Document
false--12-31Q220200000822416PULTEGROUP INC/MI/trueP7YP5Y0.04250.055000.050.060.063750.078750.04250.0550.050.060.063750.07875104000002700000000<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;">Self-insured risks</font></div><div style="line-height:120%;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">We maintain, and require our subcontractors to maintain, general liability insurance coverage. We also maintain builders' risk, property, errors and omissions, workers' compensation, and other business insurance coverage. These insurance policies protect us against a portion of the risk of loss from claims. However, we retain a significant portion of the overall risk for such claims either through policies issued by our captive insurance subsidiaries or through our own self-insured per occurrence and aggregate retentions, deductibles, and claims in excess of available insurance policy limits. </font></div><div style="line-height:120%;text-align:left;padding-left:24px;text-indent:36px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Our general liability insurance includes coverage for certain construction defects. While construction defect claims can relate to a variety of circumstances, the majority of our claims relate to alleged problems with siding, plumbing, foundations and other concrete work, windows, roofing, and heating, ventilation and air conditioning systems. The availability of general liability insurance for the homebuilding industry and its subcontractors has become increasingly limited, and the insurance policies available require us to maintain significant per occurrence and aggregate retention levels. In certain instances, we may offer our subcontractors the opportunity to purchase insurance through one of our captive insurance subsidiaries or participate in a project-specific insurance program provided by us. Policies issued by our captive insurance subsidiaries represent self-insurance of these risks by us. This self-insured exposure is limited by reinsurance policies that we purchase. General liability coverage for the homebuilding industry is complex, and our coverage varies from policy year to policy year. Our insurance coverage requires a per occurrence deductible up to an overall aggregate retention level. Beginning with the first dollar, amounts paid to satisfy insured claims generally apply to our per occurrence and aggregate retention obligations. Any amounts incurred in excess of the occurrence or aggregate retention levels are covered by insurance up to our purchased coverage levels. Our insurance policies, including the captive insurance subsidiaries' reinsurance policies, are maintained with highly-rated underwriters for whom we believe counterparty default risk is not significant.</font></div><div style="line-height:120%;text-align:left;padding-left:24px;text-indent:36px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">At any point in time, we are managing over </font><font style="font-family:inherit;font-size:10pt;">1,000</font><font style="font-family:inherit;font-size:10pt;"> individual claims related to general liability, property, errors and omissions, workers' compensation, and other business insurance coverage. We reserve for costs associated with such claims (including expected claims management expenses) on an undiscounted basis at the time revenue is recognized for each home closing and periodically evaluate the recorded liabilities based on actuarial analyses of our historical claims. The actuarial analyses calculate estimates of the ultimate net cost of all unpaid losses, including estimates for incurred but not reported losses ("IBNR"). IBNR represents losses related to claims incurred but not yet reported plus development on reported claims.</font></div><div style="line-height:120%;text-align:left;padding-left:24px;text-indent:36px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Our recorded reserves for all such claims totaled </font><font style="font-family:inherit;font-size:10pt;">$640.0 million</font><font style="font-family:inherit;font-size:10pt;"> and </font><font style="font-family:inherit;font-size:10pt;">$709.8 million</font><font style="font-family:inherit;font-size:10pt;"> at </font><font style="font-family:inherit;font-size:10pt;">June&#160;30, 2020</font><font style="font-family:inherit;font-size:10pt;"> and </font><font style="font-family:inherit;font-size:10pt;">December&#160;31, 2019</font><font style="font-family:inherit;font-size:10pt;">, respectively. The recorded reserves include loss estimates related to both (i) existing claims and related claim expenses and (ii) IBNR and related claim expenses. Liabilities related to IBNR and related claim expenses represented approximately </font><font style="font-family:inherit;font-size:10pt;">69%</font><font style="font-family:inherit;font-size:10pt;"> and </font><font style="font-family:inherit;font-size:10pt;">68%</font><font style="font-family:inherit;font-size:10pt;"> of the total general liability reserves at </font><font style="font-family:inherit;font-size:10pt;">June&#160;30, 2020</font><font style="font-family:inherit;font-size:10pt;"> and </font><font style="font-family:inherit;font-size:10pt;">December&#160;31, 2019</font><font style="font-family:inherit;font-size:10pt;">, respectively. The actuarial analyses that determine the IBNR portion of reserves consider a variety of factors, including the frequency and severity of losses, which are based on our historical claims experience supplemented by industry data. The actuarial analyses of the reserves also consider historical third party recovery rates and claims management expenses. </font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Housing market conditions can be volatile, and we believe such conditions can affect the frequency and cost of construction defect claims. Additionally, IBNR estimates comprise the majority of our liability and are subject to a high degree of uncertainty due to a variety of factors, including changes in claims reporting and resolution patterns, third party recoveries, insurance industry practices, the regulatory environment, and legal precedent. State regulations vary, but construction defect claims are typically reported and resolved over an extended period, often exceeding ten years. Changes in the frequency and timing of reported claims and estimates of specific claim values can impact the underlying inputs and trends utilized in the actuarial analyses, which could have a material impact on the recorded reserves. Additionally, the amount of insurance coverage available for each policy period also impacts our recorded reserves. Because of the inherent uncertainty in estimating future losses and the timing of such losses related to these claims, actual costs could differ significantly from estimated costs. </font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Adjustments to reserves are recorded in the period in which the change in estimate occurs. We reduced general liability reserves by </font><font style="font-family:inherit;font-size:10pt;">$60.7 million</font><font style="font-family:inherit;font-size:10pt;"> and </font><font style="font-family:inherit;font-size:10pt;">$59.4 million</font><font style="font-family:inherit;font-size:10pt;"> during the </font><font style="font-family:inherit;font-size:10pt;">three and six months ended</font><font style="font-family:inherit;font-size:10pt;"> </font><font style="font-family:inherit;font-size:10pt;">June&#160;30, 2020</font><font style="font-family:inherit;font-size:10pt;">, respectively, and </font><font style="font-family:inherit;font-size:10pt;">$12.8 million</font><font style="font-family:inherit;font-size:10pt;"> and </font><font style="font-family:inherit;font-size:10pt;">$16.6 million</font><font style="font-family:inherit;font-size:10pt;"> during the </font><font style="font-family:inherit;font-size:10pt;">three and six months ended</font><font style="font-family:inherit;font-size:10pt;"> </font><font style="font-family:inherit;font-size:10pt;">June&#160;30, 2019</font><font style="font-family:inherit;font-size:10pt;">, respectively, </font><font style="font-family:inherit;font-size:10pt;color:#212529;">as a result of changes in estimates resulting from actual claim experience being less than anticipated in previous actuarial projections. The changes in actuarial estimates were driven by changes in actual claims experience that, in turn, impacted actuarial estimates for potential future claims. These changes in actuarial estimates did not involve any changes in actuarial methodology but did impact the development of estimates for future periods, which resulted in adjustments to the IBNR portion of our recorded liabilities. </font><font style="font-family:inherit;font-size:10pt;">Costs associated with </font></div></div> 0000822416 2020-01-01 2020-06-30 0000822416 2020-07-16 0000822416 phm:SeriesAJuniorParticipatingPreferredSharePurchaseRightsMember 2020-01-01 2020-06-30 0000822416 us-gaap:CommonStockMember 2020-01-01 2020-06-30 0000822416 2019-12-31 0000822416 2020-06-30 0000822416 us-gaap:RealEstateMember 2019-01-01 2019-06-30 0000822416 us-gaap:LandMember 2019-01-01 2019-06-30 0000822416 us-gaap:HomeBuildingMember 2019-01-01 2019-06-30 0000822416 2019-04-01 2019-06-30 0000822416 2020-04-01 2020-06-30 0000822416 us-gaap:LandMember 2020-04-01 2020-06-30 0000822416 us-gaap:HomeBuildingMember 2019-04-01 2019-06-30 0000822416 2019-01-01 2019-06-30 0000822416 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

 
 OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)


 
OF THE SECURITIES EXCHANGE ACT OF 1934



Commission File Number 1-9804

PULTEGROUP, INC.
(Exact name of registrant as specified in its charter) 
Michigan
38-2766606
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
3350 Peachtree Road NE, Suite 150
Atlanta,
Georgia
30326
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:
404
978-6400
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Shares, par value $0.01
 
PHM
 
New York Stock Exchange
Series A Junior Participating Preferred Share Purchase Rights
 
 
 
New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  [X]   No  [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  [X]   No  [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
  
Accelerated filer
  
Non-accelerated filer
  
Smaller reporting company
Emerging growth company
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  
Yes
No
 
Number of common shares outstanding as of July 16, 2020: 268,177,660

1


PULTEGROUP, INC.
TABLE OF CONTENTS

 
 
Page
No.
PART I
 
 
 
 
Item 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2
 
 
 
Item 3
 
 
 
Item 4
 
 
 
PART II
 
 
 
Item 1A
 
 
 
Item 2
 
 
 
Item 6
 
 
 
 
 





2


PART I. FINANCIAL INFORMATION

Item 1.      Financial Statements

PULTEGROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($000’s omitted)
 
 
June 30,
2020
 
December 31,
2019
 
(Unaudited)
 
 
ASSETS
 
 
 
 
 
 
 
Cash and equivalents
$
1,658,530

 
$
1,217,913

Restricted cash
39,266

 
33,543

Total cash, cash equivalents, and restricted cash
1,697,796

 
1,251,456

House and land inventory
7,584,739

 
7,680,614

Land held for sale
29,409

 
24,009

Residential mortgage loans available-for-sale
394,288

 
508,967

Investments in unconsolidated entities
47,707

 
59,766

Other assets
910,271

 
895,686

Intangible assets
173,507

 
124,992

Deferred tax assets, net
120,768

 
170,107

 
$
10,958,485

 
$
10,715,597

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
Liabilities:
 
 
 
Accounts payable
$
295,249

 
$
435,916

Customer deposits
335,040

 
294,427

Accrued and other liabilities
1,302,822

 
1,399,368

Income tax liabilities
146,729

 
36,093

Financial Services debt
256,359

 
326,573

Notes payable
2,770,618

 
2,765,040

 
5,106,817

 
5,257,417

Shareholders' equity
5,851,668

 
5,458,180

 
$
10,958,485

 
$
10,715,597





See accompanying Notes to Condensed Consolidated Financial Statements.


3


PULTEGROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(000’s omitted, except per share data)
(Unaudited)
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Revenues:
 
 
 
 
 
 
 
Homebuilding
 
 
 
 
 
 
 
Home sale revenues
$
2,472,029

 
$
2,403,559

 
$
4,693,532

 
$
4,353,415

Land sale and other revenues
26,950

 
29,469

 
45,877

 
32,445

 
2,498,979

 
2,433,028

 
4,739,409

 
4,385,860

Financial Services
94,802

 
55,957

 
149,352

 
99,819

Total revenues
2,593,781

 
2,488,985

 
4,888,761

 
4,485,679

 
 
 
 
 
 
 
 
Homebuilding Cost of Revenues:
 
 
 
 
 
 
 
Home sale cost of revenues
(1,880,209
)
 
(1,848,155
)
 
(3,575,074
)
 
(3,340,946
)
Land sale and other cost of revenues
(20,041
)
 
(26,214
)
 
(35,055
)
 
(28,265
)
 
(1,900,250
)
 
(1,874,369
)
 
(3,610,129
)
 
(3,369,211
)
 
 
 
 
 
 
 
 
Financial Services expenses
(34,378
)
 
(30,901
)
 
(69,327
)
 
(62,350
)
Selling, general, and administrative expenses
(196,858
)
 
(259,440
)
 
(460,527
)
 
(512,166
)
Goodwill impairment

 

 
(20,190
)
 

Other expense, net
(5,286
)
 
(3,499
)
 
(7,810
)
 
(4,473
)
Income before income taxes
457,009

 
320,776

 
720,778

 
537,479

Income tax expense
(108,389
)
 
(79,735
)
 
(168,447
)
 
(129,681
)
Net income
$
348,620

 
$
241,041

 
$
552,331

 
$
407,798

 
 
 
 
 
 
 
 
Per share:
 
 
 
 
 
 
 
Basic earnings
$
1.29

 
$
0.86

 
$
2.03

 
$
1.46

Diluted earnings
$
1.29

 
$
0.86

 
$
2.03

 
$
1.45

Cash dividends declared
$
0.12

 
$
0.11

 
$
0.24

 
$
0.22

 
 
 
 
 
 
 
 
Number of shares used in calculation:



 
 
 
 
Basic
268,324

 
276,652

 
269,167

 
277,142

Effect of dilutive securities
701

 
932

 
960

 
967

Diluted
269,025

 
277,584

 
270,127

 
278,109




See accompanying Notes to Condensed Consolidated Financial Statements.


4


PULTEGROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($000’s omitted)
(Unaudited)

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Net income
$
348,620

 
$
241,041

 
$
552,331

 
$
407,798

 
 
 
 
 
 
 
 
Other comprehensive income, net of tax:
 
 
 
 
 
 
 
Change in value of derivatives
25

 
25

 
50

 
50

Other comprehensive income
25

 
25

 
50

 
50

 
 
 
 
 
 
 
 
Comprehensive income
$
348,645

 
$
241,066

 
$
552,381

 
$
407,848






See accompanying Notes to Condensed Consolidated Financial Statements.


5



PULTEGROUP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(000's omitted)
(Unaudited)
 
Common Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Income
(Loss)
 
Retained
Earnings
 
Total
Shares
 
$
 
Shareholders' equity, March 31, 2020
268,149

 
$
2,681

 
$
3,247,475

 
$
(220
)
 
$
2,280,455

 
$
5,530,391

Stock option exercises
6

 

 
48

 

 

 
48

Share issuances
23

 
1

 

 

 

 
1

Dividends declared

 

 

 

 
(32,447
)
 
(32,447
)
Cash paid for shares withheld for taxes

 

 

 

 
(15
)
 
(15
)
Share-based compensation

 

 
5,045

 

 

 
5,045

Net income

 

 

 

 
348,620

 
348,620

Other comprehensive income

 

 

 
25

 

 
25

Shareholders' equity, June 30, 2020
268,178

 
$
2,682

 
$
3,252,568

 
$
(195
)
 
$
2,596,613

 
$
5,851,668

 
 
 
 
 
 
 
 
 
 
 
 
Shareholders' equity, December 31, 2019
270,235

 
$
2,702

 
$
3,235,149

 
$
(245
)
 
$
2,220,574

 
$
5,458,180

Cumulative effect of accounting change (see Note 1)

 

 

 

 
(735
)
 
(735
)
Stock option exercises
13

 

 
99

 

 

 
99

Share issuances
755

 
8

 
4,088

 

 

 
4,096

Dividends declared

 

 

 

 
(65,056
)
 
(65,056
)
Share repurchases
(2,825
)
 
(28
)
 

 

 
(95,648
)
 
(95,676
)
Cash paid for shares withheld for taxes

 

 

 

 
(14,853
)
 
(14,853
)
Share-based compensation

 

 
13,232

 

 

 
13,232

Net income

 

 

 

 
552,331

 
552,331

Other comprehensive income

 

 

 
50

 

 
50

Shareholders' equity, June 30, 2020
268,178

 
$
2,682

 
$
3,252,568

 
$
(195
)
 
$
2,596,613

 
$
5,851,668



6


PULTEGROUP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(000's omitted)
(Unaudited)
 
Common Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Income
(Loss)
 
Retained
Earnings
 
Total
Shares
 
$
 
Shareholders' equity, March 31, 2019
277,256


$
2,771


$
3,216,473


$
(320
)
 
$
1,714,515

 
$
4,933,439

Stock option exercises
316

 
3

 
3,761

 

 

 
3,764

Share issuances
26

 
2

 
(2
)
 

 

 

Dividends declared

 

 

 

 
(30,633
)
 
(30,633
)
Share repurchases
(2,623
)
 
(26
)
 

 

 
(83,445
)
 
(83,471
)
Cash paid for shares withheld for taxes

 

 

 

 

 

Share-based compensation

 

 
5,642

 

 

 
5,642

Net income

 

 

 

 
241,041

 
241,041

Other comprehensive income

 

 

 
25

 

 
25

Shareholders' equity, June 30, 2019
274,975

 
$
2,750

 
$
3,225,874

 
$
(295
)
 
$
1,841,478

 
$
5,069,807

 
 
 
 
 
 
 
 
 
 
 
 
Shareholders' equity, December 31, 2018
277,110

 
$
2,771

 
$
3,201,427

 
$
(345
)
 
$
1,613,929

 
$
4,817,782

Stock option exercises
434

 
4

 
5,205

 

 

 
5,209

Share issuances
974

 
10

 
5,790

 

 

 
5,800

Dividends declared

 

 

 

 
(61,463
)
 
(61,463
)
Share repurchases
(3,543
)
 
(35
)
 

 

 
(108,436
)
 
(108,471
)
Cash paid for shares withheld for taxes

 

 

 

 
(10,350
)
 
(10,350
)
Share-based compensation

 

 
13,452

 

 

 
13,452

Net income

 

 

 

 
407,798

 
407,798

Other comprehensive income

 

 

 
50

 

 
50

Shareholders' equity, June 30, 2019
274,975

 
$
2,750


$
3,225,874


$
(295
)

$
1,841,478


$
5,069,807


7


PULTEGROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($000’s omitted)
(Unaudited)
 
Six Months Ended
 
June 30,
 
2020
 
2019
Cash flows from operating activities:
 
 
 
Net income
$
552,331

 
$
407,798

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Deferred income tax expense
49,661

 
51,458

Land-related charges
12,181


6,810

Goodwill impairment
20,190

 

Depreciation and amortization
31,538

 
26,497

Share-based compensation expense
16,682

 
17,304

Other, net
(975
)
 
2,664

Increase (decrease) in cash due to:
 
 
 
Inventories
101,766

 
(399,520
)
Residential mortgage loans available-for-sale
114,139

 
116,974

Other assets
(3,772
)
 
31,593

Accounts payable, accrued and other liabilities
(85,869
)
 
44,129

Net cash provided by (used in) operating activities
807,872

 
305,707

Cash flows from investing activities:
 
 
 
Capital expenditures
(36,746
)
 
(29,575
)
Investments in unconsolidated entities
12,955

 
(4,664
)
Business acquisition
(83,256
)
 
(163,724
)
Other investing activities, net
1,597

 
4,592

Net cash provided by (used in) investing activities
(105,450
)
 
(193,371
)
Cash flows from financing activities:
 
 
 
Repayments of notes payable
(10,106
)
 
(297,303
)
Borrowings under revolving credit facility
700,000

 

Repayments under revolving credit facility
(700,000
)
 

Financial Services borrowings (repayments)
(70,214
)
 
(114,226
)
Stock option exercises
99

 
5,208

Share repurchases
(95,676
)
 
(108,471
)
Cash paid for shares withheld for taxes
(14,853
)
 
(10,350
)
Dividends paid
(65,332
)
 
(61,620
)
Net cash provided by (used in) financing activities
(256,082
)
 
(586,762
)
Net increase (decrease) in cash, cash equivalents, and restricted cash
446,340

 
(474,426
)
Cash, cash equivalents, and restricted cash at beginning of period
1,251,456

 
1,133,700

Cash, cash equivalents, and restricted cash at end of period
$
1,697,796

 
$
659,274

 
 
 
 
Supplemental Cash Flow Information:
 
 
 
Interest paid (capitalized), net
$
3,206

 
$
5,560

Income taxes paid (refunded), net
$
5,865

 
$
12,618




See accompanying Notes to Condensed Consolidated Financial Statements.

8


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


1. Basis of presentation

PulteGroup, Inc. is one of the largest homebuilders in the United States ("U.S."), and our common shares trade on the New York Stock Exchange under the ticker symbol “PHM”. Unless the context otherwise requires, the terms "PulteGroup", the "Company", "we", "us", and "our" used herein refer to PulteGroup, Inc. and its subsidiaries. While our subsidiaries engage primarily in the homebuilding business, we also engage in mortgage banking operations, conducted through Pulte Mortgage LLC (“Pulte Mortgage”), and title and insurance brokerage operations.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal, recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with our consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Subsequent events

We evaluated subsequent events up until the time the financial statements were filed with the Securities and Exchange Commission (the "SEC").

Business acquisition

In January 2020, we acquired the operations of Innovative Construction Group ("ICG"), an offsite construction framing company located in Jacksonville, Florida, for $104.0 million, of which $83.3 million was paid in January 2020 while additional payments of $10.4 million will be settled in 2021 and 2022, respectively. The acquired net assets were recorded at their estimated fair values, including intangible assets of $27.8 million associated with customer relationships and $1.8 million associated with the ICG tradename, which are being amortized over seven- and five-year useful lives, respectively. The acquisition also resulted in $48.7 million of goodwill. The acquisition of these assets was not material to our results of operations or financial condition.

Goodwill impairment

In accordance with ASC 350, management evaluates the recoverability of goodwill by comparing the carrying value of the Company’s reporting units to their fair value. Fair value is determined using accepted valuation methods, including the use of discounted cash flows supplemented by market-based assessments of fair value. As a result of the significant decline in equity market valuations that occurred during the period between our acquisition of ICG in January 2020 and March 31, 2020, we determined that an event-driven goodwill impairment test was appropriate for the ICG goodwill, which resulted in an impairment totaling $20.2 million in the first quarter of 2020. This impairment was not the result of any unique factors specific to ICG's operations but, rather, reflected the broad-based declines in the market capitalizations of publicly-traded construction companies in the short period of time between the acquisition and the March 31, 2020 valuation date.

Restructuring costs

We recorded severance expense of $10.3 million during the three months ended June 30, 2020, as we took actions to reduce overhead expenses in response to lower demand resulting from the COVID-19 pandemic.



9


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


Other expense, net

Other expense, net consists of the following ($000’s omitted): 
 
Three Months Ended
 
Six Months Ended
June 30,
 
June 30,
2020
 
2019
 
2020
 
2019
Write-offs of deposits and pre-acquisition costs
$
(2,311
)
 
$
(2,516
)
 
$
(6,643
)
 
$
(5,433
)
Amortization of intangible assets
(5,045
)
 
(3,550
)
 
(9,602
)
 
(7,000
)
Loss on debt retirement

 
(4,843
)
 

 
(4,843
)
Interest income
1,326

 
4,471

 
5,133

 
9,420

Interest expense
(3,000
)
 
(146
)
 
(3,796
)
 
(290
)
Equity in earnings of unconsolidated entities
334

 
129

 
902

 
165

Miscellaneous, net
3,410

 
2,956

 
6,196

 
3,508

Total other expense, net
$
(5,286
)
 
$
(3,499
)
 
$
(7,810
)
 
$
(4,473
)


Revenue recognition

Home sale revenues - Home sale revenues and related profit are generally recognized when title to and possession of the home are transferred to the buyer at the home closing date. Our performance obligation to deliver the agreed-upon home is generally satisfied at the home closing date. Home sale contract assets consist of cash from home closings held in escrow for our benefit, typically for less than five days, which are considered deposits in-transit and classified as cash. Contract liabilities include customer deposits related to sold but undelivered homes, which totaled $335.0 million and $294.4 million at June 30, 2020 and December 31, 2019, respectively. Substantially all of our home sales are scheduled to close and be recorded to revenue within one year from the date of receiving a customer deposit. See Note 8 for information on warranties and related obligations.

Land sale and other revenues - We periodically elect to sell parcels of land to third parties in the event such assets no longer fit into our strategic operating plans or are zoned for commercial or other development. Land sales are generally outright sales of specified land parcels with cash consideration due on the closing date, which is generally when performance obligations are satisfied. Revenues related to our construction services operations are generally recognized as materials are delivered and installation services are completed.

Financial services revenues - Loan origination fees, commitment fees, and certain direct loan origination costs are recognized as incurred. Expected gains and losses from the sale of residential mortgage loans and their related servicing rights are included in the measurement of written loan commitments that are accounted for at fair value through Financial Services revenues at the time of commitment. Subsequent changes in the fair value of these loans are reflected in Financial Services revenues as they occur. Interest income is accrued from the date a mortgage loan is originated until the loan is sold. Mortgage servicing fees represent fees earned for servicing loans. Servicing fees are based on a contractual percentage of the outstanding principal balance and are credited to income when related mortgage payments are received.

Revenues associated with our title operations are recognized as closing services are rendered and title insurance policies are issued, both of which generally occur as each home is closed. Insurance brokerage commissions relate to commissions on homeowner and other insurance policies placed with third party carriers through various agency channels. Our performance obligations for policy renewal commissions are satisfied upon issuance of the initial policy, and related contract assets for estimated future renewal commissions are included in other assets and totaled $36.0 million and $35.1 million at June 30, 2020 and December 31, 2019, respectively.

Earnings per share

Basic earnings per share is computed by dividing income available to common shareholders (the “Numerator”) by the weighted-average number of common shares outstanding, adjusted for unvested shares (the “Denominator”) for the period. Computing diluted earnings per share is similar to computing basic earnings per share, except that the Denominator is increased to include the dilutive effects of stock options, unvested restricted share units, unvested restricted share units, and other

10


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

potentially dilutive instruments. Any stock options that have an exercise price greater than the average market price are considered to be anti-dilutive and are excluded from the diluted earnings per share calculation.

In accordance with Accounting Standards Codification ("ASC") 260, "Earnings Per Share", the two-class method determines earnings per share for each class of common stock and participating securities according to an earnings allocation formula that adjusts the Numerator for dividends or dividend equivalents and participation rights in undistributed earnings. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and, therefore, are included in computing earnings per share pursuant to the two-class method. Our outstanding restricted share units and deferred shares are considered participating securities. The following table presents the earnings per common share (000's omitted, except per share data):
 
Three Months Ended
 
Six Months Ended
June 30,
 
June 30,
2020
 
2019
 
2020
 
2019
Numerator:
 
 
 
 
 
 
 
Net income
$
348,620

 
$
241,041

 
$
552,331

 
$
407,798

Less: earnings distributed to participating securities
(265
)
 
(305
)
 
(538
)
 
(613
)
Less: undistributed earnings allocated to participating securities
(2,602
)
 
(2,089
)
 
(4,358
)
 
(3,588
)
Numerator for basic earnings per share
$
345,753

 
$
238,647

 
$
547,435

 
$
403,597

Add back: undistributed earnings allocated to participating securities
2,602

 
2,089

 
4,358

 
3,588

Less: undistributed earnings reallocated to participating securities
(2,595
)
 
(2,082
)
 
(4,342
)
 
(3,576
)
Numerator for diluted earnings per share
$
345,760

 
$
238,654

 
$
547,451

 
$
403,609

 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
Basic shares outstanding
268,324

 
276,652

 
269,167

 
277,142

Effect of dilutive securities
701

 
932

 
960

 
967

Diluted shares outstanding
269,025

 
277,584

 
270,127

 
278,109

 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
Basic
$
1.29

 
$
0.86

 
$
2.03

 
$
1.46

Diluted
$
1.29

 
$
0.86

 
$
2.03

 
$
1.45



Residential mortgage loans available-for-sale

Substantially all of the loans originated by us are sold in the secondary mortgage market within a short period of time after origination, generally within 30 days. At June 30, 2020 and December 31, 2019, residential mortgage loans available-for-sale had an aggregate fair value of $394.3 million and $509.0 million, respectively, and an aggregate outstanding principal balance of $378.0 million and $494.1 million, respectively. The net loss resulting from changes in fair value of these loans totaled $3.6 million and $0.2 million for the three months ended June 30, 2020 and 2019, respectively, and $1.4 million and $1.3 million for the six months ended June 30, 2020 and 2019, respectively. These changes in fair value were substantially offset by changes in the fair value of corresponding hedging instruments. Net gains from the sale of mortgages were $66.3 million and $30.4 million for the three months ended June 30, 2020 and 2019, respectively, and $97.2 million and $54.3 million for the six months ended June 30, 2020 and 2019, respectively, and have been included in Financial Services revenues.

Derivative instruments and hedging activities

We are party to interest rate lock commitments ("IRLCs") with customers resulting from our mortgage origination operations. At June 30, 2020 and December 31, 2019, we had aggregate IRLCs of $454.4 million and $255.3 million, respectively, which were originated at interest rates prevailing at the date of commitment. Since we can terminate a loan commitment if the borrower does not comply with the terms of the contract, and some loan commitments may expire without being drawn upon,

11


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

these commitments do not necessarily represent future cash requirements. We evaluate the creditworthiness of these transactions through our normal credit policies.

We hedge our exposure to interest rate market risk relating to residential mortgage loans available-for-sale and IRLCs using forward contracts on mortgage-backed securities, which are commitments to either purchase or sell a specified financial instrument at a specified future date for a specified price, and whole loan investor commitments, which are obligations of an investor to buy loans at a specified price within a specified time period. Forward contracts on mortgage-backed securities are the predominant derivative financial instruments we use to minimize market risk during the period from the time we extend an interest rate lock to a loan applicant until the time the loan is sold to an investor. At June 30, 2020 and December 31, 2019, we had unexpired forward contracts of $551.0 million and $518.2 million, respectively, and whole loan investor commitments of $225.1 million and $200.7 million, respectively. Changes in the fair value of IRLCs and other derivative financial instruments are recognized in Financial Services revenues, and the fair values are reflected in other assets or other liabilities, as applicable.

There are no credit-risk-related contingent features within our derivative agreements, and counterparty risk is considered minimal. Gains and losses on IRLCs and residential mortgage loans available-for-sale are substantially offset by corresponding gains or losses on forward contracts on mortgage-backed securities and whole loan investor commitments. We are generally not exposed to variability in cash flows of derivative instruments for more than approximately 60 days. The fair values of derivative instruments and their locations in the Condensed Consolidated Balance Sheets are summarized below ($000’s omitted):
 
 
June 30, 2020
 
December 31, 2019
 
Other Assets
 
Accrued and Other Liabilities
 
Other Assets
 
Accrued and Other Liabilities
Interest rate lock commitments
$
19,934

 
$
1,811

 
$
8,351

 
$
149

Forward contracts
236

 
3,624

 
299

 
1,372

Whole loan commitments
190

 
1,805

 
880

 
284

 
$
20,360

 
$
7,240

 
$
9,530

 
$
1,805



Credit losses

We are exposed to credit losses primarily through our vendors and insurance carriers. We assess and monitor each counterparty’s ability to pay amounts owed by considering contractual terms and conditions, the counterparty’s financial condition, macroeconomic factors, and business strategy.

At June 30, 2020, we reported $198.0 million of assets in-scope under Accounting Standards Codification 326, "Financial Instruments - Credit Losses" ("ASC 326"). These assets consist primarily of insurance receivables, contract assets related to insurance brokerage commissions, and vendor rebates. Counterparties associated with these assets are generally highly rated. Allowances on the aforementioned in-scope assets were de minimis as of June 30, 2020.

New accounting pronouncements

On January 1, 2020, we adopted ASC 326, which changed the impairment model for most financial assets and certain other instruments from an "incurred loss" approach to a new "expected credit loss" methodology. We adopted ASC 326 using the modified retrospective transition method. The amendment requires entities to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. Our adoption of ASC 326 resulted in a $0.7 million decrease to retained earnings as of January 1, 2020.

In January 2017, the FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment", which removed the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. Under the new standard, goodwill impairment is determined by evaluating the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. We adopted the standard for annual and interim periods beginning January 1, 2020, and the standard was followed in the previously mentioned assessment of the ICG goodwill.



12


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

2. Inventory

Major components of inventory were as follows ($000’s omitted): 
 
June 30,
2020
 
December 31,
2019
Homes under construction
$
3,125,369

 
$
2,899,016

Land under development
4,076,492

 
4,347,107

Raw land
382,878

 
434,491

 
$
7,584,739

 
$
7,680,614



We capitalize interest cost into inventory during the active development and construction of our communities. In all periods presented, we capitalized substantially all Homebuilding interest costs into inventory because the level of our active inventory exceeded our debt levels. Information related to interest capitalized into inventory is as follows ($000’s omitted):
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Interest in inventory, beginning of period
$
213,425

 
$
235,313

 
$
210,383

 
$
227,495

Interest capitalized
39,686

 
41,650

 
79,599

 
84,031

Interest expensed
(45,169
)
 
(42,254
)
 
(82,040
)
 
(76,817
)
Interest in inventory, end of period
$
207,942

 
$
234,709

 
$
207,942

 
$
234,709



Land option agreements

We enter into land option agreements in order to procure land for the construction of homes in the future. Pursuant to these land option agreements, we generally provide a deposit to the seller as consideration for the right to purchase land at different times in the future, usually at predetermined prices. Such contracts enable us to defer acquiring portions of properties owned by third parties or unconsolidated entities until we have determined whether and when to exercise our option, which reduces our financial risks associated with long-term land holdings. Option deposits and pre-acquisition costs (such as environmental testing, surveys, engineering, and entitlement costs) are capitalized if the costs are directly identifiable with the land under option, the costs would be capitalized if we owned the land, and acquisition of the property is probable. Such costs are reflected in other assets and are reclassified to inventory upon taking title to the land. We write off deposits and pre-acquisition costs when it becomes probable that we will not go forward with the project or recover the capitalized costs. Such decisions take into consideration changes in local market conditions, the timing of required land purchases, the availability and best use of necessary incremental capital, and other factors. We record any such write-offs of deposits and pre-acquisition costs within other expense, net.

If an entity holding the land under option is a variable interest entity ("VIE"), our deposit represents a variable interest in that entity. No VIEs required consolidation at either June 30, 2020 or December 31, 2019 because we determined that we were not the VIEs' primary beneficiary. Our maximum exposure to loss related to these VIEs is generally limited to our deposits and pre-acquisition costs under the land option agreements.


13


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The following provides a summary of our interests in land option agreements as of June 30, 2020 and December 31, 2019 ($000’s omitted):
 
 
June 30, 2020
 
December 31, 2019
 
Deposits and
Pre-acquisition
Costs
 
Remaining Purchase
Price
 
Deposits and
Pre-acquisition
Costs
 
Remaining Purchase
Price
Land options with VIEs
$
118,138

 
$
1,451,952

 
$
123,775

 
$
1,466,585

Other land options
183,266

 
2,080,674

 
175,662

 
1,755,377

 
$
301,404

 
$
3,532,626

 
$
299,437

 
$
3,221,962



Land-related charges

We recorded the following land-related charges ($000's omitted):
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30, 2020
 
June 30, 2019
 
Statement of Operations Classification
2020
 
2019
 
2020
 
2019
Land impairments
Home sale cost of revenues
$

 
$
88

 
$
5,386

 
$
88

Net realizable value ("NRV") adjustments - land held for sale
Land sale and other cost of revenues
142

 
1,227

 
152

 
1,289

Write-offs of deposits and pre-acquisition costs
Other expense, net
2,311

 
2,516

 
6,643

 
5,433

 
 
$
2,453


$
3,831


$
12,181


$
6,810



As explained in Note 1, we periodically elect to sell parcels of land to third parties in the event such assets no longer fit into our strategic operating plans or are zoned for commercial or other development. NRV adjustments occur when circumstances indicate that the carrying value of land held for sale will not be fully recovered.

Our evaluations for land impairments, NRV adjustments, and write-offs of deposits and pre-acquisition costs are based on our best estimates of the future cash flows of our communities. Due to uncertainties in the estimation process, the significant volatility in demand for new housing, the long life cycles of certain of our communities, and potential changes in our strategy related to certain communities, actual results could differ significantly from such estimates.

3. Segment information

Our Homebuilding operations are engaged in the acquisition and development of land primarily for residential purposes within the U.S. and the construction of housing on such land. For reporting purposes, our Homebuilding operations are aggregated into six reportable segments:
Northeast:
 
Connecticut, Maryland, Massachusetts, New Jersey, Pennsylvania, Virginia
Southeast:
 
Georgia, North Carolina, South Carolina, Tennessee
Florida:
 
Florida
Midwest:
 
Illinois, Indiana, Kentucky, Michigan, Minnesota, Ohio
Texas:
 
Texas
West:
 
Arizona, California, Nevada, New Mexico, Washington


We also have a reportable segment for our Financial Services operations, which consist principally of mortgage banking, title, and insurance brokerage operations that operate generally in the same markets as the Homebuilding segments.

14


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
Operating Data by Segment
($000’s omitted)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Revenues:
 
 
 
 
 
 
 
Northeast
$
141,478

 
$
200,237

 
$
303,912

 
$
310,729

Southeast
457,863

 
409,121

 
840,257

 
784,538

Florida
581,520

 
535,153

 
1,088,209

 
931,597

Midwest
339,680

 
350,584

 
631,849

 
644,174

Texas
365,348

 
342,886

 
710,086

 
611,889

West
613,090

 
595,047

 
1,165,096

 
1,102,933

 
2,498,979

 
2,433,028

 
4,739,409

 
4,385,860

Financial Services
94,802

 
55,957

 
149,352

 
99,819

Consolidated revenues
$
2,593,781

 
$
2,488,985

 
$
4,888,761

 
$
4,485,679

 
 
 
 
 
 
 
 
Income (loss) before income taxes:
 
 
 
 
 
 
 
Northeast
$
18,944

 
$
26,212

 
$
37,553

 
$
34,140

Southeast
72,780

 
42,499

 
127,524

 
80,355

Florida (a)
97,263

 
80,066

 
152,596

 
129,662

Midwest
43,607

 
42,962

 
75,069

 
69,120

Texas
59,909

 
49,144

 
113,504

 
80,115

West
90,164

 
94,443

 
157,419

 
184,625

Other homebuilding (b)
13,918

 
(39,628
)
 
(22,861
)
 
(78,024
)
 
396,585

 
295,698

 
640,804

 
499,993

Financial Services
60,424

 
25,078

 
79,974

 
37,486

Consolidated income before income taxes
$
457,009

 
$
320,776

 
$
720,778

 
$
537,479



(a)
Includes goodwill impairment charge totaling $20.2 million (see Note 1) in the six months ended June 30, 2020.
(b)
Other homebuilding includes the amortization of intangible assets and capitalized interest and other items not allocated to the operating segments. Other homebuilding also includes net insurance reserve reversals of $60.7 million and $59.4 million for the three and six months ended June 30, 2020, respectively, and $12.8 million and $16.6 million for the three and six months ended June 30, 2019.

