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Press release from PR Newswire

PulteGroup Reports Second Quarter 2013 Financial Results

Thursday, July 25, 2013

PulteGroup Reports Second Quarter 2013 Financial Results

06:30 EDT Thursday, July 25, 2013

BLOOMFIELD HILLS, Mich., July 25, 2013 /PRNewswire/ -- 

  • Q2 Earnings of $0.09 Per Share After Charges of $0.17 Per Share Resulting from a Contractual Dispute, Debt Repurchases, and its Previously Announced Corporate Relocation
  • Home Sale Revenues Increased 19% to $1.2 Billion, as Average Selling Prices Gained 9% to $294,000
  • Adjusted Gross Margin of 23.9% Increased 360 Basis Points Over Prior Year and 100 Basis Points Over Q1 2013
  • Backlog Value Increased 25% to $2.7 Billion; Unit Backlog Up 13% to 8,558 Homes
  • Quarter-End Cash of $1.3 Billion After Retiring $434 Million of Notes During the Quarter; Net Debt-to-Capitalization Ratio Lowered to 26%
  • Company Declares $0.05 Per Share Cash Dividend
  • Share Repurchase Authorization Increased by $250 Million to $352 Million

PulteGroup, Inc. (NYSE: PHM) announced today financial results for its second quarter ended June 30, 2013.  For the quarter, the Company reported net income of $36 million, or $0.09 per share, inclusive of the following charges: $30 million, or $0.08 per share, resulting from a contractual dispute at a previously completed luxury community; $23 million, or $0.06 per share, associated with the repurchase of $434 million of senior notes in the period; and $13 million, or $0.03 per share, associated with the Company's previously announced corporate relocation.  In the prior year's second quarter, PulteGroup reported net income of $42 million, or $0.11 per share.       

"The U.S. housing market continues to gain momentum and remains solidly on track towards a sustained, long-term recovery," said Richard J. Dugas, Jr., Chairman, President and Chief Executive Officer of PulteGroup.  "Even the recent rise in interest rates has had little effect on overall activity, as consumers continue to perceive good values, amidst limited supply and generally rising sales prices, combined with the reality of high lease rates in the rental market.  Given these market dynamics, consumers are continuing to exhibit a sense of urgency in their desire to purchase a new home."

"Our results show continued success in driving earnings growth through more efficient homebuilding operations, which is critical to our focus on delivering higher returns on invested capital and returns to our shareholders.  The strong cash flows being generated by our operations are providing us with tremendous financial flexibility to fund our operations, while continuing to strengthen our overall financial profile."  

Second Quarter Results

Home sale revenues for the second quarter increased 19% to $1.2 billion, compared with $1.0 billion last year.  Higher revenues for the period were driven by a 9% increase in average selling price to $294,000, combined with a 9% gain in closings to 4,152 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 houses. 

For the quarter, the Company's homebuilding operations generated pretax income of $22 million, inclusive of the $67 million of contractual dispute, debt repurchase and relocation charges detailed above, compared with pretax income of $24 million for the same period last year.  The Company's adjusted home sale gross margin for the quarter was 23.9%, which is an increase of 360 basis points over the prior year and 100 basis points over the first quarter of 2013.  Homebuilding SG&A expense for the quarter of $151 million, or 12.3% of home sale revenues, includes $13 million, or 110 basis points, of corporate office relocation costs.  SG&A for the prior year period was $124 million, or 12.1% of home sale revenues.  

Net new orders for the second quarter were 4,885 homes, which is a decrease of 12% from the prior year.  On a dollar basis, signup value was $1.5 billion, which is down 5% from the prior year.  On a year-over-year basis, the Company's reported community count decreased 16%.  On a unit basis, PulteGroup's quarter-end backlog was up 13% to 8,558 homes with a value of $2.7 billion, compared with a prior year backlog of 7,560 homes with a value of $2.2 billion.

The Company's financial services operations reported second quarter pretax income of $16 million, which is comparable with prior year results.  Financial services benefitted from increased loan originations resulting from the Company's higher homebuilding volumes, partially offset by a slight decrease in mortgage capture rate for the quarter of 80% compared with 82% in the prior year.

Company Announces Quarterly Dividend and Expansion of Share Repurchase Authorization

In a separate release, PulteGroup announced that its Board of Directors has declared a quarterly cash dividend of $0.05 per share on the Company's common shares payable August 12, 2013, to shareholders of record at the close of business on August 5, 2013. 

The Company also announced that its Board of Directors approved a share repurchase authorization for an additional $250 million, raising the Company's total repurchase authorization to $352 million.

"The decisions to pay a dividend and increase our repurchase authorization illustrate our confidence in the long-term prospects of PulteGroup, and are consistent with our focus on increasing shareholder value and returning capital to our shareholders," said Bob O'Shaughnessy, Executive Vice President and Chief Financial Officer of PulteGroup.

A conference call discussing PulteGroup's second quarter 2013 results is scheduled for Thursday, July 25, 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 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; our ability to successfully implement our share repurchase plan; 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.

 

PulteGroup, Inc.

