What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2023-12-21 compared with 2022-12-19 · 54 added, 52 removed, 356 unchanged (23% of the section changed)

14 unchanged sentences

We operate our own architectural, engineering, mortgage, title, land development, insurance, smart home technology and landscaping subsidiaries.

In addition, in certain regions we operate our own lumber distribution, house component assembly and component manufacturing operations.

We are developing several land parcels for master-planned communities in which we intend to build homes on a portion of the lots and sell the remaining lots to other builders.

The majority of these master-planned communities are being developed through joint ventures with other builders or financial partners, with one being developed 100% by us.

We also develop master-planned and golf course communities as well as operate, in certain regions, our own lumber distribution, house component assembly and manufacturing operations.

In addition to our residential for-sale business, we also develop and operate urban and suburban for-rent apartment communities primarily through joint ventures.

7 unchanged sentences

• Boston, Massachusetts metropolitan area

• Fairfield, Hartford, and New Haven Counties, Connecticut

• New Haven County, Connecticut

• Westchester and Dutchess Counties, New York

2 unchanged sentences

• Philadelphia, Pennsylvania metropolitan area

• Lehigh Valley area of Pennsylvania

• Virginia and Maryland suburbs of Washington, D.C.

16 unchanged sentences

• San Francisco Bay, Sacramento, and San Jose areas of northern California

• Seattle and Spokane, Washington metropolitan areas, and

• Seattle, Spokane, and Clark County, Washington metropolitan areas, and

• Portland, Oregon metropolitan area.

2 unchanged sentences

We seek to realize efficiencies from shared common costs, such as land development and infrastructure, over the several communities within the master-planned community.

Each of our detached home communities offers several home plans with the opportunity for home buyers to select various structural options and exterior styles.

Each of our detached home communities offers several home plans with the opportunity for many of our home buyers to select various structural options and exterior styles.

We design each community to fit existing land characteristics.

3 unchanged sentences

Our attached home communities generally offer one- to four-story homes, provide for select exterior options, and often include commonly owned recreational facilities, such as clubhouses, playing fields, swimming pools, and tennis courts.

The majority of our homes are sold on a built-to-order basis where we do not begin construction of the home until we have a signed contract with a customer.

However, we also build quick move-in homes (also known as “spec” homes) in most of our communities, which are homes started without a signed agreement with a customer.

These homes allow us to compete more effectively with existing homes available in the market, especially for homebuyers that require a home within a short time frame.

We sell our quick move-in homes at various stages of construction, which allows many buyers of such homes to select their finishing options at our design studios.

We determine our quick move-in home strategy for each community based on local market factors and maintain a level of quick move-in home inventory based on our current and planned sales pace and construction cadence for the community.

We are continuously developing new designs to replace or augment existing ones to ensure that our homes reflect current consumer tastes.

Increasingly, we are modifying designs and the number of options we provide in order to continue to offer our customers a curated experience while gaining efficiencies in the home building process, particularly in respect to our affordable luxury product.

Increasingly, we are modifying designs and the number of options we provide to offer our customers a curated experience while gaining efficiencies in the home building process, particularly in respect to our affordable luxury product and our quick move-in homes.

We use our own architectural staff and also engage unaffiliated architectural firms to develop new designs.

A wide selection of structural and finishing options are available to our home buyers for additional charges.

The number and complexity of options available typically increase with the size and base sales price of our homes.

Major options include home offices, fitness rooms, multi-generational living suites, finished basements, and spacious indoor/outdoor living areas.

The number and complexity of options available typically increase with the size and base sales price of our homes and are generally only available on our built-to-order homes.

Major options include home offices, fitness rooms, multi-generational living suites,

finished basements, and spacious indoor/outdoor living areas.

We also offer numerous interior fit-out options such as flooring, wall tile, plumbing, cabinets, fixtures, appliances, lighting, and home-automation and security technologies.

We market our high-quality homes to both upscale luxury and affordable luxury home buyers.

Our luxury homes are marketed primarily to buyers who generally have previously owned a home and who are seeking to buy a larger or more desirable home

— the so-called “move-up” market.

