EX-99.1 2 ex991earningspr4q16.htm EXHIBIT 99.1 - Q4 2016 EARNINGS RELEASE Exhibit


image1.jpg
FOR IMMEDIATE RELEASE
Company Contact
 
Investors: Jim Zeumer
 
(404) 978-6434
 
     Email: jim.zeumer@pultegroup.com

PULTEGROUP REPORTS FINANCIAL RESULTS FOR 2016 FOURTH QUARTER


•
Q4 Net Income of $0.83 Per Share Includes $0.16 Per Share of Insurance and Tax Benefits; Prior Year Net Income of $0.64 Per Share Included Benefit of $0.07 Per Share from Insurance and Mortgage Reserve Reversals
•
Net New Orders Increased 15% to 4,202 Homes; Value of Net New Orders Increased 22% to $1.7 Billion
•
Closings Increased 9% to 6,197 Homes; Average Sales Price Up 11% to $391,000
•
Home Sale Revenues Higher by 21% to $2.4 Billion
•
Unit Backlog Increased 10% to 7,422 Homes; Backlog Value Up 20% to $2.9 Billion
•
Year-end Cash Balance of $723 Million After Repurchasing $252 Million of Shares in the Quarter


ATLANTA, Jan. 26, 2017 - PulteGroup, Inc. (NYSE: PHM) announced today financial results for its fourth quarter ended December 31, 2016. For the quarter, PulteGroup reported net income of $273 million, or $0.83 per share, inclusive of $0.16 per share of insurance and income tax benefits. Prior year reported net income of $228 million, or $0.64 per share, included $0.07 per share of benefits associated with the reversal of certain mortgage and insurance reserves.

“With the gains achieved in our fourth quarter results, PulteGroup completed a year in which it realized significant growth, including double-digit year-over-year increases in orders, closings, revenues, net income and backlog,” said Ryan Marshall, President and CEO of PulteGroup. “Consistent with the Company’s long-term objectives, our outstanding 2016 operating results drove strong returns on invested capital, which we view as an important component to delivering increased shareholder value over the housing cycle.

“The gains PulteGroup realized for the quarter and full year reflect the successful investments we are making into our business, in combination with the positive demand conditions that continue in the housing market. We believe that continued favorable trends in the economy, job growth, demographics and consumer confidence can more than offset the impact of modestly higher rates, allowing the housing recovery to continue at a steady pace.”

Fourth Quarter Results

Home sale revenues for the fourth quarter totaled $2.4 billion, an increase of 21% over the prior year. Higher revenues for the period were driven by a 9% increase in closings to 6,197 homes, combined with an 11% increase in average selling price to $391,000. The Company’s average selling price continues to benefit from a shift in the mix of homes closed, along with price increases realized by all three of the Company’s national brands: Centex, Pulte Homes and Del Webb.



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Beginning with this quarter’s reporting, the Company reclassified internal and external sales commission expense from home sale cost of revenues to SG&A in order to be more consistent with a majority of its peers. Based on this reclassification of commission expense, the Company’s reported home sale gross margin was 24.8% in the fourth quarter.  Commission expense was 3.5% of revenue in the quarter.

SG&A expense in the fourth quarter, including commissions, was $208 million, or 8.6% of home sale revenues. Fourth quarter SG&A includes a $55 million benefit relating to a reversal of construction related insurance reserves in the period. SG&A expense, including commissions, in the fourth quarter of 2015 was $210 million, or 10.5% of home sale revenues. Prior year SG&A included a $30 million benefit relating to a reversal of construction related insurance reserves.

For the quarter, net new orders increased 15% over the prior year to 4,202 homes. The dollar value of fourth quarter orders increased 22% over the prior year to $1.7 billion. The Company ended the year with 726 active communities, which represents an increase of 17% over the comparable prior year period.

PulteGroup’s year-end backlog of 7,422 homes, valued at $2.9 billion, compares with prior year backlog of 6,731 homes, valued at $2.5 billion. The average selling price in backlog increased 9% over the prior year to $396,000, which reflects a continued mix shift toward higher priced homes and moderate price increases.

