Beazer Homes Reports Third Quarter Fiscal 2016 Results
The Company reported net income from continuing operations of
Revenue and Adjusted EBITDA both grew compared to the prior year.
Revenue of
Relative to the Company’s objective to achieve
The Company ended the quarter with more than
“Our results in the third quarter built on the strength we experienced
in the first half of the year, as we generated EBITDA growth while
reducing our leverage. Our sales pace and Average Selling Prices met our
expectations in all regions, and gross margin was up sequentially as
demand benefited from employment gains, low interest rates and a limited
supply of new and used homes,” said
Mr. Merrill continued, “Looking forward, we are well positioned to continue delivering EBITDA growth and debt reduction through a combination of increased revenue, better operating margins and improved capital efficiency.”
Summary results for the three and nine months ended June 30, 2016 are as follows:
Q3 Results from Continuing Operations (unless otherwise specified)
Three Months Ended June 30, | |||||||||||||||
2016 | 2015 | Change* | |||||||||||||
New Home Orders | 1,490 | 1,524 | (2.2 | )% | |||||||||||
Orders per community per month | 3.0 | 3.1 | (3.2 | )% | |||||||||||
Average active community count | 166 | 164 | 1.2 | % | |||||||||||
Actual community count at quarter-end | 168 | 168 | — | % | |||||||||||
Cancellation rates | 19.6 | % | 19.6 | % | — | ||||||||||
Total Home Closings | 1,364 | 1,293 | 5.5 | % | |||||||||||
Average selling price (ASP) from closings (in thousands) | $ | 330.6 | $ | 318.0 | 4.0 | % | |||||||||
Homebuilding revenue (in millions) | $ | 451.0 | $ | 411.1 | 9.7 | % | |||||||||
Homebuilding gross margin | 17.0 | % | 18.1 | % | -110 bps | ||||||||||
Homebuilding gross margin, excluding impairments and abandonments (I&A) | 19.7 | % | 18.1 | % | 160 bps | ||||||||||
Homebuilding gross margin, excluding I&A and interest amortized to cost of sales | 24.1 | % | 21.3 | % | 280 bps | ||||||||||
Homebuilding gross margin, excluding I&A, interest amortized to cost of sales and additional insurance recoveries from a third-party insurer | 20.7 | % | 21.3 | % | -60 bps | ||||||||||
Income from continuing operations before income taxes (in millions) | $ | 11.5 | $ | 12.1 | $ | (0.6 | ) | ||||||||
Provision for (benefit from) income taxes (in millions) | $ | 5.3 | $ | (0.1 | ) | $ | 5.5 | ||||||||
Income from continuing operations (in millions) | $ | 6.1 | $ | 12.2 | $ | (6.1 | ) | ||||||||
Basic income per share from continuing operations | $ | 0.19 | $ | 0.46 | $ | (0.27 | ) | ||||||||
Diluted income per share from continuing operations | $ | 0.19 | $ | 0.38 | $ | (0.19 | ) | ||||||||
Total Company land and land development spending (in millions) | $ | 72.6 | $ | 105.9 | $ | (33.4 | ) | ||||||||
Total Company Adjusted EBITDA, excluding additional insurance recoveries from a third-party insurer (in millions) |
$ | 38.3 | $ | 36.9 | 3.6 | % | |||||||||
LTM Adjusted EBITDA, excluding unexpected warranty costs, a litigation settlement in discontinued operations and additional insurance recoveries from a third-party insurer (in millions) | $ | 161.4 | $ | 134.4 | 20.1 | % |
Nine Months Ended June 30, | |||||||||||||||
2016 | 2015 | Change* | |||||||||||||
New Home Orders | 3,951 | 4,188 | (5.7 | )% | |||||||||||
LTM orders per month per community | 2.6 | 2.8 | (7.1 | )% | |||||||||||
Cancellation rates | 20.4 | % | 18.9 | % | 150 bps | ||||||||||
Total Home Closings | 3,563 | 3,114 | 14.4 | % | |||||||||||
ASP from closings (in thousands) | $ | 326.9 | $ | 307.9 | 6.2 | % | |||||||||
