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Published: 2020-10-22 07:57:07 ET
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EX-99.1 2 ex991earningspr9302020.htm EXHIBIT 99.1 - EARNINGS PRESS RELEASE 3Q 2020 Exhibit


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FOR IMMEDIATE RELEASE
Company Contact
 
Investors: Jim Zeumer
 
(404) 978-6434
 
          Email: jim.zeumer@pultegroup.com

PULTEGROUP REPORTS THIRD QUARTER 2020 FINANCIAL RESULTS

•
Net Income of $1.54 Per Share
•
Adjusted Net Income Increased 33% to $1.34 Per Share
•
Net New Orders Increased 36% to 8,202 Homes; Net New Order Value Increased 43% to $3.6 Billion
•
Closings Increased 4% to 6,454 Homes
•
Home Sale Revenues Increased 7% to $2.8 Billion
•
Reported Homebuilding Gross Margin Increased 140 Basis Points to 24.5%
•
SG&A Improved 70 Basis Points to 9.6% of Home Sale Revenues
•
Unit Backlog Increased 29% to 14,962 Homes; Backlog Value Increased 32% to $6.6 Billion

ATLANTA - Oct. 22, 2020 - PulteGroup, Inc. (NYSE: PHM) announced today financial results for its third quarter ended September 30, 2020. For the quarter, the Company reported net income of $416 million, or $1.54 per share. Adjusted net income for the period was $363 million, or $1.34 per share, which excludes a tax benefit of $53 million resulting from energy tax credits recorded in the period. In the prior year, the Company reported net income of $273 million, or $0.99 per share, and adjusted net income of $280 million, or $1.01 per share, after excluding a $9 million pre-tax warranty charge taken in the quarter.

“The dramatic rebound in housing demand that began in May continued through the third quarter, as we generated exceptionally strong sales across all buyer groups and realized a 36% increase in net new orders over last year,” said Ryan Marshall, PulteGroup President and CEO. “Our teams continue to successfully execute against our key business objectives which helped us to deliver outstanding financial results, including a 210 basis point increase in operating margin and a 33% increase in adjusted earnings per share.”

“While COVID-19 still weighs on much of the U.S. economy, housing demand continued to benefit from low interest rates, supportive demographics, limited housing supply and a desire for new homes with features that can meet the evolving needs of today’s homebuyers. With our customer-centric design process, build-to-order operating model and ability to serve buyers at all price points, we are well positioned to meet this demand within the markets we serve.”

Third Quarter Results

Home sale revenues for the third quarter increased 7% over the prior year to $2.8 billion. Higher revenues for the period were driven by a 4% increase in closings to 6,454 homes, combined with a 3% increase in the average price of homes closed to $438,000.

The Company’s reported home sale gross margin for the third quarter was 24.5%. This represents an increase of 140 basis points over the prior year reported gross margin of 23.1%. In the third quarter, the Company’s homebuilding SG&A expense was $271 million, or 9.6% of home sale revenues. Prior year third quarter SG&A expense was $271 million, or 10.3% of home sale revenues.


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Net new orders for the third quarter increased 36% over the prior year to 8,202 homes, while the value of net new orders increased 43% to $3.6 billion. Higher orders in the quarter were driven by continued strong demand among first-time buyers, along with significant gains in the Company’s move-up and active adult businesses. In the third quarter, the Company operated out of an average of 892 communities which is an increase of 3% over prior year average community count of 865.

Unit backlog at the end of the quarter totaled 14,962 homes, which is an increase of 29% over the comparable prior year period. Backlog value at the end of the third quarter was $6.6 billion, which is up 32% over prior year and is the Company’s highest third quarter value in over a decade.

For the third quarter, the Company's financial services operations reported a 98% increase in pre-tax income to $64 million. Higher pre-tax income resulted from an increase in mortgage origination volumes resulting from growth in the Company’s homebuilding operations, higher capture rates and improved margins within our mortgage operations. The Company continued to realize an improved mortgage capture rate which increased to 86% in the third quarter, up from 84% last year.

The Company’s pre-tax income for the quarter increased to $484 million. Income tax expense for the quarter was $68 million, or an effective tax rate of 14.0%, inclusive of the tax benefit of $53 million resulting from energy tax credits recognized in the period.

PulteGroup ended the third quarter with $2.1 billion of cash and a debt-to-total capital ratio of 30.8%, which is down from 33.6% at the end of 2019.

A conference call to discuss PulteGroup's third quarter 2020 results is scheduled for Thursday, October 22, 2020, at 8:30 a.m. Eastern Time. Interested investors can access the live webcast via PulteGroup's corporate website at www.pultegroup.com.

