Beazer Homes USA, Inc. (the “Company”) (NYSE: BZH)
(www.beazer.com) today announced its financial results for the
fiscal quarter ended March 31, 2011. While year-over-year
comparisons were adversely impacted by what the Company believes
was an unusual seasonal pattern during 2010 as consumers sought to
take advantage of the First Time Homebuyers’ Tax Credit, the
Company saw improved order levels over the second quarter of fiscal
2009, which is the most recent comparable period that was not
impacted by the tax credit. Following are summary results for the
quarter:
Quarter Ended March 31,
2011
- Total new orders from continuing
operations were: 1,194 homes, a 26.7% decrease from the prior year,
but a 121.1% increase from the first quarter and a 9.0% increase
from the second quarter of fiscal 2009.
- Total home closings from continuing
operations were: 573 homes, a 31.1% decrease from the prior year,
but an 8.7% increase from the first quarter.
- Revenue from continuing operations for
the quarter was $127.5 million, compared to $192.5 million in the
prior year and $110.3 million in the prior quarter.
- Including impairments and abandonments,
homebuilding gross profit margin from continuing operations was
-2.1%, compared to 12.2% in the prior year and 10.1% in the prior
quarter.
- Excluding impairments and abandonments,
homebuilding gross profit margin from continuing operations was
12.3%, compared to 17.4% in the prior year, which had a higher
revenue base and a significant non-recurring warranty recovery, and
10.7% in the prior quarter.
- Excluding interest included in cost of
sales as well as impairments and abandonments, homebuilding gross
profit margin from continuing operations was 19.0%, compared to
22.6% in the prior year and 17.0% in the prior quarter.
- The Company recorded a loss from
continuing operations of $54.9 million, or a loss of $0.74 per
share, including $17.9 million of non-cash pre-tax charges for
inventory impairments. For the prior year, the Company reported net
income from continuing operations of $6.2 million, or $0.10 per
diluted share, which included non-cash pre-tax charges of $10.0
million for inventory impairments and $8.8 million for the
impairment of our investment in an unconsolidated joint venture,
offset by a $52.9 million pre-tax gain related to the partial
exchange of our junior subordinated notes.
- Net loss, including $0.3 million of net
income from discontinued operations, was $54.6 million for the
quarter. For the prior year, the net income of $5.3 million
included a net loss from discontinued operations of $0.9
million.
As of March 31, 2011
- Total cash and cash equivalents: $453.2
million, including restricted cash of $71.0 million. The restricted
cash included $38.4 million primarily related to the Company’s
outstanding Letters of Credit, and $32.6 million related to the
Company’s Cash Secured Term Loan.
- Stockholders’ equity: $295.9 million
not including $57.5 million of mandatory convertible subordinated
notes, which automatically convert to common stock at maturity in
2013.
- Realizable net deferred tax assets
after our Section 382 limitation are estimated between $308 million
and $430 million.
- Total Backlog: 1,416 homes with a sales
value of $339.6 million compared to 1,781 homes with a sales value
of $394.5 million as of March 31, 2010.
“As expected, year-over-year comparisons were unfavorably
impacted this quarter by the First Time Homebuyers’ Tax Credit
which pulled forward sales volumes into the second quarter of
2010,” said Ian McCarthy, President and Chief Executive Officer of
Beazer Homes. “However, we did see seasonal improvement with orders
and gross margins up over the first quarter of fiscal 2011. We are
hopeful that the latest improvements in employment will help lift
consumer confidence in the coming quarters, which is necessary for
any significant recovery in housing to occur.”
“Throughout the downturn in the market, we have remained and
will continue to be disciplined in our operations,” said McCarthy.
“We’ve recently implemented significant overhead cost saving
measures as we continue to enhance our operational execution with
the goal of accelerating our return to profitability.”
Results for the Quarter Ended March 31,
2011
Net new home orders decreased 26.7% compared to the same period
of the prior year due to the absence of incentives similar to the
First Time Homebuyers’ Tax Credit that pulled sales into the first
half of fiscal 2010. The reduction in net new home orders from
continuing operations was driven by a 24.8% decrease in gross new
orders and an increase in the cancellation rate to 19.9% as
compared to 17.8% a year ago. Net new home orders increased 121.1%
over the first quarter of fiscal 2011 and 9.0% over the second
quarter of fiscal 2009, both periods which did not include the
impact of any special government incentive such as the tax
credit.
