01—Abstract
Summary
Summary of the 10-K filed February 9, 2012. Cited figures are marked; the original filing is the authoritative source.
PulteGroup, Inc. (NYSE: PHM), one of the largest homebuilders in the United States, reported a net loss of $210.4 milliona for 2011, an improvement from net losses of $1.10 billion in 2010 and $1.18 billion in 2009.
Homebuilding revenues were $4.03 billionb in 2011, down from $4.45 billion in 2010, with home closings falling 11% to 15,275 units. The company attributed the improved bottom line to higher gross margins, a leaner overhead structure, and much lower land-related charges and goodwill impairments. Home sale gross margin rose to 12.8% from 9.4%, and SG&A fell to 13.2% of home sale revenues from 20.3%, with the 2010 figure including $280.4 million of insurance reserve adjustments.
Management said its outlook for 2012 is cautious and it is not anticipating a broad recovery in homebuilding in the near term. Balance sheet and liquidity remain significant considerations. Cash and equivalents were $1.08 billionc at year-end, and senior notes totaled $3.09 billion, against shareholders' equity of $1.94 billion.
The debt-to-total-capitalization ratio was 61.4%, or 49.5% net of cash. Operating cash flow was just $17.2 milliond in 2011, compared with $590.9 million in 2010. The company retired $321.1 million of senior notes during 2011, and it has not paid a common dividend since the first quarter of 2009.
Net deferred tax assets of $2.5 billion remain fully reserved by a valuation allowance. Key risks flagged include loan origination liabilities tied to 2006–2007 mortgage loans, with related 2011 provisions of $59.3 million and a reasonably possible range of general liability self-insurance reserves of $650 million to $850 million against recorded reserves of $741.4 million.
Orders were flat at 15,215 net new units, the cancellation rate was 19%, and active communities fell 11% to 700. Backlog was $1.1 billion at year-end.
02—Key points
Key Highlights
- Net loss narrowed to $210.4 million ($0.55 per share) in 2011 from $1.10 billion ($2.90 per share) in 2010.
- Home sale gross margin improved to 12.8% from 9.4%; adjusted home sale gross margin was 17.9% versus 16.7% in 2010.
- Land-related charges fell to $35.8 million from $216.4 million, and goodwill impairments dropped to $240.5 million from $656.3 million.
- Home closings declined 11% to 15,275 units, and home sale revenues fell to $3.95 billion from $4.42 billion.
- Operating cash flow was $17.2 million in 2011, versus $590.9 million in 2010, with income tax refunds of $62.2 million offset by financing of Pulte Mortgage's lending operations.
- Debt-to-total-capitalization was 61.4% at year-end (49.5% net of cash), and the company reduced senior notes by $321.1 million during 2011.
- Backlog was $1.1 billion (3,924 units) at December 31, 2011, and the company operated in 61 markets across 29 states with 700 active communities.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 9, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $4.14B$4.57B | −9.5% |
| SG&A Expenses | $519.58M$895.10M | −42.0% |
| Interest Expense | $1.31M$2.73M | −51.9% |
| Net Income | -$210.39M-$1.10B | +80.8% |
| EPS (Basic) | $-0.55$-2.90 | +81.0% |
| EPS (Diluted) | $-0.55$-2.90 | +81.0% |
| Shares Outstanding (Basic) | 379.88M378.58M | +0.3% |
| Shares Outstanding (Diluted) | 379.88M378.58M | +0.3% |
05—Questions
Frequently Asked Questions
Why did PulteGroup's net loss narrow in 2011?
The filing attributes the improvement to higher home sale gross margins, a more efficient overhead structure, and lower asset impairment charges. Land-related charges fell from $216.4 million in 2010 to $35.8 million in 2011, goodwill impairments fell from $656.3 million to $240.5 million, and 2010 SG&A included $280.4 million of insurance reserve adjustments that did not recur.
Is PulteGroup generating cash from operations?
Operating cash flow was $17.2 million in 2011, down from $590.9 million in 2010. The filing says the company does not anticipate generating positive cash flow in the near future at the 2009 and 2010 levels, and that 2011 operating cash flow was affected by financing Pulte Mortgage's lending operations, which reduced it by $52.8 million.
What is the company's outlook for 2012?
Management described its outlook as cautious for 2012, stating that the timing of a sustainable recovery in homebuilding remains uncertain. It said it is not anticipating a broad recovery in the near term and that visibility into future earnings is limited.
What are the main mortgage-related risks?
The company may be responsible for losses on mortgage loans sold to investors if representations and warranties were breached. Loan origination liabilities were $128.3 million at year-end, with 2011 provisions of $59.3 million, mostly on loans originated in 2006 and 2007. The filing states that future losses may exceed current estimates.
Does PulteGroup pay dividends?
No. The Board discontinued the regular quarterly common dividend on November 24, 2008, effective in the first quarter of 2009, and no cash dividends were declared in 2009, 2010, or 2011. Future dividends depend on earnings, capital requirements, financial condition, and market conditions.
06—Continue