News

10.21.08

Pulte Homes Reports Third Quarter 2008 Financial Results

-- For the Third Quarter 2008, Generated 3,008 Net New Orders and Closed 5,377 Homes

BLOOMFIELD HILLS, Mich., Oct. 22 /PRNewswire-FirstCall/ -- Pulte Homes (NYSE: PHM) announced today financial results for its third quarter ended September 30, 2008. For the quarter, the Company reported a net loss of $280.4 million, or $1.11 per share, compared with a $787.9 million net loss for the prior year third quarter, or $3.12 per share. The third quarter 2008 net loss included $266.6 million of pre-tax charges related to inventory impairments and other land-related charges. Impairments and land-related charges for the prior year quarter were $842 million. Consolidated revenues for the quarter were $1.6 billion, a decline of 37% from prior year revenues of $2.5 billion.

"The homebuilding operating environment significantly worsened during the third quarter of 2008," said Richard J. Dugas, Jr., President and CEO of Pulte Homes. "The industry continues to be plagued by tighter mortgage availability, a growing number of foreclosures, and a historically high supply of unsold homes. In the third quarter of 2008, uncertainty and volatility in the capital markets, higher unemployment, and a weaker economy provided further downward pressure on the housing market. These factors caused buyer confidence to decline even more during the period, as many potential home buyers remain on the sidelines.

"As this industry downturn persists, Pulte remains focused on its goals of cash generation, reducing its overall cost structure, and managing its inventory levels," Mr. Dugas continued. "The Company generated positive cash flow, ending the quarter with a $1.2 billion cash balance and no debt outstanding under its revolving credit facility. Pulte remains well-positioned to capitalize on opportunities once stability in the housing sector begins to materialize."

Third Quarter Results

Revenues from homebuilding settlements in the third quarter decreased 37% to $1.5 billion, compared with $2.4 billion in last year's third quarter. The change in revenue for the quarter reflects a 28% decrease in closings to 5,377 homes, and a 13% decrease in average selling price to $281,000.

Third quarter homebuilding pre-tax loss was $302 million, compared with a $1.1 billion pre-tax loss for the prior year quarter. Homebuilding SG&A expense decreased $44.6 million, or 19%, compared with the prior year quarter. During the third quarter of 2008, the Company recorded $266.6 million of impairments and land-related charges, including $250.3 million related to land impairments, $15.9 million of impairments of land held for sale and $1.4 million related to the Company's investment in unconsolidated joint ventures. For the prior year quarter, these impairments and land-related charges totaled $842 million. In addition, goodwill impairments of $336 million were recorded during the prior year quarter.

Net new home orders for the third quarter were 3,008 homes, a decline of 34% from the prior year third quarter. Pulte Homes' ending backlog as of September 30, 2008 was valued at $1.7 billion (5,885 homes), compared with a value of $4.1 billion (12,042 homes) at the end of last year's third quarter. At the end of the third quarter 2008, the Company's debt-to-capitalization ratio was 49.9%, and on a net debt-to-capitalization basis was 38.5%.

The Company's financial services operations reported pre-tax income of $10.1 million for the third quarter 2008, compared with $12.9 million of pre-tax income for the prior year's quarter. This decrease in third quarter 2008 pre-tax income was primarily due to a 37% decline in mortgage loans originated during the quarter compared with the prior year quarter. This was partially offset by a shift in the mix of mortgage loans closed toward more profitable agency-backed products. The mortgage capture rate for the quarter was 93%, compared with 92% for the same quarter last year.

Nine Month Results

For the nine months ended September 30, 2008, Pulte Homes' net loss was $1.1 billion, or $4.48 per share, compared with a $1.4 billion, or $5.48 per share, net loss for the prior year period. Consolidated revenues for the period were $4.6 billion, down 27% from $6.4 billion for the first nine months of last year.

Revenues from homebuilding settlements for the period were $4.5 billion, down 27% from the prior year. Lower revenues for the period resulted from an 11% decrease in average selling price to $287,000, combined with a 17% decrease in the number of homes closed to 15,548.

Homebuilding pre-tax loss for the period was $1.2 billion, compared with a $2.1 billion pre-tax loss for the prior year period. Homebuilding SG&A expense decreased $241.9 million, or 30%, compared with the prior year period. During the first nine months of 2008, the Company recorded $1.2 billion of impairments and land-related charges, including $1 billion related to land impairments, $19.4 million associated with the write-off of land deposits and pre-acquisition costs, $125.1 million of impairments of land held for sale, and $3.1 million related to the Company's investment in unconsolidated joint ventures. For the prior year period, these impairments and land-related charges totaled $1.7 billion. Homebuilding pre-tax loss for the prior year period also includes goodwill impairment of $336 million and a pre-tax restructuring charge of approximately $47 million.

