Commission
File Number
|
001-12822
|
DELAWARE
|
58-2086934
|
(State
or other jurisdiction of
|
(I.R.S.
employer
|
incorporation
or organization)
|
Identification
no.)
|
1000
Abernathy Road, Suite 1200, Atlanta, Georgia 30328
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(770)
829-3700
|
|
(Registrant’s
telephone number, including area
code)
|
YES
|
x
|
NO
|
o
|
Large
accelerated filer
|
x
|
Accelerated
filer
|
o
|
Non-accelerated
filer
|
o
|
Smaller
reporting company
|
o
|
YES
|
o
|
NO
|
x
|
Class
|
Outstanding
at May 9, 2008
|
||||
Common
Stock, $0.001 par value
|
39,234,305
shares
|
|
·
|
the
timing and final outcome of the United States Attorney investigation, the
Securities and Exchange Commission’s (“SEC”) investigation and other state
and federal agency investigations, the 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;
|
|
·
|
material
weaknesses in our internal control over financial
reporting;
|
|
·
|
additional
asset impairment charges or
writedowns;
|
|
·
|
economic
changes nationally or in local markets, including changes in consumer
confidence, volatility of mortgage interest rates and
inflation;
|
|
·
|
continued
or increased downturn in the homebuilding
industry;
|
|
·
|
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;
|
|
·
|
continued
or increased disruption in the availability of mortgage
financing;
|
|
·
|
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;
|
|
·
|
potential
inability to comply with covenants in our debt
agreements;
|
|
·
|
continued
negative publicity;
|
|
·
|
increased
competition or delays in reacting to changing consumer preference in home
design;
|
|
·
|
shortages
of or increased prices for labor, land or raw materials used in housing
production;
|
|
·
|
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;
|
|
·
|
the
performance of our joint ventures and our joint venture
partners;
|
|
·
|
the
impact of construction defect and home warranty claims and the cost and
availability of insurance, including the availability of
insurance for the presence of moisture
intrusion;
|
|
·
|
a
material failure on the part of our subsidiary Trinity Homes LLC to
satisfy the conditions of the class action settlement agreement, including
assessment and remediation with respect to moisture intrusion related
issues;
|
|
·
|
delays
in land development or home construction resulting from adverse weather
conditions;
|
|
·
|
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;
|
|
·
|
effects
of changes in accounting policies, standards, guidelines or principles;
or
|
|
·
|
terrorist
acts, acts of war and other factors over which the Company has little or
no control.
|
PART I. FINANCIAL
INFORMATION
|
4
|
||
Item 1.
|
Financial
Statements
|
4
|
|
Unaudited Condensed Consolidated
Balance Sheets, December 31, 2007 and September 30,
2007
|
4
|
||
Unaudited Condensed Consolidated
Statements of Operations, Three Months Ended December 31, 2007 and
2006
|
5
|
||
Unaudited Condensed Consolidated
Statements of Cash Flows, Three Months Ended December 31, 2007 and
2006
|
6
|
||
Notes to Unaudited Condensed
Consolidated Financial Statements
|
7
|
||
Item 2.
|
Management’s Discussion and
Analysis of Financial Condition and Results of
Operations
|
32
|
|
Item 3.
|
Quantitative and Qualitative
Disclosures about Market Risk
|
45
|
|
Item 4.
|
Controls and
Procedures
|
45
|
|
PART II.
|
OTHER
INFORMATION
|
50
|
|
Item 1.
|
Legal
Proceedings
|
50
|
|
Item 6.
|
Exhibits and Financial Statement
Schedules
|
53
|
|
SIGNATURES
|
53
|
||
December
31,
|
September
30,
|
|||||||
2007
|
2007
|
|||||||
ASSETS
|
||||||||
Cash and cash
equivalents
|
$ | 236,540 | $ | 454,337 | ||||
Restricted
cash
|
95,987 | 5,171 | ||||||
Accounts
receivable
|
49,489 | 45,501 | ||||||
Income tax
receivable
|
100,767 | 63,981 | ||||||
Inventory
|
||||||||
Owned
inventory
|
2,290,086 | 2,537,791 | ||||||
Consolidated inventory
not owned
|
193,300 | 237,382 | ||||||
Total
inventory
|
2,483,386 | 2,775,173 | ||||||
Residential mortgage loans
available-for-sale
|
93 | 781 | ||||||
Investments in unconsolidated
joint ventures
|
99,426 | 109,143 | ||||||
Deferred tax
assets
|
341,466 | 232,949 | ||||||
Property, plant and equipment,
net
|
67,124 | 71,682 | ||||||
Goodwill
|
68,613 | 68,613 | ||||||
Other
assets
|
115,002 | 102,690 | ||||||
Total
assets
|
$ | 3,657,893 | $ | 3,930,021 | ||||
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
||||||||
Trade accounts
payable
|
$ | 98,716 | $ | 118,030 | ||||
Other
liabilities
|
462,615 | 453,089 | ||||||
Obligations related to
consolidated inventory not owned
|
137,633 | 177,931 | ||||||
Senior Notes (net of discounts of
$2,916 and $3,033, respectively)
|
1,522,084 | 1,521,967 | ||||||
Junior subordinated
notes
|
103,093 | 103,093 | ||||||
Other secured notes
payable
|
44,524 | 118,073 | ||||||
Model home financing
obligations
|
112,287 | 114,116 | ||||||
Total
liabilities
|
2,480,952 | 2,606,299 | ||||||
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,
42,576,011 and 42,597,229 issued and
|
||||||||
39,237,357 and
39,261,721 outstanding, respectively)
|
43 | 43 | ||||||
Paid-in
capital
|
545,284 | 543,705 | ||||||
Retained
earnings
|
815,521 | 963,869 | ||||||
Treasury stock, at cost (3,338,654
and 3,335,508 shares, respectively)
|
(183,907 | ) | (183,895 | ) | ||||
Total stockholders'
equity
|
1,176,941 | 1,323,722 | ||||||
Total
liabilities and stockholders' equity
|
$ | 3,657,893 | $ | 3,930,021 |
Three Months
Ended
|
||||||||
December
31,
|
||||||||
2007
|
2006
|
|||||||
Total
revenue
|
$ | 503,148 | $ | 802,535 | ||||
Home construction and land sales
expenses
|
434,676 | 665,153 | ||||||
Inventory impairments and option
contract abandonments
|
168,512 | 140,367 | ||||||
Gross loss
|
(100,040 | ) | (2,985 | ) | ||||
Selling, general and
administrative expenses
|
93,169 | 116,916 | ||||||
Depreciation and
amortization
|
6,058 | 7,558 | ||||||
Operating
loss
|
(199,267 | ) | (127,459 | ) | ||||
Equity in loss of unconsolidated
joint ventures
|
(16,140 | ) | (2,360 | ) | ||||
Other (expense) income,
net
|
(2,818 | ) | 2,161 | |||||
Loss before income
taxes
|
(218,225 | ) | (127,658 | ) | ||||
Benefit from income
taxes
|
(79,989 | ) | (47,755 | ) | ||||
Net loss
|
$ | (138,236 | ) | $ | (79,903 | ) | ||
Weighted average number of
shares:
|
||||||||
Basic
|
38,539 | 38,280 | ||||||
Diluted
|
38,539 | 38,280 | ||||||
Earnings per
share:
|
||||||||
Basic
|
$ | (3.59 | ) | $ | (2.09 | ) | ||
Diluted
|
$ | (3.59 | ) | $ | (2.09 | ) | ||
Cash dividends per
share
|
$ | - | $ | 0.10 |
Three Months
Ended
|
||||||||
December
31,
|
||||||||
2007
|
2006
|
|||||||
Cash flows from operating
activities:
|
||||||||
Net
loss
|
$ | (138,236 | ) | $ | (79,903 | ) | ||
Adjustments to reconcile net
loss to net cash provided by
(used in) operating
activities:
|
||||||||
Depreciation and
amortization
|
6,058 | 7,558 | ||||||
Stock-based compensation
expense
|
1,873 | 3,728 | ||||||
Inventory impairments and option
contract abandonments
|
168,512 | 140,367 | ||||||
Deferred income tax (benefit)
provision
|
(43,929 | ) | (44,839 | ) | ||||
Excess tax benefit from
equity-based compensation
|
388 | (1,390 | ) | |||||
Equity in loss of unconsolidated
joint ventures
|
16,140 | 2,360 | ||||||
Cash distributions of income from
unconsolidated joint ventures
|
882 | 1,282 | ||||||
Changes in operating assets and
liabilities:
|
||||||||
(Increase)
decrease in accounts receivable
|
(3,988 | ) | 254,723 | |||||
Increase
in income tax receivable
|
(36,786 | ) | (8,435 | ) | ||||
Decrease
(increase) in inventory
|
95,073 | (79,610 | ) | |||||
Decrease
in residential mortgage loans available-for-sale
|
688 | 73,153 | ||||||
Decrease
(increase) in other assets
|
8,823 | (5,936 | ) | |||||
Decrease
in trade accounts payable
|
(19,314 | ) | (53,117 | ) | ||||
Decrease
in other liabilities
|
(67,581 | ) | (131,350 | ) | ||||
Other
changes
|
8 | 1,391 | ||||||
Net cash provided by (used in)
operating activities
|
(11,389 | ) | 79,982 | |||||
Cash flows from investing
activities:
|
||||||||
Capital
expenditures
|
(4,194 | ) | (10,986 | ) | ||||
Investments
in unconsolidated joint ventures
|
(4,979 | ) | (8,723 | ) | ||||
Changes in
restricted cash
|
(90,816 | ) | 174 | |||||
Distributions
from unconsolidated joint ventures
|
- | 886 | ||||||
Net cash used in investing
activities
|
(99,989 | ) | (18,649 | ) | ||||
Cash flows from financing
activities:
|
||||||||
Borrowings
under credit facilities and warehouse line
|
- | 61,130 | ||||||
Repayment
of credit facilities and warehouse line
|
- | (137,679 | ) | |||||
Repayment
of other secured notes payable
|
(83,055 | ) | (2,455 | ) | ||||
Borrowings
under model home financing obligations
|
- | 1,444 | ||||||
Repayment
of model home financing obligations
|
(1,829 | ) | (1,824 | ) | ||||
Deferred
financing costs
|
(21,135 | ) | (70 | ) | ||||
Proceeds
from stock option exercises
|
- | 3,435 | ||||||
Common
stock redeemed
|
(12 | ) | (85 | ) | ||||
Excess tax benefit from
equity-based compensation
|
(388 | ) | 1,390 | |||||
Dividends
paid
|
- | (3,904 | ) | |||||
Net cash used in financing
activities
|
(106,419 | ) | (78,618 | ) | ||||
Decrease in cash and cash
equivalents
|
(217,797 | ) | (17,285 | ) | ||||
Cash and cash equivalents at
beginning of period
|
454,337 | 167,570 | ||||||
Cash and cash equivalents at end
of period
|
$ | 236,540 | $ | 150,285 |
Shares
|
Weighted
Average Grant
Date Fair
Value
|
|||||||
Beginning of
period
|
905,898 | $ | 48.42 | |||||
Granted
|
26,411 | 8.49 | ||||||
Vested
|
(28,531 | ) | 47.75 | |||||
Forfeited
|
(49,565 | ) | 45.16 | |||||
End of
period
|
854,213 | $ | 47.39 |
Shares
|
Weighted-
Average Exercise
Price
|
|||||||
Outstanding at beginning of
period
|
2,052,379 | $ | 45.01 | |||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Forfeited
|
(102,146 | ) | 43.09 | |||||
Outstanding at end of
period
|
1,950,233 | $ | 45.11 | |||||
Exercisable at end of
period
|
769,129 | $ | 28.88 | |||||
Vested or expected to vest in the
future
|
1,594,044 | $ | 41.93 |
|
·
|
Actual
“Net Contribution Margin” (defined as homebuilding revenues less
homebuilding costs and direct selling expenses) for homes closed in the
current fiscal quarter, fiscal year to date and prior two fiscal
quarters. Homebuilding costs include land and land
development costs (based upon an allocation of such costs, including costs
to complete the development, or specific lot costs), home construction
costs (including an estimate of costs, if any, to complete home
construction), previously capitalized indirect costs (principally for
construction supervision), capitalized interest and estimated warranty
costs;
|
|
·
|
Projected
Net Contribution Margin for homes in
backlog;
|
|
·
|
Actual
and trending new orders and cancellation
rates;
|
|
·
|
Actual
and trending base home sales prices and sales incentives for home sales
that occurred in the prior two fiscal quarters that remain in backlog at
the end of the fiscal quarter and expected future homes sales prices and
sales incentives and absorption over the expected remaining life of the
community;
|
|
·
|
A
comparison of our community to our competition to include, among other
things, an analysis of various product offerings including, the size and
style of the homes currently offered for sale, community amenity levels,
availability of lots in our community and our competition’s, desirability
and uniqueness of our community and other market factors;
and
|
|
·
|
Other
events that may indicate that the carrying value may not be
recoverable.
|
|
·
|
management
has the authority and commits to a plan to sell the
land;
|
|
·
|
the
land is available for immediate sale in its present
condition;
|
|
·
|
there
is an active program to locate a buyer and the plan to sell the land has
been initiated;
|
|
·
|
the
sale of the land is probable within one
year;
|
|
·
|
the
land is being actively marketed at a reasonable sale price relative to its
current fair value; and
|
|
·
|
it
is unlikely that the plan to sell will be withdrawn or that significant
changes to the plan will be made.
|
Quarter ended December
31,
|
||||||||
2007
|
2006
|
|||||||
Supplemental disclosure of
non-cash activity:
|
||||||||
(Decrease) increase in
consolidated
inventory not
owned
|
$ | (40,298 | ) | $ | 59,390 | |||
Land acquired through issuance
of
notes
payable
|
9,506 | 24,510 | ||||||
Issuance of stock under
deferred
bonus stock
plans
|
94 | - | ||||||
December
31,
|
September
30,
|
|||||||
(in
thousands)
|
2007
|
2007
|
||||||
Homes under
construction
|
$ | 726,103 | $ | 787,102 | ||||
Development projects in
progress
|
1,275,699 | 1,546,389 | ||||||
Unimproved land held for future
development
|
10,133 | 11,101 | ||||||
Land Held for
Sale
|
144,394 | 49,473 | ||||||
Model homes
|
133,757 | 143,726 | ||||||
Total Owned
Inventory
|
$ | 2,290,086 | $ | 2,537,791 |
December 31,
2007
|
September 30,
2007
|
|||||||||||||||||||||||
Held for
Development
|
Land Held for
Sale
|
Total Owned
Inventory
|
Held for
Development
|
Land Held for
Sale
|
Total Owned
Inventory
|
|||||||||||||||||||
West
Segment
|
$ | 760,892 | $ | 19,875 | $ | 780,767 | $ | 868,675 | $ | 35,578 | $ | 904,253 | ||||||||||||
Mid-Atlantic
Segment
|
403,097 | 30,872 | 433,969 | 439,712 | - | 439,712 | ||||||||||||||||||
Florida
Segment
|
179,726 | 4,497 | 184,223 | 203,417 | - | 203,417 | ||||||||||||||||||
Southeast
Segment
|
275,529 | 57,477 | 333,006 | 373,111 | 1,407 | 374,518 | ||||||||||||||||||
Other
|
329,650 | 31,673 | 361,323 | 407,194 | 12,488 | 419,682 | ||||||||||||||||||
Unallocated
|
196,798 | - | 196,798 | 196,209 | - | 196,209 | ||||||||||||||||||
Total
|
$ | 2,145,692 | $ | 144,394 | $ | 2,290,086 | $ | 2,488,318 | $ | 49,473 | $ | 2,537,791 |
Quarter Ended December
31,
|
||||||||
2007
|
2006
|
|||||||
Development projects and
homes
|
||||||||
in process (Held for
Development)
|
||||||||
West
|
$ | 65,446 | $ | 50,423 | ||||
Mid-Atlantic
|
23,001 | 11,170 | ||||||
Florida
|
3,093 | 34,632 | ||||||
Southeast
|
7,543 | 2,673 | ||||||
Other
|
1,099 | 8,940 | ||||||
Unallocated
|
7,889 | 7,354 | ||||||
Subtotal
|
$ | 108,071 | $ | 115,192 | ||||
Land held for
sale
|
||||||||
Southeast
|
$ | 14,473 | $ | - | ||||
Other
|
18,967 | - | ||||||
Subtotal
|
$ | 33,440 | $ | - | ||||
Lot Option
Abandonments
|
||||||||
West
|
$ | 45 | $ | 2,756 | ||||
Mid-Atlantic
|
1,796 | 2,287 | ||||||
Florida
|
475 | 10,511 | ||||||
Southeast
|
23,425 | 961 | ||||||
Other
|
1,260 | 8,660 | ||||||
Subtotal
|
$ | 27,001 | $ | 25,175 | ||||
Total
|
$ | 168,512 | $ | 140,367 |
(in
thousands)
|
December 31,
2007
|
September 30,
2007
|
||||||
Beazer's investment in joint
ventures
|
$ | 99,426 | $ | 109,143 | ||||
Total equity of joint
ventures
|
445,484 | 523,597 | ||||||
Total outstanding borrowings of
joint ventures
|
714,196 | 785,437 | ||||||
Beazer's portion of loan to value
maintenance guarantees
|
6,075 | 7,717 | ||||||
Beazer's portion of repayment
guarantees
|
38,802 | 42,307 |
Three Months
Ended
|
||||||||
December
31,
|
||||||||
2007
|
2006
|
|||||||
Capitalized interest in
inventory,
beginning of
period
|
$ | 87,560 | $ | 78,996 | ||||
Interest incurred and
capitalized
|
29,104 | 36,809 | ||||||
Capitalized interest
impaired
|
(4,952 | ) | (2,861 | ) | ||||
Capitalized interest amortized to
house
construction and
land sales expenses
|
(24,850 | ) | (23,343 | ) | ||||
Capitalized interest in inventory,
end
of
period
|
$ | 86,862 | $ | 89,601 |
Three Months
Ended
|
||||||||
December
31,
|
||||||||
2007
|
2006
|
|||||||
Basic:
|
||||||||
Net loss
|
$ | (138,236 | ) | $ | (79,903 | ) | ||
Weighted average number of common
shares outstanding
|
38,539 | 38,280 | ||||||
Basic loss per
share
|
$ | (3.59 | ) | $ | (2.09 | ) | ||
Diluted:
|
||||||||
Net loss
|
$ | (138,236 | ) | $ | (79,903 | ) | ||
Diluted weighted average common
shares outstanding
|
38,539 | 38,280 | ||||||
Diluted loss per
share
|
$ | (3.59 | ) | $ | (2.09 | ) |
Maturity
Date
|
December 31,
2007
|
September 30,
2007
|
|||||||
Revolving Credit
Facility
|
August
2011
|
$ | - | $ | - | ||||
8 5/8% Senior
Notes*
|
May 2011
|
180,000 | 180,000 | ||||||
8 3/8% Senior
Notes*
|
April 2012
|
340,000 | 340,000 | ||||||
6 1/2% Senior
Notes*
|
November
2013
|
200,000 | 200,000 | ||||||
6 7/8% Senior
Notes*
|
July 2015
|
350,000 | 350,000 | ||||||
8 1/8% Senior
Notes*
|
June 2016
|
275,000 | 275,000 | ||||||
4 5/8% Convertible Senior
Notes*
|
June 2024
|
180,000 | 180,000 | ||||||
Junior subordinated
notes
|
July 2036
|
103,093 | 103,093 | ||||||
Other secured notes
payable
|
Various
Dates
|
44,524 | 118,073 | ||||||
Model home financing
obligations
|
Various
Dates
|
112,287 | 114,116 | ||||||
Unamortized debt
discounts
|
(2,916 | ) | (3,033 | ) | |||||
Total
|
$ | 1,781,988 | $ | 1,857,249 | |||||
* Collectively, the "Senior
Notes"
|
Three Months
Ended
|
||||||||
December
31,
|
||||||||
2007
|
2006
|
|||||||
Balance at beginning of
period
|
$ | 57,053 | $ | 99,030 | ||||
Provisions
|
1,408 | 6,197 | ||||||
Payments
|
(9,505 | ) | (11,387 | ) | ||||
Balance at end of
period
|
$ | 48,956 | $ | 93,840 |
Three Months Ended
December
31,
|
||||||||
2007
|
2006
|
|||||||
Balance at beginning of
period
|
$ | 12,116 | $ | 47,704 | ||||
Reductions
|
$ | (612 | ) | $ | - | |||
Payments
|
(3,043 | ) | (1,993 | ) | ||||
Balance at end of
period
|
$ | 8,461 | $ | 45,711 |
Three Months
Ended
December
31,
|
||||||||
2007
|
2006
|
|||||||
Revenue
|
||||||||
West
|
$ | 117,888 | $ | 297,906 | ||||
Mid-Atlantic
|
92,020 | 91,266 | ||||||
Florida
|
55,328 | 91,245 | ||||||
Southeast
|
97,495 | 155,612 | ||||||
Other
homebuilding
|
136,621 | 158,155 | ||||||
Financial
Services
|
5,436 | 11,743 | ||||||
Intercompany
elimination
|
(1,640 | ) | (3,392 | ) | ||||
Consolidated
total
|
$ | 503,148 | $ | 802,535 |
Three Months
Ended
December
31,
|
||||||||
2007
|
2006
|
|||||||
Operating (loss) income
(a)
|
||||||||
West
|
$ | (60,205 | ) | $ | (26,326 | ) | ||
Mid-Atlantic
|
(20,547 | ) | (9,528 | ) | ||||
Florida
|
(643 | ) | (30,701 | ) | ||||
Southeast
|
(43,255 | ) | 8,311 | |||||
Other
homebuilding
|
(20,240 | ) | (18,888 | ) | ||||
Financial
Services
|
(333 | ) | 3,230 | |||||
Segment operating
loss
|
(145,223 | ) | (73,902 | ) | ||||
Corporate and unallocated
(b)
|
(54,044 | ) | (53,557 | ) | ||||
Total operating
loss
|
(199,267 | ) | (127,459 | ) | ||||
Equity in loss
of
unconsolidated
joint ventures
|
(16,140 | ) | (2,360 | ) | ||||
Other income,
net
|
(2,818 | ) | 2,161 | |||||
Loss before income
taxes
|
$ | (218,225 | ) | $ | (127,658 | ) |
Three Months
Ended
December
31,
|
||||||||
2007
|
2006
|
|||||||
Depreciation and
Amortization
|
||||||||
West
|
$ | 1,321 | $ | 2,710 | ||||
Mid-Atlantic
|
828 | 833 | ||||||
Florida
|
529 | 387 | ||||||
Southeast
|
920 | 898 | ||||||
Other
homebuilding
|
1,486 | 1,463 | ||||||
Financial
Services
|
87 | 130 | ||||||
Corporate and
unallocated
|
887 | 1,137 | ||||||
Consolidated
total
|
$ | 6,058 | $ | 7,558 |
December 31,
2007
|
September 30,
2007
|
|||||||
Assets (c)
|
||||||||
West
|
$ | 857,466 | $ | 940,161 | ||||
Mid-Atlantic
|
521,837 | 546,182 | ||||||
Florida
|
239,008 | 242,733 | ||||||
Southeast
|
361,122 | 403,472 | ||||||
Other
homebuilding
|
396,431 | 469,520 | ||||||
Financial
Services
|
95,795 | 99,710 | ||||||
Corporate and unallocated
(d)
|
1,186,234 | 1,228,243 | ||||||
Consolidated
total
|
$ | 3,657,893 | $ | 3,930,021 |
(a)
|
Operating
loss for the three months ended December 31, 2007 and 2006 include $27.0
million and $25.2 million, respectively, of charges related to the
abandonment of lot option agreements. Operating loss for the
three months ended December 31, 2007 and 2006 also includes $141.5 million
and $115.2 million, respectively, of inventory impairments which have been
recorded in the segments to which the inventory relates (see Note
3).
|
(b)
|
Corporate
and unallocated includes amortization of capitalized interest and numerous
shared services functions that benefit all segments, the costs of which
are not allocated to the operating segments reported above including
information technology, national sourcing and purchasing, treasury,
corporate finance, legal, branding and other national marketing
costs. In addition, for the three months ended December 31,
2007, corporate and unallocated also includes $7.5 million of
investigation and related restatement
expenses.
|
(c)
|
Segment
assets as of both December 31, 2007 and September 30, 2007 include
goodwill assigned from prior acquisitions as follows: $29.0 million in the
West, $23.3 million in the Mid-Atlantic, $5.0 million in the Southeast and
$11.2 million in Other homebuilding. There was no change in
goodwill from September 30, 2007 to December 31,
2007.
|
(d)
|
Primarily
consists of cash and cash equivalents, consolidated inventory not owned,
deferred taxes, and capitalized interest and other corporate items that
are not allocated to the segments.
|
Beazer Homes USA,
Inc.
|
||||||||||||||||||||||||
Unaudited Condensed Consolidating
Balance Sheet Information
|
||||||||||||||||||||||||
December 31,
2007
|
||||||||||||||||||||||||
(in
thousands)
|
||||||||||||||||||||||||
Beazer
|
Consolidated
|
|||||||||||||||||||||||
Beazer
Homes
|
Guarantor
|
Mortgage
|
Non-Guarantor
|
Consolidating
|
Beazer
Homes
|
|||||||||||||||||||
USA, Inc.
|
Subsidiaries
|
Corp
|
Subsidiaries
|
Adjustments
|
USA, Inc.
|
|||||||||||||||||||
ASSETS
|
||||||||||||||||||||||||
Cash and cash
equivalents
|
$ | 353,193 | $ | - | $ | 85 | $ | 772 | $ | (117,510 | ) | $ | 236,540 | |||||||||||
Restricted
cash
|
- | 95,987 | - | - | - | 95,987 | ||||||||||||||||||
Accounts
receivable
|
- | 49,109 | 377 | 3 | - | 49,489 | ||||||||||||||||||
Income tax
receivable
|
100,767 | - | - | - | - | 100,767 | ||||||||||||||||||
Owned
inventory
|
- | 2,290,086 | - | - | - | 2,290,086 | ||||||||||||||||||
Consolidated inventory not
owned
|
- | 193,300 | - | - | - | 193,300 | ||||||||||||||||||
Residential mortgage loans
available-for-sale
|
- | - | 93 | - | - | 93 | ||||||||||||||||||
Investments in unconsolidated
joint ventures
|
3,093 | 96,333 | - | - | - | 99,426 | ||||||||||||||||||
Deferred tax
assets
|
341,054 | - | 412 | - | - | 341,466 | ||||||||||||||||||
Property, plant and equipment,
net
|
- | 66,492 | 630 | 2 | - | 67,124 | ||||||||||||||||||
Goodwill
|
- | 68,613 | - | - | - | 68,613 | ||||||||||||||||||
Investments in
subsidiaries
|
1,250,071 | - | - | - | (1,250,071 | ) | - | |||||||||||||||||
Intercompany
|
943,916 | (1,126,161 | ) | 58,153 | 7,280 | 116,812 | - | |||||||||||||||||
Other
assets
|
39,414 | 68,052 | 223 | 7,313 | - | 115,002 | ||||||||||||||||||
Total
assets
|
$ | 3,031,508 | $ | 1,801,811 | $ | 59,973 | $ | 15,370 | $ | (1,250,769 | ) | $ | 3,657,893 | |||||||||||
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
||||||||||||||||||||||||
Trade accounts
payable
|
- | 98,716 | - | - | - | 98,716 | ||||||||||||||||||
Other
liabilities
|
119,652 | 333,776 | 1,831 | 7,615 | (259 | ) | 462,615 | |||||||||||||||||
Intercompany
|
(2,684 | ) | - | - | 2,684 | - | - | |||||||||||||||||
Obligations related to
consolidated inventory
not
owned
|
- | 137,633 | - | - | - | 137,633 | ||||||||||||||||||
Senior notes (net of discounts of
$2,916)
|
1,522,084 | - | - | - | - | 1,522,084 | ||||||||||||||||||
Junior subordinated
notes
|
103,093 | - | - | - | - | 103,093 | ||||||||||||||||||
Warehouse
line
|
- | - | - | - | - | - | ||||||||||||||||||
Other secured notes
payable\
|
- | 44,524 | - | - | - | 44,524 | ||||||||||||||||||
Model home financing
obligations
|
112,287 | - | - | - | - | 112,287 | ||||||||||||||||||
Total
liabilities
|
1,854,567 | 614,514 | 1,831 | 10,299 | (259 | ) | 2,480,952 | |||||||||||||||||
Stockholders'
equity
|
1,176,941 | 1,187,297 | 58,142 | 5,071 | (1,250,510 | ) | 1,176,941 | |||||||||||||||||
Total liabilities and
stockholders' equity
|
$ | 3,031,508 | $ | 1,801,811 | $ | 59,973 | $ | 15,370 | $ | (1,250,769 | ) | $ | 3,657,893 |
Beazer Homes USA,
Inc.
|
||||||||||||||||||||||||
Unaudited Consolidating Balance
Sheet Information
|
||||||||||||||||||||||||
September 30,
2007
|
||||||||||||||||||||||||
(in
thousands)
|
||||||||||||||||||||||||
Consolidated
|
||||||||||||||||||||||||
Beazer
|
Other
|
Beazer
|
||||||||||||||||||||||
Homes
|
Guarantor
|
Beazer
|
Non-Guarantor
|
Consolidating
|
Homes
|
|||||||||||||||||||
ASSETS
|
USA, Inc.
|
Subsidiaries
|
Mortgage
Corp.
|
Subsidiaries
|
Adjustments
|
USA, Inc.
|
||||||||||||||||||
Cash and cash
equivalents
|
$ | 447,296 | $ | - | $ | 9,700 | $ | 1,559 | $ | (4,218 | ) | $ | 454,337 | |||||||||||
Restricted
cash
|
- | 5,171 | - | - | - | 5,171 | ||||||||||||||||||
Accounts
receivable
|
- | 44,449 | 1,038 | 14 | - | 45,501 | ||||||||||||||||||
Income tax
receivable
|
63,981 | - | - | - | - | 63,981 | ||||||||||||||||||
Owned
inventory
|
- | 2,537,791 | - | - | - | 2,537,791 | ||||||||||||||||||
Consolidated inventory not
owned
|
- | 237,382 | - | - | - | 237,382 | ||||||||||||||||||
Residential mortgage loans
available-for-sale
|
- | - | 781 | - | - | 781 | ||||||||||||||||||
Investments in unconsolidated
joint ventures
|
3,093 | 106,050 | - | - | - | 109,143 | ||||||||||||||||||
Deferred tax
assets
|
232,537 | - | 412 | - | - | 232,949 | ||||||||||||||||||
Property, plant and equipment,
net
|
- | 70,979 | 701 | 2 | - | 71,682 | ||||||||||||||||||
Goodwill
|
- | 68,613 | - | - | - | 68,613 | ||||||||||||||||||
Investments in
subsidiaries
|
1,397,158 | - | - | - | (1,397,158 | ) | - | |||||||||||||||||
Intercompany
|
956,941 | (1,039,576 | ) | 50,774 | 6,729 | 25,132 | - | |||||||||||||||||
Other
assets
|
19,650 | 75,812 | 269 | 6,959 | - | 102,690 | ||||||||||||||||||
Total
Assets
|
$ | 3,120,656 | $ | 2,106,671 | $ | 63,675 | $ | 15,263 | $ | (1,376,244 | ) | $ | 3,930,021 | |||||||||||
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
||||||||||||||||||||||||
Trade accounts
payable
|
$ | - | $ | 118,030 | $ | - | $ | - | $ | - | $ | 118,030 | ||||||||||||
Other
liabilities
|
60,419 | 372,050 | 4,958 | 7,657 | 8,005 | 453,089 | ||||||||||||||||||
Intercompany
|
(2,661 | ) | - | - | 2,661 | - | - | |||||||||||||||||
Obligations related to
consolidated inventory not owned
|
- | 177,931 | - | - | - | 177,931 | ||||||||||||||||||
Senior Notes (net of discounts of
$3,033)
|
1,521,967 | - | - | - | - | 1,521,967 | ||||||||||||||||||
Junior subordinated
notes
|
103,093 | - | - | - | - | 103,093 | ||||||||||||||||||
Other secured notes
payable
|
- | 118,073 | - | - | - | 118,073 | ||||||||||||||||||
Model home financing
obligations
|
114,116 | - | - | - | - | 114,116 | ||||||||||||||||||
Total
Liabilities
|
1,796,934 | 786,084 | 4,958 | 10,318 | 8,005 | 2,606,299 | ||||||||||||||||||
Stockholders'
Equity
|
1,323,722 | 1,320,587 | 58,717 | 4,945 | (1,384,249 | ) | 1,323,722 | |||||||||||||||||
Total
Liabilities and Stockholders' Equity
|
$ | 3,120,656 | $ | 2,106,671 | $ | 63,675 | $ | 15,263 | $ | (1,376,244 | ) | $ | 3,930,021 |
Beazer Homes USA,
Inc.
|
||||||||||||||||||||||||
Unaudited Condensed Consolidating
Statement of Operations Information
|
||||||||||||||||||||||||
Three Months Ended December 31,
2007
|
||||||||||||||||||||||||
(in
thousands)
|
||||||||||||||||||||||||
Beazer
|
Consolidated
|
|||||||||||||||||||||||
Beazer
Homes
|
Guarantor
|
Mortgage
|
Non-Guarantor
|
Consolidating
|
Beazer
Homes
|
|||||||||||||||||||
USA, Inc.
|
Subsidiaries
|
Corp.
|
Subsidiaries
|
Adjustments
|
USA, Inc.
|
|||||||||||||||||||
Total
revenue
|
$ | - | $ | 500,449 | $ | 4,134 | $ | 204 | $ | (1,639 | ) | $ | 503,148 | |||||||||||
Home construction and land sales
expenses
|
29,104 | 406,513 | - | - | (941 | ) | 434,676 | |||||||||||||||||
Inventory impairments and option
contract abandonments
|
- | 168,512 | - | - | - | 168,512 | ||||||||||||||||||
Gross (loss)
profit
|
(29,104 | ) | (74,576 | ) | 4,134 | 204 | (698 | ) | (100,090 | ) | ||||||||||||||
Selling, general and
administrative expenses
|
- | 88,113 | 5,008 | 48 | - | 93,169 | ||||||||||||||||||
Depreciation and
amortization
|
- | 5,979 | 79 | - | - | 6,058 | ||||||||||||||||||
Operating (loss)
income
|
(29,104 | ) | (168,668 | ) | (953 | ) | 156 | (698 | ) | (199,267 | ) | |||||||||||||
Equity in loss of unconsolidated
joint ventures
|
- | (16,140 | ) | - | - | - | (16,140 | ) | ||||||||||||||||
Other (expense) income,
net
|
- | (2,893 | ) | 31 | 44 | - | (2,818 | ) | ||||||||||||||||
(Loss) income before income
taxes
|
(29,104 | ) | (187,701 | ) | (922 | ) | 200 | (698 | ) | (218,225 | ) | |||||||||||||
(Benefit from) provision for
income taxes
|
(10,800 | ) | (68,657 | ) | (347 | ) | 74 | (259 | ) | (79,989 | ) | |||||||||||||
Equity in income of
subsidiaries
|
(119,932 | ) | - | - | - | 119,932 | - | |||||||||||||||||
Net (loss)
income
|
$ | (138,236 | ) | $ | (119,044 | ) | $ | (575 | ) | $ | 126 | $ | 119,493 | $ | (138,236 | ) |
Beazer Homes USA,
Inc.
|
||||||||||||||||||||||||
Unaudited Condensed Consolidating
Statement of Operations Information
|
||||||||||||||||||||||||
Three Months Ended December 31,
2006
|
||||||||||||||||||||||||
(in
thousands)
|
||||||||||||||||||||||||
Beazer
|
Consolidated
|
|||||||||||||||||||||||
Beazer
Homes
|
Guarantor
|
Mortgage
|
Non-Guarantor
|
Consolidating
|
Beazer
Homes
|
|||||||||||||||||||
USA, Inc.
|
Subsidiaries
|
Corp.
|
Subsidiaries
|
Adjustments
|
USA, Inc.
|
|||||||||||||||||||
Total
revenue
|
$ | - | $ | 795,861 | $ | 9,939 | $ | 427 | $ | (3,392 | ) | $ | 802,535 | |||||||||||
Home construction and land sales
expenses
|
36,809 | 645,202 | - | - | (16,858 | ) | 665,153 | |||||||||||||||||
Inventory impairments and option
contract abandonments
|
- | 140,367 | - | - | - | 140,367 | ||||||||||||||||||
Gross (loss)
profit
|
(36,809 | ) | 9,992 | 9,939 | 427 | 13,466 | (2,985 | ) | ||||||||||||||||
Selling, general and
administrative expenses
|
- | 109,062 | 7,646 | 208 | - | 116,916 | ||||||||||||||||||
Depreciation and
amortization
|
- | 7,446 | 112 | - | - | 7,558 | ||||||||||||||||||
Operating (loss)
income
|
(36,809 | ) | (106,516 | ) | 2,181 | 219 | 13,466 | (127,459 | ) | |||||||||||||||
Equity in (loss) of unconsolidated
joint ventures
|
- | (2,360 | ) | - | - | - | (2,360 | ) | ||||||||||||||||
Royalty and management fee
expense
|
- | 567 | (567 | ) | - | - | - | |||||||||||||||||
Other income,
net
|
- | 2,051 | 70 | 40 | - | 2,161 | ||||||||||||||||||
(Loss) income before income
taxes
|
(36,809 | ) | (106,258 | ) | 1,684 | 259 | 13,466 | (127,658 | ) | |||||||||||||||
(Benefit from) provision for
income taxes
|
(13,770 | ) | (37,749 | ) | 630 | 97 | 5,037 | (47,755 | ) | |||||||||||||||
Equity in income of
subsidiaries
|
(56,864 | ) | - | - | - | 56,864 | - | |||||||||||||||||
Net (loss)
income
|
$ | (79,903 | ) | $ | (66,509 | ) | $ | 1,054 | $ | 162 | $ | 65,293 | $ | (79,903 | ) |
Beazer Homes USA,
Inc.
|
||||||||||||||||||||||||
Unaudited Condensed Consolidating
Statement of Cash Flows Information
|
||||||||||||||||||||||||
Three Months Ended December 31,
2007
|
||||||||||||||||||||||||
(in
thousands)
|
||||||||||||||||||||||||
Beazer
|
Consolidated
|
|||||||||||||||||||||||
Beazer
Homes
|
Guarantor
|
Mortgage
|
Non-Guarantor
|
Consolidating
|
Beazer
Homes
|
|||||||||||||||||||
USA, Inc.
|
Subsidiaries
|
Corp.
|
Subsidiaries
|
Adjustments
|
USA, Inc.
|
|||||||||||||||||||
Net cash (used in)/provided by
operating activities
|
$ | (37,892 | ) | $ | 30,208 | $ | (2,236 | ) | $ | (259 | ) | $ | - | $ | (10,179 | ) | ||||||||
Cash flows from investing
activities:
|
||||||||||||||||||||||||
Capital
expenditures
|
- | (4,186 | ) | (8 | ) | - | - | (4,194 | ) | |||||||||||||||
Investments in unconsolidated
joint ventures
|
- | (4,979 | ) | - | - | - | (4,979 | ) | ||||||||||||||||
Changes in restricted
cash
|
- | (90,816 | ) | - | - | - | (90,816 | ) | ||||||||||||||||
Net cash used in investing
activities
|
- | (99,981 | ) | (8 | ) | - | - | (99,989 | ) | |||||||||||||||
Cash flows from financing
activities:
|
||||||||||||||||||||||||
Repayment of other secured notes
payable
|
- | (83,055 | ) | - | - | - | (83,055 | ) | ||||||||||||||||
Repayment
of model home financing obligations
|
(3,039 | ) | - | - | - | - | (3,039 | ) | ||||||||||||||||
Deferred financing
costs
|
(21,135 | ) | - | - | - | - | (21,135 | ) | ||||||||||||||||
Common stock
redeemed
|
(12 | ) | - | - | - | - | (12 | ) | ||||||||||||||||
Tax benefit from stock
transactions
|
(388 | ) | - | - | - | - | (388 | ) | ||||||||||||||||
Advances to/from
subsidiaries
|
(31,637 | ) | 152,828 | (7,371 | ) | (528 | ) | (113,292 | ) | - | ||||||||||||||
Net cash (used in)/provided by
financing activities
|
(56,211 | ) | 69,773 | (7,371 | ) | (528 | ) | (113,292 | ) | (107,629 | ) | |||||||||||||
Decrease in cash and cash
equivalents
|
(94,103 | ) | - | (9,615 | ) | (787 | ) | (113,292 | ) | (217,797 | ) | |||||||||||||
Cash and cash equivalents at
beginning of period
|
447,296 | - | 9,700 | 1,559 | (4,218 | ) | 454,337 | |||||||||||||||||
Cash and cash equivalents at end
of period
|
$ | 353,193 | $ | - | $ | 85 | $ | 772 | $ | (117,510 | ) | $ | 236,540 |
Beazer
Homes USA, Inc.
|
||||||||||||||||||||||||
Unaudited
Condensed Consolidating Statement of Cash Flows
Information
|
||||||||||||||||||||||||
Three
Months Ended December 31, 2006
|
||||||||||||||||||||||||
(in
thousands)
|
||||||||||||||||||||||||
Beazer
|
Consolidated
|
|||||||||||||||||||||||
Beazer
Homes
|
Guarantor
|
Mortgage
|
Non-Guarantor
|
Consolidating
|
Beazer
Homes
|
|||||||||||||||||||
USA,
Inc.
|
Subsidiaries
|
Corp.
|
Subsidiaries
|
Adjustments
|
USA,
Inc.
|
|||||||||||||||||||
Net
cash (used in)/provided by operating activities
|
$ | (103,021 | ) | $ | 109,571 | $ | 72,475 | $ | 957 | $ | - | $ | 79,982 | |||||||||||
Cash
flows from investing activities:
|
||||||||||||||||||||||||
Capital
expenditures
|
- | (10,862 | ) | (124 | ) | - | - | (10,986 | ) | |||||||||||||||
Investments
in unconsolidated joint ventures
|
- | (8,723 | ) | - | - | - | (8,723 | ) | ||||||||||||||||
Changes
in restricted cash
|
- | 174 | - | - | - | 174 | ||||||||||||||||||
Distributions
from unconsolidated joint ventures
|
- | 886 | - | - | - | 886 | ||||||||||||||||||
Net
cash used in investing activities
|
- | (18,525 | ) | (124 | ) | - | - | (18,649 | ) | |||||||||||||||
Cash
flows from financing activities:
|
||||||||||||||||||||||||
Borrowings
under credit facilities and warehouse line
|
- | - | 61,130 | - | - | 61,130 | ||||||||||||||||||
Repayment
of credit facilities and warehouse line
|
- | - | (137,679 | ) | - | - | (137,679 | ) | ||||||||||||||||
Repayment
of other secured notes payable
|
- | (2,455 | ) | - | - | - | (2,455 | ) | ||||||||||||||||
Borrowings
under model home financing obligations
|
1,444 | - | 1,444 | |||||||||||||||||||||
Repayment
of model home financing obligations
|
(1,824 | ) | - | (1,824 | ) | |||||||||||||||||||
Debt
issuance costs paid
|
- | - | (70 | ) | - | - | (70 | ) | ||||||||||||||||
Proceeds
from stock option exercises
|
3,435 | - | - | - | - | 3,435 | ||||||||||||||||||
Common
stock redeemed
|
(85 | ) | - | - | - | - | (85 | ) | ||||||||||||||||
Tax
benefit from stock transactions
|
1,390 | - | - | - | - | 1,390 | ||||||||||||||||||
Dividends
paid
|
(3,904 | ) | - | - | - | - | (3,904 | ) | ||||||||||||||||
Advances
to/from subsidiaries
|
50,788 | (88,591 | ) | 2,032 | (103 | ) | 35,874 | - | ||||||||||||||||
Net
cash provided by (used in) financing activities
|
51,244 | (91,046 | ) | (74,587 | ) | (103 | ) | 35,874 | (78,618 | ) | ||||||||||||||
(Decrease)/increase
in cash and cash equivalents
|
(51,777 | ) | - | (2,236 | ) | 854 | 35,874 | (17,285 | ) | |||||||||||||||
Cash
and cash equivalents at beginning of period
|
254,915 | - | 10,664 | 829 | (98,838 | ) | 167,570 | |||||||||||||||||
Cash
and cash equivalents at end of period
|
$ | 203,138 | $ | - | $ | 8,428 | $ | 1,683 | $ | 62,964 | $ | 150,285 |
West
|
Mid-Atlantic
|
Florida
|
Southeast
|
Other
|
|||||
Arizona
|
Delaware
|
Florida
|
Georgia
|
Colorado
|
|||||
California
|
Maryland
|
Nashville,
TN
|
Indiana
|
||||||
Nevada
|
New
Jersey
|
North
Carolina
|
Kentucky
|
||||||
New
Mexico
|
New
York
|
South
Carolina
|
Memphis,
TN
|
||||||
Pennsylvania
|
Ohio
|
||||||||
Virginia
|
Texas
|
||||||||
West
Virginia
|
Three Months Ended December
31,
|
||||||||
($ in
thousands)
|
2007
|
2006
|
||||||
Revenues:
|
||||||||
Homebuilding (a)
|
$ | 491,787 | $ | 781,517 | ||||
Land and lot
sales
|
7,565 | 12,667 | ||||||
Financial
Services
|
5,436 | 11,743 | ||||||
Intercompany
elimination
|
(1,640 | ) | (3,392 | ) | ||||
Total
|
$ | 503,148 | $ | 802,535 | ||||
Gross (loss)
profit:
|
||||||||
Homebuilding
(b)
|
$ | (107,755 | ) | $ | (18,792 | ) | ||
Land and lot
sales
|
2,279 | 4,064 | ||||||
Financial
Services
|
5,436 | 11,743 | ||||||
Total
|
$ | (100,040 | ) | $ | (2,985 | ) | ||
Depreciation and
amortization
|
$ | 6,058 | $ | 7,558 | ||||
Selling, general and
administrative (SG&A) expenses:
|
||||||||
Homebuilding
|
$ | 87,486 | $ | 108,533 | ||||
Financial
Services
|
5,683 | 8,383 | ||||||
Total
|
$ | 93,169 | $ | 116,916 | ||||
As a percentage of total
revenue:
|
||||||||
Gross
Margin
|
-19.9 | % | -0.4 | % | ||||
SG&A -
homebuilding
|
17.4 | % | 13.5 | % | ||||
SG&A - Financial
Services
|
1.1 | % | 1.0 | % | ||||
Equity in loss of unconsolidated
joint ventures from:
|
||||||||
Joint venture
activities
|
$ | (3,305 | ) | $ | (2,360 | ) | ||
Impairments
|
(12,835 | ) | - | |||||
Equity in loss
of
unconsolidated joint
ventures
|
$ | (16,140 | ) | $ | (2,360 | ) | ||
Effective tax
rate
|
36.7 | % | 37.4 | % |
(a)
|
Homebuilding
revenues for the three months ended December 31, 2006 include $27.7
million of net revenue previously deferred in accordance with SFAS 66
for certain homes with
mortgages originated by Beazer Mortgage for which the sale of the related
mortgage loan to a third-party investor had not been completed as of the
balance sheet date.
|
(b)
|
Homebuilding
gross loss for the three months ended December 31, 2007 includes $141.5
million of inventory impairment charges and $27.0 million of
charges related to the abandonment of lot option
agreements. Homebuilding gross loss for the three months ended
December 31, 2006 includes $115.2 million of inventory impairment charges
and $25.2 million of charges related to the abandonment of lot option
agreements.
|
Homebuilding
Revenues
|
Average Selling
Price
|
|||||||||||||||||||||||
2007
|
2006
|
Change
|
2007
|
2006
|
Change
|
|||||||||||||||||||
West
|
$ | 113,618 | $ | 286,956 | -60.4 | % | $ | 286.0 | $ | 373.7 | -23.5 | % | ||||||||||||
Mid-Atlantic
|
92,013 | 91,266 | 0.8 | % | 377.1 | 451.1 | -16.4 | % | ||||||||||||||||
Florida
|
55,328 | 91,245 | -39.4 | % | 238.5 | 335.9 | -29.0 | % | ||||||||||||||||
Southeast
|
97,118 | 154,935 | -37.3 | % | 225.3 | 222.2 | 1.4 | % | ||||||||||||||||
Other
|
133,710 | 157,115 | -14.9 | % | 189.7 | 192.9 | -1.7 | % | ||||||||||||||||
Total
|
$ | 491,787 | $ | 781,517 | -37.1 | % | $ | 244.7 | $ | 282.5 | -13.4 | % |
Land and Lot Sales
Revenues
|
||||||||||||
2007
|
2006
|
Change
|
||||||||||
West
|
$ | 4,270 | $ | 10,950 | -61.0 | % | ||||||
Mid-Atlantic
|
7 | - | n/a | |||||||||
Southeast
|
377 | 677 | -44.3 | % | ||||||||
Other
|
2,911 | 1,040 | 179.9 | % | ||||||||
Total
|
$ | 7,565 | $ | 12,667 | -40.3 | % |
December 31,
2007
|
December 31,
2006
|
|||||||||||||||
Gross Profit
(Loss)
|
Gross
Margin
|
Gross Profit
(Loss)
|
Gross
Margin
|
|||||||||||||
Homebuilding
|
||||||||||||||||
West
|
$ | (44,950 | ) | -38.8 | % | $ | (1,036 | ) | -0.4 | % | ||||||
Mid-Atlantic
|
(9,439 | ) | -9.7 | % | 3,645 | 4.0 | % | |||||||||
Florida
|
6,461 | 12.4 | % | (20,256 | ) | -22.2 | % | |||||||||
Southeast
|
(29,930 | ) | -30.0 | % | 27,146 | 17.5 | % | |||||||||
Other
|
(2,701 | ) | -1.0 | % | 4,300 | 2.4 | % | |||||||||
Corporate &
Unallocated
|
(27,196 | ) | n/a | (32,591 | ) | n/a | ||||||||||
Total
Homebuilding
|
(107,755 | ) | -20.9 | % | (18,792 | ) | -2.6 | % | ||||||||
Land and Lot
Sales
|
2,279 | 4,064 | ||||||||||||||
Financial
Services
|
5,436 | n/a | 11,743 | n/a | ||||||||||||
Total
|
$ | (100,040 | ) | -19.1 | % | $ | (2,985 | ) | -0.6 | % |
Land and Lot Sales Gross Profit
(Loss)
|
||||||||
2007
|
2006
|
|||||||
West
|
$ | 1,581 | $ | 4,322 | ||||
Mid-Atlantic
|
7 | - | ||||||
Southeast
|
13 | 27 | ||||||
Other
|
678 | (285 | ) | |||||
Total
|
$ | 2,279 | $ | 4,064 |
Quarter Ended December
31,
|
||||||||
2007
|
2006
|
|||||||
Development projects and
homes
|
||||||||
in process (Held for
Development)
|
||||||||
West
|
$ | 65,446 | $ | 50,423 | ||||
Mid-Atlantic
|
23,001 | 11,170 | ||||||
Florida
|
3,093 | 34,632 | ||||||
Southeast
|
7,543 | 2,673 | ||||||
Other
|
1,099 | 8,940 | ||||||
Unallocated
|
7,889 | 7,354 | ||||||
Subtotal
|
$ | 108,071 | $ | 115,192 | ||||
Land held for
sale
|
||||||||
Southeast
|
$ | 14,473 | $ | - | ||||
Other
|
18,967 | - | ||||||
Subtotal
|
$ | 33,440 | $ | - | ||||
Lot Option
Abandonments
|
||||||||
West
|
$ | 45 | $ | 2,756 | ||||
Mid-Atlantic
|
1,796 | 2,287 | ||||||
Florida
|
475 | 10,511 | ||||||
Southeast
|
23,425 | 961 | ||||||
Other
|
1,260 | 8,660 | ||||||
Subtotal
|
$ | 27,001 | $ | 25,175 | ||||
Total
|
$ | 168,512 | $ | 140,367 |
New Orders,
net
|
Closings
|
Backlog at December
31,
|
||||||||||||||||||||||||||||||||||
Three Months Ended
December
31,
|
Three Months Ended
December
31,
|
|||||||||||||||||||||||||||||||||||
2007
|
2006
|
Change
|
2007
|
2006
|
Change
|
2007
|
2006
|
Change
|
||||||||||||||||||||||||||||
West
|
329 | 443 | -25.7 | % | 394 | 729 | -46.0 | % | 426 | 889 | -52.1 | % | ||||||||||||||||||||||||
Mid-Atlantic
|
80 | 238 | -66.4 | % | 244 | 200 | 22.0 | % | 479 | 615 | -22.1 | % | ||||||||||||||||||||||||
Florida
|
151 | 93 | 62.4 | % | 232 | 246 | -5.7 | % | 157 | 355 | -55.8 | % | ||||||||||||||||||||||||
Southeast
|
286 | 465 | -38.5 | % | 431 | 681 | -36.7 | % | 359 | 1,105 | -67.5 | % | ||||||||||||||||||||||||
Other
|
406 | 544 | -25.4 | % | 705 | 808 | -12.7 | % | 810 | 1,257 | -35.6 | % | ||||||||||||||||||||||||
Total
|
1,252 | 1,783 | -29.8 | % | 2,006 | 2,664 | -24.7 | % | 2,231 | 4,221 | -47.1 | % |
Three Months Ended December
31,
|
||||||||||||
2007
|
Change
|
2006
|
||||||||||
Number of
mortgage
originations
|
1,002 | (40.7 | )% | 1,690 | ||||||||
Capture
rate
|
54.4 | % |
(913
bps
|
) | 63.5 | % | ||||||
Revenues
|
$ | 5,436 | (53.7 | )% | $ | 11,743 | ||||||
Operating
(loss) income
|
$ | (333 | ) | (110.3 | )% | $ | 3,230 | |||||
Maturity
Date
|
December 31,
2007
|
September 30,
2007
|
|||||||
Revolving Credit
Facility
|
August
2011
|
$ | - | $ | - | ||||
8 5/8% Senior
Notes*
|
May 2011
|
180,000 | 180,000 | ||||||
8 3/8% Senior
Notes*
|
April 2012
|
340,000 | 340,000 | ||||||
6 1/2% Senior
Notes*
|
November
2013
|
200,000 | 200,000 | ||||||
6 7/8% Senior
Notes*
|
July 2015
|
350,000 | 350,000 | ||||||
8 1/8% Senior
Notes*
|
June 2016
|
275,000 | 275,000 | ||||||
4 5/8% Convertible Senior
Notes*
|
June 2024
|
180,000 | 180,000 | ||||||
Junior subordinated
notes
|
July 2036
|
103,093 | 103,093 | ||||||
Other secured notes
payable
|
Various
Dates
|
44,524 | 118,073 | ||||||
Model home financing
obligations
|
Various
Dates
|
112,287 | 114,116 | ||||||
Unamortized debt
discounts
|
(2,916 | ) | (3,033 | ) | |||||
Total
|
$ | 1,781,988 | $ | 1,857,249 | |||||
* Collectively, the "Senior
Notes"
|
|
·
|
Code of Conduct
Violations
|
|
·
|
Compliance With Laws and
Regulations
|
|
·
|
Segregation of
Duties
|
|
·
|
Management Override and
Collusion
|
|
·
|
Establish objective guidelines
that should be applied in the determination of certain
accruals;
|
|
·
|
Require detailed analyses and
review of certain subjective
estimates;
|
|
·
|
Require significant estimates and
related assumptions to be documented and
approved;
|
|
·
|
Require dual approval for material
journal entries that directly impact earnings through the adjustment of
accruals and reserves;
|
|
·
|
Establish consistent guidelines
for the compilation of financial and operational
reports;
and
|
|
·
|
Provide visibility into accruals
and estimates which were recorded in the consolidated financial statements
in amounts that were different from the sum of such accruals recorded at a
divisional level.
