PULTEGROUP INC/MI/ - FORM 8-K - EX-99.1 - PRESS RELEASE ISSUED ON OCT 24, 2013 BY PULTEGROUP, INC. - October 24, 2013

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FOR IMMEDIATE RELEASE
Company Contact
 
Investors: Jim Zeumer
 
(248) 433-4502
 
          Email: jim.zeumer@pultegroup.com
 
 

PULTEGROUP REPORTS THIRD QUARTER 2013 FINANCIAL RESULTS

•
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

Bloomfield Hills, MI, October 24, 2013 - 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

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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

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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.


# # #



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,
 
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

 
$
—



4



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



5


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
)


6



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



7


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.

8



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




9



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
 
 
 
 
 
 
Earnings Per Share
 
Dollars
 
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.


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PULTEGROUP INC/MI/ Reports