UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

or

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-9804

PULTEGROUP, INC.

(Exact name of registrant as specified in its charter) 

Michigan	38-2766606
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3350 Peachtree Road NE, Suite 1500
Atlanta,	Georgia	30326
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: 404 978-6400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, par value $0.01	PHM	New York Stock Exchange
Series A Junior Participating Preferred Share Purchase Rights		New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  [X]   No  [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  [X]   No  [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	Accelerated filer	Non-accelerated filer	Smaller reporting company	Emerging growth company
☒	☐	☐	☐	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  

Yes ☐ No ☒

Number of common shares outstanding as of July 19, 2022: 231,498,300

1

PULTEGROUP, INC.

TABLE OF CONTENTS

		Page No.
PART I	FINANCIAL INFORMATION
Item 1	Financial Statements
	Condensed Consolidated Balance Sheets at June 30, 2022 and December 31, 2021	3
	Consolidated Statements of Operations for the three and six months ended June 30, 2022 and 2021	4
	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2022 and 2021	5
	Consolidated Statements of Shareholders' Equity for the three and six months ended June 30, 2022 and 2021	6
	Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4	Controls and Procedures	40
PART II	OTHER INFORMATION	41
Item 1	Legal Proceedings	41
Item 1A	Risk Factors	41
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 6	Exhibits	42
	Signatures	44

 

2

PART I. FINANCIAL INFORMATION

Item 1.      Financial Statements

PULTEGROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

($000’s omitted)

 

	June 30, 2022		December 31, 2021
	(Unaudited)
ASSETS
Cash and equivalents	$	662,780	$	1,779,088
Restricted cash	69,324		54,477
Total cash, cash equivalents, and restricted cash	732,104		1,833,565
House and land inventory	10,729,444		9,047,569
Land held for sale	32,772		29,276
Residential mortgage loans available-for-sale	553,789		947,139
Investments in unconsolidated entities	150,496		98,155
Other assets	1,239,870		1,110,966
Intangible assets	141,337		146,923
Deferred tax assets	120,524		139,038
	$	13,700,336	$	13,352,631
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable	$	750,508	$	621,168
Customer deposits	1,027,938		844,785
Deferred tax liabilities	167,845		165,519
Accrued and other liabilities	1,535,901		1,576,478
Financial Services debt	442,816		626,123
Notes payable	2,030,112		2,029,043
	5,955,120		5,863,116
Shareholders' equity	7,745,216		7,489,515
	$	13,700,336	$	13,352,631

See accompanying Notes to Condensed Consolidated Financial Statements.

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,
	2022		2021		2022		2021
Revenues:
Homebuilding
Home sale revenues	$	3,809,601	$	3,235,379	$	6,879,914	$	5,831,889
Land sale and other revenues	33,810		33,076		66,969		60,235
	3,843,411		3,268,455		6,946,883		5,892,124
Financial Services	82,775		91,029		166,918		197,150
Total revenues	3,926,186		3,359,484		7,113,801		6,089,274
Homebuilding Cost of Revenues:
Home sale cost of revenues	(2,631,356)		(2,375,495)		(4,812,430)		(4,311,130)
Land sale and other cost of revenues	(31,656)		(31,195)		(63,657)		(55,831)
	(2,663,012)		(2,406,690)		(4,876,087)		(4,366,961)
Financial Services expenses	(43,847)		(40,411)		(87,333)		(80,086)
Selling, general, and administrative expenses	(351,256)		(272,286)		(680,279)		(543,973)
Loss on debt retirement	—		—		—		(61,469)
Other expense, net	(3,498)		(624)		(5,636)		(3,259)
Income before income taxes	864,573		639,473		1,464,466		1,033,526
Income tax expense	(212,138)		(136,074)		(357,308)		(226,020)
Net income	$	652,435	$	503,399	$	1,107,158	$	807,506
Per share:
Basic earnings	$	2.74	$	1.91	$	4.56	$	3.04
Diluted earnings	$	2.73	$	1.90	$	4.54	$	3.03
Cash dividends declared	$	0.15	$	0.14	$	0.30	$	0.28
Number of shares used in calculation:
Basic	236,328		262,099		241,036		263,744
Effect of dilutive securities	1,318		648		1,193		627
Diluted	237,646		262,747		242,229		264,371

See accompanying Notes to Condensed Consolidated Financial Statements.

