Beazer Homes Reports Strong First Quarter Fiscal 2018 Results
“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
Mr. Merrill continued, “Our strong performance in the first quarter has
us well positioned to reach both our “2B-10” target of
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,
Profitability. Net loss from continuing operations of
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
Backlog. The dollar value of homes in backlog as of
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
Liquidity. The Company ended the quarter with approximately
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
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
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
Headquartered in
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
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/
Source:
Beazer Homes USA, Inc.
David I. Goldberg, 770-829-3700
Vice
President of Treasury and Investor Relations
investor.relations@beazer.com