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OFFON

HOVNANIAN ENTERPRISES, INC.

(HOV)
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HOVNANIAN ENTERPRISES : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

06/04/2021 | 04:21pm EDT
Hovnanian Enterprises, Inc. ("HEI") conducts all of its homebuilding and
financial services operations through its subsidiaries (references herein to the
"Company," "we," "us" or "our" refer to HEI and its consolidated subsidiaries
and should be understood to reflect the consolidated business of HEI's
subsidiaries).



Key Performance Indicators




The following key performance indicators are commonly used in the homebuilding
industry and by management as a means to better understand our operating
performance and trends affecting our business and compare our performance with
the performance of other homebuilders. We believe these key performance
indicators also provide useful information to investors in analyzing our
performance:



  ? Net contracts is a volume indicator which represents the number of new
    contracts executed during the period for the purchase of homes, less
    cancellations of contracts in the same period. The dollar value of net

contracts represents the dollars associated with net contracts executed in the

    period. These values are an indicator of potential future revenues;



? Contract backlog is a volume indicator which represents the number of homes

that are under contract, but not yet delivered as of the stated date. The

dollar value of contract backlog represents the dollar amount of the homes in

contract backlog. These values are an indicator of potential future revenues;

? Active selling communities is a volume indicator which represents the number

of communities which are open for sale with ten or more home sites available

as of the end of a period. We identify communities based on product type;

therefore at times there are multiple communities at one land site. These

    values are an indicator of potential revenues;



? Net contracts per average active selling community is used to indicate the

pace at which homes are being sold (put into contract) in active selling

communities and is calculated by dividing the number of net contracts in a

period by the average number of active selling communities in the same period.

    Sales pace is an indicator of market strength and demand; and



? Contract cancellation rates is a volume indicator which represents the number

of sales contracts cancelled in the period divided by the number of gross

sales contracts executed during the period. Contract cancellation rates as a

percentage of backlog is calculated by dividing the number of cancelled

contracts in the period by the contract backlog at the beginning of the

period. Cancellation rates as compared to prior periods can be an indicator of

    market strength or weakness.




Overview



Market Conditions



The demand for new and existing homes is dependent on a variety of demographic
and economic factors, including job and wage growth, household formation,
consumer confidence, mortgage financing, interest rates and overall housing
affordability. In general, at the start of our 2020 fiscal year, factors
including rising levels of household formation, a constrained supply of new and
used homes, wage growth, strong employment conditions and mortgage rates that
continue to be low by historical standards contributed to improving conditions
for new home sales. However, overall economic conditions in the United States
have been impacted negatively by the COVID-19 pandemic, which resulted in, among
other things, quarantines, "stay-at-home" or "shelter-in-place" orders, and
similar mandates from national, state and local governments that substantially
restricted daily activities and caused many businesses to curtail or cease
normal operations. While all of the state and local governments in the markets
in which we operate have deemed housing to be an essential business, which has
allowed us to continue with construction and sales of homes, we cannot predict
the magnitude of either the near-term or long-term effects that the pandemic
will have on our business.



During the second quarter of fiscal 2020 when we confronted the initial impact
of COVID-19, we experienced adverse business conditions, including a slowdown in
customer traffic and sales pace and an increase in cancellations. That said, the
homebuilding industry generally was only impacted from mid-March through April
of 2020. Towards the end of April, economic conditions in our markets started to
improve, and this improvement continued throughout the second half of fiscal
2020 and into the first half of fiscal 2021 due to what we believe is a
combination of factors, including low interest rates, low inventory levels of
existing homes and a general desire for more indoor and outdoor space. During
the second half of fiscal 2020 and continuing through the first half of fiscal
2021, we returned to our normal activities with respect to land purchases, land
development and resuming the construction of unsold homes. As a result, our
operating metrics for the first half of fiscal 2021 improved significantly as
compared to the first half of fiscal 2020.



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Operating Results


We experienced significant positive operating results for the three and six months ended April 30, 2021 as follows:




?For the three and six months ended April 30, 2021, sale of homes revenues
increased 29.8% and 22.8%, respectively, as compared to the same periods of the
prior year, as a result of a 22.1% and 17.3% increase in deliveries,
respectively, primarily due to our increased sales absorption pace and favorable
sales prices as discussed below.



?Gross margin dollars increased 61.8% and 58.3% for the three and six months
ended April 30, 2021, respectively, as compared to the same periods of the prior
year, as a result of our increased revenues. Additionally, gross margin
percentage increased to 18.1% for the three months ended April 30, 2021 from
14.5% for the three months ended April 30, 2020 and increased to 17.7% for the
six months ended April 30, 2021 from 13.7% for the six months ended April 30,
2020. Gross margin percentage, before cost of sales interest expense and land
charges, increased from 18.2% and 17.8% for the three and six months ended April
30, 2020, respectively, to 21.3% and 21.0% for the three and six months ended
April 30, 2021, respectively. The increases were primarily due to price
increases in virtually all of our markets.



?Selling, general and administrative costs (including corporate general and
administrative expenses) ("Total SGA") was $82.6 million, or 11.7% of total
revenues, in the three months ended April 30, 2021 compared with $55.9 million,
or 10.4% of total revenues, in the three months ended April 30, 2020. During the
first six months of fiscal 2021, total SG&A was $146.3 million, or 11.4% of
total revenues, compared with $116.3 million, or 11.3% of total revenues, in the
same period of the prior fiscal year. Such costs increased $26.7 million and
$30.0 million for the three and six months ended April 30, 2021,
respectively, as compared to the same periods of the prior year, primarily due
to increased compensation costs mainly related to the grants of phantom stock
awards under our 2019 Long Term Incentive Plan ("2019 LTIP") which expense
increased due to the significant increase in our stock price from $51.16 at
January 31, 2021 to $132.59 at April 30, 2021. Had equity shares rather than
phantom shares been utilized for the 2019 LTIP, there would not have been
expenses related to the movement in our stock price. Excluding the $17.5 million
of incremental phantom stock expense associated with the 2019 LTIP due solely to
the increase in the stock price for the second quarter of fiscal 2021, Total SGA
would have been $65.1 million, or 9.3% of total revenues for the three months
ended April 30, 2021 and $128.8 million, or 10.1% of total revenues, for the six
months ended April 30, 2021.



?Pre-tax income increased to $31.0 million for the three months ended April 30,
2021 from pre-tax income of $4.2 million for the three months ended April 30,
2020, and increased to $50.6 million for the six months ended April 30, 2021
from a pre-tax loss of $3.3 million for the six months ended April 30, 2020. Net
income increased to $488.7 million for the three months ended April 30, 2021
from net income of $4.1 million for the three months ended April 30, 2020, and
increased to $507.6 million for the six months ended April 30, 2021 from a net
loss of $5.1 million for the six months ended April 30, 2020. Earnings per
share, basic and diluted, increased to $71.11 and $69.65, respectively, for the
three months ended April 30, 2021 compared to $0.63 and $0.60, respectively, for
the three months ended April 30, 2020. Earnings per share, basic and diluted,
increased to $74.00 and $72.71, respectively, for the six months ended April 30,
2021 compared to loss per share of $0.82, both basic and diluted, for the six
months ended April 30, 2020. The significant increase in net income for the
three and six months ended April 30, 2021 was due to the full reversal of our
federal valuation allowance and a portion of the state valuation allowance in
respect of our deferred tax assets in the second quarter of fiscal 2021 (see
Note 16 to the Condensed Consolidated Financial Statements).



?Net contracts increased 19.1% and 26.3% for the three and six months ended April 30, 2021, respectively, compared to the same periods of the prior year.




?Net contracts per average active selling community increased to 17.5 for the
three months ended April 30, 2021 compared to 11.1 in the same period of the
prior year, and increased to 33.5 for the six months ended April 30, 2021
compared to 20.7 in the same period of the prior year. This strong absorption
pace resulted in our active selling communities at April 30, 2021 decreasing by
26.5% over last year's second quarter. However, we are actively pursuing
replacement communities, and our total lots controlled has increased each
quarter since July 31, 2020.



?Contract backlog increased from 2,383 homes at April 30, 2020 to 3,897 homes at April 30, 2021, with a dollar value of $1.8 billion, representing an 85.2% increase in dollar value compared to the prior year.




? Our cash position allowed us to spend $353.6 million on land purchases and
land development during the six months ended April 30, 2021 and still have total
liquidity of $352.8 million, including $218.3 million of homebuilding cash and
cash equivalents as of April 30, 2021 and $125.0 million of borrowing capacity
under our senior secured revolving credit facility.





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CRITICAL ACCOUNTING POLICIES



As disclosed in our annual report on Form 10-K for the fiscal year ended October
31, 2020, our most critical accounting policies relate to income recognition
from mortgage loans; inventories; unconsolidated joint ventures; and warranty
and construction defect reserves. Since October 31, 2020, there have been no
significant changes to those critical accounting policies.



CAPITAL RESOURCES AND LIQUIDITY




Our operations consist primarily of residential housing development and sales in
the Northeast (New Jersey and Pennsylvania), the Mid-Atlantic (Delaware,
Maryland, Virginia, Washington D.C. and West Virginia), the Midwest (Illinois
and Ohio), the Southeast (Florida, Georgia and South Carolina), the Southwest
(Arizona and Texas) and the West (California). In addition, we provide certain
financial services to our homebuilding customers.



