LGI Homes(LGIH) - 2023 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Presents the company's unaudited financial statements and management's discussion for the quarter Item 1. Consolidated Financial Statements (Unaudited) Presents LGI Homes' unaudited consolidated financial statements for Q1 2023 and 2022, covering balance sheets, operations, equity, cash flows, and notes Consolidated Balance Sheets - The company's total assets slightly decreased from $3,124.8 million at December 31, 2022, to $3,100.9 million at March 31, 2023, primarily due to a decrease in real estate inventory and notes payable[12] | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (vs. Dec 31, 2022) | | :----- | :---------------------------- | :------------------------------- | :------------------------ | | Total Assets | $3,100,923 | $3,124,828 | -$23,905 (-0.76%) | | Real Estate Inventory | $2,880,520 | $2,898,296 | -$17,776 (-0.61%) | | Total Liabilities | $1,426,694 | $1,482,416 | -$55,722 (-3.76%) | | Notes Payable | $1,045,837 | $1,117,001 | -$71,164 (-6.37%) | | Total Equity | $1,674,229 | $1,642,412 | +$31,817 (+1.94%) | Consolidated Statements of Operations - For the three months ended March 31, 2023, home sales revenues decreased by 10.7% year-over-year, leading to a significant 65.7% drop in net income, primarily due to lower operating income and higher selling expenses[15] | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | Home sales revenues | $487,357 | $546,050 | -$58,693 (-10.7%) | | Cost of sales | $388,541 | $387,643 | +$898 (+0.2%) | | Operating income | $26,051 | $95,720 | -$69,669 (-72.8%) | | Net income | $26,962 | $78,686 | -$51,724 (-65.7%) | | Basic EPS | $1.15 | $3.30 | -$2.15 (-65.2%) | | Diluted EPS | $1.14 | $3.25 | -$2.11 (-64.9%) | Consolidated Statements of Equity - Total equity increased from $1,642.4 million at December 31, 2022, to $1,674.2 million at March 31, 2023, driven by net income and stock issued under employee incentive plans, partially offset by stock repurchases in the prior year[18][47] | Metric | Dec 31, 2022 (in thousands) | Mar 31, 2023 (in thousands) | Change | | :----- | :-------------------------- | :-------------------------- | :----- | | Total Equity | $1,642,412 | $1,674,229 | +$31,817 | | Net income | — | $26,962 | +$26,962 | | Stock issued under employee incentive plans | — | $1,546 | +$1,546 | | Stock repurchase (3 months ended Mar 31, 2022) | — | — | -$57,659 (YoY) | Consolidated Statements of Cash Flows - The company generated $77.6 million in cash from operating activities for the three months ended March 31, 2023, a significant improvement from a net cash outflow in the prior year, primarily due to changes in real estate inventory and other assets. Investing activities used $4.9 million, and financing activities used $61.8 million, leading to a net increase in cash and cash equivalents of $11.0 million[21] | Cash Flow Activity | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----------------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Operating Activities | $77,600 | $(137,787) | +$215,387 | | Investing Activities | $(4,855) | $(1,373) | -$3,482 | | Financing Activities | $(61,777) | $141,971 | -$203,748 | | Net increase in cash and cash equivalents | $10,968 | $2,811 | +$8,157 | | Cash and cash equivalents, end of period | $42,966 | $53,325 | -$10,359 | Notes to the Consolidated Financial Statements 1. Organization and Basis of Presentation - LGI Homes, Inc. is a Delaware corporation headquartered in The Woodlands, Texas, engaged in the development, design, construction, and sale of new homes across multiple U.S. states[23] - The unaudited consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and with SEC regulations[24] 2. Real Estate Inventory | Inventory Category | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------- | :---------------------------- | :------------------------------- | | Land, land under development and finished lots | $1,922,275 | $1,911,307 | | Homes in progress | $350,098 | $287,069 | | Completed homes | $417,575 | $523,054 | | Total owned inventory | $2,726,584 | $2,756,504 | | Real estate not owned | $153,936 | $141,792 | | Total real estate inventory | $2,880,520 | $2,898,296 | - The company uses land banking financing arrangements to