4

PULTEGROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

($000’s omitted)

(Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Net income	$	652,435	$	503,399	$	1,107,158	$	807,506
Other comprehensive income, net of tax:
Change in value of derivatives	20		25		45		50
Other comprehensive income	20		25		45		50
Comprehensive income	$	652,455	$	503,424	$	1,107,203	$	807,556

See accompanying Notes to Condensed Consolidated Financial Statements.

5

PULTEGROUP, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(000's omitted)

(Unaudited)

				Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total
	Common Stock
	Shares	$
Shareholders' equity, March 31, 2022	239,622	$	2,396	$	3,309,912	$	(20)	$	4,100,976	$	7,413,264
Share issuances	48	—		—		—		—		—
Dividends declared	—	—		—		—		(35,514)		(35,514)
Share repurchases	(7,100)	(70)		—		—		(294,157)		(294,227)
Cash paid for shares withheld for taxes	—	—		—		—		—		—
Share-based compensation	—	—		9,238		—		—		9,238
Net income	—	—		—		—		652,435		652,435
Other comprehensive income	—	—		—		20		—		20
Shareholders' equity, June 30, 2022	232,570	$	2,326	$	3,319,150	$	—	$	4,423,740	$	7,745,216
Shareholders' equity, December 31, 2021	249,326	$	2,493	$	3,290,791	$	(45)	$	4,196,276	$	7,489,515
Share issuances	634	6		6,024		—		—		6,030
Dividends declared	—	—		—		—		(72,026)		(72,026)
Share repurchases	(17,390)	(173)		—		—		(794,054)		(794,227)
Cash paid for shares withheld for taxes	—	—		—		—		(13,614)		(13,614)
Share-based compensation	—	—		22,335		—		—		22,335
Net income	—	—		—		—		1,107,158		1,107,158
Other comprehensive income	—	—		—		45		—		45
Shareholders' equity, June 30, 2022	232,570	$	2,326	$	3,319,150	$	—	$	4,423,740	$	7,745,216

6

				Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total
	Common Stock
	Shares	$
Shareholders' equity, March 31, 2021	263,637	$	2,636	$	3,274,154	$	(120)	$	3,408,604	$	6,685,274
Share issuances	12	—		—		—		—		—
Dividends declared	—	—		—		—		(36,814)		(36,814)
Share repurchases	(3,582)	(36)		—		—		(199,964)		(200,000)
Cash paid for shares withheld for taxes	—	—		—		—		(41)		(41)
Share-based compensation	—	—		6,625		—		—		6,625
Net income	—	—		—		—		503,399		503,399
Other comprehensive income	—	—		—		25		—		25
Shareholders' equity, June 30, 2021	260,067	$	2,600	$	3,280,779	$	(95)	$	3,675,184	$	6,958,468
Shareholders' equity, December 31, 2020	266,464	$	2,665	$	3,261,412	$	(145)	$	3,306,057	$	6,569,989
Stock option exercises	1	—		11		—		—		11
Share issuances	517	5		4,176		—		—		4,181
Dividends declared	—	—		—		—		(74,139)		(74,139)
Share repurchases	(6,915)	(70)		—		—		(353,633)		(353,703)
Cash paid for shares withheld for taxes	—	—		—		—		(10,607)		(10,607)
Share-based compensation	—	—		15,180		—		—		15,180
Net income	—	—		—		—		807,506		807,506
Other comprehensive income	—	—		—		50		—		50
Shareholders' equity, June 30, 2021	260,067	$	2,600	$	3,280,779	$	(95)	$	3,675,184	$	6,958,468

See accompanying Notes to Condensed Consolidated Financial Statements.

7

PULTEGROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

($000’s omitted)

(Unaudited)

