What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-17 compared with 2021-02-19 · 145 added, 180 removed, 1054 unchanged (24% of the section changed)

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Opinion on the Financial Statements

We have audited the accompanying balance sheets of M/I Homes, Inc.

and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

We have audited the accompanying consolidated balance sheets of M/I Homes, Inc.

and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

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Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

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This includes, among other things, margins on sales contracts in backlog;

the margins on homes that have

been delivered;

the margins on homes that have been delivered;

expected changes in margins with regard to future home sales over the life of the community and with regard to future land sales;

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Our audit procedures related to the Company’s identification of impairment indicators for inventory included the following, among others:

• We tested the operating effectiveness of controls over management’s evaluation of impairment indicators.

• We tested the effectiveness of controls over management’s evaluation of impairment indicators.

• We evaluated the reasonableness of management’s assessment of impairment indicators by:

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Selling 198,610 179,535 154,384

Acquisition and integration costs — — 1,700

Equity in income from joint venture arrangements ( 466 ) ( 311 ) ( 312 )

Other income ( 2,046 ) ( 466 ) ( 311 )

Interest 2,156 9,684 21,375

Loss on early extinguishment of debt 9,072 — —

Total costs and expenses $ 3,236,773 $ 2,736,102 $ 2,334,265

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Obligation for consolidated inventory not owned 2,768 9,914

Notes payable bank - homebuilding operations — 66,000

Notes payable bank - financial services operations 266,160 225,634

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Net income — — — 127,587 — 127,587

Common share issuance for conversion of convertible notes 628,515 6 20,303 — — 20,309

Repurchase of common shares ( 201,088 ) — — — ( 5,150 ) ( 5,150 )

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Other liabilities 27,682 20,465 ( 11,005 )

Net cash provided by (used in) operating activities 168,334 65,631 ( 2,592 )

Net cash (used in) provided by operating activities ( 16,823 ) 168,334 65,631

INVESTING ACTIVITIES:

Purchase of property and equipment ( 25,301 ) ( 11,677 ) ( 4,526 )

Acquisition — — ( 100,960 )

Return of capital from joint venture arrangements 1,213 2,477 812

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FINANCING ACTIVITIES:

Repayment of senior notes due 2021 ( 300,000 ) — —

Net proceeds from issuance of senior notes due 2028 400,000 — —

Repayment of convertible senior subordinated notes — — ( 65,941 )

Repayment of senior notes ( 250,000 ) ( 300,000 ) —

Proceeds from issuance of senior notes 300,000 400,000 —

Proceeds from bank borrowings - homebuilding operations — 306,800 696,500

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Net proceeds from (net repayments of) bank borrowings - financial services operations 40,526 88,730 ( 16,264 )

Principal repayments of notes payable-other and community development

Proceeds from (principal repayments of) notes payable-other and community development

district bond obligations 478 ( 1,756 ) ( 110 )

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Net cash provided by (used in) financing activities 44,103 120,263 ( 53,483 )

Net increase (decrease) in cash, cash equivalents and restricted cash 254,727 ( 15,446 ) ( 130,174 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 24,442 ) 254,727 ( 15,446 )

Cash, cash equivalents and restricted cash balance at beginning of period 260,810 6,083 21,529

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Distribution of single-family lots from joint venture arrangements $ 28,064 $ 29,740 $ 27,672

Common stock issued for conversion of convertible notes $ — $ — $ 20,309

See Notes to Consolidated Financial Statements.

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Austin, Dallas/Fort Worth, Houston and San Antonio, Texas;

and Charlotte and Raleigh, North Carolina.

Charlotte and Raleigh, North Carolina and Nashville, Tennessee.

The Company designs, sells and builds single-family homes on developed lots, which it develops or purchases ready for home construction.

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Office furnishings, leasehold improvements, computer equipment and computer software $ 38,178 $ 37,567

Transportation and construction equipment 10,045 10,061

Transportation and construction equipment 20,540 (a)

Property and equipment 58,718 47,612

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Office furnishings, leasehold improvements, computer equipment and computer software 3-7 years

Transportation and construction equipment 5-25 years

Transportation and construction equipment (a)

(a) During the fourth quarter of 2021, the Company sold its airplane and purchased another airplane for a net change in asset value of $ 10.5 million.

The asset is included in the table above within Transportation and construction equipment and within Property and Equipment - Net on our Consolidated Balance Sheet.

Depreciation is computed using the straight-line method over the respective estimated useful lives of the parts of the airplane.

Maintenance and repair expenditures are charged to selling, general and administrative expense as incurred.

The sale of the airplane was with an unrelated party and resulted in a gain of $ 1.9 million that is included in Other income on the Company’s Consolidated Statement of Operations.

Depreciation expense was $ 7.5 million, $ 6.8 million and $ 5.9 million in 2021, 2020 and 2019, respectively.

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The reserve estimate is based on an actuarial evaluation of our past history of general liability claims, other industry specific factors and specific event analysis.

At December 31, 2020

and 2019, self-insurance reserves of $ 2.8 million and $ 2.7 million, respectively, are included in Other Liabilities on the Consolidated Balance Sheets.

At December 31, 2021 and 2020, self-insurance reserves of $ 2.9 million and $ 2.8 million, respectively, are included in Other Liabilities on the Consolidated Balance Sheets.

The Company recorded expenses totaling $ 11.4 million, $ 10.1 million and $ 9.5 million for all self-insured and general liability claims during the years ended December 31, 2021, 2020 and 2019, respectively.

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Total revenue $ 3,745,887 $ 3,046,145 $ 2,500,290

(a) Revenues include hedging losses of $ 19.0 million and $ 12.1 million for the years ended December 31, 2020 and 2019, respectively, and hedging gains of $ 3.6 million for the year ended December 31, 2018.

(a) Revenues include hedging gains of $ 1.6 million for the year ended December 31, 2021 and losses of $ 19.0 million and $ 12.1 million for the years ended December 31, 2020 and 2019, respectively.

Hedging gains (losses) do not represent revenues recognized from contracts with customers.

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In determining the future tax consequences of events that have been recognized in the consolidated financial statements or tax returns, judgment is required.

This assessment gives appropriate consideration to all positive and negative evidence related to the realization of the deferred tax assets and considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the length of statutory carryforward periods, our experience with operating losses and our experience of utilizing tax credit carryforwards and tax planning alternatives.

severity of current and cumulative losses, forecasts of future profitability, the length of statutory carryforward periods, our experience with operating losses and our experience of utilizing tax credit carryforwards and tax planning alternatives.

See Note 14 to our Consolidated Financial Statements for more information regarding our deferred tax assets.

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Recently Adopted Accounting Standards and SEC Guidance.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).

ASU 2016-13 replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate credit losses.

ASU 2016-13 is effective for our fiscal year beginning January 1, 2020.

