What changed in this filing

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Item 1. Financial Statements

2024-04-30 compared with 2023-10-31 · 105 added, 119 removed, 321 unchanged (41% of the section changed)

3 unchanged sentences

(In thousands, except share data)

September 30, December 31,

March 31, December 31,

Cash and cash equivalents $ 48,996 $ 48,978

13 unchanged sentences

COMMITMENTS AND CONTINGENCIES

Common stock, par value $ 0.01 , 250,000,000 shares authorized, 27,503,340 shares issued and 23,563,868 shares outstanding as of September 30, 2023 and 27,245,278 shares issued and 23,305,806 shares outstanding as of December 31, 2022

Common stock, par value $ 0.01 , 250,000,000 shares authorized, 27,596,140 shares issued and 23,567,441 shares outstanding as of March 31, 2024 and 27,521,120 shares issued and 23,581,648 shares outstanding as of December 31, 2023

Additional paid-in capital 327,182 321,062

Retained earnings 1,906,769 1,889,716

Treasury stock, at cost, 3,939,472 shares as of September 30, 2023 and December 31, 2022

Treasury stock, at cost, 4,028,699 shares as of March 31, 2024 and 3,939,472 shares as of December 31, 2023

( 365,024 ) ( 355,022 )

5 unchanged sentences

(In thousands, except share and per share data)

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Home sales revenues $ 390,851 $ 487,357

22 unchanged sentences

Restricted stock units granted for accrued annual bonuses — — 786 — — 786

Stock repurchase — — — — ( 10,002 ) ( 10,002 )

Compensation expense for equity awards — — 3,829 — — 3,829

1 unchanged sentence

BALANCE— March 31, 2024 27,596,140 $ 276 $ 327,182 $ 1,906,769 $ ( 365,024 ) $ 1,869,203

Net income — — — 53,134 — 53,134

Compensation expense for equity awards — — 2,360 — — 2,360

Stock issued under employee incentive plans 13,307 — 1,289 — — 1,289

BALANCE— June 30, 2023 27,485,513 $ 275 $ 315,174 $ 1,770,585 $ ( 355,022 ) $ 1,731,012

Net income — — — 67,042 — 67,042

Compensation expense for equity awards — — 3,123 — — 3,123

Stock issued under employee incentive plans 17,827 — 1,498 — — 1,498

BALANCE— September 30, 2023 27,503,340 $ 275 $ 319,795 $ 1,837,627 $ ( 355,022 ) $ 1,802,675

See accompanying notes to the consolidated financial statements.

LGI HOMES, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except share data)

Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Total Equity

3 unchanged sentences

Restricted stock units granted for accrued annual bonuses — — 206 — — 206

Stock repurchase — — — — ( 57,659 ) ( 57,659 )

Compensation expense for equity awards — — 3,103 — — 3,103

1 unchanged sentence

BALANCE— March 31, 2023 27,472,206 $ 275 $ 311,525 $ 1,717,451 $ ( 355,022 ) $ 1,674,229

Net income — — — 123,376 — 123,376

Stock repurchase — — — — ( 37,443 ) ( 37,443 )

Compensation expense for equity awards — — 3,545 — — 3,545

Stock issued under employee incentive plans 24,213 — 1,692 — — 1,692

BALANCE— June 30, 2022 27,212,108 $ 271 $ 302,688 $ 1,565,984 $ ( 355,022 ) $ 1,513,921

Net income — — — 90,390 — 90,390

Compensation expense for equity awards — — 1,516 — — 1,516

Stock issued under employee incentive plans 17,650 1 1,153 — — 1,154

BALANCE— September 30, 2022 27,229,758 $ 272 $ 305,357 $ 1,656,374 $ ( 355,022 ) $ 1,606,981

See accompanying notes to the consolidated financial statements.