Forward-Looking Statements

This 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 potential impairment charges 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 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

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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; the negative impact of the COVID-19 pandemic on our financial position and ability to continue our Homebuilding or Financial Services activities at normal levels or at all in impacted areas; the duration, effect and severity of the COVID-19 pandemic; the measures that governmental authorities take to address the COVID-19 pandemic which may precipitate or exacerbate one or more of the above-mentioned and/or other risks and significantly disrupt or prevent us from operating our business in the ordinary course for an extended period of time; 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, 2019, 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 Atlanta, Georgia, is one of America’s largest homebuilding companies with operations in 40 markets throughout the country. Through its brand portfolio that includes Centex, Pulte Homes, Del Webb, DiVosta Homes, American West 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’s purpose is building incredible places where people can live their dreams.

For more information about PulteGroup, Inc. and PulteGroup’s brands, go to pultegroup.com; www.pulte.com; www.centex.com; www.delwebb.com; www.divosta.com; www.jwhomes.com; and www.americanwesthomes.com. Follow PulteGroup, Inc. on Twitter: @PulteGroupNews.

# # #


3



PulteGroup, Inc.
Consolidated Statements of Operations
($000's omitted, except per share data)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2020
 
2019
 
2020
 
2019
Revenues:
 
 
 
 
 
 
 
Homebuilding
 
 
 
 
 
 
 
Home sale revenues
$
2,823,921

 
$
2,637,002

 
$
7,517,453

 
$
6,990,417

Land sale and other revenues
24,165

 
8,548

 
70,042

 
40,993

 
2,848,086

 
2,645,550

 
7,587,495

 
7,031,410

Financial Services
106,871

 
64,815

 
256,223

 
164,634

Total revenues
2,954,957

 
2,710,365

 
7,843,718

 
7,196,044

 
 
 
 
 
 
 
 
Homebuilding Cost of Revenues:
 
 
 
 
 
 
 
Home sale cost of revenues
(2,131,741
)
 
(2,028,622
)
 
(5,706,814
)
 
(5,369,568
)
Land sale and other cost of revenues
(20,502
)
 
(7,350
)
 
(55,558
)
 
(35,615
)
 
(2,152,243
)
 
(2,035,972
)
 
(5,762,372
)
 
(5,405,183
)
 
 
 
 
 
 
 
 
Financial Services expenses
(42,807
)
 
(32,514
)
 
(112,135
)
 
(94,864
)
Selling, general, and administrative expenses
(271,257
)
 
(270,625
)
 
(731,785
)
 
(782,791
)
Goodwill impairment
—

 
—

 
(20,190
)
 
—

Other expense, net
(4,483
)
 
(5,108
)
 
(12,292
)
 
(9,581
)
Income before income taxes
484,167

 
366,146

 
1,204,944

 
903,625

Income tax expense
(67,769
)
 
(93,042
)
 
(236,216
)
 
(222,723
)
Net income
$
416,398

 
$
273,104

 
$
968,728

 
$
680,902

 
 
 
 
 
 
 
 
Per share:
 
 
 
 
 
 
 
Basic earnings
$
1.54

 
$
0.99

 
$
3.57

 
$
2.44

Diluted earnings
$
1.54

 
$
0.99

 
$
3.56

 
$
2.44

Cash dividends declared
$
0.12

 
$
0.11

 
$
0.36

 
$
0.33

 
 
 
 
 
 
 
 
Number of shares used in calculation:
 
 
 
 
 
 
 
Basic
268,363

 
272,992

 
268,892

 
275,734

Effect of dilutive securities
598

 
640

 
839

 
858

Diluted
268,961

 
273,632

 
269,731

 
276,592





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PulteGroup, Inc.
Condensed Consolidated Balance Sheets
($000's omitted)
(Unaudited)
 
September 30,
2020
 
December 31,
2019
 
 
 
 
ASSETS
 
 
 
 
 
 
 
Cash and equivalents
$
2,067,276

 
$
1,217,913

Restricted cash
46,932

 
33,543

Total cash, cash equivalents, and restricted cash
2,114,208

 
1,251,456

House and land inventory
7,615,471

 
7,680,614

Land held for sale
26,867

 
24,009

Residential mortgage loans available-for-sale
400,067

 
508,967

Investments in unconsolidated entities
41,722

 
59,766

Other assets
917,388

 
895,686

Intangible assets
168,466

 
124,992

Deferred tax assets, net
80,833

 
170,107

 
$
11,365,022

 
$
10,715,597

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
Liabilities:
 
 
 
