BZH Beazer Homes USA Inc New

Beazer Homes USA, Inc. (NYSE: BZH) (www.beazer.com) today announced its financial results for the three months ended December 31, 2016.

The Company reported a net loss from continuing operations of $1.4 million for the quarter ended December 31, 2016, compared with net income from continuing operations of $1.2 million for the same period last year. Results this quarter included a $2.7 million pre-tax charge related to the write-off of a legacy investment in a development site. Additionally, first quarter Fiscal 2016 results included a $3.6 million credit for insurance recoveries related to the Florida stucco issues.

“Our first quarter results reflected strong increases in both sales pace and average selling price, as well as a modestly higher gross margin,” said Allan Merrill, CEO of Beazer Homes. “These improvements allowed us to largely overcome the anticipated reduction in closings and community count, as well as a non-recurring SG&A expense.”

Mr. Merrill continued, “Looking forward, we are well positioned to advance our balanced growth strategy, which anticipates revenue and profitability growth, as well as an additional $100 million reduction in our debt through Fiscal 2018. We have a significant pipeline of new communities in place, targeting value-oriented first-time and active adult buyers, that will enable us to reach and surpass our ‘2B-10’ targets. This includes a number of future Gatherings communities, as we expand this unique offering across our footprint.”

Beazer Homes Fiscal First Quarter 2017 Highlights and Comparison to Fiscal First Quarter 2016

• Net loss from continuing operations of $1.4 million, compared to net income from continuing operations of $1.2 million the previous year
• Adjusted EBITDA of $24.4 million, down $1.5 million
• Homebuilding revenue of $336.1 million, effectively flat versus the prior year
• 995 new home deliveries, down 5.1%
• Average selling price (ASP) of $337.8 thousand, up 5.3%
• Homebuilding gross margin was 15.8%. Excluding impairments, abandonments, amortized interest and unexpected warranty costs (net of insurance recoveries), homebuilding gross margin was 20.5%, up 10 basis points
• Selling, general and administrative expenses (SG&A) as a percentage of total revenue were 14.7%, up 150 basis points
• Unit orders of 1,005, up 8.9%. Average community count was 156, down 7.9%
• Unrestricted cash at quarter end was $158.6 million

Orders. Net new orders for the first quarter increased 8.9% versus the prior year, driven by an 18.2% increase in the absorption rate to 2.2 sales per community per month. The Company’s average community count declined 7.9% to 156 communities. The cancellation rate was 21.2%, down 460 basis points relative to the first quarter of last year and in line with historical levels.

Homebuilding Revenue and ASP. Homebuilding revenue for the first quarter was effectively flat year-over-year at $336.1 million. The average selling price rose 5.3% to $337.8 thousand, offsetting a 5.1% decline in closings versus the same period last year.

Backlog. The dollar value of homes in backlog as of December 31, 2016 rose 5.0% to $666.1 million, or 1,926 homes, compared to $634.6 million, or 1,912 homes, at this time last year. The average selling price of homes in backlog was $345.8 thousand, up nearly $14 thousand year-over-year.

Homebuilding Gross Margin. Homebuilding gross margin for the first quarter was 15.8%. Excluding impairments, abandonments, amortized interest and unexpected warranty costs (net of insurance recoveries), homebuilding gross margin was 20.5%, up approximately 10 basis points versus the prior year.

SG&A. Selling, general and administrative expenses, as a percentage of total revenue, were 14.7%, up approximately 150 basis points versus the prior year. The increase in SG&A was in part related to the previously mentioned $2.7 million charge, which was included in our general and administrative expenses. Excluding this charge, SG&A as a percentage of total revenue would have been 13.9%.

Liquidity. The Company ended the quarter with more than $300 million of available liquidity, including $158.6 million of unrestricted cash and $142.5 million available on its secured revolving credit facility.

