PULTEGROUP INC/MI/ - FORM 8-K - EX-99.1 - PRESS RELEASE ISSUED ON OCTOBER 23, 2014 BY PULTEGROUP, INC - October 23, 2014

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FOR IMMEDIATE RELEASE
Company Contact
 
Investors: Jim Zeumer
 
(404) 978-6434
 
          Email: jim.zeumer@pultegroup.com
 
 

PULTEGROUP REPORTS THIRD QUARTER 2014 FINANCIAL RESULTS

•
Q3 Pretax Income of $225 Million Increased 29% from the Prior Year
•
Q3 Earnings of $0.37 Per Share; Prior Year Earnings of $5.87 Per Share Reflect the Reversal of $2.1 Billion of the Company’s Deferred Tax Asset Valuation Allowance
•
Home Sale Revenues Increased 4% to $1.6 Billion Driven by an 8% Increase in Average Selling Price to $334,000
•
Gross Margin of 22.9%, Which Includes the Impact of Acquisition Accounting Adjustments Associated with its Purchase of the Homebuilding Assets of Dominion Homes, Increased 200 Basis Points Over 2013
•
Q3 Absorption Pace Increased 5% Excluding Impact of Dominion Acquisition
•
Q3 Backlog Value Increased 8% to $2.6 Billion on a Unit Backlog Increase of 5% to 7,934 Homes, Inclusive of Assumed Dominion Backlog
•
In a Separate Release, the Company Announced a 60% Increase of its Quarterly Dividend to $0.08 Per Share and Expansion of its Share Repurchase Authorization by $750 Million

Atlanta, GA, October 23, 2014 - PulteGroup, Inc. (NYSE: PHM) announced today financial results for its third quarter ended September 30, 2014. For the quarter, the Company reported net income of $141 million, or $0.37 per share. Net income for the period reflects $84 million, or $0.22 per share, of income tax expense. Prior year net income of $2.3 billion, or $5.87 per share, reflects $2.1 billion, or $5.42 per share, of income tax benefit primarily related to the reversal of the Company’s deferred tax asset valuation allowance.

“I am extremely pleased with the benefits we continue to realize from our Value Creation strategy and with the resulting balance sheet strength and flexibility we have today,” said Richard J. Dugas, Jr., Chairman, President and Chief Executive Officer of PulteGroup. “By remaining disciplined in our construction and land investment practices, we continue to improve our returns on invested capital while positioning the Company to take advantage of market opportunities.

“Our view of the U.S. housing market remains positive, as continued improvements in both the economy and employment provide ongoing support to an industry that continues to benefit from low inventory, low mortgage rates and favorable demographic trends. Further, we are encouraged by proposed changes at FHFA which have the potential to improve mortgage availability, particularly for first-time homebuyers. Consistent with our expectation for an ongoing recovery in housing, we have authorized $2.4 billion for land investment in 2015, an increase of $600 to $700 million over our expected 2014 land expenditures.

“Our first priority in allocating capital is to invest responsibly in our business, and then to return excess funds to shareholders in the form of dividends and share repurchases on a routine and systematic basis. Given the strong cash flows we expect to realize in the future, our Board has approved a 60% increase of PulteGroup’s quarterly dividend to $0.08 per share and a $750 million increase in our share repurchase authorization. By intelligently investing in our business while routinely returning funds to shareholders, we are aligning our capital allocation decisions with our Value Creation strategy and our fundamental goal of increasing long-term total shareholder returns.”

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Third Quarter Results

On August 25, 2014, PulteGroup announced that it had acquired certain real estate assets from Dominion Homes, including control of approximately 8,200 lots and the assumption of 622 homes in backlog. PulteGroup’s third quarter results, which reflect the contribution from these assets for approximately 5 weeks of the quarter, include 64 signups and 86 closings from 33 communities.

Home sale revenues for the third quarter increased 4% from the prior year to $1.6 billion. Higher revenues for the period were driven by an 8% increase in average selling price to $334,000, partially offset by a 4% decrease in closings to 4,646 homes. The higher average selling price realized in the quarter reflects price increases implemented by the Company in our move-up and active adult communities which typically carry higher selling prices.

For the third quarter, pretax income from homebuilding operations increased 31% to $214 million, compared with prior year pretax income of $164 million. The Company's home sale gross margin for the period was 22.9%, an increase of 200 basis points over the prior year. Reported gross margin for the period was impacted by acquisition accounting adjustments associated with the Company’s purchase of Dominion homebuilding assets. Homebuilding SG&A expense for the quarter was $147 million, or 9.5% of home sale revenues.

