UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________________________________________________________ 

FORM 10-K

_____________________________________________________________ 

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

For the fiscal year ended September 30, 2021

or

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

Commission File Number 001-12822

_____________________________________________________________ 

BEAZER HOMES USA, INC.

(Exact name of registrant as specified in its charter)

 _____________________________________________________________ 

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

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

(770) 829-3700

(Registrant’s telephone number, including area code)

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

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

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

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  ¨ No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes  ¨ No  ☒

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ¨

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

Large accelerated filer	¨	Accelerated filer	☒
Non-accelerated filer	¨	Smaller reporting company	☐
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b) by the registered public accounting firm that prepared or issued its audit report.☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES  ☐    NO  ☒

The aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant as of March 31, 2021, based on the closing sale price per share as reported by the New York Stock Exchange on such date, was $635,661,564.

Class	Outstanding at November 5, 2021
Common Stock, $0.001 par value	31,294,498

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement for the registrant’s 2021 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, 2021.

BEAZER HOMES USA, INC.

TABLE OF CONTENTS

Forward-Looking Statements	1
PART I
Item 1. Business	3
Item 1A. Risk Factors	12
Item 1B. Unresolved Staff Comments	21
Item 2. Properties	21
Item 3. Legal Proceedings	21
Item 4. Mine Safety Disclosures	21
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	22
Item 6. Selected Financial Data	22
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations	24
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	40
Item 8. Financial Statements and Supplementary Data	41
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	80
Item 9A. Controls and Procedures	80
Item 9B. Other Information	80
PART III
Item 10. Directors, Executive Officers, and Corporate Governance	81
Item 11. Executive Compensation	81
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	81
Item 13. Certain Relationships and Related Transactions, and Director Independence	81
Item 14. Principal Accountant Fees and Services	81
PART IV
Item 15. Exhibits and Financial Statement Schedules	82
SIGNATURES	88

References to “we,” “us,” “our,” “Beazer,” “Beazer Homes” and the “Company” in this Annual Report on Form 10-K refer to Beazer Homes USA, Inc.

FORWARD-LOOKING STATEMENTS

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 “estimate,” “project,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will,”, "outlook", “goal,” “target” or other similar words or phrases.

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

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

•economic changes nationally or in local markets, changes in consumer confidence, wage levels, declines in employment levels, inflation and governmental actions, each of which is outside our control and affects the affordability of, and demand for, the homes we sell;

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

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

•shortages of or increased costs for labor used in housing production, and the level of quality and craftsmanship provided by such labor;

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

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

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

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

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

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

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

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

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

•the potential recoverability of our deferred tax assets;

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•increases in corporate tax rates;

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

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

•the impact of construction defect and home warranty claims;

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

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

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

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

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

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PART I

Item 1. Business

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 return on invested capital over the course of a housing cycle.

Beazer Homes USA, Inc. was incorporated in Delaware in 1993. Our principal executive offices are located at 1000 Abernathy Road, Suite 260, Atlanta, Georgia 30328, and our main telephone number is (770) 829-3700. We also provide information about our company, including active communities, through our Internet website located at www.beazer.com. Information on our website is not a part of this Form 10-K and shall not be deemed incorporated by reference.

Business Strategy

We continue to execute against our long-term balanced growth strategy, which we define as the expansion of earnings at a faster rate than our revenue growth, supported by a less-leveraged and return-driven capital structure. This strategy provides us with the flexibility to increase return on capital, reduce leverage, or increase investment in land and other operating assets in response to changing market conditions.

We remain committed to this strategy, which is designed to increase shareholder value by improving our return on assets while reducing operational risk and debt. Our specific objectives at the beginning of fiscal 2021 included generating higher Adjusted EBITDA and double-digit growth in earnings per share, growing our total lot position through higher land spending and increased use of lot option agreements, and retiring at least $50.0 million of debt.

For fiscal 2021, we recorded net income of $122.0 million, or $4.01 per diluted share, compared to net income of $52.2 million, or $1.74 per diluted share, for the prior year. Adjusted EBITDA was $262.7 million in fiscal 2021, compared to $204.4 million in the prior year, an increase of $58.3 million, or 28.5%. Over the past five years, we have achieved a compound annual growth rate (CAGR) of 11.0% for Adjusted EBITDA.

As of September 30, 2021 and September 30, 2020, our land position included 21,987 and 17,830 controlled lots, respectively. Through expansion of our use of lot option agreements, 45.4% and 33.0% of our controlled lots, as of September 30, 2021 and September 30, 2020, respectively, were under option contracts.

We repurchased $30.7 million of our Senior Notes and repaid $50.0 million of our Senior Unsecured Term Loan during fiscal 2021. Over the past five years, we repaid a total of $281.4 million of debt. We expect to continue to reduce outstanding debt over time, and we intend to end fiscal 2022 with less than $1.0 billion of outstanding debt. As of September 30, 2021, we had outstanding debt of $1.05 billion.

For fiscal 2022, as we are near the end of our near-term deleveraging goal, we will focus on continuing to grow our land position, improving operating margin, delivering extraordinary customer experience, and encouraging employee well-being.

Differentiating Beazer Homes

We know that our buyers have many choices when purchasing a home. To help us become a builder of choice and thereby achieve the operational objectives we have outlined, we have identified the following three strategic pillars that differentiate Beazer's homes from both resale homes and other newly built homes:

Mortgage Choice – 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 side-by-side.

Choice PlansTM – Every family lives in their home differently, which is why we created Choice PlansTM. Choice PlansTM provide our buyers with more floor plan flexibility at no additional cost. For example, buyers of to-be-built homes can typically choose between two different configurations in the kitchen/great room and in the primary bedroom/bathroom based on individual preferences, at no additional cost. Offering these pre-designed floor plan alternatives allows us to offer fewer

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different plans, which improves efficiency and reduce costs while creating living areas that match an individual buyer's lifestyle.

Surprising Performance – We place an emphasis on building high-quality homes and delivering outstanding customer experience. All Beazer homes are designed and built to provide Surprising Performance, which means more quality, comfort, and savings. We deliver these benefits through our people, materials, and process. Our homes are built to the latest ENERGY STAR® standards, and we provide buyers with an energy rating for their home, completed by a qualified third-party rating company. Used homes typically have a HERS® index score (on a scale in which a lower score is better) of 130. As of September 30, 2021, the average new Beazer home has a gross HERS® index score of 56. Each new Beazer home also comes equipped with powerful technologies, including Category 6 ethernet wiring (Cat6), a centralized network panel and immediate internet connectivity via a LTE Wi-Fi router. In December 2020, Beazer became the first national builder to publicly commit to ensuring that by the end of 2025 every home we build will be Net Zero Energy Ready. Net Zero Energy Ready means that each home will have a gross HERS® index score (before any benefit of renewable energy production) of 45 or less, and homeowners will be able to achieve net zero energy consumption by attaching a properly sized renewable energy system.

Reportable Business Segments

Our active homebuilding operations consist of the design, sale, and construction of single-family and multi-family homes in the following geographic regions, which represent our reportable segments:

Segment/State	Market(s)
West:
Arizona	Phoenix
California	Los Angeles County, Placer County, Riverside County, Sacramento County, San Bernardino County, San Diego County, Tulare County
Nevada	Las Vegas
Texas	Dallas/Ft. Worth, Houston
East:
Indiana	Indianapolis
Maryland/Delaware	Anne Arundel County, Baltimore County, Howard County, Sussex County
Tennessee	Nashville
Virginia	Arlington County, Fairfax County, Loudoun County, Prince William County, Stafford County
Southeast:
Florida	Orlando, Tampa/St. Petersburg
Georgia	Atlanta, Savannah
North Carolina	Raleigh/Durham
South Carolina	Charleston, Myrtle Beach

The following tables summarize certain operating information of our reportable segments, including number of homes closed, the average selling price (ASP) for the periods presented, and units and dollar value in backlog as of September 30, 2021, 2020, and 2019. Refer to “Management's Discussion and Analysis of Results of Operations and Financial Condition” in Item 7 of this Form 10-K for additional information.

	Fiscal Year Ended September 30,
	2021			2020			2019
($ in thousands)	Closings	Average Selling Price		Closings	Average Selling Price		Closings	Average Selling Price
West	2,945	$	377.0	3,206	$	368.2	2,859	$	354.3
East	1,185	477.6		1,045	455.7		1,092	463.7
Southeast	1,157	390.2		1,241	370.8		1,549	360.2
Total Company	5,287	$	402.4	5,492	$	385.5	5,500	$	377.7

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	As of September 30,
	2021			2020			2019
	Units in Backlog	Dollar Value in Backlog (in millions)		Units in Backlog	Dollar Value in Backlog (in millions)		Units in Backlog	Dollar Value in Backlog (in millions)
West	1,653	$	736.0	1,365	$	493.7	982	$	362.5
East	611	302.0		624	301.1		341	155.1
Southeast	522	246.0		520	200.5		385	147.5
Total Company	2,786	$	1,284.0	2,509	$	995.3	1,708	$	665.1
ASP in backlog (in thousands)		$	460.9		$	396.7		$	389.4

Seasonal and Quarterly Variability

Our homebuilding operating cycle historically has reflected escalating new order activity in the second and third fiscal quarters and increased closings in the third and fourth fiscal quarters. However, these seasonal patterns may be impacted or reduced by a variety of factors. During fiscal 2021, supply chain disruptions as well as our efforts to actively manage sales pace resulted in a shift from our typical seasonal trend such that higher levels of new order activity were observed during the first and second quarters of fiscal 2021, which led to increased closing levels starting in the second fiscal quarter.

Markets and Product Description

We evaluate a number of factors in determining which geographic markets to enter and remain in as well as which consumer segments to target with our homebuilding activities. We compete in sixteen geographic 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 sixteen 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 on 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.

