BEAZER HOMES USA
MOVING FORWARD
1996
ANNUAL REPORT
* HOMES *
---------
BEAZER
TABLE OF CONTENTS
FINANCIAL HIGHLIGHTS
MARKET DATA
LETTER TO SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ADDING VALUE TO
OUR OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ADAPTING TO
A CHANGING ENVIRONMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
TAKING ADVANTAGE
OF OPPORTUNITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
DIRECTORY OF HOMEBUILDERS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
INDEX TO FINANCIALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
NOTE REGARDING
FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 38
CORPORATE AND
OPERATING MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SHAREHOLDER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
BUSINESS DESCRIPTION
Beazer Homes USA, Inc., headquartered in Atlanta, Georgia, is one of the
nation's largest geographically diversified homebuilders. The Company currently
has operations in nine states: five in the Southeast, three in the Southwest,
and Texas. Beazer Homes focuses on building quality homes that provide value to
entry-level and first move-up home buyers. The Company has been doing business
in the United States since 1985 and has been listed on the New York Stock
Exchange since 1994. Its common stock is traded under the symbol "BZH."
[Bar Charts - Inside Cover]
[Bar Charts - 1]
93 $275.1
94 $536.5
95 $647.8
96 $866.6
[Bar Charts - 2]
93 $12.3
94 $16.5
95 $11.4
96 $18.3
[Bar Charts - 3]
93 $245.3
94 $314.9
95 $345.2
96 $356.6
[Bar Charts - 4]
93 16.6%
94 15.8%
95 11.8%
96 15.5%
Designed and produced by Collateral Communications, Inc. / Atlanta
BEAZER HOMES USA
[Map of U.S.A]
Tennessee 20 active subdivisions
Nevada 12 active subdivisions
North Carolina 24 active subdivisions
California 24 active subdivisions
South Carolina 16 active subdivisions
Arizona 26 active subdivisions
Georgia 17 active subdivisions
Florida 22 active subdivisions
Texas 31 active subdivisions
MARKET DATA
SELECTED INFORMATION BY STATE
ANNUAL
1996 INCREASE 9/30/96 AVERAGE PRICE MARKET POSITION
STATE CLOSINGS (DECREASE) BACKLOG OF HOMES CLOSED AS OF 9/30/96 (i)
ARIZONA 1,852 47.6% 414 $ 121,100 #3 in Phoenix
CALIFORNIA 1,018 21.5% 96 $ 179,300 #2 in Sacramento
#6 in Southern California
FLORIDA 405 32.4% 104 $ 160,900 #2 in Jacksonville
GEORGIA 308 21.3% 52 $ 141,700 #6 in Atlanta
NEVADA 473 34.8% 170 $ 145,400 #4 in Las Vegas
NEW JERSEY 1 (50.0%) -- $ 185,000 Single N.J. project
closed out in 1996
NORTH CAROLINA 697 16.8% 192 $ 144,600 #2 in Charlotte
#2 in Raleigh
SOUTH CAROLINA 276 22.7% 107 $ 117,700 #2 in Charleston
#6 in Columbia
TENNESSEE 526 11.7% 125 $ 171,200 #1 in Nashville
TEXAS 379 492.2% 166 $ 154,700 Entered Texas in 1995.
Acquired Trendmaker Homes --
Dallas in June 1996.
TOTAL 5,935 36.0% 1,426 $ 146,000
- -------------------------------------------------------------------------
(i) COMPANY ESTIMATE BASED UPON THE MOST RECENT MARKET DATA
AVAILABLE. MARKET DATA CONSISTS OF HOMES CLOSED OR SOLD IN ALL
MARKETS EXCEPT ATLANTA, WHERE MARKET DATA CONSISTS OF PERMITS
ISSUED.
The Beazer Homes story has been one of managing successful growth through both
upswings and downturns in the homebuilding industry. Since Beazer Homes began
operations in the United States in 1985, we have grown through a combination of
internal growth and expansion through acquisition.
The results have been impressive! Beazer Homes now builds in over twenty markets
in nine states and is ranked the seventh largest homebuilder in the United
States. We're pleased with our success -- but not satisfied.
In this Annual Report, we describe how Beazer Homes is moving forward on several
key initiatives to become better, stronger and more profitable -- creating value
for our home buyers, our employees and, ultimately, for the shareholders of
Beazer Homes.
TOTAL REVENUE
IN
MILLIONS
INCOME
BEFORE
CHANGE IN
ACCOUNTING
PRINCIPLE
IN
MILLIONS
TOTAL ASSETS
IN
MILLIONS
RETURN
ON AVERAGE
CAPITAL
BEAZER HOMES USA FINANCIAL HIGHLIGHTS
YEAR ENDED SEPTEMBER 30,
(dollars in thousands,
except per share data) 1996 1995 1994 1993
OPERATING DATA:
Homes closed 5,935 4,363 3,926 2,093
STATEMENT OF OPERATIONS DATA:
Total revenue $866,627 $647,828 $536,526 $275,054
Earnings before interest and taxes $ 45,327 $ 32,188 $ 37,169 $ 22,713
Income before change in
accounting principle $ 18,266 $ 11,352 $ 16,468 $ 12,270
Net income (i) $ 18,266 $ 11,352 $ 16,468 $ 16,046
Net income per common share:
Primary $ 2.20 $ 1.23
Fully diluted $ 2.01 $ 1.23
Pro forma net income
per common share (ii) $ 1.76
BALANCE SHEET DATA:
Total assets $356,643 $345,240 $314,941 $245,349
Total debt $115,000 $115,000 $115,000 $119,925
Stockholders' equity $178,701 $164,544 $150,406 $ 95,595
RETURN DATA (iii):
Return on average assets 12.9% 9.8% 13.3% 14.6%
Return on average capital 15.8% 11.8% 15.5% 16.6%
- ------------------------------------------------------------------------------
(i) Net income for the year ended September 30, 1993 includes a
benefit of $3,776 to reflect the cumulative effect of a change in
accounting for income taxes for the adoption of SFAS No. 109.
(ii) The 1994 pro forma net income per share has been calculated as if
the Company's initial public offering had taken place on October
1, 1993. See Note 2 to the Company's consolidated financial
statements.
(iii) Return on average assets is defined as earnings before interest
and taxes ("EBIT") divided by average total assets for the year.
Return on average capital is defined as EBIT divided by average
total debt plus stockholders' equity for the year.
Note: Certain statements in this Annual Report are "forward-looking
statements" within the meaning of the Private Securities
Litigation Act of 1995. Please refer to page 38 of this report
for additional discussion.
[Photograph - Page 2]
LEFT TO RIGHT
IAN J. MCCARTHY President and Chief Executive Officer
BRIAN C. BEAZER Non-Executive Chairman
DAVID S. WEISS Executive Vice President and Chief Financial Officer
LETTER TO SHAREHOLDERS
Fiscal 1996 caps a four-year period of phenomenal growth for Beazer Homes. Since
1992, home closings and revenues have both increased more than five times while
net income has nearly tripled. This most recent year ended with impressive
growth:
- - Revenues ($867 million) up 34%,
- - Net income ($18.3 million) up 61%,
- - Earnings per share ($2.01) up 63%.
FOCUS ON PROFITABILITY WHILE CONTINUING GROWTH
While we will continue to pursue growth, we are now moving forward to improve
productivity and increase profitability. As demonstrated by our 1996 results, we
have already begun to make progress -- net income increased 61% while revenues
increased only 34%. Our goal for the next five years is to become one of the
most profitable of the top ten homebuilders in the United States. We intend to
do this while sticking to our "Formula for Success" -- a formula that focuses on
decentralized operations combined with strong central financial controls.
During the coming year, we will begin to implement a number of plans to
improve profitability. Before describing these plans in depth, however, we would
like to review the past year's results.
A VOLATILE YEAR IN WHICH BEAZER GROWS
Much like the two years that preceded it, 1996 was a year of volatility in
interest rates and in the homebuilding industry. The average commitment rate on
a thirty-year mortgage, which was 7.6% as we entered fiscal 1996, declined to
below 7%, then rose to over 8% by September 30, 1996 and dropped soon
thereafter. These swings caused dramatic shifts in new home sales during the
year, shifts that were mirrored by the trend of new home orders at Beazer Homes.
New orders rose over 100% for the first quarter of the fiscal year, but declined
16% during the last quarter. For the full year, new orders showed significant
growth -- up 16%.
Throughout these swings, we stuck to our basic formula for success,
allowing our operating managers to aggressively drive their local markets, while
maintaining a conservative, centrally controlled financial policy. The results:
revenues increased 34% while our financial position improved, with debt to total
capitalization decreasing from 41% to 39%.
2 BEAZER HOMES USA 1996 ANNUAL REPORT
During the year our gross profit margin (including amortization of
interest) increased from 12.7% to 13.7%. Operating profit margins increased from
2.9% to 3.5%. Growth and improved profitability were particularly evident in
Arizona, Texas and Florida.
In Arizona, our decision to expand in the affordable housing segment gave
rise to a dramatic 48% increase in homes closed, to over 1,850. In Texas, the
expansion of our existing operations acquired in 1995, along with the
acquisition of Trendmaker Homes of Dallas in June 1996, created a spectacular
492% increase in homes closed. In addition, our expansion in Florida, both
through internal growth and through further acquisitions, generated a 32%
increase in the number of homes closed.
Moving forward, we expect to continue to grow in Texas and Florida, while
our Phoenix operation will implement a more cautious strategy. Phoenix is a
market that, while we expect it to remain healthy, we believe will decline
somewhat in 1997. We do not want to overextend ourselves by buying the land or
putting in place an overhead structure to maintain the current level of home
closings on a long-term basis in that market.
BEAZER ENDS YEAR IN STRONGEST FINANCIAL POSITION IN ITS HISTORY
While the changing interest rate environment caused fluctuations in homebuilding
markets, our conservative financial policy remained constant. Throughout the
year we maintained a debt to total capitalization ratio around 40% and ended the
year in our strongest financial position ever as a public company. We also
improved our interest coverage (EBITDA/interest incurred) to 3.3 times from 2.3
in 1995. The averages of these figures for the top fifteen public homebuilders
are debt to total capitalization of over 55% and under 2.5 times interest
coverage.
Finally, just after we ended our fiscal year, we increased our liquidity
and financial flexibility by raising our unsecured revolving credit facility
from $80 million to $150 million. We increased the number of banks involved,
improved the pricing and negotiated a less restrictive covenant package. Our new
facility includes seven banks, led by The First National Bank of Chicago.
In the current uncertain economic environment, we believe that it is
particularly important for us to maintain our financial flexibility to take
advantage of any opportunities that may arise; our strong capital position and
increased liquidity give us that flexibility.
[Photograph - Page 3]
LOS ANGELES CA
FOCUS ON RETURNS ON ASSETS AND CAPITAL
We manage our operations to maximize return on assets and return on capital,
which we believe are two of the most important gauges of profitability,
combining both profit margins and asset turnover. Historically at Beazer, we
have emphasized asset turnover to provide superior returns to our shareholders
with less risk than if we focused on profit margins alone. Emphasizing turnover
means controlling inventory, limiting the building of unsold houses and
maintaining a conservative balance sheet -- all of which contribute to lower
risk.
3 BEAZER HOMES USA 1996 ANNUAL REPORT
The following table shows Baezer's returns by component compared to our press:
1996 RETURN ON ASSETS (EBIT/AVERAGE TOTAL ASSETS)
AND RETURN ON CAPITAL (EBIT/AVERAGE TOTAL DEBT PLUS EQUITY)
AVERAGE FOR OTHER TOP
BEAZER HOMES FIFTEEN PUBLIC HOMEBUILDERS (i)
Asset Turnover 2.47 x 1.33 x
x EBIT Margin 5.2% 7.2%
- ------------------------------------------------------------------------------
= Return on Assets 12.9% 9.6%
----------- -----------
Return on Capital 15.8% 13.8%
(i) Derived from financial statements of CTX, CON, DHI, HOV, KBH, LEN, MHO,
MDC, NVR, PHM, RYL, TOL, UH, WBB
Our asset turnover already ranks among the top in the industry. We are now
focused on improving margins. By doing this, we believe we have an opportunity
to leverage off of our rapid turnover and increase the gap between us and the
rest of the homebuilding industry on return on assets and capital.
PLANS TO IMPROVE MARGINS
Our plans for improving margins include the following initiatives:
OPEN DESIGN CENTERS One thing we have learned from our successful expansion in
Phoenix, is that you get more sales and achieve better profitability (even in
lower price points) by letting buyers choose more options. This lesson prompted
our initiative to open design centers, where buyers can choose from a wide
variety of decorator options and upgrades. To date, we have opened such centers
in Arizona, California, Florida, Georgia, Nevada and Tennessee. These design
centers contributed to our improved profitability in 1996 and we expect to open
more in 1997.
