• Adjusted Net Income of $0.85 Per Share Increased 27% Over Prior Year Q4 Adjusted Net Income of $0.67 Per Share
• Home Sale Revenues Increased 12% to $2.7 Billion
• Value of Net New Orders Increased 22% to $2.0 Billion; Net New Orders Gained 14% to 4,805 Homes
• Backlog Value Increased 35% to $4.0 Billion; Unit Backlog Increased 21% to 8,996 Homes
• Company Repurchased 7.6 Million Shares of Stock During the Quarter for $251 Million
• Company Announces $500 Million Increase to Share Repurchase Plan
ATLANTA – Jan. 30, 2018 - PulteGroup, Inc. (NYSE: PHM) announced today financial results for its fourth quarter ended December 31, 2017. For the quarter, the Company’s reported net income was $77 million, or $0.26 per share. Adjusted net income for the period was $253 million, or $0.85 per share, after excluding a $66 million pre-tax benefit associated with insurance related adjustments, a $57 million pre-tax charge relating to land adjustments, and $181 million of income tax charges primarily relating to the revaluation of the Company’s deferred tax assets following newly enacted federal tax legislation.
Reported net income for the prior year fourth quarter was $273 million, or $0.83 per share. Adjusted net income for the prior year fourth quarter was $223 million, or $0.67 per share, after excluding $0.16 per share of insurance and income tax benefits.
“Reflecting the continued strength of housing demand, the value of new orders in the quarter increased 22% over the prior year, helping to grow our year-end backlog to a 12-year high of $4.0 billion,” said Ryan Marshall, President and CEO of PulteGroup. “Consistent with our strategic objectives, we leveraged a 12% increase in quarterly revenues into a 27% increase in adjusted earnings per share.”
“Ongoing gains in profitability and cash flow generation, which allowed us to reinvest in our business while repurchasing 11% of our outstanding common shares in 2017, also gave our Board the confidence to announce today a $500 million increase to our share repurchase plan,” added Marshall. “Given expectations for further expansion in the economy, along with ongoing gains in employment and buyer demand, we remain highly constructive on the industry. With our large backlog and robust land pipeline, we are well positioned to continue growing our business and building even greater value for our shareholders.”
Fourth Quarter Results
Home sale revenues for the fourth quarter increased 12% over the prior year to $2.7 billion. Higher revenues for the period were driven by a 7% increase in closings to 6,632 homes, combined with a 5%, or $19,000, increase in average sales price to $410,000.
The Company’s fourth quarter adjusted home sale gross margin, which excludes the $57 million land charge, was 23.8%. Inclusive of this charge, the Company’s reported gross margin for the fourth quarter was 21.6%. Prior year adjusted and reported gross margins were 24.9% and 24.8%, respectively.
The Company’s fourth quarter adjusted homebuilding SG&A expense, which excludes the $66 million insurance-related benefit, was $268 million, or 9.8% of home sale revenues. The comparable prior year adjusted SG&A expense of $263 million, or 10.8% of home sale revenues, excludes a $55 million benefit associated with an insurance-related adjustment recorded in that quarter. Reported SG&A expense in the current quarter was $202 million, or 7.4% of home sale revenues, compared with fourth quarter 2016 reported SG&A expense of $208 million, or 8.6% of home sale revenues.
The value of fourth quarter net new orders increased 22% over the prior year to $2.0 billion, while the number of orders increased 14% to 4,805 homes. For the fourth quarter, the Company operated out of 790 communities, which is up 9% over the fourth quarter of 2016.
Backlog value at the end of the fourth quarter was $4.0 billion, which is up 35% over the prior year and is the Company’s highest year-end backlog in over a decade. On a unit basis, backlog for the quarter was up 21% over last year to 8,996 homes. The average price of homes in backlog increased 12% over the prior year to $442,000.
The Company's financial services operations reported fourth quarter pre-tax income of $23 million compared with $25 million in the prior year. The decrease in pre-tax income was primarily the result of a more competitive operating environment which impacted pricing during the period. Mortgage capture rate for the quarter was 81%, compared with 82% in the prior year.
For the quarter, the Company’s adjusted income tax expense, which excludes the $181 million income tax charge relating primarily to the revaluation of its deferred tax assets resulting from the Tax Cuts and Jobs Act enacted in December 2017, was $147 million. The Company’s adjusted effective tax rate for the fourth quarter was 36.8%.
During the quarter, the Company repurchased 7.6 million common shares for $251 million, or an average price of $33.09 per share. For the year, the Company repurchased a total of 35.4 million common shares, or 11% of its outstanding shares, for $910 million, or an average price of $25.70 per share. The Company also used available cash to retire $123 million of notes that matured in the fourth quarter.
Share Repurchase Plan Increased by $500 Million
In a separate press release issued today, the Company announced that its Board of Directors approved an increase to its existing share repurchase plan of $500 million. As of December 31, 2017, the Company had $94 million of authorization remaining in its share repurchase plan. The Company expects that share repurchases will be made from time to time in the open market, through privately negotiated transactions or otherwise subject to market conditions, applicable legal requirements, and other relevant factors.
A conference call discussing PulteGroup's fourth quarter 2017 results is scheduled for Tuesday, January 30, 2018, at 8:30 a.m. Eastern Time. Interested investors can access the live webcast via PulteGroup's corporate website at www.pultegroupinc.com.
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 the impairment charge with respect to certain land parcels 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 environmental laws, including, but not limited to the Tax Cuts and Jobs Act 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, 2016, 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.
PulteGroup, Inc. (NYSE: PHM), based in Atlanta, Georgia, 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, DiVosta Homes 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 www.pultegroupinc.com; www.pulte.com; www.centex.com; www.delwebb.com; www.divosta.com and www.jwhomes.com.