We have historically funded our homebuilding and financial services operations
with cash flows from operating activities, borrowings under our credit
facilities, the issuance of new debt and equity securities and other financing
activities. Due to covenant restrictions in our debt instruments, we are
currently limited in the amount of debt we can incur that does not qualify as
refinancing indebtedness, even if market conditions, including then-current
market available interest rates (in recent years, we have not been able to
access the traditional capital and bank lending markets at competitive interest
rates due to our highly leveraged capital structure), would otherwise be
favorable, which could also impact our ability to grow our business.



Operating, Investing and Financing Activities - Overview




Our total liquidity at April 30, 2021 was $352.8 million, including
$218.3 million in homebuilding cash and cash equivalents and $125.0 million of
borrowing capacity under our senior secured revolving credit facility. This
was above our target liquidity range of $170.0 to $245.0 million. Some of our
cash will be used in the third quarter of fiscal 2021 to pay for debt due in
July 2022 that we have called for redemption (see Note 22 to the Condensed
Consolidated Financial Statements included elsewhere in this Quarterly Report on
Form 10-Q). The unprecedented public health and governmental efforts to contain
the COVID-19 pandemic have created significant uncertainty as to general
economic and housing market conditions for fiscal 2021 and beyond. We believe
that these sources of cash together with available borrowings on our senior
secured revolving credit facility will be sufficient through fiscal 2021 to
finance our working capital requirements.



We spent $353.6 million on land and land development during the first half of
fiscal 2021. After considering this land and land development and all other
operating activities, including revenue received from deliveries, cash provided
by operations was $15.5 million. During the first half of fiscal 2021, cash used
in investing activities was $12.4 million, primarily due to investments in two
new unconsolidated joint ventures, partially offset by distributions from
existing unconsolidated joint ventures. Cash used in financing activities was
$40.9 million during the first half of fiscal 2021, which was primarily due to
net payments for nonrecourse mortgage financings and land banking and model sale
leaseback financings during the period, partially offset by net proceeds
from our mortgage warehouse lines of credit. We intend to continue to use
nonrecourse mortgage financings, model sale leaseback, joint ventures, and,
subject to covenant restrictions in our debt instruments, land banking programs
as our business needs dictate.



Our cash uses during the six months ended April 30, 2021 and 2020 were for
operating expenses, land purchases, land deposits, land development,
construction spending, state income taxes, interest payments, financing
transaction costs, debt repurchases, litigation matters and investments in
unconsolidated joint ventures. During these periods, we provided for our cash
requirements from available cash on hand, housing and land sales, financing
transactions, model sale leasebacks, land banking transactions, unconsolidated
joint ventures, financial service revenues and other revenues.



Our net income (loss) historically does not approximate cash flow from operating
activities. The difference between net income (loss) and cash flow from
operating activities is primarily caused by changes in inventory levels together
with changes in receivables, prepaid and other assets, mortgage loans held for
sale, interest and other accrued liabilities, deferred income taxes, accounts
payable and other liabilities, noncash charges relating to depreciation and
stock compensation awards and impairment losses for inventory. When we are
expanding our operations, inventory levels, prepaids and other assets increase
causing cash flow from operating activities to decrease. Certain liabilities
also increase as operations expand and partially offset the negative effect on
cash flow from operations caused by the increase in inventory levels, prepaids
and other assets. Similarly, as our mortgage operations expand, net income from
these operations increases, but for cash flow purposes net income is partially
offset by the net change in mortgage assets and liabilities. The opposite is
true as our investment in new land purchases and development of new communities
decrease, causing us to generate positive cash flow from operations.



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Debt Transactions



Senior notes and credit facilities balances as of April 30, 2021 and October 31,
2020, were as follows:



                                                             April 30,      October 31,
(In thousands)                                                    2021             2020
Senior Secured Notes:
10.0% Senior Secured Notes due July 15, 2022               $   111,214     $    111,214
10.5% Senior Secured Notes due July 15, 2024                    69,683      

69,683

10.0% Senior Secured 1.75 Lien Notes due November 15, 2025

                                                           158,502      

158,502

7.75% Senior Secured 1.125 Lien Notes due February 15, 2026

                                                           350,000      

350,000

10.5% Senior Secured 1.25 Lien Notes due February 15, 2026

                                                           282,322      

282,322

11.25% Senior Secured 1.5 Lien Notes due February 15,
2026                                                           162,269          162,269
Total Senior Secured Notes                                 $ 1,133,990     $  1,133,990
Senior Notes:
8.0% Senior Notes due November 1, 2027 (1)                 $         -     $          -
13.5% Senior Notes due February 1, 2026                         90,590      

90,590

5.0% Senior Notes due February 1, 2040                          90,120      

90,120

Total Senior Notes                                         $   180,710     

$ 180,710 Senior Unsecured Term Loan Credit Facility due February 1, 2027

                                                    $    39,551     

$ 39,551 Senior Secured 1.75 Lien Term Loan Credit Facility due January 31, 2028

                                           $    81,498     $     81,498
Senior Secured Revolving Credit Facility (2)               $         -     $          -
Subtotal notes payable                                     $ 1,435,749     $  1,435,749
Net (discounts) premiums                                   $    13,614     $     17,521
Net debt issuance costs                                    $   (20,039 )   $    (22,160 )
Total notes payable, net of discounts, premiums and debt
issuance costs                                             $ 1,429,324     $  1,431,110




(1) $26.0 million of 8.0% Senior Notes due 2027 (the "8.0% 2027 Notes") are
owned by a wholly-owned consolidated subsidiary of HEI. Therefore, in accordance
with GAAP, such notes are not reflected on the Condensed Consolidated Balance
Sheets of HEI. On November 1, 2019, the maturity of the 8.0% 2027 Notes was
extended to November 1, 2027.



(2) At April 30, 2021, provides for up to $125.0 million in aggregate amount of senior secured first lien revolving loans. Availability thereunder will terminate on December 28, 2022.




Except for K. Hovnanian, the issuer of the notes and borrower under the Credit
Facilities (as defined below), our home mortgage subsidiaries, certain of our
title insurance subsidiaries, joint ventures and subsidiaries holding interests
in our joint ventures, we and each of our subsidiaries are guarantors of the
Credit Facilities, the senior secured notes (except that certain of the Notes
Guarantors (as defined below) do not guarantee the 10.5% Senior Secured Notes
due 2024 as discussed in Note 12 to the Condensed and Consolidated Financial
Statements included elsewhere in this Quarterly Report on Form 10-Q subject 

and

senior notes (except for the 8.0% 2027 Notes which are not guaranteed by K. Hovnanian at Sunrise Trail III, LLC, a wholly-owned subsidiary of the Company) outstanding at April 30, 2021 (collectively, the "Notes Guarantors").




The credit agreements governing the Credit Facilities and the indentures
governing the senior secured and senior notes (together, the "Debt Instruments")
outstanding at April 30, 2021 do not contain any financial maintenance
covenants, but do contain restrictive covenants that limit, among other things,
the ability of HEI and certain of its subsidiaries, including K. Hovnanian, to
incur additional indebtedness (other than non-recourse indebtedness, certain
permitted indebtedness and refinancing indebtedness), pay dividends and make
distributions on common and preferred stock, repay certain indebtedness prior to
its respective stated maturity, repurchase (including through exchanges) common
and preferred stock, make other restricted payments (including investments),
sell certain assets (including in certain land banking transactions), incur
liens, consolidate, merge, sell or otherwise dispose of all or substantially all
of their assets and enter into certain transactions with affiliates. The Debt
Instruments also contain customary events of default which would permit the
lenders or holders thereof to exercise remedies with respect to the collateral
(as applicable), declare the loans made under the Unsecured Term Loan Facility
(defined below) (the "Unsecured Term Loans"), loans made under the Secured Term
Loan Facility (defined below) (the "Secured Term Loans") and loans made under
the Secured Credit Agreement (as defined below) (the "Secured Revolving Loans")
or notes to be immediately due and payable if not cured within applicable grace
periods, including the failure to make timely payments on the Unsecured Term
Loans, Secured Term Loans, Secured Revolving Loans or notes or other material
indebtedness, cross default to other material indebtedness, the failure to
comply with agreements and covenants and specified events of bankruptcy and
insolvency, with respect to the Unsecured Term Loans, Secured Term Loans and
Secured Revolving Loans, material inaccuracy of representations and warranties
and with respect to the Unsecured Term Loans, Secured Term Loans and Secured
Revolving Loans, a change of control, and, with respect to the Secured Term
Loans, Secured Revolving Loans and senior secured notes, the failure of the
documents granting security for the obligations under the secured Debt
Instruments to be in full force and effect, and the failure of the liens on any
material portion of the collateral securing the obligations under the secured
Debt Instruments to be valid and perfected. As of April 30, 2021, we believe we
were in compliance with the covenants of the Debt Instruments.



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If our consolidated fixed charge coverage ratio is less than 2.0 to 1.0, as
defined in the applicable Debt Instrument, we are restricted from making certain
payments, including dividends (in the case of the payment of dividends, our
secured debt leverage ratio must also be less than 4.0 to 1.0), and from
incurring indebtedness other than certain permitted indebtedness, refinancing
indebtedness and nonrecourse indebtedness. As a result of this ratio
restriction, we are currently restricted from paying dividends, which are not
cumulative, on our 7.625% Series A Preferred Stock. Our inability to pay
dividends is in accordance with covenant restrictions and will not result in a
default under our Debt Instruments or otherwise affect compliance with any of
the covenants contained in our Debt Instruments.



