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Beazer Homes Reports Second Quarter Fiscal 2015 Results and Solid Start to the Spring Selling Season

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Beazer Homes USA, Inc. (NYSE:BZH) (www.beazer.com) today announced its financial results for the three and six months ended March 31, 2015.

The Company reported a net loss from continuing operations of $2.1 million for the quarter ended March 31, 2015, compared with a net loss of $8.2 million for the quarter ended March 31, 2014.

New home orders grew 22.2 percent for the quarter with an average active community count that was 14.3 percent higher than a year ago. Absorption rates were especially strong at 3.5 sales per community per month for the quarter, while the average selling price (“ASP”) from closings increased 12.3 percent to $305.8 thousand, the highest ASP for any quarter in the Company’s history. Backlog at March 31, 2015 consisted of 2,533 homes with a value of $814.1 million, up 27.8 percent versus last year.

“We are encouraged by the solid start to the spring selling season,” said Allan Merrill, CEO of Beazer Homes. “Driven by job growth, strong affordability and low inventory levels, the selling environment during our fiscal second quarter reflected an improvement in homebuyer demand. With our substantially larger backlog, stable gross margins and fixed cost leverage, we expect to achieve a $20 million improvement in Adjusted EBITDA for fiscal 2015 versus last year, excluding certain unexpected warranty and litigation settlement costs.”

Summary results for the three and six months ended March 31, 2015 are as follows:

Q2 Results from Continuing Operations (unless otherwise specified)

Quarter Ended March 31,
2015 2014 Change
New Home Orders 1,698 1,390 22.2 %
Orders per month per community 3.5 3.3 6.1 %
Actual community count at month-end 163 138 18.1 %
Average active community count 160 140 14.3 %
Cancellation rates 16.7 % 19.4 % 270 bps
Total Home Closings 936 977 (4.2 )%
Average sales price from closings (in thousands) $ 305.8 $ 272.4 12.3 %
Homebuilding revenue (in millions) $ 286.2 $ 266.1 7.6 %
Homebuilding gross profit margin, excluding impairments and abandonments (I&A) 18.3 % 19.7 % -140 bps
Homebuilding gross profit margin, excluding I&A and interest amortized to cost of sales 21.7 % 22.5 % -80 bps
Loss from continuing operations before income taxes (in millions) $ (2.0 ) $ (8.3 ) $ 6.3
Provision of (benefit from) income taxes (in millions) $ 0.1 $ (0.1 ) $ 0.2
Net loss from continuing operations (in millions) $ (2.1 ) $ (8.2 ) $ 6.1
Basic Loss Per Share $ (0.08 ) $ (0.32 ) $ 0.24
Total Company land and land development spending (in millions) $ 102.1 $ 128.6 $ (26.5 )
Total Company Adjusted EBITDA, excluding unexpected warranty costs and a litigation settlement in discontinued operations (in millions) $ 19.7 $ 18.5 $ 1.2
LTM Adjusted EBITDA, excluding unexpected warranty costs and a litigation settlement in discontinued operations (in millions) $ 129.1 $ 103.5 24.7 %
Six Months Ended March 31,
2015 2014 Change
New Home Orders 2,664 2,285 16.6 %
LTM orders per month per community 2.8 2.9 (3.4 )%
Cancellation rates 18.5 % 20.4 % 190 bps
Total Home Closings 1,821 2,015 (9.6 )%
Average sales price from closings (in thousands) $ 300.8 $ 276.0 9.0 %
Homebuilding revenue (in millions) $ 547.8 $ 556.1 (1.5 )%
Homebuilding gross profit margin, excluding impairments and abandonments (I&A) 16.0 % 19.2 % -320 bps
Homebuilding gross profit margin, excluding I&A and interest amortized to cost of sales 19.3 % 21.9 % -260 bps
Homebuilding gross profit margin, excluding I&A, interest amortized to cost of sales and unexpected warranty costs 21.8 % 21.9 % -10 bps
Loss from continuing operations before loss on debt extinguishment (in millions) $ (20.1 ) $ (12.0 ) $ (8.1 )
Loss on debt extinguishment (in millions) $ $ (0.2 ) $ 0.2
Net loss from continuing operations (in millions) $ (20.1 ) $ (12.2 ) $ (7.9 )
Basic Loss Per Share $ (0.76 ) $ (0.48 ) $ (0.28 )
Land and land development spending (in millions) $ 247.6 $ 252.4 $ (4.8 )
Total Company Adjusted EBITDA, excluding unexpected warranty costs and a litigation settlement in discontinued operations (in millions) $ 36.0 $ 40.2 (10.4 )%

