BZH Beazer Homes USA Inc New

Beazer Homes USA, Inc. (NYSE: BZH) (www.beazer.com) today announced financial results for the quarter ended December 31, 2006. Summary results of the quarter are as follows: Quarter Ended December 31, 2006 Reported net loss of $(59.0) million, or $(1.54) per share, including charges related to inventory impairments and abandonment of land option contracts of $119.9 million on a pre-tax basis, compared to net income of $89.9 million, or $2.00 per diluted share in the first quarter of the last fiscal year. Excluding charges for inventory impairments and abandonment of land option contracts, adjusted net income was $15.9 million, or $0.41 per diluted share. Home closings: 2,660 homes, compared to 3,829 in the first quarter of the prior year. Total revenues: $806.4 million, compared to $1.1 billion in the first quarter of the prior year. New orders: 1,779 homes, compared to 3,872 in the first quarter of the prior year. Lots under control totaled 83,422 at 12/31/06, a 22% decline from the prior year. Unsold homes under construction declined 27% from the fourth quarter of fiscal 2006. Backlog at 12/31/06: 4,221 homes with a sales value of $1.29 billion compared to 9,276 homes with a sales value $2.78 billion in the prior year. �Operating conditions remained extremely challenging for the housing industry during our first quarter of fiscal 2007,� said President and Chief Executive Officer, Ian J. McCarthy. �Most markets across the country continue to experience lower levels of demand for new homes, high cancellation rates and significant levels of discounting. At this point, we have yet to see any meaningful evidence of a sustainable recovery in the housing market, although we would expect to gain a better read on the market as the traditional spring selling season gets underway.� Total home closings of 2,660 during the first quarter were 31% below the prior fiscal year�s first quarter record. Net new home orders totaled 1,779 homes for the quarter, a decline of 54% from the first quarter record of the prior fiscal year, resulting from both reduced demand across the Company�s markets and a higher rate of cancellations at 43%, compared to a more historically normal level of cancellations at 26% in the prior year�s first quarter. However, the cancellation rate was lower sequentially from 57% in the fourth quarter of fiscal 2006. �During the first quarter, historically our weakest in terms of new orders and closings, we prioritized those initiatives aimed at both strengthening our financial capabilities and positioning us for an anticipated increase in activity as we enter the spring selling season. These initiatives include implementing overhead reductions, converting existing backlog into closings and reducing unsold home inventories,� McCarthy continued. �We believe this disciplined approach, coupled with our broad geographic and product diversity, will position us well for a continuing difficult market environment and the eventual upturn. We maintain that the long-term industry fundamentals, based on demographic driven demand and employment trends, together with further supply constraints, remain compelling.� �We remain focused on reducing costs throughout our business and enhancing liquidity as this challenging business environment continues,� said James O�Leary, Executive Vice President and Chief Financial Officer.��We have aligned our overhead structure with our reduced volume expectations in fiscal 2007. We have proactively reduced our controlled lot count by over 20% compared to the prior year, by eliminating non-strategic positions to align our land supply with our current expectations for home closings. These steps are intended to maintain our strong balance sheet and liquidity so that we are in a position to capitalize on those future opportunities that will generate meaningfully higher returns when the housing market recovers.