Beazer Homes Reports Record Earnings: Fourth Quarter EPS of $5.82, up 39%; Fiscal 2004 EPS of $17.09, up 34%
ATLANTA--(BUSINESS WIRE)--Nov. 5, 2004-- Company Issues EPS Outlook of $20.00 - $21.00 for Fiscal Year 2005
Beazer Homes USA, Inc. (NYSE:BZH) (www.beazer.com) today announced results for the quarter and full year ended September 30, 2004, reporting an all-time record for quarterly earnings per share. Highlights of the quarter and year, compared to the same periods of the prior year, are as follows:
Quarter Ended September 30, 2004 -- Record diluted EPS: $5.82 (up 39.2% vs. $4.18 in prior year) -- Home closings: 5,098 (up 1.7%) -- Total revenues: $1.21 billion (up 16.5%) -- Gross margin from home construction: 20.4% (up 130 basis points) -- Operating income margin: 10.6% (up 170 basis points) -- Net income: $80.1 million (up 40.1%) -- New orders: 4,276 (up 10.7%) Year Ended September 30, 2004 -- Record diluted EPS: $17.09 (up 33.7% vs. $12.78 in prior year) -- Home closings: 16,451 (up 6.8%) -- Total revenues: $3.91 billion (up 23.0%) -- Gross margin from home construction: 19.7% (up 90 basis points) -- Operating income margin: 9.7% (up 90 basis points) -- Net income: $235.8 million (up 36.5%) -- New orders: 17,481 (up 7.1%) Record Year-End Backlog -- Backlog at 9/30/04: 8,456 homes (up 13.9%), sales value $2.24 billion (up 35.9%)
Record Earnings for September Quarter
"Beazer Homes ends the year with an extremely strong finish, surpassing numerous milestones," said President and Chief Executive Officer, Ian J. McCarthy. "We generated annual revenues approaching $4 billion, which was accompanied by significant annual earnings growth of 36.5% in fiscal 2004. Our September quarter revenues increased 16.5%, and new orders were up 10.7%, both indicating continued strength and favorable conditions in the housing industry and Beazer Homes' strong market position. Our September quarter net income and earnings per share both represent all-time quarterly records, increasing 40.1% and 39.2%, respectively, from the prior year. These strong results illustrate our ongoing commitment to achieving profitable growth by leveraging our size, scale and geographic reach through our national brand."
"Beazer Homes' backlog now stands at a fourth quarter record level of 8,456 homes with a sales value of $2.24 billion, up 13.9% and 35.9%, respectively, from the backlog homes and sales value at September 30, 2003. We believe this sizeable year-end backlog increase provides excellent visibility for continued strong financial performance in fiscal 2005," added McCarthy.
The growth in new home orders for the quarter resulted from increases in the Company's Mid-Atlantic, Southeast and West regions. Order growth in the Southeast was driven by increases in Florida, Georgia and parts of the Carolinas, with West region order growth attributed to Arizona and California. This was partially offset by lower orders in the Central region and parts of the Midwest and Carolinas. Overall, Midwest orders were flat year-over-year.
Closings of 5,098 homes represents a quarterly record and resulted from increases in closings in the Company's West and Mid-Atlantic regions and in parts of the Southeast, notably Georgia and parts of Florida. These increases were partially offset by declines in the Central and Midwest regions and parts of the Carolinas.
These increases in new home orders and closings were achieved despite challenging weather conditions resulting from hurricane activity throughout parts of the Southeast region.
Strong Financial Position Continues in September Quarter
"Beazer Homes' financial position remained strong during the fourth fiscal quarter," said James O'Leary, Executive Vice President and Chief Financial Officer. "At September 30, 2004, net debt to total capitalization stood at 39.9%, with a cash position of $320.9 million. We achieved not only record earnings and improved margins this quarter, but also a return on average equity for the twelve months ended September 30, 2004 of 21.2%, representing a 190 basis point improvement from the same period a year ago. These financial results reflect our commitment to improved profitability and sustained growth within our diverse geographic footprint through focused product expansion and price point diversification."
During the fourth fiscal quarter of 2004, the Company realized increases over the prior year in its home construction gross margin, total gross margin and operating income margin as the Company continued to realize benefits from the execution of its profit improvement initiatives and a strong pricing environment in several markets. These results include warranty costs associated with construction defect claims from water intrusion at one of its Midwest divisions and marketing expenses associated with the Company's branding initiative totaling $18.5 million.