acquire finished lots in staged takedowns, limiting risk and minimizing cash use, while retaining control over the economic outcome of these 'real estate not owned' assets[27] 3. Accrued Expenses and Other Liabilities | Liability Category | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------- | :---------------------------- | :------------------------------- | | Land banking financing arrangements | $153,936 | $141,792 | | Real estate inventory development and construction payable | $68,239 | $73,678 | | Taxes payable | $51,071 | $47,037 | | Warranty reserve | $11,350 | $10,750 | | Total accrued expenses and other liabilities | $340,917 | $340,128 | - The warranty reserve increased from $10.75 million at the beginning of the period to $11.35 million at March 31, 2023, with a provision of $1.85 million and expenditures of $1.25 million during the quarter[32] 4. Notes Payable | Debt Instrument | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------- | :---------------------------- | :------------------------------- | | 2022 Credit Agreement | $756,241 | $828,350 | | 4.000% Senior Notes due 2029 | $300,000 | $300,000 | | Total notes payable | $1,045,837 | $1,117,001 | - The revolving credit facility was amended on April 28, 2023, increasing to $1.13 billion, with $775.0 million (68.6%) of commitments extended to April 28, 2027, while the remaining mature on April 28, 2025[40] - As of March 31, 2023, the borrowing base under the 2022 Credit Agreement was $1.4 billion, with $1.1 billion outstanding (including 2029 Senior Notes) and $315.8 million available to borrow[37] 5. Income Taxes | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | Income tax provision | $5,386 | $20,864 | -$15,478 (-74.2%) | | Effective tax rate | 16.7% | 21.0% | -4.3 percentage points | - The lower effective tax rate is primarily due to deductions in excess of compensation cost for share-based payments and the extension of federal energy-efficient homes tax credits[45] 6. Equity - The Board approved a $200.0 million increase to the stock repurchase program in February 2022, bringing the total authorization to $550.0 million[47] - No shares were repurchased during the three months ended March 31, 2023[47] - As of March 31, 2023, $211.5 million remained available under the stock repurchase program[47] 7. Earnings Per Share | Metric | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | Change (YoY) | | :----- | :-------------------------- | :-------------------------- | :----------- | | Basic EPS | $1.15 | $3.30 | -$2.15 (-65.2%) | | Diluted EPS | $1.14 | $3.25 | -$2.11 (-64.9%) | | Basic weighted average shares outstanding | 23,381,294 | 23,837,170 | -455,876 (-1.9%) | | Diluted weighted average shares outstanding | 23,629,779 | 24,194,321 | -564,542 (-2.3%) | 8. Stock-Based Compensation - Stock-based compensation expense for time-vested Restricted Stock Units (RSUs) was $1.1 million for Q1 2023, up from $0.8 million in Q1 2022[50] - Unrecognized compensation cost for unvested RSUs was $10.7 million as of March 31, 2023, to be recognized over a weighted average period of 2.3 years[50] - Stock-based compensation expense for Performance-Based Restricted Stock Units (PSUs) was $1.6 million for Q1 2023, down from $2.3 million in Q1 2022[54] 9. Fair Value Disclosures - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (significant observable inputs), and Level 3 (significant unobservable inputs)[56][57] | Liability | Fair Value Hierarchy | Carrying Value (Mar 31, 2023, in thousands) | Estimated Fair Value (Mar 31, 2023, in thousands) | | :-------- | :------------------- | :------------------------------------------ | :------------------------------------------------ | | 2029 Senior Notes | Level 2 | $300,000 | $259,334 | 10. Commitments and Contingencies - Management believes ordinary course claims and environmental matters will not have a material effect on financial statements[60][61] | Commitment | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------- | :---------------------------- | :------------------------------- | | Land deposits and option payments | $24,139 | $22,406 | | Commitments under land purchase contracts | $439,666 | $411,776 | | Lots under land purchase contracts | 12,088 | 13,184 | - Outstanding letters of credit and