Builders' Results Show Return to Profitability, Increased Contracts
Atlanta-based homebuilder Beazer Homes USA (BZH) returned to profitability in its fiscal year fourth quarter, posting income from continuing operations of $35.3m, or $0.87 per diluted share. The profits from Beazer’s FYQ409, which ended Sept. 30, compare to losses of $27.9m in FYQ309 and $453.8m in FYQ408. The results were impacted by a non-cash pre-tax charge of $29.9m for inventory impairments and abandonment of land option contracts, and a pre-tax gain on early extinguishment of debt of $89.3m. Gross profit margin was 6.6%. Total revenue of $376.3m was less than the $649.8m in FYQ408 and home closings decreased 24.3% to 1,685 homes. But new home orders totaled 1,012, an increase of 2.4%, and Beazer’s cancellation rate was 34.7%, down from 46.3% in FYQ409. Also during the quarter, Beazer repurchased $269.3m of senior notes for an aggregate purchase price of $189.5m, resulting in a pre-tax gain on early extinguishment of debt of $75m. Beazer also negotiated a reduced payoff of one of its secured notes, which resulted in a pre-tax gain on early extinguishment of debt of $14.3 million. “Following difficult market conditions throughout fiscal 2009, we were pleased to finish the year with a fourth quarter year-over-year increase in net new home orders from continuing operations, improved gross margins and a significant cash balance,” said Beazer president and CEO Ian McCarthy. “During the quarter, we experienced some moderation in negative market trends, with attractive interest rates, historically high housing affordability and the federal tax credit attracting more prospective buyers to purchase a new home.” The profitable fourth quarter helped ease Beazer’s fiscal year-end results, which include a $178m, or $4.60 per share, loss, compared to a loss of $800m in the 2008 fiscal year. For the year, home closings decreased 35.3%, new orders decreased 22.2% and total revenue was down from $1.81bn in 2008 to $1.01bn in 2009. Gross profit margin was 2.1%, compared to a loss of 12.9% in 2008. Another positive sign for the building sector arrived in preliminary quarterly results from Horsham, Pa.-based builder Toll Brothers (TOL). The luxury homebuilder said its FYQ409 net signed contracts increased 42% in units and 62% in dollar amount compared to the prior fiscal year’s fourth quarter. The increases came despite having fewer selling communities, Toll Brothers said. Revenue for FYQ409 decreased 30% from FYQ408, and the builder said it will provide full quarterly and year-end results in the coming weeks. “We have definitely progressed from one year ago,” said Robert Toll, chairman and CEO said. “The shock to the financial system in mid-September 2008 that shut down the capital markets appears to be mostly behind us.” “The improvement in consumer confidence over the past year, the increasing stabilization of home prices, the decline in unsold home inventories and the reduction in buyer cancellation rates suggest that the new home market should be improving; we sense that it is, though slowly and through choppy waters,” Toll added. Write to Austin Kilgore.