For the first nine months of 2008, the pre-tax income for Pulte's financial services operations was $35.9 million compared with $32.7 million in the prior year. The positive shift in the mix of mortgage loans toward more profitable agency-backed products was a significant reason for this increase in income, offsetting the 32% decrease in mortgage loans originated during the period.

Fourth Quarter 2008 Guidance

"Due to the high degree of uncertainty and volatility, coupled with a lack of visibility surrounding the housing industry and the overall economy, we are not providing earnings guidance for the fourth quarter of 2008," said Dugas. "We are targeting a cash position by the end of 2008 of $1.6 billion to $1.8 billion."

A conference call discussing Pulte Homes' third quarter results will be held Thursday, October 23, 2008 at 8:30 a.m. Eastern Time, and web cast live via Pulte.com. Interested investors can access the call via the Company's home page at www.pulte.com

Certain statements in this release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among other things, (1) general economic and business conditions; (2) interest rate changes and the availability of mortgage financing; (3) continued volatility and potential further deterioration in the debt and equity markets; (4) competition; (5) the availability and cost of land and other raw materials used by the Company in its homebuilding operations; (6) the availability and cost of insurance covering risks associated with the Company's business; (7) shortages and the cost of labor; (8) weather related slowdowns; (9) slow growth initiatives and/or local building moratoria; (10) governmental regulation, including the effects from the Emergency Economic Stabilization Act and the interpretation of tax, labor and environmental laws; (11) changes in consumer confidence and preferences; (12) required accounting changes; (13) terrorist acts and other acts of war; and (14) other factors of national, regional and global scale, including those of a political, economic, business and competitive nature. See the Company's Annual Report on Form 10-K and Annual Report to Shareholders for the year ended December 31, 2007 and other public filings with the Securities and Exchange Commission for a further discussion of these and other risks and uncertainties applicable to Pulte's business. Pulte undertakes no duty to update any forward-looking statement whether as a result of new information, future events or changes in Pulte's expectations.

About Pulte Homes

Pulte Homes, Inc., (NYSE: PHM), based in Bloomfield Hills, Mich., is one of America's largest home building companies with operations in 50 markets and 27 states. During its 58-year history, the company has delivered more than 500,000 new homes. In 2008, Pulte Homes operations ranked highest in customer satisfaction in 11 U.S. markets, the most of any homebuilder, in the annual J.D. Power and Associates(R) New Home-Builder Customer Satisfaction Study(sm). Under its Del Webb brand, Pulte is the nation's largest builder of active adult communities for people age 55 and older. Its DiVosta Homes brand is renowned in Florida for its distinctive master-planned communities. Pulte Mortgage LLC is a nationwide lender offering Pulte customers a wide variety of loan products and superior service.

