The following discussion and analysis of our financial condition and results of operations is intended to help the reader understand our Company, business, operations and present business environment and is provided as a supplement to, and should be read together with the sections entitled "Risk Factors," and the financial statements and the accompanying notes included elsewhere in this Form 10-K. In addition, the statements in this discussion and analysis regarding industry outlook, our expectations regarding the performance of our business, anticipated financial results, liquidity and the other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in "Forward-Looking Statements" and in "Risk Factors" above. Our actual results may differ materially from those contained in or implied by any forward-looking statements.
Executive Overview and Outlook
Market Conditions
During the first half of fiscal 2022, housing market conditions remained robust and demand remained relatively strong despite the geopolitical environment and increasing affordability concerns due to the substantial increase in home prices over the past two years. However, during the second half of fiscal 2022, housing demand sharply weakened due to a rapid and substantial increase in mortgage rates, significant inflation in the broader economy, stock market volatility, and other macro-economic conditions, which have negatively impacted buyer sentiment and behavior. We expect these factors to continue to negatively impact demand in fiscal 2023. We believe, however, that the long-term housing market outlook remains positive, supported by a demographic shift towards homeownership, robust employment market, and a multimillion unit housing deficit that has accumulated over the past decade. We are focused on making the necessary adjustments to adapt to the weak demand environment. For instance, our sales process involves continuous analysis of competitive market data, including pricing, features and incentives, which enables us to adjust pricing, incentives and specification levels to enhance affordability and respond to competitive dynamics and to best position each of our communities. In relation to land acquisition, we are more conservative in our underwriting of new land deals and will continue to attempt to renegotiate or terminate deals if a project no longer meets our stricter underwriting standards. Like many other homebuilders, we continue to experience production challenges due to supply chain disruptions and tightness in labor markets. These factors have resulted in elongated construction cycle times and decreased backlog conversion. We have been proactively working with our suppliers and trade partners to address these issues and expect to see some improvements in fiscal 2023. Balanced Growth Strategy Fiscal 2022 represented significant progress towards the execution of our balanced growth strategy. We successfully reached our goal of reducing total debt below$1.0 billion . We believe our improvements in operating margin, land position and use of lot option agreements, together with a less-leveraged and more efficient balance sheet, have positioned us well for the headwinds we expect to encounter in fiscal 2023. As we look to fiscal 2023, we are anticipating continuing weakness in both demand and pricing in the quarters ahead. During fiscal 2022, we made sizable improvement in our land position and share of lots controlled through option agreements. In fiscal 2023, we plan to continue to invest in land strategically and increase our use of lot option agreements to position ourselves for long-term growth, while focusing on the appropriate balance between pursuing growth opportunities, controlling risk and maintaining a strong liquidity position.
Overview of Results for Our Fiscal 2022
The following is a summary of our performance against certain key operating and financial metrics during fiscal 2022:
•During the year endedSeptember 30, 2022 , sales per community per month was 2.8 compared to 3.7 in the prior year, and our net new orders were 4,061, down 27.0% from 5,564 in the prior year. The decrease in sales pace is a reflection of the previously discussed macro-economic factors adversely impacting homebuyers. As we navigate the current environment, we are focused on balancing sales pace, incentives and price adjustments to maximize return on capital over time. 25 -------------------------------------------------------------------------------- •As ofSeptember 30, 2022 , our land position includes 25,170 controlled lots, up 14.5% from 21,987 as ofSeptember 30, 2021 . Excluding land held for future development and land held for sale lots, we controlled 24,397 active lots, up 13.9% from the prior year. As ofSeptember 30, 2022 , we had 13,312 lots, or 54.6% of our total active lots, under option agreements as compared to 9,992 lots controlled, or 46.6% of our total active lots, under option agreements as ofSeptember 30, 2021 . •ASP for homes closed during the year endedSeptember 30, 2022 was$484.1 thousand , up 20.3% from$402.4 thousand in the prior year. The year-over-year increase in ASP on closings was impacted primarily by price appreciation due to strong demand and limited supply of homes. However, higher mortgage interest rates and softening demand may temper ASP growth in the future. •Homebuilding gross margin for the fiscal year endedSeptember 30, 2022 was 23.1%, up from 18.9% in the prior year. Homebuilding gross margin excluding impairments, abandonments, and interest for the fiscal year endedSeptember 30, 2022 was 26.3%, up from 23.0% in the prior year. Our homebuilding gross margin has been driven by a favorable pricing environment, although softening demand may temper gross margin in the future. •Cancellation rate for the fiscal year endedSeptember 30, 2022 was 17.6%, up from 11.1% in the prior year. Cancellation rates increased significantly during the second half of the fiscal year due to the previously discussed unfavorable macro-economic factors. •SG&A for the fiscal year endedSeptember 30, 2022 was 10.9% of total revenue compared with 11.4% a year earlier. The decrease in SG&A as a percentage of revenue is primarily due to increased homebuilding revenue. The dollar amount of SG&A increased by$8.2 million , or 3.4%, primarily due to increased personnel expense. We remain focused on improving overhead cost management in relation to our revenue growth. Seasonal and Quarterly Variability: Our homebuilding operating cycle historically has reflected escalating new order activity in the second and third fiscal quarters and increased closings in the third and fourth fiscal quarters. However, these seasonal patterns may be impacted or reduced by a variety of factors, including periods of economic downturn, which result in decreased revenues and closings. The following tables present new order and closings data for the periods presented: New Orders (Net of Cancellations) 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total 2022 1,141 1,291 925 704 4,061 2021 1,442 1,854 1,199 1,069 5,564 2020 1,251 1,661 1,372 2,009 6,293 Closings 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total 2022 1,019 1,078 1,043 1,616 4,756 2021 1,114 1,388 1,378 1,407 5,287 2020 1,112 1,277 1,366 1,737 5,492 26
--------------------------------------------------------------------------------
RESULTS OF CONTINUING OPERATIONS
The following table summarizes certain key income statement metrics for the periods presented: Fiscal Year Ended September 30, $ in thousands 2022 2021 2020 Revenue: Homebuilding$ 2,302,520 $ 2,127,700 $ 2,116,910 Land sales and other 14,468 12,603 10,167 Total$ 2,316,988 $ 2,140,303 $ 2,127,077 Gross profit (loss): Homebuilding$ 532,149 $ 401,720 $ 348,110 Land sales and other 5,358 2,535 (470) Total$ 537,507 $ 404,255 $ 347,640 Gross margin: Homebuilding(a) 23.1 % 18.9 % 16.4 % Land sales and other(b) 37.0 % 20.1 % (4.6) % Total 23.2 % 18.9 % 16.3 % Commissions$ 74,336 $ 80,125 $ 82,507 General and administrative expenses (G&A)$ 177,320
10.9 % 11.4 % 11.9 % G&A as a percentage of total revenue 7.7 % 7.6 % 8.0 % Depreciation and amortization$ 13,360 $ 13,976 $ 15,640 Operating income$ 272,491 $ 146,869 $ 79,107 Operating income as a percentage of total revenue 11.8 % 6.9 % 3.7 % Effective tax rate(c) 19.4 % 15.0 % 25.2 % Inventory impairments and abandonments$ 2,963
Gain (loss) on extinguishment of debt, net$ 309
(a) Excluding impairments, abandonments, and interest amortized to cost of sales, homebuilding gross margin was 26.3%, 23.0% and 21.0% for the fiscal years endedSeptember 30, 2022 , 2021 and 2020, respectively. Please see "Homebuilding Gross Profit and Gross Margin" section below for a reconciliation of homebuilding gross profit and the related gross margin excluding impairments and abandonments and interest amortized to cost of sales to homebuilding gross profit and gross margin, the most directly comparable GAAP measure.
