press-release-details

Press Release Details

PulteGroup Reports Fourth Quarter 2017 Financial Results

01/30/2018
  • Reported Net Income of $0.26 Per Share Inclusive of Income Tax and Land Charges Partially Offset By Favorable Insurance Adjustments
  • Adjusted Net Income of $0.85 Per Share Increased 27% Over Prior Year Q4 Adjusted Net Income of $0.67 Per Share
  • Home Sale Revenues Increased 12% to $2.7 Billion
  • Value of Net New Orders Increased 22% to $2.0 Billion; Net New Orders Gained 14% to 4,805 Homes
  • Backlog Value Increased 35% to $4.0 Billion; Unit Backlog Increased 21% to 8,996 Homes
  • Company Repurchased 7.6 Million Shares of Stock During the Quarter for $251 Million
  • Company Announces $500 Million Increase to Share Repurchase Plan

ATLANTA, Jan. 30, 2018 (GLOBE NEWSWIRE) -- PulteGroup, Inc. (NYSE:PHM) announced today financial results for its fourth quarter ended December 31, 2017.  For the quarter, the Company’s reported net income was $77 million, or $0.26 per share.  Adjusted net income for the period was $253 million, or $0.85 per share, after excluding a $66 million pre-tax benefit associated with insurance related adjustments, a $57 million pre-tax charge relating to land adjustments, and $181 million of income tax charges primarily relating to the revaluation of the Company’s deferred tax assets following newly enacted federal tax legislation.

Reported net income for the prior year fourth quarter was $273 million, or $0.83 per share.  Adjusted net income for the prior year fourth quarter was $223 million, or $0.67 per share, after excluding $0.16 per share of insurance and income tax benefits.

“Reflecting the continued strength of housing demand, the value of new orders in the quarter increased 22% over the prior year, helping to grow our year-end backlog to a 12-year high of $4.0 billion,” said Ryan Marshall, President and CEO of PulteGroup.  “Consistent with our strategic objectives, we leveraged a 12% increase in quarterly revenues into a 27% increase in adjusted earnings per share.”

“Ongoing gains in profitability and cash flow generation, which allowed us to reinvest in our business while repurchasing 11% of our outstanding common shares in 2017, also gave our Board the confidence to announce today a $500 million increase to our share repurchase plan,” added Marshall.  “Given expectations for further expansion in the economy, along with ongoing gains in employment and buyer demand, we remain highly constructive on the industry.  With our large backlog and robust land pipeline, we are well positioned to continue growing our business and building even greater value for our shareholders.”

Fourth Quarter Results

Home sale revenues for the fourth quarter increased 12% over the prior year to $2.7 billion.  Higher revenues for the period were driven by a 7% increase in closings to 6,632 homes, combined with a 5%, or $19,000, increase in average sales price to $410,000.

The Company’s fourth quarter adjusted home sale gross margin, which excludes the $57 million land charge, was 23.8%.  Inclusive of this charge, the Company’s reported gross margin for the fourth quarter was 21.6%.  Prior year adjusted and reported gross margins were 24.9% and 24.8%, respectively.

The Company’s fourth quarter adjusted homebuilding SG&A expense, which excludes the $66 million insurance-related benefit, was $268 million, or 9.8% of home sale revenues.  The comparable prior year adjusted SG&A expense of $263 million, or 10.8% of home sale revenues, excludes a $55 million benefit associated with an insurance-related adjustment recorded in that quarter.  Reported SG&A expense in the current quarter was $202 million, or 7.4% of home sale revenues, compared with fourth quarter 2016 reported SG&A expense of $208 million, or 8.6% of home sale revenues.

The value of fourth quarter net new orders increased 22% over the prior year to $2.0 billion, while the number of orders increased 14% to 4,805 homes.  For the fourth quarter, the Company operated out of 790 communities, which is up 9% over the fourth quarter of 2016.

Backlog value at the end of the fourth quarter was $4.0 billion, which is up 35% over the prior year and is the Company’s highest year-end backlog in over a decade.  On a unit basis, backlog for the quarter was up 21% over last year to 8,996 homes.  The average price of homes in backlog increased 12% over the prior year to $442,000.

The Company's financial services operations reported fourth quarter pre-tax income of $23 million compared with $25 million in the prior year.  The decrease in pre-tax income was primarily the result of a more competitive operating environment which impacted pricing during the period.  Mortgage capture rate for the quarter was 81%, compared with 82% in the prior year.

For the quarter, the Company’s adjusted income tax expense, which excludes the $181 million income tax charge relating primarily to the revaluation of its deferred tax assets resulting from the Tax Cuts and Jobs Act enacted in December 2017, was $147 million.  The Company’s adjusted effective tax rate for the fourth quarter was 36.8%.

