2 0 1 4 A N N U A L R E P O R T
About PulteGroup, Inc.
PulteGroup, Inc. (NYSE: PHM), based in Atlanta, Georgia, is one of America’s largest
homebuilding companies with operations in approximately 50 markets throughout the
country. Through its brand portfolio that includes Centex, Pulte Homes, Del Webb and
DiVosta Homes, the Company is one of the industry’s most versatile homebuilders
able to meet the needs of multiple buyer groups and respond to changing consumer
demand. PulteGroup conducts extensive research to provide homebuyers with
innovative solutions and consumer inspired homes and communities to make lives
better.
For more information about PulteGroup, Inc. and PulteGroup brands, go to
pultegroupinc.com; www.pulte.com; www.centex.com; www.delwebb.com and
www.divosta.com.
LETTER TO PULTEGROUP OWNERS, CUSTOMERS,
ASSOCIATES AND BUSINESS PARTNERS
In December 2014, we hosted our first investor day in almost a decade. Our objective for this meeting was to
provide a comprehensive review of our Value Creation strategy and the underlying initiatives which have
helped to drive PulteGroup’s success over the past four years. Over the course of the day, we covered a
variety of topics including:
• A review of the significant operating and financial gains we have realized over the past four years.
• An assessment of the opportunities that remain to further enhance revenue, gross margins, overhead
leverage and overall construction and asset efficiency.
• And finally, a comprehensive review of our approach to capital allocation.
For interested investors who were unable to attend, I certainly encourage you to review the presentation
which is posted on our corporate website (www.pultegroupinc.com).
I am extremely pleased to say that the strong operating and financial performance we delivered in 2014
further demonstrates the ongoing success of our Value Creation strategy. On slightly lower unit volumes, we
generated a 4% increase in home sale revenues to $5.7 billion. The much more telling numbers, however,
were leveraging this 4% revenue growth into a 31% increase in reported pretax income to $690 million, and
reported net income of $474 million, or $1.26 per share.
The significant increase in our 2014 pretax income benefited from our strategic pricing and common plan
initiatives, along with interest savings from the dramatic reduction in our debt over the past few years. Along
with an improving market, these factors contributed to a 280 basis point expansion in our gross margin to
23.3%, and a 250 basis point expansion in our pretax margin to 11.8%.
As we have done over the past several years, we capitalized on our strong 2014 operating performance and
resulting cash flows by continuing to implement a disciplined allocation of our capital, including:
•
Investing $1.8 billion into our business, an increase of approximately 40% over 2013. Based on our
positive view of the U.S. housing market, we have also announced plans to expand our 2015 investment
by 30% to $2.4 billion, but only if we can identify high returning projects.
• We retired $246 million of debt, helping to reduce our year end debt-to-capital to 27%...among the lowest
in the industry.
• We returned $321 million to shareholders in the form of dividends and share repurchases.
• After allocating almost $2.4 billion of capital in 2014, we still ended the year with $1.3 billion of cash that
we expect to use for our planned land investments and to fund dividends and any future share
repurchases.
Given the significant gains we have realized over the past several years since launching Value Creation in
2011, we remain committed to this strategy and the ongoing benefits we believe it can deliver. As such, we
will continue to focus on enhancing our gross margins, overhead leverage, inventory turns, return on invested
capital, and a disciplined capital allocation process.
As a quick reminder on the genesis of our Value Creation strategy and focus on returns, back in 2010 we
analyzed 20 years of financial and operating data on our Company and our peers. The findings clearly
showed that companies generating the highest return on invested capital (ROIC) drove the greatest total
shareholder returns over a housing cycle. We believe focusing on ROIC should have value in all market
conditions, but we believe it can be particularly effective during the sustained, but historically slower-paced,
housing recovery we expect will continue for the next few years.
2014 ANNUAL REPORT | PulteGroup, Inc.
1
LETTER TO PULTEGROUP OWNERS, CUSTOMERS,
ASSOCIATES AND BUSINESS PARTNERS
As a result of our Value Creation efforts, we have controlled our investment in land and lowered our
investment in house inventory by reducing specs and accelerating cycle times. The combination has helped
to improve our margins and inventory turns, and to raise our returns above our weighted average cost of
capital. Having raised our ROIC above our cost of capital, we feel comfortable increasing our land spend
beyond just maintenance and to now support future growth. Consistent with our operating strategy, our
objective is higher-return growth, not growth for growth’s sake. It is important to note that, as we
demonstrated in 2013 and 2014, if the appropriate land transactions are not available, we will not force
investments into the system.
Overall, I view 2014 as another year of great progress for PulteGroup. We now enter 2015 with a higher
quality land bank and a defined view of how we want to participate in a market that we expect will continue on
the slow and steady recovery path that we have been discussing for the past several years. We are mindful,
however, that there are many cross-currents that make demand more challenging to predict. We believe that
the positives of an improving economy with declining energy costs, rising employment, lower mortgage rates
and related fees, beneficial long-term demographic trends and a generally healthy supply of inventory, should
be able to offset any headwinds the industry may face.
We can’t control the U.S. economy or the housing market, so we will concentrate on running the best
business we can. For us, this means continuing to improve returns on invested capital by capturing
efficiencies in our operations. It also means implementing a supportive capital allocation program that, in this
order, seeks to:
1)
Invest in projects to maintain or grow relative market share, while achieving required return thresholds.
2) Fund an increasing dividend.
3) Selectively engage in return accretive M&A.
4) Distribute any residual capital through systematic share repurchases.
Before closing this year’s letter, I want to highlight a program which has blossomed inside of our Company.
Called Built to Honor, it is a program through which we donate mortgage-free homes to worthy veterans
wounded during their time of service. Since its founding in 2013, our Built to Honor program has launched
builds for 30 deserving men and women who have bravely defended the freedoms this country so richly
enjoys. The success of this program is only possible because of the time and materials generously donated
by our employees, suppliers and trade partners who have consistently stepped in to help these deserving
individuals. You can learn more about Built to Honor at our corporate website or on our YouTube page.
I will close this letter as I began it, by saying that I am extremely pleased by the strong operating and financial
performance we delivered in 2014 and the ongoing success of our Value Creation strategy. The dramatic
gains we realized reflect a lot of hard work on the part of employees, supported by the thousands of talented
individuals working for our trade partners. On behalf of our Board of Directors, I say thank you to you, our
shareholders, as we work together to ensure the long-term success of PulteGroup.
Sincerely,
Richard J. Dugas, Jr.
Chairman, President and Chief Executive Officer
2
PulteGroup, Inc.
| 2014 ANNUAL REPORT
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
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
(State or other jurisdiction of
incorporation or organization)
38-2766606
(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
Common Stock, par value $0.01
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. YES [X] NO [ ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. YES [ ] NO [X]
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 and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted 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 and post such files).
Act. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. []
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES [ ] NO [X]
The aggregate market value of the registrant’s voting stock held by nonaffiliates of the registrant as of June 30, 2014, based on the
closing sale price per share as reported by the New York Stock Exchange on such date, was $7,529,488,415.
As of February 2, 2015, the registrant had 368,198,659 shares of common stock outstanding.
Applicable portions of the Proxy Statement for the 2015 Annual Meeting of Shareholders are incorporated by reference in Part III of
this Form.
Documents Incorporated by Reference
PULTEGROUP, INC.
TABLE OF CONTENTS
Item
No.
1
1A
1B
2
3
4
Part I
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
4A
Executive Officers of the Registrant
Part II
5
6
7
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
7A
Quantitative and Qualitative Disclosures About Market Risk
8
9
9A
9B
10
11
12
13
14
15
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Part III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions and Director Independence
Principal Accountant Fees and Services
Part IV
Exhibits and Financial Statement Schedules
Signatures
Page
No.
3
9
15
15
15
15
16
17
19
21
41
43
87
87
89
89
89
89
89
89
90
94
2
ITEM I.
BUSINESS
PulteGroup, Inc.
PART I
PulteGroup, Inc. is a Michigan corporation organized in 1956. We are one of the largest homebuilders in the United
States ("U.S."), and our common stock trades 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 have mortgage banking
operations, conducted principally through Pulte Mortgage LLC (“Pulte Mortgage”), and title operations.
Homebuilding, our core business, includes the acquisition and development of land primarily for residential purposes
within the U.S. and the construction of housing on such land. Homebuilding offers a broad product line to meet the needs of
home buyers in our targeted markets. Through our brands, which include Pulte Homes, Del Webb, and Centex, we offer a wide
variety of home designs, including single-family detached, townhouses, condominiums, and duplexes at different prices and
with varying levels of options and amenities to our major customer groups: entry-level, move-up, and active adult. Over our
history, we have delivered over 640,000 homes.
As of December 31, 2014, we conducted our operations in 49 markets located throughout 26 states. For reporting
purposes, our Homebuilding operations are aggregated into six reportable segments:
Northeast:
Connecticut, Maryland, Massachusetts, New Jersey, New York, Pennsylvania,
Rhode Island, Virginia
Southeast:
Georgia, North Carolina, South Carolina, Tennessee
Florida:
Texas:
North:
Florida
Texas
Illinois, Indiana, Kentucky, Michigan, Minnesota, Missouri, Northern California, Ohio, Washington
Southwest:
Arizona, Nevada, New Mexico, Southern California
We also have a reportable segment for our financial services operations, which consist principally of mortgage banking
and title operations. Our Financial Services segment operates generally in the same geographic markets as our Homebuilding
segments.
Financial information for each of our reportable business segments is included in Note 4 to our Consolidated Financial
Statements.
Available information
Our internet website address is www.pultegroupinc.com. Our annual reports on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act are available free of charge through our website as soon as reasonably practicable after we electronically file
them with or furnish them to the Securities and Exchange Commission. Our code of ethics for principal officers, our code of
ethical business conduct, our corporate governance guidelines, and the charters of the Audit, Compensation and Management
Development, Nominating and Governance, and Finance and Investment committees of our Board of Directors are also posted
on our website and are available in print, free of charge, upon request.
3
Homebuilding Operations
Years Ended December 31,
($000’s omitted)
Home sale revenues
Home closings
$
5,662,171
$
5,424,309
$
4,552,412
$
3,950,743
$
4,419,812
17,196
17,766
16,505
15,275
17,095
2014
2013
2012
2011
2010
Beginning in 2006 and continuing through 2011, the U.S. housing market experienced a significant decline in the
demand for new homes as well as a sharp decline in overall residential real estate values. U.S. new home sales in 2011 were
the lowest since 1962. As a result of this industry-wide downturn, we suffered net losses in each year between 2007 - 2011
from a combination of reduced operational profitability and significant asset impairments. In response to these market
conditions, we restructured our operations, including making significant reductions in employee headcount and overhead costs,
and managed our business to generate cash, including curtailing our investments in inventory. We used this positive cash flow
to, among other things, increase our cash reserves as well as retire outstanding debt.
In 2012, new home sales in the U.S. increased for the first time since 2005. This trend continued in 2014 as new home
sales in the U.S. rose 2% to approximately 435,000 homes, an approximate 42% increase from 2011. Additionally, mortgage
interest rates remain near historic lows and the overall inventory of homes available for sale, especially new homes, remains
low. Although current industry volume remains low compared with historical levels, the improved environment and the actions
we have taken contributed to our return to profitability in 2012 and significant increases in our profitability in 2013 and 2014.
In the long term, we continue to believe that the national publicly-traded builders will have a competitive advantage over local
builders through their ability to leverage economies of scale, access to more reliable and lower cost financing through the
capital markets, ability to control and entitle large land positions, and greater geographic and product diversification. Among
the national publicly-traded peer group, we believe that builders with broad geographic and product diversity, and sustainable
capital positions will benefit as market conditions recover. In the short-term, we expect that overall market conditions will
continue to improve but that improvements will occur unevenly across our markets. Our strategy to enhance shareholder value
is centered around the following operational objectives:
• Improving our inventory turns;
• More effectively allocating the capital we invest in our business using a risk-based portfolio approach;
• Enhancing revenues by: establishing clear product offerings for each of our brands based on systematic, consumer-
driven input, optimizing our pricing through the expanded use of options and lot premiums, and lessening our
reliance on speculative home sales;
• Reducing our house costs through common house plan management, value-engineering our house plans, and
working with suppliers to reduce costs; and
• Maintaining an efficient overhead structure.
Our Homebuilding operations are geographically diverse within the U.S. As of December 31, 2014, we had 598 active
communities. Sales prices of unit closings during 2014 ranged from less than $100,000 to greater than $1,500,000, with 84%
falling within the range of $150,000 to $500,000. The average unit selling price in 2014 was $329,000, compared with
$305,000 in 2013, $276,000 in 2012, $259,000 in 2011, and $259,000 in 2010. The increase in average selling price in recent
years resulted from a number of factors, including improved market conditions and a shift in our sales mix toward move-up and
active adult homebuyers.
Sales of single-family detached homes, as a percentage of total unit sales, were 86% in 2014, compared with 85% in
2013, 81% in 2012, 79% in 2011, and 79% in 2010. The increase in the percentage of single-family detached homes can be
attributed to a weakened demand for townhouses, condominiums, and other attached housing.
Ending backlog, which represents orders for homes that have not yet closed, was $1.9 billion (5,850 units) at
December 31, 2014 and $1.9 billion (5,772 units) at December 31, 2013. For orders in backlog, we have received a signed
customer contract and customer deposit, which is refundable in certain instances. Of the orders in backlog at December 31,
2014, substantially all are scheduled to be closed during 2015, though all orders are subject to potential cancellation by or final
negotiations with the customer. In the event of cancellation, the majority of our sales contracts stipulate that we have the right
to retain the customer’s deposit, though we may choose to refund the deposit in certain instances.
4
Land acquisition and development
We acquire land primarily for the construction of homes for sale to homebuyers. We select locations for development of
homebuilding communities after completing a feasibility study, which includes, among other things, soil tests, independent
environmental studies and other engineering work, an evaluation of necessary zoning and other governmental entitlements, and
extensive market research that enables us to match the location with our product offering to targeted consumer groups. We
consider factors such as proximity to developed areas, population and job growth patterns and, if applicable, estimated
development costs. We frequently manage a portion of the risk of controlling our land positions through the use of land option
contracts, which enable us to defer acquiring portions of properties owned by land sellers until we have determined whether and
when to exercise our option. Our use of land option agreements reduces our financial risks associated with long-term land
holdings. We typically acquire land with the intent to complete sales of housing units within 24 to 36 months from the date of
opening a community, except in the case of certain Del Webb active adult developments and other large master-planned projects
for which the completion of community build-out requires a longer time period. While our overall supply of controlled land is
in excess of our short-term needs in many of our markets, some of our controlled land consists of long-term positions that will
not be converted to home sales in the near term. Accordingly, we remain active in our pursuit of new land investment. We may
also periodically sell select parcels of land to third parties for commercial or other development if we determine that they do not
fit into our strategic operating plans.
Land is generally purchased after it is properly zoned and developed or is ready for development. In the normal course
of business, we dispose of owned land not required by our homebuilding operations through sales to appropriate end users.
Where we develop land, we engage directly in many phases of the development process, including: land and site planning;
obtaining environmental and other regulatory approvals; and constructing roads, sewers, water and drainage facilities, and
community amenities, such as parks, pools, and clubhouses. We use our staff and the services of independent engineers and
consultants for land development activities. Land development work is performed primarily by independent contractors and
local government authorities who construct sewer and water systems in some areas. At December 31, 2014, we controlled
130,793 lots, of which 96,220 were owned and 34,573 were under land option agreements.
Sales and marketing
We are dedicated to improving the quality and value of our homes through innovative architectural and community
designs. Analyzing various qualitative and quantitative data obtained through extensive market research, we stratify our
potential customers into well-defined buyer groups. Such stratification provides a method for understanding the business
opportunities and risks across the full spectrum of consumer groups in each market. Once the demands of potential buyers are
understood, we link our home design and community development efforts to the specific lifestyle of each targeted consumer
group. Through our portfolio of brands, each serving unique consumer groups, we are able to provide a distinct experience to
potential customers:
Targeted consumer group
Entry-level buyers
Move-up buyers
Active adults
Portion of 2014 home closings
25%
44%
31%
Centex
Pulte Homes
Del Webb
The move-up buyers in our Pulte Homes communities tend to place more of a premium on location and amenities.
These communities typically offer larger homes at higher price points. Our Centex brand is targeted to entry-level buyers, so
these homes tend to be smaller with product offerings geared toward lower average selling prices. Through our Del Webb
brand, we are better able to address the needs of active adults. Our Del Webb brand offers both destination communities and
“in place” communities, for those buyers who prefer to remain in their current geographic area. Many of these communities are
highly amenitized, offering a variety of features, including golf courses, recreational centers, and educational classes, to the age
fifty-five and over buyer to maintain an active lifestyle. In order to make the cost of these highly amenitized communities
affordable to the individual homeowner, Del Webb communities tend to be larger than entry-level or move-up communities.
We market our homes to prospective buyers through media advertising, illustrated brochures, internet listings and link
placements, mobile applications, and other advertising displays. We have made significant enhancements in our tools and
business practices to adapt our selling efforts to today's mobile customers. In addition, our websites, www.pulte.com,
www.delwebb.com, and www.centex.com, provide tools to help users find a home that meets their needs, investigate financing
alternatives, communicate moving plans, maintain a home, learn more about us, and communicate directly with us. There were
approximately 10.4 million unique visits to our websites during 2014, compared with approximately 9.2 million in 2013.
5
To meet the demands of our various customers, we have established design expertise for a wide array of product lines.
We believe that we are an innovator in consumer-inspired home design, and we view our design capabilities as an integral
aspect of our marketing strategy. Our in-house architectural services teams and management, supplemented by outside
consultants, follow a 12-step product development process to introduce new features and technologies based on customer-
validated data. Following this disciplined process results in distinctive design features, both in exterior facades and interior
options and features. We typically offer a variety of potential options and upgrades, such as different flooring, countertop, and
appliance choices, and design our base house and option packages to meet the needs of our customers as defined through
rigorous market research. Energy efficiency represents an important source of value for new homes compared with existing
homes and represents a key area of focus for our home designs, including high efficiency HVAC systems and insulation, low-
emissivity windows, solar power in certain geographies, and other energy-efficient features.
Typically, our sales teams, in some cases together with outside sales brokers, are responsible for guiding the customer
through the sales process. We are committed to industry-leading customer service through a variety of quality initiatives,
including our customer care program, which ensures that homeowners are comfortable at every stage of the building process.
Fully furnished and landscaped model homes are generally used to showcase our homes and their distinctive design features.
Construction
The construction of our homes is conducted under the supervision of our on-site construction field managers.
Substantially all of our construction work is performed by independent subcontractors under contracts that, in many instances,
cover both labor and materials on a fixed-price basis. Using a selective process, we have teamed up with what we believe are
premier subcontractors and suppliers to deliver all aspects of the house construction process.
Continuous improvement in our house construction process is a key area of focus. We seek to maintain efficient
construction operations by using standard materials and components from a variety of sources and utilizing standard
construction practices and are improving our product offerings and production processes through the following programs:
• Common management of house plans in order to focus on building those house designs that customers value the most
and that can be built at the highest quality and an efficient cost;
• Value engineering our house plans to optimize house designs in terms of material content and ease of construction
while still providing a clear value to the customer (value engineering eliminates items that add cost but that have little
to no value to the customer); and
• Working with our suppliers to establish the "should cost", a data driven, collaborative effort to reduce construction
costs to what the associated construction activities or materials “should cost” in the market.
The availability of labor and materials at reasonable prices is becoming an increasing concern for certain trades and
building materials in some markets as the supply chain responds to uneven industry growth. Additionally, the cost of certain
building materials, especially lumber, steel, concrete, copper, and petroleum-based materials, is influenced by changes in global
commodity prices. To minimize the effects of changes in construction costs, the contracting and purchasing of building
supplies and materials generally is negotiated at or near the time when related sales contracts are signed with customers. In
addition, we leverage our size by actively negotiating for certain materials on a national or regional basis to minimize
production component cost. We are also working to establish a more integrated system that can effectively link suppliers,
contractors, and the production schedule. However, we cannot determine the extent to which necessary building materials and
labor will be available at reasonable prices in the future.