(b) Calculated as land sales and other gross profit (loss) divided by land sales and other revenue.
(c) Calculated as tax expense for the period divided by income from continuing operations. Due to a variety of factors, our income tax expense is not always directly correlated to the amount of pre-tax income for the associated periods. Our effective tax rate was impacted by, among other factors, tax credits of$12.1 million ,$12.1 million and$0.9 million for the fiscal years endedSeptember 30, 2022 , 2021 and 2020, respectively. Please see Note 13 of the notes to our consolidated financial statements in this Form 10-K for details of significant items that impact our effective tax rate. 27
--------------------------------------------------------------------------------
Reconciliation of Net Income (Loss) to Adjusted EBITDA
Reconciliation of Adjusted EBITDA to total company net income (loss), the most directly comparable GAAP measure, is provided for each period discussed below. Management believes that Adjusted EBITDA assists investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies' respective capitalization, tax position, and level of impairments. These EBITDA measures should not be considered alternatives to net income (loss) determined in accordance with GAAP as an indicator of operating performance.
The following table reconciles our net income (loss) to Adjusted EBITDA for the periods presented:
Fiscal Year Ended September 30, in thousands 2022 2021 2020 2019 2018 Net income (loss)$ 220,704 $ 122,021
53,267 21,501 17,664 (37,245) 94,373 Interest amortized to home construction and land sales expenses and capitalized interest impaired 72,058 87,290 95,662 108,941 93,113 Interest expense not qualified for capitalization - 2,781 8,468 3,109 5,325 EBIT 346,029 233,593 174,020 (4,715) 147,436 Depreciation and amortization 13,360 13,976 15,640 14,759 13,807 EBITDA 359,389 247,569 189,660 10,044 161,243 Stock-based compensation expense 8,478 12,167 10,036 10,526 10,258 (Gain) loss on extinguishment of debt (309) 2,025 - 24,920 27,839 Inventory impairments and abandonments(a) 2,524 853 2,111 134,711 4,988 Litigation settlement in discontinued operations - 120 1,260 - - Restructuring and severance expenses - (10) 1,317 - - Joint venture impairment and abandonment charges - - - - 341 Adjusted EBITDA$ 370,082 $ 262,724 $ 204,384 $ 180,201 $ 204,669
(a) In periods during which we impaired certain of our inventory assets, capitalized interest that is impaired is included in the line above titled "Interest amortized to home construction and land sales expenses and capitalized interest impaired."
28 --------------------------------------------------------------------------------
Homebuilding Operations Data
The following table summarizes new orders and cancellation rates by reportable segment for the periods presented:
New Orders, net Cancellation Rates 2022 2021 2020 22 v 21 21 v 20 2022 2021 2020 West 2,437 3,233 3,589 (24.6) % (9.9) % 18.4 % 12.0 % 16.5 % East 879 1,172 1,328 (25.0) % (11.7) % 16.2 % 9.6 % 14.5 % Southeast 745 1,159 1,376 (35.7) % (15.8) % 16.3 % 10.2 % 15.1 % Total 4,061 5,564 6,293 (27.0) % (11.6) % 17.6 % 11.1 % 15.8 % Net new orders for the year endedSeptember 30, 2022 decreased to 4,061, down 27.0% from the year endedSeptember 30, 2021 . The decrease in net new orders was driven primarily by a decrease in average active community count from 127 in the prior year to 120, a decrease in sales pace from 3.7 sales per community per month in the prior year to 2.8, and an increase in cancellation rates from 11.1% in the prior year to 17.6%. The decreases in sales pace and the increases in cancellation rates across reportable segments were primarily driven by the sharp increase in mortgage rates as well as the previously discussed other macro-economic factors adversely impacting homebuyers. During the second half of fiscal 2022, cancellation rates increased significantly from the low teens in the first half of the fiscal year to 17.0% in fiscal third quarter and 32.8% in fiscal fourth quarter, although when compared to beginning backlog, cancellations for fiscal third quarter and fiscal fourth quarter 2022 only represented 6.0% and 11.4% of the respective fiscal quarter's beginning backlog. The table below summarizes backlog units by reportable segment as well as the aggregate dollar value and ASP of homes in backlog as ofSeptember 30, 2022 , 2021 and 2020: As of September 30, 2022 2021 2020 22 v 21 21 v 20 Backlog Units: West 1,257 1,653 1,365 (24.0) % 21.1 % East 410 611 624 (32.9) % (2.1) % Southeast 424 522 520 (18.8) % 0.4 % Total 2,091 2,786 2,509 (24.9) % 11.0 % Aggregate dollar value of homes in backlog (in millions)$ 1,144.9 $ 1,284.0 $ 995.3 (10.8) % 29.0 % ASP in backlog (in thousands)$ 547.5 $ 460.9 $ 396.7 18.8 % 16.2 % Backlog reflects the number of homes for which the Company has entered into a sales contract with a customer but has not yet delivered the home. Homes in backlog have historically been delivered within three to six months following commencement of construction. Ongoing supply chain disruptions, including the availability of certain materials and construction labor, has led to extended construction cycle times. While we are beginning to see improvements, we are still experiencing increased construction cycle times by an average of two to three months across our markets compared to the prior year. The aggregate dollar value of homes in backlog as ofSeptember 30, 2022 decreased 10.8% compared to the prior year due to a 24.9% decrease in backlog units, partially offset by an 18.8% increase in the ASP of homes in backlog. 29 --------------------------------------------------------------------------------
Homebuilding Revenue, Average Selling Price, and Closings
The table below summarizes homebuilding revenue, ASP of our homes closed, and closings by reportable segment for the periods presented:
Homebuilding Revenue Average Selling Price $ in thousands 2022 2021 2020 22 v 21 21 v 20 2022 2021 2020 22 v 21 21 v 20 West$ 1,327,770 $ 1,110,208 $ 1,180,577 19.6 % (6.0) %$ 468.7 $ 377.0 $ 368.2 24.3 % 2.4 % East 555,598 565,989 476,167 (1.8) % 18.9 % 514.4 477.6 455.7 7.7 % 4.8 % Southeast 419,152 451,503 460,166 (7.2) % (1.9) % 497.2 390.2 370.8 27.4 % 5.2 % Total$ 2,302,520 $ 2,127,700 $ 2,116,910 8.2 % 0.5 %$ 484.1 $ 402.4 $ 385.5 20.3 % 4.4 % Closings 2022 2021 2020 22 v 21 21 v 20 West 2,833 2,945 3,206 (3.8) % (8.1) % East 1,080 1,185 1,045 (8.9) % 13.4 % Southeast 843 1,157 1,241 (27.1) % (6.8) % Total 4,756 5,287 5,492 (10.0) % (3.7) %
The increase in homebuilding revenue for fiscal 2022 as compared to fiscal 2021 is the result of an increase in ASP, partially offset by a decrease in closings.
