Beazer Homes Reports Fourth Quarter and Full Year Fiscal 2009 Results

November 10, 2009 6:30 AM EST

ATLANTA--(BUSINESS WIRE)-- Beazer Homes USA, Inc. (NYSE: BZH) (www.beazer.com) today announced its financial results for the fiscal quarter and year ended September 30, 2009. Commencing with the fiscal quarter ended September 30, 2009, the Company has classified the results of operations historically included in its "Other Homebuilding" segment as discontinued operations in its consolidated statements of operations for all periods presented. Summary results of the quarter and fiscal year from continuing operations are as follows:

Quarter Ended September 30, 2009

    --  Income from continuing operations of $35.3 million, or $0.87 per diluted
        share, including non-cash pre-tax charges of $29.9 million for inventory
        impairments and abandonment of land option contracts. The results also
        include a pre-tax gain on early extinguishment of debt of $89.3 million,
        as further described below. For the fourth quarter of the prior fiscal
        year, the Company reported a loss from continuing operations of $(453.8)
        million, or $(11.77) per share.
    --  Total revenue: $376.3 million, compared to $649.8 million in the fourth
        quarter of the prior year.
    --  Home closings from continuing operations: 1,685 homes, a decrease
        year-over-year of 24.3%.
    --  New orders from continuing operations: 1,012 homes, an increase
        year-over-year of 2.4%.
    --  Cancellation rate improved to 34.7% in the fourth quarter compared to
        46.3% in the fourth quarter of the prior year.
    --  Gross profit margin of 6.6% (14.6% without impairments and
        abandonments), compared to -0.7% (7.1% without impairments and
        abandonments) in the fourth quarter of the prior year.
    --  During the quarter, the Company repurchased $269.3 million of senior
        notes for an aggregate purchase price of $189.5 million or an average
        price of 70.4%, resulting in a pre-tax gain on early extinguishment of
        debt of $75.0 million.
    --  During the quarter, the Company negotiated a reduced payoff of one of
        its secured notes payable resulting in a pre-tax gain on early
        extinguishment of debt of $14.3 million.

Fiscal Year Ended September 30, 2009

    --  Loss from continuing operations of $(178.0) million, or $(4.60) per
        share, including non-cash pre-tax charges of $97.0 million for inventory
        impairments and abandonment of land option contracts, $13.8 million for
        impairments in joint ventures and $16.1 million for goodwill
        impairments. The results also include a non-cash deferred tax valuation
        allowance of $52.8 million and a pre-tax gain on extinguishment of debt
        of $144.5 million. For the prior fiscal year, the Company reported a
        loss from continuing operations of $(800.8) million, or $(20.77) per
        share.
    --  Total revenue: $1.01 billion, compared to $1.81 billion in the prior
        year.
    --  Home closings from continuing operations: 4,330 homes, a decrease
        year-over-year of 35.3%.
    --  New orders from continuing operations: 4,205 homes, a decrease
        year-over-year of 22.2%.
    --  Cancellation rate improved to 31.4% in fiscal 2009, compared to 39.6% in
        fiscal 2008.
    --  Gross profit margin of 2.1% (11.7% without impairments and abandonments)
        for the fiscal year, compared to -12.9% (9.5% without impairments and
        abandonments) the prior fiscal year.
    --  During the fiscal year, the Company repurchased $384.8 million of senior
        notes for an aggregate purchase price of $247.7 million or an average
        price of 64.4%, resulting in a pre-tax gain on early extinguishment of
        debt of $130.2 million.

As of September 30, 2009

    --  Total cash and cash equivalents: $556.8 million, including restricted
        cash of $49.5 million.
    --  Backlog: 1,193 homes with a sales value of $280.8 million compared to
        1,318 homes with a sales value of $318.4 million as of September 30,
        2008.

Ian J. McCarthy, President and Chief Executive Officer, said, "Following difficult market conditions throughout fiscal 2009, we were pleased to finish the year with a fourth quarter year-over-year increase in net new home orders from continuing operations, improved gross margins and a significant cash balance. During the quarter, we experienced some moderation in negative market trends, with attractive interest rates, historically high housing affordability and the federal tax credit attracting more prospective buyers to purchase a new home. Nonetheless, elevated unemployment and rising foreclosure activity make it difficult to predict when and to what extent the housing market will sustainably recover. In light of the difficult market conditions, we will maintain a disciplined operating approach, focused on gradually improving profitability and protecting our liquidity."

