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Form 10-Q BEAZER HOMES USA INC For: Jun 30

July 28, 2022 4:53 PM EDT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________________________________________ 
FORM 10-Q
_____________________________________________________________ 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2022
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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par valueBZHNew York Stock Exchange
 _____________________________________________________________
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 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,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No  
Number of shares of common stock outstanding as of July 25, 2022: 31,275,185


BEAZER HOMES USA, INC.
TABLE OF CONTENTS
 
1

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

BEAZER HOMES USA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
in thousands (except share and per share data)June 30,
2022
September 30,
2021
ASSETS
Cash and cash equivalents$42,039 $246,715 
Restricted cash39,762 27,428 
Accounts receivable (net of allowance of $284 and $290, respectively)
25,137 25,685 
Income tax receivable9,929 9,929 
Owned inventory1,858,851 1,501,602 
Investments in unconsolidated entities897 4,464 
Deferred tax assets, net179,038 204,766 
Property and equipment, net24,971 22,885 
Operating lease right-of-use assets10,641 12,344 
Goodwill11,376 11,376 
Other assets15,759 11,616 
Total assets$2,218,400 $2,078,810 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade accounts payable$145,864 $133,391 
Operating lease liabilities12,155 14,154 
Other liabilities155,176 152,351 
Total debt (net of debt issuance costs of $7,752 and $8,983, respectively)
1,049,078 1,054,030 
Total liabilities1,362,273 1,353,926 
Stockholders’ equity:
Preferred stock (par value 0.01 per share, 5,000,000 shares authorized, no shares issued)
  
Common stock (par value 0.001 per share, 63,000,000 shares authorized, 31,275,185 issued and outstanding and 31,294,198 issued and outstanding, respectively)
31 31 
Paid-in capital863,520 866,158 
Accumulated deficit(7,424)(141,305)
Total stockholders’ equity856,127 724,884 
Total liabilities and stockholders’ equity$2,218,400 $2,078,810 
See accompanying notes to condensed consolidated financial statements.
2

BEAZER HOMES USA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months EndedNine Months Ended
 June 30,June 30,
 in thousands (except per share data)2022202120222021
Total revenue$526,666 $570,932 $1,489,321 $1,549,360 
Home construction and land sales expenses394,201 455,178 1,138,771 1,259,922 
Inventory impairments and abandonments 231 935 696 
Gross profit132,465 115,523 349,615 288,742 
Commissions16,277 20,955 48,668 58,346 
General and administrative expenses45,760 42,186 129,057 119,903 
Depreciation and amortization3,189 3,689 9,101 10,494 
Operating income67,239 48,693 162,789 99,999 
Equity in income of unconsolidated entities3 313 454 424 
Gain (loss) on extinguishment of debt, net86 (1,050)(78)(1,613)
Other income (expense), net134 (10)405 (2,356)
Income from continuing operations before income taxes67,462 47,946 163,570 96,454 
Expense from income taxes13,150 10,804 29,685 22,633 
Income from continuing operations54,312 37,142 133,885 73,821 
Income (loss) from discontinued operations, net of tax12 (7)(4)(161)
Net income$54,324 $37,135 $133,881 $73,660 
Weighted-average number of shares:
Basic30,512 30,022 30,480 29,915 
Diluted30,872 30,562 30,806 30,292 
Basic income (loss) per share:
Continuing operations$1.78 $1.24 $4.39 $2.47 
Discontinued operations   (0.01)
Total$1.78 $1.24 $4.39 $2.46 
Diluted income (loss) per share:
Continuing operations$1.76 $1.22 $4.35 $2.44 
Discontinued operations   (0.01)
Total$1.76 $1.22 $4.35 $2.43 
See accompanying notes to condensed consolidated financial statements.

