NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies
Basis of presentation
PulteGroup, Inc. is one of the largest homebuilders in the U.S., and our common shares trade on the New York Stock Exchange under the ticker symbol “PHM”. Unless the context otherwise requires, the terms "PulteGroup", the "Company", "we", "us", and "our" used herein refer to PulteGroup, Inc. and its subsidiaries. While our subsidiaries engage primarily in the homebuilding business, we also have mortgage banking operations, conducted principally through Pulte Mortgage LLC (“Pulte Mortgage”), and title and insurance brokerage operations.
The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles and include the accounts of PulteGroup, Inc. and all of its direct and indirect subsidiaries and variable interest entities in which PulteGroup, Inc. is deemed to be the primary beneficiary. All significant intercompany accounts, transactions, and balances have been eliminated in consolidation.
Business acquisitions
In April 2019, we acquired certain assets of American West, located in Las Vegas, Nevada, for $163.7 million. The assets acquired included approximately 1,200 finished lots and control of approximately 2,300 additional lots through land option agreements. The acquired assets were recorded at their estimated fair values, including $12.0 million associated with the American West tradename, which is being amortized over a 20-year life. The acquisition of these assets was not material to our results of operations or financial condition.
In January 2020, we acquired substantially all of the operations of Innovative Construction Group, an offsite construction framing company located in Jacksonville, Florida. This acquisition is not expected to have a material impact on our results of operations or financial condition.
Use of estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current year presentation.
Subsequent events
We evaluated subsequent events up until the time the financial statements were filed with the Securities and Exchange Commission ("SEC").
Cash and equivalents
Cash and equivalents include institutional money market investments and time deposits with a maturity of three months or less when acquired. Cash and equivalents at December 31, 2019 and 2018 also included $6.2 million and $40.9 million, respectively, of cash from home closings held in escrow for our benefit, typically for less than five days, which are considered deposits in-transit.
Restricted cash
We maintain certain cash balances that are restricted as to their use, including customer deposits on home sales that are temporarily restricted by regulatory requirements until title transfers to the homebuyer. Total cash, cash equivalents, and restricted cash includes restricted cash balances of $33.5 million and $23.6 million at December 31, 2019 and 2018, respectively.
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Investments in unconsolidated entities
We have investments in a number of unconsolidated entities, including joint ventures, with independent third parties. The equity method of accounting is used for unconsolidated entities over which we have significant influence; generally this represents ownership interests of at least 20% and not more than 50%. Under the equity method of accounting, we recognize our proportionate share of the earnings and losses of these entities. Certain of these entities sell land to us. We defer the recognition of profits from such activities until the time we ultimately sell the related land.
We evaluate our investments in unconsolidated entities for recoverability in accordance with Accounting Standards Codification (“ASC”) 323, “Investments – Equity Method and Joint Ventures” (“ASC 323”). If we determine that a loss in the value of the investment is other than temporary, we write down the investment to its estimated fair value. Any such losses are recorded to equity in (earnings) loss of unconsolidated entities, which is reflected in other expense, net. Due to uncertainties in the estimation process and the significant volatility in demand for new housing, actual results could differ significantly from such estimates. See Note 4.
Intangible assets
Goodwill, which represents the cost of acquired businesses in excess of the fair value of the net assets of such businesses at the acquisition date, totaled $40.4 million at December 31, 2019 and 2018. We assess goodwill for impairment annually in the fourth quarter and if events or changes in circumstances indicate the carrying amount may not be recoverable.
Intangible assets also include tradenames acquired in connection with acquisitions and totaled $84.6 million, net of accumulated amortization of $204.4 million, at December 31, 2019, and $86.8 million, net of accumulated amortization of $190.2 million, at December 31, 2018. Such tradenames are generally being amortized over 20-year lives. Amortization expense totaled $14.2 million in 2019 and $13.8 million in 2018 and 2017, respectively, and is expected to be $14.4 million in 2020, $11.0 million in 2021 and $6.3 million each year from 2022 - 2024. The ultimate realization of these assets is dependent upon the future cash flows and benefits that we expect to generate from their use. We assess tradenames for impairment if events or changes in circumstances indicate the carrying amount may not be recoverable.
Property and equipment
Property and equipment are recorded at cost. Maintenance and repair costs are expensed as incurred. Depreciation is computed by the straight-line method based upon estimated useful lives as follows: office furniture and equipment - 3 to 10 years; leasehold improvements - life of the lease; software and hardware - 3 to 5 years; model park improvements and furnishings - 1 to 5 years. Property and equipment are included in other assets and totaled $111.7 million net of accumulated depreciation of $218.9 million at December 31, 2019 and $92.9 million net of accumulated depreciation of $209.3 million at December 31, 2018. Depreciation expense totaled $39.8 million, $35.6 million, and $37.2 million in 2019, 2018, and 2017, respectively.
Advertising costs
Advertising costs are expensed to selling, general, and administrative expense as incurred and totaled $53.9 million, $51.0 million, and $45.0 million, in 2019, 2018, and 2017, respectively.
Employee benefits
We maintain a defined contribution retirement plan that covers substantially all of our employees. Company contributions to the plan totaled $19.1 million, $17.9 million, and $15.7 million in 2019, 2018, and 2017, respectively.
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Other expense, net
Other expense, net consists of the following ($000’s omitted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Write-offs of deposits and pre-acquisition costs (Note 2)
|
$
|
(13,116
|
)
|
|
$
|
(16,992
|
)
|
|
$
|
(11,367
|
)
|
Amortization of intangible assets (Note 1)
|
(14,200
|
)
|
|
(13,800
|
)
|
|
(13,800
|
)
|
Loss on debt retirement (Note 5)
|
(4,927
|
)
|
|
(76
|
)
|
|
—
|
|
Interest income
|
16,739
|
|
|
7,593
|
|
|
2,537
|
|
Interest expense
|
(584
|
)
|
|
(618
|
)
|
|
(503
|
)
|
Equity in earnings (loss) of unconsolidated entities (Note 4) (a)
|
747
|
|
|
2,690
|
|
|
(1,985
|
)
|
Miscellaneous, net
|
1,865
|
|
|
7,354
|
|
|
(7,269
|
)
|
Total other expense, net
|
$
|
(13,476
|
)
|
|
$
|
(13,849
|
)
|
|
$
|
(32,387
|
)
|
|
|
(a)
|
Includes an $8.0 million impairment of an investment in an unconsolidated entity in 2017 (see Note 2).
|
Earnings per share
Basic earnings per share is computed by dividing income available to common shareholders (the “Numerator”) by the weighted-average number of common shares, adjusted for unvested shares, (the “Denominator”) for the period. Computing diluted earnings per share is similar to computing basic earnings per share, except that the Denominator is increased to include the dilutive effects of stock options, unvested restricted share units, and other potentially dilutive instruments. Any stock options that have an exercise price greater than the average market price of our common shares are considered anti-dilutive and excluded from the diluted earnings per share calculation. Anti-dilutive shares were immaterial in 2019, 2018 and 2017.
In accordance with ASC 260 "Earnings Per Share" ("ASC 260"), the two-class method determines earnings per share for each class of common share and participating securities according to an earnings allocation formula that adjusts the Numerator for dividends or dividend equivalents and participation rights in undistributed earnings. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and, therefore, are included in computing earnings per share pursuant to the two-class method. Our outstanding restricted share units and deferred shares are considered participating securities. The following table presents a reconciliation of the numerator used in our earnings per common share calculation ($000's omitted):
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|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
December 31, 2018
|
|
December 31, 2017
|
Numerator:
|
|
|
|
|
|
Net income
|
$
|
1,016,700
|
|
|
$
|
1,022,023
|
|
|
$
|
447,221
|
|
Less: earnings distributed to participating securities
|
(1,228
|
)
|
|
(1,208
|
)
|
|
(1,192
|
)
|
Less: undistributed earnings allocated to participating securities
|
(9,143
|
)
|
|
(9,984
|
)
|
|
(3,380
|
)
|
Numerator for basic earnings per share
|
$
|
1,006,329
|
|
|
$
|
1,010,831
|
|
|
$
|
442,649
|
|
Add: undistributed earnings allocated to participating securities
|
9,143
|
|
|
9,984
|
|
|
3,380
|
|
Less: undistributed earnings reallocated to participating securities
|
(9,117
|
)
|
|
(9,939
|
)
|
|
(3,361
|
)
|
Numerator for diluted earnings per share
|
$
|
1,006,355
|
|
|
$
|
1,010,876
|
|
|
$
|
442,668
|
|
Share-based compensation
We measure compensation cost for share-based compensation on the grant date. Fair value for restricted share units is determined based on the quoted price of our common shares on the grant date. We recognize compensation expense for restricted share units, the majority of which cliff vest at the end of three years, ratably over the vesting period. For share-based awards containing performance conditions, we recognize compensation expense ratably over the vesting period when it is
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
probable that the stated performance targets will be achieved and record cumulative adjustments in the period in which estimates change. Compensation expense related to our share-based awards is included in selling, general, and administrative expense, except for a small portion recognized in Financial Services expenses. See Note 7.
Income taxes
The provision for income taxes is calculated using the asset and liability method, under which deferred tax assets and liabilities are recognized by identifying the temporary differences arising from the different treatment of items for tax and accounting purposes. In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is primarily dependent upon the generation of future taxable income. In determining the future tax consequences of events that have been recognized in the financial statements or tax returns, judgment is required. Differences between the anticipated and actual outcomes of these future tax consequences could have a material impact on our consolidated results of operations or financial position.
Unrecognized tax benefits represent the difference between tax positions taken or expected to be taken in a tax return and the benefits recognized for financial statement purposes. We follow the provisions of ASC 740 which prescribes a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. Significant judgment is required to evaluate uncertain tax positions. Our evaluations of tax positions consider a variety of factors, including relevant facts and circumstances, applicable tax law, correspondence with taxing authorities, and effective settlements of audit issues. Changes in the recognition or measurement of uncertain tax positions could result in material increases or decreases in income tax expense (benefit) in the period in which the change is made. Interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense (benefit). See Note 8.
Revenue recognition
Home sale revenues - Home sale revenues and related profit are generally recognized when title to and possession of the home are transferred to the buyer at the home closing date. Our performance obligation to deliver the agreed-upon home is generally satisfied at the home closing date. Home sale contract assets consist of cash from home closings held in escrow for our benefit, typically for less than five days, which are considered deposits in-transit and classified as cash. Contract liabilities include customer deposit liabilities related to sold but undelivered homes, which totaled $294.4 million and $254.6 million at December 31, 2019 and 2018, respectively. Substantially all of our home sales are scheduled to close and be recorded to revenue within one year from the date of receiving a customer deposit. See Note 11 for information on warranties and related obligations.
Land sale revenues - We periodically elect to sell parcels of land to third parties in the event such assets no longer fit into our strategic operating plans or are zoned for commercial or other development. Land sales are generally outright sales of specified land parcels with cash consideration due on the closing date, which is generally when performance obligations are satisfied.
Financial services revenues - Loan origination fees, commitment fees, and direct loan origination costs are recognized as incurred. Expected gains and losses from the sale of residential mortgage loans and their related servicing rights are included in the measurement of written loan commitments that are accounted for at fair value through Financial Services revenues at the time of commitment. Subsequent changes in the fair value of these loans are reflected in Financial Services revenues as they occur. Interest income is accrued from the date a mortgage loan is originated until the loan is sold. Mortgage servicing fees represent fees earned for servicing loans for various investors. Servicing fees are based on a contractual percentage of the outstanding principal balance and are credited to income when related mortgage payments are received or the sub-servicing fees are earned.
Revenues associated with our title operations are recognized as closing services are rendered and title insurance policies are issued, both of which generally occur as each home is closed. Insurance brokerage commissions relate to commissions on home and other insurance policies placed with third party carriers through various agency channels. Our performance obligations for policy renewal commissions are considered satisfied upon issuance of the initial policy, and related contract assets for estimated future renewal commissions are included in other assets and totaled $35.1 million and $30.8 million at December 31, 2019 and 2018, respectively. Contract assets totaling $27.7 million were recognized on January 1, 2018, in conjunction with the adoption of Accounting Standards Codification ("ASC") 606, "Revenue from Contracts with Customers" ("ASC 606"). Refer to "New accounting pronouncements" within Note 1 for further discussion.
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Sales incentives
When sales incentives involve a discount on the selling price of the home, we record the discount as a reduction of revenue at the time of house closing. If the sales incentive requires us to provide a free product or service to the customer, the cost of the free product or service is recorded as cost of revenues at the time of house closing.
Inventory and cost of revenues
Inventory is stated at cost unless the carrying value is determined to not be recoverable, in which case the affected inventory is written down to fair value. Cost includes land acquisition, land development, and home construction costs, including interest, real estate taxes, and certain direct and indirect overhead costs related to development and construction. For those communities for which construction and development activities have been idled, applicable interest and real estate taxes are expensed as incurred. Land acquisition and development costs are allocated to individual lots using an average lot cost determined based on the total expected land acquisition and development costs and the total expected home closings for the community. The specific identification method is used to accumulate home construction costs.
We capitalize interest cost into homebuilding inventories. Each layer of capitalized interest is amortized over a period that approximates the average life of communities under development. Interest expense is allocated over the period based on the timing of home closings.
Cost of revenues includes the construction cost, average lot cost, estimated warranty costs, and closing costs applicable to the home. Sales commissions are classified within selling, general, and administrative expenses. The construction cost of the home includes amounts paid through the closing date of the home, plus an accrual for costs incurred but not yet paid. Total community land acquisition and development costs are based on an analysis of budgeted costs compared with actual costs incurred to date and estimates to complete. The development cycles for our communities range from under one year to in excess of ten years for certain master planned communities. Adjustments to estimated total land acquisition and development costs for the community affect the amounts costed for the community’s remaining lots.
We test inventory for impairment when events and circumstances indicate that the undiscounted cash flows estimated to be generated by the community may be less than its carrying amount. Such indicators include gross margins or sales paces significantly below expectations, construction costs or land development costs significantly in excess of budgeted amounts, significant delays or changes in the planned development or strategy for the community, and other known qualitative factors. Communities that demonstrate potential impairment indicators are tested for impairment by comparing the expected undiscounted cash flows for the community to its carrying value. For those communities whose carrying values exceed the expected undiscounted cash flows, we estimate the fair value of the community, and impairment charges are recorded if the fair value of the community's inventory is less than its carrying value. See Note 2.
