EX-99.1 2 ex991earningspr4q19.htm EXHIBIT 99.1 - EARNINGS PR 4Q 2019 Exhibit


image1a03.jpg
FOR IMMEDIATE RELEASE
Company Contact
 
Investors: Jim Zeumer
 
(404) 978-6434
 
     Email: jim.zeumer@pultegroup.com


PULTEGROUP REPORTS FOURTH QUARTER 2019 FINANCIAL RESULTS

•
Reported Net Income of $1.22 Per Share
•
Adjusted Net Income of $1.14 Per Share
•
Net New Orders Increased 33% to 5,691 Homes
•
Closings Increased 2% to 6,822 Homes
•
Home Sale Revenues Increased 1% to $2.9 Billion
•
Unit Backlog Up 20% to 10,507 Homes
•
Backlog Value Increased 18% to $4.5 Billion
•
Year-end Cash Balance of $1.2 Billion; Debt-to-Total Capitalization Decreased to 33.6%
•
Company Announces Purchase of Off-site Framing-Shell Manufacturer

ATLANTA - Jan. 28, 2020 - PulteGroup, Inc. (NYSE: PHM) announced today financial results for its fourth quarter ended December 31, 2019. For the quarter, the Company reported net income of $336 million, or $1.22 per share. Adjusted net income for the period was $312 million, or $1.14 per share, after excluding $31 million of pre-tax benefit from an insurance reserve adjustment.

Reported net income for the fourth quarter of 2018 was $238 million, or $0.84 per share. Adjusted net income for the fourth quarter of 2018 was $314 million, or $1.11 per share, after excluding $85 million of pre-tax land charges and a $16 million pre-tax charge for a Financial Services reserve adjustment.

“As demonstrated by our 33% increase in orders, the recovery in housing demand that began earlier this year gained momentum through the fourth quarter as we realized strong sales across all buyer groups,” said Company President and CEO Ryan Marshall. “The quarter completes an outstanding year during which we continued to invest in growing our business, generated $1.1 billion in operating cash flow, returned $397 million to shareholders, paid down $310 million of homebuilder debt, and realized a 20.0% return on equity.”

“Strong demand for new homes is benefitting from favorable market dynamics including improved affordability in part due to low mortgage rates, high employment and consumer confidence, and a generally balanced inventory of new homes,” added Marshall. “The sustained strength in housing demand allowed us to deliver strong fourth quarter and full-year results, and has PulteGroup well positioned to increase delivery volumes, revenues, homebuilding gross margins and earnings in 2020.”


1


Fourth Quarter Results

Home sale revenues for the fourth quarter increased 1% over the fourth quarter of 2018 to $2.9 billion. Higher revenues for the period reflect a 2% increase in closings to 6,822 homes, partially offset by a less than 1% decrease in average sales price to $429,000.

Home sale gross margin for the fourth quarter was 22.8%, compared with prior year reported and adjusted gross margins of 21.5% and 23.8%, respectively.

Reported fourth quarter SG&A expense of $262 million, or 8.9% of home sale revenues, included a $31 million pre-tax benefit from an insurance reserve adjustment recorded in the period. Exclusive of this benefit, adjusted SG&A expense for the quarter was $293 million, or 10.0% of home sale revenues. SG&A expense for the fourth quarter of 2018 was $292 million, or 10.1% of home sale revenues.

Net new orders for the quarter increased 33% over the fourth quarter of 2018 to 5,691 homes as results benefitted from both increased community count and higher absorption pace. The value of net new orders increased 35% to $2.5 billion, up from $1.8 billion in the fourth quarter of 2018. Average community count for the fourth quarter was 865 communities, compared with 825 communities in the fourth quarter of 2018.

Unit backlog is up 20% over last year to 10,507 homes, while the backlog dollar value increased 18% to $4.5 billion. The decrease in the average price of homes in backlog reflects the Company’s efforts to modestly expand its first-time buyer business which typically carries a lower sales price.

