XML 34 R19.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Income Taxes | 12 Months Ended
--- | ---
Sep. 30, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Our expense (benefit) from income taxes from continuing operations consists of the following for the periods presented:
| Fiscal Year Ended September 30,
(In thousands) | 2017 |  | 2016 |  | 2015
Current federal | $ | — |  |  | $ | — |  |  | $ | (64 | )
Current state | 859 |  |  | 595 |  |  | 520 |
Deferred federal (a) | 1,625 |  |  | 5,574 |  |  | (314,651 | )
Deferred state (a) (b) | 212 |  |  | 10,329 |  |  | (10,374 | )
Total | $ | 2,696 |  |  | $ | 16,498 |  |  | $ | (324,569 | )
(a) Fiscal 2015 benefit is due to release of a substantial portion of the valuation allowance on our deferred tax assets; refer to discussion below titled “Valuation Allowance.” (b) Fiscal 2016 expense includes $8.6 million of additional valuation allowance on our state deferred tax assets due to a number of changes to the legal forms of our operating entities; refer to discussion below titled “Valuation Allowance.” The expense (benefit) from income taxes from continuing operations differs from the amount computed by applying the federal income tax statutory rate as follows for the periods presented:
| Fiscal Year Ended September 30,
(In thousands) | 2017 |  | 2016 |  | 2015
Income tax computed at statutory rate | $ | 12,052 |  |  | $ | 7,596 |  |  | $ | 7,711 |
State income taxes, net of federal benefit | 1,287 |  |  | 4,974 |  |  | 2,485 |
(Decrease) increase in valuation allowance - other (a) (b) (c) | (3,482 | ) |  | 6,457 |  |  | (334,605 | )
Changes for uncertain tax positions | (685 | ) |  | (40 | ) |  | 42 |
Stock based compensation | 741 |  |  | — |  |  | — |
State rate change | — |  |  | (678 | ) |  | — |
Tax credits | (7,460 | ) |  | (2,134 | ) |  | — |
Other, net | 243 |  |  | 323 |  |  | (202 | )
Total | $ | 2,696 |  |  | $ | 16,498 |  |  | $ | (324,569 | )
(a) For fiscal 2015, amount includes $335.2 million release of a substantial portion of the valuation allowance on our deferred tax assets; refer to discussion below titled “Valuation Allowance.” (b) For fiscal 2016, amount includes $8.6 million of additional valuation allowance on our state deferred tax assets due to a number of changes to the legal forms of our operating entities; refer to discussion below titled “Valuation Allowance.” (c) For fiscal 2017, amount includes $3.5 million reduction in valuation allowance on our state deferred tax assets due to changes in our state net operating loss estimates; refer to discussion below titled “Valuation Allowance.” The principal differences between our effective tax rate and the U.S. federal statutory rate relate to state taxes, changes in our valuation allowance and tax credits. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of our assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of significant temporary differences that give rise to the net deferred tax assets are as follows as of September 30, 2017 and September 30, 2016:
(In thousands) | September 30, 2017 |  | September 30, 2016
Deferred tax assets: |  |  |
Federal and state tax carryforwards | $ | 293,298 |  |  | $ | 298,426 |
Inventory adjustments | 59,507 |  |  | 62,985 |
Incentive compensation | 19,043 |  |  | 15,390 |
Warranty and other reserves | 6,140 |  |  | 16,943 |
Property, equipment and other assets | 3,247 |  |  | 2,896 |
Other | 1,785 |  |  | 809 |
Uncertain tax positions | 1,332 |  |  | 1,721 |
Total deferred tax assets | 384,352 |  |  | 399,170 |
Deferred tax liabilities: |  |  |
Deferred revenues | (11,297 | ) |  | (22,950 | )
Total deferred tax liabilities | (11,297 | ) |  | (22,950 | )
Net deferred tax assets before valuation allowance | 373,055 |  |  | 376,220 |
Valuation allowance (a) | (65,159 | ) |  | (66,265 | )
Net deferred tax assets | $ | 307,896 |  |  | $ | 309,955 |
(a) For fiscal 2016, amount includes $8.6 million of additional valuation allowance on our state deferred tax assets due to a number of changes to the legal forms of our operating entities; refer to discussion below titled “Valuation Allowance.” As of September 30, 2017, our gross deferred tax assets above included $241.3 million for federal net operating loss carryforwards, $31.7 million for state net operating loss carryforwards, $9.6 million for an alternative minimum tax credit and $14.5 million for general business credits. The net operating loss carryforwards expire at various dates through 2033, and the general business credits expire at various dates through 2037. The alternative minimum tax credit has an unlimited carryforward period. We experienced an “ownership change” as defined in Section 382 of the Internal Revenue Code (Section 382) as of January 