Item
2.01. Results of Operations and Financial Condition
The
Company provided certain unaudited and preliminary financial and operating
data
for the quarter ended December 31, 2007.
As
previously announced, the Company is in the process of
restat
ing
certain
prior periods’
financial statements
including
interim periods
of fiscal 2007
and 2006. As such,
comparisons of preliminary financial and operating data for the quarter ended
December 31, 2007 to the financial and operating data for the quarter ended
December 31, 2006 are prior to the effect of any restatement and, as this
data
is preliminary and unaudited, is subject to change. Other than cash
balances, the Company does not expect to release financial data until the
restatements are complete. The Company is working expeditiously to
complete the restatements and report financial results for the year ended
September 30, 2007 and the quarter ended December 31, 2007 as soon as
practicable. The Company currently believes such restatements can be
completed prior to May 15, 2008.
As
previously announced on January 23, 2007, home closings for the quarter ended
December 31, 2007, totaled 2,010, a 24% decline from the same period in the
prior fiscal year. This resulted in a backlog conversion ratio of
67%, as the Company remained focused on converting its existing backlog for
cash
generation. Net new home orders totaled 1,260, a decline of 29% from the
prior
fiscal year. At 46%, the cancellation rate for the quarter was
comparable to the 43% rate experienced for the same period in the prior fiscal
year and significantly improved from the unusually high rate of 68% in the
fourth quarter of fiscal 2007.
Also
as
previously announced, at December 31, 2007, the Company had a cash balance
in
excess of $325 million, compared to $155 million at December 31, 2006 and
$460
million at September 30, 2007. As previously reported, during the
quarter, the Company repaid approximately $75 million in secured debt, and
paid
a consent fee to holders of its Senior Notes and Senior Convertible Notes
and
related expenses totaling $21 million. The cash balance at December 31, 2007
includes approximately $92 million of restricted cash pledged to collateralize
the Company’s outstanding letters of credit. The Company is
continuing the process of replacing this pledged cash with real property
in the
collateral pool under its secured revolving credit facility. Due to
seasonal patterns, the Company generally experiences a net use of cash in
its
first fiscal quarter, as was the case this year, although the Company continues
to expect that for the whole of fiscal 2008, it will generate net cash from
operations.
The
Company continues to reduce its land position and unsold home inventories.
The
Company controlled approximately 58,000 lots at December 31, 2007, reflecting
reductions of 6% and 31%, respectively from previously reported levels as
of
September 30, 2007 and December 31, 2006. As of December 31, 2007,
unsold finished homes and unsold homes under construction declined by 49%
and
37%, respectively, from year-ago levels. The Company remains committed to
aligning its land supply and inventory levels to current expectations for
home
closings, and continues to exercise caution and discipline with respect to
investment in inventory. The Company continues to expect that land
spending in fiscal 2008 will be reduced compared to fiscal 2007, based on
current market conditions.
Item
2.05. Costs Associated with Exit or Disposal Activities
Beazer’s
decision to close Beazer Mortgage Corporation and end its relationship with
HFN
will result in related charges and expenses. The Company does not
believe that the amounts and timing of such expenses will be determinable
until
the Company is able to resolve the previously disclosed mortgage origination
issues identified by the Audit Committee’s investigation.
With
regard to exiting of markets referenced in item 8.01 below, the Company expects
to incur abandonment charges for certain land option positions and will incur
other shut down costs associated with the wind down of operations. Due to
the ongoing restatement, the Company will not be able to quantify the financial
impact of these decisions until restated financial statements are
finalized.
Item
2.06. Material Impairments
The
Company currently expects its results for the first quarter of fiscal 2008
to
include material charges to abandon land option contracts and to recognize
inventory impairments. As the Company is in the process of restating
prior periods’ financial statements, it is unable to quantify the amount of
these charges at this time.
With
regard to exiting of markets referenced in item 8.01 below, at December 31,
2007, the Company expects to reclassify certain assets in these markets as
property held for sale, and to recognize impairment charges to reduce their
carrying value to a value of estimated proceeds less costs to sell.