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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
MARK ONE
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
COMMISSION FILE NUMBER 001-12822
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BEAZER HOMES USA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 58-2086934
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5775 PEACHTREE DUNWOODY ROAD, SUITE C-550, ATLANTA, GEORGIA 30342
(Address of principal executive offices)
Registrant's telephone number, including area code: (404) 250-3420
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
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Common Stock, $.01 par value per share................................... New York Stock Exchange
Series A Cumulative Convertible Exchangeable Preferred Stock, $.01 par
value per share......................................................... New York Stock Exchange
Preferred Share Purchase Rights.......................................... New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant (6,362,526 shares) as of December 2, 1996,
based on the closing sale price per share as reported by the New York Stock
Exchange on such date, was $101,800,416. The number of shares outstanding of the
registrant's Common Stock as of December 2, 1996 was 6,565,690.
DOCUMENTS INCORPORATED BY REFERENCE
PART OF 10-K
WHERE INCORPORATED
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Portions of the registrant's 1996 Annual Report to Shareholders for fiscal year ended Septem-
ber 30, 1996................................................................................. II
Portions of the registrant's Proxy Statement for the Annual Meeting of Shareholders to be held
on February 6, 1997.......................................................................... I, III
Portions of the registrant's Registration Statement on Form S-1 (Registration No. 33-72982)... IV
Portions of the registrant's Registration Statement on Form S-1 (Registration No. 33-72576)... IV
Portions of the registrant's Form 10-Q for the quarter ended March 31, 1994................... IV
Portions of the registrant's Form 10-K for the year ended September 30, 1994.................. IV
Portions of the registrant's Form 10-Q for the quarter ended March 31, 1995................... IV
Portions of the registrant's Registration Statement on Form S-3 (Registration No. 33-92892)... IV
Portions of the registrant's Registration Statement on Form S-8 (Registration No. 33-91904)... IV
Portions of the registrant's report on Form 8-K filed on May 30, 1996......................... IV
Portions of the registrant's report on Form 8-K filed on June 21, 1996........................ IV
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BEAZER HOMES USA, INC.
FORM 10-K
INDEX
PAGE NUMBER
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PART I.
Item 1. Business............................................................................. 1
Item 2. Properties........................................................................... 9
Item 3. Legal Proceedings.................................................................... 9
Item 4. Submission of Matters to a Vote of Security Holders.................................. 9
PART II.
Item 5. Market for the Company's Common Equity and Related Stockholder Matters............... 12
Item 6. Selected Financial Data.............................................................. 12
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations......................................................................... 12
Item 8. Financial Statements and Supplementary Data.......................................... 12
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure......................................................................... 12
PART III.
Item 10. Directors and Executive Officers of the Registrant................................... 12
Item 11. Executive Compensation............................................................... 12
Item 12. Security Ownership of Certain Beneficial Owners and Management....................... 12
Item 13. Certain Relationships and Related Transactions....................................... 12
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K...................... 13
SIGNATURES
PART I
ITEM 1. BUSINESS
GENERAL
Beazer Homes USA, Inc. ("Beazer" or the "Company") 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, Florida, North
Carolina, South Carolina and Tennessee, its Southwest region includes Arizona,
California and Nevada, and its Central region includes Texas. The Company's
homes are designed to appeal primarily to entry-level and first move-up home
buyers.
The Company's objective is to provide its customers with homes that
incorporate quality and value while seeking to maximize its return on invested
capital. To achieve this objective, the Company has developed a business
strategy which focuses on the following elements:
GEOGRAPHIC DIVERSITY AND GROWTH MARKETS. The Company competes in a
large number of geographically diverse markets in an attempt to reduce its
exposure to any particular regional economy. Virtually all of the markets in
which the Company operates have experienced significant population growth in
recent years. Within these markets, the Company builds homes in a variety of
projects, typically with fewer than 150 homesites.
QUALITY HOMES FOR ENTRY-LEVEL AND FIRST TIME MOVE-UP HOME BUYERS. The
Company seeks to maximize customer satisfaction by offering homes which
incorporate quality materials, distinctive design features, convenient
locations and competitive prices. The Company focuses on entry-level and
first move-up home buyers because it believes they represent the largest
segment of the homebuilding market. During fiscal year 1996, the average
sales price of the Company's homes closed was approximately $146,000.
DECENTRALIZED OPERATIONS WITH EXPERIENCED MANAGEMENT. The Company
believes its in-depth knowledge of its local markets enables the Company to
better serve its customers. The Company's local managers, who have
significant experience in both the homebuilding industry and the markets
they serve, are responsible for operating decisions regarding design,
construction and marketing. The Company combines these decentralized
operations with a centralized corporate-level management which controls
decisions regarding overall strategy, land acquisitions and financial
matters.
CONSERVATIVE LAND POLICIES. The Company seeks to maximize its return on
capital employed by limiting its investment in land and by focusing on
inventory turnover. To implement this strategy and to reduce the risks
associated with investments in land, the Company uses options to control
land whenever possible. In addition, the Company does not speculate in
unentitled land.
The Company was formed in November 1993 in anticipation of an initial public
offering of its Common Stock and issuance of its 9% Senior Notes due 2004. A
predecessor of the Company was established in 1985 through the acquisition by
Beazer PLC of an established regional homebuilder in Atlanta, Georgia. At the
time of such acquisition, Beazer PLC was among the largest homebuilders in the
United Kingdom. After expanding its homebuilding operations to Tennessee, North
Carolina and South Carolina through additional acquisitions, Beazer PLC was
acquired by an indirect, wholly owned subsidiary of Hanson PLC.