Subsequent to the issuance of ASU 2016-13, the FASB issued ASU No.

2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses (“ASU 2018-19”) in November 2018, ASU No.

2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments (“ASU 2019-04”) , in April 2019, and ASU No.

2019-05, Financial Instruments-Credit Losses (Topic 326) Targeted Transition Relief (“ASU 2019-05”) in May 2019.

These ASUs do not change the core principle of the guidance in ASU 2016-13.

Instead these amendments are intended to clarify and improve operability of certain topics included within the

credit losses standard.

These ASUs will have the same effective date and transition requirements as ASU 2016-13.

Our adoption of ASU 2016-13 on January 1, 2020 did not have a material impact on our consolidated financial statements and disclosures.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”) .

ASU 2018-13 modifies the disclosure requirements for fair value measurements and removes the requirement to disclose (1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, (2) the policy for timing of transfers between levels, and (3) the valuation processes for Level 3 fair value measurements.

ASU 2018-13 requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.

For all entities, ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.

Our adoption of ASU 2018-13 on January 1, 2020 did not have a material impact on our consolidated financial statements and disclosures.

In March 2020, the FASB issued ASU No.

2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”).

ASU 2020-04 is intended to provide temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates.

This guidance was effective beginning March 12, 2020 and can be applied prospectively through December 31, 2022.

Our adoption of this guidance did not have a material impact on our consolidated financial statements and disclosures.

In March 2020, the Securities and Exchange Commission (the “SEC”) issued Final Rule Release No.

33-10762, Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities (“SEC Release No.

33-10762”) , which amends the financial disclosure requirements applicable to registered debt offerings that include credit enhancements, such as subsidiary guarantees, in Rule 3-10 of Regulation S-X.

The amended rule focuses on providing material, relevant and decision-useful information regarding guarantees and other credit enhancements, while eliminating certain prescriptive requirements.

In October 2020, the FASB issued ASU No.

2020-09, Debt (Topic 470) - Amendments to SEC Paragraphs Pursuant to SEC Release No.

33-10762 (“ASU 2020-09”) , to reflect the SEC’s new disclosure rules on guaranteed debt securities offerings adopted by the Company.

The new SEC and FASB guidance is effective January 4, 2021 with earlier adoption permitted.

The Company early adopted these amendments on December 31, 2020.

Accordingly, summarized financial information has been presented only for the issuers and guarantors of the Company's registered securities for the most recent fiscal year and as permitted, this information is included in “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

In May 2020, the SEC issued Final Rule Release No.33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses (“ SEC Release No.

The rule was effective on January 1, 2021.

Our adoption of this rule did not have a material impact on our consolidated financial statements and disclosures.

In August 2020, the SEC issued Final Rule Release No.

33-10825, Modernization of Regulation S-K Items 101, 103, and 105 (“SEC Release No.

The rule was effective on November 9, 2020.

Our adoption of this rule did not have a material impact on our consolidated financial statements and disclosures.

The updated disclosures required by this rule are included in “Item 1.

Business”, “Item 2.

Risk Factors” and “Item 3.

Legal Proceedings.”

In November 2020, the SEC issued Final Rule Release No.

33-10890, Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information (“SEC Release No.

The rule was effective on February 10, 2021.

We elected to early adopt Items 301 and 302 of this rule which eliminated the disclosure of certain selected financial data and supplementary financial data, which did not have a material impact on our consolidated financial statements and disclosures.

We did not adopt the amendments related to Item 303.

The Company is required to adopt those amendments in its Form 10-K for the fiscal year ended December 31, 2021.

Impact of New Accounting Standards.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes ("ASU 2019-12"), which is intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

ASU 2019-12 is effective for the Company beginning January 1, 2021.

We are currently evaluating the impact the adoption of ASU 2019-12 will have on our Consolidated Financial Statements and disclosures, but we do not expect that adoption will have a material impact on our Consolidated Financial Statements and disclosures.

In March 2020, the FASB issued ASU No.

2020-03, Codification Improvements to Financial Instruments (“ASU 2020-03”).

ASU 2020-03 improves and clarifies various financial instruments topics, including the current expected credit losses (CECL) standard issued in 2016 (described above).

ASU 2020-03 improves and clarifies various financial instruments topics, including the current expected credit losses (CECL) standard issued in 2016.

ASU 2020-03 includes seven different issues that describe the areas of improvement and the related amendments to GAAP that are intended to make the standards easier to understand and apply by eliminating inconsistencies and providing clarifications.

The amendments have different effective dates.

We are currently evaluating the effect of adopting this new accounting guidance, but we do not expect that adoption will have a material impact on our Consolidated Financial Statements and disclosures.

Our adoption of this guidance did not have a material impact on our Consolidated Financial Statements and disclosures.

In March 2020, the FASB issued ASU No.

2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”).

This guidance became effective on March 12, 2020 and can be applied prospectively through December 31, 2022.

In January 2021, the FASB issued Accounting Standards Update 2021-01, “Reference Rate Reform (Topic 848):

Scope” (“ASU 2021-01”), which clarified the scope and application of the original guidance.

We plan to adopt ASU 2020-04 and ASU 2021-01 when LIBOR is discontinued.

We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements and disclosures.

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (“ASU 2020-06”), to address the complexity associated with applying GAAP to certain financial instruments with characteristics of liabilities and equity.

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ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

We adopted the guidance on January 1, 2022 and the adoption did not have a material impact on our consolidated financial statements and disclosures.

In November 2020, the Securities and Exchange Commission (the “SEC”) issued Final Rule Release No.

33-10890, Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information (“SEC Release No.

The rule was effective on February 10, 2021.

Registrants are required to comply with the new rules beginning with the first fiscal year ending on or after August 9, 2021 but may early adopt the amended rules at any time after the effective date (on an item-by-item basis), as long as they provide disclosure responsive to an amended item in its entirety.

Therefore, we elected to early adopt Items 301 and 302 of this rule on December 31, 2020, which eliminated the disclosure of certain selected financial data and supplementary financial data, which did not have a material impact on our consolidated financial statements and disclosures.

We adopted the amendments related to Item 303 on December 31, 2021, which included (i) clarification of the objective of MD&A;

(ii) enhancement and clarification of the disclosure requirements for liquidity and capital resources;

(iii) elimination of tabular disclosure of contractual obligations;

(iv) integration of disclosure of off-balance sheet arrangements within the context of the MD&A;

(v) codification of prior SEC guidance on critical accounting estimates;

and (vi) flexibility in comparison of the most recently completed quarter to either the corresponding quarter of the prior year or to the immediately preceding quarter.

The adoption did not have a material impact on our consolidated financial statements and disclosures.