 

Summary results for the three months ended December 31, 2016 are as follows:

Q1 Results from Continuing Operations (unless otherwise specified)

      Three Months Ended December 31, 2016     2015     Change* New Home Orders 1,005 923 8.9 % Orders per community per month 2.2 1.8 18.2 % Average active community count 156 169 (7.9 )% Actual community count at quarter-end 154 169 (8.9 )% Cancellation rates 21.2 % 25.8 % -460 bps   Total Home Closings 995 1,049 (5.1 )% Average selling price (ASP) from closings (in thousands) $ 337.8 $ 320.9 5.3 % Homebuilding revenue (in millions) $ 336.1 $ 336.6 (0.1 )% Homebuilding gross margin 15.8 % 17.3 % -150 bps Homebuilding gross margin, excluding impairments and abandonments (I&A) 15.8 % 17.5 % -170 bps Homebuilding gross margin, excluding I&A and interest amortized to cost of sales 20.5 % 21.5 % -100 bps Homebuilding gross margin, excluding I&A, interest amortized to cost of sales and unexpected warranty costs (net of expected insurance recoveries) 20.5 % 20.4 % 10 bps   Income (loss) from continuing operations before income taxes (in millions) $ (3.9 ) $ 1.8 $ (5.7 ) Expense (benefit) from income taxes (in millions) $ (2.5 ) $ 0.6 $ (3.2 ) Income (loss) from continuing operations (in millions) $ (1.4 ) $ 1.2 $ (2.6 ) Basic and diluted income (loss) per share from continuing operations $ (0.04 ) $ 0.04 $ (0.08 )   Loss on debt extinguishment (in millions) $ — $ 0.8 $ (0.8 ) Inventory impairments and abandonments (in millions) $ — $ 1.4 $ (1.4 )

Net income (loss) from continuing operations excluding loss on debt extinguishment and inventory impairments and abandonments (in millions)

$ (1.4 ) $ 3.4 $ (4.8 ) Total Company land and land development spending (in millions) $ 103.2 $ 111.7 $ (8.5 ) Total Company Adjusted EBITDA (in millions) $ 21.7 $ 29.5 $ (7.8 ) Total Company Adjusted EBITDA, excluding unexpected warranty costs (net of recoveries) and write-off of a deposit on a legacy land investment (in millions) $ 24.4 $ 25.9 $ (1.5 ) LTM Adjusted EBITDA, excluding unexpected warranty costs (net of recoveries), additional insurance recoveries, litigation settlement and write-off of a deposit (in millions) $ 154.8 $ 153.7 $ 1.1  

* Change is calculated using unrounded numbers.

“LTM” indicates amounts for the trailing 12 months.

     

As of December 31, 2016

As of December 31, 2016     2015     Change Backlog units 1,926 1,912 0.7 % Dollar value of backlog (in millions) $ 666.1 $ 634.6 5.0 % ASP in backlog (in thousands) $ 345.8 $ 331.9 4.2 % Land and lots controlled 23,300 25,326 (8.0 )%  

Conference Call

The Company will hold a conference call on February 9, 2017 at 10:00 a.m. 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 800-839-9140 (for international callers, dial 203-369-3624) and enter the passcode “3740” (available until 10:59 p.m. ET on February 16, 2017), 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 a geographically diversified homebuilder with active operations in 13 states within three geographic regions in the United States. 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 among lenders and enhanced customer service. The Company’s active operations are in the following states: Arizona, California, Delaware, Florida, Georgia, Indiana, Maryland, Nevada, North Carolina, 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, changes in consumer confidence, declines in employment levels, inflation or increases in the quantity and decreases in the price of new homes and resale homes on the market; (ii) the cyclical nature of the homebuilding industry and a potential deterioration in homebuilding industry conditions; (iii) 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 our production and overhead cost structure; (iv) 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; (v) estimates related to homes to be delivered in the future (backlog) are imprecise, as they are subject to various cancellation risks that cannot be fully controlled; (vi) 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; (vii) our cost of and ability to access capital, due to factors such as limitations in the capital markets or adverse credit market conditions, 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 reduce our outstanding indebtedness and to comply with covenants in our debt agreements or satisfy such obligations through repayment or refinancing; (ix) 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 for tax purposes or an increased number of foreclosures; (x) increased competition or delays in reacting to changing consumer preferences in home design; (xi) continuing severe weather conditions or other related events that could result in delays in land development or home construction, increase our costs or decrease demand in the impacted areas; (xii) estimates related to the potential recoverability of our deferred tax assets and a potential reduction in corporate tax rates that could reduce the usefulness of our existing deferred tax assets; (xiii) 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 or governmental policies, including those related to the environment; (xiv) the results of litigation or government proceedings and fulfillment of any related obligations; (xv) the impact of construction defect and home warranty claims, including water intrusion issues in Florida; (xvi) the cost and availability of insurance and surety bonds, as well as the sufficiency of these instruments to cover potential losses incurred; (xvii) the performance of our unconsolidated entities and our unconsolidated entity partners; (xviii) the impact of information technology failures or data security breaches; (xix) terrorist acts, natural disasters, acts of war or other factors over which the Company has little or no control; or (xx) the impact on homebuilding in key markets of governmental regulations limiting the availability of water.

