- Net Income of $1.29 Per Share
- Adjusted Net Income of $1.15 Per Share
- Home Sale Revenues Increased 3% to $2.5 Billion
- Homebuilding Gross Margin Increased 80 Basis Points to
23.9%
- Backlog of 13,214 Homes Up 12%; Backlog Value Up 13% to $5.8
Billion
- Net New Orders Decreased 4% to 6,522 Homes
- Cash of $1.7 Billion After Repaying $700 Million on its
Revolving Credit Facility
- Company Provides Update on the Impacts of COVID-19
PulteGroup, Inc. (NYSE: PHM) announced today financial results
for its second quarter ended June 30, 2020. For the quarter, the
Company reported net income of $349 million, or $1.29 per share.
Adjusted net income for the period was $311 million, or $1.15 per
share, after excluding $61 million of pre-tax benefit from an
insurance reserve adjustment and $10 million of pre-tax severance
charges resulting from previously announced staffing actions taken
in the period. The Company’s prior year net income was $241
million, or $0.86 per share.
“Following a period of demand weakness beginning in late March
and into April as COVID-19 first impacted the country, new home
sales experienced a material acceleration as the second quarter
progressed,” said Ryan Marshall, President and Chief Executive
Officer of PulteGroup. “The recovery in demand reflects a number of
factors, including: low interest rates, a restricted supply of
existing-home inventory, pent-up demand following the economic
shutdown, the appeal of single-family living in a new home and a
desire among some buyers to exit more densely populated urban
centers.”
“By effectively adjusting our business practices to the rapidly
changing market dynamics caused by COVID-19, PulteGroup realized a
34% increase in adjusted earnings per share and generated strong
cash flows in the current quarter. With industry leading gross
margins, a backlog valued at $5.8 billion and $1.7 billion of cash
on hand, the Company is well positioned to navigate current market
conditions.”
Home sale revenues for the second quarter increased 3% over the
prior year to $2.5 billion. Higher revenues for the quarter reflect
a 6% increase in closings to 5,937 homes, partially offset by a 3%
decrease in average sales price to $416,000. The lower average
sales price for the period primarily reflects an ongoing shift in
the Company’s product mix to include more first-time buyer homes
which typically carry a lower sales price.
Gross margin for the second quarter was 23.9%, which represents
an increase of 80 basis points over the second quarter of the prior
year and is up 20 basis points from the first quarter of 2020.
Reported SG&A expense for the quarter of $197 million, or 8.0%
of home sale revenues, included the $61 million pre-tax insurance
benefit and the $10 million pre-tax severance charges. Excluding
these items, the Company’s adjusted SG&A expense for the
quarter was $247 million, or 10.0% of home sale revenues. Prior
year SG&A expense for the second quarter was $259 million, or
10.8% of home sale revenues.
Net new orders for the second quarter decreased 4% from the
prior year to 6,522 homes. The dollar value of net new orders was
$2.7 billion, or an average sales price of $410,000, which is down
from $426,000 last year. The lower average selling price reflects
the Company’s ongoing efforts to expand its sales among first-time
buyers. For the quarter, the Company operated out of an average of
887 communities.
Unit backlog at the end of the quarter totaled 13,214 homes,
which is an increase of 12%, or 1,421 homes, over the prior year
backlog of 11,793 homes. The total value of homes in backlog of
$5.8 billion, an increase of 13% over last year, reflects a
favorable geographic and product mix of homes to be closed.
Second quarter pre-tax income for the Company's financial
services operations was $60 million, which represents an increase
of 141% over prior year second quarter pre-tax income of $25
million. The increase in pre-tax income for the period reflects a
strong margin environment, higher loan volumes resulting from
growth in the Company’s homebuilding operations, and a higher
mortgage capture rate. Our mortgage capture rate for the second
quarter increased to 87% from 81% last year.
For the quarter, the Company reported $108 million of income tax
expense, representing an effective tax rate of 23.7%.
In the second quarter, the Company elected to repay $700 million
that had been borrowed on its revolving credit facility in March of
2020 as a precautionary action at the start of the COVID-19
pandemic. As previously announced, the Company has suspended its
share repurchase activities given uncertainties created by
COVID-19.