Stock-Based and Deferred Compensation

We measure and recognize compensation expense associated with our grant of equity-based awards in accordance with ASC 718, Compensation-Stock Compensation (“ASC 718”), which generally requires that companies measure and recognize stock-based compensation expense in an amount equal to the fair value of share-based awards granted under compensation arrangements over the related vesting period.

We have granted share-based awards to certain of our employees and directors in the form of stock options, director stock units and performance share units (“PSU’s”).

arrangements over the related vesting period.

We have granted share-based awards to certain of our employees and directors in the form of stock options, director stock units, director restricted stock units and performance share units (“PSU’s”).

Determining the fair value of share-based awards requires judgment to identify the appropriate valuation model and develop the assumptions.

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Treasury constant maturity rate at the date of the grant.

Expected volatility is based on an average of (1) historical volatility of the Company’s stock and (2) implied volatility from traded options on the Company’s stock.

Expected volatility is based on an average of (1) historical volatility of the Company’s stock and (2) implied volatility from traded options on the

Company’s stock.

The risk-free rate for periods within the contractual life of the stock option award is based on the yield curve of a zero-coupon U.S.

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As of December 31, 2021, there was a total of $ 11.0 million of unrecognized compensation expense related to unvested stock option awards that will be recognized as stock-based compensation expense as the awards vest over a weighted average period of 2.1 years for the service awards.

Director Stock Units

The Company awarded its non-employee directors a total of 24,000 stock units under the 2018 LTIP during each of the years ended December 31, 2020 and 2019, and a total of 21,000 stock units under the 2018 LTIP during the year ended December 31, 2018.

Director Restricted Stock Units and Stock Units

In 2021, the Company awarded each non-employee director 2,910 restricted stock units ( 20,370 restricted stock units in total) under the 2018 LTIP which will vest on the first anniversary of the date of grant (subject to the non-employee director’s continued service on the Board of Directors on the vesting date (except in the case of death or disability)) and will be settled in common shares (on a one-for-one basis) upon the director’s termination of service as a director.

The Company awarded its non-employee directors a total of 24,000 stock units under the 2018 LTIP during each of the years ended December 31, 2020 and 2019.

Each stock unit is the equivalent of one common share, vests immediately and will be converted into a common share upon termination of service as a director.

The grant date fair value for the director stock units is based upon the closing price of our common shares on the date of grant.

Stock-based compensation expense for our director stock units, which vest immediately, is fully recognized in the period of the award.

The Company recognized the stock-based compensation expense related to the awards of $ 0.7 million in each of 2020, 2019 and 2018.

The grant date fair value for the director restricted stock units and the director stock units is based upon the closing price of our common shares on the date of grant.

Stock-based compensation expense for our director restricted stock units is recognized over the period of the award (amortized over one year).

Stock-based compensation expense for our director stock units, which vest immediately, is fully recognized on the day the award is granted.

The Company recognized the stock-based compensation expense related to the awards of $ 0.9 million in 2021, and $0.7 million in both 2020 and 2019.

On May 5, 2009, the Company’s board of directors terminated the M/I Homes, Inc.

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Performance Share Unit Awards

On February 18, 2020, February 19, 2019 and February 15, 2018, the Company awarded its executive officers (in the aggregate) a target number of PSU’s under the 2018 LTIP (in the case of the 2020 and 2019 awards) and the 2009 LTIP (in the case of the 2018 awards) equal to 45,771 , 53,692 and 46,444 PSU’s, respectively.

Each PSU represents a contingent right to receive one common share of the Company if vesting is satisfied at the end of a three-year performance period (the “Performance Period”) based on the related performance conditions and markets conditions.

On February 16, 2021, February 18, 2020 and February 19, 2019, the Company awarded its executive officers (in the aggregate) a target number of PSU’s under the 2018 LTIP equal to 30,875 , 45,771 and 53,692 PSU’s, respectively.

The ultimate number of PSU’s that will vest and be earned, if any, after the completion of the Performance Period, is based on (1) (a) the Company’s cumulative annual pre-tax income from operations, excluding extraordinary items as defined in the underlying award agreements with the executive officers, over the Performance Period (weighted 80 %) (the “Performance Condition”), and (b) the Company’s relative total shareholder return over the Performance Period compared to the total shareholder return of a peer group of other publicly-traded homebuilders (weighted 20 %) (the “Market Condition”) and (2) the participant’s continued employment through the end of the Performance Period, except in the case of termination due to death, disability or retirement or involuntary termination without cause by the Company.

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The grant date fair value of the portion of the PSU’s subject to the Performance Condition and the Market Condition component was $ 51.82 and $ 56.44 , respectively, for the 2021 PSU’s, $ 42.23 and $ 37.51 , respectively, for the 2020 PSU’s, and $ 27.62 and $ 32.52 , respectively, for the 2019 PSU’s.

In accordance with ASC 718, for the portion of the PSU’s subject to a Market Condition, stock-based compensation expense is derived using the Monte Carlo simulation methodology and is recognized ratably over the service period regardless of whether or not the attainment of the Market Condition is probable.

attainment of the Market Condition is probable.

Therefore, the Company recognized $ 0.4 million in stock-based compensation expense during 2021 related to the Market Condition portion of the 2021, 2020 and 2019 PSU awards.

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If actual results differ significantly from these estimates, stock-based compensation expense could be higher and have a material impact on our consolidated financial statements.

As of December 31, 2020, the Company had not recognized any stock-based compensation expense related to the Performance Condition portion of the 2020 PSU awards.

If the Company achieves the minimum performance levels for the Performance Condition to be met for the 2020 PSU awards, the Company would record unrecognized stock-based compensation expense of $ 0.8 million as of December 31, 2020, for which $ 0.3 million would be immediately recognized as if attainment been probable at December 31, 2020.

The Company recognized $ 0.8 million of stock-based compensation expense related to the Performance Condition portion of the 2019 PSU awards during 2020 based on the probability of attaining the Performance Condition.

The Company has $ 0.4 million of unrecognized stock-based compensation expense related to the Performance Condition portion of the 2019 PSU awards at December 31, 2020.

The Company recognized $ 0.2 million and $ 1.4 million of stock-based compensation expense related to the Performance Condition portion of the 2021 and 2020 PSU awards, respectively, during 2021 based on the probability of attaining the Performance Conditions.

The Company has $ 0.4 million and $ 0.7 million of unrecognized stock-based compensation expense related to the Performance Condition portion of the 2021 and 2020 PSU awards, respectively, at December 31, 2021.

The Company recognized $ 1.0 million of stock-based compensation expense related to the Performance Condition portion of the 2019 PSU awards as of December 31, 2021 based on the achievement of the maximum performance level.

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Deferred Compensation Plans

The purpose of the Company’s Amended and Restated Executives’ Deferred Compensation Plan (the “Executive Plan”), a non-qualified deferred compensation plan, is to provide an opportunity for certain eligible employees of the Company to defer a

portion of their compensation and to invest in the Company’s common shares.

