PHM
$32.45
Pultegroup
$.20
.62%
Earnings Details
3rd Quarter September 2017
Tuesday, October 24, 2017 6:30:10 AM
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Summary

Pultegroup Misses

Pultegroup (PHM) reported 3rd Quarter September 2017 earnings of $0.60 per share on revenue of $2.1 billion. The consensus earnings estimate was $0.59 per share on revenue of $2.3 billion. The Earnings Whisper number was $0.62 per share. Revenue grew 9.6% on a year-over-year basis.

PulteGroup Inc is engaged in homebuilding business. Its business includes the acquisition and development of land for residential purposes within the U.S. It is also engaged in mortgaging banking operations.

Results
Reported Earnings
$0.60
Earnings Whisper
$0.62
Consensus Estimate
$0.59
Reported Revenue
$2.13 Bil
Revenue Estimate
$2.33 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

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

PulteGroup, Inc. (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.

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 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. (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.

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
PulteGroup, Inc.
Condensed Consolidated Balance Sheets
($000’s omitted)
(Unaudited)
September 30,
December 31,
2017
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
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
)
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
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
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

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
Three Months Ended
September 30, 2017
September 30, 2016
As Reported
Adjustments
Adjusted
As Reported
Adjustments
Adjusted
(a)
(b)
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.

PulteGroup, Inc.
Reconciliation of Non-GAAP Financial Measures
Three Months Ended
September
June 30,
30, 2017
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
23.9
%
23.4
%
margin as a percent of home
sale revenues

Company Contact

Investors: Jim Zeumer

(404) 978-6434

jim.zeumer@pultegroup.com

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