Land held for sale
We periodically elect to sell parcels of land to third parties in the event such assets no longer fit into our strategic operating plans or are zoned for commercial or other development. Land held for sale is recorded at the lower of cost or fair value less costs to sell. In determining the value of land held for sale, we consider recent offers received, prices for land in recent comparable sales transactions, and other factors. We record net realizable value adjustments for land held for sale within Homebuilding land sale cost of revenues. See Note 2.
Land option agreements
We enter into land option agreements in order to procure land for the construction of homes in the future. Pursuant to these land option agreements, we generally provide a deposit to the seller as consideration for the right to purchase land at different times in the future, usually at predetermined prices. Such contracts enable us to defer acquiring portions of properties owned by third parties or unconsolidated entities until we have determined whether and when to exercise our option, which may serve to reduce our financial risks associated with long-term land holdings. Option deposits and pre-acquisition costs (such as environmental testing, surveys, engineering, and entitlement costs) are capitalized if the costs are directly identifiable with the land under option, the costs would be capitalized if we owned the land, and acquisition of the property is probable. Such costs are reflected in other assets and are reclassified to inventory upon taking title to the land. We write off deposits and pre-acquisition costs when it becomes probable that we will not go forward with the project or recover the capitalized costs. Such
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
decisions take into consideration changes in local market conditions, the timing of required land purchases, the availability and best use of necessary incremental capital, and other factors. We record any such write-offs of deposits and pre-acquisition costs within other expense, net. See Note 2.
If an entity holding the land under option is a variable interest entity (“VIE”), our deposit represents a variable interest in that entity. No VIEs required consolidation at either December 31, 2019 or 2018 because we determined that we were not the primary beneficiary. Our maximum exposure to loss related to these VIEs is generally limited to our deposits and pre-acquisition costs under the applicable land option agreements. The following provides a summary of our interests in land option agreements ($000’s omitted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
December 31, 2018
|
|
Deposits and
Pre-acquisition
Costs
|
|
Remaining Purchase
Price
|
|
Deposits and
Pre-acquisition
Costs
|
|
Remaining Purchase
Price
|
Land options with VIEs
|
$
|
123,775
|
|
|
$
|
1,466,585
|
|
|
$
|
90,717
|
|
|
$
|
1,079,507
|
|
Other land options
|
175,662
|
|
|
1,755,377
|
|
|
127,851
|
|
|
1,522,903
|
|
|
$
|
299,437
|
|
|
$
|
3,221,962
|
|
|
$
|
218,568
|
|
|
$
|
2,602,410
|
|
Warranty liabilities
Home buyers are provided with a limited warranty against certain building defects, including a one-year comprehensive limited warranty and coverage for certain other aspects of the home's construction and operating systems for periods of up to (and in limited instances exceeding) 10 years. We estimate the costs to be incurred under these warranties and record a liability in the amount of such costs at the time revenue is recognized (see Note 11).
Self-insured risks
We maintain, and require the majority of our subcontractors to maintain, general liability insurance coverage, including coverage for certain construction defects. We also maintain builders' risk, property, errors and omissions, workers compensation, and other business insurance coverage. These insurance policies protect us against a portion of the risk of loss from claims, subject to certain self-insured per occurrence and aggregate retentions, deductibles, and available policy limits. However, we retain a significant portion of the overall risk for such claims. We reserve for these costs on an undiscounted basis at the time revenue is recognized for each home closing and evaluate the recorded liabilities based on actuarial analyses of our historical claims, which include estimates of claims incurred but not yet reported. Adjustments to estimated reserves are recorded in the period in which the change in estimate occurs. In certain instances, we have the ability to recover a portion of our costs under various insurance policies or from our subcontractors or other third parties. Estimates of such amounts are recorded when recovery is considered probable. See Note 11.
Residential mortgage loans available-for-sale
Substantially all of the loans originated by us and their related servicing rights are sold in the secondary mortgage market within a short period of time after origination, generally within 30 days. In accordance with ASC 825, “Financial Instruments” (“ASC 825”), we use the fair value option to record residential mortgage loans available-for-sale. Election of the fair value option for these loans allows a better offset of the changes in fair values of the loans and the derivative instruments used to economically hedge them without having to apply complex hedge accounting provisions. We do not designate any derivative instruments as hedges or apply the hedge accounting provisions of ASC 815, “Derivatives and Hedging" ("ASC 815"). See Note 11 for discussion of the risks retained related to mortgage loan originations.
Expected gains and losses from the sale of residential mortgage loans and their related servicing rights are included in the measurement of written loan commitments that are accounted for at fair value through Financial Services revenues at the time of commitment. Subsequent changes in the fair value of these loans are reflected in Financial Services revenues as they occur. At December 31, 2019 and 2018, residential mortgage loans available-for-sale had an aggregate fair value of $509.0 million and $461.4 million, respectively, and an aggregate outstanding principal balance of $494.1 million and $444.2 million, respectively. The net gain (loss) resulting from changes in fair value of these loans totaled $(0.6) million and $0.7 million for
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
the years ended December 31, 2019 and 2018, respectively. These changes in fair value were substantially offset by changes in fair value of the corresponding hedging instruments. Net gains from the sale of mortgages during 2019, 2018, and 2017 were $129.4 million, $111.3 million, and $110.9 million, respectively, and have been included in Financial Services revenues.
Mortgage servicing rights
We sell the servicing rights for the loans we originate through fixed price servicing sales contracts to reduce the risks and costs inherent in servicing loans. This strategy results in owning the servicing rights for only a short period of time. The servicing sales contracts provide for the reimbursement of payments made by the purchaser if loans prepay within specified periods of time, generally within 90 to 120 days after sale. We establish reserves for this exposure at the time the sale is recorded. Such reserves were immaterial at December 31, 2019 and 2018.
Interest income on mortgage loans
Interest income on mortgage loans is recorded in Financial Services revenues, accrued from the date a mortgage loan is originated until the loan is sold, and totaled $9.7 million, $11.3 million, and $9.5 million in 2019, 2018, and 2017, respectively. Loans are placed on non-accrual status once they become greater than 90 days past due their contractual terms. Subsequent payments received are applied according to the contractual terms of the loan. Mortgage discounts are not amortized as interest income due to the short period the loans are held until sale to third party investors.
Derivative instruments and hedging activities
We are party to interest rate lock commitments ("IRLCs") with customers resulting from our mortgage origination operations. At December 31, 2019 and 2018, we had aggregate IRLCs of $255.3 million and $285.0 million, respectively, which were originated at interest rates prevailing at the date of commitment. Since we can terminate a loan commitment if the borrower does not comply with the terms of the contract, and some loan commitments may expire without being drawn upon, these commitments do not necessarily represent future cash requirements. We evaluate the creditworthiness of these transactions through our normal credit policies.
We hedge our exposure to interest rate market risk relating to residential mortgage loans available-for-sale and IRLCs using forward contracts on mortgage-backed securities, which are commitments to either purchase or sell a specified financial instrument at a specified future date for a specified price, and whole loan investor commitments, which are obligations of an investor to buy loans at a specified price within a specified time period. Forward contracts on mortgage-backed securities are the predominant derivative financial instruments we use to minimize market risk during the period from the time we extend an interest rate lock to a loan applicant until the time the loan is sold to an investor. At December 31, 2019 and 2018, we had unexpired forward contracts of $518.2 million and $511.0 million, respectively, and whole loan investor commitments of $200.7 million and $187.8 million, respectively. Changes in the fair value of IRLCs and other derivative financial instruments are recognized in Financial Services revenues, and the fair values are reflected in other assets or other liabilities, as applicable.
There are no credit-risk-related contingent features within our derivative agreements, and counterparty risk is considered minimal. Gains and losses on IRLCs are substantially offset by corresponding gains or losses on forward contracts on mortgage-backed securities and whole loan investor commitments. We are generally not exposed to variability in cash flows of derivative instruments for more than approximately 60 days.
The fair values of derivative instruments and their location in the Consolidated Balance Sheets are summarized below ($000’s omitted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
December 31, 2018
|
|
Other Assets
|
|
Other Liabilities
|
|
Other Assets
|
|
Other Liabilities
|
Interest rate lock commitments
|
$
|
8,351
|
|
|
$
|
149
|
|
|
$
|
9,196
|
|
|
$
|
161
|
|
Forward contracts
|
299
|
|
|
1,372
|
|
|
315
|
|
|
7,229
|
|
Whole loan commitments
|
880
|
|
|
284
|
|
|
393
|
|
|
1,111
|
|
|
$
|
9,530
|
|
|
$
|
1,805
|
|
|
$
|
9,904
|
|
|
$
|
8,501
|
|
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
New accounting pronouncements
We adopted ASU No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting" ("ASU 2016-09"), effective January 1, 2017. Excess tax benefits or deficiencies for stock-based compensation are now reflected in the Consolidated Statements of Operations as a component of income tax expense, whereas previously they were recognized in equity. We have also elected to account for forfeitures as they occur, rather than estimate expected forfeitures. As a result of adopting ASU 2016-09, we applied the modified retrospective approach and recorded a cumulative-effect adjustment that increased our retained earnings and deferred tax assets as of January 1, 2017 by $18.6 million, as a result of previously unrecognized excess tax benefits (see Note 8). Additionally, the impact of recognizing excess tax benefits and deficiencies in the consolidated statement of operations resulted in a $7.7 million reduction in our income tax expense for 2017. The remaining aspects of adopting ASU 2016-09 did not have a material impact on our financial statements.
On January 1, 2018, we adopted ASC 606, a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services and satisfaction of performance obligations to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. We applied the modified retrospective method to contracts that were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the previous accounting standards. We recorded a net increase to opening retained earnings of $22.4 million, net of tax, as of January 1, 2018, due to the cumulative impact of adopting ASC 606, with the impact primarily related to the recognition of contract assets for insurance brokerage commission renewals. There was not a material impact to revenues as a result of applying ASC 606 and there have not been significant changes to our business processes, systems, or internal controls as a result of implementing the standard.
On January 1, 2019, we adopted Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) and related amendments using a modified retrospective approach with an effective date as of January 1, 2019. ASU 2016-02 requires leases with durations greater than 12 months to be recorded on balance sheet in our consolidated financial statements. Prior year financial statements were not required to be recast under the new standard and, therefore, have not been reflected as such in our consolidated financial statements. We elected the package of transition practical expedients, which allowed us to carry forward our historical assessment of (1) whether contracts are or contain leases, (2) lease classification, and (3) initial direct costs. The adoption of ASU 2016-02 had no impact on retained earnings. See Note 11 “Leases” for additional information about this adoption.
In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"), which changes the impairment model for most financial assets and certain other instruments from an "incurred loss" approach to a new "expected credit loss" methodology. The standard is effective for us for annual and interim periods beginning January 1, 2020. We are currently evaluating the impact the standard will have on our financial statements and do not expect a material impact on our financial statements.
In January 2017, the FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment" ("ASU 2017-04"), which removes the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for us for annual and interim periods beginning January 1, 2020, and will be applied prospectively. We do not expect ASU 2017-04 to have a material impact on our financial statements.
In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes" ("ASU 2019-12"), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for the Company beginning January 1, 2021. The Company is currently evaluating the impact of the adoption of ASU 2019-12 on its financial statements.
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Inventory and land held for sale
Major components of inventory at December 31, 2019 and 2018 were ($000’s omitted):
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
Homes under construction
|
$
|
2,899,016
|
|
|
$
|
2,630,158
|
|
Land under development
|
4,347,107
|
|
|
4,129,225
|
|
Raw land
|
434,491
|
|
|
493,970
|
|
|
$
|
7,680,614
|
|
|
$
|
7,253,353
|
|
In all periods presented, we capitalized all Homebuilding interest costs into inventory because the level of our active inventory exceeded our debt levels. Activity related to interest capitalized into inventory is as follows ($000’s omitted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Interest in inventory, beginning of period
|
$
|
227,495
|
|
|
$
|
226,611
|
|
|
$
|
186,097
|
|
Interest capitalized
|
164,114
|
|
|
172,809
|
|
|
181,719
|
|
Interest expensed
|
(181,226
|
)
|
|
(171,925
|
)
|
|
(141,205
|
)
|
Interest in inventory, end of period
|
$
|
210,383
|
|
|
$
|
227,495
|
|
|
$
|
226,611
|
|
Land-related charges
We recorded the following land-related charges ($000's omitted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations Classification
|
|
2019
|
|
2018
|
|
2017
|
Net realizable value adjustments ("NRV") - land held for sale
|
Land sale cost of revenues
|
|
$
|
5,368
|
|
|
$
|
11,489
|
|
|
$
|
83,576
|
|
Land impairments
|
Home sale cost of revenues
|
|
8,617
|
|
|
70,965
|
|
|
88,952
|
|
Impairments of unconsolidated entities
|
Other expense, net
|
|
—
|
|
|
—
|
|
|
8,018
|
|
Write-offs of deposits and pre-acquisition costs
|
Other expense, net
|
|
13,116
|
|
|
16,992
|
|
|
11,367
|
|
Total land-related charges
|
|
|
$
|
27,101
|
|
|
$
|
99,446
|
|
|
$
|
191,913
|
|
Land-related charges have not been a significant broad-based issue since the U.S. housing recovery began in 2012. However, we experienced changes to facts and circumstances related to specific individual communities in 2018 and 2017 that elevated such charges.
As explained in Note 1, we periodically elect to sell parcels of land to third parties in the event such assets no longer fit into our strategic operating plans or are zoned for commercial or other development. The higher level of NRVs in 2017 were primarily the result of a plan we announced in May 2017 to sell select non-core and underutilized land parcels following a strategic review of our land portfolio. As part of that review, we determined that we would sell certain inactive land parcels, representing approximately 17 communities and 4,600 lots. These land parcels were located in diverse geographic areas and no longer fit into our strategic plans. The land parcels identified for sale included: land requiring significant additional development spend that would not yield suitable returns; land in excess of near-term need; and land entitled for certain product types inconsistent with our primary offerings. As a consequence of the change in strategy with respect to the future use of these land parcels, we recorded NRVs totaling $81.0 million in the three months ended June 30, 2017, related to inventory with a pre-NRV carrying value of $151.0 million. An additional $2.6 million of NRVs were recorded throughout 2017 as the result of adjustments to the aforementioned valuations as the sale process progressed or related to other land parcels we chose to sell. The estimated fair values of these inactive land parcels that were held for sale were generally based on comparisons to market comparable transactions, letters of intent, active negotiations with market participants, or similar market-based information
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
supplemented in certain instances by estimated future net cash flows discounted for inherent risk associated with each underlying asset. The majority of these parcels were sold to third parties in either 2017 or 2018; such transactions are classified as land sale revenues.
