Document

DEF 14A 1 bzhproxy2021.htm DEF 14A Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934


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BEAZER HOMES USA, INC. (Name of registrant as specified in its charter)

(Name of person(s) filing proxy statement, if other than the registrant)

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FROM OUR

CHAIRMAN

Dear Fellow Stockholders:

We had a very successful fiscal year, driven by strong operational execution and continued strength in the housing market. We generated significant gains in operating margin and adjusted EBITDA, leading to full year net income that was more than double last year’s. We also significantly grew our total active lot position and reduced our leverage. These outcomes are the result of our long-standing Balanced Growth Strategy — which is our multi-year plan to grow profitability faster than revenue, from a less leveraged and more efficient balance sheet.

As we improve our financial and operational performance, we are also focused on expanding our ESG activities to create durable value for all of our stakeholders. To that end, we were pleased to be named an ENERGY STAR® Partner of the Year — Sustained Excellence for the sixth consecutive year. Every home we build is ENERGY STAR-certified, and we continue to make improvements in our designs, materials and construction practices in support of our industry-first pledge to have 100% of the homes we build certified as Net Zero Energy Ready by the end of 2025.

We also made significant progress on the rollout of Charity Title, our title insurance agency business committed to contributing 100% of its profits to charity. We expect this expansion will allow us to donate more than $1 million in fiscal 2022, allocated between our national philanthropic partner, Fisher House Foundation, and other charitable organizations in the communities we serve.

On the Governance side, we recently completed a three-year Board refreshment process that resulted in four long-serving directors retiring and three new directors joining our Board. The average tenure of our directors is now 5.6 years, compared to 10.4 years in 2018. The diversity of our Board was also enhanced as a result of this process.

As noted on page 5 of our Proxy Statement, we recently posted on our website our first-ever ESG Summary, which provides information on our ESG-related initiatives, as well as metrics that are responsive to sustainability accounting standards promulgated by the Sustainability Accounting Standards Board (SASB) for companies within the homebuilding industry. This summary represents another step forward in our commitment to meaningful ESG accountability and provides a foundation upon which we expect to build increased transparency by directly reporting on relevant sustainability issues, risks and opportunities that impact our business.

During fiscal 2021, we held more than 90 meetings with investors and discussed many important topics, including executive compensation and ESG matters. We listened closely and our Board and committees implemented several meaningful initiatives based on these engagements.

With respect to executive compensation specifically, we believe pay and performance were strongly linked in fiscal 2021, supporting our key financial, operational and strategic objectives, and aligning our compensation program with best practice principles. Based on the feedback we received from investors during the year, we believe our compensation philosophy is in alignment with their views, while also continuing to reinforce our strategic priorities. We, therefore, respectfully request your support this year on our annual say-on-pay proposal.

Last – but certainly not least – you will see under Proposals 4 and 5 that we are once again asking for stockholder approval of certain protective measures that will help us preserve our ability to fully maximize our net operating losses, or NOLs, that we use (and want to continue to use) to offset the taxable income we are now generating and expect to continue to generate in the future. These protections, which have a three-year term, are currently set to expire in November 2022, and have been overwhelmingly supported by our stockholders since they were first adopted by our Board of Directors. Because our NOLs have substantial value to us, we hope you will support the renewal of these protections for an additional three-year term until November 2025.

Thank you for your continued support as we execute our strategy. We believe that we are positioning Beazer Homes for more growth and more profitability, leading to higher returns on stockholders’ equity. As always, we appreciate your confidence in us.

ALLAN P. MERRILL

Chairman, President and Chief Executive Officer

Beazer Homes USA, Inc.

December 21, 2021


Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on February 2, 2022: This proxy statement, along with the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021, are available free of charge on the Company’s website at http://www.beazer.com

PROXY

STATEMENT SUMMARY

This summary provides an overview of the information contained within this proxy statement. We encourage you to read the entire proxy statement prior to voting.

ANNUAL MEETING OF STOCKHOLDERS ROADMAP

ANNUAL MEETING


When:			Wednesday, February 2, 2022 8:30 a.m. (Eastern time)			Where:			1000 Abernathy Road, NE, Suite 260 Atlanta, Georgia 30328

Stockholders of record as of the close of business on December 8, 2021 are entitled to notice of, and to vote at, the annual meeting.

This proxy statement, along with the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021, are available on the Company’s website at www.beazer.com.

On December 21, 2021, we began mailing this proxy statement to stockholders who requested paper copies.

For instructions on voting, please refer to the Notice of Internet Availability of Proxy Materials you received by mail or the section entitled “How to Vote” beginning on page 2 of this proxy statement. If you received a paper copy of this proxy statement, please refer to the enclosed proxy card.