Gatherings. In 2016, Gatherings® by Beazer Homes was officially introduced across several markets within Beazer's geographic footprint through age restricted condominiums. We strive to provide extraordinary value, a strong commitment to customer service, and a quality, lower-maintenance home for those seeking a 55+ lifestyle. In addition to condominiums, we are in the process of expanding the Gatherings® brand to include town homes, villas, duets, and single family homes. Our Dallas, Houston, Las Vegas, Nashville, and Orlando markets are actively selling Gatherings homes, while development is currently underway in Atlanta, Maryland, and additional sites in Houston. As of September 30, 2021, we have approved communities representing nearly 765 potential future sales.

Marketing and Sales

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®, Gatherings®, and Choice PlansTM, for use in our business.

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 with live chat support, self-guided tours to allow homebuyers to tour models privately, safely, and outside of normal business hours, and self-service appointments to help customers schedule an appointment with ease and speed.

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Our practice is to build, decorate, furnish, and landscape model homes for each community we build and maintain on-site sales offices. As of September 30, 2021, we maintained and owned 215 model homes. We believe that model homes play a particularly important role in our selling efforts, and we are continuously innovating within our model homes to provide a unique, memorable, and hands-on experience for our customers, including digital kiosks, interactive site maps/plans, interactive magnetic floor plan boards, interactive Surprising Performance rooms, signage, and more. The selection of interior features is also a principal component of our marketing and sales efforts.

Our homes are customarily sold through commissioned new home sales counselors (who work from the 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, which management believes results 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.

We sometimes use various sales incentives in order to attract homebuyers. The use of incentives depends largely on local economic and competitive market conditions.

Depending on market conditions, we also at times begin construction on a number of homes for which no signed sales contract exists, known as “speculative” or “spec” homes. 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 within 60 days.

Operational Overview

Corporate Operations

We perform the following functions at our corporate office to promote standardization and operational excellence:

•evaluate and select geographic markets;

•allocate capital resources for land acquisitions;

•maintain and develop relationships with lenders and capital markets to create and maintain access to financial resources;

•maintain and develop relationships with national product vendors;

•perform various centralized functions including accounting, finance, purchasing, legal, risk, planning/design, and marketing activities to support our field operations;

•operate and manage information systems and technology support operations; and

•monitor the operations of our divisions and partners.

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.

Field Operations

The development and construction of each new home community 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.

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Land Acquisition and Development

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 select land for purchase based upon a variety of factors, including:

•internal and external demographic and marketing studies;

•suitability for development during the time period of one to five years from the beginning of the development process to the last closing;

•financial review as to the feasibility of the proposed project, including profit margins and returns on capital employed;

•the ability to secure governmental approvals and entitlements;

•environmental and legal due diligence;

•competition in the area;

•proximity to local traffic corridors, job centers, and other amenities; and

•management's judgment of the real estate market and economic trends and our experience in a particular market.

We 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 recreational facilities, and other amenities. When available in certain markets, we also buy finished lots that are ready for home construction. During our fiscal 2021 and 2020, we continued to pursue land acquisition opportunities and develop our land positions, spending approximately $440.8 million and $276.9 million, respectively, for land acquisition and $154.7 million and $163.9 million, respectively, for land development.

We strive to develop a design and marketing concept for each of our communities, which includes determination of the size, style, and price range of the homes, layout of streets and individual lots, and overall community design. The product line offered in a particular new home community depends upon many factors, including the housing generally available in the area, the needs of a particular market, and our cost of lots in the new home community.

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Option Contracts

We acquire certain lots by means of option contracts from various sellers and developers, including land banking entities. Option contracts generally require the payment of a cash deposit or issuance of a letter of credit for the right to acquire lots during a specified period of time at a fixed or variable price.

Under option contracts, purchase of the underlying properties is contingent upon satisfaction of certain requirements by us and the sellers. Our liability under option contracts is generally limited to forfeiture of the non-refundable deposits, letters of credit, and other non-refundable amounts incurred, which totaled approximately $114.7 million as of September 30, 2021. The total remaining purchase price, net of cash deposits, committed under all land option contracts was $676.1 million as of September 30, 2021.

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

The following table summarizes land controlled by us by reportable segment as of September 30, 2021:

	Lots Owned
	Lots with Homes Under Construction (a)	Finished Lots	Lots Under Development	Lots Held for Future Development	Lots Held for Sale	Total Lots Owned	Total Lots Under Contract	Total Lots Controlled
West
Arizona	326	205	85	—	—	616	693	1,309
California	354	218	744	—	45	1,361	505	1,866
Nevada	175	286	315	66	—	842	708	1,550
Texas	1,076	1,142	1,426	—	168	3,812	3,843	7,655
Total West	1,931	1,851	2,570	66	213	6,631	5,749	12,380
East
Indiana	138	124	287	—	2	551	317	868
Maryland/Delaware	186	503	207	—	1	897	743	1,640
New Jersey	—	—	—	117	—	117	—	117
Tennessee	161	138	211	—	2	512	1,332	1,844
Virginia	90	34	85	—	—	209	266	475
Total East	575	799	790	117	5	2,286	2,658	4,944
Southeast
Florida	177	62	233	—	—	472	646	1,118
Georgia	163	464	191	—	—	818	290	1,108
North Carolina	83	169	179	21	41	493	556	1,049
South Carolina	198	222	773	68	34	1,295	93	1,388
Total Southeast	621	917	1,376	89	75	3,078	1,585	4,663
Total	3,127	3,567	4,736	272	293	11,995	9,992	21,987

(a) This category represents lots upon which construction of a home has commenced, including model homes.

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The following table summarizes the dollar value of our land under development, land held for future development, and land held for sale by reportable segment as of September 30, 2021:

in thousands	Land Under Development		Land Held for Future Development		Land Held for Sale
West	$	377,516	$	3,483	$	4,478
East	135,255		10,888		584
Southeast	135,633		5,508		4,117
Total	$	648,404	$	19,879	$	9,179

Construction

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, 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. Our home plans are created in a collaborative effort with industry leading architectural firms, allowing us to stay 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, and such materials and services have been and continue to be available. However, 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 our relationships with our suppliers and subcontractors are good.

Warranty Program

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

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 Note 9 of notes to the consolidated financial statements in this Form 10-K for additional information.

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Customer Financing

As previously mentioned, 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 94% of our fiscal 2021 customers elected to finance a portion of their home purchase.

Competition

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 to reflect changing market conditions. We strive to respond to market conditions and to capitalize on the opportunities for advantageous land acquisitions in desirable locations. 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.

Government Regulation and Environmental Matters

We are subject to a variety of local, state and federal statutes, ordinances, rules and regulations concerning zoning, building, design, constructions, the availability of water, and matters concerning the protection of health, safety and the environment. These laws may result in delays, cause us to incur substantial compliance and other costs, and prohibit or severely restrict development in certain environmentally sensitive regions or areas. 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.

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.

Failure to comply with any of these laws or regulations, where applicable, could result in loss of licensing and a restriction of our business activities in the applicable jurisdiction.

Human Capital Resources

As of September 30, 2021, we employed 1,052 persons, of whom 258 were sales and marketing personnel and 257 were construction personnel. 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.

We believe that our employees are critical to our continued growth and success. As a result, a safe and healthy working environment for our employees at every level of our organizations is our highest priority. This includes a health and safety audit system with comprehensive independent third-party inspections, as well as required attendance at certain health and safety related training programs by all of our team members applicable to their respective job responsibilities.

Upon the onset of the COVID-19 pandemic, we rapidly established a cross-functional task-force and deployed enhanced IT resources to facilitate new processes and procedures and keep our teams informed with the most up to date information. We also took a number of additional and unprecedented actions, including temporarily closing our sales centers, model homes and design centers to the general public and shifting to appointment-only interactions with our customers where permitted, as well

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as modified our construction operations to enforce enhanced safety protocols around social distancing, hygiene, and health screening.

We have also adopted ethical practices and policies to direct how we do business. The objectives of our practices and policies underscore this commitment, including:

•To treat all employees with dignity and respect;

•To embrace employee diversity and inclusion;

•To strongly encourage opportunities for training, growth, and advancement; and

•To uphold ethical standards and comply with applicable laws and our internal guidelines, including a Code of Conduct applicable to all employees and an actively-managed ethics hotline.

To put our objectives in action, we consistently measure employee engagement, maintain disciplined equal employment recruiting, hiring and promotion policies, provide company-wide learning and development programs on inclusion (beginning with unconscious bias training for all employees), and review pay practices for fairness and equality with a third-party consultant.

Competition for qualified personnel is also intense across our footprint. We believe our competitive advantage lies in our ability to attract and retain talented people who consistently exemplify integrity and respect – powerful attributes that enable us to focus on outcomes versus mere hours worked. From competitive compensation and benefits programs, to industry-leading programs such as 12-week parental leave and flexible time off (with no accrual or maximum time away from work), our employee experience is centered on engagement and work-life balance.

Available Information

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. The public may also read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 100 F Street N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Furthermore, the SEC maintains a website that contains reports, proxy statements, information statements and other information regarding issuers, including us, that file electronically with the SEC at www.sec.gov.

In addition, many of our corporate governance documents are available on our website at www.beazer.com. Specifically, our Audit, Finance, Compensation, and Nominating/Corporate Governance Committee Charters, our Corporate Governance Guidelines and Code of Business Conduct and Ethics are available. Each of these documents is also available in print to any stockholder who requests it.

The content on our website is available for information purposes only and is not a part of and shall not be deemed incorporated by reference in this Form 10-K.

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Item 1A. Risk Factors

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.

Business and Market Risks

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.

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. These economic uncertainties involve, among other things, interest rates, inflation, employment levels, wage growth and governmental actions, all of which are out of our control and affect the affordability of, and 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.

