DALLAS, Feb. 3 /PRNewswire-FirstCall/ -- Centex Corporation today reported financial results for its fiscal third quarter ended Dec. 31, 2008.
Highlights of the quarter ended Dec. 31, 2008 (compared to last year's third quarter):
-- Loss from continuing operations of $5.34 per diluted share -- Generated positive cash flow from homebuilding operations -- Dec. 31 cash balance of $1.47 billion, up from $62 million -- Reduced homebuilding SG&A expenses by 56% or $142 million -- Reduced owned lot position by 32% to 59,163 lots
"Although the declining economy caused unprecedented buyer hesitancy early in the quarter, we successfully adjusted to the difficult sales environment and made progress on key initiatives," said Timothy R. Eller, chairman and CEO of Centex Corp. "We ended the quarter with a strong cash position of $1.47 billion and anticipate generating positive operating cash flow in the fourth quarter and for fiscal year 2010. Also, we continued to move with urgency to reduce our cost structure, accelerating overhead reductions and further reducing land-related spending."
Corporate Results
Fiscal third-quarter revenues were $872 million, 53% lower than the same quarter last year. The loss from continuing operations for the third quarter was $664 million, or a loss of $5.34 per diluted share, narrower than last year's third-quarter loss of $976 million, or $7.95 per diluted share. Included in the fiscal third-quarter loss from continuing operations are $590 million of impairments and land-related charges, including the Company's share of joint venture impairments, compared to $554 million of impairments and other land-related charges in last year's third quarter. The fiscal third quarter's corporate general and administrative expenses were $40.7 million this year, up from $37.9 million in last year's third quarter, reflecting the centralizing and streamlining of certain support functions.
"I am pleased that combined corporate and homebuilding SG&A was down 48% from last year's third quarter. We are accelerating our overhead and headcount adjustments to align with the current sales environment. Overhead costs will continue to come down," Mr. Eller said.
Home Building
Fiscal third-quarter revenues were $843 million, 53% lower than the same quarter last year, as a result of a 49% decrease in closings to 3,405 homes and a 10% decrease in average sales price to $241,244. Home building reported an operating loss of $595 million for the quarter, narrower than last year's third-quarter loss of $625 million. The operating loss includes $590 million of impairments and write-offs.
Housing operating losses (housing revenues less housing cost of sales and SG&A) were $2 million this quarter, compared to losses of $32 million in the previous year's third quarter, reflective of a 110 bps improvement in housing gross margin and a 50 bps reduction in SG&A costs as a percentage of housing revenues.
Financial Services
Financial Services reported an operating loss of $14 million this quarter, narrowed from a loss of $60 million in last year's third quarter. Included in this quarter's loss is a $7 million net increase in loan loss reserves.
Other
During the fiscal third quarter, the Company increased its valuation allowance related to its deferred tax assets by $239 million in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The increase in the valuation allowance is reflected as a charge to income tax expense and a reduction of the Company's deferred tax asset. At the end of the quarter, the balance of the Company's deferred tax asset was $50 million, net of the valuation allowance of $1.18 billion.
Non-GAAP Financial Measures
Explanations of non-GAAP financial measures used in this press release and the accompanying attachments, and reconciliations of the non-GAAP financial measures to the comparable GAAP financial measures, are given in the applicable attachments.
Centex senior management will host a conference call to discuss the third-quarter financial results at 10 a.m. EST (9 a.m. CST) on Wednesday, Feb. 4. The live webcast may be accessed on the Investor Relations section of the Centex web site at http://ir.centex.com/. A replay of the webcast and the presentation will be archived on the Investor Relations page under the "Presentations" link.
Forward-Looking Statements
Some of the statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by the fact that they relate only to anticipated or expected events, activities, trends or results, which are inherently subject to risks, uncertainties and other factors. Actual results and outcomes may differ materially from what is expressed or forecast in such statements. Forward-looking statements included in this press release are made as of its date. We do not undertake any obligation to update or revise any forward-looking statement.
Important risks and other factors include, but are not limited to: (1) the effects of recent disruptions in the global credit and securities markets, which have adversely impacted the banking and mortgage finance industries, resulting in tightening of credit and reductions in liquidity; (2) recent adverse changes in national and regional economic and business conditions, including employment levels; (3) the effects of the current downturn in the homebuilding industry, including potential adverse market conditions and foreclosures that could result in reduced sales and closings and additional inventory or other impairments; (4) customer cancellations and consumer homebuyer sentiment; (5) competition; (6) price changes in raw materials or other components of our houses; (7) the availability of adequate sources of financing to continue to implement our business strategy; (8) our ability to generate cash from sales of assets and other sources that supplement our existing cash resources; and (9) the potential loss of tax benefits if we have an "ownership change" under IRC Section 382. These and other risks and uncertainties are described in greater detail in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended March 31, 2008, and subsequent Quarterly Reports on Form 10-Q.