In early 1993, the Company entered the Arizona, California and Nevada
homebuilding markets by acquiring substantially all of the homebuilding
operations of Watt Housing Corporation ("Watt") pursuant to an asset purchase
agreement, effective February 1, 1993 (the "Watt Acquisition"). Affiliates and
predecessors of Watt have been in business since 1947 and, immediately prior to
the Watt Acquisition, Watt was a builder of single family detached and attached
homes in Arizona, California and Nevada.
1
Beazer entered the Jacksonville, Florida market in fiscal 1994 by acquiring
Panitz & Company, Chartered ("Panitz") pursuant to an asset purchase agreement,
effective October 1, 1993, and the Fort Meyers/Naples, Florida market in fiscal
1996 by acquiring Gulfcoast Homes pursuant to an asset purchase agreement,
effective May 23, 1996.
Beazer entered the Dallas and Houston markets in fiscal 1995 by acquiring
Bramalea Homes Texas, Inc. ("Bramalea") pursuant to an asset purchase agreement,
effective April 1995, and expanded its presence in Dallas in fiscal 1996 by
acquiring Trendmaker Homes - Dallas pursuant to an asset purchase agreement,
effective June 26, 1996.
During fiscal 1996 the Company established Beazer Mortgage Company ("Beazer
Mortgage"). Beazer Mortgage was established to originate, but not hold or
service, mortgages for the homebuilding operations of Beazer. At September 30,
1996 one branch office in Atlanta was operational, with two additional branches,
Charlotte and Houston, in a start-up phase.
MARKETS AND PRODUCT DESCRIPTION
The Company evaluates a number of factors in determining which geographic
markets to enter or in which to concentrate its homebuilding activities. The
Company attempts to anticipate swings in economic and real estate conditions by
evaluating such statistical information as (i) the historical and projected
growth of the population; (ii) the number of new jobs created or projected to be
created; (iii) the number of housing starts in previous periods; (iv) building
lot availability and price; (v) housing inventory; (vi) level of competition;
and (vii) home sales absorption rates. In addition, the Company seeks to avoid
direct competition in a particular market with respect to product type.
The Company maintains the flexibility to alter its product mix within a
given market depending on market conditions and, in determining its product mix,
considers demographic trends, demand for a particular type of product, margins,
timing and the economic strength of the market. While remaining responsive to
market opportunities within the industry, the Company in recent years has
focused, and intends to continue to focus, its business primarily on entry-level
and first move-up housing in the form of single family detached homes and
townhouses. Entry-level homes generally are those homes priced at the lower end
of the market and target first home buyers, while first time move-up homes
generally are priced in the mid-to-upper price range and target a wide variety
of home buyers as they progress in income and family size. Although some of the
Company's move-up homes are priced at the upper end of the market and the
Company offers a selection of amenities, the Company generally does not build
"custom homes," and its prices of first move-up homes generally are well below
the prices of custom homes in most areas. The Company attempts to maximize
efficiency by using standardized design plans whenever possible and sharing
design plans among markets.
2
The following table summarizes information regarding the Company's markets
as of and for the year ended September 30, 1996.
AVERAGE NUMBER OF
CLOSING ACTIVE HOMES
FISCAL YEAR PRICE BY PROJECTS BY CLOSED BY
STATE MARKET(S) ENTERED STATE STATE STATE
- ----------------- -------------------------------------------------- ----------- ---------- ----------- -----------
SOUTHEAST REGION:
Florida Jacksonville...................................... 1993 $ 160,900 22 405
Treasure Coast.................................... 1995
Fort Myers/Naples................................. 1996
Tampa/St. Petersburg.............................. 1996
Georgia Atlanta........................................... 1985 141,700 17 308
North Carolina Charlotte......................................... 1987 144,600 24 697
Raleigh........................................... 1992
South Carolina... Charleston........................................ 1987 117,700 16 276
Columbia.......................................... 1993
Myrtle Beach...................................... 1996
Tennessee Nashville......................................... 1987 171,200 20 526
Knoxville......................................... 1995
SOUTHWEST REGION:
Arizona Phoenix........................................... 1993 121,100 26 1,852
California Los Angeles County................................ 1993 179,300 24 1,018
Orange County..................................... 1993
Riverside & San Bernadino Counties................ 1993
San Diego County.................................. 1992
Ventura County.................................... 1993
Solano County..................................... 1993
Nevada Las Vegas......................................... 1993 145,400 12 473
Reno/Sparks....................................... 1996
CENTRAL REGION:
Texas Dallas............................................ 1995 154,700 31 379
Houston........................................... 1995
OTHER MARKETS:
New Jersey Clifton........................................... 1992 185,000 0 1
---------- --- -----
$ 146,000 192 5,935
---------- --- -----
---------- --- -----
The Company's homebuilding and marketing activities are conducted under the
name of Beazer Homes in each of its markets except as follows:
MARKET DOING BUSINESS AS
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Arizona Hancock Homes
Jacksonville, Florida Panitz Homes
Fort Myers, Florida Gulfcoast Homes
Tennessee Phillips Builders
North Carolina Squires Homes
South Carolina Squires Homes
3
CORPORATE OPERATIONS
At a centralized level, the Company (i) evaluates and selects geographic
markets; (ii) allocates capital resources to particular markets, including with
respect to land acquisitions; (iii) maintains the Company's relations with its
lenders to regulate the flow of financial resources and develop consistent
relationships with such lenders; and (iv) monitors the decentralized operations
of the Company's divisions. The Company allocates capital resources necessary
for new projects consistent with its overall operating strategy. The Company
utilizes return on capital employed, profit margin and payback period as
criteria for its allocation of capital resources. The Company does not have
pre-set targets for such criteria, and instead varies such capital allocation
based on market conditions, results of operations and other factors. Capital
commitments are determined through consultation among selected executive and
operational personnel, who play an important role in ensuring that new projects
are consistent with the Company's strategy. Centralized financial controls are
also maintained through the standardization of accounting and financial policies
and procedures, which are applied uniformly throughout the Company.