Homebuilding revenue (in millions) | $ | 1,164.8 | $ | 959.0 | 21.5 | % | |||||||||
Homebuilding gross margin | 16.6 | % | 16.9 | % | -30 bps | ||||||||||
Homebuilding gross margin, excluding impairments and abandonments (I&A) | 17.8 | % | 16.9 | % | 90 bps | ||||||||||
Homebuilding gross margin, excluding I&A and interest amortized to cost of sales | 22.1 | % | 20.2 | % | 190 bps | ||||||||||
Homebuilding gross margin, excluding I&A, interest amortized to cost of sales, unexpected warranty costs and additional insurance recoveries from a third-party insurer | 20.4 | % | 21.6 | % | -120 bps | ||||||||||
Income (loss) from continuing operations before income taxes (in millions) | $ | 8.1 | $ | (8.7 | ) | $ | 16.7 | ||||||||
Provision for (benefit from) income taxes (in millions) | $ | 2.1 | $ | (0.7 | ) | $ | 2.8 | ||||||||
Income (loss) from continuing operations (in millions) | $ | 6.0 | $ | (7.9 | ) | $ | 13.9 | ||||||||
Basic and diluted income (loss) per share from continuing operations | $ | 0.19 | $ | (0.30 | ) | $ | 0.49 | ||||||||
Total Company land and land development spending (in millions) | $ | 267.8 | $ | 353.5 | $ | (85.6 | ) | ||||||||
Total Company Adjusted EBITDA, excluding unexpected warranty costs, a litigation settlement in discontinued operations and additional insurance recoveries from a third-party insurer (in millions) |
$ | 90.3 | $ | 73.0 | 23.8 | % | |||||||||
* Change is calculated using unrounded numbers. | |||||||||||||||
“LTM” indicates amounts for the trailing 12 months. | |||||||||||||||
As of
As of June 30, |
|||||||||||
2016 | 2015 | Change | |||||||||
Backlog units | 2,426 | 2,764 | (12.2 | )% | |||||||
Dollar value of backlog (in millions) | $ | 814.6 | $ | 899.2 | (9.4 | )% | |||||
ASP in backlog (in thousands) | $ | 335.8 | $ | 325.3 | 3.2 | % | |||||
Land and lots controlled | 24,317 | 27,183 | (10.5 | )% |
Conference Call
The Company will hold a conference call on July 28, 2016 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 production and overhead cost structure; (iv) 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; (v) our ability to reduce our outstanding indebtedness and to
comply with covenants in our debt agreements or satisfy such obligations
through repayment or refinancing; (vi) 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; (vii) 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; (viii) 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; (ix) a substantial
increase in mortgage interest rates, increased disruption in the
availability of mortgage financing, a change in tax laws regarding the
deductibility of mortgage interest, or an increased number of
foreclosures; (x) increased competition or delays in reacting to
changing consumer preference in home design; (xi) continuing severe
weather conditions or other related events could result in delays in
land development or home construction, increase our costs or decrease
demand in the impacted areas; (xii) estimates related to the potential
recoverability of our deferred tax assets; (xiii) 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 these related to the environment; (xiv)
the results of litigation or government proceedings and fulfillment of
the obligations in the consent orders with governmental authorities and
other settlement agreements; (xv) 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 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. | ||||||||||||||||||||
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||||
($ in thousands, except per share data) | ||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||
Total revenue | $ | 459,937 | $ | 429,438 | $ | 1,189,993 | $ | 994,561 | ||||||||||||