3

BEAZER HOMES USA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)

Three Months Ended June 30, 2022
Common StockPaid-in CapitalAccumulated Deficit
in thousandsSharesAmountTotal
Balance as of March 31, 202231,458 $31 $864,074 $(61,748)$802,357 
Net income and comprehensive income— — — 54,324 54,324 
Stock-based compensation expense— — 1,983 — 1,983 
Stock option exercises — 1 — 1 
Shares issued under employee stock plans, net1 — — — — 
Forfeiture and other settlements of restricted stock(8)— — —  
Common stock redeemed for tax liability(1)— (11)— (11)
Share repurchases(175)— (2,527)— (2,527)
Balance as of June 30, 202231,275 $31 $863,520 $(7,424)$856,127 
Nine Months Ended June 30, 2022
Common StockPaid-in CapitalAccumulated Deficit
in thousandsSharesAmountTotal
Balance as of September 30, 202131,294 $31 $866,158 $(141,305)$724,884 
Net income and comprehensive income— — — 133,881 133,881 
Stock-based compensation expense— — 6,515 — 6,515 
Stock option exercises1 — 5 — 5 
Shares issued under employee stock plans, net518 — — — — 
Forfeiture and other settlements of restricted stock(55)— — —  
Common stock redeemed for tax liability(308)— (6,631)— (6,631)
Share repurchases(175)— (2,527)— (2,527)
Balance as of June 30, 202231,275 $31 $863,520 $(7,424)$856,127 
4

BEAZER HOMES USA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
Three Months Ended June 30, 2021
Common StockPaid-in CapitalAccumulated Deficit
in thousandsSharesAmountTotal
Balance as of March 31, 202131,289 $31 $860,537 $(226,801)$633,767 
Net income and comprehensive income— — — 37,135 37,135 
Stock-based compensation expense— — 3,194 — 3,194 
Stock option exercises30 — (67)— (67)
Shares issued under employee stock plans, net6 — — — — 
Forfeiture and other settlements of restricted stock(13)— — — — 
Common stock redeemed for tax liability(18)— (424)— (424)
Balance as of June 30, 202131,294 $31 $863,240 $(189,666)$673,605 

Nine Months Ended June 30, 2021
Common StockPaid-in CapitalAccumulated Deficit
in thousandsSharesAmountTotal
Balance as of September 30, 202031,012 $31 $856,466 $(263,326)$593,171 
Net income and comprehensive income— — — 73,660 73,660 
Stock-based compensation expense— — 9,254 — 9,254 
Stock option exercises198 — 564 — 564 
Shares issued under employee stock plans, net417 — — — — 
Forfeiture and other settlements of restricted stock(29)—  —  
Common stock redeemed for tax liability(304)— (3,044)— (3,044)
Balance as of June 30, 202131,294 $31 $863,240 $(189,666)$673,605 
See accompanying notes to condensed consolidated financial statements.

5

BEAZER HOMES USA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
 June 30,
in thousands20222021
Cash flows from operating activities:
Net income$133,881 $73,660 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization9,101 10,494 
Stock-based compensation expense6,515 9,254 
Inventory impairments and abandonments935 696 
Deferred and other income tax expense 29,683 22,587 
Gain on sale of fixed assets(252)(258)
Change in allowance for doubtful accounts(6)(66)
Equity in income of unconsolidated entities(454)(424)
Cash distributions of income from unconsolidated entities380 66 
Loss on extinguishment of debt, net78 1,613 
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable554 (3,145)
Decrease in income tax receivable 49 
Increase in inventory(351,424)(54,867)
Increase in other assets(4,540)(4,195)
Increase in trade accounts payable12,473 22,892 
(Decrease) increase in other liabilities(1,428)186 
Net cash (used in) provided by operating activities(164,504)78,542 
Cash flows from investing activities:
Capital expenditures(11,192)(10,319)
Proceeds from sale of fixed assets257 308 
Net cash used in investing activities(10,935)(10,011)
Cash flows from financing activities:
Repayment of debt(7,750)(25,128)
Repayment of borrowings from credit facility(80,000) 
Borrowings from credit facility80,000  
Debt issuance costs (427)
Repurchase of common stock(2,527) 
Tax payments for stock-based compensation awards(6,631)(3,044)
Stock option exercises5 564 
Net cash used in financing activities(16,903)(28,035)
Net (decrease) increase in cash, cash equivalents, and restricted cash(192,342)40,496 
Cash, cash equivalents, and restricted cash at beginning of period274,143 342,528 
Cash, cash equivalents, and restricted cash at end of period$81,801 $383,024 
See accompanying notes to condensed consolidated financial statements.
6

