Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________________________________________
FORM 10-Q
_____________________________________________________________
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x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended December 31, 2018
or
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¨ | 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)
_____________________________________________________________
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DELAWARE | | 58-2086934 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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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 12 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 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 such files). YES x NO ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act:
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Large accelerated filer | ¨ | Accelerated filer | x |
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Non-accelerated filer | ¨ | (Do not check if a smaller reporting company) | |
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Smaller reporting company | ¨ | Emerging growth company | ¨ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x
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Class | | Outstanding as of January 30, 2019 |
Common Stock, $0.001 par value | | 32,136,987 |
BEAZER HOMES USA, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BEAZER HOMES USA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
| | | | | | | |
in thousands (except share and per share data) | December 31,
2018 | | September 30,
2018 |
ASSETS | | | |
Cash and cash equivalents | $ | 84,399 |
| | $ | 139,805 |
|
Restricted cash | 12,637 |
| | 13,443 |
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Accounts receivable (net of allowance of $378 and $378, respectively) | 19,349 |
| | 24,647 |
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Owned inventory | 1,722,120 |
| | 1,692,284 |
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Investments in unconsolidated entities | 3,650 |
| | 4,035 |
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Deferred tax assets, net | 218,025 |
| | 213,955 |
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Property and equipment, net | 24,408 |
| | 20,843 |
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Goodwill | 10,605 |
| | 9,751 |
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Other assets | 8,197 |
| | 9,339 |
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Total assets | $ | 2,103,390 |
| | $ | 2,128,102 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Trade accounts payable | $ | 99,864 |
| | $ | 126,432 |
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Other liabilities | 112,633 |
| | 126,389 |
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Total debt (net of premium of $2,447 and $2,640, respectively, and debt issuance costs of $13,651 and $14,336, respectively) | 1,255,784 |
| | 1,231,254 |
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Total liabilities | 1,468,281 |
| | 1,484,075 |
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Stockholders’ equity: | | | |
Preferred stock (par value $.01 per share, 5,000,000 shares authorized, no shares issued) | — |
| | — |
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Common stock (par value $0.001 per share, 63,000,000 shares authorized, 32,674,596 issued and outstanding and 33,522,046 issued and outstanding, respectively) | 33 |
| | 34 |
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Paid-in capital | 863,797 |
| | 880,025 |
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Accumulated deficit | (228,721 | ) | | (236,032 | ) |
Total stockholders’ equity | 635,109 |
| | 644,027 |
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Total liabilities and stockholders’ equity | $ | 2,103,390 |
| | $ | 2,128,102 |
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See accompanying notes to condensed consolidated financial statements.
BEAZER HOMES USA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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| | | | | | | |
| Three Months Ended |
| December 31, |
in thousands (except per share data) | 2018 | | 2017 |
Total revenue | $ | 402,040 |
| | $ | 372,489 |
|
Home construction and land sales expenses | 340,378 |
| | 311,660 |
|
Inventory impairments and abandonments | 1,007 |
| | — |
|
Gross profit | 60,655 |
| | 60,829 |
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Commissions | 15,737 |
| | 14,356 |
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General and administrative expenses | 38,642 |
| | 37,285 |
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Depreciation and amortization | 2,770 |
| | 2,507 |
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Operating income | 3,506 |
| | 6,681 |
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Equity in loss of unconsolidated entities | (64 | ) | | (101 | ) |
Loss on extinguishment of debt | — |
| | (25,904 | ) |
Other expense, net | (42 | ) | | (3,145 | ) |
Income (loss) from continuing operations before income taxes | 3,400 |
| | (22,469 | ) |
(Benefit) expense from income taxes | (3,922 | ) | | 108,106 |
|
Income (loss) from continuing operations | 7,322 |
| | (130,575 | ) |
Loss from discontinued operations, net of tax | (11 | ) | | (372 | ) |
Net income (loss) | $ | 7,311 |
| | $ | (130,947 | ) |
Weighted average number of shares: | | | |
Basic | 31,801 |
| | 32,055 |
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Diluted | 32,055 |
| | 32,055 |
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Basic and diluted earnings (loss) per share: | | | |
Continuing operations | $ | 0.23 |
| | $ | (4.07 | ) |
Discontinued operations | — |
| | (0.01 | ) |
Total | $ | 0.23 |
| | $ | (4.08 | ) |
See accompanying notes to condensed consolidated financial statements.
BEAZER HOMES USA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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| Three Months Ended |
| December 31, |
in thousands | 2018 | | 2017 |
Cash flows from operating activities: | | | |
Net income (loss) | $ | 7,311 |
| | $ | (130,947 | ) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | | | |
Depreciation and amortization | 2,770 |
| | 2,507 |
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Stock-based compensation expense | 2,114 |
| | 2,610 |
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Inventory impairments and abandonments | 1,007 |
| | 450 |
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Deferred and other income tax (benefit) expense | (4,070 | ) | | 107,795 |
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Gain on sale of fixed assets | (35 | ) | | (65 | ) |
Change in allowance for doubtful accounts | — |
| | (1 | ) |
Equity in loss of unconsolidated entities | 65 |
| | 88 |
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Cash distributions of income from unconsolidated entities | 320 |
| | 50 |
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Non-cash loss on extinguishment of debt | — |
| | 3,173 |
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Changes in operating assets and liabilities: | | | |
Decrease in accounts receivable | 5,298 |
| | 4,520 |
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Increase in inventory | (29,722 | ) | | (83,205 | ) |
Decrease in other assets | 1,430 |
| | 1,252 |
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Decrease in trade accounts payable | (26,568 | ) | | (5,949 | ) |
Decrease in other liabilities | (14,610 | ) | | (4,502 | ) |
Net cash used in operating activities | (54,690 | ) | | (102,224 | ) |
Cash flows from investing activities: | | | |
Capital expenditures | (6,354 | ) | | (3,702 | ) |
Proceeds from sale of fixed assets | 54 |
| | 84 |
|
Investments in unconsolidated entities | — |
| | (421 | ) |
Net cash used in investing activities | (6,300 | ) | | (4,039 | ) |
Cash flows from financing activities: | | | |
Repayment of debt | (1,479 | ) | | (401,481 | ) |
Proceeds from issuance of new debt | — |
| | 400,000 |
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Repayment of borrowings from credit facility | (75,000 | ) | | — |
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Borrowings from credit facility | 100,000 |
| | — |
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Debt issuance costs | (400 | ) | | (5,649 | ) |
Repurchase of common stock | (16,500 | ) | | — |
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Tax payments for stock-based compensation awards | (1,850 | ) | | (1,322 | ) |
Other financing activities | 7 |
| | — |
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Net cash provided by (used in) financing activities | 4,778 |
| | (8,452 | ) |
Decrease in cash, cash equivalents, and restricted cash | (56,212 | ) | | (114,715 | ) |
Cash, cash equivalents, and restricted cash at beginning of period | 153,248 |
| | 304,609 |
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Cash, cash equivalents, and restricted cash at end of period | $ | 97,036 |
| | $ | 189,894 |
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See accompanying notes to condensed consolidated financial statements.
BEAZER HOMES USA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Description of Business
Beazer Homes USA, Inc. (“we,” “us,” “our,” “Beazer,” “Beazer Homes” and the “Company”) is a geographically diversified homebuilder with active operations in 13 states within three geographic regions in the United States: the West, East, and Southeast.
Our homes are designed to appeal to homeowners at different price points across various demographic segments and are generally offered for sale in advance of their construction. Our objective is to provide our customers with homes that incorporate exceptional value and quality, while seeking to maximize our return on invested capital over the course of a housing cycle.
For an additional description of our business, refer to Item 1 within our Annual Report on Form 10-K for the fiscal year ended September 30, 2018 (2018 Annual Report).
(2) Basis of Presentation and Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements of 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. The unaudited condensed consolidated financial statements do not include all of the information and disclosures required by GAAP for complete financial statements. As such, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2018. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation have been included in the accompanying unaudited condensed consolidated financial statements. The results of the Company's consolidated operations presented herein for the three months ended December 31, 2018 are not necessarily indicative of the results to be expected for the full fiscal year due to seasonal variations in our operations and other factors.
Basis of Consolidation
The accompanying condensed consolidated financial statements include the accounts of Beazer Homes USA, Inc. and its consolidated subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Our net income (loss) is equivalent to our comprehensive income (loss), so we have not presented a separate statement of comprehensive income (loss).
In the past, we have discontinued homebuilding operations in various markets. Results from certain of these exited markets are reported as discontinued operations in the accompanying unaudited condensed consolidated statements of operations for all periods presented (see Note 16 for a further discussion of our discontinued operations).
Our fiscal year 2019 began on October 1, 2018 and ends on September 30, 2019. Our fiscal year 2018 began on October 1, 2017 and ended on September 30, 2018.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make informed estimates and judgments that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Accordingly, actual results could differ from these estimates.
