Company Name: Beazer Homes USA, Inc.
Public Availability Date: November 30, 2007
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
October 15, 2007
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, DC 20549
Re: BeazerOmission of Stockholder Proposal Pursuant to Rule 14a-8
Ladies and Gentlemen:
Pursuant to Rule 14a-8(j) under the Securities Exchange Act of 1934, as amended
(the "Act"), on behalf of our client, Beazer Homes USA, Inc., a Delaware
corporation (the "Company"), we are writing to inform you that the Company
hereby gives notice of its intention to omit from its proxy statement and form
of proxy (together, the "Proxy Statement"), pursuant to Rules 14a-8(i)(5) and
14a-8(i)(7) under the Act, a proposal (together with the statement in support
thereof, the "Proposal") from the Indiana State District Council of Laborers and
HOD Carriers Pension Fund (the "Proponent") for action at the Company's upcoming
Annual Meeting of stockholders to be held in 2008 (the "Annual Meeting"). The
Company hereby respectfully requests confirmation by the Staff of the Division
of Corporation Finance (the "Staff") of the Securities and Exchange Commission
(the "Commission") that it will not recommend enforcement action to the
Commission if the Company omits the Proposal from the Company's Proxy Statement
for the reasons set forth herein.
In accordance with Rule 14a-8(j) under the Act, we hereby enclose six copies of
this letter and six copies of the following:
1. a letter dated August 29, 2007 from Michael J. Short, Secretary-Treasurer of
the Proponent (Exhibit A-1); and
2. a letter dated August 30, 2007 from Linda L. Lockwood, Senior Vice President
of U.S. Bank, indicating that the Proponent has been the beneficial owner of at
least $2,000 in market value of voting securities of the Company at least one
year prior to the receipt of the Proposal (Exhibit A-2).
In addition, a copy of this letter is also being sent to the Proponent as notice
of the Company's intent to omit the Proposal from the Proxy Statement for the
Annual Meeting.
The Company currently is not able to determine the date upon which it intends to
begin mailing the Proxy Statement to stockholders and file the Proxy Statement
with the Commission. However, the Company notes that it began mailing and filed
its proxy statement for the Company's annual meeting held in 2007 on January 3,
2007. If the Proxy Statement is first mailed to stockholders and filed with the
Commission on or about the same date in 2008, this letter setting forth the
Company's reasons for omitting the Proposal will have been submitted 80 or more
calendar days before such mailing and filing.
The Proposal
The Proponent requests that the Company include the Proposal in the Company's
Proxy Statement for its Annual Meeting. The Proposal consists of a resolution
which would read in its entirety as follows:
Resolved: That the shareholders of Beazer Homes USA, Inc. ("Company") request
that the Board of Directors prepare within 90 days of its annual meeting a
report evaluating the Company's mortgage practices including the Company's
potential losses or liabilities relating to its mortgage operations and/or those
of any affiliates or subsidiaries and a discussion of the following:
1. The extent of the Company's mortgage originations in subprime, Alt-A, jumbo
and "exotic" mortgages, including piggybacks/second mortgages, interest only
loans, negative amortization loans, and low/no documentation loans, as well as
what percentage of its mortgage originations may be classified as such
mortgages;
2. Which of the Company's geographic markets are most reliant on mortgages
listed in (1) above;
3. The identity of the purchasers that buy the Company's mortgage loans in the
secondary market;
4. What percentage, if any, of the purchases discussed in (3) have Early Payment
Default ("EPD") provisions attached which may require the Company to buy back
loans as well as the time frame for those obligations; and
5. How many non-performing loans the Company expects it will have to repurchase
during the current and upcoming fiscal year.
The report should be prepared annually at reasonable cost, omit proprietary
information and be distributed in the manner deemed most efficient by the
Company, including posting on its website.
Reasons for Omission of the Proposal
I. The Proposal concerns a matter dealing with the Company's ordinary business
operations, and, therefore, may be excluded under Rule 14a-8(i)(7).