Competition
The housing industry in the U.S. is fragmented and highly competitive. While we are one of the largest homebuilders in
the U.S., our national market share represented only approximately 4% of U.S. new home sales in 2014. In each of our local
markets, there are numerous national, regional, and local homebuilders with whom we compete. Additionally, new home sales
have traditionally represented less than 15% of overall U.S. home sales (new and existing homes). Therefore, we also compete
with sales of existing house inventory and any provider of for sale or rent housing units, including apartment operators. We
compete primarily on the basis of location, price, quality, reputation, design, community amenities, and our customers' overall
sales and homeownership experiences.
6
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.
Regulation and environmental matters
Our operations are subject to extensive regulations imposed and enforced by various federal, state, and local governing
authorities. These regulations are complex and include building codes, land zoning and other entitlement restrictions, health
and safety regulations, labor practices, marketing and sales practices, environmental regulations, rules and regulations relating
to mortgage financing and title operations, and various other laws, rules, and regulations. Collectively, these regulations have a
significant impact on the site selection and development of our communities, our house design and construction techniques, our
relationships with customers, employees, and suppliers / subcontractors, and many other aspects of our business. The
applicable governing authorities frequently have broad discretion in administering these regulations, including inspections of
our homes prior to closing with the customer in the majority of municipalities in which we operate.
Financial Services Operations
We conduct our financial services business, which includes mortgage and title operations, through Pulte Mortgage and
other subsidiaries. Pulte Mortgage arranges financing through the origination of mortgage loans primarily for the benefit of our
homebuyers. We are a lender approved by the FHA and VA and are a seller/servicer approved by Government National
Mortgage Association ("Ginnie Mae"), Federal National Mortgage Association ("Fannie Mae"), Federal Home Loan Mortgage
Corporation ("Freddie Mac"), and other investors. In our conventional mortgage lending activities, we follow underwriting
guidelines established by Fannie Mae, Freddie Mac, and private investors. We believe that our customers’ use of our in-house
mortgage and title operations provides us with a competitive advantage by enabling more control over the quality of the overall
home buying process for our customers while also helping us align the timing of the house construction process with our
customers’ financing needs.
Operating as a captive business model primarily targeted to supporting our Homebuilding operations, the business levels
of our Financial Services operations are highly correlated to Homebuilding. During 2014, 2013, and 2012, we originated
mortgage loans for 61%, 64%, and 67%, respectively, of the homes we sold. Such originations represented substantially all of
our total originations in each of those years. Our capture rate, which we define as loan originations from our homebuilding
business as a percentage of total loan opportunities from our homebuilding business excluding cash settlements, was 80.2% in
2014, 80.2% in 2013, and 81.9% in 2012.
In originating mortgage loans, we initially use our own funds, including funds available pursuant to credit agreements
with third parties, and subsequently sell such mortgage loans to third party investors in the secondary market. 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 servicing rights for only a short period of time.
The mortgage industry in the U.S. is highly competitive. We compete with other mortgage companies and financial
institutions to provide attractive mortgage financing to our homebuyers. We utilize a centralized fulfillment center staffed with
loan consultants to perform our mortgage underwriting, processing, and closing functions. We believe centralizing both the
fulfillment and origination of our loans improves the speed, efficiency, and quality of our mortgage operations, improving our
profitability and allowing us to focus on providing attractive mortgage financing opportunities for our customers.
In originating and servicing mortgage loans, we are subject to the rules and regulations of the government-sponsored
investors and other investors that purchase the loans we originate, as well as to those of other government agencies that have
oversight of the government-sponsored investors or consumer lending rules in the U.S. In addition to being affected by changes
in these programs, our mortgage banking business is also affected by many of the same factors that impact our homebuilding
business.
7
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 repurchase the loan from
the investors or reimburse the investors' losses (a "make-whole" payment). Historically, our overall losses related to this risk
were not significant. Beginning in 2009, however, we experienced a significant increase in losses as a result of the high level of
loan defaults and related losses in the mortgage industry and increasing aggressiveness by investors in presenting such claims to
us. To date, the significant majority of these losses relates to loans originated in 2006 and 2007, during which period inherently
riskier loan products became more common in the mortgage origination market. Given the volatility in the mortgage industry
and the uncertainty regarding the ultimate resolution of these claims, actual costs could differ from our current estimates.
Our subsidiary title insurance companies serve as title insurance agents and underwriters in select markets by providing
title insurance policies and examination and closing services to buyers of homes we sell. Historically, we have not experienced
significant claims related to our title operations.
Financial Information About Geographic Areas
Substantially all of our operations are located within the U.S. However, we have some non-operating foreign
subsidiaries and affiliates, which are insignificant to our consolidated financial results.
Organization/Employees
All subsidiaries and operating units operate independently with respect to daily operations. Homebuilding real estate
purchases and other significant homebuilding, mortgage banking, financing activities, and similar operating decisions must be
approved by the business unit’s management and/or corporate senior management.
At December 31, 2014, we employed 4,149 people, of which 689 people were employed in our Financial Services
operations. Except for a small group of employees in our St. Louis homebuilding division, our employees are not represented
by any union. Contracted work, however, may be performed by union contractors. Our local and corporate management
personnel are paid incentive compensation based on a combination of individual performance and the performance of the
applicable business unit or the Company. Each business unit is given a level of autonomy regarding employment of personnel,
subject to adherence to our established policies and procedures, and our senior corporate management acts in an advisory
capacity in the employment of subsidiary officers. We consider our employee and contractor relations to be satisfactory.
8
ITEM 1A. RISK FACTORS
Discussion of our business and operations included in this annual report on Form 10-K should be read together with the
risk factors set forth below. They describe various risks and uncertainties to which we are, or may become, subject. These risks
and uncertainties, together with other factors described elsewhere in this report, have the potential to affect our business,
financial condition, results of operations, cash flows, strategies, or prospects in a material and adverse manner.
Downward changes in general economic, real estate construction, or other business conditions could adversely affect our
business or our financial results.
The residential homebuilding industry is sensitive to changes in economic conditions and other factors, such as the level
of employment, consumer confidence, consumer income, availability of financing, and interest rate levels. Adverse changes in
any of these conditions generally, or in the markets where we operate, could decrease demand and pricing for new homes in
these areas or result in customer cancellations of pending contracts, which could adversely affect the number of home deliveries
we make or reduce the prices we can charge for homes, either of which could result in a decrease in our revenues and earnings
and would adversely affect our financial condition.
The homebuilding industry experienced a significant downturn from 2006 through 2011. Although industry conditions
improved beginning in 2012, the overall U.S. economy, while improving, remains challenged and consumer demand in the
industry remains volatile. A deterioration in industry conditions could adversely affect our business and results of
operations.
Beginning in 2006 and continuing through 2011, the U.S. housing market was unfavorably impacted by severe weakness
in new home sales attributable to, among other factors, weak consumer confidence, tightened mortgage standards, significant
foreclosure activity, a more challenging appraisal environment, higher than normal unemployment levels, and significant
uncertainty in the global economy. These conditions contributed to sharply weakened demand for new homes and heightened
pricing pressures on new and existing home sales. As a result of these factors, we experienced significant decreases in our
revenues and profitability during the period 2007 - 2011. We also incurred substantial impairments of our land inventory and
certain other assets during this period. Since 2011, overall industry new home sales have increased, and we returned to
profitability. However, the overall demand for new homes remains below historical levels. Accordingly, we can provide no
assurances that the adjustments we have made in our operating strategy will be successful.
If the market value of our land and homes drops significantly, our profits could decrease.
The market value of land, building lots, and housing inventories can fluctuate significantly as a result of changing market
conditions, and the measures we employ to manage inventory risk may not be adequate to insulate our operations from a severe
drop in inventory values. We acquire land for expansion into new markets and for replacement of land inventory and expansion
within our current markets. If housing demand decreases below what we anticipated when we acquired our inventory, we may
not be able to make profits similar to what we have made in the past, we may experience less than anticipated profits, and/or we
may not be able to recover our costs when we sell and build homes. When market conditions are such that land values are not
appreciating, option arrangements previously entered into may become less desirable, at which time we may elect to forego
deposits and pre-acquisition costs and terminate the agreement. In the face of adverse market conditions, we may have
substantial inventory carrying costs, we may have to write down our inventory to its fair value, and/or we may have to sell land
or homes at a loss.
9
Our success depends on our ability to acquire land suitable for residential homebuilding at reasonable prices, in accordance
with our land investment criteria.
The homebuilding industry is highly competitive for suitable land. The availability of finished and partially finished
developed lots and undeveloped land for purchase that meet our internal criteria depends on a number of factors outside our
control, including land availability in general, competition with other homebuilders and land buyers for desirable property,
inflation in land prices, zoning, allowable housing density, and other regulatory requirements. Should suitable lots or land
become less available, the number of homes we may be able to build and sell could be reduced, and the cost of land could be
increased, perhaps substantially, which could adversely impact our results of operations.
Our long-term ability to build homes depends on our acquiring land suitable for residential building at reasonable prices
in locations where we want to build. In the past, we experienced significant competition for suitable land as a result of land
constraints in many of our markets. As competition for suitable land increases, and as available land is developed, the cost of
acquiring suitable remaining land could rise, and the availability of suitable land at acceptable prices may decline. Any land
shortages or any decrease in the supply of suitable land at reasonable prices could limit our ability to develop new communities
or result in increased land costs. We may not be able to pass through to our customers any increased land costs, which could
adversely impact our revenues, earnings, and margins.
We are subject to claims related to mortgage loans we sold in the secondary mortgage market that may be significant.
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 certain representations and warranties made by us that the loans met certain
requirements, including representations as to underwriting standards, the type of collateral, the existence of primary mortgage
insurance, and the validity of certain borrower representations in connection with the loan. We may also be required to
indemnify underwriters that purchased and securitized loans originated by a former subsidiary of Centex for losses incurred by
investors in those securitized loans based on similar breaches of representations and warranties.
To date, the significant majority of these losses relate to loans originated in 2006 and 2007, during which period
inherently riskier loan products became more common in the origination market. In addition, we entered into an agreement in
conjunction with the wind down of Centex’s mortgage operations, which ceased loan origination activities in December 2009,
that provides a guaranty for one major investor of loans originated by Centex. This guaranty provides that we will honor the
potential repurchase obligations of Centex’s mortgage operations related to breaches of similar representations in the
origination of a certain pool of loans.
The resolution of claims related to alleged breaches of these representations and warranties and repurchase claims could
have a material adverse effect on our financial condition, cash flows and results of operations, and could exceed existing
estimates and accruals. The repurchase liability we have recorded is estimated based on several factors, including the level of
current unresolved repurchase requests, the volume of estimated probable future repurchase requests, our ability to cure the
defects identified in the repurchase requests, and the severity of the estimated loss upon repurchase. The factors referred to
above are subject to change in light of market developments, the economic environment, and other circumstances, some of
which are beyond our control. Accordingly, there can be no assurance that such reserves will not need to be increased in the
future.
10
Future increases in interest rates, reductions in mortgage availability, or other increases in the effective costs of owning a
home could prevent potential customers from buying our homes and adversely affect our business and financial results.
A large majority of our customers finance their home purchases through mortgage loans, many through our mortgage
bank. Interest rates have been near historical lows for several years, which has made new homes more affordable. Increases in
interest rates or decreases in the availability of mortgage financing could adversely affect the market for new homes. Potential
homebuyers may be less willing or able to pay the increased monthly costs or to obtain mortgage financing. Lenders may
increase the qualifications needed for mortgages or adjust their terms to address any increased credit risk. Even if potential
customers do not need financing, changes in interest rates and mortgage availability could make it harder for them to sell their
current homes to potential buyers who need financing. These factors could adversely affect the sales or pricing of our homes
and could also reduce the volume or margins in our financial services business. Our financial services business could also be
impacted to the extent we are unable to match interest rates and amounts on loans we have committed to originate through the
various hedging strategies we employ. These developments have had, and may continue to have, a material adverse effect on
the overall demand for new housing and thereby on the results of operations for our homebuilding business.
We also believe that the availability of FHA and VA mortgage financing is an important factor in marketing some of our
homes. The liquidity provided by Fannie Mae and Freddie Mac to the mortgage industry is also critical to the housing market.
The impact of the federal government’s conservatorship of Fannie Mae and Freddie Mac on the short-term and long-term
demand for new housing remains unclear. Any limitations or restrictions on the availability of financing by these agencies
could adversely affect interest rates, mortgage financing, and our sales of new homes and mortgage loans.
Mortgage interest expense and real estate taxes represent significant costs of homeownership, both of which are
generally deductible for an individual’s federal and, in some cases, state income taxes. Any changes to income tax laws by the
federal government or a state government to eliminate or substantially reduce these income tax deductions, as has been
considered from time to time, would increase the after-tax cost of owning a home. Increases in real estate taxes by local
governmental authorities also increase the cost of homeownership. Any such increases to the cost of homeownership could
adversely impact the demand for and sales prices of new homes.
Adverse capital and credit market conditions may significantly affect our access to capital and cost of capital.
The capital and credit markets can experience significant volatility. We may need credit-related liquidity for future
growth and development of our business. Without sufficient liquidity, we may not be able to purchase additional land or
develop land, which could adversely affect our financial results. At December 31, 2014, we had cash and equivalents of $1.3
billion as well as restricted cash totaling $16.4 million. However, our internal sources of liquidity may prove to be insufficient,
and in such case, we may not be able to successfully obtain additional financing on terms acceptable to us, or at all.
Another source of liquidity includes our ability to use letters of credit and surety bonds pursuant to certain performance-
related obligations and 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. At December 31, 2014, we had outstanding letters of credit and surety bonds totaling $212.1 million and
$1.0 billion, respectively. Of these amounts outstanding, $3.7 million of the letters of credit were subject to cash-collateralized
agreements while the remaining letters of credit and surety bonds were unsecured. The majority of these letters of credit are
issued via our unsecured revolving credit facility, which contains certain financial covenants and other limitations. If we are
unable to obtain letters of credit or surety bonds when required, or the conditions imposed by issuers increase significantly, our
financial condition and results of operations could be adversely affected.
11
Competition for homebuyers could reduce our deliveries or decrease our profitability.
The housing industry in the U.S. is highly competitive. We compete primarily on the basis of location, price, quality,
reputation, design, community amenities, and our customers' overall sales and homeownership experiences. We compete in
each of our markets with numerous national, regional, and local homebuilders. This competition with other homebuilders could
reduce the number of homes we deliver or cause us to accept reduced margins in order to maintain sales volume.
We also compete with resales of existing or foreclosed homes, housing speculators, and available rental housing.
Increased competitive conditions in the residential resale or rental market in the regions where we operate could decrease
demand for new homes or unfavorably impact pricing for new homes.
Supply shortages and other risks related to the demand for skilled labor and building materials could increase costs and
delay deliveries.
The homebuilding industry is highly competitive for skilled labor and materials. Additionally, the cost of certain
building materials, especially lumber, steel, concrete, copper, and petroleum-based materials, is influenced by changes in global
commodity prices. Increased costs or shortages of skilled labor and/or materials could cause increases in construction costs and
construction delays. We may not be able to pass on increases in construction costs to customers and generally are unable to
pass on any such increases to customers who have already entered into sales contracts as those sales contracts generally fix the
price of the home at the time the contract is signed, which may be well in advance of the construction of the home. Sustained
increases in construction costs may, over time, erode our margins, and pricing competition may restrict our ability to pass on
any such additional costs, thereby decreasing our margins.
Our income tax provision and tax reserves may be insufficient if a taxing authority is successful in asserting positions that
are contrary to our interpretations and related reserves, if any.
Significant judgment is required in determining our provision for income taxes and our reserves for federal, state, and
local taxes. In the ordinary course of business, there may be matters for which the ultimate outcome is uncertain. Our
evaluation of our tax matters is based on a number of factors, including changes in facts or circumstances, changes in tax law,
correspondence with tax authorities during the course of audits, and effective settlement of audit issues. Although we believe
our approach to determining the tax treatment for such items is appropriate, no assurance can be given that the final tax
authority review will not be materially different than that which is reflected in our income tax provision and related tax
reserves. Such differences could have a material adverse effect on our income tax provision in the period in which such
determination is made and, consequently, on our financial position, cash flows, or net income for such period.
We are periodically audited by various federal, state, and local authorities regarding tax matters. Our current audits are
in various stages of completion; however, no outcome for a particular audit can be determined with certainty prior to the
conclusion of the audit, appeal and, in some cases, litigation process. As each audit is concluded, adjustments, if any, are
recorded in our financial statements in the period determined. To provide for potential tax exposures, we consider a variety of
factors, including changes in facts or circumstances, changes in law, correspondence with taxing authorities, and effective
settlement of audit issues. If these reserves are insufficient upon completion of an audit, there could be an adverse impact on
our financial position, cash flows, and results of operations.
We may not realize our deferred income tax assets.
As of December 31, 2014, we had deferred income tax assets, net of deferred tax liabilities, of $1.8 billion, against
which we provided a valuation allowance of $82.3 million. The ultimate realization of our deferred income tax assets is
dependent upon generating future taxable income and executing tax planning strategies. While we have recorded valuation
allowances against certain of our deferred income tax assets, the valuation allowances are subject to change as facts and
circumstances change.
Our ability to utilize net operating losses (“NOLs”), built-in losses (“BILs”), and tax credit carryforwards to offset our
future taxable income would be limited if we were to undergo an “ownership change” within the meaning of Section 382 of the
Internal Revenue Code (the “IRC”). In general, an “ownership change” occurs whenever the percentage of the stock of a
corporation owned by “5-percent shareholders” (within the meaning of Section 382 of the IRC) increases by more than 50
percentage points over the lowest percentage of the stock of such corporation owned by such “5-percent shareholders” at any
time over the testing period.
12
An ownership change under Section 382 of the IRC would establish an annual limitation to the amount of NOLs, BILs,
and tax credit carryforwards we could utilize to offset our taxable income in any single year. The application of these
limitations might prevent full utilization of the deferred tax assets attributable to our NOLs, BILs, and tax credit carryforwards.
We have not experienced an ownership change as defined by Section 382. To preserve our ability to utilize NOLs, BILs, and
other tax benefits in the future without a Section 382 limitation, we adopted a shareholder rights plan, which is triggered upon
certain transfers of our securities, and amended our by-laws to prohibit certain transfers of our securities. Notwithstanding the
foregoing measures, there can be no assurance that we will not undergo an ownership change within the meaning of
Section 382.
As a result of our merger with Centex in August 2009, our ability to use certain of Centex’s pre-ownership change NOLs,
BILs, and deductions is limited under Section 382 of the Internal Revenue Code. The applicable Section 382 limitation is
approximately $67.4 million per year for NOLs, losses realized on built-in loss assets that were sold within 60 months of the
ownership change, and certain deductions. We do not believe that the Section 382 limitation will prevent the Company from
using Centex's pre-ownership change NOL carryforwards and built-in losses or deductions.
The value of our deferred tax assets is also dependent upon the tax rates expected to be in effect at the time taxable
income is expected to be generated. A decrease in enacted corporate tax rates in our major jurisdictions, especially the U.S.
federal corporate tax rate, would decrease the value of our deferred tax assets, which could be material.
We have significant intangible assets. If these assets become impaired, then our profits and shareholders’ equity may be
reduced.
We have significant intangible assets related to prior business combinations. We evaluate the recoverability of
intangible assets whenever facts and circumstances indicate the carrying amount may not be recoverable. If the carrying value
of intangible assets is deemed impaired, the carrying value is written down to fair value. This would result in a charge to our
operating earnings. If management’s expectations of future results and cash flows decrease significantly, impairments of the
remaining intangible assets may occur.