Structurally, the Company operates through separate divisions, which are
generally located within the areas in which they operate. Each division is
managed by executives with substantial experience in the division's market. In
addition, each division is equipped with the skills to complete the functions of
land acquisition, map processing, land development, construction, marketing,
sales and product service.
LAND ACQUISITION AND DEVELOPMENT
Substantially all of the land acquired by the Company is purchased only
after necessary entitlements have been obtained so that the Company has certain
rights to begin development or construction as market conditions dictate. In
certain situations, the Company will purchase unentitled property where it
perceives an opportunity to build on such property in a manner consistent with
the Company's strategy. The term "entitlements" refers to development
agreements, tentative maps or recorded plats, depending on the jurisdiction
within which the land is located. Entitlements generally give a developer the
right to obtain building permits upon compliance with conditions that are
usually within the developer's control. Although entitlements are ordinarily
obtained prior to the Company's purchase of land, the Company is still required
to obtain a variety of other governmental approvals and permits during the
development process.
The Company has occasionally used partnerships or joint ventures to purchase
and develop land where such arrangements were necessary to acquire the land or
appeared to be otherwise economically advantageous to the Company. In the
future, the Company may consider the use of partnership or joint venture
arrangements from time to time when management perceives a favorable opportunity
to use such financing arrangements.
The Company selects its land for development based upon a variety of
factors, including (i) internal and external demographic and marketing studies;
(ii) suitability for projects comprised of generally less than 150 homesites;
(iii) suitability for development during the time period of one to five years
from the beginning of the development process to the last closing; (iv)
financial review as to the feasibility of the proposed project, including
projected profit margins, returns on capital employed and payback periods; (v)
the ability to secure governmental approvals and entitlements; (vi)
environmental and legal due diligence; (vii) competition; (viii) proximity to
local traffic corridors and amenities; and (ix) management's judgment as to the
real estate market, economic trends and the Company's experience in a particular
market.
The Company generally purchases land or obtains an option to purchase land
which, in either case, requires certain site improvements prior to construction.
Where required, the Company then undertakes or, in the case of land under
option, the grantor of the option then undertakes, the development activities
(through contractual arrangements with local developers) that include site
planning and engineering, as well as constructing road, sewer, water, utilities,
drainage and recreational facilities and other amenities. When available in
certain markets, the Company also buys finished lots that are ready for
construction.
4
The Company strives to develop a design and marketing concept for each of
its projects, which includes determination of size, style and price range of the
homes, layout of streets, layout of individual lots and overall community
design. The product line offered in a particular project depends upon many
factors, including the housing generally available in the area, the needs of a
particular market and the Company's cost of lots in the project. The Company is,
however, often able to use standardized design plans.
The development and construction of each project are managed by the
Company's operating divisions, each of which is led by a president who, in turn,
reports to the president of the region and the Company's Chief Executive
Officer. At the development stage, a manager (who may be assigned to several
projects and reports to the president of the division) supervises development of
buildable lots. In addition, a field superintendent is located at each project
site to supervise actual construction, and each division has one or more
customer service and marketing representatives assigned to projects operated by
that division.
The following table sets forth, by state, the Company's land inventory as of
September 30, 1996.
SEPTEMBER 30, 1996
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LAND OWNED LAND UNDER CONTRACT
-------------------------- -------------------------- FISCAL YEAR
FINISHED UNDEVELOPED FINISHED UNDEVELOPED 1996 HOMES
LOTS LOTS(I) LOTS LOTS(I) TOTAL CLOSED
----------- ------------- ----------- ------------- --------- ---------------
SOUTHEAST REGION:
Georgia............................... 382 170 270 0 822 308
North Carolina........................ 332 554 390 1,416 2,692 697
South Carolina........................ 254 82 170 859 1,365 276
Tennessee............................. 677 437 609 531 2,254 526
Florida............................... 352 30 567 0 949 405
SOUTHWEST REGION:
Arizona............................... 569 54 1,024 0 1,647 1,852
California............................ 642 1,037 397 406 2,482 1,018
Nevada................................ 643 0 581 0 1,224 473
CENTRAL REGION:
Texas................................. 756 65 865 0 1,686 379
Other Markets......................... 0 0 0 0 0 1
----- ----- ----- ----- --------- -----
Total............................... 4,607 2,429 4,873 3,212 15,121 5,935
----- ----- ----- ----- --------- -----
----- ----- ----- ----- --------- -----
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(i) Undeveloped lots consist of raw land that is expected to be developed into
the respective number of lots reflected in this table.
The Company acquires certain lots by means of option contracts. Option
contracts generally require the payment of a cash deposit or issuance of a
letter of credit 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 limited to forfeiture of the
non-refundable deposits, which aggregated approximately $10.3 million at
September 30, 1996. Under option contracts with specific performance
obligations, the Company generally is required to purchase specific numbers of
lots on fixed dates pursuant to a contractually established schedule. Under such
option contracts with specific performance obligations, the party granting the
option is required to maintain and/or develop the property pursuant to certain
standards specified in the contract and to deliver lots which are free of any
liens and are appropriate for residential building pursuant to a specified
schedule. If the Company fails to purchase the required number of lots on the
date fixed for purchase pursuant to such option contracts and the party granting
the option has fulfilled all of its obligations under the contract, the party
granting the option to the Company generally has the right to either terminate
the option granted pursuant to the option contract in its entirety or to require
the Company to purchase the remaining lots. If the party granting the option
fails to meet its obligations under such option contracts, the Company generally
may, at its option, either not make the lot purchase or require the party
granting the option to cure the deficiency. Under such option contracts, if the
Company
5
purchases a lot and subsequently discovers that the lot did not meet all of the
conditions specified by the option contract, the Company generally may require
the party granting the option to repurchase the lot or cure the deficiency. At
September 30, 1996, committed amounts under option contracts with specific
performance obligations aggregated approximately $60.9 million, while option
contracts without specific performance obligations aggregated $131.1 million.