Our business could be materially and adversely disrupted by an epidemic or pandemic (such as the present outbreak and worldwide spread of COVID-19), 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 consolidated financial statements.

On March 11, 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic and recommended containment and mitigation measures. On March 13, 2020, the United States declared a national emergency concerning the outbreak, and many states and municipalities have since declared public health emergencies. Along with these declarations, there have been extraordinary and wide-ranging actions taken by international, federal, state and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions across the United States and the world, including quarantines, “stay-at-home” or "shelter in place" orders and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations.

In response to these steps, in mid-March 2020, we temporarily closed our sales centers, model homes and design studios to the general public and shifted to an appointment-only personalized home sales process where permitted, following recommended social distancing and other health and safety protocols when meeting in person with a customer. In addition, we shifted our corporate and division office functions to work remotely. These measures, combined with limiting our construction operations to authorized activities and a reduction in the availability, capacity and efficiency of municipal and private services necessary to the progress of land development, homebuilding, completing mortgage loans and delivering homes, which in each case has varied by market depending on the scope of the restrictions local authorities have established, tempered our sales pace and delayed home deliveries beginning in the latter part of March 2020 and through most of our third fiscal quarter of 2020. We also prioritized our warranty service activities to respond to emergency repair requests, and otherwise on a by-exception basis. While general economic conditions have improved and our operations have since normalized, we are uncertain of the potential full magnitude or duration of the business and economic impacts from the unprecedented public health effort to contain and combat the spread of COVID-19, which include, among other things, significant volatility in financial markets and a sharp decrease in the value of equity securities, including our common stock. In addition, we can provide no assurance as to whether the COVID-19 public health effort will be intensified to such an extent that we will not be able to conduct any business operations in certain of our served markets or at all for an indefinite period.

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Although we gradually resumed nearly all of our operations with the relaxing of early COVID-19 pandemic control responses beginning in the third quarter of our fiscal 2020, the magnitude and duration of the business and economic impacts from the public health effort to contain and combat the spread of COVID-19 pandemic have produced ongoing uncertainty about the overall operating environment going forward and could negatively impact our business over the medium-to-longer term. Moreover, we can provide no assurance as to whether the COVID-19 public health effort will be intensified to such an extent, particularly in response to any resurgence in infections, whether due to the spread of any variants of the virus or otherwise, that we will not be able to conduct any business operations in certain of our served markets or at all for an indefinite period. Certain of our served markets have also seen a dramatic increase in COVID-19 cases, and more stringent COVID-19 pandemic control responses have been re-instituted. Therefore, we could again experience material disruptions in our operating environment, impairing our ability to sell and build homes in a typical manner, as occurred in during our 2020 fiscal year, 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 contract 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, as we did in our second and third fiscal quarters of 2020, and such impacts could be material to our consolidated financial statements for the current fiscal year and beyond. In addition, should public health efforts related to the COVID-19 pandemic intensify to such a degree that we cannot operate in some or all of our served markets, the number of home orders we receive and home closings we complete, if any during such period (which may be prolonged), may be significantly lower than historical norms. Along with an increase in cancellations of home purchase contracts, if there are prolonged government restrictions on our business and our customers, and/or an extended economic recession, we could be unable to produce revenues and cash flows sufficient to conduct our business; meet the terms of our covenants and other requirements under the Facility, our senior notes and the related indenture, and/or mortgages and land contracts due to land sellers and other loans; service our outstanding debt. 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.

Because almost all of our customers require mortgage financing, increases in interest rates could 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.

Substantially all of the purchasers of our homes finance their acquisition with mortgage financing. Mortgage interest rates have remained low compared to most historical periods for the last several years, which has made the homes we sell more affordable. Mortgage rates continuously fell in fiscal years 2019 and 2020 due in part to Federal Reserve interest rate reductions, but stagnated during fiscal year 2021 due to rising economic and financial market uncertainties. Given the volatility in interest rates, we cannot predict whether interest rates will continue to fall or remain low or rise. Increases in interest rates increase the costs of owning a home and could adversely affect the purchasing power of consumers and lower demand for the homes we sell, which could result in a decrease in our revenues and earnings and adversely affect our financial condition.

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 expense 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). There also continues to be meaningful discussion around certain proposed tax legislation contemplated by the Biden administration, including increasing the U.S. corporate tax rate, as well as long standing discussions within the Organization for Economic Co-operation and Development (“OECD”). It is unclear at this time which of these proposals, if

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any, may be enacted and how these various provisions will interact on a local, country and global scale. We believe changes such as these adversely impact or, in case of the proposed tax legislation, could adversely impact the demand for and sales prices of homes in certain markets, including parts of California, Maryland, and Virginia, and therefore could adversely affect our business, financial condition and results of operations.

If we are unsuccessful in competing against our competitors, our market share could decline or our growth could be impeded and, as a result, our financial condition and results of operations could suffer.

Competition in the homebuilding industry is intense, and there are relatively low barriers to entry into our business. 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.

The homebuilding industry is cyclical. A downturn in the industry could adversely affect our business, financial condition and results of operations.

During periods of downturn 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 may experience a material reduction in revenues and margins and our financial condition as well as our results of operations could be adversely affected.

The market value of our land and/or homes may decline, leading to impairments or other charges and reduced profitability.

We regularly acquire land for replacement and expansion of our land inventory within our existing and new markets. The market value of land, building lots and housing inventories can fluctuate significantly as a result of changing market conditions. While we employ measures to manage inventory risk, we may not be able to adequately insulate our operations from a severe drop in inventory values. As a result, we may incur impairment charges or have to sell land at a loss. For example, during the second quarter of fiscal 2019, we recognized impairments of $110.0 million on projects in progress and $38.6 million on land held for sale. See Note 5 of the notes to our consolidated financial statements in this Form 10-K. In addition, when market conditions are such that land values are not appreciating, option contracts previously entered into may become less desirable, at which time we may elect to forgo deposits and pre-acquisition costs and terminate the agreements, which could result in abandonment charges. Material impairment charges, abandonment charges or other write-downs of assets could adversely affect our financial condition and results of operations.

Negative publicity or poor relations with the residents of our communities could negatively impact sales, which could cause our revenues or results of operations to decline.

Unfavorable media related to our industry, company, brands, marketing, personnel, operations, business performance, or prospects may affect our stock price and the performance of our business, regardless of its accuracy or inaccuracy. Our success in maintaining, extending and expanding our brand image depends on our ability to adapt to a rapidly changing media environment. Adverse publicity or negative commentary on social media outlets could hurt operating results, as consumers might avoid or protest brands that receive bad press or negative reviews. Negative publicity may result in a decrease in our operating results. In addition, residents of communities we develop may look to us to resolve issues or disputes that may arise in connection with the operation or development of their communities. Efforts made by us to resolve these issues or disputes could be deemed unsatisfactory by the affected residents, and subsequent actions by these residents could adversely affect sales or our reputation.

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Operational, Legal and Regulatory Risks

Supply shortages and other risks related to the demand for skilled labor and building materials could increase costs, delay deliveries and could adversely affect our financial condition and results of operations.

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, trade disputes, difficulties in production or delivery or health issues like the COVID-19 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 below. 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. 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.

Our long-term success depends on our ability to acquire finished lots and undeveloped land suitable for residential homebuilding at reasonable prices, in accordance with our land investment criteria.

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.

Reduced numbers of home sales extend the time it takes us to recover land purchase and property development costs, negatively impacting profitability and our results of operations.

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.

We could experience a reduction in home sales and revenues due to our inability to acquire and develop land for our communities if we are unable to obtain reasonably priced financing.

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 contracts, we may incur contractual penalties and fees.

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An increase in cancellation rates may negatively impact our business and lead to imprecise estimates related to homes to be delivered in the future (backlog).

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 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 purchase. Significant cancellations have had, and could have, a material adverse effect on our business as a result of lost sales revenue and the accumulation of unsold housing inventory. It is important to note that both backlog and cancellation metrics are operational, rather than accounting data, and should be used only as a general gauge to evaluate our performance. There is an inherent imprecision in these metrics based on an evaluation of qualitative factors during the transaction cycle.

Inflation may adversely affect us by increasing costs beyond what we can recover through price increases.

Inflation can adversely affect us by increasing costs of land, materials and labor. In addition, inflation is often accompanied by higher interest rates. 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. Given the inflation rates in fiscal year 2021, we have experienced, and continue to experience, increases in the prices of land, labor and materials.

Natural disasters and other related events could result in delays in land development or home construction, increase our costs or decrease demand in the impacted areas.

The climates and geology of many of the states in which we operate, including California, Florida, Georgia, North Carolina, South Carolina, Tennessee, Texas and certain mid-Atlantic states, present increased risks of natural disasters. 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. For example, in fiscal 2017 and 2018, Hurricanes Harvey, Irma and Florence disrupted our operations in Texas, Florida, North Carolina and South Carolina, which resulted in what we believe were temporary reductions in sales and closings. Natural disasters can also lead to increased competition for subcontractors, which can delay our progress even after the event has 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.

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. Environmental regulations can also have an adverse impact on the availability and price of certain raw materials such as lumber. Our communities in California are especially susceptible to restrictive government regulations and environmental laws, particularly surrounding water usage due to continuing drought conditions within that region.

In addition, there is a growing concern from advocacy groups and the general public that the emissions of greenhouse gases and other human activities have caused, or will cause, significant changes in weather patterns and temperatures and the frequency and severity of natural disasters. Government mandates, standards and regulations enacted in response to these projected climate changes impacts could result in restrictions on land development in certain areas or increased energy, transportation and raw material costs that may adversely affect our financial condition and results of operations.

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We are subject to extensive government regulation, which could cause us to incur significant liabilities or restrict our business activities.

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, which may be adopted in communities that have developed rapidly, 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.

We may be subject to significant potential liabilities as a result of construction defect, product liability and warranty claims made against us.