Land impairments relate to communities that are either active or that we intend to eventually open and build out. On a quarterly basis, we review each of our land positions for potential indicators of impairment and perform detailed impairment calculations for communities that display indicators of potential impairment.
|
|
•
|
In 2019, we recorded impairment charges of $8.6 million relating to a number of communities where we experienced slower sales paces and lower average selling prices.
|
|
|
•
|
In 2018, we received an unfavorable determination related to one of our communities that had been idle while pursuing entitlements for over 10 years. This unfavorable determination caused a significant reduction in the number of lots and necessitated certain changes to the expected product offering and land development that, combined with rising costs and a softening in demand in the applicable local market, resulted in an impairment of $59.2 million. Impairments for all other communities in 2018 totaled $11.8 million.
|
|
|
•
|
In 2017, our impairments resulted from:
|
|
|
–
|
As part of the May 2017 strategic review, we decided to accelerate the monetization of two communities through a combination of changing the product offerings and lowering the sales prices within the communities. This decision resulted in land impairments of $31.5 million in the three months ended June 30, 2017.
|
|
|
–
|
Separately, we recorded an impairment charge of $53.0 million related to one large project. This impairment resulted from increases in our estimates for future land development and house construction costs combined with lower pricing and slower sales paces for this project, which is located in an area where competitive conditions limit our ability to offset our cost increases through higher sales prices. Impairments for all other communities in 2017 totaled $4.5 million.
|
We determine the fair value of a community's inventory using a combination of discounted cash flow models and market comparable transactions, where available. These estimated cash flows are significantly impacted by estimates related to expected average selling prices, expected sales paces, expected land development and construction timelines, and anticipated land development, construction, and overhead costs. The assumptions used in the cash flow models are specific to each community and typically do not assume improvements in market conditions in the near term. The discount rate used in determining each community's fair value depends on the stage of development of the community and other specific factors that increase or decrease the inherent risks associated with the community's cash flow streams. Accordingly, determining the fair value of a community's inventory involves a number of variables, many of which are interrelated. The table below summarizes certain quantitative unobservable inputs utilized in determining the fair value of impaired communities ($000's omitted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communities Impaired
|
|
Fair Value of Communities Impaired, Net of Impairment Charges
|
|
Impairment Charges
|
|
Average Selling Price
|
|
Quarterly Sales Pace (homes)
|
|
Discount Rate
|
2019
|
5
|
|
|
$
|
12,589
|
|
|
$
|
8,617
|
|
|
$284 to $550
|
|
1 to 6
|
|
12% to 14%
|
2018
|
8
|
|
|
$
|
24,062
|
|
|
$
|
70,965
|
|
|
$287 to $586
|
|
2 to 11
|
|
12% to 22%
|
2017
|
9
|
|
|
$
|
19,252
|
|
|
$
|
88,952
|
|
|
$207 to $818
|
|
1 to 11
|
|
12% to 25%
|
Our evaluations for impairments are based on our best estimates of the future cash flows for our communities. Due to uncertainties in the estimation process, the significant volatility in demand for new housing, the long life cycles of certain of our communities, and potential changes in our strategy related to certain communities, actual results could differ significantly from such estimates.
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. Segment information
Our Homebuilding operations are engaged in the acquisition and development of land primarily for residential purposes within the U.S. and the construction of housing on such land. Home sale revenues for detached and attached homes were $8.3 billion and $1.6 billion in 2019, $8.2 billion and $1.6 billion in 2018, and $7.3 billion and $1.1 billion in 2017, respectively. For reporting purposes, our Homebuilding operations are aggregated into six reportable segments:
|
|
|
|
Northeast:
|
|
Connecticut, Maryland, Massachusetts, New Jersey, Pennsylvania, Virginia
|
Southeast:
|
|
Georgia, North Carolina, South Carolina, Tennessee
|
Florida:
|
|
Florida
|
Midwest:
|
|
Illinois, Indiana, Kentucky, Michigan, Minnesota, Ohio
|
Texas:
|
|
Texas
|
West:
|
|
Arizona, California, Nevada, New Mexico, Washington
|
We also have a reportable segment for our Financial Services operations, which consist principally of mortgage banking, title, and insurance brokerage operations. The Financial Services segment operates generally in the same markets as the Homebuilding segments. Evaluation of segment performance is generally based on income before income taxes. Each reportable segment generally follows the same accounting policies described in Note 1.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Data by Segment ($000’s omitted)
Years Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Revenues:
|
|
|
|
|
|
Northeast
|
$
|
797,963
|
|
|
$
|
839,700
|
|
|
$
|
693,877
|
|
Southeast
|
1,684,655
|
|
|
1,746,161
|
|
|
1,564,116
|
|
Florida
|
2,074,194
|
|
|
1,944,170
|
|
|
1,494,389
|
|
Midwest
|
1,495,037
|
|
|
1,497,389
|
|
|
1,450,192
|
|
Texas
|
1,389,211
|
|
|
1,301,004
|
|
|
1,168,755
|
|
West
|
2,537,466
|
|
|
2,654,525
|
|
|
2,014,197
|
|
|
9,978,526
|
|
|
9,982,949
|
|
|
8,385,526
|
|
Financial Services
|
234,431
|
|
|
205,382
|
|
|
192,160
|
|
Consolidated revenues
|
$
|
10,212,957
|
|
|
$
|
10,188,331
|
|
|
$
|
8,577,686
|
|
|
|
|
|
|
|
Income before income taxes (a):
|
|
|
|
|
|
Northeast
|
$
|
116,221
|
|
|
$
|
29,629
|
|
|
$
|
21,190
|
|
Southeast (b)
|
175,763
|
|
|
202,639
|
|
|
122,532
|
|
Florida (b)
|
309,596
|
|
|
289,418
|
|
|
208,825
|
|
Midwest
|
184,438
|
|
|
179,568
|
|
|
178,231
|
|
Texas
|
195,751
|
|
|
193,946
|
|
|
182,862
|
|
West (c)
|
386,361
|
|
|
511,828
|
|
|
229,504
|
|
Other homebuilding (d)
|
(131,869
|
)
|
|
(118,224
|
)
|
|
(77,812
|
)
|
|
1,236,261
|
|
|
1,288,804
|
|
|
865,332
|
|
Financial Services
|
103,315
|
|
|
58,736
|
|
|
73,496
|
|
Consolidated income before income taxes
|
$
|
1,339,576
|
|
|
$
|
1,347,540
|
|
|
$
|
938,828
|
|
|
|
(a)
|
Includes certain land-related charges (see the following table and Note 2).
|
|
|
(b)
|
Includes warranty charges totaling $14.8 million in 2019 related to a closed-out community in Southeast and $12.4 million in 2017 related to a closed-out community in Florida (see Note 11).
|
|
|
(c)
|
West includes gains of $26.4 million in 2018 related to two land sale transactions in California.
|
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
|
|
(d)
|
Other homebuilding includes the amortization of intangible assets, amortization of capitalized interest, and other items not allocated to the operating segments. Also included are write-offs of insurance receivables associated with the resolution of certain insurance matters totaling $22.6 million and $29.6 million in 2019 and 2017, respectively (see Note 11), and general liability insurance reserve reversals of $49.4 million, $35.9 million, and $97.8 million in 2019, 2018 and 2017, respectively (see Note 11).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Data by Segment ($000's omitted)
Years Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Land-related charges*:
|
|
|
|
|
|
Northeast
|
$
|
1,122
|
|
|
$
|
74,488
|
|
|
$
|
51,362
|
|
Southeast
|
15,697
|
|
|
8,140
|
|
|
55,689
|
|
Florida
|
2,811
|
|
|
1,166
|
|
|
9,702
|
|
Midwest
|
2,581
|
|
|
7,361
|
|
|
8,917
|
|
Texas
|
1,151
|
|
|
1,204
|
|
|
2,521
|
|
West
|
2,568
|
|
|
5,159
|
|
|
56,996
|
|
Other homebuilding
|
1,171
|
|
|
1,928
|
|
|
6,726
|
|
|
$
|
27,101
|
|
|
$
|
99,446
|
|
|
$
|
191,913
|
|
|
|
*
|
Land-related charges include land impairments, net realizable value adjustments for land held for sale, and write-offs of deposits and pre-acquisition costs for land option contracts we elected not to pursue. Other homebuilding consists primarily of write-offs of capitalized interest related to such land-related charges. See Note 2 for additional discussion of these charges.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Data by Segment ($000's omitted)
Years Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Depreciation and amortization:
|
|
|
|
|
|
Northeast
|
$
|
1,962
|
|
|
$
|
2,093
|
|
|
$
|
2,392
|
|
Southeast
|
4,448
|
|
|
5,231
|
|
|
5,117
|
|
Florida
|
5,775
|
|
|
4,893
|
|
|
4,883
|
|
Midwest
|
4,417
|
|
|
4,271
|
|
|
4,449
|
|
Texas
|
3,423
|
|
|
3,082
|
|
|
3,301
|
|
West
|
9,317
|
|
|
6,758
|
|
|
5,828
|
|
Other homebuilding (a)
|
19,553
|
|
|
18,908
|
|
|
21,326
|
|
|
48,895
|
|
|
45,236
|
|
|
47,296
|
|
Financial Services
|
5,104
|
|
|
4,193
|
|
|
3,702
|
|
|
$
|
53,999
|
|
|
$
|
49,429
|
|
|
$
|
50,998
|
|
|
|
(a)
|
Other homebuilding includes amortization of intangible assets.
|
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Data by Segment
|
|
($000's omitted)
|
|
December 31, 2019
|
|
Homes Under
Construction
|
|
Land Under
Development
|
|
Raw Land
|
|
Total
Inventory
|
|
Total
Assets
|
Northeast
|
$
|
345,644
|
|
|
$
|
242,666
|
|
|
$
|
25,098
|
|
|
$
|
613,408
|
|
|
$
|
698,661
|
|
Southeast
|
430,008
|
|
|
724,258
|
|
|
72,804
|
|
|
1,227,070
|
|
|
1,354,086
|
|
Florida
|
539,895
|
|
|
894,716
|
|
|
99,228
|
|
|
1,533,839
|
|
|
1,700,198
|
|
Midwest
|
315,822
|
|
|
464,733
|
|
|
31,881
|
|
|
812,436
|
|
|
886,889
|
|
Texas
|
343,230
|
|
|
447,707
|
|
|
84,926
|
|
|
875,863
|
|
|
949,236
|
|
West
|
881,551
|
|
|
1,289,255
|
|
|
105,606
|
|
|
2,276,412
|
|
|
2,538,803
|
|
Other homebuilding (a)
|
42,866
|
|
|
283,772
|
|
|
14,948
|
|
|
341,586
|
|
|
1,953,440
|
|
|
2,899,016
|
|
|
4,347,107
|
|
|
434,491
|
|
|
7,680,614
|
|
|
10,081,313
|
|
Financial Services
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
634,284
|
|
|
$
|
2,899,016
|
|
|
$
|
4,347,107
|
|
|
$
|
434,491
|
|
|
$
|
7,680,614
|
|
|
$
|
10,715,597
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
Homes Under
Construction
|
|
Land Under
Development
|
|
Raw Land
|
|
Total
Inventory
|
|
Total
Assets
|
Northeast
|
$
|
268,900
|
|
|
$
|
291,467
|
|
|
$
|
52,245
|
|
|
$
|
612,612
|
|
|
$
|
704,515
|
|
Southeast
|
443,140
|
|
|
676,087
|
|
|
90,332
|
|
|
1,209,559
|
|
|
1,347,427
|
|
Florida
|
467,625
|
|
|
892,669
|
|
|
85,321
|
|
|
1,445,615
|
|
|
1,601,906
|
|
Midwest
|
314,442
|
|
|
433,056
|
|
|
29,908
|
|
|
777,406
|
|
|
849,596
|
|
Texas
|
284,405
|
|
|
427,124
|
|
|
98,415
|
|
|
809,944
|
|
|
881,629
|
|
West
|
805,709
|
|
|
1,131,841
|
|
|
118,579
|
|
|
2,056,129
|
|
|
2,208,092
|
|
Other homebuilding (a)
|
45,937
|
|
|
276,981
|
|
|
19,170
|
|
|
342,088
|
|
|
2,006,825
|
|
|
2,630,158
|
|
|
4,129,225
|
|
|
493,970
|
|
|
7,253,353
|
|
|
9,599,990
|
|
Financial Services
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
572,986
|
|
|
$
|
2,630,158
|
|
|
$
|
4,129,225
|
|
|
$
|
493,970
|
|
|
$
|
7,253,353
|
|
|
$
|
10,172,976
|
|
|
|
(a)
|
Other homebuilding primarily includes cash and equivalents, capitalized interest, intangibles, deferred tax assets, and other corporate items that are not allocated to the operating segments.
|
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. Investments in unconsolidated entities
We participate in a number of joint ventures and other investments with independent third parties. These entities generally purchase, develop, and sell land, including selling land to us for use in our homebuilding operations. A summary of our investments in such entities is presented below ($000’s omitted):
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2019
|
|
2018
|
Investments in joint ventures with limited recourse debt
|
$
|
39,527
|
|
|
$
|
31,551
|
|
Investments in joint ventures with debt non-recourse to PulteGroup
|
3,655
|
|
|
3,471
|
|
Investments in other unconsolidated entities
|
16,584
|
|
|
19,568
|
|
Total investments in unconsolidated entities
|
$
|
59,766
|
|
|
$
|
54,590
|
|
|
|
|
|
Total joint venture debt
|
$
|
775
|
|
|
$
|
42,948
|
|
|
|
|
|
PulteGroup proportionate share of joint venture debt:
|
|
|
|
Joint venture debt with limited recourse guaranties
|
$
|
—
|
|
|
$
|
21,059
|
|
Joint venture debt non-recourse to PulteGroup
|
205
|
|
|
217
|
|
PulteGroup's total proportionate share of joint venture debt
|
$
|
205
|
|
|
$
|
21,276
|
|
In 2019, 2018, and 2017, we recognized earnings (losses) from unconsolidated joint ventures of $0.7 million, $2.7 million, and $(2.0) million, respectively. We received distributions from our unconsolidated joint ventures of $5.1 million, $12.1 million, and $9.4 million, in 2019, 2018, and 2017, respectively. We made capital contributions of $9.5 million, $1.0 million and $23.0 million in 2019, 2018, and 2017, respectively.
