Beazer Homes USA, Inc. (NYSE: BZH) (www.beazer.com) today announced
its financial results for the quarter and nine months ended June
30, 2008. Summary results for the quarter are as follows: Quarter
Ended June 30, 2008 Reported net loss from continuing operations of
$(109.7) million, or $(2.85) per share, including pre-tax charges
related to inventory impairments and abandonment of land option
contracts of $95.5 million, impairments related to joint venture
investments of $18.5 million, and goodwill impairments of $4.4
million. For the third quarter of the prior fiscal year, net loss
from continuing operations totaled $(118.9) million, or $(3.09) per
share. Total revenues: $455.6 million, compared to $753.5 million
in the third quarter of the prior year. Home closings: 1,677 homes,
compared to 2,659 in the third quarter of the prior year. Average
sales price: $257,400 compared to $282,100 in the third quarter of
the prior year. New orders: 1,774 homes, compared to 3,048 in the
third quarter of the prior year. Net cash provided by operating
activities totaled $52.1 million and $24.5 million for the three
and nine months ended June 30, 2008, respectively, compared to net
cash used in operating activities of $79.1 million and net cash
provided by operating activities of $122.0 million, respectively,
for the same periods of the prior year. As of June 30, 2008 Cash
and cash equivalents: $314.2 million. No cash borrowings
outstanding on revolving credit facility. Net debt to
capitalization: 63.2% Backlog: 2,716 homes with a sales value of
$668.1 million compared to 5,952 homes with a sales value of $1.69
billion as of June 30, 2007. �As our third quarter results
illustrate, difficult operating conditions in the homebuilding
industry persist,� said Ian J. McCarthy, President and Chief
Executive Officer. �Despite lower home prices, relatively low
interest rates and a large choice of available homes, potential
homebuyers remain reluctant due to eroding consumer confidence amid
concerns about employment growth, higher energy costs and the
overall economy. Based on these demand dynamics, coupled with high
supply levels of new and existing home inventory, we believe
industry conditions will remain challenging for the remainder of
this fiscal year and as we enter fiscal 2009. As such, we maintain
a disciplined and cautious operating approach and our principal
operating goals during this downturn continue to include generating
liquidity, reducing overhead and direct costs, limiting investment
in land and homes and reducing unsold home inventories. At the same
time, we are focused on positioning Beazer Homes for a return to
profitability and the market�s eventual recovery. We expect
strategic actions such as our decisions to reallocate capital and
resources within our geographic footprint and further efforts to
differentiate Beazer Homes in the eyes of the consumer will enable
us to enhance shareholder value in the long term.� Quarter Ended
June 30, 2008 Homebuilding revenues declined 41.1% for the quarter
ended June 30, 2008, due to both a 36.9% decline in home closings
and an 8.8% decline in average selling price from the same period
in the prior fiscal year. Home closings declined in all regions,
with the most significant declines in the Southeast, the West and
Florida. Net new home orders totaled 1,774, a decline of 41.8% from
the prior fiscal year. The cancellation rate for the quarter was
36.8%, comparable to 36.3% and 33.7% experienced for the same
period in the prior fiscal year and in the second quarter of this
year, respectively. During the third quarter, margins continued to
be negatively impacted by both the average sales price decline and
reduced closing volume as compared to the same period a year ago.