The number of homes closed decreased 31.1% and homebuilding
revenues from continuing operations decreased 35.7% as compared to
the second quarter of fiscal 2010. The reduction in closings
compared to the prior year resulted from a lower backlog of homes
at the beginning of the quarter, 793 homes at December 31, 2010
compared to 946 homes at December 31, 2009, as well as the
reduction in new orders during the quarter.
The Company’s homebuilding gross profit margin, excluding
impairments and abandonments, was 12.3% in the quarter, down year
over year from 17.4% during the second quarter of fiscal 2010, but
up sequentially over the first quarter of fiscal 2011 when
homebuilding gross profit margins were 10.7%. The reduction in
homebuilding gross profit margins from fiscal 2010 was primarily
attributable to the impact of reduced revenues on the Company’s
fixed indirect construction costs and interest expense as well as
by a non-recurring warranty recovery of $4.4 million in the prior
year. Excluding interest included in cost of sales, the Company’s
homebuilding gross profit margin was 19.0% in the second quarter,
compared to 22.6% in the prior year and 17.0% in the prior
quarter.
The Company’s ASP increased to $215,700 for the quarter ended
March 31, 2011 from $208,700 in the prior quarter. The ASP for the
second quarter of 2010 was $230,800. These fluctuations in ASP were
primarily driven by differences in the mix of homes closed and the
opening of new communities with slightly lower average sales
prices.
The Company recorded non-cash pre-tax charges for inventory
impairments and lot option abandonments of $17.9 million for the
quarter compared to similar charges of $10.0 million in the prior
year. The impairments were primarily related to further
deterioration in the Las Vegas, Nevada market, characterized by
further reductions in new home prices and higher levels of
foreclosure inventory. During the quarter, we also recorded a $4.0
million charge in connection with our unconsolidated joint venture
in Las Vegas. This charge is recorded in selling, general and
administrative expenses.
The Company controlled 30,918 lots at March 31, 2011 (80% owned
and 20% controlled under options) an increase of 6.6% from the
level at September 30, 2010. During the quarter the Company spent
$61.1 million on land and land development, compared to $43.3
million in the prior year and $62.6 million in the prior quarter.
Year-to-date, our spending on land and land development has totaled
$123.7 million, compared to $73.7 million in the comparable period
last year.
As previously disclosed in a Form 8-K dated March 3, 2011, the
Company’s Chief Executive Officer reached a resolution with the
Securities and Exchange Commission of its claim under Section 304
of the Sarbanes-Oxley Act related to our restatement of the
Company’s fiscal 2002-2006 financial statements and the first two
quarters of 2007. The SEC did not allege that Mr. McCarthy engaged
in any misconduct or that he otherwise violated the federal
securities laws. Under the terms of the settlement, the Company
will receive approximately $6.5 million in cash plus certain vested
and unvested shares of Beazer stock from Mr. McCarthy. During the
quarter ended March 31, 2011, the Company recognized a benefit of
approximately $5.7 million related to the settlement, $6.6 million
was reflected in other expense, net offset by additional stock
compensation amortization of $943,000 which has been recorded in
selling, general and administrative expenses.
Cost Alignment Efforts
Throughout the homebuilding recession the Company has remained
disciplined in its approach to the business, reducing direct
construction costs and overhead expenses and controlling its land
acquisition and development spending. Consistent with these
practices, subsequent to the end of the second quarter of fiscal
2011, the Company identified ways to further streamline its
operations and reduce its overhead and administrative expenses.
These efforts resulted in the elimination of approximately 130 full
time positions. The cost reductions are expected to save the
Company in excess of $20 million annually and are expected to
result in charges of approximately $3 million related to severance
and lease abandonment in the Company’s third quarter ending June
30, 2011.