The increase in ASP across all segments was primarily attributed to price appreciation due to strong demand, short supply of homes, and inflation. In the East segment, ASP changes were also impacted by a change in mix of closings between products and among communities within the markets as compared to the prior year period. On average, we anticipate that our ASP will continue to increase in the near-term as indicated by the ASP for homes in backlog as ofSeptember 30, 2022 , although higher mortgage interest rates and softening demand may temper ASP growth in the future. The decrease in closings was primarily due to a decrease in backlog conversion rates as a result of longer construction cycle times compared to the prior year. Among the three reportable segments, our Southeast segment has experienced the highest increase in construction cycle times by an average of 3.1 months, resulting in a significant decrease in backlog conversion rates and closings. 30 --------------------------------------------------------------------------------
Homebuilding Gross Profit and Gross Margin
The following tables present our homebuilding (HB) gross profit and gross margin by reportable segment and in total. In addition, such amounts are presented excluding inventory impairments and abandonments and interest amortized to cost of sales (COS). Homebuilding gross profit is defined as homebuilding revenue less home cost of sales (which includes land and land development costs, home construction costs, capitalized interest, indirect costs of construction, estimated warranty costs, closing costs, and inventory impairments and abandonment charges). Reconciliation of homebuilding gross profit and the related gross margin excluding impairments and abandonments, and interest amortized to cost of sales to homebuilding gross profit and gross margin, the most directly comparable GAAP measure, is provided for each period discussed below. Management believes that this information assists investors in comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies' respective level of impairments and level of debt. These measures should not be considered alternatives to homebuilding gross profit and gross margin determined in accordance with GAAP as an indicator of operating performance. $ in thousands Fiscal Year Ended September 30, 2022 HB Gross HB Gross HB Gross Profit Impairments & Profit (Loss) Margin Interest (Loss) excluding HB Gross Margin HB Gross HB Gross Abandonments excluding excluding Amortized to COS I&A and excluding I&A and Profit (Loss) Margin (I&A) I&A I&A (Interest) Interest Interest West$ 353,370 26.6 % $ 289$ 353,659 26.6 % $ -$ 353,659 26.6 % East 137,937 24.8 % 143 138,080 24.9 % - 138,080 24.9 % Southeast 104,341 24.9 % 663 105,004 25.1 % - 105,004 25.1 % Corporate & unallocated(a) (63,499) - (63,499) 71,619 8,120 Total homebuilding$ 532,149 23.1 %$ 1,095 $ 533,244 23.2 %$ 71,619 $ 604,863 26.3 % $ in thousands Fiscal Year Ended September 30, 2021 HB Gross HB Gross Profit Impairments & HB Gross Margin Interest excluding I&A HB Gross Margin HB Gross HB Gross Abandonments Profit (Loss) excluding Amortized to COS and excluding I&A and Profit (Loss) Margin (I&A) excluding I&A I&A (Interest) Interest Interest West$ 270,671 24.4 % $ -$ 270,671 24.4 % $ -$ 270,671 24.4 % East 125,928 22.2 % 465 126,393 22.3 % - 126,393 22.3 % Southeast 98,525 21.8 % 388 98,913 21.9 % - 98,913 21.9 % Corporate & unallocated(a) (93,404) - (93,404) 87,037 (6,367) Total homebuilding$ 401,720 18.9 % $ 853$ 402,573 18.9 %$ 87,037 $ 489,610 23.0 % $ in thousands Fiscal Year Ended September 30, 2020 HB Gross HB Gross Profit Impairments & HB Gross Margin Interest excluding I&A HB Gross Margin HB Gross HB Gross Abandonments Profit (Loss) excluding Amortized to COS and excluding I&A and Profit (Loss) Margin (I&A) excluding I&A I&A (Interest) Interest Interest West$ 258,675 21.9 % $ 923$ 259,598 22.0 % $ -$ 259,598 22.0 % East 98,446 20.7 % 82 98,528 20.7 % - 98,528 20.7 % Southeast 87,935 19.1 % 641 88,576 19.2 % - 88,576 19.2 % Corporate & unallocated(a) (96,946) - (96,946) 94,844 (2,102) Total homebuilding$ 348,110 16.4 %$ 1,646 $ 349,756 16.5 %$ 94,844 $ 444,600 21.0 % (a) Corporate and unallocated includes capitalized interest and capitalized indirect costs expensed to homebuilding cost of sale related to homes closed, as well as capitalized interest and capitalized indirect costs impaired in order to reflect projects in progress assets at fair value. 31 -------------------------------------------------------------------------------- Our homebuilding gross profit increased by$130.4 million to$532.1 million for the fiscal year endedSeptember 30, 2022 , compared to$401.7 million in the prior year. The increase in homebuilding gross profit was primarily driven by an increase in homebuilding revenue of$174.8 million and an increase in gross margin of 420 basis points to 23.1%. However, as shown in the tables above, the comparability of our gross profit and gross margin was modestly impacted by impairments and abandonment charges which increased by$0.2 million and interest amortized to homebuilding cost of sales which decreased by$15.4 million year-over-year (refer to Note 5 and Note 6 of the notes to the consolidated financial statements in this Form 10-K for additional details). When excluding the impact of impairments and abandonment charges and interest amortized to homebuilding cost of sales, homebuilding gross profit increased by$115.3 million compared to the prior year while homebuilding gross margin increased by 330 basis points to 26.3%. The year-over-year improvement in gross margin for the fiscal year endingSeptember 30, 2022 is primarily driven by lower sales incentives and pricing increases, although softening demand may temper gross margin in the future.