Business Combinations
On July 13, 2018, the Company acquired substantially all of the assets, operations, and certain assumed liabilities of Venture Homes, a leading private homebuilder in the Atlanta market, for a purchase price of $61.3 million, net of cash acquired. As of December 31, 2018, $57.3 million of the purchase price had been paid, net of cash acquired, with the remaining $4.0 million due during the second quarter of fiscal 2019. The acquired assets consisted of more than 1,100 total owned or controlled lots within 27 single-family communities in the greater Atlanta metropolitan area. The acquired lots included a backlog of 48 homes and 6 model homes. The acquired assets and liabilities were recorded at their estimated fair values and resulted in inventory of $56.0 million and goodwill of $10.6 million, and other assets of $0.7 million as well as accounts payable of $5.5 million and other liabilities of $0.2 million.
The purchase price accounting reflected above is preliminary and is based on estimates and assumptions that are subject to change within the measurement period, which is generally up to one year from the acquisition date pursuant to ASC 805. The purchase price allocation of Venture Homes is provisional pending completion of the fair value analysis of acquired assets and assumed liabilities.
Share Repurchase Program
On November 13, 2018, the Company announced that its Board of Directors approved a share repurchase program that authorizes the Company to repurchase up to $50.0 million of its outstanding common stock. As part of this program, the Company executed an accelerated share repurchase agreement (ASR) on November 15, 2018 to repurchase an aggregate of $16.5 million of its outstanding common stock. During December 2018, the ASR was completed with a repurchase of approximately 1.6 million shares at an average price per share of $10.62. As of December 31, 2018, the remaining availability of the share repurchase program was $33.5 million.
Inventory Valuation
Inventory assets are assessed for recoverability no less than quarterly in accordance with the policies described in Notes 2 and 5 to the audited consolidated financial statements within our 2018 Annual Report. Homebuilding inventories that are accounted for as held for development (projects in progress) 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 communities that 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 land held for sale at the lower of the carrying value or fair value less costs to sell.
Revenue Recognition
We recognize revenue upon the transfer of promised goods to our customers in an amount that reflects the consideration to which we expect to be entitled by applying the following five-step process specified in Accounting Standards Codification Topic 606.
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• | Identify the contract(s) with a customer |
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• | Identify the performance obligations |
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• | Determine the transaction price |
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• | Allocate the transaction price |
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• | Recognize revenue when the performance obligations are met |
The following table presents our total revenue disaggregated by revenue stream:
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| Three Months Ended |
| December 31, |
in thousands | 2018 | | 2017 |
Homebuilding revenue | $ | 400,982 |
| | $ | 367,754 |
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Land sales and other revenue | 1,058 |
| | 4,735 |
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Total revenue (a) | $ | 402,040 |
| | $ | 372,489 |
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(a) Please see Note 14 for total revenue disaggregated by reportable segment.
Homebuilding revenue
Homebuilding revenue is reported net of any discounts and incentives and is generally recognized when title to and possession of the home are transferred to the buyer at the closing date. The performance obligation to deliver the home is generally satisfied in less than one year from the original contract date. Home sale contract assets consist of cash from home closings held in escrow for our benefit, typically for less than five days, and are considered deposits in-transit and classified as cash. Contract liabilities include customer deposits related to sold but undelivered homes and totaled $13.5 million and $14.9 million as of December 31, 2018 and September 30, 2018, respectively. Of the customer liabilities outstanding as of September 30, 2018, $8.4 million were recognized in revenue during the three months ended December 31, 2018 upon closing of the related homes.
Land sales and other revenue
Land sales revenue relates to land that does not fit within our homebuilding programs and strategic plans. Land sales typically require cash consideration on the closing date, which is generally when performance obligations are satisfied. In some periods, we also have other revenue related to broker fees as well as fees received for general contractor services that we perform on behalf of third parties. Revenue for broker and general contractor services are typically immaterial and are generally recognized as performance obligations are satisfied.
Recent Accounting Pronouncements
Revenue from Contracts with Customers. On October 1, 2018, we adopted Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers, and ASC 340-40, Other Assets and Deferred Costs - Contracts with Customers, collectively referred to as ASC 606. ASC 606 provides a new model for accounting for revenue arising from contracts with customers that supersedes most revenue recognition guidance. Under the new guidance, entities are required to recognize revenue at an amount that reflects the consideration to which the entity expects to be entitled upon transferring control of goods or services to a customer. As part of our adoption of ASC 606, we applied the modified retrospective method to contracts that were not completed as of October 1, 2018. Further, results for reporting periods beginning on or after October 1, 2018 are presented under ASC 606, while prior period amounts were not adjusted and continue to be reported under the previous accounting standards. The adoption of ASC 606 had no impact on opening retained earnings and did not materially affect the amount or timing of our revenue.
Leases. In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases (ASU 2016-02). ASU 2016-02 requires lessees to record most leases on their balance sheets. The timing and classification of lease-related expenses for lessees will depend on whether a lease is determined to be an operating lease or a finance lease using updated criteria within ASU 2016-02. Operating leases will result in straight-line expense (similar to current operating leases), while finance leases will result in a front-loaded expense pattern (similar to current capital leases). Regardless of lease type, the lessee will recognize a right-of-use asset, representing the right to use the identified asset during the lease term, and a related lease liability, representing the present value of the lease payments over the lease term. Lessor accounting will be largely similar to that under the current lease accounting rules. ASU 2016-02 also requires significantly enhanced disclosures around an entity's leases and the related accounting. The guidance within ASU 2016-02 will be effective for the Company's fiscal year beginning October 1, 2019, with early adoption permitted. In July 2018, the FASB issued ASU 2018-11, Leases - Targeted Improvements (ASU 2018-11), which provides an optional transition method to apply the requirements of the new lease standard through a cumulative-effect adjustment in the period of adoption. The Company expects to adopt the standard on October 1, 2019 using the optional transition method. We continue to evaluate the impact of ASU 2016-02 on our consolidated financial statements. However, a large majority of our leases are for office space, which we have determined will be treated as operating leases under ASU 2016-02. As such, we anticipate recording a right-of-use asset and related lease liability for these leases. We do not anticipate any significant change to our statements of operations or cash flows as a result of adopting ASU 2016-02.
Intangibles - Goodwill and Other. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-04). ASU 2017-04 eliminates Step 2 from the goodwill impairment test. This change will allow an entity to avoid calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination, thus reducing the cost and complexity of evaluating goodwill for impairment. This amendment is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted, and applied prospectively. We do not believe the adoption of ASU 2017-04 will have a material impact on our consolidated financial statements and disclosures.
Fair Value Measurements. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework (ASU 2018-13). The updated guidance improves the disclosure requirements for fair value measurements. The updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. We are currently assessing the impact of adopting the updated provisions.
Internal-Use Software. In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (ASU 2018-15). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This new guidance will be effective for public companies for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effect that the new guidance will have on its consolidated financial statements and related disclosures.
(3) Supplemental Cash Flow Information
The following table presents supplemental disclosure of non-cash and cash activity as well as a reconciliation of our total cash balances between our condensed consolidated balance sheets and condensed consolidated statements of cash flows for the periods presented:
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| Three Months Ended |
| December 31, |
in thousands | 2018 | | 2017 |
Supplemental disclosure of cash activity: |
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Interest payments | $ | 13,986 |
| | $ | 10,766 |
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Income tax payments | 121 |
| | — |
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Tax refunds received | 1,148 |
| | 39 |
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Reconciliation of cash, cash equivalents, and restricted cash: | | | |
Cash and cash equivalents | $ | 84,399 |
| | $ | 177,812 |
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Restricted cash | 12,637 |
| | 12,082 |
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Total cash, cash equivalents, and restricted cash shown in the statement of cash flows | $ | 97,036 |
| | $ | 189,894 |
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(4) Investments in Unconsolidated Entities
Unconsolidated Entities
As of December 31, 2018, the Company participated in certain joint ventures and had investments in unconsolidated entities in which it had less than a controlling interest. The following table presents the Company's investment in these unconsolidated entities as well as the total equity and outstanding borrowings of these unconsolidated entities as of December 31, 2018 and September 30, 2018:
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in thousands | December 31, 2018 | | September 30, 2018 |
Beazer's investment in unconsolidated entities | $ | 3,650 |
| | $ | 4,035 |
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Total equity of unconsolidated entities | 8,578 |
| | 10,113 |
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Total outstanding borrowings of unconsolidated entities | 11,867 |
| | 12,266 |
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Equity in income from unconsolidated entity activities included in income from continuing operations is as follows for the periods presented:
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| Three Months Ended |
| December 31, |
in thousands | 2018 | | 2017 |
Equity in loss of unconsolidated entities | $ | (64 | ) | | $ | (101 | ) |
For the three months ended December 31, 2018 and 2017, there were no impairments related to investments in unconsolidated entities.
Guarantees
Historically, the Company's joint ventures typically obtained secured acquisition, development, and construction financing. In addition, the Company and its joint venture partners provided varying levels of guarantees of debt and other debt-related obligations for these unconsolidated entities. However, as of December 31, 2018 and September 30, 2018, the Company had no outstanding guarantees or other debt-related obligations related to our investments in unconsolidated entities.
