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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________________________________________
FORM 10-Q
_____________________________________________________________

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2022
or

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-12822
_____________________________________________________________
BEAZER HOMES USA, INC.
(Exact name of registrant as specified in its charter)
_____________________________________________________________

Delaware |  | 58-2086934
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

1000 Abernathy Road, Suite 260, Atlanta, Georgia |  | 30328
(Address of principal executive offices) |  | (Zip Code)

(770) 829-3700
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:

Title of each class | Trading Symbol(s) | Name of each exchange on which registered
Common Stock, $0.001 par value | BZH | New York Stock Exchange

_____________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes ☒ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer | ☐ | Accelerated filer | ☒ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | Emerging growth company | ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ |

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Number of shares of common stock outstanding a s of April 25, 2022: 31,457,627

Table of Contents
BEAZER HOMES USA, INC.
TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION | 2
Item 1. Financial Statements | 2
Condensed Consolidated Balance Sheets as of March 31, 2022 and September 30, 2021 (Unaudited) | 2
Condensed Consolidated Statements of Operations for the three and six months ended March 31, 2022 and 2021 (Unaudited) | 3
Condensed Consolidated Statements of Stockholders' Equity for the three and six months ended March 31, 2022 and 2021 (Unaudited) | 4
Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 2022 and 2021 (Unaudited) | 6
Notes to Condensed Consolidated Financial Statements | 7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 28
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 44
Item 4. Controls and Procedures | 44
Item 5. Other Information | 45
PART II. OTHER INFORMATION | 45
Item 1. Legal Proceedings | 45
Item 1A. Risk Factors | 45
Item 6. Exhibits | 45
SIGNATURES | 46

1

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BEAZER HOMES USA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

in thousands (except share and per share data) | March 31, 2022 |  | September 30, 2021
ASSETS |  |  |
Cash and cash equivalents | $ | 163,905 |  |  | $ | 246,715 |
Restricted cash | 33,343 |  |  | 27,428 |
Accounts receivable (net of allowance of $290 and $290, respectively) | 24,289 |  |  | 25,685 |
Income tax receivable | 9,866 |  |  | 9,929 |
Owned inventory | 1,676,972 |  |  | 1,501,602 |
Investments in unconsolidated entities | 4,667 |  |  | 4,464 |
Deferred tax assets, net | 190,876 |  |  | 204,766 |
Property and equipment, net | 23,168 |  |  | 22,885 |
Operating lease right-of-use assets | 11,301 |  |  | 12,344 |
Goodwill | 11,376 |  |  | 11,376 |
Other assets | 10,241 |  |  | 11,616 |
Total assets | $ | 2,160,004 |  |  | $ | 2,078,810 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |
Trade accounts payable | $ | 147,257 |  |  | $ | 133,391 |
Operating lease liabilities | 12,912 |  |  | 14,154 |
Other liabilities | 147,583 |  |  | 152,351 |
Total debt (net of debt issuance costs of $8,151 and $8,983, respectively) | 1,049,895 |  |  | 1,054,030 |
Total liabilities | 1,357,647 |  |  | 1,353,926 |
Stockholders’ equity: |  |  |
Preferred stock (par value $0.01 per share, 5,000,000 shares authorized, no shares issued) | — |  |  | — |
Common stock (par value $0.001 per share, 63,000,000 shares authorized, 31,457,627 issued and outstanding and 31,294,198 issued and outstanding, respectively) | 31 |  |  | 31 |
Paid-in capital | 864,074 |  |  | 866,158 |
Accumulated deficit | (61,748) |  |  | (141,305) |
Total stockholders’ equity | 802,357 |  |  | 724,884 |
Total liabilities and stockholders’ equity | $ | 2,160,004 |  |  | $ | 2,078,810 |

See accompanying notes to condensed consolidated financial statements.
2

Table of Contents
BEAZER HOMES USA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

| Three Months Ended |  | Six Months Ended
| March 31, |  | March 31,
in thousands (except per share data) | 2022 |  | 2021 |  | 2022 |  | 2021
Total revenue | $ | 508,506 |  |  | $ | 549,889 |  |  | $ | 962,655 |  |  | $ | 978,428 |
Home construction and land sales expenses | 387,821 |  |  | 451,963 |  |  | 744,570 |  |  | 804,744 |
Inventory impairments and abandonments | 935 |  |  | — |  |  | 935 |  |  | 465 |
Gross profit | 119,750 |  |  | 97,926 |  |  | 217,150 |  |  | 173,219 |
Commissions | 16,578 |  |  | 20,884 |  |  | 32,391 |  |  | 37,391 |
General and administrative expenses | 45,530 |  |  | 39,741 |  |  | 83,297 |  |  | 77,717 |
Depreciation and amortization | 3,031 |  |  | 3,683 |  |  | 5,912 |  |  | 6,805 |
Operating income | 54,611 |  |  | 33,618 |  |  | 95,550 |  |  | 51,306 |
Equity in income of unconsolidated entities | 163 |  |  | 186 |  |  | 451 |  |  | 111 |
Loss on extinguishment of debt, net | (164) |  |  | (563) |  |  | (164) |  |  | (563) |
Other income (expense), net | 140 |  |  | (894) |  |  | 271 |  |  | (2,346) |
Income from continuing operations before income taxes | 54,750 |  |  | 32,347 |  |  | 96,108 |  |  | 48,508 |
Expense from income taxes | 10,072 |  |  | 7,704 |  |  | 16,535 |  |  | 11,829 |
Income from continuing operations | 44,678 |  |  | 24,643 |  |  | 79,573 |  |  | 36,679 |
Loss from discontinued operations, net of tax | (6) |  |  | (115) |  |  | (16) |  |  | (154) |
Net income | $ | 44,672 |  |  | $ | 24,528 |  |  | $ | 79,557 |  |  | $ | 36,525 |
Weighted-average number of shares: |  |  |  |  |  |  |
Basic | 30,594 |  |  | 29,953 |  |  | 30,464 |  |  | 29,862 |
Diluted | 30,823 |  |  | 30,215 |  |  | 30,772 |  |  | 30,150 |
Basic income (loss) per share: |  |  |  |  |  |  |
Continuing operations | $ | 1.46 |  |  | $ | 0.82 |  |  | $ | 2.61 |  |  | $ | 1.23 |
Discontinued operations | — |  |  | — |  |  | — |  |  | (0.01) |
Total | $ | 1.46 |  |  | $ | 0.82 |  |  | $ | 2.61 |  |  | $ | 1.22 |
Diluted income (loss) per share: |  |  |  |  |  |  |
Continuing operations | $ | 1.45 |  |  | $ | 0.81 |  |  | $ | 2.59 |  |  | $ | 1.22 |
Discontinued operations | — |  |  | — |  |  | — |  |  | (0.01) |
Total | $ | 1.45 |  |  | $ | 0.81 |  |  | $ | 2.59 |  |  | $ | 1.21 |

See accompanying notes to condensed consolidated financial statements.
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BEAZER HOMES USA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)

| Three Months Ended March 31, 2022
| Common Stock |  | Paid-in Capital |  | Accumulated Deficit |  |
in thousands | Shares |  | Amount |  |  |  | Total
Balance as of December 31, 2021 | 31,460 |  |  | $ | 31 |  |  | $ | 861,648 |  |  | $ | (106,420) |  |  | $ | 755,259 |
Net income and comprehensive income | — |  |  | — |  |  |  |  | 44,672 |  |  | 44,672 |
Stock-based compensation expense | 1 |  |  | — |  |  | 2,424 |  |  | — |  |  | 2,424 |
Stock option exercises | — |  |  | — |  |  | 4 |  |  | — |  |  | 4 |
Forfeiture and other settlements of restricted stock | (3) |  |  | — |  |  | — |  |  | — |  |  | — |
Common stock redeemed for tax liability | — |  |  | — |  |  | (2) |  |  | — |  |  | (2) |
Balance as of March 31, 2022 | 31,458 |  |  | $ | 31 |  |  | $ | 864,074 |  |  | $ | (61,748) |  |  | $ | 802,357 |

| Six Months Ended March 31, 2022
| Common Stock |  | Paid-in Capital |  | Accumulated Deficit |  |
in thousands | Shares |  | Amount |  |  |  | Total
Balance as of September 30, 2021 | 31,294 |  |  | $ | 31 |  |  | $ | 866,158 |  |  | $ | (141,305) |  |  | $ | 724,884 |
Net income and comprehensive income | — |  |  | — |  |  | — |  |  | 79,557 |  |  | 79,557 |
Stock-based compensation expense | — |  |  | — |  |  | 4,532 |  |  | — |  |  | 4,532 |
Stock option exercises | 1 |  |  | — |  |  | 4 |  |  | — |  |  | 4 |
Shares issued under employee stock plans, net | 517 |  |  | — |  |  | — |  |  | — |  |  | — |
Forfeiture and other settlements of restricted stock | (47) |  |  | — |  |  | — |  |  | — |  |  | — |
Common stock redeemed for tax liability | (307) |  |  | — |  |  | (6,620) |  |  | — |  |  | (6,620) |
Balance as of March 31, 2022 | 31,458 |  |  | $ | 31 |  |  | $ | 864,074 |  |  | $ | (61,748) |  |  | $ | 802,357 |

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BEAZER HOMES USA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)

| Three Months Ended March 31, 2021
| Common Stock |  | Paid-in Capital |  | Accumulated Deficit |  |
in thousands | Shares |  | Amount |  |  |  | Total
Balance as of December 31, 2020 | 31,254 |  |  | $ | 31 |  |  | $ | 857,360 |  |  | $ | (251,329) |  |  | $ | 606,062 |
Net income and comprehensive income | — |  |  | — |  |  | — |  |  | 24,528 |  |  | 24,528 |
Stock-based compensation expense | — |  |  | — |  |  | 2,549 |  |  | — |  |  | 2,549 |
Stock option exercises | 51 |  |  | — |  |  | 628 |  |  | — |  |  | 628 |
Forfeiture and other settlements of restricted stock | (16) |  |  | — |  |  | — |  |  | — |  |  | — |
Balance as of March 31, 2021 | 31,289 |  |  | $ | 31 |  |  | $ | 860,537 |  |  | $ | (226,801) |  |  | $ | 633,767 |

| Six Months Ended March 31, 2021
| Common Stock |  | Paid-in Capital |  | Accumulated Deficit |  |
in thousands | Shares |  | Amount |  |  |  | Total
Balance as of September 30, 2020 | 31,012 |  |  | $ | 31 |  |  | $ | 856,466 |  |  | $ | (263,326) |  |  | $ | 593,171 |
Net income and comprehensive income | — |  |  | — |  |  | — |  |  | 36,525 |  |  | 36,525 |
Stock-based compensation expense | — |  |  | — |  |  | 6,060 |  |  | — |  |  | 6,060 |
Stock option exercises | 168 |  |  | — |  |  | 631 |  |  | — |  |  | 631 |
Shares issued under employee stock plans, net | 411 |  |  | — |  |  | — |  |  | — |  |  | — |
Forfeiture and other settlements of restricted stock | (16) |  |  | — |  |  | — |  |  | — |  |  | — |
Common stock redeemed for tax liability | (286) |  |  | — |  |  | (2,620) |  |  | — |  |  | (2,620) |
Balance as of March 31, 2021 | 31,289 |  |  | $ | 31 |  |  | $ | 860,537 |  |  | $ | (226,801) |  |  | $ | 633,767 |

See accompanying notes to condensed consolidated financial statements.
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BEAZER HOMES USA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

| Six Months Ended
| March 31,
in thousands | 2022 |  | 2021
Cash flows from operating activities: |  |  |
Net income | 79,557 |  |  | $ | 36,525 |
Adjustments to reconcile net income to net cash used in operating activities: |  |  |
Depreciation and amortization | 5,912 |  |  | 6,805 |
Stock-based compensation expense | 4,532 |  |  | 6,060 |
Inventory impairments and abandonments | 935 |  |  | 465 |
Deferred and other income tax expense | 16,531 |  |  | 11,786 |
Gain on sale of fixed assets | (159) |  |  | (170) |
Change in allowance for doubtful accounts | — |  |  | (60) |
Equity in income of unconsolidated entities | (451) |  |  | (111) |
Cash distributions of income from unconsolidated entities | 248 |  |  | — |
Loss on extinguishment of debt, net | 164 |  |  | 563 |
Changes in operating assets and liabilities: |  |  |
Decrease in accounts receivable | 1,396 |  |  | 2,719 |
Decrease in income tax receivable | — |  |  | 49 |
Increase in inventory | (174,225) |  |  | (31,231) |
Decrease in other assets | 1,109 |  |  | 1,327 |
Increase in trade accounts payable | 13,866 |  |  | 18,440 |
Decrease in other liabilities | (7,545) |  |  | (3,028) |
Net cash (used in) provided by operating activities | (58,130) |  |  | 50,139 |
Cash flows from investing activities: |  |  |
Capital expenditures | (6,195) |  |  | (6,514) |
Proceeds from sale of fixed assets | 159 |  |  | 170 |
Net cash used in investing activities | (6,036) |  |  | (6,344) |
Cash flows from financing activities: |  |  |
Repayment of debt | (6,113) |  |  | (10,212) |
Debt issuance costs | — |  |  | (427) |
Tax payments for stock-based compensation awards | (6,620) |  |  | (2,620) |
Stock option exercises | 4 |  |  | 631 |
Net cash used in financing activities | (12,729) |  |  | (12,628) |
Net (decrease) increase in cash, cash equivalents, and restricted cash | (76,895) |  |  | 31,167 |
Cash, cash equivalents, and restricted cash at beginning of period | 274,143 |  |  | 342,528 |
Cash, cash equivalents, and restricted cash at end of period | $ | 197,248 |  |  | $ | 373,695 |

See accompanying notes to condensed consolidated financial statements.
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BEAZER HOMES USA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Description of Business
Beazer Homes USA, Inc. (“we,” “us,” “our,” “Beazer,” “Beazer Homes” and the “Company”) is a geographically diversified homebuilder with active operations in 13 states within three geographic regions in the United States: the West, East, and Southeast.
Our homes are designed to appeal to homeowners at different price points across various demographic segments and are generally offered for sale in advance of their construction. Our objective is to provide our customers with homes that incorporate exceptional value and quality, while seeking to maximize our return on invested capital over the course of a housing cycle.
For an additional description of our business, refer to Item 1 within our Annual Report on Form 10-K for the fiscal year ended September 30, 2021 (2021 Annual Report).
(2) Basis of Presentation and Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. The unaudited condensed consolidated financial state ments do not include all of the information and disclosures required by GAAP for complete financial statements. As such, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 2021 Annual Report. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation have been included in the accompanying unaudited condensed consolidated financial statements. The results of the Company's consolidated operations presented herein for the three and six months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full fiscal year due to seasonal variations in our operations and other factors.
Basis of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of Beazer Homes USA, Inc. and its consolidated subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. Our net income is equivalent to our comprehensive income, so we have not presented a separate statement of comprehensive income.
In the past, we have discontinued homebu ilding operations in various markets. Results from certain of these exited markets are reported as discontinued operations in the accompanying unaudited condensed consolidated statements of operations for all periods presented (see Note 16 for a further discussion of our discontinued operations).
Our fiscal year 2022 began on October 1, 2021 and ends on September 30, 2022. Our fiscal year 2021 began on October 1, 2020 and ended on September 30, 2021.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make informed estimates and judgments that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Accordingly, actual results could differ from these estimates.
Share Repurchase Program
During the first quarter of fiscal 2019, the Company's Board of Directors approved a share repurchase program that authorizes the Company to repurchase up to $50.0 million of its outstanding common stock. As part of this program, the Company repurchased common stock during fiscal 2019 and 2020 through open market transactions, 10b5-1 plans, and accelerated share repurchase (ASR) agreements. All shares have been retired upon repurchase. The aggregate reduction to stockholders’ equity related to share repurchases duri ng the fiscal year ended September 30, 2020 and September 30, 2019 was $3.3 million and $34.6 million, respectively. No share repurchases were made during fiscal year 2021 or the six months ended March 31, 2022. As of March 31, 2022, the remaining availability of the share repurchase program was $12.0 million.
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Revenue Recognition
We recognize revenue upon the transfer of promised goods to our customers in an amount that reflects the consideration to which we expect to be entitled by applying the following five-step process specified in ASC Topic 606, Revenue from Contracts with Customers.
•Identify the contract(s) with a customer
•Identify the performance obligations
•Determine the transaction price
•Allocate the transaction price
•Recognize revenue when the performance obligations are met
The following table presents our total revenue disaggregated by revenue stream:

| Three Months Ended |  | Six Months Ended
| March 31, |  | March 31,
in thousands | 2022 |  | 2021 |  | 2022 |  | 2021
Homebuilding revenue | $ | 507,208 |  |  | $ | 547,417 |  |  | $ | 953,937 |  |  | $ | 971,646 |
Land sales and other revenue | 1,298 |  |  | 2,472 |  |  | 8,718 |  |  | 6,782 |
Total revenue (a) | $ | 508,506 |  |  | $ | 549,889 |  |  | $ | 962,655 |  |  | $ | 978,428 |