2 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Net income $ 17,053 $ 26,962

Adjustments to reconcile net income to net cash used in operating activities:

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Equity in income of unconsolidated entities ( 2,043 ) ( 2,245 )

1 unchanged sentence

Depreciation and amortization 673 482

Gain on sale of interest rate cap — ( 7,055 )

Gain on disposal of assets ( 1,634 ) ( 2,206 )

Compensation expense for equity awards 3,829 3,103

7 unchanged sentences

Accrued expenses and other liabilities ( 16,616 ) ( 8,953 )

Net cash used in operating activities ( 22,675 ) ( 359,552 )

Net cash provided by (used in) operating activities ( 99,493 ) 77,600

Cash flows from investing activities:

Purchases of property and equipment ( 1,001 ) ( 76 )

Proceeds from sale of assets 3,019 —

Investment in unconsolidated entities — ( 5,919 )

Return of capital from unconsolidated entities — 1,140

Net cash used in investing activities ( 7,596 ) ( 2,106 )

Net cash provided by (used in) investing activities 2,018 ( 4,855 )

Cash flows from financing activities:

6 unchanged sentences

Stock repurchase ( 10,002 ) —

Net cash provided by financing activities 45,254 363,804

Net cash provided by (used in) financing activities 97,493 ( 61,777 )

Net increase in cash and cash equivalents 18 10,968

13 unchanged sentences

These financial statements should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

The accompanying unaudited consolidated financial statements include all adjustments that are of a normal recurring nature and necessary for the fair presentation of our results for the interim periods presented.

In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments that are of a normal recurring nature and necessary for the fair presentation of our results for the interim periods presented.

Results for interim periods are not necessarily indicative of results to be expected for the full year.

The accompanying unaudited financial statements as of September 30, 2023, and for the three and nine months ended September 30, 2023 and 2022, include the accounts of the Company and its subsidiaries.

The accompanying unaudited financial statements as of March 31, 2024, and for the three months ended March 31, 2024 and 2023, include the accounts of the Company and its subsidiaries.

All intercompany balances and transactions have been eliminated in consolidation.

2 unchanged sentences

Actual results could differ from those estimates, and these differences could have a significant impact on the financial statements.

Recently Issued Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures” (“ASU 2023-09”), which is intended to enhance the transparency and decision usefulness of income tax disclosures.

This amendment modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation and additional information for reconciling items that meet a quantitative threshold, (2) the amount of income taxes paid (net of refunds received) (disaggregated by federal, state, and foreign taxes) as well as individual jurisdictions in which income taxes paid is equal to or greater than 5 percent of total income taxes paid net of refunds, (3) the income or loss from continuing operations before income tax expense or benefit (disaggregated between domestic and foreign) and (4) income tax expense or benefit from continuing operations (disaggregated by federal, state and foreign).

The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted for annual financial statements that have not yet been issued or made available for issuance.

ASU 2023-09 should be applied on a prospective basis, while retrospective application is permitted.

We are currently evaluating the impact that this standard will have on our financial statements.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements, primarily through additional and more detailed information about a reportable segment’s expenses.

The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The guidance is to be applied retrospectively to all prior periods presented in the financial statements.

Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption.

We are currently evaluating the impact that this standard will have on our financial statements.

REAL ESTATE INVENTORY

Our real estate inventory consists of the following (in thousands):

September 30, December 31,

March 31, December 31,

Land, land under development and finished lots $ 2,145,846 $ 2,099,133

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We do not have any ownership interest or title to the assets that we have sold to the land banker and we do not guarantee any of the land banker’s liabilities.

During the nine months ended September 30, 2023, we transferred $ 9.8 million of home assets from real estate inventory to rental properties within property and equipment, net.

We build and lease a number of single-family homes in select, existing communities.

During the three months ended March 31, 2024, we transferred $ 3.9 million of home assets from real estate inventory to rental properties within property and equipment, net.

We are lessors of the homes representing these home assets.

2 unchanged sentences

Accrued and other liabilities consist of the following (in thousands):

September 30, December 31,

March 31, December 31,

Land banking financing arrangements $ 77,809 $ 104,459

Real estate inventory development and construction payable 64,443 71,193

Taxes payable 16,321 47,037

Inventory related obligations 12,743 13,039

Accrued compensation, bonuses and benefits 8,737 22,550

Taxes payable 7,661 14,694

Warranty reserve 14,000 13,600

Accrued interest 20,105 13,522

Contract deposits 5,284 5,545

Inventory related obligations 11,830 11,924

Lease liability 5,077 4,947

Contract deposits 4,244 2,909

Other 10,401 12,074

5 unchanged sentences

Inventory Related Obligations

We own lots in certain communities in Arizona, Florida and Texas that have Community Development Districts or similar utility and infrastructure development special assessment programs that allocate a fixed amount of debt service associated with development activities to each lot.

