PULTEGROUP INC/MI/ - FORM 8-K - EX-99 - EXHIBIT 99 - Q1 2016 EARNINGS RELEASE - April 21, 2016

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8-K - 8-K - 4.21.16 Q1 2016 EARNINGS RELEASE - PULTEGROUP INC/MI/a421168kpr.htm




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

PULTEGROUP, INC. REPORTS FIRST QUARTER 2016 FINANCIAL RESULTS

•
Q1 Net Income of $83 Million, or $0.24 Per Share, Compared With Prior Year Net Income of $55 Million, or $0.15 Per Share
•
Home Sale Revenues Increased 28% to $1.4 Billion; Closings Higher by 17% to 3,945 Homes
•
Gross Margin of 21.9% is Consistent with Prior Guidance and Reflects 80 Basis Points of Decrease Associated with the Q1 2016 Wieland Asset Purchase
•
Value of Net New Orders Increased 24% to $2.1 Billion; Net New Order Units Up 10% to 5,652 Homes
•
Backlog Value Up 31% to $3.4 Billion; Unit Backlog Increased 15% to 8,755 Homes
•
Repurchased $50 Million of Stock in the Quarter

ATLANTA - April 21, 2016 - PulteGroup, Inc. (NYSE: PHM) announced today financial results for its first quarter ended March 31, 2016. For the quarter, the Company reported net income of $83 million, or $0.24 per share, compared with prior year net income of $55 million, or $0.15 per share.

“PulteGroup has gotten off to a strong start in 2016, with increased investment driving growth in the business as the value of net new orders increased 24% to $2.1 billion and our backlog expanded by 31% to $3.4 billion,” said Richard J. Dugas, Jr., Chairman and CEO of PulteGroup. “We continued to deliver strong margin performance through our focus on better community locations, strategic pricing and construction efficiencies, while enhancing our overall liquidity and maintaining a superior balance sheet that gives us the flexibility to capitalize on market opportunities as they develop.”

“Looking to the broader housing market, we remain pleased with overall demand and expect new home sales will continue to move higher over the coming years as the industry benefits from an improving economy, ongoing employment and wage gains, low interest rates, a limited supply of homes and the gradual release of pent-up demand,” added Dugas. “We believe our business is extremely well positioned to be successful in this type of operating environment given our disciplined investment practices and focus on investing in high returning projects.”

Home sale revenues for the first quarter were $1.4 billion, an increase of 28% over the prior year. Higher revenues for the quarter were driven by a 17% increase in closings to 3,945 homes in combination with a 9% increase in average selling price to $353,000.

Home sale gross margin for the quarter was 21.9%, in line with Company guidance. Margins for the period were reduced by approximately 80 basis points associated with the Company’s recent purchase of substantially all of the assets of John Wieland Homes and Neighborhoods.

Homebuilding SG&A expense for the period was $191 million, or 13.7% of home sale revenues, compared with $161 million, or 14.8% of home sale revenues, in the prior year.


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“Our SG&A increased due to our investment in the incremental workforce necessary to manage the 41% increase in homes we have under construction and the $4 million of transaction costs associated with the Wieland transaction, but has importantly decreased 110 basis points as a percentage of revenue as we gained overhead leverage due to the increase in our deliveries this quarter,” said Bob O’Shaughnessy, Executive Vice President and CFO.  “We expect a slight decline in our quarterly SG&A spend through the balance of 2016, and currently project our full year SG&A to be approximately $730 million, or approximately 10% of our revenues.”

For the quarter, the dollar value of net new orders increased 24% over the prior year to $2.1 billion, while net new orders increased 10% to 5,652 homes. For the quarter, the Company operated out of 709 communities, which represents an increase of 16% over last year. Community count for the quarter included 49 communities acquired as part of the Wieland transaction. Excluding the acquired Wieland communities, absorption paces in the first quarter were comparable with the prior year quarter.

PulteGroup’s backlog at quarter end totaled 8,755 homes valued at $3.4 billion, compared with prior year backlog of 7,624 homes valued at $2.6 billion. The average sales price in backlog of $384,000, which is up 14% over the prior year, reflects the ongoing shift in the mix of homes sold toward more move-up product, as well as the inclusion of luxury homes offered in Wieland communities.

Benefitting from increased closing volumes, the Company's financial services operations reported pretax income of $10 million for the quarter, compared with pretax income of $5 million in the prior year. Mortgage capture rate for the quarter was 81% compared with 82% in the comparable prior year period.

