e10vk
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM 10-K
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(Mark One)
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x
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Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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For
the fiscal year ended September 30,
2009
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Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Commission file number:
001-12822
BEAZER HOMES USA,
INC.
(Exact name of Registrant as specified in its charter)
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Delaware
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58-2086934
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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1000 Abernathy Road, Suite 1200, Atlanta, Georgia
30328
(Address of principal executive offices) (Zip code)
(770) 829-3700
(Registrants telephone number including area code)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Securities
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Exchanges on which Registered
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Common Stock, $.001 par value per share
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the
Act: None
Indicate by check mark if the registrant is a well-known
seasoned issuer (as defined in Rule 405 of the Securities
Act) Yes o
No x
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o
No x
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes x
No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes o
No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. x
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer x
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Smaller reporting company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Act).
Yes o
No x
The aggregate market value of the registrants Common Stock
held by non-affiliates of the registrant
(39,248,956 shares) as of March 31, 2009, based on the
closing sale price per share as reported by the New York Stock
Exchange on such date, was $39,641,446.
The number of shares outstanding of the registrants Common
Stock as of November 6, 2009 was 39,779,304.
DOCUMENTS
INCORPORATED BY REFERENCE
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Part of 10-K
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where
incorporated
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Portions of the registrants Proxy Statement for the 2010
Annual Meeting of Stockholders
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III
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BEAZER
HOMES USA, INC.
FORM 10-K
INDEX
2
References to we, us, our,
Beazer, Beazer Homes, and the
Company in this annual report on
Form 10-K
refer to Beazer Homes USA, Inc.
FORWARD-LOOKING
STATEMENTS
This Annual Report on
Form 10-K
contains forward-looking statements. These forward-looking
statements represent our expectations or beliefs concerning
future events, and it is possible that the results described in
this annual report will not be achieved. These forward-looking
statements can generally be identified by the use of statements
that include words such as estimate,
project, believe, expect,
anticipate, intend, plan,
foresee, likely, will,
goal, target or other similar words or
phrases. All forward-looking statements are based upon
information available to us on the date of this annual report.
These forward-looking statements are subject to risks,
uncertainties and other factors, many of which are outside of
our control, that could cause actual results to differ
materially from the results discussed in the forward-looking
statements, including, among other things, the matters discussed
in this annual report in the section captioned
Managements Discussion and Analysis of Financial
Condition and Results of Operations. Additional
information about factors that could lead to material changes in
performance is contained in Part I, Item 1A−
Risk Factors. Such factors may include:
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the final outcome of various putative class action lawsuits, the
derivative claims, multi-party suits and similar proceedings as
well as the results of any other litigation or government
proceedings and fulfillment of the obligations in the Deferred
Prosecution Agreement and other settlement agreements and
consent orders with governmental authorities;
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additional asset impairment charges or writedowns;
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economic changes nationally or in local markets, including
changes in consumer confidence, volatility of mortgage interest
rates and inflation;
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continued or increased downturn in the homebuilding industry;
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estimates related to homes to be delivered in the future
(backlog) are imprecise as they are subject to various
cancellation risks which cannot be fully controlled;
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continued or increased disruption in the availability of
mortgage financing;
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our cost of and ability to access capital and otherwise meet our
ongoing liquidity needs including the impact of any further
downgrades of our credit ratings or reductions in our tangible
net worth or liquidity levels;
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potential inability to comply with covenants in our debt
agreements or satisfy such obligations through repayment or
refinancing;
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increased competition or delays in reacting to changing consumer
preference in home design;
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shortages of or increased prices for labor, land or raw
materials used in housing production;
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factors affecting margins such as decreased land values
underlying land option agreements, increased land development
costs on communities under development or delays or difficulties
in implementing initiatives to reduce production and overhead
cost structure;
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the performance of our joint ventures and our joint venture
partners;
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the impact of construction defect and home warranty claims
including those related to possible installation of drywall
imported from China;
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the cost and availability of insurance and surety bonds;
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delays in land development or home construction resulting from
adverse weather conditions;
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potential delays or increased costs in obtaining necessary
permits as a result of changes to, or complying with, laws,
regulations, or governmental policies and possible penalties for
failure to comply with such laws, regulations and governmental
policies;
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effects of changes in accounting policies, standards, guidelines
or principles; or
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terrorist acts, acts of war and other factors over which the
Company has little or no control.
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Any forward-looking statement speaks only as of the date on
which such statement is made, and, except as required by law, we
undertake no obligation to update any forward-looking statement
to reflect events or circumstances after the date on which such
statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time and it is not
possible for management to predict all such factors.
3
PART I
Item 1.
Business
We are a geographically diversified homebuilder with active
operations in 16 states. Our homes are designed to appeal
to homeowners at various price points across various demographic
segments and are generally offered for sale in advance of their
construction. Our objective is to provide our customers with
homes that incorporate exceptional value and quality while
seeking to maximize our return on invested capital over time.
Our principal executive offices are located at 1000 Abernathy
Road, Suite 1200, Atlanta, Georgia 30328, telephone
(770) 829-3700.
We also provide information about our active communities through
our Internet website located at
http://www.beazer.com.
Information on our website is not a part of and shall not be
deemed incorporated by reference in this report.
Industry
Overview and Current Market Conditions
The sale of new homes has been and will likely remain a large
industry in the United States for four primary reasons:
historical growth in both population and households, demographic
patterns that indicate an increased likelihood of home ownership
as age and income increase, job creation within geographic
markets that necessitate new home construction and consumer
demand for home features that can be more easily provided in a
new home than an existing home.
In any year, the demand for new homes is closely tied to job
growth, the availability and cost of mortgage financing, the
supply of new and existing homes for sale and, importantly,
consumer confidence. Consumer confidence is perhaps the most
important of these demand variables and is the hardest one to
predict accurately because it is a function of, among other
things, consumers views of their employment and income
prospects, recent and likely future home price trends, localized
new and existing home inventory, the level of current and
near-term interest and mortgage rates, the availability of
consumer credit, valuations in stock and bond markets, and other
geopolitical factors. Moreover, because the purchase of a home
represents many buyers largest single financial
commitment, it is often also associated with significant
emotional considerations.
The supply of new homes within specific geographic markets
consists of both new homes built pursuant to pre-sale
arrangements and speculative homes (frequently referred to as
spec homes) built by home builders prior to their
sale. The ratio of pre-sold to spec homes differs both by
geographic market and over time within individual markets based
on a wide variety of factors, including the availability of land
and lots, access to construction financing, the availability and
cost of construction labor and materials, the inventory or
existing homes for sale and job growth characteristics. Consumer
preferences also play a role. In rapidly growing markets
characterized by relatively few available new homes, presale
homes are very common. In markets characterized by a significant
supply of newly built and existing homes, spec homes tend to
represent a larger portion of new home sales as builders attempt
to reduce their inventories of completed homes.
In general, high levels of employment, low mortgage interest
rates and low new home and resale inventories contribute to a
strong and growing homebuilding market environment. Conversely,
rising or continued high levels of unemployment, higher interest
rates and larger new and existing home inventories generally
lead to weak industry conditions.
While we believe that long-term fundamentals for new home
construction remain intact, beginning in mid-fiscal 2006,
accelerating through fiscal 2008 and continuing through fiscal
2009, the homebuilding environment deteriorated against a
backdrop of macroeconomic recession, declining consumer
confidence and significant tightening in the availability of
home mortgage credit. Throughout this period, most housing
markets across the United States suffered from an oversupply of
new and resale home inventory, reduced levels of consumer demand
for new homes, high cancellation rates, aggressive home sale
price and buyer incentive competition among homebuilders, and a
growing supply of foreclosed homes typically offered at
substantially reduced prices. In 2008 and continuing through
fiscal 2009, due initially to market disruptions resulting from
the deterioration in the credit quality of loans originated to
non-prime and subprime borrowers and also due to steadily
increasing unemployment, the credit markets and the mortgage
industry experienced a period of disruption characterized by
bankruptcy, financial institution failure, consolidation and an
unprecedented level of intervention by the United States federal
4
government. This mortgage crisis led to reduced availability for
mortgage products and reduced investor demand for mortgage loans
and mortgage-backed securities. These developments severely
impacted consumer confidence and demand for our homes. Although
we have recently begun to see signs that certain of these
negative market trends may be moderating at both local and
national levels, key macroeconomic indicators remain soft or
mixed. The supply of new and resale homes in the marketplace has
decreased recently, but it is still excessive for the current
level of consumer demand and is challenged by an increased
number of foreclosed homes offered at substantially reduced
prices. These pressures in the marketplace have resulted in the
use of increased sales incentives and price reductions in an
effort to generate sales and reduce inventory levels by us and
many of our competitors throughout our fiscal 2009.
The Housing and Economic Recovery Act of 2008 (HERA) was enacted
into law on July 30, 2008. Among other things, HERA
provided for a temporary first-time home buyer tax credit for
purchases made through July 1, 2009; reforms of Fannie Mae
and Freddie Mac, including adjustments to the conforming loan
limits; modernization and expansion of the FHA, including an
increase to 3.5% in the minimum down payment required for FHA
loans; and the elimination of seller-funded down payment
assistance programs for FHA loans approved after
September 30, 2008. Overall, HERA was intended to help
stabilize and add consumer confidence to the housing industry.
However, certain of the changes, such as the elimination of the
down payment assistance programs and the increase in minimum
down payments, have adversely impacted the ability of potential
homebuyers to afford to purchase a new home or obtain financing.
The down payment assistance programs were utilized for a number
of our home closings prior to fiscal 2009.
The Emergency Economic Stabilization Act of 2008 (EESA) was
enacted into law on October 3, 2008. EESA authorized up to
$700 billion in new spending authority for the United
States Secretary of the Treasury (the Secretary) to purchase,
manage and ultimately dispose of troubled assets. The provisions
of this law include an expansion of the Hope for Homeowners
Program. This program allows the Secretary to use loan
guarantees and credit enhancements so that loans can be modified
to prevent foreclosures. Also, the Secretary can consent to term
extensions, rate-reductions and principal write-downs. Federal
agencies that own mortgage loans are directed to seek
modifications prior to foreclosures.
In February 2009, the $8,000 First Time Homebuyer Tax Credit was
enacted into law. This law enables homebuyers who have not owned
a home in the past three years, subject to certain income
limits, to receive a tax credit of 10% of the purchase price of
a home up to a maximum of $8,000. In November 2009, this tax
credit was extended by Congress to June 2010 and the new law
increased the annual income limits for qualification. In
addition, the new law also added a $6,500 tax credit for
qualified existing homeowners who elect to purchase a new home.
Certain states also enacted laws which enabled certain
homebuyers to receive additional state tax credits. Availability
of these tax credits appears to have incentivized certain
homebuyers to purchase homes during the second half of fiscal
2009 although it is not possible to quantify the precise impact.
As a result of these factors, we, like many other homebuilders,
have experienced a material reduction in revenues and margins
and have incurred significant net losses in fiscal 2007 through
2009. These net losses were driven primarily by asset impairment
and lot option abandonment charges incurred in fiscal 2007, 2008
and 2009. Please see Managements Discussion and
Analysis of Results of Operations and Financial Condition
for additional information.
We have responded to this challenging environment with a
disciplined approach to the business with continued reductions
in direct construction costs, overhead expenses and land
spending. We limited our supply of unsold homes under
construction and focused on the generation of cash from our
existing inventory supply and preservation of cash on hand as we
attempted to align our land supply and inventory levels to
current expectations for home closings.
During fiscal 2009, we continued to focus on cash generation
from the sale of existing inventory supply and introduced
additional sales incentives and reduced sales prices in certain
situations in order to move this inventory. We also reevaluated
pricing and incentives offered in select communities in response
to local market conditions to generate sales on to-be-built
inventory. Certain of these changes resulted in adjustments to
our inventory valuations.
5
In fiscal 2008, we completed a comprehensive review of each of
our markets in order to refine our overall investment strategy
and to optimize capital and resource allocations in an effort to
enhance our financial position and to increase shareholder
value. This review entailed an evaluation of both external
market factors and our position in each market and resulted in
the decision formalized and announced on February 1, 2008,
to discontinue homebuilding operations in Charlotte, NC,
Cincinnati/Dayton, OH, Columbia, SC, Columbus, OH and Lexington,
KY. During the third quarter of fiscal 2008, we announced our
decision to discontinue homebuilding operations in Colorado and
Fresno, CA. As of September 30, 2009, the homebuilding
operations of these markets have ceased, but we remain committed
to our remaining customer care responsibilities (primarily
warranty-related) and will continue to market a limited number
of our remaining land positions for sale. While the underlying
basis for exiting each market was different, in each instance we
concluded we could better serve shareholder interests by
re-allocating the capital employed in these markets. The results
of operations of the homebuilding markets we exited are reported
as discontinued operations in our Consolidated Statements of
Operations.
On February 1, 2008, we exited the mortgage origination
business and entered into an exclusive preferred lender
relationship with a national mortgage provider. This exclusive
relationship offers our homebuyers the option of a simplified
financing process while enabling us to focus on our core
competency of homebuilding. Our decision to exit the mortgage
origination business was related to the problems identified by
the Audit Committees investigation of our mortgage
origination practices (see Item 3 Legal
Proceedings), the growing complexity and cost of compliance with
national, state and local lending rules, and the retrenchment
among mortgage capital sources which has had the effect of
reducing the profitability of many mortgage brokerage
activities. Our mortgage origination business is reported as a
discontinued operation in our Consolidated Statements of
Operations.
Long-Term
Business Strategy
We have developed a long-term business strategy which focuses on
the following elements in order to provide a wide range of
homebuyers with quality homes while maximizing returns on our
invested capital over the course of a housing cycle:
Geographic Diversification in Growth Markets. We compete
in a large number of geographically diverse markets in an
attempt to reduce our exposure to any particular regional
economy. Within these markets, we build homes in a variety of
new home communities. We continually review our selection of
markets based on both aggregate demographic information and our
own operating results. We use the results of these reviews to
re-allocate our investments to those markets where we believe we
can maximize our profitability and return on capital over the
next several years.
Differentiated Product. Our product strategy is to design
and build high performance homes that are more enjoyable, more
desirable and more affordable. Our eSMART homes are engineered
for energy-efficiency, cost savings and comfort. Our eSMART
initiative represents a comprehensive program focused on
environmental stewardship which seeks to make energy saving,
water conservation and improved air quality components standard
in all of our homes. These energy efficient homes minimize the
impact on the environment while reducing our homebuyers
annual operating costs. Through our
SMARTDESIGNtm
concept, we have adapted our floor plans to make them more
livable by arranging spaces to progress logically from public to
private areas. We also offer upgrade packages that give our
homebuyers the option to personalize their home with built-in
closet systems, laundry centers, multi-purpose kitchen islands
and more.
Diversity of Product Offerings. Our product strategy
further entails addressing the needs of an increasingly diverse
profile of home buyers. Within each of our markets we determine
the profile of buyers we hope to address and design
neighborhoods and homes with the specific needs of those buyers
in mind. Depending on the market, we attempt to address one or
more of the following types of home buyers: entry-level,
move-up or
retirement-oriented. The targeted buyer profiles are further
refined by information about their marital and family status,
employment, age, affluence and special interests. Recognizing
that our customers want to choose certain components of their
new home, we offer limited customization through the use of
design studios in most of our markets. These design studios
allow the
6
customer to select certain non-structural options for their
homes such as cabinetry, flooring, fixtures, appliances and wall
coverings.
Consistent Use of National Brand. Our homebuilding and
marketing activities are conducted under the name of Beazer
Homes in each of our markets. We utilize a single brand name
across our markets in order to better leverage our national and
local marketing activities. Using a single brand has allowed us
to execute successful national marketing campaigns and online
marketing practices.
Operational Scale Efficiencies. Beyond marketing
advantages, we attempt to create both national and local scale
efficiencies as a result of the scope of our operations. On a
national basis we are able to achieve volume purchasing
advantages in certain product categories, share best practices
in construction, planning and design among our markets, respond
to telephonic and electronic customer inquiries and leverage our
fixed costs in ways that improve profitability. On a local
level, while we are not generally the largest builder within our
markets, we do attempt to be a major participant within our
selected submarkets and targeted buyer profiles. There are
further design, construction and cost advantages associated with
having strong market positions within particular markets.
Balanced Land Policies. We seek to maximize our return on
capital by carefully managing our investment in land. To reduce
the risks associated with investments in land, we often use
options to control land. We generally do not speculate in land
which does not have the benefit of entitlements providing basic
development rights to the owner.
Reportable
Business Segments
We design, sell and build single-family and multi-family homes
in the following geographic regions which are presented as
reportable segments. As of September 30, 2009, the
homebuilding operations of our markets which were historically
included in our Other Homebuilding segment have
ceased and these markets are now reported as discontinued
operations in our Consolidated Statements of Operations.
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Segment/State
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Market(s) / Year
Entered
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West:
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Arizona
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Phoenix (1993)
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California
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Los Angeles County (1993), Orange County (1993), Riverside and
San Bernardino Counties (1993), San Diego County
(1992), Ventura County (1993), Sacramento (1993), Kern County
(2005)
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Nevada
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Las Vegas (1993)
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New Mexico
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Albuquerque (2005)
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Texas
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Dallas/Ft. Worth (1995), Houston (1995)
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East:
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Maryland/Delaware
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Baltimore (1998), Metro-Washington, D.C. (1998), Delaware
(2003)
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New Jersey/Pennsylvania
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Central and Southern New Jersey (1998), Bucks County, PA (1998)
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Virginia
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Fairfax County (1998), Loudoun County (1998), Prince William
County (1998)
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North Carolina
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Raleigh/Durham (1992)
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Indiana
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Indianapolis (2002)
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Tennessee
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Nashville (1987)
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Southeast:
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Florida
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Jacksonville (1993), Fort Myers/Naples (1996), Tampa/St.
Petersburg (1996), Orlando (1997), Sarasota (2005), Tallahassee
(2006), Panama City (2008)
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Georgia
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Atlanta (1985), Savannah (2005)
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South Carolina
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Charleston (1987), Myrtle Beach (2002)
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Financial
Services:
We provide title services to our customers in several of our
markets and report these services under our Financial Services
reportable segment.
7
Seasonal
and Quarterly Variability
Our homebuilding operating cycle generally reflects higher
levels of new home order activity in the second and third fiscal
quarters and increased closings in the third and fourth fiscal
quarters. However, during periods of an economic downturn in the
industry such as we have experienced in recent years, decreased
revenues and closings as compared to prior periods including
prior quarters, will typically reduce seasonal patterns.
Markets
and Product Description
We evaluate a number of factors in determining which geographic
markets to enter as well as which consumer segments to target
with our homebuilding activities. We attempt to anticipate
changes in economic and real estate conditions by evaluating
such statistical information as the historical and projected
growth of the population; the number of new jobs created or
projected to be created; the number of housing starts in
previous periods; building lot availability and price; housing
inventory; level of competition; and home sale absorption rates.
We generally seek to differentiate ourselves from our
competition in a particular market with respect to customer
service, product type, and design and construction quality. We
maintain the flexibility to alter our product mix within a given
market, depending on market conditions. In determining our
product mix, we consider demographic trends, demand for a
particular type of product, consumer preferences, margins,
timing and the economic strength of the market. Although some of
our homes are priced at the upper end of the market, and we
offer a selection of amenities and home customization options,
we generally do not build custom homes. We attempt
to maximize efficiency by using standardized design plans
whenever possible. In all of our home offerings, we attempt to
maximize customer satisfaction by incorporating quality and
energy-efficient materials, distinctive design features,
convenient locations and competitive prices. Specifically, our
eSMART homes represent a comprehensive program focused on
environmental stewardship which seeks to make energy saving,
water conservation and improved air quality components standard
in all of our homes. These energy efficient homes minimize the
impact on the environment while reducing our homebuyers
annual operating costs.
During fiscal year 2009, the average sales price of our homes
closed related to continuing operations was approximately
$230,900. The following table summarizes certain operating
information of our reportable homebuilding segments and our
discontinued homebuilding operations as of and for the years
ended September 30, 2009, 2008 and 2007 (dollars in
thousands). Please see Managements Discussion and
Analysis of Results of Operations and Financial Condition
for additional information.
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2009
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2008
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2007
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Number of
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Number of
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Number of
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Average
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Homes
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Average
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Homes
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Average
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Homes
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Closing
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Closed
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Closing Price
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Closed
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Closing Price
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Closed
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Price
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West
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1,916
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$
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216.3
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2,777
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$
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240.5
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4,369
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$
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288.5
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East
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1,573
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257.5
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2,405
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279.9
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2,821
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313.2
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Southeast
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841
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214.6
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1,515
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232.0
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2,970
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258.9
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Continuing Operations
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4,330
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$
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230.9
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6,697
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$
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252.7
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10,160
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$
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286.7
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued Operations
|
|
|
58
|
|
|
$
|
257.1
|
|
|
|
995
|
|
|
$
|
221.8
|
|
|
|
1,860
|
|
|
$
|
226.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009
|
|
|
September 30, 2008
|
|
|
September 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units in
|
|
|
Dollar Value
|
|
|
Units in
|
|
|
Dollar Value
|
|
|
Units in
|
|
|
Dollar Value
|
|
|
|
Backlog
|
|
|
in Backlog
|
|
|
Backlog
|
|
|
in Backlog
|
|
|
Backlog
|
|
|
in Backlog
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
West
|
|
|
445
|
|
|
$
|
92,734
|
|
|
|
527
|
|
|
$
|
117,721
|
|
|
|
805
|
|
|
$
|
217,122
|
|
East
|
|
|
581
|
|
|
|
154,390
|
|
|
|
485
|
|
|
|
132,766
|
|
|
|
1,317
|
|
|
|
410,659
|
|
Southeast
|
|
|
167
|
|
|
|
33,642
|
|
|
|
306
|
|
|
|
67,959
|
|
|
|
490
|
|
|
|
123,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations
|
|
|
1,193
|
|
|
$
|
280,766
|
|
|
|
1,318
|
|
|
$
|
318,446
|
|
|
|
2,612
|
|
|
$
|
751,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
Corporate
Operations
We perform all or most of the following functions at our
corporate office:
|
|
|
|
|
evaluate and select geographic markets;
|
|
|
allocate capital resources to particular markets for land
acquisitions;
|
|
|
maintain and develop relationships with lenders and capital
markets to create access to financial resources;
|
|
|
plan and design homes and community projects;
|
|
|
operate and manage information systems and technology support
operations; and
|
|
|
monitor the operations of our subsidiaries and divisions.
|
We allocate capital resources necessary for new investments in a
manner consistent with our overall business strategy. We will
vary the capital allocation based on market conditions, results
of operations and other factors. Capital commitments are
determined through consultation among selected executive and
operational personnel, who play an important role in ensuring
that new investments are consistent with our strategy.
Centralized financial controls are also maintained through the
standardization of accounting and financial policies and
procedures.
Field
Operations
The development and construction of each new home community is
managed by our operating divisions, each of which is generally
led by a market leader who, in turn, reports directly to our
Chief Executive Officer. At the development stage, a manager
(who may be assigned to several communities and reports to the
market leader of the division) supervises development of
buildable lots. Together with our operating divisions, our field
teams are equipped with the skills to complete the functions of
identification of land acquisition opportunities, land
entitlement, land development, construction, marketing, sales
and warranty service. Beginning in fiscal 2008, the accounting,
accounts payable, billing and purchasing functions of our field
operations are concentrated in three regional accounting centers.
Land
Acquisition and Development
Generally, the land we acquire is purchased only after necessary
entitlements have been obtained so that we have the right to
begin development or construction as market conditions dictate.
During the downturn in the homebuilding industry, we have made
very few significant land acquisitions but we have continued to
consider attractive opportunities as they arise. We expect to
continue to consider land acquisition opportunities as the
market improves and particularly in markets where our land bank
has been depleted. In a very small number of situations, we will
purchase property without all necessary entitlements where we
perceive an opportunity to build on such property in a manner
consistent with our strategy. The term entitlements
refers to subdivision approvals, development agreements,
tentative maps or recorded plats, depending on the jurisdiction
within which the land is located. Entitlements generally give a
developer the right to obtain building permits upon compliance
with conditions that are usually within the developers
control. Although entitlements are ordinarily obtained prior to
the purchase of land, we are still required to obtain a variety
of other governmental approvals and permits during the
development process.
We select our land for development based upon a variety of
factors, including:
|
|
|
|
|
internal and external demographic and marketing studies;
|
|
|
suitability for development during the time period of one to
five years from the beginning of the development process to the
last closing;
|
|
|
financial review as to the feasibility of the proposed project,
including profit margins and returns on capital employed;
|
|
|
the ability to secure governmental approvals and entitlements;
|
|
|
environmental and legal due diligence;
|
|
|
competition in the area;
|
|
|
proximity to local traffic corridors and amenities; and
|
|
|
managements judgment as to the real estate market and
economic trends and our experience in a particular market.
|
9
We generally purchase land or obtain an option to purchase land,
which, in either case, requires certain site improvements prior
to construction. Where required, we then undertake or, in the
case of land under option, the grantor of the option then
undertakes, the development activities (through contractual
arrangements with local developers), which include site planning
and engineering, as well as constructing road, sewer, water,
utilities, drainage and recreational facilities and other
amenities. When available in certain markets, we also buy
finished lots that are ready for construction.
We strive to develop a design and marketing concept for each of
our communities, which include determination of size, style and
price range of the homes, layout of streets, layout of
individual lots and overall community design. The product line
offered in a particular new home community depends upon many
factors, including the housing generally available in the area,
the needs of a particular market and our cost of lots in the new
home community. We are, however, often able to use standardized
home design plans.
Option Contracts. We acquire certain lots by means of
option contracts. Option contracts generally require the payment
of a cash deposit or issuance of a letter of credit for the
right to acquire lots during a specified period of time at a
fixed or variable price.
Under option contracts, purchase of the properties is contingent
upon satisfaction of certain requirements by us and the sellers.
Our liability under option contracts is generally limited to
forfeiture of the non-refundable deposits, letters of credit and
other non-refundable amounts incurred, which aggregated
approximately $41.9 million at September 30, 2009. At
September 30, 2009, future amounts under option contracts
aggregated approximately $306.2 million, net of cash
deposits.
The following table sets forth, by reportable segment, land
controlled by us as of September 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lots Owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Lots
|
|
|
|
|
|
|
|
|
Homes Under
|
|
|
Finished
|
|
|
Lots for Current
|
|
|
Lots for Future
|
|
|
Land Held
|
|
|
Total Lots
|
|
|
|
Under
|
|
|
|
Total Lots
|
|
|
|
|
Construction (2)
|
|
|
Lots
|
|
|
Development
|
|
|
Development
|
|
|
for Sale
|
|
|
Owned (1)
|
|
|
|
Contract
|
|
|
|
Controlled
|
|
West
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arizona
|
|
|
|
141
|
|
|
|
713
|
|
|
|
118
|
|
|
|
650
|
|
|
|
14
|
|
|
|
1,636
|
|
|
|
|
199
|
|
|
|
|
1,835
|
|
California
|
|
|
|
235
|
|
|
|
241
|
|
|
|
-
|
|
|
|
4,267
|
|
|
|
217
|
|
|
|
4,960
|
|
|
|
|
-
|
|
|
|
|
4,960
|
|
Nevada
|
|
|
|
107
|
|
|
|
1,031
|
|
|
|
655
|
|
|
|
249
|
|
|
|
-
|
|
|
|
2,042
|
|
|
|
|
820
|
|
|
|
|
2,862
|
|
Texas
|
|
|
|
348
|
|
|
|
1,123
|
|
|
|
1,124
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,595
|
|
|
|
|
588
|
|
|
|
|
3,183
|
|
New Mexico
|
|
|
|
23
|
|
|
|
62
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
85
|
|
|
|
|
-
|
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
Total West
|
|
|
|
854
|
|
|
|
3,170
|
|
|
|
1,897
|
|
|
|
5,166
|
|
|
|
231
|
|
|
|
11,318
|
|
|
|
|
1,607
|
|
|
|
|
12,925
|
|
|
|
|
|
|
|
|
|
East
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Virginia
|
|
|
|
101
|
|
|
|
238
|
|
|
|
133
|
|
|
|
-
|
|
|
|
14
|
|
|
|
486
|
|
|
|
|
88
|
|
|
|
|
574
|
|
Maryland
|
|
|
|
161
|
|
|
|
921
|
|
|
|
835
|
|
|
|
872
|
|
|
|
-
|
|
|
|
2,789
|
|
|
|
|
-
|
|
|
|
|
2,789
|
|
Indiana
|
|
|
|
224
|
|
|
|
889
|
|
|
|
1,585
|
|
|
|
-
|
|
|
|
251
|
|
|
|
2,949
|
|
|
|
|
232
|
|
|
|
|
3,181
|
|
North Carolina (3)
|
|
|
|
88
|
|
|
|
290
|
|
|
|
184
|
|
|
|
21
|
|
|
|
-
|
|
|
|
583
|
|
|
|
|
47
|
|
|
|
|
630
|
|
Tennessee
|
|
|
|
106
|
|
|
|
238
|
|
|
|
959
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,303
|
|
|
|
|
460
|
|
|
|
|
1,763
|
|
New Jersey
|
|
|
|
98
|
|
|
|
161
|
|
|
|
165
|
|
|
|
152
|
|
|
|
-
|
|
|
|
576
|
|
|
|
|
220
|
|
|
|
|
796
|
|
|
|
|
|
|
|
|
|
Total East
|
|
|
|
778
|
|
|
|
2,737
|
|
|
|
3,861
|
|
|
|
1,045
|
|
|
|
265
|
|
|
|
8,686
|
|
|
|
|
1,047
|
|
|
|
|
9,733
|
|
|
|
|
|
|
|
|
|
Southeast
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Georgia (3)
|
|
|
|
16
|
|
|
|
118
|
|
|
|
162
|
|
|
|
88
|
|
|
|
-
|
|
|
|
384
|
|
|
|
|
-
|
|
|
|
|
384
|
|
Florida
|
|
|
|
199
|
|
|
|
604
|
|
|
|
1,335
|
|
|
|
308
|
|
|
|
39
|
|
|
|
2,485
|
|
|
|
|
1,397
|
|
|
|
|
3,882
|
|
South Carolina
|
|
|
|
113
|
|
|
|
521
|
|
|
|
972
|
|
|
|
76
|
|
|
|
-
|
|
|
|
1,682
|
|
|
|
|
1,270
|
|
|
|
|
2,952
|
|
|
|
|
|
|
|
|
|
Total Southeast
|
|
|
|
328
|
|
|
|
1,243
|
|
|
|
2,469
|
|
|
|
472
|
|
|
|
39
|
|
|
|
4,551
|
|
|
|
|
2,667
|
|
|
|
|
7,218
|
|
|
|
|
|
|
|
|
|
Discontinued Operations
|
|
|
|
7
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
755
|
|
|
|
762
|
|
|
|
|
-
|
|
|
|
|
762
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
1,967
|
|
|
|
7,150
|
|
|
|
8,227
|
|
|
|
6,683
|
|
|
|
1,290
|
|
|
|
25,317
|
|
|
|
|
5,321
|
|
|
|
|
30,638
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes 88 Undeveloped Lots (raw land that is
expected to be developed, currently or in the future, into the
respective number of lots reflected in this table). |
10
|
|
|
(2) |
|
The category Homes Under Construction represents
lots upon which construction of a home has commenced. |
|
(3) |
|
Subsequent to September 30, 2009, we entered into an
agreement with a residential development investor to build and
market 462 homes in five existing communities in the Metro
Atlanta area and 329 homes in one existing community in Raleigh,
North Carolina. |
The following table sets forth, by reportable segment, land held
for development, land held for future development and land held
for sale as of September 30, 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land Held for
|
|
|
|
|
|
|
|
|
Land Held for
|
|
|
|
Future
|
|
|
|
Land Held for
|
|
|
|
|
Development
|
|
|
|
Development
|
|
|
|
Sale
|
|
West
|
|
|
$
|
179,025
|
|
|
|
$
|
345,050
|
|
|
|
$
|
8,171
|
|
East
|
|
|
|
229,910
|
|
|
|
|
49,097
|
|
|
|
|
2,927
|
|
Southeast
|
|
|
|
78,522
|
|
|
|
|
23,687
|
|
|
|
|
423
|
|
Discontinued Operations
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
30,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
487,457
|
|
|
|
$
|
417,834
|
|
|
|
$
|
42,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint Ventures. We participate in land development joint
ventures in which Beazer Homes has less than a controlling
interest. We enter into joint ventures in order to acquire
attractive land positions, to manage our risk profile and to
leverage our capital base. Our joint ventures are typically
entered into with developers, other homebuilders and financial
partners to develop finished lots for sale to the joint
ventures members and other third parties. During fiscal
2009, 2008 and 2007 respectively, we wrote down our investment
in certain of our joint ventures by $14.8 million,
$68.8 million and $28.6 million as a result of
impairments of inventory held within those ventures. In fiscal
2007, we also recorded $3.4 million in contractual
obligation abandonments related to those ventures.
Our joint ventures typically obtain secured acquisition,
development and construction financing. At September 30,
2009, our unconsolidated joint ventures had borrowings
outstanding totaling $422.7 million of which
$327.9 million related to one joint venture in which we are
a 2.58% partner. In some instances, Beazer Homes and our joint
venture partners have provided varying levels of guarantees of
debt of our unconsolidated joint ventures. At September 30,
2009, these guarantees included, for certain joint ventures,
construction completion guarantees, loan to value maintenance
agreements, repayment guarantees and environmental indemnities
(see Note 3 to the Consolidated Financial Statements for
additional information).
Construction
We typically act as the general contractor for the construction
of our new home communities. Our project development operations
are controlled by our operating divisions, whose employees
supervise the construction of each new home community,
coordinate the activities of subcontractors and suppliers,
subject their work to quality and cost controls and assure
compliance with zoning and building codes. We specify that
quality, durable materials be used in the construction of our
homes. Our subcontractors follow design plans prepared by
architects and engineers who are retained or directly employed
by us and whose designs are geared to the local market. A
majority of our home plans are prepared in our corporate office,
allowing us to ensure the quality of the plans we build as well
as to enable us to reduce direct costs through our value
engineering efforts.
Subcontractors typically are retained on a
project-by-project
basis to complete construction at a fixed price. Agreements with
our subcontractors and materials suppliers are generally entered
into after competitive bidding. In connection with this
competitive bid process, we obtain information from prospective
subcontractors and vendors with respect to their financial
condition and ability to perform their agreements with us. We do
not maintain significant inventories of construction materials,
except for materials being utilized for homes under
construction. We have numerous suppliers of raw materials and
services used in our business, and such materials and services
have been, and continue to be, available. Material prices may
fluctuate, however, due to various factors, including
11
demand or supply shortages, which may be beyond the control of
our vendors. Whenever possible, we enter into regional and
national supply contracts with certain of our vendors. We
believe that our relationships with our suppliers and
subcontractors are good.
Construction time for our homes depends on the availability of
labor, materials and supplies, product type and location. Homes
are designed to promote efficient use of space and materials,
and to minimize construction costs and time. In all of our
markets, construction of a home is typically completed within
three to six months following commencement of construction. At
September 30, 2009, excluding models, we had 1,646 homes at
various stages of completion of which 959 were under contract
and included in backlog at such date and 687 homes (270 were
completed and 417 under construction) were not under a sales
contract, either because the construction of the home was begun
without a sales contract or because the original sales contract
had been cancelled.
Warranty
Program
For certain homes sold through March 31, 2004 (and in
certain markets through July 31, 2004), we self-insured our
structural warranty obligations through our wholly owned risk
retention group. We continue to maintain reserves to cover
potential claims on home covered under this warranty program.
Beginning with homes sold April 1, 2004 (August 1,
2004 in certain markets), our warranties are issued,
administered, and insured, subject to applicable self-insured
retentions, by independent third parties. We currently provide a
limited warranty (ranging from one to two years) covering
workmanship and materials per our defined performance quality
standards. In addition, we provide a limited warranty (generally
ranging from a minimum of five years up to the period covered by
the applicable statute of repose) covering only certain defined
construction defects. We also provide a defined structural
element warranty with single-family homes and townhomes in
certain states.
Since we subcontract our homebuilding work to subcontractors who
generally provide us with an indemnity and a certificate of
insurance prior to receiving payments for their work, many
claims relating to workmanship and materials are the primary
responsibility of our subcontractors.
In addition, we maintain third-party insurance, subject to
applicable self-insured retentions, for most construction
defects that we encounter in the normal course of business. We
believe that our warranty and litigation accruals and
third-party insurance are adequate to cover the ultimate
resolution of our potential liabilities associated with known
and anticipated warranty and construction defect related claims
and litigation. Please see Managements Discussion
and Analysis of Results of Operations and Financial
Condition and Note 12, Contingencies
to the Consolidated Financial Statements for additional
information.
There can be no assurance, however, that the terms and
limitations of the limited warranty will be effective against
claims made by the homebuyers, that we will be able to renew our
insurance coverage or renew it at reasonable rates, that we will
not be liable for damages, the cost of repairs,
and/or the
expense of litigation surrounding possible construction defects,
soil subsidence or building related claims or that claims will
not arise out of events or circumstances not covered by
insurance
and/or not
subject to effective indemnification agreements with our
subcontractors.
Marketing
and Sales
We make extensive use of advertising and other promotional
activities, including our Internet website
(http://www.beazer.com),
mass-media advertisements, brochures, direct mail, billboards
and the placement of strategically located signboards in the
immediate areas of our developments.
We normally build, decorate, furnish and landscape model homes
for each community and maintain
on-site
sales offices. At September 30, 2009, we maintained 341
model homes, of which 241 were owned, 80 were financed and 20
were leased from third parties pursuant to sale and leaseback
agreements. We believe that model homes play a particularly
important role in our marketing efforts.
We generally sell our homes through commissioned new home sales
counselors (who typically work from the sales offices located in
the model homes used in the subdivision) as well as through
independent brokers. Our personnel are available to assist
prospective homebuyers by providing them with floor plans, price
information and tours of model homes, and in connection with the
selection of options. The selection of interior features is a
principal
12
component of our marketing and sales efforts. Sales personnel
are trained by us and attend periodic meetings to be updated on
sales techniques, competitive products in the area, the
availability of financing, construction schedules, marketing and
advertising plans and Company policies including compliance,
which management believes results in a sales force with
extensive knowledge of our operating policies and housing
products. Our policy also provides that sales personnel be
licensed real estate agents where required by law. Depending on
market conditions, we also at times begin construction on a
number of homes for which no signed sales contract exists. The
use of an inventory of such homes satisfies the requirements of
relocated personnel and of independent brokers, who often
represent customers who require a completed home within
60 days. We sometimes use various sales incentives in order
to attract homebuyers. The use of incentives depends largely on
local economic and competitive market conditions.
During fiscal 2009, we established a national new home contact
center within our existing leased premises in Phoenix, Arizona.
This contact center responds to telephonic and electronic
(email) inquiries from prospective home buyers by providing any
required information and then scheduling an appointment with a
new home sales counselor in one of our new home communities.
Customer
Financing
Through January 31, 2008, Beazer Mortgage Corporation
(Beazer Mortgage) financed certain of our mortgage lending
activities with borrowings under its warehouse line of credit or
from general corporate funds prior to selling the loans and
their servicing rights shortly after origination to third-party
investors. Beazer Mortgage provided qualified homebuyers
numerous financing options, including conventional, FHA and
Veterans Administration (VA) financing programs. Effective
February 1, 2008, we exited the mortgage origination
business and entered into an exclusive preferred lender
arrangement with a national, third-party mortgage provider. The
operating results of Beazer Mortgage are included in loss from
discontinued operations, net of tax in the Consolidated
Statements of Operations for all periods presented. See
Item 3 Legal Proceedings for discussion of the
investigations and litigation related to our mortgage
origination business.
We continue to offer title insurance services to our homebuyers
in several of our markets.
Competition
The development and sale of residential properties is highly
competitive and fragmented, particularly in the current weak
housing environment. We compete for residential sales on the
basis of a number of interrelated factors, including location,
reputation, amenities, design, quality and price, with numerous
large and small homebuilders, including some homebuilders with
nationwide operations and greater financial resources
and/or lower
costs than us. We also compete for residential sales with
individual resales of existing homes (including a growing number
of foreclosed homes offered at substantially reduced prices),
available rental housing and, to a lesser extent, resales of
condominiums. In recent months, short sales (a transaction in
which the sellers mortgage lender agrees to accept a
payoff of less than the balance due on the loan) and
foreclosures have become a sizable portion of the existing home
market.
We utilize our experience within our geographic markets and
breadth of product line to vary our regional product offerings
to reflect changing market conditions. We strive to respond to
market conditions and to capitalize on the opportunities for
advantageous land acquisitions in desirable locations. To
further strengthen our competitive position, we rely on quality
design, construction and service to provide customers with a
higher measure of home.
Government
Regulation and Environmental Matters
Generally, our land is purchased with entitlements, giving us
the right to obtain building permits upon compliance with
specified conditions, which generally are within our control.
Upon compliance with such conditions, we are able to obtain
building permits. The length of time necessary to obtain such
permits and approvals affects the carrying costs of unimproved
property acquired for the purpose of development and
construction. In addition, the continued effectiveness of
permits already granted is subject to factors such as changes in
policies, rules and regulations and their interpretation and
application. Many governmental authorities have imposed impact
fees as a means of defraying the cost of providing certain
governmental services to developing areas. To date, the
governmental approval processes discussed above have not had a
material adverse effect on our development
13
activities, and indeed all homebuilders in a given market face
the same fees and restrictions. There can be no assurance,
however, that these and other restrictions will not adversely
affect us in the future.
We may also be subject to periodic delays or may be precluded
entirely from developing communities due to building
moratoriums, slow-growth or no-growth
initiatives or building permit allocation ordinances which could
be implemented in the future in the states and markets in which
we operate. Substantially all of our land is entitled and,
therefore, the moratoriums generally would only adversely affect
us if they arose from health, safety and welfare issues such as
insufficient water or sewage facilities. Local and state
governments also have broad discretion regarding the imposition
of development fees for communities in their jurisdictions.
These fees are normally established, however, when we receive
recorded final maps and building permits. We are also subject to
a variety of local, state and federal statutes, ordinances,
rules and regulations concerning the protection of health and
the environment. These laws may result in delays, cause us to
incur substantial compliance and other costs, and prohibit or
severely restrict development in certain environmentally
sensitive regions or areas.
In order to provide homes to homebuyers qualifying for
FHA-insured or VA-guaranteed mortgages, we must construct homes
in compliance with FHA and VA regulations. Our title
subsidiaries are subject to various licensing requirements and
real estate laws and regulations in the states in which they do
business. These laws and regulations include provisions
regarding operating procedures, investments, lending and privacy
disclosures, forms of policies and premiums.
In some states, we are required to be registered as a licensed
contractor and comply with applicable rules and regulations.
Also, in various states, our new home counselors are required to
be licensed real estate agents and to comply with the laws and
regulations applicable to real estate agents.
Failure to comply with any of these laws or regulations could
result in loss of licensing and a restriction of our business
activities in the applicable jurisdiction.
Bonds and
Other Obligations
In connection with the development of our communities, we are
frequently required to provide letters of credit and
performance, maintenance and other bonds in support of our
related obligations with respect to such developments. The
amount of such obligations outstanding at any time varies in
accordance with our pending development activities. In the event
any such bonds or letters of credit are drawn upon, we would be
obligated to reimburse the issuer of such bonds or letters of
credit. At September 30, 2009 we had approximately
$40.1 million and $237.2 million of outstanding
letters of credit and performance bonds, respectively, related
to our obligations to local governments to construct roads and
other improvements in various developments, which were in
addition to outstanding letters of credit of approximately
$5.5 million related to our land option contracts.
Employees
and Subcontractors
At September 30, 2009, we employed 901 persons, of
whom 304 were sales and marketing personnel and 177 were
involved in construction. Although none of our employees are
covered by collective bargaining agreements, certain of the
subcontractors engaged by us are represented by labor unions or
are subject to collective bargaining arrangements. We believe
that our relations with our employees and subcontractors are
good. In response to the weakness in the homebuilding industry
and economy in general over the past few years, as of
September 30, 2009, we had reduced our overall number of
employees by 543 or 38% as compared to September 30, 2008,
or a cumulative reduction of 79% since September 30, 2006.
Available
Information
Our Internet website address is www.beazer.com. Our annual
reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and amendments to those reports filed or furnished pursuant to
section 13(a) or 15(d) of the Exchange Act are available
free of charge through our website as soon as reasonably
practicable after we electronically file with or furnish them to
the Securities and Exchange Commission (SEC) and are available
in print to any stockholder who requests a printed copy. The
public may also read and copy any materials that we file with
the SEC at the SECs Public Reference Room at
100 F Street N.E.,
14
Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
Additionally, the SEC maintains a website that contains reports,
proxy statements, information statements and other information
regarding issuers, including us, that file electronically with
the SEC at www.sec.gov.
In addition, many of our corporate governance documents are
available on our website at www.beazer.com. Specifically, our
Audit, Finance, Compensation and Nominating/Corporate Governance
Committee Charters, our Corporate Governance Guidelines and Code
of Business Conduct and Ethics are available. Each of these
documents is available in print to any stockholder who
requests it.
The content on our website is available for information purposes
only and is not a part of and shall not be deemed incorporated
by reference in this report.
Item 1A.
Risk Factors
The
homebuilding industry is experiencing a severe downturn that may
continue for an indefinite period and continue to adversely
affect our business, results of operations and
stockholders equity.
Most housing markets across the United States continue to be
characterized by an oversupply of both new and resale home
inventory, including foreclosed homes, reduced levels of
consumer demand for new homes, increased cancellation rates,
aggressive price competition among homebuilders and increased
incentives for home sales. As a result of these factors, we,
like many other homebuilders, have experienced a material
reduction in revenues and margins. These challenging market
conditions are expected to continue for the foreseeable future
and, in the near term, these conditions may further deteriorate.
We expect that continued weakness in the homebuilding market
would adversely affect our business, results of operations and
stockholders equity as compared to prior periods and could
result in additional inventory impairments in the future.
During the past few years, we have experienced elevated levels
of cancellations by potential homebuyers although the level of
cancellations has improved significantly during the last few
quarters. Our backlog reflects the number and value of homes for
which we have entered into a sales contract with a customer but
have not yet delivered the home. Although these sales contracts
typically require a cash deposit and do not make the sale
contingent on the sale of the customers existing home, in
some cases a customer may cancel the contract and receive a
complete or partial refund of the deposit as a result of local
laws or as a matter of our business practices. If the current
industry downturn continues, economic conditions continue to
deteriorate or if mortgage financing becomes less accessible,
more homebuyers may have an incentive to cancel their contracts
with us, even where they might be entitled to no refund or only
a partial refund, rather than complete the purchase. Significant
cancellations have had, and could have, a material adverse
effect on our business as a result of lost sales revenue and the
accumulation of unsold housing inventory. In particular, our
cancellation rates for the fiscal quarter and fiscal year ended
September 30, 2009 were 34.7% and 31.4%, respectively. It
is important to note that both backlog and cancellation metrics
are operational, rather than accounting data, and should be used
only as a general gauge to evaluate performance. There is an
inherent imprecision in these metrics based on an evaluation of
qualitative factors during the transaction cycle.
Based on our impairment tests and consideration of the current
and expected future market conditions, we recorded inventory
impairment charges of $102.1 million, lot option
abandonment charges of $5.0 million and non-cash goodwill
impairment charges totaling $16.1 million during fiscal
2009. During fiscal 2009, we also wrote down our investment in
certain of our joint ventures reflecting $14.8 million of
impairments of inventory held within those ventures. While we
believe that no additional joint venture investment or inventory
impairments existed as of September 30, 2009, future
economic or financial developments, including general interest
rate increases, poor performance in either the national economy
or individual local economies, or our ability to meet our
projections could lead to future impairments.
15
Our home
sales and operating revenues could decline due to macro-economic
and other factors outside of our control, such as changes in
consumer confidence, declines in employment levels and increases
in the quantity and decreases in the price of new homes and
resale homes in the market.
Changes in national and regional economic conditions, as well as
local economic conditions where we conduct our operations and
where prospective purchasers of our homes live, may result in
more caution on the part of homebuyers and, consequently, fewer
home purchases. These economic uncertainties involve, among
other things, conditions of supply and demand in local markets
and changes in consumer confidence and income, employment
levels, and government regulations. These risks and
uncertainties could periodically have an adverse effect on
consumer demand for and the pricing of our homes, which could
cause our operating revenues to decline. Additional reductions
in our revenues could, in turn, further negatively affect the
market price of our securities.
We are
the subject of pending civil litigation which could require us
to pay substantial damages or could otherwise have a material
adverse effect on us. The failure to fulfill our obligations
under the Deferred Prosecution Agreement (the DPA) with the
United States Attorney (or related agreements) and the consent
order with the SEC could have a material adverse effect on our
operations.
On July 1, 2009, we entered into the DPA with the United
States Attorney for the Western District of North Carolina and a
separate but related agreement with the United States Department
of Housing and Urban Development (HUD) and the Civil Division of
the United States Department of Justice (the HUD Agreement).
Under the DPA, we are obligated to make payments to a
restitution fund in an amount not to exceed $50 million. As
of September 30, 2009, we have been credited with making
$10 million of such payments. However, the future payments
to the restitution fund will be equal to 4% of adjusted
EBITDA as defined in the DPA for the first to occur of
(x) a period of 60 months and (y) the total of
all payments to the restitution fund equaling $50 million.
In the event such payments do not equal at least
$50 million at the end of 60 months then, under the
HUD Agreement, the obligations to make restitution payments will
continue until the first to occur of (a) 24 months or
(b) the date that $48 million has been paid into the
restitution fund. Our obligation to make such payments could
limit our ability to invest in our business or make payments of
principal or interest on our outstanding debt. In addition, in
the event we fail to comply with our obligations under the DPA
or the HUD Agreement various federal authorities could bring
criminal or civil charges against us which could be material to
our consolidated financial position, results of operations and
liquidity.
We and certain of our current and former employees, officers and
directors have been named as defendants in securities lawsuits,
class action lawsuits, lawsuits regarding Employee Retirement
Income Security Act (ERISA) claims, and derivative shareholder
actions. In addition, certain of our subsidiaries have been
named in class action and multi-party lawsuits regarding claims
made by homebuyers. While a number of these suits have been
dismissed
and/or
settled, we cannot be assured that new claims by different
plaintiffs will not be brought in the future. We cannot predict
or determine the timing or final outcome of the current lawsuits
or the effect that any adverse determinations in the lawsuits
may have on us. An unfavorable determination in any of the
lawsuits could result in the payment by us of substantial
monetary damages which may not be covered by insurance. Further,
the legal costs associated with the lawsuits and the amount of
time required to be spent by management and the Board of
Directors on these matters, even if we are ultimately
successful, could have a material adverse effect on our
business, financial condition and results of operations. In
addition to expenses incurred to defend the Company in these
matters, under Delaware law and our bylaws, we may have an
obligation to indemnify our current and former officers and
directors in relation to these matters. We have obligations to
advance legal fees and expenses to certain directors and
officers, and we have advanced, and may continue to advance,
legal fees and expenses to certain other current and former
employees.