Your vote is important. Whether or not you plan to attend the annual meeting, we encourage you to vote as soon as possible.

VOTING MATTERS


PROPOSAL	BOARD’S VOTING RECOMMENDATION	PAGE REFERENCE
Election of directors	For Each Nominee	15
Ratification of appointment of independent auditors	For	22
Approval of executive compensation	For	24
Amendment of Amended and Restated Certificate of Incorporation to preserve tax benefits	For	55
Approval of a new Section 382 Rights Agreement to preserve tax benefits	For	57


			i

2021

BUSINESS HIGHLIGHTS

Here are several highlights of our financial and operational achievements in fiscal 2021:


	FINANCIAL
	$2.1 BILLION	Revenue
		Achieved a slight increase in revenue despite a 3.7% year-over-year decrease in home closings
	$122.2 MILLION	Net Income
		Generated net income from continuing operations of $122.2 million compared to $53.3 million in fiscal 2020
	$262.7 MILLION	Adjusted EBITDA
		Achieved $262.7 million in Adjusted EBITDA, an increase of $58.3 million, or 28.5%, year-over-year
	$80.7 MILLION	Debt Reduction
		Reduced our outstanding debt by $80.7 million.

	OPERATIONAL
	3.7 HOME SALES/MONTH	Sales Pace Achieved average monthly home sales pace per community of 3.7, a year-over-year increase of 13.8%
	$595.5 MILLION	Land Acquisition and Land Development Spending
		Spent $595.5 million on land acquisition and land development, a 35.1% year-over-year increase
	$1.3 BILLION	Dollar Value of Backlog
		Ended the year with dollar value of homes in backlog of $1.3 billion, a year-over-year increase of 29.0%
	$402,400	Average Selling Price
		Average selling price (ASP) for our homes was $402,400, marking our tenth consecutive year of ASP growth and reflecting an increase of more than 4% year-over-year
	127 COMMUNITIES	Average Community Count
		Average active community count was 127, a 22.3% year-over-year decrease
	21,987 LOTS	Number of Controlled Lots
		Ended the year with 21,987 lots controlled either through ownership or options to purchase, a year-over-year increase of 23.3%
For fiscal 2022, we expect to: •grow EBITDA by more than 10%, leading to earnings per share of more than $5.00 •grow our lot position by double digits, with lots controlled by options remaining around 50% •deliver a return on total equity of about 20%, or nearly 25% excluding our deferred tax assets, and •reduce our total debt below $1 billion


Please see Annex I for a reconciliation of non-GAAP measures to GAAP measures. Statements regarding goals, aspirations, strategies or future initiatives and their expected results are forward-looking statements, which involve known and unknown risks, uncertainties and other factors described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021.


			ii

CORPORATE

GOVERNANCE HIGHLIGHTS

Annual election of all directors

Double triggers for both cash severance and accelerated vesting of equity upon a change of control

Significant director refreshment over last three years, reducing average tenure from 10.4 years to 5.6 years

Robust and thorough Board, committee and director evaluation practices to enhance effectiveness

Majority vote standard for the election of directors, with a director resignation policy

Long-standing stockholder engagement practices

Meaningful officer and director stock ownership and holding requirements

No tax gross-ups in connection with severance or change of control

Policies against hedging, pledging and stock option repricing

Board engagement and oversight on all ESG matters

Clawbacks of incentive awards in the event of a restatement

STOCKHOLDER

ENGAGEMENT

We are committed to a robust stockholder engagement program. Our Board values our stockholders’ perspectives. Feedback from stockholders on our business, executive compensation program and ESG matters represent important considerations for Board discussions throughout the year. Over the course of the year, we held more than 90 meetings with investors.

Our Board maintains a process for stockholders and interested parties to communicate with the Board. Stockholders and interested parties may write or call our Board as provided under “ESG — Corporate Governance Overview” on page 15.


			iii

BOARD

NOMINEES (PG. 15)

Below are the directors nominated for election by stockholders at the annual meeting. The Board recommends a vote “FOR” each of the directors.

AGE

SERVING SINCE

PRINCIPAL OCCUPATION

INDEPENDENT

Elizabeth S. Acton

2012

Former Executive Vice President Finance and Chief Financial Officer
Comerica Incorporated

Yes

Lloyd E. Johnson

2021

Former Global Managing Director, Finance and Internal Audit
Accenture Corporation

Yes

Allan P. Merrill*

2011

President and Chief Executive Officer
Beazer Homes USA, Inc.

Peter M. Orser

2016

Former President and Chief Executive Officer
Weyerhaeuser Real Estate Company

Yes

Norma A. Provencio**

2009

President and Owner
Provencio Advisory Services Inc.

