What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-26 compared with 2024-02-20 · 112 added, 93 removed, 642 unchanged (24% of the section changed)

63 unchanged sentences

Retained earnings 2,085,787 1,889,716

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

Treasury stock, at cost, 4,247,339 shares and 3,939,472 shares, respectively

( 385,996 ) ( 355,022 )

12 unchanged sentences

Operating income 212,146 233,255 390,107

Loss on extinguishment of debt — — 13,976

Other income, net ( 46,767 ) ( 28,499 ) ( 28,009 )

24 unchanged sentences

Net income — — — 199,227 — 199,227

Stock repurchase — — — — ( 95,102 ) ( 95,102 )

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

4 unchanged sentences

Net income — — — 196,071 — 196,071

Stock repurchase including excise tax

— — — — ( 30,974 ) ( 30,974 )

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

11 unchanged sentences

Net income $ 196,071 $ 199,227 $ 326,567

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

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

Equity in income of unconsolidated entities ( 13,302 ) ( 12,834 ) ( 5,507 )

1 unchanged sentence

Depreciation and amortization 3,108 2,408 1,576

Loss on extinguishment of debt — — 13,976

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

9 unchanged sentences

Accrued expenses and other liabilities 14,126 ( 18,256 ) 58,052

Net cash provided by (used in) operating activities ( 56,968 ) ( 370,451 ) 21,700

Net cash used in operating activities ( 143,739 ) ( 56,968 ) ( 370,451 )

Cash flows from investing activities:

Purchases of property and equipment ( 1,952 ) ( 1,443 ) ( 1,187 )

Proceeds from sale of property and equipment 25,441 — —

Investment in unconsolidated entities ( 7,869 ) ( 17,889 ) ( 5,016 )

Return of capital from unconsolidated entities — 5,684 235

Payment for business acquisitions — — ( 66,970 )

Net cash used in investing activities ( 13,648 ) ( 5,968 ) ( 70,391 )

Net cash provided by (used in) investing activities 15,620 ( 13,648 ) ( 5,968 )

Cash flows from financing activities:

3 unchanged sentences

Payments on financing arrangements ( 67,850 ) ( 95,027 ) ( 8,813 )

Redemption premium — — ( 10,314 )

Loan issuance costs ( 5,982 ) ( 14,322 ) ( 4,235 )

12 unchanged sentences

We engage in the development of communities and the design, construction and sale of new homes in markets in Texas, Arizona, Florida, Georgia, New Mexico, Colorado, North Carolina, South Carolina, Washington, Tennessee, Minnesota, Oklahoma, Alabama, California, Oregon, Nevada, West Virginia, Virginia, Pennsylvania, Maryland and Utah.

On May 6, 2021, we acquired certain real estate assets owned by KenRoe Inc.

and its affiliated entities, including R Home LLC and Paxmar Land Development (collectively, “KenRoe”), and assumed certain related liabilities.

As a result of the KenRoe acquisition, we expanded our Minnesota presence in the Minneapolis market.

We acquired approximately 100 homes under construction and more than 3,000 owned and controlled lots.

The total purchase price for the KenRoe assets, primarily consisting of inventory, was approximately $ 27.3 million in cash, subject to certain potential post-closing adjustments.

The acquisition was accounted for in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”).

Our purchase accounting for KenRoe as of December 31, 2022 was final.

On July 14, 2021, we acquired the real estate assets of Buffington Homebuilding Group, Ltd.

(“Buffington”) and assumed certain related liabilities.

The total purchase price for the Buffington assets, primarily consisting of inventory, was approximately $ 39.1 million in cash, subject to certain potential post-closing adjustments.

This acquisition further expands our land position in the Austin, Texas market.

The acquired assets include over 100 homes under construction, and more than 500 owned and controlled lots.

The acquisition is accounted for in accordance with ASC 805.

Our purchase accounting for Buffington as of December 31, 2022 was final .

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Actual individual community lives will vary based on the size of the community, the sales absorption rate, and whether the property was purchased as raw land or finished lots.

We have land banking financing arrangements with a third-party land banker to repurchase land that we sold to the land banker as a method of acquiring finished lots in staged takedowns.

We have land banking financing arrangements with a third-party land banker to repurchase land that we sold to the land banker as a method of acquiring finished lots in staged takedowns, while limiting risk and minimizing the use of funds from our available cash or other financing sources.

In consideration for this repurchase option, we paid a non-refundable commitment fee.

