PulteGroup Reports Second Quarter 2014 Financial Results

24 Jul, 2014, 06:30 ET from PulteGroup, Inc.

ATLANTA, July 24, 2014 /PRNewswire/ --

  • Q2 Earnings of $0.11 Per Share, After Charges of $0.14 Per Share for Insurance Reserves and Office Relocation Costs
  • Q2 Pretax Income of $68 Million After Charges of $88 Million; Q2 2013 Pretax Income of $38 Million After Charges of $67 Million
  • Home Sale Revenues Increased 2% to $1.2 Billion
  • Average Selling Price for Homes Delivered in the Quarter Increased 12% to $328,000
  • Gross Margin of 23.6% Expanded by 480 Basis Points Over Prior Year
  • Value of Net New Orders Increased 5% to $1.6 Billion
  • Higher Absorptions Per Community Drove Signups of 4,778 Homes
  • Backlog Value at Quarter End of $2.8 Billion, Up from $2.7 Billion in 2013
  • 7% Increase in Average Sales Price of Homes in Backlog to $339,000
  • Company Announces New $500 Million Senior Unsecured Revolving Credit Facility

PulteGroup, Inc. (NYSE: PHM) announced today financial results for its second quarter ended June 30, 2014.  For the quarter, net income was $42 million, or $0.11 per share, after pretax charges of $88 million, or $0.14 per share, for insurance reserves and office relocation costs.  Net income for the second quarter reflects $26 million, or $0.07 per share, of income tax expense.  Prior year net income was $36 million, or $0.09 per share, after pretax charges of $67 million, or $0.17 per share, resulting from a contractual dispute, debt repurchases and corporate relocation.  Prior year net income reflects $2 million, or less than $0.01 per share, of income tax expense.

"The ongoing gains demonstrated in PulteGroup's second quarter operating results reflect the benefits of company-specific initiatives and favorable macro conditions that exist in today's housing market," said Richard J. Dugas, Jr., Chairman, President and Chief Executive Officer of PulteGroup.  "Price appreciation, which in combination with the operational improvements we continue to realize, supported a 480 basis point increase in gross margin to 23.6% and corresponding gains in quarterly net income.

"Our view of the U.S. housing market remains positive, as improvements in both the economy and employment provide ongoing support to an industry already benefiting from low inventory, low mortgage rates, better pricing and favorable demographic trends.  Within this environment, our strong operating gains enable us to continue increasing investment into the business, while continuing to drive excellent returns on invested capital."

Second Quarter Results

Home sale revenues for the second quarter increased 2% to $1.2 billion.  Higher revenues for the period were driven by a 12% increase in average selling price to $328,000, partially offset by a 9% decrease in closings to 3,798 homes.  The higher average selling price in the quarter is the result of price increases realized across all three of the Company's brands serving entry level, move up and active adult homebuyers.

The Company's home sale gross margin for the period was 23.6%, which is an increase of 480 basis points over the prior year.  Homebuilding SG&A expense for the quarter was $230 million, or 18.4% of home sale revenues, compared with $151 million, or 12.3% last year.  Higher SG&A for the period was due primarily to an $84 million charge for increased insurance reserves.

"The adjustment to insurance reserves was primarily driven by estimated costs associated with siding repairs in certain previously completed communities in the west that, in turn, impacted actuarial estimates for potential future claims," said Bob O'Shaughnessy, Executive Vice President and Chief Financial Officer.  "We are in the process of making needed repairs and look to complete the work in a timely and cost-efficient manner."

The value of net new orders for the second quarter increased 5% to $1.6 billion.  On a unit basis, net new orders for the period were 4,778 homes, compared with 4,885 in the prior year.  For the quarter, the Company operated out of 589 communities, which is a decrease of 6% from the second quarter of 2013.

PulteGroup's quarter-end backlog was 8,179 homes valued at $2.8 billion, compared with a prior year backlog of 8,558 homes with a value of $2.7 billion.  The average price of homes in backlog was $339,000 which is up 7% over last year and up 3% from the average selling price of homes delivered in the second quarter.

The Company's financial services operations reported second quarter pretax income of $9 million compared with $16 million in the prior year.  Mortgage capture rate for the quarter was 80%, which is unchanged from the prior year.  The reduction in pretax income for the period was the result of lower origination volumes and the more competitive operating conditions that continue to exist within the mortgage industry.

