PULTEGROUP INC/MI/ - FORM 8-K - EX-99.1 - EXHIBIT 99 EARNINGS PR 3Q18 - October 23, 2018

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8-K - 8-K EARNINGS RELEASE 3Q 2018 - PULTEGROUP INC/MI/a8-k10x23x18earningsrelease.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 2018 FINANCIAL RESULTS

•
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


ATLANTA - Oct. 23, 2018 - 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.”


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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

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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. 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 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





4



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



5


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



6



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.

7


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

 
 
 
 
 
 
 
 



8


    
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




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