets deemed to be impaired is determined based upon the type of asset being evaluated The fair value of our owned inventory assets when required to be calculated is further discussed within Notes 2 and 4 Due to the substantial use of unobservable inputs in valuing the assets on a non recurring basis they are classified within Level 3
Determining within which hierarchical level an asset or liability falls requires significant judgment We evaluate our hierarchy disclosures each quarter The following table presents the period end balances of assets measured at fair value for each hierarchy level
The fair value of cash and cash equivalents restricted cash accounts receivable trade accounts payable other liabilities and amounts due under the Unsecured Facility if outstanding approximate their carrying amounts due to the short maturity of these assets and liabilities When outstanding obligations related to land not owned under option agreements approximate fair value
Certificates of deposit held for investment with an original maturity greater than three months are carried at original cost plus accrued interest and reported as other assets on the condensed consolidated balance sheets The type of certificates of deposit that the Company invests in are not considered debt securities under ASC Topic 320
Since there is no trading market for our Junior Subordinated Notes the fair value of these notes is estimated by discounting scheduled cash flows through maturity Level 3 The discount rate is estimated using market rates currently being offered on loans with similar terms and credit quality Judgment is required in interpreting market data to develop these estimates of fair value Accordingly the estimates presented herein are not necessarily indicative of the amounts that we could realize in a current market exchange
The Company leases certain office space and equipment under operating leases for use in our operations We recognize operating lease expense on a straight line basis over the lease term Certain of our lease agreements include one or more options to renew The exercise of lease renewal options is generally at our discretion Variable lease expense primarily relates to maintenance and other monthly expense that do not depend on an index or rate
We determine if an arrangement is a lease at contract inception Lease and non lease components are accounted for as a single component for all leases Operating lease right to use assets and liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the expected lease term which includes optional renewal periods if we determine it is reasonably certain that the option will be exercised As our leases do not provide an implicit rate the discount rate used in the present value calculation represents our incremental borrowing rate determined using information available at the commencement date
Operating lease expense is included as a component of general and administrative expenses in our consolidated statements of operations Sublease income and variable lease expenses are de minimis For the fiscal years ended September 30 2024 2023 and
ect the net tax effects of temporary differences between the carrying amounts of our assets and liabilities for financial reporting purposes and the amounts used for income tax purposes The tax effects of significant temporary differences that give rise to the net deferred tax assets are as follows as of September 30 2024 and
As of September 30 2024 our gross deferred tax assets included 21 3 million of federal net operating loss NOL carryforwards 74 1 million of federal tax credits and 33 6 million of state NOL carryforwards The majority of our federal NOL carryforwards expire in our fis
As of September 30 2024 valuation allowance of 27 6 million remains on various state NOL carryforwards for which the Company has concluded that it is more likely than not that these attributes will not be realized
We experienced an ownership change as defined in Section 382 of the Internal Revenue Code Section 382 as of January 12 2010 Section 382 contains rules that limit the ability of a company that undergoes an ownership change to utilize its net operating loss carryforwards tax credits and certain built in losses or deductions recognized during the five year period after the ownership change to offset future taxable income Because the five year period has expired we have determined the actual impact and final classification of those amounts which are properly reflected in the amounts presented above
There can be no assurance that another ownership change as defined in the tax law will not occur If another ownership change occurs a new annual limitation on the utilization of net operating loss carryforwards tax credits and built in losses would be determined as of that date This limitation should one be required in the future is subject to assumptions and estimates that could differ from actual results
