PulteGroup, Inc., Bloomfield Hills, Mich. (NYSE:PHM) on Thursday morning reported a net loss of $40 million, or -$0.10 per share, for the first quarter ended March 31 compared with a loss of $12 million, or -$0.03 per share, for the comparable prior year period. Wall Street was looking for a loss of 13 cents a share.
The loss included an impairment charge of only $700,000, which the company labeled "immaterial." It compared with a charge of $3.5 million in the prior year quarter and impairments and other write-downs of $67.9 million taken in the fourth quarter of 2010.
Home building revenue for the first quarter fell 20% to $782 million, as closings dropped 17% to 3,141 and the average selling price declined 3% to $249,000. The company attributed the price drop to a shift in the mix of homes closed during the quarter.
New orders were up slightly from 4,320 homes to 4,345 homes, with the comparison made more favorable by a change in the company's signup process that reduced reported first quarter 2010 orders by approximately 450 homes.New order dollars also were virtually flat with last year's quarter at $1.09 billion. Orders, however, were up 43% from the fourth quarter of 2010. The cancellation rate fell to 16% from 18% cancellation rate in the first quarter of last year.
Backlog at quarter's end was 5,188 homes valued at $1.4 billion, down from6,456 homes with an estimated value of $1.7 billion at the end of last year's first quarter. The company did not report lot- or community-count data.
Excluding impairments, write-downs and other charges, gross margin for the quarter would have been 16.9%, compared with a comparable prior year gross margin of 16.3%. The improvement in adjusted gross margin reflects changes in the mix of houses closed and cost cutting in construction.SG&A for the quarter was $136 million, down from $151 million in the comparable period last year but was up as a percentage of home-sale revenue.
The financial services segment reported pretax income of $1 million for the quarter, compared with prior-year income of $5 million. Loan originations for the first quarter were 1,865 compared with prior year originations of 2,325, due mostly to fewer closings. Mortgage capture rate for the quarter was 76%, compared with 75% for the same quarter last year.
PulteGroup ended the quarter with a cash balance of $1.4 billion, including restricted cash. During the quarter, the company said it would terminate the its $250 million revolving credit facility, which it said would save an estimated $5 million annually but resulted in a one-time charge of approximately $1.3 million for the quarter. It listed $3.38 billion in long-term debt on its balance sheet, down slightly from $3.39 billion at yearend 2010.
"Over the near term, we expect the industry will continue to face low levels of demand and that overall operating conditions will remain highly competitive," said Richard J. Dugas, Jr., CEO, president and chairman of PulteGroup. "We are encouraged by traffic and orders within the quarter which showed sequential increases from month-to-month, while we exceeded internal forecasts for the period on key business drivers including net new home orders and margins. An improving economy is slowly beginning to generate new jobs which over the long term should translate into stronger consumer confidence, both of which are critical to a meaningful and sustained recovery in the U.S. housing industry."
Dugas said he expects the improving conditions to allow the company to return to profitability in the second half of 2011.
David Goldberg, home building analyst at UBS, called the results "impressive" given the "backdrop" of the difficult sales environment. "In our view, Pulte's ability to grow orders (as most peers shrink) reflects a combination of: 1) easier comps & 2) strength in the active adult segment. Additionally, we'd note that the cancellation rate -220bps YOY to 16% partially reflecting more consistent underwriting standards from lenders."