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Interest and financing costs incurred under our debt obligations and financing arrangements, as more fully discussed in Note 6 and Note 5 , respectively, are capitalized to qualifying real estate projects under development and homes under construction.

In accordance with ASC Topic 360, Property, Plant, and Equipment , real estate inventory is evaluated for indicators of impairment by each community during each reporting period.

In accordance with Accounting Standards Codification (“ASC”) Topic 360, Property, Plant, and Equipment , real estate inventory is evaluated for indicators of impairment by each community during each reporting period.

In conducting its review for indicators of impairment on a community level, management evaluates, among other things, the margins on homes that have been closed, communities with slow moving inventory, projected margins on future home sales over the life of the community, and the estimated fair value of the land.

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Therefore, whenever we enter into a land option or purchase contract with an entity and make a nonrefundable deposit, we may have a variable interest in a variable interest entity (“VIE”).

In accordance with ASC 810, we perform ongoing reassessments of

whether we are the primary beneficiary of a VIE and would consolidate the VIE if we are deemed to be the primary beneficiary.

In accordance with ASC 810, we perform ongoing reassessments of whether we are the primary beneficiary of a VIE and would consolidate the VIE if we are deemed to be the primary beneficiary.

As of December 31, 2024 and 2023, we were not deemed to be the primary beneficiary for any VIEs associated with non-refundable land deposits.

1 unchanged sentence

Deferred loan costs represent debt issuance costs related to a recognized debt liability and are presented in the balance sheet as a direct deduction from the carrying amount of that debt liability.

Other assets consist primarily of municipal utility district reimbursements, prepaid insurance, prepaid expenses, financing arrangement commitment fees, right-of-use (“ROU”) assets, investments in unconsolidated entities, land held for sale, forward commitments and other receivables.

Our prepaid insurance and prepaid expenses were $ 6.9 million and $ 8.3 million as of December 31, 2023 and 2022, respectively.

Investment in Unconsolidated Entities

Other assets consist primarily of land held for sale, municipal utility district reimbursements, prepaid insurance, prepaid expenses, financing arrangement commitment fees, right-of-use (“ROU”) assets, investments in unconsolidated entities, forward commitments and other receivables.

Prepaid insurance and prepaid expenses were $ 14.1 million and $ 6.9 million as of December 31, 2024 and 2023, respectively.

We have investments in unconsolidated entities with independent third parties.

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Maintenance and repair costs are expensed as incurred.

We are lessors of the homes representing rental properties.

Our leasing contracts are typically for terms of one year .

Impairments of long-lived assets are determined periodically when indicators of impairment are present.

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Future direct warranty costs are accrued and charged to cost of sales in the period when the related home is closed.

Our warranty liability is based upon historical warranty cost experience and is adjusted as appropriate to reflect qualitative risks

associated with the types of homes built, the geographic areas in which they are built, and potential impacts of our continued expansion.

Our warranty liability is based upon historical warranty cost experience and is adjusted as appropriate to reflect qualitative risks associated with the types of homes built, the geographic areas in which they are built, and potential impacts of our continued expansion.

Warranty reserves are reviewed quarterly to assess the reasonableness and adequacy and adjusted, as needed, to reflect changes in trends and historical data as information becomes available.

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Once the performance target outcome is determined to be probable, the cumulative expense is adjusted, as needed, to recognize compensation expense on a straight-line basis over the award’s requisite service period.

Recently Adopted Accounting Pronouncement

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting - (Topic 280):

Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which is intended to improve reportable segment disclosures.

ASU 2023-07 expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss.

It also requires disclosure of the amount and description of the composition of other segment items and interim disclosures of a reportable segment’s profit or loss and assets.

The standard is effective for the Company’s annual periods beginning in fiscal year 2024 and interim periods beginning in the first quarter of fiscal year 2025 on a retrospective basis to all periods presented.

We applied the amendment retrospectively to all periods presented.

The adoption of ASU 2023-07 impacted the presentation of the performance measures in the tables in “Segment Information” under Note 14 .

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):

In December 2023, the FASB issued 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.

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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.

In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses” (“ASU 2024-03”), which requires disclosure of certain costs and expenses on an interim and annual basis in the notes to the financial statements.

The amendments in this update are to be applied on a prospective basis, with the option for retrospective application.

Early adoption is permitted.