A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if based on the available evidence it is more likely than not that such assets will not be realized Accordingly we assess the need to establish valuation allowances for deferred tax assets periodically based on the more likely than not realization threshold criterion In our assessment appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets This assessment considers among other matters the nature frequency and severity of current and cumulative losses forecasts of future profitability the duration of statutory carryforward periods the Company s experience with operating loss carryforwards and tax credit carryforwards not expiring unused the Section 382 limitation on our ability to carryforward pre ownership change net operating losses recognized built in losses or deductions and tax planning alternatives Our assessment while rooted in actual Company performance are highly subjective and rely on certain estimates including forecasts which could differ materially from actual results
In fiscal 2024 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 The negative factors included the overall health of the broader economy elevated mortgage interest rates and softening housing demand due to affordability challenges As of September 30 2024 the Company will have to cumulatively generate
If we were to recognize our 2 4 million gross unrecognized tax benefits remaining as of September 30 2024 substantially all would result in adjustments to other tax accounts primarily deferred taxes Additionally we had no accrued interest or penalties as of September 30 2024 2023 and
In the normal course of business we are subject to audits by federal and state tax authorities regarding various tax liabilities The statute of limitations for our major tax jurisdictions remains open for examination for fiscal year 2007 and subsequent years As of September 30 2024 we expect 0 4 million of our uncertain tax positions will reverse within the next twelve months
In May 2022 the Company s Board of Directors approved a share repurchase program that authorizes the Company to repurchase up to 50 0 million of its outstanding common stock The repurchase program has no expiration date During the fiscal year ended September 30 2024 the Company repurchased 455 thousand shares of its common stock for 12 9 million at an average price per share of 28 41 through open market transactions All shares have been retired upon repurchase The aggregate reduction to stockholders equity related to share repurchases during the fiscal year ended September 30 2024 was 12 9 million As of September 30 2024 the remaining availability of the share repurchase program was 28 9 million
No share repurchases were made during fiscal year 2023 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 The aggregate reduction to stockholders equity related to share repurchases during the fiscal year ended September 30 2022 was 8 2 million
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 2024 2023 or 2022
or more of our common stock These instruments are designed to preserve the value of certain tax assets associated with our net operating loss carryforwards tax credits and built in losses under Section 382 In February 2022 our stockholders approved an extension of these protective provisions in our certificate of incorporation and the rights agreement The rights agreement is scheduled to expire in November 2025
The Company sponsors a defined contribution plan that is a tax qualified retirement plan under section 401 k of the Internal Revenue Code the Plan Substantially all employees are eligible for participation in the Plan Participants may defer and contribute from 1 to 80 of their salary to the Plan with certain limitations on highly compensated individuals The Company matches up to 50 of the participant s contributions limited to 6 of the participant s earnings The participant s contributions vest immediately while the Company s contributions vest over five years The total Company contributions for the fiscal years ended September 30 2024 2023 and 2022 were
The Beazer Homes USA Inc Deferred Compensation Plan the DCP is a non qualified deferred compensation plan for a select group of executives and highly compensated employees The DCP allows the executives to defer current compensation on a pre tax basis to a future year until termination of employment The objectives of the DCP are to assist executives with financial planning and capital accumulation and to provide the Company with a method of attracting rewarding and retaining executives Participation in the DCP is voluntary The Company may voluntarily make a contribution to the participants DCP accounts
years ended September 30 2024 2023 and 2022 the Company contributed 0 2 million 0 2 million and 0 2 million respectively to the participants DCP accounts in the form of voluntary contributions which was recorded as compensation expense within general and administrative expenses in our
and 6 5 million as of September 30 2024 and 2023 respectively are included in other assets on our consolidated balance sheets and are recorded at fair value Realized and unrealized gains and losses on DCP assets are recorded in other income net within our consolidated statement of operations DCP liabilities of
The Company has shares available for grant under the Amended and Restated 2014 Beazer Homes USA Inc Long Term Incentive Plan as amended We issue new shares upon the exercise of stock options and the grant of restricted stock awards In cases of forfeitures and cancellations those shares are returned to the share pool for future issuance As of September 30 2024 we had