In connection with the settlement agreement with the SEC entered
into on September 24, 2008, we consented, without admitting
or denying any wrongdoing, to a cease and desist order requiring
future compliance with certain provisions of the federal
securities laws and regulations. If we are found to be in
violation of the order in the future, we may be subject to
penalties and other adverse consequences as a result of the
prior actions which could be material to our consolidated
financial position, results of operations and liquidity.
Our insurance carriers may seek to rescind or deny coverage with
respect to certain of the pending lawsuits, or we may not have
sufficient coverage under such policies. If the insurance
companies are successful in rescinding or
16
denying coverage or if we do not have sufficient coverage under
our policies, our business, financial condition and results of
operations could be materially adversely affected.
We are
dependent on the services of certain key employees, and the loss
of their services could hurt our business.
Our future success depends upon our ability to attract, train,
assimilate and retain skilled personnel. If we are unable to
retain our key employees or attract, train, assimilate or retain
other skilled personnel in the future, it could hinder our
business strategy and impose additional costs of identifying and
training new individuals. Competition for qualified personnel in
all of our operating markets is intense.
Recent
and potential future downgrades of our credit ratings could
adversely affect our access to capital and could otherwise have
a material adverse effect on us.
During the three months ended June 30, 2009, S&P
lowered the Companys corporate credit rating from CCC+ to
CCC and maintained its negative outlook. S&P also cut
ratings on the companys senior unsecured notes from CCC to
CCC-. On August 18, 2009, S&P lowered the
Companys corporate credit rating to SD (selective default)
and lowered the rating of the Companys senior unsecured
notes from CCC- to D following the Companys repurchase of
$115.5 million of its senior unsecured notes on the open
market at a discount to face value, which S&P determined to
constitute a de facto restructuring under its criteria. On
August 19, 2009, in accordance with its criteria for
exchange offers and similar restructurings, S&P raised the
Companys corporate credit rating back to CCC, and
maintained the rating of the Companys senior unsecured
notes of D, given S&Ps expectation for additional
discounted repurchases.
On March 6, 2009 Moodys lowered its rating from B2 to
Caa2 and reaffirmed its negative outlook. On August 21,
2009, Moodys assigned a Caa2/LD probability of default
rating to the Company following the Companys repurchase of
$115.5 million of senior unsecured notes in the open market
at a discount to face value, which under Moodys
definition, constituted a distressed exchange and a limited
default. The ratings on the senior notes impacted by the open
market transactions were lowered to Ca from Caa2 to reflect the
discount incurred by participating bondholders. On
August 27, 2009, Moodys removed the LD designation on
the probability of default rating and changed the ratings on the
Companys senior notes back to Caa2, which is consistent
with Moodys loss given default framework.
On March 12, 2009, Fitch lowered the Companys
issuer-default rating from B- to CCC and its senior notes from
CCC+/RR5 to CC/RR5. The rating agencies announced that these
downgrades reflect continued deterioration in our homebuilding
operations, credit metrics, other earnings-based metrics and the
significant decrease in our tangible net worth over the past
year. These ratings and our current credit condition affect,
among other things, our ability to access new capital,
especially debt, and may result in more stringent covenants and
higher interest rates under the terms of any new debt. Our
credit ratings could be further lowered or rating agencies could
issue adverse commentaries in the future, which could have a
material adverse effect on our business, results of operations,
financial condition and liquidity. In particular, a further
weakening of our financial condition, including any further
increase in our leverage or decrease in our profitability or
cash flows, could adversely affect our ability to obtain
necessary funds, result in a credit rating downgrade or change
in outlook, or otherwise increase our cost of borrowing.
Our
Senior Notes, revolving credit and letter of credit facilities,
and certain other debt impose significant restrictions and
obligations on us. Restrictions on our ability to borrow could
adversely affect our liquidity. In addition, our substantial
indebtedness could adversely affect our financial condition,
limit our growth and make it more difficult for us to satisfy
our debt obligations.
Certain of our secured and unsecured indebtedness and revolving
credit and letter of credit facilities impose certain
restrictions and obligations on us. Under certain of these
instruments, we must comply with defined covenants which limit
the Company to, among other things, incur additional
indebtedness, engage in certain asset sales, make certain types
of restricted payments, engage in transactions with affiliates
and create liens on assets of the Company. Failure to comply
with certain of these covenants could result in an event of
default under the applicable instrument.
17
Any such event of default, could negatively impact other
covenants or lead to cross defaults under certain of our other
debt. There can be no assurance that we will be able to obtain
any waivers or amendments that may become necessary in the event
of a future default situation without significant additional
cost or at all.
As of September 30, 2009, we had total outstanding
indebtedness of approximately $1.5 billion, net of
unamortized discount of approximately $27.3 million. Our
substantial indebtedness could have important consequences to us
and the holders of our securities, including, among other things:
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causing us to be unable to satisfy our obligations under our
debt agreements;
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making us more vulnerable to adverse general economic and
industry conditions;
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making it difficult to fund future working capital, land
purchases, acquisitions, share repurchases, general corporate
purposes or other purposes; and
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causing us to be limited in our flexibility in planning for, or
reacting to, changes in our business.
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In addition, subject to restrictions in our existing debt
instruments, we may incur additional indebtedness. If new debt
is added to our current debt levels, the related risks that we
now face could intensify. Our growth plans and our ability to
make payments of principal or interest on, or to refinance, our
indebtedness, will depend on our future operating performance
and our ability to enter into additional debt
and/or
equity financings. If we are unable to generate sufficient cash
flows in the future to service our debt, we may be required to
refinance all or a portion of our existing debt, to sell assets
or to obtain additional financing. We may not be able to do any
of the foregoing on terms acceptable to us, if at all.
The
differing financial exposure of our debt holders could impact
our ability to complete any restructuring of our indebtedness or
impact the terms of such restructuring.
We believe that a portion of the holders of our existing notes
may have hedged the risk of default with respect to the existing
notes. These holders may have an economic interest that is
different from other holders of our existing notes. Such holders
may be less willing to participate in any voluntary
restructuring of our indebtedness if, under certain
circumstances, they are entitled to receive higher consideration
from a private counterparty. This could make any restructuring
of our debt more expensive or prevent us from being able to
complete certain types of recapitalization transactions.
A
substantial increase in mortgage interest rates or
unavailability of mortgage financing may reduce consumer demand
for our homes.
Substantially all purchasers of our homes finance their
acquisition with mortgage financing. Recently, the credit
markets and the mortgage industry have been experiencing a
period of unparalleled turmoil and disruption characterized by
bankruptcies, financial institution failure, consolidation and
an unprecedented level of intervention by the United States
federal government. The U.S. residential mortgage market
has been further impacted by the deterioration in the credit
quality of loans originated to non-prime and subprime borrowers
and an increase in mortgage foreclosure rates. These
difficulties are not expected to improve until residential real
estate inventories return to a more normal level and the
mortgage credit market stabilizes. While the ultimate outcome of
these events cannot be predicted, they have had and may continue
to have an impact on the availability and cost of mortgage
financing to our customers. The volatility in interest rates,
the decrease in the willingness and ability of lenders to make
home mortgage loans, the tightening of lending standards and the
limitation of financing product options, have made it more
difficult for homebuyers to obtain acceptable financing. Any
substantial increase in mortgage interest rates or
unavailability of mortgage financing would adversely affect the
ability of prospective first-time and
move-up
homebuyers to obtain financing for our homes, as well as
adversely affect the ability of prospective
move-up
homebuyers to sell their current homes. This disruption in the
credit markets and the curtailed availability of mortgage
financing has adversely affected, and is expected to continue to
adversely affect, our business, financial condition, results of
operations and cash flows as compared to prior periods.
18
If we are
unsuccessful in competing against our homebuilding competitors,
our market share could decline or our growth could be impaired
and, as a result, our financial results could suffer.
Competition in the homebuilding industry is intense, and there
are relatively low barriers to entry into our business.
Increased competition could hurt our business, as it could
prevent us from acquiring attractive parcels of land on which to
build homes or make such acquisitions more expensive, hinder our
market share expansion, and lead to pricing pressures on our
homes that may adversely impact our margins and revenues. If we
are unable to successfully compete, our financial results could
suffer and the value of, or our ability to service, our debt
could be adversely affected. Our competitors may independently
develop land and construct housing units that are superior or
substantially similar to our products. Furthermore, some of our
competitors have substantially greater financial resources and
lower costs of funds than we do. Many of these competitors also
have longstanding relationships with subcontractors and
suppliers in the markets in which we operate. We currently build
in several of the top markets in the nation and, therefore, we
expect to continue to face additional competition from new
entrants into our markets.
Our
financial condition, results of operations and
stockholders equity may be adversely affected by any
decrease in the value of our inventory, as well as by the
associated carrying costs.
We regularly acquire land for replacement and expansion of land
inventory within our existing and new markets. The risks
inherent in purchasing and developing land increase as consumer
demand for housing decreases. The market value of land, building
lots and housing inventories can fluctuate significantly as a
result of changing market conditions and the measures we employ
to manage inventory risk may not be adequate to insulate our
operations from a severe drop in inventory values. When market
conditions are such that land values are not appreciating,
previously entered into option agreements may become less
desirable, at which time we may elect to forego deposits and
preacquisition costs and terminate the agreements. In fiscal
2009, we recorded $5.0 million of lot option abandonment
charges. During fiscal 2009, as a result of the further
deterioration of the housing market, we determined that the
carrying amount of certain of our inventory assets exceeded
their estimated fair value. As a result of our analysis, during
fiscal 2009, we incurred $102.1 million of non-cash pre-tax
charges related to inventory impairments. If these adverse
market conditions continue or worsen, we may have to incur
additional inventory impairment charges which would adversely
affect our financial condition, results of operations and
stockholders equity and our ability to comply with certain
covenants in our debt instruments linked to tangible net worth.
We
conduct certain of our operations through unconsolidated joint
ventures with independent third parties in which we do not have
a controlling interest and we can be adversely impacted by joint
venture partners failure to fulfill their
obligations.
We participate in land development joint ventures (JVs) in which
we have less than a controlling interest. We have entered into
JVs in order to acquire attractive land positions, to manage our
risk profile and to leverage our capital base. Our JVs are
typically entered into with developers, other homebuilders and
financial partners to develop finished lots for sale to the
joint ventures members and other third parties. As a
result of the continued deterioration of the housing market, in
fiscal 2009 and 2008 we wrote down our investment in certain of
our JVs reflecting $14.8 million and $68.8 million of
impairments of inventory held within those JVs, respectively. If
these adverse market conditions continue or worsen, we may have
to take further writedowns of our investments in our JVs.
Our joint venture investments are generally very illiquid both
because we lack a controlling interest in the JVs and because
most of our JVs are structured to require super-majority or
unanimous approval of the members to sell a substantial portion
of the JVs assets or for a member to receive a return of
its invested capital. Our lack of a controlling interest also
results in the risk that the JV will take actions that we
disagree with, or fail to take actions that we desire, including
actions regarding the sale of the underlying property.
Our JVs typically obtain secured acquisition, development and
construction financing. At September 30, 2009, our
unconsolidated JVs had borrowings totaling $422.7 million,
of which $327.9 million related to one joint venture in
which we are a 2.58% partner. Generally, we and our joint
venture partners have provided varying levels of guarantees of
debt or other obligations of our unconsolidated JVs. At
September 30, 2009, these guarantees included, for certain
joint ventures, construction completion guarantees,
loan-to-value
maintenance agreements, repayment guarantees and environmental
indemnities. At September 30, 2009, we had repayment
guarantees of
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$15.8 million and
loan-to-value
maintenance guarantees of $3.9 million of debt of three
unconsolidated joint ventures (see Note 3 to the
Consolidated Financial Statements). During fiscal 2008 and 2009,
as the housing market continued to deteriorate, many of these
joint ventures were in default or are at risk of defaulting
under their debt agreements and it became more likely that our
guarantees may be called upon. As of September 30, 2009,
three of our unconsolidated joint ventures are in default (or
have received default notices) under their debt agreements. If
one or more of the guarantees under these debt agreements were
drawn upon or otherwise invoked, our obligations could be
significant, individually or in the aggregate, which could have
a material adverse effect on our financial position or results
of operations. We cannot predict whether such events will occur
or whether such obligations will be invoked.
We may
not be able to utilize all of our deferred tax assets.
As of September 30, 2009, we are in a cumulative loss
position based on the guidance in Statement of Financial
Accounting Standards No. 109, Accounting for Income
Taxes (ASC 740). Due to this cumulative loss position and
the lack of sufficient objective evidence regarding the
realization of our deferred tax assets in the foreseeable
future, we have recorded a valuation allowance for substantially
all of our deferred tax assets. Although we do expect the
industry to recover from the current downturn to normal profit
levels in the future, it may be necessary for us to record
additional valuation allowances in the future related to
operating losses. Additional valuation allowances could
materially increase our income tax expense, and therefore
adversely affect our results of operations and tangible net
worth in the period in which such valuation allowance is
recorded.
We could
experience a reduction in home sales and revenues or reduced
cash flows due to our inability to acquire land for our housing
developments if we are unable to obtain reasonably priced
financing to support our homebuilding activities.
The homebuilding industry is capital intensive, and homebuilding
requires significant up-front expenditures to acquire land and
begin development. Accordingly, we incur substantial
indebtedness to finance our homebuilding activities. If
internally generated funds are not sufficient, we would 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 amount and types of indebtedness which
we may incur are limited by the terms of our existing debt. In
addition, the availability of borrowed funds, especially for
land acquisition and construction financing, may be greatly
reduced nationally, and the lending community may require
increased amounts of equity to be invested in a project by
borrowers in connection with both new loans and the extension of
existing loans. The credit and capital markets have recently
experienced significant volatility. If we are required to seek
additional financing to fund our operations, continued
volatility in these markets may restrict our flexibility to
access such financing. If we are not successful in obtaining
sufficient capital to fund our planned capital and other
expenditures, we may be unable to acquire land for our housing
developments. Additionally, if we cannot obtain additional
financing to fund the purchase of land under our option
contracts, we may incur contractual penalties and fees.
Our stock
price is volatile and could further decline.
The securities markets in general and our common stock in
particular have experienced significant price and volume
volatility over the past two years. The market price and volume
of our common stock may continue to experience significant
fluctuations due not only to general stock market conditions but
also to a change in sentiment in the market regarding our
industry, operations or business prospects. In addition to the
other risk factors discussed in this section, the price and
volume volatility of our common stock may be affected by:
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operating results that vary from the expectations of securities
analysts and investors;
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factors influencing home purchases, such as availability of home
mortgage loans and interest rates, credit criteria applicable to
prospective borrowers, ability to sell existing residences, and
homebuyer sentiment in general;
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the operating and securities price performance of companies that
investors consider comparable to us;
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announcements of strategic developments, acquisitions and other
material events by us or our competitors; and
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changes in global financial markets and global economies and
general market conditions, such as interest rates, commodity and
equity prices and the value of financial assets.
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To the extent that the price of our common stock remains low or
declines, our ability to raise funds through the issuance of
equity or otherwise use our common stock as consideration will
be reduced. This, in turn, may adversely impact our ability to
reduce our financial leverage, as measured by the ratio of debt
to total capital. As of September 30, 2009, our financial
leverage was 88.4%. Continued high levels of leverage or further
increases may adversely affect our credit ratings and make it
more difficult for us to access additional capital. These
factors may limit our ability to implement our operating and
growth plans.
The tax
benefits of our pre-ownership change net operating loss
carryforwards and any future recognized built-in losses in our
assets will be substantially limited since we experienced an
ownership change as defined in Section 382 of
the Internal Revenue Code.
Based on recent impairments and our current financial
performance, we generated net operating losses for fiscal 2008
and fiscal 2009 and expect to generate additional net operating
losses in future years. In addition, we believe we have
significant built-in losses in our assets (i.e. an
excess tax basis over current fair market value) that may result
in tax losses as such assets are sold. Net operating losses
generally may be carried forward for a
20-year
period to offset future earnings and reduce our federal income
tax liability. Built-in losses, if and when recognized,
generally will result in tax losses that may then be deducted or
carried forward. However, because we experienced an
ownership change under Section 382 of the
Internal Revenue Code as of December 31, 2007, our ability
to realize these tax benefits may be significantly limited.
Section 382 contains rules that limit the ability of a
company that undergoes an ownership change, which is
generally defined as any change in ownership of more than 50% of
its common stock over a three-year period, to utilize its net
operating loss carryforwards and certain built-in losses or
deductions, as of the ownership change date, that are recognized
during the five-year period after the ownership change. These
rules generally operate by focusing on changes in the ownership
among shareholders owning, directly or indirectly, 5% or more of
the companys common stock (including changes involving a
shareholder becoming a 5% shareholder) or any change in
ownership arising from a new issuance of stock or share
repurchases by the company.
As a result of our recent ownership change for
purposes of Section 382, our ability to use certain of our
pre-ownership change net operating loss carryforwards and
recognize certain built-in losses or deductions is limited by
Section 382 to a maximum amount of approximately
$17 million annually. Based on the resulting limitation, a
significant portion of our pre-ownership change net operating
loss carryforwards and any future recognized built-in losses or
deductions could expire before we would be able to use them. Our
inability to utilize our pre-ownership change net operating loss
carryforwards and any future recognized built-in losses or
deductions could have a material adverse effect on our financial
condition, results of operations and cash flows.
Although our Board of Directors recently adopted a shareholder
rights plan, subject to shareholder approval, which is intended
to reduce the likelihood of an unintended ownership
change within the meaning of Section 382 and thereby
protect stockholder value by preserving our ability to use our
net operating loss carryforwards, the shareholder rights plan
does not ensure that such an ownership change will not occur or
that our net operating loss carryforwards will be protected from
an ownership change as defined in the tax laws.
We are
subject to extensive government regulation which could cause us
to incur significant liabilities or restrict our business
activities.
Regulatory requirements could cause us to incur significant
liabilities and operating expenses and could restrict our
business activities. We are subject to local, state and federal
statutes and rules regulating, among other things, certain
developmental matters, building and site design, and matters
concerning the protection of health and the environment. Our
operating expenses may be increased by governmental regulations
such as building permit allocation ordinances and impact and
other fees and taxes, which may be imposed to defray the cost of
providing certain governmental services and improvements. Other
governmental regulations, such as building moratoriums and
no growth or slow growth initiatives,
which may be adopted in communities which have developed
rapidly, may cause delays in new home communities or otherwise
restrict our business activities resulting in reductions in
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our revenues. Any delay or refusal from government agencies to
grant us necessary licenses, permits and approvals could have an
adverse effect on our operations.
We may
incur additional operating expenses due to compliance programs
or fines, penalties and remediation costs pertaining to
environmental regulations within our markets.
We are subject to a variety of local, state and federal
statutes, ordinances, rules and regulations concerning the
protection of health and the environment. The particular
environmental laws which apply to any given community vary
greatly according to the community site, the sites
environmental conditions and the present and former use of the
site. Environmental laws may result in delays, may cause us to
implement time consuming and expensive compliance programs and
may prohibit or severely restrict development in certain
environmentally sensitive regions or areas. From time to time,
the United States Environmental Protection Agency (EPA) and
similar federal or state agencies review homebuilders
compliance with environmental laws and may levy fines and
penalties for failure to strictly comply with applicable
environmental laws or impose additional requirements for future
compliance as a result of past failures. Any such actions taken
with respect to us may increase our costs. Further, we expect
that increasingly stringent requirements will be imposed on
homebuilders in the future. Environmental regulations can also
have an adverse impact on the availability and price of certain
raw materials such as lumber. Our communities in California are
especially susceptible to restrictive government regulations and
environmental laws.
We may be
subject to significant potential liabilities as a result of
construction defect, product liability and warranty claims made
against us.
As a homebuilder, we have been, and continue to be, subject to
construction defect, product liability and home warranty claims,
including moisture intrusion and related claims, arising in the
ordinary course of business. These claims are common to the
homebuilding industry and can be costly.
We and certain of our subsidiaries have been, and continue to
be, named as defendants in various construction defect claims,
product liability claims, complaints and other legal actions
that include claims related to Chinese drywall and moisture
intrusion. As of September 30, 2009, we had accrued
$2.7 million in our warranty reserves for the repair of
less than 40 homes in southwest Florida where certain of our
subcontractors installed defective Chinese drywall in homes that
were delivered during our 2006 and 2007 fiscal years. We are
inspecting additional homes in order to determine whether they
also contain the defective Chinese drywall. The outcome of these
inspections may require us to increase our warranty reserve in
the future. However, the amount of additional liability, if any,
is not reasonably estimable. Furthermore, plaintiffs may in
certain of these legal proceedings seek class action status with
potential class sizes that vary from case to case. Class action
lawsuits can be costly to defend, and if we were to lose any
certified class action suit, it could result in substantial
liability for us.
With respect to certain general liability exposures, including
construction defect, Chinese drywall and related claims and
product liability, interpretation of underlying current and
future trends, assessment of claims and the related liability
and reserve estimation process is highly judgmental due to the
complex nature of these exposures, with each exposure exhibiting
unique circumstances. Furthermore, once claims are asserted for
construction defects, it is difficult to determine the extent to
which the assertion of these claims will expand geographically.
Although we have obtained insurance for construction defect
claims subject to applicable self-insurance retentions, such
policies may not be available or adequate to cover any liability
for damages, the cost of repairs,
and/or the
expense of litigation surrounding current claims, and future
claims may arise out of events or circumstances not covered by
insurance and not subject to effective indemnification
agreements with our subcontractors.
Our
operating expenses could increase if we are required to pay
higher insurance premiums or litigation costs for various
claims, which could cause our net income to decline.
The costs of insuring against construction defect, product
liability and director and officer claims are high. This
coverage may become more costly or more restricted in the future.
Increasingly in recent years, lawsuits (including class action
lawsuits) have been filed against builders, asserting claims of
personal injury and property damage. Our insurance may not cover
all of the claims, including personal
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injury claims, or such coverage may become prohibitively
expensive. If we are not able to obtain adequate insurance
against these claims, we may experience losses that could reduce
our net income and restrict our cash flow available to service
debt.
Historically, builders have recovered from subcontractors and
their insurance carriers a significant portion of the
construction defect liabilities and costs of defense that the
builders have incurred. Insurance coverage available to
subcontractors for construction defects is becoming increasingly
expensive, and the scope of coverage is restricted. If we cannot
effectively recover from our subcontractors or their carriers,
we may suffer greater losses which could decrease our net income.
A builders ability to recover against any available
insurance policy depends upon the continued solvency and
financial strength of the insurance carrier that issued the
policy. Many of the states in which we build homes have lengthy
statutes of limitations applicable to claims for construction
defects. To the extent that any carrier providing insurance
coverage to us or our subcontractors becomes insolvent or
experiences financial difficulty in the future, we may be unable
to recover on those policies, and our net income may decline.
We are
dependent on the continued availability and satisfactory
performance of our subcontractors, which, if unavailable, could
have a material adverse effect on our business.
We conduct our construction operations only as a general
contractor. Virtually all construction work is performed by
unaffiliated third-party subcontractors. As a consequence, we
depend on the continued availability of and satisfactory
performance by these subcontractors for the construction of our
homes. There may not be sufficient availability of and
satisfactory performance by these unaffiliated third-party
subcontractors in the markets in which we operate. In addition,
inadequate subcontractor resources could have a material adverse
effect on our business.
We
experience fluctuations and variability in our operating results
on a quarterly basis and, as a result, our historical
performance may not be a meaningful indicator of future
results.
Our operating results in a future quarter or quarters may fall
below expectations of securities analysts or investors and, as a
result, the market value of our common stock will fluctuate. We
historically have experienced, and expect to continue to
experience, variability in home sales and net earnings on a
quarterly basis. As a result of such variability, our historical
performance may not be a meaningful indicator of future results.
Our quarterly results of operations may continue to fluctuate in
the future as a result of a variety of both national and local
factors, including, among others:
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the timing of home closings and land sales;
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our ability to continue to acquire additional land or secure
option contracts to acquire land on acceptable terms;
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conditions of the real estate market in areas where we operate
and of the general economy;
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raw material and labor shortages;
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seasonal home buying patterns; and
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other changes in operating expenses, including the cost of labor
and raw materials, personnel and general economic conditions.
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The
occurrence of natural disasters could increase our operating
expenses and reduce our revenues and cash flows.
The climates and geology of many of the states in which we
operate, including California, Florida, Georgia, North Carolina,
South Carolina, Tennessee and Texas, present increased risks of
natural disasters. To the extent that hurricanes, severe storms,
earthquakes, droughts, floods, wildfires or other natural
disasters or similar events occur, our homes under construction
or our building lots in such states could be damaged or
destroyed, which may result in losses exceeding our insurance
coverage. Any of these events could increase our operating
expenses, impair our cash flows and reduce our revenues, which
could, in turn, negatively affect the market price of our
securities.
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Future
terrorist attacks against the United States or increased
domestic or international instability could have an adverse
effect on our operations.
Adverse developments in the war on terrorism, future terrorist
attacks against the United States, or any outbreak or escalation
of hostilities between the United States and any foreign power,
including the armed conflict in Iraq, may cause disruption to
the economy, our Company, our employees and our customers, which
could adversely affect our revenues, operating expenses, and
financial condition.
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Item 1B.
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Unresolved
Staff Comments
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None.
As of September 30, 2009, we lease approximately
80,000 square feet of office space in Atlanta, Georgia to
house our corporate headquarters. We also lease an aggregate of
approximately 459,000 square feet of office space for our
subsidiaries operations at various locations. We have
subleased approximately 91,000 square feet of our leased
office space to unrelated third-parties. We own an aggregate of
49,388 square feet of office space in Indianapolis,
Indiana. We are actively marketing our Indiana office building
for sale.
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Item 3.
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Legal
Proceedings
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Investigations
United States Attorney, State and Federal Agency
Investigations. On July 1, 2009, the Company
announced that it had resolved the criminal and civil
investigations by the United States Attorneys Office in
the Western District of North Carolina (the U.S. Attorney)
and other state and federal agencies concerning the matters that
were the subject of the independent investigation by the Audit
Committee of the Beazer Homes Board of Directors (the
Investigation) completed in May 2008. The Company entered into a
deferred prosecution agreement (DPA) with the U.S. Attorney
and a settlement agreement with the U.S. Department of
Housing and Urban Development (HUD) and the civil division of
the Department of Justice. In addition, certain of the
Companys subsidiaries entered into a settlement agreement
with the North Carolina Real Estate Commission (NCREC). Also, as
previously disclosed, Beazer Mortgage Corporation (Beazer
Mortgage) entered into a settlement agreement with the North
Carolina Office of the Commissioner of Banks (OCOB), under which
Beazer Mortgage consented, without admitting the alleged
violations, to the entry of a consent order pursuant to which
Beazer Mortgage has provided approximately $2.5 million in
restitution to certain borrowers in respect of the alleged
violations. The settlement agreement concludes the OCOBs
investigation into these matters with respect to Beazer Mortgage.
Under the DPA, the U.S. Attorney agreed not to prosecute
the Company in connection with the matters that were the subject
of the Investigation and are set forth in a Bill of Information
filed with the United States District Court for the Western
District of North Carolina, provided that the Company satisfies
its obligations under the DPA over the next 60 months. The
term of the DPA may be less than 60 months in the event
certain conditions, as described more fully in the DPA, are met.
The DPA recognizes the cooperation of the Company, its voluntary
disclosure and its adoption of remedial measures.
Under the terms of the DPA, in fiscal year 2009, the Company
contributed $7.5 million to a restitution fund established
to compensate those Beazer customers who can demonstrate that
they were injured by certain of the practices identified in the
Bill of Information. For fiscal year 2010 the Company will
contribute to the restitution fund the greater of
$1.0 million or an amount equal to 4% of the Companys
fiscal 2010 adjusted EBITDA as defined in the DPA. The
Companys liability in each of the fiscal years after 2010
will also be equal to 4% of the Companys adjusted EBITDA
through a portion of fiscal year 2014, unless extended as
described below. Under the terms of the DPA, the Companys
total contributions to the restitution fund including amounts
paid to OCOB will not exceed $50.0 million.
Under the terms of the settlement agreement with HUD and the
civil division of the Department of Justice, the Company made an
immediate payment of $4.0 million to HUD to resolve civil
and administrative investigations. In addition, on the first
anniversary of the agreement, the Company will make a
$1.0 million payment to HUD.
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Under the agreement with HUD, if the amounts paid into the
restitution fund with the U.S. Attorney described above do
not reach $48.0 million at the end of 60 months, the
restitution fund term will be extended using the adjusted EBITDA
formula until the earlier of an additional 24 months or the
time the Companys contribution reaches $48.0 million.
The amounts paid to the U.S. Attorney for contribution into
the restitution fund and payments to HUD do not include the
$2.5 million contributed to resolve the investigation by
the OCOB, although this amount will be counted as part of the
Companys maximum obligation to the restitution fund.
The Companys payment obligations under the DPA and the
settlement agreement with HUD are interrelated. The total amount
of such obligations will be dependent on several factors;
however, the maximum liability under both agreements and the
agreement with the OCOB will not exceed $55.0 million.
With respect to the NCREC, Beazer/Squires Realty, Inc.
(Beazer/Squires) and Beazer Homes Corp. each has agreed to the
entry of a consent order regarding violations of certain North
Carolina statutes. Under the respective consent orders, the
NCREC agreed that a reprimand of Beazer Homes would not be
issued as long as Beazer Homes completed certain remedial
measures and that the broker license held by Beazer/Squires is
revoked. The broker license held by Beazer/Squires has been on
inactive status since October 2007. There is no monetary payment
by the Company or its subsidiaries under either of the consent
orders. The consent orders conclude the investigation by the
NCREC into these matters with respect to the Company.
Independent Investigation. In May 2008, the Audit
Committee of the Beazer Homes Board of Directors completed the
Investigation of Beazer Homes mortgage origination
business, including, among other things, investigating certain
evidence that the Companys subsidiary, Beazer Mortgage,
violated HUD regulations and may have violated certain other
laws and regulations in connection with certain of its mortgage
origination activities. The Investigation also found evidence
that employees of the Companys Beazer Mortgage subsidiary
violated certain federal
and/or state
regulations, including HUD regulations. Areas of concern
uncovered by the Investigation included our former practices in
the areas of: down payment assistance program; the charging of
discount points; the closure of certain HUD Licenses; closing
accommodations; and the payment of a number of realtor bonuses
and decorator allowances in certain Federal Housing
Administration (FHA) insured loans and non-FHA conventional
loans originated by Beazer Mortgage dating back to at least
2000. The Investigation also uncovered limited improper
practices in relation to the issuance of a number of non-FHA
Stated Income Loans. We reviewed the loan documents and
supporting documentation, and determined that the assets were
effectively isolated from the seller and its creditors (even in
the event of bankruptcy). Based on that information, management
continues to believe that sale accounting at the time of the
transfer of the loans to third parties was appropriate. In
addition, the Investigation identified accounting and financial
reporting errors and irregularities which resulted in the
restatement of certain prior period consolidated financial
statements which was included in our 2007
Form 10-K
filed with the SEC on May 12, 2008.
Litigation
Securities Litigation. Beazer Homes and certain of our
current and former officers (the Individual Defendants), as well
as our Independent Registered Accounting Firm, were named as
defendants in putative class action securities litigation in the
United States District Court for the Northern District of
Georgia, the details of which were previously disclosed by the
Company (the Beazer Securities Litigation). The action has been
settled and has been dismissed with prejudice. The Company and
all other defendants did not admit any liability and have
received a full and complete release of all claims asserted
against them in the litigation, in exchange for the payment of
an aggregate of $30.5 million. The monetary payment made on
behalf of the Company and the individual defendants was funded
from insurance proceeds. As a result, there was no financial
contribution by the Company.
Beazer Homes and certain of its current and former officers were
named as defendants in a securities lawsuit filed on
September 18, 2009 in the United States District Court for
the Northern District of Georgia. The complaint was filed by a
group of plaintiffs who opted out of the settlement of the
Beazer Securities Litigation. The complaint alleges that the
defendants violated Sections 10(b), 18, and 20(a) of the
Securities Exchange Act of 1934 and
Rule 10b-5
promulgated thereunder by issuing materially false and
misleading statements regarding our business and prospects due
to allegedly improper lending practices in our mortgage
origination business. The plaintiffs are
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seeking an unspecified amount of compensatory damages. The
Company intends to vigorously defend against this action.
Derivative Shareholder Actions. Certain of Beazer
Homes current and former officers and directors were named
as defendants in two derivative shareholder suits filed on
April 16, 2007 and August 29, 2007 in the United
States District Court for the Northern District of Georgia,
which were subsequently consolidated. Beazer Homes is named as a
nominal defendant. The amended consolidated complaint,
purportedly on behalf of Beazer Homes, alleges that the
defendants (i) violated Section 10(b) of the Exchange
Act and
Rule 10b-5
promulgated thereunder; (ii) breached their fiduciary
duties and misappropriated information; (iii) abused their
control; (iv) wasted corporate assets; and (v) were
unjustly enriched, and seeks an unspecified amount of
compensatory damages against the individual defendants and in
favor of Beazer Homes. The parties have reached an agreement to
settle the lawsuit. Under the terms of the proposed settlement,
the action will be dismissed with prejudice, and the Company and
all other defendants will not admit any liability. Pursuant to
the terms of the settlement, the Company has acknowledged that
the pendency of the derivative action was a factor in the
Companys adoption of various corporate governance reforms
and remedial measures, all of which have previously been
disclosed, and agreed that plaintiffs counsel would
receive attorneys fees not to exceed $950,000, which will
be funded by insurance proceeds. The settlement remains subject
to court approval.
ERISA Class Actions. On April 30, 2007, a
putative class action complaint was filed on behalf of a
purported class consisting of present and former participants
and beneficiaries of the Beazer Homes USA, Inc. 401(k) Plan. The
complaint was filed in the United States District Court for the
Northern District of Georgia. The complaint alleges breach of
fiduciary duties, including those set forth in the Employee
Retirement Income Security Act (ERISA), as a result of the
investment of retirement monies held by the 401(k) Plan in
common stock of Beazer Homes at a time when participants were
allegedly not provided timely, accurate and complete information
concerning Beazer Homes. Four additional lawsuits were filed
subsequently making similar allegations and the court
consolidated these five lawsuits. The consolidated amended
complaint names as defendants Beazer Homes, our chief executive
officer, certain current and former directors of the Company,
including the members of the Compensation Committee of the Board
of Directors, and certain employees of the Company who acted as
members of the Companys 401(k) Committee. On
October 10, 2008, the Company and the other defendants
filed a motion to dismiss the consolidated amended complaint.
Briefing of the motion was completed in January 2009. The
Company intends to vigorously defend against these actions.
Homeowners Class Action Lawsuits and Multi-Plaintiff
Lawsuit. A putative class action was filed on April 8,
2008 in the United States District Court for the Middle District
of North Carolina, Salisbury Division, against Beazer Homes,
U.S.A., Inc., Beazer Homes Corp. and Beazer Mortgage
Corporation. The Complaint alleges that Beazer violated the Real
Estate Settlement Practices Act (RESPA) and North Carolina Gen.
Stat.
§ 75-1.1
by (1) improperly requiring homebuyers to use Beazer-owned
mortgage and settlement services as part of a down payment
assistance program, and (2) illegally increasing the cost
of homes and settlement services sold by Beazer Homes Corp. The
purported class consists of all residents of North Carolina who
purchased a home from Beazer, using mortgage financing provided
by and through Beazer that included seller-funded down payment
assistance, between January 1, 2000 and October 11,
2007. The Complaint demands an unspecified amount of damages,
equitable relief, treble damages, attorneys fees and
litigation expenses. The defendants moved to dismiss the
Complaint on June 4, 2008. On July 25, 2008, in lieu
of a response to the motion to dismiss, plaintiff filed an
amended complaint. The Company moved to dismiss the amended
complaint, which motion is pending before the Court. The Company
intends to vigorously defend against this action.
Beazer Homes Corp. and Beazer Mortgage Corporation are also
named defendants in a lawsuit filed on July 3, 2007, in the
General Court of Justice, Superior Court Division, County of
Mecklenburg, North Carolina. The case was removed to the
U.S. District Court for the Western District of North
Carolina, Charlotte Division, but remanded on April 23,
2008 to the General Court of Justice, Superior Court Division,
County of Mecklenburg, North Carolina. The complaint was filed
on behalf of ten individual homeowners who purchased homes from
Beazer in Mecklenburg County. The complaint alleges certain
deceptive conduct by the defendants and brings various claims
under North Carolina statutory and common law, including a claim
for punitive damages. The case has been assigned to the docket
of the North Carolina Business Court. The plaintiffs have filed
four amended complaints, and the Company has filed motions to
dismiss each of the complaints filed by the plaintiffs. The
court granted the
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Companys motion to dismiss one defendant and one cause of
action as to all defendants. With respect to all other claims,
the court denied the Companys motion to dismiss. The
Company intends to vigorously defend against this action.
Beazer Homes and several subsidiaries were named as defendants
in a putative class action lawsuit originally filed on
March 12, 2008, in the Superior Court of the State of
California, County of Placer. The purported class is defined as
all persons who purchased a home from the defendants or their
affiliates, with the assistance of a federally related mortgage
loan, from March 25, 1999, to the present where Security
Title Insurance Company received any money as a reinsurer
of the transaction. The complaint alleges that the defendants
violated RESPA and asserts claims under a number of state
statutes alleging that defendants engaged in a uniform and
systematic practice of giving
and/or
accepting fees and kickbacks to affiliated businesses including
affiliated
and/or
recommended title insurance companies. The complaint also
alleges a number of common law claims. Plaintiffs seek an
unspecified amount of damages under RESPA, unspecified
statutory, compensatory and punitive damages and injunctive and
declaratory relief, as well as attorneys fees and costs.
Defendants removed the action to federal court and plaintiffs
filed a second amended complaint which substituted new
named-plaintiffs. The Company filed a motion to dismiss the
second amended complaint which the federal court granted in
part. The federal court dismissed the sole federal claim,
declined to rule on the state law claims, and remanded the case
to the Superior Court of Placer County. The Company filed a
supplemental motion to dismiss/demurrer regarding the remaining
state law claims in the second amended complaint, and the state
court sustained defendants demurrer but granted plaintiffs
leave to amend their claims. Plaintiffs thereafter filed a third
amended complaint which the defendants removed to federal court
based on the presence of a federal question and pursuant to the
Class Action Fairness Act and thereafter moved to dismiss.
Plaintiffs have filed a motion to remand the case to the
Superior Court of Placer County. The Company intends to continue
to vigorously defend against the action.
We cannot predict or determine the timing or final outcome of
the lawsuits or the effect that any adverse findings or adverse
determinations in the pending lawsuits may have on us. In
addition, an estimate of possible loss or range of loss if any,
cannot presently be made with respect to the above pending
matters. An unfavorable determination resulting from any
governmental investigation could result in the filing of
criminal charges, payment of substantial criminal or civil
restitution, the imposition of injunctions on our conduct or the
imposition of other penalties or consequences, including but not
limited to the Company having to adjust, curtail or terminate
the conduct of certain of our business operations. Any of these
outcomes could have a material adverse effect on our business,
financial condition, results of operations and prospects. An
unfavorable determination in any of the pending lawsuits could
result in the payment by us of substantial monetary damages
which may not be fully covered by insurance. Further, the legal
costs associated with the lawsuits and the amount of time
required to be spent by management and the Board of Directors on
these matters, even if we are ultimately successful, could have
a material adverse effect on our business, financial condition
and results of operations.
Other Matters
In November 2003, Beazer Homes received a request for
information from the EPA pursuant to Section 308 of the
Clean Water Act seeking information concerning the nature and
extent of storm water discharge practices relating to certain of
our communities completed or under construction. The EPA has
since requested information on additional communities and has
conducted site inspections at a number of locations. In certain
instances, the EPA or the equivalent state agency has issued
Administrative Orders identifying alleged instances of
noncompliance and requiring corrective action to address the
alleged deficiencies in storm water management practices. As of
September 30, 2009, no monetary penalties had been imposed
in connection with such Administrative Orders. Consistent with
its approach with other homebuilders, the EPA has contacted the
Company about a possible resolution of these issues. Settlement
negotiations are proceeding. The EPA has reserved the right to
impose monetary penalties at a later date, the amount of which,
if any, cannot currently be estimated. Beazer Homes has taken
action to comply with the requirements of each of the
Administrative Orders and is working to otherwise maintain
compliance with the requirements of the Clean Water Act.
In 2006, we received two Administrative Orders issued by the New
Jersey Department of Environmental Protection. The Orders allege
certain violations of wetlands disturbance permits. The two
Orders assess proposed fines of $630,000 and $678,000,
respectively. We have met with the Department to discuss their
concerns on the two
27
affected communities and have requested hearings on both
matters. We believe that we have significant defenses to the
alleged violations and intend to contest the agencys
findings and the proposed fines. We are currently pursuing
settlement discussions with the Department.
On June 3, 2009, a purported class action complaint was
filed by the owners of one of our homes in our Magnolia
Lakes community in Ft. Myers, Florida. The complaint
names the Company and certain distributors and suppliers of
drywall and was filed in the Circuit Court for Lee County,
Florida on behalf of the named plaintiffs and other similarly
situated owners of homes in Magnolia Lakes or alternatively in
the State of Florida. The plaintiffs allege that the Company
built their homes with defective drywall, manufactured in China,
that contains sulfur compounds that allegedly corrode certain
metals and that are allegedly capable of harming the health of
individuals. Plaintiffs allege physical and economic damages and
seek legal and equitable relief, medical monitoring and
attorneys fees. This case has been transferred to the
Eastern District of Louisiana pursuant to an order from the
United States Judicial Panel on Multidistrict Litigation. The
Company believes that the claims asserted in this complaint are
governed by its home warranty or are without merit. Accordingly,
the Company intends to vigorously defend against this litigation.
Recently, the lender of one of our unconsolidated joint ventures
has filed individual lawsuits against some of the joint venture
partners and certain of those partners parent companies
(including the Company), seeking to recover damages under
completion guarantees, among other claims. We intend to
vigorously defend against this legal action. We are a 2.58%
partner in this joint venture (see Note 3 for additional
information).
We and certain of our subsidiaries have been named as defendants
in various claims, complaints and other legal actions, most
relating to construction defects, moisture intrusion and product
liability claims. Certain of the liabilities resulting from
these actions are covered in whole or part by insurance. In our
opinion, based on our current assessment, the ultimate
resolution of these matters will not have a material adverse
effect on our financial condition, results of operations or cash
flows.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
None.
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
Market
Information
The Company lists its common shares on the New York Stock
Exchange (NYSE) under the symbol BZH. On
November 6, 2009, the last reported sales price of the
Companys common stock on the NYSE was $4.47. On
November 6, 2009, Beazer Homes USA, Inc. had approximately
255 stockholders of record and 39,779,304 shares of common
stock outstanding. The following table sets forth, for the
quarters indicated, the range of high and low trading for the
Companys common stock during fiscal 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st Qtr
|
|
2nd Qtr
|
|
3rd Qtr
|
|
4th Qtr
|
|
Fiscal Year 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
6.76
|
|
|
$
|
1.71
|
|
|
$
|
3.95
|
|
|
$
|
6.93
|
|
Low
|
|
$
|
1.13
|
|
|
$
|
0.24
|
|
|
$
|
0.87
|
|
|
$
|
1.36
|
|
Fiscal Year 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
12.49
|
|
|
$
|
11.44
|
|
|
$
|
12.40
|
|
|
$
|
9.34
|
|
Low
|
|
$
|
7.00
|
|
|
$
|
4.53
|
|
|
$
|
5.02
|
|
|
$
|
3.36
|
|
28
Dividends
Effective November 2, 2007, the Board of Directors
suspended the payment of quarterly dividends. The Board
concluded that this action, which will allow the Company to
conserve approximately $16 million of cash on an annual
basis, was a prudent effort in light of the continued
deterioration in the housing market. The Board of Directors will
periodically reconsider the declaration of dividends. The
reinstatement of quarterly dividends, the amount of such
dividends, and the form in which the dividends are paid (cash or
stock) depends upon the results of operations, the financial
condition of the Company and other factors which the Board of
Directors deems relevant. The indentures under which our senior
notes were issued contain certain restrictive covenants,
including limitations on payment of dividends. At
September 30, 2009, under the most restrictive covenants of
each indenture, none of our retained earnings was available for
cash dividends or share repurchases.
Securities
Authorized for Issuance under Equity Compensation
Plans
The following table provides information as of
September 30, 2009 with respect to our shares of common
stock that may be issued under our existing equity compensation
plans, all of which have been approved by our stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Common
|
|
|
|
Number of Common Shares
|
|
|
Shares to be Issued
|
|
Weighted Average
|
|
Remaining Available for Future
|
|
|
Upon Exercise of
|
|
Exercise Price of
|
|
Issuance Under Equity Compensation
|
|
|
Outstanding Options,
|
|
Outstanding Options,
|
|
Plans (Excluding Common Shares
|
Plan Category
|
|
Warrants and Rights
|
|
Warrants and Rights
|
|
Reflected in Column (a))
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
Equity compensation plans approved by stockholders
|
|
|
2,108,914
|
|
|
$
|
33.07
|
|
|
|
18,643
|
|
Issuer
Purchases of Equity Securities
On November 18, 2005, as part of an acceleration of our
comprehensive plan to enhance stockholder value, our Board of
Directors authorized an increase of our stock repurchase plan to
ten million shares of our common stock. Shares may be purchased
for cash in the open market, on the NYSE or in privately
negotiated transactions. During fiscal 2009, 2008 and 2007, we
did not repurchase any shares in the open market. We have
currently suspended our repurchase program and any resumption of
such program will be at the discretion of the Board of Directors
and is unlikely in the foreseeable future.
During the quarter ended September 30, 2009, no shares were
surrendered to us by employees in payment of minimum tax
obligations upon the vesting of restricted stock units under our
stock incentive plans.
29
Performance
Graph
The following graph illustrates the cumulative total stockholder
return on Beazer Homes common stock for the last five
fiscal years through September 30, 2009, compared to the
S&P 500 Index and the S&P 500 Homebuilding Index. The
comparison assumes an investment in Beazer Homes common
stock and in each of the foregoing indices of $100 at
September 30, 2004, and assumes that all dividends were
reinvested. Stockholder returns over the indicated period are
based on historical data and should not be considered indicative
of future stockholder returns.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended September 30,
|
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
|
2008
|
|
2009
|
|
Beazer Homes USA, Inc.
|
|
$
|
100.00
|
|
|
$
|
165.48
|
|
|
$
|
110.99
|
|
|
$
|
23.86
|
|
|
$
|
17.30
|
|
|
$
|
16.17
|
|
S&P 500
|
|
|
100.00
|
|
|
|
112.25
|
|
|
|
124.37
|
|
|
|
144.81
|
|
|
|
112.99
|
|
|
|
105.18
|
|
S&P Homebuilding
|
|
|
100.00
|
|
|
|
143.28
|
|
|
|
103.78
|
|
|
|
52.74
|
|
|
|
44.63
|
|
|
|
37.38
|
|
30
|
|
Item 6.
|
Selected
Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions, except per share amounts)
|
|
Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
Statement of Operations Data: (i)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
1,005
|
|
|
$
|
1,814
|
|
|
$
|
3,037
|
|
|
$
|
4,686
|
|
|
$
|
4,430
|
|
Gross profit (loss)
|
|
|
21
|
|
|
|
(234
|
)
|
|
|
(109
|
)
|
|
|
1,159
|
|
|
|
1,091
|
|
Operating (loss) income
|
|
|
(242
|
)
|
|
|
(616
|
)
|
|
|
(548
|
)
|
|
|
612
|
|
|
|
569
|
|
(Loss) income from continuing operations
|
|
|
(178
|
)
|
|
|
(801
|
)
|
|
|
(372
|
)
|
|
|
388
|
|
|
|
299
|
|
EPS from continuing operations -basic
|
|
|
(4.60
|
)
|
|
|
(20.77
|
)
|
|
|
(9.68
|
)
|
|
|
9.75
|
|
|
|
7.40
|
|
EPS from continuing operations -diluted
|
|
|
(4.60
|
)
|
|
|
(20.77
|
)
|
|
|
(9.68
|
)
|
|
|
8.75
|
|
|
|
6.56
|
|
Dividends paid per common share
|
|
|
-
|
|
|
|
-
|
|
|
|
0.40
|
|
|
|
0.40
|
|
|
|
0.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data (end of year):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents and restricted cash
|
|
$
|
557
|
|
|
$
|
585
|
|
|
$
|
460
|
|
|
$
|
172
|
|
|
$
|
297
|
|
Inventory
|
|
|
1,318
|
|
|
|
1,652
|
|
|
|
2,775
|
|
|
|
3,608
|
|
|
|
2,934
|
|
Total assets
|
|
|
2,029
|
|
|
|
2,642
|
|
|
|
3,930
|
|
|
|
4,715
|
|
|
|
3,829
|
|
Total debt
|
|
|
1,509
|
|
|
|
1,747
|
|
|
|
1,857
|
|
|
|
1,956
|
|
|
|
1,322
|
|
Stockholders equity
|
|
|
197
|
|
|
|
375
|
|
|
|
1,324
|
|
|
|
1,730
|
|
|
|
1,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
94
|
|
|
$
|
316
|
|
|
$
|
509
|
|
|
$
|
(378
|
)
|
|
$
|
(46
|
)
|
Investing activities
|
|
|
(80
|
)
|
|
|
(18
|
)
|
|
|
(52
|
)
|
|
|
(105
|
)
|
|
|
(85
|
)
|
Financing activities
|
|
|
(91
|
)
|
|
|
(167
|
)
|
|
|
(171
|
)
|
|
|
353
|
|
|
|
108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt as a percentage of total debt and stockholders
equity
|
|
|
88.5
|
%
|
|
|
82.3
|
%
|
|
|
58.4
|
%
|
|
|
53.1
|
%
|
|
|
46.0
|
%
|
Net debt as a percentage of net debt and stockholders
equity (ii)
|
|
|
82.9
|
%
|
|
|
75.6
|
%
|
|
|
51.4
|
%
|
|
|
50.9
|
%
|
|
|
39.7
|
%
|
Gross margin (i)
|
|
|
2.1
|
%
|
|
|
-12.9
|
%
|
|
|
-3.6
|
%
|
|
|
24.7
|
%
|
|
|
24.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Statistics from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New orders, net
|
|
|
4,205
|
|
|
|
5,403
|
|
|
|
8,377
|
|
|
|
11,695
|
|
|
|
16,250
|
|
Closings
|
|
|
4,330
|
|
|
|
6,697
|
|
|
|
10,160
|
|
|
|
15,584
|
|
|
|
15,445
|
|
Units in backlog
|
|
|
1,193
|
|
|
|
1,318
|
|
|
|
2,612
|
|
|
|
4,395
|
|
|
|
8,268
|
|
Average selling price (in thousands)
|
|
$
|
230.9
|
|
|
$
|
252.7
|
|
|
$
|
286.7
|
|
|
$
|
297.1
|
|
|
$
|
284.6
|
|
|
|
|
(i) |
|
Gross profit (loss) includes inventory impairments and lot
options abandonments of $97.0 million, $406.2 million,
$572.0 million, $28.7 million and $4.5 million
for the fiscal years ended September 30, 2009, 2008, 2007,
2006 and 2005, respectively. Operating (loss) income also
includes goodwill impairments of $16.1 million,
$48.1 million, $51.6 million, $0 and
$48.1 million for the fiscal years ended September 30,
2009, 2008, 2007, 2006 and 2005. Loss from continuing operations
for fiscal 2009 and 2007 also include a gain (loss) on
extinguishment of debt of $144.5 million and ($413,000),
respectively. The aforementioned charges were primarily related
to the deterioration of the homebuilding environment over the
past few years. |
|
(ii) |
|
Net Debt = Debt less unrestricted cash and cash equivalents;
Gross margin = Gross (loss) profit divided by total revenue. |
31
A reconciliation of EBIT and Adjusted EBITDA to net (loss)
income, the most directly comparable GAAP measure, is provided
below for each period presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
Net (loss) income
|
|
$
|
(189,383
|
)
|
|
$
|
(951,912
|
)
|
|
$
|
(411,073
|
)
|
|
$
|
368,836
|
|
|
$
|
275,899
|
|
(Benefit) provision for income taxes
|
|
|
(9,076
|
)
|
|
|
84,763
|
|
|
|
(222,207
|
)
|
|
|
214,421
|
|
|
|
237,315
|
|
Interest amortized to home construction and land sales expenses
and capitalized interest impaired
|
|
|
58,090
|
|
|
|
126,057
|
|
|
|
139,880
|
|
|
|
95,974
|
|
|
|
80,180
|
|
Interest expense not qualified for capitalization
|
|
|
83,030
|
|
|
|
55,185
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
EBIT
|
|
|
(57,339
|
)
|
|
|
(685,907
|
)
|
|
|
(493,400
|
)
|
|
|
679,231
|
|
|
|
593,394
|
|
Depreciation and amortization and stock compensation amortization
|
|
|
30,723
|
|
|
|
40,273
|
|
|
|
44,743
|
|
|
|
58,178
|
|
|
|
48,013
|
|
Inventory impairments and option contract abandonments
|
|
|
103,751
|
|
|
|
496,833
|
|
|
|
599,514
|
|
|
|
44,175
|
|
|
|
5,511
|
|
Goodwill impairment
|
|
|
16,143
|
|
|
|
52,470
|
|
|
|
52,755
|
|
|
|
-
|
|
|
|
130,235
|
|
Joint venture impairment and abandonment charges
|
|
|
14,793
|
|
|
|
68,791
|
|
|
|
31,939
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Adjusted EBITDA
|
|
$
|
108,071
|
|
|
$
|
(27,540
|
)
|
|
$
|
235,551
|
|
|
$
|
781,584
|
|
|
$
|
777,153
|
|
|
|
EBIT (earnings before interest and taxes) equals net (loss)
income before (a) previously capitalized interest amortized
to home construction and land sales expenses, capitalized
interest impaired and interest expense not qualified for
capitalization and (b) income taxes. Adjusted EBITDA
(earnings before interest, taxes, depreciation, amortization and
impairments) is calculated by adding non-cash charges, including
depreciation, amortization, inventory impairment and abandonment
charges, goodwill impairments and joint venture impairment
charges for the period to EBIT. EBIT and Adjusted EBITDA are not
GAAP financial measures. EBIT and Adjusted EBITDA should not be
considered alternatives to net income determined in accordance
with GAAP as an indicator of operating performance, nor an
alternative to cash flows from operating activities determined
in accordance with GAAP as a measure of liquidity. Because some
analysts and companies may not calculate EBIT and Adjusted
EBITDA in the same manner as Beazer Homes, the EBIT and Adjusted
EBITDA information presented above may not be comparable to
similar presentations by others.
