<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, 1998
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 ____
---
<TABLE>
<CAPTION>
Class Outstanding at August 14, 1998
- ------------------------------- ------------------------------
<S> <C>
Common Stock, $0.01 par value 6,064,180 shares
Series A Cumulative Convertible
Exchangeable Preferred Stock,
$0.01 par value 2,000,000 shares
</TABLE>
Page 1 of 18 Pages
Exhibit Index Appears on Page 17
<PAGE>
BEAZER HOMES USA, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheets,
June 30, 1998 (unaudited) and September 30, 1997 3
Unaudited Condensed Consolidated Statements of Operations,
Three and Nine Months Ended June 30, 1998 and 1997 4
Unaudited Condensed Consolidated Statements of Cash Flows,
Nine Months Ended June 30, 1998 and 1997 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 17
SIGNATURES 18
</TABLE>
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,
1998 1997
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ -- $ 1,267
Accounts receivable 8,825 7,114
Inventory 435,459 361,945
Property, plant and equipment, net 11,982 11,592
Goodwill, net 9,053 5,664
Other assets 16,466 12,013
--------- ---------
Total assets $ 481,785 $ 399,595
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Trade accounts payable $ 48,667 $ 44,443
Other payables and accrued liabilities 25,564 30,866
Revolving credit facility 4,500 30,000
Senior notes 215,000 115,000
--------- ---------
Total liabilities 293,731 220,309
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, 9,355,957
issued, 6,064,180 outstanding) 93 93
Paid in capital 187,798 187,798
Retained earnings 53,045 44,802
Unearned restricted stock (919) (1,444)
Treasury stock (3,291,777 shares) (51,983) (51,983)
--------- ---------
Total stockholders' equity 188,054 179,286
--------- ---------
Total liabilities and stockholders' equity $ 481,785 $ 399,595
--------- ---------
--------- ---------
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
<PAGE>
BEAZER HOMES USA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended June 30, Ended June 30,
------------------ ------------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Total revenue $234,811 $195,608 $611,760 $534,453
Costs and expenses:
Home construction and land sales 194,380 165,843 510,173 453,626
Interest 4,914 3,609 12,232 9,523
Selling, general and administrative 26,703 20,718 71,597 59,474
Write-down of inventory -- -- -- 6,326
-------- -------- -------- --------
Operating income 8,814 5,438 17,758 5,504
Other income 252 190 453 481
-------- -------- -------- --------
Income before income taxes 9,066 5,628 18,211 5,985
Provision for income taxes 3,445 2,194 6,965 2,334
-------- -------- -------- --------
Net income $ 5,621 $ 3,434 $ 11,246 $ 3,651
-------- -------- -------- --------
-------- -------- -------- --------
Preferred dividends $ 1,000 $ 1,000 $ 3,000 $ 3,000
Net income applicable to common stockholders $ 4,621 $ 2,434 $ 8,246 $ 651
Weighted average number of shares (in thousands):
Basic 5,886 5,917 5,857 6,174
Diluted 8,772 8,695 8,737 6,337
Net income per common share:
Basic $0.79 $ 0.41 $ 1.41 $ 0.11
Diluted $0.64 $ 0.40 $ 1.29 $ 0.10
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE>
BEAZER HOMES USA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 11,246 $ 3,651
Adjustments to reconcile net income to
net cash used by operating activities:
Depreciation and amortization 2,118 1,545
Write-down of inventory -- 6,326
Changes in operating assets and liabilities,
net of effects of acquisition
Increase in inventory (56,584) (73,485)
Increase in trade accounts payable 2,549 3,034
Other changes (7,855) (17,508)
-------- --------
Net cash used by operating activities (48,526) (76,437)
-------- --------
Cash flows from investing activities:
Acquisition, net of cash acquired (16,766)
Capital expenditures (4,408) (1,578)
-------- --------
Net cash used by investing activities (21,174) (1,578)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of senior notes, net 96,933
Changes in revolving credit facility, net (25,500) 75,000
Treasury stock purchased (6,927)
Dividends paid on preferred stock (3,000) (3,000)
-------- --------
Net cash provided by financing activities 68,433 65,073
-------- --------
Increase (decrease) in cash and cash equivalents (1,267) (12,942)
Cash and cash equivalents at beginning of period 1,267 12,942
-------- --------
Cash and cash equivalents at end of period $ 0 $ 0
-------- --------
-------- --------
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
<PAGE>
BEAZER HOMES USA, INC.
