• Adjusted Net Income of $1.11 Per Share Increased 31% Over Prior Year Q4 Adjusted Net Income of $0.85 Per Share
• Home Sale Revenues Increased 6% to $2.9 Billion
• Closings Increased 1% to 6,709 Homes
• Year-end Backlog of 8,722 Homes Valued at $3.8 Billion
• Company Repurchased $122 Million of Common Shares During the Quarter; Full-Year Repurchases Totaled $295 Million
• Year-end Cash Balance of $1.1 Billion; Debt-to-Total Capitalization Lowered to 38.6%
ATLANTA – Jan. 29, 2019 - PulteGroup, Inc. (NYSE: PHM) announced today financial results for its fourth quarter ended December 31, 2018. For the quarter, the Company’s reported net income was $238 million, or $0.84 per share. Adjusted net income for the period was $314 million, or $1.11 per share, after excluding $85 million of pre-tax land charges and a $16 million pre-tax Financial Services reserve adjustment.
Reported net income for the prior year fourth quarter was $77 million, or $0.26 per share. Adjusted net income for the prior year fourth quarter 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 relating to the revaluation of the Company’s deferred tax assets.
“PulteGroup’s fourth quarter results complete an outstanding year in which we dramatically increased top and bottom line financial results, while achieving key operating performance metrics consistent with our stated business strategies,” said Ryan Marshall, President and CEO of PulteGroup. “We ended the year with $1.1 billion of cash after investing $2.6 billion to support the ongoing success of the business and returning almost $400 million to shareholders in 2018.”
“The Company delivered strong financial results, but market conditions grew more challenging as 2018 progressed, with homebuying demand softening in response to affordability challenges and general market uncertainty,” added Marshall. “While continued strength in the economy, jobs and consumer confidence supports maintaining a positive long-term view on housing demand, we maintain our disciplined approach to the business that we believe will help us to better navigate today’s more volatile market conditions.”
Fourth Quarter Results
Home sale revenues for the fourth quarter increased 6% over the prior year to $2.9 billion. Higher revenues for the period reflect a 5%, or $20,000, increase in average sales price to $430,000, in combination with a 1% increase in closings to 6,709 homes.
The Company’s reported home sale gross margin for the fourth quarter was 21.5%. The Company’s fourth quarter adjusted home sale gross margin, which excludes $67 million of pre-tax land charges, was 23.8%. Prior year reported and adjusted gross margins were 21.6% and 23.8%, respectively.
For the fourth quarter, the Company’s reported SG&A expense was $292 million, or 10.1% of home sale revenues. Prior year fourth quarter reported SG&A expense of $202 million, or 7.4% of home sale revenues, included a $66 million pre-tax benefit from an insurance-related adjustment. Exclusive of this insurance benefit, prior year adjusted SG&A expense was $268 million, or 9.8% of home sale revenues.
Net new orders for the quarter totaled 4,267, which is a decrease of 11% from the prior year. The value of net new orders was $1.8 billion, compared with $2.0 billion in the fourth quarter of 2017. For the fourth quarter, the Company operated out of 815 communities which is an increase of 3% over the fourth quarter of 2017.
At the end of the quarter, the Company’s backlog of sold houses totaled 8,722 homes with a value of $3.8 billion. The comparable prior year backlog totals were 8,996 homes with a value of $4.0 billion. The average price of homes in backlog was essentially unchanged at $440,000.
Fourth quarter Financial Services pre-tax income was $5 million compared with $23 million in the prior year. Lower pre-tax income for the period was driven primarily by a $16 million pre-tax charge associated with a reserve adjustment taken in the period, as well as more competitive operating conditions which continue to impact overall profitability. Reflective of the more competitive market, mortgage capture rate was 77%, down from 81% in the prior year.
During the quarter, the Company repurchased 5.1 million common shares for $122 million, or an average price of $24.13 per share. For the year, the Company repurchased a total of 10.9 million common shares, or 4% of its outstanding shares, for $295 million, or an average price of $27.00 per share.
At year end, the Company had $1.1 billion of cash and a debt-to-total capitalization of 39%, which is down from 42% at the end of 2017.
A conference call discussing PulteGroup's fourth quarter 2018 results is scheduled for Tuesday, January 29, 2019, 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 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 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, 2017, 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 44 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. # # #