During the quarter, the Company repurchased 7.6 million common shares for $251 million, or an average price of $33.09 per share.  For the year, the Company repurchased a total of 35.4 million common shares, or 11% of its outstanding shares, for $910 million, or an average price of $25.70 per share.  The Company also used available cash to retire $123 million of notes that matured in the fourth quarter.

Share Repurchase Plan Increased by $500 Million

In a separate press release issued today, the Company announced that its Board of Directors approved an increase to its existing share repurchase plan of $500 million.  As of December 31, 2017, the Company had $94 million of authorization remaining in its share repurchase plan.  The Company expects that share repurchases will be made from time to time in the open market, through privately negotiated transactions or otherwise subject to market conditions, applicable legal requirements, and other relevant factors.

A conference call discussing PulteGroup's fourth quarter 2017 results is scheduled for Tuesday, January 30, 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 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, 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, 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. 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 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.

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

PulteGroup, Inc.
Consolidated Results of Operations
($000's omitted, except per share data)
(Unaudited)
        
 Three Months Ended Year Ended
 December 31, December 31,
 2017 2016 2017 2016
Revenues:
Homebuilding       
Home sale revenues$2,717,031  $2,423,472  $8,323,984  $7,451,315 
Land sale revenues20,360  15,431  57,106  36,035 
 2,737,391  2,438,903  8,381,090  7,487,350 
Financial Services56,166  54,175  192,160  181,126 
Total revenues2,793,557  2,493,078  8,573,250  7,668,476 
        
Homebuilding Cost of Revenues:       
Home sale cost of revenues(2,128,931) (1,821,672) (6,461,152) (5,587,974)
Land sale cost of revenues(18,500) (14,256) (134,449) (32,115)
 (2,147,431) (1,835,928) (6,595,601) (5,620,089)
        
Financial Services expenses(33,139) (29,370) (119,289) (108,573)
Selling, general, and administrative expenses(201,607) (207,647) (891,581) (957,150)
Other expense, net(2,613) (6,412) (27,951) (48,814)
Income before income taxes408,767  413,721  938,828  933,850 
Income tax expense(331,352) (140,549) (491,607) (331,147)
Net income$77,415  $273,172  $447,221  $602,703 
        
Net income per share:       
Basic$0.26  $0.83  $1.45  $1.76 
Diluted$0.26  $0.83  $1.44  $1.75 
Cash dividends declared$0.09  $0.09  $0.36  $0.36 
        
Number of shares used in calculation:       
Basic292,174  325,975  305,089  339,747 
Effect of dilutive securities1,318  1,834  1,725  2,376 
Diluted293,492  327,809  306,814  342,123 
 

 

PulteGroup, Inc.
Condensed Consolidated Balance Sheets
($000's omitted)
(Unaudited)
 December 31,
 2017
 December 31,
 2016
 
ASSETS   
    
Cash and equivalents$272,683  $698,882 
Restricted cash33,485  24,366 
Total cash, cash equivalents, and restricted cash306,168  723,248 
House and land inventory7,147,130  6,770,655 
Land held for sale68,384  31,728 
Residential mortgage loans available-for-sale570,600  539,496 
Investments in unconsolidated entities62,957  51,447 
Other assets745,123  857,426 
Intangible assets140,992  154,792 
Deferred tax assets, net645,295  1,049,408 
 $9,686,649  $10,178,200 
    
    
LIABILITIES AND SHAREHOLDERS’ EQUITY   
    
Liabilities:   
Accounts payable$393,815  $405,455 
Customer deposits250,779  187,891 
Accrued and other liabilities1,356,333  1,429,712 
Income tax liabilities86,925  34,860 
Financial Services debt437,804  331,621 
Notes payable3,006,967  3,129,298 
Total liabilities5,532,623  5,518,837 
Shareholders' equity4,154,026  4,659,363 
 $9,686,649  $10,178,200 
 

 

