PHH Corporation CEO Discusses Q3 2010 Results – Earnings Call Transcript
PHH Corporation (
)
Q3 2010 Earnings Call Transcript
November 2, 2010 10:00 am ET
Executives
Nancy Kyle – VP, IR
Jerry Selitto – President and CEO
Sandra Bell – EVP and CFO
Marty Foster – SVP, Servicing
Analysts
Bose George – KBW
Samuel Crawford – Stone Harbor
Gabe Kim – Wellington
Howard Shainker – Third Point
Wayne Archambo – Monarch Partners
Saud Siddique – Peterhill Captial
Joe Jolson – Harvest Capital
Presentation
Operator
Compare to:
Previous Statements by PHH
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PHH Corporation Q2 2010 Earnings Call Transcript
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PHH Corporation Q1 2010 Earnings Call Transcript
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PHH Corporation Q4 2009 Earnings Call Transcript
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PHH Corp. Q2 2009 Earnings Call Transcript
Good morning, ladies and gentlemen, welcome to the PHH Corporation 2010 third quarter earnings conference call. Your lines will be in a listen-only mode during the remarks by PHH management. At the conclusion of the company's remarks, we will begin the question-and-answer session, at which time, I will give you instructions on entering the queue to ask your questions.
Today's call is also being webcast and recorded for replay purposes. The audio replay can be accessed even on the company's website at www.phh.com or by telephone at 1-719-457-0820 or 1-888-203-1112 using conference ID 9012324 beginning shortly after the conclusion of this call. It will be available until November 17, 2010. This access information is also described in the company's earnings release and I will repeat it again at the end of our session. This call is scheduled to conclude in one hour. At this time, Nancy Kyle, Vice President of Investor Relations will proceed with the introduction. Please go ahead.
Nancy Kyle
Thank you, John. Good morning and welcome to the PHH third quarter 2010 earnings conference call. On the call today are Jerry Selitto, President and Chief Executive Officer; Sandra Bell, Executive Vice President and Chief Financial Officer; Luke Hayden, Executive Vice President of Mortgage; and George Kilroy, Executive Vice President of Fleet; and Smriti Popenoe, Executive Vice President and Chief Risk Officer.
Remarks by our management team will be supplemented by a presentation that is posted on our website at www.phh.com. Click on investors, then on webcast and presentations and that will take you to the slide desk – excuse me. You are invited to follow along as we go through each slide. If you did not receive a copy of the earnings release we issued this morning, you may access it from our website or you may call our Investor Hotline at 856-917-7405 and request a faxed or mailed copy.
Please note that statements made during this conference call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as further described in slide two of the presentation. We will also be discussing various non-GAAP financial measures, including core earnings pre-tax, core earnings after-tax and core earnings per share. Please refer to our third quarter 2010 earnings release and the accompanying investor presentation for a description of these non-GAAP financial measures as well as a reconciliation of such measures to their respective, most directly comparable GAAP financial measures.
Now, I'll turn the call over to Jerry.
Jerry Selitto
Thank you, Nancy. Good morning, everyone and thank you for joining our third quarter earnings conference call. I'll begin with a brief review of the quarter, Sandra will then discuss our financial results and I will conclude with a summary of our outlook for the remainder of 2010.
The third quarter marked another very strong quarter in terms of operating performance across each of our business segments. In mortgage, we were able to grow income and increase market share without compromising our credit standards.
Beginning on slide three, third quarter core earnings were more than double core earnings for the first half of 2010. Our core year-to-date earnings for the nine-month ended September 30 exceeded core earnings for the full year 2009.
Our GAAP results reflected a substantial year-over-year improvement. Each segment delivered strong earnings for the quarter as it regained momentum through a strategic focus on fee-based services. We realized an unexpected spike in mortgage refinance activity that began in mid-June and continue throughout the quarter. As a result of this unexpected spike in volume, we postponed certain mortgage transformation initiatives.
We captured the profitable mortgage origination volume during the quarter. Notwithstanding these actions, we reported $83 million in annualized run rate savings from transformation through the end of the quarter and remain on track to achieve our $100 million goal of annualized run rate savings by year end 2010.
Turning to the summary table on slide four. For the quarter, our GAAP pre-tax loss before non-controlling interest was $2 million. GAAP after-tax loss was $8 million and GAAP EPS was a loss of $0.14. The unfavorable market-related MSR mark of $191 million were substantially offset by profitable production volume.
Our core earnings pre-tax for the third quarter were $180 million, core earnings after-tax were $109 million and a core EPS was $1.96. Mortgage production was $12.7 billion in the quarter, while interest rate lock commitments were $14.4 billion. Declining interest rates drove the strong refi activity and margins.
Our pricing margin was 190 basis points in the quarter. Our fleet business is making progress against these goals for the year, by focusing on fee-based services within both new and existing clients. Leased units, accident management units and fuel cards remained stable while maintenance units were up for the quarter compared to the second quarter of 2010.
Our focus in fleet is to increase ROE by driving revenues through fee-based services and continuing to lead the industry in innovative solutions for our clients. Fleet won the TechForum Best Practice Award for the second year in a row, sponsored by the Technology Managers Forum, the professional associations for enterprise IT managers. We were awarded first place in the technology innovation category to the fleet industries first mobile applications for drivers.
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