The timing of cash flows related to a joint venture and any related financing agreements varies by agreement. If additional capital contributions are required and approved by the joint venture, we would need to contribute our pro rata portion of those capital needs in order to not dilute our ownership in the joint ventures. While future capital contributions may be required, we believe the total amount of such contributions will be limited. Our maximum financial exposure related to joint ventures is unlikely to exceed the combined investment and limited recourse guaranty totals.
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Debt
Our notes payable are summarized as follows ($000’s omitted):
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2019
|
|
2018
|
4.250% unsecured senior notes due March 2021 (a)
|
$
|
425,954
|
|
|
$
|
700,000
|
|
5.500% unsecured senior notes due March 2026 (a)
|
700,000
|
|
|
700,000
|
|
5.000% unsecured senior notes due January 2027 (a)
|
600,000
|
|
|
600,000
|
|
7.875% unsecured senior notes due June 2032 (a)
|
300,000
|
|
|
300,000
|
|
6.375% unsecured senior notes due May 2033 (a)
|
400,000
|
|
|
400,000
|
|
6.000% unsecured senior notes due February 2035 (a)
|
300,000
|
|
|
300,000
|
|
Net premiums, discounts, and issuance costs (b)
|
(14,295
|
)
|
|
(13,247
|
)
|
Total senior notes
|
$
|
2,711,659
|
|
|
$
|
2,986,753
|
|
Other notes payable
|
53,381
|
|
|
41,313
|
|
Notes payable
|
$
|
2,765,040
|
|
|
$
|
3,028,066
|
|
Estimated fair value
|
$
|
3,152,046
|
|
|
$
|
2,899,143
|
|
|
|
(a)
|
Redeemable prior to maturity; guaranteed on a senior basis by certain wholly-owned subsidiaries.
|
|
|
(b)
|
The carrying value of senior notes reflects the impact of premiums, discounts, and issuance costs that are amortized to interest cost over the respective terms of the senior notes.
|
The indentures governing the senior notes impose certain restrictions on the incurrence of additional debt along with other limitations. At December 31, 2019, we were in compliance with all of the covenants and requirements under the senior notes. Refer to Note 12 for supplemental consolidating financial information.
Other notes payable include non-recourse and limited recourse collateralized notes with third parties that totaled $53.4 million and $41.3 million at December 31, 2019 and 2018, respectively. These notes have maturities ranging up to three years, are secured by the applicable land positions to which they relate, and have no recourse to any other assets. The stated interest rates on these notes range up to 8.00%.
We retired outstanding debt totaling $310.0 million, $82.8 million, and $134.7 million during 2019, 2018, and 2017, respectively. The retirements in 2019 included a tender offer to retire $274.0 million of our unsecured senior notes maturing in 2021 which resulted in a loss of $4.9 million, which included the write-off of debt issuance costs, unamortized discounts and premiums, and transaction fees related to the repurchased debt, and is reflected in other expense, net.
Revolving credit facility
We maintain a revolving credit facility ("Revolving Credit Facility") maturing in June 2023 that has a maximum borrowing capacity of $1.0 billion and contains an uncommitted accordion feature that could increase the capacity to $1.5 billion, subject to certain conditions and availability of additional bank commitments. The Revolving Credit Facility also provides for the issuance of letters of credit that reduce the available borrowing capacity under the Revolving Credit Facility, with a sublimit of $500.0 million at December 31, 2019. The interest rate on borrowings under the Revolving Credit Facility may be based on either the London Interbank Offered Rate ("LIBOR") or a base rate plus an applicable margin, as defined therein. In the event that LIBOR is no longer widely available, the agreement contemplates transitioning to an alternative widely available market rate agreeable between the parties. We had no borrowings outstanding and $262.8 million and $239.4 million of letters of credit issued under the Revolving Credit Facility at December 31, 2019 and 2018, respectively.
The Revolving Credit Facility contains financial covenants that require us to maintain a minimum Tangible Net Worth, a minimum Interest Coverage Ratio, and a maximum Debt-to-Capitalization Ratio (as each term is defined in the Revolving Credit Facility). As of December 31, 2019, we were in compliance with all covenants. Outstanding balances under the Revolving Credit Facility are guaranteed by certain of our wholly-owned subsidiaries. Our available and unused borrowings under the Revolving Credit Facility, net of outstanding letters of credit, amounted to $737.2 million and $760.6 million as of December 31, 2019 and 2018, respectively.
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Pulte Mortgage
Pulte Mortgage maintains a master repurchase agreement with third party lenders. In August 2019, Pulte Mortgage entered into an amended and restated repurchase agreement (the “Repurchase Agreement”) that extended the maturity date to July 2020. The maximum aggregate commitment was $375.0 million during the seasonally high borrowing period from December 26, 2019 through January 13, 2020. At all other times, the maximum aggregate commitment ranges from $220.0 million to $270.0 million. The purpose of the changes in capacity during the term of the agreement is to lower associated fees during seasonally lower volume periods of mortgage origination activity. Borrowings under the Repurchase Agreement are secured by residential mortgage loans available-for-sale. The Repurchase Agreement contains various affirmative and negative covenants applicable to Pulte Mortgage, including quantitative thresholds related to net worth, net income, and liquidity. Pulte Mortgage had $326.6 million and $348.4 million outstanding under the Repurchase Agreement at December 31, 2019, and 2018, respectively, and was in compliance with its covenants and requirements as of such dates.
The following is aggregate borrowing information for our mortgage operations ($000’s omitted):
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2019
|
|
2018
|
Available credit lines
|
$
|
375,000
|
|
|
$
|
520,000
|
|
Unused credit lines
|
$
|
48,427
|
|
|
$
|
171,588
|
|
Weighted-average interest rate
|
4.16
|
%
|
|
4.27
|
%
|
6. Shareholders’ equity
Our declared quarterly cash dividends totaled $124.4 million, $108.5 million, and $110.0 million in 2019, 2018, and 2017, respectively. Under a share repurchase program authorized by our Board of Directors, we repurchased 8.4 million, 10.9 million, and 35.4 million shares in 2019, 2018, and 2017, respectively, for a total of $274.3 million, $294.6 million, and $910.3 million in 2019, 2018, and 2017, respectively. At December 31, 2019, we had remaining authorization to repurchase $525.5 million of common shares.
Under our stock compensation plans, we accept shares as payment under certain conditions related to stock option exercises and vesting of restricted shares and share units, generally related to the payment of tax obligations. During 2019, 2018, and 2017, employees surrendered shares valued at $11.5 million, $7.9 million, and $6.0 million, respectively, under these plans. Such share transactions are excluded from the above noted share repurchase authorization.
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Stock compensation plans
We maintain a stock award plan for both employees and non-employee directors. The plan provides for the grant of a variety of equity awards, including options (generally non-qualified options), restricted shares, restricted share units ("RSUs"), and performance shares to key employees (as determined by the Compensation and Management Development Committee of the Board of Directors) for periods not to exceed ten years. Non-employee directors are awarded an annual distribution of common shares. Options granted to employees generally vest incrementally over four years and are generally exercisable for ten years from the vest date. Shares issued upon the exercise of a stock option are from newly issued shares. RSUs represent the right to receive an equal number of common shares and are converted into common shares upon distribution. RSUs generally cliff vest after three years. RSU holders receive cash dividends during the vesting period. Performance shares vest upon attainment of the stated performance targets and minimum service requirements and are converted into common shares upon distribution. As of December 31, 2019, there were 23.6 million shares that remained available for grant under the plan. Our stock compensation expense for the three years ended December 31, 2019, is presented below ($000's omitted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
RSUs and performance shares
|
$
|
21,538
|
|
|
$
|
20,145
|
|
|
$
|
24,207
|
|
Long-term incentive plans
|
6,830
|
|
|
8,145
|
|
|
9,476
|
|
|
$
|
28,368
|
|
|
$
|
28,290
|
|
|
$
|
33,683
|
|
Stock options
A summary of stock option activity for the three years ended December 31, 2019, is presented below (000’s omitted, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
Shares
|
|
Weighted-
Average
Per Share
Exercise Price
|
|
Shares
|
|
Weighted-
Average
Per Share
Exercise Price
|
|
Shares
|
|
Weighted-
Average
Per Share
Exercise Price
|
Outstanding, beginning of year
|
563
|
|
|
$
|
12
|
|
|
1,168
|
|
|
$
|
11
|
|
|
3,623
|
|
|
$
|
12
|
|
Granted
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Exercised
|
(547
|
)
|
|
12
|
|
|
(605
|
)
|
|
11
|
|
|
(2,353
|
)
|
|
12
|
|
Forfeited
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(102
|
)
|
|
28
|
|
Outstanding, end of year
|
16
|
|
|
$
|
8
|
|
|
563
|
|
|
$
|
12
|
|
|
1,168
|
|
|
$
|
11
|
|
Options exercisable at year end
|
16
|
|
|
$
|
8
|
|
|
563
|
|
|
$
|
12
|
|
|
1,168
|
|
|
$
|
11
|
|
We did not issue any stock options during 2019, 2018, or 2017. As a result, there is no unrecognized compensation cost related to stock option awards at December 31, 2019. The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. The aggregate intrinsic value of stock options that were exercised during 2019, 2018, and 2017 was $10.5 million, $11.7 million, and $31.1 million, respectively. As of December 31, 2019, options outstanding, all of which were exercisable, had an intrinsic value of $0.5 million and an exercise price of $8.
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Restricted shares (including RSUs and performance shares)
A summary of restricted share activity, including RSUs and performance shares, for the three years ended December 31, 2019, is presented below (000’s omitted, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
Shares
|
|
Weighted-
Average
Per Share
Grant Date
Fair Value
|
|
Shares
|
|
Weighted-
Average
Per Share
Grant Date
Fair Value
|
|
Shares
|
|
Weighted-
Average
Per Share
Grant Date
Fair Value
|
Outstanding, beginning of
year
|
3,074
|
|
|
$
|
23
|
|
|
3,271
|
|
|
$
|
19
|
|
|
2,974
|
|
|
$
|
19
|
|
Granted
|
932
|
|
|
27
|
|
|
833
|
|
|
31
|
|
|
1,251
|
|
|
21
|
|
Distributed
|
(1,181
|
)
|
|
17
|
|
|
(786
|
)
|
|
22
|
|
|
(775
|
)
|
|
19
|
|
Forfeited
|
(144
|
)
|
|
26
|
|
|
(244
|
)
|
|
22
|
|
|
(179
|
)
|
|
19
|
|
Outstanding, end of year
|
2,681
|
|
|
$
|
26
|
|
|
3,074
|
|
|
$
|
23
|
|
|
3,271
|
|
|
$
|
19
|
|
Vested, end of year
|
153
|
|
|
$
|
20
|
|
|
129
|
|
|
$
|
21
|
|
|
152
|
|
|
$
|
17
|
|
During 2019, 2018, and 2017, the total fair value of shares vested during the year was $20.0 million, $17.1 million, and $15.0 million, respectively. Unamortized compensation cost related to restricted share awards was $19.7 million at December 31, 2019. These costs will be expensed over a weighted-average period of approximately 2 years. Additionally, there were 0.2 million RSUs outstanding at December 31, 2019, that had vested but had not yet been paid out because the payout date had been deferred by the holders.
Long-term incentive plans
We maintain long-term incentive plans for senior management and other employees that provide awards based on the achievement of stated performance targets over three-year periods. Awards are stated in dollars but are settled in common shares based on the stock price at the end of the performance period. If the share price falls below a floor of $5.00 per share at the end of the performance period or we do not have a sufficient number of shares available under our stock incentive plans at the time of settlement, then a portion of each award will be paid in cash. We adjust the liabilities and recognize the expense associated with the awards based on the probability of achieving the stated performance targets at each reporting period. Liabilities for these awards totaled $15.0 million and $17.0 million at December 31, 2019 and 2018, respectively.
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. Income taxes
Components of current and deferred income tax expense (benefit) are as follows ($000’s omitted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Current expense (benefit)
|
|
|
|
|
|
Federal
|
$
|
196,186
|
|
|
$
|
(44,462
|
)
|
|
$
|
81,101
|
|
State and other
|
21,252
|
|
|
7,202
|
|
|
(11,801
|
)
|
|
$
|
217,438
|
|
|
$
|
(37,260
|
)
|
|
$
|
69,300
|
|
Deferred expense (benefit)
|
|
|
|
|
|
Federal
|
$
|
74,700
|
|
|
$
|
271,544
|
|
|
$
|
444,695
|
|
State and other
|
30,738
|
|
|
91,233
|
|
|
(22,388
|
)
|
|
$
|
105,438
|
|
|
$
|
362,777
|
|
|
$
|
422,307
|
|
Income tax expense (benefit)
|
$
|
322,876
|
|
|
$
|
325,517
|
|
|
$
|
491,607
|
|
The following table reconciles the statutory federal income tax rate to the effective income tax rate:
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Income taxes at federal statutory rate
|
21.0
|
%
|
|
21.0
|
%
|
|
35.0
|
%
|
State and local income taxes, net of federal tax
|
3.7
|
|
|
4.0
|
|
|
3.1
|
|
Tax accounting method change
|
—
|
|
|
(2.5
|
)
|
|
—
|
|
Changes in tax laws, including the Tax Act
|
0.2
|
|
|
1.0
|
|
|
18.3
|
|
Deferred tax asset valuation allowance
|
(0.4
|
)
|
|
0.9
|
|
|
(1.1
|
)
|
Tax contingencies
|
(0.1
|
)
|
|
0.1
|
|
|
(1.0
|
)
|
Other
|
(0.3
|
)
|
|
(0.3
|
)
|
|
(1.9
|
)
|
Effective rate
|
24.1
|
%
|
|
24.2
|
%
|
|
52.4
|
%
|
In December 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made broad and complex changes to the U.S. tax code, including, but not limited to, the following that impact us: (1) reducing the U.S. federal corporate rate from 35 percent to 21 percent; (2) eliminating the corporate alternative minimum tax; (3) creating a new limitation on deductible interest expense; (4) repealing the domestic production activities deduction; (5) limiting the deductibility of certain executive compensation; and (6) limiting certain other deductions. As the result of the Tax Act, we recorded net tax expense of $172.1 million in 2017 related to the remeasurement of our deferred tax balances and other effects.
The 2019 and 2018 effective tax rates utilize the reduced 21% tax rate due to the Tax Act while the 2017 effective tax rate utilizes the prior 35% tax rate but reflects the revaluation of deferred taxes due to the Tax Act’s enactment.