Government regulations could increase the cost and limit the availability of our development and homebuilding projects or
affect our related financial services operations and adversely affect our business or financial results.
Our operations are subject to building, environmental, and other regulations imposed and enforced by various federal,
state, and local governing authorities. New housing developments may also be subject to various assessments for schools,
parks, streets, and other public improvements. These can cause an increase in the effective cost of our homes.
We also are subject to a variety of local, state, and federal laws and regulations concerning protection of health, safety,
and the environment. The impact of environmental laws varies depending upon the prior uses of the building site or adjoining
properties and may be greater in areas with less supply where undeveloped land or desirable alternatives are less available.
These matters may result in delays, may cause us to incur substantial compliance, remediation and other costs, and can prohibit
or severely restrict development and homebuilding activity in environmentally sensitive regions or areas. More stringent
requirements could be imposed in the future on homebuilders and developers, thereby increasing the cost of compliance.
Our financial services operations are also subject to numerous federal, state, and local laws and regulations. These
include eligibility requirements for participation in federal loan programs and compliance with consumer lending and similar
requirements such as disclosure requirements, prohibitions against discrimination, and real estate settlement procedures. They
also subject our operations to examination by applicable agencies, pursuant to which those agencies may limit our ability to
provide mortgage financing or title services to potential purchasers of our homes. For our homes to qualify for FHA or VA
mortgages, we must satisfy valuation standards and site, material, and construction requirements of those agencies.
In January 2013, the Consumer Financial Protection Bureau adopted new rules regarding the origination of mortgages,
including the criteria for “qualified mortgages”, rules for lender practices regarding assessing borrowers’ ability to repay, and
limitations on certain fees and incentive arrangements. Such rules went into effect in January 2014. While we have adjusted
our operations to comply with the new rules, the impact such rules will have on our business remains unclear. Additionally,
many other rules required by the Dodd-Frank Act of 2010 have not yet been completed or implemented, which has created
uncertainty in the overall U.S. financial services and mortgage industries as to their long-term impact.
13
Homebuilding is subject to warranty and other claims in the ordinary course of business that can be significant.
As a homebuilder, we are subject to home warranty, construction defect, and other claims arising in the ordinary course
of business. We record warranty and other reserves for the homes we sell based on historical experience in our markets and our
judgment of the qualitative risks associated with the types of homes built. We have, and require our subcontractors to have,
general liability, property, errors and omissions, workers compensation, and other business insurance. These insurance policies
protect us against a portion of our risk of loss from claims, subject to certain self-insured per occurrence and aggregate
retentions, deductibles, and available policy limits. We reserve for costs to cover our self-insured and deductible amounts under
these policies and for any costs of claims and lawsuits based on an analysis of our historical claims, which includes an estimate
of claims incurred but not yet reported. Because of the uncertainties inherent in these matters, we cannot provide assurance that
our insurance coverage, our subcontractor arrangements, and our reserves will be adequate to address all our warranty and
construction defect claims in the future. Contractual indemnities can be difficult to enforce, we may be responsible for
applicable self-insured retentions, and some types of claims may not be covered by insurance or may exceed applicable
coverage limits. Additionally, the coverage offered by and the availability of general liability insurance for construction defects
are currently costly and limited. We have responded to increases in insurance costs and coverage limitations by increasing our
self-insured retentions and claim reserves. There can be no assurance that coverage will not be further restricted or become
more costly. Additionally, we are exposed to counterparty default risk related to our subcontractors, our insurance carriers, and
our subcontractors’ insurance carriers.
Natural disasters and severe weather conditions could delay deliveries, increase costs, and decrease demand for new homes
in affected areas.
Our homebuilding operations are located in many areas that are subject to natural disasters and severe weather. The
occurrence of natural disasters or severe weather conditions can delay new home deliveries, increase costs by damaging
inventories, reduce the availability of materials, and negatively impact the demand for new homes in affected areas.
Furthermore, if our insurance does not fully cover business interruptions or losses resulting from these events, our earnings,
liquidity, or capital resources could be adversely affected.
Inflation may result in increased costs that we may not be able to recoup.
Inflation can have a long-term impact on us because increasing costs of land, materials, and labor may require us to
increase the sales prices of homes in order to maintain satisfactory margins. However, we may not be able to raise home prices
sufficiently to keep up with the rate of inflation and our margins could decrease. In addition, inflation is often accompanied by
higher interest rates, which could have a negative impact on housing demand.
Information technology failures or data security breaches could harm our business.
We use information technology and other computer resources to carry out important operational activities and to
maintain our business records. Our computer systems, including our back-up systems, are subject to damage or interruption
from power outages, computer and telecommunications failures, computer viruses, security breaches (through cyberattacks
from computer hackers and sophisticated organizations), catastrophic events such as fires, tornadoes and hurricanes, and usage
errors by our associates. If our computer systems and our back-up systems are damaged, breached, or cease to function
properly, we could suffer interruptions in our operations or unintentionally allow misappropriation of proprietary or confidential
information (including information about our homebuyers and business partners), which could require us to incur significant
costs to remediate or otherwise resolve these issues.
14
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our homebuilding and corporate headquarters are located in leased office facilities at 3350 Peachtree Road NE, Suite
150, Atlanta, GA 30326. Pulte Mortgage leases its primary office facilities in Englewood, Colorado. We also maintain various
support functions in leased facilities in Tempe, Arizona and Bloomfield Hills, Michigan. Our homebuilding divisions and
financial services branches lease office space in the geographic locations in which they conduct their day-to-day operations.
Because of the nature of our homebuilding operations, significant amounts of property are held as inventory in the
ordinary course. Such properties are not included in response to this Item.
ITEM 3. LEGAL PROCEEDINGS
We are involved in various legal and governmental proceedings incidental to our continuing business operations, many
involving claims related to certain construction defects. The consequences of these matters are not presently determinable but,
in our opinion, after consulting with legal counsel and taking into account insurance and reserves, the ultimate liability is not
expected to 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 our estimates reflected in the recorded reserves
relating to such matter, we could incur additional charges that could be significant.
ITEM 4. MINE SAFETY DISCLOSURES
This Item is not applicable.
15
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is certain information with respect to our executive officers.
Name
Richard J. Dugas, Jr.
Robert T. O'Shaughnessy
James R. Ellinghausen
Harmon D. Smith
Ryan R. Marshall
Steven M. Cook
James L. Ossowski
Age Position
49
49
56
51
40
56
Chairman, President and Chief Executive Officer
Executive Vice President and Chief Financial Officer
Executive Vice President, Human Resources
Executive Vice President, Field Operations
Executive Vice President, Homebuilding Operations
Senior Vice President, General Counsel and Secretary
46 Vice President, Finance and Controller
Year Became
An Executive
Officer
2002
2011
2005
2011
2012
2006
2013
The following is a brief account of the business experience of each officer during the past five years:
Mr. Dugas was appointed Chairman in August 2009 and President and Chief Executive Officer in July 2003. Previously,
he was appointed Chief Operating Officer in May 2002 and Executive Vice President in December 2002. Since joining our
company in 1994, he has served in a variety of management positions.
Mr. O'Shaughnessy was appointed Executive Vice President and Chief Financial Officer in May 2011. Prior to joining
our company, he held a number of financial roles at Penske Automotive Group from 1997 to 2011, most recently as Executive
Vice President and Chief Financial Officer.
Mr. Ellinghausen was appointed Executive Vice President, Human Resources in December 2006.
Mr. Smith was appointed Executive Vice President, Field Operations in May 2014 and previously held the position of
Executive Vice President, Homebuilding Operations and Area President, Texas since May 2012. He served as an Area President
over various geographical markets since 2006.
Mr. Marshall was appointed Executive Vice President, Homebuilding Operations in May 2014. Previously he held the
positions of Area President, Southeast since November 2012, Area President, Florida since May 2012, and Division President,
South Florida since 2006.
Mr. Cook was appointed Senior Vice President, General Counsel and Secretary in December 2008 and previously held the
position of Vice President, General Counsel and Secretary since February 2006.
Mr. Ossowski was appointed Vice President, Finance and Controller in February 2013 and previously held the position of
Vice President, Finance - Homebuilding Operations since August 2010. Since 2002, Mr. Ossowski has held various finance
positions of increasing responsibility with the Company.
There is no family relationship between any of the officers. Each officer serves at the pleasure of the Board of Directors.
16
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
PART II
Our common shares are listed on the New York Stock Exchange (Symbol: PHM).
Related Stockholder Matters
The table below sets forth, for the quarterly periods indicated, the range of high and low intraday sales prices for our
common shares and dividend per share information:
December 31, 2014
December 31, 2013
High
Low
Declared
Dividend
High
Low
Declared
Dividend
$
21.65
$
18.21
$
20.47
20.64
22.03
18.01
17.47
16.56
0.05
0.05
0.05
0.08
$
21.97
$
17.98
$
24.47
20.57
20.49
17.46
14.23
15.28
—
—
0.10
0.05
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
At February 2, 2015, there were 2,717 shareholders of record.
Issuer Purchases of Equity Securities
(a)
Total number
of shares
purchased
(b)
Average
price paid
per share
3,010,175
$
725,088
1,449,647
5,184,910
$
17.30
21.07
21.08
18.89
(c)
Total number of
shares purchased
as part of publicly
announced plans
or programs
(d)
Approximate dollar
value of shares
that may yet be
purchased under
the plans or
programs
($000’s omitted)
3,010,175
725,088
1,449,647
5,184,910
$
$
$
784,290 (1)
769,010 (1)
738,456 (1)
October 1, 2014 to October 31, 2014
November 1, 2014 to November 30, 2014
December 1, 2014 to December 31, 2014
Total
(1) In July 2013, our Board of Directors authorized a share repurchase program totaling $250 million. We have fully
utilized the July 2013 authorization and will no longer conduct share repurchases under this program. In October 2014,
the Board of Directors approved a share repurchase authorization totaling $750 million, of which $738.5 million
remained available as of December 31, 2014. There is no expiration date for this program. During 2014, we
repurchased 12.9 million shares under these programs.
The information required by this item with respect to equity compensation plans is set forth under Item 12 of this annual
report on Form 10-K and is incorporated herein by reference.
17
Performance Graph
The following line graph compares for the fiscal years ended December 31, 2010, 2011, 2012, 2013, and 2014 (a) the
yearly cumulative total shareholder return (i.e., the change in share price plus the cumulative amount of dividends, assuming
dividend reinvestment, divided by the initial share price, expressed as a percentage) on PulteGroup’s common shares, with
(b) the cumulative total return of the Standard & Poor’s 500 Stock Index, and with (c) the Dow Jones U.S. Select Home
Construction Index. The Dow Jones U.S. Select Home Construction Index is a widely-recognized index comprised primarily
of large national homebuilders. We believe comparison of our shareholder return to this index represents a meaningful analysis
for investors.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG PULTEGROUP, INC., S&P 500 INDEX, AND PEER INDEX
Fiscal Year Ended December 31, 2014
PULTEGROUP, INC.
S&P 500 Index - Total Return
Dow Jones U.S. Select Home Construction
Index
2009
2010
2011
2012
2013
2014
100.00
100.00
75.20
115.06
63.10
117.49
181.60
136.30
205.20
180.44
218.50
205.14
100.00
111.03
95.67
194.40
215.76
202.92
* Assumes $100 invested on December 31, 2009, and the reinvestment of dividends.
18
ITEM 6. SELECTED FINANCIAL DATA
Set forth below is selected consolidated financial data for each of the past five fiscal years. The selected financial data
should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations
and our Consolidated Financial Statements and Notes thereto included elsewhere in this report.
OPERATING DATA:
Homebuilding:
Revenues
Income (loss) before income taxes
Financial Services:
Revenues
Income (loss) before income taxes
Consolidated results:
Revenues
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
PER SHARE DATA:
Net income (loss) per share:
Basic
Diluted
Number of shares used in calculation:
Basic
Effect of dilutive securities
Diluted
Shareholders’ equity
Cash dividends declared
Years Ended December 31,
(000’s omitted, except per share data)
2014
2013
2012
2011
2010
$ 5,696,725
$ 5,538,644
$ 4,659,110
$ 4,033,596
$ 4,447,627
$
$
$
635,177
125,638
54,581
$
$
$
479,113
140,951
48,709
$
$
$
157,991
$ (275,830) $(1,240,155)
160,888
25,563
$
$
103,094
$
121,663
(34,470) $
5,609
$ 5,822,363
$ 5,679,595
$ 4,819,998
$ 4,136,690
$ 4,569,290
$
$
$
$
$
$
689,758
215,420
474,338
$
527,822
(2,092,294)
$ 2,620,116
1.27
1.26
$
$
6.79
6.72
$
$
$
$
183,554
(22,591)
206,145
$ (310,300) $(1,234,546)
(137,817)
$ (210,388) $(1,096,729)
(99,912)
0.54
0.54
$
$
(0.55) $
(0.55) $
(2.90)
(2.90)
370,377
3,725
374,102
383,077
3,789
386,866
381,562
3,002
384,564
379,877
—
379,877
13.01
0.23
$
$
12.19
0.15
$
$
5.66
$
5.07
$
— $
— $
378,585
—
378,585
5.59
—
19
December 31,
($000’s omitted)
BALANCE SHEET DATA:
House and land inventory
Total assets
Senior notes
Shareholders’ equity
OTHER DATA:
Markets, at year-end
Active communities, at year-end
Closings (units)
Net new orders (units)
Backlog (units), at year-end
2014
2013
2012
2011
2010
$ 4,392,100
$ 3,978,561
$ 4,214,046
$ 4,636,468
$ 4,781,813
8,569,410
1,818,561
4,804,954
8,734,143
2,058,168
4,648,952
6,734,409
2,509,613
2,189,616
6,885,620
3,088,344
1,938,615
7,699,376
3,391,668
2,135,167
Years Ended December 31,
2014
2013
2012
2011
2010
49
598
17,196
16,652
5,850
48
577
17,766
17,080
5,772
58
670
16,505
19,039
6,458
61
700
15,275
15,215
3,924
67
786
17,095
15,148
3,984
Average selling price (per unit)
$
329,000
$
305,000
$
276,000
$
259,000
$
259,000
Gross margin from home sales (a)
23.3%
20.5%
15.8%
12.8%
9.4%
(a) Homebuilding interest expense, which represents the amortization of capitalized interest, and land impairment
charges are included in home sale cost of revenues.
20
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
The overall U.S. housing market continues to be influenced by a combination of low interest rates and affordable
home prices that have kept monthly mortgage payments affordable relative to historical levels and the rental market. This
environment has contributed to our experiencing relatively stable overall demand in 2014. On slightly lower unit volumes, we
generated a 4% increase in home sale revenues to $5.7 billion. We leveraged this growth into a 33% increase in reported pretax
income of $635 million for our homebuilding operations by improving gross margins by 280 basis points to 23.3%, amongst
the highest annual gross margins reported in the Company's history. Including our Financial Services operations, we realized
pretax income growth of 31% to $690 million.
We generated positive cash flow from operations in 2014 due primarily to improved profitability. Our improved
financial position provided additional flexibility to retire debt early and increase our investments in future communities, while
also returning funds to shareholders through dividends and expanded share repurchases. Specifically, we accomplished the
following during 2014:
Proactively reduced our outstanding debt by $245.7 million;
Increased our existing share repurchase authorization by $750.0 million and retired $245.8 million of shares;
•
•
• Raised our quarterly dividend by 60% to $0.08 per share;
•
• Lowered our ratio of debt to total capitalization to 27.5%; and
• Ended the year with a total cash balance of $1.3 billion.
Increased our land investment spending by almost 40% to support future growth;
Assuming market conditions remain consistent with our expectations, we also expect to continue to invest increasing
amounts into our land portfolio following our disciplined capital allocation process. Our first priority in allocating capital is to
invest responsibly in our business and then to return excess funds to shareholders in the form of dividends and share
repurchases on a routine and systematic basis. By intelligently investing in our business while routinely returning funds to
shareholders, we are aligning our capital allocation decisions with our value creation strategy and our fundamental goal of
increasing long-term total shareholder returns.
We are optimistic heading into 2015. We believe the positive factors of an improving economy with declining energy
costs, rising employment, lower mortgage rates and related fees, beneficial long-term demographic trends, and a generally
healthy supply of inventory will continue to support a slow and sustained housing recovery. Within this environment, we
remain focused on driving additional gains in construction and asset efficiency to deliver higher returns on invested capital.
Consistent with our positive market view and long-term business strategy, we expect to use our capital to support future
growth, while consistently returning funds to shareholders.
21
The following is a summary of our operating results by line of business ($000's omitted, except per share data):
Income before income taxes:
Homebuilding
Financial Services
Income before income taxes
Income tax expense (benefit)
Net income
Per share data - assuming dilution:
Net income
Years Ended December 31,
2013
2012
2014
$
$
$
635,177
54,581
689,758
215,420
474,338
1.26
$
$
$
479,113
48,709
527,822
(2,092,294)
2,620,116
6.72
$
$
$
157,991
25,563
183,554
(22,591)
206,145
0.54
• Homebuilding income before income taxes improved each year from 2012 to 2014, primarily as the result of higher
gross margins and revenues. Homebuilding income before income taxes also reflected the following significant
items ($000's omitted):
Land-related charges (see Note 3)
Loss on debt retirements (see Note 6)
Settlement of contractual dispute at a closed-out
community (see Note 12)
Corporate office relocation (see Note 2)
Insurance reserve adjustments (see Note 12)
2014
2013
2012
$
$
$
11,168
8,584
$
9,672
26,930
—
16,344
69,267
105,363
$
41,170
15,376
—
93,148
$
17,195
32,071
—
—
—
49,266
For additional information on each of the above, see the applicable Notes to the Consolidated Financial Statements.
The acquisition of certain real estate assets from Dominion Homes in August 2014 (see Note 1) was not material to
our results of operations or financial condition.
• The increase in Financial Services income in 2014 compared with 2013 and 2012 was primarily due to lower
provisions for loan losses. We reduced loss reserves by $18.6 million in 2014 while there were no adjustments to
the reserve in 2013. In 2012, loss reserves increased by $49.0 million. See Note 12 to the Consolidated Financial
Statements. Excluding these loss reserve adjustments, Financial Services income has been declining since 2012 due
to margin compression caused by heightened competition in the mortgage industry.
• Our effective tax rate is affected by a number of factors, the most significant of which are the valuation allowance
related to our deferred tax assets, changes in tax laws or other circumstances that impact the value of our deferred
tax assets, and changes in our unrecognized tax benefits. Due to the effects of these factors, our effective tax rates
in 2014, 2013, and 2012 are not correlated to the amount of our income before income taxes. Income tax expense
(benefit) reflects reversals of deferred tax asset valuation allowances totaling $45.6 million in 2014 and $2.1 billion
in 2013. The income tax benefit in 2012 was attributable primarily to the favorable resolution of certain federal and
state income tax matters. See Note 9 to the Consolidated Financial Statements for additional information.
22
Homebuilding Operations
The following is a summary of income before income taxes for our Homebuilding operations ($000’s omitted):
Years Ended December 31,
2014
FY 2014 vs.
FY 2013
2013
FY 2013 vs.