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

REAL ESTATE INVENTORY

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Property and equipment, net $ 57,038 $ 45,522

During the year ended December 31, 2023, we transferred $ 13.5 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.

Our leasing contracts are typically for terms of one year.

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

During the years ended December 31, 2024 and 2023, we transferred $ 25.1 million and $ 13.5 million, respectively, of home assets from real estate

inventory to rental properties within property and equipment, net.

During the year ended December 31, 2024, we had a bulk sale of 103 leased, single family homes and realized gains of $ 14.0 million included in Other income, net.

Depreciation expense incurred for the years ended December 31, 2024, 2023 and 2022 was $ 3.1 million, $ 2.4 million and $ 1.6 million, respectively.

1 unchanged sentence

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

Land banking financing arrangements

104,459 141,792

Real estate inventory development and construction payable $ 48,019 $ 71,193

Accrued compensation, bonuses and benefits 22,550 12,900

Taxes payable 43,076 14,694

Land banking financing arrangements 37,140 104,459

Accrued compensation, bonuses and benefits 18,653 22,550

Warranty reserve 16,100 13,600

8 unchanged sentences

Principal payments on these financing arrangements will generally coincide with the repurchase of lot takedowns from the land banker.

We expect to complete the repurchase of all lots via takedowns associated with these transactions over the course of approximately one to three years .

We expect to complete the repurchase of all lots via takedowns associated with these transactions over the course of approximately one to two years .

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.

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.

1 unchanged sentence

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):

6 unchanged sentences

Revolving 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”).

On October 9, 2024, we entered into a Fifth Amendment to Fifth Amended and Restated Credit Agreement with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent (the “Fifth 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 Fifth 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 matures on April 28, 2028 with respect to $ 1.085 billion, or 90.0 %, of the $ 1.205 billion of commitments thereunder and on April 28, 2025 with respect to 10.0 % of the commitments thereunder.

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”) and our 8.750 % Senior Notes due 2028 (the “2028 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 8.750 % Senior Notes due 2028 (the “2028 Senior Notes”), our 4.000 % Senior Notes due 2029 (the “2029 Senior Notes”) and our 7.000 % Senior Notes due 2032 (the “2032 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 December 31, 2024, the borrowing base under the Credit Agreement was $ 1.205 billion, of which the maximum available to borrow was $ 1.8 billion.

As of December 31, 2023, borrowings under the Credit Agreement and the outstanding principal amount of the 2029 Senior Notes and the 2028 Senior Notes totaled $ 1.3 billion, $ 28.1 million of letters of credit were outstanding and $ 354.8 million was available to borrow under the Credit Agreement.

As of December 31, 2024, borrowings under the Credit Agreement and the outstanding principal amount of the 2028 Senior Notes, the 2029 Senior Notes and the 2032 Senior Notes totaled approximately $ 1.5 billion, $ 24.5 million of letters of credit were outstanding and $ 270.5 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.

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persons in transactions outside the United States pursuant to Regulation S (“Regulation S”) under the Securities Act.

Interest on the 2032 Senior Notes accrues at a rate of 7.000 % per annum, payable semi-annually in arrears on May 15 and November 15 of each year, commencing on May 15, 2025.

The 2032 Senior Notes mature on November 15, 2032.

The terms of the 2032 Senior Notes are governed by an Indenture, dated as of July 6, 2018, and Fifth Supplemental Indenture thereto, dated as of November 15, 2024, 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.

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 and to certain non-U.S.

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

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.

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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.

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.

The 2029 Senior Notes mature on July 15, 2029.

4 unchanged sentences

$ 401,946 $ 569,633

8.750 % Senior Notes due December 15, 2028;

interest paid semi-annually at 8.750 %.

400,000 400,000

4.000 % Senior Notes due July 15, 2029;

1 unchanged sentence

300,000 300,000

8.750 % Senior Notes due December 15, 2028;

7.000 % Senior Notes due November 15, 2032;

interest paid semi-annually at 7.000 %.

2 unchanged sentences

As of December 31, 2024, the annual aggregate maturities of notes payable during each of the next five fiscal years are as follows (in thousands):

2025 $ 40,028

Thereafter 400,000

Total notes payable 1,501,946

Debt issuance costs ( 21,301 )

Net debt issuance costs ( 21,228 )

Net notes payable $ 1,480,718

30 unchanged sentences

The 2024 effective tax rate differs from the federal statutory rate primarily due to state income tax expense on current year earnings and non-deductible salaries related to Section 162(m) of the U.S.