West Segment: Compared to the prior fiscal year, homebuilding gross profit
increased by
East Segment: Compared to the prior fiscal year, homebuilding gross profit increased by$12.0 million due to higher gross margin, partially offset by a decrease in homebuilding revenue. Homebuilding gross margin, excluding impairments and abandonments, increased to 24.9%, up from 22.3% in the prior year. The increase in gross margin was driven primarily by lower sales incentives and pricing increases. Southeast Segment: Compared to the prior fiscal year, homebuilding gross profit increased by$5.8 million due to higher gross margin, partially offset by a decrease in homebuilding revenue. Homebuilding gross margin, excluding impairments and abandonments, increased to 25.1%, up from 21.9% in the prior year. The increase in gross margin was driven primarily by lower sales incentives and pricing increases. Measures of homebuilding gross profit and gross margin after excluding inventory impairments and abandonments, interest amortized to cost of sales, and other non-recurring items are not GAAP financial measures. These measures should not be considered alternatives to homebuilding gross profit and gross margin determined in accordance with GAAP as an indicator of operating performance. In particular, the magnitude and volatility of non-cash inventory impairments and abandonment charges for the Company and other homebuilders have been significant historically and, as such, have made financial analysis of our industry more difficult. Homebuilding metrics excluding these charges, as well as interest amortized to cost of sales and other similar presentations by analysts and other companies, are frequently used to assist investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies' respective level of impairments and levels of debt. Management believes these non-GAAP measures enable holders of our securities to better understand the cash implications of our operating performance and our ability to service our debt obligations as they currently exist and as additional indebtedness is incurred in the future. These measures are also useful internally, helping management to compare operating results and to measure cash available for discretionary spending. In a given period, our reported gross profit is generated from both communities previously impaired and communities not previously impaired. In addition, as indicated above, certain gross profit amounts arise from recoveries of prior period costs, including warranty items that are not directly tied to communities generating revenue in the period. Home closings from communities previously impaired would, in most instances, generate very low or negative gross margins prior to the impact of the previously recognized impairment. Gross margin for each home closing is higher for a particular community after an impairment because the carrying value of the underlying land was previously reduced to the present value of future cash flows as a result of the impairment, leading to lower cost of sales at the home closing. This improvement in gross margin resulting from one or more prior impairments is frequently referred to in the aggregate as the "impairment turn" or "flow-back" of impairments within the reporting period. The amount of this impairment turn may exceed the gross margin for an individual impaired asset if the gross margin for that asset prior to the impairment would have been negative. The extent to which this impairment turn is greater than the reported gross margin for the individual asset is related to the specific historical cost basis of that individual asset. 32 -------------------------------------------------------------------------------- The asset valuations that result from our impairment calculations are based on discounted cash flow analyses and are not derived by simply applying prospective gross margins to individual communities. As such, impaired communities may have gross margins that are somewhat higher or lower than the gross margins for unimpaired communities. The mix of home closings in any particular quarter varies to such an extent that comparisons between previously impaired and never impaired communities would not be a reliable way to ascertain profitability trends or to assess the accuracy of previous valuation estimates. In addition, since any amount of impairment turn is tied to individual lots in specific communities, it will vary considerably from period to period. As a result of these factors, we review the impairment turn impact on gross margin on a trailing 12-month basis rather than a quarterly basis as a way of considering whether our impairment calculations are resulting in gross margins for impaired communities that are comparable to our unimpaired communities. For fiscal 2022, our homebuilding gross margin was 23.1% and excluding interest and inventory impairments and abandonments, it was 26.3%. For the same period, homebuilding gross margin was as follows in those communities that have previously been impaired, which represented 3.4% of total closings during fiscal 2022: Homebuilding Gross Margin from previously impaired communities: Pre-impairment turn gross margin 11.3 % Impact of interest amortized to COS related to these communities 2.4 % Pre-impairment turn gross margin, excluding interest amortization 13.7 % Impact of impairment turns
19.3 % Gross margin (post impairment turns), excluding interest amortization 33.0 %
For further discussion of our impairment policies, refer to Note 2 and Note 5 of the notes to consolidated financial statements in this Form 10-K.
Land Sales and Other Revenue and Gross Profit (Loss)
Land sales relate to land and lots sold that do not fit within our homebuilding programs and strategic plans. We also have other revenue related to title examinations provided for our homebuyers in certain markets. The following tables summarize our land sales and other revenue and related gross profit (loss) by reportable segment for the periods presented: $ in thousands Land Sales and Other Revenue 2022 2021 2020 22 v 21 21 v 20 West$ 3,783 $ 8,370 $ 2,762 (54.8) % 203.0 % East 5,149 3,846 1,457 33.9 % 164.0 % Southeast 5,536 387 5,948 1,330.5 % (93.5) % Total$ 14,468 $ 12,603 $ 10,167 14.8 % 24.0 % $ in thousands Land Sales and Other Gross Profit (Loss) 2022 2021 2020 22 v 21 21 v 20 West$ 734 $ 2,330 $ 417 (68.5) % 458.8 % East 4,206 440 111 855.9 % 296.4 % Southeast 984 73 200 1,247.9 % (63.5) % Corporate and unallocated(a) (566) (308) (1,198) (83.8) % 74.3 % Total$ 5,358 $ 2,535 $ (470) 111.4 % 639.4 %
(a) Includes capitalized interest and capitalized indirect costs expensed to land cost of sale related to land sold, as well as capitalized interest and capitalized indirect costs impaired in order to reflect land held for sale assets at net realizable value.