Stock options have an exercise price equal to the fair market value of the common stock on the grant date generally vest two or three years after the date of grant and may be exercised thereafter until their expiration subject to forfeiture upon termination of employment as provided in the applicable plan Under certain conditions of retirement eligible participants may receive a partial vesting of stock options Stock options generally expire on the eighth anniversary from the date such options were granted depending on the terms of the award
The fair value of each stock option granted is estimated on the date of grant using the Black Scholes option pricing model Black Scholes Model As of both September 30 2024 and 2023 there was less than 0 1 million of total unrecognized compensation cost related to unvested stock options The cost remaining as of September 30 2024 is expected to be recognized over a weighted average period of 1 3 years
During fiscal 2018 the Compensation Committee of our Board of Directors approved the Employee Stock Option Program ESOP This program is available to all full time employees and is designed to enable employees to share in potential price appreciation of the Company s stock The ESOP matches stock purchases made by eligible employees meeting certain conditions with an option to purchase an additional share of the Company s shares on a one to one basis The exercise price of the options granted is equal to the closing price of the Company s stock on the day the underlying shares are purchased by the employee which is also the ESOP grant date The options will vest on the second anniversary of the date of grant but are forfeited if 1 the eligible employee no longer works for the Company or 2 the underlying shares are sold before the two year vesting period is over The total number of options available under the ESOP is limited to 100 000 each for one share of the Company s common stock of which 32 118 options were granted through the end of fiscal
The fair value of each restricted stock award with market conditions is estimated on the date of grant using the Monte Carlo valuation method The fair value of restricted stock awards without market conditions is based on the market price of the Company s common stock on the date of grant If applicable the cash settled component of any awards granted to employees is accounted for as a liability which is adjusted to fair value each reporting period until vested
During fiscal 2024 we issued time based restricted stock awards and performance based restricted stock awards with a payout subject to certain performance and market conditions Each award type is discussed below
of performance based restricted stock 2024 Performance Shares containing market conditions to our executive officers and certain other employees The 2024 Performance Shares are structured to be awarded based on the Company s performance under three pre determined financial and operational metrics at the end of the three year performance period After determining the number of shares earned based on the financial and operational metrics which can range from 0 to 175 of the targeted number of shares the award will be subject to further upward or downward adjustment by as much as 30 based on the Company s relative total shareholder return TSR compared against a selected small to mid cap homebuilder peers during the three year performance period The 2024 Performance Shares were valued using the Monte Carlo valuation model due to the existence of the TSR market condition and had an estimated fair value of 28 69 per share on the date of grant
A Monte Carlo valuation model requires the following inputs 1 the expected dividend yield on the underlying stock 2 the expected price volatility of the underlying stock 3 the risk free interest rate for the period corresponding with the expected term of the award and 4 the fair value of the underlying stock For the Company and each member of the peer group the following inputs were used as applicable in the Monte Carlo valuation model to determine the fair value as of the grant date for performance based restricted stock granted in each of the fiscal years ended
Each of our performance shares represent a contingent right to receive one share of the Company s common stock if vesting is satisfied at the end of the three year performance period Our performance stock award plans provide that any performance shares earned in excess of the target numb
er of performance shares issued may be settled in cash or additional shares at the discretion of the Human Capital Committee We have no current plans to cash settle any additional performance based restricted shares in the future
The performance criteria of the 2022 Performance Share grant were satisfied as of September 30 2024 Based on the actual performance level achieved 71 470 performance based restricted stock awards from the 2022 Performance Share grant cliff vested at the end of the three year vesting period on