The Company's financial services operations reported pretax income for the quarter of $25 million. Prior year financial services pretax income of $29 million included a $12 million benefit relating to a reversal of mortgage repurchase reserves. Financial services pretax income primarily benefitted from higher closing volumes in the Company’s homebuilding operations and a fourth quarter capture rate of 82%.

For the quarter, the Company reported $141 million of income tax expense representing an effective tax rate of 34%. The Company’s effective tax rate for the quarter was lower than its previous guidance of 38%. due to the recognition of energy efficient home credits, as well as a deferred tax benefit relating to a legal entity restructuring.
  
During the fourth quarter, the Company repurchased 13.2 million common shares for $252 million, or an average price of $19.07 per share. The Company ended the year with a cash balance of $723 million.

A conference call discussing PulteGroup's fourth quarter results will be held Thursday, January 26, 2017, at 8:30 a.m. Eastern Time, and webcast live via www.pultegroupinc.com. Interested investors can access the call via the Company's home page at www.pultegroupinc.com, and are encouraged to download the available slides that provide additional details on the Company's fourth quarter results.


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 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

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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, 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. (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 Results of Operations
($000's omitted, except per share data)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Year Ended
 
December 31,
 
December 31,
 
2016
 
2015
 
2016
 
2015
Revenues:
 
 
 
 
 
 
 
Homebuilding
 
 
 
 
 
 
 
Home sale revenues
$
2,423,472

 
$
1,997,309

 
$
7,451,315

 
$
5,792,675

Land sale revenues
15,431

 
20,885

 
36,035

 
48,536

 
2,438,903

 
2,018,194

 
7,487,350

 
5,841,211

Financial Services
54,175

 
43,434

 
181,126

 
140,753

Total revenues
2,493,078

 
2,061,628

 
7,668,476

 
5,981,964

 
 
 
 
 
 
 
 
Homebuilding Cost of Revenues:
 
 
 
 
 
 
 
Home sale cost of revenues
(1,821,672
)
 
(1,456,186
)
 
(5,587,974
)
 
(4,235,945
)
Land sale cost of revenues
(14,256
)
 
(13,867
)
 
(32,115
)
 
(35,858
)
 
(1,835,928
)
 
(1,470,053
)
 
(5,620,089
)
 
(4,271,803
)
 
 
 
 
 
 
 
 
Financial Services expenses
(29,370
)
 
(14,138
)
 
(108,573
)
 
(82,047
)
Selling, general, and administrative expenses
(207,647
)
 
(210,398
)
 
(957,150
)
 
(794,728
)
Other expense, net
(6,412
)
 
6,276

 
(48,814
)
 
(17,363
)
Income before income taxes
413,721

 
373,315

 
933,850

 
816,023

Income tax expense
(140,549
)
 
(145,288
)
 
(331,147
)
 
(321,933
)
Net income
$
273,172

 
$
228,027

 
$
602,703

 
$
494,090

 
 
 

 
 
 

Net income per share:
 
 
 
 
 
 
 
Basic
$
0.83

 
$
0.65

 
$
1.76

 
$
1.38

Diluted
$
0.83

 
$
0.64

 
$
1.75

 
$
1.36

Cash dividends declared
$
0.09

 
$
0.09

 
$
0.36

 
$
0.33

 
 
 
 
 
 
 
 
Number of shares used in calculation:
 
 
 
 
 
 
 
Basic
325,975

 
348,699

 
339,747

 
356,576

Effect of dilutive securities
1,834

 
3,047

 
2,376

 
3,217

Diluted
327,809

 
351,746

 
342,123

 
359,793



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PulteGroup, Inc.
Condensed Consolidated Balance Sheets
($000's omitted)
(Unaudited)
 
December 31,
2016
 
December 31,
2015
 
 
 
 
ASSETS
 
 
 
 
 
 
 
