PulteGroup Reports Second Quarter 2012 Financial Results - Q2 Net Income of $42 Million, or $0.11 Per Share

- Company Remains on Track for Full-Year Profitability

- 32% Increase in Net New Orders to 5,578 Homes Realized from 7% Fewer Communities

- Adjusted Gross Margin of 20.3% Increased 320 Basis Points from Prior Year and 160 Basis Points from Q1 2012

- Unit Backlog Up 31% to 7,560 Homes Valued at $2.2 Billion

- Quarter-End Cash of $1.4 Billion, an Increase of $96 Million from Q1 2012

BLOOMFIELD HILLS, Mich., July 26, 2012 /PRNewswire/ -- PulteGroup, Inc. (NYSE: PHM) announced today financial results for its second quarter ended June 30, 2012.  For the quarter, the Company reported net income of $42 million, or $0.11 per share, inclusive of land and restructuring charges totaling $8 million, or $0.02 per share.  In the prior year, the Company reported a net loss of $55 million, or $0.15 per share, inclusive of $41 million, or $0.11 per share, of land, mortgage, restructuring and debt repurchase charges.      

"Our second quarter results showed significant gains as homebuilding operating margins expanded by more than 600 basis points, net income improved by $98 million and we continued to benefit from our strategic pricing strategies, improved construction efficiencies and further reductions in finished spec home inventory," said Richard J. Dugas, Jr., Chairman, President and Chief Executive Officer of PulteGroup.  "Ongoing success in the execution of our value creation initiatives, combined with a recovery in new home demand, contributed to gains in overall operating results allowing PulteGroup to realize second quarter profitability and post its strongest financial performance in over five years."

"Consistent with our focus on capital discipline, PulteGroup's 32% increase in second quarter signups were generated from 7% fewer communities.  By using our existing land assets more efficiently, allocating capital more effectively and managing finished spec inventory more tightly, we continue to position the Company to deliver improved long-term returns." 

Mr. Dugas added, "With each passing quarter, we grow more confident that new home demand has found its footing and is moving along a path toward a gradual recovery.  Within this environment, we remain focused on strengthening our local market positions while continuing to implement initiatives designed to increase revenues, expand margins, improve overhead leverage and allocate capital more effectively."  

Second Quarter Results

Revenue from home sales in the second quarter increased 14% from the prior year to $1.0 billion.  Higher revenue for the period was driven by an 8% increase in average selling price to $268,000, combined with a 5% increase in closings to 3,816 homes.

For the quarter, the Company's homebuilding operations generated pretax income of $24 million, compared with a pretax loss of $37 million for the same period last year.  Excluding capitalized interest expense and land-related charges, home sale gross margin for the quarter was 20.3%, an increase of 320 basis points from the prior year and 160 basis points compared with the first quarter of 2012. PulteGroup's second quarter margins benefitted from a favorable mix of home closings and improved pricing, as well as from the Company's value creation initiatives which are focused on capturing greater construction efficiencies and strategic pricing opportunities.    

Homebuilding SG&A expense for the quarter decreased 10% to $124 million, or 12.1% of homebuilding revenue.  SG&A for the prior year period was $138 million, inclusive of $5 million of restructuring costs, or 15.4% of homebuilding revenue.  

Net new orders for the second quarter were 5,578, which is an increase of 32% over the prior year and a sequential gain of 12% from the first quarter of 2012.  The year-over-year increase in signups was generated from 7% fewer communities.  On a unit basis, PulteGroup's quarter-end backlog was up 31% to 7,560 homes with a value of $2.2 billion, compared with a prior year backlog of 5,777 homes with a value of $1.6 billion.

The Company's financial services operations reported second quarter pretax income of $16 million, compared with a prior year pretax loss of $17 million.  Prior year results included a charge of $19 million related to potential loan repurchase obligations.  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 82% compared with 77% for the same quarter last year.

A conference call discussing PulteGroup's second quarter 2012 results is scheduled for Thursday, July 26, 2012, 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 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.

About PulteGroup

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.

For more information about PulteGroup, Inc. and PulteGroup brands, go to www.pultegroupinc.com; www.pulte.com; www.centex.com; www.delwebb.com.

PulteGroup, Inc.