COVID-19 Update
In conjunction with announcing its second quarter financial
results, the Company also provided the following update on the
impact of the COVID-19 pandemic on housing demand and its overall
operations:
“After a period during which we elected to close our sales
centers and leverage multiple technologies to sell remotely, all of
our communities are now reopened to walk-in traffic with sales
staff working on-site,” said Mr. Marshall. “Our Financial Services
teams also adapted their business practices to operate remotely and
continue to do so currently. Our construction and manufacturing
operations were deemed essential services in all but a handful of
markets, so we incurred only limited production disruptions in the
second quarter and are now operating at effectively full capacity
in all markets. In response to the ongoing risks relating to the
pandemic, all of our teams are working under enhanced safety
protocols designed to protect the health of our employees,
customers and trade partners.”
“PulteGroup was in a strong financial position at the start of
this health crisis, but given the risks of severe economic impact
we moved quickly to protect our overall liquidity and financial
flexibility. Our actions included: reducing controllable
expenditures, tightly managing investment in the business, drawing
$700 million on our revolver, and suspending share repurchase
activity. These actions, coupled with the improving operations we
experienced through the quarter, resulted in strong free cash flow
generation in the quarter. As a result, our cash balance at the end
of the second quarter was $1.7 billion, after having repaid the
$700 million we borrowed under our revolver.”
“New home demand has clearly rebounded, but we continue to take
a disciplined approach to our business given the ongoing spread of
the coronavirus. As a result, we are gradually increasing our land
acquisition and development spend to help ensure future lot
availability. We are also increasing our start cadence and related
investment in house inventory, while continuing to expand our
offering of first-time buyer product to meet the growing demand for
more affordably priced homes. We have also recalled the majority of
furloughed employees and may rehire additional staff as the
recovery continues to unfold.”
“Given the strength of second quarter sales, we are encouraged
about the back half of 2020 and plan to provide guidance for the
remainder of the year as part of our second quarter earnings
call.”
A conference call discussing PulteGroup's second quarter 2020
results is scheduled for Thursday, July 23, 2020, at 8:30 a.m.
Eastern Time. Interested investors can access the live webcast via
PulteGroup's corporate website at www.pultegroup.com.
Forward-Looking Statements
This release includes "forward-looking statements." These
statements are subject to a number of risks, uncertainties and
other factors that could cause our actual results, performance,
prospects or opportunities, as well as those of the markets we
serve or intend to serve, to differ materially from those expressed
in, or implied by, these statements. You can identify these
statements by the fact that they do not relate to matters of a
strictly factual or historical nature and generally discuss or
relate to forecasts, estimates or other expectations regarding
future events. Generally, the words “believe,” “expect,” “intend,”
“estimate,” “anticipate,” “plan,” “project,” “may,” “can,” “could,”
“might,” "should", “will” and similar expressions identify
forward-looking statements, including statements related to any
potential impairment charges and the impacts or effects thereof,
expected operating and performing results, planned transactions,
planned objectives of management, future developments or conditions
in the industries in which we participate and other trends,
developments and uncertainties that may affect our business in the
future.
Such risks, uncertainties and other factors include, among other
things: interest rate changes and the availability of mortgage
financing; competition within the industries in which we operate;
the availability and cost of land and other raw materials used by
us in our homebuilding operations; the impact of any changes to our
strategy in responding to the cyclical nature of the industry,
including any changes regarding our land positions and the levels
of our land spend; the availability and cost of insurance covering
risks associated with our businesses; shortages and the cost of
labor; weather related slowdowns; slow growth initiatives and/or
local building moratoria; governmental regulation directed at or
affecting the housing market, the homebuilding industry or
construction activities; uncertainty in the mortgage lending
industry, including revisions to underwriting standards and
repurchase requirements associated with the sale of mortgage loans;
the interpretation of or changes to tax, labor and environmental
laws which could have a greater impact on our effective tax rate or
the value of our deferred tax assets than we anticipate; economic
changes nationally or in our local markets, including inflation,
deflation, changes in consumer confidence and preferences and the
state of the market for homes in general; legal or regulatory
proceedings or claims; our ability to generate sufficient cash flow
in order to successfully implement our capital allocation
priorities; required accounting changes; terrorist acts and other
acts of war; the negative impact of the COVID-19 pandemic on our
financial position and ability to continue our Homebuilding or
Financial Services activities at normal levels or at all in
impacted areas; the duration, effect and severity of the COVID-19
pandemic; the measures that governmental authorities take to
address the COVID-19 pandemic which may precipitate or exacerbate
one or more of the above-mentioned and/or other risks and
significantly disrupt or prevent us from operating our business in
the ordinary course for an extended period of time; and other
factors of national, regional and global scale, including those of
a political, economic, business and competitive nature. See
PulteGroup's Annual Report on Form 10-K for the fiscal year ended
December 31, 2019, and other public filings with the Securities and
Exchange Commission (the "SEC") for a further discussion of these
and other risks and uncertainties applicable to our businesses.
