BZH-3.31.2013-Q2 Document
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________________________________________ 
FORM 10-Q
_____________________________________________________________ 
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2013
or
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-12822
_____________________________________________________________ 
BEAZER HOMES USA, INC.
(Exact name of registrant as specified in its charter)
 _____________________________________________________________ 
DELAWARE
 
58-2086934
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. employer
Identification no.)
1000 Abernathy Road, Suite 260,
Atlanta, Georgia
 
30328
(Address of principal executive offices)
 
(Zip Code)

(770) 829-3700
(Registrant’s telephone number, including area code)
 _____________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.    YES  x    NO  ¨
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  x    NO  ¨
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):
Large accelerated filer
¨
Accelerated filer
x
 
 
 
 
Non-accelerated filer
¨
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x
Class
 
Outstanding at April 30, 2013
Common Stock, $0.001 par value
 
25,089,873

Table of Contents

References to “we,” “us,” “our,” “Beazer”, “Beazer Homes” and the “Company” in this quarterly report on Form 10-Q refer to Beazer Homes USA, Inc.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q 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 quarterly 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 quarterly 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 quarterly report in the section captioned “Management’s 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 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2012. These factors are not intended to be an all-encompassing list of risks and uncertainties that may affect the operations, performance, development and results of our business, but instead are the risks that we currently perceive as potentially being material. Such factors may include:

•
economic changes nationally or in local markets, including changes in consumer confidence, changes in the level of housing starts, declines in employment levels, inflation and changes in the demand and prices of new homes and resale homes in the market;
•
a slower economic rebound than anticipated, coupled with persistently high unemployment and additional foreclosures;
•
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;
•
a substantial increase in mortgage interest rates, increased disruption in the availability of mortgage financing or a change in tax laws regarding the deductibility of mortgage interest;
•
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;
•
the final outcome of various putative class action lawsuits, 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 consent orders with governmental authorities and other settlement agreements;
•
our cost of and ability to access capital and otherwise meet our ongoing liquidity needs including the impact of any downgrades of our credit ratings or reductions in our tangible net worth or liquidity levels;
•
our ability to comply with covenants in our debt agreements or satisfy such obligations through repayment or refinancing;
•
estimates related to the potential recoverability of our deferred tax assets;
•
increased competition or delays in reacting to changing consumer preference in home design;
•
shortages of or increased prices for labor, land or raw materials used in housing production;
•
additional asset impairment charges or writedowns;
•
the impact of construction defect and home warranty claims;
•
the cost and availability of insurance and surety bonds;
•
delays in land development or home construction resulting from adverse weather conditions;
•
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;
•
the performance of our unconsolidated entities and our unconsolidated entity partners;
•
potential exposure related to additional repurchase claims on mortgages and loans originated by Beazer Mortgage Corporation;
•
effects of changes in accounting policies, standards, guidelines or principles; or
•
terrorist acts, acts of war and other factors over which the Company has little or no control.
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.

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BEAZER HOMES USA, INC.
FORM 10-Q
INDEX
 


3
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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BEAZER HOMES USA, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
 
 
March 31,
2013
 
September 30,
2012
ASSETS
 
 
 
Cash and cash equivalents
$
425,660

 
$
487,795

Restricted cash
246,742

 
253,260

Accounts receivable (net of allowance of $2,051 and $2,235, respectively)
25,070

 
24,599

Income tax receivable
2,513

 
6,372

Inventory
 
 
 
Owned inventory
1,143,737

 
1,099,132

Land not owned under option agreements
8,375


12,420

Total inventory
1,152,112

 
1,111,552

Investments in unconsolidated entities
41,814

 
42,078

Deferred tax assets, net
7,000

 
6,848

Property, plant and equipment, net
16,928

 
18,974

Other assets
28,871

 
30,740

Total assets
$
1,946,710

 
$
1,982,218

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Trade accounts payable
$
62,235

 
$
69,268

Other liabilities
140,802

 
147,718

Obligations related to land not owned under option agreements
3,286

 
4,787

Total debt (net of discounts of $2,440 and $3,082, respectively)
1,507,153

 
1,498,198

Total liabilities
1,713,476

 
1,719,971

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, 63,000,000 shares authorized, 25,092,502 and 24,601,830 issued and outstanding, respectively)
25

 
25

Paid-in capital
845,009

 
833,994

Accumulated deficit
(611,800
)
 
(571,772
)
Total stockholders’ equity
233,234

 
262,247

Total liabilities and stockholders’ equity
$
1,946,710

 
$
1,982,218


See Notes to Unaudited Condensed Consolidated Financial Statements.


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BEAZER HOMES USA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
 
 
Three Months Ended
 
Six Months Ended
 
March 31,
 
March 31,
 
2013
 
2012
 
2013
 
2012
Total revenue
$
287,902

 
$
191,643

 
$
534,804

 
$
380,191

Home construction and land sales expenses
241,992

 
170,283

 
452,606

 
333,059

Inventory impairments and option contract abandonments
2,025

 
1,170

 
2,229

 
4,673

Gross profit
43,885

 
20,190

 
79,969

 
42,459

Commissions
11,686

 
8,375

 
22,328

 
16,746

General and administrative expenses
28,795

 
26,319

 
55,123

 
54,513

Depreciation and amortization
3,093

 
3,190

 
5,808

 
5,593

Operating income (loss)
311

 
(17,694
)
 
(3,290
)
 
(34,393
)
Equity in income (loss) of unconsolidated entities
68

 
4

 
104

 
(73
)
Loss on extinguishment of debt
(3,638
)
 
(2,747
)
 
(3,638
)
 
(2,747
)
Other expense, net
(16,195
)
 
(18,265
)
 
(31,822
)
 
(36,538
)
Loss from continuing operations before income taxes
(19,454
)
 
(38,702
)
 
(38,646
)
 
(73,751
)
Benefit from income taxes
(343
)
 
(836
)
 
(596
)
 
(36,583
)
Loss from continuing operations
(19,111
)
 
(37,866
)
 
(38,050
)
 
(37,168
)
Loss from discontinued operations, net of tax
(529
)
 
(2,082
)
 
(1,978
)
 
(2,041
)
Net loss
$
(19,640
)
 
$
(39,948
)
 
$
(40,028
)
 
$
(39,209
)
Weighted average number of shares:
 
 
 
 
 
 
 
Basic
24,654

 
15,711

 
24,472

 
15,269

Diluted
24,654

 
15,711

 
24,472

 
15,269

(Loss) earnings per share:
 
 
 
 
 
 
 
Basic loss per share from continuing operations
$
(0.78
)
 
$
(2.41
)
 
$
(1.55
)
 
$
(2.43
)
Basic loss per share from discontinued operations
$
(0.02
)
 
$
(0.13
)
 
$
(0.09
)
 
$
(0.14
)
Basic loss per share
$
(0.80
)
 
$
(2.54
)
 
$
(1.64
)
 
$
(2.57
)
Diluted loss per share from continuing operations
$
(0.78
)
 
$
(2.41
)
 
$
(1.55
)
 
$
(2.43
)
Diluted loss per share from discontinued operations
$
(0.02
)
 
$
(0.13
)
 
$
(0.09
)
 
$
(0.14
)
Diluted loss per share
$
(0.80
)
 
$
(2.54
)
 
$
(1.64
)
 
$
(2.57
)

See Notes to Unaudited Condensed Consolidated Financial Statements.


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BEAZER HOMES USA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
 
Six Months Ended
 
March 31,
 
2013
 
2012
Cash flows from operating activities:
 
 
 
Net loss
$
(40,028
)
 
$
(39,209
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation and amortization
5,808

 
5,618

Stock-based compensation expense
1,638

 
2,508

Inventory impairments and option contract abandonments
2,246

 
4,707

Deferred and other income tax benefit
(577
)
 
(36,278
)
Provision for doubtful accounts
(184
)
 
227

Equity in (income) loss of unconsolidated entities
(104
)
 
109

Cash distributions of income from unconsolidated entities
336

 
—

Loss on extinguishment of debt
1,517

 
2,747

Changes in operating assets and liabilities:
 
 
 
(Increase) decrease in accounts receivable
(287
)
 
6,375

Decrease in income tax receivable
3,859

 
2,424

Increase in inventory
(40,407
)
 
(14
)
Decrease in other assets
2,823

 
7,420

Decrease in trade accounts payable
(7,033
)
 
(17,748
)
Decrease in other liabilities
(6,050
)
 
(18,905
)
Other changes
107

 
(7
)
Net cash used in operating activities
(76,336
)
 
(80,026
)
Cash flows from investing activities:
 
 
 
Capital expenditures
(3,869
)
 
(12,488
)
Investments in unconsolidated entities
(400
)
 
(810
)
Return of capital from unconsolidated entities
432

 
428

Increases in restricted cash
(1,044
)
 
(888
)
Decreases in restricted cash
7,562

 
551

Net cash provided by (used in) investing activities
2,681

 
(13,207
)
Cash flows from financing activities:
 
 
 
Repayment of debt
(183,319
)
 
(2,899
)
Proceeds from issuance of new debt
200,000

 
—

Debt issuance costs
(4,635
)
 
(97
)
Equity issuance costs
—

 
(1,212
)
Settlement of unconsolidated entity debt obligation
(500
)
 
(15,862
)
Payments for other financing activities
(26
)
 
(72
)
Net cash provided by (used in) financing activities
11,520

 
(20,142
)
Decrease in cash and cash equivalents
(62,135
)
 
(113,375
)
Cash and cash equivalents at beginning of period
487,795

 
370,403

Cash and cash equivalents at end of period
$
425,660

 
$
257,028


See Notes to Unaudited Condensed Consolidated Financial Statements.

