Beazer Homes Reaches Settlements with Governmental Authorities

Wed Jul 1, 2009 4:05pm EDT

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ATLANTA--(Business Wire)--
Beazer Homes USA, Inc. (NYSE: BZH) ( ("the Company") announced
that it has resolved several previously-disclosed governmental investigations.
The Company has entered into a deferred prosecution agreement ("DPA") with the
U.S. Attorney`s Office for the Western District of North Carolina ("the U.S.
Attorney") and a settlement agreement with the U.S. Department of Housing and
Urban Development ("HUD") and the civil division of the Department of Justice.
In addition, certain of the Company`s subsidiaries have entered into a
settlement agreement with the North Carolina Real Estate Commission ("NCREC"). 

Since issues involving the Company`s mortgage origination business and financial
reporting irregularities came to light, the Company has fully cooperated with
the investigations by governmental authorities. In addition, the Company`s Audit
Committee conducted an independent investigation into these matters. In February
2008, the Company voluntarily exited the mortgage origination business and in
May 2008, the Company completed the restatement of certain prior period
financial statements and implemented changes in its internal controls over
financial reporting. 

"We deeply regret these matters and have used what we have learned to strengthen
our control and compliance culture and reinforce our absolute commitment to act
according to the highest standards of ethical conduct throughout our
organization. We are pleased that the governmental authorities recognized our
cooperation and remedial measures," said Ian J. McCarthy, president and chief
executive officer. 

These settlements enable the Company to close an unfortunate chapter in its
history and focus its efforts on executing the Company`s financial and operating
business plan for the benefit of the Company`s shareholders, employees, and

Deferred Prosecution Agreement with the U.S. Attorney

Under the DPA, the U.S. Attorney has agreed not to prosecute the Company in
connection with the matters that were the subject of the Audit Committee
investigation and are set forth in a Bill of Information filed with the United
States District Court for the Western District of North Carolina, provided that
the Company satisfies its obligations under the DPA over the next 60 months. The
term of the DPA may be less than 60 months in the event certain conditions, as
described more fully in the DPA, are met. The DPA recognizes the cooperation of
the Company, its voluntary disclosure and its adoption of remedial measures. 

Under the terms of the DPA, in fiscal year 2009, the Company will contribute
$7.5 million to a restitution fund established to compensate those Beazer
customers who can demonstrate that they were injured by certain of the practices
identified in the Bill of Information. For fiscal year 2010 the Company will
contribute to the restitution fund the greater of $1.0 million or an amount
equal to 4% of the Company`s fiscal 2010 adjusted EBITDA as defined in the DPA.
The Company`s liability in each of the fiscal years after 2010 will also be
equal to 4% of the Company`s adjusted EBITDA through a portion of fiscal year
2014, unless extended as described below. Under the terms of the DPA, the
Company`s total contributions to the restitution fund will not exceed $50.0

Settlement Agreement with HUD

Under the terms of the settlement agreement with HUD and the civil division of
the Department of Justice, the Company will make an immediate payment of $4.0
million to HUD to resolve civil and administrative investigations. In addition,
on the first anniversary of the agreement, the Company will make a $1.0 million
payment to HUD. 

If the amounts paid into the restitution fund with the U.S. Attorney do not
reach $48.0 million at the end of 60 months, the restitution fund term will be
extended using the adjusted EBITDA formula until the earlier of an additional 24
months or the time the Company`s contribution reaches $48.0 million. 

The amounts paid to the U.S. Attorney for contribution into the restitution fund
and payments to HUD do not include the $2.5 million contributed to resolve the
investigation by the North Carolina Office of the Commissioner of Banks ("OCOB")
which was previously announced by the Company in May 2009, although this amount
will be counted as part of the Company`s maximum obligation to the restitution

As previously disclosed, the Company recognized expense in the quarter ended
March 31, 2009 of $10.5 million for the amounts yet to be paid in fiscal years
2009 and 2010. The Company will recognize additional expense in the quarter
ended June 30, 2009 of $3.0 million. In recognition of the financial challenges
currently facing the Company, Mr. McCarthy and Michael Furlow, executive vice
president and chief operating officer, have voluntarily contributed to the
Company an amount equal to the after-tax proceeds of their fiscal 2008 bonuses
to defray part of its initial payment to the restitution fund. 