NOTES TO UNAUDITED 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. 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
incorporated by reference in the Company's Annual Report on Form 10-K for the
year ended September 30, 1997.
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 (in thousands):
<TABLE>
<CAPTION>
June 30, September 30,
1998 1997
---- ----
<S> <C> <C>
Finished homes $ 47,616 $ 69,609
Development projects in progress 338,897 231,692
Unimproved land held for future
development 18,004 34,792
Model homes 30,942 25,852
-------- ---------
$435,459 $ 361,945
-------- ---------
-------- ---------
</TABLE>
Development projects in progress consist principally of land, land
improvement costs and, if applicable, construction costs for houses that are
in various stages of development. Certain of the finished homes in inventory
are reserved by a deposit or sales contract.
6
<PAGE>
(3) INTEREST
The following table sets forth certain information regarding interest
(in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
During the period:
Interest incurred $ 5,525 $4,414 $15,440 $11,352
------- ------ ------- -------
------- ------ ------- -------
Previously capitalized interest
amortized to costs and expenses $ 4,863 $3,609 $12,182 $ 9,523
------- ------ ------- -------
------- ------ ------- -------
At the end of the period:
Capitalized interest in ending
inventory $10,113 $7,382 $10,113 $ 7,382
------- ------ ------- -------
------- ------ ------- -------
</TABLE>
(4) Earnings Per Share
During the first quarter of fiscal 1998, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." As a
result, all previously reported earnings per share data has been restated to
conform with SFAS No. 128. Basic and diluted earnings per share are calculated
as follows:
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
June 30, June 30,
------------- -----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Earnings
Net income $5,621 $3,434 $11,246 $3,651
Less: Dividends on preferred shares 1,000 1,000 3,000 3,000
------ ------ ------- ------
Net income applicable tocommon shareholders $4,621 $2,434 $ 8,246 $ 651
------ ------ ------- ------
------ ------ ------- ------
Basic:
Net income applicable to common shareholders $4,621 $2,434 $ 8,246 $ 651
Weighted average number of common shares outstanding 5,886 5,917 5,857 6,174
Basic earnings per share $ 0.79 $ 0.41 $ 1.41 $ 0.11
Diluted:
Net income applicable to common shareholders $4,621 $2,434 $ 8,246 $ 651
Plus: Dividends on preferred shares 1,000 1,000 3,000 n/a
------ ------ ------- ------
Net income applicable to common shareholders $5,621 $3,434 $11,246 $ 651
------ ------ ------- ------
Weighted average number of common shares outstanding 5,886 5,917 5,857 6,174
Effect of dilutive securities-
Assumed conversion of Preferred Stock 2,625 2,625 2,625 n/a
Restricted stock 143 139 173 139
Options to acquire common stock 118 14 82 24
------ ------ ------- ------
Diluted weighted common shares outstanding 8,772 8,695 8,737 6,337
Diluted earnings per share $ 0.64 $ 0.40 $ 1.29 $ 0.10
</TABLE>
7
<PAGE>
BEAZER HOMES USA, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The computation of diluted earnings per share for the nine months ended
June 30, 1997 excludes the assumed 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 since the effect of
such conversion is antidilutive for this period.
