What changed in this filing

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Item 1A. Risk Factors

2023-11-17 compared with 2022-11-17 · 54 added, 70 removed, 280 unchanged (31% of the section changed)

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Horton is not restricted from competing with us or otherwise taking for itself or its other affiliates certain corporate opportunities that may be attractive to us.

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Any inability to resolve favorably any disputes that may arise between us and D.R.

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However, if we elect to use the controlled company exemptions, our stockholders will not have the same protections afforded to stockholders of companies that are subject to all of the NYSE corporate governance requirements.

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We may not realize potential benefits of the strategic relationship with D.R.

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In addition, we have in the past relied on builder referrals as a source for land development opportunities, and there is a risk that builders may refer such opportunities to land developers other than us as a result of our close alignment with D.R.

Risks Related to Our Business and our Industry

The homebuilding and lot development industries are cyclical and affected by changes in economic, real estate or other conditions that could adversely affect our business or financial results.

Risks Related to Our Business Operations

The homebuilding and lot development industries are cyclical and significantly affected by changes in economic, real estate or other conditions that could adversely affect our business and financial results.

The homebuilding and lot development industries are cyclical and are significantly affected by changes in general and local economic and real estate conditions, such as:

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The federal government’s fiscal policies and the Federal Reserve's monetary policies may negatively impact the financial markets and consumer confidence and could hurt the U.S.

economy and the real estate market, and in turn, could adversely affect the operating results of our businesses.

During fiscal 2022, in response to increased inflation, the Federal Reserve raised interest rates significantly and has signaled it expects additional future interest rate increases.

As a result, mortgage interest rates increased significantly, and we began to see a moderation in housing demand.

Increases in mortgage interest rates would likely reduce demand for our residential lots and may have an adverse impact on our business or financial results.

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economy and the real estate market, and in turn, could adversely affect the operating results of our business.

In response to increased inflation, the Federal Reserve has raised interest rates significantly, which has resulted in higher mortgage interest rates.

Prolonged periods of elevated mortgage interest rates or further increases in mortgage interest rates could have an adverse impact on our business and financial results.

Deployments of U.S.

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Our pricing and product strategies may also be limited by market conditions.

We may be unable to change the mix of our product offerings, reduce the costs of the residential lots we develop, or satisfactorily address changing market conditions in other ways without adversely affecting our profits and returns.

We may be unable to change the pricing or mix of our product offerings, reduce the costs of the residential lots we develop, or satisfactorily address changing market conditions in other ways without adversely affecting our profits and returns.

Our business and financial results could be adversely affected by significant inflation, higher interest rates or deflation.

Inflation can adversely affect us by increasing costs of land, materials and labor.

During the past two years, the economy has experienced significant inflationary pressures.

Inflation can adversely affect us by increasing costs of land, materials, labor and our cost of capital.

In addition, significant inflation is often accompanied by higher interest rates, which have a negative impact on housing affordability.

During fiscal 2022, we began to see a moderation in housing demand as inflationary pressures and mortgage interest rates increased.

In an inflationary environment, depending on industry and other economic conditions, we may be precluded from raising residential lot prices enough to keep up with the rate of inflation, which could reduce our profit margins.

Moreover, in an inflationary environment, our cost of capital, labor and materials can increase and the purchasing power of our cash resources can decline, which can have an adverse impact on our business or financial results.

In an effort to lower the current rate of inflation, the Federal Reserve has raised interest rates significantly, which has resulted in higher mortgage rates.

The increase in mortgage rates has reduced the affordability of our lots and has required us to use pricing adjustments and incentives to adapt to current market conditions.

If inflation and mortgage interest rates remain high or continue to increase, lot affordability may be further impacted, which could reduce our profit margins and have an adverse impact on our business and financial results.

Alternatively, a significant period of deflation could cause a decrease in overall spending and borrowing levels.

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Deflation could also cause the value of our real estate to decline.

These, or other factors related to deflation, could have a negative impact on our business or financial results.

Supply shortages and other risks related to acquiring land, materials and skilled labor could increase our costs and delay lot deliveries.

These, or other factors related to deflation, could have a negative impact on our business and financial results.

