Beazer Homes USA(BZH) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This part contains the unaudited financial statements and management's discussion and analysis of the company's performance Item 1. Financial Statements Presents the unaudited condensed consolidated financial statements and accompanying notes for the periods ended December 31, 2021, and 2020 Condensed Consolidated Balance Sheets Details the company's assets, liabilities, and stockholders' equity at the end of the reporting periods Condensed Consolidated Balance Sheets | in thousands | December 31, 2021 | September 30, 2021 | | :------------- | :------------------ | :------------------- | | Cash and cash equivalents | $157,701 | $246,715 | | Total assets | $2,060,191 | $2,078,810 | | Total liabilities | $1,304,932 | $1,353,926 | | Total stockholders' equity | $755,259 | $724,884 | - Total assets decreased slightly from $2,078,810 thousand as of September 30, 2021, to $2,060,191 thousand as of December 31, 2021, with a notable decrease in cash and cash equivalents from $246,715 thousand to $157,701 thousand[9] - Total liabilities decreased from $1,353,926 thousand to $1,304,932 thousand, while total stockholders' equity increased from $724,884 thousand to $755,259 thousand[9] Condensed Consolidated Statements of Operations Summarizes revenues, costs, and expenses to report the company's net income over the reporting periods Condensed Consolidated Statements of Operations | in thousands (except per share data) | December 31, 2021 | December 31, 2020 | | :----------------------------------- | :------------------ | :------------------ | | Total revenue | $454,149 | $428,539 | | Gross profit | $97,400 | $75,293 | | Operating income | $40,939 | $17,688 | | Net income | $34,885 | $11,997 | | Basic income per share | $1.15 | $0.40 | | Diluted income per share | $1.14 | $0.40 | - Total revenue increased by 6.0% to $454,149 thousand for the three months ended December 31, 2021, compared to $428,539 thousand in the prior year[11] - Net income significantly increased by 190.8% to $34,885 thousand for the three months ended December 31, 2021, from $11,997 thousand in the same period last year[11] - Basic and diluted income per share both rose to $1.15 and $1.14, respectively, in 2021, up from $0.40 in 2020[11] Condensed Consolidated Statements of Stockholders' Equity Shows the changes in the company's equity accounts over the reporting period Condensed Consolidated Statements of Stockholders' Equity | in thousands | Balance as of September 30, 2021 | Net income and comprehensive income | Stock-based compensation expense | Common stock redeemed for tax liability | Balance as of December 31, 2021 | | :------------- | :------------------------------- | :---------------------------------- | :------------------------------- | :-------------------------------------- | :------------------------------ | | Total | $724,884 | $34,885 | $2,108 | $(6,618) | $755,259 | - Total stockholders' equity increased from $724,884 thousand as of September 30, 2021, to $755,259 thousand as of December 31, 2021, primarily due to net income and stock-based compensation[13] Condensed Consolidated Statements of Cash Flows Reports the cash generated and used by operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows | in thousands | December 31, 2021 | December 31, 2020 | | :------------- | :------------------ | :------------------ | | Net cash used in operating activities | $(77,817) | $(74,578) | | Net cash used in investing activities | $(2,811) | $(2,858) | | Net cash used in financing activities | $(6,618) | $(3,044) | | Net decrease in cash, cash equivalents, and restricted cash | $(87,246) | $(80,480) | | Cash, cash equivalents, and restricted cash at end of period | $186,897 | $262,048 | - Net cash used in operating activities increased to $77,817 thousand in 2021 from $74,578 thousand in 2020[15] - Net cash used in financing activities more than doubled to $6,618 thousand in 2021, primarily due to tax payments for stock-based compensation awards[15] - There was a net decrease in cash, cash equivalents, and restricted cash of $87,246 thousand, resulting in an end-of-period balance of $186,897 thousand[15] Notes to