(5) SENIOR NOTES
In 1994 the Company issued $115 million of Senior Notes which mature in
March 2004 (the "9% Senior Notes"). Interest on the 9% Senior Notes is
payable semiannually. The Company may, at its option, redeem the 9% Senior
Notes in whole or in part at any time after February 1999, initially at
102.571% of the principal amount, declining to 100% of the principal amount
after February 2001.
On March 20, 1998 the Company completed a $100 million offering of 8 7/8%
Senior Notes, due April 1, 2008 (the "8 7/8% Senior Notes") at a price to
investors of 99.183% of the face amounts. The net proceeds of the Senior Note
offering were used to repay short-term borrowings under the Company's revolving
credit facility. Interest on the 8 7/8% Senior Notes is payable semiannually.
The Company may, at its option, redeem the 8 7/8% Senior Notes in whole or in
part at any time after April 1, 2003, initially at 104.438% of the principal
amount, declining to 100% of the principal amount after April 1, 2006.
The 9% Senior Notes and the 8 7/8% Senior Notes are unsecured obligations
of the Company ranking pari passu with all other existing and future senior
indebtedness of the Company.
(6) ACQUISITION
On November 30, 1997 the Company acquired the assets of the Orlando,
Florida homebuilding operations of Calton Homes of Florida, Inc. for
approximately $16.8 million in cash. The allocation of the purchase price
resulted in approximately $3.9 million of goodwill.
8
<PAGE>
BEAZER HOMES USA, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(7) 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.
(8) RECENT ACCOUNTING PRONOUNCEMENTS
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 not have an 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,
----------------------- -------------------------
1998 1997 1998 1997
-------------- ------ -------------- ------
% %
Amount Change Amount Amount Change Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Number of new orders,
net of cancellations(a):
Southeast Region 767 38.2% 555 2,126 42.0% 1,497
Southwest Region 971 23.1 789 2,602 25.9 2,067
Central Region 245 (2.0) 250 619 3.5 598
-------- ----- -------- -------- ---- --------
Total 1,983 24.4 1,594 5,347 28.5 4,162
-------- ----- -------- -------- ---- --------
-------- ----- -------- -------- ---- --------
Number of closings:
Southeast Region 608 23.3% 493 1,584 19.3% 1,328
Southwest Region 750 15.2 651 1,882 0.2 1,878
Central Region 139 (18.7) 171 442 (1.6) 449
-------- ----- -------- -------- ---- --------
Total 1,497 13.8 1,315 3,908 6.9 3,655
-------- ----- -------- -------- ---- --------
-------- ----- -------- -------- ---- --------
Total revenue:
Southeast Region $ 99,541 24.7% $ 79,809 $256,807 18.7% $216,342
Southwest Region 111,754 24.6 89,711 278,956 12.0 249,164
Central Region 23,516 (9.9) 26,088 75,997 10.2 68,947
-------- ----- -------- -------- ---- --------
Total $234,811 20.0 $195,608 $611,760 14.5 $534,453
-------- ----- -------- -------- ---- --------
-------- ----- -------- -------- ---- --------
Average sales price per home closed:
Southeast Region $ 163.7 0.7% $ 161.9 $ 162.1 (0.8)% $ 162.9
Southwest Region 149.0 7.5 137.8 148.2 11.2 132.7
Central Region 169.2 10.4 152.6 171.9 11.6 153.6
Total 156.9 5.4 148.8 156.5 7.0 146.2
Backlog units at end of period:
Southeast Region 1,142 52.5% 749
Southwest Region 1,199 38.0 869
Central Region 385 22.2 315
-------- ----- --------
Total 2,726 41.0 1,933
-------- ----- --------
-------- ----- --------
Aggregate sales value of homes in
backlog at end of period: $438,996 50.2% $292,267
-------- ----- --------
-------- ----- --------
Number of active subdivisions:
Southeast Region 119 6.3% 112
Southwest Region 62 (3.1) 64
Central Region 33 0.0 33
-------- ----- --------
Total 214 2.4 209
-------- ----- --------
-------- ----- --------
</TABLE>
(a) New orders for the nine months ended June 30, 1998 do not include 96 homes
in backlog acquired from Calton Homes of Florida, Inc.
