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Beazer Homes Reports Second Quarter Fiscal 2014 Results; Affirms Expectation Of Net Income For Fiscal 2014 And Increases Full Year Adjusted EBITDA Guidance

Beazer Homes USA, Inc. (NYSE: BZH) ( www.beazer.com) today announced its financial results for the quarter and six months ended March 31, 2014.

"Despite inclement weather and a slower start to the spring selling season than anticipated, we made further progress on our operational and financial objectives during the quarter," said Allan Merrill, President and CEO of Beazer Homes. "We exceeded our expectations for sales per community, increased gross margins, improved Adjusted EBITDA and invested heavily for our long-term growth. These results allow us to reaffirm our confidence in delivering full year profitability in Fiscal 2014 and in making substantial progress on our multi-year "2B-10" target this year."

On its earnings conference call today, the Company intends to update its full year Fiscal 2014 expectations for several operational and financial metrics, including increasing the Company’s guidance for year-over-year growth in Adjusted EBITDA. The Company now expects growth in Adjusted EBITDA of at least $45 million compared to Fiscal Year 2013.

Summary results for the quarter and six months ended March 31, 2014 are as follows:

Q2 Results from Continuing Operations (unless otherwise specified)

  Quarter Ended March 31,
2014     2013     Change
New Home Orders 1,390 1,521 (8.6

)

%

Orders per month per community 3.3 3.4 (2.9

)

%

LTM orders per month per community 2.9 2.7 7.4 %
Cancellation rates 19.4 % 18.7 %

70

bps

 
Total Home Closings 977 1,127 (13.3

)

%

Average sales price from closings (in thousands) $ 272.4 $ 253.3 7.5 %
Homebuilding revenue (in millions) $ 266.1 $ 285.5 (6.8

)

%

Homebuilding gross profit margin, excluding impairments and abandonments (I&A) 19.7 % 15.9 %

380

bps

Homebuilding gross profit margin, excluding I&A and interest amortized to cost of sales 22.5 % 19.1 %

340

bps

 
Loss from continuing operations before income taxes (in millions) $ (8.3 ) $ (19.5 ) $ 11.2
Benefit from income taxes (in millions) $ 0.1 $ 0.3 $ (0.2

)

 

Net loss from continuing operations (in millions) $ (8.2 ) $ (19.1 ) $ 10.9
Basic Loss Per Share $ (0.32 ) $ (0.78 ) $ 0.46
Land and land development spending (in millions) $ 128.6 $ 62.6 $ 66.0
Total Company Adjusted EBITDA (in millions) $ 18.5 $ 15.2 $ 3.3
 
  Six Months Ended March 31,
2014     2013     Change
New Home Orders 2,285 2,453 (6.8

)

%

LTM orders per month per community 2.9 2.7 7.4 %
Cancellation rates 20.4 % 21.8 %

-140

bps

 
Total Home Closings 2,015 2,165 (6.9

)

%

Average sales price from closings (in thousands) $ 276.0 $ 244.8 12.7 %
Homebuilding revenue (in millions) $ 556.1 $ 529.9 4.9 %
Homebuilding gross profit margin, excluding impairments and abandonments (I&A) 19.2 % 15.3 %

390

bps

Homebuilding gross profit margin, excluding I&A and interest amortized to cost of sales 21.9 % 18.7 %

320

bps

 
Loss from continuing operations before income taxes (in millions) $ (12.2 ) $ (38.6 ) $ 26.4
Benefit from income taxes (in millions) $ $

0.6

$

(0.6

)

 

Net loss from continuing operations (in millions) $ (12.2 ) $ (38.1 ) $ 25.9
Basic Loss Per Share $ (0.48 ) $ (1.55 ) $ 1.07
Land and land development spending (in millions) $ 252.4 $ 152.6 $ 99.8
Total Company Adjusted EBITDA (in millions) $ 40.2 $ 23.0 $ 17.2
 

As of March 31, 2014

  • Total cash and cash equivalents: $350.4 million, including unrestricted cash of approximately $299.6 million
  • Stockholders' equity: $230.8 million
  • Total backlog from continuing operations: 2,163 homes with a sales value of $637.1 million, compared to 2,211 homes with a sales value of $584.2 million as of March 31, 2013
  • Land and lots controlled: 29,331 lots (80.9% owned), an increase of 18.8% from March 31, 2013 (includes 246 lots obtained through a non-cash distribution of our Las Vegas joint venture)

Conference Call

The Company will hold a conference call on May 1, 2014 at 10:00 am ET to discuss these results. Interested parties may listen to the conference call and view the Company's slide presentation over the Internet by visiting the “Investor Relations” section of the Company's website at www.beazer.com. To access the conference call by telephone, listeners should dial 800-619-8639 (for international callers, dial 312-470-7002). 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 888-662-6653 or 402-220-6417 and enter the passcode “3740” (available until 11 pm ET on May 8, 2014), or visit www.beazer.com. A replay of the webcast will be available at www.beazer.com for at least 30 days.

