Corporate News

Pulte Homes Inc. (NYSE: PHM) reports Q4 loss of $0.31 including charges, may not compare to the analyst estimate of ($0.19). Revenue for the quarter was $1.70 billion, which compares to the estimate of $1.50 billion. Shares are down 2.25% today.

Highlights From PHM's Q4 Conference Call:

• (CEO and Chairman) From sign-up base in margins to cost controls and cash accumulation PHMs' Q4
  results demonstrated another quarterly improvement in key business and financial metrics.
  
• Order rates for the quarter were up 113% on a reported basis. The 100 plus percent increase, obviously reflects the merger with Centex.
  
• On a pro forma basis our Q4 sign-ups were also very strong, showing an increase of 32% over combined Pulte and Centex numbers for the same period last year. Along with strong orders, we realized continued expansion in gross margin, which was 14.2% for the quarter before impairments and merger related costs.
  
• Margins expanded every quarter in 2009, as we worked hard to lower our construction cost, while improving our selling position by moving toward a built order model.
  
• Along with reducing our cost of goods, we are realizing similar success in lowering and leveraging our SG&A.
  
• Q4 homebuilding SG&A, for the combined businesses was $188 million, which is down more than $17 million from Pulte standalone last year.
  
• SG&A cost as a percentage of homebuilding revenue dropped a 170 basis points, as we realized meaningful overhead leverage on the volume delivered in the quarter.
  
• Adjusting for the charges taken in the quarter, we have significantly moved the needle profitability through the gains we have delivered in both margin and overhead leverage. But success ultimately requires ongoing stability in market demand and associated pricing.
  
• Externally, while we are cautiously optimistic about housing demand in the year ahead, we can't control micro conditions, but can only be prepared to respond as the year plays out.
  
• Over time we believe that all of the government supports for housing will and need to go away. Ideally it happens as soon as consumer confidence and job growth return.
  
• By running the two businesses with essentially one management team, we have the opportunity to save over $310 million in corporate and fuel cost, plus $130 million in interest savings, we are realizing from paying down the $1.9 billion in debt.
  
• We also remain confident in achieving the targeted $440 million in annual savings by the end of 2010.
  
• Beyond these cost savings as a result of the merger Pulte now controls approximately 155,000 lots which means, we have a land pipeline that can help to drive future sales and cash flow generation.
  
• One of the strategic pillars to the deal was acquiring Centex's 56,000 lots while retaining our cash position. I think everyone is getting a better appreciation for the current land environment and the limited availability of well positioned finished lots. The long anticipated and feared flood of bank loan lots has not and in our view will not materialize.
  
• 2009 was tough, but clearly a different trajectory than the prior couple of years. We'll have to see how 2010 develops but the company's ample cash position puts Pulte Homes in a very strong position to manage whatever the market has to offer.
  
• (CFO) Revenues from home settlements for the homebuilding operations increased approximately 5% from the prior year quarter to approximately $1.6 billion.
  
• Increased revenues reflect the increase in unit closings that were above prior year by approximately 13%.
  
• The average sales price decreased approximately 7% versus the prior year quarter to an average of $258,000. In the fourth quarter, land sales generated approximately $90 million in total revenues, which is a decrease of approximately $2 million versus the prior year's quarter.
  
• The sales in the quarter resulted from the rationalization of our land portfolio and giving consideration to the land acquired in the merger.
  
• Additionally, we eliminated approximately $4 million in the annual carrying costs.
  
• Homebuilding gross profits from home settlements for the quarter including homebuilding interest expense, was approximately $26 million versus the loss of $84 million in the prior year quarter.
  
• Homebuilding gross margins from home settlements as a percentage of revenues was 1.6% compared with a negative 5.5% in the fourth quarter of 2008.
  
• Adjusting the current quarter's gross margin for land and community valuation charges, interest expense and the acquisition accounting write-up for the Centex work-in-process resulted in a 14.2% conversion compared to 13.1% for Q3 of 2009 or an improvement of 110 basis points.
  