Net new orders for the third quarter totaled 3,779 homes, which is comparable with the prior year. On a dollar basis, signup value was $1.3 billion, which is up 3% from the third quarter of 2013. The Company ended the quarter with 600 active communities, which is consistent with the prior year. PulteGroup's quarter-end backlog of 7,934 homes, including backlog relating to acquired Dominion assets, was valued at $2.6 billion, compared with prior year backlog of 7,522 homes with a value of $2.4 billion.

The Company's financial services operations reported third quarter pretax income of $11 million, which is comparable with prior year results. Mortgage capture rate for the quarter was 80%, which is consistent with the same quarter last year.

During the quarter, PulteGroup invested $525 million in land acquisition and development, raising its total land spend through the first nine months of 2014 to $1.25 billion. The Company also repurchased 2.7 million shares of common stock for $50.3 million, or an average price of $18.85 per share. PulteGroup ended the quarter with $1.2 billion of cash.

Company Significantly Increases Dividend and Share Repurchase Authorization

In a separate press release issued today, PulteGroup announced that its Board of Directors voted to increase its quarterly dividend by 60% to $0.08 per share. The Board also approved an increase in the Company’s share repurchase authorization of $750 million. At the end of the third quarter, the Company had $85 million available under its existing repurchase authorization.

A conference call discussing PulteGroup's third quarter 2014 results is scheduled for Thursday, October 23, 2014, 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,” “project,” “may,” “can,” “could,” “might,” “will” and similar expressions identify forward-looking statements, including statements related

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to 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; continued volatility in the debt and equity markets; competition within the industries in which PulteGroup operates; the availability and cost of land and other raw materials used by PulteGroup in its 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; the availability and cost of insurance covering risks associated with PulteGroup's 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; economic changes nationally or in PulteGroup's 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, 2013, 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 and DiVosta Homes, 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 and www.divosta.com.


# # #




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PulteGroup, Inc.
Consolidated Results of Operations
($000's omitted, except per share data)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Revenues:
 
 
 
 
 
 
 
Homebuilding
 
 
 
 
 
 
 
Home sale revenues
$
1,551,226

 
$
1,491,959

 
$
3,885,703

 
$
3,811,386

Land sale revenues
10,047

 
55,783

 
24,558

 
102,299

 
1,561,273

 
1,547,742

 
3,910,261

 
3,913,685

Financial Services
33,452

 
34,336

 
89,544

 
110,571

Total revenues
1,594,725

 
1,582,078

 
3,999,805

 
4,024,256

 
 
 
 
 
 
 
 
Homebuilding Cost of Revenues:
 
 
 
 
 
 
 
Home sale cost of revenues
1,195,369

 
1,180,137

 
2,976,665

 
3,072,425

Land sale cost of revenues
3,539

 
49,933

 
15,382

 
92,661

 
1,198,908

 
1,230,070

 
2,992,047

 
3,165,086

Financial Services expenses
22,623

 
23,244

 
48,058

 
68,867

Selling, general and administrative expenses
147,136

 
138,637

 
521,791

 
418,794

Other expense, net
2,406

 
17,055

 
25,561

 
79,166

Interest income
(1,205
)
 
(1,036
)
 
(3,431
)
 
(3,321
)
Interest expense
210

 
171

 
625

 
544

Equity in (earnings) loss of unconsolidated entities
(281
)
 
(785
)
 
(7,483
)
 
(282
)
Income before income taxes
224,928

 
174,722

 
422,637

 
295,402

Income tax expense (benefit)
84,383

 
(2,107,162
)
 
165,393

 
(2,104,661
)
Net income
$
140,545

 
$
2,281,884

 
$
257,244

 
$
2,400,063

 
 
 
 
 
 
 
 
Per share:
 
 
 
 
 
 
 
Basic earnings
$
0.37

 
$
5.92

 
$
0.68

 
$
6.20

Diluted earnings
$
0.37

 
$
5.87

 
$
0.67

 
$
6.14

Cash dividends declared
$
0.05

 
$
0.10

 
$
0.15

 
$
0.10

 
 
 
 
 
 
 
 
Number of shares used in calculation:
 
 
 
 
 
 
 