15


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
Operating Data by Segment
($000’s omitted)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Land-related charges*:
 
 
 
 
 
 
 
Northeast
$
92

 
$
130

 
$
4,845

 
$
454

Southeast
929

 
2,015

 
1,676

 
2,587

Florida
459

 
765

 
981

 
1,246

Midwest
499

 
203

 
1,275

 
1,306

Texas
329

 
414

 
986

 
482

West
145

 
216

 
1,674

 
647

Other homebuilding

 
88

 
744

 
88

 
$
2,453

 
$
3,831

 
$
12,181

 
$
6,810


*
Land-related charges include land impairments, NRV adjustments on land held for sale, and write-offs of deposits and pre-acquisition costs for land option contracts we elected not to pursue.
 
Operating Data by Segment
 
($000's omitted)
 
June 30, 2020
 
Homes Under
Construction
 
Land Under
Development
 
Raw Land
 
Total
Inventory
 
Total
Assets
Northeast
$
393,329

 
$
215,468

 
$
23,910

 
$
632,707

 
$
723,207

Southeast
429,024

 
674,337

 
60,516

 
1,163,877

 
1,317,066

Florida
567,963

 
885,307

 
92,112

 
1,545,382

 
1,838,880

Midwest
372,744

 
412,438

 
16,477

 
801,659

 
908,805

Texas
311,896

 
448,418

 
69,927

 
830,241

 
909,554

West
1,004,927

 
1,214,046

 
106,515

 
2,325,488

 
2,681,671

Other homebuilding (a)
45,486

 
226,478

 
13,421

 
285,385

 
2,041,189

 
3,125,369

 
4,076,492

 
382,878

 
7,584,739

 
10,420,372

Financial Services

 

 

 

 
538,113

 
$
3,125,369

 
$
4,076,492

 
$
382,878

 
$
7,584,739

 
$
10,958,485



16


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
Operating Data by Segment
 
($000's omitted)
 
December 31, 2019
 
Homes Under
Construction
 
Land Under
Development
 
Raw Land
 
Total
Inventory
 
Total
Assets
Northeast
$
345,644

 
$
242,666

 
$
25,098

 
$
613,408

 
$
698,661

Southeast
430,008

 
724,258

 
72,804

 
1,227,070

 
1,354,086

Florida
539,895

 
894,716

 
99,228

 
1,533,839

 
1,700,198

Midwest
315,822

 
464,733

 
31,881

 
812,436

 
886,889

Texas
343,230

 
447,707

 
84,926

 
875,863

 
949,236

West
881,551

 
1,289,255

 
105,606

 
2,276,412

 
2,538,803

Other homebuilding (a)
42,866

 
283,772

 
14,948

 
341,586

 
1,953,440

 
2,899,016

 
4,347,107

 
434,491

 
7,680,614

 
10,081,313

Financial Services

 

 

 

 
634,284

 
$
2,899,016

 
$
4,347,107

 
$
434,491

 
$
7,680,614

 
$
10,715,597


 
(a)
Other homebuilding primarily includes cash and equivalents, capitalized interest, intangibles, deferred tax assets, and other corporate items that are not allocated to the operating segments.

4. Debt

Notes payable

Our notes payable are summarized as follows ($000’s omitted):
 
June 30,
2020
 
December 31,
2019
4.250% unsecured senior notes due March 2021 (a)
$
425,954

 
$
425,954

5.500% unsecured senior notes due March 2026 (a)
700,000

 
700,000

5.000% unsecured senior notes due January 2027 (a)
600,000

 
600,000

7.875% unsecured senior notes due June 2032 (a)
300,000

 
300,000

6.375% unsecured senior notes due May 2033 (a)
400,000

 
400,000

6.000% unsecured senior notes due February 2035 (a)
300,000

 
300,000

Net premiums, discounts, and issuance costs (b)
(14,022
)
 
(14,295
)
Total senior notes
2,711,932

 
2,711,659

Other notes payable
58,686

 
53,381

Notes payable
$
2,770,618

 
$
2,765,040

Estimated fair value
$
3,084,190

 
$
3,152,046



(a)
Redeemable prior to maturity; guaranteed on a senior basis by certain wholly-owned subsidiaries.
(b)
The carrying value of senior notes reflects the impact of premiums, discounts, and issuance costs that are amortized to interest cost over the respective terms of the senior notes.
Other notes payable include non-recourse and limited recourse secured notes with third parties that totaled $58.7 million and $53.4 million at June 30, 2020 and December 31, 2019, respectively. These notes have maturities ranging up to three years, are secured by the applicable land positions to which they relate, and have no recourse to any other assets. The stated interest rates on these notes range up to 8%.


17


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Revolving credit facility

We maintain a revolving credit facility (the "Revolving Credit Facility") maturing in 2023 that has a maximum borrowing capacity of $1.0 billion and contains an uncommitted accordion feature that could increase the capacity to $1.5 billion, subject to certain conditions and availability of additional bank commitments. The Revolving Credit Facility also provides for the issuance of letters of credit that reduce the available borrowing capacity under the Revolving Credit Facility, with a sublimit of $500.0 million at June 30, 2020. The interest rate on borrowings under the Revolving Credit Facility may be based on either the London Interbank Offered Rate ("LIBOR") or a base rate plus an applicable margin, as defined therein. As a precautionary measure during the initial phase of the COVID-19 pandemic, we made the decision in March 2020 to draw $700.0 million under the Revolving Credit Facility. In June 2020, we repaid the full outstanding balance of $700.0 million. As a result, we had no borrowings outstanding at both June 30, 2020 and December 31, 2019, and $244.8 million and $262.8 million of letters of credit issued under the Revolving Credit Facility at June 30, 2020 and December 31, 2019, respectively.

The Revolving Credit Facility contains financial covenants that require us to maintain a minimum Tangible Net Worth, a minimum Interest Coverage Ratio, and a maximum Debt-to-Capitalization Ratio (as each term is defined in the Revolving Credit Facility). As of June 30, 2020, we were in compliance with all covenants. Our available and unused borrowings
under the Revolving Credit Facility, net of outstanding letters of credit, amounted to $755.2 million and $737.2 million at June 30, 2020 and December 31, 2019, respectively.

Financial Services debt

Pulte Mortgage maintains a master repurchase agreement with third party lenders (the "Repurchase Agreement") that matures on July 30, 2020. The maximum aggregate commitment was $270.0 million at June 30, 2020 and continues through maturity. The Repurchase Agreement contains various affirmative and negative covenants applicable to Pulte Mortgage, including quantitative thresholds related to net worth, net income, and liquidity. Pulte Mortgage had $256.4 million and $326.6 million outstanding under the Repurchase Agreement at June 30, 2020 and December 31, 2019, respectively, and was in compliance with all of its covenants and requirements as of such dates.

5. Shareholders’ equity

During the six months ended June 30, 2020, we declared cash dividends totaling $65.1 million and repurchased 2.8 million shares under our repurchase authorization for $95.7 million. For the six months ended June 30, 2019, we declared cash dividends totaling $61.5 million and repurchased 3.5 million shares under our repurchase authorization for $108.5 million. In May 2019, our board of directors approved a $500.0 million increase in our share repurchase authorization. At June 30, 2020, we had remaining authorization to repurchase $429.9 million of common shares.

Under our share-based compensation plans, we accept shares as payment under certain conditions related to stock option exercises and vesting of shares, generally related to the payment of minimum tax obligations. During the six months ended June 30, 2020 and 2019, participants surrendered shares valued at $14.9 million and $10.4 million, respectively, under these plans. Such share transactions are excluded from the above noted share repurchase authorization.

6. Income taxes

Our effective tax rate for the three and six months ended June 30, 2020 was 23.7% and 23.4%, respectively, compared to 24.9% and 24.1%, respectively, for the same periods in 2019. Our effective tax rate differs from the federal statutory rate primarily due to state income tax expense.

At June 30, 2020 and December 31, 2019, we had deferred tax assets, net of deferred tax liabilities and valuation allowance, of $120.8 million and $170.1 million, respectively. The accounting for deferred taxes is based upon estimates of future results. Differences between estimated and actual results could result in changes in the valuation of deferred tax assets that could have a material impact on our consolidated results of operations or financial position. Changes in existing tax laws could also affect actual tax results and the realization of deferred tax assets over time.


18


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Unrecognized tax benefits represent the difference between tax positions taken or expected to be taken in a tax return and the benefits recognized for financial statement purposes. We had $45.1 million and $40.3 million of gross unrecognized tax benefits at June 30, 2020 and December 31, 2019, respectively. Additionally, we had accrued interest and penalties of $7.0 million and $6.5 million at June 30, 2020 and December 31, 2019, respectively. It is reasonably possible within the next twelve months that our gross unrecognized tax benefits may decrease by up to $24.2 million, excluding interest and penalties, primarily due to potential audit settlements.

7. Fair value disclosures

ASC 820, “Fair Value Measurements and Disclosures,” provides a framework for measuring fair value in generally accepted accounting principles and establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The fair value hierarchy can be summarized as follows: 
Level 1
 
Fair value determined based on quoted prices in active markets for identical assets or liabilities.
 
 
Level 2
 
Fair value determined using significant observable inputs, generally either quoted prices in active markets for similar assets or liabilities or quoted prices in markets that are not active.
 
 
Level 3
 
Fair value determined using significant unobservable inputs, such as pricing models, discounted cash flows, or similar techniques.

Our assets and liabilities measured or disclosed at fair value are summarized below ($000’s omitted): 
Financial Instrument
 
Fair Value
Hierarchy
 
Fair Value
June 30,
2020
 
December 31,
2019
 
 
 
 
 
 
 
Measured at fair value on a recurring basis:
 
 
 
 
 
 
Residential mortgage loans available-for-sale
 
Level 2
 
$
394,288

 
$
508,967

Interest rate lock commitments
 
Level 2
 
18,123

 
8,202

Forward contracts
 
Level 2
 
(3,388
)
 
(1,073
)
Whole loan commitments
 
Level 2
 
(1,615
)
 
596

 
 
 
 
 
 
 
Measured at fair value on a non-recurring basis:
 
 
 
 
 
 
House and land inventory
 
Level 3
 
$

 
$
9,979

Land held for sale
 
Level 2
 

 
4,193

 
 
 
 
 
 
 
Disclosed at fair value:
 
 
 
 
 
 
Cash, cash equivalents, and restricted cash
 
Level 1
 
$
1,697,796

 
$
1,251,456

Financial Services debt
 
Level 2
 
256,359

 
326,573

Senior notes payable
 
Level 2
 
3,025,505

 
3,098,665

Other notes payable
 
Level 2
 
58,686

 
53,381




Fair values for agency residential mortgage loans available-for-sale are determined based on quoted market prices for comparable instruments. Fair values for non-agency residential mortgage loans available-for-sale are determined based on purchase commitments from whole loan investors and other relevant market information available to management. Fair values for interest rate lock commitments, including the value of servicing rights, and forward contracts on mortgage-backed securities are valued based on market prices for similar instruments. Fair values for whole loan commitments are based on market prices for similar instruments from the specific whole loan investor.


19


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Certain assets are required to be recorded at fair value on a non-recurring basis when events and circumstances indicate that the carrying value may not be recoverable. The non-recurring fair values included in the above table represent only those assets whose carrying values were adjusted to fair value as of the respective balance sheet dates.

The carrying amounts of cash and equivalents, Financial Services debt and other notes payable approximate their fair values due to their short-term nature and/or floating interest rate terms. The fair values of senior notes are based on quoted market prices, when available. If quoted market prices are not available, fair values are based on quoted market prices of similar issues. The carrying value of senior notes was $2.7 billion at both June 30, 2020 and December 31, 2019.

8. Commitments and contingencies

Loan origination liabilities

Our mortgage operations may be responsible for losses associated with mortgage loans originated and sold to investors in the event of errors or omissions relating to representations and warranties made by us that the loans met certain requirements, including representations as to underwriting standards, the existence of primary mortgage insurance, and the validity of certain borrower representations in connection with the loan. If a loan is determined to be faulty, we either indemnify the investor for potential future losses, repurchase the loan from the investor, or reimburse the investor's actual losses. In addition, certain trustees and investors continue to attempt to collect damages based on losses from loans that originated prior to 2009. Some of our mortgage subsidiaries are currently defendants in litigation related to such claims.

CTX Mortgage Company, LLC ("CTX Mortgage") was the mortgage subsidiary of Centex and ceased originating loans in December 2009. In the matter Lehman Brothers Holdings, Inc. ("Lehman") in the U.S. Bankruptcy Court in the Southern District of New York, Lehman has initiated an adversary proceeding against CTX Mortgage seeking indemnity for loans sold to it by CTX Mortgage prior to 2009. This claim is part of a broader action by Lehman in U.S. Bankruptcy Court against more than 100 mortgage originators and brokers. On August 13, 2018, the court denied a motion to dismiss filed by CTX Mortgage and other defendants, and on December 17, 2018, Lehman filed an amended adversary complaint against CTX Mortgage. Lehman's complaint alleges claims for indemnifiable losses of up to $261 million due from CTX Mortgage. We believe that CTX Mortgage has meritorious defenses and CTX Mortgage will continue to vigorously defend itself in this matter. We have recorded a liability for an amount that we consider to be the best estimate within a range of potential losses.

In addition, both CTX Mortgage and Pulte Mortgage sold certain loans originated prior to 2009 to financial institutions that were subsequently included in residential mortgage-backed securities or other securitizations issued by such financial institutions. In connection with such sales, CTX Mortgage and Pulte Mortgage have been put on notice of potential direct and / or third-party claims for indemnification arising out of litigation relating to certain of these residential mortgage-backed securities or other securitizations and, in some instances, such claims have resulted in legal proceedings against CTX Mortgage and Pulte Mortgage. We cannot yet quantify CTX Mortgage's or Pulte Mortgage's potential liability as a result of these matters. We do not believe, however, that these matters will have a material adverse impact on the results of operations, financial position, or cash flows of the Company.

Our recorded liabilities for all such claims totaled $25.3 million and $25.2 million at June 30, 2020 and December 31, 2019, respectively. Determining the liabilities for anticipated losses requires a significant level of management judgment. Given the unsettled litigation, changes in values of underlying collateral over time, unpredictable factors inherent in litigation, and other uncertainties regarding the ultimate resolution of these claims, actual costs could differ from our current estimates.


20


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Letters of credit and surety bonds

In the normal course of business, we post letters of credit and surety bonds pursuant to certain performance-related obligations, as security for certain land option agreements, and under various insurance programs. The majority of these letters of credit and surety bonds are in support of our land development and construction obligations to various municipalities, other government agencies, and utility companies related to the construction of roads, sewers, and other infrastructure. We had outstanding letters of credit and surety bonds totaling $244.8 million and $1.3 billion, respectively, at June 30, 2020 and $262.8 million and $1.4 billion, respectively, at December 31, 2019. In the event any such letter of credit or surety bond is drawn, we would be obligated to reimburse the issuer of the letter of credit or surety bond. Our surety bonds generally do not have stated expiration dates; rather we are released from the surety bonds as the underlying contractual performance is completed. Because significant construction and development work has been performed related to projects that have not yet received final acceptance by the respective counterparties, the aggregate amount of surety bonds outstanding is in excess of the projected cost of the remaining work to be performed. We do not believe that a material amount, if any, of the letters of credit or surety bonds will be drawn.

Litigation and regulatory matters

We are involved in various litigation and legal claims in the normal course of our business operations, including actions brought on behalf of various classes of claimants. We are also subject to a variety of local, state, and federal laws and regulations related to land development activities, house construction standards, sales practices, mortgage lending operations, employment practices, and protection of the environment. As a result, we are subject to periodic examination or inquiry by various governmental agencies that administer these laws and regulations.

We establish liabilities for litigation, legal claims, and regulatory matters when such matters are both probable of occurring and any potential loss is reasonably estimable. We accrue for such matters based on the facts and circumstances specific to each matter and revise these estimates as the matters evolve. In such cases, there may exist an exposure to loss in excess of any amounts currently accrued. In view of the inherent difficulty of predicting the outcome of these legal and regulatory matters, we generally cannot predict the ultimate resolution of the pending matters, the related timing, or the eventual loss. While the outcome of such contingencies cannot be predicted with certainty, we do not believe that the resolution of such matters will have a material adverse impact on our results of operations, financial position, or cash flows. However, to the extent the liability arising from the ultimate resolution of any matter exceeds the estimates reflected in the recorded reserves relating to such matter, we could incur additional charges that could be significant.

Product warranty

Home purchasers are provided with a limited warranty against certain building defects, including a one-year comprehensive limited warranty and coverage for certain other aspects of the home’s construction and operating systems for periods of up to and, in limited instances, exceeding 10 years. We estimate the costs to be incurred under these warranties and record liabilities in the amount of such costs at the time product revenue is recognized. Factors that affect our warranty liabilities include the number of homes sold, historical and anticipated rates of warranty claims, and the projected cost per claim. We periodically assess the adequacy of the warranty liabilities for each geographic market in which we operate and adjust the amounts as necessary. Actual warranty costs in the future could differ from the current estimates. Changes to warranty liabilities were as follows ($000’s omitted):
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Warranty liabilities, beginning of period
$
88,395

 
$
79,747

 
$
91,389

 
$
79,154

Reserves provided
17,005

 
14,646

 
32,044

 
26,908

Payments
(15,914
)
 
(17,931
)
 
(34,189
)
 
(34,061
)
Other adjustments
(3,208
)
 
4,980

 
(2,966
)
 
9,441

Warranty liabilities, end of period
$
86,278

 
$
81,442

 
$
86,278

 
$
81,442





21


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Self-insured risks

We maintain, and require our subcontractors to maintain, general liability insurance coverage. We also maintain builders' risk, property, errors and omissions, workers' compensation, and other business insurance coverage. These insurance policies protect us against a portion of the risk of loss from claims. However, we retain a significant portion of the overall risk for such claims either through policies issued by our captive insurance subsidiaries or through our own self-insured per occurrence and aggregate retentions, deductibles, and claims in excess of available insurance policy limits.

Our general liability insurance includes coverage for certain construction defects. While construction defect claims can relate to a variety of circumstances, the majority of our claims relate to alleged problems with siding, plumbing, foundations and other concrete work, windows, roofing, and heating, ventilation and air conditioning systems. The availability of general liability insurance for the homebuilding industry and its subcontractors has become increasingly limited, and the insurance policies available require us to maintain significant per occurrence and aggregate retention levels. In certain instances, we may offer our subcontractors the opportunity to purchase insurance through one of our captive insurance subsidiaries or participate in a project-specific insurance program provided by us. Policies issued by our captive insurance subsidiaries represent self-insurance of these risks by us. This self-insured exposure is limited by reinsurance policies that we purchase. General liability coverage for the homebuilding industry is complex, and our coverage varies from policy year to policy year. Our insurance coverage requires a per occurrence deductible up to an overall aggregate retention level. Beginning with the first dollar, amounts paid to satisfy insured claims generally apply to our per occurrence and aggregate retention obligations. Any amounts incurred in excess of the occurrence or aggregate retention levels are covered by insurance up to our purchased coverage levels. Our insurance policies, including the captive insurance subsidiaries' reinsurance policies, are maintained with highly-rated underwriters for whom we believe counterparty default risk is not significant.

At any point in time, we are managing over 1,000 individual claims related to general liability, property, errors and omissions, workers' compensation, and other business insurance coverage. We reserve for costs associated with such claims (including expected claims management expenses) on an undiscounted basis at the time revenue is recognized for each home closing and periodically evaluate the recorded liabilities based on actuarial analyses of our historical claims. The actuarial analyses calculate estimates of the ultimate net cost of all unpaid losses, including estimates for incurred but not reported losses ("IBNR"). IBNR represents losses related to claims incurred but not yet reported plus development on reported claims.

Our recorded reserves for all such claims totaled $640.0 million and $709.8 million at June 30, 2020 and December 31, 2019, respectively. The recorded reserves include loss estimates related to both (i) existing claims and related claim expenses and (ii) IBNR and related claim expenses. Liabilities related to IBNR and related claim expenses represented approximately 69% and 68% of the total general liability reserves at June 30, 2020 and December 31, 2019, respectively. The actuarial analyses that determine the IBNR portion of reserves consider a variety of factors, including the frequency and severity of losses, which are based on our historical claims experience supplemented by industry data. The actuarial analyses of the reserves also consider historical third party recovery rates and claims management expenses.

Housing market conditions can be volatile, and we believe such conditions can affect the frequency and cost of construction defect claims. Additionally, IBNR estimates comprise the majority of our liability and are subject to a high degree of uncertainty due to a variety of factors, including changes in claims reporting and resolution patterns, third party recoveries, insurance industry practices, the regulatory environment, and legal precedent. State regulations vary, but construction defect claims are typically reported and resolved over an extended period, often exceeding ten years. Changes in the frequency and timing of reported claims and estimates of specific claim values can impact the underlying inputs and trends utilized in the actuarial analyses, which could have a material impact on the recorded reserves. Additionally, the amount of insurance coverage available for each policy period also impacts our recorded reserves. Because of the inherent uncertainty in estimating future losses and the timing of such losses related to these claims, actual costs could differ significantly from estimated costs.

Adjustments to reserves are recorded in the period in which the change in estimate occurs. We reduced general liability reserves by $60.7 million and $59.4 million during the three and six months ended June 30, 2020, respectively, and $12.8 million and $16.6 million during the three and six months ended June 30, 2019, respectively, as a result of changes in estimates resulting from actual claim experience being less than anticipated in previous actuarial projections. The changes in actuarial estimates were driven by changes in actual claims experience that, in turn, impacted actuarial estimates for potential future claims. These changes in actuarial estimates did not involve any changes in actuarial methodology but did impact the development of estimates for future periods, which resulted in adjustments to the IBNR portion of our recorded liabilities. Costs associated with

22


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

our insurance programs are classified within selling, general, and administrative expenses. Changes in these liabilities were as follows ($000's omitted):
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Balance, beginning of period
$
719,172

 
$
729,170

 
$
709,798

 
$
737,013

Reserves provided
20,177

 
20,270

 
38,626

 
37,666

Adjustments to previously recorded reserves
(60,662
)
 
(12,763
)
 
(59,362
)
 
(16,638
)
Payments, net (a)
(38,673
)
 
(20,459
)
 
(49,048
)
 
(41,823
)
Balance, end of period
$
640,014

 
$
716,218

 
$
640,014

 
$
716,218


(a)
Includes net changes in amounts expected to be recovered from our insurance carriers, which are recorded in other assets (see below).

Estimates of anticipated recoveries of our costs under various insurance policies or from subcontractors or other third parties are recorded when recovery is considered probable. Such receivables are recorded in other assets and totaled $82.4 million and $118.4 million at June 30, 2020 and December 31, 2019, respectively. Those receivables relate to costs incurred to perform corrective repairs, settle claims with customers, and other costs related to the continued progression of construction defect claims that we believe are insured. Given the complexity inherent with resolving construction defect claims in the homebuilding industry described above, there generally exists a significant lag between our payment of claims and our reimbursements from applicable insurance carriers or third parties. In addition, disputes between homebuilders and insurance carriers or third parties over coverage positions relating to construction defect claims are common. Resolution of claims involves the exchange of significant amounts of information and frequently involves legal action. During the three and six months ended June 30, 2019, we wrote-off $12.6 million and $24.2 million, respectively, of insurance receivables in connection with the settlement of an arbitration with one of our carriers, pursuant to which we received the majority of the coverage under the policy.

Leases

We lease certain office space and equipment for use in our operations. We recognize lease expense for these leases on a straight-line basis over the lease term and combine lease and non-lease components for all leases. Right-of-use ("ROU") assets and lease liabilities are recorded on the balance sheet for all leases with an expected term of at least one year. Some leases include one or more options to renew. The exercise of lease renewal options is generally at our discretion. The depreciable lives of ROU assets and leasehold improvements are limited to the expected lease term. Certain of our lease agreements include rental payments based on a pro-rata share of the lessor’s operating costs which are variable in nature. Our lease agreements do not contain any residual value guarantees or material restrictive covenants.
    
ROU assets are classified within other assets on the balance sheet, while lease liabilities are classified within accrued and other liabilities. Leases with an initial term of 12 months or less are not recorded on the balance sheet. ROU assets and lease liabilities were $76.7 million and $98.1 million at June 30, 2020, respectively, and $70.0 million and $91.4 million at December 31, 2019, respectively. During the three and six months ended June 30, 2020, we recorded an additional $3.4 million and $13.0 million of lease liabilities under operating leases, respectively, and $1.0 million and $8.8 million in the comparable prior year periods. Payments on lease liabilities during the three and six months ended June 30, 2020 totaled $4.2 million and $10.1 million, respectively, and $5.7 million and $11.5 million in the comparable prior year periods.

Lease expense includes costs for leases with terms in excess of one year as well as short-term leases with terms of less than one year. For the three and six months ended June 30, 2020, our total lease expense was $8.8 million and $18.7 million, respectively, and $9.1 million and $17.9 million in the comparable prior year periods. Our total lease expense is inclusive of variable lease costs of $1.5 million and $3.4 million for the three and six months ended June 30, 2020, respectively, and $1.6 million and $3.2 million in the comparable prior year periods, as well as short-term lease costs of $1.8 million and $4.0 million for the three and six months ended June 30, 2020, respectively, and $2.6 million and $4.8 million in the comparable prior year periods. Sublease income was de minimis.


23


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The future minimum lease payments required under our leases as of June 30, 2020 were as follows ($000's omitted):
Years Ending December 31,
 
2020 (a)
$
10,603

2021
22,651

2022
20,755

2023
19,424

2024
13,755

Thereafter
28,687

Total lease payments (b)
115,875

Less: Interest (c)
17,762

Present value of lease liabilities (d)
$
98,113


(a)
Remaining payments are for the six months ending December 31, 2020.
(b)
Lease payments include options to extend lease terms that are reasonably certain of being exercised. There were $1.7 million of legally binding minimum lease payments for leases signed but not yet commenced at June 30, 2020.
(c)
Our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our discount rate for such leases to determine the present value of lease payments at the lease commencement date.
(d)
The weighted average remaining lease term and weighted average discount rate used in calculating our lease liabilities were 5.6 years and 5.7%, respectively, at June 30, 2020.

9. Supplemental guarantor information

All of our senior notes are guaranteed jointly and severally on a senior basis by certain of our wholly-owned Homebuilding subsidiaries and certain other wholly-owned subsidiaries (collectively, the “Guarantors”). Such guaranties are full and unconditional. Our subsidiaries comprising the Financial Services segment along with certain other subsidiaries (collectively, the "Non-Guarantor Subsidiaries") do not guarantee the senior notes. In accordance with Rule 3-10 of Regulation S-X, supplemental consolidating financial information of the Company, including such information for the Guarantors, is presented below. Investments in unconsolidated entities are presented using the equity method of accounting.

24


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 CONDENSED CONSOLIDATING BALANCE SHEET
June 30, 2020
($000’s omitted)
 
Unconsolidated
 
Eliminating
Entries
 
Consolidated
PulteGroup,
Inc.
 
PulteGroup,
Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
ASSETS
 
 
 
 
 
 
 
 
 
Cash and equivalents
$


$
1,591,082


$
67,448


$


$
1,658,530

Restricted cash


32,470


6,796




39,266

Total cash, cash equivalents, and
restricted cash


1,623,552


74,244




1,697,796

House and land inventory


7,443,855


140,884




7,584,739

Land held for sale


29,409






29,409

Residential mortgage loans available-
for-sale




394,288




394,288

Investments in unconsolidated entities


46,548


1,159




47,707

Other assets
4,801


661,239


244,231




910,271

Intangible assets


117,792


55,715




173,507

Deferred tax assets, net
133,228




(12,460
)



120,768

Investments in subsidiaries and
intercompany accounts, net
8,657,717


910,129


9,969,347


(19,537,193
)



$
8,795,746


$
10,832,524


$
10,867,408


$
(19,537,193
)

$
10,958,485

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable, customer deposits,
accrued and other liabilities
$
85,417


$
1,588,835


$
258,859


$


$
1,933,111

Income tax liabilities
146,729








146,729

Financial Services debt




256,359




256,359

Notes payable
2,711,932


58,686






2,770,618

Total liabilities
2,944,078


1,647,521


515,218




5,106,817

Total shareholders’ equity
5,851,668


9,185,003


10,352,190


(19,537,193
)

5,851,668


$
8,795,746


$
10,832,524


$
10,867,408


$
(19,537,193
)

$
10,958,485



25


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2019
($000’s omitted)

 
Unconsolidated
 
Eliminating
Entries
 
Consolidated
PulteGroup,
Inc.
 
PulteGroup,
Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
ASSETS
 
 
 
 
 
 
 
 
 
Cash and equivalents
$


$
1,026,743


$
191,170


$


$
1,217,913

Restricted cash


31,328


2,215




33,543

Total cash, cash equivalents, and
restricted cash


1,058,071


193,385




1,251,456

House and land inventory


7,554,662


125,952




7,680,614

Land held for sale


24,009






24,009

Residential mortgage loans available-
for-sale




508,967




508,967

Investments in unconsolidated entities


59,266


500




59,766

Other assets
8,172


688,996


198,518





895,686

Intangible assets


124,992






124,992

Deferred tax assets, net
182,461




(12,354
)



170,107

Investments in subsidiaries and
intercompany accounts, net
8,103,191


1,081,472


9,279,403


(18,464,066
)



$
8,293,824


$
10,591,468


$
10,294,371


$
(18,464,066
)

$
10,715,597

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable, customer deposits,
accrued and other liabilities
$
87,892


$
1,781,893


$
259,926


$


$
2,129,711

Income tax liabilities
36,093








36,093

Financial Services debt




326,573




326,573

Notes payable
2,711,659


53,381






2,765,040

Total liabilities
2,835,644


1,835,274


586,499




5,257,417

Total shareholders’ equity
5,458,180


8,756,194


9,707,872


(18,464,066
)

5,458,180


$
8,293,824


$
10,591,468


$
10,294,371


$
(18,464,066
)

$
10,715,597




26


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the three months ended June 30, 2020
($000’s omitted)
 
Unconsolidated
 
 
 
Consolidated
PulteGroup, 
Inc.
 
PulteGroup,
Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminating
Entries
 
Revenues:
 
 
 
 
 
 
 
 
 
Homebuilding
 
 
 
 
 
 
 
 
 
Home sale revenues
$

 
$
2,447,552

 
$
24,477

 
$

 
$
2,472,029

Land sale and other revenues

 
8,548

 
18,402

 

 
26,950

 

 
2,456,100

 
42,879

 

 
2,498,979

Financial Services

 

 
94,802

 

 
94,802

 

 
2,456,100

 
137,681

 

 
2,593,781

Homebuilding Cost of Revenues:
 
 
 
 
 
 
 
 
 
Home sale cost of revenues

 
(1,861,026
)
 
(19,183
)
 

 
(1,880,209
)
Land sale and other cost of revenues

 
(4,533
)
 
(15,508
)
 

 
(20,041
)
 

 
(1,865,559
)
 
(34,691
)
 

 
(1,900,250
)
Financial Services expenses

 
(212
)
 
(34,166
)
 

 
(34,378
)
Selling, general, and administrative
expenses

 
(195,375
)
 
(1,483
)
 

 
(196,858
)
Goodwill impairment

 

 

 

 

Other income (expense), net
(2,851
)
 
(10,443
)
 
8,008

 

 
(5,286
)
Intercompany interest
(1,468
)
 

 
1,468

 

 

Income (loss) before income taxes and
equity in income (loss) of
subsidiaries
(4,319
)
 
384,511

 
76,817

 

 
457,009

Income tax (expense) benefit
1,080

 
(90,743
)
 
(18,726
)
 

 
(108,389
)
Income (loss) before equity in income
(loss) of subsidiaries
(3,239
)
 
293,768

 
58,091

 

 
348,620

Equity in income (loss) of subsidiaries
351,859

 
24,505

 
288,995

 
(665,359
)
 

Net income (loss)
348,620

 
318,273

 
347,086

 
(665,359
)
 
348,620

Other comprehensive income
25

 

 

 

 
25

Comprehensive income (loss)
$
348,645

 
$
318,273

 
$
347,086

 
$
(665,359
)
 
$
348,645



27


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the three months ended June 30, 2019
($000’s omitted)
 
Unconsolidated
 
 
 
Consolidated
PulteGroup, 
Inc.
 
PulteGroup,
Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminating
Entries
 
Revenues:
 
 
 
 
 
 
 
 
 
Homebuilding
 
 
 
 
 
 
 
 
 
Home sale revenues
$

 
$
2,359,210

 
$
44,349

 
$

 
$
2,403,559

Land sale and other revenues

 
29,459

 
10

 

 
29,469

 

 
2,388,669

 
44,359

 

 
2,433,028

Financial Services

 

 
55,957

 

 
55,957

 

 
2,388,669

 
100,316

 

 
2,488,985

Homebuilding Cost of Revenues:
 
 
 
 
 
 
 
 
 
Home sale cost of revenues

 
(1,814,701
)
 
(33,454
)
 

 
(1,848,155
)
Land sale and other cost of revenues

 
(26,214
)
 

 

 
(26,214
)
 

 
(1,840,915
)
 
(33,454
)
 

 
(1,874,369
)
Financial Services expenses

 
(125
)
 
(30,776
)
 

 
(30,901
)
Selling, general, and administrative
expenses

 
(245,272
)
 
(14,168
)
 

 
(259,440
)
Other income (expense), net
(4,966
)
 
(9,276
)
 
10,743

 

 
(3,499
)
Intercompany interest
(2,254
)
 

 
2,254

 

 

Income (loss) before income taxes and
equity in income (loss) of
subsidiaries
(7,220
)
 
293,081

 
34,915

 

 
320,776

Income tax (expense) benefit
1,733

 
(72,598
)
 
(8,870
)
 

 
(79,735
)
Income (loss) before equity in income
(loss) of subsidiaries
(5,487
)
 
220,483

 
26,045

 

 
241,041

Equity in income (loss) of subsidiaries
246,528

 
24,504

 
162,404

 
(433,436
)
 

Net income (loss)
241,041

 
244,987

 
188,449

 
(433,436
)
 
241,041

Other comprehensive income
25

 

 

 

 
25

Comprehensive income (loss)
$
241,066

 
$
244,987

 
$
188,449

 
$
(433,436
)
 
$
241,066








28


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the six months ended June 30, 2020
($000’s omitted)
 
Unconsolidated
 
 
 
Consolidated
PulteGroup, 
Inc.
 
PulteGroup,
Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminating
Entries
 
Revenues:
 
 
 
 
 
 
 
 
 
Homebuilding
 
 
 
 
 
 
 
 
 
Home sale revenues
$

 
$
4,645,116

 
$
48,416

 
$

 
$
4,693,532

Land sale and other revenues

 
10,998

 
34,879

 

 
45,877

 

 
4,656,114

 
83,295

 

 
4,739,409

Financial Services

 

 
149,352

 

 
149,352

 

 
4,656,114

 
232,647

 

 
4,888,761

Homebuilding Cost of Revenues:
 
 
 
 
 
 
 
 
 
Home sale cost of revenues

 
(3,536,373
)
 
(38,701
)
 

 
(3,575,074
)
Land sale and other cost of revenues

 
(5,386
)
 
(29,669
)
 

 
(35,055
)
 

 
(3,541,759
)
 
(68,370
)
 

 
(3,610,129
)
Financial Services expenses

 
(355
)
 
(68,972
)
 

 
(69,327
)
Selling, general, and administrative
expenses

 
(451,010
)
 
(9,517
)
 

 
(460,527
)
Goodwill impairment

 

 
(20,190
)
 

 
(20,190
)
Other income (expense), net
(3,544
)
 
(17,059
)
 
12,793

 

 
(7,810
)
Intercompany interest
(3,073
)
 

 
3,073

 

 

Income (loss) before income taxes and
equity in income (loss) of
subsidiaries
(6,617
)
 
645,931

 
81,464

 

 
720,778

Income tax (expense) benefit
1,654

 
(150,203
)
 
(19,898
)
 

 
(168,447
)
Income (loss) before equity in income
(loss) of subsidiaries
(4,963
)
 
495,728

 
61,566

 

 
552,331

Equity in income (loss) of subsidiaries
557,294

 
42,702

 
484,616

 
(1,084,612
)
 

Net income (loss)
552,331

 
538,430

 
546,182

 
(1,084,612
)
 
552,331

Other comprehensive income
50

 

 

 

 
50

Comprehensive income (loss)
$
552,381

 
$
538,430

 
$
546,182

 
$
(1,084,612
)
 
$
552,381



















29


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the six months ended June 30, 2019
($000’s omitted)
 
Unconsolidated
 
 
 
Consolidated
PulteGroup, 
Inc.
 