BEAZER HOMES USA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Description of Business
Beazer Homes USA, Inc. (“we,” “us,” “our,” “Beazer,” “Beazer Homes” and the “Company”) is a geographically diversified homebuilder with active operations in 13 states within three geographic regions in the United States: the West, East, and Southeast.
Our homes are designed to appeal to homeowners at different price points across various demographic segments and are generally offered for sale in advance of their construction. Our objective is to provide our customers with homes that incorporate exceptional value and quality, while seeking to maximize our return on invested capital over the course of a housing cycle.
For an additional description of our business, refer to Item 1 within our Annual Report on Form 10-K for the fiscal year ended September 30, 2021 (2021 Annual Report).
(2) Basis of Presentation and Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. The unaudited condensed consolidated financial statements do not include all of the information and disclosures required by GAAP for complete financial statements. As such, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 2021 Annual Report. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation have been included in the accompanying unaudited condensed consolidated financial statements. The results of the Company's consolidated operations presented herein for the three and nine months ended June 30, 2022 are not necessarily indicative of the results to be expected for the full fiscal year due to seasonal variations in our operations and other factors.
Basis of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of Beazer Homes USA, Inc. and its consolidated subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. Our net income is equivalent to our comprehensive income, so we have not presented a separate statement of comprehensive income.
In the past, we have discontinued homebuilding operations in various markets. Results from certain of these exited markets are reported as discontinued operations in the accompanying unaudited condensed consolidated statements of operations for all periods presented (see Note 16 for a further discussion of our discontinued operations).
Our fiscal year 2022 began on October 1, 2021 and ends on September 30, 2022. Our fiscal year 2021 began on October 1, 2020 and ended on September 30, 2021.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make informed estimates and judgments that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Accordingly, actual results could differ from these estimates.
Share Repurchase Program
In May 2022, the Company's Board of Directors approved a new share repurchase program that authorizes the Company to repurchase up to $50.0 million of its outstanding common stock. This newly authorized program replaced the prior share repurchase program authorized in the first quarter of fiscal 2019 of up to $50.0 million of common stock repurchases, pursuant to which $12.0 million of the capacity remained prior to the replacement of the program. As part of this new program, the Company repurchased 175 thousand shares of its common stock for $2.5 million at an average price per share of $14.47 during the three months ended June 30, 2022 through open market transactions. No share repurchases were made during fiscal year 2021. All shares have been retired upon repurchase.
The aggregate reduction to stockholders’ equity related to share repurchases during the nine months ended June 30, 2022 was $2.5 million. As of June 30, 2022, the remaining availability of the new share repurchase program was $47.5 million.
7