Our luxury homes are marketed primarily to buyers who generally have previously owned a home and who are seeking to buy a larger or more desirable home — the so-called “move-up” market.

Our affordable luxury homes are marketed primarily to more affluent first-time buyers.

We believe our reputation as a builder of luxury homes in these markets enhances our competitive position with respect to the sale of our smaller, more moderately priced homes.

We continue to pursue growth initiatives by expanding our geographic footprint and by broadening our product lines and price points to appeal to buyers across the demographic spectrum.

We continue to pursue growth initiatives by expanding our product lines and price points to appeal to buyers across the demographic spectrum.

We have also significantly expanded our geographic footprint over the past decade.

In addition to our traditional “move-up” home buyer, we are focusing on the “empty-nester” market, the millennial generation, and the affordable luxury buyer.

4 unchanged sentences

With the millennial generation in its prime family formation years, we also continue to focus on this group with our core suburban homes, affordable luxury offerings, urban condominiums and luxury rental apartment products.

Through our City Living brand, with third-party joint venture partners, we currently are developing a number of high-density, high-rise urban luxury communities to serve affluent move-up families, empty-nesters, and young professionals who are seeking to live in or close to major cities.

These City Living communities are high-rise condominiums and take an extended period of time to construct.

Through our City Living brand, with third-party joint venture partners, we currently are developing two high-density, high-rise urban luxury communities to serve affluent move-up families, empty-nesters, and young professionals who are seeking to live in or close to major cities.

Our City Living communities are generally high-rise condominiums that take an extended period of time to construct.

We generally start selling homes in these communities after construction has commenced.

1 unchanged sentence

Once construction has been completed, the homes in backlog in these communities are generally delivered quickly.

Because of the larger upfront costs and longer development time periods associated with high-rise projects, we are developing, and expect to continue to, develop all future City Living communities through joint ventures with third parties.

Because of the larger upfront costs and longer development time periods associated with high-rise projects, we generally expect to continue developing future high density, high-rise urban luxury condominium communities through joint ventures with third parties.

We believe that the demographics supporting the luxury first-time, move-up, empty-nester, active-adult, affordable luxury and second-home upscale markets will provide us with an opportunity for growth in the future.

14 unchanged sentences

Of the 370 communities in which homes were being offered for sale at October 31, 2023, a total of 304 were detached home communities and 66 were attached home communities.

At October 31, 2022, excluding 373 model homes, we had 1,929 homes under construction or completed but not under contract in our communities, of which 998 were affordable luxury homes, 558 were luxury homes, and 373 were active-adult homes.

At October 31, 2023, we had 3,026 quick move-in homes in various stages of construction in our communities, of which 1,460 were affordable luxury homes, 1,011 were luxury homes, and 555 were active-adult homes.

As a result of the breath of our products and geographic footprint, we have a wide range of base sales prices for our homes.

8 unchanged sentences

the remaining home buyers borrowed approximately 69% of the sales price of the home.

The table below provides the average value of all structural and finishing options purchased by our home buyers, as well as lot premiums, and the value of these options and premiums as a percent of the base sales price of the homes purchased in fiscal 2022, 2021, and 2020:

The table below provides the average value of all structural and finishing options purchased by our home buyers, including lot premiums, and the value of these options and premiums as a percent of the base sales price of the homes purchased in fiscal 2023, 2022, and 2021:

2023 2022 2021

3 unchanged sentences

Attached $ 136 17.0 % $ 117 15.4 % $ 105 15.3 %

In general, the ability to purchase a premium lot or customize a home with structural options and interior finishes varies widely across our product lines, which may result in significant variation in the option value as a percentage of base sales price.

For example, our attached homes do not offer the opportunity for buyers to add significant structural options to their homes and thus they have a smaller option value as a percentage of base sales price.

In general, the ability to purchase a premium lot or customize a home with structural options and interior finishes varies widely across our product lines and what stage of construction the home is in when a purchase contract is signed, which may result in significant variation in the option value as a percentage of base sales price.