ESTABLISH MORTGAGE ORIGINATION OPERATIONS By controlling the mortgage
origination process, we assist our buyers and gain a portion of the profit from
the mortgage business. At the same time, we minimize our financial risk and the
capital involved by originating, but not holding or servicing the mortgages.
During 1996, we established Beazer Mortgage Company. Beazer Mortgage now has
operations in Georgia, North Carolina and Texas and we intend to expand to all
Beazer locations in calendar 1997.
STRENGTHEN PREFERRED VENDOR RELATIONSHIPS One of the advantages of Beazer's
current size and national scope of operations is the ability to negotiate
favorable purchasing contracts with major suppliers. Over the past few years, we
have strengthened our relationship with a number of vendors using such
contracts. During 1996, for example, we established an exclusive, three-year
relationship with General Electric as our national supplier of appliances,
achieving strong benefits for both companies along with significant savings for
Beazer. In the coming year, we intend to expand these contracts and limit the
number of suppliers and vendors with whom Beazer conducts business.
ENHANCE OUR COMPANY-WIDE INFORMATION SYSTEM During 1996, we embarked on an
extensive review of our company-wide information system and are now in the
process of implementing a new, more efficient system -- taking advantage of the
latest technology available. One of the benefits of this effort is an executive
information system that will give our operating managers immediate access to
current information about both their own and other Beazer operations. We believe
that access to information about
[Photograph - Page 4]
ATLANTA GA
DESIGN CENTER
other builders within the Beazer group is one of the key benefits that a company
like Beazer provides to our decentralized network of local managers.
4 BEAZER HOMES USA 1996 ANNUAL REPORT
Later in this Annual Report, under "Adding Value to Our Operations," we
describe some more of these benefits in detail.
These are just a few of the action plans that we have already begun to
implement to help us achieve improved profitability. Perhaps the most important,
however, are a focus on profitability throughout the organization and incentives
established to encourage all of our local managers to develop additional plans
to improve return on capital.
[Photograph - Page 5]
JACKSONVILLE FL
Our near-term objective is to significantly improve our operating profit
margin by the fourth quarter of fiscal 1997. To achieve this objective, we need
to increase the profit per home through a combination of reducing costs and
increasing prices, while still enhancing value to the home buyer. We expect to
make progress toward this goal over the coming year.
MOVING FORWARD
Beazer Homes is "Moving Forward" to meet the challenges of the future and
improve profitability. On the following pages we will provide an overview of how
we intend to:
- - Add value to our operations through sharing ideas and spreading best
practices;
- - Adapt to a changing environment by encouraging our local operating managers
to track local changes and react to them quickly; and
- - Take advantage of future opportunities by maintaining a strong financial
position and the flexibility to act quickly and prudently on opportunities
that arise.
CHALLENGES AHEAD IN 1997
While we are extremely excited about our action plans to improve profitability,
we are also realistic about the challenges ahead. Increases in interest rates
during 1996 have created a very competitive environment as we enter fiscal 1997.
Consequently, we have focused this past year on maintaining our strong financial
position, to allow us to take advantage of future opportunities, rather than on
aggressively expanding our current operations. As we ended fiscal 1996, we had
over 20 active subdivisions with only a few homes left. Most of these
subdivisions are not expected to be immediately replaced and, as a result, we
expect our active subdivision count to decline in the first quarter of fiscal
1997. This has contributed to lower levels of new orders in the fourth quarter
of 1996 and a slightly lower level of backlog at September 30, 1996 than at
September 30, 1995, creating a challenging environment in the first half of
1997.
Despite the challenges of this competitive environment we are optimistic
about the future. We believe that our focus on improving profitability will
provide us with measurable gains in the coming years. In addition, we believe
that our strong financial position will allow us to react quickly to the current
volatile environment and take advantage of any opportunities that may arise.
For our strong results in fiscal 1996, we wish to thank our dedicated
employees, suppliers and subcontractors. They are the backbone of this
organization and provide us the ability to react quickly and make sound
decisions. We look forward to working with them in the coming years to create
one of the most profitable of all U.S. homebuilders.
Sincerely,
/s/ BRIAN C. BEAZER
NON-EXECUTIVE CHAIRMAN
/s/ IAN J. MCCARTHY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
5 BEAZER HOMES USA 1996 ANNUAL REPORT
Beazer Homes has a proven track record for growing both existing and acquired
operations. Our Georgia, North Carolina, South Carolina and Tennessee operations
have all been part of Beazer Homes since 1987. Our Arizona, California and
Nevada operations were acquired in 1993.
[Bar Charts - Page 6]
92 1,182 92 0
93 1,312 93 1,327
94 1,517 94 2,073
95 1,547 95 2,444
96 1,807 96 3,343
INTERNAL GROWTH GROWTH SINCE ACQUISITION
HOMES CLOSED HOMES CLOSED
(1993 PRO FORMA FOR FULL YEAR)
GEORGIA ARIZONA
NORTH CAROLINA CALIFORNIA
SOUTH CAROLINA NEVADA
TENNESSEE
[Photograph - Page 6]
LEFT TO RIGHT:
PATTY ARTIST LAS VEGAS
LAURIE MADDEN HOUSTON
EDDIE PATE CHARLESTON
RICHARD JACKSON RALEIGH
MARILYN GARDNER HOUSTON
[Photograph - Page 6]
NASHVILLE TN
JACKIE ALEXANDER SENIOR VICE PRESIDENT MARKETING AND SALES, PHILLIPS BUILDERS
After being named "National Marketing Director of the Year" for 1996 by the
National Association of Homebuilders, Jackie Alexander has shared her expertise
with other Beazer Homes sales and marketing managers (seen above at one of our
Nashville models). This type of knowledge sharing is just one way Beazer adds
value to its people and operations.
6 BEAZER HOMES USA 1996 ANNUAL REPORT
ADDING VALUE
ADDING VALUE TO OUR OPERATIONS. Sharing ideas across markets. This is one of
the most critical ways we add value to our operations. By giving local managers
access to ideas, they become stronger and have opportunities that others in
their market do not.
- - REGIONAL AND NATIONAL KNOWLEDGE SHARING. Moving forward, the sharing of
ideas will be accelerated through increased national and regional meetings of
functional areas and by implementing a state-of-the-art executive information
system that can be accessed by managers throughout our organization. This
information system will be in place fiscal 1997.
- - ADVERTISING SYNERGY. Shared ideas come in many forms. Some are relatively
small, like the sharing of printed advertisements. Advertising from one market
is available to any other market if they choose to use it. In the future, this
information will be available through our information network.
- - DESIGN CENTERS MEET CUSTOMER NEEDS. Some shared ideas are very broad and
can revolutionize the way we do business. One such idea is the use of design
centers. Beazer's first design center was opened in Phoenix as part of a
strategy that allows home buyers to choose from a wide variety of options and
upgrades -- to get exactly what they want and can afford. The idea of using a
central design center met with such success that it was quickly adopted in
Atlanta, Jacksonville, Las Vegas, Nashville and Southern California. By the end
of 1997, design centers will be open in nearly all of our markets.
- - STRONG GROWTH THROUGH SHARED IDEAS. The ultimate benefits of sharing ideas
can be seen in the growth of our Southeast region, a region made up mostly of
operations that have been with Beazer since 1987. The three operations that made
up Beazer Homes in 1987 (Atlanta, Nashville and the Carolinas) have experienced
significant growth as part of the Beazer group. Without any acquisitions, these
operations have grown 94.9% over the past five years and 16.8% in fiscal 1996.
These operations have been sharing ideas for nearly a decade, giving them the
ability to become better homebuilders and to achieve this growth.
7 BEAZER HOMES USA 1996 ANNUAL REPORT
[Photograph - Page 8]
COLUMBIA SC
The architectural plans for a number of our homes in South Carolina, including
the home shown above, were adapted from efficient, affordable plans developed in
Phoenix (below).
By responding to the changing needs of customers, Beazer Homes has experienced a
steady increase in home closings over the past five years.
[Bar Chart - Page 8]
92 1,182
93 2,093
94 3,926
95 4,363
96 5,935
HOMES CLOSED
[Photograph - Page 8]
PHOENIX AZ
LEFT TO RIGHT:
GONZALO ROMERO Vice President Planning and Design (Southeast Region)
JOSEPH THOMPSON President, Hancock Homes (Arizona)
Joseph Thompson and local managers at Hancock Homes identified a need for
high-quality, affordable housing in Phoenix. By focusing on affordability, they
came up with a series of efficient plans, allowing Hancock Homes to offer 1,000
square-foot, three- bedroom houses for under $60,000. The result -- a 50%
increase in homes closed in Phoenix. Beazer managers in the Southeast region,
like Gonzalo Romero, saw the success of the Phoenix plans and adapted the
designs to fit the needs of their own markets. Today, we build variations on the
affordable Phoenix house plans in California, Nevada, North Carolina and South
Carolina.
8 BEAZER HOMES USA 1996 ANNUAL REPORT
ADAPTING TO CHANGE
ADAPTING TO A CHANGING ENVIRONMENT. The ability to identify changes in a
market as they occur and to react quickly and effectively are the advantages
that only a depth of local market knowledge can bring.
- - IDENTIFYING NICHE OPPORTUNITIES. In Jacksonville, adapting to a changing
environment meant identifying a growing market niche that was not being
adequately served. Lee Panitz, President of Panitz Homes, saw builders competing
head to head in the first-time buyer segment, traditionally the market's largest
segment. As Jacksonville expanded, however, the move-up segment of the market
was growing. He and his team of top managers, with an average of over 18 years
experience of building in Jacksonville, worked to expand their presence in that
segment. Today, Panitz Homes is the second-largest builder in the tri-county
Jacksonville area, measured by units, and the largest in the over $110,000
segment.
- - EXPANSION INTO NEW MARKETS. At Phillips Builders, Nashville's number one
builder, President Eddie Phillips saw the Nashville market becoming increasingly
competitive in 1996 as new builders entered that strong and growing market.
Rather than fight to maintain or increase market share, Eddie expanded to
Knoxville, a growing city 180 miles away. Today, through our satellite expansion
out of Nashville, we are the first major national builder in Knoxville and
expect to build over 100 homes there in the coming year.
- - CONSISTENT GROWTH. The ability to adapt to a changing environment has
given Beazer the ability to grow consistently, despite dramatic economic shifts,
including changes in interest rates. Since 1992, mortgage rates have fluctuated
by over 200 basis points, both up and down. Nevertheless, Beazer has grown every
year since then and, overall, the number of units closed has increased more than
five times.
9 BEAZER HOMES USA 1996 ANNUAL REPORT
Beazer is strategically positioned in key markets to seize growth opportunities.
We are currently in eight of the eleven states with the largest projected
increases in population for the period 1995 through 2000, according to the U.S.
Census Bureau.
1 TEXAS 1,400,000 7.5%
2 FLORIDA 1,060,000 7.5%
3 CALIFORNIA 930,000 2.9%
4 GEORGIA 680,000 9.4%
5 NORTH CAROLINA 580,000 8.1%
6 ARIZONA 580,000 13.7%
7 WASHINGTON 430,000 7.9%
8 COLORADO 420,000 11.2%
9 TENNESSEE 400,000 7.6%
10 VIRGINIA 380,000 5.7%
11 NEVADA 340,000 22.2%
- ---------------------------------------------
TOTAL U.S. 11,932,000 4.3%
POPULATION GROWTH
1995 -- 2000
[Photograph - Page 10]
DALLAS TX
LEFT TO RIGHT:
DANIEL MENENDEZ Warranty Representative, Beazer Homes Texas -- Dallas Division
SUSAN LEONARD Marketing Director, Beazer Homes Texas -- Dallas Division
KURT WATZEK President, Beazer Homes Texas
In 1995, Beazer identified an opportunity to expand to a strong and growing
market through the acquisition of Bramalea Homes Texas. In 1996, we increased
our presence in Texas through the acquisition of Trendmaker Homes -- Dallas.
Leveraging off of the experienced management, like Kurt Watzek with over 20
years of homebuilding experience in Texas, we see significant future growth
opportunities in the Lone Star State.
While revenues have grown by more than 60% since our IPO in 1994, our financial
position has strengthened. Debt to total capitalization is now 39% and we have
just increased our liquidity by expanding our unsecured revolving credit
facility from $80 million to $150 million.
[Bar Chart - Page 10]
DEBT TO TOTAL CAPITALIZATION
94 43%
95 41%
96 39%
10 BEAZER HOMES USA 1996 ANNUAL REPORT
OPPORTUNITIES
TAKING ADVANTAGE OF OPPORTUNITIES.
