EX-99.1 2 ex991earningspr6302019.htm EXHIBIT 99.1 - EARNINGS PR 2Q 2019 Exhibit


pultegrouplogo1a18.jpg

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

PULTEGROUP REPORTS SECOND QUARTER 2019 FINANCIAL RESULTS

•
Net Income of $0.86 Per Share
•
Net New Orders Increased 7% to 6,792 Homes
•
Value of Net New Orders Increased 7% to $2.9 Billion
•
Home Sale Revenues of $2.4 Billion
•
Homebuilding Gross Margin of 23.1% and Operating Margin of 12.3%
•
Backlog of 11,793 Homes Valued at $5.1 Billion
•
Company Retired $274 Million of Senior Notes and Repurchased $83 Million of Stock During the Quarter


ATLANTA - July 23, 2019 - PulteGroup, Inc. (NYSE: PHM) announced today financial results for its second quarter ended June 30, 2019. For the quarter, the Company’s reported net income was $241 million, or $0.86 per share. Prior year reported net income for the second quarter was $324 million, or $1.12 per share, which included $38 million of pretax benefit associated with insurance adjustments, $26 million of pretax land sale gains, and $17 million of net tax benefits. Adjusted net income for the prior year period was $259 million, or $0.89 per share.

“PulteGroup’s second quarter results demonstrate our ongoing success in running a highly profitable, high returning business, with a clearly articulated approach to capital allocation,” said Ryan Marshall, President and Chief Executive Officer of PulteGroup. “Consistent with our stated objectives, our continued strong operating performance allowed us to invest over $850 million in total land spend in the quarter, while also using almost $400 million of available cash for dividends, share repurchases and debt reduction.”

“As reflected in our results, consumer activity remains high as homebuyers are returning to the market following a period of softer demand in the back half of 2018,” added Mr. Marshall. “Given the low interest rate environment, in combination with supportive economic, employment and demographic trends, we are optimistic about housing demand as we advance through the remainder of 2019.”
Second Quarter Results

Home sale revenues for the second quarter decreased 2% from the prior year to $2.4 billion. Lower revenues for the quarter reflect a 1% increase in average sales price to $430,000, offset by a 3% decrease in closings to 5,589 homes.

Gross margin for the second quarter was 23.1%, compared with 24.0% in the second quarter of 2018. SG&A expense for the quarter was $259 million, or 10.8% of home sale revenues. Prior year reported SG&A expense was $226 million, or 9.2% of home sale revenues, inclusive of the $38 million benefit relating to insurance adjustments recorded in the period. Adjusted SG&A expense for the prior year period was $264 million, or 10.8% of home sale revenues.
      

1


In the second quarter, the Company recorded land sales gains of $1.4 million compared with prior year gains of $27.3 million. Second quarter 2018 land sale gains included $26 million relating to the sale of two large land parcels completed in the period.
  
Net new orders for the second quarter increased 7% from the prior year to 6,792 homes. The dollar value of net new orders also increased 7% over the prior year to $2.9 billion. For the quarter, the Company operated out of 877 communities.

Unit backlog at the end of the quarter was 11,793 homes, which is comparable with prior year backlog of 11,845 homes. The average sales price of homes in backlog was $433,000, which is down 1% from last year’s average sales price in backlog of $439,000. The total value of homes in backlog was $5.1 billion.

Second quarter pretax income for the Company's financial services operations increased 21% over the prior year to $25 million. Financial services benefitted from higher closing volumes, as mortgage capture rate increased to 81% from 76% in the prior year, as well as higher net margins on mortgage originations.

For the quarter, the Company reported $80 million of income tax expense, representing an effective tax rate of 24.9%. Second quarter tax expense in the prior year was $85 million, or an effective tax rate of 20.8%, which included the net benefit of $17 million of tax adjustments recorded in the period. The adjusted tax rate for the prior year period was 25.0%.

During the quarter, PulteGroup repurchased 2.6 million of common shares for $83 million, or an average price of $31.82 per share. In the second quarter, the Company also used available cash to retire $274 million of its 4.250% Senior Notes due 2021. The Company incurred a pretax charge of $4.8 million in the quarter associated with the early redemption of these notes.

