EX-99.1 2 ex99-1.htm EXHIBIT 99.1 Exhibit 99.1
Exhibit 99.1
                  

 
                                        PRESS RELEASE
                                        FOR IMMEDIATE RELEASE
 

Beazer Homes Reports Fiscal Second Quarter 2007 Financial Results

ATLANTA, April 26, 2007-- Beazer Homes USA, Inc. (NYSE: BZH) (www.beazer.com) today announced financial results for the quarter ended March 31, 2007. Summary results of the quarter are as follows:

Quarter Ended March 31, 2007
n  
Reported net loss of $(43.1) million, or $(1.12) per share, including charges related to inventory impairments, impairments from joint ventures, and abandonment of land option contracts totaling $86.9 million on a pre-tax basis. Excluding charges for inventory impairments, impairments of investments in joint ventures and abandonment of land option contracts, adjusted net income was $11.2 million, or $0.30 per diluted share. For the second quarter of the prior year, net income was $104.4 million, or $2.35 per diluted share.
n  
Home closings: 2,743 homes, compared to 4,273 in the second quarter of the prior year.
n  
Total revenues: $826.3 million, compared to $1.27 billion in the second quarter of the prior year.
n  
New orders: 4,085 homes, compared to 4,224 in the second quarter of the prior year.
n  
Lots under control totaled 79,528 at 3/31/07, a 24% decline from the prior year.
n  
Unsold finished homes and total unsold homes declined 47% and 20%, respectively from the first quarter of fiscal 2007.
n  
Net debt to capitalization was 49.1% as of 3/31/07.
n  
Backlog at 3/31/07: 5,563 homes with a sales value of $1.67 billion compared to 9,227 homes with a sales value of $2.79 billion in the prior year.

“We continued to experience extremely challenging operating conditions during our second quarter of fiscal 2007” said President and Chief Executive Officer, Ian J. McCarthy. “Most housing markets across the country continue to experience lower levels of demand coupled with higher levels of inventory, resulting in increased competition and continued significant discounting. While we were pleased with the level of new orders we achieved this quarter, at this point in the traditional spring selling season we still have yet to see any meaningful evidence of a sustainable recovery in the housing market, and we expect current conditions will continue to put pressure on homebuilders’ operating results.”

Total home closings of 2,743 during the second quarter of fiscal 2007 were 36% below the prior fiscal year’s second quarter record. Net new home orders totaled 4,085 homes for the quarter, a decline of 3% from the second quarter record of the prior fiscal year. The cancellation rate for the second quarter was 29%, compared to 33% in the prior year’s second quarter. The cancellation rate was also lower sequentially from 43% in the first quarter of fiscal 2007.

“During the second quarter, we continued to focus on initiatives aimed at strengthening our financial capabilities and positioning ourselves for a significantly more competitive environment as we entered the spring selling season. These initiatives include ongoing comprehensive reviews of our direct costs, converting existing backlog into closings and reducing unsold home inventories through integrated national marketing and promotion efforts,” McCarthy continued. “We believe this disciplined approach, coupled with our broad geographic and product diversity, positions us well for the continuing difficult market environment and the eventual upturn. We maintain that the long-term industry fundamentals, based on demographic driven demand and employment trends, together with further supply constraints, remain compelling.”

 
The Company remains focused on reducing costs throughout the business and maintaining a strong balance sheet and liquidity during the challenging business environment, in an effort to position the Company to capitalize on future opportunities which will arise when the housing market recovers. The Company has proactively reduced its controlled lot count by over 24% compared to March of the prior year. The Company remains committed to aligning its land supply and inventory levels to current expectations for home closings, and continues to exercise caution and discipline with regard to land and land development spending.

During the second quarter, margins continued to be negatively impacted by both higher levels of discounting and reduced revenue volume as compared to the same period a year ago. In addition, the Company incurred pre-tax charges to abandon land option contracts, to recognize inventory impairments, and to record impairments in investments in joint ventures of $19.1 million, $60.8 million, and $7.1 million, respectively. The results for the second quarter also included a $6.0 million reduction of the warranty accrual for the remediation of homes in connection with the Trinity Homes class action settlement in October 2004, based on a reduction in the estimated remaining remediation costs.