The 2019 effective tax rate differs from the federal statutory rate primarily due to state income tax expense on current year earnings, changes in valuation allowances relating to projected utilization of certain state net operating loss carryforwards, and state tax law changes. The 2018 effective tax rate differs from the federal statutory rate primarily due to state income tax expense on current year earnings, tax benefits due to Internal Revenue Service (IRS) acceptance of a tax accounting method change applicable to the 2017 tax year, valuation allowances relating to projected utilization of certain state net operating loss carryforwards, and state tax law changes. The acceptance of the tax accounting method change provided a deferral of profit on home sales, which resulted in a favorable adjustment in 2018 due to the tax rate reduction in the Tax Act. The 2017 effective tax rate differs from the federal statutory rate primarily due to remeasurement of deferred taxes resulting from the enactment of the Tax Act, state income tax expense on current year earnings, the favorable resolution of certain state income tax matters, the domestic production activities deduction, and state tax law changes.
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Deferred tax assets and liabilities reflect temporary differences arising from the different treatment of items for tax and accounting purposes. Components of our net deferred tax asset are as follows ($000’s omitted):
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
2019
|
|
2018
|
Deferred tax assets:
|
|
|
|
Accrued insurance
|
$
|
142,515
|
|
|
$
|
144,225
|
|
Inventory valuation reserves
|
97,585
|
|
|
132,495
|
|
Other
|
64,373
|
|
|
50,237
|
|
NOL carryforwards:
|
|
|
|
Federal
|
12,962
|
|
|
27,122
|
|
State
|
200,710
|
|
|
228,959
|
|
Tax credits
|
8,648
|
|
|
7,692
|
|
|
526,793
|
|
|
590,730
|
|
Deferred tax liabilities:
|
|
|
|
Deferred income
|
(228,186
|
)
|
|
(195,596
|
)
|
Intangibles and other
|
(44,547
|
)
|
|
(26,966
|
)
|
|
(272,733
|
)
|
|
(222,562
|
)
|
Valuation allowance
|
(83,953
|
)
|
|
(92,589
|
)
|
Net deferred tax asset
|
$
|
170,107
|
|
|
$
|
275,579
|
|
Our federal NOL carryforward deferred tax asset of $13.0 million expires, if unused, between 2031 and 2032. We also have state NOLs in various jurisdictions which may generally be carried forward up to 20 years, depending on the jurisdiction. Our state NOL carryforward deferred tax assets will expire if unused at various dates as follows: $35.9 million from 2020 to 2024 and $164.8 million from 2025 and thereafter.
We evaluate our deferred tax assets each period to determine if a valuation allowance is required based on whether it is "more likely than not" that some portion of the deferred tax assets would not be realized. The ultimate realization of these deferred tax assets is dependent upon the generation of sufficient taxable income during future periods. We conduct our evaluation by considering all available positive and negative evidence. This evaluation considers, among other factors, historical operating results, forecasts of future profitability, the duration of statutory carryforward periods, and the outlooks for the U.S. housing industry and broader economy.
The accounting for deferred taxes is based upon estimates of future results. Differences between estimated and actual results could result in changes in the valuation of our deferred tax assets that could have a material impact on our consolidated results of operations or financial position. Changes in existing tax laws could also affect actual tax results and the realization of deferred tax assets over time.
Unrecognized tax benefits represent the difference between tax positions taken or expected to be taken in a tax return and the benefits recognized for financial statement purposes. We had $40.3 million and $30.6 million of gross unrecognized tax benefits at December 31, 2019 and 2018, respectively. If recognized, $21.6 million and $19.7 million, respectively, of these amounts would impact our effective tax rate. Additionally, we had accrued interest and penalties of $6.5 million and $5.8 million at December 31, 2019 and 2018, respectively.
It is reasonably possible within the next twelve months that our gross unrecognized tax benefits may decrease by up to $23.0 million, excluding interest and penalties, primarily due to potential settlements. A reconciliation of the change in the unrecognized tax benefits is as follows ($000’s omitted):
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Unrecognized tax benefits, beginning of period
|
$
|
30,554
|
|
|
$
|
48,604
|
|
|
$
|
21,502
|
|
Increases related to positions taken during a prior period
|
2,376
|
|
|
5,389
|
|
|
20,555
|
|
Decreases related to positions taken during a prior period
|
(7,918
|
)
|
|
(31,850
|
)
|
|
(9,665
|
)
|
Increases related to positions taken during the current period
|
16,332
|
|
|
8,411
|
|
|
18,895
|
|
Decreases related to settlements with taxing authorities
|
(1,044
|
)
|
|
—
|
|
|
—
|
|
Decreases related to lapse of the applicable statute of limitations
|
—
|
|
|
—
|
|
|
(2,683
|
)
|
Unrecognized tax benefits, end of period
|
$
|
40,300
|
|
|
$
|
30,554
|
|
|
$
|
48,604
|
|
We continue to participate in the Compliance Assurance Process (“CAP”) with the IRS as an alternative to the traditional IRS examination process. As a result of our participation in CAP, federal tax years 2017 and prior are closed. Tax year 2018 is expected to close by the first quarter of 2020. We are also currently under examination by various state taxing jurisdictions and anticipate finalizing certain of the examinations within the next twelve months. The outcome of these examinations is not yet determinable. The statute of limitations for our major tax jurisdictions remains open for examination for tax years 2015 to 2019.
9. Fair value disclosures
ASC 820, “Fair Value Measurements and Disclosures,” provides a framework for measuring fair value in generally accepted accounting principles and establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The fair value hierarchy can be summarized as follows:
|
|
|
|
Level 1
|
|
Fair value determined based on quoted prices in active markets for identical assets or liabilities.
|
|
|
Level 2
|
|
Fair value determined using significant observable inputs, generally either quoted prices in active markets for similar assets or liabilities or quoted prices in markets that are not active.
|
|
|
Level 3
|
|
Fair value determined using significant unobservable inputs, such as pricing models, discounted cash flows, or similar techniques
|
Our assets and liabilities measured or disclosed at fair value are summarized below ($000’s omitted):
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instrument
|
|
Fair Value
Hierarchy
|
|
Fair Value
|
December 31,
2019
|
|
December 31,
2018
|
|
|
|
|
|
|
|
Measured at fair value on a recurring basis:
|
|
|
|
|
|
|
Residential mortgage loans available-for-sale
|
|
Level 2
|
|
$
|
508,967
|
|
|
$
|
461,354
|
|
Interest rate lock commitments
|
|
Level 2
|
|
8,202
|
|
|
9,035
|
|
Forward contracts
|
|
Level 2
|
|
(1,073
|
)
|
|
(6,914
|
)
|
Whole loan commitments
|
|
Level 2
|
|
596
|
|
|
(718
|
)
|
|
|
|
|
|
|
|
Measured at fair value on a non-recurring basis:
|
|
|
|
|
|
|
House and land inventory
|
|
Level 3
|
|
$
|
9,979
|
|
|
$
|
18,253
|
|
Land held for sale
|
|
Level 2
|
|
4,193
|
|
|
17,813
|
|
|
|
|
|
|
|
|
Disclosed at fair value:
|
|
|
|
|
|
|
Cash and equivalents (including restricted cash)
|
|
Level 1
|
|
$
|
1,251,456
|
|
|
$
|
1,133,700
|
|
Financial Services debt
|
|
Level 2
|
|
326,573
|
|
|
348,412
|
|
Other notes payable
|
|
Level 2
|
|
53,381
|
|
|
41,313
|
|
Senior notes payable
|
|
Level 2
|
|
3,098,665
|
|
|
2,857,830
|
|
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Fair values for agency residential mortgage loans available-for-sale are determined based on quoted market prices for comparable instruments. Fair values for non-agency residential mortgage loans available-for-sale are determined based on purchase commitments from whole loan investors and other relevant market information available to management. Fair values for interest rate lock commitments, including the value of servicing rights, and forward contracts on mortgage-backed securities are valued based on market prices for similar instruments. Fair values for whole loan commitments are based on market prices for similar instruments from the specific whole loan investor.
Certain assets are required to be recorded at fair value on a non-recurring basis when events and circumstances indicate that the carrying value may not be recoverable. The non-recurring fair values included in the above table represent only those assets whose carrying values were adjusted to fair value during the quarterly period ended as of the respective balance sheet dates. See Note 1 for a more detailed discussion of the valuation methods used for inventory.
The carrying amounts of cash and equivalents, Financial Services debt, Other notes payable and the Revolving Credit Facility approximate their fair values due to their short-term nature and floating interest rate terms. The fair values of the Senior notes payable are based on quoted market prices, when available. If quoted market prices are not available, fair values are based on quoted market prices of similar issues. The carrying value of the senior notes payable was $2.8 billion and $3.0 billion at December 31, 2019 and 2018, respectively.
10. Other assets and accrued and other liabilities
Other assets are presented below ($000’s omitted):
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2019
|
|
2018
|
Accounts and notes receivable:
|
|
|
|
|
$
|
118,366
|
|
|
$
|
152,987
|
|
Other receivables
|
129,781
|
|
|
136,319
|
|
|
248,147
|
|
|
289,306
|
|
Prepaid expenses
|
123,220
|
|
|
131,523
|
|
Deposits and pre-acquisition costs (Note 1)
|
299,437
|
|
|
218,568
|
|
|
111,713
|
|
|
92,935
|
|
|
70,029
|
|
|
—
|
|
Income taxes receivable
|
2,285
|
|
|
58,090
|
|
Other
|
40,855
|
|
|
39,937
|
|
|
$
|
895,686
|
|
|
$
|
830,359
|
|
|
|
(a)
|
Right-of-use assets have no balance at December 31, 2018 as a result of the Company's adoption of ASU 2016-02 using a modified retrospective approach with an effective date of January 1, 2019 (Note 11).
|
We record receivables from various parties in the normal course of business, including amounts due from insurance companies (see Note 11) and municipalities. In certain instances, we may accept consideration for land sales or other transactions in the form of a note receivable.
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Accrued and other liabilities are presented below ($000’s omitted):
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2019
|
|
2018
|
|
$
|
709,798
|
|
|
$
|
737,013
|
|
Compensation-related liabilities
|
171,533
|
|
|
161,068
|
|
|
91,408
|
|
|
—
|
|
|
91,389
|
|
|
79,154
|
|
Accrued interest
|
48,483
|
|
|
52,521
|
|
|
25,159
|
|
|
50,282
|
|
Other
|
261,598
|
|
|
280,445
|
|
|
$
|
1,399,368
|
|
|
$
|
1,360,483
|
|
|
|
(a)
|
Lease liabilities have no balance at December 31, 2018 as a result of the Company's adoption of ASU 2016-02 using a modified retrospective approach with an effective date of January 1, 2019 (Note 11).
|
11. Commitments and contingencies
Loan origination liabilities
Our mortgage operations may be responsible for losses associated with mortgage loans originated and sold to investors in the event of errors or omissions relating to representations and warranties made by us that the loans met certain requirements, including representations as to underwriting standards, the existence of primary mortgage insurance, and the validity of certain borrower representations in connection with the loan. If a loan is determined to be faulty, we either indemnify the investor for potential future losses, repurchase the loan from the investor, or reimburse the investor's actual losses.
CTX Mortgage Company, LLC ("CTX Mortgage") was the mortgage subsidiary of Centex and ceased originating loans in December 2009. In the matter Lehman Brothers Holdings, Inc. ("Lehman") in the U.S. Bankruptcy Court in the Southern District of New York, Lehman has initiated an adversary proceeding against CTX Mortgage seeking indemnity for loans sold to it by CTX Mortgage prior to 2009. This claim is part of a broader action by Lehman in U.S. Bankruptcy Court against more than 100 mortgage originators and brokers. On August 13, 2018, the court denied a motion to dismiss filed by CTX Mortgage and other defendants, and on December 17, 2018, Lehman filed an amended adversary complaint against CTX Mortgage. Lehman's complaint alleges claims for indemnifiable losses of up to $261.0 million due from CTX Mortgage. We believe that CTX Mortgage has meritorious defenses and CTX Mortgage will continue to vigorously defend itself in this matter. We have recorded a liability for an amount that we consider to be the best estimate within a range of potential losses.
In addition, both CTX Mortgage and Pulte Mortgage sold certain loans originated prior to 2009 to financial institutions for inclusion in residential mortgage-backed securities or other securitizations issued by such financial institutions. In connection with such sales, CTX Mortgage and Pulte Mortgage have been put on notice of potential direct and / or third party claims for indemnification arising out of litigation relating to certain of these residential mortgage-backed securities or other securitizations and both CTX Mortgage and Pulte Mortgage have a pending litigation matter relating to such claims. We cannot yet quantify CTX Mortgage's or Pulte Mortgage's potential liability as a result of these indemnification obligations. We do not believe, however, that these matters will have a material adverse impact on the results of operations, financial position, or cash flows of the Company.
Estimating the required liability for these potential losses requires a significant level of management judgment. During 2018, we increased our loan origination liabilities by $16.1 million based on settlements or probable settlements of a number of claims related to loans originated by CTX Mortgage prior to 2009. Reserves provided (released) are reflected in Financial Services expenses. Changes in these liabilities were as follows ($000's omitted):
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Liabilities, beginning of period
|
$
|
50,282
|
|
|
$
|
34,641
|
|
|
$
|
35,114
|
|
Reserves provided (released), net
|
(225
|
)
|
|
16,130
|
|
|
(50
|
)
|
Payments
|
(24,898
|
)
|
|
(489
|
)
|
|
(423
|
)
|
Liabilities, end of period
|
$
|
25,159
|
|
|
$
|
50,282
|
|
|
$
|
34,641
|
|
Given the unsettled litigation, changes in values of underlying collateral over time, unpredictable factors inherent in litigation, and other uncertainties regarding the ultimate resolution of these claims, actual costs could differ from our current estimates.
Community development and other special district obligations
A community development district or similar development authority (“CDD”) is a unit of local government created under various state statutes that utilizes the proceeds from the sale of bonds to finance the construction or acquisition of infrastructure assets of a development. A portion of the liability associated with the bonds, including principal and interest, is assigned to each parcel of land within the development. This debt is typically paid by subsequent special assessments levied by the CDD on the landowners. Generally, we are only responsible for paying the special assessments for the period during which we are the landowner of the applicable parcels.