(a) Please see Note 15 for total revenue disaggregated by reportable segment.
Homebuilding revenue
Homebuilding revenue is reported net of any discounts and incentives and is generally recognized when title to and possession of the home are transferred to the buyer at the closing date. The performance obligation to deliver the home is generally satisfied in less than one year from the original contract date. Home sale contract assets consist of cash from home closings held by title companies in escrow for our benefit, typically for less than five days, and are considered accounts receivable. Contract liabilities include customer deposits related to sold but undelivered homes and to taled $38.4 million and $28.5 million as of March 31, 2022 and September 30, 2021, respectively. Of the customer liabilities outstanding as of September 30, 2021, $7.5 million and $17.7 million was recognized in revenue during the three and six months ended March 31, 2022 upon closing of the related homes.
Land sales and other revenue
Land sales revenue relates to land that does not fit within our homebuilding programs and strategic plans. Land sales typically require cash consideration on the closing date, which is generally when performance obligations are satisfied. We also provide title examinations for our homebuyers in certain markets. Revenues associated with our title operations are recognized as closing services are rendered and title insurance policies are issued, both of which generally occur as each home is closed.
Recent Accounting Pronouncements
Reference Rate Reform. In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04). ASU 2020-04 provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. This guidance is effective beginning on March 12, 2020, and all entities may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the effect of adopting the new guidance on its consolidated financial statements and related disclosures.
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(3) Supplemental Cash Flow Information
The following table presents supplemental disclosure of non-cash and cash activity as well as a reconciliation of total cash balances between the condensed consolidated balance sheets and condensed consolidated statements of cash flows for the periods presented:

| Six Months Ended
| March 31,
in thousands | 2022 |  | 2021
Supplemental disclosure of non-cash activity: |  |  |
Increase in operating lease right-of-use assets (a) | $ | 626 |  |  | $ | 1,453 |
Increase in operating lease liabilities (a) | 626 |  |  | 1,453 |
Supplemental disclosure of cash activity: |  |  |
Interest payments | $ | 34,649 |  |  | $ | 37,412 |
Income tax payments | 2,578 |  |  | 143 |
Tax refunds received | — |  |  | 49 |
Reconciliation of cash, cash equivalents, and restricted cash: |  |  |
Cash and cash equivalents | $ | 163,905 |  |  | $ | 355,533 |
Restricted cash | 33,343 |  |  | 18,162 |
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows | $ | 197,248 |  |  | $ | 373,695 |

(a) Represents leases renewed or additional leases commenced during the six months ended March 31, 2022 and March 31, 2021.
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(4) Investments in Unconsolidated Entities
Unconsolidated Entities
As of March 31, 2022, the Company participated in certain joint ventures and had investments in unconsolidated entities in which it had less than a controlling interest. The following table presents the Company's investment in these unconsolidated entities as well as the total equity and outstanding borrowings of these unconsolidated entities as of March 31, 2022 and September 30, 2021:

in thousands | March 31, 2022 |  | September 30, 2021
Investment in unconsolidated entities | $ | 4,667 |  |  | $ | 4,464 |
Total equity of unconsolidated entities | 7,491 |  |  | 7,316 |
Total outstanding borrowings of unconsolidated entities | 15,549 |  |  | 12,708 |

Equity in income from unconsolidated entity activities included in income from continuing operations is as follows for the periods presented:

| Three Months Ended |  | Six Months Ended
| March 31, |  | March 31,
in thousands | 2022 |  | 2021 |  | 2022 |  | 2021
Equity in income of unconsolidated entities | $ | 163 |  |  | $ | 186 |  |  | $ | 451 |  |  | $ | 111 |

For the six months ended March 31, 2022 and 2021, ther e were no impairments related to investments in unconsolidated entities.
Guarantees
Historically, the Company's joint ventures typically obtained secured acquisition, development, and construction financing. In addition, the Company and its joint venture partners provided varying levels of guarantees of debt and other debt-related obligations for these unconsolidated entities. However, as of March 31, 2022 and September 30, 2021, the Company had no outstanding guarantees or other debt-related obligations related to our investments in unconsolidated entities.
The Company and its joint venture partners generally provide unsecured environmental indemnities to land development joint venture project lenders. These indemnities obligate the Company to reimburse the project lenders for claims related to environmental matters for which they are held responsible. During the three and six months ended March 31, 2022 and 2021, the Company was not required to make any payments related to environmental indemnities.
In assessing the need to record a liability for these guarantees, the Company considers its historical experience in being required to perform under the guarantees, the fair value of the collateral underlying these guarantees, and the financial condition of the applicable unconsolidated entities. In addition, the fair value of the collateral of unconsolidated entities is monitored to ensure that the related borrowings do not exceed the specified percentage of the value of the property securing the borrowings. As of March 31, 2022, no liability was recorded for the contingent aspects of any guarantees that were determined to be reasonably possible but not probable.
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(5) Owned Inventory
The components of our owned inventory are as follows as of March 31, 2022 and September 30, 2021:

in thousands | March 31, 2022 |  | September 30, 2021
Homes under construction | $ | 838,139 |  |  | $ | 648,283 |
Land under development | 619,385 |  |  | 648,404 |
Land held for future development | 19,879 |  |  | 19,879 |
Land held for sale | 14,167 |  |  | 9,179 |
Capitalized interest | 112,686 |  |  | 106,985 |
Model homes | 72,716 |  |  | 68,872 |
Total owned inventory | $ | 1,676,972 |  |  | $ | 1,501,602 |

Homes under construction include homes substantially finished and ready for delivery and homes in various stages of construction, including costs of the underlying lot, direct construction costs and capitalized indirect costs. As of March 31, 2022, we had 3,568 homes under construction, including 775 spec homes totaling $157.2 million (725 in-process spec homes totaling $139.0 million, and 50 finished spec homes totaling $18.2 million). As of September 30, 2021, we had 2,912 homes under construction, including 576 spec homes totaling $116.4 million (542 in-process spec units totaling $105.2 million, and 34 finished spec units totaling $11.2 million).
Land under development consists principally of land acquisition, land development and other common costs. These land related costs are allocated to individual lots on a pro-rata basis, and the lot costs are transferred to homes under construction when home construction begins for the respective lots. Certain of the fully developed lots in this category are reserved by a customer deposit or sales contract.
Land held for future development consists of communities for which construction and development activities are expected to occur in the future or have been idled and are stated at cost unless facts and circumstances indicate that the carrying value of the assets may not be recoverable. All applicable carrying costs, such as interest and real estate taxes, are expensed as incurred.
Land held for sale includes land and lots that do not fit within our homebuilding programs and strategic plans in certain markets, and land is classified as held for sale once certain criteria are met (refer to Note 2 to the audited consolidated financial statements within our 2021 Annual Report). These assets are recorded at the lower of the carrying value or fair value less costs to sell (net realizable value).
The amount of interest we are able to capitalize depends on our qualified inventory balance, which considers the status of our inventory holdings. Our qualified inventory balance includes the majority of our homes under construction and land under development but excludes land held for future development and land held for sale (see Note 6 for additional information on capitalized interest).

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Total owned inventory by reportable segment is presented in the table below as of March 31, 2022 and September 30, 2021:

in thousands | Projects in Progress (a) |  | Land Held for Future Development |  | Land Held for Sale |  | Total Owned Inventory
March 31, 2022 |  |  |  |  |  |  |
West | $ | 876,616 |  |  | $ | 3,483 |  |  | $ | 11,726 |  |  | $ | 891,825 |
East | 294,345 |  |  | 10,888 |  |  | — |  |  | 305,233 |
Southeast | 301,079 |  |  | 5,508 |  |  | 2,441 |  |  | 309,028 |
Corporate and unallocated (b) | 170,886 |  |  | — |  |  | — |  |  | 170,886 |
Total | $ | 1,642,926 |  |  | $ | 19,879 |  |  | $ | 14,167 |  |  | $ | 1,676,972 |
September 30, 2021 |  |  |  |  |  |  |
West | $ | 781,036 |  |  | $ | 3,483 |  |  | $ | 4,478 |  |  | $ | 788,997 |
East | 264,991 |  |  | 10,888 |  |  | 584 |  |  | 276,463 |
Southeast | 269,738 |  |  | 5,508 |  |  | 4,117 |  |  | 279,363 |
Corporate and unallocated (b) | 156,779 |  |  | — |  |  | — |  |  | 156,779 |
Total | $ | 1,472,544 |  |  | $ | 19,879 |  |  | $ | 9,179 |  |  | $ | 1,501,602 |

(a) Projects in progress include homes under construction, land under development, capitalized interest, and model home categories from the preceding table.
(b) Projects in progress amount includes capitalized interest and indirect costs that are maintained within our Corporate and unallocated segment.
Inventory Impairments
Inventory assets are assessed for recoverability periodically in accordance with the policies described in Notes 2 and 5 to the audited consolidated financial statements within our 2021 Annual Report.
The following table presents, by reportable segment, our total impairment and abandonment charges for the periods presented:

| Three Months Ended March 31, |  | Six Months Ended March 31,
in thousands | 2022 |  | 2021 |  | 2022 |  | 2021
Land Held for Sale: |  |  |  |  |  |  |
West | $ | 440 |  |  | $ | — |  |  | $ | 440 |  |  | $ | — |
Total impairment charges on land held for sale | $ | 440 |  |  | $ | — |  |  | $ | 440 |  |  | $ | — |
Abandonments: |  |  |  |  |  |  |
West | $ | 12 |  |  | $ | — |  |  | $ | 12 |  |  | $ | — |
East | — |  |  |  |  | — |  |  | 465 |
Southeast | 483 |  |  | — |  |  | 483 |  |  | — |
Total abandonments charges | $ | 495 |  |  | $ | — |  |  | $ | 495 |  |  | $ | 465 |
Total impairment and abandonment charges | $ | 935 |  |  | $ | — |  |  | $ | 935 |  |  | $ | 465 |

Projects in Progress Impairments
Projects in progress inventory includes homes under construction and land under development grouped together as communities. Projects in progress are stated at cost unless facts and circumstances indicate that the carrying value of the assets may not be recoverable.
We assess our projects in progress inventory for indicators of impairment at the community level on a quarterly basis. If indicators of impairment are present for a community with more than ten homes remaining to close, we perform a recoverability test by comparing the expected undiscounted cash flows for the community to its carrying value. If the aggregate undiscounted cash flows are in excess of the carrying value, the asset is considered to be recoverable and is not impaired. If the carrying value exceeds the aggregate undiscounted cash flows, we perform a discounted cash flow analysis to determine the fair value of the community, and impairment charges are recorded if the fair value of the community's inventory is less than its carrying value.
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No project in progress impairments were recognized during the three and six months ended March 31, 2022 and 2021, respectively.
Land Held for Sale Impairments
We evaluate the net realizable value of a land held for sale asset when indicators of impairment are present. Impairments on land held for sale generally represent write downs of these properties to net realizable value based on sales contracts, letters of intent, current market conditions, and recent comparable land sale transactions, as applicable. Absent an executed sales contract, our assumptions related to land sales prices require significant judgment because the real estate market is highly sensitive to changes in economic conditions, and our estimates of sale prices could differ significantly from actual results.
We recognized $0.4 million land held for sale impairments d uring the three and six months ended March 31, 2022 related to one held for sale community in the West segment. No land held for sale impairments were recognized during the three and six months ended March 31, 2021.
Abandonments
From time-to-time, we may determine to abandon lots or not exercise certain option contracts that are not projected to produce adequate results or no longer fit with our long-term strategic plan. Additionally, in certain limited instances, we are forced to abandon lots due to seller non-performance, or permitting or other regulatory issues that do not allow us to build on those lots. If we intend to abandon or walk away from a property, we record an abandonment charge to earnings for the deposit amount and any related capitalized costs in the period such decision is made.
We recognized $0.5 million abandonment charges during the three and six months ended March 31, 2022 related to one under contract deal in the West segment and one under contract deal in the Southeast segment that we decided to terminate. During the three months ended March 31, 2021, no abandonment charges were recognized. During the six months ended March 31, 2021, w e recognized $0.5 million abandonment charges in the East segment related to one under contract deal that we decided to terminate.
Lot Option Agreements
In addition to purchasing land directly, we utilize lot option agreements that enable us to defer acquiring portions of properties owned by third parties and unconsolidated entities until we have determined whether to exercise our lot option. The majority of our lot option agreements require a non-refundable cash deposit or irrevocable letter of credit based on a percentage of the purchase price of the land for the right to acquire lots during a specified period at a specified price. Purchase of the properties under these agreements is contingent upon satisfaction of certain requirements by us and the sellers. Under lot option agreements, our liability is generally limited to forfeiture of the non-refundable deposits, letters of credit and other non-refundable amounts incurred. If the Company cancels a lot option agreement, it would result in a write-off of the related deposits and pre-acquisition costs, but would not expose the Company to the overall risks or losses of the applicable entity we are purchasing from. We expect to exercise, subject to market conditions and seller satisfaction of contract terms, most of our remaining option contracts. Various factors, some of which are beyond our control, such as market conditions, weather conditions, and the timing of the completion of development activities, will have a significant impact on the timing of option exercises or whether lot options will be exercised at all.
The following table provides a summary of our interests in lot option agreements as of March 31, 2022 and September 30, 2021:

in thousands | Deposits & Non-refundable Pre-acquisition Costs Incurred (a) |  | Remaining Obligation, Net of Deposits |  |
As of March 31, 2022 |  |  |  |  |
Unconsolidated lot option agreements | $ | 131,971 |  |  | $ | 772,584 |  |  |
As of September 30, 2021 |  |  |  |  |
Unconsolidated lot option agreements | $ | 114,688 |  |  | $ | 676,149 |  |  |

(a) Amount is included as a component of land under development within our owned inventory in the condensed consolidated balance sheet.
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(6) Interest
Interest capitalized during the three and six months ended March 31, 2022 and 2021 was limited by the balance of inventory eligible for capitalization. The following table presents certain information regarding interest for the periods presented:

| Three Months Ended March 31, |  | Six Months Ended March 31,
in thousands | 2022 |  | 2021 |  | 2022 |  | 2021
Capitalized interest in inventory, beginning of period | $ | 110,516 |  |  | $ | 119,148 |  |  | $ | 106,985 |  |  | $ | 119,659 |
Interest incurred | 18,253 |  |  | 19,345 |  |  | 36,564 |  |  | 39,247 |
Interest expense not qualified for capitalization and included as other expense (a) | — |  |  | (969) |  |  | — |  |  | (2,569) |
Capitalized interest amortized to home construction and land sales expenses (b) | (16,083) |  |  | (24,110) |  |  | (30,863) |  |  | (42,923) |
Capitalized interest in inventory, end of period | $ | 112,686 |  |  | $ | 113,414 |  |  | $ | 112,686 |  |  | $ | 113,414 |