The magnitude and volatility of non-cash inventory impairment
and abandonment charges, goodwill impairments and joint venture
impairment charges for the Company, and for other home builders,
have been significant in recent periods and, as such, have made
financial analysis of our industry more difficult. Adjusted
EBITDA, and other similar presentations by analysts and other
companies, is frequently used to assist investors in
understanding and comparing the operating characteristics of
home building activities by eliminating many of the differences
in companies respective capitalization, tax position and
level of impairments. Management believes this non-GAAP measure
enables holders of our securities to better understand the cash
implications of our operating performance and our ability to
service our debt obligations as they currently exist and as
additional indebtedness is incurred in the future. The measure
is also useful internally, helping management compare operating
results and as a measure of the level of cash which may be
available for discretionary spending.
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
Executive
Overview
Throughout fiscal 2007, fiscal 2008 and most of fiscal 2009, the
homebuilding environment continued to deteriorate against a
backdrop of macroeconomic recession, declining consumer
confidence and significant tightening in the availability of
home mortgage credit. While we have begun to see signs that some
negative market trends may be moderating at both local and
national levels, key macroeconomic indicators remain soft or
mixed. In addition, throughout fiscal 2009, the credit markets
and the mortgage industry have experienced a period of
disruption characterized by bankruptcy, financial institution
failure, consolidation and an unprecedented level of
intervention by the United States federal government. While the
ultimate outcome of these events cannot be predicted, it has
made it more difficult for homebuyers to obtain acceptable
financing. Although the supply of new and resale homes in the
marketplace has decreased recently, it is still excessive for
the current level of consumer demand and is
32
challenged by an increased number of foreclosed homes offered at
substantially reduced prices. These pressures in the marketplace
have resulted in the use of increased sales incentives and price
reductions in an effort to generate sales and reduce inventory
levels by us and many of our competitors throughout much of our
fiscal 2009.
We have responded to this challenging environment with a
disciplined approach to the business with continued reductions
in direct costs, overhead expenses and land spending. We have
limited our supply of unsold homes under construction and have
focused on the generation of cash from our existing inventory
supply as we strive to align our land supply and inventory
levels to current expectations for home closings.
During fiscal 2009, as the macro-economic environment tempered,
we continued to focus on the preservation of cash on hand and
cash generation from the sale of existing inventory supply,
including the introduction of additional sales incentives and
reduced sales prices in certain situations in order to move this
inventory. We also reevaluated pricing and incentives offered in
select communities in response to local market conditions to
generate sales on to-be-built inventory. Certain of these
changes resulted in adjustments to our inventory valuations. See
Note 4 to the Consolidated Financial Statements for
discussion of the Companys fiscal 2009 inventory
impairments. In addition, we undertook the initial steps in
improving our capitalization with the repurchase of
$384.8 million of our Senior Notes at a discount and the
issuance of $250 million of 12% Senior Secured Notes
due 2017 (see Note 7 to the Consolidated Financial
Statements where further discussed).
In fiscal 2008, we completed a comprehensive review of each of
our markets in order to refine our overall investment strategy
and to optimize capital and resource allocations in an effort to
enhance our financial position and to increase shareholder
value. This review entailed an evaluation of both external
market factors and our position in each market and resulted in
the decision formalized and announced on February 1, 2008,
to discontinue homebuilding operations in Charlotte, NC,
Cincinnati/Dayton, OH, Columbia, SC, Columbus, OH and Lexington,
KY. During the third quarter of fiscal 2008, we announced our
decision to discontinue homebuilding operations in Colorado and
Fresno, CA. As of September 30, 2009, we have completed all
homebuilding activities in these markets. While the underlying
basis for exiting each market was different, in each instance we
concluded we could better serve shareholder interests by
re-allocating the capital employed in these markets. The
operating results of these markets that we have exited are
included in loss from discontinued operations, net of tax in the
accompanying Consolidated Statements of Operations for all
periods presented.
In addition, as disclosed in our 2008
Form 10-K,
the independent investigation, initiated in April 2007 by the
Audit Committee of the Board of Directors (the Investigation)
and concluded in May 2008, identified accounting and financial
reporting errors and irregularities which resulted in the
restatement of certain of our prior period consolidated
financial statements and found evidence that employees of the
Companys Beazer Mortgage Corporation (Beazer Mortgage)
subsidiary, which voluntarily ceased operations in February
2008, violated certain federal
and/or state
regulations, including U.S. Department of Housing and Urban
Development (HUD) regulations. Areas of concern uncovered by the
Investigation included our former practices in the areas of:
down payment assistance programs; the charging of discount
points; the closure of certain HUD Licenses; closing
accommodations; and the payment of a number of realtor bonuses
and decorator allowances in certain Federal Housing
Administration (FHA) insured loans and non-FHA conventional
loans originated by Beazer Mortgage dating back to at least
2000. The Investigation also uncovered limited improper
practices in relation to the issuance of a number of non-FHA
Stated Income Loans. We reviewed the loan documents and
supporting documentation and determined that the assets were
effectively isolated from the seller and its creditors (even in
the event of bankruptcy). Based on that information, management
continues to believe that sale accounting at the time of the
transfer of the loans to third parties was appropriate.
As explained in Note 12 to the consolidated financial
statements, on July 1, 2009, the Company announced that it
has resolved the criminal and civil investigations by the United
States Attorneys Office in the Western District of North
Carolina (the U.S. Attorney) and other state and federal
agencies concerning matters that were the subject of the
Investigation discussed above. Based on the deferred prosecution
agreement (DPA) with the U.S. Attorney and a settlement
agreement with HUD and the civil division of the Department of
Justice and our settlement agreements with the North Carolina
Real Estate Commission and North Carolina Office of the
Commissioner of Banks, we recognized expense of approximately
$16 million in fiscal 2009 to cover payments that we
believe are probable and reasonably estimable for fiscal years
2009 and 2010. Under the terms of the DPA, the Companys
liability in each of
33
the fiscal years after 2010 through a portion of fiscal 2014
(unless extended as described in Note 12) will also be
equal to 4% of the Companys adjusted EBITDA (as defined in
the DPA). The total amount of such obligations will be dependent
on several factors; however, the maximum liability under the DPA
and other settlement agreements discussed above will not exceed
$55.0 million. As of September 30, 2009, we have paid
$11.5 million under the DPA and HUD agreement and have
accrued $2.0 million for fiscal 2010 obligations. While we
believe that our accrual for this liability is adequate as of
September 30, 2009, positive adjusted EBITDA results in
future years will require us to increase our accrual and incur
additional expense in the future.
The Housing and Economic Recovery Act of 2008 (HERA) was enacted
into law on July 30, 2008. Among other things, HERA
provided for a temporary first-time home buyer tax credit for
purchases made through July 1, 2009; reforms of Fannie Mae
and Freddie Mac, including adjustments to the conforming loan
limits; modernization and expansion of the FHA, including an
increase to 3.5% in the minimum down payment required for FHA
loans; and the elimination of seller-funded down payment
assistance programs for FHA loans approved after
September 30, 2008. Overall, HERA was intended to help
stabilize and add consumer confidence to the housing industry.
However, certain of the changes, such as the elimination of the
down payment assistance programs and the increase in minimum
down payments, have adversely impacted the ability of potential
homebuyers to afford to purchase a new home or obtain financing.
The down payment assistance programs were utilized for a number
of our home closings in fiscal 2008.
The Emergency Economic Stabilization Act of 2008 (EESA) was
enacted into law on October 3, 2008. EESA authorizes up to
$700 billion in new spending authority for the United
States Secretary of the Treasury (the Secretary) to purchase,
manage and ultimately dispose of troubled assets. The provisions
of this law include an expansion of the Hope for Homeowners
Program. This program allows the Secretary to use loan
guarantees and credit enhancements so that loans can be modified
to prevent foreclosures. Also, the Secretary can consent to term
extensions, rate-reductions and principal write-downs. Federal
agencies that own mortgage loans are directed to seek
modifications prior to foreclosures.
In February 2009, the $8,000 First Time Homebuyer Tax Credit was
enacted into law. This law enables homebuyers who have not owned
a home in the past three years, subject to certain income
limits, to receive a tax credit of 10% of the purchase price of
a home up to a maximum of $8,000. In November 2009, this tax
credit was extended by Congress to June 2010 and the new law
increased the annual income limits for qualification. In
addition, the new law also added a $6,500 tax credit for
qualified existing homeowners who elect to purchase a new home.
Certain states also enacted laws which enabled certain
homebuyers to receive additional state tax credits. Availability
of these tax credits appears to have incentivized certain
homebuyers to purchase homes during the second half of fiscal
2009, although it is not possible to quantify the precise impact.
In November 2009, Congress passed new net operating loss
carry-back legislation which extended the carryback period from
two years to five years. Based on our preliminary estimates, we
expect to apply for a cash tax refund of approximately
$50 million during the first quarter of fiscal 2010 from
carrying back net operating losses to our 2004 tax year.
Outlook
Historically low interest rates, increased affordability and
federal and state housing tax credits appear to have recently
incented more prospective buyers to purchase a new home.
Together with much lower levels of competition from private
builders, these factors offer a slight hint of improvement,
though it is premature to conclude that a sustainable recovery
is underway. Foreclosures are still having by far the most
damaging impact on the market. In most of our markets,
appraisals continue to be negatively impacted by foreclosure
comparables which put additional pricing pressure on all home
sales and limit financing availability. As a result, we expect
that fiscal 2010 will continue to pose challenges for us. Like
many other homebuilders, we have experienced a material
reduction in revenues and margins and we incurred significant
net losses in fiscal 2007 through 2009. These net losses were
driven primarily by asset impairment and lot option abandonment
charges incurred in all three fiscal years. This has resulted in
a decrease in our stockholders equity from
$1.7 billion at September 30, 2006 to
$196.6 million at September 30, 2009. We believe that
the homebuilding market will remain challenging into fiscal
34
2010 and, as a result, it is likely that we will also incur net
losses in 2010, which will further reduce our stockholders
equity.
There were no amounts outstanding under our secured revolving
credit facility at September 30, 2009 or 2008; however, as
of September 30, 2009, we had provided $48.3 million
of cash in addition to pledged real estate assets to
supplementally collateralize our outstanding letters of credit
of $45.6 million under the secured revolving credit
facility and three stand-alone letter of credit facilities.
Obligations to consummate offers to purchase 10% of the original
face amount of our non-convertible Senior Notes at par may be
triggered if our consolidated tangible net worth
(stockholders equity less intangible assets, as defined)
is less than $85 million at the end of any two consecutive
fiscal quarters. As of September 30, 2009, our consolidated
tangible net worth was $137.0 million. If triggered and
fully subscribed in the future, this could result in our having
to purchase a maximum of $137.5 million of notes, based on
the original amounts of the applicable notes; however, this
amount may be reduced by certain Senior Note repurchases
(potentially at less than par) made after the triggering date.
During fiscal 2009, S&P lowered the Companys
corporate credit rating to CCC and maintained its negative
outlook. S&P also cut ratings on the companys senior
unsecured notes to D given S&Ps expectation for
additional discounted bond repurchases. During fiscal 2009,
Moodys lowered its rating to Caa2 and reaffirmed its
negative outlook, which is consistent with Moodys
methodology given a net loss situation. On March 12, 2009,
Fitch lowered the Companys issuer-default rating from B-
to CCC and its senior notes from CCC+/RR5 to CC/RR5. The rating
agencies announced that these downgrades reflect continued
deterioration in our homebuilding operations, credit metrics,
other earnings-based metrics and the significant decrease in our
tangible net worth over the past year. These ratings and our
current credit condition affect, among other things, our ability
to access new capital, especially debt, and may result in more
stringent covenants and higher interest rates under the terms of
any new debt. Our credit ratings could be further lowered or
rating agencies could issue adverse commentaries in the future,
which could have a material adverse effect on our business,
results of operations, financial condition and liquidity. In
particular, a further weakening of our financial condition,
including any further increase in our leverage or decrease in
our profitability or cash flows, could adversely affect our
ability to obtain necessary funds, result in a credit rating
downgrade or change in outlook, or otherwise increase our cost
of borrowing.
Further, as of September 30, 2009, three of our joint
ventures are in default (or have received default notices) under
their debt agreements. Although neither the Company nor any of
its subsidiaries is the borrower of any of this joint venture
debt, we have issued guarantees of various types with respect to
a number of these joint ventures. To the extent that we are
unable to reach satisfactory resolutions, we may be called upon
to perform under our applicable guarantees. The estimated
maximum exposure related to our debt repayment and
loan-to-value
maintenance guarantees was $19.6 million at
September 30, 2009. See Note 3 to the Consolidated
Financial Statements.
Our cash and cash equivalents at September 30, 2009 was
$507.3 million. We believe our cash and cash equivalents as
of September 30, 2009 and cash generated from our
operations during fiscal 2010 will be adequate to meet our
liquidity needs during fiscal 2010. Additionally, we may be able
to reduce our investment in land and homes to generate further
liquidity. However, if we are required to fund all of the
potential obligations associated with lower levels of
stockholders equity, tangible net worth and joint venture
defaults, we would have cash requirements totaling approximately
$205 million which would significantly reduce our overall
liquidity.
As a result of these issues, in addition to our continued focus
on generation and preservation of cash, we are also focused on
increasing our stockholders equity and reducing our
leverage. In order to accomplish this goal, we will likely need
to issue new common or preferred equity. Any new issuance may
take the form of public or private offerings for cash, equity
issued to consummate acquisitions of assets or equity issued in
exchange for a portion of our outstanding debt. In addition, we
may from time to time continue to seek to retire or purchase our
outstanding debt through cash purchases
and/or
exchanges for equity or other debt securities, in open market
purchases, privately negotiated transactions or otherwise. There
can be no assurance that we will be able to complete any of
these transactions in the future on favorable terms or at all.
35
Critical
Accounting Policies
Some of our critical accounting policies require the use of
judgment in their application or require estimates of inherently
uncertain matters. Although our accounting policies are in
compliance with accounting principles generally accepted in the
United States of America, a change in the facts and
circumstances of the underlying transactions could significantly
change the application of the accounting policies and the
resulting financial statement impact. Listed below are those
policies that we believe are critical and require the use of
complex judgment in their application.
Inventory
Valuation Held for Development
Our homebuilding inventories that are accounted for as held for
development include land and home construction assets grouped
together as communities. Homebuilding inventories held for
development are stated at cost (including direct construction
costs, capitalized indirect costs, capitalized interest and real
estate taxes) unless facts and circumstances indicate that the
carrying value of the assets may not be recoverable. We assess
these assets no less than quarterly for recoverability in
accordance with the provisions of Statement of Financial
Accounting Standards (SFAS) 144, Accounting for the
Impairment or Disposal of Long-Lived Assets (ASC 360). For
those communities for which construction and development
activities are expected to occur in the future or have been
idled (land held for future development), all applicable
interest and real estate taxes are expensed as incurred and the
inventory is stated at cost unless facts and circumstances
indicate that the carrying value of the assets may not be
recoverable. The future enactment of a development plan or the
occurrence of events and circumstances may indicate that the
carrying amount of an asset may not be recoverable.
SFAS 144 requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Generally, upon the commencement of land development activities,
it may take three to five years (depending on, among other
things, the size of the community and its sales pace) to fully
develop, sell, construct and close all the homes in a typical
community. However, the impact of the recent downturn in our
business has significantly lengthened the estimated life of many
communities. Recoverability of assets is measured by comparing
the carrying amount of an asset to future undiscounted cash
flows expected to be generated by the asset. If the expected
undiscounted cash flows generated are expected to be less than
its carrying amount, an impairment charge should be recorded to
write down the carrying amount of such asset to its estimated
fair value based on discounted cash flows.
We conduct a review of the recoverability of our homebuilding
inventories held for development at the community level as
factors indicate that an impairment may exist. Events and
circumstances that might indicate impairment include, but are
not limited to, (1) adverse trends in new orders,
(2) higher than anticipated cancellations,
(3) declining margins, which might result from the need to
offer incentives to new homebuyers to drive sales or price
reductions to respond to actions taken by our competitors,
(4) economic factors specific to the markets in which we
operate, including fluctuations in employment levels, population
growth, or levels of new and resale homes for sale in the
marketplace and (5) a decline in the availability of credit
across all industries.
As a result, we evaluate, among other things, the following
information for each community:
|
|
|
|
|
Actual Net Contribution Margin (defined as
homebuilding revenues less homebuilding costs and direct selling
expenses) for homes closed in the current fiscal quarter, fiscal
year to date and prior two fiscal quarters. Homebuilding costs
include land and land development costs (based upon an
allocation of such costs, including costs to complete the
development, or specific lot costs), home construction costs
(including an estimate of costs, if any, to complete home
construction), previously capitalized indirect costs
(principally for construction supervision), capitalized interest
and estimated warranty costs. Direct selling expenses include
commissions, closing costs and amortization related to model
home furnishings and improvements;
|
|
|
|
Projected Net Contribution Margin for homes in backlog;
|
|
|
|
Actual and trending new orders and cancellation rates;
|
|
|
|
Actual and trending base home sales prices and sales incentives
for home sales that occurred in the prior two fiscal quarters
that remain in backlog at the end of the fiscal quarter and
expected future
|
36
|
|
|
|
|
homes sales prices and sales incentives and absorption over the
expected remaining life of the community;
|
|
|
|
|
|
A comparison of our community to our competition to include,
among other things, an analysis of various product offerings
including, the size and style of the homes currently offered for
sale, community amenity levels, availability of lots in our
community and our competitions, desirability and
uniqueness of our community and other market factors; and
|
|
|
|
Other events that may indicate that the carrying value may not
be recoverable.
|
In determining the recoverability of the carrying value of the
assets of a community that we have evaluated as requiring a test
for impairment, significant quantitative and qualitative
assumptions are made relative to the future home sales prices,
sales incentives, direct and indirect costs of home construction
and land development and the pace of new home orders. In
addition, these assumptions are dependent upon the specific
market conditions and competitive factors for each specific
community and may differ greatly between communities within the
same market and communities in different markets. Our estimates
are made using information available at the date of the
recoverability test, however, as facts and circumstances may
change in future reporting periods, our estimates of
recoverability are subject to change.
For assets in communities for which the undiscounted future cash
flows are less than the carrying value, the carrying value of
that community is written down to its then estimated fair value
based on discounted cash flows. The carrying value of assets in
communities that were previously impaired and continue to be
classified as held for development is not written up for future
estimates of increases in fair value in future reporting
periods. Market deterioration that exceeds our estimates may
lead us to incur additional impairment charges on previously
impaired homebuilding assets in addition to homebuilding assets
not currently impaired but for which indicators of impairment
may arise if the market continues to deteriorate.
The fair value of the homebuilding inventory held for
development is estimated using the present value of the
estimated future cash flows using discount rates commensurate
with the risk associated with the underlying community assets.
The discount rate used may be different for each community. The
factors considered when determining an appropriate discount rate
for a community include, among others: (1) community
specific factors such as the number of lots in the community,
the status of land development in the community, the competitive
factors influencing the sales performance of the community and
(2) overall market factors such as employment levels,
consumer confidence and the existing supply of new and used
homes for sale. The assumptions used in our discounted cash flow
models are specific to each community tested for impairment.
Historically, these assumptions did not include market
improvements except in limited circumstances in the latter years
of long-lived communities. Our assumptions assume limited market
improvements in some communities beginning in fiscal 2011 and
continuing improvement in these communities in subsequent years.
We assumed the remaining communities would have market
improvements beginning in fiscal 2012.
For the fiscal year ended September 30, 2009, we used
discount rates of 17% to 22% in our estimated discounted cash
flow impairment calculations. During fiscal 2009, 2008 and 2007,
we recorded impairments of our inventory of approximately
$80.1 million, $292.8 million and $412.6 million,
respectively, for land under development and homes under
construction for our continuing operations. Impairments of
inventory previously held for development related to our
discontinued operations were $93,000, $19.9 million and
$28.3 million for fiscal 2009, 2008 and 2007, respectively.
Due to uncertainties in the estimation process, particularly
with respect to projected home sales prices and absorption
rates, the timing and amount of the estimated future cash flows
and discount rates, it is reasonably possible that actual
results could differ from the estimates used in our historical
analyses. Our assumptions about future home sales prices and
absorption rates require significant judgment because the
residential homebuilding industry is cyclical and is highly
sensitive to changes in economic conditions. We calculated the
estimated fair values of inventory held for development that
were evaluated for impairment based on current market conditions
and assumptions made by management relative to future results.
Because our projected cash flows are significantly impacted by
changes in market conditions, it is reasonably possible that
actual results could differ materially from our estimates and
result in additional impairments.
37
Asset
Valuation Land Held for Sale
We record assets held for sale at the lower of the carrying
value or fair value less costs to sell in accordance with
SFAS 144. The following criteria are used to determine if
land is held for sale:
|
|
|
|
|
management has the authority and commits to a plan to sell the
land;
|
|
|
the land is available for immediate sale in its present
condition;
|
|
|
there is an active program to locate a buyer and the plan to
sell the property has been initiated;
|
|
|
the sale of the land is probable within one year;
|
|
|
the property is being actively marketed at a reasonable sale
price relative to its current fair value; and
|
|
|
it is unlikely that the plan to sell will be withdrawn or that
significant changes to the plan will be made.
|
Additionally, in certain circumstances, management will
re-evaluate the best use of an asset that is currently being
accounted for as held for development. In such instances,
management will review, among other things, the current and
projected competitive circumstances of the community, including
the level of supply of new and used inventory, the level of
sales absorptions by us and our competition, the level of sales
incentives required and the number of owned lots remaining in
the community. Based on this review, if the foregoing criteria
have been met at the end of the applicable reporting period and
we believe that the best use of the asset is the sale of all or
a portion of the asset in its current condition, then all or
portions of the community are accounted for as held for sale.
In determining the fair value of the assets less cost to sell,
we considered factors including current sales prices for
comparable assets in the area, recent market analysis studies,
appraisals, any recent legitimate offers, and listing prices of
similar properties. If the estimated fair value less cost to
sell of an asset is less than its current carrying value, the
asset is written down to its estimated fair value less cost to
sell. During fiscal 2009, 2008 and 2007, we recorded inventory
impairments on land held for sale by our continuing operations
of approximately $12.9 million, $61.2 million and
$47.4 million, respectively. Land held for sale inventory
impairments related to our discontinued operations totaled
$9.0 million, $55.6 million and $0.6 million for
fiscal 2009, 2008 and 2007, respectively.
Due to uncertainties in the estimation process, it is reasonably
possible that actual results could differ from the estimates
used in our historical analyses. Our assumptions about land
sales prices require significant judgment because the current
market is highly sensitive to changes in economic conditions. We
calculated the estimated fair values of land held for sale based
on current market conditions and assumptions made by management,
which may differ materially from actual results and may result
in additional impairments if market conditions continue to
deteriorate.
Homebuilding
Revenues and Costs
Revenue from the sale of a home is generally recognized when the
closing has occurred and the risk of ownership is transferred to
the buyer. As appropriate, revenue for condominiums under
construction is recognized based on the
percentage-of-completion
method in accordance with SFAS 66, Accounting for Sales
of Real Estate (ASC 360), when certain criteria are met. All
associated homebuilding costs are charged to cost of sales in
the period when the revenues from home closings are recognized.
Homebuilding costs include land and land development costs
(based upon an allocation of such costs, including costs to
complete the development, or specific lot costs), home
construction costs (including an estimate of costs, if any, to
complete home construction), previously capitalized indirect
costs (principally for construction supervision), capitalized
interest and estimated warranty costs. Sales commissions are
included in selling, general and administrative expense when the
closing has occurred. All other costs are expensed as incurred.
Warranty
Reserves
We currently provide a limited warranty (ranging from one to two
years) covering workmanship and materials per our defined
performance quality standards. In addition, we provide a limited
warranty (generally ranging from a minimum of five years up to
the period covered by the applicable statute of repose) covering
only certain defined construction defects. We also provide a
defined structural element warranty with single-family homes and
townhomes in certain states.
38
Since we subcontract our homebuilding work to subcontractors who
generally provide us with an indemnity and a certificate of
insurance prior to receiving payments for their work, claims
relating to workmanship and materials are generally the primary
responsibility of our subcontractors.
Warranty reserves are included in other liabilities in the
consolidated balance sheets. We record reserves covering our
anticipated warranty expense for each home closed. Management
reviews the adequacy of warranty reserves each reporting period,
based on historical experience and managements estimate of
the costs to remediate the claims, and adjusts these provisions
accordingly. Our review includes a quarterly analysis of the
historical data and trends in warranty expense by operating
segment. An analysis by operating segment allows us to consider
market specific factors such as our warranty experience, the
number of home closings, the prices of homes, product mix and
other data in estimating our warranty reserves. In addition, our
analysis also contemplates the existence of any non-recurring or
community-specific warranty related matters that might not be
contemplated in our historical data and trends. As a result of
our analyses, we adjust our estimated warranty liabilities.
Based on historical results, we believe that our existing
estimation process is accurate and do not anticipate the process
to materially change in the future. Our estimation process for
such accruals is discussed in Note 12 to the Consolidated
Financial Statements. While we believe that our warranty
reserves at September 30, 2009 are adequate, there can be
no assurances that historical data and trends will accurately
predict our actual warranty costs or that future developments
might not lead to a significant change in the reserve.
Investments
in Unconsolidated Joint Ventures
We periodically enter into joint ventures with unrelated
developers, other homebuilders and financial partners to develop
finished lots for sale to the joint ventures members and
other third parties. We have determined that our interest in
these joint ventures should be accounted for under the equity
method as prescribed by
SOP 78-9,
Accounting for Investments in Real Estate Ventures (ASC
970). We recognize our share of profits and losses from the sale
of lots to other buyers. Our share of profits from lots
purchased by Beazer Homes from the joint ventures are deferred
and treated as a reduction of the cost of the land purchased
from the joint venture. Such profits are subsequently recognized
at the time the home closes and title passes to the homebuyer.
We evaluate our investments in unconsolidated entities for
impairment during each reporting period in accordance with APB
18, The Equity Method of Accounting for Investments in Common
Stock (ASC 323). A series of operating losses of an investee
or other factors may indicate that a decrease in the value of
our investment in the unconsolidated entity has occurred which
is
other-than-temporary.
The amount of impairment recognized is the excess of the
investments carrying value over its estimated fair value.
Our assumptions of the joint ventures estimated fair value
is dependent on market conditions. Inventory in the joint
venture is also reviewed for potential impairment by the
unconsolidated entities in accordance with SFAS 144. If a
valuation adjustment is recorded by an unconsolidated entity in
accordance with SFAS 144, our proportionate share of it is
reflected in our equity in income (loss) from unconsolidated
joint ventures with a corresponding decrease to our investment
in unconsolidated entities. The operating results of the
unconsolidated joint ventures are dependent on the status of the
homebuilding industry, which has historically been cyclical and
sensitive to changes in economic conditions such as interest
rates, credit availability, unemployment levels and consumer
sentiment. Changes in these economic conditions could materially
affect the projected operational results of the unconsolidated
entities. Because of these changes in economic conditions,
actual results could differ materially from managements
assumptions and may require material valuation adjustments to
our investments in unconsolidated entities to be recorded in the
future.
During fiscal 2009, 2008 and 2007, we wrote down our investment
in certain of our joint ventures reflecting $13.8 million,
$64.0 million and $28.6 million, respectively, of
impairments of inventory held within those ventures. These
charges are included in equity in loss of unconsolidated joint
ventures in the accompanying Statement of Operations for the
fiscal years ended September 30, 2009, 2008 and 2007,
respectively. In addition, for fiscal 2009 and 2008,
respectively, there were $1.0 million and $4.8 million
of joint venture impairments related to certain homebuilding
operations in our discontinued operations and, as a result, have
been included in loss from discontinued operations, net in the
accompanying Statement of Operations. While we believe that no
additional impairment of our unconsolidated joint venture
investments existed as of September 30, 2009, market
deterioration or
39
changes in estimated future cash flows that exceeds our
estimates may lead us to incur additional impairment charges. As
of September 30, 2009, our remaining investments in
unconsolidated joint ventures totaled $30.1 million.
Income
Taxes Valuation Allowance
Judgment is required in estimating valuation allowances for
deferred tax assets. In accordance with SFAS 109,
Accounting for Income Taxes (ASC 740), a valuation
allowance is established against a deferred tax asset if, based
on the available evidence, it is not more likely than not that
such assets will be realized. The realization of a deferred tax
asset ultimately depends on the existence of sufficient taxable
income in either the carryback or carryforward periods under tax
law. We periodically assess the need for valuation allowances
for deferred tax assets based on the SFAS 109
more-likely-than-not realization threshold criterion. In our
assessment, appropriate consideration is given to all positive
and negative evidence related to the realization of the deferred
tax assets. This assessment considers, among other matters, the
nature, frequency and severity of current and cumulative losses,
forecasts of future profitability, the duration of statutory
carryforward periods, our experience with operating loss and tax
credit carryforwards not expiring unused, the Section 382
limitation on our ability to carryforward pre-ownership change
net operating losses and recognized built-in losses or
deductions, and tax planning alternatives.
Our assessment of the need for the valuation of deferred tax
assets includes assessing the likely future tax consequences of
events that have been recognized in our financial statements or
tax returns. We base our estimate of deferred tax assets and
liabilities on current tax laws and rates and, in certain cases,
business plans and other expectations about future outcomes.
Changes in existing tax laws or rates could affect actual tax
results and future business results may affect the amount of
deferred tax liabilities or the valuation of deferred tax assets
over time. Our accounting for deferred tax consequences
represents our best estimate of future events. Although it is
possible there will be changes that are not anticipated in our
current estimates, we believe it is unlikely such changes would
have a material
period-to-period
impact on our financial position or results of operations.
SFAS 109 requires that deferred tax assets be reduced by a
valuation allowance if is more likely than not that some portion
or all of a deferred tax asset will not be realized. During
fiscal 2008, we determined that it was not more likely than not
that substantially all of our deferred tax assets would be
realized and, therefore, we established a valuation allowance of
$400.6 million for substantially all of our deferred tax
assets. We have not changed our assessment regarding the
recoverability of our deferred tax assets as of
September 30, 2009 and consequently, during the fiscal year
ended September 30, 2009, we determined that an additional
valuation allowance of $52.8 million was warranted. As of
September 30, 2009, our deferred tax valuation allowance
was $453.3 million. Management reassesses the realizability
of the deferred tax assets each reporting period. To the extent
that our results of operations improve and deferred tax assets
become realizable, the valuation allowance will be reduced and
result in a non-cash tax benefit.
We experienced an ownership change as defined in
Section 382 of the Internal Revenue Code as of
December 31, 2007. Section 382 contains rules that
limit the ability of a company that undergoes an ownership
change to utilize its net operating loss carryforwards and
certain built-in losses or deductions recognized during the
five-year period after the ownership change. Therefore, our
ability to utilize our pre-ownership change net operating loss
carryforwards and recognize certain built-in losses or
deductions is limited by Section 382 to a maximum amount of
approximately $17 million annually.
At September 30, 2009, we estimated that approximately
$165.8 million of our federal net operating loss
carryforwards are not subject to the annual limitation imposed
by Section 382. In addition, we have estimated that
approximately $242.6 million of net operating loss
carryforwards are subject to the annual limitation imposed by
Section 382. Furthermore, we estimated that approximately
$520.9 million of unrecognized built-in losses as of
September 30, 2009 that, if recognized before
January 1, 2013 would also be subject to the annual
limitation triggered by the Section 382 ownership change at
December 31, 2007.
Although our Board of Directors recently adopted a shareholder
rights plan on July 31, 2009 which is intended to reduce
the likelihood of an unintended ownership change
within the meaning of Section 382 and thereby protect
stockholder value by preserving our ability to use our net
operating loss carryforwards, the shareholder rights plan does
not ensure that our net operating loss carryforwards will be
protected from an ownership change as defined in
40
the tax laws, and there can be no assurance that such an
ownership change will not occur. If another ownership
change occurs, a new annual limitation on the utilization
of net operating losses would be determined on that date.
Seasonal and Quarterly Variability: Our
homebuilding operating cycle generally reflects escalating new
order activity in the second and third fiscal quarters and
increased closings in the third and fourth fiscal quarters.
However, beginning in the second half of fiscal 2006 and
continuing through the first two quarters of fiscal 2009, we
continued to experience challenging conditions in most of our
markets which contributed to decreased revenues and closings as
compared to prior periods including prior quarters, thereby
reducing typical seasonal variations. The following chart
presents certain quarterly operating data for our continuing
operations for our last twelve fiscal quarters.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Orders (net of
cancellations)
|
|
|
1st Qtr
|
|
2nd Qtr
|
|
3rd Qtr
|
|
4th Qtr
|
|
Total
|
|
|
|
|
2009
|
|
|
533
|
|
|
|
1,124
|
|
|
|
1,536
|
|
|
|
1,012
|
|
|
|
4,205
|
|
2008
|
|
|
1,054
|
|
|
|
1,745
|
|
|
|
1,616
|
|
|
|
988
|
|
|
|
5,403
|
|
2007
|
|
|
1,488
|
|
|
|
3,466
|
|
|
|
2,580
|
|
|
|
843
|
|
|
|
8,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closings
|
|
|
1st Qtr
|
|
2nd Qtr
|
|
3rd Qtr
|
|
4th Qtr
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
890
|
|
|
|
807
|
|
|
|
948
|
|
|
|
1,685
|
|
|
|
4,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
1,733
|
|
|
|
1,319
|
|
|
|
1,419
|
|
|
|
2,226
|
|
|
|
6,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2,216
|
|
|
|
2,323
|
|
|
|
2,243
|
|
|
|
3,378
|
|
|
|
10,160
|
|
41
RESULTS
OF CONTINUING OPERATIONS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended September 30,
|
|
($ in thousands)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding
|
|
$
|
1,000,010
|
|
|
$
|
1,693,583
|
|
|
$
|
2,935,900
|
|
Land and lot sales
|
|
|
3,389
|
|
|
|
115,737
|
|
|
|
93,020
|
|
Financial Services
|
|
|
1,813
|
|
|
|
4,193
|
|
|
|
8,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,005,212
|
|
|
$
|
1,813,513
|
|
|
$
|
3,036,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding
|
|
$
|
18,374
|
|
|
$
|
(247,688
|
)
|
|
$
|
(122,320
|
)
|
Land and lot sales
|
|
|
620
|
|
|
|
9,570
|
|
|
|
5,111
|
|
Financial Services
|
|
|
1,813
|
|
|
|
4,193
|
|
|
|
8,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
20,807
|
|
|
$
|
(233,925
|
)
|
|
$
|
(109,141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative (SG&A) expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding
|
|
$
|
226,973
|
|
|
$
|
306,837
|
|
|
$
|
355,897
|
|
Financial Services
|
|
|
1,106
|
|
|
|
2,483
|
|
|
|
3,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
228,079
|
|
|
$
|
309,320
|
|
|
$
|
359,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
18,736
|
|
|
$
|
24,708
|
|
|
$
|
28,244
|
|
As a percentage of total revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
|
2.1
|
%
|
|
|
-12.9
|
%
|
|
|
-3.6
|
%
|
SG&A - homebuilding
|
|
|
22.6
|
%
|
|
|
16.9
|
%
|
|
|
11.7
|
%
|
SG&A - Financial Services
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
Goodwill impairment
|
|
$
|
16,143
|
|
|
$
|
48,105
|
|
|
$
|
51,625
|
|
Equity in income (loss) of unconsolidated joint ventures
from:
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint venture activities
|
|
$
|
509
|
|
|
$
|
(12,527
|
)
|
|
$
|
(3,138
|
)
|
Impairments
|
|
$
|
(13,812
|
)
|
|
$
|
(64,025
|
)
|
|
$
|
(28,553
|
)
|
Option contract abandonments
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,386
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in loss of unconsolidated joint ventures
|
|
$
|
(13,303
|
)
|
|
$
|
(76,552
|
)
|
|
$
|
(35,077
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on extinguishment of debt
|
|
$
|
144,503
|
|
|
$
|
-
|
|
|
$
|
(413
|
)
|
Effective tax rate from continuing operations
|
|
|
4.6
|
%
|
|
|
-9.8
|
%
|
|
|
35.3
|
%
|
Discontinued Operations. During fiscal 2009, all of
the homebuilding operating activities in the markets we have
exited have ceased. On February 1, 2008, we determined that
we would discontinue our mortgage origination services through
Beazer Mortgage Corporation (BMC). As of September 30,
2008, all of BMC operating activities had ceased. We have
classified the results of operations of BMC, previously included
in our Financial Services segment, and our exit markets,
previously included in our Other Homebuilding segment, as
discontinued operations in the accompanying Consolidated
Statements of Operations for all periods presented. All
statement of operations information in the table above and the
management discussion and analysis that follow exclude the
results of discontinued operations. Discontinued operations were
not segregated in the Consolidated Statements of Cash Flows or
the Consolidated Balance Sheets. Total revenue from discontinued
operations was $18.0 million, $264.6 million and
$453.8 million for the fiscal years ended
September 30, 2009, 2008 and 2007, respectively.
42
Additional operating data related to discontinued operations for
the fiscal years ended September 30, 2009, 2008 and 2007 is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended September 30,
|
($ in thousands)
|
|
2009
|
|
2008
|
|
2007
|
|
Closings
|
|
|
58
|
|
|
|
995
|
|
|
|
1,860
|
|
New Orders
|
|
|
18
|
|
|
|
662
|
|
|
|
1,526
|
|
Homebuilding revenues
|
|
$
|
14,913
|
|
|
$
|
220,721
|
|
|
$
|
423,694
|
|
Land and lot sale revenues
|
|
$
|
3,077
|
|
|
$
|
40,064
|
|
|
$
|
6,043
|
|
Mortgage revenues
|
|
$
|
-
|
|
|
$
|
3,842
|
|
|
$
|
24,094
|
|
See Note 14 to the Consolidated Financial Statements for
additional information related to our discontinued operations.
Fiscal
Year Ended September 30, 2009 Compared to Fiscal Year Ended
September 30, 2008
Revenues. The continued deterioration of the housing
industry contributed to a 41.0% decrease in homebuilding
revenues and a 35.3% decrease in homes closed from fiscal 2008
primarily due to the tightening of mortgage credit availability,
an increase in home foreclosures and other economic factors that
impacted consumer homebuyers. Foreclosures are still having the
most damaging impact on the market. In every market, appraisals
continue to be negatively impacted by foreclosure comparables
which put further pricing pressure on all home sales and limit
financing availability. The decline in closings was especially
pronounced in all of the markets in our Southeast segment and
our Nevada, North Carolina and Tennessee markets. The average
sales price of homes closed decreased by 8.6% to $230,900 from
$252,700 for the fiscal years ended September 30, 2009 and
2008, respectively. Average sales price decreased most
significantly in our Florida, Nevada, Virginia, Maryland, New
Jersey and California markets, due primarily to increased price
competition and subsequent price discounting and increasing
sales incentives related to the challenging market conditions,
including the increased number of foreclosed homes on the market
at below average sales prices.
In addition, we had $3.4 million and $115.7 million of
land sales for the fiscal years ended September 30, 2009
and 2008 respectively. Fiscal 2008 land and lot sales
primarily resulted from our sale of two condominium projects in
Virginia to third parties.
Gross Profit (Loss). Gross margin for fiscal 2009
was 2.1% (11.7% without $97.0 million of impairments and
abandonments) compared to a gross margin of -12.9% for fiscal
2008 (9.5% without $406.2 million of impairments and
abandonments). While we have begun to see signs that some
negative market trends may be moderating at both local and
national levels, key macroeconomic indicators remain soft or
mixed and gross margins continued to be negatively impacted by
continued market weakness in the homebuilding industry. The
improvement in gross margin was directly related to a reduction
in non-cash pre-tax inventory impairments and option contract
abandonments from $406.2 million in fiscal 2008 to
$97.0 million in fiscal 2009, as well as from cost
reductions related to our cost control initiatives including
renegotiated vendor pricing where possible.
In our continued efforts to redeploy assets to more profitable
endeavors, we executed several land sales during the past two
fiscal years. We realized minimal profit on land sales of
$0.6 million in fiscal 2009 compared to a gain on land
sales of $9.6 million in fiscal 2008.
Selling, General and Administrative
Expense. Selling, general and administrative expense
(SG&A) totaled $228.1 million in fiscal 2009 and
$309.3 million in fiscal 2008. The 26.3% decrease in
SG&A expense during the periods presented is primarily
related to cost reductions realized as a result of our
comprehensive review and realignment of our overhead structure
in light of our reduced volume expectations and lower sales
commissions related to decreased revenues, and decreased
investigation-related costs and severance costs offset partially
by approximately $16 million of expense for obligations
related to the government investigations (see Note 12 to
the Consolidated Financial Statements). Fiscal 2009 and 2008
SG&A expense included $4.6 million and
$3.3 million in severance costs related to employees who
had been severed as of September 30 of the respective year. In
addition, fiscal 2009 and 2008 SG&A expense included
$23.8 million and $31.8 million, respectively of
government investigation-related costs, including the
$16 million obligation discussed above. As of
September 30, 2009, we had
43
reduced our overall number of employees by 543 or 38% as
compared to September 30, 2008, or a cumulative reduction
of 79% since September 30, 2006. As a percentage of total
revenue, SG&A expenses were 22.7% in fiscal 2009 (20.3%
excluding the investigation-related costs) and 17.1% in fiscal
2008 (15.3% excluding the investigation-related costs). The
increase in SG&A costs as a percentage of total revenue is
primarily related to the aforementioned investigative and
severance costs and the impact of fixed overhead expenses on
reduced revenues.
Depreciation and Amortization. Depreciation and
amortization (D&A) totaled $18.7 million in fiscal
2009 and $24.7 million in fiscal 2008. The decrease in
D&A during the periods presented is primarily related to
reduced spending on model furnishings and sales office
improvements as a result of our strategic review of our
communities and reduction in headcount.
Goodwill Impairment Charges. The Company experienced
a significant decline in its market capitalization during first
quarter of fiscal 2009. As of December 31, 2008, we
considered current and expected future market conditions and
recorded a pre-tax, non-cash goodwill impairment charge of
$16.1 million in the first quarter of fiscal 2009 related
to our reporting units in Maryland, Houston, Texas and
Nashville, Tennessee. As a result of this impairment charge, we
have no goodwill remaining as of September 30, 2009. In
fiscal 2008, in light of continuing market weakness,
significantly reduced new orders, additional pricing pressures
and additional incentives provided to homebuyers, our
reforecasting of expected future results of operations and
increasing inventory charges, we recorded pretax, non-cash
goodwill impairment charges of $48.1 million related to our
reporting units in Arizona, New Jersey, Southern California and
Virginia. In fiscal 2007, we recorded pretax, non-cash goodwill
impairment charges of $51.6 million related to our
reporting units in Nevada, Northern California, Florida and
certain of our reporting units in South Carolina. The goodwill
impairment charges were based on estimates of the fair value of
the underlying assets of the reporting units.
Joint Venture Impairment Charges. As a result of the
further deterioration of the housing market in fiscal 2008 and
the first half of fiscal 2009 and the settlement of guarantees
under debt obligations of certain of our unconsolidated joint
ventures, we recorded impairments in certain of our
unconsolidated joint ventures totaling $13.8 million and
$64.0 million in fiscal 2009 and 2008, respectively (see
Note 3 to the Consolidated Financial Statements where
further discussed). If these adverse market conditions continue
or worsen, we may have to take further impairments of our
investments in these joint ventures that may have a material
adverse effect on our financial position and results of
operations.
Gain on Extinguishment of Debt. During the second
half of fiscal 2009, we voluntarily repurchased in open-market
transactions $384.8 million principal amount of our Senior
Notes. The aggregate purchase price was $247.7 million,
plus accrued and unpaid interest as of the purchase date. The
repurchase of these notes resulted in a $130.2 million
pre-tax gain on extinguishment of debt, net of unamortized
discounts and debt issuance costs related to these notes. During
fiscal 2009, we also negotiated a reduced payoff for one of our
other secured notes payable totaling $22.7 million and
recorded a gain on debt extinguishment of $14.3 million
related to the repayment of this note.
Income Taxes. As we are in a cumulative loss
position, as analyzed under SFAS 109, and based on the lack
of sufficient objective evidence regarding the realization of
our deferred tax assets in the foreseeable future, we recorded
an additional valuation allowances of $52.8 million and
$400.3 million in fiscal 2009 and 2008, respectively, for
substantially all of our deferred tax assets (see Note 8 to
the Consolidated Financial Statements for additional
information).
Our effective tax rate for continuing operations was 4.6% for
fiscal 2009 and -9.8% for fiscal 2008. The effective tax rates
for fiscal 2009 and 2008 were impacted by $16.1 million and
$48.1 million of non-cash goodwill impairment charges
discussed above. The change in our effective tax rate between
years is primarily due to our valuation allowances, state income
taxes incurred, non-deductible goodwill impairment charges and
adjustments related to our liabilities for unrecognized tax
benefits. The principal difference between our effective rate
and the U.S. federal statutory rate in fiscal 2009 and 2008
is due to our valuation allowance, state income taxes incurred
and certain non-deductible goodwill impairment charges
($15.7 million and $47.0 million were non-tax
deductible in fiscal 2009 and 2008, respectively).
44
Segment
Results for Fiscal 2009 Compared to Fiscal 2008:
Homebuilding Revenues and Average Selling Price. The
table below summarizes homebuilding revenues, the average
selling prices of our homes and closings by reportable segment
($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding Revenues
|
|
|
Average Selling Price
|
|
|
Closings
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
West
|
|
$
|
414,498
|
|
|
$
|
668,900
|
|
|
|
-38.0
|
%
|
|
$
|
216.3
|
|
|
$
|
240.5
|
|
|
|
-10.1
|
%
|
|
|
1,916
|
|
|
|
2,777
|
|
|
|
-31.0
|
%
|
East
|
|
|
404,992
|
|
|
|
673,251
|
|
|
|
-39.8
|
%
|
|
|
257.5
|
|
|
|
279.9
|
|
|
|
-8.0
|
%
|
|
|
1,573
|
|
|
|
2,405
|
|
|
|
-34.6
|
%
|
Southeast
|
|
|
180,520
|
|
|
|
351,432
|
|
|
|
-48.6
|
%
|
|
|
214.6
|
|
|
|
232.0
|
|
|
|
-7.5
|
%
|
|
|
841
|
|
|
|
1,515
|
|
|
|
-44.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,000,010
|
|
|
$
|
1,693,583
|
|
|
|
-41.0
|
%
|
|
$
|
230.9
|
|
|
$
|
252.7
|
|
|
|
-8.6
|
%
|
|
|
4,330
|
|
|
|
6,697
|
|
|
|
-35.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding revenues decreased for the fiscal year ended
September 30, 2009 compared to fiscal 2008 due to decreased
closings in the majority of our markets, related to reduced
demand, excess capacity in both new and resale markets
(including increased foreclosures available at lower prices) as
investors continued to divest of prior home purchases and
potential homebuyers have difficulty selling their homes
and/or
obtaining financing. In addition, credit tightening in the
mortgage markets, increased unemployment and a decline in
consumer confidence in the majority of our markets further
compounded the market pressures during the fiscal year 2009.
Specifically, homebuilding revenues in the West segment
decreased for fiscal 2009 compared to fiscal 2008 due to reduced
average sales prices and reduced demand in the majority of the
markets in this segment due to deteriorating market conditions
and excess capacity in both the new home and resale markets. In
addition, credit tightening in the mortgage markets and a
decline in consumer confidence in all of our markets further
compounded the market deterioration in our Nevada, California,
Texas and Arizona markets in our West segment.
