Beazer Homes Reports Third Quarter 2006 EPS of $2.37; Company Repurchases 1.1 Million Shares in Q3 06; Diluted EPS Now Expected to be in the Range of $9.25 - $9.75 for Fiscal Year 2006.ATLANTA -- Beazer Homes USA This article documents an lawsuit. Information may change rapidly as the suit progresses. . Beazer Homes USA (NYSE: BZH) is a Fortune 500 American homebuilding company based in Atlanta, Georgia. , Inc. (NYSE NYSE See: New York Stock Exchange : BZH BZH Breizh (French Brittany) BZH Big Zen Hugs ) (www.beazer.com) today announced results for the quarter ended June 30, 2006. Highlights of the quarter are as follows: Quarter Ended June 30, 2006 --Net income of $102.6 million, or $2.37 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared to net income of $112.7 million, or $2.50 per diluted share in the prior year's third quarter. --Home closings: 4,156, compared to 4,631 in the prior year. --Total revenues: $1.20 billion, compared to $1.29 billion in the prior year. --Operating income margin: 13.0%, compared to 13.8% in the prior year. --New orders: 4,378 homes, compared to 5,202 in the prior year. --Backlog at 6/30/06: 9,449 homes with a sales value of $2.85 billion, compared to 10,635 homes with a sales value of $3.12 billion at 6/30/05. --Repurchased 1.07 million shares for approximately $50.1 million; year-to-date share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. totaled 3.09 million for $183.3 million. "Beazer Homes delivered solid fiscal third quarter financial results in an increasingly difficult housing market," said President and Chief Executive Officer, Ian J. McCarthy. "Across the country, the housing markets that had experienced rapid price appreciation have seen significant increases in cancellation rates and resale resale n. selling again, particularly at retail. In many states a "resale license" or "resale number" is required so that the state can monitor the collection of sales tax on retail sales. RESALE. home inventories. While it is difficult to predict the duration of these current market trends, our broad geographic and product diversity, coupled with our commitment to profitability and prudent capital allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as , should position us well for the future. We continue to believe that the long-term industry fundamentals, based on demographic driven demand and employment trends, together with further supply constraints CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. , remain compelling." Total home closings declined 10.3% from the prior year as decreases in closings in the West and Florida homebuilding segments were offset partially by increases in the Mid-Atlantic, Southeast and Other homebuilding segments. Net new home orders totaled 4,378 homes for the quarter, a decline of 15.8% from the third quarter of the prior year. Increases in several markets in the Southeast homebuilding segment and Texas in the Other homebuilding segment were offset primarily by significantly decreased new home orders in the West and Florida homebuilding segments. Conditions in each of the company's major markets have become considerably more challenging as the seasonal strengthening of sales trends did not materialize ma·te·ri·al·ize v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es v.tr. 1. To cause to become real or actual: By building the house, we materialized a dream. to the extent previously anticipated and historically experienced. The company achieved an operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. margin of 13.0% in the third quarter, a decline of 80 basis points from the prior year, as a result of a higher percentage of closings from lower margin markets, higher market driven sales incentives Noun 1. sales incentive - remuneration offered to a salesperson for exceeding some predetermined sales goal bonus, incentive - an additional payment (or other remuneration) to employees as a means of increasing output and costs associated with exiting markets and land option contracts no longer meeting the company's return criteria. These costs were offset by both a reduction in warranty accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. and insurance recoveries related to progress made in resolving the Trinity Homes warranty issue. Capital Allocation Initiatives, Liquidity and Share Repurchases "While the current market environment is more challenging than anticipated earlier in the year, we remain focused on the value drivers which we believe will benefit us in the long term," said James O'Leary James O'Leary may refer to;
A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility and the two debt offerings completed this quarter meaningfully strengthened our financial position and liquidity, positioning us for the eventual upturn. We will continue to focus on opportunistically growing our business while prudently returning capital to our shareholders during this more challenging period." The results for the quarter included approximately $11 million in pre-tax charges to write off land options and exit positions that were no longer providing sufficient returns. The company also incurred approximately $1 million of additional pre-tax charges during the quarter to exit land positions and close its operations in Ft. Wayne and Lafayette, Indiana Lafayette (IPA: [ˈlɑ.fəˌjɛt]) is a city in Tippecanoe County, Indiana, U.S., 63 miles (101 km) northwest of Indianapolis. while significantly