PulteGroup,
Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminating
Entries
 
Revenues:
 
 
 
 
 
 
 
 
 
Homebuilding
 
 
 
 
 
 
 
 
 
Home sale revenues
$

 
$
4,267,018

 
$
86,397

 
$

 
$
4,353,415

Land sale and other revenues

 
31,785

 
660

 

 
32,445

 

 
4,298,803

 
87,057

 

 
4,385,860

Financial Services

 

 
99,819

 

 
99,819

 

 
4,298,803

 
186,876

 

 
4,485,679

Homebuilding Cost of Revenues:
 
 
 
 
 
 
 
 
 
Home sale cost of revenues

 
(3,275,596
)
 
(65,350
)
 

 
(3,340,946
)
Land sale and other cost of revenues

 
(27,159
)
 
(1,106
)
 

 
(28,265
)
 

 
(3,302,755
)
 
(66,456
)
 

 
(3,369,211
)
Financial Services expenses

 
(257
)
 
(62,093
)
 

 
(62,350
)
Selling, general, and administrative
expenses

 
(479,388
)
 
(32,778
)
 

 
(512,166
)
Other income (expense), net
(5,087
)
 
(14,264
)
 
14,878

 

 
(4,473
)
Intercompany interest
(4,251
)
 

 
4,251

 

 

Income (loss) before income taxes and
equity in income (loss) of
subsidiaries
(9,338
)
 
502,139

 
44,678

 

 
537,479

Income tax (expense) benefit
2,241

 
(120,248
)
 
(11,674
)
 

 
(129,681
)
Income (loss) before equity in income
(loss) of subsidiaries
(7,097
)
 
381,891

 
33,004

 

 
407,798

Equity in income (loss) of subsidiaries
414,895

 
42,808

 
276,100

 
(733,803
)
 

Net income (loss)
407,798

 
424,699

 
309,104

 
(733,803
)
 
407,798

Other comprehensive income
50

 

 

 

 
50

Comprehensive income (loss)
$
407,848

 
$
424,699

 
$
309,104

 
$
(733,803
)
 
$
407,848

 



















30


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

CONSOLIDATING STATEMENT OF CASH FLOWS
For the six months ended June 30, 2020
($000’s omitted)
 
Unconsolidated
 
 
 
Consolidated
PulteGroup, Inc.
 
PulteGroup,
Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminating
Entries
 
Net cash provided by (used in)
operating activities
$
162,014

 
$
495,413

 
$
150,445

 
$

 
$
807,872

Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
Capital expenditures

 
(32,129
)
 
(4,617
)
 

 
(36,746
)
Investments in unconsolidated entities

 
13,619

 
(664
)
 

 
12,955

Other investing activities, net

 
87

 
1,510

 

 
1,597

Business acquisition

 

 
(83,256
)
 

 
(83,256
)
Net cash provided by (used in)
investing activities

 
(18,423
)
 
(87,027
)
 

 
(105,450
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
Financial Services borrowing (repayments), net

 

 
(70,214
)
 

 
(70,214
)
Repayments of debt

 
(10,106
)
 

 

 
(10,106
)
Borrowings under revolving credit facility
700,000

 

 

 

 
700,000

Repayments under revolving credit facility
(700,000
)
 

 

 

 
(700,000
)
Stock option exercises
99

 

 

 

 
99

Share repurchases
(95,676
)
 

 

 

 
(95,676
)
Cash paid for shares withheld for taxes
(14,853
)
 

 

 

 
(14,853
)
Dividends paid
(65,332
)
 

 

 

 
(65,332
)
Intercompany activities, net
13,748

 
98,597

 
(112,345
)
 

 

Net cash provided by (used in)
financing activities
(162,014
)
 
88,491

 
(182,559
)
 

 
(256,082
)
Net increase (decrease) in cash, cash equivalents, and restricted cash

 
565,481

 
(119,141
)
 

 
446,340

Cash, cash equivalents, and restricted cash
at beginning of year

 
1,058,071

 
193,385

 

 
1,251,456

Cash, cash equivalents, and restricted cash
at end of year
$

 
$
1,623,552

 
$
74,244

 
$

 
$
1,697,796



31


PULTEGROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

CONSOLIDATING STATEMENT OF CASH FLOWS
For the six months ended June 30, 2019
($000’s omitted)
 
Unconsolidated
 
 
 
Consolidated
PulteGroup, Inc.
 
PulteGroup,
Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminating
Entries
 
Net cash provided by (used in)
operating activities
$
130,811

 
$
34,461

 
$
140,435

 
$

 
$
305,707

Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
Capital expenditures

 
(24,707
)
 
(4,868
)
 

 
(29,575
)
Investments in unconsolidated entities

 
(4,183
)
 
(481
)
 

 
(4,664
)
Other investing activities, net

 
3,241

 
1,351

 

 
4,592

Business acquisition

 
(163,724
)
 

 

 
(163,724
)
Net cash provided by (used in)
investing activities

 
(189,373
)
 
(3,998
)
 

 
(193,371
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
Financial Services borrowings (repayments), net

 

 
(114,226
)
 

 
(114,226
)
Repayments of debt
(280,175
)
 
(16,591
)
 
(537
)
 

 
(297,303
)
Stock option exercises
5,208

 

 

 

 
5,208

Share repurchases
(108,471
)
 

 

 

 
(108,471
)
Cash paid for shares withheld for taxes
(10,350
)
 

 

 

 
(10,350
)
Dividends paid
(61,620
)
 

 

 

 
(61,620
)
Intercompany activities, net
324,597

 
(149,715
)
 
(174,882
)
 

 

Net cash provided by (used in)
financing activities
(130,811
)
 
(166,306
)
 
(289,645
)
 

 
(586,762
)
Net increase (decrease) in cash, cash equivalents, and restricted cash

 
(321,218
)
 
(153,208
)
 

 
(474,426
)
Cash, cash equivalents, and restricted cash
at beginning of year

 
929,367

 
204,333

 

 
1,133,700

Cash, cash equivalents, and restricted cash
at end of year
$

 
$
608,149

 
$
51,125

 
$

 
$
659,274




32


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

In response to the COVID-19 pandemic and various state and local orders, we instituted the following actions in March, which remained in place for some of the second quarter:

Placed restrictions on business travel for our employees and imposed mandatory quarantine periods for employees who traveled to areas impacted by the pandemic;
Closed our sales centers, model homes, and design centers to the general public and shifted to appointment-only interactions with our customers where permitted, following recommended distancing and other health and safety protocols when meeting in person with a customer;
Enhanced our virtual sales tools to give customers the ability to shop for a new home from their mobile device or personal computer;
Closed the public gathering spaces of our amenity centers as well as community pools and athletic facilities;
Modified our corporate and division office functions in order to allow all of our employees to work remotely except for essential minimum basic operations which could only be done in an office setting;
Eliminated non-emergency warranty work in our customers’ homes;
Modified much of our customer interactions around the mortgage origination and closing process to be virtual and minimize in-person interactions; and
Modified our construction operations to enforce enhanced safety protocols around social distancing, hygiene, and health screening.

The severity of these restrictions and the date we resumed more normal operations varied by market during the second quarter based on the reduction in restrictions under "shelter in place" orders and improvement in public health conditions. While all of the above-referenced steps were, and some remain, necessary and appropriate in light of the COVID-19 pandemic, they impacted our ability to operate our business in its ordinary and traditional course. Those restrictions, combined with a reduction in the availability, capacity, and efficiency of municipal and private services necessary to progress land development, homebuilding, mortgage loan originations, and home sales, which in each case has varied by market depending on the scope of the restrictions local authorities have established, tempered our sales pace and delayed home construction and deliveries in April and through parts of May.

As a result of the volatile macroeconomic environment, our reported results for the six months ended June 30, 2020 are not necessarily indicative of current market conditions. We began the year under positive demand conditions that resulted in net new orders increasing more than 30% for both January and February 2020 over the comparable prior year periods. However, demand declined significantly as a result of the pandemic, resulting in net new orders in March and April 2020 falling 11% and 53%, respectively, below the comparable prior periods.

As the pandemic spread and government and business responses expanded, we focused on protecting our liquidity and closely managing our cash flows, including through the following actions:

Delaying the acquisition of certain land parcels and slowing land development where practical;
Limiting our investment in house construction, including strictly limiting production of new unsold "speculative" homes, and contacting backlog customers to reconfirm status before beginning construction of sold homes;
As a precautionary measure, proactively drawing $700.0 million under the Revolving Credit Facility in March;
Suspending the repurchase of shares under our share repurchase program; and
Reducing headcount and other overhead expenses.
 

33


Demand began to stabilize in May 2020 and then rebounded sharply in June, with net new orders increasing 50% in June 2020 over June 2019. This increase in June was realized across each of our primary buyer groups, but was particularly strong among first-time buyers. We believe the recovery in demand reflects a number of factors, including low mortgage interest rates, a restricted supply of existing home inventory, pent-up demand following the economic shutdown resulting from the COVID-19 pandemic, the appeal of single-family living in a new home, and a desire among some buyers to exit more densely populated urban centers. In addition to the improved demand, our construction and manufacturing operations were deemed essential services in all but a handful of markets and are now functioning at effectively full capacity. By effectively adjusting our business practices to the rapidly changing market dynamics, we were able to significantly improve our liquidity profile and increase our reported income for the three and six months ended June 30, 2020 compared to the comparable prior year periods. We also elected to repay the $700.0 million that had been borrowed under the Revolving Credit Facility.

While our operations are now fully functioning, subject to regulated restrictions and safety constraints we have enacted in order to protect our employees, trade contractors, and customers, the current resurgence of the COVID pandemic in key areas of our operations may require us to implement restrictions on our operations. The potential magnitude or duration of the business and economic impacts from the unprecedented public health effort to contain and combat the spread of COVID-19 are uncertain and include, among other things, significant volatility in financial markets. In addition, we can provide no assurance as to whether the COVID-19 public health effort will be intensified to such an extent that we will not be able to conduct business operations in certain of our served markets or at all for an indefinite period. There are no reliable estimates of how long the COVID-19 pandemic will last or how severe it may be, and therefore, the unpredictability of the current economic and public health conditions will continue to evolve. However, we believe that the steps we have taken over the years to reduce risk to our operations and the measures we have taken recently to meet the challenges of the COVID-19 pandemic position us well to continue to serve our customers, protect our employees and business partners, and deliver value for our stakeholders.

Consolidated Operations

The following is a summary of our operating results by line of business ($000's omitted, except per share data):
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Income before income taxes:
 
 
 
 
 
 
 
Homebuilding
$
396,585

 
$
295,698

 
$
640,804

 
$
499,993

Financial Services
60,424

 
25,078

 
79,974

 
37,486

Income before income taxes
457,009

 
320,776

 
720,778

 
537,479

Income tax expense
(108,389
)
 
(79,735
)
 
(168,447
)
 
(129,681
)
Net income
$
348,620

 
$
241,041

 
$
552,331

 
$
407,798

Per share data - assuming dilution:
 
 
 
 
 
 
 
Net income
$
1.29

 
$
0.86

 
$
2.03

 
$
1.45

Homebuilding income before income taxes for the three and six months ended June 30, 2020 increased 34% and 28% compared with the same periods in 2019, respectively. The results include $60.7 million and $59.4 million of insurance reserve reversals for the three and six months ended June 30, 2020, respectively, compared to $12.8 million and $16.6 million for the three and six months ended June 30, 2019, respectively, as well as increased closings, higher gross margins, and improved overhead leverage. These increases were partially offset by severance expense of $10.3 million during the three and six months ended June 30, 2020 and a goodwill impairment charge totaling $20.2 million during the six months ended June 30, 2020 (see Note 1).
Financial Services income before income taxes for the three and six months ended June 30, 2020 increased 141% and 113%, respectively, compared with the same periods in 2019 as the result of higher volumes, which largely resulted from increased homebuilding volumes combined with an improved capture rate, and improved margin per loan. Interest rates declined during the six months ended June 30, 2020, which led to enhanced margins contributing to improved capture rate and higher gains from sales of mortgages.
Our effective tax rate for the three and six months ended June 30, 2020 was 23.7% and 23.4%, respectively, compared to 24.9% and 24.1% for the same periods in 2019, respectively.


34



Homebuilding Operations

The following presents selected financial information for our Homebuilding operations ($000’s omitted):
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2020 vs. 2019
 
2019
 
2020
 
2020 vs. 2019
 
2019
Home sale revenues
$
2,472,029

 
3
 %
 
$
2,403,559

 
$
4,693,532

 
8
 %
 
$
4,353,415

Land sale and other revenues
26,950

 
(9
)%
 
29,469

 
45,877

 
41
 %
 
32,445

Total Homebuilding revenues
2,498,979

 
3
 %
 
2,433,028

 
4,739,409

 
8
 %
 
4,385,860

Home sale cost of revenues (a)
(1,880,209
)
 
2
 %
 
(1,848,155
)
 
(3,575,074
)
 
7
 %
 
(3,340,946
)
Land sale and other cost of revenues
(20,041
)
 
(24
)%
 
(26,214
)
 
(35,055
)
 
24
 %
 
(28,265
)
Selling, general, and administrative
expenses ("SG&A")
(b)
(196,858
)
 
(24
)%
 
(259,440
)
 
(460,527
)
 
(10
)%
 
(512,166
)
Goodwill impairment

 
(c)
 

 
(20,190
)
 
(c)
 

Other expense, net
(5,286
)
 
50
 %
 
(3,521
)
 
(7,759
)
 
73
 %
 
(4,490
)
Income before income taxes
$
396,585

 
34
 %
 
$
295,698

 
$
640,804

 
28
 %
 
$
499,993

 
 
 
 
 
 
 
 
 
 
 
 
Supplemental data:
 
 
 
 
 
 
 
 
 
 
 
Gross margin from home sales
23.9
%
 
80 bps

 
23.1
%
 
23.8
%
 
50 bps

 
23.3
%
SG&A as a percentage of home
sale revenues
8.0
%
 
(280) bps

 
10.8
%
 
9.8
%
 
(200) bps

 
11.8
%
Closings (units)
5,937

 
6
 %
 
5,589

 
11,310

 
11
 %
 
10,224

Average selling price
$
416

 
(3
)%
 
$
430

 
$
415

 
(3
)%
 
$
426

Net new orders (d):
 
 
 
 
 
 
 
 
 
 
 
Units
6,522

 
(4
)%
 
6,792

 
14,017

 
6
 %
 
13,255

Dollars
$
2,677,074

 
(7
)%
 
$
2,890,709

 
$
5,945,823

 
6
 %
 
$
5,626,561

Cancellation rate
19
%
 
 
 
14
%
 
16
%
 
 
 
13
%
Average active communities
887

 
1
 %
 
877

 
880

 
2
 %
 
860

Backlog at June 30:
 
 
 
 
 
 
 
 
 
 
 
Units
 
 
 
 
 
 
13,214

 
12
 %
 
11,793

Dollars
 
 
 
 
 
 
$
5,788,096

 
13
 %
 
$
5,109,293


(a)
Includes the amortization of capitalized interest.
(b)
Includes insurance reserve reversals of $60.7 million and $59.4 million for the three and six months ended June 30, 2020, respectively, and $12.8 million and $16.6 million for the three and six months ended June 30, 2019, respectively, and severance expense of $10.3 million for the three months ended June 30, 2020.
(c)
Percentage not meaningful
(d)
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.

Home sale revenues

Home sale revenues for the three and six months ended June 30, 2020 were higher than the prior year periods by $68.5 million and $340.1 million, respectively. For the three months ended June 30, 2020, the 3% increase was attributable to a 6% increase in closings partially offset by a 3% decrease in average selling price. For the six months ended June 30, 2020, the 8% increase was attributable to an 11% increase in closings partially offset by a 3% decrease in average selling price. The increase in closings was primarily the result of improved demand conditions that began in 2019 and continued into the first quarter of 2020, especially among first-time buyers, in part due to meaningfully lower mortgage interest rates. Beginning in March 2020, the COVID-19 pandemic began to significantly impact the demand environment. Thus, the higher closings resulted from the higher backlog of orders that existed prior to the unfavorable impact of the pandemic. While order cancellations did increase beginning in March 2020, the vast majority of customers completed their home closings. The decrease in the average selling price is reflective of an increase in the mix of first-time buyer homes, which typically carry a lower sales price.    

35



Home sale gross margins

Home sale gross margins were 23.9% and 23.8% for the three and six months ended June 30, 2020, respectively, compared to 23.1% and 23.3% for the three and six months ended June 30, 2019, respectively. Gross margins for the three and six months ended June 30, 2020 remained strong relative to historical levels and reflect a combination of factors, including shifts in community mix. The pricing environment that existed in many of our markets in the second half of 2019 and the first half of 2020 allowed us to effectively manage pressure in house and land costs. Additionally, the low mortgage interest rate environment combined with limited supply of new and existing housing has contributed to our ability to maintain or increase pricing in many of our markets.

Land sale and other revenues

We periodically elect to sell parcels of land to third parties in the event such assets no longer fit into our strategic operating plans or are zoned for commercial or other development. Land sale and other revenues and their related gains or losses vary between periods, depending on the timing of land sales and our strategic operating decisions. Land sales and other revenues contributed income of $6.9 million and $10.8 million for the three and six months ended June 30, 2020, respectively, compared to $3.3 million and $4.2 million for the three and six months ended June 30, 2019, respectively.

SG&A

SG&A as a percentage of home sale revenues was 8.0% and 9.8% for the three and six months ended June 30, 2020, respectively, compared with 10.8% and 11.8% for the three and six months ended June 30, 2019, respectively. The gross dollar amount of our SG&A decreased $62.6 million, or 24%, for the three months ended June 30, 2020 compared to June 30, 2019, and $51.6 million, or 10.1%, for the six months ended June 30, 2020 compared to June 30, 2019. The decrease in gross dollars is primarily attributable to insurance reserve reversals of $60.7 million and $59.4 million for the three and six months ended June 30, 2020, respectively, and $12.8 million and $16.6 million for the three and six months ended June 30, 2019, respectively, partially offset by severance expense of $10.3 million for the three months ended June 30, 2020, as we took actions during the second quarter of 2020 to reduce overhead expenses.

Other expense, net

Other expense, net includes the following ($000’s omitted):
 
Three Months Ended
 
Six Months Ended
June 30,
 
June 30,
2020
 
2019
 
2020
 
2019
Write-offs of deposits and pre-acquisition costs
$
(2,311
)
 
$
(2,516
)
 
$
(6,643
)
 
$
(5,433
)
Amortization of intangible assets
(5,045
)
 
(3,550
)
 
(9,602
)
 
(7,000
)
Loss on debt retirement

 
(4,843
)
 

 
(4,843
)
Interest income
1,326

 
4,471

 
5,133

 
9,420

Interest expense
(3,000
)
 
(146
)
 
(3,796
)
 
(290
)
Equity in earnings of unconsolidated entities
334

 
129

 
902

 
165

Miscellaneous, net
3,410

 
2,934

 
6,247

 
3,491

Total other expense, net
$
(5,286
)
 
$
(3,521
)
 
$
(7,759
)
 
$
(4,490
)

Net new orders

Net new orders in units decreased 4% while net new orders in dollars decreased 7% for the three months ended June 30, 2020, respectively, as compared with the prior year period. Net new orders in units and dollars increased 6% for the six months ended June 30, 2020, as compared with the prior year period. The cancellation rate (canceled orders for the period divided by gross new orders for the period) was 19% and 16% for the three and six months ended June 30, 2020, respectively, and 14% and 13% for the same periods in 2019. Ending backlog, which represents orders for homes that have not yet closed, increased 13% at June 30, 2020 compared with June 30, 2019. As a result of the COVID-19 pandemic, new order volume slowed dramatically in March and April 2020 leading to decreased volume during the three months ended June 30, 2020 when compared to the same period in 2019. However, we experienced an increase in demand beginning in May and continuing through June 2020.

36



Homes in production

The following is a summary of our homes in production:
 
June 30,
2020
 
June 30,
2019
Sold
8,825

 
8,528

Unsold
 
 
 
Under construction
1,626

 
2,316

Completed
495

 
610

 
2,121

 
2,926

Models
1,279

 
1,235

Total
12,225

 
12,689


The number of homes in production at June 30, 2020 was 4% lower than at June 30, 2019. The decrease in homes under production is consistent with our decision to tightly manage production due to the significant decrease in demand that occurred in March and April 2020 as the result of the COVID-19 pandemic. As a result, the number of homes produced, particularly unsold, or "speculative", homes was significantly lower during the three months ended June 30, 2020 relative to the comparable prior year period. In response to improved demand, we have started to increase production of speculative homes while continuing to focus on building sold homes.

Controlled lots

The following is a summary of our lots under control at June 30, 2020 and December 31, 2019:
 
June 30, 2020
 
December 31, 2019
 
Owned
 
Optioned
 
Controlled
 
Owned
 
Optioned
 
Controlled
Northeast
4,711

 
4,697

 
9,408

 
4,999

 
4,240

 
9,239

Southeast
14,981

 
13,966

 
28,947

 
16,174

 
12,802

 
28,976

Florida
19,726

 
20,767

 
40,493

 
20,281

 
17,802

 
38,083

Midwest
9,560

 
12,661

 
22,221

 
10,016

 
12,027

 
22,043

Texas
15,215

 
13,026

 
28,241

 
16,256

 
10,573

 
26,829

West
24,073

 
9,768

 
33,841

 
25,633

 
7,459

 
33,092

Total
88,266

 
74,885

 
163,151

 
93,359

 
64,903

 
158,262

 
 
 
 
 
 
 
 
 
 
 
 
Developed (%)
43
%
 
22
%
 
33
%
 
39
%
 
22
%
 
32
%

Of our total controlled lots, 88,266 and 93,359 were owned and 74,885 and 64,903 were controlled under land option agreements at June 30, 2020 and December 31, 2019, respectively. While competition for well-positioned land is robust, we continue to pursue land investments that we believe can achieve appropriate risk-adjusted returns on invested capital. The remaining purchase price under our land option agreements totaled $3.5 billion at June 30, 2020. These land option agreements generally may be canceled at our discretion and in certain cases extend over several years. Our maximum exposure related to these land option agreements is generally limited to our deposits and pre-acquisition costs, which totaled $301.4 million, of which $13.8 million is refundable at June 30, 2020.


37



Homebuilding Segment Operations

As of June 30, 2020, we conducted our operations in 40 markets located throughout 23 states. For reporting purposes, our Homebuilding operations are aggregated into six reportable segments:
 
Northeast:
 
Connecticut, Maryland, Massachusetts, New Jersey, Pennsylvania, Virginia
Southeast:
 
Georgia, North Carolina, South Carolina, Tennessee
Florida:
 
Florida
Midwest:
 
Illinois, Indiana, Kentucky, Michigan, Minnesota, Ohio
Texas:
 
Texas
West:
 
Arizona, California, Nevada, New Mexico, Washington

The following tables present selected financial information for our reportable Homebuilding segments:

 
Operating Data by Segment ($000's omitted)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2020 vs. 2019
 
2019
 
2020
 
2020 vs. 2019
 
2019
Home sale revenues:
 
 
 
 
 
 
 
 
 
 
 
Northeast
$
141,299

 
(24
)%
 
$
186,006

 
$
303,679

 
3
 %
 
$
296,269

Southeast
456,788

 
13
 %
 
405,960

 
838,929

 
7
 %
 
780,415

Florida
559,275

 
5
 %
 
530,534

 
1,049,303

 
13
 %
 
926,665

Midwest
337,797

 
(2
)%
 
345,670

 
628,730

 
(2
)%
 
638,522

Texas
364,996

 
7
 %
 
342,626

 
709,504

 
16
 %
 
611,367

West
611,874

 
3
 %
 
592,763

 
1,163,387

 
6
 %
 
1,100,177

 
$
2,472,029

 
3
 %
 
$
2,403,559

 
$
4,693,532

 
8
 %
 
$
4,353,415

Income (loss) before income taxes (a):
 
 
 
 
 
 
 
 
 
 
 
Northeast
$
18,944

 
(28
)%
 
$
26,212

 
$
37,553

 
10
 %
 
$
34,140

Southeast
72,780

 
71
 %
 
42,499

 
127,524

 
59
 %
 
80,355

Florida (b)
97,263

 
21
 %
 
80,066

 
152,596

 
18
 %
 
129,662

Midwest
43,607

 
2
 %
 
42,962

 
75,069

 
9
 %
 
69,120

Texas
59,909

 
22
 %
 
49,144

 
113,504

 
42
 %
 
80,115

West
90,164

 
(5
)%
 
94,443

 
157,419

 
(15
)%
 
184,625

Other homebuilding (c)
13,918

 
135
 %
 
(39,628
)
 
(22,861
)
 
71
 %
 
(78,024
)
 
$
396,585

 
34
 %
 
$
295,698

 
$
640,804

 
28
 %
 
$
499,993

 
 
 
 
 
 
 
 
 
 
 
 
(a)
Includes land-related charges as summarized in the table below.
(b)
Includes goodwill impairment charge totaling $20.2 million in the six months ended June 30, 2020.
(c)
Other homebuilding includes the amortization of intangible assets and capitalized interest and other items not allocated to the operating segments. Other homebuilding also includes insurance reserve reversals of $60.7 million and $59.4 million for the three and six months ended June 30, 2020, respectively, and $12.8 million and $16.6 million for the three and six months ended June 30, 2019, respectively.

 

38



 
Operating Data by Segment ($000's omitted)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2020 vs. 2019
 
2019
 
2020
 
2020 vs. 2019
 
2019
Closings (units):
 
 
 
 
 
 
 
 
 
 
 
Northeast
260

 
(26
)%
 
349

 
570

 
 %
 
568

Southeast
1,104

 
16
 %
 
951

 
2,032

 
10
 %
 
1,848

Florida
1,380

 
10
 %
 
1,252

 
2,590

 
15
 %
 
2,260

Midwest
808

 
(2
)%
 
822

 
1,516

 
(2
)%
 
1,548

Texas
1,194

 
7
 %
 
1,119

 
2,322

 
18
 %
 
1,968

West
1,191

 
9
 %
 
1,096

 
2,280

 
12
 %
 
2,032

 
5,937

 
6
 %
 
5,589

 
11,310

 
11
 %
 
10,224

 
 
 
 
 
 
 
 
 
 
 
 
Average selling price:
 
 
 
 
 
 
 
 
 
 
 
Northeast
$
543

 
2
 %
 
$
533

 
$
533

 
2
 %
 
$
522

Southeast
414

 
(3
)%
 
427

 
413

 
(2
)%
 
422

Florida
405

 
(4
)%
 
424

 
405

 
(1
)%
 
410

Midwest
418

 
(1
)%
 
421

 
415

 
1
 %
 
412

Texas
306

 
 %
 
306

 
306

 
(2
)%
 
311

West
514

 
(5
)%
 
541

 
510

 
(6
)%
 
541

 
$
416

 
(3
)%
 
$
430

 
$
415

 
(3
)%
 
$
426

 
 
 
 
 
 
 
 
 
 
 
 
Net new orders - units:
 
 
 
 
 
 
 
 
 
 
 
Northeast
383

 
(16
)%
 
455

 
831

 
2
 %
 
816

Southeast
1,095

 
(10
)%
 
1,214

 
2,236

 
(2
)%
 
2,287

Florida
1,488

 
2
 %
 
1,460

 
3,173

 
13
 %
 
2,806

Midwest
896

 
(8
)%
 
975

 
1,915

 
(4
)%
 
1,999

Texas
1,431

 
8
 %
 
1,323

 
2,940

 
9
 %
 
2,689

West
1,229

 
(10
)%
 
1,365

 
2,922

 
10
 %
 
2,658

 
6,522

 
(4
)%
 
6,792

 
14,017

 
6
 %
 
13,255

 
 
 
 
 
 
 
 
 
 
 
 
Net new orders - dollars:
 
 
 
 
 
 
 
 
 
 
 
Northeast
$
203,532

 
(17
)%
 
$
244,346

 
$
459,544

 
4
 %
 
$
440,644

Southeast
449,511

 
(11
)%
 
502,970

 
923,392

 
(4
)%
 
957,358

Florida
597,382

 
(1
)%
 
600,738

 
1,290,099

 
12
 %
 
1,151,043

Midwest
373,390

 
(6
)%
 
399,199

 
819,747

 
(1
)%
 
824,841

Texas
417,675

 
2
 %
 
407,927

 
873,464

 
7
 %
 
819,970

West
635,584

 
(14
)%
 
735,529

 
1,579,577

 
10
 %
 
1,432,705

 
$
2,677,074

 
(7
)%
 
$
2,890,709

 
$
5,945,823

 
6
 %
 
$
5,626,561


39



 
Operating Data by Segment ($000's omitted)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2020 vs. 2019
 
2019
 
2020
 
2020 vs. 2019
 
2019
Cancellation rates:
 
 
 
 
 
 
 
 
 
 
 
Northeast
12
%
 
 
 
13
%
 
12
%
 
 
 
12
%
Southeast
13
%
 
 
 
10
%
 
12
%
 
 
 
11
%
Florida
19
%
 
 
 
12
%
 
16
%
 
 
 
12
%
Midwest
15
%
 
 
 
12
%
 
13
%
 
 
 
11
%
Texas
22
%
 
 
 
16
%
 
19
%
 
 
 
15
%
West
25
%
 
 
 
17
%
 
19
%
 
 
 
16
%
 
19
%
 
 
 
14
%
 
16
%
 
 
 
13
%
 
 
 
 
 
 
 
 
 
 
 
 
Unit backlog:
 
 
 
 
 
 
 
 
 
 
 
Northeast
 
 
 
 
 
 
850

 
18
 %
 
718

Southeast
 
 
 
 
 
 
2,069

 
1
 %
 
2,049

Florida
 
 
 
 
 
 
2,889

 
19
 %
 
2,435

Midwest
 
 
 
 
 
 
1,939

 
5
 %
 
1,853

Texas
 
 
 
 
 
 
2,468

 
12
 %
 
2,213

West
 
 
 
 
 
 
2,999

 
19
 %
 
2,525

 
 
 
 
 
 
 
13,214

 
12
 %
 
11,793

 
 
 
 
 
 
 
 
 
 
 
 
Backlog dollars:
 
 
 
 
 
 
 
 
 
 
 
Northeast
 
 
 
 
 
 
$
503,562

 
25
 %
 
$
402,186

Southeast
 
 
 
 
 
 
867,932

 
(1
)%
 
875,973

Florida
 
 
 
 
 
 
1,219,057

 
19
 %
 
1,024,429

Midwest
 
 
 
 
 
 
842,993

 
9
 %
 
774,739

Texas
 
 
 
 
 
 
754,827

 
9
 %
 
694,816

West
 
 
 
 
 
 
1,599,725

 
20
 %
 
1,337,150

 
 
 
 
 
 
 
$
5,788,096

 
13
 %
 
$
5,109,293




40



 
Operating Data by Segment
($000’s omitted)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Land-related charges*:
 
 
 
 
 
 
 
Northeast
$
92

 
$
130

 
$
4,845

 
$
454

Southeast
929

 
2,015

 
1,676

 
2,587

Florida
459

 
765

 
981

 
1,246

Midwest
499

 
203

 
1,275

 
1,306

Texas
329

 
414

 
986

 
482

West
145

 
216

 
1,674

 
647

Other homebuilding

 
88

 
744

 
88

 
$
2,453

 
$
3,831

 
$
12,181

 
$
6,810

*
Land-related charges include land inventory impairments, net realizable value adjustments on land held for sale, and write-offs of deposits and pre-acquisition costs for land option contracts we elected not to pursue. Other homebuilding consists primarily of write-offs of capitalized interest related to such land-related charges.
Northeast     

For the second quarter of 2020, Northeast home sale revenues decreased by 24% when compared with the prior year period due to a 26% decrease in closings partially offset by a 2% increase in average selling price. The decrease in closings occurred across all markets, primarily due to disruption caused by the COVID-19 pandemic, especially with our operations located in Pennsylvania. The increase in average selling price was primarily attributable to Northeast Corridor. Income before income taxes decreased 28% primarily as a result of the aforementioned decrease in closings. Net new orders decreased across all markets except Mid-Atlantic.

For the six months ended June 30, 2020, Northeast home sale revenues increased by 3% when compared with the prior year period due to a 2% increase in average selling price and a slight increase in closings. The increase in average selling price was primarily attributable to Northeast Corridor. Income before income taxes increased 10% primarily due to the higher revenues combined with improved gross margins across the majority of markets. Net new orders increased in Mid-Atlantic while Northeast Corridor and New England experienced decreases.

Southeast

For the second quarter of 2020, Southeast home sale revenues increased 13% compared with the prior year period as the result of a 16% increase in closings partially offset by a 3% decrease in average selling price. The increase in closings occurred in all markets except Georgia while the decrease in average selling price was mixed among markets. Income before income taxes increased 71% primarily due to higher revenues, improved gross margins, and improved overhead management which occurred across the majority of markets. Net new orders decreased across the majority of markets.

For the six months ended June 30, 2020, Southeast home sale revenues increased 7% compared with the prior year period as the result of a 10% increase in closings partially offset by a 2% decrease in average selling price. The increase in closings occurred in all markets except Georgia and Tennessee while the decrease in average selling price occurred in all markets except Charlotte. Income before income taxes increased 59% primarily due to higher revenues and improved gross margins, which occurred across all markets. Net new orders decreased across the majority of markets.

Florida

For the second quarter of 2020, Florida home sale revenues increased 5% compared with the prior year period due to a 10% increase in closings partially offset by a 4% decrease in the average selling price. The increased closings occurred across the majority of markets while the decreased average selling price was mixed among markets. Income before income taxes increased 21% due to the higher revenues and improved overhead management and margins across the majority of markets. Net new orders increased across the majority of markets.


41



For the six months ended June 30, 2020, Florida home sale revenues increased 13% compared with the prior year period due to a 15% increase in closings partially offset by a 1% decrease in the average selling price. The increased closings occurred across all markets while the decreased average selling price was mixed among markets. Income before income taxes increased 18% due to the higher revenues, improved gross margins, and improved overhead management across all markets, partially offset by a goodwill impairment charge of $20.2 million (see Note 1). Net new orders increased across the majority of markets.

Midwest

For the second quarter of 2020, Midwest home sale revenues decreased 2% compared with the prior year period due to a 2% decrease in closings and a slight decrease in average selling price. The decrease in closings occurred primarily in Michigan due to disruption caused by the COVID-19 pandemic while the decrease in average selling price was mixed among markets. Income before income taxes increased 2% primarily due to improved overhead management and gross margins.

For the six months ended June 30, 2020, Midwest home sale revenues decreased 2% compared with the prior year period due to a 2% decrease in closings partially offset by a slight increase in average selling price. The decrease in closings occurred primarily in Michigan due to disruption caused by the COVID-19 pandemic while the increase in average selling price occurred across the majority of markets. Income before income taxes increased 9% primarily due to improved overhead management and gross margins. Net new orders decreased across the majority of markets.

Texas

For the second quarter of 2020, Texas home sale revenues increased 7% compared with the prior year period due to a 7% increase in closings. The increase in closings occurred in San Antonio and Austin while the decrease in average selling price occurred in the majority of markets. Income before income taxes increased 22% primarily due to higher revenues and improved overhead management and gross margins. Net new orders increased in the majority of markets.

For the six months ended June 30, 2020, Texas home sale revenues increased 16% compared with the prior year period due to an 18% increase in closings partially offset by a 2% decrease in the average selling price. The increase in closings occurred in all markets while the decrease in average selling price occurred in the majority of markets. Income before income taxes increased 42% primarily due to higher revenues and improved overhead management and gross margins. Net new orders increased in the majority of markets.

West
    
For the second quarter of 2020, West home sale revenues increased 3% compared with the prior year period due to a 9% increase in closings partially offset by a 5% decrease in average selling price. Revenues were higher in most markets with Las Vegas benefiting from the American West acquisition that occurred in 2019. However, Northern California experienced significantly lower revenues, primarily due to disruption caused by the COVID-19 pandemic combined with the prior period completion, or near completion, of several high performing communities and an overall moderation of demand in that market. Average selling prices decreased, primarily as the result of Northern California. Income before income taxes decreased 5% primarily due to the aforementioned results from Northern California partially offset by improved overhead management. Net new orders decreased across all markets except Arizona.

For the six months ended June 30, 2020, West home sale revenues increased 6% compared with the prior year period due to a 12% increase in closings partially offset by a 6% decrease in average selling price. Revenues were higher in most markets with Las Vegas benefiting from the American West acquisition that occurred in 2019. However, Northern California experienced significantly lower revenues, primarily due to disruption caused by the COVID-19 pandemic combined with the prior period completion, or near completion, of several high performing communities and an overall moderation of demand in that market. Average selling prices decreased, primarily as the result of lower revenues from Northern California. Income before income taxes decreased 15% primarily due to the aforementioned results from Northern California partially offset by improved overhead management. Net new orders increased across all markets except Arizona.

42



Financial Services Operations

We conduct our Financial Services operations, which include mortgage banking, title, and insurance brokerage operations, through Pulte Mortgage and other subsidiaries. In originating mortgage loans, we initially use our own funds, including funds available pursuant to credit agreements with third parties. Substantially all of the loans we originate are sold in the secondary market within a short period of time after origination, generally within 30 days. We also sell the servicing rights for the loans we originate through fixed price servicing sales contracts to reduce the risks and costs inherent in servicing loans. This strategy results in owning the loans and related servicing rights for only a short period of time. Operating as a captive business model primarily targeted to support our Homebuilding operations, the business levels of our Financial Services operations are highly correlated to Homebuilding as Homebuilding customers continue to account for substantially all of its business. We believe that our mortgage capture rate, which represents loan originations from our Homebuilding operations as a percentage of total loan opportunities, excluding cash closings, from our Homebuilding operations is an important metric in evaluating the effectiveness of our captive mortgage business model. The following tables present selected financial information for our Financial Services operations ($000's omitted):
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2020 vs. 2019
 
2019
 
2020
 
2020 vs. 2019
 
2019
Mortgage revenues
$
77,411

 
94
%
 
$
39,833

 
$
118,145

 
65
 %
 
$
71,706

Title services revenues
14,323

 
8
%
 
13,210

 
26,525

 
15
 %
 
23,052

Insurance brokerage commissions
3,068

 
5
%
 
2,914

 
4,682

 
(7
)%
 
5,061

Total Financial Services revenues
94,802

 
69
%
 
55,957

 
149,352

 
50
 %
 
99,819

Expenses
(34,378
)
 
11
%
 
(30,901
)
 
(69,327
)
 
11
 %
 
(62,350
)
Other income (expense), net

 
(a)
 
22

 
(51
)
 
(a)
 
17

Income before income taxes
$
60,424

 
141
%
 
$
25,078

 
$
79,974

 
113
 %
 
$
37,486

Total originations:
 
 
 
 
 
 
 
 
 
 
 
Loans
4,474

 
20
%
 
3,720

 
8,344

 
24
 %
 
6,718

Principal
$
1,436,103

 
24
%
 
$
1,161,906

 
$
2,649,370

 
28
 %
 
$
2,076,617


(a)
Percentage not meaningful

 
Six Months Ended
 
June 30,
 
2020
 
2019
Supplemental data:
 
 
 
Capture rate
86.8
%
 
80.4
%
Average FICO score
751

 
750

Funded origination breakdown:
 
 
 
Government (FHA, VA, USDA)
22
%
 
20
%
Other agency
70
%
 
71
%
Total agency
92
%
 
91
%
Non-agency
8
%
 
9
%
Total funded originations
100
%
 
100
%






43


Revenues

Total Financial Services revenues for the three and six months ended June 30, 2020 increased 69% and 50%, respectively, compared with the comparable prior year periods as the result of increased homebuilding volumes combined with an improved capture rate and improved margin per loan. Interest rates declined during the three and six months ended June 30, 2020, which led to enhanced margins contributing to improved capture rate and higher gains from sales of mortgages. Such gains offset a sharp reduction in values of mortgage servicing rights that occurred as the result of the increased risk to mortgage servicers related to potential forbearance claims and loan defaults, though mortgage servicing rights values improved in June 2020 as conditions moderated.