For example, our attached homes and our quick move-in homes do not offer the opportunity for buyers to add significant structural options to their homes and thus they have a smaller option value as a percentage of base sales price.

For more information regarding revenues, net contracts signed, income (loss) before income taxes, and assets by segment, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Segments” in Item 7 of this Form 10-K.

As part of our strategy to continue expanding our geographic footprint and product offerings, in fiscal 2022, we acquired substantially all of the assets and operations of a privately-held home builder with operations in San Antonio, Texas for approximately $48.1 million in cash.

From time to time, we acquire home builders in order to increase our footprint and/or product offerings in an existing market or to expand into a new market.

These acquisitions are generally completed using available cash on hand and primarily consist of smaller privately-held builders.

In fiscal 2023, we did not make any acquisitions.

In fiscal 2022, we acquired substantially all of the assets and operations of a privately-held home builder with operations in San Antonio, Texas for approximately $48.1 million in cash.

The assets acquired, which consisted of 16 communities, were primarily inventory, including approximately 450 home sites owned or controlled through land purchase agreements.

In fiscal 2021, we acquired substantially all of the assets and operations of a privately-held home builder serving the Las Vegas, Nevada market, for approximately $38.8 million in cash.

The assets acquired were primarily inventory for future communities, including approximately 550 home sites owned or controlled through land purchase agreements.

In fiscal 2020, we acquired substantially all of the assets and operations of an urban infill builder with operations in Atlanta, Georgia and Nashville, Tennessee.

We also acquired substantially all of the assets and operations of a builder with operations is Colorado Springs, Colorado.

The aggregate purchase price for these acquisitions was approximately $79.2 million in cash.

The assets acquired were primarily inventory, including approximately 1,100 home sites owned or controlled through land purchase options.

Before entering into an agreement to purchase a land parcel, we complete extensive comparative studies and analyses that assist us in evaluating the acquisition.

These analyses may include soil tests, environmental studies, an evaluation of necessary zoning and other governmental entitlements and extensive market research to evaluate which of our product offerings are appropriate for the market.

In addition to purchasing land parcels outright, we are increasingly attempting to enter into option agreements and other arrangements to defer the acquisition of land until we are closer in time to delivering the completed home to our

We have also entered into several joint ventures with other builders, financial partners, or developers to develop land for the use of the joint venture participants or for sale to third parties.

In addition to purchasing land parcels outright, we strive to enter into option agreements and other arrangements

to defer the acquisition of land until we are closer in time to delivering the completed home to our customer.

We have also entered into several joint ventures with other builders, financial partners, or developers to develop land for the use of the joint venture partners or for sale to third parties.

These structures are generally more capital efficient than outright land purchases that occur earlier in the entitlement and development process.

10 unchanged sentences

During fiscal 2023 and 2022, we acquired control of approximately 4,200 and 5,700 home sites, respectively, net of options terminated and lots sold.

During fiscal year 2022, we forfeited control of over 9,000 lots subject to land purchase agreements primarily because the planned community no longer met our development criteria.

During fiscal year 2023 and 2022, we forfeited control of over 4,000 and 9,000 lots, respectively, subject to land purchase agreements primarily because the planned community no longer met our development criteria.

At October 31, 2023, we controlled approximately 70,700 home sites, as compared to approximately 76,000 home sites at October 31, 2022.

16 unchanged sentences

Of the $4.22 billion of land purchase contracts, we paid or deposited $449.9 million.

If we acquire all of these land parcels, we will be required to pay an additional $3.86 billion.

If we acquire all

of these land parcels, we will be required to pay an additional $3.77 billion.

The purchases of these land parcels are expected to occur over the next several years.

We have additional land parcels under option that have been excluded from this aggregate

purchase price because we do not believe that we will complete the purchase of these land parcels and no additional funds will be required from us to terminate these contracts.

We have additional land parcels under option that have been excluded from this aggregate purchase price because we do not believe that we will complete the purchase of these land parcels and no additional funds will be required from us to terminate these contracts.