Results for the Quarter Ended September 30, 2009

Homebuilding revenues from continuing operations declined 30.8% in the September quarter, due to a 24.3% decline in home closings and an 8.6% decline in the average selling price of homes closed compared to the same period of the prior year. Net new home orders from continuing operations increased 2.4% compared to the fourth quarter of last year, driven by a 35.5% increase in new orders in the East segment. The cancellation rate for the fourth quarter improved to 34.7%, compared to 46.3% a year ago.

Overall, margins continued to be negatively impacted by weak market conditions, impacting both closing volumes and pricing, and by non-cash pre-tax charges for inventory impairments and lot option abandonments of $29.7 million and $0.2 million, respectively. Compared to the fourth quarter of the prior year, however, gross profit margin improved to 6.6% (14.6% without impairments and abandonments), compared to -0.7% (7.1% without impairments and abandonments) in the fourth quarter of the prior year.

The Company controlled 30,638 lots at September 30, 2009 (83% owned and 17% controlled under options), including 762 owned lots in discontinued operations. This reflects a reduction of 22.7% from the level at September 30, 2008.

As of September 30, 2009, unsold finished homes totaled 270, a decline of approximately 34% from the level a year ago. The Company substantially reduced its land and land development spending in fiscal 2009, which totaled $198.8 million, compared to $333.4 million in fiscal 2008.

Liquidity and Liability Management Initiatives

At September 30 2009, the Company had cash and cash equivalents of $556.8 million, including restricted cash of $49.5 million to collateralize outstanding letters of credit.

As previously reported, on September 11, 2009, the Company issued and sold $250 million aggregate principal amount of 12% Senior Secured Notes due 2017 at an issue price of 89.50%, resulting in net proceeds to the Company of $220 million, which were used to replenish cash that had been used to fund open market repurchases of outstanding senior notes that it had made or agreed to make since April 1, 2009.

During the fourth fiscal quarter, the Company repurchased $269.3 million of outstanding senior notes for an aggregate purchase price of $189.5 million, or an average price of 70.4%, plus accrued and unpaid interest. These repurchases resulted in a pre-tax gain on the extinguishment of debt of approximately $75.0 million. As previously reported, in August 2009, the Company also negotiated a reduced payoff of one of its secured notes payable relating to a joint venture which was previously consolidated by the Company, resulting in a pre-tax gain on early extinguishment of debt of $14.3 million.

The Company also announced its intention to file a Form S-3 Universal Shelf registration statement under which it may offer, from time to time, senior debt securities, subordinated debt securities, common stock, preferred stock, depositary shares, warrants, rights, stock purchase contracts or stock purchase units. However, the Company is not pursuing any particular offering under the registration at this time.

Conference Call

The Company will hold a conference call today, November 10, 2009, at 10:00 am 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 866-423-4776 or 203-369-0842 and enter the passcode "3740". (available until 5:00 pm ET on November 17, 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 final outcome of various putative class action lawsuits, the derivative claims, 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 other settlement agreements and consent orders with governmental authorities; (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) continued or increased disruption in the availability of mortgage financing; (vii) 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; (viii) potential inability to comply with covenants in our debt agreements or satisfy such obligations through repayment or refinancing; (ix) increased competition or delays in reacting to changing consumer preference in home design; (x) shortages of or increased prices for labor, land or raw materials used in housing production; (xi) 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; (xii) the performance of our joint ventures and our joint venture partners; (xiii) the impact of construction defect and home warranty claims including those related to possible installation of drywall imported from China; (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 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                Fiscal Year Ended

                      September 30,                September 30,

                        2009          2008           2009            2008

INCOME STATEMENT

Total revenue         $ 376,348     $ 649,795      $ 1,005,212     $ 1,813,513

Home construction
and land sales          321,550       603,433        887,407         1,641,270
expenses

Inventory
impairments and         29,887        50,902         96,998          406,168
option contract
abandonments

Gross profit (loss)     24,911        (4,540   )     20,807          (233,925  )

