PULTEGROUP INC/MI/ - FORM 8-K - EX-99.1 - EXHIBIT 99.1 PRESS RELEASE - EARNINGS Q3 2017 - October 24, 2017

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8-K - 8-K 2017 Q3 EARNINGS RELEASE 10-24-17 - PULTEGROUP INC/MI/a8-k10x24x17earningsrelease.htm


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

PULTEGROUP REPORTS THIRD QUARTER 2017 FINANCIAL RESULTS

•
Reported Net Income of $0.58 Per Share
•
Adjusted Net Income of $0.60 Per Share Increased 40% Over Prior Year Q3 Adjusted Net Income of $0.43 Per Share
•
Home Sale Revenues Gained 9% to $2.1 Billion
•
Operating Margin Expanded by 100 Basis Points to 12.3%
•
Net New Orders Gained 11% to 5,300; Value of Net New Orders Increased 23% to $2.3 Billion
•
Unit Backlog Increased 15% to 10,823 Homes; Backlog Value Increased 26% to $4.7 Billion
•
Company Repurchased 10.4 Million Shares of Stock During the Quarter for $260 Million

ATLANTA - Oct. 24, 2017 - PulteGroup, Inc. (NYSE: PHM) announced today financial results for its third quarter ended September 30, 2017. For the quarter, the Company’s reported net income was $178 million, or $0.58 per share. Adjusted net income for the period was $181 million, or $0.60 per share, after excluding a pretax charge of $5 million resulting from the resolution of certain insurance matters.

Reported net income for the prior year third quarter was $128 million, or $0.37 per share. Adjusted net income for the period was $148 million, or $0.43 per share, after excluding costs associated with the settlement of a disputed land transaction, certain restructuring costs and costs relating to shareholder activities.

“We continue to be extremely pleased with the strength of homebuyer demand and the sustained course of the housing recovery,” said Ryan Marshall, President and CEO of PulteGroup. “Despite the disruptions caused by Hurricanes Harvey and Irma, our 11% increase in year-over-year orders for the quarter points to the health of the market, while the 15% increase in our backlog puts us in an excellent position to deliver strong fourth quarter and full-year financial results.”

“Fueled by growing demand among first-time buyers and supported by a strong economy, high employment and historically low interest rates, U.S. new home sales for 2017 are expected to grow a healthy 5% to 10% over last year,” added Marshall. “We remain optimistic about the strength of future housing demand, as the current housing cycle moves into its seventh year of growth.”

Third Quarter Results

Home sale revenues for the third quarter increased 9% over the prior year to $2.1 billion. Higher revenues for the period were driven by a 2% increase in deliveries to 5,151 homes, combined with a 7%, or $25,000, increase in average sales price to $399,000.

1



Home sale gross margin for the third quarter was 23.9%, which is down 80 basis points from the prior year, but is up 50 basis points from the Company’s second quarter 2017 adjusted gross margin of 23.4%. Homebuilding SG&A expense for the quarter of $237 million, or 11.6% of home sale revenues, included a $5 million charge associated with the resolution of certain insurance matters. Prior year SG&A of $251 million, or 13.3% of home sale revenues, included approximately $12 million of charges for certain restructuring costs and shareholder activities.
  
Net new orders for the third quarter increased 11% to 5,300 homes, while the value of new orders increased 23% over the prior year to $2.3 billion. The Company operated out of 778 communities for the third quarter, which is up 10% over the third quarter of 2016.

Ending backlog for the quarter was up 15% over the prior year to 10,823 homes, as backlog value gained 26% to $4.7 billion. The average price of homes in backlog increased 10% over the prior year to $431,000, which is a 10 year high for the Company.

The Company's financial services operations reported third quarter pretax income of $18 million compared with $21 million in 2016. The decrease in pretax income for the period was primarily the result of a more competitive operating environment which impacted pricing during the period. Mortgage capture rate for the quarter was 80%, compared with 81% in the prior year.

During the quarter, the Company repurchased 10.4 million common shares for $260 million, or an average price of $25.11 per share.

