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Contingencies | 9 Months Ended
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Jun. 30, 2019
Commitments and Contingencies Disclosure [Abstract] |
Contingencies | Contingencies Beazer Homes and certain of its subsidiaries have been and continue to be named as defendants in various construction defect claims, complaints, and other legal actions. The Company is subject to the possibility of loss contingencies related to these defects as well as others arising from its business. In determining loss contingencies, we consider the likelihood of loss and our ability to reasonably estimate the amount of such loss. An estimated loss is recorded when it is considered probable that a liability has been incurred and the amount of loss can be reasonably estimated. Warranty Reserves We currently provide a limited warranty ranging from one to two years covering workmanship and materials per our defined quality standards. In addition, we provide a limited warranty for up to ten years covering only certain defined structural element failures. Our homebuilding work is performed by subcontractors who typically must agree to indemnify us with regard to their work and provide certificates of insurance demonstrating that they have met our insurance requirements and have named us as an additional insured under their policies. Therefore, many claims relating to workmanship and materials that result in warranty spending are the primary responsibility of these subcontractors. In addition, we maintain insurance coverage related to our construction efforts that can result in recoveries of warranty and construction defect costs above certain specified limits. Warranty reserves are included in other liabilities within the condensed consolidated balance sheets, and the provision for warranty accruals is included in home construction expenses in the condensed consolidated statements of operations. Reserves covering anticipated warranty expenses are recorded for each home closed. Management assesses the adequacy of warranty reserves each reporting period based on historical experience and the expected costs to remediate potential claims. Our review includes a quarterly analysis of the historical data and trends in warranty expense by division. Such analysis considers market-specific factors such as warranty experience, the number of home closings, the prices of homes, product mix, and other data in estimating warranty reserves. In addition, the analysis also contemplates the existence of any non-recurring or community-specific warranty-related matters that might not be included in historical data and trends. While estimated warranty liabilities are adjusted each reporting period based on the results of our quarterly analyses, we may not accurately predict actual warranty costs, which could lead to significant changes in the reserve. Changes in warranty reserves are as follows for the periods presented:
| Three Months Ended |  | Nine Months Ended
| June 30, |  | June 30,
in thousands | 2019 |  | 2018 |  | 2019 |  | 2018
Balance at beginning of period | $ | 12,585 |  |  | $ | 14,583 |  |  | $ | 15,331 |  |  | $ | 18,091 |
Accruals for warranties issued (a) | 2,650 |  |  | 3,254 |  |  | 7,504 |  |  | 10,758 |
Changes in liability related to warranties existing in prior periods | 157 |  |  | 711 |  |  | (1,811 | ) |  | (2,574 | )
Payments made | (3,155 | ) |  | (3,258 | ) |  | (8,787 | ) |  | (10,985 | )
Balance at end of period | $ | 12,237 |  |  | $ | 15,290 |  |  | $ | 12,237 |  |  | $ | 15,290 |
(a) Accruals for warranties issued are a function of the number of home closings in the period, the selling prices of the homes closed, and the rates of accrual per home estimated as a percentage of the selling price of the home. Insurance Recoveries The Company has insurance policies that provide for the reimbursement of certain warranty costs incurred above specified thresholds for each period covered. Amounts recorded for anticipated insurance recoveries are reflected within the condensed consolidated statements of income as a reduction of home construction expenses. Amounts not yet received from our insurer are recorded on a gross basis, without any reduction for the associated warranty expense, within accounts receivable on our condensed consolidated balance sheets. Litigation In the normal course of business, we are subject to various lawsuits. We cannot predict or determine the timing or final outcome of these lawsuits or the effect that any adverse findings or determinations in pending lawsuits may have on us. In addition, an estimate of possible loss or range of loss, if any, cannot presently be made with respect to certain of these pending matters. An unfavorable determination in any of the pending lawsuits could result in the payment by us of substantial monetary damages that may not be fully covered by insurance. Further, the legal costs associated with the lawsuits and the amount of time required to be spent by management and our Board of Directors on these matters, even if we are ultimately successful, could have a material adverse effect on our financial condition, results of operations, or cash flows. Strougo v. Beazer Homes USA, Inc., et al. During the quarter ended March 31, 2019, we recognized inventory impairment charges related to 15 communities in California, all of which were previously land held for future development assets. Related to these inventory impairment charges, on June 5, 2019, an alleged stockholder filed a putative class action lawsuit against Beazer Homes USA, Inc., and certain of our current officers in the U.S. District Court for the Southern District of New York. The proposed class consists of all persons and entities that acquired our securities between August 1, 2014 and May 2, 2019. The complaint alleges violations of the federal securities laws, including, among other things, that we made materially false and/or misleading statements and failed to disclose material adverse facts about our business, operations, and prospects during the proposed Class Period. The plaintiff seeks compensatory damages and attorneys’ fees and costs but does not specify the amount. We believe the allegations are without merit and intend to vigorously defend against the claims. However, the outcome of this legal proceeding cannot be predicted with certainty. Gusinsky Revocable Trust v. Beazer Homes USA, Inc., et al. On June 25, 2019 an alleged stockholder filed a putative class action lawsuit against Beazer Homes USA, Inc., and certain of our current officers and our Board of Directors in the U.S. District Court for the Northern District of Georgia also relating to the above referenced inventory impairment charges. The proposed class consists of all persons and entities that acquired our securities between August 1, 2014 and June 25, 2019. The complaint alleges violations of the federal securities laws, including, among other things, that we made materially false and/or misleading statements and failed to disclose material adverse facts about our business, operations, and prospects during the proposed Class Period, as well as a breach of fiduciary duties by our Board of Directors. The plaintiff seeks compensatory damages and attorneys’ fees and costs but does not specify the amount. We believe the allegations are without merit and intend to vigorously defend against the claims. However, the outcome of this legal proceeding cannot be predicted with certainty. Based on the limited nature of the plaintiffs' allegations, the early stage of the proceedings, the lack of discovery and because significant legal issues have yet to be raised and decided by the courts, we have determined that, at present, the amount of any possible loss or range of possible loss in connection with either of the above lawsuits is not reasonably estimable. Other Matters We and certain of our subsidiaries have been named as defendants in various claims, complaints, and other legal actions, most relating to construction defects, moisture intrusion, and product liability. Certain of the liabilities resulting from these actions are covered in whole or in part by insurance. In our opinion, based on our current assessment, the ultimate resolution of these matters will not have a material adverse effect on our financial condition, results of operations, or cash flows. We have an accrual of $3.2 million and $3.7 million in other liabilities on our condensed consolidated balance sheets related to litigation and other matters, excluding warranty, as of June 30, 2019 and September 30, 2018, respectively. We had outstanding letters of credit and performance bonds of approximately $49.2 million and $286.5 million, respectively, as of June 30, 2019, related principally to our obligations to local governments to construct roads and other improvements in various developments.

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