PulteGroup undertakes no duty to update any forward-looking
statement, whether as a result of new information, future events or
changes in PulteGroup's expectations.
About PulteGroup
PulteGroup, Inc. (NYSE: PHM), based in Atlanta, Georgia, is one
of America’s largest homebuilding companies with operations in 40
markets throughout the country. Through its brand portfolio that
includes Centex, Pulte Homes, Del Webb, DiVosta Homes, American
West and John Wieland Homes and Neighborhoods, the company is one
of the industry’s most versatile homebuilders able to meet the
needs of multiple buyer groups and respond to changing consumer
demand. PulteGroup’s purpose is building incredible places where
people can live their dreams.
For more information about PulteGroup, Inc. and PulteGroup’s
brands, go to pultegroup.com; www.pulte.com; www.centex.com;
www.delwebb.com; www.divosta.com; www.jwhomes.com; and
www.americanwesthomes.com. Follow PulteGroup, Inc. on Twitter:
@PulteGroupNews.
PulteGroup, Inc.
Consolidated Statements of
Operations
($000's omitted, except per
share data)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Revenues:
Homebuilding
Home sale revenues
$
2,472,029
$
2,403,559
$
4,693,532
$
4,353,415
Land sale and other revenues
26,950
29,469
45,877
32,445
2,498,979
2,433,028
4,739,409
4,385,860
Financial Services
94,802
55,957
149,352
99,819
Total revenues
2,593,781
2,488,985
4,888,761
4,485,679
Homebuilding Cost of Revenues:
Home sale cost of revenues
(1,880,209
)
(1,848,155
)
(3,575,074
)
(3,340,946
)
Land sale and other cost of revenues
(20,041
)
(26,214
)
(35,055
)
(28,265
)
(1,900,250
)
(1,874,369
)
(3,610,129
)
(3,369,211
)
Financial Services expenses
(34,378
)
(30,901
)
(69,327
)
(62,350
)
Selling, general, and administrative
expenses
(196,858
)
(259,440
)
(460,527
)
(512,166
)
Goodwill impairment
—
—
(20,190
)
—
Other expense, net
(5,286
)
(3,499
)
(7,810
)
(4,473
)
Income before income taxes
457,009
320,776
720,778
537,479
Income tax expense
(108,389
)
(79,735
)
(168,447
)
(129,681
)
Net income
$
348,620
$
241,041
$
552,331
$
407,798
Per share:
Basic earnings
$
1.29
$
0.86
$
2.03
$
1.46
Diluted earnings
$
1.29
$
0.86
$
2.03
$
1.45
Cash dividends declared
$
0.12
$
0.11
$
0.24
$
0.22
Number of shares used in
calculation:
Basic
268,324
276,652
269,167
277,142
Effect of dilutive securities
701
932
960
967
Diluted
269,025
277,584
270,127
278,109
PulteGroup, Inc.
Condensed Consolidated Balance
Sheets
($000's omitted)
(Unaudited)
June 30, 2020
December 31, 2019
ASSETS
Cash and equivalents
$
1,658,530
$
1,217,913
Restricted cash
39,266
33,543
Total cash, cash equivalents, and
restricted cash
1,697,796
1,251,456
House and land inventory
7,584,739
7,680,614
Land held for sale
29,409
24,009
Residential mortgage loans
available-for-sale
394,288
508,967
Investments in unconsolidated entities
47,707
59,766
Other assets
910,271
895,686
Intangible assets
173,507
124,992
Deferred tax assets, net
120,768
170,107
$
10,958,485
$
10,715,597
LIABILITIES AND SHAREHOLDERS’
EQUITY
Liabilities:
Accounts payable
$
295,249
$
435,916
Customer deposits
335,040
294,427
Accrued and other liabilities
1,302,822
1,399,368
Income tax liabilities
146,729
36,093
Financial Services debt
256,359
326,573
Notes payable
2,770,618
2,765,040
5,106,817
5,257,417
Shareholders' equity
5,851,668
5,458,180
$
10,958,485
$
10,715,597
PulteGroup, Inc.
