News

04.23.14

PulteGroup, Inc. Reports First Quarter 2014 Financial Results

BLOOMFIELD HILLS, Mich., April 24, 2014 /PRNewswire/ --

  • Q1 Pretax Income Increased 58% to $130 Million; Up from $82 Million in 2013
  • Q1 2014 Pretax Includes $19 million of Income Relating to the Reversal of Mortgage Repurchase Reserves and $9 Million of Expense Relating to Debt Redemption Charges
  • Net Income of $75 Million, or $0.19 Per Share, Includes Income Tax Expense of $55 Million; Prior Year Net Income of $82 Million, or $0.21 Per Share, Includes Income Tax Expense of $1 Million
  • Average Selling Price Up 10% to $317,000
  • Gross Margin of 23.8% Increased 580 Basis Points Over Prior Year and 60 Basis Points Over Q4 2013
  • Value of Net New Orders Increased 2% to $1.6 Billion, as Increased Absorptions Per Community Generate New Orders of 4,863 Homes
  • Unit Backlog of 7,199 Homes Valued at $2.4 Billion
  • During the Quarter, Company Redeemed $246 Million of Senior Notes and Repurchased $45 Million of Stock

PulteGroup, Inc. (NYSE: PHM) announced today financial results for its first quarter ended March 31, 2014.  For the quarter, the Company reported pretax income of $130 million, an increase of 58% over prior year pretax income of $82 million.  Net income for the period was $75 million, or $0.19 per share, compared with prior year net income of $82 million, or $0.21 per share.

Net income in 2014 included income tax expense of $55 million, or $0.14 per share, compared with prior year income tax expense of $1 million, or less than $0.01 per share.  The first quarter effective tax rate of 42% was higher than expected primarily as the result of deferred tax expense associated with changes in certain state income tax rates.

"PulteGroup has gotten off to a strong start in 2014, with first quarter results showing gains resulting from our efforts to drive better pricing, operating margins and pretax earnings in support of higher returns on invested capital," said Richard J. Dugas, Jr. , PulteGroup Chairman, President and CEO.  "Our first quarter gross margin of 23.8% is up 580 basis points over last year and 60 basis points over the prior quarter, marking our ninth consecutive quarter of gross margin expansion."

"We are pleased with the start of the spring selling season, as absorption paces per community improved from year ago levels and demand accelerated through the quarter.  We continue to believe housing is in the early stages of a multiyear recovery benefitting from low interest rates, low inventory and continued relative affordability of homes, and with consumers looking for well-located houses and displaying a clear willingness to invest in those features they value most."

Home sale revenues for the first quarter were $1.1 billion, which was comparable with last year.  Revenues for the quarter reflect a 10%, or $30,000, increase in average selling price to $317,000, offset by a 10% decrease in closings to 3,436 homes.  The higher average selling price was the result of price increases in each of our entry level, move-up and active adult demographics.

The Company's home sale gross margin for the quarter was 23.8%, which is an increase of 580 basis points over the prior year and 60 basis points over the fourth quarter of 2013.  Homebuilding SG&A expense for the period was $144 million, or 13.3% of home sale revenues.  SG&A expense for the first quarter of 2013 was $129 million, or 11.8% of home sale revenues.

For the quarter, the Company reported 4,863 net new orders, a decrease of 6% from prior year.  The dollar value of new orders was $1.6 billion, which is up 2% from the prior year.  For the quarter, the Company operated out of 584 communities which is a decrease of 10% from the first quarter last year.

PulteGroup's backlog at quarter end totaled 7,199 homes valued at $2.4 billion, compared with prior year backlog of 7,825 homes valued at $2.4 billion.  The average selling price in the Company's current backlog increased 9%, or $28,000, over the prior year to $336,000.

The Company's financial services operations reported pretax income of $22 million for the quarter, compared with pretax income of $14 million in the prior year.  Mortgage capture rate for the quarter was 78% compared with 82% in the comparable prior year period.  Pretax income for the period reflects the reversal of $19 million of mortgage repurchase reserves, offset by a decrease in operating profitability due to the more competitive operating conditions that currently exist within the mortgage industry.

During the quarter, PulteGroup repurchased 2.2 million shares of common stock in the first quarter for $45 million, or an average price of $19.95 per share.  The Company also completed its previously announced redemption of $246 million of senior notes, resulting in a first quarter charge of $9 million.

A conference call discussing PulteGroup's first quarter results is scheduled for Thursday, April 24, 2014, 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; 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, 2013, 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


March 31,


2014


2013

Revenues:






Homebuilding






  Home sale revenues

$

1,088,015



$

1,099,752


  Land sale revenues

5,984



26,131



1,093,999



1,125,883


Financial Services

24,895



36,873


Total revenues

1,118,894



1,162,756








Homebuilding Cost of Revenues:






Home sale cost of revenues

828,603



901,470


Land sale cost of revenues

5,011



22,018



833,614



923,488


Financial Services expenses

3,322



22,588


Selling, general and administrative expenses

144,887



129,626


Other expense, net

13,831



4,772


Interest income

(1,111)



(1,173)


Interest expense

213



207


Equity in (earnings) loss of unconsolidated entities

(5,891)



898


Income before income taxes

130,029



82,350


Income tax expense

55,210



588


Net income

$

74,819



$

81,762








Per share:






Basic earnings

$

0.19



$

0.21


Diluted earnings

$

0.19



$

0.21


Cash dividends declared

$

0.05



$








Number of shares used in calculation:






Basic

383,991



384,228


Effect of dilutive securities

3,815



6,093


Diluted

387,806



390,321


 

 

PulteGroup, Inc.