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BEAZER HOMES USA, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements of Beazer Homes USA, Inc. (Beazer Homes, Beazer or the Company) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Such financial statements do not include all of the information and disclosures required by GAAP for complete financial statements. In our opinion, all adjustments (consisting primarily of normal recurring accruals) necessary for a fair presentation have been included in the accompanying financial statements. Certain items in prior period financial statements have been reclassified to conform to the current presentation. For further information and a discussion of our significant accounting policies other than as discussed below, refer to our audited consolidated financial statements appearing in Beazer Homes’ Annual Report on Form 10-K for the fiscal year ended September 30, 2012 (the 2012 Annual Report). Over the past few years, we have discontinued homebuilding operations in certain of our markets. Results from our title services business and our exit markets are reported as discontinued operations in the accompanying unaudited condensed consolidated statements of operations for all periods presented (see Note 14 for further discussion of our Discontinued Operations). On October 11, 2012, the Company announced the effectiveness of a one-for-five reverse stock split. All historic share and per share information, including earnings per share, in this Form 10-Q have been retroactively adjusted to reflect this reverse stock split. Certain items in prior period financial statements have been revised to conform to the current presentation. Our net loss is equivalent to our comprehensive loss so we have not presented a separate statement of comprehensive loss. We evaluated events that occurred after the balance sheet date but before the financial statements were issued or were available to be issued for accounting treatment and disclosure.
Inventory Valuation — We assess our inventory assets no less than quarterly for recoverability in accordance with the policies as described in Notes 1 and 4 to the consolidated financial statements in our 2012 Annual Report. 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. 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. We record assets held for sale at the lower of the carrying value or fair value less costs to sell.
Other Liabilities. Other liabilities include the following:
(In thousands)
March 31, 2013
 
September 30, 2012
Income tax liabilities
$
21,834

 
$
22,225

Accrued warranty expenses
13,601

 
15,477

Accrued interest
33,483

 
28,673

Accrued and deferred compensation
17,579

 
24,612

Customer deposits
12,498

 
8,830

Other
41,807

 
47,901

Total
$
140,802

 
$
147,718


Recent Accounting Pronouncements. In May 2011, the Financial Accounting Standard Board (FASB) issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. ASU 2011-04 clarifies some existing concepts, eliminates wording differences between GAAP and International Financial Reporting Standards (IFRS), and in some limited cases, changes some principles to achieve convergence between GAAP and IFRS. ASU 2011-04 results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between GAAP and IFRS. ASU 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. The adoption of ASU 2011-04 effective with our second quarter of fiscal 2012 did not have a material effect on our operating results or financial position.



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(2) Supplemental Cash Flow Information
 
Six Months Ended
 
March 31,
(In thousands)
2013
 
2012
Supplemental disclosure of non-cash activity:
 
 
 
(Decrease) increase in obligations related to land not owned under option agreements
$
(1,501
)
 
$
871

Decrease in future land purchase rights
—

 
(11,651
)
Contribution of future land purchase rights to unconsolidated entities
—

 
11,651

Decrease in debt related to conversion of Mandatory Convertible Subordinated Notes and Tangible Equity Units for common stock
(9,402
)
 
(55,308
)
Supplemental disclosure of cash activity:

 

Interest payments
48,944

 
60,145

Income tax payments
121

 
518

Tax refunds received
3,925

 
2,564



(3) Investments in Unconsolidated Entities
As of March 31, 2013, we participated in certain land development joint ventures and other unconsolidated entities in which Beazer Homes had less than a controlling interest. The following table presents our investment in our unconsolidated entities, the total equity and outstanding borrowings of these unconsolidated entities, and our guarantees of these borrowings, as of March 31, 2013 and September 30, 2012:
(In thousands)
March 31, 2013
 
September 30, 2012
Beazer’s investment in unconsolidated entities
$
41,814

 
$
42,078

Total equity of unconsolidated entity
441,996

 
383,482

Total outstanding borrowings of unconsolidated entities
64,441

 
64,912

Beazer’s estimate of its maximum exposure to our repayment guarantees
—

 
696


For the three and six months ended March 31, 2013 and 2012, our income (loss) from unconsolidated entity activities, the impairments of our investments in certain of our unconsolidated entities, and the overall equity in income (loss) of unconsolidated entities is as follows:
 
Three Months Ended
 
Six Months Ended
 
March 31,
 
March 31,
(In thousands)
2013
 
2012
 
2013
 
2012
Continuing operations:
 
 
 
 
 
 
 
Income (loss) from unconsolidated entity activity
$
68

 
$
4

 
$
104

 
$
(73
)
Impairment of unconsolidated entity investment
—

 
—

 
—

 
—

Equity in income (loss) of unconsolidated entities - continuing operations
$
68

 
$
4

 
$
104

 
$
(73
)

South Edge/Inspirada
The Company holds a minority (less than 10%) interest in Inspirada Builders LLC which was formed in connection with the bankruptcy and subsequent plan of reorganization of the South Edge joint venture. During the quarter ended December 31, 2011, we paid $15.9 million in connection with this plan of reorganization. Our right to acquire land in Las Vegas, Nevada from Inspirada is a component of our investment. As such, we have recorded an investment in Inspirada, which includes the $11.7 million we previously estimated for our future right to purchase land and our cash contributions to the joint venture, primarily for organization costs. In addition to our initial payment, we, as a member of the Inspirada joint venture, will have obligations for a portion of future infrastructure and other development costs. At this time, these costs cannot be quantified due to, among other things, uncertainty over the future development configuration of the project and the related costs, market conditions, uncertainty over the remaining infrastructure costs and potential recoveries from previously filed bankruptcies of certain other South Edge members. In addition, there are uncertainties with respect to the location and density of the land we will receive as a result of our investment

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in Inspirada, the products we will build on such land and the estimated selling prices of such homes. Because there are uncertainties with respect to development costs, in future periods, we may be required to record adjustments to the carrying value of this Inspirada investment as better information becomes available.
Pre-Owned Rental Homes
Effective May 3, 2012, we contributed $0.3 million in cash and our Pre-Owned Homes business at cost, including 190 homes in Arizona and Nevada, of which 187 were leased, for a 23.5% equity method investment in an unconsolidated real estate investment trust (the REIT). The Company also received grants of restricted units in the REIT, of which a portion vested during the year ended September 30, 2012 and the quarter ended March 31, 2013. As of March 31, 2013, we held a 15.14% investment in the REIT.

Subsequent to the initial REIT offering, we entered into a transition services agreement with the REIT under which we agreed to provide interim Chief Financial Officer (CFO) and various back office and administrative support on an as needed basis. Subsequent to March 31, 2013, the REIT hired a CFO. In the future, we may continue to provide services including treasury operations, cash management, accounting and financial reporting support, human resources support, environmental and safety services, and tax support on an as needed basis. Fees received related to the transition services agreement billed at our cost and recognized as other income were not material to our consolidated financial results.
Guarantees
Our land development joint ventures typically obtain secured acquisition, development and construction financing. Generally, Beazer and our land development joint venture partners provide varying levels of guarantees of debt and other obligations for these unconsolidated entities.
As of September 30, 2012, we had recorded $0.7 million in Other Liabilities related to one repayment guarantee. During the six months ended March 31, 2013, we entered into a guarantee release agreement and paid $0.5 million to settle our liability and recognized the remaining $0.2 million as other income.
We and our joint venture partners generally provide unsecured environmental indemnities to land development 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 three and six months ended March 31, 2013 and 2012, we were not required to make any payments related to environmental indemnities.
In assessing the need to record a liability for the contingent aspect of these guarantees, 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 entities. In addition, we monitor the fair value of the collateral of these unconsolidated entities 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.

