PHM
$18.34
Pultegroup
$.03
.16%
Earnings Details
3rd Quarter September 2016
Thursday, October 20, 2016 6:30:00 AM
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Summary

Pultegroup Misses

Pultegroup (PHM) reported 3rd Quarter September 2016 earnings of $0.43 per share on revenue of $1.9 billion. The consensus earnings estimate was $0.43 per share on revenue of $2.0 billion. The Earnings Whisper number was $0.45 per share. Revenue grew 28.9% 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
$0.43
Earnings Whisper
$0.45
Consensus Estimate
$0.43
Reported Revenue
$1.94 Bil
Revenue Estimate
$1.95 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

PulteGroup Reports Third Quarter 2016 Financial Results

PulteGroup, Inc. (PHM) announced today financial results for its third quarter ended September 30, 2016. The Company’s reported Q3 net income of $128 million, or $0.37 per share, included pretax charges of $31 million, or $0.06 per share, associated with the settlement of a disputed land transaction, restructuring costs associated with previously announced plans to reduce overhead expenses, and costs relating to shareholder activities. Prior year net income of $108 million, or $0.30 per share, included net pretax charges of $14 million, or $0.03 per share, resulting from litigation-related reserve adjustments in the quarter.

"I am extremely pleased with PulteGroup’s third quarter results which show a continuation of the strong demand and operating trends we experienced in the first half of 2016," said Ryan Marshall, President and Chief Executive Officer of PulteGroup. "Of particular note, the 25% increase in the value of our Q3 orders, one of the largest gains we have realized in years, benefited from the increased land investments we made in recent years and strong sales activity across all buyer groups, as first time, move up and active adult all gained over last year.

"Along with delivering strong operating and financial results, the Company also completed its announced leadership transition during the quarter as Richard Dugas retired as CEO following a successful 22-year career. As an organization, we will continue to advance the Company’s Value Creation strategy which has been instrumental in elevating our financial results over the past five years to be among the industry leaders.

"With U.S. new home sales for 2016 on track to grow in excess of 10% over last year, we believe housing demand remains on a sustained path of recovery fueled by ongoing job creation, low unemployment, a supportive interest rate environment and a limited inventory of homes. Given these market dynamics, and in alignment with our Value Creation strategy, we continue to grow our operations through continued investment in high returning land positions, while consistently returning funds to shareholders through dividends and share repurchases."

Third Quarter Results

Home sale revenues for the third quarter of 2016 increased 29% over the prior year to $1.9 billion. Higher revenues for the period benefited from a 16% increase in deliveries to 5,037 homes and an 11%, or $37,000, increase in average selling price to $374,000.

Home sale gross margin for the third quarter was 21.1%. Homebuilding SG&A expense for the quarter was $183 million, or 9.7% of home sale revenues, including approximately $12 million of charges for severance costs associated with actions taken to reduce overhead expenses, and for shareholder activities. Prior year SG&A of $159 million, or 10.9% of home sale revenues, included a benefit of $6 million from a litigation-related reserve adjustment taken in the period.

"The restructuring costs incurred in the third quarter were driven by actions associated with the Company’s previously announced plans targeting full-year 2017 SG&A expenses of 9% of revenues, down from an expected 10% in 2016," said Bob O’Shaughnessy, Executive Vice President and CFO. "We implemented these actions with the goal of realizing greater overhead efficiency, while still being able to deliver expected growth in our business in 2017 and beyond."

In the quarter, the Company also recorded charges of $20 million in Other Expense, net, resulting from the settlement of a contract dispute associated with a land transaction the Company terminated a decade ago in response to the collapse of housing demand and from lease exit and related costs associated with overhead reduction actions. In the prior year period, the Company recorded a charge of $20 million in Other Expense, net, to increase reserves following an unfavorable jury verdict in a contract dispute.

Net new orders for the third quarter increased 17% to 4,775 homes. The value of orders increased 25% over the prior year to $1.8 billion. The Company operated out of 709 communities in the third quarter, which is an increase of 16% over the third quarter of 2015.

Backlog value increased 20% over the prior year to $3.7 billion, as the number of homes in backlog increased 8% to 9,417 homes. The average price of homes in backlog was $393,000, which is up 11% over last year.