Letters of credit and surety bonds
In the normal course of business, we post letters of credit and surety bonds pursuant to certain performance-related obligations, as security for certain land option agreements, and under various insurance programs. The majority of these letters of credit and surety bonds are in support of our land development and construction obligations to various municipalities, other government agencies, and utility companies related to the construction of roads, sewers, and other infrastructure. We had outstanding letters of credit and surety bonds totaling $262.8 million and $1.4 billion, respectively, at December 31, 2019, and $239.4 million and $1.3 billion, respectively, at December 31, 2018. In the event any such letter of credit or surety bonds is drawn, we would be obligated to reimburse the issuer of the letter of credit or surety bond. We do not believe that a material amount, if any, of the letters of credit or surety bonds will be drawn. Our surety bonds generally do not have stated expiration dates; rather, we are released from the surety bonds as the underlying contractual performance is completed. Because significant construction and development work has been performed related to the applicable projects but has not yet received final acceptance by the respective counterparties, the aggregate amount of surety bonds outstanding is in excess of the projected cost of the remaining work to be performed.
Litigation and regulatory matters
We are involved in various litigation and legal claims in the normal course of our business operations, including actions brought on behalf of various classes of claimants. We are also subject to a variety of local, state, and federal laws and regulations related to land development activities, house construction standards, sales practices, mortgage lending operations, employment practices, and protection of the environment. As a result, we are subject to periodic examination or inquiry by various governmental agencies that administer these laws and regulations.
We establish liabilities for legal claims and regulatory matters when such matters are both probable of occurring and any potential loss is reasonably estimable. We accrue for such matters based on the facts and circumstances specific to each matter and revise these estimates as the matters evolve. In such cases, there may exist an exposure to loss in excess of any amounts currently accrued. In view of the inherent difficulty of predicting the outcome of these legal and regulatory matters, we generally cannot predict the ultimate resolution of the pending matters, the related timing, or the eventual loss. While the outcome of such contingencies cannot be predicted with certainty, we do not believe that the resolution of such matters will have a material adverse impact on our results of operations, financial position, or cash flows. However, to the extent the liability arising from the ultimate resolution of any matter exceeds the estimates reflected in the recorded reserves relating to such matter, we could incur additional charges that could be significant.
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Warranty liabilities
Factors that affect our warranty liabilities include the number of homes sold, historical and anticipated rates of warranty claims, and the projected cost of claims. We periodically assess the adequacy of the warranty liabilities for each geographic market in which we operate and adjust the amounts as necessary. Actual warranty costs in the future could differ from the current estimates. Changes in warranty liabilities were as follows ($000’s omitted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Warranty liabilities, beginning of period
|
$
|
79,154
|
|
|
$
|
72,709
|
|
|
$
|
66,134
|
|
Reserves provided
|
60,818
|
|
|
65,567
|
|
|
50,014
|
|
Payments
|
(75,635
|
)
|
|
(64,525
|
)
|
|
(58,780
|
)
|
Other adjustments (a)
|
27,052
|
|
|
5,403
|
|
|
15,341
|
|
Warranty liabilities, end of period
|
$
|
91,389
|
|
|
$
|
79,154
|
|
|
$
|
72,709
|
|
|
|
(a)
|
Includes charges totaling $14.8 million in 2019 related to a closed-out community in Southeast and $12.4 million in 2017 related to a closed-out community in Florida.
|
Self-insured risks
We maintain, and require our subcontractors to maintain, general liability insurance coverage. We also maintain builders' risk, property, errors and omissions, workers compensation, and other business insurance coverage. These insurance policies protect us against a portion of the risk of loss from claims. However, we retain a significant portion of the overall risk for such claims either through policies issued by our captive insurance subsidiaries or through our own self-insured per occurrence and aggregate retentions, deductibles, and claims in excess of available insurance policy limits.
Our general liability insurance includes coverage for certain construction defects. While construction defect claims can relate to a variety of circumstances, the majority of our claims relate to alleged problems with siding, windows, roofing, and foundations. The availability of general liability insurance for the homebuilding industry and its subcontractors has become increasingly limited, and the insurance policies available require companies to maintain significant per occurrence and aggregate retention levels. In certain instances, we may offer our subcontractors the opportunity to purchase insurance through one of our captive insurance subsidiaries or participate in a project-specific insurance program provided by us. Policies issued by the captive insurance subsidiaries represent self-insurance of these risks by us. This self-insured exposure is limited by reinsurance policies that we purchase. General liability coverage for the homebuilding industry is complex, and our coverage varies from policy year to policy year. Our insurance coverage requires a per occurrence deductible up to an overall aggregate retention level. Beginning with the first dollar, amounts paid to satisfy insured claims apply to our per occurrence and aggregate retention obligations. Any amounts incurred in excess of the occurrence or aggregate retention levels are covered by insurance up to our purchased coverage levels. Our insurance policies, including the captive insurance subsidiaries' reinsurance policies, are maintained with highly-rated underwriters for whom we believe counterparty default risk is not significant.
At any point in time, we are managing over 1,000 individual claims related to general liability, property, errors and omission, workers compensation, and other business insurance coverage. We reserve for costs associated with such claims (including expected claims management expenses) on an undiscounted basis at the time revenue is recognized for each home closing and evaluate the recorded liabilities based on actuarial analyses of our historical claims. The actuarial analyses calculate estimates of the ultimate net cost of all unpaid losses, including estimates for incurred but not reported losses ("IBNR"). IBNR represents losses related to claims incurred but not yet reported plus development on reported claims.
Our recorded reserves for all such claims totaled $709.8 million and $737.0 million at December 31, 2019 and 2018, respectively, the vast majority of which relate to general liability claims. The recorded reserves include loss estimates related to both (i) existing claims and related claim expenses and (ii) IBNR and related claim expenses. Liabilities related to IBNR and related claim expenses represented approximately 68% and 65% of the total general liability reserves at December 31, 2019 and 2018, respectively. The actuarial analyses that determine the IBNR portion of reserves consider a variety of factors, including the frequency and severity of losses, which are based on our historical claims experience supplemented by industry data. The actuarial analyses of the reserves also consider historical third party recovery rates and claims management expenses.
Volatility in both national and local housing market conditions can affect the frequency and cost of construction defect claims. Additionally, IBNR estimates comprise the majority of our liability and are subject to a high degree of uncertainty due
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
to a variety of factors, including changes in claims reporting and resolution patterns, third party recoveries, insurance industry practices, the regulatory environment, and legal precedent. State regulations vary, but construction defect claims are reported and resolved over an extended period often exceeding ten years. Changes in the frequency and timing of reported claims and estimates of specific claim values can impact the underlying inputs and trends utilized in the actuarial analyses, which could have a material impact on the recorded reserves. Additionally, the amount of insurance coverage available for each policy period also impacts our recorded reserves. Because of the inherent uncertainty in estimating future losses and the timing of such losses related to these claims, actual costs could differ significantly from estimated costs.
Adjustments to reserves are recorded in the period in which the change in estimate occurs. During 2019, 2018, and 2017, we reduced reserves, primarily general liability reserves, by $49.4 million, $35.9 million, and $97.8 million respectively, as a result of changes in estimates resulting from actual claim experience observed being less than anticipated in previous actuarial projections. The changes in actuarial estimates were driven by changes in actual claims experience that, in turn, impacted actuarial estimates for potential future claims. These changes in actuarial estimates did not involve any changes in actuarial methodology but did impact the development of estimates for future periods, which resulted in adjustments to the IBNR portion of our recorded liabilities. Costs associated with our insurance programs are classified within selling, general, and administrative expenses. Changes in these liabilities were as follows ($000's omitted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Balance, beginning of period
|
$
|
737,013
|
|
|
$
|
758,812
|
|
|
$
|
831,058
|
|
Reserves provided
|
83,209
|
|
|
93,156
|
|
|
98,176
|
|
Adjustments to previously recorded reserves (a)
|
(49,437
|
)
|
|
(35,873
|
)
|
|
(97,789
|
)
|
Payments, net (a)
|
(60,987
|
)
|
|
(79,082
|
)
|
|
(72,633
|
)
|
Balance, end of period
|
$
|
709,798
|
|
|
$
|
737,013
|
|
|
$
|
758,812
|
|
|
|
(a)
|
Includes net changes in amounts expected to be recovered from our insurance carriers, which are recorded in other assets (see below).
|
In certain instances, we have the ability to recover a portion of our costs under various insurance policies or from subcontractors or other third parties. Estimates of such amounts are recorded when recovery is considered probable. As reflected in Note 10, our receivables from insurance carriers totaled $118.4 million and $153.0 million at December 31, 2019 and 2018, respectively. The insurance receivables relate to costs incurred or to be incurred to perform corrective repairs, settle claims with customers, and other costs related to the continued progression of both known and anticipated future construction defect claims that we believe to be insured related to previously closed homes. Given the complexity inherent with resolving construction defect claims in the homebuilding industry as described above, there generally exists a significant lag between our payment of claims and our reimbursements from applicable insurance carriers. In addition, disputes between homebuilders and carriers over coverage positions relating to construction defect claims are common. Resolution of claims with carriers involves the exchange of significant amounts of information and frequently involves legal action.
In 2019 and 2017, we recorded write-offs of $22.6 million and $29.6 million, respectively, in connection with policy settlement negotiations with certain of our carriers. We believe collection of our recorded insurance receivables is probable based on the legal merits of our positions after review by legal counsel, the high credit ratings of our carriers, and our long history of collecting significant amounts of insurance reimbursements under similar insurance policies related to similar claims. While the outcomes of these matters cannot be predicted with certainty, we do not believe that the resolution of such matters will have a material adverse impact on our results of operations, financial position, or cash flows.
Leases
We lease certain office space and equipment for use in our operations. We recognize lease expense for these leases on a straight-line basis over the lease term and combine lease and non-lease components for all leases. Right-of-use ("ROU") assets and lease liabilities are recorded on the balance sheet for all leases with an expected term of at least one year. Some leases include one or more options to renew. The exercise of lease renewal options is generally at our discretion. The depreciable lives of ROU assets and leasehold improvements are limited to the expected lease term. Certain of our lease agreements include rental payments based on a pro-rata share of the lessor’s operating costs which are variable in nature. Our lease agreements do not contain any residual value guarantees or material restrictive covenants.
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
ROU assets are classified within other assets on the balance sheet, while lease liabilities are classified within accrued and other liabilities. Leases with an initial term of 12 months or less are not recorded on the balance sheet. ROU assets and lease liabilities were $70.0 million and $91.4 million, respectively, at December 31, 2019. During 2019, we recorded an additional $17.6 million of lease liabilities under operating leases. Payments on lease liabilities during 2019 totaled $23.4 million.
Lease expense includes costs for leases with terms in excess of one year as well as short-term leases with terms of less than one year. Our total lease expense was $36.4 million, $33.6 million, and $30.8 million during 2019, 2018, and 2017, respectively. Our total lease expense in 2019 is inclusive of variable lease costs of $6.7 million and short-term lease costs of $9.6 million. Sublease income was de minimis. The future minimum lease payments required under our leases as of December 31, 2019 were as follows ($000's omitted):
|
|
|
|
|
Years Ending December 31,
|
|
2020
|
$
|
18,995
|
|
2021
|
20,523
|
|
2022
|
18,605
|
|
2023
|
17,306
|
|
2024
|
11,677
|
|
Thereafter
|
22,476
|
|
Total lease payments (a)
|
109,582
|
|
Less: Interest (b)
|
18,174
|
|
Present value of lease liabilities (c)
|
$
|
91,408
|
|
|
|
(a)
|
Lease payments include options to extend lease terms that are reasonably certain of being exercised and exclude $6.0 million of legally binding minimum lease payments for leases signed but not yet commenced at December 31, 2019.
|
|
|
(b)
|
Our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our discount rate for such leases to determine the present value of lease payments at the lease commencement date.
|
|
|
(c)
|
The weighted average remaining lease term and weighted average discount rate used in calculating our lease liabilities were 6.1 years and 5.8%, respectively, at December 31, 2019.
|
12. Supplemental Guarantor information
All of our senior notes are guaranteed jointly and severally on a senior basis by certain of our wholly-owned Homebuilding subsidiaries and certain other wholly-owned subsidiaries (collectively, the “Guarantors”). Such guaranties are full and unconditional. Our subsidiaries comprising the Financial Services segment along with certain other subsidiaries (collectively, the "Non-Guarantor Subsidiaries") do not guarantee the senior notes. In accordance with Rule 3-10 of Regulation S-X, supplemental consolidating financial information of the Company, including such information for the Guarantors, is presented below. Investments in subsidiaries are presented using the equity method of accounting.
