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Beazer Homes Reports Third Quarter Fiscal 2009 Results

August 6, 2009 at 4:04 PM EDT

ATLANTA--(BUSINESS WIRE)--Aug. 6, 2009-- Beazer Homes USA, Inc. (NYSE: BZH) (www.beazer.com) today announced its financial results for the quarter ended June 30, 2009. Summary results of the quarter are as follows:

  • Reported loss from continuing operations of $(27.9) million, or $(0.72) per share, including non-cash pre-tax charges of $16.7 million, consisting of inventory impairments and abandonment of land option contracts of $11.9 million and impairments in joint ventures of $4.8 million. These results also include a non-cash deferred tax valuation allowance of $4.5 million and a $55.2 million gain on extinguishment of debt, as described further below. For the third quarter of the prior fiscal year, the Company reported a loss from continuing operations of $(109.7) million, or $(2.85) per share.
  • Total revenue: $224.7 million, compared to $455.6 million in the third quarter of the prior year.
  • Home closings: 950 homes, representing a decrease year-over-year of 33.2% in markets where the Company maintains a presence.
  • New orders: 1,537 homes, representing a decrease year-over-year of 5.0% in markets where the Company maintains a presence.
  • The cancellation rate for the third quarter improved to 23.0%, compared to 29.8% in the second quarter of this fiscal year and 36.8% in the third quarter of the prior year.
  • Cash and cash equivalents as of June 30, 2009: $464.9 million, compared to $559.5 million at March 31, 2009 and $314.2 million at June 30, 2008. During the quarter, the Company repurchased $115.5 million of senior notes for an aggregate purchase price of $58.2 million or an average price of 50.4%, resulting in a gain on the extinguishment of debt of $55.2 million.
  • Backlog as of June 30, 2009: 1,867 homes with a sales value of $430.8 million compared to 1,280 homes with a sales value of $296.6 million as of March 31, 2009, and 2,716 homes with a sales value of $668.1 million as of June 30, 2008.

Ian J. McCarthy, President and Chief Executive Officer, said, “Although the economic recession continued to weigh on both the overall housing industry and our operations in the third quarter, we continued to experience sequential improvement in sales trends. In addition to normal seasonal patterns, we attribute this increased demand to attractive interest rates, historically high housing affordability and federal and state tax credits which have enticed more prospective buyers to purchase a new home. On the other hand, we remain cautious as rising levels of both unemployment and foreclosures, coupled with the scheduled expiration of the federal home purchase tax credit, make it difficult to predict when and to what extent housing market conditions will sustainably recover. As such, we continue to maintain a disciplined operating approach and remain focused on generating and maintaining liquidity.”

Results for the Quarter Ended June 30, 2009

Homebuilding revenues declined 48.3% in the June quarter, due to a 43.4% decline in total home closings and an 8.7% decline in the average selling price of homes closed compared to the same period of the prior year. Home closings declined 33.2% in markets where the Company maintains a presence (West, East and Southeast segments) and 99.2% in the Company’s exit markets (Other segment). Net new home orders totaled 1,537 for the quarter, a decrease of 13.4% from 1,774 net orders in the third quarter of the prior fiscal year. Net orders declined 5.0% in markets where the Company maintains a presence and 99.4% in its exit markets. The cancellation rate for the third quarter improved to 23.0%, compared to 29.8% in the second quarter of this fiscal year and 36.8% in the third quarter of the prior year.

Overall, margins continued to be negatively impacted by weak market conditions, impacting both closing volumes and pricing, and as a result of non-cash pre-tax charges for inventory impairments, lot option abandonments and joint venture impairments of $10.8 million, $1.1 million and $4.8 million, respectively.

The Company controlled 32,904 lots at June 30, 2009 (81% owned and 19% controlled under options), reflecting reductions of approximately 17.0% and 28.8% from levels as of September 30, 2008 and June 30, 2008, respectively. As of June 30, 2009, unsold finished homes totaled 234, a decline of approximately 38% from the second quarter of this fiscal year and 22% from the level a year ago. The Company continued to substantially reduce its land and land development spending, which totaled $31.2 million in the third fiscal quarter, compared to $62.6 million for the same period in the prior year.

Liquidity and Liability Management Initiatives

Cash Position and Senior Notes Repurchases

At June 30, 2009, the Company had cash and cash equivalents of $464.9 million, compared to $559.5 million at March 31, 2009 and $314.2 million at June 30, 2008. As of June 30, 2009, the Company had restricted cash of $11.3 million to sufficiently collateralize outstanding letters of credit under the Company’s secured revolving credit facility.

During the quarter, the Company repurchased $115.5 million of senior notes in open market transactions for an aggregate purchase price of $58.2 million, or an average price of 50.4%, plus accrued and unpaid interest. These repurchases resulted in a gain on the extinguishment of debt of $55.2 million.

Secured Revolving Credit Facility

As a result of its current liquidity position and reduced working capital needs in the current economic environment, the Company does not foresee any need for cash borrowings on its secured revolving credit facility during its remaining term. As a result, the Company has decided to amend and restructure its secured revolving credit facility.

