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Press release from PR Newswire

PulteGroup, Inc. Reports First Quarter 2011 Financial Results

Thursday, April 28, 2011

PulteGroup, Inc. Reports First Quarter 2011 Financial Results06:30 EDT Thursday, April 28, 2011BLOOMFIELD HILLS, Mich., April 28, 2011 /PRNewswire/ -- Net New Home Orders Totaled 4,345, a Sequential Increase of 43% from Q4 2010Adjusted Gross Margin of 16.9% Increased 60 Basis Points Over Prior YearHomebuilding SG&A Reduced by 10% to $136 MillionLand Impairment Charges Drop to $0.7 Million Loss of $0.10 Per Share Reflects Lower Closing Volumes Partially Offset by Improved Margins and Cost Controls Cancellation Rate Dropped to 16.1% from 18.3%Quarter Ending Cash Balance of $1.4 Billion Company Expects Improving Margins and Greater Overhead Leverage to Drive Profitability in Second Half of 2011PulteGroup, Inc. (NYSE: PHM) announced today financial results for its first quarter ended March 31, 2011.  For the quarter, the Company reported a net loss of $40 million, or $0.10 per share, compared with a loss of $12 million, or $0.03 per share, for the comparable prior year period.  "We are encouraged by traffic and orders within the quarter which showed sequential increases from month-to-month, while we exceeded internal forecasts for the period on key business drivers including net new home orders and margins," said Richard J. Dugas, Jr., PulteGroup Chairman, President and CEO.  "An improving economy is slowly beginning to generate new jobs which over the long term should translate into stronger consumer confidence, both of which are critical to a meaningful and sustained recovery in the U.S. housing industry. "Over the near term, we expect the industry will continue to face low levels of demand and that overall operating conditions will remain highly competitive.  Within this environment, we remain focused on implementing actions that can drive further margin expansion and sustained overhead leverage.  In combination with anticipated higher closing volumes, we expect that the financial benefits associated with these actions will enable the Company to achieve profitability in the back half of 2011."Revenue from home sales (settlements) in the first quarter declined 20% to $782 million, compared with $977 million in the prior year.  Lower revenue for the quarter reflects a 17% decrease in closings to 3,141 homes, combined with a 3%, or $8,000, decrease in average selling price to $249,000.  The decrease in average selling price primarily reflects a shift in the mix of homes closed during the quarter.  First quarter cost of sales related to home sales totaled $685 million compared with costs of $850 million in 2010.  Prior year cost of sales included $5 million of impairments and $2 million in merger-related costs; these expenses were immaterial in the current period.  Excluding impairments, capitalized interest expense and merger-related costs, gross margin for the quarter would have been 16.9%, compared with a comparable prior year gross margin of 16.3%. The improvement in adjusted gross margin reflects changes in the mix of houses closed and ongoing initiatives to reduce house construction costs. Homebuilding selling, general and administrative (SG&A) expense for the quarter was $136 million, down from $151 million in the comparable period last year.  Although down approximately $15 million in absolute dollars, on a year-over-year basis SG&A increased as a percentage of home sale revenue as a result of the approximately 20% decrease in revenue for the quarter.The Company's first quarter homebuilding pre-tax loss was $41 million, compared with a $12 million pre-tax loss in the comparable prior year period.  Net new home orders for the first quarter were 4,345 homes, compared with net new orders of 4,320 for the first quarter of 2010.  As previously announced, a change in the Company's signup process reduced reported first quarter 2010 orders by approximately 450 homes.  Sequentially, orders for the quarter increased 43% from the fourth quarter of 2010.  Net new orders in the quarter benefitted from a decrease in cancellation rate to 16%, compared with an 18% cancellation rate in the first quarter of last year.  PulteGroup's quarter-ending backlog was 5,188 homes valued at $1.4 billion.  Prior year backlog totaled 6,456 homes with an estimated value of $1.7 billion. The Company's financial services operations reported pretax income of $1 million for the quarter, compared with prior year income of $5 million. Loan originations for the first quarter were 1,865 compared with prior year originations of 2,325.  Lower pretax income and originations for the period directly reflect the impact of reduced closings in the Company's homebuilding operations.  Mortgage capture rate for the quarter was 76%, compared with 75% for the same quarter last year.The Company ended the quarter with a cash balance of $1.4 billion, including restricted cash.  Prior to the close of the quarter, PulteGroup announced its decision to terminate the Company's $250 million revolving credit facility.  Terminating this facility will save the Company an estimated $5 million annually, but resulted in a one-time charge of approximately $1.3 million for the quarter.   