These option contracts have either been written off or written down to the estimated amount that we expect to recover when the contracts are terminated.

1 unchanged sentence

We devote significant resources to locating suitable land for future development and obtaining the required approvals on land under our control.

There can be no assurance that the necessary development approvals will be secured for the land currently under our control or for land that we may acquire control of in the future or that, upon obtaining such development approvals, we will elect to complete the purchases of land under option or complete the development of land that we own.

There can be no assurance that the necessary development approvals will be secured for the land currently under our control or for land that we may acquire control of in the future.

In addition, upon obtaining such development approvals, we may elect not to complete the purchases of land under option or complete the development of land that we own.

We generally have been successful in obtaining governmental approvals in the past.

9 unchanged sentences

Subcontractors perform all home construction and land development work, generally under fixed-price contracts.

We generally have multiple sources for the materials we purchase.

In recent years, as a result of strong demand for homes following the onset of the COVID-19 pandemic, supply chain disruptions and the constrained availability of certain building products, housing components and construction labor, and municipality-related delays, the production cycle in many of our markets became elongated.

There can be no assurance that these challenges will recede or that cycle times will normalize in the near term.

See “Risk Factors – General Risk Factors” in Item 1A and “Manufacturing/Distribution Facilities” in Item 2 of this Form 10-K.

We generally have multiple sources for the materials we purchase and believe our suppliers have sufficient capacity to support our business operations.

However, factors beyond our control can and have resulted in disruptions to our supply chain, the availability of labor, and the ability of municipalities to process approvals, which can result in elongated production cycles.

See “Risk Factors – Risks Related to Our Business and Industry” in Item 1A and “Manufacturing/Distribution Facilities” in Item 2 of this Form 10-K.

Our construction managers coordinate subcontracting activities and supervise all aspects of construction work and quality control.

25 unchanged sentences

The second step in the sales process occurs when we sign a binding agreement of sale contract with the home buyer and the home buyer provides a larger cash down payment that is generally non-refundable.

Cash down payments averaged approximately 8% of the total purchase price of a home at the end of fiscal year 2022.

Cash down payments averaged approximately 8% of the total purchase price of a home in fiscal year 2023.

Between the time that the home buyer signs the non-binding deposit agreement and the binding agreement of sale, which typically takes about three weeks, the home buyer is required to complete a financial questionnaire that allows us to determine whether the home buyer has the financial resources necessary to purchase the home.

If we determine that the home buyer is not financially qualified, we will not enter into an agreement of sale.

During fiscal 2022, 2021, and 2020, our customers signed net contracts for $9.07 billion (8,255 homes), $11.54 billion (12,472 homes), and $8.00 billion (9,932 homes), respectively.

During fiscal 2023, 2022, and 2021, our customers signed binding net contracts for $7.91 billion (8,077 homes), $9.07 billion (8,255 homes), and $11.54 billion (12,472 homes), respectively.

When we report net contracts signed, the number and value of contracts signed are reported net of all cancellations occurring during the reporting period, whether the cancelled contracts were originally signed in that reporting period or in a prior period.

17 unchanged sentences

2021 9,986 4,364 43.7% $ 2,160.8

* Amounts exclude brokered and referred loans, which amounted to 6.5%, 5.6%, and 4.7% of our home closings in fiscal 2022, 2021, and 2020, respectively.

* Amounts exclude referred loans, which amounted to 9.5%, 6.5%, and 5.6% of our home closings in fiscal 2023, 2022, and 2021, respectively.

Prior to the actual closing of the home and funding of the mortgage, the home buyer may lock in an interest rate based upon the terms of the commitment.

28 unchanged sentences

Weather-related events can delay housing starts and closings and increase costs.

See “Risk Factors – Risks Related to Our Business and Industry – Our quarterly operating results may fluctuate due to the seasonal nature of our business” and “– Adverse weather conditions, natural disasters, and other conditions could disrupt the development of our communities, which could harm our sales and results of operation” in Item 1A of this

See “Risk Factors – Risks Related to Our Business and Industry – Our quarterly operating results may fluctuate due to the seasonal nature of our business” and “Risk Factors – Risks Related to Other Events and Factors – Adverse weather conditions, natural disasters, and other conditions could disrupt the development of our communities, which could harm our sales and results of operation” in Item 1A of this Form 10-K.