Income before income taxes

Income before income taxes for the three and six months ended June 30, 2020 increased 141% and 113%, respectively, compared with the same periods in 2019 as the result of higher revenues, improved margins, and improved expense leverage.

Income Taxes

Our effective tax rate for the three and six months ended June 30, 2020 was 23.7% and 23.4%, respectively, compared to 24.9% and 24.1%, respectively, for the same periods in 2019. Each year's rate differs from the federal statutory rate primarily due to state income tax expense.

Liquidity and Capital Resources

We finance our land acquisition, development, and construction activities and financial services operations using internally-generated funds supplemented by credit arrangements with third parties and capital market financing. We routinely monitor current and expected operational requirements and financial market conditions to evaluate accessing other available financing sources, including revolving bank credit and securities offerings.

At June 30, 2020, we had unrestricted cash and equivalents of $1.7 billion, restricted cash balances of $39.3 million, and $755.2 million available under our Revolving Credit Facility. We follow a diversified investment approach for our cash and equivalents by maintaining such funds with a broad portfolio of banks within our group of relationship banks in high quality, highly liquid, short-term deposits and investments. Given the financial resources available to us and the actions we have taken as summarized in the Overview section, we believe that we have adequate liquidity to continue funding our operations for the foreseeable future.

Our ratio of debt to total capitalization, excluding our Financial Services debt, was 32.1% at June 30, 2020, as compared with 33.6% at December 31, 2019, which are within our targeted range of 30.0% to 40.0%.

Unsecured senior notes

We had $2.7 billion of unsecured senior notes outstanding at both June 30, 2020 and December 31, 2019, with no repayments due until 2021, when $426.0 million of unsecured senior notes are scheduled to mature.

Other notes payable

Other notes payable include non-recourse and limited recourse secured notes with third parties that totaled $58.7 million and $53.4 million at June 30, 2020 and December 31, 2019, respectively. These notes have maturities ranging up to three years, are secured by the applicable land positions to which they relate, and have no recourse to any other assets. The stated interest rates on these notes range up to 8%.

Revolving credit facility
    
We maintain a revolving credit facility (the "Revolving Credit Facility") maturing in 2023 that has a maximum borrowing capacity of $1.0 billion and contains an uncommitted accordion feature that could increase the capacity to $1.5 billion, subject to certain conditions and availability of additional bank commitments. The Revolving Credit Facility also provides for the issuance of letters of credit that reduce the available borrowing capacity under the Revolving Credit Facility, with a sublimit of $500.0 million at June 30, 2020. The interest rate on borrowings under the Revolving Credit Facility may be based on either the London Interbank Offered Rate ("LIBOR") or a base rate plus an applicable margin, as defined therein. As a precautionary measure during the COVID-19 pandemic, we made the decision in March 2020 to draw $700.0 million under the Revolving

44


Credit Facility. In June 2020, we repaid the full outstanding balance of $700.0 million. As a result, we had no borrowings outstanding at both June 30, 2020 and December 31, 2019, and $244.8 million and $262.8 million of letters of credit issued under the Revolving Credit Facility at June 30, 2020 and December 31, 2019, respectively.

The Revolving Credit Facility contains financial covenants that require us to maintain a minimum Tangible Net Worth, a minimum Interest Coverage Ratio, and a maximum Debt-to-Capitalization Ratio (as each term is defined in the Revolving Credit Facility). As of June 30, 2020, we were in compliance with all covenants. Our available and unused borrowings
under the Revolving Credit Facility, net of outstanding letters of credit, amounted to $755.2 million and $737.2 million at June 30, 2020 and December 31, 2019, respectively.

Financial Services debt

Pulte Mortgage maintains a Repurchase Agreement with third party lenders that matures on July 30, 2020. The maximum aggregate commitment was $270.0 million at June 30, 2020 and continues through maturity. The Repurchase Agreement contains various affirmative and negative covenants applicable to Pulte Mortgage, including quantitative thresholds related to net worth, net income, and liquidity. Pulte Mortgage had $256.4 million and $326.6 million outstanding under the Repurchase Agreement at June 30, 2020 and December 31, 2019, respectively, and was in compliance with all of its covenants and requirements as of such dates. While there can be no assurances that the Repurchase Agreement can be renewed or replaced on commercially reasonable terms upon its expiration, we believe we have adequate liquidity to meet Pulte Mortgage's anticipated financing needs.

Dividends and share repurchase program

During the six months ended June 30, 2020, we declared cash dividends totaling $65.1 million and repurchased 2.8 million shares under our repurchase authorization totaling $95.7 million. The repurchase of shares was suspended in March 2020 as a response to the COVID-19 pandemic and continued through the second quarter of 2020. At June 30, 2020, we had remaining authorization to repurchase $429.9 million of common shares.

Cash flows

Operating activities

Net cash provided by operating activities for the six months ended June 30, 2020 was $807.9 million, compared with net cash provided by operating activities of $305.7 million for the six months ended June 30, 2019. Generally, the primary drivers of our cash flow from operations are profitability and changes in the levels of inventory and residential mortgage loans available-for-sale, each of which experiences seasonal fluctuations. The positive cash flow from operations for the six months ended June 30, 2020 was primarily due to our net income of $552.3 million, which included various non-cash items, a seasonal $114.1 million decrease in residential mortgage loans available-for-sale, and a net decrease in inventories of $101.8 million. The decrease in inventories resulted from our deliberate efforts to reduce inventory spend, especially land acquisition and development spend, starting in March 2020 in response to the COVID-19 pandemic. While a seasonal increase in house inventory partially offset the reduced land expenditures, the size of the seasonal increase was lower as we tightly managed production levels given the volatility in demand during March through June 2020.

Net cash provided by operating activities for the six months ended June 30, 2019 was $305.7 million. The positive cash flow from operations for the six months ended June 30, 2019 was primarily due to our net income of $407.8 million, supplemented by $51.5 million of deferred income taxes and a $117.0 million reduction in residential mortgage loans available-for-sale, partially offset by a net increase in inventories of $399.5 million resulting from ongoing land acquisition and development investment to support future growth, combined with a seasonal build of house inventory.

Investing activities

Net cash used in investing activities for the six months ended June 30, 2020 was $105.5 million, compared with net cash used in investing activities of $193.4 million for the six months ended June 30, 2019. Cash outflows in 2020 primarily reflected our acquisition of ICG in January 2020 for $83.3 million, as well as capital expenditures of $36.7 million related to our ongoing investments in new communities and certain information technology applications.

Net cash used in investing activities for the six months ended June 30, 2019 was $193.4 million. These cash outflows primarily reflected our acquisition of American West in April 2019 for $163.7 million, as well as, capital expenditures of $29.6 million related to our ongoing investments in new communities and certain information technology applications.

45



Financing activities

Net cash provided by financing activities for the six months ended June 30, 2020 totaled $256.1 million, compared with net cash used in financing activities of $586.8 million for the six months ended June 30, 2019. The net cash provided by financing activities for the six months ended June 30, 2020 resulted primarily from the repurchase of 2.8 million common shares for $95.7 million under our share repurchase authorization, repayments of debt totaling $10.1 million, payments of $65.3 million in cash dividends, and net repayments of $70.2 million for borrowings under the Repurchase Agreement related to a seasonal reduction in residential mortgage loans available-for-sale.

Net cash used in financing activities for the six months ended June 30, 2019 resulted primarily from the repurchase of 3.5 million common shares for $108.5 million under our repurchase authorization, repayments of debt totaling $297.3 million, payments of $61.6 million in cash dividends, and net repayments of $114.2 million for borrowings under the Repurchase Agreement related to a seasonal reduction in residential mortgage loans available-for-sale.

Inflation

We, and the homebuilding industry in general, may be adversely affected during periods of inflation because of higher land and construction costs. Inflation may also increase our financing costs. In addition, higher mortgage interest rates affect the affordability of our products to prospective homebuyers. While we attempt to pass on increases in our costs through increased sales prices, market forces may limit our ability to do so. If we are unable to raise sales prices enough to compensate for higher costs, or if mortgage interest rates increase significantly, our revenues, gross margins, and net income could be adversely affected.

Seasonality

Although significant changes in market conditions have impacted our seasonal patterns in the past and could do so again, we historically experience variability in our quarterly results from operations due to the seasonal nature of the homebuilding industry. We generally experience increases in revenues and cash flow from operations during the fourth quarter based on the timing of home closings. This seasonal activity increases our working capital requirements in our third and fourth quarters to support our home production and loan origination volumes. As a result of the seasonality of our operations, our quarterly results of operations are not necessarily indicative of the results that may be expected for the full year. Additionally, given the disruption in economic activity caused by the COVID-19 pandemic, our results for the three and six months ended June 30, 2020 are not indicative of results that may be achieved in the future.

Contractual Obligations and Commercial Commitments

There have been no material changes to our contractual obligations from those disclosed in our "Contractual Obligations and Commercial Commitments" contained in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Off-Balance Sheet Arrangements

We use letters of credit and surety bonds to guarantee our performance under various contracts, principally in connection with the development of our homebuilding projects. The expiration dates of the letter of credit contracts coincide with the expected completion date of the related homebuilding projects. If the obligations related to a project are ongoing, annual extensions of the letters of credit are typically granted on a year-to-year basis. At June 30, 2020, we had outstanding letters of credit totaling $244.8 million. Our surety bonds generally do not have stated expiration dates; rather, we are released from the bonds as the contractual performance is completed. These bonds, which approximated $1.3 billion at June 30, 2020, are typically outstanding over a period of approximately three to five years. Because significant construction and development work has been performed related to projects that have not yet received final acceptance by the respective counterparties, the aggregate amount of surety bonds outstanding is in excess of the projected cost of the remaining work to be performed.

In the ordinary course of business, we enter into land option agreements in order to procure land for the construction of houses in the future. At June 30, 2020, these agreements had an aggregate remaining purchase price of $3.5 billion. Pursuant to these land option agreements, we generally provide a deposit to the seller as consideration for the right to purchase land at different times in the future, usually at predetermined prices.


46


Critical Accounting Policies and Estimates

There have been no significant changes to our critical accounting policies and estimates during the six months ended June 30, 2020 compared with those contained in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2019, except for additional impairment sensitivity information reflected in the following:

Inventory and cost of revenues

Inventory is stated at cost unless the carrying value is determined to not be recoverable, in which case the affected inventory is written down to fair value. Cost includes land acquisition, land development, and home construction costs, including interest, real estate taxes, and certain direct and indirect overhead costs related to development and construction. For those communities for which construction and development activities have been idled, applicable interest and real estate taxes are expensed as incurred. Land acquisition and development costs are allocated to individual lots using an average lot cost determined based on the total expected land acquisition and development costs and the total expected home closings for the community. The specific identification method is used to accumulate home construction costs.

We capitalize interest cost into homebuilding inventories. Each layer of capitalized interest is amortized over a period that approximates the average life of communities under development. Interest expense is allocated over the period based on the timing of home closings.

Cost of revenues includes the construction cost, average lot cost, estimated warranty costs, amortization of capitalized interest, and closing costs applicable to the home. Sales commissions are classified within selling, general, and administrative expenses. The construction cost of the home includes amounts paid through the closing date of the home, plus an accrual for costs incurred but not yet paid, based on an analysis of budgeted construction costs. This accrual is reviewed for accuracy based on actual payments made after closing compared with the amount accrued, and adjustments are made if needed. Total community land acquisition and development costs are based on an analysis of budgeted costs compared with actual costs incurred to date and estimates to complete. The development cycles for our communities range from under one year to in excess of ten years for certain master planned communities. Adjustments to estimated total land acquisition and development costs for the community affect the amounts costed for the community’s remaining lots.

We test inventory for impairment when events and circumstances indicate that the undiscounted cash flows estimated to be generated by the community may be less than its carrying amount. Such indicators include gross margins or sales paces significantly below expectations, construction costs or land development costs significantly in excess of budgeted amounts, significant delays or changes in the planned development for the community, and other known qualitative factors. Communities that demonstrate potential impairment indicators are tested for impairment by comparing the expected undiscounted cash flows for the community to its carrying value. For those communities whose carrying values exceed the expected undiscounted cash flows, we determine the fair value of the community and impairment charges are recorded if the fair value of the community’s inventory is less than its carrying value.
    
We generally determine the fair value of each community using a combination of discounted cash flow models and market comparable transactions, where available. These estimated cash flows are significantly impacted by estimates related to expected average selling prices, expected sales paces, expected land development and construction timelines, and anticipated land development, construction, and overhead costs. The assumptions used in the discounted cash flow models are specific to each community. Due to uncertainties in the estimation process, the significant volatility in demand for new housing, the long life cycles of many communities, and potential changes in our strategy related to certain communities, actual results could differ significantly from such estimates.
    
Generally, a community must have projected gross margin percentages in the mid single digits in order to potentially fail the undiscounted cash flow step and proceed to the fair value step. Our overall gross margin realized in the three months ended June 30, 2020 and our average gross margin in backlog at June 30, 2020 both exceeded 20%, and we have only a small minority of communities with gross margins below 10%. However, in the event of an extended economic slowdown that leads to moderate or significant decreases in the price of new homes in certain geographic or buyer submarkets, we could have a larger number of communities that begin to approach these levels such that more detailed impairment analyses would be necessary, and the resulting impairments could be material. Additionally, we have $301.4 million of deposits and pre-acquisition costs at June 30, 2020 related to option agreements to acquire additional land. In the event of an extended economic slowdown, we could elect to cancel a large portion of such land option agreements, which would generally result in the write-off of the related deposits and pre-acquisition costs.

47



Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Quantitative disclosure
We are subject to market risk on our debt instruments primarily due to fluctuations in interest rates. We utilize both fixed-rate and variable-rate debt. For fixed-rate debt, changes in interest rates generally affect the fair value of the debt instrument but not our earnings or cash flows. Conversely, for variable-rate debt, changes in interest rates generally do not affect the fair value of the debt instrument but could affect our earnings and cash flows. Except in very limited circumstances, we do not have an obligation to prepay fixed-rate debt prior to maturity. As a result, interest rate risk and changes in fair value should not have a significant impact on our fixed-rate debt until we are required or elect to refinance or repurchase such debt.
    
The following table sets forth the principal cash flows by scheduled maturity, weighted-average interest rates, and estimated fair value of our debt obligations as of June 30, 2020 ($000’s omitted):
 
As of June 30, 2020 for the
Years ending December 31,
 
2020
 
2021
 
2022
 
2023
 
2024
 
Thereafter
 
Total
 
Fair
Value
Rate-sensitive liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed rate debt
$
11,329

 
$
463,016

 
$
10,295

 
$

 
$

 
$
2,300,000

 
$
2,784,640

 
$
2,811,823

Average interest rate
3.80
%
 
4.04
%
 
0.39
%
 
%
 
%
 
5.90
%
 
5.56
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable rate debt (a)
$
256,359

 
$

 
$

 
$

 
$

 
$

 
$
256,359

 
$
256,359

Average interest rate
2.16
%
 
%
 
%
 
%
 
%
 
%
 
2.16
%
 
 

(a) Includes the Pulte Mortgage Repurchase Agreement and amounts outstanding under our Revolving Credit facility, under which there was no amount outstanding at June 30, 2020.

Qualitative disclosure

There have been no material changes to the qualitative disclosure found in Item 7A, Quantitative and Qualitative Disclosures about Market Risk, of our Annual Report on Form 10-K for the year ended December 31, 2019 with the exception of the potentially negative impacts of the COVID-19 pandemic as described within the below section.

SPECIAL NOTES CONCERNING FORWARD-LOOKING STATEMENTS

As a cautionary note, except for the historical information contained herein, certain matters discussed in Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, and Item 3, Quantitative and Qualitative Disclosures About Market Risk, are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking 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,” “plan,” “project,” “may,” “can,” “could,” “might,” "should", “will” and similar expressions identify forward-looking statements, including statements related to any potential impairment charges and the impacts or effects thereof, 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; competition within the industries in which we operate; the availability and cost of land and other raw materials used by us in our 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 and the levels of our land spend; the availability and cost of insurance covering risks associated with our 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

48


to tax, labor and environmental laws which could have a greater impact on our effective tax rate or the value of our deferred tax assets than we anticipate; economic changes nationally or in our 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; our ability to generate sufficient cash flow in order to successfully implement our capital allocation priorities; required accounting changes; terrorist acts and other acts of war; the negative impact of the COVID-19 pandemic on our financial position and ability to continue our Homebuilding or Financial Services activities at normal levels or at all in impacted areas; the duration, effect and severity of the COVID-19 pandemic; the measures that governmental authorities take to address the COVID-19 pandemic which may precipitate or exacerbate one or more of the above-mentioned and/or other risks and significantly disrupt or prevent us from operating our business in the ordinary course for an extended period of time; 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, 2019, 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.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Management, including our President and Chief Executive Officer and Executive Vice President and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2020. Based upon, and as of the date of that evaluation, our President and Chief Executive Officer and Executive Vice President and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of June 30, 2020.

Management is responsible for establishing and maintaining effective internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). There was no change in our internal control over financial reporting during the quarter ended June 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION

Item 1A. Risk Factors

Except as set forth below, as of the date of this report, there have been no material changes to the risk factors we previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.

Our business has been materially and adversely disrupted by the present outbreak and worldwide spread of COVID-19 and could be materially and adversely disrupted by another epidemic or pandemic, or similar public threat, or fear of such an event, and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it.

An epidemic, pandemic, or similar serious public health issue, and the measures undertaken by governmental authorities to address it, could significantly disrupt or prevent us from operating our business in the ordinary course for an extended period, and thereby, and/or along with any associated economic and/or social instability or distress, have a significant adverse impact on our consolidated financial statements.
    
On March 11, 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic and recommended containment and mitigation measures worldwide. On March 13, 2020, the United States declared a national emergency concerning the COVID-19 outbreak, and shortly thereafter many states and municipalities also declared public health emergencies. Along with these declarations, there have been extraordinary and wide-ranging actions taken by international, federal, state, and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions across the United States and the world, including quarantines, and “shelter-in-place” orders and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations.

In response to these steps and as we assessed the risk to our employees, trade partners and customers, in March, we instituted the following actions:


49


Placed restrictions on business travel for our employees and imposed mandatory quarantine periods for employees who traveled to areas impacted by the pandemic;
Closed our sales centers, model homes, and design centers to the general public and shifted to appointment-only interactions with our customers where permitted, following recommended distancing and other health and safety protocols when meeting in person with a customer;
Enhanced our virtual sales tools to give customers the ability to shop for a new home from their mobile device or personal computer;
Closed the public gathering spaces of our amenity centers as well as community pools and athletic facilities;
Modified our corporate and division office functions in order to allow all of our employees to work remotely except for essential minimum basic operations which could only be done in an office setting;
Eliminated non-emergency warranty work in our customers’ homes;
Modified much of our customer interactions around the mortgage origination and closing process to be virtual and minimize in-person interactions; and
Modified our construction operations to enforce enhanced safety protocols around social distancing, hygiene, and health screening.

The severity of these restrictions and the date we resumed more normal operations varied by market during the second quarter based on the reductions in restrictions under "shelter in place" orders and improvement in public health conditions. While all of the above-referenced steps were necessary and appropriate in light of the COVID-19 pandemic, they have impacted our ability to operate our business in its ordinary and traditional course. Those restrictions, combined with a reduction in the availability, capacity, and efficiency of municipal and private services necessary to progress land development, homebuilding, mortgage loan originations, and home sales, which in each case varied by market depending on the scope of the restrictions local authorities have established, tempered our sales pace and delayed home construction and deliveries in the latter part of March and through April.

While our operations are now fully functioning, subject to regulated restrictions and safety constraints we have enacted in order to protect our employees, trade contractors, and customers, the current resurgence of the COVID pandemic in key areas of our operations may require us to implement restrictions on our operations. The potential magnitude or duration of the business and economic impacts from the unprecedented public health effort to contain and combat the spread of COVID-19 are uncertain and could include, among other things, significant volatility in financial markets. We can provide no assurance as to whether the COVID-19 public health effort will be intensified to such an extent that we will not be able to conduct any business operations in certain of our served markets or at all for an indefinite period. In addition, efforts by local governments and agencies to lift restrictions on individuals’ daily activities and businesses’ normal operations may result in a resurgence of a pandemic or epidemic like COVID-19 and potentially prolong and intensify the impact of the crisis. There are no reliable estimates of how long the COVID-19 pandemic will last or how severe it may be, and therefore, the unpredictability of the current economic and public health conditions will continue to evolve.

Our business could also be negatively impacted over the medium-to-longer term if the disruptions related to COVID-19 decrease consumer confidence generally or with respect to purchasing a home; cause civil unrest; or precipitate a prolonged economic downturn and/or an extended rise in unemployment or tempering of wage growth, any of which could lower demand for our products, impair our ability to sell and build homes in a typical manner or at all, generate revenues and cash flows, and/or access the capital or lending markets (or significantly increase the costs of doing so), as may be necessary to sustain our business; increase the costs or decrease the supply of building materials or the availability of subcontractors and other talent, including as a result of infections or medically necessary or recommended self-quarantining, or governmental mandates to direct production activities to support public health efforts; and/or result in our recognizing charges in future periods, which may be material, for inventory impairments or land option contract abandonments, or both, related to our current inventory assets. The unprecedented uncertainty surrounding COVID-19, due to rapidly changing governmental directives, public health challenges and progress, macroeconomic consequences, and market reactions thereto, also makes it more challenging for our management to estimate the future performance of our business and develop strategies to generate growth or achieve our initial or any revised objectives for 2020.

Should the adverse impacts described above (or others that are currently unknown) occur, whether individually or collectively, we would expect to experience, among other things, increases in the cancellation rates for homes in our backlog, and decreases in our net orders, homes delivered, revenues, and profitability, as we experienced in the first few weeks of our second quarter. Such impacts could be material to our consolidated financial statements in future reporting periods. We could also be forced to reduce our average selling prices in order to generate consumer demand or in reaction to competitive pressures. In addition, should the COVID-19 public health effort intensify to such an extent that we cannot operate in most or all of our served

50


markets, we could generate few or no orders and deliver few, if any, homes during the applicable period, which could be prolonged. Along with a potential increase in cancellations of home purchase contracts, if there are prolonged government restrictions on our business and our customers, and/or an extended economic recession, we could be unable to produce revenues and cash flows sufficient to conduct our business; meet the terms of our covenants and other requirements under our debt obligations, and/or mortgages and land contracts due to land sellers and other loans; service our outstanding debt; or pay any dividends to our stockholders. Such circumstances could, among other things, exhaust our available liquidity (and ability to access liquidity sources) and/or trigger an acceleration to pay a significant portion or all of our then-outstanding debt obligations, which we may be unable to do.

While the economic impact of COVID-19 may be reduced by financial assistance under the Coronavirus Aid, Relief, and Economic Security (CARES) Act or other similar COVID-19 related federal and state programs, such programs may not have a positive impact on our business.


51



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities
 

Total number
of shares
purchased (1)
 

Average
price paid
per share
 

Total number of
shares purchased
as part of publicly
announced plans
or programs
 

Approximate dollar
value of shares
that may yet be
purchased under
the plans or
programs
($000’s omitted) (2)
April 1, 2020 to April 30, 2020

 
$

 

 
$
429,872

May 1, 2020 to May 31, 2020

 
$

 

 
$
429,872

June 1, 2020 to June 30, 2020

 
$

 

 
$
429,872

Total

 
$

 

 
 
 

(1)
During the six months ended June 30, 2020, participants surrendered 0.3 million shares for payment of minimum tax obligations upon the vesting or exercise of previously granted share-based compensation awards. Such shares were not repurchased as part of our publicly-announced share repurchase programs and are excluded from the table above.

(2)
The Board of Directors approved a share repurchase authorization totaling $500.0 million in January 2018 and an increase of $500.0 million to such authorization in May 2019. There is no expiration date for this program, under which $429.9 million remained as of June 30, 2020. During the six months ended June 30, 2020, we repurchased 2.8 million shares for a total of $95.7 million under this program.

Item 6. Exhibits

Exhibit Number and Description
3
 
(a)
 
 
 
 
 
 
 
 
(b)
 
 
 
 
 
 
 
 
(c)
 
 
 
 
 
 
 
 
(d)
 
 
 
 
 
 
 
 
(e)
 
 
 
 
 
 
4
 
(a)
 
Any instrument with respect to long-term debt, where the securities authorized thereunder do not exceed 10% of the total assets of PulteGroup, Inc. and its subsidiaries, has not been filed. The Company agrees to furnish a copy of such instruments to the SEC upon request.
 
 
 
 
 
 
 
(b)
 
 
 
 
 
 
 
 
(c)
 
 
 
 
 
 

52


 
 
(d)
 
 
 
 
 
 
 
 
(e)
 

 
 
 
 
 
 
 
(f)
 
31
 
(a)
 
 
 
 
 
 
 
 
(b)
 
 
 
 
 
 
32
 
 
 
 
 
 
 
 
101.INS
 
 
 
Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
 
 
 
 
 
101.SCH
 
 
 
Inline XBRL Taxonomy Extension Schema Document
 
 
 
 
 
101.CAL
 
 
 
Inline XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
 
 
101.DEF
 
 
 
Inline XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
 
 
101.LAB
 
 
 
Inline XBRL Taxonomy Extension Label Linkbase Document
 
 
 
 
 
101.PRE
 
 
 
Inline XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 
 
 
104
 
 
 
The cover page from this Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in Inline XBRL

53


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 

 
PULTEGROUP, INC.
 
 
 
 
 
 
 
 
 
 
/s/ Robert T. O'Shaughnessy
 
Robert T. O'Shaughnessy
 
Executive Vice President and Chief Financial Officer
 
(Principal Financial Officer and duly authorized officer)
 
Date:
July 23, 2020
 



54
Exhibit


EXHIBIT 31(a)
CHIEF EXECUTIVE OFFICER'S CERTIFICATION
I, Ryan R. Marshall, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of PulteGroup, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
Date:
July 23, 2020
/s/ Ryan R. Marshall
 
 
Ryan R. Marshall
 
 
President and Chief Executive Officer



Exhibit


EXHIBIT 31(b)
CHIEF FINANCIAL OFFICER'S CERTIFICATION
I, Robert T. O'Shaughnessy, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of PulteGroup, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
Date:
July 23, 2020
/s/ Robert T. O'Shaughnessy
 
 
Robert T. O'Shaughnessy
 
 
Executive Vice President and
Chief Financial Officer



Exhibit


EXHIBIT 32
Certification
Pursuant to 18 United States Code § 1350 and
Rule 13a-14(b) of the Securities Exchange Act of 1934
In connection with the Quarterly Report of PulteGroup, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certifies that to his knowledge:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date:
July 23, 2020


/s/ Ryan R. Marshall
Ryan R. Marshall
President and Chief Executive Officer
/s/ Robert T. O'Shaughnessy
Robert T. O'Shaughnessy
Executive Vice President and
Chief Financial Officer



v3.20.2
Document and Entity Information Document - shares
6 Months Ended
Jun. 30, 2020
Jul. 16, 2020
Entity Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Jun. 30, 2020  
Document Transition Report false  
Entity File Number 1-9804  
Entity Registrant Name PULTEGROUP INC/MI/  
Entity Incorporation, State or Country Code MI  
Entity Tax Identification Number 38-2766606  
Entity Address, Address Line One 3350 Peachtree Road NE, Suite 150  
Entity Address, City or Town Atlanta,  
Entity Address, State or Province GA  
Entity Address, Postal Zip Code 30326  
City Area Code 404  
Local Phone Number 978-6400  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   268,177,660
Entity Central Index Key 0000822416  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q2  
Amendment Flag false  
Common Stock    
Entity Information [Line Items]    
Title of each class Common Shares, par value $0.01  
Trading Symbol PHM  
Security Exchange Name NYSE  
Series A Junior Participating Preferred Share Purchase Rights    
Entity Information [Line Items]    
Title of each class Series A Junior Participating Preferred Share Purchase Rights  
Security Exchange Name NYSE  
No Trading Symbol Flag true  
v3.20.2
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
ASSETS    
Cash and equivalents $ 1,658,530 $ 1,217,913
Restricted cash 39,266 33,543
Total cash, cash equivalents, and restricted cash 1,697,796 1,251,456
House and land inventory 7,584,739 7,680,614
Land held for sale 29,409 24,009
Residential mortgage loans available-for-sale 394,288 508,967
Investments in unconsolidated entities 47,707 59,766
Other assets 910,271 895,686
Intangible assets 173,507 124,992
Deferred tax assets, net 120,768 170,107
Total assets 10,958,485 10,715,597
Liabilities:    
Accounts payable 295,249 435,916
Customer deposits 335,040 294,427
Accrued and other liabilities 1,302,822 1,399,368
Income tax liabilities 146,729 36,093
Financial Services debt 256,359 326,573
Notes payable 2,770,618 2,765,040
Total liabilities 5,106,817 5,257,417
Shareholders' equity 5,851,668 5,458,180
Total liabilities and shareholders' equity $ 10,958,485 $ 10,715,597
v3.20.2
Consolidated Statements Of Operations - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Revenues:        
Total revenues $ 2,593,781 $ 2,488,985 $ 4,888,761 $ 4,485,679
Homebuilding Cost of Revenues:        
Selling, general, and administrative expenses (196,858) (259,440) (460,527) (512,166)
Goodwill impairment 0 0 (20,190) 0
Other income (expense), net (5,286) (3,499) (7,810) (4,473)
Income before income taxes 457,009 320,776 720,778 537,479
Income tax expense (108,389) (79,735) (168,447) (129,681)
Net income $ 348,620 $ 241,041 $ 552,331 $ 407,798
Per share:        
Basic earnings (usd per share) $ 1.29 $ 0.86 $ 2.03 $ 1.46
Diluted earnings (usd per share) 1.29 0.86 2.03 1.45
Cash dividends declared (usd per share) $ 0.12 $ 0.11 $ 0.24 $ 0.22
Number of shares used in calculation:        
Basic shares outstanding (shares) 268,324 276,652 269,167 277,142
Effect of dilutive securities (shares) 701 932 960 967
Diluted shares outstanding (shares) 269,025 277,584 270,127 278,109
Home sale        
Revenues:        
Revenues $ 2,472,029 $ 2,403,559 $ 4,693,532 $ 4,353,415
Homebuilding Cost of Revenues:        
Cost of revenues (1,880,209) (1,848,155) (3,575,074) (3,340,946)
Land sale and other        
Revenues:        
Revenues 26,950 29,469 45,877 32,445
Homebuilding Cost of Revenues:        
Cost of revenues (20,041) (26,214) (35,055) (28,265)
Total Homebuilding        
Revenues:        
Revenues 2,498,979 2,433,028 4,739,409 4,385,860
Homebuilding Cost of Revenues:        
Financial services expenses (1,900,250) (1,874,369) (3,610,129) (3,369,211)
Financial Services        
Revenues:        
Revenues 94,802 55,957 149,352 99,819
Homebuilding Cost of Revenues:        
Financial services expenses $ (34,378) $ (30,901) $ (69,327) $ (62,350)
v3.20.2
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]        
Net income $ 348,620 $ 241,041 $ 552,331 $ 407,798
Other comprehensive income, net of tax:        
Change in value of derivatives 25 25 50 50
Other comprehensive income 25 25 50 50
Comprehensive income (loss) $ 348,645 $ 241,066 $ 552,381 $ 407,848
v3.20.2
Consolidated Statements Of Shareholders' Equity - USD ($)
shares in Thousands, $ in Thousands
Total
Common Stock
Additional Paid-in Capital
Accumulated Other Comprehensive Income (Loss)
Retained Earnings
Shareholders' equity (shares) at Dec. 31, 2018   277,110      
Shareholders' equity at Dec. 31, 2018 $ 4,817,782 $ 2,771 $ 3,201,427 $ (345) $ 1,613,929
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Stock option exercises (shares)   434      
Stock option exercises 5,209 $ 4 5,205    
Stock issuances (shares)   974      
Share issuances 5,800 $ 10 5,790    
Dividends declared (61,463)       (61,463)
Share repurchases (shares)   (3,543)      
Share repurchases (108,471) $ (35)     (108,436)
Cash paid for shares withheld for taxes (10,350)       (10,350)
Share-based compensation 13,452   13,452    
Net income 407,798       407,798
Other comprehensive income 50     50  
Shareholders' equity (shares) at Jun. 30, 2019   274,975      
Shareholders' equity at Jun. 30, 2019 5,069,807 $ 2,750 3,225,874 (295) 1,841,478
Shareholders' equity (shares) at Mar. 31, 2019   277,256      
Shareholders' equity at Mar. 31, 2019 4,933,439 $ 2,771 3,216,473 (320) 1,714,515
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Stock option exercises (shares)   316      
Stock option exercises 3,764 $ 3 3,761    
Stock issuances (shares)   26      
Share issuances 0 $ 2 (2)    
Dividends declared (30,633)       (30,633)
Share repurchases (shares)   (2,623)      
Share repurchases (83,471) $ (26)     (83,445)
Cash paid for shares withheld for taxes 0       0
Share-based compensation 5,642   5,642    
Net income 241,041       241,041
Other comprehensive income 25     25  
Shareholders' equity (shares) at Jun. 30, 2019   274,975      
Shareholders' equity at Jun. 30, 2019 5,069,807 $ 2,750 3,225,874 (295) 1,841,478
Shareholders' equity (shares) at Dec. 31, 2019   270,235      
Shareholders' equity at Dec. 31, 2019 5,458,180 $ 2,702 3,235,149 (245) 2,220,574
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Cumulative effect of accounting change (735)       (735)
Stock option exercises (shares)   13      
Stock option exercises 99 $ 0 99    
Stock issuances (shares)   755      
Share issuances 4,096 $ 8 4,088    
Dividends declared (65,056)       (65,056)
Share repurchases (shares)   (2,825)      
Share repurchases (95,676) $ (28)     (95,648)
Cash paid for shares withheld for taxes (14,853)       (14,853)
Share-based compensation 13,232   13,232    
Net income 552,331       552,331
Other comprehensive income 50     50  
Shareholders' equity (shares) at Jun. 30, 2020   268,178      
Shareholders' equity at Jun. 30, 2020 5,851,668 $ 2,682 3,252,568 (195) 2,596,613
Shareholders' equity (shares) at Mar. 31, 2020   268,149      
Shareholders' equity at Mar. 31, 2020 5,530,391 $ 2,681 3,247,475 (220) 2,280,455
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Stock option exercises (shares)   6      
Stock option exercises 48 $ 0 48    
Stock issuances (shares)   23      
Share issuances 1 $ 1 0    
Dividends declared (32,447)       (32,447)
Cash paid for shares withheld for taxes (15)       (15)
Share-based compensation 5,045   5,045    
Net income 348,620       348,620
Other comprehensive income 25     25  
Shareholders' equity (shares) at Jun. 30, 2020   268,178      
Shareholders' equity at Jun. 30, 2020 $ 5,851,668 $ 2,682 $ 3,252,568 $ (195) $ 2,596,613
v3.20.2
Consolidated Statements Of Cash Flows - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Cash flows from operating activities:    
Net income $ 552,331 $ 407,798
Adjustments to reconcile net income to net cash from operating activities:    
Deferred income tax expense 49,661 51,458
Land-related charges 12,181 6,810
Goodwill impairment 20,190 0
Depreciation and amortization 31,538 26,497
Share-based compensation expense 16,682 17,304
Other, net (975) 2,664
Increase (decrease) in cash due to:    
Inventories 101,766 (399,520)
Residential mortgage loans available-for-sale 114,139 116,974
Other assets (3,772) 31,593
Accounts payable, accrued and other liabilities (85,869) 44,129
Net cash provided by (used in) operating activities 807,872 305,707
Cash flows from investing activities:    
Capital expenditures (36,746) (29,575)
Investments in unconsolidated entities 12,955  
Investments in unconsolidated entities   (4,664)
Business acquisition (83,256) (163,724)
Other investing activities, net 1,597 4,592
Net cash provided by (used in) investing activities (105,450) (193,371)
Cash flows from financing activities:    
Repayments of notes payable (10,106) (297,303)
Borrowings under revolving credit facility 700,000 0
Repayments under revolving credit facility (700,000) 0
Financial Services borrowings (repayments) (70,214) (114,226)
Stock option exercises 99 5,208
Share repurchases (95,676) (108,471)
Cash paid for shares withheld for taxes (14,853) (10,350)
Dividends paid (65,332) (61,620)
Net cash provided by (used in) financing activities (256,082) (586,762)
Net increase (decrease) in cash, cash equivalents, and restricted cash 446,340 (474,426)
Cash, cash equivalents, and restricted cash at beginning of period 1,251,456 1,133,700
Cash, cash equivalents, and restricted cash at end of period 1,697,796 659,274
Supplemental Cash Flow Information:    
Interest paid (capitalized), net 3,206 5,560
Income taxes paid (refunded), net $ 5,865 $ 12,618
v3.20.2
Basis of Presentation
6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Basis of presentation Basis of presentation

PulteGroup, Inc. is one of the largest homebuilders in the United States ("U.S."), and our common shares trade on the New York Stock Exchange under the ticker symbol “PHM”. Unless the context otherwise requires, the terms "PulteGroup", the "Company", "we", "us", and "our" used herein refer to PulteGroup, Inc. and its subsidiaries. While our subsidiaries engage primarily in the homebuilding business, we also engage in mortgage banking operations, conducted through Pulte Mortgage LLC (“Pulte Mortgage”), and title and insurance brokerage operations.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal, recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with our consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Subsequent events

We evaluated subsequent events up until the time the financial statements were filed with the Securities and Exchange Commission (the "SEC").