The disclosure in the Company's reports and proxy statements is regulated by the
Act and the rules and regulations of the Commission thereunder. As disclosed in
footnote 1 (an excerpt of which is attached hereto as Exhibit B-1) to the
financial statements of the Company included in the Company's Annual Report on
Form 10-K for the fiscal year ended September 30, 2006 (the "2006 Form 10-K"),
the Company provides mortgage origination services through its subsidiary Beazer
Mortgage Corporation ("Beazer Mortgage"). The Company believes that its filings
with the Commission include all other information with regard to Beazer Mortgage
and its mortgage origination business required to be disclosed by the Act and
the rules and regulations of the Commission thereunder.
The Proposal would require the Company to prepare on an annual basis a report
"evaluating the Company's mortgage practices including the Company's potential
losses or liabilities relating to its mortgage operations" and make certain
enumerated disclosures related thereto.1 Such disclosure is not required by the
Act or the rules and regulations of the Commission thereunder. The Company
believes that, once applicable regulatory requirements have been met, the
determination of what additional information is to be disclosed and the format
in which such information is to be disclosed is fundamentally a decision of
ordinary business operations properly made by the Company's Board and management
and not by its stockholders.
As has been publicly disclosed, the Audit Committee of the Company's Board of
Directors is conducting an independent internal investigation into the Company's
mortgage origination business and certain accounting and financial reporting
matters. If, upon completion of such investigation, the Audit Committee
determines that further disclosure regarding Beazer Mortgage and the Company's
mortgage origination business is necessary or appropriate, then the Company will
make such disclosure at such time. However, the Company believes that inclusion
in the Proxy Statement of the Proposal, at a time when the Company's mortgage
origination practices are under investigation by the Audit Committee, could
result in the Company being required to make disclosures deemed unnecessary or
inappropriate by such committee. Therefore, the Proposal deals with a matter
relating to the Company's ordinary business operations and, as described below,
the Company should be able to exclude it from the Proxy Statement in reliance
upon Rule 14a-8(i)(7).
Rule 14a-8(i)(7) allows a company to omit a stockholder proposal that relates to
the ordinary business operations of the company. The Staff has stated that one
of the key policy considerations underlying the business operations exclusion
provided by Rule 14a-8(i)(7) is the "degree to which the proposal seeks to
`micro-manage' the company by probing too deeply into matters of a complex
nature upon which shareholders, as a group, would not be in a position to make
an informed judgment." Release No. 34-40018 (May 28, 1998). The Staff has also
taken the position that proposals may be excluded under Rule 14a-8(i)(7) based
on "the general proposition that some proposals may intrude unduly on a
company's `ordinary business' operations by virtue of the level of detail that
they seek." Release No. 34-40018 (May 28, 1998). More specifically, the Staff
previously has examined the issue about whether a proposal by stockholders to
prepare a special report is excludable and has stated, "[T]he staff will
consider whether the subject matter of the special report ... involves a matter
of ordinary business; where it does, the proposal will be excludable under [Rule
14a-8]." Release No. 34-20091 (August 16, 1983). The Staff has consistently
applied these principles to allow companies to omit from their proxy statements
stockholder proposals requiring companies to make disclosures to stockholders
beyond applicable regulatory requirements and beyond what the Company's Board
and management have determined is necessary and appropriate. See General
Electric Company (January 28, 2003) (permitting exclusion of proposal seeking
disclosure of the method of selecting independent auditors); General Electric Company (January 21, 2003) (permitting exclusion of proposal seeking disclosure
in annual report of certain subsidiary information); Refac (March 27, 2002)
(permitting exclusion of proposal requesting disclosure of shareholders of
record for and results of voting at the company's annual meeting); International
Business Machines Corporation (January 9, 2001) (permitting exclusion of
proposal requesting, in part, that the company "provide transparent financial
reporting of profit from real company operations"; reconsideration denied
February 14, 2001); and Conseco, Inc. (April 18, 2000) (permitting exclusion of
proposal requesting that "accounting methods and financial statements adequately
report the risks of subprime lending").
For the reasons set forth above, the Company hereby requests a determination by
the Staff that it will not recommend enforcement action to the Commission should
the Company omit the Proposal from the Company's Proxy Statement pursuant to
Rule 14a-8(i)(7).
II. The Proposal concerns a matter that is not relevant to the Company's
operations, and, therefore, may be excluded under Rule 14a-8(i)(5).