An opportunity arises. You see it before others and have the proven ability and
resources to act on it. At Beazer Homes, this has been our tradition.
- - GROWTH THROUGH ACQUISITION. In 1995, we seized such an opportunity when we
expanded to Texas through the acquisition, at a substantial discount to book
value, of Bramalea Homes Texas. Our Texas operations grew nearly 500% in 1996,
contributing 379 home closings. With this growth, we found that we were rapidly
running out of land in Dallas. At the same time, we saw an opportunity to
purchase Trendmaker Homes -- Dallas. Again we acted quickly and seized the
opportunity. In June 1996, we purchased Trendmaker Homes for $22 million, again
at a discount to book value, and gained control of over 900 lots. With the
internal growth of our Texas operations and the addition of Trendmaker Homes --
Dallas, we see excellent opportunities for further expansion in Texas in 1997.
- - FOCUS ON GROWING MARKETS. Our Texas acquisitions in 1995 and 1996 have
given us a strong presence in one of the fastest-growing states in the United
States. These acquisitions demonstrate how we target growth markets -- markets
with strong long-term population and employment growth expectations. Currently
we are in eight of the eleven markets with the largest projected population
increases from 1995 to 2000 (according to the U.S. Census Bureau). We intend to
maintain the flexibility to both expand in these current markets and enter other
strong growth markets where we do not currently operate.
- - FINANCIALLY PREPARED FOR FUTURE OPPORTUNITIES. Two critical elements that
give us this flexibility are our conservative financial policies and our
liquidity. As we end fiscal 1996, our financial position is at its strongest
ever -- debt to total capitalization is at an all time low and we have just
increased our liquidity with a new, expanded credit facility. In the current
volatile economic environment, we believe we are well prepared for whatever lies
ahead and intend to take advantage of significant opportunities that are likely
to arise.
DIRECTORY OF HOMEBUILDERS
BEAZER HOMES ARIZONA
Hancock Homes (Phoenix)
2005 West 14th Street, Suite 110
Tempe, AZ 85281
BEAZER HOMES CALIFORNIA
Southern California Division
Executive Tower
1100 Town and Country, Suite 100
Orange, CA 92868
Northern California Division
2260 Douglas Boulevard
Suite 110
Roseville, CA 95661
BEAZER HOMES FLORIDA
Panitz Homes (Jacksonville)
3020 Hartley Avenue
Suite 200
Jacksonville, FL 32257
Gulfcoast Homes (Ft. Myers/Naples)
11934 Fairway Lakes Drive #1
Ft. Myers, FL 33913
[Photograph]
LAS VEGAS, NV
Tampa Division
City Center Avenue
100 Second Avenue South, Suite 200
St. Petersburg, FL 33701
BEAZER HOMES GEORGIA
3790 Data Drive
Suite 2
Norcross, GA 30092
BEAZER HOMES NEVADA
Las Vegas Division
2700 Chandler
Suite 2A
Las Vegas, NV 89120
Reno/Sparks Division
4480 Scott Peak Circle
Sparks, NV 89434
BEAZER HOMES TEXAS
Houston Division
10235 West Little York
Suite 167
Houston, TX 77040
Dallas Division
1231 Greenway Drive
Suite 400
Irving, TX 75038
PHILLIPS BUILDERS
Nashville Division
2910 Kraft Drive
Nashville, TN 37204
Knoxville Division
1645 Downtown West Blvd.
Suite 45
Knoxville, TN 37922
SQUIRES HOMES
Charlotte Division
5501 Executive Center Drive
Suite 120
Charlotte, NC 28212
Raleigh Division
3701 National Drive
Suite 101
Raleigh, NC 27612
Charleston Division
7410 Northside Drive
Suite 107
North Charleston, SC 29220
Columbia Division
2001 Assembly Street
Suite 202
Columbia, SC 29201
Myrtle Beach Division
1494 Medinah Lane
Murrells Inlet, SC 29576
12 BEAZER HOMES USA 1996 ANNUAL REPORT
INDEX TO FINANCIALS
MANAGEMENT'S RESPONSIBILITY
FOR FINANCIAL REPORTING AND
SYSTEM OF INTERNAL CONTROLS. . . . . . . . . . . . . . . . . . . . . . . . . 14
SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 16
REPORT OF INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . 24
CONSOLIDATED STATEMENTS
OF OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
CONSOLIDATED BALANCE SHEETS. . . . . . . . . . . . . . . . . . . . . . . . . 26
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
CONSOLIDATED STATEMENTS
OF CASH FLOWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
QUARTERLY FINANCIAL DATA
AND STOCK PRICE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 37
1996
FINANCIAL REVIEW
13 BEAZER HOMES USA 1996 ANNUAL REPORT
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING AND SYSTEM OF INTERNAL
CONTROLS
FINANCIAL STATEMENTS
The accompanying consolidated financial statements are the responsibility of the
Company's management. The consolidated financial statements have been prepared
in accordance with generally accepted accounting principles and, as such,
include amounts based on management's best estimates and judgments.
The Company's 1996 consolidated financial statements have been audited by
Deloitte & Touche LLP, independent auditors, who were given unrestricted access
to all financial records and related data. The Company believes that all
representations made to the independent auditors during their audit were valid
and appropriate. Deloitte & Touche LLP's audit report included on page 24
provides an independent opinion as to the fairness of presentation of the
consolidated financial statements.
SYSTEM OF INTERNAL CONTROLS
The Company maintains a system of internal controls over financial recording and
reporting which is designed to provide reasonable assurance that assets are
safeguarded and transactions are recorded in accordance with the Company's
policies and procedures and which ultimately will result in the preparation of
reliable financial statements. The system contains self-monitoring mechanisms,
and actions are taken to correct deficiencies as they are identified. Even an
effective internal control system has inherent limitations -- including the
possibility of the overriding of controls -- and therefore can provide only
reasonable, not absolute, assurance with respect to financial statement
preparation.
The Company assessed its internal controls system as of September 30, 1996 in
relation to criteria for effective internal control over preparation of
published annual (and interim) financial statements described in "Internal
Control -- Integrated Framework" issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this assessment, the Company
believes that, as of September 30, 1996, its system of internal controls over
the preparation of its published annual (and interim) financial statements met
these criteria. Deloitte & Touche LLP also reviews and tests the effectiveness
of these systems to the extent they deem necessary to determine the extent of
audit procedures needed in connection with their annual audit of the
consolidated financial statements.
The Audit Committee of the Board of Directors, which is composed of Directors
who are not officers or employees of the Company, provides oversight to the
financial reporting process. The independent auditors have unrestricted access
to the Audit Committee.
/s/ IAN J. MCCARTHY
President and Chief Executive Officer
/s/ DAVID S. WEISS
Executive Vice President and Chief Financial Officer
/s/ JOHN SKELTON
Senior Vice President and Controller
14 BEAZER HOMES USA 1996 ANNUAL REPORT
SELECTED FINANCIAL DATA
(dollars in thousands, except per share amounts) TEN MONTHS
YEAR ENDED SEPTEMBER 30, ENDED
SEPTEMBER 30,
1996 1995 1994 1993 1992(i)
STATEMENT OF OPERATIONS DATA:
Total revenue $ 866,627 $ 647,828 $ 536,526 $ 275,054 $ 111,429
Operating income $ 30,122 $ 18,629 $ 27,377 $ 19,959 $ 8,081
Income before cumulative
effect of change in
accounting principle $ 18,266 $ 11,352 $ 16,468 $ 12,270 $ 6,415
Net income (ii) $ 18,266 $ 11,352 $ 16,468 $ 16,046 $ 6,415
Net income per common share:
Primary $ 2.20 $ 1.23
Fully diluted $ 2.01 $ 1.23
Pro forma net income (iii) $ 16,226
Pro forma net income
per common share (iii) $ 1.76
BALANCE SHEET DATA:
Cash $ 12,942 $ 40,407 $ 35,980 $ 819 $ 469
Inventory $ 320,969 $ 285,268 $ 253,356 $ 225,863 $ 58,948
Total assets $ 356,643 $ 345,240 $ 314,941 $ 245,349 $ 65,694
Total debt $ 115,000 $ 115,000 $ 115,000 $ 119,925 $ 11
Stockholders' equity $ 178,701 $ 164,544 $ 150,406 $ 95,595 $ 58,816
SUPPLEMENTAL FINANCIAL DATA:
EBIT (iv) $ 45,327 $ 32,188 $ 37,169 $ 22,713 $ 8,595
EBITDA (iv) $ 46,855 $ 33,542 $ 38,384 $ 23,609 $ 9,496
Interest incurred $ 14,176 $ 14,737 $ 11,306 $ 6,553 $ 505
EBIT/interest incurred 3.20x 2.18x 3.29x 3.47x 17.02x
EBITDA/interest incurred 3.31x 2.28x 3.40x 3.60x 18.80x
FINANCIAL STATISTICS (v):
Total debt as a percentage
of total debt and
stockholders' equity 39.2% 41.1% 43.3% 55.6% n/m
Asset turnover 2.47x 1.96x 1.92x 1.77x n/m
EBIT margin 5.2% 5.0% 6.9% 8.3% n/m
Return on average assets 12.9% 9.8% 13.3% 14.6% n/m
Return on average capital 15.8% 11.8% 15.5% 16.6% n/m
Return on average equity 10.6% 7.2% 13.4% 20.8% n/m
(i) Represents the period from the acquisition of Beazer PLC by Hanson PLC on
December 1, 1991 through September 30, 1992.
(ii) Net income for the year ended September 30, 1993 includes a benefit of
$3,776 to reflect the cumulative effect of a change in accounting for
income taxes for the adoption of SFAS No. 109.
(iii) The 1994 pro forma net income per share has been calculated as if the
Company's initial public offering had taken place on October 1, 1993.
See Note 2 to the consolidated financial statements.
(iv) EBIT and EBITDA: EBIT (earnings before interest and taxes) equals net
income before (a) previously capitalized interest amortized to costs and
expenses; (b) income taxes; and (c) cumulative effect of change in
accounting principle. EBITDA (earnings before interest, taxes,
depreciation and amortization) is calculated by adding depreciation and
amortization for the period to EBIT. EBITDA is commonly used to analyze
companies on the basis of operating performance, leverage and liquidity.
EBITDA is not intended to represent cash flows for the period nor has it
been presented as an alternative to net income as an indicator of
operating performance.
(v) Asset turnover = (total revenue divided by average total assets); EBIT
margin = (EBIT divided by total revenues); Return on average assets =
(EBIT divided by average total assets); Return on average capital = (EBIT
divided by average total debt plus stockholders equity); Return on
average equity = (Net income divided by average stockholder's equity).
n/m Not meaningful.
15 BEAZER HOMES USA 1996 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
See "Notes to Consolidated Financial Statements" for definitions of certain
items included in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
OPERATING AND FINANCIAL DATA
The following tables present certain operating and financial data for the
periods discussed:
(DOLLARS IN THOUSANDS) YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993
AMOUNT % CHANGE AMOUNT % CHANGE AMOUNT AMOUNT
NUMBER OF NEW ORDERS,
NET OF CANCELLATIONS(i):
SOUTHEAST REGION:
Georgia 253 (18.4)% 310 13.1% 274 301
North Carolina 671 1.5 661 21.3 545 502
South Carolina 303 30.0 233 (6.0) 248 169
Tennessee 457 (14.9) 537 28.5 418 420
Florida 364 6.4 342 41.9 241
---------------- ----------------- ------- -------
Total Southeast 2,048 (1.7) 2,083 20.7 1,726 1,392
---------------- ----------------- ------- -------
SOUTHWEST REGION:
Arizona 1,681 23.3 1,363 18.9 1,146 660
California 1,008 17.8 856 81.4 472 176
Nevada 483 9.5 441 55.3 284 235
---------------- ----------------- ------- -------
Total Southwest 3,172 19.2 2,660 39.9 1,902 1,071
---------------- ----------------- ------- -------
CENTRAL REGION:
Texas 401 309.2 98 n/a
---------------- ----------------- ------- -------
OTHER MARKETS 48 80
---------------- ----------------- ------- -------
Total 5,621 16.1% 4,841 31.7% 3,676 2,543
---------------- ----------------- ------- -------
BACKLOG AT END OF PERIOD:
SOUTHEAST REGION:
Georgia 52 (51.4)% 107 109.8% 51 68
North Carolina 192 (11.9) 218 41.6 154 161
South Carolina 107 33.8 80 11.1 72 45
Tennessee 125 (35.6) 194 51.6 128 163
Florida 104 (4.6) 109 49.3 73
---------------- ----------------- ------- -------
Total Southeast 580 (18.1) 708 48.1 478 437
---------------- ----------------- ------- -------
SOUTHWEST REGION:
Arizona 414 (9.2) 456 31.0 348 454
California 96 (9.4) 106 20.5 88 72
Nevada 170 6.3 160 128.6 70 151
---------------- ----------------- ------- -------
Total Southwest 680 (5.8) 722 42.7 506 677
---------------- ----------------- ------- -------
CENTRAL REGION:
Texas 166 213.2 53 n/a
---------------- ----------------- ------- -------
OTHER MARKETS 1 (66.7) 3 74
---------------- ----------------- ------- -------
Total 1,426 (3.9)% 1,484 50.4% 987 1,188
---------------- ----------------- ------- -------
(i) NEW ORDERS FOR 1996, 1995, 1994 AND 1993 DO NOT INCLUDE 256, 19, 49 AND
376 HOMES IN BACKLOG FROM ACQUIRED OPERATIONS AT THE DATE OF THEIR
ACQUISITION.
