Pulte Homes Inc. (PHM, Financial) filed Quarterly Report for the period ended 2011-09-30.
Pulte Group has a market cap of $2.07 billion; its shares were traded at around $5.41 with and P/S ratio of 0.4.
The gross dollar amount of our Homebuilding SG&A decreased 72% and 46% for the three and nine months ended September 30, 2011, respectively, from the prior year periods. SG&A as a percentage of home sale revenues was 10.6% for the three months ended September 30, 2011 compared with 40.7% for the same period in the prior year. For the nine months ended September 30, 2011, SG&A as a percentage of home sales revenues was 13.8% compared with 21.9% in the prior year period. The prior year periods reflect insurance reserve adjustments of $272.2 million and $291.8 million during the three and nine months ended September 30, 2010, respectively (see Note 11 to the Condensed Consolidated Financial Statements for additional discussion of these insurance reserve adjustments). SG&A as a percentage of home sales revenues excluding these insurance reserve adjustments was 14.1% and 13.0% for the three and nine months ended September 30, 2010, respectively. (See the Non-GAAP Financial Measure section for a reconciliation of SG&A as a percentage of home sale revenue, excluding insurance reserve adjustments, to SG&A as a percentage of home sale revenues). Excluding the insurance reserve adjustments from 2010, our SG&A declined significantly in gross dollars in 2011 and resulted in a significant improvement in overhead leverage during the three months ended September 30, 2011. This improved overhead leverage resulted from a combination of better matching our overall cost structure with the current business environment and lower severance and equity compensation expense in 2011. In order to further reduce overhead costs and drive greater leverage, we reconfigured our organization during the fourth quarter of 2010 and again in the second quarter of 2011, reducing the number of our operating areas from six to three and consolidating certain local divisions. Along with these changes in our field operations, we also further reduced corporate and support staffing across a number of functions to further consolidate and streamline our operating processes.
Other income (expense), net totaled $(259.2) million and $(271.2) million for the three and nine months ended September 30, 2011, respectively, compared with $(673.0) million and $(673.8) million for the comparable prior year periods. Other income (expense), net includes goodwill impairments totaling $240.5 million for the three and nine months ended September 30, 2011, respectively, and $654.9 million and $656.3 million for the three and nine months ended September 30, 2010, respectively (see Note 2 to the Condensed Consolidated Financial Statements for additional information regarding these goodwill impairments). Other income (expense), net also includes the write-off of deposits and pre-acquisition costs resulting from decisions not to pursue certain land acquisitions. These write-offs vary in amount from period to period as we evaluate potential land acquisitions and totaled $2.3 million and $1.1 million for the three months ended September 30, 2011 and 2010, respectively, and $6.6 million and $4.0 million for the nine months ended September 30, 2011 and 2010, respectively. Additionally, other income (expense), net includes certain lease exit costs and asset impairments related to the consolidation of various facilities. Such costs totaled $0.1 million and $6.3 million for the three and nine months ended September 30, 2011, respectively, compared with $6.7 million and $9.3 million for the three and nine months ended September 30, 2010, respectively. Other income (expense), net also includes expense of $13.0 million and $7.9 million for the three and nine months ended September 30, 2011, respectively, related to the net unfavorable resolution of certain contingencies and other miscellaneous income and expense items. Such items totaled expense of $7.0 million and income of $5.6 million for the three and nine months ended September 30, 2010, respectively.
For the third quarter of 2011, West home sale revenues decreased 10% compared with the prior year period due to a 6% decrease in unit settlements and a 5% decrease in average selling prices due to weakness in our California divisions combined with the close-out in late 2010 of our luxury condo community in Hawaii that had average selling prices in excess of $1 million. Gross margin, including land-related charges, increased over the prior year period, and excluding land-related charges, decreased slightly. The increased income before income taxes was primarily due to the decrease in land-related charges to $1.7 million in the third quarter of 2011, from $24.6 million in the prior year period. The West also benefited in 2011 from land sale gains totaling $12.5 million; such items were not significant in 2010. Net new order units increased 6% in the third quarter of 2011 compared with the same period in the prior year, primarily in our Michigan, Arizona, and Pacific Northwest divisions. The cancellation rate was 18% and 20% in the third quarters of 2011 and 2010, respectively.
