This year, I introduced a weekly series called "CEO Gaffe of the Week." Having come across more than a handful of questionable executive decisions last year when compiling my list of the worst CEOs of 2011, I thought it could be a learning experience for all of us if I pointed out apparent gaffes as they occur. Trusting your investments begins with trusting the leadership at the top -- and with leaders like these on your side, sometimes you don't need enemies!
This week, we're going to take a look at homebuilder Beazer Homes (NYSE: BZH ) and put its CEO, Allan Merrill, on the hot seat.
The dunce cap
This has truly been a remarkable year for many homebuilders as a long awaited bottom in the housing market appears to have finally come to fruition. According to the latest housing data in November, housing permits are tracking along at a healthy annual pace of 861,000, home prices are slowly rebounding, and homebuilder sentiment is at a six-and-a-half-year high.
Not surprisingly we've seen double-digit order jumps from all facets of builders -- from luxury to entry-level. On the high-end, KB Home (NYSE: KBH ) eked out a net delivery rise of 6% but was boosted most by a 14% jump in home sale prices. The model of consistency, Lennar (NYSE: LEN ) reported a 210 basis-point improvement in its sector-leading homebuilding margin. Even previous troubled entry level builders that struggled, like Standard Pacific (NYSE: SPF ) and Hovnanian (NYSE: HOV ) , have even shocked Wall Street with their turnarounds. Hovnanian recently reported a pre-tax quarterly profit -- it's first since 2006 -- while Standard Pacific has returned to consistent profitability and recorded a 29% increase in net new orders in the third-quarter.
And then we have Beazer Homes. Since 2006 Beazer hasn't turned an annual profit, has seen its annual revenue decline by more than 80%, and has seen book value dip by 95%. Furthermore, over the past two years shareholders have witnessed the company burn cash as it's nearly doubled it share base to raise cash.
Now, here's where things really get interesting. In mid-November, Beazer reported its fiscal 2012 results that highlighted a 25% increase in new orders and a 90 basis-point improvement in its homebuilding margin, but still managed to lose $135.6 million for the year . Despite this loss, it was noted in a recent filing with the Securities and Exchange Commission that Allan Merrill is up for a 67% increase in pay this year to $2.94 million. That's right -- 67% for a $135.6 million loss.
To the corner, Mr. Merrill
But wait -- there's more!
It's not just that Merrill is due for just any pay raise. According to the regulatory filing:
During fiscal year 2012, the company delivered significantly improved operating results, meeting or exceeding virtually all of the operational goals it set out to achieve at the beginning of the year.
That's right... losing only $135.6 million completely exceeding the threshold Beazer's management set for itself and Merrill is therefore "deserving" of a 67% boost in pay. In addition to Merrill, Beazer's chief financial officer, Robert Salomon, has a proposed 95% pay raise on the table.
Thankfully shareholders have a say-on-pay vote and I can't, on this planet or any other, see why they wouldn't vote this down with every fiber of their being. It'd be one thing if Beazer were profitable, or even cash-flow positive, but the company isn't! Beazer is in the second inning of a nine-inning recovery, and it'll be lucky to get back into the black by 2015 at the pace it's going.
This is another ridiculous attempt at an executive board to line their pockets at a truly inappropriate time, and I wag my finger in disdain at Mr. Merrill and the Beazer Homes board.
Do you have a CEO you'd like to nominate for this dubious honor? Shoot me an email and a one- or two-sentence description of why your choice deserves next week's nomination, and you just may see your suggestion in the spotlight.
billy
Recent BZH News
- Beazer Homes USA, Inc. Announces the Release of its 2023 Sustainability Report • Business Wire • 06/20/2024 08:15:00 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/13/2024 08:15:37 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 06/12/2024 08:44:26 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/17/2024 08:07:30 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/08/2024 08:12:55 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 05/07/2024 08:33:35 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 05/06/2024 08:08:18 PM
- Beazer Homes Reports Second Quarter Fiscal 2024 Results • Business Wire • 05/01/2024 08:15:00 PM
- Beazer Homes Acquires 174 Acres in Marietta, Georgia; 591 Homes Planned • Business Wire • 05/01/2024 01:00:00 PM
- Beazer Homes USA, Inc. to Webcast Its Fiscal Second Quarter Results Conference Call on Wednesday, May 1, 2024 • Business Wire • 04/09/2024 10:30:00 AM
- Beazer Homes Named to Newsweek’s Most Trustworthy Companies in America 2024 List • Business Wire • 03/27/2024 02:11:00 PM
- Beazer Homes Earns 2024 ENERGY STAR® Partner of the Year – Sustained Excellence Award • Business Wire • 03/26/2024 02:34:00 PM
- Beazer Homes Named No. 5 in Georgia on Top Workplaces USA List • Business Wire • 03/21/2024 04:21:00 PM
- Beazer Homes Announces Closing of Offering of $250 Million Senior Unsecured Notes due 2031 • Business Wire • 03/15/2024 02:25:00 PM
- Beazer Homes Announces Pricing of Offering of $250 Million of Senior Unsecured Notes due 2031 • Business Wire • 03/12/2024 06:50:00 PM
- Beazer Homes Announces Proposed Offering of $250 Million of Senior Unsecured Notes Due 2031 • Business Wire • 03/12/2024 01:05:00 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 03/07/2024 10:00:47 PM
- Beazer Homes and Partners Donate $1.9 Million to Fisher House Foundation • Business Wire • 03/01/2024 04:20:00 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 02/09/2024 07:42:11 PM
- Form 10-Q - Quarterly report [Sections 13 or 15(d)] • Edgar (US Regulatory) • 02/01/2024 09:45:35 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 02/01/2024 09:16:49 PM
- Beazer Homes Reports First Quarter Fiscal 2024 Results • Business Wire • 02/01/2024 09:15:00 PM
- Beazer Homes USA, Inc. to Webcast Its Fiscal First Quarter Results Conference Call on Thursday, February 1, 2024 • Business Wire • 01/11/2024 11:30:00 AM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 01/05/2024 12:26:13 AM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 01/05/2024 12:26:00 AM
FEATURED BNCM and DELEX Healthcare Group Announce Strategic Merger to Drive Expansion and Growth • Jul 2, 2024 7:19 AM
EWRC's 21 Moves Gaming Studios Moves to SONY Pictures Studios and Green Lights Development of a Third Upcoming Game • EWRC • Jul 2, 2024 8:00 AM
NUBURU Announces Upcoming TV Interview Featuring CEO Brian Knaley on Fox Business, Bloomberg TV, and Newsmax TV as Sponsored Programming • BURU • Jul 1, 2024 1:57 PM
Mass Megawatts Announces $220,500 Debt Cancellation Agreement to Improve Financing and Sales of a New Product to be Announced on July 11 • MMMW • Jun 28, 2024 7:30 AM
VAYK Exited Caribbean Investments for $320,000 Profit • VAYK • Jun 27, 2024 9:00 AM
North Bay Resources Announces Successful Flotation Cell Test at Bishop Gold Mill, Inyo County, California • NBRI • Jun 27, 2024 9:00 AM