PulteGroup, Inc.
Consolidated Statements of Cash Flows
($000's omitted)
(Unaudited)
 Year Ended
 December 31,
 2017
 2016
Cash flows from operating activities:
Net income$447,221  $602,703 
Adjustments to reconcile net income to net cash from operating activities:   
Deferred income tax expense422,307  334,787 
Land-related charges191,913  19,357 
Depreciation and amortization50,998  54,007 
Share-based compensation expense33,683  22,228 
Loss on debt retirements  657 
Other, net(1,789) 1,614 
Increase (decrease) in cash due to:   
Inventories(569,030) (897,092)
Residential mortgage loans available-for-sale(33,009) (99,527)
Other assets55,099  (45,721)
Accounts payable, accrued and other liabilities65,684  75,257 
Net cash provided by (used in) operating activities663,077  68,270 
Cash flows from investing activities:   
Capital expenditures(32,051) (39,295)
Investment in unconsolidated subsidiaries(23,037) (14,539)
Cash used for business acquisition  (430,458)
Other investing activities, net4,846  13,100 
Net cash used in investing activities(50,242) (471,192)
Cash flows from financing activities:   
Proceeds from debt issuance  1,995,937 
Repayments of debt(134,747) (986,919)
Borrowings under revolving credit facility2,720,000  619,000 
Repayments under revolving credit facility(2,720,000) (619,000)
Financial Services borrowings, net106,183  63,744 
Stock option exercises27,720  5,845 
Share repurchases(916,323) (603,206)
Dividends paid(112,748) (124,666)
Net cash provided by (used in) financing activities(1,029,915) 350,735 
Net increase (decrease)(417,080) (52,187)
Cash, cash equivalents, and restricted cash at beginning of period723,248  775,435 
Cash, cash equivalents, and restricted cash at end of period$306,168  $723,248 
    
Supplemental Cash Flow Information:   
Interest paid (capitalized), net$(942) $(26,538)
Income taxes paid (refunded), net$14,875  $2,743 
 

 

PulteGroup, Inc.
Segment Data
($000's omitted)
(Unaudited)
        
 Three Months Ended Year Ended
 December 31, December 31,
                2017 2016 2017  2016
HOMEBUILDING:
Home sale revenues$2,717,031  $2,423,472  $8,323,984  $7,451,315 
Land sale revenues20,360  15,431  57,106  36,035 
Total Homebuilding revenues2,737,391  2,438,903  8,381,090  7,487,350 
        
Home sale cost of revenues(2,128,931) (1,821,672) (6,461,152) (5,587,974)
Land sale cost of revenues(18,500) (14,256) (134,449) (32,115)
Selling, general, and administrative expenses(201,607) (207,647) (891,581) (957,150)
Other income (expense), net(2,845) (6,604) (28,576) (49,345)
Income before income taxes$385,508  $388,724  $865,332  $860,766 
        
FINANCIAL SERVICES:       
Income before income taxes$23,259  $24,997  $73,496  $73,084 
        
CONSOLIDATED:       
Income before income taxes$408,767  $413,721  $938,828  $933,850 

 

PulteGroup, Inc.
Segment Data, continued
($000's omitted)
(Unaudited)
        
 Three Months Ended Year Ended
 December 31, December 31,
 2017 2016 2017 2016
       
Home sale revenues$2,717,031  $2,423,472  $8,323,984  $7,451,315 
        
Closings - units       
Northeast489  529  1,335  1,418 
Southeast1,137  1,102  3,888  3,901 
Florida1,222  1,093  3,861  3,441 
Midwest1,120  1,142  3,696  3,418 
Texas1,298  1,080  4,107  3,726 
West1,366  1,251  4,165  4,047 
 6,632  6,197  21,052  19,951 
Average selling price$410  $391  $395  $373 
        
Net new orders - units       
Northeast357  306  1,460  1,361 
Southeast919  804  4,233  3,810 
Florida1,000  705  4,121  3,585 
Midwest757  766  3,876  3,636 
Texas840  784  4,121  3,793 
West932  837  4,815  4,141 
 4,805  4,202  22,626  20,326 
Net new orders - dollars$2,030,223  $1,666,066  $9,361,534  $7,753,399 
        
     December 31,
     2017 2016
Unit backlog
Northeast    512  387 
Southeast    1,716  1,371 
Florida    1,678  1,418 
Midwest    1,487  1,307 
Texas    1,426  1,412 
West    2,177  1,527 
     8,996  7,422 
Dollars in backlog    $3,979,064  $2,941,512 
        

 

PulteGroup, Inc.
Segment Data, continued
($000's omitted)
(Unaudited)
        
 Three Months Ended Year Ended
 December 31, December 31,
 2017 2016 2017 2016
MORTGAGE ORIGINATIONS:
Origination volume4,521  4,250  14,152  13,373 
Origination principal$1,348,933  $1,225,568  $4,127,084  $3,706,745 
Capture rate80.6% 81.8% 79.9% 81.2%

 

Supplemental Data
($000's omitted)
(Unaudited)
        
 Three Months Ended Year Ended
 December 31, December 31,
 2017 2016 2017 2016
        
Interest in inventory, beginning of period$222,545  $176,661  $186,097  $149,498 
Interest capitalized45,771  44,961  181,719  160,506 
Interest expensed(41,705) (35,525) (141,205) (123,907)
Interest in inventory, end of period$226,611  $186,097  $226,611  $186,097 

 

