The PulteGroup announced its first quarterly profit in more than three years, but management barely noted the event, perhaps because it had some extra help getting there.
An $82 million income tax refund more than offset $45 million in land charges to help net the company a $76 million profit, or $0.20 per share.
But perhaps of more help was the merger with Centex, which helped increase the number of homes the company delivered to 5,030, roughly double the volume Pulte alone did last year.
"Achieving these results would have been difficult without the merger," CEO Richard Dugas said.
Orders, too, were boosted because of the Centex addition to 4,218, 26% higher than the same quarter last year before the August 2009 merger. A better measure of sales would be that it was nearly flat with the first quarter of 2010, despite the expiration of the tax credit.
Unlike other builders, such as D.R. Horton, Pulte did not beef up speculative homes in an attempt to capitalize on the tax credit. As a result, it didn't seem to suffer from as big an order hangover afterward. While sales did fall in May for the company, they settled back down to a more stable level after that, Dugas said.
"We are benefiting from the strategy of not chasing the tax credit buyer," he said. That said, the company's current volume "remains below typical seasonal demand."
Dugas credited "incredibly low demand" for slow sales, rather than giving the whole credit to foreclosures, short sales, and oversupply of product. "Supply is obviously important, but right now the industry's biggest issue is lack of buyers."
He told analysts that the merger with Centex is on track to net the company $440 million in savings this year. The company has reduced expenses by 81% from what they were as separate companies. Pulte is hoping to save another $150 million to $200 million in purchasing costs over time as well.
In response to an analyst's question about what the company was thinking about doing with its $2.7 billion cash balance, the highest in the industry, Dugas said they are discussing that.
"We do think that any significant liquidity concerns for a couple of years are gone, and we are looking at funding something," Dugas said, adding his preference would be to put the money in more land inventory.
But Pulte kept a lot of its land rather than selling it at a discount during the crash, and it acquired even more with the Centex merger.
Paying off debt is another option. "It's not lost on us [the thought of finding a way to put the cash to use]," said Dugas. "It's clearly about value creation and how we get there from here."