Settlement of Class Action Suit
As disclosed in the Company's Report on Form 8-K filed with the SEC on October 26, 2004, the Hamilton County Superior Court approved the settlement agreement between the parties in the putative class action suit against Trinity Homes LLC and Beazer Homes Investment Corp., Trinity's parent, on October 20, 2004. The plaintiffs asserted that homes built by Trinity with a brick veneer lacked a one inch air gap, resulting in water intrusion.
The settlement agreement establishes an agreed protocol and process for assessment and remediation of any water intrusion issues at the homes which includes, among other things, that the homes will be repaired at Trinity's expense. The settlement establishes a time frame within which the work must be completed and provides a Dispute Resolution Panel to resolve disputes between a homeowner and Trinity concerning both the plan to remediate the home and the performance of the work.
Under the settlement, each homeowner releases Trinity, Beazer Homes Investment Corp. and other affiliated companies from the claims asserted in the class action lawsuit, claims arising out of external water intrusion, and claims of improper brick installation, including property damage claims, loss or diminution of property value claims, and most personal injury claims, among others.
As the Company receives claims pursuant to the settlement, we will accrue our estimated costs to resolve those claims. We expect to know substantially the number of claims that will ultimately be filed pursuant to the settlement during the second quarter of fiscal 2005.
Fiscal 2005 EPS Outlook
"Our strong backlog coupled with our expectations of continued strength in the housing market provide us confidence in our future growth opportunities," said McCarthy. "In addition, we expect continued execution on our strategic initiatives that leverage our national brand, capitalize on our broad geographic profile through focused product expansion and price-point diversification, and also drive best practices to achieve optimal efficiencies, will place us in a strong position for continued growth. Absent any unanticipated adverse changes, our outlook for fiscal 2005 diluted earnings per share is in the range of $20.00 - $21.00 per share." This outlook reflects inclusion of 1,166,400 shares issuable upon conversion of the Company's convertible senior notes in the calculation of diluted earnings per share for fiscal 2005, in accordance with the EITF 04-8 "The Effect of Contingently Convertible Debt on Diluted Earnings per Share," which is currently expected to be effective for reporting periods ending after December 15, 2004.
Beazer Homes USA, Inc., headquartered in Atlanta is one of the country's ten largest single-family homebuilders with operations in Arizona, California, Colorado, Delaware, Florida, Georgia, Indiana, Kentucky, Maryland, Mississippi, Nevada, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia and West Virginia. Beazer Homes also provides mortgage origination and title services to its homebuyers.
Forward-Looking Statements
Certain statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such risks, uncertainties and other factors include, but are not limited to changes in general economic conditions, fluctuations in interest rates, increases in raw materials and labor costs, levels of competition, potential liability as a result of construction defect, product liability and warranty claims, the possibility that the Company's improvement plan for the Midwest will not achieve desired results, and other factors described in the Company's Form S-3/A filed with the Securities and Exchange Commission on August 17, 2004 and Annual Report and Form 10-K for the year ended September 30, 2003.