This obligation for infrastructure development is attached to the land, which is typically payable over a 30-year period and is ultimately assumed by the homebuyer when home sales are closed.

We own lots in certain communities in Florida and Texas that have Community Development Districts or similar utility and infrastructure development special assessment programs that allocate a fixed amount of debt service associated with development activities to each lot.

This obligation for infrastructure development is attached to the land, which is typically

payable over a 30-year period and is ultimately assumed by the homebuyer when home sales are closed.

The obligations assumed by the homebuyer represent a non-cash cost of the lots.

Estimated Warranty Reserve

We typically provide homebuyers with a one-year warranty on the house and a ten-year limited warranty for major defects in structural elements, such as framing components and foundation systems.

We generally provide homebuyers with a one-year warranty on the house and a limited warranty for major defects in structural elements, such as framing components and foundation systems, typically ranging from six to ten years depending on the applicable state.

Changes to our warranty accrual are as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Warranty reserves, beginning of period $ 13,600 $ 10,750

4 unchanged sentences

Revolving Credit Agreement

On April 28, 2023, we entered into a Third Amendment to Fifth Amended and Restated Credit Agreement with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent (the “Third Amendment”), which amends the Fifth Amended and Restated Credit Agreement, dated as of April 28, 2021, with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent (as amended by an amendment dated as of April 29, 2022, the “2022 Credit Agreement” and as further amended by the Third Amendment, the “Credit Agreement”).

Agreement provides for a $ 1.13 billion revolving credit facility, which can be increased at the request of the Company by up to $ 170.0 million, subject to the terms and conditions of the Credit Agreement.

On December 5, 2023, we entered into a Fourth Amendment to Fifth Amended and Restated Credit Agreement with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent (the “Fourth Amendment”), which amended the Fifth Amended and Restated Credit Agreement, dated as of April 28, 2021, with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent (as amended to date, including the Fourth Amendment, the “Credit Agreement”).

The Credit Agreement provides for a $ 1.205 billion revolving credit facility, which can be increased at the request of the Company by up to $ 95.0 million, subject to the terms and conditions of the Credit Agreement.

The Credit Agreement matures on April 28, 2028 with respect to $ 960.0 million, or 79.7 %, of the $ 1.205 billion of commitments thereunder and on April 28, 2025 with respect to 20.3 % of the commitments thereunder.

The Credit Agreement also permits our subsidiaries that solely own and operate single family rental homes to incur secured indebtedness not to exceed 6 % of our tangible net worth, and allows such subsidiaries to not guarantee the obligations under the Credit Agreement.

The Credit Agreement otherwise has substantially similar terms and provisions to the 2022 Credit Agreement.

Before each anniversary of the Credit Agreement, we may request a one-year extension of its maturity date.

The Credit Agreement is guaranteed by, among others, each of our subsidiaries that have gross assets of at least $ 0.5 million, other than subsidiaries whose sole purpose is to own and operate single-family rental homes.

The borrowings and letters of credit outstanding under the Credit Agreement, together with the outstanding principal balance of our 4.000 % Senior Notes due 2029 (the “2029 Senior Notes”), may not exceed the borrowing base under the Credit Agreement.

The borrowings and letters of credit outstanding under the Credit Agreement, together with the outstanding principal balance of our 4.000 % Senior Notes due 2029 (the “2029 Senior Notes”) and our 8.750 % Senior Notes due 2028 (the “2028 Senior Notes”), may not exceed the borrowing base under the Credit Agreement.

The borrowing base primarily consists of a percentage of commercial land, land held for development, lots under development and finished lots held by the Company and its subsidiaries that guarantee the obligations under the Credit Agreement.

As of September 30, 2023, the borrowing base under the Credit Agreement is $ 1.8 billion of which the maximum available to borrow is $ 1.4 billion.

As of September 30, 2023, borrowings under the Credit Agreement and the outstanding principal amount of the 2029 Senior Notes totaled $ 1.2 billion, $ 28.1 million of letters of credit were outstanding and $ 196.2 million was available to borrow under the Credit Agreement.