FY 2012
2012
$ 5,662,171
4 % $ 5,424,309
19 % $ 4,552,412
Home sale revenues
Land sale revenues
Total Homebuilding revenues
Home sale cost of revenues (a)
Land sale cost of revenues
Selling, general, and administrative expenses
("SG&A") (b)
Equity in earnings of unconsolidated entities
Other expense, net (c)
Interest income, net
34,554
5,696,725
4,343,249
23,748
667,815
(8,226)
38,745
(3,783)
(70)%
114,335
3 %
1 %
5,538,644
4,310,528
(77)%
104,426
17 %
728 %
(52)%
3 %
568,500
(993)
80,753
(3,683)
479,113
7 %
19 %
12 %
10 %
11 %
(74)%
22 %
(10)%
(203)% $
106,698
4,659,110
3,833,451
94,880
514,457
(3,873)
66,298
(4,094)
157,991
Income before income taxes
$
635,177
33 % $
Supplemental data:
Gross margin from home sales
SG&A as a percentage of home sale revenues
Closings (units)
Average selling price
Net new orders:
Units
Dollars (d)
Cancellation rate
Active communities at December 31
Backlog at December 31:
23.3%
11.8%
17,196
329
$
16,652
$ 5,558,937
280 bps
130 bps
(3)%
8 % $
20.5%
10.5%
17,766
305
470 bps
(80) bps
8 %
11 % $
15.8%
11.3%
16,505
276
(3)%
17,080
3 % $ 5,394,566
(10)%
19,039
(1)% $ 5,424,300
15%
598
4 %
15%
577
(14)%
15%
670
5,850
$ 1,943,861
1 %
5,772
2 % $ 1,901,796
(11)%
6,458
(2)% $ 1,931,538
Includes the amortization of capitalized interest. Home sale cost of revenues also includes land impairments of $3.9
million, $2.9 million, and $13.4 million for 2014, 2013, and 2012, respectively.
SG&A includes costs associated with the relocation of our corporate headquarters totaling $7.6 million and $15.0
million in 2014 and 2013, respectively, and charges totaling $69.3 million to increase general liability insurance
reserves in 2014.
Includes the write-off of deposits and pre-acquisition costs for land option contracts we elected not to pursue of
$6.1 million, $3.1 million, and $2.3 million in 2014, 2013, and 2012, respectively, and net losses related to the
redemption of debt totaling $8.6 million, $26.9 million, and $32.1 million in 2014, 2013, and 2012, respectively.
Also includes lease exit charges of $8.7 million in 2014 resulting from the relocation of our corporate headquarters
and charges totaling $41.2 million in 2013 resulting from a contractual dispute related to a previously completed
luxury community.
(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.
23
Units
Dollars
(a)
(b)
(c)
Home sale revenues
Home sale revenues for 2014 were higher than 2013 by $237.9 million, or 4%. The increase was attributable to an 8%
increase in the average selling price partially offset by a 3% decrease in closings. The increase in average selling price
occurred in substantially all of our local markets and reflects an ongoing shift in our revenue mix toward move-up and active
adult buyers along with improved market conditions that have allowed for increased sale prices, including higher levels of
house options and lot premiums. The decrease in closings resulted from the lower net new order volume in 2014 combined
with the lower beginning of the year backlog in 2014 compared with the beginning of the year 2013. The nature of the
homebuilding industry results in a lag between when the significant investments we have made in land acquisition and
development the last two years yields new community openings and related home closings.
Home sale revenues for 2013 were higher than 2012 by $871.9 million, or 19%. The increase was attributable to an 11%
increase in the average selling price combined with an 8% increase in closings. The increase in average selling price occurred
in substantially all of our local markets and reflects an ongoing shift in our revenue mix toward move-up and active adult
buyers and improved market conditions that have allowed for increased sale prices, including higher levels of house options
and lot premiums. The increase in closings reflected improved consumer demand for new homes in the majority of our local
markets.
Home sale gross margins
Home sale gross margins were 23.3% in 2014, compared with 20.5% in 2013 and 15.8% in 2012. The gross margin
improvement was broad-based as substantially all of our operating divisions experienced higher gross margins in 2014 compared
with the prior year periods. These improved gross margins reflect a combination of factors, including an improved pricing
environment, contributions from our strategic pricing and house cost reduction initiatives, and lower amortized interest costs
(3.4%, 4.7%, and 4.9% in 2014, 2013, and 2012, respectively). The lower amortized interest costs resulted from a significant
reduction in our outstanding debt in recent years. Gross margins during 2014 and 2013 also benefited from lower land impairments
of $3.9 million and $2.9 million, respectively, compared with $13.4 million in 2012.
Land sales
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 revenues and their related gains or losses vary
between periods, depending on the timing of land sales and our strategic operating decisions. Land sales had margin
contributions of $10.8 million, $9.9 million, and $11.8 million in 2014, 2013, and 2012, respectively.
SG&A
SG&A as a percentage of home sale revenues was 11.8% in 2014 compared with 10.5% in 2013 and 11.3% in 2012.
The gross dollar amount of our SG&A increased $99.3 million, or 17%, in 2014 compared with 2013. SG&A includes charges
totaling $69.3 million to increase general liability insurance reserves in 2014. Additionally, we incurred $7.6 million and $15.0
million in 2014 and 2013, respectively, of employee severance, retention, relocation, and related costs attributable to the
relocation of our corporate headquarters. The remaining increases in gross overhead dollars in 2014 compared with 2013 were
primarily due to variable costs related to the higher revenue volume.
The gross dollar amount of our SG&A increased $54.0 million, or 11%, in 2013 compared with 2012. In 2013, SG&A
includes costs associated with the relocation of our corporate headquarters totaling $15.0 million. The remainder of the
increase is due to variable costs related to the higher revenue volume combined with higher incentive compensation accruals
resulting from our improved operating results.
Equity in earnings of unconsolidated entities
Equity in earnings of unconsolidated entities was $8.2 million, $1.0 million, and $3.9 million for 2014, 2013, and 2012,
respectively. The majority of our unconsolidated entities represent land development joint ventures. Consequently, their results
vary between periods depending on the timing of transactions and circumstances specific to each entity.
24
Other expense, net
Other expense, net includes the following ($000’s omitted):
Write-offs of deposits and pre-acquisition costs (Note 3)
Loss on debt retirements (Note 6)
Lease exit and related costs
Amortization of intangible assets (Note 1)
Miscellaneous expense, net
2014
2013
2012
$
$
6,099
8,584
9,609
13,033
1,420
38,745
$
$
3,122
26,930
2,778
13,100
34,823
80,753
$
$
2,278
32,071
7,306
13,100
11,543
66,298
For additional information on each of the above, see the applicable Notes to the Consolidated Financial Statements.
Miscellaneous expense, net includes charges of $41.2 million in 2013 resulting from a contractual dispute related to a
previously completed luxury community and $5.1 million in 2012 related to the write-down of notes receivable.
Interest income, net
Interest income, net was similar in 2014, 2013, and 2012 based on our invested cash balances and low returns on
invested cash available in the current interest rate environment.
Net new orders
Net new orders decreased 3% in 2014 compared with 2013. The number of active communities increased slightly (up
4% to 598 at December 31, 2014) in 2014 versus 2013, though this was primarily due to our acquisition of certain real estate
assets from Dominion Homes in August 2014 (see Note 1 to the Consolidated Financial Statements). Excluding such assets,
our active community count actually declined in 2014 as our pace of new community openings lagged the number of
community close-outs. The cancellation rate (canceled orders for the period divided by gross new orders for the period) was
unchanged from 2013 to 2014 at 15%. Ending backlog units, which represent orders for homes that have not yet closed,
increased 1% at December 31, 2014 compared with December 31, 2013 as measured in units and increased by 2% over the
prior year period as measured in dollars due to the increase in our average selling price.
Net new order levels decreased 10% in 2013 compared with 2012 primarily due to selling from 14% fewer active
communities in 2013 (577 active communities at December 31, 2013). The cancellation rate was unchanged from 2012 to
2013 at 15%. Ending backlog units decreased 11% at December 31, 2013 compared with December 31, 2012 due to the
decrease in net new orders but only decreased by 2% over the prior period as measured in dollars due to the increase in our
average selling price.
Homes in production
The following is a summary of our homes in production at December 31, 2014 and 2013:
Sold
Unsold
Under construction
Completed
Models
Total
2014
2013
3,761
3,723
815
483
1,298
981
6,040
813
338
1,151
1,034
5,908
The number of homes in production at December 31, 2014 was essentially flat (2% higher) compared to December 31,
2013. As part of our inventory management strategies, we will continue to maintain reasonable inventory levels relative to
demand in each of our markets. Aggressively controlling the start of construction homes unsold to customers ("spec homes") is
a component of our strategic pricing and inventory turns objectives. We continue to focus on maintaining a low level of spec
home inventory, especially our completed specs ("final specs"), though inventory levels tend to fluctuate throughout the year.
25
Controlled lots
The following is a summary of our lots under control at December 31, 2014 and 2013:
Northeast
Southeast
Florida
Texas
North
Southwest
Total
December 31, 2014
December 31, 2013
Owned
Optioned
Controlled
Owned
Optioned
Controlled
6,389
11,195
20,511
11,847
17,865
28,413
96,220
4,185
4,785
7,119
7,435
8,358
2,691
10,574
15,980
27,630
19,282
26,223
31,104
34,573
130,793
7,423
12,702
21,805
12,038
11,785
29,459
95,212
2,762
4,296
6,956
3,860
7,952
2,440
10,185
16,998
28,761
15,898
19,737
31,899
28,266
123,478
Developed (%)
25%
23%
25%
24%
18%
23%
Of our controlled lots, 96,220 and 95,212 were owned and 34,573 and 28,266 were under land option agreements at
December 31, 2014 and 2013, respectively. While competition for well-positioned land is robust, we continue to pursue
strategic land positions that meet our underwriting requirements. The remaining purchase price under our land option
agreements totaled $1.9 billion at December 31, 2014. These land option agreements, which generally may be canceled at our
discretion and in certain cases extend over several years, are secured by deposits and pre-acquisition costs totaling $127.3
million, of which only $7.7 million is refundable.
Homebuilding Segment Operations
Our homebuilding operations represent our core business. Homebuilding offers a broad product line to meet the needs
of homebuyers in our targeted markets. As of December 31, 2014, we conducted our operations in 49 markets located
throughout 26 states. For reporting purposes, our Homebuilding operations are aggregated into six reportable segments:
Northeast:
Connecticut, Maryland, Massachusetts, New Jersey, New York, Pennsylvania,
Rhode Island, Virginia
Southeast:
Georgia, North Carolina, South Carolina, Tennessee
Florida:
Texas:
North:
Florida
Texas
Illinois, Indiana, Kentucky, Michigan, Minnesota, Missouri, Northern California, Ohio,
Washington
Southwest:
Arizona, Nevada, New Mexico, Southern California
We also have a reportable segment for our financial services operations, which consist principally of mortgage banking
and title operations. The Financial Services segment operates generally in the same markets as the Homebuilding segments.
26
The following table presents selected financial information for our reportable Homebuilding segments:
Home sale revenues:
Northeast
Southeast
Florida
Texas
North
Southwest
Income before income taxes:
Northeast
Southeast
Florida
Texas
North
Southwest
Other homebuilding (a)
Closings (units):
Northeast
Southeast
Florida
Texas
North
Southwest
Average selling price:
Northeast
Southeast
Florida
Texas
North
Southwest
Operating Data by Segment ($000's omitted)
Years Ended December 31,
2014
FY 2014 vs.
FY 2013
2013
FY 2013 vs.
FY 2012
2012
$
708,465
(10)% $
784,087
8 % $
722,691
949,134
913,758
856,613
1,428,461
805,740
13 %
14 %
6 %
18 %
(18)%
842,856
800,331
804,806
1,214,332
977,898
22 %
29 %
21 %
23 %
13 %
689,163
620,156
666,759
989,510
864,133
$ 5,662,171
4 % $ 5,424,309
19 % $ 4,552,412
$
103,865
(6)% $
110,246
50 % $
156,513
190,441
133,005
197,230
136,357
(282,234)
29 %
36 %
19 %
20 %
(24)%
19 %
$
635,177
33 % $
1,568
3,160
2,752
3,750
3,684
2,282
(15)%
5 %
— %
— %
8 %
(24)%
121,055
139,673
111,431
164,348
179,163
(346,803)
479,113
1,835
3,022
2,747
3,768
3,401
2,993
17,196
(3)% $
17,766
$
$
452
300
332
228
388
353
329
6 % $
8 %
14 %
7 %
9 %
8 %
8 % $
427
279
291
214
357
327
305
87 %
90 %
83 %
94 %
124 %
(24)%
203 % $
2 %
10 %
17 %
8 %
10 %
(1)%
8 %
6 % $
12 %
10 %
12 %
12 %
14 %
11 % $
73,345
64,678
73,472
60,979
84,597
79,887
(278,967)
157,991
1,800
2,757
2,340
3,487
3,103
3,018
16,505
401
250
265
191
319
286
276
(a) Other homebuilding includes the amortization of intangible assets, amortization of capitalized interest, and other
items not allocated to the operating segments. Other homebuilding also included the following: losses on debt
retirements of $8.6 million, $26.9 million, and $32.1 million, for 2014, 2013, and 2012, respectively; charges
totaling $69.3 million to increase general liability insurance reserves in 2014; costs associated with the relocation
of our corporate headquarters totaling $16.3 million and $15.4 million in 2014 and 2013, respectively; and charges
of $41.2 million in 2013 resulting from a contractual dispute related to a previously completed luxury community.
27
The following tables present additional selected financial information for our reportable Homebuilding segments:
Net new orders - units:
Northeast
Southeast
Florida
Texas
North
Southwest
Net new orders - dollars:
Northeast
Southeast
Florida
Texas
North
Southwest
Cancellation rates:
Northeast
Southeast
Florida
Texas
North
Southwest
Unit backlog:
Northeast
Southeast
Florida
Texas
North
Southwest
Backlog dollars:
Northeast
Southeast
Florida
Texas
North
Southwest
Operating Data by Segment ($000's omitted)
Years Ended December 31,
2014
FY 2014 vs.
FY 2013
2013
FY 2013 vs.
FY 2012
2012
1,408
3,075
2,841
3,773
3,311
2,244
16,652
(23)%
(3)%
9 %
6 %
(1)%
(13)%
(3)%
1,834
3,164
2,595
3,563
3,347
2,577
17,080
(8)%
3 %
(6)%
(13)%
(9)%
(25)%
(10)%
1,997
3,066
2,747
4,117
3,661
3,451
19,039
$
649,202
(17)% $
782,474
(5)% $
820,609
944,567
954,892
881,843
1,336,114
792,319
$ 5,558,937
5 %
16 %
11 %
895,800
820,032
796,377
8 % 1,233,071
(9)%
866,812
3 % $ 5,394,566
14 %
12 %
(1)%
787,286
735,250
807,455
— % 1,228,743
(17)% 1,044,957
(1)% $ 5,424,300
12%
12%
10%
19%
13%
20%
15%
461
968
1,002
1,273
1,462
684
5,850
13%
12%
13%
22%
11%
19%
15%
621
1,053
913
1,250
1,213
722
5,772
(26)%
(8)%
10 %
2 %
21 %
(5)%
1 %
12%
13%
12%
22%
13%
15%
15%
622
911
1,065
1,455
1,267
1,138
6,458
— %
16 %
(14)%
(14)%
(4)%
(37)%
(11)%
$
215,977
(22)% $
275,239
(1)% $
276,851
301,033
349,968
311,424
518,431
247,028
(1)%
13 %
9 %
11 %
(5)%
305,600
308,834
286,195
465,480
260,448
21 %
7 %
(3)%
4 %
(30)%
252,656
289,133
294,623
446,741
371,534
$ 1,943,861
2 % $ 1,901,796
(2)% $ 1,931,538
28
The following table presents additional selected financial information for our reportable Homebuilding segments:
Land-related charges*:
Northeast
Southeast
Florida
Texas
North
Southwest
Other homebuilding
Operating Data by Segment ($000's omitted)
Years Ended December 31,
2014
FY 2014 vs.
FY 2013
2013
FY 2013 vs.
FY 2012
2012
$
2,824
1,826
487
321
3,227
816
1,667
407 % $
83 %
(55)%
68 %
(6)%
73 %
(43)%
$
11,168
15 % $
557
998
1,076
191
3,434
472
2,944
9,672
(69)% $
(27)%
403 %
(66)%
(24)%
(79)%
(54)%
1,794
1,363
214
556
4,546
2,254
6,468
(44)% $
17,195
* Land-related charges include land impairments, net realizable value adjustments for land held for sale, and write-
offs of deposits and pre-acquisition costs. Other homebuilding consists primarily of write-offs of capitalized interest
resulting from land-related charges. See Notes 3 and 4 to the Consolidated Financial Statements for additional
discussion of these charges.
Northeast:
For 2014, Northeast home sale revenues decreased 10% compared with 2013 due to a 15% decrease in closings offset by
a 6% increase in the average selling price. The decrease in closings occurred across all divisions. The increase in average selling
price occurred primarily in the New England and the Mid-Atlantic. The decreased income before income taxes resulted from
lower gross margins and increased overhead. Net new orders decreased 23%, reflecting lower order levels across all divisions
due in part to a lower active community count.
For 2013, Northeast home sale revenues increased 8% compared with 2012 due to a 6% increase in the average selling
price, combined with a 2% increase in closings. The increase in average selling price occurred primarily in New England and
Mid-Atlantic. The increased income before income taxes was due to higher revenues and improved gross margins and
overhead leverage. Net new orders decreased 8%, mainly due to lower order levels in the Mid-Atlantic due to fewer active
communities, offset in part by an increase in orders in New England.
Southeast:
For 2014, Southeast home sale revenues increased 13% compared with 2013 due to an 8% increase in the average selling
price combined with a 5% increase in closings. The increase in average selling price was due to increases across all divisions.
The increase in closing volumes was primarily due to increases in Georgia and the Coastal Carolinas. The increased income
before income taxes resulted from the higher revenues combined with improved gross margins. Net new orders decreased 3%
in 2014 mainly due to lower order levels in Tennessee, Charlotte, and the Coastal Carolinas.
For 2013, Southeast home sale revenues increased 22% compared with 2012 due to a 12% increase in the average selling
price, combined with a 10% increase in closings. The increase in average selling price was concentrated in Raleigh and
Tennessee. The increase in closing volumes was primarily due to increases in Charlotte and Raleigh. The increased income
before income taxes was due to the higher revenues and moderately improved gross margins. Net new orders increased 3% in
2013 led by our operations in Raleigh.
Florida:
For 2014, Florida home sale revenues increased 14% compared with 2013 due to a 14% increase in the average selling
price. The increase in average selling price occurred in both North and South Florida. Closings remained flat compared with
the prior year as the increase in closings in South Florida was offset by a decrease in closings in North Florida. The increased
income before income taxes for 2014 resulted from the higher revenues combined with improved gross margins. Net new
orders increased by 9% in 2014 due to an increase in active communities in South Florida.
29
For 2013, Florida home sale revenues increased 29% compared with 2012 due to a 10% increase in the average selling
price and a 17% increase in closings. The increase in closings was concentrated in North Florida while the increase in average
selling price occurred in both North and South Florida. The increased income before income taxes for 2013 resulted from the
higher revenues combined with improved gross margins and overhead leverage. Net new orders decreased by 6% in 2013 due
to fewer active communities in North Florida.
Texas:
For 2014, Texas home sale revenues increased 6% compared with the prior year period due to a 7% increase in average
selling price. The increase in average selling price was led by our operations in Central Texas and San Antonio. Closings were
consistent with the prior year as the increases in Dallas, Houston, and San Antonio were offset by a decrease in closings in
Central Texas. The increased income before income taxes for 2014 resulted from the higher revenues combined with improved
gross margins. Net new orders increased by 6% for 2014 while the number of active communities remained consistent with the
prior year.
For 2013, Texas home sale revenues increased 21% compared with the prior year period due to an 8% increase in
closings combined with a 12% increase in average selling price. The increase in closings was most significant in Houston and
Central Texas, while the increase in average selling price was led by our operations in Central Texas and Dallas. The increased
income before income taxes for 2013 resulted from the higher revenues combined with improved gross margins and overhead
leverage. Net new orders decreased by 13% for 2013 driven mainly by fewer active communities.