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2019
($000’s omitted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unconsolidated
|
|
Eliminating
Entries
|
|
Consolidated
PulteGroup,
Inc.
|
|
PulteGroup,
Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Cash and equivalents
|
$
|
—
|
|
|
$
|
1,026,743
|
|
|
$
|
191,170
|
|
|
$
|
—
|
|
|
$
|
1,217,913
|
|
Restricted cash
|
—
|
|
|
31,328
|
|
|
2,215
|
|
|
—
|
|
|
33,543
|
|
Total cash, cash equivalents, and
restricted cash
|
—
|
|
|
1,058,071
|
|
|
193,385
|
|
|
—
|
|
|
1,251,456
|
|
House and land inventory
|
—
|
|
|
7,554,662
|
|
|
125,952
|
|
|
—
|
|
|
7,680,614
|
|
Land held for sale
|
—
|
|
|
24,009
|
|
|
—
|
|
|
—
|
|
|
24,009
|
|
Residential mortgage loans available-
for-sale
|
—
|
|
|
—
|
|
|
508,967
|
|
|
—
|
|
|
508,967
|
|
Investments in unconsolidated entities
|
—
|
|
|
59,266
|
|
|
500
|
|
|
—
|
|
|
59,766
|
|
Other assets
|
8,172
|
|
|
688,996
|
|
|
198,518
|
|
|
|
|
|
895,686
|
|
Intangible assets
|
—
|
|
|
124,992
|
|
|
—
|
|
|
—
|
|
|
124,992
|
|
Deferred tax assets, net
|
182,461
|
|
|
—
|
|
|
(12,354
|
)
|
|
—
|
|
|
170,107
|
|
Investments in subsidiaries and
intercompany accounts, net
|
8,103,191
|
|
|
1,081,472
|
|
|
9,279,403
|
|
|
(18,464,066
|
)
|
|
—
|
|
|
$
|
8,293,824
|
|
|
$
|
10,591,468
|
|
|
$
|
10,294,371
|
|
|
$
|
(18,464,066
|
)
|
|
$
|
10,715,597
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable, customer deposits,
accrued and other liabilities
|
$
|
87,892
|
|
|
$
|
1,781,893
|
|
|
$
|
259,926
|
|
|
$
|
—
|
|
|
$
|
2,129,711
|
|
Income tax liabilities
|
36,093
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
36,093
|
|
Financial Services debt
|
—
|
|
|
—
|
|
|
326,573
|
|
|
—
|
|
|
326,573
|
|
Notes payable
|
2,711,659
|
|
|
53,381
|
|
|
—
|
|
|
—
|
|
|
2,765,040
|
|
Total liabilities
|
2,835,644
|
|
|
1,835,274
|
|
|
586,499
|
|
|
—
|
|
|
5,257,417
|
|
Total shareholders’ equity
|
5,458,180
|
|
|
8,756,194
|
|
|
9,707,872
|
|
|
(18,464,066
|
)
|
|
5,458,180
|
|
|
$
|
8,293,824
|
|
|
$
|
10,591,468
|
|
|
$
|
10,294,371
|
|
|
$
|
(18,464,066
|
)
|
|
$
|
10,715,597
|
|
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2018
($000’s omitted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unconsolidated
|
|
Eliminating
Entries
|
|
Consolidated
PulteGroup,
Inc.
|
|
PulteGroup,
Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Cash and equivalents
|
$
|
—
|
|
|
$
|
906,961
|
|
|
$
|
203,127
|
|
|
$
|
—
|
|
|
$
|
1,110,088
|
|
Restricted cash
|
—
|
|
|
22,406
|
|
|
1,206
|
|
|
—
|
|
|
23,612
|
|
Total cash, cash equivalents, and
restricted cash
|
—
|
|
|
929,367
|
|
|
204,333
|
|
|
—
|
|
|
1,133,700
|
|
House and land inventory
|
—
|
|
|
7,157,665
|
|
|
95,688
|
|
|
—
|
|
|
7,253,353
|
|
Land held for sale
|
—
|
|
|
36,849
|
|
|
—
|
|
|
—
|
|
|
36,849
|
|
Residential mortgage loans available-
for-sale
|
—
|
|
|
—
|
|
|
461,354
|
|
|
—
|
|
|
461,354
|
|
Investments in unconsolidated entities
|
—
|
|
|
54,045
|
|
|
545
|
|
|
—
|
|
|
54,590
|
|
Other assets
|
66,154
|
|
|
579,452
|
|
|
184,753
|
|
|
—
|
|
|
830,359
|
|
Intangible assets
|
—
|
|
|
127,192
|
|
|
—
|
|
|
—
|
|
|
127,192
|
|
Deferred tax assets, net
|
282,874
|
|
|
—
|
|
|
(7,295
|
)
|
|
—
|
|
|
275,579
|
|
Investments in subsidiaries and
intercompany accounts, net
|
7,557,245
|
|
|
500,138
|
|
|
8,231,342
|
|
|
(16,288,725
|
)
|
|
—
|
|
|
$
|
7,906,273
|
|
|
$
|
9,384,708
|
|
|
$
|
9,170,720
|
|
|
$
|
(16,288,725
|
)
|
|
$
|
10,172,976
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable, customer deposits,
accrued and other liabilities
|
$
|
90,158
|
|
|
$
|
1,598,265
|
|
|
$
|
278,713
|
|
|
$
|
—
|
|
|
$
|
1,967,136
|
|
Income tax liabilities
|
11,580
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,580
|
|
Financial Services debt
|
—
|
|
|
—
|
|
|
348,412
|
|
|
—
|
|
|
348,412
|
|
Notes payable
|
2,986,753
|
|
|
40,776
|
|
|
537
|
|
|
—
|
|
|
3,028,066
|
|
Total liabilities
|
3,088,491
|
|
|
1,639,041
|
|
|
627,662
|
|
|
—
|
|
|
5,355,194
|
|
Total shareholders’ equity
|
4,817,782
|
|
|
7,745,667
|
|
|
8,543,058
|
|
|
(16,288,725
|
)
|
|
4,817,782
|
|
|
$
|
7,906,273
|
|
|
$
|
9,384,708
|
|
|
$
|
9,170,720
|
|
|
$
|
(16,288,725
|
)
|
|
$
|
10,172,976
|
|
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the year ended December 31, 2019
($000’s omitted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unconsolidated
|
|
|
|
Consolidated
PulteGroup,
Inc.
|
|
PulteGroup,
Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminating
Entries
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Homebuilding
|
|
|
|
|
|
|
|
|
|
Home sale revenues
|
$
|
—
|
|
|
$
|
9,725,421
|
|
|
$
|
190,284
|
|
|
$
|
—
|
|
|
$
|
9,915,705
|
|
Land sale and other revenues
|
—
|
|
|
61,282
|
|
|
1,539
|
|
|
—
|
|
|
62,821
|
|
|
—
|
|
|
9,786,703
|
|
|
191,823
|
|
|
—
|
|
|
9,978,526
|
|
Financial Services
|
—
|
|
|
—
|
|
|
234,431
|
|
|
—
|
|
|
234,431
|
|
|
—
|
|
|
9,786,703
|
|
|
426,254
|
|
|
—
|
|
|
10,212,957
|
|
Homebuilding Cost of Revenues:
|
|
|
|
|
|
|
|
|
|
Home sale cost of revenues
|
—
|
|
|
(7,485,268
|
)
|
|
(143,432
|
)
|
|
—
|
|
|
(7,628,700
|
)
|
Land sale cost of revenues
|
—
|
|
|
(54,143
|
)
|
|
(1,955
|
)
|
|
—
|
|
|
(56,098
|
)
|
|
—
|
|
|
(7,539,411
|
)
|
|
(145,387
|
)
|
|
—
|
|
|
(7,684,798
|
)
|
Financial Services expenses
|
—
|
|
|
(483
|
)
|
|
(130,287
|
)
|
|
—
|
|
|
(130,770
|
)
|
Selling, general, and administrative
expenses
|
—
|
|
|
(994,262
|
)
|
|
(50,075
|
)
|
|
—
|
|
|
(1,044,337
|
)
|
Other expense, net
|
(5,423
|
)
|
|
(46,490
|
)
|
|
38,437
|
|
|
—
|
|
|
(13,476
|
)
|
Intercompany interest
|
(8,194
|
)
|
|
—
|
|
|
8,194
|
|
|
—
|
|
|
—
|
|
Income (loss) before income taxes and
equity in income (loss) of
subsidiaries
|
(13,617
|
)
|
|
1,206,057
|
|
|
147,136
|
|
|
—
|
|
|
1,339,576
|
|
Income tax (expense) benefit
|
3,404
|
|
|
(289,102
|
)
|
|
(37,178
|
)
|
|
—
|
|
|
(322,876
|
)
|
Income (loss) before equity in income
(loss) of subsidiaries
|
(10,213
|
)
|
|
916,955
|
|
|
109,958
|
|
|
—
|
|
|
1,016,700
|
|
Equity in income (loss) of subsidiaries
|
1,026,913
|
|
|
120,622
|
|
|
962,865
|
|
|
(2,110,400
|
)
|
|
—
|
|
Net income (loss)
|
1,016,700
|
|
|
1,037,577
|
|
|
1,072,823
|
|
|
(2,110,400
|
)
|
|
1,016,700
|
|
Other comprehensive income (loss)
|
100
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
100
|
|
Comprehensive income (loss)
|
$
|
1,016,800
|
|
|
$
|
1,037,577
|
|
|
$
|
1,072,823
|
|
|
$
|
(2,110,400
|
)
|
|
$
|
1,016,800
|
|
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the year ended December 31, 2018
($000’s omitted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unconsolidated
|
|
|
|
Consolidated
PulteGroup,
Inc.
|
|
PulteGroup,
Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminating
Entries
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Homebuilding
|
|
|
|
|
|
|
|
|
|
Home sale revenues
|
$
|
—
|
|
|
$
|
9,694,703
|
|
|
$
|
123,742
|
|
|
$
|
—
|
|
|
$
|
9,818,445
|
|
Land sale and other revenues
|
—
|
|
|
162,012
|
|
|
2,492
|
|
|
—
|
|
|
164,504
|
|
|
—
|
|
|
9,856,715
|
|
|
126,234
|
|
|
—
|
|
|
9,982,949
|
|
Financial Services
|
—
|
|
|
—
|
|
|
205,382
|
|
|
—
|
|
|
205,382
|
|
|
—
|
|
|
9,856,715
|
|
|
331,616
|
|
|
—
|
|
|
10,188,331
|
|
Homebuilding Cost of Revenues:
|
|
|
|
|
|
|
|
|
|
Home sale cost of revenues
|
—
|
|
|
(7,449,343
|
)
|
|
(91,594
|
)
|
|
—
|
|
|
(7,540,937
|
)
|
Land sale cost of revenues
|
—
|
|
|
(125,016
|
)
|
|
(1,544
|
)
|
|
—
|
|
|
(126,560
|
)
|
|
—
|
|
|
(7,574,359
|
)
|
|
(93,138
|
)
|
|
—
|
|
|
(7,667,497
|
)
|
Financial Services expenses
|
—
|
|
|
(563
|
)
|
|
(146,859
|
)
|
|
—
|
|
|
(147,422
|
)
|
Selling, general, and administrative
expenses
|
—
|
|
|
(974,858
|
)
|
|
(37,165
|
)
|
|
—
|
|
|
(1,012,023
|
)
|
Other expense, net
|
(580
|
)
|
|
(53,765
|
)
|
|
40,496
|
|
|
—
|
|
|
(13,849
|
)
|
Intercompany interest
|
(7,835
|
)
|
|
—
|
|
|
7,835
|
|
|
—
|
|
|
—
|
|
Income (loss) before income taxes and
equity in income (loss) of
subsidiaries
|
(8,415
|
)
|
|
1,253,170
|
|
|
102,785
|
|
|
—
|
|
|
1,347,540
|
|
Income tax (expense) benefit
|
2,104
|
|
|
(304,218
|
)
|
|
(23,403
|
)
|
|
—
|
|
|
(325,517
|
)
|
Income (loss) before equity in income
(loss) of subsidiaries
|
(6,311
|
)
|
|
948,952
|
|
|
79,382
|
|
|
—
|
|
|
1,022,023
|
|
Equity in income (loss) of subsidiaries
|
1,028,334
|
|
|
73,097
|
|
|
782,948
|
|
|
(1,884,379
|
)
|
|
—
|
|
Net income (loss)
|
1,022,023
|
|
|
1,022,049
|
|
|
862,330
|
|
|
(1,884,379
|
)
|
|
1,022,023
|
|
Other comprehensive income (loss)
|
100
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
100
|
|
Comprehensive income (loss)
|
$
|
1,022,123
|
|
|
$
|
1,022,049
|
|
|
$
|
862,330
|
|
|
$
|
(1,884,379
|
)
|
|
$
|
1,022,123
|
|
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the year ended December 31, 2017
($000’s omitted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unconsolidated
|
|
Eliminating
Entries
|
|
Consolidated
PulteGroup,
Inc.
|
|
PulteGroup,
Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Homebuilding
|
|
|
|
|
|
|
|
|
|
Home sale revenues
|
$
|
—
|
|
|
$
|
8,229,392
|
|
|
$
|
94,592
|
|
|
$
|
—
|
|
|
$
|
8,323,984
|
|
Land sale and other revenues
|
—
|
|
|
57,711
|
|
|
3,831
|
|
|
—
|
|
|
61,542
|
|
|
—
|
|
|
8,287,103
|
|
|
98,423
|
|
|
—
|
|
|
8,385,526
|
|
Financial Services
|
—
|
|
|
—
|
|
|
192,160
|
|
|
—
|
|
|
192,160
|
|
|
—
|
|
|
8,287,103
|
|
|
290,583
|
|
|
—
|
|
|
8,577,686
|
|
Homebuilding Cost of Revenues:
|
|
|
|
|
|
|
|
|
|
Home sale cost of revenues
|
—
|
|
|
(6,385,167
|
)
|
|
(75,985
|
)
|
|
—
|
|
|
(6,461,152
|
)
|
Land sale cost of revenues
|
—
|
|
|
(131,363
|
)
|
|
(3,086
|
)
|
|
—
|
|
|
(134,449
|
)
|
|
—
|
|
|
(6,516,530
|
)
|
|
(79,071
|
)
|
|
—
|
|
|
(6,595,601
|
)
|
Financial Services expenses
|
—
|
|
|
(527
|
)
|
|
(118,762
|
)
|
|
—
|
|
|
(119,289
|
)
|
Selling, general, and administrative
expenses
|
—
|
|
|
(785,266
|
)
|
|
(106,315
|
)
|
|
—
|
|
|
(891,581
|
)
|
Other expense, net
|
(482
|
)
|
|
(63,050
|
)
|
|
31,145
|
|
|
—
|
|
|
(32,387
|
)
|
Intercompany interest
|
(2,485
|
)
|
|
—
|
|
|
2,485
|
|
|
—
|
|
|
—
|
|
Income (loss) before income taxes and
equity in income (loss) of
subsidiaries
|
(2,967
|
)
|
|
921,730
|
|
|
20,065
|
|
|
—
|
|
|
938,828
|
|
Income tax (expense) benefit
|
1,127
|
|
|
(483,435
|
)
|
|
(9,299
|
)
|
|
—
|
|
|
(491,607
|
)
|
Income (loss) before equity in income
(loss) of subsidiaries
|
(1,840
|
)
|
|
438,295
|
|
|
10,766
|
|
|
—
|
|
|
447,221
|
|
Equity in income (loss) of subsidiaries
|
449,061
|
|
|
58,559
|
|
|
226,864
|
|
|
(734,484
|
)
|
|
—
|
|
Net income (loss)
|
447,221
|
|
|
496,854
|
|
|
237,630
|
|
|
(734,484
|
)
|
|
447,221
|
|
Other comprehensive income (loss)
|
81
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
81
|
|
Comprehensive income (loss)
|
$
|
447,302
|
|
|
$
|
496,854
|
|
|
$
|
237,630
|
|
|
$
|
(734,484
|
)
|
|
$
|
447,302
|
|
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATING STATEMENT OF CASH FLOWS
For the year ended December 31, 2019
($000’s omitted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unconsolidated
|
|
|
|
Consolidated
PulteGroup, Inc.