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.

At any given time, we are the subject of pending civil litigation that could require us to pay substantial damages or could otherwise have a material adverse effect on us.

Certain of our subsidiaries have been named in class action and multi-party lawsuits regarding claims made by homebuyers. We are also party to putative class action lawsuits related to the inventory impairment charges we recognized during fiscal 2019. We cannot predict or determine the timing or final outcome of the current 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 certain of the pending lawsuits, or we may not have sufficient coverage under such 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.

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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 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 impact our financial condition and results of operations.

We are dependent on the services of certain key employees and the loss of their services could hurt our business.

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.

Terrorist attacks or acts of war against the United States or increased domestic or international instability could have an adverse effect on our operations.

Adverse developments in the war on terrorism, terrorist attacks against the United States or any outbreak or escalation of hostilities between the United States and 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.

Information technology failures, cybersecurity breaches or data security breaches could harm our business.

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. 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. While, to date, we have not had a significant cybersecurity breach or attack that had a material impact on our business or results of operations, there can be no assurance that our efforts to maintain the security and integrity of these types of IT networks and related systems will be effective or that attempted security breaches or disruptions would not be successful or damaging.

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Financial and Liquidity Risks

Our access to capital and our ability to obtain additional financing could be affected by any downgrade of our credit ratings, as well as limitations in the capital markets or adverse credit market conditions.

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 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, 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 substantial indebtedness could adversely affect our financial condition, limit our growth and make it more difficult for us to satisfy our debt obligations.

Our senior notes, revolving credit facility, unsecured term loan, letter of credit facilities and 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.

Our substantial indebtedness could have important consequences to us and the holders of our securities, including, among other things:

•causing us to be unable to satisfy our obligations under our debt agreements;

•causing us to pay higher interest rates upon refinancing indebtedness if interest rates rise;

•making us more vulnerable to adverse general economic and industry conditions;

•making it difficult to fund future working capital, land purchases, acquisitions, capital expenditures, share repurchases, general corporate or other activities; and

•causing us to be limited in our flexibility in planning for, or reacting to, changes in our business.

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.

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We believe we have significant “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. 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 prohibits certain transfers of our common stock that could result in an ownership change. In addition, we are party to a rights agreement intended to act as a deterrent to any person desiring to acquire 4.95% or more of our common stock. In February 2019, our stockholders approved an extension of these protective provisions in our certificate of incorporation and the rights agreement, which as a result are scheduled to expire on November 2022. Any extension of these protective provisions and our entry into a new rights agreement will require additional approval by our stockholders. We cannot guarantee that the requisite stockholder approvals will be obtained. In addition, neither the protective provisions nor the rights agreement offer a complete solution, and an ownership change may occur even if the protective provisions of our charter are extended and a new rights agreement is approved upon expiration. 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 cannot 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.

Inefficient or ineffective allocation of capital could adversely affect our operating results and/or stockholder value.

Our goal is to allocate capital to maximize our overall long-term returns. This includes spending on capital projects, such as developing strategic businesses (e.g., the launch of our Gatherings® business in 2016 to meet the needs of the growing 55 plus segment) and acquiring other homebuilders with the potential to strengthen our industry position. 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.

Risk Relating to an Investment in our Common Stock

Our stock price is volatile and could decline.

The securities markets in general and our common stock in particular have experienced significant price and volume volatility over the past several years. The market price and volume of our common stock may continue to experience significant fluctuations due not only to general stock market conditions, but also to a change in sentiment in the market regarding our industry, operations or business prospects. The price and volume volatility of our common stock may be affected by:

•operating results that vary from the expectations of securities analysts and investors;

•factors influencing home purchases, such as higher interest rates and availability of home mortgage loans, credit criteria applicable to prospective borrowers, ability to sell existing residences and homebuyer sentiment in general;

•the operating and securities price performance of companies that investors consider comparable to us;

•announcements of strategic developments, acquisitions and other material events by us or our competitors; and

•changes in global financial markets and global economies and general market conditions, such as interest rates, commodity and equity prices and the value of financial assets.

Our ability to raise funds through the issuance of equity or otherwise use our common stock as consideration is impacted by the price of our common stock. A low stock price may adversely impact our ability to reduce our financial leverage, as measured

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by the ratio of total debt to total capital. Continued high levels of leverage or significant increases may adversely affect our credit ratings and make it more difficult for us to access additional capital. These factors may limit our ability to implement our operating and growth plans.

We experience fluctuations and variability in our operating results on a quarterly basis and, as a result, our historical performance may not be a meaningful indicator of future results.

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:

•the timing of home closings and land sales;

•our ability to continue to acquire additional land or secure option contracts to acquire land on acceptable terms;

•conditions of the real estate market in areas where we operate and of the general economy;

•inventory impairments or other material write-downs;

•raw material and labor shortages;

•seasonal home buying patterns; and

•other changes in operating expenses, including the cost of labor and raw materials, personnel and general economic conditions.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

As of September 30, 2021, we had under lease approximately 32,300 square feet of office space in Atlanta, Georgia to house our corporate headquarters. We also lease and own an aggregate of approximately 152,000 and 4,500 square feet of office space, respectively, for our divisional and shared services operations at various locations. All facilities are in good condition, adequately utilized, and sufficient to meet our present operating needs.

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 5 of notes to the consolidated financial statements in this Form 10-K for a further discussion of our inventory.

Item 3. Legal Proceedings

Litigation

In the normal course of business, we 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 any of the pending lawsuits could result in the payment by us of substantial monetary damages that may not be fully covered by insurance. Further, the legal costs associated with the lawsuits and the amount of time required to be spent by management and our Board of Directors on these matters, even if we are ultimately successful, could have a material adverse effect on our financial condition, results of operations, or cash flows.

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

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

The Company lists its common stock on the New York Stock Exchange (NYSE) under the symbol “BZH.” On November 5, 2021, the last reported sales price of the Company's common stock on the NYSE was $18.74, and we had approximately 205 stockholders of record and 31,294,498 shares of common stock outstanding.

Dividends

The indentures under which our senior notes were issued contain certain restrictive covenants, including limitations on the payment of dividends. There were no dividends paid during our fiscal 2021, 2020, or 2019. 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.

Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information about the Company's shares of common stock that may be issued under our existing equity compensation plans as of September 30, 2021, all of which have been approved by our stockholders:

Plan Category	Number of Common Shares to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights	Number of Common Shares Remaining Available for Future Issuance Under Equity Compensation Plans
Equity compensation plans approved by stockholders	114,259	$17.89	1,949,496

Issuer Purchases of Equity Securities

None.

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Performance Graph

The following graph illustrates the cumulative total stockholder return on Beazer Homes' common stock for the last five fiscal years through September 30, 2021 as compared to the S&P 500 Index and the S&P 500 Homebuilding Index. The comparison assumes an investment of $100 at September 30, 2016 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.

		Fiscal Year Ended September 30,
		2017	2018	2019	2020	2021
u	Beazer Homes USA, Inc.	160.72	90.05	127.78	113.20	147.94
g	S&P 500 Index	118.61	139.85	145.80	167.89	218.26
p	S&P 500 Homebuilding Index	131.67	127.26	164.71	221.89	249.18

Item 6. Selected Financial Data

Part II, Item 6 is no longer required as the Company has adopted the changes to Item 301 of Regulation S-K contained in SEC Release No. 33-10890.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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,” “Selected Financial Data,” and the financial statements and the accompanying notes included elsewhere in this Form 10-K.

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.

Executive Overview and Outlook

Market Conditions

The demand for new and existing homes is dependent on a variety of demographic and economic factors, including job and wage growth, household formation, consumer confidence, mortgage financing, and overall housing affordability. As we began our fiscal 2021, the U.S. economy had begun to recover from the severe impacts of the initial onset of the COVID-19 pandemic in early 2020, and housing market conditions were generally healthy.

Demand for new homes in our markets was strong throughout fiscal 2021. Many factors contributed to this level of demand, including historically low mortgage interest rates, a structural shortage of homes to purchase, favorable demographics, as well as workplace changes as a result of the pandemic. The strong demand also contributed to a rise in home prices. Fiscal 2021 was also impacted by a variety of supply chain disruptions, including increases in labor and direct building costs, as well as lack of availability of certain materials and construction labor. In response to elongated construction cycle times caused by supply chain disruptions, we proactively limited sales in a number of communities during the latter half of the fiscal year to better align sales pace with our production capacity. While we have been carefully managing our sales pace, the supply chain for labor and materials continues to negatively impact construction cycle times.

The magnitude and duration of the COVID-19 pandemic remains unknown. If economic conditions deteriorate, we may experience material declines in our net new orders, closings, revenues, cash flow and/or profitability in fiscal 2022, compared to the corresponding prior-year periods, and compared to our expectations. In addition, if conditions in the overall housing market or in a specific market worsen in the future beyond our current expectations, if future changes in our business strategy significantly affect any key assumptions used in our projections of future cash flows, or if there are material changes in any of the other items we consider in assessing recoverability, we may recognize charges in future periods for inventory impairments related to our current inventory assets. Any such charges could be material to our consolidated financial statements. For further discussion of the potential impacts on our business from the COVID-19 pandemic, see Part I, Item 1A – Risk Factors above.

Balanced Growth Strategy

Fiscal 2021 represented continued progress towards the execution of our balanced growth strategy. Specifically, we believe our strong improvements in sales pace, homes in backlog, average selling price, homebuilding gross margin, operating margin, lot count, and use of lot option agreements have positioned us well for fiscal 2022 growth. We have also successfully improved our balance sheet by reducing our debt balance, which puts us closer to our goal of having less than $1.0 billion of outstanding debt by the end of fiscal 2022.

