- Revenue and Margin Gains Drive 74%
Increase in Net Income to $1.01 Per Share
- Closings Increased 17% to 6,031
Homes
- Home Sale Revenues Increased 25% to
$2.6 Billion
- Gross Margin Increased 10 Basis
Points to 24.0%
- SG&A Decreased 180 Basis Points
to 9.8% of Home Sale Revenues
- Operating Margin Expanded 190 Basis
Points to 14.2%
- Net New Orders Increased 1% to
5,350; Value of Net New Orders Increased 1% to $2.3
Billion
- Unit Backlog Up 3% to 11,164 Homes;
Backlog Value Increased 5% to $4.9 Billion
- Company Repurchased 2.4 Million
Shares for $67 Million
PulteGroup, Inc. (NYSE: PHM) announced today financial results
for its third quarter ended September 30, 2018. For the quarter,
the Company reported net income of $290 million, or $1.01 per share
compared with prior year net income of $178 million, or $0.58 per
share. The higher net income for the period was primarily the
result of a 25% increase in homebuilding revenues, in combination
with a 190 basis point expansion of operating margin.
“Consistent with our stated strategies, PulteGroup continues to
successfully deliver strong earnings growth, while achieving high
returns on invested capital and equity,” said Company President and
CEO, Ryan Marshall. “By focusing on intelligently growing our
business, while realizing increased operating efficiencies, we
leveraged 25% growth in homebuilding revenues into a 74% gain in
earnings to $1.01 per share.”
“The critical underpinnings that have supported a slow but
steady housing recovery, including a strong economy, low
unemployment, high consumer confidence and limited home inventory,
remain solidly in place,” continued Marshall. “While buyer concerns
around affordability and rising mortgage rates appear to have
impacted near term market dynamics, traffic trends indicate that
buyer interest levels are still high and that the overall housing
recovery remains on track.”
Third Quarter Results
Home sale revenues for the third quarter increased 25% over the
prior year to $2.6 billion. The higher revenues for the period
reflect a 17% increase in closings to 6,031 homes, combined with a
7%, or $27,000, increase in average sales price to $427,000.
Home sale gross margin for the third quarter was 24.0%, which is
up 10 basis points over the prior year and consistent with the
Company’s reported gross margin for the second quarter of 2018.
Homebuilding SG&A expense for the quarter was $253 million, or
9.8% of home sale revenues, compared with $237 million, or 11.6% of
home sale revenues, in the prior year. Operating margin for the
third quarter expanded 190 basis points over last year to
14.2%.
Net new orders for the third quarter increased 1% to 5,350
homes. The value of third quarter net new orders was $2.3 billion,
which is an increase of 1% over the prior year. For the quarter,
the Company operated out of 843 communities compared with 778
communities in the third quarter of 2017.
Unit backlog for the quarter was up 3% over the third quarter of
last year to 11,164 homes, with backlog value increasing 5% to $4.9
billion. The average price of homes in backlog increased 2% over
the prior year to $440,000.
Third quarter pretax income for the Company's financial services
operations increased 10% to $20 million. The increase in pretax
income for the period was driven by higher mortgage origination
volumes resulting from growth in the Company’s homebuilding
operations. Mortgage capture rate for the quarter was 75%, compared
with 80% in the prior year.
During the quarter, the Company repurchased 2.4 million common
shares for $67 million, or an average price of $28.14 per
share.
A conference call discussing PulteGroup's third quarter 2018
results is scheduled for Tuesday, October 23, 2018, at 8:30 a.m.
Eastern Time. Interested investors can access the live webcast via
PulteGroup's corporate website at www.pultegroupinc.com.
Forward-Looking Statements
This press release includes "forward-looking statements." These
statements are subject to a number of risks, uncertainties and
other factors that could cause our actual results, performance,
prospects or opportunities, as well as those of the markets we
serve or intend to serve, to differ materially from those expressed
in, or implied by, these statements. You can identify these
statements by the fact that they do not relate to matters of a
strictly factual or historical nature and generally discuss or
relate to forecasts, estimates or other expectations regarding
future events. Generally, the words “believe,” “expect,” “intend,”
“estimate,” “anticipate,” “plan,” “project,” “may,” “can,” “could,”
“might,” "should", “will” and similar expressions identify
forward-looking statements, including statements related to any
impairment charge and the impacts or effects thereof, expected
operating and performing results, planned transactions, planned
objectives of management, future developments or conditions in the
industries in which we participate and other trends, developments
and uncertainties that may affect our business in the future.