Pre-Owned Homes Division
In recognition of a market opportunity presented by difficult
conditions in certain of the Company’s markets, during the quarter
ended March 31, 2011, the Company launched its Pre-Owned Homes
Division beginning in the Phoenix market. This division is charged
with acquiring, improving and renting out recently built,
previously owned homes within select communities in markets in
which the Company currently operates. By augmenting the sale of
newly constructed homes with rental options of previously owned
homes, Beazer expects to appeal to a broader range of consumers.
Because the primary source of Pre-Owned Homes will be distressed
sales, typically foreclosures or short sales, Beazer anticipates
acquiring homes at a discount to their replacement cost. The new
Division leverages Beazer’s strengths as a homebuilder with
knowledge of its markets, and offers an attractive investment
proposition for a portion of the Company’s cash reserve. Local
third party property managers will handle the day-to-day operations
and the marketing of the rentals.
Conference Call
The Company will hold a conference call on May 3, 2011, at 10:00
am EDT to discuss these results. Interested parties may listen to
the conference call and view the Company’s slide presentation over
the internet by visiting the “Investor Relations” section of the
Company’s website at www.beazer.com. In addition, the conference
call will be available by telephone at 877-601-3546 (for
international callers, dial 212-547-0388). To be admitted to the
call, verbally supply the pass code "BZH". A replay of the
conference call will be available, until 10:00 PM ET on May 10,
2011, at 800-284-7031 (for international callers, dial
203-369-3222) with pass code “3740.”
Beazer Homes USA Inc., headquartered in Atlanta, Georgia, is
one of the ten largest single-family homebuilders in the United
States. The Company’s industry-leading eSMART high
performance homes are designed to lower the total cost of home
ownership while reducing energy and water consumption. With
award-winning floor-plans, the Company offers homes that
incorporate exceptional value and quality to consumers in 16
states, including Arizona, California, Delaware, Florida, Georgia,
Indiana, Maryland, Nevada, New Jersey, New York, North Carolina,
Pennsylvania, South Carolina, Tennessee, Texas, and Virginia.
Beazer Homes is listed on the New York Stock Exchange and trades
under the ticker symbol “BZH.”
Forward Looking Statements
This presentation contains forward-looking statements. 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 final outcome of various putative class action
lawsuits, multi-party suits and similar proceedings as well as the
results of any other litigation or government proceedings and
fulfillment of the obligations in the Deferred Prosecution
Agreement and consent orders with governmental authorities and
other settlement agreements; (ii) additional asset impairment
charges or writedowns; (iii) economic changes nationally or in
local markets, including changes in consumer confidence, declines
in employment levels, volatility of mortgage interest rates and
inflation; (iv) the effect of changes in lending guidelines and
regulations and the uncertain availability of mortgage financing;
(v) a slower economic rebound than anticipated, coupled with
persistently high unemployment and additional foreclosures; (vi)
continued or increased downturn in the homebuilding industry; (vii)
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, (viii) our cost of and ability to
access capital and otherwise meet our ongoing liquidity needs
including the impact of any downgrades of our credit ratings or
reductions in our tangible net worth or liquidity levels; (ix)
potential inability to comply with covenants in our debt agreements
or satisfy such obligations through repayment or refinancing; (x)
increased competition or delays in reacting to changing consumer
preference in home design; (xi) shortages of or increased prices
for labor, land or raw materials used in housing production; (xii)
factors affecting margins such as decreased land values underlying
lot option agreements, increased land development costs on
communities under development or delays or difficulties in
implementing initiatives to reduce production and overhead cost
structure; (xiii) the performance of our joint ventures and our
joint venture partners; (xiv) the impact of construction defect and
home warranty claims including those related to possible
installation of drywall imported from China; (xv) the cost and
availability of insurance and surety bonds; (xvi) delays in land
development or home construction resulting from adverse weather
conditions; (xvii) potential delays or increased costs in obtaining
necessary permits and possible penalties for failure to comply with
laws, regulations and governmental policies; (xviii) potential
exposure related to additional repurchase claims on mortgages and
loans originated by Beazer Mortgage Corp.; (xix) estimates related
to the potential recoverability of our deferred tax assets; (xx)
effects of changes in accounting policies, standards, guidelines or
principles; or (xxi) 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.