As of March 31, 2024, the borrowing base under the Credit Agreement was $ 1.9 billion, and borrowings under the Credit Agreement and the outstanding principal amount of the 2029 Senior Notes and the 2028 Senior Notes totaled approximately $ 1.4 billion, $ 22.5 million of letters of credit were outstanding and $ 442.5 million was available to borrow under the Credit Agreement.

Borrowings under the Credit Agreement bear interest, payable monthly in arrears, at the Company’s option, at either (1) the Adjusted Term SOFR (defined as a term SOFR that is based on a fixed 1, 3 or 6 month interest period, as selected by the Company, plus a 10 , 15 or 25 basis point adjustment, respectively), which rate is subject to a 50 basis point floor, plus an applicable margin ranging from 145 basis points to 210 basis points (the “Applicable Margin”) based on the Company’s leverage ratio as determined in accordance with a pricing grid, or (2) the Base Rate (defined as a term SOFR that is based on a daily variable 1 month interest period plus a 10 basis point adjustment), subject to a 50 basis point floor, plus the Applicable Margin.

At September 30, 2023, the Applicable Margin was 1.70 %, and SOFR was 5.32 %, subject to the 0.50 % SOFR floor as included in the Credit Agreement.

At March 31, 2024, the Applicable Margin was 1.85 %, and SOFR was 5.33 %, subject to the 0.50 % SOFR floor as included in the Credit Agreement.

The Credit Agreement contains various financial covenants, including a minimum tangible net worth, a leverage ratio, a minimum liquidity amount and an EBITDA to interest expense ratio.

The Credit Agreement contains various covenants that, among other restrictions, limit the amount of our additional debt and our ability to make certain investments.

At September 30, 2023, we were in compliance with all of the covenants contained in the Credit Agreement.

At March 31, 2024, we were in compliance with all of the covenants contained in the Credit Agreement.

Senior Notes Offering

On June 28, 2021, we issued $ 300.0 million aggregate principal amount of the 2029 Senior Notes in an offering to persons reasonably believed to be qualified institutional buyers in the United States pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to certain non-U.S.

persons in transactions outside the United States pursuant to Regulation S under the Securities Act.

On November 21, 2023, we issued $ 400.0 million aggregate principal amount of the 2028 Senior Notes in an offering to persons reasonably believed to be qualified institutional buyers in the United States pursuant to Rule 144A (“Rule 144A”) under the Securities Act of 1933, as amended (the “Securities Act”), and to certain non-U.S.

persons in transactions outside the

United States pursuant to Regulation S (“Regulation S”) under the Securities Act.

Interest on the 2028 Senior Notes accrues at a rate of 8.750 % per annum, payable semi-annually in arrears on June 15 and December 15 of each year, commencing on June 15, 2024.

The 2028 Senior Notes mature on December 15, 2028.

The terms of the 2028 Senior Notes are governed by an Indenture, dated as of July 6, 2018, and Fourth Supplemental Indenture thereto, dated as of November 21, 2023, as may be supplemented from time to time, among us, our subsidiaries that guarantee our obligations under the Credit Agreement and Regions Bank, as trustee.

persons in transactions outside the United States pursuant to Regulation S.

Interest on the 2029 Senior Notes accrues at a rate of 4.000 % per annum, payable semi-annually in arrears on January 15 and July 15 of each year.

2 unchanged sentences

Notes payable consist of the following (in thousands):

September 30, 2023 December 31, 2022

Notes payable under the Credit Agreement ($ 1.13 billion revolving credit facility at September 30, 2023) maturing in part on April 28, 2025 and in part on April 28, 2027;

March 31, 2024 December 31, 2023

Notes payable under the Credit Agreement ($ 1.205 billion revolving credit facility at March 31, 2024) maturing in part on April 28, 2025 and in part on April 28, 2028;

interest paid monthly at SOFR plus 1.85 %

3 unchanged sentences

300,000 300,000

8.750 % Senior Notes due December 15, 2028;

interest paid semi-annually at 8.750 %

400,000 400,000

Net debt issuance costs ( 19,835 ) ( 21,301 )

2 unchanged sentences

Interest activity, including other financing costs, for notes payable and financing arrangements for the periods presented is as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Interest incurred $ 29,363 $ 19,169

2 unchanged sentences

Cash paid for interest $ 21,286 $ 25,500

Included in interest incurred was amortization of deferred financing costs and applicable discounts for notes payable and financing arrangements of $ 2.4 million and $ 0.9 million for the three months ended September 30, 2023 and 2022, respectively, and $ 10.6 million and $ 2.5 million for the nine months ended September 30, 2023 and 2022, respectively.