Such risks, uncertainties and other factors include, among other
things: interest rate changes and the availability of mortgage
financing; competition within the industries in which we operate;
the availability and cost of land and other raw materials used by
us in our homebuilding operations; the impact of any changes to our
strategy in responding to the cyclical nature of the industry,
including any changes regarding our land positions and the levels
of our land spend; the availability and cost of insurance covering
risks associated with our businesses; shortages and the cost of
labor; weather related slowdowns; slow growth initiatives and/or
local building moratoria; governmental regulation directed at or
affecting the housing market, the homebuilding industry or
construction activities; uncertainty in the mortgage lending
industry, including revisions to underwriting standards and
repurchase requirements associated with the sale of mortgage loans;
the interpretation of or changes to tax, labor and environmental
laws, including, but not limited to the Tax Cuts and Jobs Act which
could have a greater impact on our effective tax rate or the value
of our deferred tax assets than we anticipate; economic changes
nationally or in our local markets, including inflation, deflation,
changes in consumer confidence and preferences and the state of the
market for homes in general; legal or regulatory proceedings or
claims; our ability to generate sufficient cash flow in order to
successfully implement our capital allocation priorities; required
accounting changes; terrorist acts and other acts of war; and other
factors of national, regional and global scale, including those of
a political, economic, business and competitive nature. See
PulteGroup's Annual Report on Form 10-K for the fiscal year ended
December 31, 2017, and other public filings with the Securities and
Exchange Commission (the "SEC") for a further discussion of these
and other risks and uncertainties applicable to our businesses.
PulteGroup undertakes no duty to update any forward-looking
statement, whether as a result of new information, future events or
changes in PulteGroup's expectations.
About PulteGroup
PulteGroup, Inc. (NYSE: PHM), based in Atlanta, Georgia, is one
of America's largest homebuilding companies with operations in
approximately 50 markets throughout the country. Through its brand
portfolio that includes Centex, Pulte Homes, Del Webb, DiVosta
Homes and John Wieland Homes and Neighborhoods, the Company is one
of the industry's most versatile homebuilders able to meet the
needs of multiple buyer groups and respond to changing consumer
demand. PulteGroup conducts extensive research to provide
homebuyers with innovative solutions and consumer inspired homes
and communities to make lives better.
For more information about PulteGroup, Inc. and PulteGroup
brands, go to www.pultegroupinc.com; www.pulte.com; www.centex.com;
www.delwebb.com; www.divosta.com and www.jwhomes.com.