Cash and equivalents
$
698,882

 
$
754,161

Restricted cash
24,366

 
21,274

Total cash, cash equivalents, and restricted cash
723,248

 
775,435

House and land inventory
6,770,655

 
5,450,058

Land held for sale
31,728

 
81,492

Residential mortgage loans available-for-sale
539,496

 
442,715

Investments in unconsolidated entities
51,447

 
41,267

Other assets
857,426

 
893,345

Intangible assets
154,792

 
110,215

Deferred tax assets, net
1,049,408

 
1,394,879

 
$
10,178,200

 
$
9,189,406

 
 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
Liabilities:
 
 
 
Accounts payable
$
405,455

 
$
327,725

Customer deposits
187,891

 
186,141

Accrued and other liabilities
1,448,994

 
1,516,783

Income tax liabilities
34,860

 
57,050

Financial Services debt
331,621

 
267,877

Term loan
—

 
498,423

Senior notes
3,110,016

 
1,576,082

Total liabilities
5,518,837

 
4,430,081

Shareholders' equity
4,659,363

 
4,759,325

 
$
10,178,200

 
$
9,189,406



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PulteGroup, Inc.
Consolidated Statements of Cash Flows
($000's omitted)
(Unaudited)
 
Year Ended
 
December 31,
 
2016
 
2015
Cash flows from operating activities:
 
 
 
Net income
$
602,703

 
$
494,090

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Deferred income tax expense
334,787

 
311,699

Write-down of land and deposits and pre-acquisition costs
19,357

 
11,467

Depreciation and amortization
54,007

 
46,222

Share-based compensation expense
22,228

 
24,752

Loss on debt retirements
657

 
—

Other, net
1,614

 
(4,865
)
Increase (decrease) in cash due to:
 
 
 
Inventories
(897,092
)
 
(917,298
)
Residential mortgage loans available-for-sale
(99,527
)
 
(104,609
)
Other assets
(45,721
)
 
(175,150
)
Accounts payable, accrued and other liabilities
75,257

 
(23,898
)
Net cash provided by (used in) operating activities
68,270

 
(337,590
)
Cash flows from investing activities:
 
 
 
Capital expenditures
(39,295
)
 
(45,440
)
Investment in unconsolidated subsidiaries
(14,539
)
 
(454
)
Cash used for business acquisition
(430,458
)
 
—

Other investing activities, net
13,100

 
11,330

Net cash used in investing activities
(471,192
)
 
(34,564
)
Cash flows from financing activities:
 
 
 
Proceeds from debt issuance
1,995,937

 
498,087

Repayments of debt
(986,919
)
 
(239,193
)
Borrowings under revolving credit facility
619,000

 
125,000

Repayments under revolving credit facility
(619,000
)
 
(125,000
)
Financial Services borrowings
63,744

 
127,636

Stock option exercises
5,845

 
10,535

Share repurchases
(603,206
)
 
(442,738
)
Dividends paid
(124,666
)
 
(115,958
)
Net cash provided by (used in) financing activities
350,735

 
(161,631
)
Net increase (decrease)
(52,187
)
 
(533,785
)
Cash, cash equivalents and restricted cash at beginning of period
775,435

 
1,309,220

Cash, cash equivalents and restricted cash at end of period
$
723,248

 
$
775,435

 
 
 
 
Supplemental Cash Flow Information:
 
 
 
Interest paid (capitalized), net
$
(26,538
)
 
$
(4,193
)
Income taxes paid (refunded), net
$
2,743

 
$
(5,654
)

6



PulteGroup, Inc.
Segment Data
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Year Ended
 
December 31,
 
December 31,
 
2016
 
2015
 
2016
 
2015
HOMEBUILDING:
 
 
 
 
 
 
 
Home sale revenues
$
2,423,472

 
$
1,997,309

 
$
7,451,315

 
$
5,792,675

Land sale revenues
15,431

 
20,885

 
36,035

 
48,536

Total Homebuilding revenues
2,438,903

 
2,018,194

 
7,487,350

 
5,841,211

 
 
 
 
 
 
 
 
Home sale cost of revenues
(1,821,672
)
 
(1,456,186
)
 