As of March 31, 2015

As of March 31,
2015 2014 Change
Backlog 2,533 2,163 17.1 %
Dollar value of backlog at end of period (in millions) $ 814.1 $ 637.1 27.8 %
ASP in Backlog $ 321.4 $ 294.5 9.1 %
Land and lots controlled 27,794 29,331 (5.2

)

%

Conference Call

The Company will hold a conference call on April 30, 2015 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 866-461-2739 or 203-369-1355 and enter the passcode “3740” (available until 10:59 pm ET on May 7, 2015), 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(R) 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 15 states, namely Arizona, California, Delaware, Florida, Georgia, Indiana, Maryland, Nevada, New Jersey, 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 and the level of quality and craftsmanship provided by our subcontractors; (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, including these related to the environment; (xiii) the results of litigation or government proceedings and fulfillment of the obligations in the consent orders with governmental authorities and other settlement agreements; (xiv) the impact of construction defect and home warranty claims, including water intrusion issues in Florida and New Jersey; (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 or other factors; (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 or 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 CONSOLIDATED STATEMENTS OF INCOME

($ in thousands, except per share data)

Three Months Ended Six Months Ended
March 31, March 31,
2015 2014 2015 2014
Total revenue $ 299,359 $ 270,021 $ 565,123 $ 563,191
Home construction and land sales expenses 245,446 216,969 475,992 455,438
Inventory impairments and option contract abandonments - 880 - 911
Gross profit 53,913 52,172 89,131 106,842
Commissions 11,969 11,096 22,895 22,917
General and administrative expenses 32,727 32,628 64,168 61,038
Depreciation and amortization 2,781 2,831 5,122 5,738
Operating income (loss) 6,436 5,617 (3,054 ) 17,149
Equity in income (loss) of unconsolidated entities 82 (17 ) 224 302
Loss on extinguishment of debt - (153 ) - (153 )
Other expense, net (8,473 ) (13,727 ) (17,907 ) (29,484 )
Loss from continuing operations before income taxes (1,955 ) (8,280 ) (20,737 ) (12,186 )
Provision for (benefit from) income taxes 105 (56 ) (591 ) (14 )
Loss from continuing operations (2,060 ) (8,224 ) (20,146 ) (12,172 )
Income (loss) from discontinued operations, net of tax 64 253 (4,190 ) (937 )
Net loss $ (1,996 ) $ (7,971 ) $ (24,336 ) $ (13,109 )
Weighted average number of shares:
Basic and Diluted 26,480 25,320 26,469 25,163
Basic and Diluted (loss) income per share:
Continuing Operations $ (0.08 ) $ (0.32 ) $ (0.76 ) $ (0.48 )
Discontinued Operations $ - $ 0.01 $ (0.16 ) $ (0.04 )
Total $ (0.08 ) $ (0.31 ) $ (0.92 ) $ (0.52 )
Three Months Ended Six Months Ended
March 31, March 31,
2015 2014 2015 2014
Capitalized interest in inventory, beginning of period $ 99,868 $ 61,836 $ 87,619 $ 52,562
Interest incurred 30,259 32,458 60,542 64,899
Interest expense not qualified for capitalization and included as other expense (7,695 ) (14,659 ) (17,442 ) (30,691 )
Capitalized interest amortized to house construction and land sales expenses (9,956 ) (7,379 ) (18,243 ) (14,514 )
Capitalized interest in inventory, end of period $ 112,476 $ 72,256 $ 112,476 $ 72,256

BEAZER HOMES USA, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

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

March 31, 2015 September 30, 2014
ASSETS
Cash and cash equivalents $ 146,261 $ 324,154
Restricted cash 43,169 62,941
Accounts receivable (net of allowance of $1,305 and $1,245, respectively) 35,880 34,429
Income tax receivable 46 46
Inventory:
Owned inventory 1,757,036 1,557,496
Land not owned under option agreements - 3,857
Total inventory 1,757,036 1,561,353
Investments in marketable securities and unconsolidated entities 10,372 38,341
Deferred tax assets, net 46 2,823
Property, plant and equipment, net 21,153 18,673
Other assets 18,290 23,460
Total assets $ 2,032,253 $ 2,066,220
LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade accounts payable $ 100,844 $ 106,237
Other liabilities 137,435 142,516
Obligations related to land not owned under option agreements - 2,916
Total debt (net of discounts of $4,019 and $4,399, respectively) 1,535,172 1,535,433
Total liabilities $ 1,773,451 $ 1,787,102
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, 27,434,097 issued and outstanding and 27,173,421 issued and outstanding, respectively) 27 27
Paid-in capital 854,368 851,624
Accumulated deficit (595,593 ) (571,257 )
Accumulated other comprehensive loss - (1,276 )
Total stockholders’ equity 258,802 279,118
Total liabilities and stockholders’ equity $ 2,032,253 $ 2,066,220
Inventory Breakdown
Homes under construction $ 395,726 $ 282,095
Development projects in progress 849,644 786,768
Land held for future development 270,518 301,048
Land held for sale 64,929 51,672
Capitalized interest 112,476 87,619
Model homes 63,743 48,294
Land not owned under option agreements - 3,857
Total inventory $ 1,757,036 $ 1,561,353