The Company and its joint venture partners generally provide unsecured environmental indemnities to land development joint venture project lenders. These indemnities obligate the Company to reimburse the project lenders for claims related to environmental matters for which they are held responsible. During the three months ended December 31, 2018 and 2017, the Company was not required to make any payments related to environmental indemnities.
In assessing the need to record a liability for these guarantees, the Company considers its 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, the fair value of the collateral of unconsolidated entities is monitored to ensure that the related borrowings do not exceed the specified percentage of the value of the property securing the borrowings. As of December 31, 2018, no liability was recorded for the contingent aspects of any guarantees that were determined to be reasonably possible but not probable.
(5) Inventory
The components of our owned inventory are as follows as of December 31, 2018 and September 30, 2018:
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| | | | | | | |
in thousands | December 31, 2018 | | September 30, 2018 |
Homes under construction | $ | 478,539 |
| | $ | 476,752 |
|
Development projects in progress | 925,728 |
| | 907,793 |
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Land held for future development | 83,177 |
| | 83,173 |
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Land held for sale | 6,997 |
| | 7,781 |
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Capitalized interest | 151,886 |
| | 144,645 |
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Model homes | 75,793 |
| | 72,140 |
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Total owned inventory | $ | 1,722,120 |
| | $ | 1,692,284 |
|
Homes under construction include homes substantially finished and ready for delivery and homes in various stages of construction, including the cost of the underlying lot. We had 223 (with a cost of $83.9 million) and 240 (with a cost of $84.8 million) substantially completed homes that were not subject to a sales contract (spec homes) as of December 31, 2018 and September 30, 2018, 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 customer 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 for sale includes land and lots that do not fit within our homebuilding programs and strategic plans in certain markets and land is classified as held for sale once certain criteria are met. These assets are recorded at the lower of the carrying value or fair value less costs to sell.
The amount of interest we are able to capitalize depends on our qualified inventory balance, which considers the status of our inventory holdings. Our qualified inventory balance includes the majority of our homes under construction and development projects in progress, but excludes land held for future development and land held for sale (see Note 6 for additional information on capitalized interest).
Total owned inventory by reportable segment is presented in the table below as of December 31, 2018 and September 30, 2018:
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| | | | | | | | | | | | | | | |
in thousands | Projects in Progress (a) | | Land Held for Future Development | | Land Held for Sale | | Total Owned Inventory |
December 31, 2018 | | | | | | | |
West Segment | $ | 785,702 |
| | $ | 58,129 |
| | $ | — |
| | $ | 843,831 |
|
East Segment | 277,300 |
| | 14,077 |
| | 3,906 |
| | 295,283 |
|
Southeast Segment | 357,172 |
| | 10,971 |
| | 3,091 |
| | 371,234 |
|
Corporate and unallocated (b) | 211,772 |
|
| — |
| | — |
| | 211,772 |
|
Total | $ | 1,631,946 |
| | $ | 83,177 |
| | $ | 6,997 |
| | $ | 1,722,120 |
|
September 30, 2018 | | | | | | | |
West Segment | $ | 763,453 |
| | $ | 58,125 |
| | $ | — |
| | $ | 821,578 |
|
East Segment | 280,761 |
| | 14,077 |
| | 4,580 |
| | 299,418 |
|
Southeast Segment | 358,126 |
| | 10,971 |
| | 3,177 |
| | 372,274 |
|
Corporate and unallocated (b) | 198,990 |
| | — |
| | 24 |
| | 199,014 |
|
Total | $ | 1,601,330 |
| | $ | 83,173 |
| | $ | 7,781 |
| | $ | 1,692,284 |
|
(a) Projects in progress include homes under construction, development projects in progress, capitalized interest, and model home categories from the preceding table.
(b) Projects in progress amount includes capitalized interest and indirect costs that are maintained within our Corporate and unallocated segment. Land held for sale amount includes parcels held by our discontinued operations.
Inventory Impairments
When conducting our community level review for the recoverability of inventory related to projects in progress, we establish a quarterly “watch list” comprised of communities that carry profit margins in backlog and in our forecast that are below a minimum threshold of profitability. We also include in our watch list communities with recent closings that have gross margins less than a specific threshold. Each community is first evaluated qualitatively to determine if there are temporary factors driving the low profitability levels. Following our qualitative evaluation, communities with more than ten homes remaining to close are subjected to substantial additional financial and operational analysis and review that considers the competitive environment and other factors contributing to gross margins below our watch list threshold. 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. For certain communities, we determined that it is prudent to reduce sales prices or further increase sales incentives in response to a variety of factors, including competitive market conditions in those specific submarkets for the product and locations of these communities. 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. Market deterioration that exceeds our initial estimates may lead us to incur 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.
For the quarter ended December 31, 2018, there were four communities that were included in our watch list that required further analysis to be performed after considering the number of lots remaining in each community and certain other qualitative factors. This additional analysis led to a $1.0 million impairment charge for one of these communities, principally due to a reduction in price that is other than temporary based on current competitive and market dynamics. For the quarter ended December 31, 2017, there were two communities on our quarterly watch list. However, none of these communities required further impairment analysis to be performed after considering certain qualitative factors.
The table below summarizes the results of our undiscounted cash flow analyses by reportable segment, where applicable, for the quarter ended December 31, 2018 (the period that such analyses were required):
|
| | | | | | | | | | | | |
$ in thousands | | | Undiscounted Cash Flow Analyses Prepared |
Segment (a) | # of
Communities
on Watch List (b) | | # of
Communities (c) | | Pre-analysis
Book Value
(BV) | | Aggregate
Undiscounted
Cash Flow as a
% of BV (d) |
Quarter Ended December 31, 2018 | | | | | | | |
West | 3 |
| | — |
| | $ | — |
| | — | % |
Southeast | 1 |
| | 1 |
| | 2,225 |
| | 71.3 | % |
Corporate and unallocated (e) | — |
| | — |
| | 387 |
| | N/A (f) |
|
Total | 4 |
| | 1 |
| | $ | 2,612 |
| | |
(a) 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.
(b) Number of communities in this column excludes communities that are closing out and have less than ten closings remaining.
(c) Number of communities in this column is lower than the number of communities on our watch list because it excludes communities due to certain qualitative considerations that would imply that the low profitability levels are temporary in nature.
(d) An aggregate undiscounted cash flow as a percentage of book value under 100% would indicate a possible impairment and is consistent with our "watch list" methodology. The book value of each project assessed for recoverability on an undiscounted cash flow basis includes all inventory costs applicable to the project as of the date of the analysis, including capitalized interest and indirects.
(e) Amount represents capitalized interest and indirects balance related to the communities for which an undiscounted cash flow analysis was prepared. Capitalized interest and indirects are maintained within our Corporate and unallocated segment.
(f) N/A - not applicable.
The following table presents, by reportable segment, details of the impairment charges taken on projects in progress for the periods presented:
|
| | | | | | | | | | | | | |
$ in thousands | Results of Discounted Cash Flow Analyses Prepared |
Segment | # of
Communities
Impaired | | # of Lots
Impaired | | Impairment
Charge | | Estimated Fair
Value of
Impaired
Inventory at time of
Impairment |
Quarter Ended December 31, 2018 | | | | | | | |
Southeast | 1 |
| | 15 |
| | $ | 858 |
| | $ | 1,367 |
|
Corporate and unallocated (a) | — |
| | — |
| | 149 |
| | 238 |
|
Total | 1 |
| | 15 |
| | $ | 1,007 |
| | $ | 1,605 |
|
(a) Amount represents capitalized interest and indirects balance that was impaired. Capitalized interest and indirects are maintained within our Corporate and unallocated segment.
The following table presents the ranges or values of significant quantitative unobservable inputs we used in determining the fair value of the communities we impaired during the periods presented:
|
| | | |
$ in thousands | Three Months Ended |
Unobservable Inputs | December 31, 2018 |
Average selling price | $ | 412 |
|
Closings per community per month | 1 - 2 |
|
Discount rate | 16.8 | % |
Impairments on land held for sale generally represent 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. Our assumptions about land sales prices require significant judgment because the real estate market is highly sensitive to changes in economic conditions. We calculate the estimated fair value 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.
From time-to-time, we also determine that the proper course of action with respect to a community is to not exercise an option and to write off the deposit securing the option takedown and the related pre-acquisition costs, as applicable. In determining whether to abandon lots or lot option contracts, our evaluation is primarily based upon the expected cash flows from the property. Additionally, in certain limited instances, we are forced to abandon lots due to permitting or other regulatory issues that do not allow us to build on those lots. If we intend to abandon or walk away from a property, we record a charge to earnings for the deposit amount and any related capitalized costs in the period such decision is made. Abandonment charges generally relate to our decision to abandon lots or not exercise certain option contracts that are not projected to produce adequate results, no longer fit with our long-term strategic plan or, in limited circumstances, are not suitable for building due to regulatory or environmental restrictions that are enacted.