Of the total 2 1 million compensation cost related to these awards we have recognized 0 4 million 1 0 million and 0 6 million during the fiscal years ended September 30 2024 2023 and 2022 respectively The remaining 0 1 million of unrecognized compensation cost will be recognized in the first quarter of fiscal 2025
ime based restricted stock Restricted Shares to our directors executive officers and certain other employees Restricted Shares are valued based on the market price of the Company s common stock on the date of the grant The Restricted Shares granted to our non employee directors vest on the first anniversary of the grant while the Restricted Shares granted to our executive officers and other employees generally vest ratably over three years from the date of grant
Basic income per share is calculated by dividing net income by the weighted average number of shares outstanding during the period Diluted income per share adjusts the basic income per share for the effects of any potentially dilutive securities in periods in which the Company has net income and such effects are dilutive under the treasury stock method
We currently operate in 13 states that are grouped into three homebuilding segments based on geography Revenues from our homebuilding segments are derived from the sale of homes that we construct land and lot sales and our title operations Land sales revenue relates to land that does not fit within our homebuilding programs or strategic plans We also provide title examinations for our homebuyers in certain markets Our reportable segments have been determined on a basis that is used internally by management for evaluating segment performance and resource allocations We have considered the applicable aggregation criteria and have combined our homebuilding operations into three reportable segments as follows
On May 20 2022 we acquired substantially all of the assets of Imagine Homes a private San Antonio based homebuilder in which the Company held a one third ownership stake for the previous 16 years The results of our San Antonio operations are reported herein within our West reportable segment
During our fiscal 2015 we made the decision that we would not continue to reinvest in new homebuilding assets in our New Jersey division therefore it is no longer considered an active operation However it is included in this listing because the segment information below continues to include New Jersey
Management s evaluation of segment performance is based on segment operating income Operating income for our homebuilding segments is defined as homebuilding and land sales and other revenue less home construction land development land sales expense title operations expense commission expense depreciation and amortization and certain G A expenses that are incurred by or allocated to our homebuilding segments The accounting policies of our segments are those described in Note 2
Includes amortization of capitalized interest capitalization and amortization of indirect costs impairment of capitalized interest and capitalized indirect costs when applicable expenses related to numerous shared services functions that benefit all segments but are not allocated to the operating segments reported above including information technology treasury corporate finance legal branding and national marketing and certain other amounts that are not allocated to our operating segments
within other income net We previously held a minority interest in a technology company specializing in digital marketing for new home communities which was sold in March 2024 In exchange for the previously held investment we received cash in escrow along with a minority partnership interest in the acquiring company which was recorded within other assets in our consolidated balance sheets
We have audited the accompanying consolidated balance sheets of Beazer Homes USA Inc and subsidiaries the Company as of September 30 2024 and 2023 the related consolidated statements of operations stockholders equity and cash flows for each of the three years in the period ended September 30 2024 and the related notes collectively referred to as the financial statements In our opinion the financial statements present fairly in all material respects the financial position of the Company as of September 30 2024 and 2023 and the results of its operations and its cash flows for each of the three years in the period ended September 30 2024 in conformity with accounting principles generally accepted in the United States of America
We have also audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the Company s internal control over financial reporting as of September 30 2024 based on criteria established in
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 13 2024 expressed an unqualified opinion on the Company s internal control over financial reporting
These financial statements are the responsibility of the Company s management Our responsibility is to express an opinion on the Company s financial statements based on our audits We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audits in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error or fraud Our audits included performing procedures to assess the risks of material misstatement of the financial statements whether due to error or fraud and performing procedures that respond to those risks Such procedures included examining on a test basis evidence regarding the amounts and disclosures in the financial statements Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statements We believe that our audits provide a reasonable basis for our opinion
