<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20594
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1997
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-12822
--------------
BEAZER HOMES USA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 58-2086934
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
5775 Peachtree Dunwoody Road, Suite C-550, Atlanta, Georgia 30342
(Address of principal executive offices) (Zip Code)
(404) 250-3420
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding twelve months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to the filing requirements for the past 90 days.
YES X NO
------- --------
Class Outstanding at August 13, 1997
----- ------------------------------
Common Stock, $0.01 par value 6,048,180 shares
Series A Cumulative Convertible
Exchangeable Preferred Stock,
$0.01 par value 2,000,000 shares
Page 1 of 17 Pages
Exhibit Index Appears on Page 16
<PAGE>
BEAZER HOMES USA, INC.
FORM 10-Q
INDEX Page No.
--------
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheets,
June 30, 1997 (unaudited) and September 30, 1996.................3
Unaudited Condensed Consolidated Statements of Operations,
Three and Nine Months Ended June 30, 1997 and 1996...............4
Unaudited Condensed Consolidated Statements of Cash Flows,
Nine Months Ended June 30, 1997 and 1996.........................5
Notes to Condensed Consolidated Financial Statements..............6
Item 2 Management's Discussion and Analysis
of Financial Condition and Results of
Operations.................................................10
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K............................16
SIGNATURES...................................................................17
2
<PAGE>
PART I. FINANCIAL INFORMATION
BEAZER HOMES USA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents............................................................. $ -- $ 12,942
Accounts receivable................................................................... 3,687 6,473
Inventory............................................................................. 388,128 320,969
Property, plant and equipment, net.................................................... 3,840 2,823
Goodwill, net......................................................................... 5,798 6,204
Other assets.......................................................................... 14,975 7,232
----------- -------------
Total assets........................................................................ $ 416,428 $ 356,643
----------- -------------
----------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Trade accounts payable................................................................ $ 34,465 $ 31,431
Other payables and accrued liabilities................................................ 19,294 31,511
Revolving credit facility............................................................. 75,000 --
Senior notes.......................................................................... 115,000 115,000
----------- -------------
Total liabilities................................................................... 243,759 177,942
Stockholders' equity:
Preferred stock (par value $.01 per share, 5,000,000 shares
authorized, 2,000,000 issued and outstanding; $50,000
aggregate liquidation preference)................................................... 20 20
Common stock (par value $.01 per share, 30,000,000 shares
authorized, 9,339,957 and 9,305,200 issued,
6,048,180 and 6,530,933 outstanding)................................................ 93 93
Paid in capital....................................................................... 187,477 187,477
Retained earnings..................................................................... 38,265 37,613
Unearned restricted stock............................................................. (1,203) (1,446)
Less treasury stock, at cost (3,291,777 and 2,774,267 shares)......................... (51,983) (45,056)
----------- -------------
Total stockholders' equity............................................................ 172,669 178,701
----------- -------------
Total liabilities and stockholders' equity.......................................... $ 416,428 $ 356,643
----------- -------------
----------- -------------
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
<PAGE>
BEAZER HOMES USA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended June 30, Ended June 30,
---------------------- ----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Total revenue.................................................... $ 195,608 $ 217,065 $ 534,453 $ 571,800
Costs and expenses:
Home construction and land sales................................ 165,843 183,776 453,626 483,610
Interest........................................................ 3,609 3,860 9,523 10,637
Selling, general and administrative............................. 20,718 21,450 59,474 58,658
Write-down of inventory......................................... -- -- 6,326 --
---------- ---------- ---------- ----------
Operating income ................................................ 5,438 7,979 5,504 18,895
Other income..................................................... 190 50 481 71
---------- ---------- ---------- ----------
Income before income taxes....................................... 5,628 8,029 5,985 18,966
Provision for income taxes....................................... 2,194 3,212 2,334 7,587
---------- ---------- ---------- ----------
Net income ...................................................... $ 3,434 $ 4,817 $ 3,651 $ 11,379
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Preferred dividends.............................................. $ 1,000 1,000 3,000 3,000
Net income applicable to common stockholders..................... $ 2,434 $ 3,817 $ 651 $ 8,379
Weighted average number of shares (in thousands):
Primary................................................. 6,069 6,481 6,334 6,487
Fully-diluted........................................... 8,693 9,105 N/A 9,111