The following table presents, by reportable segment, our total impairment and abandonment charges for the periods presented:
|
| | | | | | | |
| Three Months Ended December 31, |
in thousands | 2018 | | 2017 |
Projects in Progress: | | | |
Southeast | $ | 858 |
| | $ | — |
|
Corporate and unallocated (a) | 149 |
| | — |
|
Total impairment charges on projects in progress | $ | 1,007 |
| | $ | — |
|
Discontinued Operations: | | | |
Land Held for Sale | — |
| | 450 |
|
Total impairment and abandonment charges | $ | 1,007 |
| | $ | 450 |
|
(a) Amount represents capitalized interest and indirects balance that was impaired. Capitalized interest and indirects are maintained within our Corporate and unallocated segment.
Lot Option Agreements and Variable Interest Entities (VIE)
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. The 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 specified 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 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 at all.
The following table provides a summary of our interests in lot option agreements as of December 31, 2018 and September 30, 2018:
|
| | | | | | | |
in thousands | Deposits & Non-refundable Pre-acquisition Costs Incurred | | Remaining Obligation |
As of December 31, 2018 | | | |
Unconsolidated lot option agreements | $ | 71,644 |
| | $ | 367,026 |
|
As of September 30, 2018 | | | |
Unconsolidated lot option agreements | $ | 72,191 |
| | $ | 383,150 |
|
(6) Interest
Our ability to capitalize interest incurred during the three months ended December 31, 2018 and 2017 was limited by the balance of inventory eligible for capitalization. The following table presents certain information regarding interest for the periods presented:
|
| | | | | | | |
| Three Months Ended December 31, |
in thousands | 2018 | | 2017 |
Capitalized interest in inventory, beginning of period | $ | 144,645 |
| | $ | 139,203 |
|
Interest incurred | 24,921 |
| | 25,555 |
|
Capitalized interest impaired | (115 | ) | | — |
|
Interest expense not qualified for capitalization and included as other expense (a) | (242 | ) | | (3,435 | ) |
Capitalized interest amortized to home construction and land sales expenses (b) | (17,323 | ) | | (16,476 | ) |
Capitalized interest in inventory, end of period | $ | 151,886 |
| | $ | 144,847 |
|
(a) The amount of interest we are able to capitalize is dependent upon our qualified inventory balance, which considers the status of our inventory holdings. Our qualified inventory balance includes the majority of our homes under construction and development projects in progress, but excludes land held for future development and land held for sale.
(b) Capitalized interest amortized to home construction and land sales expenses varies based on the number of homes closed during the period and land sales, if any, as well as other factors.
(7) Borrowings
As of December 31, 2018 and September 30, 2018, we had the following debt, net of premium/discounts and unamortized debt issuance costs:
|
| | | | | | | | | |
in thousands | Maturity Date | | December 31, 2018 | | September 30, 2018 |
8 3/4% Senior Notes | March 2022 | | $ | 500,000 |
| | $ | 500,000 |
|
7 1/4% Senior Notes | February 2023 | | 24,834 |
| | 24,834 |
|
6 3/4% Senior Notes | March 2025 | | 250,000 |
| | 250,000 |
|
5 7/8% Senior Notes | October 2027 | | 400,000 |
| | 400,000 |
|
Unamortized debt premium, net | | | 2,447 |
| | 2,640 |
|
Unamortized debt issuance costs | | | (13,651 | ) | | (14,336 | ) |
Total Senior Notes, net | | | 1,163,630 |
| | 1,163,138 |
|
Junior Subordinated Notes (net of unamortized accretion of $36,253 and $36,770, respectively) | July 2036 | | 64,520 |
| | 64,003 |
|
Revolving Credit Facility | February 2021 | | 25,000 |
| | — |
|
Other Secured Notes payable | Various Dates | | 2,634 |
| | 4,113 |
|
Total debt, net | | | $ | 1,255,784 |
| | $ | 1,231,254 |
|
Secured Revolving Credit Facility
The Secured Revolving Credit Facility (the Facility) provides working capital and letter of credit capacity. In October 2018, the Company executed a Fifth Amendment to the Facility, extending the termination date of the Facility from February 15, 2020 to February 15, 2021 and increasing the maximum aggregate amount of commitments under the Facility, including borrowings and letters of credit, from $200.0 million to $210.0 million. The aggregate collateral ratio (as defined by the underlying Credit Agreement) remained at 4.00 to 1.00 and the after-acquired exclusionary condition (also as defined by the underlying Credit Agreement) remained at $800.0 million. The Facility continues to be with three lenders. For additional discussion of the Facility, refer to Note 8 to the audited consolidated financial statements within our 2018 Annual Report.
As of December 31, 2018, $25.0 million of borrowings and $1.5 million letters of credit were outstanding under the Facility, resulting in a remaining capacity of $183.5 million. As of September 30, 2018, no borrowings and no letters of credit were outstanding under the Facility, resulting in a remaining capacity of $200.0 million. The Facility requires compliance with certain covenants, including negative covenants and financial maintenance covenants. As of December 31, 2018, the Company was in compliance with all such covenants.
Letter of Credit Facilities
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 (in addition to the letters of credit issued under the Facility). As of December 31, 2018 and September 30, 2018, we had letters of credit outstanding under these additional facilities of $11.2 million and $10.4 million, respectively, all of which were secured by cash collateral in restricted accounts. The Company may enter into additional arrangements to provide additional letter of credit capacity.
In May 2018, the Company entered into a reimbursement agreement, which provides for the issuance of performance letters of credit, and an unsecured credit agreement that provides for the issuance of up to $50.0 million of standby letters of credit to backstop the Company's obligations under the reimbursement agreement (collectively, the "Bilateral Facility"). The Bilateral Facility will terminate on June 10, 2021. As of December 31, 2018, the total stated amount of performance letters of credit issued under the reimbursement agreement was $28.5 million (and the stated amount of the backstop standby letter of credit issued under the credit agreement was $30.0 million). The Company may enter into additional arrangements to provide greater letter of credit capacity.
Senior Notes
Our Senior Notes are unsecured 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 Facility. Each guarantor subsidiary is a 100% owned subsidiary of Beazer Homes. See Note 15 for further information.
All unsecured Senior 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 the Facility, if outstanding, to the extent of the value of the assets securing such indebtedness. The unsecured Senior Notes and related guarantees are structurally subordinated to all indebtedness and other liabilities of all of the Company's subsidiaries that do not guarantee these notes, but are fully and unconditionally guaranteed jointly and severally on a senior basis by the Company's wholly-owned subsidiaries party to each applicable indenture.
The Company's Senior Notes are issued under indentures that contain certain restrictive covenants which, among other things, restrict our ability to pay dividends, repurchase our common stock, incur certain types of additional indebtedness, and to make certain investments. Compliance with our Senior Note covenants does not significantly impact our operations. We were in compliance with the covenants contained in the indentures of all of our Senior Notes as of December 31, 2018.
For additional redemption features, refer to the table below that summarizes the redemption terms of our Senior Notes:
|
| | | | | | |
Senior Note Description | | Issuance Date | | Maturity Date | | Redemption Terms |
8 3/4% Senior Notes | | September 2016 | | March 2022 | | Callable at any time prior to March 15, 2019, in whole or in part, at a redemption price equal to 100.000% of the principal amount, plus a customary make-whole premium; on or after March 15, 2019, callable at a redemption price equal to 104.375% of the principal amount; on or after March 15, 2020, callable at a redemption price equal to 102.188% of the principal amount; on or after March 15, 2021, callable at a redemption price equal to 100.000% of the principal amount plus, in each case, accrued and unpaid interest |
7 1/4% Senior Notes | | February 2013 | | February 2023 | | Callable at any time on or after February 1, 2018, callable at a redemption price equal to 103.625% of the principal amount; on or after February 1, 2019, callable at a redemption price equal to 102.417% of the principal amount; on or after February 1, 2020, callable at a redemption price equal to 101.208% of the principal amount; on or after February 1, 2021, callable at 100.000% of the principal amount plus, in each case, accrued and unpaid interest |
6 3/4% Senior Notes | | March 2017 | | March 2025 | | Callable at any time prior to March 15, 2020, in whole or in part, at a redemption price equal to 100.000% of the principal amount, plus a customary make-whole premium; on or after March 15, 2020, callable at a redemption price equal to 105.063% of the principal amount; on or after March 15, 2021, callable at a redemption price equal to 103.375% of the principal amount; on or after March 15, 2022, callable at a redemption price equal to 101.688% of the principal amount; on or after March 15, 2023, callable at a redemption price equal to 100.000% of the principal amount, plus, in each case, accrued and unpaid interest |
5 7/8% Senior Notes | | October 2017 | | October 2027 | | Callable at any time prior to October 15, 2022, in whole or in part, at a redemption price equal to 100.000% of the principal amount, plus a customary make-whole premium; on or after October 15, 2022, callable at a redemption price equal to 102.938% of the principal amount; on or after October 15, 2023, callable at a redemption price equal to 101.958% of the principal amount; on or after October 15, 2024, callable at a redemption price equal to 100.979% of the principal amount; on or after October 15, 2025, callable at a redemption price equal to 100.000% of the principal amount, plus, in each case, accrued and unpaid interest |
Junior Subordinated Notes
Our unsecured junior subordinated notes (Junior Subordinated Notes) mature on July 30, 2036. The Junior Subordinated Notes are redeemable at par and paid interest at a fixed rate of 7.987% for the first ten years ending July 30, 2016. The securities now have a floating interest rate as defined in the Junior Subordinated Notes Indenture, which was a weighted-average of 4.97% as of December 31, 2018 (because the rate on the portion of the Junior Subordinated Notes that was modified, as discussed below, is subject to a floor). The obligations relating to these notes are subordinated to the Facility and the Senior Notes. In January 2010, we modified the terms of $75.0 million of these notes and recorded them at their then estimated fair value. Over the remaining life of the Junior Subordinated Notes, we will increase their carrying value until this carrying value equals the face value of the notes. As of December 31, 2018, the unamortized accretion was $36.3 million and will be amortized over the remaining life of the notes. As of December 31, 2018, we were in compliance with all covenants under our Junior Subordinated Notes.
