EX-99.1 2 ex991earningspr9302016.htm EXHIBIT 99.1 Exhibit


pultegrouplogo1a06.jpg

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


PULTEGROUP REPORTS THIRD QUARTER 2016 FINANCIAL RESULTS

•
Reported Q3 Net Income of $0.37 Per Share Includes $0.06 Per Share of Charges Associated with a Contract Settlement, Previously Announced Plans to Reduce Overhead Expenses and Shareholder Activities
•
Home Sale Revenues Increased 29% to $1.9 Billion; Closings Increased 16% to 5,037 Homes
•
Net New Orders Up 17% to 4,775; Value of Net New Orders Increased 25% to $1.8 Billion
•
Backlog Value of $3.7 Billion Up 20% Over Prior Year; Unit Backlog Increased 8% to 9,417 Homes
•
Proceeds from Successful $1.0 Billion Debt Offering Used to Repay Approximately $500 Million of Outstanding Debt, to Fund Operations and to Support $250 Million of Share Repurchases in the Quarter

ATLANTA - October 20, 2016 - PulteGroup, Inc. (NYSE: 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.”



1


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

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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. (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
 
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



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PulteGroup, Inc.
Condensed Consolidated Balance Sheets
($000's omitted)
(Unaudited)
 
September 30,
2016
 
December 31,
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



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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



6



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



7


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.

8


    
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




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