Beazer Homes USA, Inc., Atlanta (NYSE:BZH) on Tuesday reported a net loss of$59.1 million ($-0.80 per share) for its fiscal third quarter ended June 30.The results, which included a loss of $3.4 million from discontinued operations, compared to a net loss of $27.8 million in the prior year quarter that included a loss from discontinued operations of $4.4 million.
The loss included $16.0 million in pre-tax charges, including $6.9 million in impairments. Analysts were expecting a loss of 46 cents a share not including the charges.
Revenue from continuing operations dropped 46.3% as closings fell 49% to 791 homes. The average selling price rose to $213,000 from $206,300 in last year's quarter due mainly to a change in product mix of home closed. The company decided to exit the Northwest Florida market during the quarter and included results from that unit in discontinued operations.
New-home orders increased 23.7% from the prior-year quarter to 1,215, driven by a 15.5% increase in gross new orders and a decrease in the cancellation rate to 24.3% from 29.3% a year earlier.
Backlog rose 57.3% to 1,848 homes with a sales value of $438 million, up from $288 million as of June 30, 2010.
Beazer controlled 29,800 lots at quarter's end, 84% owned and 16% optioned, a decrease of 2.7% from June 30, 2010.
Gross margins minus charges and interest were 17.8%, down from 18% in the prior year quarter. Including pre-tax charges and interest costs, gross margin from continuing operations was 7.1%, compared to 11.3% in the prior year quarter.
SG&A fell in dollar terms to $46.4 million from $52.8 million in last year's quarter but rose 610 basis points in terms of percentage of sales to 22.2%.
Beazer's earnings release made no mention of its new home-rental business; a line included in the selected operating data section of the earnings release showed revenue of $144,000 from pre-owned homes.
The company ended the quarter with $559 million in cash, including restricted cash of $284 million. Beazer spent $54.2 million on land and development in the quarter. Debt was reported at $1.49 billion. Net debt-to-capital was 79.4% at quarter's end.
"Over the past several years, our team has demonstrated creativity and resiliency in repairing our balance sheet and improving our operations,"said Allan Merrill, Beazer president and CEO. "With no significant debt maturities before mid-2015 and a flexible capital structure, we are now applying that same intensity to driving revenue growth as we work to return to sustainable profitability as soon as possible."
Shares of Beazer were down 4.5% at $1.85 in morning trading. Michael Rehaut at J.P. Morgan, who has an underweight rating on Beazer, wrote to investors, "we view these results as modestly disappointing, as we point to orders and charges slightly worse than our estimates as well as continued solidly negative EPS. Hence, we maintain our relative Underweight rating on BZH amid our positive sector stance as we point to BZH¹s still solidly negative EPS, our concerns regarding the company¹s above-average leverage position, featuring an above average net-debt-to-capital ratio of 79% vs. our universe average (ex-NVR) of 47%, as well as our outlook for further equity dilution risk, as we believe the company will likely continue to repair its capital structure."
David Goldberg at UBS called the results a "mixed bag." In a research note, he noted a $108 million decline in the company's unrestricted cash and wrote, "Although this decline was likely in excess of investor expectations, our concerns are partially assuaged by the following: 1) the inventory build should reverse over time, following normal seasonal trends; 2) the co has preserved substantial financing capacity to issue either secured or unsecured debt."