<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 March 31, 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)
<TABLE>
<CAPTION>
DELAWARE 58-2086934
<S> <C>
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
</TABLE>
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 May 15, 1998
----- ---------------------------
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
Page 1 of 17 Pages
Exhibit Index Appears on Page 16
<PAGE>
BEAZER HOMES USA, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page No.
-------
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheets,
March 31, 1998 (unaudited) and September 30, 1997 3
Unaudited Condensed Consolidated Statements of Operations,
Three and Six Months Ended March 31, 1998 and 1997 4
Unaudited Condensed Consolidated Statements of Cash Flows,
Six Months Ended March 31, 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 16
SIGNATURES 17
</TABLE>
2
<PAGE>
Part I. Financial Information
BEAZER HOMES USA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
March 31, September 30,
1998 1997
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 25,516 $ 1,267
Accounts receivable 6,289 7,114
Inventory 399,583 361,945
Property, plant and equipment, net 11,120 11,592
Goodwill, net 9,254 5,664
Other assets 24,654 12,013
--------- ---------
Total assets $ 476,416 $ 399,595
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Trade accounts payable $ 31,239 $ 44,443
Other payables and accrued liabilities 26,810 30,866
Revolving credit facility 20,000 30,000
Senior notes 215,000 115,000
--------- ---------
Total liabilities 293,049 220,309
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 48,424 44,802
Unearned restricted stock (985) (1,444)
Treasury stock (3,291,777 shares) (51,983) (51,983)
--------- ---------
Total stockholders' equity 183,367 179,286
--------- ---------
Total liabilities and stockholders' equity $ 476,416 $ 399,595
--------- ---------
--------- ---------
</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 Six Months
Ended March 31, Ended March 31,
-------------------------- -----------------------
1998 1997 1998 1997
---------- ----------- -------- --------
<S> <C> <C> <C> <C>
Total revenue $ 221,323 $ 177,762 $ 376,949 $ 338,845
Costs and expenses:
Home construction and land sales 185,318 152,412 315,793 287,783
Interest 4,271 3,174 7,318 5,914
Selling, general and administrative 25,599 19,983 44,895 38,756
Write-down of inventory --- 6,326 --- 6,326
---------- ----------- -------- --------
Operating income (loss) 6,135 (4,133) 8,943 66
Other income 51 101 201 291
---------- ----------- -------- --------
Income (loss) before income taxes 6,186 (4,032) 9,144 357
Provision (benefit) for income taxes 2,381 (1,572) 3,520 140
---------- ----------- -------- --------
Net income (loss) $ 3,805 $ (2,460) $ 5,624 $ 217
---------- ----------- -------- --------
---------- ----------- -------- --------
Preferred dividends $ 1,000 $ 1,000 $ 2,000 $ 2,000
Net income (loss) applicable to common stockholders $ 2,805 $ (3,460) $ 3,624 $ (1,783)
Weighted average number of shares (in thousands):
Basic 5,850 6,295 5,842 6,303
Diluted 8,732 6,295 6,095 6,303
Net income (loss) per common share:
Basic $ 0.48 $ (0.55) $ 0.62 $ (0.28)
Diluted $ 0.44 $ (0.55) $ 0.59 $ (0.28)
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE>
BEAZER HOMES USA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
March 30,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,624 $ 217
Adjustments to reconcile net income to
net cash used by operating activities:
Depreciation and amortization 1,344 956
Write-down of inventory 6,326
Changes in operating assets and liabilities,
net of effects of acquisitions
Increase in inventory (20,708) (34,852)
Decrease in trade accounts payable (14,879) (8,517)
Other changes (11,804) (17,867)