North:
For 2014, North home sale revenues increased 18% compared with the prior year period due to an 8% increase in
closings and a 9% increase in average selling price. The increase in average selling price was due to increases across all
divisions. The increase in closing volumes was primarily due to significant increases in the Midwest, including a small increase
from the acquisition of certain real estate assets from Dominion Homes in August 2014, but offset by decreases in other North
divisions. Demand in Northern California in particular has slowed in 2014 compared to 2013. The increase in income before
income taxes resulted from the higher revenues combined with improved gross margins in the majority of divisions. Net new
orders decreased by 1% in 2014 compared with 2013, mainly due to decreases in Illinois, St. Louis, Minnesota, and the Pacific
Northwest, partially offset by increases in other North divisions.
For 2013, North home sale revenues increased 23% compared with the prior year period due to a 10% increase in
closings and a 12% increase in average selling price. The increase in closing volumes was primarily due to significant
increases in Michigan and Northern California. The increase in average selling price was due to increases across all divisions.
The increase in income before income taxes resulted from the higher revenues combined with improved gross margins in every
division. Net new orders decreased by 9% in 2013 compared with 2012, mainly due to a decrease in Northern California, as we
purposely slowed sales pace in a number of communities by raising prices and limiting lot releases.
Southwest:
For 2014, Southwest home sale revenues decreased 18% compared with the prior year period due to a 24% decrease in
closings offset in part by an 8% increase in average selling price. Both the decrease in closings and the increase in average
selling price occurred across all divisions. The decrease in income before income taxes resulted from lower revenues combined
with lower gross margins. Net new orders decreased by 13% in 2014 compared with 2013 primarily due to fewer active
communities.
For 2013, Southwest home sale revenues increased 13% compared with the prior year period due to a 14% increase in
average selling price offset by a 1% decrease in closings. The increase in average selling price occurred across all divisions.
The decrease in closings was mainly due to decreases in Southern California and Las Vegas. The significant increase in income
before income taxes was due to higher revenues and gross margins. Net new orders decreased by 25% in 2013 compared with
2012 primarily due to fewer active communities.
30
Financial Services Operations
We conduct our Financial Services operations, which include mortgage and title 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 either third parties or with the Company. 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 servicing rights for only a short period of time. Operating as a captive business model primarily targeted
to supporting our Homebuilding operations, the business levels of our Financial Services operations are highly correlated to
Homebuilding. Our Homebuilding customers continue to account for substantially all loan production. We believe that our
capture rate, which represents loan originations from our Homebuilding operations as a percentage of total loan opportunities
from our Homebuilding operations, excluding cash closings, is an important metric in evaluating the effectiveness of our
captive mortgage business model. The following table presents selected financial information for our Financial Services
operations ($000’s omitted):
Mortgage operations revenues
$
Title services revenues
Total Financial Services revenues
Expenses
Equity in earnings of unconsolidated
entities
Income before income taxes
Total originations:
Loans
Principal
Years Ended December 31,
FY 2014 vs.
FY 2013
2013
FY 2013 vs.
FY 2012
2012
(14)% $
113,552
(17)% $
137,443
2 %
(11)%
(23)%
27,399
140,951
92,379
17 %
(12)%
(32)%
23,445
160,888
135,511
2014
97,787
27,851
125,638
71,239
(182)
$
54,581
33 %
12 % $
(137)
48,709
(26)%
91 % $
(186)
25,563
10,805
$ 2,656,683
(9)%
11,818
(4)% $ 2,765,509
4 %
11,322
10 % $ 2,509,928
Supplemental data:
Capture rate
Average FICO score
Loan application backlog
Funded origination breakdown:
FHA
VA
USDA
Other agency
Total agency
Non-agency
Years Ended December 31,
2014
2013
2012
80.2%
749
80.2%
746
81.9%
743
$
980,863
$
984,754
$ 1,178,321
10%
12%
2%
70%
94%
6%
16%
11%
3%
67%
97%
3%
22%
12%
3%
61%
98%
2%
Total funded originations
100%
100%
100%
31
Revenues
Total Financial Services revenues during 2014 decreased 11% compared with 2013. The decrease was primarily
attributable to lower origination volume resulting from lower home closings in our Homebuilding operations combined with
lower revenues per loan resulting from the increased competitiveness in the mortgage industry that began in 2013.
Total Financial Services revenues during 2013 decreased 12% compared with 2012. The decrease was primarily due to
lower revenues per loan resulting from the increased competitiveness in the mortgage industry that occurred in 2013. The
decline in revenues per loan more than offset the higher origination volume. Interest income, which is included in mortgage
operations revenues, was moderately higher in 2013 than in 2012 due to the increase in loan originations.
In recent years, the mortgage industry has experienced a significant overall tightening of lending standards and a shift
toward agency production. Adjustable rate mortgages (“ARMs”) accounted for 11% of funded loan production in 2014
compared with 5% and 3% in 2013 and 2012, respectively. The shift toward ARMs has contributed to lower profitability as
ARMs generally contain lower margins. Additionally, fixed rate mortgages tend to have higher servicing values. Beginning in
2013, competition increased in the industry, partially as the result of the mortgage industry's lower refinancing volume. We
expect this increased level of competition, and more challenging pricing environment, to continue for the foreseeable future.
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 that the loans sold 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 at fault, we either repurchase the loans from
the investors or reimburse the investors' losses (a “make-whole” payment).
During 2014, we reduced our loan origination liabilities by $18.6 million based on settlements of various pending
repurchase requests and current conditions. During 2012, we recorded $49.0 million of provisions for losses as a change in
estimate primarily to reflect projected claim volumes in excess of previous estimates. Reserves provided and related
adjustments are reflected in Financial Services expenses. Given the ongoing volatility in the mortgage industry, changes in
values of underlying collateral over time, and other uncertainties regarding the ultimate resolution of these claims, actual costs
could differ from our current estimates. See Note 12 in the Consolidated Financial Statements.
The mortgage subsidiary of Centex also sold loans to a bank for inclusion in residential mortgage-backed securities
(“RMBSs”) issued by the bank. In connection with these sales, Centex's mortgage subsidiary entered into agreements pursuant
to which it may be required to indemnify the bank for losses incurred by investors in the RMBSs arising out of material errors
or omissions in certain information provided by the mortgage subsidiary relating to the loans and loan origination process. In
2011, the bank notified us that it has been named defendant in two lawsuits alleging various violations of federal and state
securities laws asserting that untrue statements of material fact were included in the registration statements used to market the
sale of two RMBS transactions. See Note 12 in the Consolidated Financial Statements.
Income before income taxes
The increased income before income taxes for 2014 as compared with 2013 resulted from lower loss reserves related to
loans originated in previous years, partially offset by less favorable loan pricing.
The increased income before income taxes for 2013 as compared with 2012 was due to higher origination volumes and
lower loss reserves related to loans originated in previous years, partially offset by less favorable loan pricing.
32
Income Taxes
Our effective tax rate is affected by a number of factors, the most significant of which are the valuation allowance related
to our deferred tax assets, changes in tax laws or other circumstances that impact the value of our deferred tax assets, and
changes in our unrecognized tax benefits. Due to the effects of these factors, our effective tax rates in 2014, 2013, and 2012 are
not correlated to the amount of our income before income taxes. Income tax expense for 2014 reflects a reversal of a portion of
our valuation allowance, primarily related to certain of our state deferred tax assets, along with the favorable resolution of
certain federal and state income tax matters. The income tax benefit for 2013 resulted from the reversal of substantially all of
the valuation allowance related to our federal deferred tax assets and certain of our state deferred tax assets, while the income
tax benefit for 2012 resulted primarily from the favorable resolution of certain federal and state income tax matters.
We evaluate our deferred tax assets each period to determine if a valuation allowance is required based on whether it is
"more likely than not" that some portion of the deferred tax assets would not be realized. The ultimate realization of these
deferred tax assets is dependent upon the generation of sufficient taxable income during future periods. We conduct our
evaluation by considering all available positive and negative evidence.
Our income tax expense (benefit) for 2014 and 2013 included benefits of $45.6 million and $2.1 billion, respectively,
related to reversals of valuation allowance previously recorded against our deferred tax assets. The 2014 reversal related
primarily to certain of our state deferred tax assets as the result of an increase in expected future taxable income in certain
jurisdictions. In 2013, we determined that the valuation allowance against substantially all of our federal deferred tax assets
and a significant portion of our state deferred tax assets was no longer required. The principal positive evidence that led to the
reversal of the valuation allowance in 2013 included: (1) our emergence from a three-year cumulative loss in 2013; (2) the
significant positive income we generated during 2012 and 2013, including seven consecutive quarters of pretax income as of
December 31, 2013; (3) continued improvements in 2013 over recent years in other key operating metrics, including revenues,
gross margin, and overhead leverage; (4) our forecasted future profitability; (5) improvement in our financial position; and (6)
significant evidence that conditions in the U.S. housing industry are more favorable than in recent years and our belief that
conditions will continue to be favorable over the long-term.
After careful evaluation of all available positive and negative evidence, and giving more weight to objectively verifiable
evidence over more subjective evidence, we concluded as of December 31, 2014 and December 31, 2013, that it was "more
likely than not" that substantially all of our federal deferred tax assets and a significant portion of our state deferred tax assets
would be realized. Even if industry conditions weaken from current levels, we believe we will be able to adjust our operations
to sustain long-term profitability.
Liquidity and Capital Resources
We finance our land acquisition, development, and construction activities and financial services operations by 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. Based on our current financial condition and credit
relationships, we believe that our operations and borrowing resources are sufficient to provide for our current and foreseeable
capital requirements. However, we continue to evaluate the impact of market conditions on our liquidity and may determine
that modifications are appropriate.
At December 31, 2014, we had unrestricted cash and equivalents of $1.3 billion and senior notes of $1.8 billion. We also
had restricted cash balances of $16.4 million. Other financing sources include an unsecured revolving credit facility, a separate
letter of credit agreement, and surety bond arrangements.
We follow a diversified investment approach for our cash and equivalents by maintaining such funds with a diversified
portfolio of banks within our group of relationship banks in high quality, highly liquid, short-term investments, including
money market funds and federal government or agency securities. We monitor our investments with each bank and do not
believe our cash and equivalents are exposed to any material risk of loss. However, there can be no assurances that losses of
principal balance on our cash and equivalents will not occur.
Our ratio of debt to total capitalization, excluding our Financial Services debt, was 27.5% at December 31, 2014.
33
During 2014, we retired prior to their scheduled maturity dates $245.7 million of senior notes. We recorded losses related
to these transactions totaling $8.6 million. Losses on these transactions included the write-off of unamortized discounts,
premiums, and transaction fees and are reflected in other expense, net. During 2013 and 2012, we retired senior notes totaling
$461.4 million and $592.4 million, respectively.
Revolving credit facility
In July 2014, we entered into a senior unsecured revolving credit facility (the “Revolving Credit Facility”) maturing in
July 2017. The Revolving Credit Facility provides for maximum borrowings of $500 million and contains an uncommitted
accordion feature that could increase the size of the Revolving Credit Facility to $1.0 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 available borrowing capacity under the Revolving Credit Facility and may total no more than the greater of: (i) 50%
of the size of the facility or (ii) $300 million in the aggregate. The interest rate on borrowings under the Revolving Credit
Facility may be based on either the London Interbank Offered Rate or Base Rate plus an applicable margin, as defined. At
December 31, 2014, we had no borrowings outstanding and $208.4 million of letters of credit issued under the Revolving
Credit Facility.
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 December 31, 2014, we were in compliance with all covenants. Outstanding balances under the
Revolving Credit Facility are guaranteed by certain of our wholly-owned subsidiaries.
Limited recourse notes payable
We maintain limited recourse collateralized notes payable with third parties totaling $22.3 million and $7.5 million at
December 31, 2014 and 2013, respectively. These notes have maturities ranging up to 6 years, are collateralized by the
applicable land positions to which they relate, have no recourse to any other assets, and are classified within Accrued and other
liabilities.
Pulte Mortgage
Pulte Mortgage provides mortgage financing for the majority of our home closings by utilizing its own funds and funds
made available pursuant to credit agreements with third parties or through intercompany borrowings. Pulte Mortgage uses
these resources to finance its lending activities until the mortgage loans are sold in the secondary market, which generally
occurs within 30 days.
Pulte Mortgage maintains a master repurchase agreement (the “Repurchase Agreement”) with third party lenders. In
September 2014, Pulte Mortgage entered into an amendment to the Repurchase Agreement that extended the effective date to
September 2015 and established a borrowing capacity of $150.0 million. The capacity will reduce to $99.8 million in February
2015, and will increase again to $150.0 million in June 2015. The purpose for the change in capacity during the term of the
agreement is to lower associated fees during seasonally low volume periods when the additional capacity is unnecessary.
Borrowings under the Repurchase Agreement are secured by residential mortgage loans available-for-sale. 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 $140.2 million and $105.7 million outstanding under the
Repurchase Agreement at December 31, 2014, and 2013, respectively, and was in compliance with all of its covenants and
requirements.
Stock repurchase programs
In previous years, our Board of Directors authorized and announced a share repurchase program. In October 2014, our
Board of Directors approved an increase of $750.0 million to such authorization. We repurchased 12.9 million and 7.2 million
shares under the repurchase authorization for a total of $245.8 million and $118.1 million in 2014 and 2013, respectively.
There were no repurchases under these programs during 2012. At December 31, 2014, we had remaining authorization to
repurchase $738.5 million of common shares.
34
Dividends
We reinstated our quarterly cash dividend in July 2013. During 2013, we declared three cash dividends of $0.05 per
common share each. During 2014, we declared cash dividends of $0.05 per common share in each of the first three quarters
and $0.08 per common share in the fourth quarter for a total of $86.4 million.
Cash flows
Operating activities
Our net cash provided by operating activities in 2014 was $309.2 million, compared with $881.1 million and
$760.1 million in 2013 and 2012, respectively. Generally, the primary drivers of our cash flow from operations are profitability
and changes in inventory levels. Our positive cash flow from operations for 2014 was primarily due to our income before
income taxes of $689.8 million. These cash flows were partially offset in 2014 by a net increase in inventories of $346.6
million as the result of an almost 40% increase in investment spending over the prior year to support future operations.
Additionally, residential mortgage loans available-for-sale increased $53.7 million as the result of an increase in home closings
in the month of December compared with the prior year.
Our positive cash flow from operations for 2013 was primarily due to our income before income taxes of $527.8 million
combined with a net decrease in inventories of $265.1 million and a reduction of $28.4 million in residential mortgage loans
available-for-sale. The inventory decrease resulted from a reduction in homes in production and lower land inventory
consistent with the decline in the number of our active communities while the decrease in residential mortgage loans available-
for-sale resulted from a decrease in the home closings in the month of December compared with the prior year.
Our positive cash flow from operations for 2012 was primarily due to our net income of $206.1 million combined with a
net decrease in inventories of $455.2 million. The inventory decrease resulted from lower reinvestment in land inventory
combined with a significant reduction in spec homes in production, partially offset by an increase in sold homes in production.
Investing activities
Investing activities are generally not a significant source or use of cash for us. Net cash used in investing activities
totaled $67.6 million in 2014, compared with $46.0 million in 2013 and net cash provided by investing activities of $9.7 million
in 2012. The use of cash from investing activities in 2014 was primarily due to the acquisition of certain real estate assets from
Dominion Homes (see Note 1). Additionally, capital expenditures increased in 2014 as the result of new community openings
and the relocation of our corporate headquarters. These cash outflows were partially offset by a $55.0 million reduction in
restricted cash related to letters of credit as a result of the Revolving Credit Facility entered into in July 2014.
The use of cash from investing activities in 2013 was primarily due to $28.9 million of capital expenditures, a $12.3
million increase in residential mortgage loans held for investment, and a $4.2 million increase in the restricted cash we were
required to maintain under our letter of credit facilities.
The positive cash flow from investing activities in 2012 was primarily due to a $28.7 million decrease in the restricted
cash we are required to maintain under our letter of credit facilities, which resulted from a reduction in letters of credit
outstanding, offset by capital expenditures and investments in unconsolidated entities.
Financing activities
Net cash used in financing activities was $529.1 million in 2014, compared with net cash used of $659.6 million and
$448.2 million in 2013 and 2012, respectively. During the last three years, we significantly reduced our outstanding senior
notes through a variety of transactions, including scheduled maturities, open market repurchases, early redemptions as provided
within indenture agreements, and tender offers. Completion of these transactions required the use of $250.6 million,
$479.8 million, and $618.8 million of cash in 2014, 2013, and 2012, respectively. We borrowed an incremental $34.6 million
under the Repurchase Agreement during 2014, repaid $33.1 million of borrowings in 2013, and borrowed $138.8 million in
2012, the year in which it was put in place. Cash used in financing activities for 2014 also reflects dividend payments of $75.6
million and the repurchase of common shares for $253.0 million, partially offset by funds provided by the issuance of common
shares in connection with employee stock option exercises.
35
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 to our customers 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.
Contractual Obligations and Commercial Commitments
The following table summarizes our payments under contractual obligations as of December 31, 2014:
Total
2015
Payments Due by Period
($000’s omitted)
2016-2017
2018-2019
After 2019
Contractual obligations:
Long-term debt (a)
Operating lease obligations
Other long-term liabilities (b)
Total contractual obligations (c)
$
$
3,160,188
143,723
26,844
3,330,755
$
$
350,986
28,744
1,210
380,940
$
$
756,375
44,530
15,518
816,423
$
$
134,252
27,716
5,046
167,014
$
$
1,918,575
42,733
5,070
1,966,378
(a)
(b)
Represents principal and interest payments related to our senior notes.
Represents limited recourse collateralized financing arrangements and related interest payments.
(c) We do not have any payments due in connection with capital lease or long-term purchase obligations.
We are subject to certain obligations associated with entering into contracts (including land option contracts) for the
purchase, development, and sale of real estate in the routine conduct of our business. Option contracts for the purchase of land
enable us to defer acquiring portions of properties owned by third parties and unconsolidated entities until we have determined
whether to exercise our option, which may serve to reduce our financial risks associated with long-term land holdings. At
December 31, 2014, we had $127.3 million of deposits and pre-acquisition costs relating to option agreements to acquire
34,573 lots with a remaining purchase price of $1.9 billion. We expect to acquire the majority of such land within the next two
years and the remainder thereafter.
At December 31, 2014, we had $32.9 million of gross unrecognized tax benefits and $17.3 million of related accrued
interest and penalties. We are currently under examination by various taxing jurisdictions and anticipate finalizing the
examinations with certain jurisdictions within the next twelve months. However, the final outcome of these examinations is not
yet determinable. The statute of limitations for our major tax jurisdictions remains open for examination for tax years 2004 -
2014.
36
The following table summarizes our other commercial commitments as of December 31, 2014:
Other commercial commitments:
Total
Amount of Commitment Expiration by Period
($000’s omitted)
2016-2017
2018-2019
2015
After 2019
Guarantor credit facilities (a)
Non-guarantor credit facilities (b)
Total commercial commitments (c)
$
$
500,000
150,000
650,000
$
$
— $
500,000
150,000
—
150,000
$
500,000
$
$
— $
—
— $
—
—
—
(a)
(b)
The $500.0 million in 2016-2017 represents the capacity of our unsecured revolving credit facility, under which no
borrowings were outstanding and $208.4 million of letters of credit were issued at December 31, 2014.
Represents the capacity of the Repurchase Agreement, of which $140.2 million was outstanding at December 31,
2014, and which expires in September 2015. Effective September 2014, the borrowing capacity under the agreement
was set at $150.0 million. The capacity will reduce to $99.8 million in February 2015, and will increase again to
$150.0 million in June 2015.
(c)
The above table excludes an aggregate $1.0 billion of surety bonds, which typically do not have stated expiration
dates.
