- Reported Net Income Per Share of
$1.12 Reflects Favorable Impact of Insurance Adjustments, Land Sale
Gains and Lower Tax Rate
- Revenue Growth and Operational Gains
Drive 89% Year-Over-Year Increase in Adjusted Net Income Per Share
to $0.89
- Home Sale Revenues Increased 25% to
$2.5 Billion
- Reported Gross Margin Increased to
24.0%
- Reported Operating Margin of 14.8%;
Adjusted Operating Margin Increased 180 Basis Points Over Prior
Year to 13.2%
- Value of Net New Orders Increased 3%
to $2.7 Billion; Net New Orders Decreased 1% to 6,341
Homes
- Backlog Value Increased 17% to $5.2
Billion; Backlog Increased 11% to 11,845 Homes
PulteGroup, Inc. (NYSE: PHM) announced today financial results
for its second quarter ended June 30, 2018. For the quarter, the
Company’s reported net income was $324 million, or $1.12 per share.
Adjusted net income for the period was $259 million, or $0.89 per
share, after excluding $38 million of pretax benefit associated
with insurance reserve adjustments, $26 million of pretax land-sale
gains, and $17 million of net tax benefits recorded during the
period.
Reported net income for the prior year second quarter was $101
million, or $0.32 per share. Adjusted net income for the prior year
period was $148 million, or $0.47 per share, after excluding $121
million of pretax charges associated with the decision to dispose
of select non-core land assets, $8 million of net pretax benefit
relating to warranty and insurance reserve adjustments, and $24
million of net tax benefits recorded during the period.
“Working against our defined strategic plan, our operating teams
continue to do an outstanding job as revenues increased 25%,
adjusted gross margin increased 60 basis points, and adjusted EPS
surged 89%,” said Ryan Marshall, President and Chief Executive
Officer of PulteGroup. “Given the operating and financial gains we
have realized through the first half of 2018, and with almost
12,000 homes in backlog, we are well positioned to deliver
outstanding full-year results.”
“We continue to see U.S. housing demand being supported by a
number of positive market dynamics including an expanding economy,
ongoing growth in jobs and wages, historically low unemployment,
and sustained high levels of consumer confidence,” added Mr.
Marshall. “With our strong land pipeline and ability to serve all
primary buyer groups, we believe PulteGroup is well positioned to
grow its business within this market environment, while continuing
to generate high financial returns.”
Second Quarter Results
Home sale revenues for the second quarter increased 25% over the
prior year to $2.5 billion. The increase in revenues for the period
was driven by a 14% increase in deliveries to 5,741 homes, combined
with a 10% increase in average sales price to $427,000.
Reported gross margin for the second quarter was 24.0%, which is
60 basis points higher than second quarter 2017 adjusted gross
margin of 23.4%. Prior year adjusted gross margin excludes the
impact of the land-related and warranty charges recorded in the
period.
Reported SG&A expense for the second quarter of $226
million, or 9.2% of home sale revenues, includes the $38 million
benefit relating to an insurance reserve adjustment recorded in the
period. Exclusive of this benefit, adjusted SG&A expense for
the quarter was $264 million, or 10.8% of home sale revenues.
Adjusted SG&A expense for the prior year was $236 million, or
12.0% of home sale revenues, which excludes a $20 million benefit
relating to an insurance reserve adjustment recorded in the
period.
In the quarter, the Company recorded land sales gains totaling
$27.3 million relating primarily to the sale of two land parcels
that were completed in the period.
Net new orders for the second quarter declined less than 1.0%
from the prior year to 6,341 homes. The dollar value of net new
orders increased 3% to $2.7 billion. For the quarter, the Company
operated out of 847 communities.
PulteGroup’s unit backlog increased 11% over the prior year to
11,845 homes. The value of homes in backlog increased 17% to $5.2
billion. The average sales price of homes in backlog is $439,000,
which is 5% higher than last year’s average sales price in
backlog.
Second quarter pretax income for the Company's financial
services operations increased 9% over the prior year to $21
million. Financial services benefitted from higher homebuilder
closing volumes and an increase in the average loan size. Mortgage
capture rate for the quarter was 76%, compared with 79% in the
prior year.
