Beazer Homes USA Inc., Atlanta, (NYSE:BZH) on Tuesday morning reported a net loss of $472.5 million (-$3.95 per share) for its fiscal fourth quarter ended September 30, including a feared $398.6 million charge to deferred tax assets.
The charge, which was made necessary by the company's determination that trading in its stock triggered a material change in ownership under federal tax law, was in addition to inventory impairments and land related charges of $58.8 million and impairments related to joint ventures of $6 million.
In its earnings release, Beazer stated, "The company has determined that an 'ownership change' under Section 382 did occur as of December 31, 2007. As a result, the Company's ability to utilize certain of its loss carry-forwards and recognize certain built-in losses or deductions will be limited in the future." It added, however, that it expects a tax refund of approximately $150 million in fiscal 2009.
The charges put the company out of compliance with the tangible net worth requirements on its credit facility of $350 million, which effectively leaves the company with no borrowing capacity under its revolver. The facility, meantime, will be reduced to $250 million from $400 million and the collateral value of assets securing the facility must now equal 4.5 times outstanding loans and letters of credit, up from 3 times. Beazer said it would set aside $20 million in cash to collateralize the existing letters of credit and later add $250 million in assets to the collateral pool during fiscal 2009 to allow for a line of credit of $35 million in addition to the return of the restricted cash.
For the quarter, home building revenues declined 44.6% to $712.6 million as home closings dropped 38.2% decline in home closings to 2,441 and a 9.9% decline in average selling price from the same period in the prior fiscal year. Net new home orders totaled 1,083 for the quarter, an increase of 10.3% from the same period in fiscal 2007, driven by a lower cancellation rate of 45.7% during the fourth quarter, compared to 68.1% in the same period of the prior year. The increase in net orders year-over-year was also achieved through a 17.2% increase in net orders in markets where Beazer continues operations, partially offset by a 31.7% decline in net orders in markets the company has exited.
Revenues from land and lot sales totaled $121.3 million in the quarter as Beazer unloaded assets in Virginia totaling $99.1 million, including the previously announced sale of two condominium projects, as well as additional asset sales primarily related to market exits.
Beazer controlled 39,627 lots at September 30, 2008 (73% owned and 27% controlled under options), down14% and 36% from levels as of June 30, 2008 and September 30, 2007, respectively. Unsold finished homes totaled 408, down 53% from the level a year ago. Beazer also reduced land and land development spending to $333 million in fiscal 2008, compared to $824 million for the prior year.
The company ended the quarter and fiscal year with a cash balance of $584.3 million, compared to $314.2 million at June 30, 2008 and $454.3 million at September 30, 2007. Cash from operating activities for the three months and year ended September 30, 2008 was $291.1 and $315.6 million, respectively.
The net loss for the 2008 fiscal year totaled $951.2 million, or -$24.68 per share, including impairments and write-downs internally and for joint ventures of $631.9 million and $400.3 million in charges to deferred tax assets.
"Conditions in both the overall economy and housing market came under greater pressure during our fourth quarter and have continued to deteriorate since that time," said Ian J. McCarthy, president and CEO. "Home buyer demand for new homes continues to be adversely affected by low levels of consumer confidence, falling home prices, extensive new and existing home supply and reduced access to mortgage financing. In recent months this difficult environment has been greatly exacerbated by turmoil in financial markets, heightened concerns about the global economy and a substantial rise in the number of home foreclosures."
During the quarter, Beazer realigned its divisions into: West (Arizona, California, Nevada, New Mexico and Texas), East (Delaware, Indiana, Maryland, New Jersey, New York, North Carolina, Pennsylvania, Tennessee and Virginia), Southeast (Florida, Georgia and South Carolina) and Other Homebuilding, the latter including markets the Company has exited or is exiting including Cincinnati, Columbus, Lexington, Columbia, Charlotte, Colorado Springs, Denver and Fresno.
Shares of Beazer sank 2.6% to $1.46 in early trading Tuesday on the New York Stock Exchange.