For the fiscal year ended September 30, 2009, our East
segment homebuilding revenues decreased by 39.8% driven by a
34.6% decline in closings and a 8% decline in average sales
prices which was particularly pronounced in our Maryland, New
Jersey and Tennessee, Virginia markets. These declines reflect
the impact of excess capacity in the resale markets, the impact
of credit tightening in the mortgage markets, competitive
pricing pressures and a decline in consumer confidence.
Our Southeast segment continued to be challenged by significant
declines in demand and excess capacity in both the new home and
resale markets and high foreclosures, especially in our Georgia
and Florida markets, driving decreases in homebuilding revenues
of 48.6% for fiscal 2009 as compared to fiscal 2008. Home
closings in the Southeast segment decreased by 44.5% from the
prior year due to deteriorating market conditions and
competitive pressures. The decrease in closings was driven by
lower demand, higher available supply of new and resale
inventory, increased competition and the tightening of credit
requirements and decreased availability of mortgage options for
potential homebuyers.
Land and Lot Sales Revenues. The table below
summarizes land and lot sales revenues by reportable segment ($
in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and Lot Sales Revenues
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
West
|
|
$
|
1,529
|
|
|
$
|
5,203
|
|
|
|
-70.6
|
%
|
East
|
|
|
1,120
|
|
|
|
107,129
|
|
|
|
-99.0
|
%
|
Southeast
|
|
|
740
|
|
|
|
3,405
|
|
|
|
-78.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,389
|
|
|
$
|
115,737
|
|
|
|
-97.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and lot sales revenue in fiscal 2009 relate to land and
lots sold that did not fit within our homebuilding programs and
strategic plans in these markets. Fiscal 2008 land and lots
sales revenue primarily related to the sale of two condominium
projects in Virginia.
Gross Profit (Loss). Homebuilding gross profit
(loss) is defined as homebuilding revenues less home cost of
sales (which includes land and land development costs, home
construction costs, capitalized interest, indirect costs of
45
construction, estimated warranty costs, closing costs and
inventory impairment and lot option abandonment charges). The
following table sets forth our homebuilding gross profit (loss)
and gross margin by reportable segment and total gross profit
(loss) and gross margin ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Gross Profit
|
|
|
|
|
|
Gross (Loss)
|
|
|
Gross
|
|
|
|
(Loss)
|
|
|
Gross Margin
|
|
|
Profit
|
|
|
Margin
|
|
|
West
|
|
$
|
29,634
|
|
|
|
7.1
|
%
|
|
$
|
(57,471
|
)
|
|
|
-8.6%
|
|
East
|
|
|
47,760
|
|
|
|
11.8
|
%
|
|
|
11,563
|
|
|
|
1.7%
|
|
Southeast
|
|
|
(1,718
|
)
|
|
|
-1.0
|
%
|
|
|
(57,338
|
)
|
|
|
-16.3%
|
|
Corporate & unallocated
|
|
|
(57,302
|
)
|
|
|
|
|
|
|
(144,442
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total homebuilding
|
|
|
18,374
|
|
|
|
1.8
|
%
|
|
|
(247,688
|
)
|
|
|
-14.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and lot sales
|
|
|
620
|
|
|
|
|
|
|
|
9,570
|
|
|
|
|
|
Financial services
|
|
|
1,813
|
|
|
|
|
|
|
|
4,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
20,807
|
|
|
|
2.1
|
%
|
|
$
|
(233,925
|
)
|
|
|
-12.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in gross margins across all segments is primarily
due to lower inventory impairments and lot option abandonment
charges.
Corporate and unallocated. Corporate and unallocated
costs include the amortization of capitalized interest and
indirect construction costs. The decrease in corporate and
unallocated costs relates primarily to 1) a reduction of
approximately $8 million in investigation-related costs
given the resolution of the previously disclosed investigations
despite $16 million of expense related to our obligations
under the Deferred Prosecution Agreement (see Note 12 to
the Consolidated Financial Statements), 2) a reduction of
$57.5 million in the amortization of capitalized interest
costs due to a lower capitalizable inventory base and an
increase in disallowed interest for capitalization which is
recorded as other expense, net in the accompanying Consolidated
Statements of Operations, and 3) a reduction of
$16.7 million in expenses related to the impairment of
capitalized interest and indirect costs in connection with the
reduced level of inventory impairments in fiscal 2009 compared
to fiscal 2008.
Land and Lot Sales Gross Profit (Loss). The table
below summarizes land and lot sales gross profit (loss) by
reportable segment ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and Lot Sales Gross Profit (Loss)
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
West
|
|
$
|
(1
|
)
|
|
$
|
2,139
|
|
|
|
-100.0
|
%
|
East
|
|
|
562
|
|
|
|
7,454
|
|
|
|
-92.5
|
%
|
Southeast
|
|
|
59
|
|
|
|
(23
|
)
|
|
|
356.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
620
|
|
|
$
|
9,570
|
|
|
|
-93.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The decrease in land and lot sales gross profit from fiscal 2008
is primarily related to the 2008 sale of two condominium
projects in Virginia in our East segment.
46
Inventory Impairments. The following tables set
forth, by reportable homebuilding segment, the inventory
impairments and lot option abandonment charges recorded for the
fiscal years ended September 30, 2009 and 2008 (in
thousands) :
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Development projects and homes in process (Held for Development)
|
West
|
|
$
|
42,842
|
|
|
$
|
147,278
|
|
East
|
|
|
10,005
|
|
|
|
72,040
|
|
Southeast
|
|
|
22,160
|
|
|
|
51,663
|
|
Unallocated
|
|
|
5,116
|
|
|
|
21,769
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
80,123
|
|
|
$
|
292,750
|
|
|
|
|
|
|
|
Land Held for Sale
|
|
|
|
|
|
|
|
|
West
|
|
$
|
9,357
|
|
|
$
|
8,505
|
|
East
|
|
|
1,071
|
|
|
|
18,068
|
|
Southeast
|
|
|
2,452
|
|
|
|
34,608
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
12,880
|
|
|
$
|
61,181
|
|
|
|
|
|
|
|
Lot Option Abandonments
|
|
|
|
|
|
|
|
|
West
|
|
$
|
99
|
|
|
$
|
15,356
|
|
East
|
|
|
2,949
|
|
|
|
10,362
|
|
Southeast
|
|
|
947
|
|
|
|
26,519
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
3,995
|
|
|
$
|
52,237
|
|
|
|
|
|
|
|
Continuing Operations
|
|
$
|
96,998
|
|
|
$
|
406,168
|
|
|
|
|
|
|
|
The inventory held for development that was impaired during
fiscal 2009 represented 3,526 lots in 45 communities with an
estimated fair value of $108.4 million. The inventory held
for development that was impaired during fiscal 2008 represented
9,899 lots in 169 communities with an estimated fair value of
$486.2 million. During fiscal 2009, for certain communities
we determined it was prudent to reduce sales prices or further
increase sales incentives in response to factors including
competitive market conditions. Because the projected cash flows
used to evaluate the fair value of inventory are significantly
impacted by changes in market conditions including decreased
sales prices, the change in sales prices and changes in
absorption estimates led to additional impairments in certain
communities during the fiscal year. In future periods, we may
again determine that it is prudent to reduce sales prices,
further increase sales incentives or reduce absorption rates
which may lead to additional impairments, which could be
material. The impairments recorded on our held for development
inventory for the fiscal years ended September 30, 2009 and
2008, primarily resulted from the continued decline in the
homebuilding environment across our submarkets.
During fiscal 2009 and 2008, as a result of challenging market
conditions and review of recent comparable transactions, certain
of the Companys land held for sale was further written
down to net realizable value, less estimated costs to sell. As a
result, we recorded $12.9 million and $61.2 million of
impairments on land during fiscal 2009 and 2008, respectively.
We have determined the proper course of action with respect to a
number of communities within each homebuilding segment was to
abandon the remaining lots under option and to write-off the
deposits securing the option takedowns, as well as
preacquisition costs. We recorded lot option abandonment charges
during the fiscal years ended September 30, 2009 and 2008
of $4.0 million and $52.2 million, respectively. The
abandonment charges relate to our decision to abandon certain
option contracts that no longer fit in our long-term strategic
plan and related to our prior year decision to exit certain
markets.
47
Inventory impairments recorded on a quarterly basis during
fiscal 2009, the estimated fair value of impaired inventory at
period end, the number of lots and number of communities
impaired are set forth in the table below as follows ($ in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Fair
|
|
|
|
|
|
|
|
|
|
Inventory Impairments
|
|
|
Value of Impaired
|
|
|
|
|
|
|
|
|
|
Held for
|
|
|
Held for
|
|
|
|
|
|
Inventory at Period
|
|
|
Lots
|
|
|
Communities
|
|
Quarter Ended
|
|
Development
|
|
|
Sale
|
|
|
Total
|
|
|
End
|
|
|
Impaired
|
|
|
Impaired
|
|
|
December 31, 2008
|
|
$
|
11,943
|
|
|
$
|
176
|
|
|
$
|
12,119
|
|
|
$
|
23,265
|
|
|
|
339
|
|
|
|
6
|
|
March 31, 2009
|
|
|
35,082
|
|
|
|
5,399
|
|
|
|
40,481
|
|
|
|
43,404
|
|
|
|
1,752
|
|
|
|
22
|
|
June 30, 2009
|
|
|
6,269
|
|
|
|
4,420
|
|
|
|
10,689
|
|
|
|
5,877
|
|
|
|
117
|
|
|
|
4
|
|
September 30, 2009
|
|
|
26,829
|
|
|
|
2,885
|
|
|
|
29,714
|
|
|
|
35,876
|
|
|
|
1,318
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2008
|
|
$
|
80,123
|
|
|
$
|
12,880
|
|
|
$
|
93,003
|
|
|
|
|
|
|
|
3,526
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit Data
by Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Orders, net
|
|
|
Cancellation Rates
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
2009
|
|
|
2008
|
|
|
West
|
|
|
1,834
|
|
|
|
2,499
|
|
|
|
-26.6
|
%
|
|
|
35.3
|
%
|
|
|
41.1
|
%
|
East
|
|
|
1,669
|
|
|
|
1,573
|
|
|
|
6.1
|
%
|
|
|
29.3
|
%
|
|
|
45.2
|
%
|
Southeast
|
|
|
702
|
|
|
|
1,331
|
|
|
|
-47.3
|
%
|
|
|
25.2
|
%
|
|
|
27.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,205
|
|
|
|
5,403
|
|
|
|
-22.2
|
%
|
|
|
31.4
|
%
|
|
|
39.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Orders and Backlog: New orders, net of
cancellations, decreased 22.2% to 4,205 units during fiscal
2009 compared to 5,403 units for the same period in the
prior year driven by weaker market conditions, including the
tightening of mortgage credit availability, an increase in home
foreclosures and other economic factors that have impacted
homebuyers. Our third and fourth quarter fiscal 2009 net
new orders reflect a sequential improvement in sales trends that
we have experienced recently. Historically low interest rates,
increased affordability and federal and state housing tax
credits appear to have enticed more prospective buyers to
purchase a new home; however, foreclosures are still having a
damaging impact on the market. In most of our markets,
appraisals continue to be negatively impacted by foreclosure
comparables which put additional pricing pressures on all home
sales and limit financing availability.
For fiscal 2009, we experienced cancellation rates of 31.4%
compared to 39.6% for fiscal 2008. These cancellation rates in
both fiscal 2009 and 2008 reflect the continued challenging
market environment which includes the inability of many
potential homebuyers to sell their existing homes and obtain
affordable financing. In addition, on July 1, 2008, we
completed the sale of two large condominium projects in
Virginia, which resulted in the cancellation of 215 orders for
fiscal 2008, and the significant increase in the cancellation
rate for our East segment. Excluding these transactions, our
cancellation rates in the East Segment and total continuing
operations were 37.7% and 37.2%, respectively, for fiscal 2008.
The decrease in cancellation rates across all markets reflects
competitive pricing and a trend in the current environment that
buyers are only willing to contract on a new home once their
current home sells.
Backlog reflects the number and value of homes for which the
Company has entered into a sales contract with a customer but
has not yet delivered the home. The aggregate dollar value of
homes in backlog for our continuing operations at
September 30, 2009 of $280.8 million decreased 11.8%
from $318.4 million at September 30, 2008, related to
a decrease in the number of homes in backlog from
1,318 units at September 30, 2008 to 1,193 units
at September 30, 2009. The decrease in the number of homes
in backlog across our West and Southeast markets is driven
primarily by the aforementioned market weakness and lower new
orders.
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog at September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
West
|
|
|
445
|
|
|
|
527
|
|
|
|
-15.6
|
%
|
East
|
|
|
581
|
|
|
|
485
|
|
|
|
19.8
|
%
|
Southeast
|
|
|
167
|
|
|
|
306
|
|
|
|
-45.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,193
|
|
|
|
1,318
|
|
|
|
-9.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog has declined in many of our homebuilding markets due
primarily to lower new orders caused by a competitive
environment, increased foreclosures, the reduction in the
availability of mortgage credit for our potential homebuyers and
our decision to sell certain large projects. Foreclosures are
still having by far the most damaging impact on the market.
Particularly in our Southeast and Nevada markets, appraisals
continue to be negatively impacted by foreclosure comparables
which put additional pricing pressure on all home sales and
limit financing availability. As the availability of mortgage
loans stabilizes and the inventory of new and used homes
decreases, backlog should increase; however, continued reduced
levels of backlog will produce less revenue in the future which
could also result in additional asset impairment charges and
lower levels of liquidity.
Fiscal
Year Ended September 30, 2008 Compared to Fiscal Year Ended
September 30, 2007
Revenues. The continued deterioration of the housing
industry contributed to a 42.3% decrease in homebuilding
revenues from fiscal 2008 compared to fiscal 2007. Homes closed
decreased by 34.1% to 6,697 in fiscal 2008 compared to 10,160 in
fiscal 2007 as excessive levels of new and resale home supplies,
tightening of mortgage credit availability and other economic
factors impacted consumer homebuyers. This decline was
especially pronounced in our California, Nevada, Arizona, New
Jersey, South Carolina and Florida markets. The average sales
price of homes closed decreased by 11.8% to $252,700 from
$286,700 for the fiscal years ended September 30, 2008 and
2007, respectively. Average sales price decreased most
significantly in our Florida, Nevada and California markets, due
primarily to increased price competition and subsequent price
discounting and increasing sales incentives related to the
challenging market conditions, including the increased number of
foreclosed homes on the market at below average sales prices.
In addition, we had $115.7 million and $93.0 million
of land sales for the fiscal years ended September 30, 2008
and 2007 respectively. The increase in land sales in fiscal 2008
primarily resulted from our sale of two condominium projects in
Virginia.
Gross Profit (Loss). Gross margin for fiscal 2008
was -12.9% compared to a gross margin of -3.6% for fiscal 2007
driven by market weakness resulting in lower revenues. Gross
margins for both periods were significantly impacted by non-cash
pre-tax inventory impairments and option contract abandonments
of $406.2 million in fiscal 2008 compared to
$572.0 million recognized in fiscal 2007. Gross margins for
fiscal 2008 continued to be negatively impacted by both higher
levels of price discounting and sales incentives as compared to
the same period a year ago. In response to these market
conditions and based on our internal analyses and business
decisions, we incurred non-cash, pretax charges of
$353.9 million for inventory impairments and
$52.2 million for the abandonment of certain land option
contracts during fiscal 2008. During fiscal 2007, we recorded
$460.0 million of inventory impairments and
$112.0 million for the abandonment of land option
contracts. Gross profit also includes a reduction in the accrual
and costs related to the Trinity class action litigation
settlement of $2.5 million in 2008 and $23.8 million
in 2007 (see Note 12 to the Consolidated Financial
Statements).
In an effort to redeploy assets to more profitable endeavors, we
executed several land sales during the past two fiscal years. We
realized a gain on land sales of $9.6 million in fiscal
2008 and $5.1 million in fiscal 2007.
Selling, General and Administrative
Expense. Selling, general and administrative expense
(SG&A) totaled $309.3 million in fiscal 2008 and
$359.2 million in fiscal 2007. The 13.9% decrease in
SG&A expense during the periods presented is primarily
related to cost reductions realized as a result of our
comprehensive review and realignment of our overhead structure
in light of our reduced volume expectations and lower sales
commissions related to decreased revenues, offset by increased
costs related to investigation related costs and severance
costs. Fiscal 2008 and 2007 SG&A expense included
$3.3 million and $3.8 million in severance costs
related to
49
employees who had been severed as of September 30 of the
respective year. In addition, fiscal 2008 and 2007 SG&A
expense included $31.8 million and $10.8 million,
respectively of investigation related costs (an additional
$6.4 million was incurred in fiscal 2007 related to and is
recorded in our discontinued operations). As of
September 30, 2008, we had reduced our overall number of
employees by 1,175 or 45% as compared to September 30,
2007, or a cumulative reduction of 66% since September 30,
2006. As a percentage of total revenue, SG&A expenses were
17.1% in fiscal 2008 (15.3% excluding the investigation related
costs) and 11.8% in fiscal 2007 (11.5% excluding the
investigation related costs). The increase in SG&A costs as
a percentage of total revenue is primarily related to the
aforementioned investigative and severance costs and the impact
of fixed overhead expenses on reduced revenues.
Depreciation and Amortization. Depreciation and
amortization (D&A) totaled $24.7 million in fiscal
2008 and $28.2 million in fiscal 2007. The decrease in
D&A during the periods presented is primarily related to
reduced spending on model furnishings and sales office
improvements as a result of our strategic review of our
communities.
Goodwill Impairment Charges. In light of continuing
market weakness, significantly reduced new orders, additional
pricing pressures and additional incentives provided to
homebuyers, our reforecasting of expected future results of
operations and increasing inventory charges, and in connection
with goodwill impairment tests in accordance with SFAS 142,
we recorded pretax, non-cash goodwill impairment charges of
$48.1 million in fiscal 2008 related to our reporting units
in Arizona, New Jersey, Southern California and Virginia. In
fiscal 2007, we recorded pretax, non-cash goodwill impairment
charges of $51.6 million related to our reporting units in
Nevada, Northern California, Florida and certain of our
reporting units in South Carolina. The goodwill impairment
charges were based on estimates of the fair value of the
underlying assets of the reporting units. These charges are
reported in Corporate and unallocated and are not allocated to
our homebuilding segments. To the extent that there is further
deterioration in market conditions or overall economic
conditions or our strategic plans change, it is possible that
our conclusion regarding fair value of reporting units which are
currently not impaired could change, which could result in
future goodwill impairments that have a material adverse effect
on our financial position and results of operations.
Loss on Extinguishment of Debt. In fiscal 2007, we
voluntarily repurchased $30.0 million of our outstanding
senior notes on the open market for an aggregate purchase price
of $30.5 million, plus accrued and unpaid interest as of
the purchase date. The repurchase of these notes resulted in a
net $412,500 pretax loss on extinguishment of debt.
Joint Venture Impairment Charges. As of
September 30, 2008, we participated in certain land
development joint ventures in which we had less than a
controlling interest. Our joint ventures are typically entered
into with developers, other homebuilders and financial partners
to develop finished lots for sale to the joint ventures
members and other third parties. As a result of the
deterioration of the housing market in fiscal 2008, we wrote
down our investment in certain of our joint ventures reflecting
$64.0 million of impairments of inventory held within those
joint ventures. Joint venture impairments of $28.6 million
and $3.4 million of contractual obligation abandonments
were recorded in fiscal 2007. If these adverse market conditions
continue or worsen, we may have to take further writedowns of
our investments in these joint ventures that may have a material
adverse effect on our financial position and results of
operations.
Income Taxes. Our effective tax rate for continuing
operations was -9.8% for fiscal 2008 and 35.3% for fiscal 2007.
The effective tax rates for fiscal 2008 and 2007, respectively,
were impacted by $48.1 million and $51.6 million of
non-cash goodwill impairment charges discussed above.
The decrease in our effective tax rate between years is
primarily due to the valuation allowance recorded in fiscal
2008. As we are in a cumulative loss position, as analyzed under
SFAS 109, and based on the lack of sufficient objective
evidence regarding the realization of our deferred tax assets in
the foreseeable future, during fiscal 2008, we recorded an
additional valuation allowance of $400.3 million for
substantially all of our deferred tax assets (see Note 8 to
the Consolidated Financial Statements for additional
information). We recorded tax benefits related to certain
discrete items totaling $3.1 million in fiscal 2007. The
principal difference between our effective rate and the
U.S. federal statutory rate in fiscal 2008 is due to our
valuation allowance, state income taxes incurred and certain
non-deductible goodwill impairment charges ($47.0 million
of the $48.1 million was non-tax deductible). The principal
difference between our effective rate and the U.S. federal
statutory rate in fiscal 2007 is due to state
50
income taxes incurred and certain non-deductible goodwill
impairment charges ($46.4 million of the $51.6 million
was non-tax deductible).
Segment Results for Fiscal 2008 Compared to Fiscal
2007:
Homebuilding Revenues and Average Selling Price. The
table below summarizes homebuilding revenues, the average
selling prices of our homes and closings by reportable segment
($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding Revenues
|
|
|
Average Selling Price
|
|
|
Closings
|
|
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
West
|
|
$
|
668,900
|
|
|
$
|
1,276,480
|
|
|
|
-47.6
|
%
|
|
$
|
240.5
|
|
|
$
|
288.5
|
|
|
|
-16.6
|
%
|
|
|
2,777
|
|
|
|
4,369
|
|
|
|
-36.4
|
%
|
East
|
|
|
673,251
|
|
|
|
877,705
|
|
|
|
-23.3
|
%
|
|
|
279.9
|
|
|
|
313.2
|
|
|
|
-10.6
|
%
|
|
|
2,405
|
|
|
|
2,821
|
|
|
|
-14.7
|
%
|
Southeast
|
|
|
351,432
|
|
|
|
781,715
|
|
|
|
-55.0
|
%
|
|
|
232.0
|
|
|
|
258.9
|
|
|
|
-10.4
|
%
|
|
|
1,515
|
|
|
|
2,970
|
|
|
|
-49.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,693,583
|
|
|
$
|
2,935,900
|
|
|
|
-42.3
|
%
|
|
$
|
252.7
|
|
|
$
|
286.7
|
|
|
|
-11.9
|
%
|
|
|
6,697
|
|
|
|
10,160
|
|
|
|
-34.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding revenues decreased for the fiscal year ended
September 30, 2008 compared to fiscal 2007 due to decreased
closings in the majority of our markets, related to reduced
demand, a continued high rate of cancellations, excess capacity
in both new and resale markets (including increased foreclosures
available at lower prices) and the mortgage credit tightening as
investors continued to divest of prior home purchases and
potential homebuyers have difficulty selling their homes
and/or
obtaining financing. Specifically, homebuilding revenues in the
West segment decreased for fiscal 2008 compared to fiscal 2007
due to reduced average sales prices and reduced demand in the
majority of the markets in this segment due to deteriorating
market conditions and excess capacity in both the new home and
resale markets. In addition, credit tightening in the mortgage
markets and a decline in consumer confidence in all of our
markets further compounded the market deterioration in our
Nevada, California, Texas and Arizona markets in our West
segment.
For the fiscal year ended September 30, 2008, our East
segment homebuilding revenues decreased by 23.3% driven by a
14.7% decline in closings and a 10.6% decline in average sales
prices. These declines reflect the impact of excess capacity in
the resale markets and competitive pricing pressures.
Our Southeast segment continued to be challenged by significant
declines in demand, high cancellations and excess capacity in
both the new home and resale markets, driving decreases in
homebuilding revenues of 55.0% for fiscal 2008 as compared to
fiscal 2007. Home closings in the Southeast segment decreased by
49.0% from the prior year due to deteriorating market conditions
and competitive pressures. The decrease in closings was driven
by higher cancellations, lower demand, higher available supply
or new and resale inventory, increased competition and the
tightening of credit requirements and decreased availability of
mortgage options for potential homebuyers.
Land and Lot Sales Revenues. The table below
summarizes land and lot sales revenues by reportable segment ($
in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and Lot Sales Revenues
|
|
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
West
|
|
$
|
5,203
|
|
|
$
|
45,390
|
|
|
|
-88.5
|
%
|
East
|
|
|
107,129
|
|
|
|
11,892
|
|
|
|
800.8
|
%
|
Southeast
|
|
|
3,405
|
|
|
|
35,738
|
|
|
|
-90.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
115,737
|
|
|
$
|
93,020
|
|
|
|
24.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in land and lot sales revenues in fiscal 2008
primarily resulted from our sale of two condominium projects in
Virginia. Fiscal 2007 land and lot sales revenues related
to land and lots sold in our West and Southeast segments that
did not fit within our homebuilding programs in those segments.
51
Gross (Loss) Profit. The following table sets forth
our homebuilding gross (loss) profit and gross margin by
reportable segment and total gross (loss) profit and gross
margin ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
Gross (Loss)
|
|
|
Gross
|
|
|
Gross (Loss)
|
|
|
Gross
|
|
|
|
Profit
|
|
|
Margin
|
|
|
Profit
|
|
|
Margin
|
|
|
West
|
|
$
|
(57,471
|
)
|
|
|
-8.6
|
%
|
|
$
|
(95,309
|
)
|
|
|
-7.5
|
%
|
East
|
|
|
11,563
|
|
|
|
1.7
|
%
|
|
|
41,545
|
|
|
|
4.7
|
%
|
Southeast
|
|
|
(57,338
|
)
|
|
|
-16.3
|
%
|
|
|
66,644
|
|
|
|
8.5
|
%
|
Corporate & unallocated
|
|
|
(144,442
|
)
|
|
|
|
|
|
|
(135,199
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total homebuilding
|
|
|
(247,688
|
)
|
|
|
-14.6
|
%
|
|
|
(122,319
|
)
|
|
|
-4.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and lot sales
|
|
|
9,570
|
|
|
|
|
|
|
|
5,110
|
|
|
|
|
|
Financial services
|
|
|
4,193
|
|
|
|
|
|
|
|
8,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(233,925
|
)
|
|
|
-12.9
|
%
|
|
$
|
(109,141
|
)
|
|
|
-3.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The decrease in gross margins across all segments is primarily
due to further deteriorating market conditions, increase in
sales incentives and the impact of charges related to inventory
impairments and the abandonment of certain lot option contracts,
discussed by segment below.
Corporate and unallocated. Corporate and unallocated
costs include the amortization of capitalized interest and
indirect construction costs. Costs for fiscal 2008 and fiscal
2007 are offset by $2.5 million and $23.8 million,
respectively, of reductions in accruals associated with
construction defect claims from water intrusion in Indiana
related to a prior acquisition. Excluding these accrual
reductions, fiscal 2008 corporate and unallocated costs
decreased from fiscal 2007 due primarily to decreased
amortization of capitalized interest related to decreased
closings.
Land and Lot Sales Gross Profit (Loss). The table
below summarizes land and lot sales gross profit (loss) by
reportable segment ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and Lot Sales Gross Profit (Loss)
|
|
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
West
|
|
$
|
2,139
|
|
|
$
|
2,957
|
|
|
|
-27.7
|
%
|
East
|
|
|
7,454
|
|
|
|
2,374
|
|
|
|
214.0
|
%
|
Southeast
|
|
|
(23
|
)
|
|
|
(221
|
)
|
|
|
89.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
9,570
|
|
|
$
|
5,110
|
|
|
|
87.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in land and lot sales gross profit from fiscal 2007
is primarily related to the 2008 sale of two condominium
projects in Virginia in our East segment.
52
Inventory Impairments. The following tables set
forth, by reportable homebuilding segment, the inventory
impairments and lot option abandonment charges recorded for the
fiscal years ended September 30, 2008 and 2007 (in
thousands) :
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended September 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
Development projects and homes in process (Held for Development)
|
West
|
|
$
|
147,278
|
|
|
$
|
224,782
|
|
East
|
|
|
72,040
|
|
|
|
95,734
|
|
Southeast
|
|
|
51,663
|
|
|
|
68,220
|
|
Unallocated
|
|
|
21,769
|
|
|
|
23,853
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
292,750
|
|
|
$
|
412,589
|
|
|
|
|
|
|
|
|
|
|
Land Held for Sale
|
|
|
|
|
|
|
|
|
West
|
|
$
|
8,505
|
|
|
$
|
46,138
|
|
East
|
|
|
18,068
|
|
|
|
798
|
|
Southeast
|
|
|
34,608
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
61,181
|
|
|
$
|
47,436
|
|
|
|
|
|
|
|
|
|
|
Lot Option Abandonments
|
|
|
|
|
|
|
|
|
West
|
|
$
|
15,356
|
|
|
$
|
54,703
|
|
East
|
|
|
10,362
|
|
|
|
23,979
|
|
Southeast
|
|
|
26,519
|
|
|
|
33,332
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
52,237
|
|
|
$
|
112,014
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations
|
|
$
|
406,168
|
|
|
$
|
572,039
|
|
|
|
|
|
|
|
|
|
|
The inventory held for development that was impaired during
fiscal 2008 represented 9,899 lots in 169 communities with an
estimated fair value of $486.2 million. The inventory held
for development that was impaired during fiscal 2007 represented
10,923 lots in 122 communities with an estimated fair value of
$783.6 million. The impairments recorded on our held for
development inventory, for all segments, primarily resulted from
the continued significant decline in the homebuilding
environment that negatively impacted the sales prices of homes
and increased the sales incentives offered to potential
homebuyers in our efforts to increase home sales absorptions. In
addition, the homebuilding markets that comprise our West
segment consist of markets that once experienced the most
significant home price appreciation in the nation during the
2004 through 2006 periods which was driven in large part by
speculative purchases and the availability of mortgage credit
during those time periods which are significantly less available
in the marketplace. The decline in the availability of mortgage
loan products and the exit of speculators from the market, among
other factors, contributed to the significant increase in the
supply of new and used homes on the market for sale.
We have also recorded $61.2 million and $47.4 million
of impairments on land during fiscal 2008 and 2007, respectively
that we have determined does not fit within our homebuilding
needs in the current environment and have thus classified as
held for sale. The impairments recorded on our land held for
sale, for all segments, primarily resulted from the continued
significant decline in the homebuilding environment as discussed
above.
In addition, based on the significant decline in the
homebuilding market, we have determined the proper course of
action with respect to a number of communities within each
homebuilding segment was to abandon the remaining lots under
option and to write-off the deposits securing the option
takedowns, as well as preacquisition costs. The total
abandonments recorded for fiscal 2008 were $52.2 million
representing 39 communities, with the Southeast segment
representing 50.8% of fiscal 2008 abandonments as we made
decisions to abandon certain option contracts that no longer fit
in our long-term strategic plan. Fiscal 2007 abandonments were
$112.0 million, representing 103 communities and were
concentrated in our West and Southeast segments, generally among
markets with the highest levels of new and resale home supply.
53
Inventory impairments recorded on a quarterly basis during
fiscal 2008, the estimated fair value of impaired inventory at
period end, the number of lots and number of communities
impaired are set forth in the table below as follows ($ in
thousands):
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Fair
|
|
|
|
|
|
|
|
|
|
Inventory Impairments
|
|
|
Value of Impaired
|
|
|
|
|
|
|
|
|
|
Held for
|
|
|
Held for
|
|
|
|
|
|
Inventory at Period
|
|
|
Lots
|
|
|
Communities
|
|
Quarter Ended
|
|
Development
|
|
|
Sale
|
|
|
Total
|
|
|
End
|
|
|
Impaired
|
|
|
Impaired
|
|
|
December 31, 2007
|
|
$
|
99,634
|
|
|
$
|
10,769
|
|
|
$
|
110,403
|
|
|
$
|
150,150
|
|
|
|
2,529
|
|
|
|
43
|
|
March 31, 2008
|
|
|
110,432
|
|
|
|
33,010
|
|
|
|
143,442
|
|
|
|
164,083
|
|
|
|
3,153
|
|
|
|
57
|
|
June 30, 2008
|
|
|
44,328
|
|
|
|
16,214
|
|
|
|
60,542
|
|
|
|
97,855
|
|
|
|
2,328
|
|
|
|
40
|
|
September 30, 2008
|
|
|
38,356
|
|
|
|
1,188
|
|
|
|
39,544
|
|
|
|
74,089
|
|
|
|
1,889
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2008
|
|
$
|
292,750
|
|
|
$
|
61,181
|
|
|
$
|
353,931
|
|
|
|
|
|
|
|
9,899
|
|
|
|
169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit Data
by Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Orders, net
|
|
|
Cancellation Rates
|
|
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
2008
|
|
|
2007
|
|
|
West
|
|
|
2,499
|
|
|
|
3,444
|
|
|
|
-27.4
|
%
|
|
|
41.1
|
%
|
|
|
46.4
|
%
|
East
|
|
|
1,573
|
|
|
|
2,816
|
|
|
|
-44.1
|
%
|
|
|
45.2
|
%
|
|
|
34.3
|
%
|
Southeast
|
|
|
1,331
|
|
|
|
2,117
|
|
|
|
-37.1
|
%
|
|
|
27.4
|
%
|
|
|
40.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
5,403
|
|
|
|
8,377
|
|
|
|
-35.5
|
%
|
|
|
39.6
|
%
|
|
|
41.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Orders and Backlog: New orders, net of
cancellations, decreased 35.5% to 5,403 units during fiscal
2008 compared to 8,377 units for the same period in the
prior year driven by weaker market conditions resulting in
reduced demand compared to the number of new orders received in
fiscal 2007. For fiscal 2008, we experienced cancellation rates
of 39.6% compared to 41.2% for fiscal 2007. These cancellation
rates in both fiscal 2008 and 2007 reflect the continued
challenging market environment which included the inability of
many potential homebuyers to sell their existing homes and
obtain affordable financing. In addition, on July 1, 2008,
we completed the sale of two large condominium projects in
Virginia, which resulted in the cancellation of 215 orders for
fiscal 2008, and the significant increase in the cancellation
rate for our East segment.
Backlog reflects the number and value of homes for which the
Company has entered into a sales contract with a customer but
has not yet delivered the home. The aggregate dollar value of
homes in backlog at September 30, 2008 of
$318.4 million decreased 57.6% from $751.1 million at
September 30, 2007, related to a decrease in the number of
homes in backlog from 2,612 units at September 30,
2007 to 1,318 units at September 30, 2008. The
decrease in the number of homes in backlog across all of our
markets is driven primarily by the aforementioned market
weakness and lower new orders.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog at September 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
|
|
|
|
West
|
|
|
527
|
|
|
|
805
|
|
|
|
-34.5
|
%
|
East
|
|
|
485
|
|
|
|
1,317
|
|
|
|
-63.2
|
%
|
Southeast
|
|
|
306
|
|
|
|
490
|
|
|
|
-37.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,318
|
|
|
|
2,612
|
|
|
|
-49.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Instruments and Hedging Activities. We
are exposed to fluctuations in interest rates. From time to
time, we enter into derivative agreements to manage interest
costs and hedge against risks associated with fluctuating
interest rates. As of September 30, 2009, we were not a
party to any such derivative agreements. We do not enter into or
hold derivatives for trading or speculative purposes.
Liquidity and Capital Resources. Our sources of cash
liquidity include, but are not limited to, cash from operations,
proceeds from Senior Notes and other bank borrowings, the
issuance of equity securities and other
54
external sources of funds. Our short-term and long-term
liquidity depend primarily upon our level of net income, working
capital management (cash, accounts receivable, accounts payable
and other liabilities) and bank borrowings.
We used $77.0 million in cash during fiscal 2009. We paid
off $384.8 million of our Senior Notes and
$41.3 million of our secured notes payable, at a discount,
for $264.5 million in cash, collateralized our letters of
credit with $48.3 million of restricted cash, issued
$250 million of new Senior Secured Notes which resulted in
proceeds of $223.8 million, sold non-core assets in all of
our markets and reduced fixed costs, land acquisition and land
development spending. Our liquidity position consisted of
$507.3 million in cash and cash equivalents as of
September 30, 2009.
Our net cash provided by operating activities for fiscal 2009
was $93.8 million primarily due to income tax refunds, net
of payments, totaling $162.8 million offset by significant
reductions in trade accounts payable and other liabilities. For
the fiscal years ended September 30, 2008 and 2007, net
cash provided by operating activities was $315.6 million
and $509.4 million, respectively. Based on the applicable
years closings, as of September 30, 2009, our land
bank includes a 7 year supply of owned and optioned
land/lots for current and future development. Our ending land
bank includes 30,638 owned and optioned lots and represents 23%
and 51% decreases from the land bank as of September 30,
2008 and 2007, respectively. As the homebuilding market
declined, we were successful in significantly reducing our land
bank through the abandonment of lot option contracts, the sale
of land assets not required in our homebuilding program and
through the sale of new homes. The decrease in the number of
owned lots in our land bank from September 30, 2008 related
to our decision to eliminate non-strategic positions to align
our land supply with our expectations for future home closings.
Net cash used in investing activities was $79.7 million for
fiscal 2009 compared to $18.4 million for fiscal 2008 and
$52.0 million for fiscal 2007, as we strategically
increased our investment in certain of our unconsolidated joint
ventures and were required to increase the amount of cash
restricted under our revolving credit and letter of credit
facilities by $48.3 million in fiscal 2009.
Specifically, during fiscal 2009, we reduced the size of our
Secured Revolving Credit Facility to $22 million and
entered into three stand-alone, cash-secured letter of credit
agreements with banks. These facilities will continue to provide
for future working capital and letter of credit needs
collateralized by either cash or assets of the Company at our
option, based on certain conditions and covenant compliance. As
of September 30, 2009, we have secured our letters of
credit under these facilities using cash collateral which is
maintained in restricted accounts of $48.3 million. In
addition, we have pledged approximately $390 million of
inventory assets to our revolving credit facility. Subsequent to
September 30, 2009, we closed an additional standalone,
cash-secured letter of credit facility with a major bank to add
additional letter of credit capacity.
Net cash used in financing activities was $91.1 million for
fiscal 2009 and related primarily to the repurchase of
$384.8 million principal amount of Senior Notes at a
discount offset by proceeds from the issuance of our 2017 Senior
Secured Notes. In fiscal 2008, $167.2 million was used for
financing activities for the repayment of certain secured notes
payable and model home financing obligations and the payment of
debt issuance costs. Net cash used in financing activities was
$170.6 million for fiscal 2007 and consisted primarily of
net borrowings under credit facilities and warehouse line of
$94.9 million, repurchase of Senior Notes and other secured
notes payable of $61.6 million and dividends paid of
$15.6 million.
During the second half of fiscal 2009, we voluntarily
repurchased in open-market transactions $384.8 million
principal amount of our Senior Notes ($52.7 million of
85/8% Senior
Notes, due 2011, $36.4 million of
83/8% Senior
Notes due 2012, $35.6 million of
61/2% Senior
Notes due 2013, $140.5 million of
67/8% Senior
Notes due 2015, $94.1 million of
81/8% Senior
Notes due 2016, and $25.5 million of Convertible Senior
Notes due 2024). The aggregate purchase price was
$247.7 million, plus accrued and unpaid interest as of the
purchase date. The repurchase of the notes resulted in a $130.2
pretax gain on extinguishment of debt, net of unamortized
discounts and debt issuance costs related to these notes. Senior
Notes purchased by the Company were cancelled.
In addition, on September 11, 2009, we issued and sold
$250 million aggregate principal amount of our
12% Senior Secured Notes due 2017 (Senior Secured Notes)
through a private placement. The Senior Secured Notes were
issued at a price of 89.5% of their face amount (before
underwriting and other issuance costs). Interest on the Senior
55
Secured Notes is payable semi-annually in cash in arrears,
commencing April 15, 2010. The Senior Secured Notes were
issued under an indenture, dated as of September 11, 2009
which contains covenants that limit the ability of the Company
to, among other things, incur additional indebtedness, engage in
certain asset sales, and make certain types of restricted
payments. The Senior Secured Notes are secured on a second
priority basis by, subject to exceptions specified in the
related agreements, substantially all of the tangible and
intangible assets of the Company as defined in the indenture
(see Note 7 to the Consolidated Financial Statements for
additional information regarding our Senior Notes and Senior
Secured Notes).
To finance land purchases, we may also use seller, or
third-party financed non-recourse secured notes payable, subject
to certain limits as defined in our Senior Notes and Senior
Secured Notes. As of September 30, 2009 and 2008, such
secured notes payable outstanding totaled $12.5 million and
$50.6 million, respectively.
As the homebuilding markets have contracted over the past few
years, we continued to decrease the size of our business through
a reduction in personnel and the closeout of additional
communities. As the markets begin to recover, we will continue
our focus on cash generation and preservation to ensure we have
the required liquidity to fund our operations and to take
advantage of strategic opportunities as they are presented.
We fulfill our short-term cash requirements with cash generated
from our operations. There were no amounts outstanding under the
Secured Revolving Credit Facility at September 30, 2009 or
September 30, 2008; however, we had $45.6 and
$61.2 million of letters of credit outstanding under the
Secured Revolving Credit Facility or stand-alone letter of
credit facilities at September 30, 2009 and
September 30, 2008, respectively. We believe that the cash
and cash equivalents at September 30, 2009 of
$507.3 million, cash generated from our operations and
availability of new debt and equity financing, if any, will be
adequate to meet our liquidity needs during fiscal 2010.
However, if we are required to fund all of the potential
obligations associated with lower levels of stockholders
equity and joint venture defaults, we would have cash
requirements totaling approximately $205 million which
would significantly reduce our overall liquidity.
As a result of these issues, in addition to our continued focus
on generation and preservation of cash, we are also focused on
increasing our stockholders equity and reducing our
leverage. In order to accomplish this goal, we will likely need
to issue new common or preferred equity. Any new issuance may
take the form of public or private offerings for cash, equity
issued to consummate acquisitions of assets or equity issued in
exchange for a portion of our outstanding debt. We may also from
time to time seek to continue to retire or purchase our
outstanding debt through cash purchases
and/or
exchanges for equity or other debt securities, in open market
purchases, privately negotiated transactions or otherwise. In
addition, any material variance from our projected operating
results or land investments, or investments in or acquisitions
of businesses, or amounts paid to fulfill obligations with
governmental entities, could require us to obtain additional
equity or debt financing. Any such equity transactions or debt
financing may be on terms less favorable or at higher costs than
our current financing sources, depending on future market
conditions and other factors including any possible downgrades
in our credit ratings or adverse commentaries issued by rating
agencies in the future. Also, there can be no assurance that we
will be able to complete any of these transactions in the future
on favorable terms or at all.
Stock Repurchases and Dividends Paid The
Company did not repurchase any shares in the open market during
fiscal 2009, 2008 or 2007. At September 30, 2009, there are
approximately 5.4 million additional shares available for
purchase pursuant to the Companys stock repurchase plan.
However, we have currently suspended our repurchase program and
any resumption of such program will be at the discretion of the
Board of Directors and as allowed by our debt covenants and is
unlikely in the foreseeable future.
On November 2, 2007, our Board of Directors suspended
payment of quarterly dividends. The Board concluded that
suspending dividends, which will allow us to conserve
approximately $16 million of cash annually, was a prudent
effort in light of the continued deterioration of the housing
market. In addition, the indentures under which our Senior Notes
were issued contain certain restrictive covenants, including
limitations on the payment of dividends. At September 30,
2009, under the most restrictive covenants of each indenture,
none of our retained earnings was available for cash dividends.
Hence, there were no dividends paid in either fiscal 2009 or
2008. For fiscal 2007, we paid quarterly cash dividends of $0.10
per common share, or a total of approximately $15.6 million.
56
Off-Balance Sheet Arrangements and Aggregate Contractual
Commitments. At September 30, 2009, we controlled
30,638 lots (a
7-year
supply based on fiscal 2009 closings). We owned 83%, or 25,317
lots, and 5,321 lots, 17%, were under option contracts which
generally require the payment of cash or the posting of a letter
of credit for the right to acquire lots during a specified
period of time at a certain price. We historically have
attempted to control a portion of our land supply through
options. As a result of the flexibility that these options
provide us, upon a change in market conditions we may
renegotiate the terms of the options prior to exercise or
terminate the agreement. Under option contracts, purchase of the
properties is contingent upon satisfaction of certain
requirements by us and the sellers and our liability is
generally limited to forfeiture of the non-refundable deposits,
letters of credit and other non-refundable amounts incurred,
which aggregated approximately $41.9 million at
September 30, 2009. This amount includes non-refundable
letters of credit of approximately $5.0 million. The total
remaining purchase price, net of cash deposits, committed under
all options was $306.2 million as of September 30,
2009.
We expect to exercise, subject to market conditions, most of our
option contracts. Various factors, some of which are beyond our
control, such as market conditions, weather conditions and the
timing of the completion of development activities, will have a
significant impact on the timing of option exercises or whether
land options will be exercised.
We have historically funded the exercise of land options through
a combination of operating cash flows. We expect these sources
to continue to be adequate to fund anticipated future option
exercises. Therefore, we do not anticipate that the exercise of
our land options will have a material adverse effect on our
liquidity.
Certain of our option contracts are with sellers who are deemed
to be Variable Interest Entities (VIEs) under FASB
Interpretation No. 46 (Revised), Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51
(FIN 46R) (ASC 810). We have determined that we are the
primary beneficiary of certain of these option contracts. Our
risk is generally limited to the option deposits that we pay,
and creditors of the sellers generally have no recourse to the
general credit of the Company. Although we do not have legal
title to the optioned land, for those option contracts for which
we are the primary beneficiary, we are required to consolidate
the land under option at fair value. We believe that the
exercise prices of our option contracts approximate their fair
value. Our consolidated balance sheets at September 30,
2009 and 2008 reflect consolidated inventory not owned of
$53.0 million and $106.7 million, respectively.
Obligations related to consolidated inventory not owned totaled
$26.4 million at September 30, 2009 and
$70.6 million at September 30, 2008. The difference
between the balances of consolidated inventory not owned and
obligations related to consolidated inventory not owned
represents cash deposits paid under the option agreements. When
market conditions improve, we may expand our use of option
agreements to supplement our owned inventory supply.
We participate in a number of land development joint ventures in
which we have less than a controlling interest. We enter into
joint ventures in order to acquire attractive land positions, to
manage our risk profile and to leverage our capital base. Our
joint ventures are typically entered into with developers, other
homebuilders and financial partners to develop finished lots for
sale to the joint ventures members and other third
parties. We account for our interest in these joint ventures
under the equity method. Our consolidated balance sheets include
investments in joint ventures totaling $30.1 million and
$33.1 million at September 30, 2009 and 2008,
respectively.
Our joint ventures typically obtain secured acquisition and
development financing. At September 30, 2009, our
unconsolidated joint ventures had borrowings outstanding
totaling $422.7 million, of which $327.9 million
related to one joint venture in which we are a 2.58% partner.
Generally, we and our joint venture partners have provided
varying levels of guarantees of debt or other obligations of our
unconsolidated joint ventures. At September 30, 2009, we
had repayment guarantees of $15.8 million and
loan-to-value
maintenance guarantees of $3.9 million of debt of certain
of our unconsolidated joint ventures. Three of our
unconsolidated joint ventures are in default (or have received
default notices) under their debt agreements at
September 30, 2009. To the extent that we are unable to
reach satisfactory resolutions, we may be called upon to perform
under our applicable guarantees. See Note 3 to the
Consolidated Financial Statements.
57
The following summarizes our aggregate contractual commitments
at September 30, 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
|
|
|
|
Less than
|
|
|
|
|
|
|
|
|
More than 5
|
|
Contractual obligations
|
|
Total
|
|
|
1 Year
|
|
|
1-3 Years
|
|
|
3-5 Years
|
|
|
Years
|
|
|
|
|
Senior Notes, Senior Secured Notes & other notes
payable
|
|
$
|
1,536,156
|
|
|
$
|
30,668
|
|
|
$
|
596,388
|
|
|
$
|
165,121
|
|
|
$
|
743,979
|
|
Interest commitments under Senior Notes, Senior Secured
Notes & other notes payable (1)
|
|
|
754,646
|
|
|
|
123,829
|
|
|
|
192,885
|
|
|
|
131,992
|
|
|
|
305,940
|
|
Operating leases
|
|
|
28,394
|
|
|
|
9,066
|
|
|
|
12,874
|
|
|
|
5,728
|
|
|
|
726
|
|
Uncertain tax positions (2)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,319,196
|
|
|
$
|
163,563
|
|
|
$
|
802,147
|
|
|
$
|
302,841
|
|
|
$
|
1,050,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Interest on variable rate obligations is based on rates
effective as of September 30, 2009.
(2) Due to the uncertainty of the timing of settlement with
taxing authorities, the Company is unable to make reasonably
reliable estimates of the period of cash settlement of
unrecognized tax benefits for the remaining tax liabilities.
Therefore, $41.8 million of unrecognized tax benefits as of
September 30, 2009 have been excluded from the Contractual
Obligations table above. See Note 8 to Consolidated
Financial Statements for additional information regarding the
Companys unrecognized tax benefits as of
September 30, 2009.
We had outstanding letters of credit and performance bonds of
approximately $40.1 million and $237.2 million,
respectively, at September 30, 2009 related principally to
our obligations to local governments to construct roads and
other improvements in various developments in addition to the
letters of credit of approximately $5.5 million relating to
our land option contracts discussed above.
Recently Adopted Accounting Pronouncements. In
February 2007, the FASB issued SFAS 159, The Fair Value
Option for Financial Assets and Financial
Liabilities Including an amendment of FASB Statement
No. 115. SFAS 159 permits companies to measure
certain financial instruments and other items at fair value. We
have not elected the fair value option applicable under
SFAS 159.
In April 2009, the FASB issued
FSP 107-1
and Accounting Principles Board Opinion (APB)
28-1,
Interim Disclosures about Fair Value of Financial
Instruments.
FSP 107-1
amends SFAS 107, Disclosures about Fair Value
Instruments and APB 28, Interim Financial Reporting,
to require disclosures about fair value of financial instruments
during interim reporting periods. The Company adopted the
provisions of
FSP 107-1
and APB 28-1
during the quarter ended June 30, 2009.
In May 2009, the FASB issued SFAS No. 165,
Subsequent Events, which establishes general standards of
accounting for and disclosures of events that occur after the
balance sheet date but before financial statements are issued or
are available to be issued. SFAS 165 also requires the
disclosure of the date through which subsequent events have been
evaluated and the basis for that date. The Company adopted the
provisions of SFAS 165 during the quarter ended
June 30, 2009.
In June 2009, the FASB issued SFAS No. 168, The
FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles, a replacement of FASB
Statement No. 162, (SFAS 168). SFAS 168
establishes the FASB Accounting Standards Codification as the
source of authoritative accounting principles recognized by the
FASB to be applied by nongovernmental entities in the
preparation of financial statements in conformity with GAAP.
SFAS 168 does not change GAAP and the adoption of
SFAS 168 did not have a material impact on the
Companys consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted. In
September 2006, the FASB issued SFAS 157, Fair Value
Measurements (ASC 820). SFAS 157 provides guidance for
using fair value to measure assets and liabilities.
SFAS 157 applies whenever other standards require (or
permit) assets or liabilities to be measured at fair value but
does not expand the use of fair value in any new circumstances.
