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PulteGroup Reports Second Quarter 2017 Financial Results

  • Reported Net Income of $0.32 Per Share Reflects Land and Warranty Charges, Partially Offset by an Insurance Reserve Reversal and Lower Tax Rate
  • Adjusted Net Income of $0.47 Per Share Increased 27% Over Prior Year Q2 Adjusted Net Income of $0.37 Per Share
  • Net New Orders Increased 12% to 6,395 Homes; Value of Net New Orders Increased 23% to $2.6 Billion
  • Home Sale Revenues Increased 12% to $2.0 Billion
  • Backlog Increased 10% to 10,674 Homes; Backlog Value Increased 19% to $4.5 Billion
  • Company Repurchased 12.8 Million Shares of Stock During the Quarter for $300 Million

ATLANTA, July 25, 2017 (GLOBE NEWSWIRE) -- PulteGroup, Inc. (NYSE:PHM) announced today financial results for its second quarter ended June 30, 2017. For the quarter, the Company’s reported net income was $101 million, or $0.32 per share. Adjusted net income for the period was $148 million, or $0.47 per share. Adjustments to the Company’s reported results include a pretax charge of $121 million associated with the Company’s previously announced decision to dispose of select non-core and underutilized land assets, a net pretax benefit of $8 million relating to warranty and construction defect reserve adjustments, and $24 million of net tax benefits recorded during the period.

Reported net income for the prior year second quarter was $118 million, or $0.34 per share. Adjusted net income for the prior year quarter was $127 million, or $0.37 per share, after excluding the impact of land and corporate office relocation charges in the period.

“U.S. housing demand continues to benefit from positive market dynamics including an improving economy and job market, high consumer confidence, low interest rates and a generally limited supply of homes across the country,” said Ryan Marshall, President and Chief Executive Officer of PulteGroup. “Given these strong market supports, we believe housing demand can continue to move higher over the coming quarters.”

“Within this market environment, PulteGroup is successfully executing against its business strategies as we focus on intelligently growing our business while delivering high returns,” added Mr. Marshall. “Consistent with this focus, our second quarter results show orders up 12%, backlog value up 19% and adjusted earnings per share up 27%, while ROE improved 140 basis points to 12.8%.”

Second Quarter Results

Home sale revenues for the second quarter increased 12% over the prior year to $2.0 billion. Higher revenues for the period were driven by a 6% increase in deliveries to 5,044 homes, combined with a 6% increase in average sales price to $390,000.

Reported gross margin for the second quarter was 21.1%, including the impact of land-related and warranty charges taken in the period. Exclusive of these charges, the Company’s adjusted gross margin for the quarter was 23.4%. Reported SG&A expense for the second quarter was $216 million, or 11.0% of home sale revenues, which includes a $20 million benefit relating to an insurance reserve adjustment taken in the period. Adjusted SG&A expense for the quarter was $236 million, or 12.0% of home sale revenues. Reported SG&A expense for the prior year was $256 million, or 14.6% of home sale revenues.

Net new orders for the second quarter increased 12% over the prior year to 6,395 homes. The dollar value of net new orders gained 23% to $2.6 billion. For the quarter, the Company operated out of 803 communities.

PulteGroup’s unit backlog increased 10% over the prior year to 10,674 homes. The value of homes in backlog increased 19% to $4.5 billion. The average sales price of homes in backlog is $418,000, which is up 8% over the average sales price in backlog in the second quarter of last year and up 7% from the average sales price of homes delivered in the second quarter of 2017.

Pretax income for the Company's financial services operations increased 11% for the quarter to $19 million, as the operations benefitted from higher homebuilder closing volumes and an increase in the average loan size. Mortgage capture rate for the quarter was 79%, compared with 81% in the prior year.

For the quarter, the Company reported $22 million of income tax expense, representing an effective tax rate of 17.8%. The Company’s tax rate for the quarter included the net benefit of $24 million resulting from the favorable resolution of certain tax matters. Excluding this benefit, the Company’s effective tax rate would have been approximately 37%.

During the quarter, PulteGroup repurchased 12.8 million common shares for $300 million, or an average price of $23.42 per share.

A conference call discussing PulteGroup's second quarter 2017 results is scheduled for Tuesday, July 25, 2017, at 8:30 a.m. Eastern Time. Interested investors can access the live webcast via PulteGroup's corporate website at www.pultegroupinc.com.