(a) The amount of interest capitalized depends on the qualified inventory balance, which considers the status of the Company's inventory holdings. Qualified inventory balance includes the majority of homes under construction and land under development but excludes land held for future development and land held for sale.
(b) Capitalized interest amortized to home construction and land sales expenses varies based on the number of homes closed during the period and land sales, if any, as well as other factors.
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(7) Borrowings
The Company's debt, net of unamortized debt issuance costs consisted of the following as of March 31, 2022 and September 30, 2021:

in thousands | Maturity Date |  | March 31, 2022 |  | September 30, 2021
Senior Unsecured Term Loan | September 2022 |  | $ | 50,000 |  |  | $ | 50,000 |
6 3/4% Senior Notes (2025 Notes) | March 2025 |  | 229,555 |  |  | 229,555 |
5 7/8% Senior Notes (2027 Notes) | October 2027 |  | 357,255 |  |  | 363,255 |
7 1/4% Senior Notes (2029 Notes) | October 2029 |  | 350,000 |  |  | 350,000 |
Unamortized debt issuance costs |  |  | (8,151) |  |  | (8,983) |
Total Senior Notes, net |  |  | 978,659 |  |  | 983,827 |
Junior Subordinated Notes (net of unamortized accretion of $29,536 and $30,570, respectively) | July 2036 |  | 71,236 |  |  | 70,203 |
Revolving Credit Facility | February 2024 |  | — |  |  | — |
Total debt, net |  |  | $ | 1,049,895 |  |  | $ | 1,054,030 |

Secured Revolving Credit Facility
The Secured Revolving Credit Facility (the Facility) provides working capital and letter of credit capacity of $250.0 million. The Facility is currently with four lenders. For additional discussion of the Facility, refer to Note 8 to the audited consolidated financial statements within our 2021 Annual Report.
As of March 31, 2022 and September 30, 2021, no borrowings and no letters of credit were outstanding under the Facility, resulting in a remaining capacity of $250.0 million. The Facility requires compliance with certain covenants, including negative covenants and financial covenants. As of March 31, 2022, the Company believes it was in compliance with all such covenants.
Senior Unsecured Term Loan
On September 9, 2019, the Company entered into a term loan agreement, which provides for a Senior Unsecured Term Loan (the Term Loan). The principal balance as of March 31, 2022 was $50.0 million. The Term Loan (1) will mature in September 2022, with the remaining $50.0 million annual repayment installment due in September 2022; (2) bears interest at a fixed rate of 4.875%; and (3) includes an option to prepay, subject to certain conditions and the payment of certain premiums. The Term Loan contains covenants generally consistent with the covenants contained in the Facility. As of March 31, 2022, the Company believes it was in compliance with all such covenants.
Letter of Credit Facilities
The Company has entered into stand-alone, cash-secured letter of credit agreements with banks to maintain pre-existing letters of credit and to provide for the issuance of new letters of credit (in addition to the letters of credit issued under the Facility). As of March 31, 2022 and September 30, 2021, the Company had letters of credit outstanding under these additional facilities of $26.4 million and $21.8 million, respectively, all of which were secured by cash collateral in restricted accounts totaling $26.1 million and $22.3 million, respectively. The Company may enter into additional arrangements to provide additional letter of credit capacity.
In May 2018, the Company entered into a reimbursement agreement, which provides for the issuance of performance letters of credit, and an unsecured credit agreement that provides for the issuance of up to $50.0 million of stand by letters of credit to backstop the Company's obligations under the reimbursement agreement (collectively, the "Bilateral Facility"). The Bilateral Facility will terminate on June 10, 2022. As of March 31, 2022, the total stated amount of performance letters of credit issued under the reimbursement agreement wa s $8.2 million (and the stated amount of the backstop standby letter of credit issued under the credit agreement was $40.0 million). The Company may enter into additional arrangements to provide greater letter of credit capacity.
Senior Notes
The Company's Senior Notes are unsecured obligations ranking pari passu with all other existing and future senior indebtedness. Substantially all of the Company's significant subsidiaries are full and unconditional guarantors of the Senior Notes and are jointly and severally liable for obligations under the Senior Notes and the Facility. Each guarantor subsidiary is a 100% owned subsidiary of Beazer Homes.
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All unsecured Senior Notes rank equally in right of payment with all existing and future senior unsecured obligations, senior to all of the Company's existing and future subordinated indebtedness and effectively subordinated to the Company's existing and future secured indebtedness, including indebtedness under the Facility, if outstanding, to the extent of the value of the assets securing such indebtedness. The unsecured Senior Notes and related guarantees are structurally subordinated to all indebtedness and other liabilities of all of the Company's subsidiaries that do not guarantee these notes but are fully and unconditionally guaranteed jointly and severally on a senior basis by the Company's wholly-owned subsidiaries party to each applicable indenture.
The Company's Senior Notes are issued under indentures that contain certain restrictive covenants which, among other things, restrict our ability to pay dividends, repurchase our common stock, incur certain types of additional indebtedness, and make certain investments. Compliance with the Senior Note covenants does not significantly impact the Company's operations. The Company believes it was in compliance with the covenants contained in the indentures of all of its Senior Notes as of March 31, 2022.
During the three and six months ended March 31, 2022, we repurchased $6.0 million of our outstanding 2027 Notes using cash on hand, resulting in a loss on extinguishment of debt of $0.2 million.
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For additional redemption features, refer to the table below that summarizes the redemption terms of our Senior Notes:

Senior Note Description |  | Issuance Date |  | Maturity Date |  | Redemption Terms
6 3/4% Senior Notes |  | March 2017 |  | March 2025 |  | Callable at any time prior to March 15, 2020, in whole or in part, at a redemption price equal to 100.000% of the principal amount, plus a customary make-whole premium; on or after March 15, 2020, callable at a redemption price equal to 105.063% of the principal amount; on or after March 15, 2021, callable at a redemption price equal to 103.375% of the principal amount; on or after March 15, 2022, callable at a redemption price equal to 101.688% of the principal amount; on or after March 15, 2023, callable at a redemption price equal to 100.000% of the principal amount, plus, in each case, accrued and unpaid interest.
5 7/8% Senior Notes |  | October 2017 |  | October 2027 |  | On or prior to October 15, 2022, we may redeem up to 35% of the aggregate principal amount of the 2027 Notes with the net cash proceeds of certain equity offerings at a redemption price equal to 105.875% of the principal amount, plus accrued and unpaid interest to, but excluding, the redemption date, provided at least 65% of the aggregate principal amount of the 2027 Notes originally issued remains outstanding immediately after such redemption.
|  |  | Callable at any time prior to October 15, 2022, in whole or in part, at a redemption price equal to 100.000% of the principal amount, plus a customary make-whole premium; on or after October 15, 2022, callable at a redemption price equal to 102.938% of the principal amount; on or after October 15, 2023, callable at a redemption price equal to 101.958% of the principal amount; on or after October 15, 2024, callable at a redemption price equal to 100.979% of the principal amount; on or after October 15, 2025, callable at a redemption price equal to 100.000% of the principal amount, plus, in each case, accrued and unpaid interest.
7 1/4% Senior Notes |  | September 2019 |  | October 2029 |  | On or prior to October 15, 2022, we may redeem up to 35% of the aggregate principal amount of the 2029 Notes with the net cash proceeds of certain equity offerings at a redemption price equal to 107.250% of the principal amount, plus accrued and unpaid interest to, but excluding, the redemption date, provided at least 65% of the aggregate principal amount of the 2029 Notes originally issued remains outstanding immediately after such redemption.
|  |  | Callable at any time prior to October 15, 2024, in whole or in part, at a redemption price equal to 100.000% of the principal amount, plus a customary make-whole premium; on or after October 15, 2024, callable at a redemption price equal to 103.625% of the principal amount; on or after October 15, 2025, callable at a redemption price equal to 102.417% of the principal amount; on or after October 15, 2026, callable at a redemption price equal to 101.208% of the principal amount; on or after October 15, 2027, callable at a redemption price equal to 100.000% of the principal amount, plus, in each case, accrued and unpaid interest.

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Junior Subordinated Notes
The Company's unsecured junior subordinated notes (Junior Subordinated Notes) mature on July 30, 2036 and have an aggregate principal balance of $100.8 million as of March 31, 2022. The securities have a floating interest rate as defined in the Junior Subordinated Notes Indentures, wh i ch was a weighted-average of 3.87% as of March 31, 2022. The obligations relating to these notes are subordinated to the Facility and the Senior Notes. In January 2010, the Company restructured $75.0 million of these notes and recorded them at their then estimated fair value. Over the remaining life of the restructured notes, we will increase their carrying value until this carrying value equals the face value of the notes. As of March 31, 2022, the unamortized accretion was $29.5 million and will be amortized over the remaining life of the restructured notes. The remaining $25.8 million of these notes are subject to the terms of the original agreement, have a floating interest rate equal to three-month LIBOR plus 2.45% per annum, resetting quarterly, and are redeemable in whole or in part at par value. The material terms of the $75.0 million restructured notes are identical to the terms of the original agreement except that the floating interest rate is subject to a floor of 4.25% and a cap of 9.25%. In addition, beginning on June 1, 2012, the Company has the option to redeem the $75.0 million principal balance in whole or in part at 75% of par value; beginning on June 1, 2022, the redemption price will increase by 1.785% annually. As of March 31, 2022, the Company believes it was in compliance with all covenants under the Junior Subordinated Notes.
(8) Operating Leases
The Company leases certain office space and equipment under operating leases for use in our operations. We recognize operating lease expense on a straight-line basis over the lease term. Certain of our lease agreements include one or more options to renew. The exercise of lease renewal options is generally at our discretion. Variable lease expense primarily relates to maintenance and other monthly expense that do not depend on an index or rate.
We determine if an arrangement is a lease at contract inception. Lease and non-lease components are accounted for as a single component for all leases. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the expected lease term, which includes optional renewal periods if we determine it is reasonably certain that the option will be exercised. As our leases do not provide an implicit rate, the discount rate used in the present value calculation represents our incremental borrowing rate determined using information available at the commencement date.
Operating lease expense is included as a component of general and administrative expenses in our condensed consolidated statements of operations. Sublease income and variable lease expenses are de minimis. For the three and six months ended March 31, 2022 and 2021, operating lease expense and cash payments on lease liabilities were as follows:

| Three Months Ended March 31, |  | Six Months Ended March 31,
in thousands | 2022 | 2021 |  | 2022 | 2021
Operating lease expense | $ | 979 |  | $ | 1,085 |  |  | $ | 1,978 |  | $ | 2,173 |
Cash payments on lease liabilities | $ | 1,090 |  | $ | 1,167 |  |  | $ | 2,176 |  | $ | 2,519 |

At March 31, 2022 and 2021, the weighted-average remaining lease term and discount rate were as follows:

|  |  | As of March 31,
|  |  | 2022 | 2021
Weighted-average remaining lease term |  |  | 4.6 years | 5.0 years
Weighted-average discount rate |  |  | 4.42% | 4.76%

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The following is a maturity analysis of the annual undiscounted cash flows reconciled to the carrying value of the operating lease liabilities as of March 31, 2022:

Fiscal Years Ending September 30, |
in thousands |
2022 (a) | $ | 2,158 |
2023 | 3,719 |
2024 | 2,601 |
2025 | 2,257 |
2026 | 1,643 |
Thereafter | 1,928 |
Total lease payments | 14,306 |
Less: Imputed interest | 1,394 |
Total operating lease liabilities | $ | 12,912 |

(a) Remaining lease payments are for the period beginning April 1, 2022 through September 30, 2022.
(9) 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.
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. An analysis by division allows us to consider 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 that may need to be separately estimated based on management's judgment of the ultimate cost of repair for that specific issue. 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.
In addition, we maintain third-party insurance, subject to applicable self-insured retentions, for most construction defects that we encounter in the normal course of business. We believe that our warranty and litigation accruals and third-party insurance are adequate to cover the ultimate resolution of our potential liabilities associated with known and anticipated warranty and construction defect related claims and litigation. However, there can be no assurance that the terms and limitations of the limited warranty will be effective against claims made by homebuyers; that we will be able to renew our insurance coverage or renew it at reasonable rates; that we will not be liable for damages, the cost of repairs, and/or the expense of litigation surrounding possible construction defects, soil subsidence, or building related claims; or that claims will not arise out of events or circumstances not covered by insurance and/or not subject to effective indemnification agreements with our subcontractors.
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Changes in warranty reserves are as follows for the periods presented:

| Three Months Ended |  | Six Months Ended
| March 31, |  | March 31,
in thousands | 2022 |  | 2021 |  | 2022 |  | 2021
Balance at beginning of period | $ | 12,743 |  |  | $ | 12,616 |  |  | $ | 12,931 |  |  | $ | 13,052 |
Accruals for warranties issued (a) | 2,811 |  |  | 2,783 |  |  | 5,183 |  |  | 5,037 |
Net changes in liability related to warranties existing in prior periods | (512) |  |  | (57) |  |  | 22 |  |  | 320 |
Payments made | (2,361) |  |  | (2,921) |  |  | (5,455) |  |  | (5,988) |
Balance at end of period | $ | 12,681 |  |  | $ | 12,421 |  |  | $ | 12,681 |  |  | $ | 12,421 |

(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 and certain of our subsidiaries are subject to various lawsuits and 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.
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.
We have an accrual of $8.5 million and $8.3 million in other liabilities on our condensed consolidated balance sheets related to litigation matters as of March 31, 2022 and September 30, 2021, respectively.
Surety Bonds and Letters of Credit
We had outstanding letters of credit and surety bonds of $34.6 million and $272.6 million, r espectively, as of March 31, 2022, related principally to our obligations to local governments to construct roads and other improvements in various developments.
(10) Fair Value Measurements
As of the dates presented, we had assets on our condensed consolidated balance sheets that were required to be measured at fair value on a recurring or non-recurring basis. We use a fair value hierarchy that requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value as follows:
•Level 1 – Quoted prices in active markets for identical assets or liabilities;
•Level 2 – Inputs other than quoted prices included in Level 1 that are observable either directly or indirectly through corroboration with market data; and
•Level 3 – Unobservable inputs that reflect our own estimates about the assumptions market participants would use in pricing the asset or liability.
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Certain of our assets are required to be recorded at fair value on a non-recurring basis when events and circumstances indicate that the carrying value of these assets may not be recovered. We review our long-lived assets, including inventory, for recoverability when factors indicate an impairment may exist, but no less than quarterly. Fair value on assets deemed to be impaired is determined based upon the type of asset being evaluated. Fair value of our owned inventory assets, when required to be calculated, is further discussed within Note 5. Due to the substantial use of unobservable inputs in valuing the assets on a non-recurring basis, they are classified within Level 3.
During the three and six months ended March 31, 2022, we recognized $0.4 million i mpairments on land held for sale. No impairments on projects in progress or land held for sale were recognized during the the three and six months ended March 31, 2021.
Determining within which hierarchical level an asset or liability falls requires significant judgment. We evaluate our hierarchy disclosures each quarter. The following table presents the period-end balances of our assets measured at fair value on a recurring basis and the impairment date fair value of certain assets measured at fair value on a non-recurring basis for each hierarchy level. These balances represent only those assets whose carrying values were adjusted to fair value during the periods presented:

in thousands | Level 1 |  | Level 2 |  | Level 3 |  | Total
As of March 31, 2022 |  |  |  |  |  |  |
Deferred compensation plan assets (a) | $ | — |  |  | $ | 3,020 |  |  | $ | — |  |  | $ | 3,020 |
Land held for sale (b) | $ | — |  |  | $ | — |  |  | $ | 250 |  | (c) | $ | 250 |
As of September 30, 2021 |  |  |  |  |  |  |
Deferred compensation plan assets (a) | $ | — |  |  | $ | 2,730 |  |  | $ | — |  |  | $ | 2,730 |

