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serve all segments

 

active adult 44% on closings in 2006

 

capitalize on baby boom.  26 states and diverse.

 

Q&A

Restructuring programs rightsize

 

SG&A percentage of revenue?

 

200MM savings some of COGS but mostly SG&A

 

Order rate below 30,000 level.  versus 41K in 2006.  back end 2006 reduced to 1900 employees, volumes, now structural in May collapsing divisions to volume will continue going forward

 

If market turns up in 08, 09 lowest overhead in running the business for profitablility. 

 

Active adult softening (why and thought process)  discretionary mover, lifestyle and taking time in to make 50% pay cash cancellation 1000pts better, 400 to 600 - have to sell a house to buy a house.  Buy to occupy.  Not interest rate sensitive with cash buying.  Subprime media impact, not a market that have not been effected, LVS and PHX performing well, but Sacramento is not performing as well. 

 

Asset based purchasers versus income.  Good equity base still, just a little more cautious.  Not have seen impact lower end of the entry level more of a concentration of active adult.  Still pleased with PHX and LVS, DelWebb brand.  Traditional business subprime 3 - 5%.  One active community impaired in Denver, only non performer. 

 

Project that have not been developed large supply so no build, others are reasonably healthy

 

FCF generation?  Land development?  end of 1Q 1B in cash after paying down WC line.  500MM FCF generated in 4Q, build out some projects on active adult side that are developed and profitable.  Rolling option lots taking them down. 

 

 

2.8 B of amortization what happens in overall pricing.  What are your expectations, comparable home basis?  discounted incentive 8 - 12% January and February were improving until the subprime, balance sheet house value 2 - 3 lot value.  Market elasticity is not there so they are not using pricing.  Pricing is a little shaky, it affects consumer behavior. 

 

Demand affecting spec?  Dropped off spec model, 30 - 35% homes spec, how many final specs 5 - 7% as final spec.  2006 inventory ballooned to 9K, orders cancelled, margins go.  4400 units at end of quarter.  Multi family units are rougher. 

 

Conversations with rating agencies?  Dropping capital structure? Cash flow generation.  Mitigated risk with options, PHM wants to be investment grade and CFO says they run balance sheet that way. 40 % debt to cap 35% now

 

Assets are long term with multiple year.  Margins have been more impacted versus comparable, timing difference.  Simplification of floor plans to 500 from 2500.  370 SKU windows down to 30.  300 to 500 basis points in pricing.  Vertically integrated operation?  In LVS and PHX is working very well, Boston model not working as well, efficiencies of fixed cost when volume drops off. 

 

More aggressive in acquisitions?  Think about them all the time, shareholder value is important.  Strategic sector buy like Del Webb.  Can leverage volum for large builders.   Vertical integration is 300 beeps of margin