Beazer homes

[temeculaguy]

I would worry about WCI because it is all over the florida condo market (current stock at $6 compared to years in the twenties), D.R. horton has a 5 year supply of land that is killing them, but, (and I hate to repeat anything cramer says) he mentioned Standard Pacific (SPF) as a company he wouldn’t loan a nickel to right now if he was a lender. Of course he also thinks KB may go out of business but the Wall Street journal says they have a good cash flow. WSJ says Lennar has the best cash flow in the industry, I wouldn’t short them right now, they may fall with the industry but not at the same percentage and they also look to be one of the survivors on the other side, in a five year comparison to the industry they are performing 50% better and only lost 1% in friday’s slide when the other got killed.

[Allan from Fallbrook]

TheBreeze: In this case (and in my opinion), liquidity is the key. As far as Balance Sheet items go, only the cash and receivables really count as liquid. I don’t know what makes up that $526MM in misc. assets and would need to see the notes to ascertain how liquid those assets really are. I’d also like to see their average DSO (Day’s Sales Outstanding) for receivables; this is usually a good indicator as to how quickly they are turning their receivables.

The inventory and options are fairly illiquid, especially in today’s market.

Homebuilders have notoriously low market caps, so be somewhat judicious when using that as a signpost. It appears, based on your numbers (and I would want to see an Income Statement to really comment), that Beazer has most of their net worth tied up in illiquid assets and their burn rate is excessive when compared to cash on hand. A good look at the liabilities side of the Balance Sheet would be informative as well.

One really severe bump and things could get really dicey.

[Allan from Fallbrook]

TheBreeze: In this case (and in my opinion), liquidity is the key. As far as Balance Sheet items go, only the cash and receivables really count as liquid. I don’t know what makes up that $526MM in misc. assets and would need to see the notes to ascertain how liquid those assets really are. I’d also like to see their average DSO (Day’s Sales Outstanding) for receivables; this is usually a good indicator as to how quickly they are turning their receivables.

The inventory and options are fairly illiquid, especially in today’s market.

Homebuilders have notoriously low market caps, so be somewhat judicious when using that as a signpost. It appears, based on your numbers (and I would want to see an Income Statement to really comment), that Beazer has most of their net worth tied up in illiquid assets and their burn rate is excessive when compared to cash on hand. A good look at the liabilities side of the Balance Sheet would be informative as well.

One really severe bump and things could get really dicey.

[Allan from Fallbrook]

TheBreeze: In this case (and in my opinion), liquidity is the key. As far as Balance Sheet items go, only the cash and receivables really count as liquid. I don’t know what makes up that $526MM in misc. assets and would need to see the notes to ascertain how liquid those assets really are. I’d also like to see their average DSO (Day’s Sales Outstanding) for receivables; this is usually a good indicator as to how quickly they are turning their receivables.

The inventory and options are fairly illiquid, especially in today’s market.

Homebuilders have notoriously low market caps, so be somewhat judicious when using that as a signpost. It appears, based on your numbers (and I would want to see an Income Statement to really comment), that Beazer has most of their net worth tied up in illiquid assets and their burn rate is excessive when compared to cash on hand. A good look at the liabilities side of the Balance Sheet would be informative as well.

One really severe bump and things could get really dicey.

[TheBreeze]

Allan: I didn’t see anything on DSO’s in the 10-Q.

TG: Have you shorted any of the homebuilders? I’d rather not short down here, but I may buy some put options with play money. I think having a few hundred bucks in put options on one of the homebuilders would motivate me to keep digging into these financial statements, which would help me to better understand both the financial markets and real estate.

[TheBreeze]

Allan: I didn’t see anything on DSO’s in the 10-Q.

TG: Have you shorted any of the homebuilders? I’d rather not short down here, but I may buy some put options with play money. I think having a few hundred bucks in put options on one of the homebuilders would motivate me to keep digging into these financial statements, which would help me to better understand both the financial markets and real estate.

[TheBreeze]

Allan: I didn’t see anything on DSO’s in the 10-Q.

TG: Have you shorted any of the homebuilders? I’d rather not short down here, but I may buy some put options with play money. I think having a few hundred bucks in put options on one of the homebuilders would motivate me to keep digging into these financial statements, which would help me to better understand both the financial markets and real estate.

[bsrsharma]

I looked up their income statement; they made a gross profit of 1.26B on a revenue of 4.27B last year. Unless, things are much much worse this year (they probably are), I would think they may survive with a Chap 11 rather than liquidate.

