PULTEGROUP INC/MI/ - FORM 8-K - EX-99 - EXHIBIT 99 - Q2 2017 EARNINGS RELEASE - July 25, 2017

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8-K - 8-K 2016 Q2 EARNINGS RELEASE 7-25-17 - PULTEGROUP INC/MI/a725178kpr.htm


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

PULTEGROUP REPORTS SECOND QUARTER 2017 FINANCIAL RESULTS

•
Reported Net Income of $0.32 Per Share Reflects Land and Warranty Charges, Partially Offset by an Insurance Reserve Reversal and Lower Tax Rate
•
Adjusted Net Income of $0.47 Per Share Increased 27% Over Prior Year Q2 Adjusted Net Income of $0.37 Per Share
•
Net New Orders Increased 12% to 6,395 Homes; Value of Net New Orders Increased 23% to $2.6 Billion
•
Home Sale Revenues Increased 12% to $2.0 Billion
•
Backlog Increased 10% to 10,674 Homes; Backlog Value Increased 19% to $4.5 Billion
•
Company Repurchased 12.8 Million Shares of Stock During the Quarter for $300 Million

ATLANTA - July 25, 2017 - PulteGroup, Inc. (NYSE: PHM) announced today financial results for its second quarter ended June 30, 2017. For the quarter, the Company’s reported net income was $101 million, or $0.32 per share. Adjusted net income for the period was $148 million, or $0.47 per share. Adjustments to the Company’s reported results include a pretax charge of $121 million associated with the Company’s previously announced decision to dispose of select non-core and underutilized land assets, a net pretax benefit of $8 million relating to warranty and construction defect reserve adjustments, and $24 million of net tax benefits recorded during the period.
Reported net income for the prior year second quarter was $118 million, or $0.34 per share. Adjusted net income for the prior year quarter was $127 million, or $0.37 per share, after excluding the impact of land and corporate office relocation charges in the period.
“U.S. housing demand continues to benefit from positive market dynamics including an improving economy and job market, high consumer confidence, low interest rates and a generally limited supply of homes across the country,” said Ryan Marshall, President and Chief Executive Officer of PulteGroup. “Given these strong market supports, we believe housing demand can continue to move higher over the coming quarters.”
“Within this market environment, PulteGroup is successfully executing against its business strategies as we focus on intelligently growing our business while delivering high returns,” added Mr. Marshall. “Consistent with this focus, our second quarter results show orders up 12%, backlog value up 19% and adjusted earnings per share up 27%, while ROE improved 140 basis points to 12.8%.”

1


Second Quarter Results
Home sale revenues for the second quarter increased 12% over the prior year to $2.0 billion. Higher revenues for the period were driven by a 6% increase in deliveries to 5,044 homes, combined with a 6% increase in average sales price to $390,000.
Reported gross margin for the second quarter was 21.1%, including the impact of land-related and warranty charges taken in the period. Exclusive of these charges, the Company’s adjusted gross margin for the quarter was 23.4%. Reported SG&A expense for the second quarter was $216 million, or 11.0% of home sale revenues, which includes a $20 million benefit relating to an insurance reserve adjustment taken in the period. Adjusted SG&A expense for the quarter was $236 million, or 12.0% of home sale revenues. Reported SG&A expense for the prior year was $256 million, or 14.6% of home sale revenues.
Net new orders for the second quarter increased 12% over the prior year to 6,395 homes. The dollar value of net new orders gained 23% to $2.6 billion. For the quarter, the Company operated out of 803 communities.
PulteGroup’s unit backlog increased 10% over the prior year to 10,674 homes. The value of homes in backlog increased 19% to $4.5 billion. The average sales price of homes in backlog is $418,000, which is up 8% over the average sales price in backlog in the second quarter of last year and up 7% from the average sales price of homes delivered in the second quarter of 2017.
Pretax income for the Company's financial services operations increased 11% for the quarter to $19 million, as the operations benefitted from higher homebuilder closing volumes and an increase in the average loan size. Mortgage capture rate for the quarter was 79%, compared with 81% in the prior year.
For the quarter, the Company reported $22 million of income tax expense, representing an effective tax rate of 17.8%. The Company’s tax rate for the quarter included the net benefit of $24 million resulting from the favorable resolution of certain tax matters. Excluding this benefit, the Company’s effective tax rate would have been approximately 37%.
During the quarter, PulteGroup repurchased 12.8 million common shares for $300 million, or an average price of $23.42 per share.
A conference call discussing PulteGroup's second quarter 2017 results is scheduled for Tuesday, July 25, 2017, 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 the impairment charge with respect to certain land parcels 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