SFAS 157 includes provisions that require expanded
disclosure of the effect on earnings for items measured using
unobservable data. SFAS 157 is effective for fiscal years
beginning after November 15, 2007 and for interim periods
within those fiscal years. In February 2008, the
58
FASB issued FASB Staff Position (FSP)
157-2,
Effective Date of FASB Statement No. 157 (ASC 820),
delaying the effective date of certain non-financial assets and
liabilities to fiscal periods beginning after November 15,
2008. The adoption of SFAS 157 will not have a material
impact on our consolidated financial condition and results of
operations.
In December 2007, the FASB issued SFAS 141 (revised 2007),
Business Combinations. SFAS 141R amends and
clarifies the accounting guidance for the acquirers
recognition and measurement of assets acquired, liabilities
assumed and noncontrolling interests of an acquiree in a
business combination. SFAS 141R is effective for any
acquisitions completed by the Company after September 30,
2009.
In December 2007, the FASB issued SFAS 160,
Noncontrolling Interests in Consolidated Financial
Statements an Amendment of ARB 51. SFAS 160
requires that a noncontrolling interest (formerly a minority
interest) in a subsidiary be classified as equity and the amount
of consolidated net income specifically attributable to the
noncontrolling interest be included in the consolidated
financial statements. SFAS 160 is effective for our fiscal
year beginning October 1, 2009 and its provisions will be
applied retrospectively upon adoption. We are currently
evaluating the impact of adopting SFAS 160 on our
consolidated financial condition and results of operations.
In June 2008, the FASB issued FSP Emerging Issues Task Force
(EITF) Issue No
03-6-1,
Determining Whether Instruments Granted in Share-Based
Payment Transactions are Participating Securities.
FSP 03-6-1
clarifies that non-vested share-based payment awards that
contain nonforfeitable rights to dividends or dividend
equivalents (whether paid or unpaid) are participating
securities and are to be included in the computation of earnings
per share under the two-class method described in SFAS 128,
Earnings per Share and requires that prior period EPS and
share data be restated retrospectively for comparability. The
Company grants restricted shares under a share-based
compensation plan that qualify as participating securities.
FSP 03-6-1
is effective for the Company beginning October 1, 2009 with
early adoption prohibited. We are currently evaluating the
impact of adopting
FSP 03-6-1
on our consolidated financial statements.
In May 2008, the FASB issued FSP APB
14-1,
Accounting for Convertible Debt Instruments That May Be
Settled in Cash Upon Conversion (Including Partial Cash
Settlement). FSP APB
14-1 applies
to convertible debt instruments that have a net settlement
feature permitting settlement partially or fully in cash
upon conversion. FSP APB
14-1 is
effective for the Company beginning October 1, 2009 and the
provisions of FSP APB
14-1 are
required to be applied retrospectively to all periods presented.
Due to the fact that the Companys convertible securities
cannot be settled in cash upon conversion, the adoption of FSP
APB 14-1 is
not expected to have a material impact on our consolidated
financial condition and results of operations.
In June 2009, the FASB issued SFAS No. 167,
Amendments to FASB Interpretation No. 46(R), which
revises the approach to determining the primary beneficiary of a
variable interest entity (VIE) to be more qualitative in nature
and requires companies to more frequently reassess whether they
must consolidate a VIE. SFAS 167 also requires enhanced
disclosures to provide more information about an
enterprises involvement in a variable interest entity.
SFAS 167 is effective for the Companys fiscal year
beginning October 1, 2010. The Company is currently
reviewing the effect of SFAS 167 on its condensed
consolidated financial statements.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
We are exposed to a number of market risks in the ordinary
course of business. Our primary market risk exposure relates to
fluctuations in interest rates. We do not believe that our
exposure in this area is material to cash flows or earnings. As
of September 30, 2009, we had $30.4 million of
variable rate debt outstanding. Based on our fiscal 2009 average
outstanding borrowings under our variable rate debt, a
one-percentage point increase in interest rates would negatively
impact our annual pre-tax earnings by approximately
$0.3 million.
The estimated fair value of our fixed rate debt at
September 30, 2009 was $1.27 billion, compared to a
carrying value of $1.5 billion, due primarily to increases
in our estimated discount rates for similar financial
instruments. In addition, the effect of a hypothetical
one-percentage point decrease in our estimated discount rates
would increase the estimated fair value of the fixed rate debt
instruments from $1.27 billion to $1.33 billion at
September 30, 2009.
59
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
Beazer Homes
USA, Inc.
Consolidated Statements of Operations
(in thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Total revenue
|
|
|
$1,005,212
|
|
|
|
$1,813,513
|
|
|
|
$3,036,988
|
|
Home construction and land sales expenses
|
|
|
887,407
|
|
|
|
1,641,270
|
|
|
|
2,574,090
|
|
Inventory impairments and option contract abandonments
|
|
|
96,998
|
|
|
|
406,168
|
|
|
|
572,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss)
|
|
|
20,807
|
|
|
|
(233,925
|
)
|
|
|
(109,141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
228,079
|
|
|
|
309,320
|
|
|
|
359,239
|
|
Depreciation and amortization
|
|
|
18,736
|
|
|
|
24,708
|
|
|
|
28,244
|
|
Goodwill impairment
|
|
|
16,143
|
|
|
|
48,105
|
|
|
|
51,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(242,151
|
)
|
|
|
(616,058
|
)
|
|
|
(548,249
|
)
|
Equity in loss of unconsolidated joint ventures
|
|
|
(13,303
|
)
|
|
|
(76,552
|
)
|
|
|
(35,077
|
)
|
Gain (loss) on extinguishment of debt
|
|
|
144,503
|
|
|
|
-
|
|
|
|
(413
|
)
|
Other (expense) income, net
|
|
|
(75,595
|
)
|
|
|
(36,505
|
)
|
|
|
9,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes
|
|
|
(186,546
|
)
|
|
|
(729,115
|
)
|
|
|
(574,593
|
)
|
(Benefit from) provision for income taxes
|
|
|
(8,531
|
)
|
|
|
71,655
|
|
|
|
(202,871
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(178,015
|
)
|
|
|
(800,770
|
)
|
|
|
(371,722
|
)
|
Loss from discontinued operations, net of tax
|
|
|
(11,368
|
)
|
|
|
(151,142
|
)
|
|
|
(39,351
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
$ (189,383
|
)
|
|
|
$ (951,912
|
)
|
|
|
$ (411,073
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
38,688
|
|
|
|
38,549
|
|
|
|
38,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
$(4.60
|
)
|
|
|
$(20.77
|
)
|
|
|
$(9.68
|
)
|
Discontinued operations
|
|
|
$(0.30
|
)
|
|
|
$(3.92
|
)
|
|
|
$(1.02
|
)
|
Total
|
|
|
$(4.90
|
)
|
|
|
$(24.69
|
)
|
|
|
$(10.70
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per share
|
|
|
$-
|
|
|
|
$-
|
|
|
|
$0.40
|
|
See Notes to Consolidated Financial Statements.
60
Beazer Homes USA, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
September 30,
2009
|
|
|
September 30, 2008
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$507,339
|
|
|
|
$584,334
|
|
Restricted cash
|
|
|
49,461
|
|
|
|
297
|
|
Accounts receivable (net of allowance of $7,545 and $8,915,
respectively)
|
|
|
28,405
|
|
|
|
46,555
|
|
Income tax receivable
|
|
|
9,922
|
|
|
|
173,500
|
|
Inventory
|
|
|
|
|
|
|
|
|
Owned inventory
|
|
|
1,265,441
|
|
|
|
1,545,006
|
|
Consolidated inventory not owned
|
|
|
53,015
|
|
|
|
106,655
|
|
|
|
|
|
|
|
|
|
|
Total inventory
|
|
|
1,318,456
|
|
|
|
1,651,661
|
|
Investments in unconsolidated joint ventures
|
|
|
30,124
|
|
|
|
33,065
|
|
Deferred tax assets
|
|
|
7,520
|
|
|
|
20,216
|
|
Property, plant and equipment, net
|
|
|
25,939
|
|
|
|
39,822
|
|
Goodwill
|
|
|
-
|
|
|
|
16,143
|
|
Other assets
|
|
|
52,244
|
|
|
|
76,206
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
$2,029,410
|
|
|
|
$2,641,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
|
$70,285
|
|
|
|
$90,371
|
|
Other liabilities
|
|
|
227,315
|
|
|
|
358,592
|
|
Obligations related to consolidated inventory not owned
|
|
|
26,356
|
|
|
|
70,608
|
|
Senior Notes (net of discounts of $27,257 and $2,565,
respectively)
|
|
|
1,362,902
|
|
|
|
1,522,435
|
|
Junior subordinated notes
|
|
|
103,093
|
|
|
|
103,093
|
|
Other secured notes payable
|
|
|
12,543
|
|
|
|
50,618
|
|
Model home financing obligations
|
|
|
30,361
|
|
|
|
71,231
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,832,855
|
|
|
|
2,266,948
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock (par value $.01 per share, 5,000,000 shares
|
|
|
|
|
|
|
|
|
authorized, no shares issued)
|
|
|
-
|
|
|
|
-
|
|
Common stock (par value $0.001 per share, 80,000,000 shares
authorized, 43,150,472 and 42,612,801 issued and 39,793,316 and
39,270,038 outstanding, respectively)
|
|
|
43
|
|
|
|
43
|
|
Paid-in capital
|
|
|
568,019
|
|
|
|
556,910
|
|
Retained earnings (accumulated deficit)
|
|
|
(187,538
|
)
|
|
|
1,845
|
|
Treasury stock, at cost (3,357,156 and 3,342,763 shares,
respectively)
|
|
|
(183,969
|
)
|
|
|
(183,947
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
196,555
|
|
|
|
374,851
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
|
$2,029,410
|
|
|
|
$2,641,799
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
61
Beazer Homes USA, Inc.
Consolidated Statement of Stockholders
Equity
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
|
|
|
Common
|
|
|
Paid in
|
|
|
Retained
|
|
|
Treasury
|
|
|
|
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Capital
|
|
|
Earnings
|
|
|
Stock
|
|
|
Total
|
|
|
|
|
|
|
Balance, September 30, 2006
|
|
|
|
$-
|
|
|
|
$42
|
|
|
|
$529,326
|
|
|
|
$1,390,552
|
|
|
|
$(189,453
|
)
|
|
|
$1,730,467
|
|
Net loss and comprehensive loss
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(411,073
|
)
|
|
|
-
|
|
|
|
(411,073
|
)
|
Dividends paid
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(15,610
|
)
|
|
|
-
|
|
|
|
(15,610
|
)
|
Amortization of nonvested stock awards
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,318
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,318
|
|
Amortization of stock option awards
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,831
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,831
|
|
Exercises of stock options (312,501 shares)
|
|
|
|
-
|
|
|
|
1
|
|
|
|
4,421
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,422
|
|
Tax benefit from stock transactions
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,635
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,635
|
|
Issuance of bonus stock (71,429 shares)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,080
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,080
|
|
Issuance of restricted stock (159,378 shares)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,906
|
)
|
|
|
-
|
|
|
|
5,906
|
|
|
|
-
|
|
Common stock redeemed (13,946 shares)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(348
|
)
|
|
|
(348
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2007
|
|
|
|
-
|
|
|
|
43
|
|
|
|
543,705
|
|
|
|
963,869
|
|
|
|
(183,895
|
)
|
|
|
1,323,722
|
|
Net loss and comprehensive loss
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(951,912
|
)
|
|
|
-
|
|
|
|
(951,912
|
)
|
Amortization of nonvested stock awards
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,160
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,160
|
|
Amortization of stock option awards
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,404
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,404
|
|
Tax benefit from stock transactions
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,158
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,158
|
)
|
Issuance of bonus stock (43,075 shares)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,799
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,799
|
|
Adoption of FIN 48
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,112
|
)
|
|
|
-
|
|
|
|
(10,112
|
)
|
Common stock redeemed (7,255 shares)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(52
|
)
|
|
|
(52
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2008
|
|
|
|
-
|
|
|
|
43
|
|
|
|
556,910
|
|
|
|
1,845
|
|
|
|
(183,947
|
)
|
|
|
374,851
|
|
Net loss and comprehensive loss
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(189,383
|
)
|
|
|
-
|
|
|
|
(189,383
|
)
|
Amortization of nonvested stock awards
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,562
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,562
|
|
Amortization of stock option awards
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,277
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,277
|
|
Tax benefit from stock transactions
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,273
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,273
|
)
|
Issuance of bonus stock (27,708 shares)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,543
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,543
|
|
Issuance of restricted stock (544,143 shares)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Common stock redeemed (14,393 shares)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(22
|
)
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2009
|
|
|
|
$ -
|
|
|
|
$ 43
|
|
|
|
$ 568,019
|
|
|
|
$ (187,538
|
)
|
|
|
$ (183,969
|
)
|
|
|
$196,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
62
Beazer Homes USA, Inc.
Consolidated Statements of Cash Flows
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(189,383
|
)
|
|
$
|
(951,912
|
)
|
|
$
|
(411,073
|
)
|
Adjustments to reconcile net loss to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
18,884
|
|
|
|
27,709
|
|
|
|
33,594
|
|
Stock-based compensation expense
|
|
|
11,839
|
|
|
|
12,564
|
|
|
|
11,149
|
|
Inventory impairments and option contract abandonments
|
|
|
107,127
|
|
|
|
510,628
|
|
|
|
611,864
|
|
Goodwill impairment
|
|
|
16,143
|
|
|
|
52,470
|
|
|
|
52,755
|
|
Deferred income tax provision (benefit)
|
|
|
12,696
|
|
|
|
260,410
|
|
|
|
(161,605
|
)
|
Provision for doubtful accounts
|
|
|
(1,370
|
)
|
|
|
8,710
|
|
|
|
(862
|
)
|
Excess tax benefit (deficiency) from equity-based compensation
|
|
|
2,273
|
|
|
|
1,158
|
|
|
|
(2,635
|
)
|
Equity in loss of unconsolidated joint ventures
|
|
|
14,275
|
|
|
|
81,314
|
|
|
|
35,154
|
|
Cash distributions of income from unconsolidated joint ventures
|
|
|
2,991
|
|
|
|
2,439
|
|
|
|
5,285
|
|
(Gain) loss on extinguishment of debt
|
|
|
(148,077
|
)
|
|
|
-
|
|
|
|
413
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in accounts receivable
|
|
|
19,520
|
|
|
|
(7,820
|
)
|
|
|
293,394
|
|
Decrease (increase) in income tax receivable
|
|
|
163,578
|
|
|
|
(109,519
|
)
|
|
|
(63,981
|
)
|
Decrease in inventory
|
|
|
208,371
|
|
|
|
572,746
|
|
|
|
134,953
|
|
Decrease in other assets
|
|
|
25,072
|
|
|
|
49,600
|
|
|
|
100,556
|
|
Decrease in trade accounts payable
|
|
|
(20,086
|
)
|
|
|
(27,916
|
)
|
|
|
(21,978
|
)
|
Decrease in other liabilities
|
|
|
(150,260
|
)
|
|
|
(161,113
|
)
|
|
|
(108,809
|
)
|
Other changes
|
|
|
232
|
|
|
|
(5,901
|
)
|
|
|
1,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
93,825
|
|
|
|
315,567
|
|
|
|
509,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(7,034
|
)
|
|
|
(10,566
|
)
|
|
|
(29,474
|
)
|
Investments in unconsolidated joint ventures
|
|
|
(25,537
|
)
|
|
|
(13,758
|
)
|
|
|
(24,505
|
)
|
Changes in restricted cash
|
|
|
(49,164
|
)
|
|
|
4,874
|
|
|
|
(298
|
)
|
Distributions from unconsolidated joint ventures
|
|
|
2,054
|
|
|
|
1,050
|
|
|
|
2,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(79,681
|
)
|
|
|
(18,400
|
)
|
|
|
(52,048
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under credit facilities and warehouse line
|
|
|
-
|
|
|
|
-
|
|
|
|
169,888
|
|
Repayment of credit facilities and warehouse line
|
|
|
-
|
|
|
|
-
|
|
|
|
(264,769
|
)
|
Repayment of other secured notes payable
|
|
|
(21,246
|
)
|
|
|
(100,740
|
)
|
|
|
(31,139
|
)
|
Proceeds from issuance of senior secured notes
|
|
|
223,750
|
|
|
|
-
|
|
|
|
-
|
|
Repurchase of senior notes
|
|
|
(243,283
|
)
|
|
|
-
|
|
|
|
(30,413
|
)
|
Borrowings under model home financing obligations
|
|
|
-
|
|
|
|
-
|
|
|
|
5,919
|
|
Repayment of model home financing obligations
|
|
|
(40,870
|
)
|
|
|
(42,885
|
)
|
|
|
(8,882
|
)
|
Debt issuance costs
|
|
|
(7,195
|
)
|
|
|
(22,335
|
)
|
|
|
(2,259
|
)
|
Proceeds from stock option exercises
|
|
|
-
|
|
|
|
-
|
|
|
|
4,422
|
|
Common stock redeemed
|
|
|
(22
|
)
|
|
|
(52
|
)
|
|
|
(348
|
)
|
Excess tax (benefit) deficiency from equity-based compensation
|
|
|
(2,273
|
)
|
|
|
(1,158
|
)
|
|
|
2,635
|
|
Dividends paid
|
|
|
-
|
|
|
|
-
|
|
|
|
(15,610
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(91,139
|
)
|
|
|
(167,170
|
)
|
|
|
(170,556
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash equivalents
|
|
|
(76,995
|
)
|
|
|
129,997
|
|
|
|
286,767
|
|
Cash and cash equivalents at beginning of period
|
|
|
584,334
|
|
|
|
454,337
|
|
|
|
167,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
507,339
|
|
|
$
|
584,334
|
|
|
$
|
454,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
63
Beazer Homes USA, Inc.
Notes to Consolidated Financial Statements
|
|
(1)
|
Summary
of Significant Accounting Policies
|
Organization. Beazer Homes USA, Inc. is one of the ten
largest homebuilders in the United States, based on number of
homes closed. We are a geographically diversified homebuilder
with active operations in 17 states: Arizona, California,
Delaware, Florida, Georgia, Indiana, Maryland, Nevada, New
Jersey, New Mexico, New York, North Carolina, Pennsylvania,
South Carolina, Tennessee, Texas, and Virginia. Through Beazer
Mortgage Corporation, or Beazer Mortgage, we historically
offered mortgage origination services to our homebuyers. Through
January 31, 2008, Beazer Mortgage financed certain of our
mortgage lending activities with borrowings under a warehouse
line of credit or from general corporate funds prior to selling
the loans and their servicing rights shortly after origination
to third-party investors. In addition, we offer title insurance
services to our homebuyers in many of our markets. Effective
February 1, 2008, we exited the mortgage origination
business. Results from our mortgage origination business and
exit markets are reported as discontinued operations in the
accompanying Consolidated Statements of Operations for all
periods presented (see Note 14 for further discussion of
our Discontinued Operations).
In June 2009, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Standards (SFAS) No. 168,
The FASB Accounting Standards Codification and the Hierarchy
of Generally Accepted Accounting Principles, a replacement of
FASB Statement No. 162, (SFAS 168). SFAS 168
establishes the FASB Accounting Standards Codification (ASC) as
the source of authoritative accounting principles recognized by
the FASB to be applied by nongovernmental entities in the
preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America (GAAP). SFAS 168 does not change GAAP and the
adoption of SFAS 168 did not have a material impact on the
Companys consolidated financial statements.
We evaluated events that occurred after the balance sheet date
but before the financial statements were issued or are available
to be issued for accounting treatment and disclosure in
accordance with SFAS No. 165, Subsequent Events
(ASC 855). Any applicable subsequent events have been
evaluated through November 9, 2009, the date these
financial statements were available to be issued.
Presentation. The accompanying consolidated financial
statements include the accounts of Beazer Homes USA, Inc. and
our subsidiaries. Intercompany balances have been eliminated in
consolidation. Certain items in prior period financial
statements have been reclassified to conform to the current
presentation.
Cash and Cash Equivalents and Restricted Cash. We
consider investments with maturities of three months or less
when purchased to be cash equivalents. At September 30,
2009, the majority of our cash and cash equivalents were
invested in high-quality money market mutual funds or on deposit
with major banks, which were valued at par with no withdrawal
restrictions. The underlying investments of these funds were
predominately U.S. Government and U.S. Government
Agency obligations. Restricted cash includes cash restricted by
state law or a contractual requirement and, as of
September 30, 2009 relates primarily to cash collateral for
our outstanding letters of credit.
Accounts Receivable. Accounts receivable primarily
consist of escrow deposits to be received from title companies
associated with closed homes. Generally, we receive cash from
title companies within a few days of the home being closed.
Inventory. Owned inventory consists solely of residential
real estate developments. Interest, real estate taxes and
development costs are capitalized in inventory during the
development and construction period. Construction and land costs
are comprised of direct and allocated costs, including estimated
future costs for warranties and amenities. Land, land
improvements and other common costs are typically allocated to
individual residential lots on a pro-rata basis, and the costs
of residential lots are transferred to construction in progress
when home construction begins. Consolidated inventory not owned
represents the fair value of land under option agreements
consolidated pursuant to FASB Interpretation No. 46
(Revised), Consolidation of Variable Interest Entities ,
an Interpretation of ARB No. 51 (FIN 46R) (ASC 810).
FIN 46R requires us to consolidate the financial results of
a variable interest entity (VIE) if the Company is the primary
beneficiary of the VIE. VIEs are entities in which
1) equity investors do not have a controlling financial
interest
and/or
2) the entity is unable to finance its activities without
additional
64
subordinated financial support from other parties. In addition
to lot options recorded in accordance with FIN 46R, we
evaluate lot options in accordance with the provisions of
SFAS No. 49, Product Financing Arrangements
(ASC 470). When our deposits and pre-acquisition development
costs exceed certain thresholds, we record the remaining
purchase price of the lots as consolidated inventory not owned
and obligations related to consolidated inventory not owned in
the Consolidated Balance Sheets.
Investments in Unconsolidated Joint Ventures. We
participate in a number of land development joint ventures in
which we have less than a controlling interest. Our joint
ventures are typically entered into with unrelated developers,
other homebuilders and financial partners to develop finished
lots for sale to the joint ventures members and other
third parties. We have determined that our interest in these
joint ventures should be accounted for under the equity method
as prescribed by
SOP 78-9,
Accounting for Investments in Real Estate Ventures. We
recognize our share of profits from the sale of lots to other
buyers. Our share of profits from lots we purchase from the
joint ventures is deferred and treated as a reduction of the
cost of the land purchased from the joint venture. Such profits
are subsequently recognized at the time the home closes and
title passes to the homebuyer. We evaluate our investments in
unconsolidated entities for impairment during each reporting
period in accordance with APB 18, The Equity Method of
Accounting for Investments in Common Stock (ASC 323). A
series of operating losses of an investee or other factors may
indicate that a decrease in the value of our investment in the
unconsolidated entity has occurred which is
other-than-temporary.
The amount of impairment recognized is the excess of the
investments carrying value over its estimated fair value.
Our joint ventures typically obtain secured acquisition and
development financing. See Note 3, Investments in
Unconsolidated Joint Ventures.
Property, Plant and Equipment. Property, plant and
equipment is recorded at cost. Depreciation is computed on a
straight-line basis at rates based on estimated useful lives as
follows:
|
|
|
Buildings
|
|
15 30 years
|
Computer and office equipment
|
|
3 10 years
|
Information systems
|
|
Lesser of estimated useful life of the asset or 5 years
|
Furniture and fixtures
|
|
3 7 years
|
Model and sales office improvements
|
|
Lesser of estimated useful life of the asset or estimated useful
life of the community
|
Leasehold improvements
|
|
Lesser of the lease term or the estimated useful life of the
asset
|
Inventory Valuation Held for Development. Our
homebuilding inventories that are accounted for as held for
development include land and home construction assets grouped
together as communities. Homebuilding inventories held for
development are stated at cost (including direct construction
costs, capitalized indirect costs, capitalized interest and real
estate taxes) unless facts and circumstances indicate that the
carrying value of the assets may not be recoverable. We assess
these assets no less than quarterly for recoverability in
accordance with the provisions of SFAS 144, Accounting
for the Impairment or Disposal of Long-Lived Assets (ASC
360). For those communities for which construction and
development activities are expected to occur in the future or
have been idled (land held for future development), all
applicable interest and real estate taxes are expensed as
incurred and the inventory is stated at cost unless facts and
circumstances indicate that the carrying value of the assets may
not be recoverable. The future enactment of a development plan
or the occurrence of events and circumstances may indicate that
the carrying amount of an asset may not be recoverable.
SFAS 144 requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Generally, upon the commencement of land development activities,
it may take three to five years (depending on, among other
things, the size of the community and its sales pace) to fully
develop, sell, construct and close all the homes in a typical
community. However, the impact of the recent downturn in our
business has significantly lengthened the estimated life of many
communities. Recoverability of assets is measured by comparing
the carrying amount of an asset to future undiscounted cash
flows expected to be generated by the asset. If the expected
undiscounted cash flows generated are expected to be less than
its carrying amount, an
65
impairment charge should be recorded to write down the carrying
amount of such asset to its estimated fair value based on
discounted cash flows.
We conduct a review of the recoverability of our homebuilding
inventories held for development at the community level as
factors indicate that an impairment may exist. Events and
circumstances that might indicate impairment include, but are
not limited to, (1) adverse trends in new orders,
(2) higher than anticipated cancellations,
(3) declining margins which might result from the need to
offer incentives to new homebuyers to drive sales or price
reductions in response to actions taken by our competitors,
(4) economic factors specific to the markets in which we
operate, including fluctuations in employment levels, population
growth, or levels of new and resale homes for sale in the
marketplace and (5) a decline in the availability of credit
across all industries.
As a result, we evaluate, among other things, the following
information for each community:
|
|
|
|
|
Actual Net Contribution Margin (defined as
homebuilding revenues less homebuilding costs and direct selling
expenses) for homes closed in the current fiscal quarter, fiscal
year to date and prior two fiscal quarters. Homebuilding costs
include land and land development costs (based upon an
allocation of such costs, including costs to complete the
development, or specific lot costs), home construction costs
(including an estimate of costs, if any, to complete home
construction), previously capitalized indirect costs
(principally for construction supervision), capitalized interest
and estimated warranty costs Direct selling expenses include
commissions, closing costs and amortization related to model
home furnishings and improvements;
|
|
|
Projected Net Contribution Margin for homes in backlog;
|
|
|
Actual and trending new orders and cancellation rates;
|
|
|
Actual and trending base home sales prices and sales incentives
for home sales that occurred in the prior two fiscal quarters
that remain in backlog at the end of the fiscal quarter and
expected future homes sales prices and sales incentives and
absorption over the expected remaining life of the community;
|
|
|
A comparison of our community to our competition to include,
among other things, an analysis of various product offerings
including, the size and style of the homes currently offered for
sale, community amenity levels, availability of lots in our
community and our competitions, desirability and
uniqueness of our community and other market factors; and
|
|
|
Other events that may indicate that the carrying value may not
be recoverable.
|
In determining the recoverability of the carrying value of the
assets of a community that we have evaluated as requiring a test
for impairment, significant quantitative and qualitative
assumptions are made relative to the future home sales prices,
sales incentives, direct and indirect costs of home construction
and land development and the pace of new home orders. In
addition, these assumptions are dependent upon the specific
market conditions and competitive factors for each specific
community and may differ greatly between communities within the
same market and communities in different markets. Our estimates
are made using information available at the date of the
recoverability test, however, as facts and circumstances may
change in future reporting periods, our estimates of
recoverability are subject to change.
For assets in communities for which the undiscounted future cash
flows are less than the carrying value, the carrying value of
that community is written down to its then estimated fair value
based on discounted cash flows. The carrying value of assets in
communities that were previously impaired and continue to be
classified as held for development is not written up for future
estimates of increases in fair value in future reporting
periods. Market deterioration that exceeds our estimates may
lead us to incur additional impairment charges on previously
impaired homebuilding assets in addition to homebuilding assets
not currently impaired but for which indicators of impairment
may arise if the market continues to deteriorate.
The fair value of the homebuilding inventory held for
development is estimated using the present value of the
estimated future cash flows using discount rates commensurate
with the risk associated with the underlying community assets.
The discount rate used may be different for each community. The
factors considered when determining an appropriate discount rate
for a community include, among others: (1) community
specific factors such as the number of lots in the community,
the status of land development in the community, the competitive
factors influencing the sales performance of the community and
(2) overall market factors such as employment
66
levels, consumer confidence and the existing supply of new and
used homes for sale. The assumptions used in our discounted cash
flow models are specific to each community tested for
impairment. Historically we did not include market improvements
except in limited circumstances in the latter years of
long-lived communities. Beginning in the fourth quarter of
fiscal 2009, we assumed limited market improvements in some
communities beginning in fiscal 2011 and continuing improvement
in these communities in subsequent years. We assumed the
remaining communities would have market improvements beginning
in fiscal 2012.
For the fiscal year ended September 30, 2009, we used
discount rates of 17% to 22% in our estimated discounted cash
flow impairment calculations. During fiscal 2009, 2008, and
2007, we recorded impairments of our inventory of approximately
$80.1 million, $292.8 million and $412.6 million,
respectively, for land under development and homes under
construction for our continuing operations. Impairments of
inventory previously held for development related to our
discontinued operations were $93,000, $19.9 million and
$28.3 million for fiscal 2009, 2008 and 2007, respectively.
Due to uncertainties in the estimation process, particularly
with respect to projected home sales prices and absorption
rates, the timing and amount of the estimated future cash flows
and discount rates, it is reasonably possible that actual
results could differ from the estimates used in our historical
analyses. Our assumptions about future home sales prices and
absorption rates require significant judgment because the
residential homebuilding industry is cyclical and is highly
sensitive to changes in economic conditions. We calculated the
estimated fair values of inventory held for development that
were evaluated for impairment based on current market conditions
and assumptions made by management relative to future results.
Because our projected cash flows are significantly impacted by
changes in market conditions, it is reasonably possible that
actual results could differ materially from our estimates and
result in additional impairments.
Asset Valuation Land Held for Sale. We record
assets held for sale at the lower of the carrying value or fair
value less costs to sell in accordance with SFAS 144. The
following criteria are used to determine if land is held for
sale:
|
|
|
|
|
management has the authority and commits to a plan to sell the
land;
|
|
|
the land is available for immediate sale in its present
condition;
|
|
|
there is an active program to locate a buyer and the plan to
sell the property has been initiated;
|
|
|
the sale of the land is probable within one year;
|
|
|
the property is being actively marketed at a reasonable sale
price relative to its current fair value; and
|
|
|
it is unlikely that the plan to sell will be withdrawn or that
significant changes to the plan will be made.
|
Additionally, in certain circumstances, management will
re-evaluate the best use of an asset that is currently being
accounted for as held for development. In such instances,
management will review, among other things, the current and
projected competitive circumstances of the community, including
the level of supply of new and used inventory, the level of
sales absorptions by us and our competition, the level of sales
incentives required and the number of owned lots remaining in
the community. If, based on this review and the foregoing
criteria have been met at the end of the applicable reporting
period, we believe that the best use of the asset is the sale of
all or a portion of the asset in its current condition, then all
or portions of the community are accounted for as held for sale.
In determining the fair value of the assets less cost to sell,
we considered factors including current sales prices for
comparable assets in the area, recent market analysis studies,
appraisals, any recent legitimate offers, and listing prices of
similar properties. If the estimated fair value less cost to
sell of an asset is less than its current carrying value, the
asset is written down to its estimated fair value less cost to
sell. During fiscal 2009, 2008 and 2007, we recorded inventory
impairments on land held for sale by our continuing operations
of $12.9 million, $61.2 million and
$47.4 million, respectively. Land held for sale inventory
impairments related to our discontinued operations totaled
$9.0 million, $55.6 million and $0.6 million for
fiscal 2009, 2008 and 2007, respectively.
Due to uncertainties in the estimation process, it is reasonably
possible that actual results could differ from the estimates
used in our historical analyses. Our assumptions about land
sales prices require significant judgment because the current
market is highly sensitive to changes in economic conditions. We
calculated the estimated fair values of land held for sale based
on current market conditions and assumptions made by management,
which may differ materially from actual results and may result
in additional impairments if market conditions continue to
deteriorate.
67
Goodwill. Goodwill represents the excess of the purchase
price over the fair value of assets acquired. We historically
have tested goodwill for impairment annually as of April 30 or
more frequently if an event occurred or circumstances indicated
that the asset might be impaired in accordance with
SFAS 142, Goodwill and Other Intangible Assets (ASC
350). For purposes of goodwill impairment testing, we compare
the fair value of each reporting unit with its carrying amount,
including goodwill. Each of our operating divisions is
considered a reporting unit. The fair value of each reporting
unit was determined based on expected discounted future cash
flows. If the carrying amount of a reporting unit exceeded its
fair value, the goodwill within the reporting unit may have been
potentially impaired. An impairment loss was recognized if the
carrying amount of the goodwill exceeded implied fair value of
that goodwill. From late fiscal 2006 through the first half of
fiscal 2009, the deterioration of the housing industry resulted
in an oversupply of inventory, reduced levels of demand,
increased cancellation rates, aggressive price competition and
increased incentives for homes sales. Based on our impairment
tests and consideration of the current and expected future
market conditions, over this time we determined that all of our
goodwill was impaired. Specifically, based on our impairment
tests and consideration of current and expected future market
conditions, we recorded a non-cash, pre-tax goodwill impairment
of $16.1 million in fiscal 2009. In fiscal 2008, we had
determined that the goodwill was impaired related to our
Southern California, Arizona, Colorado, New Jersey and Virginia
reporting units and recorded non-cash, pre-tax goodwill
impairment charges totaling $52.5 million, of which
$4.4 million has been included in loss from discontinued
operations, net of tax. In fiscal 2007, we recorded non-cash,
pre-tax goodwill impairments related to our South Carolina,
Northern California, Nevada, Florida and North Carolina
reporting units totaling $52.8 million, of which
$1.1 million is included in loss from discontinued
operations, net of tax. The Company has no goodwill remaining as
of September 30, 2009.
Goodwill impairment charges are reported in Corporate and
Unallocated and are not allocated to our homebuilding segments.
Goodwill balances by reporting segment as of September 30,
2007, 2008 and 2009 were as follows.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
September 30,
|
|
|
Fiscal 2008
|
|
|
September 30,
|
|
|
Fiscal 2009
|
|
|
|
|
(In thousands)
|
|
2007
|
|
|
Impairments
|
|
|
2008
|
|
|
Impairments
|
|
|
September 30,
2009
|
|
|
|
|
|
|
West
|
|
$
|
35,918
|
|
|
$
|
(29,033
|
)
|
|
$
|
6,885
|
|
|
$
|
(6,885
|
)
|
|
$
|
-
|
|
East
|
|
|
28,330
|
|
|
|
(19,072
|
)
|
|
|
9,258
|
|
|
|
(9,258
|
)
|
|
|
-
|
|
Discontinued Operations
|
|
|
4,365
|
|
|
|
(4,365
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
Total
|
|
$
|
68,613
|
|
|
$
|
(52,470
|
)
|
|
$
|
16,143
|
|
|
$
|
(16,143
|
)
|
|
$
|
-
|
|
|
|
|
|
|
|
Other Assets. Other assets principally include prepaid
expenses, debt issuance costs and deferred compensation plan
assets.
Income Taxes. Income taxes are accounted for in
accordance with SFAS 109, Accounting for Income Taxes
and FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes An Interpretation of
FASB Statement No. 109 (FIN 48) (ASC 740). Under
SFAS 109, the provision for income taxes is comprised of
taxes that are currently payable and deferred taxes that relate
to temporary differences between financial reporting carrying
values and tax bases of assets and liabilities. Deferred tax
assets and liabilities result from deductible or taxable amounts
in future years when such assets and liabilities are recovered
or settled and are measured using the enacted tax rates and laws
that are expected to be in effect when the assets and
liabilities are recovered or settled.
On October 1, 2007, the Company adopted FIN 48 which
clarifies the accounting for uncertainty in income taxes
recognized in the financial statements in accordance with
SFAS 109, Accounting for Income Taxes (ASC 740).
FIN 48 defines the threshold for recognizing the benefits
of tax return positions as well as guidance regarding the
measurement of the resulting tax benefits. FIN 48 requires
a company to recognize for financial statement purposes the
impact of a tax position, if a tax return position is more
likely than not to prevail (defined as a likelihood of
more than fifty percent of being sustained upon audit, based on
the technical merits of the tax position). FIN 48 also
provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosure, and
transition. The cumulative effect of the adoption of FIN 48
was recorded as a $10.1 million reduction to retained
earnings as of October 1, 2007. See Note 8,
Income Taxes, for the additional disclosure required
by FIN 48.
68
Other Liabilities. Other liabilities include the
following:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
(In thousands)
|
|
2009
|
|
|
2008
|
|
|
Income tax liabilities
|
|
$
|
50,850
|
|
|
$
|
71,210
|
|
Accrued warranty expenses
|
|
|
30,100
|
|
|
|
40,822
|
|
Accrued interest
|
|
|
32,533
|
|
|
|
39,551
|
|
Accrued and deferred compensation
|
|
|
29,379
|
|
|
|
54,194
|
|
Customer deposits
|
|
|
5,507
|
|
|
|
7,339
|
|
Other
|
|
|
78,946
|
|
|
|
145,476
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
227,315
|
|
|
$
|
358,592
|
|
|
|
|
|
|
|
|
|
|
Income Recognition and Classification of Costs. Revenue
and related profit are generally recognized at the time of the
closing of a sale, when title to and possession of the property
are transferred to the buyer. As appropriate, revenue for
condominiums under construction is recognized based on the
percentage-of-completion
method in accordance with SFAS 66, Accounting for Sales
of Real-Estate and Emerging Issues Task Force (EITF) Issue
No. 06-8,
Applicability of the Assessment of a Buyers Continuing
Investment under FASB Statement No. 66, Accounting for
Sales of Real Estate, for Sales of Condominiums (ASC 360),
when certain criteria are met.
We recognized loan origination fees and expenses and gains and
losses on mortgage loans when the related loans were sold to
third-party investors. Beazers policy was to sell all
mortgage loans it originates and these sales usually occur
within 15 to 30 days of the closing of the home
sale. Effective February 1, 2008, Beazer exited the
mortgage origination business. The results of Beazer Mortgage
have been reported as discontinued operations for all periods
presented (see Note 14, Discontinued Operations).
Sales discounts and incentives include items such as cash
discounts, discounts on options included in the home, option
upgrades (such as upgrades for cabinetry, countertops and
flooring), and seller-paid financing or closing costs. In
addition, from time to time, we may also provide homebuyers with
retail gift certificates
and/or other
nominal retail merchandise. All sales incentives other than cash
discounts are recognized as a cost of selling the home and are
included in home construction and land sales expenses. Cash
discounts are accounted for as a reduction in the sales price of
the home.
Sales commissions are included in selling, general and
administrative expenses.
Estimated future warranty costs are charged to cost of sales in
the period when the revenues from home closings are recognized.
Such estimated warranty costs generally range from 0.5% to 1.5%
of total revenue. Additional warranty costs are charged to cost
of sales as necessary based on managements estimate of the
costs to remediate existing claims. See Note 12 for a more
detailed discussion of warranty costs and related reserves.
Advertising costs of $12.0 million, $23.5 million and
$34.2 million for fiscal years 2009, 2008, and 2007,
respectively, were expensed as incurred and are included in
selling, general and administrative expenses. The decrease in
advertising costs relates primarily to the reduced number of
communities being marketed and our more efficient use of
advertising dollars in connection with our cost control
initiatives.
Earnings Per Share (EPS). The computation of basic
earnings per common share is determined by dividing net income
applicable to common stockholders by the weighted average number
of common shares outstanding during the period. Diluted EPS
additionally gives effect (when dilutive) to stock options,
other stock based awards and other potentially dilutive
securities. In computed diluted loss per share for the fiscal
years ended September 30, 2009, 2008 and 2007, all common
stock equivalents were excluded from the computation of diluted
loss per share as a result of their anti-dilutive effect.
Fair Value of Financial Instruments. The fair value of
our cash and cash equivalents, accounts receivable, trade
accounts payable, other liabilities and other notes payable
approximate their carrying amounts due to the short maturity of
these assets and liabilities or the variable interest rates on
such obligations. Obligations related to consolidated inventory
not owned are recorded at estimated fair value. The fair value
of our model home financing obligations approximate their
carrying amounts due to the variable interest rates associated
with those obligations.
69
The fair value of our publicly held junior subordinated notes is
estimated by discounting scheduled cash flows through maturity
and was approximately $52 million at September 30,
2009 and $69 million at September 30, 2008. The
discount rate is estimated using market rates currently being
offered on loans with similar terms and credit quality. The fair
value of our publicly held senior notes and senior secured notes
is estimated based on the quoted bid prices for these debt
instruments and was approximately $1.2 billion at
September 30, 2009 and $1.1 billion at
September 30, 2008.
Stock-Based Compensation. We use the Black-Scholes model
to value stock-settled appreciation rights (SSARs) and stock
option grants under SFAS 123R, Share-Based Payment
(ASC 718), and applied the modified prospective
method for existing grants which required us to value the
grants made prior to our adoption of SFAS 123R under the
fair value method and expense the unvested portion over the
remaining vesting period. SFAS 123R also requires us to
estimate forfeitures in calculating the expense related to
stock-based compensation. In addition, SFAS 123R requires
us to reflect the benefits of tax deductions in excess of
recognized compensation cost as a financing cash inflow and an
operating cash outflow. Nonvested stock granted to employees is
valued based on the market price of the common stock on the date
of the grant. Performance based, nonvested stock granted to
employees is valued using the Monte Carlo valuation method. We
account for cash-settled, stock-based awards issued to employees
under the recognition and measurement principles of
SFAS 123R. Cash-settled, stock-based awards granted to
employees are initially valued based on the market price of the
underlying common stock on the date of the grant and are
adjusted to fair value until vested. We account for stock awards
issued to non-employees and under the recognition and
measurement principles of SFAS 123R and Emerging Issues
Task Force Issue
No. 96-18:
Accounting for Equity Instruments That Are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services (ASC 505). Stock options issued to
non-employees are valued using the Black-Scholes option pricing
model. Nonvested stock granted to non-employees is initially
valued based on the market price of the common stock on the date
of the grant and is adjusted to fair value until vested.
Compensation cost arising from nonvested stock granted to
employees, from cash-settled, stock-based employee awards and
from non-employee stock awards is recognized as expense using
the straight-line method over the vesting period. Unearned
compensation is included in paid in capital in accordance with
SFAS 123R. As of September 30, 2009 and 2008, there
was $9.6 million and $13.5 million, respectively, of
total unrecognized compensation cost related to nonvested stock.
The cost remaining at September 30, 2009 is expected to be
recognized over a weighted average period of 2.7 years. For
the years ended September 30, 2009, 2008, and 2007, total
non-cash stock-based compensation expense, included in SG&A
expenses, was $11.8 million ($8.3 million net of tax),
$12.3 million ($8.7 million net of tax) and
$10.6 million ($7.2 million net of tax), respectively.
Use of Estimates. The preparation of financial statements
in conformity with GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Recently Adopted Accounting Pronouncements. In February
2007, the FASB issued SFAS 159, The Fair Value Option
for Financial Assets and Financial Liabilities
Including an amendment of FASB Statement No. 115 (ASC
825). SFAS 159 permits companies to measure certain
financial instruments and other items at fair value. We have not
elected the fair value option applicable under SFAS 159.
In April 2009, the FASB issued
FSP 107-1
and Accounting Principles Board Opinion (APB)
28-1,
Interim Disclosures about Fair Value of Financial Instruments
(ASC 820).
FSP 107-1
amends SFAS 107, Disclosures about Fair Value
Instruments and APB 28, Interim Financial Reporting
(ASC 820), to require disclosures about fair value of
financial instruments during interim reporting periods. The
Company adopted the provisions of
FSP 107-1
and APB 28-1
during the quarter ended June 30, 2009.
In May 2009, the FASB issued SFAS 165, which establishes
general standards of accounting for and disclosures of events
that occur after the balance sheet date but before financial
statements are issued or are available to be issued.
SFAS 165 also requires the disclosure of the date through
which subsequent events have been evaluated and the basis for
that date. The Company adopted the provisions of SFAS 165
during the quarter ended June 30, 2009.
70
Recent Accounting Pronouncements Not Yet Adopted. In
September 2006, the FASB issued SFAS 157, Fair Value
Measurements (ASC 820). SFAS 157 provides guidance for
using fair value to measure assets and liabilities.
SFAS 157 applies whenever other standards require (or
permit) assets or liabilities to be measured at fair value but
does not expand the use of fair value in any new circumstances.
SFAS 157 includes provisions that require expanded
disclosure of the effect on earnings for items measured using
unobservable data. In February 2008, the FASB issued FASB Staff
Position (FSP)
157-2,
Effective Date of FASB Statement No. 157 (ASC 820),
delaying the effective date of certain non-financial assets and
liabilities to fiscal periods beginning after November 15,
2008, our fiscal 2010. The adoption of SFAS 157 will not
have a material impact on our consolidated financial condition
and results of operations.
In December 2007, the FASB issued SFAS 141 (revised 2007),
Business Combinations (ASC 815). SFAS 141R amends
and clarifies the accounting guidance for the acquirers
recognition and measurement of assets acquired, liabilities
assumed and noncontrolling interests of an acquiree in a
business combination. SFAS 141R is effective for any
acquisitions completed by the Company after September 30,
2009.
In December 2007, the FASB issued SFAS 160,
Noncontrolling Interests in Consolidated Financial
Statements an Amendment of ARB 51 (ASC 810).
SFAS 160 requires that a noncontrolling interest (formerly
a minority interest) in a subsidiary be classified as equity and
the amount of consolidated net income specifically attributable
to the noncontrolling interest be included in the consolidated
financial statements. SFAS 160 is effective for our fiscal
year beginning October 1, 2009 and its provisions will be
applied retrospectively upon adoption. The adoption of
SFAS 160 will not have a material impact on our
consolidated financial condition and results of operations.
In June 2008, the FASB issued FSP EITF Issue No
03-6-1,
Determining Whether Instruments Granted in Share-Based
Payment Transactions are Participating Securities (ASC 260).
FSP 03-6-1
clarifies that non-vested share-based payment awards that
contain nonforfeitable rights to dividends or dividend
equivalents (whether paid or unpaid) are participating
securities and are to be included in the computation of earnings
per share under the two-class method described in SFAS 128,
Earnings per Share and requires that prior period EPS and
share data be restated retrospectively for comparability. The
Company grants restricted shares under a share-based
compensation plan that qualify as participating securities.
FSP 03-6-1
is effective for the Company beginning October 1, 2009 with
early adoption prohibited. We are currently evaluating the
impact of adopting
FSP 03-6-1
on our consolidated financial statements.
In May 2008, the FASB issued FSP APB
14-1,
Accounting for Convertible Debt Instruments That May Be
Settled in Cash Upon Conversion (Including Partial Cash
Settlement) (ASC 470). FSP APB
14-1 applies
to convertible debt instruments that have a net settlement
feature permitting settlement partially or fully in cash
upon conversion. FSP APB
14-1 is
effective for the Company beginning October 1, 2009 and the
provisions of FSP APB
14-1 are
required to be applied retrospectively to all periods presented.
Due to the fact that the Companys convertible securities
cannot be settled in cash upon conversion, the adoption of FSP
APB 14-1 is
not expected to have a material impact on our consolidated
financial condition and results of operations.
In June 2009, the FASB issued SFAS No. 167,
Amendments to FASB Interpretation No. 46(R) (ASC
810), which revises the approach to determining the primary
beneficiary of a variable interest entity (VIE) to be more
qualitative in nature and requires companies to more frequently
reassess whether they must consolidate a VIE. SFAS 167 also
requires enhanced disclosures to provide more information about
an enterprises involvement in a variable interest entity.
SFAS 167 is effective for the Companys fiscal year
beginning October 1, 2010. The Company is currently
reviewing the effect of SFAS 167 on its condensed
consolidated financial statements.
|
|
(2)
|
Supplemental
Cash Flow Information
|
During the fiscal years ended September 30, we paid
interest of $129.7 million in fiscal 2009,
$133.5 million in fiscal 2008 and $148.0 million in
fiscal 2007. In addition, we paid income taxes of
$9.7 million in fiscal 2009, $2.9 million in fiscal
2008, and $15.8 million in fiscal 2007 and received tax
refunds of $172.5 million in fiscal 2009
71
and $59.2 million in fiscal 2008 related to the carryback
of tax losses. We also had the following non-cash activity
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Supplemental disclosure of non-cash activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in consolidated inventory not owned
|
|
$
|
(44,252
|
)
|
|
$
|
(107,323
|
)
|
|
$
|
(152,772
|
)
|
Land acquired through issuance of notes payable
|
|
|
3,064
|
|
|
|
33,285
|
|
|
|
59,948
|
|
Land acquired through capital distributions from joint ventures
|
|
|
13,796
|
|
|
|
-
|
|
|
|
-
|
|
Issuance of stock under deferred bonus stock plans
|
|
|
1,543
|
|
|
|
1,799
|
|
|
|
2,080
|
|
Decrease in retained earnings from FIN 48 adoption
|
|
|
-
|
|
|
|
(10,112
|
)
|
|
|
-
|
|
|
|
(3)
|
Investments
in Unconsolidated Joint Ventures
|
As of September 30, 2009, we participated in land
development joint ventures in which Beazer Homes had less than a
controlling interest. The following table presents our
investment in our unconsolidated joint ventures, the total
equity and outstanding borrowings of these joint ventures and
our guarantees of these borrowings as of September 30, 2009
and September 30, 2008:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
|
2008
|
|
|
Beazers investment in joint ventures
|
|
$
|
30,124
|
|
|
$
|
33,065
|
|
Total equity of joint ventures
|
|
|
328,875
|
|
|
|
340,674
|
|
Total outstanding borrowings of joint ventures
|
|
|
422,682
|
|
|
|
524,431
|
|
Beazers estimate of its portion of
loan-to-value
maintenance guarantees
|
|
|
3,850
|
|
|
|
5,839
|
|
Beazers estimate of its portion of repayment guarantees
|
|
|
15,789
|
|
|
|
39,166
|
|
The reduction in our investment in unconsolidated joint ventures
from September 30, 2008 to September 30, 2009 relates
primarily to impairments totaling $14.8 million,
distributions of earnings totaling $3.0 million, and return
of capital in the form of cash and inventory assets totaling
$15.9 million which were offset by $25.5 million of
additional investments and $4.6 of accrued liabilities for
guarantee payments and deferred income. During fiscal 2009, we
also acquired our joint venture partners interest in two
joint ventures which are consolidated as of September 30,
2009. In connection with the acquisition of one of these joint
ventures, we paid off the joint ventures debt of
approximately $13.6 million.