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
 December 31, 2017 December 31, 2016
 As Reported Adjustments (a) Adjusted As Reported Adjustments (b) Adjusted
Revenues:
Homebuilding           
Home sale revenues$2,717,031  $  $2,717,031  $2,423,472  $  $2,423,472 
Land sale revenues20,360    20,360  15,431    15,431 
 2,737,391    2,737,391  2,438,903    2,438,903 
Financial Services56,166    56,166  54,175    54,175 
Total revenues2,793,557    2,793,557  2,493,078    2,493,078 
            
Homebuilding Cost of Revenues:           
Home sale cost of revenues(2,128,931) 57,466  (2,071,465) (1,821,672) 1,074  (1,820,598)
Land sale cost of revenues(18,500)   (18,500) (14,256)   (14,256)
 (2,147,431) 57,466  (2,089,965) (1,835,928) 1,074  (1,834,854)
            
Financial Services expenses(33,139)   (33,139) (29,370)   (29,370)
Selling, general, and administrative expenses (SG&A)(201,607) (66,009) (267,616) (207,647) (55,243) (262,890)
Other expense, net(2,613)   (2,613) (6,412)   (6,412)
Income before income taxes408,767  (8,543) 400,224  413,721  (54,169) 359,552 
Income tax expense(331,352) 183,871  (147,481) (140,549) 3,865  (136,684)
Net income$77,415  $175,328  $252,743  $273,172  $(50,304) $222,868 
            
Earnings per share (diluted)$0.26    $0.85  $0.83    $0.67 
            
Home sale gross margin21.6%   23.8% 24.8%   24.9%
SG&A as a percentage of sales7.4%   9.8% 8.6%   10.8%
Operating margin14.2%   13.9% 16.3%   14.0%
            
Effective tax rate81.1%   36.8% 34.0%   38.0%

(a)  Includes land inventory impairments, an insurance-related benefit, and income tax charges primarily related to the revaluation of deferred tax assets resulting from the Tax Cuts and Jobs Act enacted in December 2017
(b)  Includes land inventory impairments, an insurance-related benefit, and net income tax benefits primarily related to energy efficient home credits and a deferred tax benefit related to a legal entity restructuring

 Twelve Months Ended Twelve Months Ended
 December 31, 2017 December 31, 2016
 As Reported Adjustments (a) Adjusted As Reported Adjustments (b) Adjusted
Revenues:
Homebuilding           
Home sale revenues$8,323,984  $  $8,323,984  $7,451,315  $  $7,451,315 
Land sale revenues57,106    57,106  36,035    36,035 
 8,381,090    8,381,090  7,487,350    7,487,350 
Financial Services192,160    192,160  181,126    181,126 
Total revenues8,573,250    8,573,250  7,668,476    7,668,476 
            
Homebuilding Cost of Revenues:           
Home sale cost of revenues(6,461,152) 101,058  (6,360,094) (5,587,974) 1,074  (5,586,900)
Land sale cost of revenues(134,449) 81,006  (53,443) (32,115)   (32,115)
 (6,595,601) 182,064  (6,413,537) (5,620,089) 1,074  (5,619,015)
            
Financial Services expenses(119,289)   (119,289) (108,573)   (108,573)
Selling, general, and administrative expenses (SG&A)(891,581) (65,496) (957,077) (957,150) (45,213) (1,002,363)
Other expense, net(27,951) 8,017  (19,934) (48,814) 26,643  (22,171)
Income before income taxes938,828  124,585  1,063,413  933,850  (17,496) 916,354 
Income tax expense(491,607) 107,661  (383,946) (331,147) (17,596) (348,743)
Net income$447,221  $232,246  $679,467  $602,703  $(35,092) $567,611 
            
Earnings per share (diluted)$1.44    $2.19  $1.75    $1.66 
            
Home sale gross margin22.4%   23.6% 25.0%   25.0%
SG&A as a percentage of sales10.7%   11.5% 12.8%   13.5%
Operating margin11.7%   12.1% 12.2%   11.6%
Effective tax rate52.4%   36.1% 35.5%   38.1%

(a)  Includes land inventory impairments, net realizable value adjustments on land held for sale, net insurance-related benefits, an impairment of an investment in an unconsolidated subsidiary, and income tax charges primarily related to the revaluation of deferred tax assets resulting from the Tax Cuts and Jobs Act enacted in December 2017
(b)  Includes land inventory impairments, net insurance-related benefits, restructuring costs associated with a plan to reduce overhead expenses, costs relating to shareholder activities, a charge resulting from the settlement of a disputed land transaction, and net income tax benefits primarily related to energy efficient home credits and a deferred tax benefit related to a legal entity restructuring

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Source: PulteGroup, Inc.