The purpose of the Company’s Amended and Restated Director Deferred Compensation Plan (the “Director Plan”) is to provide its directors with an opportunity to defer their director compensation and to invest in the Company’s common shares.

Compensation expense deferred into the Executive Plan and the Director Plan (together the “Plans”) totaled $ 0.2 million for each of the years ended December 31, 2020, 2019 and 2018.

Compensation expense deferred into the Executive Plan and the Director Plan (together the “Plans”) totaled $ 0.3 million for the year ended December 31, 2021 and $ 0.2 million for the years ended December 31, 2020 and 2019.

The portion of cash compensation deferred by employees and directors under the Plans is invested in fully-vested equity units in the Plans.

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Equity units and the related dividends (if any) will be converted and generally distributed to the employee or director in the form of common shares at the earlier of his or her elected distribution date or termination of service as an employee or director of the Company.

Distributions from the Plans totaled $ 0.4 million during the year ended December 31, 2020, and $0.2 million in both the years ended December 31, 2019 and 2018.

Distributions from the Plans totaled $ 0.3 million, $ 0.4 million, and $ 0.2 million during the years ended December 31, 2021, 2020 and 2019, respectively.

As of December 31, 2021, there were a total of 47,874 equity units with a value of $ 1.4 million outstanding under the Plans.

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Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 2 inputs include quoted prices for similar assets and liabilities in active

markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.

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Impairment, if any, is recognized through a valuation allowance and a reduction of revenue.

Both the carrying value and fair value of mortgage servicing rights was $ 8.4 million at December 31, 2021.

The carrying value and fair value of mortgage servicing rights was $ 9.4 million and $ 9.2 million, respectively, at December 31, 2020.

This $ 0.2 million decrease in the value of our mortgage servicing rights was caused by the disruption in the mortgage industry as a result of the COVID-19 pandemic, and was recorded as a decrease in revenue to bring the carrying value down to the fair value, for a net valuation allowance and impairment of $ 0.2 million for the year ended December 31, 2020.

At December 31, 2019, the carrying value and fair value of our mortgage servicing rights were both $ 9.6 million.

The fair value of the Company’s forward sales contracts to broker/dealers solely considers the market price movement of the same type of security between the trade date and the balance sheet date.

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Whole loan contracts 353 ( 360 ) 173

Total (loss) gain recognized $ ( 382 ) $ 511 $ 833

Total gain (loss) recognized $ 1,741 $ ( 382 ) $ 511

The following tables set forth the fair value of the Company’s derivative instruments and their location within the Consolidated Balance Sheets for the periods indicated (except for mortgage loans held for sale which are disclosed as a separate line item):

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Interest rate lock commitments Level 2 — — 1,664 1,664

Notes payable - homebuilding operations Level 2 — — 66,000 66,000

Forward sales of mortgage-backed securities Level 2 4,477 4,477 — —

Notes payable - financial services operations Level 2 266,160 266,160 225,634 225,634

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Level 2 300,000 294,375 — —

Interest rate lock commitments Level 2 487 487 — —

Whole loan contracts for committed IRLCs and mortgage loans held for sale Level 2 62 62 422 422

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As of December 31, 2021 and 2020, our investment in such joint venture arrangements totaled $ 57.1 million and $ 34.7 million, respectively, and was reported as Investment in Joint Venture Arrangements on our Consolidated Balance Sheets.

The decrease from prior year was driven primarily by lot distributions from our joint venture arrangements during 2020 of $ 29.7 million offset, in part, by our cash contributions to our joint venture arrangements during 2020 of $ 28.5 million.

The increase from prior year was driven primarily by our cash contributions to our joint venture arrangements during 2021 of $ 51.6 million offset, in part, by lot distributions from our joint venture arrangements during 2021 of $ 28.1 million.

The majority of our investment in joint venture arrangements for both 2021 and 2020 consisted of joint ownership and development agreements for which a special purpose entity was not established (“JODAs”).

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As of December 31, 2021 and 2020, the Company had $ 6.5 million and $ 0.8 million, respectively, of equity invested in LLCs.

The Company’s percentage of ownership in these LLCs as of both December 31, 2020 and 2019 ranged from 25 % to 74 %.

The Company’s percentage of ownership in these LLCs as of December 31, 2021 ranged from 25 % to 50 % and as of December 31, 2020 ranged from 25 % to 74 %.

We use the equity method of accounting for investments in LLCs and other joint venture arrangements, including JODAs, over which we exercise significant influence but do not have a controlling interest.

Under the equity method, our share of the LLCs’ earnings or loss, if any, is included in our Consolidated Statements of Income.

The Company’s equity in income relating to earnings from its LLCs was $ 0.5 million for year ended December 31, 2020, and $ 0.3 million for each of the years ended December 31, 2019 and 2018.

The Company’s equity in income relating to

earnings from its LLCs was $ 0.1 million for year ended December 31, 2021, $ 0.5 million for the year ended December 31, 2020 and $ 0.3 million for the year ended December 31, 2019.

Our share of the profit relating to lots we purchase from our LLCs is deferred until homes are delivered by us and title passes to a homebuyer.

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Loans totaling approximately $ 305.0 million and $ 21.1 million were covered under these guarantees as of December 31, 2021 and 2020, respectively.

The decrease in loans covered by these guarantees from December 31, 2019 is a result of a change in the mix of investors and their related purchase terms.

The increase in loans covered by these guarantees from December 31, 2020 is a result of a change in the mix of investors and their related purchase terms.

A portion of the revenue paid to M/I Financial for providing the guarantees on these loans was deferred at December 31, 2021, and will be recognized in income as M/I Financial is released from its obligation under the guarantees.

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Actual future costs associated with loans guaranteed or indemnified could differ materially from our current estimated amounts.

M/I Financial has received inquiries concerning underwriting matters from purchasers of its loans regarding certain loans totaling approximately $ 0.6 million at both December 31, 2020 and 2019.

M/I Financial has received inquiries concerning underwriting matters from purchasers of its loans regarding certain loans totaling approximately $ 0.7 million and $ 0.6 million at December 31, 2021 and 2020, respectively.

M/I Financial has also guaranteed the collectability of certain loans to third party insurers (U.S.

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(a) This represents charges of $ 1.6 million for additional stucco-related repair costs, net of $ 0.7 million of recoveries for past stucco-related claims, during 2020.

(b) This represents charges of $ 1.0 million for additional stucco-related repair costs, net of $ 1.0 million of recoveries for past stucco-related claims, during 2018.

We have received claims related to stucco installation from homeowners in certain of our communities in our Tampa and Orlando, Florida markets and have been named as a defendant in legal proceedings initiated by certain of such homeowners.

These claims primarily relate to homes built prior to 2014 which have second story elevations with frame construction.