During the quarter, PulteGroup invested $395 million in land acquisition and development.  The Company also repurchased 2.8 million shares of common stock for $53 million, or an average price of $19.12 per share.  The Company ended the quarter with $1.3 billion of cash.

Effective July 23, 2014, PulteGroup entered into a new three year, $500 million senior unsecured revolving credit facility.   The revolver includes an uncommitted accordion feature which could increase its size to $1.0 billion, subject to certain conditions and availability of additional bank commitments. The revolver is expected to be used primarily to replace a letter of credit facility that is set to expire later this year.

A conference call discussing PulteGroup's second quarter 2014 results is scheduled for Thursday, July 24, 2014, 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 the cyclical nature of 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, 2013, 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, GA, 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 and DiVosta Homes, 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 and www.divosta.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,

2014

2013

2014

2013

Revenues:

Homebuilding

  Home sale revenues

$

1,246,462

$

1,219,675

$

2,334,477

$

2,319,427

  Land sale revenues

8,527

20,385

14,511

46,516

1,254,989

1,240,060

2,348,988

2,365,943

Financial Services

31,198

39,362

56,093

76,235

Total revenues

1,286,187

1,279,422

2,405,081

2,442,178

Homebuilding Cost of Revenues:

Home sale cost of revenues

952,692

990,818

1,781,295

1,892,288

Land sale cost of revenues

6,832

20,710

11,843

42,728

959,524

1,011,528

1,793,138

1,935,016

Financial Services expenses

22,114

23,035

25,436

45,623

Selling, general and administrative expenses

229,767

150,531

374,655

280,157

Other expense, net

9,324

57,339

23,155

62,111

Interest income

(1,115)

(1,112)

(2,226)

(2,285)

Interest expense

203

166

416

373

Equity in (earnings) loss of unconsolidated entities

(1,311)

(395)

(7,202)

503

Income before income taxes

67,681

38,330

197,709

120,680

Income tax expense

25,801

1,913

81,010

2,501

Net income

$

41,880

$

36,417

$

116,699

$

118,179

Per share:

Basic earnings

$

0.11

$

0.09

$

0.31

$

0.31

Diluted earnings

$

0.11

$

0.09

$

0.30

$

0.30

Cash dividends declared

$

0.05

$

$

0.10

$

Number of shares used in calculation:

Basic

376,072

385,389

377,410

384,813

Effect of dilutive securities

3,592

5,791

3,703

5,943

Diluted

379,664

391,180

381,113

390,756

 

PulteGroup, Inc. Condensed Consolidated Balance Sheets ($000's omitted) (Unaudited)

June 30,  2014

December 31,  2013

ASSETS

Cash and equivalents

$

1,170,934

$

1,580,329

Restricted cash

101,607

72,715

House and land inventory

4,197,121

3,978,561

Land held for sale

80,328

61,735

Land, not owned, under option agreements

27,294

24,024

Residential mortgage loans available-for-sale

221,607

287,933

Investments in unconsolidated entities

40,131

45,323

Other assets

496,990

460,621

Intangible assets

129,598

136,148

Deferred tax assets, net

2,001,726

2,086,754

$

8,467,336

$

8,734,143

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:

Accounts payable

$

253,915

$

202,736

Customer deposits

206,991

134,858

Accrued and other liabilities

1,301,186

1,377,750

Income tax liabilities

193,146

206,015

Financial Services debt

58,506

105,664

Senior notes

1,815,548

2,058,168

3,829,292

4,085,191

Shareholders' equity

4,638,044

4,648,952

$

8,467,336

$

8,734,143

 

PulteGroup, Inc. Consolidated Statements of Cash Flows ($000's omitted) (Unaudited)

Six Months Ended

June 30,

2014

2013

Cash flows from operating activities:

Net income

$

116,699

$

118,179

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

      operating activities:

Deferred income tax expense

85,028

Depreciation and amortization

18,904

15,084

Stock-based compensation expense

16,797

15,765

Equity in (earnings) loss of unconsolidated entities

(7,202)

503

Distributions of earnings from unconsolidated entities

4,777

1,298

Loss on debt retirements

8,584

23,072

Other non-cash, net

6,649

8,986

Increase (decrease) in cash due to:

Restricted cash

(726)

1,285

Inventories

(249,861)

32,920

Residential mortgage loans available-for-sale

64,672

81,336

Other assets

(15,709)

(32,607)

Accounts payable, accrued and other liabilities

38,539

67,463

Income tax liabilities

(12,869)