Pre-tax income for the Company’s Financial Services operations was $34 million compared with $5 million in the fourth quarter of 2018. Results for the fourth quarter of 2018 included a $16 million pre-tax charge for a reserve adjustment recorded in the period. The increase in pre-tax income for the period also reflects a strong margin environment, higher loan volumes resulting from growth in the Company’s homebuilding operations and a higher mortgage capture rate. Capture rate for the fourth quarter increased to 84% from 77% last year.

During the quarter, the Company repurchased 0.8 million of its common shares for $30 million, or an average price of $39.16 per share. For the year, the Company repurchased 8.4 million common shares, or 3% of its outstanding shares, for $274 million, or an average price of $32.52 per share.

At year end, the Company had $1.2 billion of cash and a debt-to-total capitalization of 33.6%, which is down from 38.6% at the end of 2018.

Company Acquires Off-site Framing-Shell Manufacturer

In a separate press release, PulteGroup also announced today that it has acquired the assets of Innovative Construction Group (ICG), a leading off-site solutions provider focused on single family and multifamily wood framed construction. Based in Jacksonville, Florida, ICG’s comprehensive framing solutions include design services, manufactured wall panels, roof trusses and floor systems, and onsite installation to provide a full frame shell construction process. ICG will remain a stand-alone operation and continue serving its existing customer base and builder clients.

“In response to ongoing labor constraints which are impacting construction trades throughout the country, we have made the strategic decision to acquire off-site manufacturing capabilities that we believe can help us drive greater production efficiencies,” said Marshall. “We view this acquisition as a logical next step in the common plan management platform we have been advancing for years and see the potential to open comparable production plants in future years.”


2


A conference call discussing PulteGroup's fourth quarter 2019 results is scheduled for Tuesday, January 28, 2020, 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 any impairment charge 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 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 the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and the Company’s other public filings with the Securities and Exchange Commission for a further discussion of these and other risks and uncertainties applicable to our businesses. The Company 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 more than 40 markets throughout the country. Through its brand portfolio that includes Centex, Pulte Homes, Del Webb, DiVosta Homes, American West 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 pultegroup.com; www.pulte.com; www.centex.com; www.delwebb.com; www.divosta.com; www.jwhomes.com and www.americanwesthomes.com. Follow PulteGroup, Inc. on Twitter: @PulteGroupNews.


# # #

3


PulteGroup, Inc.
Consolidated Results of Operations
($000's omitted, except per share data)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Year Ended
 
December 31,
 
December 31,
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 
 
 
 
 
 
Homebuilding
 
 
 
 
 
 
 
Home sale revenues
$
2,925,288

 
$
2,884,557

 
$
9,915,705

 
$
9,818,445

Land sale and other revenues
21,828

 
59,534

 
62,821

 
164,504

 
2,947,116

 
2,944,091

 
9,978,526

 
9,982,949

Financial Services
69,797

 
55,059

 
234,431

 
205,382

Total revenues
3,016,913

 
2,999,150

 
10,212,957

 
10,188,331

 
 
 
 
 
 
 
 
Homebuilding Cost of Revenues:
 
 
 
 
 
 
 
Home sale cost of revenues
(2,259,131
)
 
(2,264,704
)
 
(7,628,700
)
 
(7,540,937
)
Land sale cost of revenues
(20,484
)
 
(54,769
)
 
(56,098
)
 
(126,560
)
 
(2,279,615
)
 
(2,319,473
)
 
(7,684,798
)
 
(7,667,497
)
 
 
 
 
 
 
 
 
Financial Services expenses
(35,906
)
 
(50,772
)
 
(130,770
)
 
(147,422
)
Selling, general, and administrative expenses
(261,545
)
 
(292,318
)
 
(1,044,337
)
 
(1,012,023
)
Other expense, net
(3,896
)
 
(7,096
)
 