During 2015 through 2018, we recorded an aggregate total of $ 28.4 million of warranty charges for stucco-related repair costs, net of recoveries, for (1) homes in our Florida communities that we had identified as needing repair but had not yet completed the repair and (2) estimated repair costs for homes in our Florida communities that we had not yet identified as needing repair but that may require repair in the future.

During 2019, we did not record any charges for stucco-related repair costs, and we received a total of $ 1.1 million of recoveries that were recorded directly to income as they related to past stucco-related claims and we had no current charge.

During 2020, we incurred $ 1.6 million of additional stucco-related charges, and we received a total of $ 0.7 million of recoveries for past stucco-related claims, resulting in a net charge of $ 0.9 million.

Stucco-related recoveries are reflected in our financial statements in the period the reimbursement is received.

During 2020, as a result of our on-going review of stucco-related data described below, we (1) incurred $ 1.6 million of additional stucco-related charges and (2) also received $ 0.7 million of additional recoveries for past stucco-related claims, resulting in a net charge of $ 0.9 million.

The remaining reserve for both known repair costs and an estimate of future costs of stucco-related repairs at December 31, 2020 included within our warranty reserve was $ 4.7 million.

During 2021, we did not record any additional warranty charges or receive any additional recoveries for stucco-related repair costs.

The remaining reserve at December 31, 2021, for (1) homes in our Florida communities that we had identified as needing repair but had not yet completed the repair and (2) estimated repair costs for homes in our Florida communities that we had not yet identified as needing repair but that may require repair in the future included within our warranty reserve was $ 2.7 million.

We believe that this amount is sufficient to cover both known and estimated future repair costs as of December 31, 2021.

Our remaining stucco-related reserve is gross of any recoveries.

Our review of the stucco-related issues in our Florida communities is ongoing.

Our estimate of future costs of stucco-related repairs is based on our judgment, various assumptions and internal data.

Due to the degree of judgment and the potential for variability in our underlying assumptions and data, as we obtain additional information, we may revise our estimate, including to reflect additional estimated future stucco-related repairs costs, which revision could be material.

We continue to investigate the extent to which we may be able to further recover a portion of our stucco repair and claims handling costs from other sources, including our direct insurers, the subcontractors involved with the construction of the homes and their insurers.

As of December 31, 2020, we are unable to estimate any additional amount that we believe is probable of recovery from these sources and, as noted above, we have not recorded a receivable for recoveries nor included an estimated amount of recoveries in determining our stucco-related warranty reserve.

Due to the degree of judgment and the potential for variability in our underlying assumptions and data, we may revise our estimate, including to reflect additional estimated future stucco-related repairs costs, which revision could be material.

Performance Bonds and Letters of Credit

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At December 31, 2021 and 2020, the corresponding liability of $ 2.8 million and $ 9.9 million, respectively, has been classified as Obligation for Consolidated Inventory Not Owned on the Consolidated Balance Sheets.

The decrease in this balance from December 31, 2019 is related primarily to a decrease in the number of land purchase agreements that had deposits and prepaid acquisition and development costs that exceeded certain thresholds resulting in the remaining purchase price of the lots to be recorded in inventory not owned, partially offset by an increase in the aggregate purchase amount of land contracts with specific performance requirements.

The decrease in this balance from December 31, 2020 is related primarily to a decrease in the number of land purchase agreements that had deposits and prepaid acquisition and development costs that exceeded certain thresholds resulting in the remaining purchase price of the lots to be recorded in inventory not owned, as well as a decrease in the aggregate purchase amount of land contracts with specific performance requirements.

Legal Matters

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Operating Leases

The Company leases certain office space and model homes under operating leases with remaining terms of one to six years.

The Company leases certain office space and model homes under operating leases with remaining terms of one to 19 years.

The Company sells model homes to investors with the express purpose of leasing the homes back as sales models for a specified period of time.

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

During the twelve months ended December 31, 2020, the Company increased both its operating ROU asset and operating lease liability by $ 33.9 million and $ 34.1 million, respectively, as a result of $ 40.2 million in additional leases and modifications to existing leases throughout the period (primarily due to our new home office headquarters lease which commenced in June 2020), offset partially by $ 6.3 million of additional ROU asset amortization and $ 6.1 million of additional periodic lease expense (which is recorded within its Consolidated Statement of Cash Flows in the change in Other Assets and Other Liabilities).

During the twelve months ended December 31, 2021, the Company’s operating ROU asset and operating lease liability decreased by $ 1.3 million and $ 1.0 million, respectively, as a result of $ 8.5 million of additional ROU asset amortization and $ 8.2 million of additional periodic lease expense, offset partially by $ 7.2 million in additional leases and modifications to existing leases throughout the period (which is recorded within its Consolidated Statement of Cash Flows in the change in Other Assets and Other Liabilities).

As of December 31, 2021, the Company’s ROU asset was $ 51.0 million and its operating lease liability had a balance of $ 51.5 million on its Consolidated Balance Sheets.

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(Dollars in thousands)

2022 $ 10,390

Thereafter 33,151

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7/18/2019 5/1/2050 4.10 % 4,705 4,705

10/29/2020 5/1/2051 3.80 % 5,785 —

6/30/2021 5/1/2051 3.66 % 6,135 —

10/5/2021 5/1/2052 3.59 % 4,910 —

Total CDD bond obligations issued and outstanding $ 36,555 $ 26,460

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The Credit Facility provides for an aggregate commitment amount of $ 550 million and also includes an accordion feature pursuant to which the maximum borrowing availability may be increased to an aggregate of $ 700 million, subject to obtaining additional commitments from lenders.

The Credit Facility matures on July 18, 2023 for $ 475 million of commitments and July 18, 2021 for $ 25 million of commitments.

The Credit Facility matures on July 18, 2025 .

Interest on amounts borrowed under the Credit Facility is payable at a rate which is adjusted daily and is equal to the sum of the one-month LIBOR (subject to a floor of 0.25 %) plus a margin of 175 basis points (subject to adjustment in subsequent quarterly periods based on the Company’s leverage ratio).

The available amount under the Credit Facility is computed in accordance with a borrowing base, which is calculated by applying various advance rates for different categories of inventory, and totaled $ 926.9 million of availability for additional senior debt at December 31, 2020.

As a result, the full $ 500 million commitment amount of the Credit Facility was available,

less any borrowings and letters of credit outstanding.

The Credit Facility includes a provision for the replacement of LIBOR under certain circumstances where one-month LIBOR is no longer available.

The available amount under the Credit Facility is computed in accordance with a borrowing base, which is calculated by applying various advance rates for different categories of inventory, and totaled $ 1.3 billion of availability for additional senior debt at December 31, 2021.

As a result, the full $ 550 million commitment amount of the Credit Facility was available, less any borrowings and letters of credit outstanding.