Any forward-looking statement speaks only as of the date on which such statement is made and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. 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 December 31, 2016     2015 Total revenue $ 339,241 $ 344,449 Home construction and land sales expenses 285,578 285,511 Inventory impairments and abandonments   —     1,356   Gross profit 53,663 57,582 Commissions 13,323 13,774 General and administrative expenses 36,388 31,669 Depreciation and amortization   2,677     2,991   Operating income 1,275 9,148 Equity in income of unconsolidated entities 22 60 Loss on extinguishment of debt — (828 ) Other expense, net   (5,196 )   (6,565 ) Income (loss) from continuing operations before income taxes (3,899 ) 1,815 Expense (benefit) from income taxes   (2,540 )   616   Income (loss) from continuing operations (1,359 ) 1,199 Loss from discontinued operations, net of tax   (70 )   (200 ) Net income (loss) and comprehensive income (loss) $ (1,429 ) $ 999   Weighted average number of shares: Basic 31,893 31,757 Diluted 31,893 31,844 Basic income (loss) per share: Continuing operations $ (0.04 ) $ 0.04 Discontinued operations $ — $ (0.01 ) Total $ (0.04 ) $ 0.03 Diluted income (loss) per share: Continuing operations $ (0.04 ) $ 0.04 Discontinued operations $ — $ (0.01 ) Total $ (0.04 ) $ 0.03     Three Months Ended December 31, 2016 2015 Capitalized interest in inventory, beginning of period $ 138,108 $ 123,457 Interest incurred 27,087 30,088 Interest expense not qualified for capitalization and included as other expense (5,252 ) (7,432 ) Capitalized interest amortized to home construction and land sales expenses   (15,644 )   (13,651 ) Capitalized interest in inventory, end of period $ 144,299   $ 132,462      

BEAZER HOMES USA, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

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

      December 31, 2016     September 30, 2016 ASSETS Cash and cash equivalents $ 158,623 $ 228,871 Restricted cash 15,963 14,405 Accounts receivable (net of allowance of $350 and $354, respectively) 51,797 53,226 Income tax receivable 288 292 Owned Inventory 1,618,544 1,569,279 Investments in unconsolidated entities 5,065 10,470 Deferred tax assets, net 312,666 309,955 Property and equipment, net 19,335 19,138 Other assets   5,862     7,522   Total assets $ 2,188,143   $ 2,213,158   LIABILITIES AND STOCKHOLDERS’ EQUITY Trade accounts payable $ 86,730 $ 104,174 Other liabilities 121,711 134,253 Total debt (net of premium of $1,535 and $1,482, respectively, and debt issuance costs of $14,509 and $15,514, respectively)   1,336,483     1,331,878   Total liabilities $ 1,544,924   $ 1,570,305   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, 33,545,721 issued and outstanding and 33,071,331 issued and outstanding, respectively) 34 33 Paid-in capital 867,084 865,290 Accumulated deficit   (223,899 )   (222,470 ) Total stockholders’ equity   643,219     642,853   Total liabilities and stockholders’ equity $ 2,188,143   $ 2,213,158     Inventory Breakdown Homes under construction $ 422,493 $ 377,191 Development projects in progress 778,078 742,417 Land held for future development 172,824 213,006 Land held for sale 28,021 29,696 Capitalized interest 144,299 138,108 Model homes   72,829     68,861   Total owned inventory $ 1,618,544   $ 1,569,279    

 

BEAZER HOMES USA, INC.