For the quarter, the Company reported $85 million of income tax
expense, representing an effective tax rate of 20.8%. The Company’s
tax rate for the quarter included the net benefit of $17 million of
tax adjustments recorded in the period. Excluding this benefit, the
Company’s effective tax rate would have been approximately 25%.
During the quarter, PulteGroup repurchased 1.7 million common
shares for $53 million, or an average price of $30.07 per
share.
A conference call discussing PulteGroup's second quarter 2018
results is scheduled for Thursday, July 26, 2018, at 8:00 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 any
impairment charge 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, including, but not limited to the Tax Cuts and Jobs Act which
could have a greater impact on our effective tax rate or the value
of our deferred tax assets than we anticipate; 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, 2017, 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.
PulteGroup undertakes no duty to update any forward-looking
statement, whether as a result of new information, future events or
changes in PulteGroup's 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, 2018 2017
2018 2017 Revenues: Homebuilding Home sale
revenues $ 2,450,054 $ 1,965,641 $ 4,361,652 $ 3,551,063 Land sale
and other revenues 66,904 8,944 79,461 11,632
2,516,958 1,974,585 4,441,113 3,562,695 Financial Services
52,764 47,275 98,702 89,042 Total
revenues 2,569,722 2,021,860 4,539,815
3,651,737
Homebuilding Cost of Revenues: Home
sale cost of revenues (1,862,133 ) (1,549,937 ) (3,322,073 )
(2,767,615 ) Land sale cost of revenues (38,183 ) (87,599 ) (49,731
) (90,827 ) (1,900,316 ) (1,637,536 ) (3,371,804 ) (2,858,442 )
Financial Services expenses (32,224 ) (28,478 )
(64,436 ) (56,846 )
Selling, general, and administrative
expenses (226,056 ) (216,211 ) (466,950 ) (452,479 )
Other
expense, net (1,956 ) (17,088 ) (3,263 ) (22,157 )
Income
before income taxes 409,170 122,547 633,362 261,813
Income
tax expense (85,081 ) (21,798 ) (138,521 ) (69,545 )
Net
income $ 324,089 $ 100,749 $ 494,841 $
192,268
Per share: Basic earnings $ 1.12
$ 0.32 $ 1.72 $ 0.60 Diluted earnings $
1.12 $ 0.32 $ 1.71 $ 0.60 Cash
dividends declared $ 0.09 $ 0.09 $ 0.18 $ 0.18
Number of shares used in calculation: Basic
285,276 312,315 285,976 315,021 Effect of dilutive securities 1,378
1,565 1,088 1,946 Diluted 286,654
313,880 287,064 316,967
PulteGroup, Inc.
Condensed Consolidated Balance
Sheets
($000's omitted)
(Unaudited)
June 30, 2018 December 31,
2017 ASSETS Cash and equivalents $
367,091 $ 272,683 Restricted cash 34,824 33,485 Total cash,
cash equivalents, and restricted cash 401,915 306,168 House and
land inventory 7,499,665 7,147,130 Land held for sale 77,941 68,384
Residential mortgage loans available-for-sale 369,634 570,600
Investments in unconsolidated entities 61,718 62,957 Other assets
759,230 745,123 Intangible assets 134,092 140,992 Deferred tax
assets, net 511,381 645,295 $ 9,815,576 $ 9,686,649
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities: Accounts payable $ 399,330 $ 393,815 Customer deposits
354,968 250,779 Accrued and other liabilities 1,242,349 1,356,333
Income tax liabilities 22,484 86,925 Financial Services debt
264,043 437,804 Notes payable 3,005,690 3,006,967 5,288,864
5,532,623 Shareholders' equity 4,526,712 4,154,026 $
9,815,576 $ 9,686,649
PulteGroup, Inc.
