PulteGroup reports Q3 net income rose to US$2.3B from US$116.6M a year earlier, driven by US$2.1B gain related to deferred tax asset valuation allowance reversal; home sales revenues up 21% to US$1.5B, average selling price up 11% to US$310,000

BLOOMFIELD HILLS, Michigan , October 24, 2013 (press release) –

  • Q3 Earnings of $5.87 Per Share, Including $5.42 Per Share from the Reversal of Substantially all of the Company's Deferred Tax Asset Valuation Allowance
  • Adjusted Q3 Earnings of $0.45 Per Share, Excluding the Deferred Tax Asset Valuation Allowance Reversal, Compared with Prior Year Earnings of $0.30 Per Share
  • Home Sale Revenues Increased 21% to $1.5 Billion, With Average Selling Price Gaining 11% to $310,000
  • Adjusted Gross Margin of 25.5% Increased 390 Basis Points from Prior Year and 160 Basis Points from Q2 2013; Reported Q3 Gross Margin of 20.9% Compared with 17.0% in Q3 2012
  • SG&A Declined 90 Basis Points from Prior Year to 9.3% of Home Sale Revenues
  • Backlog Value Increased 8% Over the Prior Year to $2.4 Billion Representing 7,522 Homes
  • Company Repurchased $83 Million of Stock and $27 Million of Debt in the Quarter
  • Quarter End Cash Balance of $1.4 Billion
  • Debt-to-Total Capital of 31%, Down from 53% at Year-end 2012

PulteGroup, Inc. (NYSE: PHM) announced today financial results for its third quarter ended September 30, 2013. For the quarter, the Company reported net income of $2.3 billion, or $5.87 per share, including $2.1 billion, or $5.42 per share, relating to the reversal of substantially all of the Company's deferred tax asset valuation allowance. Excluding the impact of the deferred tax asset valuation allowance reversal, net income would have been $173 million, or $0.45 per share, compared with prior year net income of $117 million, or $0.30 per share.

"PulteGroup's third quarter financial results demonstrate continued progress in our strategic repositioning of the Company to deliver better earnings and returns on invested capital," said Richard J. Dugas, Jr., Chairman, President and Chief Executive Officer of PulteGroup. "We are extremely pleased with the gains in profitability and overall returns that our Value Creation initiatives continue to drive within our homebuilding operations, while our stronger balance sheet provides us the flexibility to systematically increase investment into the business while also returning funds to our shareholders.

"We are running our business with a more balanced approach to capital allocation. Through the first nine months of 2013, we have invested $918 million in land and development, retired $461 million of debt, repurchased $83 million of our common stock, and declared $38 million in dividends. We believe that by being more balanced in our allocation of capital across investment opportunities, we can deliver better returns over a housing cycle.

"Our disciplined investment strategies should help to keep the Company in a strong position when facing changes in market conditions such as the reduced demand the industry experienced during the third quarter. While consumers have recently slowed home purchases due to higher home prices, a rapid rise in mortgage rates, and political and economic uncertainty, we believe the slowdown will ultimately prove to be short lived within a sustained, multiyear housing recovery. Consistent with this view, we have increased our annual land investment authorization to $1.6 billion for 2014, which represents an incremental $200 million of investment from our current forecast for 2013 and almost $700 million from full year 2012 expenditures. Even after this planned increase, we have significant financial flexibility to take advantage of market opportunities that may develop."

Third Quarter Results

Home sale revenues for the third quarter increased 21% from the prior year to $1.5 billion. Higher revenues for the period were driven by an 11% increase in average selling price to $310,000, combined with a 9% increase in closings to 4,817 homes. The higher average selling price realized in the quarter reflects price increases implemented by the Company and a continued shift in the mix of homes closed toward more move-up and active adult homes which typically carry higher selling prices.

For the quarter, pretax income from homebuilding operations more than doubled to $164 million, compared with prior year pretax income of $79 million. The Company's adjusted home sale gross margin for the third quarter was 25.5%, an increase of 390 basis points over the prior year and 160 basis points over the second quarter of 2013. Reported gross margin for the period increased 390 basis points over the prior year to 20.9%, and increased 210 basis points over the second quarter of 2013. Homebuilding SG&A expense for the quarter was $139 million, or 9.3% of home sale revenues, compared with prior year SG&A expense of $125 million, or 10.2% of home sale revenues.

Net new orders for the third quarter totaled 3,781 homes, which is a decrease of 17% from the prior year. On a dollar basis, signup value was $1.2 billion, which is down 8% from the third quarter of 2012. The Company ended the quarter with 604 active communities, which is down 15% from the comparable prior year period. PulteGroup's quarter-end backlog of 7,522 homes was valued at $2.4 billion, compared with prior year backlog of 7,686 homes with a value of $2.2 billion.