Net income per common share:
Primary................................................. $ 0.40 $ 0.59 $ 0.10 $ 1.29
Fully-diluted........................................... $ 0.40 $ 0.53 N/A $ 1.25
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE>
<TABLE>
<CAPTION>
BEAZER HOMES USA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
Nine Months Ended June 30,
----------------------------
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................................................ $ 3,651 $ 11,379
Adjustments to reconcile net income to
net cash used by operating activities:
Depreciation and amortization........................................................... 1,545 1,080
Changes in operating assets and liabilities,
net of effects of acquisitions:
Write-down of inventory................................................................. 6,326
Increase in inventory................................................................... (73,485) (22,249)
Increase (Decrease) in trade accounts payable........................................... 3,034 (12,364)
Other changes........................................................................... (17,508) (25,375)
--------- ---------
Net cash used by operating activities....................................................... (76,437) (47,529)
--------- ---------
Cash flows from investing activities:
Acquisitions, net of cash acquired........................................................ (19,581)
Capital expenditures...................................................................... (1,578) (1,345)
--------- ---------
Net cash used by investing activities....................................................... (1,578) (20,926)
--------- ---------
Cash flows from financing activities:
Proceeds from revolving credit facility, net.............................................. 75,000 32,000
Treasury stock purchased.................................................................. (6,927) 0
Dividend paid on preferred stock.......................................................... (3,000) (3,000)
--------- ---------
Net cash provided by financing activities................................................... 65,073 29,000
--------- ---------
Decrease in cash and cash equivalents....................................................... (12,942) (39,455)
Cash and cash equivalents at beginning of period............................................ 12,942 40,407
--------- ---------
Cash and cash equivalents at end of period.................................................. $ 0 $ 952
--------- ---------
--------- ---------
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
<PAGE>
BEAZER HOMES USA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Beazer Homes USA, Inc. ("Beazer" or the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and in accordance with the instructions to Form 10-Q and Article 10
of Regulation S-X, and consequently such financial statements do not include all
of the information and disclosures required by generally accepted accounting
principles for complete financial statements. Accordingly, for further
information, the reader of this Form 10-Q should refer to the audited
consolidated financial statements of the Company for the year ended September
30, 1996 incorporated by reference in the Company's Annual Report on Form 10-K.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included in the accompanying condensed financial statements.
(2) INVENTORY
A summary of inventory is as follows (dollars in thousands):
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
----------- -------------
(unaudited)
<S> <C> <C>
Finished homes....................................... $ 65,221 $ 64,709
Development projects in progress..................... 276,126 197,984
Unimproved land held for future
development......................................... 27,621 34,040
Model homes.......................................... 28,160 24,236
----------- -------------
$ 388,128 $ 320,969
----------- -------------
----------- -------------
</TABLE>
Development projects in progress consist principally of land, land
improvement costs and, if applicable, construction costs for houses which are in
various stages of development but not ready for sale. Certain of the finished
homes in inventory are reserved by a deposit or sales contract.
6
<PAGE>
BEAZER HOMES USA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(3) WRITE-DOWN OF INVENTORY
In March 1997, the Company recorded a pretax charge of $6.3 million ($3.9
million after tax) to write down two properties located in Nevada to their fair
market value (estimated based on the sales prices of comparable projects). The
two Nevada properties, Craig Ranch in North Las Vegas and Promontory in Reno,
had incurred significant development costs that were not anticipated at the
beginning of the projects. As a result, the estimated future undiscounted cash
flows of the projects were less than their respective current book values.
(4) INTEREST
The following table sets forth certain unaudited information regarding
interest (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
During the period:
Interest incurred............................... $ 4,414 $ 3,980 $ 11,352 $ 10,729
--------- --------- --------- ---------
--------- --------- --------- ---------
Previously capitalized interest
amortized to costs and expenses................ $ 3,609 $ 3,860 $ 9,523 $ 10,637
--------- --------- --------- ---------
--------- --------- --------- ---------
At the end of the period:
Capitalized interest in ending
inventory...................................... $ 7,382 $ 6,603 $ 7,382 $ 6,603
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
(5) EARNINGS PER SHARE
The computation of primary earnings per common share is based upon the
weighted average number of common shares outstanding during the period plus (in
periods in which they have a dilutive effect) the effect of common stock
equivalents, primarily from stock options. Common share equivalents are computed
using the treasury stock method.