Accounts payable
$
342,277

 
$
435,916

Customer deposits
403,646

 
294,427

Accrued and other liabilities
1,335,299

 
1,399,368

Income tax liabilities
15,769

 
36,093

Financial Services debt
249,046

 
326,573

Notes payable
2,778,970

 
2,765,040

 
5,125,007

 
5,257,417

Shareholders' equity
6,240,015

 
5,458,180

 
$
11,365,022

 
$
10,715,597



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PulteGroup, Inc.
Consolidated Statements of Cash Flows
($000's omitted)
(Unaudited)
 
Nine Months Ended
 
September 30,
 
2020
 
2019
Cash flows from operating activities:
 
 
 
Net income
$
968,728

 
$
680,902

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Deferred income tax expense
89,492

 
83,752

Land-related charges
13,930

 
17,549

Goodwill impairment
20,190

 
—

Depreciation and amortization
48,536

 
40,302

Share-based compensation expense
25,010

 
21,389

Other, net
(1,136
)
 
2,567

Increase (decrease) in cash due to:
 
 
 
Inventories
84,253

 
(427,183
)
Residential mortgage loans available-for-sale
108,178

 
76,813

Other assets
(15,627
)
 
4,146

Accounts payable, accrued and other liabilities
(72,929
)
 
82,543

Net cash provided by (used in) operating activities
1,268,625

 
582,780

Cash flows from investing activities:
 
 
 
Capital expenditures
(46,925
)
 
(43,162
)
Investments in unconsolidated entities
(663
)
 
(8,515
)
Distributions from unconsolidated entities
19,939

 
214

Business acquisition
(83,251
)
 
(163,724
)
Other investing activities, net
1,721

 
4,795

Net cash provided by (used in) investing activities
(109,179
)
 
(210,392
)
Cash flows from financing activities:
 
 
 
Repayments of notes payable
(10,993
)
 
(297,411
)
Borrowings under revolving credit facility
700,000

 
—

Repayments under revolving credit facility
(700,000
)
 
—

Financial Services borrowings (repayments), net
(77,527
)
 
(99,052
)
Stock option exercises
111

 
6,368

Share repurchases
(95,676
)
 
(244,388
)
Cash paid for shares withheld for taxes
(14,853
)
 
(10,726
)
Dividends paid
(97,756
)
 
(92,235
)
Net cash provided by (used in) financing activities
(296,694
)
 
(737,444
)
Net increase (decrease) in cash, cash equivalents, and restricted cash
862,752

 
(365,056
)
Cash, cash equivalents, and restricted cash at beginning of period
1,251,456

 
1,133,700

Cash, cash equivalents, and restricted cash at end of period
$
2,114,208

 
$
768,644

 
 
 
 
Supplemental Cash Flow Information:
 
 
 
Interest paid (capitalized), net
$
16,297

 
$
19,569

Income taxes paid (refunded), net
$
195,494

 
$
60,329



6



PulteGroup, Inc.
Segment Data
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2020
 
2019
 
2020
 
2019
HOMEBUILDING:
 
 
 
 
 
 
 
Home sale revenues
$
2,823,921

 
$
2,637,002

 
$
7,517,453

 
$
6,990,417

Land sale and other revenues
24,165

 
8,548

 
70,042

 
40,993

Total Homebuilding revenues
2,848,086

 
2,645,550

 
7,587,495

 
7,031,410

 
 
 
 
 
 
 
 
Home sale cost of revenues
(2,131,741
)
 
(2,028,622
)
 
(5,706,814
)
 
(5,369,568
)
Land sale and other cost of revenues
(20,502
)
 
(7,350
)
 
(55,558
)
 
(35,615
)
Selling, general, and administrative expenses ("SG&A")
(271,257
)
 
(270,625
)
 
(731,785
)
 
(782,791
)
Goodwill impairment
—

 
—

 
(20,190
)
 
—

Other expense, net
(4,483
)
 
(5,091
)
 
(12,242
)
 
(9,582
)
Income before income taxes
$
420,103

 
$
333,862

 
$
1,060,906

 
$
833,854

 
 
 
 
 
 
 
 
FINANCIAL SERVICES:
 
 
 
 
 
 
 
Income before income taxes
$
64,064

 
$
32,284

 
$
144,038

 
$
69,771

 
 
 
 
 
 
 
 
CONSOLIDATED:
 
 
 
 
 
 
 
Income before income taxes
$
484,167

 
$
366,146

 
$
1,204,944

 
$
903,625

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OPERATING METRICS:
 
 
 
 
 
 
 
Gross margin % (a)(b)
24.5
 %
 
23.1
 %
 
24.1
 %
 
23.2
 %
SG&A % (a)
(9.6
)%
 
(10.3
)%
 
(9.7
)%
 
(11.2
)%
Operating margin % (a)
14.9
 %
 
12.8
 %
 
14.4
 %
 
12.0
 %
(a)
As a percentage of home sale revenues
(b)
Gross margin represents home sale revenues minus home sale cost of revenues