As we begin to look to 2022, we see continued strength in market demand, although higher home prices relative to income growth and disciplined industry-wide mortgage underwriting are likely to moderate the extent of home price appreciation. We believe the combination of demographics, household formation, workplace changes, and the structural deficit in new home supply will keep housing market fundamentals strong for some time to come. Our focus for fiscal 2022 will be to increase our land acquisition and development investments and continue our use of lot option agreements to support future community count growth. In addition to growing our land position, we expect to emphasize the following strategic business objectives in fiscal 2022:

•Improve operating margin - Our operating margin increased by 320 basis points to 6.9% for the year ended September 30, 2021 from 3.7% for the year ended September 30, 2020. We remain focused on improving overhead cost management in relation to our revenue growth to drive operating margin improvement.

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•Deliver extraordinary customer experience - We regularly survey our customers throughout the homebuyer journey to measure and improve the customer experience, including through use of third-party customer surveys such as Trustbuilder and GuildQuality. In fiscal 2022, we remain focused on delivering extraordinary value and a great customer experience for our homebuyers.

•Encourage employee well-being - We believe that our employees are critical to our continued growth and success. We consistently measure employee engagement and remain focused on delivering programs that enhance employee engagement and work-life balance.

Overview of Results for Our Fiscal 2021

The following is a summary of our performance against certain key operating and financial metrics during fiscal 2021:

•Sales per community per month was 3.7 and 3.2 for the fiscal years ended September 30, 2021 and 2020, respectively. The increase in sales pace is reflective of the high demand for new homes primarily driven by low interest rates, short supply of homes, and consumers' reassessment of living arrangements. Given the high demand and construction cycle time constraints, we have deliberately slowed down sales in a number of our communities during the latter half of the fiscal year to better align sales pace with production capacity, to ensure a positive customer experience, and to drive price appreciation to maximize margins.

•During the year ended September 30, 2021, our net new orders decreased to 5,564, down 11.6% from the prior year. Our average active community count of 127 was down 22.3% from the prior year. We ended the year with an active community count of 117 in part due to strong sales pace experienced during fiscal 2021 as well as the temporary reduction in land spend during fiscal 2020. We are working to rebuild community counts by investing in new communities. We invested $595.5 million and $440.8 million in land acquisition and land development during the year ended September 30, 2021 and September 30, 2020, respectively.

•As of September 30, 2021, our land position includes 21,987 controlled lots, up 23.3% from 17,830 from the prior year. Excluding land held for future development and land held for sale lots, we controlled 21,422 active lots, up 26.7% from a year earlier. Through expansion of our use of lot option agreements, as of September 30, 2021, we had 9,992 lots, or 46.6% of our total active lots, under option contracts as compared to 5,878 lots, or 34.8% of our total active lots, under option contracts as of September 30, 2020.

•Aggregated dollar value of homes in backlog as of September 30, 2021 was $1,284.0 million, up 29.0% compared to the prior year. As a result of our strong sales pace, we ended the year with 2,786 homes in backlog, up 11.0% compared to the prior year. ASP in backlog as of September 30, 2021 has risen 16.2% versus the prior year to $460.9 thousand.

•Homebuilding gross margin for the fiscal year ended September 30, 2021 was 18.9%, up from 16.4% in the prior year. Homebuilding gross margin excluding impairments, abandonments, and interest for the fiscal year ended September 30, 2021 was 23.0%, up from 21.0% in the prior year. Our homebuilding gross margin has been favorably impacted by the strong demand and price appreciation, although cost pressures and the availability of labor has affected and may continue to temper gross margin expansion in the future.

•SG&A for the fiscal year ended September 30, 2021 was 11.4% of total revenue compared with 11.9% a year earlier. We remain focused on improving overhead cost management in relation to our revenue growth, contributing to our balanced growth strategy.

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Seasonal and Quarterly Variability: Our homebuilding operating cycle historically has reflected escalating new order activity in the second and third fiscal quarters and increased closings in the third and fourth fiscal quarters. However, these seasonal patterns may be impacted or reduced by a variety of factors. During fiscal 2021, supply chain disruptions as well as our efforts to actively manage sales pace resulted in a shift from our typical seasonal trend such that higher levels of new order activity were observed during the first and second quarters of fiscal 2021, which led to increased closing levels starting in the second fiscal quarter.

The following tables present new order and closings data for the periods presented:

New Orders (Net of Cancellations)
	1st Qtr	2nd Qtr	3rd Qtr	4th Qtr	Total
2021	1,442	1,854	1,199	1,069	5,564
2020	1,251	1,661	1,372	2,009	6,293
2019	976	1,598	1,544	1,458	5,576
Closings
	1st Qtr	2nd Qtr	3rd Qtr	4th Qtr	Total
2021	1,114	1,388	1,378	1,407	5,287
2020	1,112	1,277	1,366	1,737	5,492
2019	1,083	1,134	1,269	2,014	5,500

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RESULTS OF CONTINUING OPERATIONS

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

	Fiscal Year Ended September 30,
$ in thousands	2021			2020			2019
Revenue:
Homebuilding	$	2,127,700		$	2,116,910		$	2,077,245
Land sales and other	12,603			10,167			10,494
Total	$	2,140,303		$	2,127,077		$	2,087,739
Gross profit (loss):
Homebuilding	$	401,720		$	348,110		$	206,034
Land sales and other	2,535			(470)			(39,998)
Total	$	404,255		$	347,640		$	166,036
Gross margin:
Homebuilding (a)	18.9		%	16.4		%	9.9		%
Land sales and other (b)	20.1		%	(4.6)		%	(381.2)		%
Total	18.9		%	16.3		%	8.0		%
Commissions	$	80,125		$	82,507		$	79,802
General and administrative expenses (G&A)	$	163,285		$	170,386		$	161,371
SG&A (commissions plus G&A) as a percentage of total revenue	11.4		%	11.9		%	11.6		%
G&A as a percentage of total revenue	7.6		%	8.0		%	7.7		%
Depreciation and amortization	$	13,976		$	15,640		$	14,759
Operating income (loss)	$	146,869		$	79,107		$	(89,896)
Operating income (loss) as a percentage of total revenue	6.9		%	3.7		%	(4.3)		%
Effective tax rate (c)	15.0		%	25.2		%	31.9		%
Inventory impairments and abandonments	$	853		$	2,903		$	148,618
Loss on extinguishment of debt, net	$	(2,025)		$	—		$	(24,920)

(a) Homebuilding gross margin for fiscal 2019 was impacted by $110.0 million of impairments primarily related to impairments recorded in the second quarter for certain projects in progress in California. Excluding impairments, abandonments, and interest amortized to cost of sales, homebuilding gross margin was 23.0%, 21.0%, and 19.7% for the fiscal years ended September 30, 2021, 2020, and 2019, respectively. Please see "Homebuilding Gross Profit and Gross Margin" section below for a reconciliation of homebuilding gross profit and the related gross margin excluding impairments and abandonments and interest amortized to cost of sales to homebuilding gross profit and gross margin, the most directly comparable GAAP measure.

(b) Calculated as land sales and other gross profit (loss) divided by land sales and other revenue. Land sales and other gross margin is shown as a significant negative percentage for fiscal 2019 due to the $38.6 million of impairments recorded in the second quarter related to land held for sale assets in California.

(c) Calculated as tax expense (benefit) for the period divided by income (loss) from continuing operations. Due to a variety of factors, our income tax expense (benefit) is not always directly correlated to the amount of pre-tax income (loss) for the associated periods. Our effective tax rate was impacted by, among other factors, energy efficiency tax credits of $12.1 million, $0.9 million and $14.9 million for the fiscal years ended September 30, 2021, 2020, and 2019, respectively. Please see Note 13 of the notes to our consolidated financial statements in this Form 10-K for details of significant items that impact our effective tax rate.

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Reconciliation of Net Income (Loss) to Adjusted EBITDA

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

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

	Fiscal Year Ended September 30,
in thousands	2021		2020		2019		2018		2017
Net income (loss)	$	122,021	$	52,226	$	(79,520)	$	(45,375)	$	31,813
Expense (benefit) from income taxes	21,501		17,664		(37,245)		94,373		2,621
Interest amortized to home construction and land sales expenses and capitalized interest impaired	87,290		95,662		108,941		93,113		88,820
Interest expense not qualified for capitalization	2,781		8,468		3,109		5,325		15,636
EBIT	233,593		174,020		(4,715)		147,436		138,890
Depreciation and amortization	13,976		15,640		14,759		13,807		14,014
EBITDA	247,569		189,660		10,044		161,243		152,904
Stock-based compensation expense	12,167		10,036		10,526		10,258		8,159
Loss on extinguishment of debt	2,025		—		24,920		27,839		12,630
Inventory impairments and abandonments (a)	853		2,111		134,711		4,988		2,389
Litigation settlement in discontinued operations	120		1,260		—		—		—
Restructuring and severance expenses	(10)		1,317		—		—		—
Joint venture impairment and abandonment charges	—		—		—		341		—
Write-off of deposit on legacy land investment	—		—		—		—		2,700
Adjusted EBITDA	$	262,724	$	204,384	$	180,201	$	204,669	$	178,782

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

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Homebuilding Operations Data

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

	New Orders, net							Cancellation Rates
	2021	2020	2019	21 v 20		20 v 19		2021		2020		2019
West	3,233	3,589	2,983	(9.9)	%	20.3	%	12.0	%	16.5	%	16.7	%
East	1,172	1,328	1,152	(11.7)	%	15.3	%	9.6	%	14.5	%	16.0	%
Southeast	1,159	1,376	1,441	(15.8)	%	(4.5)	%	10.2	%	15.1	%	15.2	%
Total	5,564	6,293	5,576	(11.6)	%	12.9	%	11.1	%	15.8	%	16.1	%

Net new orders for the year ended September 30, 2021 decreased to 5,564, down 11.6% from the year ended September 30, 2020. The decrease in net new orders was driven primarily by a decrease in active community count from 163 in the prior year to 127, partially offset by an increase in sales pace from 3.2 sales per community per month in the prior year to 3.7, and a decrease in cancellation rates from 15.8% in the prior year to 11.1%. We are working to grow community counts by investing in new communities, and we are also actively managing sales pace, in part by selectively increasing prices and limiting lot releases in some communities, to optimize margins and lot supply.