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 2015 2014 2015 2014
Closings:
West region 386 453 702 888
East region 269 257 574 595
Southeast region 281 267 545 532
Total closings 936 977 1,821 2,015
New orders, net of cancellations:
West region 715 550 1,120 901
East region 488 424 774 732
Southeast region 495 416 770 652
Total new orders 1,698 1,390 2,664 2,285
Backlog units at end of period:
West region 975 751 975 751
East region 800 798 800 798
Southeast region 758 614 758 614
Total backlog units 2,533 2,163 2,533 2,163
Dollar value of backlog at end of period (in millions) $ 814.1 $ 637.1 $ 814.1 $ 637.1
Homebuilding Revenue:
West region $ 108,766 $ 119,044 $ 195,084 $ 239,256
East region 96,758 82,366 198,590 189,245
Southeast region 80,698 64,715 154,130 127,582
Total homebuilding revenue $ 286,222 $ 266,125 $ 547,804 $ 556,083
Quarter Ended March 31, Six Months Ended March 31,
SUPPLEMENTAL FINANCIAL DATA 2015 2014 2015 2014
Revenues:
Homebuilding $ 286,222 $ 266,125 $ 547,804 $ 556,083
Land sales and other 13,137 3,896 17,319 7,108
Total $ 299,359 $ 270,021 $ 565,123 $ 563,191
Gross profit:
Homebuilding $ 52,379 $ 51,655 $ 87,656 $ 106,105
Land sales and other 1,534 517 1,475 737
Total $ 53,913 $ 52,172 $ 89,131 $ 106,842

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 Florida stucco issues during the six months ended March 31, 2015, homebuilding gross profit is also shown excluding these charges. Management believes that this representation best reflects the operating characteristics of the company.

Quarter Ended March 31, Six Months Ended March 31,
2015 2014 2015 2014
Homebuilding gross profit $ 52,379 18.3 % $ 51,655 19.4 % $ 87,656 16.0 % $ 106,105 19.1 %
Inventory impairments and lot option abandonments (I&A) - 880 - 911
Homebuilding gross profit before I&A 52,379 18.3 % 52,535 19.7 % 87,656 16.0 % 107,016 19.2 %
Interest amortized to cost of sales 9,782 7,379 17,976 14,514
Homebuilding gross profit before I&A and interest amortized to cost of sales 62,161 21.7 % 59,914 22.5 % 105,632 19.3 % 121,530 21.9 %
Unexpected warranty costs related to Florida stucco issues 13,582
Homebuilding gross profit before I&A, interest amortized to cost of sales and unexpected warranty costs $ 62,161 21.7 % $ 59,914 22.5 % $ 119,214 21.8 % $ 121,530 21.9 %

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.

Quarter Ended
March 31,

Six Months Ended
March 31,

LTM Ended
March 31, (a)

2015 2014 2015 2014 2015 2014
Net loss $ (1,996 ) $ (7,971 ) $ (24,336 ) $ (13,109 ) $ 23,156 $ (6,949 )
(Benefit from) provision for income taxes 103 (56 ) (594 ) (4 ) (42,392 ) (3,061 )
Interest amortized to home construction and land sales expenses, capitalized interest impaired and interest expense not qualified for capitalization 17,651 22,038 35,685 45,205 82,328 95,625
Depreciation and amortization and stock compensation amortization 4,322 3,488 8,037 7,004 16,899 15,200
Inventory impairments and option contract abandonments - 880 - 911 7,151 1,315
Loss on debt extinguishment - 153 - 153 19,764 1,151
Joint venture impairment and abandonment charges - - - 181
Adjusted EBITDA $ 20,080 $ 18,532 $ 18,792 $ 40,160 $ 106,906 $ 103,462
Unexpected warranty costs related to stucco issues in Florida - 13,582 17,872
Unexpected warranty costs related to water intrusion issues in New Jersey - - 648
Litigation settlement in discontinued operations (340 ) 3,660 3,660
Adjusted EBITDA excluding unexpected warranty costs and a litigation settlement in discontinued operations $ 19,740 $ 18,532 $ 36,034 $ 40,160 $ 129,086 $ 103,462

(a) “LTM” indicates amounts for the trailing 12-months.

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