The Company’s reported income tax expense of $35 million, which represents an effective tax rate of 29.5%, includes a reduction of approximately $10 million relating to the favorable resolution of certain state income matters. The Company currently estimates that its normalized tax rate for future quarters will be in line with its previous guidance of 38%.

The Company ended the quarter with $1.0 billion of cash, of which $465 million will be used to retire bonds maturing in May 2016. On a pro forma basis, adjusting for the repayment of these bonds, the Company’s debt-to-total capital ratio falls to 35%, down from the 39% currently reported.

During the quarter, the Company repurchased 3.1 million common shares for $50 million, or an average price of $16.36 per share.

A conference call discussing PulteGroup's first quarter results is scheduled for Thursday, April 21, 2016, at 8:30 a.m. Eastern Time. Interested investors can access the live webcast via PulteGroup's corporate website at www.pultegroupinc.com.




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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 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, 2015, 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.

# # #

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PulteGroup, Inc.
Consolidated Results of Operations
($000's omitted, except per share data)
(Unaudited)
 
 
 
 
 
Three Months Ended
 
March 31,
 
2016
 
2015
Revenues:
 
 
 
Homebuilding
 
 
 
Home sale revenues
$
1,394,243

 
$
1,088,158

Land sale revenues
2,487

 
17,542

 
1,396,730

 
1,105,700

Financial Services
35,848

 
27,598

Total revenues
1,432,578

 
1,133,298

 
 
 
 
Homebuilding Cost of Revenues:
 
 
 
Home sale cost of revenues
1,089,329

 
841,145

Land sale cost of revenues
2,028

 
13,378

 
1,091,357

 
854,523

Financial Services expenses
26,119

 
22,541

Selling, general, and administrative expenses
191,015

 
161,312

Other expense (income), net
5,874

 
(883
)
Income before income taxes
118,213

 
95,805

Income tax expense
34,913

 
40,834

Net income
$
83,300

 
$
54,971

 
 
 
 
Per share:
 
 
 
Basic earnings
$
0.24

 
$
0.15

Diluted earnings
$
0.24

 
$
0.15

Cash dividends declared
$
0.09

 
$
0.08

 
 
 
 
Number of shares used in calculation:
 
 
 
Basic
347,815

 
366,748

Effect of dilutive securities
2,662

 
3,362

Diluted
350,477

 
370,110



4



PulteGroup, Inc.
Condensed Consolidated Balance Sheets
($000's omitted)
(Unaudited)
 
March 31,
2016
 
December 31,
2015
 
 
 
 
ASSETS
 
 
 
 
 
 
 
Cash and equivalents
$
995,696

 
$
754,161

Restricted cash
22,419

 
21,274

House and land inventory
6,202,479

 
5,450,058

Land held for sale
85,017

 
81,492

Residential mortgage loans available-for-sale
290,578

 
442,715

Investments in unconsolidated entities
53,090

 
41,267

Other assets
686,163

 
660,835

Intangible assets
163,185

 
110,215

Deferred tax assets, net
1,344,853

 
1,394,879

 
$
9,843,480

 
$
8,956,896

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
Liabilities:
 
 
 
Accounts payable
$
331,932

 
$
327,725

Customer deposits
223,692

 
186,141

Accrued and other liabilities
1,294,892

 
1,284,273

Income tax liabilities
33,460

 
57,050

Financial Services debt
118,614

 
267,877

Term loan
498,817

 
498,423

Senior notes
2,568,546

 
1,576,082

 
5,069,953

 
4,197,571

Shareholders' equity
4,773,527

 
4,759,325

 
$
9,843,480

 
$
8,956,896



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PulteGroup, Inc.
Consolidated Statements of Cash Flows
($000's omitted)
(Unaudited)
 
Three Months Ended
 
March 31,
 
2016
 
2015
Cash flows from operating activities:
 
 
 
Net income
$
83,300

 
$
54,971

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Deferred income tax expense
50,026

 
40,805

Depreciation and amortization
13,113

 
11,062

Share-based compensation expense
9,355

 
8,280

Other, net
4,447

 
4,810

Increase (decrease) in cash due to:
 
 
 
Restricted cash
(1,145
)
 
(1,686
)
Inventories
(381,910
)
 
(230,993
)
Residential mortgage loans available-for-sale
151,886

 
119,976

Other assets
(25,133
)
 
(3,830
)
Accounts payable, accrued and other liabilities
31,999

 
(28,792
)
Net cash provided by (used in) operating activities
(64,062
)
 
