Beazer Homes USA, Inc. (NYSE: BZH) (www.beazer.com) today
announced its financial results for the quarter ended
December 31, 2017.
“Our first quarter operating results showed year-over-year
improvement in nearly every operational metric, with notable gains
in our sales pace, gross margin and EBITDA,” said Allan Merrill,
President and CEO of Beazer Homes. “During the quarter we recorded
two nonrecurring losses: $26 million related to the early
retirement of debt which was previously disclosed, and $113 million
related to a remeasurement in the carrying value of our deferred
tax assets as a result of the reduction in corporate tax rates.
Excluding these charges net income would have been well above the
prior year.”
Mr. Merrill continued, “Our strong performance in the first
quarter has us well positioned to reach both our “2B-10” target of
$200 million of EBITDA and our debt reduction plan of $100 million
during Fiscal 2018. We believe that our commitment to provide
customers with extraordinary value at an affordable price will
drive further improvements in profitability and returns as we
continue to push toward generating a double-digit return on
assets.”
Beazer Homes Fiscal First Quarter 2018
Highlights and Comparison to Fiscal First Quarter 2017
- Net loss from continuing operations of
$130.6 million, mainly attributable to the remeasurement of our
deferred tax assets, compared to net loss of $1.4 million in Fiscal
2017
- Adjusted EBITDA of $28.4 million, up
16.2%
- Homebuilding revenue of $367.8 million,
up 9.4%
- 1,066 new home deliveries, up 7.1%.
Backlog conversion of 57.5%, up 560 basis points
- Average selling price of $345.0
thousand, up 2.1%
- Homebuilding gross margin was 16.4%.
Excluding amortized interest, homebuilding gross margin was 20.9%,
up 40 basis points
- SG&A as a percentage of total
revenue was 13.9%, flat year-over-year
- Unit orders of 1,110, up 10.4%. Average
community count was 155, down 1 community. Sales/Community/Month of
2.4, up 10.9%
- Dollar value of backlog of $704.4
million, up 5.7%
- Unrestricted cash at quarter end was
$177.8 million
M&A Activity. At the end of December, the Company acquired
several communities in the Carolinas from private homebuilder, Bill
Clark Homes. In the cash transaction, the Company purchased more
than 450 lots spread across seven new home communities in Raleigh
and Myrtle Beach which have been incorporated into its existing
operations in those markets. The acquisition made an immediate
impact in the first quarter, adding 4 active communities as well as
21 net new orders, and will continue to make contributions in the
remainder of Fiscal 2018 and beyond.
Profitability. Net loss from continuing operations of $130.6
million was driven primarily by a $112.6 million expense related to
the remeasurement of the Company’s deferred tax assets as a result
of a change to the Federal corporate tax rate. Additionally, the
Company recorded a $25.9 million loss on the extinguishment of debt
for the quarter following its refinancing activities in October.
Looking past the impact from these one-time items, first quarter
Adjusted EBITDA of $28.4 million was up $4.0 million, or 16.2%,
compared to the same period last year.
Orders. Net new orders for the first quarter increased more than
10% from the prior year, which was achieved while average community
count remained relatively flat at 155. The growth in net new orders
was driven by an increase in the absorption rate to 2.4 sales per
community per month, up nearly 11% from the previous year. The
cancellation rate was 18.9%, down 230 basis points from the first
quarter of last year.
Homebuilding Revenue. First quarter closings of 1,066 homes were
7.1% above the level achieved in the same period last year.
Additionally, homebuilding revenue for the quarter increased 9.4%
over the prior year to $367.8 million, as the average selling price
rose 2.1% to $345.0 thousand.
Backlog. The dollar value of homes in backlog as of December 31,
2017 increased 5.7% to $704.4 million, or 1,899 homes, compared to
$666.1 million, or 1,926 homes, for the same period last year. At
the same time, the average selling price of homes in backlog
increased 7.2% from the prior year to $370.9 thousand.
Homebuilding Gross Margin. Homebuilding gross margin for the
first quarter was 16.4%. Excluding amortized interest, homebuilding
gross margin was 20.9%, up 40 basis points versus the prior
year.