A conference call discussing PulteGroup's first quarter 2011 results is scheduled for Thursday, April 28, 2011, at 8:30 a.m. Eastern Time.  Interested investors can access the live webcast via PulteGroup's corporate website at www.pultegroupinc.com.Forward-Looking StatementsThis press release includes "forward-looking statements." These statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities, as well as those of the markets we serve or intend to serve, to differ materially from those expressed in, or implied by, these statements. You can identify these statements by the fact that they do not relate to matters of a strictly factual or historical nature and generally discuss or relate to forecasts, estimates or other expectations regarding future events. Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "may," "can," "could," "might," "will" and similar expressions identify forward-looking statements, including statements related to expected operating and performing results, planned transactions, planned objectives of management, future developments or conditions in the industries in which we participate and other trends, developments and uncertainties that may affect our business in the future. Such risks, uncertainties and other factors include, among other things: interest rate changes and the availability of mortgage financing; continued volatility in, and potential further deterioration of, the debt and equity markets; competition within the industries in which PulteGroup operates; the availability and cost of land and other raw materials used by PulteGroup in its homebuilding operations; the availability and cost of insurance covering risks associated with PulteGroup's businesses; shortages and the cost of labor; weather related slowdowns; slow growth initiatives and/or local building moratoria; governmental regulation directed at or affecting the housing market, the homebuilding industry or construction activities; uncertainty in the mortgage lending industry, including revisions to underwriting standards and repurchase requirements associated with the sale of mortgage loans; the interpretation of or changes to tax, labor and environmental laws; economic changes nationally or in PulteGroup's local markets, including inflation, deflation, changes in consumer confidence and preferences and the state of the market for homes in general; legal or regulatory proceedings or claims; required accounting changes; terrorist acts and other acts of war; and other factors of national, regional and global scale, including those of a political, economic, business and competitive nature. See PulteGroup's Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and other public filings with the Securities and Exchange Commission (the "SEC") for a further discussion of these and other risks and uncertainties applicable to our businesses.About PulteGroup PulteGroup, Inc. (NYSE: PHM) based in Bloomfield Hills, Mich., is America's premier home building company with operations in 60 markets located throughout 28 states.  The Company has an unmatched capacity to meet the needs of all buyer segments through its brand portfolio that includes Pulte Homes, Centex and Del Webb.  As the most awarded homebuilder in customer satisfaction, the brands of PulteGroup have consistently ranked among the nation's top homebuilders as surveyed by third-party, independent national customer satisfaction studies. For more information about PulteGroup, Inc. and PulteGroup brands, see www.pultegroup.com; www.pulte.com; www.centex.com; www.delwebb.com.PulteGroup, Inc.Condensed Consolidated Results of Operations($000's omitted, except per share data)(Unaudited)Three Months EndedMarch 31,20112010CONSOLIDATED RESULTS:Revenues:Homebuilding$ 783,767$    989,792Financial Services21,43530,566Total revenues$ 805,202$ 1,020,358Pre-tax income (loss):Homebuilding$ (40,794)$    (11,836)Financial Services9735,472Other non-operating(5,571)(8,144)Income (loss) before income taxes(45,392)(14,508)Income tax expense (benefit)(5,866)(2,020)Net income (loss)$ (39,526)$    (12,488)EARNINGS PER SHARE - ASSUMING DILUTION:Net income (loss)$     (0.10)$        (0.03)Shares used in per sharecalculations379,544377,747PulteGroup, Inc.Condensed Consolidated Balance Sheets($000's omitted)March 31,December 31,20112010ASSETSCash and equivalents$ 1,292,949$   1,470,625Restricted cash133,40424,601Unfunded settlements12,47312,765House and land inventory4,767,2164,781,813Land held for sale96,69071,055Land, not owned, under option agreements43,27150,781Residential mortgage loans available-for-sale143,846176,164Investments in unconsolidated entities45,47046,313Goodwill240,541240,541Intangible assets, net172,173175,448Other assets489,147567,963Income taxes receivable79,44981,307$ 7,516,629$   7,699,376LIABILITIES AND SHAREHOLDERS' EQUITYLiabilities:Accounts payable$    206,067$      226,466Customer deposits66,42251,727Accrued and other liabilities1,473,4151,599,940Income tax liabilities289,605294,408Senior notes3,380,9803,391,668Total liabilities5,416,4895,564,209Total shareholders' equity2,100,1402,135,167$ 7,516,629$   7,699,376PulteGroup, Inc.Segment Data($000's omitted)(Unaudited)Three Months EndedMarch 31,20112010HOMEBUILDING:  Home sale revenues$ 782,471$ 976,806  Land sale revenues1,29612,986783,767989,792  