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" or "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. On November 30, 1997 the Company acquired
the assets of the Orlando operations of Calton Homes Florida, Inc. ("Calton")
for approximately $16.8 million.
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, and currently has branches in each of the Company's
markets. Beazer Mortgage originates mortgages principally for homebuyers of
Beazer homes. Beazer Mortgage does not hold or service the mortgages.
During the first quarter of fiscal 1998 the Company entered into a joint
venture agreement with Corporacion GEO, the largest builder of affordable
homes in Mexico, to build homes in the United States. The joint venture will
focus exclusively on the development, construction and sale of affordable
housing throughout the U.S., priced between $35,000 and $45,000. The joint
venture is owned 60% by Corporacion GEO and 40% by Beazer. Development is
scheduled to begin on the venture during fiscal 1998. The Company does not
anticipate the venture to significantly impact operating results during
fiscal 1998.
NEW ORDERS AND BACKLOG: New orders for the three and nine months ended June 30,
1998, were up 24.4% and 28.5%, respectively, relative to the comparable periods
of the prior year. Each of the Company's Southeast and Southwest regions
experienced growth in excess of 20% in new orders for the comparable periods.
Excluding the impact of the Company's Orlando acquisition, which contributed 126
and 206 new orders for the three and nine month periods, respectively, the
Southeast region recognized order growth of 15.5% and 28.3%. New orders for the
three and nine month periods ended June 30, 1998 in the Company's Central region
were consistent with those experienced in the comparable periods in fiscal 1997.
The Company believes that the new order increases on stable active subdivision
levels for the comparable periods reflect both strong general economic
conditions and the success of many of the Company's newer subdivisions opened in
the first half of fiscal 1998.
11
<PAGE>
The strong order comparisons for the three and nine month periods ended June 30,
1998 exceeded the increase in unit closings for the same periods resulting in a
Company record for unit backlog. This high unit backlog combined with sales
price increases in several markets and increases in the revenue contributions
from options sold in the Company's design centers, resulted in a significantly
higher aggregate dollar value of homes in backlog at June 30, 1998 compared to
the same period in 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,
------------------ -----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total revenue 100.0% 100.0% 100.0% 100.0%
Costs of home construction and land sales 82.8 84.8 83.4 84.9
Interest 2.1 1.9 2.0 1.8
Selling, general and administrative 11.4 10.6 11.7 11.1
Write-down of inventory -- -- -- 1.2
Operating income 3.8 2.8 2.9 1.0
</TABLE>
REVENUES: The percentage increase in revenues for the three and nine months
ended June 30, 1998 compared to the same periods in 1997 is the result of both
an increase in the average price per home closed and increases in the number of
homes closed. The increase in average price is largely attributable to sales
price increases during fiscal 1998 in several markets and higher revenue
contributions from options sold through the Company's design centers than those
recognized during the comparable periods of the prior year. Also contributing
to the increase in average price is the increase in number of home closings in
certain markets, such as Florida and California, where average home prices are
greater than the Company average. In addition, the Company has recognized
revenues on land sales during the three and nine months ended June 30, 1998 of
$2.0 million and $10.5 million, respectively. The land sales are consistent
with the Company's stated policy of reducing its investment in markets and
projects that are not exceeding the Company's overall cost of capital. The
Company did not realize any significant profit or loss on these land sales
during the three and nine month periods.
COST OF HOME CONSTRUCTION AND LAND SALES: The cost of home construction and land
sales as a percentage of revenues decreased for the three and nine months ended
June 30, 1998 compared to the same periods in 1997. The decrease is largely
attributable to continued savings and earnings from the Company's profitability
initiatives, specifically design centers and mortgage origination operations.