Rule 14a-8(i)(5) allows a company to omit a stockholder proposal that relates to
operations which account for less than 5% of the company's total assets as of
the end of its most recent fiscal year and for less than 5% of its net earnings
and gross sales for its most recent fiscal year, and is not otherwise
significantly related to the company's business.
A. The Company's Mortgage Origination Business Accounted for Less than 5% of the
Company's Total Assets as of September 30, 2006 and Provided Less than 5% of the
Company's Net Earnings and Gross Sales for Its Fiscal Year Ended 2006.
As shown in footnote 15 (an excerpt of which is attached hereto as Exhibit B-2)
to the financial statements of the Company included in the Form 10-K, Beazer
Mortgage, which as noted above conducts the Company's mortgage origination
business, comprised $163,417,000 of $4,559,431,000, or 3.6%, of the Company's
total assets as of September 30, 2006, contributed $4,453,000 of $388,761,000,
or 1.1%, of the Company's net income for the fiscal year ended September 30,
2006 ("FY 2006") and contributed $54,344,000 of $5,462,003,000, or 1.0%, of the
Company's revenues (which is the Company's term for gross sales) for FY 2006.2
B. The Proposal Is Not Otherwise Significantly Related to the Company's
Business.
The Staff has generally interpreted the phrase "otherwise significantly related
to the company's business" in Rule 14a-8(i)(5) to not allow companies to exclude
from proxy statements proposals that raise "social or ethical issues," despite
the fact that the subject matter of such issues does not meet or exceed the 5%
thresholds described above. See Release No. 34-19135 (October 14, 1982). As
described above, the Company's mortgage origination business does not meet or
exceed the 5% of the thresholds set forth in Rule 14a-8(i)(5). Further, as noted
above, the Proposal does not raise social or ethical issues related to the
Company's business. Therefore, the Proposal is similar to other proposals
allowed by the Staff to be excluded from proxy statements pursuant to Rule
14a-8(i)(5). See, e.g., College Retirement Equities Fund (May 3, 2004); The
Proctor & Gamble Company (August 11, 2003); and Hewlett-Packard Company (January
7, 2003); and The Walt Disney Company (November 29, 2002).
Even if the Proposal were deemed to implicate social or ethical issues, the
Company does not believe that it is significantly related to the Company's
business because it would require substantial additional disclosure regarding an
insignificant portion of the Company's business. The Company's primary business
is the construction and sale of homes. Indeed, the Company is one of the largest
homebuilders in the United States and builds in dozens of markets in the
Southeast, Mid-Atlantic, Midwest, West and Central United States. The
origination of mortgages by Beazer Mortgage is ancillary to the Company's
primary business and is offered only as a value-added feature for prospective
purchasers of the Company's homes. Such purchasers have available numerous
sources to finance their purchase of a home constructed by the Company other
than the Company's mortgage origination services. Further, the Company believes
that, if it were to discontinue its ancillary mortgage origination business, its
primary business of constructing and selling homes would not be significantly
affected.
For the reasons set forth above, the Company hereby requests a determination by
the Staff that it will not recommend enforcement action to the Commission should
the Company omit the Proposal from the Company's Proxy Statement pursuant to
Rule 14a-8(i)(5).
Summary
For each of the reasons set forth above, the Company believes that it may omit
the Proposal from the Proxy Statement for the Annual Meeting. The Company hereby
requests a determination by the Staff that it will not recommend enforcement
action to the Commission should the Company omit the Proposal from the Company's
Proxy Statement.
Should the Staff disagree with the Company's reasons that it may omit the
Proposal from the Proxy Statement, or should the Staff desire any additional
information to support of the Company's positions set forth herein, we would
appreciate an opportunity to confer with the Staff prior to the issuance of its
response to this letter.
If you have any questions or comments regarding this request, please call the
undersigned at (212) 701-3323.
Very truly yours,
/s/
John Schuster
cc: Mr. Michael J. Short
Secretary-Treasurer
Indiana State District Council of Laborers and HOD Carriers Pension Fund
P.O. Box 1587
Terre Haute, IN 47808-1587
Ms. Jennifer O'Dell
Assistant Director, LIUNA Corporate Affairs Department
Laborer's International Union of North America
905 16th Street, N.W.