United States Attorney Inquiry and Outstanding Litigation
As previously disclosed, Beazer Homes has received a subpoena from the United States Attorney’s office in the Western District of North Carolina, seeking the production of documents focusing on the Company’s mortgage origination services and, together with certain of its subsidiaries and current and former officers, has been named as a defendant in a putative securities class action lawsuit and a putative homeowner class action lawsuit. The Company has also recently learned that a second punitative homeowner class action lawsuit has been filed in South Carolina and that it has been named as a nominal defendant in a shareholder derivative complaint filed against certain of its current and former executive officers and directors claiming violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 and breaches of fiduciary duty based on matters related to the Company’s mortgage origination business. The Company is cooperating with the United States Attorney and the document production request and intends to vigorously defend each of the lawsuits. The Audit Committee of the Beazer Homes Board of Directors has initiated an internal review of Beazer Homes’ mortgage origination business and related matters and has retained independent legal counsel and an independent financial consultant to assist with that review. The U.S. Attorney inquiry and the related internal review by the Audit Committee and the three lawsuits are in their early stages. At this time, the Company cannot predict the outcome of these matters or the length of time it will take to resolve them.

Fiscal 2007 Outlook
The current housing market environment continues to be characterized by lower demand and higher inventories, with heavy discounting needed to drive meaningful sales volume. Given current market conditions, and the low visibility as to when conditions may improve, the Company is not comfortable at this time updating its earnings per share outlook for fiscal 2007 and is withdrawing its previously-issued outlook.

During this period, the Company will focus on maintaining balance sheet strength, continue to reduce costs, and maximize its financial resources to better position the Company to take advantage of those opportunities that will arise when conditions stabilize. Steps taken to date to align the Company’s cost structure with the current environment are consistent with the Company’s goal to be in the top quartile of its peer group with respect to margins and returns.

Conference Call
The Company will hold a conference call today, April 26 2007, at 10:00 AM ET to discuss the results and take questions. You 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 888-405-9176. 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 888-562-4353 (available until 5:00 PM ET on May 3, 2007), or visit www.beazer.com.
 
 
Beazer Homes USA, Inc., headquartered in Atlanta, is one of the country’s ten largest single-family homebuilders with operations in Arizona, California, Colorado, Delaware, Florida, Georgia, Indiana, Kentucky, Maryland, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia and West Virginia and also provides mortgage origination and title services to its homebuyers. Beazer Homes, a Fortune 500 Company, is listed on the New York Stock Exchange under the ticker symbol “BZH.”

Use of Non-GAAP Financial Information
In addition to the results in this press release reported in accordance with generally accepted accounting principles in the United States (“GAAP”), the Company has provided information regarding adjusted net income and earnings per share which excludes the effects of charges for inventory impairments, impairments in investments in joint ventures and abandonment of land option contracts recorded during the second quarters of fiscal 2007 and fiscal 2006. Management believes that these adjusted financial results are useful to both management and investors in the analysis of the Company’s financial performance when comparing it to prior periods and that they provide investors with an important perspective on the current underlying operating performance of the business by isolating the impact of non-cash charges related to inventory valuation.

Below is a reconciliation of these non-GAAP financial measures for the quarters ended March 31, 2007 and March 31, 2006 to the most directly comparable financial measures calculated and presented in accordance with GAAP:


   
Quarter Ended March 31, 2007
  
Quarter Ended March 31, 2006
  
(in thousands, except per share data)
          
           
           
Reported net (loss) income
  
$
(43,089
)
$
104,351
  
Reported net (loss) income per common share
    
($1.12
)
$
2.35
  
               
Adjusted Net Income and Earnings Per Share:
              
Reported net (loss) income
  
$
(43,089
)
$
104,351
  
After-tax charges for inventory impairments, impairments of investments in joint ventures
              
and abandonment of land option contracts
    
54,334
   
6,002
 
Adjusted net income, excluding charges for inventory impairments, impairments in joint ventures
             
and abandonment of land option contracts
  
$
11,245
  
$
110,353
  
               
After-tax interest add-back to pro-forma net income for
             
'if converted' treatment of convertible notes in
             
calculation of diluted net income per common share
 
$
1,347
  
$
1,347
  
               
Adjusted diluted net income per common share, excluding charges for inventory impairments,
             
impairments in joint ventures and abandonment of land option contracts
  
$
0.30
  
$
2.48
  
               
Diluted weighted average shares outstanding
    
42,651
   
45,066
 
               
 
 
Forward-Looking Statements
Certain statements in this press release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such risks, uncertainties and other factors include, but are not limited to, changes in general economic conditions, changes in levels of customer demand, fluctuations in interest rates, increases in raw materials and labor costs, levels of competition, implementation of overhead realignments and associated costs, potential liability as a result of construction defect, product liability and warranty claims, the outcome of the U.S. Attorney inquiry and related internal review, the class action lawsuits, derivative claims and similar proceedings and other factors described in the Company’s Annual Report on Form 10-K for the year ended September 30, 2006 filed with the Securities and Exchange Commission on December 8, 2006 and other reports filed from time to time with the Securities and Exchange Commission.