To further support our efforts to improve capital efficiency, we continued to focus on closing a number of land sales for land positions that did not fit within our strategic plans. Future land and lot sales will depend on a variety of factors, including local market conditions, individual community performance, and changing strategic plans. 33 --------------------------------------------------------------------------------
Operating Income
The table below summarizes operating income by reportable segment for the periods presented: Fiscal Year Ended September 30, in thousands 2022 2021 2020 22 v 21 21 v 20 West$ 253,961 $ 181,303 $ 161,786 $ 72,658 $ 19,517 East 102,146 84,630 56,319 17,516 28,311 Southeast 68,726 57,581 40,746 11,145 16,835 Corporate and Unallocated(a) (152,342) (176,645) (179,744) 24,303 3,099 Operating income$ 272,491 $ 146,869 $ 79,107 $ 125,622 $ 67,762
(a) Includes amortization of capitalized interest, capitalization and amortization of indirect costs, impairment of capitalized interest and capitalized indirect costs, expenses related to numerous shared services functions that benefit all segments but are not allocated to the operating segments, and certain other amounts that are not allocated to our operating segments.
Our operating income increased by$125.6 million to$272.5 million for the year endedSeptember 30, 2022 , compared to operating income of$146.9 million for year endedSeptember 30, 2021 , primarily driven by the previously discussed increase in gross profit, partially offset by an increase in SG&A expense. The dollar amount of SG&A increased by$8.2 million , or 3.4%, primarily due to increased personnel expense. Additionally, SG&A as a percentage of total revenue decreased year-over-year by 50 basis points from 11.4% to 10.9% primarily due to the increase in homebuilding revenue. West Segment: The$72.7 million increase in operating income compared to the prior year was primarily due to the increase in gross profit previously discussed, partially offset by higher commissions expense on higher homebuilding revenue, higher sales and marketing expenses, and higher other G&A expenses in the segment. East Segment: The$17.5 million increase in operating income compared to the prior year was primarily due to the increase in gross profit previously discussed and lower commissions expense on lower homebuilding revenue in the segment. This increase to operating income is partially offset by higher sales and marketing expenses and higher other G&A expenses in the segment. Southeast Segment: The$11.1 million increase in operating income compared to the prior year was primarily due to the increase in gross profit previously discussed and lower commissions expense on lower homebuilding revenue. This increase to operating income is partially offset by higher sales and marketing expenses and higher other G&A expenses in the segment. Corporate and Unallocated: Our Corporate and unallocated results include amortization of capitalized interest, capitalization and amortization of indirect costs, impairment of capitalized interest and capitalized indirect costs, expenses for various shared services functions that benefit all segments but are not allocated, including information technology, treasury, corporate finance, legal, branding and national marketing, and certain other amounts that are not allocated to our operating segments. For the fiscal year endedSeptember 30, 2022 , corporate and unallocated net expenses decreased by$24.3 million from the prior fiscal year, primarily due to lower amortization of capitalized interest and capitalized indirect costs to cost of sales, partially offset by higher G&A costs. Below operating income, we had two noteworthy fluctuations between fiscal 2022 and fiscal 2021 as follows: (1) we experienced an increase in other income and expense, net, as we had no interest expense not qualified for capitalization during fiscal 2022 compared to$2.8 million during fiscal 2021, and (2) we recorded a gain on extinguishment of debt of$0.3 million during fiscal 2022 compared to a loss on extinguishment of debt of$2.0 million in fiscal 2021. See Note 6 and Note 7 of the notes to our consolidated financial statements in this Form 10-K for further discussion of these items.
Income Taxes
We recognized income tax expense from continuing operations of$53.3 million for the fiscal year endedSeptember 30, 2022 , compared to income tax expense from continuing operations of$21.5 million and$18.0 million for our fiscal years endedSeptember 30, 2021 and 2020, respectively. Income tax expense in our fiscal 2022, 2021 and 2020 primarily resulted from income generated in the fiscal year and permanent book/tax differences, partially offset by the generation of additional federal tax credits. Refer to Note 13 of the notes to the consolidated financial statements in this Form 10-K for a further discussion of our income taxes. 34 --------------------------------------------------------------------------------
Liquidity and Capital Resources
Our sources of liquidity include, but are not limited to, cash from operations, proceeds from Senior Notes, our Secured Revolving Credit Facility (the Facility) and other bank borrowings, the issuance of equity and equity-linked securities, and other external sources of funds. Our short-term and long-term liquidity depends primarily upon our level of net income, working capital management (cash, accounts receivable, accounts payable and other liabilities), and available credit facilities. Net changes in cash, cash equivalents, and restricted cash are as follows for the periods presented: in thousands 2022 2021 2020 Cash provided by operating activities$ 81,074 $ 31,656 $ 289,095 Cash used in investing activities (14,709) (14,189) (10,164) Cash used in financing activities (88,680) (85,852) (59,197) Net (decrease) increase in cash, cash equivalents, and restricted cash$ (22,315) $ (68,385) $ 219,734 Operating Activities Net cash provided by operating activities was$81.1 million for the fiscal year endedSeptember 30, 2022 . The primary drivers of operating cash flows are typically cash earnings and changes in inventory levels, including land acquisition and development spending. Net cash provided by operating activities during the period was primarily driven by income before income taxes of$274.0 million , which included$24.0 million of non-cash charges, a net decrease in non-inventory working capital of$14.5 million , partially offset by an increase in inventory of$231.4 million resulting from land acquisition, land development, and house construction spending to support continued growth. Net cash provided by operating activities was$31.7 million during the fiscal year endedSeptember 30, 2021 , primarily driven by income before income taxes of$143.5 million , which included$28.1 million of non-cash charges, a net decrease in non-inventory working capital of$7.6 million , and a decrease in inventory of$147.5 million as a result of home sales, partially offset by land acquisition, land development, and house construction spending to support continued growth.
