Centex CEO Tim Eller today (July 25) said during a conference call with analysts that the company will be exiting Columbus, Ohio and the Triad area of North Carolina, each of which did roughly 500 units in 2005, and he indicated that further pullbacks may be in the offing.
"We are looking at all markets in terms of strategic importance and predictability," said Eller. "I expect we will continue to participate in 35 to 40 of the top 50 markets."
Centex on July 24 reported a $131 million loss ($1.08 per diluted share), well below Wall Street expectations. Centex executives continue to stress that they are focused on the fundamentals and that current actions will enhance the company's future results. Across the board, ongoing efforts continue as the company moves to centralize and simplify operations. In order to turn assets faster, Centex is turning increased focus on markets where managers predict they can increase share and capture the best returns.
Revenues were $1.94 billion, down 31% from last year's fiscal first quarter, with the loss from continuing operations coming in at $131 million, including $193 million in impairments and other land charges on a pre-tax basis, down from earnings of $172 million, or $1.37 per diluted share, in 2007's fiscal first quarter.
First-quarter revenues were $1.80 billion, 32% below last year on a 27% decrease in closings to 6,095 homes. The loss in home building was $172 million after the $193 million in impairments and other land charges. The housing operating loss (housing revenues less housing cost of sales andSG&A) was $5 million, down from earnings of $318 million in the previous year. The decrease is a result of lower unit volume, a 5.5% decrease in the unit average sales price and higher sales incentives, according to the company. While discounts and incentives climbed 400 bps, housing gross margins fell to 16.5%. Despite those efforts, sales still dropped by 22%.
The Financial Services unit posted operating earnings of $15 million, 35% lower than the same quarter a year ago, due principally to lower origination volume. CTX Mortgage originated loans for 78% of Centex Homes' buyers during the first quarter, up one percentage point versus last year's first quarter.
On a brighter note, the company reported that it reduced homebuilding SG&A expenses by 20%, or $80 million; reduced inventory of unsold homes by 17%, to 4,815; and cut its cancellation rate by 150 basis points to 31.2%, a second consecutive quarter of decline and down year-over-year for the first time in 10 quarters. The home building operation was operating at a profitable level before impairments.
The company said it reduced its land and lot position by nearly half over the same period last year, with 15% fewer lots owned and a 68% reduction in lots under control. The company ended the quarter with 150,710 lots. This land position is now at the same level as September, 2003.
Said Eller, "In the quarter, we reduced overhead expenses and unsold inventory, and we saw an improving cancellation rate in a difficult market. We remain focused on the fundamentals: selling homes, minimizing inventory, generating cash and attacking costs."