16 BEAZER HOMES USA 1996 ANNUAL REPORT
(DOLLARS IN THOUSANDS) YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993
AMOUNT % CHANGE AMOUNT % CHANGE AMOUNT AMOUNT
SALES VALUE OF HOMES IN
BACKLOG AT END OF PERIOD:
Southeast region $ 98,092 (4.3)% $102,511 46.2% $ 70,129 $ 55,765
Southwest region 86,539 (14.6) 101,346 39.3 72,754 88,290
Central region 26,006 219.8 8,133 n/m
Other markets 0 (100.0) 173 (66.4) 515 10,577
-------------------- ------------------- ---------------------
Total $210,637 (0.7)% $212,163 48.0% $143,398 $154,632
-------------------- ------------------- ---------------------
NUMBER OF CLOSINGS:
SOUTHEAST REGION:
Georgia 308 21.3% 254 (12.7)% 291 297
North Carolina 697 16.8 597 8.2 552 460
South Carolina 276 22.7 225 1.8 221 167
Tennessee 526 11.7 471 4.0 453 388
Florida 405 32.4 306 41.0 217
-------------------- ------------------- ---------------------
Total Southeast 2,212 19.4 1,853 6.9 1,734 1,312
-------------------- ------------------- ---------------------
SOUTHWEST REGION:
Arizona 1,852 47.6 1,255 0.2 1,252 441
California 1,018 21.5 838 83.8 456 195
Nevada 473 34.8 351 (3.8) 365 139
-------------------- ------------------- ---------------------
Total Southwest 3,343 36.8 2,444 17.9 2,073 775
-------------------- ------------------- ---------------------
CENTRAL REGION:
Texas 379 492.2 64 n/a
-------------------- ------------------- ---------------------
OTHER MARKETS 1 (50.0) 2 (98.3) 119 6
-------------------- ------------------- ---------------------
Total 5,935 36.0% 4,363 11.1% 3,926 2,093
-------------------- ------------------- ---------------------
REVENUES:
Southeast region $332,159 24.8% $266,228 18.9% $223,967 $153,600
Southwest region 475,662 28.4 370,369 25.8 294,467 120,601
Central region 58,621 438.5 10,886 n/a
Other markets 185 (46.4) 345 (98.1) 18,092 853
-------------------- ------------------- ---------------------
Total $866,627 33.8% $647,828 20.7% $536,526 $275,054
-------------------- ------------------- ---------------------
AVERAGE SALES PRICE
PER HOME CLOSED:
Southeast region $ 150.2 4.5% $ 143.7 11.2% $ 129.2 $ 117.1
Southwest region 142.3 (6.1) 151.5 6.7 142.0 155.6
Central region 154.7 (9.1) 170.1 n/a
Other markets 185.0 7.2 172.5 13.5 152.0 142.2
-------------------- ------------------- ---------------------
Total $ 146.0 (1.7)% $ 148.5 8.6% $ 136.7 $ 131.4
-------------------- ------------------- ---------------------
NUMBER OF ACTIVE
SUBDIVISIONS AT YEAR END:
Southeast region 99 12.5% 88 7.3% 82 94
Southwest region 62 21.6 51 30.8 39 50
Central region 31 210.0 10 n/m
Other markets 1 1
-------------------- ------------------- ---------------------
Total 192 8.9% 149 22.1% 122 145
-------------------- ------------------- ---------------------
N/A NOT APPLICABLE.
N/M NOT MEANINGFUL.
SEE "RESULTS OF OPERATIONS" FOR A DISCUSSION OF CERTAIN FLUCTUATIONS
CONSIDERED TO BE SIGNIFICANT IN BOTH ABSOLUTE VALUE AND PERCENTAGE
AMOUNT.
17 BEAZER HOMES USA 1996 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
OVERVIEW
Beazer Homes designs, builds and sells single family homes in the Southeast,
Southwest and Central regions of the United States. The Company's Southeast
region includes Georgia, North Carolina, South Carolina, Tennessee and Florida,
its Southwest region includes Arizona, California and Nevada, and its Central
region includes Texas. The Company's other markets include a single project in
New Jersey which was closed out during fiscal 1996. The Company intends,
subject to market conditions, to expand in its current markets and to consider
entering new markets through expansion from existing markets ("satellite
expansion") or through acquisitions of established regional homebuilders.
The Company's homes are designed to appeal primarily to entry-level and
first move-up home buyers, and are generally offered for sale in advance of
their construction. The majority of homes are sold pursuant to standard sales
contracts entered into prior to commencement of construction. Once a contract
has been signed, the Company classifies the transaction as a "new order." Such
sales contracts are usually subject to certain contingencies, such as the
buyer's ability to qualify for financing. Homes covered by such sales contracts
are considered by the Company as its "backlog." The Company does not recognize
revenue on homes in backlog until the sales are closed and the risk of ownership
has been transferred to the buyer.
During fiscal 1996 the Company began providing mortgage origination
services for its local operations through Beazer Mortgage Company ("Beazer
Mortgage"). Beazer Mortgage originates and processes mortgages on behalf of
third-party investors. Beazer Mortgage does not retain or service the mortgages
that it originates. The results of operations for Beazer Mortgage were not
significant for the year ended September 30, 1996.
NEW ORDERS AND BACKLOG -- The Company believes the positive new order
comparisons for the year ended September 30, 1996 compared to the year ended
September 30, 1995 are the result of generally favorable economic conditions for
much of the year (primarily declining mortgage interest rates during the first
four months of the fiscal year), continued order growth in our Southwest region,
and the expanded operations in Texas.
The Company has historically experienced fluctuations in new order activity
in periods of significant mortgage rate changes. The Company's Arizona and
California markets continued to experience strong order growth despite the
increase in rates that began in January 1996 and continued for the remainder of
the Company's fiscal year. The Company believes the timely acquisition of land
from Del Mar Development in Phoenix (December 1995) and successful product mix
in both markets contributed to the sustained growth. New order activity in the
Company's Southeast region for the full year is about flat with that experienced
in fiscal 1995, although new orders were up in the first and second quarters and
down in the third and fourth quarters of fiscal 1996 compared to the same
periods in fiscal 1995. The Company believes that these changes in new orders
are principally the result of interest rate fluctuations.
The strong growth in new orders in 1995 compared to 1994 is the result of
favorable economic conditions during the second half of the year, primarily
reduced mortgage interest rates, and the Company's timing of opening new
subdivisions. The strong backlog comparisons indicate the strength of new orders
at the end of the fiscal year.
With the exception of the Reno/Sparks market, which contributed 59 new
orders during fiscal 1996, recent satellite expansions did not contribute
significantly to new order activity in 1996 or 1995.
18 BEAZER HOMES USA 1996 ANNUAL REPORT
Backlog levels correspond directly with the new order trends experienced by
the Company. As new order levels slowed late in fiscal 1996, unit backlog levels
at September 30, 1996 were slightly less than the comparable prior year date.
The new order acceleration late in fiscal 1995 resulted in strong unit backlog
figures at September 30, 1995 compared to the same date in 1994.
Active subdivision levels for the Company have increased in each of the
last two years. As interest rates decreased and general economic conditions
improved late in fiscal 1995, the Company expanded its number of active
subdivisions. This internal expansion continued through the middle of fiscal
1996 and slowed as conditions warranted. While the number of active subdivisions
at September 30, 1996 is above that at September 30, 1995, many of the
subdivisions are nearing close-out status and the Company anticipates reporting
a decrease in the number of active subdivisions early in fiscal 1997.
SEASONALITY AND QUARTERLY VARIABILITY -- The Company has historically
experienced significant seasonality and quarter-to-quarter variability in
homebuilding activity levels. The annual operating cycle generally reflects
escalating home sales (new orders) in the Company's second and third fiscal
quarters and slower sales in the Company's first and fourth fiscal quarters.
Since closings usually trail home sales by four to six months, closings
typically are lowest in the first quarter of the fiscal year, and revenue from
home closings usually peaks in the third and fourth quarters of the fiscal year.
The Company believes that this seasonality reflects the preference of homebuyers
to shop for a new home in the spring, as well as the scheduling of construction
to accommodate seasonal weather conditions. This trend, however, may be altered
in periods of extreme fluctuations in economic conditions, such as interest
rates and general consumer confidence. For example, decreases in interest rates
contributed to the increased level of new orders during the Company's third and
fourth quarters of fiscal 1995 and first and second quarters of fiscal 1996.
The following table presents certain unaudited financial and operating data
for the Company's last eight fiscal quarters. These historical results are not
necessarily indicative of results to be expected for any future period.
(DOLLARS IN THOUSANDS) QUARTER ENDED
September 30, June 30, March 31, December 31, September 30, June 30, March 31, December 31,
1996 1996 1996 1995 1995 1995 1995 1994
------------- -------- --------- ------------ ------------- -------- ---------- ------------
Total revenue $294,828 $217,065 $196,505 $158,230 $270,604 $151,377 $123,544 $102,303
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
NUMBER OF NEW ORDERS, NET:
Southeast 445 550 617 436 618 687 526 252
Southwest 646 837 995 694 776 935 625 324
Central 134 119 94 54 64 34
Other markets 1 (1)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total 1,225 1,506 1,706 1,184 1,459 1,656 1,150 576
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
NUMBER OF CLOSINGS:
Southeast 709 554 483 466 716 405 384 348
Southwest 1,044 868 836 595 1,055 570 447 372
Central 202 74 46 57 49 15
Other markets 1 2
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total 1,955 1,496 1,365 1,119 1,820 990 831 722
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
19 BEAZER HOMES USA 1996 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
The Company's operations can be affected by inflation. All costs and
expenses including land, raw materials, subcontracted labor and interest would
increase in an inflationary period. The Company's margins would decrease unless
the increased costs are recovered through higher sales prices.
RESULTS OF OPERATIONS
The following table shows certain items in the Company's statements of income
expressed as a percentage of total revenue.
YEAR ENDED SEPTEMBER 30,
1996 1995 1994
Total revenue 100.0% 100.0% 100.0%
Costs of home
construction and
land sales (84.5) (85.2) (84.0)
Amortization of
previously capitalized
interest (1.7) (2.0) (1.8)
Selling, general
and administrative
expenses (10.3) (9.8) (9.1)
-------- ------- -------
Operating income 3.5% 3.0% 5.1%
-------- ------- -------
REVENUES -- The increase in revenues for the year ended September 30, 1996
compared to the same period in 1995 is the result of a 36% increase in the
number of homes closed and a 1.7% decrease in average sales price. The increase
in home closings was experienced in all markets and is a result of the strong
order growth early in fiscal 1996, and the expansion of the Texas operations
entered initially via the acquisition of Bramalea Homes Texas ("Bramalea") in
April 1995 and supplemented through the acquisition of Trendmaker Homes --
Dallas in June 1996. Gulfcoast Homes, acquired in May 1996 contributed 16
closings and $4.6 million in revenues. The small decrease in average sales price
is the result of shifting product mix in the Southeast region, an emphasis on
the affordable product in the Southwest (especially in Arizona), and decreases
in Texas as a result of the Company opening new, lower-priced subdivisions in
Dallas.
The revenue growth in fiscal 1995 compared to 1994 is the result of an
11.1% increase in closings and an 8.6% increase in average sales price. This
growth in closings is largely attributable to expansion in existing markets, the
Bramalea acquisition ($10.8 million in revenues and 64 closings) and strong
order growth during the second half of fiscal 1995. Increases in average sales
price are principally the result of expansion in the higher-priced home market
in Tennessee and new higher-priced subdivisions in Raleigh. Offsetting the noted
growth factors is the decrease in revenues because of the close-out of the
Company's single New Jersey project, which contributed $18.1 million in revenues
in 1994 and $0.3 million in 1995.
