A Look at Beazer from Quarter-to-Quarter

Beazer Homes (BZH) is busy fixing many things: Restating financials from over a multi-year period, dealing with multiple justice department investigations, crafting a new mortgage origination agreement with Countrywide/Bank of America (BAC), paying down a massive $1.7B debt and trying to generate some cash. They’re ending the fiscal year with $584 million in cash.

All this in the face of huge operating losses from the housing slump. From Beazer Homes’ FQ408 conference call and Beazer Homes’ FQ308 conference call:

Inventory impairments in FQ308:

Inventory-related and goodwill impairment charges of $95.5 million and $4.4 million respectively contributed to a net loss per share from continuing operations of $2.85 compared to a loss of $3.09 in the prior year.

Vs. inventory impairments in FQ408:

Inventory related impairment charges of $59 million and a deferred tax asset valuation allowance of $400 million contributed to a net loss from continuing operations of $12.32 per share compared to a loss of $3.95 per share in the prior year.

This has led to a significant shift over the year in the weighting of our land holdings toward owned land. Excluding property held for sale, over 40% of our remaining owned lots were either finished lots or lots upon which home construction had commenced. Less than 2% were in the form of raw land.

For fiscal 2008 we spent $333 million on land and land development compared to $824 million in fiscal 2007.

Cancellations in FQ308:

We’re seeing some stability, is in our cancellation rate… Net new home owners totaled 1,774, a decline of 42% from the prior fiscal year… At 37% the cancellation rate for the quarter was comparable to the 36% rate experienced for the same period in the prior fiscal year.

Vs. cancellations in FQ4. Note orders are up 10%:

Net new home orders totaled 1,083 for the quarter, up from 982 in the prior year. This year-over-year increase was helped by a lower cancellation rate of 45.7% during the fourth quarter compared to 68.1% in the prior year. That 31.7% decline in net orders in our exit markets was more than offset by a 17.2% increase in net orders in markets where we are maintaining a presence giving an overall increase of 10.3% in new orders compared to the same period in the prior fiscal year.

Are the hardest hit housing markets leading the way out of the downturn?

FQ308:

We’ve seen a little bit of… somewhat surprisingly but positive improvements, in Florida

In FQ408 Beazer attributed its 10.3% increase in orders to an improvement in the worst housing markets:

In this period we actually performed slightly better in the west coast, in California, Las Vegas and Phoenix. Those markets are seeing affordability come to certain levels now and I think people are taking some of those opportunities.

Comments

[Did U Think...:]

So the pace of decline goes from heart stopping to merely horrifying and these guys are turning cautiously optimistic?

BZH will BK before this bust is over.

2008 Dec 04 04:47 AM

[Pipo:]

Read Toll Brothers CEO comments on homebuilders prospects.

TOL is only down 2% in the last year. Quite impressive for a homebuilder.

ceotalk.blogspot.com/

2008 Dec 05 07:22 AM