(25,397
)
Cash flows from investing activities:
 
 
 
Capital expenditures
(9,460
)
 
(14,517
)
Cash used for business acquisition
(430,011
)
 
—

Other investing activities, net
(12,281
)
 
4,632

Net cash used in investing activities
(451,752
)
 
(9,885
)
Cash flows from financing activities:
 
 
 
Proceeds from debt issuance
991,575

 
—

Repayments of debt
(702
)
 
—

Borrowings under revolving credit facility
220,000

 
—

Repayments under revolving credit facility
(220,000
)
 
—

Financial Services borrowings (repayments)
(149,263
)
 
(72,678
)
Stock option exercises
52

 
6,596

Share repurchases
(52,745
)
 
(107,955
)
Dividends paid
(31,568
)
 
(29,616
)
Net cash provided by (used in) financing activities
757,349

 
(203,653
)
Net increase (decrease) in cash and equivalents
241,535

 
(238,935
)
Cash and equivalents at beginning of period
754,161

 
1,292,862

Cash and equivalents at end of period
$
995,696

 
$
1,053,927

 
 
 
 
Supplemental Cash Flow Information:
 
 
 
Interest paid (capitalized), net
$
(23,124
)
 
$
(21,412
)
Income taxes paid (refunded), net
$
1,212

 
$
(1,997
)


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PulteGroup, Inc.
Segment Data
($000's omitted)
(Unaudited)
 
 
 
 
 
Three Months Ended
 
March 31,
 
2016
 
2015
HOMEBUILDING:
 
 
 
Home sale revenues
$
1,394,243

 
$
1,088,158

Land sale revenues
2,487

 
17,542

Total Homebuilding revenues
1,396,730

 
1,105,700

 
 
 
 
Home sale cost of revenues
1,089,329

 
841,145

Land sale cost of revenues
2,028

 
13,378

Selling, general, and administrative expenses
191,015

 
161,312

Other expense (income), net
5,925

 
(883
)
Income before income taxes
$
108,433

 
$
90,748

 
 
 
 
FINANCIAL SERVICES:
 
 
 
Income before income taxes
$
9,780

 
$
5,057

 
 
 
 
CONSOLIDATED:
 
 
 
Income before income taxes
$
118,213

 
$
95,805



7


PulteGroup, Inc.
Segment Data, continued
($000's omitted)
(Unaudited)
 
 
 
 
 
Three Months Ended
 
March 31,
 
2016
 
2015
 
 
 
 
Home sale revenues
$
1,394,243

 
$
1,088,158

 
 
 
 
Closings - units
 
 
 
Northeast
262

 
248

Southeast (a)
826

 
612

Florida
745

 
601

Midwest
552

 
569

Texas
775

 
746

West
785

 
589

 
3,945

 
3,365

Average selling price
$
353

 
$
323

 
 
 
 
Net new orders - units
 
 
 
Northeast
378

 
437

Southeast (a)
1,052

 
938

Florida
923

 
911

Midwest
994

 
763

Texas
1,121

 
1,117

West
1,184

 
973

 
5,652

 
5,139

Net new orders - dollars (b)
$
2,113,973

 
$
1,708,390

 
 
 
 
Unit backlog
 
 
 
Northeast
560

 
650

Southeast (a)
1,689

 
1,294

Florida
1,452

 
1,312

Midwest
1,531

 
1,382

Texas
1,691

 
1,644

West
1,832

 
1,342

 
8,755

 
7,624

Dollars in backlog
$
3,359,157

 
$
2,564,092

 
 
 
 
(a)
Southeast includes the acquisition in January 2016 of substantially all of the assets of JW Homes ("Wieland").
(b)
Net new orders excludes backlog acquired from Wieland in January 2016. 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
 
March 31,
 
2016
 
2015
MORTGAGE ORIGINATIONS:
 
 
 
Origination volume
2,548

 
2,116

Origination principal
$
666,647

 
$
514,788

Capture rate
81.1
%
 
81.6
%


Supplemental Data
($000's omitted)
(Unaudited)
 
 
 
 
 
Three Months Ended
 
March 31,
 
2016
 
2015
 
 
 
 
Interest in inventory, beginning of period
$
149,498

 
$
167,638

Interest capitalized
35,284

 
30,803

Interest expensed
(26,129
)
 
(31,554
)
Interest in inventory, end of period
$
158,653

 
$
166,887




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