7


PulteGroup, Inc.
Segment Data, continued
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2020
 
2019
 
2020
 
2019
 
 
 
 
 
 
 
 
Home sale revenues
$
2,823,921

 
$
2,637,002

 
$
7,517,453

 
$
6,990,417

 
 
 
 
 
 
 
 
Closings - units
 
 
 
 
 
 
 
Northeast
428

 
388

 
998

 
956

Southeast
1,057

 
1,067

 
3,089

 
2,915

Florida
1,427

 
1,326

 
4,017

 
3,586

Midwest
950

 
944

 
2,466

 
2,492

Texas
1,162

 
1,194

 
3,484

 
3,162

West
1,430

 
1,267

 
3,710

 
3,299

 
6,454

 
6,186

 
17,764

 
16,410

Average selling price
$
438

 
$
426

 
$
423

 
$
426

 
 
 
 
 
 
 
 
Net new orders - units
 
 
 
 
 
 
 
Northeast
591

 
424

 
1,422

 
1,240

Southeast
1,255

 
994

 
3,491

 
3,281

Florida
1,868

 
1,340

 
5,041

 
4,146

Midwest
1,243

 
895

 
3,158

 
2,894

Texas
1,673

 
1,103

 
4,613

 
3,792

West
1,572

 
1,275

 
4,494

 
3,933

 
8,202

 
6,031

 
22,219

 
19,286

Net new orders - dollars
$
3,634,158

 
$
2,538,708

 
$
9,579,982

 
$
8,165,268

 
 
 
 
 
 
 
 
Unit backlog
 
 
 
 
 
 
 
Northeast
 
 
 
 
1,013

 
754

Southeast
 
 
 
 
2,267

 
1,976

Florida
 
 
 
 
3,330

 
2,449

Midwest
 
 
 
 
2,232

 
1,804

Texas
 
 
 
 
2,979

 
2,122

West
 
 
 
 
3,141

 
2,533

 
 
 
 
 
14,962

 
11,638

Dollars in backlog
 
 
 
 
$
6,598,334

 
$
5,010,999




8


    
PulteGroup, Inc.
Segment Data, continued
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2020
 
2019
 
2020
 
2019
MORTGAGE ORIGINATIONS:
 
 
 
 
 
 
 
Origination volume
4,858

 
4,301

 
13,202

 
11,019

Origination principal
$
1,625,250

 
$
1,365,940

 
$
4,274,619

 
$
3,442,557

Capture rate
86.0
%
 
83.7
%
 
86.5
%
 
81.6
%


Supplemental Data
($000's omitted)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2020
 
2019
 
2020
 
2019
 
 
 
 
 
 
 
 
Interest in inventory, beginning of period
$
207,942

 
$
234,709

 
$
210,383

 
$
227,495

Interest capitalized
40,044

 
39,893

 
119,643

 
123,924

Interest expensed
(46,841
)
 
(46,040
)
 
(128,881
)
 
(122,857
)
Interest in inventory, end of period
$
201,145

 
$
228,562

 
$
201,145

 
$
228,562




9


PulteGroup, Inc.
Reconciliation of Non-GAAP Financial Measures
(Unaudited)

This report contains information about our operating results reflecting certain adjustments, including: net income and diluted earnings per share ("EPS"). These measures are considered non-GAAP financial measures under the SEC's rules and should be considered in addition to, rather than as a substitute for, the comparable GAAP financial measures as measures of our profitability. We believe that reflecting these adjustments provides investors relevant and useful information for evaluating the comparability of financial information presented and comparing our profitability 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 these measures and any adjustments thereto before comparing our measures to those of such other companies.

The following tables set forth a reconciliation of the non-GAAP financial measures to the GAAP financial measures that management believes to be most directly comparable ($000's omitted):
 
 
 
Three Months Ended
 
Results of Operations Classification
 
September 30,
 
 
2020
 
2019
 
 
 
 
 
 
Net income, as reported
 
 
$
416,398

 
$
273,104

Adjustments to income before income taxes:
 
 
 
 
 
Warranty claim
Home sale cost of revenues
 
—

 
8,956

Income tax effect of the above item
Income tax expense
 
—

 
(2,229
)
Energy tax credits
Income tax expense
 
(53,210
)
 
—

Adjusted net income
 
 
$
363,188

 
$
279,831

 
 
 
 
 
 
EPS (diluted), as reported
 
 
$
1.54

 
$
0.99

Adjusted EPS (diluted)
 
 
$
1.34

 
$
1.01


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