Dear Shareholders,

Beazer Homes is at a turning point. This annual report marks our tenth year as a public company. Since our initial public offering in 1994, we’ve transformed the Company from a regional builder into one of the nation’s largest. In the process, the Company has built an impressive foundation of assets, skills, people and capital. Even more importantly, we are proud to have helped thousands realize the quintessential American dream of home ownership and to have rewarded our shareholders with a significant level of value creation. Now, it’s time to take this foundation to an entirely new level of performance. Continued positive industry trends combined with our national scope, strong customer orientation and solid financial platform should enable us to achieve an era of Brand New Growth.

Indeed, we have demonstrated over the past decade that we can grow and achieve record-setting results in a variety of different business environments – from the booming economy of the late 1990s to the economic weakness of the past several years. Though this weakness continued during fiscal 2003, homebuilding remained strong and once again Beazer Homes posted record results.

For the fiscal year 2003, home closings increased 13 percent to 15,409, an annual record. For the first time, we generated annual revenues in excess of $3 billion, representing a 20 percent increase year-over-year. Net income reached an all-time record of $172.7 million, up 41 percent over 2002 and resulting in earnings per share of $12.78, up 19 percent from the prior year.

We were very pleased with our strong performance in fiscal 2003, during which we surpassed numerous milestones, illustrating our ongoing commitment to profitable growth.

At September 30, 2003, our backlog stood at 7,426 homes with a sales value of $1.6 billion, up 14 percent and 27 percent respectively from the backlog homes and sales value at September 30, 2002, providing an excellent platform for another strong performance in fiscal 2004.

A Time to Take Stock

While generating record sales and earnings certainly consumed much of our energy in fiscal 2003, the past 12 months have also been a period of intense planning for us. After several years of rapid growth, driven both organically and through acquisition, the time was right to take a fresh, comprehensive view of the business and determine a set of strategic priorities that will enable Beazer Homes to realize new potential. To do so, we took three major areas into consideration – homebuilding industry trends, the Company’s industry position and its core strengths. At the same time, we considered the evolving needs of our customers, who represent a greater degree of diversity than we’ve seen in the past.

Continued Positive Homebuilding Industry Trends

On the industry front, the outlook remains positive. The same industry trends that we outlined in last year’s annual report show no signs of abatement. For the foreseeable future, we expect housing demand to remain strong due to household formation growth, largely driven by population and demographic trends. Similarly, housing supply is and will remain tight as a result of constraints in entitled land and capital availability. These constraints should lead to continued industry consolidation and expanding market share for large builders. In short, we expect the same industry trends upon which Beazer Homes has been able to capitalize in the past to remain in place well into the next decade.

Strong Position as Sixth Largest Homebuilder

As we consider Beazer Homes’ position within the overall market, it is useful to put the past decade in context. The differences between our operations today and when we went public in 1994 are striking. At that time, Beazer Homes operated in nine states and closed just under 4,000 homes in a year. Today, our operations span 19 states across the Southeast, West, Central, Mid-Atlantic and Midwest regions of the United States, and the number of homes closed has nearly quadrupled. In addition to organic growth, our increased size and scale have been the result of several meaningful and strategic acquisitions.

Today Beazer Homes is among the ten largest homebuilders in the United States, ranking sixth in terms of home closings. In the process of moving up the ranks, the Company has consistently translated its operational and financial growth into value creation for its shareholders. Since 1994, revenues have increased by a factor of nearly six, and net income increased over ten times.

Core Strengths & Priorities

Clearly, when we contemplate Beazer Homes’ future today, we are dealing with a vastly different operational scope and market position than ten years ago. Not everything, however, has changed. The same qualities that catapulted us into homebuilding’s top ten are alive and well within our organization today. These qualities include:

• A national reputation for quality construction that delivers customer value consistently.
• A strong customer orientation that ensures we understand our target markets and that we build homes specifically to meet the desires and needs of these markets.
• A solid record of operational performance that has been marked by consistent financial performance and a track record of industry innovation.

Against the backdrop of a favorable industry outlook, it is clear that the key to Beazer Homes’ continued growth and prosperity is to leverage our traditional core strengths across the enviable geographic footprint we have built over the past decade. To put it simply – we need to do what we’ve always done well, but on a much bigger and broader scale. To lead this effort, we have embarked upon three strategic growth initiatives:

• to further strengthen the Beazer Homes brand nationally;
• to more clearly define and understand our target buyers in order to achieve increased market penetration; and
• to expand margins through operational enhancements and improved productivity.

A Stronger National Consumer Brand

Industry consolidation and increased competitiveness will make this the era of the large national builder. Though we have moved into the top echelon of national builders, it is imperative that Beazer Homes distinguish itself in the minds of buyers. While many things have changed in our industry, one has not – a home purchase remains a highly personal and important decision. Good recommendations, referrals from friends and family and repeat purchases by loyal customers can impact sales significantly. For this reason, we have undertaken a major branding initiative that extends across all divisions of the Company. The over-arching goal is to establish Beazer Homes as a unified consumer brand across all regions in which we operate – one company, one name, one logo, one message and one purpose.