Condensed Consolidated Financial Statements Provides detailed disclosures and explanations for the information presented in the financial statements (1) Description of Business Outlines the company's core operations as a geographically diversified homebuilder in the United States - Beazer Homes USA, Inc is a geographically diversified homebuilder operating in 13 states across three regions: West, East, and Southeast[18] - The company's objective is to provide homes with exceptional value and quality, while maximizing return on invested capital[19] (2) Basis of Presentation and Summary of Significant Accounting Policies Details the accounting principles and policies applied in the preparation of the financial statements - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and Form 10-Q instructions[21] - Revenue is recognized upon transfer of title and possession of the home to the buyer at closing, net of discounts and incentives[28] - Customer deposits related to sold but undelivered homes totaled $31.3 million as of December 31, 2021, up from $28.5 million as of September 30, 2021[28] - The company is evaluating ASU 2020-04 regarding reference rate reform, effective through December 31, 2022[30] Revenue by Type | in thousands | December 31, 2021 | December 31, 2020 | | :------------- | :------------------ | :------------------ | | Homebuilding revenue | $446,729 | $424,229 | | Land sales and other revenue | $7,420 | $4,310 | | Total revenue | $454,149 | $428,539 | (3) Supplemental Cash Flow Information Provides additional details on cash flow items, including interest and income tax payments - Interest payments decreased from $27,048 thousand in 2020 to $25,081 thousand in 2021[32] - Total cash, cash equivalents, and restricted cash at period end decreased to $186,897 thousand from $262,048 thousand year-over-year[32] Supplemental Cash Flow Data | in thousands | December 31, 2021 | December 31, 2020 | | :------------- | :------------------ | :------------------ | | Interest payments | $25,081 | $27,048 | | Income tax payments | $53 | $0 | | Cash and cash equivalents | $157,701 | $244,628 | | Restricted cash | $29,196 | $17,420 | | Total cash, cash equivalents, and restricted cash | $186,897 | $262,048 | (4) Investments in Unconsolidated Entities Discloses the company's investments in joint ventures and other entities not fully consolidated - Equity in income from unconsolidated entities was $288 thousand for the three months ended December 31, 2021, a positive swing from a loss of $75 thousand in the prior year[34] - The company had no outstanding guarantees or other debt-related obligations related to investments in unconsolidated entities as of December 31, 2021[35] Unconsolidated Entity Financials | in thousands | December 31, 2021 | September 30, 2021 | | :------------- | :------------------ | :------------------- | | Investment in unconsolidated entities | $4,590 | $4,464 | | Total equity of unconsolidated entities | $7,326 | $7,316 | | Total outstanding borrowings of unconsolidated entities | $9,890 | $12,708 | (5) Owned Inventory Details the composition of the company's inventory, including homes under construction and land - Total owned inventory increased to $1,581,801 thousand as of December 31, 2021, from $1,501,602 thousand as of September 30, 2021, driven by an increase in homes under construction[39] - The number of homes under construction increased to 3,196 (including 744 spec homes) as of December 31, 2021, from 2,912 (including 576 spec homes) as of September 30, 2021[39] - No inventory impairments were recognized for projects in progress or land held for sale during the three months ended December 31, 2021 and 2020[49][51] - No abandonment charges were recognized in the three months ended December 31, 2021, compared to $0.5 million in the prior year[53] Owned Inventory Breakdown | in thousands | December 31, 2021 | September 30, 2021 | | :------------- | :------------------ | :------------------- | | Homes under construction | $726,379 | $648,283 | | Land under development | $646,161 | $648,404 | | Capitalized interest | $110,516 | $106,985 | | Total owned inventory | $1,581,801 | $1,501,602 | Unconsolidated Lot Option Agreements | in thousands | December 31, 2021 | September 30, 2021 | | :------------- | :------------------ | :------------------- | | Unconsolidated lot option agreements (Costs) | $121,581 | $114,688 | | Unconsolidated lot option agreements (Remaining Obligation, Net of Deposits) | $715,350 | $676,149 | (6) Interest Provides a reconciliation of capitalized interest included in inventory - Capitalized interest in inventory increased to $110,516 thousand at December 31, 2021, from $106,985 thousand at the beginning of the period[56] - Interest incurred decreased to $18,311 thousand in 2021 from $19,902 thousand in 2020[56] Capitalized Interest Reconciliation | in thousands | December 31, 2021 | December 31, 2020 | | :------------- | :------------------ | :------------------ | | Capitalized interest in inventory, beginning of period | $106,985 | $119,659 | | Interest incurred | $18,311 | $19,902 | | Capitalized interest amortized to home construction and land sales expenses | $(14,780) | $(18,813) | | Capitalized interest in inventory, end of period | $110,516 | $119,148 | (7) Borrowings Details the company's outstanding debt obligations, including senior notes and credit facilities - Total debt, net, remained relatively stable at $1,054,938 thousand as of December 31, 2021[58] - The company had $250.0 million remaining capacity under its Secured Revolving Credit Facility, with no outstanding borrowings as of December 31, 2021[60] - The Senior Unsecured Term Loan of $50.0 million matures in September 2022 and bears a fixed interest rate of 4.875%[61] - Junior Subordinated Notes have an aggregate principal balance of $100.8 million and a weighted-average floating interest rate of 3.82% as of December 31, 2021[73] Debt Composition | in thousands | December 31, 2021 | September 30, 2021 | | :------------- | :------------------ | :------------------- | | Senior Unsecured Term Loan | $50,000 | $50,000 | | 6 3/4% Senior Notes (2025 Notes) | $229,555 | $229,555 | | 5 7/8% Senior Notes (2027 Notes) | $363,255 | $363,255 | | 7 1/4% Senior Notes (2029 Notes) | $350,000 | $350,000 | | Junior Subordinated Notes | $70,720 | $70,203 | | Total debt, net | $1,054,938 | $1,054,030 | (8) Operating Leases Discloses information about the company's operating lease liabilities and related expenses - Operating lease expense was $1.0 million for the three months ended December 31, 2021, down from $1.1 million in the prior year[76] - Cash payments on lease liabilities decreased to $1.1 million in 2021 from $1.4 million in 2020[76] Future Lease Payments | Fiscal Years Ending September 30, | in thousands | | :-------------------------------- | :------------- | | 2022 | $3,248 | | 2023 | $3,719 | | 2024 | $2,601 | | 2025 | $2,257 | | 2026 | $1,643 | | Thereafter | $1,928 | | Total lease payments | $15,396 | | Less: Imputed interest | $1,544 | | Total operating lease liabilities | $13,852 | (9) Contingencies Describes potential liabilities from warranties, litigation, and other commitments - The company provides limited warranties for workmanship (1-2 years) and structural elements (up to 10 years)[81] - Litigation accruals were $8.7 million as of December 31, 2021, up from $8.3 million as of September 30, 2021[91] - Outstanding letters of credit and surety bonds totaled $31.9 million and $281.8 million, respectively, as of December 31, 2021[92] Warranty Reserve Activity | in thousands | December 31, 2021 | December 31, 2020 | | :------------- | :------------------ | :------------------ | | Warranty reserve balance at beginning of period | $12,931 | $13,052 | | Accruals for warranties issued | $2,372 | $2,254 | | Payments made | $(3,094) | $(3,067) | | Warranty reserve balance at end of period | $12,743 | $12,616 | (10) Fair Value Measurements Provides information on how the company measures the fair value of its financial assets and liabilities - The fair value of deferred compensation plan assets, measured using Level 2 inputs, was $3.0 million as of December 31, 2021[94] - No impairments were recognized on projects in process or land held for sale during the three months ended December 31, 2021 and 2020[95] Fair Value of Debt | in thousands | December 31, 2021 (Carrying Amount) | December 31, 2021 (Fair