	Six Months Ended
	June 30,
	2022		2021
Cash flows from operating activities:
Net income	$	1,107,158	$	807,506
Adjustments to reconcile net income to net cash from operating activities:
Deferred income tax expense	20,823		4,781
Land-related charges	8,013		3,254
Loss on debt retirement	—		61,469
Depreciation and amortization	33,393		35,407
Share-based compensation expense	29,640		21,603
Other, net	(58)		(2,922)
Increase (decrease) in cash due to:
Inventories	(1,683,129)		(632,647)
Residential mortgage loans available-for-sale	393,350		(16,384)
Other assets	(87,569)		(85,049)
Accounts payable, accrued and other liabilities	280,722		235,050
Net cash provided by operating activities	102,343		432,068
Cash flows from investing activities:
Capital expenditures	(62,557)		(31,547)
Investments in unconsolidated entities	(50,480)		(15,920)
Distributions of capital from unconsolidated entities	3,010		10,500
Business acquisition	(10,400)		(10,400)
Other investing activities, net	(2,713)		(17)
Net cash used in investing activities	(123,140)		(47,384)
Cash flows from financing activities:
Repayments of notes payable	(4,152)		(797,395)
Borrowings under revolving credit facility	110,000		—
Repayments under revolving credit facility	(110,000)		—
Financial Services repayments, net	(183,307)		(59,193)
Debt issuance costs	(11,167)		—
Stock option exercises	—		11
Share repurchases	(794,227)		(353,703)
Cash paid for shares withheld for taxes	(13,614)		(10,607)
Dividends paid	(74,197)		(74,910)
Net cash used in financing activities	(1,080,664)		(1,295,797)
Net decrease in cash, cash equivalents, and restricted cash	(1,101,461)		(911,113)
Cash, cash equivalents, and restricted cash at beginning of period	1,833,565		2,632,235
Cash, cash equivalents, and restricted cash at end of period	$	732,104	$	1,721,122
Supplemental Cash Flow Information:
Interest paid (capitalized), net	$	230	$	11,606
Income taxes paid (refunded), net	$	290,571	$	154,658

See accompanying Notes to Condensed Consolidated Financial Statements.

8

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Basis of presentation

PulteGroup, Inc. is one of the largest homebuilders in the United States ("U.S."), and our common shares trade on the New York Stock Exchange under the ticker symbol “PHM”. Unless the context otherwise requires, the terms "PulteGroup", the "Company", "we", "us", and "our" used herein refer to PulteGroup, Inc. and its subsidiaries. While our subsidiaries engage primarily in the homebuilding business, we also engage in mortgage banking operations, conducted through Pulte Mortgage LLC (“Pulte Mortgage”), and title and insurance brokerage operations.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal, recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with our consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Subsequent events

We evaluated subsequent events up until the time the financial statements were filed with the Securities and Exchange Commission (the "SEC").

Other expense, net

Other expense, net consists of the following ($000’s omitted): 

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Write-offs of deposits and pre-acquisition costs	$	(4,503)	$	(1,866)	$	(8,013)	$	(3,235)
Amortization of intangible assets	(2,766)		(4,968)		(5,587)		(9,961)
Interest income	290		473		678		1,105
Interest expense	(65)		(138)		(150)		(272)
Equity in earnings of unconsolidated entities	723		4,190		1,944		5,017
Miscellaneous, net	2,823		1,685		5,492		4,087
Total other expense, net	$	(3,498)	$	(624)	$	(5,636)	$	(3,259)

Revenue recognition

Home sale revenues - Home sale revenues and related profit are generally recognized when title to and possession of the home are transferred to the buyer, and our performance obligation to deliver the agreed-upon home is generally satisfied at the home closing date. Home sale contract assets consist of cash from home closings held in escrow for our benefit, typically for less than five days, which are considered deposits in-transit and classified as cash. Contract liabilities include customer deposits related to sold but undelivered homes, which totaled $1.0 billion and $844.8 million at June 30, 2022 and December 31, 2021, respectively. Substantially all of our home sales are scheduled to close and be recorded to revenue within one year from the date of receiving a customer deposit. See Note 8 for information on warranties and related obligations.

9

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Land sale and other revenues - We periodically elect to sell parcels of land to third parties in the event such assets no longer fit into our strategic operating plans or are zoned for commercial or other development. Land sales are generally outright sales of specified land parcels with cash consideration due on the closing date, which is generally when performance obligations are satisfied. Revenues related to our construction services operations are generally recognized as materials are delivered and installation services are provided.

Financial services revenues - Loan origination fees, commitment fees, and certain direct loan origination costs are recognized as incurred. Expected gains and losses from the sale of residential mortgage loans and their related servicing rights are included in the measurement of written loan commitments that are accounted for at fair value through Financial Services revenues at the time of commitment. Subsequent changes in the fair value of these loans are reflected in Financial Services revenues as they occur. Interest income is accrued from the date a mortgage loan is originated until the loan is sold. Mortgage servicing fees represent fees earned for servicing loans. Servicing fees are based on a contractual percentage of the outstanding principal balance and are credited to income when related mortgage payments are received.

