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There have been no material changes to the risk factors we previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 that was filed with the SEC on February 7, 2020, other than one new risk factor and the four revised risk factors below.
−Removed: The global novel strain of coronavirus (COVID-19) pandemic has begun to adversely impact and will likely continue to adversely impact our business, operating results and financial condition.
+Added: The global novel strain of coronavirus (COVID-19) pandemic could adversely impact our business, operating results and financial condition.
The global COVID-19 pandemic has created significant volatility, disruption and uncertainty.
−Removed: It has resulted in government restrictions, such as “stay-at-home” or “shelter-in-place” directives, quarantines, travel advisories and social distancing, leading to the closure of businesses and causing weakened economic conditions that will likely worsen and may ultimately result in an economic slowdown or recession.
−Removed: These actions have begun to adversely impact and will likely continue to adversely impact Century directly and indirectly.
+Added: It has resulted in government restrictions, such as “stay-at-home” or “shelter-in-place” directives, quarantines, travel advisories and the implementation of social distancing measures, leading to the closure of businesses and causing weakened economic conditions and resulting in an economic slowdown and recession.
In response to the pandemic and these government restrictions, Century has shifted our sales process to offer additional virtual online tours and appointments and, where permitted, appointment-only in-person meetings that comply with social distancing and other health and safety requirements and protocols.
−Removed: We have limited our construction and other operations to those that are authorized under the various applicable governmental orders and shifted our corporate and other office functions to work remotely.
−Removed: As of the date of this filing, other than the State of Michigan and certain counties within the Bay Area market of Northern California, construction and sale of residential real estate has been determined to be an essential business, and accordingly our operations have been exempt from the applicable health orders.
+Added: As of the date of this filing, construction and sale of residential real estate has been determined to be an essential business, and accordingly our operations have been exempted from the applicable health orders.
We are uncertain as to how long these restrictions will remain in place and whether the COVID-19 public health effort will be intensified to further restrict our business.
−Removed: While these circumstances did not materially adversely affect our first quarter 2020 financial results, they have begun to negatively impact our business, including our ability to develop, construct, market and sell homes, and beginning in April 2020, have begun to negatively impact and will likely continue to negatively impact our revenues and other operating results.
−Removed: The adverse effect of the COVID-19 pandemic on the broader economy has negatively impacted and will likely continue to negatively impact demand for new homes.
−Removed: Continued demand for Century homes is uncertain but is unlikely to return quickly to the record levels that we experienced prior to the pandemic in light of anticipated higher unemployment rates, decreased consumer confidence, decreased availability of credit, and other factors.
−Removed: This impact on demand for our homes will likely adversely affect our operating results in future periods.
−Removed: In addition, a decline in our home building operations will have a direct effect on the origination volume of and revenues from our Financial Services segment.
+Added: While these circumstances did not materially adversely affect our second quarter 2020 financial results, we recognize that the long term macro-economic effects could ultimately impact the homebuilding industry and our business and future operating results.
+Added: The adverse effect of the COVID-19 pandemic on the broader economy could negatively impact demand for new homes.
+Added: Despite strong demand and sales during the second quarter of 2020, continued demand for Century homes is uncertain in light of higher unemployment rates, decreased consumer confidence, decreased availability of credit, and other factors.
+Added: This impact on demand for our homes could adversely affect our operating results in future periods.
+Added: In addition, a decline in our home building operations would have a direct effect on the origination volume of and revenues from our Financial Services segment.
The COVID-19 pandemic may have other adverse effects on our business, operating results and financial condition, including:
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For example, while rising interest rates and tightening affordability created an industry-wide deceleration in housing growth during the second half of 2018 and into 2019, this deceleration reversed during the remainder of 2019 due in part to reduced mortgage rates.
−Removed: More recently, as a result of the COVID-19 pandemic, beginning in mid-March 2020, we began to experience a decrease in demand for our homes which is unlikely to return quickly to the record levels that we experienced prior to the pandemic in light of anticipated higher unemployment rates, decreased consumer confidence, decreased availability of credit, and other factors, including those described elsewhere in this report.
+Added: More recently, as a result of the COVID-19 pandemic, beginning in mid-March 2020, we began to experience a decrease in demand for our homes which reversed course in May and June of 2020.
+Added: Despite overall strong demand and sales during the second quarter of 2020, continued demand for Century homes is uncertain in light of higher unemployment rates, decreased consumer confidence, decreased availability of credit, and other factors, including those described elsewhere in this report.
Adverse changes in general economic conditions typically reduce the demand for our homes which may result in a material adverse effect on our business, results of operations and financial condition.
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Bureau of Labor Statistics.
−Removed: As a result of impacts from the COVID-19 pandemic and efforts to contain it, the unemployment rate increased to 4.4% as of the end of March 2020 and is anticipated to increase further in April 2020.
+Added: As a result of impacts from the COVID-19 pandemic and efforts to contain it, the unemployment rate increased to 11.1% as of the end of June 2020 and it is uncertain how quickly the unemployment rate will improve or if it will further deteriorate.
People who are not employed, are underemployed or are concerned about the loss of their jobs are less likely to purchase new homes, may be forced to try to sell the homes they own and may face difficulties in making required mortgage payments.
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In addition, an increase in unemployment or underemployment may result in increased default rates on mortgage loans we originated, which could expose us to repurchase obligations or other liabilities, reduce our ability to sell or finance the loans we originate or require us to sell or finance the loans we originate on less favorable terms, lead us to impose stricter loan qualification standards, or result in us no longer being able to offer financing terms that are attractive to potential buyers, all of which would adversely affect our Financial Services business.
−Removed: Our Financial Services segment will likely be adversely affected by reduced demand for our homes or by a slowdown in mortgage refinancing.
+Added: Our Financial Services segment could be adversely affected by reduced demand for our homes or by a slowdown in mortgage refinancing.
Approximately 98.3% of the mortgage loans made by our Financial Services segment in 2019 were made to buyers of homes we built.
Therefore, a decrease in the demand for our homes would adversely affect the revenues of this segment of our business.
−Removed: As a result of the COVID-19 pandemic, beginning in mid-March 2020, we began to experience a decrease in demand for our homes and is unlikely to return quickly to the record levels that we experienced prior to the pandemic in light of anticipated higher unemployment rates, decreased consumer confidence, decreased availability of credit, and other factors, including those described elsewhere in this report.
−Removed: We expect this decrease in demand to adversely affect the revenues of our Financial Services segment beginning with our second quarter of 2020.
+Added: As a result of the COVID-19 pandemic, beginning in mid-March 2020, we began to experience a decrease in demand for our homes which reversed course in May and June of 2020.
+Added: Despite overall strong demand and sales during the second quarter of 2020, continued demand for Century homes is uncertain in light of higher unemployment rates, decreased consumer confidence, decreased availability of credit, and other factors, including those described elsewhere in this report.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.