The Company's financial services operations reported third quarter pretax income of $11 million, compared with prior year pretax income of $27 million. Lower pretax income for the period reflects the impact of less favorable market conditions and increased competition resulting from the rapid rise in interest rates, partially offset by higher loan originations. Mortgage capture rate for the quarter was 80% compared with 83% for the same quarter last year.

Through open-market transactions, PulteGroup repurchased 5.3 million of its common shares, at a cost of $83 million, and $27 million of outstanding senior notes during the quarter.

A conference call discussing PulteGroup's third quarter 2013 results is scheduled for Thursday, October 24, 2013, 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," "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; 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; 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, 2012, 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. (NYSE: PHM), based in Bloomfield Hills, Mich., 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 and DiVosta Homes, 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 and www.divosta.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,

 

2013

 

2012

 

2013

 

2012

Revenues:

               

Homebuilding

                 

Home sale revenues

$

1,491,959

 

$

1,232,704

 

$

3,811,386

 

$

3,070,895

Land sale revenues

55,783

 

22,623

 

102,299

 

69,770

 

1,547,742

 

1,255,327

 

3,913,685

 

3,140,665

Financial Services

34,336

 

47,264

 

110,571

 

112,367

Total revenues

1,582,078

 

1,302,591

 

4,024,256

 

3,253,032

                 

Homebuilding Cost of Revenues:

               

Home sale cost of revenues

1,180,137

 

1,023,704

 

3,072,425

 

2,605,249

Land sale cost of revenues

49,933

 

21,061

 

92,661

 

62,069

 

1,230,070

 

1,044,765

 

3,165,086

 

2,667,318

Financial Services expenses

23,244

 

20,578

 

68,867

 

62,914

Selling, general and administrative expenses

138,637

 

125,191

 

418,794

 

372,691

Other expense (income), net

17,055

 

7,453

 

79,166

 

24,570

Interest income

(1,036)

 

(1,219)

 

(3,321)

 

(3,582)

Interest expense

171

 

201

 

544

 

616

Equity in (earnings) loss of unconsolidated entities

(785)

 

(284)

 

(282)

 

(3,836)

Income before income taxes

174,722

 

105,906

 

295,402

 

132,341

Income tax expense (benefit)

(2,107,162)

 

(10,727)

 

(2,104,661)

 

(15,062)

Net income

$

2,281,884

 

$

116,633

 

$

2,400,063

 

$

147,403

                 

Per share:

               

Basic earnings

$

5.92

 

$

0.31

 

$

6.20

 

$

0.39

Diluted earnings

$

5.87

 

$

0.30

 

$

6.14

 

$

0.38

Cash dividends declared

$

0.10

 

$

 

$

0.10

 

$

                       

 

PulteGroup, Inc.

Condensed Consolidated Balance Sheets

($000's omitted)

(Unaudited)

       
 

September 30,

2013

 

December 31,

2012

         

ASSETS

       
         

Cash and equivalents

$

1,349,994

 

$

1,404,760

Restricted cash

69,421

 

71,950

House and land inventory

4,150,964

 

4,214,046

Land held for sale

65,100

 

91,104

Land, not owned, under option agreements

27,612

 

31,066

Residential mortgage loans available-for-sale

296,922

 

318,931

Investments in unconsolidated entities

45,006

 

45,629

Other assets

440,524

 

407,675

Intangible assets

139,423

 

149,248

Deferred tax assets, net

2,108,756

 

 

$

8,693,722

 

$

6,734,409

         

LIABILITIES AND SHAREHOLDERS' EQUITY

       
         

Liabilities:

       

Accounts payable

$

214,098

 

$

178,274

Customer deposits

173,665

 

101,183

Accrued and other liabilities

1,445,649

 

1,418,063

Income tax liabilities

196,870

 

198,865

Financial Services debt

115,098

 

138,795

Senior notes

2,056,657

 

2,509,613

 

4,202,037

 

4,544,793

         

Shareholders' equity

4,491,685

 

2,189,616

         
 

$

8,693,722

 

$

6,734,409

         

 

 

 

PulteGroup, Inc.