Revenues associated with our title operations are recognized as closing services are rendered and title insurance policies are issued, both of which generally occur as each home is closed. Insurance brokerage commissions relate to commissions on homeowner and other insurance policies placed with third-party carriers through various agency channels. Our performance obligations for policy renewal commissions are considered satisfied upon issuance of the initial policy, and related contract assets for estimated future renewal commissions are included in other assets and totaled $49.5 million and $44.3 million at June 30, 2022 and December 31, 2021, respectively.

Earnings per share

Basic earnings per share is computed by dividing income available to common shareholders (the “Numerator”) by the weighted-average number of common shares outstanding, adjusted for unvested shares (the “Denominator”) for the period. Computing diluted earnings per share is similar to computing basic earnings per share, except that the Denominator is increased to include the dilutive effects of unvested restricted share units and other potentially dilutive instruments.

In accordance with Accounting Standards Codification ("ASC") 260, "Earnings Per Share", the two-class method determines earnings per share for each class of common stock and participating securities according to an earnings allocation formula that adjusts the Numerator for dividends or dividend equivalents and participation rights in undistributed earnings. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and, therefore, are included in computing earnings per share pursuant to the two-class method. Certain of our outstanding restricted share units and deferred shares are considered participating securities. The following table presents the earnings per common share (000's omitted, except per share data):

10

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Numerator:
Net income	$	652,435	$	503,399	$	1,107,158	$	807,506
Less: earnings distributed to participating securities	(217)		(294)		(434)		(592)
Less: undistributed earnings allocated to participating securities	(3,672)		(3,731)		(6,721)		(5,908)
Numerator for basic earnings per share	$	648,546	$	499,374	$	1,100,003	$	801,006
Add back: undistributed earnings allocated to participating securities	3,672		3,731		6,721		5,908
Less: undistributed earnings reallocated to participating securities	(3,644)		(3,722)		(6,677)		(5,895)
Numerator for diluted earnings per share	$	648,574	$	499,383	$	1,100,047	$	801,019
Denominator:
Basic shares outstanding	236,328		262,099		241,036		263,744
Effect of dilutive securities	1,318		648		1,193		627
Diluted shares outstanding	237,646		262,747		242,229		264,371
Earnings per share:
Basic	$	2.74	$	1.91	$	4.56	$	3.04
Diluted	$	2.73	$	1.90	$	4.54	$	3.03

Residential mortgage loans available-for-sale

Substantially all of the loans originated by us are sold in the secondary mortgage market within a short period of time after origination, generally within 30 days. At June 30, 2022 and December 31, 2021, residential mortgage loans available-for-sale had an aggregate fair value of $553.8 million and $947.1 million, respectively, and an aggregate outstanding principal balance of $553.9 million and $924.5 million, respectively. Net gains from the sale of mortgages were $45.1 million and $56.7 million for the three months ended June 30, 2022 and 2021, respectively, and $97.5 million and $134.2 million for the six months ended June 30, 2022 and 2021, respectively, and have been included in Financial Services revenues.

Derivative instruments and hedging activities

We are party to interest rate lock commitments ("IRLCs") with customers resulting from our mortgage origination operations. At June 30, 2022 and December 31, 2021, we had aggregate IRLCs of $1.5 billion and $337.9 million, respectively, which were originated at interest rates prevailing at the date of commitment. Since we can terminate a loan commitment if the borrower does not comply with the terms of the contract, and some loan commitments may expire without being drawn upon, these commitments do not necessarily represent future cash requirements. We evaluate the creditworthiness of these transactions through our normal credit policies.

We hedge our exposure to interest rate market risk relating to residential mortgage loans available-for-sale and IRLCs using forward contracts on mortgage-backed securities, which are commitments to either purchase or sell a specified financial instrument at a specified future date for a specified price, and whole loan investor commitments, which are obligations of an investor to buy loans at a specified price within a specified time period. Forward contracts on mortgage-backed securities are the predominant derivative financial instruments we use to minimize market risk during the period from the time we extend an interest rate lock to a loan applicant until the time the loan is sold to an investor. At June 30, 2022 and December 31, 2021, we had unexpired forward contracts of $1.7 billion and $903.0 million, respectively, and whole loan investor commitments of $316.2 million and $310.0 million, respectively. Changes in the fair value of IRLCs and other derivative financial instruments are recognized in Financial Services revenues, and the fair values are reflected in other assets or other liabilities, as applicable.