The Company's option contracts have expiration periods ranging from one to 60
months.
CONSTRUCTION
The Company acts as the general contractor for the construction of its
projects. The Company's project development operations are controlled by its
divisions, whose employees supervise the construction of each project,
coordinate the activities of subcontractors and suppliers, subject their work to
quality and cost controls and assure compliance with zoning and building codes.
The Company specifies that quality, durable materials be used in the
construction of the Company's homes. The Company's subcontractors follow design
plans prepared by architects and engineers who are retained by the Company and
whose designs are geared to the local market. Subcontractors typically are
retained on a project-by-project basis to complete construction at a fixed
price. Agreements with the Company's subcontractors and materials' suppliers are
generally entered into after competitive bidding, and the Company does not have
any long-term contractual commitments with any of its subcontractors or
suppliers. In connection with such competitive bid process, the Company obtains
information from prospective subcontractors and vendors with respect to their
financial condition and ability to perform their agreements with the Company.
The Company does not maintain significant inventories of construction materials
except for materials being utilized for homes under construction. The Company
has numerous suppliers of raw materials and services used in its business, and
such materials and services have been and continue to be available. Material
prices may fluctuate, however, due to various factors, including demand or
supply shortages which may be beyond the control of the Company's vendors. In
order to reduce costs and improve service to the Company, Beazer from time to
time enters into regional and national supply contracts with certain of its
vendors. For instance, during 1996 the Company entered into a three year
agreement with General Electric as its exclusive supplier of appliances. The
Company believes that its relationships with its suppliers and subcontractors
are good.
Construction time for the Company's homes depends on the availability of
labor, materials and supplies, product type and location. Homes are designed to
promote efficient use of space and materials, and to minimize construction costs
and time. In all of the Company's markets except California, construction of a
home historically has been completed within three to four months following
commencement of construction. In California, construction of a home historically
has been completed within four to eight months following commencement of
construction. At September 30, 1996, the Company had 608 finished homes, of
which 165 were sold and included in backlog at such date.
WARRANTY PROGRAM
The Company provides a one-year limited warranty of workmanship and
materials with each of its homes, which generally includes home inspection
visits with the customer during the first year following the purchase of a home.
The Company subcontracts its homebuilding work to subcontractors who provide the
Company with an indemnity and a certificate of insurance prior to receiving
payments for their work and, therefore, claims relating to workmanship and
materials are generally the primary responsibility of the Company's
subcontractors. The Company also provides homeowners with an insured 10-year
homeowners' warranty through a single national agreement with the Home Buyers
Warranty Corporation ("HBW"). The first year of such warranty covers unfulfilled
workmanship claims, as well as defects in plumbing, electrical, heating, cooling
and ventilation systems, and major structural defects; the second year of such
warranty covers major structural defects and certain defects in plumbing,
electrical, heating, cooling and ventilation systems of the home (exclusive of
defects in appliances, fixtures and equipment); and the final eight years of
protection cover only major structural defects. An allowance of approximately
0.5% to 1.0%
6
of the sale price of a home is established to cover warranty expenses, although
this allowance is subject to adjustment in special circumstances. The Company's
historical experience is that such warranty expenses generally fall within the
amount established for such allowance.
For homes closed prior to October 7, 1994, the Company's structural warranty
coverage was with the Home Owners Warranty Corporation ("HOW"). On October 7,
1994, the Commonwealth of Virginia placed HOW under temporary receivership, and
a permanent injunction followed on October 17, 1994. Terms of the injunction
allowed policies that were effective prior to October 7, 1994 to be honored for
their full term. Concurrent with the above, the Company entered into an
agreement with HBW to provide its homebuyers with equally suitable coverage for
homes closed subsequent to October 7, 1994. The Company anticipates, however,
that substantially all claims under such policies will be at levels below
applicable deductibles and, therefore, could be the subject of a claim under the
Company's warranty. The Company does not currently have any material litigation
or claims regarding warranties or latent defects with respect to the
construction of its homes. The Company believes that claims and litigation will
be substantially covered by the Company's warranty accrual or insurance.
The Company is currently considering the establishment of a risk retention
group to self insure its structural warranty obligations and replace the
Company's warranty program with HBW. The Company believes this would result in
cost savings to the Company.
MARKETING AND SALES
The Company makes extensive use of advertising and other promotional
activities, including newspaper advertisements, brochures, direct mail and the
placement of strategically located sign boards in the immediate areas of its
developments.
The Company normally builds, decorates, furnishes and landscapes between one
and five model homes for each project and maintains on-site sales offices. At
September 30, 1996, the Company maintained 248 model homes, of which 168 were
owned and 80 were leased from third parties pursuant to sale and leaseback
agreements. The Company believes that model homes play a particularly important
role in the Company's marketing efforts. Consequently, the Company expends a
significant effort in creating an attractive atmosphere at its model homes.
Interior decorations are undertaken by both in-house and third party local
design specialists, and vary among the Company's models based upon the
lifestyles of targeted home buyers. The purchase of furniture, fixtures and
fittings is coordinated to ensure that manufacturers' bulk discounts are
utilized to the maximum extent. Structural changes in design from the model
homes are not generally permitted, but home buyers may select various optional
amenities. The Company also uses a cross-referral program that encourages
Company personnel to direct customers to other Company subdivisions based on the
customers' needs.