At December 31, 2021, there were no borrowings outstanding and $ 85.0 million of letters of credit outstanding, leaving a net remaining borrowing availability of $ 465.0 million.

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Our obligations under the Credit Facility are effectively subordinated to our and the Subsidiary Guarantors’ existing and future secured indebtedness with respect to any assets comprising security or collateral for such indebtedness.

The Credit Facility contains various representations, warranties and covenants which require, among other things, that the Company maintain (1) a minimum level of Consolidated Tangible Net Worth ($ 813.4 million at December 31, 2020 and subject to increase over time based on earnings and proceeds from equity offerings), (2) a leverage ratio not in excess of 60 %, and (3) either a minimum Interest Coverage Ratio of 1.5 to 1.0 or a minimum amount of available liquidity.

The Credit Facility contains various representations, warranties and covenants which require, among other things, that the Company maintain (1) a minimum level of Consolidated Tangible Net Worth ($ 1.1 billion at December 31, 2021 and subject to increase over time based on earnings and proceeds from equity offerings), (2) a leverage ratio not in excess of 60 %, and (3) either a minimum Interest Coverage Ratio of 1.5 to 1.0 or a minimum amount of available liquidity.

In addition, the Credit Facility contains covenants that limit the Company's number of unsold housing units and model homes, as well as the amount of Investments in Unrestricted Subsidiaries and Joint Ventures.

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At December 31, 2021, M/I Financial was in compliance with all financial covenants of the MIF Mortgage Warehousing Agreement.

The MIF Mortgage Warehousing Agreement includes a provision for the replacement of LIBOR under certain circumstances where one-month LIBOR is no longer available.

The MIF Mortgage Repurchase Facility is used to finance eligible residential mortgage loans originated by M/I Financial.

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The MIF Mortgage Repurchase Facility expires on October 24, 2022 .

M/I Financial pays interest on each advance under the MIF Mortgage Repurchase Facility at a per annum rate equal to the one-month LIBOR rate (subject to a floor of 1.0 %) plus 175 or 200 basis points depending on the loan type.

M/I Financial pays interest on each advance under the MIF Mortgage Repurchase Facility at a per annum rate equal to the one-month LIBOR rate (subject to a floor of

0.75 % or 0.625 % based on the type of loan) plus 175 or 200 basis points depending on the loan type.

The MIF Mortgage Repurchase Facility also contains certain financial covenants.

At December 31, 2021, M/I Financial was in compliance with all financial covenants of the MIF Mortgage Repurchase Facility.

The MIF Mortgage Repurchase Facility includes a provision for the replacement of LIBOR under certain circumstances where one-month LIBOR is no longer available.

At December 31, 2021 and 2020, M/I Financial’s total combined maximum borrowing availability under the two credit facilities were $ 325.0 million and $ 275.0 million, respectively.

At December 31, 2021 and December 31, 2020, M/I Financial had $ 266.2 million and $ 225.6 million outstanding on a combined basis under its credit facilities, respectively.

On January 22, 2020, the Company issued $ 400.0 million aggregate principal amount of the 2028 Senior Notes.

On August 23, 2021, the Company issued $ 300.0 million aggregate principal amount of the 2030 Senior Notes.

The 2030 Senior Notes bear interest at a rate of 3.95 % per year, payable semiannually in arrears on February 15 and August 15 of each year (commencing on February 15, 2022), and mature on February 15, 2030 .

The Company may redeem some or all of the 2030 Senior Notes at any time prior to August 15, 2029 (the date that is six months prior to the maturity of the 2030 Senior Notes), at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the redemption date, plus a “make-whole” amount set forth in the indenture governing the 2030 Senior Notes.

In addition, on or after August 15, 2029 (the date that is six months prior to the maturity of the 2030 Senior Notes), the Company may redeem some or all of the 2030 Senior Notes at a redemption price equal to 100.000 % of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the redemption date.

The Company used a portion of the net proceeds from the issuance of the 2030 Senior Notes to redeem all $ 250.0 million aggregate principal amount of its then outstanding 5.625 % Senior Notes due 2025 (the “2025 Senior Notes”) at a redemption price of 102.813 % of the principal amount, plus accrued and unpaid interest thereon, on August 24, 2021.

As of both December 31, 2021 and 2020, we had $ 400.0 million of our 2028 Senior Notes outstanding.

The 2028 Senior Notes bear interest at a rate of 4.95 % per year, payable semiannually in arrears on February 1 and August 1 of each year, and mature on February 1, 2028 .

We may redeem all or any portion of the 2028 Senior Notes on or after February 1, 2023 at a stated redemption price, together with accrued and unpaid interest thereon.

during the 12-month period beginning on February 1, 2025 and will further decline to 100.000 % of the principal amount outstanding if redeemed on or after February 1, 2026, but prior to maturity.

The Company used a portion of the net proceeds from the issuance of the 2028 Senior Notes to redeem all $ 300.0 million aggregate principal amount of its then outstanding 6.75 % Senior Notes due 2021 (the “2021 Senior Notes”) at 100.000 % of the principal amount outstanding, plus accrued and unpaid interest thereon, on January 22, 2020.

As of both December 31, 2020 and 2019, we had $ 250.0 million of our 2025 Senior Notes outstanding.

The 2025 Senior Notes bear interest at a rate of 5.625 % per year, payable semiannually in arrears on February 1 and August 1 of each year, and mature on August 1, 2025 .

We may redeem all or any portion of the 2025 Senior Notes on or after August 1, 2020 at a stated redemption price, together with accrued and unpaid interest thereon.

The redemption price will initially be 104.219 % of the principal amount outstanding, but will decline to 102.813 % of the principal amount outstanding if redeemed during the 12-month period beginning on August 1, 2021, will further decline to 101.406 % of the principal amount outstanding if redeemed during the 12-month period beginning on August 1, 2022 and will further decline to 100.000 % of the principal amount outstanding if redeemed on or after August 1, 2023, but prior to maturity.

The redemption price will initially be 103.713 % of the principal amount outstanding, but will decline to 102.475 % of the principal amount outstanding if redeemed during the 12 month period beginning on February 1, 2024, will further decline to 101.238 % of the principal amount outstanding if redeemed during the 12-month period beginning on February 1, 2025 and will further decline to 100.000 % of the principal amount outstanding if redeemed on or after February 1, 2026, but prior to maturity.

As of December 31, 2020, we had $ 250.0 million of our 2025 Senior Notes outstanding.

The 2021 Senior Notes paid interest at a rate of 6.75 % per year, semiannually in arrears on January 15 and July 15 of each year, and were scheduled to mature on January 15, 2021 .

As stated above, the Company redeemed all of the 2021 Senior Notes on January 22, 2020.