Under the terms of our Debt Instruments, we have the right to make certain
redemptions and prepayments and, depending on market conditions, our strategic
priorities and covenant restrictions, may do so from time to time. We also
continue to actively analyze and evaluate our capital structure and explore
transactions to simplify our capital structure and to strengthen our balance
sheet, including those that reduce leverage, interest rates and/or extend
maturities, and will seek to do so with the right opportunity. We may also
continue to make debt purchases and/or exchanges for debt or equity from time to
time through tender offers, exchange offers, redemptions, open market purchases,
private transactions, or otherwise, or seek to raise additional debt or equity
capital, depending on market conditions and covenant restrictions.



Any liquidity-enhancing or other capital raising or refinancing transaction will
depend on identifying counterparties, negotiation of documentation and
applicable closing conditions and any required approvals. Due to covenant
restrictions in our Debt Instruments, we are currently limited in the amount of
debt we can incur that does not qualify as refinancing indebtedness, even if
market conditions, including then-current market available interest rates (in
recent years, we have not been able to access the traditional capital and bank
lending markets at competitive interest rates due to our highly leveraged
capital structure), would otherwise be favorable, which could also impact our
ability to grow our business.



We have certain stand-alone cash collateralized letter of credit agreements and
facilities under which there was a total of $9.3 million and $11.3 million
letters of credit outstanding at April 30, 2021 and October 31, 2020,
respectively. These agreements and facilities require us to maintain specified
amounts of cash as collateral in segregated accounts to support the letters of
credit issued thereunder, which will affect the amount of cash we have available
for other uses. At April 30, 2021 and October 31, 2020, the amount of cash
collateral in these segregated accounts was $9.5 million and $11.6 million,
respectively, which is reflected in "Restricted cash and cash equivalents" on
the Condensed Consolidated Balance Sheets.



See Note 12 to the Condensed Consolidated Financial Statements included
elsewhere in this Quarterly Report on Form 10-Q for a discussion of the
Unsecured Term Loans, the Secured Term Loans and Secured Revolving Loans and K.
Hovnanian's senior secured notes and senior notes, including information with
respect to the collateral securing our Secured Debt Instruments.



Mortgages and Notes Payable



We have nonrecourse mortgage loans for certain communities totaling
$113.9 million and $135.1 million (net of debt issuance costs) at April 30, 2021
and October 31, 2020, respectively, which are secured by the related real
property, including any improvements, with an aggregate book value of
$419.7 million and $368.1 million, respectively. The weighted-average interest
rate on these obligations was 5.0% and 6.4% at April 30, 2021 and October 31,
2020, respectively, and the mortgage loan payments on each community primarily
correspond to home deliveries.



Our wholly owned mortgage banking subsidiary, K. Hovnanian American Mortgage,
LLC ("K. Hovnanian Mortgage"), originates mortgage loans primarily from the sale
of our homes. Such mortgage loans and related servicing rights are sold in the
secondary mortgage market within a short period of time. In certain instances,
we retain the servicing rights for a small amount of loans. K. Hovnanian
Mortgage finances the origination of mortgage loans through various master
repurchase agreements, which are recorded in "Financial services" liabilities on
the Condensed Consolidated Balance Sheets. The loans are secured by the
mortgages held for sale and are repaid when we sell the underlying mortgage
loans to permanent investors. As of April 30, 2021 and October 31, 2020, we had
an aggregate of $110.5 million and $87.2 million, respectively, outstanding
under several of K. Hovnanian Mortgage's short-term borrowing facilities.



See Note 11 to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for a discussion of these agreements.





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Inventory Activities



Total inventory, excluding consolidated inventory not owned, increased
$117.9 million during the six months ended April 30, 2021 from October 31,
2020. Total inventory, excluding consolidated inventory not owned, increased in
the Northeast by $27.6 million, in the Southeast by $8.1 million, in the
Southwest by $79.9 million and in the West by $20.1 million. The increase was
partially offset by decreases in the Mid-Atlantic of $17.3 million and in the
Midwest of $0.5 million. The net increase was primarily attributable to new land
purchases and land development, partially offset by home deliveries during the
period. During the six months ended April 30, 2021, we recorded an impairment
loss for one community in the amount of $0.8 million, and wrote-off costs in the
amount of $1.2 million related to land options that expired or that we
terminated, as the communities' forecasted profitability was not projected to
produce adequate returns on investment commensurate with the risk. In the last
few years, we have been able to acquire new land parcels at prices that we
believe will generate reasonable returns under current homebuilding market
conditions. This trend may not continue in either the near or the long term.
Substantially all homes under construction or completed and included in
inventory at April 30, 2021 are expected to be delivered during the next six to
nine months.



Consolidated inventory not owned decreased $56.8 million. Consolidated inventory
not owned consists of options related to land banking and model financing
transactions that were added to our Condensed Consolidated Balance Sheet in
accordance with US GAAP. The decrease from October 31, 2020 to April 30, 2021
was primarily due to a decrease in land banking transactions and a decrease in
the sale and leaseback of certain model homes during the period. We have land
banking arrangements, whereby we sell land parcels to the land bankers and they
provide us an option to purchase back finished lots on a predetermined
schedule. Because of our options to repurchase these parcels, for accounting
purposes in accordance with ASC 606-10-55-70, these transactions are considered
a financing rather than a sale. For purposes of our Condensed Consolidated
Balance Sheet, at April 30, 2021, inventory of $84.6 million was recorded to
"Consolidated inventory not owned," with a corresponding amount of $50.2 million
(net of debt issuance costs) recorded to "Liabilities from inventory not owned"
for the amount of net cash received from the transactions. In addition, we sell
and lease back certain of our model homes with the right to participate in the
potential profit when each home is sold to a third party at the end of the
respective lease. As a result of our continued involvement, for accounting
purposes in accordance with ASC 606-10-55-68, these sale and leaseback
transactions are considered a financing rather than a sale. Therefore, for
purposes of our Condensed Consolidated Balance Sheet, at April 30, 2021,
inventory of $40.8 million was recorded to "Consolidated inventory not owned,"
with a corresponding amount of $40.2 million (net of debt issuance costs)
recorded to "Liabilities from inventory not owned" for the amount of net cash
received from the transactions.



When possible, we option property for development prior to acquisition. By
optioning property, we are only subject to the loss of the cost of the option
and predevelopment costs if we choose not to exercise the option. As a result,
our commitment for major land acquisitions is reduced. The costs associated with
optioned properties are included in "Land and land options held for future
development or sale" on the Condensed Consolidated Balance Sheets. Also included
in "Land and land options held for future development or sale" are amounts
associated with inventory in mothballed communities. We mothball (or stop
development on) certain communities when we determine the current performance
does not justify further investment at the time. That is, we believe we will
generate higher returns if we decide against spending money to improve land
today and save the raw land until such time as the markets improve or we
determine to sell the property. As of April 30, 2021, we had mothballed land in
8 communities. The book value associated with these communities at April 30,
2021 was $4.4 million, which was net of impairment charges recorded in prior
periods of $61.5 million. We continually review communities to determine if
mothballing is appropriate. During the first half of fiscal 2021, we did not
mothball any additional communities, but we sold two previously mothballed
communities and we re-activated two previously mothballed communities
and portions of two previously mothballed communities.



Inventories held for sale, which are land parcels where we have decided not to
build homes and are actively marketing the land for sale, represented $2.0
million of our total inventories held for sale at October 31, 2020, and are
reported at the lower of carrying amount or fair value less costs to sell. There
were no inventories held for sale at April 30, 2021. In determining fair value
for land held for sale, management considers, among other things, prices for
land in recent comparable sale transactions, market analysis studies, which
include the estimated price a willing buyer would pay for the land (other than
in a forced liquidation sale) and recent bona fide offers received from outside
third parties.



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The following tables summarize home sites included in our total residential real
estate. The increase in total home sites available at April 30, 2021 compared
to October 31, 2020 is attributable to acquiring new land parcels, partially
offset by delivering homes and terminating certain option agreements during the
period.



                                                                   Active           Proposed
                                                Active           Communities       Developable        Total
                                            Communities(1)          Homes             Homes           Homes
April 30, 2021:

Northeast                                                 3               788             2,146         2,934
Mid-Atlantic                                             15             2,206             5,268         7,474
Midwest                                                   9             1,263               977         2,240
Southeast                                                14             1,510             1,896         3,406
Southwest                                                42             4,668             3,260         7,928
West                                                     14             1,672             2,773         4,445

Consolidated total                                       97            12,107            16,320        28,427

Unconsolidated joint ventures (2)                        21             4,798                 -         4,798

Owned                                                                   6,708             3,795        10,503
Optioned                                                                5,049            12,525        17,574

Controlled lots                                                        11,757            16,320        28,077

Construction to permanent financing lots                                  350                 -           350

Consolidated total                                                     12,107            16,320        28,427



(1) Active communities are open for sale communities with ten or more home sites

      available. We identify communities based on product type. Therefore, at
      times there are multiple communities at one land site.




  (2) Represents active communities and home sites for our unconsolidated
      homebuilding joint ventures for the period. We provide this data as a

supplement to our consolidated results as an indicator of the volume managed

      in our unconsolidated joint ventures. See Note 18 to the Condensed
      Consolidated Financial Statements for a further discussion of our
      unconsolidated joint ventures.




