- Net Income of $0.86 Per Share
- Net New Orders Increased 7% to 6,792 Homes
- Value of Net New Orders Increased 7% to $2.9
Billion
- Home Sale Revenues of $2.4 Billion
- Homebuilding Gross Margin of 23.1% and Operating Margin of
12.3%
- Backlog of 11,793 Homes Valued at $5.1 Billion
- Company Retired $274 Million of Senior Notes and Repurchased
$83 Million of Stock During the Quarter
PulteGroup, Inc. (NYSE: PHM) announced today financial results
for its second quarter ended June 30, 2019. For the quarter, the
Company’s reported net income was $241 million, or $0.86 per share.
Prior year reported net income for the second quarter was $324
million, or $1.12 per share, which included $38 million of pretax
benefit associated with insurance adjustments, $26 million of
pretax land sale gains, and $17 million of net tax benefits.
Adjusted net income for the prior year period was $259 million, or
$0.89 per share.
“PulteGroup’s second quarter results demonstrate our ongoing
success in running a highly profitable, high returning business,
with a clearly articulated approach to capital allocation,” said
Ryan Marshall, President and Chief Executive Officer of PulteGroup.
“Consistent with our stated objectives, our continued strong
operating performance allowed us to invest over $850 million in
total land spend in the quarter, while also using almost $400
million of available cash for dividends, share repurchases and debt
reduction.”
“As reflected in our results, consumer activity remains high as
homebuyers are returning to the market following a period of softer
demand in the back half of 2018,” added Mr. Marshall. “Given the
low interest rate environment, in combination with supportive
economic, employment and demographic trends, we are optimistic
about housing demand as we advance through the remainder of
2019.”
Second Quarter Results
Home sale revenues for the second quarter decreased 2% from the
prior year to $2.4 billion. Lower revenues for the quarter reflect
a 1% increase in average sales price to $430,000, offset by a 3%
decrease in closings to 5,589 homes.
Gross margin for the second quarter was 23.1%, compared with
24.0% in the second quarter of 2018. SG&A expense for the
quarter was $259 million, or 10.8% of home sale revenues. Prior
year reported SG&A expense was $226 million, or 9.2% of home
sale revenues, inclusive of the $38 million benefit relating to
insurance adjustments recorded in the period. Adjusted SG&A
expense for the prior year period was $264 million, or 10.8% of
home sale revenues.
In the second quarter, the Company recorded land sales gains of
$1.4 million compared with prior year gains of $27.3 million.
Second quarter 2018 land sale gains included $26 million relating
to the sale of two large land parcels completed in the period.
Net new orders for the second quarter increased 7% from the
prior year to 6,792 homes. The dollar value of net new orders also
increased 7% over the prior year to $2.9 billion. For the quarter,
the Company operated out of 877 communities.
Unit backlog at the end of the quarter was 11,793 homes, which
is comparable with prior year backlog of 11,845 homes. The average
sales price of homes in backlog was $433,000, which is down 1% from
last year’s average sales price in backlog of $439,000. The total
value of homes in backlog was $5.1 billion.
Second quarter pretax income for the Company’s financial
services operations increased 21% over the prior year to $25
million. Financial services benefitted from higher closing volumes,
as mortgage capture rate increased to 81% from 76% in the prior
year, as well as higher net margins on mortgage originations.
For the quarter, the Company reported $80 million of income tax
expense, representing an effective tax rate of 24.9%. Second
quarter tax expense in the prior year was $85 million, or an
effective tax rate of 20.8%, which included the net benefit of $17
million of tax adjustments recorded in the period. The adjusted tax
rate for the prior year period was 25.0%.
During the quarter, PulteGroup repurchased 2.6 million of common
shares for $83 million, or an average price of $31.82 per share. In
the second quarter, the Company also used available cash to retire
$274 million of its 4.250% Senior Notes due 2021. The Company
incurred a pretax charge of $4.8 million in the quarter associated
with the early redemption of these notes.
A conference call discussing PulteGroup’s second quarter 2019
results is scheduled for Tuesday, July 23, 2019, at 8:30 a.m.
Eastern Time. Interested investors can access the live webcast via
PulteGroup’s corporate website at www.pultegroup.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 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 the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2018, and the Company’s
other public filings with the Securities and Exchange Commission
for a further discussion of these and other risks and uncertainties
applicable to our businesses. The Company 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 more
than 40 markets throughout the country. Through its brand portfolio
that includes Centex, Pulte Homes, Del Webb, DiVosta Homes,
American West 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 pultegroup.com; www.pulte.com; www.centex.com;
www.delwebb.com; www.divosta.com; www.jwhomes.com and
www.americanwesthomes.com. Follow PulteGroup, Inc. on Twitter:
@PulteGroupNews.
PulteGroup, Inc.