This effort has been two years in the making and has included intensive assessment of the Beazer Homes brand, including those characteristics that set us apart. From this we have developed a position that promises, “to provide an enjoyable customer experience plus value.” This position encompasses a new tag line, new visual graphics across all collateral and marketing materials, and extensive employee orientation and training. We are committed to making this effort far more than a marketing exercise; rather, it is truly about uniting our entire organization under one set of values and attributes in order to deliver an exceptional experience and value to our customers, and in turn, to our shareholders.

Clearly Defined Customer Markets
and Increased Market Penetration

The centerpiece of our brand strategy is to be as customer-centric as possible: the buyer should always be at the center of all strategic thinking. To this end, we have completed a major market segmentation study that has focused on psychographic profiles of target buyers as well as demographic trends that create new market opportunities. We have used these insights to refine our traditional base of entry-level and move-up buyers, to understand what factors motivate them and to better plan our products to meet their needs.

Beazer Homes has historically focused on a value-oriented product offering, targeting entry-level and first-time move-up buyers. While our focus on delivering exceptional value has remained consistent, we have broadened our product expertise through acquisitions. As new builders have come into the Beazer Homes organization, we have broadened our product portfolio, diversified price points and gained expertise in adjacent market segments. Much of this activity, however, has been contained to specific geographic markets. Going forward, a key top-line growth driver will be to leverage broadened product lines and expertise across our more expansive geographic profile, resulting in greater penetration of markets in which we already have an established presence.

Margin Expansion Initiatives and Growth Targets

As we move to unify the Company under one brand and increase market penetration, we also have the opportunity to leverage our size, capabilities and best practices to push margin expansion. To this end, we are creating economies of scale in materials purchasing and construction and applying best practices in order to simplify and standardize procedures throughout the company. We are streamlining product designs and option offerings to maximize cost efficiency and capitalizing on our information technology capabilities. Our focus on increased market penetration will also allow us to leverage the fixed-cost infrastructure that we already have in place.

Collectively, we believe these initiatives have the potential to expand margins to the industry median over the next two to three years. We believe these margin enhancements combined with our top-line growth initiatives and a continued robust homebuilding environment should enable us to generate earnings per share in the range of $14.00-$14.75 in fiscal year 2004, representing approximately 10-15 percent growth over 2003.

Management Transitions

During the remarkable growth of the last ten years, our organization has been fortunate to keep the same senior management team largely intact. Change, however, is inevitable, and it occurred in August with the retirement of David Weiss, our Chief Financial Officer. David was a key member of our IPO team and made significant contributions to Beazer Homes’ development in the past ten years. We are fortunate that he will remain associated with Beazer Homes as a consultant while Jim O’Leary, formerly Executive Vice President of Corporate Development, has taken over as Executive Vice President and Chief Financial Officer.

On a similar note, we also bid farewell and extend many thanks to Thomas Howard, who retired from the Board of Directors after nine years of service. In his place, we welcome Stephen P. Zelnak, Jr., Chairman and CEO of Martin Marietta Materials, Inc. In addition, Katie J. Bayne, Senior Vice President, Integrated Marketing, North America for The Coca-Cola Company has recently joined our board, which continues to have a majority of independent directors who comprise the membership of all board committees. When Sarbanes-Oxley was enacted in the summer of 2002, many of the new requirements mandated by the law had been in effect at Beazer Homes for quite some time. We have continued to demonstrate our commitment to sound corporate governance by adopting additional measures designed to fully comply with the requirements of Sarbanes-Oxley and other resulting regulations in advance of required timelines.

A Tradition of Growth

We are not only convinced that the strategies outlined here are filled with potential for new growth, but we also know that we have the talent to capitalize on and execute these opportunities. That talent lies within the men and women who comprise our organization today. Their commitment and dedication to our customers and our shareholders will be what ultimately sets us apart from the competition in the future. For this, we extend our most sincere thanks and appreciation.

In the past decade, Beazer Homes has not only achieved strong growth and outstanding financial performance, but it has built on a tradition of helping people realize their dreams. It’s humbling and rewarding to think of how many families Beazer Homes has touched through years of building homes. But what truly excites us is that this tradition may still have its best days ahead of it. And for that, we look forward to the next decade of Brand New Growth.

Sincerely,

Brian C. Beazer
Non-Executive Chairman

Ian J. McCarthy
President and Chief Executive Officer

December 31, 2003

Revenues have grown at a strong 23 percent compounded annual rate over the past five years and topped $3 billion for the first time ever in fiscal year 2003.

Fiscal 2003 home closings rose 13 percent over 2002, while our five-year compounded annual growth rate was 19 percent. Over the past decade, closings have nearly quadrupled from approximately 4,000 in 1994.

New orders reached a record high and a
20 percent year-over-year increase.

Record backlog at fiscal year-end was up 14 percent and 27 percent over 2002, in units and sales value respectively. This provides excellent visibility moving forward into fiscal 2004.

Total assets have more than doubled in the past two years.

We further strengthened an already strong balance sheet in fiscal 2003 by improving interest coverage ratios and debt-to-total capitalization.