(13,476
)
 
(13,849
)
Income before income taxes
435,951

 
329,491

 
1,339,576

 
1,347,540

Income tax expense
(100,153
)
 
(91,842
)
 
(322,876
)
 
(325,517
)
Net income
$
335,798

 
$
237,649

 
$
1,016,700

 
$
1,022,023

 
 
 

 
 
 

Net income per share:
 
 
 
 
 
 
 
Basic
$
1.23

 
$
0.84

 
$
3.67

 
$
3.56

Diluted
$
1.22

 
$
0.84

 
$
3.66

 
$
3.55

Cash dividends declared
$
0.12

 
$
0.11

 
$
0.45

 
$
0.38

 
 
 
 
 
 
 
 
Number of shares used in calculation:
 
 
 
 
 
 
 
Basic
270,843

 
278,964

 
274,495

 
283,578

Effect of dilutive securities
632

 
1,248

 
802

 
1,287

Diluted
271,475

 
280,212

 
275,297

 
284,865



4



PulteGroup, Inc.
Condensed Consolidated Balance Sheets
($000's omitted)
(Unaudited)
 
December 31,
2019
 
December 31,
2018
 
 
 
 
ASSETS
 
 
 
 
 
 
 
Cash and equivalents
$
1,217,913

 
$
1,110,088

Restricted cash
33,543

 
23,612

Total cash, cash equivalents, and restricted cash
1,251,456

 
1,133,700

House and land inventory
7,680,614

 
7,253,353

Land held for sale
24,009

 
36,849

Residential mortgage loans available-for-sale
508,967

 
461,354

Investments in unconsolidated entities
59,766

 
54,590

Other assets
895,686

 
830,359

Intangible assets
124,992

 
127,192

Deferred tax assets, net
170,107

 
275,579

 
$
10,715,597

 
$
10,172,976

 
 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
Liabilities:
 
 
 
Accounts payable
$
435,916

 
$
352,029

Customer deposits
294,427

 
254,624

Accrued and other liabilities
1,399,368

 
1,360,483

Income tax liabilities
36,093

 
11,580

Financial Services debt
326,573

 
348,412

Notes payable
2,765,040

 
3,028,066

Total liabilities
5,257,417

 
5,355,194

Shareholders' equity
5,458,180

 
4,817,782

 
$
10,715,597

 
$
10,172,976



5


PulteGroup, Inc.
Consolidated Statements of Cash Flows
($000's omitted)
(Unaudited)
 
Year Ended
 
December 31,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income
$
1,016,700

 
$
1,022,023

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Deferred income tax expense
105,438

 
362,777

Land-related charges
27,101

 
99,446

Depreciation and amortization
53,999

 
49,429

Share-based compensation expense
28,368

 
28,290

Loss on debt retirements
4,927

 
76

Other, net
1,155

 
(3,688
)
Increase (decrease) in cash due to:
 
 
 
Inventories
(237,741
)
 
(50,362
)
Residential mortgage loans available-for-sale
(48,261
)
 
107,330

Other assets
(15,125
)
 
(64,174
)
Accounts payable, accrued and other liabilities
140,984

 
(101,400
)
Net cash provided by (used in) operating activities
1,077,545

 
1,449,747

Cash flows from investing activities:
 
 
 
Capital expenditures
(58,119
)
 
(59,039
)
Investments in unconsolidated entities
(9,515
)
 
(1,000
)
Business acquisition
(163,724
)
 
—

Other investing activities, net
5,129

 
18,097

Net cash provided by (used in) investing activities
(226,229
)
 
(41,942
)
Cash flows from financing activities:
 
 
 
Debt issuance costs
—

 
(8,164
)
Repayments of notes payable
(309,985
)
 
(82,775
)
Borrowings under revolving credit facility
—

 
1,566,000

Repayments under revolving credit facility
—

 
(1,566,000
)
Financial Services borrowings (repayments), net
(21,841
)
 