Other Secured Notes Payable
We periodically acquire land through the issuance of notes payable. As of December 31, 2018 and September 30, 2018, we had outstanding notes payable of $2.6 million and $4.1 million, respectively, primarily related to land acquisitions. These secured notes payable have varying expiration dates in 2019, a weighted-average fixed interest rate of 1.88% as of December 31, 2018, and are secured by the real estate to which they relate.
The agreements governing these other 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) 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 related to these defects as well as others arising from its business. In determining loss contingencies, we consider the likelihood of loss and our ability to reasonably estimate the amount of such loss. An estimated loss is recorded when it is considered probable that a liability has been incurred and 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 quality standards. In addition, we provide a limited warranty for up to ten years covering only certain defined structural element failures.
Our homebuilding work is performed by subcontractors who typically must agree to indemnify us with regard to their work and provide certificates of insurance demonstrating that they have met our insurance requirements and have named us as an additional insured under their policies. Therefore, many claims relating to workmanship and materials that result in warranty spending are the primary responsibility of these subcontractors. In addition, we maintain insurance coverage related to our construction efforts that can result in recoveries of warranty and construction defect costs above certain specified limits.
Warranty reserves are included in other liabilities within the condensed consolidated balance sheets, and the provision for warranty accruals is included in home construction expenses in the condensed consolidated statements of operations. Reserves covering anticipated warranty expenses are recorded for each home closed. Management assesses the adequacy of warranty reserves each reporting period based on historical experience and the expected costs to remediate potential claims. Our review includes a quarterly analysis of the historical data and trends in warranty expense by division. Such analysis considers market-specific factors such as warranty experience, the number of home closings, the prices of homes, product mix, and other data in estimating warranty reserves. In addition, the analysis also contemplates the existence of any non-recurring or community-specific warranty-related matters that might not be included in historical data and trends. While estimated warranty liabilities are adjusted each reporting period based on the results of our quarterly analyses, we may not accurately predict actual warranty costs, which could lead to significant changes in the reserve.
Changes in warranty reserves are as follows for the periods presented:
|
| | | | | | | |
| Three Months Ended |
| December 31, |
in thousands | 2018 | | 2017 |
Balance at beginning of period | $ | 15,331 |
| | $ | 18,091 |
|
Accruals for warranties issued (a) | 2,305 |
| | 4,212 |
|
Changes in liability related to warranties existing in prior periods | (1,874 | ) | | (2,296 | ) |
Payments made | (2,330 | ) | | (4,191 | ) |
Balance at end of period | $ | 13,432 |
| | $ | 15,816 |
|
(a) Accruals for warranties issued are a function of the number of home closings in the period, the selling prices of the homes closed, and the rates of accrual per home estimated as a percentage of the selling price of the home.
Insurance Recoveries
The Company has insurance policies that provide for the reimbursement of certain warranty costs incurred above specified thresholds for each period covered. Amounts recorded for anticipated insurance recoveries are reflected within the condensed consolidated statements of income as a reduction of home construction expenses. Amounts not yet received from our insurer are recorded on a gross basis, without any reduction for the associated warranty expense, within accounts receivable on our condensed consolidated balance sheets.
Litigation
In the normal course of business, we are subject to various lawsuits. We cannot predict or determine the timing or final outcome of these lawsuits or the effect that any adverse findings or determinations in 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 these pending matters. An unfavorable determination in any of the pending lawsuits could result in the payment by us of substantial monetary damages that 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 our Board of Directors on these matters, even if we are ultimately successful, could have a material adverse effect on our financial condition, results of operations, or cash flows.
Other Matters
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 in 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 an accrual of $3.3 million and $3.7 million in other liabilities on our condensed consolidated balance sheets related to litigation and other matters, excluding warranty, as of December 31, 2018 and September 30, 2018, respectively.
We had outstanding letters of credit and performance bonds of approximately $41.2 million and $250.1 million, respectively, as of December 31, 2018, related principally to our obligations to local governments to construct roads and other improvements in various developments.
(9) Fair Value Measurements
As of the dates presented, we had assets on our condensed consolidated balance sheets that were required to be measured at fair value on a recurring or non-recurring basis. 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; and |
| |
• | Level 3 – Unobservable inputs that reflect our own estimates about the assumptions market participants would use in pricing the asset or liability. |
Certain of our assets are required to be recorded at fair value on a recurring basis. The fair value of our deferred compensation plan assets is based on market-corroborated inputs (Level 2).
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 of these assets may not be recovered. We review our long-lived assets, including inventory, for recoverability when factors indicate an impairment may exist, but no less than quarterly. Fair value on assets deemed to be impaired is determined based upon the type of asset being evaluated. Fair value of our owned inventory assets, when required to be calculated, is further discussed within Notes 2 and 5. The fair value of our investments in unconsolidated entities is determined primarily using a discounted cash flow model to value the underlying net assets of the respective entities. Due to the substantial use of unobservable inputs in valuing the assets on a non-recurring basis, they are classified within Level 3.
During the three months ended December 31, 2018, we recorded impairments of $1.0 million on projects in process compared to $0.5 million of impairments for land held for sale during the three months ended December 31, 2017.
Determining within which hierarchical level an asset or liability falls requires significant judgment. We evaluate our hierarchy disclosures each quarter.
The following table presents the period-end balances of our assets measured at fair value on a recurring basis and the impairment-date fair value of certain assets measured at fair value on a non-recurring basis for each hierarchy level. These balances represent only those assets whose carrying values were adjusted to fair value during the periods presented:
|
| | | | | | | | | | | | | | | |
in thousands | Level 1 | | Level 2 | | Level 3 | | Total |
As of December 31, 2018 | | | | | | | |
Deferred compensation plan assets (a) | $ | — |
| | $ | 1,760 |
| | $ | — |
| | $ | 1,760 |
|
Development projects in progress (b) | — |
| | — |
| | 1,605 |
|
| 1,605 |
|
As of September 30, 2018 | | | | | | | |
Deferred compensation plan assets (a) | $ | — |
| | $ | 1,578 |
| | $ | — |
| | $ | 1,578 |
|
Development projects in progress (b) | — |
| | — |
| | 1,312 |
| | 1,312 |
|
Land held for sale (b) | — |
| | — |
| | 1,724 |
| | 1,724 |
|
Unconsolidated entity investments (b) | — |
| | — |
| | 80 |
| | 80 |
|
(a) Measured at fair value on a recurring basis.
(b) Measured at fair value on a non-recurring basis, including the capitalized interest and indirects related to the asset.
The fair value of our cash and cash equivalents, restricted cash, accounts receivable, trade accounts payable, other liabilities, amounts due under the Facility (if outstanding), and other secured notes payable approximate their carrying amounts due to the short maturity of these assets and liabilities. When outstanding, obligations related to land not owned under option agreements approximate fair value.
The following table presents the carrying value and estimated fair value of certain of our other financial liabilities as of December 31, 2018 and September 30, 2018:
|
| | | | | | | | | | | | | | | |
| As of December 31, 2018 | | As of September 30, 2018 |
in thousands | Carrying
Amount (a) | | Fair Value | | Carrying
Amount (a) | | Fair Value |
Senior Notes (b) | $ | 1,163,630 |
| | $ | 1,048,346 |
| | $ | 1,163,138 |
| | $ | 1,096,214 |
|
Junior Subordinated Notes | 64,520 |
| | 64,520 |
| | 64,003 |
| | 64,003 |
|
Total | $ | 1,228,150 |
| | $ | 1,112,866 |
| | $ | 1,227,141 |
| | $ | 1,160,217 |
|
(a) Carrying amounts are net of unamortized debt premiums/discounts, debt issuance costs, or accretion.
(b) The estimated fair value for our publicly-held Senior Notes has been determined using quoted market rates (Level 2).