|
|
PulteGroup,
Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminating
Entries
|
|
Net cash provided by (used in)
operating activities
|
$
|
195,371
|
|
|
$
|
858,338
|
|
|
$
|
23,836
|
|
|
$
|
—
|
|
|
$
|
1,077,545
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
—
|
|
|
(48,899
|
)
|
|
(9,220
|
)
|
|
—
|
|
|
(58,119
|
)
|
Investment in unconsolidated subsidiaries
|
—
|
|
|
(8,807
|
)
|
|
(708
|
)
|
|
—
|
|
|
(9,515
|
)
|
Cash used for business acquisition
|
—
|
|
|
(163,724
|
)
|
|
—
|
|
|
—
|
|
|
(163,724
|
)
|
Other investing activities, net
|
—
|
|
|
3,337
|
|
|
1,792
|
|
|
—
|
|
|
5,129
|
|
Net cash provided by (used in) investing
activities
|
—
|
|
|
(218,093
|
)
|
|
(8,136
|
)
|
|
—
|
|
|
(226,229
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from debt, net of issuance costs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Repayments of debt
|
(280,259
|
)
|
|
(29,189
|
)
|
|
(537
|
)
|
|
—
|
|
|
(309,985
|
)
|
Borrowings under revolving credit facility
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Repayments under revolving credit facility
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Financial Services borrowings
(repayments), net
|
—
|
|
|
—
|
|
|
(21,841
|
)
|
|
—
|
|
|
(21,841
|
)
|
Stock option exercises
|
6,399
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,399
|
|
Share repurchases
|
(274,333
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(274,333
|
)
|
Cash paid for shares withheld for taxes
|
(11,450
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,450
|
)
|
Dividends paid
|
(122,350
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(122,350
|
)
|
Intercompany activities, net
|
486,622
|
|
|
(482,352
|
)
|
|
(4,270
|
)
|
|
—
|
|
|
—
|
|
Net cash provided by (used in)
financing activities
|
(195,371
|
)
|
|
(511,541
|
)
|
|
(26,648
|
)
|
|
—
|
|
|
(733,560
|
)
|
Net increase (decrease)
|
—
|
|
|
128,704
|
|
|
(10,948
|
)
|
|
—
|
|
|
117,756
|
|
Cash, cash equivalents, and restricted cash
at beginning of year
|
—
|
|
|
929,367
|
|
|
204,333
|
|
|
—
|
|
|
1,133,700
|
|
Cash, cash equivalents, and restricted cash
at end of year
|
$
|
—
|
|
|
$
|
1,058,071
|
|
|
$
|
193,385
|
|
|
$
|
—
|
|
|
$
|
1,251,456
|
|
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATING STATEMENT OF CASH FLOWS
For the year ended December 31, 2018
($000’s omitted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unconsolidated
|
|
|
|
Consolidated
PulteGroup, Inc.
|
|
PulteGroup,
Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminating
Entries
|
|
Net cash provided by (used in)
operating activities
|
$
|
494,521
|
|
|
$
|
791,350
|
|
|
$
|
163,876
|
|
|
$
|
—
|
|
|
$
|
1,449,747
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
—
|
|
|
(51,147
|
)
|
|
(7,892
|
)
|
|
—
|
|
|
(59,039
|
)
|
Investment in unconsolidated subsidiaries
|
—
|
|
|
(1,000
|
)
|
|
—
|
|
|
—
|
|
|
(1,000
|
)
|
Cash used for business acquisitions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other investing activities, net
|
—
|
|
|
11,300
|
|
|
6,797
|
|
|
—
|
|
|
18,097
|
|
Net cash provided by (used in) investing
activities
|
—
|
|
|
(40,847
|
)
|
|
(1,095
|
)
|
|
—
|
|
|
(41,942
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from debt, net of issuance costs
|
(8,164
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,164
|
)
|
Repayments of debt
|
—
|
|
|
(81,758
|
)
|
|
(1,017
|
)
|
|
—
|
|
|
(82,775
|
)
|
Borrowings under revolving credit facility
|
1,566,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,566,000
|
|
Repayments under revolving credit facility
|
(1,566,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,566,000
|
)
|
Financial Services borrowings
(repayments), net
|
—
|
|
|
—
|
|
|
(89,393
|
)
|
|
—
|
|
|
(89,393
|
)
|
Stock option exercises
|
6,555
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,555
|
|
Share repurchases
|
(294,566
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(294,566
|
)
|
Cash paid for shares withheld for taxes
|
(7,910
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,910
|
)
|
Dividends paid
|
(104,020
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(104,020
|
)
|
Intercompany activities, net
|
(86,416
|
)
|
|
102,821
|
|
|
(16,405
|
)
|
|
—
|
|
|
—
|
|
Net cash provided by (used in)
financing activities
|
(494,521
|
)
|
|
21,063
|
|
|
(106,815
|
)
|
|
—
|
|
|
(580,273
|
)
|
Net increase (decrease)
|
—
|
|
|
771,566
|
|
|
55,966
|
|
|
—
|
|
|
827,532
|
|
Cash, cash equivalents, and restricted cash
at beginning of year
|
—
|
|
|
157,801
|
|
|
148,367
|
|
|
—
|
|
|
306,168
|
|
Cash, cash equivalents, and restricted cash
at end of year
|
$
|
—
|
|
|
$
|
929,367
|
|
|
$
|
204,333
|
|
|
$
|
—
|
|
|
$
|
1,133,700
|
|
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATING STATEMENT OF CASH FLOWS
For the year ended December 31, 2017
($000’s omitted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unconsolidated
|
|
|
|
Consolidated
PulteGroup,
Inc.
|
|
PulteGroup,
Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminating
Entries
|
|
Net cash provided by (used in)
operating activities
|
$
|
309,760
|
|
|
$
|
328,163
|
|
|
$
|
25,157
|
|
|
$
|
—
|
|
|
$
|
663,080
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
—
|
|
|
(25,432
|
)
|
|
(6,619
|
)
|
|
—
|
|
|
(32,051
|
)
|
Investment in unconsolidated subsidiaries
|
—
|
|
|
(23,037
|
)
|
|
—
|
|
|
—
|
|
|
(23,037
|
)
|
Cash used for business acquisitions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other investing activities, net
|
—
|
|
|
5,778
|
|
|
(932
|
)
|
|
—
|
|
|
4,846
|
|
Net cash provided by (used in)
investing activities
|
—
|
|
|
(42,691
|
)
|
|
(7,551
|
)
|
|
—
|
|
|
(50,242
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Financial Services borrowings (repayments)
|
—
|
|
|
—
|
|
|
106,183
|
|
|
—
|
|
|
106,183
|
|
Proceeds from debt, net of issuance costs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Repayments of debt
|
(123,000
|
)
|
|
(10,301
|
)
|
|
(1,446
|
)
|
|
—
|
|
|
(134,747
|
)
|
Borrowings under revolving credit facility
|
2,720,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,720,000
|
|
Repayments under revolving credit facility
|
(2,720,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,720,000
|
)
|
Stock option exercises
|
27,720
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27,720
|
|
Share repurchases
|
(910,331
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(910,331
|
)
|
Cash paid for shares withheld for taxes
|
(5,995
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,995
|
)
|
Dividends paid
|
(112,748
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(112,748
|
)
|
Intercompany activities, net
|
814,594
|
|
|
(728,555
|
)
|
|
(86,039
|
)
|
|
—
|
|
|
—
|
|
Net cash provided by (used in)
financing activities
|
(309,760
|
)
|
|
(738,856
|
)
|
|
18,698
|
|
|
—
|
|
|
(1,029,918
|
)
|
Net increase (decrease)
|
—
|
|
|
(453,384
|
)
|
|
36,304
|
|
|
—
|
|
|
(417,080
|
)
|
Cash, cash equivalents, and restricted cash
at beginning of year
|
—
|
|
|
611,185
|
|
|
112,063
|
|
|
—
|
|
|
723,248
|
|
Cash, cash equivalents, and restricted cash
at end of year
|
$
|
—
|
|
|
$
|
157,801
|
|
|
$
|
148,367
|
|
|
$
|
—
|
|
|
$
|
306,168
|
|
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. Quarterly results (unaudited)
UNAUDITED QUARTERLY INFORMATION
(000’s omitted, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st
Quarter
|
|
2nd
Quarter
|
|
3rd
Quarter
|
|
4th
Quarter
|
|
Total (a)
|
2019
|
|
|
|
|
|
|
|
|
|
Homebuilding:
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
1,952,831
|
|
|
$
|
2,433,028
|
|
|
$
|
2,645,550
|
|
|
$
|
2,947,116
|
|
|
$
|
9,978,526
|
|
Cost of revenues (b)
|
(1,494,841
|
)
|
|
(1,874,369
|
)
|
|
(2,035,972
|
)
|
|
(2,279,615
|
)
|
|
(7,684,798
|
)
|
Income before income taxes (c)
|
204,294
|
|
|
295,698
|
|
|
333,862
|
|
|
402,407
|
|
|
1,236,261
|
|
Financial Services:
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
43,862
|
|
|
$
|
55,957
|
|
|
$
|
64,815
|
|
|
$
|
69,797
|
|
|
$
|
234,431
|
|
Income before income taxes
|
12,409
|
|
|
25,078
|
|
|
32,284
|
|
|
33,544
|
|
|
103,315
|
|
Consolidated results:
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
1,996,693
|
|
|
$
|
2,488,985
|
|
|
$
|
2,710,365
|
|
|
$
|
3,016,913
|
|
|
$
|
10,212,957
|
|
Income before income taxes
|
216,703
|
|
|
320,776
|
|
|
366,146
|
|
|
435,951
|
|
|
1,339,576
|
|
Income tax expense
|
(49,946
|
)
|
|
(79,735
|
)
|
|
(93,042
|
)
|
|
(100,153
|
)
|
|
(322,876
|
)
|
Net income
|
$
|
166,757
|
|
|
$
|
241,041
|
|
|
$
|
273,104
|
|
|
$
|
335,798
|
|
|
$
|
1,016,700
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.59
|
|
|
$
|
0.86
|
|
|
$
|
0.99
|
|
|
$
|
1.23
|
|
|
$
|
3.67
|
|
Diluted
|
$
|
0.59
|
|
|
$
|
0.86
|
|
|
$
|
0.99
|
|
|
$
|
1.22
|
|
|
$
|
3.66
|
|
Number of shares used in calculation:
|
|
|
|
|
|
|
|
|
|
Basic
|
277,637
|
|
|
276,652
|
|
|
272,992
|
|
|
270,843
|
|
|
274,495
|
|
Effect of dilutive securities
|
1,003
|
|
|
932
|
|
|
640
|
|
|
632
|
|
|
802
|
|
Diluted
|
278,640
|
|
|
277,584
|
|
|
273,632
|
|
|
271,475
|
|
|
275,297
|
|
|
|
(a)
|
Due to rounding, the sum of quarterly results may not equal the total for the year. Additionally, quarterly and year-to-date computations of per share amounts are made independently.
|
|
|
(b)
|
Cost of revenues includes a warranty charge related to a closed-out community of $9.0 million during the 3rd Quarter (See Note 11).
|
|
|
(c)
|
Homebuilding income before income taxes includes insurance reserve reversals of $12.8 million and $31.1 million during the 2nd and 4th Quarters, respectively; and write-offs of insurance receivables of $11.6 million and $12.6 million in the 1st and 2nd Quarters, respectively.
|
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
UNAUDITED QUARTERLY INFORMATION
(000’s omitted, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st
Quarter
|
|
2nd
Quarter
|
|
3rd
Quarter
|
|
4th
Quarter
|
|
Total (a)
|
2018
|
|
|
|
|
|
|
|
|
|
Homebuilding:
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
1,924,155
|
|
|
$
|
2,516,958
|
|
|
$
|
2,597,746
|
|
|
$
|
2,944,091
|
|
|
$
|
9,982,949
|
|
Cost of revenues (b)
|
(1,471,488
|
)
|
|
(1,900,316
|
)
|
|
(1,976,220
|
)
|
|
(2,319,473
|
)
|
|
(7,667,497
|
)
|
Income before income taxes (c)
|
210,358
|
|
|
388,453
|
|
|
365,055
|
|
|
324,938
|
|
|
1,288,804
|
|
Financial Services:
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
45,938
|
|
|
$
|
52,764
|
|
|
$
|
51,620
|
|
|
$
|
55,059
|
|
|
$
|
205,382
|
|
Income before income taxes (d)
|
13,833
|
|
|
20,717
|
|
|
19,633
|
|
|
4,553
|
|
|
58,736
|
|
Consolidated results:
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
1,970,093
|
|
|
$
|
2,569,722
|
|
|
$
|
2,649,366
|
|
|
$
|
2,999,150
|
|
|
$
|
10,188,331
|
|
Income before income taxes
|
224,191
|
|
|
409,170
|
|
|
384,688
|
|
|
329,491
|
|
|
1,347,540
|
|
Income tax expense
|
(53,440
|
)
|
|
(85,081
|
)
|
|
(95,153
|
)
|
|
(91,842
|
)
|
|
(325,517
|
)
|
Net income
|
$
|
170,751
|
|
|
$
|
324,089
|
|
|
$
|
289,535
|
|
|
$
|
237,649
|
|
|
$
|
1,022,023
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.59
|
|
|
$
|
1.12
|
|
|
$
|
1.01
|
|
|
$
|
0.84
|
|
|
$
|
3.56
|
|
Diluted
|
$
|
0.59
|
|
|
$
|
1.12
|
|
|
$
|
1.01
|
|
|
$
|
0.84
|
|
|
$
|
3.55
|
|
Number of shares used in calculation:
|
|
|
|
|
|
|
|
|
|
Basic
|
286,683
|
|
|
285,276
|
|
|
283,489
|
|
|
278,964
|
|
|
283,578
|
|
Effect of dilutive securities
|
1,343
|
|
|
1,378
|
|
|
1,183
|
|
|
1,248
|
|
|
1,287
|
|
Diluted
|
288,026
|
|
|
286,654
|
|
|
284,672
|
|
|
280,212
|
|
|
284,865
|
|
|
|
(a)
|
Due to rounding, the sum of quarterly results may not equal the total for the year. Additionally, quarterly and year-to-date computations of per share amounts are made independently.
|
|
|
(b)
|
Cost of revenues includes land inventory impairments of $66.9 million and net realizable value adjustments on land held for sale of $9.0 million in the 4th Quarter. See Note 2 for a complete discussion of land-related charges for the full year.
|
|
|
(c)
|
Homebuilding income before income taxes includes an insurance reserve reversal of $37.9 million in the 2nd Quarter (see Note 11) and write-offs of pre-acquisition costs of $9.6 million in the 4th quarter (see Note 2).
|
|
|
(d)
|
Financial Services income before income taxes includes a charge related to loan origination liabilities of $16.2 million in the 4th quarter (see Note 11).
|