Business acquisition

In January 2020, we acquired the operations of Innovative Construction Group ("ICG"), an offsite construction framing company located in Jacksonville, Florida, for $104.0 million, of which $83.3 million was paid in January 2020 while additional payments of $10.4 million will be settled in 2021 and 2022, respectively. The acquired net assets were recorded at their estimated fair values, including intangible assets of $27.8 million associated with customer relationships and $1.8 million associated with the ICG tradename, which are being amortized over seven- and five-year useful lives, respectively. The acquisition also resulted in $48.7 million of goodwill. The acquisition of these assets was not material to our results of operations or financial condition.

Goodwill impairment

In accordance with ASC 350, management evaluates the recoverability of goodwill by comparing the carrying value of the Company’s reporting units to their fair value. Fair value is determined using accepted valuation methods, including the use of discounted cash flows supplemented by market-based assessments of fair value. As a result of the significant decline in equity market valuations that occurred during the period between our acquisition of ICG in January 2020 and March 31, 2020, we determined that an event-driven goodwill impairment test was appropriate for the ICG goodwill, which resulted in an impairment totaling $20.2 million in the first quarter of 2020. This impairment was not the result of any unique factors specific to ICG's operations but, rather, reflected the broad-based declines in the market capitalizations of publicly-traded construction companies in the short period of time between the acquisition and the March 31, 2020 valuation date.

Restructuring costs

We recorded severance expense of $10.3 million during the three months ended June 30, 2020, as we took actions to reduce overhead expenses in response to lower demand resulting from the COVID-19 pandemic.



Other expense, net

Other expense, net consists of the following ($000’s omitted): 
 
Three Months Ended
 
Six Months Ended
June 30,
 
June 30,
2020
 
2019
 
2020
 
2019
Write-offs of deposits and pre-acquisition costs
$
(2,311
)
 
$
(2,516
)
 
$
(6,643
)
 
$
(5,433
)
Amortization of intangible assets
(5,045
)
 
(3,550
)
 
(9,602
)
 
(7,000
)
Loss on debt retirement

 
(4,843
)
 

 
(4,843
)
Interest income
1,326

 
4,471

 
5,133

 
9,420

Interest expense
(3,000
)
 
(146
)
 
(3,796
)
 
(290
)
Equity in earnings of unconsolidated entities
334

 
129

 
902

 
165

Miscellaneous, net
3,410

 
2,956

 
6,196

 
3,508

Total other expense, net
$
(5,286
)
 
$
(3,499
)
 
$
(7,810
)
 
$
(4,473
)


Revenue recognition

Home sale revenues - Home sale revenues and related profit are generally recognized when title to and possession of the home are transferred to the buyer at the home closing date. Our performance obligation to deliver the agreed-upon home is generally satisfied at the home closing date. Home sale contract assets consist of cash from home closings held in escrow for our benefit, typically for less than five days, which are considered deposits in-transit and classified as cash. Contract liabilities include customer deposits related to sold but undelivered homes, which totaled $335.0 million and $294.4 million at June 30, 2020 and December 31, 2019, respectively. Substantially all of our home sales are scheduled to close and be recorded to revenue within one year from the date of receiving a customer deposit. See Note 8 for information on warranties and related obligations.

Land sale and other revenues - We periodically elect to sell parcels of land to third parties in the event such assets no longer fit into our strategic operating plans or are zoned for commercial or other development. Land sales are generally outright sales of specified land parcels with cash consideration due on the closing date, which is generally when performance obligations are satisfied. Revenues related to our construction services operations are generally recognized as materials are delivered and installation services are completed.

Financial services revenues - Loan origination fees, commitment fees, and certain direct loan origination costs are recognized as incurred. Expected gains and losses from the sale of residential mortgage loans and their related servicing rights are included in the measurement of written loan commitments that are accounted for at fair value through Financial Services revenues at the time of commitment. Subsequent changes in the fair value of these loans are reflected in Financial Services revenues as they occur. Interest income is accrued from the date a mortgage loan is originated until the loan is sold. Mortgage servicing fees represent fees earned for servicing loans. Servicing fees are based on a contractual percentage of the outstanding principal balance and are credited to income when related mortgage payments are received.

Revenues associated with our title operations are recognized as closing services are rendered and title insurance policies are issued, both of which generally occur as each home is closed. Insurance brokerage commissions relate to commissions on homeowner and other insurance policies placed with third party carriers through various agency channels. Our performance obligations for policy renewal commissions are satisfied upon issuance of the initial policy, and related contract assets for estimated future renewal commissions are included in other assets and totaled $36.0 million and $35.1 million at June 30, 2020 and December 31, 2019, respectively.

Earnings per share

Basic earnings per share is computed by dividing income available to common shareholders (the “Numerator”) by the weighted-average number of common shares outstanding, adjusted for unvested shares (the “Denominator”) for the period. Computing diluted earnings per share is similar to computing basic earnings per share, except that the Denominator is increased to include the dilutive effects of stock options, unvested restricted share units, unvested restricted share units, and other
potentially dilutive instruments. Any stock options that have an exercise price greater than the average market price are considered to be anti-dilutive and are excluded from the diluted earnings per share calculation.

In accordance with Accounting Standards Codification ("ASC") 260, "Earnings Per Share", the two-class method determines earnings per share for each class of common stock and participating securities according to an earnings allocation formula that adjusts the Numerator for dividends or dividend equivalents and participation rights in undistributed earnings. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and, therefore, are included in computing earnings per share pursuant to the two-class method. Our outstanding restricted share units and deferred shares are considered participating securities. The following table presents the earnings per common share (000's omitted, except per share data):
 
Three Months Ended
 
Six Months Ended
June 30,
 
June 30,
2020
 
2019
 
2020
 
2019
Numerator:
 
 
 
 
 
 
 
Net income
$
348,620

 
$
241,041

 
$
552,331

 
$
407,798

Less: earnings distributed to participating securities
(265
)
 
(305
)
 
(538
)
 
(613
)
Less: undistributed earnings allocated to participating securities
(2,602
)
 
(2,089
)
 
(4,358
)
 
(3,588
)
Numerator for basic earnings per share
$
345,753

 
$
238,647

 
$
547,435

 
$
403,597

Add back: undistributed earnings allocated to participating securities
2,602

 
2,089

 
4,358

 
3,588

Less: undistributed earnings reallocated to participating securities
(2,595
)
 
(2,082
)
 
(4,342
)
 
(3,576
)
Numerator for diluted earnings per share
$
345,760

 
$
238,654

 
$
547,451

 
$
403,609

 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
Basic shares outstanding
268,324

 
276,652

 
269,167

 
277,142

Effect of dilutive securities
701

 
932

 
960

 
967

Diluted shares outstanding
269,025

 
277,584

 
270,127

 
278,109

 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
Basic
$
1.29

 
$
0.86

 
$
2.03

 
$
1.46

Diluted
$
1.29

 
$
0.86

 
$
2.03

 
$
1.45



Residential mortgage loans available-for-sale

Substantially all of the loans originated by us are sold in the secondary mortgage market within a short period of time after origination, generally within 30 days. At June 30, 2020 and December 31, 2019, residential mortgage loans available-for-sale had an aggregate fair value of $394.3 million and $509.0 million, respectively, and an aggregate outstanding principal balance of $378.0 million and $494.1 million, respectively. The net loss resulting from changes in fair value of these loans totaled $3.6 million and $0.2 million for the three months ended June 30, 2020 and 2019, respectively, and $1.4 million and $1.3 million for the six months ended June 30, 2020 and 2019, respectively. These changes in fair value were substantially offset by changes in the fair value of corresponding hedging instruments. Net gains from the sale of mortgages were $66.3 million and $30.4 million for the three months ended June 30, 2020 and 2019, respectively, and $97.2 million and $54.3 million for the six months ended June 30, 2020 and 2019, respectively, and have been included in Financial Services revenues.

Derivative instruments and hedging activities

We are party to interest rate lock commitments ("IRLCs") with customers resulting from our mortgage origination operations. At June 30, 2020 and December 31, 2019, we had aggregate IRLCs of $454.4 million and $255.3 million, respectively, which were originated at interest rates prevailing at the date of commitment. Since we can terminate a loan commitment if the borrower does not comply with the terms of the contract, and some loan commitments may expire without being drawn upon,
these commitments do not necessarily represent future cash requirements. We evaluate the creditworthiness of these transactions through our normal credit policies.

We hedge our exposure to interest rate market risk relating to residential mortgage loans available-for-sale and IRLCs using forward contracts on mortgage-backed securities, which are commitments to either purchase or sell a specified financial instrument at a specified future date for a specified price, and whole loan investor commitments, which are obligations of an investor to buy loans at a specified price within a specified time period. Forward contracts on mortgage-backed securities are the predominant derivative financial instruments we use to minimize market risk during the period from the time we extend an interest rate lock to a loan applicant until the time the loan is sold to an investor. At June 30, 2020 and December 31, 2019, we had unexpired forward contracts of $551.0 million and $518.2 million, respectively, and whole loan investor commitments of $225.1 million and $200.7 million, respectively. Changes in the fair value of IRLCs and other derivative financial instruments are recognized in Financial Services revenues, and the fair values are reflected in other assets or other liabilities, as applicable.

There are no credit-risk-related contingent features within our derivative agreements, and counterparty risk is considered minimal. Gains and losses on IRLCs and residential mortgage loans available-for-sale are substantially offset by corresponding gains or losses on forward contracts on mortgage-backed securities and whole loan investor commitments. We are generally not exposed to variability in cash flows of derivative instruments for more than approximately 60 days. The fair values of derivative instruments and their locations in the Condensed Consolidated Balance Sheets are summarized below ($000’s omitted):
 
 
June 30, 2020
 
December 31, 2019
 
Other Assets
 
Accrued and Other Liabilities
 
Other Assets
 
Accrued and Other Liabilities
Interest rate lock commitments
$
19,934

 
$
1,811

 
$
8,351

 
$
149

Forward contracts
236

 
3,624

 
299

 
1,372

Whole loan commitments
190

 
1,805

 
880

 
284

 
$
20,360

 
$
7,240

 
$
9,530

 
$
1,805



Credit losses

We are exposed to credit losses primarily through our vendors and insurance carriers. We assess and monitor each counterparty’s ability to pay amounts owed by considering contractual terms and conditions, the counterparty’s financial condition, macroeconomic factors, and business strategy.

At June 30, 2020, we reported $198.0 million of assets in-scope under Accounting Standards Codification 326, "Financial Instruments - Credit Losses" ("ASC 326"). These assets consist primarily of insurance receivables, contract assets related to insurance brokerage commissions, and vendor rebates. Counterparties associated with these assets are generally highly rated. Allowances on the aforementioned in-scope assets were de minimis as of June 30, 2020.

New accounting pronouncements

On January 1, 2020, we adopted ASC 326, which changed the impairment model for most financial assets and certain other instruments from an "incurred loss" approach to a new "expected credit loss" methodology. We adopted ASC 326 using the modified retrospective transition method. The amendment requires entities to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. Our adoption of ASC 326 resulted in a $0.7 million decrease to retained earnings as of January 1, 2020.

In January 2017, the FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment", which removed the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. Under the new standard, goodwill impairment is determined by evaluating the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. We adopted the standard for annual and interim periods beginning January 1, 2020, and the standard was followed in the previously mentioned assessment of the ICG goodwill.
v3.20.2
Inventory
6 Months Ended
Jun. 30, 2020
Inventory Disclosure [Abstract]  
Inventory Inventory

Major components of inventory were as follows ($000’s omitted): 
 
June 30,
2020
 
December 31,
2019
Homes under construction
$
3,125,369

 
$
2,899,016

Land under development
4,076,492

 
4,347,107

Raw land
382,878

 
434,491

 
$
7,584,739

 
$
7,680,614



We capitalize interest cost into inventory during the active development and construction of our communities. In all periods presented, we capitalized substantially all Homebuilding interest costs into inventory because the level of our active inventory exceeded our debt levels. Information related to interest capitalized into inventory is as follows ($000’s omitted):
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Interest in inventory, beginning of period
$
213,425

 
$
235,313

 
$
210,383

 
$
227,495

Interest capitalized
39,686

 
41,650

 
79,599

 
84,031

Interest expensed
(45,169
)
 
(42,254
)
 
(82,040
)
 
(76,817
)
Interest in inventory, end of period
$
207,942

 
$
234,709

 
$
207,942

 
$
234,709



Land option agreements

We enter into land option agreements in order to procure land for the construction of homes in the future. Pursuant to these land option agreements, we generally provide a deposit to the seller as consideration for the right to purchase land at different times in the future, usually at predetermined prices. Such contracts enable us to defer acquiring portions of properties owned by third parties or unconsolidated entities until we have determined whether and when to exercise our option, which reduces our financial risks associated with long-term land holdings. Option deposits and pre-acquisition costs (such as environmental testing, surveys, engineering, and entitlement costs) are capitalized if the costs are directly identifiable with the land under option, the costs would be capitalized if we owned the land, and acquisition of the property is probable. Such costs are reflected in other assets and are reclassified to inventory upon taking title to the land. We write off deposits and pre-acquisition costs when it becomes probable that we will not go forward with the project or recover the capitalized costs. Such decisions take into consideration changes in local market conditions, the timing of required land purchases, the availability and best use of necessary incremental capital, and other factors. We record any such write-offs of deposits and pre-acquisition costs within other expense, net.

If an entity holding the land under option is a variable interest entity ("VIE"), our deposit represents a variable interest in that entity. No VIEs required consolidation at either June 30, 2020 or December 31, 2019 because we determined that we were not the VIEs' primary beneficiary. Our maximum exposure to loss related to these VIEs is generally limited to our deposits and pre-acquisition costs under the land option agreements.

The following provides a summary of our interests in land option agreements as of June 30, 2020 and December 31, 2019 ($000’s omitted):
 
 
June 30, 2020
 
December 31, 2019
 
Deposits and
Pre-acquisition
Costs
 
Remaining Purchase
Price
 
Deposits and
Pre-acquisition
Costs
 
Remaining Purchase
Price
Land options with VIEs
$
118,138

 
$
1,451,952

 
$
123,775

 
$
1,466,585

Other land options
183,266

 
2,080,674

 
175,662

 
1,755,377

 
$
301,404

 
$
3,532,626

 
$
299,437

 
$
3,221,962



Land-related charges

We recorded the following land-related charges ($000's omitted):
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30, 2020
 
June 30, 2019
 
Statement of Operations Classification
2020
 
2019
 
2020
 
2019
Land impairments
Home sale cost of revenues
$

 
$
88

 
$
5,386

 
$
88

Net realizable value ("NRV") adjustments - land held for sale
Land sale and other cost of revenues
142

 
1,227

 
152

 
1,289

Write-offs of deposits and pre-acquisition costs
Other expense, net
2,311

 
2,516

 
6,643

 
5,433

 
 
$
2,453


$
3,831


$
12,181


$
6,810



As explained in Note 1, we periodically elect to sell parcels of land to third parties in the event such assets no longer fit into our strategic operating plans or are zoned for commercial or other development. NRV adjustments occur when circumstances indicate that the carrying value of land held for sale will not be fully recovered.

Our evaluations for land impairments, NRV adjustments, and write-offs of deposits and pre-acquisition costs are based on our best estimates of the future cash flows of our communities. Due to uncertainties in the estimation process, the significant volatility in demand for new housing, the long life cycles of certain of our communities, and potential changes in our strategy related to certain communities, actual results could differ significantly from such estimates.
v3.20.2
Segment Information
6 Months Ended
Jun. 30, 2020
Segment Reporting [Abstract]  
Segment information Segment information

Our Homebuilding operations are engaged in the acquisition and development of land primarily for residential purposes within the U.S. and the construction of housing on such land. For reporting purposes, our Homebuilding operations are aggregated into six reportable segments:
Northeast:
 
Connecticut, Maryland, Massachusetts, New Jersey, Pennsylvania, Virginia
Southeast:
 
Georgia, North Carolina, South Carolina, Tennessee
Florida:
 
Florida
Midwest:
 
Illinois, Indiana, Kentucky, Michigan, Minnesota, Ohio
Texas:
 
Texas
West:
 
Arizona, California, Nevada, New Mexico, Washington


We also have a reportable segment for our Financial Services operations, which consist principally of mortgage banking, title, and insurance brokerage operations that operate generally in the same markets as the Homebuilding segments.
 
Operating Data by Segment
($000’s omitted)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Revenues:
 
 
 
 
 
 
 
Northeast
$
141,478

 
$
200,237

 
$
303,912

 
$
310,729

Southeast
457,863

 
409,121

 
840,257

 
784,538

Florida
581,520

 
535,153

 
1,088,209

 
931,597

Midwest
339,680

 
350,584

 
631,849

 
644,174

Texas
365,348

 
342,886

 
710,086

 
611,889

West
613,090

 
595,047

 
1,165,096

 
1,102,933

 
2,498,979

 
2,433,028

 
4,739,409

 
4,385,860

Financial Services
94,802

 
55,957

 
149,352

 
99,819

Consolidated revenues
$
2,593,781

 
$
2,488,985

 
$
4,888,761

 
$
4,485,679

 
 
 
 
 
 
 
 
Income (loss) before income taxes:
 
 
 
 
 
 
 
Northeast
$
18,944

 
$
26,212

 
$
37,553

 
$
34,140

Southeast
72,780

 
42,499

 
127,524

 
80,355

Florida (a)
97,263

 
80,066

 
152,596

 
129,662

Midwest
43,607

 
42,962

 
75,069

 
69,120

Texas
59,909

 
49,144

 
113,504

 
80,115

West
90,164

 
94,443

 
157,419

 
184,625

Other homebuilding (b)
13,918

 
(39,628
)
 
(22,861
)
 
(78,024
)
 
396,585

 
295,698

 
640,804

 
499,993

Financial Services
60,424

 
25,078

 
79,974

 
37,486

Consolidated income before income taxes
$
457,009

 
$
320,776

 
$
720,778

 
$
537,479



(a)
Includes goodwill impairment charge totaling $20.2 million (see Note 1) in the six months ended June 30, 2020.
(b)
Other homebuilding includes the amortization of intangible assets and capitalized interest and other items not allocated to the operating segments. Other homebuilding also includes net insurance reserve reversals of $60.7 million and $59.4 million for the three and six months ended June 30, 2020, respectively, and $12.8 million and $16.6 million for the three and six months ended June 30, 2019.
 
Operating Data by Segment
($000’s omitted)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Land-related charges*:
 
 
 
 
 
 
 
Northeast
$
92

 
$
130

 
$
4,845

 
$
454

Southeast
929

 
2,015

 
1,676

 
2,587

Florida
459

 
765

 
981

 
1,246

Midwest
499

 
203

 
1,275

 
1,306

Texas
329

 
414

 
986

 
482

West
145

 
216

 
1,674

 
647

Other homebuilding

 
88

 
744

 
88

 
$
2,453

 
$
3,831

 
$
12,181

 
$
6,810


*
Land-related charges include land impairments, NRV adjustments on land held for sale, and write-offs of deposits and pre-acquisition costs for land option contracts we elected not to pursue.
 
Operating Data by Segment
 
($000's omitted)
 
June 30, 2020
 
Homes Under
Construction
 
Land Under
Development
 
Raw Land
 
Total
Inventory
 
Total
Assets
Northeast
$
393,329

 
$
215,468

 
$
23,910

 
$
632,707

 
$
723,207

Southeast
429,024

 
674,337

 
60,516

 
1,163,877

 
1,317,066

Florida
567,963

 
885,307

 
92,112

 
1,545,382

 
1,838,880

Midwest
372,744

 
412,438

 
16,477

 
801,659

 
908,805

Texas
311,896

 
448,418

 
69,927

 
830,241

 
909,554

West
1,004,927

 
1,214,046

 
106,515

 
2,325,488

 
2,681,671

Other homebuilding (a)
45,486

 
226,478

 
13,421

 
285,385

 
2,041,189

 
3,125,369

 
4,076,492

 
382,878

 
7,584,739

 
10,420,372

Financial Services

 

 

 

 
538,113

 
$
3,125,369

 
$
4,076,492

 
$
382,878

 
$
7,584,739

 
$
10,958,485


 
Operating Data by Segment
 
($000's omitted)
 
December 31, 2019
 
Homes Under
Construction
 
Land Under
Development
 
Raw Land
 
Total
Inventory
 
Total
Assets
Northeast
$
345,644

 
$
242,666

 
$
25,098

 
$
613,408

 
$
698,661

Southeast
430,008

 
724,258

 
72,804

 
1,227,070

 
1,354,086

Florida
539,895

 
894,716

 
99,228

 
1,533,839

 
1,700,198

Midwest
315,822

 
464,733

 
31,881

 
812,436

 
886,889

Texas
343,230

 
447,707

 
84,926

 
875,863

 
949,236

West
881,551

 
1,289,255

 
105,606

 
2,276,412

 
2,538,803

Other homebuilding (a)
42,866

 
283,772

 
14,948

 
341,586

 
1,953,440

 
2,899,016

 
4,347,107

 
434,491

 
7,680,614

 
10,081,313

Financial Services

 

 

 

 
634,284

 
$
2,899,016

 
$
4,347,107

 
$
434,491

 
$
7,680,614

 
$
10,715,597


 
(a)
Other homebuilding primarily includes cash and equivalents, capitalized interest, intangibles, deferred tax assets, and other corporate items that are not allocated to the operating segments.
v3.20.2
Debt
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Debt Debt

Notes payable

Our notes payable are summarized as follows ($000’s omitted):
 
June 30,
2020
 
December 31,
2019
4.250% unsecured senior notes due March 2021 (a)
$
425,954

 
$
425,954

5.500% unsecured senior notes due March 2026 (a)
700,000

 
700,000

5.000% unsecured senior notes due January 2027 (a)
600,000

 
600,000

7.875% unsecured senior notes due June 2032 (a)
300,000

 
300,000

6.375% unsecured senior notes due May 2033 (a)
400,000

 
400,000

6.000% unsecured senior notes due February 2035 (a)
300,000

 
300,000

Net premiums, discounts, and issuance costs (b)
(14,022
)
 
(14,295
)
Total senior notes
2,711,932

 
2,711,659

Other notes payable
58,686

 
53,381

Notes payable
$
2,770,618

 
$
2,765,040

Estimated fair value
$
3,084,190

 
$
3,152,046



(a)
Redeemable prior to maturity; guaranteed on a senior basis by certain wholly-owned subsidiaries.
(b)
The carrying value of senior notes reflects the impact of premiums, discounts, and issuance costs that are amortized to interest cost over the respective terms of the senior notes.
Other notes payable include non-recourse and limited recourse secured notes with third parties that totaled $58.7 million and $53.4 million at June 30, 2020 and December 31, 2019, respectively. These notes have maturities ranging up to three years, are secured by the applicable land positions to which they relate, and have no recourse to any other assets. The stated interest rates on these notes range up to 8%.

Revolving credit facility

We maintain a revolving credit facility (the "Revolving Credit Facility") maturing in 2023 that has a maximum borrowing capacity of $1.0 billion and contains an uncommitted accordion feature that could increase the capacity to $1.5 billion, subject to certain conditions and availability of additional bank commitments. The Revolving Credit Facility also provides for the issuance of letters of credit that reduce the available borrowing capacity under the Revolving Credit Facility, with a sublimit of $500.0 million at June 30, 2020. The interest rate on borrowings under the Revolving Credit Facility may be based on either the London Interbank Offered Rate ("LIBOR") or a base rate plus an applicable margin, as defined therein. As a precautionary measure during the initial phase of the COVID-19 pandemic, we made the decision in March 2020 to draw $700.0 million under the Revolving Credit Facility. In June 2020, we repaid the full outstanding balance of $700.0 million. As a result, we had no borrowings outstanding at both June 30, 2020 and December 31, 2019, and $244.8 million and $262.8 million of letters of credit issued under the Revolving Credit Facility at June 30, 2020 and December 31, 2019, respectively.

The Revolving Credit Facility contains financial covenants that require us to maintain a minimum Tangible Net Worth, a minimum Interest Coverage Ratio, and a maximum Debt-to-Capitalization Ratio (as each term is defined in the Revolving Credit Facility). As of June 30, 2020, we were in compliance with all covenants. Our available and unused borrowings
under the Revolving Credit Facility, net of outstanding letters of credit, amounted to $755.2 million and $737.2 million at June 30, 2020 and December 31, 2019, respectively.

Financial Services debt

Pulte Mortgage maintains a master repurchase agreement with third party lenders (the "Repurchase Agreement") that matures on July 30, 2020. The maximum aggregate commitment was $270.0 million at June 30, 2020 and continues through maturity. The Repurchase Agreement contains various affirmative and negative covenants applicable to Pulte Mortgage, including quantitative thresholds related to net worth, net income, and liquidity. Pulte Mortgage had $256.4 million and $326.6 million outstanding under the Repurchase Agreement at June 30, 2020 and December 31, 2019, respectively, and was in compliance with all of its covenants and requirements as of such dates.
v3.20.2
Shareholders' Equity
6 Months Ended
Jun. 30, 2020
Stockholders' Equity Note [Abstract]  
Shareholders’ equity Shareholders’ equity

During the six months ended June 30, 2020, we declared cash dividends totaling $65.1 million and repurchased 2.8 million shares under our repurchase authorization for $95.7 million. For the six months ended June 30, 2019, we declared cash dividends totaling $61.5 million and repurchased 3.5 million shares under our repurchase authorization for $108.5 million. In May 2019, our board of directors approved a $500.0 million increase in our share repurchase authorization. At June 30, 2020, we had remaining authorization to repurchase $429.9 million of common shares.

Under our share-based compensation plans, we accept shares as payment under certain conditions related to stock option exercises and vesting of shares, generally related to the payment of minimum tax obligations. During the six months ended June 30, 2020 and 2019, participants surrendered shares valued at $14.9 million and $10.4 million, respectively, under these plans. Such share transactions are excluded from the above noted share repurchase authorization.
v3.20.2
Income Taxes
6 Months Ended
Jun. 30, 2020
Income Tax Disclosure [Abstract]  
Income taxes Income taxes

Our effective tax rate for the three and six months ended June 30, 2020 was 23.7% and 23.4%, respectively, compared to 24.9% and 24.1%, respectively, for the same periods in 2019. Our effective tax rate differs from the federal statutory rate primarily due to state income tax expense.

At June 30, 2020 and December 31, 2019, we had deferred tax assets, net of deferred tax liabilities and valuation allowance, of $120.8 million and $170.1 million, respectively. The accounting for deferred taxes is based upon estimates of future results. Differences between estimated and actual results could result in changes in the valuation of deferred tax assets that could have a material impact on our consolidated results of operations or financial position. Changes in existing tax laws could also affect actual tax results and the realization of deferred tax assets over time.

Unrecognized tax benefits represent the difference between tax positions taken or expected to be taken in a tax return and the benefits recognized for financial statement purposes. We had $45.1 million and $40.3 million of gross unrecognized tax benefits at June 30, 2020 and December 31, 2019, respectively. Additionally, we had accrued interest and penalties of $7.0 million and $6.5 million at June 30, 2020 and December 31, 2019, respectively. It is reasonably possible within the next twelve months that our gross unrecognized tax benefits may decrease by up to $24.2 million, excluding interest and penalties, primarily due to potential audit settlements.
v3.20.2
Fair Value Disclosures
6 Months Ended
Jun. 30, 2020
Fair Value Disclosures [Abstract]  
Fair value disclosures Fair value disclosures

ASC 820, “Fair Value Measurements and Disclosures,” provides a framework for measuring fair value in generally accepted accounting principles and establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The fair value hierarchy can be summarized as follows: 
Level 1
 
Fair value determined based on quoted prices in active markets for identical assets or liabilities.
 
 
Level 2
 
Fair value determined using significant observable inputs, generally either quoted prices in active markets for similar assets or liabilities or quoted prices in markets that are not active.
 
 
Level 3
 
Fair value determined using significant unobservable inputs, such as pricing models, discounted cash flows, or similar techniques.

Our assets and liabilities measured or disclosed at fair value are summarized below ($000’s omitted): 
Financial Instrument
 
Fair Value
Hierarchy
 
Fair Value
June 30,
2020
 
December 31,
2019
 
 
 
 
 
 
 
Measured at fair value on a recurring basis:
 
 
 
 
 
 
Residential mortgage loans available-for-sale
 
Level 2
 
$
394,288

 
$
508,967

Interest rate lock commitments
 
Level 2
 
18,123

 
8,202

Forward contracts
 
Level 2
 
(3,388
)
 
(1,073
)
Whole loan commitments
 
Level 2
 
(1,615
)
 
596

 
 
 
 
 
 
 
Measured at fair value on a non-recurring basis:
 
 
 
 
 
 
House and land inventory
 
Level 3
 
$

 
$
9,979

Land held for sale
 
Level 2
 

 
4,193

 
 
 
 
 
 
 
Disclosed at fair value:
 
 
 
 
 
 
Cash, cash equivalents, and restricted cash
 
Level 1
 
$
1,697,796

 
$
1,251,456

Financial Services debt
 
Level 2
 
256,359

 
326,573

Senior notes payable
 
Level 2
 
3,025,505

 
3,098,665

Other notes payable
 
Level 2
 
58,686

 
53,381




Fair values for agency residential mortgage loans available-for-sale are determined based on quoted market prices for comparable instruments. Fair values for non-agency residential mortgage loans available-for-sale are determined based on purchase commitments from whole loan investors and other relevant market information available to management. Fair values for interest rate lock commitments, including the value of servicing rights, and forward contracts on mortgage-backed securities are valued based on market prices for similar instruments. Fair values for whole loan commitments are based on market prices for similar instruments from the specific whole loan investor.

Certain assets are required to be recorded at fair value on a non-recurring basis when events and circumstances indicate that the carrying value may not be recoverable. The non-recurring fair values included in the above table represent only those assets whose carrying values were adjusted to fair value as of the respective balance sheet dates.

The carrying amounts of cash and equivalents, Financial Services debt and other notes payable approximate their fair values due to their short-term nature and/or floating interest rate terms. The fair values of senior notes are based on quoted market prices, when available. If quoted market prices are not available, fair values are based on quoted market prices of similar issues. The carrying value of senior notes was $2.7 billion at both June 30, 2020 and December 31, 2019.
v3.20.2
Commitments and Contingencies
6 Months Ended
Jun. 30, 2020
Commitments and Contingencies Disclosure [Abstract]  
Commitments and contingencies Commitments and contingencies

Loan origination liabilities

Our mortgage operations may be responsible for losses associated with mortgage loans originated and sold to investors in the event of errors or omissions relating to representations and warranties made by us that the loans met certain requirements, including representations as to underwriting standards, the existence of primary mortgage insurance, and the validity of certain borrower representations in connection with the loan. If a loan is determined to be faulty, we either indemnify the investor for potential future losses, repurchase the loan from the investor, or reimburse the investor's actual losses. In addition, certain trustees and investors continue to attempt to collect damages based on losses from loans that originated prior to 2009. Some of our mortgage subsidiaries are currently defendants in litigation related to such claims.

CTX Mortgage Company, LLC ("CTX Mortgage") was the mortgage subsidiary of Centex and ceased originating loans in December 2009. In the matter Lehman Brothers Holdings, Inc. ("Lehman") in the U.S. Bankruptcy Court in the Southern District of New York, Lehman has initiated an adversary proceeding against CTX Mortgage seeking indemnity for loans sold to it by CTX Mortgage prior to 2009. This claim is part of a broader action by Lehman in U.S. Bankruptcy Court against more than 100 mortgage originators and brokers. On August 13, 2018, the court denied a motion to dismiss filed by CTX Mortgage and other defendants, and on December 17, 2018, Lehman filed an amended adversary complaint against CTX Mortgage. Lehman's complaint alleges claims for indemnifiable losses of up to $261 million due from CTX Mortgage. We believe that CTX Mortgage has meritorious defenses and CTX Mortgage will continue to vigorously defend itself in this matter. We have recorded a liability for an amount that we consider to be the best estimate within a range of potential losses.

In addition, both CTX Mortgage and Pulte Mortgage sold certain loans originated prior to 2009 to financial institutions that were subsequently included in residential mortgage-backed securities or other securitizations issued by such financial institutions. In connection with such sales, CTX Mortgage and Pulte Mortgage have been put on notice of potential direct and / or third-party claims for indemnification arising out of litigation relating to certain of these residential mortgage-backed securities or other securitizations and, in some instances, such claims have resulted in legal proceedings against CTX Mortgage and Pulte Mortgage. We cannot yet quantify CTX Mortgage's or Pulte Mortgage's potential liability as a result of these matters. We do not believe, however, that these matters will have a material adverse impact on the results of operations, financial position, or cash flows of the Company.

Our recorded liabilities for all such claims totaled $25.3 million and $25.2 million at June 30, 2020 and December 31, 2019, respectively. Determining the liabilities for anticipated losses requires a significant level of management judgment. Given the unsettled litigation, changes in values of underlying collateral over time, unpredictable factors inherent in litigation, and other uncertainties regarding the ultimate resolution of these claims, actual costs could differ from our current estimates.

Letters of credit and surety bonds

In the normal course of business, we post letters of credit and surety bonds pursuant to certain performance-related obligations, as security for certain land option agreements, and under various insurance programs. The majority of these letters of credit and surety bonds are in support of our land development and construction obligations to various municipalities, other government agencies, and utility companies related to the construction of roads, sewers, and other infrastructure. We had outstanding letters of credit and surety bonds totaling $244.8 million and $1.3 billion, respectively, at June 30, 2020 and $262.8 million and $1.4 billion, respectively, at December 31, 2019. In the event any such letter of credit or surety bond is drawn, we would be obligated to reimburse the issuer of the letter of credit or surety bond. Our surety bonds generally do not have stated expiration dates; rather we are released from the surety bonds as the underlying contractual performance is completed. Because significant construction and development work has been performed related to projects that have not yet received final acceptance by the respective counterparties, the aggregate amount of surety bonds outstanding is in excess of the projected cost of the remaining work to be performed. We do not believe that a material amount, if any, of the letters of credit or surety bonds will be drawn.

Litigation and regulatory matters

We are involved in various litigation and legal claims in the normal course of our business operations, including actions brought on behalf of various classes of claimants. We are also subject to a variety of local, state, and federal laws and regulations related to land development activities, house construction standards, sales practices, mortgage lending operations, employment practices, and protection of the environment. As a result, we are subject to periodic examination or inquiry by various governmental agencies that administer these laws and regulations.

We establish liabilities for litigation, legal claims, and regulatory matters when such matters are both probable of occurring and any potential loss is reasonably estimable. We accrue for such matters based on the facts and circumstances specific to each matter and revise these estimates as the matters evolve. In such cases, there may exist an exposure to loss in excess of any amounts currently accrued. In view of the inherent difficulty of predicting the outcome of these legal and regulatory matters, we generally cannot predict the ultimate resolution of the pending matters, the related timing, or the eventual loss. While the outcome of such contingencies cannot be predicted with certainty, we do not believe that the resolution of such matters will have a material adverse impact on our results of operations, financial position, or cash flows. However, to the extent the liability arising from the ultimate resolution of any matter exceeds the estimates reflected in the recorded reserves relating to such matter, we could incur additional charges that could be significant.

Product warranty

Home purchasers are provided with a limited warranty against certain building defects, including a one-year comprehensive limited warranty and coverage for certain other aspects of the home’s construction and operating systems for periods of up to and, in limited instances, exceeding 10 years. We estimate the costs to be incurred under these warranties and record liabilities in the amount of such costs at the time product revenue is recognized. Factors that affect our warranty liabilities include the number of homes sold, historical and anticipated rates of warranty claims, and the projected cost per claim. We periodically assess the adequacy of the warranty liabilities for each geographic market in which we operate and adjust the amounts as necessary. Actual warranty costs in the future could differ from the current estimates. Changes to warranty liabilities were as follows ($000’s omitted):
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Warranty liabilities, beginning of period
$
88,395

 
$
79,747

 
$
91,389

 
$
79,154

Reserves provided
17,005

 
14,646

 
32,044

 
26,908

Payments
(15,914
)
 
(17,931
)
 
(34,189
)
 
(34,061
)
Other adjustments
(3,208
)
 
4,980

 
(2,966
)
 
9,441

Warranty liabilities, end of period
$
86,278

 
$
81,442

 
$
86,278

 
$
81,442




Self-insured risks

We maintain, and require our subcontractors to maintain, general liability insurance coverage. We also maintain builders' risk, property, errors and omissions, workers' compensation, and other business insurance coverage. These insurance policies protect us against a portion of the risk of loss from claims. However, we retain a significant portion of the overall risk for such claims either through policies issued by our captive insurance subsidiaries or through our own self-insured per occurrence and aggregate retentions, deductibles, and claims in excess of available insurance policy limits.