• Homebuilding interest expense decreased during the quarter to approximately $41 million versus approximately 61 million in the prior year. Included in the interest expense of 41 million is an additional $11 million of expense related to the land and community valuation adjustments taken in the current
  quarter.
  
• For Q4, we tested approximately 53 communities for potential impairments and valuation adjustments. We recorded valuation adjustments on approximately 40 communities for the quarter, of which approx. 34 communities or 85% have been previously impaired.
  
• Additionally, we impaired three large projects, which represented approximately $99 million or 71% of the total 140 million in impairments.
  
• Of the 140 million of land and community valuation adjustments, approximately 49% or 69 million were related to Del Webb communities, reflecting adjustments due to current absorption rates and pricing.
  
• The total net loss from land sales posted for the quarter was approximately 90 - $97 million.
  
• Homebuilding SG&A expenses as a percentage of home sales for the quarter was approximately 11.8% or $188 million, a decrease of approximately $17 million or approximately 8% versus the prior year quarter.
  
• If we look at SG&A on a pro forma basis, our expenses reflects the reduction of approximately $168 million or 45% from the combined Pulte and Centex SG&A expenses from the previous year's quarter.
  
• Impairment is measured as a difference between the resulting implied fair value of goodwill and the recorded carrying value of goodwill. We had recorded in the third quarter approximately $1.4 billion in goodwill all attributable to the Centex merger. As a result of the test, we determine that approximately $563 million of goodwill was impaired.
  
• The pre-tax loss from Pulte's financial services operations for Q4 was approximately $36 million, for an increased loss compared to the previous year's quarter of approximately $28 million.
  
• Total mortgage principle origination dollars were $906 million, an increase of 7% when compared to the same period last year. The increase is related to the volume increase in the homebuilder closing activity for the quarter.
  
• Total agency originations were 823 million, non-agency originations were approximately six million, and brokered or non-funded loans were approximately 77 million.
  
• Additionally, within the funding agency originations, FHA loans were approximately 45% of the loans funded from the financing line in the fourth quarter, compared to approximately 43% in the third quarter of 2009. Pulte mortgages capture rate for the current quarter was approximately 81% and the
  average FICO score for the quarter of 735.
  
• We ended with the cash balance of approximately $1.9 billion, increasing approximately $340 million from the third quarter of 2009. House and land inventory ended the quarter at approximately $4.9 billion. The total reduction in house and land inventory and land held for sale generated approximately $356 million in cash from Q3 of 2009.
  
• We increased our income tax receivable by approximately $917 million to $955 million associated with the expected federal tax refund. And the difference of $38 million is associated with state tax refunds receivable.
  
• The company's gross debt-to-total capitalization ratio was approximately 57.3%, and on a net basis, 42.8%. Interest incurred amounted to approximately $69 million in the fourth quarter, compared to 54 million for the same period of last year.
  
• (COO)We've already started the process of rationalizing some of the combined land positions along with redesigning and/or rebranding select communities to better match the targeted consumer profile.
  
• At year-end the combined operations can grow just under 155,000 lots of which 89% were owned and remaining 11% under option.
  
• Within our land pipeline, about one third of the lots are developed, which means we're in a great position heading into the selling season and permitting demand in general.
  
• Our existing land pipeline means is not under any undue pressure to complete deals, so we can be more selective in acquiring positions that offer the best possible returns.
  
• Consistent with the comments above in the fourth quarter we acquired approximately 2,600 new lots, while rationalizing some of the combined Pulte Centex inventory by selling approximately 12,000 lots.
  
• Cost savings along with reduced spec sales continue to help our margins, which increased to 110 basis point sequentially to 14.2% before interests, merger costs, impairments and the work-in-process write off. Further given the near-term visibility associated with our current backlog, our expectations are that we can realize additional margin expansion in 2010.
  
• Moving on to other data points for the quarter, on a reported basis sign-ups for the quarter totaled 3,748 homes, which is an increase of 113% over the same period of last year.
  
• In our Southeast area, sign-ups for the quarter were 649 homes.
  