Home sale cost of revenues(685,030)(850,095)  Land sale cost of revenues (930)(8,998)  Selling, general, and administrative expenses(135,830)(150,865)  Equity in earnings (loss) from unconsolidated entities1,098(111)  Other income (expense), net(3,869)8,441Pre-tax income (loss)$ (40,794)$ (11,836)FINANCIAL SERVICES:Pre-tax income (loss)$        973$     5,472OTHER NON-OPERATING:Pre-tax income (loss):Net interest income$     1,086$     2,297Selling, general & administrative(6,616)(10,441)Other income (expense), net(41)- Total other non-operating$   (5,571)$   (8,144)PulteGroup, Inc.Segment Data, continued($000's omitted)(Unaudited)Three Months EndedMarch 31,20112010Home sale revenues$    782,471$    976,806Unit settlements:East9371,221Gulf Coast1,1871,251Central624771West3935523,1413,795Average selling price$           249$           257Net new orders: (a)East1,2301,191Gulf Coast1,7841,551Central893991West4385874,3454,320Net new orders - dollars (a)(b)$ 1,094,000$ 1,091,000Unit backlog:East1,5802,038Gulf Coast2,0662,381Central1,0501,205West4928325,1886,456Dollars in backlog$ 1,368,000$ 1,691,000(a) During the three months ended March 31, 2010, we revised our criteria for recognizing new orders to include the additional requirement of customer preliminary loan approval.  This change resulted in a reduction of approximately 450 units and $110.0 million in our reported net new orders and backlog in the first quarter of 2010.  We reversed this methodology in the fourth quarter of 2010 as the revised process was not providing a significant benefit for either our operations or our customers.(b)  Net new order dollars represents a composite of new order dollars combined with other movements of the dollars in backlog related to cancellations and change orders.PulteGroup, Inc.Segment Data, continued($000's omitted)(Unaudited)Three Months EndedMarch 31,20112010MORTGAGE ORIGINATIONS:Origination volume1,8652,325Origination principal$    378,000$     498,000Capture rate percentage76.5%75.3%PulteGroup, Inc.Supplemental Information($000's omitted)(Unaudited)Three Months EndedMarch 31,20112010Interest in inventory, beginning of period$    323,379$     239,365Interest capitalized56,19168,896Interest expensed(34,816)(27,000)Interest in inventory, end of period$    344,754$     281,261Interest incurred$      56,191$       68,896Reconciliation of Non-GAAP Financial MeasuresThis press release contains information about home sale gross margin excluding impairments, interest expense, and merger-related costs, which is considered a non-GAAP financial measure under the SEC's rules and should be considered in addition to, rather than as a substitute for, home sale gross margin (which we define as home sale revenues less home cost of revenues) as a measure of our operating performance. Management and our local divisions use this measure in evaluating the operating performance of each community and in making strategic decisions regarding sales pricing, construction and development pace, product mix, and other daily operating decisions. We believe it is a relevant and useful measure to investors for evaluating our performance through gross profit generated on homes delivered during a given period and for comparing our operating performance to other companies in the homebuilding industry. Although other companies in the homebuilding industry report similar information, the methods used may differ. We urge investors to understand the methods used by other companies in the homebuilding industry to calculate gross margins and any adjustments thereto before comparing our measures to that of such other companies. The following table sets forth a reconciliation of  this non-GAAP financial measure to home sale gross margin, a GAAP financial measure, which management believes to be the GAAP financial measure most directly comparable to this non-GAAP financial measure ($000's omitted): Three Months EndedThree Months EndedMarch 31, 2011December 31, 2010March 31, 2011March 31, 2010Home sale revenues$ 782,471$      1,155,169$ 782,471$ 976,806Home sale cost of revenues(685,030)(1,099,046)(685,030)(850,095)Home sale gross margin97,44156,12397,441126,711Add:  Impairments (a)4167,880413,518  Capitalized interest amortization (a)34,81667,48934,81627,000  Merger-related costs (b)2802822802,444Home sale gross margin excluding     impairments, interest expense, and     merger-related costs$ 132,578$         191,774$ 132,578$ 159,673Home sale gross margin as a     percentage of home sale     revenues12.5%4.9%12.5%13.0%Home sale gross margin excluding     impairments, interest expense, and     merger-related costs as a     percentage of home sale revenues16.9%16.6%16.9%16.3%(a)  Write-offs of capitalized interest related to impairments are reflected in capitalized interest amortization.   (b)  Home sale gross margin was adversely impacted by the amortization of a fair value adjustment to homes under construction inventory acquired with the Centex merger. This fair value adjustment is being amortized as an increase to cost of sales over the related home closings.    SOURCE PulteGroup, Inc.For further information: Investors: James Zeumer, +1-248-433-4502, jim.zeumer@pultegroup.com; News Media: Travis Parman, +1-248-433-4533, travis.parman@pultegroup.com