For the fiscal year ended September 30, 2009, 2008 and
2007, the impairments of our investments in certain of our other
unconsolidated joint ventures, totaling $14.8 million,
$68.8 million and $28.6 million, respectively, were
recorded in accordance with APB 18. In fiscal 2007, we also
recorded $3.4 million in contractual obligation
abandonments related to those ventures. Impairments totaling
$13.8 million, $64.0 million and $28.6 million
for fiscal 2009, 2008 and 2007, respectively, are included in
equity in loss of unconsolidated joint ventures on the
accompanying Consolidated Statements of Operations. The
remaining impairments of $1.0 million and $4.8 million
for fiscal 2009 and 2008 are included in loss from discontinued
operations, net of taxes in the accompanying Consolidated
Statements of Operations. Equity in loss of unconsolidated joint
ventures related to our continuing operations totaled
$13.3 million, $76.6 and $35.1 million for the fiscal
years ended September 30, 2009, 2008 and 2007, respectively.
The aggregate debt of the unconsolidated joint ventures was
$422.7 million and $524.4 million at
September 30, 2009 and 2008, respectively. At
September 30, 2009, total borrowings outstanding include
$327.9 million related to one joint venture in which we are
a 2.58% partner. The $101.7 million reduction in total
outstanding joint venture debt during fiscal 2009 resulted
primarily from the cancellation of $51.5 million of debt of
four joint ventures and debt payments of $76.7 million in
accordance with loan agreements
and/or
negotiated settlements offset by loan draws of
$27.9 million to fund the development activities of the
joint ventures.
During the fourth quarter of fiscal 2009, one of our
unconsolidated joint ventures completed a modification of its
loan agreement with its lender, which resulted in, among other
things, an extension of its maturity, enhanced guarantees from
our joint venture partner and the release of Beazer under all
guarantees related to this joint venture.
72
Beazer contributed $9.7 million as an additional investment
in the joint venture as part of the loan modification. Also
during the fourth quarter of fiscal 2009, the Company and its
joint venture partners entered into agreements with a lender to
repay the notes payable of one of its unconsolidated joint
ventures at a discount. The Company contributed an additional
$4.3 million as an investment which was used to reduce the
loan balance of this joint venture. We also entered into an
agreement with a lender and our joint venture partner to
purchase the notes payable and our partners interest in
one of our unconsolidated joint ventures for a total of
$13.6 million. This joint venture is consolidated in our
financial statements as of September 30, 2009. In fiscal
2009, we also paid $3.0 million to settle our obligations
under guarantees for three ventures which we had previously
estimated at a maximum potential obligation of
$16.6 million. As part of the settlement agreements, the
lenders also cancelled $48.6 million of the outstanding
debt of these three joint ventures. Subsequent to
September 30, 2009, together with our joint venture
partner, we reached agreement with a lender to another joint
venture to pay down the outstanding debt by $7.6 million
($3.8 million per partner). In connection with this loan
repayment, the lender has agreed to release the obligations
under the related
loan-to-value
maintenance guarantee.
Three of our joint ventures are in default (or have received
default notices) under their respective debt obligations. During
fiscal 2008, the lender to the joint venture, in which we have a
2.58% investment, notified the joint venture partners that it
believes the joint venture is in default of certain joint
venture loan agreements as a result of certain of the
Companys joint venture partners not complying with all
aspects of the joint ventures loan agreements. The joint
venture partners are currently in discussions with the lender.
In December 2008, the lender has filed individual lawsuits
against some of the joint venture partners and certain of those
partners parent companies (including the Company), seeking
to recover damages under completion guarantees, among other
claims. We intend to vigorously defend against this legal
action. The Companys share of the outstanding debt is
approximately $14.5 million at September 30, 2009.
Under the terms of the agreement, our repayment guarantee is
estimated at $15.1 million, which is only triggered in the
event of bankruptcy of the joint venture. Our equity interest at
September 30, 2009 was $8.6 million in this joint
venture. Given the inherent uncertainties in this litigation, as
of September 30, 2009, no accrual has been recorded, as
losses, if any, related to this matter are not both probable and
reasonably estimable.
In addition, certain of our joint venture partners have
curtailed their funding of their allocable joint venture
obligations. Given the inherent uncertainties in these
negotiations, as of September 30, 2009, no accrual has been
recorded, as obligations to Beazer, if any, related to these
matters were not both probable and reasonably estimable.
Our joint ventures typically obtain secured acquisition,
development and construction financing. Generally Beazer and our
joint venture partners provide varying levels of guarantees of
debt and other obligations for our unconsolidated joint
ventures. At September 30, 2009, these guarantees included,
for certain joint ventures, construction completion guarantees,
loan-to-value
maintenance agreements, repayment guarantees and environmental
indemnities.
In assessing the need to record a liability for the contingent
aspect of these guarantees in accordance with FIN 45,
Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of
Others (ASC 400), we consider our historical experience in
being required to perform under the guarantees, the fair value
of the collateral underlying these guarantees and the financial
condition of the applicable unconsolidated joint ventures. In
addition, we monitor the fair value of the collateral of these
unconsolidated joint ventures to ensure that the related
borrowings do not exceed the specified percentage of the value
of the property securing the borrowings. We have not recorded a
liability for the contingent aspects of any guarantees that we
determined were reasonably possible but not probable.
Construction
Completion Guarantees
We and our joint venture partners may be obligated to the
project lenders to complete land development improvements and
the construction of planned homes if the joint venture does not
perform the required development. Provided the joint venture and
the partners are not in default under any loan provisions, the
project lenders typically are obligated to fund these
improvements through any financing commitments available under
the applicable loans. A majority of these construction
completion guarantees are joint and several with our partners.
In those cases, we generally have a reimbursement arrangement
with our partner which provides that neither party is
responsible for more than its proportionate share of the
guarantee. However, if our joint venture partner does not have
adequate financial resources to meet its obligations under such
reimbursement arrangement,
73
we may be liable for more than our proportionate share, up to
our maximum exposure, which is the full amount covered by the
relevant joint and several guarantee. The guarantees cover a
specific scope of work, which may range from an individual
development phase to the completion of the entire project. No
accrual has been recorded, as losses, if any, related to
construction completion guarantees are not both probable and
reasonably estimable.
Loan-to-Value
Maintenance Agreements
We and our joint venture partners may provide credit
enhancements to acquisition, development and construction
borrowings in the form of
loan-to-value
maintenance agreements, which can limit the amount of additional
funding provided by the lenders or require repayment of the
borrowings to the extent such borrowings plus construction
completion costs exceed a specified percentage of the value of
the property securing the borrowings. The agreements generally
require periodic reappraisals of the underlying property value.
To the extent that the underlying property gets reappraised, the
amount of the exposure under the loan-to value-maintenance (LTV)
guarantee would be adjusted accordingly and any such change
could be significant. In certain cases, we may be required to
make a re-balancing payment following a reappraisal in order to
reduce the applicable
loan-to-value
ratio to the required level.
Our estimate of the Companys portion of LTV guarantees of
the unconsolidated joint ventures was $3.9 million at
September 30, 2009 and $5.8 million at
September 30, 2008. Subsequent to September 30, 2009,
the Company and its joint venture partner have reached an
agreement with the lender of a joint venture to release the LTV
guarantee and extend the related loan maturity up to two years
in exchange for a loan repayment of $7.6 million. The
Company and its joint venture partner have agreed to each invest
an additional $3.8 million in the joint venture to
facilitate this repayment.
Repayment
Guarantees
We and our joint venture partners have repayment guarantees
related to certain joint ventures borrowings. These
repayment guarantees require the repayment of all or a portion
of the debt of the unconsolidated joint venture only in the
event the joint venture defaults on its obligations under the
borrowing or in some cases only in the event the joint venture
files for bankruptcy.
Our estimate of Beazers portion of repayment guarantees
related to the outstanding debt of its unconsolidated joint
ventures was $15.8 million and $39.2 million at
September 30, 2009 and 2008, respectively. The reduction in
the estimate of joint venture repayment guarantees was driven
primarily by 1) the negotiated settlement with the lenders
of two joint ventures for the cancellation of debt and the
release of other loan obligations including $16.6 million
in repayment guarantees for nominal consideration and
2) the negotiated loan modification and release of
guarantees with the lender of one joint venture in return for
the repayment of a portion of the outstanding debt. The Company
contributed $9.7 million as an additional investment in
this latter joint venture which was used to reduce the
outstanding loan balance.
Environmental
Indemnities
Additionally, we and our joint venture partners generally
provide unsecured environmental indemnities to joint venture
project lenders. In each case, we have performed due diligence
on potential environmental risks. These indemnities obligate us
to reimburse the project lenders for claims related to
environmental matters for which they are held responsible.
During the fiscal years ended September 30, 2009 and 2008,
we were not required to make any payments related to
environmental indemnities. No accrual has been recorded, as
losses, if any, related to environmental indemnities are not
both probable and reasonably estimable
74
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
(in thousands)
|
|
2009
|
|
|
2008
|
|
|
Homes under construction
|
|
$
|
219,724
|
|
|
$
|
338,971
|
|
Development projects in progress
|
|
|
487,457
|
|
|
|
572,275
|
|
Land held for future development
|
|
|
417,834
|
|
|
|
407,320
|
|
Land held for sale
|
|
|
42,470
|
|
|
|
85,736
|
|
Capitalized interest
|
|
|
38,338
|
|
|
|
45,977
|
|
Model homes
|
|
|
59,618
|
|
|
|
94,727
|
|
|
|
|
|
|
|
|
|
|
Total owned inventory
|
|
$
|
1,265,441
|
|
|
$
|
1,545,006
|
|
|
|
|
|
|
|
|
|
|
Homes under construction includes homes finished and ready for
delivery and homes in various stages of construction. We had 270
($46.3 million) and 408 ($76.2 million) completed
homes that were not subject to a sales contract at
September 30, 2009 and 2008, respectively. Development
projects in progress consist principally of land and land
improvement costs. Certain of the fully developed lots in this
category are reserved by a deposit or sales contract. During
fiscal 2009 and 2008, the Company decided to re-allocate capital
employed through strategic sales of select properties and
through the exiting of certain markets no longer viewed as
strategic and has recorded such land as held for sale. Land held
for sale as of September 30, 2009 principally included land
held for sale in the markets we have decided to exit including
Colorado and Charlotte, North Carolina. Land held for sale as of
September 30, 2008 was primarily located in markets that we
have subsequently exited, Colorado, Columbus and Cincinnati,
Ohio, Lexington, Kentucky and Charlotte, North Carolina.
Total owned inventory, by reportable segment, is set forth in
the table below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009
|
|
|
September 30, 2008
|
|
|
|
Projects in
|
|
|
Held for Future
|
|
|
Land Held for
|
|
|
Total Owned
|
|
|
Projects in
|
|
|
Held for Future
|
|
|
Land Held for
|
|
|
Total Owned
|
|
|
|
Progress
|
|
|
Development
|
|
|
Sale
|
|
|
Inventory
|
|
|
Progress
|
|
|
Development
|
|
|
Sale
|
|
|
Inventory
|
|
|
West Segment
|
|
$
|
282,753
|
|
|
$
|
345,050
|
|
|
$
|
8,171
|
|
|
$
|
635,974
|
|
|
$
|
348,475
|
|
|
$
|
341,784
|
|
|
$
|
26,515
|
|
|
$
|
716,774
|
|
East Segment
|
|
|
340,859
|
|
|
|
49,097
|
|
|
|
2,927
|
|
|
|
392,883
|
|
|
|
394,643
|
|
|
|
44,387
|
|
|
|
3,642
|
|
|
|
442,672
|
|
Southeast Segment
|
|
|
121,621
|
|
|
|
23,687
|
|
|
|
423
|
|
|
|
145,731
|
|
|
|
165,231
|
|
|
|
21,149
|
|
|
|
14,841
|
|
|
|
201,221
|
|
Unallocated
|
|
|
56,992
|
|
|
|
-
|
|
|
|
-
|
|
|
|
56,992
|
|
|
|
128,299
|
|
|
|
-
|
|
|
|
-
|
|
|
|
128,299
|
|
Discontinued Operations
|
|
|
2,912
|
|
|
|
-
|
|
|
|
30,949
|
|
|
|
33,861
|
|
|
|
15,302
|
|
|
|
-
|
|
|
|
40,738
|
|
|
|
56,040
|
|
|
|
|
|
|
|
Total
|
|
$
|
805,137
|
|
|
$
|
417,834
|
|
|
$
|
42,470
|
|
|
$
|
1,265,441
|
|
|
$
|
1,051,950
|
|
|
$
|
407,320
|
|
|
$
|
85,736
|
|
|
$
|
1,545,006
|
|
|
|
|
|
|
|
Inventory located in California, the state with our largest
concentration of inventory, was $358.7 million and $431.1
million at September 30, 2009 and 2008, respectively.
75
Inventory Impairments. The following tables set forth, by
reportable homebuilding segment, the inventory impairments and
lot option abandonment charges recorded for the fiscal years
ended September 30, 2009, 2008 and 2007 (in thousands)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Development projects and homes in process (Held for Development)
|
West
|
|
$
|
42,842
|
|
|
$
|
147,278
|
|
|
$
|
224,782
|
|
East
|
|
|
10,005
|
|
|
|
72,040
|
|
|
|
95,734
|
|
Southeast
|
|
|
22,160
|
|
|
|
51,663
|
|
|
|
68,220
|
|
Unallocated
|
|
|
5,116
|
|
|
|
21,769
|
|
|
|
23,853
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
80,123
|
|
|
$
|
292,750
|
|
|
$
|
412,589
|
|
|
|
|
|
|
|
Land Held for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
West
|
|
$
|
9,357
|
|
|
$
|
8,505
|
|
|
$
|
46,138
|
|
East
|
|
|
1,071
|
|
|
|
18,068
|
|
|
|
798
|
|
Southeast
|
|
|
2,452
|
|
|
|
34,608
|
|
|
|
500
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
12,880
|
|
|
$
|
61,181
|
|
|
$
|
47,436
|
|
|
|
|
|
|
|
Lot Option Abandonments
|
|
|
|
|
|
|
|
|
|
|
|
|
West
|
|
$
|
99
|
|
|
$
|
15,356
|
|
|
$
|
54,703
|
|
East
|
|
|
2,949
|
|
|
|
10,362
|
|
|
|
23,979
|
|
Southeast
|
|
|
947
|
|
|
|
26,519
|
|
|
|
33,332
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
3,995
|
|
|
$
|
52,237
|
|
|
$
|
112,014
|
|
|
|
|
|
|
|
Continuing Operations
|
|
$
|
96,998
|
|
|
$
|
406,168
|
|
|
$
|
572,039
|
|
|
|
|
|
|
|
Discontinued Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Held for Development
|
|
$
|
93
|
|
|
$
|
19,872
|
|
|
$
|
28,326
|
|
Land Held for Sale
|
|
|
9,012
|
|
|
|
55,593
|
|
|
|
588
|
|
Lot Option Abandonments
|
|
|
1,024
|
|
|
|
28,995
|
|
|
|
10,911
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
10,129
|
|
|
$
|
104,460
|
|
|
$
|
39,825
|
|
|
|
|
|
|
|
Total Company
|
|
$
|
107,127
|
|
|
$
|
510,628
|
|
|
$
|
611,864
|
|
|
|
|
|
|
|
The inventory held for development that was impaired during
fiscal 2009 represented 3,526 lots in 45 communities with an
estimated fair value of $108.4 million. The inventory held
for development that was impaired during fiscal 2008 represented
10,753 lots in 221 communities with an estimated fair value of
$579.2 million, of which 854 lots in 52 communities related
to discontinued operations. The inventory held for development
that was impaired during fiscal 2007 represented 12,409 lots in
168 communities with an estimated fair value of
$897.1 million, of which 1,486 lots in 46 communities
related to discontinued operations. During fiscal 2009, for
certain communities we determined it was prudent to reduce sales
prices or further increase sales incentives in response to
factors including competitive market conditions. Because the
projected cash flows used to evaluate the fair value of
inventory are significantly impacted by changes in market
conditions including decreased sales prices, the change in sales
prices and changes in absorption estimates led to additional
impairments in certain communities during the fiscal year. In
future periods, we may again determine that it is prudent to
reduce sales prices, further increase sales incentives or reduce
absorption rates which may lead to additional impairments, which
could be material. The impairments recorded on our held for
development inventory for the fiscal years ended
September 30, 2009, 2008 and 2007, primarily resulted from
the continued decline in the homebuilding environment across our
submarkets.
During fiscal 2009, 2008 and 2007, as a result of challenging
market conditions and review of recent comparable transactions,
certain of the Companys land held for sale was further
written down to net realizable value, less
76
estimated costs to sell. As a result, we recorded
$21.9 million, $116.8 million and $48.0 million
of impairments on land during fiscal 2009, 2008 and 2007,
respectively.
We also have access to land inventory through lot option
contracts, which generally enable us to defer acquiring portions
of properties owned by third parties and unconsolidated entities
until we have determined whether to exercise our lot option. A
majority of our lot option contracts require a non-refundable
cash deposit or irrevocable letter of credit based on a
percentage of the purchase price of the land for the right to
acquire lots during a specified period of time at a certain
price. Under lot option contracts, purchase of the properties is
contingent upon satisfaction of certain requirements by us and
the sellers. Our liability under option contracts is generally
limited to forfeiture of the non-refundable deposits, letters of
credit and other non-refundable amounts incurred, which
aggregated approximately $41.9 million at
September 30, 2009. This amount includes non-refundable
letters of credit of approximately $5.0 million. The total
remaining purchase price, net of cash deposits, committed under
all options was $306.2 million as of September 30,
2009.
We have determined the proper course of action with respect to a
number of communities within each homebuilding segment was to
abandon the remaining lots under option and to write-off the
deposits securing the option takedowns, as well as
preacquisition costs. In determining whether to abandon a lot
option contract, we evaluate the lot option primarily based upon
the expected cash flows from the property that is the subject of
the option. If we intend to abandon or walk-away from a lot
option contract, we record a charge to earnings in the period
such decision is made for the deposit amount and any related
capitalized costs associated with the lot option contract. We
recorded total lot option abandonment charges during the fiscal
years ended September 30, 2009, 2008 and 2007 of
$5.0 million, $81.2 million and $122.9 million,
respectively. The abandonment charges relate to our decision to
abandon certain option contracts that no longer fit in our
long-term strategic plan and related to our prior year decision
to exit certain markets.
We expect to exercise, subject to market conditions, most of our
remaining option contracts. Various factors, some of which are
beyond our control, such as market conditions, weather
conditions and the timing of the completion of development
activities, will have a significant impact on the timing of
option exercises or whether land options will be exercised.
Certain of our option contracts are with sellers who are deemed
to be VIEs under FIN 46R. FIN 46R defines a VIE as an
entity with insufficient equity investment to finance its
planned activities without additional financial support or an
entity in which the equity investors lack certain
characteristics of a controlling financial interest. Pursuant to
FIN 46R, an enterprise that absorbs a majority of the
expected losses or receives a majority of the expected residual
returns of a VIE is deemed to be the primary beneficiary of the
VIE and must consolidate the VIE.
We have determined that we are the primary beneficiary of
certain of these option contracts. Our risk is generally limited
to the option deposits that we pay, and creditors of the sellers
generally have no recourse to the general credit of the Company.
Although we do not have legal title to the optioned land, for
those option contracts for which we are the primary beneficiary,
we are required to consolidate the land under option at fair
value. We believe that the exercise prices of our option
contracts approximate their fair value. Our consolidated balance
sheets at September 30, 2009 and 2008 reflect consolidated
inventory not owned of $53.0 million and
$106.7 million, respectively. We consolidated
$42.8 million and $46.9 million of lot option
agreements as consolidated inventory not owned pursuant to
FIN 46R as of September 30, 2009 and 2008,
respectively. In addition, as of September 30, 2009 and
2008, we recorded $10.2 million and $59.8 million,
respectively, of land under the caption consolidated
inventory not owned related to lot option agreements in
accordance with SFAS 49. Obligations related to
consolidated inventory not owned totaled $26.4 million at
September 30, 2009 and $70.6 million at
September 30, 2008. The difference between the balances of
consolidated inventory not owned and obligations related to
consolidated inventory not owned represents cash deposits paid
under the option agreements.
77
Our ability to capitalize all interest incurred during fiscal
2009 and 2008 has been limited by the reduction in our inventory
eligible for capitalization. The following table sets forth
certain information regarding interest (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Capitalized interest in inventory, beginning of year
|
|
|
$45,977
|
|
|
$
|
87,560
|
|
|
$
|
78,996
|
|
Interest incurred
|
|
|
133,481
|
|
|
|
139,659
|
|
|
|
148,444
|
|
Capitalized interest impaired
|
|
|
(3,376
|
)
|
|
|
(13,795
|
)
|
|
|
(12,350
|
)
|
Interest expense not qualified for capitalization and included
as other expense
|
|
|
(83,030
|
)
|
|
|
(55,185
|
)
|
|
|
-
|
|
Capitalized interest amortized to house construction and land
sales expenses
|
|
|
(54,714
|
)
|
|
|
(112,262
|
)
|
|
|
(127,530
|
)
|
|
|
|
|
|
|
Capitalized interest in inventory, end of year
|
|
|
$38,338
|
|
|
$
|
45,977
|
|
|
$
|
87,560
|
|
|
|
|
|
|
|
|
|
(6)
|
Property,
Plant and Equipment
|
Property, plant and equipment consists of (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Building
|
|
$
|
2,378
|
|
|
$
|
2,391
|
|
Model and sales office improvements
|
|
|
57,010
|
|
|
|
65,040
|
|
Leasehold improvements
|
|
|
8,298
|
|
|
|
8,809
|
|
Computer and office equipment
|
|
|
18,709
|
|
|
|
19,354
|
|
Information systems
|
|
|
25,148
|
|
|
|
22,625
|
|
Furniture and fixtures
|
|
|
8,168
|
|
|
|
8,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
119,711
|
|
|
|
126,915
|
|
Less: Accumulated depreciation
|
|
|
(93,772
|
)
|
|
|
(87,093
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
25,939
|
|
|
$
|
39,822
|
|
|
|
|
|
|
|
|
|
|
78
(7)
Borrowings
At September 30, 2009 and 2008 we had the following
long-term debt (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
Maturity Date
|
|
2009
|
|
|
2008
|
|
|
Secured Revolving Credit Facility
|
|
July 2011
|
|
$
|
-
|
|
|
$
|
-
|
|
8 5/8% Senior Notes*
|
|
May 2011
|
|
|
127,254
|
|
|
|
180,000
|
|
8 3/8% Senior Notes*
|
|
April 2012
|
|
|
303,599
|
|
|
|
340,000
|
|
6 1/2% Senior Notes*
|
|
November 2013
|
|
|
164,473
|
|
|
|
200,000
|
|
6 7/8% Senior Notes*
|
|
July 2015
|
|
|
209,454
|
|
|
|
350,000
|
|
8 1/8% Senior Notes*
|
|
June 2016
|
|
|
180,879
|
|
|
|
275,000
|
|
12% Senior Secured Notes*
|
|
September 2017
|
|
|
250,000
|
|
|
|
-
|
|
4 5/8% Convertible Senior Notes*
|
|
June 2024
|
|
|
154,500
|
|
|
|
180,000
|
|
Junior subordinated notes
|
|
July 2036
|
|
|
103,093
|
|
|
|
103,093
|
|
Other secured notes payable
|
|
Various Dates
|
|
|
12,543
|
|
|
|
50,618
|
|
Model home financing obligations
|
|
Various Dates
|
|
|
30,361
|
|
|
|
71,231
|
|
Unamortized debt discounts
|
|
|
|
|
(27,257
|
)
|
|
|
(2,565
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
1,508,899
|
|
|
$
|
1,747,377
|
|
|
|
|
|
|
|
|
|
|
|
|
* Collectively, the Senior Notes
Secured Revolving Credit Facility As of
September 30, 2008, our Secured Revolving Credit Facility
was $400 million and was subject to further reductions to
$250 million and $100 million if our consolidated
tangible net worth, (defined in the agreement as
stockholders equity less intangible assets as defined)
fell below specified levels. During fiscal 2009, through various
amendments to the facility, the Company obtained waivers of
potential breaches of covenants and ultimately decided to amend
and restructure its Secured Revolving Credit Facility.
On August 5, 2009, we entered into an amendment to our
Secured Revolving Credit Facility that reduced the size of the
facility to $22 million. The Secured Revolving Credit
Facility is now provided by one lender. The Secured Revolving
Credit Facility will continue to provide for future working
capital and letter of credit needs collateralized by either cash
or assets of the Company at our option, based on certain
conditions and covenant compliance. We also entered into three
stand-alone, cash-secured letter of credit agreements with banks
to maintain our pre-existing letters of credit that had been
under our prior revolving credit facility. As of
September 30, 2009, we have secured our letters of credit
under the three stand-alone facilities using cash collateral in
restricted accounts of $48.3 million. In addition, we have
pledged approximately $390 million of inventory assets to
our revolving credit facility. The Secured Revolving Credit
Facility contains certain covenants, including negative
covenants and financial maintenance covenants, with which we are
required to comply. Subject to our option to cash collateralize
our obligations under the Secured Revolving Credit Facility upon
certain conditions, our obligations under the Secured Revolving
Credit Facility are secured by liens on substantially all of our
personal property and a significant portion of our owned real
properties. There were no outstanding borrowings under the
Secured Revolving Credit Facility as of September 30, 2009
or 2008. Subsequent to September 30, 2009, we closed an
additional standalone, cash-secured letter of credit facility
with a major bank to add additional letter of credit capacity.
Senior Notes - The Senior Notes are unsecured or secured
obligations ranking pari passu with all other existing and
future senior indebtedness. Substantially all of our significant
subsidiaries are full and unconditional guarantors of the Senior
Notes and are jointly and severally liable for obligations under
the Senior Notes and the Secured Revolving Credit Facility. Each
guarantor subsidiary is a 100% owned subsidiary of Beazer Homes.
The indentures under which the Senior Notes were issued contain
certain restrictive covenants, including limitations on payment
of dividends. At September 30, 2009, under the most
restrictive covenants of each indenture, no portion of our
retained earnings was available for cash dividends or for share
repurchases. The indentures provide that, in the event of
defined changes in control or if our consolidated tangible net
worth falls below a specified level or in certain circumstances
upon a sale of assets, we are required to offer to repurchase
79
certain specified amounts of outstanding Senior Notes.
Specifically, each indenture (other than the indenture governing
the convertible Senior Notes) requires us to offer to purchase
10% of each series of Senior Notes at par if our consolidated
tangible net worth (defined as stockholders equity less
intangible assets) is less than $85 million at the end of
any two consecutive fiscal quarters. If triggered and fully
subscribed, this could result in our having to purchase
$137.5 million of notes, based on the original amounts of
the applicable notes; however, this amount may be reduced by
certain Senior Note repurchases (potentially at less than par)
made after the triggering date.
In June 2004, we issued $180 million aggregate principal
amount of 4 5/8% Convertible Senior Notes due 2024 (the
Convertible Senior Notes). In August 2004, we filed a
registration statement on
Form S-3
with the SEC covering resales of the Convertible Senior Notes
and the common stock issuable upon conversion. During the fourth
quarter of fiscal 2007, the cumulative dividends declared to
date caused a change in the conversion rate per $1,000 principal
amount to an adjusted conversion rate of 20.1441 shares of
common stock, representing a current conversion price of $49.64
per share. We may, at our option, redeem for cash the
Convertible Senior Notes in whole or in part at any time on or
after June 15, 2009 at specified redemption prices. Holders
have the right to require us to purchase all or any portion of
the Convertible Senior Notes for cash on June 15, 2011,
June 15, 2014 and June 15, 2019. In each case, we will
pay a purchase price equal to 100% of the principal amount of
the Convertible Senior Notes to be purchased plus any accrued
and unpaid interest, if any, and any additional amounts owed, if
any to such purchase date.
In fiscal 2007, we voluntarily repurchased $20.0 million of
our outstanding 8 5/8% Senior Notes and $10.0 million
of our outstanding 8 3/8% Senior Notes on the open market.
The aggregate purchase price was $30.5 million, plus
accrued and unpaid interest as of the purchase date. The
repurchase of the notes resulted in a net $412,500 pretax loss
during fiscal 2007. Senior Notes purchased by the Company were
cancelled.
On October 26, 2007, we obtained consents from holders of
our Senior Notes to approve amendments of the indentures under
which the Senior Notes were issued. These amendments restrict
our ability to secure additional debt in excess of
$700 million until certain conditions are met and enable us
to invest up to $50 million in joint ventures. The consents
also provided us with a waiver of any and all defaults under the
Senior Notes that may have occurred on or prior to May 15,
2008 relating to filing or delivering annual and quarterly
financial statements. Fees and expenses related to obtaining
these consents totaled approximately $21 million. The
recording of such fees and expenses has been deferred and will
be amortized as an adjustment to interest expense in accordance
with
EITF 96-19
Debtors Accounting for a Modification or Exchange of
Debt Instruments.
During the second half of fiscal 2009, we voluntarily
repurchased in open-market transactions $384.8 million
principal amount of our Senior Notes ($52.7 million of 8
5/8% Senior Notes due 2011, $36.4 million of
8 3/8% Senior
Notes due 2012, $35.6 million of 6 1/2% Senior Notes
due 2013, $140.5 million of
6 7/8% Senior
Notes due 2015, $94.1 million of 8 1/8% Senior Notes
due 2016, and $25.5 million of Convertible Senior Notes due
2024). The aggregate purchase price was $247.7 million,
plus accrued and unpaid interest as of the purchase date. The
repurchase of the notes resulted in a $130.2 million
pre-tax gain on extinguishment of debt, net of unamortized
discounts and debt issuance costs related to these notes. Senior
Notes purchased by the Company were cancelled.
On September 11, 2009, we issued and sold $250 million
aggregate principal amount of our 12% Senior Secured Notes
due 2017 (Senior Secured Notes) through a private placement. The
Senior Secured Notes were issued at a price of 89.5% of their
face amount (before underwriting and other issuance costs).
Interest on the Senior Secured Notes is payable semi-annually in
cash in arrears, commencing April 15, 2010. The Senior
Secured Notes were issued under an indenture, dated as of
September 11, 2009. The indenture contains covenants which,
subject to certain exceptions, limit the ability of the Company
and its restricted subsidiaries to, among other things, incur
additional indebtedness, engage in certain asset sales, make
certain types of restricted payments, engage in transactions
with affiliates and create liens on assets of the Company. Upon
a change of control, as defined, the indenture requires us to
make an offer to repurchase the Senior Secured Notes at 101% of
their principal amount, plus accrued and unpaid interest. If we
sell certain assets and do not reinvest the net proceeds in
compliance with the indenture, then we must use the net proceeds
to offer to repurchase the Senior Secured Notes at 100% of their
principal amount, plus accrued and unpaid interest.
80
Prior to October 15, 2012, we may redeem the Senior Secured
Notes at a redemption price equal to 100% of the principal
amount plus the applicable premium amount as set forth in the
indenture. Thereafter, we may redeem some or all of the Senior
Secured Notes at redemption prices set forth in the indenture.
The Senior Secured Notes are secured on a second priority basis
by, subject to exceptions specified in the related agreements,
substantially all of the tangible and intangible assets of the
Company as defined.
As of September 30, 2009, we were in compliance with all
covenants under our Senior Notes.
Junior Subordinated Notes On June 15,
2006, we completed a private placement of $103.1 million of
unsecured junior subordinated notes which mature on
July 30, 2036 and are redeemable at par on or after
July 30, 2011 and pay a fixed rate of 7.987% for the first
ten years ending July 30, 2016. Thereafter, the securities
have a floating interest rate equal to three-month LIBOR plus
2.45% per annum, resetting quarterly. These notes were issued to
Beazer Capital Trust I, which simultaneously issued, in a
private transaction, trust preferred securities and common
securities with an aggregate value of $103.1 million to
fund its purchase of these notes. The transaction is treated as
debt in accordance with GAAP. The obligations relating to these
notes and the related securities are subordinated to the Secured
Revolving Credit Facility and the Senior Notes.
Other Secured Notes Payable We periodically
acquire land through the issuance of notes payable. As of
September 30, 2009 and September 30, 2008, we had
outstanding notes payable of $12.5 million and
$50.6 million, respectively, primarily related to land
acquisitions. These notes payable expire at various times
through 2011 and had fixed and variable rates ranging from 4.8%
to 9.0% at September 30, 2009. These notes are secured by
the real estate to which they relate. During fiscal 2009, we
negotiated a reduced payoff of two of our secured notes payable
totaling $39.2 million and recorded gains on debt
extinguishment totaling $20.1 million which is included in
gain on extinguishment of debt in the accompanying Consolidated
Statements of Operations for the fiscal year ended
September 30, 2009.
The agreements governing these secured notes payable contain
various affirmative and negative covenants. There can be no
assurance that we will be able to obtain any future waivers or
amendments that may become necessary without significant
additional cost or at all. In each instance, however, a covenant
default can be cured by repayment of the indebtedness.
Model Home Financing Obligations - Due to a continuing
interest in certain model home sale-leaseback transactions, we
have recorded $30.4 million and $71.2 million of debt
as of September 30, 2009 and September 30, 2008,
respectively, related to these financing
transactions in accordance with SFAS 98 (As amended),
Accounting for Leases (ASC 840). These model home
transactions incur interest at a variable rate of one-month
LIBOR plus 450 basis points, 4.8% as of September 30,
2009, and expire at various times through 2015. The model homes
financed in these transactions are recorded as inventory until
such homes are sold to the ultimate homebuyer and the related
financing obligation is repaid. At such time, we recognize
revenue and related costs, and the inventory associated with the
model homes and the model home financing obligations are
reduced. The sale transaction above is reflected as cash
provided by operating activities and the reduction in the model
home financing obligation is presented as cash used in financing
activities in the accompanying Consolidated Statements of Cash
Flows.
As of September 30, 2009, future maturities of our
borrowings are as follows (in thousands):
|
|
|
|
|
Year Ending September 30,
|
|
|
|
|
2010
|
|
|
$30,668
|
|
2011
|
|
|
289,769
|
|
2012
|
|
|
306,619
|
|
2013
|
|
|
164,797
|
|
2014
|
|
|
324
|
|
Thereafter
|
|
|
743,979
|
|
|
|
|
|
|
Total
|
|
|
$1,536,156
|
|
|
|
|
|
|
81
The (benefit) provision for income taxes from continuing
operations consists of (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Current federal
|
|
|
$(13,025
|
)
|
|
|
$ (145,361
|
)
|
|
|
$ (56,578
|
)
|
Current state
|
|
|
(162
|
)
|
|
|
(3,123
|
)
|
|
|
1,250
|
|
Deferred federal
|
|
|
1,459
|
|
|
|
212,624
|
|
|
|
(131,054
|
)
|
Deferred state
|
|
|
3,197
|
|
|
|
7,515
|
|
|
|
(16,489
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$ (8,531
|
)
|
|
|
$71,655
|
|
|
|
$(202,871
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The (benefit) provision for income taxes from continuing
operations differs from the amount computed by applying the
federal income tax statutory rate as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Income tax computed at statutory rate
|
|
|
$(65,291
|
)
|
|
|
$(255,190
|
)
|
|
|
$(201,108
|
)
|
State income taxes, net of federal benefit
|
|
|
(2,936
|
)
|
|
|
6,740
|
|
|
|
(19,381
|
)
|
Penalties
|
|
|
5,146
|
|
|
|
-
|
|
|
|
-
|
|
Impairment of non-deductible goodwill
|
|
|
5,158
|
|
|
|
16,446
|
|
|
|
16,238
|
|
Valuation allowance
|
|
|
46,062
|
|
|
|
307,080
|
|
|
|
-
|
|
Other, net
|
|
|
3,330
|
|
|
|
(3,421
|
)
|
|
|
1,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$(8,531
|
)
|
|
|
$71,655
|
|
|
|
$(202,871
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets and liabilities are composed of the
following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Warranty and other reserves
|
|
|
$22,407
|
|
|
|
$24,927
|
|
Incentive compensation
|
|
|
15,660
|
|
|
|
20,854
|
|
Property, equipment and other assets
|
|
|
4,803
|
|
|
|
4,320
|
|
Federal and state tax carryforwards
|
|
|
186,088
|
|
|
|
85,711
|
|
Inventory adjustments
|
|
|
191,119
|
|
|
|
237,487
|
|
FIN 48
|
|
|
39,083
|
|
|
|
47,677
|
|
Other
|
|
|
1,699
|
|
|
|
3,505
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
460,859
|
|
|
|
424,481
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilties:
|
|
|
|
|
|
|
|
|
Inventory adjustments
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
(3,686
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
-
|
|
|
|
(3,686
|
)
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
(453,339
|
)
|
|
|
(400,579
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
$7,520
|
|
|
|
$20,216
|
|
|
|
|
|
|
|
|
|
|
SFAS 109 requires that deferred tax assets be reduced by a
valuation allowance if is more likely than not that some portion
or all of a deferred tax asset will not be realized. During
fiscal 2008, we determined that it was not more likely than not
that substantially all of our deferred tax assets would be
realized and, therefore, we established a
82
valuation allowance of $400.6 million for substantially all
of our deferred tax assets. We have not changed our assessment
regarding the recoverability of our deferred tax assets as of
September 30, 2009 and consequently, during the fiscal year
ended September 30, 2009, we determined that an additional
valuation allowance of $52.8 million was warranted. As of
September 30, 2009, our deferred tax valuation allowance
was $453.3 million. Management reassesses the realizability
of the deferred tax assets each reporting period. To the extent
that our financial results of operations improve and deferred
tax assets become realizable, the valuation allowance will be
reduced and result in a non-cash tax benefit.
We experienced an ownership change as defined in
Section 382 of the Internal Revenue Code as of
December 31, 2007. Section 382 of the Internal Revenue
Code contains rules that limit the ability of a company that
undergoes an ownership change to utilize its net
operating loss carryforwards and certain built-in losses or
deductions recognized during the five-year period after the
ownership change. Therefore, our ability to utilize our
pre-ownership change net operating loss carryforwards and
recognize certain built-in losses or deductions is limited by
Section 382 to a maximum amount of approximately
$17 million annually.
Although our Board of Directors recently adopted a shareholder
rights plan on July 31, 2009 which is intended to reduce
the likelihood of an unintended ownership change
within the meaning of Section 382 and thereby protect
stockholder value by preserving our ability to use our net
operating loss carryforwards, the shareholder rights plan does
not ensure that our net operating loss carryforwards will be
protected from an ownership change as defined in the tax laws,
and there can be no assurance that such an ownership change will
not occur. If another ownership change occurs, a new
annual limitation on the utilization of net operating losses
would be determined on that date.
At September 30, 2009, we had U.S. federal and state
net operating loss (NOL) carryforwards of $408.4 million
and $924.5 million, respectively. These NOL carryforwards
will expire between 2010 and 2028. In addition, we have
alternative minimum tax (AMT) credit carryforwards of
$9.8 million, which do not expire. On an after-tax basis,
our federal and state NOL carryforwards and the AMT tax credit
carryforward result in a deferred tax asset of
$186.1 million. At September 30, 2009, our federal NOL
carryforwards of $408.4 million consisted of approximately
$165.8 million in estimated NOL carryforwards that are not
subject to the annual limitation imposed by Section 382 and
approximately $242.6 million in estimated NOL carryforwards
that are subject to the annual limitation imposed by
Section 382.
Further, as of September 30, 2009, we had net unrecognized
built-in losses totaling approximately $520.9 million that
would be subject to the annual Section 382 limitation if
recognized before January 1, 2013. The $520.9 million
of unrecognized built-in losses consist of $316.1 million
in inventory valuation adjustments and $204.8 million of
other balance sheet related unrecognized built-in losses. We
also have approximately $270.8 million of unrecognized tax
losses related to inventory valuation adjustments that will not
be subject to our Section 382 limitation when recognized.
We adopted the provisions of FIN 48 on October 1, 2007
which resulted in a $10.1 million reduction to retained
earnings. A reconciliation of the beginning and ending amount of
unrecognized tax benefits at the beginning and end of fiscal
2009 and fiscal 2008 is as follows ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Balance at beginning of year
|
|
|
$57,916
|
|
|
|
$72,500
|
|
Reductions in tax positions related to current year
|
|
|
(3,527
|
)
|
|
|
891
|
|
Additions for tax positions related to prior years
|
|
|
211
|
|
|
|
12,232
|
|
Reductions for tax positions of prior years
|
|
|
(219
|
)
|
|
|
(22,440
|
)
|
Settlements with taxing authorities
|
|
|
(8,572
|
)
|
|
|
(3,767
|
)
|
Lapse of statute of limitations
|
|
|
(3,961
|
)
|
|
|
(1,500
|
)
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
|
$41,848
|
|
|
|
$57,916
|
|
|
|
|
|
|
|
|
|
|
83
The Company recognizes accrued interest and penalties related to
unrecognized tax benefits in the financial statements as a
component of the income tax provision, consistent with the
Companys historical accounting policy. The Company
recorded a $4.8 million reduction in gross interest and
penalties during fiscal 2009 in accordance with FIN 48,
resulting in $8.0 million of accrued interest and penalties
at September 30, 2009. The Companys liability for
unrecognized tax benefits including accrued interest and
penalties is reflected as a component of other liabilities.
As of September 30, 2009, the Companys total
unrecognized tax benefit that, if recognized, would affect the
Companys effective tax rate is $5.3 million. It is
reasonably possible that, within the next 12 months, total
unrecognized tax benefits may decrease as a result of the
expiration of the statute of limitations on certain return
positions. The change that could occur within the next
12 months, however, cannot be estimated at this time.
During the next 12 months, it is reasonably possible that
the statute of limitations for fiscal year 2006 in certain tax
jurisdictions will expire. If the statute expires, approximately
$40.4 million of unrecognized tax benefits related to
temporary differences would shift from fiscal year 2006 to
fiscal year 2007, resulting in an increase in unrecognized tax
benefits in 2007. This increase in unrecognized tax benefits in
2007, absent any other planning, could result in an increase to
our valuation allowance and tax provision of $10.5 million
in the third quarter of fiscal year 2010. Additionally, the
statute expiration of certain permanent federal and state tax
exposures and related accrued interest and penalties would
result in a tax benefit of approximately $2.2 million.
Our income tax receivable was $9.9 million and
$173.5 million as of September 30, 2009 and 2008,
respectively. This receivable relates primarily to the carryback
of losses incurred in fiscal 2009 and 2008 to open tax years in
which we previously paid significant income taxes. During fiscal
2009 and 2008, we received $172.5 million and
$59.2 million of federal and state income tax refunds
related to prior tax years in which we previously paid taxes.
In the normal course of business, we are subject to audits by
federal and state tax authorities regarding various tax
liabilities. The federal statute of limitations for pre-fiscal
year 2006 tax years expired on June 15, 2009. The statute
of limitations for the Companys major tax jurisdictions
remains open for examination for fiscal years 2006 through 2008.
We are not currently under IRS audit for any other open years.
During fiscal 2009, we completed a number of state examinations
without any material effect on our fiscal 2009 net loss.
We are obligated under various noncancelable operating leases
for office facilities, model homes and equipment. Rental expense
under these agreements, which is included in selling, general
and administrative expenses, amounted to approximately
$12.5 million, $17.8 million and $18.9 million
for the years ended September 30, 2009, 2008, and 2007,
respectively. This rental expense excludes model home
transactions accounted for as financing arrangements in
accordance with SFAS 98 as discussed in Note 7 and
expense related to our discontinued operations. As of
September 30, 2009, future minimum lease payments under
noncancelable operating lease agreements are as follows (in
thousands):
|
|
|
|
|
Year Ending September 30,
|
|
|
|
|
|
|
2010
|
|
|
$9,066
|
|
2011
|
|
|
7,396
|
|
2012
|
|
|
5,478
|
|
2013
|
|
|
4,483
|
|
2014
|
|
|
1,245
|
|
Thereafter
|
|
|
726
|
|
|
|
|
|
|
Total
|
|
|
$ 28,394
|
|
|
|
|
|
|
84
|
|
(10)
|
Stockholders
Equity
|
Preferred Stock. We currently have no shares of preferred
stock outstanding.
Common Stock Repurchase Plan. On November 18, 2005,
as part of an acceleration of our comprehensive plan to enhance
stockholder value, our Board of Directors authorized an increase
of our stock repurchase plan to ten million shares of our common
stock. The plan provides that shares may be purchased for cash
in the open market, on the NYSE or in privately negotiated
transactions. During fiscal 2009, 2008 and fiscal 2007, we did
not repurchase any shares in the open market. At
September 30, 2009, there are approximately
5.4 million additional shares available for purchase
pursuant to the plan; however, we have currently suspended our
repurchase program and any resumption of such program will be at
the discretion of the Board of Directors and as allowed by our
debt covenants and is unlikely in the foreseeable future.
During fiscal 2009, 2008, and 2007, 14,393, 7,255, and
13,946 shares, respectively, were surrendered to us by
employees in payment of minimum tax obligations upon the vesting
of restricted stock and restricted stock units under our stock
incentive plans. We valued the stock at the market price on the
date of surrender, for an aggregate value of approximately
$21,000, or less than $2 per share in fiscal 2009, $52,000, or
approximately $7 per share in fiscal 2008, and $348,000, or
approximately $25 per share in fiscal 2007.
Dividends. Effective November 2, 2007, our
Board of Directors suspended payment of quarterly dividends. The
Board concluded that suspending dividends, which will allow us
to conserve approximately $16 million of cash annually, was
a prudent effort in light of the continued deterioration in the
housing market. In addition, the indentures under which our
senior notes were issued contain certain restrictive covenants,
including limitations on payment of dividends. At
September 30, 2009, under the most restrictive covenants of
each indenture, none of our retained earnings was available for
cash dividends. Hence, there were no dividends paid in fiscal
2009 or fiscal 2008. For fiscal 2007, we paid quarterly cash
dividends aggregating approximately $15.6 million ($0.40
per common share).
|
|
(11)
|
Retirement
Plan and Incentive Awards
|
401(k) Retirement Plan. We sponsor a 401(k) plan
(the Plan). Substantially all employees are eligible for
participation in the Plan after completing one calendar month of
service with us. Participants may defer and contribute to the
Plan from 1% to 80% of their salary with certain limitations on
highly compensated individuals. We match 50% of the first 6% of
the participants contributions. The participants
contributions vest 100% immediately, while our contributions
vest over five years. Our total contributions for the fiscal
years ended September 30, 2009, 2008, and 2007 were
approximately $1.1 million, $1.7 million and
$2.8 million, respectively. During fiscal 2009, 2008, and
2007 participants forfeited $0.7 million, $1.3, million and
$1.6 million, respectively, of unvested matching
contributions.
Deferred Compensation Plan. During fiscal 2002, we
adopted the Beazer Homes USA, Inc. Deferred Compensation Plan
(the DCP Plan). The DCP Plan is a non-qualified deferred
compensation plan for a select group of executives and highly
compensated employees. The DCP Plan allows the executives to
defer current compensation on a pre-tax basis to a future year,
up until termination of employment. The objectives of the DCP
Plan are to assist executives with financial planning and
capital accumulation and to provide the Company with a method of
attracting, rewarding, and retaining executives. Participation
in the DCP Plan is voluntary. Beazer Homes may voluntarily make
a contribution to the participants DCP accounts. Deferred
compensation assets of $12.7 million and $19.4 million
and deferred compensation liabilities of $13.2 million and
$22.8 million as of September 30, 2009 and 2008,
respectively, are included in other assets and other liabilities
on the accompanying Consolidated Balance Sheets. The decrease in
the deferred compensation assets and liabilities between fiscal
2008 and fiscal 2009 relates to employee elections to withdraw
funds from the plan, forfeitures of matching contributions
related to terminated employees and market losses on investments
held within the plan. For the years ended September 30,
2009, 2008, and 2007, Beazer Homes contributed approximately
$355,000, $517,000, and $4.7 million, respectively, to the
DCP Plan.
Stock Incentive Plans. During fiscal 2000, we
adopted the 1999 Stock Incentive Plan (the 1999 Plan) because
the shares reserved under the 1994 Stock Incentive Plan (the
1994 Plan) had been substantially depleted. At
85
September 30, 2009, we had reserved 11,925,000 shares
of common stock for issuance under our various stock incentive
plans, of which approximately 19,000 shares are available
for future grants.
Stock Option and SSAR Awards. We have issued various
stock option and SSAR awards to officers and key employees under
both the 1999 Plan and the 1994 Plan. Stock options have an
exercise price equal to the fair market value of the common
stock on the grant date, vest three years after the date of
grant and may be exercised thereafter until their expiration,
subject to forfeiture upon termination of employment as provided
in the applicable plan. Under certain conditions of retirement,
eligible participants may receive a partial vesting of stock
options. Stock options granted prior to fiscal 2004, generally
expire on the tenth anniversary from the date such options were
granted. Beginning in fiscal 2004, newly granted stock options
expire on the seventh anniversary from the date such options
were granted. SSARs generally vest three years after the date of
grant, have an exercise price equal to the fair market value of
the common stock on the date of grant and are subject to
forfeiture upon termination of employment as provided in the
applicable plan. Under certain conditions of retirement,
eligible participants may receive a partial vesting of SSARs.
The following table summarizes stock options and SSARs
outstanding as of September 30 and activity during the fiscal
years ended September 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended September 30,
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
Weighted Average
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Outstanding at beginning of year
|
|
|
1,848,995
|
|
|
|
$45.78
|
|
|
|
2,052,379
|
|
|
|
$45.01
|
|
|
|
2,135,572
|
|
|
|
$43.82
|
|
Granted
|
|
|
671,600
|
|
|
|
3.94
|
|
|
|
-
|
|
|
|
-
|
|
|
|
538,594
|
|
|
|
38.61
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(312,501
|
)
|
|
|
14.15
|
|
Forfeited
|
|
|
(34,761
|
)
|
|
|
44.28
|
|
|
|
(111,670
|
)
|
|
|
46.55
|
|
|
|
(309,286
|
)
|
|
|
56.84
|
|
Cancelled with exchange
|
|
|
(292,969
|
)
|
|
|
43.05
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
(83,951
|
)
|
|
|
40.41
|
|
|
|
(91,714
|
)
|
|
|
27.71
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
2,108,914
|
|
|
|
$33.07
|
|
|
|
1,848,995
|
|
|
|
$45.78
|
|
|
|
2,052,379
|
|
|
|
$45.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of year
|
|
|
773,869
|
|
|
|
$ 40.40
|
|
|
|
704,762
|
|
|
|
$ 29.31
|
|
|
|
617,914
|
|
|
|
$ 26.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes information about stock options
and SSARs outstanding and exercisable at September 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options/SSARs Outstanding
|
|
|
Stock Options/SSARs Exercisable
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Contractual
|
|
|
Weighted
|
|
|
|
|
|
Contractual
|
|
|
Weighted
|
|
Range of
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
Exercise
|
|
Number
|
|
|
Life
|
|
|
Exercise
|
|
|
Number
|
|
|
Life
|
|
|
Exercise
|
|
Prices
|
|
Outstanding
|
|
|
(Years)
|
|
|
Price
|
|
|
Exercisable
|
|
|
(Years)
|
|
|
Price
|
|
|
$3 - $9
|
|
|
685,715
|
|
|
|
6.74
|
|
|
$
|
4.00
|
|
|
|
14,115
|
|
|
|
0.60
|
|
|
$
|
6.81
|
|
$18 - $21
|
|
|
189,774
|
|
|
|
3.17
|
|
|
|
20.52
|
|
|
|
189,774
|
|
|
|
3.17
|
|
|
|
20.52
|
|
$24 - $29
|
|
|
134,037
|
|
|
|
2.52
|
|
|
|
26.85
|
|
|
|
134,037
|
|
|
|
2.52
|
|
|
|
26.85
|
|
$30 - $39
|
|
|
439,015
|
|
|
|
3.45
|
|
|
|
34.59
|
|
|
|
174,309
|
|
|
|
1.73
|
|
|
|
35.50
|
|
$40 - $49
|
|
|
19,509
|
|
|
|
4.36
|
|
|
|
43.10
|
|
|
|
-
|
|
|
|
0.00
|
|
|
|
43.10
|
|
$62 - $66
|
|
|
72,019
|
|
|
|
3.11
|
|
|
|
62.27
|
|
|
|
72,019
|
|
|
|
3.11
|
|
|
|
62.27
|
|
$68 - $69
|
|
|
568,845
|
|
|
|
3.34
|
|
|
|
68.56
|
|
|
|
189,615
|
|
|
|
3.34
|
|
|
|
68.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$3 - $69
|
|
|
2,108,914
|
|
|
|
4.40
|
|
|
$
|
33.07
|
|
|
|
773,869
|
|
|
|
2.72
|
|
|
$
|
40.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average fair value of each option/SSAR granted
during the years ended September 30, 2009 and 2007 was
$2.97 and $20.48, respectively. There were no SSARs/options
granted in fiscal 2008. The fair value of each grant is
estimated on the date of grant using the Black-Scholes
option-pricing model. Expected life of options
86
granted in fiscal 2009 was a weighted average of 5.06 years
and was determined based on the average historical exercise
experience of our previous grants. Expected life of
options/SSARs granted in fiscal 2007 were computed using the
mid-point between the vesting period and contractual life of the
options/SSARs and was a weighted average of 5.25 years for
fiscal 2007 grants. Expected volatilities are based on the
historical volatility of the Companys stock and other
factors and averaged 99.49% and 60.33% in fiscal 2009 and 2007,
respectively. No dividends were assumed for fiscal 2009 grants
since our Board of Directors has suspended the payment of
dividends (see Note 10). Expected discrete dividends of
$0.10 per quarter were assumed in lieu of a continuously
compounding dividend yield for fiscal 2007 grants. The weighted
average risk-free interest rate assumed was 2.75% and 4.66%,
respectively, for fiscal 2009 and 2007.