SG&A Expenses. Selling, general and administrative expenses,
as a percentage of total revenue, were 13.9% for the quarter, flat
compared to the prior year after excluding a $2.7 million charge
related to the write-off of a legacy investment that the Company
took in the first quarter of Fiscal 2017.
Liquidity. The Company ended the quarter with approximately
$343.6 million of available liquidity, including $177.8 million of
unrestricted cash and $165.8 million available on its secured
revolving credit facility, after adjusting for outstanding letters
of credit. In early October, the Company issued $400 million of
5.875% unsecured Senior Notes due 2027. The proceeds, combined with
cash on the balance sheet, were used to retire $225 million of its
5.750% Senior Notes due 2019 and $175 million of its 7.250% Senior
Notes due 2023 in a leverage-neutral refinancing transaction. In
addition, later in October, the Company increased the capacity of
its existing secured revolving credit facility to $200 million from
$180 million and extended the maturity to February 2020.
Taxes. The Tax Cuts and Jobs Act made significant revisions to
Federal income tax laws, including lowering the corporate income
tax rate from 35% to 21%, effective January 1, 2018. Tax expense in
the quarter was $108.0 million dollars, which included a $112.6
million expense related to the remeasurement of the Company’s
deferred tax assets as a result of a change to the Federal
corporate tax rate.
Gatherings
The Company made significant progress with regard to its
Gatherings communities during the first quarter of Fiscal 2018.
Construction began on the amenity center for Orlando’s Gatherings
at Lake Nona, and in January, interior finish work commenced for
building 1, with building 2 scheduled to start construction during
the second quarter. In Dallas, Gatherings at Mercer Crossing
entered the final stages of land development, with building 1
construction scheduled for a second quarter start. Additionally,
the Company began land development operations at its Gatherings at
Herrington Springs project in Atlanta, and anticipates construction
starting before the end of the fiscal year. The Company is
currently reviewing a large pipeline of potential communities which
exceeds 2,000 homes spread across its geographic footprint and
expects to see Gatherings acquisition activity accelerate
throughout Fiscal 2018.
Summary results for the three months ended December 31,
2017 are as follows:
Three Months Ended December 31, 2017
2016 Change* New home
orders, net of cancellations
1,110 1,005 10.4 % Orders per
community per month
2.4 2.2 10.9 % Average active community
count
155 156 (0.4 )% Actual community count at quarter-end
156 154 1.3 % Cancellation rates
18.9 % 21.2 %
-230 bps Total home closings
1,066 995 7.1 % Average
selling price (ASP) from closings (in thousands)
$
345.0 $ 337.8 2.1 % Homebuilding revenue (in millions)
$ 367.8 $ 336.1 9.4 % Homebuilding gross margin
16.4 % 15.8 % 60 bps Homebuilding gross margin,
excluding impairments, abandonments and interest amortized to cost
of sales
20.9 % 20.5 % 40 bps Loss from
continuing operations before income taxes (in millions)
$
(22.5 ) $ (3.9 ) $ (18.6 ) Expense (benefit) from
income taxes (in millions)
$ 108.1 $ (2.5 ) $ 110.6
Loss from continuing operations (in millions)
$
(130.6 ) $ (1.4 ) $ (129.2 ) Basic and diluted loss
per share from continuing operations
$ (4.07 )
$ (0.04 ) $ (4.03 ) Loss from continuing operations before
income taxes (in millions)
$ (22.5 ) $ (3.9 )
$ (18.6 ) Loss on debt extinguishment (in millions)
$
(25.9 ) $ — $ (25.9 ) Income (loss) from continuing
operations excluding loss on debt extinguishment before income
taxes (in millions)
$ 3.4 $ (3.9 ) $ 7.3 Net
loss
$ (130.9 ) $ (1.4 ) $ (129.5 ) Net income
(loss) excluding loss on debt extinguishment (in millions) +
$ 2.8 $ (2.8 ) $ 5.6 Land and land development
spending (in millions)
$ 141.7 $ 103.2 $ 38.5
Adjusted EBITDA (in millions)
$ 28.4 $ 24.4 $ 4.0 LTM
Adjusted EBITDA (in millions)
$ 182.7 $ 154.8 $ 27.9
*
Change and totals are calculated using unrounded numbers.