The Company generally sells its homes through commissioned employees (who
typically work from the sales offices located at the model homes used in each
division) as well as through independent brokers. Company personnel are
available to assist prospective home buyers by providing them with floor plans,
price information and tours of model homes and in connection with the selection
of options. The Company's selection of interior features is a principal
component of the Company's marketing and sales efforts. Sales personnel are
trained by the Company and attend periodic meetings to be updated on sales
techniques, competitive products in the area, the availability of financing,
construction schedules, marketing and advertising plans, which management
believes result in a sales force with extensive knowledge of the Company's
operating policies and housing products. The Company's policy also provides that
sales personnel be licensed real estate agents where required by law. The
Company typically also builds a number of homes for which no signed sales
contract exists at the time of commencement of construction. The use of an
inventory of such homes is necessary to satisfy the requirements of relocated
personnel and of independent brokers, who often represent customers who require
a completed home within 60 days. At September 30, 1996, excluding models, the
Company had 1,083 homes at various stages of completion for which the Company
had not received a sales contract.
7
The Company uses various sales incentives (such as landscaping and certain
interior home options and upgrades) in order to attract home buyers. The use of
incentives depends largely on prevailing economic and competitive market
conditions.
CUSTOMER FINANCING
The Company provides customer financing in certain markets through branch
offices of Beazer Mortgage. Beazer Mortgage provides mortgage originations only,
and does not retain or service the mortgages that it originates. Such mortgages
are generally funded by one of a network of mortgage lenders arranged for the
Company by Homebuilders Financial Network, an independent consultant of the
Company. Beazer Mortgage currently operates in Atlanta, Charlotte and Houston.
For operations that have not established Beazer Mortgage branches, Company
seeks to assist its home buyers in obtaining financing from mortgage lenders
offering qualified home buyers a variety of financing options, including a wide
variety of conventional, FHA and VA financing programs. From time to time, the
Company has arranged for lender representatives to be available in sales
offices, has prequalified home buyers and has paid a portion of the closing
costs and discount mortgage points to assist home buyers with financing. In
certain limited circumstances, the Company may attempt to minimize potential
risks relating to the availability of customer financing by purchasing mortgage
financing commitments that lock in the availability of funds and interest rates
at specified levels for a certain period of time. Since substantially all home
buyers utilize long-term mortgage financing to purchase a home, adverse economic
conditions, increases in unemployment and high mortgage interest rates may deter
and eliminate a substantial number of potential home buyers from the Company's
markets in the future.
COMPETITION AND MARKET FACTORS
The development and sale of residential properties is highly competitive and
fragmented. The Company competes for residential sales on the basis of a number
of interrelated factors, including location, reputation, amenities, design,
quality and price, with numerous large and small homebuilders, including some
homebuilders with nationwide operations and greater financial resources and/or
lower costs than the Company. The Company also competes for residential sales
with individual resales of existing homes, available rental housing and, to a
lesser extent, resales of condominiums. The Company believes that it compares
favorably to other builders in the markets in which it operates, due primarily
to (i) its experience within its geographic markets and breadth of product line,
which allow it to vary its regional product offerings to reflect changing market
conditions; (ii) its responsiveness to market conditions, enabling it to
capitalize on the opportunities for advantageous land acquisitions in desirable
locations; and (iii) its reputation for quality design, construction and
service.
The housing industry is cyclical and is affected by consumer confidence
levels, prevailing economic conditions generally, and interest rate levels in
particular. A variety of other factors affect the housing industry and demand
for new homes, including the availability of labor and materials and increases
in the costs thereof, changes in costs associated with home ownership such as
increases in property taxes and energy costs, changes in consumer preferences,
demographic trends and the availability of and changes in mortgage financing
programs.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
Substantially all the Company's land is purchased with entitlements, giving
it the right to obtain building permits upon compliance with specified
conditions, which generally are within the Company's control. Upon compliance
with such conditions, the Company must seek building permits. The length of time
necessary to obtain such permits and approvals affects the carrying costs of
unimproved property acquired for the purpose of development and construction. In
addition, the continued effectiveness of permits already granted is subject to
factors such as changes in policies, rules and regulations and their
interpretation and application. Several governmental authorities in California
have imposed impact fees as a means of defraying the cost of providing certain
governmental services to developing areas. To date, the governmental approval
processes discussed above have not had a material adverse effect on the
Company's
8
development activities, and indeed all home-builders in a given market face the
same fees and restrictions. There can be no assurance, however, that these and
other restrictions will not adversely affect the Company in the future.
The Company may also be subject to periodic delays or may be precluded
entirely from developing communities due to building moratoriums or
"slow-growth" or "no-growth" initiatives or building permit allocation
ordinances which could be implemented in the future in the states and markets in
which it operates. Substantially all of the Company's land is entitled and,
therefore, the moratoriums generally would only adversely affect the Company if
they arose from health, safety and welfare issues such as insufficient water or
sewage facilities. Local and state governments also have broad discretion
regarding the imposition of development fees for projects in their jurisdiction.
These are normally established, however, when the Company receives recorded
final maps and building permits. The Company is also subject to a variety of
local, state and federal statutes, ordinances, rules and regulations concerning
the protection of health and the environment. These laws may result in delays,
cause the Company to incur substantial compliance and other costs, and prohibit
or severely restrict development in certain environmentally sensitive regions or
areas.
BONDS AND OTHER OBLIGATIONS
The Company is frequently required, in connection with the development of
its projects, to obtain letters of credit and performance, maintenance and other
bonds in support of its related obligations with respect to such developments.
The amount of such obligations outstanding at any time varies in accordance with
the Company's pending development activities. In the event any such bonds or
letters of credit are drawn upon, the Company would be obligated to reimburse
the issuer of such bonds or letters of credit. At September 30, 1996, there were
approximately $6.0 million and $50.4 million of outstanding letters of credit
and performance bonds, respectively for such purposes. The Company does not
believe that any such bonds or letters of credit are likely to be drawn upon.
