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.

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 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


Nine Months Ended


September 30,


September 30,


2012


2011


2012


2011

Revenues:








Homebuilding








Home sale revenues

$

1,232,704



$

1,101,368



$

3,070,895



$

2,783,602


Land sale revenues

22,623



12,659



69,770



19,023



1,255,327



1,114,027



3,140,665



2,802,625


Financial Services

47,264



27,904



112,367



71,720


Total revenues

1,302,591



1,141,931



3,253,032



2,874,345










Homebuilding Cost of Revenues:








Home sale cost of revenues

1,023,704



947,817



2,605,249



2,422,525


Land sale cost of revenues

21,061



(2,935)



62,069



1,782



1,044,765



944,882



2,667,318



2,424,307










Financial Services expenses

20,578



19,306



62,914



78,832


Selling, general, and administrative expenses

125,191



121,553



372,691



402,379


Other expense (income), net

7,453



259,187



24,570



274,765


Interest income

(1,219)



(1,122)



(3,582)



(3,704)


Interest expense

201



322



616



990


Equity in (earnings) loss of unconsolidated entities

(284)



303



(3,836)



(1,999)


Income (loss) before income taxes

105,906



(202,500)



132,341



(301,225)


Income tax expense (benefit)

(10,727)



(73,202)



(15,062)



(77,016)


Net income (loss)

$

116,633



$

(129,298)



$

147,403



$

(224,209)










Net income (loss) per share:








Basic

$

0.31



$

(0.34)



$

0.39



$

(0.59)


Diluted

$

0.30



$

(0.34)



$

0.38



$

(0.59)










Number of shares used in calculation:








Basic

381,355



380,025



380,839



379,785


Effect of dilutive securities

3,215





2,036




Diluted

384,570



380,025



382,875



379,785



 

PulteGroup, Inc.

Condensed Consolidated Balance Sheets

($000's omitted)

(Unaudited)






September 30,
2012


December 31,
2011





ASSETS








Cash and equivalents

$

1,563,651



$

1,083,071


Restricted cash

76,730



101,860


House and land inventory

4,470,571



4,636,468


Land held for sale

129,523



135,307


Land, not owned, under option agreements

11,054



24,905


Residential mortgage loans available-for-sale

263,378



258,075


Investments in unconsolidated entities

30,794



35,988


Income taxes receivable

28,282



27,154


Other assets

414,074



420,444


Intangible assets, net

152,523



162,348



$

7,140,580



$

6,885,620










LIABILITIES AND SHAREHOLDERS' EQUITY








Liabilities:




Accounts payable

$

210,332



$

196,447


Customer deposits

122,144



46,960


Accrued and other liabilities

1,380,941



1,411,941


Income tax liabilities

202,280



203,313


Financial Services debt

103,000




Senior notes

2,999,837



3,088,344


Total liabilities

5,018,534



4,947,005






Shareholders' equity

2,122,046



1,938,615







$

7,140,580



$

6,885,620


 


PulteGroup, Inc.

Consolidating Statements of Cash Flows

($000's omitted)

(Unaudited)


Nine Months Ended


September 30,


2012


2011

Cash flows from operating activities:




Net income (loss)

$

147,403



$

(224,209)


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

12,623



11,419


Goodwill impairments



240,541


Depreciation and amortization

22,278



24,629


Stock-based compensation expense

14,368



14,444


Equity in (earnings) loss of unconsolidated entities

(3,836)



(1,999)


Distributions of earnings from unconsolidated entities

7,223



5,042


Loss on debt repurchases



3,537


Other, net

5,254



2,741


Increase (decrease) in cash due to:




Restricted cash

(966)



690


Inventories

160,973



(174,231)


Residential mortgage loans available-for-sale

(5,275)



2,182


Other assets

(1,612)



108,202


Accounts payable, accrued and other liabilities

63,832



(99,674)


Income tax liabilities

(1,033)



(73,280)


Net cash provided by (used in) operating activities

421,232



(159,966)


Cash flows from investing activities:




Distributions from unconsolidated entities

2,696



4,388


Investments in unconsolidated entities

(1,266)



(3,749)


Net change in loans held for investment

736



449


Change in restricted cash related to letters of credit

26,096



(89,385)


Proceeds from the sale of fixed assets

4,705



9,449


Capital expenditures

(10,597)



(15,162)


Net cash provided by (used in) investing activities

22,370



(94,010)


Cash flows from financing activities:




Financial Services borrowings (repayments)

103,000




Other borrowings (repayments)

(92,493)



(68,351)


Issuance of common stock

27,432




Stock repurchases

(961)



(2,021)


Net cash provided by (used in) financing activities

36,978



(70,372)


Net increase (decrease) in cash and equivalents

480,580



(324,348)


Cash and equivalents at beginning of period

1,083,071



1,483,390


Cash and equivalents at end of period

$

1,563,651



$

1,159,042






Supplemental Cash Flow Information:




Interest paid (capitalized), net

$

(28,072)



$

(29,457)


Income taxes paid (refunded), net

$

(12,901)



$

(5,665)



 

PulteGroup, Inc.

