Beazer Homes USA, Inc. (NYSE: BZH) on Tuesday reported a net loss from continuing operations of $789 thousand, or $0.03 per share, for the company’s fiscal fourth quarter ended Sept. 30. The loss compares with a profit of $357.5 million in last year’s quarter. Analysts were looking for a gain of $0.56 per share.
The results included $11.4 million of losses related to the early extinguishment of debt and an elevated tax provision related to a legal entity restructuring undertaken to reduce state taxes.
Home-building revenue was up 1.4% to $620.0 million as home deliveries dropped 2.1% to 1,856 and the average selling price rose 3.5% to $334,000. Home-building gross margin was 16.2%. Excluding impairments, abandonments and amortized interest, home-building gross margin was 20.8%, down 50 basis points from last year’s quarter. SG&A as a percentage of total revenue was 10.6%, up 30 basis points.
Net new orders for the fourth quarter increased 15.0% versus the prior year, driven by a 16.7% increase in the absorption rate to 2.8 sales per community per month. The company’s average community count declined 1.2% to 162 communities. The cancellation rate was 20.4%, down 380 basis points relative to the fourth quarter of last year and in line with historical levels.
The dollar value of homes in backlog as of September 30, 2016 declined 2.2% to $652.7 million, or 1,916 homes, which compared to $667.7 million, or 2,038 homes, for the same period last year. The decline, in part, reflected the improved backlog conversion ratio experienced during the quarter. The average selling price of homes in backlog was approximately $341 thousand.
Beazer ended the quarter with approximately $335.7 million of available liquidity, including $228.9 million of unrestricted cash and $106.8 million available on its secured revolving credit facility. During the fourth quarter, the company issued $500 million of Senior Notes due 2022. The proceeds, combined with cash on the balance sheet, were used to retire all of its outstanding 6.625% Senior Secured Notes due 2018 and 9.125% Senior Notes due 2019. In October, the company announced it had increased the capacity of its secured revolving credit facility to $180 million from $145 million and extended the maturity to February 2019.
For the full fiscal year, Beazer reported net income from continuing operations of $5.2 million, down from $349.8 million in the 2015 fiscal year; home-building revenue of $1.8 billion, up 13.6%; 5,419 new home deliveries, up 8.2%;
Home-building gross margin was 16.5%. Excluding impairments, abandonments, amortized interest, unexpected warranty costs and additional insurance recoveries, home-building gross margin was 20.6%, down 90 basis points
SG&A as a percentage of total revenue was 12.3%, down 50 basis points.
Unit orders for the fiscal year were down 1.1% to 5,297, and average community count was 166, up 3.3%. During the year, Beazer said it paid down nearly $157 million in debt.
“With improved orders and a sequential improvement in gross margin in the fourth quarter, we are poised to achieve even better operational results in 2017,” said Allan Merrill, CEO of Beazer Homes. “We also expect to substantially expand our investment in new communities, including age-restricted Gatherings condominium sites in many more of our divisions. With significant exposure to value-oriented first-time and active-adult buyers, we believe we are very well positioned for the coming years.”