Forward-Looking Statements

This press release includes "forward-looking statements." These statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities, as well as those of the markets we serve or intend to serve, to differ materially from those expressed in, or implied by, these statements. You can identify these statements by the fact that they do not relate to matters of a strictly factual or historical nature and generally discuss or relate to forecasts, estimates or other expectations regarding future events. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “plan,” “project,” “may,” “can,” “could,” “might,” "should", “will” and similar expressions identify forward-looking statements, including statements related to the impairment charge with respect to certain land parcels and the impacts or effects thereof, expected operating and performing results, planned transactions, planned objectives of management, future developments or conditions in the industries in which we participate and other trends, developments and uncertainties that may affect our business in the future.

Such risks, uncertainties and other factors include, among other things: interest rate changes and the availability of mortgage financing; competition within the industries in which we operate; the availability and cost of land and other raw materials used by us in our homebuilding operations; the impact of any changes to our strategy in responding to the cyclical nature of the industry, including any changes regarding our land positions and the levels of our land spend; the availability and cost of insurance covering risks associated with our businesses; shortages and the cost of labor; weather related slowdowns; slow growth initiatives and/or local building moratoria; governmental regulation directed at or affecting the housing market, the homebuilding industry or construction activities; uncertainty in the mortgage lending industry, including revisions to underwriting standards and repurchase requirements associated with the sale of mortgage loans; the interpretation of or changes to tax, labor and environmental laws; economic changes nationally or in our local markets, including inflation, deflation, changes in consumer confidence and preferences and the state of the market for homes in general; legal or regulatory proceedings or claims; our ability to generate sufficient cash flow in order to successfully implement our capital allocation priorities; required accounting changes; terrorist acts and other acts of war; and other factors of national, regional and global scale, including those of a political, economic, business and competitive nature. See PulteGroup's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and other public filings with the Securities and Exchange Commission (the “SEC”) for a further discussion of these and other risks and uncertainties applicable to our businesses. We undertake no duty to update any forward-looking statement, whether as a result of new information, future events or changes in our expectations.

About PulteGroup

PulteGroup, Inc. (NYSE:PHM), based in Atlanta, Georgia, is one of America's largest homebuilding companies with operations in approximately 50 markets throughout the country. Through its brand portfolio that includes Centex, Pulte Homes, Del Webb, DiVosta Homes and John Wieland Homes and Neighborhoods, the Company is one of the industry's most versatile homebuilders able to meet the needs of multiple buyer groups and respond to changing consumer demand. PulteGroup conducts extensive research to provide homebuyers with innovative solutions and consumer inspired homes and communities to make lives better.

For more information about PulteGroup, Inc. and PulteGroup brands, go to www.pultegroupinc.com;
www.pulte.com; www.centex.com; www.delwebb.com; www.divosta.com and www.jwhomes.com.

PulteGroup, Inc.
Consolidated Results of Operations
($000's omitted, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
Revenues:
Homebuilding
Home sale revenues$1,965,641 $1,751,882 $3,551,063 $3,146,125
Land sale revenues7,930 4,950 9,570 7,437
1,973,571 1,756,832 3,560,633 3,153,562
Financial Services47,275 43,082 89,042 78,930
Total revenues2,020,846 1,799,914 3,649,675 3,232,492
Homebuilding Cost of Revenues:
Home sale cost of revenues(1,549,937) (1,310,569) (2,767,615) (2,348,597)
Land sale cost of revenues(87,599) (4,403) (90,827) (6,430)
(1,637,536) (1,314,972) (2,858,442) (2,355,027)
Financial Services expenses(28,478) (26,180) (56,846) (52,298)
Selling, general, and administrative expenses(216,211) (256,273) (452,479) (498,589)
Other expense, net(16,074) (12,909) (20,095) (18,785)
Income before income taxes122,547 189,580 261,813 307,793
Income tax expense(21,798) (71,820) (69,545) (106,733)
Net income$100,749 $117,760 $192,268 $201,060
Per share:
Basic earnings$0.32 $0.34 $0.60 $0.58
Diluted earnings$0.32 $0.34 $0.60 $0.57
Cash dividends declared$0.09 $0.09 $0.18 $0.18
Number of shares used in calculation:
Basic312,315 345,240 315,021 346,528
Effect of dilutive securities1,565 2,759 1,946 2,710
Diluted313,880 347,999 316,967 349,238