As part of this restructuring, the current Secured Revolving Credit Facility was reduced to $22 million and will be provided by one lender. The restructured facility will continue to provide for future working capital and letter of credit needs, collateralized by either cash or assets of the Company at the Company’s option, conditioned upon certain conditions and covenant compliance. The Company also entered into three stand-alone, cash-secured, letter of credit agreements with banks to maintain the pre-existing letters of credit that had been issued under the current Secured Revolving Credit Facility. At closing on August 5, 2009, the Company elected to secure all of its letters of credit using cash collateral which required additional cash in restricted accounts of $37.8 million.

Due to this restructuring, the Company recognized expense of $3.3 million of previously capitalized unamortized debt issuance costs as of June 30, 2009, which is reflected in other expense in the Company’s income statement for the quarter ended June 30, 2009.

Conference Call

The Company will hold a conference call today, August 6, 2009, at 5:00 PM 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. To access the conference call by telephone, listeners should dial 877-601-3546 or 212-547-0388. 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 866-448-2576 or 203-369-1172 and enter the passcode “3740”. (available until 6:00 PM ET on August 13, 2009), or visit www.beazer.com. A replay of the webcast will be available at www.beazer.com for approximately 30 days.

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 any state and federal agency investigations, as well as the results of any other 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.

-Tables Follow-

BEAZER HOMES USA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
       
 
Quarter Ended Nine Months Ended
June 30, June 30,
  2009     2008     2009     2008  
INCOME STATEMENT
Total revenue $ 224,653 $ 455,578 $ 645,340

$

1,361,649

Home construction and land sales expenses 207,176 407,512 580,920 1,223,252
Inventory impairments and option contract abandonments   11,856     95,482     76,320     451,854  
Gross profit (loss) 5,621 (47,416 ) (11,900 ) (313,457 )
 
Selling, general and administrative expenses 51,357 83,517 174,596 245,696
Depreciation & amortization 4,957 6,046 13,079 18,250
Goodwill impairment   -     4,365     16,143     52,470  
Operating loss (50,693 ) (141,344 ) (215,718 ) (629,873 )
Equity in loss of unconsolidated joint ventures (4,041 ) (18,568 ) (13,795 ) (75,069 )
Gain on extinguishment of debt 55,214 - 58,788 -
Other expense, net   (22,370 )   (13,489 )   (59,958 )   (20,907 )
 
Loss from continuing operations before income taxes (21,890 ) (173,401 ) (230,683 ) (725,849 )
Provision for (benefit from) income taxes   5,990     (63,707 )   (7,981 )   (249,771 )
Loss from continuing operations (27,880 ) (109,694 ) (222,702 ) (476,078 )
Loss from discontinued operations, net of tax   (96 )   (148 )   (472 )   (1,893 )
Net loss $ (27,976 ) $ (109,842 )

$

(223,174)

  $ (477,971 )
 
Loss per common share from continuing operations:

Basic

$ (0.72 ) $ (2.85 ) $ (5.76 ) $ (12.35 )

Diluted

$ (0.72 ) $ (2.85 ) $ (5.76 ) $ (12.35 )
Loss per common share from discontinued operations:

Basic

$ (0.00 )   (0.00 ) $ (0.01 ) $ (0.05 )

Diluted

$ (0.00 )   (0.00 ) $ (0.01 ) $ (0.05 )
Loss per common share:

Basic

$ (0.72 ) $ (2.85 ) $ (5.77 ) $ (12.40 )

Diluted

$ (0.72 ) $ (2.85 ) $ (5.77 ) $ (12.40 )
 
 
Weighted average shares outstanding, in thousands:

Basic

38,815 38,551 38,666 38,546

Diluted

38,815 38,551 38,666 38,546
 
 
Interest Data:
Quarter Ended Nine Months Ended
June 30, June 30,
  2009     2008     2009     2008  
Capitalized interest in inventory, beginning of period $ 45,466 $ 78,665 $ 45,977 $ 87,560
Interest incurred 35,806 34,234 103,059 105,214
Capitalized interest impaired (160 ) (1,875 ) (2,113 ) (12,468 )

Interest expense not qualified for capitalization and included as other expense

(23,727 ) (15,873 ) (65,986 ) (35,866 )

Capitalized interest amortized to house construction and land sales expense

  (12,999 )   (26,693 )   (36,551 )   (75,982 )
Capitalized interest in inventory, end of period $ 44,386   $ 68,458   $ 44,386   $ 68,458  
 
BEAZER HOMES USA, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
 
CONSOLIDATED BALANCE SHEETS   June 30,   September 30,
  2009     2008  
Assets
Cash and cash equivalents $ 464,949 $ 584,334
Restricted cash 11,902 297
Accounts receivable, net 26,185 46,555
Income tax receivable 13,957 173,500
Inventory
Owned inventory 1,397,181 1,545,006
Consolidated inventory not owned   58,542     106,655  
Total inventory 1,455,723 1,651,661
Investments in unconsolidated joint ventures 29,905 33,065
Deferred tax assets, net 22,109 20,216
Property, plant and equipment, net 30,071 39,822
Goodwill - 16,143
Other assets   53,788     76,206  
Total assets $ 2,108,589   $ 2,641,799  
 