(a) Measured at fair value on a recurring basis using market-corroborated inputs.
(b) Measured at fair value on a non-recurring basis, refer to Note 5 for further discussion.
(c) Amount represents the impairment-date fair value of the land held for sale assets that were impaired during the period indicated.
The fair value of cash and cash equivalents, restricted cash, accounts receivable, trade accounts payable, other liabilities, and amounts due under the Facility (if outstanding) approximate their carrying amounts due to the short maturity of these assets and liabilities. When outstanding, obligations related to land not owned under option agreements approximate fair value.
The following table presents the carrying value and estimated fair value of certain other financial liabilities as of March 31, 2022 and September 30, 2021:

| As of March 31, 2022 |  | As of September 30, 2021
in thousands | Carrying Amount (a) |  | Fair Value |  | Carrying Amount (a) |  | Fair Value
Senior Notes and Term Loan (b) | $ | 978,659 |  |  | $ | 981,144 |  |  | $ | 983,827 |  |  | $ | 1,046,965 |
Junior Subordinated Notes (c) | 71,236 |  |  | 71,236 |  |  | 70,203 |  |  | 70,203 |
Total | $ | 1,049,895 |  |  | $ | 1,052,380 |  |  | $ | 1,054,030 |  |  | $ | 1,117,168 |

(a) Carrying amounts are net of unamortized debt issuance costs o r accretion.
(b) The estimated fair value for our publicly-held Senior Notes and the Term Loan have been determined using quoted market rates (Level 2).
(c) Since there is no trading market for our Junior Subordinated Notes, the fair value of these notes is estimated by discounting scheduled cash flows through maturity (Level 3). The discount rate is estimated using market rates currently being offered on loans with similar terms and credit quality. Judgment is required in interpreting market data to develop these estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we could realize in a current market exchange.
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(11) Income Taxes
Income Tax Provision
The Company's income tax provision for quarterly interim periods is based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent, or unusual items. Income tax expense from continuing operations was $10.1 million and $16.5 million for the three and six months ended March 31, 2022, compared to $7.7 million and $11.8 million for the three and six months ended March 31, 2021. Income tax expense for the six months ended March 31, 2022 was substantially driven by (1) income from continuing operations, partially offset by (2) the completion of work necessary to claim an additional $6.2 million in energy efficiency tax credits related to homes closed in prior fiscal years, and (3) the discrete impact related to stock-based compensation expense as a result of current period activity. Income tax expense for the six months ended March 31, 2021 was substantially driven by (1) income from continuing operations, and (2) the discrete impact related to stock-based compensation expense as a result of current period activity.
Deferred Tax Assets and Liabilities
The Company continues to evaluate its deferred tax assets each period to determine if a valuation allowance is required based on whether it is more likely than not that some portion of these deferred tax assets will not be realized. As of March 31, 2022, management concluded that it is more likely than not that a substantial portion of our deferred tax assets will be realized. As part of our analysis, we considered both positive and negative factors that impact profitability and whether those factors would lead to a change in the estimate of our deferred tax assets that may be realized in the future. At this time, our conclusions on the valuation allowance and Internal Revenue Code Section 382 limitations related to our deferred tax assets remain consistent with the determinations we made during the period ended September 30, 2021, and such conclusions are based on similar company specific and industry factors to those discussed in Note 13 to the audited consolidated financial statements within our 2021 Annual Report.
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(12) Stock-based Compensation
Stock-based compensation expense is included in general and administrative expenses in the condensed consolidated statements of operations. Following is a summary of stock-based compensation expense related to stock options and restricted stock awards for the three and six months ended March 31, 2022 and 2021, respectively.

| Three Months Ended |  | Six Months Ended
| March 31, |  | March 31,
in thousands | 2022 |  | 2021 |  | 2022 |  | 2021
Stock-based compensation expense | $ | 2,424 |  |  | $ | 2,549 |  |  | $ | 4,532 |  |  | $ | 6,060 |

Stock Options
Following is a summary of stock option activity for the six months ended March 31, 2022:

| Six Months Ended
| March 31, 2022
| Shares |  | Weighted Average Exercise Price
Outstanding at beginning of period | 114,259 |  |  | $ | 17.89 |
Granted | 236 |  |  | 16.58 |
Exercised | (788) |  |  | 12.32 |
Expired | (86,000) |  |  | 19.11 |
Outstanding at end of period | 27,707 |  |  | $ | 14.26 |
Exercisable at end of period | 27,471 |  |  | $ | 14.24 |

As of both March 31, 2022 and September 30, 2021, there was less than $0.1 million of total unrecognized compensation costs related to unvested stock options. The costs remaining as of March 31, 2022 are expected to be recognized over a weighted-average period of 1.94 years.
Restricted Stock Awards
During the six months ended March 31, 2022, the Company issued time-based and performance-based restricted stock awards. The time-based restricted shares granted to our non-employee directors vest on the first anniversary of the grant, while the time-based restricted shares granted to our executive officers and other employees generally vest ratably over two to three years from the date of grant. Performance-based restricted share awards vest subject to the achievement of performance and market conditions over a three-year performance period.
Following is a summary of restricted stock activity for the six months ended March 31, 2022:

| Six Months Ended March 31, 2022
| Performance-Based Restricted Shares |  | Time-Based Restricted Shares |  | Total Restricted Shares
Beginning of period | 738,155 |  |  | 486,574 |  |  | 1,224,729 |
Granted (a) | 269,617 |  |  | 246,844 |  |  | 516,461 |
Vested | (552,417) |  |  | (279,277) |  |  | (831,694) |
Forfeited | (18,158) |  |  | (28,298) |  |  | (46,456) |
End of period | 437,197 |  |  | 425,843 |  |  | 863,040 |

(a) Each of our performance shares represent a contingent right to receive one share of the Company's common stock if vesting is satisfied at the end of the three-year performance period. Our performance stock award plans provide that any performance shares earned in excess of the target number of performance shares issued may be settled in cash or additional shares at the discretion of the Compensation Committee. In November 2021, we issued 177,759 shares earned above target level based on the performance level achieved under the fiscal 2019 performance-based award plan.
As of March 31, 2022 and September 30, 2021, total unrecognized compensation costs related to unvested restricted stock awards w as $10.7 million and $7.2 million, respectively. The costs remaining as of March 31, 2022 are expected to be recognized over a weighted average period of 1.87 years.
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(13) Earnings Per Share
Basic income (loss) per share is calculated by dividing net income (loss) by the weighted-average number of shares outstanding during the period. Diluted income (loss) per share adjusts the basic income (loss) per share for the effects of any potentially dilutive securities in periods in which the Company has net income and such effects are dilutive under the treasury stock method.
Following is a summary of the components of basic and diluted income per share for the periods presented:

| Three Months Ended March 31, |  | Six Months Ended March 31,
in thousands (except per share data) | 2022 |  | 2021 |  | 2022 |  | 2021
Numerator: |  |  |  |  |  |  |
Income from continuing operations | $ | 44,678 |  |  | $ | 24,643 |  |  | $ | 79,573 |  |  | $ | 36,679 |
Loss from discontinued operations, net of tax | (6) |  |  | (115) |  |  | (16) |  |  | (154) |
Net income | $ | 44,672 |  |  | $ | 24,528 |  |  | $ | 79,557 |  |  | $ | 36,525 |
Denominator: |  |  |  |  |  |  |
Basic weighted-average shares | 30,594 |  |  | 29,953 |  |  | 30,464 |  |  | 29,862 |
Dilutive effect of restricted stock awards | 222 |  |  | 231 |  |  | 300 |  |  | 262 |
Dilutive effect of stock options | 7 |  |  | 31 |  |  | 8 |  |  | 26 |
Diluted weighted-average shares (a) | 30,823 |  |  | 30,215 |  |  | 30,772 |  |  | 30,150 |
Basic income (loss) per share: |  |  |  |  |  |  |
Continuing operations | $ | 1.46 |  |  | $ | 0.82 |  |  | $ | 2.61 |  |  | $ | 1.23 |
Discontinued operations | — |  |  | — |  |  | — |  |  | (0.01) |
Total | $ | 1.46 |  |  | $ | 0.82 |  |  | $ | 2.61 |  |  | $ | 1.22 |
Diluted income (loss) per share: |  |  |  |  |  |  |
Continuing operations | $ | 1.45 |  |  | $ | 0.81 |  |  | $ | 2.59 |  |  | $ | 1.22 |
Discontinued operations | — |  |  | — |  |  | — |  |  | (0.01) |
Total | $ | 1.45 |  |  | $ | 0.81 |  |  | $ | 2.59 |  |  | $ | 1.21 |

(a) The following potentially dilutive shares were excluded from the calculation of diluted income (loss) per share as a result of their anti-dilutive effect.

| Three Months Ended March 31, |  | Six Months Ended March 31,
in thousands | 2022 |  | 2021 |  | 2022 |  | 2021
Stock options | 13 |  |  | 177 |  |  | 31 |  |  | 214 |
Time-based restricted stock | 188 |  |  | 13 |  |  | — |  |  | 121 |

(14) Other Liabilities
Other liabilities include the following as of March 31, 2022 and September 30, 2021:

in thousands | March 31, 2022 |  | September 30, 2021
Customer deposits | $ | 38,394 |  |  | $ | 28,526 |
Accrued compensations and benefits | 37,355 |  |  | 54,606 |
Accrued interest | 22,680 |  |  | 22,835 |
Warranty reserve | 12,681 |  |  | 12,931 |
Litigation accruals | 8,517 |  |  | 8,325 |
Other | 27,956 |  |  | 25,128 |
Total | $ | 147,583 |  |  | $ | 152,351 |

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(15) Segment Information
We currently operate in 13 states that are grouped into three homebuilding segments based on geography. Revenues from our homebuilding segments are derived from the sale of homes that we construct and from land and lot sales. Our reportable segments have been determined on a basis that is used internally by management for evaluating segment performance and resource allocations. We have considered the applicable aggregation criteria and have combined our homebuilding operations into three reportable segments as follows:
West: Arizona, California, Nevada, and Texas
East: Delaware, Indiana, Maryland, New Jersey(a), Tennessee, and Virginia
Southeast: Florida, Georgia, North Carolina, and South Carolina
(a) During our fiscal 2015, we made the decision that we would not continue to reinvest in new homebuilding assets in our New Jersey division; therefore, it is no longer considered an active operation. However, it is included in this listing because the segment information below continues to include New Jersey.
Management’s evaluation of segment performance is based on segment operating income. Operating income for our homebuilding segments is defined as homebuilding and land sales and other revenue less home construction, land development, and land sales expense, commission expense, depreciation and amortization, and certain G&A expenses that are incurred by or allocated to our homebuilding segments. The accounting policies of our segments are those described in Note 2 to the consolidated financial statements within our 2021 Annual Report.
The following tables contain our revenue, operating income, and depreciation and amortization by segment for the periods presented:

| Three Months Ended |  | Six Months Ended
| March 31, |  | March 31,
in thousands | 2022 |  | 2021 |  | 2022 |  | 2021
Revenue |  |  |  |  |  |  |
West | $ | 303,492 |  |  | $ | 278,720 |  |  | $ | 561,158 |  |  | $ | 515,600 |
East | 128,935 |  |  | 153,571 |  |  | 247,104 |  |  | 251,535 |
Southeast | 76,079 |  |  | 117,598 |  |  | 154,393 |  |  | 211,293 |
Total revenue | $ | 508,506 |  |  | $ | 549,889 |  |  | $ | 962,655 |  |  | $ | 978,428 |

| Three Months Ended |  | Six Months Ended
| March 31, |  | March 31,
in thousands | 2022 |  | 2021 |  | 2022 |  | 2021
Operating income |  |  |  |  |  |  |
West | $ | 58,103 |  |  | $ | 42,488 |  |  | $ | 100,827 |  |  | $ | 75,791 |
East | 24,072 |  |  | 22,449 |  |  | 43,931 |  |  | 33,817 |
Southeast | 10,007 |  |  | 15,074 |  |  | 18,207 |  |  | 25,382 |
Segment total | 92,182 |  |  | 80,011 |  |  | 162,965 |  |  | 134,990 |
Corporate and unallocated (a) | (37,571) |  |  | (46,393) |  |  | (67,415) |  |  | (83,684) |
Total operating income | $ | 54,611 |  |  | $ | 33,618 |  |  | $ | 95,550 |  |  | $ | 51,306 |

(a) Corporate and unallocated operating loss includes amortization of capitalized interest, movement in capitalized indirect costs, expenses related to numerous shared services functions that benefit all segments but are not allocated to the operating segments reported above, including information technology, treasury, corporate finance, legal, branding and national marketing, and other amounts that are not allocated to our operating segments.
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| Three Months Ended |  | Six Months Ended
| March 31, |  | March 31,
in thousands | 2022 |  | 2021 |  | 2022 |  | 2021
Depreciation and amortization |  |  |  |  |  |  |
West | $ | 1,810 |  |  | $ | 1,936 |  |  | $ | 3,409 |  |  | $ | 3,473 |
East | 367 |  |  | 575 |  |  | 802 |  |  | 1,046 |
Southeast | 374 |  |  | 676 |  |  | 773 |  |  | 1,271 |
Segment total | 2,551 |  |  | 3,187 |  |  | 4,984 |  |  | 5,790 |
Corporate and unallocated (a) | 480 |  |  | 496 |  |  | 928 |  |  | 1,015 |
Total depreciation and amortization | $ | 3,031 |  |  | $ | 3,683 |  |  | $ | 5,912 |  |  | $ | 6,805 |

(a) Corporate and unallocated depreciation and amortization represents depreciation and amortization related to assets held by our corporate functions that benefit all segments.
The following table presents capital expenditures by segment for the periods presented:

| Six Months Ended
| March 31,
in thousands | 2022 |  | 2021
Capital expenditures |  |  |
West | $ | 3,275 |  |  | $ | 3,066 |
East | 253 |  |  | 1,001 |
Southeast | 595 |  |  | 378 |
Corporate and unallocated | 2,072 |  |  | 2,069 |
Total capital expenditures | $ | 6,195 |  |  | $ | 6,514 |

The following table presents assets by segment as of March 31, 2022 and September 30, 2021:

in thousands | March 31, 2022 |  | September 30, 2021
Assets |  |  |
West | $ | 921,217 |  |  | $ | 819,317 |
East | 314,973 |  |  | 286,133 |
Southeast | 324,914 |  |  | 296,581 |
Corporate and unallocated (a) | 598,900 |  |  | 676,779 |
Total assets | $ | 2,160,004 |  |  | $ | 2,078,810 |