Fully diluted earnings per share, which further assumes the conversion of
2.0 million shares of Series A Cumulative Convertible Exchangeable Preferred
Stock ($50.0 million aggregate liquidation preference) issued in August 1995
into 2.6 million shares of common stock at the conversion price of $19.05, is
not presented in the accompanying condensed consolidated statements of
operations for the nine month period ended June 30, 1997 since the effect of
such conversion is antidilutive for such period.
7
<PAGE>
BEAZER HOMES USA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(6) CREDIT AGREEMENT
In October 1996, the Company entered into a $150 million unsecured,
revolving credit agreement (the "Credit Agreement") with a group of banks.
Borrowings under the Credit Agreement generally bear interest at a fluctuating
rate equal to (i ) the sum of a specified margin plus the higher of (a) the
corporate base rate of interest announced by the lead bank (the "Agent") from
time to time or (b) a specified spread above the Federal Funds Rate or (ii) the
sum of a specified margin plus a rate of interest based on LIBOR determined by
the Agent pursuant to a specified formula. All outstanding indebtedness under
the Credit Agreement will be due in October 1999. The Credit Agreement contains
various operating and financial covenants. Each of the Company's significant
subsidiaries is a guarantor under the Credit Agreement.
In July 1997, the Company amended the credit agreement to increase the
available borrowings to $200 million, increase the number of participating banks
from seven to eight, reduce the borrowing rates and increase the Company's
flexibility under certain operating and financial covenants.
(7) RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement No. 123, "Accounting for Stock-Based Compensation," ("SFAS 123"). SFAS
123 encourages, but does not require companies to record compensation cost for
stock-based employee compensation plans at fair value. The Company has chosen to
continue to account for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related Interpretations. Accordingly,
compensation cost for stock options is generally measured as the excess, if any,
of the quoted market price of the Company's stock at the date of the grant over
the amount an employee must pay to acquire the stock. The Company will disclose
the pro-forma impact of adoption of SFAS 123 in its financial statements for the
fiscal year ending September 30, 1997.
In February 1997, the FASB issued Statement No. 128, "Earnings per Share,"
("SFAS 128"). SFAS 128 is effective for financial statements for both interim
and annual periods ending after December 15, 1997 and requires restatement of
all prior period earnings per share ("EPS") data. Earlier adoption of this
standard is not permitted. The implementation of SFAS 128 will not have a
material effect on the Company's reported EPS.
8
<PAGE>
BEAZER HOMES USA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income," ("SFAS 130"), and Statement No. 131, "Disclosures about Segments of an
Enterprise and Related Information," ("SFAS 131"). Both SFAS 130 and SFAS 131
become effective for fiscal periods beginning after December 15, 1997 with early
adoption permitted. The Company is evaluating the effects these statements will
have on its financial reporting and disclosures. The statements will have no
effect on the Company's results of operations, financial position, capital
resources or liquidity.