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                                                                  Active           Proposed
                                               Active           Communities       Developable        Total
                                           Communities(1)          Homes             Homes           Homes
October 31, 2020:

Northeast                                                2               424             2,619         3,043
Mid-Atlantic                                            17             2,164             3,764         5,928
Midwest                                                 11             1,267               899         2,166
Southeast                                                9             1,599             1,472         3,071
Southwest                                               52             4,451             3,190         7,641
West                                                    25             2,000             2,495         4,495

Consolidated total                                     116            11,905            14,439        26,344

Unconsolidated joint ventures (2)                       20             4,724                 -         4,724

Owned                                                                  6,008             3,737         9,745
Optioned                                                               5,602            10,702        16,304

Controlled lots                                                       11,610            14,439        26,049

Construction to permanent financing lots                                 295                 -           295

Consolidated total                                                    11,905            14,439        26,344



(1) Active communities are open for sale communities with ten or more home sites

available. We identify communities based on product type. Therefore, at

      times there are multiple communities at one land site.

  (2) Represents active communities and home sites for our unconsolidated
      homebuilding joint ventures for the period. We provide this data as a

supplement to our consolidated results as an indicator of the volume managed

      in our unconsolidated joint ventures. See Note 18 to the Condensed
      Consolidated Financial Statements for a further discussion of our
      unconsolidated joint ventures.




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The following table summarizes our started or completed unsold homes and models,
excluding unconsolidated joint ventures, in active and substantially completed
communities.



                                         April 30, 2021                           October 31, 2020:

                               Unsold                                     Unsold
                                Homes        Models         Total         Homes         Models         Total

Northeast                             3             3             6              1             5             6
Mid-Atlantic                         13            19            32             31            10            41
Midwest                               2            10            12             11             8            19
Southeast                            12            25            37             42            17            59
Southwest                           100            18           118            174            16           190
West                                  4            21            25             14            19            33

Total                               134            96           230            273            75           348


Started or completed unsold
homes and models per active
selling communities (1)             1.4           1.0           2.4            2.4           0.6           3.0



(1) Active selling communities (which are communities that are open for sale with

ten or more home sites available) were 97 and 116 at April 30, 2021 and

October 31, 2020, respectively. This ratio does not include substantially

completed communities, which are communities with less than ten home sites

    available.





Other Balance Sheet Activities




Homebuilding Restricted cash and cash equivalents decreased $2.0 million from
October 31, 2020 to $12.8 million at April 30, 2021. The decrease was due to a
reduction in cash collateralization of our stand-alone letters of credit during
the period.



Investments in and advances to unconsolidated joint ventures increased
$9.3 million to $112.5 million at April 30, 2021 compared to October 31, 2020.
The increase was primarily due to entry into two new unconsolidated joint
ventures during the first half of fiscal 2021, partially offset by
unconsolidated joint venture partner distributions during the period. As of
April 30, 2021 and October 31, 2020, we had investments in 12 and ten
unconsolidated homebuilding joint ventures, respectively, and one unconsolidated
land development joint venture for both periods. We have no guarantees
associated with our unconsolidated joint ventures, other than guarantees limited
to performance and completion of development activities, environmental
indemnification and standard warranty and representation against fraud,
misrepresentation and similar actions, including a voluntary bankruptcy.



Prepaid expenses and other assets were as follows as of:



                            April 30,       October 31,       Dollar
(In thousands)                2021             2020           Change

Prepaid insurance          $     2,347     $       2,687     $   (340 )
Prepaid project costs           25,387            28,549       (3,162 )
Other prepaids                   9,110             7,022        2,088
Other assets                       909               431          478
Lease right of use asset        18,959            20,016       (1,057 )
Total                      $    56,712     $      58,705     $ (1,993 )




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Prepaid insurance decreased during the six months ended April 30, 2021 due to
the timing of premium payments. These costs are amortized over the life of the
associated insurance policy, which can be one to three years. Prepaid project
costs consist of community specific expenditures that are used over the life of
the community. Such prepaid costs are expensed as homes are delivered. Other
prepaids increased primarily due to new premiums for the renewal of certain
software and related services during the period, partially offset by the
amortization of these costs. Other assets increased primarily due to the timing
of certain property tax payments. Lease right of use asset represents the net
present value of our operating leases which, in accordance with ASC 842, are
required to be recorded as an asset on our Condensed Consolidated Balance
Sheets. See Note 9 to the Condensed Consolidated Financial Statements for
further information.



Financial services assets consist primarily of residential mortgages receivable
held for sale of which $124.0 million and $101.8 million at April 30, 2021 and
October 31, 2020, respectively, were being temporarily warehoused and are
awaiting sale in the secondary mortgage market. The increase in mortgage loans
held for sale from October 31, 2020 was related to an increase in the volume of
loans originated during the second quarter of 2021 compared to the fourth
quarter of 2020, primarily due to the increase in deliveries, along with an
increase in the average loan value.



Deferred tax assets, net, was $459.2 million at April 30, 2021, and zero at
October 31, 2020, due to the full reversal of our federal valuation allowance
and the reversal of a portion of our state valuation allowance in the second
quarter of fiscal 2021.



Nonrecourse mortgages secured by inventory decreased to $113.9 million at April
30, 2021 from $135.1 million at October 31, 2020. The decrease was primarily due
to the payment of existing mortgages, partially offset by additional loan
borrowings on existing mortgages, along with new mortgages for communities in
most of our segments obtained during the six months ended April 30, 2021.



Accounts payable and other liabilities are as follows as of:



                       April 30,       October 31,       Dollar
(In thousands)            2021            2020           Change

Accounts payable       $  156,492     $     148,541     $  7,951
Reserves                   93,973            89,985        3,988
Lease liability            19,970            21,049       (1,079 )
Accrued expenses           12,353            10,680        1,673
Accrued compensation       71,850            68,641        3,209
Other liabilities          24,743            20,378        4,365
Total                  $  379,381     $     359,274     $ 20,107




The increase in accounts payable was primarily due an increase in construction
spending, which correlates with the increase in backlog for the six months
ended April 30, 2021. Reserves increased due to new accruals primarily for
warranty and construction defect claims, partially offset by claim payments
during the period. Lease liability represents the net present value of our
minimum lease obligations, which as discussed above, are required to be recorded
on our Condensed Consolidated Balance Sheets in accordance with ASC 842. Accrued
expenses increased primarily due to an accrual for a sales reward program. The
increase in accrued compensation was primarily due to expenses associated
with our 2019 LTIP plan based on the increase in our stock price during the
first half of fiscal 2021, along with the accrual of fiscal 2021 bonuses,
partially offset by the payment of our fiscal year 2020 bonuses during the first
quarter of fiscal 2021. Other liabilities increased primarily due to deferred
payroll tax withholdings, along with an increase related to the timing
of hospitalization claims and payments during the period.



Customers' deposits increased $17.6 million from October 31, 2020 to $65.9 million at April 30, 2021. The increase was primarily related to the increase in backlog during the period.




Liabilities from inventory not owned decreased $40.8 million to $90.4 million at
April 30, 2021. The decrease was primarily due to a decrease in land banking
activity during the period and a decrease in the sale and leaseback of certain
model homes, both accounted for as financing transactions as described above.



Financial Services (liabilities) increased $29.4 million from $119.0 million at
October 31, 2020, to $148.4 million at April 30, 2021. The increase was
primarily due to an increase in amounts outstanding under our mortgage warehouse
lines of credit and directly correlates to the increase in the volume of
mortgage loans held for sale during the period.



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RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 2021 COMPARED TO THE THREE AND SIX MONTHS ENDED APRIL 30, 2020



Total Revenues


Compared to the same prior period, revenues increased as follows:



                                                   Three Months Ended

                                April 30,      April 30,       Dollar        Percentage
(Dollars in thousands)             2021           2020         Change          Change
Homebuilding:
Sale of homes                   $  679,515     $  523,347     $ 156,168             29.8 %
Land sales and other revenues        1,919            643         1,276            198.4 %
Financial services                  21,728         14,361         7,367             51.3 %

Total revenues                  $  703,162     $  538,351     $ 164,811             30.6 %




                                                     Six Months Ended

                                 April 30,       April 30,       Dollar        Percentage
(Dollars in thousands)             2021            2020          Change          Change
Homebuilding:
Sale of homes                   $ 1,230,880     $ 1,002,580     $ 228,300             22.8 %
Land sales and other revenues         5,721           1,452         4,269            294.0 %
Financial services                   41,225          28,375        12,850             45.3 %

Total revenues                  $ 1,277,826     $ 1,032,407     $ 245,419             23.8 %




Homebuilding



For the three and six months ended April 30, 2021, sale of homes revenues
increased $156.2 million, or 29.8%, and $228.3 million, or 22.8%, respectively,
as compared to the same periods of the prior year. These increases were
primarily due to the number of home deliveries increasing 22.1% and 17.3% for
the three and six months ended April 30, 2021, respectively, compared to the
three and six months ended April 30, 2020. In addition, there was a 6.3% and
4.7% increase in the average price per home for the three and six months ended
April 30, 2021, respectively, compared with the respective prior year periods.
The average price per home increased to $419,972 in the three months ended April
30, 2021 from $394,979 in the three months ended April 30, 2020. The average
price per home increased to $409,883 in the six months ended April 30, 2021 from
$391,480 in the six months ended April 30, 2020. The increase in average price
was the result of increases in home prices in virtually all of our markets along
with the geographic and community mix of our deliveries. Land sales are
ancillary to our homebuilding operations and are expected to continue in the
future but may significantly fluctuate up or down. For further details on the
decrease in land sales and other revenues, see the section titled "Land Sales
and Other Revenues" below.



