Beazer Homes Reports Fiscal Third Quarter 2007 Financial Results

Business Wire, July 26, 2007

ATLANTA -- Beazer Homes USA, Inc. (NYSE:BZH) (www.beazer.com) today announced financial results for the third fiscal quarter ended June 30, 2007. Summary results of the quarter are as follows:

Quarter Ended June 30, 2007

* Reported net loss of $(123.0) million, or $(3.20) per share, including pre-tax charges related to inventory impairments, abandonment of land option contracts and goodwill impairments totaling $188.5 million. For the third quarter of the prior fiscal year, net income was $102.6 million, or $2.37 per diluted share.

* Home closings: 2,666 homes, compared to 4,156 in the third quarter of the prior year.

* Total revenues: $761.0 million, compared to $1.20 billion in the third quarter of the prior year.

* New orders: 3,055 homes, compared to 4,378 in the third quarter of the prior year.

* Lots under control totaled 71,801 at 6/30/07, a 31% and 10% decline from the third quarter of the prior fiscal year and the second quarter of fiscal 2007, respectively

* Unsold finished homes declined 38% compared to the second quarter of this fiscal year.

* Net debt to capitalization was 52.6% as of 6/30/07.

* Backlog at 6/30/07: 5,952 homes with a sales value of $1.69 billion compared to 9,449 homes with a sales value of $2.85 billion in the third quarter of the prior year and 5,563 homes with a sales value of $1.67 billion in the second quarter of this fiscal year.

"Operating conditions in the housing industry deteriorated further in the fiscal third quarter and remain very challenging," said President and Chief Executive Officer, Ian J. McCarthy. "Most housing markets across the country continue to be characterized by an oversupply of both new and resale home inventory, reduced levels of consumer demand for new homes and aggressive price competition among home builders. These factors, together with a pronounced credit tightening in the mortgage markets, particularly for credit challenged home buyers, are likely to lead to continued difficult market conditions for Beazer Homes and other home builders. Although we cannot predict when market conditions will improve, we continue to believe that longer-term industry fundamentals remain compelling due to demographic changes, employment trends and new home supply constraints."

Total home closings of 2,666 during the third quarter of fiscal 2007 were 36% below the same period a year ago. Net new home orders totaled 3,055 homes for the quarter, a decline of 30% from the third quarter of the prior fiscal year. The cancellation rate for the third quarter was 36%, compared to 34% in the prior year's third quarter, and 29% in the second quarter of this fiscal year.

"We have remained disciplined in our operating approach and continue to focus on initiatives aimed at positioning us well for what we believe will continue to be a challenging environment. These initiatives include reductions in our direct construction costs, overhead expenses and land and land development spending. At the same time, we are intensely focused on enhancing our sales and marketing efforts, including the use of integrated, national promotion efforts to reduce unsold home inventories," McCarthy continued.

During the third quarter, margins continued to be negatively impacted by both higher levels of discounting and reduced revenue volume as compared to the same period a year ago. In addition, the Company incurred pre-tax charges to abandon land option contracts, and to recognize inventory impairments and goodwill impairments of $44.8 million, $113.9 million, and $29.8 million, respectively. The charges for goodwill impairment relate to goodwill allocated to operations in Northern California, Nevada and Florida. The results for the third fiscal quarter also included a $6.0 million reduction of the warranty accrual for the remediation of homes in connection with the Trinity Homes class action settlement in October 2004, based on a reduction in the estimated remaining remediation costs.

The Company has proactively reduced its controlled lot count by 31% compared to June of the prior year and by 10% compared to the March quarter of this fiscal year. The Company remains committed to aligning its land supply and inventory levels to current expectations for home closings, and continues to exercise caution and discipline with regard to land and land development spending.

Revolving Credit Facility

The Company also announced that it has entered into a new, four year $500 million revolving credit facility. The new agreement, which matures in July 2011, replaces the company's existing $1 billion revolving credit facility which was scheduled to mature in August 2009. The new facility contains an accordion feature which permits the aggregate commitment to increase up to $1 billion, subject to the availability of additional commitments.

"We are focused on maintaining a strong balance sheet and significant liquidity during this challenging business environment," said Allan P. Merrill, Executive Vice President and Chief Financial Officer. "While we have no near-term plans for borrowing under the new credit agreement, its terms provide us with increased flexibility to manage successfully through the current downturn and at the same time to take a long-term view of the business."