2


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; 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, 2016 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. We undertake no duty to update any forward-looking statement, whether as a result of new information, future events or changes in our 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.

# # #



3



PulteGroup, Inc.
Consolidated Results of Operations
($000's omitted, except per share data)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Homebuilding
 
 
 
 
 
 
 
Home sale revenues
$
1,965,641

 
$
1,751,882

 
$
3,551,063

 
$
3,146,125

Land sale revenues
7,930

 
4,950

 
9,570

 
7,437

 
1,973,571

 
1,756,832

 
3,560,633

 
3,153,562

Financial Services
47,275

 
43,082

 
89,042

 
78,930

Total revenues
2,020,846

 
1,799,914

 
3,649,675

 
3,232,492

 
 
 
 
 
 
 
 
Homebuilding Cost of Revenues:
 
 
 
 
 
 
 
Home sale cost of revenues
(1,549,937
)
 
(1,310,569
)
 
(2,767,615
)
 
(2,348,597
)
Land sale cost of revenues
(87,599
)
 
(4,403
)
 
(90,827
)
 
(6,430
)
 
(1,637,536
)
 
(1,314,972
)
 
(2,858,442
)
 
(2,355,027
)
 
 
 
 
 
 
 
 
Financial Services expenses
(28,478
)
 
(26,180
)
 
(56,846
)
 
(52,298
)
Selling, general, and administrative expenses
(216,211
)
 
(256,273
)
 
(452,479
)
 
(498,589
)
Other expense, net
(16,074
)
 
(12,909
)
 
(20,095
)
 
(18,785
)
Income before income taxes
122,547

 
189,580

 
261,813

 
307,793

Income tax expense
(21,798
)
 
(71,820
)
 
(69,545
)
 
(106,733
)
Net income
$
100,749

 
$
117,760

 
$
192,268

 
$
201,060

 
 
 
 
 
 
 
 
Per share:
 
 
 
 
 
 
 
Basic earnings
$
0.32

 
$
0.34

 
$
0.60

 
$
0.58

Diluted earnings
$
0.32

 
$
0.34

 
$
0.60

 
$
0.57

Cash dividends declared
$
0.09

 
$
0.09

 
$
0.18

 
$
0.18

 
 
 
 
 
 
 
 
Number of shares used in calculation:
 
 
 
 
 
 
 
Basic
312,315

 
345,240

 
315,021

 
346,528

Effect of dilutive securities
1,565

 
2,759

 
1,946

 
2,710

Diluted
313,880

 
347,999

 
316,967

 
349,238





4



PulteGroup, Inc.
Condensed Consolidated Balance Sheets
($000's omitted)
(Unaudited)
 
June 30,
2017
 
December 31,
2016
 
 
 
 
ASSETS
 
 
 
 
 
 
 
Cash and equivalents
$
208,203

 
$
698,882

Restricted cash
31,652

 
24,366

Total cash, cash equivalents, and restricted cash
239,855

 
723,248

House and land inventory
7,090,164

 
6,770,655

Land held for sale
104,652

 
31,728

Residential mortgage loans available-for-sale
364,939

 
539,496

Investments in unconsolidated entities
59,617

 
51,447

Other assets
818,972

 
857,426

Intangible assets
147,892

 
154,792

Deferred tax assets, net
986,787

 
1,049,408

 
$
9,812,878

 
$
10,178,200

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
Liabilities:
 