(4) Inventory
(In thousands)
March 31, 2013
 
September 30, 2012
Homes under construction
$
271,882

 
$
251,828

Development projects in progress
420,914

 
391,019

Land held for future development
355,613

 
367,102

Land held for sale
10,413

 
10,149

Capitalized interest
45,501

 
38,190

Model homes
39,414

 
40,844

Total owned inventory
$
1,143,737

 
$
1,099,132


Homes under construction includes homes finished and ready for delivery and homes in various stages of construction. We had 111 ($26.9 million) and 174 ($39.7 million) substantially completed homes that were not subject to a sales contract (spec homes) at March 31, 2013 and September 30, 2012, 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. Land held for future development consists of communities for which construction and development activities are expected to occur in the future or have been idled and are stated at cost unless facts and circumstances indicate that the carrying value of the assets may not be recoverable. All applicable interest and real estate taxes on land held for future development are expensed as incurred. Land held

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for sale in Unallocated and Other includes land held for sale in the markets we have decided to exit including Jacksonville, Florida, Charlotte, North Carolina and Detroit, Michigan. Total owned inventory, by reportable segment, is set forth in the table below:
(In thousands)
Projects in
Progress
 
Held for Future
Development
 
Land Held
for Sale
 
Total Owned
Inventory
March 31, 2013
 
 
 
 
 
 
 
West Segment
$
289,932

 
$
306,496

 
$
2,478

 
$
598,906

East Segment
261,501

 
25,496

 
3,130

 
290,127

Southeast Segment
155,370

 
23,621

 
2,087

 
181,078

Unallocated & Other
70,908

 
—

 
2,718

 
73,626

Total
$
777,711

 
$
355,613

 
$
10,413

 
$
1,143,737

September 30, 2012
 
 
 
 
 
 
 
West Segment
$
261,239

 
$
318,351

 
$
2,553

 
$
582,143

East Segment
279,954

 
25,130

 
3,204

 
308,288

Southeast Segment
118,853

 
23,621

 
1,675

 
144,149

Unallocated & Other
61,835

 
—

 
2,717

 
64,552

Total
$
721,881

 
$
367,102

 
$
10,149

 
$
1,099,132


Inventory Impairments. When conducting our community level review for the recoverability of our homebuilding inventories held for development, we establish a quarterly “watch list” of communities with more than 10 homes remaining that carry profit margins in backlog and in our forecast that are below a minimum threshold of profitability. Assets on the quarterly watch list are subject to substantial additional financial and operational analyses and review that consider the competitive environment and other factors contributing to profit margins below our threshold. For communities where the current competitive and market dynamics indicate that these factors may be other than temporary, which may call into question the recoverability of our investment, a formal impairment analysis is performed. The formal impairment analysis consists of both qualitative competitive market analyses and a quantitative analysis reflecting market and asset specific information.

As of March 31, 2013, one community in our East Segment was on our quarterly watch list. However, after additional financial and operational review, we determined that the factors contributing to profit margins below our threshold were temporary in nature and, therefore, the community was not subjected to our impairment analyses.
In our impairment analyses for the quarter ended March 31, 2012, we assumed limited market improvements in some communities beginning in fiscal 2013 and continuing improvement in these communities in subsequent years. For any communities scheduled to close out in fiscal 2012, we did not assume any market improvements. The discount rate used may be different for each community and ranged from 13.4% to 15.2% for the quarter ended March 31, 2012. The following tables represent the results, by reportable segment, of our community level review of the recoverability of our inventory assets held for development as of March 31, 2013, and 2012. We have elected to aggregate our disclosure at the reportable segment level because we believe this level of disclosure is most meaningful to the readers of our financial statements. The aggregate undiscounted cash flow fair value as a percentage of book value for the communities represented below is consistent with our expectations given our “watch list” methodology.

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($ in thousands)
 
 
Undiscounted Cash Flow Analyses Prepared
Segment
# of
Communities
on Watch List
 
# of
Communities
 
Pre-analysis
Book Value
(BV)
 
Aggregate
Undiscounted
Cash Flow as a
% of BV
Quarter Ended March 31, 2013
 
 
 
 
 
 
 
West
—

 
—

 
$
—

 
—
%
East
1

 
—

 
—

 
—
%
Southeast
—

 
—

 
—

 
—
%
Unallocated
—

 
—

 
—

 
—
%
Total
1

 
—

 
$
—

 
—
%
Quarter Ended March 31, 2012
 
 
 
 
 
 
 
West
6

 
4

 
$
8,550

 
103.7
%
East
12

 
4

 
12,920

 
101.2
%
Southeast
2

 
1

 
1,027

 
132.4
%
Unallocated
—

 
—

 
1,178

 
n/a

Total
20

 
9

 
$
23,675

 
103.4
%

There were no impairments recorded during the three and six months ended March 31, 2013 related to our discounted cash flow analyses. The table below summarizes the results of our discounted cash flow analysis for the three and six months ended March 31, 2012. The impairment charges below include impairments taken as a result of these discounted cash flow analyses and impairment charges recorded for individual homes sold and in backlog with net contribution margins below a minimum threshold of profitability in communities that were not otherwise impaired through our discounted cash flow analyses. The estimated fair value of the impaired inventory is determined immediately after a community’s impairment.
($ in thousands)
Communities Impaired As a Result of Discounted Cash
Flow Analyses Prepared
Segment
# of
Communities
Impaired
 
# of Lots
Impaired
 
Impairment
Charge
 
Estimated Fair
Value of
Impaired
Inventory at
Period End
 
# of
Communities
Impaired
 
# of Lots
Impaired
 
Impairment
Charge
 
Estimated Fair
Value of
Impaired
Inventory at
Period End
Quarter Ended March 31, 2012
 
 
 
 
 
 
 
Six Months Ended March 31, 2012
West
—

 
—

 
$
202

 
$
—

 
1

 
51

 
$
2,198

 
$
6,377

East
1

 
25

 
565

 
3,292

 
1

 
25

 
687

 
3,292

Southeast
—

 
—

 
46

 
—

 
—

 
—

 
164

 
—

Unallocated
—

 
—

 
36

 
—

 
—

 
—

 
84

 
—

Continuing Operations
1

 
25

 
$
849

 
$
3,292

 
2

 
76

 
3,133

 
9,669

Discontinued Operations
—

 
—

 
2

 
—

 
—

 
—

 
18

 
—

Total
1

 
25

 
$
851

 
$
3,292

 
2

 
76

 
$
3,151

 
$
9,669


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. During the quarter ended March 31, 2012, for certain communities we determined that it was prudent to reduce sales prices or further increase sales incentives in response to factors, including competitive market conditions in those specific submarkets for the product and locations of these communities. 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 based on current market conditions and management’s assumptions relative to future results led to an impairment in one community in our East segment for the quarter ended March 31, 2012. There were no comparable impairments in the quarter ended March 31, 2013. 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 markets deteriorate.

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The impairments on land held for sale generally represent further write downs of these properties to net realizable value, less estimated costs to sell and are based on current market conditions and our review of recent comparable transactions. For the quarter ended March 31, 2013, the land held for sale impairment in the Southeast Segment related to our decision to reposition one community in South Carolina to address consumer demand, including the decision to sell a portion of the lots in this community. 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 deteriorate.
Also, we have determined the proper course of action with respect to a number of communities within each homebuilding segment was to not exercise certain options and to write-off the deposits securing the option takedowns and pre-acquisition costs, as applicable. 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. Abandonment charges relate to our decision to abandon or not exercise certain option contracts that are not projected to produce adequate results or no longer fit in our long-term strategic plan.
The following table sets forth, by reportable homebuilding segment, the inventory impairments and lot option abandonment charges recorded for the three and six months ended March 31, 2013 and 2012:
 
Three Months Ended March 31,
 
Six Months Ended March 31,
(In thousands)
2013
 
2012
 
2013
 
2012
Development projects and homes in process (Held for Development)
 
 
 
 
 
 
West
$
—

 
$
202

 
$
46

 
$
2,198

East
—

 
565

 
13

 
687

Southeast
—

 
46

 
—

 
164

Unallocated
—

 
36

 
—

 
84

Subtotal
$
—

 
$
849

 
$
59

 
$
3,133

Land Held for Sale
 
 
 
 
 