Consolidated Statements of
Operations
($000’s omitted, except per
share data)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2019
2018
2019
2018
Revenues:
Homebuilding
Home sale revenues
$
2,403,559
$
2,450,054
$
4,353,415
$
4,361,652
Land sale and other revenues
29,469
66,904
32,445
79,461
2,433,028
2,516,958
4,385,860
4,441,113
Financial Services
55,957
52,764
99,819
98,702
Total revenues
2,488,985
2,569,722
4,485,679
4,539,815
Homebuilding Cost of Revenues:
Home sale cost of revenues
(1,848,155
)
(1,862,133
)
(3,340,946
)
(3,322,073
)
Land sale cost of revenues
(26,214
)
(38,183
)
(28,265
)
(49,731
)
(1,874,369
)
(1,900,316
)
(3,369,211
)
(3,371,804
)
Financial Services expenses
(30,901
)
(32,224
)
(62,350
)
(64,436
)
Selling, general, and administrative
expenses
(259,440
)
(226,056
)
(512,166
)
(466,950
)
Other expense, net
(3,499
)
(1,956
)
(4,473
)
(3,263
)
Income before income taxes
320,776
409,170
537,479
633,362
Income tax expense
(79,735
)
(85,081
)
(129,681
)
(138,521
)
Net income
$
241,041
$
324,089
$
407,798
$
494,841
Per share:
Basic earnings
$
0.86
$
1.12
$
1.46
$
1.72
Diluted earnings
$
0.86
$
1.12
$
1.45
$
1.71
Cash dividends declared
$
0.11
$
0.09
$
0.22
$
0.18
Number of shares used in
calculation:
Basic
276,652
285,276
277,142
285,976
Effect of dilutive securities
932
1,378
967
1,088
Diluted
277,584
286,654
278,109
287,064
PulteGroup, Inc.
Condensed Consolidated Balance
Sheets
($000’s omitted)
(Unaudited)
June 30, 2019
December 31, 2018
ASSETS
Cash and equivalents
$
631,309
$
1,110,088
Restricted cash
27,965
23,612
Total cash, cash equivalents, and
restricted cash
659,274
1,133,700
House and land inventory
7,802,492
7,253,353
Land held for sale
38,218
36,849
Residential mortgage loans
available-for-sale
343,732
461,354
Investments in unconsolidated entities
58,246
54,590
Other assets
837,279
830,359
Intangible assets
132,192
127,192
Deferred tax assets, net
224,104
275,579
$
10,095,537
$
10,172,976
LIABILITIES AND SHAREHOLDERS’
EQUITY
Liabilities:
Accounts payable
$
380,363
$
352,029
Customer deposits
334,484
254,624
Accrued and other liabilities
1,308,459
1,360,483
Income tax liabilities
27,913
11,580
Financial Services debt
234,186
348,412
Notes payable
2,740,325
3,028,066
5,025,730
5,355,194
Shareholders’ equity
5,069,807
4,817,782
$
10,095,537
$
10,172,976
PulteGroup, Inc.
Consolidated Statements of
Cash Flows
($000’s omitted)
(Unaudited)
Six Months Ended
June 30,
2019
2018
Cash flows from operating
activities:
Net income
$
407,798
$
494,841
Adjustments to reconcile net income to net
cash from operating activities:
Deferred income tax expense
51,458
126,991
Land-related charges
6,810
5,841
Depreciation and amortization
26,497
24,161
Share-based compensation expense
17,304
16,162
Other, net
2,664
(2,803
)
Increase (decrease) in cash due to:
Inventories
(399,520
)
(281,362
)
Residential mortgage loans
available-for-sale
116,974
199,623
Other assets
31,593
15,822
Accounts payable, accrued and other
liabilities
44,132
(51,694
)
Net cash provided by (used in) operating
activities
305,710
547,582
Cash flows from investing
activities:
Capital expenditures
(29,575
)
(33,059
)
Investments in unconsolidated entities
(4,664
)
(1,000
)
Business acquisition
(163,724
)
—
Other investing activities, net
4,592
6,915
Net cash provided by (used in) investing
activities
(193,371
)
(27,144
)
Cash flows from financing
activities:
Repayments of notes payable
(297,303
)
(82,432
)
Borrowings under revolving credit
facility
—
1,566,000
Repayments under revolving credit
facility
—
(1,566,000
)
Financial Services borrowings
(repayments)
(114,226
)
(173,761
)
Debt issuance costs
—
(8,090
)
Stock option exercises
5,208
4,467
Share repurchases
(118,824
)
(112,491
)
Dividends paid
(61,620
)
(52,384
)
Net cash provided by (used in) financing
activities
(586,765
)
(424,691
)
Net increase (decrease) in cash, cash
equivalents, and restricted cash
(474,426
)
95,747
Cash, cash equivalents, and restricted
cash at beginning of period
1,133,700
306,168
Cash, cash equivalents, and restricted
cash at end of period
$
659,274
$
401,915
Supplemental Cash Flow
Information:
Interest paid (capitalized), net
$
5,560
$
(387
)
Income taxes paid (refunded), net
$
12,618
$
77,077
PulteGroup, Inc.