Headquartered in Atlanta, Beazer Homes is one of the country's 10 largest single-family homebuilders. The Company's homes meet or exceed the benchmark for energy-efficient home construction as established by ENERGY STAR® and are designed with Choice Plans to meet the personal preferences and lifestyles of its buyers. In addition, the Company is committed to providing a range of preferred lender choices to facilitate transparent competition between lenders and enhanced customer service. The Company offers homes in 16 states, including Arizona, California, Delaware, Florida, Georgia, Indiana, Maryland, Nevada, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas and Virginia. Beazer Homes is listed on the New York Stock Exchange under the ticker symbol “BZH.” For more info visit Beazer.com, or check out Beazer on Facebook and Twitter.

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 availability and cost of land and the risks associated with the future value of our inventory such as additional asset impairment charges or writedowns; (ii) economic changes nationally or in local markets, including changes in consumer confidence, declines in employment levels, inflation and increases in the quantity and decreases in the price of new homes and resale homes in the market; (iii) the cyclical nature of the homebuilding industry and a potential deterioration in homebuilding industry conditions; (iv) 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; (v) shortages of or increased prices for labor, land or raw materials used in housing production; (vi) our cost of and ability to access capital 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; (vii) our ability to comply with covenants in our debt agreements or satisfy such obligations through repayment or refinancing; (viii) 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; (ix) increased competition or delays in reacting to changing consumer preference in home design; (x) 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; (xi) estimates related to the potential recoverability of our deferred tax assets; (xii) 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; (xiii) the results of litigation or government proceedings and fulfillment of the obligations in the Deferred Prosecution Agreement and consent orders with governmental authorities and other settlement agreements; (xiv) the impact of construction defect and home warranty claims; (xv) the cost and availability of insurance and surety bonds; (xvi) the performance of our unconsolidated entities and our unconsolidated entity partners; (xvii) delays in land development or home construction resulting from adverse weather conditions; (xviii) the impact of information technology failures or data security breaches; (xix) effects of changes in accounting policies, standards, guidelines or principles; or (xx) 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 data)

         
Three Months Ended Six Months Ended
March 31, March 31,
2014   2013 2014   2013
Total revenue $ 270,021 $ 287,902 $ 563,191 $ 534,804
Home construction and land sales expenses 216,969 241,992 455,438 452,606
Inventory impairments and option contract abandonments 880   2,025   911   2,229  
Gross profit 52,172 43,885 106,842 79,969
Commissions 11,096 11,686 22,917 22,328
General and administrative expenses 32,628 28,795 61,038 55,123
Depreciation and amortization 2,831   3,093   5,738   5,808  
Operating income (loss) 5,617 311 17,149 (3,290 )
Equity in (loss) income of unconsolidated entities (17 ) 68 302 104
Loss on extinguishment of debt (153 ) (3,638 ) (153 ) (3,638 )
Other expense, net (13,727 ) (16,195 ) (29,484 ) (31,822 )
Loss from continuing operations before income taxes (8,280 ) (19,454 ) (12,186 ) (38,646 )
Benefit from income taxes (56 ) (343 ) (14 ) (596 )
Loss from continuing operations (8,224 ) (19,111 ) (12,172 ) (38,050 )
Income (loss) from discontinued operations, net of tax 253   (529 ) (937 ) (1,978 )
Net loss $ (7,971 ) $ (19,640 ) $ (13,109 ) $ (40,028 )
Weighted average number of shares:
Basic and Diluted 25,320 24,654 25,163 24,472
Basic and Diluted (loss) income per share:
Continuing Operations $ (0.32 ) $ (0.78 ) $ (0.48 ) $ (1.55 )
Discontinued Operations $ 0.01 $ (0.02 ) $ (0.04 ) $ (0.09 )
Total $ (0.31 ) $ (0.80 ) $ (0.52 ) $ (1.64 )
 
    Three Months Ended   Six Months Ended
March 31,   March 31,
2014   2013 2014   2013
Capitalized interest in inventory, beginning of period $ 61,836 $ 41,922 $ 52,562 $ 38,190
Interest incurred 32,458 29,177 64,899 57,595
Interest expense not qualified for capitalization and included as other expense (14,659 ) (16,246 ) (30,691 ) (32,457 )
Capitalized interest amortized to house construction and land sales expenses (7,379 ) (9,352 ) (14,514 ) (17,827 )
Capitalized interest in inventory, end of period $ 72,256   $ 45,501   $ 72,256   $ 45,501  

BEAZER HOMES USA, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

($ in thousands, except share and per share data)