Internal Revenue Code, as amended (the “Code”), partially offset by the deductions in excess of compensation cost (“windfalls”) for share-based payments and benefits associated with the federal energy efficient homes tax credits enacted into law in December 2019 (the “45L Tax Credits”).

effective tax rate differs from the federal statutory rate primarily due to state income tax expense on current year earnings and non-deductible salaries related to Section 162(m) of the Code, partially offset by benefits associated with the 45L Tax Credits and the windfalls for share-based payments.

The 2021 effective tax rate differs from the federal statutory rate primarily due to benefits associated with the 45L Tax Credits and the windfalls for share-based payments, partially offset by state income tax expense on current year earnings and non-deductible salaries related to Section 162(m) of the Code.

Income tax expense for 2023, 2022 and 2021 includes a benefit of $ 1.2 million, $ 9.1 million and $ 16.2 million, respectively, associated with the extension of federal energy efficient homes tax credits.

The federal energy efficient homes tax credit provision applies to qualifying homes closed through December 31, 2023.

Internal Revenue Code, as amended (the “Code”), partially offset by benefits associated with the federal energy efficient homes tax credits (the “45L Tax Credits”).

The 2023 effective tax rate differs from the federal statutory rate primarily due to state income tax expense on current year earnings and non-deductible salaries related to Section 162(m) of the Code, partially offset by the windfalls for share-based payments and benefits associated with the 45L Tax Credits.

The 2022 effective tax rate differs from the federal statutory rate primarily due to state income tax expense on current year earnings and non-deductible salaries related to Section 162(m) of the Code, partially offset by benefits associated with the 45L Tax Credits and the windfalls for share-based payments.

Income tax expense for 2024, 2023 and 2022 includes a benefit of $ 1.8 million, $ 1.2 million and $ 9.1 million, respectively, associated with the 45L Tax Credits.

The 45L Tax Credits provision applies to qualifying homes closed through December 31, 2024.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

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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 years ended December 31, 2024 and 2022, we repurchased 307,867 shares of our common stock for $ 30.8 million to be held as treasury stock, excluding the excise taxes accrued on our share repurchases as a result of the Inflation Reduction Act of 2022, and 892,916 shares of our common stock for $ 95.1 million to be held as treasury stock, respectively.

During the year ended December 31, 2023, we did not repurchase any shares of our common stock.

During the years ended December 31, 2022

and 2021, we repurchased 892,916 shares of our common stock for 95.1 million to be held as treasury stock and 1,288,563 shares of our common stock for $ 193.8 million to be held as treasury stock, respectively.

A total of 3,247,339 shares of our common stock has been repurchased since our stock repurchase program commenced.

As of December 31, 2024, we may purchase up to $ 180.7 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.

Our stock repurchase program may be modified, discontinued or suspended at any time.

Earnings Per Share

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We recognized $ 5.2 million, $ 4.9 million, and $ 3.6 million of stock-based compensation expense related to outstanding RSUs for the years ended December 31, 2024, 2023 and 2022, respectively.

At December 31, 2023, we had unrecognized compensation cost of $ 7.8 million related to unvested RSUs, which is expected to be recognized over a weighted average period of 1.8 years.

At December 31, 2024, we had unrecognized

compensation cost of $ 11.0 million related to unvested RSUs, which is expected to be recognized over a weighted average period of 2.1 years.

Performance-Based Restricted Stock Units

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At December 31, 2024, management estimates that the recipients will receive approximately 100 %, 73.3 % and 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 $ 2.9 million, $ 4.5 million, and $ 9.0 million of total stock-based compensation expense related to PSUs for the years ended December 31, 2023, 2022 and 2021, respectively.

The 2020 - 2022 performance period PSUs vested and issued on February 27, 2023 at 200 % of the target number.

We recognized $ 4.3 million, $ 2.9 million and $ 4.5 million of total stock-based compensation expense related to outstanding PSUs for the years ended December 31, 2024, 2023 and 2022, respectively.

The 2021 - 2023 performance period PSUs vested and issued on March 8, 2024 at 93.6 % of the target number.

At December 31, 2024, we had unrecognized compensation cost of $ 8.2 million, based on the probable amount, related to unvested PSUs, which is expected to be recognized over a weighted average period of 1.7 years.

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We recognized $ 0.9 million, $ 0.9 million and $ 1.0 million in stock compensation expense related to the ESPP for 2024, 2023 and 2022, respectively.