COST OF HOME CONSTRUCTION AND LAND SALES -- Cost of home construction and land
sales, as a percentage of revenues, decreased for the year ended September 30,
1996 compared to 1995, but increased in 1995 compared to 1994. The decrease in
1996 is largely attributable to decreases in hard construction costs (material
and labor) and an increase in deliveries from homes started subsequent to sale.
Additionally, the Company's Arizona and Texas markets, which typically
experience higher gross margins than the Company average, represent a greater
percentage of total closings for the year. The increase in cost of home
construction and land sales, as a percentage of revenues, in 1995 compared to
1994 is the result of reduced margins in Georgia and South Carolina, where
20 BEAZER HOMES USA 1996 ANNUAL REPORT
measures were taken to reduce inventory levels built up early in the year, and
an increased proportion of sales from the Company's California market, which has
experienced lower gross margins than the Company average.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE -- Selling, general and
administrative expense increased, as a percentage of revenues, in 1996 to 10.3%
from 9.8%. This increase can be attributed primarily to certain consulting and
start-up costs relating to various long-term initiatives the Company began late
in fiscal 1996 and one-time costs relating to employee severance arrangements
for certain employees. General and administrative expenses, as a percentage of
total revenues, increased to 4.2% from 3.7% during 1996, while sales and
marketing expenses were unchanged at 6.1%.
Selling, general and administrative expenses increased, as a percentage of
revenues, to 9.8% in 1995 from 9.1% in 1994. During the year ended September 30,
1995, as market conditions warranted, the Company expanded its number of active
subdivisions and, in doing so, incurred additional marketing expense. This
contrasts with 1994 when, as market conditions worsened, the Company slowed
expansion into additional subdivisions. Additionally, the Company experienced
some increase during 1995 over 1994, as this year represented the first full
year as a public company.
AMORTIZATION OF PREVIOUSLY
CAPITALIZED INTEREST -- The decrease in interest amortized to costs and expenses
as a percentage of revenues for the year ended September 30, 1996 compared to
the same period in 1995 is the result of a favorable interest rate environment
and accelerated inventory turnover. The increase in interest amortized to costs
and expenses during 1995 as compared to 1994 is due to a combination of the
higher interest incurred resulting from a full year's impact of the Senior Notes
(issued in conjunction with the Initial Public Offering in March 1994) and
expanded borrowings under the credit facility during the year to assist internal
expansion.
INCOME TAXES -- The Company's effective income tax rate was 39.5%, 40.0 % and
39.9% for 1996, 1995 and 1994, respectively. The decrease in 1996 compared to
1995 is principally the result of various tax savings strategies implemented
during 1996.
FINANCIAL CONDITION AND LIQUIDITY
In March 1994, the Company completed its initial public offering and sold six
million shares of common stock followed by the issuance of 125,367 additional
(overallotment) shares, providing net cash proceeds of approximately $99
million. In addition, in March 1994, the Company also issued $115 million of 9%
Senior Notes, providing net cash proceeds of approximately $112 million. The net
proceeds were used principally to repay amounts due an Affiliate of the
Company's Former Parent.
During fiscal 1995, the company repurchased the remaining shares held by an
affiliate of the Former Parent and financed the repurchase with the proceeds
from the issuance of the Company's Series A Convertible, Exchangeable Preferred
Stock.
21 BEAZER HOMES USA 1996 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Prior to these offerings, the Company financed its operations from a
combination of cash generated from operations and funds from the Former Parent
and Affiliates.
Effective January 1995, the Company entered into the Credit Agreement with
a group of banks which provides for an $80 million unsecured, revolving line of
credit. Borrowings under the Credit Agreement generally bear interest at a
fluctuating rate equal to (i) the sum of a specified margin plus the higher of
(x) the corporate base rate of interest announced by the Agent from time to time
or (y) a specified spread above the Federal Funds Rate or (ii) the sum of a
specified margin plus a rate of interest based on LIBOR.
Available borrowings under the Credit Agreement are limited to certain
percentages of homes under contract, unsold homes, substantially improved lots
and accounts receivable as defined in the Credit Agreement. At September 30,
1996, the Company had no borrowings outstanding, and had available additional
borrowings of $74.1 million under the Credit Agreement. The Company's debt to
total capitalization ratio at September 30, 1996 was 39.2%.
In October 1996, the Company entered into a $150 million unsecured,
revolving credit agreement (the "New Credit Agreement") with a group of banks to
replace the above $80 million Credit Agreement. Borrowings under the New Credit
Agreement bear interest at a fluctuating rate calculated in a manner consistent
with the previous facility but with lower specified margins. Interest on
outstanding loans is due and payable monthly. All outstanding indebtedness under
the New Credit Agreement will be due in October 1999. The New Credit Agreement
contains various operating and financial covenants.
All subsidiaries of Beazer Homes USA, Inc. are guarantors of the Senior
Notes and the credit agreements and are jointly and severally liable for the
Company's obligations thereunder. Separate financial statements and other
disclosures concerning each of the subsidiaries are not included, as the
aggregate assets, liabilities, earnings and equity of the subsidiaries
substantially equal such amounts for the Company on a consolidated basis and
separate subsidiary financial statements are not considered material to
investors. Neither the Credit Agreement nor the Senior Notes restrict
distributions to Beazer Homes USA, Inc. by its subsidiaries.
In June 1996, the Company's Board of Directors approved a stock repurchase
plan authorizing the repurchase of up to 10% of the Company's currently
outstanding common stock. Such repurchases, if completed, would be effected at
various prices from time to time in the open market. The timing of the purchases
and the exact number of shares to be purchased will depend on market conditions.
As of September 30, 1996, the Company had purchased 25,000 shares for an
aggregate purchase price of approximately $349,000.
The Company has utilized, and will continue to utilize, land options as a
method of controlling and subsequently acquiring land. At September 30, 1996,
the Company had 8,085 lots under option. At September 30, 1996, the Company had
commitments with respect to option contracts with specific performance
obligations of approximately $60.9 million. The Company expects to exercise all
of its option contracts with specific performance obligations and, subject to
market conditions, substantially all of its options contracts without specific
performance obligations.
22 BEAZER HOMES USA 1996 ANNUAL REPORT
Management believes that the Company's current borrowing capacity, cash on
hand at September 30, 1996, and anticipated cash flows from operations are
sufficient to meet liquidity needs for the foreseeable future. There can be no
assurance, however, that amounts available in the future from the Company's
sources of liquidity will be sufficient to meet the Company's future capital
needs and the amount and types of indebtedness that the Company may incur may be
limited by the terms of the Indenture governing the Senior Notes and the credit
agreements.
During fiscal 1996 the Company utilized borrowings under the Credit
Agreement of $21.4 million for acquisitions. All such borrowings were repaid as
of September 30, 1996. The Company continually evaluates expansion opportunities
through acquisition of established regional homebuilders and, such opportunities
may require the Company to seek additional capital in the form of equity or debt
financing from a variety of potential sources, including additional bank
financing and securities offerings.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement No.
123, "Accounting for Stock-Based Compensation"("SFAS 123"). SFAS 123 establishes
financial accounting and reporting standards for stock-based employee
compensation plans, such as stock option plans. SFAS 123 was effective for
certain transactions entered into after December 15, 1995. The Company intends
to adopt the expanded disclosures provisions of SFAS 123 in fiscal 1997.
23 BEAZER HOMES USA 1996 ANNUAL REPORT
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Beazer Homes USA, Inc.
We have audited the accompanying consolidated balance sheet of Beazer Homes USA,
Inc. as of September 30, 1996 and the related consolidated statements of
operations, stockholders' equity and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the management of
Beazer Homes USA, Inc. Our responsibility is to express an opinion on these
financial statements based on our audit. The consolidated financial statements
of the Company as of September 30, 1995 and for each of the two years in the
period then ended were audited by other auditors whose report, dated October 27,
1995, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Beazer Homes USA, Inc. at September 30, 1996 and the consolidated results of its
operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.
Atlanta, Georgia
October 30, 1996
24 BEAZER HOMES USA 1996 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts) YEAR ENDED SEPTEMBER 30,
1996 1995 1994
Total revenue $ 866,627 $ 647,828 $ 536,526
Costs and expenses:
Home construction and land sales 732,395 552,204 450,570
Amortization of previously
capitalized interest 15,134 13,268 9,768
Selling, general and administrative 88,976 63,727 48,811
----------- ---------- ----------
Operating income 30,122 18,629 27,377
Other income 71 291 24
----------- ---------- ----------
Income before income taxes 30,193 18,920 27,401
Provision for income taxes 11,927 7,568 10,933
----------- ---------- ----------
Net income $ 18,266 $ 11,352 $ 16,468
----------- ---------- ----------
Preferred dividends $ 4,000 $ 611
Net income applicable to
common shareholders $ 14,266 $ 10,741
NET INCOME PER COMMON SHARE:
Primary $ 2.20 $ 1.23
Fully diluted $ 2.01 $ 1.23
Pro forma net income $ 16,226
Pro forma net income
per common share $ 1.76
WEIGHTED AVERAGE NUMBER OF SHARES:
Primary 6,475,167 8,716,965 9,220,367
Fully diluted 9,099,839 8,716,965
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
25 BEAZER HOMES USA 1996 ANNUAL REPORT
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) SEPTEMBER 30,
1996 1995
ASSETS:
Cash and cash equivalents $ 12,942 $ 40,407
Accounts receivable 6,473 2,842
Inventory 320,969 285,268
Deferred tax asset 1,645 2,086
Property, plant and equipment, net 2,823 1,323
Goodwill, net 6,204 6,745
Other assets 5,587 6,569
----------- -----------
Total assets $ 356,643 $ 345,240
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Trade accounts payable $ 31,431 $ 40,111
Other liabilities 31,511 25,585
Senior Notes 115,000 115,000
----------- -----------
Total liabilities 177,942 180,696
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock (par value $.01 per share,
5,000,000 shares authorized, 2,000,000
issued and outstanding, $50,000 aggregate
liquidation preference) 20 20
Common stock (par value $.01 per share,
30,000,000 shares authorized, 9,305,200
and 9,297,117 issued, 6,530,933 and
6,547,850 outstanding) 93 93
Paid-in-capital 187,477 187,698
Retained earnings 37,613 23,347
Unearned restricted stock (1,446) (1,907)
Treasury stock, at cost
(2,774,267 and 2,749,267 shares) (45,056) (44,707)
----------- -----------
Total stockholders' equity 178,701 164,544
----------- -----------
Total liabilities and stockholders' equity $ 356,643 $ 345,240
----------- -----------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
26 BEAZER HOMES USA 1996 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS) UNEARNED
INVESTED PREFERRED COMMON PAID-IN- RETAINED RESTRICTED TREASURY
CAPITAL STOCK STOCK CAPITAL EARNINGS STOCK STOCK TOTAL
Balance, September 30, 1993 $ 95,595 $ 95,595
Dividend to Former Parent (7,400) (7,400)
Net cash transfers from
Former Parent 269 269
Net income prior
to Initial Public Offering 4,195 4,195
Formation of Beazer
Homes USA, Inc. (1 share)
Return of invested capital
to Former Parent (53,238) (53,238)
Exchange of common stock
of BHI and BHH for
common stock of the
Company (2,999,999 shares) (39,421) $ 30 $ 39,391
Public offering of Common
Stock (6,125,367 shares) 61 98,501 98,562
Issuance of restricted stock
(95,000 shares) 1 1,662 $ (1,663)
Remeasurement of unearned
restricted stock (273) 273
Amortization of unearned
restricted stock 150 150
Net income since
Initial Public Offering $ 12,273 12,273
---------- ----------- --------- --------- ----------- ----------- ----------- ----------
BALANCE, SEPTEMBER 30, 1994 $ -- 92 139,281 12,273 (1,240) 150,406
Purchase of treasury stock
(2,749,267 shares) $(44,707) (44,707)
Issuance of preferred stock
(2,000,000 shares) $ 20 47,386 47,406
Issuance of restricted stock
(103,000 shares) 1 1,184 (1,185)
Cancellation of restricted
stock (26,250 shares) (340) 340
Remeasurement of
unearned restricted stock 187 (187)
Amortization of
unearned restricted stock 365 365
Preferred stock dividends paid (278) (278)
Net income 11,352 11,352
---------- ----------- --------- --------- ----------- ----------- ----------- ----------
BALANCE, SEPTEMBER 30, 1995 20 93 187,698 23,347 (1,907) (44,707) 164,544
Purchase of treasury stock
(25,000 shares) (349) (349)
Issuance of restricted stock
(46,500 shares) 482 (482)
Cancellation of restricted
stock (38,417 shares) (458) 458
Remeasurement of
unearned restricted stock (228) 228
Amortization of
unearned restricted stock 257 257
Preferred stock dividends paid (4,000) (4,000)
Other (17) (17)
Net income 18,266 18,266
BALANCE, SEPTEMBER 30, 1996 $ 20 $ 93 $187,477 $ 37,613 $ (1,446) $(45,056) $178,701
---------- ----------- --------- --------- ----------- ----------- ----------- ----------
---------- ----------- --------- --------- ----------- ----------- ----------- ----------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
27 BEAZER HOMES USA 1996 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS) YEAR ENDED SEPTEMBER 30,
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 18,266 $ 11,352 $ 16,468
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization 1,528 1,354 1,215
Provision for deferred income taxes 588 1,111 1,709
CHANGES IN OPERATING ASSETS AND LIABILITIES,
NET OF EFFECTS FROM ACQUISITIONS:
Increase in inventory (11,603) (28,674) (25,677)
(Decrease) increase in trade
accounts payable (9,024) 9,409 14,143
Other changes 352 11,650 (2,772)
---------- ---------- ----------
Net cash provided by operating activities 107 6,202 5,086
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,866) (540) (473)
Acquisitions, net of cash acquired (21,357) (3,656) (3,168)
---------- ---------- ----------
Net cash used by investing activities (23,223) (4,196) (3,641)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash transfers from Affiliate 270
Proceeds from common stock issuance 98,562
Proceeds from Senior Notes issuance 111,500
Proceeds from preferred stock issuance 47,406
Repayment of invested capital (53,238)
Repayment of notes payable to Affiliate (115,978)
Payment of dividend to Affiliate (7,400)
Proceeds from short-term debt 169,500 99,500 59,900
Repayments of short-term debt (169,500) (99,500) (59,900)
Preferred stock dividends (4,000) (278)
Treasury stock purchased (349) (44,707)
---------- ---------- ----------
Net cash (used) provided by
financing activities (4,349) 2,421 33,716
---------- ---------- ----------
(Decrease) increase in cash
and cash equivalents (27,465) 4,427 35,161
Cash and cash equivalents at
beginning of year 40,407 35,980 819
---------- ---------- ----------
Cash and cash equivalents at end of year $ 12,942 $ 40,407 $ 35,980
---------- ---------- ----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 13,885 $ 14,023 $ 14,193
Income taxes paid $ 11,581 $ 2,857 $ 6,515
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
28 BEAZER HOMES USA 1996 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 | FORMATION AND ORGANIZATION OF BEAZER HOMES USA, INC.