Selling, general and
administrative          58,272        89,233         228,079         309,320
expenses

Depreciation &          5,802         8,602          18,736          24,708
amortization

Goodwill impairment     -             -              16,143          48,105

Operating loss          (39,163 )     (102,375 )     (242,151  )     (616,058  )

Equity in loss of
unconsolidated joint    (112    )     (1,483   )     (13,303   )     (76,552   )
ventures

Gain on early
extinguishment of       89,289        -              144,503         -
debt

Other expense, net      (15,881 )     (16,049  )     (75,595   )     (36,505   )

Income (loss) from
continuing              34,133        (119,907 )     (186,546  )     (729,115  )
operations before
income taxes

Income tax (benefit)    (1,167  )     333,928        (8,531    )     71,655
provision

Income (loss) from
continuing            $ 35,300      $ (453,835 )   $ (178,015  )   $ (800,770  )
operations

Loss from
discontinued          $ (1,509  )   $ (20,106  )   $ (11,368   )   $ (151,142  )
operations, net of
tax

Net income (loss)     $ 33,791      $ (473,941 )   $ (189,383  )   $ (951,912  )

Net income (loss)
per common share
from continuing
operations:

 Basic                $ 0.91        $ (11.77   )   $ (4.60     )   $ (20.77    )

 Diluted              $ 0.87        $ (11.77   )   $ (4.60     )   $ (20.77    )

Loss per common
share from
discontinued
operations:

 Basic                  (0.04   )     (0.52    )   $ (0.30     )   $ (3.92     )

 Diluted                (0.04   )     (0.52    )   $ (0.30     )   $ (3.92     )

Net income (loss)
per common share:

 Basic                $ 0.87        $ (12.29   )   $ (4.90     )   $ (24.69    )

 Diluted              $ 0.84        $ (12.29   )   $ (4.90     )   $ (24.69    )

Weighted average
shares outstanding,
in thousands:

 Basic                  38,753        38,561         38,688          38,549

 Diluted                41,865        38,561         38,688          38,549

Interest Data:

                      Quarter Ended                Fiscal Year Ended

                      September 30,                September 30,

                        2009          2008           2009            2008

Capitalized interest
in inventory,         $ 44,386      $ 68,458       $ 45,977        $ 87,560
beginning of period

Interest incurred       30,422        34,445         133,481         139,659

Capitalized interest    (1,263  )     (1,327   )     (3,376    )     (13,795   )
impaired

Interest expense not
qualified for
capitalization and      (17,044 )     (19,319  )     (83,030   )     (55,185   )
included as other
expense

Capitalized interest
amortized to house
construction            (18,163 )     (36,280  )     (54,714   )     (112,262  )
and land sales
expense

Capitalized interest
in inventory, end of  $ 38,338      $ 45,977       $ 38,338        $ 45,977
period

BEAZER HOMES USA, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

CONSOLIDATED BALANCE SHEETS                       September 30,    September 30,

                                                    2009             2008

Assets

Cash and cash equivalents                         $ 507,339        $ 584,334

Restricted cash                                     49,461           297

Accounts receivable (net of allowance of $7,545     28,405           46,555
and $8,915, respectively)

Income tax receivable                               9,922            173,500

Inventory

Owned inventory                                     1,265,441        1,545,006

Consolidated inventory not owned                    53,015           106,655

Total inventory                                     1,318,456        1,651,661

Investments in unconsolidated joint ventures        30,124           33,065

Deferred tax assets, net                            7,520            20,216

Property, plant and equipment, net                  25,939           39,822

Goodwill                                            -                16,143

Other assets                                        52,244           76,206

Total assets                                      $ 2,029,410      $ 2,641,799

Liabilities and Stockholders' Equity

Trade accounts payable                            $ 70,285         $ 90,371

Other liabilities                                   227,315          358,592

Obligations related to consolidated inventory       26,356           70,608
not owned

Senior Notes (net of discounts of $27,257 and       1,362,902        1,522,435
$2,565, respectively)

Junior subordinated notes                           103,093          103,093

Other secured notes payable                         12,543           50,618

Model home financing obligations                    30,361           71,231

Total liabilities                                   1,832,855        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, 43,150,472 and 42,612,801 issued        43               43
and
39,793,316 and 39,270,038 outstanding,
respectively)