Home construction and land sales expenses | 370,367 | 353,081 | 980,094 | 829,073 | ||||||||||||||||
Inventory impairments and abandonments | 11,917 | 249 | 15,098 | 249 | ||||||||||||||||
Gross profit | 77,653 | 76,108 | 194,801 | 165,239 | ||||||||||||||||
Commissions | 17,500 | 17,246 | 45,856 | 40,141 | ||||||||||||||||
General and administrative expenses | 40,457 | 37,669 | 111,024 | 101,837 | ||||||||||||||||
Depreciation and amortization | 3,387 | 3,497 | 9,434 | 8,619 | ||||||||||||||||
Operating income | 16,309 | 17,696 | 28,487 | 14,642 | ||||||||||||||||
Equity in income of unconsolidated entities | 62 | 153 | 71 | 377 | ||||||||||||||||
Gain (loss) on extinguishment of debt | 429 | — | (2,030 | ) | — | |||||||||||||||
Other expense, net | (5,344 | ) | (5,763 | ) | (18,467 | ) | (23,670 | ) | ||||||||||||
Income (loss) from continuing operations before income taxes | 11,456 | 12,086 | 8,061 | (8,651 | ) | |||||||||||||||
Expense (benefit) from income taxes | 5,349 | (135 | ) | 2,067 | (726 | ) | ||||||||||||||
Income (loss) from continuing operations | 6,107 | 12,221 | 5,994 | (7,925 | ) | |||||||||||||||
Loss from discontinued operations, net of tax | (325 | ) | (46 | ) | (447 | ) | (4,236 | ) | ||||||||||||
Net income (loss) | $ | 5,782 | $ | 12,175 | $ | 5,547 | $ | (12,161 | ) | |||||||||||
Weighted average number of shares: | ||||||||||||||||||||
Basic | 31,813 | 26,482 | 31,793 | 26,473 | ||||||||||||||||
Diluted | 31,820 | 31,800 | 31,797 | 26,473 | ||||||||||||||||
Basic income (loss) per share: | ||||||||||||||||||||
Continuing operations | $ | 0.19 | $ | 0.46 | $ | 0.19 | $ | (0.30 | ) | |||||||||||
Discontinued operations | $ | (0.01 | ) | $ | — | $ | (0.01 | ) | $ | (0.16 | ) | |||||||||
Total | $ | 0.18 | $ | 0.46 | $ | 0.18 | $ | (0.46 | ) | |||||||||||
Diluted income (loss) per share: | ||||||||||||||||||||
Continuing operations | $ | 0.19 | $ | 0.38 | $ | 0.19 | $ | (0.30 | ) | |||||||||||
Discontinued operations | $ | (0.01 | ) | $ | — | $ | (0.01 | ) | $ | (0.16 | ) | |||||||||
Total | $ | 0.18 | $ | 0.38 | $ | 0.18 | $ | (0.46 | ) |
Three Months Ended | Nine Months Ended | ||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||
Capitalized interest in inventory, beginning of period | $ | 140,139 | $ | 112,476 | $ | 123,457 | $ | 87,619 | |||||||||||
Interest incurred | 28,758 | 30,748 | 89,313 | 91,290 | |||||||||||||||
Capitalized interest impaired | (626 | ) | — | (710 | ) | — | |||||||||||||
Interest expense not qualified for capitalization and included as other expense | (5,406 | ) | (5,954 | ) | (19,471 | ) | (23,396 | ) | |||||||||||
Capitalized interest amortized to house construction and land sales expenses | (20,467 | ) | (13,558 | ) | (50,191 | ) | (31,801 | ) | |||||||||||
Capitalized interest in inventory, end of period | $ | 142,398 | $ | 123,712 | $ | 142,398 | $ | 123,712 | |||||||||||
BEAZER HOMES USA, INC. | ||||||||||
UNAUDITED CONSOLIDATED BALANCE SHEETS | ||||||||||
($ in thousands, except share and per share data) | ||||||||||
June 30, 2016 | September 30, 2015 | |||||||||
ASSETS | ||||||||||
Cash and cash equivalents | $ | 127,209 | $ | 251,583 | ||||||
Restricted cash | 18,846 | 38,901 | ||||||||
Accounts receivable (net of allowance of $866 and $1,052, respectively) | 65,905 | 52,379 | ||||||||
Income tax receivable | 221 | 419 | ||||||||
Owned Inventory | 1,731,850 | 1,697,590 | ||||||||
Investments in unconsolidated entities | 9,361 | 13,734 | ||||||||
Deferred tax assets, net | 324,763 | 325,373 | ||||||||
Property and equipment, net | 21,008 | 22,230 | ||||||||
Other assets | 19,464 | 18,994 | ||||||||