As a comparison, If I remember, Lucent was in far worse shape, almost no revenues – forget profits, during dot com bust but was still bought by Alcatel (of France). I read somewhere Chrysler has a net negative worth when divested from Daimler but was bought by Cerberus. Strange are the ways of Merger Maniacs!

BTW, Cerberus appointed ex Home Depot Chairman Nardelli to run Chrysler. Deaf guiding a blind?

Income Statement
Revenue (ttm): 4.27B
Revenue Per Share (ttm): 111.326
Qtrly Revenue Growth (yoy): -36.80%
Gross Profit (ttm): 1.26B
EBITDA (ttm): 188.63M
Net Income Avl to Common (ttm): -133.23M
Diluted EPS (ttm): -3.44

[bsrsharma]

I looked up their income statement; they made a gross profit of 1.26B on a revenue of 4.27B last year. Unless, things are much much worse this year (they probably are), I would think they may survive with a Chap 11 rather than liquidate.

As a comparison, If I remember, Lucent was in far worse shape, almost no revenues – forget profits, during dot com bust but was still bought by Alcatel (of France). I read somewhere Chrysler has a net negative worth when divested from Daimler but was bought by Cerberus. Strange are the ways of Merger Maniacs!

BTW, Cerberus appointed ex Home Depot Chairman Nardelli to run Chrysler. Deaf guiding a blind?

Income Statement
Revenue (ttm): 4.27B
Revenue Per Share (ttm): 111.326
Qtrly Revenue Growth (yoy): -36.80%
Gross Profit (ttm): 1.26B
EBITDA (ttm): 188.63M
Net Income Avl to Common (ttm): -133.23M
Diluted EPS (ttm): -3.44

[bsrsharma]

I looked up their income statement; they made a gross profit of 1.26B on a revenue of 4.27B last year. Unless, things are much much worse this year (they probably are), I would think they may survive with a Chap 11 rather than liquidate.

As a comparison, If I remember, Lucent was in far worse shape, almost no revenues – forget profits, during dot com bust but was still bought by Alcatel (of France). I read somewhere Chrysler has a net negative worth when divested from Daimler but was bought by Cerberus. Strange are the ways of Merger Maniacs!

BTW, Cerberus appointed ex Home Depot Chairman Nardelli to run Chrysler. Deaf guiding a blind?

Income Statement
Revenue (ttm): 4.27B
Revenue Per Share (ttm): 111.326
Qtrly Revenue Growth (yoy): -36.80%
Gross Profit (ttm): 1.26B
EBITDA (ttm): 188.63M
Net Income Avl to Common (ttm): -133.23M
Diluted EPS (ttm): -3.44

[PerryChase]

Great post, TheBreeze. Interesting to watch the new “developments” in the homebuilding industry.

[PerryChase]

Great post, TheBreeze. Interesting to watch the new “developments” in the homebuilding industry.

[PerryChase]

Great post, TheBreeze. Interesting to watch the new “developments” in the homebuilding industry.

[Allan from Fallbrook]

bsrsharma: Accounting for Chrysler or Lucent is going to be different than for Beazer, largely due to the fact that in both cases, they have significant physical assets (auto production plants for Chrysler, telephone networks for Lucent). Chrysler’s net negative is mainly composed of unfunded pension liabilities and legacy costs.

I think this upcoming year will be particularly telling for the big homebuilders, especially after seeing their stocks savaged this year. Homebuilders don’t enjoy very good market capitalizations and those capitalizations are in large part based on a pretty bare bones Graham’s valuation (land + houses + Cash + A/R). Beazer’s rate of burn would be a major concern, especially if they continue to have problems moving houses.

[Allan from Fallbrook]

bsrsharma: Accounting for Chrysler or Lucent is going to be different than for Beazer, largely due to the fact that in both cases, they have significant physical assets (auto production plants for Chrysler, telephone networks for Lucent). Chrysler’s net negative is mainly composed of unfunded pension liabilities and legacy costs.

I think this upcoming year will be particularly telling for the big homebuilders, especially after seeing their stocks savaged this year. Homebuilders don’t enjoy very good market capitalizations and those capitalizations are in large part based on a pretty bare bones Graham’s valuation (land + houses + Cash + A/R). Beazer’s rate of burn would be a major concern, especially if they continue to have problems moving houses.

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