Supply shortages and other risks related to acquiring land, materials and skilled labor and obtaining regulatory approval could increase our costs and delay lot deliveries.

The residential lot development industry may experience significant difficulties that can affect the cost or timing of lot development, including:

• difficulty in acquiring land suitable for residential development at affordable prices in locations that are attractive to homebuilders;

• delays in receiving the necessary approvals from municipalities or other government agencies;

• shortages of qualified subcontractors;

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• significant increases in the cost of materials and other inputs, including petroleum-based products.

These factors may cause construction delays or increase our costs.

During fiscal 2021 and 2022, we have experienced multiple disruptions in our supply chain, which have resulted in shortages of certain building materials and tightness in the labor market.

This has caused our construction cycle to lengthen and costs of building materials to increase.

If shortages and cost increases in building materials and tightness in the labor market persist for a prolonged period of time, our profit margins could be adversely impacted if we are unable to offset future cost increases by increasing the selling price of our lots.

Public health issues such as a major epidemic or pandemic could adversely affect our business or financial results.

During the last few years, we experienced multiple disruptions in our supply chain, which resulted in shortages of certain building materials and tightness in the labor market.

This caused our construction cycle to lengthen and costs of building materials to increase.

Although our construction cycle times have decreased more recently, if shortages and cost increases in building materials and tightness in the labor market increase, our construction cycle time and profit margins could be adversely impacted.

Public health issues such as a major epidemic or pandemic could adversely affect our business and financial results.

and other countries have experienced, and may experience in the future, outbreaks of contagious diseases that affect public health and public perception of health risk.

The ongoing COVID-19 pandemic continues to affect the global economy.

The effects of the pandemic contributed to disrupting our supply chain, which has resulted in shortages of certain building materials and tightness in the labor market.

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There is uncertainty regarding the extent to which and how long COVID-19 and its variant strains will continue to impact the global economy and our supply chain, and the effect of the pandemic on our operational and financial performance will depend on future developments, including its impact on our customers, trade partners and employees, all of which are highly uncertain and cannot be predicted.

If COVID-19 and its variant strains continue to have a negative impact on economic conditions, our results of operations and financial condition could be adversely impacted.

In the event of a resurgence of COVID-19, or a widespread, prolonged actual or perceived outbreak of any contagious disease, our operations could be negatively impacted.

Such events have had, and could in the future have, an effect on our operations, including a reduction in homebuilder traffic, a disruption in our supply chain, tightness in the labor market or other factors, all of which could reduce demand for our lots.

These or other repercussions of a public health crisis that affect the global economy could have an adverse impact on our results of operations and financial condition.

Our business and financial results could be adversely affected by weather conditions and natural disasters.

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If we are unable to obtain surety bonds when required, our results of operations and cash flows could be adversely affected.

Governmental regulations and environmental matters could increase the cost and limit the availability of property suitable for residential lot development and could adversely affect our business or financial results.

Information technology failures, data security breaches and the failure to satisfy privacy and data protection laws and regulations could harm our business.

We use information technology and other computer resources to carry out important operational and marketing activities and to maintain our business records.

These information technology systems are dependent upon global communications providers, web browsers, third-party software and data storage providers and other aspects of the Internet infrastructure that have experienced security breaches, cyber-attacks, ransomware attacks, significant systems failures and service outages in the past.

Additionally, phishing attacks, whereby perpetrators attempt to fraudulently induce employees, customers, vendors or other users of a company’s systems to disclose sensitive information to gain access to its data, have become more prevalent in recent years.

The use of remote work environments and virtual platforms may increase our risk of cyber-attack or data security breaches.

Further, geopolitical tensions or conflicts may create a heightened risk of cyber-attacks or other data security breaches.

Our normal business activities involve collecting and storing information specific to our customers, employees, vendors and suppliers and maintaining operational and financial information related to our business, both in an office setting and remote locations as needed.

A material breach in the security of our information technology systems or other data security controls could include the theft or release of this information.

The unintended or unauthorized disclosure of personal identifying and confidential information as a result of a security breach by any means could lead to litigation or other proceedings against us by the affected individuals or business partners, or by regulators.

The outcome of such proceedings, which could include penalties or fines, could have a significant negative impact on our business.