Included in interest incurred was amortization of deferred financing costs and applicable discounts for notes payable and financing arrangements of $ 4.9 million and $ 3.1 million for the three months ended March 31, 2024 and 2023, respectively.

and state income tax returns in jurisdictions with varying statutes of limitations.

4 unchanged sentences

however, audit outcomes and the timing of audit adjustments are subject to significant uncertainty.

For the three months ended September 30, 2023, our effective tax rate of 25.1 % is higher than the Federal statutory rate primarily as a result of an increase in the rate for the compensation limitation under Section 162(m) of the Internal Revenue Code, as amended, and for state income taxes, net of the federal benefit, offset by the federal energy efficient homes tax credits.

For the nine months ended September 30, 2023, our effective tax rate of 23.8 % is higher than the Federal statutory rate primarily as a result of an increase in the rate for the compensation limitation under Section 162(m) of the Internal Revenue Code, as amended, and for state income taxes, net of the federal benefit, offset by a decrease in the rate for the deductions in excess of compensation cost for share-based payments and the federal energy efficient homes tax credits.

Income taxes paid were $ 20.2 million and $ 3.8 million for the three months ended September 30, 2023 and 2022, respectively.

Income taxes paid were $ 80.0 million and $ 56.2 million for the nine months ended September 30, 2023 and 2022, respectively.

For the three months ended March 31, 2024, our effective tax rate of 26.2 % is higher than the Federal statutory rate primarily as a result of an increase in the rate for state income taxes, net of the federal benefit, the compensation cost in excess of deductions for share-based payments, and the compensation limitation under Section 162(m) of the Internal Revenue Code, as amended, partially offset by a decrease in the rate for the federal energy efficient homes tax credits.

Income taxes paid were $ 12.1 million and $ 0.1 million for the three months ended March 31, 2024 and 2023, respectively.

Stock Repurchase Program

In February 2022, our Board of Directors (the “Board”) approved a $ 200.0 million increase to our previously authorized stock repurchase program, pursuant to which we may purchase up to $ 550.0 million of shares of our common stock through open market transactions, privately negotiated transactions or otherwise in accordance with applicable laws.

During the three and nine months ended September 30, 2023, we did no t repurchase any shares of our common stock.

During the three months ended September 30, 2022, we did not repurchase any shares of our common stock.

During the nine months ended September 30, 2022, we repurchased 892,916 shares of our common stock for $ 95.1 million to be held as treasury stock.

During the three months ended March 31, 2024, we repurchased 89,227 shares of our common stock for $ 10.0 million to be held as treasury stock.

During the three months ended March 31, 2023, we did not repurchase any shares of our common stock.

A total of 3,028,699 shares of our common stock has been repurchased since our stock repurchase program commenced.

As of September 30, 2023, we may purchase up to $ 211.5 million of shares of our common stock under our stock repurchase program.

As of March 31, 2024, we may purchase up to $ 201.5 million of shares of our common stock under our stock repurchase program.

The timing, amount and other terms and conditions of any repurchases of shares of our common stock under our stock repurchase program will be determined by our management at its discretion based on a variety of factors, including the market price of our common stock, corporate considerations, general market and economic conditions and legal requirements.

1 unchanged sentence

EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2023 and 2022:

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

Numerator (in thousands):

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The following table summarizes the activity of our time-vested restricted stock units (“RSUs”):

Nine Months Ended September 30,

Three Months Ended March 31,

Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value

4 unchanged sentences

Ending balance 167,870 $ 109.90 138,228 $ 113.02

We recognized $ 1.2 million and $ 0.9 million of stock-based compensation expense related to outstanding RSUs for the three months ended September 30, 2023 and 2022, respectively.

We recognized $ 3.6 million and $ 2.8 million of stock-based compensation expense related to outstanding RSUs for the nine months ended September 30, 2023 and 2022, respectively.

We recognized $ 1.4 million and $ 1.1 million of stock-based compensation expense related to outstanding RSUs for the three months ended March 31, 2024 and 2023, respectively.