• Sign-ups in our Midwest area totaled 434 homes and look to be consistent with the typical seasonal slowdown combined with a 6% decline in community count.
  
• Our Gulf Cost operations continue to show very strong performance with sign-ups of 1,337 homes in the quarter. Gains were particularly strong in both South Florida and Dallas.
  
• Market conditions in the Southwest continued to be among the most difficult in the country as both Phoenix and Las Vegas continue to struggle with too much inventory on the ground. Even within this environment, we are finding packets of improvement in markets closer in towards Phoenix.
  
• Q4 sign-ups in the area were 429 homes with demand growth in New Mexico being among the bright spot albeit in the small volumes.
  
• Finally sign-ups of 409 homes at our West area reflected relatively stable market conditions.
  
• (Q&A) Hey if I am - if home prices are stable from here. How should we think of gross margins going forward. You said that it would get better but as we assume that the fourth quarter was basically the floor in gross margins? And is there a point at which you're going to step up in gross margin from the Centex land assets that were return down, but we'll flow through income statement over the next few quarters?(A) Yeah, Josh, this is Roger. Yeah, I would say that looking at the fourth quarter that would be the floor going into 2010. We expect to continue seeing expansion into 2010 with the margins. And again, certainly pricing is stable from this point going forward as well. So again we feel pretty good about that based on the work that we've done on the cost side as well as the pricing side of it is also.
  (A)Yeah, Josh this is Richard. I will answer maybe your second one. in terms of Centex inventory and now that effects margins. I think you ought to think about it as more of a gradual improvement than a
  step up at anyone point in time. I think we mentioned on our third quarter call that the assets are coming online and - and the weight of the purchase accounting work it's going to take sometime to realize the full benefit of that. So I think reasonably we won't get to our full run rate of any benefit for sometime yet. So rather than - than expect a step up in any one quarter as a result specifically of that it's going to be more gradual. Having said that to Roger's point, we do expect margins better intend and what we delivered in `09. (A)And the bring back in the fourth quarter was roughly about $17 million on the Centex volume.
  
• Okay and one follow-up if I may. If home prices and absorption rates are stable with a rise from here, how should we think about impairments going forward?(A)John, it's Roger again. I think what we saw in the fourth quarter, we had three large projects that we impaired to roughly about a 100 million out of the 140 excluding the interest on that. So we're seeing a decreasing level of impairments and expectation would be stability there on the absorption and also the price will bring those down going forward as well. So I think we can seen that coming through 2009 and except for the three large projects that we had, we're seeing that in the remainder of the business.
  
• The first question I have, - one of you can talk a little bit about the sales mix between buyer segments and maybe house sales for community were varying between the different buyer segments, you guys are focusing on.(A)Yeah, David, this is Steve. Yeah, specifically, I don't have the details right in front of me. Mike can probably give us those - we could break out the sign-ups by brand. But in general, just as we suspected we're seeing probably a little bit slower absorption pace in our Del Webb brand although our traffic and visitor rates to communities continue to be fairly stable, which is a good sign, meaning those buyers are buying. We thought some follow up in the Centex traffic levels, as you would expect that for the tax rebate expired at the end of 11/30 and then it was put back in, but that was probably temporary, we think that those folks will be back out in force Centex is making up roughly a third, maybe the 40% of our sign-ups in the quarter and in the Pulte overall demand remained relatively strong although that's where we've seen predominantly more community run-off over the last two years and so it's tough to get comparisons and much dig into a - just in comparison by community count. But relatively stable traffic accounts relatively stable demand.(A)Yeah, David. This is Mike. You want to get some specifics on the sign-up numbers for the quarter, Pulte was approximately 1,000 units, Centex with approximately 1,800 unit, Del Webb was 850 and the DiVosta with approximately a 100.
  
