Beazer Homes Reports Improved Third Quarter Results Highlighted By Higher Margins And Faster Sales Pace

Beazer Homes USA, Inc. (NYSE: BZH) ( www.beazer.com) today announced its financial results for the quarter and nine months ended June 30, 2013.

The Company's third quarter results included notable progress on its Path-to-Profitability strategies, including increased margins and higher sales per active community. Adjusted EBITDA was $21.8 million for the quarter, up from $4.0 million in the third quarter of Fiscal 2012. Year-to-date orders were up slightly over last year, while orders for the third quarter were down year-over-year due to an expected decline in community count. With an aggressive land acquisition strategy underway, the Company expects a materially higher community count by the end of Fiscal 2014.

“We were pleased with the continued improvement in both our key operational metrics and our financial results for the third quarter,” said Allan Merrill, CEO of Beazer Homes. “With improved homebuilding gross margins, higher average sales prices and strict control over operating expenses, we are poised to report positive net income in our fiscal fourth quarter and expect to report our first full year of profitability in nearly a decade for fiscal 2014.”

Summary results for the quarter and nine months ended June 30, 2013 are as follows (per share amounts are calculated after giving effect to a 1-for-5 reverse stock split completed on October 11, 2012, as applicable):

Q3 Results from Continuing Operations (unless otherwise specified)
  Quarter Ended June 30,
2013     2012     Change
New Home Orders 1,381 1,555 (11.2 )%
LTM orders per month per community 2.7 2.2 22.7 %
Cancellation rates 20.0 % 24.5 % -450 bps
 
Total Home Closings 1,234 1,109 11.3 %
Average sales price from closings (in thousands) $ 253.8 $ 227.3 11.7 %
Homebuilding revenue (in millions) $ 313.1 $ 252.1 24.2 %
Homebuilding gross profit margin, excluding impairments and abandonments (I&A) 17.1 % 10.5 % 660 bps
Homebuilding gross profit margin, excluding I&A and interest amortized to cost of sales 20.3 % 16.7 % 360 bps
 
Loss from continuing operations before income taxes (in millions) $ (5.9 ) $ (37.9 ) $ 32.0
Benefit from (provision for) income taxes (in millions) $ 0.4 $ (0.1 ) $ 0.5
Net loss from continuing operations (in millions) $ (5.4 ) $ (38.0 ) $ 32.6
Basic Loss Per Share $ (0.22 ) $ (1.92 ) $ 1.70
Inventory impairments (in millions) $ $ (5.8 ) $ 5.8
Net loss from continuing operations excluding inventory impairments (in millions) $ (5.4 ) $ (32.2 ) $ 26.8
Land and land development spending (in millions) $ 161.8 $ 40.5 $ 121.3
Total Company Adjusted EBITDA (in millions) $ 21.8 $ 4.0 $ 17.8
 
 

Nine Month Results from Continuing Operations (unless otherwise specified)
  Nine Months Ended June 30,
2013     2012     Change
New Home Orders 3,834 3,791 1.1 %
LTM orders per month per community 2.7 2.2 22.7 %
Cancellation rates 21.1 % 26.0 % -490 bps
 
Total Home Closings 3,399 2,820 20.5 %
Average sales price from closings (in thousands) $ 248.0 $ 222.9 11.3 %
Homebuilding revenue (in millions) $ 843.0 $ 628.5 34.1 %
Homebuilding gross profit margin, excluding impairments and abandonments (I&A) (a) 16.0 % 11.4 % 460 bps
Homebuilding gross profit margin, excluding I&A and interest amortized to cost of sales (a) 19.3 % 18.0 % 130 bps
 
Loss from continuing operations before income taxes (in millions) $ (44.5 ) $ (111.7 ) $ 67.2
Benefit from income taxes (in millions) $ 1.0 $ 36.4 $ (35.4 )
Net loss from continuing operations (in millions) $ (43.5 ) $ (75.3 ) $ 31.8
Basic Loss Per Share $ (1.77 ) $ (4.48 ) $ 2.71
Loss on debt extinguishment (in millions) $ (3.6 ) $ (2.7 ) $ (0.9 )
Inventory impairments (in millions) $ (2.2 ) $ (10.5 ) $ 8.3
Net loss from continuing operations excluding inventory impairments and loss on debt extinguishment (in millions) $ (37.7 ) $ (62.1 ) $ 24.4
Land and land development spending (in millions) $ 314.4 $ 140.6 $ 173.8
Total Company Adjusted EBITDA (in millions) $ 44.7 $ 6.8 $ 37.9
 
 

(a) This homebuilding gross profit for the nine months ended June 30, 2012 includes an $11.0 million warranty recovery which contributed 180 bps to this margin.