Consolidated Statements of Cash
Flows
($000's omitted)
(Unaudited)
Six Months Ended June 30, 2018
2017 Cash flows from operating activities: Net income
$ 494,841 $ 192,268 Adjustments to reconcile net income to net cash
from operating activities: Deferred income tax expense 126,991
80,841 Land-related charges 5,841 129,108 Depreciation and
amortization 24,161 26,023 Share-based compensation expense 16,162
20,871 Other, net (2,803 ) (1,536 ) Increase (decrease) in cash due
to: Inventories (281,362 ) (486,393 ) Residential mortgage loans
available-for-sale 199,623 172,943 Other assets 15,822 15,309
Accounts payable, accrued and other liabilities (51,694 ) 26,892
Net cash provided by (used in) operating activities 547,582
176,326
Cash flows from investing activities:
Capital expenditures (33,059 ) (16,892 ) Investments in
unconsolidated entities (1,000 ) (17,832 ) Other investing
activities, net 6,915 3,143 Net cash used in
investing activities (27,144 ) (31,581 )
Cash flows from
financing activities: Repayments of debt (82,432 ) (2,153 )
Borrowings under revolving credit facility 1,566,000 110,000
Repayments under revolving credit facility (1,566,000 ) (110,000 )
Financial Services borrowings (repayments) (173,761 ) (177,918 )
Debt issuance costs (8,090 ) — Stock option exercises 4,467 15,966
Share repurchases (112,491 ) (405,819 ) Dividends paid (52,384 )
(58,214 ) Net cash provided by (used in) financing activities
(424,691 ) (628,138 ) Net increase (decrease) 95,747 (483,393 )
Cash, cash equivalents, and restricted cash at beginning of period
306,168 723,248 Cash, cash equivalents, and
restricted cash at end of period $ 401,915 $ 239,855
Supplemental Cash Flow Information: Interest paid
(capitalized), net $ (387 ) $ (2,359 ) Income taxes paid
(refunded), net $ 77,077 $ (10,980 )
PulteGroup, Inc.
Segment Data
($000's omitted)
(Unaudited)
Three Months Ended Six Months
Ended June 30, June 30, 2018 2017
2018 2017 HOMEBUILDING: Home sale revenues $
2,450,054 $ 1,965,641 $ 4,361,652 $ 3,551,063 Land sale and other
revenues 66,904 8,944 79,461 11,632
Total Homebuilding revenues 2,516,958 1,974,585 4,441,113 3,562,695
Home sale cost of revenues (1,862,133 ) (1,549,937 )
(3,322,073 ) (2,767,615 ) Land sale cost of revenues (38,183 )
(87,599 ) (49,731 ) (90,827 ) Selling, general, and administrative
expenses ("SG&A") (226,056 ) (216,211 ) (466,950 ) (452,479 )
Other expense, net (2,133 ) (17,239 ) (3,548 ) (22,412 ) Income
before income taxes $ 388,453 $ 103,599 $ 598,811
$ 229,362
FINANCIAL SERVICES: Income
before income taxes $ 20,717 $ 18,948 $ 34,551
$ 32,451
CONSOLIDATED: Income before income
taxes $ 409,170 $ 122,547 $ 633,362 $ 261,813
OPERATING METRICS: Gross margin %
(a)(b) 24.0 % 21.1 % 23.8 % 22.1 % SG&A % (a) (9.2 )% (11.0 )%
(10.7 )% (12.7 )% Operating margin % (a) 14.8 % 10.1 % 13.1 % 9.4 %
(a) As a percentage of home sale revenues. (b) Gross margin equals
home sale revenues minus home sale cost of revenues.
PulteGroup, Inc.