(89,393
)
Stock option exercises
6,399

 
6,555

Share repurchases
(274,333
)
 
(294,566
)
Cash paid for shares withheld for taxes
(11,450
)
 
(7,910
)
Dividends paid
(122,350
)
 
(104,020
)
Net cash provided by (used in) financing activities
(733,560
)
 
(580,273
)
Net increase (decrease)
117,756

 
827,532

Cash, cash equivalents, and restricted cash at beginning of period
1,133,700

 
306,168

Cash, cash equivalents, and restricted cash at end of period
$
1,251,456

 
$
1,133,700

 
 
 
 
Supplemental Cash Flow Information:
 
 
 
Interest paid (capitalized), net
$
5,605

 
$
557

Income taxes paid, net
$
137,119

 
$
89,204


6



PulteGroup, Inc.
Segment Data
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Year Ended
 
December 31,
 
December 31,
 
2019
 
2018
 
2019
 
2018
HOMEBUILDING:
 
 
 
 
 
 
 
Home sale revenues
$
2,925,288

 
$
2,884,557

 
$
9,915,705

 
$
9,818,445

Land sale and other revenues
21,828

 
59,534

 
62,821

 
164,504

Total Homebuilding revenues
2,947,116

 
2,944,091

 
9,978,526

 
9,982,949

 
 
 
 
 
 
 
 
Home sale cost of revenues
(2,259,131
)
 
(2,264,704
)
 
(7,628,700
)
 
(7,540,937
)
Land sale cost of revenues
(20,484
)
 
(54,769
)
 
(56,098
)
 
(126,560
)
Selling, general, and administrative expenses
(261,545
)
 
(292,318
)
 
(1,044,337
)
 
(1,012,023
)
Other expense, net
(3,549
)
 
(7,362
)
 
(13,130
)
 
(14,625
)
Income before income taxes
$
402,407

 
$
324,938

 
$
1,236,261

 
$
1,288,804

 

 

 

 

FINANCIAL SERVICES:
 
 
 
 
 
 
 
Income before income taxes
$
33,544

 
$
4,553

 
$
103,315

 
$
58,736

 
 
 
 
 
 
 
 
CONSOLIDATED:
 
 
 
 
 
 
 
Income before income taxes
$
435,951

 
$
329,491

 
$
1,339,576

 
$
1,347,540



7


PulteGroup, Inc.
Segment Data, continued
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Year Ended
 
December 31,
 
December 31,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Home sale revenues
$
2,925,288

 
$
2,884,557

 
$
9,915,705

 
$
9,818,445

 
 
 
 
 
 
 
 
Closings - units
 
 
 
 
 
 
 
Northeast
487

 
556

 
1,443

 
1,558

Southeast
1,067

 
1,123

 
3,982

 
4,220

Florida
1,459

 
1,509

 
5,045

 
4,771

Midwest
1,091

 
1,063

 
3,583

 
3,716

Texas
1,366

 
1,193

 
4,528

 
4,212

West
1,352

 
1,265

 
4,651

 
4,630

 
6,822

 
6,709

 
23,232

 
23,107

Average selling price
$
429

 
$
430

 
$
427

 
$
425

 
 
 
 
 
 
 
 
Net new orders - units
 
 
 
 
 
 
 
Northeast
322

 
265

 
1,562

 
1,516

Southeast
956

 
814

 
4,237

 
4,114

Florida
1,316

 
1,018

 
5,462

 
4,982

Midwest
827

 
651

 
3,721

 
3,631

Texas
1,094

 
767

 
4,886

 
4,278

West
1,176

 
752

 
5,109

 
4,312

 
5,691

 
4,267

 
24,977

 
22,833

Net new orders - dollars
$
2,450,095

 
$
1,809,352

 
$
10,615,363

 
$
9,675,529

 
 
 
 
 
 
 
 
 
 
 
 