� During the first quarter, operating margin was negatively impacted by higher market driven sales incentives and reduced revenue as compared to the same period a year ago. In addition, the Company incurred pre-tax charges to abandon land option contracts and to recognize inventory impairments of $25.2 million and $94.7 million, respectively. As previously disclosed, the Company also incurred approximately $4.0 million in severance costs during the first quarter of fiscal 2007 related to the alignment of its overhead structure. Fiscal 2007 Outlook The current market environment continues to be characterized by weak demand, with heavy discounting required to drive meaningful sales volume. While this could improve as the year progresses, the Company currently believes that the low end of its previously announced outlook of 12,000 � 13,500 closings is now a more reasonable target in fiscal 2007. At this level of closings and the current conditions in the marketplace, the Company currently expects fiscal 2007 diluted earnings per share to be in the range of $1.25 - $1.50 prior to any impact of inventory impairments and abandonment of land option contracts. During this period, the Company will focus on maintaining balance sheet strength, continue to reduce costs, and maximize its financial resources to better position the Company to take advantage of those opportunities that will arise when conditions stabilize.�Steps taken to date to align the Company�s cost structure with the current environment are consistent with the Company�s goal to be in the top quartile of its peer group with respect to margins and returns. Conference Call The Company will hold a conference call today, January 25, 2007, at 11:00 AM ET to discuss the results and take questions. You may listen to the conference call and view the Company�s slide presentation over the internet by going to the �Investor Relations� section of the Company�s website at www.beazer.com. To access the conference call by telephone, listeners should dial 800-369-1904. To be admitted to the call, verbally supply the passcode "BZH". A replay of the call will be available shortly after the conclusion of the live call. To directly access the replay, dial 866-433-1154 (available until 5:00 PM ET on February 1, 2007), or visit www.beazer.com. Beazer Homes USA, Inc., headquartered in Atlanta, is one of the country�s ten largest single-family homebuilders with operations in Arizona, California, Colorado, Delaware, Florida, Georgia, Indiana, Kentucky, Maryland, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia and West Virginia and also provides mortgage origination and title services to its homebuyers. Beazer Homes, a Fortune 500 Company, is listed on the New York Stock Exchange under the ticker symbol �BZH.� Use of Non-GAAP Financial Information In addition to the results in this press release reported in accordance with generally accepted accounting principles in the United States (�GAAP�), the Company has provided information regarding adjusted net income and earnings per share which excludes the effects of charges for inventory impairments and abandonment of land option contracts recorded during the first quarter of fiscal 2007 and adjusted earnings per share outlook for fiscal 2007. Management believes that these adjusted financial results are useful to both management and investors in the analysis of the Company�s financial performance when comparing it to prior periods and that they provide investors with an important perspective on the current underlying operating performance of the business by isolating the impact of non-cash charges related to inventory valuation. Below is a reconciliation of these non-GAAP financial measures for the quarter ended December 31, 2006 to the most directly comparable financial measures calculated and presented in accordance with GAAP: � � Three Months Ended December 31,2006 � (in thousands, except per share data) � � Reported net loss $ (59,006) Reported net loss per common share ($1.54) � Adjusted Net Income and Earnings Per Share: Reported net loss $ (59,006) After-tax charges for inventory impairments and abandonment of land option contracts � 74,952� Adjusted net income, excluding charges for inventory impairments and abandonment of land option contracts $ 15,946� � After-tax interest add-back to pro-forma net income for 'if converted' treatment of convertible notes in calculation of diluted net income per common share � $ 1,347� � Adjusted diluted net income per common share, excluding charges for inventory impairments and abandonment of land option contracts $ 0.41� � Diluted weighted average shares outstanding 42,521� Forward-Looking Statements Certain statements in this press release are �forward-looking statements� within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such risks, uncertainties and other factors include, but are not limited to, changes in general economic conditions, changes in levels of customer demand, fluctuations in interest rates, increases in raw materials and labor costs, levels of competition, implementation of overhead