The Company’s financial services operations reported third quarter pretax income of $21 million compared with $14 million in 2015. Higher pretax income for the period was primarily the result of higher closing volumes in the Company’s homebuilding operations. Mortgage capture rate for the quarter was 81%, compared with 83% in the prior year.

During the quarter, the Company issued $1.0 billion of senior notes, the proceeds of which were used, in part, to repay approximately $500 million of outstanding debt, to fund ongoing operations and to repurchase 12 million common shares for $250 million, or an average price of $20.77 per share.

A conference call discussing PulteGroup’s third quarter 2016 results is scheduled for Thursday, October 20, 2016, 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," "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 and the rate of growth in land spend; 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. (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,
2016
2015
2016
2015
Revenues:
Homebuilding
Home sale revenues
$
1,881,718
$
1,464,131
$
5,027,843
$
3,795,366
Land sale revenues
13,167
3,649
20,604
27,651
1,894,885
1,467,780
5,048,447
3,823,017
Financial Services
48,020
38,967
126,950
97,319
Total revenues
1,942,905
1,506,747
5,175,397
3,920,336
Homebuilding Cost of Revenues:
Home sale cost of revenues
1,485,611
1,118,874
3,949,449
2,913,299
Land sale cost of revenues
11,428
3,301
17,859
21,992
1,497,039
1,122,175
3,967,308
2,935,291
Financial Services expenses
26,906
24,602
79,204
67,909
Selling, general, and administrative expenses 183,008
159,361
566,355
450,793
Other expense (income), net
23,617
21,333
42,402
23,638
Income before income taxes
212,335
179,276
520,128
442,705
Income tax expense
83,865
71,507
190,598
176,643
Net income
$
128,470
$
107,769
$
329,530
$
266,062
Per share:
Basic earnings
$
0.37
$
0.31
$
0.95
$
0.74
Diluted earnings
$
0.37
$
0.30
$
0.94
$
0.73
Cash dividends declared
$
0.09
$
0.08
$
0.27
$
0.24
Number of shares used in calculation:
Basic
340,171
350,147
344,383
359,236
Effect of dilutive securities
2,250
3,225
2,557
3,273
Diluted
342,421
353,372
346,940
362,509
PulteGroup, Inc.
Condensed Consolidated Balance Sheets
($000’s omitted)
(Unaudited)
September 30,
December 31,
2016
2015
ASSETS
Cash and equivalents
$
434,205
$
754,161
Restricted cash
26,984
21,274
House and land inventory
6,950,242
5,450,058
Land held for sale
57,468
81,492
Residential mortgage loans available-for-sale 349,012
442,715
Investments in unconsolidated entities
51,768
41,267
Other assets
647,706
660,835
Intangible assets
158,242
110,215
Deferred tax assets, net
1,195,905
1,394,879
$
9,871,532
$
8,956,896
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable
$
378,423
$
327,725
Customer deposits
248,302
186,141
Accrued and other liabilities
1,270,353
1,284,273
Income tax liabilities
33,562
57,050
Financial Services debt
158,794
267,877
Term loan
--
498,423
Senior notes
3,110,066
1,576,082
5,199,500
4,197,571
Shareholders’ equity
4,672,032
4,759,325
$
9,871,532
$
8,956,896
PulteGroup, Inc.
Consolidated Statements of Cash Flows
($000’s omitted)
(Unaudited)
Nine Months Ended
September 30,
2016
2015
Cash flows from operating activities:
Net income
$
329,530
$
266,062
Adjustments to reconcile net income to net cash from operating activities:
Deferred income tax expense
198,974
171,364
Depreciation and amortization
40,218
33,719
Share-based compensation expense
19,813
20,139
Other, net
17,678
11,300
Increase (decrease) in cash due to:
Restricted cash
(5,710)
(13,293)
Inventories
(1,100,173)
(835,276)
Residential mortgage loans available-for-sale
92,649
68,381
Other assets
11,502
(130,282)
Accounts payable, accrued and other liabilities
83,303
162,987