12, 2010. Section 382 contains rules that limit the ability of a company that undergoes an “ownership change” to utilize its net operating loss carryforwards (NOLs) and certain built-in losses or deductions recognized during the five-year period after the ownership change to offset future taxable income. Because the five-year period has expired, we have determined the actual impact and final classification of those amounts, which are properly reflected in the amounts presented above. The actual realization of our deferred tax assets is difficult to predict and is dependent on future events. We recognized income tax expense from continuing operations of $2.7 million in our fiscal 2017, compared to income tax expense from continuing operations of $16.5 million and income tax benefit of $324.6 million in our fiscal 2016 and fiscal 2015, respectively. The income tax expense in our fiscal 2017 primarily resulted from income in the current year, offset by the generation of federal tax credits and an additional benefit resulting from changes to our valuation allowance due to changes in our state net operating loss estimates. The income tax expense in our fiscal 2016 primarily resulted from income generated in the fiscal year, offset by the generation of federal tax credits. In fiscal 2015, our income tax benefit primarily resulted from the release of a substantial portion of the valuation allowance. Due to the effects of changes in our valuation allowance on our deferred tax balance and changes in our unrecognized tax benefits, our effective tax rates in fiscal 2017, 2016 and 2015 are not meaningful metrics, as our income tax amounts were not directly correlated to the amount of our pretax income for those periods. Valuation Allowance A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically based on the more-likely-than-not realization threshold criterion. In the assessment for a valuation allowance, appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, the Company's experience with loss carryforwards not expiring unused and tax planning alternatives. Based upon an evaluation of all available evidence, the most important of which was recent losses incurred, we established a valuation allowance for substantially all of our deferred tax assets during our fiscal 2008. We have continued to evaluate the need for our valuation allowance by assessing all positive and negative evidence indicating our ability to realize our deferred tax assets. In these evaluations, we gave more significant weight to objective evidence, such as our actual financial condition and results of operations, as compared to subjective evidence. The positive evidence we considered as part of our analysis during the fourth quarter of 2015 included our recent trends in cumulative income from continuing operations, along with our growth in backlog units, closings and ASP for both backlog and actual closings. Our levels of backlog (in both units and dollars) supported our expectations of future profitability. The negative evidence we considered as part of our analysis centered around significant quarterly losses that the Company incurred through the quarter ended March 31, 2013, which rolled-off our 36-month cumulative income position during the first half of our fiscal 2016. The removal of these losses from our analysis provided a significant increase in our recent earnings trend and, coupled with our actual improvements in continuing operations, pointed to an objectively verifiable increase in our earnings profile. Therefore, during the quarter ended September 30, 2015, we concluded that it was more likely than not that a substantial amount of our deferred tax assets would be realized. This conclusion was based on an evaluation of all relevant evidence, both positive and negative, as discussed above, as well as a generally improving housing market and stabilization in broader economic conditions. The principal positive evidence that led us to this determination was our improved pre-tax earnings profile, particularly over our most recent fiscal years. Given the remaining recovery period for the majority of our deferred tax assets, our recent historical operating results continued to support the realization of a significant amount of our deferred tax assets. The valuation allowance on our deferred tax assets was $57.7 million as of September 30, 2015. The remaining valuation allowance was balanced between various federal and state attributes for which the Company had concluded it is not more likely than not that these attributes would be realized at that time. During our fiscal 2016, we contemplated various tax planning strategies based on our operations profile. This planning resulted in a restructuring effort