In addition, the Company incurred pre-tax charges to abandon land
option contracts of $27.8 million, and to recognize inventory
impairments of $67.7 million, impairments in joint ventures of
$18.5 million, and goodwill impairments $4.4 million. The goodwill
impaired relates to the Company�s operations in Colorado, which the
Company decided to exit during the third quarter. The Company also
decided to exit the Fresno, CA market during the third quarter. The
Company controlled 46,224 lots at June 30, 2008 (72% owned and 28%
controlled under options), reflecting reduction of approximately
15% and 36% from levels as of March 31, 2008 and June 30, 2007,
respectively. As of June 30, 2008, unsold finished homes totaled
300, declining by approximately 32% and 65% from the level a year
ago and as of September 30, 2007, respectively. The Company has
substantially reduced its land and land development spending, which
totaled $275 million year to date this year, compared to $694
million for the same period in the prior year. At June 30, 2008,
the Company had a cash balance of $314.2 million, an increase from
$273.7 million as of March 31, 2008. Cash provided by operating
activities for the three and nine months ended June 30, 2008 was
$52.1 and $24.5 million, respectively. As previously disclosed, the
Company received a cash tax refund of approximately $55.8 million
during the third quarter relating to a fiscal 2007 net operating
loss carried back to fiscal 2005. In addition, the sale of two
condominium projects in Virginia was concluded in July, subsequent
to the end of the fiscal third quarter, with net proceeds totaling
approximately $85.0 million. The Company currently expects to
generate positive cash flow in its fiscal fourth quarter,
historically its seasonally strongest quarter in terms of closings.
Revolving Credit Facility On August 7, 2008, the Company entered
into an amendment to its revolving credit facility which changed
the size, covenants and pricing of the facility. The Company
achieved its principal objective in the amendment negotiation �
namely, gaining additional financial flexibility during the current
housing downturn by modifying or eliminating certain restrictive
covenants � by agreeing to reduce the size of the facility,
increase collateralization requirements and increase pricing paid
to the bank group. In addition, to minimize uncertainty regarding
real or perceived consequences of potential further deterioration
in the Company�s financial metrics over the next three years, the
Company and the bank group also agreed to a framework that will
further reduce the size of the facility, and increase
collateralization and pricing if particular financial metrics are
not maintained. The Company believes this framework eliminates many
of the circumstances that might otherwise lead to the requirement
for future facility amendments. The amendment eliminated financial
covenants related to interest coverage, leverage and land holdings
and reduced the consolidated tangible net worth maintenance
covenant from $900 million to $100 million, which provides
significant additional flexibility for the Company to absorb both
potential additional inventory impairments and the potential
consequences of a reserve against the Company�s deferred tax assets
under FAS 109. In exchange, the Company agreed to a reduction in
the size of the facility from $500 million to $400 million, an
increase in collateralization requirements (the value of assets
secured under the facility in relation to amounts outstanding or
drawn as letters of credit) from approximately 2.25x to 3.0x, and
an increase in pricing from LIBOR plus 350 basis points to LIBOR
plus 450 basis points. The only other maintenance covenant, which
remains unchanged by the amendment, is a requirement for the
Company to maintain minimum liquidity of $120 million, in the form
of cash or availability under the facility or a combination of the
two. The facility is subject to further reductions to $250 million
and $100 million if the Company�s consolidated tangible net worth
falls below $350 million and $250 million, respectively. As of June
30, 2008, the Company�s consolidated tangible net worth was $784
million. The facility size is also subject to a reduction to $250
million if the Company�s leverage ratio exceeds 5.0x (or 3.5x
excluding the effect of any deferred tax valuation allowance). The
Company�s leverage ratio at June 30, 2008 was 2.19x. To the extent
the facility size is reduced to $250 million or $100 million, both
the multiple of assets securing the facility to outstanding
borrowings and letters of credit and the pricing will increase. The
facility size is also subject to a reduction to $200 million if the
Company�s interest coverage ratio for the quarter ending June 30,
2010 is less than 1.0x. Availability under the facility continues
to be subject to a secured borrowing base. The Company has not had
cash borrowings under this facility since its inception in June
2007. The Company had $71.5 million in letters of credit
outstanding at June 30, 2008. At August, 7, 2008, after giving
effect to the amendment and the impact of recent asset sales
previously included in the secured borrowing base, the Company did
not have access to additional borrowings under the facility.
However, the Company expects to add more real estate assets to the
borrowing base in order to create availability under the facility.