 
 
West
$
—

 
$
—

 
$
—

 
$
—

East
—

 
—

 
—

 
—

Southeast
1,778

 
—

 
1,778

 
208

Subtotal
$
1,778

 
$
—

 
$
1,778

 
$
208

Lot Option Abandonments
 
 
 
 
 
 
 
West
$
30

 
$
170

 
$
104

 
$
172

East
(2
)
 
90

 
20

 
564

Southeast
219

 
60

 
268

 
594

Unallocated
—

 
1

 
—

 
2

Subtotal
$
247

 
$
321

 
$
392

 
$
1,332

Continuing Operations
$
2,025

 
$
1,170

 
$
2,229

 
$
4,673

Discontinued Operations
 
 
 
 
 
 
 
Held for Development
$
—

 
$
2

 
$
—

 
$
18

Land Held for Sale
—

 
—

 
17

 
—

Lot Option Abandonments
—

 
—

 
—

 
16

Subtotal
$
—

 
$
2

 
$
17

 
$
34

Total Company
$
2,025

 
$
1,172

 
$
2,246

 
$
4,707


Lot Option Agreements and Variable Interest Entities (VIEs). As previously discussed, 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. We expect to exercise, subject to market conditions and seller satisfaction of contract terms, most of our remaining option contracts. Various factors, some of which

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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 lot options will be exercised.
For the VIEs in which we are the primary beneficiary, we have consolidated the VIE and reflected such assets and liabilities as land not owned under option agreements in our balance sheets. For VIEs we were required to consolidate, we recorded the remaining contractual purchase price under the applicable lot option agreement to land not owned under option agreements with an offsetting increase to obligations related to land not owned under option agreements. Also, to reflect the purchase price of this inventory consolidated, we present the related option deposits as land not owned under option agreement in the accompanying unaudited condensed consolidated balance sheets. Consolidation of these VIEs has no impact on the Company’s results of operations or cash flows.
The following provides a summary of our interests in lot option agreements as of March 31, 2013 and September 30, 2012:
(In thousands)
Deposits &
Non-refundable
Preacquisition
Costs Incurred
 
Remaining
Obligation
 
Land Not Owned -
Under Option
Agreements
As of March 31, 2013
 
 
 
 
 
Consolidated VIEs
$
4,899

 
$
2,650

 
$
7,549

Other consolidated lot option agreements (a)
190

 
636

 
826

Unconsolidated lot option agreements
19,933

 
203,618

 
—

Total lot option agreements
$
25,022

 
$
206,904

 
$
8,375

As of September 30, 2012
 
 
 
 
 
Consolidated VIEs
$
7,203

 
$
3,346

 
$
10,549

Other consolidated lot option agreements (a)
430

 
1,441

 
1,871

Unconsolidated lot option agreements
17,290

 
193,711

 
—

Total lot option agreements
$
24,923

 
$
198,498

 
$
12,420


(a)
Represents lot option agreements with non-VIE entities that we have deemed to be “financing arrangements” pursuant to ASC 470-40, Product Financing Arrangements.

(5) Interest
Our ability to capitalize all interest incurred during the three and six months ended March 31, 2013 and 2012 has been limited by our inventory eligible for capitalization. The following table sets forth certain information regarding interest:
 
Three Months Ended March 31,
 
Six Months Ended March 31,
(In thousands)
2013
 
2012
 
2013
 
2012
Capitalized interest in inventory, beginning of period
$
41,922

 
$
46,510

 
$
38,190

 
$
45,973

Interest incurred
29,177

 
32,190

 
57,595

 
64,715

Capitalized interest impaired
—

 
(25
)
 
—

 
(53
)
Interest expense not qualified for capitalization and included as other expense
(16,246
)
 
(18,797
)
 
(32,457
)
 
(37,914
)
Capitalized interest amortized to house construction and land sales expenses
(9,352
)
 
(12,636
)
 
(17,827
)
 
(25,479
)
Capitalized interest in inventory, end of period
$
45,501

 
$
47,242

 
$
45,501

 
$
47,242


(6) Earnings Per Share

In computing diluted loss per share for the three and six ended March 31, 2013 and 2012, all common stock equivalents were excluded from the computation of diluted loss per share as a result of their anti-dilutive effect. For the quarter ended March 31, 2013, these excluded common stock equivalents included options/stock-settled appreciation rights (SSARs) to purchase 0.6 million shares of common stock and 8.1 million shares issuable upon the conversion of our Tangible Equity Unit (TEU) prepaid stock purchase contracts (based on the maximum potential shares upon conversion), respectively.


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Table of Contents

During the quarter ended March 31, 2013, our stockholders approved the Company's proposal to amend our Amended and Restated Certificate of Incorporation to decrease the authorized number of shares of our common stock from 100 million to 63 million. Such decrease is reflected on our unaudited condensed consolidated balance sheet.

During the quarter ended March 31, 2012, we exchanged 2.2 million shares of our common stock for $48.1 million of our Mandatory Convertible Subordinated Notes and 2.8 million shares of our common stock for 2.8 million TEUs comprised of prepaid stock purchase contracts and senior amortizing notes. During the quarter ended September 30, 2012, we issued an additional 4.6 million TEUs. As of March 31, 2013, there were 4.8 million TEUs outstanding (including $20.0 million of amortizing notes). In January 2013, we issued 0.4 million shares of our common stock upon conversion of the Mandatory Convertible Subordinated Notes. If the remaining TEU instruments were converted at the maximum settlement factor under their respective agreements, we would be required to issue approximately 8.1 million shares of common stock to the instrument holders upon conversion. See Note 7 below for additional information related to the March 2012 conversion transactions and July 2012 TEU issuance.

(7) Borrowings

At March 31, 2013 and September 30, 2012 we had the following long-term debt, net of discounts:
(In thousands)
Maturity Date
 
March 31, 2013
 
September 30, 2012
6 7/8% Senior Notes
July 2015
 
$
—

 
$
172,454

8 1/8% Senior Notes
June 2016
 
172,879

 
172,879

6 5/8% Senior Secured Notes
April 2018
 
300,000

 
300,000

9 1/8% Senior Notes
June 2018
 
298,000

 
300,000

9 1/8% Senior Notes
May 2019
 
235,000

 
235,000

7 1/4% Senior Notes
February 2023
 
200,000

 
—

TEU Senior Amortizing Notes
August 2013
 
161

 
316

TEU Senior Amortizing Notes
August 2015
 
19,885

 
23,500

Unamortized debt discounts
 
 
(2,440
)
 
(3,082
)
Total Senior Notes, net
 
 
1,223,485

 
1,201,067

Mandatory Convertible Subordinated Notes
January 2013
 
—

 
9,402

Junior subordinated notes
July 2036
 
52,637

 
51,603

Cash Secured Loan
November 2017
 
222,368

 
227,368

Other secured notes payable
Various Dates
 
8,663

 
8,758

Total debt, net
 
 
$
1,507,153

 
$
1,498,198


Secured Revolving Credit Facility — In September 2012, we amended and expanded our Secured Revolving Credit Facility from $22 million to $150 million. The three-year Amended Secured Revolving Credit Facility provides for future working capital and letter of credit needs collateralized by substantially all of the Company's personal property (excluding cash and cash equivalents) and real property. This facility is subject to various financial, collateral-based and negative covenants with which we are required to comply. As of March 31, 2013, we were in compliance with all such covenants and had $150 million of available borrowings under the Secured Revolving Credit Facility. We have elected to cash collateralize all letters of credit; however, as of March 31, 2013, we have pledged approximately $1 billion of inventory assets to our Secured Revolving Credit Facility to collateralize potential future borrowings or letters of credit. 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 March 31, 2013 or September 30, 2012.
We have entered into stand-alone, cash-secured letter of credit agreements with banks to maintain our pre-existing letters of credit and to provide for the issuance of new letters of credit. The letter of credit arrangements combined with our Secured Revolving Credit Facility provide a total letter of credit capacity of approximately $220.0 million. As of March 31, 2013 and September 30, 2012, we have letters of credit outstanding of $23.2 million and $24.7 million, respectively, which are secured by cash collateral in restricted accounts. The Company may enter into additional arrangements to provide additional letter of credit capacity.