immediately following the close of our fiscal 2016, where we executed certain tax elections and a number of changes to the legal forms of our operating entities, which significantly reduced our income profile in certain state jurisdictions going forward. The restructuring reduced our effective tax rate in fiscal 2017 to an amount that is in-line with our peers, through a significant reduction in our state effective tax rate. In addition, the restructure provides cash tax savings in various jurisdictions where we no longer have significant state loss carryforwards available. In conjunction with the restructure, we also evaluated our ability to realize certain state components of our deferred tax asset. Given this change, we evaluated both positive and negative evidence, including consideration of a change in expected future taxable earnings in the separate state jurisdictions that will be impacted by the restructuring. Based on those evaluations, we recorded an additional $8.6 million in valuation allowance during the quarter ended September 30, 2016 for state deferred tax assets we concluded are no longer more likely than not to be realized. In fiscal 2017, we recorded additional impacts related to our tax elections and changes in legal form as further determinations were made throughout the year. These impacts included changes to our apportionment and deferred balances by jurisdiction, as well as changes to our uncertain tax positions. As a result, we recorded a decrease of $3.5 million in valuation allowance during the quarter ended September 30, 2017 for changes in our expected state net operating loss utilization due to changes in our uncertain tax positions. During our fiscal 2017, we continued to monitor the various factors that led to our determination of the realization of a significant portion of our deferred tax assets during our fiscal 2015. Our fiscal 2017 income from continuing operations continues to reflect the positive trends of recent years, along with increases in closings and ASP from closings. We continue to maintain levels of backlog and community count to support our expectations of future profitability. During the current fiscal year, the Company continued its plan to repurchase portions of its outstanding debt, which altered its debt maturity and interest rate profile through new issuances and redemptions of prior issuances. The change in the Company's debt portfolio will create future interest expense savings that further support its estimates of future profitability, and may result in the realization of additional deferred tax assets in the future. As of September 30, 2017, the Company will have to cumulatively generate approximately $721.9 million in pre-tax income over the course of its carryforward period to realize its deferred tax assets prior to their expiration, which, as previously discussed, is the Company's fiscal 2037. The valuation allowance of $65.2 million as of September 30, 2017 was balanced between various federal and state attributes for which the Company has concluded it is not more likely than not that these attributes would be realized at that time. Unrecognized Tax Benefits A reconciliation of our unrecognized tax benefits is as follows for the beginning and end of each period presented:
| Fiscal Year Ended September 30,
(In thousands) | 2017 |  | 2016 |  | 2015
Balance at beginning of year | $ | 4,541 |  |  | $ | 4,721 |  |  | $ | 4,615 |
Additions for (reductions in) tax positions related to current year | 61 |  |  | (180 | ) |  | 252 |
Additions for tax positions related to prior years | 2,611 |  |  | — |  |  | — |
Reductions in tax positions of prior years | (2,273 | ) |  | — |  |  | (10 | )
Lapse of statute of limitations | (1,136 | ) |  | — |  |  | (136 | )
Balance at end of year | $ | 3,804 |  |  | $ | 4,541 |  |  | $ | 4,721 |
If we were to recognize our $3.8 million of gross unrecognized tax benefits remaining as of September 30, 2017, substantially all would impact our effective tax rate. Additionally, we had $1.4 thousand and $339.5 thousand, respectively, of accrued interest and penalties as of September 30, 2017 and 2016. Our income tax expense includes tax-related interest. In the normal course of business, we are subject to audits by federal and state tax authorities regarding various tax liabilities. Certain state income tax returns for various fiscal years are under routine examination. The statute of limitations for our major tax jurisdictions remains open for examination for fiscal years 2007 and subsequent years. As of September 30, 2017, it is reasonably possible that $17.0 thousand of our uncertain tax positions will reverse within the next twelve months.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration