It was Beazer Homes USA's positives that CEO Ian McCarthy chose to mention first during Thursday's conference call with analysts, downplaying the company's bottom-line return to red ink for its third fiscal quarter, following three in the black.
Beazer lost $27.6 million, or $0.41 per share, for the quarter.
McCarthy preferred to talk about the company's revenue boost by 50% to $339.1 million in the quarter compared with the year before, a 73.3% increase in closings over last year's 1,643 homes, and year-over-year gross margin improvements.
Then there was the company's significant continued progress it has made in lowering and extending debt and raising capital.
It was part of those financial perambulations that ate into the company's profit for the quarter. The company logged an on-paper loss of $9 million for extinguishing debt. Other non-cash adjustments also impacted the bottom line, including $5.4 million of inventory impairments and $12.5 million of impairments in the company's investments in two joint ventures.
The expiration of the federal home buyer tax credit had a fairly strong impact on Beazer, causing closings to rise for the quarter and new sales to fall by 32.5% to 1,037 units.
Despite the sales slowdown, McCarthy said the company has been discounting only a few spec homes that were left over after the tax credit.
"We hold back, preserve margins," he said. "We don't want to undercut our communities now."
While the market continues to be challenged, McCarthy said he is confident it will get better next year and told the company's board recently that sales are expected to be up 25% next year and 35% in 2012.
"We do expect this to happen," he said. "We are concerned about unemployment, and until unemployment is really addressed, it's going to be really difficult."
Still, said McCarthy, Beazer and other publicly traded builders are gaining market share simply by surviving as private competitors' sources of funding are choked off.
Beazer is preparing for the housing market's return by shoring up its land holdings. The company has brought on 47 new communities, 25 in its third quarter. While it doesn't give specific community counts, executives did say that by next year the number of communities it has open are likely to stop shrinking and grow. Currently, the company's lot count is a third of what it was in 2005.
Beazer appears to be a bit behind other public builders at bringing new, more profitable communities on line. Less than 1% of its recent closings came from new communities. While the company has had less than a dozen new-community closings, executives estimated the margins are 2 to 3 percentage points higher.
However, the company is planning to open a new larger community that it already owns in California because it is out of inventory in the improving market there, but it will require some cash to finish improving the land for development.
With finished lot deals in some locations becoming scarcer and prices climbing, executives said Beazer may begin developing more of its existing land holdings itself.
"Doing land development in A locations will result in a better lot and value situation," said CFO Allan Merrill.