Consolidated Statements of Cash Flows

($000's omitted)

(Unaudited)

 

Nine Months Ended

 

September 30,

 

2013

 

2012

Cash flows from operating activities:

         

Net income

$

2,400,063

 

$

147,403

Adjustments to reconcile net income to net cash flows provided by (used in)

      operating activities:

     

Deferred income taxes

(2,108,756)

 

Write-down of land inventory and deposits and pre-acquisition costs

6,371

 

12,623

Depreciation and amortization

23,134

 

22,278

Stock-based compensation expense

21,570

 

14,368

Equity in (earnings) loss of unconsolidated entities

(282)

 

(3,836)

Distributions of earnings from unconsolidated entities

1,693

 

7,223

Loss on debt retirements

26,930

 

Other non-cash, net

5,943

 

5,254

Increase (decrease) in cash due to:

       

Restricted cash

1,654

 

(966)

Inventories

89,040

 

160,973

Residential mortgage loans available-for-sale

21,967

 

(5,275)

Other assets

(29,989)

 

(1,612)

Accounts payable, accrued and other liabilities

97,607

 

63,832

Income tax liabilities

(1,995)

 

(1,033)

Net cash provided by (used in) operating activities

554,950

 

421,232

Cash flows from investing activities:

       

Distributions from unconsolidated entities

200

 

2,696

Investments in unconsolidated entities

(1,057)

 

(1,266)

Net change in loans held for investment

236

 

736

Change in restricted cash related to letters of credit

875

 

26,096

Proceeds from the sale of property and equipment

9

 

4,705

Capital expenditures

(18,354)

 

(10,597)

Net cash provided by (used in) investing activities

(18,091)

 

22,370

Cash flows from financing activities:

       

Financial Services borrowings (repayments)

(23,697)

 

103,000

Other borrowings (repayments)

(477,220)

 

(92,493)

Stock option exercises

18,549

 

27,432

Stock repurchases

(89,940)

 

(961)

Dividends paid

(19,317)

 

Net cash provided by (used in) financing activities

(591,625)

 

36,978

Net increase (decrease) in cash and equivalents

(54,766)

 

480,580

Cash and equivalents at beginning of period

1,404,760

 

1,083,071

Cash and equivalents at end of period

$

1,349,994

 

$

1,563,651

         

Supplemental Cash Flow Information:

       

Interest paid (capitalized), net

$

(18,304)

 

$

(28,072)

Income taxes paid (refunded), net

$

(792)

 

$

(12,901)

           

 

PulteGroup, Inc.

Segment Data

($000's omitted)

(Unaudited)

 
 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2013

 

2012

 

2013

 

2012

HOMEBUILDING:

             

Home sale revenues

$

1,491,959

 

$

1,232,704

 

$

3,811,386

 

$

3,070,895

Land sale revenues

55,783

 

22,623

 

102,299

 

69,770

Total Homebuilding revenues

1,547,742

 

1,255,327

 

3,913,685

 

3,140,665

               

Home sale cost of revenues

1,180,137

 

1,023,704

 

3,072,425

 

2,605,249

Land sale cost of revenues

49,933

 

21,061

 

92,661

 

62,069

Selling, general and administrative expenses

138,637

 

125,191

 

418,794

 

372,691

Equity in (earnings) loss of  unconsolidated entities

(749)

 

(243)

 

(186)

 

(3,714)

Other expense (income), net

17,055

 

7,453

 

79,166

 

24,570

Interest income, net

(865)

 

(1,018)

 

(2,777)

 

(2,966)

Income before income taxes

$

163,594

 

$

79,179

 

$

253,602

 

$

82,766

               

FINANCIAL SERVICES:

             

Income before income taxes

$

11,128

 

$

26,727

 

$

41,800

 

$

49,575

               

CONSOLIDATED:

             

Income before income taxes

$

174,722

 

$

105,906

 

$

295,402

 

$

132,341

                     

 

 

PulteGroup, Inc.

Segment Data, continued

($000's omitted)

(Unaudited)

 
 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2013

 

2012

 

2013

 

2012

 

Home sale revenues

$

1,491,959

 

$

1,232,704

 

$

3,811,386

 

$

3,070,895

               

Closings - units

             

Northeast

532

 

456

 

1,212

 

1,224

Southeast

823

 

776

 

2,209

 

1,984

Florida

760

 

588

 

1,992

 

1,633

Texas

976

 

923

 

2,833

 

2,484

North

926

 

863

 

2,333

 

2,057

Southwest

800

 

812

 

2,223

 

1,969

 

4,817

 

4,418

 

12,802

 

11,351

Average selling price

$

310

 

$

279

 

$

298

 

$

271

               

Net new orders - units

             

Northeast

405

 

432

 

1,519

 

1,599

Southeast

714

 

787

 

2,560

 

2,384

Florida

589

 

679

 

2,094

 

2,147

Texas

813

 

978

 

2,881

 

3,212

North

720

 

939

 

2,665

 

2,872

Southwest

540

 