Revenue Recognition
We recognize revenue upon the transfer of promised goods to our customers in an amount that reflects the consideration to which we expect to be entitled by applying the following five-step process specified in ASC Topic 606, Revenue from Contracts with Customers.
Identify the contract(s) with a customer
Identify the performance obligations
Determine the transaction price
Allocate the transaction price
Recognize revenue when the performance obligations are met
The following table presents our total revenue disaggregated by revenue stream:
Three Months EndedNine Months Ended
June 30, June 30,
in thousands2022202120222021
Homebuilding revenue$523,229 $566,930 $1,477,166 $1,538,576 
Land sales and other revenue3,437 4,002 12,155 10,784 
Total revenue (a)
$526,666 $570,932 $1,489,321 $1,549,360 
(a) Please see Note 15 for total revenue disaggregated by reportable segment.
Homebuilding revenue
Homebuilding revenue is reported net of any discounts and incentives and is generally recognized when title to and possession of the home are transferred to the buyer at the closing date. The performance obligation to deliver the home is generally satisfied in less than one year from the original contract date. Home sale contract assets consist of cash from home closings held by title companies in escrow for our benefit, typically for less than five days, and are considered accounts receivable. Contract liabilities include customer deposits related to sold but undelivered homes and totaled $44.1 million and $28.5 million as of June 30, 2022 and September 30, 2021, respectively. Of the customer liabilities outstanding as of September 30, 2021, $5.4 million and $23.1 million was recognized in revenue during the three and nine months ended June 30, 2022 upon closing of the related homes.
Land sales and other revenue
Land sales revenue relates to land that does not fit within our homebuilding programs and strategic plans. Land sales typically require cash consideration on the closing date, which is generally when performance obligations are satisfied. We also provide title examinations for our homebuyers in certain markets. Revenues associated with our title operations are recognized as closing services are rendered and title insurance policies are issued, both of which generally occur as each home is closed.
Recent Accounting Pronouncements
Reference Rate Reform. In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04). ASU 2020-04 provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. This guidance is effective beginning on March 12, 2020, and all entities may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the effect of adopting the new guidance on its consolidated financial statements and related disclosures.
8

(3) Supplemental Cash Flow Information
The following table presents supplemental disclosure of non-cash and cash activity as well as a reconciliation of total cash balances between the condensed consolidated balance sheets and condensed consolidated statements of cash flows for the periods presented:
Nine Months Ended
 June 30,
in thousands20222021
Supplemental disclosure of non-cash activity:
Increase in operating lease right-of-use assets (a)
$811 $2,649 
Increase in operating lease liabilities (a)
$811 $2,649 
Derecognition of investment in unconsolidated entities (b)
$3,641 $ 
Supplemental disclosure of cash activity:
Interest payments$60,052 $63,878 
Income tax payments$3,783 $2,297 
Tax refunds received$ $49 
Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents$42,039 $358,334 
Restricted cash39,762 24,690 
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows$81,801 $383,024 
(a) Represents leases renewed or additional leases commenced during the nine months ended June 30, 2022 and June 30, 2021.
(b) Represents the derecognition of investment in unconsolidated entities associated with the carrying value of previously held interest in Imagine Homes upon the acquisition of substantially all of the assets of Imagine Homes during the quarter ended June 30, 2022. Refer to Note 4 for further discussion.
9

(4) Investments in Unconsolidated Entities
Unconsolidated Entities
As of June 30, 2022, the Company participated in certain joint ventures and had investments in unconsolidated entities in which it had less than a controlling interest. The following table presents the Company's investment in these unconsolidated entities as well as the total equity and outstanding borrowings of these unconsolidated entities as of June 30, 2022 and September 30, 2021:
in thousandsJune 30, 2022September 30, 2021
Investment in unconsolidated entities$897 $4,464 
Total equity of unconsolidated entities$1,032 $7,316 
Total outstanding borrowings of unconsolidated entities$ $12,708 
On May 20, 2022, the Company acquired substantially all of the assets of Imagine Homes, a private San Antonio-based homebuilder. For the past 16 years, Beazer has held a one-third ownership stake in Imagine Homes, recorded as an investment in unconsolidated entities on the condensed consolidated balance sheet. The transaction was deemed an asset acquisition under the guidance of ASC Topic 805-50, Business Combinations - Related Issues. The Company accounted for the asset acquisition following the cost accumulation model, whereby the sum of the carrying value of the previously held interest, additional consideration paid and transaction costs was allocated to the acquired assets on a relative fair value basis. The reduction in balances of the Company's investment in unconsolidated entities, total equity and outstanding borrowings of unconsolidated entities during the quarter ended June 30, 2022 reflects the Imagine Homes transaction.
Equity in income from unconsolidated entity activities included in income from continuing operations is as follows for the periods presented:
Three Months EndedNine Months Ended
June 30, June 30,
in thousands2022202120222021
Equity in income of unconsolidated entities$3 $313 $454 $424 
For the nine months ended June 30, 2022 and 2021, there were no impairments related to investments in unconsolidated entities.
Guarantees
Historically, the Company's joint ventures typically obtained secured acquisition, development, and construction financing. In addition, the Company and its joint venture partners provided varying levels of guarantees of debt and other debt-related obligations for these unconsolidated entities. However, as of June 30, 2022 and September 30, 2021, the Company had no outstanding guarantees or other debt-related obligations related to our investments in unconsolidated entities.
The Company and its joint venture partners generally provide unsecured environmental indemnities to land development joint venture project lenders. These indemnities obligate the Company to reimburse the project lenders for claims related to environmental matters for which they are held responsible. During the three and nine months ended June 30, 2022 and 2021, the Company was not required to make any payments related to environmental indemnities.
In assessing the need to record a liability for these guarantees, the Company considers its historical experience in being required to perform under the guarantees, the fair value of the collateral underlying these guarantees, and the financial condition of the applicable unconsolidated entities. In addition, the fair value of the collateral of unconsolidated entities is monitored to ensure that the related borrowings do not exceed the specified percentage of the value of the property securing the borrowings. As of June 30, 2022, no liability was recorded for the contingent aspects of any guarantees that were determined to be reasonably possible but not probable.
10