9
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table presents certain operating and financial data for the
Company (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
----------------------------------- -----------------------------------
1997 1996 1997 1996
----------------------- ---------- ----------------------- ----------
% %
Amount Change Amount Amount Change Amount
---------- ----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
NUMBER OF NEW ORDERS,
NET OF CANCELLATIONS: (a)
Southeast Region.................................... 555 0.9% 550 1,497 (6.6)% 1,603
Southwest Region.................................... 789 (5.7) 837 2,067 (18.2) 2,526
Central Region...................................... 250 110.1 119 598 124.0 267
---------- ---------- ---------- ----------
Total............................................... 1,594 5.8 1,506 4,162 (5.3) 4,396
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
NUMBER OF CLOSINGS:
Southeast Region.................................... 493 (11.0)% 554 1,328 (11.6)% 1,503
Southwest Region.................................... 651 (25.0) 868 1,878 (18.3) 2,299
Central Region...................................... 171 131.1 74 449 152.2 178
---------- ---------- ---------- ----------
Total............................................... 1,315 (12.1) 1,496 3,655 (8.2) 3,980
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
TOTAL REVENUE:
Southeast Region.................................... $ 79,809 (4.0)% $ 83,162 $ 216,342 (2.0)% $ 220,651
Southwest Region.................................... 89,711 (26.7) 122,379 249,164 (22.9) 323,101
Central Region...................................... 26,088 126.4 11,524 68,947 145.8 28,048
---------- ---------- ---------- ----------
Total............................................... $ 195,608 (9.9) $ 217,065 $ 534,453 (6.5) $ 571,800
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
AVERAGE SALES PRICE PER HOME CLOSED:
Southeast Region.................................... $ 161.9 7.9% $ 150.1 $ 162.9 11.0% $ 146.8
Southwest Region.................................... 137.8 (2.3) 141.0 132.7 (5.6) 140.5
Central Region...................................... 152.6 (2.0) 155.7 153.6 (2.4) 157.4
Total............................................... 148.8 2.5 145.1 146.2 1.7 143.7
BACKLOG UNITS AT END OF PERIOD:
Southeast Region.................................... 749 (11.3)% 844
Southwest Region.................................... 869 (19.4) 1,078
Central Region...................................... 315 34.6 234
---------- ----------
Total............................................... 1,933 (10.3) 2,156
---------- ----------
---------- ----------
AGGREGATE SALES VALUE OF HOMES IN
BACKLOG AT END OF PERIOD:............................. $ 292,267 (12.0)% $ 332,254
---------- ----------
---------- ----------
NUMBER OF ACTIVE SUBDIVISIONS AT END OF PERIOD:
Southeast Region.................................... 112 7.7% 104
Southwest Region.................................... 64 4.9 61
Central Region...................................... 33 17.9 28
---------- ----------
Total............................................... 209 8.3 193
---------- ----------
---------- ----------
</TABLE>
(a) New orders for the nine months ended June 30, 1996 does not include 129
homes in backlog acquired on December 27, 1995 from Del Mar Development,
Inc. New orders for the three and nine months ended June 30, 1996 does not
include 127 homes in backlog acquired on May 23, 1996 and June 26, 1996 with
Gulfcoast Homes and Trendmaker Homes--Dallas, respectively.
10
<PAGE>
BEAZER HOMES USA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW:
Beazer Homes USA, Inc. (the "Company" and "Beazer") designs, builds and sells
single family homes in the Southeast, Southwest and Central regions of the
United States. The Company's Southeast Region includes Georgia, North
Carolina, South Carolina, Tennessee and Florida, its Southwest Region
includes Arizona, California and Nevada and its Central Region includes
Texas. The Company intends, subject to market conditions, to expand in its
current markets and to consider entering new markets through expansion from
existing markets ("satellite expansion") or through acquisitions of
established regional homebuilders.
The Company's homes are designed to appeal primarily to entry-level and first
move-up home buyers, and are generally offered for sale in advance of their
construction. The majority of homes are sold pursuant to standard sales
contracts entered into prior to commencement of construction. Once a contract
has been signed, the Company classifies the transaction as a "new order."
Such sales contracts are usually subject to certain contingencies such as the
buyer's ability to qualify for financing. Homes covered by such sales
contracts are considered by the Company as its "backlog." The Company does
not recognize revenue on homes in backlog until the sales are closed and the
risk of ownership has been transferred to the buyer.
The Company began offering mortgage origination services for its local
homebuilders through branch offices of Beazer Mortgage Corp. ("Beazer
Mortgage") during 1996. Beazer Mortgage originates and processes mortgages on
behalf of third-party investors, but does not retain or service the mortgages
that it originates. Beazer Mortgage currently has branch offices in Arizona,
Florida, Georgia, North Carolina and Texas, and anticipates having branch
offices open in nearly all of the Company's markets by the end of calendar
year 1997. The results of operations for Beazer Mortgage were not significant
for the quarters ended June 30, 1997 and 1996.