11

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

There are no credit-risk-related contingent features within our derivative agreements, and counterparty risk is considered minimal. Gains and losses on IRLCs and residential mortgage loans available-for-sale are substantially offset by corresponding gains or losses on forward contracts on mortgage-backed securities and whole loan investor commitments. We are generally not exposed to variability in cash flows of derivative instruments for more than approximately 60 days. The fair values of derivative instruments and their locations in the Condensed Consolidated Balance Sheets are summarized below ($000’s omitted):

 

	June 30, 2022				December 31, 2021
	Other Assets		Accrued and Other Liabilities		Other Assets		Accrued and Other Liabilities
Interest rate lock commitments	$	23,024	$	3,185	$	8,582	$	33
Forward contracts	10,418		3,651		757		1,336
Whole loan commitments	997		548		384		4
	$	34,439	$	7,384	$	9,723	$	1,373

Credit losses

We are exposed to credit losses primarily through our vendors and insurance carriers. We assess and monitor each counterparty’s ability to pay amounts owed by considering contractual terms and conditions, the counterparty’s financial condition, macroeconomic factors, and business strategy.

At June 30, 2022 and December 31, 2021, we reported $199.9 million and $208.4 million, respectively, of assets in-scope under ASC 326, "Financial Instruments - Credit Losses". These assets consist primarily of insurance receivables, contract assets related to insurance brokerage commissions, and vendor rebate receivables. Counterparties associated with these assets are generally highly rated. Allowances on the aforementioned in-scope assets were not material as of June 30, 2022.

New accounting pronouncements

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848)”, as amended by ASU 2021-01 in January 2021, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the cessation of the London Interbank Offered Rate ("LIBOR") or by another reference rate expected to be discontinued. The guidance was effective beginning March 12, 2020 and can be applied prospectively through December 31, 2022. We are currently evaluating the effect that such new guidance will have on our consolidated financial statements and related disclosures, but do not expect that the adoption will have a material impact on our consolidated financial statements or related disclosures.

2. Inventory

Major components of inventory were as follows ($000’s omitted): 

	June 30, 2022		December 31, 2021
Homes under construction	$	5,916,047	$	4,225,309
Land under development	4,028,971		4,091,015
Raw land	784,426		731,245
	$	10,729,444	$	9,047,569

We capitalize interest cost into inventory during the active development and construction of our communities. In all periods presented, we capitalized substantially all Homebuilding interest costs into inventory because the level of our active inventory exceeded our debt levels. Information related to interest capitalized into inventory is as follows ($000’s omitted):

12

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Interest in inventory, beginning of period	$	158,670	$	193,352	$	160,756	$	193,409
Interest capitalized	31,338		31,476		62,921		66,103
Interest expensed	(38,454)		(39,395)		(72,123)		(74,079)
Interest in inventory, end of period	$	151,554	$	185,433	$	151,554	$	185,433

Land option agreements

We enter into land option agreements in order to procure land for the construction of homes in the future. Pursuant to these land option agreements, we generally provide a deposit to the seller as consideration for the right to purchase land at different times in the future, usually at predetermined prices. Such contracts enable us to defer acquiring portions of properties owned by third parties or unconsolidated entities until we have determined whether and when to exercise our option, which reduces our financial risks associated with long-term land holdings. Option deposits and pre-acquisition costs (such as environmental testing, surveys, engineering, and entitlement costs) are capitalized if the costs are directly identifiable with the land under option, the costs would be capitalized if we owned the land, and acquisition of the property is probable. Such costs are reflected in other assets and are reclassified to inventory upon taking title to the land. We write off deposits and pre-acquisition costs when it becomes probable that we will not go forward with the project or recover the capitalized costs. Such decisions take into consideration changes in local market conditions, the timing of required land purchases, the availability and best use of necessary incremental capital, and other factors. We record any such write-offs of deposits and pre-acquisition costs within other expense, net. We recorded $4.5 million and $1.9 million of such charges during the three months ended June 30, 2022 and 2021, respectively, and $8.0 million and $3.2 million during the six months ended June 30, 2022 and 2021, respectively.