Generally, the RSUs cliff vest on the third anniversary of the grant date and can only be settled in shares of our common stock.

At September 30, 2023, we had unrecognized compensation cost of $ 8.1 million related to unvested RSUs, which is expected to be recognized over a weighted average period of 2.0 years.

At March 31, 2024, we had unrecognized compensation cost of $ 11.3 million related to unvested RSUs, which is expected to be recognized over a weighted average period of 2.2 years.

Performance-Based Restricted Stock Units

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this market condition applies for amounts recorded above target.

The compensation expense associated with the PSU grants is

determined using the derived grant date fair value, based on a third-party valuation analysis, and expensed over the applicable period.

The compensation expense associated with the PSU grants is determined using the derived grant date fair value, based on a third-party valuation analysis, and expensed over the applicable period.

The PSUs vest upon the determination date for the actual results at the end of the three-year period and require that the recipients continue to be employed by us through the determination date.

The PSUs can only be settled in shares of our common stock.

The following table summarizes the activity of our PSUs for the nine months ended September 30, 2023:

Period Granted Performance Period Target PSUs Outstanding at December 31, 2022 Target PSUs Granted Target PSUs Forfeited Target PSUs Vested Target PSUs Outstanding at September 30, 2023 Weighted Average Grant Date Fair Value

The following table summarizes the activity of our PSUs for the three months ended March 31, 2024:

Period Granted Performance Period Target PSUs Outstanding at December 31, 2023 Target PSUs Granted Target PSUs Forfeited Target PSUs Vested Target PSUs Outstanding at March 31, 2024 Weighted Average Grant Date Fair Value

2021 2021 - 2023 43,159 — — ( 43,159 ) — $ 141.00

3 unchanged sentences

Total 178,906 70,947 — ( 43,159 ) 206,694

At September 30, 2023, management estimates that the recipients will receive approximately 125.0 %, 50.0 % and 80.7 % of the 2023, 2022 and 2021 target number of PSUs, respectively, at the end of the applicable three-year performance cycle based on projected performance compared to the target performance metrics.

We recognized $ 1.7 million and $ 0.4 million of total stock-based compensation expense related to outstanding PSUs for the three months ended September 30, 2023 and 2022, respectively.

We recognized $ 4.0 million and $ 4.9 million of total stock-based compensation expense related to outstanding PSUs for the nine months ended September 30, 2023 and 2022, respectively.

At March 31, 2024, management estimates that the recipients will receive approximately 100.0 %, 100.5 % and 0.0 % of the 2024, 2023 and 2022 target number of PSUs, respectively, at the end of the applicable three-year performance cycle based on projected performance compared to the target performance metrics.

We recognized $ 2.0 million and $ 1.6 million of total stock-based compensation expense related to outstanding PSUs for the three months ended March 31, 2024 and 2023, respectively.

The 2021 - 2023 performance period PSUs vested and issued on February 27, 2024, at 93.6 % of the target number.

At September 30, 2023, we had unrecognized compensation cost of $ 10.0 million, based on the probable amount, related to unvested PSUs, which is expected to be recognized over a weighted average period of 2.1 years.

At March 31, 2024, we had unrecognized compensation cost of $ 12.7 million, based on the probable amount, related to unvested PSUs, which is expected to be recognized over a weighted average period of 2.6 years.

FAIR VALUE DISCLOSURES

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We utilize fair value measurements to account for certain items and account balances within our consolidated financial statements.

Fair value measurements may also be utilized on a nonrecurring basis, such as for the impairment of long-lived assets.

Fair value measurements may also be utilized on a nonrecurring basis, such as for the impairment of long-lived

The fair value of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and certain accrued liabilities approximate their carrying amounts due to the short-term nature of these instruments.

As of September 30, 2023, the Credit Agreement’s carrying value approximates market value since it has a floating interest rate, which increases or decreases with market interest rates and our leverage ratio.

In order to determine the fair value of the 2029 Senior Notes, the future contractual cash flows are discounted at our estimate of current market rates of interest, which were determined based upon the average interest rates of similar senior notes within the homebuilding industry (Level 2 measurement).

The following table below shows the level and measurement of liabilities at September 30, 2023 and December 31, 2022 (in thousands):

September 30, 2023 December 31, 2022

As of March 31, 2024, the Credit Agreement’s carrying value approximates market value since it has a floating interest rate, which increases or decreases with market interest rates and our leverage ratio.