Paid-in capital                                     568,019          556,910

Retained earnings (accumulated deficit)             (187,538  )      1,845

Treasury stock, at cost (3,357,156 and              (183,969  )      (183,947  )
3,342,763 shares, respectively)

Total stockholders' equity                          196,555          374,851

Total liabilities and stockholders' equity        $ 2,029,410      $ 2,641,799

Inventory Breakdown

Homes under construction                          $ 219,724        $ 338,971

Development projects in progress                    487,457          572,275

Land held for future development                    417,834          407,320

Land held for sale                                  42,470           85,736

Capitalized interest                                38,338           45,977

Model homes                                         59,618           94,727

Consolidated inventory not owned                    53,015           106,655

                                                  $ 1,318,456      $ 1,651,661

BEAZER HOMES USA, INC.

CONSOLIDATED OPERATING AND FINANCIAL DATA - CONTINUING OPERATIONS

(Dollars in thousands)

OPERATING DATA

                                   Quarter Ended           Fiscal Year Ended

                                   September 30,           September 30,

SELECTED OPERATING DATA            2009        2008        2009    2008

Closings:

 West region                         740         1,038     1,916   2,777

 East region                         660         733       1,573   2,405

 Southeast region                    285         455       841     1,515

Total closings                       1,685       2,226     4,330   6,697

New orders, net of cancellations:

 West region                         400         440       1,834   2,499

 East region                         431         318       1,669   1,573

 Southeast region                    181         230       702     1,331

Total new orders                     1,012       988       4,205   5,403

Backlog units at end of period:

 West region                         445         527

 East region                         581         485

 Southeast region                    167         306

Total backlog units                  1,193       1,318

Dollar value of backlog at end of  $ 280,766   $ 318,447
period

BEAZER HOMES USA, INC.

CONSOLIDATED OPERATING AND FINANCIAL DATA - CONTINUING OPERATIONS

(Dollars in thousands)

                      Quarter Ended                Fiscal Year Ended

                      September 30,                September 30,

SUPPLEMENTAL            2009          2008           2009            2008
FINANCIAL DATA

Revenues

 Homebuilding         $ 373,672     $ 539,837      $ 1,000,010     $ 1,693,583
 operations

 Land and lot sales     2,020         108,704        3,389           115,737

 Financial Services     656           1,254          1,813           4,193

Total revenues        $ 376,348     $ 649,795      $ 1,005,212     $ 1,813,513

Gross profit (loss)

 Homebuilding         $ 23,691        (12,071  )   $ 18,374          (247,688  )
 operations

 Land and lot sales     564           6,277          620             9,570

 Financial Services     656           1,254          1,813           4,193

Total gross (loss)    $ 24,911      $ (4,540   )   $ 20,807        $ (233,925  )
profit

Selling, general and
administrative

 Homebuilding         $ 58,086      $ 88,656       $ 226,973       $ 306,837
 operations

 Financial Services     186           577            1,106           2,483

Total selling,
general and           $ 58,272      $ 89,233       $ 228,079       $ 309,320
administrative

SELECTED SEGMENT
INFORMATION

Revenue:

 West region          $ 151,599     $ 236,734      $ 416,027       $ 674,103

 East region            166,083       307,873        406,112         780,380

 Southeast region       58,010        103,934        181,260         354,837

 Financial services     656           1,254          1,813           4,193

Total revenue         $ 376,348     $ 649,795      $ 1,005,212     $ 1,813,513

Operating income
(loss)

 West region          $ 1,128       $ (439     )   $ (32,019   )   $ (140,989  )

 East region            8,666         (887     )     (6,094    )     (63,913   )

 Southeast region       (9,479  )     (21,054  )     (30,025   )     (109,675  )

 Financial services     469           669            697             1,681

 Segment operating      784           (21,711  )     (67,441   )     (312,896  )
 income (loss)

 Corporate and          (39,947 )     (80,664  )     (174,710  )     (303,162  )
 unallocated

Total operating loss  $ (39,163 )   $ (102,375 )   $ (242,151  )   $ (616,058  )

    Source: Beazer Homes USA, Inc.

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