Washington, DC 20006
Ms. Peggy Caldwell
Senior Vice President and Acting General Counsel
Beazer Homes
1000 Abernathy Road, Suite 1200
Atlanta, GA 30328
Ms. Leslie H. Kratcoski
Vice President, Investor Relations & Corporate Communications
Beazer Homes
1000 Abernathy Road, Suite 1200
Atlanta, GA 30328
-----FOOTNOTES-----
1 The Company notes that the Proposal raises only disclosure issues. The
Proposal does not raise any social or ethical issues that would not be subject
to the ordinary business exclusion provided by Rule 14a-8(i)(7).
2 The Company notes that it has disclosed in filings made with the Commission
that its expected restatement of its financial statements will decrease net
income for FY 2006. Although the Company is unable to quantify precisely the
impact of the restatement on its previously issued financial statements, it does
not believe that any such restatement would result in the percentages set forth
above as of September 30, 2006 and for FY 2006 meeting or exceeding 5%
thresholds set forth in Rule 14a-8(i)(5).
[INQUIRY LETTER]
August 27, 2007
Ms. Peggy J. Caldwell
Senior Vice President and Acting General Counsel
Beazer Homes USA, Inc.
1000 Abernathy Road, Suite 1200
Atlanta, GA 30328
Dear Ms. Caldwell,
On behalf of the Indiana Laborers' Pension Fund ("Fund"), I hereby submit the
enclosed shareholder proposal ("Proposal") for inclusion in the Beazer Homes
USA, Inc. ("Company") proxy statement to be circulated to Company shareholders
in conjunction with the next annual meeting of shareholders. The Proposal is
submitted under Rule 14(a)-8 (Proposals of Security Holders) of the U.S.
Securities and Exchange Commission's proxy regulations.
The Fund is the beneficial owner of approximately 300 shares of the Company's
common stock, which have been held continuously for more than a year prior to
this date of submission. The Proposal is submitted in order to promote a
governance system at the Company that enables the Board and senior management to
manage the Company for the long-term. Maximizing the Company's wealth generating
capacity over the long-term will best serve the interests of the Company
shareholders and other important constituents of the Company.
The Fund intends to hold the shares through the date of the Company's next
annual meeting of shareholders. The record holder of the stock will provide the
appropriate verification of the Fund's beneficial ownership by separate letter.
Either the undersigned or a designated representative will present the Proposal
for consideration at the annual meeting of shareholders.
If you have any questions or wish to discuss the Proposal, please contact,
Jennifer O'Dell, Assistant Director, LIUNA Corporate Affairs Department, at
(202) 942-2359. Copies of correspondence or a request for a "no-action" letter
should be forwarded to Ms. O'Dell to the following address: Laborers'
International Union of North America, 905 16\th/ Street, NW, Washington, DC
20006.
Sincerely,
/s/
Michael J. Short
Secretary-Treasurer
cc: Jennifer O'Dell
Enclosure
[APPENDIX]
Resolved: That the shareholders of Beazer Homes USA, Inc. ("Company") request
that the Board of Directors prepare within 90 days of its annual meeting a
report evaluating the Company's mortgage practices including the Company's
potential losses or liabilities relating to its mortgage operations and/or those
of any affiliates or subsidiaries and a discussion of the following:
1. The extent of the Company's mortgage originations in subprime, Alt-A, jumbo
and "exotic" mortgages including piggybacks/second mortgages, interest only
loans, negative amortization loans, and low/no documentation loans, as well as
what percentage of its mortgage originations may be classified as such
mortgages;
2. Which of the Company's geographic markets are most reliant on mortgages
listed in (1) above;
3. The identity of the purchasers that buy the Company's mortgage loans in the
secondary market;
4. What percentage, if any, of the purchases discussed in (3) have Early Payment
Default ("EPD") provisions attached which may require the Company to buy back
those loans as well as the time frame for those obligations; and
5. How many non-performing loans the Company expects it will have to repurchase
during the current and upcoming fiscal year.
The report should be prepared annually at reasonable cost, omit proprictary
information, and be distributed in the manner deemed most efficient by the
Company, including posting on its website.