(a) Primarily consists of cash and cash equivalents, restricted cash, deferred taxes, capitalized interest and indirect costs, and other items that are not allocated to the segments.
(16) Discontinued Operations
We continually review each of our markets in order to refine our overall investment strategy and to optimize capital and resource allocations in an effort to enhance our financial position and to increase stockholder value. This review entails an evaluation of both external market factors and our position in each market and over time has resulted in the decision to discontinue certain of our homebuilding operations.
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We have classified the results of operations of our discontinued operations separately in the accompanying condensed consolidated statements of operations for all periods presented. There were no material assets or liabilities related to our discontinued operations as of March 31, 2022 or September 30, 2021. Discontinued operations were not segregated in the condensed consolidated statements of cash flows. Therefore, amounts for certain captions in the condensed consolidated statements of cash flows will not agree with the respective data in the condensed consolidated statements of operations. The results of our discontinued operations in the condensed consolidated statements of operations for the periods presented were as follows:

| Three Months Ended |  | Six Months Ended
| March 31, |  | March 31,
in thousands | 2022 |  | 2021 |  | 2022 |  | 2021
Home construction and land sales expenses | — |  |  | 121 |  |  | (5) |  |  | 119 |
Gross profit (loss) | — |  |  | (121) |  |  | 5 |  |  | (119) |
General and administrative expenses | 7 |  |  | 26 |  |  | 25 |  |  | 78 |
Loss from discontinued operations before income taxes | (7) |  |  | (147) |  |  | (20) |  |  | (197) |
Benefit from income taxes | (1) |  |  | (32) |  |  | (4) |  |  | (43) |
Loss from discontinued operations, net of tax | $ | (6) |  |  | $ | (115) |  |  | $ | (16) |  |  | $ | (154) |

(17) Subsequent Events
On April 27, 2022, the Company entered into an agreement to acquire substantially all of the assets of Imagine Homes, a private San Antonio-based homebuilder. For the past 16 years, Beazer has held a one-third ownership stake in Imagine Homes. The acquisition will expand Beazer's Texas footprint, which already includes the Dallas and Houston markets.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Executive Overview and Outlook
Market Conditions
During the second quarter of fiscal 2022, demand remained strong despite the geopolitical environment and increasing affordability concerns. The affordability of homes has come under pressure as both prices for new and existing homes and mortgage interest rates increase. These affordability concerns have not yet had a significant impact on the demand or sales pace for our homes currently but are likely to impact demand in the future. We attribute the current strength in demand to the robust employment market which is leading to meaningful wage growth, a demographic shift towards homeownership amplified by the pandemic and a multimillion unit housing deficit that has accumulated over the past decade.
We believe home affordability is the most significant risk to our industry's outcomes. Our strategies to help mitigate this risk include: (1) our Mortgage Choice platform which eliminates the typical mortgage subsidiary middleman and allows us to partner with our customers to help them get the most competitive interest rates, fees, and service levels available; (2) our Choice Plans TM which allow customers to select from a list of structural options at no additional cost; and (3) the Surprising Performance our homes are designed to deliver as they are all built to meet or exceed the latest ENERGY STAR® standards and reduce home energy costs. In relation to future communities, our underwriting continues to incorporate higher than currently available mortgage rates to enable us to assess future affordability.
Like many other homebuilders, we continue to experience production challenges due to supply chain disruptions and tightness in labor markets, which was exacerbated by the Omicron variant of the COVID-19 pandemic. These disruptions have resulted in elongated construction cycle times and decreased backlog conversion. In response, we are proactively managing our sales pace and lot releases to better align with our production capacity. We continue to work with our trade partners to resolve these issues, but we do not expect conditions to significantly improve in the near term. However, the strength in our markets has allowed us to pass on most cost increases through increased prices, helping to protect our margins and profitability.
Balanced Growth Strategy
We continue to execute against our balanced growth strategy, which we define as the expansion of earnings at a faster rate than our revenue growth, supported by a less-leveraged capital structure. This strategy provides us with flexibility to reduce leverage, increase investment in land and other operating assets, or repurchase shares in response to changing market conditions. Our priorities for fiscal 2022 are to grow our lot position by increasing land spend and our use of land option agreements, improve profitability while reducing our total debt below $1.0 billion, deliver an extraordinary customer experience and encourage employee well-being.
Overview of Results for Our Fiscal Second Quarter
The following is a summary of our performance against certain key operating and financial metrics during the quarter ended March 31, 2022:
•During the quarter ended March 31, 2022, sales per community per month was 3.6 compared to 4.7 in the prior year quarter, and our net new orders were 1,291, down 30.4% from 1,854 in the prior year quarter. Sales per community per month was 3.3 an d 3.8 for the trailing 12 months ended March 31, 2022 and 2021, respectively. We believe our sales pace has been strong by historical standards and will remain robust throughout fiscal 2022. Given the high demand and construction cycle time constra ints, we have deliberately limited sales in a number of our communities to better align sales pace with production capacity, to manage lot supply, to ens ure a positive customer experience and to maximize margins.
•During the quarter ended March 31, 2022, our average active community coun t of 119 was down 9.2% from 131 in the prior year quarter. This is in part due to strong sales pace experienced during fiscal 2021 as well as the temporary reduction in land spend during fiscal 2020 an d the first half of 2021. We are working to grow community counts by increasing investments in new communities. We invested $132.6 million and $97.3 million in land acquisition and land development during the quarters ended March 31, 2022 and March 31, 2021, resp ectively.
•As of March 31, 2022, our land position includes 23,516 controlled lots, up 24.7% from 18,851 as of March 31, 2021. Excluding land held for future development and land held for sale lots, we controlled 22,728 active lots, up 24.7% from the prior year quarter. A s of March 31, 2022, we had 11,551 lots, or 50.8% of our total active lots, under option contracts as compared to 8,381 lots, or 46.0% of our total active lots, under option contracts as of March 31, 2021.
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•Aggregated dollar value of homes in backlog as of March 31, 2022 was $1,583.5 million, up 14.2% compared to the prior year quarter. We ended the quarter with 3,121 homes in backlog, down 5.5% compared to the prior year quarter. Benefiting from pricing power in most mark ets, the average selling price (ASP) in backlog as of March 31, 2022 has risen to $507.4 thousand, up 20.9% versus the prior year quarter.
•Our ASP for homes closed during the quarter ended March 31, 2022 was $470.5 thousand, up 19.3% from $394.4 thousand in the prior year quarter. The year-over-year increase in ASP on closings was impacted primarily by price appreciation due to strong demand and limited supply of homes. On average, we anticipate that our ASP will continue to increase in the near-term as indicated by the ASP for homes in backlog as of March 31, 2022.
•Homebuilding gross margin for the quarter ended March 31, 2022 was 23.5%, up from 17.8% in the prior year quarter. Homebuilding gross margin excluding impairments, abandonments, and interest for the quarter ended March 31, 2022 was 26.8%, up from 22.2% in the prior year qua rte r. Our homebuilding gross margin has been favorably impacted by the strong demand and price appreciation, although cost pressures and the availability of labor may temper gross margin expansion in the future.
•SG&A for the quarter ended March 31, 2022 was 12.2% of total revenue, up from 11.0% a year earlier. The increase in SG&A as a percentage of total revenue was primarily due to decreases in closings and revenue as a result of construction cycle time extension. The dollar amount of SG&A increased by $1.5 million, or 2.4%, compared to the prior year quarter primarily due to increased personnel expense. We remain focused on improving overhead cost management in relation to our revenue gr owth.
Seasonal and Quarterly Variability
Our homebuilding operating cycle historically has reflected escalating new order activity in the second and third fiscal quarters and increased closings in the third and fourth fiscal quarters. However, these seasonal patterns may be impacted or reduced by a variety of factors. Accordingly, our financial results for the three and six months ended March 31, 2022 may not be indicative of our full year results.
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RESULTS OF CONTINUING OPERATIONS:
The following table summarizes certain key income statement metrics for the periods presented:

| Three Months Ended |  | Six Months Ended
| March 31, |  | March 31,
$ in thousands | 2022 |  | 2021 |  | 2022 |  | 2021
Revenue: |  |  |  |  |  |  |
Homebuilding | $ | 507,208 |  |  | $ | 547,417 |  |  | $ | 953,937 |  |  | $ | 971,646 |
Land sales and other | 1,298 |  |  | 2,472 |  |  | 8,718 |  |  | 6,782 |
Total | $ | 508,506 |  |  | $ | 549,889 |  |  | $ | 962,655 |  |  | $ | 978,428 |
Gross profit: |  |  |  |  |  |  |
Homebuilding | $ | 119,402 |  |  | $ | 97,456 |  |  | $ | 212,706 |  |  | $ | 172,293 |
Land sales and other | 348 |  |  | 470 |  |  | 4,444 |  |  | 926 |
Total | $ | 119,750 |  |  | $ | 97,926 |  |  | $ | 217,150 |  |  | $ | 173,219 |
Gross margin: |  |  |  |  |  |  |
Homebuilding (a) | 23.5 | % |  | 17.8 | % |  | 22.3 | % |  | 17.7 | %
Land sales and other | 26.8 | % |  | 19.0 | % |  | 51.0 | % |  | 13.7 | %
Total | 23.5 | % |  | 17.8 | % |  | 22.6 | % |  | 17.7 | %
Commissions | $ | 16,578 |  |  | $ | 20,884 |  |  | $ | 32,391 |  |  | $ | 37,391 |
General and administrative expenses (G&A) | $ | 45,530 |  |  | $ | 39,741 |  |  | $ | 83,297 |  |  | $ | 77,717 |
SG&A (commissions plus G&A) as a percentage of total revenue | 12.2 | % |  | 11.0 | % |  | 12.0 | % |  | 11.8 | %
G&A as a percentage of total revenue | 9.0 | % |  | 7.2 | % |  | 8.7 | % |  | 7.9 | %
Depreciation and amortization | $ | 3,031 |  |  | $ | 3,683 |  |  | $ | 5,912 |  |  | $ | 6,805 |
Operating income | $ | 54,611 |  |  | $ | 33,618 |  |  | $ | 95,550 |  |  | $ | 51,306 |
Operating income as a percentage of total revenue | 10.7 | % |  | 6.1 | % |  | 9.9 | % |  | 5.2 | %
Effective tax rate (b) | 18.4 | % |  | 23.8 | % |  | 17.2 | % |  | 24.4 | %
Inventory impairments and abandonments | $ | 935 |  |  | $ | — |  |  | $ | 935 |  |  | $ | 465 |
Loss on extinguishment of debt, net | $ | (164) |  |  | $ | (563) |  |  | $ | (164) |  |  | $ | (563) |

(a) Excluding impairments, abandonments, and interest amortized to cost of sales, homebuilding gross margin was 26.8% and 22.2% for the three months ended March 31, 2022 and 2021, respectiv ely, and 25.6% and 22.2% for the six months ended March 31, 2022 and 2021, respectiv ely. Please see "Homebuilding Gross Profit and Gross Margin" section below for a reconciliation of homebuilding gross profit and the related gross margin excluding impairments and abandonments and interest amortized to cost of sales to homebuilding gross profit and gross margin, the most directly comparable GAAP measure.
(b) Calculated as tax expense for the period divided by income from c ontinuing operations. Due to a variety of factors, including the impact of discrete tax items on our effective tax rate, our income tax expense is not always directly correlated to the amount of pre-tax income for the associated periods. For the three and six months ended March 31, 2022, our effective tax rate was impacted by, among other factors, $3.0 million and $6.2 million of energy efficiency tax credits claimed, respectively, compared to less than $0.1 million of such credits claimed during the three and six months ended March 31, 2021.
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EBITDA: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Adjusted EBITDA to total company net income, the most directly comparable GAAP measure, is provided for each period discussed below. Management believes that Adjusted EBITDA assists investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies' respective capitalization, tax position, and level of impairments. These EBITDA measures should not be considered alternatives to net income determined in accordance with GAAP as an indicator of operating performance.
The following table reconciles our net income to Adjusted EBITDA for the periods presented:

| Three Months Ended March 31, |  | Six Months Ended March 31, |  | LTM Ended March 31, (a)
in thousands | 2022 |  | 2021 |  | 22 vs 21 |  | 2022 |  | 2021 |  | 22 vs 21 |  | 2022 |  | 2021 |  | 22 vs 21
Net income | $ | 44,672 |  |  | $ | 24,528 |  |  | $ | 20,144 |  |  | $ | 79,557 |  |  | $ | 36,525 |  |  | $ | 43,032 |  |  | $ | 165,053 |  |  | $ | 75,391 |  |  | $ | 89,662 |
Expense from income taxes | 10,071 |  |  | 7,672 |  |  | 2,399 |  |  | 16,531 |  |  | 11,786 |  |  | 4,745 |  |  | 26,246 |  |  | 25,508 |  |  | 738 |
Interest amortized to home construction and land sales expenses and capitalized interest impaired | 16,083 |  |  | 24,110 |  |  | (8,027) |  |  | 30,863 |  |  | 42,923 |  |  | (12,060) |  |  | 75,230 |  |  | 96,256 |  |  | (21,026) |
Interest expense not qualified for capitalization | — |  |  | 969 |  |  | (969) |  |  | — |  |  | 2,569 |  |  | (2,569) |  |  | 212 |  |  | 7,667 |  |  | (7,455) |
EBIT | 70,826 |  |  | 57,279 |  |  | 13,547 |  |  | 126,951 |  |  | 93,803 |  |  | 33,148 |  |  | 266,741 |  |  | 204,822 |  |  | 61,919 |
Depreciation and amortization | 3,031 |  |  | 3,683 |  |  | (652) |  |  | 5,912 |  |  | 6,805 |  |  | (893) |  |  | 13,083 |  |  | 15,391 |  |  | (2,308) |
EBITDA | 73,857 |  |  | 60,962 |  |  | 12,895 |  |  | 132,863 |  |  | 100,608 |  |  | 32,255 |  |  | 279,824 |  |  | 220,213 |  |  | 59,611 |
Stock-based compensation expense | 2,424 |  |  | 2,549 |  |  | (125) |  |  | 4,532 |  |  | 6,060 |  |  | (1,528) |  |  | 10,639 |  |  | 12,886 |  |  | (2,247) |
Loss on extinguishment of debt | 164 |  |  | 563 |  |  | (399) |  |  | 164 |  |  | 563 |  |  | (399) |  |  | 1,626 |  |  | 563 |  |  | 1,063 |
Inventory impairments and abandonments (b) | 935 |  |  | — |  |  | 935 |  |  | 935 |  |  | 465 |  |  | 470 |  |  | 1,323 |  |  | 2,576 |  |  | (1,253) |
Restructuring and severance expenses | — |  |  | — |  |  | — |  |  | — |  |  | (10) |  |  | 10 |  |  | — |  |  | 1,307 |  |  | (1,307) |
Litigation settlement in discontinued operations | — |  |  | 120 |  |  | (120) |  |  | — |  |  | 120 |  |  | (120) |  |  | — |  |  | 1,380 |  |  | (1,380) |
Adjusted EBITDA | $ | 77,380 |  |  | $ | 64,194 |  |  | $ | 13,186 |  |  | $ | 138,494 |  |  | $ | 107,806 |  |  | $ | 30,688 |  |  | $ | 293,412 |  |  | $ | 238,925 |  |  | $ | 54,487 |

(a) "LTM" indicates amounts for the trailing 12 months.
(b) In periods during which we impaired certain of our inventory assets, capitalized interest that is impaired is included in the line above titled "Interest amortized to home construction and land sales expenses and capitalized interest impaired."
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Homebuilding Operations Data
The following table summarizes new orders and cancellation rates by reportable segment for the periods presented:

| Three Months Ended March 31,
| New Orders, net |  | Cancellation Rates
| 2022 |  | 2021 |  | 22 vs 21 |  | 2022 |  | 2021
West | 832 |  |  | 1,116 |  |  | (25.4) | % |  | 12.1 | % |  | 9.4 | %
East | 284 |  |  | 357 |  |  | (20.4) | % |  | 9.8 | % |  | 12.3 | %
Southeast | 175 |  |  | 381 |  |  | (54.1) | % |  | 16.3 | % |  | 9.7 | %
Total | 1,291 |  |  | 1,854 |  |  | (30.4) | % |  | 12.2 | % |  | 10.0 | %
| Six Months Ended March 31,
| New Orders, net |  | Cancellation Rates
| 2022 |  | 2021 |  | 22 vs 21 |  | 2022 |  | 2021
West | 1,487 |  |  | 1,898 |  |  | (21.7) | % |  | 12.4 | % |  | 11.6 | %
East | 520 |  |  | 677 |  |  | (23.2) | % |  | 11.7 | % |  | 10.6 | %
Southeast | 425 |  |  | 721 |  |  | (41.1) | % |  | 11.1 | % |  | 9.9 | %
Total | 2,432 |  |  | 3,296 |  |  | (26.2) | % |  | 12.0 | % |  | 11.0 | %