A conference call discussing PulteGroup's third quarter 2017 results is scheduled for Tuesday, October 24, 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 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

2


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
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Homebuilding
 
 
 
 
 
 
 
Home sale revenues
$
2,055,891

 
$
1,881,718

 
$
5,606,953

 
$
5,027,843

Land sale revenues
27,176

 
13,167

 
36,746

 
20,604

 
2,083,067

 
1,894,885

 
5,643,699

 
5,048,447

Financial Services
46,952

 
48,020

 
135,995

 
126,950

Total revenues
2,130,019

 
1,942,905

 
5,779,694

 
5,175,397

 
 
 
 
 
 
 
 
Homebuilding Cost of Revenues:
 
 
 
 
 
 
 
Home sale cost of revenues
(1,564,605
)
 
(1,417,705
)
 
(4,332,221
)
 
(3,766,302
)
Land sale cost of revenues
(25,123
)
 
(11,428
)
 
(115,950
)
 
(17,859
)
 
(1,589,728
)
 
(1,429,133
)
 
(4,448,171
)
 
(3,784,161
)
 
 
 
 
 
 
 
 
Financial Services expenses
(29,304
)
 
(26,906
)
 
(86,150
)
 
(79,204
)
Selling, general, and administrative expenses
(237,495
)
 
(250,914
)
 
(689,974
)
 
(749,502
)
Other expense, net
(5,243
)
 
(23,617
)
 
(25,337
)
 
(42,402
)
Income before income taxes
268,249

 
212,335

 
530,062

 
520,128

Income tax expense
(90,710
)
 
(83,865
)
 
(160,255
)
 
(190,598
)
Net income
$
177,539

 
$
128,470

 
$
369,807

 
$
329,530

 
 
 
 
 
 
 
 
Per share:
 
 
 
 
 
 
 
Basic earnings
$
0.59

 
$
0.37

 
$
1.18

 
$
0.95

Diluted earnings
$
0.58

 
$
0.37

 
$
1.18

 
$
0.94

Cash dividends declared
$
0.09

 
$
0.09

 
$
0.27

 
$
0.27

 
 
 
 
 
 
 
 
Number of shares used in calculation:
 
 
 
 
 
 
 
Basic
298,538

 
340,171

 
309,453

 
344,383

Effect of dilutive securities
1,690

 
2,250

 
1,861

 
2,557

Diluted
300,228

 
342,421

 
311,314

 
346,940





4



PulteGroup, Inc.
Condensed Consolidated Balance Sheets
($000's omitted)
(Unaudited)
 
September 30,
2017
 
December 31,
2016
 
 
 
 
ASSETS
 
 
 
 
 
 
 
Cash and equivalents
$
158,237

 
$
698,882

Restricted cash
38,860

 
24,366

Total cash, cash equivalents, and restricted cash
197,097

 
723,248

House and land inventory
7,370,152

 
6,770,655

Land held for sale
96,149

 
31,728

Residential mortgage loans available-for-sale
364,734

 
539,496

Investments in unconsolidated entities
61,497

 
51,447

Other assets
797,439

 
857,426

Intangible assets
144,442

 
154,792

Deferred tax assets, net
939,759

 
1,049,408

 
$
9,971,269

 
$
10,178,200

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
Liabilities:
 
 
 
Accounts payable
$
441,481

 
$
405,455

Customer deposits
306,641

 
187,891

Accrued and other liabilities
1,439,254

 
1,483,854

Financial Services debt
245,824

 
331,621

Revolving credit facility
83,000

 
—

Senior notes
3,109,984

 
3,110,016

 
5,626,184

 
5,518,837

Shareholders' equity
4,345,085

 
4,659,363

 
$
9,971,269

 
$
10,178,200



5


PulteGroup, Inc.
Consolidated Statements of Cash Flows
($000's omitted)
(Unaudited)
 
Nine Months Ended
 
September 30,
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Net income
$
369,807

 
$
329,530

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Deferred income tax expense
127,856

 
198,974

Land-related charges
131,254

 
13,185

Depreciation and amortization
38,689

 
40,218

Share-based compensation expense
26,505

 
19,813

Other, net
(1,438
)
 
4,493

Increase (decrease) in cash due to:
 
 
 
Inventories
(758,006
)
 
(1,100,173
)
Residential mortgage loans available-for-sale
173,148

 
92,649

Other assets
22,120

 
11,502

Accounts payable, accrued and other liabilities
122,544

 
83,303

Net cash provided by (used in) operating activities
252,479

 
(306,506
)
Cash flows from investing activities:
 
 
 
Capital expenditures
(23,548
)
 
(30,551
)
Investment in unconsolidated subsidiaries
(22,007
)
 
(14,049
)
Cash used for business acquisition
—

 
(430,458
)
Other investing activities, net
5,788

 
5,473

Net cash used in investing activities
(39,767
)
 
(469,585
)
Cash flows from financing activities:
 
 
 
Proceeds from debt issuance
—

 
1,995,961

Repayments of debt
(7,001
)
 