At September 30, 2009, 1,758,663 SSARs/stock options were
vested or expected to vest in the future with a weighted average
exercise price of $30.58 and a weighted average expected life of
2.59 years. At September 30, 2009, there was no
aggregate intrinsic value of SSARs/stock options outstanding,
vested and expected to vest in the future or SSARs/options
exercisable. The intrinsic value of a stock option/SSAR is the
amount by which the market value of the underlying stock exceeds
the exercise price of the option/SSAR. The intrinsic value for
options/SSARs exercised in the fiscal year ended
September 30, 2007 was $8.7 million.
On August 5, 2008, at the Companys annual meeting of
stockholders, the stockholders voted to approve amendments to
the 1999 Plan to authorize a stock option/SSAR exchange program
for eligible employees other than executive officers and
directors. On August 4, 2009 we offered to exchange stock
options/SSARs with exercise prices ranging from $26.51 to $62.02
per share for newly issued restricted shares of common stock
based on the exercise price of the eligible awards exchanged.
This exchange was structured to be a value for value exchange
and, as of the grant date, there was no incremental expense
recorded related to this exchange. Stock options/SSARs to
purchase 292,969 shares of our common stock were cancelled
and exchanged for 90,405 restricted shares of stock with a grant
price of $4.16.
Nonvested Stock Awards. We have made various
non-vested stock awards to officers and key employees under both
the 1999 Plan and the 1994 Plan. All restricted stock is awarded
in the name of the participant, who has all the rights of other
common stockholders with respect to such stock, subject to
restrictions and forfeiture provisions. Accordingly, such
non-vested stock awards are considered outstanding shares.
Restricted stock awards generally vest from three to seven years
after the date of grant. Certain restricted stock awards provide
for accelerated vesting if certain performance goals are
achieved.
In fiscal 2009 as discussed above, we exchanged certain stock
options/SSARs to purchase shares of our common stock for
restricted shares of common stock. These restricted shares will
vest 50% on the first anniversary of the exchange and 50% on the
second anniversary of the exchange. We valued these restricted
shares in accordance with SFAS 123R based on the remaining
unamortized cost of the exchanged stock options/SSARs. The
weighted average exchange price fair value of these restricted
shares was $4.16 per share. Our estimated fair value of these
restricted shares will be amortized over the applicable vesting
period.
In fiscal 2007, we issued 75,939 shares of restricted stock
to our executive officers with vesting contingent upon the
achievement of performance criteria based on Beazer Homes
total shareholder return, as defined by the award agreements, as
compared to the total shareholder return of a defined peer
group. The grants of performance-based, nonvested stock were
valued using the Monte Carlo valuation method and had a weighted
average fair value of $32.13. One-third of the shares will be
eligible to vest on dates defined in the grant agreements,
generally three, four and five years after the date of grant.
Depending on the level of performance achieved based on the
established criteria, between 0% and 150% of the eligible shares
will vest as of each applicable date.
A Monte Carlo simulation model requires the following inputs, as
of the modification date: (1) expected dividend yield on
the underlying stock, (2) expected price volatility of the
underlying stock, (3) risk-free interest rate for a period
corresponding with the expected term of the option and
(4) fair value of the underlying stock. The methodology
used to determine these assumptions is similar as for the
Black-Scholes Model discussed above; however, the expected term
is determined by the model in the Monte-Carlo simulation.
For Beazer Homes and each member of the peer group, the
following inputs were used in the Monte Carlo simulation model
to determine fair value as of the grant date for the
performance-based, nonvested awards: risk-free
87
interest rate ranging from 4.54% to 4.8%; aggregate discrete
dividends during the performance period ($0.10 per quarter for
the company for all grants); and expected volatility ranging
from 35.16% to 38.14%.
Prior to fiscal 2008, participants in certain of our management
incentive compensation programs could defer a portion of their
earned annual incentive compensation under the applicable plan
pursuant to the terms of the Corporate Management Stock Purchase
Program (the CMSPP). The deferred amounts are represented by
restricted stock units, each of which represents the right to
receive one share of Beazer Homes common stock upon
vesting. Such shares are issued after a three-year vesting
period, subject to an election for further deferral by the
participant. The number of restricted stock units granted is
based on a discount to the market value of our common stock at
the time the bonus is earned. Should the participants
employment terminate during the vesting period, the deferred
incentive compensation is settled in cash or cash and stock,
depending on the cause of termination as set forth in the CMSPP
or applicable deferred compensation plan. Due to low
availability of shares at the beginning of fiscal 2008 under the
1999 Plan, from which shares under CMSPP are issued, the
Compensation Committee suspended this program until further
notice.
Activity relating to the nonvested stock awards for the fiscal
year ended September 30, 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Beginning of year
|
|
|
782,866
|
|
|
$
|
46.80
|
|
Granted
|
|
|
453,738
|
|
|
|
3.94
|
|
Granted in exchange
|
|
|
90,405
|
|
|
|
4.16
|
|
Vested
|
|
|
(152,522
|
)
|
|
|
31.48
|
|
Forfeited
|
|
|
(47,607
|
)
|
|
|
59.35
|
|
|
|
|
|
|
|
|
|
|
End of year
|
|
|
1,126,880
|
|
|
$
|
27.66
|
|
|
|
|
|
|
|
|
|
|
Compensation expense for the nonvested stock awards totaled
$6.6 million, $6.2 million and $5.3 million for
the fiscal years ended September 30, 2009, 2008, and 2007,
respectively. The weighted average grant-date fair value of
nonvested stock awards granted during the fiscal years ended
September 30, 2009 and 2007, excluding shares granted in
the exchange offer, was $3.98 and $39.12, respectively.
Beazer Homes and certain of its subsidiaries have been and
continue to be named as defendants in various construction
defect claims, complaints and other legal actions that include
claims related to Chinese drywall. The Company is subject to the
possibility of loss contingencies arising in its business and
such contingencies are accounted for in accordance with
SFAS 5, Accounting for Contingencies (ASC 7). In
determining loss contingencies, we consider the likelihood of
loss as well as the ability to reasonably estimate the amount of
such loss or liability. An estimated loss is recorded when it is
considered probable that a liability has been incurred and when
the amount of loss can be reasonably estimated.
Warranty Reserves. We currently provide a limited
warranty (ranging from one to two years) covering workmanship
and materials per our defined performance quality standards. In
addition, we provide a limited warranty (generally ranging from
a minimum of five years up to the period covered by the
applicable statute of repose) covering only certain defined
construction defects. We also provide a defined structural
element warranty with single-family homes and townhomes in
certain states.
Since we subcontract our homebuilding work to subcontractors who
generally provide us with an indemnity and a certificate of
insurance prior to receiving payments for their work, many
claims relating to workmanship and materials are the primary
responsibility of the subcontractors.
Warranty reserves are included in other liabilities and the
provision for warranty accruals is included in home construction
and land sales expenses in the consolidated financial
statements. We record reserves covering anticipated warranty
expense for each home closed. Management reviews the adequacy of
warranty reserves each reporting period based on historical
experience and managements estimate of the costs to
remediate the
88
claims and adjusts these provisions accordingly. Our review
includes a quarterly analysis of the historical data and trends
in warranty expense by operating segment. An analysis by
operating segment allows us to consider market specific factors
such as our warranty experience, the number of home closings,
the prices of homes, product mix and other data in estimating
our warranty reserves. In addition, our analysis also
contemplates the existence of any non-recurring or
community-specific warranty related matters that might not be
contemplated in our historical data and trends.
As of September 30, 2009, we have accrued $2.7 million
in our warranty reserves for the repair of fewer than 40 homes
in southwest Florida where certain of our subcontractors
installed defective Chinese drywall in homes that were delivered
during our 2006 and 2007 fiscal years. We are inspecting
additional homes in order to determine whether they also contain
the defective Chinese drywall. The outcome of these inspections
may require us to increase our warranty reserve in the future.
However, the amount of additional liability, if any, is not
reasonably estimable. In addition, the Company has been named as
defendants in a number of legal actions related to Chinese
drywall (see Other Matters below).
We have experienced a significant number of moisture intrusion
claims in our East segment and particularly with respect to
homes built by Trinity Homes LLC (Trinity), a subsidiary which
was acquired in the Crossmann acquisition in 2002. As of
September 30, 2009, there were two pending lawsuits related
to such complaints received by Trinity by individual homeowners
and the cost to resolve such matters is not expected to be
material, either individually or in the aggregate. There was a
class action suit filed in the State of Indiana in August 2003
against Trinity. The parties in the class action reached a
settlement agreement which was approved by the court on
October 20, 2004. The settlement agreement establishes an
agreed protocol and process for assessment and remediation of
any external moisture intrusion issues at the homes which
includes, among other things, that the homes will be repaired at
Trinitys expense. The settlement agreement also provides
for payment of plaintiffs attorneys fees and for
Trinity to pay an agreed amount for engineering inspection costs
for each home for which a claim is filed under the settlement.
As of September 30, 2009, we have completed the remediation
of 1,881 homes related to 1,884 total Trinity claims. Our
warranty reserve as of September 30, 2009 and 2008 include
accruals of approximately $450,000 and $2.8 million,
respectively, for our estimated costs to assess and remediate
all homes for which Trinity had received complaints related to
moisture intrusion.
As a result of our analyses, we adjust our estimated warranty
liabilities. While we believe that our warranty reserves are
adequate as of September 30, 2009, historical data and
trends may not accurately predict actual warranty costs, or
future developments could lead to a significant change in the
reserve. Our warranty reserves are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Balance at beginning of year
|
|
$
|
40,822
|
|
|
$
|
57,053
|
|
|
$
|
99,030
|
|
Provisions (1)
|
|
|
4,249
|
|
|
|
11,630
|
|
|
|
4,736
|
|
Payments
|
|
|
(14,971
|
)
|
|
|
(27,861
|
)
|
|
|
(46,713
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
30,100
|
|
|
$
|
40,822
|
|
|
$
|
57,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Upon review of the adequacy of the warranty reserves,
it was determined that the warranty reserve as of
September 30, 2008 and 2007, respectively, contained
reserves in excess of anticipated claims related to the Trinity
moisture intrusion related issues. As a result, the provision to
warranty reserves for fiscal 2008 and 2007 was reduced by
$2.5 million and $23.8 million, respectively. In
addition, the Company also determined that its warranty reserve
covering workmanship, materials, certain construction defects
and structural elements were in excess of anticipated claims as
of September 30, 2007, which resulted in an additional
reduction in the provision to warranty reserves of
$8.3 million in fiscal 2007.
Investigations
Independent Investigation. In May 2008, the Audit
Committee of the Beazer Homes Board of Directors completed the
Investigation of Beazer Homes mortgage origination
business, including, among other things, investigating
89
certain evidence that the Companys subsidiary, Beazer
Mortgage, violated HUD regulations and may have violated certain
other laws and regulations in connection with certain of its
mortgage origination activities. The Investigation also found
evidence that employees of the Companys Beazer Mortgage
subsidiary violated certain federal
and/or state
regulations, including HUD regulations. Areas of concern
uncovered by the Investigation included our former practices in
the areas of: down payment assistance program; the charging of
discount points; the closure of certain HUD Licenses; closing
accommodations; and the payment of a number of realtor bonuses
and decorator allowances in certain Federal Housing
Administration (FHA) insured loans and non-FHA conventional
loans originated by Beazer Mortgage dating back to at least
2000. The Investigation also uncovered limited improper
practices in relation to the issuance of a number of non-FHA
Stated Income Loans. We reviewed the loan documents and
supporting documentation, and determined that the assets were
effectively isolated from the seller and its creditors (even in
the event of bankruptcy). Based on that information, management
continues to believe that sale accounting at the time of the
transfer of the loans to third parties was appropriate. In
addition, the Investigation identified accounting and financial
reporting errors and irregularities which resulted in the
restatement of certain prior period consolidated financial
statements which was included in our 2007
Form 10-K
filed with the SEC on May 12, 2008.
United States Attorney, State and Federal Agency
Investigations. On July 1, 2009, the Company
announced that it had resolved the criminal and civil
investigations by the United States Attorneys Office in
the Western District of North Carolina (the U.S. Attorney)
and other state and federal agencies concerning the matters that
were the subject of the independent investigation by the Audit
Committee of the Beazer Homes Board of Directors (the
Investigation) completed in May 2008. The Company entered into a
deferred prosecution agreement (DPA) with the U.S. Attorney
and a settlement agreement with the U.S. Department of
Housing and Urban Development (HUD) and the civil division of
the Department of Justice. In addition, certain of the
Companys subsidiaries entered into a settlement agreement
with the North Carolina Real Estate Commission (NCREC). Also, as
previously disclosed, Beazer Mortgage Corporation (Beazer
Mortgage) entered into a settlement agreement with the North
Carolina Office of the Commissioner of Banks (OCOB), under which
Beazer Mortgage consented, without admitting the alleged
violations, to the entry of a consent order pursuant to which
Beazer Mortgage has provided approximately $2.5 million in
restitution to certain borrowers in respect of the alleged
violations. The settlement agreement concludes the OCOBs
investigation into these matters with respect to Beazer Mortgage.
Under the DPA, the U.S. Attorney agreed not to prosecute
the Company in connection with the matters that were the subject
of the Investigation and are set forth in a Bill of Information
filed with the United States District Court for the Western
District of North Carolina, provided that the Company satisfies
its obligations under the DPA over the next 60 months. The
term of the DPA may be less than 60 months in the event
certain conditions, as described more fully in the DPA, are met.
The DPA recognizes the cooperation of the Company, its voluntary
disclosure and its adoption of remedial measures.
Under the terms of the DPA, in fiscal year 2009, the Company
contributed $7.5 million to a restitution fund established
to compensate those Beazer customers who can demonstrate that
they were injured by certain of the practices identified in the
Bill of Information. For fiscal year 2010 the Company will
contribute to the restitution fund the greater of
$1.0 million or an amount equal to 4% of the Companys
fiscal 2010 adjusted EBITDA as defined in the DPA. The
Companys liability in each of the fiscal years after 2010
will also be equal to 4% of the Companys adjusted EBITDA
through a portion of fiscal year 2014, unless extended as
described below. Under the terms of the DPA, the Companys
total contributions to the restitution fund including amounts
paid to OCOB will not exceed $50.0 million.
Under the terms of the settlement agreement with HUD and the
civil division of the Department of Justice, the Company made an
immediate payment of $4.0 million to HUD to resolve civil
and administrative investigations. In addition, on the first
anniversary of the agreement, the Company will make a
$1.0 million payment to HUD.
Under the agreement with HUD, if the amounts paid into the
restitution fund with the U.S. Attorney described above do
not reach $48.0 million at the end of 60 months, the
restitution fund term will be extended using the adjusted EBITDA
formula until the earlier of an additional 24 months or the
time the Companys contribution reaches $48.0 million.
90
The amounts paid to the U.S. Attorney for contribution into
the restitution fund and payments to HUD do not include the
$2.5 million contributed to resolve the investigation by
the OCOB, although this amount will be counted as part of the
Companys maximum obligation to the restitution fund.
The Companys payment obligations under the DPA and the
settlement agreement with HUD are interrelated. The total amount
of such obligations will be dependent on several factors;
however, the maximum liability under both agreements and the
agreement with the OCOB will not exceed $55.0 million.
With respect to the NCREC, Beazer/Squires Realty, Inc.
(Beazer/Squires) and Beazer Homes Corp. each has agreed to the
entry of a consent order regarding violations of certain North
Carolina statutes. Under the respective consent orders, the
NCREC agreed that a reprimand of Beazer Homes would not be
issued as long as Beazer Homes completed certain remedial
measures and that the broker license held by Beazer/Squires is
revoked. The broker license held by Beazer/Squires has been on
inactive status since October 2007. There is no monetary payment
by the Company or its subsidiaries under either of the consent
orders. The consent orders conclude the investigation by the
NCREC into these matters with respect to the Company.
As of September 30, 2009, $2.0 million is accrued
related to these obligations. While we believe that our accrual
for this liability is adequate as of September 30, 2009,
positive adjusted EBITDA results in future years will require us
to increase our accrual and incur additional expense. The amount
of future liability in excess of amounts recorded to date, if
any, are not reasonably estimable.
Litigation
Securities Litigation. Beazer Homes and certain of
our current and former officers (the Individual Defendants), as
well as our Independent Registered Accounting Firm, were named
as defendants in putative class action securities litigation in
the United States District Court for the Northern District of
Georgia, the details of which were previously disclosed by the
Company (the Beazer Securities Litigation). During fiscal 2009,
the action has been settled and has been dismissed with
prejudice. The Company and all other defendants did not admit
any liability and received a full and complete release of all
claims asserted against them in the litigation, in exchange for
the payment of an aggregate of $30.5 million. The monetary
payment made on behalf of the Company and the individual
defendants was funded from insurance proceeds. As a result,
there was no financial contribution by the Company.
Beazer Homes and certain of its current and former officers were
named as defendants in a securities lawsuit filed on
September 18, 2009 in the United States District Court for
the Northern District of Georgia. The complaint was filed by a
group of plaintiffs who opted out of the settlement of the
Beazer Securities Litigation. The complaint alleges that the
defendants violated Sections 10(b), 18, and 20(a) of the
Securities Exchange Act of 1934 and
Rule 10b-5
promulgated thereunder by issuing materially false and
misleading statements regarding our business and prospects due
to allegedly improper lending practices in our mortgage
origination business. The plaintiffs are seeking an unspecified
amount of compensatory damages. The Company intends to
vigorously defend against this action. Given the inherent
uncertainties in this litigation, as of September 30, 2009,
no accrual has been recorded, as losses, if any, related to this
matter are not both probable and reasonably estimable.
Derivative Shareholder Actions. Certain of Beazer
Homes current and former officers and directors were named
as defendants in two derivative shareholder suits filed on
April 16, 2007 and August 29, 2007 in the United
States District Court for the Northern District of Georgia,
which were subsequently consolidated. Beazer Homes is named as a
nominal defendant. The amended consolidated complaint,
purportedly on behalf of Beazer Homes, alleges that the
defendants (i) violated Section 10(b) of the Exchange
Act and
Rule 10b-5
promulgated thereunder; (ii) breached their fiduciary
duties and misappropriated information; (iii) abused their
control; (iv) wasted corporate assets; and (v) were
unjustly enriched, and seeks an unspecified amount of
compensatory damages against the individual defendants and in
favor of Beazer Homes. The parties have reached an agreement to
settle the lawsuit. Under the terms of the proposed settlement,
the action will be dismissed with prejudice, and the Company and
all other defendants will not admit any liability. Pursuant to
the terms of the settlement, the Company has acknowledged that
the pendency of the derivative action was a factor in the
Companys adoption of various corporate governance reforms
and remedial measures, all of which have previously been
disclosed, and agreed that plaintiffs counsel would
receive attorneys fees not to exceed $950,000, which will
be funded by insurance proceeds. The settlement
91
remains subject to court approval. Based on the terms of the
proposed settlement, as of September 30, 2009, no accrual
has been recorded related to this action.
ERISA Class Actions. On April 30, 2007, a
putative class action complaint was filed on behalf of a
purported class consisting of present and former participants
and beneficiaries of the Beazer Homes USA, Inc. 401(k) Plan. The
complaint was filed in the United States District Court for the
Northern District of Georgia. The complaint alleges breach of
fiduciary duties, including those set forth in the Employee
Retirement Income Security Act (ERISA), as a result of the
investment of retirement monies held by the 401(k) Plan in
common stock of Beazer Homes at a time when participants were
allegedly not provided timely, accurate and complete information
concerning Beazer Homes. Four additional lawsuits were filed
subsequently making similar allegations and the court
consolidated these five lawsuits. The consolidated amended
complaint names as defendants Beazer Homes, our chief executive
officer, certain current and former directors of the Company,
including the members of the Compensation Committee of the Board
of Directors, and certain employees of the Company who acted as
members of the Companys 401(k) Committee. On
October 10, 2008, the Company and the other defendants
filed a motion to dismiss the consolidated amended complaint.
Briefing of the motion was completed in January 2009. The
Company intends to vigorously defend against these actions.
Given the inherent uncertainties in this litigation, as of
September 30, 2009, no accrual has been recorded, as
losses, if any, related to this matter are not both probable and
reasonably estimable.
Homeowners Class Action Lawsuits and Multi-Plaintiff
Lawsuit. A putative class action was filed on
April 8, 2008 in the United States District Court for the
Middle District of North Carolina, Salisbury Division, against
Beazer Homes, U.S.A., Inc., Beazer Homes Corp. and Beazer
Mortgage Corporation. The Complaint alleges that Beazer violated
the Real Estate Settlement Practices Act (RESPA) and North
Carolina Gen. Stat.
§ 75-1.1
by (1) improperly requiring homebuyers to use Beazer-owned
mortgage and settlement services as part of a down payment
assistance program, and (2) illegally increasing the cost
of homes and settlement services sold by Beazer Homes Corp. The
purported class consists of all residents of North Carolina who
purchased a home from Beazer, using mortgage financing provided
by and through Beazer that included seller-funded down payment
assistance, between January 1, 2000 and October 11,
2007. The Complaint demands an unspecified amount of damages,
equitable relief, treble damages, attorneys fees and
litigation expenses. The defendants moved to dismiss the
Complaint on June 4, 2008. On July 25, 2008, in lieu
of a response to the motion to dismiss, plaintiff filed an
amended complaint. The Company has moved to dismiss the amended
complaint, which motion is pending before the Court. The Company
intends to vigorously defend against this action. Given the
inherent uncertainties in this litigation, as of
September 30, 2009, no accrual has been recorded, as
losses, if any, related to this matter are not both probable and
reasonably estimable.
Beazer Homes Corp. and Beazer Mortgage Corporation are also
named defendants in a lawsuit filed on July 3, 2007, in the
General Court of Justice, Superior Court Division, County of
Mecklenburg, North Carolina. The case was removed to the
U.S. District Court for the Western District of North
Carolina, Charlotte Division, but remanded on April 23,
2008 to the General Court of Justice, Superior Court Division,
County of Mecklenburg, North Carolina. The complaint was filed
on behalf of ten individual homeowners who purchased homes from
Beazer in Mecklenburg County. The complaint alleges certain
deceptive conduct by the defendants and brings various claims
under North Carolina statutory and common law, including a claim
for punitive damages. The case has been assigned to the docket
of the North Carolina Business Court. The plaintiffs have filed
four amended complaints and the Company has filed a motion to
dismiss each of the complaints filed by the plaintiffs. The
defendants motion to dismiss the fourth amended complaint
is currently pending. The Company intends to vigorously defend
against this action. Given the inherent uncertainties in this
litigation, as of September 30, 2009, no accrual has been
recorded, as losses, if any, related to this matter are not both
probable and reasonably estimable.
Beazer Homes and several subsidiaries were named as defendants
in a putative class action lawsuit originally filed on
March 12, 2008, in the Superior Court of the State of
California, County of Placer. The purported class is defined as
all persons who purchased a home from the defendants or their
affiliates, with the assistance of a federally related mortgage
loan, from March 25, 1999, to the present where Security
Title Insurance Company received any money as a reinsurer
of the transaction. The complaint alleges that the defendants
violated RESPA and asserts claims under a number of state
statutes alleging that defendants engaged in a uniform and
systematic practice of giving
and/or
accepting fees and kickbacks to affiliated businesses including
affiliated
and/or
recommended title insurance
92
companies. The complaint also alleges a number of common law
claims. Plaintiffs seek an unspecified amount of damages under
RESPA, unspecified statutory, compensatory and punitive damages
and injunctive and declaratory relief, as well as
attorneys fees and costs. Defendants removed the action to
federal court and plaintiffs filed a Second Amended Complaint
which substituted new named-plaintiffs. The Company filed a
motion to dismiss the Second Amended Complaint, which the
federal court granted in part. The federal court dismissed the
sole federal claim, declined to rule on the state law claims,
and remanded the case to the Superior Court of Placer County.
The Company filed a supplemental motion to dismiss/demurrer
regarding the remaining state law claims in the Second Amended
Complaint and the state court sustained defendants
demurrer but granted the plaintiffs leave to amend their claims.
Plaintiffs thereafter filed a Third Amended Complaint which
defendants removed to federal court based on the presence of a
federal question and pursuant to the Class Action Fairness
Act and thereafter moved to dismiss. Plaintiffs have filed a
motion to remand the case to the Superior Court of Placer
County. The Company intends to continue to vigorously defend
against the action. Given the inherent uncertainties in this
litigation, as of September 30, 2009, no accrual has been
recorded, as losses, if any, related to this matter are not both
probable and reasonably estimable.
We cannot predict or determine the timing or final outcome of
the lawsuits or the effect that any adverse findings or adverse
determinations in the pending lawsuits may have on us. In
addition, an estimate of possible loss or range of loss, if any,
cannot presently be made with respect to the above pending
matters. An unfavorable determination resulting from any
governmental investigation could result in the filing of
criminal charges, payment of substantial criminal or civil
restitution, the imposition of injunctions on our conduct or the
imposition of other penalties or consequences, including but not
limited to the Company having to adjust, curtail or terminate
the conduct of certain of our business operations. Any of these
outcomes could have a material adverse effect on our business,
financial condition, results of operations and prospects. An
unfavorable determination in any of the pending lawsuits could
result in the payment by us of substantial monetary damages
which may not be fully covered by insurance. Further, the legal
costs associated with the lawsuits and the amount of time
required to be spent by management and the Board of Directors on
these matters, even if we are ultimately successful, could have
a material adverse effect on our business, financial condition
and results of operations.
Other
Matters
In November 2003, Beazer Homes received a request for
information from the EPA pursuant to Section 308 of the
Clean Water Act seeking information concerning the nature and
extent of storm water discharge practices relating to certain of
our communities completed or under construction. The EPA has
since requested information on additional communities and has
conducted site inspections at a number of locations. In certain
instances, the EPA or the equivalent state agency has issued
Administrative Orders identifying alleged instances of
noncompliance and requiring corrective action to address the
alleged deficiencies in storm water management practices. As of
September 30, 2009, no monetary penalties had been imposed
in connection with such Administrative Orders. Consistent with
its approach with other homebuilders, the EPA has contacted the
Company about a possible resolution of these issues. Settlement
negotiations are proceeding. The EPA has reserved the right to
impose monetary penalties at a later date, the amount of which,
if any, cannot currently be estimated. Beazer Homes has taken
action to comply with the requirements of each of the
Administrative Orders and is working to otherwise maintain
compliance with the requirements of the Clean Water Act.
In 2006, we received two Administrative Orders issued by the New
Jersey Department of Environmental Protection. The Orders allege
certain violations of wetlands disturbance permits. The two
Orders assess proposed fines of $630,000 and $678,000,
respectively. We have met with the Department to discuss their
concerns on the two affected communities and have requested
hearings on both matters. We believe that we have significant
defenses to the alleged violations and intend to contest the
agencys findings and the proposed fines. We are currently
pursuing settlement discussions with the Department.
On June 3, 2009, a purported class action complaint was
filed by the owners of one of our homes in our Magnolia
Lakes community in Ft. Myers, Florida. The complaint
names the Company and certain distributors and suppliers of
drywall and was filed in the Circuit Court for Lee County,
Florida on behalf of the named plaintiffs and other similarly
situated owners of homes in Magnolia Lakes or alternatively in
the State of Florida. The plaintiffs allege that the Company
built their homes with defective drywall, manufactured in China,
that contains sulfur compounds
93
that allegedly corrode certain metals and that are allegedly
capable of harming the health of individuals. Plaintiffs allege
physical and economic damages and seek legal and equitable
relief, medical monitoring and attorneys fees. This case
has been transferred to the Eastern District of Louisiana
pursuant to an order from the United States Judicial Panel on
Multidistrict Litigation. The Company believes that the claims
asserted in this complaint are governed by its home warranty or
are without merit. Accordingly, the Company intends to
vigorously defend against this litigation. Given the inherent
uncertainties in this litigation, as of September 30, 2009,
no accrual has been recorded, as losses, if any, related to this
matter are not both probable and reasonably estimable.
We and certain of our subsidiaries have been named as defendants
in various claims, complaints and other legal actions, most
relating to construction defects, moisture intrusion and product
liability. Certain of the liabilities resulting from these
actions are covered in whole or part by insurance. In our
opinion, based on our current assessment, the ultimate
resolution of these matters will not have a material adverse
effect on our financial condition, results of operations or cash
flows.
We have accrued $19.7 million and $17.9 million in
other liabilities related to these matters as of
September 30, 2009 and 2008, respectively.
The lender of one of our unconsolidated joint ventures has filed
individual lawsuits against some of the joint venture partners
and certain of those partners parent companies (including
the Company), seeking to recover damages under completion
guarantees, among other claims. We intend to vigorously defend
against this legal action. We are a 2.58% partner in this joint
venture (see Note 3 for additional information). In
addition, an estimate of possible loss or range of loss if any,
cannot presently be made with respect to the above matter. Given
the inherent uncertainties and complexities in this litigation,
as of September 30, 2009, no accrual has been recorded, as
losses, if any, related to this matter are not both probable and
reasonably estimable.
We had outstanding letters of credit and performance bonds of
approximately $40.1 million and $237.2 million,
respectively, at September 30, 2009 related principally to
our obligations to local governments to construct roads and
other improvements in various developments in addition to the
letters of credit of approximately $5.5 million relating to
our land option contracts discussed in Note 4.
As defined in SFAS 131, Disclosures About Segments of an
Enterprise and Related Information (ASC 280), we now have
three homebuilding segments operating in 17 states and one
financial services segment. Revenues in our homebuilding
segments are derived from the sale of homes which we construct
and from land and lot sales. Revenues in our financial services
segment are derived primarily from title services provided
predominantly to customers of our homebuilding operations. Our
reportable segments, described below, have been determined on a
basis that is used internally by management for evaluating
segment performance and resource allocations in accordance with
SFAS 131. The reportable homebuilding segments, and all
other homebuilding operations not required to be reported
separately, include operations conducting business in the
following states:
|
|
West: |
Arizona, California, Nevada, New Mexico and Texas
|
|
|
East: |
Delaware, Indiana, Maryland, New Jersey, New York, North
Carolina (Raleigh), Pennsylvania, Tennessee (Nashville) and
Virginia
|
|
|
Southeast: |
Florida, Georgia and South Carolina
|
We have ceased all of our homebuilding operating activities in
the markets previously included in our Other Homebuilding
segment. As a result, the financial information related to these
markets are reported as discontinued operations in the
accompanying Consolidated Financial Statements and are further
discussed in Note 14.
Managements evaluation of segment performance is based on
segment operating income, which for our homebuilding segments is
defined as homebuilding and land sale revenues less home
construction, land development and land sales expense,
depreciation and amortization and certain selling, general and
administrative expenses which are incurred by or allocated to
our homebuilding segments. Segment operating income for our
Financial Services segment is defined as revenues less costs
associated with our title operations and
94
certain selling, general and administrative expenses incurred by
or allocated to the Financial Services segment. The accounting
policies of our segments are those described in Note 1. The
following information is in thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
West
|
|
$
|
416,027
|
|
|
$
|
674,103
|
|
|
$
|
1,321,870
|
|
East
|
|
|
406,112
|
|
|
|
780,380
|
|
|
|
889,597
|
|
Southeast
|
|
|
181,260
|
|
|
|
354,837
|
|
|
|
817,453
|
|
Financial Services
|
|
|
1,813
|
|
|
|
4,193
|
|
|
|
8,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,005,212
|
|
|
$
|
1,813,513
|
|
|
$
|
3,036,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Operating (loss) income
|
|
|
|
|
|
|
|
|
|
|
|
|
West
|
|
$
|
(32,019
|
)
|
|
$
|
(140,989
|
)
|
|
$
|
(228,271
|
)
|
East
|
|
|
(6,094
|
)
|
|
|
(63,913
|
)
|
|
|
(62,332
|
)
|
Southeast
|
|
|
(30,025
|
)
|
|
|
(109,675
|
)
|
|
|
(20,122
|
)
|
Financial Services
|
|
|
697
|
|
|
|
1,681
|
|
|
|
4,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment total
|
|
|
(67,441
|
)
|
|
|
(312,896
|
)
|
|
|
(306,029
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and unallocated (a)
|
|
|
(174,710
|
)
|
|
|
(303,162
|
)
|
|
|
(242,220
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating loss
|
|
|
(242,151
|
)
|
|
|
(616,058
|
)
|
|
|
(548,249
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in loss of unconsolidated joint ventures
|
|
|
(13,303
|
)
|
|
|
(76,552
|
)
|
|
|
(35,077
|
)
|
Gain (loss) on extinguishment of debt
|
|
|
144,503
|
|
|
|
-
|
|
|
|
(413
|
)
|
Other (expense) income, net
|
|
|
(75,595
|
)
|
|
|
(36,505
|
)
|
|
|
9,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes
|
|
$
|
(186,546
|
)
|
|
$
|
(729,115
|
)
|
|
$
|
(574,593
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
West
|
|
$
|
6,823
|
|
|
$
|
8,832
|
|
|
$
|
13,196
|
|
East
|
|
|
5,936
|
|
|
|
8,103
|
|
|
|
7,075
|
|
Southeast
|
|
|
2,224
|
|
|
|
3,187
|
|
|
|
3,915
|
|
Financial Services
|
|
|
10
|
|
|
|
29
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment total
|
|
|
14,993
|
|
|
|
20,151
|
|
|
|
24,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and unallocated (a)
|
|
|
3,743
|
|
|
|
4,557
|
|
|
|
4,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
$
|
18,736
|
|
|
$
|
24,708
|
|
|
$
|
28,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Assets (b)
|
|
|
|
|
|
|
|
|
West
|
|
$
|
664,857
|
|
|
$
|
779,863
|
|
East
|
|
|
428,673
|
|
|
|
507,412
|
|
Southeast
|
|
|
182,155
|
|
|
|
225,125
|
|
Financial Services
|
|
|
35,720
|
|
|
|
38,156
|
|
Corporate and unallocated (c)
|
|
|
680,047
|
|
|
|
1,024,681
|
|
Discontinued operations
|
|
|
37,958
|
|
|
|
66,562
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
$
|
2,029,410
|
|
|
$
|
2,641,799
|
|
|
|
|
|
|
|
|
|
|
|
|
a.
|
Corporate and unallocated includes the amortization of
capitalized interest and numerous shared services functions that
benefit all segments, the costs of which are not allocated to
the operating segments reported above including information
technology, national sourcing and purchasing, treasury,
corporate finance, legal, branding and other national marketing
costs. Fiscal 2009 includes $8.3 million of
investigation-related costs and approximately $16 million
for obligations related to the government investigations (see
Note 12). Fiscal 2008 and 2007 include $31.8 million
and $10.8 million, respectively, of investigation-related
costs (an additional $6.4 million was incurred in fiscal
2007 related to Beazer Mortgage and is recorded in our
discontinued operations). Fiscal 2009, 2008 and 2007 include
$16.1 million, $52.5 million and $52.8 million of
non-cash goodwill impairment charges to write-off all of the
goodwill allocated to certain underperforming markets (see
Note 1). Fiscal 2008 and fiscal 2007 also include
reductions of $2.5 million and $23.8 million,
respectively, in the accrual and costs related to construction
defect claims for Trinity moisture intrusion (see Note 12).
|
|
b.
|
Segment assets as of September 30, 2008 include goodwill
assigned from prior acquisitions. See Note 1 for goodwill
by segment as of September 30, 2008.
|
|
c.
|
Primarily consists of cash and cash equivalents, consolidated
inventory not owned, income tax receivable, deferred taxes, and
capitalized interest and other corporate items that are not
allocated to the segments.
|
|
|
(14)
|
Discontinued
Operations
|
On February 1, 2008, we determined that we would
discontinue our mortgage origination services through Beazer
Mortgage Corporation (BMC). As of September 30, 2008, all
of BMCs operating activities had ceased. In February 2008,
we entered into a new marketing services arrangement with
Countrywide Financial Corporation (Countrywide), whereby the
Company would market Countrywide as the preferred mortgage
provider to its customers. In addition, during fiscal 2008, we
wrote off our entire $7.1 million investment in
Homebuilders Financial Network LLC (HFN). This write-off is
included in equity in loss of unconsolidated joint ventures in
the accompanying consolidated statements of operations. HFN was
a joint venture investment which was established to provide loan
processing services to mortgage originators. We assigned our
ownership interest to its joint venture partner. Our joint
venture interest in HFN was not owned by Beazer Mortgage
Corporation and, therefore, the associated write-off is not
included in the discontinued operations information presented
below.
In fiscal 2008, we completed a comprehensive review of each of
our markets in order to refine our overall investment strategy
and to optimize capital and resource allocations in an effort to
enhance our financial position and to increase shareholder
value. This review entailed an evaluation of both external
market factors and our position in each market and resulted in
the decision formalized and announced on February 1, 2008,
to discontinue homebuilding operations in Charlotte, NC,
Cincinnati/Dayton, OH, Columbia, SC, Columbus, OH and Lexington,
KY. During the third quarter of fiscal 2008, we announced our
decision to discontinue homebuilding operations in Colorado and
Fresno, CA. During fiscal 2009, the homebuilding operating
activities in the markets we exited and which were historically
reported in our Other Homebuilding segment have ceased.
We have classified the results of operations of BMC, previously
included in our Financial Services segment, and our exit markets
as discontinued operations in the accompanying consolidated
statements of operations for all periods presented in accordance
with SFAS No. 144. Discontinued operations were not
segregated in the consolidated balance sheets or statements of
cash flows. Therefore, amounts for certain captions in the
consolidated statements of
96
cash flows will not agree with the respective data in the
consolidated statements of operations. The results of operations
of the BMC and the exit markets classified as discontinued
operations in the consolidated statements of operations for the
fiscal years ended September 30, 2009, 2008, and 2007 were
as follows ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Total revenue
|
|
$
|
17,990
|
|
|
$
|
264,627
|
|
|
$
|
453,831
|
|
Home construction and land sales expenses
|
|
|
15,922
|
|
|
|
245,241
|
|
|
|
385,570
|
|
Inventory impairments and lot option abandonments
|
|
|
10,129
|
|
|
|
104,460
|
|
|
|
39,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross (loss) profit
|
|
|
(8,061
|
)
|
|
|
(85,074
|
)
|
|
|
28,436
|
|
Selling, general and administrative expenses
|
|
|
6,100
|
|
|
|
42,440
|
|
|
|
79,608
|
|
Depreciation and amortization
|
|
|
148
|
|
|
|
3,001
|
|
|
|
5,350
|
|
Goodwill impairment
|
|
|
-
|
|
|
|
4,365
|
|
|
|
1,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(14,309
|
)
|
|
|
(134,880
|
)
|
|
|
(57,652
|
)
|
Equity in loss of unconsolidated joint ventures
|
|
|
(972
|
)
|
|
|
(4,762
|
)
|
|
|
(77
|
)
|
Gain on extinguishment of debt
|
|
|
3,574
|
|
|
|
-
|
|
|
|
-
|
|
Other (expense) income, net
|
|
|
(206
|
)
|
|
|
1,608
|
|
|
|
(958
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations before income taxes
|
|
|
(11,913
|
)
|
|
|
(138,034
|
)
|
|
|
(58,687
|
)
|
(Benefit from) provision for income taxes
|
|
|
(545
|
)
|
|
|
13,108
|
|
|
|
(19,336
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of tax
|
|
$
|
(11,368
|
)
|
|
$
|
(151,142
|
)
|
|
$
|
(39,351
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The loss from discontinued operations for the fiscal years ended
September 30, 2009, 2008, and 2007 included approximately
$0.1 million, $3.5 million and $1.1 million,
respectively for severance and termination benefits. Fiscal 2008
loss includes $2.3 million of pretax income related to a
settlement with a third-party service provider.
Assets and liabilities from discontinued operations at
September 30, 2009 and 2008, which relate to BMC and the
exit markets, consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
-
|
|
|
$
|
198
|
|
Accounts receivable
|
|
|
979
|
|
|
|
7,127
|
|
Inventory
|
|
|
33,861
|
|
|
|
56,040
|
|
Other
|
|
|
3,118
|
|
|
|
3,197
|
|
|
|
|
|
|
|
|
|
|
Assets of discontinued operations
|
|
$
|
37,958
|
|
|
$
|
66,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Trade accounts payable and other liabilities
|
|
$
|
5,719
|
|
|
$
|
10,978
|
|
Accrued warranty expenses
|
|
|
6,486
|
|
|
|
7,746
|
|
Other secured notes payable
|
|
|
-
|
|
|
|
16,319
|
|
|
|
|
|
|
|
|
|
|
Liabilities of discontinued operations
|
|
$
|
12,205
|
|
|
$
|
35,043
|
|
|
|
|
|
|
|
|
|
|
|
|
(15)
|
Supplemental
Guarantor Information
|
As discussed in Note 7, our obligations to pay principal,
premium, if any, and interest under certain debt are guaranteed
on a joint and several basis by substantially all of our
subsidiaries. Certain of our title, warranty and immaterial
subsidiaries do not guarantee our Senior Notes or our Secured
Revolving Credit Facility. The guarantees are full and
unconditional and the guarantor subsidiaries are 100% owned by
Beazer Homes USA, Inc. We have determined that separate, full
financial statements of the guarantors would not be material to
investors and, accordingly, supplemental financial information
for the guarantors is presented.
97
Beazer
Homes USA, Inc.
Consolidating
Balance Sheet Information
September 30,
2009
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
Beazer Homes
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Consolidating
|
|
|
Beazer Homes
|
|
|
|
|
USA, Inc.
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Adjustments
|
|
|
USA, Inc.
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
495,692
|
|
|
$
|
11,482
|
|
|
$
|
2,915
|
|
|
$
|
(2,750
|
)
|
|
$
|
507,339
|
|
Restricted cash
|
|
|
|
48,326
|
|
|
|
1,135
|
|
|
|
-
|
|
|
|
-
|
|
|
|
49,461
|
|
Accounts receivable (net of allowance of $7,545)
|
|
|
|
-
|
|
|
|
28,377
|
|
|
|
28
|
|
|
|
-
|
|
|
|
28,405
|
|
Income tax receivable
|
|
|
|
9,922
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,922
|
|
Owned inventory
|
|
|
|
-
|
|
|
|
1,265,441
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,265,441
|
|
Consolidated inventory not owned
|
|
|
|
-
|
|
|
|
53,015
|
|
|
|
-
|
|
|
|
-
|
|
|
|
53,015
|
|
Investments in unconsolidated joint ventures
|
|
|
|
3,093
|
|
|
|
27,031
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,124
|
|
Deferred tax assets
|
|
|
|
7,520
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,520
|
|
Property, plant and equipment, net
|
|
|
|
-
|
|
|
|
25,939
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25,939
|
|
Investments in subsidiaries
|
|
|
|
210,730
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(210,730
|
)
|
|
|
-
|
|
Intercompany
|
|
|
|
977,956
|
|
|
|
(984,511
|
)
|
|
|
3,805
|
|
|
|
2,750
|
|
|
|
-
|
|
Other assets
|
|
|
|
26,750
|
|
|
|
22,419
|
|
|
|
3,075
|
|
|
|
-
|
|
|
|
52,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
$
|
1,779,989
|
|
|
$
|
450,328
|
|
|
$
|
9,823
|
|
|
$
|
(210,730
|
)
|
|
$
|
2,029,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
|
$
|
-
|
|
|
$
|
70,285
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
70,285
|
|
Other liabilities
|
|
|
|
86,717
|
|
|
|
134,655
|
|
|
|
5,943
|
|
|
|
-
|
|
|
|
227,315
|
|
Intercompany
|
|
|
|
361
|
|
|
|
-
|
|
|
|
(361
|
)
|
|
|
-
|
|
|
|
-
|
|
Obligations related to consolidated inventory not owned
|
|
|
|
-
|
|
|
|
26,356
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26,356
|
|
Senior notes (net of discounts of $27,257)
|
|
|
|
1,362,902
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,362,902
|
|
Junior subordinated notes
|
|
|
|
103,093
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
103,093
|
|
Other secured notes payable
|
|
|
|
-
|
|
|
|
12,543
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,543
|
|
Model home financing obligations
|
|
|
|
30,361
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
1,583,434
|
|
|
|
243,839
|
|
|
|
5,582
|
|
|
|
-
|
|
|
|
1,832,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
|
196,555
|
|
|
|
206,489
|
|
|
|
4,241
|
|
|
|
(210,730
|
)
|
|
|
196,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
|
$
|
1,779,989
|
|
|
$
|
450,328
|
|
|
$
|
9,823
|
|
|
$
|
(210,730
|
)
|
|
$
|
2,029,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98
Beazer
Homes USA, Inc.
Consolidating
Balance Sheet Information
September 30,
2008
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
Beazer
|
|
|
|
|
|
|
|
|
|
|
|
Beazer
|
|
|
|
|
Homes
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Consolidating
|
|
|
Homes
|
|
|
|
|
USA, Inc.
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Adjustments
|
|
|
USA, Inc.
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
575,856
|
|
|
$
|
14,806
|
|
|
$
|
5
|
|
|
$
|
(6,333
|
)
|
|
$
|
584,334
|
|
Restricted cash
|
|
|
|
-
|
|
|
|
297
|
|
|
|
-
|
|
|
|
-
|
|
|
|
297
|
|
Accounts receivable (net of allowance of $8,915)
|
|
|
|
-
|
|
|
|
46,504
|
|
|
|
51
|
|
|
|
-
|
|
|
|
46,555
|
|
Income tax receivable
|
|
|
|
173,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
173,500
|
|
Owned inventory
|
|
|
|
-
|
|
|
|
1,545,006
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,545,006
|
|
Consolidated inventory not owned
|
|
|
|
-
|
|
|
|
106,655
|
|
|
|
-
|
|
|
|
-
|
|
|
|
106,655
|
|
Investments in unconsolidated joint ventures
|
|
|
|
3,093
|
|
|
|
29,972
|
|
|
|
-
|
|
|
|
-
|
|
|
|
33,065
|
|
Deferred tax assets
|
|
|
|
20,216
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,216
|
|
Property, plant and equipment, net
|
|
|
|
-
|
|
|
|
39,822
|
|
|
|
-
|
|
|
|
-
|
|
|
|
39,822
|
|
Goodwill
|
|
|
|
-
|
|
|
|
16,143
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,143
|
|
Investments in subsidiaries
|
|
|
|
393,783
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(393,783
|
)
|
|
|
-
|
|
Intercompany
|
|
|
|
979,646
|
|
|
|
(989,138
|
)
|
|
|
3,159
|
|
|
|
6,333
|
|
|
|
-
|
|
Other assets
|
|
|
|
35,701
|
|
|
|
33,518
|
|
|
|
6,987
|
|
|
|
-
|
|
|
|
76,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
$
|
2,181,795
|
|
|
$
|
843,585
|
|
|
$
|
10,202
|
|
|
$
|
(393,783
|
)
|
|
$
|
2,641,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
|
$
|
-
|
|
|
$
|
90,371
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
90,371
|
|
Other liabilities
|
|
|
|
108,975
|
|
|
|
243,010
|
|
|
|
6,607
|
|
|
|
-
|
|
|
|
358,592
|
|
Intercompany
|
|
|
|
1,210
|
|
|
|
-
|
|
|
|
(1,210
|
)
|
|
|
-
|
|
|
|
-
|
|
Obligations related to consolidated inventory not owned
|
|
|
|
-
|
|
|
|
70,608
|
|
|
|
-
|
|
|
|
-
|
|
|
|
70,608
|
|
Senior notes (net of discounts of $2,565)
|
|
|
|
1,522,435
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,522,435
|
|
Junior subordinated notes
|
|
|
|
103,093
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
103,093
|
|
Other secured notes payable
|
|
|
|
-
|
|
|
|
50,618
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,618
|
|
Model home financing obligations
|
|
|
|
71,231
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
71,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
1,806,944
|
|
|
|
454,607
|
|
|
|
5,397
|
|
|
|
-
|
|
|
|
2,266,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
|
374,851
|
|
|
|
388,978
|
|
|
|
4,805
|
|
|
|
(393,783
|
)
|
|
|
374,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
|
$
|
2,181,795
|
|
|
$
|
843,585
|
|
|
$
|
10,202
|
|
|
$
|
(393,783
|
)
|
|
$
|
2,641,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99
Beazer
Homes USA, Inc.
Consolidating
Statement of Operations Information
Fiscal
Year Ended September 30, 2009
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
Beazer Homes
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Consolidating
|
|
|
Beazer Homes
|
|
|
|
|
USA, Inc.