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Information on homes delivered by segment is set forth below:




                              Three Months Ended April 30,                    Six Months Ended April 30,
(Dollars in
thousands)                 2021           2020         % Change          2021            2020          % Change

Northeast:
Dollars                 $    28,686     $  46,791          (38.7 )%   $    59,902     $    92,055          (34.9 )%
Homes                            42            94          (55.3 )%            95             175          (45.7 )%

Mid-Atlantic:
Dollars                 $   112,124     $  89,677           25.0 %    $   205,035     $   177,266           15.7 %
Homes                           216           168           28.6 %            392             323           21.4 %

Midwest:
Dollars                 $    64,010     $  56,543           13.2 %    $   120,603     $   102,935           17.2 %
Homes                           203           184           10.3 %            386             343           12.5 %

Southeast:
Dollars                 $    80,863     $  56,317           43.6 %    $   126,511     $    92,997           36.0 %
Homes                           167           127           31.5 %            269             224           20.1 %

Southwest:
Dollars                 $   217,165     $ 170,485           27.4 %    $   407,347     $   334,188           21.9 %
Homes                           633           515           22.9 %          1,215           1,008           20.5 %

West:
Dollars                 $   176,667     $ 103,534           70.6 %    $   311,482     $   203,139           53.3 %
Homes                           357           237           50.6 %            646             488           32.4 %

Consolidated total:
Dollars                 $   679,515     $ 523,347           29.8 %    $ 1,230,880     $ 1,002,580           22.8 %
Homes                         1,618         1,325           22.1 %          3,003           2,561           17.3 %

Unconsolidated joint
ventures (1)
Dollars                 $    91,067     $ 112,196          (18.8 )%   $   162,180     $   198,545          (18.3 )%
Homes                           155           188          (17.6 )%           274             337          (18.7 )%




(1) Represents housing revenues and home deliveries for our unconsolidated
homebuilding joint ventures for the period. We provide this data as a supplement
to our consolidated results as an indicator of the volume managed in our
unconsolidated joint ventures. See Note 18 to the Condensed Consolidated
Financial Statements included elsewhere in this Quarterly Report on Form 10-Q
for a further discussion of our unconsolidated joint ventures.



As discussed above, the overall increase in consolidated housing revenues during
the three and six months ended April 30, 2021 as compared to the same periods of
the prior year was attributed to an increase in deliveries, due to the strong
homebuilding market and high demand for new home construction, and to the
increase in average sales price, due to raising prices in virtually all of our
markets and the geographic and community mix of deliveries.





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An important indicator of our future results are recently signed contracts and
our home contract backlog for future deliveries. Our sales contracts and homes
in contract backlog by segment are set forth below:



                          Net Contracts (1) for the          Net Contracts (1) for the
                              Three Months Ended                  Six Months Ended              Contract Backlog as of
                                  April 30,                          April 30,                         April 30,
(Dollars in
thousands)                  2021               2020             2021             2020             2021            2020

Northeast:
Dollars                 $      49,948       $   23,266     $       83,618     $    56,269     $     105,828     $  50,771
Homes                              64               66                107             129               142           106

Mid-Atlantic:
Dollars                 $     152,237       $  128,652     $      296,718     $   222,354     $     350,183     $ 228,622
Homes                             242              247                471             430               585           429

Midwest:
Dollars                 $      80,541       $   54,501     $      159,927     $   112,777     $     208,841     $ 132,523
Homes                             225              174                463             361               673           468

Southeast:
Dollars                 $      66,485       $   48,508     $      164,679     $   115,666     $     185,139     $ 131,695
Homes                             153              109                363             264               392           287

Southwest:
Dollars                 $     319,618       $  187,493     $      587,443     $   365,926     $     540,321     $ 262,634
Homes                             829              582              1,565           1,110             1,416           765

West:
Dollars                 $     151,571       $  139,418     $      325,685     $   230,250     $     384,089     $ 151,812
Homes                             258              309                580             515               689           328

Consolidated total:
Dollars                 $     820,400       $  581,838     $    1,618,070     $ 1,103,242     $   1,774,401     $ 958,057
Homes                           1,771            1,487              3,549           2,809             3,897         2,383

Unconsolidated joint
ventures:(2)
Dollars                 $     132,611       $  127,283     $      267,891     $   249,041     $     494,524     $ 267,368
Homes                             335              439                732             704             1,927           884



(1) Net contracts are defined as new contracts executed during the period for the purchase of homes, less cancellations of contracts in the same period.




(2) Represents net contract dollars, net contract homes and contract backlog
dollars and homes for our unconsolidated homebuilding joint ventures for the
period. We provide this data as a supplement to our consolidated results as an
indicator of the volume managed in our unconsolidated joint ventures. See Note
18 to the Condensed Consolidated Financial Statements included elsewhere in this
Quarterly Report on Form 10-Q for a further discussion of our unconsolidated
joint ventures.



In the first half of 2021, our open for sale community count decreased to
97 from 116 at October 31, 2020, which was the net result of opening 31 new
communities, closing 47 communities and contributing three active selling
communities to an unconsolidated joint venture since the beginning of fiscal
2021. High demand accelerated the close out of our communities, which
contributed to the decrease in community count. Our reported level of sales
contracts (net of cancellations) was impacted by an increase in sales pace per
community in the first half of fiscal 2021 as compared to the same period of the
prior year. Net contracts per average active selling community for the three
months ended April 30, 2021 increased to 17.5 compared to 11.1 for the same
period in the prior year. Net contracts per average active selling community for
the six months ended April 30, 2021 increased to 33.5 compared to 20.7 for the
same period in the prior year.





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Cancellation rates represent the number of cancelled contracts in the quarter divided by the number of gross sales contracts executed in the quarter. For comparison, the following are historical cancellation rates, excluding unconsolidated joint ventures:



Quarter   2021      2020      2019      2018      2017

First        17 %      19 %      24 %      18 %      19 %
Second       16 %      23 %      19 %      17 %      18 %
Third                  18 %      19 %      19 %      19 %
Fourth                 18 %      21 %      23 %      22 %



Another common and meaningful way to analyze our cancellation trends is to compare the number of contract cancellations as a percentage of the beginning backlog. The following table provides this historical comparison, excluding unconsolidated joint ventures:



Quarter   2021      2020      2019      2018      2017

First        11 %      14 %      16 %      12 %      12 %
Second        9 %      20 %      20 %      15 %      16 %
Third                  21 %      16 %      14 %      13 %
Fourth                 14 %      14 %      13 %      12 %




Most cancellations occur within the legal rescission period, which varies by
state but is generally less than two weeks after the signing of the contract.
Cancellations also occur as a result of a buyer's failure to qualify for a
mortgage, which generally occurs during the first few weeks after signing. As
shown in the tables above, contract cancellations over the past several years
have been within what we believe to be a normal range, with fiscal 2021
cancellation rates, in particular, being below historical norms as a result of
the strong market conditions. However, it is difficult to predict what
cancellation rates will be in the future.



Total cost of sales on our Condensed Consolidated Statements of Operations
includes expenses for consolidated housing and land and lot sales, including
inventory impairment loss and land option write-offs (defined as "land charges"
in the tables below). A breakout of such expenses for housing sales and
homebuilding gross margin is set forth below.



Homebuilding gross margin before cost of sales interest expense and land charges
is a non-GAAP financial measure. This measure should not be considered as an
alternative to homebuilding gross margin determined in accordance with GAAP as
an indicator of operating performance.



Management believes this non-GAAP measure enables investors to better understand
our operating performance. This measure is also useful internally, helping
management evaluate our operating results on a consolidated basis and relative
to other companies in our industry. In particular, the magnitude and volatility
of land charges for the Company, and for other homebuilders, have been
significant and, as such, have made financial analysis of our industry more
difficult. Homebuilding metrics excluding land charges, as well as interest
amortized to cost of sales, and other similar presentations prepared 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.





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                                             Three Months Ended             Six Months Ended
                                                  April 30,                     April 30,
(Dollars in thousands)                       2021          2020           2021            2020

Sale of homes                              $ 679,515     $ 523,347     $ 1,230,880     $ 1,002,580
Cost of sales, excluding interest
expense and land charges                     535,017       427,944         972,389         824,262
Homebuilding gross margin, before cost
of sales interest expense and land
charges                                      144,498        95,403         258,491         178,318
Cost of sales interest expense,
excluding land sales interest expense         21,704        18,537          38,421          36,673
Homebuilding gross margin, after cost of
sales interest expense, before land
charges                                      122,794        76,866         220,070         141,645
Land charges                                      81         1,010           1,958           3,838
Homebuilding gross margin                  $ 122,713     $  75,856     $   218,112     $   137,807
Homebuilding gross margin percentage            18.1 %        14.5 %          17.7 %          13.7 %
Homebuilding gross margin percentage,
before cost of sales interest expense
and land charges                                21.3 %        18.2 %          21.0 %          17.8 %
Homebuilding gross margin percentage,
after cost of sales interest expense,
before land charges                             18.1 %        14.7 %          17.9 %          14.1 %




Cost of sales expenses as a percentage of consolidated home sales revenues are
presented below:



                                              Three Months Ended             Six Months Ended
                                                   April 30,                    April 30,
                                              2021           2020           2021          2020

Sale of homes                                   100.0 %        100.0 %        100.0 %       100.0 %

Cost of sales, excluding interest
expense and land charges:
Housing, land and development costs              70.2 %         72.3 %         70.4 %        72.5 %
Commissions                                       3.6 %          3.6 %          3.6 %         3.5 %
Financing concessions                             1.2 %          1.3 %          1.2 %         1.4 %
Overheads                                         3.7 %          4.6 %          3.8 %         4.8 %
Total cost of sales, before interest
expense and land charges                         78.7 %         81.8 %         79.0 %        82.2 %
Cost of sales interest                            3.2 %          3.5 %          3.1 %         3.7 %
Land charges                                      0.0 %          0.2 %          0.2 %         0.4 %