Investing Activities
Net cash used in investing activities for the fiscal year endedSeptember 30, 2022 and 2021 was$14.7 million and 14.2 million, respectively, primarily driven in both periods by capital expenditures for model homes and information systems infrastructure. Financing Activities Net cash used in financing activities was$88.7 million for the fiscal year endedSeptember 30, 2022 primarily driven by repayment of the Senior Unsecured Term Loan (the Term Loan), repurchases of a portion of our 2025 and 2027 Senior Notes, common stock repurchases under our share repurchase program, and tax payments for stock-based compensation awards vesting. Net cash used in financing activities was$85.9 million during the fiscal year endedSeptember 30, 2021 primarily driven by installment payment of the Senior Unsecured Term Loan (the Term Loan), partial extinguishment of our 2027 Senior Notes, the payment of cash for debt issuance costs, and tax payments for stock-based compensation awards vesting.
Debt
We generally fulfill our short-term cash requirements with cash generated from our operations and available borrowings. Additionally, our Secured Revolving Credit Facility provides working capital and letter of credit capacity of$250.0 million . As ofSeptember 30, 2022 , no borrowings were outstanding under the Facility, and after accounting for outstanding letters of credit under the Facility, there was a remaining capacity of$244.5 million . OnOctober 13, 2022 , the Company entered into a Senior Unsecured Revolving Credit Facility (the "New Unsecured Facility"). The New Unsecured Facility replaces the Secured Revolving Credit Facility, and the Company expects to use the proceeds from the New Unsecured Facility for general corporate purposes. The New Unsecured Facility provides for a revolving credit facility with borrowing capacity up to$265.0 million . The Company also will have the right from time to time to request to increase the size of the commitments under the New Unsecured Facility by up to$135.0 million for a maximum of$400.0 million . The New Unsecured Facility terminates onOctober 13, 2026 (the "Termination Date"), and the Company may borrow, repay and reborrow amounts under the New Unsecured Facility until the Termination Date. See Note 8 of the notes to the consolidated financial statements in this Form 10-K for additional details related to the New Unsecured Facility. 35 -------------------------------------------------------------------------------- We have also entered into a number of stand-alone, cash-secured letter of credit agreements with banks. These combined facilities provide for letter of credit needs collateralized by either cash or assets of the Company. We currently have$29.7 million of outstanding letters of credit under these facilities, which are secured by cash collateral that is maintained in restricted accounts totaling$31.5 million . In the future, we may from time to time seek to continue to retire or purchase our outstanding debt through cash repurchases or in exchange for other debt securities, in open market purchases, privately-negotiated transactions, or otherwise. In addition, any material variance from our projected operating results could require us to obtain additional equity or debt financing. There can be no assurance that we will be able to complete any of these transactions in the future on favorable terms or at all. See Note 8 of the notes to the consolidated financial statements in this Form 10-K for additional details related to our borrowings.
Financial Position
As ofSeptember 30, 2022 , we had$459.1 million of available liquidity, including$214.6 million in cash and cash equivalents and$244.5 million of remaining capacity under our$250.0 million Secured Revolving Credit Facility, which was subsequently replaced and expanded by the new$265.0 million Senior Unsecured Revolving Credit Facility as noted above. While we believe we possess sufficient liquidity, we are mindful of potential short-term or seasonal requirements for enhanced liquidity that may arise to operate and grow our business. As of the date of this report, we believe we have adequate capital resources and sufficient access to external financing sources to satisfy our current and reasonably anticipated requirements for funds to conduct our operations and meet other needs in the ordinary course of our business. At times, we may also engage in capital markets, bank loan, project debt or other financial transactions, including the repurchase of debt or potential new issuances of debt or equity securities to support our business needs. The amounts involved in these transactions, if any, may be material. In addition, as necessary or desirable, we may adjust or amend the terms of and/or expand the capacity of the Facility, or enter into additional letter of credit facilities, or other similar facility arrangements, in each case with the same or other financial institutions, or allow any such facilities to mature or expire.
Supplemental Guarantor Information
As discussed in Note 8 of the notes to the consolidated financial statements in this Form 10-K, the Company's obligations to pay principal and interest under certain debt agreements are guaranteed on a joint and several basis by substantially all of the Company's subsidiaries. Some of the immaterial subsidiaries do not guarantee the Senior Notes. The guarantees are full and unconditional. The following summarized financial information is presented forBeazer Homes USA, Inc. and the guarantor subsidiaries on a combined basis after elimination of intercompany transactions between entities in the combined group and amounts related to investments in any subsidiary that is a non-guarantor. As of September 30, in thousands 2022 2021 Due from non-guarantor subsidiary$ 3,145 $ 1,532 Total assets$ 2,245,160 $ 2,075,518 Total liabilities$ 1,312,185 $ 1,353,734 Fiscal Year Ended September 30, in thousands 2022 2021 Total revenues$ 2,312,307 $ 2,137,976 Gross profit $ 533,942$ 402,646 Income from continuing operations $ 219,898$ 120,571 Net income $ 219,884$ 121,372 36
--------------------------------------------------------------------------------
Credit Ratings
Our credit ratings are periodically reviewed by rating agencies. InJuly 2022 , S&P reaffirmed the Company's corporate credit rating of B and the Company's positive outlook. InOctober 2022 , Moody's upgraded the ratings for our senior unsecured notes from B3 to B2, reaffirmed the Company's issuer corporate family rating of B2 and returned the Company's outlook from stable to positive. These ratings and our current credit condition affect, among other things, our ability to access new capital. Negative changes to these ratings may result in more stringent covenants and higher interest rates under the terms of any new debt. Our credit ratings could be lowered, or rating agencies could issue adverse commentaries in the future, which could have a material adverse effect on our business, financial condition, results of operations, and liquidity. In particular, a weakening of our financial condition, including any further increase in our leverage or decrease in our profitability or cash flows, could adversely affect our ability to obtain necessary funds, could result in a credit rating downgrade or change in outlook, or could otherwise increase our cost of borrowing.
Stock Repurchases and Dividends Paid
InMay 2022 , the Company's Board of Directors approved a new share repurchase program that authorizes the Company to repurchase up to$50.0 million of its outstanding common stock. This newly authorized program replaced the prior share repurchase program authorized in the first quarter of fiscal 2019 of up to$50.0 million of common stock repurchases, pursuant to which$12.0 million of the capacity remained prior to the replacement of the program. As part of this new program, the Company repurchased 570 thousand shares of its common stock for$8.2 million at an average price per share of$14.33 during the year endedSeptember 30, 2022 through open market transactions. No share repurchases were made during fiscal year 2021. During the year endedSeptember 30, 2020 , the Company repurchased approximately 362 thousand shares of its common stock for$3.3 million at an average price per share of$9.20 through open market transactions, including 10b5-1 plans. All shares have been retired upon repurchase. The aggregate reduction to stockholders' equity related to share repurchases during the fiscal years endedSeptember 30, 2022 and 2020 was$8.2 million and$3.3 million , respectively. As ofSeptember 30, 2022 , the remaining availability of the new share repurchase program was$41.8 million . The repurchase program has no expiration date. The indentures under which our Senior Notes were issued contain certain restrictive covenants, including limitations on our payment of dividends. There were no dividends paid during our fiscal years endedSeptember 30, 2022 , 2021 or 2020.