BEAZER HOMES USA, INC. CONSOLIDATED OPERATING AND FINANCIAL DATA (Dollars in thousands, except per share amounts) FINANCIAL DATA -------------- Quarter Ended Year Ended September 30, September 30, ----------------------- ----------------------- 2004 2003 2004 2003 ---- ---- ---- ---- INCOME STATEMENT Revenues $1,211,141 $1,039,923 $3,907,109 $3,177,408 Costs and expenses: Home construction and land sales 953,898 829,983 3,099,732 2,534,035 Selling, general and administrative expense 129,042 117,306 429,442 356,648 Expenses related to retirement of debt - - - 7,570 ----------- ----------- ----------- ----------- Operating income 128,201 92,634 377,935 279,155 Other income 3,089 1,851 8,640 6,374 ----------- ----------- ----------- ----------- Income before income taxes 131,290 94,485 386,575 285,529 Income taxes 51,203 37,321 150,764 112,784 ----------- ----------- ----------- ----------- Net income $80,087 $57,164 $235,811 $172,745 =========== =========== =========== =========== Net income per common share: Basic $6.05 $4.38 $17.74 $13.41 =========== =========== =========== =========== Diluted $5.82 $4.18 $17.09 $12.78 =========== =========== =========== =========== Weighted average shares outstanding, in thousands: Basic 13,241 13,060 13,293 12,886 Diluted 13,749 13,679 13,801 13,514 Interest incurred $21,163 $15,677 $76,035 $65,295 Interest amortized to cost of sales $20,016 $17,302 $66,199 $55,451 Depreciation and amortization $3,655 $3,623 $15,755 $13,220 SELECTED BALANCE SHEET DATA September 30, 2004 2003 ----------- ----------- Cash $320,880 $73,372 Inventory 2,344,095 1,723,483 Total assets 3,149,462 2,212,034 Total debt 1,137,404 741,365 Shareholders' equity 1,232,121 993,695 BEAZER HOMES USA, INC. CONSOLIDATED OPERATING AND FINANCIAL DATA (Continued) (Dollars in thousands) OPERATING DATA -------------- Quarter Ended Year Ended September 30, September 30, ----------------------- --------------- SELECTED OPERATING DATA 2004 2003 2004 2003 ---- ---- ---- ---- Closings: Southeast region 1,782 1,770 5,576 5,160 West region 1,700 1,379 5,880 4,688 Central region 356 405 1,020 1,239 Mid-Atlantic region 489 449 1,583 1,238 Midwest region 771 1,011 2,392 3,084 ----------- ----------- ------- ------- Total closings 5,098 5,014 16,451 15,409 =========== =========== ======= ======= New orders, net of cancellations: Southeast region 1,548 1,298 5,884 5,614 West region 1,571 1,452 6,733 5,142 Central region 220 268 1,053 1,128 Mid-Atlantic region 367 273 1,513 1,655 Midwest region 570 571 2,298 2,777 ----------- ----------- ------- ------- Total new orders 4,276 3,862 17,481 16,316 =========== =========== ======= ======= Backlog units at end of period: Southeast region 2,629 2,321 West region 3,140 2,287 Central region 429 396 Mid-Atlantic region 1,047 1,117 Midwest region 1,211 1,305 ----------- ----------- Total backlog units 8,456 7,426 =========== =========== Dollar value of backlog at end of period $2,235,917 $1,644,814 =========== =========== Active subdivisions: Southeast region 177 178 West region 90 97 Central region 43 39 Mid-Atlantic region 57 40 Midwest region 129 140 ----------- ----------- Total active subdivisions 496 494 =========== =========== BEAZER HOMES USA, INC. CONSOLIDATED OPERATING AND FINANCIAL DATA (Continued) (Dollars in thousands) Quarter Ended Year Ended September 30, September 30, ----------------------- ----------------------- SUPPLEMENTAL FINANCIAL DATA: 2004 2003 2004 2003 ---- ---- ---- ---- Revenues Home sales $1,187,246 $1,007,416 $3,824,142 $3,097,021 Land and lot sales 12,566 19,266 44,702 39,069 Mortgage origination revenue 15,169 16,801 51,140 57,152 Intercompany elimination - mortgage (3,840) (3,560) (12,875) (15,834) ----------- ----------- ----------- ----------- Total revenues $1,211,141 $1,039,923 $3,907,109 $3,177,408 =========== =========== =========== =========== Cost of home construction and land sales Home sales $944,774 $815,261 $3,069,976 $2,515,015 Land and lot sales 12,964 18,282 42,631 34,854 Intercompany elimination - mortgage (3,840) (3,560) (12,875) (15,834) ----------- ----------- ----------- ----------- Total costs of home construction and land sales $953,898 $829,983 $3,099,732 $2,534,035 =========== =========== =========== =========== Selling, general and administrative Homebuilding operations $120,091 $107,785 $397,601 $325,657 Mortgage origination operations 8,951 9,521 31,841 30,991 ----------- ----------- ----------- ----------- Total selling, general and administrative $129,042 $117,306 $429,442 $356,648 =========== =========== =========== ===========
CONTACT: Beazer Homes USA, Inc., Atlanta Leslie H. Kratcoski, 770-829-3764 lkratcos@beazer.com SOURCE: Beazer Homes USA, Inc.