Additionally, substantially improved gross margins in the Company's California
operations and price increases in most of the Company's markets contributed to
the overall decrease in the cost of home construction and land sales as
percentage of revenues for the three and nine month periods ended June 30, 1998
compared to the same periods in fiscal 1997.
12
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE: Selling, general and administrative
expenses ("SG&A") increased as a percentage of total revenues for the three and
nine month periods ended June 30, 1998 compared to the same periods in the prior
year. This increase is the result of incentive compensation accruals recorded
during the June 1998 quarter, and increased general and administrative costs of
operating Beazer Mortgage. Excluding these items, SG&A for the three and nine
month periods ended June 30, 1998 is consistent with that recognized during the
same periods in fiscal 1997.
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.
MORTGAGE ORIGINATION OPERATIONS: The Company recognizes revenues for
premiums paid to Beazer Mortgage branch offices from third party lenders
($1.2 million and $2.5 million for the three and nine months ended June 30,
1998, respectively). Closing and discount points paid to Beazer Mortgage
branch offices by the Company's homebuilding operation are eliminated against
costs of home construction in consolidation ($1.0 million and $2.4 million
for the three and nine months ended June 30, 1998, respectively). All
general and administrative expenses of operating Beazer Mortgage are included
in SG&A ($1.1 million and $2.7 million for the three and nine months ended
June 30, 1998). Beazer Mortgage recognized net operating income prior to
intercompany eliminations of $1.0 million and $2.2 million for the three and
nine months ended June 30, 1998, respectively. The results of operations for
Beazer Mortgage were not significant for the three and nine month periods
ended June 30, 1997.
FINANCIAL CONDITION AND LIQUIDITY:
On March 20, 1998 the Company completed a $100 million offering of 8 7/8% Senior
Notes, due April 1, 2008 (the "8 7/8% Senior Notes") at a price to investors of
99.183% of the face amount. The net proceeds of the Senior Note offering were
used to repay short-term borrowings under the Company's revolving credit
facility. Interest on the 8 7/8% Senior Notes is payable semiannually. The
Company may, at its option, redeem the 8 7/8% Senior Notes in whole or in part
at any time after April 1, 2003, initially at 104.438% of the principal amount,
declining to 100% of the principal amount after April 1, 2006.
The Company also has outstanding $115 million of Senior Notes which mature in
March 2004 (the "9% Senior Notes"). Interest on the 9% Senior Notes is payable
semiannually. The Company may, at its option, redeem the 9% Senior Notes in
whole or in part at any time after February 1999, initially at 102.571% of the
principal amount, declining to 100% of the principal amount after February 2001.
The 9% Senior Notes and the 8 7/8% Senior Notes are unsecured obligations of the
Company ranking pari passu with all other existing and future senior
indebtedness of the Company.
13
<PAGE>
At June 30, 1998 the Company had $4.5 million of outstanding borrowings under
its $200 million unsecured revolving credit facility (the "Credit Facility").
The Company fulfills its short-term cash requirements with cash generated from
its operations and unused funds available from the Credit Facility. Available
borrowings under this credit agreement are limited to certain percentages of
homes under contract, unsold homes, substantially improved lots and accounts
receivable. At June 30, 1998 the Company had available additional borrowings of
$63.9 million under the Credit Facility. During the quarter ended December 31,
1997, the Company utilized borrowings under its credit agreement of
approximately $16.8 million for the acquisition of the Orlando, Florida
operations of Calton Homes of Florida, Inc.
All significant subsidiaries of Beazer Homes USA, Inc. are guarantors of the
Notes and the Company's obligations under the Credit Facility and are jointly
and severally liable for the Company's obligations under the Notes and the
Credit Facility. 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 consolidated basis. Neither the Credit Facility nor the 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, 1998 the Company
had 9,165 lots under option. At June 30, 1998, the Company had commitments with
respect to option contracts with specific performance obligations of
approximately $34.1 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.