729

 

2,147

 

2,899

 

3,781

 

4,544

 

13,866

 

15,113

Net new orders - dollars (a)

$

1,210,976

 

$

1,312,490

 

$

4,312,597

 

$

4,257,541

                     

Unit backlog

                   

Northeast

           

929

   

800

Southeast

           

1,262

   

1,002

Florida

           

1,167

   

1,172

Texas

           

1,503

   

1,553

North

           

1,599

   

1,524

Southwest

           

1,062

   

1,635

             

7,522

   

7,686

Dollars in backlog

         

$

2,432,747

 

$

2,246,296

                     

(a)  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,

 

2013

 

2012

 

2013

 

2012

MORTGAGE ORIGINATIONS:

     

Origination volume

3,126

 

3,073

 

8,660

 

7,697

Origination principal

$

733,433

 

$

685,001

 

$

1,998,697

 

$

1,681,321

Capture rate

79.5%

 

82.6%

 

80.5%

 

81.3%

                       
 

Supplemental Data

($000's omitted)

(Unaudited)

 
 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2013

 

2012

 

2013

 

2012

   

Interest in inventory, beginning of period

$

298,575

 

$

358,451

 

$

331,880

 

$

355,068

Interest capitalized

35,962

 

50,730

 

118,527

 

153,369

Interest expensed

(68,013)

 

(57,155)

 

(183,883)

 

(156,411)

Interest in inventory, end of period

$

266,524

 

$

352,026

 

$

266,524

 

$

352,026

Interest incurred

$

35,962

 

$

50,730

 

$

118,527

 

$

153,369

                 

 

PulteGroup, Inc.
Reconciliation of Non-GAAP Financial Measures

This report contains information about our home sale gross margins and earnings per share reflecting certain adjustments.  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 operating performance.  Management and our local divisions use adjusted home sale gross margin in evaluating the operating performance of each community and in making strategic decisions regarding sales pricing, construction and development pace, product mix, and other daily operating decisions.  We believe adjusted home sale gross margin is a relevant and useful measure to investors for evaluating our performance through gross profit generated on homes delivered during a given period and that both adjusted home sale gross margin and earnings per share reflecting certain adjustments are useful measures for comparing our operating performance 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 gross margins and earnings per share and any adjustments thereto before comparing our measures to those of such other companies.

The following tables set forth a reconciliation of these non-GAAP financial measures to the GAAP financial measures that management believes to be most directly comparable ($000's omitted):

Adjusted Home Sale Gross Margin

 
 

Three Months Ended

 

September 30,

2013

 

June 30,

2013

 

March 30,

2013

 

December 31,

2012

 

September 30,

2012

                   

Home sale revenues

$

1,491,959

 

$

1,219,675

 

$

1,099,752

 

$

1,481,517

 

$

1,232,704

Home sale cost of revenues

1,180,137

 

990,818

 

901,470

 

1,228,201

 

1,023,704

Home sale gross margin

311,822

 

228,857

 

198,282

 

253,316

 

209,000

Add:

                 

Land and community valuation

adjustments (a)

 

 

 

2,250

 

385

Capitalized interest amortization (a)

68,013

 

62,193

 

53,677

 

67,880

 

57,155

Adjusted home sale gross margin

$

379,835

 

$

291,050

 

$

251,959

 

$

323,446

 

$

266,540

                   

Home sale gross margin as a

percentage of home sale revenues

20.9%

 

18.8%

 

18.0%

 

17.1%

 

17.0%

Adjusted home sale gross margin as a percentage of home sale revenues

25.5%

 

23.9%

 

22.9%

 

21.8%

 

21.6%

(a)  Write-offs of capitalized interest related to impairments are reflected in capitalized interest amortization.

 

Adjusted Earnings Per Share

     
 

Dollars

 

Earnings Per

Share

Net income

$

2,281,884

 

$

5.87

       

Less:  reversal of deferred tax asset valuation allowance

(2,108,756)

 

(5.46)

Addback:  earnings per share allocated to participating securities (b)

 

0.04

 

(2,108,756)

 

(5.42)

       

Adjusted net income, excluding reversal of deferred tax asset valuation allowance

$

173,128

 

$

0.45

           

(b)  Represents required adjustments under the "two class method" of calculating earnings per share.  The effect of the two class method on the Company's earnings per share was exacerbated for the three and nine months ended September 30, 2013, by the impact the deferred tax asset valuation allowance reversal had on the Company's net income.  In future periods, the impact of the two class method on the Company's earnings per share is expected to be de minimis. 


SOURCE PulteGroup, Inc.


RELATED LINKS
http://www.pultegroupinc.com

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