In order to determine the fair value of each of the 2029 Senior Notes and the 2028 Senior Notes, the future contractual cash flows are discounted at our estimate of current market rates of interest, which were determined based upon the average interest rates of similar senior notes within the homebuilding industry (Level 2 measurement).

The following table below shows the level and measurement of liabilities at March 31, 2024 and December 31, 2023 (in thousands):

March 31, 2024 December 31, 2023

Fair Value Hierarchy Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value

1 unchanged sentence

Level 2 $ 300,000 $ 296,908 $ 300,000 $ 296,381

(1) See Note 4 for more details regarding the offering of the 2029 Senior Notes.

2028 Senior Notes (1)

Level 2 $ 400,000 $ 442,706 $ 400,000 $ 486,306

(1) See Note 4 for more details regarding the offerings of the 2029 Senior Notes and the 2028 Senior Notes.

COMMITMENTS AND CONTINGENCIES

14 unchanged sentences

The following is a summary of our land purchase deposits included in pre-acquisition costs and deposits (in thousands, except for lot count):

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Land deposits and option payments (1)

4 unchanged sentences

15,382 15,750

(1) Includes land banking financing arrangements, see Notes 2 and 3 for more details regarding real estate not owned.

As of September 30, 2023 and December 31, 2022, approximately $ 13.0 million and $ 12.8 million, respectively, of the land deposits are related to purchase contracts to deliver finished lots that are refundable under certain circumstances, such as feasibility or specific performance, and secured by mortgages or letters of credit or guaranteed by the seller or its affiliates.

(1) Includes land banking financing arrangements, see Note 2 and Note 3 for more details regarding real estate not owned.

As of March 31, 2024 and December 31, 2023, approximately $ 14.6 million and $ 11.4 million, respectively, of the land deposits are related to purchase contracts to deliver finished lots that are refundable under certain circumstances, such as feasibility or specific performance, and secured by mortgages or letters of credit or guaranteed by the seller or its affiliates.

Lease Obligations

2 unchanged sentences

We have non-cancelable operating leases primarily associated with our corporate and regional office facilities.

Operating lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the terms.

Operating lease expense is

recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the terms.

Variable lease costs such as common area costs and property taxes are expensed as incurred.

2 unchanged sentences

As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

ROU assets, as included in other assets on the consolidated balance sheets, were $ 5.0 million and $ 4.9 million at September 30, 2023 and December 31, 2022, respectively.

Lease obligations, as included in accrued expenses and other liabilities on the consolidated balance sheets, were $ 5.3 million and $ 5.2 million at September 30, 2023 and December 31, 2022, respectively.

Operating lease cost, as included in general and administrative expense in our consolidated statements of operations, was $ 0.7 million and $ 0.5 million for the three months ended September 30, 2023 and 2022, respectively.

Operating lease cost, as included in general and administrative expense in our consolidated statements of operations, was $ 1.9 million and $ 1.6 million for the nine months ended September 30, 2023 and 2022, respectively.

Cash paid for amounts included in the measurement of lease liabilities for operating leases during the nine months ended September 30, 2023 and 2022 was $ 1.4 million and $ 1.3 million, respectively.

As of September 30, 2023, the weighted-average discount rate was 5.8 % and our weighted-average remaining life was 2.4 years.

We do not have any significant lease contracts that have not yet commenced at September 30, 2023.

The table below shows the future minimum payments under non-cancelable operating leases at September 30, 2023 (in thousands):

ROU assets, as included in other assets on the consolidated balance sheets, were $ 4.7 million and $ 4.6 million as of March 31, 2024 and December 31, 2023, respectively.

Lease obligations, as included in accrued expenses and other liabilities on the consolidated balance sheets, were $ 5.1 million and $ 4.9 million as of March 31, 2024 and December 31, 2023, respectively.

Operating lease cost, as included in general and administrative expense in our consolidated statements of operations, was $ 0.4 million and $ 0.6 million for the three months ended March 31, 2024 and 2023, respectively.

Cash paid for amounts included in the measurement of lease liabilities for operating leases during the three months ended March 31, 2024 and 2023 was $ 0.6 million and $ 0.5 million, respectively.