 
December 31,
 
 
 
 
 
2019
 
2018
Unit backlog
 
 
 
 
 
 
 
Northeast
 
 
 
 
589

 
470

Southeast
 
 
 
 
1,865

 
1,610

Florida
 
 
 
 
2,306

 
1,889

Midwest
 
 
 
 
1,540

 
1,402

Texas
 
 
 
 
1,850

 
1,492

West
 
 
 
 
2,357

 
1,859

 
 
 
 
 
10,507

 
8,722

Dollars in backlog
 
 
 
 
$
4,535,805

 
$
3,836,147

 
 
 
 
 
 
 
 




8



PulteGroup, Inc.
Segment Data, continued
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Year Ended
 
December 31,
 
December 31,
 
2019
 
2018
 
2019
 
2018
MORTGAGE ORIGINATIONS:
 
 
 
 
 
 
 
Origination volume
4,802

 
4,145

 
15,821

 
14,464

Origination principal
$
1,534,416

 
$
1,286,154

 
$
4,976,973

 
$
4,456,360

Capture rate
84.1
%
 
76.8
%
 
82.4
%
 
76.2
%


Supplemental Data
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Year Ended
 
December 31,
 
December 31,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Interest in inventory, beginning of period
$
228,562

 
$
242,787

 
$
227,495

 
$
226,611

Interest capitalized
40,191

 
42,335

 
164,114

 
172,809

Interest expensed
(58,370
)
 
(57,627
)
 
(181,226
)
 
(171,925
)
Interest in inventory, end of period
$
210,383

 
$
227,495

 
$
210,383

 
$
227,495




9


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):

Reconciliation of Adjusted Net Income and Adjusted EPS
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
December 31,
 
Results of Operations Classification
 
2019
 
2018
 
 
 
 
 
 
Net income, as reported
 
 
$
335,798

 
$
237,649

Adjustments to income before income taxes:
 
 
 
 
 
Land impairments
Home sale cost of revenues
 
*

 
66,911

Net realizable value adjustments - land held for sale
Land sale cost of revenues
 
*

 
8,968

Write-offs of pre-acquisition costs
Other income (expense)
 
*

 
9,595

Insurance reserve adjustments
SG&A
 
(31,099
)
 
*

Financial Services reserve adjustments
Financial Services expense
 
*

 
16,224

Income tax effect of the above items
Income tax expense
 
7,672

 
(25,719
)
Adjusted net income
 
 
$
312,371

 
$
313,628

 
 
 
 
 
 
EPS (diluted), as reported
 
 
$
1.22

 
$
0.84

Adjusted EPS (diluted)
 
 
$
1.14

 
$
1.11

 
 
 
 
 
 
*Item not meaningful for the period presented
 
 
 
 
 
















10


Other Reconciliations
 
 
 
 
 
 
 
Three Months Ended
 
December 31,
 
2019
 
2018
Home sale revenues
$
2,925,288

 
 
$
2,884,557

 
 
 
 
 
 
 
Gross margin, as reported
$
666,157

22.8
%
 
$
619,853

21.5
%
Land impairments
*
*

 
66,911

2.3
%
Adjusted gross margin
$
666,157

22.8
%
 
$
686,764

23.8
%
 
 
 
 
 
 
SG&A, as reported
$
261,545

8.9
%
 
$
292,318

10.1
%
Insurance reserve adjustments
31,099

1.1
%
 
*
*

Adjusted SG&A
$
292,644

10.0
%
 
$
292,318

10.1
%
 
 
 
 
 
 
Operating margin, as reported**
 
13.8
%
 
 
11.4
%
Adjusted operating margin***
 
12.8
%
 
 
13.7
%
 
 
 
 
 
 
*Item not meaningful for the period presented
**Operating margin represents gross margin less SG&A divided by home sale revenues
***Adjusted operating margin represents adjusted gross margin less adjusted SG&A divided by home sale revenues











11