Investments in Unconsolidated Entities

10 unchanged sentences

At October 31, 2023, we had $351.2 million invested in our Land Development Joint Ventures and funding commitments of $204.4 million to nine of the Land Development Joint Ventures which will be funded if additional investments in the ventures are required.

At October 31, 2022, ten of these joint ventures had aggregate loan commitments of $557.2 million and outstanding borrowings against these commitments of $444.3 million.

At October 31, 2023, twelve of these joint ventures had aggregate loan commitments of $610.8 million and outstanding borrowings against these commitments of $445.5 million.

At October 31, 2023, our Land Development Joint Ventures owned approximately 25,800 home sites.

At October 31, 2022, we had agreed to acquire 409 home sites from two of our Land Development Joint Ventures for an aggregate purchase price of approximately $42.1 million.

At October 31, 2023, we had agreed to acquire 332 home sites from three of our Land Development Joint Ventures for an aggregate purchase price of approximately $31.5 million.

In addition, we expect to purchase approximately 8,200 additional home sites over a number of years from several of these joint ventures.

13 unchanged sentences

Gibraltar Joint Ventures

Over the past three years, we, through Gibraltar, entered into several ventures with an institutional investor to provide financing and land banking to residential buildings and developers.

Over the past several years, we, through Gibraltar, entered into several ventures with an institutional investor to provide financing and land banking to residential buildings and developers.

We have an approximate 25% interest in these ventures.

27 unchanged sentences

At October 31, 2023, we employed approximately 4,800 persons full-time, as compared to approximately 5,200 employees at October 31, 2022.

At October 31, 2022, less than 2% of our employees were covered by a collective bargaining agreement.

At October 31, 2023, approximately 1% of our employees were covered by a collective bargaining agreement.

We believe our employees are among our most important resources and are critical to our continued success.

5 unchanged sentences

All of our employees must adhere to a code of conduct that sets standards for appropriate behavior and includes required annual training on preventing, identifying, reporting and stopping any type of unlawful discrimination.

In response to the COVID-19 pandemic, we implemented enhanced safety protocols and procedures to protect our employees, subcontractors and customers.

Many of these protocols have evolved and become more permanent fixtures in our workplace and in the way we conduct certain aspects of our business.

For example, we continue to use and expand technologies that allow for virtual interactions in many aspects of our business, including customer facing activities.

In recent years, we have implemented protocols and procedures to protect our employees, subcontractors and customers.

For example, we have expanded technologies that allow for virtual interactions in many aspects of our business, including customer facing activities.

Many administrative and operational routines have been modified including with respect to providing our employees with greater flexibility to work remotely.

Many of these modifications have been well received by our employees with minimal disruption to our operations and have continued through fiscal 2023.

For a detailed discussion of the impact of the COVID-19 pandemic on our human capital resources, see “Risk Factors - Public health issues such as a major epidemic or pandemic could adversely affect our business or financial results” in “Item 1A” of this Form 10-K.

Available Information

16 unchanged sentences

demand for our homes;

our built-to-order and quick move-in home strategy;

sales paces and prices;

27 unchanged sentences

the outcome of legal proceedings, investigations, and claims;

and the future impact of COVID-19 or other public health or other emergencies.

and the impact of public health or other emergencies.

Any or all of the forward-looking statements included in this report and in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate.

7 unchanged sentences

and in other materials released to the public.

Forward-looking statements speak only as of the date they are made.

These statements may include guidance regarding our future performance, such as our anticipated annual revenue, home deliveries, and margins, that represents management’s estimates as of the date of publication.

Guidance is based upon a number of assumptions and estimates that, while presented with numerical specificity, is inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions, some of which will change.

Forward-looking statements, including guidance, speak only as of the date they are made.

We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

4 unchanged sentences

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 1. Business