Beazer Homes Announces Fiscal Third Quarter 2008 Financial Results
Company Completes Amendment of Revolving Credit Facility
ATLANTA--(BUSINESS WIRE)--Aug. 8, 2008--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 June 30, September 30,
SHEET DATA
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)
===================== =========== ===========
CONTACT:
Beazer Homes USA, Inc.
Leslie H. Kratcoski, 770-829-3764
Vice President, Investor Relations
& Corporate Communications
lkratcos@beazer.com
SOURCE:
Beazer Homes USA, Inc.