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Last updated on April 24, 2014 at 21:24 EDT

PulteGroup Reports Financial Results For 2012 Fourth Quarter

January 31, 2013

BLOOMFIELD HILLS, Mich., Jan. 31, 2013 /PRNewswire/ — PulteGroup, Inc. (NYSE: PHM) announced today financial results for its fourth quarter ended December 31, 2012. For the quarter, PulteGroup reported net income of $59 million, or $0.15 per share. Reported net income includes charges of $49 million, or $0.13 per share, for potential future loan repurchase obligations, and $32 million, or $0.08 per share, relating to the repurchase of $496 million of senior notes in the period. These charges were partially offset by $8 million, or $0.02 per share, of income tax benefits associated with the favorable resolution of certain tax matters.

In the prior year fourth quarter, PulteGroup reported net income of $14 million, or $0.04 per share, inclusive of net charges totaling $27 million, or $0.07 per share, related to potential future loan repurchase obligations, land-related charges, and debt repurchases, partially offset by land-sale gains and income tax benefits.

“We are pleased to report another quarter of strong financial results that demonstrate improved fundamental operating performance and higher returns on invested capital,” said Richard J. Dugas, Jr., Chairman, President and CEO of PulteGroup. “Improving market conditions, combined with the value creation initiatives we have implemented over the last two years, helped to drive a 320 basis point increase in our adjusted gross margin to 21.8%. In addition, our continued focus on cost controls enabled us to realize a 40 basis point decrease in our SG&A as a percentage of home sales to 9.6%.”

“Fourth quarter results also demonstrated continued strong cash flow generation consistent with our focus on greater capital efficiency. For the full year, we were able to increase our cash position by $292 million after paying down almost $600 million of senior notes.”

“We now look ahead to 2013 with expectations for a continued rebound in U.S. housing driven by record low interest rates, higher rent vs. own costs, rising home prices and sharply lower overall housing inventory. Given this expectation, and consistent with our focus on improving long-term returns, we have authorized an additional $250 million per year of investment in land and related development in 2013 and 2014. This incremental investment, which will raise planned land spend for each year to approximately $1.2 billion, will be made using the same disciplined capital investment process we established 18 months ago. The incremental investment is expected to provide additional land resources for use primarily in 2014 and beyond.”

Fourth Quarter Results

Home sale revenues in the fourth quarter ended December 31, 2012, totaled $1.5 billion, an increase of 27% over the prior year’s fourth quarter. The increase in revenue was driven by a 20% increase in closings to 5,154 homes, combined with a 6% increase in average selling price to $287,000. The higher average selling price reported for the quarter reflects price increases, as well as a continued shift in product mix to include more move-up homes being closed in the period.

The Company’s adjusted home sale gross margin for the fourth quarter was 21.8%, an increase of 320 basis points over the prior year and 20 basis points compared with the third quarter of 2012. Homebuilding SG&A expense for the quarter was $142 million, or 9.6% of home sale revenues. SG&A for the prior year period was $117 million, or 10.0% of home sale revenues.

For the quarter, the Company reported 3,926 net new orders, an increase of 27% over prior year orders of 3,084. The dollar value of net new orders in the quarter was $1.2 billion, an increase of 41% over the prior year order value of $828 million. The Company operated out of 4% fewer communities in the fourth quarter of 2012 compared with the comparable prior year period. Contract backlog at year end was valued at $1.9 billion and totaled 6,458 homes, which represent increases of 82% and 65%, respectively, over the prior year.

The Company’s financial services operations reported a pretax loss of $24 million in the quarter, inclusive of a $49 million charge associated with potential future loan repurchase obligations. The increase in estimated repurchase obligations primarily reflects the Company’s expectation that repurchase requests will now continue through 2014, or a year longer than previously estimated, coupled with a higher volume of repurchase requests experienced in 2012.

During the quarter, the Company used available cash to repurchase $496 million principal value of its senior notes, resulting in a pretax charge of $32 million. Combined with transactions completed earlier in the year, the Company retired an aggregate $592 million principal value of its senior notes during 2012 which helped to lower the Company’s year-end debt and net debt-to-total capitalization to 53% and 32%, respectively.

A conference call discussing PulteGroup’s fourth quarter results will be held Thursday, January 31, 2013, at 8:30 a.m. Eastern Time, and webcast live via pultegroupinc.com. Interested investors can access the call via the Company’s home page at pultegroupinc.com, and are encouraged to download the available slides that provide additional details on the Company’s fourth quarter results.

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; and www.delwebb.com.

