What changed in this filing

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Item 1A. Risk Factors

2020-11-03 compared with 2020-08-04 · 18 added, 19 removed, 52 unchanged (42% of the section changed)

4 unchanged sentences

On March 11, 2020, the World Health Organization declared the current outbreak of COVID-19 to be a global pandemic, and on March 13, 2020, the United States declared a national emergency.

In response to these declarations and the rapid spread of COVID-19, federal, state and local governments have imposed varying degrees of restrictions on business and social activities to contain COVID-19, including business shutdowns and closures, travel restrictions, quarantines, curfews, shelter-in-place orders and “stay-at-home” orders in certain of our markets.

State and local authorities have also implemented multi-step policies with the goal of re-opening.

However, certain jurisdictions have begun re-opening only to return to restrictions in the face of increases in new COVID-19 cases.

We have experienced resulting disruptions to our business operations, as these restrictions have significantly impacted many sectors of the economy, with businesses curtailing or ceasing normal operations.In March 2020, certain markets in which we do business temporarily stopped our construction of homes.

In response to these declarations and the rapid spread of COVID-19, federal, state and local governments imposed varying degrees of restrictions on business and social activities to contain COVID-19, including business shutdowns and closures, travel restrictions, quarantines, curfews, shelter-in-place orders and “stay-at-home” orders in certain of our markets.

State and local authorities have also implemented multi-step policies with the goal of re-opening various sectors of the economy.

However, certain jurisdictions began re-opening only to return to restrictions in the face of increases in new COVID-19 cases, while other jurisdictions are continuing to re-open or have nearly completed the re-opening process despite increases in COVID-19 cases.

The COVID-19 outbreak may significantly worsen in the United States during the upcoming winter months, which may cause federal, state and local governments to reconsider restrictions on business and social activities.

In the event governments increase restrictions, the re-opening of the economy may be further curtailed.

We have experienced some resulting disruptions to our business operations, as these restrictions have significantly impacted, and may continue to impact, many sectors of the economy, with various businesses curtailing or ceasing normal operations and subsequently attempting to resume operations.

In March 2020, certain markets in which we do business temporarily stopped our construction of homes.

Beginning in April 2020, we resumed construction of homes in those markets.

Although we continued to build and sell homes in all of our markets, the pace of sales declined and we experienced an increase in the rate of contract cancellations.

Since May 2020, the pace of sales has rebounded and we have experienced increased demand in our markets.

However, the slower pace of our sales in March 2020 and April 2020 ultimately resulted in home closings during the second quarter of 2020 being lower than we would have predicted prior to the pandemic.

Additionally, as a result of reducing starts in March 2020 and April 2020 to preserve cash, our availability of completed homes was reduced, which could slow the pace of our home closings in later periods.

Since May 2020, the pace of sales has rebounded and we have experienced a sustained increase in demand in our markets.

However, as a result of reducing starts in March 2020 and April 2020 to preserve cash, our availability of completed homes was reduced, which slowed the pace of our home closings in the second and third quarter.

Further, our inventory of owned or controlled lots decreased during the first half of 2020 primarily due to certain cash management policies we implemented beginning in March 2020, which included delaying or canceling land acquisitions to manage our overall inventory.

From time to time during the COVID-19 outbreak, we have had to close individual sales offices for a limited period of time, as a result of potential or actual exposure to COVID-19 by one or more of our employees.

The economic impact of COVID-19 may be reduced by financial assistance under the Coronavirus Aid, Relief, and Economic Security (CARES) Act or other similar COVID-19 related federal and state programs;

however, such programs may not have a positive impact on our business.

While we continue to assess the COVID-19 situation, at this time we cannot estimate with any degree of certainty the full impact of the COVID-19 outbreak on our financial condition and future results of operations, although we expect the COVID-19 situation to adversely impact future quarters.

The ultimate impacts of COVID-19 and related mitigation efforts will depend on future developments, including, but not limited to, the duration and geographic spread of COVID-19, the impact of government actions designed to prevent the spread of COVID-19, the development of effective treatments, actions taken by customers, subcontractors, suppliers and other third parties, workforce availability, and the timing and extent to which normal economic and operating conditions resume.

