Question-and-Answer Session
Operator
Thank you. (Operator Instructions). Your first question comes from the line of Megan McGrath, representing Barclays Capital. Please proceed.
Megan McGrath – Barclays Capital
Good morning, thank you. I have a ton of questions, but I guess the first one is more of a modeling question, but I appreciate the chart on the goodwill. I guess I’m still a little bit confused. Can you explain the difference in the goodwill balance from when you filed your 8-K in September when it was about 6.90 to the 1.4 it ended up today?
Roger Cregg
Yes, Megan. This is Roger. There is a couple of differences against that one. One was about – roughly about $170 million associated with the debt. Again, we are fair valuing and looking at the debt as we came through quarters and as you know, the prices continue to come in from the discount that Centex was trading at. So by the time we got to the closing date, there was very little difference between the market and book value on that.
The other was about $400 million in the assets themselves and basically, we – as I mentioned, they were driven really around a very small number of communities, but when we ended up looking at what we were doing on the fair value to the more extensive opportunity we got to look at the assets themselves and do a lot more analysis on it, we wound up with some variances related to loss densities, asset lives, some of the assumptions on pricing as I mentioned.
So a lot of those things that I mentioned earlier were some of the things that drove some of the differences in some of the projects, but they are really isolated to rather a few projects, not all projects and some of them were concentrated more in the Southeastern part of the United States in the Florida market.
Megan McGrath – Barclays Capital
Okay, thanks. That’s helpful. And then Richard, sort of a more higher view question, but as we move throughout 2010, you’ve acknowledged that the P&L and balance sheet could be a little complex over the next couple of quarters. How would you suggest the investors evaluate the success of this merger as we go throughout the year? What are some things we can look for to say that this merger is really working?
Richard Dugas
I think you need to look at the financial performance of kind of the core run rate of the business, Megan, excluding these adjustments that are going to flow through primarily in this quarter and next. So that’s why we try to obviously isolate the kind of run rate of the business relative to margins as an example. You can see the improvement that we have there and our comments are for further expectation of improvement in the future. It’s those items, margins, SG&A performance, signup performance, the typical, I would say, metrics that you look at to determine P&L success and obviously, that’s our keen focus.
- To read the full transcript on Seeking Alpha, click here »