Beazer Homes USA, Inc. ("Beazer" or the "Company") designs, constructs, markets
and sells single family homes in Arizona, California, Florida, Georgia, Nevada,
North Carolina, South Carolina, Tennessee and Texas.
Beazer was formed in November 1993 by Hanson Properties North America, Inc.
(the "Former Parent") in contemplation of the planned initial public offering of
common stock and issuance of Senior Notes (together, the "Initial Public
Offering") of the homebuilding operations of Beazer Homes, Inc. ("BHI") and
Beazer Homes Holdings, Inc. ("BHH"). The Former Parent was an indirect wholly
owned subsidiary of Hanson PLC ("Hanson"), a company registered in the United
Kingdom. Effective February 24, 1994, the Former Parent contributed all of the
issued and outstanding shares of BHI and BHH to the Company in exchange for
2,999,999 shares of the Company's common stock. In March 1994, the Company
completed the Initial Public Offering. As a result of the Initial Public
Offering, the Former Parent's ownership interest in the Company was reduced to
approximately 30% and the Company was no longer a subsidiary of the Former
Parent.
In accordance with the requirements of Accounting Principles Board Opinion
No. 16, "Business Combinations" ("APB 16"), the exchange of the common stock of
the Company for the common stock of BHI and BHH was accounted for in a manner
similar to a pooling of interests, and the assets and liabilities of the
entities in the combination were carried forward at their historical values.
Financial statements for periods prior to the combination have been combined on
this basis.
In June 1995, the Former Parent transferred its investment (2,749,267
shares) in the Company's common stock to USI Properties, Inc. ("USI"), a
subsidiary of US Industries, Inc. Also in June 1995, the Company and USI entered
into a stock purchase agreement pursuant to which the Company purchased from USI
1,000,000 shares of the Company's common stock for $16.0 million and the Company
entered into an option agreement with USI (the "Option") to acquire the
remaining 1,749,267 shares of the Company's common stock held by USI. Cash
consideration of $500,000 was paid for the Option. In August 1995, pursuant to
its exercise of the Option, the Company repurchased the remaining 1,749,267
shares held by USI for $28.2 million. The repurchased shares are reflected in
the accompanying consolidated financial statements as treasury stock.
Wholly owned subsidiaries of Hanson (other than the Former Parent) are
hereinafter referred to as "Affiliates" for the periods prior to the Initial
Public Offering.
2 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION -- The accompanying consolidated financial statements
include the accounts of Beazer Homes USA, Inc., and its wholly owned
subsidiaries. Intercompany balances have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS -- The Company considers cash investments with
maturities of three months or less when purchased to be cash equivalents. Cash
and cash equivalents as of September 30, 1996 and 1995 includes $1.4 million and
$6.0 million, respectively, of cash held in escrow for periods of up to three
days.
INVENTORY -- Inventory consists of residential real estate developments,
including interest, real estate taxes and development costs capitalized to land
and construction costs during the development and construction period.
29 BEAZER HOMES USA 1996 ANNUAL REPORT
NOTES OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During fiscal 1996, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" ("SFAS No. 121"). SFAS No. 121 requires
that long-lived assets, such as real estate inventories, goodwill, and property,
plant and equipment be reviewed for impairment. The adoption of SFAS 121 had no
impact on the Company's fiscal 1996 financial statements.
PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment are recorded at
cost. Depreciation is computed on a straight-line basis based on estimated
useful lives as follows:
Buildings 15 years
Machinery and equipment 3 - 12 years
Furniture and fixtures 3 - 5 years
INCOME TAXES -- Deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
Prior to the Initial Public Offering, the Company's results were included
in the consolidated federal income tax return filed by its ultimate U.S. parent
company, HM Anglo-American, Ltd. Pursuant to informal tax allocation agreements,
the Company provided for federal income taxes on a stand-alone separate company
basis.
INCOME RECOGNITION AND CLASSIFICATION OF COSTS -- Income from the sale of land
and residential units is recognized when closings have occurred and the risk of
ownership is transferred to the buyer. Sales commissions are included in
selling, general and administrative expense.
GOODWILL -- Goodwill represents the excess of the purchase price over the fair
value of assets acquired and is being amortized over a 15-year period.
Amortization expense was $541,000, $538,000 and $528,000 for the years ended
September 30, 1996, 1995 and 1994, respectively. Accumulated amortization was
$1,908,000 and $1,367,000 at September 30, 1996 and 1995, respectively. In the
event that facts and circumstances indicate that the carrying value of goodwill
may be impaired, an evaluation of recoverability would be performed. If an
evaluation is required, the estimated future undiscounted cash flows associated
with the asset would be compared to the asset's carrying amount to determine if
a write-down to fair value is required.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- For short-term financial instruments, the
historical carrying amount is a reasonable estimate of fair value. The fair
value of the Company's Senior Notes at September 30, 1996 and 1995 is
approximately $104 million and $105 million, respectively, based upon quoted
market prices.
EARNINGS PER SHARE -- The computation of primary earnings per Common Share and
common equivalent share for periods subsequent to the Company's Initial Public
Offering is based upon the weighted average number of Common Shares outstanding
during the period plus (in periods in which they have a dilutive effect) the
effect of Common Shares contingently issuable, primarily from stock options.
Common share equivalents are computed using the treasury stock method.
Fully diluted earnings per share further assumes the conversion of
2,000,000 shares of Series A Cumulative Convertible Exchangeable Preferred Stock
issued in August 1995 (see Note 12) into 2,624,672 shares of common stock.
30 BEAZER HOMES USA 1996 ANNUAL REPORT
Pro forma net income per share for the year ended September 30, 1994 is
comprised of pro forma net income per share for the period October 1, 1993
through March 2, 1994 ($.43 per share) and historical net income per share for
the remainder of the year ($1.33 per share). Pro Forma net income per share from
October 1, 1993 through March 2, 1994 was calculated as if the Initial Public
Offering was consummated on October 1, 1993, the other changes in the capital
structure discussed in the second paragraph of Note 1 occurred on such date, and
the Company incurred certain additional general and administrative costs as a
result of being a publicly owned company.
WARRANTY COSTS -- Estimated future warranty costs are charged to cost of sales
in the period when the revenues from home closings are recognized. Such
estimated warranty costs range from 0.5% to 1.0% of total revenue and, based
upon experience, have been sufficient to cover costs incurred.
OTHER LIABILITIES -- Other liabilities include home buyer deposits, land
purchase obligations, accrued compensation and various other accrued expenses.
USE OF ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS -- Certain items in prior period financial statements have
been reclassified to conform to the current presentation.
RECENT ACCOUNTING PRONOUNCEMENTS -- In October 1995, the Financial Accounting
Standards Board issued Statement No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 establishes financial accounting and
reporting standards for stock-based employee compensation plans, such as stock
option plans. SFAS 123 was effective for certain transactions entered into after
December 15, 1995. The Company intends to adopt the expanded disclosures
provisions of SFAS 123 in fiscal 1997.
3 | ACQUISITIONS
Since October 1, 1993, the Company has acquired substantially all of the assets
or all of the outstanding capital stock of each of the following businesses:
COMPANY CONSIDERATION ACQUISITION
ACQUIRED (IN THOUSANDS) DATE
Trendmaker
Homes -- Dallas $ 22,000 June 1996
Gulfcoast Homes 3,200 May 1996
Bramalea Homes
Texas, Inc. 3,100 April 1995
Bauer and Barone, Inc. 200 October 1994
Panitz & Company,
Chartered 3,200 October 1993
Consideration includes cash paid plus certain borrowings assumed and repaid
immediately subsequent to the acquisitions. Other liabilities assumed were not
significant. These acquisitions have been recorded using the purchase method of
accounting and, accordingly, the purchase price has been allocated to the assets
acquired and the liabilities assumed, based on their estimated fair values as of
the respective date of acquisition. The operating results of the acquired
businesses are included in the Company's consolidated statements of income from
their respective dates of acquisition. The pro forma effect on the Company's
operating results of acquired businesses prior to their acquisition date would
not be significant.
4 | RELATED PARTY TRANSACTIONS
Prior to the Initial Public Offering, cash accounts for the Company were
controlled on a centralized basis by the Former Parent and Affiliates and,
accordingly, cash receipts and disbursements were received or made through the
Former Parent and Affiliates.
31 BEAZER HOMES USA 1996 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Prior to August 1, 1994, the Former Parent administered two 401(k)
Retirement Plans (the "Plans") for the employees of the Company (see Note 13).
The Company made discretionary contributions under the Plans of $392,000 for the
ten months ended July 31, 1994.
Prior to the Initial Public Offering, operations and acquisitions were
funded by the Former Parent. Interest incurred related to promissory notes to
the Former Parent totaled $3.9 million for the year ended September 30, 1994. As
of the date of the Initial Public Offering, these notes and all accrued interest
thereon were repaid in full.
5 | INVENTORY
Inventory at September 30 includes:
(in thousands) 1996 1995
Finished homes $ 64,709 $ 52,464
Development projects
in progress 197,984 196,500
Unimproved land held
for future development 34,040 21,315
Model homes 24,236 14,989
---------- ----------
$320,969 $285,268
---------- ----------
Development projects in progress consist principally of land, land improvement
costs and, if applicable, construction costs for houses which are in various
stages of development but not ready for sale. Certain of the finished homes in
inventory are reserved by a deposit or sales contract.
Inventory located in California, the state with the Company's largest
concentration of inventory, was $72.5 million and $110.2 million at September
30, 1996 and 1995, respectively. Such inventory at September 30, 1996 includes
three projects with approximately $22 million of unimproved land held for future
development. Given their longer term nature, the Company intends to continually
monitor changes in circumstances related to these projects. If, based upon
future economic circumstances and the costs of developing these properties
(including any future capitalized interest), the book value of the properties
exceeds their undiscounted cash flows (excluding interest), a write-down to fair
value would be required.