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Senior Notes — The majority of our 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 Company's Senior Notes are subject to indentures containing certain restrictive covenants which, among other things, restrict our ability to pay dividends, repurchase our common stock, incur additional indebtedness and to make certain investments. Compliance with these covenants does not significantly impact our operations. We were in compliance with the covenants contained in all of our Senior Notes as of March 31, 2013.
All of our Senior Notes contain covenants that restrict our ability to incur additional indebtedness unless it is refinancing indebtedness or non-recourse indebtedness. The incurrence of refinancing indebtedness and non-recourse indebtedness, as defined in the applicable indentures, are exempted from the covenant test. As of March 31, 2013, we were not able to incur additional indebtedness, except refinancing or non-recourse indebtedness.
Our Senior Notes due 2016 (the 2016 Notes) contain the most restrictive covenants, including the consolidated tangible net worth covenant, which states that should consolidated tangible net worth fall below $85 million for two consecutive quarters, the Company is required to make an offer to purchase 10% of the 2016 Notes at par. If triggered and fully subscribed, this could result in our having to purchase $27.5 million of the 2016 Notes which may be reduced by certain 2016 Note repurchases (potentially at less than par) made in the open market after the triggering date. As of March 31, 2013 our consolidated tangible net worth was $206.6 million, well in excess of the minimum covenant requirement.
In February 2013, we issued and sold $200 million aggregate principal amount of 7.25% Senior Notes due 2023 (the 2023 Notes) at par (before underwriting and other issuance costs) through a private placement to qualified institutional buyers. Interest on the 2023 Notes is payable semi-annually in cash in arrears, beginning August 1, 2013. The 2023 Notes will mature on February 1, 2023.
The 2023 Notes were issued under an Indenture, dated as February 1, 2013 (the Indenture) that contains covenants which, subject to certain exceptions, limit the ability of the Company and its restricted subsidiaries (as defined in the Indenture) to, among other things, incur additional indebtedness, including secured indebtedness, and make certain types of restricted payments. The Indenture contains customary events of default. Upon the occurrence of an event of default, payments on the 2023 Notes may be accelerated and become immediately due and payable. Upon a change of control (as defined in the Indenture), the Indenture requires us to make an offer to repurchase the 2023 Notes at 101% of their principal amount, plus accrued and unpaid interest.
We may redeem the 2023 Notes at any time prior to August 1, 2018, in whole or in part, at a redemption price equal to 100% of the principal amount, plus a customary make-whole premium, plus accrued and unpaid interest to the redemption date. In addition, at any time on or prior to August 1, 2016, we may redeem up to 35% of the aggregate principal amount of 2023 Notes with the proceeds of certain equity offerings at a redemption price equal to 107.250% of the principal amount of the 2023 Notes plus accrued and unpaid interest, if any, to the date fixed for redemption; provided, that at least 65% of the aggregate principal amount of the 2023 Notes originally issued under the Indenture remain outstanding after such redemption. On or after August 1, 2018, we may redeem some or all of the 2023 Notes at redemption prices set forth in the Indenture. These percentages range from 100.000% to 103.625%.
The 2023 Notes rank equally in right of payment with all of our existing and future senior unsecured obligations, senior to all of the Company's existing and future subordinated indebtedness and effectively subordinated to the Company's existing and future secured indebtedness, including indebtedness under our revolving credit facility and our 6.625% Senior Secured Notes due 2018, to the extent of the value of the assets securing such indebtedness. The 2023 Notes and related guarantees are structurally subordinated to all indebtedness and other liabilities of all of the Company's subsidiaries that do not guarantee the 2023 Notes. The 2023 Notes are fully and unconditionally guaranteed jointly and severally on a senior basis by the Company's wholly-owned subsidiaries party to the Indenture.
During the quarter ended March 31, 2013, we used a portion of the net cash proceeds from the 2023 Notes offering to redeem all of our outstanding 6.875% Senior Notes due 2015 (the 2015 Notes). The 2015 Notes were redeemed at 101.146% of the principal amount, plus accrued and unpaid interest. During the quarter ended March 31, 2013, we also repurchased $2 million of our outstanding 9.125% Senior Notes due 2018 in open market transactions. These transactions resulted in a loss on debt extinguishment of $3.6 million, net of unamortized discounts and debt issuance costs. All Senior Notes redeemed/repurchased by the Company were canceled.
Senior Notes: Tangible Equity Units — In July 2012, we issued 4.6 million 7.5% TEUs (the 2012 TEUs), which were comprised of prepaid stock purchase contracts (PSPs) and senior amortizing notes. As the two components of the TEUs are legally separate and detachable, we have accounted for the two components as separate items for financial reporting purposes and valued them

15
Table of Contents

based on their relative fair value at the date of issuance. The amortizing notes are unsecured senior obligations and rank equally with all of our other unsecured indebtedness. Outstanding notes pay quarterly installments of principal and interest through maturity. The PSPs were originally accounted for as equity (additional paid in capital) at the initial fair value of these contracts based on the relative fair value method. The PSPs related to these July 2012 TEUs are scheduled to be settled in Beazer Homes' common stock on July 15, 2015. If on that date, our common stock price is (1) at or below $14.50 per share, the PSPs will convert to 1.72414 shares per unit, (2) at or above $17.75 per share, the PSPs will convert to 1.40746 shares per unit or (3) between $14.50 and $17.75 per share, the PSPs will convert to a number of shares of our common stock equal to $25.00 divided by the applicable market value of our common stock.
During May 2010, we issued 3.0 million 7.25% TEUs (the 2010 TEUs). In March 2012, we exchanged 2.8 million shares of our common stock for 2.8 million 2010 TEUs (comprised of prepaid stock purchase contracts and $7.2 million of senior amortizing notes). Since our offer to convert the 2010 TEUs included a premium share component and was not pursuant to the instrument's original conversion terms, we accounted for the exchange as an induced conversion of the 2010 TEUs. We compared the fair value of the common stock issued to the fair value of the 2010 TEU instruments at the date of acceptance in order to determine the premium of the consideration. This premium was then allocated between the debt and equity components of the 2010 TEUs based on each components relative fair value. The difference between the implied fair value of the amortizing notes (including the premium allocation) and the carrying value of the amortizing notes was recognized as a loss on extinguishment of debt and totaled approximately $0.7 million. The remaining related PSPs issued in May 2010 will be settled in Beazer Homes’ common stock on August 15, 2013.
Mandatory Convertible Subordinated Notes — On January 12, 2010, we issued $57.5 million aggregate principal amount of 7 1/2% Mandatory Convertible Subordinated Notes due 2013 (the Mandatory Convertible Subordinated Notes). Interest on the Mandatory Convertible Subordinated Notes was payable quarterly in cash in arrears. Holders of the Mandatory Convertible Subordinated Notes had the right to convert their notes, in whole or in part, at any time prior to maturity, into shares of our common stock at a fixed conversion rate of 0.8909 shares per $25 principal amount of notes.
During the quarter ended March 31, 2012, we exchanged 2.2 million shares of our common stock for $48.1 million of our Mandatory Convertible Subordinated Notes. Since our offer to convert these notes included a premium share component, we accounted for the exchange as an induced conversion of these notes. We recognized a $2.0 million inducement expense equal to the fair value of the premium shares issued based on our common stock price as of the date of acceptance. This expense was included in loss on extinguishment of debt for the fiscal year ended September 30, 2012.
On January 15, 2013, the remaining $9.4 million of outstanding Mandatory Convertible Subordinated Notes converted into 0.4 million shares of the Company’s common stock in accordance with the notes' conversion provisions.
Junior Subordinated Notes — $103.1 million of unsecured junior subordinated notes mature on July 30, 2036, are redeemable at par and pay a fixed rate of 7.987% for the first ten years ending July 30, 2016. Thereafter, the securities have a variable interest rate as defined in the agreement. The obligations relating to these notes and the related securities are subordinated to our Secured Revolving Credit Facility and Senior Notes. In January 2010, we modified the terms of $75 million of these notes and recorded these notes at their estimated fair value. Over the remaining life of the notes, we will increase their carrying value until this carrying value equals the face value of the notes. As of March 31, 2013, the unamortized accretion was $48.1 million and will be amortized over the remaining life of the notes.
As of March 31, 2013, we were in compliance with all covenants under our Junior Notes.
Cash Secured Loans — We have entered into two separate loan facilities, totaling $222.4 million as of March 31, 2013, which provide for borrowings up to a combined total of $275 million through March 2013. Borrowing under the cash secured loan facilities will replenish cash used to repay or repurchase the Company’s debt and would be considered “refinancing indebtedness” under certain of the Company’s existing indentures and debt covenants. However, because the loans are fully collateralized by cash equal to the loan amount, the loans do not provide liquidity to the Company.
The lenders of these facilities may put the outstanding loan balances to the Company in November 2014. The loan matures in November 2017. Borrowings under the facilities are fully secured by cash held by the lender or its affiliates. This secured cash is included in restricted cash on our unaudited condensed consolidated balance sheet as of March 31, 2013 and September 30, 2012. The cash secured loan has an interest rate equivalent to LIBOR plus 0.4% per annum which is paid every three months following the effective date of each borrowing. During the quarter ended September 30, 2012, we repaid $20 million of the outstanding cash secured term loan. Further, during the quarter ended March 31, 2013, we repaid $5 million of the outstanding cash secured term loan.
Other Secured Notes Payable — We periodically acquire land through the issuance of notes payable. As of March 31, 2013 and September 30, 2012, we had outstanding notes payable of $8.7 million and $8.8 million respectively, primarily related to land

16
Table of Contents

acquisitions. These notes payable have varying expiration dates between 2013 and 2019 and have a weighted average fixed rate of 3.83% at March 31, 2013. These notes are secured by the real estate to which they relate.
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.