(5) Owned Inventory
The components of our owned inventory are as follows as of June 30, 2022 and September 30, 2021:
in thousandsJune 30, 2022September 30, 2021
Homes under construction$976,590 $648,283 
Land under development659,057 648,404 
Land held for future development19,879 19,879 
Land held for sale13,598 9,179 
Capitalized interest115,735 106,985 
Model homes73,992 68,872 
Total owned inventory$1,858,851 $1,501,602 
Homes under construction include homes substantially finished and ready for delivery and homes in various stages of construction, including costs of the underlying lot, direct construction costs and capitalized indirect costs. As of June 30, 2022, we had 3,656 homes under construction, including 936 spec homes totaling $212.8 million (881 in-process spec homes totaling $191.0 million, and 55 finished spec homes totaling $21.8 million). As of September 30, 2021, we had 2,912 homes under construction, including 576 spec homes totaling $116.4 million (542 in-process spec units totaling $105.2 million, and 34 finished spec units totaling $11.2 million).
Land under development consists principally of land acquisition, land development and other common costs. These land related costs are allocated to individual lots on a pro-rata basis, and the lot costs are transferred to homes under construction when home construction begins for the respective lots. Certain of the fully developed lots in this category are reserved by a customer deposit or sales contract.
Land held for future development consists of communities for which construction and development activities are expected to occur in the future or have been idled and are stated at cost unless facts and circumstances indicate that the carrying value of the assets may not be recoverable. All applicable carrying costs, such as interest and real estate taxes, are expensed as incurred.
Land held for sale includes land and lots that do not fit within our homebuilding programs and strategic plans in certain markets, and land is classified as held for sale once certain criteria are met (refer to Note 2 to the audited consolidated financial statements within our 2021 Annual Report). These assets are recorded at the lower of the carrying value or fair value less costs to sell (net realizable value).
The amount of interest we are able to capitalize depends on our qualified inventory balance, which considers the status of our inventory holdings. Our qualified inventory balance includes the majority of our homes under construction and land under development but excludes land held for future development and land held for sale (see Note 6 for additional information on capitalized interest).