-Tables Follow-
BEAZER HOMES USA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data) Three Months
Ended Six Months Ended March 31, March 31,
2011 2010
2011
2010 Total revenue
$ 127,503 $
192,455
$ 237,802 $ 405,528 Home construction and
land sales expenses
110,891 157,591
209,116 343,735
Inventory impairments and option contract abandonments
17,853 9,986
18,539
18,536 Gross (loss) profit
(1,241
) 24,878
10,147 43,257 Selling, general and
administrative expenses
42,606 43,875
80,404 88,741
Depreciation and amortization
2,075
2,681
3,988 5,957
Operating loss
(45,922 ) (21,678 )
(74,245
) (51,441 ) Equity in income (loss) of unconsolidated joint
ventures
71 (8,779 )
309 (8,809 ) (Loss) gain on
extinguishment of debt
(102 ) 52,946
(3,004
) 52,946 Other expense, net
(11,710 )
(18,033 )
(29,776 ) (37,559 )
Loss from continuing operations before income taxes
(57,663
) 4,456
(106,716 ) (44,863 ) Benefit from
income taxes
(2,793 ) (1,699 )
(3,386 ) (95,525 ) (Loss) income from
continuing operations
(54,870 ) 6,155
(103,330
) 50,662 Income (loss) from discontinued operations, net of
tax
294 (857 )
(54
) 2,635 Net (loss) income
$
(54,576 ) $ 5,298
$ (103,384
) $ 53,297 Weighted average number of shares:
Basic
73,930 58,314
73,904 48,463 Diluted
73,930 69,147
73,904 56,933 (Loss) earnings
per share: Basic (loss) earnings per share from continuing
operations
$ (0.74 ) $ 0.11
$
(1.40 ) $ 1.05 Basic earnings (loss) per share from
discontinued operations
$ - $ (0.02 )
$
- $ 0.05 Basic (loss) earnings per share
$
(0.74 ) $ 0.09
$ (1.40 ) $ 1.10
Diluted (loss) earnings per share from continuing operations
$ (0.74 ) $ 0.10
$ (1.40
) $ 0.94 Diluted earnings (loss) per share from discontinued
operations
$ - $ (0.01 )
$ - $ 0.05
Diluted (loss) earnings per share
$ (0.74 ) $
0.09
$ (1.40 ) $ 0.99
Interest Data: Three Months Ended Six Months
Ended March 31, March 31, 2011
2010
2011 2010
Capitalized interest in inventory, beginning of
period
$ 43,433 $ 38,970
$ 36,884 $
38,338 Interest incurred
32,937 32,236
65,303 65,416
Capitalized interest impaired
(1,409 ) (464 )
(1,409 ) (1,096 ) Interest expense not qualified for
capitalization
and included as other expense
(19,058 ) (19,565 )
(37,981 ) (40,097 )
Capitalized interest amortized to house
construction and land sales expenses
(8,279 ) (10,070 )
(15,173 ) (21,454 ) Capitalized interest in
inventory, end of period
$ 47,624 $ 41,107
$ 47,624 $ 41,107
BEAZER HOMES USA, INC. UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (in thousands, except share and per
share data) March 31,
September 30,
2011 2010
ASSETS Cash and cash equivalents
$ 382,196 $
537,121 Restricted cash
71,018 39,200 Accounts receivable
(net of allowance of $3,550 and $3,567, respectively)
34,236
32,647 Income tax receivable
2,823 7,684 Inventory Owned
inventory
1,233,428 1,153,703 Land not owned under option
agreements
35,458 49,958 Total
inventory
1,268,886 1,203,661 Investments in unconsolidated
joint ventures
9,305 8,721 Deferred tax assets, net
7,864 7,779 Property, plant and equipment, net
25,010
23,995 Other assets
52,020 42,094
Total assets
$ 1,853,358 $ 1,902,902
LIABILITIES AND STOCKHOLDERS' EQUITY
Trade accounts payable
$ 39,199 $ 53,418 Other
liabilities
211,878 210,170 Obligations related to land not
owned under option agreements
19,693 30,666 Total debt (net
of discounts of $25,220 and $23,617, respectively)
1,286,696 1,211,547 Total liabilities
1,557,466 1,505,801
