PHM PulteGroup Inc

• 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