Just in time to meet a May 15 deadline, Beazer Homes USA caught up with filing all the SEC-required financial documents it delayed while the company investigated accounting errors and irregularities.
"Completing the restatement of our prior years' financial results and filing all outstanding periodic financial reports is an important step for Beazer Homes," Beazer CEO Ian McCarthy said during a Friday morning conference call. "We look forward to resuming regular quarterly communication of our financial and operating results."
Sparked by newspaper articles published more than a year ago that spotlighted the high rate of foreclosures in some of Beazer's Charlotte, N.C. neighborhoods, federal investigators and the Securities and Exchange Commission have been investigating Beazer Homes and its employees and entities.
Beazer launched its own independent investigation at the same time determining that its mortgage origination practices did violate federal and state requirements. It also disclosed accounting errors and irregularities that required the company to restate its financials for several years.
"We are very disappointed that these issues occurred," McCarthy said Friday.
The company is in the process of negotiating settlements with the investigating agencies. In the meantime, it has taken a number of steps to keep problems from arising again, including: remediating and addressing weaknesses in internal control and financial reporting; creating an advanced code of business ethics; providing an independent third-party administer for its wrong-doing hotline; and hiring a new experienced chief of finance.
With those issues mostly behind the company, it can now concentrate on handling the repercussions of the deflated home building market. And, like most of the other production home builders, Beazer's challenge is substantial.
The company logged losses of $138.2 million, or $3.59 a share, in its first quarter, which ended Dec. 31 of '07, and $228.7 million, or $5.93 a share, in its second quarter, ending March 31 of '08.
Pre-tax charges related to inventory impairments and abandonment of option contracts contributed significantly to those losses. There was $168.5 million worth of land and inventory-related impairments in the quarter ended Dec. 31 and $187.9 million in the quarter ended March 31.
The builder closed 2,006 homes in its first quarter, compared with 2,664 in the same quarter at the end of '06. In the first three months of '08, Beazer closed 1,568 homes compared to 2,748 in the same quarter of '07.
At the March 31 end of the first half of the company's fiscal year, it had 2,619 homes in backlog compared to 5,563 last year. Last year's closings took a severe hit, with cancellations skyrocketing in the wake of the investigations last summer.
Beazer ended the first half of its fiscal year with $277.3 million in cash, including $3.6 million of non-restricted cash, and no borrowing on its revolving credit line. Its net-debt-to-capitalization was 61.2%.
Since March 31, Beazer has managed to add to its cash cache. It received a $55.8 million tax refund related to operating losses carried back against profits in '05. It also is expecting $100 million in the next 120 days from selling land in markets it is exiting as well as from the sale of a Mid-Atlantic condominium it was developing but sold to an apartment developer. The down side was Beazer gave back deposits on the 100 units it had sold.
"I think, when we get into significant high rise construction, that...has never been a big part of our business," said Allan Merrill, the company's chief financial officer. "This was particularly large, upper-middle-end that would sell out over several years. ...Ultimately, the ability to recoup a significant amount of cash made sense to us."