PulteGroup, Inc. Consolidated Statements of
Operations ($000's omitted, except per share data)
(Unaudited) Three Months
Ended Nine Months Ended September
30, September 30, 2018 2017
2018 2017 Revenues: Homebuilding
Home sale revenues $ 2,572,236 $ 2,055,891 $ 6,933,888 $ 5,606,953
Land sale and other revenues 25,510 28,215 104,971
39,848 2,597,746 2,084,106 7,038,859 5,646,801
Financial Services 51,620 46,952 150,322
135,995 Total revenues 2,649,366 2,131,058
7,189,181 5,782,796
Homebuilding Cost of
Revenues: Home sale cost of revenues (1,954,160 ) (1,564,605 )
(5,276,232 ) (4,332,221 ) Land sale cost of revenues (22,060 )
(25,123 ) (71,791 ) (115,950 ) (1,976,220 ) (1,589,728 ) (5,348,023
) (4,448,171 )
Financial Services expenses (32,213 )
(29,304 ) (96,650 ) (86,150 )
Selling, general, and
administrative expenses (252,757 ) (237,495 ) (719,706 )
(689,974 )
Other expense, net (3,488 ) (6,282 ) (6,753 )
(28,439 )
Income before income taxes 384,688 268,249
1,018,049 530,062
Income tax expense (95,153 ) (90,710 )
(233,674 ) (160,255 )
Net income $ 289,535 $ 177,539
$ 784,375 $ 369,807
Per share:
Basic earnings $ 1.01 $ 0.59 $ 2.72 $ 1.18
Diluted earnings $ 1.01 $ 0.58 $ 2.71 $
1.18 Cash dividends declared $ 0.09 $ 0.09 $
0.27 $ 0.27
Number of shares used in
calculation: Basic 283,489 298,538 285,127 309,453 Effect of
dilutive securities 1,183 1,690 1,301 1,861
Diluted 284,672 300,228 286,428 311,314
PulteGroup, Inc. Condensed
Consolidated Balance Sheets ($000's omitted)
(Unaudited)
September 30, 2018
December 31, 2017
ASSETS Cash and equivalents $ 728,631 $
272,683 Restricted cash 30,381 33,485 Total cash, cash equivalents,
and restricted cash 759,012 306,168 House and land inventory
7,489,454 7,147,130 Land held for sale 65,905 68,384 Residential
mortgage loans available-for-sale 349,784 570,600 Investments in
unconsolidated entities 54,278 62,957 Other assets 797,976 745,123
Intangible assets 130,642 140,992 Deferred tax assets, net 408,029
645,295 $ 10,055,080 $ 9,686,649
LIABILITIES AND
SHAREHOLDERS’ EQUITY Liabilities: Accounts payable $
465,833 $ 393,815 Customer deposits 342,376 250,779 Accrued and
other liabilities 1,251,518 1,356,333 Income tax liabilities 10,324
86,925 Financial Services debt 250,733 437,804 Notes payable
3,005,418 3,006,967 5,326,202 5,532,623 Shareholders' equity
4,728,878 4,154,026 $ 10,055,080 $ 9,686,649
PulteGroup,
Inc. Consolidated Statements of Cash Flows ($000's
omitted) (Unaudited) Nine Months
Ended September 30, 2018
2017 Cash flows from operating activities: Net income
$ 784,375 $ 369,807 Adjustments to reconcile net income to net cash
from operating activities: Deferred income tax expense 230,335
127,856 Land-related charges 13,973 131,254 Depreciation and
amortization 36,717 38,689 Share-based compensation expense 21,521
26,505 Other, net (3,466 ) (1,438 ) Increase (decrease) in cash due
to: Inventories (263,734 ) (758,006 ) Residential mortgage loans
available-for-sale 218,900 173,148 Other assets (22,117 ) 22,120
Accounts payable, accrued and other liabilities (1,524 ) 122,544
Net cash provided by (used in) operating activities
1,014,980 252,479
Cash flows from investing
activities: Capital expenditures (46,529 ) (23,548 )
Investments in unconsolidated entities (1,000 ) (22,007 ) Other
investing activities, net 15,545 5,788 Net cash
provided by (used in) investing activities (31,984 ) (39,767 )
Cash flows from financing activities: Repayments of debt
(82,655 ) (7,001 ) Borrowings under revolving credit facility
1,566,000 971,000 Repayments under revolving credit facility
(1,566,000 ) (888,000 ) Financial Services borrowings (repayments)
