Beazer Homes USA joined the lineup of builders who were able to report a profitable quarter because of the government's extension of the net operating loss carryback to five years from two.
The Atlanta-based builder posted net earnings of nearly $44.5 million, $1.09 per diluted share, compared with a loss of $79.2 million, or $2.05 per diluted share, in the same quarter of its last fiscal year. Its tax refund contributed $94 million.
But executives spent little time talking about their tax refund-fueled break into the black and more time talking about improvements in sales, closing, and operations.
Beazer closed 961 homes in the company's first quarter of fiscal year 2010, ended Dec. 31, up 8% for the year. Yet revenue was essentially flat at $218 million because the average sales price was down 8.8%, offsetting the higher number of sales.
Orders showed an even greater improvement for the quarter, 728 homes, up year over year by 36.6%. Cancellations were down from 46.1%, but still higher than peers at 26.9%.
Gross profit margin was 8.8%, though it would have been 12.9% without impairments and abandonment charges. That's improved from 5.6% , or 11.3% without impairments, in the same quarter in fiscal year 2009.
"Recent signs of stability are encouraging," CEO Ian McCarthy told analysts during Friday's earnings call. "While our visibility remains quite low, we continue to be cautiously optimistic."
McCarthy stopped short of promising a profitable 2010. "Getting back to profitability is certainly our main objective."
The home buyer tax credit that expires April 30 (with closings by June 30) makes it difficult to predict results, he said. It's possible that it could pull forward demand toward the beginning of the year, leaving the second half to languish, though that is not a foregone conclusion, he added.
"Having said that, we are planning for a softer second half of the year but hoping for something better," McCarthy said.
Whatever the market does, the company's restructuring of its debt, paying off some at a discount and pushing back major due dates, plus a pro forma cash balance of more than $600 million, the largest the company has ever had, should put it in position to survive the downturn and be prepared to profit when business improves, executives said.
The company is looking for land but remains less aggressive than other builders, saying it has enough finished lots to fuel its current growth and enough mothballed land to fuel future growth. That said, McCarthy said the company has picked up some distressed parcels at prices lower than it would cost to develop them.
Previously, with legal problems and government investigations hanging over it, Beazer was hampered in land buying. Now, with the lion's share of its legal issues resolved and the company's balance sheet restructured, the company has the ability to take advantage of bargains that might hit the market.
"We are not holding back," said McCarthy. "We have the resources now. Now we feel slightly more confident moving forward."
