Macro Tsimmis

intelligently hedged investment

Beazer Homes (BZH) update #10

Posted by intelledgement on Thu, 15 May 08

Another nail was driven into the coffin of Beazer Homes (BZH), the homebuilder company we are short today, when they announced their 1Q08 and 2Q08 results today after the market close (Beazer’s fiscal year ends 30 Sep). There was little comfort here for those hoping for a turnaround in the residential housing market.

Year-over-year revenues were down 37% from 1Q07 to 1Q08, and down 51% to $405.4 million from 2Q07 to 2Q08. 2Q08 was the sixth consecutive quarter of red ink, and the worst one yet, with a loss of $229.9 million, ballooning from a loss of $57.2 million in 2Q07. The company lost $138.2 million in 1Q08 compared with $79.9 million of red ink in 1Q07. Closings also declined Y-O-Y, by 25% in 1Q08 and by 43% in 2Q08. New housing starts were down 30% Y-O-Y in 1Q08 and an utterly alarming 51% in 2Q08. So, the decline appears to be accelerating.

Meanwhile, the investigatory pot keeps boiling. The company received an order from the SEC requiring they cooperate to determine if violations of federal securities laws, “including, among others, the anti-fraud, books and records, internal accounting controls, periodic reporting and certification provisions thereof,” were committed. Beazer is cooperating with the SEC and the DOJ (which is also investigating potential criminal activity mostly relating to Beazer’s treatment of their customers) and they hope to negotiate settlements. However, management stated: “no settlement has been reached with any regulatory authority and the Company believes that although it is probable that a liability exists related to this exposure, it is not reasonably estimable at this time.”

The stock closed today at $9.60 but was significantly lower in after-hours trading once these results were released.

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