Pulte Homes, No. 3 in the 2006 BUILDER 100 reported a second quarter loss of $507.6 million for continuing operations today. This compares with the prior year second quarter income of $243.9 million from continuing operations. The enormous difference is a result of approximately $749.4 million of impairments and pre-tax charges from land-related transactions along with another $40 million in restructuring charges. Pulte's home building pre-tax loss is approximately $803.2 million, compared with 2006's pre-tax income of $380.8 million. The company says it will continue to focus on "reducing its land and speculative home portfolio, and properly adjusting overhead spending to navigate through this continued severe downturn."
Pulte Homes made headlines earlier this year when they announced a 16-percent slashing of their workforce.
"It was another challenging operating period," Richard J. Dugas, Jr., CEO of Pulte Homes said at Thursday morning's teleconference. "Subprime woes continue to shake consumer demand."
Dugas said at the quarterly meeting that Pulte Homes will focus their efforts on gaining a healthy balance sheet. He also states that the company is dedicated to selling as many homes as they can but admits that moving the inventory will be difficult without price concessions.
The Michigan-based company says revenues from home building settlements decreased 42 percent to $1.9 billion compared with $3.3 billion last year. The change in revenue for the quarter reflects a 40 percent decrease in closings to 5,938 homes and a 4% decrease in average selling price to $320,000. In addition, net new home orders during the second quarter were 7,532 homes, valued at $2.4 billion, representing declines of 20 and 22 percent, respectively, from 2006 second quarter results. Pulte Homes' ending backlog at the end of the second quarter is valued at $5.2 billion (14,928 homes), compared with a value of $6.9 billion (19,516 homes) last year.
For the first six months of 2007, home building pre-tax losses for Pulte Homes total approximately $951.6 million.
During the company teleconference, Dugas identified Pulte Homes' current cancellation rate as one of the company's challenges. "We continue to see a fairly difficult environment due to cancellations," he explained. "It is still a struggle out there. Buyer remorse is high and people are still cancelling on us."
Company COO Steven C. Petruska says Pulte was challenged in the third quarter by weak consumer demand and an overstocked market and admitted that there are no immediate signs of improvement. He also stated that the company needs to continue to address its over-inventory issues.
Home buyers may be playing a bigger role in industry woes according to Dugas. "Consumer sentiment is a bigger factor in the market than mortgage issues," he says. "The malaise will continue until people believe things have bottomed."
News of Pulte Homes' quarterly reports, in addition to the reports of other home builders, shook Wall Street Thursday as the Dow Jones industrial average tumbled more than 300 points.
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