Home Builder Beazer Homes
Plans To Restate Results
by Andrew Edwards
From The Wall Street Journal Online
October 12, 2007
Beazer Homes USA Inc. completed its internal review into accounting irregularities and will restate results going back almost a decade.
The company also said fiscal fourth-quarter home closings were down 39% and home orders dropped 52% amid the summer credit crunch.
The Atlanta single-family home builder said its review found that employees in its mortgage unit violated Department of Housing and Urban Development downpayment assistance rules on federally insured loans going back to at least 2000.
Beazer said it may have to reimburse losses on federally insured loans in the event of fraud or misrepresenations by employees to mortgage buyers.
Beazer said there are "several uncertainties" about its liability, but thinks a settlement with federal regulators of $8 million to $15 million "may be attainable." Beazer said there is a potential liability for expenses related to civil litigation and its exposure can't be quantified yet.
In August, Beazer said its former chief accounting officer improperly recorded "reserves and other accrued liabilities" on the company's books. An investigation found that the improper accounting was related to land-development and home-completion costs. The executive, Michael T. Rand, was dismissed in late June after Beazer said he had attempted to destroy company documents. Rand's lawyer declined to comment at the time.
The August disclosure was expected to bolster an investigation by the Securities and Exchange Commission related to whether Beazer violated securities laws. The SEC inquiry came amid charges from home buyers in North Carolina that Beazer's mortgage unit steered them to loans they couldn't afford.
Beazer has also come under pressure from bondholders, as the company has delayed the filing of its third-quarter report with the SEC due to the discovery of accounting irregularities. The company said it is working "expeditiously" on the restatements, but didn't give a date it expects to file.
Beazer's accountants expect to restate financial results from 1999 through 2007 to reflect the errors. Overall, Beazer expects the changes will boost the company's cumulative bottom line, though it is expected to reflect a decrease in net income for 2006. Beazer said it can't be certain of the exact impacts until the restatement is finalized. The company expects to book a $20 million charge in the first half of 2007, balanced by a $20 million gain in the second.
The company's shares rose in premarket trading to $10.37 after closing at $9.93 on Wednesday.
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