Supporting Statement
The homebuilding and mortgage industries in general and our Company in
particular face extraordinary challenges at this time. In an article entitled
"Feds are investigating homebuilder Beazer: Residential builder probed in
connection with potential mortgage fraud," Business Week online (March 28, 2007)
the potential scope of our Company's problems is noted:
...Federal investigators have opened a broad criminal probe into lending
practices, some financial transactions, and other dealings at Beazer Homes USA.
Atlanta-based Beazer, the nation's sixth-largest residential homebuilder, rode
high during the heyday of the housing boomprofiting from both selling the homes
it constructed and often financing the buyers as well through a wholly owned
mortgage arm. It's common in the industry, but Beazer may have pushed the
bounds: The North Carolina field offices of the Federal Bureau of Investigation,
the Internal Revenue Service, and the Justice Dept. have recently opened a joint
investigation into the company over such matters....
In a Form 8-K dated July 23, 2007, the Company disclosed that it is also the
subject of a Securities and Exchange Commission formal investigation.
As these investigations are pending, the Company is also experiencing
significant declines in revenue. The Company's most recent 10-Q disclosed that
for the six months ended March 31, 2007, the Company's revenues declined 31.4%,
from $2,374,707,000 to $1,629,309,000 from the same period in the prior year.
Unfortunately, the Company is not providing sufficient information on its
mortgage practices for shareholders to adequately monitor risk. For these
reasons, we urge shareholders to support our proposal.
[INQUIRY LETTER]
November 9, 2007
Office of Chief Counsel
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: Response to Beazer Homes USA, Inc.'s Request for No-Action Advice Concerning
the Indiana State District Council of Laborers and HOD Carriers Pension Fund's
Shareholder Proposal
Dear Sir or Madam:
The Indiana State District Council of Laborers and HOD Carriers Pension Fund
("Fund") hereby submits this letter in reply to Beazer Homes USA, Inc.'s
("Beazer" or "Company") Request for No-Action Advice to the Security and
Exchange Commission's Division of Corporation Finance staff ("Staff") concerning
the Fund's shareholder proposal ("Proposal") and supporting statement submitted
to the Company for inclusion in its 2008 proxy materials. The Fund respectfully
submits that the Company has failed to satisfy its burden of persuasion and
should not be granted permission to exclude the Proposal. Pursuant to Rule
14a-8(k), six paper copies of the Fund's response are hereby included and a copy
has been provided to the Company.
The Proposal concerns a matter that clearly transcends the Company's ordinary
business operations so it is not excludable under Rule 14a-8(i)(7)
The Company first argues that the Proposal may be excluded under Rule
14a-8(i)(7) because it relates to the ordinary business operations of the
Company. The Company bears the burden of persuasion to show that such is the
casea burden we will show it fails to meet.
The Company states that a key policy consideration behind the ordinary business
exclusion is the "degree to which the proposal seeks to `micro-manage' the
company by probing too deeply into matters of a complex nature upon which
shareholders, as a group, would not be in a position to make an informed
judgment." Release No. 34-40018 (May 28, 1998).
The Proposal requests that the Company's Board of Directors prepare a report
evaluating the Company's mortgage operations in order to provide vital
information to shareholders as they monitor their investment in Beazer as it
confronts a crisis relating to its mortgage practices. None of the extraordinary
challenges confronting Beazer today, nor the information we seek to elicit, can
reasonably be construed as "ordinary business."
Consider the following:
The Wall Street Journal reported on August 1, 2007:
Shares of Beazer Homes USA Inc. lost as much as 40% Wednesday morning on talk
that the company could be filing for bankruptcy, but the home builder strong
dismissed the rumors in a statement as `scurrilous and unfounded.' (emphasis
supplied)
The closing price of Beazer's stock on Nov. 8, 2006, was $41.03. The closing
price of Beazer's stock on Nov. 8, 2007, was $9.79.
A Beazer News Release on July 26, 2007, noted:
As previously disclosed on March 29, 2007, Beazer Homes received a subpoena from
the United States Attorney's office in the Western District of North Carolina,
seeking the production of documents focusing on the Company's mortgage
origination services. On May 1, 2007 the Company received notice that the
Securities and Exchange Commission had commenced an informal inquiry to
determine whether any person or entity related to Beazer Homes had violated
federal securities laws. On July 20, 2007, the Company received a formal order
of private investigation issued by the SEC in this matter. The Company intends
to continue to fully cooperate with all related inquiries.