Net cash provided by (used in) operating activities
(312,216)
(244,899)
Cash flows from investing activities:
Capital expenditures
(30,551)
(34,049)
Cash used for business acquisition
(430,458)
--
Other investing activities, net
(8,576)
13,669
Net cash used in investing activities
(469,585)
(20,380)
Cash flows from financing activities:
Proceeds from debt issuance
1,995,961
498,087
Repayments of debt
(985,734)
(238,520)
Borrowings under revolving credit facility
619,000
125,000
Repayments under revolving credit facility
(619,000)
(125,000)
Financial Services borrowings (repayments)
(109,083)
(32,733)
Stock option exercises
5,845
10,371
Share repurchases
(350,846)
(442,738)
Dividends paid
(94,298)
(87,897)
Net cash provided by (used in) financing activities
461,845
(293,430)
Net increase (decrease) in cash and equivalents
(319,956)
(558,709)
Cash and equivalents at beginning of period
754,161
1,292,862
Cash and equivalents at end of period
$
434,205
$
734,153
Supplemental Cash Flow Information:
Interest paid (capitalized), net
$
(11,324)
$
(20,304)
Income taxes paid (refunded), net
$
(74)
$
740
PulteGroup, Inc.
Segment Data
($000’s omitted)
(Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2016
2015
2016
2015
HOMEBUILDING:
Home sale revenues
$
1,881,718
$
1,464,131
$
5,027,843
$
3,795,366
Land sale revenues
13,167
3,649
20,604
27,651
Total Homebuilding revenues
1,894,885
1,467,780
5,048,447
3,823,017
Home sale cost of revenues
1,485,611
1,118,874
3,949,449
2,913,299
Land sale cost of revenues
11,428
3,301
17,859
21,992
Selling, general, and administrative expenses 183,008
159,361
566,355
450,793
Other expense (income), net
23,775
21,333
42,742
23,637
Income before income taxes
$
191,063
$
164,911
$
472,042
$
413,296
FINANCIAL SERVICES:
Income before income taxes
$
21,272
$
14,365
$
48,086
$
29,409
CONSOLIDATED:
Income before income taxes
$
212,335
$
179,276
$
520,128
$
442,705
PulteGroup, Inc.
Segment Data, continued
($000’s omitted)
(Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2016
2015
2016
2015
Home sale revenues
$
1,881,718
$
1,464,131
$
5,027,843
$
3,795,366
Closings - units
Northeast
317
401
889
965
Southeast (a)
948
865
2,799
2,249
Florida
836
712
2,348
1,910
Midwest
938
756
2,276
1,984
Texas
948
821
2,646
2,321
West
1,050
801
2,796
2,036
5,037
4,356
13,754
11,465
Average selling price
$
374
$
336
$
366
$
331
Net new orders - units
Northeast
325
346
1,055
1,226
Southeast (a)
938
780
3,006
2,759
Florida
946
755
2,880
2,471
Midwest
817
639
2,870
2,232
Texas
852
698
3,009
2,808
West
897
874
3,304
2,853
4,775
4,092
16,124
14,349
Net new orders - dollars (b) $
1,831,339
$
1,465,322
$
6,087,334
$
4,940,560
Unit backlog
Northeast
610
722
Southeast (a)
1,669
1,478
Florida
1,806
1,563
Midwest
1,683
1,436
Texas
1,708
1,760
West
1,941
1,775
9,417
8,734
Dollars in backlog
$
3,698,920
$
3,089,055

(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.

PulteGroup, Inc.
Segment Data, continued
($000’s omitted)
(Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2016
2015
2016
2015
MORTGAGE ORIGINATIONS:
Origination volume
3,417
2,992
9,123
7,615
Origination principal
$
945,859
$
766,450
$
2,481,177
$
1,916,391
Capture rate
81.1
%
83.5
%
80.9
%
82.9
%
Supplemental Data
($000’s omitted)
(Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2016
2015
2016
2015
Interest in inventory, beginning of period $
167,488
$
164,384
$
149,498
$
167,638
Interest capitalized
42,030
28,006
115,545
90,105
Interest expensed
(32,857)
(36,609)
(88,382)
(101,962)
Interest in inventory, end of period
$
176,661
$
155,781
$
176,661
$
155,781

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/pultegroup-reports-third-quarter-2016-financial-results-300347986.html

SOURCE PulteGroup, Inc.

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