(10) Income Taxes
Income Tax Provision
The Company's income tax provision for quarterly interim periods is based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent, or unusual items. The total income tax provision, including discontinued operations, was a tax benefit of $3.9 million for the three months ended December 31, 2018, compared to an income tax expense of $108.0 million for the three months ended December 31, 2017. The current fiscal year income tax benefit was primarily driven by the completion of work necessary to claim an additional $5.3 million in tax credits related to prior fiscal years, partially offset by income from continuing operations and discrete impacts related to stock-based compensation. The tax expense for the three months ended December 31, 2017 was primarily driven by the remeasurement of the Company's deferred tax assets as a result of the enactment of the Tax Cuts and Jobs Act and several discrete tax items, including stock-based compensation. These items were partially offset by the loss incurred from continuing operations.
Deferred Tax Assets and Liabilities
As of December 31, 2018, our net deferred tax asset is comprised of various tax attributes that includes $9.6 million of minimum tax credit carryforwards. Beginning with the fiscal 2019 tax return, the Company will be able to make cash refund claims for significant portions of these credits due to the elimination of the alternative minimum tax in the Tax Cuts and Jobs Act.
The Company continues to evaluate its deferred tax assets each period to determine if a valuation allowance is required based on whether it is more likely than not that some portion of these deferred tax assets will not be realized. As of December 31, 2018, management concluded that it is more likely than not that a substantial portion of our deferred tax assets will be realized. As part of our analysis, we considered both positive and negative factors that impact profitability and whether those factors would lead to a change in the estimate of our deferred tax assets that may be realized in the future. Our conclusions on the valuation allowance and Internal Revenue Code Section 382 limitations related to our deferred tax assets remain consistent with the determinations we made during the period ended September 30, 2018, and such conclusions are based on similar company specific and industry factors to those discussed in Note 13 to the audited consolidated financial statements within our 2018 Annual Report.
(11) Stock-based Compensation
Stock-based compensation expense is included in general and administrative expenses in the condensed consolidated statements of operations. We recognized $2.1 million and $2.6 million of stock-based compensation expense related to stock options and restricted stock awards for the three months ended December 31, 2018 and December 31, 2017, respectively.
Stock Options
Following is a summary of stock option activity for the three months ended December 31, 2018:
|
| | | | | | |
| Three Months Ended |
| December 31, 2018 |
| Shares | | Weighted Average
Exercise Price |
Outstanding at beginning of period | 533,052 |
| | $ | 14.26 |
|
Granted | 25,230 |
| | 10.38 |
|
Exercised | (1,000 | ) | | 7.56 |
|
Cancelled | (1,319 | ) | | 11.53 |
|
Outstanding at end of period | 555,963 |
| | $ | 14.10 |
|
Exercisable at end of period | 504,092 |
| | $ | 14.13 |
|
Vested or expected to vest in the future | 552,799 |
| | $ | 14.13 |
|
As of December 31, 2018 and September 30, 2018, total unrecognized compensation cost related to unvested stock options was $0.3 million and $0.2 million, respectively. The cost remaining as of December 31, 2018 is expected to be recognized over a weighted-average period of 1.7 years.
Restricted Stock Awards
During the three months ended December 31, 2018, we issued time-based restricted stock awards that vest ratably over three years on each anniversary from the grant date and performance-based restricted stock awards with a payout subject to the achievement of performance and market conditions over a three-year period.
Following is a summary of restricted stock activity for the three months ended December 31, 2018:
|
| | | | | | | | |
| Three Months Ended December 31, 2018 |
| Performance-Based Restricted Shares | | Time-Based Restricted Shares | | Total Restricted Shares |
Beginning of period | 644,785 |
| | 431,783 |
| | 1,076,568 |
|
Granted (a) | 467,819 |
| | 441,991 |
| | 909,810 |
|
Vested (a) | (309,843 | ) | | (196,246 | ) | | (506,089 | ) |
Forfeited | (7,020 | ) | | (21,329 | ) | | (28,349 | ) |
End of period | 795,741 |
| | 656,199 |
| | 1,451,940 |
|
(a) Grant and vesting activity during the three months ended December 31, 2018 include 86,050 shares that were issued above target based on the performance level achieved under performance-based restricted stock vesting in the current period.
As of December 31, 2018 and September 30, 2018, total unrecognized compensation cost related to unvested restricted stock awards was $14.8 million and $8.8 million, respectively. The remaining cost as of December 31, 2018 is expected to be recognized over a weighted average period of 2.2 years.
(12) Earnings Per Share
Basic income (loss) per share is calculated by dividing net income (loss) by the weighted-average number of shares outstanding during the period. Diluted income (loss) per share adjusts the basic income (loss) per share for the effects of any potentially dilutive securities in periods in which the Company has net income and such effects are dilutive under the treasury stock method.
Following is a summary of the components of basic and diluted income (loss) per share for the periods presented:
|
| | | | | | | |
| Three Months Ended December 31, |
in thousands, except per share data | 2018 | | 2017 |
Numerator: | | | |
Income (loss) from continuing operations | $ | 7,322 |
| | $ | (130,575 | ) |
Loss from discontinued operations, net of tax | (11 | ) | | (372 | ) |
Net income (loss) | $ | 7,311 |
| | $ | (130,947 | ) |
| | | |
Denominator: | | | |
Basic weighted-average shares | 31,801 |
| | 32,055 |
|
Dilutive effect of restricted stock awards | 243 |
| | — |
|
Dilutive effect of stock options | 11 |
| | — |
|
Diluted weighted-average shares (a) | 32,055 |
| | 32,055 |
|
| | | |
Basic and diluted income (loss) per share: | | | |
Continuing operations | $ | 0.23 |
| | $ | (4.07 | ) |
Discontinued operations | — |
| | (0.01 | ) |
Total | $ | 0.23 |
| | $ | (4.08 | ) |
(a) The following potentially dilutive shares were excluded from the calculation of diluted income (loss) per share as a result of their anti-dilutive effect. Due to the reported net loss for the three months ended December 31, 2017, all common stock equivalents were excluded from the computation of diluted loss per share for that period because inclusion would have resulted in anti-dilution.
|
| | | | | |
| Three Months Ended December 31, |
in thousands | 2018 | | 2017 |
Stock options | 493 |
| | 556 |
|
Time-based restricted stock | 195 |
| | 828 |
|
Performance-based restricted stock | — |
| | 628 |
|
(13) Other Liabilities
Other liabilities include the following as of December 31, 2018 and September 30, 2018:
|
| | | | | | | |
in thousands | December 31, 2018 | | September 30, 2018 |
Accrued interest | $ | 24,217 |
| | $ | 14,401 |
|
Accrued bonus and deferred compensation | 20,236 |
| | 41,508 |
|
Customer deposits | 13,462 |
| | 14,903 |
|
Accrued warranty expense | 13,432 |
| | 15,331 |
|
Litigation accrual | 3,348 |
| | 3,656 |
|
Income tax liabilities | 856 |
| | 710 |
|
Other | 37,082 |
| | 35,880 |
|
Total | $ | 112,633 |
| | $ | 126,389 |
|
(14) Segment Information
We currently operate in 13 states that are grouped into three homebuilding segments based on geography. Revenues from our homebuilding segments are derived from the sale of homes that we construct and from land and lot sales. Our reportable segments have been determined on a basis that is used internally by management for evaluating segment performance and resource allocations. We have considered the applicable aggregation criteria and have combined our homebuilding operations into three reportable segments as follows:
West: Arizona, California, Nevada, and Texas
East: Delaware, Indiana, Maryland, New Jersey(a), Tennessee, and Virginia
Southeast: Florida, Georgia, North Carolina, and South Carolina
(a) During our fiscal 2015, we made the decision that we would not continue to reinvest in new homebuilding assets in our New Jersey division; therefore, it is no longer considered an active operation. However, it is included in this listing because the segment information below continues to include New Jersey.
Management’s evaluation of segment performance is based on segment operating income. Operating income for our homebuilding segments is defined as homebuilding and land sales and other revenue less home construction, land development, and land sales expense, commission expense, depreciation and amortization, and certain G&A expenses that are incurred by or allocated to our homebuilding segments. The accounting policies of our segments are those described in Note 2 to the consolidated financial statements within our 2018 Annual Report.