downsizing (1) Converting mainframe and mini-based systems to client/server LANs. (2) To reduce equipment and associated costs by switching to a less-expensive system. (jargon) downsizing its operations in Memphis, Tenn. Collectively, these actions will focus the company's spending on its highest value opportunities. During the third quarter of fiscal 2006, the company repurchased 1,069,100 shares of its common stock under its 10 million share repurchase authorization The right or permission to use a system resource; the process of granting access. See access control. for approximately $50.1 million or $46.88 per share. Year to date, the company has repurchased 3,090,900 shares, for a total of $183.3 million. At June 30, net debt to total capitalization Total capitalization The total long-term debt and all types of equity of a company that constitutes its capital structure. total capitalization See capitalization. stood at 52%. The company expects its net debt to capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. ratio to be in its year-end target range of under 50% at September 30 after it completes what is its historically strongest quarter for closings and cash flow generation. Trinity Homes Update The company regularly reviews its estimate of the costs required to resolve the claims associated with the Trinity Homes class action lawsuit class action lawsuit A lawsuit in which one party or a limited number of parties sue on behalf of a larger group to which the parties belong. For example, investors may bring a class action lawsuit against a brokerage firm that has actively promoted a tax which was settled in October 2004. During the recent quarter's review, the company concluded that, based on the numbers of homes remediated and estimates of costs to resolve the remaining claims, approximately $15 million of accruals associated with this matter were no longer required. Since the commencement of the remediation program, the company's cost per home has continued to decrease as homes requiring more extensive repairs were addressed first, coupled with improvement in the internal processes and procedures as the company gained experience in addressing these issues. These improvements, which include enhanced bidding and inspection processes, have yielded meaningful benefits on a per home basis. Also during the quarter the company realized approximately $4 million in insurance and subcontractor One who takes a portion of a contract from the principal contractor or from another subcontractor. When an individual or a company is involved in a large-scale project, a contractor is often hired to see that the work is done. recoveries related to reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. for defense, investigative and remediation costs. The company continues to aggressively pursue recovery of defense, investigative and remediation costs from both its insurance carriers and subcontractors to obtain maximum restitution In the context of Criminal Law, state programs under which an offender is required, as a condition of his or her sentence, to repay money or donate services to the victim or society; with respect to maritime law, the restoration of articles lost by jettison, done when the . Fiscal 2006 EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. Outlook McCarthy concluded, "We expect continued execution of our Profitable Growth Strategy, including our share repurchase program, to result in continued profitability and enhanced shareholder value in the near and long term. Looking ahead, we do not see conditions in the housing markets improving significantly in the remainder of the fiscal year. As such, we have adjusted our expectation for our fiscal 2006 diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of to be in a range of $9.25- $9.75. This compares to adjusted earnings per share of $8.72 in fiscal 2005." Conference Call The company will hold a conference call today, July 27, 2006, at 11:00 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 Investor relations The process by which the corporation communicates with its investors. " section of the company's website at www.beazer.com. To access the conference call by telephone, listeners should dial 800-369-1904. 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 888-568-0121 (available through August 3, 2006), 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, Mississippi, Nevada, New Jersey, New Mexico New Mexico, state in the SW United States. At its northwestern corner are the so-called Four Corners, where Colorado, New Mexico, Arizona, and Utah meet at right angles; New Mexico is also bordered by Oklahoma (NE), Texas (E, S), and Mexico (S). , New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , North Carolina North Carolina, state in the SE United States. It is bordered by the Atlantic Ocean (E), South Carolina and Georgia (S), Tennessee (W), and Virginia (N). Facts and Figures Area, 52,586 sq mi (136,198 sq km). Pop. , Ohio, Pennsylvania, South Carolina South Carolina, state of the SE United States. It is bordered by North Carolina (N), the Atlantic Ocean (SE), and Georgia (SW). Facts and Figures Area, 31,055 sq mi (80,432 sq km). Pop. (2000) 4,012,012, a 15. , Tennessee, Texas, Virginia and West Virginia West Virginia, E central state of the United States. It is bordered by Pennsylvania and Maryland (N), Virginia (E and S), and Kentucky and, across the Ohio R., Ohio (W). Facts and Figures Area, 24,181 sq mi (62,629 sq km). Pop. and also provides mortgage origination Origination The process through which a mortgage lender creates a mortgage secured by some amount of the mortgagor's real property. Notes: Also known as loan origination, everyone must go through the origination process when securing a mortgage for a piece of real and title services to its homebuyers. Beazer Homes, a Fortune 500 company, is listed on the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. under the ticker symbol Ticker Symbol An arrangement of characters (usually letters) representing a particular security listed on an exchange or otherwise traded publicly. When a company issues securities to the public marketplace, it selects an available ticker symbol for its securities which investors "BZH." Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Certain statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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, potential liability as a result of construction defect defect - bug , product liability and warranty claims, the possibility that the company's strategies to broaden target price points and lessen less·en v. less·ened, less·en·ing, less·ens v.tr. 1. To make less; reduce. 2. Archaic To make little of; belittle. v.intr. To become less; decrease. dependence on the entry-level product offering in certain markets will not achieve desired results, and other factors described in the company's Annual Report on Form 10-K/A for the year ended September 30, 2005 filed with the Securities and Exchange Commission on May 25, 2006. Use of Non-GAAP Financial Information In addition to the results in this press release reported in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "), the company has provided information regarding adjusted fiscal 2005 earnings per share which excludes the effects of the non-cash goodwill impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge recorded during the second quarter of fiscal 2005. Management believes that this adjusted financial result is useful to both management and investors in the analysis of the company's financial performance when comparing it to prior periods and that it provides investors with an important perspective on the current underlying operating performance of the business by isolating i·so·late tr.v. i·so·lat·ed, i·so·lat·ing, i·so·lates 1. To set apart or cut off from others. 2. To place in quarantine. 3. the impact of a non-cash adjustment related to a previous acquisition. Below is a reconciliation of this non-GAAP financial measure, adjusted fiscal 2005 earnings per share, as well as adjusted fiscal 2005 net income used to derive adjusted fiscal 2005 earnings per share, to the most directly comparable financial measures calculated and presented in accordance with GAAP:
Twelve Months Ended
September 30, 2005
-------------------
(in thousands, except per share data)
Reported net income $ 262,524
Reported net income per common share $ 5.87
Adjusted Net Income and Earnings Per Share:
Reported net income $ 262,524
Goodwill impairment loss 130,235
--------------
Net income, excluding goodwill impairment loss $ 392,759
==============
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 $ 5,325
Diluted net income per common share, excluding $ 8.72
goodwill impairment loss
Diluted weighted average shares outstanding 45,634
-Tables Follow-
BEAZER HOMES USA, INC.
CONSOLIDATED OPERATING AND FINANCIAL DATA
(Dollars in thousands, except per share amounts)
FINANCIAL DATA
--------------
Quarter Ended Nine Months Ended
June 30, June 30,
--------------------- ---------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
INCOME STATEMENT
Total revenue $1,203,538 $1,293,227 $3,578,245 $3,181,302
Home construction and land
sales expenses 894,231 963,699 2,681,613 2,456,111
---------- ---------- ---------- ----------
Gross profit 309,307 329,528 896,632 725,191
Selling, general and
administrative expenses 153,412 150,891 436,283 363,555
Goodwill impairment charge - - - 130,235
---------- ---------- ---------- ----------
Operating income 155,895 178,637 460,349 231,401
Equity in income of
unconsolidated joint
ventures 127 2,951 809 3,150
Other income 1,480 987 7,165 4,987
---------- ---------- ---------- ----------
Income before income taxes 157,502 182,575 468,323 239,538
Income taxes 54,878 69,835 171,435 141,438
---------- ---------- ---------- ----------
Net income $ 102,624 $ 112,740 $ 296,888 $ 98,100
========== ========== ========== ==========
Net income per common
share:
Basic $ 2.60 $ 2.78 $ 7.37 $ 2.43
========== ========== ========== ==========
Diluted $ 2.37 $ 2.50 $ 6.70 $ 2.24
========== ========== ========== ==========
Weighted average shares
outstanding, in thousands:
Basic 39,435 40,497 40,281 40,400
Diluted 43,929 45,666 44,909 45,510
Interest incurred $ 31,759 $ 22,798 $ 85,195 $ 64,269
Interest amortized to cost
of sales $ 22,071 $ 21,568 $ 60,788 $ 54,880
EPS interest add back -
Convertible debt $ 1,347 $ 1,331 $ 4,038 $ 3,993
Depreciation and
amortization $ 8,055 $ 5,676 $ 19,097 $ 15,311
SELECTED BALANCE SHEET DATA June 30, Sept. 30, June 30,
2006 2005 2005
---------- ---------- ----------
Cash $ 24,366 $ 297,098 $ 8,098
Inventory 3,752,862 2,901,165 2,986,994
Total assets 4,383,609 3,770,516 3,483,091
Total debt (net of
discount of $3,766,
$4,118 and $3,535) 1,791,903 1,321,936 1,265,924
Shareholders' equity 1,631,064 1,504,688 1,333,879
BEAZER HOMES USA, INC.