Contact:  Leslie H. Kratcoski
 Vice President, Investor Relations & Corporate Communications
 (770) 829-3764
                 lkratcos@beazer.com
-Tables Follow- 

 
 


BEAZER HOMES USA, INC.
CONSOLIDATED OPERATING AND FINANCIAL DATA
(Dollars in thousands, except per share amounts)
                   
FINANCIAL DATA
                  
   
Quarter Ended
  
Six Months Ended
  
   
March 31,
  
March 31,
  
   
2007
  
2006
  
2007
  
2006
  
INCOME STATEMENT
                  
Total revenue
  
$
826,295
  
$
1,269,091
  
$
1,629,309
  
$
2,374,707
  
Home construction and land sales expenses
    
701,029
   
944,992
   
1,363,011
   
1,774,851
 
Inventory impairments and option contract abandonments
    
79,854
   
9,604
   
199,777
   
12,531
 
Gross profit
    
45,412
   
314,495
   
66,521
   
587,325
 
                           
Selling, general and administrative expenses
    
109,729
   
149,793
   
225,097
   
282,871
 
Operating (loss) income
    
(64,317
)
  
164,702
   
(158,576
)
  
304,454
 
                           
Equity in (loss) income of unconsolidated joint ventures
    
(7,692
)
  
330
   
(10,052
)
  
682
 
Other income, net
    
2,694
   
1,582
   
4,687
   
5,685
 
                           
(Loss) income before income taxes
    
(69,315
)
  
166,614
   
(163,941
)
  
310,821
 
(Benefit) provision for income taxes
    
(26,226
)
  
62,263
   
(61,846
)
  
116,557
 
Net (loss) income
  
$
(43,089
)
$
104,351
  
$
(102,095
)
$
194,264
  
                           
Net (loss) income per common share:
                          
Basic
  
$
(1.12
)
$
2.58
  
$
(2.66
)
$
4.77
  
Diluted
  
$
(1.12
)
$
2.35
  
$
(2.66
)
$
4.34
  
                           
                           
Weighted average shares outstanding, in thousands:
                          
Basic
    
38,427
   
40,442
   
38,353
   
40,703
 
Diluted
    
38,427
   
45,066
   
38,353
   
45,395
 
                           
Interest incurred
  
$
35,091
  
$
27,903
  
$
69,394
  
$
53,436
  
Interest amortized to cost of sales
  
$
29,427
  
$
20,542
  
$
49,542
  
$
38,717
  
EPS interest add back - Convertible Debt
    
n/a
 
$
1,347
    
n/a
 
$
2,691
  
Depreciation and amortization
  
$
2,650
  
$
6,332
  
$
8,929
  
$
11,042
  
                           
SELECTED BALANCE SHEET DATA
    
March 31,
    
September 30,
    
March 31,
        
     
2007
    
2006
   
2006
       
Cash
  
$
224,482
  
$
172,443
  
$
15,183
        
Inventory
    
3,371,581
   
3,520,332
   
3,481,162
       
Total assets
    
4,191,024
   
4,559,431
   
4,111,743
       
Total debt (net of discount of $3,302, $3,578 and $3,883)
    
1,762,473
   
1,838,660
   
1,514,069
       
Shareholders' equity
    
1,603,135
   
1,701,923
   
1,576,943
       
                           
                           
Inventory Breakdown
                          
Homes under construction
 
$
1,186,280
  
$
1,368,056
  
$
1,468,443
        
Development projects in progress
   
1,647,947
   
1,623,819
   
1,569,384
       
Unimproved land held for future development
   
12,095
   
12,213
   
63,922
       
Model homes
   
62,963
   
44,803
   
42,891
       
Consolidated inventory not owned
    
462,296
   
471,441
   
336,522
       
   
$
3,371,581
  
$
3,520,332
  
$
3,481,162
        

 
 


BEAZER HOMES USA, INC.
CONSOLIDATED OPERATING AND FINANCIAL DATA
(Dollars in thousands)
                       
                       
OPERATING DATA
                      
                       
       
Quarter Ended
  
Six Months Ended
  
       
March 31,
  
March 31,
  
SELECTED OPERATING DATA
  
2007
  
2006
  
2007
  
2006
  
Closings:
                  