The amendment to the facility will be filed with the Company�s
third quarter 10-Q. Ongoing External Investigations As previously
disclosed, the Company and its subsidiary, Beazer Mortgage
Corporation, are under investigations by the United States
Attorney�s Office in the Western District of North Carolina, the
SEC and other state and federal agencies, concerning the matters
that were the subject of the Audit Committee�s previous independent
investigation. The Company is fully cooperating with these
investigations which are ongoing. The Company cannot predict or
determine the timing or final outcome of the investigations or the
effect that any adverse findings in the investigations may have on
it. The Company intends to attempt to negotiate a settlement with
prosecutors and regulatory authorities with respect to these
matters that would allow us to quantify our exposure associated
with reimbursement of losses and payment of regulatory and/or
criminal fines, if they are imposed. However, no settlement has
been reached with any regulatory authority and the Company believes
that although it is probable that a liability exists related to
this exposure, it is not reasonably estimable at this time.
Conference Call The Company will hold a conference call today,
August 8, 2008, at 11:00 AM ET to discuss these results and take
questions. Interested parties 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. A replay of the call will also be available at
www.beazer.com for approximately 30 days. To access the conference
call by telephone, listeners should dial 877-601-3546 (for
international callers, dial 210-234-0031). To be admitted to the
call, verbally supply the passcode "BZH". A replay of the call by
telephone will be available shortly after the conclusion of the
live call. To directly access the replay, available until 5:00 PM
ET on August 15, 2008, dial 800-282-5731 (for international
callers, dial 402-220-9726). Beazer Homes USA, Inc., headquartered
in Atlanta, is one of the country�s ten largest single-family
homebuilders with continuing operations in Arizona, California,
Colorado, Delaware, Florida, Georgia, Indiana, Maryland, Nevada,
New Jersey, New Mexico, New York, North Carolina, Ohio,
Pennsylvania, South Carolina, Tennessee, Texas, and Virginia.
Beazer Homes is listed on the New York Stock Exchange under the
ticker symbol �BZH.� Forward Looking Statements This press release
contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These
forward-looking statements represent our expectations or beliefs
concerning future events, and it is possible that the results
described in this press release will not be achieved. These
forward-looking statements are subject to 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, (i) the timing and final outcome of the United States
Attorney investigation, the Securities and Exchange Commission�s
(�SEC�) investigation and other state and federal agency
investigations, the putative class action lawsuits, the derivative
claims, multi-party suits and similar proceedings as well as the
results of any other litigation or government proceedings; (ii)
material weaknesses in our internal control over financial
reporting; (iii) additional asset impairment charges or writedowns;
(iv) economic changes nationally or in local markets, including
changes in consumer confidence, volatility of mortgage interest
rates and inflation; (v) continued or increased downturn in the
homebuilding industry; (vi) estimates related to homes to be
delivered in the future (backlog) are imprecise as they are subject
to various cancellation risks which cannot be fully controlled,
(vii) continued or increased disruption in the availability of
mortgage financing; (viii) our cost of and ability to access