Net new orders for the quarter ended March 31, 2022 decreased to 1,291, down 30.4% from the quarter ended March 31, 2021. Net new orders for the six months ended March 31, 2022 decreased to 2,432, down 26.2% from the six months ended March 31, 2021. For the quarter ended March 31, 2022, the decrease in net new orders compared to the prior year quarter was driven primarily by a 23.4% decrease in sales pace from 4.7 sales per community per month in the prior year quarter to 3.6 and a 9.2% decrease in active community count from 131 in the prior year quarter to 119. We are working to grow community count by investing in new communities, and we are also deliberately limiting sales in a number of our communities to better align sales pace with production capacity, to manage lot supply, to ens ure a positive customer experience and to maximize margins.
The table below summarizes backlog units by reportable segment as well as the aggregate dollar value and ASP of homes in backlog as of March 31, 2022 and 2021:

| As of March 31, |
| 2022 |  | 2021 |  | 22 vs 21 |
Backlog Units: |  |  |  |  |  |
West | 1,872 |  |  | 1,864 |  |  | 0.4 | % |
East | 634 |  |  | 757 |  |  | (16.2) | % |
Southeast | 615 |  |  | 682 |  |  | (9.8) | % |
Total | 3,121 |  |  | 3,303 |  |  | (5.5) | % |
Aggregate dollar value of homes in backlog (in millions) | $ | 1,583.5 |  |  | $ | 1,386.4 |  |  | 14.2 | % |
ASP in backlog (in thousands) | $ | 507.4 |  |  | $ | 419.7 |  |  | 20.9 | % |

Backlog reflects the number of homes for which the Company has entered into a sales contract with a customer but has not yet delivere d the home. Homes in backlog have historically been delivered within three to six months following commencement of construction. Ongoing supply chain disruptions, including the availability of certain materials and construction labor, has led to extended construction cycle times. As a result, we are experiencing increased construction cycle times by an average of two to three months across our markets compared to the prior year. The aggregate dollar value of homes in backlog as of March 31, 2022 increased 14.2% compared to March 31, 2021 due to a 20.9% increase in the ASP of homes in backlog, partially offset by a 5.5% decrease in backlog units.
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Homebuilding Revenue, Average Selling Price, and Closings
The table below summarizes homebuilding revenue, ASP of our homes closed, and closings by reportable segment for the periods presented:

| Three Months Ended March 31,
| Homebuilding Revenue |  | Average Selling Price |  | Closings
$ in thousands | 2022 |  | 2021 |  | 22 vs 21 |  | 2022 |  | 2021 |  | 22 vs 21 |  | 2022 |  | 2021 |  | 22 vs 21
West | $ | 302,887 |  |  | $ | 277,843 |  |  | 9.0 | % |  | $ | 455.5 |  |  | $ | 367.0 |  |  | 24.1 | % |  | 665 |  |  | 757 |  |  | (12.2) | %
East | 128,424 |  |  | 151,993 |  |  | (15.5) | % |  | 509.6 |  |  | 473.5 |  |  | 7.6 | % |  | 252 |  |  | 321 |  |  | (21.5) | %
Southeast | 75,897 |  |  | 117,581 |  |  | (35.5) | % |  | 471.4 |  |  | 379.3 |  |  | 24.3 | % |  | 161 |  |  | 310 |  |  | (48.1) | %
Total | $ | 507,208 |  |  | $ | 547,417 |  |  | (7.3) | % |  | $ | 470.5 |  |  | $ | 394.4 |  |  | 19.3 | % |  | 1,078 |  |  | 1,388 |  |  | (22.3) | %
| Six Months Ended March 31,
| Homebuilding Revenue |  | Average Selling Price |  | Closings
$ in thousands | 2022 |  | 2021 |  | 22 vs 21 |  | 2022 |  | 2021 |  | 22 vs 21 |  | 2022 |  | 2021 |  | 22 vs 21
West | $ | 559,379 |  |  | $ | 510,783 |  |  | 9.5 | % |  | $ | 441.2 |  |  | $ | 365.1 |  |  | 20.8 | % |  | 1,268 |  |  | 1,399 |  |  | (9.4) | %
East | 242,711 |  |  | 249,957 |  |  | (2.9) | % |  | 488.4 |  |  | 459.5 |  |  | 6.3 | % |  | 497 |  |  | 544 |  |  | (8.6) | %
Southeast | 151,847 |  |  | 210,906 |  |  | (28.0) | % |  | 457.4 |  |  | 377.3 |  |  | 21.2 | % |  | 332 |  |  | 559 |  |  | (40.6) | %
Total | $ | 953,937 |  |  | $ | 971,646 |  |  | (1.8) | % |  | $ | 454.9 |  |  | $ | 388.3 |  |  | 17.2 | % |  | 2,097 |  |  | 2,502 |  |  | (16.2) | %

For the three and six months ended March 31, 2022, homebuilding revenue decreased primarily as a result of a decrease in closings, partially offset by an increase in ASP.
The increase in ASP across all segments was attributed to price appreciation due to inflation, strong demand, and short supply of homes. In the East segment, ASP changes were also impacted by a change in mix of closings between products and among communities within the markets as compared to the prior year period. On average, we anticipate that our ASP will continue to increase in the near-term as indicated by the ASP for homes in backlog as of March 31, 2022.
The decrease in closings was primarily due to a decrease in backlog conversion rates as a result of longer construction cycle times compared to the prior year quarter. Among the three reportable segments, the Southeast segment has experienced the highest increase in construction cycle ti mes by an average of 3.2 months, resulting in a significant decrease in backlog conversion rates and closings.
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Homebuilding Gross Profit and Gross Margin
The following tables present our homebuilding (HB) gross profit and gross margin by reportable segment and in total. In addition, such amounts are presented excluding inventory impairments and abandonments and interest amortized to cost of sales (COS). Homebuilding gross profit is defined as homebuilding revenue less home cost of sales (which includes land and land development costs, home construction costs, capitalized interest, indirect costs of construction, estimated warranty costs, closing costs, and inventory impairment and abandonment charges).
Reconciliation of homebuilding gross profit and the related gross margin excluding impairments and abandonments and interest amortized to cost of sales to homebuilding gross profit and gross margin, the most directly comparable GAAP measure, is provided for each period discussed below. Management believes that this information assists investors in comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies' respective level of impairments and level of debt. These measures should not be considered alternatives to homebuilding gross profit and gross margin determined in accordance with GAAP as an indicator of operating performance.

| Three Months Ended March 31, 2022
$ in thousands | HB Gross Profit |  | HB Gross Margin |  | Impairments & Abandonments (I&A) |  | HB Gross Profit excluding I&A |  | HB Gross Margin excluding I&A |  | Interest Amortized to COS (Interest) |  | HB Gross Profit excluding I&A and Interest |  | HB Gross Margin excluding I&A and Interest
West | $ | 81,849 |  |  | 27.0 | % |  | $ | 12 |  |  | $ | 81,861 |  |  | 27.0 | % |  | $ | — |  |  | $ | 81,861 |  |  | 27.0 | %
East | 33,673 |  |  | 26.2 | % |  |  |  | 33,673 |  |  | 26.2 | % |  | — |  |  | 33,673 |  |  | 26.2 | %
Southeast | 17,510 |  |  | 23.1 | % |  | 483 |  |  | 17,993 |  |  | 23.7 | % |  | — |  |  | 17,993 |  |  | 23.7 | %
Corporate & unallocated (a) | (13,630) |  |  |  |  | — |  |  | (13,630) |  |  |  |  | 16,083 |  |  | 2,453 |  |  |
Total homebuilding | $ | 119,402 |  |  | 23.5 | % |  | $ | 495 |  |  | $ | 119,897 |  |  | 23.6 | % |  | $ | 16,083 |  |  | $ | 135,980 |  |  | 26.8 | %
| Three Months Ended March 31, 2021
$ in thousands | HB Gross Profit |  | HB Gross Margin |  | Impairments & Abandonments (I&A) |  | HB Gross Profit excluding I&A |  | HB Gross Margin excluding I&A |  | Interest Amortized to COS (Interest) |  | HB Gross Profit excluding I&A and Interest |  | HB Gross Margin excluding I&A and Interest
West | $ | 65,595 |  |  | 23.6 | % |  | $ | — |  |  | $ | 65,595 |  |  | 23.6 | % |  | $ | — |  |  | $ | 65,595 |  |  | 23.6 | %
East | 33,569 |  |  | 22.1 | % |  | — |  |  | 33,569 |  |  | 22.1 | % |  | — |  |  | 33,569 |  |  | 22.1 | %
Southeast | 25,287 |  |  | 21.5 | % |  | — |  |  | 25,287 |  |  | 21.5 | % |  | — |  |  | 25,287 |  |  | 21.5 | %
Corporate & unallocated (a) | (26,995) |  |  |  |  | — |  |  | (26,995) |  |  |  |  | 24,110 |  |  | (2,885) |  |  |
Total homebuilding | $ | 97,456 |  |  | 17.8 | % |  | $ | — |  |  | $ | 97,456 |  |  | 17.8 | % |  | $ | 24,110 |  |  | $ | 121,566 |  |  | 22.2 | %

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| Six Months Ended March 31, 2022
$ in thousands | HB Gross Profit |  | HB Gross Margin |  | Impairments & Abandonments (I&A) |  | HB Gross Profit excluding I&A |  | HB Gross Margin excluding I&A |  | Interest Amortized to COS (Interest) |  | HB Gross Profit excluding I&A and Interest |  | HB Gross Margin excluding I&A and Interest
West | $ | 144,776 |  |  | 25.9 | % |  | $ | 12 |  |  | $ | 144,788 |  |  | 25.9 | % |  | $ | — |  |  | $ | 144,788 |  |  | 25.9 | %
East | 59,207 |  |  | 24.4 | % |  | — |  |  | 59,207 |  |  | 24.4 | % |  | — |  |  | 59,207 |  |  | 24.4 | %
Southeast | 33,545 |  |  | 22.1 | % |  | 483 |  |  | 34,028 |  |  | 22.4 | % |  | — |  |  | 34,028 |  |  | 22.4 | %
Corporate & unallocated (a) | (24,822) |  |  |  |  | — |  |  | (24,822) |  |  |  |  | 30,863 |  |  | 6,041 |  |  |
Total homebuilding | $ | 212,706 |  |  | 22.3 | % |  | $ | 495 |  |  | $ | 213,201 |  |  | 22.3 | % |  | $ | 30,863 |  |  | $ | 244,064 |  |  | 25.6 | %
| Six Months Ended March 31, 2021
$ in thousands | HB Gross Profit |  | HB Gross Margin |  | Impairments & Abandonments (I&A) |  | HB Gross Profit excluding I&A |  | HB Gross Margin excluding I&A |  | Interest Amortized to COS (Interest) |  | HB Gross Profit excluding I&A and Interest |  | HB Gross Margin excluding I&A and Interest
West | $ | 118,469 |  |  | 23.2 | % |  | $ | — |  |  | $ | 118,469 |  |  | 23.2 | % |  | $ | — |  |  | $ | 118,469 |  |  | 23.2 | %
East | 53,434 |  |  | 21.4 | % |  | 465 |  |  | 53,899 |  |  | 21.6 | % |  | — |  |  | 53,899 |  |  | 21.6 | %
Southeast | 45,109 |  |  | 21.4 | % |  | — |  |  | 45,109 |  |  | 21.4 | % |  | — |  |  | 45,109 |  |  | 21.4 | %
Corporate & unallocated (a) | (44,719) |  |  | — |  |  | — |  |  | (44,719) |  |  |  |  | 42,670 |  |  | (2,049) |  |  |
Total homebuilding | $ | 172,293 |  |  | 17.7 | % |  | $ | 465 |  |  | $ | 172,758 |  |  | 17.8 | % |  | $ | 42,670 |  |  | $ | 215,428 |  |  | 22.2 | %