Value) | September 30, 2021 (Carrying Amount) | September 30, 2021 (Fair Value) | | :------------- | :---------------------------------- | :----------------------------- | :----------------------------------- | :------------------------------ | | Senior Notes and Term Loan | $984,218 | $1,058,740 | $983,827 | $1,046,965 | | Junior Subordinated Notes | $70,720 | $70,720 | $70,203 | $70,203 | | Total | $1,054,938 | $1,129,460 | $1,054,030 | $1,117,168 | (11) Income Taxes Details the components of income tax expense and deferred tax assets - Income tax expense from continuing operations increased to $6.5 million for the three months ended December 31, 2021, from $4.1 million in the prior year[101] - The 2021 tax expense was partially offset by $3.2 million in energy efficiency tax credits and discrete impacts from stock-based compensation[101] - Management concluded that a substantial portion of deferred tax assets will be realized, maintaining consistency with prior period determinations[102] (12) Stock-based Compensation Discloses the expense and status of the company's stock-based compensation plans - Stock-based compensation expense decreased to $2,108 thousand for the three months ended December 31, 2021, from $3,511 thousand in the prior year[105] - Unrecognized compensation costs for unvested restricted stock awards were $12.1 million as of December 31, 2021, expected to be recognized over 2.05 years[109] Stock-based Compensation Expense | in thousands | December 31, 2021 | December 31, 2020 | | :------------- | :------------------ | :------------------ | | Stock-based compensation expense | $2,108 | $3,511 | (13) Earnings Per Share Provides the calculation of basic and diluted earnings per share - Basic and diluted EPS significantly increased to $1.15 and $1.14, respectively, in 2021, from $0.40 in 2020, reflecting higher net income[112] Earnings Per Share Calculation | in thousands (except per share data) | December 31, 2021 | December 31, 2020 | | :----------------------------------- | :------------------ | :------------------ | | Net income | $34,885 | $11,997 | | Basic weighted-average shares | 30,336 | 29,771 | | Diluted weighted-average shares | 30,724 | 30,086 | | Basic income per share (Total) | $1.15 | $0.40 | | Diluted income per share (Total) | $1.14 | $0.40 | (14) Other Liabilities Presents a breakdown of other current and non-current liabilities - Total other liabilities decreased to $121,441 thousand as of December 31, 2021, from $152,351 thousand as of September 30, 2021, primarily due to a decrease in accrued compensations and benefits[114] Other Liabilities Breakdown | in thousands | December 31, 2021 | September 30, 2021 | | :------------- | :------------------ | :------------------- | | Customer deposits | $31,321 | $28,526 | | Accrued compensations and benefits | $27,286 | $54,606 | | Accrued interest | $15,029 | $22,835 | | Warranty reserve | $12,743 | $12,931 | | Litigation accruals | $8,654 | $8,325 | | Total | $121,441 | $152,351 | (15) Segment Information Provides financial data for the company's reportable operating segments - The company operates in 13 states, grouped into three homebuilding segments: West, East, and Southeast[115] - West and East segments showed revenue and operating income growth, while the Southeast segment experienced a decrease in both[117][119] Revenue by Segment | in thousands | December 31, 2021 | December 31, 2020 | | :------------- | :------------------ | :------------------ | | West Revenue | $257,666 | $236,880 | | East Revenue | $118,169 | $97,964 | | Southeast Revenue | $78,314 | $93,695 | | Total revenue | $454,149 | $428,539 | Operating Income by Segment | in thousands | December 31, 2021 | December 31, 2020 | | :------------- | :------------------ | :------------------ | | West Operating income | $42,724 | $33,303 | | East Operating income | $19,859 | $11,368 | | Southeast Operating income | $8,200 | $10,308 | | Total operating income | $40,939 | $17,688 | (16) Discontinued Operations Reports the financial results of business operations that have been disposed of or are held for sale - The company continually reviews markets to optimize investment strategy, leading to the discontinuation of certain homebuilding