-------- --------
Net cash used by operating activities (40,423) (53,737)
-------- --------
Cash flows from investing activities:
Acquisitions, net of cash acquired (16,766)
Capital expenditures (2,995) (780)
-------- --------
Net cash used by investing activities (19,761) (780)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of senior notes, net 96,433
Changes in revolving credit facility, net (10,000) 50,000
Treasury stock purchased (789)
Dividend paid on preferred stock (2,000) (2,000)
-------- --------
Net cash provided by financing activities 84,433 47,211
-------- --------
Increase (decrease) in cash and cash equivalents 24,249 (7,306)
Cash and cash equivalents at beginning of period 1,267 12,942
-------- --------
Cash and cash equivalents at end of period $ 25,516 $ 5,636
-------- --------
-------- --------
</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 for the year ended September
30, 1997 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>
March 31, September 30,
1998 1997
-------- --------
<S> <C> <C>
Finished homes $ 61,026 $ 69,609
Development projects in progress 288,627 231,692
Unimproved land held for future
development 17,559 34,792
Model homes 32,371 25,852
-------- --------
$399,583 $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>
BEAZER HOMES USA, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(3) Interest
The following table sets forth certain unaudited information regarding
interest (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
During the period:
Interest incurred $5,300 $3,757 $9,916 $6,938
------ ------ ------ ------
------ ------ ------ ------
Previously capitalized interest
amortized to costs and expenses $4,271 $3,174 $7,318 $5,914
------ ------ ------ ------
------ ------ ------ ------
At the end of the period:
Capitalized interest in ending
inventory $9,453 $6,577 $9,453 $6,577
------ ------ ------ ------
------ ------ ------ ------
</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 have been restated
to conform with SFAS No. 128. Basic and diluted earnings per share are
calculated as follows:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
March 31, March 31,
------------------- -------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Earnings
Net income (loss) $ 3,805 $(2,460) $ 5,624 $ 217
Less: Dividends on preferred shares 1,000 1,000 2,000 2,000
------- ------- ------- -------
Net income (loss) applicable to common shareholders $ 2,805 $(3,460) $ 3,624 $(1,783)
------- ------- ------- -------
------- ------- ------- -------
Basic:
Net income (loss) applicable to common shareholders $ 2,805 $(3,460) $ 3,624 $(1,783)
Weighted average number of common shares outstanding 5,850 6,295 5,842 6,303
Basic earnings per share $ 0.48 $ (0.55) $ 0.62 $ (0.28)
Diluted:
Net income (loss) applicable to common shareholders $ 2,805 $(3,460) $ 3,624 $(1,783)
Plus: Dividends on preferred shares 1,000 n/a n/a n/a
------- ------- ------- -------
Net income (loss) applicable to common shareholders $ 3,805 $(3,460) $ 3,624 $(1,783)
------- ------- ------- -------
Weighted average number of common shares outstanding 5,850 6,295 5,842 6,303
Effect of dilutive securities--
Assumed conversion of Preferred Stock 2,625 n/a n/a n/a
Restricted stock 176 n/a 184 n/a
Options to acquire common stock 81 n/a 69 n/a
------- ------- ------- -------
Diluted weighted common shares outstanding 8,732 6,295 6,095 6,303
Diluted earnings per share $ 0.44 $ (0.55) $ 0.59 $ (0.28)
</TABLE>
7
<PAGE>
BEAZER HOMES USA, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
The computation of diluted earnings per share for the three and six months ended
March 31, 1997 excludes all potential common shares as these potential
securities would be antidilutive since the Company recognized a net loss to
common shareholders for those periods.