Consolidated Results of Operations

($000's omitted, except per share data)

(Unaudited)










Three Months Ended


Six Months Ended


June 30,


June 30,


2012


2011


2012


2011

Revenues:








Homebuilding








Home sale revenues

$

1,024,405



$

899,763



$

1,838,191



$

1,682,234


Land sale revenues

8,749



5,068



47,147



6,364



1,033,154



904,831



1,885,338



1,688,598


Financial Services

36,251



22,381



65,103



43,816


Total revenues

1,069,405



927,212



1,950,441



1,732,414










Homebuilding Cost of Revenues:








Home sale cost of revenues

869,379



789,678



1,581,545



1,474,708


Land sale cost of revenues

7,611



3,787



41,008



4,717



876,990



793,465



1,622,553



1,479,425










Financial Services expenses

20,327



39,053



42,336



59,526


Selling, general, and administrative expenses

124,186



138,380



247,500



280,826


Other expense (income), net

10,498



11,668



17,117



15,578


Interest income

(1,164)



(1,145)



(2,363)



(2,582)


Interest expense

198



317



415



668


Equity in (earnings) loss of unconsolidated entities

(1,556)



(1,193)



(3,552)



(2,302)


Income (loss) before income taxes

39,926



(53,333)



26,435



(98,725)


Income tax expense (benefit)

(2,510)



2,052



(4,335)



(3,814)


Net income (loss)

$

42,436



$

(55,385)



$

30,770



$

(94,911)










Net income (loss) per share:








Basic

$

0.11



$

(0.15)



$

0.08



$

(0.25)


Diluted

$

0.11



$

(0.15)



$

0.08



$

(0.25)










Number of shares used in calculation:








Basic

380,655



379,781



380,579



379,663


Effect of dilutive securities

1,548





1,446




Diluted

382,203



379,781



382,025



379,663


 

PulteGroup, Inc.

Condensed Consolidated Balance Sheets

($000's omitted)

(Unaudited)






June 30,
2012


December 31,
2011





ASSETS








Cash and equivalents

$

1,310,478



$

1,083,071


Restricted cash

86,795



101,860


House and land inventory

4,551,893



4,636,468


Land held for sale

139,346



135,307


Land, not owned, under option agreements

10,482



24,905


Residential mortgage loans available-for-sale

234,334



258,075


Investments in unconsolidated entities

31,576



35,988


Income taxes receivable

28,897



27,154


Other assets

403,226



420,444


Intangible assets, net

155,798



162,348



$

6,952,825



$

6,885,620










LIABILITIES AND SHAREHOLDERS' EQUITY








Liabilities:




Accounts payable

$

214,254



$

196,447


Customer deposits

117,320



46,960


Accrued and other liabilities

1,340,179



1,411,941


Income tax liabilities

212,477



203,313


Senior notes

3,093,548



3,088,344


Total liabilities

4,977,778



4,947,005






Shareholders' equity

1,975,047



1,938,615







$

6,952,825



$

6,885,620


 


PulteGroup, Inc.

Consolidating Statements of Cash Flows

($000's omitted)

(Unaudited)


Six Months Ended


June 30,


2012


2011

Cash flows from operating activities:




Net income (loss)

$

30,770



$

(94,911)


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

      operating activities:




Write-down of land and deposits and pre-acquisition costs

9,218



7,486


Depreciation and amortization

14,828



16,973


Stock-based compensation expense

8,886



11,405


Equity in (earnings) loss of unconsolidated entities

(3,552)



(2,302)


Distributions of earnings from unconsolidated entities

5,782



440


Loss on debt repurchases



3,537


Other, net

850



1,156


Increase (decrease) in cash due to:




Restricted cash

(1,215)



307


Inventories

72,222



(180,964)


Residential mortgage loans available-for-sale

23,768



27,590


Other assets

12,020



93,699


Accounts payable, accrued and other liabilities

28,799



(101,337)


Income tax liabilities

9,164



(2,406)


Net cash provided by (used in) operating activities

211,540



(219,327)


Cash flows from investing activities:




Distributions from unconsolidated entities

2,696



3,856


Investments in unconsolidated entities

(858)



(3,184)


Net change in loans held for investment

627



519


Change in restricted cash related to letters of credit

16,280



(103,940)


Proceeds from the sale of fixed assets

4,627



9,178


Capital expenditures

(6,997)



(10,848)


Net cash provided by (used in) investing activities

16,375



(104,419)


Cash flows from financing activities:




Borrowings (repayments) under credit arrangements

400



(68,831)


Stock repurchases

(908)



(1,956)


Net cash provided by (used in) financing activities

(508)



(70,787)


Net increase (decrease) in cash and equivalents

227,407



(394,533)


Cash and equivalents at beginning of period

1,083,071



1,483,390


Cash and equivalents at end of period

$

1,310,478



$

1,088,857






Supplemental Cash Flow Information:




Interest paid (capitalized), net

$

(5,840)



$

(5,915)


Income taxes paid (refunded), net

$

(11,756)



$

(3,851)



 

PulteGroup, Inc.