Together with certain of its subsidiaries and current and former officers and
directors, the Company has also been named as a defendant in several purported
class action lawsuits.
In response to these matters, the Audit Committee of the Beazer Homes Board of
Directors and its independent legal counsel and financial consultant launched an
internal review of Beazer Homes' mortgage origination business and related
matters. The results of the ongoing review by the Audit Committee, the
governmental investigations, or the pending lawsuits could result in the payment
of criminal or civil fines, the imposition of an injunction on future conduct,
the imposition of other penalties, or other consequences, including the Company
adjusting the conduct of certain of its business operations and the timing and
content of its existing and future public disclosures, any of which could have a
material adverse effect on the business, financial condition or results of
operations of the Company. (emphasis supplied)
A Beazer News Release on October 11, 2007 ("Beazer Homes Announces Findings of
Independent Audit Committee Investigation") stated:
Beazer Homes USA, Inc. (NYSE: BZH) (www.beazer.com) today announced interim
findings from its Audit Committee's previously announced independent internal
investigation into the Company's mortgage origination business and certain
accounting and financial reporting matters.
The Audit Committee has determined that it will be necessary for the Company to
restate its financial statements relating to fiscal years 2004 through 2006 and
the interim periods of fiscal 2006 and fiscal 2007 (collectively the
"restatement period"). The restatement is also expected to impact the financial
results for fiscal years 1999 through 2003 and the Company expects that it will
reflect the impact of financial results for these prior years as a part of the
opening balances in the financial statements for the restatement period.
As described more fully below, the Company expects the restatement's cumulative
impact will likely be an increase in net income, but will reflect an expected
decrease in net income for the Company's 2006 fiscal year. Until the internal
investigation is completed and the restatement is finalized, the Company is
unable to quantify precisely the impact of the restatement on its previously
issued financial statements. As a result of the Audit Committee's findings, the
Company's previously issued financial statements for the periods impacted by the
restatement as described above and the related audit reports of the Company's
independent registered public accounting firm should no longer be relied upon.
....
The internal investigation found evidence that employees of the Company's Beazer
Mortgage Corporation subsidiary violated certain U.S. Department of Housing and
Urban Development ('HUD') regulations... (emphasis supplied)
In a Form 8-K filing submitted by Beazer on August 15, 2007, the Company
reported:
As previously disclosed in the Company's Form 12b-25 Notification of Late Filing
filed with the Securities and Exchange Commission (the "SEC") on August 10,
2007, the Company has not yet filed with the SEC the Company's Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 2007. The Company's delay
in filing the Form 10-Q is the result of an independent internal investigation
being conducted by the Audit Committee of the Beazer Homes Board of Directors
into Beazer Homes' mortgage origination business, including, among other things,
an investigation of certain evidence that the Company's subsidiary, Beazer
Mortgage Corporation, violated U.S. Department of Housing and Urban Development
("HUD") regulations and may have violated certain other laws and regulations in
connection with certain of its mortgage origination activities. The Audit
Committee has retained independent legal counsel which, in turn, has retained
independent forensic accountants, to assist with the investigation. During the
course of the investigation, it was also discovered that the Company's former
Chief Accounting Officer caused reserves and other accrued liabilities, relating
primarily to land development costs and costs to complete houses, to have been
recorded in prior accounting periods in excess of amounts that would have been
appropriate under generally accepted accounting principles.
In a Form 8-K filing submitted by Beazer on November 5, 2007, the Company
reported:
On November 5, 2007, the Company also announced that it has recently taken steps
to further reduce its overall cost structure and improve operating efficiencies.
As a result, in October 2007, the Company further reduced overall headcount by
approximately 650 positions, or 25%. Since peak headcount levels in March 2006,
overall headcount has declined by over 50% through reductions in force and
attrition. The Company expects these headcount reductions to result in
annualized cost savings of at least $30 million. In addition, the Company has
reorganized accounting and back-office functions and is centralizing a number of
marketing initiatives to achieve additional efficiencies.