The following tables contain our revenue, operating income, and depreciation and amortization by segment for the periods presented:
|
| | | | | | | |
| Three Months Ended |
| December 31, |
in thousands | 2018 | | 2017 |
Revenue | | | |
West | $ | 208,944 |
| | $ | 177,971 |
|
East | 88,746 |
| | 88,853 |
|
Southeast | 104,350 |
| | 105,665 |
|
Total revenue | $ | 402,040 |
| | $ | 372,489 |
|
|
| | | | | | | |
| Three Months Ended |
| December 31, |
in thousands | 2018 | | 2017 |
Operating income (a) | | | |
West | $ | 24,261 |
| | $ | 21,110 |
|
East | 5,395 |
| | 7,396 |
|
Southeast | 1,380 |
| | 6,910 |
|
Segment total | 31,036 |
| | 35,416 |
|
Corporate and unallocated (b) | (27,530 | ) | | (28,735 | ) |
Total operating income | $ | 3,506 |
| | $ | 6,681 |
|
|
| | | | | | | |
| Three Months Ended |
| December 31, |
in thousands | 2018 | | 2017 |
Depreciation and amortization | | | |
West | $ | 1,278 |
| | $ | 1,256 |
|
East | 538 |
| | 439 |
|
Southeast | 610 |
| | 579 |
|
Segment total | 2,426 |
| | 2,274 |
|
Corporate and unallocated (b) | 344 |
| | 233 |
|
Total depreciation and amortization | $ | 2,770 |
| | $ | 2,507 |
|
(a) Operating income is impacted by impairment and abandonment charges incurred during the periods presented (see Note 5).
(b) Corporate and unallocated operating loss includes amortization of capitalized interest; movement in capitalized indirects; expenses related to numerous shared services functions that benefit all segments but are not allocated to the operating segments reported above, including information technology, treasury, corporate finance, legal, branding and national marketing; and other amounts that are not allocated to our operating segments. Corporate and unallocated depreciation and amortization represents depreciation and amortization related to assets held by our corporate functions that benefit all segments.
The following table presents capital expenditures by segment for the periods presented:
|
| | | | | | | |
| Three Months Ended |
| December 31, |
in thousands | 2018 | | 2017 |
Capital Expenditures | | | |
West | $ | 2,651 |
| | $ | 1,776 |
|
East | 762 |
| | 595 |
|
Southeast | 859 |
| | 743 |
|
Corporate and unallocated | 2,082 |
| | 588 |
|
Total capital expenditures | $ | 6,354 |
| | $ | 3,702 |
|
The following table presents assets by segment as of December 31, 2018 and September 30, 2018:
|
| | | | | | | |
in thousands | December 31, 2018 | | September 30, 2018 |
Assets | | | |
West | $ | 855,823 |
| | $ | 835,230 |
|
East | 305,232 |
| | 335,474 |
|
Southeast | 390,934 |
| | 414,685 |
|
Corporate and unallocated (a) | 551,401 |
| | 542,713 |
|
Total assets | $ | 2,103,390 |
| | $ | 2,128,102 |
|
(a) Primarily consists of cash and cash equivalents, restricted cash, deferred taxes, capitalized interest and indirects, and other items that are not allocated to the segments.
(15) Supplemental Guarantor Information
As discussed in Note 7, the Company's obligations to pay principal, premium, if any, and interest under certain debt agreements are guaranteed on a joint and several basis by substantially all of the Company's subsidiaries. Some of the immaterial subsidiaries do not guarantee the Senior Notes or the Facility. The guarantees are full and unconditional and the guarantor subsidiaries are 100% owned by Beazer Homes USA, Inc. The following unaudited financial information presents the line items of the Company's unaudited condensed consolidated financial statements separated by amounts related to the parent issuer, guarantor subsidiaries, non-guarantor subsidiaries, and consolidating adjustments as of or for the periods presented.
Beazer Homes USA, Inc.
Condensed Consolidating Balance Sheet Information
December 31, 2018
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | |
in thousands | Beazer Homes
USA, Inc. | | Guarantor
Subsidiaries | | Non-Guarantor
Subsidiaries | | Consolidating
Adjustments | | Consolidated
Beazer Homes
USA, Inc. |
ASSETS | | | | | | | | | |
Cash and cash equivalents | $ | 82,115 |
| | $ | 2,267 |
| | $ | 17 |
| | $ | — |
| | $ | 84,399 |
|
Restricted cash | 11,897 |
| | 740 |
| | — |
| | — |
| | 12,637 |
|
Accounts receivable (net of allowance of $378) | — |
| | 19,349 |
| | — |
| | — |
| | 19,349 |
|
Owned inventory | — |
| | 1,722,120 |
| | — |
| | — |
| | 1,722,120 |
|
Investments in unconsolidated entities | 773 |
| | 2,877 |
| | — |
| | — |
| | 3,650 |
|
Deferred tax assets, net | 218,025 |
| | — |
| | — |
| | — |
| | 218,025 |
|
Property and equipment, net | — |
| | 24,408 |
| | — |
| | — |
| | 24,408 |
|
Investments in subsidiaries | 636,800 |
| | — |
| | — |
| | (636,800 | ) | | — |
|
Intercompany | 963,614 |
| | (6,858 | ) | | 1,686 |
| | (958,442 | ) | | — |
|
Goodwill | — |
| | 10,605 |
| | — |
| | — |
| | 10,605 |
|
Other assets | 982 |
| | 7,215 |
| | — |
| | — |
| | 8,197 |
|
Total assets | $ | 1,914,206 |
| | $ | 1,782,723 |
| | $ | 1,703 |
| | $ | (1,595,242 | ) | | $ | 2,103,390 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | |
Trade accounts payable | $ | — |
| | $ | 99,864 |
| | $ | — |
| | $ | — |
| | $ | 99,864 |
|
Other liabilities | 24,261 |
| | 88,359 |
| | 13 |
| | — |
| | 112,633 |
|
Intercompany | 1,686 |
| | 956,756 |
| | — |
| | (958,442 | ) | | — |
|
Total debt (net of premium and debt issuance costs) | 1,253,150 |
| | 2,634 |
| | — |
| | — |
| | 1,255,784 |
|
Total liabilities | 1,279,097 |
| | 1,147,613 |
| | 13 |
| | (958,442 | ) | | 1,468,281 |
|
Stockholders’ equity | 635,109 |
| | 635,110 |
| | 1,690 |
| | (636,800 | ) | | 635,109 |
|
Total liabilities and stockholders’ equity | $ | 1,914,206 |
| | $ | 1,782,723 |
| | $ | 1,703 |
| | $ | (1,595,242 | ) | | $ | 2,103,390 |
|
Beazer Homes USA, Inc.
Condensed Consolidating Balance Sheet Information
September 30, 2018
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | |
in thousands | Beazer Homes
USA, Inc. | | Guarantor
Subsidiaries | | Non-Guarantor
Subsidiaries | | Consolidating
Adjustments | | Consolidated
Beazer Homes
USA, Inc. |
ASSETS | | | | | | | | | |
Cash and cash equivalents | $ | 93,875 |
| | $ | 45,355 |
| | $ | 575 |
| | $ | — |
| | $ | 139,805 |
|
Restricted cash | 10,921 |
| | 2,522 |
| | — |
| | — |
| | 13,443 |
|
Accounts receivable (net of allowance of $378) | — |
| | 24,647 |
| | — |
| | — |
| | 24,647 |
|
Owned inventory | — |
| | 1,692,284 |
| | — |
| | — |
| | 1,692,284 |
|
Investments in unconsolidated entities | 773 |
| | 3,262 |
| | — |
| | — |
| | 4,035 |
|
Deferred tax assets, net | 213,955 |
| | — |
| | — |
| | — |
| | 213,955 |
|
Property and equipment, net | — |
| | 20,843 |
| | — |
| | — |
| | 20,843 |
|
Investments in subsidiaries | 645,086 |
| | — |
| | — |
| | (645,086 | ) | | — |
|
Intercompany | 922,525 |
| | — |
| | 2,304 |
| | (924,829 | ) | | — |
|
Goodwill | — |
| | 9,751 |
| | — |
| | — |
| | 9,751 |
|
Other assets | 694 |
| | 8,626 |
| | 19 |
| | — |
| | 9,339 |
|
Total assets | $ | 1,887,829 |
| | $ | 1,807,290 |
| | $ | 2,898 |
| | $ | (1,569,915 | ) | | $ | 2,128,102 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | |
Trade accounts payable | $ | — |
| | $ | 126,432 |
| | $ | — |
| | $ | — |
| | $ | 126,432 |
|
Other liabilities | 14,357 |
| | 111,906 |
| | 126 |
| | — |
| | 126,389 |
|
Intercompany | 2,304 |
| | 922,525 |
| | — |
| | (924,829 | ) | | — |
|
Total debt (net of premium and debt issuance costs) | 1,227,141 |
| | 4,113 |
| | — |
| | — |
| | 1,231,254 |
|
Total liabilities | 1,243,802 |
| | 1,164,976 |
| | 126 |
| | (924,829 | ) | | 1,484,075 |
|
Stockholders’ equity | 644,027 |
| | 642,314 |
| | 2,772 |
| | (645,086 | ) | | 644,027 |
|
Total liabilities and stockholders’ equity | $ | 1,887,829 |
| | $ | 1,807,290 |
| | $ | 2,898 |
| | $ | (1,569,915 | ) | | $ | 2,128,102 |
|
Beazer Homes USA, Inc.