Our general liability insurance includes coverage for certain construction defects. While construction defect claims can relate to a variety of circumstances, the majority of our claims relate to alleged problems with siding, plumbing, foundations and other concrete work, windows, roofing, and heating, ventilation and air conditioning systems. The availability of general liability insurance for the homebuilding industry and its subcontractors has become increasingly limited, and the insurance policies available require us to maintain significant per occurrence and aggregate retention levels. In certain instances, we may offer our subcontractors the opportunity to purchase insurance through one of our captive insurance subsidiaries or participate in a project-specific insurance program provided by us. Policies issued by our captive insurance subsidiaries represent self-insurance of these risks by us. This self-insured exposure is limited by reinsurance policies that we purchase. General liability coverage for the homebuilding industry is complex, and our coverage varies from policy year to policy year. Our insurance coverage requires a per occurrence deductible up to an overall aggregate retention level. Beginning with the first dollar, amounts paid to satisfy insured claims generally apply to our per occurrence and aggregate retention obligations. Any amounts incurred in excess of the occurrence or aggregate retention levels are covered by insurance up to our purchased coverage levels. Our insurance policies, including the captive insurance subsidiaries' reinsurance policies, are maintained with highly-rated underwriters for whom we believe counterparty default risk is not significant.

At any point in time, we are managing over 1,000 individual claims related to general liability, property, errors and omissions, workers' compensation, and other business insurance coverage. We reserve for costs associated with such claims (including expected claims management expenses) on an undiscounted basis at the time revenue is recognized for each home closing and periodically evaluate the recorded liabilities based on actuarial analyses of our historical claims. The actuarial analyses calculate estimates of the ultimate net cost of all unpaid losses, including estimates for incurred but not reported losses ("IBNR"). IBNR represents losses related to claims incurred but not yet reported plus development on reported claims.

Our recorded reserves for all such claims totaled $640.0 million and $709.8 million at June 30, 2020 and December 31, 2019, respectively. The recorded reserves include loss estimates related to both (i) existing claims and related claim expenses and (ii) IBNR and related claim expenses. Liabilities related to IBNR and related claim expenses represented approximately 69% and 68% of the total general liability reserves at June 30, 2020 and December 31, 2019, respectively. The actuarial analyses that determine the IBNR portion of reserves consider a variety of factors, including the frequency and severity of losses, which are based on our historical claims experience supplemented by industry data. The actuarial analyses of the reserves also consider historical third party recovery rates and claims management expenses.

Housing market conditions can be volatile, and we believe such conditions can affect the frequency and cost of construction defect claims. Additionally, IBNR estimates comprise the majority of our liability and are subject to a high degree of uncertainty due to a variety of factors, including changes in claims reporting and resolution patterns, third party recoveries, insurance industry practices, the regulatory environment, and legal precedent. State regulations vary, but construction defect claims are typically reported and resolved over an extended period, often exceeding ten years. Changes in the frequency and timing of reported claims and estimates of specific claim values can impact the underlying inputs and trends utilized in the actuarial analyses, which could have a material impact on the recorded reserves. Additionally, the amount of insurance coverage available for each policy period also impacts our recorded reserves. Because of the inherent uncertainty in estimating future losses and the timing of such losses related to these claims, actual costs could differ significantly from estimated costs.

Adjustments to reserves are recorded in the period in which the change in estimate occurs. We reduced general liability reserves by $60.7 million and $59.4 million during the three and six months ended June 30, 2020, respectively, and $12.8 million and $16.6 million during the three and six months ended June 30, 2019, respectively, as a result of changes in estimates resulting from actual claim experience being less than anticipated in previous actuarial projections. The changes in actuarial estimates were driven by changes in actual claims experience that, in turn, impacted actuarial estimates for potential future claims. These changes in actuarial estimates did not involve any changes in actuarial methodology but did impact the development of estimates for future periods, which resulted in adjustments to the IBNR portion of our recorded liabilities. Costs associated with
our insurance programs are classified within selling, general, and administrative expenses. Changes in these liabilities were as follows ($000's omitted):
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Balance, beginning of period
$
719,172

 
$
729,170

 
$
709,798

 
$
737,013

Reserves provided
20,177

 
20,270

 
38,626

 
37,666

Adjustments to previously recorded reserves
(60,662
)
 
(12,763
)
 
(59,362
)
 
(16,638
)
Payments, net (a)
(38,673
)
 
(20,459
)
 
(49,048
)
 
(41,823
)
Balance, end of period
$
640,014

 
$
716,218

 
$
640,014

 
$
716,218


(a)
Includes net changes in amounts expected to be recovered from our insurance carriers, which are recorded in other assets (see below).

Estimates of anticipated recoveries of our costs under various insurance policies or from subcontractors or other third parties are recorded when recovery is considered probable. Such receivables are recorded in other assets and totaled $82.4 million and $118.4 million at June 30, 2020 and December 31, 2019, respectively. Those receivables relate to costs incurred to perform corrective repairs, settle claims with customers, and other costs related to the continued progression of construction defect claims that we believe are insured. Given the complexity inherent with resolving construction defect claims in the homebuilding industry described above, there generally exists a significant lag between our payment of claims and our reimbursements from applicable insurance carriers or third parties. In addition, disputes between homebuilders and insurance carriers or third parties over coverage positions relating to construction defect claims are common. Resolution of claims involves the exchange of significant amounts of information and frequently involves legal action. During the three and six months ended June 30, 2019, we wrote-off $12.6 million and $24.2 million, respectively, of insurance receivables in connection with the settlement of an arbitration with one of our carriers, pursuant to which we received the majority of the coverage under the policy.

Leases

We lease certain office space and equipment for use in our operations. We recognize lease expense for these leases on a straight-line basis over the lease term and combine lease and non-lease components for all leases. Right-of-use ("ROU") assets and lease liabilities are recorded on the balance sheet for all leases with an expected term of at least one year. Some leases include one or more options to renew. The exercise of lease renewal options is generally at our discretion. The depreciable lives of ROU assets and leasehold improvements are limited to the expected lease term. Certain of our lease agreements include rental payments based on a pro-rata share of the lessor’s operating costs which are variable in nature. Our lease agreements do not contain any residual value guarantees or material restrictive covenants.
    
ROU assets are classified within other assets on the balance sheet, while lease liabilities are classified within accrued and other liabilities. Leases with an initial term of 12 months or less are not recorded on the balance sheet. ROU assets and lease liabilities were $76.7 million and $98.1 million at June 30, 2020, respectively, and $70.0 million and $91.4 million at December 31, 2019, respectively. During the three and six months ended June 30, 2020, we recorded an additional $3.4 million and $13.0 million of lease liabilities under operating leases, respectively, and $1.0 million and $8.8 million in the comparable prior year periods. Payments on lease liabilities during the three and six months ended June 30, 2020 totaled $4.2 million and $10.1 million, respectively, and $5.7 million and $11.5 million in the comparable prior year periods.

Lease expense includes costs for leases with terms in excess of one year as well as short-term leases with terms of less than one year. For the three and six months ended June 30, 2020, our total lease expense was $8.8 million and $18.7 million, respectively, and $9.1 million and $17.9 million in the comparable prior year periods. Our total lease expense is inclusive of variable lease costs of $1.5 million and $3.4 million for the three and six months ended June 30, 2020, respectively, and $1.6 million and $3.2 million in the comparable prior year periods, as well as short-term lease costs of $1.8 million and $4.0 million for the three and six months ended June 30, 2020, respectively, and $2.6 million and $4.8 million in the comparable prior year periods. Sublease income was de minimis.

The future minimum lease payments required under our leases as of June 30, 2020 were as follows ($000's omitted):
Years Ending December 31,
 
2020 (a)
$
10,603

2021
22,651

2022
20,755

2023
19,424

2024
13,755

Thereafter
28,687

Total lease payments (b)
115,875

Less: Interest (c)
17,762

Present value of lease liabilities (d)
$
98,113


(a)
Remaining payments are for the six months ending December 31, 2020.
(b)
Lease payments include options to extend lease terms that are reasonably certain of being exercised. There were $1.7 million of legally binding minimum lease payments for leases signed but not yet commenced at June 30, 2020.
(c)
Our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our discount rate for such leases to determine the present value of lease payments at the lease commencement date.
(d)
The weighted average remaining lease term and weighted average discount rate used in calculating our lease liabilities were 5.6 years and 5.7%, respectively, at June 30, 2020.
v3.20.2
Supplemental Guarantor Information
6 Months Ended
Jun. 30, 2020
Supplemental Guarantor Information [Abstract]  
Supplemental Guarantor information Supplemental guarantor information

All of our senior notes are guaranteed jointly and severally on a senior basis by certain of our wholly-owned Homebuilding subsidiaries and certain other wholly-owned subsidiaries (collectively, the “Guarantors”). Such guaranties are full and unconditional. Our subsidiaries comprising the Financial Services segment along with certain other subsidiaries (collectively, the "Non-Guarantor Subsidiaries") do not guarantee the senior notes. In accordance with Rule 3-10 of Regulation S-X, supplemental consolidating financial information of the Company, including such information for the Guarantors, is presented below. Investments in unconsolidated entities are presented using the equity method of accounting.
 CONDENSED CONSOLIDATING BALANCE SHEET
June 30, 2020
($000’s omitted)
 
Unconsolidated
 
Eliminating
Entries
 
Consolidated
PulteGroup,
Inc.
 
PulteGroup,
Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
ASSETS
 
 
 
 
 
 
 
 
 
Cash and equivalents
$


$
1,591,082


$
67,448


$


$
1,658,530

Restricted cash


32,470


6,796




39,266

Total cash, cash equivalents, and
restricted cash


1,623,552


74,244




1,697,796

House and land inventory


7,443,855


140,884




7,584,739

Land held for sale


29,409






29,409

Residential mortgage loans available-
for-sale




394,288




394,288

Investments in unconsolidated entities


46,548


1,159




47,707

Other assets
4,801


661,239


244,231




910,271

Intangible assets


117,792


55,715




173,507

Deferred tax assets, net
133,228




(12,460
)



120,768

Investments in subsidiaries and
intercompany accounts, net
8,657,717


910,129


9,969,347


(19,537,193
)



$
8,795,746


$
10,832,524


$
10,867,408


$
(19,537,193
)

$
10,958,485

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable, customer deposits,
accrued and other liabilities
$
85,417


$
1,588,835


$
258,859


$


$
1,933,111

Income tax liabilities
146,729








146,729

Financial Services debt




256,359




256,359

Notes payable
2,711,932


58,686






2,770,618

Total liabilities
2,944,078


1,647,521


515,218




5,106,817

Total shareholders’ equity
5,851,668


9,185,003


10,352,190


(19,537,193
)

5,851,668


$
8,795,746


$
10,832,524


$
10,867,408


$
(19,537,193
)

$
10,958,485


CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2019
($000’s omitted)

 
Unconsolidated
 
Eliminating
Entries
 
Consolidated
PulteGroup,
Inc.
 
PulteGroup,
Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
ASSETS
 
 
 
 
 
 
 
 
 
Cash and equivalents
$


$
1,026,743


$
191,170


$


$
1,217,913

Restricted cash


31,328


2,215




33,543

Total cash, cash equivalents, and
restricted cash


1,058,071


193,385




1,251,456

House and land inventory


7,554,662


125,952




7,680,614

Land held for sale


24,009






24,009

Residential mortgage loans available-
for-sale




508,967




508,967

Investments in unconsolidated entities


59,266


500




59,766

Other assets
8,172


688,996


198,518





895,686

Intangible assets


124,992






124,992

Deferred tax assets, net
182,461




(12,354
)



170,107

Investments in subsidiaries and
intercompany accounts, net
8,103,191


1,081,472


9,279,403


(18,464,066
)



$
8,293,824


$
10,591,468


$
10,294,371


$
(18,464,066
)

$
10,715,597

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable, customer deposits,
accrued and other liabilities
$
87,892


$
1,781,893


$
259,926


$


$
2,129,711

Income tax liabilities
36,093








36,093

Financial Services debt




326,573




326,573

Notes payable
2,711,659


53,381






2,765,040

Total liabilities
2,835,644


1,835,274


586,499




5,257,417

Total shareholders’ equity
5,458,180


8,756,194


9,707,872


(18,464,066
)

5,458,180


$
8,293,824


$
10,591,468


$
10,294,371


$
(18,464,066
)

$
10,715,597



CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the three months ended June 30, 2020
($000’s omitted)
 
Unconsolidated
 
 
 
Consolidated
PulteGroup, 
Inc.
 
PulteGroup,
Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminating
Entries
 
Revenues:
 
 
 
 
 
 
 
 
 
Homebuilding
 
 
 
 
 
 
 
 
 
Home sale revenues
$

 
$
2,447,552

 
$
24,477

 
$

 
$
2,472,029

Land sale and other revenues

 
8,548

 
18,402

 

 
26,950

 

 
2,456,100

 
42,879

 

 
2,498,979

Financial Services

 

 
94,802

 

 
94,802

 

 
2,456,100

 
137,681

 

 
2,593,781

Homebuilding Cost of Revenues:
 
 
 
 
 
 
 
 
 
Home sale cost of revenues

 
(1,861,026
)
 
(19,183
)
 

 
(1,880,209
)
Land sale and other cost of revenues

 
(4,533
)
 
(15,508
)
 

 
(20,041
)
 

 
(1,865,559
)
 
(34,691
)
 

 
(1,900,250
)
Financial Services expenses

 
(212
)
 
(34,166
)
 

 
(34,378
)
Selling, general, and administrative
expenses

 
(195,375
)
 
(1,483
)
 

 
(196,858
)
Goodwill impairment

 

 

 

 

Other income (expense), net
(2,851
)
 
(10,443
)
 
8,008

 

 
(5,286
)
Intercompany interest
(1,468
)
 

 
1,468

 

 

Income (loss) before income taxes and
equity in income (loss) of
subsidiaries
(4,319
)
 
384,511

 
76,817

 

 
457,009

Income tax (expense) benefit
1,080

 
(90,743
)
 
(18,726
)
 

 
(108,389
)
Income (loss) before equity in income
(loss) of subsidiaries
(3,239
)
 
293,768

 
58,091

 

 
348,620

Equity in income (loss) of subsidiaries
351,859

 
24,505

 
288,995

 
(665,359
)
 

Net income (loss)
348,620

 
318,273

 
347,086

 
(665,359
)
 
348,620

Other comprehensive income
25

 

 

 

 
25

Comprehensive income (loss)
$
348,645

 
$
318,273

 
$
347,086

 
$
(665,359
)
 
$
348,645


CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the three months ended June 30, 2019
($000’s omitted)
 
Unconsolidated
 
 
 
Consolidated
PulteGroup, 
Inc.
 
PulteGroup,
Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminating
Entries
 
Revenues:
 
 
 
 
 
 
 
 
 
Homebuilding
 
 
 
 
 
 
 
 
 
Home sale revenues
$

 
$
2,359,210

 
$
44,349

 
$

 
$
2,403,559

Land sale and other revenues

 
29,459

 
10

 

 
29,469

 

 
2,388,669

 
44,359

 

 
2,433,028

Financial Services

 

 
55,957

 

 
55,957

 

 
2,388,669

 
100,316

 

 
2,488,985

Homebuilding Cost of Revenues:
 
 
 
 
 
 
 
 
 
Home sale cost of revenues

 
(1,814,701
)
 
(33,454
)
 

 
(1,848,155
)
Land sale and other cost of revenues

 
(26,214
)
 

 

 
(26,214
)
 

 
(1,840,915
)
 
(33,454
)
 

 
(1,874,369
)
Financial Services expenses

 
(125
)
 
(30,776
)
 

 
(30,901
)
Selling, general, and administrative
expenses

 
(245,272
)
 
(14,168
)
 

 
(259,440
)
Other income (expense), net
(4,966
)
 
(9,276
)
 
10,743

 

 
(3,499
)
Intercompany interest
(2,254
)
 

 
2,254

 

 

Income (loss) before income taxes and
equity in income (loss) of
subsidiaries
(7,220
)
 
293,081

 
34,915

 

 
320,776

Income tax (expense) benefit
1,733

 
(72,598
)
 
(8,870
)
 

 
(79,735
)
Income (loss) before equity in income
(loss) of subsidiaries
(5,487
)
 
220,483

 
26,045

 

 
241,041

Equity in income (loss) of subsidiaries
246,528

 
24,504

 
162,404

 
(433,436
)
 

Net income (loss)
241,041

 
244,987

 
188,449

 
(433,436
)
 
241,041

Other comprehensive income
25

 

 

 

 
25

Comprehensive income (loss)
$
241,066

 
$
244,987

 
$
188,449

 
$
(433,436
)
 
$
241,066







CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the six months ended June 30, 2020
($000’s omitted)
 
Unconsolidated
 
 
 
Consolidated
PulteGroup, 
Inc.
 
PulteGroup,
Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminating
Entries
 
Revenues:
 
 
 
 
 
 
 
 
 
Homebuilding
 
 
 
 
 
 
 
 
 
Home sale revenues
$

 
$
4,645,116

 
$
48,416

 
$

 
$
4,693,532

Land sale and other revenues

 
10,998

 
34,879

 

 
45,877

 

 
4,656,114

 
83,295

 

 
4,739,409

Financial Services

 

 
149,352

 

 
149,352

 

 
4,656,114

 
232,647

 

 
4,888,761

Homebuilding Cost of Revenues:
 
 
 
 
 
 
 
 
 
Home sale cost of revenues

 
(3,536,373
)
 
(38,701
)
 

 
(3,575,074
)
Land sale and other cost of revenues

 
(5,386
)
 
(29,669
)
 

 
(35,055
)
 

 
(3,541,759
)
 
(68,370
)
 

 
(3,610,129
)
Financial Services expenses

 
(355
)
 
(68,972
)
 

 
(69,327
)
Selling, general, and administrative
expenses

 
(451,010
)
 
(9,517
)
 

 
(460,527
)
Goodwill impairment

 

 
(20,190
)
 

 
(20,190
)
Other income (expense), net
(3,544
)
 
(17,059
)
 
12,793

 

 
(7,810
)
Intercompany interest
(3,073
)
 

 
3,073

 

 

Income (loss) before income taxes and
equity in income (loss) of
subsidiaries
(6,617
)
 
645,931

 
81,464

 

 
720,778

Income tax (expense) benefit
1,654

 
(150,203
)
 
(19,898
)
 

 
(168,447
)
Income (loss) before equity in income
(loss) of subsidiaries
(4,963
)
 
495,728

 
61,566

 

 
552,331

Equity in income (loss) of subsidiaries
557,294

 
42,702

 
484,616

 
(1,084,612
)
 

Net income (loss)
552,331

 
538,430

 
546,182

 
(1,084,612
)
 
552,331

Other comprehensive income
50

 

 

 

 
50

Comprehensive income (loss)
$
552,381

 
$
538,430

 
$
546,182

 
$
(1,084,612
)
 
$
552,381


















CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the six months ended June 30, 2019
($000’s omitted)
 
Unconsolidated
 
 
 
Consolidated
PulteGroup, 
Inc.
 
PulteGroup,
Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminating
Entries
 
Revenues:
 
 
 
 
 
 
 
 
 
Homebuilding
 
 
 
 
 
 
 
 
 
Home sale revenues
$

 
$
4,267,018

 
$
86,397

 
$

 
$
4,353,415

Land sale and other revenues

 
31,785

 
660

 

 
32,445

 

 
4,298,803

 
87,057

 

 
4,385,860

Financial Services

 

 
99,819

 

 
99,819

 

 
4,298,803

 
186,876

 

 
4,485,679

Homebuilding Cost of Revenues:
 
 
 
 
 
 
 
 
 
Home sale cost of revenues

 
(3,275,596
)
 
(65,350
)
 

 
(3,340,946
)
Land sale and other cost of revenues

 
(27,159
)
 
(1,106
)
 

 
(28,265
)
 

 
(3,302,755
)
 
(66,456
)
 

 
(3,369,211
)
Financial Services expenses

 
(257
)
 
(62,093
)
 

 
(62,350
)
Selling, general, and administrative
expenses

 
(479,388
)
 
(32,778
)
 

 
(512,166
)
Other income (expense), net
(5,087
)
 
(14,264
)
 
14,878

 

 
(4,473
)
Intercompany interest
(4,251
)
 

 
4,251

 

 

Income (loss) before income taxes and
equity in income (loss) of
subsidiaries
(9,338
)
 
502,139

 
44,678

 

 
537,479

Income tax (expense) benefit
2,241

 
(120,248
)
 
(11,674
)
 

 
(129,681
)
Income (loss) before equity in income
(loss) of subsidiaries
(7,097
)
 
381,891

 
33,004

 

 
407,798

Equity in income (loss) of subsidiaries
414,895

 
42,808

 
276,100

 
(733,803
)
 

Net income (loss)
407,798

 
424,699

 
309,104

 
(733,803
)
 
407,798

Other comprehensive income
50

 

 

 

 
50

Comprehensive income (loss)
$
407,848

 
$
424,699

 
$
309,104

 
$
(733,803
)
 
$
407,848

 


















CONSOLIDATING STATEMENT OF CASH FLOWS
For the six months ended June 30, 2020
($000’s omitted)
 
Unconsolidated
 
 
 
Consolidated
PulteGroup, Inc.
 
PulteGroup,
Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminating
Entries
 
Net cash provided by (used in)
operating activities
$
162,014

 
$
495,413

 
$
150,445

 
$

 
$
807,872

Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
Capital expenditures

 
(32,129
)
 
(4,617
)
 

 
(36,746
)
Investments in unconsolidated entities

 
13,619

 
(664
)
 

 
12,955

Other investing activities, net

 
87

 
1,510

 

 
1,597

Business acquisition

 

 
(83,256
)
 

 
(83,256
)
Net cash provided by (used in)
investing activities

 
(18,423
)
 
(87,027
)
 

 
(105,450
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
Financial Services borrowing (repayments), net

 

 
(70,214
)
 

 
(70,214
)
Repayments of debt

 
(10,106
)
 

 

 
(10,106
)
Borrowings under revolving credit facility
700,000

 

 

 

 
700,000

Repayments under revolving credit facility
(700,000
)
 

 

 

 
(700,000
)
Stock option exercises
99

 

 

 

 
99

Share repurchases
(95,676
)
 

 

 

 
(95,676
)
Cash paid for shares withheld for taxes
(14,853
)
 

 

 

 
(14,853
)
Dividends paid
(65,332
)
 

 

 

 
(65,332
)
Intercompany activities, net
13,748

 
98,597

 
(112,345
)
 

 

Net cash provided by (used in)
financing activities
(162,014
)
 
88,491

 
(182,559
)
 

 
(256,082
)
Net increase (decrease) in cash, cash equivalents, and restricted cash

 
565,481

 
(119,141
)
 

 
446,340

Cash, cash equivalents, and restricted cash
at beginning of year

 
1,058,071

 
193,385

 

 
1,251,456

Cash, cash equivalents, and restricted cash
at end of year
$

 
$
1,623,552

 
$
74,244

 
$

 
$
1,697,796


CONSOLIDATING STATEMENT OF CASH FLOWS
For the six months ended June 30, 2019
($000’s omitted)
 
Unconsolidated
 
 
 
Consolidated
PulteGroup, Inc.
 
PulteGroup,
Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminating
Entries
 
Net cash provided by (used in)
operating activities
$
130,811

 
$
34,461

 
$
140,435

 
$

 
$
305,707

Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
Capital expenditures

 
(24,707
)
 
(4,868
)
 

 
(29,575
)
Investments in unconsolidated entities

 
(4,183
)
 
(481
)
 

 
(4,664
)
Other investing activities, net

 
3,241

 
1,351

 

 
4,592

Business acquisition

 
(163,724
)
 

 

 
(163,724
)
Net cash provided by (used in)
investing activities

 
(189,373
)
 
(3,998
)
 

 
(193,371
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
Financial Services borrowings (repayments), net

 

 
(114,226
)
 

 
(114,226
)
Repayments of debt
(280,175
)
 
(16,591
)
 
(537
)
 

 
(297,303
)
Stock option exercises
5,208

 

 

 

 
5,208

Share repurchases
(108,471
)
 

 

 

 
(108,471
)
Cash paid for shares withheld for taxes
(10,350
)
 

 

 

 
(10,350
)
Dividends paid
(61,620
)
 

 

 

 
(61,620
)
Intercompany activities, net
324,597

 
(149,715
)
 
(174,882
)
 

 

Net cash provided by (used in)
financing activities
(130,811
)
 
(166,306
)
 
(289,645
)
 

 
(586,762
)
Net increase (decrease) in cash, cash equivalents, and restricted cash

 
(321,218
)
 
(153,208
)
 

 
(474,426
)
Cash, cash equivalents, and restricted cash
at beginning of year

 
929,367

 
204,333

 

 
1,133,700

Cash, cash equivalents, and restricted cash
at end of year
$

 
$
608,149

 
$
51,125

 
$

 
$
659,274


v3.20.2
Basis of Presentation (Policy)
6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Consolidation policy
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal, recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with our consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019.
Use of estimates
Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Subsequent events
Subsequent events

We evaluated subsequent events up until the time the financial statements were filed with the Securities and Exchange Commission (the "SEC").
Revenue recognition
Revenue recognition

Home sale revenues - Home sale revenues and related profit are generally recognized when title to and possession of the home are transferred to the buyer at the home closing date. Our performance obligation to deliver the agreed-upon home is generally satisfied at the home closing date. Home sale contract assets consist of cash from home closings held in escrow for our benefit, typically for less than five days, which are considered deposits in-transit and classified as cash. Contract liabilities include customer deposits related to sold but undelivered homes, which totaled $335.0 million and $294.4 million at June 30, 2020 and December 31, 2019, respectively. Substantially all of our home sales are scheduled to close and be recorded to revenue within one year from the date of receiving a customer deposit. See Note 8 for information on warranties and related obligations.

Land sale and other revenues - We periodically elect to sell parcels of land to third parties in the event such assets no longer fit into our strategic operating plans or are zoned for commercial or other development. Land sales are generally outright sales of specified land parcels with cash consideration due on the closing date, which is generally when performance obligations are satisfied. Revenues related to our construction services operations are generally recognized as materials are delivered and installation services are completed.

Financial services revenues - Loan origination fees, commitment fees, and certain direct loan origination costs are recognized as incurred. Expected gains and losses from the sale of residential mortgage loans and their related servicing rights are included in the measurement of written loan commitments that are accounted for at fair value through Financial Services revenues at the time of commitment. Subsequent changes in the fair value of these loans are reflected in Financial Services revenues as they occur. Interest income is accrued from the date a mortgage loan is originated until the loan is sold. Mortgage servicing fees represent fees earned for servicing loans. Servicing fees are based on a contractual percentage of the outstanding principal balance and are credited to income when related mortgage payments are received.

Revenues associated with our title operations are recognized as closing services are rendered and title insurance policies are issued, both of which generally occur as each home is closed. Insurance brokerage commissions relate to commissions on homeowner and other insurance policies placed with third party carriers through various agency channels. Our performance obligations for policy renewal commissions are satisfied upon issuance of the initial policy, and related contract assets for estimated future renewal commissions are included in other assets and totaled $36.0 million and $35.1 million at June 30, 2020 and December 31, 2019, respectively.
Earnings per share
Earnings per share

Basic earnings per share is computed by dividing income available to common shareholders (the “Numerator”) by the weighted-average number of common shares outstanding, adjusted for unvested shares (the “Denominator”) for the period. Computing diluted earnings per share is similar to computing basic earnings per share, except that the Denominator is increased to include the dilutive effects of stock options, unvested restricted share units, unvested restricted share units, and other
potentially dilutive instruments. Any stock options that have an exercise price greater than the average market price are considered to be anti-dilutive and are excluded from the diluted earnings per share calculation.

In accordance with Accounting Standards Codification ("ASC") 260, "Earnings Per Share", the two-class method determines earnings per share for each class of common stock and participating securities according to an earnings allocation formula that adjusts the Numerator for dividends or dividend equivalents and participation rights in undistributed earnings. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and, therefore, are included in computing earnings per share pursuant to the two-class method. Our outstanding restricted share units and deferred shares are considered participating securities.
Residential mortgage loans available-for-sale
Residential mortgage loans available-for-sale

Substantially all of the loans originated by us are sold in the secondary mortgage market within a short period of time after origination, generally within 30 days. At June 30, 2020 and December 31, 2019, residential mortgage loans available-for-sale had an aggregate fair value of $394.3 million and $509.0 million, respectively, and an aggregate outstanding principal balance of $378.0 million and $494.1 million, respectively. The net loss resulting from changes in fair value of these loans totaled $3.6 million and $0.2 million for the three months ended June 30, 2020 and 2019, respectively, and $1.4 million and $1.3 million for the six months ended June 30, 2020 and 2019, respectively. These changes in fair value were substantially offset by changes in the fair value of corresponding hedging instruments. Net gains from the sale of mortgages were $66.3 million and $30.4 million for the three months ended June 30, 2020 and 2019, respectively, and $97.2 million and $54.3 million for the six months ended June 30, 2020 and 2019, respectively, and have been included in Financial Services revenues.

Derivative instruments and hedging activities
Derivative instruments and hedging activities

We are party to interest rate lock commitments ("IRLCs") with customers resulting from our mortgage origination operations. At June 30, 2020 and December 31, 2019, we had aggregate IRLCs of $454.4 million and $255.3 million, respectively, which were originated at interest rates prevailing at the date of commitment. Since we can terminate a loan commitment if the borrower does not comply with the terms of the contract, and some loan commitments may expire without being drawn upon,
these commitments do not necessarily represent future cash requirements. We evaluate the creditworthiness of these transactions through our normal credit policies.

We hedge our exposure to interest rate market risk relating to residential mortgage loans available-for-sale and IRLCs using forward contracts on mortgage-backed securities, which are commitments to either purchase or sell a specified financial instrument at a specified future date for a specified price, and whole loan investor commitments, which are obligations of an investor to buy loans at a specified price within a specified time period. Forward contracts on mortgage-backed securities are the predominant derivative financial instruments we use to minimize market risk during the period from the time we extend an interest rate lock to a loan applicant until the time the loan is sold to an investor. At June 30, 2020 and December 31, 2019, we had unexpired forward contracts of $551.0 million and $518.2 million, respectively, and whole loan investor commitments of $225.1 million and $200.7 million, respectively. Changes in the fair value of IRLCs and other derivative financial instruments are recognized in Financial Services revenues, and the fair values are reflected in other assets or other liabilities, as applicable.

There are no credit-risk-related contingent features within our derivative agreements, and counterparty risk is considered minimal. Gains and losses on IRLCs and residential mortgage loans available-for-sale are substantially offset by corresponding gains or losses on forward contracts on mortgage-backed securities and whole loan investor commitments. We are generally not exposed to variability in cash flows of derivative instruments for more than approximately 60 days.
New accounting pronouncements
New accounting pronouncements

On January 1, 2020, we adopted ASC 326, which changed the impairment model for most financial assets and certain other instruments from an "incurred loss" approach to a new "expected credit loss" methodology. We adopted ASC 326 using the modified retrospective transition method. The amendment requires entities to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. Our adoption of ASC 326 resulted in a $0.7 million decrease to retained earnings as of January 1, 2020.

In January 2017, the FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment", which removed the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. Under the new standard, goodwill impairment is determined by evaluating the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. We adopted the standard for annual and interim periods beginning January 1, 2020
Inventory interest capitalization We capitalize interest cost into inventory during the active development and construction of our communities. In all periods presented, we capitalized substantially all Homebuilding interest costs into inventory because the level of our active inventory exceeded our debt levels.
Fair value of financial instruments
Fair values for agency residential mortgage loans available-for-sale are determined based on quoted market prices for comparable instruments. Fair values for non-agency residential mortgage loans available-for-sale are determined based on purchase commitments from whole loan investors and other relevant market information available to management. Fair values for interest rate lock commitments, including the value of servicing rights, and forward contracts on mortgage-backed securities are valued based on market prices for similar instruments. Fair values for whole loan commitments are based on market prices for similar instruments from the specific whole loan investor.

Certain assets are required to be recorded at fair value on a non-recurring basis when events and circumstances indicate that the carrying value may not be recoverable. The non-recurring fair values included in the above table represent only those assets whose carrying values were adjusted to fair value as of the respective balance sheet dates.

The carrying amounts of cash and equivalents, Financial Services debt and other notes payable approximate their fair values due to their short-term nature and/or floating interest rate terms. The fair values of senior notes are based on quoted market prices, when available. If quoted market prices are not available, fair values are based on quoted market prices of similar issues. The carrying value of senior notes was $2.7 billion at both June 30, 2020 and December 31, 2019.
Letters of credit and surety bonds
Letters of credit and surety bonds

In the normal course of business, we post letters of credit and surety bonds pursuant to certain performance-related obligations, as security for certain land option agreements, and under various insurance programs. The majority of these letters of credit and surety bonds are in support of our land development and construction obligations to various municipalities, other government agencies, and utility companies related to the construction of roads, sewers, and other infrastructure. We had outstanding letters of credit and surety bonds totaling $244.8 million and $1.3 billion, respectively, at June 30, 2020 and $262.8 million and $1.4 billion, respectively, at December 31, 2019. In the event any such letter of credit or surety bond is drawn, we would be obligated to reimburse the issuer of the letter of credit or surety bond. Our surety bonds generally do not have stated expiration dates; rather we are released from the surety bonds as the underlying contractual performance is completed. Because significant construction and development work has been performed related to projects that have not yet received final acceptance by the respective counterparties, the aggregate amount of surety bonds outstanding is in excess of the projected cost of the remaining work to be performed.
Litigation and regulatory matters
Litigation and regulatory matters

We are involved in various litigation and legal claims in the normal course of our business operations, including actions brought on behalf of various classes of claimants. We are also subject to a variety of local, state, and federal laws and regulations related to land development activities, house construction standards, sales practices, mortgage lending operations, employment practices, and protection of the environment. As a result, we are subject to periodic examination or inquiry by various governmental agencies that administer these laws and regulations.

We establish liabilities for litigation, legal claims, and regulatory matters when such matters are both probable of occurring and any potential loss is reasonably estimable. We accrue for such matters based on the facts and circumstances specific to each matter and revise these estimates as the matters evolve. In such cases, there may exist an exposure to loss in excess of any amounts currently accrued. In view of the inherent difficulty of predicting the outcome of these legal and regulatory matters, we generally cannot predict the ultimate resolution of the pending matters, the related timing, or the eventual loss. While the outcome of such contingencies cannot be predicted with certainty, we do not believe that the resolution of such matters will have a material adverse impact on our results of operations, financial position, or cash flows. However, to the extent the liability arising from the ultimate resolution of any matter exceeds the estimates reflected in the recorded reserves relating to such matter, we could incur additional charges that could be significant.