Off-Balance Sheet Arrangements and Aggregate Contractual Commitments
Lot Option Agreements
In addition to purchasing land directly, we control a portion of our land supply through lot option agreements. In recent years, we have focused on increasing our lot option agreement usage to minimize risk as we grow our land position. As ofSeptember 30, 2022 , we controlled 25,170 lots, which includes 272 lots of land held for future development and 501 lots of land held for sale. Of the 24,397 total active lots, we owned 11,085, or 45.4%, of these lots and the remaining 13,312 of these lots, or 54.6%, were under option agreements, primarily through lot option agreements with land developers and land bankers, which generally require the payment of cash or the posting of a letter of credit or surety bond for the right to acquire lots during a specified period of time at a certain price. In comparison, we controlled 9,992 lots, or 46.6% of our total active lot position, through option agreements as ofSeptember 30, 2021 . As a result of the flexibility that these options provide us, upon a change in market conditions, we may renegotiate the terms of the options prior to exercise or terminate the agreement. Under option agreements, purchase of the properties is contingent upon satisfaction of certain requirements by us and the sellers, and our liability is generally limited to forfeiture of the non-refundable deposits and other non-refundable amounts incurred, which totaled approximately$142.4 million as ofSeptember 30, 2022 . The total remaining purchase price, net of cash deposits, committed under all options was$827.6 million as ofSeptember 30, 2022 . Subject to market conditions and our liquidity, we plan to further expand our use of option agreements to supplement our owned inventory supply. We expect to exercise, subject to market conditions and seller satisfaction of contract terms, most of our option agreements. Various factors, some of which are beyond our control, such as market conditions, weather conditions, and the timing of the completion of development activities, will have a significant impact on the timing of option exercises or whether lot options will be exercised at all. We have historically funded the exercise of lot options with operating cash flows. We expect these sources to continue to be adequate to fund anticipated future option exercises. Therefore, we do not anticipate that the exercise of our lot options will have a material adverse effect on our liquidity. 37 --------------------------------------------------------------------------------
Investments in Unconsolidated Entities
Occasionally, we use legal entities in which we have less than a controlling interest. We enter into the majority of these arrangements with land developers, other homebuilders, and financial partners to acquire attractive land positions, to manage our risk profile, and to leverage our capital base. The underlying land positions are developed into finished lots for sale to the unconsolidated entity's members or other third parties. We account for our interest in unconsolidated entities under the equity method. Historically, we and our partners have provided varying levels of guarantees of debt or other obligations of our unconsolidated entities. As ofSeptember 30, 2022 , we had no repayment guarantees outstanding related to the debt of our unconsolidated entities. See Note 2 and Note 4 of the notes to the consolidated financial statements in this Form 10-K for more information.
Letters of Credit and Surety Bonds
In connection with the development of our communities, we are frequently required to provide performance, maintenance, and other bonds and letters of credit in support of our related obligations with respect to such developments. The amount of such obligations outstanding at any time varies in accordance with our pending development activities. In the event any such bonds or letters of credit are drawn upon, we would be obligated to reimburse the issuer of such bonds or letters of credit. We had outstanding letters of credit and surety bonds of$35.2 million and$279.6 million , respectively, as ofSeptember 30, 2022 , primarily related to our obligations to local governments to construct roads and other improvements in various developments.
Contractual Commitments
The following table summarizes our aggregate contractual commitments as ofSeptember 30, 2022 : Payments Due by Period Less than 1 More than 5 in thousands Total Year 1-3 Years 3-5 Years Years Senior notes and junior subordinated notes(a)$ 1,019,223 $ -$ 211,195 $ 357,255 $ 450,773 Interest commitments under senior notes and junior subordinated notes(b) 399,154 65,892 131,784 103,273 98,205 Obligations related to lots under option 827,600 386,844 368,458 61,954 10,344 Operating leases 12,357 3,799 4,987 2,345 1,226 Uncertain tax positions(c) - - - - - Total$ 2,258,334 $ 456,535 $ 716,424 $ 524,827 $ 560,548
(a) For a listing of our borrowings, refer to Note 8 of the notes to the consolidated financial statements in this Form 10-K.