Segment Data

($000's omitted)

(Unaudited)










Three Months Ended


Nine Months Ended


September 30,


September 30,


2012


2011


2012


2011

HOMEBUILDING:








Home sale revenues

$

1,232,704



$

1,101,368



$

3,070,895



$

2,783,602


Land sale revenues

22,623



12,659



69,770



19,023


Total Homebuilding revenues

1,255,327



1,114,027



3,140,665



2,802,625










Home sale cost of revenues

1,023,704



947,817



2,605,249



2,422,525


Land sale cost of revenues

21,061



(2,935)



62,069



1,782


Selling, general, and administrative expenses

125,191



121,553



372,691



402,379


Equity in (earnings) loss of  unconsolidated entities

(243)



331



(3,714)



(1,931)


Other expense (income), net

7,453



259,187



24,570



274,765


Interest income, net

(1,018)



(800)



(2,966)



(2,714)


Income (loss) before income taxes

$

79,179



$

(211,126)



$

82,766



$

(294,181)










FINANCIAL SERVICES:








Income (loss) before income taxes

$

26,727



$

8,626



$

49,575



$

(7,044)










CONSOLIDATED:








Income (loss) before income taxes

$

105,906



$

(202,500)



$

132,341



$

(301,225)


 


PulteGroup, Inc.

Segment data, continued

($000's omitted)

(Unaudited)










Three Months Ended


Nine Months Ended


September 30,


September 30,


2012


2011


2012


2011









Home sale revenues

$

1,232,704



$

1,101,368



$

3,070,895



$

2,783,602










Closings - units








Northeast

456



515



1,224



1,231


Southeast

776



744



1,984



2,032


Florida

588



621



1,633



1,655


Texas

923



963



2,484



2,505


North

863



721



2,057



1,837


Southwest

812



634



1,969



1,712



4,418



4,198



11,351



10,972


Average selling price

$

279



$

262



$

271



$

254










Net new orders - units








Northeast

432



390



1,599



1,378


Southeast

787



625



2,384



2,108


Florida

679



479



2,147



1,844


Texas

978



775



3,212



2,681


North

939



633



2,872



2,049


Southwest

729



662



2,899



2,071



4,544



3,564



15,113



12,131


Net new orders - dollars (a)

$

1,312,490



$

916,552



$

4,257,541



$

3,125,675















September 30,






2012


2011

Unit backlog








Northeast





800



703


Southeast





1,002



807


Florida





1,172



784


Texas





1,553



1,050


North





1,524



865


Southwest





1,635



934







7,686



5,143


Dollars in backlog





$

2,246,296



$

1,398,636










(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


Nine Months Ended


September 30,


September 30,


2012


2011


2012


2011

MORTGAGE ORIGINATIONS:








Origination volume

3,073



2,585



7,697



6,667


Origination principal

$

685,001



$

549,859



$

1,681,321



$

1,363,752


Capture rate

82.6

%


78.1

%


81.3

%


77.1

%

















 

Supplemental Data

($000's omitted)

(Unaudited)










Three Months Ended


Nine Months Ended


September 30,


September 30,


2012


2011


2012


2011









Interest in inventory, beginning of period

$

358,451



$

358,806



$

355,068



$

323,379


Interest capitalized

50,730



55,230



153,369



167,367


Interest expensed

(57,155)



(48,693)



(156,411)



(125,403)


Interest in inventory, end of period

$

352,026



$

365,343



$

352,026



$

365,343


Interest incurred

$

50,730



$

55,230



$

153,369



$

167,367



 

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


September 30,
2012


June 30,
2012


March 30,

2012


December 31, 2011


September 30,
2011











Home sale revenues

$

1,232,704



$

1,024,405



$

813,786



$

1,167,141



$

1,101,368


Home sale cost of revenues

1,023,704



869,379



712,166



1,021,873



947,817


Home sale gross margin

209,000



155,026



101,620



145,268



153,551


Add:










Impairments (a)

385



633



3,700



7,885



526


Capitalized interest amortization (a)

57,155



52,070



47,186



63,979



48,693


Adjusted home sale gross margin

$

266,540



$

207,729



$

152,506



$

217,132



$

202,770












Home sale gross margin as a

   percentage of home sale revenues

17.0

%


15.1

%


12.5

%


12.4

%


13.9

%











Adjusted home sale gross margin as a

   percentage of home sale revenues

21.6

%


20.3

%


18.7

%


18.6

%


18.4

%
















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






 

SOURCE Pulte Homes, Inc.



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