Stockholders' equity: Preferred stock (par value $.01 per share,
5,000,000 shares authorized, no shares issued)
- -
Common stock (par value $0.001 per share,
180,000,000 shares authorized,76,261,416 and 75,669,381 issued and
outstanding, respectively)
76 76 Paid-in capital
620,787 618,612
Accumulated deficit
(324,971 ) (221,587
) Total stockholders' equity
295,892
397,101 Total liabilities and stockholders' equity
$
1,853,358 $ 1,902,902 Inventory
Breakdown Homes under construction
$ 246,964 $
210,104 Development projects in progress
478,303 444,062
Land held for future development
376,949 382,889 Land held
for sale
37,496 36,259 Capitalized interest
47,624
36,884 Pre-owned homes and deposits
372 - Model homes
45,720 43,505 Land not owned under option agreements
35,458 49,958 Total inventory
$
1,268,886 $ 1,203,661
BEAZER HOMES USA, INC. CONSOLIDATED
OPERATING AND FINANCIAL DATA - CONTINUING OPERATIONS
Quarter Ended Six
Months Ended March 31, March 31, SELECTED
OPERATING DATA 2011 2010
2011
2010 Closings: West region
181 369
397
765 East region
219 308
421 651 Southeast region
173 155
282
351 Continuing Operations
573
832
1,100 1,767 Discontinued Operations
10
20
32
46 Total closings
583
852
1,132
1,813 New orders, net of cancellations: West region
417 646
591 999 East region
480 624
737 852 Southeast
region
297 359
406 488 Continuing Operations
1,194 1,629
1,734 2,339 Discontinued Operations
5 44
18
62 Total new orders
1,199
1,673
1,752
2,401 Backlog units at end of period: West region
463 665
463 665 East region
682 733
682
733 Southeast region
269
345
269 345 Continuing
Operations
1,414 1,743
1,414 1,743 Discontinued
Operations
2 38
2 38 Total backlog units
1,416 1,781
1,416
1,781 Dollar value of backlog at end of
period (in millions)
$ 339.6 $
394.5
$ 339.6 $ 394.5
Revenue (in thousands): West region
$ 36,791 $ 80,770
$ 76,339 $ 166,563 East region
58,418 80,165
108,632 168,968 Southeast region
32,294
31,520
52,831
69,997 Total revenue
$ 127,503
$ 192,455
$ 237,802
$ 405,528
BEAZER HOMES USA, INC.
CONSOLIDATED OPERATING AND FINANCIAL DATA - CONTINUING
OPERATIONS (Dollars in thousands)
Quarter Ended Six Months Ended March
31, March 31, SUPPLEMENTAL FINANCIAL DATA
2011 2010
2011
2010
Revenues Homebuilding operations
$
123,591 $ 192,066
$ 233,577 $ 400,659 Land
sales and other
3,912 389
4,225 4,869 Total revenues
$
127,503 $ 192,455
$ 237,802
$ 405,528
Gross profit Homebuilding operations
$ (2,606 ) 23,412
$ 8,471 41,021
Land sales and other
1,365 1,466
1,676 2,236 Total gross profit
$
(1,241 ) $ 24,878
$ 10,147
$ 43,257
Reconciliation of homebuilding gross
profit before impairments and abandonments and interest amortized
to cost of sales and the related gross margins to homebuilding
gross profit and gross margin, the most directly comparable GAAP
measure, is provided for each period discussed below:
Quarter Ended
March 31,
Six Months Ended
March 31,
2011 2010
2011 2010
Homebuilding gross profit
$ (2,606 )
-2.1 % $ 23,412 12.2 %
$ 8,471
3.6 % $ 41,021 10.2 % Inventory
impairments and lot option
abandonments (I&A)
17,853 9,986
18,539
18,536 Homebuilding Gross Profit before I&A
15,247 12.3 % 33,398 17.4 %
27,010
11.6 % 59,557 14.9 % Interest amortized to cost of
sales
8,279 10,070
15,173
21,454 Homebuilding gross profit before I&A
and interest amortized to cost of
sales
$ 23,526 19.0 % $ 43,468 22.6 %
$ 42,183 18.1 % $ 81,011 20.2 %
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