As of June 30, 2013

  • Total cash and cash equivalents: $544.4 million, including unrestricted cash of approximately $298.3 million
  • Stockholders' equity: $228.0 million
  • Total backlog from continuing operations: 2,358 homes with a sales value of $646.1 million, compared to 2,421 homes with a sales value of $572.8 million as of June 30, 2012
  • Land and lots controlled: 26,966 lots (79.4% owned), an increase of 7.5% from June 30, 2012

Conference Call

The Company will hold a conference call on August 1, 2013 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 on the "Investor Relations" page of the Company's website, www.beazer.com. In addition, the conference call will be available by telephone at 800-619-8639 (for international callers, dial 312-470-7002). To be admitted to the call, verbally supply the pass code "BZH". A replay of the conference call will be available, until 5:00 PM ET on August 8, 2013, at 888-566-0432 (for international callers, dial 203-369-3046) with pass code “3740.” A replay of the webcast will be available at www.beazer.com for approximately 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 flexible floorplan options 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) economic changes nationally or in local markets, including changes in consumer confidence, changes in the level of housing starts, declines in employment levels, inflation and changes in the demand and prices of new homes and resale homes in the market; (ii) a slower economic rebound than anticipated, coupled with persistently high unemployment and additional foreclosures; (iii) 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; (iv) a substantial increase in mortgage interest rates, increased disruption in the availability of mortgage financing or a change in tax laws regarding the deductibility of mortgage interest; (v) factors affecting margins such as decreased land values underlying lot option agreements, increased land development costs on communities under development or delays or difficulties in implementing initiatives to reduce production and overhead cost structure; (vi) the final outcome of various putative class action lawsuits, multi-party suits and similar proceedings as well as the results of any other litigation or government proceedings and fulfillment of the obligations in the Deferred Prosecution Agreement and consent orders with governmental authorities and other settlement agreements; (vii) 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; (viii) our ability to comply with covenants in our debt agreements or satisfy such obligations through repayment or refinancing; (ix) estimates related to the potential recoverability of our deferred tax assets; (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) additional asset impairment charges or writedowns; (xiii) the impact of construction defect and home warranty claims; (xiv) the cost and availability of insurance and surety bonds; (xv) delays in land development or home construction resulting from adverse weather conditions; (xvi) potential delays or increased costs in obtaining necessary permits and possible penalties for failure to comply with laws, regulations and governmental policies; (xvii) the performance of our joint ventures and our joint venture partners; (xviii) potential exposure related to additional repurchase claims on mortgages and loans originated by Beazer Mortgage Corp.; (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 Nine Months Ended
June 30, June 30,
2013     2012 2013     2012
Total revenue $ 314,439 $ 254,555 $ 849,243 $ 634,746
Home construction and land sales expenses 260,324 227,505 712,930 560,564
Inventory impairments and option contract abandonments   5,819   2,229   10,492  
Gross profit 54,115 21,231 134,084 63,690
Commissions 13,078 10,776 35,406 27,522
General and administrative expenses 29,612 27,867 84,735 82,380
Depreciation and amortization 2,953   3,743   8,761   9,336  
Operating income (loss) 8,472 (21,155 ) 5,182 (55,548 )
Equity in (loss) income of unconsolidated entities (310 ) 48 (206 ) (25 )
Loss on extinguishment of debt (3,638 ) (2,747 )
Other expense, net (14,036 ) (16,804 ) (45,858 ) (53,342 )
Loss from continuing operations before income taxes (5,874 ) (37,911 ) (44,520 ) (111,662 )
(Benefit from) provision for income taxes (432 ) 145   (1,028 ) (36,438 )
Loss from continuing operations (5,442 ) (38,056 ) (43,492 ) (75,224 )
Loss from discontinued operations, net of tax (346 ) (1,828 ) (2,324 ) (3,869 )
Net loss $ (5,788 ) $ (39,884 ) $ (45,816 ) $ (79,093 )
Weighted average number of shares:
Basic and Diluted 24,770 19,810 24,571 16,777
Basic and Diluted loss per share:
Continuing Operations $ (0.22 ) $ (1.92 ) $ (1.77 ) $ (4.48 )
Discontinued Operations $ (0.01 ) $ (0.09 ) $ (0.09 ) $ (0.23 )
Total $ (0.23 ) $ (2.01 ) $ (1.86 ) $ (4.71 )
 
 
Three Months Ended     Nine Months Ended
June 30,   June 30,
2013     2012 2013     2012
Capitalized interest in inventory, beginning of period $ 45,501 $ 47,242 $ 38,190 $ 45,973
Interest incurred 28,766 31,235 86,361 95,950
Capitalized interest impaired (222 ) (275 )
Interest expense not qualified for capitalization and included as other expense (14,252 ) (17,233 ) (46,709 ) (55,147 )
Capitalized interest amortized to house construction and land sales expenses (9,996 ) (15,649 ) (27,823 ) (41,128 )
Capitalized interest in inventory, end of period $ 50,019   $ 45,373   $ 50,019   $ 45,373  
 
 
BEAZER HOMES USA, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands, except share and per share data)
     