Note Attachments: (1) Revenues and Earnings by Lines of Business (2) Condensed Consolidated Balance Sheet (3) Home Building Segment Data (4) Supplemental Home Building Data (non-GAAP reconciliation) Attachment 1 Centex Corporation and Subsidiaries Revenues and Earnings by Lines of Business (Dollars in thousands, except per share data) Quarter Ended Nine Months Ended December 31, December 31, (unaudited) (unaudited) ----------- ----------- 2008 2007 (C) Change 2008 2007 (C) Change ---- -------- ------ ---- -------- ------ Revenues Home Building (A) $843,156 $1,811,084 (53%) $2,845,451 $5,720,388 (50%) Financial Services 29,032 62,203 (53%) 157,864 240,869 (34%) ------ ------ ------- ------- Total $872,188 $1,873,287 (53%) $3,003,315 $5,961,257 (50%) ======== ========== ========== ========== Operating Earnings (Loss) Home Building (A) $(595,046) $(625,265) $(840,913) $(1,749,737) Financial Services (14,329) (60,484) (52,420) (99,597) Other 6,953 1,445 19,346 24,493 ----- ----- ------ ------ Total Operating Earnings (Loss) (602,422) (684,304) (873,987) (1,824,841) Corporate General and Admini- strative Expenses (40,683) (37,850) (152,757) (117,371) Interest Expense (17,758) - (28,911) - ------- --- ------- --- Loss from Continuing Operations Before Income Taxes (660,863) (722,154) (1,055,655) (1,942,212) Income Tax (Provision) Benefit (B) (3,043) (253,897) 21,017 189,319 ------ -------- ------ ------- Loss from Continuing Operations (663,906) (976,051) (1,034,638) (1,752,893) Earnings from Discontinued Operations, net - 863 48,643 5,913 --- --- ------ ----- Net Loss $(663,906) $(975,188) $(985,995) $(1,746,980) ========= ========= ========= =========== Earnings (Loss) Per Share - Basic and Diluted Continuing Operations $(5.34) $(7.95) $(8.32) $(14.35) Discontinued Operations - 0.01 0.39 0.05 --- ---- ---- ---- Earnings (Loss) Per Share - Basic and Diluted $(5.34) $(7.94) $(7.93) $(14.30) ====== ====== ====== ======= Average Shares Outstanding - Basic and Diluted 124,360,192 122,787,414 124,290,248 122,188,922 (A) See Attachment 3 for detailed home building segment revenues and earnings. (B) Includes increases in the valuation allowance related to the deferred tax assets of $239,303, $500,000, $354,124, and $500,000, respectively. (C) Prior periods have been conformed to the current year presentation. INTEREST ANALYSIS Quarter Ended Nine Months Ended December 31, December 31, (unaudited) (unaudited) ----------- ----------- 2008 2007 2008 2007 ---- ---- ---- ---- Total Interest Incurred $55,814 $68,206 $170,404 $226,643 Less - Interest Capitalized (35,710) (56,999) (131,301) (178,369) - Financial Services' Interest Expense (2,346) (11,207) (10,192) (48,274) ------ ------- ------- ------- Interest Expense, net $17,758 $- $28,911 $- ======= === ======= === Capitalized Interest Charged to Home Building's Costs and Expenses $67,032 $69,854 $119,799 $209,618 ======= ======= ======== ======== Attachment 2 Centex Corporation and Subsidiaries Condensed Consolidated Balance Sheet (Dollars in millions) (unaudited) BALANCE SHEET December 31, March 31, 2008 2008 ---- ---- Assets Cash - Unrestricted $1,472 $587 Restricted 47 51 Receivables - Residential Mortgage Loans Held for Sale, net 270 516 Other Receivables 224 824 Inventories - Direct Construction 1,269 1,746 Land Under Development 2,051 2,883 Land Held for Development and Sale 490 558 Land Held Under Option Agreements not Owned 115 148 Other 19 27 Investments 140 207 Property and Equipment, net 40 78 Goodwill 10 52 Deferred Tax Asset, Net of Valuation Allowance of $1,184 and $830 50 191 Deferred Charges and Other Assets 122 172 Assets of Discontinued Operations - 97 --- -- $6,319 $8,137 ====== ====== Liabilities and Stockholders' Equity Accounts Payable and Accrued Liabilities $1,681 $2,064 Senior Notes and Other 3,104 3,325 Financial Services Debt Secured by Mortgage Loans 158 337 Liabilities of Discontinued Operations - 34 Minority Interests 61 78 Stockholders' Equity 1,315 2,299 ----- ----- $6,319 $8,137 ====== ====== Attachment 3 Centex Corporation and Subsidiaries Home Building Segment Data (A) (Dollars in thousands, except per unit data) (Unaudited) Revenues -------- 2008 2007 Change ---- ---- ------ Quarter Ended December 31, East $339,570 $561,826 (40%) Central 261,684 452,258 (42%) West 240,966 763,002 (68%) Other homebuilding 936 33,998 (97%) --- ------ Total Home Building $843,156 $1,811,084 (53%) ======== ========== Closings (Units) ---------------- 2008 2007 Change ---- ---- ------ Quarter Ended December 31, East 1,155 1,929 (40%) Central 1,476 2,491 (41%) West 774 2,148 (64%) Other homebuilding - 89 (100%) --- -- Total Home Building 3,405 6,657 (49%) ===== ===== Average Housing Revenue per Unit -------------------------------- 2008 2007 Change ---- ---- ------ Quarter Ended December 31, East $280,011 $285,114 (2%) Central 176,392 180,447 (2%) West 307,066 354,202 (13%) Other homebuilding - 311,101 (100%) --- ------- Total Home Building $241,244 $268,588 (10%) ======== ======== Sales (Orders) (Units) ---------------------- 2008 2007 Change ---- ---- ------ Quarter Ended December 31, East 375 1,550 (76%) Central 508 2,074 (76%) West 197 1,854 (89%) Other homebuilding - 59 (100%) --- -- Total Home Building 1,080 5,537 (80%) ===== ===== Sales (Orders) Backlog (Units) ------------------------------ 2008 2007 Change ---- ---- ------ Quarter Ended December 31, East 2,021 2,378 (15%) Central 1,648 3,365 (51%) West 959 2,728 (65%) Other homebuilding - 42 (100%) --- -- Total Home Building 4,628 8,513 (46%) ===== ===== Sales (Orders) Backlog ---------------------- 2008 2007 Change ---- ---- ------ Quarter Ended December 31, East $621,985 $709,982 (12%) Central 289,836 605,526 (52%) West 307,690 937,874 (67%) Other homebuilding - 13,510 (100%) --- ------ Total Home Building $1,219,511 $2,266,892 (46%) ========== ========== Operating Earnings (Loss) ------------------------- 2008 2007 ---- ---- Quarter Ended December 31, East $(285,977) $(177,125) Central (61,757) (37,032) West (262,173) (377,589) Other homebuilding 14,861 (33,519) ------ ------- Total Home Building $(595,046) $(625,265) ========= ========= Impairments & Write-offs (B) ---------------------------- 2008 2007 ---- ---- Quarter Ended December 31, East $218,978 $168,761 Central 55,520 37,819 West 244,542 293,706 Other homebuilding - 29,029 --- ------ Total Home Building 519,040 529,315 Share of Joint Venture Impairments 70,551 24,850 ------ ------ Total Impairments $589,591 $554,165 ======== ======== Lots Controlled Lots Owned (Units) (Units) ------------------ ----------- 2008 2007 2008 2007 ---- ---- ---- ---- Quarter Ended December 31, East 30,192 38,209 4,805 13,790 Central 16,450 24,163 3,760 9,402 West 11,197 21,584 928 7,869 Other homebuilding 1,324 3,645 - - ----- ----- --- --- Total Home Building 59,163 87,601 9,493 31,061 ====== ====== ===== ====== (A) Prior periods have been conformed to the current year presentation. (B) Impairments and write-offs by segment include land-related impairments and write-offs and goodwill impairments. Attachment 3 (Continued) Centex Corporation and Subsidiaries Home Building Segment Data (A) (Dollars in thousands, except per unit data) (Unaudited) Revenues -------- 2008 2007 Change ---- ---- ------ Nine Months Ended December 31, East $958,646 $1,856,359 (48%) Central 855,672 1,423,409 (40%) West 1,013,637 2,307,220 (56%) Other homebuilding 17,496 133,400 (87%) ------ ------- Total Home Building $2,845,451 $5,720,388 (50%) ========== ========== Closings (Units) ---------------- 2008 2007 Change ---- ---- ------ Nine Months Ended December 31, East 3,361 6,121 (45%) Central 4,640 7,672 (40%) West 3,104 5,993 (48%) Other homebuilding 36 316 (89%) -- --- Total Home Building 11,141 20,102 (45%) ====== ====== Average Housing Revenue per Unit -------------------------------- 2008 2007 Change ---- ---- ------ Nine Months Ended December 31, East $276,843 $296,072 (6%) Central 182,311 183,919 (1%) West 323,821 382,944 (15%) Other homebuilding 332,861 343,237 (3%) ------- ------- Total Home Building $250,742 $279,909 (10%) ======== ======== Operating Earnings (Loss) ------------------------- 2008 2007 ---- ---- Nine Months Ended