01—Abstract
Summary
Summary of the 10-K filed March 6, 1997. Cited figures are marked; the original filing is the authoritative source.
Pulte Corporation, the publicly held parent of the Pulte Home Corporation group, reported net income of $179,643 thousanda ($7.17 per primary share) for 1996, up from $58,346 thousand ($2.13 per share) in 1995.
The result was driven largely by $116,432 thousandb of income from discontinued operations, which included a $110,000 thousand tax benefit from net operating losses tied to its exited thrift business, First Heights. Income from continuing operations before taxes and extraordinary items rose to $102,463 thousand from $82,024 thousand, and income from continuing operations was $63,211 thousand ($2.52 per share) versus $48,839 thousand in 1995. The homebuilding operation is the core business.
Unit settlements rose to 14,673 from 12,456, and sales (settlements) revenue reached $2,326,462 thousandc, up from $1,935,703 thousand. Net new orders hit a record 14,443 units, and the company reported 395 active communities and 41 markets at year-end. Gross profit margin improved to 14.8% from 14.5%, and return on average shareholders' equity was 22.6%.
Management cautioned that the slowdown in net new orders and competitive conditions would challenge efforts to improve gross margins in 1997. The balance sheet shows total assets of $1,985,141 thousandd and total indebtedness of $735,658 thousand, down from $921,127 thousand a year earlier.
Shareholders' equity rose to $829,273 thousand, and the company repurchased 3,807,932 shares for $99,561 thousand during 1996. The company is also in litigation with the FDIC over tax benefit sharing from its thrift acquisition, which it disputes.
02—Key points
Key Highlights
- Net income of $179,643 thousand ($7.17 per share) versus $58,346 thousand ($2.13 per share) in 1995, with $116,432 thousand from discontinued operations including a $110,000 thousand tax benefit
- Income from continuing operations of $63,211 thousand ($2.52 per share) versus $48,839 thousand in 1995
- Record 14,443 net new orders and 14,673 unit settlements, up 18% in settlements; homebuilding revenues of $2,326,462 thousand
- Gross profit margin improved to 14.8% from 14.5%; management expects challenges to sustain margin improvement in 1997
- Backlog declined 6% to 3,469 units ($598,000 thousand) at year-end, after net new orders trended lower in the final eight months of 1996
- Total indebtedness reduced to $735,658 thousand from $921,127 thousand; cash and equivalents of $189,625 thousand
- Repurchased 3,807,932 shares for $99,561 thousand in 1996; return on average shareholders' equity was 22.6%
03—Questions
Frequently Asked Questions
What drove the large jump in 1996 net income?
Net income rose to $179,643 thousand from $58,346 thousand, primarily because of $116,432 thousand of income from discontinued operations. That figure includes a $110,000 thousand tax benefit from net operating losses associated with the exited thrift business, First Heights. Income from continuing operations rose more modestly, to $63,211 thousand from $48,839 thousand.
How did the homebuilding business perform in 1996?
Unit settlements increased 18% to 14,673 units, and homebuilding revenues rose to $2,326,462 thousand from $1,935,703 thousand. The average unit selling price increased to $159,000 from $155,000. Pre-tax homebuilding income increased to $108,582 thousand from $79,798 thousand.
What risks did management identify for 1997?
Management stated that the continued slowdown in net new order activity and competitive conditions in many markets would challenge its ability to achieve sequential or year-over-year improvements in gross profit margins during 1997. It also noted that the housing industry is cyclical and affected by interest rates and other economic factors.
What litigation is the company involved in?
The company is a party to two lawsuits with the FDIC over the 1988 acquisition of First Heights and its ownership of five failed Texas thrifts. The FDIC disputes how tax benefits from the assistance agreement are shared. The company disputes the FDIC's claims and filed a second suit in the United States Court of Federal Claims on December 26, 1996. Management believes that the outcome of the litigation will not have a material adverse financial impact on the company.
How strong is the company's balance sheet and liquidity?
At December 31, 1996, the company had cash and equivalents of $189,625 thousand and total indebtedness of $735,658 thousand, down from $921,127 thousand a year earlier. It had a $250,000 thousand unsecured revolving credit facility with no borrowings during 1996, and shareholders' equity rose to $829,273 thousand. Management said it believes it has adequate financial resources to meet current working capital needs.
04—Continue