Capitalized Interest

3 Months Ended

Dec. 31, 2023

The Company capitalizes interest costs incurred to inventory during active development and construction (active inventory). Capitalized interest is charged to cost of sales as the related inventory is delivered to the buyer. During periods in which the Company’s active inventory is lower than its debt level, a portion of the interest incurred is reflected as interest expense in the period incurred. During the first three months of fiscal 2024 and fiscal 2023, the Company’s active inventory exceeded its debt level, and all interest incurred was capitalized to inventory.

The following table summarizes the Company’s interest costs incurred, capitalized and expensed during the three months ended December 31, 2023 and 2022:


	Three Months Ended December 31,
	2023		2022
	(In millions)
Capitalized interest, beginning of period	$	286.4	$	237.4
Interest incurred (1)	42.6		46.2
Interest charged to cost of sales	(28.0)		(28.5)
Capitalized interest, end of period	$	301.0	$	255.1

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(1) Interest incurred in the three months ended December 31, 2023 and 2022 includes (a) interest on the Company's mortgage repurchase facilities of $14.9 million and $8.1 million, respectively; (b) Forestar interest of $8.1 million and $8.2 million, respectively; and (c) interest on DRH Rental’s revolving credit facility of $8.2 million and $9.0 million, respectively.