Pulte and Centex Homes Losses Narrow
Pulte Homes (PHM) just reported its Q109 loss narrowed to $514.8m, or $2.02 a share, compared to a loss of $696.1m, or $2.75 a share, from Q108. The quarterly loss includes $410.2m of pre-tax charges related to inventory impairments and other land-related charges. Despite the positive news -- and dismissing the fact that current economic conditions mean narrowing losses are a good thing -- revenue at the Michigan home builder fell by 3X and new orders also continue downward on a year-by-year basis. The company reports $587.4m in revenue from $1.45 bn, Net new home orders for the quarter totaled 3,022 homes, down 44% from the first quarter of 2008 but up 71% from the fourth quarter. Quarterly, things are more positive: the company generated 3,022 net new orders in the quarter, a 71% increase compared to Q408. Richard Dugas, Jr., CEO of Pulte Homes says: "The housing market continues to face rising unemployment, tight mortgage availability, increased foreclosure activity and declining home prices, all putting negative pressure on buyer demand. Despite this backdrop, affordability for housing has reached historic highs due to lower home prices and outstanding 30-year mortgage rates. These excellent buying conditions, combined with sharply reduced new home inventory levels provide the setting for an eventual housing recovery which inches closer every day." The results echo those of homebuilder D.R. Horton which saw signs of several small recoveries as year-over-year losses narrowed and net sales increased over the previous quarter. Pulte is in the middle of a merger with another large home builder, Centex, in a deal that is proceeding on schedule for a Q409 integration completion and close. That firm also separately announced its results. Housing operating losses at Centex are $54m this quarter, compared to a loss of $112m in the previous year's fourth quarter, reflective of a 200bps improvement in housing gross margin and a 310bps increase in general expenses as a percentage of housing revenues. Centex's fourth quarter general expenses include $27m of costs related to severance and lease abandonment charges. "We generated positive cash flow from operations for the seventh straight quarter, ending with $1.77bn in cash and cash equivalents on hand," said Timothy Eller, CEO of Centex. "Additionally, the previously announced combination with Pulte continues to progress as expected, and we still anticipate the closing to be in the third calendar quarter of this year."