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that 1 relates to accounts or disclosures that are material to the financial statements and 2 involved our especially challenging subjective or complex judgments The communication of critical audit matters does not alter in any way our opinion on the financial statements taken as a whole and we are not by communicating the critical audit matter below providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates
Projects in progress inventory includes homes under construction and land under development grouped together as communities Projects in progress are stated at cost unless facts and circumstances indicate that the carrying value of the assets may not be recoverable The Company assesses its projects in progress inventory for indicators of potential impairment at the community level on a quarterly basis The Company evaluates among other things the average sales price and margins on current homes and sales contracts in backlog for each community As of September 30 2024 the carrying value of the Company s projects in progress inventory was 2 0 billion
Given the subjectivity in determining whether impairment indicators are present at a community management exercises significant judgment when evaluating for indicators of impairment Accordingly auditing management s judgments regarding the identification of impairment indicators involved an increased extent of effort and especially subjective auditor judgment
issued by the Committee of Sponsoring Organizations of the Treadway Commission COSO In our opinion the Company maintained in all material respects effective internal control over financial reporting as of September 30 2024 based on criteria established in
We have also audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the consolidated financial statements as of and for the year ended September 30 2024 of the Company and our report dated November 13 2024 expressed an unqualified opinion on those financial statements
The Company s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management s Report on Internal Control over Financial Reporting Our responsibility is to express an opinion on the Company s internal control over financial reporting based on our audit We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audit in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects Our audit included obtaining an understanding of internal control over financial reporting assessing the risk that a material weakness exists testing and evaluating the design and operating effectiveness of internal control based on the assessed risk and performing such other procedures as we considered necessary in the circumstances We believe that our audit provides a reasonable basis for our opinion
A company s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles A company s internal control over financial reporting includes those policies and procedures that 1 pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company 2 provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company and 3 provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company s assets that could have a material effect on the financial statements
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
Our management under the supervision and with the participation of our Chief Executive Officer CEO and Chief Financial Officer CFO evaluated the effectiveness of the design and operation of the Company s disclosure controls and procedures as of September 30 2024 pursuant to Rule 13a 15 b of the Securities Exchange Act of 1934 as amended Exchange Act Our disclosure controls and procedures are designed to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded processed summarized and reported within the time periods specified in the Securities and Exchange Commission s rules and forms and that such information is accumulated and communicated to our management including our CEO and CFO as appropriate to allow timely decisions regarding required disclosure Based on the evaluation our CEO and CFO concluded that our disclosure controls and procedures were effective as of September 30 2024
Our management is responsible for the preparation and fair presentation of the consolidated financial statements included in this Annual Report on Form 10 K The consolidated financial statements have been prepared in conformity with U S generally accepted accounting principles U S GAAP and reflect management s judgments and estimates concerning events and transactions that are accounted for or disclosed
Our management is also responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a 15 f The Company s internal control over financial reporting is a process designed under the supervision of our CEO and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company s financial statements for external purposes in accordance with U S GAAP