1,781

Net cash provided by (used in) operating activities

74,282

335,065

Cash flows from investing activities:

Distributions from unconsolidated entities

7,577

200

Investments in unconsolidated entities

(9)

(807)

Net change in loans held for investment

(6,791)

18

Change in restricted cash related to letters of credit

(28,166)

4,222

Proceeds from the sale of property and equipment

98

9

Capital expenditures

(33,021)

(11,017)

Net cash provided by (used in) investing activities

(60,312)

(7,375)

Cash flows from financing activities:

Financial Services borrowings (repayments)

(47,158)

(78,929)

Other borrowings (repayments)

(240,133)

(452,950)

Stock option exercises

5,789

18,544

Stock repurchases

(103,711)

(6,447)

Dividends paid

(38,152)

Net cash provided by (used in) financing activities

(423,365)

(519,782)

Net increase (decrease) in cash and equivalents

(409,395)

(192,092)

Cash and equivalents at beginning of period

1,580,329

1,404,760

Cash and equivalents at end of period

$

1,170,934

$

1,212,668

Supplemental Cash Flow Information:

Interest paid (capitalized), net

$

(328)

$

2,309

Income taxes paid (refunded), net

$

(2,487)

$

(2,471)

 

PulteGroup, Inc. Segment Data ($000's omitted) (Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2014

2013

2014

2013

HOMEBUILDING:

Home sale revenues

$

1,246,462

$

1,219,675

$

2,334,477

$

2,319,427

Land sale revenues

8,527

20,385

14,511

46,516

Total Homebuilding revenues

1,254,989

1,240,060

2,348,988

2,365,943

Home sale cost of revenues

952,692

990,818

1,781,295

1,892,288

Land sale cost of revenues

6,832

20,710

11,843

42,728

Selling, general and administrative expenses

229,767

150,531

374,655

280,157

Equity in (earnings) loss of  unconsolidated entities

(1,287)

(363)

(7,157)

563

Other expense, net

9,324

57,339

23,155

62,111

Interest income, net

(912)

(946)

(1,810)

(1,912)

Income before income taxes

$

58,573

$

21,971

$

167,007

$

90,008

FINANCIAL SERVICES:

Income before income taxes

$

9,108

$

16,359

$

30,702

$

30,672

CONSOLIDATED:

Income before income taxes

$

67,681

$

38,330

$

197,709

$

120,680

 

PulteGroup, Inc. Segment Data, continued ($000's omitted) (Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2014

2013

2014

2013

Home sale revenues

$

1,246,462

$

1,219,675

$

2,334,477

$

2,319,427

Closings - units

Northeast

346

378

689

680

Southeast

785

735

1,432

1,386

Florida

623

649

1,190

1,232

Texas

885

960

1,666

1,857

North

678

741

1,308

1,407

Southwest

481

689

949

1,423

3,798

4,152

7,234

7,985

Average selling price

$

328

$

294

$

323

$

290

Net new orders - units

Northeast

380

543

824

1,114

Southeast

880

887

1,704

1,846

Florida

774

701

1,624

1,505

Texas

1,139

988

2,311

2,068

North

988

976

1,880

1,945

Southwest

617

790

1,298

1,607

4,778

4,885

9,641

10,085

Net new orders - dollars (a)

$

1,594,408

$

1,519,656

$

3,202,814

$

3,101,621

Unit backlog

Northeast

756

1,056

Southeast

1,325

1,371

Florida

1,347

1,338

Texas

1,895

1,666

North

1,785

1,805

Southwest

1,071

1,322

8,179

8,558

Dollars in backlog

$

2,770,134

$

2,713,733

(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,

2014

2013

2014

2013

MORTGAGE ORIGINATIONS:

Origination volume

2,469

2,812

4,583

5,534

Origination principal

$

597,273

$

643,267

$

1,092,802

$

1,265,264

Capture rate

80.3

%

79.8

%

79.3

%

81.0

%

 

Supplemental Data

($000's omitted)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2014

2013

2014

2013

Interest in inventory, beginning of period

$

225,619

$

320,859

$

230,922

$

331,880

Interest capitalized

31,455

39,909

66,768

82,565

Interest expensed

(46,471)

(62,193)

(87,087)

(115,870)

Interest in inventory, end of period

$

210,603

$

298,575

$

210,603

$

298,575

Interest incurred

$

31,455

$

39,909

$

66,768

$

82,565

SOURCE PulteGroup, Inc.



RELATED LINKS

http://www.pulte.com