+
Loss on debt extinguishment was
tax-effected at annualized effective tax rates of 26.6% and 36.22%
for the three months ended December 31, 2017 and December 31, 2016,
respectively.
“LTM” indicates amounts for the trailing 12 months.
As of December
31, 2017
As of December 31, 2017
2016 Change Backlog units
1,899
1,926 (1.4 )% Dollar value of backlog (in millions)
$
704.4 $ 666.1 5.7 % ASP in backlog (in thousands)
$
370.9 $ 345.8 7.2 % Land and lots controlled
22,324
23,300 (4.2 )%
Conference Call
The Company will hold a conference call on February 6, 2018
at 5:00 p.m. ET 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. To access the conference call by
telephone, listeners should dial 800-619-8639 (for international
callers, dial 312-470-7002). 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 888-566-0418 (for international callers, dial
203-369-3043) and enter the passcode “3740” (available until 10:59
p.m. ET on February 13, 2018), or visit www.beazer.com. A replay of the webcast will be
available at www.beazer.com for at
least 30 days.
Headquartered in Atlanta, Beazer Homes is one of the
country’s largest single-family homebuilders. The Company’s homes
meet or exceed the benchmark for energy-efficient home construction
as established by ENERGY STAR® and are designed with Choice Plans
to meet the personal preferences and lifestyles of its buyers.
In addition, the Company is committed to providing a range of
preferred lender choices to facilitate transparent competition
between lenders and enhanced customer service. The Company
offers homes in Arizona, California, Delaware, Florida, Georgia,
Indiana, Maryland, Nevada, North Carolina, South Carolina,
Tennessee, Texas and Virginia. Beazer Homes is listed on the
New York Stock Exchange under the ticker symbol “BZH.” For more
info visit Beazer.com,
or check out Beazer on Facebook and Twitter.
This press release 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) economic changes nationally or in local markets,
changes in consumer confidence, declines in employment levels,
inflation or increases in the quantity and decreases in the price
of new homes and resale homes on the market; (ii) the cyclical
nature of the homebuilding industry and a potential deterioration
in homebuilding industry conditions; (iii) factors affecting
margins, such as decreased land values underlying land option
agreements, increased land development costs on communities under
development or delays or difficulties in implementing initiatives
to reduce our production and overhead cost structure; (iv) the
availability and cost of land and the risks associated with the
future value of our inventory, such as additional asset impairment
charges or writedowns; (v) shortages of or increased prices for
labor, land or raw materials used in housing production, and the
level of quality and craftsmanship provided by our subcontractors;
(vi) estimates related to homes to be delivered in the future
(backlog) are imprecise, as they are subject to various
cancellation risks that cannot be fully controlled; (vii) a
substantial increase in mortgage interest rates, increased
disruption in the availability of mortgage financing, the recent
change in tax laws regarding the deductibility of mortgage interest
for tax purposes or an increased number of foreclosures; (viii)
government actions, policies, programs and regulations directed at
or affecting the housing market (including the Tax Cuts and Jobs
Act, the Dodd-Frank Act and the tax benefits associated with
purchasing and owning a home); (ix) changes in existing tax laws or
enacted corporate income tax rates, including pursuant to the Tax
Cuts and Jobs Act; (x) our cost of and ability to access capital,
due to factors such as limitations in the capital markets or
adverse credit market conditions, 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; (xi) our ability to reduce our outstanding indebtedness and
to comply with covenants in our debt agreements or satisfy such
obligations through repayment or refinancing; (xii) increased
competition or delays in reacting to changing consumer preferences
in home design; (xiii) weather conditions or other related events
that could result in delays in land development or home
construction, increase our costs or decrease demand in the impacted
areas; (xiv) estimates related to the potential recoverability of
our deferred tax assets; (xv) 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 or governmental policies, including those related to
the environment; (xvi) the results of litigation or government
proceedings and fulfillment of any related obligations; (xvii) the
impact of construction defect and home warranty claims, including
water intrusion issues in Florida; (xviii) the cost and
availability of insurance and surety bonds, as well as the
sufficiency of these instruments to cover potential losses
incurred; (xix) the performance of our unconsolidated entities and
our unconsolidated entity partners; (xx) the impact of information
technology failures or data security breaches; (xxi) terrorist
acts, natural disasters, acts of war or other factors over which
the Company has little or no control; or (xxii) the impact on
homebuilding in key markets of governmental regulations limiting
the availability of water.