For the nine months ended September 30, 2011, West home sale revenues decreased 25% compared with the prior year period due to a 22% decrease in unit settlements and a 4% decrease in average selling prices due to weakness in our California divisions combined with the close-out in late 2010 of our luxury condo community in Hawaii that had average selling prices in excess of $1 million. Gross margin, including land-related charges, increased over the prior year period, and excluding land-related charges, decreased slightly. The increased income before income taxes was primarily due to the decrease in land-related charges. Land-related charges totaled $5.2 million in the first nine months of 2011, compared with $42.1 million in the prior year period. The West also benefited from land sale gains totaling $12.9 million and $5.3 million for the nine months ended September 30, 2011 and 2010, respectively. Net new order units decreased by 9% in the nine months ended September 30, 2011 compared with the same period in the prior year, primarily in our California divisions. The sales volumes for our California divisions reflect the impact of the state homebuyer tax credit that existed in California during 2010. The expiration of this tax credit has exacerbated the already challenging local market conditions. The declines in California and other local markets were partially offset by improvements in Michigan and the Pacific Northwest. The cancellation rate was 17% for both the nine months ended September 30, 2011 and 2010.
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Pulte Group has a market cap of $2.07 billion; its shares were traded at around $5.41 with and P/S ratio of 0.4.
Highlight of Business Operations:
Home sale gross margins were 13.9% for the three months ended September 30, 2011 compared with 7.0% for the same period in the prior year. For the nine months ended September 30, 2011, Homebuilding gross profit margins were 13.0% compared with 10.9% for the same period in 2010. Gross margins during 2011 benefited from lower land and community valuation adjustments, which totaled $1.5 million and $4.9 million for the three and nine months ended September 30, 2011, respectively, compared with $57.5 million and $87.5 million, during the respective prior year periods. The benefit of these lower charges was partially offset by increased amortization of capitalized interest relative to sales due to the incremental debt assumed with the Centex merger. Excluding the impact of land and community valuation adjustments, amortization of capitalized interest, and merger-related costs, home sale gross margins improved to 18.5% and 17.6% for the three and nine months ended September 30, 2011, respectively, compared to 16.7% and 16.8% for the respective prior year periods (see the Non-GAAP Financial Measure section for a reconciliation of home sale gross profit margins, excluding land and community valuation adjustments, amortization of capitalized interest, and merger-related costs, to home sale gross profit margins). These improved gross margins continue the margin expansion we have seen in recent periods and reflect a combination of factors, including shifts in the product and geographic mix of homes closed, better alignment of our product offering with current market conditions, a shift in our sales strategy toward more pre-selling of homes, and our focus in recent periods on a variety of operational improvement initiatives.The gross dollar amount of our Homebuilding SG&A decreased 72% and 46% for the three and nine months ended September 30, 2011, respectively, from the prior year periods. SG&A as a percentage of home sale revenues was 10.6% for the three months ended September 30, 2011 compared with 40.7% for the same period in the prior year. For the nine months ended September 30, 2011, SG&A as a percentage of home sales revenues was 13.8% compared with 21.9% in the prior year period. The prior year periods reflect insurance reserve adjustments of $272.2 million and $291.8 million during the three and nine months ended September 30, 2010, respectively (see Note 11 to the Condensed Consolidated Financial Statements for additional discussion of these insurance reserve adjustments). SG&A as a percentage of home sales revenues excluding these insurance reserve adjustments was 14.1% and 13.0% for the three and nine months ended September 30, 2010, respectively. (See the Non-GAAP Financial Measure section for a reconciliation of SG&A as a percentage of home sale revenue, excluding insurance reserve adjustments, to SG&A as a percentage of home sale revenues). Excluding the insurance reserve adjustments from 2010, our SG&A declined significantly in gross dollars in 2011 and resulted in a significant improvement in overhead leverage during the three months ended September 30, 2011. This improved overhead leverage resulted from a combination of better matching our overall cost structure with the current business environment and lower severance and equity compensation expense in 2011. In order to further reduce overhead costs and drive greater leverage, we reconfigured our organization during the fourth quarter of 2010 and again in the second quarter of 2011, reducing the number of our operating areas from six to three and consolidating certain local divisions. Along with these changes in our field operations, we also further reduced corporate and support staffing across a number of functions to further consolidate and streamline our operating processes.