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective can only provide reasonable assurance with respect to financial statement preparation and presentation Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
Management assessed the effectiveness of our internal control over financial reporting as of September 30 2024 Management s assessment was based on criteria for effective internal control over financial reporting described in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 Framework Based on this assessment management concluded that the Company has maintained effective internal control over f
inancial reporting as of September 30 2024 The effectiveness of our internal control over financial reporting as of September 30 2024 has been audited by Deloitte Touche LLP our independent registered public accounting firm as stated in their report which is included in Part II Item 8 Financial Statements and Supplementary Data
There have been no changes in the Company s internal control over financial reporting during the quarter ended September 30 2024 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting
none of the Company s directors or executive officers adopted or terminated any contract instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5 1 c or any non Rule 10b5 1 trading arrangement
Beazer Homes has adopted a Code of Business Conduct and Ethics the Code that applies to its principal executive officer principal financial officer principal accounting officer and other senior financial officers The Company s Board of Directors approved amendments to the Code in November 2019 and then again in August 2024 The full text of the Code as amended can be found on the Company s website at www beazer com If at any time there is an amendment or waiver of any provision of the Code that is required to be disclosed information regarding such amendment or waiver will be published on the Company s website
Market for Registrant s Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities All of the other information required by this item is incorporated by reference to our proxy statement for our 2025 Annual Meeting of Stockholders which is expected to be filed on or before December 27 2024
Certificate of Amendment dated April 13 2010 to the Amended and Restated Certificate of Incorporation of the Company incorporated herein by reference to Exhibit 3 1 of the Company s Form 10 Q for the quarter ended March 31 2010
Certificate of Amendment dated February 3 2011 to the Amended and Restated Certificate of Incorporation of the Company as amended incorporated herein by reference to Exhibit 3 1 of the Company s Form 8 K filed on February 8 2011
Certificate of Amendment dated October 11 2012 to the Amended and Restated Certificate of Incorporation of the Company as amended incorporated herein by reference to Exhibit 3 1 of the Company s Form 8 K filed on October 12 2012
Certificate of Amendment dated February 2 2013 to the Amended and Restated Certificate of Incorporation of the Company as amended incorporated herein by reference to Exhibit 3 1 of the Company s Form 8 K filed on February 5 2013
Certificate of Amendment dated November 6 2013 to the Amended and Restated Certificate of Incorporation of the Company as amended incorporated herein by reference to Exhibit 3 1 of the Company s Form 8 K filed on November 7 2013
Certificate of Amendment dated November 11 2016 to the Amended and Restated Certificate of Incorporation of the Company as amended incorporated herein by reference to Exhibit 3 8 of the Company s Form 10 K for the year ended September 30 2016
Certificate of Amendment dated as of November 8 2019 and effective as of November 12 2019 to the Amended and Restated Certificate of Incorporation of the Company as amended incorporated herein by reference to Exhibit 3 8 of the Company s Form 10 K for the year ended September 30 2019
Certificate of Amendment dated November 9 2022 to the Amended and Restated Certificate of Incorporation of Beazer Homes USA Inc incorporated herein by reference to Exhibit 3 1 of the Company s Form 8 K filed on November 14 2022
Section 382 Rights Agreement dated as of December 7 2021 and effective as of November 14 2022 between Beazer Homes USA Inc and American Stock Transfer Trust Company LLC as Rights Agent incorporated herein by reference to Exhibit 4 1 of the Company s Form 8 K filed on November 14 2022
Form of Junior Subordinated Indenture dated June 15 2006 between the Company and JPMorgan Chase Bank National Association incorporated herein by reference to Exhibit 4 1 of the Company s Form 8 K filed on June 21 2006
Form of Amended and Restated Trust Agreement dated June 15 2006 among the Company JPMorgan Chase Bank National Association Chase Bank USA National Association and certain individuals named therein as Administrative Trustees incorporated herein by reference to Exhibit 4 2 of the Company s Form 8 K filed on June 21 2006
Junior Subordinated Indenture between Beazer Homes USA Inc and Wilmington Trust Company as trustee dated as of January 15 2010 incorporated herein by reference to Exhibit 10 2 of the Company s Form 8 K dated January 21 2010