(8) Income Taxes
For the three and six months ended March 31, 2013, our non-cash tax benefit from continuing operations was $0.3 million and $0.6 million, respectively, primarily related to a decrease of our prior year's recognized tax benefits.
For the periods ended March 31, 2013 and September 30, 2012, we had $2.4 million and $2.5 million, respectively of accrued interest and penalties related to our unrecognized tax benefits.
Our federal income tax returns for fiscal years 2007 through 2010 and certain state income tax returns for various fiscal years are under routine examination. The final outcome of these examinations are not yet determinable and therefore the change in our unrecognized tax benefits that could occur within the next 12 months cannot be estimated at this time.
During fiscal 2008, we determined that we did not meet the more likely than not standard that substantially all of our deferred tax assets would be realized and therefore, we established a valuation allowance for substantially all of our deferred tax assets.
Given the prolonged economic downturn affecting the homebuilding industry and the continued uncertainty regarding the recoverability of the remaining deferred tax assets, we continue to believe that a valuation allowance is needed for substantially all of our deferred tax assets. In future periods, the allowance could be modified based on sufficient evidence indicating that more likely than not a portion of our deferred tax assets will be realized. Changes in existing tax laws could also affect actual tax results and the valuation of deferred tax assets over time.
Further, we experienced an “ownership change” as defined in Section 382 of the Internal Revenue Code (Section 382) as of January 12, 2010. Section 382 contains rules that limit the ability of a company that undergoes an “ownership change” to utilize its net operating loss (NOL) carryforwards and certain built-in losses or deductions recognized during the five-year period after the ownership change to offset future taxable income. Therefore, our ability to utilize our pre-ownership change NOL carryforwards and recognize certain built-in losses or deductions is limited by Section 382 to an estimated maximum amount of approximately $11.4 million ($4 million tax-effected) annually. Certain deferred tax assets are not subject to any limitation imposed by Section 382.
Due to a combination of Section 382 limitations and the maximum 20-year carryforward of our NOLs, we will be unable to fully recognize certain deferred tax assets. As a result, as of March 31, 2013, our valuation allowance was $503.0 million and we expect to continue to add to our gross deferred tax assets for anticipated NOLs that will not be limited by Section 382.

(9) Contingencies
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. The Company is subject to the possibility of loss contingencies arising in its business. 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.
We subcontract our homebuilding work to subcontractors whose contracts generally include an indemnity obligation and a requirement that certain minimum insurance requirements be met, including providing us with a certificate of insurance prior to receiving payments for their work. Therefore, 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 unaudited condensed 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 management’s 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

17
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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 quarterly analyses, we adjust our estimated warranty liabilities if required. While we believe our warranty reserves are adequate as of March 31, 2013, 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:
 
Three Months Ended
 
Six Months Ended
 
March 31,
 
March 31,
(In thousands)
2013
 
2012
 
2013
 
2012
Balance at beginning of period
$
14,342

 
$
17,414

 
$
15,477

 
$
17,916

Accruals for warranties issued
1,302

 
1,741

 
2,730

 
3,228

Changes in liability related to warranties existing in prior periods
(437
)
 
(1,244
)
 
(1,739
)
 
(1,351
)
Payments made
(1,606
)
 
(1,778
)
 
(2,867
)
 
(3,660
)
Balance at end of period
$
13,601

 
$
16,133

 
$
13,601

 
$
16,133


Litigation
On June 3, 2009, Beazer Homes Corp., a wholly-owned subsidiary of the Company, was named as a defendant in a purported class action lawsuit in the Circuit Court for Lee County, State of Florida, filed by Bryson and Kimberly Royal, 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 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 attorney's 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. In addition, the Company has been named in other multi-plaintiff complaints filed in the multidistrict litigation and individual state court actions. We believe that the claims asserted in these actions are governed by home warranties or are without merit. The Company has offered to repair all of these homes pursuant to a repair protocol that has been adopted by the multidistrict litigation court, including those homes involved in litigation. To date, the owners of all but two of the affected homes have accepted the Company's offer to repair. Furthermore, the Company has agreed to participate in a global class settlement with the plaintiff class counsel and numerous other defendants in the multidistrict litigation, which was approved by the Court on February 13, 2013. The class action settlement requires Beazer to make a settlement payment that is not material to our consolidated financial position or results of operations, and resolves all claims, including future claims, against Beazer related to Chinese drywall. The only exception would have been any claims by persons or entities that opted out of the settlement, but there were no opt outs by the Court’s deadline. The Company also continues to pursue recovery against responsible subcontractors, drywall suppliers and drywall manufacturers for its repair costs. As of March 31, 2013, we have recorded an immaterial amount related to our expected liability under the settlement.
As disclosed in prior SEC filings, we operated Beazer Mortgage Corporation (BMC) from 1998 through February 2008 to offer mortgage financing to buyers of our homes. BMC entered into various agreements with mortgage investors, pursuant to which BMC originated certain mortgage loans and ultimately sold these loans to investors. In general underwriting decisions were not made by BMC but by the investors themselves or third-party service providers. From time to time we have received claims from institutions which have acquired certain of these mortgages demanding damages or indemnity arising from BMC's activities or that we repurchase such mortgages. We have been able to resolve these claims for amounts that are not material to our consolidated financial position or results of operation. We currently have an insignificant number of such claims outstanding for which we believe we have no liability. However, we cannot rule out the potential for additional mortgage loan repurchase or indemnity claims in the future from other investors, although, at this time, we do not believe that the exposure related to any such claims would be material to our consolidated financial position or results of operations. As of March 31, 2013, no liability has been recorded for any such additional claims as such exposure is 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 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 certain of the above pending matters. 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.

18
Table of Contents

Other Matters
As disclosed in our 2009 Form 10-K, on July 1, 2009, the Company announced that it had resolved the criminal and civil investigations by the United States Attorney’s 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 independent investigation, initiated in April 2007 by the Audit Committee of the Board of Directors (the Investigation) and concluded in May 2008. Under the terms of a deferred prosecution agreement (DPA), the Company’s liability for each of the fiscal years after 2010 through a portion of fiscal 2014 (unless extended as previously described in our 2009 Form 10-K) will be equal to 4% of the Company’s 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, of which $16.6 million has been paid as of March 31, 2013. Positive adjusted EBITDA in future years will require us to incur additional expense in the future.
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 and 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. Although we believe that we have significant defenses to the alleged violations, we have reached a settlement with the Department, through an Administrative Consent Order, for an amount that is not material to our consolidated financial position or results of operations.
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 $16.0 million and $19.4 million in other liabilities related to litigation and other matters, excluding warranty, as of March 31, 2013 and September 30, 2012, respectively.
We had outstanding letters of credit and performance bonds of approximately $23.2 million and $148.3 million, respectively, at March 31, 2013 related principally to our obligations to local governments to construct roads and other improvements in various developments. We have no outstanding letters of credit relating to our land option contracts as of March 31, 2013.