EMPLOYEES AND SUBCONTRACTORS
At September 30, 1996, the Company employed 1,070 persons, of whom 220 were
sales and marketing personnel, 370 were executive, management and administrative
personnel, 452 were involved in construction and 28 were employed at the
Nashville, Tennessee manufacturing facility. Although none of the Company's
employees is covered by collective bargaining agreements, certain of the
subcontractors engaged by the Company are represented by labor unions or are
subject to collective bargaining arrangements. The Company believes that its
relations with its employees and subcontractors are good.
ITEM 2. PROPERTIES
The Company leases approximately 4,850 square feet of office space in
Atlanta, Georgia to house its corporate headquarters. The Company also leases an
aggregate of approximately 100,000 square feet of office space for its
subsidiaries' operations at various locations. The Company owns approximately
18,500 square feet of manufacturing space and 6,800 square feet of office space
in Nashville, Tennessee.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings, all of which have
arisen in the ordinary course of business and some of which are covered by
insurance. In the opinion of the Company's management, none of the claims
relating to such proceedings will have a material adverse effect on the
financial condition or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the quarter
ended September 30, 1996.
9
SEPARATE ITEM: EXECUTIVE OFFICERS OF THE REGISTRANT
Unless otherwise indicated, the following executive officers have served in
their current capacity with the Company since its inception.
NAME AGE POSITION
- --------------------------------------- --- -------------------------------------------------------------------
EXECUTIVE OFFICERS
Ian J. McCarthy...................... 43 President, Chief Executive Officer and Director
David S. Weiss....................... 36 Executive Vice President, Chief Financial Officer and Director
John Skelton......................... 47 Senior Vice President, Operations and Controller
Peter H. Simons...................... 37 Since September 1994, Vice President, Corporate Development
David T. Root........................ 49 Since November 1994, Vice President, Operations
Gary N. Baucom....................... 52 President, Squires Homes, Inc.
H. Eddie Phillips.................... 49 President, Phillips Builders, Inc.
James A. Moore....................... 56 Since May 1995, Southeast Regional Manager
Michael T. Rand...................... 34 Since December 1996, Vice President, Operational and Accounting
Controls
All officers are elected by the Board of Directors.
There are no family relationships nor arrangements or understandings
pursuant to which any of the officers listed were elected. See pages 12 to 14 of
the Company's Proxy Statement for the Annual Meeting of Shareholders to be held
on February 6, 1997 for a description of employment arrangements with certain
executive officers of the Company.
BUSINESS EXPERIENCE
Refer to page 4 of the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held on February 6, 1997 for the business experience of
Messrs. Ian J. McCarthy, and David S. Weiss.
JOHN SKELTON. Mr. Skelton has served as the Company's Senior Vice President,
Operations and Controller since March 1994. Mr. Skelton served as Vice President
and Chief Financial Officer of Beazer Homes, Inc. since 1985 and Vice President
and Chief Financial Officer of Beazer Homes Holdings, Inc. since April 1993.
During the period 1977 to 1985, Mr. Skelton served as Finance Director of Leech
Homes, a subsidiary of Leech PLC which was acquired by Beazer PLC in 1985. After
graduating with a Bachelor's degree from Durham University in the United
Kingdom, he was employed by Deloitte & Touche and is a Fellow of the Institute
of Chartered Accountants in England and Wales.
PETER H. SIMONS. Mr. Simons has served as Vice President of Corporate
Development since September 1994. The preceding year, he was Director of
Operations for Lokelani Homes in Hawaii. From 1989 to 1993, Mr. Simons was a
Senior Project Manager for Castle & Cooke Properties in Hawaii. Mr. Simons
earned a Bachelor of Arts degree from Yale University and a Masters in Public
and Private Management from the Yale School of Management.
DAVID T. ROOT. Mr. Root has served as Vice President of Operations since
November 1994. From the time Mr. Root joined the Company in July 1992 to
November 1994, he managed product development and certain operational matters
for the Company. Prior to joining the Company, Mr. Root was the Director of
Operations for several Southern California development companies and brings over
20 years of experience to the Company. Mr. Root earned a Bachelor of Science
degree from the University of Nevada, and is a licensed general contractor and
real estate broker.
10
GARY N. BAUCOM. Mr. Baucom has served as President of Squires Homes, Inc., a
subsidiary of the Company, since 1987. He joined the Ralph Squires Construction
Company in 1971 and served as Vice President, Finance, and was promoted to
Executive Vice President in 1980. Mr. Baucom earned a Bachelor of Science degree
in Accounting from the University of North Carolina at Charlotte. Mr. Baucom is
a licensed Certified Public Accountant.
H. EDDIE PHILLIPS. Mr. Phillips has served as President of Phillips
Builders, Inc., a subsidiary of the Company, since January 1989. Prior to that
time, Mr. Phillips was Senior Vice President of Phillips Builders, Inc. for the
preceding ten years and, in that capacity, was responsible for all aspects of
land acquisition, land development, product design, home construction and
contracting. Mr. Phillips also established the component manufacturing plant for
Phillips Builders, Inc. in Nashville, Tennessee. Mr. Phillips earned a Bachelor
of Science degree in Business Administration from the University of Tennessee.
JAMES A. MOORE. Mr. Moore joined the Company as President of Beazer Homes
Nevada in January 1994. Since May 1995 he has served as Southeast Regional
Manager responsible for operations in Georgia, Texas and Florida. Prior to
joining the Company, Mr. Moore was President of Watt Housing Corp., a
homebuilding and land development company, as well as a director and officer of
Watt Housing Corp. and several of its subsidiaries. Mr. Moore has also acted as
a management consultant in the homebuilding industry. Mr. Moore earned a
Bachelor of Science degree in Accounting from Northern Illinois University. Mr.