Allowance for warranties

Home purchasers are provided with a limited warranty against certain building defects, including a one-year comprehensive limited warranty and coverage for certain other aspects of the home’s construction and operating systems for periods of up to and, in limited instances, exceeding 10 years. We estimate the costs to be incurred under these warranties and record liabilities in the amount of such costs at the time product revenue is recognized. Factors that affect our warranty liabilities include the number of homes sold, historical and anticipated rates of warranty claims, and the projected cost per claim. We periodically assess the adequacy of the warranty liabilities for each geographic market in which we operate and adjust the amounts as necessary. Actual warranty costs in the future could differ from the current estimates.
Self insured risks <div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;">Self-insured risks</font></div><div style="line-height:120%;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">We maintain, and require our subcontractors to maintain, general liability insurance coverage. We also maintain builders' risk, property, errors and omissions, workers' compensation, and other business insurance coverage. These insurance policies protect us against a portion of the risk of loss from claims. However, we retain a significant portion of the overall risk for such claims either through policies issued by our captive insurance subsidiaries or through our own self-insured per occurrence and aggregate retentions, deductibles, and claims in excess of available insurance policy limits. </font></div><div style="line-height:120%;text-align:left;padding-left:24px;text-indent:36px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Our general liability insurance includes coverage for certain construction defects. While construction defect claims can relate to a variety of circumstances, the majority of our claims relate to alleged problems with siding, plumbing, foundations and other concrete work, windows, roofing, and heating, ventilation and air conditioning systems. The availability of general liability insurance for the homebuilding industry and its subcontractors has become increasingly limited, and the insurance policies available require us to maintain significant per occurrence and aggregate retention levels. In certain instances, we may offer our subcontractors the opportunity to purchase insurance through one of our captive insurance subsidiaries or participate in a project-specific insurance program provided by us. Policies issued by our captive insurance subsidiaries represent self-insurance of these risks by us. This self-insured exposure is limited by reinsurance policies that we purchase. General liability coverage for the homebuilding industry is complex, and our coverage varies from policy year to policy year. Our insurance coverage requires a per occurrence deductible up to an overall aggregate retention level. Beginning with the first dollar, amounts paid to satisfy insured claims generally apply to our per occurrence and aggregate retention obligations. Any amounts incurred in excess of the occurrence or aggregate retention levels are covered by insurance up to our purchased coverage levels. Our insurance policies, including the captive insurance subsidiaries' reinsurance policies, are maintained with highly-rated underwriters for whom we believe counterparty default risk is not significant.</font></div><div style="line-height:120%;text-align:left;padding-left:24px;text-indent:36px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">At any point in time, we are managing over </font><font style="font-family:inherit;font-size:10pt;">1,000</font><font style="font-family:inherit;font-size:10pt;"> individual claims related to general liability, property, errors and omissions, workers' compensation, and other business insurance coverage. We reserve for costs associated with such claims (including expected claims management expenses) on an undiscounted basis at the time revenue is recognized for each home closing and periodically evaluate the recorded liabilities based on actuarial analyses of our historical claims. The actuarial analyses calculate estimates of the ultimate net cost of all unpaid losses, including estimates for incurred but not reported losses ("IBNR"). IBNR represents losses related to claims incurred but not yet reported plus development on reported claims.</font></div><div style="line-height:120%;text-align:left;padding-left:24px;text-indent:36px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Our recorded reserves for all such claims totaled </font><font style="font-family:inherit;font-size:10pt;">$640.0 million</font><font style="font-family:inherit;font-size:10pt;"> and </font><font style="font-family:inherit;font-size:10pt;">$709.8 million</font><font style="font-family:inherit;font-size:10pt;"> at </font><font style="font-family:inherit;font-size:10pt;">June&#160;30, 2020</font><font style="font-family:inherit;font-size:10pt;"> and </font><font style="font-family:inherit;font-size:10pt;">December&#160;31, 2019</font><font style="font-family:inherit;font-size:10pt;">, respectively. The recorded reserves include loss estimates related to both (i) existing claims and related claim expenses and (ii) IBNR and related claim expenses. Liabilities related to IBNR and related claim expenses represented approximately </font><font style="font-family:inherit;font-size:10pt;">69%</font><font style="font-family:inherit;font-size:10pt;"> and </font><font style="font-family:inherit;font-size:10pt;">68%</font><font style="font-family:inherit;font-size:10pt;"> of the total general liability reserves at </font><font style="font-family:inherit;font-size:10pt;">June&#160;30, 2020</font><font style="font-family:inherit;font-size:10pt;"> and </font><font style="font-family:inherit;font-size:10pt;">December&#160;31, 2019</font><font style="font-family:inherit;font-size:10pt;">, respectively. The actuarial analyses that determine the IBNR portion of reserves consider a variety of factors, including the frequency and severity of losses, which are based on our historical claims experience supplemented by industry data. The actuarial analyses of the reserves also consider historical third party recovery rates and claims management expenses. </font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Housing market conditions can be volatile, and we believe such conditions can affect the frequency and cost of construction defect claims. Additionally, IBNR estimates comprise the majority of our liability and are subject to a high degree of uncertainty due to a variety of factors, including changes in claims reporting and resolution patterns, third party recoveries, insurance industry practices, the regulatory environment, and legal precedent. State regulations vary, but construction defect claims are typically reported and resolved over an extended period, often exceeding ten years. Changes in the frequency and timing of reported claims and estimates of specific claim values can impact the underlying inputs and trends utilized in the actuarial analyses, which could have a material impact on the recorded reserves. Additionally, the amount of insurance coverage available for each policy period also impacts our recorded reserves. Because of the inherent uncertainty in estimating future losses and the timing of such losses related to these claims, actual costs could differ significantly from estimated costs. </font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Adjustments to reserves are recorded in the period in which the change in estimate occurs. We reduced general liability reserves by </font><font style="font-family:inherit;font-size:10pt;">$60.7 million</font><font style="font-family:inherit;font-size:10pt;"> and </font><font style="font-family:inherit;font-size:10pt;">$59.4 million</font><font style="font-family:inherit;font-size:10pt;"> during the </font><font style="font-family:inherit;font-size:10pt;">three and six months ended</font><font style="font-family:inherit;font-size:10pt;"> </font><font style="font-family:inherit;font-size:10pt;">June&#160;30, 2020</font><font style="font-family:inherit;font-size:10pt;">, respectively, and </font><font style="font-family:inherit;font-size:10pt;">$12.8 million</font><font style="font-family:inherit;font-size:10pt;"> and </font><font style="font-family:inherit;font-size:10pt;">$16.6 million</font><font style="font-family:inherit;font-size:10pt;"> during the </font><font style="font-family:inherit;font-size:10pt;">three and six months ended</font><font style="font-family:inherit;font-size:10pt;"> </font><font style="font-family:inherit;font-size:10pt;">June&#160;30, 2019</font><font style="font-family:inherit;font-size:10pt;">, respectively, </font><font style="font-family:inherit;font-size:10pt;color:#212529;">as a result of changes in estimates resulting from actual claim experience being less than anticipated in previous actuarial projections. The changes in actuarial estimates were driven by changes in actual claims experience that, in turn, impacted actuarial estimates for potential future claims. These changes in actuarial estimates did not involve any changes in actuarial methodology but did impact the development of estimates for future periods, which resulted in adjustments to the IBNR portion of our recorded liabilities. </font><font style="font-family:inherit;font-size:10pt;">Costs associated with </font></div></div>
v3.20.2
Basis of Presentation (Tables)
6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Schedule of Other Expense (Income), Net
Other expense, net consists of the following ($000’s omitted): 
 
Three Months Ended
 
Six Months Ended
June 30,
 
June 30,
2020
 
2019
 
2020
 
2019
Write-offs of deposits and pre-acquisition costs
$
(2,311
)
 
$
(2,516
)
 
$
(6,643
)
 
$
(5,433
)
Amortization of intangible assets
(5,045
)
 
(3,550
)
 
(9,602
)
 
(7,000
)
Loss on debt retirement

 
(4,843
)
 

 
(4,843
)
Interest income
1,326

 
4,471

 
5,133

 
9,420

Interest expense
(3,000
)
 
(146
)
 
(3,796
)
 
(290
)
Equity in earnings of unconsolidated entities
334

 
129

 
902

 
165

Miscellaneous, net
3,410

 
2,956

 
6,196

 
3,508

Total other expense, net
$
(5,286
)
 
$
(3,499
)
 
$
(7,810
)
 
$
(4,473
)


Schedule of Earnings Per Share The following table presents the earnings per common share (000's omitted, except per share data):
 
Three Months Ended
 
Six Months Ended
June 30,
 
June 30,
2020
 
2019
 
2020
 
2019
Numerator:
 
 
 
 
 
 
 
Net income
$
348,620

 
$
241,041

 
$
552,331

 
$
407,798

Less: earnings distributed to participating securities
(265
)
 
(305
)
 
(538
)
 
(613
)
Less: undistributed earnings allocated to participating securities
(2,602
)
 
(2,089
)
 
(4,358
)
 
(3,588
)
Numerator for basic earnings per share
$
345,753

 
$
238,647

 
$
547,435

 
$
403,597

Add back: undistributed earnings allocated to participating securities
2,602

 
2,089

 
4,358

 
3,588

Less: undistributed earnings reallocated to participating securities
(2,595
)
 
(2,082
)
 
(4,342
)
 
(3,576
)
Numerator for diluted earnings per share
$
345,760

 
$
238,654

 
$
547,451

 
$
403,609

 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
Basic shares outstanding
268,324

 
276,652

 
269,167

 
277,142

Effect of dilutive securities
701

 
932

 
960

 
967

Diluted shares outstanding
269,025

 
277,584

 
270,127

 
278,109

 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
Basic
$
1.29

 
$
0.86

 
$
2.03

 
$
1.46

Diluted
$
1.29

 
$
0.86

 
$
2.03

 
$
1.45


Schedule of Derivative Instruments in Statement of Financial Position, Fair Value The fair values of derivative instruments and their locations in the Condensed Consolidated Balance Sheets are summarized below ($000’s omitted):
 
 
June 30, 2020
 
December 31, 2019
 
Other Assets
 
Accrued and Other Liabilities
 
Other Assets
 
Accrued and Other Liabilities
Interest rate lock commitments
$
19,934

 
$
1,811

 
$
8,351

 
$
149

Forward contracts
236

 
3,624

 
299

 
1,372

Whole loan commitments
190

 
1,805

 
880

 
284

 
$
20,360

 
$
7,240

 
$
9,530

 
$
1,805


v3.20.2
Inventory (Tables)
6 Months Ended
Jun. 30, 2020
Inventory Disclosure [Abstract]  
Components of Inventory

Major components of inventory were as follows ($000’s omitted): 
 
June 30,
2020
 
December 31,
2019
Homes under construction
$
3,125,369

 
$
2,899,016

Land under development
4,076,492

 
4,347,107

Raw land
382,878

 
434,491

 
$
7,584,739

 
$
7,680,614


Capitalized Interest Rollforward Information related to interest capitalized into inventory is as follows ($000’s omitted):
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Interest in inventory, beginning of period
$
213,425

 
$
235,313

 
$
210,383

 
$
227,495

Interest capitalized
39,686

 
41,650

 
79,599

 
84,031

Interest expensed
(45,169
)
 
(42,254
)
 
(82,040
)
 
(76,817
)
Interest in inventory, end of period
$
207,942

 
$
234,709

 
$
207,942

 
$
234,709


Schedule Of Company Interests In Land Option Agreements
The following provides a summary of our interests in land option agreements as of June 30, 2020 and December 31, 2019 ($000’s omitted):
 
 
June 30, 2020
 
December 31, 2019
 
Deposits and
Pre-acquisition
Costs
 
Remaining Purchase
Price
 
Deposits and
Pre-acquisition
Costs
 
Remaining Purchase
Price
Land options with VIEs
$
118,138

 
$
1,451,952

 
$
123,775

 
$
1,466,585

Other land options
183,266

 
2,080,674

 
175,662

 
1,755,377

 
$
301,404

 
$
3,532,626

 
$
299,437

 
$
3,221,962


Schedule Of Impairment Losses
We recorded the following land-related charges ($000's omitted):
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30, 2020
 
June 30, 2019
 
Statement of Operations Classification
2020
 
2019
 
2020
 
2019
Land impairments
Home sale cost of revenues
$

 
$
88

 
$
5,386

 
$
88

Net realizable value ("NRV") adjustments - land held for sale
Land sale and other cost of revenues
142

 
1,227

 
152

 
1,289

Write-offs of deposits and pre-acquisition costs
Other expense, net
2,311

 
2,516

 
6,643

 
5,433

 
 
$
2,453


$
3,831


$
12,181


$
6,810


v3.20.2
Segment Information (Tables)
6 Months Ended
Jun. 30, 2020
Segment Reporting [Abstract]  
Components of Reportable Segments For reporting purposes, our Homebuilding operations are aggregated into six reportable segments:
Northeast:
 
Connecticut, Maryland, Massachusetts, New Jersey, Pennsylvania, Virginia
Southeast:
 
Georgia, North Carolina, South Carolina, Tennessee
Florida:
 
Florida
Midwest:
 
Illinois, Indiana, Kentucky, Michigan, Minnesota, Ohio
Texas:
 
Texas
West:
 
Arizona, California, Nevada, New Mexico, Washington

Operating Data By Reporting Segment
 
Operating Data by Segment
($000’s omitted)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Revenues:
 
 
 
 
 
 
 
Northeast
$
141,478

 
$
200,237

 
$
303,912

 
$
310,729

Southeast
457,863

 
409,121

 
840,257

 
784,538

Florida
581,520

 
535,153

 
1,088,209

 
931,597

Midwest
339,680

 
350,584

 
631,849

 
644,174

Texas
365,348

 
342,886

 
710,086

 
611,889

West
613,090

 
595,047

 
1,165,096

 
1,102,933

 
2,498,979

 
2,433,028

 
4,739,409

 
4,385,860

Financial Services
94,802

 
55,957

 
149,352

 
99,819

Consolidated revenues
$
2,593,781

 
$
2,488,985

 
$
4,888,761

 
$
4,485,679

 
 
 
 
 
 
 
 
Income (loss) before income taxes:
 
 
 
 
 
 
 
Northeast
$
18,944

 
$
26,212

 
$
37,553

 
$
34,140

Southeast
72,780

 
42,499

 
127,524

 
80,355

Florida (a)
97,263

 
80,066

 
152,596

 
129,662

Midwest
43,607

 
42,962

 
75,069

 
69,120

Texas
59,909

 
49,144

 
113,504

 
80,115

West
90,164

 
94,443

 
157,419

 
184,625

Other homebuilding (b)
13,918

 
(39,628
)
 
(22,861
)
 
(78,024
)
 
396,585

 
295,698

 
640,804

 
499,993

Financial Services
60,424

 
25,078

 
79,974

 
37,486

Consolidated income before income taxes
$
457,009

 
$
320,776

 
$
720,778

 
$
537,479



(a)
Includes goodwill impairment charge totaling $20.2 million (see Note 1) in the six months ended June 30, 2020.
(b)
Other homebuilding includes the amortization of intangible assets and capitalized interest and other items not allocated to the operating segments. Other homebuilding also includes net insurance reserve reversals of $60.7 million and $59.4 million for the three and six months ended June 30, 2020, respectively, and $12.8 million and $16.6 million for the three and six months ended June 30, 2019.
 
Operating Data by Segment
($000’s omitted)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Land-related charges*:
 
 
 
 
 
 
 
Northeast
$
92

 
$
130

 
$
4,845

 
$
454

Southeast
929

 
2,015

 
1,676

 
2,587

Florida
459

 
765

 
981

 
1,246

Midwest
499

 
203

 
1,275

 
1,306

Texas
329

 
414

 
986

 
482

West
145

 
216

 
1,674

 
647

Other homebuilding

 
88

 
744

 
88

 
$
2,453

 
$
3,831

 
$
12,181

 
$
6,810


*
Land-related charges include land impairments, NRV adjustments on land held for sale, and write-offs of deposits and pre-acquisition costs for land option contracts we elected not to pursue.
Total Assets And Inventory By Reporting Segment
 
Operating Data by Segment
 
($000's omitted)
 
June 30, 2020
 
Homes Under
Construction
 
Land Under
Development
 
Raw Land
 
Total
Inventory
 
Total
Assets
Northeast
$
393,329

 
$
215,468

 
$
23,910

 
$
632,707

 
$
723,207

Southeast
429,024

 
674,337

 
60,516

 
1,163,877

 
1,317,066

Florida
567,963

 
885,307

 
92,112

 
1,545,382

 
1,838,880

Midwest
372,744

 
412,438

 
16,477

 
801,659

 
908,805

Texas
311,896

 
448,418

 
69,927

 
830,241

 
909,554

West
1,004,927

 
1,214,046

 
106,515

 
2,325,488

 
2,681,671

Other homebuilding (a)
45,486

 
226,478

 
13,421

 
285,385

 
2,041,189

 
3,125,369

 
4,076,492

 
382,878

 
7,584,739

 
10,420,372

Financial Services

 

 

 

 
538,113

 
$
3,125,369

 
$
4,076,492

 
$
382,878

 
$
7,584,739

 
$
10,958,485


 
Operating Data by Segment
 
($000's omitted)
 
December 31, 2019
 
Homes Under
Construction
 
Land Under
Development
 
Raw Land
 
Total
Inventory
 
Total
Assets
Northeast
$
345,644

 
$
242,666

 
$
25,098

 
$
613,408

 
$
698,661

Southeast
430,008

 
724,258

 
72,804

 
1,227,070

 
1,354,086

Florida
539,895

 
894,716

 
99,228

 
1,533,839

 
1,700,198

Midwest
315,822

 
464,733

 
31,881

 
812,436

 
886,889

Texas
343,230

 
447,707

 
84,926

 
875,863

 
949,236

West
881,551

 
1,289,255

 
105,606

 
2,276,412

 
2,538,803

Other homebuilding (a)
42,866

 
283,772

 
14,948

 
341,586

 
1,953,440

 
2,899,016

 
4,347,107

 
434,491

 
7,680,614

 
10,081,313

Financial Services

 

 

 

 
634,284

 
$
2,899,016

 
$
4,347,107

 
$
434,491

 
$
7,680,614

 
$
10,715,597


 
(a)
Other homebuilding primarily includes cash and equivalents, capitalized interest, intangibles, deferred tax assets, and other corporate items that are not allocated to the operating segments.
v3.20.2
Debt (Tables)
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Schedule of Senior Notes
Our notes payable are summarized as follows ($000’s omitted):
 
June 30,
2020
 
December 31,
2019
4.250% unsecured senior notes due March 2021 (a)
$
425,954

 
$
425,954

5.500% unsecured senior notes due March 2026 (a)
700,000

 
700,000

5.000% unsecured senior notes due January 2027 (a)
600,000

 
600,000

7.875% unsecured senior notes due June 2032 (a)
300,000

 
300,000

6.375% unsecured senior notes due May 2033 (a)
400,000

 
400,000

6.000% unsecured senior notes due February 2035 (a)
300,000

 
300,000

Net premiums, discounts, and issuance costs (b)
(14,022
)
 
(14,295
)
Total senior notes
2,711,932

 
2,711,659

Other notes payable
58,686

 
53,381

Notes payable
$
2,770,618

 
$
2,765,040

Estimated fair value
$
3,084,190

 
$
3,152,046



(a)
Redeemable prior to maturity; guaranteed on a senior basis by certain wholly-owned subsidiaries.
(b)
The carrying value of senior notes reflects the impact of premiums, discounts, and issuance costs that are amortized to interest cost over the respective terms of the senior notes.
v3.20.2
Fair Value Disclosures Fair Value Disclosures (Tables)
6 Months Ended
Jun. 30, 2020
Fair Value Disclosures [Abstract]  
Fair Value, Assets Measured on Recurring and Nonrecurring Basis
Our assets and liabilities measured or disclosed at fair value are summarized below ($000’s omitted): 
Financial Instrument
 
Fair Value
Hierarchy
 
Fair Value
June 30,
2020
 
December 31,
2019
 
 
 
 
 
 
 
Measured at fair value on a recurring basis:
 
 
 
 
 
 
Residential mortgage loans available-for-sale
 
Level 2
 
$
394,288

 
$
508,967

Interest rate lock commitments
 
Level 2
 
18,123

 
8,202

Forward contracts
 
Level 2
 
(3,388
)
 
(1,073
)
Whole loan commitments
 
Level 2
 
(1,615
)
 
596

 
 
 
 
 
 
 
Measured at fair value on a non-recurring basis:
 
 
 
 
 
 
House and land inventory
 
Level 3
 
$

 
$
9,979

Land held for sale
 
Level 2
 

 
4,193

 
 
 
 
 
 
 
Disclosed at fair value:
 
 
 
 
 
 
Cash, cash equivalents, and restricted cash
 
Level 1
 
$
1,697,796

 
$
1,251,456

Financial Services debt
 
Level 2
 
256,359

 
326,573

Senior notes payable
 
Level 2
 
3,025,505

 
3,098,665

Other notes payable
 
Level 2
 
58,686

 
53,381


v3.20.2
Commitments and Contingencies (Tables)
6 Months Ended
Jun. 30, 2020
Commitments and Contingencies Disclosure [Abstract]  
Summary of Changes in Warranty Liability Changes to warranty liabilities were as follows ($000’s omitted):
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Warranty liabilities, beginning of period
$
88,395

 
$
79,747

 
$
91,389

 
$
79,154

Reserves provided
17,005

 
14,646

 
32,044

 
26,908

Payments
(15,914
)
 
(17,931
)
 
(34,189
)
 
(34,061
)
Other adjustments
(3,208
)
 
4,980

 
(2,966
)
 
9,441

Warranty liabilities, end of period
$
86,278

 
$
81,442

 
$
86,278

 
$
81,442




Summary of Changes in Self-Insurance Liability hanges in these liabilities were as follows ($000's omitted):
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Balance, beginning of period
$
719,172

 
$
729,170

 
$
709,798

 
$
737,013

Reserves provided
20,177

 
20,270

 
38,626

 
37,666

Adjustments to previously recorded reserves
(60,662
)
 
(12,763
)
 
(59,362
)
 
(16,638
)
Payments, net (a)
(38,673
)
 
(20,459
)
 
(49,048
)
 
(41,823
)
Balance, end of period
$
640,014

 
$
716,218

 
$
640,014

 
$
716,218


(a)
Includes net changes in amounts expected to be recovered from our insurance carriers, which are recorded in other assets (see below).

Schedule of Future Minimum Lease Payments Required Under Leases
The future minimum lease payments required under our leases as of June 30, 2020 were as follows ($000's omitted):
Years Ending December 31,
 
2020 (a)
$
10,603

2021
22,651

2022
20,755

2023
19,424

2024
13,755

Thereafter
28,687

Total lease payments (b)
115,875

Less: Interest (c)
17,762

Present value of lease liabilities (d)
$
98,113


(a)
Remaining payments are for the six months ending December 31, 2020.
(b)
Lease payments include options to extend lease terms that are reasonably certain of being exercised. There were $1.7 million of legally binding minimum lease payments for leases signed but not yet commenced at June 30, 2020.
(c)
Our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our discount rate for such leases to determine the present value of lease payments at the lease commencement date.
(d)
The weighted average remaining lease term and weighted average discount rate used in calculating our lease liabilities were 5.6 years and 5.7%, respectively, at June 30, 2020.
v3.20.2
Supplemental Guarantor Information (Tables)
6 Months Ended
Jun. 30, 2020
Supplemental Guarantor Information [Abstract]  
Consolidating Balance Sheet CONDENSED CONSOLIDATING BALANCE SHEET
June 30, 2020
($000’s omitted)
 
Unconsolidated
 
Eliminating
Entries
 
Consolidated
PulteGroup,
Inc.
 
PulteGroup,
Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
ASSETS
 
 
 
 
 
 
 
 
 
Cash and equivalents
$


$
1,591,082


$
67,448


$


$
1,658,530

Restricted cash


32,470


6,796




39,266

Total cash, cash equivalents, and
restricted cash


1,623,552


74,244




1,697,796

House and land inventory


7,443,855


140,884




7,584,739

Land held for sale


29,409






29,409

Residential mortgage loans available-
for-sale




394,288




394,288

Investments in unconsolidated entities


46,548


1,159




47,707

Other assets
4,801


661,239


244,231




910,271

Intangible assets


117,792


55,715




173,507

Deferred tax assets, net
133,228




(12,460
)



120,768

Investments in subsidiaries and
intercompany accounts, net
8,657,717


910,129


9,969,347


(19,537,193
)



$
8,795,746


$
10,832,524


$
10,867,408


$
(19,537,193
)

$
10,958,485

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable, customer deposits,
accrued and other liabilities
$
85,417


$
1,588,835


$
258,859


$


$
1,933,111

Income tax liabilities
146,729








146,729

Financial Services debt




256,359




256,359

Notes payable
2,711,932


58,686






2,770,618

Total liabilities
2,944,078


1,647,521


515,218




5,106,817

Total shareholders’ equity
5,851,668


9,185,003


10,352,190


(19,537,193
)

5,851,668


$
8,795,746


$
10,832,524


$
10,867,408


$
(19,537,193
)

$
10,958,485


CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2019
($000’s omitted)

 
Unconsolidated
 
Eliminating
Entries
 
Consolidated
PulteGroup,
Inc.
 
PulteGroup,
Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
ASSETS
 
 
 
 
 
 
 
 
 
Cash and equivalents
$


$
1,026,743


$
191,170


$


$
1,217,913

Restricted cash


31,328


2,215




33,543

Total cash, cash equivalents, and
restricted cash


1,058,071


193,385




1,251,456

House and land inventory


7,554,662


125,952




7,680,614

Land held for sale


24,009






24,009

Residential mortgage loans available-
for-sale




508,967




508,967

Investments in unconsolidated entities


59,266


500




59,766

Other assets
8,172


688,996


198,518





895,686

Intangible assets


124,992






124,992

Deferred tax assets, net
182,461




(12,354
)



170,107

Investments in subsidiaries and
intercompany accounts, net
8,103,191


1,081,472


9,279,403


(18,464,066
)



$
8,293,824


$
10,591,468


$
10,294,371


$
(18,464,066
)

$
10,715,597

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable, customer deposits,
accrued and other liabilities
$
87,892


$
1,781,893


$
259,926


$


$
2,129,711

Income tax liabilities
36,093








36,093

Financial Services debt




326,573




326,573

Notes payable
2,711,659


53,381






2,765,040

Total liabilities
2,835,644


1,835,274


586,499




5,257,417

Total shareholders’ equity
5,458,180


8,756,194


9,707,872


(18,464,066
)

5,458,180


$
8,293,824


$
10,591,468


$
10,294,371


$
(18,464,066
)

$
10,715,597



Consolidating Statement of Operations and Comprehensive Income (Loss)
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the three months ended June 30, 2020
($000’s omitted)
 
Unconsolidated
 
 
 
Consolidated
PulteGroup, 
Inc.
 
PulteGroup,
Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminating
Entries
 
Revenues:
 
 
 
 
 
 
 
 
 
Homebuilding
 
 
 
 
 
 
 
 
 
Home sale revenues
$

 
$
2,447,552

 
$
24,477

 
$

 
$
2,472,029

Land sale and other revenues

 
8,548

 
18,402

 

 
26,950

 

 
2,456,100

 
42,879

 

 
2,498,979

Financial Services

 

 
94,802

 

 
94,802

 

 
2,456,100

 
137,681

 

 
2,593,781

Homebuilding Cost of Revenues:
 
 
 
 
 
 
 
 
 
Home sale cost of revenues

 
(1,861,026
)
 
(19,183
)
 

 
(1,880,209
)
Land sale and other cost of revenues

 
(4,533
)
 
(15,508
)
 

 
(20,041
)
 

 
(1,865,559
)
 
(34,691
)
 

 
(1,900,250
)
Financial Services expenses

 
(212
)
 
(34,166
)
 

 
(34,378
)
Selling, general, and administrative
expenses

 
(195,375
)
 
(1,483
)
 

 
(196,858
)
Goodwill impairment

 

 

 

 

Other income (expense), net
(2,851
)
 
(10,443
)
 
8,008

 

 
(5,286
)
Intercompany interest
(1,468
)
 

 
1,468

 

 

Income (loss) before income taxes and
equity in income (loss) of
subsidiaries
(4,319
)
 
384,511

 
76,817

 

 
457,009

Income tax (expense) benefit
1,080

 
(90,743
)
 
(18,726
)
 

 
(108,389
)
Income (loss) before equity in income
(loss) of subsidiaries
(3,239
)
 
293,768

 
58,091

 

 
348,620

Equity in income (loss) of subsidiaries
351,859

 
24,505

 
288,995

 
(665,359
)
 

Net income (loss)
348,620

 
318,273

 
347,086

 
(665,359
)
 
348,620

Other comprehensive income
25

 

 

 

 
25

Comprehensive income (loss)
$
348,645

 
$
318,273

 
$
347,086

 
$
(665,359
)
 
$
348,645


CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the three months ended June 30, 2019
($000’s omitted)
 
Unconsolidated
 
 
 
Consolidated
PulteGroup, 
Inc.
 
PulteGroup,
Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminating
Entries
 
Revenues:
 
 
 
 
 
 
 
 
 
Homebuilding
 
 
 
 
 
 
 
 
 
Home sale revenues
$

 
$
2,359,210

 
$
44,349

 
$

 
$
2,403,559

Land sale and other revenues

 
29,459

 
10

 

 
29,469

 

 
2,388,669

 
44,359

 

 
2,433,028

Financial Services

 

 
55,957

 

 
55,957

 

 
2,388,669

 
100,316

 

 
2,488,985

Homebuilding Cost of Revenues:
 
 
 
 
 
 
 
 
 
Home sale cost of revenues

 
(1,814,701
)
 
(33,454
)
 

 
(1,848,155
)
Land sale and other cost of revenues

 
(26,214
)
 

 

 
(26,214
)
 

 
(1,840,915
)
 
(33,454
)
 

 
(1,874,369
)
Financial Services expenses

 
(125
)
 
(30,776
)
 

 
(30,901
)
Selling, general, and administrative
expenses

 
(245,272
)
 
(14,168
)
 

 
(259,440
)
Other income (expense), net
(4,966
)
 
(9,276
)
 
10,743

 

 
(3,499
)
Intercompany interest
(2,254
)
 

 
2,254

 

 

Income (loss) before income taxes and
equity in income (loss) of
subsidiaries
(7,220
)
 
293,081

 
34,915

 

 
320,776

Income tax (expense) benefit
1,733

 
(72,598
)
 
(8,870
)
 

 
(79,735
)
Income (loss) before equity in income
(loss) of subsidiaries
(5,487
)
 
220,483

 
26,045

 

 
241,041

Equity in income (loss) of subsidiaries
246,528

 
24,504

 
162,404

 
(433,436
)
 

Net income (loss)
241,041

 
244,987

 
188,449

 
(433,436
)
 
241,041

Other comprehensive income
25

 

 

 

 
25

Comprehensive income (loss)
$
241,066

 
$
244,987

 
$
188,449

 
$
(433,436
)
 
$
241,066







CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the six months ended June 30, 2020
($000’s omitted)
 
Unconsolidated
 
 
 
Consolidated
PulteGroup, 
Inc.
 
PulteGroup,
Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminating
Entries
 
Revenues:
 
 
 
 
 
 
 
 
 
Homebuilding
 
 
 
 
 
 
 
 
 
Home sale revenues
$

 
$
4,645,116

 
$
48,416

 
$

 
$
4,693,532

Land sale and other revenues

 
10,998

 
34,879

 

 
45,877

 

 
4,656,114

 
83,295

 

 
4,739,409

Financial Services

 

 
149,352

 

 
149,352

 

 
4,656,114

 
232,647

 

 
4,888,761

Homebuilding Cost of Revenues:
 
 
 
 
 
 
 
 
 
Home sale cost of revenues

 
(3,536,373
)
 
(38,701
)
 

 
(3,575,074
)
Land sale and other cost of revenues

 
(5,386
)
 
(29,669
)
 

 
(35,055
)
 

 
(3,541,759
)
 
(68,370
)
 

 
(3,610,129
)
Financial Services expenses

 
(355
)
 
(68,972
)
 

 
(69,327
)
Selling, general, and administrative
expenses

 
(451,010
)
 
(9,517
)
 

 
(460,527
)
Goodwill impairment

 

 
(20,190
)
 

 
(20,190
)
Other income (expense), net
(3,544
)
 
(17,059
)
 
12,793

 

 
(7,810
)
Intercompany interest
(3,073
)
 

 
3,073

 

 

Income (loss) before income taxes and
equity in income (loss) of
subsidiaries
(6,617
)
 
645,931

 
81,464

 

 
720,778

Income tax (expense) benefit
1,654

 
(150,203
)
 
(19,898
)
 

 
(168,447
)
Income (loss) before equity in income
(loss) of subsidiaries
(4,963
)
 
495,728

 
61,566

 

 
552,331

Equity in income (loss) of subsidiaries
557,294

 
42,702

 
484,616

 
(1,084,612
)
 

Net income (loss)
552,331

 
538,430

 
546,182

 
(1,084,612
)
 
552,331

Other comprehensive income
50

 

 

 

 
50

Comprehensive income (loss)
$
552,381

 
$
538,430

 
$
546,182

 
$
(1,084,612
)
 
$
552,381


















Consolidating Statement Of Cash Flows
CONSOLIDATING STATEMENT OF CASH FLOWS
For the six months ended June 30, 2020
($000’s omitted)
 
Unconsolidated
 
 
 
Consolidated
PulteGroup, Inc.
 
PulteGroup,
Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminating
Entries
 
Net cash provided by (used in)
operating activities
$
162,014

 
$
495,413

 
$
150,445

 
$

 
$
807,872

Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
Capital expenditures

 
(32,129
)
 
(4,617
)
 

 
(36,746
)
Investments in unconsolidated entities

 
13,619

 
(664
)
 

 
12,955

Other investing activities, net

 
87

 
1,510

 

 
1,597

Business acquisition

 

 
(83,256
)
 

 
(83,256
)
Net cash provided by (used in)
investing activities

 
(18,423
)
 
(87,027
)
 

 
(105,450
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
Financial Services borrowing (repayments), net

 

 
(70,214
)
 

 
(70,214
)
Repayments of debt

 
(10,106
)
 

 

 
(10,106
)
Borrowings under revolving credit facility
700,000

 

 

 

 
700,000

Repayments under revolving credit facility
(700,000
)
 

 

 

 
(700,000
)
Stock option exercises
99

 

 

 

 
99

Share repurchases
(95,676
)
 

 

 

 
(95,676
)
Cash paid for shares withheld for taxes
(14,853
)
 

 

 

 
(14,853
)
Dividends paid
(65,332
)
 

 

 

 
(65,332
)
Intercompany activities, net
13,748

 
98,597

 
(112,345
)
 

 

Net cash provided by (used in)
financing activities
(162,014
)
 
88,491

 
(182,559
)
 

 
(256,082
)
Net increase (decrease) in cash, cash equivalents, and restricted cash

 
565,481

 
(119,141
)
 

 
446,340

Cash, cash equivalents, and restricted cash
at beginning of year

 
1,058,071

 
193,385

 

 
1,251,456

Cash, cash equivalents, and restricted cash
at end of year
$

 
$
1,623,552

 
$
74,244

 
$

 
$
1,697,796


CONSOLIDATING STATEMENT OF CASH FLOWS
For the six months ended June 30, 2019
($000’s omitted)
 
Unconsolidated
 
 
 
Consolidated
PulteGroup, Inc.
 
PulteGroup,
Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminating
Entries
 
Net cash provided by (used in)
operating activities
$
130,811

 
$
34,461

 
$
140,435

 
$

 
$
305,707

Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
Capital expenditures

 
(24,707
)
 
(4,868
)
 

 
(29,575
)
Investments in unconsolidated entities

 
(4,183
)
 
(481
)
 

 
(4,664
)
Other investing activities, net

 
3,241

 
1,351

 

 
4,592

Business acquisition

 
(163,724
)
 

 

 
(163,724
)
Net cash provided by (used in)
investing activities

 
(189,373
)
 
(3,998
)
 

 
(193,371
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
Financial Services borrowings (repayments), net

 

 
(114,226
)
 

 
(114,226
)
Repayments of debt
(280,175
)
 
(16,591
)
 
(537
)
 

 
(297,303
)
Stock option exercises
5,208

 

 

 

 
5,208

Share repurchases
(108,471
)
 

 

 

 
(108,471
)
Cash paid for shares withheld for taxes
(10,350
)
 

 

 

 
(10,350
)
Dividends paid
(61,620
)
 

 

 

 
(61,620
)
Intercompany activities, net
324,597

 
(149,715
)
 
(174,882
)
 

 

Net cash provided by (used in)
financing activities
(130,811
)
 
(166,306
)
 
(289,645
)
 

 
(586,762
)
Net increase (decrease) in cash, cash equivalents, and restricted cash

 
(321,218
)
 
(153,208
)
 

 
(474,426
)
Cash, cash equivalents, and restricted cash
at beginning of year

 
929,367

 
204,333

 

