01—Abstract
Summary
Summary of the 10-K filed February 10, 2011. Cited figures are marked; the original filing is the authoritative source.
PulteGroup, Inc. (NYSE: PHM) reported a net loss of $1.10 billiona, or $2.90 per share, for 2010, compared with a net loss of $1.18 billion ($3.94 per share) in 2009.
Results were driven by continued homebuilding weakness: home sale revenues rose to $4.42 billionb from $3.87 billion, with unit settlements of 17,095 versus 15,013, while the average selling price was $259,000. Homebuilding still posted a pre-tax loss of $1.17 billion, including a $656.3 million goodwill impairment and $280.4 million of insurance-related charges. Gross margin on home sales improved to 9.4% from negative 10.5% in 2009, largely due to lower land and community valuation adjustments of $169.7 million versus $751.2 million.
Liquidity was the company's main near-term focus. Cash and equivalents totaled $1.5 billionc at year-end, with no borrowings under the unsecured revolving Credit Facility, which was cut to $250.0 million from $750.0 million in December 2010. The company stated it was in compliance with its Credit Facility covenants at December 31, 2010, but said it may need to take action to avoid violating the debt-to-tangible-capital ratio as early as March 31, 2011.
Senior notes outstanding were $3.4 billiond, and the company retired $898.5 million of them in the fourth quarter. Management described the outlook for 2011 as tempered, with uncertain timing for a sustainable homebuilding recovery and limited visibility into future earnings. The company also reported $934.7 million of federal tax refunds received in 2010, primarily from loss carrybacks under the 2009 Worker, Homeownership, and Business Assistance Act.
Operating cash flow of $580.3 million was, according to management, negative after adjusting for these refunds. Shareholders' equity fell to $2.14 billion from $3.19 billion, and the company has not paid a dividend since the first quarter of 2009.
02—Key points
Key Highlights
- Net loss of $1,096.7 million ($2.90 per share) in 2010, compared with a net loss of $1,182.6 million ($3.94 per share) in 2009.
- Home sale revenues rose to $4.42 billion from $3.87 billion, on 17,095 unit settlements versus 15,013, at an average selling price of $259,000.
- Homebuilding gross margin on home sales improved to 9.4% from negative 10.5%, as land and community valuation adjustments fell to $169.7 million from $751.2 million.
- Goodwill impairments of $656.3 million and insurance-related charges of $280.4 million drove the homebuilding pre-tax loss of $1.17 billion.
- Cash and equivalents were $1.5 billion at year-end, with no revolver borrowings; the Credit Facility was reduced to $250.0 million from $750.0 million in December 2010.
- The company said it may need to act to avoid violating its debt-to-tangible-capital covenant as early as March 31, 2011.
- Shareholders' equity declined to $2.14 billion from $3.19 billion, and $3.4 billion of senior notes remained outstanding after $898.5 million was retired in the fourth quarter.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 10, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $4.57B$4.08B | +11.9% |
| SG&A Expenses | $895.10M$672.43M | +33.1% |
| Interest Expense | $2.73M$2.26M | +20.6% |
| Net Income | -$1.10B-$1.18B | +7.3% |
| EPS (Basic) | $-2.90$-3.94 | +26.4% |
| EPS (Diluted) | $-2.90$-3.94 | +26.4% |
| Shares Outstanding (Basic) | 378.58M300.18M | +26.1% |
| Shares Outstanding (Diluted) | 378.58M300.18M | +26.1% |
05—Questions
Frequently Asked Questions
Why did PulteGroup post a large net loss in 2010 despite improving margins?
Homebuilding remained loss-making mainly because of a $656.3 million goodwill impairment and $280.4 million of insurance-related charges, both recorded in 2010. Gross margins on home sales improved to 9.4% from negative 10.5%, mainly because land and community valuation adjustments dropped to $169.7 million from $751.2 million.
What were the main liquidity risks flagged in the filing?
The company had $1.5 billion of cash and equivalents at year-end, but its unsecured revolving Credit Facility was cut to $250.0 million. The filing says it may need to take action to avoid violating the debt-to-tangible-capital covenant as early as March 31, 2011, and that a covenant violation could trigger acceleration or a default under its $3.4 billion of senior notes.
How much of 2010 operating cash flow came from tax refunds?
The company received $934.7 million of federal income tax refunds in 2010, mainly from loss carrybacks under the 2009 Worker, Homeownership, and Business Assistance Act. Operating cash flow was $580.3 million, and management stated that after adjusting for these refunds, operating cash flow was negative for 2010.
What is management's outlook for 2011?
Management said it sees signs of stabilization in some local markets, but its outlook for 2011 is tempered. It noted that the timing of a sustainable homebuilding recovery remains uncertain, that visibility into future earnings is limited, and that further land-related charges or impairments could occur if conditions worsen.
Is PulteGroup paying a dividend?
No. The Board discontinued the regular quarterly dividend effective in the first quarter of 2009, and no cash dividends were declared in 2010. The company also repurchased no shares under its stock repurchase programs in 2010, though $102.3 million of authorization remained at December 31, 2010.
06—Continue