Basic
373,531

 
382,883

 
376,097

 
384,159

Effect of dilutive securities
3,761

 
3,220

 
3,723

 
3,745

Diluted
377,292

 
386,103

 
379,820

 
387,904



4



PulteGroup, Inc.
Condensed Consolidated Balance Sheets
($000's omitted)
(Unaudited)
 
 
 
 
 
September 30,
2014
 
December 31,
2013
 
 
 
 
ASSETS
 
 
 
 
 
 
 
Cash and equivalents
$
1,221,817

 
$
1,580,329

Restricted cash
25,003

 
72,715

House and land inventory
4,431,801

 
3,978,561

Land held for sale
93,162

 
61,735

Land, not owned, under option agreements
16,817

 
24,024

Residential mortgage loans available-for-sale
236,372

 
287,933

Investments in unconsolidated entities
40,295

 
45,323

Other assets
500,744

 
460,621

Intangible assets
126,340

 
136,148

Deferred tax assets, net
1,922,294

 
2,086,754

 
$
8,614,645

 
$
8,734,143

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
Liabilities:
 
 
 
Accounts payable
$
299,004

 
$
202,736

Customer deposits
192,551

 
134,858

Accrued and other liabilities
1,327,819

 
1,377,750

Income tax liabilities
196,214

 
206,015

Financial Services debt
71,594

 
105,664

Senior notes
1,817,054

 
2,058,168

 
3,904,236

 
4,085,191

 
 
 
 
Shareholders' equity
4,710,409

 
4,648,952

 
 
 
 
 
$
8,614,645

 
$
8,734,143



5


PulteGroup, Inc.
Consolidated Statements of Cash Flows
($000's omitted)
(Unaudited)
 
Nine Months Ended
 
September 30,
 
2014
 
2013
Cash flows from operating activities:
 
 
 
Net income
$
257,244

 
$
2,400,063

Adjustments to reconcile net income to net cash flows provided by (used in)
      operating activities:
 
 
 
Deferred income tax expense
164,460

 
(2,108,756
)
Depreciation and amortization
28,864

 
23,134

Stock-based compensation expense
21,290

 
21,570

Equity in (earnings) loss of unconsolidated entities
(7,483
)
 
(282
)
Distributions of earnings from unconsolidated entities
4,824

 
1,693

Loss on debt retirements
8,584

 
26,930

Other non-cash, net
8,211

 
12,314

Increase (decrease) in cash due to:
 
 
 
Restricted cash
(689
)
 
1,654

Inventories
(384,571
)
 
89,040

Residential mortgage loans available-for-sale
49,600

 
21,967

Other assets
(12,802
)
 
(29,989
)
Accounts payable, accrued and other liabilities
74,102

 
97,607

Income tax liabilities
(9,799
)
 
(1,995
)
Net cash provided by (used in) operating activities
201,835

 
554,950

Cash flows from investing activities:
 
 
 
Distributions from unconsolidated entities
7,624

 
200

Investments in unconsolidated entities
(9
)
 
(1,057
)
Net change in loans held for investment
(6,338
)
 
236

Change in restricted cash related to letters of credit
48,401

 
875

Proceeds from the sale of property and equipment
83

 
9

Capital expenditures
(41,888
)
 
(18,354
)
Cash used for business acquisitions
(77,469
)
 
—

Net cash provided by (used in) investing activities
(69,596
)
 
(18,091
)
Cash flows from financing activities:
 
 
 
Financial Services borrowings (repayments)
(34,070
)
 
(23,697
)
Other borrowings (repayments)
(250,631
)
 
(477,220
)
Stock option exercises
6,034

 
18,549

Stock repurchases
(155,140
)
 
(89,940
)
Dividends paid
(56,944
)
 
(19,317
)
Net cash provided by (used in) financing activities
(490,751
)
 
(591,625
)
Net increase (decrease) in cash and equivalents
(358,512
)
 
(54,766
)
Cash and equivalents at beginning of period
1,580,329

 
1,404,760

Cash and equivalents at end of period
$
1,221,817

 
$
1,349,994

 
 
 
 
Supplemental Cash Flow Information:
 
 
 
Interest paid (capitalized), net
$
(23,236
)
 
$
(18,304
)
Income taxes paid (refunded), net
$
(1,054
)
 
$
(792
)


6



PulteGroup, Inc.
Segment Data
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
HOMEBUILDING:
 
 
 
 
 
 
 