The table below summarizes backlog units by reportable segment as well as the aggregate dollar value and ASP of homes in backlog as of September 30, 2021, 2020, and 2019:

	As of September 30,
	2021		2020		2019		21 v 20		20 v 19
Backlog Units:
West	1,653		1,365		982		21.1	%	39.0	%
East	611		624		341		(2.1)	%	83.0	%
Southeast	522		520		385		0.4	%	35.1	%
Total	2,786		2,509		1,708		11.0	%	46.9	%
Aggregate dollar value of homes in backlog (in millions)	$	1,284.0	$	995.3	$	665.1	29.0	%	49.6	%
ASP in backlog (in thousands)	$	460.9	$	396.7	$	389.4	16.2	%	1.9	%

Backlog reflects the number of homes for which the Company has entered into a sales contract with a customer but has not yet delivered the home. Homes in backlog have historically been delivered within three to six months following commencement of construction. Due to the stronger than expected demand for new homes during the economic recovery, we have seen disruptions in our supply chain during the latter half of fiscal 2021, including the availability of certain materials and construction labor, which has led to extended construction cycle times. As a result, homes in backlog are currently delivered within four to nine months following commencement of construction. The aggregate dollar value of homes in backlog as of September 30, 2021 increased 29.0% compared to the prior year due to a 16.2% increase in the ASP of homes in backlog and an 11.0% increase in backlog units.

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Homebuilding Revenue, Average Selling Price, and Closings

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

	Homebuilding Revenue										Average Selling Price
$ in thousands	2021		2020		2019		21 v 20		20 v 19		2021		2020		2019		21 v 20		20 v 19
West	$	1,110,208	$	1,180,577	$	1,012,977	(6.0)	%	16.5	%	$	377.0	$	368.2	$	354.3	2.4	%	3.9	%
East	565,989		476,167		506,389		18.9	%	(6.0)	%	477.6		455.7		463.7		4.8	%	(1.7)	%
Southeast	451,503		460,166		557,879		(1.9)	%	(17.5)	%	390.2		370.8		360.2		5.2	%	2.9	%
Total	$	2,127,700	$	2,116,910	$	2,077,245	0.5	%	1.9	%	$	402.4	$	385.5	$	377.7	4.4	%	2.1	%

	Closings
	2021	2020	2019	21 v 20		20 v 19
West	2,945	3,206	2,859	(8.1)	%	12.1	%
East	1,185	1,045	1,092	13.4	%	(4.3)	%
Southeast	1,157	1,241	1,549	(6.8)	%	(19.9)	%
Total	5,287	5,492	5,500	(3.7)	%	(0.1)	%

The slight increase in our overall homebuilding revenue for fiscal 2021 as compared to fiscal 2020 is the result of an increase in ASP, partially offset by a decrease in closings. The ASP changes were impacted primarily by price appreciation due to strong demand and short supply of homes, as well as a change in mix of closings between geographies, products, and among communities within each individual market as compared to the prior year. On average, we anticipate that our ASP will continue to increase in the near-term as indicated by the ASP for homes in backlog as of September 30, 2021.

West Segment: Homebuilding revenue decreased by 6.0% for the fiscal year ended September 30, 2021 compared to the prior fiscal year due to a 8.1% decrease in closings, partially offset by a 2.4% increase in ASP. The decrease in closings is due to a decrease in backlog conversion rates as a result of longer production cycle times compared to the prior year, partially offset by higher units in beginning backlog for fiscal 2021 compared to fiscal 2020.

East Segment: Homebuilding revenue increased by 18.9% for the fiscal year ended September 30, 2021 compared to the prior fiscal year due to a 13.4% increase in closings as well as a 4.8% increase in ASP. The year-over-year increase in closings in the East segment was primarily the result of higher units in beginning backlog for fiscal 2021 compared to fiscal 2020.

Southeast Segment: Homebuilding revenue decreased by 1.9% for the fiscal year ended September 30, 2021 compared to the prior fiscal year due to a decrease in closings of 6.8%, partially offset by a 5.2% increase in ASP. The decrease in closings is due to a decrease in backlog conversion rates as a result of longer production cycle times compared to the prior year, partially offset by higher units in beginning backlog for fiscal 2021 compared to fiscal 2020.

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Homebuilding Gross Profit and Gross Margin

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

Reconciliation of homebuilding gross profit and the related gross margin excluding impairments and abandonments and interest amortized to cost of sales to homebuilding gross profit and gross margin, the most directly comparable GAAP measure, is provided for each period discussed below. 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 measures should not be considered alternatives to homebuilding gross profit and gross margin determined in accordance with GAAP as an indicator of operating performance.

$ in thousands	Fiscal Year Ended September 30, 2021
	HB Gross Profit (Loss)		HB Gross Margin		Impairments & Abandonments (I&A)		HB Gross Profit (Loss) excluding I&A		HB Gross Margin  excluding I&A		Interest Amortized to COS (Interest)		HB Gross Profit (Loss) excluding I&A and Interest		HB Gross Margin excluding I&A and Interest
West	$	270,671	24.4	%	$	—	$	270,671	24.4	%	$	—	$	270,671	24.4	%
East	125,928		22.2	%	465		126,393		22.3	%	—		126,393		22.3	%
Southeast	98,525		21.8	%	388		98,913		21.9	%	—		98,913		21.9	%
Corporate & unallocated (a)	(93,404)				—		(93,404)				87,037		(6,367)
Total homebuilding	$	401,720	18.9	%	$	853	$	402,573	18.9	%	$	87,037	$	489,610	23.0	%
$ in thousands	Fiscal Year Ended September 30, 2020
	HB Gross Profit (Loss)		HB Gross Margin		Impairments & Abandonments (I&A)		HB Gross Profit (Loss) excluding I&A		HB Gross Margin  excluding I&A		Interest Amortized to COS (Interest)		HB Gross Profit excluding I&A and Interest		HB Gross Margin excluding I&A and Interest
West	$	258,675	21.9	%	$	923	$	259,598	22.0	%	$	—	$	259,598	22.0	%
East	98,446		20.7	%	82		98,528		20.7	%	—		98,528		20.7	%
Southeast	87,935		19.1	%	641		88,576		19.2	%	—		88,576		19.2	%
Corporate & unallocated (a)	(96,946)				—		(96,946)				94,844		(2,102)
Total homebuilding	$	348,110	16.4	%	$	1,646	$	349,756	16.5	%	$	94,844	$	444,600	21.0	%
$ in thousands	Fiscal Year Ended September 30, 2019
	HB Gross Profit (Loss)		HB Gross Margin		Impairments & Abandonments (I&A)		HB Gross Profit (Loss) excluding I&A		HB Gross Margin  excluding I&A		Interest Amortized to COS (Interest)		HB Gross Profit excluding I&A and Interest		HB Gross Margin excluding I&A and Interest
West	$	119,624	11.8	%	$	92,912	$	212,536	21.0	%	$	—	$	212,536	21.0	%
East	96,008		19.0	%	—		96,008		19.0	%	—		96,008		19.0	%
Southeast	95,603		17.1	%	858		96,461		17.3	%	—		96,461		17.3	%
Corporate & unallocated (a)	(105,201)				16,259		(88,942)				93,875		4,933
Total homebuilding	$	206,034	9.9	%	$	110,029	$	316,063	15.2	%	$	93,875	$	409,938	19.7	%

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

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Our homebuilding gross profit increased by $53.6 million to $401.7 million for the fiscal year ended September 30, 2021, from $348.1 million in the prior year. The increase in homebuilding gross profit was primarily driven by growth in homebuilding revenue of $10.8 million, and an increase in gross margin of 250 basis points to 18.9%. However, as shown in the tables above, the comparability of our gross profit and gross margin was modestly impacted by impairment and abandonment charges which decreased by $0.8 million and interest amortized to homebuilding cost of sales which decreased by $7.8 million year-over-year (refer to Note 5 and Note 6 of the notes to the consolidated financial statements in this Form 10-K for additional details). When excluding the impact of impairment and abandonment charges and interest amortized to homebuilding cost of sales, homebuilding gross profit increased by $45.0 million compared to the prior year while homebuilding gross margin increased by 200 basis points to 23.0%. The year-over-year improvement in gross margin for the fiscal year ending September 30, 2021 is primarily driven by lower sales incentives and pricing increases, although cost pressures and the availability of labor has affected and may continue to temper gross margin expansion in the future.

West Segment: Compared to the prior fiscal year, homebuilding gross profit increased by $12.0 million primarily due to higher gross margin. Homebuilding gross margin, excluding impairments and abandonments, increased to 24.4%, up from 22.0% in the prior year. The increase in gross margin was driven primarily by lower sales incentives and pricing increases.

East Segment: Compared to the prior fiscal year, homebuilding gross profit increased by $27.5 million due to the increase in homebuilding revenue and higher gross margin. Homebuilding gross margin, excluding impairments and abandonments, increased to 22.3%, up from 20.7% in the prior year. The increase in gross margin was driven primarily by lower sales incentives and pricing increases.

Southeast Segment: Compared to the prior fiscal year, homebuilding gross profit increased by $10.6 million due to higher gross margin. Homebuilding gross margin, excluding impairments and abandonments, increased to 21.9%, up from 19.2% in the prior year. The increase in gross margin was driven primarily by lower sales incentives and pricing increases.