(5,587,974
)
 
(4,235,945
)
Land sale cost of revenues
(14,256
)
 
(13,867
)
 
(32,115
)
 
(35,858
)
Selling, general, and administrative expenses
(207,647
)
 
(210,398
)
 
(957,150
)
 
(794,728
)
Other income (expense), net
(6,604
)
 
6,276

 
(49,345
)
 
(17,363
)
Income before income taxes
$
388,724

 
$
344,019

 
$
860,766

 
$
757,317

 

 

 

 

FINANCIAL SERVICES:
 
 
 
 
 
 
 
Income before income taxes
$
24,997

 
$
29,296

 
$
73,084

 
$
58,706

 
 
 
 
 
 
 
 
CONSOLIDATED:
 
 
 
 
 
 
 
Income before income taxes
$
413,721

 
$
373,315

 
$
933,850

 
$
816,023



7


PulteGroup, Inc.
Segment Data, continued
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Year Ended
 
December 31,
 
December 31,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Home sale revenues
$
2,423,472

 
$
1,997,309

 
$
7,451,315

 
$
5,792,675

 
 
 
 
 
 
 
 
Closings - units
 
 
 
 
 
 
 
Northeast
529

 
531

 
1,418

 
1,496

Southeast (a)
1,102

 
1,027

 
3,901

 
3,276

Florida
1,093

 
986

 
3,441

 
2,896

Midwest
1,142

 
977

 
3,418

 
2,961

Texas
1,080

 
1,036

 
3,726

 
3,357

West
1,251

 
1,105

 
4,047

 
3,141

 
6,197

 
5,662

 
19,951

 
17,127

Average selling price
$
391

 
$
353

 
$
373

 
$
338

 
 
 
 
 
 
 
 
Net new orders - units
 
 
 
 
 
 
 
Northeast
306

 
253

 
1,361

 
1,479

Southeast (a)
804

 
695

 
3,810

 
3,454

Florida
705

 
697

 
3,585

 
3,168

Midwest
766

 
630

 
3,636

 
2,862

Texas
784

 
621

 
3,793

 
3,429

West
837

 
763

 
4,141

 
3,616

 
4,202

 
3,659

 
20,326

 
18,008

Net new orders - dollars (b)
$
1,666,066

 
$
1,364,821

 
$
7,753,399

 
$
6,305,380

 
 
 
 
 
 
 
 
 
 
 
 
 
December 31,
 
 
 
 
 
2016
 
2015
Unit backlog
 
 
 
 
 
 
 
Northeast
 
 
 
 
387

 
444

Southeast (a)
 
 
 
 
1,371

 
1,146

Florida
 
 
 
 
1,418

 
1,274

Midwest
 
 
 
 
1,307

 
1,089

Texas
 
 
 
 
1,412

 
1,345

West
 
 
 
 
1,527

 
1,433

 
 
 
 
 
7,422

 
6,731

Dollars in backlog
 
 
 
 
$
2,941,512

 
$
2,456,565

 
 
 
 
 
 
 
 
(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.



8



PulteGroup, Inc.
Segment Data, continued
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Year Ended
 
December 31,
 
December 31,
 
2016
 
2015
 
2016
 
2015
MORTGAGE ORIGINATIONS:
 
 
 
 
 
 
 
Origination volume
4,250

 
3,820

 
13,373

 
11,435

Origination principal
$
1,225,568

 
$
1,013,140

 
$
3,706,745

 
$
2,929,531

Capture rate
81.8
%
 
82.8
%
 
81.2
%
 
82.9
%


Supplemental Data
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Year Ended
 
December 31,
 
December 31,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Interest in inventory, beginning of period
$
176,661

 
$
155,781

 
$
149,498

 
$
167,638

Interest capitalized
44,961

 
29,896

 
160,506

 
120,001

Interest expensed
(35,525
)
 
(36,179
)
 
(123,907
)
 
(138,141
)
Interest in inventory, end of period
$
186,097

 
$
149,498

 
$
186,097

 
$
149,498




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