Home sale revenues
$
1,551,226

 
$
1,491,959

 
$
3,885,703

 
$
3,811,386

Land sale revenues
10,047

 
55,783

 
24,558

 
102,299

Total Homebuilding revenues
1,561,273

 
1,547,742

 
3,910,261

 
3,913,685

 
 
 
 
 
 
 
 
Home sale cost of revenues
1,195,369

 
1,180,137

 
2,976,665

 
3,072,425

Land sale cost of revenues
3,539

 
49,933

 
15,382

 
92,661

Selling, general and administrative expenses
147,136

 
138,637

 
521,791

 
418,794

Equity in (earnings) loss of unconsolidated entities
(233
)
 
(749
)
 
(7,391
)
 
(186
)
Other expense, net
2,406

 
17,055

 
25,561

 
79,166

Interest income, net
(995
)
 
(865
)
 
(2,806
)
 
(2,777
)
Income before income taxes
$
214,051

 
$
163,594

 
$
381,059

 
$
253,602

 
 
 
 
 
 
 
 
FINANCIAL SERVICES:
 
 
 
 
 
 
 
Income before income taxes
$
10,877

 
$
11,128

 
$
41,578

 
$
41,800

 
 
 
 
 
 
 
 
CONSOLIDATED:
 
 
 
 
 
 
 
Income before income taxes
$
224,928

 
$
174,722

 
$
422,637

 
$
295,402



7


PulteGroup, Inc.
Segment Data, continued
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
Home sale revenues
$
1,551,226

 
$
1,491,959

 
$
3,885,703

 
$
3,811,386

 
 
 
 
 
 
 
 
Closings - units
 
 
 
 
 
 
 
Northeast
383

 
532

 
1,072

 
1,212

Southeast
833

 
823

 
2,265

 
2,209

Florida
754

 
760

 
1,944

 
1,992

Texas
963

 
976

 
2,629

 
2,833

North
1,098

 
926

 
2,406

 
2,333

Southwest
615

 
800

 
1,564

 
2,223

 
4,646

 
4,817

 
11,880

 
12,802

Average selling price
$
334

 
$
310

 
$
327

 
$
298

 
 
 
 
 
 
 
 
Net new orders - units
 
 
 
 
 
 
 
Northeast
336

 
405

 
1,160

 
1,519

Southeast
756

 
714

 
2,460

 
2,560

Florida
650

 
589

 
2,274

 
2,094

Texas
735

 
813

 
3,046

 
2,881

North
778

 
720

 
2,658

 
2,665

Southwest
524

 
540

 
1,822

 
2,147

 
3,779

 
3,781

 
13,420

 
13,866

Net new orders - dollars (a)
$
1,251,081

 
$
1,210,976

 
$
4,453,895

 
$
4,312,597

 
 
 
 
 
 
 
 
Unit backlog
 
 
 
 
 
 
 
Northeast
 
 
 
 
709

 
929

Southeast
 
 
 
 
1,248

 
1,262

Florida
 
 
 
 
1,243

 
1,167

Texas
 
 
 
 
1,667

 
1,503

North
 
 
 
 
2,087

 
1,599

Southwest
 
 
 
 
980

 
1,062

 
 
 
 
 
7,934

 
7,522

Dollars in backlog
 
 
 
 
$
2,615,288

 
$
2,432,747

 
 
 
 
 
 
 
 

(a)
Net new order dollars represent a composite of new order dollars combined with other movements of the dollars in backlog related to cancellations and change orders.

8


    
PulteGroup, Inc.
Segment Data, continued
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
MORTGAGE ORIGINATIONS:
 
 
 
 
 
 
 
Origination volume
2,899

 
3,126

 
7,482

 
8,660

Origination principal
$
724,025

 
$
733,433

 
$
1,816,827

 
$
1,998,697

Capture rate
80.3
%
 
79.5
%
 
79.7
%
 
80.5
%


Supplemental Data
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
Interest in inventory, beginning of period
$
210,603

 
$
298,575

 
$
230,922

 
$
331,880

Interest capitalized
32,025

 
35,962

 
98,793

 
118,527

Interest expensed
(52,286
)
 
(68,013
)
 
(139,373
)
 
(183,883
)
Interest in inventory, end of period
$
190,342

 
$
266,524

 
$
190,342

 
$
266,524

Interest incurred
$
32,025

 
$
35,962

 
$
98,793

 
$
118,527




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PULTEGROUP INC/MI/ Reports