capital and otherwise meet our ongoing liquidity needs including
the impact of any further downgrades of our credit ratings; (ix)
potential inability to comply with covenants in our debt
agreements; (x) continued negative publicity; (xi) increased
competition or delays in reacting to changing consumer preference
in home design; (xii) shortages of or increased prices for labor,
land or raw materials used in housing production; (xiii) factors
affecting margins such as decreased land values underlying land
option agreements, increased land development costs on projects
under development or delays or difficulties in implementing
initiatives to reduce production and overhead cost structure; (xiv)
the performance of our joint ventures and our joint venture
partners; (xv) the impact of construction defect and home warranty
claims and the cost and availability of insurance, including the
availability of insurance for the presence of moisture intrusion;
(xvi) a material failure on the part of our subsidiary Trinity
Homes LLC to satisfy the conditions of the class action settlement
agreement, including assessment and remediation with respect to
moisture intrusion related issues; (xvii) delays in land
development or home construction resulting from adverse weather
conditions; (xviii) 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 and
governmental policies; (xix) effects of changes in accounting
policies, standards, guidelines or principles; or(xx) terrorist
acts, acts of war and other factors over which the Company has
little or no control. Any forward-looking statement speaks only as
of the date on which such statement is made, and, except as
required by law, we do not undertake any obligation to update or
revise any forward-looking statement, whether as a result of new
information, future events or otherwise. New factors emerge from
time to time and it is not possible for management to predict all
such factors. BEAZER HOMES USA, INC. CONSOLIDATED OPERATING AND
FINANCIAL DATA (Dollars in thousands, except per share amounts) � �
� � FINANCIAL DATA � Quarter Ended � Nine Months Ended � June 30, �
� June 30, � � 2008 � � � 2007 � � 2008 � � 2007 � INCOME STATEMENT
Total revenue $ 455,578 $ 753,456 $ 1,361,649 $ 2,373,048 Home
construction and land sales expenses 407,512 647,489 1,223,252
2,022,687 Inventory impairments and option contract abandonments �
95,482 � � 154,244 � � 451,854 � � 399,856 � Gross loss (47,416 )
(48,277 ) (313,457 ) (49,495 ) � Selling, general and
administrative expenses 83,517 96,327 245,696 302,323 Depreciation
& amortization 6,046 7,773 18,250 22,838 Goodwill impairment �
4,365 � � 29,752 � � 52,470 � � 29,752 � Operating loss (141,344 )
(182,129 ) (629,873 ) (404,408 ) � Equity in loss of unconsolidated
joint ventures (18,568 ) (939 ) (75,069 ) (7,012 ) Other (expense)
income, net � (13,489 ) � 2,664 � � (20,907 ) � 7,870 � � Loss from
continuing operations before income taxes (173,401 ) (180,404 )
(725,849 ) (403,550 ) Benefit from Income taxes � (63,707 ) �
(61,474 ) � (249,771 ) � (145,161 ) Loss from continuing operations
� (109,694 ) � (118,930 ) � (476,078 ) � (258,389 ) (Loss) income
from discontinued operations, net of tax � (148 ) � 183 � � (1,893
) � 2,548 � Net loss $ (109,842 ) $ (118,747 ) $ (477,971 ) $
(255,841 ) � Loss per common share from continuing operations:
Basic $ (2.85 ) � $ (3.09 ) $ (12.35 ) $ (6.73 ) Diluted $ (2.85 )
� $ (3.09 ) $ (12.35 ) $ (6.73 ) (Loss) income per common share
from discontinued operations: Basic $ - � � $ - � $ (0.05 ) $ 0.07
� Diluted $ - � � $ - � $ (0.05 ) $ 0.07 � Loss per common share:
Basic $ (2.85 ) � $ (3.09 ) $ (12.40 ) $ (6.66 ) Diluted $ (2.85 )
� $ (3.09 ) $ (12.40 ) $ (6.66 ) � � Weighted average shares
outstanding, in thousands: Basic 38,551 38,459 38,546 38,388