(985,734
)
Borrowings under revolving credit facility
971,000

 
619,000

Repayments under revolving credit facility
(888,000
)
 
(619,000
)
Financial Services borrowings (repayments)
(85,797
)
 
(109,083
)
Stock option exercises
22,765

 
5,845

Share repurchases
(665,812
)
 
(350,846
)
Dividends paid
(86,018
)
 
(94,298
)
Net cash provided by (used in) financing activities
(738,863
)
 
461,845

Net increase (decrease)
(526,151
)
 
(314,246
)
Cash, cash equivalents, and restricted cash at beginning of period
723,248

 
775,435

Cash, cash equivalents, and restricted cash at end of period
$
197,097

 
$
461,189

 
 
 
 
Supplemental Cash Flow Information:
 
 
 
Interest paid (capitalized), net
$
11,516

 
$
(11,324
)
Income taxes paid (refunded), net
$
17,206

 
$
(74
)


6



PulteGroup, Inc.
Segment Data
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
HOMEBUILDING:
 
 
 
 
 
 
 
Home sale revenues
$
2,055,891

 
$
1,881,718

 
$
5,606,953

 
$
5,027,843

Land sale revenues
27,176

 
13,167

 
36,746

 
20,604

Total Homebuilding revenues
2,083,067

 
1,894,885

 
5,643,699

 
5,048,447

 
 
 
 
 
 
 
 
Home sale cost of revenues
(1,564,605
)
 
(1,417,705
)
 
(4,332,221
)
 
(3,766,302
)
Land sale cost of revenues
(25,123
)
 
(11,428
)
 
(115,950
)
 
(17,859
)
Selling, general, and administrative expenses
(237,495
)
 
(250,914
)
 
(689,974
)
 
(749,502
)
Other expense, net
(5,381
)
 
(23,775
)
 
(25,730
)
 
(42,742
)
Income before income taxes
$
250,463

 
$
191,063

 
$
479,824

 
$
472,042

 
 
 
 
 
 
 
 
FINANCIAL SERVICES:
 
 
 
 
 
 
 
Income before income taxes
$
17,786

 
$
21,272

 
$
50,238

 
$
48,086

 
 
 
 
 
 
 
 
CONSOLIDATED:
 
 
 
 
 
 
 
Income before income taxes
$
268,249

 
$
212,335

 
$
530,062

 
$
520,128



7


PulteGroup, Inc.
Segment Data, continued
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
Home sale revenues
$
2,055,891

 
$
1,881,718

 
$
5,606,953

 
$
5,027,843

 
 
 
 
 
 
 
 
Closings - units
 
 
 
 
 
 
 
Northeast
318

 
317

 
846

 
889

Southeast
966

 
948

 
2,751

 
2,799

Florida
897

 
836

 
2,639

 
2,348

Midwest
1,001

 
938

 
2,576

 
2,276

Texas
927

 
948

 
2,809

 
2,646

West
1,042

 
1,050

 
2,799

 
2,796

 
5,151

 
5,037

 
14,420

 
13,754

Average selling price
$
399

 
$
374

 
$
389

 
$
366

 
 
 
 
 
 
 
 
Net new orders - units
 
 
 
 
 
 
 
Northeast
316

 
325

 
1,103

 
1,055

Southeast
1,044

 
938

 
3,314

 
3,006

Florida
991

 
946

 
3,121

 
2,880

Midwest
868

 
817

 
3,119

 
2,870

Texas
881

 
852

 
3,281

 
3,009

West
1,200

 
897

 
3,883

 
3,304

 
5,300

 
4,775

 
17,821

 
16,124

Net new orders - dollars
$
2,260,082

 
$
1,831,339

 
$
7,331,311

 
$
6,087,334

 
 
 
 
 
 
 
 
Unit backlog
 
 
 
 
 
 
 
Northeast
 
 
 
 
644

 
610

Southeast
 
 
 
 
1,934

 
1,669

Florida
 
 
 
 
1,900

 
1,806

Midwest
 
 
 
 
1,850

 
1,683

Texas
 
 
 
 
1,884

 
1,708

West
 
 
 
 
2,611

 
1,941

 
 
 
 
 
10,823

 
9,417

Dollars in backlog
 
 
 
 
$
4,665,871

 
$
3,698,920

 
 
 
 
 
 
 
 



8


    
PulteGroup, Inc.
Segment Data, continued
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
MORTGAGE ORIGINATIONS:
 
 
 
 
 
 
 