                                                                             PulteGroup, Inc.
                                                                    Consolidated Results of Operations
                                                                 ($000's omitted, except per share data)
                                                                               (Unaudited)

                                                                      Three Months Ended                                    Year Ended
                                                                         December 31,                                      December 31,
                                                                         ------------                                      ------------
                                                              2012                              2011           2012                 2011
                                                              ----                              ----           ----                 ----
    Revenues:
    Homebuilding
    Home sale revenues                                              $1,481,517                           $1,167,141                      $4,552,412  $3,950,743
    Land sale revenues                                      36,928                            63,830                  106,698                82,853
                                                            ------                            ------                  -------                ------
                                                         1,518,445                         1,230,971                4,659,110             4,033,596
    Financial Services                                      48,521                            31,374                  160,888               103,094
                                                            ------                            ------                  -------               -------
    Total revenues                                       1,566,966                         1,262,345                4,819,998             4,136,690
                                                         ---------                         ---------                ---------             ---------

    Homebuilding Cost of Revenues:
    Home sale cost of revenues                           1,228,201                         1,021,873                3,833,451             3,444,398
    Land sale cost of revenues                              32,811                            57,497                   94,880                59,279
                                                            ------                            ------                   ------                ------
                                                         1,261,012                         1,079,370                3,928,331             3,503,677

    Financial Services expenses                             72,597                            58,836                  135,511               137,666
    Selling, general, and administrative expenses          141,766                           117,204                  514,457               519,583
    Other expense (income), net                             41,728                            18,337                   66,298               293,102
    Interest income                                         (1,331)                           (1,351)                  (4,913)               (5,055)
    Interest expense                                           204                               323                      819                 1,313
    Equity in (earnings) loss of unconsolidated entities      (223)                           (1,299)                  (4,059)               (3,296)
                                                              ----                            ------                   ------                ------
    Income (loss) before income taxes                       51,213                            (9,075)                 183,554              (310,300)
    Income tax expense (benefit)                            (7,529)                          (22,896)                 (22,591)              (99,912)
                                                            ------
    Net income (loss)                                                  $58,742                              $13,821                        $206,145   $(210,388)
                                                                       =======                              =======                        ========   =========

    Net income (loss) per share:
    Basic                                                                $0.15                                $0.04                           $0.54      $(0.55)
                                                                         =====                                =====                           =====      ======
    Diluted                                                              $0.15                                $0.04                           $0.54      $(0.55)
                                                                         =====                                =====                           =====      ======

    Number of shares used in calculation:
    Basic                                                  383,404                           380,149                  381,562               379,877
    Effect of dilutive securities                            5,900                             1,112                    3,002                     -
                                                             -----                             -----                    -----                   ---
    Diluted                                                389,304                           381,261                  384,564               379,877
                                                           =======                           =======                  =======               =======
                              PulteGroup, Inc.
                    Condensed Consolidated Balance Sheets
                              ($000's omitted)
                                 (Unaudited)

                            December 31,                 December 31,
                                    2012                            2011
                                    ----                            ----

    ASSETS

    Cash and
     equivalents                          $1,404,760                     $1,083,071
    Restricted
     cash                         71,950                         101,860
    House and
     land
     inventory                 4,214,046                       4,636,468
    Land held
     for sale                     91,104                         135,307
    Land, not
     owned,
     under
     option
     agreements                   31,066                          24,905
    Residential
     mortgage
     loans
     available-
     for-sale                    318,931                         258,075
    Investments
     in
     unconsolidated
     entities                     45,629                          35,988
    Other assets                 407,675                         447,598
    Intangible
     assets                      149,248                         162,348
                                          $6,734,409                     $6,885,620
                                          ==========                     ==========

    LIABILITIES
     AND
     SHAREHOLDERS'
     EQUITY

    Liabilities:
    Accounts
     payable                                $178,274                       $196,447
    Customer
     deposits                    101,183                          46,960
    Accrued and
     other
     liabilities               1,418,063                       1,411,941
    Income tax
     liabilities                 198,865                         203,313
    Financial
     Services
     debt                        138,795                               -
    Senior notes               2,509,613                       3,088,344
                               ---------                       ---------
    Total
     liabilities               4,544,793                       4,947,005

     Shareholders'
     equity                    2,189,616                       1,938,615

                                          $6,734,409                     $6,885,620
                                          ==========                     ==========