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 December 31, 2014, we had outstanding
letters of credit of $212.1 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 $1.0 billion at December 31, 2014,
are typically outstanding over a period of approximately three to five years. Because significant construction and development
work has been performed related to the applicable projects but has 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 December 31, 2014, these agreements had an aggregate remaining purchase price of $1.9 billion.
Pursuant to these land option agreements, we provide a deposit to the seller as consideration for the right to purchase land at
different times in the future, usually at predetermined prices. In certain instances, we are required to record the land under
option as if we own it. At December 31, 2014, we recorded assets of $30.2 million as land, not owned, under option
agreements.
At December 31, 2014, aggregate outstanding debt of unconsolidated joint ventures was $25.8 million, of which our
proportionate share was $11.6 million. Of this amount, we provided limited recourse guaranties for $0.3 million at
December 31, 2014. See Note 5 to the Consolidated Financial Statements for additional information.
37
Critical Accounting Policies and Estimates
The accompanying consolidated financial statements were prepared in conformity with U.S. generally accepted
accounting principles. When more than one accounting principle, or the method of its application, is generally accepted, we
select the principle or method that is appropriate in our specific circumstances (see Note 1 of our Consolidated Financial
Statements). Application of these accounting principles requires us to make estimates about the future resolution of existing
uncertainties; as a result, actual results could differ from these estimates. In preparing these consolidated financial statements,
we have made our best estimates and judgments of the amounts and disclosures included in the consolidated financial
statements, giving due regard to materiality.
Revenue recognition
Homebuilding – Homebuilding revenue and related profit are generally recognized when title to and possession of the
property are transferred to the buyer. In situations where the buyer’s financing is originated by Pulte Mortgage, our wholly-
owned mortgage subsidiary, and the buyer has not made an adequate initial or continuing investment, the profit on such sale is
deferred until the sale of the related mortgage loan to a third-party investor has been completed. If there is a loss on the sale of
the property, the loss on such sale is recognized at the time of closing.
Financial Services – Mortgage servicing fees represent fees earned for servicing loans for various investors. Servicing
fees are based on a contractual percentage of the outstanding principal balance, or a contracted set fee in the case of certain sub-
servicing arrangements, and are credited to income when related mortgage payments are received or the sub-servicing fees are
earned. 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. Loans are placed on non-accrual
status once they become greater than 90 days past due their contractual terms. Subsequent payments received are applied
according to the contractual terms of the loan.
Inventory
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, and commissions and closing
costs applicable to the home. 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 record valuation adjustments on land inventory when events and circumstances indicate that they may be impaired
and when the cash flows estimated to be generated by those assets are less than their carrying amounts. For communities that
demonstrate indicators of impairment, we compare the expected undiscounted cash flows for these communities to their
carrying value. For those communities whose carrying values exceed the expected undiscounted cash flows, we calculate the
fair value of the community. Impairment charges are required to be recorded if the fair value of the community’s inventory is
less than its carrying value.
38
We generally determine the fair value of each community’s inventory 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 and sale incentives, expected sales paces and cancellation rates, expected
land development and construction timelines, and anticipated land development, construction, and overhead costs. Such
estimates must be made for each individual community and may vary significantly between communities. Due to uncertainties
in the estimation process, the significant volatility in demand for new housing, and the long life cycles of many communities,
actual results could differ significantly from such estimates.
Residential mortgage loans available-for-sale
In accordance with ASC 825, “Financial Instruments” (“ASC 825”), we use the fair value option for our residential
mortgage loans available-for-sale. Election of the fair value option for residential mortgage loans available-for-sale allows a
better offset of the changes in fair values of the loans and the derivative instruments used to economically hedge them without
having to apply complex hedge accounting provisions. Changes in the fair value of these loans are reflected in revenues as they
occur.
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 repurchase the loan from
the investors or reimburse the investors' losses (a “make-whole” payment).
Because we generally do not retain the servicing rights to the loans we originate, information regarding the current and
historical performance, credit quality, and outstanding balances of such loans is limited. Estimating these loan origination
liabilities is further complicated by uncertainties surrounding numerous external factors, such as various macroeconomic factors
(including unemployment rates and changes in home prices), actions taken by third parties, including the parties servicing the
loans, and the U.S. federal government in its dual capacity as regulator of the U.S. mortgage industry and conservator of the
government-sponsored enterprises commonly known as Fannie Mae and Freddie Mac, which own or guarantee the majority of
mortgage loans in the U.S. Most requests received to date relate to make-whole payments on loans that have been foreclosed.
Requests undergo extensive analysis to confirm the exposure, attempt to cure the identified defect, and, when necessary,
determine our liability. We establish liabilities for such anticipated losses based upon, among other things, the level of current
unresolved repurchase requests, the volume of estimated probable future repurchase requests, our ability to cure the defects
identified in the repurchase requests, and the severity of the estimated loss upon repurchase. Determining these estimates and
the resulting liability requires a significant level of management judgment.
During 2014, we reduced our loan origination liabilities by $18.6 million based on settlements of various pending
repurchase requests and current conditions. During 2012, we recorded $49.0 million of provisions for losses as a change in
estimate primarily to reflect projected claim volumes in excess of previous estimates. Reserves provided and related
adjustments are reflected in Financial Services expenses. Given the ongoing volatility in the mortgage industry, changes in
values of underlying collateral over time, and other uncertainties regarding the ultimate resolution of these claims, actual costs
could differ from our current estimates.
Intangible assets
We have recorded intangible assets related to tradenames acquired with the Centex merger completed in 2009 and the
Del Webb merger completed in 2001, which are being amortized over their estimated useful lives. The carrying values and
ultimate realization of these assets are dependent upon estimates of future earnings and benefits that we expect to generate from
their use. If we determine that the carrying values of intangible assets may not be recoverable based upon the existence of one
or more indicators of impairment, we use a projected undiscounted cash flow method to determine if impairment exists. If the
carrying values of the intangible assets exceed the expected undiscounted cash flows, then we measure impairment as the
difference between the fair value of the asset and the recorded carrying value. To date, no impairments relating to tradenames
have been recorded. However, if our expectations of future results and cash flows decrease significantly, or if our strategy
related to the use of the intangible assets changes, the related intangible assets may become impaired.
39
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 ten years. We estimate the costs to be incurred under these warranties and record a liability in the amount of
such costs at the time product revenue is recognized. Factors that affect our warranty liability include the number of homes
sold, historical and anticipated rates of warranty claims, and the cost per claim. We periodically assess the adequacy of our
recorded warranty liability for each geographic market in which we operate and adjust the amounts as necessary. Actual
warranty costs in the future could differ from our estimates.
Self-insured risks
At any point in time, we are managing over 1,000 individual claims related to general liability, property, errors and
omission, 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 product 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 an estimate 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. These estimates 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 reported and resolved over an extended period often
exceeding ten years. In certain instances, we have the ability to recover a portion of our costs under various insurance policies
or from our subcontractors or other third parties. Estimates of such amounts are recorded when recovery is considered
probable.
During 2014, we recorded a change in estimate increasing general liability insurance reserves by $69.3 million. Such
additional reserves were primarily driven by estimated costs associated with siding repairs in certain previously completed
communities that, in turn, impacted actuarial estimates for potential future claims. Adjustments to reserves are recorded in the
period in which the change in estimate occurs. 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. Costs associated with our insurance programs are classified within selling, general, and administrative
expenses.
Our recorded reserves for all such claims totaled $710.2 million and $668.1 million at December 31, 2014 and 2013,
respectively, the vast majority of which relate to general liability claims. 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 72% and 78% of the total general liability reserves at December 31, 2014 and
2013, 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. Because
of the inherent uncertainty in estimating future losses related to these claims, actual costs could differ significantly from
estimated costs. Based on the actuarial analyses performed, we believe the range of reasonably possible losses related to these
claims is $650 million to $825 million. While this range represents our best estimate of our ultimate liability related to these
claims, due to a variety of factors, including those factors described above, there can be no assurance that the ultimate costs
realized by us will fall within this range.
Income taxes
In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is primarily dependent upon the
generation of future taxable income during the periods in which those temporary differences become deductible. In
determining the future tax consequences of events that have been recognized in the financial statements or tax returns, judgment
is required. Differences between the anticipated and actual outcomes of these future tax consequences could have a material
impact on the consolidated results of operations or financial position.
40
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 follow the provisions of ASC 740, “Income Taxes” (“ASC 740”),
which prescribes a minimum recognition threshold a tax position is required to meet before being recognized in the financial
statements. Significant judgment is required to evaluate uncertain tax positions. Our evaluations of tax positions consider a
variety of factors, including changes in facts or circumstances, changes in law, correspondence with taxing authorities, and
effective settlements of audit issues. Changes in the recognition or measurement of uncertain tax positions could result in
material increases or decreases in income tax expense (benefit) in the period in which the change is made. Interest and
penalties related to unrecognized tax benefits are recognized as a component of income tax expense (benefit).
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are subject to interest rate risk on our rate-sensitive financings to the extent long-term rates decline. The following
tables set forth, as of December 31, 2014 and 2013, our rate-sensitive financing obligations, principal cash flows by scheduled
maturity, weighted-average interest rates, and estimated fair value ($000’s omitted).
As of December 31, 2014 for the
Years ending December 31,
2015
2016
2017
2018
2019
Thereafter
Total
Fair
Value
Rate-sensitive liabilities:
Fixed interest rate debt:
Senior notes
Average interest rate
Rate-sensitive liabilities:
Fixed interest rate debt:
Senior notes
Average interest rate
$ 237,994
$ 465,245
$ 123,000
$
— $
— $ 1,000,000
$1,826,239
$ 1,952,774
5.25%
6.50%
7.63%
—%
—%
6.71%
6.53%
As of December 31, 2013 for the
Years ending December 31,
2014
2015
2016
2017
2018
Thereafter
Total
Fair
Value
$
— $ 333,647
$ 465,245
$ 123,000
$
— $ 1,150,000
$2,071,892
$ 2,070,744
—%
5.24%
6.50%
7.63%
—%
6.80%
6.53%
Derivative instruments and hedging activities
Pulte Mortgage is exposed to market risks from commitments to lend, movements in interest rates, and canceled or
modified commitments to lend. A commitment to lend at a specific interest rate (an interest rate lock commitment) is a
derivative financial instrument (interest rate is locked to the borrower). The interest rate risk continues through the loan closing
and until the loan is sold to an investor. We are generally not exposed to variability in cash flows of derivative instruments for
more than approximately 75 days. In periods of rising interest rates, the length of exposure will generally increase due to
customers locking in an interest rate sooner as opposed to letting the interest rate float. In periods of low or decreasing interest
rates, the length of exposure will also generally increase as customers desire to lock before the possibility of rising rates.
In order to reduce these risks, we use other derivative financial instruments, principally cash forward placement
contracts on mortgage-backed securities and whole loan investor commitments, to economically hedge the interest rate lock
commitment. We enter into one of the aforementioned derivative financial instruments upon accepting interest rate lock
commitments. Changes in the fair value of interest rate lock commitments and the other derivative financial instruments are
recognized in Financial Services revenues. We do not use any derivative financial instruments for trading purposes.
Hypothetical changes in the fair values of our financial instruments arising from immediate parallel shifts in long-term
mortgage rates of 50, 100, and 150 basis points would not be material to our financial results due to the offsetting nature in the
movements in fair value of our financial instruments.
41
SPECIAL NOTES CONCERNING FORWARD-LOOKING STATEMENTS
As a cautionary note, except for the historical information contained herein, certain matters discussed in Item 7,
Management's Discussion and Analysis of Financial Condition and Results of Operations, and Item 7a, 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,” “project,” “may,” “can,” “could,” “might,” “will” and similar expressions identify forward-looking statements,
including statements related to expected operating and performing results, planned transactions, planned objectives of
management, future developments or conditions in the industries in which we participate and other trends, developments and
uncertainties that may affect our business in the future.
Such risks, uncertainties and other factors include, among other things: interest rate changes and the availability of
mortgage financing; continued volatility in the debt and equity markets; competition within the industries in which 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; 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 to tax, labor and environmental laws; 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; and other factors of national, regional and global
scale, including those of a political, economic, business and competitive nature. See Item 1A – Risk Factors for a further
discussion of these and other risks and uncertainties applicable to our businesses. We undertake no duty to update any forward-
looking statement, whether as a result of new information, future events or changes in our expectations.
42
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PULTEGROUP, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2014 and 2013
($000’s omitted, except per share data)
ASSETS
Cash and equivalents
Restricted cash
House and land inventory
Land held for sale
Land, not owned, under option agreements
Residential mortgage loans available-for-sale
Investments in unconsolidated entities
Other assets
Intangible assets
Deferred tax assets, net
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable, including book overdrafts of $32,586 and $35,827
in 2014 and 2013, respectively
Customer deposits
Accrued and other liabilities
Income tax liabilities
Financial Services debt
Senior notes
Total liabilities
Shareholders’ equity:
Preferred stock, $0.01 par value; 25,000,000 shares authorized, none issued
Common stock, $0.01 par value; 500,000,000 shares authorized, 369,458,530
and 381,299,600 shares issued and outstanding at December 31, 2014 and
2013, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total shareholders’ equity
$
$
$
2014
2013
$
$
$
1,292,862
16,358
4,392,100
101,190
30,186
339,531
40,368
513,032
123,115
1,720,668
8,569,410
270,516
142,642
1,343,774
48,722
140,241
1,818,561
3,764,456
1,580,329
72,715
3,978,561
61,735
24,024
287,933
45,323
460,621
136,148
2,086,754
8,734,143
202,736
134,858
1,377,750
206,015
105,664
2,058,168
4,085,191
$
— $
—
3,695
3,072,996
(690)
1,728,953
4,804,954
8,569,410
$
3,813
3,052,016
(795)
1,593,918
4,648,952
8,734,143
$
See Notes to Consolidated Financial Statements.
43
PULTEGROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2014, 2013, and 2012
(000’s omitted, except per share data)
Revenues:
Homebuilding
Home sale revenues
Land sale revenues
Financial Services
Total revenues
Homebuilding Cost of Revenues:
Home sale cost of revenues
Land sale cost of revenues
Financial Services expenses
Selling, general, and administrative expenses
Other expense, net
Interest income
Interest expense
Equity in earnings of unconsolidated entities
Income before income taxes
Income tax expense (benefit)
Net income
Net income per share:
Basic
Diluted
Cash dividends declared
Number of shares used in calculation:
Basic
Effect of dilutive securities
Diluted
2014
2013
2012
$
5,662,171
$
5,424,309
$
4,552,412
34,554
5,696,725
125,638
5,822,363
4,343,249
23,748
4,366,997
71,239
667,815
38,745
(4,632)
849
(8,408)
689,758
215,420
474,338
$
114,335
5,538,644
140,951
5,679,595
4,310,528
104,426
4,414,954
92,379
568,500
80,753
(4,395)
712
(1,130)
527,822
(2,092,294)
2,620,116
1.27
1.26
0.23
$
$
$
6.79
6.72
0.15
$
$
$
$
106,698
4,659,110
160,888
4,819,998
3,833,451
94,880
3,928,331
135,511
514,457
66,298
(4,913)
819
(4,059)
183,554
(22,591)
206,145
0.54
0.54
—
$
$
$
$
370,377
3,725
374,102
383,077
3,789
386,866
381,562
3,002
384,564
See Notes to Consolidated Financial Statements.
44
PULTEGROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31, 2014, 2013, and 2012
(000’s omitted)
Net income
Other comprehensive income, net of tax:
Change in value of derivatives
Other comprehensive income
2014
2013
2012
$
474,338
$
2,620,116
$
206,145
105
105
197
197
314
314
Comprehensive income
$
474,443
$
2,620,313
$
206,459
See Notes to Consolidated Financial Statements.
45
PULTEGROUP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
For the years ended December 31, 2014, 2013, and 2012
(000’s omitted, except per share data)
Shareholders' Equity, January 1, 2012
Stock option exercises
Stock awards, net of cancellations
Stock repurchases
Stock-based compensation
Net income
Other comprehensive income
Shareholders' Equity, December 31, 2012
Stock option exercises
Stock awards, net of cancellations
Dividends declared
Stock repurchases
Stock-based compensation
Excess tax benefits (deficiencies) from stock-based compensation
Net income
Other comprehensive income
Shareholders' Equity, December 31, 2013
Stock option exercises
Stock awards, net of cancellations
Dividends declared
Stock repurchases
Stock-based compensation
Excess tax benefits (deficiencies) from stock-based compensation
Net income
Other comprehensive income
Shareholders' Equity, December 31, 2014
Common Stock
Shares
382,608
2,877
1,228
(105)
—
—
—
386,608
1,432
1,002
—
(7,742)
—
—
—
—
381,300
1,422
(43)
—
(13,220)
—
—
—
—
369,459
$
$
$
$
Additional
Paid-in
Capital
$ 2,986,240
32,780
(12)
(813)
12,694
—
—
$ 3,030,889
19,397
(10)
—
(3,063)
14,474
(9,671)
—
—
$ 3,052,016
15,613
—
72
—
13,786
(8,491)
—
—
$ 3,072,996
$
3,826
29
12
(1)
—
—
—
3,866
14
10
—
(77)
—
—
—
—
3,813
14
—
—
(132)
—
—
—
—
3,695
See Notes to Consolidated Financial Statements.
46
Accumulated
Other
Comprehensive
Income
(Loss)
Retained
Earnings
(Accumulated
Deficit)
$
$
$
$
(1,306) $
—
—
—
—
—
314
(992) $
—
—
—
—
—
—
—
197
(795) $
—
—
—
—
—
—
—
105
(690) $
(1,050,145) $
—
—
(147)
—
206,145
—
(844,147) $
—
—
(57,530)
(124,521)
—
—
2,620,116
—
1,593,918
—
—
(86,442)
(252,887)
26
—
474,338
—
1,728,953
$
$
Total
1,938,615
32,809
—
(961)
12,694
206,145
314
2,189,616
19,411
—
(57,530)
(127,661)
14,474
(9,671)
2,620,116
197
4,648,952
15,627
—
(86,370)
(253,019)
13,812
(8,491)
474,338
105
4,804,954
PULTEGROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2014, 2013, and 2012
($000’s omitted)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash flows provided by (used in)
operating activities:
Deferred income tax expense
Write-down of land and deposits and pre-acquisition costs
Depreciation and amortization
Stock-based compensation expense
Loss on debt retirements
Equity in earnings of unconsolidated entities
Distributions of earnings from unconsolidated entities
Other non-cash, net
Increase (decrease) in cash due to:
Restricted cash
Inventories
Residential mortgage loans available-for-sale
Other assets
Accounts payable, accrued and other liabilities
Income tax liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Distributions from unconsolidated entities
Investments in unconsolidated entities
Net change in loans held for investment
Change in restricted cash related to letters of credit
Proceeds from the sale of property and equipment
Capital expenditures
Cash used for business acquisition
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Financial Services borrowings (repayments)
Other borrowings (repayments)
Stock option exercises
Stock repurchases
Dividends paid
Net cash used in financing activities
Net increase (decrease) in cash and equivalents
Cash and equivalents at beginning of period
Cash and equivalents at end of period
Supplemental Cash Flow Information:
Interest paid (capitalized), net
Income taxes paid (refunded), net
2014
2013
2012
$
474,338
$
2,620,116
$
206,145
223,769
(2,096,425)
11,168
39,864
29,292
8,584
(8,408)
4,932
9,567
1,368
(346,596)
(53,734)
(46,249)
(23,671)
(14,975)
309,249
8,157
(9)
335
54,989
113
(48,790)
(82,419)
(67,624)
34,577
(250,631)
15,627
(253,019)
(75,646)
(529,092)
(287,467)
9,672
31,587
30,480
26,930
(1,130)
2,049
9,375
3,387
265,064
28,448
(38,190)
(17,377)
7,150
881,136
1,001
(1,677)
(12,265)
(4,152)
15
—
17,195
30,027
22,897
32,071
(4,059)
7,488
10,356
1,257
455,223
(60,828)
26,014
20,802
(4,448)
760,140
3,029
(16,456)
836
28,653
7,586
(28,899)
(13,942)
—
(45,977)
(33,131)
(479,827)
19,411
(127,661)
(38,382)
(659,590)
175,569
—
9,706
138,795
(618,800)
32,809
(961)
—
(448,157)
321,689
1,580,329
1,404,760
1,083,071
1,292,862
$
1,580,329
$
1,404,760
(4,561) $
1,030
$
(171) $
373
$
(1,470)
(13,322)
$
$
$
See Notes to Consolidated Financial Statements.
