While strengthening our brand and pursuing focused product expansion and greater market penetration are keys to future organic growth, no less important are specific initiatives aimed at maximizing the profitability of that growth. We believe this will be accomplished by leveraging the full potential of Beazer Homes’ size, capabilities and best practices to achieve improved efficiencies in all that we do. Combined, the branding, market penetration and profitability initiatives will drive sales and expand margins, leading to profitable growth and ultimately to greater value for our shareholders.

Leverage Size to Create Economies of Scale

As a $3 billion-plus homebuilder, Beazer Homes is positioned now more than ever to leverage our size, scale and scope to create significant economies of scale. For example, we have prioritized our national accounts purchasing program as an area for further margin enhancement. Elements of this program include maximizing rebates through standardized specifications with fewer manufacturers, as well as evaluating, selecting and growing strategically with partners on a preferred or exclusive basis. By negotiating win-win agreements with our supplier partners, we are able to reduce the direct costs of building homes, and translate those savings into exceptional value for our customers and enhanced profitability for Beazer Homes, a key to our strategy.

We are further leveraging our information technology capabilities, which are widely acknowledged as some of the most innovative in the industry, across strategic functions including design, purchasing, construction, scheduling and finance.

Furthermore, through our geographic expansion, we have an established infrastructure in the most attractive markets in the country. Leveraging these fixed costs through increased market penetration is yet another example of achieving improved profitability through increased economies of scale.

Durning the past five years, EPS has grown at a compounded annual rate of 32 percent.

Practicing our Best

Throughout our history, Beazer Homes has embraced a “best practices” mentality. Our opportunity now is to further formalize and institutionalize the “Best of Beazer,” creating top-of-mind awareness of best practices across the organization. Our “best practices” initiative is charged with simplifying and standardizing many of the common functions throughout the Company. These functions include bid management, vendor/contract management, specification and option management, variance management, scheduling and technology optimization. Such areas are candidates for simplification and standardization, which can result in faster, more efficient capital utilization and ultimately lead to a higher level of productivity throughout the organization.

*See Footnotes to Selected Financial Data for a reconciliation of EBIT to the most directly comparable GAAP measure.

An increased focus on efficiency already has resulted in an improvement in EBIT margin of 140 basis points over fiscal 2002.

Effective Products at an Efficient Price

Building the right home at the right price is the key to a satisfied buyer and a profitable transaction. Better aligning floor plans and products with target market segments is instrumental to building the right home, but doing so at the right price requires another step. As with any consumer product, features and pricing must be aligned with costs. This is the rationale behind a company-wide review that is focused on providing our customers with the highest value and the most choice in their homes by targeting the right level of amenities. As we better identify which home plans work best with various segments of the market, it is essential that these plans encompass the right set of specifications. These specifications must strike the appropriate balance between cost and customer desires.

Through this process, we intend to streamline product development, more effectively target plans and specifications to likely buyers in new neighborhoods and better monitor the sales and profitability of individual floor plans. In particular, the scope of work reviews will enable us to better position our design studios. These design studios enable home buyers to select a variety of options and upgrades to customize their homes. They are an integral part of our competitive strategy in the marketplace and a high-margin profit center for our business. More refinement of product options and pricing in these design studios represents a significant opportunity to further expand our margins.

Our Goal:
Brand New Growth

A new logo, brand ambassador training, market segmentation, purchasing programs, best practices – all of these initiatives have one common theme: enhanced growth and profitability. We believe a higher level of profitability will be driven by top-line growth that is a result of a stronger, nationally recognized brand that offers product lines aligned with clearly defined target markets. While increasing sales, these initiatives also will bring stronger uniformity and consistency to the organization, which in turn can be utilized to enhance productivity and expand margins. The result is brand new growth that benefits all Beazer Homes constituencies–our customers, our employees, our partners and our shareholders.