CONSOLIDATED OPERATING AND FINANCIAL DATA
(Dollars in thousands)
OPERATING DATA
--------------
Quarter Ended Nine Months Ended
June 30, June 30,
--------------------- ---------------------
SELECTED OPERATING DATA 2006 2005 2006 2005
---------- ---------- ---------- ----------
Closings:
West region 1,037 1,630 3,294 3,972
Mid-Atlantic region 477 439 1,432 1,175
Florida region 362 528 1,375 1,234
Southeast region 1,033 933 2,818 2,613
Other homebuilding 1,247 1,101 3,339 2,813
---------- ---------- ---------- ----------
Total closings 4,156 4,631 12,258 11,807
========== ========== ========== ==========
New orders, net of
cancellations:
West region 861 1,464 2,799 4,473
Mid-Atlantic region 461 514 1,261 1,582
Florida region 380 591 1,453 1,599
Southeast region 1,295 1,242 3,315 3,059
Other homebuilding 1,381 1,391 3,646 3,273
---------- ---------- ---------- ----------
Total new orders 4,378 5,202 12,474 13,986
========== ========== ========== ==========
Backlog units at end of
period:
West region 2,499 3,508
Mid-Atlantic region 1,022 1,454
Florida region 1,337 1,565
Southeast region 2,251 1,823
Other homebuilding 2,340 2,285
---------- ----------
Total backlog units 9,449 10,635
========== ==========
Dollar value of backlog at
end of period $2,852,052 $3,121,702
========== ==========
BEAZER HOMES USA, INC.
CONSOLIDATED OPERATING AND FINANCIAL DATA (Continued)
(Dollars in thousands)
Quarter Ended Nine Months Ended
June 30, June 30,
--------------------- --------------------
SUPPLEMENTAL FINANCIAL
DATA: 2006 2005 2006 2005
---------- ---------- ---------- ----------
Revenues
Homebuilding operations $1,178,360 $1,262,890 $3,491,646 $3,126,302
Land and lot sales 18,568 20,789 64,119 29,767
Financial services 12,392 13,708 36,505 35,872
Intercompany elimination (5,782) (4,160) (14,025) (10,639)
---------- ---------- ---------- ----------
Total revenues $1,203,538 $1,293,227 $3,578,245 $3,181,302
========== ========== ========== ==========
Gross profit
Homebuilding operations $ 300,058 $ 312,877 $ 861,434 $ 683,535
Land and lot sales (3,143) 2,943 (1,307) 5,784
Financial services 12,392 13,708 36,505 35,872
---------- ---------- ---------- ----------
Total gross profit $ 309,307 $ 329,528 $ 896,632 $ 725,191
========== ========== ========== ==========
Selling, general and
administrative
Homebuilding operations $ 143,250 $ 141,315 $ 405,250 $ 337,564
Financial services 10,162 9,576 31,033 25,991
---------- ---------- ---------- ----------
Total selling, general and
administrative $ 153,412 $ 150,891 $ 436,283 $ 363,555
========== ========== ========== ==========
SELECTED SEGMENT INFORMATION
Revenue:
West region $ 389,934 $ 533,667 $1,230,380 $1,334,306
Mid-Atlantic region 232,373 211,279 664,987 500,884
Florida region 108,551 139,181 421,901 317,241
Southeast region 215,708 197,333 581,610 488,732
Other homebuilding 250,362 202,219 656,887 514,906
Financial services 12,392 13,708 36,505 35,872
Intercompany elimination (5,782) (4,160) (14,025) (10,639)
---------- ---------- ---------- ----------
Total revenue $1,203,538 $1,293,227 $3,578,245 $3,181,302
========== ========== ========== ==========
Operating income
West region $ 60,340 $ 117,716 $ 211,321 $ 298,198
Mid-Atlantic region 53,336 50,706 155,952 111,263
Florida region 17,797 18,594 86,684 41,567
Southeast region 25,350 18,298 52,026 31,092
Other homebuilding 1,895 3,411 (4,516) 8,516
Financial services 2,230 4,132 5,472 9,881
---------- ---------- ---------- ----------
Segment operating income 160,948 212,857 506,939 500,517
Corporate and unallocated (5,053) (34,220) (46,590) (269,116)
---------- ---------- ---------- ----------
Total operating income $ 155,895 $ 178,637 $ 460,349 $ 231,401
========== ========== ========== ==========
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