operations[122] - Loss from discontinued operations, net of tax, decreased to $10 thousand in 2021 from $39 thousand in 2020[123] Discontinued Operations Results | in thousands | December 31, 2021 | December 31, 2020 | | :------------- | :------------------ | :------------------ | | Total revenue | $0 | $0 | | Loss from discontinued operations, net of tax | $(10) | $(39) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's perspective on financial performance, market trends, operational results, and liquidity Executive Overview and Outlook Highlights strong housing demand, strategic priorities, and key performance metrics for the first quarter of fiscal 2022 - Strong housing demand continued in Q1 fiscal 2022, driven by low mortgage rates, housing shortages, and favorable demographics[125] - The company proactively managed sales pace to align with production capacity, improving margins and profitability[126] - Fiscal 2022 priorities include growing lot position, improving profitability, and reducing total debt below $1.0 billion[127] Key Performance Metrics | Metric | Q1 FY2022 (Dec 31, 2021) | Q1 FY2021 (Dec 31, 2020) | Change | | :----------------------------------- | :----------------------- | :----------------------- | :----- | | Sales per community per month | 3.3 | 3.5 | -5.7% | | Net new orders | 1,141 | 1,442 | -20.9% | | Average active community count | 114 | 136 | -16.2% | | Controlled lots | 23,049 | 18,801 | +22.6% | | Homes in backlog (units) | 2,908 | 2,837 | +2.5% | | Aggregate dollar value of homes in backlog | $1,405.2 million | $1,162.4 million | +20.9% | | ASP in backlog | $483.2 thousand | $409.7 thousand | +17.9% | | ASP for homes closed | $438.4 thousand | $380.8 thousand | +15.1% | | Homebuilding gross margin | 20.9% | 17.6% | +330 bps | | Homebuilding gross margin (excl. impairments, abandonments, interest) | 24.2% | 22.1% | +210 bps | | SG&A as % of total revenue | 11.8% | 12.7% | -90 bps | Seasonal and Quarterly Variability Discusses the typical seasonal patterns affecting the company's homebuilding operations - Homebuilding operations historically show escalating new order activity in Q2 and Q3, and increased closings in Q3 and Q4[136] RESULTS OF CONTINUING OPERATIONS Provides a detailed analysis of the company's operating results for the quarter - Operating income more than doubled to $40.9 million (9.0% of revenue) in Q1 FY2022 from $17.7 million (4.1% of revenue) in Q1 FY2021[138] - The effective tax rate decreased to 15.6% in Q1 FY2022 from 25.5% in Q1 FY2021, partly due to $3.2 million in energy efficiency tax credits[138] Summary of Operations | $ in thousands | December 31, 2021 | December 31, 2020 | | :------------- | :------------------ | :------------------ | | Total Revenue | $454,149 | $428,539 | | Total Gross Profit | $97,400 | $75,293 | | Homebuilding Gross Margin | 20.9% | 17.6% | | SG&A as a percentage of total revenue | 11.8% | 12.7% | | Operating Income | $40,939 | $17,688 | | Operating income as a percentage of total revenue | 9.0% | 4.1% | | Effective tax rate | 15.6% | 25.5% | EBITDA: Reconciliation of Net Income to Adjusted EBITDA Presents a reconciliation of the non-GAAP measure Adjusted EBITDA to net income - Adjusted EBITDA increased by $17.5 million to $61.1 million for the three months ended December 31, 2021, reflecting improved operating performance[142] Adjusted EBITDA Reconciliation | in thousands | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | Change | | :------------- | :------------------------------ | :------------------------------ | :----- | | Net income | $34,885 | $11,997 | $22,888 | | EBIT | $56,125 | $36,524 | $19,601 | | EBITDA | $59,006 | $39,646 | $19,360 | | Adjusted EBITDA | $61,114 | $43,612 | $17,502 | Homebuilding Operations Data Analyzes key operational metrics including new orders, backlog, and cancellation rates - Net new orders decreased by 20.9% to 1,141 units, primarily due to a 16.2% decrease in active community count[144] - Aggregate dollar value of homes in backlog increased by 20.9% to $1,405.2 million, driven by a 17.9% increase in Average Selling Price (ASP)[145] - Construction cycle times have extended by an average of two to three months due to supply chain