The Company also announced that its Board of Directors has voted to suspend the
Company's quarterly dividend of $0.10 per share. The Board concluded that this
action, which will allow the Company to conserve approximately $16 million of
cash on an annual basis, is prudent in light of the continued deterioration in
the housing market at this time. (emphasis supplied)
We respectfully submit that rumored bankruptcies, state and federal
investigations, internal investigations, stock price drops of 40% in a morning,
financial restatements covering multiple years, "headcount reductions" of more
than 50%, suspension of dividends, and Company statements that its financial
statements cannot be relied upon cannot reasonably be construed as matters of
ordinary business.
We have noted above the extreme circumstances facing Beazer today. If state and
federal investigations had not been commenced, it is unclear whether Beazer's
Audit Committee would have begun an internal investigation. Shareholders are
entitled to the type of information requested by the Proposal in order to
monitor their investment. The Company should not be able to hide behind the
assertion that recent events represent no more than "ordinary business." Such is
clearly not the case.
In Staff Legal Bulletin No. 14A (July 12, 2002) it was noted:
The Division has noted many times that the presence of widespread public debate
regarding an issue is among the factors to be considered in determining whether
proposals concerning that issue "transcend the day-to-day business matters. []
We believe that the public debate regarding shareholder approval of equity
compensation plans has become significant in recent months. Consequently, in
view of the widespread public debate regarding shareholder approval of equity
compensation plans and consistent with our historical analysis of the `ordinary
business' exclusion, we are modifying our treatment of proposals relating to
this topic.[]....
The analogy to the widespread debate surrounding equity-based compensation is
apt. The subprime crisis that has engulfed the country and dominated news the
last several months, as well as the severe economic and financial crisis that
has ensued, certainly serves to elevate what admittedly once might have been a
matter of ordinary business to anything but that today.
For these reasons, we submit that the Company has failed to satisfy its burden
of persuasion under Rule 14a-8(i)(7) and the Proposal should be included in the
Company's proxy statement.
The Company also fails to satisfy its burden under Rule 14a-8(i)(5) of proving
that the Proposal concerns a matter not relevant to the Company's operations
First, we believe that this argument may be disposed of based on a single
representation made in the Company's recent (Oct. 11, 2007) News Release, in
which it noted:
As a result of the Audit Committee's findings, the Company's previously issued
financial statements for the periods impacted by the restatement as described
above and the related audit reports of the Company's independent registered
public accounting firm should no longer be relied upon.
Yet, the Company seeks to do exactly that: Rely on its financial statements to
demonstrate its mortgage business is below a mandated threshold under Rule
14a-8(i)(5). It should not be allowed to contravene its own advice when it
serves its purpose. Beazer states its financial statements cannot be relied upon
and the Staff should not rely upon them.
Although that is sufficient to rebut the Company's argument under (i)(5), we
would also briefly note that we believe the above-quoted information concerning
the enormous challenges confronting Beazer amply demonstrates that the Proposal
is in fact "significantly related to the company's business." The Company finds
itself in crisis today, in large part as a result of its mortgage operations.
Conclusion
For all these reasons we believe the company has failed to satisfy its burdens
of persuasion under Rules 14a-8(i)(5) and (7) and its request should be denied.
Should you wish to discuss this matter further, please contact Ms. Jennifer
O'Dell, LIUNA's Assistant Director of Corporate Affairs at (202) 942-2359.
Sincerely,
/s/
Michael J. Short
Secretary-Treasurer
[STAFF REPLY LETTER]
November 30, 2007
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Beazer Homes USA, Inc.
Incoming letter dated October 15, 2007
The proposal requests that the board prepare a report evaluating the company's
mortgage practices, including the company's potential losses and liabilities
relating to its mortgage operations.
We are unable to concur in your view that Beazer Homes USA may exclude the
proposal under rule 14a-8(i)(5). Accordingly, we do not believe that Beazer
Homes USA may omit the proposal from its proxy materials in reliance on rule
14a-8(i)(5).
We are unable to conclude that Beazer Homes USA has met its burden of
establishing that Beazer Homes USA may exclude the proposal under rule
14a-8(i)(7). Accordingly, we do not believe that Beazer Homes USA may omit the
proposal from its proxy materials in reliance on rule 14a-8(i)(7).
Sincerely,
Ted Yu
Special Counsel
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