(a) Corporate and unallocated includes capitalized interest and capitalized indirect costs expensed to homebuilding cost of sale related to homes closed, as well as capitalized interest and capitalized indirect costs impaired in order to reflect projects in progress assets at fair value.
Three Months Ended March 31, 2022 as compared to 2021
Our homebuilding gross profit increased by $21.9 million to $119.4 million for the three months ended March 31, 2022, compared to $97.5 million in the prior year quarter. The increase in homebuilding gross profit was primarily driven by an increase in gross margin of 570 basis points to 23.5%, partially offset by a decrease in homebuilding revenue of $40.2 million. However, as shown in the tables above, the comparability of our gross profit and gross margin was impacted by impairment and abandonment charges which increased by $0.5 million, and interest amortized to homebuilding cost of sales which decreased by $8.0 million period-over-period (refer to Note 5 and Note 6 of the notes to the condensed consolidated financial statements in this Form 10-Q for additional details). When excluding the impact of impairment and abandonment charges and interest amortized to homebuilding cost of sales, homebuilding gross profit increased by $14.4 million compared to the prior year quarter, while homebuilding gross margin increased by 460 basis points to 26.8%. The year-over-year improvement in gross margin for the three months ended March 31, 2022 was primarily driven by lower sales incentives and pricing increases, although cost pressures and the availability of labor may temper gross margin expansion in the future.
West Segment: Compared to the prior year quarter, homebuilding gross profit increased by $16.3 million due to the increase in homebuilding revenue and higher gross margin. Homebuilding gross margin, excluding impairments and abandonments, increased to 27.0%, up from 23.6% in the prior year quarter. The increase in gross margin was driven primarily by lower sales incentives and pricing increases.
East Segment: Compared to the prior year quarter, homebuilding gross profit increased slightly by $0.1 million due to higher gross margin, partially offset by a decrease in homebuilding revenue. Homebuilding gross margin, excluding impairments and abandonments, increased to 26.2%, up from 22.1% in the prior year quarter. The increase in gross margin was driven primarily by lower sales incentives and pricing increases.
Southeast Segment: Compared to the prior year quarter, homebuilding gross profit decreased by $7.8 million due to a decrease in homebuilding revenue, partially offset by higher gross margin. Homebuilding gross margin, excluding impairments and abandonments, increased to 23.7%, up from 21.5% in the prior year quarter. The increase in gross margin was driven primarily by lower sales incentives and pricing increases.
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Six Months Ended March 31, 2022 as compared to 2021
Our homebuilding gross profit increased by $40.4 million to $212.7 million for the six months ended March 31, 2022, from $172.3 million in the prior year period. The increase in gross profit was primarily driven by an increase in gross margin of 460 basis points to 22.3%, partially offset by a decrease in homebuilding revenue of $17.7 million. However, similar to the three-month period discussed above, the comparability of our gross profit and gross margin for the six-month period was impacted by impairment and abandonment charges which increased by less than $0.1 million, and interest amortized to homebuilding cost of sales which decreased by $11.8 million period-over-period (refer to Note 5 and Note 6 of the notes to the condensed consolidated financial statements in this Form 10-Q for additional details). When excluding the impact of impairment and abandonment charges and interest amortized to homebuilding cost of sales, homebuilding gross profit increased by $28.6 million compared to the prior year period, while homebuilding gross margin increased by 340 basis points to 25.6%. The year-over-year improvement in gross margin for the six months ended March 31, 2022 was primarily driven by lower sales incentives and pricing increases, although cost pressures and the availability of labor may temper gross margin expansion in the future.
West Segment: Compared to the prior year period, homebuilding gross profit increased by $26.3 million due to the increase in homebuilding revenue and higher gross margin. Homebuilding gross margin, excluding impairments and abandonments, increased to 25.9%, up from 23.2% in the prior year period. The increase in gross margin was driven primarily by lower sales incentives and pricing increases.
East Segment: Compared to the prior year period, homebuilding gross profit increased by $5.8 million due to higher gross margin, partially offset by a decrease in homebuilding revenue. Homebuilding gross margin, excluding impairments and abandonments, increased to 24.4%, up from 21.6% in the prior year period. The increase in gross margin was driven primarily by lower sales incentives and pricing increases.
Southeast Segment: Compared to the prior year period, homebuilding gross profit decreased by $11.6 million due to a decrease in homebuilding revenue, partially offset by higher gross margin. Homebuilding gross margin, excluding impairments and abandonments, increased to 22.4%, up from 21.4% in the prior year period. The increase in gross margin was driven primarily by lower sales incentives and pricing increases.
Measures of homebuilding gross profit and gross margin after excluding inventory impairments and abandonments, interest amortized to cost of sales, and other non-recurring items are not GAAP financial measures. These measures should not be considered alternatives to homebuilding gross profit and gross margin determined in accordance with GAAP as an indicator of operating performance.
In particular, the magnitude and volatility of non-cash inventory impairment and abandonment charges for the Company and other homebuilders have been significant historically and, as such, have made financial analysis of our industry more difficult. Homebuilding metrics excluding these charges, as well as interest amortized to cost of sales and other similar presentations by analysts and other companies, are frequently used to assist investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies' respective level of impairments and levels of debt. Management believes these non-GAAP measures enable holders of our securities to better understand the cash implications of our operating performance and our ability to service our debt obligations as they currently exist and as additional indebtedness is incurred in the future. These measures are also useful internally, helping management to compare operating results and to measure cash available for discretionary spending.
In a given period, our reported gross profit is generated from both communities previously impaired and communities not previously impaired. In addition, as indicated above, certain gross profit amounts arise from recoveries of prior period costs, including warranty items that are not directly tied to communities generating revenue in the period. Home closings from communities previously impaired would, in most instances, generate very low or negative gross margins prior to the impact of the previously recognized impairment. Gross margin for each home closing is higher for a particular community after an impairment because the carrying value of the underlying land was previously reduced to the present value of future cash flows as a result of the impairment, leading to lower cost of sales at the home closing. This improvement in gross margin resulting from one or more prior impairments is frequently referred to in the aggregate as the “impairment turn” or “flow-back” of impairments within the reporting period. The amount of this impairment turn may exceed the gross margin for an individual impaired asset if the gross margin for that asset prior to the impairment would have been negative. The extent to which this impairment turn is greater than the reported gross margin for the individual asset is related to the specific historical cost basis of that individual asset.
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The asset valuations that result from our impairment calculations are based on discounted cash flow analyses and are not derived by simply applying prospective gross margins to individual communities. As such, impaired communities may have gross margins that are somewhat higher or lower than the gross margins for unimpaired communities. The mix of home closings in any particular quarter varies to such an extent that comparisons between previously impaired and never impaired communities would not be a reliable way to ascertain profitability trends or to assess the accuracy of previous valuation estimates. In addition, since any amount of impairment turn is tied to individual lots in specific communities, it will vary considerably from period to period. As a result of these factors, we review the impairment turn impact on gross margin on a trailing 12-month basis rather than a quarterly basis as a way of considering whether our impairment calculations are resulting in gross margins for impaired communities that are comparable to our unimpaired communities. For the trailing 12-month period ended March 31, 2022, our homebuilding gross margin w as 21.0%. Excluding interest and inventory impairments and abandonments, our homebuilding gross margin for the trailing 12-month period ended March 31, 2022 was 24.6%. For the same trailing 12-month period, ho mebuilding gross margin was as follows in those communities that have previously been impaired, which represent ed 6.0% of to tal closings durin g this period:

Homebuilding Gross Margin from previously impaired communities: |
Pre-impairment turn gross margin | 10.6 | %
Impact of interest amortized to COS related to these communities | 3.1 | %
Pre-impairment turn gross margin, excluding interest amortization | 13.7 | %
Impact of impairment turns | 16.5 | %
Gross margin (post impairment turns), excluding interest amortization | 30.2 | %

For a further discussion of our impairment policies, refer to Note 5 of the notes to the condensed consolidated financial statements in this Form 10-Q.
Land Sales and Other Revenue and Gross Profit
Land sales relate to land and lots sold that do not fit within our homebuilding programs and strategic plans. We also have other revenue related to title examinations provided for our homebuyers in certain markets. The following tables summarize our land sales and other revenue and related gross profit by reportable segment for the periods presented:

| Land Sales and Other Revenue |  | Land Sales and Other Gross Profit
| Three Months Ended March 31, |  | Three Months Ended March 31,
in thousands | 2022 |  | 2021 |  | 22 vs 21 |  | 2022 |  | 2021 |  | 22 vs 21
West | $ | 605 |  |  | $ | 877 |  |  | $ | (272) |  |  | $ | 15 |  |  | $ | 312 |  |  | $ | (297) |
East | 511 |  |  | 1,578 |  |  | (1,067) |  |  | 199 |  |  | 142 |  |  | 57 |
Southeast | 182 |  |  | 17 |  |  | 165 |  |  | 134 |  |  | 16 |  |  | 118 |
Total | $ | 1,298 |  |  | $ | 2,472 |  |  | $ | (1,174) |  |  | $ | 348 |  |  | $ | 470 |  |  | $ | (122) |

| Land Sales and Other Revenue |  | Land Sales and Other Gross Profit (Loss)
| Six Months Ended March 31, |  | Six Months Ended March 31,
in thousands | 2022 |  | 2021 |  | 22 vs 21 |  | 2022 |  | 2021 |  | 22 vs 21
West | $ | 1,779 |  |  | $ | 4,817 |  |  | $ | (3,038) |  |  | $ | 493 |  |  | $ | 1,019 |  |  | $ | (526) |
East | 4,393 |  |  | 1,578 |  |  | 2,815 |  |  | 3,606 |  |  | 142 |  |  | 3,464 |
Southeast | 2,546 |  |  | 387 |  |  | 2,159 |  |  | 345 |  |  | 73 |  |  | 272 |
Corporate and unallocated (a) | — |  |  | — |  |  | — |  |  | — |  |  | (308) |  |  | 308 |
Total | $ | 8,718 |  |  | $ | 6,782 |  |  | $ | 1,936 |  |  | $ | 4,444 |  |  | $ | 926 |  |  | $ | 3,518 |

(a) Corporate and unallocated includes capitalized interest and capitalized indirect costs expensed to land cost of sale related to land sold, as well as capitalized interest and capitalized indirect costs impaired in order to reflect land held for sale assets at net realizable value.
To further support our efforts to improve capital efficiency, we continued to focus on closing a number of land sales in the three and six months ended March 31, 2022 for land positions that did not fit within our strategic plans. Future land and lot sales will depend on a variety of factors, including local market conditions, individual community performance, and changing strategic plans.
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Operating Income
The table below summarizes operating income by reportable segment for the periods presented:

| Three Months Ended March 31, |  | Six Months Ended March 31,
in thousands | 2022 |  | 2021 |  | 22 vs 21 |  | 2022 |  | 2021 |  | 22 vs 21
West | $ | 58,103 |  |  | $ | 42,488 |  |  | $ | 15,615 |  |  | $ | 100,827 |  |  | $ | 75,791 |  |  | $ | 25,036 |
East | 24,072 |  |  | 22,449 |  |  | 1,623 |  |  | 43,931 |  |  | 33,817 |  |  | 10,114 |
Southeast | 10,007 |  |  | 15,074 |  |  | (5,067) |  |  | 18,207 |  |  | 25,382 |  |  | (7,175) |
Corporate and unallocated (a) | (37,571) |  |  | (46,393) |  |  | 8,822 |  |  | (67,415) |  |  | (83,684) |  |  | 16,269 |
Operating income | $ | 54,611 |  |  | $ | 33,618 |  |  | $ | 20,993 |  |  | $ | 95,550 |  |  | $ | 51,306 |  |  | $ | 44,244 |

(a) Corporate and unallocated includes amortization of capitalized interest, capitalization and amortization of indirect costs, impairment of capitalized interest and capitalized indirect costs, expenses related to numerous shared services functions that benefit all segments but are not allocated to the operating segments, and certain other amounts that are not allocated to our operating segments.
Our operating income increased by $21.0 million to $54.6 million for the three months ended March 31, 2022, compared to operating income of $33.6 million for the three months ended March 31, 2021, driven primarily by the previously discussed increase in gross profit, partially offset by an increase of $1.5 million, or 2.4%, in SG&A expense primarily due to increased personnel expense. SG&A as a percentage of total revenue increased by 120 basis points quarter-over-quarter from 11.0% to 12.2% primarily due to decreases in closings and revenue as a result of construction cycle time extension.
Our operating income increased by $44.2 million to $95.6 million for the six months ended March 31, 2022, compared to operating income of $51.3 million for the six months ended March 31, 2021, driven primarily by the previously discussed increase in gross profit. Dollar amount of SG&A remained relatively flat year-over-year, SG&A as a percentage of total revenue increased by 20 basis points year-over-year from 11.8% to 12.0% primarily due to decreases in closings and revenue as a result of construction cycle time extension.
Three Months Ended March 31, 2022 as compared to 2021
West Segment: The $15.6 million increase in operating income compared to the prior year quarter was primarily due to the increase in gross profit previously discussed, and lower commissions expense despite higher homebuilding revenue as we reduce our reliance on external agents given the favorable sales environment. These increases to operating income were partially offset by higher G&A expenses and higher sales and marketing expenses in the segment.
East Segment: The $1.6 million increase in operating income compared to the prior year quarter was primarily due to the increase in gross profit previously discussed and lower commissions expense on lower homebuilding revenue. These increases to operating income were partially offset by higher G&A expenses and higher sales and marketing expenses in the segment.
Southeast Segment: The $5.1 million decrease in operating income compared to the prior year quarter was primarily due to the decrease in gross profit previously discussed and higher G&A expenses. These decreases to operating income were partially offset by lower commissions expense on lower homebuilding revenue and lower sales and marketing expenses in the segment.
Corporate and Unallocated: Our Corporate and unallocated results include amortization of capitalized interest, capitalization and amortization of indirect costs, impairment of capitalized interest and capitalized indirect costs, expenses for various shared services functions that benefit all segments but are not allocated, including information technology, treasury, corporate finance, legal, branding and national marketing, and certain other amounts that are not allocated to our operating segments. For the three months ended March 31, 2022, corporate and unallocated net expenses decreased by $8.8 million from the prior year quarter primarily due to lower amortization of capitalized interest and capitalized indirect costs to cost of sales, partially offset by higher G&A costs.
Six Months Ended March 31, 2022 as compared to 2021
West Segment: The $25.0 million increase in operating income compared to the prior year period was primarily due to the increase in gross profit previously discussed, and lower commissions expense despite higher homebuilding revenue as we reduced our reliance on external agents given the favorable sales environment. These increases to operating income were partially offset by higher G&A expenses and higher sales and marketing expenses in the segment.
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East Segment: The $10.1 million increase in operating income compared to the prior year period was primarily due to the increase in gross profit previously discussed, lower commissions expense on lower homebuilding revenue, and lower sales and marketing expenses. These increases to operating income were partially offset by higher G&A expenses in the segment.
Southeast Segment: The $7.2 million decrease in operating income compared to the prior year period was primarily due to the decrease in gross profit previously discussed, partially offset by lower commissions expense on lower homebuilding revenue, lower sales and marketing expenses and lower G&A expenses in the segment.
Corporate and Unallocated: For the six months ended March 31, 2022, corporate and unallocated net costs decreased by $16.3 million over the prior year period. The decrease was primarily due to lower amortization of capitalized interest and capitalized indirect costs to cost of sales, partially offset by higher G&A costs.
Below operating income, we had one noteworthy year-over-year fluctuations for the six months ended March 31, 2022 compared to the prior period. Specifically, we experienced a decline in other expense, net, primarily attributable to a year-over-year decrease in interest expense not qualified for capitalization. See Note 6 of the notes to our condensed consolidated financial statements in this Form 10-Q for a further discussion of these items.
Income Taxes
Our income tax assets and liabilities and related effective tax rate are affected by various factors, the most significant of which is the valuation allowance recorded against a portion of our deferred tax assets. Due to the effect of our valuation allowance adjustments beginning in fiscal 2008, a comparison of our annual effective tax rates must consider the changes in our valuation allowance. In addition, our effective tax rate is also impacted by a variety of factors, including, but not limited to, tax credits and permanent differences. As such, our income tax expense/benefit is no t always directly correlated to the amount of pre-tax income or loss for the associated periods.
We recognized income tax expense from continuing operations of $10.1 million and $16.5 million for the three and six months ended March 31, 2022, respectively, compared to $7.7 million and $11.8 million for the three and six months ended March 31, 2021, respectively. Income tax expense for the six months ended March 31, 2022 was primarily driven by income tax expense on earnings from continuing operations, partially offset by the generation of additional federal tax credits and the discrete tax benefits related to stock-based compensation activity in the quarter. Income tax expense for the six months ended March 31, 2021 was primarily driven by income tax expense on earnings from continuing operations and the discrete tax expense related to stock-based compensation activity in the quarter. Refer to Note 11 of the notes to the condensed consolidated financial statements included in this Form 10-Q for further discussion of our income taxes.
Liquidity and Capital Resources
Our sources of liquidity include, but are not limited to, cash from operations, proceeds from Senior Notes, the Facility and other bank borrowings, the issuance of equity and equity-linked securities, and other external sources of funds. Our short-term and long-term liquidity depends primarily upon our level of net income, working capital management (cash, accounts receivable, accounts payable and other liabilities), and available credit facilities.
Net changes in cash, cash equivalents, and restricted cash are as follows for the periods presented:

| Six Months Ended March 31,
in thousands | 2022 |  | 2021
Cash (used in) provided by operating activities | $ | (58,130) |  |  | $ | 50,139 |
Cash used in investing activities | (6,036) |  |  | (6,344) |
Cash used in financing activities | (12,729) |  |  | (12,628) |
Net (decrease) increase in cash, cash equivalents, and restricted cash | $ | (76,895) |  |  | $ | 31,167 |