Indenture dated as of October 10 2017 between the Company the Guarantors and U S Bank National Association as trustee incorporated herein by reference to Exhibit 4 1 of the Company s Form 8 K filed on October 10 2017
Registration Rights Agreement dated as of October 10 2017 between the Company the Guarantors and Credit Suisse Securities USA LLC as representative of the Initial Purchasers incorporated herein by reference to Exhibit 4 3 of the Company s Form 8 K filed on October 10 2017
Indenture for 7 500 Senior Notes due 2031 dated March 15 2024 by and among the Company the Guarantors and Regions Bank as trustee incorporated herein by reference to Exhibit 4 1 of the Company s Form 8 K filed on March 18 2024
Indenture for 7 250 Senior Notes due 2029 dated as of September 24 2019 by and among the Company the Guarantors and U S Bank National Association as trustee incorporated herein by reference to Exhibit 4 1 of the Company s Form 8 K filed on September 24 2019
Registration Rights Agreement dated as of September 24 2019 by and among the Company the Guarantors and Credit Suisse Securities USA LLC as representative of the Initial Purchasers incorporated herein by reference to Exhibit 4 3 of the Company s Form 8 K filed on September 24 2019
Description of the Registrant s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 incorporated herein by reference to Exhibit 4 37 of the Company s Form 10 K for the year ended September 30 2021
Form of 2010 Equity Incentive Plan Employee Award Agreement for Option and Restricted Stock Awards incorporated herein by reference to Exhibit 10 1 of the Company s Form 10 Q for the quarter ended June 30 2010
Form of 2010 Equity Incentive Plan Award Agreement for Option and Restricted Stock Awards Non Employee Directors incorporated herein by reference to Exhibit 10 2 of the Company s Form 10 Q for the quarter ended June 30 2010
Form of 2010 Equity Incentive Plan Award Agreement for Option and Restricted Stock Awards Named Executive Officers dated as of November 16 2011 incorporated herein by reference to Exhibit 10 1 of the Company s 8 K filed on November 22 2011
Form of 2010 Equity Incentive Plan Performance Cash Award Agreement Named Executive Officers incorporated herein by reference to Exhibit 10 1 of the Company s 10 Q for the quarter ended December 31 2012
Form of 2014 Long Term Incentive Plan Award Agreement for Restricted Stock Awards Named Executive Officers incorporated herein by reference to Exhibit 10 21 of the Company s Form 10 K filed on November 13 2014
Form of 2014 Long Term Incentive Plan Award Agreement for TSR Performance Share Awards Named Executive Officers incorporated herein by reference to Exhibit 10 22 of the Company s Form 10 K filed on November 13 2014
Form of 2014 Long Term Incentive Plan Award Agreement for Pre Tax Income Performance Share Awards Named Executive Officers incorporated herein by reference to Exhibit 10 23 of the Company s Form 10 K filed on November 13 2014
Form of 2014 Long Term Incentive Plan Award Agreement for Restricted Stock Awards Non Employee Directors incorporated herein by reference to Exhibit 10 24 of the Company s Form 10 K filed on November 13 2014
Form of 2014 Long Term Incentive Plan Award Agreement for Performance Shares Named Executive Officers incorporated herein by reference to Exhibit 10 1 of the Company s Form 10 Q filed on February 4 2016
Form of 2014 Long Term Incentive Plan Award Agreement for Performance Shares Named Executive Officers incorporated herein by reference to Exhibit 10 26 of the Company s Form 10 K filed on November 14 2017
Severance and Change In Control Agreement by and between Allan P Merrill and the Company effective as of September 18 2018 incorporated herein by reference to Exhibit 10 1 of the Company s Form 8 K filed on September 24 2018
Severance and Change In Control Agreement by and between Robert L Salomon and the Company effective as of September 18 2018 incorporated herein by reference to Exhibit 10 2 of the Company s Form 8 K filed on September 24 2018
Severance and Change In Control Agreement by and between Keith L Belknap and the Company effective as of September 18 2018 incorporated herein by reference to Exhibit 10 29 of the Company s Form 10 K filed on November 13 2018
Delayed Draw Term Loan Facility dated November 16 2010 among Beazer Homes USA Inc Citibank N A and Citigroup Global Markets Inc incorporated herein by reference to Exhibit 10 1 of the Company s Form 8 K filed on November 18 2010
Delayed Draw Term Loan Facility dated November 16 2010 among Beazer Homes USA Inc Deutsche Bank AG Cayman Islands Branch and Deutsche Bank Securities Inc incorporated herein by reference to Exhibit 10 2 of the Company s Form 8 K filed on November 18 2010
First Amendment to the Delayed Draw Term Loan Facility dated as of November 16 2010 by and between Beazer Homes USA Inc and Citibank N A incorporated herein by reference to Exhibit 10 2 of the Company s 8 K filed on August 9 2012
First Amendment to the Delayed Draw Term Loan Facility dated as of November 16 2010 by and between Beazer Homes USA Inc and Deutsche Bank AG Cayman Islands Branch incorporated herein by reference to Exhibit 10 3 of the Company s 8 K filed on August 9 2012