Homebuilding gross margin percentage             18.1 %         14.5 %         17.7 %        13.7 %
Homebuilding gross margin percentage,
before cost of sales interest expense
and land charges                                 21.3 %         18.2 %         21.0 %        17.8 %
Homebuilding gross margin percentage,
after cost of sales interest expense,
before land charges                              18.1 %         14.7 %         17.9 %        14.1 %




We sell a variety of home types in various communities, each yielding a
different gross margin. As a result, depending on the mix of communities
delivering homes, consolidated gross margin may fluctuate up or down. Total
homebuilding gross margin percentage increased to 18.1% during the three months
ended April 30, 2021 compared to 14.5% for the same period last year and
increased to 17.7% during the six months ended April 30, 2021 compared to 13.7%
for the same period last year. Homebuilding gross margin percentage, before cost
of sales interest expense and land charges, increased from 18.2% for the three
months ended April 30, 2020 to 21.3% for the three months ended April 30, 2021,
and increased from 17.8% for the six months ended April 30, 2020 to 21.0% for
the six months ended April 30, 2021. The increases for the three and six months
ended April 30, 2021 for both gross margin percentage and gross margin
percentage, before cost of sales interest expense and land charges, were
primarily due to increases in home prices across virtually all our operating
segments, along with the mix of communities delivering compared to the prior
year periods.



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Reflected as inventory impairment loss and land option write-offs in cost of
sales, we wrote-off or wrote-down certain inventories totaling $0.1 million and
$1.0 million during the three months ended April 30, 2021 and 2020,
respectively, and $2.0 million and $3.8 million during the six months ended
April 30, 2021 and 2020, respectively, to their estimated fair value. During the
three and six months ended April 30, 2021, we wrote-off residential land options
and approval and engineering costs amounting to $0.1 million and $1.2 million,
respectively, compared to $1.0 and $3.8 million for the three and six months
ended April 30, 2020, respectively, which are included in the total land charges
discussed above. Option, approval and engineering costs are written-off when a
community's pro forma profitability is not projected to produce adequate returns
on the investment commensurate with the risk and when we believe it is probable
we will cancel the option or when a community is redesigned engineering costs
related to the initial design are written-off. Such write-offs were located in
the Southeast, Southwest and West segments in the first half of fiscal 2021 and
all of our segments, execpt our Mid-Atlantic segment, in the first half of
fiscal 2020. We recorded an inventory impairment of $0.8 million during the six
months ended April 30, 2021, which was related to one community in the West
segment. We did not record any inventory impairments during the three and six
months ended April 30, 2020. It is difficult to predict impairment levels, and
should it become necessary or desirable to have additional land sales, lower
prices, or should the estimates or expectations used in determining estimated
cash flows or fair value decrease or differ from current estimates in the
future, we may need to recognize additional impairments.



Land Sales and Other Revenues

Land sales and other revenues consist primarily of land and lot sales. A breakout of land and lot sales is set forth below:



                                               Three Months Ended              Six Months Ended
                                                    April 30,                      April 30,
(In thousands)                                2021             2020           2021           2020

Land and lot sales                         $     1,549       $      50     $    4,911      $      75
Cost of sales, excluding interest                1,517              83          3,783            120
Land and lot sales gross margin,
excluding interest                                  32             (33 )        1,128            (45 )
Land and lot sales interest expense                 21              52            469             52
Land and lot sales gross margin,
including interest                         $        11       $     (85 )   $      659      $     (97 )




Land sales are ancillary to our residential homebuilding operations and are
expected to continue in the future but may significantly fluctuate up or down.
Although we budget land sales, they are often dependent upon receiving approvals
and entitlements, the timing of which can be uncertain. As a result, projecting
the amount and timing of land sales is difficult. Revenue associated with land
sales can vary significantly due to the mix of land parcels sold. There were two
land sales in both the three months ended April 30, 2021 and 2020. The
increase of $1.5 million in land sales revenues was due to selling higher-priced
land in the current period as compared to the same period of the prior year.
There were six land sales in the six months ended April 30, 2021 compared to
three land sales in the same period of the prior year, resulting in an increase
of $4.8 million in land sales revenues.



Land sales and other revenues increased $1.3 million and $4.3 million for the
three and six months ended April 30, 2021, respectively, as compared to the same
periods in the prior year. Other revenues include income from contract
cancellations where the deposit has been forfeited due to contract terminations,
interest income, cash discounts and miscellaneous one-time receipts.  The
increase for the three and six months ended April 30, 2021, compared to the
three and six months ended April 30, 2020, was mainly due to the increase in
land sales discussed above.


Homebuilding Selling, General and Administrative




Homebuilding selling, general and administrative ("SGA") expenses increased $1.6
million and $1.2 million for the three and six months ended April 30, 2021,
respectively, compared to the same periods last year. The increase for the three
and six months ended April 30, 2021 was primarily due to an increase in
compensation expense, mostly attributed to our long-term incentive programs now
forecasted to achieve above target metrics as a result of the recent improved
operating results and higher stock price. SGA expenses as a percentage of
homebuilding revenues decreased to 6.2% and 6.7% for the three and six months
ended April 30, 2021, respectively, compared to 7.7% and 8.1% for the three and
six months ended April 30, 2020, respectively, as a result of the 30.0% and
23.2% increase in homebuilding revenue for the same periods, respectively.



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HOMEBUILDING OPERATIONS BY SEGMENT



Segment Analysis



                                                        Three Months Ended April 30,

(Dollars in thousands, except average
sales price)                                 2021          2020        Variance       Variance %

Northeast
Homebuilding revenue                       $  30,189     $  46,798     $ (16,609 )          (35.5 )%
Income before income taxes                 $   5,068     $   6,722     $  (1,654 )          (24.6 )%
Homes delivered                                   42            94           (52 )          (55.3 )%
Average sales price                        $ 683,000     $ 497,777     $ 185,223             37.2 %

Mid-Atlantic

Homebuilding revenue                       $ 112,200     $  89,738     $  22,462             25.0 %
Income before income taxes                 $  12,010     $   5,466     $   6,544            119.7 %
Homes delivered                                  216           168            48             28.6 %
Average sales price                        $ 519,093     $ 533,792     $ (14,699 )           (2.8 )%

Midwest

Homebuilding revenue                       $  64,079     $  56,673     $   7,406             13.1 %
Income (loss) before income taxes          $   4,128     $    (385 )   $   4,513           1172.2 %
Homes delivered                                  203           184            19             10.3 %
Average sales price                        $ 315,320     $ 307,299     $   8,021              2.6 %

Southeast
Homebuilding revenue                       $  80,917     $  56,369     $  24,548             43.5 %
Income before income taxes                 $   6,504     $      50     $   6,454            12908 %
Homes delivered                                  167           127            40             31.5 %
Average sales price                        $ 484,210     $ 443,441     $  40,769              9.2 %

Southwest
Homebuilding revenue                       $ 217,312     $ 170,654     $  46,658             27.3 %
Income before income taxes                 $  29,275     $  13,052     $  16,223            124.3 %
Homes delivered                                  633           515           118             22.9 %
Average sales price                        $ 343,073     $ 331,039     $  12,034              3.6 %

West
Homebuilding revenue                       $ 176,733     $ 103,603     $  73,130             70.6 %
Income before income taxes                 $  21,863     $   2,723     $  19,140            702.9 %
Homes delivered                                  357           237           120             50.6 %
Average sales price                        $ 494,866     $ 436,852     $  58,014             13.3 %




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                                                        Six Months Ended April 30,

(Dollars in thousands, except average
sales price)                              2021          2020        

Variance Variance %

Northeast

Homebuilding revenue                    $  62,233     $  92,074     $ (29,841 )              (32.4 )%
Income before income taxes              $   9,662     $  12,463     $  (2,801 )              (22.5 )%
Homes delivered                                95           175           (80 )              (45.7 )%
Average sales price                     $ 630,547     $ 526,029     $ 104,518                 19.9 %

Mid-Atlantic
Homebuilding revenue                    $ 205,145     $ 177,497     $  27,648                 15.6 %
Income before income taxes              $  22,711     $   9,524     $  13,187                138.5 %
Homes delivered                               392           323            69                 21.4 %
Average sales price                     $ 523,048     $ 548,811     $ (25,763 )               (4.7 )%

Midwest
Homebuilding revenue                    $ 123,236     $ 103,117     $  20,119                 19.5 %
Income (loss) before income taxes       $   7,712     $  (3,828 )   $  11,540                301.5 %
Homes delivered                               386           343            43                 12.5 %
Average sales price                     $ 312,443     $ 300,102     $  12,341                  4.1 %

Southeast
Homebuilding revenue                    $ 126,691     $  93,143     $  33,548                 36.0 %

Income (loss) before income taxes $ 6,858 $ (4,261 ) $ 11,119

                260.9 %
Homes delivered                               269           224            45                 20.1 %
Average sales price                     $ 470,301     $ 415,165     $  55,136                 13.3 %

Southwest
Homebuilding revenue                    $ 407,721     $ 334,553     $  73,168                 21.9 %
Income before income taxes              $  50,325     $  21,672     $  28,653                132.2 %
Homes delivered                             1,215         1,008           207                 20.5 %
Average sales price                     $ 335,265     $ 331,536     $   3,729                  1.1 %

West
Homebuilding revenue                    $ 311,565     $ 203,224     $ 108,341                 53.3 %
Income before income taxes              $  31,540     $   4,334     $  27,206                627.7 %
Homes delivered                               646           488           158                 32.4 %
Average sales price                     $ 482,170     $ 416,268     $  65,902                 15.8 %




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Homebuilding Results by Segment




Northeast - Homebuilding revenues decreased 35.5% for the three months ended
April 30, 2021 compared to the same period of the prior year. The decrease for
the three months ended April 30, 2021 was attributed to a 55.3% decrease in
homes delivered, partially offset by a 37.2% increase in average sales price.
The increase in average sales price was mainly the result of price increases in
certain communities.