The ESPP contributions are not refundable (other than in the case of termination of employment) and, therefore, the shares purchasable with the amounts withheld are included in weighted-average shares outstanding for both basic

and diluted earnings per share.

The maximum aggregate number of shares of our common stock which may be issued pursuant to the ESPP is 500,000 shares, and as of December 31, 2024, 51,921 shares of our common stock remain available for issuance under the ESPP.

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As of December 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).

In order to determine the fair value of each of the 2028 Senior Notes, the 2029 Senior Notes and the 2032 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 December 31, 2024 and 2023 (in thousands):

2 unchanged sentences

2028 Senior Notes (1)

$ 400,000 $ 436,783 $ 400,000 $ 486,306

2029 Senior Notes (1)

Level 2 $ 300,000 $ 274,692 $ 300,000 $ 296,381

1 unchanged sentence

$ 400,000 $ 421,247 $ — $ —

(1) See Note 6 for more details regarding the offerings of the 2029 Senior Notes and the 2028 Senior Notes.

RELATED PARTY TRANSACTIONS

Land Purchases from Affiliates

We did not enter into or complete any related party transactions during the years ended December 31, 2023 and 2022.

For the year ended December 31, 2021, we completed a land purchase contract to purchase a total of 110 finished lots in Pasco County, Florida, from an affiliate of one of our directors for a total base purchase price of approximately $ 4.0 million.

For the year ended December 31, 2021, we completed a land purchase contract to purchase a total of 25 finished lots in Burnet County, Texas, from an affiliate of a family member of our chief executive officer for a total base purchase price of approximately $ 2.5 million.

(1) See Note 6 for more details regarding the offerings of the 2028 Senior Notes, the 2029 Senior Notes and the 2032 Senior Notes.

RETIREMENT BENEFITS

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Salary deferrals are allowed in amounts up to 100 % of an eligible employee’s salary, not to exceed the maximum permitted by law.

We may make a discretionary match of

up to 100 % of the first 4 % of an eligible employee’s deferral, not to exceed the maximum allowed by law.

We may make a discretionary match of up to 100 % of the first 4 % of an eligible employee’s deferral, not to exceed the maximum allowed by law.

For the years ended December 31, 2024, 2023 and 2022, our matching contributions were $ 4.5 million, $ 4.4 million and $ 4.5 million, respectively.

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In the opinion of management, these matters will not have a material effect on our consolidated financial position, results of operations or cash flows.

Class Action Lawsuit

On May 23, 2023, a class action lawsuit was filed by Rikki McAlister, a former sales representative, on behalf of herself and all others similarly situated, in the District Court of Arapahoe County, State of Colorado, against LGI Homes Corporate,

LLC, a subsidiary of the Company, alleging violations of Colorado employment law, including failure to pay overtime compensation, failure to provide rest periods and improper deductions from wages.

On November 21, 2023, the lawsuit was removed to the United States District Court for the District of Colorado, which granted the plaintiff’s motion for class certification on December 6, 2024.

The plaintiff in the lawsuit is requesting as damages, on behalf of the plaintiff and all members of the class, unpaid back wages, unpaid minimum wages, unpaid overtime compensation, reimbursement for unlawfully-deducted wages, compensation for rest periods not provided, certain mandatory and additional penalties, reasonable attorney’s fees and incurred costs.

We have responded to the complaint and intend to defend ourselves vigorously against the allegations.

Land Deposits

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Lease Obligations

We recognize lease obligations and associated right-of-use (“ROU”) assets for our existing non-cancelable leases.

We recognize lease obligations and associated ROU assets for our existing non-cancelable leases.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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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 $ 4.6 million and $ 4.9 million as of December 31, 2023 and 2022, respectively.

ROU assets, as included in other assets on the consolidated balance sheets, were $ 5.6 and $ 4.6 million as of December 31, 2024 and 2023, respectively.

Lease obligations, as included in accrued expenses and other liabilities on the consolidated balance sheets, were $ 6.1 million and $ 4.9 million as of December 31, 2024 and 2023, respectively.

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Bonding and Letters of Credit

We have outstanding letters of credit and performance and surety bonds totaling $ 357.0 million (including $ 28.1 million of letters of credit issued under the Credit Agreement) and $ 368.1 million (including $ 9.1 million of letters of credit issued under our credit agreement then in effect) at December 31, 2023 and 2022, respectively, related to our obligations for site improvements at various projects.

