Centex: Orders Down 24 Percent, Loss Expected
According to preliminary results announced this morning, Centex Corporation is feeling the crunch in U.S. housing markets. For the quarter ended Dec. 31, 2006, the company had 8,360 home closings, a decrease of 12 percent from the prior year. New orders for the quarter were 6,139, a decrease of 24 percent. "We are navigating through one of the most challenging housing environments in the past 25 years," said Tim Eller, Centex chairman and CEO. "We are responding by reducing our land position and inventory, aligning our workforce to the current sales pace, and improving our overall cost structure." The company said it is in the process of completing its quarterly land inventory valuation and option analysis, and has cancelled or intends not to exercise land option contracts related to approximately 37,000 controlled lots given the decline of housing activity in many of its markets. Consequently, the company currently expects option deposit and pre-acquisition walk-away costs to be approximately $150 million this quarter. Additionally, Centex said it plans to record land valuation adjustments of approximately $300 million, about one-third of which represents the company's share of such amounts in joint ventures. Furthermore, in the December quarter, the company is increasing its provision for taxes by approximately $60 million in connection with its previously-disclosed ongoing federal tax audit. Taking into account the option deposit and walk-away costs, land valuation adjustments and the tax provision adjustment, the company said Tuesday it expects to report a loss from continuing operations of approximately $2.00 per fully diluted share for the third quarter. Before these adjustments, the company expects its third quarter earnings to be approximately $0.75 per share. "Our local operators are focused on execution while maintaining a strong commitment to quality and customer satisfaction," said Eller. "We're committed to reducing inventory, generating cash and strengthening our balance sheet so we are positioned to extend our industry leadership as individual markets recover." Centex will release its financial results on Jan. 24, 2007.