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Adjustments
|
|
|
USA, Inc.
|
|
Total revenue
|
|
|
$
|
-
|
|
|
$
|
1,004,608
|
|
|
$
|
604
|
|
|
$
|
-
|
|
|
$
|
1,005,212
|
|
Home construction and land sales expenses
|
|
|
|
54,714
|
|
|
|
832,693
|
|
|
|
-
|
|
|
|
-
|
|
|
|
887,407
|
|
Inventory impairments and option contract abandonments
|
|
|
|
3,376
|
|
|
|
93,622
|
|
|
|
-
|
|
|
|
-
|
|
|
|
96,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross (loss) profit
|
|
|
|
(58,090
|
)
|
|
|
78,293
|
|
|
|
604
|
|
|
|
-
|
|
|
|
20,807
|
|
Selling, general and administrative expenses
|
|
|
|
-
|
|
|
|
228,124
|
|
|
|
(45
|
)
|
|
|
-
|
|
|
|
228,079
|
|
Depreciation and amortization
|
|
|
|
-
|
|
|
|
18,736
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,736
|
|
Goodwill impairment
|
|
|
|
-
|
|
|
|
16,143
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
|
(58,090
|
)
|
|
|
(184,710
|
)
|
|
|
649
|
|
|
|
-
|
|
|
|
(242,151
|
)
|
Equity in loss of unconsolidated joint ventures
|
|
|
|
-
|
|
|
|
(13,303
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,303
|
)
|
Gain on extinguishment of debt
|
|
|
|
130,229
|
|
|
|
14,274
|
|
|
|
-
|
|
|
|
-
|
|
|
|
144,503
|
|
Other (expense) income, net
|
|
|
|
(83,030
|
)
|
|
|
7,684
|
|
|
|
(249
|
)
|
|
|
-
|
|
|
|
(75,595
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
|
(10,891
|
)
|
|
|
(176,055
|
)
|
|
|
400
|
|
|
|
-
|
|
|
|
(186,546
|
)
|
(Benefit from) provision for income taxes
|
|
|
|
(3,761
|
)
|
|
|
(4,934
|
)
|
|
|
164
|
|
|
|
-
|
|
|
|
(8,531
|
)
|
Equity in loss of subsidiaries
|
|
|
|
(170,885
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
170,885
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income from continuing operations
|
|
|
|
(178,015
|
)
|
|
|
(171,121
|
)
|
|
|
236
|
|
|
|
170,885
|
|
|
|
(178,015
|
)
|
Net loss from discontinued operations
|
|
|
|
-
|
|
|
|
(11,368
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(11,368
|
)
|
Equity in loss of subsidiaries
|
|
|
|
(11,368
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
11,368
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
$
|
(189,383
|
)
|
|
$
|
(182,489
|
)
|
|
$
|
236
|
|
|
$
|
182,253
|
|
|
$
|
(189,383
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beazer
Homes USA, Inc.
Consolidating
Statement of Operations Information
Fiscal
Year Ended September 30, 2008
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
Beazer Homes
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Consolidating
|
|
|
Beazer Homes
|
|
|
|
|
USA, Inc.
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Adjustments
|
|
|
USA, Inc.
|
|
Total revenue
|
|
|
$
|
-
|
|
|
$
|
1,812,859
|
|
|
$
|
654
|
|
|
$
|
-
|
|
|
$
|
1,813,513
|
|
Home construction and land sales expenses
|
|
|
|
112,262
|
|
|
|
1,529,008
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,641,270
|
|
Inventory impairments and option contract abandonments
|
|
|
|
13,795
|
|
|
|
392,373
|
|
|
|
-
|
|
|
|
-
|
|
|
|
406,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross (loss) profit
|
|
|
|
(126,057
|
)
|
|
|
(108,522
|
)
|
|
|
654
|
|
|
|
-
|
|
|
|
(233,925
|
)
|
Selling, general and administrative expenses
|
|
|
|
-
|
|
|
|
309,055
|
|
|
|
265
|
|
|
|
-
|
|
|
|
309,320
|
|
Depreciation and amortization
|
|
|
|
-
|
|
|
|
24,708
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24,708
|
|
Goodwill impairment
|
|
|
|
-
|
|
|
|
48,105
|
|
|
|
-
|
|
|
|
-
|
|
|
|
48,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
|
(126,057
|
)
|
|
|
(490,390
|
)
|
|
|
389
|
|
|
|
-
|
|
|
|
(616,058
|
)
|
Equity in loss of unconsolidated joint ventures
|
|
|
|
-
|
|
|
|
(76,552
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(76,552
|
)
|
Other (expense) income, net
|
|
|
|
(55,185
|
)
|
|
|
18,441
|
|
|
|
239
|
|
|
|
-
|
|
|
|
(36,505
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
|
(181,242
|
)
|
|
|
(548,501
|
)
|
|
|
628
|
|
|
|
-
|
|
|
|
(729,115
|
)
|
(Benefit from) provision for income taxes
|
|
|
|
(67,567
|
)
|
|
|
139,002
|
|
|
|
220
|
|
|
|
-
|
|
|
|
71,655
|
|
Equity in loss of subsidiaries
|
|
|
|
(687,095
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
687,095
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income from continuing operations
|
|
|
|
(800,770
|
)
|
|
|
(687,503
|
)
|
|
|
408
|
|
|
|
687,095
|
|
|
|
(800,770
|
)
|
Net loss from discontinued operations
|
|
|
|
-
|
|
|
|
(151,142
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(151,142
|
)
|
Equity in loss of subsidiaries
|
|
|
|
(151,142
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
151,142
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
$
|
(951,912
|
)
|
|
$
|
(838,645
|
)
|
|
$
|
408
|
|
|
$
|
838,237
|
|
|
$
|
(951,912
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
Beazer
Homes USA, Inc.
Consolidating
Statement of Operations Information
Fiscal
Year Ended September 30, 2007
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
Beazer Homes
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Consolidating
|
|
|
Beazer Homes
|
|
|
|
|
USA, Inc.
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Adjustments
|
|
|
USA, Inc.
|
|
Total revenue
|
|
|
$
|
-
|
|
|
$
|
3,035,063
|
|
|
$
|
1,925
|
|
|
$
|
-
|
|
|
$
|
3,036,988
|
|
Home construction and land sales expenses
|
|
|
|
148,444
|
|
|
|
2,446,560
|
|
|
|
-
|
|
|
|
(20,914
|
)
|
|
|
2,574,090
|
|
Inventory impairments and option contract abandonments
|
|
|
|
-
|
|
|
|
572,039
|
|
|
|
-
|
|
|
|
-
|
|
|
|
572,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross (loss) profit
|
|
|
|
(148,444
|
)
|
|
|
16,464
|
|
|
|
1,925
|
|
|
|
20,914
|
|
|
|
(109,141
|
)
|
Selling, general and administrative expenses
|
|
|
|
-
|
|
|
|
358,224
|
|
|
|
1,015
|
|
|
|
-
|
|
|
|
359,239
|
|
Depreciation and amortization
|
|
|
|
-
|
|
|
|
28,244
|
|
|
|
-
|
|
|
|
-
|
|
|
|
28,244
|
|
Goodwill impairment
|
|
|
|
-
|
|
|
|
51,625
|
|
|
|
-
|
|
|
|
-
|
|
|
|
51,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
|
(148,444
|
)
|
|
|
(421,629
|
)
|
|
|
910
|
|
|
|
20,914
|
|
|
|
(548,249
|
)
|
Equity in (loss) of unconsolidated joint ventures
|
|
|
|
-
|
|
|
|
(35,077
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(35,077
|
)
|
Loss on extinguishment of debt
|
|
|
|
(413
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(413
|
)
|
Other income, net
|
|
|
|
-
|
|
|
|
8,967
|
|
|
|
179
|
|
|
|
-
|
|
|
|
9,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
|
(148,857
|
)
|
|
|
(447,739
|
)
|
|
|
1,089
|
|
|
|
20,914
|
|
|
|
(574,593
|
)
|
(Benefit from) provision for income taxes
|
|
|
|
(56,820
|
)
|
|
|
(154,473
|
)
|
|
|
417
|
|
|
|
8,005
|
|
|
|
(202,871
|
)
|
Equity in loss of subsidiaries
|
|
|
|
(279,685
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
279,685
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income from continuing operations
|
|
|
|
(371,722
|
)
|
|
|
(293,266
|
)
|
|
|
672
|
|
|
|
292,594
|
|
|
|
(371,722
|
)
|
Net loss from discontinued operations
|
|
|
|
-
|
|
|
|
(39,351
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(39,351
|
)
|
Equity in loss of subsidiaries
|
|
|
|
(39,351
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
39,351
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
$
|
(411,073
|
)
|
|
$
|
(332,617
|
)
|
|
$
|
672
|
|
|
$
|
331,945
|
|
|
$
|
(411,073
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beazer
Homes USA, Inc.
Consolidating
Statement of Cash Flow Information
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
Beazer Homes
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Consolidating
|
|
|
Beazer Homes
|
|
Fiscal Year Ended September 30, 2009
|
|
|
USA, Inc.
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Adjustments
|
|
|
USA, Inc.
|
|
Net cash provided by operating activities
|
|
|
$
|
29,731
|
|
|
$
|
60,587
|
|
|
$
|
3,507
|
|
|
$
|
-
|
|
|
$
|
93,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
-
|
|
|
|
(7,034
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,034
|
)
|
Investments in unconsolidated joint ventures
|
|
|
|
-
|
|
|
|
(25,537
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(25,537
|
)
|
Changes in restricted cash
|
|
|
|
(48,326
|
)
|
|
|
(838
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(49,164
|
)
|
Distributions from unconsolidated joint ventures
|
|
|
|
-
|
|
|
|
2,054
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
|
(48,326
|
)
|
|
|
(31,355
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(79,681
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of other secured notes payable
|
|
|
|
-
|
|
|
|
(21,246
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(21,246
|
)
|
Proceeds from issuance of senior secured notes
|
|
|
|
223,750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
223,750
|
|
Repurchase of senior notes
|
|
|
|
(243,283
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(243,283
|
)
|
Repayment of model home financing obligations
|
|
|
|
(40,870
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(40,870
|
)
|
Debt issuance costs
|
|
|
|
(7,195
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,195
|
)
|
Common stock redeemed
|
|
|
|
(22
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(22
|
)
|
Tax benefit from stock transactions
|
|
|
|
(2,273
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,273
|
)
|
Advances to/from subsidiaries
|
|
|
|
8,324
|
|
|
|
(11,310
|
)
|
|
|
(597
|
)
|
|
|
3,583
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
|
(61,569
|
)
|
|
|
(32,556
|
)
|
|
|
(597
|
)
|
|
|
3,583
|
|
|
|
(91,139
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease)/increase in cash and cash equivalents
|
|
|
|
(80,164
|
)
|
|
|
(3,324
|
)
|
|
|
2,910
|
|
|
|
3,583
|
|
|
|
(76,995
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
|
575,856
|
|
|
|
14,806
|
|
|
|
5
|
|
|
|
(6,333
|
)
|
|
|
584,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
|
$
|
495,692
|
|
|
$
|
11,482
|
|
|
$
|
2,915
|
|
|
$
|
(2,750
|
)
|
|
$
|
507,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101
Beazer
Homes USA, Inc.
Consolidating
Statement of Cash Flow Information
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
Beazer Homes
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Consolidating
|
|
|
Beazer Homes
|
|
Fiscal Year Ended September 30, 2008
|
|
|
USA, Inc.
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Adjustments
|
|
|
USA, Inc.
|
|
Net cash (used in)/provided by operating activities
|
|
|
$
|
51,886
|
|
|
$
|
264,388
|
|
|
$
|
(707
|
)
|
|
$
|
-
|
|
|
$
|
315,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
-
|
|
|
|
(10,568
|
)
|
|
|
2
|
|
|
|
-
|
|
|
|
(10,566
|
)
|
Investments in unconsolidated joint ventures
|
|
|
|
-
|
|
|
|
(13,758
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,758
|
)
|
Changes in restricted cash
|
|
|
|
-
|
|
|
|
4,874
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,874
|
|
Distributions from unconsolidated joint ventures
|
|
|
|
-
|
|
|
|
1,050
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
|
-
|
|
|
|
(18,402
|
)
|
|
|
2
|
|
|
|
-
|
|
|
|
(18,400
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of other secured notes payable
|
|
|
|
-
|
|
|
|
(100,740
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(100,740
|
)
|
Repayment of model home financing obligations
|
|
|
|
(42,885
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(42,885
|
)
|
Debt issuance costs
|
|
|
|
(22,335
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(22,335
|
)
|
Common stock redeemed
|
|
|
|
(52
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(52
|
)
|
Tax benefit from stock transactions
|
|
|
|
(1,158
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,158
|
)
|
Advances to/from subsidiaries
|
|
|
|
143,104
|
|
|
|
(140,140
|
)
|
|
|
(849
|
)
|
|
|
(2,115
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
|
76,674
|
|
|
|
(240,880
|
)
|
|
|
(849
|
)
|
|
|
(2,115
|
)
|
|
|
(167,170
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease)/increase in cash and cash equivalents
|
|
|
|
128,560
|
|
|
|
5,106
|
|
|
|
(1,554
|
)
|
|
|
(2,115
|
)
|
|
|
129,997
|
|
Cash and cash equivalents at beginning of period
|
|
|
|
447,296
|
|
|
|
9,700
|
|
|
|
1,559
|
|
|
|
(4,218
|
)
|
|
|
454,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
|
$
|
575,856
|
|
|
$
|
14,806
|
|
|
$
|
5
|
|
|
$
|
(6,333
|
)
|
|
$
|
584,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the fiscal year ended September 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
$
|
(329,882
|
)
|
|
$
|
838,486
|
|
|
$
|
767
|
|
|
$
|
-
|
|
|
$
|
509,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
-
|
|
|
|
(29,474
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(29,474
|
)
|
Investments in unconsolidated joint ventures
|
|
|
|
-
|
|
|
|
(24,505
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(24,505
|
)
|
Changes in restricted cash
|
|
|
|
-
|
|
|
|
(298
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(298
|
)
|
Distributions from and proceeds from sale of unconsolidated
joint ventures
|
|
|
|
-
|
|
|
|
2,229
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
|
-
|
|
|
|
(52,048
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(52,048
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under credit facilities and warehouse line
|
|
|
|
-
|
|
|
|
169,888
|
|
|
|
-
|
|
|
|
-
|
|
|
|
169,888
|
|
Repayment of credit facilities and warehouse line
|
|
|
|
-
|
|
|
|
(264,769
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(264,769
|
)
|
Repayment of other secured notes payable
|
|
|
|
-
|
|
|
|
(31,139
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(31,139
|
)
|
Repurchase of senior notes
|
|
|
|
(30,413
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(30,413
|
)
|
Borrowings under model home financing obligations
|
|
|
|
5,919
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,919
|
|
Repayment of model home financing obligations
|
|
|
|
(8,882
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,882
|
)
|
Debt issuance costs
|
|
|
|
(1,935
|
)
|
|
|
(324
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,259
|
)
|
Proceeds from stock option exercises
|
|
|
|
4,422
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,422
|
|
Common stock redeemed
|
|
|
|
(348
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(348
|
)
|
Tax benefit from stock transactions
|
|
|
|
2,635
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,635
|
|
Dividends paid
|
|
|
|
(15,610
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(15,610
|
)
|
Advances to/from subsidiaries
|
|
|
|
566,475
|
|
|
|
(661,058
|
)
|
|
|
(37
|
)
|
|
|
94,620
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
|
522,263
|
|
|
|
(787,402
|
)
|
|
|
(37
|
)
|
|
|
94,620
|
|
|
|
(170,556
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) in cash and cash equivalents
|
|
|
|
192,381
|
|
|
|
(964
|
)
|
|
|
730
|
|
|
|
94,620
|
|
|
|
286,767
|
|
Cash and cash equivalents at beginning of period
|
|
|
|
254,915
|
|
|
|
10,664
|
|
|
|
829
|
|
|
|
(98,838
|
)
|
|
|
167,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
|
$
|
447,296
|
|
|
$
|
9,700
|
|
|
$
|
1,559
|
|
|
$
|
(4,218
|
)
|
|
$
|
454,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102
REPORT OF
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Beazer Homes USA, Inc.
Atlanta, Georgia
We have audited the accompanying consolidated balance sheets of
Beazer Homes USA, Inc. and subsidiaries (the Company) as of
September 30, 2009 and 2008, and the related consolidated
statements of operations, stockholders equity, and cash
flows for each of the three years in the period ended
September 30, 2009. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the
companies at September 30, 2009 and 2008, and the results
of their operations and their cash flows for the years then
ended in conformity with accounting principles generally
accepted in the United States of America.
As described in Note 1 to the consolidated financial
statements, the Company adopted new accounting guidance on the
accounting for uncertainty in income taxes, on October 1,
2007.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
Companys internal control over financial reporting as of
September 30, 2009, based on the criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated November 10, 2009 expressed
an unqualified opinion on the Companys internal control
over financial reporting.
/s/ Deloitte & Touche LLP
Atlanta, Georgia
November 10, 2009
103
REPORT OF
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM ON INTERNAL CONTROL
OVER FINANCIAL REPORTING
To the Board of Directors and Stockholders of
Beazer Homes USA, Inc.:
Atlanta, Georgia
We have audited the internal control over financial reporting of
Beazer Homes USA, Inc. and subsidiaries (the Company) as of
September 30, 2009, based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission. The Companys management is responsible for
maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying
Managements Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on the
Companys internal control over financial reporting based
on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed by, or under the supervision of, the
companys principal executive and principal financial
officers, or persons performing similar functions, and effected
by the companys board of directors, management, and other
personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting
to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as
of September 30, 2009, based on the criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Beazer Homes USA, Inc. and
subsidiaries as of September 30, 2009 and 2008, and the
related consolidated statement of operations, stockholders
equity, and cash flows for each of the three years in the period
ended September 30, 2009 and our report dated
November 10, 2009 expressed an unqualified opinion on those
financial statements and included an explanatory paragraph
regarding the Companys adoption of new accounting guidance
on the accounting for uncertainty in income taxes, on
October 1, 2007.
/s/ Deloitte & Touche LLP
Atlanta, Georgia
November 10, 2009
104
Quarterly
Financial Data
Summarized quarterly financial information (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
December 31
|
|
March 31
|
|
June 30
|
|
September 30
|
|
Fiscal 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
218,169
|
|
|
$
|
186,624
|
|
|
$
|
224,071
|
|
|
$
|
376,348
|
|
Gross profit (loss) (a)
|
|
|
12,261
|
|
|
|
(22,186
|
)
|
|
|
5,821
|
|
|
|
24,911
|
|
Goodwill impairment (b)
|
|
|
16,143
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Operating loss
|
|
|
(61,460
|
)
|
|
|
(92,766
|
)
|
|
|
(48,762
|
)
|
|
|
(39,163
|
)
|
Net (loss) income from continuing operations (c)
|
|
|
(79,159
|
)
|
|
|
(108,739
|
)
|
|
|
(25,417
|
)
|
|
|
35,300
|
|
Basic EPS from continuing operations
|
|
$
|
(2.05
|
)
|
|
$
|
(2.81
|
)
|
|
$
|
(0.65
|
)
|
|
$
|
0.91
|
|
Diluted EPS from continuing operations
|
|
$
|
(2.05
|
)
|
|
$
|
(2.81
|
)
|
|
$
|
(0.65
|
)
|
|
$
|
0.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
435,521
|
|
|
$
|
351,647
|
|
|
$
|
376,550
|
|
|
$
|
649,795
|
|
Gross loss (a)
|
|
|
(69,303
|
)
|
|
|
(125,351
|
)
|
|
|
(34,731
|
)
|
|
|
(4,540
|
)
|
Goodwill impairment (b)
|
|
|
-
|
|
|
|
48,105
|
|
|
|
-
|
|
|
|
-
|
|
Operating loss
|
|
|
(153,697
|
)
|
|
|
(244,365
|
)
|
|
|
(115,621
|
)
|
|
|
(102,375
|
)
|
Net loss from continuing operations
|
|
|
(88,150
|
)
|
|
|
(177,402
|
)
|
|
|
(81,383
|
)
|
|
|
(453,835
|
)(c)
|
Basic and diluted EPS from continuing operations
|
|
$
|
(2.29
|
)
|
|
$
|
(4.60
|
)
|
|
$
|
(2.11
|
)
|
|
$
|
(11.77
|
)
|
|
|
|
(a) |
|
Gross profit (loss) in fiscal 2009 and 2008 includes inventory
impairment and option contract abandonments as follows: |
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Fiscal 2009
|
|
Fiscal 2008
|
|
1st Quarter
|
|
$
|
12,390
|
|
|
$
|
124,635
|
|
2nd Quarter
|
|
|
42,929
|
|
|
|
154,688
|
|
3rd Quarter
|
|
|
11,792
|
|
|
|
75,943
|
|
4th Quarter
|
|
|
29,887
|
|
|
|
50,902
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
96,998
|
|
|
$
|
406,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) |
|
In the first quarter of fiscal 2009, the Company recognized
non-cash goodwill impairment charges to write off all of its
remaining goodwill. In fiscal 2008, the Company recognized
non-cash goodwill impairment charges to write off all of the
goodwill allocated to our Arizona, New Jersey, Southern
California and Virginia reporting units. |
|
(c) |
|
Net loss from continuing operations for the third and fourth
quarters of fiscal 2009 include $55.2 million and
$89.3 million, respectively, of gain on extinguishment of
debt related to the repurchase of certain of our Senior Notes
and Other Secured Notes Payable at a discount. Net loss from
continuing operations for the fourth quarter of fiscal 2008
includes the impact of our $398.6 million valuation
allowance charge for substantially all of our deferred tax
assets. |
|
|
Item 9.
|
Changes
in and Disagreements With Accountants on Accounting and
Financial Disclosure
|
None.
|
|
Item 9A.
|
Controls
and Procedures
|
Disclosure
Controls and Procedures
Management, under the supervision and with the participation of
its Chief Executive Officer (CEO) and Chief Financial Officer
(CFO), evaluated the effectiveness of the Companys
disclosure controls and procedures (as
105
defined in
Rules 13a-15(e)
and
15d-15(e)
promulgated under the Act), as of the end of period covered by
this report. Management concluded that, as of September 30,
2009, the Companys disclosure controls and procedures were
effective.
Attached as exhibits to this Annual Report on
Form 10-K
are certifications of our CEO and CFO, which are required by
Rule 13a-14
of the Act. This Disclosure Controls and Procedures section
includes information concerning managements evaluation of
disclosure controls and procedures referred to in those
certifications and, as such, should be read in conjunction with
the certifications of the CEO and CFO.
Managements Report on Internal Control over
Financial Reporting
Beazer Homes USA, Inc.s management is responsible for
establishing and maintaining adequate internal control over
financial reporting. Pursuant to the rules and regulations of
the Securities and Exchange Commission, internal control over
financial reporting is a process designed by, or under the
supervision of, the Companys principal executive and
principal financial officer and effected by Beazer Homes USA,
Inc.s board of directors, management and other personnel,
to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles and includes those policies and procedures
that:
|
|
|
|
|
Pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company;
|
|
|
Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with GAAP, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of
management and directors of the Company; and
|
|
|
Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the
Companys assets that could have a material effect on the
financial statements.
|
Management performed an assessment of the effectiveness of the
Companys internal control over financial reporting as of
September 30, 2009, utilizing the criteria described in the
Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). The objective of this assessment was
to determine whether the Companys internal control over
financial reporting was effective as of September 30, 2009.
Based on this assessment, management has determined that the
Companys internal control over financial reporting was
effective as of September 30, 2009. The effectiveness of
our internal control over financial reporting as of
September 30, 2009 has been audited by Deloitte &
Touche LLP, our independent registered public accounting firm,
as stated in their report, which is included in
Part II Item 8 Financial
Statements and Supplementary Data.
Changes
in Internal Control over Financial Reporting
There have been no changes in the Companys internal
control over financial reporting during the fiscal year ended
September 30, 2009 that have materially affected, or are
reasonably likely to materially affect, our internal control
over financial reporting.
Inherent
Limitations over Internal Controls
Our system of controls is designed to provide reasonable, not
absolute, assurance regarding the reliability and integrity of
accounting and financial reporting. Management does not expect
that our disclosure controls and procedures or our internal
control over financial reporting will prevent or detect all
errors and all fraud. A control system, no matter how well
designed and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system
will be met. These inherent limitations include the following:
|
|
|
|
|
Judgments in decision-making can be faulty, and control and
process breakdowns can occur because of simple errors or
mistakes.
|
|
|
Controls can be circumvented by individuals, acting alone or in
collusion with each other, or by management override.
|
|
|
The design of any system of controls is based in part on certain
assumptions about the likelihood of future events, and there can
be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions.
|
106
|
|
|
|
|
Over time, controls may become inadequate because of changes in
conditions or deterioration in the degree of compliance with
associated policies or procedures.
|
|
|
The design of a control system must reflect the fact that
resources are constrained, and the benefits of controls must be
considered relative to their costs.
|
Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, have been
detected.
|
|
Item 9B.
|
Other
Information
|
None.
PART III
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
Except as set forth below, the information required by this item
is incorporated by reference to our proxy statement for our 2010
annual meeting of stockholders, which is expected to be filed on
or before December 20, 2009.
Executive
Officer Business Experience
IAN J. MCCARTHY. Mr. McCarthy, 56, is the President
and Chief Executive Officer of Beazer Homes and has served as a
director of Beazer Homes since the IPO. Mr. McCarthy has
served as President of predecessors of Beazer Homes since
January 1991 and was responsible for all United States
residential homebuilding operations in that capacity. During the
period May 1981 to January 1991, Mr. McCarthy was employed
in Hong Kong and Thailand, becoming a director of Beazer Far
East and from January 1980 to May 1981 was employed by Kier,
Ltd., a company engaged in the United Kingdom construction
industry which became an indirect, wholly owned subsidiary of
Beazer PLC. Mr. McCarthy is a Chartered Civil Engineer with
a Bachelor of Science degree from The City University, London.
Mr. McCarthy currently serves as a member of the Board of
Directors of HomeAid America and of Builder Homesite, Inc. He
was inducted into the California Building Industry Hall of Fame
in 2004, the first non-California resident to receive this honor.
ALLAN P. MERRILL. Mr. Merrill, 43, joined us in May
2007 as Executive Vice President and Chief Financial Officer.
Mr. Merrill was previously with Move, Inc. where he served
as Executive Vice President of Corporate Development and
Strategy beginning in October 2001. From April 2000 to October
2001, Mr. Merrill was president of Homebuilder.com, a
division of Move, Inc. Mr. Merrill joined Move, Inc.
following a
13-year
tenure with the investment banking firm UBS (and its predecessor
Dillon, Read & Co.), where he was a managing director
and served most recently as co-head of the Global Resources
Group, overseeing the construction and building materials,
chemicals, forest products, mining and energy industry groups.
Mr. Merrill is a member of the Policy Advisory Board of the
Joint Center for Housing Studies at Harvard University and the
Homebuilding Community Foundation. He is a graduate of the
University of Pennsylvania, Wharton School with a Bachelor of
Science in Economics.
KENNETH F. KHOURY. Mr. Khoury, 58, joined us in
January 2009 as Executive Vice President and General Counsel.
Mr. Khoury was previously Executive Vice President and
General Counsel of Delta Air Lines from September 2006 to
November 2008. Practicing law for over 30 years,
Mr. Khourys career has included both private practice
and extensive in-house counsel experience. Prior to Delta Air
Lines, Mr. Khoury was Senior Vice President and General
Counsel of Weyerhaeuser Corporation and spent 15 years with
Georgia-Pacific Corporation, where he served as Vice President
and Deputy General Counsel. He also spent six years at law firm
White & Case in New York. He received a Bachelor of
Arts degree from Rutgers College and a Juris Doctor from Fordham
University School of Law.
Code of
Ethics
Beazer Homes has adopted a Code of Business Conduct and Ethics
for its senior financial officers, which applies to its
principal financial officer and controller, other senior
financial officers and Chief Executive Officer. The full text of
the Code of Business Conduct and Ethics can be found on the
Companys website, www.beazer.com. If at any time there is
an amendment or waiver of any provision of our Code of Business
Conduct and Ethics that is required to be disclosed, information
regarding such amendment or waiver will be published on our
website.
107
|
|
Item 11.
|
Executive
Compensation
|
The information required by this item is incorporated by
reference to our proxy statement for our 2010 annual meeting of
stockholders, which is expected to be filed on or before
December 20, 2009.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The information relating to securities authorized for issuance
under equity compensation plans is set forth above in
Item 5 Market for Registrants Common
Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities. All of the other information required by this
item is incorporated by reference to our proxy statement for our
2010 annual meeting of stockholders, which is expected to be
filed on or before December 20, 2009.
|
|
Item 13.
|
Certain
Relationships and Related Transactions and Director
Independence
|
The information required by this item is incorporated by
reference to our proxy statement for our 2010 annual meeting of
stockholders, which is expected to be filed on or before
December 20, 2009.
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
The information required by this item is incorporated by
reference to our proxy statement for our 2010 annual meeting of
stockholders, which is expected to be filed on or before
December 20, 2009.
PART IV
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
The following documents are filed as part of this Annual Report
on
Form 10-K.
|
|
(a)
|
1.
Financial Statements
|
|
|
|
|
|
|
|
Page
|
|
|
|
herein
|
|
|
Consolidated Statements of Operations for the years ended
September 30, 2009, 2008 and 2007.
|
|
|
60
|
|
Consolidated Balance Sheets as of September 30, 2009 and
2008.
|
|
|
61
|
|
Consolidated Statements of Stockholders Equity for the
years ended September 30, 2009, 2008 and 2007.
|
|
|
62
|
|
Consolidated Statements of Cash Flows for the years ended
September 30, 2009, 2008 and 2007.
|
|
|
63
|
|
Notes to Consolidated Financial Statements.
|
|
|
64
|
|
|
|
2.
|
Financial
Statement Schedules
|
None required.
|
|
|
|
|
Exhibit
|
|
|
|
|
Number
|
|
|
|
Exhibit Description
|
|
|
3.1
|
|
--
|
|
Amended and Restated Certificate of Incorporation of the
Company incorporated herein by reference to Exhibit
3.1 of the Companys Form 10-K filed on December 2, 2008
(File No. 001-12822)
|
3.2
|
|
--
|
|
Third Amended and Restated Bylaws of the Company
incorporated herein by reference to Exhibit 3.1 of the
Companys Form 8-K filed on July 1, 2008 (File No.
001-12822)
|
4.1
|
|
--
|
|
Indenture dated as of May 21, 2001 among the Company and U.S.
Bank Trust National Association, as trustee, related to the
Companys 8 5/8% Senior Notes due
2011 incorporated herein by reference to
Exhibit 4.4 of the Companys Form 10-K for the year ended
September 30, 2001 (File No. 001-12822)
|
108
|
|
|
|
|
4.2
|
|
--
|
|
Supplemental Indenture (8 5/8% Notes) dated as of May 21,
2001 among the Company, its subsidiaries party thereto and U.S.
Bank Trust National Association, as
trustee incorporated herein by reference to
Exhibit 4.5 of the Companys Form 10-K for the year ended
September 30, 2001 (File No. 001-12822)
|
4.3
|
|
--
|
|
Form of 8 5/8% Senior Notes due
2011 incorporated herein by reference to
Exhibit 4.6 of the Companys Form 10-K for the year ended
September 30, 2001 (File No. 001-12822)
|
4.4
|
|
--
|
|
Specimen of Common Stock
Certificate incorporated herein by reference to
Exhibit 4.1 of the Companys Registration Statement on Form
S-1 initially filed on December 6, 1993
|
4.5
|
|
--
|
|
Indenture dated as of April 17, 2002 among Beazer, the
Guarantors party thereto and U.S. Bank Trust National
Association, as trustee, related to the Companys 8
3/8% Senior Notes due 2012 incorporated herein
by reference to Exhibit 4.11 of the Companys Registration
Statement on Form S-4 filed on July 16, 2002
|
4.6
|
|
--
|
|
First Supplemental Indenture dated as of April 17, 2002 among
Beazer, the Guarantors party thereto and U.S. Bank Trust
National Association, as trustee, related to the Companys
8 3/8% Senior Notes due
2012 incorporated herein by reference to
Exhibit 4.12 of the Companys Registration Statement on
Form S-4 filed on July 16, 2002
|
4.7
|
|
--
|
|
Form of 8 3/8% Senior Notes due
2012 incorporated herein by reference to
Exhibit 4.14 of the Companys Registration Statement on
Form S-4 filed on July 16, 2002
|
4.8
|
|
--
|
|
Second Supplemental Indenture dated as of November 13, 2003
among Beazer, the Guarantors party thereto and U.S. Bank Trust
National Association, as trustee, related to the Companys
6 1/2% Senior Notes due 2013 incorporated
herein by reference to Exhibit 4.11 of the Companys
Form 10-K for the year ended September 30, 2003 (File No.
001-12822)
|
4.9
|
|
--
|
|
Form of 6 1/2% Senior Notes due 2013
incorporated herein by reference to Exhibit 4.12 of the
Companys Form 10-K for the year ended September 30, 2003
(File No. 001-12822)
|
4.10
|
|
--
|
|
Indenture dated as of June 8, 2004 among Beazer, the Guarantors
party thereto and SunTrust Bank, as trustee, related to the 4
5/8% Convertible Senior Notes due
2024 incorporated herein by reference to
Exhibit 4.1 of the Companys Form 10-Q for the quarter
ended June 30, 2004 (File No. 001-12822)
|
4.11
|
|
--
|
|
Form of 4 5/8% Convertible Senior Notes due
2024 incorporated herein by reference to
Exhibit 4.2 of the Companys Form 10-Q for the quarter
ended June 30, 2004 (File No. 001-12822)
|
4.12
|
|
--
|
|
Form of 6 7/8% Senior Notes due
2015 incorporated herein by reference to
Exhibit 4.2 of the Companys Form 8-K filed on June 13, 2005
|
4.13
|
|
--
|
|
Form of Fifth Supplemental Indenture, dated as of June 8, 2005,
by and among Beazer, the Subsidiary Guarantors party thereto and
U.S. Bank National Association, as
trustee incorporated herein by reference to
Exhibit 4.1 of the Companys Form 8-K filed on June 13, 2005
|
4.14
|
|
--
|
|
Sixth Supplemental Indenture, dated as of January 9, 2006, to
the Trust Indenture dated as of May 21,
2001 incorporated herein by reference to
Exhibit 99.1 of the Companys
Form 8-K
filed on January 17, 2006 (File No. 001-12822)
|
4.15
|
|
--
|
|
Seventh Supplement Indenture, dated as of January 9, 2006, to
the Trust Indenture dated as of April 17,
2002 incorporated herein by reference to
Exhibit 99.2 of the Companys Form 8-K filed on
January 17, 2006 (File No. 001-12822)
|
4.16
|
|
--
|
|
Form of Senior Note due 2016 incorporated herein by
reference to Exhibit 4.2 of the Companys
Form 8-K
filed on June 8, 2006 (File
No. 001-12822)
|
4.17
|
|
--
|
|
Form of Eighth Supplemental Indenture, dated June 6, 2006,
by and among Beazer Homes USA, Inc., the guarantors named
therein and UBS Securities LLC, Citigroup Global Markets Inc.,
J.P. Morgan Securities, Inc., Wachovia Capital Markets,
LLC, Deutsche Bank Securities Inc., BNP Paribas Securities Corp.
and Greenwich Capital Markets incorporated herein by
reference to Exhibit 4.1 of the Companys
Form 8-K
filed on June 8, 2006 (File
No. 001-12822)
|
109
|
|
|
|
|
4.18
|
|
--
|
|
Form of Junior Subordinated indenture between Beazer Homes USA,
Inc., JPMorgan Chase Bank, National Association, dated
June 15, 2006 incorporated herein by reference
to Exhibit 4.1 of the Companys
Form 8-K
filed on June 21, 2006 (File
No. 001-12822)
|
4.19
|
|
--
|
|
Form of the Amended and Restated Trust Agreement among
Beazer Homes USA, Inc., JPMorgan Chase Bank, National
Association, Chase Bank USA, National Association and certain
individuals named therein as Administrative Trustees, dated
June 15, 2006 incorporated herein by reference
to Exhibit 4.2 of the Companys
Form 8-K
filed on June 21, 2006 (File
No. 001-12822)
|
4.20
|
|
--
|
|
Seventh Supplemental Indenture, dated October 26, 2007,
amending and supplementing the Indenture, dated May 21,
2001, among the Company, US Bank National Association, as
trustee, and the subsidiary guarantors party thereto
incorporated herein by reference to Exhibit 10.2 of the
Companys
Form 8-K
filed on October 30, 2007 (File
No. 001-12822)
|
4.21
|
|
--
|
|
Ninth Supplemental Indenture, dated October 26, 2007,
amending and supplementing the Indenture, dated April 17,
2002, among the Company, US Bank National Association, as
trustee, and the subsidiary guarantors party thereto
incorporated herein by reference to Exhibit 10.3 of the
Companys
Form 8-K
filed on October 30, 2007 (File
No. 001-12822)
|
4.22
|
|
--
|
|
Third Supplemental Indenture, dated October 26, 2007,
amending and supplementing the Indenture, dated June 8,
2004, among the Company, SunTrust Bank, as trustee, and the
subsidiary guarantors party thereto incorporated
herein by reference to Exhibit 10.4 of the Companys
Form 8-K
filed on October 30, 2007 (File
No. 001-12822)
|
4.23
|
|
--
|
|
Section 382 Rights Agreement, dated as of July 31,
2009, between Beazer Homes USA, Inc. and American Stock
Transfer & Trust Company, LLC, as Rights
Agent incorporated herein by reference to
Exhibit 10.1 of the Companys
Form 8-K
filed on August 3, 2009
(File No. 001-12822)
|
4.24
|
|
--
|
|
Form of Indenture, dated as of September 11, 2009, by and
among Beazer Homes USA, Inc., the subsidiary guarantors party
thereto, U.S. Bank National Association, as trustee, and
Wilmington Trust FSB, as notes collateral agent
incorporated herein by reference to Exhibit 4.1 of the
Companys
Form 8-K
filed on September 11, 2009 (File
No. 001-12822)
|
4.25
|
|
--
|
|
Form of Senior Secured Note due 2017 incorporated
herein by reference to Exhibit 4.2 of the Companys
Form 8-K
filed on September 11, 2009 (File
No. 001-12822)
|
4.26
|
|
--
|
|
Form of Registration Rights Agreement, dated September 11,
2009, by and among Beazer Homes USA, Inc., the guarantors party
thereto, Citigroup Global Markets Inc. and Moelis &
Company LLC incorporated herein by reference to
Exhibit 4.3 of the Companys
Form 8-K
filed on September 11, 2009 (File
No. 001-12822)
|
10.1*
|
|
--
|
|
Amended and Restated 1994 Stock Incentive Plan
incorporated herein by reference to Exhibit 10.1 of the
Companys
Form 10-K
for the year ended September 30, 2005 (File
No. 001-12822)
|
10.2*
|
|
--
|
|
Non-Employee Director Stock Option Plan incorporated
herein by reference to Exhibit 10.2 of the Companys
Form 10-K
for the year ended September 30, 2001
(File No. 001-12822)
|
10.3*
|
|
--
|
|
Amended and Restated 1999 Stock Incentive Plan
incorporated herein by reference to Exhibit 10.2 of the
Companys
Form 8-K
filed on August 8, 2008 (File
No. 001-12822)
|
10.4*
|
|
--
|
|
2005 Value Created Incentive Plan incorporated
herein by reference to Exhibit 10.4 of the Companys
Form 10-K
for the year ended September 30, 2004 (File
No. 001-12822)
|
10.5*
|
|
--
|
|
Second Amended and Restated Corporate Management Stock Purchase
Program incorporated herein by reference to
Exhibit 10.5 of the Companys
Form 10-K
for the year ended September 30, 2007 (File
No. 001-12822)
|
10.6*
|
|
--
|
|
Customer Survey Incentive Plan incorporated herein
by reference to Exhibit 10.6 of the Companys
Form 10-K
for the year ended September 30, 2004 (File
No. 001-12822)
|
10.7*
|
|
--
|
|
Director Stock Purchase Program incorporated herein
by reference to Exhibit 10.7 of the Companys
Form 10-K
for the year ended September 30, 2004 (File
No. 001-12822)
|
110
|
|
|
|
|
10.8*
|
|
--
|
|
Form of Stock Option and Restricted Stock Award
Agreement incorporated herein by reference to
Exhibit 10.8 of the Companys
Form 10-K
for the year ended September 30, 2004 (File
No. 001-12822)
|
10.9*
|
|
--
|
|
Form of Stock Option Award Agreement incorporated
herein by reference to Exhibit 10.9 of the Companys
Form 10-K
for the year ended September 30, 2004 (File
No. 001-12822)
|
10.10*
|
|
--
|
|
Amended and Restated Employment Agreement of Ian J. McCarthy
dated as of September 1, 2004 incorporated
herein by reference to Exhibit 10.01 of the Companys
Form 8-K
filed on September 1, 2004 (File
No. 001-12822)
|
10.11*
|
|
--
|
|
First Amendment to Amended and Restated Employment Agreement of
Ian J. McCarthy dated as of February 3, 2006
incorporated herein by reference to Exhibit 10.11 of the
Companys
Form 10-Q
for the quarter ended March 31, 2006 (File
No. 001-12822)
|
10.12*
|
|
--
|
|
Second Amendment to Amended and Restated Employment Agreement of
Ian J. McCarthy dated as of December 31, 2008
incorporated herein by reference to Exhibit 10.31 of the
Companys
Form 10-Q
for the quarter ended December 31, 2008 (File
No. 001-12822)
|
10.13*
|
|
--
|
|
Amended and Restated Employment Agreement of Michael H. Furlow
dated as of August 6, 2009 incorporated herein
by reference to Exhibit 10.3 of the Companys
Form 10-Q
for the quarter ended June 30, 2009 (File
No. 001-12822)
|
10.14*
|
|
--
|
|
Employment Agreement effective May 1, 2007 for Allan P.
Merrill - incorporated herein by reference to Exhibit 10.01
of the Companys
Form 8-K
filed on April 24, 2007 (File
No. 001-12822)
|
10.15*
|
|
--
|
|
First Amendment to Employment Agreement effective
December 31, 2008 for Allan P. Merrill
incorporated herein by reference to Exhibit 10.5 of the
Companys
Form 10-Q
for the quarter ended December 31, 2008 (File
No. 001-12822)
|
10.16*
|
|
--
|
|
Amended and Restated Supplemental Employment Agreement of Ian J.
McCarthy dated as of February 3, 2006
incorporated herein by reference to Exhibit 10.1of the
Companys
Form 10-Q
for the quarter ended March 31, 2006 (File
No. 001-12822)
|
10.17*
|
|
--
|
|
First Amendment to Amended and Restated Supplemental Employment
Agreement of Ian J. McCarthy effective December 31,
2008 incorporated herein by reference to
Exhibit 10.6 of the Companys
Form 10-Q
for the quarter ended December 31, 2008 (File
No. 001-12822)
|
10.18*
|
|
--
|
|
Amended and Restated Supplemental Employment Agreement of
Michael H. Furlow dated as of August 6, 2009
incorporated herein by reference to Exhibit 10.4 of the
Companys
Form 10-Q
for the quarter ended June 30, 2009 (File
No. 001-12822)
|
10.19*
|
|
--
|
|
Change of Control Employment Agreement effective May 1,
2007 for Allan P. Merrill incorporated herein by
reference to Exhibit 10.02 of the Companys
Form 8-K
filed on April 24, 2007 (File
No. 001-12822)
|
10.20*
|
|
--
|
|
First Amendment to Change of Control Employment Agreement
effective December 31, 2008 for Allan P.
Merrill incorporated herein by reference to
Exhibit 10.8 of the Companys
Form 10-Q
for the quarter ended December 31, 2008 (File
No. 001-12822)
|
10.21*
|
|
--
|
|
Employment Letter for Kenneth F. Khoury effective
January 5, 2009 incorporated herein by
reference to Exhibit 10.1 of the Companys
Form 10-Q
for the quarter ended December 31, 2008 (File
No. 001-12822)
|
10.22*
|
|
--
|
|
Change of Control Agreement for Kenneth F. Khoury effective
December 5, 2008 incorporated herein by
reference to Exhibit 10.2 of the Companys
Form 10-Q
for the quarter ended December 31, 2008 (File
No. 001-12822)
|
10.23*
|
|
--
|
|
Form of Performance Shares Award Agreement dated as of
February 2, 2006 incorporated herein by
reference to Exhibit 10.18 of the Companys
Form 10-Q
for the quarter ended March 31, 2006 (File
No. 001-12822)
|
10.24*
|
|
--
|
|
Form of Award Agreement dated as of February 2,
2006 incorporated herein by reference to
Exhibit 10.19 of the Companys
Form 10-Q
for the quarter ended March 31, 2006
(File No. 001-12822)
|
10.25*
|
|
--
|
|
2005 Executive Value Created Incentive Plan
incorporated herein by reference to Exhibit 10.1 of the
Companys
Form 8-K
filed on February 9, 2005 (File
No. 001-12822)
|
111
|
|
|
|
|
10.20*
|
|
--
|
|
Form of Indemnification Agreement incorporated
herein by reference to Exhibit 10.1 of the Companys
Form 8-K
filed on July 1, 2008 (File
No. 001-12822)
|
10.21
|
|
--
|
|
Credit Agreement dated as of July 25, 2007 between the
Company, the lenders thereto, and Wachovia Bank, National
Association, as Agent, BNP Paribas, The Royal Bank of Scotland,
and Guaranty Bank, as Documentation Agents, Regions Bank, as
Senior Managing Agent, and JPMorgan Chase Bank, as Managing
Agent incorporated herein by reference to
Exhibit 10.1 of the Companys
Form 8-K
filed on July 26, 2007 (File
No. 001-12822)
|
10.22
|
|
--
|
|
Waiver and First Amendment, dated as of October 10, 2007,
to and under the Credit Agreement, dated as of July 25,
2007, among the Company, the lenders thereto and Wachovia Bank,
National Association, as Agent incorporated herein
by reference to Exhibit 10.1 of the Companys
Form 8-K
filed on October 11, 2007 (File
No. 001-12822)
|
10.23
|
|
--
|
|
Second Amendment, dated October 26, 2007, to and under the
Credit Agreement, dated as of July 25, 2007, among the
Company, the lenders thereto and Wachovia Bank, National
Association, as Agent incorporated herein by
reference to Exhibit 10.1 of the Companys
Form 8-K
filed on October 30, 2007 (File
No. 001-12822)
|
10.24
|
|
--
|
|
Third Amendment, dated as of August 7, 2008, to and under
the Credit Agreement, dated as of July 25, 2007, among the
Company, the lenders thereto and Wachovia Bank, National
Association, as Agent incorporated herein by
reference to Exhibit 10.1 of the Companys
Form 8-K
filed on August 8, 2008 (File
No. 001-12822)
|
10.25
|
|
--
|
|
Fourth Amendment, dated as of July 31, 2009, to and under
the Credit Agreement, dated as of July 25, 2007, among the
Company, the lenders thereto and Wachovia Bank, National
Association, as Agent incorporated herein by
reference to Exhibit 10.1 of the Companys
Form 10-Q
for the quarter ended June 30, 2009 (File
No. 001-12822)
|
10.26
|
|
--
|
|
Amended and Restated Credit Agreement, dated August 5,
2009, between the Company, the lenders and issuers thereto and
CITIBANK, N.A., as Swing Line Lender and Agent
incorporated herein by reference to Exhibit 10.2 of the
Companys
Form 10-Q
for the quarter ended June 30, 2009 (File
No. 001-12822)
|
10.27*
|
|
--
|
|
2008 Beazer Homes USA, Inc. Deferred Compensation Plan, adopted
effective January 1, 2008 incorporated herein
by reference to Exhibit 10.27 of the Companys
Form 10-K
for the fiscal year ended September 30, 2007 (File
No. 001-12822)
|
10.28*
|
|
--
|
|
Discretionary Employee Bonus Plan incorporated
herein by reference to Exhibit 10.28 of the Companys
Form 10-K
for the fiscal year ended September 30, 2007 (File
No. 001-12822)
|
21
|
|
--
|
|
Subsidiaries of the Company
|
23
|
|
--
|
|
Consent of Deloitte & Touche LLP
|
31.1
|
|
--
|
|
Certification pursuant to 17 CFR 240.13a-14 promulgated
under Section 302 of the Sarbanes-Oxley Act of 2002
|
31.2
|
|
--
|
|
Certification pursuant to 17 CFR 240.13a-14 promulgated
under Section 302 of the Sarbanes-Oxley Act of 2002
|
32.1
|
|
--
|
|
Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
|
32.2
|
|
--
|
|
Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
|
|
|
|
|
|
|
|
|
|
* Represents a management contract or compensatory plan or
arrangement
|
112
Reference is made to Item 15(a)3 above. The following is a
list of exhibits, included in item 15(a)3 above, that are
filed concurrently with this report.
|
|
|
|
|
21
|
|
--
|
|
Subsidiaries of the Company
|
23
|
|
--
|
|
Consent of Deloitte & Touche LLP
|
31.1
|
|
--
|
|
Certification pursuant to 17 CFR 240.13a-14 promulgated
under Section 302 of the Sarbanes-Oxley Act of 2002
|
31.2
|
|
--
|
|
Certification pursuant to 17 CFR 240.13a-14 promulgated
under Section 302 of the Sarbanes-Oxley Act of 2002
|
32.1
|
|
--
|
|
Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
|
32.2
|
|
--
|
|
Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
|
|
|
(d)
|
Financial
Statement Schedules
|
Reference is made to Item 15(a)2 above.
113
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
|
|
|
|
|
|
|
|
By:
|
|
/s/ Ian
J. McCarthy
|
|
|
|
|
Name: Ian J. McCarthy
|
|
|
|
|
Title: President and Chief
Executive Officer
|
|
|
|
|
Date: November 10, 2009
|
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
November 10, 2009
|
|
By:
|
|
/s/ Brian C. Beazer
|
Date
|
|
|
|
Brian C. Beazer, Director and Non-
|
|
|
|
|
Executive Chairman of the Board
|
|
|
|
|
|
November 10, 2009
|
|
By:
|
|
/s/ Ian J. McCarthy
|
Date
|
|
|
|
Ian J. McCarthy, Director, President
|
|
|
|
|
and Chief Executive Officer
|
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
November 10, 2009
|
|
By:
|
|
/s/ Laurent Alpert
|
Date
|
|
|
|
Laurent Alpert, Director
|
|
|
|
|
|
November 10, 2009
|
|
By:
|
|
/s/ Peter G. Leemputte
|
Date
|
|
|
|
Peter G. Leemputte, Director
|
|
|
|
|
|
November 10, 2009
|
|
By:
|
|
/s/ Larry T. Solari
|
Date
|
|
|
|
Larry T. Solari, Director
|
|
|
|
|
|
November 10, 2009
|
|
By:
|
|
/s/ Stephen P. Zelnak
|
Date
|
|
|
|
Stephen P. Zelnak, Jr., Director
|
|
|
|
|
|
November 10, 2009
|
|
By:
|
|
/s/ Allan P. Merrill
|
Date
|
|
|
|
Allan P. Merrill, Executive Vice
|
|
|
|
|
President and Chief Financial
|
|
|
|
|
Officer (Principal Financial Officer)
|
|
|
|
|
|
November 10, 2009
|
|
By:
|
|
/s/ Robert L. Salomon
|
Date
|
|
|
|
Robert Salomon, Senior Vice
|
|
|
|
|
President, Chief Accounting Officer
|
|
|
|
|
and Controller (Principal Accounting Officer)
|
114