Consolidated Statements of
Cash Flows
($000's omitted)
(Unaudited)
Six Months Ended
June 30,
2020
2019
Cash flows from operating
activities:
Net income
$
552,331
$
407,798
Adjustments to reconcile net income to net
cash from operating activities:
Deferred income tax expense
49,661
51,458
Land-related charges
12,181
6,810
Goodwill impairment
20,190
—
Depreciation and amortization
31,538
26,497
Share-based compensation expense
16,682
17,304
Other, net
(975
)
2,664
Increase (decrease) in cash due to:
Inventories
101,766
(399,520
)
Residential mortgage loans
available-for-sale
114,139
116,974
Other assets
(3,772
)
31,593
Accounts payable, accrued and other
liabilities
(85,869
)
44,129
Net cash provided by (used in) operating
activities
807,872
305,707
Cash flows from investing
activities:
Capital expenditures
(36,746
)
(29,575
)
Investments in unconsolidated entities
12,955
(4,664
)
Business acquisition
(83,256
)
(163,724
)
Other investing activities, net
1,597
4,592
Net cash provided by (used in) investing
activities
(105,450
)
(193,371
)
Cash flows from financing
activities:
Repayments of notes payable
(10,106
)
(297,303
)
Borrowings under revolving credit
facility
700,000
—
Repayments under revolving credit
facility
(700,000
)
—
Financial Services borrowings
(repayments)
(70,214
)
(114,226
)
Stock option exercises
99
5,208
Share repurchases
(95,676
)
(108,471
)
Cash paid for shares withheld for
taxes
(14,853
)
(10,350
)
Dividends paid
(65,332
)
(61,620
)
Net cash provided by (used in) financing
activities
(256,082
)
(586,762
)
Net increase (decrease) in cash, cash
equivalents, and restricted cash
446,340
(474,426
)
Cash, cash equivalents, and restricted
cash at beginning of period
1,251,456
1,133,700
Cash, cash equivalents, and restricted
cash at end of period
$
1,697,796
$
659,274
Supplemental Cash Flow
Information:
Interest paid (capitalized), net
$
3,206
$
5,560
Income taxes paid (refunded), net
$
5,865
$
12,618
PulteGroup, Inc.
Segment Data
($000's omitted)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
HOMEBUILDING:
Home sale revenues
$
2,472,029
$
2,403,559
$
4,693,532
$
4,353,415
Land sale and other revenues
26,950
29,469
45,877
32,445
Total Homebuilding revenues
2,498,979
2,433,028
4,739,409
4,385,860
Home sale cost of revenues
(1,880,209
)
(1,848,155
)
(3,575,074
)
(3,340,946
)
Land sale and other cost of revenues
(20,041
)
(26,214
)
(35,055
)
(28,265
)
Selling, general, and administrative
expenses ("SG&A")
(196,858
)
(259,440
)
(460,527
)
(512,166
)
Goodwill impairment
—
—
(20,190
)
—
Other expense, net
(5,286
)
(3,521
)
(7,759
)
(4,490
)
Income before income taxes
$
396,585
$
295,698
$
640,804
$
499,993
FINANCIAL SERVICES:
Income before income taxes
$
60,424
$
25,078
$
79,974
$
37,486
CONSOLIDATED:
Income before income taxes
$
457,009
$
320,776
$
720,778
$
537,479
OPERATING METRICS:
Gross margin % (a)(b)
23.9
%
23.1
%
23.8
%
23.3
%
SG&A % (a)
(8.0
)%
(10.8
)%
(9.8
)%
(11.8
)%
Operating margin % (a)
16.0
%
12.3
%
14.0
%
11.5
%
(a) As a percentage of home
sale revenues
(b) Gross margin represents home
sale revenues minus home sale cost of revenues
PulteGroup, Inc.
