Beazer Homes USA, Inc. this morning (April 26) reported a net loss of $43.1 million ($1.12 per share) for its fiscal second quarter ended March 31 on total revenues of $826.3 million, down 35% from $1.27 billion in the same quarter last year. The results included $86.9 million in charges related to impairments of inventory, joint ventures and abandonment of land-option contracts.
The company said it was abandoning its previous guidance for fiscal 2007 and would not provide further guidance at this time.
The $43.1 million loss compares to net income of $104.4 million ($2.35 per diluted share) in the fiscal second quarter of 2006. It generated $180 million in free cash flow during the quarter.
The company also said it had launched an internal inquiry into its mortgage business, which is the subject of an investigation by the U.S. Attorney for the Western District of North Carolina. The inquiry is under the auspices of the company's audit committee and involves independent legal and financial counsel.
It also said it is the subject of several class-action lawsuits filed on behalf of shareholders and home buyers. During a conference call with analysts, Beazer president and CEO Ian McCarthy said the company was cooperating with the U.S. Attorney and will "vigorously defend each of the lawsuits."
McCarthy also said that the results of the internal investigation would not be known for some time and that the company would have no further comment on the U.S. Attorney investigation or the lawsuits.
Home closings were down 36% to 2,743 homes from 4,273 in the same quarter last year. New orders fell 3.3% to 4,085 homes from 4,224 in last year's fiscal second quarter. The cancellation rate fell to 29% from 43% in the fiscal first quarter and 33% in the same quarter last year.
Lots under control totaled 79,528 at 3/31/07, a 24% decline from the prior year. Unsold finished homes and total unsold homes declined 47% and 25%, respectively from the first quarter of fiscal 2007. Net debt to capitalization was 49.1% as of 3/31/07. Backlog as of 3/31/07 was 5,563 homes with a sales value of $1.67 billion compared to 9,227 homes with a sales value of $2.79 billion in the prior year.
"We continued to experience extremely challenging operating conditions during our second quarter of fiscal 2007," said McCarthy. "Most housing markets across the country continue to experience lower levels of demand coupled with higher levels of inventory, resulting in increased competition and continued significant discounting. While we were pleased with the level of new orders we achieved this quarter, at this point in the traditional spring selling season we still have yet to see any meaningful evidence of a sustainable recovery in the housing market, and we expect current conditions will continue to put pressure on homebuilders' operating results."
During the second quarter, the Company incurred pre-tax charges to abandon land option contracts, to recognize inventory impairments, and to record impairments in investments in joint ventures of $19.1 million, $60.8 million, and $7.1 million, respectively. The results for the second quarter also included a $6.0 million reduction of the warranty accrual for the remediation of homes in connection with the Trinity Homes class action settlement in October 2004, based on a reduction in the estimated remaining remediation costs.
Regionally, closings in the West totaled 674 vs. 1,246 in last year's fiscal second quarter; Mid-Atlantic, 209 vs. 502; Florida, 349 vs. 536; Southeast, 729 vs. 919; and other, 782 vs. 1,070. New orders, net of cancellations, in the West totaled 1,054 vs. 862; Mid-Atlantic, 559 vs. 517; Florida 441 vs. 418; Southeast, 1,016 vs. 1,148; and other, 1,015 vs. 1,279. Backlog units in the West totaled 1,269 vs. 2,675; Mid-Atlantic, 965 vs. 1,038; Florida, 447 vs. 1,319; Southeast 1,392 vs. 1,989; and other, 1,490 vs. 2,206.
Although the company said it would not provide further guidance at this time, McCarthy said during the conference call that "April has not started out as a strong month" and that "we are not seeing consistency. We are seeing erratic results from week to week."