We may also be required to incur significant costs to protect against damages caused by information technology failures, security breaches, and the failure to satisfy privacy and data protection laws and regulations in the future as legal requirements continue to increase.

The European Union and other international regulators, as well as state governments, have enacted or enhanced data privacy regulations, such as the California Privacy Rights Act, and other governments are considering establishing similar or stronger protections.

These regulations impose certain obligations for handling specified personal information in our systems, including notifying individuals regarding information we have collected from them.

We have incurred costs in an effort to comply with these requirements, but our costs may increase significantly if new requirements are enacted and based on how individuals exercise their rights.

Any noncompliance could result in substantial penalties, reputational damage or litigation.

We routinely utilize information technology security experts to assist us in our evaluations of the effectiveness of the security of our information technology systems, and we regularly enhance our security measures, which include multiple redundant safeguards, to protect our systems and data.

We use various encryption, tokenization and authentication technologies to mitigate cybersecurity risks and have increased our monitoring capabilities to enhance early detection and rapid response to potential cyber threats.

However, because the techniques used to obtain unauthorized access, disable or degrade systems change frequently and increasingly leverage sophisticated technologies such as artificial intelligence, they often are not recognized until launched against a target.

As such, we may be unable to anticipate these techniques, to implement adequate preventative measures or to identify and investigate cybersecurity incidents.

Although past cybersecurity incidents have not had a material effect on our business or operations to date, in the future, a data security breach, a significant and extended disruption in the functioning of our information technology systems or a breach of any of our data security controls could disrupt our business operations, damage our reputation and cause us to lose customers.

We cannot provide assurances that a security breach, cyber-attack, data theft or other significant systems or security failures will not occur in the future, and such occurrences could have a material and adverse effect on our consolidated results of operations or financial position.

We are subject to extensive and complex regulations that affect land acquisition, development and home construction, including zoning, density restrictions and building standards.

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New housing developments may also be subject to various assessments for schools, parks, streets and other public improvements.

In addition, in many markets, government authorities have implemented no growth or growth control initiatives.

In addition, government authorities in many markets have implemented no growth or growth control initiatives.

Any of these may limit, delay or increase the costs of acquisition of land for residential use and development or home construction.

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We are also subject to a significant number and variety of local, state and federal laws and regulations concerning protection of health, safety, labor standards and the environment.

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Government agencies also routinely initiate audits, reviews or investigations of our business practices to ensure compliance with these laws and regulations, which can cause us to incur costs or create other disruptions in our business that can be significant.

Recently, there has been growing concern from advocacy groups, government agencies and the general public over the effects of climate change on the environment.

In recent years, advocacy groups, government agencies and the general public have expressed growing concerns regarding the effects of climate change on the environment.

Transition risks, such as government restrictions, standards or regulations intended to reduce greenhouse gas emissions and potential climate change impacts, are emerging and may increase in the future in the form of restrictions or additional requirements on land development in certain areas.

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Additionally, actual or perceived environmental, social, governance ("ESG") and other sustainability matters and our response to these matters could harm our business.

Increasing governmental and societal attention to ESG matters, including expanding mandatory and voluntary reporting, diligence, and disclosure on topics such as climate change, human capital, labor and risk oversight, could expand the nature, scope, and complexity of matters that we are required to control, assess and report.

Increasing governmental and societal attention to ESG matters, including expanding mandatory and voluntary reporting, diligence, and disclosure on topics such as climate change, human capital, labor, cybersecurity and risk oversight, could expand the nature, scope, and complexity of matters that we are required to control, assess and report.

These factors may alter the environment in which we do business and may increase the ongoing costs of compliance, and adversely impact our results of operations and cash flows.

If we are unable to adequately address such ESG matters or fail to comply with all laws, regulations, policies and related interpretations, it could negatively impact our reputation and our business results.

The subcontractors we rely on to perform the actual development of our residential lots are also subject to a significant

number of local, state and federal laws and regulations, including laws involving matters that are not within our control.

If the subcontractors who develop our residential lots fail to comply with all applicable laws, we can suffer reputational

damage and may be exposed to possible liability.

The subcontractors we rely on to perform the actual development of our residential lots are also subject to a significant number of local, state and federal laws and regulations, including laws involving matters that are not within our control.