disruptions[145] New Orders and Cancellation Rates by Segment | | New Orders, net (2021) | New Orders, net (2020) | Change | Cancellation Rates (2021) | Cancellation Rates (2020) | | :---------- | :--------------------- | :--------------------- | :----- | :------------------------ | :------------------------ | | West | 655 | 782 | (16.2)% | 12.8% | 14.6% | | East | 236 | 320 | (26.3)% | 13.9% | 8.6% | | Southeast | 250 | 340 | (26.5)% | 7.1% | 10.1% | | Total | 1,141 | 1,442 | (20.9)% | 11.8% | 12.3% | Backlog by Segment | | Backlog Units (2021) | Backlog Units (2020) | Change | | :---------- | :------------------- | :------------------- | :----- | | West | 1,705 | 1,505 | 13.3% | | East | 602 | 721 | (16.5)% | | Southeast | 601 | 611 | (1.6)% | | Total | 2,908 | 2,837 | 2.5% | | Aggregate dollar value of homes in backlog (in millions) | $1,405.2 | $1,162.4 | 20.9% | | ASP in backlog (in thousands) | $483.2 | $409.7 | 17.9% | Homebuilding Revenue, Average Selling Price, and Closings Breaks down homebuilding revenue, ASP, and closings by geographic segment - Total homebuilding revenue increased by 5.3% to $446.7 million, driven by a 15.1% increase in ASP to $438.4 thousand, despite an 8.5% decrease in closings[147] - West and East segments saw revenue increases, while the Southeast segment experienced an 18.6% decrease in revenue due to a significant drop in closings[148][149][150] Homebuilding Revenue, ASP, and Closings by Segment | $ in thousands | Homebuilding Revenue (2021) | Homebuilding Revenue (2020) | Change | Average Selling Price (2021) | Average Selling Price (2020) | Change | Closings (2021) | Closings (2020) | Change | | :------------- | :-------------------------- | :-------------------------- | :----- | :--------------------------- | :--------------------------- | :----- | :-------------- | :-------------- | :----- | | West | $256,492 | $232,940 | 10.1% | $425.4 | $362.8 | 17.3% | 603 | 642 | (6.1)% | | East | $114,287 | $97,964 | 16.7% | $466.5 | $439.3 | 6.2% | 245 | 223 | 9.9% | | Southeast | $75,950 | $93,325 | (18.6)% | $444.2 | $374.8 | 18.5% | 171 | 249 | (31.3)% | | Total | $446,729 | $424,229 | 5.3% | $438.4 | $380.8 | 15.1% | 1,019 | 1,114 | (8.5)% | Homebuilding Gross Profit and Gross Margin Analyzes the profitability of homebuilding operations by segment - Homebuilding gross profit increased by $18.5 million to $93.3 million, with gross margin improving by 330 basis points to 20.9%[155] - Excluding impairments, abandonments, and interest, homebuilding gross margin increased by 210 basis points to 24.2%, driven by lower sales incentives and pricing increases[155] - West and East segments saw increased gross profit and margin, while the Southeast segment's gross profit decreased[157][158][159] Homebuilding Gross Profit and Margin by Segment | $ in thousands | HB Gross Profit (2021) | HB Gross Margin (2021) | HB Gross Profit (2020) | HB Gross Margin (2020) | | :------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | West | $62,927 | 24.5% | $52,874 | 22.7% | | East | $25,534 | 22.3% | $19,865 | 20.3% | | Southeast | $16,035 | 21.1% | $19,822 | 21.2% | | Total homebuilding | $93,304 | 20.9% | $74,837 | 17.6% | Land Sales and Other Revenue and Gross Profit Details revenue and profit from land sales and other ancillary activities - Total land sales and other revenue increased by $3.1 million to $7.4 million, with gross profit increasing by $3.6 million to $4.1 million[166] - The increase was primarily driven by land sales in the East and Southeast segments as the company divested non-strategic land positions[167] Land Sales and Other Revenue by Segment | in thousands | Land Sales and Other Revenue (2021) | Land Sales and Other Revenue (2020) | Change | Land Sales and Other Gross Profit (2021) | Land Sales and Other Gross Profit (2020) | Change | | :------------- | :---------------------------------- | :---------------------------------- | :----- | :--------------------------------------- | :--------------------------------------- | :----- | | West | $1,174 | $3,940 | $(2,766) | $478 | $707 | $(229) | | East | $3,882 | $0 | $3,882 | $3,407 | $0 | $3,407 | | Southeast | $2,364 | $370 | $1,994 | $211 | $57 | $154 | | Total | $7,420 | $4,310 | $3,110 | $4,096 | $456 | $3,640 | Operating Income Analyzes operating income by segment and discusses corporate expenses - Operating income increased by $23.3 million to $40.9 million, primarily due to increased gross profit and a 90 basis point decrease in SG&A as a percentage of total revenue[169] - Corporate and unallocated net expenses decreased by $7.4 million, mainly due to lower amortization of capitalized interest and reduced G&A[174] Operating Income by Segment | in thousands | December 31, 2021 | December 31, 2020 | Change | | :------------- | :------------------ | :------------------ | :----- | | West | $42,724 | $33,303 | $9,421 | | East | $19,859 | $11,368 | $8,491 | | Southeast | $8,200 | $10,308 | $(2,108) | | Corporate and unallocated | $(29,844) | $(37,291) | $7,447 | | Operating income | $40,939 | $17,688 | $23,251 | Income Taxes Discusses the factors affecting the company's income tax expense - Income tax expense from continuing operations was $6.5 million for Q1 FY2022, up from $4.1 million in Q1 FY2021[177] - The current period's tax expense was influenced by earnings, additional federal tax credits, and discrete tax benefits from stock-based compensation[177] Liquidity and Capital Resources Assesses the company's ability to meet its short-term and long-term obligations - Net cash used in operating activities increased to $77.8 million, primarily due to a $79.2 million increase in inventory spending[181] - Net cash used in financing activities increased to $6.6 million, mainly due to tax payments for stock-based compensation[184] - As of December 31, 2021, liquidity included $157.7 million in cash and $250.0 million available under the Secured Revolving Credit Facility[185][188] - The company controlled 23,049 lots, with 49.2% under option contracts, representing a remaining purchase price of $715.4 million[199] - Outstanding letters of credit and surety bonds totaled $31.9 million and $281.8 million, respectively[204] Summary of Cash Flows | in thousands | December 31, 2021 | December 31, 2020 | | :------------- | :------------------ | :------------------ | | Cash used in operating activities | $(77,817) | $(74,578) | | Cash used in investing activities | $(2,811) | $(2,858) | | Cash used in financing activities | $(6,618) | $(3,044) | | Net decrease in cash, cash equivalents, and restricted cash | $(87,246) | $(80,480) | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure is to fluctuations in interest rates - As of December 31, 2021, the company had $70.7 million in variable-rate debt; a one percent interest rate increase would raise interest expense by approximately $1.0 million annually[212] - The estimated fair value of fixed-rate debt was $1.06 billion, compared to a carrying amount of $0.98 billion[212] Item 4. Controls and Procedures Confirms the effectiveness of disclosure controls and procedures with no material changes in internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[213] - No material changes in internal control over financial reporting occurred during the quarter ended December 31, 2021[215] Item 5. Other Information This section states that there is no other information to report - No other information is reported in this section[219] PART II. OTHER INFORMATION This part includes information on legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings Refers to Note 9 of the financial statements for details on the company's legal proceedings - For details on legal proceedings, refer to Note 9 of the condensed consolidated financial statements[220] Item 1A. Risk Factors States no material changes to risk factors from the latest Annual Report on Form 10-K - No material changes to risk factors were reported compared to the 2021 Annual Report on Form 10-K[221] Item 6. Exhibits Lists the exhibits filed with the Quarterly Report on Form 10-Q - Exhibits include Inline XBRL documents and certifications from the CEO and CFO as required by the Sarbanes-Oxley Act of 2002[218][222] SIGNATURES Contains the official sign-off by the company's authorized officer - The report was signed by David I Goldberg, Senior Vice President and Chief Financial Officer, on behalf of Beazer Homes USA, Inc on January 27, 2022[225][228]