11

Total owned inventory by reportable segment is presented in the table below as of June 30, 2022 and September 30, 2021:
in thousands
Projects in
Progress (a)
Land Held for Future DevelopmentLand Held for SaleTotal Owned
Inventory
June 30, 2022
West$977,567 $3,483 $12,922 $993,972 
East340,673 10,888  351,561 
Southeast327,156 5,508 676 333,340 
Corporate and unallocated (b)
179,978 

  179,978 
Total$1,825,374 $19,879 $13,598 $1,858,851 
September 30, 2021
West$781,036 $3,483 $4,478 $788,997 
East264,991 10,888 584 276,463 
Southeast269,738 5,508 4,117 279,363 
Corporate and unallocated (b)
156,779   156,779 
Total$1,472,544 $19,879 $9,179 $1,501,602 
(a) Projects in progress include homes under construction, land under development, capitalized interest, and model home categories from the preceding table.
(b) Projects in progress amount includes capitalized interest and indirect costs that are maintained within our Corporate and unallocated segment.
Inventory Impairments
Inventory assets are assessed for recoverability periodically in accordance with the policies described in Notes 2 and 5 to the audited consolidated financial statements within our 2021 Annual Report.
The following table presents, by reportable segment, our total impairment and abandonment charges for the periods presented:
 Three Months Ended June 30,Nine Months Ended June 30,
in thousands2022202120222021
Land Held for Sale:
West$ $ $440 $ 
Total impairment charges on land held for sale$ $ $440 $ 
Abandonments:
West$ $ $12 $ 
East  465 
Southeast 231 483 231 
Total abandonments charges$ $231 $495 $696 
Total impairment and abandonment charges$ $231 $935 $696 
Projects in Progress Impairments
Projects in progress inventory includes homes under construction and land under development grouped together as communities. Projects in progress are stated at cost unless facts and circumstances indicate that the carrying value of the assets may not be recoverable.
We assess our projects in progress inventory for indicators of impairment at the community level on a quarterly basis. If indicators of impairment are present for a community with more than ten homes remaining to close, we perform a recoverability test by comparing the expected undiscounted cash flows for the community to its carrying value. If the aggregate undiscounted cash flows are in excess of the carrying value, the asset is considered to be recoverable and is not impaired. If the carrying value exceeds the aggregate undiscounted cash flows, we perform a discounted cash flow analysis to determine the fair value of the community, and impairment charges are recorded if the fair value of the community's inventory is less than its carrying value.
12

No project in progress impairments were recognized during the three and nine months ended June 30, 2022 and 2021, respectively.
Land Held for Sale Impairments`
We evaluate the net realizable value of a land held for sale asset when indicators of impairment are present. Impairments on land held for sale generally represent write downs of these properties to net realizable value based on sales contracts, letters of intent, current market conditions, and recent comparable land sale transactions, as applicable. Absent an executed sales contract, our assumptions related to land sales prices require significant judgment because the real estate market is highly sensitive to changes in economic conditions, and our estimates of sale prices could differ significantly from actual results.
No land held for sale impairments were recognized during the three months ended June 30, 2022. We recognized $0.4 million land held for sale impairments during the nine months ended June 30, 2022 related to one held for sale community in the West segment. No land held for sale impairments were recognized during the three and nine months ended June 30, 2021.
Abandonments
From time-to-time, we may determine to abandon lots or not exercise certain option contracts that are not projected to produce adequate results or no longer fit with our long-term strategic plan. Additionally, in certain limited instances, we are forced to abandon lots due to seller non-performance, or permitting or other regulatory issues that do not allow us to build on those lots. If we intend to abandon or walk away from a property, we record an abandonment charge to earnings for the deposit amount and any related capitalized costs in the period such decision is made.
No abandonment charges were recognized during the three months ended June 30, 2022. We recognized $0.5 million abandonment charges during the nine months ended June 30, 2022 related to one under contract deal in the West segment and one under contract deal in the Southeast segment that we decided to terminate. During the three and nine months ended June 30, 2021, we recognized $0.2 million and $0.7 million abandonment charges, respectively, related to under contract deals that we decided to terminate in the East and Southeast segments.
Lot Option Agreements
In addition to purchasing land directly, we utilize lot option agreements that enable us to defer acquiring portions of properties owned by third parties and unconsolidated entities until we have determined whether to exercise our lot option. The majority of our lot option agreements require a non-refundable cash deposit or irrevocable letter of credit based on a percentage of the purchase price of the land for the right to acquire lots during a specified period at a specified price. Purchase of the properties under these agreements is contingent upon satisfaction of certain requirements by us and the sellers. Under lot option agreements, our liability is generally limited to forfeiture of the non-refundable deposits, letters of credit and other non-refundable amounts incurred. If the Company cancels a lot option agreement, it would result in a write-off of the related deposits and pre-acquisition costs, but would not expose the Company to the overall risks or losses of the applicable entity we are purchasing from. We expect to exercise, subject to market conditions and seller satisfaction of contract terms, most of our remaining option 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 provides a summary of our interests in lot option agreements as of June 30, 2022 and September 30, 2021:
in thousands
Deposits &
Non-refundable
Pre-acquisition
Costs Incurred (a)
Remaining
Obligation, Net of Deposits
As of June 30, 2022
Unconsolidated lot option agreements$137,357 $819,072 
As of September 30, 2021
Unconsolidated lot option agreements$114,688 $676,149 
(a) Amount is included as a component of land under development within our owned inventory in the condensed consolidated balance sheet.
13