The 2028 Senior Notes and the 2025 Senior Notes contain certain covenants, as more fully described and defined in the indentures governing the 2028 Senior Notes and the 2025 Senior Notes, which limit the ability of the Company and the restricted subsidiaries to, among other things:

The 2025 Senior Notes paid interest at a rate of 5.625 % per year, semiannually in arrears on February 1 and August 1 of each year, and were scheduled to mature on August 1, 2025 .

As stated above, the Company redeemed all of the 2025 Senior Notes on August 24, 2021.

The 2030 Senior Notes contain certain covenants, as more fully described and defined in the indenture governing the 2030 Senior Notes, which limit the ability of the Company and the restricted subsidiaries to, among other things:

incur certain liens securing indebtedness without equally and ratably securing the 2030 Senior Notes and the guarantees thereof; enter into certain sale and leaseback transactions; and consolidate or merge with or into other companies, liquidate or sell or otherwise dispose of all or substantially all of the Company’s assets.

These covenants are subject to a number of exceptions and qualifications as described in the indenture governing the 2030 Senior Notes.

As of December 31, 2021, the Company was in compliance with all terms, conditions, and covenants under the indenture.

The 2028 Senior Notes contain certain covenants, as more fully described and defined in the indenture governing the 2028 Senior Notes, which limit the ability of the Company and the restricted subsidiaries to, among other things:

incur additional indebtedness;

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and create or incur certain liens, consolidate or merge with or into other companies, or liquidate or sell or transfer all or substantially all of our assets.

These covenants are subject to a number of exceptions and qualifications as described in the indentures governing the 2028 Senior Notes and the 2025 Senior Notes.

As of December 31, 2020, the Company was in compliance with all terms, conditions, and covenants under the indentures.

These covenants are subject to a number of exceptions and qualifications as described in the indenture governing the 2028 Senior Notes.

As of December 31, 2021, the Company was in compliance with all terms, conditions, and covenants under the indenture.

The 2030 Senior Notes and the 2028 Senior Notes are fully and unconditionally guaranteed jointly and severally on a senior unsecured basis by the Subsidiary Guarantors.

The 2030 Senior Notes and the 2028 Senior Notes are general, unsecured senior obligations of the Company and the Subsidiary Guarantors and rank equally in right of payment with all our and the Subsidiary Guarantors’ existing and future unsecured senior indebtedness.

The 2028 Senior Notes and the 2025 Senior Notes are effectively subordinated to our and the Subsidiary Guarantors’ existing and future secured indebtedness with respect to any assets comprising security or collateral for such indebtedness.

The indentures governing our 2028 Senior Notes and our 2025 Senior Notes limit our ability to pay dividends on, and repurchase, our common shares and any of our preferred shares then outstanding to the amount of the positive balance in our “restricted payments basket,” as defined in the indentures.

In each case, the “restricted payments basket” is equal to $ 125.0 million plus (1) 50 % of our aggregate consolidated net income (or minus 100 % of our aggregate consolidated net loss) from October 1, 2015, excluding income or loss from Unrestricted Subsidiaries (as defined in the indentures), plus (2) 100 % of the net cash proceeds from either contributions to the common equity of the Company after December 1, 2015 or the sale of qualified equity interests after December 1, 2015, plus other items and subject to other exceptions.

The 2030 Senior Notes and the 2028 Senior Notes are

effectively subordinated to our and the Subsidiary Guarantors’ existing and future secured indebtedness with respect to any assets comprising security or collateral for such indebtedness.

The indenture governing the 2028 Senior Notes limits our ability to pay dividends on, and repurchase, our common shares and any of our preferred shares then outstanding to the amount of the positive balance in our “restricted payments basket,” as defined in the indenture.

The “restricted payments basket” is equal to $ 125.0 million plus (1) 50 % of our aggregate consolidated net income (or minus 100 % of our aggregate consolidated net loss) from October 1, 2015, excluding income or loss from Unrestricted Subsidiaries (as defined in the indenture), plus (2) 100 % of the net cash proceeds from either contributions to the common equity of the Company after December 1, 2015 or the sale of qualified equity interests after December 1, 2015, plus other items and subject to other exceptions.

The positive balance in our restricted payments basket was $ 487.5 million and $ 363.0 million at December 31, 2021 and 2020, respectively.

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If the reporting unit’s carrying value exceeds its fair value, then an impairment loss is recognized for the amount of the excess of the carrying amount over the reporting unit’s fair value.

The Company performed its annual goodwill impairment analysis during the fourth quarter of 2020, and no impairment was recorded at December 31, 2020, and there were no indicators of impairment or impairment charges recorded at December 31, 2019.

The Company performed its annual goodwill impairment analysis during the fourth quarter of 2021, and there were no indicators of impairment or impairment charges recorded at December 31, 2021, and no impairment was recorded at December 31, 2020.

The evaluation of goodwill for possible impairment includes estimating fair value using one or a combination of valuation techniques, such as discounted cash flows.

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Net income $ 396,868 $ 239,874 $ 127,587

Interest on 3.00% convertible senior subordinated notes due 2018 (a)

Diluted income available to common shareholders $ 239,874 $ 127,587 $ 108,070

Basic weighted average shares outstanding 29,092 28,610 27,846

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Deferred compensation awards 320 244 217

3.00% convertible senior subordinated notes due 2018 (a)

Diluted weighted average shares outstanding - adjusted for assumed conversions 29,880 29,152 28,475

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Anti-dilutive equity awards not included in the calculation of diluted earnings per common share 11 379 1

(a) On March 1, 2013, the Company issued $ 86.3 million aggregate principal amount of 3.0 % Convertible Senior Subordinated Notes due 2018 (the “2018 Convertible Senior Subordinated Notes”).

The 2018 Convertible Senior Subordinated Notes were scheduled to mature on March 1, 2018 and the deadline for holders to convert the 2018 Convertible Senior Subordinated Notes was February 27, 2018.

As a result of conversion elections made by holders of the 2018 Convertible Senior Subordinated Notes, (1) approximately $ 20.3 million in aggregate principal amount of the 2018 Convertible Senior Subordinated Notes were converted and settled through the issuance of approximately 0.629 million of our common shares (at a conversion price per common share of $ 32.31 ) and (2) the Company repaid in cash approximately $ 65.9 million in aggregate principal amount of the 2018 Convertible Senior Subordinated Notes at maturity.

For the year ended December 31, 2018, the effect of our convertible debt outstanding was included in the diluted earnings per share calculations.

The Company records income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and attributable to operating loss and tax credit carryforwards, if any.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which the temporary differences are expected to be recovered or paid.

During the fourth quarter of 2019, former President Trump signed into law the Taxpayer Certainty and Disaster Relief Act of 2019 (“Tax Extenders Act”), which temporarily renewed approximately two dozen credits that previously expired or were set to expire at the end of 2019.

Notable for the Company was the retroactive extension of the energy efficient homes credit for 2018 through 2020.

