How did Pulte Homes perform financially in 2004?

Consolidated revenues were $11.71 billion and net income was $986.5 million, compared with $9.01 billion and $624.6 million in 2003. Homebuilding pre-tax income increased 64% year over year, and diluted EPS from net income was $7.58.

Why was operating cash flow negative in 2004?

Net cash used in operating activities was $698.3 million, primarily because inventories increased by $2.07 billion as the company invested in land and development to support continued growth, offsetting strong net income.

What happened to the Argentina operations?

In January 2005, Pulte sold all of its Argentina operations to an Argentine real estate development company. The operations were classified as held for sale and presented as discontinued operations at December 31, 2004, and a pre-tax loss of $33.2 million was recognized on the write-down.

What debt did the company issue and what are its key obligations?

In 2004 it sold $500 million of 5.25% senior notes due 2014 and $400 million of 4.875% senior notes due 2009. After year-end it sold $350 million of 5.2% notes due 2015 and $300 million of 6% notes due 2035. A $125 million 7.3% note matures in 2005.

What regulatory or legal matters does the filing disclose?

The company received an EPA request for storm water discharge information, and the matter has been referred to the Department of Justice; the company cannot predict the outcome or estimate costs. Separately, a $48.7 million judgment in its First Heights claim against the U.S. government is under appeal, and any gain will be recognized only upon final resolution.

PHM 10-K FY2004 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 10, 2005. Cited figures are marked; the original filing is the authoritative source.

Pulte Homes, Inc. reported record 2004 results driven by strong homebuilding demand.

Homebuilding revenues were $11.60 billion^a and homebuilding pre-tax income was $1.64 billion, compared with $8.89 billion and $1.01 billion in 2003. Consolidated net income was $986.5 million, or $7.58 per diluted share, versus $624.6 million, or $4.97 per diluted share, in 2003. Domestic settlements rose to 38,612 homes at an average selling price of $287,000, and net new orders reached a record 40,576 units.

Year-end backlog was a record 15,916 units valued at about $5.2 billion^b. Results were weighed by a $2.07 billion increase in inventories, which pushed operating cash flow to a use of $698.3 million. Senior notes and subordinated notes totaled $2.86 billion at year-end, and the company issued $500 million of 5.25% notes in January 2004 and $400 million of 4.875% notes in July 2004.

Subsequent to year-end, it sold $350 million^c of 5.2% notes due 2015 and $300 million of 6% notes due 2035. The filing also discloses the January 2005 sale of all Argentina operations, which were classified as discontinued operations, and an ongoing evaluation of strategic alternatives for the International homebuilding business in Mexico and Puerto Rico.

The company disclosed an EPA storm water discharge inquiry that has been referred to the Department of Justice, with the outcome and costs not estimable. It also disclosed a pending appeal of a $48.7 million^d judgment in its First Heights-related claim against the United States.

02—Key points

Key Highlights

Homebuilding pre-tax income rose to $1.64 billion in 2004 from $1.01 billion in 2003.
Net income was $986.5 million, or $7.58 per diluted share, up from $4.97 per diluted share in 2003.
Domestic settlements reached a record 38,612 homes, with an average selling price of $287,000 versus $259,000 in 2003.
Net new orders increased 16% to a record 40,576 units, and backlog reached a record 15,916 units valued at $5.2 billion.
Operating cash flow was negative $698.3 million, reflecting a $2.07 billion increase in inventories to support growth.
The company sold all Argentina operations in January 2005 and is evaluating strategic alternatives for its International operations.
Senior notes and subordinated notes totaled $2.86 billion at December 31, 2004, with $1.31 billion of committed revolver capacity.

03—Questions

Frequently Asked Questions

How did Pulte Homes perform financially in 2004?
Consolidated revenues were $11.71 billion and net income was $986.5 million, compared with $9.01 billion and $624.6 million in 2003. Homebuilding pre-tax income increased 64% year over year, and diluted EPS from net income was $7.58.
Why was operating cash flow negative in 2004?
Net cash used in operating activities was $698.3 million, primarily because inventories increased by $2.07 billion as the company invested in land and development to support continued growth, offsetting strong net income.
What happened to the Argentina operations?
In January 2005, Pulte sold all of its Argentina operations to an Argentine real estate development company. The operations were classified as held for sale and presented as discontinued operations at December 31, 2004, and a pre-tax loss of $33.2 million was recognized on the write-down.
What debt did the company issue and what are its key obligations?
In 2004 it sold $500 million of 5.25% senior notes due 2014 and $400 million of 4.875% senior notes due 2009. After year-end it sold $350 million of 5.2% notes due 2015 and $300 million of 6% notes due 2035. A $125 million 7.3% note matures in 2005.
What regulatory or legal matters does the filing disclose?
The company received an EPA request for storm water discharge information, and the matter has been referred to the Department of Justice; the company cannot predict the outcome or estimate costs. Separately, a $48.7 million judgment in its First Heights claim against the U.S. government is under appeal, and any gain will be recognized only upon final resolution.

04—Continue

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