Liabilities and Stockholders' Equity
Trade accounts payable $ 76,461 $ 90,371
Other liabilities 248,973 358,592
Obligations related to consolidated inventory not owned 31,764 70,608
Senior Notes (net of discounts of $2,013 and $2,565, respectively) 1,407,486 1,522,435
Junior subordinated notes 103,093 103,093
Other secured notes payable 34,122 50,618
Model home financing obligations   46,908     71,231  
Total liabilities   1,948,807     2,266,948  
 
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, 80,000,000 shares authorized, 42,605,804 and 42,612,801 issued and 39,248,648 and 39,270,038 outstanding, respectively)

43 43
Paid-in capital 565,037 556,910
Retained earnings (221,329 ) 1,845
Treasury stock, at cost (3,357,156 and 3,342,763 shares, respectively)   (183,969 )   (183,947 )
Total stockholders' equity   159,782     374,851  
Total liabilities and stockholders' equity $ 2,108,589   $ 2,641,799  
 
 
Inventory Breakdown
Homes under construction $ 289,985 $ 338,971
Development projects in progress 559,373 618,252
Land held for future development 415,309 407,320
Land held for sale 59,922 85,736
Model homes 72,592 94,727
Consolidated inventory not owned   58,542     106,655  
$ 1,455,723   $ 1,651,661  
 
BEAZER HOMES USA, INC.
CONSOLIDATED OPERATING AND FINANCIAL DATA - CONTINUING OPERATIONS
(Dollars in thousands)
 
       
OPERATING DATA
 
Quarter Ended Nine Months Ended
June 30, June 30,
SELECTED OPERATING DATA   2009   2008 2009 2008
Closings:
West region 398 599 1,176 1,739
East region 368 516 913 1,672
Southeast region 182 304 556 1,060
Other homebuilding   2   258 57 780
Total closings   950   1,677 2,702 5,251
New orders, net of cancellations:
West region 670 813 1,434 2,059
East region 599 386 1,238 1,255
Southeast region 267 417 521 1,101
Other homebuilding   1   158 18 567
Total new orders   1,537   1,774 3,211 4,982
Backlog units at end of period:
West region 785 1,125
East region 810 900
Southeast region 271 531
Other homebuilding   1   160
Total backlog units   1,867   2,716
Dollar value of backlog at end of period $ 430,807 $ 668,147
 
BEAZER HOMES USA, INC.
CONSOLIDATED OPERATING AND FINANCIAL DATA - CONTINUING OPERATIONS
(Dollars in thousands)
       
Quarter Ended Nine Months Ended
June 30, June 30,
SUPPLEMENTAL FINANCIAL DATA 2009 2008 2009 2008
 
Revenues
Homebuilding operations $ 223,219 $ 431,723 $ 641,087

$1,324,166

Land and lot sales 1,077 22,975 3,096 34,544
Financial Services 357 880 1,157 2,939
Total revenues $ 224,653 $ 455,578 $ 645,340

$1,361,649

Gross profit (loss)
Homebuilding operations $ 5,168 (50,338) $ (13,122) (317,398)
Land and lot sales 96 2,042 65 1,002
Financial Services 357 880 1,157 2,939
Total gross profit (loss) $ 5,621 $ (47,416) $ (11,900) $(313,457)
Selling, general and administrative
Homebuilding operations $ 51,172 $ 82,847 $ 173,676 $ 243,790
Financial Services 185 670 920 1,906
Total selling, general and administrative $ 51,357 $ 83,517 $ 174,596 $ 245,696
 
 
SELECTED SEGMENT INFORMATION
Revenue:
West region $ 87,328 $ 144,913 $ 264,428 $ 437,369
East region 95,043 161,241 240,029 472,507
Southeast region 41,343 69,516 123,250 250,903
Other homebuilding 582 79,028 16,476 197,931
Financial services 357 880 1,157 2,939
Total revenue

$ 224,653

$ 455,578 $ 645,340

$1,361,649

 
Operating (loss) income
West region $ (6,467) $ (37,572) $ (33,147) $(140,550)
East region (923) (3,632) (14,760) (63,026)
Southeast region (3,877) (14,475) (20,546) (88,621)
Other homebuilding (1,931) (21,358) (12,730) (111,825)
Financial services 172 202 228 1,012
Segment operating loss (13,026) (76,835) (80,955) (403,010)
Corporate and unallocated (37,667) (64,509) (134,763) (226,863)
Total operating loss $ (50,693) $ (141,344)

$(215,718)

$(629,873)
 

Source: Beazer Homes USA, Inc.

Beazer Homes USA, Inc.
Leslie H. Kratcoski, 770-829-3700
Vice President, Investor Relations & Corporate Communications
lkratcos@beazer.com