• I've got a couple of questions for Steve. You talk about the purchasing synergies, Steve, the 150 to 200 million then you're pleased with what you're achieving? But I'm curious what kind of volume levels or that's kind a variable do you need to get to sort run it for $200 million. Can you just give a little bit of details about what particular building materials or labor cost savings are you seeing there?(A)Yeah, I mean it's kind of a loaded question. Without giving you what our anticipated volume is for the year. But I would tell you that 150 to 200 this based on the volume that we see out in front of us this year. In other words, we're not basing that off of some pie number like 25 to 30,000 closing. So, we're pretty confident that we can achieve it that based on the volume that we see right out in front of us. That said, it depends on the market, and it depends on the trade and the synergies that we're seeing it by marketplace. I could give you examples of at the foundation level in California. We're seeing anywhere from, 800 to a $1000 per house savings, just in the way that we have synergized our operations in combined or trade basis throughout California likewise, one of our largest savings and a placing that we are still working on because it's a very large geographic area is Washington, DC. And just in our drywall savings there, we've seen so far up to about 1100 of housing bucks of housing drywall savings. So it varies by trade we bring in our trades. We sit down and literally summit with them and figure out who wants the business? Who can service the company best? Who has the ability to really allow to work with us. We can peer into their books, they can understand we were going and it's all across the board. So I would tell you that what gives us confidence in driving to the 150 to $200 million is that we're seeing savings across the board it's not anyone particular line item of cost savings.

Shares of Dendreon (Nasdaq: DNDN) have ticked higher in the last few minutes of trading as the company's President and CEO, Mitchell Gold, is making some comments at an investor conference in New York. The exec has said that it will have a Provenge salesforce of about 125 people and that the company will have full manufacturing ability by the middle of 2011.

Dendreon last traded at $29.42 and is now up about 1.8% from yesterday's closing price.

IBM (NYSE: IBM) has signed a five-year remote managed services agreement with Sandhar Technologies, an auto ancillary group based in New Delhi. The deal will enable the company to align its information technology (IT) initiatives with business priorities, thereby ensuring risk mitigation and substantial cost savings.

As part of the agreement signed in December 2009, IBM will manage IT infrastructure for Sandhar Technologies, helping the company focus on its core business while reducing capital expenditure. The scope of managed services includes server management and network & security management, which will be remotely carried out from IBM's Global Management Center in Bangalore.

[SM]

Google (Nasdaq: GOOG) has just unveiled its new "Buzz" feature for its popular Gmail service.

• Google execs are billing the feature as an email approach to the sharing involved in social networking
  
• Buzz will be a new way to communicate within e-mail
  
• it will automatically follow people in chat, or an e-mail and includes updates from Twitter and YouTube
  
• Buzz includes both public and private sharing
  
• the service will let users see posts of photos and videos and also let them comment on these and others' posts
  
• Buzz will work on Android phones
  
• Google has introduced a new mobile maps version with the Buzz
  
• Buzz lets users see nearby comments from friends and also shows the locations of the people posting these items
  
• Google has left the door open, saying that Buzz could include phone messages someday

Semiconductor Manufacturing International Corporation (NYSE: SMI) refers to certain articles in the press today regarding a possible capital injection plan and confirms that it is currently in negotiations with an investor in respect of a proposed investment in the Company through the subscription by such investor of shares in the Company ("Proposed Investment"). The terms of the Proposed Investment is still under negotiation and to-date, no binding agreement has been entered into by the Company and there is no assurance that any definitive agreement can be entered into by the parties.

In addition, the directors of the Company are, as always, also looking at other strategic and/or other opportunities to enhance shareholder value for the Company. No decision has been made about any resulting transaction. There is no certainty that any such opportunity will or will not result in any transaction by or involving the Company or its subsidiaries.

This announcement is made pursuant to the disclosure obligations under Rule 13.09(1) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

As at the date of this announcement, the directors of the Company are Jiang Shang Zhou as Chairman of the Board of Directors and Independent Non-Executive Director of the Company; David N. K. Wang as President, Chief Executive Officer and Executive Director; Chen Shanzhi, Gao Yonggang and Zhou Jie (Wang Zheng Gang as alternate director to Zhou Jie) as Non-Executive Directors of the Company; and Tsuyoshi Kawanishi and Lip-Bu Tan as the other Independent Non-Executive Directors of the Company.