Total assets | $ | 2,318,627 | $ | 2,421,203 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
Trade accounts payable | $ | 109,449 | $ | 113,539 | ||||||
Other liabilities | 138,319 | 148,966 | ||||||||
Total debt (net of discounts of $4,819 and $3,639, respectively) | 1,429,483 | 1,528,275 | ||||||||
Total liabilities | $ | 1,677,251 | $ | 1,790,780 | ||||||
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, 33,083,145 issued and outstanding and 32,660,583 issued and outstanding, respectively) | 33 | 33 | ||||||||
Paid-in capital | 862,959 | 857,553 | ||||||||
Accumulated deficit | (221,616 | ) | (227,163 | ) | ||||||
Total stockholders’ equity | 641,376 | 630,423 | ||||||||
Total liabilities and stockholders’ equity | $ | 2,318,627 | $ | 2,421,203 | ||||||
Inventory Breakdown | ||||||||||
Homes under construction | $ | 520,313 | $ | 377,281 | ||||||
Development projects in progress | 736,587 | 809,900 | ||||||||
Land held for future development | 221,148 | 270,990 | ||||||||
Land held for sale | 38,791 | 44,555 | ||||||||
Capitalized interest | 142,398 | 123,457 | ||||||||
Model homes | 72,613 | 71,407 | ||||||||
Total owned inventory | $ | 1,731,850 | $ | 1,697,590 |
BEAZER HOMES USA, INC. | |||||||||||||||
CONSOLIDATED OPERATING AND FINANCIAL DATA – CONTINUING OPERATIONS | |||||||||||||||
($ in thousands, except otherwise noted) | |||||||||||||||
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
SELECTED OPERATING DATA | 2016 | 2015 | 2016 | 2015 | |||||||||||
Closings: | |||||||||||||||
West region | 620 | 473 | 1,666 | 1,175 | |||||||||||
East region | 373 | 412 | 907 | 986 | |||||||||||
Southeast region | 371 | 408 | 990 | 953 | |||||||||||
Total closings | 1,364 | 1,293 | 3,563 | 3,114 | |||||||||||
New orders, net of cancellations: | |||||||||||||||
West region | 661 | 691 | 1,820 | 1,811 | |||||||||||
East region | 343 | 390 | 982 | 1,164 | |||||||||||
Southeast region | 486 | 443 | 1,149 | 1,213 | |||||||||||
Total new orders, net | 1,490 | 1,524 | 3,951 | 4,188 | |||||||||||
As of June 30, | |||||||||||||||
2016 | 2015 | ||||||||||||||
Backlog units at end of period: | |||||||||||||||
West region | 1,109 | 1,193 | |||||||||||||
East region | 562 | 778 | |||||||||||||
Southeast region | 755 | 793 | |||||||||||||
Total backlog units | 2,426 | 2,764 | |||||||||||||
Dollar value of backlog at end of period (in millions) | $ | 814.6 | $ | 899.2 |
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||
SUPPLEMENTAL FINANCIAL DATA | 2016 | 2015 | 2016 | 2015 | ||||||||||||||
Homebuilding revenue: | ||||||||||||||||||
West region | $ | 201,848 | $ | 143,328 | $ | 535,984 | $ | 338,412 | ||||||||||
East region | 136,204 | 148,898 | 332,411 | 347,488 | ||||||||||||||
Southeast region | 112,925 | 118,923 | 296,430 | 273,053 | ||||||||||||||
Total homebuilding revenue | $ | 450,977 | $ | 411,149 | $ | 1,164,825 | $ | 958,953 | ||||||||||
Revenues: | ||||||||||||||||||
Homebuilding | $ | 450,977 | $ | 411,149 | $ | 1,164,825 | $ | 958,953 | ||||||||||
Land sales and other | 8,960 | 18,289 | 25,168 | 35,608 | ||||||||||||||
Total revenues | $ | 459,937 | $ | 429,438 | $ | 1,189,993 | $ | 994,561 | ||||||||||
Gross profit: | ||||||||||||||||||
Homebuilding | $ | 76,803 | $ | 74,221 | $ | 193,141 | $ | 161,877 | ||||||||||
Land sales and other | 850 | 1,887 | 1,660 | 3,362 | ||||||||||||||
Total gross profit | $ | 77,653 | $ | 76,108 | $ | 194,801 | $ | 165,239 | ||||||||||
Reconciliation of homebuilding gross profit before impairments and abandonments and interest amortized to cost of sales and the related gross margins 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.