 
 
Accounts payable
$
407,691

 
$
405,455

Customer deposits
290,890

 
187,891

Accrued and other liabilities
1,406,598

 
1,483,854

Financial Services debt
153,703

 
331,621

Senior notes
3,109,994

 
3,110,016

 
5,368,876

 
5,518,837

Shareholders' equity
4,444,002

 
4,659,363

 
$
9,812,878

 
$
10,178,200



5


PulteGroup, Inc.
Consolidated Statements of Cash Flows
($000's omitted)
(Unaudited)
 
Six Months Ended
 
June 30,
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Net income
$
192,268

 
$
201,060

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Deferred income tax expense
80,841

 
117,783

Land-related charges
129,108

 
10,522

Depreciation and amortization
26,023

 
26,705

Share-based compensation expense
20,871

 
16,906

Other, net
(1,536
)
 
(732
)
Increase (decrease) in cash due to:
 
 
 
Inventories
(486,393
)
 
(810,417
)
Residential mortgage loans available-for-sale
172,943

 
78,460

Other assets
15,309

 
(15,506
)
Accounts payable, accrued and other liabilities
26,892

 
55,113

Net cash provided by (used in) operating activities
176,326

 
(320,106
)
Cash flows from investing activities:
 
 
 
Capital expenditures
(16,892
)
 
(21,044
)
Investment in unconsolidated subsidiaries
(17,832
)
 
(13,769
)
Cash used for business acquisition
—

 
(430,025
)
Other investing activities, net
3,143

 
5,473

Net cash used in investing activities
(31,581
)
 
(459,365
)
Cash flows from financing activities:
 
 
 
Proceeds from debt issuance
—

 
986,084

Repayments of debt
(2,153
)
 
(484,974
)
Borrowings under revolving credit facility
110,000

 
358,000

Repayments under revolving credit facility
(110,000
)
 
(358,000
)
Financial Services borrowings (repayments)
(177,918
)
 
(78,320
)
Stock option exercises
15,966

 
742

Share repurchases
(405,819
)
 
(100,806
)
Dividends paid
(58,214
)
 
(63,019
)
Net cash provided by (used in) financing activities
(628,138
)
 
259,707

Net increase (decrease)
(483,393
)
 
(519,764
)
Cash, cash equivalents, and restricted cash at beginning of period
723,248

 
775,435

Cash, cash equivalents, and restricted cash at end of period
$
239,855

 
$
255,671

 
 
 
 
Supplemental Cash Flow Information:
 
 
 
Interest paid (capitalized), net
$
(2,359
)
 
$
(14,671
)
Income taxes paid (refunded), net
$
(10,980
)
 
$
(5,457
)


6



PulteGroup, Inc.
Segment Data
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2017
 
2016
 
2017
 
2016
HOMEBUILDING:
 
 
 
 
 
 
 
Home sale revenues
$
1,965,641

 
$
1,751,882

 
$
3,551,063

 
$
3,146,125

Land sale revenues
7,930

 
4,950

 
9,570

 
7,437

Total Homebuilding revenues
1,973,571

 
1,756,832

 
3,560,633

 
3,153,562

 
 
 
 
 
 
 
 
Home sale cost of revenues
(1,549,937
)
 
(1,310,569
)
 
(2,767,615
)
 
(2,348,597
)
Land sale cost of revenues
(87,599
)
 
(4,403
)
 
(90,827
)
 
(6,430
)
Selling, general, and administrative expenses
(216,211
)
 
(256,273
)
 
(452,479
)
 
(498,589
)
Other expense, net
(16,225
)
 
(13,041
)
 
(20,350
)
 
(18,967
)
Income before income taxes
$
103,599

 
$
172,546

 
$
229,362

 
$
280,979

 
 
 
 
 
 
 
 
FINANCIAL SERVICES:
 
 
 
 
 
 
 