(6) Interest
Interest capitalized during the three and nine months ended June 30, 2022 and 2021 was limited by the balance of inventory eligible for capitalization. The following table presents certain information regarding interest for the periods presented:
Three Months Ended June 30, Nine Months Ended June 30,
in thousands2022202120222021
Capitalized interest in inventory, beginning of period$112,686 $113,414 $106,985 $119,659 
Interest incurred18,728 19,270 55,292 58,517 
Interest expense not qualified for capitalization and included as other expense (a)
 (212) (2,781)
Capitalized interest amortized to home construction and land sales expenses (b)
(15,679)(22,529)(46,542)(65,452)
Capitalized interest in inventory, end of period$115,735 $109,943 $115,735 $109,943 
(a) The amount of interest capitalized depends on the qualified inventory balance, which considers the status of the Company's inventory holdings. Qualified inventory balance includes the majority of homes under construction and land under development but excludes land held for future development and land held for sale.
(b) Capitalized interest amortized to home construction and land sales expenses varies based on the number of homes closed during the period and land sales, if any, as well as other factors.
(7) Borrowings
The Company's debt, net of unamortized debt issuance costs consisted of the following as of June 30, 2022 and September 30, 2021:
in thousandsMaturity DateJune 30, 2022September 30, 2021
Senior Unsecured Term LoanSeptember 2022$50,000 $50,000 
6.750% Senior Notes (2025 Notes)
March 2025227,822 229,555 
5.875% Senior Notes (2027 Notes)
October 2027357,255 363,255 
7.250% Senior Notes (2029 Notes)
October 2029350,000 350,000 
Unamortized debt issuance costs(7,752)(8,983)
Total Senior Notes, net977,325 983,827 
Junior Subordinated Notes (net of unamortized accretion of $29,020 and $30,570, respectively)
July 203671,753 70,203 
Revolving Credit FacilityFebruary 2024  
Total debt, net$1,049,078 $1,054,030 
Secured Revolving Credit Facility
The Secured Revolving Credit Facility (the Facility) provides working capital and letter of credit capacity of $250.0 million. The Facility is currently with four lenders. For additional discussion of the Facility, refer to Note 8 to the audited consolidated financial statements within our 2021 Annual Report.
As of June 30, 2022 and September 30, 2021, no borrowings were outstanding under the Facility. As of June 30, 2022, we had letters of credit outstanding of $1.8 million under the Facility, resulting in a remaining capacity of $248.2 million. We had no letters of credit outstanding under the Facility as of September 30, 2021. The Facility requires compliance with certain covenants, including negative covenants and financial covenants. As of June 30, 2022, the Company believes it was in compliance with all such covenants.
Senior Unsecured Term Loan
On September 9, 2019, the Company entered into a term loan agreement, which provides for a Senior Unsecured Term Loan (the Term Loan). The principal balance as of June 30, 2022 was $50.0 million. The Term Loan (1) will mature in September 2022, with the remaining $50.0 million annual repayment installment due in September 2022; (2) bears interest at a fixed rate of 4.875%; and (3) includes an option to prepay, subject to certain conditions and the payment of certain premiums. The Term Loan contains covenants generally consistent with the covenants contained in the Facility. As of June 30, 2022, the Company believes it was in compliance with all such covenants.
14