Segment Data, continued
($000's omitted)
(Unaudited)
Three Months Ended Six Months
Ended June 30, June 30, 2018 2017
2018 2017 Home sale revenues $
2,450,054 $ 1,965,641 $ 4,361,652 $ 3,551,063
Closings - units Northeast 401 296 652 528 Southeast
1,072 949 1,996 1,785 Florida 1,134 910 2,021 1,742 Midwest 872 907
1,639 1,575 Texas 1,096 1,042 1,905 1,882 West 1,166 940
2,154 1,757 5,741 5,044 10,367
9,269
Average selling price $ 427 $ 390 $ 421
$ 383
Net new orders - units Northeast 450 376
898 787 Southeast 1,093 1,193 2,352 2,270 Florida 1,347 1,090 2,791
2,130 Midwest 1,055 1,089 2,157 2,251 Texas 1,183 1,189 2,506 2,400
West 1,213 1,458 2,512 2,683 6,341
6,395 13,216 12,521
Net new orders - dollars $
2,694,271 $ 2,625,091 $ 5,587,823 $ 5,071,230
Unit backlog Northeast 758 646 Southeast 2,072 1,856
Florida 2,448 1,806 Midwest 2,005 1,983 Texas 2,027 1,930 West
2,535 2,453 11,845 10,674
Dollars in backlog $
5,205,234 $ 4,461,680
PulteGroup, Inc.
Segment Data, continued
($000's omitted)
(Unaudited)
Three Months Ended Six Months
Ended June 30, June 30, 2018 2017
2018 2017 MORTGAGE ORIGINATIONS: Origination volume
3,635 3,330 6,627 6,203 Origination
principal $ 1,122,017 $ 969,691 $ 2,031,817 $
1,776,043 Capture rate 75.8 % 78.9 % 76.6 % 79.5 %
Supplemental Data
($000's omitted)
(Unaudited)
Three Months Ended Six Months
Ended June 30, June 30, 2018 2017
2018 2017 Interest in inventory, beginning of
period $ 240,013 $ 203,828 $ 226,611 $ 186,097 Interest capitalized
43,771 44,949 87,731 89,872 Interest expensed (40,157 ) (35,927 )
(70,715 ) (63,119 ) Interest in inventory, end of period $ 243,627
$ 212,850 $ 243,627 $ 212,850
PulteGroup, Inc.Reconciliation of
Non-GAAP Financial Measures(Unaudited)
This report contains information about our operating results
reflecting certain adjustments, including: adjustments to gross
margin from home sales; selling general, and administrative
expenses ("SG&A"); net income; and diluted earnings per share
("EPS"). 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):
Reconciliation of Adjusted Net Income and Adjusted
EPS Three Months Ended
Results of
OperationsClassification
June 30, 2018 2017 Net income, as
reported $ 324,089 $ 100,749 Adjustments to income before
income taxes: Land and community valuation adjustments Home sale
cost of revenues — 31,487 Warranty claim Home sale cost of revenues
— 12,106 Net realizable value adjustments - land held for sale Land
sale cost of revenues — 81,006 Land sale gains Land sale revenues /
cost of revenues
(26,402 ) — Insurance reserve reversal SG&A (37,890 ) (19,813 )
Impairments of joint ventures Other expense, net — 8,017 Income tax
effect of the above items Income tax expense 16,086 (41,737 ) Net
tax benefits Income tax expense (17,276 ) (23,808 )
Adjusted net
income $ 258,607 $ 148,007
EPS
(diluted), as reported $ 1.12 $ 0.32
Adjusted EPS
(diluted) $ 0.89 $ 0.47
Other
Reconciliations Three Months
Ended June 30, 2018 2017 Home
sale revenues $ 2,450,054 $ 1,965,641
Gross margin
from home sales, as reported $ 587,921 24.0 % $ 415,704 21.1 %
Adjustments: Land and community valuation adjustments — — % 31,487
1.6 % Warranty claim — — % 12,106 0.6 %
Adjusted
gross margin from home sales $ 587,921 24.0 % $ 459,297
23.4 %
SG&A, as reported $ 226,056 9.2 % $
216,211 11.0 % Adjustments: Insurance reserve reversal 37,890
1.5 % 19,813 1.0 %
Adjusted SG&A $ 263,946
10.8 % $ 236,024 12.0 %
Operating margin,
as reported* 14.8 % 10.1 %
Adjusted operating margin**
13.2 % 11.4 % *Operating margin represents gross margin from
home sales less SG&A
**Adjusted operating margin represents
adjusted gross margin from home sales less adjusted SG&A
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180726005091/en/
PulteGroup, Inc.Jim Zeumer,
404-978-6434jim.zeumer@pultegroup.com
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