The ultimate impacts of COVID-19 and related mitigation efforts will depend on future developments, including, but not limited to, the duration and geographic spread of COVID-19, the impact of government actions designed to prevent the spread of COVID-19, the development and availability of effective treatments and vaccines, actions taken by customers, subcontractors, suppliers and other third parties, workforce availability, and the timing and extent to which normal economic and operating conditions resume.

Our business could also be negatively impacted over the medium-to-longer term if the disruptions related to COVID-19 decrease consumer confidence generally or with respect to purchasing a home;

7 unchanged sentences

increase the costs or decrease the supply of building materials or the financial viability or availability of subcontractors, including as a result of infections or medically necessary or recommended self-quarantining, or governmental mandates to direct production activities to support public health efforts;

and result in our recognizing charges in future periods, which may be material, for inventory impairments or land option contract abandonments, or both, related to our current inventory assets.

result in our recognizing charges in future periods, which may be material, for inventory impairments or land option contract abandonments, or both, related to our current inventory assets.

The inherent uncertainty surrounding COVID-19, due in part to rapidly changing governmental directives, public health challenges and progress and market reactions thereto, also makes it more challenging for our management to estimate the future performance of our business and develop strategies to generate growth or achieve our objectives for the remainder of 2020.

Should the adverse impacts described above (or others that are currently unknown) occur, whether individually or collectively, we would expect to experience, among other things, decreases in our net orders, homes closed, average sales prices, revenues and profitability, and such impacts could be material to our business, financial condition, results of operations, cash flows, strategies or prospects in future quarters.

In addition, should the COVID-19 public health effort intensify to such an extent that we cannot operate in most or all of our markets, we could generate few or no orders and deliver few, if any, homes during the applicable period, which could be prolonged.

Along with a potential increase in cancellations of home purchase contracts, if there are prolonged government restrictions on our business and our customers, or an extended economic recession, we could be unable to produce revenues and cash flows sufficient to conduct our business;

Should the adverse impacts described above (or others that are currently unknown) occur, whether individually or collectively, we would expect to experience, among other things, decreases in our net orders, homes closed, average sales prices per home closed, revenues and profitability, and such impacts could be material to our business, financial condition, results of operations, cash flows, strategies or prospects in future quarters.

In addition, should the surge in COVID-19 cases or the public health effort related thereto intensify to such an extent that we cannot operate in most or all of our markets, we could generate few or no orders and deliver few, if any, homes during the applicable period, which could be prolonged.

Along with a potential increase in cancellations of home purchase contracts, if prolonged government restrictions on our business and our customers return in response to increases in COVID-19 cases, or if there is an extended economic recession, we could be unable to produce revenues and cash flows sufficient to conduct our business;

meet the terms of our covenants and other requirements under the Credit Agreement, the Senior Notes and the related indenture, and/or mortgages and land contracts due to land sellers and other loans;

9 unchanged sentences

filed with the SEC on August 28, 2013).

10.1** Second Supplemental Indenture, dated as of April 30, 2020, among LGI Homes, Inc., the guaranteeing subsidiaries listed therein, the other subsidiary guarantors listed therein and Wilmington Trust, National Association, as trustee, governing LGI Homes, Inc.’s 6.875% Senior Notes due 2026 (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (File No.

001-36126) of LGI Homes, Inc.

filed with the SEC on May 5, 2020).

10.2* Second Amendment to Fourth Amended and Restated Credit Agreement, dated as of April 30, 2020, by and among LGI Homes, Inc., each of the financial institutions initially a signatory thereto, and Wells Fargo Bank, National Association, as administrative agent .

31.1* CEO Certification, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

16 unchanged sentences

LGI Homes, Inc.

August 4, 2020 /s/ Eric Lipar

November 3, 2020 /s/ Eric Lipar

Chief Executive Officer and Chairman of the Board

August 4, 2020 /s/ Charles Merdian

November 3, 2020 /s/ Charles Merdian

Charles Merdian

1 unchanged sentence

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-Q

Item 1A. Risk Factors