Beazer Homes 3Q loss narrows

Beazer Homes USA Inc. said Friday it posted a narrower loss in its fiscal third quarter despite lower revenue as the homebuilder's expenses declined. The quarterly results fell short of Wall Street's expectations.

Chief Executive Ian McCarthy said he expects continued tough industry conditions due to eroding consumer confidence and high inventories of unsold homes to extend into next year.

The Atlanta-based company posted a loss of $109.8 million, or $2.85 a share, in the quarter that ended June 30. That compares with a loss of $118.7 million, or $3.09 a share, in the same period last year.

The latest quarter included a $95.5 million charge as the builder walked away from land option contracts and the value of its unsold homes declined.

Revenue slid 40 percent to $455.6 million, as home closings fell to 37 percent.

Average sales prices, new orders and backlog also declined year over year.

Analysts surveyed by Thomson Financial expected the builder to report a loss of $2.34 cents per share on revenue of $430.1 million. Wall Street estimates typically exclude one-time charges or gains.

"As our third quarter results illustrate, difficult operating conditions in the homebuilding industry persist," McCarthy said in a statement. "Based on these demand dynamics, coupled with high supply levels of new and existing home inventory, we believe industry conditions will remain challenging for the remainder of this fiscal year and as we enter fiscal 2009."

McCarthy said the company is focusing on reducing costs, improving its cash position, limiting investment in land and homes and trimming its stock of unsold homes to position itself for when the market improves.

Beazer said net new home orders fell almost 42 percent to 1,774.

The rate at which buyers canceled orders during the quarter was 36.8 percent, up from 33.7 percent from the second quarter and essentially flat versus the same period last year.

The builder saw home closings decline across all of its regions during the quarter, with the steepest declines in the Southeast, the West and Florida.

In all, Beazer closed 1,677 homes during the quarter, down from 2,659 in the same period last year. The average selling price of Beazer's homes also declined, dropping 8.8 percent to $257,400 from $282,100.

As of June 30, the builder's orders for homes that had yet to close stood at 2,716 homes valued at $668.1 million. That's down from a backlog of 5,952 homes valued at $1.69 billion a year earlier.

Beazer said it expects to generate positive cash flow in its fiscal fourth quarter.

Like other builders, Beazer's business has suffered as the housing market downturn worsened.

Demand for new and preowned homes is down industrywide, adding to a glut of unsold and foreclosed properties on the market. That's keeping downward pressure on home prices and contributing to tighter profit margins for builders.

Rival public builders D.R. Horton Inc., Centex Corp., and Pulte Homes Inc., each reported losses for the three months ended June 30. Each booked impairment charges on inventory and other assets.

In addition to dealing with the housing slump, Beazer has been grappling with investigations of the company's business practices.

The company is under investigation by the Securities and Exchange Commission and the U.S. Attorney's office in the Western District of North Carolina stemming from an internal probe that found employees in the builder's mortgage-origination unit violated federal lending rules.

Beazer said Friday that it intends to negotiate a settlement with prosecutors and regulators, but noted it doesn't have an estimate on the size of the potential fine it might have to pay.

For the first nine months of the year, Beazer's loss widened to $478 million, or $12.35 a share. That compares with a loss of $256 million, or $6.73 a share, in the same period last year.

Total revenue fell to $1.4 billion from $2.4 billion in the same period a year ago.

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On the Net:

Beazer Homes USA: http://www.beazer.com/

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