Yes

Danny R. Shepherd

2016

Former Vice Chairman, Senior Vice President, Executive Vice President and
Chief Operating Officer
Vulcan Materials Company

Yes

David J. Spitz

2019

Chief Executive Officer
ChannelAdvisor Corp.

Yes

C. Christian Winkle

2019

Former Chief Executive Officer
Sunrise Senior Living

Yes

*Chairman

**Lead Director


			iv

BOARD AND

COMMITTEE COMPOSITION (PG. 11)

The standing committees of the Board are the Audit Committee, Compensation Committee, Nominating/Corporate Governance Committee and Finance Committee. Below are our current directors and their committee memberships. Each of our directors attended at least 75% of the regularly scheduled Board and committee meetings during the period he or she was on the Board, with seven of eight attending 100% of such meetings.

AUDIT

COMPENSATION

NOMINATING/CORPORATE GOVERNANCE

FINANCE

Elizabeth S. Acton

Lloyd E. Johnson

Allan P. Merrill

Peter M. Orser

Norma A. Provencio*

Danny R. Shepherd

David J. Spitz

C. Christian Winkle

lChair

* Lead Director


			v

KEY

QUALIFICATIONS

The following are several of the key qualifications, skills and experience of our Board nominees that we believe are uniquely important to our business.

Homebuilding/Construction Industry Experience Merrill, Orser, Shepherd

CEO/COO Experience

Merrill, Orser, Shepherd, Spitz, Winkle

CFO/Accounting/Finance Experience

Acton, Johnson, Merrill, Provencio, Shepherd

Public Company Board Experience

Acton, Johnson, Merrill, Provencio, Shepherd, Spitz, Winkle

Corporate Governance/Ethics

Merrill, Provencio, Shepherd, Spitz

Risk Management

Acton, Johnson, Merrill, Provencio, Shepherd, Winkle

Marketing/Sales Expertise

Merrill, Orser, Spitz

ESG Expertise

Merrill, Orser, Provencio, Shepherd, Spitz

The lack of a mark for a director does not mean that he or she does not possess that particular qualification, skill or experience. The marks above simply indicate that the characteristic is one for which the director is especially well known among our Board.

We believe our Board reflects the broad expertise and perspective needed to govern our business and constructively engage with senior management.

HOW

WE PAY

Our executive compensation program is composed of the following elements:

Base salary

Long-term incentive compensation, with the majority of target award opportunities tied to multi-year performance goals and payable in stock and cash, as well as restricted stock

Short-term incentive compensation, based on performance

Benefits available to all employees


			vi

2021

EXECUTIVE COMPENSATION HIGHLIGHTS

Base Salaries (PG. 32)

As we reported in our 2020 Proxy Statement, due to a significant decline in net new orders and the Company's focus on protecting liquidity at the onset of the COVID-19 pandemic, our named executive officers (NEOs, as defined on page 25) voluntarily reduced their respective salaries by 20%, effective April 1, 2020. Those reductions remained in place for all of fiscal 2020.

While market conditions had improved dramatically by the beginning of fiscal 2021, our NEOs voluntarily extended a portion of base salary reductions, equal to 10% of their respective pre-pandemic annual salaries, into fiscal 2021, subject to the possibility of salaries being restored for the second half of fiscal 2021 if the Company's performance at that time was on pace to exceed 95% of its annual plan. As a result, Mr. Merrill began fiscal 2021 with a base salary of $877,500 and Mr. Goldberg and Mr. Belknap began fiscal 2021 with base salaries of $382,500 and $486,000, respectively. Because the Company's results for the first half of fiscal 2021 exceeded 95% of the Company's annual plan, the NEOs' salaries were restored to pre-pandemic levels for the second half of the year, resulting in actual base salaries earned in fiscal 2021 of $926,384 for Mr. Merrill, $403,808 for Mr. Goldberg and $513,074 for Mr. Belknap.

Short-Term Incentive Opportunities (PG. 33)

In addition to the reduction in base salaries discussed above, our NEOs voluntarily reduced their respective target short-term incentive award opportunities by 10% for all of fiscal 2021. After taking into account these 10% reductions in short-term incentive opportunities, the target short-term incentive award opportunities for our NEOs (expressed as percentages of weighted salary) were 157.5% for Mr. Merrill, 90.0% for Mr. Goldberg and 112.5% for Mr. Belknap.

Our Compensation Committee determined that our NEOs would be eligible to receive an award for the operational components of the 2021 short-term bonus opportunity only if threshold Bonus Plan EBITDA was achieved. Furthermore, the Committee retained the discretion to deduct from awards earned for any reason, including the failure to achieve certain construction quality standards based on the assessment of an independent third-party expert.