December 31, East $(419,241) $(310,088) Central (97,709) (64,781) West (334,566) (1,196,135) Other homebuilding 10,603 (178,733) ------ -------- Total Home Building $(840,913) $(1,749,737) ========= =========== Impairments & Write-offs (B) ---------------------------- 2008 2007 ---- ---- Nine Months Ended December 31, East $289,208 $324,213 Central 85,406 94,494 West 288,315 1,050,432 Other homebuilding 7,163 172,165 ----- ------- Total Home Building 670,092 1,641,304 Share of Joint Venture Impairments 102,232 88,512 ------- ------ Total Impairments $772,324 $1,729,816 ======== ========== Sales (Orders) (Units) ---------------------- 2008 2007 Change ---- ---- ------ Nine Months Ended December 31, East 2,934 5,222 (44%) Central 3,333 7,048 (53%) West 1,723 5,548 (69%) Other homebuilding 33 146 (77%) -- --- Total Home Building 8,023 17,964 (55%) ===== ====== (A) Prior periods have been conformed to the current year presentation. (B) Impairments and write-offs by segment include land-related impairments and write-offs and goodwill impairments. Attachment 4 Centex Corporation and Subsidiaries Supplemental Home Building Data (Dollars in thousands, except per unit data) (unaudited) RECONCILIATION OF HOUSING/HOME BUILDING OPERATING EARNINGS Quarter Ended December 31, -------------------------- 2008 2007 ---- ---- HOME BUILDING Revenues - Housing $821,437 100.0% $1,787,990 100.0% Cost of Sales - Housing (710,136) (86.4%) (1,564,552) (87.5%) -------- ----- ---------- ----- Gross Margin - Housing 111,301 13.6% 223,438 12.5% Selling, General & Administrative (A) (113,005) (13.8%) (254,952) (14.3%) -------- ----- -------- ----- Housing Operating (Loss) Earnings (B) (1,704) (0.2%) (31,514) (1.8%) Revenues - Land Sales & Other 21,719 23,094 Cost of Sales - Land Sales & Other (507,236) (556,320) -------- -------- Gross Margin - Land Sales & Other (485,517) (533,226) Goodwill Impairment (38,101) - Losses from Unconsolidated Entities and Other (C) (69,724) (60,525) ------- ------- Operating Loss $(595,046) (70.6%) $(625,265) (34.5%) ========= ----- ========= ----- Average Neighborhoods 499 644 % Change (22.5%) (7.9%) Nine Months Ended December 31, ------------------------------ 2008 2007 ---- ---- HOME BUILDING Revenues - Housing $2,793,516 100.0% $5,626,727 100.0% Cost of Sales - Housing (2,419,218) (86.6%) (4,787,106) (85.1%) ---------- ----- ---------- ----- Gross Margin - Housing 374,298 13.4% 839,621 14.9% Selling, General & Administrative (A) (428,076) (15.3%) (850,211) (15.1%) -------- ----- -------- ----- Housing Operating (Loss) Earnings (B) (53,778) (1.9%) (10,590) (0.2%) Revenues - Land Sales & Other 51,935 93,661 Cost of Sales - Land Sales & Other (705,019) (1,659,126) -------- ---------- Gross Margin-Land Sales & Other (653,084) (1,565,465) Goodwill Impairment (38,101) (61,322) Losses from Unconsolidated Entities and Other (C) (95,950) (112,360) ------- -------- Operating Loss $(840,913) (29.6%) $(1,749,737) (30.6%) ========= ----- =========== ----- Average Neighborhoods 529 659 % Change (19.7%) (3.9%) (A) Selling, General & Administrative expenses above are those associated with field operations. (B) Housing Operating Earnings is defined as housing revenues less housing cost of sales less selling, general & administrative expenses. Housing Operating Margin is defined as housing operating earnings divided by total housing revenues. (C) Includes losses from unconsolidated entities of $74,396, $63,140, $107,595 and $125,333, respectively. IMPAIRMENTS AND WRITE-OFFS Quarter Ended Nine Months Ended December 31, December 31, ------------- ----------------- 2008 2007 2008 2007 ---- ---- ---- ---- Impairment Charges $467,074 $502,949 $594,079 $1,492,428 Write-offs of Land Deposits and Pre- Acquisition Costs 13,865 26,366 37,912 87,554 Goodwill Impairment 38,101 - 38,101 61,322 ------ --- ------ ------ Subtotal 519,040 529,315 670,092 1,641,304 Share of Joint Venture Impairments 70,551 24,850 102,232 88,512 ------ ------ ------- ------ Total Impairments and Write-offs $589,591 $554,165 $772,324 $1,729,816 ======== ======== ======== ==========