Letter of Credit Facilities
The Company has entered into stand-alone, cash-secured letter of credit agreements with banks to maintain pre-existing letters of credit and to provide for the issuance of new letters of credit (in addition to the letters of credit issued under the Facility). As of June 30, 2022 and September 30, 2021, the Company had letters of credit outstanding under these additional facilities of $28.8 million and $21.8 million, respectively, all of which were secured by cash collateral in restricted accounts totaling $31.5 million and $22.3 million, respectively. The Company may enter into additional arrangements to provide additional letter of credit capacity.
Senior Notes
The Company's Senior Notes are unsecured obligations ranking pari passu with all other existing and future senior indebtedness. Substantially all of the Company's significant subsidiaries are full and unconditional guarantors of the Senior Notes and are jointly and severally liable for obligations under the Senior Notes and the Facility. Each guarantor subsidiary is a 100% owned subsidiary of Beazer Homes.
All unsecured Senior Notes rank equally in right of payment with all existing and future senior unsecured obligations, senior to all of the Company's existing and future subordinated indebtedness and effectively subordinated to the Company's existing and future secured indebtedness, including indebtedness under the Facility, if outstanding, to the extent of the value of the assets securing such indebtedness. The unsecured Senior Notes and related guarantees are structurally subordinated to all indebtedness and other liabilities of all of the Company's subsidiaries that do not guarantee these notes but are fully and unconditionally guaranteed jointly and severally on a senior basis by the Company's wholly-owned subsidiaries party to each applicable indenture.
The Company's Senior Notes are issued under indentures that contain certain restrictive covenants which, among other things, restrict our ability to pay dividends, repurchase our common stock, incur certain types of additional indebtedness, and make certain investments. Compliance with the Senior Note covenants does not significantly impact the Company's operations. The Company believes it was in compliance with the covenants contained in the indentures of all of its Senior Notes as of June 30, 2022.
During the three months ended June 30, 2022, we repurchased $1.7 million of our outstanding 2025 Notes using cash on hand, resulting in a gain on extinguishment of debt of $0.1 million.
During the nine months ended June 30, 2022, we repurchased $6.0 million of our outstanding 2027 Notes and $1.7 million of our outstanding 2025 Notes using cash on hand, resulting in a loss on extinguishment of debt of $0.1 million.
15

For additional redemption features, refer to the table below that summarizes the redemption terms of our Senior Notes:
Senior Note DescriptionIssuance DateMaturity DateRedemption Terms
6.750% Senior Notes
March 2017March 2025
Callable at any time prior to March 15, 2020, in whole or in part, at a redemption price equal to 100.000% of the principal amount, plus a customary make-whole premium; on or after March 15, 2020, callable at a redemption price equal to 105.063% of the principal amount; on or after March 15, 2021, callable at a redemption price equal to 103.375% of the principal amount; on or after March 15, 2022, callable at a redemption price equal to 101.688% of the principal amount; on or after March 15, 2023, callable at a redemption price equal to 100.000% of the principal amount, plus, in each case, accrued and unpaid interest.
5.875% Senior Notes
October 2017October 2027
Callable at any time prior to October 15, 2022, in whole or in part, at a redemption price equal to 100.000% of the principal amount, plus a customary make-whole premium; on or after October 15, 2022, callable at a redemption price equal to 102.938% of the principal amount; on or after October 15, 2023, callable at a redemption price equal to 101.958% of the principal amount; on or after October 15, 2024, callable at a redemption price equal to 100.979% of the principal amount; on or after October 15, 2025, callable at a redemption price equal to 100.000% of the principal amount, plus, in each case, accrued and unpaid interest.