Moore is a licensed Certified Public Accountant.
MICHAEL T. RAND. Mr. Rand joined the Company in December 1996. Prior to that
time he was a Senior Audit Manager with KPMG Peat Marwick LLP, where he had been
employed since 1984. Mr. Rand earned a Bachelor of Science degree in Commerce
from the University of Virginia. Mr. Rand is a licensed Certified Public
Accountant.
11
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information required by this item is incorporated by reference to the
information set forth under the captions "Trading Information" and "Quarterly
Stock Price Information" located on Page 41 and 37, respectively, of the
Company's Annual Report to Shareholders for the year ended September 30, 1996.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated by reference from page
15 of the Company's Annual Report to Shareholders for the Year ended September
30, 1996.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is incorporated by reference from the
pages 16 to 23 of the Company's Annual Report to Shareholders for the year ended
September 30, 1996.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated by reference from
pages 25 to 36 of the Company's Annual Report to Shareholders for the year ended
September 30, 1996.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On December 12, 1995, upon the recommendation of the Audit Committee, the
Board of Directors selected the firm of Deloitte & Touche LLP to serve as the
Company's independent auditor for the fiscal year ending September 30, 1996.
Ernst & Young LLP served as independent auditor for the Company's fiscal years
ended September 30, 1995 and 1994.
Ernst & Young LLP's report on the financial statements of the Company for
the fiscal years ended September 30, 1995 and 1994 did not contain an adverse
opinion or a disclaimer of an opinion. Neither in connection with the audits by
Ernst & Young LLP for the fiscal years ended September 30, 1995 and 1994 nor
during any subsequent interim period, were there disagreements on any matters of
accounting principles or practice, financial statement disclosure or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
Ernst & Young LLP, would have caused it to make reference to the subject matter
of the disagreement in connection with its reports.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Director information is incorporated by reference from pages 3 to 4 of the
Company's Proxy Statement for the Annual Meeting of Shareholders to be held
February 6, 1997. Information regarding the Company's executive officers is set
forth in under Part I as a separate item.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from
pages 7 to 14 of the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held February 6, 1997.
12
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this is incorporated by reference from page 6 of
the Company's Proxy Statement for the Annual Meeting of Shareholders to be held
February 6, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements.
The Report of the Independent Auditors and the following consolidated
financial statements are incorporated by reference from the Company's
Annual Report to Shareholders for the fiscal year ended September 30,
1996 in Part II, Item 8 of this report:
Consolidated Statements of Operations for the years ended September
30, 1996, 1995 and 1994.
Consolidated Balance Sheets as of September 30, 1996 and 1995.
Consolidated Statement of Stockholders' Equity for the years ended
September 30, 1996, 1995 and 1994.
Consolidated Statements of Cash Flow for the years ended September
30, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements.
The Report of the Independent Auditors on the consolidated financial
statements for the fiscal year ended September 30, 1995 is included in
this report on page 18.
2. Financial Statement Schedules.
None required.
3. Exhibits
EXHIBIT
NUMBER
- ---------
3.1(7) --Amended and Restated Certificate of Incorporation of the Company.
3.2(7) --Amended and Restated Bylaws of the Company.
4.1(1) --Indenture dated as of March 2, 1994 among the Company, its subsidiaries party thereto,
and Continental Bank, National Association, as trustee, relating to the Company's 9%
Senior Notes due 2004.
4.2(2) --Form of 9% Senior Note due 2004.
4.3(6) --Specimen of Common Stock Certificate.
4.4(4) --Form of Certificate of Designations for Series A Cumulative Convertible Exchangeable
Preferred Stock, $.01 par value per share.
4.5(4) --Form of Certificate representing shares of Series A Cumulative Convertible Exchangeable
Preferred Stock, $.01 par value per share.
13
EXHIBIT
NUMBER
- ---------
4.6(4) --Form of Indenture between the Company and the First National Bank of Boston, as trustee,
relating to the 8% Convertible Subordinated Debentures due 2005.
4.7(4) --Form of 8% Convertible Subordinated Debenture due 2005.
4.8(5) --Retirement Savings and Investment Plan.
4.9(5) --Summary Plan Description.
4.10(8) --Rights Agreement, dated as of June 21, 1996, between the Company and First Chicago Trust
Company of New York, as Rights Agent.
10.1 --Credit Agreement dated as of October 22, 1996 between the Company and First National Bank
of Chicago, as agent (filed herewith).
10.2(3) --Amended 1994 Stock Incentive Plan.
10.3(3) --Non-Employee Director Stock Option Plan.
10.4(2) --Asset Purchase Agreement dated as of April 14, 1993 as amended, between Beazer Homes
Holdings Inc., Beazer Homes California Inc., Beazer Homes Nevada Inc., Beazer Homes
Arizona Inc., Beazer Homes Sales Arizona Inc., Watt Housing Corporation, Watt American,
Inc., Watt/Hancock Homes of Arizona, Inc., Watt Homes Inc., Watt Nevada, Inc., Watt Homes
of Northern California, Inc., Watt Pacific, Inc., Orange Homes South, Inc., Narcissa
Corporation, and WH/Arizona, Inc.
10.5(9) --Amended and Restated Employment Agreement dated as of March 31, 1995 between the Company
and Ian J. McCarthy.
10.6(9) --Amended and Restated Employment Agreement dated as of March 31, 1995 between the Company
and David S. Weiss.
10.7(9) --Amended and Restated Employment Agreement dated as of March 31, 1995 between the Company
and John Skelton.
10.8(9) --Amended and Restated Employment Agreement dated as of March 31, 1995 between the Company
and Gary N. Baucom.
10.9(1) --Employment Agreement dated as of March 2, 1994 between the Company and H. Eddie Phillips.