47
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies
Basis of presentation
PulteGroup, Inc. is one of the largest homebuilders in the U.S., and our common stock trades 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 have mortgage banking operations, conducted principally through Pulte
Mortgage LLC (“Pulte Mortgage”), and title operations.
The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting
principles and include the accounts of PulteGroup, Inc. and all of its direct and indirect subsidiaries and variable interest
entities in which PulteGroup, Inc. is deemed to be the primary beneficiary. All significant intercompany accounts,
transactions, and balances have been eliminated in consolidation.
Business acquisition
We acquired certain real estate assets from Dominion Homes in August 2014 for $82.4 million in cash and the
assumption of certain payables related to such assets. The net assets acquired are located in Columbus, Ohio, and
Louisville and Lexington, Kentucky, and included approximately 8,200 lots, including approximately 400 homes in
inventory and control of approximately 900 lots through option contracts. We also assumed a sales order backlog of
622 homes. The acquired net assets were recorded at their estimated fair values. The acquisition of these assets was not
material to our results of operations or financial condition.
Use of estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 ("SEC").
Cash and equivalents
Cash and equivalents include institutional money market investments and time deposits with a maturity of three
months or less when acquired. Cash and equivalents at December 31, 2014 and 2013 also included $5.1 million and
$3.7 million, respectively, of cash from home closings held in escrow for our benefit, typically for less than five days,
which are considered deposits in-transit.
Restricted cash
We maintain certain cash balances that are restricted as to their use. Restricted cash includes deposits maintained
with financial institutions under cash-collateralized letter of credit agreements (see Note 6) as well as certain other
accounts with restrictions, including customer deposits on home sales that are temporarily restricted by regulatory
requirements until title transfers to the homebuyer.
48
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Investments in unconsolidated entities
We have investments in a number of unconsolidated entities, including joint ventures, with independent third
parties. The equity method of accounting is used for unconsolidated entities over which we have significant influence;
generally this represents ownership interests of at least 20% and not more than 50%. Under the equity method of
accounting, we recognize our proportionate share of the earnings and losses of these entities. Certain of these entities sell
land to us. We defer the recognition of profits from such activities until the time we ultimately sell the related land.
We evaluate our investments in unconsolidated entities for recoverability in accordance with Accounting Standards
Codification (“ASC”) 323, “Investments – Equity Method and Joint Ventures” (“ASC 323”). If we determine that a loss in
the value of the investment is other than temporary, we write down the investment to its estimated fair value. Any such
losses are recorded to equity in (earnings) loss of unconsolidated entities in the Consolidated Statements of Operations.
Due to uncertainties in the estimation process and the significant volatility in demand for new housing, actual results could
differ significantly from such estimates. See Note 5.
Intangible assets
Intangible assets consist of tradenames acquired in connection with the 2009 acquisition of Centex Corporation
("Centex") and the 2001 acquisition of Del Webb Corporation ("Del Webb"). These intangible assets were valued at the
acquisition date and are being amortized over 20-year lives. The acquired cost and accumulated amortization of our
intangible assets were $259.0 million and $135.9 million, respectively, at December 31, 2014, and $259.0 million and
$122.9 million, respectively, at December 31, 2013. Amortization expense totaled $13.0 million in 2014, and $13.1
million in 2013 and 2012, and is expected to be $12.9 million in each of the next five years.
The ultimate realization of these assets is dependent upon estimates of future earnings and benefits that we expect to
generate from their use. If we determine that the carrying values of intangible assets may not be recoverable based upon
the existence of one or more indicators of impairment, we use a projected undiscounted cash flow method to determine if
impairment exists. If the carrying values of the intangible assets exceed the expected undiscounted cash flows, then we
measure impairment as the difference between the fair value of the asset and the recorded carrying value. There were no
impairments of tradenames during 2014, 2013, or 2012.
Property and equipment, net, and depreciation
Property and equipment are recorded at cost. Maintenance and repair costs are expensed as incurred. Depreciation is
computed by the straight-line method based upon estimated useful lives as follows: model home furniture - two years;
office furniture and equipment - three to ten years; and leasehold improvements - life of the lease. Property and equipment
are included in other assets and totaled $75.2 million net of accumulated depreciation of $192.2 million at December 31,
2014 and $53.1 million net of accumulated depreciation of $182.0 million at December 31, 2013. Depreciation expense
totaled $26.8 million, $18.5 million, and $16.9 million in 2014, 2013, and 2012, respectively.
Advertising costs
Advertising costs are expensed as incurred and totaled $41.8 million, $42.4 million, and $45.8 million, in 2014, 2013,
and 2012, respectively.
Employee benefits
We maintain defined contribution retirement plans that cover substantially all of our employees. Company
contributions to the plans totaled $12.1 million, $11.0 million, and $9.4 million in 2014, 2013, and 2012, respectively.
49
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Other expense, net
Other expense, net consists of the following ($000’s omitted):
Write-offs of deposits and pre-acquisition costs (Note 3)
Loss on debt retirements (Note 6)
Lease exit and related costs
Amortization of intangible assets (Note 1)
Miscellaneous, net (a)
2014
2013
2012
$
$
6,099
8,584
9,609
13,033
1,420
38,745
$
$
3,122
26,930
2,778
13,100
34,823
80,753
$
$
2,278
32,071
7,306
13,100
11,543
66,298
(a)
Includes charges of $41.2 million in 2013 resulting from a contractual dispute related to a previously completed
luxury community (see Note 12) and $5.1 million in 2012 related to the write-down of notes receivable.
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, 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 stock and restricted stock 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. Our earnings per share
excluded 6.6 million, 9.6 million, and 16.6 million stock options, unvested restricted stock and restricted stock units, and
other potentially dilutive instruments in 2014, 2013, and 2012, respectively.
In accordance with ASC 260 "Earnings Per Share" ("ASC 260"), 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. The Company's
outstanding restricted stock awards, restricted stock units, and deferred shares are considered participating securities.
50
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following table presents the earnings per share of common stock ($000's omitted, except per share data):
Numerator:
Net income
December 31,
2014
December 31,
2013
December 31,
2012
$
474,338
$
2,620,116
$
206,145
Less: earnings distributed to participating securities
(583)
(407)
Less: undistributed earnings allocated to participating
securities
Numerator for basic earnings per share
Add back: undistributed earnings allocated to participating
securities
Less: undistributed earnings reallocated to participating
securities
Numerator for diluted earnings per share
Denominator:
Basic shares outstanding
Effect of dilutive securities
Diluted shares outstanding
Earnings per share:
Basic
Diluted
Stock-based compensation
$
$
$
$
(2,668)
471,087
$
(19,201)
2,600,508
$
2,668
19,201
(2,643)
471,112
$
(18,845)
2,600,864
$
370,377
3,725
374,102
383,077
3,789
386,866
—
—
206,145
—
—
206,145
381,562
3,002
384,564
1.27
1.26
$
$
6.79
6.72
$
$
0.54
0.54
We measure compensation cost for restricted stock and restricted stock units at fair value on the grant date. Fair
value is determined based on the quoted price of our common stock on the grant date. We recognize compensation
expense for restricted stock and restricted stock units, the majority of which cliff vest at the end of three years, ratably over
the vesting period. For share-based awards containing performance conditions, we recognize compensation expense
ratably over the vesting period when it is probable that the stated performance targets will be achieved and record
cumulative adjustments in the period in which estimates change. Compensation expense related to our share-based awards
is included in selling, general, and administrative expense, except for a small portion recognized in Financial Services
expenses. See Note 8.
Income taxes
The provision for income taxes is calculated using the asset and liability method, under which deferred tax assets
and liabilities are recognized by identifying the temporary differences arising from the different treatment of items for tax
and accounting purposes. In assessing the realizability of deferred tax assets, we consider whether it is more likely than
not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is
primarily dependent upon the generation of future taxable income. In determining the future tax consequences of events
that have been recognized in the financial statements or tax returns, judgment is required. Differences between the
anticipated and actual outcomes of these future tax consequences could have a material impact on the consolidated results
of operations or financial position.
51
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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 follow the provisions of ASC 740, “Income
Taxes” (“ASC 740”), which prescribes a minimum recognition threshold a tax position is required to meet before being
recognized in the financial statements. Significant judgment is required to evaluate uncertain tax positions. Our
evaluations of tax positions consider a variety of factors, including changes in facts or circumstances, changes in law,
correspondence with taxing authorities, and effective settlements of audit issues. Changes in the recognition or
measurement of uncertain tax positions could result in material increases or decreases in income tax expense (benefit) in
the period in which the change is made. Interest and penalties related to unrecognized tax benefits are recognized as a
component of income tax expense (benefit). See Note 9.
Homebuilding revenue recognition
Homebuilding revenue and related profit are generally recognized when title to and possession of the property are
transferred to the buyer. In situations where the buyer’s financing is originated by Pulte Mortgage and the buyer has not
made an adequate initial or continuing investment, the profit on such sale is deferred until the sale of the related mortgage
loan to a third-party investor has been completed. If there is a loss on the sale of the property, the loss on such sale is
recognized at the time of closing. The amount of such deferred profits were not material at either December 31, 2014 or
December 31, 2013.
Sales incentives
When sales incentives involve a discount on the selling price of the home, we record the discount as a reduction of
revenue at the time of house closing. If the sales incentive requires us to provide a free product or service to the customer,
the cost of the free product or service is recorded as cost of revenues at the time of house closing. This includes the cost
related to optional upgrades and seller-paid financing costs, closing costs, homeowners’ association fees, or merchandise.
Inventory
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, and commissions and
closing costs applicable to the home. The construction cost of the home includes amounts paid through the closing date of
the home, plus an appropriate 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 record valuation adjustments on land inventory when events and circumstances indicate that the related
community may be impaired and when the cash flows estimated to be generated by the community are less than its
carrying amount. Such indicators include gross margin 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 estimate the fair
52
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
value of the community. Impairment charges are recorded if the fair value of the community's inventory is less than its
carrying value. We determine the fair value of a community's inventory using a combination of market comparable land
transactions, where available, and discounted cash flow models. 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. Our evaluations for impairments are based on our best estimates of the
future cash flows for our communities. 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. See Note 3.
Land held for sale
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 held for sale is recorded at the lower of cost or
fair value less costs to sell. In determining the value of land held for sale, we consider recent offers received, prices for
land in recent comparable sales transactions, and other factors. We record net realizable value adjustments for land held
for sale within Homebuilding land sale cost of revenues. See Note 3.
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. See Note 3.
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 December 31, 2014 or December 31, 2013 because we
determined that we were not the primary beneficiary. Our maximum exposure to loss related to these VIEs is generally
limited to our deposits and pre-acquisition costs under the applicable land option agreements. Separately, certain land
option agreements represent financing arrangements due to the remaining purchase price under the land option agreements,
in the event we exercise the purchase rights under the agreements, even though we generally have no obligation to pay
these future amounts. As a result, we recorded $30.2 million and $24.0 million at December 31, 2014 and December 31,
2013, respectively, to land, not owned, under option agreements with a corresponding increase to accrued and other
liabilities. The following provides a summary of our interests in land option agreements ($000’s omitted):
December 31, 2014
December 31, 2013
Deposits and
Pre-
acquisition
Costs
Remaining
Purchase
Price
Land, Not
Owned,
Under
Option
Agreements
Deposits and
Pre-
acquisition
Costs
Remaining
Purchase
Price
Land, Not
Owned,
Under
Option
Agreements
Land options with VIEs $
Other land options
56,039
71,241
$
127,280
$
$
891,506
999,079
1,890,585
$
$
12,533
17,653
30,186
$
$
40,486
$
50,548
661,158
729,128
91,034
$ 1,390,286
$
$
8,167
15,857
24,024
53
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Start-up costs
Costs and expenses associated with opening new communities are expensed to selling, general, and administrative
expenses when incurred.
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 10 years. We estimate the costs to be incurred under these warranties and record a liability in the
amount of such costs at the time the product revenue is recognized.
Self-insured risks
We maintain, and require the majority of our subcontractors to maintain, general liability insurance coverage,
including coverage for certain construction defects. 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, subject to certain self-insured per occurrence and aggregate retentions, deductibles, and available
policy limits. However, we retain a significant portion of the overall risk for such claims. We reserve for these costs on an
undiscounted basis at the time product revenue is recognized for each home closing and evaluate the recorded liabilities
based on actuarial analyses of our historical claims, which include estimates of claims incurred but not yet reported.
Adjustments to estimated reserves are recorded in the period in which the change in estimate occurs. In certain instances,
we have the ability to recover a portion of our costs under various insurance policies or from our subcontractors or other
third parties. Estimates of such amounts are recorded when recovery is considered probable. See Note 12.
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. In accordance with ASC 825, “Financial Instruments” (“ASC 825”), we
use the fair value option to record residential mortgage loans available-for-sale. Election of the fair value option for these
loans allows a better offset of the changes in fair values of the loans and the derivative instruments used to economically
hedge them without having to apply complex hedge accounting provisions. We do not designate any derivative
instruments as hedges or apply the hedge accounting provisions of ASC 815, “Derivatives and Hedging.” See Note 12 for
discussion of the risks retained related to mortgage loan originations.
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. At December 31, 2014 and 2013, residential mortgage loans available-for-sale had an aggregate fair value
of $339.5 million and $287.9 million, respectively, and an aggregate outstanding principal balance of $327.4 million and
$278.1 million, respectively. The net gain (loss) resulting from changes in fair value of these loans totaled $1.7 million
and $(1.2) million for the years ended December 31, 2014 and 2013, respectively. These changes in fair value were
substantially offset by changes in fair value of the corresponding hedging instruments. Net gains from the sale of
mortgages during 2014, 2013, and 2012 were $67.2 million, $80.3 million, and $109.2 million, respectively, and have been
included in Financial Services revenues.
Mortgage servicing rights
We 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 servicing rights for only a short period of
time. We recognize the fair value of our rights to service a mortgage loan as revenue at the time of entering into an interest
rate lock commitment with a borrower. Due to the short period of time the servicing rights are held, we do not amortize
the servicing asset. The servicing sales contracts provide for the reimbursement of payments made by the purchaser if
loans prepay within specified periods of time, generally within 90 to 120 days after sale. We establish reserves for this
liability at the time the sale is recorded. Such reserves were immaterial at December 31, 2014 and 2013 and are included
in accrued and other liabilities.
54
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Loans held for investment
We maintain a portfolio of loans that either have been repurchased from investors or were not saleable upon closing.
We have the intent and ability to hold these loans for the foreseeable future or until maturity or payoff. These loans are
carried at cost and are reviewed for impairment when recoverability becomes doubtful. Loans held for investment are
included in other assets and totaled $12.5 million and $11.0 million at December 31, 2014 and 2013, respectively.
Interest income on mortgage loans
Interest income on mortgage loans is recorded in Financial Services revenues, accrued from the date a mortgage
loan is originated until the loan is sold, and totaled $7.2 million, $7.5 million, and $6.0 million in 2014, 2013, and 2012,
respectively. Loans are placed on non-accrual status once they become greater than 90 days past due their contractual
terms. Subsequent payments received are applied according to the contractual terms of the loan. Mortgage discounts are
not amortized as interest income due to the short period the loans are held until sale to third party investors.
Mortgage servicing, origination, and commitment fees
Mortgage servicing fees represent fees earned for servicing loans for various investors. Servicing fees are based on
a contractual percentage of the outstanding principal balance, or a contracted set fee in the case of certain sub-servicing
arrangements, and are credited to income when related mortgage payments are received or the sub-servicing fees are
earned. Loan origination costs related to residential mortgage loans available-for-sale are recognized as incurred in
Financial Services expenses while the associated mortgage origination fees are recognized in Financial Services revenues
as earned, generally upon loan closing.
Title services
Revenues associated with our title operations are recognized within Financial Services revenues as closing services
are rendered and title insurance policies are issued, both of which generally occur as each home is closed.
Derivative instruments and hedging activities
We are exposed to market risks from commitments to lend, movements in interest rates, and canceled or modified
commitments to lend. A commitment to lend at a specific interest rate (an interest rate lock commitment) is a derivative
financial instrument (interest rate is locked to the borrower). In order to reduce these risks, we use other derivative
financial instruments, principally cash forward placement contracts on mortgage-backed securities and whole loan investor
commitments, to economically hedge the interest rate lock commitment. We enter into these derivative financial
instruments based upon our portfolio of interest rate lock commitments and closed loans. We do not enter into any
derivative financial instruments for trading purposes.
At December 31, 2014 and 2013, we had aggregate interest rate lock commitments of $146.1 million and $175.7
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.
Forward contracts on mortgage-backed securities are commitments to either purchase or sell a specified financial
instrument at a specified future date for a specified price that may be settled in cash, by offsetting the position, or through
the delivery of the financial instrument. 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. We also use whole loan investor commitments, which are
obligations of the investor to buy loans at a specified price within a specified time period. At December 31, 2014 and
2013, we had unexpired forward contracts of $371.0 million and $381.5 million, respectively, and whole loan investor
commitments of $63.5 million and $31.7 million, respectively. Changes in the fair value of interest rate lock commitments
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.
55
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
There are no credit-risk-related contingent features within our derivative agreements, and counterparty risk is
considered minimal. Gains and losses on interest rate lock commitments 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 75 days.
The fair values of derivative instruments and their location in the Consolidated Balance Sheets is summarized
below ($000’s omitted):
December 31, 2014
December 31, 2013
Other Assets
Other Liabilities
Other Assets
Other Liabilities
$
$
4,313
$
65
$
3,628
$
79
31
3,653
619
4,374
189
4,423
$
4,337
$
8,191
$
489
34
84
607
Interest rate lock commitments
Forward contracts
Whole loan commitments
New accounting pronouncements
In January 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No.
2014-04, “Receivables - Troubled Debt Restructurings by Creditors,” which clarifies when an in substance repossession or
foreclosure of residential real estate property collateralizing a consumer mortgage loan has occurred. By doing so, this
guidance helps determine when the creditor should derecognize the loan receivable and recognize the real estate property.
The guidance is effective for us beginning January 1, 2015 and is not expected to have a material impact on our
consolidated financial position, results of operations, or cash flows.
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with
Customers” (“ASU 2014-09”). The standard is a comprehensive new revenue recognition model that requires revenue to
be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the
consideration expected to be received in exchange for those goods or services. ASU 2014-09 is effective for us for fiscal
and interim periods beginning January 1, 2017 and allows for full retrospective or modified retrospective methods of
adoption. We are currently evaluating the impact that the standard will have on our financial statements.
In June 2014, the FASB issued Accounting Standards Update No. 2014-11, "Repurchase-to-Maturity Transactions,
Repurchase Financings, and Disclosures” ("ASU 2014-11"), which makes limited amendments to ASC 860, "Transfers and
Servicing." The ASU requires entities to account for repurchase-to-maturity transactions as secured borrowings, eliminates
accounting guidance on linked repurchase financing transactions, and expands disclosure requirements related to certain
transfers of financial assets. ASU 2014-11 is effective for us for fiscal periods beginning January 1, 2015 and interim
periods beginning April 1, 2015 and is not expected to have a material impact on our consolidated financial position,
results of operations, or cash flows.
