We have experienced significant volatility in market conditions during 2020. We began the year under positive demand conditions that resulted in net new orders increasing more than 30% for both January and February 2020 over the comparable prior year periods. On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic, and the various containment and mitigation measures adopted by governments and institutions globally and in the U.S. began to have a severe economic impact, including causing the U.S. to enter into an economic recession that continues through the date of this report.

In response to the COVID-19 pandemic and various state and local orders, we instituted the following actions in March:



•      Placed restrictions on business travel for our employees and imposed
       mandatory quarantine periods for employees who traveled to areas impacted
       by the pandemic;


•      Closed our sales centers, model homes, and design centers to the general
       public and shifted to appointment-only interactions with our customers
       where permitted, following recommended distancing and other health and
       safety protocols when meeting in person with a customer;


•      Enhanced our virtual sales tools to give customers the ability to shop for
       a new home from their mobile device or personal computer;


•      Closed the public gathering spaces of our amenity centers as well as
       community pools and athletic facilities;


•      Modified our corporate and division office functions in order to allow all
       of our employees to work remotely except for essential minimum basic
       operations which could only be done in an office setting;

• Eliminated non-emergency warranty work in our customers' homes;




•      Modified much of our customer interactions around the mortgage origination
       and closing process to be virtual and minimize in-person interactions; and


•      Modified our construction operations to enforce enhanced safety protocols
       around social distancing, hygiene, and health screening.


As the pandemic spread and government and business responses expanded, we focused on protecting our liquidity and closely managing our cash flows, including through the following actions:



•      Delaying the acquisition of certain land parcels and slowing land
       development where practical;


•      Limiting our investment in house construction, including strictly limiting
       production of new unsold "speculative" homes, and contacting backlog
       customers to reconfirm status before beginning construction of sold homes;


•      As a precautionary measure, proactively drawing $700.0 million under the
       Revolving Credit Facility in March;

• Suspending the repurchase of shares under our share repurchase program; and

• Reducing headcount and other overhead expenses.

The severity of these restrictions and the date we resumed more normal operations has varied by market based on the reduction in restrictions under "shelter in place" orders and improvement in public health conditions. While all of the above-referenced steps were, and some remain, necessary and appropriate in light of the COVID-19 pandemic, they impacted our ability to operate our business in its ordinary and traditional course. Combined with the decrease in demand that occurred as the result of the severe macroeconomic conditions, our net new orders declined significantly in late March through April. Demand began to stabilize in May 2020 and then rebounded sharply in June and remained strong through September, resulting in increases of 36% and 15% in net new orders during the three and nine months ended September 30, 2020, respectively, over the comparable prior year periods. We believe the recovery in demand reflects a number of factors, including low mortgage interest rates, a restricted supply of new and existing home inventory, pent-up demand following the economic shutdown resulting from the COVID-19 pandemic, the appeal of single-family living in a new home, and a desire among some buyers to exit more densely populated urban centers. In addition to the improved demand, our construction and manufacturing operations are now functioning at effectively full capacity. However, we have experienced periodic disruptions in our supply chain, which have elongated the production cycles in certain markets. We are also facing cost pressures related to labor and materials, especially lumber, though we believe that we will be able to increase pricing to offset the majority of such cost increases.

While our operations are now fully functioning, subject to regulated restrictions and safety constraints we have enacted in order to protect our employees, trade contractors, and customers, the current resurgence of the COVID-19 pandemic in key areas of our operations may require us to implement restrictions on our operations in the future. The potential magnitude or duration of the business and economic impacts from the unprecedented public health effort to contain and combat the spread of COVID-19 are uncertain and may include, among other things, significant volatility in financial markets. In addition, we can provide no assurance as to whether the COVID-19 public health effort will be intensified to such an extent that we will not be able to



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conduct business operations in certain of our served markets or at all for an indefinite period. There are no reliable estimates of how long the COVID-19 pandemic will last or how severe it may be, and therefore, the unpredictability of the current economic and public health conditions will continue to evolve. However, we believe that the steps we have taken over the years to reduce risk to our operations and the measures we have taken recently to meet the challenges of the COVID-19 pandemic position us well to continue to serve our customers, protect our employees and business partners, and deliver value for our stakeholders.

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