(10) Fair Value Measurements
As of March 31, 2013, we had no assets or liabilities in our unaudited condensed consolidated balance sheets that were required to be measured at fair value on a recurring basis. Certain of our assets are required to be recorded at fair value on a non-recurring basis when events and circumstances indicate that the carrying value may not be recovered. We use a fair value hierarchy that requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value as follows: Level 1 – Quoted prices in active markets for identical assets or liabilities; Level 2 – Inputs other than quoted prices included in Level 1 that are observable either directly or indirectly through corroboration with market data; Level 3 – Unobservable inputs that reflect our own estimates about the assumptions market participants would use in pricing the asset or liability.
As previously disclosed, we review our long-lived assets, including inventory, for recoverability when factors that indicate an impairment may exist, but no less than quarterly. Fair value is based on estimated cash flows discounted for market risks associated with the long-lived assets. The fair values of our investments in unconsolidated entities are determined primarily using a discounted cash flow model to value the underlying net assets of the respective entities. See Notes 1, 3 and 4 for additional information related to the fair value accounting for the assets listed above. Determining which hierarchical level an asset or liability falls within requires significant judgment. We evaluate our hierarchy disclosures each quarter.
The following table presents our assets measured at fair value on a non-recurring basis for each hierarchy level and represents only those assets whose carrying values were adjusted to fair value during the six months ended March 31, 2013 and 2012:
(In thousands)
Level 1
 
Level 2
 
Level 3
 
Total
Six Months Ended March 31, 2013
 
 
 
 
 
 
 
Land held for sale
—

 
—

 
$
2,013

 
$
2,013

Six Months Ended March 31, 2012
 
 
 
 
 
 
 
Development projects in progress
—

 
—

 
$
9,669

 
$
9,669

Land held for sale
—

 
—

 
$
1,600

 
$
1,600


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Table of Contents

The fair value of our cash and cash equivalents, restricted cash, accounts receivable, trade accounts payable, other liabilities, cash secured loan and other secured notes payable approximate their carrying amounts due to the short maturity of these assets and liabilities.
Obligations related to land not owned under option agreements approximate fair value. The carrying values and estimated fair values of other financial assets and liabilities were as follows:

(In thousands)
As of March 31, 2013
 
As of September 30, 2012
 
Carrying
Amount
 
Fair Value
 
Carrying
Amount
 
Fair Value
Senior Notes
$
1,223,485

 
$
1,305,905

 
$
1,201,067

 
$
1,228,745

Mandatory Convertible Subordinated Notes
—

 
—

 
9,402

 
7,465

Junior Subordinated Notes
52,637

 
52,637

 
51,603

 
51,603

 
$
1,276,122

 
$
1,358,542

 
$
1,262,072

 
$
1,287,813


The estimated fair values shown above for our publicly-held Senior Notes and Mandatory Convertible Subordinated Notes have been determined using quoted market rates (Level 2). Since there is no trading market for our junior subordinated notes, the fair value of these notes is estimated by discounting scheduled cash flows through maturity (Level 3). The discount rate is estimated using market rates currently being offered on loans with similar terms and credit quality. Judgment is required in interpreting market data to develop these estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we could realize in a current market exchange.


(11) Stock-based Compensation
For the three months ended March 31, 2013, our total stock-based compensation, included in general and administrative expenses (G&A), was approximately $0.9 million ($0.7 million net of tax). The fair value of each option/stock-based stock appreciation right (SSAR) grant is estimated on the date of grant using the Black-Scholes option-pricing model. The fair value of each performance-based, nonvested stock grant is estimated on the date of grant using the Monte Carlo valuation method. The cash-settled component of any awards granted to employees are accounted for as a liability award and the liability is adjusted to fair value each reporting period until vested. Non-performance based, nonvested stock is valued based on the market price of the common stock on the date of the grant.
During the six months ended March 31, 2013 and 2012, employees surrendered 1,306 and 12,553 shares, respectively, to us in payment of minimum tax obligations upon the vesting of stock awards under our stock incentive plans. We valued the stock at the market price on the date of surrender, for an aggregate value of approximately $19,000 and $34,000 for the six months ended March 31, 2013 and 2012, respectively.

Stock Options: We used the following assumptions for our options granted during the six months ended March 31, 2013:
Expected life of options
5.0 years

Expected volatility
46.15
%
Expected discrete dividends
—

Weighted average risk-free interest rate
0.63
%
Weighted average fair value
$
5.39


The expected volatility is based on the historic returns of our stock and the implied volatility of our publicly-traded options. We assumed no dividends would be paid since our Board of Directors has suspended payment of dividends indefinitely and payment of dividends is restricted under our Senior Note covenants. The risk-free interest rate is based on the term structure of interest rates at the time of the option grant and we have relied upon a combination of the observed exercise behavior of our prior grants with similar characteristics, the vesting schedule of the current grants, and an index of peer companies with similar grant characteristics to determine the expected life of the options.
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. At March 31, 2013, our SSAR/stock options outstanding had an intrinsic value of $0.9 million. The intrinsic value of SSARs/stock options vested and expected to vest in the future was $0.9 million. The SSARS/stock options vested

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Table of Contents

and expected to vest in the future had a weighted average expected life of 2.9 years. The aggregate intrinsic value of exercisable SSARs/stock options as of March 31, 2013 was $0.2 million.
The following table summarizes stock options and SSARs outstanding as of March 31, 2013, as well as activity during the three and six months then ended:
 
Three Months Ended
 
Six Months Ended
 
March 31, 2013
 
March 31, 2013
 
Shares
 
Weighted-
Average
Exercise
Price
 
Shares
 
Weighted-
Average
Exercise
Price
Outstanding at beginning of period
581,857

 
$
33.35

 
429,965

 
$
40.80

Granted
—

 
—

 
155,565

 
13.33

Exercised
(105
)
 
10.80

 
(105
)
 
10.80

Expired
(6,000
)
 
94.25

 
(7,703
)
 
96.45

Forfeited
(1,587
)
 
18.89

 
(3,557
)
 
19.90

Outstanding at end of period
574,165

 
$
32.75

 
574,165

 
$
32.75

Exercisable at end of period
295,087

 
$
49.50

 
295,087

 
$
49.50

Vested or expected to vest in the future
573,378

 
$
32.78

 
573,378

 
$
32.78


Nonvested Stock Awards: Compensation cost arising from nonvested stock awards granted to employees is recognized as an expense using the straight-line method over the vesting period. As of March 31, 2013 and September 30, 2012, there was $1.8 million and $2.1 million, respectively, of total unrecognized compensation cost related to nonvested stock awards included in paid-in capital. The cost remaining at March 31, 2013 is expected to be recognized over a weighted average period of 1.3 years.
During the six months ended March 31, 2013, we issued 31,532 shares of performance-based restricted stock (Performance Shares) to our executive officers and certain corporate employees. Each Performance Share represents a contingent right to receive one share of the Company’s common stock if vesting is satisfied at the end of the three-year performance period. The number of shares that will vest at the end of the three-year performance period will depend upon the level to which the following two performance criteria are achieved (1) Beazer’s total shareholder return (TSR) relative to a group of peer companies and (2) the compound annual growth rate (CAGR) during the three-year performance period of Beazer common stock. The target number of Performance Shares that vest may be increased by up to 50% based on the level of achievement of the above criteria as defined in the applicable award agreement. Payment for Performance Shares in excess of the target number (31,532) will be settled in cash. Any portion of the Performance Shares that do not vest at the end of the period will be forfeited. The grants of the performance-based, nonvested stock were valued using the Monte Carlo valuation method and had an estimated fair value of $5.02 per share, a portion of which is attributable to the potential cash-settled liability aspect of the grant which is included in Other Liabilities.
A Monte Carlo simulation model requires the following inputs: (1) expected dividend yield on the underlying stock, (2) expected price volatility of the underlying stock, (3) risk-free interest rate for the period corresponding with the expected term of the award and (4) fair value of the underlying stock. For the Company and each member of the peer group, the following inputs were used, as applicable, in the Monte Carlo simulation model to determine the fair value as of the grant date for the Performance Shares: 0% dividend yield for the Company, expected price volatility ranging from 35.6% to 60.4% and a risk-free interest rate of 0.34%. The methodology used to determine these assumptions is similar to that for the Black-Scholes Model used for stock option grants discussed above; however the expected term is determined by the model in the Monte Carlo simulation.