Consolidated Results of Operations

($000's omitted, except per share data)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

Revenues:

  Homebuilding

    Home sale revenues

$

1,219,675

$

1,024,405

$

2,319,427

$

1,838,191

    Land sale revenues

20,385

8,749

46,516

47,147

1,240,060

1,033,154

2,365,943

1,885,338

  Financial Services

39,362

36,251

76,235

65,103

    Total revenues

1,279,422

1,069,405

2,442,178

1,950,441

Homebuilding Cost of Revenues:

Home sale cost of revenues

990,818

869,379

1,892,288

1,581,545

Land sale cost of revenues

20,710

7,611

42,728

41,008

1,011,528

876,990

1,935,016

1,622,553

Financial Services expenses

23,035

20,327

45,623

42,336

Selling, general and administrative expenses

150,531

124,186

280,157

247,500

Other expense (income), net

57,339

10,498

62,111

17,117

Interest income

(1,112)

(1,164)

(2,285)

(2,363)

Interest expense

166

198

373

415

Equity in (earnings) loss of unconsolidated entities

(395)

(1,556)

503

(3,552)

Income before income taxes

38,330

39,926

120,680

26,435

Income tax expense (benefit)

1,913

(2,510)

2,501

(4,335)

Net income

$

36,417

$

42,436

$

118,179

$

30,770

Net income per share:

  Basic

$

0.09

$

0.11

$

0.31

$

0.08

  Diluted

$

0.09

$

0.11

$

0.30

$

0.08

Number of shares used in calculation:

  Basic

385,389

380,655

384,813

380,579

  Effect of dilutive securities

5,791

1,548

5,943

1,446

  Diluted

391,180

382,203

390,756

382,025

 

PulteGroup, Inc.

Condensed Consolidated Balance Sheets

($000's omitted)

(Unaudited)

June 30, 2013

December 31, 2012

ASSETS

Cash and equivalents

$

1,212,668

$

1,404,760

Restricted cash

66,443

71,950

House and land inventory

4,183,069

4,214,046

Land held for sale

89,765

91,104

Land, not owned, under option agreements

33,751

31,066

Residential mortgage loans available-for-sale

237,595

318,931

Investments in unconsolidated entities

44,378

45,629

Other assets

441,904

407,675

Intangible assets

142,698

149,248

$

6,452,271

$

6,734,409

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:

  Accounts payable

$

207,750

$

178,274

  Customer deposits

167,076

101,183

  Accrued and other liabilities

1,406,656

1,418,063

  Income tax liabilities

200,646

198,865

  Financial Services debt

59,866

138,795

  Senior notes

2,082,062

2,509,613

4,124,056

4,544,793

Shareholders' equity

2,328,215

2,189,616

$

6,452,271

$

6,734,409

 

PulteGroup, Inc.

Consolidated Statements of Cash Flows

($000's omitted)

(Unaudited)

Six Months Ended

June 30,

2013

2012

Cash flows from operating activities:

  Net income

$

118,179

$

30,770

  Adjustments to reconcile net income to net cash flows provided by (used in)

      operating activities:

      Write-down of land and deposits and pre-acquisition costs

4,709

9,218

      Depreciation and amortization

15,084

14,828

      Stock-based compensation expense

15,765

8,886

      Equity in (earnings) loss of unconsolidated entities

503

(3,552)

      Distributions of earnings from unconsolidated entities

1,298

5,782

      Loss on debt retirements

23,072

?

      Other non-cash, net

4,277

850

  Increase (decrease) in cash due to:

      Restricted cash

1,285

(1,215)

      Inventories

32,920

72,222

      Residential mortgage loans available-for-sale

81,336

23,768

      Other assets

(32,607)

12,020

      Accounts payable, accrued and other liabilities

67,463

28,799

      Income tax liabilities

1,781

9,164

Net cash provided by (used in) operating activities

335,065

211,540

Cash flows from investing activities:

      Distributions from unconsolidated entities

200

2,696

      Investments in unconsolidated entities

(807)

(858)

      Net change in loans held for investment

18

627

      Change in restricted cash related to letters of credit

4,222

16,280

      Proceeds from the sale of property and equipment

9

4,627

      Capital expenditures

(11,017)

(6,997)

Net cash provided by (used in) investing activities

(7,375)

16,375

Cash flows from financing activities:

      Financial Services borrowings (repayments)

(78,929)

?

      Other borrowings (repayments)

(452,950)

400

      Stock option exercises

18,544

?

      Stock repurchases

(6,447)

(908)

Net cash provided by (used in) financing activities

(519,782)

(508)

Net increase (decrease) in cash and equivalents

(192,092)

227,407

Cash and equivalents at beginning of period

1,404,760

1,083,071

Cash and equivalents at end of period

$

1,212,668

$

1,310,478

Supplemental Cash Flow Information:

      Interest paid (capitalized), net

$

2,309

$

(5,840)

      Income taxes paid (refunded), net

$

(2,471)

$

(11,756)

 

PulteGroup, Inc.