As a result, the Company recognized a $ 7.2 million tax benefit for the year ended December 31, 2020.

In accordance with ASC 740 , we evaluate our deferred tax assets, including the benefit from NOLs and tax credit carryforwards, if any, to determine if a valuation allowance is required.

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For 2021, 2020 and 2019, the Company’s effective tax rate was 22.05 %, 22.63 %, and 23.15 %, respectively.

The decrease in 2020’s effective tax rate from 2019 was primarily attributable to an increased tax benefit from energy tax credits.

The decrease in 2019’s effective tax rate from 2018 was primarily attributable to an increased tax benefit from equity compensation.

The decrease in 2021’s effective tax rate from 2020 and 2020’s effective tax rate from 2019 was primarily attributable to an increased tax benefit from energy tax credits.

Reconciliation of the differences between income taxes computed at the federal statutory tax rate and consolidated benefit from income taxes are as follows:

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Our state NOLs may be carried forward from one to 15 years, depending on the tax jurisdiction, with $ 0.1 million expiring between 2028 and 2032, absent sufficient state taxable income.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law.

The CARES Act includes several significant business tax provisions including modifications for net operating losses, credit for prior-year minimum tax liability and limitations on business interest and charitable contributions.

The CARES Act also provides for an employee retention credit and technical corrections regarding qualified improvement property.

We assessed the tax impact of the CARES Act as it relates to the Company, and it did not have a material impact on our tax rate for 2020.

Business Segments

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Raleigh, North Carolina

The following table shows, by segment, revenue, operating income and interest expense for 2020, 2019 and 2018, as well as the Company’s income before income taxes for such periods:

Nashville, Tennessee

The following table shows, by segment, revenue, operating income and interest (income) expense for 2021, 2020 and 2019, as well as the Company’s income before income taxes for such periods:

Year Ended December 31,

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$ 518,296 $ 319,261 $ 187,089

Interest expense:

Interest expense (income):

Northern homebuilding $ 76 $ 2,465 $ 7,474

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3,912 2,927 3,651

Corporate ( 1,368 ) — —

Total interest expense $ 2,156 $ 9,684 $ 21,375

Equity in income from joint venture arrangements $ ( 466 ) $ ( 311 ) $ ( 312 )

Acquisition and integration costs (e)

Other income (e)

$ ( 2,046 ) $ ( 466 ) $ ( 311 )

Loss on early extinguishment of debt (f)

Income before income taxes $ 509,114 $ 310,043 $ 166,025

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(a) Our financial services operational results should be viewed in connection with our homebuilding business as its operations originate loans and provide title services primarily for our homebuying customers, with the exception of an immaterial amount of mortgage refinancing.

(b) Includes $ 0.6 million and $ 5.1 million of acquisition-related charges taken during 2019 and 2018, respectively, as a result of our acquisition of Pinnacle Homes in Detroit, Michigan on March 1, 2018.

(b) Includes $ 0.6 million of acquisition-related charges taken during 2019 as a result of our acquisition of Pinnacle Homes in Detroit, Michigan on March 1, 2018.

(c) Includes a $ 0.9 million net charge for stucco-related repair costs in certain of our Florida communities (as more fully discussed in Note 8 to our Consolidated Financial Statements) taken during 2020.

(d) For the years ended December 31, 2020, 2019 and 2018, total operating income was reduced by $ 8.4 million, $ 5.0 million and $ 5.8 million, respectively, related to asset impairment charges taken during the period.

(e) Represents costs which include, but are not limited to, legal fees and expenses, travel and communication expenses, cost of appraisals, accounting fees and expenses, and miscellaneous expenses related to our acquisition of Pinnacle Homes.

As these costs are not eligible for capitalization as initial direct costs, such amounts are expensed as incurred.

(d) For the years ended December 31, 2020 and 2019, total operating income was reduced by $ 8.4 million and $ 5.0 million, respectively, related to asset impairment charges taken during the period.

(e) Other income is comprised of the gain on the sale of a non-operating asset during the fourth quarter of 2021 as well as equity in income from joint venture arrangements.

(f) Loss on early extinguishment of debt relates to the early redemption of our 2025 Senior Notes during the third quarter of 2021, consisting of a prepayment premium due to early redemption and a write-off of unamortized debt issuance costs.

The following tables show total assets by segment at December 31, 2021 and 2020:

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Other assets 37,527 63,844 (b)

596,711 691,764

Total assets $ 1,028,908 $ 1,582,018 $ 628,927 $ 3,239,853

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Share Repurchase Program

On August 14, 2018, the Company announced that its Board of Directors authorized a share repurchase program (the “2018 Share Repurchase Program”) pursuant to which the Company may purchase up to $ 50 million of its outstanding common shares through open market transactions, privately negotiated transactions or otherwise in accordance with all applicable laws.

On July 28, 2021, the Company announced that its Board of Directors approved a new share repurchase program (the “2021 Share Repurchase Program”), which replaced and superseded the share repurchase program authorized by the Board of Directors in 2018 (the “2018 Share Repurchase Program”).

Prior to its replacement, the Company did not repurchase any outstanding common shares under the 2018 Share Repurchase Program during 2021.

Pursuant to the 2021 Share Repurchase Program, the Company may purchase up to $ 100 million of its outstanding common shares through open market transactions, privately negotiated transactions or otherwise in accordance with all applicable laws.

During the year ended December 31, 2021, the Company repurchased 0.8 million outstanding common shares at an aggregate purchase price of $ 51.5 million under the 2021 Share Repurchase Program.

The Company did not repurchase any shares during the second, third or fourth quarters of 2020.

As of December 31, 2020, the Company has repurchased 1.4 million outstanding common shares at an aggregate purchase price of $ 32.8 million under the 2018 Share Repurchase Program and $ 17.2 million remains available for repurchases under the 2018 Share Repurchase Program.

The Company did not repurchase any shares during the first or second quarters of 2021.

As of December 31, 2021, $ 48.5 million remained available for repurchases under the 2021 Share Repurchase Program.

The timing, amount and other terms and conditions of any additional repurchases under the 2021 Share Repurchase Program will be determined by the Company’s management at its discretion based on a variety of factors, including the market price of the Company’s common shares, corporate considerations, general market and economic conditions and legal requirements.

The 2021 Share Repurchase Program does not have an expiration date and the Board may modify, discontinue or suspend it at any time.

See Note 17 for additional information.

Subsequent Event

On February 16, 2022, the Company amended its Credit Facility to eliminate specified limits on the Company to make investments in its subordinated debt and capital stock.

Such investments are subject to the Company’s compliance with the other covenants and provisions in the Credit Facility.

On February 17, 2022, the Company announced that its Board of Directors approved an increase to its 2021 Share Repurchase Program by an additional $ 100 million, leaving up to $ 148.5 million available for repurchase.

See Note 16 for additional information.

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