West region
  
674
  
1,246
  
1,403
  
2,257
  
Mid-Atlantic region
  
209
  
502
  
407
  
955
  
Florida region
  
349
  
536
  
595
  
1,013
  
Southeast region
  
729
  
919
  
1,408
  
1,785
  
Other homebuilding
  
782
  
1,070
  
1,590
  
2,092
  
Total closings
  
2,743
  
4,273
  
5,403
  
8,102
  
New orders, net of cancellations:
                  
West region
  
1,054
  
862
  
1,497
  
1,938
  
Mid-Atlantic region
  
559
  
517
  
795
  
800
  
Florida region
  
441
  
418
  
534
  
1,073
  
Southeast region
  
1,016
  
1,148
  
1,479
  
2,020
  
Other homebuilding
  
1,015
  
1,279
  
1,559
  
2,265
  
Total new orders
  
4,085
  
4,224
  
5,864
  
8,096
  
Backlog units at end of period:
              
West region
  
1,269
  
2,675
      
Mid-Atlantic region
  
965
  
1,038
      
Florida region
  
447
  
1,319
      
Southeast region
  
1,392
  
1,989
      
Other homebuilding
  
1,490
  
2,206
      
Total backlog units
  
5,563
  
9,227
      
Dollar value of backlog at end of period
 
$
1,669,949
  
$
2,793,519
      


 
 


BEAZER HOMES USA, INC.
  
CONSOLIDATED OPERATING AND FINANCIAL DATA (Continued)
  
(Dollars in thousands)
 
                   
   
Quarter Ended
  
Six Months Ended
  
   
March 31,
  
March 31,
  
SUPPLEMENTAL FINANCIAL DATA:
  
2007
  
2006
  
2007
  
2006
  
                   
Revenues
                  
Homebuilding operations
  
$
777,140
  
$
1,239,859
  
$
1,559,136
  
$
2,313,286
  
Land and lot sales
    
41,539
   
20,596
   
54,206
   
45,551
 
Financial Services
    
11,226
   
13,135
   
22,969
   
24,113
 
Intercompany elimination
    
(3,610
)
  
(4,499
)
  
(7,002
)
  
(8,243
)
Total revenues
  
$
826,295
  
$
1,269,091
  
$
1,629,309
  
$
2,374,707
  
Gross profit
                          
Homebuilding operations
  
$
36,054
  
$
299,226
  
$
41,356
  
$
561,376
  
Land and lot sales
    
(1,868
)
  
2,134
   
2,196
   
1,836
 
Financial Services
    
11,226
   
13,135
   
22,969
   
24,113
 
Total gross profit
  
$
45,412
  
$
314,495
  
$
66,521
  
$
587,325
  
Selling, general and administrative
                          
Homebuilding operations
  
$
100,549
  
$
139,605
  
$
207,404
  
$
262,000
  
Financial Services
    
9,180
   
10,188
   
17,693
   
20,871
 
Total selling, general and administrative
  
$
109,729
  
$
149,793
  
$
225,097
  
$
282,871
  
                           
                           
SELECTED SEGMENT INFORMATION
                          
Revenue:
                          
West region
  
$
266,722
  
$
471,854
  
$
564,629
  
$
840,446
  
Mid-Atlantic region
    
102,366
   
233,108
   
194,594
   
432,614
 
Florida region
    
106,409
   
167,769
   
197,654
   
313,350
 
Southeast region
    
183,626
   
188,969
   
338,755
   
365,902
 
Other homebuilding
    
159,556
   
198,755
   
317,710
   
406,525
 
Financial services
    
11,226
   
13,135
   
22,969
   
24,113
 
Intercompany elimination
    
(3,610
)
  
(4,499
)
  
(7,002
)
  
(8,243
)
Total revenue
  
$
826,295
  
$
1,269,091
  
$
1,629,309
  
$
2,374,707
  
 
                          
Operating (loss) income
                          
West region
  
$
(20,607
)
$
87,242
  
$
(47,111
)
$
150,981
  
Mid-Atlantic region
    
(17,221
)
  
53,115
   
(20,472
)
  
102,616
 
Florida region
    
6,773
   
38,256
   
(21,720
)
  
68,887
 
Southeast region
    
14,705
   
10,573
   
23,139
   
26,676
 
Other homebuilding
    
(16,846
)
  
(7,131
)
  
(32,554
)
  
(6,411
)
Financial services
    
2,046
   
2,947
   
5,276
   
3,242
 
Segment operating (loss) income
    
(31,150
)
  
185,002
   
(93,442
)
  
345,991
 
Corporate and unallocated
    
(33,167
)
  
(20,300
)
  
(65,134
)
  
(41,537
)
Total operating (loss) income
  
$
(64,317
)
$
164,702
  
$
(158,576
)
$
304,454