Business Context and Reporting Period
Company: Pulte Homes, Inc. (formerly Pulte Corporation)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: June 30, 2001
Business Overview: The Company operates primarily in homebuilding (Domestic and International) and financial services (mortgage banking). The reporting period covers the first six months of fiscal year 2001. The Company recently completed the acquisition of Del Webb Corporation on July 31, 2001, a subsequent event not included in the financial statements.
Key Financial Metrics
| Metric ($000s omitted) | Six Months Ended June 30, 2001 | Six Months Ended June 30, 2000 |
|---|---|---|
| Total Revenues | $1,855,438 | $1,758,403 |
| Net Income | $99,165 | $72,028 |
| Diluted EPS | $2.30 | $1.71 |
| Cash and Equivalents (End of Period) | $101,805 | $31,003 |
| Total Assets | $3,227,565 | $2,886,483 |
| Total Liabilities | $1,868,195 | $1,638,552 |
| Long-Term Debt | $884,918 | $677,602 |
| Net Cash Used in Operating Activities | $(261,072) | $(152,839) |
Margins: Domestic Homebuilding gross profit margins improved to 20.2% for the six months ended June 30, 2001, compared to 18.3% in the prior year period.
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 5.5% year-over-year, driven by a 5% increase in homebuilding revenues and a 47% increase in financial services revenues.
- Profitability: Net income increased 37.7% to $99.2 million. Pre-tax income for the Homebuilding segment rose 31% due to improved gross margins and higher average selling prices ($217 vs. $198).
- Operational Volume: Domestic unit settlements declined 5% to 8,319 units due to land development delays, while net new orders increased 5% to a record 11,633 units.
- Backlog: Unit backlog increased 12% to 8,791 units, with a dollar value of $2.01 billion, an all-time record.
- Financial Services: Mortgage origination volume increased 29% year-over-year, with refinancings representing 12% of total originations (up from 2% in 2000).
- Discontinued Operations: The Company reported a loss of $573,000 from discontinued operations (First Heights thrift) for the six months ended June 30, 2001, compared to income of $99,000 in the prior year.
Guidance, Outlook, and Risks
- Acquisition of Del Webb: On July 31, 2001, the Company completed the acquisition of Del Webb Corporation, the nation's leading developer of active adult communities. Approximately 17 million shares were issued to Del Webb shareholders. Del Webb reported $1.94 billion in revenue for the year ended June 30, 2001.
- Capital Resources: In July 2001, revolving credit facilities were expanded to $560 million. In August 2001, the Company sold $500 million of 7.875% Senior Notes due in 2011 to fund the Del Webb acquisition and general corporate purposes.
- Accounting Changes: The Company will adopt FAS 141 and FAS 142 in 2002, eliminating goodwill amortization. This is expected to increase net income by approximately $4.1 million ($0.09 per share) annually.
- Litigation Risks: The Company is involved in ongoing litigation with the FDIC regarding the former First Heights thrift. A District Court judgment required a payment of approximately $221.3 million, though the Company believes it is entitled to a credit of approximately $105 million. The case was remanded for recalculation of damages, and the final outcome remains uncertain.
- Market Risks: Risks include exposure to interest rate fluctuations, inflation affecting land and construction costs, and the ability to integrate Del Webb operations.
Investor Verification Checklist
- Del Webb Integration: Verify the financial impact and operational integration progress of the Del Webb acquisition in subsequent filings.
- FDIC Litigation Status: Monitor updates on the District Court and Court of Federal Claims cases regarding the First Heights thrift resolution and potential liability adjustments.
- Land Inventory Levels: Review the $2.29 billion in house and land inventories and the associated capitalization of interest costs.
- Debt Structure: Confirm the terms and utilization of the new $500 million Senior Notes and the expanded $560 million credit facility.
- Backlog Conversion: Track the conversion rate of the record $2.01 billion backlog into future revenues, considering potential market slowdowns.