performance/surety bonds totaled $361.1 million at March 31, 2023, related to site improvements[67] 11. Revenues | Revenue Stream | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :------------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Retail home sales revenues | $456,177 | $494,206 | -$38,029 (-7.7%) | | Wholesale home sales revenues | $31,180 | $51,844 | -$20,664 (-39.9%) | | Total home sales revenues | $487,357 | $546,050 | -$58,693 (-10.7%) | 12. Segment Information - The company aggregates seven operating segments into five qualifying reportable segments: Central, Southeast, Northwest, West, and Florida[72] | Segment | Revenues (3 Months Ended Mar 31, 2023, in thousands) | Revenues (3 Months Ended Mar 31, 2022, in thousands) | Net Income (Loss) Before Taxes (3 Months Ended Mar 31, 2023, in thousands) | Net Income (Loss) Before Taxes (3 Months Ended Mar 31, 2022, in thousands) | | :------ | :------------------------------------------------- | :------------------------------------------------- | :------------------------------------------------------------------------- | :------------------------------------------------------------------------- | | Central | $150,380 | $262,298 | $9,064 | $57,740 | | Southeast | $104,376 | $72,463 | $6,924 | $10,129 | | Northwest | $74,815 | $102,874 | $7,651 | $27,584 | | West | $78,886 | $55,583 | $2,383 | $(231) | | Florida | $78,900 | $52,832 | $7,487 | $5,360 | | Total | $487,357 | $546,050 | $32,348 | $99,550 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion and analysis of LGI Homes' Q1 2023 financial condition and operational results, covering key metrics, performance, and liquidity Business Overview - LGI Homes adapted to market conditions in Q1 2023 by increasing targeted advertising, offering mortgage buy-down programs, and focusing on smaller, more affordable homes[78] - Demand for homes increased in Q1 2023 compared to Q4 2022, leading to higher net orders and selective increases in construction starts[79] - Home closings decreased by 14.6% to 1,366 homes in Q1 2023 (vs. 1,599 in Q1 2022) due to the slowdown in demand during H2 2022 and ongoing supply chain disruptions[80] Recent Developments - The revolving credit facility was amended on April 28, 2023, increasing to $1.13 billion, with $775.0 million of commitments extended to April 28, 2027[85] Key Results | Metric | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | Change (YoY) | | :----- | :-------------------------- | :-------------------------- | :----------- | | Home sales revenues | $487.4 million | $546.1 million | -10.7% | | Homes closed | 1,366 | 1,599 | -14.6% | | Average sales price per home closed | $356,777 | $341,495 | +4.5% | | Gross margin % | 20.3% | 29.0% | -8.7 percentage points | | Net income before income taxes | $32.3 million | $99.6 million | -67.5% | | Net income | $27.0 million | $78.7 million | -65.7% | | EBITDA % (non-GAAP) | 8.1% | 19.1% | -11.0 percentage points | | Adjusted EBITDA % (non-GAAP) | 7.2% | 18.8% | -11.6 percentage points | - The company owned and controlled 69,724 lots at March 31, 2023, a decrease from 71,904 lots at December 31, 2022[86] Results of Operations - The company experienced a significant decline in operating performance for Q1 2023 compared to Q1 2022, with home sales revenues decreasing by 10.7% and net income before income taxes dropping by 67.5%[87][98] | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | Home sales revenues | $487,357 | $546,050 | -$58,693 (-10.7%) | | Operating income | $26,051 | $95,720 | -$69,669 (-72.8%) | | Net income before income taxes | $32,348 | $99,550 | -$67,202 (-67.5%) | | Net income | $26,962 | $78,686 | -$51,724 (-65.7%) | | Gross margin % | 20.3% | 29.0% | -8.7 percentage points | | Selling expenses % of revenue | 8.8% | 6.3% | +2.5 percentage points | | General and administrative % of revenue | 6.1% | 5.2% | +0.9 percentage points | Homes Sales | Metric | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | Change (YoY) | | :----- | :-------------------------- | :-------------------------- | :----------- | | Home sales revenues | $487,357 | $546,050 | -10.7% | | Homes closed | 1,366 | 1,599 | -14.6% | | Average sales price per home closed | $356,777 | $341,495 | +4.5% | | Average community count | 97.7 | 