Income before income taxes decreased $1.7 million to $5.1 million for the three
months ended April 30, 2021 as compared to the prior year period. This was
primarily due to the decrease in homebuilding revenues discussed above and a
$3.0 million decrease in income from unconsolidated joint ventures, partially
offset by an increase in gross margin percentage before interest expense for the
period compared to the same period of the prior year.



Homebuilding revenues decreased 32.4% for the six months ended April 30, 2021
compared to the same period of the prior year. The decrease was attributed to a
45.7% decrease in homes delivered, partially offset by a 19.9% increase in
average sales price. The increase in average sales price was mainly the result
of price increases in certain communities.



Income before income taxes decreased $2.8 million to $9.7 million for the six
months ended April 30, 2021 as compared to the prior year. This was primarily
due to the decrease in homebuilding revenues discussed above and a $5.2 million
decrease in income from unconsolidated joint ventures, partially offset by an
increase in gross margin percentage before interest expense for the period
compared to the same period of the prior year.



Mid-Atlantic - Homebuilding revenues increased 25.0% for the three months ended
April 30, 2021 compared to the same period in the prior year period. The
increase was primarily due to a 28.6% increase in homes delivered, partially
offset by a 2.8% decrease in average sales price for the three months ended
April 30, 2021 compared to the same period in the prior year. Although there
were price increases in virtually all communities overall, the decrease in
average sales price was the result of new communities delivering lower priced,
larger single family homes and townhomes in higher-end submarkets of the segment
in the three months ended April 30, 2021 compared to some communities delivering
in the three months ended April 30, 2020 that had higher priced, large single
family homes and townhomes in such submarkets of the segment that are no longer
delivering.



Income before income taxes increased $6.5 million to $12.0 million for the three
months ended April 30, 2021 compared to the same period in the prior year. This
was primarily due to the increase in homebuilding revenue discussed above and a
$0.4 million decrease in selling, general and administrative costs, while gross
margin percentage before interest expense was flat for the three months ended
April 30, 2021 compared to the same period of the prior year.



Homebuilding revenues increased 15.6% for the six months ended April 30, 2021
compared to the same period in the prior year. The increase was primarily due to
a 21.4% increase in homes delivered, partially offset by a 4.7% decrease in
average sales price for the six months ended April 30, 2021. Although there were
price increases in virtually all communities overall, the decrease in average
sales price was the result of new communities delivering lower priced, larger
single family homes and townhomes in higher-end submarkets of the segment in the
six months ended April 30, 2021 compared to some communities delivering in the
six months ended April 30, 2020 that had higher priced, large single family
homes and townhomes in such submarkets of the segment that are no longer
delivering.



Income before income taxes increased $13.2 million to $22.7 million for the six
months ended April 30, 2021 as compared to the prior year period, which was
primarily due to the increase in homebuilding revenues discussed above, a $0.8
million decrease in selling, general and administrative costs and a slight
increase in gross margin percentage before interest expense.



Midwest - Homebuilding revenues increased 13.1% for the three months ended April
30, 2021 compared to the same period in the prior year. The increase was due to
a 10.3% increase in homes delivered and a 2.6% increase in average sales price.
The increase in average sales price was the result of new communities delivering
higher priced, larger single family homes and townhomes in higher-end submarkets
of the segment in the three months ended April 30, 2021 compared to some
communities delivering in the three months ended April 30, 2020 that had lower
priced, single family homes in lower-end submarkets of the segment that are no
longer delivering. Also impacting the increase in the average sales price was
price increases in certain communities.



Loss before income taxes improved $4.5 million to income of $4.1 million for the
three months ended April 30, 2021 compared to the same period in the prior
year. The improvement was primarily due to the increase in homebuilding revenue
discussed above, a $1.1 million decrease in selling, general and administrative
costs and a slight increase in gross margin percentage before interest expense.



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Homebuilding revenues increased 19.5% for the six months ended April 30, 2021
compared to the same period in the prior year. The increase was primarily due to
an 12.5% increase in homes delivered and a 4.1% increase in the average sales
price. The increase in average sales price was the result of new communities
delivering higher priced, larger single family homes and townhomes in higher-end
submarkets of the segment in the six months ended April 30, 2021 compared to
some communities delivering in the six months ended April 30, 2020 that had
lower priced, single family homes in lower-end submarkets of the segment that
are no longer delivering. Also impacting the increase in the average sales price
was price increases in certain communities.



Loss before income taxes improved $11.5 million to income of $7.7 million for
the six months ended April 30, 2021 as compared to the prior year period,
primarily due to the increase in homebuilding revenue discussed above, a $2.5
million decrease in selling, general and administrative costs, a $2.8 million
decrease in inventory impairment loss and land option write-offs and a slight
increase in gross margin percentage before interest expense.



Southeast - Homebuilding revenues increased 43.5% for the three months ended
April 30, 2021 compared to the same period in the prior year. The increase was
due to a 31.5% increase in homes delivered and a 9.2% increase in average sales
price. The increase in average sales price was the result of new communities
delivering higher priced, larger single family homes in higher-end submarkets of
the segment in the three months ended April 30, 2021 compared to some
communities delivering in the three months ended April 30, 2020 that had lower
priced, smaller single family homes and townhomes in lower-end submarkets of the
segment that are no longer delivering. Also impacting the increase in the
average sales price was price increases in certain communities.



Income before income taxes increased $6.5 million to $6.5 million for the three
months ended April 30, 2021 compared to the prior year period, primarily due to
the increase in homebuilding revenue discussed above and an increase in gross
margin percentage before interest expense for the period compared to the same
period of the prior year.



Homebuilding revenues increased 36.0% for the six months ended April 30, 2021
compared to the same period in the prior year. The increase for the six months
ended April 30, 2021 was due to a 20.1% increase in homes delivered and a 13.3%
increase in average sales price. The increase in average sales price was the
result of new communities delivering higher priced, larger single family homes
in higher-end submarkets of the segment in the six months ended April 30, 2021
compared to some communities delivering in the six months ended April 30, 2020
that had lower priced, smaller single family homes and townhomes in lower-end
submarkets of the segment that are no longer delivering. Also impacting the
increase in the average sales price was price increases in certain communities.



Loss before income taxes improved $11.1 million to income of $6.9 million for
the six months ended April 30, 2021 compared to the prior year period, primarily
due to the increase in homebuilding revenue discussed above, a $0.8 million
increase in income from unconsolidated joint ventures and an increase in gross
margin percentage before interest expense.



Southwest - Homebuilding revenues increased 27.3% for the three months ended
April 30, 2021 compared to the same period in the prior year. The increase in
homebuilding revenues was primarily due to a 22.9% increase in homes delivered
and a 3.6% increase in average sales price. The increase in the average sales
price was due to price increases in certain communities.



Income before income taxes increased $16.2 million to $29.3 million for the
three months ended April 30, 2021 compared to the same period in the prior
year. The increase was primarily due to the increase in homebuilding revenue
discussed above and an increase in gross margin percentage before interest
expense for the three months ended April 30, 2021 compared to the same period of
the prior year.



Homebuilding revenues increased 21.9% for the six months ended April 30, 2021
compared to the same period in the prior year. The increase was primarily due to
a 20.5% increase in homes delivered, while average sales price was essentially
flat with a 1.1% increase for the six months ended April 30, 2021.



Income before income taxes increased $28.7 million to $50.3 million for the six
months ended April 30, 2021 compared to the same period in the prior year. The
increase was due to the increase in homebuilding revenues discussed above and an
increase in gross margin percentage before interest expense for the six months
ended April 30, 2021 compared to the same period of the prior year.





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West - Homebuilding revenues increased 70.6% for the three months ended April
30, 2021 compared to the same period in the prior year. The increase was due to
a 50.6% increase in homes delivered and a 13.3% increase in average sales
price. The increase in average sales price was the result of new communities
delivering higher priced, larger single family homes in higher-end submarkets of
the segment in the three months ended April 30, 2021 compared to some
communities delivering in the three months ended April 30, 2020 that had lower
priced, smaller single family homes in lower-end submarkets of the segment that
are no longer delivering. Also impacting the increase in the average sales price
was price increases in certain communities.



Income before income taxes increased $19.1 million to $21.9 million for the
three months ended April 30, 2021 compared to the prior year period, primarily
due to the increase in homebuilding revenue discussed above and an increase in
gross margin percentage before interest expense for the period compared to the
same period of the prior year.



Homebuilding revenues increased 53.3% for the six months ended April 30, 2021
compared to the same period in the prior year. The increase was due to a 32.4%
increase in homes delivered and a 15.8% increase in average sales price. The
increase in average sales price was the result of new communities delivering
higher priced, larger single family homes in higher-end submarkets of the
segment in the six months ended April 30, 2021 compared to some communities
delivering in the six months ended April 30, 2020 that had lower priced, smaller
single family homes in lower-end submarkets of the segment that are no longer
delivering. Also impacting the increase in the average sales price was price
increases in certain communities.