Income before income taxes
$
18,948

 
$
17,034

 
$
32,451

 
$
26,814

 
 
 
 
 
 
 
 
CONSOLIDATED:
 
 
 
 
 
 
 
Income before income taxes
$
122,547

 
$
189,580

 
$
261,813

 
$
307,793



7


PulteGroup, Inc.
Segment Data, continued
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
Home sale revenues
$
1,965,641

 
$
1,751,882

 
$
3,551,063

 
$
3,146,125

 
 
 
 
 
 
 
 
Closings - units
 
 
 
 
 
 
 
Northeast
296

 
310

 
528

 
572

Southeast
949

 
1,025

 
1,785

 
1,851

Florida
910

 
767

 
1,742

 
1,512

Midwest
907

 
786

 
1,575

 
1,338

Texas
1,042

 
923

 
1,882

 
1,698

West
940

 
961

 
1,757

 
1,746

 
5,044

 
4,772

 
9,269

 
8,717

Average selling price
$
390

 
$
367

 
$
383

 
$
361

 
 
 
 
 
 
 
 
Net new orders - units
 
 
 
 
 
 
 
Northeast
376

 
352

 
787

 
730

Southeast
1,193

 
1,016

 
2,270

 
2,068

Florida
1,090

 
1,011

 
2,130

 
1,934

Midwest
1,089

 
1,059

 
2,251

 
2,053

Texas
1,189

 
1,036

 
2,400

 
2,157

West
1,458

 
1,223

 
2,683

 
2,407

 
6,395

 
5,697

 
12,521

 
11,349

Net new orders - dollars
$
2,625,091

 
$
2,142,024

 
$
5,071,230

 
$
4,255,995

 
 
 
 
 
 
 
 
Unit backlog
 
 
 
 
 
 
 
Northeast
 
 
 
 
646

 
602

Southeast
 
 
 
 
1,856

 
1,679

Florida
 
 
 
 
1,806

 
1,696

Midwest
 
 
 
 
1,983

 
1,804

Texas
 
 
 
 
1,930

 
1,804

West
 
 
 
 
2,453

 
2,094

 
 
 
 
 
10,674

 
9,679

Dollars in backlog
 
 
 
 
$
4,461,680

 
$
3,749,299

 
 
 
 
 
 
 
 



8


    
PulteGroup, Inc.
Segment Data, continued
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2017
 
2016
 
2017
 
2016
MORTGAGE ORIGINATIONS:
 
 
 
 
 
 
 
Origination volume
3,330

 
3,158

 
6,203

 
5,706

Origination principal
$
969,691

 
$
868,671

 
$
1,776,043

 
$
1,535,317

Capture rate
78.9
%
 
80.6
%
 
79.5
%
 
80.8
%


Supplemental Data
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
Interest in inventory, beginning of period
$
203,828

 
$
158,653

 
$
186,097

 
$
149,498

Interest capitalized
44,949

 
38,231

 
89,872

 
73,515

Interest expensed
(35,927
)
 
(29,396
)
 
(63,119
)
 
(55,525
)
Interest in inventory, end of period
$
212,850

 
$
167,488

 
$
212,850

 
$
167,488




9



PulteGroup, Inc.
Reconciliation of Non-GAAP Financial Measures

This report contains information about our operating results reflecting certain adjustments, including adjustments to cost of revenues, selling general, and administrative expenses, income before income taxes, income tax expense, net income, diluted earnings per share, and operating margin. 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, 2017
 
 
 
 
 
 
 
 
 
Adjustments
 
 
 
 
 
 
 
Warranty /
 
Income
 
 
 
As Reported
 
Impairments
 
Insurance
 
Taxes
 
Adjusted
Revenues:
 
 
 
 
 
 
 
 
 
Homebuilding
 
 
 
 
 
 
 
 
 
Home sale revenues
$
1,965,641

 
$
—

 
$
—

 
$
—

 
$
1,965,641

Land sale revenues
7,930

 
 
