ATLANTA--(BUSINESS WIRE)--Jul. 1, 2009--
Beazer Homes USA, Inc. (NYSE: BZH) (www.beazer.com)
(“the Company”) announced that it has resolved several
previously-disclosed governmental investigations. The Company has
entered into a deferred prosecution agreement (“DPA”) with the U.S.
Attorney’s Office for the Western District of North Carolina (“the U.S.
Attorney”) and a settlement agreement with the U.S. Department of
Housing and Urban Development (“HUD”) and the civil division of the
Department of Justice. In addition, certain of the Company’s
subsidiaries have entered into a settlement agreement with the North
Carolina Real Estate Commission (“NCREC”).
Since issues involving the Company’s mortgage origination business and
financial reporting irregularities came to light, the Company has fully
cooperated with the investigations by governmental authorities. In
addition, the Company’s Audit Committee conducted an independent
investigation into these matters. In February 2008, the Company
voluntarily exited the mortgage origination business and in May 2008,
the Company completed the restatement of certain prior period financial
statements and implemented changes in its internal controls over
financial reporting.
“We deeply regret these matters and have used what we have learned to
strengthen our control and compliance culture and reinforce our absolute
commitment to act according to the highest standards of ethical conduct
throughout our organization. We are pleased that the governmental
authorities recognized our cooperation and remedial measures,” said Ian
J. McCarthy, president and chief executive officer.
These settlements enable the Company to close an unfortunate chapter in
its history and focus its efforts on executing the Company’s financial
and operating business plan for the benefit of the Company’s
shareholders, employees, and customers.
Deferred Prosecution Agreement with the U.S. Attorney
Under the DPA, the U.S. Attorney has agreed not to prosecute the Company
in connection with the matters that were the subject of the Audit
Committee investigation and are set forth in a Bill of Information filed
with the United States District Court for the Western District of North
Carolina, provided that the Company satisfies its obligations under the
DPA over the next 60 months. The term of the DPA may be less than 60
months in the event certain conditions, as described more fully in the
DPA, are met. The DPA recognizes the cooperation of the Company, its
voluntary disclosure and its adoption of remedial measures.
Under the terms of the DPA, in fiscal year 2009, the Company will
contribute $7.5 million to a restitution fund established to compensate
those Beazer customers who can demonstrate that they were injured by
certain of the practices identified in the Bill of Information. For
fiscal year 2010 the Company will contribute to the restitution fund the
greater of $1.0 million or an amount equal to 4% of the Company’s fiscal
2010 adjusted EBITDA as defined in the DPA. The Company’s liability in
each of the fiscal years after 2010 will also be equal to 4% of the
Company’s adjusted EBITDA through a portion of fiscal year 2014, unless
extended as described below. Under the terms of the DPA, the Company’s
total contributions to the restitution fund will not exceed $50.0
million.
Settlement Agreement with HUD
Under the terms of the settlement agreement with HUD and the civil
division of the Department of Justice, the Company will make an
immediate payment of $4.0 million to HUD to resolve civil and
administrative investigations. In addition, on the first anniversary of
the agreement, the Company will make a $1.0 million payment to HUD.
If the amounts paid into the restitution fund with the U.S. Attorney do
not reach $48.0 million at the end of 60 months, the restitution fund
term will be extended using the adjusted EBITDA formula until the
earlier of an additional 24 months or the time the Company’s
contribution reaches $48.0 million.
The amounts paid to the U.S. Attorney for contribution into the
restitution fund and payments to HUD do not include the $2.5 million
contributed to resolve the investigation by the North Carolina Office of
the Commissioner of Banks (“OCOB”) which was previously announced by the
Company in May 2009, although this amount will be counted as part of the
Company’s maximum obligation to the restitution fund.
As previously disclosed, the Company recognized expense in the quarter
ended March 31, 2009 of $10.5 million for the amounts yet to be paid in
fiscal years 2009 and 2010. The Company will recognize additional
expense in the quarter ended June 30, 2009 of $3.0 million. In
recognition of the financial challenges currently facing the Company,
Mr. McCarthy and Michael Furlow, executive vice president and chief
operating officer, have voluntarily contributed to the Company an amount
equal to the after-tax proceeds of their fiscal 2008 bonuses to defray
part of its initial payment to the restitution fund.
The Company’s payment obligations under the DPA and the settlement
agreement with HUD are interrelated. The total amount of such
obligations will be dependent on several factors; however, the maximum
liability under both agreements and the previously announced agreement
with the OCOB will not exceed $55.0 million.
Agreement with NCREC
With respect to the NCREC, Beazer/Squires Realty, Inc.
(“Beazer/Squires”) and Beazer Homes Corp. each has agreed to the entry
of a consent order regarding violations of certain North Carolina
statutes. Under the respective consent orders, the NCREC agreed that a
reprimand of Beazer Homes would not be issued as long as Beazer Homes
completed certain remedial measures and that the broker license held by
Beazer/Squires is revoked. The broker license held by Beazer/Squires has
been on inactive status since October 2007. There is no monetary payment
by the Company or its subsidiaries under either of the consent orders.
The consent orders conclude the investigation by the NCREC into these
matters with respect to the Company.
Beazer Homes USA, Inc., headquartered in Atlanta, is one of the
country’s ten largest single-family homebuilders with continuing
operations in Arizona, California, Delaware, Florida, Georgia, Indiana,
Maryland, Nevada, New Jersey, New Mexico, North Carolina, 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. 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 any litigation or government proceedings; (ii) additional
asset impairment charges or writedowns; (iii) economic changes
nationally or in local markets, including changes in consumer
confidence, volatility of mortgage interest rates and inflation; (iv)
continued or increased downturn in the homebuilding industry; (v)
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, (vi) our ability to maintain the listing of our
common stock on the New York Stock Exchange, (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 or reductions in our tangible net worth or liquidity
levels; (ix) potential inability to comply with covenants in our debt
agreements; (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
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; (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 and the cost of
investigation and remediation and availability of insurance; (xv)
delays in land development or home construction resulting from adverse
weather conditions; (xvi) 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; (xvii) effects of changes in accounting policies, standards,
guidelines or principles; or (xviii) 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.
Source: Beazer Homes USA, Inc.
Investors:
Beazer Homes USA, Inc.
Leslie H. Kratcoski,
770-829-3764
lkratcos@beazer.com
or
Media:
Kekst
& Company
Dawn Dover, 212-521-4817
dawn-dover@kekst.com