Second Amended and Restated Credit Agreement dated as of September 24 2012 between Beazer Homes USA Inc as borrower the lenders party thereto the issuers party thereto and Credit Suisse AG Cayman Islands Branch as agent incorporated herein by reference to Exhibit 10 1 of the Company s 8 K filed on September 26 2012
First Amendment to Second Amended and Restated Credit Agreement dated as of November 10 2014 between Beazer Homes USA Inc as borrower the lenders party thereto the issuers party thereto and Credit Suisse AG Cayman Islands Branch as agent incorporated herein by reference to Exhibit 10 33 of the Company s Form 10 K filed on November 13 2014
Second Amendment to Second Amended and Restated Credit Agreement dated as of November 6 2015 between Beazer Homes USA Inc as borrower the lenders party thereto the issuers party thereto and Credit Suisse AG Cayman Islands Branch as agent incorporated herein by reference to Exhibit 10 34 of the Company s 10 K filed on November 10 2015
Third Amendment to Second Amended and Restated Credit Agreement dated as of October 13 2016 by and among Beazer Homes USA Inc as borrower the lenders party thereto the issuers party thereto and Credit Suisse AG Cayman Islands Branch incorporated herein by reference to Exhibit 10 1 of the Company s Form 8 K filed October 13 2016
Fourth Amendment to the Second Amended and Restated Credit Agreement dated as of September 24 2012 among the Company as borrower the lenders party thereto the issuers party thereto and Credit Suisse AG Cayman Islands Branch as agent as amended incorporated herein by reference to Exhibit 10 1 of the Company s Form 8 K filed on October 24 2017
Fifth Amendment to the Second Amended and Restated Credit Agreement dated as of September 24 2012 among the Company as borrower the lenders party thereto the issuers party thereto and Credit Suisse AG Cayman Islands Branch as agent as amended incorporated herein by reference to Exhibit 10 1 of the Company s Form 8 K filed on October 5 2018
Sixth Amendment to the Second Amended and Restated Credit Agreement dated as of September 24 2012 among the Company as borrower the lenders party thereto the issuers party thereto and Credit Suisse AG Cayman Islands Branch as agent as amended incorporated herein by reference to Exhibit 10 1 of the Company s Form 10 Q filed on May 2 2019
Seventh Amendment to the Second Amended and Restated Credit Agreement dated as of September 24 2012 among the Company as borrower the lenders party thereto the issuers party thereto and Credit Suisse AG Cayman Islands Branch as agent as amended incorporated herein by reference to Exhibit 10 1 of the Company s Form 8 K filed on September 10 2019
Term Loan Agreement dated as of September 9 2019 by and among the Company the subsidiaries of the Company as guarantors thereto and Credit Suisse International as lender incorporated herein by reference to Exhibit 10 2 of the Company s Form 8 K filed on September 10 2019
Form of 2014 Long Term Incentive Plan Award Agreement for Performance Shares Named Executive Officers incorporated herein by reference to Exhibit 10 2 of the Company s Form 10 Q for the quarter ended December 31 2017
Eighth Amendment to the Second Amended and Restated Credit Agreement dated as of September 24 2012 among the Company as borrower the lenders and issuers party thereto and Credit Suisse AG Cayman Islands Branch acting as agent as amended incorporated herein by reference to Exhibit 10 45 of the Company s Form 10 Q filed on April 4 2020
Ninth Amendment to the Second Amended and Restated Credit Agreement dated as of September 24 2012 among the Company as borrower the lenders party thereto the issuers party thereto and Credit Suisse AG Cayman Islands Branch as agent as amended incorporated herein by reference to Exhibit 10 1 of the Company s Form 8 K filed on October 13 2020
Tenth Amendment to the Second Amended and Restated Credit Agreement dated as of September 24 2012 among the Company as borrower the lenders and issuers party thereto and Credit Suisse AG Cayman Islands Branch acting as agent as amended incorporated herein by reference to Exhibit 10 1 of the Company s Form 8 K filed on September 27 2021
Credit Agreement dated as of October 13 2022 among Beazer Homes USA Inc the several lenders from time to time parties thereto and JPMorgan Chase Bank N A as an issuing lender and administrative agent incorporated by reference to Exhibit 10 1 to the Company s Form 8 K filed on October 13 2022
Commitment Increase Activation Notice dated October 12 2023 by and among Beazer Homes USA Inc Flagstar Bank N A and JPMorgan Chase Bank N A as administrative agent and issuing lender incorporated by reference to Exhibit 10 1 to the Company s Form 10 Q filed on February 1 2024
Commitment Increase Activation Notice and New Lender Supplement dated October 12 2023 by and among Beazer Homes USA Inc Texas Capital Bank and JPMorgan Chase Bank N A as administrative agent and issuing lender incorporated by reference to Exhibit 10 2 to the Company s Form 10 Q filed on February 1 2024
Pursuant to the requirements of Section 13 or 15 d of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized
Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated

Company Name	BEAZER HOMES USA INC Vist SEC web-site
Category	OPERATIVE BUILDERS
Trading Symbol	BZH