 
1,133,700

Cash, cash equivalents, and restricted cash
at end of year
$

 
$
608,149

 
$
51,125

 
$

 
$
659,274


v3.20.2
Basis of Presentation (Narrative) (Details) - USD ($)
$ in Thousands
1 Months Ended 3 Months Ended 6 Months Ended 12 Months Ended
Jan. 31, 2020
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2022
Dec. 31, 2021
Jan. 01, 2020
Dec. 31, 2019
Finite-Lived Intangible Assets [Line Items]                  
Assets In-Scope Under Accounting Standards Codification 326   $ 198,000   $ 198,000          
Payments for business acquisitions       (83,256) $ (163,724)        
Customer deposits   335,040   335,040         $ 294,427
Contract asset insurance renewals   36,000   36,000         35,100
Residential mortgage loans available-for-sale fair value   394,288   394,288         508,967
Residential mortgage loans available-for-sale aggregate outstanding principal balance   378,000   378,000         494,100
Changes in fair value, gain (loss)   (3,600) $ (200) (1,400) (1,300)        
Net gains from the sale of mortgages   66,300 30,400 $ 97,200 54,300        
Variability in future cash flows of derivative instruments in days       60 days          
Cumulative effect of accounting change       $ (735)          
Goodwill impairment   0 $ 0 (20,190) $ 0        
Severance expense   10,300              
Retained Earnings                  
Finite-Lived Intangible Assets [Line Items]                  
Cumulative Effect of New Accounting Principle in Period of Adoption               $ (700)  
Cumulative effect of accounting change       (735)          
Interest rate lock commitments                  
Finite-Lived Intangible Assets [Line Items]                  
Derivative, notional amount   454,400   454,400         255,300
Forward contracts                  
Finite-Lived Intangible Assets [Line Items]                  
Derivative, notional amount   551,000   551,000         518,200
Whole loan commitments                  
Finite-Lived Intangible Assets [Line Items]                  
Derivative, notional amount   $ 225,100   225,100         $ 200,700
Innovative Construction Group [Member]                  
Finite-Lived Intangible Assets [Line Items]                  
Payments for business acquisitions $ (83,300)     (104,000)          
Goodwill 48,700                
Goodwill impairment       $ (20,200)          
Innovative Construction Group [Member] | Customer Relationships [Member]                  
Finite-Lived Intangible Assets [Line Items]                  
Intangible asset acquired $ 27,800                
Intangible asset, amortization period 7 years                
Innovative Construction Group [Member] | Trade Name                  
Finite-Lived Intangible Assets [Line Items]                  
Intangible asset acquired $ 1,800                
Intangible asset, amortization period 5 years                
Forecast [Member] | Innovative Construction Group [Member]                  
Finite-Lived Intangible Assets [Line Items]                  
Payments for business acquisitions           $ (10,400) $ (10,400)    
v3.20.2
Basis of Presentation (Other Expense (Income), Net) (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Accounting Policies [Abstract]        
Write-offs of deposits and pre-acquisition costs $ (2,311) $ (2,516) $ (6,643) $ (5,433)
Amortization of intangible assets (5,045) (3,550) (9,602) (7,000)
Loss on debt retirement (see Note 4) 0 (4,843) 0 (4,843)
Interest income 1,326 4,471 5,133 9,420
Interest expense (3,000) (146) (3,796) (290)
Equity in earnings of unconsolidated entities 334 129 902 165
Miscellaneous, net 3,410 2,956 6,196 3,508
Total other expense, net $ (5,286) $ (3,499) $ (7,810) $ (4,473)
v3.20.2
Basis of Presentation (Earnings per share) (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Numerator:        
Net income $ 348,620 $ 241,041 $ 552,331 $ 407,798
Less: earnings distributed to participating securities (265) (305) (538) (613)
Less: undistributed earnings allocated to participating securities (2,602) (2,089) (4,358) (3,588)
Numerator for basic earnings per share 345,753 238,647 547,435 403,597
Add back: undistributed earnings allocated to participating securities 2,602 2,089 4,358 3,588
Less: undistributed earnings reallocated to participating securities (2,595) (2,082) (4,342) (3,576)
Numerator for diluted earnings per share $ 345,760 $ 238,654 $ 547,451 $ 403,609
Denominator:        
Basic shares outstanding (shares) 268,324 276,652 269,167 277,142
Effect of dilutive securities (shares) 701 932 960 967
Diluted shares outstanding (shares) 269,025 277,584 270,127 278,109
Earnings per share:        
Basic earnings (usd per share) $ 1.29 $ 0.86 $ 2.03 $ 1.46
Diluted earnings (usd per share) $ 1.29 $ 0.86 $ 2.03 $ 1.45
v3.20.2
Basis of Presentation (Fair Value Of the Company's Derivative Instruments) (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]    
Other Assets $ 20,360 $ 9,530
Accrued and Other Liabilities 7,240 1,805
Interest rate lock commitments    
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]    
Other Assets 19,934 8,351
Accrued and Other Liabilities 1,811 149
Forward contracts    
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]    
Other Assets 236 299
Accrued and Other Liabilities 3,624 1,372
Whole loan commitments    
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]    
Other Assets 190 880
Accrued and Other Liabilities $ 1,805 $ 284
v3.20.2
Basis of Presentation Payments to Acquire Businesses, Net of Cash Acquired (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Business Acquisitions [Abstract]    
Payments for business acquisitions $ (83,256) $ (163,724)
v3.20.2
Inventory (Major Components Of Inventory) (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Inventory Disclosure [Abstract]    
Homes under construction $ 3,125,369 $ 2,899,016
Land under development 4,076,492 4,347,107
Raw land 382,878 434,491
Total Inventory $ 7,584,739 $ 7,680,614
v3.20.2
Inventory (Information Related To Interest Capitalized Into Homebuilding Inventory) (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Real Estate Inventory, Capitalized Interest Costs [Roll Forward]        
Interest in inventory, beginning of period $ 213,425 $ 235,313 $ 210,383 $ 227,495
Interest capitalized 39,686 41,650 79,599 84,031
Interest expensed (45,169) (42,254) (82,040) (76,817)
Interest in inventory, end of period $ 207,942 $ 234,709 $ 207,942 $ 234,709
v3.20.2
Inventory (Summary of Interests in Land Option Agreements) (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Variable Interest Entity [Line Items]    
Deposits and Pre-acquisition Costs $ 301,404 $ 299,437
Remaining Purchase Price 3,532,626 3,221,962
Land options with VIEs    
Variable Interest Entity [Line Items]    
Deposits and Pre-acquisition Costs 118,138 123,775
Remaining Purchase Price 1,451,952 1,466,585
Other land options    
Variable Interest Entity [Line Items]    
Deposits and Pre-acquisition Costs 183,266 175,662
Remaining Purchase Price $ 2,080,674 $ 1,755,377
v3.20.2
Inventory Inventory (Summary of Land-related Charges) (Details) (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Inventory Disclosure [Abstract]        
Land impairments $ 0 $ 88 $ 5,386 $ 88
Net realizable value adjustments (NRV) - land held for sale 142 1,227 152 1,289
Write-offs of deposits and pre-acquisition costs 2,311 2,516 6,643 5,433
Total land-related charges $ 2,453 $ 3,831 $ 12,181 $ 6,810
v3.20.2
Inventory - Fair Value Unobservable Inputs (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Inventory Disclosure [Abstract]        
Impairment Charges $ 0 $ 88 $ 5,386 $ 88
v3.20.2
Segment Information Narrative (Details)
6 Months Ended
Jun. 30, 2020
segment
Segment Reporting [Abstract]  
Number of reportable segments 6
v3.20.2
Segment Information (Operating Data By Segment) (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Revenues:        
Total revenues $ 2,593,781 $ 2,488,985 $ 4,888,761 $ 4,485,679
Income before Income Taxes:        
Income before income taxes 457,009 320,776 720,778 537,479
Goodwill impairment 0 0 20,190 0
Adjustments to previously recorded reserves (60,662) (12,763) (59,362) (16,638)
Severance expense 10,300      
Northeast        
Income before Income Taxes:        
Income before income taxes 18,944 26,212 37,553 34,140
Southeast        
Income before Income Taxes:        
Income before income taxes 72,780 42,499 127,524 80,355
Florida        
Income before Income Taxes:        
Income before income taxes 97,263 80,066 152,596 129,662
Midwest        
Income before Income Taxes:        
Income before income taxes 43,607 42,962 75,069 69,120
Texas        
Income before Income Taxes:        
Income before income taxes 59,909 49,144 113,504 80,115
West        
Income before Income Taxes:        
Income before income taxes 90,164 94,443 157,419 184,625
Other homebuilding        
Income before Income Taxes:        
Income before income taxes 13,918 (39,628) (22,861) (78,024)
Home sales        
Income before Income Taxes:        
Income before income taxes 396,585 295,698 640,804 499,993
Financial Services        
Income before Income Taxes:        
Income before income taxes 60,424 25,078 79,974 37,486
Total Homebuilding        
Revenues:        
Revenues 2,498,979 2,433,028 4,739,409 4,385,860
Total Homebuilding | Northeast        
Revenues:        
Revenues 141,478 200,237 303,912 310,729
Total Homebuilding | Southeast        
Revenues:        
Revenues 457,863 409,121 840,257 784,538
Total Homebuilding | Florida        
Revenues:        
Revenues 581,520 535,153 1,088,209 931,597
Total Homebuilding | Midwest        
Revenues:        
Revenues 339,680 350,584 631,849 644,174
Total Homebuilding | Texas        
Revenues:        
Revenues 365,348 342,886 710,086 611,889
Total Homebuilding | West        
Revenues:        
Revenues 613,090 595,047 1,165,096 1,102,933
Financial Services        
Revenues:        
Revenues $ 94,802 $ 55,957 149,352 $ 99,819
Innovative Construction Group [Member]        
Income before Income Taxes:        
Goodwill impairment     $ 20,200  
v3.20.2
Segment Information (Land-Related Charges by Segment) (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Restructuring Cost and Reserve [Line Items]        
Land-related charges $ 2,453 $ 3,831 $ 12,181 $ 6,810
Northeast        
Restructuring Cost and Reserve [Line Items]        
Land-related charges 92 130 4,845 454
Southeast        
Restructuring Cost and Reserve [Line Items]        
Land-related charges 929 2,015 1,676 2,587
Florida        
Restructuring Cost and Reserve [Line Items]        
Land-related charges 459 765 981 1,246
Midwest        
Restructuring Cost and Reserve [Line Items]        
Land-related charges 499 203 1,275 1,306
Texas        
Restructuring Cost and Reserve [Line Items]        
Land-related charges 329 414 986 482
West        
Restructuring Cost and Reserve [Line Items]        
Land-related charges 145 216 1,674 647
Other homebuilding        
Restructuring Cost and Reserve [Line Items]        
Land-related charges $ 0 $ 88 $ 744 $ 88
v3.20.2
Segment Information (Total Assets And Inventory By Reportable Segment) (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Segment Reporting Information    
Homes under construction $ 3,125,369 $ 2,899,016
Land under development 4,076,492 4,347,107
Raw land 382,878 434,491
Total Inventory 7,584,739 7,680,614
Total Assets 10,958,485 10,715,597
Northeast    
Segment Reporting Information    
Homes under construction 393,329 345,644
Land under development 215,468 242,666
Raw land 23,910 25,098
Total Inventory 632,707 613,408
Total Assets 723,207 698,661
Southeast    
Segment Reporting Information    
Homes under construction 429,024 430,008
Land under development 674,337 724,258
Raw land 60,516 72,804
Total Inventory 1,163,877 1,227,070
Total Assets 1,317,066 1,354,086
Florida    
Segment Reporting Information    
Homes under construction 567,963 539,895
Land under development 885,307 894,716
Raw land 92,112 99,228
Total Inventory 1,545,382 1,533,839
Total Assets 1,838,880 1,700,198
Midwest    
Segment Reporting Information    
Homes under construction 372,744 315,822
Land under development 412,438 464,733
Raw land 16,477 31,881
Total Inventory 801,659 812,436
Total Assets 908,805 886,889
Texas    
Segment Reporting Information    
Homes under construction 311,896 343,230
Land under development 448,418 447,707
Raw land 69,927 84,926
Total Inventory 830,241 875,863
Total Assets 909,554 949,236
West    
Segment Reporting Information    
Homes under construction 1,004,927 881,551
Land under development 1,214,046 1,289,255
Raw land 106,515 105,606
Total Inventory 2,325,488 2,276,412
Total Assets 2,681,671 2,538,803
Other homebuilding    
Segment Reporting Information    
Homes under construction 45,486 42,866
Land under development 226,478 283,772
Raw land 13,421 14,948
Total Inventory 285,385 341,586
Total Assets 2,041,189 1,953,440
Home sales    
Segment Reporting Information    
Homes under construction 3,125,369 2,899,016
Land under development 4,076,492 4,347,107
Raw land 382,878 434,491
Total Inventory 7,584,739 7,680,614
Total Assets 10,420,372 10,081,313
Financial Services    
Segment Reporting Information    
Homes under construction 0 0
Land under development 0 0
Raw land 0 0
Total Inventory 0 0
Total Assets $ 538,113 $ 634,284
v3.20.2
Debt (Summary of Senior Notes) (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Debt Instrument [Line Items]    
Net premiums, discounts, and issuance costs (b) $ (14,022) $ (14,295)
Total senior notes 2,711,932 2,711,659
Other notes payable 58,686 53,381
Notes payable (2,770,618) (2,765,040)
Estimated fair value $ 3,084,190 $ 3,152,046
Senior Notes | 4.250% unsecured senior notes due March 2021    
Debt Instrument [Line Items]    
Stated interest rate 4.25% 4.25%
Face amount $ 425,954 $ 425,954
Senior Notes | 5.500% unsecured senior notes due March 2026    
Debt Instrument [Line Items]    
Stated interest rate 5.50% 5.50%
Face amount $ 700,000 $ 700,000
Senior Notes | 5.000% unsecured senior notes due January 2027    
Debt Instrument [Line Items]    
Stated interest rate 5.00% 5.00%
Face amount $ 600,000 $ 600,000
Senior Notes | 7.875% unsecured senior notes due June 2032    
Debt Instrument [Line Items]    
Stated interest rate 7.875% 7.875%
Face amount $ 300,000 $ 300,000
Senior Notes | 6.375% unsecured senior notes due May 2033    
Debt Instrument [Line Items]    
Stated interest rate 6.375% 6.375%
Face amount $ 400,000 $ 400,000
Senior Notes | 6.000% unsecured senior notes due February 2035    
Debt Instrument [Line Items]    
Stated interest rate 6.00% 6.00%
Face amount $ 300,000 $ 300,000
v3.20.2
Debt (Narrative) (Details) - USD ($)
1 Months Ended 6 Months Ended
Mar. 31, 2020
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Debt Instrument [Line Items]        
Other notes payable   $ 58,686,000   $ 53,381,000
Debt instrument term   3 years    
Line of Credit Facility, Current Borrowing Capacity   $ 1,000,000,000.0    
Maximum borrowing capacity   1,500,000,000    
Borrowings under revolving credit facility   700,000,000 $ 0  
Repayments under revolving credit facility   700,000,000 $ 0  
Letters of credit outstanding   244,800,000   262,800,000
Line of credit facility, remaining borrowing capacity   755,200,000   737,200,000
Long-term line of credit   256,359,000   326,573,000
Revolving Credit Facility Accordion Feature        
Debt Instrument [Line Items]        
Maximum additional issuance   500,000,000.0    
Revolving Credit Facility        
Debt Instrument [Line Items]        
Borrowings under revolving credit facility $ 700,000,000.0      
Line of credit, current       0
Line of Credit | Financial Services        
Debt Instrument [Line Items]        
Long-term line of credit   256,400,000   $ 326,600,000
Line of Credit | Amendment Effective September 24, 2018 through and including December 25, 2018 | Financial Services        
Debt Instrument [Line Items]        
Maximum borrowing capacity   $ 270,000,000.0    
Maximum        
Debt Instrument [Line Items]        
Stated interest rate   8.00%    
v3.20.2
Shareholders' Equity (Details) - USD ($)
shares in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
May 31, 2019
Class of Stock [Line Items]          
Dividends $ 32,447,000 $ 30,633,000 $ 65,056,000 $ 61,463,000  
Payments for repurchase of common stock     $ 95,676,000 $ 108,471,000  
Increase in share repurchase authorization         $ 500,000,000.0
Share repurchase plan          
Class of Stock [Line Items]          
Share repurchases (shares)     2.8 3.5  
Payments for repurchase of common stock     $ 95,700,000 $ 108,500,000  
Remaining value of stock repurchase programs authorization $ 429,900,000   429,900,000    
Shares withheld to pay taxes          
Class of Stock [Line Items]          
Payments for repurchase of common stock     $ 14,900,000 $ 10,400,000  
v3.20.2
Income Taxes (Details) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Income Tax Disclosure [Abstract]          
Effective income tax 23.70% 24.90% 23.40% 24.10%  
Deferred tax assets, net $ 120.8   $ 120.8   $ 170.1
Gross unrecognized tax benefits 45.1   45.1   40.3
Accrued interest and penalties on unrecognized tax benefits 7.0   7.0   $ 6.5
Possible decrease in unrecognized tax benefits $ 24.2   $ 24.2    
v3.20.2
Fair Value Disclosures (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Disclosed at fair value:    
Other notes payable $ 58,686 $ 53,381
Level 2    
Disclosed at fair value:    
Financial Services debt 256,359 326,573
Senior notes payable 3,025,505 3,098,665
Level 1    
Disclosed at fair value:    
Cash, cash equivalents, and restricted cash 1,697,796 1,251,456
Fair Value, Measurements, Recurring | Residential mortgage loans available-for-sale | Level 2    
Measured at fair value on a recurring basis:    
Assets, fair value 394,288 508,967
Measured at fair value on a non-recurring basis:    
Assets, fair value 394,288 508,967
Fair Value, Measurements, Recurring | Interest rate lock commitments | Level 2    
Measured at fair value on a recurring basis:    
Assets, fair value 18,123 8,202
Measured at fair value on a non-recurring basis:    
Assets, fair value 18,123 8,202
Fair Value, Measurements, Recurring | Forward contracts | Level 2    
Measured at fair value on a recurring basis:    
Liabilities, fair value (3,388) (1,073)
Fair Value, Measurements, Recurring | Whole loan commitments | Level 2    
Measured at fair value on a recurring basis:    
Liabilities, fair value (1,615) 596
Fair Value, Measurements, Nonrecurring | Land held for sale | Level 2    
Measured at fair value on a recurring basis:    
Assets, fair value 0 4,193
Measured at fair value on a non-recurring basis:    
Assets, fair value 0 4,193
Fair Value, Measurements, Nonrecurring | House and land inventory | Level 3    
Measured at fair value on a recurring basis:    
Assets, fair value 0 9,979
Measured at fair value on a non-recurring basis:    
Assets, fair value $ 0 $ 9,979
v3.20.2
Fair Value Disclosures - Narrative (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Fair Value Disclosures [Abstract]    
Carrying value of senior notes $ 2,711,932 $ 2,711,659
v3.20.2
Commitments and Contingencies (Narrative) (Details)
$ in Thousands
3 Months Ended 6 Months Ended
Dec. 17, 2018
USD ($)
party
Jun. 30, 2020
USD ($)
claim
Jun. 30, 2019
USD ($)
Jun. 30, 2020
USD ($)
claim
Jun. 30, 2019
USD ($)
Mar. 31, 2020
USD ($)
Dec. 31, 2019
USD ($)
Mar. 31, 2019
USD ($)
Dec. 31, 2018
USD ($)
Loss Contingencies [Line Items]                  
Loss contingency accrual   $ 25,300   $ 25,300     $ 25,200    
Letters of credit outstanding   244,800   244,800     262,800    
Surety bonds outstanding   $ 1,300,000   $ 1,300,000     1,400,000    
Maximum product warranty in years       10 years          
Number of individual claims managed | claim   1,000   1,000          
Self-insurance liabilities   $ 640,014 $ 716,218 $ 640,014 $ 716,218 $ 719,172 $ 709,798 $ 729,170 $ 737,013
Incurred but not reported percentage of liability reserves   69.00%   69.00%     68.00%    
Adjustments to previously recorded reserves   $ (60,662) (12,763) $ (59,362) (16,638)        
Write-off of insurance receivables     12,600   24,200        
ROU assets   76,700   76,700     $ 70,000    
Operating lease liabilities   98,113   98,113     91,400    
Additional ROU assets under operating leases   3,400 1,000 13,000 8,800        
Payments on lease liabilities   4,200 5,700 10,100 11,500        
Total lease expense   8,800 9,100 18,700 17,900        
Variable lease costs   1,500 1,600 3,400 3,200        
Short-term lease costs   1,800 $ 2,600 4,000 $ 4,800        
Other Assets                  
Loss Contingencies [Line Items]                  
Recorded insurance receivables   $ 82,400   $ 82,400     $ 118,400    
Lehman Complaint | CTX Mortgage Company LLC                  
Loss Contingencies [Line Items]                  
Number of mortgage originators involved in bankruptcy claim | party 100                
Damages sought, value $ 261,000                
v3.20.2
Commitments and Contingencies (Changes To Warranty Liability) (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Movement in Standard Product Warranty Accrual [Roll Forward]        
Warranty liabilities, beginning of period $ 88,395 $ 79,747 $ 91,389 $ 79,154
Reserves provided 17,005 14,646 32,044 26,908
Payments (15,914) (17,931) (34,189) (34,061)
Other adjustments (3,208) 4,980 (2,966) 9,441
Warranty liabilities, end of period $ 86,278 $ 81,442 $ 86,278 $ 81,442
v3.20.2
Commitments and Contingencies (Changes in Self-insurance Liability) (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Changes in Self-insurance Liability [Roll Forward]        
Balance, beginning of period $ 719,172 $ 729,170 $ 709,798 $ 737,013
Reserves provided 20,177 20,270 38,626 37,666
Adjustments to previously recorded reserves (60,662) (12,763) (59,362) (16,638)
Payments, net (38,673) (20,459) (49,048) (41,823)
Balance, end of period $ 640,014 $ 716,218 $ 640,014 $ 716,218
v3.20.2
Commitments and Contingencies (Future Minimum Lease Payments Required Under Leases) (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]    
Remainder of 2019 $ 10,603  
2020 22,651  
2021 20,755  
2022 19,424  
2023 13,755  
Thereafter 28,687  
Total lease payments 115,875  
Less: Interest 17,762  
Present value of lease liabilities 98,113 $ 91,400
Legally binding minimum lease payments for leases signed but not yet commenced $ 1,700  
Weighted average remaining lease term 5 years 7 months 6 days  
Weighted average discount rate 5.70%  
v3.20.2
Commitments and Contingencies Increase (Decrease) in Liability for Claims and Claims Adjustment Expense Reserve (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Increase (Decrease) in Liability for Claims and Claims Adjustment Expense Reserve [Abstract]        
Adjustments to previously recorded reserves $ (60,662) $ (12,763) $ (59,362) $ (16,638)
v3.20.2
Supplemental Guarantor Information (Balance Sheet) (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Mar. 31, 2020
Dec. 31, 2019
Jun. 30, 2019
Mar. 31, 2019
Dec. 31, 2018
ASSETS            
Cash and equivalents $ 1,658,530   $ 1,217,913      
Restricted cash 39,266   33,543      
Total cash, cash equivalents, and restricted cash 1,697,796   1,251,456 $ 659,274   $ 1,133,700
House and land inventory 7,584,739   7,680,614      
Land held for sale 29,409   24,009      
Residential mortgage loans available-for-sale 394,288   508,967      
Investments in unconsolidated entities 47,707   59,766      
Other assets 910,271   895,686      
Intangible assets 173,507   124,992      
Deferred tax assets, net 120,768   170,107      
Investments in subsidiaries and intercompany accounts, net 0   0      
Total assets 10,958,485   10,715,597      
Liabilities:            
Accounts payable, customer deposits, accrued and other liabilities 1,933,111   2,129,711      
Income tax liabilities 146,729   36,093      
Financial Services debt 256,359   326,573      
Notes payable 2,770,618   2,765,040      
Total liabilities 5,106,817   5,257,417      
Total shareholders’ equity 5,851,668 $ 5,530,391 5,458,180 5,069,807 $ 4,933,439 4,817,782
Total liabilities and shareholders' equity 10,958,485   10,715,597      
Eliminating Entries            
ASSETS            
Cash and equivalents 0   0      
Restricted cash 0   0      
Total cash, cash equivalents, and restricted cash 0   0 0   0
House and land inventory 0   0      
Land held for sale 0   0      
Residential mortgage loans available-for-sale 0   0      
Investments in unconsolidated entities 0   0      
Other assets 0        
Intangible assets 0   0      
Deferred tax assets, net 0   0      
Investments in subsidiaries and intercompany accounts, net (19,537,193)   (18,464,066)      
Total assets (19,537,193)   (18,464,066)      
Liabilities:            
Accounts payable, customer deposits, accrued and other liabilities 0   0      
Income tax liabilities 0   0      
Financial Services debt 0   0      
Notes payable 0   0      
Total liabilities 0   0      
Total shareholders’ equity (19,537,193)   (18,464,066)      
Total liabilities and shareholders' equity (19,537,193)   (18,464,066)      
PulteGroup, Inc.            
ASSETS            
Cash and equivalents 0   0      
Restricted cash 0   0      
Total cash, cash equivalents, and restricted cash 0   0 0   0
House and land inventory 0   0      
Land held for sale 0   0      
Residential mortgage loans available-for-sale 0   0      
Investments in unconsolidated entities 0   0      
Other assets 4,801   8,172      
Intangible assets 0   0      
Deferred tax assets, net 133,228   182,461      
Investments in subsidiaries and intercompany accounts, net 8,657,717   8,103,191      
Total assets 8,795,746   8,293,824      
Liabilities:            
Accounts payable, customer deposits, accrued and other liabilities 85,417   87,892      
Income tax liabilities 146,729   36,093      
Financial Services debt 0   0      
Notes payable 2,711,932   2,711,659      
Total liabilities 2,944,078   2,835,644      
Total shareholders’ equity 5,851,668   5,458,180      
Total liabilities and shareholders' equity 8,795,746   8,293,824      
Guarantor Subsidiaries            
ASSETS            
Cash and equivalents 1,591,082   1,026,743      
Restricted cash 32,470   31,328      
Total cash, cash equivalents, and restricted cash 1,623,552   1,058,071 608,149   929,367
House and land inventory 7,443,855   7,554,662      
Land held for sale 29,409   24,009      
Residential mortgage loans available-for-sale 0   0      
Investments in unconsolidated entities 46,548   59,266      
Other assets 661,239   688,996      
Intangible assets 117,792   124,992      
Deferred tax assets, net 0   0      
Investments in subsidiaries and intercompany accounts, net 910,129   1,081,472      
Total assets 10,832,524   10,591,468      
Liabilities:            
Accounts payable, customer deposits, accrued and other liabilities 1,588,835   1,781,893      
Income tax liabilities 0   0      
Financial Services debt 0   0      
Notes payable 58,686   53,381      
Total liabilities 1,647,521   1,835,274      
Total shareholders’ equity 9,185,003   8,756,194      
Total liabilities and shareholders' equity 10,832,524   10,591,468      
Non-Guarantor Subsidiaries            
ASSETS            
Cash and equivalents 67,448   191,170      
Restricted cash 6,796   2,215      
Total cash, cash equivalents, and restricted cash 74,244   193,385 $ 51,125   $ 204,333
House and land inventory 140,884   125,952      
Land held for sale 0   0      
Residential mortgage loans available-for-sale 394,288   508,967      
Investments in unconsolidated entities 1,159   500      
Other assets 244,231   198,518      
Intangible assets 55,715   0      
Deferred tax assets, net (12,460)   (12,354)      
Investments in subsidiaries and intercompany accounts, net 9,969,347   9,279,403      
Total assets 10,867,408   10,294,371      
Liabilities:            
Accounts payable, customer deposits, accrued and other liabilities 258,859   259,926      
Income tax liabilities 0   0      
Financial Services debt 256,359   326,573      
Notes payable 0   0      
Total liabilities 515,218   586,499      
Total shareholders’ equity 10,352,190   9,707,872      
Total liabilities and shareholders' equity $ 10,867,408   $ 10,294,371      
v3.20.2
Supplemental Guarantor Information (Statement of Operations and Comprehensive Income (Loss)) (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Homebuilding        
Total revenues $ 2,593,781 $ 2,488,985 $ 4,888,761 $ 4,485,679
Homebuilding Cost of Revenues:        
Selling, general, and administrative expenses (196,858) (259,440) (460,527) (512,166)
Goodwill impairment 0 0 (20,190) 0
Other income (expense), net (5,286) (3,499) (7,810) (4,473)
Intercompany interest 0 0 0 0
Income (loss) before income taxes and equity in income (loss) of subsidiaries 457,009 320,776 720,778 537,479
Income tax (expense) benefit (108,389) (79,735) (168,447) (129,681)
Income (loss) before equity in income (loss) of subsidiaries 348,620 241,041 552,331 407,798
Equity in income (loss) of subsidiaries 0 0 0 0
Net income 348,620 241,041 552,331 407,798
Other comprehensive income 25 25 50 50
Comprehensive income (loss) 348,645 241,066 552,381 407,848
Total Homebuilding        
Homebuilding        
Revenues 2,498,979 2,433,028 4,739,409 4,385,860
Homebuilding Cost of Revenues:        
Financial services expenses (1,900,250) (1,874,369) (3,610,129) (3,369,211)
Home sales        
Homebuilding        
Revenues 2,472,029 2,403,559 4,693,532 4,353,415
Homebuilding Cost of Revenues:        
Cost of revenues (1,880,209) (1,848,155) (3,575,074) (3,340,946)
Land sale and other        
Homebuilding        
Revenues 26,950 29,469 45,877 32,445
Homebuilding Cost of Revenues:        
Cost of revenues (20,041) (26,214) (35,055) (28,265)
Financial Services        
Homebuilding        
Revenues 94,802 55,957 149,352 99,819
Homebuilding Cost of Revenues:        
Financial services expenses (34,378) (30,901) (69,327) (62,350)
Eliminating Entries        
Homebuilding        
Total revenues 0 0 0 0
Homebuilding Cost of Revenues:        
Selling, general, and administrative expenses 0 0 0 0
Goodwill impairment 0   0  
Other income (expense), net 0 0 0 0
Intercompany interest 0 0 0 0
Income (loss) before income taxes and equity in income (loss) of subsidiaries 0 0 0 0
Income tax (expense) benefit 0 0 0 0
Income (loss) before equity in income (loss) of subsidiaries 0 0 0 0
Equity in income (loss) of subsidiaries (665,359) (433,436) (1,084,612) (733,803)
Net income (665,359) (433,436) (1,084,612) (733,803)
Other comprehensive income 0 0 0 0
Comprehensive income (loss) (665,359) (433,436) (1,084,612) (733,803)
Eliminating Entries | Total Homebuilding        
Homebuilding        
Revenues 0 0 0 0
Homebuilding Cost of Revenues:        
Financial services expenses 0 0 0 0
Eliminating Entries | Home sales        
Homebuilding        
Revenues 0 0 0 0
Homebuilding Cost of Revenues:        
Cost of revenues 0 0 0 0
Eliminating Entries | Land sale and other        
Homebuilding        
Revenues 0 0 0 0
Homebuilding Cost of Revenues:        
Cost of revenues 0 0 0 0
Eliminating Entries | Financial Services        
Homebuilding        
Revenues 0 0 0 0
Homebuilding Cost of Revenues:        
Financial services expenses 0 0 0 0
PulteGroup, Inc.        
Homebuilding        
Total revenues 0 0 0 0
Homebuilding Cost of Revenues:        
Selling, general, and administrative expenses 0 0 0 0
Goodwill impairment 0   0  
Other income (expense), net (2,851) (4,966) (3,544) (5,087)
Intercompany interest (1,468) (2,254) (3,073) (4,251)
Income (loss) before income taxes and equity in income (loss) of subsidiaries (4,319) (7,220) (6,617) (9,338)
Income tax (expense) benefit 1,080 1,733 1,654 2,241
Income (loss) before equity in income (loss) of subsidiaries (3,239) (5,487) (4,963) (7,097)
Equity in income (loss) of subsidiaries 351,859 246,528 557,294 414,895
Net income 348,620 241,041 552,331 407,798
Other comprehensive income 25 25 50 50
Comprehensive income (loss) 348,645 241,066 552,381 407,848
PulteGroup, Inc. | Total Homebuilding        
Homebuilding        
Revenues 0 0 0 0
Homebuilding Cost of Revenues:        
Financial services expenses 0 0 0 0
PulteGroup, Inc. | Home sales        
Homebuilding        
Revenues 0 0 0 0
Homebuilding Cost of Revenues:        
Cost of revenues 0 0 0 0
PulteGroup, Inc. | Land sale and other        
Homebuilding        
Revenues 0 0 0 0
Homebuilding Cost of Revenues:        
Cost of revenues 0 0 0 0
PulteGroup, Inc. | Financial Services        
Homebuilding        
Revenues 0 0 0 0
Homebuilding Cost of Revenues:        
Financial services expenses 0 0 0 0
Guarantor Subsidiaries        
Homebuilding        
Total revenues 2,456,100 2,388,669 4,656,114 4,298,803
Homebuilding Cost of Revenues:        
Selling, general, and administrative expenses (195,375) (245,272) (451,010) (479,388)
Goodwill impairment 0   0  
Other income (expense), net (10,443) (9,276) (17,059) (14,264)
Intercompany interest 0 0 0 0
Income (loss) before income taxes and equity in income (loss) of subsidiaries 384,511 293,081 645,931 502,139
Income tax (expense) benefit (90,743) (72,598) (150,203) (120,248)
Income (loss) before equity in income (loss) of subsidiaries 293,768 220,483 495,728 381,891
Equity in income (loss) of subsidiaries 24,505 24,504 42,702 42,808
Net income 318,273 244,987 538,430 424,699
Other comprehensive income 0 0 0 0
Comprehensive income (loss) 318,273 244,987 538,430 424,699
Guarantor Subsidiaries | Total Homebuilding        
Homebuilding        
Revenues 2,456,100 2,388,669 4,656,114 4,298,803
Homebuilding Cost of Revenues:        
Financial services expenses (1,865,559) (1,840,915) (3,541,759) (3,302,755)
Guarantor Subsidiaries | Home sales        
Homebuilding        
Revenues 2,447,552 2,359,210 4,645,116 4,267,018
Homebuilding Cost of Revenues:        
Cost of revenues (1,861,026) (1,814,701) (3,536,373) (3,275,596)
Guarantor Subsidiaries | Land sale and other        
Homebuilding        
Revenues 8,548 29,459 10,998 31,785
Homebuilding Cost of Revenues:        
Cost of revenues (4,533) (26,214) (5,386) (27,159)
Guarantor Subsidiaries | Financial Services        
Homebuilding        
Revenues 0 0 0 0
Homebuilding Cost of Revenues:        
Financial services expenses (212) (125) (355) (257)
Non-Guarantor Subsidiaries        
Homebuilding        
Total revenues 137,681 100,316 232,647 186,876
Homebuilding Cost of Revenues:        
Selling, general, and administrative expenses (1,483) (14,168) (9,517) (32,778)
Goodwill impairment 0   (20,190)  
Other income (expense), net 8,008 10,743 12,793 14,878
Intercompany interest 1,468 2,254 3,073 4,251
Income (loss) before income taxes and equity in income (loss) of subsidiaries 76,817 34,915 81,464 44,678
Income tax (expense) benefit (18,726) (8,870) (19,898) (11,674)
Income (loss) before equity in income (loss) of subsidiaries 58,091 26,045 61,566 33,004
Equity in income (loss) of subsidiaries 288,995 162,404 484,616 276,100
Net income 347,086 188,449 546,182 309,104
Other comprehensive income 0 0 0 0
Comprehensive income (loss) 347,086 188,449 546,182 309,104
Non-Guarantor Subsidiaries | Total Homebuilding        
Homebuilding        
Revenues 42,879 44,359 83,295 87,057
Homebuilding Cost of Revenues:        
Financial services expenses (34,691) (33,454) (68,370) (66,456)
Non-Guarantor Subsidiaries | Home sales        
Homebuilding        
Revenues 24,477 44,349 48,416 86,397
Homebuilding Cost of Revenues:        
Cost of revenues (19,183) (33,454) (38,701) (65,350)
Non-Guarantor Subsidiaries | Land sale and other        
Homebuilding        
Revenues 18,402 10 34,879 660
Homebuilding Cost of Revenues:        
Cost of revenues (15,508) 0 (29,669) (1,106)
Non-Guarantor Subsidiaries | Financial Services        
Homebuilding        
Revenues 94,802 55,957 149,352 99,819
Homebuilding Cost of Revenues:        
Financial services expenses $ (34,166) $ (30,776) $ (68,972) $ (62,093)
v3.20.2
Supplemental Guarantor Information (Statement Of Cash Flows) (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Net cash provided by (used in) operating activities $ 807,872 $ 305,707
Cash flows from investing activities:    
Capital expenditures (36,746) (29,575)
Investments in unconsolidated entities   (4,664)
Investments in unconsolidated entities 12,955  
Other investing activities, net 1,597 4,592
Business acquisition (83,256) (163,724)
Net cash provided by (used in) investing activities (105,450) (193,371)
Cash flows from financing activities:    
Financial Services borrowings (repayments) (70,214) (114,226)
Repayments of notes payable (10,106) (297,303)
Borrowings under revolving credit facility 700,000 0
Repayments under revolving credit facility (700,000) 0
Stock option exercises 99 5,208
Share repurchases (95,676) (108,471)
Cash paid for shares withheld for taxes (14,853) (10,350)
Dividends paid (65,332) (61,620)
Intercompany activities, net 0 0
Net cash provided by (used in) financing activities (256,082) (586,762)
Net increase (decrease) in cash, cash equivalents, and restricted cash 446,340 (474,426)
Cash, cash equivalents, and restricted cash at beginning of period 1,251,456 1,133,700
Cash, cash equivalents, and restricted cash at end of period 1,697,796 659,274
Eliminating Entries    
Net cash provided by (used in) operating activities 0 0
Cash flows from investing activities:    
Capital expenditures 0 0
Investments in unconsolidated entities 0 0
Other investing activities, net 0 0
Business acquisition 0 0
Net cash provided by (used in) investing activities 0 0
Cash flows from financing activities:    
Financial Services borrowings (repayments) 0 0
Repayments of notes payable 0 0
Borrowings under revolving credit facility 0  
Repayments under revolving credit facility 0  
Stock option exercises 0 0
Share repurchases 0 0
Cash paid for shares withheld for taxes 0 0
Dividends paid 0 0
Intercompany activities, net 0 0
Net cash provided by (used in) financing activities 0 0
Net increase (decrease) in cash, cash equivalents, and restricted cash 0 0
Cash, cash equivalents, and restricted cash at beginning of period 0 0
Cash, cash equivalents, and restricted cash at end of period 0 0
PulteGroup, Inc.    
Net cash provided by (used in) operating activities 162,014 130,811
Cash flows from investing activities:    
Capital expenditures 0 0
Investments in unconsolidated entities 0 0
Other investing activities, net 0 0
Business acquisition 0 0
Net cash provided by (used in) investing activities 0 0
Cash flows from financing activities:    
Financial Services borrowings (repayments) 0 0
Repayments of notes payable 0 (280,175)
Borrowings under revolving credit facility 700,000  
Repayments under revolving credit facility (700,000)  
Stock option exercises 99 5,208
Share repurchases (95,676) (108,471)
Cash paid for shares withheld for taxes (14,853) (10,350)
Dividends paid (65,332) (61,620)
Intercompany activities, net 13,748 324,597
Net cash provided by (used in) financing activities (162,014) (130,811)
Net increase (decrease) in cash, cash equivalents, and restricted cash 0 0
Cash, cash equivalents, and restricted cash at beginning of period 0 0
Cash, cash equivalents, and restricted cash at end of period 0 0
Guarantor Subsidiaries    
Net cash provided by (used in) operating activities 495,413 34,461
Cash flows from investing activities:    
Capital expenditures (32,129) (24,707)
Investments in unconsolidated entities   (4,183)
Investments in unconsolidated entities 13,619  
Other investing activities, net 87 3,241
Business acquisition 0 (163,724)
Net cash provided by (used in) investing activities (18,423) (189,373)
Cash flows from financing activities:    
Financial Services borrowings (repayments) 0 0
Repayments of notes payable (10,106) (16,591)
Borrowings under revolving credit facility 0  
Repayments under revolving credit facility 0  
Stock option exercises 0 0
Share repurchases 0 0
Cash paid for shares withheld for taxes 0 0
Dividends paid 0 0
Intercompany activities, net 98,597 (149,715)
Net cash provided by (used in) financing activities 88,491 (166,306)
Net increase (decrease) in cash, cash equivalents, and restricted cash 565,481 (321,218)
Cash, cash equivalents, and restricted cash at beginning of period 1,058,071 929,367
Cash, cash equivalents, and restricted cash at end of period 1,623,552 608,149
Non-Guarantor Subsidiaries    
Net cash provided by (used in) operating activities 150,445 140,435
Cash flows from investing activities:    
Capital expenditures (4,617) (4,868)
Investments in unconsolidated entities (664) (481)
Other investing activities, net 1,510 1,351
Business acquisition (83,256) 0
Net cash provided by (used in) investing activities (87,027) (3,998)
Cash flows from financing activities:    
Financial Services borrowings (repayments) (70,214) (114,226)
Repayments of notes payable 0 (537)
Borrowings under revolving credit facility 0  
Repayments under revolving credit facility 0  
Stock option exercises 0 0
Share repurchases 0 0
Cash paid for shares withheld for taxes 0 0
Dividends paid 0 0
Intercompany activities, net (112,345) (174,882)
Net cash provided by (used in) financing activities (182,559) (289,645)
Net increase (decrease) in cash, cash equivalents, and restricted cash (119,141) (153,208)
Cash, cash equivalents, and restricted cash at beginning of period 193,385 204,333
Cash, cash equivalents, and restricted cash at end of period $ 74,244 $ 51,125