|
|
·
|
Inappropriate reserves and other
accrued liabilities were recorded relating to land development costs,
house construction costs and warranty accruals. These errors
were caused by a failure to require a determination and documentation of
the reasonableness of the assumptions used to develop such estimates of
future expenditures for land development, house construction and warranty
claims.
|
|
·
|
Asset impairments were misstated
because certain assumptions used to calculate impairments, indirect costs
and capitalized interest were improper or
inaccurate.
|
|
·
|
The accounting for certain model
home sale and leaseback agreements was not in compliance with GAAP. GAAP
does not permit a sale of real estate to be recognized if the seller has a
continuing involvement in the real estate sold. The Company’s arrangement
for certain sale and lease-back transactions included various forms of
continuing involvement which prevented the Company from accounting for the
transactions as sales.
|
|
·
|
Certain sale and lease-back
agreements entered into by the former Chief Accounting Officer were not
properly documented and considered in the evaluation of the accounting for
the transaction.
|
|
·
|
Certain home closings in
California were not reflected in the
Company’s accounting records in the proper accounting
periods.
|
|
·
|
We appointed a Compliance Officer
in November 2007. The Compliance Officer is responsible for
implementing and overseeing the Company’s enhanced Compliance
Program. The Compliance Officer has oversight responsibility
for compliance practices across the organization and will implement
programs designed to foster compliance with all laws, rules, and
regulations as well as Company policies and
procedures
|
|
·
|
We have reorganized our field
operations to concentrate certain accounting, accounts payable, billing,
and purchasing functions into Regional Accounting Centers, and we are
implementing new controls and procedures. This
centralization is designed to create a greater degree of control and
consistency in financial reporting practices and enable trend analyses
across business units.
|
|
·
|
We have created the position of
Regional CFOs within the Regional Accounting Center finance function to minimize the
lack of segregation of duties in our prior structure that placed overly
concentrated control with the Corporate Chief Accounting
Officer. The Regional CFOs will play a critical role in
ensuring the integrity of financial information prior to submission to the
Corporate office and enable these employees to assess data and identify
trends across multiple markets. The risks of override and
collusion are also expected to be minimized as these positions have a much
wider span of control and
authority.
|
|
·
|
We have streamlined the
responsibilities of business unit financial Controllers to eliminate
certain previously held responsibilities related to Budgeting &
Forecasting and Land Management; Controllers are now specifically
responsible solely for financial reporting, which we believe will foster a
more thorough and targeted review of financial
statements.
|
|
·
|
We have implemented the following
policies and practices related to estimates involving significant
management judgments:
|
|
-
|
House construction cost accruals
are now cleared at consistent intervals after the house has closed with
the customer.
|
|
-
|
Warranty reserves are now
consistent across business units according to a routine calculation based
on historical trends.
|
|
-
|
Several system applications were
developed during the restatement process to identify transactions
requiring adjustment. These tools were designed so that they
can, and are
being, used prospectively to
monitor several of the specific areas which required
restatement.
|
|
·
|
We have allocated additional
resources within our Audit and Controls department to the review of
financial reporting policies, process, controls, and risks. The
Audit and Controls department has also developed and is in the process of
implementing additional review procedures specifically focused on
period-end reporting
validation.
|
|
·
|
We revised, adopted, disclosed,
and distributed an amended Code of Business Conduct and Ethics in March
2008. In addition, a comprehensive set of “Interpretive
Guidelines” was developed and implemented in conjunction with the amended
Code of Business Conduct and Ethics. These guidelines are
intended to assist employees with understanding the requirements of the
Code of Business Conduct and Ethics by setting out specific examples of
potential business situations. Both the Code and the Guidelines
highlight the existence of multiple lines of communication for employees
to report concerns which include: their immediate supervisor, any member
of management, any local or corporate officer, local or Corporate Human
Resources, the Compliance Officer, the Head of Audit and Controls, the
Legal Department, the Chair of the Nominating and Corporate Governance
Committee of the Board of Directors or through the Ethics
Hotline.
|
|
·
|
We transferred the administration
of our Ethics Hotline from officers of the Company to an independent third
party company in March 2008. Complaints are reported directly
to the independent third party, whether via the toll-free Ethics Hotline
or via an on-line form. In addition to other things, the
transfer of administration of the Ethics Hotline is intended to help
ensure that all employees understand that there is an independent,
confidential, and if the employee chooses, anonymous method of reporting
ethics concerns, including those related to accounting, financial
reporting or other irregularities. An “Awareness Campaign” will
be launched to introduce all employees to the new Ethics Hotline process
and to encourage reporting of all
concerns.
|
|
·
|
We launched a comprehensive
training program in April 2008 that emphasizes adherence to and the vital
importance of the Company’s Code of Business Conduct and
Ethics. Every employee in the Company is required to
participate in the training program which was developed by an outside
company that specializes in ethics and other employee training
programs.
|
·
|
We withdrew from the mortgage
business and voluntarily discontinued accepting mortgage applications in
February 2008. Prior to our withdrawal from the mortgage
business, we terminated certain employees from our mortgage subsidiary who
we concluded violated certain HUD
regulations.
|
|
·
|
We terminated the Company’s former Chief Accounting Officer
and took appropriate
action, including the termination of employment, against other business unit employees who
violated the
Company’s Code of Business Conduct and Ethics Policy. While the former
Chief Accounting Officer was terminated for cause, due to violations of
the Company’s ethics policy stemming from attempts to destroy documents in
violation of the Company’s document retention policy, we believe his
termination has addressed concerns about the internal control deficiencies
that we believe he caused or permitted to
occur.
|
|
·
|
We hired a new, experienced Chief
Accounting Officer in February 2008. The new Chief Accounting
Officer has significant experience in the homebuilding industry, including
one prior circumstance where he was retained to oversee financial
controls.
|
|
·
|
The Chief Accounting Officer and
Regional CFOs are taking, or plan to take in the near term, the following
additional actions:
|
|
-
|
Conducting reviews of accounting
processes to incorporate technology improvements to strengthen the design
and operation of controls;
|
|
-
|
Formalizing the process,
analytics, and documentation around the monthly analysis of actual results
against budgets and forecasts conducted within the accounting and finance
departments;
|
|
-
|
Improving quality control reviews
within the accounting function to ensure account analyses and
reconciliations are completed accurately, timely, and with proper
management review;
|
|
-
|
Formalizing and expanding the
documentation of the Company’s procedures for review and oversight of
financial reporting.
|
·
|
Judgments in decision-making can
be faulty, and control and process breakdowns can occur because of simple
errors or mistakes.
|
·
|
Controls can be circumvented by
individuals, acting alone or in collusion with each other, or by
management override.
|
·
|
The design of any system of
controls is based in part on certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed
in achieving its stated goals under all potential future
conditions.
|
·
|
Over time, controls may become
inadequate because of changes in conditions or deterioration in the degree
of compliance with associated policies or
procedures.
|
·
|
The design of a control system
must reflect the fact that resources are constrained, and the benefits of
controls must be considered relative to their
costs.
|
|
31.1
|
Certification
pursuant to 17 CFR 240.13a-14 promulgated under Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
31.2
|
Certification
pursuant to 17 CFR 240.13a-14 promulgated under Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
32.1
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
|
32.2
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
Beazer Homes USA, Inc. | |||||
Date:
|
May
15, 2008
|
By:
|
/s/
Allan P. Merrill
|
||
Name:
|
Allan
P. Merrill
|
||||
Executive
Vice President and
|
|||||
Chief
Financial Officer
|