                                                                                                  PulteGroup, Inc.
                                                                                       Consolidating Statements of Cash Flows
                                                                                                  ($000's omitted)
                                                                                                     (Unaudited)
                                                                                                                                               Year Ended
                                                                                                                                              December 31,
                                                                                                                                              ------------
                                                                                                                                   2012                         2011
                                                                                                                                   ----                         ----
    Cash flows from operating activities:
    Net income (loss)                                                                                                                      $206,145                    $(210,388)
    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                                                                    17,195                       35,786
    Goodwill impairments                                                                                                              -                      240,541
    Amortization and depreciation                                                                                                30,027                       32,098
    Stock-based compensation expense                                                                                             22,897                       16,970
    Loss on debt repurchases                                                                                                     32,071                        5,638
    Equity in (earnings) loss of unconsolidated entities                                                                         (4,059)                      (3,296)
    Distributions of earnings from unconsolidated entities                                                                        7,488                        7,083
    Other non-cash, net                                                                                                          10,356                       12,188
    Increase (decrease) in cash due to:
    Restricted cash                                                                                                               1,257                        5,940
    Inventories                                                                                                                 455,223                       54,891
    Residential mortgage loans available-for-sale                                                                               (60,828)                     (82,113)
    Other assets                                                                                                                 26,014                      182,471
    Accounts payable, accrued and other liabilities                                                                              20,802                    (189,435)
    Income tax liabilities                                                                                                       (4,448)                     (91,095)
    Net cash provided by (used in) operating activities                                                                         760,140                       17,279
                                                                                                                                -------                       ------
    Cash flows from investing activities:
    Distributions from unconsolidated entities                                                                                    3,029                        4,531
    Investments in unconsolidated entities                                                                                      (16,456)                      (4,603)
    Net change in loans held for investment                                                                                         836                          325
    Change in restricted cash related to letters of credit                                                                       28,653                      (83,199)
    Proceeds from the sale of property and equipment                                                                              7,586                       10,555
    Capital expenditures                                                                                                        (13,942)                     (21,238)
    Net cash provided by (used in) investing activities                                                                           9,706                      (93,629)
                                                                                                                                  -----                      -------
    Cash flows from financing activities:
    Financial Services borrowings (repayments)                                                                                  138,795                            -
    Other borrowings (repayments)                                                                                              (618,800)                   (321,133)
    Stock option exercises                                                                                                       32,809                            -
    Stock repurchases                                                                                                              (961)                      (2,836)
    Net cash provided by (used in) financing activities                                                                        (448,157)                   (323,969)
                                                                                                                               --------                     --------
    Net increase (decrease) in cash and equivalents                                                                             321,689                    (400,319)
    Cash and equivalents at beginning of period                                                                               1,083,071                    1,483,390
    Cash and equivalents at end of period                                                                                                $1,404,760                   $1,083,071
                                                                                                                                         ==========                   ==========

    Supplemental Cash Flow Information:
    Interest paid (capitalized), net                                                                                                        $(1,470)                     $(9,623)
                                                                                                                                            =======                      =======
    Income taxes paid (refunded), net                                                                                                      $(13,322)                    $(62,167)
                                                                                                                                           ========                     ========
                                                                           PulteGroup, Inc.
                                                                             Segment Data
                                                                           ($000's omitted)
                                                                             (Unaudited)

                                                                      Three Months Ended                                 Year Ended
                                                                         December 31,                                   December 31,
                                                                         ------------                                   ------------
                                                              2012                              2011        2012                 2011
                                                              ----                              ----        ----                 ----
    HOMEBUILDING:
    Home sale revenues                                              $1,481,517                        $1,167,141                      $4,552,412  $3,950,743
    Land sale revenues                                      36,928                            63,830                106,698               82,853
                                                            ------                            ------                -------               ------
    Total Homebuilding revenues                          1,518,445                         1,230,971              4,659,110            4,033,596

    Home sale cost of revenues                           1,228,201                         1,021,873              3,833,451            3,444,398
    Land sale cost of revenues                              32,811                            57,497                 94,880               59,279
    Selling, general, and administrative expenses          141,766                           117,204                514,457              519,583
    Equity in (earnings) loss of unconsolidated entities      (159)                           (1,263)                (3,873)              (3,194)
    Other expense (income), net                             41,728                            18,337                 66,298              293,102
    Interest income, net                                    (1,127)                           (1,028)                (4,094)              (3,742)
                                                            ------
    Income (loss) before income taxes                                  $75,225                           $18,351                        $157,991   $(275,830)
                                                                       =======                           =======                        ========   =========

    FINANCIAL SERVICES:
    Income (loss) before income taxes                                 $(24,012)                         $(27,426)                        $25,563    $(34,470)
                                                                      ========                          ========                         =======    ========

    CONSOLIDATED:
    Income (loss) before income taxes                                  $51,213                           $(9,075)                       $183,554   $(310,300)
                                                                       =======                           =======                        ========   =========

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

                                                                              Three Months Ended                                        Year Ended
                                                                                 December 31,                                          December 31,
                                                                                 ------------                                          ------------
                                                                      2012                           2011                   2012                 2011
                                                                      ----                           ----                   ----                 ----

    Home sale revenues                                                      $1,481,517                                $1,167,141                                  $4,552,412            $3,950,743
                                                                            ==========                                ==========                                  ==========            ==========