Any forward-looking statement speaks only as of the date on
which such statement is made and, except as required by law, we
undertake no obligation to update any forward-looking statement to
reflect events or circumstances after the date on which such
statement is made or to reflect the occurrence of unanticipated
events. 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 INCOME (LOSS) AND UNAUDITED
COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share
data)
Three Months Ended December 31, 2017
2016 Total revenue
$ 372,489 $ 339,241
Home construction and land sales expenses
311,660
285,578 Gross profit
60,829 53,663 Commissions
14,356 13,323 General and administrative expenses
37,285 36,388 Depreciation and amortization
2,507
2,677 Operating income
6,681 1,275 Equity in
(loss) income of unconsolidated entities
(101 ) 22
Loss on extinguishment of debt
(25,904 ) — Other
expense, net
(3,145 ) (5,196 ) Loss from continuing
operations before income taxes
(22,469 ) (3,899 )
Expense (benefit) from income taxes
108,106 (2,540 )
Loss from continuing operations
(130,575 ) (1,359 )
Loss from discontinued operations, net of tax
(372 )
(70 ) Net loss and comprehensive loss
$ (130,947
) $ (1,429 ) Weighted average number of shares: Basic and
diluted
32,055 31,893 Basic and diluted loss per share:
Continuing operations
$ (4.07 ) $ (0.04 )
Discontinued operations
(0.01 ) — Total
$ (4.08 ) $ (0.04 )
Three
Months Ended December 31, Capitalized Interest in
Inventory 2017 2016 Capitalized interest in inventory,
beginning of period
$ 139,203 $ 138,108 Interest
incurred
25,555 27,087 Interest expense not qualified for
capitalization and included as other expense
(3,435 )
(5,252 ) Capitalized interest amortized to home construction and
land sales expenses
(16,476 ) (15,644 ) Capitalized
interest in inventory, end of period
$ 144,847
$ 144,299
BEAZER HOMES USA, INC.
UNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEETS
(In thousands, except share and per
share data)
December 31, 2017 September 30, 2017
ASSETS
Cash and cash equivalents
$ 177,812 $ 292,147
Restricted cash
12,082 12,462 Accounts receivable (net of
allowance of $329 and $330, respectively)
31,804 36,323
Income tax receivable
88 88 Owned Inventory
1,626,721
1,542,807 Investments in unconsolidated entities
4,277 3,994
Deferred tax assets, net
200,101 307,896 Property and
equipment, net
18,742 17,566 Other assets
6,355
7,712 Total assets
$ 2,077,982 $
2,220,995
LIABILITIES AND STOCKHOLDERS’ EQUITY Trade
accounts payable
$ 97,535 $ 103,484 Other liabilities
103,157 107,659 Total debt (net of premium of $3,220 and
$3,413, respectively, and debt issuance costs of $16,545 and
$14,800, respectively)
1,324,509 1,327,412
Total liabilities
1,525,201 1,538,555
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, 63,000,000 shares authorized,
33,596,091 issued and outstanding and 33,515,768 issued and
outstanding, respectively)
34 34 Paid-in capital
874,351 873,063 Accumulated deficit
(321,604 )
(190,657 ) Total stockholders’ equity
552,781 682,440
Total liabilities and stockholders’ equity
$
2,077,982 $ 2,220,995
Inventory
Breakdown Homes under construction
$ 461,185 $
419,312 Development projects in progress
830,827 785,777
Land held for future development
97,166 112,565 Land held
for sale
19,258 17,759 Capitalized interest
144,847
139,203 Model homes
73,438 68,191 Total owned
inventory
$ 1,626,721 $ 1,542,807
BEAZER HOMES USA, INC.