If the subcontractors who develop our residential lots fail to comply with all applicable laws, we can suffer reputational damage and may be exposed to possible liability.

We are also subject to an extensive number of laws and regulations because our common stock is publicly traded in the capital markets.

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If we are not successful in achieving our objectives, our business, results of operations, cash flows and financial condition may be negatively affected.

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We may have continuing liabilities relating to assets that have been sold, which could adversely impact our results of operations.

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• lack of familiarity with local governmental and permitting procedures.

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We plan to raise additional capital in the future, and such capital may not be available when needed or at all.

We have a $410 million senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $600 million, subject to certain conditions and availability of additional bank commitments.

The facility also provides for the issuance of letters of credit with a sublimit equal to the greater of $100 million and 50% of the revolving credit commitment.

The facility also provides for the issuance of letters of credit with a sublimit equal to the greater of $100 million and 50% of the total revolving credit commitments.

The maturity date of the facility is October 28, 2026.

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The real estate development industry is highly competitive and a number of entities with which we compete are larger and have greater resources or are smaller and have lower cost structures, and competitive conditions may adversely affect our results of operations.

The real estate development industry in which we operate is highly competitive.

We operate in a highly competitive industry.

Competitive conditions in the real estate development industry may result in difficulties acquiring suitable land at acceptable prices, lower sales volumes and prices, increased development or construction costs and delays in construction.

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Our business, financial condition and results of operations may be negatively affected by any of these factors.

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Risks Related to Our Indebtedness

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Any lowering of our debt ratings could make accessing the capital markets or obtaining additional credit from banks more difficult and/or more expensive.

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Change of Control Purchase Option and Change of Control Default .

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• prevent us from making debt service payments on certain of our debt instruments.

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General Risk Factors

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We depend to a large extent on the services of certain key management personnel.

These individuals have extensive experience and expertise in our business.

The loss of any of these individuals could have a material adverse effect on our operations.

We do not maintain key-person life insurance with respect to any of our employees.

Our success may be dependent on our ability to continue to employ and retain skilled personnel.

Information technology failures, data security breaches and the failure to satisfy privacy and data protection laws and regulations could harm our business.

We use information technology and other computer resources to carry out important operational and marketing activities and to maintain our business records.

The use of remote work environments and virtual platforms may increase our risk of cyber-attack or data security breaches.

Further, geopolitical tensions or conflicts, such as the ongoing conflict between Russia and Ukraine, may create a heightened risk of cyber-attacks or other data security breaches.

A material breach in the security of our information technology systems or other data security controls could include the theft or release of this information.

The outcome of such proceedings, which could include penalties or fines, could have a significant negative impact on our business.

The European Union and other international regulators, as well as state governments, have enacted or enhanced data privacy regulations, such as the California Consumer Privacy Act (and its successor the California Privacy Rights Act that will go into effect on January 1, 2023), and other governments are considering establishing similar or stronger protections.

These regulations impose certain obligations for handling specified personal information in our systems, including notifying individuals regarding information we have collected from them.

We have incurred costs in an effort to comply with these requirements, but our costs may increase significantly if new requirements are enacted and based on how individuals exercise their rights.

Any noncompliance could result in substantial penalties, reputational damage or litigation.

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We provide employee awareness training about cybersecurity threats.

However, because the techniques used to obtain unauthorized access, disable or degrade systems change frequently and are increasing in sophistication, they often are not recognized until launched against a target.

As such, we may be unable to anticipate these techniques, to implement adequate preventative measures or to identify and investigate cybersecurity incidents.

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These individuals have significant experience and skills as well as leadership and management abilities that are vital to our success.

Our ability to attract and retain our key personnel may be impacted by matters involving reputation, culture, diversity and inclusion, compensation and benefits and our management of executive succession.

We seek to retain our key personnel to have succession and transition plans in place to address the potential loss of key personnel and to manage personnel transitions due to retirements, promotions, transfers and other circumstances.

However, if our retention, succession and transition implementation efforts are unsuccessful, the loss of key personnel could adversely affect our business.

Unresolved Staff Comments.

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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.

What changed 10-K

Item 1A. Risk Factors