    Closings - units
    Northeast                                                          576                            649                              1,800                           1,880
    Southeast                                                          773                            739                              2,757                           2,771
    Florida                                                            707                            596                              2,340                           2,251
    Texas                                                            1,003                            822                              3,487                           3,327
    North                                                            1,046                            742                              3,103                           2,579
    Southwest                                                        1,049                            755                              3,018                           2,467
                                                                     5,154                          4,303                             16,505                          15,275
                                                                     =====                          =====                             ======                          ======
    Average selling price                                                         $287                                      $271                                        $276                  $259
                                                                                  ====                                      ====                                        ====                  ====

    Net new orders - units
    Northeast                                                          398                            371                              1,997                           1,749
    Southeast                                                          682                            534                              3,066                           2,642
    Florida                                                            600                            470                              2,747                           2,314
    Texas                                                              905                            597                              4,117                           3,278
    North                                                              789                            586                              3,661                           2,635
    Southwest                                                          552                            526                              3,451                           2,597
                                                                     3,926                          3,084                             19,039                          15,215
                                                                     =====                          =====                             ======                          ======
    Net new orders - dollars (a)                                            $1,166,760                                  $828,154                                  $5,424,300            $3,953,829
                                                                            ==========                                  ========                                  ==========            ==========

                                                                                                                                   December 31,
                                                                                                                                   ------------
                                                                                                                           2012                 2011
                                                                                                                           ----                 ----
    Unit backlog
    Northeast                                                                                                               622                             425
    Southeast                                                                                                               911                             602
    Florida                                                                                                               1,065                             658
    Texas                                                                                                                 1,455                             825
    North                                                                                                                 1,267                             709
    Southwest                                                                                                             1,138                             705
                                                                                                                          6,458                           3,924
                                                                                                                          =====                           =====
    Dollars in backlog                                                                                                           $1,931,538                                  $1,059,649
                                                                                                                                 ==========                                  ==========

    (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                                    Year Ended
                                                        December 31,                                      December 31,
                                                        ------------                                      ------------
                                                  2012                   2011                  2012                 2011
                                                  ----                   ----                  ----                 ----
    MORTGAGE ORIGINATIONS:
    Origination volume                           3,625                             2,815                          11,322       9,482
                                                 =====                             =====                          ======       =====
    Origination principal                                $828,607                                   $622,473              $2,509,928  $1,986,225
                                                         ========                                   ========              ==========  ==========
    Capture rate                                  83.0%                             81.8%                           81.9%       78.5%
                                                  ====        ===                   ====                            ====        ====

                                                                  Supplemental Data
                                                                   ($000's omitted)
                                                                     (Unaudited)

                                                   Three Months Ended                                Year Ended
                                                      December 31,                                  December 31,
                                                      ------------                                  ------------
                                                  2012                   2011                  2012                 2011
                                                  ----                   ----                  ----                 ----

    Interest in inventory, beginning of period           $352,026                                   $365,343                $355,068    $323,379
    Interest capitalized                        47,734                            53,704                         201,103     221,071
    Interest expensed                          (67,880)                          (63,979)                       (224,291)   (189,382)
    Interest in inventory, end of period                 $331,880                                   $355,068                $331,880    $355,068
                                                         ========                                   ========                ========    ========
    Interest incurred                                     $47,734                                    $53,704                $201,103    $221,071
                                                          =======                                    =======                ========    ========

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
                                                                                                                                   ------------------
                                                                                      December 31,              September 30,            June 30,              March 31,   December 31,
                                                                                              2012                       2012                 2012                   2012          2011
                                                                                              ----                       ----                 ----                   ----          ----

    Home sale revenues                                                                              $1,481,517                                      $1,232,704                          $1,024,405             $813,786 $1,167,141
    Home sale cost of revenues                                                           1,228,201                            1,023,704                           869,379                  712,166  1,021,873
                                                                                         ---------                            ---------                           -------                  -------  ---------
    Home sale gross margin                                                                 253,316                              209,000                           155,026                  101,620    145,268
    Add:
    Impairments (a)                                                                          2,250                                  385                               633                    3,700      7,885
    Capitalized interestamortization (a)                                                    67,880                               57,155                            52,070                   47,186     63,979
                                                                                            ------                               ------                            ------                              ------
    Adjusted home sale gross margin                                                                   $323,446                                        $266,540                            $207,729             $152,506   $217,132
                                                                                                      ========                                        ========                            ========             ========   ========

    Home sale gross margin as a                                                               17.1%                                17.0%                             15.1%                    12.5%      12.4%
    percentage of home sale revenues

    Adjusted home sale gross margin as a                                                      21.8%                                21.6%                             20.3%                    18.7%      18.6%
    percentage of home sale revenues

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

SOURCE PulteGroup, Inc.


Source: PR Newswire