NEW ORDERS AND BACKLOG: New orders increased by 5.8% for the three months
ended June 30, 1997 compared to the three months ended June 30, 1996. The
Company's Central region experienced the greatest increase in new orders. The
majority of this increase can be attributed to the expansion of operations in
Dallas through the acquisition of Trendmaker Homes--Dallas in late June 1996,
although new orders also increased significantly in Houston, where there was
no acquisition during the past year. New orders increased slightly in the
Southeast region and decreased slightly in the Southwest region for the
comparable quarters, with the most significant decline in new orders in
Nevada. The significant decrease in Nevada can be attributed to scaling back
operations slightly during a change in management structure in that market.
The Company believes that new subdivisions opened towards the end of the
previous quarter and improving economic conditions contributed to the
increase in new orders in the Southeast region and increased new orders in
Phoenix.
11
<PAGE>
BEAZER HOMES USA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
New orders decreased by 5.3% for the nine month period ending June 30, 1997
compared to the nine month period ended June 30, 1996. The most substantial
decrease for the nine month period was in the Southwest region where new
orders were down 18.2%. Most of this decrease can be attributed to decreases
in Arizona resulting from substantially reduced active subdivision counts
during the first six months of the fiscal year. There were 26 active
subdivisions in the Company's Arizona operation at the beginning of the
fiscal year, 16 at December 31, 1996 and 32 at June 30, 1997. Similar trends
in subdivision counts in the Southeast region contributed to the negative new
order comparisons for the nine month period ended June 30, 1997.
RESULTS OF OPERATIONS:
The following table shows certain items in the Company's statements of income
expressed as a percentage of total revenue.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Total revenue................................................................... 100.0% 100.0% 100.0% 100.0%
Costs of home construction and
land sales.................................................................... 84.8 84.7 84.9 84.6
Interest........................................................................ 1.9 1.8 1.8 1.9
Selling, general and administrative............................................. 10.6 9.9 11.1 10.3
Write-down of inventory......................................................... -- -- 1.2 --
Operating income (loss)......................................................... 2.8 3.7 1.0 3.3
</TABLE>
REVENUES: The Company experienced decreases in revenues for the three and
nine month periods ended June 30, 1997 compared to the same periods ended
June 30, 1996. The decline in revenues for the Company's Southeast and
Southwest region is the result of lower backlog levels entering the 1997
periods and lower levels of new orders during the first two quarters of
fiscal 1997. The most significant decrease for the comparable periods was in
Arizona where closings and revenues were down 50.5% and 53.3% for the three
month period and 33.4% and 38.0% for the nine month periods. The revenue
growth experienced in the Company's Central region for the three and nine
month periods reflects growth in the Houston and Dallas operations (entered
via acquisition in April 1995) and the successful assimilation of the
acquired operations of Trendmaker Homes--Dallas (acquired in June 1996).
COST OF HOME CONSTRUCTION AND LAND SALES: The cost of home construction and
land sales as a percentage of revenues increased slightly for both the three
and nine month periods ended June 30, 1997 compared to the same periods in
1996. The principal reason for the increases relates to the Company's Nevada
operations where the cost of home construction and land sales as a percentage
of revenues represented 92.2% and 92.1% for the three and nine month period
ended June 30, 1997 compared to 88.7% and 87.6% for the same periods of 1996
respectively. The Company also believes that the increase in costs of home
construction and land sales as a
12
<PAGE>
BEAZER HOMES USA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
percentage of revenues results from a lower mix of closings from certain of
the Company's higher margin markets, such as Arizona.
WRITE-DOWN OF INVENTORY: During the quarter ended March 31, 1997, the Company
recorded a pretax charge of $6.3 million ($3.9 million after tax) to write
down two properties located in Nevada to their fair market value (estimated
based on the sales prices of comparable projects). The two Nevada properties,
Craig Ranch in North Las Vegas and Promontory in Reno, had incurred
significant development costs that were not anticipated at the beginning of
the project. As a result, the estimated future undiscounted cash flows of the
projects were less than their respective current book values.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE: Selling, general and
administrative expenses increased as a percentage of total
revenues for the three and nine month periods ended June 30, 1997 compared to
the prior year periods. This increase can be attributed to the initial costs
of profitability initiatives that the Company is in the process of
implementing (such as the set up of mortgage origination operations and
design centers and the development and implementation of new information
systems). Additionally, the Company incurred higher overhead costs in certain
key markets that the Company believes will provide higher closing volumes
in subsequent quarters, including the Arizona, Texas and Florida markets.