Consolidating Statements of Operations
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | |
in thousands | Beazer Homes
USA, Inc. | | Guarantor
Subsidiaries | | Non-Guarantor
Subsidiaries | | Consolidating
Adjustments | | Consolidated
Beazer Homes
USA, Inc. |
Three Months Ended December 31, 2018 | | | | | | | | | |
Total revenue | $ | — |
| | $ | 402,040 |
| | $ | 115 |
| | $ | (115 | ) | | $ | 402,040 |
|
Home construction and land sales expenses | 17,323 |
| | 323,170 |
| | — |
| | (115 | ) | | 340,378 |
|
Inventory impairments and abandonments | 115 |
| | 892 |
| | — |
| | — |
| | 1,007 |
|
Gross (loss) profit | (17,438 | ) | | 77,978 |
| | 115 |
| | — |
| | 60,655 |
|
Commissions | — |
| | 15,737 |
| | — |
| | — |
| | 15,737 |
|
General and administrative expenses | — |
| | 38,646 |
| | (4 | ) | | — |
| | 38,642 |
|
Depreciation and amortization | — |
| | 2,770 |
| | — |
| | — |
| | 2,770 |
|
Operating (loss) income | (17,438 | ) | | 20,825 |
| | 119 |
| | — |
| | 3,506 |
|
Equity in loss of unconsolidated entities | — |
| | (64 | ) | | — |
| | — |
| | (64 | ) |
Other (expense) income, net | (242 | ) | | 204 |
| | (4 | ) | | — |
| | (42 | ) |
(Loss) income from continuing operations before income taxes | (17,680 | ) | | 20,965 |
| | 115 |
| | — |
| | 3,400 |
|
Expense (benefit) from income taxes | 20,385 |
| | (24,336 | ) | | 29 |
| | — |
| | (3,922 | ) |
Equity in income of subsidiaries | 45,387 |
| | — |
| | — |
| | (45,387 | ) | | — |
|
Income from continuing operations | 7,322 |
| | 45,301 |
| | 86 |
| | (45,387 | ) | | 7,322 |
|
Loss from discontinued operations, net of tax | — |
| | (7 | ) | | (4 | ) | | — |
| | (11 | ) |
Equity in loss of subsidiaries from discontinued operations | (11 | ) | | — |
| | — |
| | 11 |
| | — |
|
Net income | $ | 7,311 |
| | $ | 45,294 |
| | $ | 82 |
| | $ | (45,376 | ) | | $ | 7,311 |
|
| | | | | | | | | |
in thousands | Beazer Homes
USA, Inc. | | Guarantor
Subsidiaries | | Non-Guarantor
Subsidiaries | | Consolidating
Adjustments | | Consolidated
Beazer Homes
USA, Inc. |
Three Months Ended December 31, 2017 | | | | | | | | | |
Total revenue | $ | — |
| | $ | 372,489 |
| | $ | 14 |
| | $ | (14 | ) | | $ | 372,489 |
|
Home construction and land sales expenses | 16,468 |
| | 295,206 |
| | — |
| | (14 | ) | | 311,660 |
|
Gross (loss) profit | (16,468 | ) | | 77,283 |
| | 14 |
| | — |
| | 60,829 |
|
Commissions | — |
| | 14,356 |
| | — |
| | — |
| | 14,356 |
|
General and administrative expenses | — |
| | 37,244 |
| | 41 |
| | — |
| | 37,285 |
|
Depreciation and amortization | — |
| | 2,507 |
| | — |
| | — |
| | 2,507 |
|
Operating (loss) income | (16,468 | ) | | 23,176 |
| | (27 | ) | | — |
| | 6,681 |
|
Equity in loss of unconsolidated entities | — |
| | (101 | ) | | — |
| | — |
| | (101 | ) |
Loss on extinguishment of debt | (25,904 | ) | | — |
| | — |
| | — |
| | (25,904 | ) |
Other (expense) income, net | (3,435 | ) | | 296 |
| | (6 | ) | | — |
| | (3,145 | ) |
(Loss) income from continuing operations before income taxes | (45,807 | ) | | 23,371 |
| | (33 | ) | | — |
| | (22,469 | ) |
(Benefit) expense from income taxes | (12,185 | ) | | 120,303 |
| | (12 | ) | | — |
| | 108,106 |
|
Equity in loss of subsidiaries | (96,953 | ) | | — |
| | — |
| | 96,953 |
| | — |
|
Loss from continuing operations | (130,575 | ) | | (96,932 | ) | | (21 | ) | | 96,953 |
| | (130,575 | ) |
Loss from discontinued operations | — |
| | (369 | ) | | (3 | ) | | — |
| | (372 | ) |
Equity in loss of subsidiaries from discontinued operations | (372 | ) | | — |
| | — |
| | 372 |
| | — |
|
Net loss | $ | (130,947 | ) | | $ | (97,301 | ) | | $ | (24 | ) | | $ | 97,325 |
| | $ | (130,947 | ) |
Beazer Homes USA, Inc.
Condensed Consolidating Statements of Cash Flow Information
(Unaudited) |
| | | | | | | | | | | | | | | | | | | |
in thousands | Beazer Homes
USA, Inc. | | Guarantor
Subsidiaries | | Non-Guarantor
Subsidiaries | | Consolidating
Adjustments | | Consolidated
Beazer Homes
USA, Inc. |
Three Months Ended December 31, 2018 | | | | | | | | | |
Net cash used in operating activities | $ | (31,908 | ) | | $ | (22,756 | ) | | $ | (26 | ) | | $ | — |
| | $ | (54,690 | ) |
Cash flows from investing activities: | | | | | | | | | |
Capital expenditures | — |
| | (6,354 | ) | | — |
| | — |
| | (6,354 | ) |
Proceeds from sale of fixed assets | — |
| | 54 |
| | — |
| | — |
| | 54 |
|
Return of capital from unconsolidated entities | 532 |
| | — |
| | (532 | ) | | — |
| | — |
|
Advances to/from subsidiaries | 21,204 |
| | — |
| | — |
| | (21,204 | ) | | — |
|
Net cash provided by (used in) investing activities | 21,736 |
| | (6,300 | ) | | (532 | ) | | (21,204 | ) | | (6,300 | ) |
Cash flows from financing activities: | | | | | | | | | |
Repayment of debt | (11 | ) | | (1,468 | ) | | — |
| | — |
| | (1,479 | ) |
Repayment of borrowings from credit facility | (75,000 | ) | | — |
| | — |
| | — |
| | (75,000 | ) |
Borrowings from credit facility | 100,000 |
| | — |
| | — |
| | — |
| | 100,000 |
|
Debt issuance costs | (400 | ) | | — |
| | — |
| | — |
| | (400 | ) |
Repurchase of common stock | (16,500 | ) | | — |
| | — |
| | — |
| | (16,500 | ) |
Tax payments for stock-based compensation awards | (1,850 | ) | | — |
| | — |
| | — |
| | (1,850 | ) |
Advances to/from subsidiaries | — |
| | (21,204 | ) | | — |
| | 21,204 |
| | — |
|
Other financing activities | 7 |
| | — |
| | — |
| | — |
| | 7 |
|
Net cash provided by (used in) financing activities | 6,246 |
| | (22,672 | ) | | — |
| | 21,204 |
| | 4,778 |
|
Decrease in cash, cash equivalents, and restricted cash | (3,926 | ) | | (51,728 | ) | | (558 | ) | | — |
| | (56,212 | ) |
Cash, cash equivalents, and restricted cash at beginning of period | 104,796 |
| | 47,877 |
| | 575 |
| | — |
| | 153,248 |
|
Cash, cash equivalents, and restricted cash at end of period | $ | 100,870 |
| | $ | (3,851 | ) | | $ | 17 |
| | $ | — |
| | $ | 97,036 |
|
| | | | | | | | | |
in thousands | Beazer Homes
USA, Inc. | | Guarantor
Subsidiaries | | Non-Guarantor
Subsidiaries | | Consolidating
Adjustments | | Consolidated
Beazer Homes
USA, Inc. |
Three Months Ended December 31, 2017 | | | | | | | | | |
Net cash provided by (used in) operating activities | $ | 91,465 |
| | $ | (193,721 | ) | | $ | 32 |
| | $ | — |
| | $ | (102,224 | ) |
Cash flows from investing activities: | | | | | | | | | |
Capital expenditures | — |
| | (3,702 | ) | | — |
| | — |
| | (3,702 | ) |
Proceeds from sale of fixed assets | — |
| | 84 |
| | — |
| | — |
| | 84 |
|
Investments in unconsolidated entities | — |
| | (421 | ) | | — |
| | — |
| | (421 | ) |
Advances to/from subsidiaries | (187,451 | ) | | — |
| | (26 | ) | | 187,477 |
| | — |
|
Net cash used in investing activities | (187,451 | ) | | (4,039 | ) | | (26 | ) | | 187,477 |
| | (4,039 | ) |
Cash flows from financing activities: | | | | | | | | | |
Repayment of debt | (400,012 | ) | | (1,469 | ) | | — |
| | — |
| | (401,481 | ) |
Proceeds from issuance of new debt | 400,000 |
| | — |
|