Other income (expense), net totaled $(259.2) million and $(271.2) million for the three and nine months ended September 30, 2011, respectively, compared with $(673.0) million and $(673.8) million for the comparable prior year periods. Other income (expense), net includes goodwill impairments totaling $240.5 million for the three and nine months ended September 30, 2011, respectively, and $654.9 million and $656.3 million for the three and nine months ended September 30, 2010, respectively (see Note 2 to the Condensed Consolidated Financial Statements for additional information regarding these goodwill impairments). Other income (expense), net also includes the write-off of deposits and pre-acquisition costs resulting from decisions not to pursue certain land acquisitions. These write-offs vary in amount from period to period as we evaluate potential land acquisitions and totaled $2.3 million and $1.1 million for the three months ended September 30, 2011 and 2010, respectively, and $6.6 million and $4.0 million for the nine months ended September 30, 2011 and 2010, respectively. Additionally, other income (expense), net includes certain lease exit costs and asset impairments related to the consolidation of various facilities. Such costs totaled $0.1 million and $6.3 million for the three and nine months ended September 30, 2011, respectively, compared with $6.7 million and $9.3 million for the three and nine months ended September 30, 2010, respectively. Other income (expense), net also includes expense of $13.0 million and $7.9 million for the three and nine months ended September 30, 2011, respectively, related to the net unfavorable resolution of certain contingencies and other miscellaneous income and expense items. Such items totaled expense of $7.0 million and income of $5.6 million for the three and nine months ended September 30, 2010, respectively.
For the third quarter of 2011, West home sale revenues decreased 10% compared with the prior year period due to a 6% decrease in unit settlements and a 5% decrease in average selling prices due to weakness in our California divisions combined with the close-out in late 2010 of our luxury condo community in Hawaii that had average selling prices in excess of $1 million. Gross margin, including land-related charges, increased over the prior year period, and excluding land-related charges, decreased slightly. The increased income before income taxes was primarily due to the decrease in land-related charges to $1.7 million in the third quarter of 2011, from $24.6 million in the prior year period. The West also benefited in 2011 from land sale gains totaling $12.5 million; such items were not significant in 2010. Net new order units increased 6% in the third quarter of 2011 compared with the same period in the prior year, primarily in our Michigan, Arizona, and Pacific Northwest divisions. The cancellation rate was 18% and 20% in the third quarters of 2011 and 2010, respectively.
For the nine months ended September 30, 2011, West home sale revenues decreased 25% compared with the prior year period due to a 22% decrease in unit settlements and a 4% decrease in average selling prices due to weakness in our California divisions combined with the close-out in late 2010 of our luxury condo community in Hawaii that had average selling prices in excess of $1 million. Gross margin, including land-related charges, increased over the prior year period, and excluding land-related charges, decreased slightly. The increased income before income taxes was primarily due to the decrease in land-related charges. Land-related charges totaled $5.2 million in the first nine months of 2011, compared with $42.1 million in the prior year period. The West also benefited from land sale gains totaling $12.9 million and $5.3 million for the nine months ended September 30, 2011 and 2010, respectively. Net new order units decreased by 9% in the nine months ended September 30, 2011 compared with the same period in the prior year, primarily in our California divisions. The sales volumes for our California divisions reflect the impact of the state homebuyer tax credit that existed in California during 2010. The expiration of this tax credit has exacerbated the already challenging local market conditions. The declines in California and other local markets were partially offset by improvements in Michigan and the Pacific Northwest. The cancellation rate was 17% for both the nine months ended September 30, 2011 and 2010.
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