Condensed Consolidated Balance Sheets

($000's omitted)

(Unaudited)








March 31,
 2014


December 31,
 2013







ASSETS












Cash and equivalents

$

1,268,162



$

1,580,329


Restricted cash

75,596



72,715


House and land inventory

4,034,294



3,978,561


Land held for sale

72,531



61,735


Land, not owned, under option agreements

22,200



24,024


Residential mortgage loans available-for-sale

209,921



287,933


Investments in unconsolidated entities

40,120



45,323


Other assets

461,046



460,621


Intangible assets

132,873



136,148


Deferred tax assets, net

2,034,668



2,086,754



$

8,351,411



$

8,734,143








LIABILITIES AND SHAREHOLDERS' EQUITY












Liabilities:






Accounts payable

$

205,234



$

202,736


Customer deposits

168,573



134,858


Accrued and other liabilities

1,257,854



1,377,750


Income tax liabilities

205,810



206,015


Financial Services debt

35,836



105,664


Senior notes

1,814,041



2,058,168



3,687,348



4,085,191








Shareholders' equity

4,664,063



4,648,952









$

8,351,411



$

8,734,143


 

PulteGroup, Inc.

Consolidated Statements of Cash Flows

($000's omitted)

(Unaudited)


Three Months Ended


March 31,


2014


2013

Cash flows from operating activities:




Net income

$           74,819


$          81,762

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

      operating activities:




Deferred income tax expense

52,086


Depreciation and amortization

5,670


7,339

Stock-based compensation expense

8,522


7,141

Equity in (earnings) loss of unconsolidated entities

(5,891)


898

Distributions of earnings from unconsolidated entities

4,753


265

Loss on debt retirements

8,584


Other non-cash, net

3,256


3,035

Increase (decrease) in cash due to:




Restricted cash

(890)


860

Inventories

(68,812)


99,760

Residential mortgage loans available-for-sale

76,357


80,727

Other assets

17,090


(370)

Accounts payable, accrued and other liabilities

(83,943)


(8,795)

Income tax liabilities

(205)


(2,002)

Net cash provided by (used in) operating activities

91,396


270,620

Cash flows from investing activities:




Distributions from unconsolidated entities

6,385


200

Investments in unconsolidated entities

(9)


(593)

Net change in loans held for investment

(6,390)


10

Change in restricted cash related to letters of credit

(1,991)


4,513

Proceeds from the sale of property and equipment

23


59

Capital expenditures

(17,865)


(5,378)

Net cash provided by (used in) investing activities

(19,847)


(1,189)

Cash flows from financing activities:




Financial Services borrowings (repayments)

(69,828)


(82,164)

Other borrowings (repayments)

(250,013)


(213)

Stock option exercises

5,295


7,537

Stock repurchases

(50,105)


(6,427)

Dividends paid

(19,065)


Net cash provided by (used in) financing activities

(383,716)


(81,267)

Net increase (decrease) in cash and equivalents

(312,167)


188,164

Cash and equivalents at beginning of period

1,580,329


1,404,760

Cash and equivalents at end of period

$       1,268,162


$       1,592,924





Supplemental Cash Flow Information:




Interest paid (capitalized), net

$          (19,556)


$          (23,095)

Income taxes paid (refunded), net

$            (8,253)


$            (3,026)

 

 

PulteGroup, Inc.

Segment Data

($000's omitted)

(Unaudited)



Three Months Ended


March 31,


2014


2013

HOMEBUILDING:




Home sale revenues

$ 1,088,015


$ 1,099,752

Land sale revenues

5,984


26,131

Total Homebuilding revenues

1,093,999


1,125,883





Home sale cost of revenues

828,603


901,470

Land sale cost of revenues

5,011


22,018

Selling, general and administrative expenses

144,887


129,626

Equity in (earnings) loss of unconsolidated entities

(5,870)


926

Other expense, net

13,831


4,772

Interest income, net

(898)


(966)

Income before income taxes

$ 108,435


$ 68,037





FINANCIAL SERVICES:




Income before income taxes

$ 21,594


$ 14,313





CONSOLIDATED:




Income before income taxes

$ 130,029


$ 82,350

 

 

PulteGroup, Inc.

Segment Data, continued

($000's omitted)

(Unaudited)



Three Months Ended


March 31,


2014


2013





Home sale revenues

$    1,088,015


$     1,099,752





Closings - units




Northeast

343


302

Southeast

647


651

Florida

567


583

Texas

781


897

North

630


666

Southwest

468


734


3,436


3,833

Average selling price

$              317


$               287





Net new orders - units




Northeast

444


571

Southeast

824


959

Florida

850


804

Texas

1,172


1,080

North

892


969

Southwest

681


817


4,863


5,200

Net new orders - dollars (a)

$     1,608,406


$     1,581,965





Unit backlog




Northeast

722


891

Southeast

1,230


1,219

Florida

1,196


1,286

Texas

1,641


1,638

North

1,475


1,570

Southwest

935


1,221


7,199


7,825

Dollars in backlog

$     2,422,187


$     2,413,753







(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


March 31,


2014


2013

MORTGAGE ORIGINATIONS:




Origination volume

2,114


2,722

Origination principal

$     495,529


$     621,997

Capture rate 

78.2%


82.3%

 

 

Supplemental Data

($000's omitted)

(Unaudited)



Three Months Ended


March 31,


2014


2013





Interest in inventory, beginning of period

$     230,922


$     331,880

Interest capitalized

35,313


42,656

Interest expensed

(40,616)


(53,677)

Interest in inventory, end of period

$     225,619


$     320,859

Interest incurred

$       35,313


$       42,656

 

SOURCE PulteGroup, Inc.

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

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