PulteGroup Reports Third Quarter 2012 Financial Results
- Q3 Net Income of $117 Million, or $0.30 Per Share
- Adjusted Gross Margin of 21.6% Increased 320 Basis Points from Prior Year and 130 Basis Points from Q2 2012
- SG&A Dropped 80 Basis Points to 10.2% of Home Sale Revenues
- Net New Orders Increased 27% to 4,544 Homes Realized from 7% Fewer Communities
- On a Dollar Basis, Net New Orders Increased 43% to $1.3 Billion
- Unit Backlog Grew 49% to 7,686 Homes Valued at $2.2 Billion; Dollar Backlog At Highest Level Since 2008
- Quarter-End Cash of $1.6 Billion After Retiring $96 Million of Notes During the Quarter, Up $243 Million from Q2 2012
- Company Launches Tender Offer for Up to $1.0 Billion of Outstanding Senior Notes
BLOOMFIELD HILLS, Mich., Oct. 25, 2012 /PRNewswire/ -- PulteGroup, Inc. (NYSE: PHM) announced today financial results for its third quarter ended September 30, 2012. For the quarter, the Company reported net income of $117 million, or $0.30 per share, inclusive of an $11 million, or $0.03 per share, tax benefit. In the prior year, the Company reported a net loss of $129 million, or $0.34 per share, inclusive of a goodwill impairment charge of $241 million, or $0.63 per share, partially offset by a $73 million, or $0.19 per share, tax benefit.
"We are extremely pleased with the progress PulteGroup continues to make as our third quarter results represent our highest quarterly earnings since the third quarter of 2006 and keep us on track for full-year profitability," said Richard J. Dugas, Jr., Chairman, President and Chief Executive Officer of PulteGroup. "Our financial performance reflects improvements within our homebuilding operations which resulted in adjusted gross margins of 21.6%, an increase of 320 basis points over last year, and improved SG&A leverage as overhead expenses fell 80 basis points to 10.2% of home sale revenues.
"The quarter also showed a continuation of the stronger housing demand we have been experiencing since the start of 2012, as PulteGroup's 27% increase in year-over-year signups was generated from 7% fewer communities. Although still well below historical levels, the U.S. housing market has realized a meaningful increase in the volume of new home sales for the first nine months of 2012.
"In past cycles, the U.S. housing industry proved to be a powerful engine that could help drive the economy forward and accelerate the pace of a recovery. A similar scenario could again be unfolding, as the industry is responding to increased sales by hiring additional workers and purchasing more building materials. While we are mindful of any potential impact from global or domestic economic issues, we are optimistic that the combination of ever higher rental rates, record low interest rates and limited housing supply can continue to support the improved housing demand. Within this environment, we continue to invest in the business appropriately, including having recently increased our approved 2012 land spend by $90 million to approximately $1.0 billion, while remaining focused on driving improved returns."
Third Quarter Results
Revenue from home sales in the third quarter increased 12% from the prior year to $1.2 billion. Higher revenue for the period was driven by a 6% increase in average selling price to $279,000, combined with a 5% increase in closings to 4,418 homes.
For the quarter, the Company's homebuilding operations generated pretax income of $79 million, compared with a prior year pretax loss of $211 million, which included a goodwill impairment charge of $241 million. The Company's adjusted home sale gross margin for the third quarter was 21.6%, an increase of 320 basis points over the prior year and 130 basis points over the second quarter of 2012. Homebuilding SG&A expense for the quarter was $125 million, or 10.2% of home sale revenues. SG&A for the prior year period was $122 million, or 11.0% of home sale revenues.
Net new orders for the third quarter totaled 4,544 homes valued at $1.3 billion, an increase of 27% and 43%, respectively, over the prior year. The year-over-year increase in signups was generated from 7% fewer communities. On a unit basis, PulteGroup's quarter-end backlog was up 49% to 7,686 homes with a value of $2.2 billion, compared with a prior year backlog of 5,143 homes with a value of $1.4 billion. The Company's third quarter 2012 backlog is the highest dollar value since the second quarter of 2008.
The Company's financial services operations reported third quarter pretax income of $27 million, compared with prior year pretax income of $9 million. For the quarter, the Company's financial services operations benefitted from increased loan originations and favorable market conditions which drove higher gains on mortgage sales. Mortgage capture rate for the quarter was 83% compared with 78% for the same quarter last year.
Company Announces Tender for Up to $1.0 Billion of its Bonds
As detailed in a separate press release issued October 24, 2012, PulteGroup announced a tender offer for up to $1.0 billion face amount of certain of the Company's outstanding senior notes. The Company intends to fund the tender with cash on hand.
"Our liquidity reflects the Company's improving operating performance, more stringent capital investment policies, and ongoing sales of non-core assets. This tender will allow us to reduce PulteGroup's total leverage on terms that will generate positive yields and further improve our return on invested capital," said Bob O'Shaughnessy, Executive Vice President and Chief Financial Officer.
The terms and conditions of the tender offer are described in the Offer to Purchase, dated October 24, 2012 (the "Offer to Purchase"), and the related Letter of Transmittal (the "Letter of Transmittal"). Holders of Notes are urged to read the Offer to Purchase and the related Letter of Transmittal carefully before making any decision with respect to the tender offer.
A conference call discussing PulteGroup's third quarter 2012 results is scheduled for Thursday, October 25, 2012, at 8:30 a.m. Eastern Time. Interested investors can access the live webcast via PulteGroup's corporate website at 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," "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 continuing adverse conditions in 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, 2011, 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 Bloomfield Hills, Mich., is one of America's largest homebuilding companies with operations in approximately 60 markets throughout the country. Through its brand portfolio that includes Centex, Pulte Homes and Del Webb, 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 new homes designed for the way people actually live today. As the most awarded homebuilder in customer satisfaction, PulteGroup brands have consistently ranked among top homebuilders in third-party customer satisfaction studies.
PulteGroup and Georgia Power announced today a new partnership to develop Atlanta’s first Smart Neighborhood at Pulte’s Altus at the Quarter development. Each technology-enhanced home will include rooftop solar installations and in-home battery energy storage, as well as be equipped with the latest energy technologies such as optimal insulation for maximum efficiency, advanced heating and cooling systems and LED lighting, and home automation featuring smart thermostats, smart locks and voice control.
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