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

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

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

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The asset valuations that result from our impairment calculations are based on discounted cash flow analyses and are not derived by simply applying prospective gross margins to individual communities. As such, impaired communities may have gross margins that are somewhat higher or lower than the gross margins for unimpaired communities. The mix of home closings in any particular quarter varies to such an extent that comparisons between previously impaired and never impaired communities would not be a reliable way to ascertain profitability trends or to assess the accuracy of previous valuation estimates. In addition, since any amount of impairment turn is tied to individual lots in specific communities, it will vary considerably from period to period. As a result of these factors, we review the impairment turn impact on gross margin on a trailing 12-month basis rather than a quarterly basis as a way of considering whether our impairment calculations are resulting in gross margins for impaired communities that are comparable to our unimpaired communities. For fiscal 2021, our homebuilding gross margin was 18.9% and excluding interest and inventory impairments and abandonments, it was 23.0%. For the same period, homebuilding gross margin was as follows in those communities that have previously been impaired, which represented 8.2% of total closings during fiscal 2021:

Homebuilding Gross Margin from previously impaired communities:
Pre-impairment turn gross margin	6.3	%
Impact of interest amortized to COS related to these communities	3.9	%
Pre-impairment turn gross margin, excluding interest amortization	10.2	%
Impact of impairment turns	16.9	%
Gross margin (post impairment turns), excluding interest amortization	27.1	%

For a further discussion of our impairment policies and communities impaired during the current and prior two fiscal years, refer to Note 2 and Note 5 of the notes to consolidated financial statements in this Form 10-K.

Land Sales and Other Revenue and Gross Profit (Loss)

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

$ in thousands	Land Sales and Other Revenue
	2021		2020		2019		21 v 20		20 v 19
West	$	8,370	$	2,762	$	1,725	203.0	%	60.1	%
East	3,846		1,457		8,572		164.0	%	(83.0)	%
Southeast	387		5,948		197		(93.5)	%	2,919.3	%
Total	$	12,603	$	10,167	$	10,494	24.0	%	(3.1)	%
$ in thousands	Land Sales and Other Gross Profit (Loss)
	2021		2020		2019		21 v 20		20 v 19
West	$	2,330	$	417	$	(37,854)	458.8	%	101.1	%
East	440		111		208		296.4	%	(46.6)	%
Southeast	73		200		(65)		(63.5)	%	407.7	%
Corporate and unallocated (a)	(308)		(1,198)		(2,287)		74.3	%	47.6	%
Total	$	2,535	$	(470)	$	(39,998)	639.4	%	98.8	%

(a) Corporate and unallocated 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.

To further support our efforts to reduce leverage, we continued to focus on closing a number of land sales for land positions that did not fit within our strategic plans. Future land and lot sales will depend on a variety of factors, including local market conditions, individual community performance, and changing strategic plans.

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Operating Income (Loss)

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

	Fiscal Year Ended September 30,
in thousands	2021		2020		2019		21 v 20		20 v 19
West	$	181,303	$	161,786	$	(5,492)	$	19,517	$	167,278
East	84,630		56,319		51,576		28,311		4,743
Southeast	57,581		40,746		40,165		16,835		581
Corporate and Unallocated (a)	(176,645)		(179,744)		(176,145)		3,099		(3,599)
Operating income (loss) (b)	$	146,869	$	79,107	$	(89,896)	$	67,762	$	169,003

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

(b) Operating income (loss) is impacted by impairment and abandonment charges incurred during the periods presented (see Note 5 of the notes to our consolidated financial statements in this Form 10-K).

Our operating income increased by $67.8 million to $146.9 million for the year ended September 30, 2021, compared to operating income of $79.1 million for year ended September 30, 2020, primarily driven by the previously discussed increase in gross profit. Additionally, SG&A as a percentage of total revenue decreased year-over-year by 50 basis points from 11.9% to 11.4%.

West Segment: The $19.5 million increase in operating income compared to the prior year was primarily due to the increase in gross profit previously discussed, lower commissions expense on lower homebuilding revenue, lower sales and marketing expenses, and lower remaining G&A expenses in the segment.

East Segment: The $28.3 million increase in operating income compared to the prior year was primarily due to the increase in gross profit previously discussed and lower sales and marketing expenses, partially offset by higher commissions expense on higher homebuilding revenue in the segment.

Southeast Segment: The $16.8 million increase in operating income compared to the prior year was primarily due to the increase in gross profit previously discussed, lower commissions expense on lower homebuilding revenue, lower sales and marketing expenses, and lower remaining G&A expenses in the segment.

Corporate and Unallocated: Our Corporate and unallocated results include amortization of capitalized interest, capitalization and amortization of indirect costs, impairment of capitalized interest and capitalized indirect costs, expenses for various shared services functions that benefit all segments but are not allocated, including information technology, treasury, corporate finance, legal, branding and national marketing, and certain other amounts that are not allocated to our operating segments. For the fiscal year ended September 30, 2021, corporate and unallocated net expenses decreased by $3.1 million from the prior fiscal year, primarily due to a decrease in capitalized interest amortized to cost of sales, partially offset by higher incentive compensation expenses.

Below operating income (loss), we had two noteworthy fluctuations between fiscal 2021 and fiscal 2020 as follows: (1) we experienced a decline in other expense, net, primarily attributable to a year-over-year decrease in interest expense not qualified for capitalization; and (2) we recorded a loss on extinguishment of debt of $2.0 million during fiscal 2021 as compared to no such loss in fiscal 2020. See Note 6 and Note 7 of the notes to our consolidated financial statements in this Form 10-K for further discussion of these items.

Income Taxes

Our income tax assets and liabilities and related effective tax rate are affected by various factors, the most significant of which is the valuation allowance recorded against a portion of our deferred tax assets. Due to the effect of our valuation allowance adjustments beginning in fiscal 2008, a comparison of our annual effective tax rates must consider the changes in our valuation allowance. As such, our effective tax rates have not been meaningful metrics, as our income tax expense/benefit was not directly correlated to the amount of pretax income or loss for the associated periods.

We recognized income tax expense from continuing operations of $21.5 million in our fiscal 2021, compared to income tax expense from continuing operations of $18.0 million in our fiscal 2020 and income tax benefit from continuing operations of

34

$37.2 million in our fiscal 2019. The income tax expense in our fiscal 2021 and 2020 primarily resulted from income generated in the fiscal year and permanent book/tax differences, partially offset by the generation of additional federal tax credits. The income tax benefit recorded in our fiscal 2019 primarily resulted from the loss generated in the fiscal year and the generation of additional federal tax credits.

Refer to Note 13 of the notes to the consolidated financial statements in this Form 10-K for a further discussion of our income taxes.

Liquidity and Capital Resources

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

Cash, cash equivalents, and restricted cash increased as follows for the periods presented:

in thousands	2021		2020		2019
Cash provided by operating activities	$	31,656	$	289,095	$	113,635
Cash used in investing activities	(14,189)		(10,164)		(25,125)
Cash used in financing activities	(85,852)		(59,197)		(118,964)
Net (decrease) increase in cash and cash equivalents	$	(68,385)	$	219,734	$	(30,454)

Operating Activities

Net cash provided by operating activities was $31.7 million for the fiscal year ended September 30, 2021. The primary drivers of operating cash flows are typically cash earnings and changes in inventory levels, including land acquisition and land development spending. Net cash provided by operating activities during the period was primarily driven by income before income taxes of $143.5 million, which included $28.1 million of non-cash charges, a net decrease in non-inventory working capital of $7.6 million, partially offset by an increase in inventory of $147.5 million resulting from of land acquisition, land development, and house construction spending to support continued growth.

Net cash provided by operating activities was $289.1 million during the fiscal year ended September 30, 2020, primarily driven by income before income taxes of $69.9 million, which included $28.2 million of non-cash charges, a net decrease in non-inventory working capital of $36.1 million, and a decrease in inventory of $154.9 million as a result of from home sales, partially offset by land acquisition, land development, and house construction spending to support continued growth.

Investing Activities

Net cash used in investing activities for the fiscal year ended September 30, 2021 and September 30, 2020, was $14.2 million and $10.2 million, respectively, primarily driven in both periods by capital expenditures for model homes.

Financing Activities

Net cash used in financing activities was $85.9 million for the fiscal year ended September 30, 2021 primarily driven by installment payment of the Senior Unsecured Term Loan (the Term Loan), partial extinguishment of our 2027 Senior Notes, the payment of cash for debt issuance costs, and tax payments for stock-based compensation awards vesting.

Net cash used in financing activities was $59.2 million during the fiscal year ended September 30, 2020 driven by installment payment of the Term Loan, common stock repurchases under our share repurchase program, tax payments for stock-based compensation awards vesting, cash settlement of performance-based restricted stock, the repayment of other secured notes payable, and payment of debt issuance costs.

Financial Position

As of September 30, 2021, our liquidity position consisted of $246.7 million in cash and cash equivalents and $250.0 million of remaining capacity under the Facility.

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While we believe we possess sufficient liquidity, we are mindful of potential short-term or seasonal requirements for enhanced liquidity that may arise to operate and grow our business. As of the date of this report, we believe we have adequate capital resources and sufficient access to external financing sources to satisfy our current and reasonably anticipated requirements for funds to conduct our operations and meet other needs in the ordinary course of our business.

During this time, we may also engage in capital markets, bank loan, project debt or other financial transactions, including the repurchase of debt or potential new issuances of debt or equity securities to support our business needs. The amounts involved in these transactions, if any, may be material. In addition, as necessary or desirable, we may adjust or amend the terms of and/or expand the capacity of the Facility, or enter into additional letter of credit facilities, or other similar facility arrangements, in each case with the same or other financial institutions, or allow any such facilities to mature or expire.