   
March 31, 2014 September 30, 2013
ASSETS
Cash and cash equivalents $ 299,620 $ 504,459
Restricted cash 50,765 48,978
Accounts receivable (net of allowance of $1,278 and $1,651, respectively) 28,911 22,342
Income tax receivable 2,813 2,813
Inventory
Owned inventory 1,480,360 1,304,694
Land not owned under option agreements 7,751   9,124  
Total inventory 1,488,111 1,313,818
Investments in unconsolidated entities 36,547 44,997
Deferred tax assets, net 5,407 5,253
Property, plant and equipment, net 18,142 17,000
Other assets 21,068   27,129  
Total assets $ 1,951,384   $ 1,986,789  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade accounts payable $ 71,891 $ 83,800
Other liabilities 133,675 145,623
Obligations related to land not owned under option agreements 3,147 4,633
Total debt (net of discounts of $4,780 and $5,160 respectively) 1,511,873   1,512,183  
Total liabilities $ 1,720,586   $ 1,746,239  
 
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, 26,721,886 and 25,245,945 issued and outstanding, respectively) 27 25
Paid-in capital 849,520 846,165
Accumulated deficit (618,749 ) (605,640 )
Total stockholders’ equity 230,798   240,550  
Total liabilities and stockholders’ equity $ 1,951,384   $ 1,986,789  
 
Inventory Breakdown
Homes under construction $ 319,758 $ 262,476
Development projects in progress 681,665 578,453
Land held for future development 306,119 341,986
Land held for sale 57,537 31,331
Capitalized interest 72,256 52,562
Model homes 43,025 37,886
Land not owned under option agreements 7,751   9,124  
Total inventory $ 1,488,111   $ 1,313,818  
 

BEAZER HOMES USA, INC.

CONSOLIDATED OPERATING AND FINANCIAL DATA – CONTINUING OPERATIONS

($ in thousands, except otherwise noted)

   
Quarter Ended March 31, Six Months Ended March 31,
SELECTED OPERATING DATA 2014   2013 2014   2013
Closings:
West region 453 504 888 1,003
East region 257 383 595 736
Southeast region 267   240   532   426
Total closings 977   1,127   2,015   2,165
 
New orders, net of cancellations:
West region 550 658 901 1,082
East region 424 442 732 751
Southeast region 416   421   652   620
Total new orders 1,390   1,521   2,285   2,453
 
Backlog units at end of period:
West region 751 918 751 918
East region 798 762 798 762
Southeast region 614   531   614   531
Total backlog units 2,163   2,211   2,163   2,211
 
Dollar value of backlog at end of period (in millions) $ 637.1   $ 584.2   $ 637.1   $ 584.2
 
Homebuilding Revenue:
West region $ 119,044 $ 117,496 $ 239,256 $ 227,249
East region 82,366 116,537 189,245 213,001
Southeast region 64,715   51,438   127,582   89,646
Total homebuilding revenue $ 266,125   $ 285,471   $ 556,083   $ 529,896
 
  Quarter Ended March 31,   Six Months Ended March 31,
SUPPLEMENTAL FINANCIAL DATA 2014   2013 2014   2013
Revenues:
Homebuilding $ 266,125 $ 285,471 $ 556,083 $ 529,896
Land sales and other 3,896   2,431   7,108   4,908
Total $ 270,021   $ 287,902   $ 563,191   $ 534,804
 
Gross profit:
Homebuilding $ 51,655 $ 43,253 $ 106,105 $ 78,883
Land sales and other 517   632   737   1,086
Total $ 52,172   $ 43,885   $ 106,842   $ 79,969
 

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.

    Quarter Ended March 31,     Six Months Ended March 31,
2014     2013 2014     2013
Homebuilding gross profit $ 51,655     19.4 % $ 43,253     15.2 % $ 106,105     19.1 % $ 78,883     14.9 %
Inventory impairments and lot option abandonments (I&A) 880   2,025   911   2,229  
Homebuilding gross profit before I&A 52,535 19.7 % 45,278 15.9 % 107,016 19.2 % 81,112 15.3 %
Interest amortized to cost of sales 7,379   9,352   14,514   17,827  
Homebuilding gross profit before I&A and interest amortized to cost of sales $ 59,914   22.5 % $ 54,630   19.1 % $ 121,530   21.9 % $ 98,939   18.7 %
 
  Quarter Ended March 31,   Six Months Ended March 31,
2014   2013 2014   2013
Net loss $ (7,971 ) $ (19,640 ) $ (13,109 ) $ (40,028 )
Benefit from income taxes (56 ) (352 ) (4 ) (627 )
Interest amortized to home construction and land sales expenses, capitalized interest impaired, and interest expense not qualified for capitalization 22,038 25,598 45,205 50,284
Depreciation and amortization and stock compensation amortization 3,488 3,947 7,004 7,446
Inventory impairments and option contract abandonments 880 2,025 911 2,246
Loss on debt extinguishment 153   3,638   153   3,638  
Adjusted EBITDA $ 18,532   $ 15,216   $ 40,160   $ 22,959  

Reconciliation of Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, debt extinguishment, impairments and abandonments) to total company net loss (including discontinued operations), 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.

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