Segment Data,
continued
($000's omitted)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Home sale revenues
$
2,472,029
$
2,403,559
$
4,693,532
$
4,353,415
Closings - units
Northeast
260
349
570
568
Southeast
1,104
951
2,032
1,848
Florida
1,380
1,252
2,590
2,260
Midwest
808
822
1,516
1,548
Texas
1,194
1,119
2,322
1,968
West
1,191
1,096
2,280
2,032
5,937
5,589
11,310
10,224
Average selling price
$
416
$
430
$
415
$
426
Net new orders - units
Northeast
383
455
831
816
Southeast
1,095
1,214
2,236
2,287
Florida
1,488
1,460
3,173
2,806
Midwest
896
975
1,915
1,999
Texas
1,431
1,323
2,940
2,689
West
1,229
1,365
2,922
2,658
6,522
6,792
14,017
13,255
Net new orders - dollars
$
2,677,074
$
2,890,709
$
5,945,823
$
5,626,561
Unit backlog
Northeast
850
718
Southeast
2,069
2,049
Florida
2,889
2,435
Midwest
1,939
1,853
Texas
2,468
2,213
West
2,999
2,525
13,214
11,793
Dollars in backlog
$
5,788,096
$
5,109,293
PulteGroup, Inc.
Segment Data,
continued
($000's omitted)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
MORTGAGE ORIGINATIONS:
Origination volume
4,474
3,720
8,344
6,718
Origination principal
$
1,436,103
$
1,161,906
$
2,649,370
$
2,076,617
Capture rate
86.8
%
81.0
%
86.8
%
80.4
%
Supplemental Data
($000's omitted)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Interest in inventory, beginning of
period
$
213,425
$
235,313
$
210,383
$
227,495
Interest capitalized
39,686
41,650
79,599
84,031
Interest expensed
(45,169
)
(42,254
)
(82,040
)
(76,817
)
Interest in inventory, end of period
$
207,942
$
234,709
$
207,942
$
234,709
PulteGroup, Inc. Reconciliation of
Non-GAAP Financial Measures (Unaudited)
This report contains information about our operating results
reflecting certain adjustments, including: adjustments to selling,
general, and administrative expenses ("SG&A"); income tax
expense; net income; and diluted earnings per share ("EPS"). These
measures are considered non-GAAP financial measures under the SEC's
rules and should be considered in addition to, rather than as a
substitute for, the comparable GAAP financial measures as measures
of our profitability. We believe that reflecting these adjustments
provides investors relevant and useful information for evaluating
the comparability of financial information presented and comparing
our profitability to other companies in the homebuilding industry.
Although other companies in the homebuilding industry report
similar information, the methods used may differ. We urge investors
to understand the methods used by other companies in the
homebuilding industry to calculate these measures and any
adjustments thereto before comparing our measures to those of such
other companies.
The following tables set forth a reconciliation of the non-GAAP
financial measures to the GAAP financial measures that management
believes to be most directly comparable ($000's
omitted):
Three Months Ended
June 30,
Results of Operations
Classification
2020
2019
Net income, as reported
$
348,620
$
241,041
Adjustments to income before income
taxes:
Insurance adjustments
SG&A
(60,662
)
*
Severance expense
SG&A
10,328
*
Income tax effect of the above items
Income tax expense
12,347
*
Adjusted net income
$
310,633
$
241,041
EPS (diluted), as reported
$
1.29
$
0.86
Adjusted EPS (diluted)
$
1.15
$
0.86
Three Months Ended
June 30,
2020
2019
Home sale revenues
$
2,472,029
$
2,403,559
Gross margin (a)
$
591,820
23.9
%
$
555,404
23.1
%
SG&A, as reported
$
196,858
8.0
%
$
259,440
10.8
%
Adjustments:
Insurance adjustments
60,662
2.5
%
*
*
Severance expense
(10,328
)
(0.4
)%
*
*
Adjusted SG&A
$
247,192
10.0
%
$
259,440
10.8
%
Operating margin, as reported
(b)
16.0
%
12.3
%
Adjusted operating margin (c)
13.9
%
12.3
%
*Item not meaningful for the period
presented
(a) Gross margin represents home sale
revenues minus home sale cost of revenues
(b) Operating margin represents gross
margin less SG&A
(c) Adjusted operating margin represents
gross margin less SG&A
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200723005291/en/
Investors: Jim Zeumer (404) 978-6434
jim.zeumer@pultegroup.com
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