A conference call discussing PulteGroup's second quarter 2019 results is scheduled for Tuesday, July 23, 2019, at 8:30 a.m. Eastern Time. Interested investors can access the live webcast via PulteGroup's corporate website at www.pultegroup.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

2


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 PulteGroup's Annual Report on Form 10-K for the fiscal year ended December 31, 2018, 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 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 Statements of Operations
($000's omitted, except per share data)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 
 
 
 
 
 
Homebuilding
 
 
 
 
 
 
 
Home sale revenues
$
2,403,559

 
$
2,450,054

 
$
4,353,415

 
$
4,361,652

Land sale and other revenues
29,469

 
66,904

 
32,445

 
79,461

 
2,433,028

 
2,516,958

 
4,385,860

 
4,441,113

Financial Services
55,957

 
52,764

 
99,819

 
98,702

Total revenues
2,488,985

 
2,569,722

 
4,485,679

 
4,539,815

 
 
 
 
 
 
 
 
Homebuilding Cost of Revenues:
 
 
 
 
 
 
 
Home sale cost of revenues
(1,848,155
)
 
(1,862,133
)
 
(3,340,946
)
 
(3,322,073
)
Land sale cost of revenues
(26,214
)
 
(38,183
)
 
(28,265
)
 
(49,731
)
 
(1,874,369
)
 
(1,900,316
)
 
(3,369,211
)
 
(3,371,804
)
 
 
 
 
 
 
 
 
Financial Services expenses
(30,901
)
 
(32,224
)
 
(62,350
)
 
(64,436
)
Selling, general, and administrative expenses
(259,440
)
 
(226,056
)
 
(512,166
)
 
(466,950
)
Other expense, net
(3,499
)
 
(1,956
)
 
(4,473
)
 
(3,263
)
Income before income taxes
320,776

 
409,170

 
537,479

 
633,362

Income tax expense
(79,735
)
 
(85,081
)
 
(129,681
)
 
(138,521
)
Net income
$
241,041

 
$
324,089

 
$
407,798

 
$
494,841

 
 
 
 
 
 
 
 
Per share:
 
 
 
 
 
 
 
Basic earnings
$
0.86

 
$
1.12

 
$
1.46

 
$
1.72

Diluted earnings
$
0.86

 
$
1.12

 
$
1.45

 
$
1.71

Cash dividends declared
$
0.11

 
$
0.09

 
$
0.22

 
$
0.18

 
 
 
 
 
 
 
 
Number of shares used in calculation:
 
 
 
 
 
 
 
Basic
276,652

 
285,276

 
277,142

 
285,976

Effect of dilutive securities
932

 
1,378

 
967

 
1,088

Diluted
277,584

 
286,654

 
278,109

 
287,064





4



PulteGroup, Inc.
Condensed Consolidated Balance Sheets
($000's omitted)
(Unaudited)
 
June 30,
2019
 
December 31,
2018
 
 
 
 
ASSETS
 
 
 
 
 
 
 
Cash and equivalents
$
631,309

 
$
1,110,088

Restricted cash
27,965

 
23,612

Total cash, cash equivalents, and restricted cash
659,274

 
1,133,700

House and land inventory
7,802,492

 
7,253,353

Land held for sale
38,218

 
36,849

Residential mortgage loans available-for-sale
343,732

 
461,354

Investments in unconsolidated entities
58,246

 
54,590

Other assets
837,279

 
830,359

Intangible assets
132,192

 
127,192

Deferred tax assets, net
224,104

 
275,579

 
$
10,095,537

 
$
10,172,976

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
Liabilities:
 
 
 
Accounts payable
$
380,363

 
$
352,029

Customer deposits
334,484

 
254,624

Accrued and other liabilities
1,308,459

 
1,360,483

Income tax liabilities
27,913

 
11,580

Financial Services debt
234,186

 
348,412

Notes payable
2,740,325

 
3,028,066

 
5,025,730

 
5,355,194

Shareholders' equity
5,069,807

 
4,817,782

 
$
10,095,537

 
$
10,172,976



5


PulteGroup, Inc.
Consolidated Statements of Cash Flows
($000's omitted)
(Unaudited)
 
Six Months Ended
 
June 30,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income
$
407,798

 
$
494,841

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Deferred income tax expense
51,458

 
126,991

Land-related charges
6,810

 
5,841

Depreciation and amortization
26,497

 
24,161

Share-based compensation expense
17,304

 
16,162

Other, net
2,664

 
(2,803
)
Increase (decrease) in cash due to:
 