(187,071 ) (85,797 ) Debt issuance costs (8,165 ) — Stock option
exercises 5,462 22,765 Share repurchases (179,439 ) (665,812 )
Dividends paid (78,284 ) (86,018 ) Net cash provided by (used in)
financing activities (530,152 ) (738,863 ) Net increase (decrease)
in cash, cash equivalents, and restricted cash 452,844 (526,151 )
Cash, cash equivalents, and restricted cash at beginning of period
306,168 723,248 Cash, cash equivalents, and
restricted cash at end of period $ 759,012 $ 197,097
Supplemental Cash Flow Information: Interest paid
(capitalized), net $ 16,747 $ 11,516 Income taxes
paid, net $ 88,544 $ 17,206
PulteGroup, Inc. Segment Data ($000's omitted)
(Unaudited) Three Months
Ended Nine Months Ended September
30, September 30, 2018 2017
2018 2017 HOMEBUILDING: Home
sale revenues $ 2,572,236 $ 2,055,891 $ 6,933,888 $ 5,606,953 Land
sale and other revenues 25,510 28,215 104,971
39,848 Total Homebuilding revenues 2,597,746 2,084,106
7,038,859 5,646,801 Home sale cost of revenues (1,954,160 )
(1,564,605 ) (5,276,232 ) (4,332,221 ) Land sale cost of revenues
(22,060 ) (25,123 ) (71,791 ) (115,950 ) Selling, general, and
administrative expenses ("SG&A") (252,757 ) (237,495 ) (719,706
) (689,974 ) Other expense, net (3,714 ) (6,420 ) (7,263 ) (28,832
) Income before income taxes $ 365,055 $ 250,463 $
963,867 $ 479,824
FINANCIAL SERVICES:
Income before income taxes $ 19,633 $ 17,786 $ 54,182
$ 50,238
CONSOLIDATED: Income before
income taxes $ 384,688 $ 268,249 $ 1,018,049 $
530,062
OPERATING METRICS: Gross margin
% (a)(b) 24.0 % 23.9 % 23.9 % 22.7 % SG&A % (a) (9.8 )% (11.6
)% (10.4 )% (12.3 )% Operating margin % (a) 14.2 % 12.3 % 13.5 %
10.4 %
(a) As a percentage of home sale
revenues.
(b) Gross margin equals home sale revenues
minus home sale cost of revenues.
PulteGroup, Inc. Segment Data,
continued ($000's omitted) (Unaudited)
Three Months Ended
Nine Months Ended September 30, September 30,
2018 2017 2018
2017 Home sale revenues $ 2,572,236 $
2,055,891 $ 6,933,888 $ 5,606,953
Closings - units
Northeast 350 318 1,002 846 Southeast 1,101 966 3,097 2,751 Florida
1,241 897 3,262 2,639 Midwest 1,014 1,001 2,653 2,576 Texas 1,114
927 3,019 2,809 West 1,211 1,042 3,365 2,799 6,031 5,151 16,398
14,420
Average selling price $ 427 $ 399 $ 423 $ 389
Net new orders - units Northeast 353 316 1,251 1,103
Southeast 948 1,044 3,300 3,314 Florida 1,173 991 3,964 3,121
Midwest 823 868 2,980 3,119 Texas 1,005 881 3,511 3,281 West 1,048
1,200 3,560 3,883 5,350 5,300 18,566 17,821
Net new orders -
dollars $ 2,278,357 $ 2,260,082 $ 7,866,177 $ 7,331,311
Unit backlog Northeast 761 644 Southeast 1,919 1,934 Florida
2,380 1,900 Midwest 1,814 1,850 Texas 1,918 1,884 West 2,372 2,611
11,164 10,823
Dollars in backlog $ 4,911,353 $ 4,665,871
PulteGroup, Inc. Segment Data,
continued ($000's omitted) (Unaudited)
Three Months Ended
Nine Months Ended September 30, September 30,
2018 2017 2018
2017 MORTGAGE ORIGINATIONS: Origination volume 3,692
3,428 10,319 9,631 Origination principal $
1,138,389 $ 1,002,108 $ 3,170,206 $ 2,778,151
Capture rate 75.0 % 79.6 % 76.0 % 79.5 %
Supplemental Data ($000's omitted) (Unaudited)
Three Months Ended
Nine Months Ended September 30, September 30,
2018 2017 2018
2017 Interest in inventory, beginning of period $
243,627 $ 212,850 $ 226,611 $ 186,097 Interest capitalized 42,743
46,077 130,474 135,949 Interest expensed (43,583 ) (36,381 )
(114,298 ) (99,500 ) Interest in inventory, end of period $ 242,787
$ 222,546 $ 242,787 $ 222,546
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181023005253/en/
PulteGroup, Inc.Investors:Jim Zeumer,
404-978-6434jim.zeumer@pultegroup.com
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