The Company`s payment obligations under the DPA and the settlement agreement
with HUD are interrelated. The total amount of such obligations will be
dependent on several factors; however, the maximum liability under both
agreements and the previously announced agreement with the OCOB will not exceed
$55.0 million. 

Agreement with NCREC

With respect to the NCREC, Beazer/Squires Realty, Inc. ("Beazer/Squires") and
Beazer Homes Corp. each has agreed to the entry of a consent order regarding
violations of certain North Carolina statutes. Under the respective consent
orders, the NCREC agreed that a reprimand of Beazer Homes would not be issued as
long as Beazer Homes completed certain remedial measures and that the broker
license held by Beazer/Squires is revoked. The broker license held by
Beazer/Squires has been on inactive status since October 2007. There is no
monetary payment by the Company or its subsidiaries under either of the consent

The consent orders conclude the investigation by the NCREC into these matters
with respect to the Company. 

Beazer Homes USA, Inc., headquartered in Atlanta, is one of the country`s ten
largest single-family homebuilders with continuing operations in Arizona,
California, Delaware, Florida, Georgia, Indiana, Maryland, Nevada, New Jersey,
New Mexico, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, and
Virginia. Beazer Homes is listed on the New York Stock Exchange under the ticker
symbol "BZH." 

Forward Looking Statements

This press release contains forward-looking statements. These forward-looking
statements represent our expectations or beliefs concerning future events, and
it is possible that the results described in this press release will not be
achieved. These forward-looking statements are subject to risks, uncertainties
and other factors, many of which are outside of our control, that could cause
actual results to differ materially from the results discussed in the
forward-looking statements, including, among other things, (i) the timing and
final outcome of any litigation or government proceedings; (ii) additional asset
impairment charges or writedowns; (iii) economic changes nationally or in local
markets, including changes in consumer confidence, volatility of mortgage
interest rates and inflation; (iv) continued or increased downturn in the
homebuilding industry; (v) estimates related to homes to be delivered in the
future (backlog) are imprecise as they are subject to various cancellation risks
which cannot be fully controlled, (vi) our ability to maintain the listing of
our common stock on the New York Stock Exchange, (vii) continued or increased
disruption in the availability of mortgage financing; (viii) our cost of and
ability to access capital and otherwise meet our ongoing liquidity needs
including the impact of any further downgrades of our credit ratings or
reductions in our tangible net worth or liquidity levels; (ix) potential
inability to comply with covenants in our debt agreements; (x) increased
competition or delays in reacting to changing consumer preference in home
design; (xi) shortages of or increased prices for labor, land or raw materials
used in housing production; (xii) factors affecting margins such as decreased
land values underlying land option agreements, increased land development costs
on projects under development or delays or difficulties in implementing
initiatives to reduce production and overhead cost structure; (xiii) the
performance of our joint ventures and our joint venture partners; (xiv) the
impact of construction defect and home warranty claims including those related
to possible installation of drywall imported from China and the cost of
investigation and remediation and availability ofinsurance; (xv) delays in land
development or home construction resulting from adverse weather conditions;
(xvi) potential delays or increased costs in obtaining necessary permits as a
result of changes to, or complying with, laws, regulations, or governmental
policies and possible penalties for failure to comply with such laws,
regulations and governmental policies; (xvii) effects of changes in accounting
policies, standards, guidelines or principles; or (xviii) terrorist acts, acts
of war and other factors over which the Company has little or no control.

Any forward-looking statement speaks only as of the date on which such statement
is made, and, except as required by law, we do not undertake any obligation to
update or revise any forward-looking statement, whether as a result of new
information, future events or otherwise. New factors emerge from time to time
and it is not possible for management to predict all such factors.

Beazer Homes USA, Inc.
Leslie H. Kratcoski, 770-829-3764
Kekst & Company
Dawn Dover, 212-521-4817

Copyright Business Wire 2009

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