10.11 --Supplemental Employment Agreement dated as of July 17, 1996 between the Company and Ian
J. McCarthy (filed herewith).
10.12 --Supplemental Employment Agreement dated as of July 17, 1996 between the Company and David
S. Weiss (filed herewith).
10.13 --Supplemental Employment Agreement dated as of July 17, 1996 between the Company and John
Skelton (filed herewith).
10.14 --Supplemental Employment Agreement dated as of July 17, 1996 between the Company and Peter
H. Simons (filed herewith).
11 --Earnings Per Share Calculations (filed herewith).
13 --Annual Report to Shareholders for the year ended September 30, 1996. (filed herewith)
21 --Subsidiaries of the Company (filed herewith).
23.1 --Consent of Deloitte & Touche LLP, Independent Auditors (filed herewith)
14
EXHIBIT
NUMBER
- ---------
23.2 --Consent of Ernst & Young LLP, Independent Auditors (filed herewith).
27 --Financial Data Schedule (filed herewith).
- --------------------------
(1) Incorporated herein by reference to the exhibits to the Company's report on
Form 10-Q for the quarterly period ended March 31, 1994.
(2) Incorporated herein by reference to the exhibits to the Company's
Registration Statement on Form S-1 (Registration No. 33-72982) initially
filed on December 15, 1993.
(3) Incorporated herein by reference to the exhibits to the Company's report on
Form 10-K for the year ended September 30, 1994.
(4) Incorporated herein by reference to the exhibits to the Company's
Registration Statement on Form S-3 (Registration No. 33-92892) initially
filed on June 15, 1995.
(5) Incorporated herein by reference to the exhibits to the Company's
Registration Statement on Form S-8 (Registration No. 33-91904) filed on May
4, 1995.
(6) Incorporated herein by reference to the exhibits to the Company's
Registration Statement on Form S-1 (Registration No. 33-72576) initially
filed on December 6, 1993.
(7) Incorporated herein by reference to the exhibits to the Company's report on
Form 8-K filed on May 30, 1996
(8) Incorporated herein by reference to the exhibits to the Company's report on
Form 8-K filed on June 21, 1996
(9) Incorporated herein by reference to the exhibits to the Company's report on
Form 10-Q for the quarterly period ended March 31, 1995.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the fourth quarter
of the fiscal year ended September 30, 1996.
(c) Exhibits
Reference is made to Item 14(a)3 above. The following is a list of exhibits,
included in Item 14(a)3 above, that are filed concurrently with this report.
10.1 --Credit Agreement dated as of October 22, 1996 between the Company and
First National Bank of Chicago, as agent (filed herewith).
10.11 --Supplemental Employment Agreement dated as of July 17, 1996 between the
Company and Ian J. McCarthy (filed herewith).
10.12 --Supplemental Employment Agreement dated as of July 17, 1996 between the
Company and David S. Weiss (filed herewith).
10.13 --Supplemental Employment Agreement dated as of July 17, 1996 between the
Company and John Skelton (filed herewith).
15
10.14 --Supplemental Employment Agreement dated as of July 17, 1996 between the
Company and Peter H. Simons (filed herewith).
11 --Earnings Per Share Calculations
13 --The Company's Annual Report to Shareholders for the fiscal year ended
September 30, 1996. Except as expressly incorporated by reference in
this report on Form 10-K, such Annual Report is furnished only for the
information of the Securities and Exchange Commission and is not to be
deemed "filed" as part of this report. The following portions of such
Annual Report are incorporated by reference in the indicated items of
this report.
PORTIONS OF THE ANNUAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
1996 ITEM OF THIS REPORT
- --------------------------------------------------------------------------- -----------------------
"Trading Information" and "Quarterly Stock Price Information" 5
Selected Financial Data 6
Management's Discussion and Analysis of Financial Condition and Results
of Operations 7
Consolidated Financial Statements 8
21 --Subsidiaries of the Company
23.1 --Consent of Deloitte & Touche LLP, Independent Auditors
23.2 --Consent of Ernst & Young LLP, Independent Auditors.
27 --Financial Data Schedule
(d) Financial Statement Schedules
Reference is made to Item 14(a)2 above.
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BEAZER HOMES USA, INC.
By: /s/ IAN J. MCCARTHY
--------------------------------------
Name: Ian J. McCarthy
Title: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Date: December 17, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ BRIAN C. BEAZER
- ------------------------------ Director and Non-Executive December 17, 1996
(Brian C. Beazer) Chairman of the Board
Director, President and
/s/ IAN J. MCCARTHY Chief Executive Officer
- ------------------------------ (Principal Executive December 17, 1996
(Ian J. McCarthy) Officer)
Director, Executive Vice
/s/ DAVID S. WEISS President and Chief
- ------------------------------ Financial Officer December 17, 1996
(David S. Weiss) (Principal Financial
Officer)
/s/ THOMAS B. HOWARD
- ------------------------------ Director December 17, 1996
(Thomas B. Howard)
/s/ GEORGE W. MEFFERD
- ------------------------------ Director December 17, 1996
(George W. Mefferd)
/s/ D.E. MUNDELL
- ------------------------------ Director December 17, 1996
(D.E. Mundell)
/s/ LARRY T. SOLARI
- ------------------------------ Director December 17, 1996
(Larry T. Solari)
Secretary, Senior Vice
/s/ JOHN SKELTON President and Controller
- ------------------------------ (Principal Accounting December 17, 1996
(John Skelton) Officer)
17
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, 1995, and the related consolidated statements of
operations, stockholders' equity/invested capital and cash flows for each of the
two years in the period ended September 30, 1995. 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 audits.
We conducted our audits 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 audits provide 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, 1995 and the consolidated results of its
operations and its cash flows for each of the two years in the period ended
September 30, 1995, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Atlanta, Georgia
October 27, 1995
18