89.0 | +9.8% | | Average monthly absorption rate | 4.7 | 6.0 | -21.7% | - Wholesale revenues decreased significantly to $31.2 million (103 closings) in Q1 2023 from $51.8 million (213 closings) in Q1 2022, representing a smaller percentage of total closings (7.5% vs. 13.3%)[92] Cost of Sales and Gross Margin | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | Cost of sales | $388,541 | $387,643 | +$898 (+0.2%) | | Gross margin | $98,816 | $158,407 | -$59,591 (-37.6%) | | Gross margin % | 20.3% | 29.0% | -8.7 percentage points | - The decrease in gross margin percentage was primarily due to higher construction costs, capitalized interest, and the impact of sales incentives[94] Selling Expenses | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | Selling expenses | $42,805 | $34,398 | +$8,407 (+24.4%) | | Selling expenses % of home sales revenues | 8.8% | 6.3% | +2.5 percentage points | General and Administrative | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | General and administrative | $29,960 | $28,289 | +$1,671 (+5.9%) | | General and administrative % of home sales revenues | 6.1% | 5.2% | +0.9 percentage points | Other Income | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | Other income, net | $6,297 | $3,830 | +$2,467 (+64.4%) | Operating Income and Net Income before Income Taxes | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | Operating income | $26,051 | $95,720 | -$69,669 (-72.8%) | | Net income before income taxes | $32,348 | $99,550 | -$67,202 (-67.5%) | - The Central segment contributed 28.0% ($9.1 million) to net income before income taxes, Southeast 21.4% ($6.9 million), Northwest 23.7% ($7.7 million), West 7.4% ($2.4 million), and Florida 23.1% ($7.5 million)[98] Income Taxes | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | Income tax provision | $5,386 | $20,864 | -$15,478 (-74.2%) | | Effective tax rate | 16.7% | 21.0% | -4.3 percentage points | Net Income | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | Net income | $26,962 | $78,686 | -$51,724 (-65.7%) | Non-GAAP Measures - The company provides non-GAAP financial measures, Adjusted Gross Margin, EBITDA, and Adjusted EBITDA, to offer supplemental insights into operating performance by excluding certain non-cash or non-recurring items[102][103][105] Adjusted Gross Margin - Adjusted gross margin is defined as gross margin less capitalized interest and adjustments resulting from the application of purchase accounting included in the cost of sales[103] | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | Gross margin | $98,816 | $158,407 | -$59,591 (-37.6%) | | Capitalized interest charged to cost of sales | $6,757 | $4,513 | +$2,244 (+49.7%) | | Purchase accounting adjustments | $2,036 | $2,282 | -$246 (-10.8%) | | Adjusted gross margin | $107,609 | $165,202 | -$57,593 (-34.8%) | | Adjusted gross margin % | 22.1% | 30.3% | -8.2 percentage points | EBITDA and Adjusted EBITDA - EBITDA is defined as net income before interest expense, income taxes, depreciation and amortization, and capitalized interest charged to the cost of sales. Adjusted EBITDA further excludes loss on extinguishment of debt, other income, net, and purchase accounting adjustments[105] | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | Net income | $26,962 | $78,686 | -$51,724 (-65.7%) | | EBITDA | $39,587 | $104,411 | -$64,824 (-62.1%) | | Adjusted EBITDA | $35,326 | $102,863 | -$67,537 (-65.7%) | | EBITDA margin % | 8.1% | 19.1% | -11.0 percentage points | | Adjusted EBITDA margin % | 7.2% | 18.8% | -11.6 percentage points | Backlog | Metric | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | Change (YoY) | | :----- | :-------------------------- | :-------------------------- | :----------- | | Net orders | 2,219 | 1,973 | +246 (+12.5%) | | Cancellation rate | 15.9% | 15.6% | +0.3 percentage points | | Ending backlog – homes | 1,555 | 2,429 | -874 (-36.0%) | | Ending backlog – value (in thousands) | $561,422 | $849,117 | -$287,695 (-33.9%) | - The decrease in ending backlog is attributed to lower demand for home sales in Q1 2023 compared to Q1 2022, influenced by increased mortgage rates[113] Land Acquisition Policies and Development - The company had 99 active communities as of March 31, 2023[115] - Total owned or controlled lot inventory decreased