Long-Term Incentive Opportunities (PG. 35)

In addition to the reductions discussed above, our NEOs voluntarily reduced their respective target long-term incentive award opportunities by 10% for all of fiscal 2021. After taking into account these 10% reductions in long-term incentive opportunities, the target long-term incentive award opportunities for the NEOs (expressed as percentages of already reduced salary) were 270.0% for Mr. Merrill, 135.0% for Mr. Goldberg and 157.5% for Mr. Belknap.

For the 2021-2023 performance period, our Compensation Committee continued its practice of tying two-thirds of target long-term incentive award opportunities to multi-year performance goals, with one-half of the performance-based component payable in cash and one-half payable in performance shares, subject to the same performance criteria.

In addition, our Compensation Committee continued to include a relative total shareholder return (TSR) modifier to NEO performance share and performance cash awards, which could result in an adjustment to any earned awards (by up to +/- 20%) based on our three-year relative TSR performance vs. companies in the S&P Homebuilders Select Industry Index.


			vii

COMPENSATION OUTCOMES (PGS. 34 and 37)

Compensation outcomes from performance incentives were well-aligned with Company and management team performance during fiscal 2021. Based on actual vs. planned outcomes for the financial and operational performance factors, our NEOs earned 192.5% of reduced target annual incentive award opportunities.

The three-year award cycle relating to our 2019 performance share program ended on September 30, 2021, with results yielding a payout equal to 148.75% of the target award opportunity after applying a negative 15.0% TSR modifier. Metrics included cumulative pre-tax income, return on assets and expansion of our Gatherings® product line, which were then collectively subject to the TSR modifier.

RATIFICATION OF

INDEPENDENT AUDITORS (PG. 22)

Although stockholder ratification is not required, the appointment of Deloitte & Touche LLP as the Company’s independent auditors for fiscal 2022 is being submitted for ratification at the annual meeting because the Board believes doing so is a good corporate governance practice. The Board recommends a vote “FOR” the ratification of Deloitte & Touche LLP as the Company’s independent auditors.

CHARTER AMENDMENT AND

NEW RIGHTS AGREEMENT (PG. 53)

We have significant deferred tax assets comprised primarily of net operating losses, or NOLs, that we use (and want to continue to use) to offset the taxable income we are now generating and expect to continue to generate in the future. These benefits, which have substantial value to us, can be significantly impaired, however, if we experience an “ownership change” under Section 382 of the Internal Revenue Code (which is discussed in detail under “Proposals 4 and 5 — Background” on page 53). To help protect against an “ownership change” and preserve our ability to fully maximize our NOLs, our stockholders have previously approved certain protective measures, including the charter amendment and the Section 382 Rights Agreement described in Proposal 4 and Proposal 5, respectively.

These protective provisions are set to expire in November 2022. Accordingly, we are now seeking stockholder approval to extend the expiration dates of each of these protective provisions by an additional three years. We have provided a brief “Frequently Asked Questions” section beginning on page 53, followed by the related proposals. The Board recommends a vote “FOR” approval of both the protective charter amendment and the new Rights Agreement.


			viii

TABLE OF

CONTENTS


PROXY STATEMENT SUMMARY			i
PROXY STATEMENT			1
General			1
Purpose of the Annual Meeting			1
Who Can Vote			1
How to Vote			2
Revoking a Proxy			2
Quorum			3
Votes Needed			3
Who Counts the Votes			4
Expenses of Solicitation			4
ESG - ENVIRONMENTAL, SOCIAL AND GOVERNANCE			5
ESG - ENVIRONMENTAL HIGHLIGHTS			5
ESG - SOCIAL HIGHLIGHTS			7
ESG - CORPORATE GOVERNANCE OVERVIEW			9
Director Independence			9
Board Leadership Structure and Governance Practices			9
Standing Committees and Meetings of the Board of Directors			11
Audit Committee			11
Nominating/Corporate Governance Committee			12
Compensation Committee			12
Finance Committee			12
Committee Charters and Other Information			12
Director, Board and Committee Evaluations			13
Director Qualifications			13
Procedures Regarding Director Candidates Recommended by Stockholders			13
Reporting of Concerns to Independent Directors			14
PROPOSAL 1 — ELECTION OF DIRECTORS			15
NON-EMPLOYEE DIRECTOR COMPENSATION			20
PROPOSAL 2 — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			22
REPORT OF THE AUDIT COMMITTEE			23
PROPOSAL 3 — ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS			24
COMPENSATION DISCUSSION AND ANALYSIS			25
CD&A OVERVIEW			25
Who We Are			25
2021 Business Highlights			26
Fiscal 2021 Compensation Highlights			28


			ix


OUR OVERALL COMPENSATION PHILOSOPHY AND OBJECTIVES			29
Core Principles and Key Objectives			29
Pay for Performance			30
Pay Best Practices

SEC Form DEF 14A filed by Beazer Homes USA, Inc.