As of March 31, 2024, the weighted-average discount rate was 5.9 % and our weighted-average remaining life was 2.4 years.

We do not have any significant lease contracts that have not yet commenced at March 31, 2024.

The table below shows the future minimum payments under non-cancelable operating leases at March 31, 2024 (in thousands):

Year Ending December 31, Operating leases

3 unchanged sentences

Bonding and Letters of Credit

We have outstanding letters of credit and performance and surety bonds totaling $ 382.9 million (including $ 28.1 million of letters of credit issued under the Credit Agreement) and $ 368.1 million (including $ 33.4 million of letters of credit issued under the 2022 Credit Agreement) at September 30, 2023 and December 31, 2022, respectively, related to our obligations for site improvements at various projects.

We have outstanding letters of credit and performance and surety bonds totaling $ 351.7 million (including $ 22.5 million of letters of credit issued under the Credit Agreement) and $ 357.0 million (including $ 28.1 million of letters of credit issued under the Credit Agreement) at March 31, 2024 and December 31, 2023, respectively, related to our obligations for site improvements at various projects.

Management does not believe that draws upon the letters of credit, surety bonds or financial guarantees if any, will have a material effect on our consolidated financial position, results of operations or cash flows.

Investment in Unconsolidated Entities

As of September 30, 2023, we had one equity-method land joint venture and two additional joint ventures engaged in mortgage and insurance activities that primarily provide services to our homebuyers.

As of September 30, 2023 and December 31, 2022, we have a total of $ 16.5 million and $ 11.2 million, respectively, within other assets on the balance sheet relating to our investment in joint ventures associated with our operations.

As of March 31, 2024, we had one equity-method land joint venture and two additional joint ventures engaged in mortgage and insurance activities that primarily provide services to our homebuyers.

As of March 31, 2024 and December 31, 2023, we have a total of $ 21.6 million and $ 21.5 million, respectively, within other assets on the balance sheet relating to our investment in joint ventures associated with our operations.

Contributions into the unconsolidated entities are for the use of investing in certain real estate transactions and residential mortgage services, respectively.

Income associated with our investment in unconsolidated entities during the three and nine months ended September 30, 2023 was $ 3.2 million and $ 8.5 million, respectively.

Income associated with our investment in unconsolidated entities during the three and nine months ended September 30, 2022 was $ 2.2 million and $ 4.0 million, respectively.

Income associated with our investment in unconsolidated entities during the three months ended March 31, 2024 and 2023 was $ 2.0 million and $2.2 million, respectively.

Home Sales Revenues

1 unchanged sentence

The following table presents our home sales revenues disaggregated by revenue stream (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Retail home sales revenues $ 362,289 $ 456,177

5 unchanged sentences

We operate one principal homebuilding business that is organized and reports by division.

We have seven operating segments (our Central, Midwest, Southeast, Mid-Atlantic, Northwest, West, and Florida divisions) that we aggregate into five qualifying reportable segments at September 30, 2023:

We have seven operating segments (our Central, Midwest, Southeast, Mid-Atlantic, Northwest, West, and Florida divisions) that we aggregate into five qualifying reportable segments at March 31, 2024:

our Central, Southeast, Northwest, West, and Florida divisions.

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Financial information relating to our reportable segments is as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Central $ 103,736 $ 150,380

13 unchanged sentences

Total net income before income taxes $ 23,094 $ 32,348

(1) The Corporate balance consists of general and administration unallocated costs for various shared service functions and non-strategic other income, as well as our warranty reserve.

(1) The Corporate balance consists of general and administration unallocated costs for various shared service functions offset by non-strategic other income, as well as our warranty reserve.

Actual warranty expenses are reflected within the reportable segments.

Additionally, for the three and nine months ended September 30, 2022, the balance includes the $ 7.1 million gain on the sale of the three-year interest rate cap of LIBOR prior to its expiration.

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Central $ 1,069,887 $ 1,026,303

6 unchanged sentences

Total assets $ 3,522,886 $ 3,407,851

(1) The Corporate balance consists primarily of cash and investments in unconsolidated entities as of September 30, 2023.

Additionally, the Corporate balance consists of cash, investments in unconsolidated entities and tax receivables as of December 31, 2022.

(1) The Corporate balance consists primarily of cash and investments in unconsolidated entities.

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 1. Financial Statements