In addition, given the unusual size and nature of the charges recorded
related to the
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||||||
Homebuilding gross profit | $ | 76,803 | 17.0 | % | $ | 74,221 | 18.1 | % | $ | 193,141 | 16.6 | % | $ | 161,877 | 16.9 | % | |||||||||||||||
Inventory impairments and abandonments (I&A) | 11,899 | — | 14,512 | — | |||||||||||||||||||||||||||
Homebuilding gross profit before I&A | 88,702 | 19.7 | % | 74,221 | 18.1 | % | 207,653 | 17.8 | % | 161,877 | 16.9 | % | |||||||||||||||||||
Interest amortized to cost of sales | 20,080 | 13,548 | 49,520 | 31,524 | |||||||||||||||||||||||||||
Homebuilding gross profit before I&A and interest amortized to cost of sales | 108,782 | 24.1 | % | 87,769 | 21.3 | % | 257,173 | 22.1 | % | 193,401 | 20.2 | % | |||||||||||||||||||
Unexpected warranty costs related to Florida stucco issues (net of expected insurance recoveries) | — |
— |
(3,612 | ) | 13,582 | ||||||||||||||||||||||||||
Additional insurance recoveries from a third-party insurer |
(15,500 | ) |
— |
(15,500 | ) |
— |
|
||||||||||||||||||||||||
Homebuilding gross profit before I&A, interest amortized to cost of sales, unexpected warranty costs and additional insurance recoveries from a third-party insurer | $ | 93,282 | 20.7 | % | $ | 87,769 | 21.3 | % | $ | 238,061 | 20.4 | % | $ | 206,983 | 21.6 | % |
Reconciliation of Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, debt extinguishment, impairments and abandonments) to total Company net 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.
In addition, given the unusual size and nature of certain charges recorded during the periods presented, Adjusted EBITDA is also shown excluding these charges. Management believes that this representation best reflects the operating characteristics of the Company.
Three Months Ended | Nine Months Ended | LTM Ended | ||||||||||||||||||||||
June 30, | June 30, |
June 30, (a) |
||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||
Net income (loss) | $ | 5,782 | $ | 12,175 | $ | 5,547 | $ | (12,161 | ) | $ | 361,802 | $ | 47,686 | |||||||||||
Provision (benefit) from income taxes | 5,168 | (137 | ) | 1,809 | (731 | ) | (323,387 | ) | (40,868 | ) | ||||||||||||||
Interest amortized to home construction and land sales expenses, capitalized interest impaired and interest expense not qualified for capitalization | 26,499 | 19,512 | 70,372 | 55,197 | 101,161 | 81,989 | ||||||||||||||||||
Depreciation and amortization and stock compensation amortization | 5,444 | 5,128 | 15,278 | 13,165 | 21,586 | 18,014 | ||||||||||||||||||
Inventory impairments and abandonments (b) | 11,291 | 249 | 14,388 | 249 | 17,248 | 5,390 | ||||||||||||||||||
(Gain) loss on debt extinguishment | (429 | ) | — | 2,030 | — | 2,110 | — | |||||||||||||||||
Adjusted EBITDA | $ | 53,755 | $ | 36,927 | $ | 109,424 | $ | 55,719 | $ | 180,520 | $ | 112,211 | ||||||||||||
Unexpected warranty costs related to Florida stucco issues (net of expected insurance recoveries) | — | — | (3,612 | ) | 13,582 | (3,612 | ) | 17,872 | ||||||||||||||||
Unexpected warranty costs related to water intrusion issues in New Jersey (net of expected insurance recoveries) | — | — | — | — | — | 648 | ||||||||||||||||||
Additional insurance recoveries from third-party insurer | (15,500 | ) | — | (15,500 | ) | — | (15,500 | ) | — | |||||||||||||||
Litigation settlement in discontinued operations | — | — | — | 3,660 | — | 3,660 | ||||||||||||||||||
Adjusted EBITDA excluding unexpected warranty costs, a litigation settlement in discontinued operations and additional insurance recoveries from a third-party insurer | $ | 38,255 | $ | 36,927 | $ | 90,312 | $ | 72,961 | $ | 161,408 | $ | 134,391 |
(a) “LTM” indicates amounts for the trailing 12 months.
(b)
Amounts for both the three and nine months ended June 30, 2016 exclude
View source version on businesswire.com: http://www.businesswire.com/news/home/20160728005188/en/
Source:
Beazer Homes USA, Inc.
David I. Goldberg
Vice President of
Treasury and Investor Relations
770-829-3700
investor.relations@beazer.com