Websites: www.pulte.com; www.delwebb.com; www.divosta.com

Pulte Homes, Inc. Condensed Consolidated Results Of Operations (000's omitted, except per share data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------------- ------------------- 2008 2007 2008 2007 ------- -------- -------- -------- CONSOLIDATED RESULTS: Revenues: Homebuilding $1,521,789 $2,438,556 $4,500,366 $6,261,962 Financial Services 36,438 32,743 118,871 99,686 Other non-operating 6,362 499 19,936 2,829 -------- --------- --------- --------- Total revenues $1,564,589 $2,471,798 $4,639,173 $6,364,477 ========= ========= ========= ========= Pretax income (loss): Homebuilding $(301,966) $(1,098,679) $(1,228,417) $(2,050,256) Financial Services 10,092 12,896 35,938 32,659 Other non-operating (2,717) (8,130) (10,395) (25,473) --------- ---------- ----------- ----------- Loss before income taxes (294,591) (1,093,913) (1,202,874) (2,043,070) Income taxes (benefit) (14,204) (306,042) (67,926) (661,976) ---------- ----------- ---------- ----------- Net loss $(280,387) $(787,871) $(1,134,948) $(1,381,094) ========= ========= ========= =========== EARNINGS PER SHARE - ASSUMING DILUTION Net loss $(1.11) $(3.12) $(4.48) $(5.48) ====== ====== ====== ====== Shares used in per share calculations 253,582 252,264 253,401 252,093 ======= ======= ======= ======= Pulte Homes, Inc. Condensed Consolidated Balance Sheets ($000's omitted) September 30, December 31, 2008 2007 ----------- ----------- (Unaudited) ASSETS Cash and equivalents $ 1,173,892 $ 1,060,311 Unfunded settlements 15,228 38,714 House and land inventory 5,230,066 7,027,511 Land held for sale 285,951 252,563 Land, not owned, under option agreements 17,254 20,838 Residential mortgage loans available-for-sale 236,648 447,089 Investments in unconsolidated entities 144,950 105,479 Other assets 830,838 1,167,292 Deferred income tax assets 248,204 105,906 ----------- ----------- $ 8,183,031 $ 10,225,703 ========= =========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Accounts payable, accrued and other liabilities $ 1,481,546 $ 1,859,911 Collateralized short-term debt, recourse solely to applicable non-guarantor subsidiary assets 192,407 440,611 Income taxes 159,721 126,758 Senior notes 3,165,998 3,478,230 ------------ ----------- Total liabilities 4,999,672 5,905,510 Shareholders' equity 3,183,359 4,320,193 ------------- ------------- $ 8,183,031 $ 10,225,703 ========= =========== Pulte Homes, Inc. Segment Data ($000's omitted) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ----------------- ------------------ 2008 2007 2008 2007 -------- -------- -------- -------- HOMEBUILDING: Home sale revenue (settlements) $ 1,508,825 $ 2,407,762 $ 4,460,393 $ 6,098,869 Land sale revenue 12,964 30,794 39,973 163,093 ---------- ---------- --------- ----------- Total Homebuilding revenues 1,521,789 2,438,556 4,500,366 6,261,962 Home cost of sales 1,599,064) (2,700,512) (4,981,387) (6,549,864) Land cost of sales (27,910) ( 110,041) (160,979) (285,021) Selling, general and administrative expense (191,997) (236,610) (571,577) (813,476) Other income (expense), net (4,784) ( 490,072) (14,840) (663,857) --------- ------------- ---------- ------------ Pre-tax income (loss) $ (301,966) $(1,098,679)$(1,228,417)$(2,050,256) ========= ========= ========== ========== FINANCIAL SERVICES: Pre-tax income $ 10,092 $ 1 2,896 $ 35,938 $ 32,659 ======= ======== ======= ======== OTHER NON OPERATING: Pre-tax loss: Net interest income (expense) $ 5,639 $ ( 268) $ 1 7,757 $ 134 Other expense, net (8,356) (7,862) ( 28,152) (25,607) ---------- --------- ----------- ---------- Total other non- operating $ (2,717) $ (8,130) $ (10,395) $ (25,473) ======== ======= ======== ========= Pulte Homes, Inc. Business Operating Data ($000's omitted) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 2008 2007 2008 2007 ---------- ---------- ---------- ---------- Homebuilding settlement revenues $1,508,825 $2,407,762 $4,460,393 $6,098,869 ========= ========= ========= ========== Unit settlements: Northeast 497 729 1,433 1,633 Southeast 776 1,019 2,405 2,798 Florida 808 1,058 2,377 2,944 Midwest 661 1,132 1,899 2,537 Central 545 699 1,698 1,995 Southwest 1,571 2,025 4,191 4,860 California 519 806 1,545 2,059 ---------- ---------- ---------- ---------- 5,377 7,468 15,548 18,826 ======= ======= ====== ======= Average selling price $281 $322 $287 $324 ===== ===== ===== ===== Net new orders: Northeast 328 440 1,363 2,000 Southeast 493 883 2,063 2,907 Florida 424 766 2,283 3,362 Midwest 553 631 1,832 2,789 Central 317 521 1,259 1,876 Southwest 629 900 3,516 5,307 California 264 441 1,227 2,372 ------ ------ ------- -------- 3,008 4,582 13,543 20,613 -------- ------- --------- --------- Net new orders - dollars* $785,000 $1,267,000 $3,659,000 $6,606,000 ======== ========= ========= ========== Unit backlog: Northeast 721 1,284 Southeast 939 1,817 Florida 1,158 1,630 Midwest 761 1,649 Central 431 1,003 Southwest 1,335 3,166 California 540 1,493 ---------- ---------- 5,885 12,042 ===== ====== Dollars in backlog $1,708,700 $4,087,000 ========== ========= * Net new order dollars represent a composite of new order dollars combined with other movements of the dollars in backlog related to cancellations and change orders. Pulte Homes, Inc. Business Operating Data, continued ($000's omitted) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 2008 2007 2008 2007 --------- --------- --------- --------- MORTGAGE ORIGINATIONS: Origination volume 3,924 6,261 11,369 16,719 ===== ===== ===== ====== Origination principal $875,100 $1,424,100 $2,555,800 $3,743,800 ======== ========= ========= ========== Capture rate percentage 93.4 % 92.5 % 91.9 % 92.7 % ===== ===== ===== ===== Pulte Homes, Inc. Supplemental Information ($000's omitted) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ---------------- ----------------- 2008 2007 2008 2007 ------- ------- ------- ------- Interest expense: Homebuilding (included in home cost of sales) $52,526 $98,205 $149,650 $242,585 Financial Services 1,468 4,230 4,893 12,464 Other non-operating 723 767 2,179 2,695 ------- -------- -------- -------- Total interest expense $54,717 $103,202 $156,722 $257,744 ====== ======== ======= ======== Depreciation & amortization $18,713 $20,836 $57,541 $64,109 ====== ======= ======= =======

SOURCE Pulte Homes

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