QMuch of Beazer Homes’ growth over the past decade has corresponded with one of the best housing markets ever. Can we expect this to continue?

AIan McCarthy: Yes. The same supply and demand dynamics that we have enjoyed in recent years are likely to be in place for well into the next decade. Household formation – one of the biggest demand drivers – is expected to increase by nearly 1.2 million a year over the next decade, the result of demographic trends including continued immigration, continued predominance of the baby boomers and the echo boomers coming of age.

Jim O’Leary: On the supply side, the gap between housing starts and population growth remains large. We remain near historical lows for months supply of unsold homes, while increasing scarcity of entitled land puts a real limit on supply.

QThe homebuilding industry in general, and the public homebuilder’s results in particular, have been less cyclical in the last decade. Will this continue, or will we revert to the cyclicality of previous decades?

AMcCarthy: The supply and demand fundamentals that we just outlined have helped dampen cyclicality and will continue to do so. In past instances of significant cyclicality, these fundamentals have been considerably different, with both inventories and prices increasing significantly. Currently, inventory levels are at record lows, and housing price increases are largely in step with increases in disposable income, with very limited exceptions. Housing held up through the boom of the 1990s and through the economic downturn since 2000. In fact, ours was essentially the only industry to support the economy during the recession. The homebuilding industry, and the supporting mortgage financing industry, have become considerably more sophisticated and professionally managed during this period. I am hopeful that some of the old stereotypes about homebuilders and the homebuilding industry are finally fading, and future valuations will reflect this.

QIn the past several years, organic growth and acquisitions have dramatically increased Beazer Homes’ presence in the industry. Why is it so important to be a big builder in this day and age?

AMike Furlow: Large builders have operational advantages that are significant and sustainable. Historically, homebuilding has been a very fragmented business. Large, regional builders have certainly existed, yet collectively, smaller builders possessed considerable market share. Today, critical activities such as acquiring land and gaining entitlements require more financial resources and flexibility – something that large, publicly held companies possess. Large builders also have the ability to build a brand relationship with consumers. If done well, this is a huge advantage, because it instills customer trust. When people buy a house, they want more than anything else to trust their builder. It’s the biggest purchase most people make in their lifetime, and a trusted builder with credibility can make them much more comfortable about their decision.

O’Leary: Advantages also come from purchasing power and enhanced technological capabilities. For example, Beazer Homes leverages its buying power through a national accounts strategy in which we are evaluating, selecting and growing volume with partners strategically on a preferred or exclusive basis.We also enjoy advantages in greater availability and lower cost of capital. In short, size creates sustainable competitive advantages for large players.

QHas Beazer Homes capitalized fully on these advantages as a top ten builder?

AO’Leary: We have capitalized on these advantages in the past, as evidenced by improving margins; however, a significant upside still exists. The past decade has been about expanding our size and geographic diversity to now take many of our initiatives to a higher level. The next ten years are about leveraging this size and diversity to achieve growth through focused product expansion and market penetration, as well as by driving best practices and other profitability initiatives.

QWhat prompted the Company’s branding initiative?

AMcCarthy: We started this process two years ago, when we saw that changing industry dynamics created an opportunity for Beazer Homes to distinguish itself in the market. This has not been an overnight exercise, but rather an enormous undertaking of research, analytics, planning and development, all with an aim of ensuring that we consistently apply a customer-centric focus throughout our organization and live up to our commitment to earning the trust of customers, employees and partners through open communication, responsiveness and respect.

QSo how will Beazer Homes differentiate itself in the marketplace?

AFurlow: Our brand strategy has many components, but the customer is the constant focus. We’re investing a tremendous amount of time and resources in training our employees – our brand ambassadors. Our goal is to impart brand values every time we come into contact with a buyer or potential buyer. If we can do this, then I have no doubt that Beazer Homes will reinforce and strengthen an already solid reputation, giving the customer an even more enjoyable experience and exceptional value.

QWill the Company remain focused on the entry-level and move-up segments of the market?

AMcCarthy: This has been our focus historically, and providing exceptional value will continue to be our emphasis. Over time, however, the definition of “value” has evolved to encompass a variety of price points and features. In addition, customer profiles and demographic trends are broader. First-time buyers, for example, used to imply families. Today, this market counts singles as a major customer segment. Similarly, the influence of minorities, particularly the Hispanic market, is a vast opportunity.

Furlow: And within the markets we serve, there are different types of buyers motivated by different factors, such as price and style. One of the great opportunities that acquisitions have provided us is a broader product line and more diversified price points. A key to our organic growth is to utilize this broader portfolio across our customer base, increasing both depth and breadth in our markets.

QBeazer Homes has always had a strong technology orientation. What role is technology playing in profitability initiatives?

AO’Leary: Technology enables all of our profitability initiatives, including purchasing, scheduling and design efficiency best practices initiatives. The latest Information Week 500 ranked Beazer Homes the highest of any homebuilder. Clearly, technology is a competitive advantage and one that we intend to maintain.

QIt seems like you are making a lot of changes at Beazer Homes. What is your growth strategy going forward?

AMcCarthy: We see it as building upon the solid foundation we have established in terms of size, experience, capabilities and talent. At the same time, we recognize that an evolving Beazer Homes and an evolving industry bring about change and new opportunities. One thing that has not and will not change is our absolute commitment to delivering outstanding financial performance by providing maximum value to our customers.

Our strategy for achieving this focuses on initiatives that leverage our size, capabilities and best practices to achieve improved efficiencies, strengthen our brand identity and capitalize on our broad geographic profile through focused product and price-point expansion.