The computation of diluted earnings per share for the six months ended March 31,
1998 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
are not expected to 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 Six Months Ended
March 31, March 31,
--------------------------------- -----------------------------------
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 941 64.2% 573 1,358 44.2% 942
Southwest Region 1,058 44.3 733 1,631 27.6 1,278
Central Region 278 21.9 228 374 7.5 348
-------- -------- -------- --------
Total 2,277 48.4 1,534 3,363 31.0 2,568
-------- -------- -------- --------
-------- -------- -------- --------
Number of closings:
Southeast Region 561 22.8% 457 976 16.9% 835
Southwest Region 663 5.7 627 1,132 (7.7) 1,227
Central Region 149 4.2 143 303 9.0 278
-------- -------- -------- --------
Total 1,373 11.9 1,227 2,411 3.0 2,340
-------- -------- -------- --------
-------- -------- -------- --------
Total revenue:
Southeast Region $ 91,110 25.7% $ 72,464 $157,289 15.2% $136,533
Southwest Region 103,727 24.5 83,309 167,170 4.8 159,453
Central Region 26,486 19.7 21,989 52,490 22.5 42,859
-------- -------- -------- --------
Total $221,323 24.5 $177,762 $376,949 11.2 $338,845
-------- -------- -------- --------
-------- -------- -------- --------
Average sales price per home closed:
Southeast Region $ 161.7 2.0% $ 158.6 $ 160.7 (1.7)% $ 163.5
Southwest Region 155.4 16.9 132.9 147.1 13.2 130.0
Central Region 176.6 14.8 153.8 172.7 12.0 154.2
Total 161.2 11.2 144.9 156.3 7.9 144.8
Backlog units at end of period:
Southeast Region 983 43.1% 687
Southwest Region 978 33.8 731
Central Region 279 18.2 236
-------- --------
Total 2,240 35.4 1,654
-------- --------
-------- --------
Aggregate sales value of homes in
backlog at end of period: $350,364 40.1% $250,136
-------- --------
-------- --------
Number of active subdivisions:
Southeast Region 117 17.0% 100
Southwest Region 65 1.6 64
Central Region 32 0.0 32
-------- --------
Total 214 9.2 196
-------- --------
-------- --------
</TABLE>
(a) New orders for the six months ended March 31, 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, however the Company does not anticipate
a significant contribution to operating results during fiscal 1998.
New Orders and Backlog: New orders for the three and six months ended March 31,
1998, were up 48.4% and 31.0%, respectively, relative to the comparable periods
of the prior year. The Company believes that these increases exceeded the 4%
increase in active subdivisions at March 31, 1998, as a result of both the
strong economic conditions and the stage in the life cycle of the Company's
subdivisions, many of which have been opened during the past six months.
In addition to the strong order trends contributing to an increase in unit
backlog, the increase in sales activity in certain markets with higher average
sales prices, such as California and Florida, as well as price increases in
certain markets (principally California), contributed to a significantly higher
aggregate dollar value of homes in backlog in March 1998 compared to March 1997.
11
<PAGE>
BEAZER HOMES USA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 Six Months Ended
March 31, March 31,
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 83.7 85.7 83.8 84.9
Interest 1.9 1.8 1.9 1.7
Selling, general and administrative 11.6 11.2 11.9 11.4
Write-down of inventory -- 3.6 -- 1.9
Operating income (loss) 2.8 (2.3) 2.4 0.0
</TABLE>
Revenues: The percentage increase in revenues for the three and six months ended
March 31, 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 a result of a higher number of
closings in certain markets such as Texas, Florida and California where average
home prices are greater than the Company average, and a lower percentage of home
closings from Arizona where the average home price is less than the Company
average. Additionally, the Company recognized revenues on land sales during the
quarter of $8.5 million. 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 quarter.
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 six months ended
March 31, 1998 compared to the same periods in 1997. The decrease is largely
attributable to expansion of the Company's profitability initiatives,
specifically design centers and mortgage origination operations. Additionally,
substantially improved gross margins in the Company's California operations
contributed to the overall decrease in the cost of home construction and land
sales as a percentage of revenues for the three and six month periods ended
March 31, 1998 compared to the same periods in fiscal 1997.
Selling, General and Administrative Expense: Selling, general and administrative
expenses ("SG&A") increased as a percentage of total revenues for the three and
six month periods ended March 31, 1998 compared to the same periods in the prior
year. This increase resulted from higher overhead and marketing costs associated
with the increase in active subdivision levels in most of the Company's markets,
and an increase in the general and administrative costs of operating Beazer
Mortgage.