Segment Data
($000’s omitted)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2019
2018
2019
2018
HOMEBUILDING:
Home sale revenues
$
2,403,559
$
2,450,054
$
4,353,415
$
4,361,652
Land sale and other revenues
29,469
66,904
32,445
79,461
Total Homebuilding revenues
2,433,028
2,516,958
4,385,860
4,441,113
Home sale cost of revenues
(1,848,155
)
(1,862,133
)
(3,340,946
)
(3,322,073
)
Land sale cost of revenues
(26,214
)
(38,183
)
(28,265
)
(49,731
)
Selling, general, and administrative
expenses ("SG&A")
(259,440
)
(226,056
)
(512,166
)
(466,950
)
Other expense, net
(3,521
)
(2,133
)
(4,490
)
(3,548
)
Income before income taxes
$
295,698
$
388,453
$
499,993
$
598,811
FINANCIAL SERVICES:
Income before income taxes
$
25,078
$
20,717
$
37,486
$
34,551
CONSOLIDATED:
Income before income taxes
$
320,776
$
409,170
$
537,479
$
633,362
OPERATING METRICS:
Gross margin % (a)(b)
23.1
%
24.0
%
23.3
%
23.8
%
SG&A % (a)
(10.8
)%
(9.2
)%
(11.8
)%
(10.7
)%
Operating margin % (a)
12.3
%
14.8
%
11.5
%
13.1
%
(a) As a percentage of home sale
revenues
(b) Gross margin represents 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,
2019
2018
2019
2018
Home sale revenues
$
2,403,559
$
2,450,054
$
4,353,415
$
4,361,652
Closings - units
Northeast
349
401
568
652
Southeast
951
1,072
1,848
1,996
Florida
1,252
1,134
2,260
2,021
Midwest
822
872
1,548
1,639
Texas
1,119
1,096
1,968
1,905
West
1,096
1,166
2,032
2,154
5,589
5,741
10,224
10,367
Average selling price
$
430
$
427
$
426
$
421
Net new orders - units
Northeast
455
450
816
898
Southeast
1,214
1,093
2,287
2,352
Florida
1,460
1,347
2,806
2,791
Midwest
975
1,055
1,999
2,157
Texas
1,323
1,183
2,689
2,506
West
1,365
1,213
2,658
2,512
6,792
6,341
13,255
13,216
Net new orders - dollars
$
2,890,709
$
2,694,271
$
5,626,561
$
5,587,823
Unit backlog
Northeast
718
758
Southeast
2,049
2,072
Florida
2,435
2,448
Midwest
1,853
2,005
Texas
2,213
2,027
West
2,525
2,535
11,793
11,845
Dollars in backlog
$
5,109,293
$
5,205,234
PulteGroup, Inc.
Segment Data,
continued
($000’s omitted)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2019
2018
2019
2018
MORTGAGE ORIGINATIONS:
Origination volume
3,720
3,635
6,718
6,627
Origination principal
$
1,161,906
$
1,122,017
$
2,076,617
$
2,031,817
Capture rate
81.0
%
75.8
%
80.4
%
76.6
%
Supplemental Data
($000’s omitted)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2019
2018
2019
2018
Interest in inventory, beginning of
period
$
235,313
$
240,013
$
227,495
$
226,611
Interest capitalized
41,650
43,771
84,031
87,731
Interest expensed
(42,254
)
(40,157
)
(76,817
)
(70,715
)
Interest in inventory, end of period
$
234,709
$
243,627
$
234,709
$
243,627
PulteGroup, Inc. Reconciliation of
Non-GAAP Financial Measures (Unaudited)
This report contains information about our operating results
reflecting certain adjustments, including: adjustments to selling,
general, and administrative expenses ("SG&A"); income tax
expense; 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 Operations
Classification
June 30,
2019
2018
Net income, as reported
$
241,041
$
324,089
Adjustments to income before income
taxes:
Land sale gains
Land sale revenues / cost of
revenues
—
(26,402
)
Insurance adjustments
SG&A
—
(37,890
)
Income tax effect of the above items
Income tax expense
—
16,086
Net tax benefits
Income tax expense
—
(17,276
)
Adjusted net income
$
241,041
$
258,607
EPS (diluted), as reported
$
0.86
$
1.12
Adjusted EPS (diluted)
$
0.86
$
0.89
Other Reconciliations
Three Months Ended
June 30,
2019
2018
Home sale revenues
$
2,403,559
$
2,450,054
Gross margin (a)
$
555,404
23.1
%
$
587,921
24.0
%
SG&A, as reported
$
259,440
10.8
%
$
226,056
9.2
%
Adjustments:
Insurance adjustments
—
—
%
37,890
1.5
%
Adjusted SG&A
$
259,440
10.8
%
$
263,946
10.8
%
Operating margin, as reported
(b)
12.3
%
14.8
%
Adjusted operating margin (c)
12.3
%
13.2
%
(a) Gross margin represents home sale
revenues minus home sale cost of revenues
(b) Operating margin represents gross
margin less SG&A
(c) Adjusted operating margin represents
gross margin less adjusted SG&A
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190723005125/en/
Investors: Jim Zeumer (404) 978-6434
jim.zeumer@pultegroup.com
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