Operating Activities
Net cash used in operating activities was $58.1 million for the six months ended March 31, 2022. The primary drivers of operating cash flows are typically cash earnings and changes in inventory levels, including land acquisition and development spending. Net cash used in operating activities during the period was primarily driven by an increase in inventory of $174.2 million resulting from land acquisition, land development, and house construction spending to support continued growth. This was partially offset by cash inflows from income before income taxes of $96.1 million, which included $11.2 million of non-cash charges and and a net decrease in non-inventory working capital balances of $8.8 million.
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Net cash provided by operating activities was $50.1 million for the six months ended March 31, 2021, primarily driven by income before income taxes of $48.3 million, which included $13.5 million of non-cash charges, and a net decrease in non-inventory working capital balances of $19.5 million, partially offset by an increase in inventory of $31.2 million resulting from land acquisition, land development, and house construction spending to support continued growth.
Investing Activities
Net cash used in investing activities for th e six months ended March 31, 2022 and March 31, 2021 was $6.0 million and $6.3 million, respectively, primarily driven in both periods by capital expenditures for model homes and information systems infrastructure.
Financing Activities
Net cash used in financing activities for the six months ended March 31, 2022 and March 31, 2021 was $12.7 million and $12.6 million, respectively, primarily driven by the repurchase of a portion of our 2027 Senior Notes, and tax payments for stock-based compensation awards vesting.
Financial Position
As of March 31, 2022, our liquidity position consisted of $163.9 million in cash and cash equivalents and $250.0 million of remaining capacity under the Facility.
While we believe we possess sufficient liquidity, we are mindful of potential short-term or seasonal requirements for enhanced liquidity that may arise to operate and grow our business. As of the date of this report, we believe we have adequate capital resources and sufficient access to external financing sources to satisfy our current and reasonably anticipated requirements for funds to conduct our operations and meet other needs in the ordinary course of our business.
During this time, we may also engage in capital markets, bank loan, project debt or other financial transactions, including the repurchase of debt or potential new issuances of debt or equity securities to support our business needs. The amounts involved in these transactions, if any, may be material. In addition, as necessary or desirable, we may adjust or amend the terms of and/or expand the capacity of the Facility, or enter into additional letter of credit facilities, or other similar facility arrangements, in each case with the same or other financial institutions, or allow any such facilities to mature or expire.
Debt
We generally fulfill our short-term cash requirements with cash generated from our operations and available borrowings. Additionally, our Secured Revolving Credit Facility provides working capital and letter of credit capacity of $250.0 million. As of March 31, 2022, no borrowings and no letters of credit were outstanding under the Facility, resulting in $250.0 million remaining capacity.
We have also entered into a number of stand-alone, cash secured letter of credit agreements with banks. These combined facilities provide for letter of credit needs collateralized by either cash or assets of the Company. We currently have $26.4 million of outstanding letters of credit under these facilities, which are secured by cash collateral that is maintained in restricted accounts totaling $26.1 million.
To provide greater letter of credit capacity, the Company has also entered into a reimbursement agreement, which provides for the issuance of performance letters of credit, and an unsecured credit agreement that provides for the issuance of up to $50.0 million of standby letters of credit to backstop the Company's obligations under the reimbursement agreement (collectively, the "Bilateral Facility"). As of March 31, 2022, the total stated amount of performance letters of credit issued under the reimbursement agreeme nt was $8.2 million (and the stated amount of the backstop standby letter of credit issued under the credit agreement was $40.0 million).
In the future, we may from time to time s eek to continue to retire or purchase our outstanding debt through cash repurchases or in exchange for other debt securities, in open market purchases, privately-negotiated transactions, or otherwise. In addition, any material variance from our projected operating results could require us to obtain additional equity or debt financing. There can be no assurance that we will be able to complete any of these transactions in the future on favorable terms or at all. See Note 7 of the notes to the condensed consolidated financial statements in this Form 10-Q for additional details related to our borrowings.
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Supplemental Guarantor Information
As discussed in Note 7 of the notes to the condensed consolidated financial statements in this Form 10-Q, the Company's obligations to pay principal and interest under certain debt agreements are guaranteed on a joint and several basis by substantially all of the Company's subsidiaries. Some of the immaterial subsidiaries do not guarantee the Senior Notes. The guarantees are full and unconditional.
The following summarized financial information is presented for Beazer Homes USA, Inc. and the guarantor subsidiaries on a combined basis after elimination of intercompany transactions between entities in the combined group and amounts related to investments in any subsidiary that is a non-guarantor.

| As of
in thousands | March 31, 2022 |  | September 30, 2021
Due from non-guarantor subsidiary | $ | 2,196 |  |  | $ | 1,532 |
Total assets | $ | 3,647,670 |  |  | $ | 2,075,518 |
Total liabilities | $ | 1,357,175 |  |  | $ | 1,353,734 |

| Six Months Ended March 31,
in thousands | 2022 |  | 2021
Total revenues | $ | 960,907 |  |  | $ | 977,686 |
Gross profit | $ | 215,865 |  |  | $ | 172,740 |
Income from continuing operations | $ | 79,096 |  |  | $ | 36,403 |
Net income | $ | 79,080 |  |  | $ | 36,251 |

Credit Ratings
Our credit ratings are periodically reviewed by rating agencies. In June 2021, S&P upgraded the Company’s corporate rating to a B from a B- and reaffirmed the Company's positive outlook. In August 2021, Moody's upgraded the Company's issuer corporate family rating from B3 to B2 and revised the Company's outlook from positive to stable. These ratings and our current credit condition affect, among other things, our ability to access new capital. Negative changes to these ratings may result in more stringent covenants and higher interest rates under the terms of any new debt. Our credit ratings could be lowered, or rating agencies could issue adverse commentaries in the future, which could have a material adverse effect on our business, financial condition, results of operations, and liquidity. In particular, a weakening of our financial condition, including any further increase in our leverage or decrease in our profitability or cash flows, could adversely affect our ability to obtain necessary funds, could result in a credit rating downgrade or change in outlook, or could otherwise increase our cost of borrowing.
Stock Repurchases and Dividends Paid
During the first quarter of fiscal 2019, the Company's Board of Directors approved a share repurchase program that authorizes the Company to repurchase up to $50.0 million of its outstanding common stock. As part of this program, the Company repurchased common stock during fiscal 2019 and 2020 through open market transactions, 10b5-1 plans, and accelerated share repurchase (ASR) agreements. All shares have been retired upon repurchase. The aggregate reduction to stockholders’ equity related to share repurchases duri ng the fiscal year ended September 30, 2020 and September 30, 2019 was $3.3 million and $34.6 million, respectively. No share repurchases were made during fiscal year 2021 or the three and six months ended March 31, 2022. As of March 31, 2022, the remaining availability of the share repurchase program was $12.0 million.
The indentures under which our Senior Notes were issued contain certain restrictive covenants, including limitations on the payment of dividends. There were no dividends paid during the three and six months ended March 31, 2022 or 2021.
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Off-Balance Sheet Arrangements and Aggregate Contractual Commitments
Lot Option Agreements
In addition to purchasing land directly, we control a portion of our land supply through lot option agreements. In recent years, we have focused on increasing our lot option agreement usage to minimize risk as we grow our land position. As of March 31, 2022, we controlled 23,516 lots, which includes 272 lots of land held for future development and 516 lots of land held for sale. Of the total activ e 22,728 lots, we owned 49.2%, or 11,177 of these lots, and the remaining 11,551 of these lots, or 50.8%, were under option contracts, primarily through lot option agreements with land developers and land bankers, which generally require the payment of cash or the posting of a letter of credit for the right to acquire lots during a specified period of time at a certain price. In comparison, we controlled 8,381 lots, or 46.0% of our total active lot position, through option contracts as of March 31, 2021. As a result of the flexibility that these options provide us, upon a change in market conditions, we may renegotiate the terms of the options prior to exercise or terminate the agreement. Under option contracts, purchase of the properties is contingent upon satisfaction of certain requirements by us and the sellers, and our liability is generally limited to forfeiture of the non-refundable deposits and other non-refundable amounts incurred, which totaled approximately $132.0 million as of March 31, 2022. The total remaining purchase price, net of cash deposits, committed under all options was $772.6 million as of March 31, 2022. Based on market conditions and our liquidity, we may further expand our use of option agreements to supp lement our owned inventory supply.
We expect to exercise, subject to market conditions and seller satisfaction of contract terms, most of our option contracts. Various factors, some of which are beyond our control, such as market conditions, weather conditions, and the timing of the completion of development activities, will have a significant impact on the timing of option exercises or whether lot options will be exercised at all.
We have historically funded the exercise of lot options with operating cash flows. We expect these sources to continue to be adequate to fund anticipated future option exercises. Therefore, we do not anticipate that the exercise of our lot options will have a material adverse effect on our liquidity.
Investments in Unconsolidated Entities
Occasionally, we use legal entities in which we have less than a controlling interest. We enter into the majority of these arrangements with land developers, other homebuilders, and financial partners to acquire attractive land positions, to manage our risk profile, and to leverage our capital base. The underlying land positions are developed into finished lots for sale to the unconso lidated entity’s members or other third parties. We account for our interest in unconsolidated entities under the equity method.
Historically, we and our partners have provided varying levels of guarantees of debt or other obligations of our unconsolidated entities. As of March 31, 2022, we had no repayment guarantees outstanding related to the debt of our unconsolidated entities. See Note 4 of the notes to the condensed consol idated financial statements in this Form 10-Q for more information.
Letters of Credit and Surety Bonds
In connection with the development of our communities, we are frequently required to provide performance, maintenance, and other bonds and letters of credit in support of our related obligations with resp ect to such developments. The amount of such obligations outstanding at any time varies in accordance with our pending development activities. In the event any such bonds or letters of credit are drawn upon, we would be obligated to reimburse the issuer of such bonds or letters of credit. We had outstanding letters of credit and surety bonds of $34.6 million and $272.6 million, respectively, as of March 31, 2022, primarily related to our obligations to local governments to construct roads and other improvements in various developments.
Critical Accounting Policies and Estimates
Our critical accounting policies require the use of judgment in their application and in certain cases require estimates of inherently uncertain matters. Although our accounting policies are in compliance with accounting principles generally accepted in the United States of America (GAAP), a change in the facts and circumstances of the underlying transactions could significantly change the application of the accounting policies and the resulting financial statement impact. It is also possible that other professionals applying reasonable judgment to the same set of facts and circumstances could reach a different conclusion. As disclosed in our 2021 Annual Report, our most critical accounting policies relate to inventory valuation of projects in progress, warranty reserves, and income tax valuation allowances. There have been no significant changes to our critical accounting policies and estimates during the six months ended March 31, 2022 as compared to those described in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations included in our 2021 Annual Report on Form 10-K.
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FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (Form 10-Q) contains forward-looking statements. These forward-looking statements represent our expectations or beliefs concerning future events or results, and it is possible that such events or results described in this Form 10-Q will not occur or be achieved. These forward-looking statements can generally be identified by the use of statements that include words such as “estimate,” “project,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will,” "outlook," “goal,” “target” or other similar words or phrases.
These forward-looking statements involve risks, uncertainties and other factors, many of which are outside of our control, that could cause actual results to differ materially from the results discussed in the forward-looking statements, including, among other things, the matters discussed in this Form 10-Q in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Additional information about factors that could lead to material changes is contained in Part I, Item 1A— Risk Factors of our Annual Report on Form 10-K for the fiscal year ended September 30, 2021. These factors are not intended to be an all-inclusive list of risks and uncertainties that may affect the operations, performance, development and results of our business, but instead are the risks that we currently perceive as po tentially being material. Such factors may include:
•the cyclical na ture of the homebuilding industry and a potential deterioration in homebuilding industry conditions;
•increases in mortgage interest rates and reduced availability of mortgage financing due to, among other factors, recent and likely continued actions by the Federal Reserve to address sharp increases in inflation;
•other economic changes nationally and in local markets, including changes in consumer confidence, wage levels, declines in employment levels, and an increase in the number of foreclosures, each of which is outside our control and affects the affordability of, and demand for, the homes we sell;
•potential negative impacts of the COVID-19 pandemic, which, in addition to exacerbating each of the risks listed above and below, may include a significant decrease in demand for our homes or consumer confidence generally with respect to purchasing a home, an inability to sell and build homes in a typical manner or at all, increased costs or decreased supply of building materials, including lumber, or the availability of subcontractors, housing inspectors, and other third-parties we rely on to support our operations, and recognizing charges in future periods, which may be material, for goodwill impairments, inventory impairments and/or land option contract abandonments;
•supply chain challenges negatively impacting our homebuilding production, including shortages of raw materials and other critical components such as windows, doors, and appliances;
•shortages of or increased costs for labor used in housing production, and the level of quality and craftsmanship provided by such labor;
•the availability and cost of land and the risks associated with the future value of our inventory, such as asset impairment charges we took on select California assets during the second quarter of fiscal 2019;
•factors affecting margins, such as decreased land values underlying land option agreements, increased land development costs in communities under development or delays or difficulties in implementing initiatives to reduce our production and overhead cost structure;
•our ability to raise debt and/or equity capital, due to factors such as limitations in the capital markets (including market volatility) or adverse credit market conditions, and our ability to otherwise meet our ongoing liquidity needs (which could cause us to fail to meet the terms of our covenants and other requirements under our various debt instruments and therefore trigger an acceleration of a significant portion or all of our outstanding debt obligations), including the impact of any downgrades of our credit ratings or reduction in our liquidity levels;
•market perceptions regarding any capital raising initiatives we may undertake (including future issuances of equity or debt capital);
•terrorist acts, protests and civil unrest, political uncertainty, natural disasters, acts of war or other factors over which the Company has no control;
•inaccurate estimates related to homes to be delivered in the future (backlog), as they are subject to various cancellation risks that cannot be fully controlled;
•changes in tax laws or otherwise regarding the deductibility of mortgage interest expenses and real estate taxes;
•increased competition or delays in reacting to changing consumer preferences in home design;
•natural disasters or other related events that could result in delays in land development or home construction, increase our costs or decrease demand in the impacted areas;
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•the potential recoverability of our deferred tax assets;
•increases in corporate tax rates;
•potential delays or increased costs in obtaining necessary permits as a result of changes to, or complying with, laws, regulations or governmental policies, and possible penalties for failure to comply with such laws, regulations or governmental policies, including those related to the environment;
•the results of litigation or government proceedings and fulfillment of any related obligations;
•the impact of construction defect and home warranty claims;
•the cost and availability of insurance and surety bonds, as well as the sufficiency of these instruments to cover potential losses incurred;
•the impact of information technology failures, cybersecurity issues or data security breaches;
•the impact of governmental regulations on homebuilding in key markets, such as regulations limiting the availability of water; and
•the success of our Environmental, Social, and Governance (ESG) initiatives, including our ability to meet our goal that every home we build will be Net Zero Energy Ready by 2025 as well as the success of any other related partnerships or pilot programs we may enter into in order to increase the energy efficiency of our homes and prepare for a Net Zero future.
Any forward-looking statement, including any statement expressing confidence regarding future outcomes, speaks only as of the date on which such statement is made and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible to predict all such factors.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to a number of market risks in the ordinary course of business. Our primary market risk exposure relates to fluctuations in interest rates. We do not believe that our exposure in this area is material to our cash flows or results of operations. As of March 31, 2022, we had variable rate debt outstanding tot aling approximately $71.2 million. A one percent increase in the interest rate for these notes would result in an increase of our interest expense by approximately $1.0 million over the next twelve-month period. The estimated fair value of our fixed-rate debt as of March 31, 2022 was $0.98 billion, compared to a carrying amount o f $0.98 billion. The effect of a hypothetical one-percentage point decrease in our estimated discount rates would increase the estimated fair value of the fixed rate debt instruments from $0.98 billion to $1.03 billion as of March 31, 2022.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this report, an evaluation was performed based on criteria established in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Act). Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2022 at a reasonable assurance level.
Attached as exhibits to this Quarterly Report on Form 10-Q are certifications of our CEO and CFO, which are required by Rule 13a-14 of the Act. This Disclosure Controls and Procedures section includes information concerning management’s evaluation of disclosure controls and procedures referred to in those certifications and should be read in conjunction with the certifications of the CEO and CFO.
Changes in Internal Control Over Financial Reporting
There have been n o changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Item 5. Other Information
None.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For a discussion of our legal proceedings, see Note 9 of the notes to our condensed consolidated financial statements in this Form 10-Q.
Item 1A. Risk Factors
There have been no material changes to the risk factors we previously disclosed in our Annual Report on Form 10-K for the year ended September 30, 2021.
Item 6. Exhibits

22 | List of Guarantor Subsidiaries (incorporated herein by reference to Exhibit 22 of the Company's Form 10-K filed on November 10, 2021)
31.1 | Certification of Chief Executive Officer pursuant to 17 CFR 240.13a-14 promulgated under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 | Certification of Chief Financial Officer pursuant to 17 CFR 240.13a-14 promulgated under Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS | Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH | Inline XBRL Taxonomy Extension Schema Document
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: | April 28, 2022 | Beazer Homes USA, Inc.
|  | By: |  | /s/ David I. Goldberg
|  |  | Name: | David I. Goldberg
|  |  |  | Senior Vice President and Chief Financial Officer

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