One Homebuilder That Still Needs to Get Well

Beazer USA Homes Inc. (NYSE: BZH) reported a third fiscal quarter net loss of $0.38 per share and $254.6 million in revenue before markets opened today. The net loss for the same period a year ago was $0.75 per share, and last year’s revenue totaled $172.8 million. The results compare to the Thomson Reuters consensus estimates for a net loss of $0.33 per share and $263.9 million in revenue.

Beazer’s main story for the quarter was that it was able to complete a secondary stock offering, refinance debt and set the table for a new revolving credit facility. Gross margins for homebuilding actually fell year-over-year, although new orders rose 28% to 1,555 and closings rose 40.2% to 1,109 homes.

The company’s CEO said:

We generated improvement in new home orders, home closings and backlog, recording our fourth consecutive quarter of year-over-year increases in these metrics. This improvement reflects both the continuing operational benefits of our path-to-profitability strategies and gradually improving conditions in the housing market.

In the third fiscal quarter, Beazer sold 22 million shares at $2.90 in a secondary offering, as well as 4.6 million 7.5% tangible equity units, and placed a $300 million senior secured note that generated $466 million in proceeds for the company. Beazer spent $250 million to redeem 12% senior secured notes due in 2017 and plans to use the rest to “fund an expansion in our new home community count in targeted markets” and for general corporate purposes. Getting back on firmer financial ground was the goal:

[W]hile we believe we possess sufficient liquidity to participate in a housing recovery, we are mindful of potential short-term, or seasonal, requirements for enhanced liquidity that may arise. As such, we have negotiated a commitment letter with four financial institutions for a proposed $150 million secured revolving credit agreement that we expect to finalize in the fourth quarter.

Beazer’s share price peaked at around $73 in 2006 and hit an all-time low of around $0.50 in early 2009. The company is lucky to still be breathing.

Shares are inactive in premarket trading today, having closed at $2.31 last night. The current 52-week range is $1.35 to $3.98. Thomson Reuters had a consensus analyst price target of $3.10 before today’s results were announced.

Paul Ausick