Beazer Homes USA , Inc., Atlanta (NYSE:BZH) reported a new loss from continuing operations of $54.9 million, - $0.74 per share, for its fiscal second quarter ended March 31. The loss, which included $17.9 million in impairments and charges, compared with a profit of $6.2 million from continuing operations in the comparable quarter of 2010.
Analysts were expecting a loss of 47 cents per share, not including impairments. Shares of Beazer fell at the market open Tuesday and were trading down more than 3% shortly thereafter.
Revenue fell 33.8% as home closings dropped 31.1% to 573 and the average selling price declined to $215,700 for the quarter from $230,800 in last year's quarter. The ASP was up, however, from the prior quarter's $208,700.The year-over-year decline was driven in part by a change in mix toward lower-priced product.
New orders fell 26.7% to 1,194 homes, a 26.7% decrease from the prior year but a 121.1% increase from the fiscal first quarter. The cancellation rate increased to 19.9% from 17.8% at the same time last year.
Beazer had a backlog at quarter's end of 1,416 homes with a sales value of$339.6 million, down from 1,781 homes with a sales value of $394.5 million on March 31, 2010.
The gross margin percentage, excluding impairments, was 12.3% in the quarter, down from 17.4% during the second quarter of fiscal 2010 but up from 10.7% in the first quarter, due primarily to the impact of reduced revenues on fixed indirect construction costs and interest expense as well as by a non-recurring warranty recovery of $4.4 million in the prior year.Excluding interest included in cost of sales, the margin was 19.0% in the second quarter, down from 22.6% in the prior year and 17.0% in the prior quarter. Including charges, the margin percentage was minus 2.1%.
SG&A remained relative flat with last year's quarter despite the drop in volume at $42.6 million, down from $43.8 million in the prior-year quarter.SG&A however, should fall in the fiscal third quarter as the impact of a staff reduction of 130 positions taken after the close of the second quarter is recorded.
Beazer's lot count was 30,918 lots at the end of the quarter, 80% owned and 20% controlled under options, an increase of 6.6% from September 30, 2010.During the quarter the company spent $61.1 million on land and land development, compared to $43.3 million in the prior year and $62.6 million in the prior quarter.
The company ended the quarter with $453.2 million in cash, including restricted cash of $71.0 million. Long-term debt was listed at #1.287 billion, up from $1.211 billion as of Sept. 30, 2010.
"As expected, year-over-year comparisons were unfavorably impacted this quarter by the First Time Homebuyers' Tax Credit which pulled forward sales volumes into the second quarter of 2010," said Ian McCarthy, president and CEO. "However, we did see seasonal improvement with orders and gross margins up over the first quarter of fiscal 2011. We are hopeful that the latest improvements in employment will help lift consumer confidence in the coming quarters, which is necessary for any significant recovery in housing to occur."
In a note to investors, Michael Rehaut, home building analyst at J.P.Morgan, wrote, "We view these results as modestly disappointing, as while BZH did demonstrate better than expected gross margins, at the same time, its order decline was at the low end of the range of 1Q results demonstrated so far among our homebuilding universe, and also had greater than expected charges and a higher 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 75% vs. its peer¹s (ex-NVR) 39% average, as well as our outlook for further equity dilution risk, as we believe the company will likely continue to repair its capital structure."