realignments and associated costs, potential liability as a result of construction defect, product liability and warranty claims, and other factors described in the Company�s Annual Report on Form 10-K for the year ended September 30, 2006 filed with the Securities and Exchange Commission on December 8, 2006. -Tables Follow- BEAZER HOMES USA, INC. CONSOLIDATED OPERATING AND FINANCIAL DATA (Dollars in thousands, except per share amounts) � FINANCIAL DATA Quarter Ended December 31, � 2006� � � 2005� INCOME STATEMENT Total revenue $ 806,406� $ 1,105,616� Home construction and land sales expenses 665,374� 829,859� Inventory impairments and option project abandonments � 119,923� � � 2,927� Gross profit 21,109� 272,830� � Selling, general and administrative expenses � 115,368� � � 133,078� Operating income/(loss) (94,259) 139,752� Equity in income/(loss) of unconsolidated joint ventures (2,360) 352� Other income � 1,993� � 4,103� � Income/(loss) before income taxes (94,626) 144,207� Income tax expense/(benefit) � (35,620) � � 54,294� Net income/(loss) $ (59,006) � $ 89,913� � Net income/(loss) per common share: Basic $ (1.54) � $ 2.20� Diluted $ (1.54) � $ 2.00� � � Weighted average shares outstanding, in thousands: Basic 38,280� 40,958� Diluted 38,280� 45,607� � Interest incurred $ 34,303� $ 25,533� Interest amortized to cost of sales $ 20,115� $ 18,175� EPS interest add back - Convertible Debt n/a� $ 1,344� Depreciation and amortization $ 6,279� $ 4,710� � SELECTED BALANCE SHEET DATA December 31, September 30, December 31, � 2006� � � 2006� � 2005� Cash $ 154,984� $ 172,443� $ 12,149� Inventory 3,574,361� 3,520,332� 3,263,679� Total assets 4,313,348� 4,559,431� 3,852,719� Total debt (net of discount of $3,457, $3,578, and $4,000) 1,784,287� 1,838,660� 1,379,487� Shareholders' equity 1,647,481� 1,701,923� 1,538,008� � Inventory Breakdown Homes under construction $ 1,321,019� $ 1,368,056� $ 1,277,524� Development projects in progress 1,606,549� 1,623,819� 1,547,756� Unimproved land held for future development 11,294� 12,213� 46,049� Model homes 61,671� 44,803� 45,906� Consolidated inventory not owned � 573,828� � 471,441� � 346,444� $ 3,574,361� $ 3,520,332� $ 3,263,679� � � BEAZER HOMES USA, INC. CONSOLIDATED OPERATING AND FINANCIAL DATA (Dollars in thousands) � � OPERATING DATA � Quarter Ended December 31, SELECTED OPERATING DATA 2006� � 2005� Closings: West region 729� 1,011� Mid-Atlantic region 198� 453� Florida region 246� 477� Southeast region 679� 866� Other homebuilding � 808� � � 1,022� Total closings � 2,660� � � 3,829� New orders, net of cancellations: West region 443� 1,076� Mid-Atlantic region 236� 283� Florida region 93� 655� Southeast region 463� 872� Other homebuilding � 544� � � 986� Total new orders � 1,779� � � 3,872� Backlog units at end of period: West region 889� 3,059� Mid-Atlantic region 615� 1,023� Florida region 355� 1,437� Southeast region 1,105� 1,760� Other homebuilding � 1,257� � � 1,997� Total backlog units � 4,221� � � 9,276� Dollar value of backlog at end of period $ 1,291,627� � $ 2,780,551� � � BEAZER HOMES USA, INC. CONSOLIDATED OPERATING AND FINANCIAL DATA (Dollars in thousands) � Quarter Ended December 31, SUPPLEMENTAL FINANCIAL DATA: � 2006� � 2005� � Revenues Homebuilding operations $ 781,996� $ 1,073,427� Land and lot sales 12,667� 24,955� Financial services 18,290� 10,978� Intercompany elimination � (6,547) � � (3,744) Total revenues $ 806,406� � $ 1,105,616� Gross profit Homebuilding operations $ (1,245) $ 262,150� Land and lot sales 4,064� (298) Financial Services � 18,290� � � 10,978� Total Gross profit $ 21,109� � $ 272,830� Selling, general and administrative Homebuilding operations $ 106,855� $ 122,395� Financial services � 8,513� � � 10,683� Total selling, general and administrative $ 115,368� � $ 133,078� � � SELECTED SEGMENT INFORMATION Revenue: West region $ 297,907� $ 368,592� Mid-Atlantic region 92,228� 199,506� Florida region 91,245� 145,581� Southeast region 155,129� 176,933� Other homebuilding 158,154� 207,770� Financial services 18,290� 10,978� Intercompany elimination � (6,547) � � (3,744) Total revenue $ 806,406� � $ 1,105,616� � Operating income/(loss) West region $ (26,504) $ 63,739� Mid-Atlantic region (3,251) 49,501� Florida region (28,493) 30,631� Southeast region 8,434� 16,103� Other homebuilding (15,708) 720� Financial services � 3,230� � � 295� Segment operating income/(loss) 62,292� 160,989� Corporate and unallocated � (31,967) � � (21,237) Total operating income/(loss) $ (94,259) � $ 139,752