 
 
Inventories
(399,520
)
 
(281,362
)
Residential mortgage loans available-for-sale
116,974

 
199,623

Other assets
31,593

 
15,822

Accounts payable, accrued and other liabilities
44,132

 
(51,694
)
Net cash provided by (used in) operating activities
305,710

 
547,582

Cash flows from investing activities:
 
 
 
Capital expenditures
(29,575
)
 
(33,059
)
Investments in unconsolidated entities
(4,664
)
 
(1,000
)
Business acquisition
(163,724
)
 
—

Other investing activities, net
4,592

 
6,915

Net cash provided by (used in) investing activities
(193,371
)
 
(27,144
)
Cash flows from financing activities:
 
 
 
Repayments of notes payable
(297,303
)
 
(82,432
)
Borrowings under revolving credit facility
—

 
1,566,000

Repayments under revolving credit facility
—

 
(1,566,000
)
Financial Services borrowings (repayments)
(114,226
)
 
(173,761
)
Debt issuance costs
—

 
(8,090
)
Stock option exercises
5,208

 
4,467

Share repurchases
(118,824
)
 
(112,491
)
Dividends paid
(61,620
)
 
(52,384
)
Net cash provided by (used in) financing activities
(586,765
)
 
(424,691
)
Net increase (decrease) in cash, cash equivalents, and restricted cash
(474,426
)
 
95,747

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
$
659,274

 
$
401,915

 
 
 
 
Supplemental Cash Flow Information:
 
 
 
Interest paid (capitalized), net
$
5,560

 
$
(387
)
Income taxes paid (refunded), net
$
12,618

 
$
77,077



6



PulteGroup, Inc.
Segment Data
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2019
 
2018
 
2019
 
2018
HOMEBUILDING:
 
 
 
 
 
 
 
Home sale revenues
$
2,403,559

 
$
2,450,054

 
$
4,353,415

 
$
4,361,652

Land sale and other revenues
29,469

 
66,904

 
32,445

 
79,461

Total Homebuilding revenues
2,433,028

 
2,516,958

 
4,385,860

 
4,441,113

 
 
 
 
 
 
 
 
Home sale cost of revenues
(1,848,155
)
 
(1,862,133
)
 
(3,340,946
)
 
(3,322,073
)
Land sale cost of revenues
(26,214
)
 
(38,183
)
 
(28,265
)
 
(49,731
)
Selling, general, and administrative expenses ("SG&A")
(259,440
)
 
(226,056
)
 
(512,166
)
 
(466,950
)
Other expense, net
(3,521
)
 
(2,133
)
 
(4,490
)
 
(3,548
)
Income before income taxes
$
295,698

 
$
388,453

 
$
499,993

 
$
598,811

 
 
 
 
 
 
 
 
FINANCIAL SERVICES:
 
 
 
 
 
 
 
Income before income taxes
$
25,078

 
$
20,717

 
$
37,486

 
$
34,551

 
 
 
 
 
 
 
 
CONSOLIDATED:
 
 
 
 
 
 
 
Income before income taxes
$
320,776

 
$
409,170

 
$
537,479

 
$
633,362

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OPERATING METRICS:
 
 
 
 
 
 
 
Gross margin % (a)(b)
23.1
 %
 
24.0
 %
 
23.3
 %
 
23.8
 %
SG&A % (a)
(10.8
)%
 
(9.2
)%
 
(11.8
)%
 
(10.7
)%
Operating margin % (a)
12.3
 %
 
14.8
 %
 
11.5
 %
 
13.1
 %
(a)
As a percentage of home sale revenues
(b)
Gross margin represents home sale revenues minus home sale cost of revenues

7


PulteGroup, Inc.
Segment Data, continued
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Home sale revenues
$
2,403,559

 
$
2,450,054

 
$
4,353,415

 
$
4,361,652

 
 
 
 
 
 
 
 
Closings - units
 
 
 
 
 
 
 
Northeast
349

 
401

 
568

 
652

Southeast
951

 
1,072

 
1,848

 
1,996

Florida
1,252

 
1,134

 
2,260

 
2,021

Midwest
822

 
872

 
1,548

 
1,639

Texas
1,119

 
1,096

 
1,968

 
1,905

West
1,096

 
1,166

 
2,032

 
2,154

 
5,589

 
5,741

 
10,224

 
10,367

Average selling price
$
430

 
$
427

 
$
426

 
$
421

 
 