(b) Interest on variable rate obligations is based on rates effective as of
(c) Based on its current inventory of uncertain tax positions and tax carryforward attributes, the Company does not expect a cash settlement of unrecognized tax benefits related to uncertain tax positions in future years. See Note 13 of the notes to the consolidated financial statements in this Form 10-K for additional information regarding the Company's unrecognized tax benefits related to uncertain tax positions as ofSeptember 30, 2022 . We had outstanding letters of credit and surety bonds of$35.2 million and$279.6 million , respectively, as ofSeptember 30, 2022 , primarily related to our obligations to local governments to construct roads and other improvements in various developments. Critical Accounting Estimates Our critical accounting policies require the use of judgment in their application and in certain cases require estimates of inherently uncertain matters. Although our accounting policies are in compliance with accounting principles generally accepted inthe United States of America (GAAP), a change in the facts and circumstances of the underlying transactions could significantly change the application of the accounting policies and the resulting financial statement impact. Listed below are those policies that we believe are critical and require the use of complex judgment in their application. 38 --------------------------------------------------------------------------------
Inventory Valuation - Projects in Progress
Projects in progress inventory includes homes under construction and land under development grouped together as communities. Generally, upon the commencement of land development activities, it may take three to five years (depending on, among other things, the size of the community and its sales pace) to fully develop, sell, construct and close all the homes in a typical community. Projects in progress are stated at cost unless facts and circumstances indicate that the carrying value of the assets may not be recoverable. We assess our projects in progress inventory for indicators of impairment at the community level on a quarterly basis. We evaluate, among other things, the average sales price and margins on recent home closings, homes in backlog and expected future home sales for each community. If indicators of impairment are present for a community with more than ten homes remaining to close, we perform a recoverability test by comparing the expected undiscounted cash flows for the community to its carrying value. For those communities whose carrying values exceed the aggregate undiscounted cash flows, we perform a discounted cash flow analysis to determine the fair value of the community, and impairment charges are recorded if the fair value of the community's inventory is less than its carrying value. There is uncertainty associated with preparing the undiscounted cash flow analyses because future market conditions will almost certainly be different, either better or worse, than current conditions. Significant valuation assumptions include expected pace of closings, average sales price, expected costs for land development, direct construction, overhead, and interest. The risk of over or under-stating any of the important cash flow variables is greater with longer-lived communities and within markets that have historically experienced greater home price volatility. To address these risks, we consider home price and construction cost appreciation in future years for certain communities that are expected to be selling for more than a year and/or if the market has typically exhibited high levels of price volatility. Absent these assumptions on cost and sales price appreciation, we believe the long-term cash flow analysis would be unrealistic. Finally, we also ensure that the pace of sales and closings used in our undiscounted cash flow analyses are reasonable by considering seasonal variations in sales and closings, our development schedules and what we have achieved historically, and by comparing to those achieved by our competitors for comparable communities. The fair value of the community is estimated based on the present value of the estimated future cash flows using discount rates commensurate with the risk associated with the underlying community. The discount rate used may be different for each community. The factors considered when determining an appropriate discount rate for a community include, among others: (1) community specific factors such as product types, development stage and expected duration of the project, and the competitive factors influencing the sales performance of the community and (2) local market factors such as employment levels, consumer confidence and the existing supply of new and used homes for sale. The assumptions used in the determination of fair value of projects in progress communities are based on factors known to us at the time such estimates are made and our expectations of future operations and market conditions. Due to uncertainties in the estimation process, the significant volatility in market conditions, the long life cycles of many communities, and potential changes in our strategy related to certain communities, actual results could differ significantly from our estimates.
Warranty Reserves
The adequacy of our warranty reserves is based on historical experience and management's estimate of the costs to remediate any claims. Our review includes a quarterly analysis of the historical data and trends in warranty expense by division. An analysis by division allows us to consider market specific factors such as our warranty experience, the number of home closings, the prices of homes, product mix, and other data in estimating our warranty reserves. In addition, our analysis also factors in the existence of any non-recurring or community-specific warranty matters that might not be contemplated in our historical data and trends that may need to be separately estimated based on management's judgment of the ultimate cost of repair for that specific issue. AtSeptember 30, 2022 , our warranty reserve was$13.9 million , reflecting an accrual range of 0.3% to 1.0% of total revenue recognized for each home closed depending on our loss history in the division in which the home was built. A ten basis point increase in our warranty reserve rate would have increased our accrual and corresponding cost of sales by$2.5 million as ofSeptember 30, 2022 .
There were no material changes in assumptions in calculating our reserve balance
for the year ended
Our estimation process is discussed in Note 9 of notes to the consolidated
financial statements in this Form 10-
39 --------------------------------------------------------------------------------
Income Taxes - Valuation Allowance
The carrying amounts of deferred tax assets are reduced by a valuation allowance if an assessment of their components indicates that it is more likely than not that all or some portion of these assets will not be realized. Judgment is required in estimating valuation allowances for deferred tax assets. The realization of a deferred tax asset ultimately depends on the existence of sufficient taxable income in either the carryback or carryforward periods under tax law. We assess the need for valuation allowances for deferred tax assets based on more-likely-than-not realization threshold criteria. In our assessment, appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, (1) the nature, frequency and severity of any current and cumulative losses; (2) forecasts of future profitability; (3) the duration of statutory carryforward periods; (4) our experience with operating loss and tax credit carryforwards not expiring unused; (5) the Section 382 limitation on our ability to carryforward pre-ownership change net operating losses; (6) recognized built-in losses or deductions; and (7) tax planning alternatives. Our assessment of the need for the valuation of deferred tax assets includes assessing the likely future tax consequences of events that have been recognized in our financial statements or tax returns. We base our estimate of deferred tax assets and liabilities on current tax laws and rates and, in certain cases, business plans and other expectations about future outcomes. Changes in existing tax laws or rates could affect actual tax results and future business results may affect the amount of deferred tax liabilities or the valuation of deferred tax assets over time. Our analysis includes several scenarios with both increases and decreases in our estimates of operating income across future periods. Routine or cyclical reductions in our pre-tax earnings would not have changed our assessment of our ability to utilize various tax carryforwards. In addition to various company-specific factors, we consider several positive and negative external factors that may impact our estimates. These factors may include broad economic considerations such as mortgage interest rates, the relative health of theU.S. economy and employment levels, as well as industry or market specific factors such as housing supply and demand outlook. In fiscal 2022, our conclusions about our ability to more likely than not realize all of our federal and certain state tax attributes remain consistent with our prior determinations. We considered positive factors including significant increases in our current earnings, interest savings from our debt reduction strategies, shortage in housing supply, and our backlog. The negative factors included the overall health of the broader economy, significant increases in mortgage interest rates, and weakened housing demand. Our accounting for deferred tax consequences represents our best estimate of future events. It is possible there will be changes that are not anticipated in our current estimates. If those changes resulted in significant and sustained reduction in our pre-tax earnings or our utilization of existing tax carryforwards, it is likely such changes would have a material impact on our financial condition or results of operations. The nature and amounts of the various tax attributes comprising our deferred tax assets are discussed in Note 13 of notes to the consolidated financial statements in this Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to a number of market risks in the ordinary course of business. Our primary market risk exposure relates to fluctuations in interest rates. We do not believe that our exposure in this area is material to our cash flows or results of operations. As ofSeptember 30, 2022 , we had variable-rate debt outstanding, totaling approximately$72.3 million . A one percent increase in the interest rate for these notes would result in an increase of our interest expense by approximately$1.0 million over the next twelve-month period. The estimated fair value of our fixed rate debt as ofSeptember 30, 2022 was$753.3 million , compared to a carrying value of$911.2 million . The effect of a hypothetical one-percentage point decrease in our estimated discount rates would increase the estimated fair value of the fixed rate debt instruments from$753.3 million to$784.2 million as ofSeptember 30, 2022 . 40
--------------------------------------------------------------------------------
© Edgar Online, source