PulteGroup, Inc.
Condensed Consolidated Balance Sheets
($000's omitted)
(Unaudited)
June 30,
2017
December 31,
2016
ASSETS
Cash and equivalents$208,203 $698,882
Restricted cash31,652 24,366
Total cash, cash equivalents, and restricted cash239,855 723,248
House and land inventory7,090,164 6,770,655
Land held for sale104,652 31,728
Residential mortgage loans available-for-sale364,939 539,496
Investments in unconsolidated entities59,617 51,447
Other assets818,972 857,426
Intangible assets147,892 154,792
Deferred tax assets, net986,787 1,049,408
$9,812,878 $10,178,200
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable$407,691 $405,455
Customer deposits290,890 187,891
Accrued and other liabilities1,406,598 1,483,854
Financial Services debt153,703 331,621
Senior notes3,109,994 3,110,016
5,368,876 5,518,837
Shareholders' equity4,444,002 4,659,363
$9,812,878 $10,178,200


PulteGroup, Inc.
Consolidated Statements of Cash Flows
($000's omitted)
(Unaudited)
Six Months Ended
June 30,
2017 2016
Cash flows from operating activities:
Net income$192,268 $201,060
Adjustments to reconcile net income to net cash from operating activities:
Deferred income tax expense80,841 117,783
Land-related charges129,108 10,522
Depreciation and amortization26,023 26,705
Share-based compensation expense20,871 16,906
Other, net(1,536) (732)
Increase (decrease) in cash due to:
Inventories(486,393) (810,417)
Residential mortgage loans available-for-sale172,943 78,460
Other assets15,309 (15,506)
Accounts payable, accrued and other liabilities26,892 55,113
Net cash provided by (used in) operating activities176,326 (320,106)
Cash flows from investing activities:
Capital expenditures(16,892) (21,044)
Investment in unconsolidated subsidiaries(17,832) (13,769)
Cash used for business acquisition (430,025)
Other investing activities, net3,143 5,473
Net cash used in investing activities(31,581) (459,365)
Cash flows from financing activities:
Proceeds from debt issuance 986,084
Repayments of debt(2,153) (484,974)
Borrowings under revolving credit facility110,000 358,000
Repayments under revolving credit facility(110,000) (358,000)
Financial Services borrowings (repayments)(177,918) (78,320)
Stock option exercises15,966 742
Share repurchases(405,819) (100,806)
Dividends paid(58,214) (63,019)
Net cash provided by (used in) financing activities(628,138) 259,707
Net increase (decrease)(483,393) (519,764)
Cash, cash equivalents, and restricted cash at beginning of period723,248 775,435
Cash, cash equivalents, and restricted cash at end of period$239,855 $255,671
Supplemental Cash Flow Information:
Interest paid (capitalized), net$(2,359) $(14,671)
Income taxes paid (refunded), net$(10,980) $(5,457)


PulteGroup, Inc.
Segment Data
($000's omitted)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
HOMEBUILDING:
Home sale revenues$1,965,641 $1,751,882 $3,551,063 $3,146,125
Land sale revenues7,930 4,950 9,570 7,437
Total Homebuilding revenues1,973,571 1,756,832 3,560,633 3,153,562
Home sale cost of revenues(1,549,937) (1,310,569) (2,767,615) (2,348,597)
Land sale cost of revenues(87,599) (4,403) (90,827) (6,430)
Selling, general, and administrative expenses(216,211) (256,273) (452,479) (498,589)
Other expense, net(16,225) (13,041) (20,350) (18,967)
Income before income taxes$103,599 $172,546 $229,362 $280,979
FINANCIAL SERVICES:
Income before income taxes$18,948 $17,034 $32,451 $26,814
CONSOLIDATED:
Income before income taxes$122,547 $189,580 $261,813 $307,793


PulteGroup, Inc.
Segment Data, continued
($000's omitted)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
Home sale revenues$1,965,641 $1,751,882 $3,551,063 $3,146,125
Closings - units
Northeast296 310 528 572
Southeast949 1,025 1,785 1,851
Florida910 767 1,742 1,512
Midwest907 786 1,575 1,338
Texas1,042 923 1,882 1,698
West940 961 1,757 1,746
5,044 4,772 9,269 8,717
Average selling price$390 $367 $383 $361
Net new orders - units
Northeast376 352 787 730
Southeast1,193 1,016 2,270 2,068
Florida1,090 1,011 2,130 1,934
Midwest1,089 1,059 2,251 2,053
Texas1,189 1,036 2,400 2,157
West1,458 1,223 2,683 2,407
6,395 5,697 12,521 11,349
Net new orders - dollars$2,625,091 $2,142,024 $5,071,230 $4,255,995
Unit backlog
Northeast 646 602
Southeast 1,856 1,679
Florida 1,806 1,696
Midwest 1,983 1,804
Texas 1,930 1,804
West 2,453 2,094
10,674 9,679
Dollars in backlog $4,461,680 $3,749,299