21
Table of Contents

Activity relating to nonvested stock awards, including the Performance Shares for the three and six months ended March 31, 2013 is as follows:
 
Three Months Ended
 
Six Months Ended
 
March 31, 2013
 
March 31, 2013
 
Shares
 
Weighted
Average
Grant
Date Fair
Value
 
Shares
 
Weighted
Average
Grant
Date Fair
Value
Beginning of period
381,181

 
$
18.10

 
323,335

 
$
19.61

Granted
717

 
18.82

 
93,309

 
10.32

Vested
—

 
—

 
(31,653
)
 
10.80

Forfeited
(7,145
)
 
13.25

 
(10,238
)
 
14.14

End of period
374,753

 
$
18.19

 
374,753

 
$
18.19


(12) Segment Information
We have three homebuilding segments operating in 16 states. Beginning in the second quarter of fiscal 2011, through May 2, 2012, we operated our Pre-Owned Homes business in Arizona and Nevada. The results below include operating results of our Pre-Owned segment through May 2, 2012. Effective May 3, 2012, we contributed our Pre-Owned Homes business for an investment in an unconsolidated entity (see Note 3 for additional information). Revenues in our homebuilding segments are derived from the sale of homes which we construct and from land and lot sales. Revenues from our Pre-Owned segment were derived from the rental of previously owned homes purchased and improved by the Company. Our reportable segments have been determined on a basis that is used internally by management for evaluating segment performance and resource allocations. 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 and Texas
East: Delaware, Indiana, Maryland, New Jersey, New York, Pennsylvania, Tennessee (Nashville) and Virginia
Southeast: Florida, Georgia, North Carolina (Raleigh) and South Carolina
Management’s evaluation of segment performance is based on segment operating income. Operating income for our homebuilding segments is defined as homebuilding, land sale and other revenues less home construction, land development and land sales expense, commission expense, depreciation and amortization and certain general and administrative expenses which are incurred by or allocated to our homebuilding segments. Operating income for our Pre-Owned segment was historically defined as rental revenues less home repairs and operating expenses, home sales expense, depreciation and amortization and certain general and administrative expenses which are incurred by or allocated to the segment. The accounting policies of our segments are those described in Note 1 above and Note 1 to our consolidated financial statements in our 2012 Annual Report.
 
Three Months Ended
 
Six Months Ended
 
March 31,
 
March 31,
(In thousands)
2013
 
2012
 
2013
 
2012
Revenue
 
 
 
 
 
 
 
West
$
118,996

 
$
77,857

 
$
229,122

 
$
148,634

East
117,129

 
75,192

 
213,668

 
157,010

Southeast
51,777

 
38,070

 
92,014

 
73,638

Pre-Owned
—

 
524

 
—

 
909

Continuing Operations
$
287,902

 
$
191,643

 
$
534,804

 
$
380,191



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Table of Contents

 
Three Months Ended
 
Six Months Ended
 
March 31,
 
March 31,
(In thousands)
2013
 
2012
 
2013
 
2012
Operating income/(loss)
 
 
 
 
 
 
 
West
$
10,045

 
$
3,377

 
$
18,403

 
$
2,786

East
10,313

 
(659
)
 
16,501

 
147

Southeast
2,050

 
1,180

 
4,380

 
1,965

Pre-Owned
—

 
(62
)
 
—

 
(200
)
Segment total
22,408

 
3,836

 
39,284

 
4,698

Corporate and unallocated (a)
(22,097
)
 
(21,530
)
 
(42,574
)
 
(39,091
)
Total operating income (loss)
311

 
(17,694
)
 
(3,290
)
 
(34,393
)
Equity in income (loss) of unconsolidated entities
68

 
4

 
104

 
(73
)
Loss on extinguishment of debt
(3,638
)
 
(2,747
)
 
(3,638
)
 
(2,747
)
Other expense, net
(16,195
)
 
(18,265
)
 
(31,822
)
 
(36,538
)
Loss from continuing operations before income taxes
$
(19,454
)
 
$
(38,702
)
 
$
(38,646
)
 
$
(73,751
)

 
Three Months Ended
 
Six Months Ended
 
March 31,
 
March 31,
(In thousands)
2013
 
2012
 
2013
 
2012
Depreciation and amortization
 
 
 
 
 
 
 
West
$
1,185

 
$
1,090

 
$
2,207

 
$
1,870

East
900

 
805

 
1,583

 
1,310

Southeast
339

 
374

 
657

 
713

Pre-Owned
—

 
154

 
—

 
273

Segment total
2,424

 
2,423

 
4,447

 
4,166

Corporate and unallocated (a)
669

 
767

 
1,361

 
1,427

Continuing Operations
$
3,093

 
$
3,190

 
$
5,808

 
$
5,593


 
Six Months Ended
 
March 31,
(In thousands)
2013
 
2012
Capital Expenditures
 
 
 
West
$
1,866

 
$
1,415

East
611

 
1,883

Southeast
482

 
1,078

Pre-Owned (b)
910

 
7,906

Corporate and unallocated
—

 
206

Consolidated total
$
3,869

 
$
12,488


(In thousands)
March 31, 2013
 
September 30, 2012
Assets
 
 
 
West
$
633,065

 
$
618,805

East
300,748

 
320,404

Southeast
193,122

 
160,868

Corporate and unallocated (c)
819,775

 
882,141

Consolidated total
$
1,946,710

 
$
1,982,218



23
Table of Contents

(a)
Corporate and unallocated includes 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. For the six months ended March 31, 2012, corporate and unallocated also includes an $11 million recovery related to old water intrusion warranty and related legal expenditures.
(b)
Capital expenditures represent the purchase of previously owned homes during the six months ended March 31, 2012.
(c)
Primarily consists of cash and cash equivalents, consolidated inventory not owned, deferred taxes, capitalized interest and other items that are not allocated to the segments.

(13) 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 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.


Beazer Homes USA, Inc.
Unaudited Consolidating Balance Sheet Information
March 31, 2013
(In thousands)
 
 
Beazer Homes
USA, Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Consolidating
Adjustments
 
Consolidated
Beazer Homes
USA, Inc.
ASSETS
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
423,377

 
$
5,551

 
$
514

 
$
(3,782
)
 
$
425,660

Restricted cash
246,201

 
541

 
—

 
—

 
246,742

Accounts receivable (net of allowance of $2,051)
—

 
25,063

 
7

 
—

 
25,070

Income tax receivable
2,513

 
—

 
—

 
—

 
2,513

Owned inventory
—

 
1,143,737

 
—

 
—

 
1,143,737

Consolidated inventory not owned
—

 
8,375

 
—

 
—

 
8,375

Investments in unconsolidated entities
773

 
41,041

 
—

 
—

 
41,814

Deferred tax assets, net
7,000

 
—

 
—

 
—

 
7,000

Property, plant and equipment, net
—

 
16,928

 
—

 
—

 
16,928

Investments in subsidiaries
79,504

 
—

 
—

 
(79,504
)
 
—

Intercompany
1,004,919

 
—

 
2,846

 
(1,007,765
)
 
—

Other assets
22,260

 
5,051

 
1,560

 
—

 
28,871

Total assets
$
1,786,547

 
$
1,246,287

 
$
4,927

 
$
(1,091,051
)
 
$
1,946,710

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
Trade accounts payable
$
—

 
$
62,235

 
$
—

 
$
—

 
$
62,235

Other liabilities
53,746

 
85,478

 
1,578

 
—

 
140,802

Intercompany
1,077

 
1,010,470

 
—

 
(1,011,547
)
 
—

Obligations related to land not owned under option agreements
—

 
3,286

 
—

 
—

 
3,286

Total debt (net of discounts of $2,440)
1,498,490

 
8,663

 
—

 
—

 
1,507,153

Total liabilities
1,553,313

 
1,170,132

 
1,578

 
$
(1,011,547
)
 
1,713,476

Stockholders’ equity
233,234

 
76,155

 
3,349

 
(79,504
)
 
233,234

Total liabilities and stockholders’ equity
$
1,786,547

 
$
1,246,287

 
$
4,927

 
$
(1,091,051
)
 
$
1,946,710


24
Table of Contents

Beazer Homes USA, Inc.
 
Unaudited Consolidating Balance Sheet Information
September 30, 2012
(In thousands)

 
Beazer Homes
USA, Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Consolidating
Adjustments
 
Consolidated
Beazer Homes
USA, Inc.
ASSETS
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
481,394

 
$
8,215

 
$
646

 
$
(2,460
)
 
$
487,795

Restricted cash
252,900

 
360

 
—

 
—

 
253,260

Accounts receivable (net of allowance of $2,235)
—

 
24,594

 
5

 
—

 
24,599

Income tax receivable
6,372

 
—

 
—

 
—

 
6,372

Owned inventory
—

 
1,099,132

 
—

 
—

 
1,099,132

Consolidated inventory not owned
—

 
12,420

 
—

 
—

 
12,420

Investments in unconsolidated entities
773

 
41,305

 
—

 
—

 
42,078

Deferred tax assets, net
6,848

 
—

 
—

 
—

 
6,848

Property, plant and equipment, net
—

 
18,974

 
—

 
—

 
18,974

Investments in subsidiaries
63,120

 
—

 
—

 
(63,120
)
 
—

Intercompany
969,425

 
—

 
3,001

 
(972,426
)
 
—

Other assets
21,307

 
7,783

 
1,650

 
—

 
30,740

Total assets
$
1,802,139