CONSOLIDATED OPERATING AND FINANCIAL DATA – CONTINUING OPERATIONS

($ in thousands, except otherwise noted)

      Three Months Ended December 31, SELECTED OPERATING DATA 2016     2015 Closings: West region 510 492 East region 217 257 Southeast region   268   300   Total closings   995   1,049   New orders, net of cancellations: West region 467 422 East region 228 248 Southeast region   310   253   Total new orders, net   1,005   923     As of December 31, Backlog units at end of period: 2016 2015 West region 785 885 East region 455 478 Southeast region   686   549   Total backlog units   1,926   1,912   Dollar value of backlog at end of period (in millions) $ 666.1 $ 634.6       Three Months Ended December 31, SUPPLEMENTAL FINANCIAL DATA 2016 2015 Homebuilding revenue: West region $ 171,749 $ 157,196 East region 81,250 94,345 Southeast region   83,127   85,052   Total homebuilding revenue $ 336,126 $ 336,593     Revenues: Homebuilding $ 336,126 $ 336,593 Land sales and other   3,115   7,856   Total revenues $ 339,241 $ 344,449     Gross profit: Homebuilding $ 53,204 $ 58,063 Land sales and other   459   (481 ) Total gross profit $ 53,663 $ 57,582    

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 (net of expected insurance recoveries) recorded related to the Florida stucco issues, homebuilding gross profit is also shown excluding these charges. Management believes that this representation best reflects the operating characteristics of the Company.

    Three Months Ended December 31, 2016     2015 Homebuilding gross profit/margin $ 53,204     15.8 % $ 58,063     17.3 % Inventory impairments and abandonments (I&A)   —   788   Homebuilding gross profit/margin before I&A 53,204 15.8 % 58,851 17.5 % Interest amortized to cost of sales   15,644   13,367   Homebuilding gross profit/margin before I&A and interest amortized to cost of sales   68,848 20.5 %   72,218   21.5 %

Unexpected warranty costs related to Florida stucco issues (net of expected insurance recoveries)

  —   (3,612 )

Homebuilding gross profit/margin before I&A, interest amortized to cost of sales and unexpected warranty costs (net of recoveries)

$ 68,848 20.5 % $ 68,606   20.4 %  

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.

       

Three Months EndedDecember 31,

LTM EndedDecember 31,(a)

2016     2015 2016     2015 Net income (loss) $ (1,429 ) $ 999 $ 2,265 $ 367,433 Expense (benefit) from income taxes (2,579 ) 506 13,139 (324,724 ) Interest amortized to home construction and land sales expenses, capitalized interest impaired and interest expense not qualified for capitalization 20,896 21,083 104,523 89,035 Depreciation and amortization and stock-based compensation amortization 4,859 4,747 21,864 20,505 Inventory impairments and abandonments (b) — 1,356 13,216 4,465 Loss on debt extinguishment   —     828     12,595     908   Adjusted EBITDA $ 21,747 $ 29,519 $ 167,602 $ 157,622 Unexpected warranty costs related to Florida stucco issues (net of expected insurance recoveries) — (3,612 ) — (3,612 ) Additional insurance recoveries from third-party insurer — — (15,500 ) — Litigation settlement in discontinued operations — — — (340 ) Write-off of deposit on legacy land investment   2,700     —     2,700     —   Adjusted EBITDA excluding unexpected warranty costs (net of recoveries), additional insurance recoveries, litigation settlement and write-off of deposit $ 24,447   $ 25,907   $ 154,802   $ 153,670   (a)   “LTM” indicates amounts for the trailing 12 months. (b) Amounts for the trailing 12 months ended December 31, 2016 and 2015 exclude capitalized interest impaired during the period. Capitalized interest that is impaired is included in the line above titled “Interest amortized to home construction and land sales expenses, capitalized interest impaired and interest expense not qualified for capitalization.”

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Beazer Homes USA, Inc.David I. Goldberg, 770-829-3700Vice President of Treasury and Investor Relationsinvestor.relations@beazer.com