 
 
 
 
 
 
Net new orders - units
 
 
 
 
 
 
 
Northeast
455

 
450

 
816

 
898

Southeast
1,214

 
1,093

 
2,287

 
2,352

Florida
1,460

 
1,347

 
2,806

 
2,791

Midwest
975

 
1,055

 
1,999

 
2,157

Texas
1,323

 
1,183

 
2,689

 
2,506

West
1,365

 
1,213

 
2,658

 
2,512

 
6,792

 
6,341

 
13,255

 
13,216

Net new orders - dollars
$
2,890,709

 
$
2,694,271

 
$
5,626,561

 
$
5,587,823

 
 
 
 
 
 
 
 
Unit backlog
 
 
 
 
 
 
 
Northeast
 
 
 
 
718

 
758

Southeast
 
 
 
 
2,049

 
2,072

Florida
 
 
 
 
2,435

 
2,448

Midwest
 
 
 
 
1,853

 
2,005

Texas
 
 
 
 
2,213

 
2,027

West
 
 
 
 
2,525

 
2,535

 
 
 
 
 
11,793

 
11,845

Dollars in backlog
 
 
 
 
$
5,109,293

 
$
5,205,234

 
 
 
 
 
 
 
 



8


    
PulteGroup, Inc.
Segment Data, continued
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2019
 
2018
 
2019
 
2018
MORTGAGE ORIGINATIONS:
 
 
 
 
 
 
 
Origination volume
3,720

 
3,635

 
6,718

 
6,627

Origination principal
$
1,161,906

 
$
1,122,017

 
$
2,076,617

 
$
2,031,817

Capture rate
81.0
%
 
75.8
%
 
80.4
%
 
76.6
%


Supplemental Data
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Interest in inventory, beginning of period
$
235,313

 
$
240,013

 
$
227,495

 
$
226,611

Interest capitalized
41,650

 
43,771

 
84,031

 
87,731

Interest expensed
(42,254
)
 
(40,157
)
 
(76,817
)
 
(70,715
)
Interest in inventory, end of period
$
234,709

 
$
243,627

 
$
234,709

 
$
243,627




9


PulteGroup, Inc.
Reconciliation of Non-GAAP Financial Measures
(Unaudited)

This report contains information about our operating results reflecting certain adjustments, including: adjustments to selling, general, and administrative expenses ("SG&A"); income tax expense; net income; and diluted earnings per share ("EPS"). 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
 
Results of Operations Classification
 
June 30,
 
 
2019
 
2018
 
 
 
 
 
 
Net income, as reported
 
 
$
241,041

 
$
324,089

Adjustments to income before income taxes:
 
 
 
 
 
Land sale gains
Land sale revenues /
cost of revenues
 
—

 
(26,402
)
Insurance adjustments
SG&A
 
—

 
(37,890
)
Income tax effect of the above items
Income tax expense
 
—

 
16,086

Net tax benefits
Income tax expense
 
—

 
(17,276
)
Adjusted net income
 
 
$
241,041

 
$
258,607

 
 
 
 
 
 
EPS (diluted), as reported
 
 
$
0.86

 
$
1.12

Adjusted EPS (diluted)
 
 
$
0.86

 
$
0.89


10


Other Reconciliations
 
 
 
 
 
 
 
Three Months Ended
 
June 30,
 
2019
 
2018
 
 
 
 
 
 
Home sale revenues
$
2,403,559


 
$
2,450,054



 
 
 
 
 
 
Gross margin (a)
$
555,404

23.1
%
 
$
587,921

24.0
%
 
 
 
 
 
 
SG&A, as reported
$
259,440

10.8
%
 
$
226,056

9.2
%
Adjustments:
 

 


Insurance adjustments
—

—
%
 
37,890

1.5
%
Adjusted SG&A
$
259,440

10.8
%
 
$
263,946

10.8
%
 
 
 
 
 
 
Operating margin, as reported (b)
 
12.3
%
 
 
14.8
%
Adjusted operating margin (c)
 
12.3
%
 
 
13.2
%
 
 
 
 
 
 
(a) Gross margin represents home sale revenues minus home sale cost of revenues
(b) Operating margin represents gross margin less SG&A
(c) Adjusted operating margin represents gross margin less adjusted SG&A

11