INCOME TAXES: The decrease in the Company's effective income tax rate from
40% for the three and nine month periods ended June 30, 1996 compared to 39% for
the same periods at June 30, 1997 is principally the result of a reduction in
the overall state effective income tax rate.
FINANCIAL CONDITION AND LIQUIDITY:
In October 1996, the Company entered into a $150 million unsecured, revolving
credit agreement (the "Credit Agreement") with a group of banks to replace a
similar $80 million unsecured, revolving credit agreement the Company had
utilized since January 1995. In July 1997, the Company amended the credit
agreement to increase the available borrowings to $200 million, increase the
number of participating banks from seven to eight, reduce the borrowing rates
and increase the Company's flexibility under certain covenants. The Credit
Agreement is used primarily to fund seasonal working capital needs.
At June 30, 1997, the Company had $75 million of borrowings outstanding under
the Credit Agreement, and had available additional borrowings of $46
million. Available borrowings under the Credit Agreement are limited to a
Borrowing Base, as defined in the Credit Agreement, based upon certain
percentages of homes under contract, unsold homes, substantially improved
lots and accounts receivable.
All significant subsidiaries of Beazer Homes USA, Inc. are guarantors of the
Senior Notes and are jointly and severally liable for the Company's
obligations under the Senior Notes. Separate financial statements and other
disclosures concerning each of the significant subsidiaries are not included,
as the aggregate assets, liabilities, earnings and equity of the subsidiaries
equal such amounts for the Company on a consolidated basis and separate
subsidiary financial statements are not considered material to investors. The
total assets, revenues and operating profit of the non-guarantor subsidiaries
are in the aggregate immaterial to the Company on a
13
<PAGE>
BEAZER HOMES USA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
consolidated basis. Neither the Credit Agreement nor the Senior Notes
restrict distributions to Beazer Homes USA, Inc. by its subsidiaries.
The Company has utilized, and will continue to utilize, land options as a
method of controlling and subsequently acquiring land. At June 30, 1997, the
Company had 10,630 lots under option. At June 30, 1997, the Company had
commitments with respect to option contracts with specific performance
obligations of approximately $54.5 million. The Company expects to exercise
all of its option contracts with specific performance obligations and,
subject to market conditions, substantially all of its options contracts
without specific performance obligations.
In June 1996, the Company's Board of Directors approved a stock repurchase
plan authorizing the repurchase of up to 10% of the Company's currently
outstanding common stock (the "Stock Repurchase Plan"). Such repurchases, if
completed, would be effected at various prices from time to time in the open
market. The timing of the purchase and the exact number of shares will depend
on market conditions. As of June 30, 1997 the Company had purchased 542,510
shares for an aggregate purchase price of approximately $7.2 million.
Management believes that the Company's current borrowing capacity and
anticipated cash flows from the operations is sufficient to meet liquidity
needs for the foreseeable future. There can be no assurance, however, that
amounts available in the future from the Company's sources of liquidity will
be sufficient to meet the Company's future capital needs. The amount and
types of indebtedness that the Company may incur may be limited by the terms
of the Indenture governing its Senior Notes and its Credit Agreement. The
Company continually evaluates expansion opportunities through acquisition of
established regional homebuilders and such opportunities may require the
Company to seek additional capital in the form of equity or debt financing
from a variety of potential sources, including additional bank financing
and/or securities offerings.