Origination volume
3,428

 
3,417

 
9,631

 
9,123

Origination principal
$
1,002,108

 
$
945,859

 
$
2,778,151

 
$
2,481,177

Capture rate
79.6
%
 
81.1
%
 
79.5
%
 
80.9
%


Supplemental Data
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
Interest in inventory, beginning of period
$
212,850

 
$
167,488

 
$
186,097

 
$
149,498

Interest capitalized
46,077

 
42,030

 
135,949

 
115,545

Interest expensed
(36,381
)
 
(32,857
)
 
(99,500
)
 
(88,382
)
Interest in inventory, end of period
$
222,546

 
$
176,661

 
$
222,546

 
$
176,661




9


PulteGroup, Inc.
Reconciliation of Non-GAAP Financial Measures
(Unaudited)

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
 
Three Months Ended
 
September 30, 2017
 
September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
As Reported
 
Adjustments (a)
 
Adjusted
 
As Reported
 
Adjustments (b)
 
Adjusted
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Homebuilding
 
 
 
 
 
 
 
 
 
 
 
Home sale revenues
$
2,055,891

 
$
—

 
$
2,055,891

 
$
1,881,718

 
$
—

 
$
1,881,718

Land sale revenues
27,176

 
—

 
27,176

 
13,167

 
—

 
13,167

 
2,083,067

 
—

 
2,083,067

 
1,894,885

 
—

 
1,894,885

Financial Services
46,952

 
—

 
46,952

 
48,020

 
—

 
48,020

Total revenues
2,130,019

 
—

 
2,130,019

 
1,942,905

 
 
 
1,942,905

 
 
 
 
 
 
 
 
 
 
 
 
Homebuilding Cost of Revenues:
 
 
 
 
 
 
 
 
 
 
 
Home sale cost of revenues
(1,564,605
)
 
—

 
(1,564,605
)
 
(1,417,705
)
 
—

 
(1,417,705
)
Land sale cost of revenues
(25,123
)
 
—

 
(25,123
)
 
(11,428
)
 
—

 
(11,428
)
 
(1,589,728
)
 
—

 
(1,589,728
)
 
(1,429,133
)
 
—

 
(1,429,133
)
 
 
 
 
 
 
 
 
 
 
 
 
Financial Services expenses
(29,304
)
 
—

 
(29,304
)
 
(26,906
)
 
—

 
(26,906
)
Selling, general, and administrative expenses (SG&A)
(237,495
)
 
5,326

 
(232,169
)
 
(250,914
)
 
11,529

 
(239,385
)
Other expense, net
(5,243
)
 
—

 
(5,243
)
 
(23,617
)
 
19,644

 
(3,973
)
Income before income taxes
268,249

 
5,326

 
273,575

 
212,335

 
31,173

 
243,508

Income tax expense
(90,710
)
 
(1,944
)
 
(92,654
)
 
(83,865
)
 
(11,846
)
 
(95,711
)
Net income
$
177,539

 
$
3,382

 
$
180,921

 
$
128,470

 
$
19,327

 
$
147,797

 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share (diluted)
$
0.58

 
 
 
$
0.60

 
$
0.37

 
 
 
$
0.43

 
 
 
 
 
 
 
 
 
 
 
 
Home sale gross margin
23.9
%
 
 
 
23.9
%
 
24.7
%
 
 
 
24.7
%
SG&A as a percentage of sales
11.6
%
 
 
 
11.3
%
 
13.3
%
 
 
 
12.7
%
Operating margin
12.3
%
 
 
 
12.6
%
 
11.3
%
 
 
 
11.9
%
(a)
Includes a charge related to the resolution of certain insurance matters.
(b)
Includes costs associated with the settlement of a disputed land transaction, restructuring, and shareholder activities.

10


PulteGroup, Inc.
Reconciliation of Non-GAAP Financial Measures, continued
($000's omitted)
(Unaudited)

 
Three Months Ended
 
 
 
 
 
September 30, 2017
 
June 30, 2017
 
 
 
 
Home sale revenues
$
2,055,891

 
$
1,965,641

Home sale cost of revenues
(1,564,605
)
 
(1,549,937
)
Home sale gross margin
491,286

 
415,704

 
 
 
 
Add:
 
 
 
Impairments
—

 
31,487

Warranty adjustment
—

 
12,106

Adjusted home sale gross margin
$
491,286

 
$
459,297

 
 
 
 
Adjusted home sale gross margin as a percent of home sale revenues
23.9
%
 
23.4
%


11

PULTEGROUP INC/MI/ Reports