Segment Data

($000's omitted)

(Unaudited)










Three Months Ended


Six Months Ended


June 30,


June 30,


2012


2011


2012


2011

HOMEBUILDING:








Home sale revenues

$

1,024,405



$

899,763



$

1,838,191



$

1,682,234


Land sale revenues

8,749



5,068



47,147



6,364


Total Homebuilding revenues

1,033,154



904,831



1,885,338



1,688,598










Home sale cost of revenues

869,379



789,678



1,581,545



1,474,708


Land sale cost of revenues

7,611



3,787



41,008



4,717


Selling, general, and administrative expenses

124,186



138,380



247,500



280,826


Equity in (earnings) loss of  unconsolidated entities

(1,493)



(1,164)



(3,471)



(2,262)


Other expense (income), net

10,498



11,668



17,117



15,578


Interest income, net

(966)



(828)



(1,948)



(1,914)


Income (loss) before income taxes

$

23,939



$

(36,690)



$

3,587



$

(83,055)










FINANCIAL SERVICES:








Income (loss) before income taxes

$

15,987



$

(16,643)



$

22,848



$

(15,670)










CONSOLIDATED:








Income (loss) before income taxes

$

39,926



$

(53,333)



$

26,435



$

(98,725)


 


PulteGroup, Inc.

Segment data, continued

($000's omitted)

(Unaudited)










Three Months Ended


Six Months Ended


June 30,


June 30,


2012


2011


2012


2011









Home sale revenues

$

1,024,405



$

899,763



$

1,838,191



$

1,682,234










Closings - units








Northeast

416



368



768



716


Southeast

673



699



1,208



1,288


Florida

569



542



1,045



1,034


Texas

862



847



1,561



1,542


North

663



622



1,194



1,116


Southwest

633



555



1,157



1,078



3,816



3,633



6,933



6,774


Average selling price

$

268



$

248



$

265



$

248










Net new orders - units








Northeast

614



506



1,167



988


Southeast

823



735



1,597



1,483


Florida

700



629



1,468



1,365


Texas

1,125



858



2,234



1,906


North

1,064



758



1,933



1,416


Southwest

1,252



736



2,170



1,409



5,578



4,222



10,569



8,567


Net new orders - dollars (a)

$

1,605,073



$

1,115,490



$

2,945,050



$

2,209,124















June 30,






2012


2011

Unit backlog








Northeast





824



828


Southeast





991



926


Florida





1,081



926


Texas





1,498



1,238


North





1,448



953


Southwest





1,718



906







7,560



5,777


Dollars in backlog





$

2,166,508



$

1,583,452










(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


Six Months Ended


June 30,


June 30,


2012


2011


2012


2011

MORTGAGE ORIGINATIONS:








Origination volume

2,603



2,217



4,624



4,082


Origination principal

$

566,856



$

435,921



$

996,321



$

813,893


Capture rate

82.2%



76.7%



80.5%



76.6%


















 

Supplemental Data

($000's omitted)

(Unaudited)










Three Months Ended


Six Months Ended


June 30,


June 30,


2012


2011


2012


2011









Interest in inventory, beginning of period

$

359,205



$

344,754



$

355,068



$

323,379


Interest capitalized

51,316



55,946



102,639



112,137


Interest expensed

(52,070)



(41,894)



(99,256)



(76,710)


Interest in inventory, end of period

$

358,451



$

358,806



$

358,451



$

358,806


Interest incurred

$

51,316



$

55,946



$

102,639



$

112,137


 

PulteGroup, Inc.
Reconciliation of Non-GAAP Financial Measures

This report contains information about our home sale gross margins reflecting certain adjustments.  This measure is considered a non-GAAP financial measure under the SEC's rules and should be considered in addition to, rather than as a substitute for, the comparable GAAP financial measure as a measure of our operating performance.  Management and our local divisions use this measure in evaluating the operating performance of each community and in making strategic decisions regarding sales pricing, construction and development pace, product mix, and other daily operating decisions.  We believe it is a relevant and useful measure to investors for evaluating our performance through gross profit generated on homes delivered during a given period and for comparing our operating performance 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 gross margins and any adjustments thereto before comparing our measure to that of such other companies.

The following table sets forth a reconciliation of this non-GAAP financial measure to the GAAP financial measure that management believes to be most directly comparable ($000's omitted):

Home Sale Gross Margin











Three Months Ended


June 30,
2012


March 30,

2012


December 31,

2011


September 30,
2011


June 30,
2011











Home sale revenues

$

1,024,405



$

813,786



$

1,167,141



$

1,101,368



$

899,763


Home sale cost of revenues

869,379



712,166



1,021,873



947,817



789,678


Home sale gross margin

155,026



101,620



145,268



153,551



110,085


Add:










Impairments (a)

633



3,700



7,885



526



2,046


Capitalized interest amortization (a)

52,070



47,186



63,979



48,693



41,894


Adjusted home sale gross margin

$

207,729



$

152,506



$

217,132



$

202,770



$

154,025












Home sale gross margin as a

   percentage of home sale revenues

15.1%



12.5%



12.4%



13.9%



12.2%












Adjusted home sale gross margin as a

   percentage of home sale revenues

20.3%



18.7%



18.6%



18.4%



17.1%

















(a) Write-offs of capitalized interest related to impairments are reflected in capitalized interest amortization.

SOURCE PulteGroup, Inc.



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