The Company acquires certain lots by means of option contracts. Option
contracts generally require the payment of cash for the right to acquire lots
during a specified period of time at a certain price. Under option contracts
without specific performance obligations, the Company's liability is generally
limited to forfeiture of the nonrefundable deposits, which aggregated
approximately $10.3 million and $9.2 million at September 30, 1996 and 1995,
respectively, and is included in development projects in process. Under option
contracts, both with and without specific performance, purchase of the
properties is contingent upon satisfaction of certain requirements by the
Company and the sellers. Below is a summary of amounts committed under all
options:
AGGREGATE PURCHASE
(in thousands) PRICE AS OF
SEPTEMBER 30, 1996
Options with
specific performance $ 60,853
Options without
specific performance 131,123
----------
Total options $191,976
----------
6 | INTEREST
Information regarding interest is as follows:
(in thousands) YEAR ENDED SEPTEMBER 30,
1996 1995 1994
DURING THE PERIOD:
Interest incurred $14,176 $14,737 $11,306
Interest capitalized (14,176) (14,737) (11,306)
Previously capitalized interest
amortized to cost of sales 15,134 13,268 9,768
--------- --------- ---------
Total interest expensed in
statement of operations $15,134 $13,268 $ 9,768
--------- --------- ---------
AT THE END OF THE PERIOD:
Capitalized interest in ending inventory $ 5,553 $ 6,511 $ 5,042
32 BEAZER HOMES USA 1996 ANNUAL REPORT
7 | PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of:
(in thousands) Year Ended September 30,
1996 1995
Land and buildings $ 998 $ 633
Leasehold improvements 378 272
Machinery and equipment 2,547 2,223
Furniture and fixtures 3,074 3,244
--------- ---------
6,997 6,372
Less accumulated
depreciation 4,174 5,049
--------- ---------
Total $ 2,823 $ 1,323
--------- ---------
8 | CREDIT AGREEMENT
In January 1995, the Company entered into a credit agreement (the "Credit
Agreement") for an $80 million unsecured revolving line of credit with a group
of banks. The Credit Agreement replaced a previous $40 million facility.
Borrowings under the Credit Agreement generally bear interest at a fluctuating
rate equal to (i) the sum of a specified margin plus the higher of (x) the
corporate base rate of interest announced by the lead bank (the "Agent") from
time to time or (y) a specified spread above the Federal Funds Rate or (ii) the
sum of a specified margin plus a rate of interest based on LIBOR. All
outstanding indebtedness under the Credit Agreement would be due in full in
January 1998. The Credit Agreement contains various operating and financial
covenants. Each of the Company's subsidiaries is a guarantor under the Credit
Agreement.
Available borrowings under the Credit Agreement are limited to certain
percentages of homes under contract, unsold homes, substantially improved lots
and accounts receivable as defined in the Credit Agreement. At September 30,
1996, the Company had no borrowings outstanding, and had available additional
borrowings of $74.1 million under the Credit Agreement.
On October 22, 1996, the Company entered into a $150 million unsecured,
revolving credit agreement (the "New Credit Agreement") with a group of banks to
replace the previous $80 million credit agreement. Borrowings under the New
Credit Agreement will bear interest at a fluctuating rate calculated in a manner
consistent with the previous facility but with lower specified margins and
spreads. Interest on outstanding loans is payable monthly. All outstanding
indebtedness under the New Credit Agreement will be due in October 1999. The New
Credit Agreement contains various operating and financial covenants. Each of the
Company's subsidiaries is a guarantor under the New Credit Agreement.
9 | SENIOR NOTES
In March 1994, the Company issued the Senior Notes under an Indenture (the
"Senior Note Indenture") among the Company, each of the Company's subsidiaries,
as guarantors, and Continental Bank, National Association, as trustee.
The Senior Notes mature ten years from the date of issuance. Interest on
the Senior Notes is payable semiannually, at the rate of 9% per annum. The
Company may, at its option, redeem the Senior Notes in whole or in part at any
time on or after March 1, 1999, initially at 102.571% of the principal amount
thereof, declining to 100% of the principal amount thereof on or after March 1,
2001, in each case together with accrued interest. The Senior Notes are
unsecured and rank pari passu (except as to collateral) with, or senior in right
of payment to, all other existing and future senior indebtedness of the Company.
The Senior Notes are guaranteed, jointly and severally, on a senior unsecured
basis by all of the subsidiaries of the Company.
The Senior Note Indenture contains certain restrictive covenants, including
limitations on payment of dividends. At September 30, 1996, under the most
restrictive covenants, approximately $34 million of the Company's retained
earnings was available for payment of cash dividends and for the acquisition by
the Company of its common stock. In addition, the Senior Note Indenture provides
that, in the event of defined
33 BEAZER HOMES USA 1996 ANNUAL REPORT
changes in control, or if the consolidated tangible net worth of the Company and
its subsidiaries falls below a specified level, or, in certain circumstances,
upon sales of assets, the Company is required to make an offer to repurchase
certain specified amounts of outstanding Senior Notes.
10 | INCOME TAXES
The provision for income taxes consists of:
(in thousands) YEAR ENDED SEPTEMBER 30,
1996 1995 1994
------ ------ ------
CURRENT:
Federal $ 9,579 $ 5,231 $ 7,443
State 1,760 1,226 1,781
DEFERRED: 588 1,111 1,709
--------- --------- ---------
Total $11,927 $ 7,568 $10,933
--------- --------- ---------
The provision for income taxes differs from the amount computed by applying the
federal income tax statutory rate as follows:
(in thousands) YEAR ENDED SEPTEMBER 30,
1996 1995 1994
------ ------ ------
Income tax computed
at statutory rate $10,568 $ 6,622 $ 9,590
State income taxes,
net of federal benefit 1,143 784 1,158
Goodwill amortization 189 162 185
Other, net 27
--------- --------- ---------
Total $11,927 $ 7,568 $10,933
--------- --------- ---------
Deferred tax assets relate principally to differences between book and tax bases
of inventory as a result of the various acquisitions and accrued warranty costs.
11 | LEASES
The Company is obligated under various noncancelable operating leases for office
facilities and equipment. Rental expense under these agreements amounted to
approximately $2,485,000, $1,292,000 and $1,054,000 for the years ended
September 30, 1996, 1995 and 1994, respectively. As of September 30, 1996,
future minimum lease payments under noncancelable operating lease agreements,
excluding leaseback of model homes, are as follows:
YEAR ENDED SEPTEMBER 30, (in thousands)
1997 $ 2,468
1998 1,817
1999 1,325
2000 304
2001 65
-----------
Total $ 5,979
-----------
During the year ended September 30, 1995, the Company sold and leased back 102
model homes in Arizona, California and Nevada for approximately $15.0 million,
comprised of cash consideration of $13.0 million and recourse notes receivable
of $2.0 million. The transactions were accounted for as a sale-leaseback and
resulted in the recognition of a $350,000 gain. The lease terms on individual
model homes range from 3 to 33 months. Lease payments vary based on LIBOR and
totaled $1,536,000 and $914,000 for fiscal years 1996 and 1995, respectively.
Future lease commitments approximate $422,000 in fiscal year 1997 and $42,000
thereafter. The recourse notes receivable are secured by second deeds of trust
on the model homes, provide interest at LIBOR plus 3.5% and are due upon sale of
the related model home.
12 | STOCKHOLDERS' EQUITY
PREFERRED STOCK -- In August 1995, the Company sold 2,000,000 shares of its
Series A Cumulative Convertible Exchangeable Preferred Stock (liquidation
preference $25.00 per share). The preferred stock pays dividends quarterly at an
annual rate of 8%, is convertible at the holder's option into the Company's
common stock at a conversion price of $19.05 per Common Share and is
exchangeable, at the Company's option beginning September 1, 1997, into 8%
Convertible Subordinated Debentures due 2005. The net proceeds of approximately
$48.1 million were used principally to purchase the Company's common stock held
by USI (see Note 1).
34 BEAZER HOMES USA 1996 ANNUAL REPORT
COMMON STOCK -- In March 1994, the Company completed an offering of 6,125,367
shares of common stock for proceeds of approximately $99 million. The proceeds
were used together with proceed from the issuance of the Senior Notes (see Note
9) to retire borrowings and repay amounts payable to affiliates of the Former
Parent.
In June 1996, the Company's Board of Directors approved a stock repurchase
plan authorizing the purchase of up to 10% of the Company's currently
outstanding common stock. Such repurchases, if completed, would be effected at
various prices from time to time in the open market. As of September 30, 1996,
the Company has purchased 25,000 shares for an aggregate purchase price of
approximately $349,000.
As of September 30, 1996, the Company has reserved 675,000 shares of common
stock for issuance under various stock incentive plans and has 495,167 shares
available for future grants.
SHAREHOLDER RIGHTS PLAN -- In June 1996, the Company's Board of Directors
adopted a Shareholder Rights Plan and distributed a dividend of one preferred
share purchase right (a "Right") to purchase one one-hundredth of a share of
Series B Junior Participating Preferred Stock, par value $0.01 per share (the
"Preferred Shares"), of the Company. The Rights become exercisable in certain
limited circumstances involving principally the acquisition of over 20% of the
Company's outstanding common stock by any one individual or group. The Rights
are initially exercisable at a price of $80.00 per one hundredth of a Preferred
Share, subject to adjustment. Following certain other events after the Rights
have become exercisable, each Right entitles its holder to purchase at the
Right's then current exercise price, a number of shares of the Company's common
stock having a market value of twice such price, or, in certain circumstances,
securities of the acquirer, having a then current market value of two times the
exercise price of the Right.
The Rights are redeemable and may be amended at the Company's option before
they become exercisable. Until a Right is exercised, the holder of a Right has
no rights as a shareholder of the Company. The Rights expire on June 24, 2006.
13 | RETIREMENT PLAN AND INCENTIVE AWARDS
401(k) RETIREMENT PLAN -- Effective August 1994, the Company began its 401(k)
Retirement Savings and Investment Plan (the "Beazer USA Plan"). Similar plans
that were in place prior to August 1994 were terminated and their assets were
transferred to the Beazer USA Plan. Substantially all employees are eligible for
participation in the Beazer USA Plan after completing one year of service with
the Company. Participants are permitted to make contributions to the Beazer USA
Plan on a pre-tax salary reduction basis in accordance with the provisions of
Section 401(k) of the Internal Revenue Code of 1986, as amended. Participants
may defer from 1% to 17% of their salary with certain limitations on highly
compensated individuals. The Company matches 50% of the first 6% of the
participant's contributions. The participant's contributions vest 100%
immediately, while the Company's contributions vest after five years. The
Company's total contributions for the years ended September 30, 1996 and 1995
were approximately $587,000 and $495,000, respectively.
RESTRICTED STOCK AWARDS -- The Company has issued several restricted stock
awards to officers and key employees under the 1994 Stock Incentive Plan (the
"Stock Plan"). All restricted stock is awarded in the name of each participant,
who has all the rights of other common stockholders, subject to restrictions and
forfeiture provisions. Accordingly, all restricted stock awards are considered
outstanding shares.
Stock awards are valued when granted and such associated unearned
compensation is amortized as expense over the vesting period of the awarded
shares. Unearned compensation related to such awards is reflected as a reduction
of stockholders' equity. Compensation
35 BEAZER HOMES USA 1996 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
expense recognized for such awards totaled $257,000, $365,000 and $150,000 for
the years ended September 30, 1996, 1995 and 1994, respectively.
Activity relating to restricted stock awards is summarized as follows:
YEAR ENDED SEPTEMBER 30,
1996 1995 1994
--------------------------------
Restricted shares,
beginning of period 171,750 95,000 --
Shares awarded 46,500 103,000 95,000
Shares forfeited (38,417) (26,250)
--------- --------- --------
Restricted shares,
end of period 179,833 171,750 95,000
--------- --------- --------
Restricted stock awarded during the year ended September 30, 1994 originally
would vest based solely on the achievement of certain future financial targets.
Accordingly, unearned compensation was subsequently remeasured for such awards
based on changes in market value of the Company's common stock. In September
1996, the vesting of such awards was amended to occur unconditionally in March
2001; accordingly, unearned compensation for such awards was then fixed and will
not be subsequently remeasured.
STOCK OPTION AWARDS -- The Company has issued several stock option awards to
officers and key employees under the Stock Plan and to non-employee directors
pursuant to the Company's Non-Employee Director Stock Option Plan. Stock options
may be exercised three to ten years from the date such options were granted. As
of September 30, 1996, there were no stock options exercisable.
Activity under the Company's stock option plans is summarized as follows:
1994 STOCK NON-EMPLOYEE
INCENTIVE PLAN DIRECTOR STOCK
OPTION PLAN
SHARES UNDER OPTION:
October 1, 1993 -- --
Granted at
$17.50 per share 205,000
Canceled at
$17.50 per share (20,000)
--------- --------
September 30, 1994 185,000 --
--------- --------
Granted at $13.375
to $14.375 per share 127,000 40,000
--------- --------
September 30, 1995 312,000 40,000
--------- --------
Granted at $16.875
to $19.125 per share 24,000 10,000
Canceled at $16.875
to $17.50 per share (28,000)
--------- --------
September 30, 1996
(at $13.375 to $17.50
per share) 308,000 50,000
--------- --------
14 | CONTINGENCIES
The Company had outstanding letters of credit and performance bonds of
approximately $6.0 million and $50.4 million, respectively, at September 30,
1996, related principally to its obligations to local governments to construct
roads and other improvements in various developments. The Company does not
believe that any such letters of credit or bonds are likely to be drawn upon.