Segment Data

($000's omitted)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

HOMEBUILDING:

  Home sale revenues

$

1,219,675

$

1,024,405

$

2,319,427

$

1,838,191

  Land sale revenues

20,385

8,749

46,516

47,147

  Total Homebuilding revenues

1,240,060

1,033,154

2,365,943

1,885,338

  Home sale cost of revenues

990,818

869,379

1,892,288

1,581,545

  Land sale cost of revenues

20,710

7,611

42,728

41,008

  Selling, general, and administrative expenses

150,531

124,186

280,157

247,500

  Equity in (earnings) loss of  unconsolidated entities

(363)

(1,493)

563

(3,471)

  Other expense (income), net

57,339

10,498

62,111

17,117

  Interest income, net

(946)

(966)

(1,912)

(1,948)

  Income before income taxes

$

21,971

$

23,939

$

90,008

$

3,587

FINANCIAL SERVICES:

  Income before income taxes

$

16,359

$

15,987

$

30,672

$

22,848

CONSOLIDATED:

  Income before income taxes

$

38,330

$

39,926

$

120,680

$

26,435

 

PulteGroup, Inc.

Segment data, continued

($000's omitted)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

Home sale revenues

$

1,219,675

$

1,024,405

$

2,319,427

$

1,838,191

Closings - units

  Northeast

378

416

680

768

  Southeast

735

673

1,386

1,208

  Florida

649

569

1,232

1,045

  Texas

960

862

1,857

1,561

  North

741

663

1,407

1,194

  Southwest

689

633

1,423

1,157

4,152

3,816

7,985

6,933

Average selling price

$

294

$

268

$

290

$

265

Net new orders - units

  Northeast

543

614

1,114

1,167

  Southeast

887

823

1,846

1,597

  Florida

701

700

1,505

1,468

  Texas

988

1,125

2,068

2,234

  North

976

1,064

1,945

1,933

  Southwest

790

1,252

1,607

2,170

4,885

5,578

10,085

10,569

Net new orders - dollars (a)

$

1,519,656

$

1,605,073

$

3,101,621

$

2,945,050

Unit backlog

  Northeast

1,056

824

  Southeast

1,371

991

  Florida

1,338

1,081

  Texas

1,666

1,498

  North

1,805

1,448

  Southwest

1,322

1,718

8,558

7,560

Dollars in backlog

$

2,713,733

$

2,166,508

(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.

 

PulteGroup, Inc.

Segment Data, continued

($000's omitted)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

MORTGAGE ORIGINATIONS:

  Origination volume

2,812

2,603

5,534

4,624

  Origination principal

$

643,267

$

566,856

$

1,265,264

$

996,321

  Capture rate

79.8

%

82.2

%

81.0

%

80.5

%

 

Supplemental Data

($000's omitted)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

Interest in inventory, beginning of period

$

320,859

$

359,205

$

331,880

$

355,068

  Interest capitalized

39,909

51,316

82,565

102,639

  Interest expensed

(62,193)

(52,070)

(115,870)

(99,256)

Interest in inventory, end of period

$

298,575

$

358,451

$

298,575

$

358,451

Interest incurred

$

39,909

$

51,316

$

82,565

$

102,639

 

PulteGroup, Inc.Reconciliation of Non-GAAP Financial Measures

This report contains information about our home sale gross margins reflecting certain adjustments.  This measure is considered a non-GAAP financial measure under the SEC's rules and should be considered in addition to, rather than as a substitute for, the comparable GAAP financial measure as a measure of our operating performance.  Management and our local divisions use this measure 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 it is a relevant and useful measure to investors for evaluating our performance through gross profit generated on homes delivered during a given period and 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 any adjustments thereto before comparing our measure to that of such other companies.

The following table sets forth a reconciliation of this non-GAAP financial measure to the GAAP financial measure that management believes to be most directly comparable ($000's omitted):

Home Sale Gross Margin

Three Months Ended

June 30, 2013

March 30, 2013

December 31, 2012

September 30, 2012

June 30, 2012

Home sale revenues

$

1,219,675

$

1,099,752

$

1,481,517

$

1,232,704

$

1,024,405

Home sale cost of revenues

990,818

901,470

1,228,201

1,023,704

869,379

Home sale gross margin

228,857

198,282

253,316

209,000

155,026

Add:

  Land and community valuation adjustments (a)

?

?

2,250

385

633

  Capitalized interest amortization (a)

62,193

53,677

67,880

57,155

52,070

Adjusted home sale gross margin

$

291,050

$

251,959

$

323,446

$

266,540

$

207,729

Home sale gross margin as a

percentage of home sale revenues

18.8

%

18.0

%

17.1

%

17.0

%

15.1

%

Adjusted home sale gross margin as a

percentage of home sale revenues

23.9

%

22.9

%

21.8

%

21.6

%

20.3

%

(a) Write-offs of capitalized interest related to impairments are reflected in capitalized interest amortization.

 

SOURCE PulteGroup, Inc.

For further information: Investors: Jim Zeumer, (248) 433-4502, jim.zeumer@pultegroup.com

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