Debt

We generally fulfill our short-term cash requirements with cash generated from our operations and available borrowings. Additionally, our Secured Revolving Credit Facility provides working capital and letter of credit capacity of $250.0 million. As of September 30, 2021, no borrowings and no letters of credit were outstanding under the Facility, resulting in $250.0 million remaining capacity.

We have also entered into a number of stand-alone, cash-secured letter of credit agreements with banks. These combined facilities provide for letter of credit needs collateralized by either cash or assets of the Company. We currently have $21.8 million of outstanding letters of credit under these facilities, which are secured by cash collateral that is maintained in restricted accounts totaling $22.3 million.

To provide greater letter of credit capacity, the Company has also entered into a reimbursement agreement, which provides for the issuance of performance letters of credit, and an unsecured credit agreement that provides for the issuance of up to $50.0 million of standby letters of credit to backstop the Company's obligations under the reimbursement agreement (collectively, the "Bilateral Facility"). As of September 30, 2021, the total stated amount of performance letters of credit issued under the reimbursement agreement was $11.8 million (and the stated amount of the backstop standby letter of credit issued under the credit agreement was $40.0 million).

In the future, we may from time to time seek to continue to retire or purchase our outstanding debt through cash repurchases or in exchange for other debt securities, in open market purchases, privately-negotiated transactions, or otherwise. In addition, any material variance from our projected operating results could require us to obtain additional equity or debt financing. There can be no assurance that we will be able to complete any of these transactions in the future on favorable terms or at all. See Note 8 of the notes to the consolidated financial statements in this Form 10-K for additional details related to our borrowings.

Supplemental Guarantor Information

As discussed in Note 8 of the notes to the consolidated financial statements in this Form 10-K, the Company's obligations to pay principal and interest under certain debt agreements are guaranteed on a joint and several basis by substantially all of the Company's subsidiaries. Some of the immaterial subsidiaries do not guarantee the Senior Notes. The guarantees are full and unconditional.

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

	As of September 30,
in thousands	2021		2020
Due from non-guarantor subsidiary	$	1,532	$	417
Total assets	$	2,075,518	$	2,006,611
Total liabilities	$	1,353,734	$	1,414,105

	Fiscal Year Ended September 30,
in thousands	2021		2020
Total revenues	$	2,137,976	$	2,126,660
Gross profit	$	402,646	$	347,387
Income from continuing operations	$	120,571	$	53,909
Net income	$	121,372	$	52,861

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Credit Ratings

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

Stock Repurchases and Dividends Paid

During the first quarter of fiscal 2019, the Company's Board of Directors approved a share repurchase program that authorizes the Company to repurchase up to $50.0 million of its outstanding common stock. As part of this program, the Company has repurchased common stock during fiscal 2019 and 2020 through open market transactions, 10b5-1 plans, and accelerated share repurchase (ASR) agreements. All shares have been retired upon repurchase. The aggregate reduction to stockholders’ equity related to share repurchases during the fiscal year ended September 30, 2020 and September 30, 2019 was $3.3 million and $34.6 million, respectively. No share repurchases were made during fiscal 2021. As of September 30, 2021, the remaining availability of the share repurchase program was $12.0 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 years ended September 30, 2021, 2020, or 2019.

Off-Balance Sheet Arrangements and Aggregate Contractual Commitments

Lot Option Agreements

We historically have attempted to control a portion of our land supply through lot option agreements. As of September 30, 2021, we controlled 21,987 lots, which includes 272 lots of land held for future development and 293 lots of land held for sale. Of the total 21,422 active lots, we owned 11,430, or 53.4%, of these lots and the remaining 9,992 of these lots, or 46.6%, were under option contracts, primarily through lot option agreements with land developers and land bankers, which generally require the payment of cash or the posting of a letter of credit for the right to acquire lots during a specified period of time at a certain price. In comparison, we controlled 5,878 lots, or 34.8% of our total active lot position, through option contracts as of September 30, 2020. As a result of the flexibility that these options provide us, upon a change in market conditions, we may renegotiate the terms of the options prior to exercise or terminate the agreement. Under option contracts, purchase of the properties is contingent upon satisfaction of certain requirements by us and the sellers, and our liability is generally limited to forfeiture of the non-refundable deposits and other non-refundable amounts incurred, which totaled approximately $114.7 million as of September 30, 2021. The total remaining purchase price, net of cash deposits, committed under all options was $676.1 million as of September 30, 2021. Based on market conditions and our liquidity, we may further expand our use of option agreements to supplement our owned inventory supply.

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

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

Investments in Unconsolidated Entities

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

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Historically, we and our partners have provided varying levels of guarantees of debt or other obligations of our unconsolidated entities. As of September 30, 2021, we had no repayment guarantees outstanding related to the debt of our unconsolidated entities. See Note 2 and Note 4 of the notes to the consolidated financial statements in this Form 10-K for more information.

Letters of Credit and Surety Bonds

In connection with the development of our communities, we are frequently required to provide performance, maintenance, and other bonds and letters of credit in support of our related obligations with respect to such developments. The amount of such obligations outstanding at any time varies in accordance with our pending development activities. In the event any such bonds or letters of credit are drawn upon, we would be obligated to reimburse the issuer of such bonds or letters of credit. We had outstanding letters of credit and surety bonds of $33.6 million and $282.3 million, respectively, as of September 30, 2021, primarily related to our obligations to local governments to construct roads and other improvements in various developments.

Contractual Commitments

The following table summarizes our aggregate contractual commitments as of September 30, 2021:

	Payments Due by Period
in thousands	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Senior notes, term loan, and junior subordinated notes (a)	$	1,093,583	$	50,000	$	—	$	229,555	$	814,028
Interest commitments under senior notes, term loan, and junior subordinated notes (b)	454,363		68,501		134,564		123,733		127,565
Obligations related to lots under option	676,148		318,447		278,122		78,835		744
Operating leases	15,808		4,335		6,062		3,626		1,785
Uncertain tax positions (c)	—		—		—		—		—
Total	$	2,239,902	$	441,283	$	418,748	$	435,749	$	944,122

(a) For a listing of our borrowings, refer to Note 8 of the notes to the consolidated financial statements in this Form 10-K.

(b) Interest on variable rate obligations is based on rates effective as of September 30, 2021.

(c) Based on its current inventory of uncertain tax positions and tax carryforward attributes, the Company does not expect a cash settlement of unrecognized tax benefits related to uncertain tax positions in future years. See Note 13 of the notes to the consolidated financial statements in this Form 10-K for additional information regarding the Company's unrecognized tax benefits related to uncertain tax positions as of September 30, 2021.

We had outstanding letters of credit and surety bonds of $33.6 million and $282.3 million, respectively, as of September 30, 2021, primarily related to our obligations to local governments to construct roads and other improvements in various developments.

Critical Accounting Estimates

Our critical accounting policies require the use of judgment in their application and in certain cases require estimates of inherently uncertain matters. Although our accounting policies are in compliance with accounting principles generally accepted in the United States of America (GAAP), a change in the facts and circumstances of the underlying transactions could significantly change the application of the accounting policies and the resulting financial statement impact. It is also possible that other professionals applying reasonable judgment to the same set of facts and circumstances could reach a different conclusion. Listed below are those policies that we believe are critical and require the use of complex judgment in their application.

Inventory Valuation - Projects in Progress

Projects in progress inventory includes homes under construction and land under development grouped together as communities. 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.

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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.

Warranty Reserves

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 that may need to be separately estimated based on management's judgment of the ultimate cost of repair for that specific issue.

At September 30, 2021, our warranty reserve was $12.9 million, reflecting an accrual range of 0.3% to 1.0% of total revenue recognized for each home closed depending on our loss history in the division in which the home was built. A ten basis point increase in our warranty reserve rate would have increased our accrual and corresponding cost of sales by $2.3 million as of September 30, 2021.

There were no material changes in assumptions in calculating our reserve balance for the year ended September 30, 2021.

Our estimation process is discussed in Note 9 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.

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Income Taxes - Valuation Allowance

The carrying amounts of deferred tax assets are reduced by a valuation allowance if an assessment of their components indicates that it is more likely than not that all or some portion of these assets will not be realized. Judgment is required in estimating valuation allowances for deferred tax assets. 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 2021, our conclusions about our ability to more likely than not realize all of our federal and certain state tax attributes remain consistent with our prior determinations. We considered positive factors including significant increases in our current earnings, interest savings from our debt reduction strategies, housing demand and price appreciation, and our backlog. The negative factors included the overall health of the broader economy, labor shortages and unemployment levels, as well as potential increases in mortgage interest rates.

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 reduction in our pre-tax earnings or our utilization of existing tax carryforwards, it is likely such changes would have a material impact on our financial condition or results of operations. The nature and amounts of the various tax attributes comprising our deferred tax assets are discussed in Note 13 of notes to the consolidated financial statements in this Form 10-K.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to a number of market risks in the ordinary course of business. Our primary market risk exposure relates to fluctuations in interest rates. We do not believe that our exposure in this area is material to our cash flows or results of operations. As of September 30, 2021, we had variable-rate debt outstanding, totaling approximately $70.2 million. A one percent increase in the interest rate for these notes would result in an increase of our interest expense by approximately $1.0 million over the next twelve-month period. The estimated fair value of our fixed rate debt as of September 30, 2021 was $1.05 billion, compared to a carrying value of $0.98 billion. The effect of a hypothetical one-percentage point decrease in our estimated discount rates would increase the estimated fair value of the fixed rate debt instruments from $1.05 billion to $1.10 billion as of September 30, 2021.

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Item 8. Financial Statements and Supplementary Data

BEAZER HOMES USA, INC.

CONSOLIDATED BALANCE SHEETS

in thousands (except share and per share data)	September 30, 2021		September 30, 2020
ASSETS
Cash and cash equivalents	$	246,715	$	327,693
Restricted cash	27,428		14,835
Accounts receivable (net of allowance of $290 and $358, respectively)	25,685		19,817