Diluted 38,551 38,459 38,546 38,388 � � SELECTED BALANCE SHEET DATA
� June 30, � September 30, � 2008 � � � 2007 � Cash and cash
equivalents $ 314,202 $ 454,337 Inventory 2,028,543 2,775,173 Total
assets 3,146,371 3,930,021 Total debt (net of discount of $2,682,
and $3,033) 1,762,187 1,857,249 Shareholders' equity 844,186
1,323,722 � Inventory Breakdown Homes under construction $ 626,890
$ 787,102 Development projects in progress 600,175 1,233,140 Land
held for future development 364,163 324,350 Land held for sale
215,679 49,473 Model homes 101,320 143,726 Consolidated inventory
not owned � 120,316 � � 237,382 � $ 2,028,543 � $ 2,775,173 � �
BEAZER HOMES USA, INC. CONSOLIDATED OPERATING AND FINANCIAL DATA
(Dollars in thousands) � � � � � � OPERATING DATA � � Quarter Ended
Nine Months Ended � June 30, June 30, SELECTED OPERATING DATA �
2008 � � � 2007 2008 2007 Closings: West region 407 721 1,206 2,125
Mid-Atlantic region 244 263 692 676 Florida region 152 266 545 861
Southeast region 324 608 1,060 2,018 Other homebuilding � 550 � � �
801 1,748 2,391 Total closings � 1,677 � � � 2,659 5,251 8,071 New
orders, net of cancellations: West region 594 726 1,420 2,224
Mid-Atlantic region 107 327 411 1,128 Florida region 188 357 509
891 Southeast region 409 647 1,117 2,128 Other homebuilding � 476 �
� � 991 1,525 2,550 Total new orders � 1,774 � � � 3,048 4,982
8,921 Backlog units at end of period: West region 705 1,274
Mid-Atlantic region 362 1,029 Florida region 202 538 Southeast
region 561 1,431 Other homebuilding � 886 � � � 1,680 Total backlog
units � 2,716 � � � 5,952 Dollar value of backlog at end of period
$ 668,147 � � $ 1,691,630 � BEAZER HOMES USA, INC. CONSOLIDATED
OPERATING AND FINANCIAL DATA (Continued) (Dollars in thousands) � �
� � � � Quarter Ended � Nine Months Ended � June 30, � June 30,
Supplemental Financial Data (Continuing Operations) � 2008 � � 2007
� � 2008 � � 2007 � � Revenues Homebuilding operations $ 431,723 $
732,491 $ 1,324,166 $ 2,294,186 Land and lot sales 22,975 19,187
34,544 73,393 Financial Services � 880 � � � 1,778 � � 2,939 � �
5,469 � Total revenues $ 455,578 � � $ 753,456 � $ 1,361,649 � $
2,373,048 � Gross (loss) profit Homebuilding operations $ (50,338 )
$ (49,303 ) $ (317,398 ) $ (56,409 ) Land and lot sales 2,042 (752
) 1,002 1,445 Financial Services � 880 � � � 1,778 � � 2,939 � �
5,469 � Total gross loss $ (47,416 ) � $ (48,277 ) $ (313,457 ) $
(49,495 ) Selling, general and administrative Homebuilding
operations $ 82,847 $ 95,726 $ 243,790 $ 300,022 Financial Services
� 670 � � � 601 � � 1,906 � � 2,301 � Total selling, general and
administrative $ 83,517 � � $ 96,327 � $ 245,696 � $ 302,323 � � �
Selected Segment Information - Continuing Operations Revenue: West
region $ 111,557 $ 248,830 $ 344,942 $ 814,792 Mid-Atlantic region
108,294 113,840 284,780 309,176 Florida region 32,751 72,470
127,205 270,124 Southeast region 77,204 152,121 246,013 491,359
Other homebuilding 124,892 164,417 355,770 482,128 Financial
services � 880 � � � 1,778 � � 2,939 � � 5,469 � Total revenue $
455,578 � � $ 753,456 � $ 1,361,649 � $ 2,373,048 � � Operating
(loss) income West region $ (41,402 ) $ (62,394 ) $ (158,245 ) $
(122,582 ) Mid-Atlantic region 5,061 (11,852 ) (50,024 ) (37,205 )
Florida region (10,801 ) (20,166 ) (44,830 ) (42,560 ) Southeast
region (12,313 ) (1,917 ) (75,784 ) 17,788 Other homebuilding
(17,582 ) (14,580 ) (75,139 ) (52,429 ) Financial services � 202 �
� � 1,188 � � 1,012 � � � 3,144 � Segment operating loss (76,835 )
(109,721 ) (403,010 ) (233,844 ) Corporate and unallocated �
(64,509 ) � � (72,408 ) � (226,863 ) � (170,564 ) Total operating
loss $ (141,344 ) � $ (182,129 ) $ (629,873 ) $ (404,408 ) �
Beazer Homes USA (NYSE:BZH)
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