PulteGroup, Inc.
Segment Data, continued
($000's omitted)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
MORTGAGE ORIGINATIONS:
Origination volume3,330 3,158 6,203 5,706
Origination principal$969,691 $868,671 $1,776,043 $1,535,317
Capture rate78.9% 80.6% 79.5% 80.8%


Supplemental Data
($000's omitted)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
Interest in inventory, beginning of period$203,828 $158,653 $186,097 $149,498
Interest capitalized44,949 38,231 89,872 73,515
Interest expensed(35,927) (29,396) (63,119) (55,525)
Interest in inventory, end of period$212,850 $167,488 $212,850 $167,488

PulteGroup, Inc.
Reconciliation of Non-GAAP Financial Measures

This report contains information about our operating results reflecting certain adjustments, including adjustments to cost of revenues, selling general, and administrative expenses, income before income taxes, income tax expense, net income, diluted earnings per share, and operating margin. These measures are considered non-GAAP financial measures under the SEC's rules and should be considered in addition to, rather than as a substitute for, the comparable GAAP financial measures as measures of our profitability. We believe that reflecting these adjustments provides investors relevant and useful information for evaluating the comparability of financial information presented and comparing our profitability to other companies in the homebuilding industry. Although other companies in the homebuilding industry report similar information, the methods used may differ. We urge investors to understand the methods used by other companies in the homebuilding industry to calculate these measures and any adjustments thereto before comparing our measures to those of such other companies.

The following tables set forth a reconciliation of the non-GAAP financial measures to the GAAP financial measures that management believes to be most directly comparable ($000's omitted):

Three Months Ended
June 30, 2017
Adjustments
Warranty / Income
As Reported Impairments Insurance Taxes Adjusted
Revenues:
Homebuilding
Home sale revenues$1,965,641 $ $ $ $1,965,641
Land sale revenues7,930 7,930
1,973,571 1,973,571
Financial Services47,275 47,275
Total revenues2,020,846 2,020,846
Homebuilding Cost of Revenues:
Home sale cost of revenues(1,549,937) 31,487 12,106 (1,506,344)
Land sale cost of revenues(87,599) 81,006 (6,593)
(1,637,536) 112,493 12,106 (1,512,937)
Financial Services expenses(28,478) (28,478)
Selling, general, and administrative expenses (SG&A)(216,211) (19,813) (236,024)
Other expense, net(16,074) 8,017 (8,057)
Income before income taxes122,547 120,510 (7,707) 235,350
Income tax expense(21,798) (44,589) 2,852 (23,808) (87,343)
Net income$100,749 $75,921 $(4,855) $(23,808) $148,007
Earnings per share (diluted)$0.32 $0.47
Home sale gross margin21.1% 23.4%
SG&A as a percentage of sales11.0% 12.0%
Operating margin10.1% 11.4%
Effective income tax rate17.8% 37.1%


Three Months Ended
June 30, 2016
As Reported Adjustments* Adjusted
Revenues:
Homebuilding
Home sale revenues$1,751,882 $ $1,751,882
Land sale revenues4,950 4,950
1,756,832 1,756,832
Financial Services43,082 43,082
Total revenues1,799,914 1,799,914
Homebuilding Cost of Revenues:
Home sale cost of revenues(1,310,569) (1,310,569)
Land sale cost of revenues(4,403) (4,403)
(1,314,972) (1,314,972)
Financial Services expenses(26,180) (26,180)
Selling, general, and administrative expenses (SG&A)(256,273) (256,273)
Other expense, net(12,909) 14,724 1,815
Income before income taxes189,580 14,724 204,304
Income tax expense(71,820) (5,595) (77,415)
Net income$117,760 $9,129 $126,889
Earnings per share (diluted)$0.34 $0.37
Home sale gross margin25.2% 25.2%
SG&A as a percentage of sales14.6% 14.6%
Operating margin10.6% 10.6%
Effective income tax rate37.9% 37.9%

* Includes charges associated with the termination of certain pending land transactions and recognition of final costs associated with our corporate office relocation.


Company Contact Investors: Jim Zeumer (404) 978-6434 jim.zeumer@pultegroup.com

Source:PulteGroup, Inc.