Management believes that the Company's current borrowing capacity at June 30,
1998, and anticipated cash flows from 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 the Notes and the Credit Facility. 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.
The Company is in the process of implementing a number of information systems
which are intended to help improve the Company's profitability. Such systems
include an executive information system, a new centralized accounting and
purchasing system and a sales office automation system. Such initiatives were
begun in fiscal 1997 and are expected to be substantially completed during
fiscal 1999. Neither the costs incurred to date nor the expected future costs
are material.
In conjunction with the information systems initiatives described above, the
Company evaluated the ability of its computer systems to accurately process
information which includes dates in the year 2000 and beyond ("Year 2000
Compliant"). The Company has determined that all new systems, as well as any of
existing
14
<PAGE>
systems expected to be used beyond 1999, are Year 2000 Compliant. The
Company has no significant control over whether its subcontractors, vendors
and suppliers will be Year 2000 Compliant. The Company does believe,
however, based upon its lack of reliance on any one significant or small
group of entities, that the failure of any of its subcontractors, vendors or
suppliers to be Year 2000 Compliant would not have a material, adverse effect
upon the financial condition, results of operations or cash flows of the
Company.
OUTLOOK:
The Company is optimistic about its prospects for the remainder of fiscal
1998 and into fiscal 1999. As a result of increased backlog at June 30,
1998, the Company expects home closings to be strong for the remainder of
fiscal 1998 compared to fiscal 1997. The Company believes the current strong
economic environment combined with its profitability initiatives will result
in a continued reduction of its cost of home construction and land sales as a
percentage of revenues. Additionally, increased home closings will
contribute to a reduction in SG&A as a percentage of revenues.
The Company's Series A Convertible Preferred Stock (the "Preferred Stock") is
convertible into common stock at an exchange rate of $19.05 per common share
and becomes callable by the Company on September 1, 1998 at a 5% premium.
The Company intends to call its Preferred Stock at the earliest date that it
believes it is likely that the majority of holders would convert into common
stock. Based upon the current price of the Company's common stock, the
Company is evaluating the potential call of all or some portion of its
Preferred Stock, but has made no definitive decision to proceed with such a
call.
15
<PAGE>
CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995:
Certain of the statements contained in this report, including those under
"Outlook" and "Financial Condition," constitute "forward-looking statements"
within the meaning of the federal securities laws. While the Company believes
that these statements are accurate, Beazer's business is dependent upon general
economic conditions and are subject to risks and uncertainties that could cause
actual results to differ materially from those expressed in or implied by such
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 land development cost on projects under development
- 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.
- Decreased value of the Company's common stock deterring conversion of
Preferred Stock
- Delays in land development or home construction resulting from adverse
weather conditions in one of the Company's local markets
16
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
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, 1998.
17
<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 14, 1998 By: /s/ David S. Weiss
--------------- ---------------------------------
Name: David S. Weiss
Executive Vice President and
Chief Financial Officer
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's quarterly report on form 10-Q for the quarter ended June 30, 1998 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000915840
<NAME> BEAZER HOMES USA, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 8,825
<ALLOWANCES> 0
<INVENTORY> 435,459
<CURRENT-ASSETS> 0<F1>
<PP&E> 11,982
<DEPRECIATION> 0
<TOTAL-ASSETS> 481785
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 219500
20
0
<COMMON> 93
<OTHER-SE> 187941
<TOTAL-LIABILITY-AND-EQUITY> 481785
<SALES> 611760
<TOTAL-REVENUES> 611760
<CGS> 522405
<TOTAL-COSTS> 594002
<OTHER-EXPENSES> (453)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 18211
<INCOME-TAX> 6965
<INCOME-CONTINUING> 11246
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11246
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 1.29
<FN>
<F1>The Company presents a condensed balance sheet
</FN>
</TABLE>