Income before income taxes increased $27.2 million to $31.5 million for the six
months ended April 30, 2021 compared to the prior year period, primarily due to
the increase in homebuilding revenue discussed above and an increase in gross
margin percentage before interest expense for the period compared to the same
period of the prior year, partially offset by a $1.5 million increase in
inventory impairment loss and land option write-offs.



Financial Services



Financial services consist primarily of originating mortgages from our home
buyers, selling such mortgages in the secondary market, and title insurance
activities. We use mandatory investor commitments and forward sales of
mortgage-backed securities ("MBS") to hedge our mortgage-related interest rate
exposure on agency and government loans. These instruments involve, to varying
degrees, elements of credit and interest rate risk. Credit risk associated with
MBS forward commitments and loan sales transactions is managed by limiting our
counterparties to investment banks, federally regulated bank affiliates and
other investors meeting our credit standards. Our risk, in the event of default
by the purchaser, is the difference between the contract price and fair value of
the MBS forward commitments. For the first half of fiscal 2021 and 2020, Federal
Housing Administration and Veterans Administration ("FHA/VA") loans represented
31.5% and 32.2%, respectively, of our total loans. The origination of FHA/VA
loans decreased from the first half of fiscal 2020 to the first half of fiscal
2021, and our conforming conventional loan originations as a percentage of our
total loans increased from 65.6% to 68.1% for these periods, respectively. The
origination of loans which exceed conforming conventions decreased from 2.2% for
the first half of fiscal 2020 to 0.4% for the first half of fiscal 2021. Profits
and losses relating to the sale of mortgage loans are recognized when legal
control passes to the buyer of the mortgage and the sales price is collected.



During the three and six months ended April 30, 2021, financial services
provided a $10.4 million and $19.5 million pretax profit, respectively, compared
to $4.7 million and $9.2 million, respectively, of pretax profit for the same
periods of fiscal 2020. This increase in pretax profit was attributed to the
increase in the homebuilding deliveries and an increase in the average price of
the loans settled. Also impacting the increase for the six months ended April
30, 2021, was the increase in the basis point spread between the loans
originated and the implied rate from the sale of the loans. In the market areas
served by our wholly owned mortgage banking subsidiaries, 69.5% and 68.4% of our
noncash homebuyers obtained mortgages originated by these subsidiaries during
the three months ended April 30, 2021 and 2020, respectively, and 70.1% and
68.5% of our noncash homebuyers obtained mortgages originated by these
subsidiaries for the six months ended April 30, 2021 and 2020, respectively.



Corporate General and Administrative




Corporate general and administrative expenses include the operations at our
headquarters in New Jersey. These expenses include payroll, stock compensation,
facility costs and rent and other costs associated with our executive offices,
legal expenses, information services, human resources, corporate accounting,
training, treasury, process redesign, internal audit, national and digital
marketing, construction services and administration of insurance, quality and
safety. Corporate general and administrative expenses increased to $40.4 million
for the three months ended April 30, 2021 compared to $15.3 million for the
three months ended April 30, 2020 and increased to $63.9 million for the six
months ended April 30, 2021 compared to $35.0 million for the six months ended
April 30, 2020. The increase for both periods was primarily due to an increase
in compensation expense, mainly related to the grants of phantom stock awards
under our 2019 Long Term Incentive Plan ("2019 LTIP") which expense increased
due to the significant increase in our stock price from $51.16 at January 31,
2021 to $132.59 at April 30, 2021. Had equity shares rather than phantom shares
been utilized for the 2019 LTIP, there would not have been expenses related to
the movement in our stock price.



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Other Interest



Other interest decreased $4.8 million for the three months ended April 30, 2021
compared to the three months ended April 30, 2020 and decreased $5.9 million for
the six months ended April 30, 2021 compared to the six months ended April 30,
2020 primarily due to the decrease in nonrecourse mortgages at April 30, 2021
compared to April 30, 2020. Our assets that qualify for interest capitalization
(inventory under development) are less than our debt, and therefore the portion
of interest not covered by qualifying assets is directly expensed.



(Loss) Gain on Extinguishment of Debt




On December 10, 2019, the Company entered into a credit agreement providing for
$81.5 million of senior secured 1.75 lien term loans in exchange for $163.0
million of senior unsecured term loans. On December 10, 2019, the Company also
issued $158.5 million of 10.0% Senior Secured 1.75 Lien Notes due 2025 in
exchange for $23.2 million of 10.0% Senior Secured Notes due 2022 and $141.7
million 10.5% Senior Secured Notes due 2024. These transactions were accounted
for in accordance with ASC 470-60, resulting in a net gain on extinguishment of
debt of $9.3 million (including additional costs of $0.2 million incurred in the
three months ended April 30, 2020).



Income from Unconsolidated Joint Ventures




Income from unconsolidated joint ventures consists of our share of the earnings
or losses of our unconsolidated joint ventures. Income from unconsolidated joint
ventures decreased $3.6 million to $2.6 million for the three months ended April
30, 2021 and decreased $3.2 million to $4.6 million for the six months ended
April 30, 2021 compared to the same respective periods of the prior year. The
decrease was primarily due to the recognition of our share of income from
certain of our joint ventures delivering fewer homes in the current fiscal year
as compared to the prior fiscal year.



Total Taxes



The total income tax benefit for the three and six months ended April 30, 2021
was $457.6 million and $457.0 million, respectively. As discussed in Note 16 to
the Condensed Consolidated Financial Statements, the benefit for both the three
and six months ended April 30, 2021 was primarily due to the reversal of a
substantial portion of our valuation allowance previously recorded against our
deferred tax assets, partially offset by state tax expense from income generated
in states where we do not have net operating loss carryforwards to offset the
current year income.



Inflation



Inflation has a long-term effect, because increasing costs of land, materials
and labor result in increasing sale prices of our homes. In general, these price
increases have been commensurate with the general rate of inflation in our
housing markets and have not had a significant adverse effect on the sale of our
homes. A significant risk faced by the housing industry generally is that rising
house construction costs, including land and interest costs, will substantially
outpace increases in the income of potential purchasers and therefore limit our
ability to raise home sale prices, which may result in lower gross margins.



Inflation has a lesser short-term effect, because we generally negotiate
fixed-price contracts with many, but not all, of our subcontractors and material
suppliers for the construction of our homes. These prices usually are applicable
for a specified number of residential buildings or for a time period of between
three to twelve months. Construction costs for residential buildings represented
approximately 53.1% of our homebuilding cost of sales for the six months ended
April 30, 2021.





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Safe Harbor Statement



All statements in this Quarterly Report on Form 10-Q that are not historical
facts should be considered as "Forward-Looking Statements" within the meaning of
the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of
1995. Such statements involve known and unknown risks, uncertainties and other
factors that may cause actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. Such
forward-looking statements include but are not limited to statements related to
the Company's goals and expectations with respect to its financial results for
future financial periods. Although we believe that our plans, intentions and
expectations reflected in, or suggested by, such forward-looking statements are
reasonable, we can give no assurance that such plans, intentions or expectations
will be achieved. By their nature, forward-looking statements: (i) speak only as
of the date they are made, (ii) are not guarantees of future performance or
results and (iii) are subject to risks, uncertainties and assumptions that are
difficult to predict or quantify. Therefore, actual results could differ
materially and adversely from those forward-looking statements as result of a
variety of factors. Such risks, uncertainties and other factors include, but are
not limited to:


? The outbreak and spread of COVID-19 and the measures that governments,

agencies, law enforcement and/or health authorities implement to address it;

? Changes in general and local economic, industry and business conditions and

impacts of a significant homebuilding downturn;

? Adverse weather and other environmental conditions and natural disasters;

? The seasonality of the Company's business;

? The availability and cost of suitable land and improved lots and sufficient

liquidity to invest in such land and lots;

? Shortages in, and price fluctuations of, raw materials and labor, including

due to changes in trade policies, including the imposition of tariffs and

duties on homebuilding materials and products and related trade disputes with

and retaliatory measures taken by other countries;

? Reliance on, and the performance of, subcontractors;

? Regional and local economic factors, including dependency on certain sectors

of the economy, and employment levels affecting home prices and sales

activity in the markets where the Company builds homes;

? Increases in cancellations of agreements of sale;

? Fluctuations in interest rates and the availability of mortgage financing;

? Changes in tax laws affecting the after-tax costs of owning a home;

? Legal claims brought against us and not resolved in our favor, such as

product liability litigation, warranty claims and claims made by mortgage

     investors;
  ?  Levels of competition;
  ?  Utility shortages and outages or rate fluctuations;
  ?  Information technology failures and data security breaches;
  ?  Negative publicity;

? High leverage and restrictions on the Company's operations and activities

imposed by the agreements governing the Company's outstanding indebtedness;

? Availability and terms of financing to the Company;

? The Company's sources of liquidity;

? Changes in credit ratings;

? Government regulations, including regulations concerning development of land,

the home building, sales and customer financing processes, tax laws and the

     environment;
  ?  Operations through unconsolidated joint ventures with third parties;
  ?  Significant influence of the Company's controlling stockholders;
  ?  Availability of net operating loss carryforwards; and

? Loss of key management personnel or failure to attract qualified personnel.





Certain risks, uncertainties and other factors are described in detail in Part
I, Item 1 "Business" and Part I, Item 1A "Risk Factors" in our Annual Report on
Form 10-K for the fiscal year ended October 31, 2020. Except as otherwise
required by applicable securities laws, we undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events, changed circumstances or any other reason after the
date of this Quarterly Report on Form 10-Q.

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