 
 
 
 
 
7,930

 
1,973,571

 
 
 
 
 
 
 
1,973,571

Financial Services
47,275

 
 
 
 
 
 
 
47,275

Total revenues
2,020,846

 
 
 
 
 
 
 
2,020,846

 
 
 
 
 
 
 
 
 
 
Homebuilding Cost of Revenues:
 
 
 
 
 
 
 
 
 
Home sale cost of revenues
(1,549,937
)
 
31,487

 
12,106

 
 
 
(1,506,344
)
Land sale cost of revenues
(87,599
)
 
81,006

 
 
 
 
 
(6,593
)
 
(1,637,536
)
 
112,493

 
12,106

 
 
 
(1,512,937
)
 
 
 
 
 
 
 
 
 
 
Financial Services expenses
(28,478
)
 
 
 
 
 
 
 
(28,478
)
Selling, general, and administrative expenses (SG&A)
(216,211
)
 
 
 
(19,813
)
 
 
 
(236,024
)
Other expense, net
(16,074
)
 
8,017

 
 
 
 
 
(8,057
)
Income before income taxes
122,547

 
120,510

 
(7,707
)
 
—

 
235,350

Income tax expense
(21,798
)
 
(44,589
)
 
2,852

 
(23,808
)
 
(87,343
)
Net income
$
100,749

 
$
75,921

 
$
(4,855
)
 
$
(23,808
)
 
$
148,007

 
 
 
 
 
 
 
 
 
 
Earnings per share (diluted)
$
0.32

 
 
 
 
 
 
 
$
0.47

 
 
 
 
 
 
 
 
 
 
Home sale gross margin
21.1
%
 
 
 
 
 
 
 
23.4
%
SG&A as a percentage of sales
11.0
%
 
 
 
 
 
 
 
12.0
%
Operating margin
10.1
%
 
 
 
 
 
 
 
11.4
%
 
 
 
 
 
 
 
 
 
 
Effective income tax rate
17.8
%
 
 
 
 
 
 
 
37.1
%

10


 
Three Months Ended
 
June 30, 2016
 
 
 
 
 
 
 
As Reported
 
Adjustments*
 
Adjusted
Revenues:
 
 
 
 
 
Homebuilding
 
 
 
 
 
Home sale revenues
$
1,751,882

 
$
—

 
$
1,751,882

Land sale revenues
4,950

 
 
 
4,950

 
1,756,832

 
 
 
1,756,832

Financial Services
43,082

 
 
 
43,082

Total revenues
1,799,914

 
 
 
1,799,914

 
 
 
 
 
 
Homebuilding Cost of Revenues:
 
 
 
 
 
Home sale cost of revenues
(1,310,569
)
 
 
 
(1,310,569
)
Land sale cost of revenues
(4,403
)
 
 
 
(4,403
)
 
(1,314,972
)
 
—

 
(1,314,972
)
 
 
 
 
 
 
Financial Services expenses
(26,180
)
 
 
 
(26,180
)
Selling, general, and administrative expenses (SG&A)
(256,273
)
 
 
 
(256,273
)
Other expense, net
(12,909
)
 
14,724

 
1,815

Income before income taxes
189,580

 
14,724

 
204,304

Income tax expense
(71,820
)
 
(5,595
)
 
(77,415
)
Net income
$
117,760

 
$
9,129

 
$
126,889

 
 
 
 
 
 
Earnings per share (diluted)
$
0.34

 
 
 
$
0.37

 
 
 
 
 
 
Home sale gross margin
25.2
%
 
 
 
25.2
%
SG&A as a percentage of sales
14.6
%
 
 
 
14.6
%
Operating margin
10.6
%
 
 
 
10.6
%
 
 
 
 
 
 
Effective income tax rate
37.9
%
 
 
 
37.9
%

* Includes charges associated with the termination of certain pending land transactions and recognition of final costs associated with our corporate office relocation.


11

PULTEGROUP INC/MI/ Reports