If an entity holding the land under option is a variable interest entity ("VIE"), our deposit represents a variable interest in that entity. No VIEs required consolidation at either June 30, 2022 or December 31, 2021 because we determined that we were not any VIE's primary beneficiary. Our maximum exposure to loss related to these VIEs is generally limited to our deposits and pre-acquisition costs under the land option agreements. The following provides a summary of our interests in land option agreements as of June 30, 2022 and December 31, 2021 ($000’s omitted):

 

	June 30, 2022				December 31, 2021
	Deposits and Pre-acquisition Costs		Remaining Purchase Price		Deposits and Pre-acquisition Costs		Remaining Purchase Price
Land options with VIEs	$	209,767	$	2,824,818	$	179,604	$	2,329,187
Other land options	259,461		3,674,049		225,318		3,128,691
	$	469,228	$	6,498,867	$	404,922	$	5,457,878

Land-related charges

Our evaluations for land impairments, net realizable value adjustments, and write-offs of deposits and pre-acquisition costs are based on our best estimates of the future cash flows of our communities. Due to uncertainties in the estimation process, the significant volatility in demand for new housing, the long life cycles of certain of our communities, and potential changes in our strategy related to certain communities, actual results could differ significantly from such estimates.

13

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

3. Segment information

Our Homebuilding operations are engaged in the acquisition and development of land primarily for residential purposes within the U.S. and the construction of housing on such land. For reporting purposes, our Homebuilding operations are aggregated into six reportable segments:

Northeast:	Connecticut, Maryland, Massachusetts, New Jersey, Pennsylvania, Virginia
Southeast:	Georgia, North Carolina, South Carolina, Tennessee
Florida:	Florida
Midwest:	Illinois, Indiana, Kentucky, Michigan, Minnesota, Ohio
Texas:	Texas
West:	Arizona, California, Colorado, Nevada, New Mexico, Washington

We also have a reportable segment for our Financial Services operations, which consist principally of mortgage banking, title, and insurance brokerage operations that operate generally in the same markets as the Homebuilding segments.

	Operating Data by Segment ($000’s omitted)
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Revenues:
Northeast	$	248,454	$	285,874	$	412,785	$	462,342
Southeast	587,743		517,256		1,115,941		954,034
Florida	992,737		791,564		1,760,707		1,416,805
Midwest	553,767		465,590		1,006,441		832,403
Texas	573,763		470,294		1,020,036		844,416
West	886,947		737,877		1,630,973		1,382,124
	3,843,411		3,268,455		6,946,883		5,892,124
Financial Services	82,775		91,029		166,918		197,150
Consolidated revenues	$	3,926,186	$	3,359,484	$	7,113,801	$	6,089,274
Income (loss) before income taxes:
Northeast	$	59,971	$	53,300	$	87,370	$	79,194
Southeast	152,257		93,444		278,389		164,766
Florida	247,435		147,833		408,129		249,040
Midwest	86,550		70,804		151,251		123,668
Texas	134,133		84,388		217,849		150,037
West	186,561		131,070		319,872		229,902
Other homebuilding (a)	(42,409)		7,180		(79,062)		(80,884)
	824,498		588,019		1,383,798		915,723
Financial Services	40,075		51,454		80,668		117,803
Consolidated income before income taxes	$	864,573	$	639,473	$	1,464,466	$	1,033,526

(a)Other homebuilding includes the amortization of intangible assets and capitalized interest and other items not allocated to the other segments. Other homebuilding also includes insurance reserve reversals of $49.1 million and $55.2 million for the three and six months ended June 30, 2021, respectively (see Note 8), and a loss on debt retirement of $61.5 million in the six months ended June 30, 2021 (see Note 4).

14

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	Operating Data by Segment ($000’s omitted)
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Land-related charges (a):
Northeast	$	100	$	18	$	202	$	134
Southeast	1,933		883		3,835		1,339
Florida	641		302		1,612		433
Midwest	944		438		1,102		492
Texas	294		263		534		791
West	591		(19)		728		65
Other homebuilding	—		—		—		—
	$	4,503	$	1,885	$	8,013	$	3,254

(a)    Land-related charges include land impairments, net realizable value adjustments on land held for sale, and write-offs of deposits and pre-acquisition costs for land option contracts we elected not to pursue.

	Operating Data by Segment
	($000's omitted)
	June 30, 2022
	Homes Under Construction		Land Under Development		Raw Land		Total Inventory		Total Assets
Northeast	$	385,827	$	226,922	$	49,687	$	662,436	$	762,972
Southeast	928,441		469,621		85,948		1,484,010		1,651,072
Florida	1,352,877		902,309		228,910		2,484,096		3,002,618
Midwest	678,149		448,266		29,607		1,156,022		1,297,723
Texas	802,580		567,713		139,742		1,510,035		1,671,542
West	1,715,411		1,134,767		234,789		3,084,967		3,404,950
Other homebuilding (a)	52,762		279,373		15,743		347,878		1,173,333
	5,916,047		4,028,971		784,426		10,729,444		12,964,210
Financial Services