14
<PAGE>
BEAZER HOMES USA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995:
This quarterly report on Form 10-Q contains "forward-looking statements"
within the meaning of the federal securities laws. These forward-looking
statements include, among others, statements concerning the Company's outlook
for future quarters, overall and market specific volume trends, pricing
trends and forces in the industry, cost reduction strategies and their
results, the Company's expectations as to funding its capital expenditures
and operations during 1997, and other statements of expectations, beliefs,
future plans and strategies, anticipated events or trends, and similar
expressions concerning matters that are not historical facts. The
forward-looking statements in this report are subject to risks and
uncertainties that could cause actual results to differ materially from those
expressed in or implied by the statements. The most significant factors that
could cause actual results to differ materially from those expressed in the
forward-looking statements include, but are not limited to, the following:
- Economic changes nationally or in one of the Company's local markets
- Volatility of mortgage interest rates
- Increased competition in some of the Company's local markets
- Increased prices for labor, land and raw materials used in the production
of houses
- Increased cost in the development of raw land
- Any delays in reacting to changing consumer preference in home design
- Delays or difficulties in implementing the Company's initiatives to reduce
its production and overhead cost structure.
15
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: 11 Statement Regarding Computation of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the quarter
ended June 30, 1997.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Beazer Homes USA, Inc.
Date: August 13, 1997 By: /s/ David S. Weiss
----------------------- -----------------------------------
Name: David S. Weiss
Executive Vice President and
Chief Financial Officer
17
<PAGE>
EXHIBIT 11
BEAZER HOMES USA, INC.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
---------------------- ----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Primary:
Earnings
Net income.............................................. $ 3,434 $ 4,817 $ 3,651 $ 11,379
Less: Dividends on preferred shares (a)................. 1,000 1,000 3,000 3,000
---------- ---------- ---------- ----------
Net income applicable to common shares.................. $ 2,434 $ 3,817 $ 651 $ 8,379
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Shares
Weighted average number of unrestricted
common shares outstanding............................. 5,914,708 6,376,100 6,170,995 6,376,100
Weighted average number of restricted
common shares outstanding, net........................ 139,590 92,650 139,463 90,726
Dilutive effect of outstanding options as determined
by the application of the treasury stock method....... 14,205 11,973 23,757 19,697
---------- ---------- ---------- ----------
Weighted average number of shares outstanding,
as adjusted........................................... 6,068,503 6,480,723 6,334,215 6,486,523
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Primary net income per share............................... $ 0.40 $ 0.59 $ 0.10 $ 1.29
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Fully-diluted:
Earnings
Net income.............................................. $ 3,434 $ 4,817 $ 3,651 $ 11,379
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Shares
Weighted average number of unrestricted
common shares outstanding............................. 5,914,708 6,376,100 6,170,995 6,376,100
Weighted average number of restricted
common shares outstanding, net........................ 139,590 92,650 139,463 90,726
Dilutive effect of outstanding options as determined
by the application of the treasury stock method....... 14,205 11,973 3,232 19,697
Assumed conversion of preferred stock (a)............... 2,624,672 2,624,672 2,624,672 2,624,672
---------- ---------- ---------- ----------
Weighted average number of shares outstanding,
as adjusted........................................... 8,693,175 9,105,395 8,938,362 9,111,195
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income per share assuming full dilution................ $ 0.40 $ 0.53 $ 0.41(b) $ 1.25
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
- ------------------------
(a) The Company's Series A Cumulative Convertible Exchangeable Preferred Stock
(2,000,000 shares of $50,000,000 aggregate liquidation preference,
convertible into 2,624,672 shares of common stock), issued in August 1995.
(b) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15
because it produces an anti-dilutive result.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S QUARTERTlY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000915840
<NAME> BEAZER HOMES USA, INC.
<MULTIPLIER> 1,000
<CURRENCY>U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 3687
<ALLOWANCES> 0
<INVENTORY> 388128
<CURRENT-ASSETS> 0<F1>
<PP&E> 3840
<DEPRECIATION> 0
<TOTAL-ASSETS> 416428
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 115000
0
20
<COMMON> 93
<OTHER-SE> 187477
<TOTAL-LIABILITY-AND-EQUITY> 416428
<SALES> 534453
<TOTAL-REVENUES> 534453
<CGS> 463149
<TOTAL-COSTS> 528949
<OTHER-EXPENSES> (481)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5985
<INCOME-TAX> 2334
<INCOME-CONTINUING> 3651
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3651
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0
<FN>
<F1>THE COMPANY PRESENTS A CONDENSED BALANCE SHEET.
</FN>
</TABLE>