The Company is a defendant or plaintiff in various legal actions which have
arisen in the normal course of business. In the opinion of management, the
ultimate resolution of these matters will not have a material adverse effect on
the Company's financial position or results of operations.
36 BEAZER HOMES USA 1996 ANNUAL REPORT
QUARTERLY FINANCIAL DATA AND STOCK PRICE INFORMATION (UNAUDITED)
SUMMARIZED QUARTERLY FINANCIAL INFORMATION:
(DOLLARS IN THOUSANDS, Quarter Ended
EXCEPT PER SHARE AMOUNTS)
September 30 June 30 March 31 December 31
-------------------------------------------------------
FISCAL 1996
Total revenue $294,828 $217,065 $196,505 $158,230
Operating income 11,228 7,979 6,084 4,833
Net income 6,888 4,817 3,663 2,900
Net income per common
share:
Primary $ 0.91 $ 0.59 $ 0.41 $ 0.29
Fully diluted 0.76 0.53 0.40 0.29
FISCAL 1995
Total revenue $270,604 $151,377 $123,544 $102,303
Operating income 10,472 2,324 2,461 3,372
Net income 6,317 1,417 1,485 2,133
Net income per common share:
Primary $ 0.78 $ 0.16 $ 0.16 $ 0.23
Fully diluted 0.71 n/a n/a n/a
QUARTERLY STOCK PRICE INFORMATION: HIGH LOW
1996 PERIOD
July 1, 1996 through September 30, 1996 $ 16 3/4 $ 14
---------- ----------
April 1, 1996 through June 30, 1996 $ 18 3/8 $ 15 1/4
---------- ----------
January 1, 1996 through March 31, 1996 $ 20 1/2 $ 16 1/4
---------- ----------
October 1, 1995 through December 31, 1995 $ 20 5/8 $ 16 3/8
---------- ----------
1995 PERIOD
July 1, 1995 through September 30, 1995 $ 17 1/8 $ 15 1/4
---------- ----------
April 1, 1995 through June 30, 1995 $ 16 5/8 $ 13 3/8
---------- ----------
January 1, 1995 through March 31, 1995 $ 14 5/8 $ 11 1/2
---------- ----------
October 1, 1994 through December 31, 1994 $ 14 5/8 $ 11 1/8
---------- ----------
37 BEAZER HOMES USA 1996 ANNUAL REPORT
NOTE REGARDING FORWARD-LOOKING STATEMENTS
CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This Annual Report contains "forward-looking statements" within the meaning of
the federal securities laws. These forward-looking statements include, among
others, statements concerning the Company's outlook for 1997, overall and
market-specific volume trends, pricing trends and forces in the industry, cost
reduction strategies and their results, targeted goals for margins and returns,
the Company's expectations as to funding its capital expenditures and operations
during 1997, and other statements of expectations, beliefs, future plans and
strategies, anticipated events or trends, and similar expressions concerning
matters that are not historical facts. The forward-looking statements in this
report are subject to risks and uncertainties that could cause actual results to
differ materially from those expressed in or implied by the statements.
As described in this Annual Report, the Company has begun various
initiatives designed to improve its operating profit margin. The most
significant factors that could prevent the Company from achieving these goals --
and cause actual results to differ materially from those expressed in the
forward-looking statements -- include, but are not limited to, the following:
- - Economic changes nationally or in one of the Company's local markets
- - Volatility of mortgage interest rates
- - Increased competition in some of the Company's local markets
- - Increased prices for labor, land and raw materials used in the production of
houses
- - Any delays in reacting to changing consumer preferences in home design
- - Delays or difficulties in implementing the Company's initiatives to reduce its
production and overhead cost structure.
The Company undertakes no duty to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
38 BEAZER HOMES USA 1996 ANNUAL REPORT
CORPORATE AND OPERATING MANAGEMENT
OPERATING MANAGEMENT
SOUTHEAST REGION
James A. Moore
Regional Manager
FLORIDA
Leon J. Panitz
President, Panitz Homes
Craig G. Bloxham
President, Gulfcoast Homes
Jeffrey D. Thorson
President, Mid-Florida Division
GEORGIA
Scott A. Hoisington
President
NORTH AND SOUTH CAROLINA
Gary N. Baucom
Regional Manager
NORTH CAROLINA
Scott K. Thorson
President, Squires Homes -- Charlotte
Robert J. Polanco
President, Squires Homes -- Raleigh
SOUTH CAROLINA
William J. Mazar
President, Squire Homes -- Columbia
Jeffrey L. Keefer
City Manager, Squire Homes -- Myrtle Beach
TENNESSEE
H. Eddie Phillips
President, Phillips Builders
Thomas O. Brooks
President, Phillips Builders -- Knoxville
SOUTHWEST REGION
ARIZONA
Joseph C. Thompson
President, Hancock Homes
CALIFORNIA
Anthony R. Tonso
President, Northern California Division
Gerald A. Gates
President, Southern California Division
NEVADA
Warren D. Kiggins, Jr.
President
CENTRAL REGION
TEXAS
Kurt S. Watzek
President
Mark A. Angeli
President, Dallas Division
CORPORATE MANAGEMENT
IAN J. MCCARTHY
President and Chief Executive Officer
DAVID S. WEISS
Executive Vice President and Chief
Financial Officer
JOHN SKELTON
Senior Vice President, Operations and Controller
PETER H. SIMONS
Vice President, Corporate Development
DAVID T. ROOT
Vice President, Operations
MICHAEL T. RAND
Vice President, Operational and Accounting Controls
39 BEAZER HOMES USA 1996 ANNUAL REPORT
BOARD OF DIRECTORS
[Photograph - Page 40]
LEFT TO RIGHT:
JOHN SKELTON (Secretary)
DAVID S. WEISS
LARRY T. SOLARI
GEORGE W. MEFFERD
THOMAS B. HOWARD, JR.
D. E. MUNDELL
BRIAN C. BEAZER
IAN J. MCCARTHY
(1) Audit Committee
(2) Compensation Committee
(3) Stock Option Committee
BRIAN C. BEAZER (2)
NON-EXECUTIVE CHAIRMAN OF THE BOARD BEAZER HOMES USA, INC.
Mr. Beazer has served as non-executive Chairman since March 1994. He began work
in the construction industry in the late 1950s. He served as Chief Executive
Officer of Beazer PLC, from 1968 to 1991, and Chairman of that company from 1983
to 1991. Mr. Beazer is also a Director of Koppers Industries, Inc., Beazer
Japan, Ltd., Seal Mint Ltd., Jade Holdings Pte Ltd., Jade Technologies Singapore
Pte Ltd. and U.S. Industries, Inc.
THOMAS B. HOWARD, JR. (1,2,3)
FORMER CHAIRMAN AND CHIEF EXECUTIVE OFFICER, GIFFORD-HILL & COMPANY
Mr. Howard has served as a Director of the Company since 1995. He served as the
Chairman and Chief Executive Officer of Gifford-Hill & Company, a construction
and aggregates company, from 1969 to 1989. Gifford-Hill & Co. was acquired by
Beazer PLC in 1989 and Mr. Howard served as Chairman and Chief Executive Officer
of the successor company until 1992. During the period 1957 to 1969, Mr. Howard
held various positions with Vulcan Materials Company. Mr. Howard currently
serves as a Director of Lennox International, Inc. and is on the Board of
Trustees of the Methodist Hospitals Foundation.
IAN J. MCCARTHY
PRESIDENT AND CHIEF EXECUTIVE OFFICER, BEAZER HOMES USA, INC.
Mr. McCarthy has served as a Director and Chief Executive Officer since March
1994. Mr. McCarthy served as President of Beazer Homes, Inc. ("BHI") since
October 1992 and as President of Beazer Homes Holdings, Inc. ("BHH") since April
1993. From January 1991 to October 1992, he served as Executive Vice President
of BHI, responsible for all U.S. residential homebuilding operations. During the
period May 1981 to January 1991, Mr. McCarthy was employed in Hong Kong and
Thailand as a Director of Beazer Far East, and from January 1980 to May 1981 was
employed by Kier Limited, a company engaged in the U.K. construction industry.
GEORGE W. MEFFERD (1,2,3)
FORMER GROUP VICE PRESIDENT, FLUOR CORPORATION NEWPORT BEACH, CALIFORNIA
Mr. Mefferd has served as a Director since March 1994. In 1986, Mr. Mefferd
retired as Group Vice President and a Director of Flour Corporation, an
engineering and construction company. From 1974 to 1986, Mr. Mefferd held
various positions with Fluor Corporation, including Senior Vice President -
Finance, Treasurer, Group Vice President and Chief Financial Officer.
40 BEAZER HOMES USA 1996 ANNUAL REPORT
D. E. MUNDELL (1,2,3)
Chairman, ORIX USA Corporation
San Francisco, California
Mr. Mundell has served as a Director since March 1994. Mr. Mundell has served as
Chairman of ORIX USA corporation, a financial services company, since January
1991. During the period 1959 to 1990, Mr. Mundell held various positions within
United States Leasing International, Inc., retiring as Chairman in 1990. He is
also a Director of Varian Associates and Stockton Holding, Ltd.
LARRY T. SOLARI (1,2,3)
Former President, Building Materials
Group, Domtar, Inc.
Ann Arbor, Michigan
Mr. Solari has served as a Director since March 1994. Mr. Solari was the
President of the Building Materials Group of Domtar, Inc. He was the President
of the Construction Products Group, Owens-Corning Fiberglass from 1986 to 1994.
Mr. Solari has been a Director of the Policy Advisory Board of the Harvard Joint
Center for Housing Studies and an Advisory Board Member of the National
Homebuilders Association.
DAVID S. WEISS
Executive Vice President and Chief
Financial Officer, Beazer Homes USA, Inc.
Mr. Weiss has served as a Director and as Executive Vice President and Chief
Financial Officer since March 1994. Previously he was Assistant Corporate
Controller of Hanson Industries from February 1993. He was Manager of Financial
Reporting for Colgate -- Palmolive Company from November 1991 to February 1993
and was with the firm Deloitte & Touche from 1982 to 1991, at which time he
served as a Senior Audit Manager.
SHAREHOLDER INFORMATION
CORPORATE HEADQUARTERS
Beazer Homes USA, Inc.
5775 Peachtree Dunwoody Road
Suite C-550
Atlanta, GA 30342
Telephone: (404) 250-3420
INQUIRIES
Individuals seeking financial data should contact David S. Weiss, Executive Vice
President and Chief Financial Officer or Scott M. McKelvey, Manager of Financial
Reporting.
Others seeking information about the Company and its operations should contact
Ian J. McCarthy, President and Chief Executive Officer.
FORM 10-K
Copies of Beazer Homes USA, Inc.'s Annual Report on Form 10-K as filed with the
United States Securities and Exchange Commission will be furnished upon written
request to David S. Weiss, Executive Vice President and Chief Financial Officer.
ANNUAL MEETING
The Annual Shareholders' meeting will be held at 9:00 am EST on February 6, 1997
at The Penn Club, 30 West 44th Street, New York, NY 10036.
TRANSFER AGENT
First Chicago Trust Company of New York
52 Washington Boulevard
Suite 4694
Jersey City, NJ 07310
GENERAL COUNSEL
Paul, Hastings, Janofsky & Walker LLP
INDEPENDENT AUDITORS
Deloitte & Touche LLP
TRADING INFORMATION
Beazer Homes USA, Inc. lists its common shares on the New York Stock Exchange,
reading under the symbol BZH, and its preferred shares under the symbol BZH.PrA.
On December 2, 1996, the last reported sales price of Company's Common Stock on
the New York Stock Exchange was $16.00.
OWNERSHIP
On December 2, 1996, Beazer Homes USA, Inc. had approximately 74 shareholders of
record and 6,565,690 shares of Common Stock outstanding.
41 BEAZER HOMES USA 1996 ANNUAL REPORT
* HOMES *
- ---------
BEAZER
BEAZER HOMES USA, INC. | 5775 Peachtree Dunwoody Road | Suite C-550 |
Atlanta, GA 30342 | 404.250.3420
visit our Web site at www.beazer.com
APPENDIX TO FORM 10-K FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED AND
EDGAR-FILED TEXTS:
(1) Boldface typeface is displayed with capital letters, italic typeface is
displayed in normal type.
(2) Because the printed page breaks are not reflected, certain tabular and
columnar headings and symbols are displayed differently in this filing.
(3) Bullet points and similar graphic signals are omitted.