We have outstanding letters of credit and performance and surety bonds totaling $ 377.5 million (including $ 24.5 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 our credit agreement then in effect) at December 31, 2024 and 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 December 31, 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 December 31, 2024, we had two equity-method real estate joint ventures and four additional joint ventures engaged primarily to provide services, such as mortgage and insurance, to our homebuyers.

As of December 31, 2024 and 2023, we have a total of $ 28.3 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 was $ 12.8 million and $ 5.5 million, within other income, net on the statement of operations for the years ended December 31, 2023 and 2022, respectively.

We did not have any income recognized for our investment in unconsolidated entities for the year ended December 31, 2021.

Income associated with our investment in unconsolidated entities was $ 13.3 million, $ 12.8 million and $ 5.5 million, within other income, net on the statement of operations for the years ended December 31, 2024, 2023 and 2022, respectively.

Revenue Recognition

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

These segments reflect the way the Company evaluates its business performance and manages its operations.

The Central division is our largest division and comprised approximately 31.0 %, 43.9 % and 41.1 % of total home sales revenues for the years ended December 31, 2023, 2022 and 2021, respectively.

In accordance with ASC 280, Segment Reporting , operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision-makers (“CODMs”) in deciding how to allocate resources and in assessing performance.

The CODMs primarily evaluate performance based on the number of homes closed, gross margin and average sales price per home closed.

These segments reflect the way we evaluate our business performance and manage our operations.

For reporting purposes, our homebuilding operations are aggregated into five reportable segments as follows:

Texas, Oklahoma, Minnesota

Georgia, Alabama, Tennessee, North Carolina, South Carolina,

West Virginia, Maryland, Pennsylvania, Virginia

Colorado, Washington, Oregon

Arizona, New Mexico, Nevada, California, Utah

In determining the most appropriate reportable segments, we consider operating segments’ economic and other characteristics, including home floor plans, average selling prices, gross margin percentage, geographical proximity, production construction processes, suppliers, subcontractors, regulatory environments, customer type and underlying demand and supply.

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Operating results for each segment may not be indicative of the results for such segment had it been an independent, stand-alone entity for the periods presented.

Our Chief Executive Officer and Chairman of the Board and our President and Chief Operating Officer have been determined to be our chief operating decision-makers (“CODMs”).

The CODMs primarily evaluate the segments’ operating performance and allocate resources for all of our reportable segments based on net income before income taxes.

For all of the segments, the CODMs use segment income before income tax expense in the annual budget and forecasting process.

These operating results are reviewed against actual and forecasted figures, with income before income taxes being the key operating metric used to measure profit or loss.

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

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Total home sales revenues $ 2,202,598 $ 2,358,580 $ 2,304,455

Net income (loss) before income taxes:

Cost of sales:

Central $ 433,932 $ 556,664 $ 716,485

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Florida 287,129 340,963 210,518

Total cost of sales $ 1,669,310 $ 1,816,393 $ 1,657,855

Other segment items (1) :

Central $ 63,988 $ 87,728 $ 83,563

Southeast 63,265 61,235 49,065

Northwest 33,277 29,850 26,959

West 61,036 47,429 37,981

Florida 51,274 49,524 34,964

Corporate (2)

1,535 4,667 ( 4,048 )

Total other segment items

$ 274,375 $ 280,433 $ 228,484

Net income (loss) before income taxes:

Central $ 66,688 $ 86,296 $ 211,796

Southeast 85,279 78,994 87,767

Northwest 25,913 23,684 50,786

West 52,213 29,123 26,314

Florida 30,355 48,324 37,405

( 1,535 ) ( 4,667 ) 4,048

Total net income before income taxes $ 258,913 $ 261,754 $ 418,116

(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.

Actual warranty expenses are reflected within the reportable segments.

(1) Other segment items reflects other sources of income and expense, including selling expenses, general and administrative expenses and other income, net.

(2) The Corporate balance consists of general and administrative unallocated costs for various shared service functions and non-strategic other income.

Additionally, for the year ended December 31, 2022, the Corporate balance includes the $ 7.1 million gain on the sale of the three-year interest rate cap of LIBOR prior to its expiration.

Also, for the year ended December 31, 2021, the Corporate balance includes $ 14.0 million of loss on extinguishment of debt.

Central $ 1,096,500 $ 1,026,303

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

Additionally, at December 31, 2022, the Corporate balance includes tax receivables.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data