CONSOLIDATED OPERATING AND FINANCIAL
DATA – CONTINUING OPERATIONS
($ in thousands, except otherwise
noted)
Three Months Ended December 31, SELECTED OPERATING
DATA 2017 2016
Closings: West
region
526 510 East region
225 217 Southeast region
315 268 Total closings
1,066 995
New orders, net of cancellations: West region
534 467
East region
259 228 Southeast region
317 310
Total new orders, net
1,110 1,005
As of
December 31, Backlog units at end of period: 2017
2016 West region
887 785 East region
447 455
Southeast region
565 686 Total backlog units
1,899 1,926 Dollar value of backlog at end of period
(in millions)
$ 704.4 $ 666.1
Three Months Ended December 31, SUPPLEMENTAL FINANCIAL
DATA 2017 2016
Homebuilding revenue: West region
$ 176,556 $ 171,749 East region
85,688 81,250
Southeast region
105,510 83,127 Total homebuilding
revenue
$ 367,754 $ 336,126
Revenues: Homebuilding
$ 367,754 $ 336,126
Land sales and other
4,735 3,115 Total revenues
$ 372,489 $ 339,241
Gross
profit: Homebuilding
$ 60,232 $ 53,204 Land sales
and other
597 459 Total gross profit
$
60,829 $ 53,663
Reconciliation of homebuilding gross profit and the related
gross margin before impairments and abandonments and interest
amortized to cost of sales to homebuilding gross profit and gross
margin, the most directly comparable GAAP measure, is provided for
each period discussed below. Management believes that this
information assists investors in comparing the operating
characteristics of homebuilding activities by eliminating many of
the differences in companies' respective level of impairments and
level of debt.
Three Months Ended December 31, 2017
2016 Homebuilding gross profit/margin
$
60,232 16.4 % $ 53,204
15.8 % Interest amortized to cost of sales
16,468
15,644 Homebuilding gross profit/margin before impairments,
abandonments and interest amortized to cost of sales
$
76,700 20.9 % $ 68,848 20.5 %
Reconciliation of Adjusted EBITDA to total company net income
(loss), the most directly comparable GAAP measure, is provided for
each period discussed below. Management believes that Adjusted
EBITDA assists investors in understanding and comparing the
operating characteristics of homebuilding activities by eliminating
many of the differences in companies' respective capitalization,
tax position and level of impairments. These EBITDA measures should
not be considered alternatives to net income determined in
accordance with GAAP as an indicator of operating performance.
The reconciliation of Adjusted EBITDA to total company net
income (loss) below differs from the prior year, as it provides a
more simplified presentation of EBIT, EBITDA and Adjusted EBITDA
that excludes certain non-recurring amounts recorded during the
periods presented. Management believes that this presentation best
reflects the operating characteristics of the Company.
Three Months Ended December 31,
LTM Ended December 31,(a) (In thousands)
2017
2016
2017 2016 Net (loss) income
$ (130,947 ) $ (1,429 )
$
(97,705 ) $ 2,265 Expense (benefit) from income taxes
107,979 (2,579 )
113,179 13,139 Interest amortized to
home construction and land sales expenses and capitalized interest
impaired
16,476 15,644
89,652 81,315 Interest expense
not qualified for capitalization
3,435 5,252
13,819 23,208 EBIT
(3,057 )
16,888
118,945 119,927 Depreciation and amortization and
stock-based compensation amortization
5,117 4,859
22,431 21,864 EBITDA
2,060
21,747
141,376 141,791 Loss on extinguishment of debt
25,904 —
38,534 12,595 Inventory impairments and
abandonments (b)
450 —
2,839 13,216 Additional
insurance recoveries from third-party insurer
— —
—
(15,500 ) Write-off of deposit on legacy land investment
—
2,700
— 2,700 Adjusted EBITDA
$ 28,414 $ 24,447
$
182,749 $ 154,802 (a) “LTM” indicates
amounts for the trailing 12 months. (b) In periods during which we
impaired certain of our inventory assets, capitalized interest that
is impaired is included in the line above titled “Interest
amortized to home construction and land sales expenses and
capitalized interest impaired.”
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180206005865/en/
Beazer Homes USA, Inc.David I. Goldberg, 770-829-3700Vice
President of Treasury and Investor Relationsinvestor.relations@beazer.com
Beazer Homes USA (NYSE:BZH)
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