June 30, 2013 September 30, 2012
ASSETS
Cash and cash equivalents $ 298,346 $ 487,795
Restricted cash 246,013 253,260
Accounts receivable (net of allowance of $2,045 and $2,235, respectively) 26,066 24,599
Income tax receivable 3,080 6,372
Inventory
Owned inventory 1,265,112 1,099,132
Land not owned under option agreements 7,880   12,420  
Total inventory 1,272,992 1,111,552
Investments in unconsolidated entities 42,477 42,078
Deferred tax assets, net 7,076 6,848
Property, plant and equipment, net 16,734 18,974
Other assets 30,133   30,740  
Total assets $ 1,942,917   $ 1,982,218  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade accounts payable $ 79,625 $ 69,268
Other liabilities 126,746 147,718
Obligations related to land not owned under option agreements 2,904 4,787
Total debt (net of discounts of $2,341 and $3,082, respectively) 1,505,656   1,498,198  
Total liabilities $ 1,714,931   $ 1,719,971  
 
Stockholders’ equity:

Preferred stock (par value $.01 per share, 5,000,000 shares authorized, no sharesissued)
$ $

Common stock (par value $0.001 per share, 63,000,000 shares authorized, 25,090,653and 24,601,830 issued and outstanding, respectively)
25 25
Paid-in capital 845,549 833,994
Accumulated deficit (617,588 ) (571,772 )
Total stockholders’ equity 227,986   262,247  
Total liabilities and stockholders’ equity $ 1,942,917   $ 1,982,218  
 
Inventory Breakdown
Homes under construction $ 324,619 $ 251,828
Development projects in progress 498,363 391,019
Land held for future development 341,995 367,102
Land held for sale 10,648 10,149
Capitalized interest 50,019 38,190
Model homes 39,468 40,844
Land not owned under option agreements 7,880   12,420  
Total inventory $ 1,272,992   $ 1,111,552  
 
 
BEAZER HOMES USA, INC.
CONSOLIDATED OPERATING AND FINANCIAL DATA – CONTINUING OPERATIONS
($ in thousands, except otherwise noted)
     
Quarter Ended June 30, Nine Months Ended June 30,
SELECTED OPERATING DATA 2013     2012 2013     2012
Closings:
West region 550 455 1,553 1,194
East region 370 382 1,106 984
Southeast region 314   272   740   642
Total closings 1,234   1,109   3,399   2,820
 
New orders, net of cancellations:
West region 614 730 1,696 1,688
East region 389 486 1,140 1,237
Southeast region 378   339   998   866
Total new orders 1,381   1,555   3,834   3,791
 
Backlog units at end of period:
West region 982 1,064 982 1,064
East region 781 891 781 891
Southeast region 595   466   595   466
Total backlog units 2,358   2,421   2,358   2,421
 
Dollar value of backlog at end of period (in millions) $ 646.1   $ 572.8   $ 646.1   $ 572.8
 
Homebuilding Revenue:
West region $ 132,803 $ 97,356 $ 360,052 $ 245,420
East region 111,333 98,850 324,334 255,519
Southeast region 68,993   55,865   158,639   127,601
Total homebuilding revenue $ 313,129   $ 252,071   $ 843,025   $ 628,540
 
 
  Quarter Ended June 30,     Nine Months Ended June 30,
SUPPLEMENTAL FINANCIAL DATA 2013     2012 2013     2012
Revenues:
Homebuilding $ 313,129 $ 252,071 $ 843,025 $ 628,540
Land sales and other 1,310   2,484   6,218   6,206
Total $ 314,439   $ 254,555   $ 849,243   $ 634,746
 
Gross profit:
Homebuilding $ 53,588 $ 20,656 $ 132,471 $ 61,475
Land sales and other 527   575   1,613   2,215
Total $ 54,115   $ 21,231   $ 134,084   $ 63,690
 
 

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. Homebuilding gross profit for the nine months ended June 30, 2012 included an $11.0 million warranty recovery which added 180 basis points to homebuilding gross profit before impairments and abandonments and interest amortized to cost of sales.
  Quarter Ended June 30,       Nine Months Ended June 30,  
2013       2012   2013       2012  
Homebuilding gross profit $ 53,588     17.1 % $ 20,656     8.2 % $ 132,471     15.7 % $ 61,475     9.8 %
Inventory impairments and lot option abandonments (I&A)   5,819   2,229   10,492  
Homebuilding gross profit before I&A 53,588 17.1 % 26,475 10.5 % 134,700 16.0 % 71,967 11.4 %
Interest amortized to cost of sales 9,996   15,649   27,823   41,128  

Homebuilding gross profit before I&Aand interest amortized to cost of sales
$ 63,584   20.3 % $ 42,124   16.7 % $ 162,523   19.3 % $ 113,095   18.0 %
 
 

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.
  Quarter Ended June 30,     Nine Months Ended June 30,
2013     2012 2013     2012
Net loss $ (5,788 ) $ (39,884 ) $ (45,816 ) $ (79,093 )
Benefit from income taxes (470 ) 150 (1,097 ) (36,846 )

Interest amortized to home construction and land salesexpenses, capitalized interest impaired, and interestexpense not qualified for capitalization
24,248 33,104 74,532 96,550
Depreciation and amortization and stock compensation
amortization 3,590 4,456 11,036 12,582
Inventory impairments and option contract abandonments 6,142 2,246 10,796
Loss on debt extinguishment 3,638 2,747
Joint venture impairment and abandonment charges 181     181   36  
Adjusted EBITDA $ 21,761   $ 3,968   $ 44,720   $ 6,772  

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