to 69,724 lots at March 31, 2023, from 71,904 lots at December 31, 2022[116] | Reportable Segment | Home Closings (3 Months Ended Mar 31, 2023) | Owned Lots (As of Mar 31, 2023) | Controlled Lots (As of Mar 31, 2023) | Total Lots (As of Mar 31, 2023) | | :----------------- | :------------------------------------------ | :------------------------------ | :----------------------------------- | :------------------------------ | | Central | 453 | 21,471 | 3,413 | 24,884 | | Southeast | 316 | 14,761 | 2,750 | 17,511 | | Northwest | 159 | 6,553 | 2,010 | 8,563 | | West | 209 | 9,669 | 1,255 | 10,924 | | Florida | 229 | 5,182 | 2,660 | 7,842 | | Total | 1,366 | 57,636 | 12,088 | 69,724 | Homes in Inventory - As of March 31, 2023, the company had 1,628 completed homes (including information centers) and 2,026 homes in progress[120] Raw Materials and Labor - The company mitigates risks from material and labor cost increases by contracting at fixed prices for the anticipated construction period[121] - During Q1 2023, the company experienced delays and cost increases in building materials and construction, which were generally absorbed by increasing home sales prices[121][146] Seasonality - The homebuilding industry is seasonal, with the company typically closing more homes in the second, third, and fourth quarters, leading to quarterly fluctuations in results and higher capital requirements in those periods[122] Liquidity and Capital Resources Overview - As of March 31, 2023, cash and cash equivalents totaled $43.0 million[124] - Principal uses of capital include operating expenses, land/lot purchases, lot development, home construction, interest costs, and stock repurchases[125] Short-term Liquidity and Capital Resources - Short-term liquidity is primarily funded by operating cash flows, the Credit Agreement, and land banking financing arrangements[126] - The company believes it can fund liquidity needs for at least the next twelve months with cash on hand, operating cash, and available credit[127] Long-term Liquidity and Capital Resources - Long-term liquidity uses include inventory purchases, stock repurchases, capital expenditures, and principal and interest payments on debt obligations[129] - Long-term funding sources include operating cash flows, the Credit Agreement, and strategic land banking, with potential for additional debt or equity capital[129] Revolving Credit Facility - The Credit Agreement provides a $1.13 billion revolving credit facility, which can be increased by up to $170.0 million[130] - Lenders with $775.0 million (68.6%) of commitments extended their maturity to April 28, 2027, with the remaining maturing on April 28, 2025[130] - As of March 31, 2023, $315.8 million was available to borrow under the $1.4 billion borrowing base[132] Senior Notes Offering - $300.0 million aggregate principal amount of 4.000% Senior Notes due July 15, 2029, were issued on June 28, 2021[134] Letters of Credit, Surety Bonds and Financial Guarantees - Outstanding letters of credit, surety bonds, and financial guarantees totaled $361.1 million as of March 31, 2023[136] - Management does not believe it is probable that any outstanding letters of credit, surety bonds, or financial guarantees will be drawn upon[138] Stock Repurchase Program - The stock repurchase program was increased to $550.0 million in February 2022[139] - No shares were repurchased in Q1 2023; $57.7 million was used to repurchase 475,055 shares in Q1 2022[139] - $211.5 million remained available under the program as of March 31, 2023[139] Cash Flows Operating Activities | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | | Net cash provided by (used in) operating activities | $77,600 | $(137,787) | | Net change in real estate inventory | +$15,945 | $(251,612) | | Net income | $26,962 | $78,686 | Investing Activities | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | | Net cash used in investing activities | $(4,855) | $(1,373) | | Investment in unconsolidated entities | $(5,919) | $(380) | Financing Activities | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | | Net cash provided by (used in) financing activities | $(61,777) | $141,971 | | Payments on notes payable | $(105,000) | — | | Proceeds from notes payable | $32,890 | $197,617 | | Stock repurchase | — | $(57,659) | Inflation - Inflation adversely impacts land, financing, labor, material, and construction costs, and can increase mortgage rates, affecting homebuyer affordability[145] - The company expects cost pressures from inflation to continue in 2023 but has generally offset them by increasing home sales prices[146] Material Cash Requirements - As of March 31, 2023, there have been no material changes to the company's known contractual and other obligations previously disclosed in its 2022 Annual Report on Form 10-K[148] Critical Accounting Policies and Estimates - No significant changes to critical accounting policies and estimates were identified during Q1 2023 compared to the 2022 Annual Report on Form 10-K[150] Cautionary Statement about Forward-Looking Statements - Forward-looking statements are subject to risks such as adverse economic changes, market volatility, supply chain disruptions, inflation, and changes in mortgage rates[153] - The company expressly disclaims any intent, obligation, or undertaking to update or revise any forward-looking statements[155] Item 3. Quantitative and Qualitative Disclosures About Market Risk Details the company's exposure to market risks, particularly interest rate fluctuations, and its management strategies for variable-rate debt Quantitative and Qualitative Disclosures About Interest Rate Risk - The company utilizes both fixed-rate debt ($300.0 million Senior Notes) and variable-rate debt ($756.2 million outstanding under the 2022 Credit Agreement)[157][159] - A hypothetical 100 basis point increase in the average interest rate above the SOFR floor on variable-rate indebtedness would increase annual interest cost by approximately $7.6 million[159] - Management believes that current interest rate management policies will prevent a material adverse impact on the company's financial position, results of operations, or liquidity[160] Item 4. Controls and Procedures Addresses the effectiveness of disclosure controls and procedures, reporting on changes in internal control over financial reporting for the quarter Disclosure Controls and Procedures - As of March 31, 2023, the CEO and CFO concluded that the company's disclosure controls and procedures were effective in ensuring timely and accurate information reporting[161] - Control systems, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that objectives are met and can be circumvented[162] Changes in Internal Controls - No change in internal control over financial reporting occurred during the three months ended March 31, 2023, that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting[164] PART II - OTHER INFORMATION Provides additional information including risk factors, recent developments, exhibits, and official signatures Item 1A. Risk Factors Updates risk factors, noting no material changes except for new concerns regarding financial industry and capital markets turmoil impacting liquidity - No material changes to previously disclosed risk factors, except for new concerns about financial industry and capital markets turmoil[166] - The failure of other banks could adversely affect liquidity if the company has deposits or if Credit Agreement lenders face issues, potentially limiting access to the full borrowing capacity[167] Item 5. Other Information Reiterates the recent amendment to the 2022 Credit Agreement, detailing the revolving credit facility increase and extended maturity - The 2022 Credit Agreement was amended on April 28, 2023, to provide for a $1.13 billion revolving credit facility[168] - Lenders with $775.0 million, or 68.6%, of the commitments agreed to extend the maturity of their commitments to April 28, 2027[168] Item 6. Exhibits Lists all documents filed as exhibits to the Form 10-Q, including corporate governance, amended credit agreement, and officer certifications - Key exhibits include the Third Amendment to Fifth Amended and Restated Credit Agreement, CEO and CFO certifications, and Inline XBRL documents[170] SIGNATURES Contains the official signatures of the registrant's authorized officers, certifying the Form 10-Q filing - The report was signed by Eric Lipar (Chief Executive Officer and Chairman of the Board) and Charles Merdian (Chief Financial Officer and Treasurer) on May 2, 2023[173][174]