12
<PAGE>
BEAZER HOMES USA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Amortization of Previously Capitalized Interest: Amortization of previously
capitalized interest expense as a percentage of revenues for the three and six
months ended March 31, 1998 is greater than the comparable periods in 1997 as a
result of increased borrowing levels associated with the Company's increased
investment in inventory.
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: Beazer Mortgage recognized net operating
income prior to intercompany eliminations of $1.0 million for the three
months ended March 31, 1998. The Company recognized revenues for premiums
paid to Beazer Mortgage branch offices from third party lenders ($1.3 million
for the three months ended March 31, 1998). Closing and discount points paid
to Beazer Mortgage branch offices from the Company's homebuilding operation
are eliminated against costs of home construction in consolidation ($1.2
million for the three months ended March 31, 1998). All general and
administrative expenses of operating Beazer Mortgage are included in SG&A
($1.5 million for the three months ended March 31, 1998). The results of
operations for Beazer Mortgage were not significant for the three and six
months ended March 31, 1997 or the three months ended December 31, 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.
At March 31, 1998 the Company had $20 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
13
<PAGE>
BEAZER HOMES USA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
improved lots and accounts receivable. At March 31, 1998 the Company had
available additional borrowings of $18.2 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. During
the quarter ended December 31, 1997 the company utilized borrowings under its
credit agreement of approximately 16.7 million for acquisitions.
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 March 31, 1998 the Company
had 10,567 lots under option. At March 31, 1998, the Company had commitments
with respect to option contracts with specific performance obligations of
approximately $45.5million. 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 March 31,
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.
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 March 31, 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 and its profitability initiatives will result in 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 for redemption its Preferred Stock at the earliest
date that it believes it is likely that the majority of holders would convert
into common stock.
14
<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:
o Economic changes nationally or in one of the Company's local markets
o Volatility of mortgage interest rates
o Increased competition in some of the Company's local markets
o Increased prices for labor, land and raw materials used in the
production of houses
o Increased land development cost on projects under development
o Any delays in reacting to changing consumer preference in home design
o Delays or difficulties in implementing the Company's initiatives to
reduce its production and overhead cost structure.
o Decreased value of the Company's common stock deterring conversion of
Preferred Stock
o Delays in land development or home construction resulting from adverse
weather conditions in one of the Company's local markets
15
<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 filed a Current Report on Form 8-K on March 10, 1998
announcing the Company's new orders for the two months ended February
28, 1998.
The Company filed Current Reports on Form 8-K on March 19, 1998 and
March 31, 1998 relating to the Company's offering and closing,
respectively, of its $100 million in aggregate principal amount of 8
7/8% Senior Notes due 2008.
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: May 15, 1998 By: /s/ David S. Weiss
------------------ ----------------------------------
Name: David S. Weiss
Executive Vice President and
Chief Financial Officer
17
<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 MARCH 31, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 25,516
<SECURITIES> 0
<RECEIVABLES> 6,289
<ALLOWANCES> 0
<INVENTORY> 399,583
<CURRENT-ASSETS> 0<F1>
<PP&E> 11,120
<DEPRECIATION> 0
<TOTAL-ASSETS> 476,416
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 215,000
0
20
<COMMON> 93
<OTHER-SE> 183,254
<TOTAL-LIABILITY-AND-EQUITY> 476,416
<SALES> 376,949
<TOTAL-REVENUES> 376,949
<CGS> 323,111
<TOTAL-COSTS> 368,006
<OTHER-EXPENSES> (201)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,144
<INCOME-TAX> 3,520
<INCOME-CONTINUING> 5,624
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,624
<EPS-PRIMARY> .62
<EPS-DILUTED> .59
<FN>
<F1>THE COMPANY PRESENTS A CONDENSED BALANCE SHEET.
</FN>
</TABLE>
