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 PR Newswire BLOOMFIELD HILLS, Mich., Oct. 25, 2012 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 approximately60 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 1,023,704 947,817 2,605,249 2,422,525 revenues Land sale cost of 21,061 (2,935) 62,069 1,782 revenues 1,044,765 944,882 2,667,318 2,424,307 Financial Services 20,578 19,306 62,914 78,832 expenses Selling, general, and 125,191 121,553 372,691 402,379 administrative expenses Other expense (income), 7,453 259,187 24,570 274,765 net Interest income (1,219) (1,122) (3,582) (3,704) Interest expense 201 322 616 990 Equity in (earnings) loss of unconsolidated (284) 303 (3,836) (1,999) entities Income (loss) before 105,906 (202,500) 132,341 (301,225) income taxes Income tax expense (10,727) (73,202) (15,062) (77,016) (benefit) 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 3,215 — 2,036 — securities Diluted 384,570 380,025 382,875 379,785 PulteGroup, Inc. Condensed Consolidated Balance Sheets ($000's omitted) (Unaudited) September30, December31, 2012 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 12,623 11,419 costs 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 (3,836) (1,999) entities Distributions of earnings from unconsolidated 7,223 5,042 entities 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 26,096 (89,385) credit 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 1,255,327 1,114,027 3,140,665 2,802,625 revenues Home sale cost of 1,023,704 947,817 2,605,249 2,422,525 revenues Land sale cost of 21,061 (2,935) 62,069 1,782 revenues Selling, general, and 125,191 121,553 372,691 402,379 administrative expenses Equity in (earnings) loss of unconsolidated (243) 331 (3,714) (1,931) entities Other expense (income), 7,453 259,187 24,570 274,765 net Interest income, net (1,018) (800) (2,966) (2,714) Income (loss) before $ 79,179 $ (211,126) $ 82,766 $ (294,181) income taxes FINANCIAL SERVICES: Income (loss) before $ 26,727 $ 8,626 $ 49,575 $ (7,044) income taxes CONSOLIDATED: Income (loss) before $ 105,906 $ (202,500) $ 132,341 $ (301,225) income taxes 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 $ 1,232,704 $ 1,101,368 $ 3,070,895 $ 2,783,602 revenues 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 $ 279 $ 262 $ 271 $ 254 price 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 - $ 1,312,490 $ 916,552 $ 4,257,541 $ 3,125,675 dollars (a) 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 $ 2,246,296 $ 1,398,636 backlog (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, $ 358,451 $ 358,806 $ 355,068 $ 323,379 beginning of period 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 $ 352,026 $ 365,343 $ 352,026 $ 365,343 period 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 September30, June30, March30, December31, September30, 2012 2012 2011 2011 2012 Home sale $ 1,232,704 $ 1,024,405 $ 813,786 $ 1,167,141 $ 1,101,368 revenues Home sale cost of 1,023,704 869,379 712,166 1,021,873 947,817 revenues Home sale 209,000 155,026 101,620 145,268 153,551 gross margin Add: Impairments 385 633 3,700 7,885 526 (a) Capitalized interest 57,155 52,070 47,186 63,979 48,693 amortization (a) Adjusted home sale $ 266,540 $ 207,729 $ 152,506 $ 217,132 $ 202,770 gross margin Home sale gross margin as a 17.0 % 15.1 % 12.5 % 12.4 % 13.9 % percentage of home sale revenues Adjusted home sale gross margin as a 21.6 % 20.3 % 18.7 % 18.6 % 18.4 % percentage of home sale revenues (a) Write-offs of capitalized interest related to impairments are reflected in capitalized interest amortization. SOURCE Pulte Homes, Inc. Website: http://www.pulte.com Contact: Investors: Jim Zeumer, +1-248-433-4502, firstname.lastname@example.org
PulteGroup Reports Third Quarter 2012 Financial Results
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