In August 2014, the FASB issued Accounting Standards Update No. 2014-15, “Disclosure of Uncertainties About an
Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”), which requires management to evaluate, at each
annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity’s
ability to continue as a going concern and provide related disclosures. ASU 2014-15 is effective for annual and interim
reporting periods beginning January 1, 2017 and is not expected to have a material impact on our financial statements.
2. Corporate office relocation
In May 2013, we announced our plan to relocate our corporate offices to Atlanta, Georgia, from the previous
location in Bloomfield Hills, Michigan. The relocation of operations is occurring in phases over time and is expected to be
substantially complete in 2015. We recorded employee severance, retention, relocation, and related costs of $7.6 million
and $15.0 million in 2014 and 2013, respectively. We also recorded lease exit and asset impairment costs totaling $8.7
million and $0.4 million in 2014 and 2013, respectively. Severance, retention, relocation, and related costs are recorded
within selling, general, and administrative expense, while lease exit and asset impairments are included in other expense,
net. We expect the remaining costs to total less than $15.0 million. We have also incurred costs at the new location related
to the recruitment and onboarding of new employees and certain redundant operating costs, the amount of which has not
been material.
56
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. Inventory and land held for sale
Major components of inventory at December 31, 2014 and 2013 were ($000’s omitted):
Homes under construction
Land under development
Raw land
2014
2013
$
1,084,137
$
1,042,147
2,545,049
762,914
2,189,387
747,027
$
4,392,100
$
3,978,561
In all periods presented, we capitalized 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):
Interest in inventory, beginning of period
$
Interest capitalized
Interest expensed (a)
Interest in inventory, end of period
Years Ended December 31,
2013
2012
2014
$
230,922
131,444
(194,728)
167,638
$
331,880
154,107
(255,065)
230,922
355,068
201,103
(224,291)
331,880
(a) Interest expensed to Home sale cost of revenues for 2014, 2013, and 2012 included $1.3 million, $2.9 million, and $6.5
million, respectively, of capitalized interest write-offs resulting from land-related charges and sales.
Land-related charges
We recorded the following land-related charges:
Land impairments
Net realizable value adjustments
("NRV") - land held for sale
Write-off of deposits and pre-
acquisition costs
Total land-related charges
$
$
2014
2013
2012
$
3,911
1,158
6,099
$
2,944
3,606
3,122
13,437
1,480
2,278
11,168
$
9,672
$
17,195
Land held for sale
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 held for sale at December 31, 2014 and 2013 was
as follows ($000’s omitted):
Land held for sale, gross
Net realizable value reserves
Land held for sale, net
2014
2013
$
$
108,725
(7,535)
101,190
$
$
70,003
(8,268)
61,735
57
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. 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. Home sale revenues for detached and attached
homes were $4.8 billion and $885.8 million in 2014, $4.5 billion and $939.0 million in 2013, and $3.6 billion and
$925.4 million in 2012, respectively. For reporting purposes, our Homebuilding operations are aggregated into six
reportable segments:
Northeast:
Connecticut, Maryland, Massachusetts, New Jersey, New York, Pennsylvania,
Rhode Island, Virginia
Southeast:
Georgia, North Carolina, South Carolina, Tennessee
Florida:
Texas:
North:
Florida
Texas
Illinois, Indiana, Kentucky, Michigan, Minnesota, Missouri, Northern California, Ohio, Washington
Southwest:
Arizona, Nevada, New Mexico, Southern California
We also have a reportable segment for our Financial Services operations, which consist principally of mortgage
banking and title operations. The Financial Services segment operates generally in the same markets as the Homebuilding
segments. Evaluation of segment performance is generally based on income before income taxes. Each reportable
segment generally follows the same accounting policies described in Note 1 "Summary of Significant Accounting Policies"
to the consolidated financial statements.
58
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Operating Data by Segment ($000’s omitted)
Years Ended December 31,
2013
2014
2012
Revenues:
Northeast
Southeast
Florida
Texas
North
Southwest
Financial Services
Consolidated revenues
Income before income taxes:
Northeast
Southeast
Florida
Texas
North
Southwest
Other homebuilding (a)
Financial Services
$
710,859
$
819,709
$
949,635
917,956
859,165
1,436,500
822,610
5,696,725
125,638
842,921
802,665
835,473
1,232,814
1,005,062
5,538,644
140,951
755,148
691,113
628,997
682,929
1,022,633
878,290
4,659,110
160,888
$
5,822,363
$
5,679,595
$
4,819,998
$
103,865
$
110,246
$
156,513
190,441
133,005
197,230
136,357
(282,234)
635,177
54,581
121,055
139,673
111,431
164,348
179,163
(346,803)
479,113
48,709
73,345
64,678
73,472
60,979
84,597
79,887
(278,967)
157,991
25,563
Consolidated income before income taxes
$
689,758
$
527,822
$
183,554
(a) Other homebuilding includes the amortization of intangible assets, amortization of capitalized interest, and other
items not allocated to the operating segments. Other homebuilding also included the following: losses on debt
retirements of $8.6 million, $26.9 million, and $32.1 million for 2014, 2013, and 2012, respectively; charges
totaling $69.3 million to increase general liability insurance reserves in 2014; costs associated with the relocation
of our corporate headquarters totaling $16.3 million and $15.4 million in 2014 and 2013, respectively; and charges
of $41.2 million in 2013 resulting from a contractual dispute related to a previously completed luxury community.
59
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Operating Data by Segment ($000's omitted)
Years Ended December 31,
2013
2012
2014
Land-related charges*:
Northeast
Southeast
Florida
Texas
North
Southwest
Other homebuilding
$
2,824
$
1,826
487
321
3,227
816
1,667
$
557
998
1,076
191
3,434
472
2,944
1,794
1,363
214
556
4,546
2,254
6,468
$
11,168
$
9,672
$
17,195
*
Land-related charges include land impairments, net realizable value adjustments for 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. See Note 1 for additional
discussion of these charges.
Operating Data by Segment ($000's omitted)
Years Ended December 31,
2013
2012
2014
Depreciation and amortization:
Northeast
Southeast
Florida
Texas
North
Southwest
Other homebuilding (a)
Financial Services
$
$
1,852
2,666
2,150
1,698
4,414
4,002
19,548
36,330
3,534
39,864
$
$
1,987
1,647
1,334
1,784
2,265
2,969
16,248
28,234
3,353
31,587
$
$
1,790
1,028
1,640
1,619
1,709
3,143
16,168
27,097
2,930
30,027
(a) Other homebuilding includes amortization of intangible assets.
Operating Data by Segment ($000's omitted)
Years Ended December 31,
2013
2012
2014
Equity in (earnings) loss of unconsolidated entities:
Northeast
Southeast
Florida
Texas
North
Southwest
Other homebuilding
Financial Services
$
$
(4,733) $
—
(7)
—
(2,417)
(486)
(583)
(8,226)
(182)
(8,408) $
(58) $
—
(4)
—
(608)
(678)
355
(993)
(137)
(1,130) $
(4)
—
—
—
(1,497)
(1,137)
(1,235)
(3,873)
(186)
(4,059)
60
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Northeast
Southeast
Florida
Texas
North
Southwest
Other homebuilding (a)
Financial Services
Northeast
Southeast
Florida
Texas
North
Southwest
Other homebuilding (a)
Financial Services
Northeast
Southeast
Florida
Texas
North
Southwest
Other homebuilding (a)
Financial Services
Operating Data by Segment
($000's omitted)
December 31, 2014
Homes Under
Construction
Land Under
Development
Raw Land
Total
Inventory
Total
Assets
$
184,974
$
266,229
$
106,077
$
557,280
$
147,506
150,743
134,873
280,970
166,056
19,015
304,762
350,016
250,102
478,665
698,513
196,762
1,084,137
2,545,049
—
—
117,981
112,225
91,765
137,044
163,421
34,401
762,914
—
570,249
612,984
476,740
896,679
1,027,990
250,178
4,392,100
—
659,224
605,067
717,531
528,392
996,908
1,113,592
3,527,731
8,148,445
420,965
$
1,084,137
$
2,545,049
$
762,914
$
4,392,100
$
8,569,410
Homes Under
Construction
Land Under
Development
Raw Land
Total
Inventory
Total
Assets
December 31, 2013
$
212,611
$
325,241
$
106,681
$
644,533
$
139,484
140,366
130,398
227,537
159,350
32,401
274,981
295,631
223,979
350,239
512,164
207,152
1,042,147
2,189,387
—
—
146,617
104,766
57,480
78,945
201,659
50,879
747,027
—
561,082
540,763
411,857
656,721
873,173
290,432
3,978,561
—
731,259
599,271
618,449
466,198
716,239
940,462
4,334,591
8,406,469
327,674
$
1,042,147
$
2,189,387
$
747,027
$
3,978,561
$
8,734,143
Homes Under
Construction
Land Under
Development
Raw Land
Total
Inventory
Total
Assets
December 31, 2012
$
198,549
$
445,436
$
109,136
$
753,121
$
147,227
130,276
145,594
219,172
226,204
49,162
286,210
310,625
256,704
369,144
496,488
270,771
1,116,184
2,435,378
—
—
120,193
100,633
54,556
46,414
167,295
64,257
662,484
—
553,630
541,534
456,854
634,730
889,987
384,190
4,214,046
—
866,024
590,650
620,220
523,843
680,447
963,540
2,140,739
6,385,463
348,946
$
1,116,184
$
2,435,378
$
662,484
$
4,214,046
$
6,734,409
(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.
61
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Investments in unconsolidated entities
We participate in a number of joint ventures with independent third parties. Many of these joint ventures purchase,
develop, and/or sell land and homes. A summary of our joint ventures is presented below ($000’s omitted):
Investments in joint ventures with debt non-recourse to PulteGroup
Investments in other active joint ventures
Total investments in unconsolidated entities
Total joint venture debt
PulteGroup proportionate share of joint venture debt:
Joint venture debt with limited recourse guaranties
Joint venture debt non-recourse to PulteGroup
PulteGroup's total proportionate share of joint venture debt
December 31,
2014
2013
$
$
$
$
$
26,488
13,880
40,368
25,849
283
11,341
11,624
$
$
$
$
$
26,532
18,791
45,323
12,408
750
3,654
4,404
In 2014, 2013, and 2012, we recognized income from unconsolidated joint ventures of $8.4 million, $1.1 million,
and $4.1 million, respectively. During 2014, 2013, and 2012, we made capital contributions of $0.0 million, $1.7 million,
and $16.5 million, respectively, and received distributions of $13.1 million, $3.1 million, and $10.5 million, respectively.
The timing of cash obligations under a joint venture and any related financing agreements varies by agreement. If
additional capital contributions are required and approved, we would need to contribute our pro rata portion of those
capital needs in order to not dilute our ownership in the joint ventures. While future capital contributions may be required,
we believe the total amount of such contributions will be limited. Our maximum financial loss exposure related to joint
ventures is unlikely to exceed the combined investment and limited recourse guaranty totals.
6. Debt
Our senior notes are summarized as follows ($000’s omitted):
5.20% unsecured senior notes due February 2015 (a)
5.25% unsecured senior notes due June 2015 (a)
6.50% unsecured senior notes due May 2016 (a)
7.625% unsecured senior notes due October 2017 (b)
7.875% unsecured senior notes due June 2032 (a)
6.375% unsecured senior notes due May 2033 (a)
6.00% unsecured senior notes due February 2035 (a)
7.375% unsecured senior notes due June 2046 (a)
Total senior notes – carrying value (c)
Estimated fair value
December 31,
2014
2013
$
— $
236,452
462,009
122,752
299,239
398,640
299,469
—
95,633
233,085
459,581
122,663
299,196
398,567
299,443
150,000
$
$
1,818,561
1,952,774
$
$
2,058,168
2,070,744
(a)
Redeemable prior to maturity; guaranteed on a senior basis by certain wholly-owned subsidiaries.
(b) Not redeemable prior to maturity; guaranteed on a senior basis by certain wholly-owned subsidiaries.
(c)
The recorded carrying value reflects the impact of various discounts and premiums that are amortized to interest
cost over the respective terms of the senior notes.
62
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The indentures governing the senior notes impose certain restrictions on the incurrence of additional debt along with
other limitations. At December 31, 2014, we were in compliance with all of the covenants and requirements under the
senior notes. Total senior note principal maturities of $1.8 billion during the five years following 2014 and thereafter are as
follows: 2015 - $238.0 million; 2016 - $465.2 million; 2017 - $123.0 million; 2018 - $0.0 million; 2019 - $0.0 million; and
thereafter - $1.0 billion. Refer to Note 13 for supplemental consolidating financial information of the Company.
Debt retirement
During the last three years, we significantly reduced our outstanding senior notes through a variety of transactions.
As a result of these transactions, we reduced our outstanding senior notes by $245.7 million, $461.4 million, and
$592.4 million during 2014, 2013, and 2012, respectively, and recorded losses totaling $8.6 million, $26.9 million, and
$32.1 million in 2014, 2013 and 2012, respectively. Losses on debt repurchase transactions include the write-off of
unamortized discounts, premiums, and transaction fees and are reflected in other expense (income), net.
Revolving credit facility
In July 2014, we entered into a senior unsecured revolving credit facility (the “Revolving Credit Facility”) maturing
in July 2017. The Revolving Credit Facility provides for maximum borrowings of $500 million and contains an
uncommitted accordion feature that could increase the size of the Revolving Credit Facility to $1.0 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 available borrowing capacity under the Revolving Credit Facility and may total no
more than the greater of: (i) 50% of the size of the facility or (ii) $300 million in the aggregate. The interest rate on
borrowings under the Revolving Credit Facility may be based on either the London Interbank Offered Rate or Base Rate
plus an applicable margin, as defined. At December 31, 2014, we had no borrowings outstanding and $208.4 million of
letters of credit issued under the Revolving Credit Facility.
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 December 31, 2014, we were in compliance with all covenants. Outstanding balances
under the Revolving Credit Facility are guaranteed by certain of our wholly-owned subsidiaries.
Other letter of credit facilities
We maintain a separate cash-collateralized letter of credit agreement with a bank. Letters of credit totaling $3.7
million and $58.7 million were outstanding under this agreement (or similar previous agreements with different financial
institutions) at December 31, 2014 and 2013, respectively. Under this agreement, we are required to maintain deposits with
the financial institution in amounts approximating the letters of credit outstanding. Such deposits are included in restricted
cash. An unsecured letter of credit facility we previously maintained with a bank expired in September 2014.
Limited recourse notes payable
Certain of our local homebuilding operations maintain limited recourse collateralized notes payable with third parties
totaling $22.3 million and $7.5 million at December 31, 2014 and 2013, respectively. These notes have maturities ranging
up to 6 years, are collateralized by the applicable land positions to which they relate, have no recourse to any other assets,
and are classified within accrued and other liabilities. The stated interest rates on these notes range up to 5.00%.
63
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Pulte Mortgage
Pulte Mortgage maintains a master repurchase agreement (the “Repurchase Agreement”) with third party lenders. In
September 2014, Pulte Mortgage entered into an amendment to the Repurchase Agreement that extended the effective date
to September 2015 and established a borrowing capacity of $150.0 million. The capacity will reduce to $99.8 million in
February 2015, and will increase again to $150.0 million in June 2015. The purpose for the change in capacity during the
term of the agreement is to lower associated fees during seasonally low volume periods when the additional capacity is
unnecessary. Borrowings under the Repurchase Agreement are secured by residential mortgage loans available-for-sale.
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 $140.2 million and $105.7
million outstanding under the Repurchase Agreement at December 31, 2014, and 2013, respectively, and was in
compliance with all of its covenants and requirements as of such dates.
The following is aggregate borrowing information for our mortgage operations ($000’s omitted):
Available credit lines
Unused credit lines
2014
December 31,
2013
$
$
150,000
9,759
$
$
150,000
44,336
$
$
2012
150,000
11,205
Weighted-average interest rate
2.70%
2.90%
3.00%
7. Shareholders’ equity
We reinstated our quarterly cash dividend in July 2013. During 2013, we declared three cash dividends of $0.05 per
common share each. During 2014, we declared cash dividends of $0.05 per common share in each of the first three
quarters and $0.08 per common share in the fourth quarter for a total of $86.4 million.
In previous years, our Board of Directors authorized a share repurchase program. In October 2014, our Board of
Directors approved an increase of $750.0 million to such authorization. We repurchased 12.9 million and 7.2 million
shares under the repurchase authorizations for a total of $245.8 million and $118.1 million in 2014 and 2013, respectively.
There were no repurchases under these programs during 2012. At December 31, 2014, we had remaining authorization to
repurchase $738.5 million of common shares.
Under our stock-based compensation plans, we accept shares as payment under certain conditions related to stock
option exercises and vesting of restricted stock, generally related to the payment of minimum tax obligations. During
2014, 2013, and 2012, employees surrendered shares valued at $7.2 million, $9.6 million, and $1.0 million, respectively,
under these plans. Such share transactions are excluded from the above noted share repurchase authorization.
64
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. Stock compensation plans
We maintain a stock award plan for both employees and non-employee directors. The plan provides for the grant of
a variety of equity awards, including options (generally non-qualified options), restricted stock, performance shares, and
restricted stock units ("RSUs") to key employees (as determined by the Compensation and Management Development
Committee of the Board of Directors) for periods not exceeding ten years. Non-employee directors are entitled to an
annual distribution of stock options, common stock, or restricted stock units. All options granted to non-employee
directors vest immediately and are exercisable on the grant date for ten years. Options granted to employees generally vest
incrementally over four years. Restricted stock and RSUs generally cliff vest after three years. Restricted stock holders
have voting rights during the vesting period and both restricted stock and RSU holders receive cash dividends during the
vesting period. Performance shares vest upon attainment of the stated performance targets and minimum service
requirements and are converted into shares of common stock upon distribution. RSUs represent the right to receive an
equal number of shares of common stock and are converted into shares of common stock upon distribution. As of
December 31, 2014, there were 23.5 million shares that remained available for grant under the plan.
Our stock compensation expense for the three years ended December 31, 2014 is presented below ($000's omitted):
Stock options
Restricted stock (including RSUs and
performance shares)
Long-term incentive plans
2014
2013
2012
$
121
$
1,056
$
2,617
13,690
13,418
10,077
15,481
16,006
10,203
$
29,292
$
30,480
$
22,897
Stock options
A summary of stock option activity for the three years ended December 31, 2014 is presented below (000’s omitted
except per share data):
2014
2013
2012
Weighted-
Average
Per Share
Exercise
Price
Weighted-
Average
Per Share
Exercise
Price
Weighted-
Average
Per Share
Exercise
Price
Shares
Shares
Shares
12,887
$
—
(1,422)
(2,095)
9,370
9,265
$
$
23
—
11
29
23
23
17,148
$
—
(1,432)
(2,829)
12,887
12,402
$
$
22
—
14
25
23
23
21,641
$
—
(2,877)
(1,616)
17,148
15,719
$
$
21
—
11
27
22
23
$
—
$
—
$
—
Outstanding, beginning of year
Granted
Exercised
Forfeited
Outstanding, end of year
Options exercisable at year end
Weighted-average per share fair value of
options granted during the year
65
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following table summarizes information about the weighted-average remaining contractual lives of stock
options outstanding and exercisable at December 31, 2014:
Options Outstanding
Weighted-
Average
Remaining
Contract Life
(in years)
Number
Outstanding
(000's omitted)
Options Exercisable
Weighted-
Average
Per Share
Exercise Price
Number
Exercisable
(000's omitted)
Weighted-
Average Per
Share
Exercise Price
907
4,003
417
1,997
2,046
9,370
4.0
4.6
0.3
1.9
0.9
3.0
$
$
10
12
23
34
40
23
802
$
4,003
417
1,997
2,046
9,265
$
10
12
23
34
40
23
$0.01 to $11.00
$11.01 to $18.00
$18.01 to $25.00
$25.01 to $35.00
$35.01 to $45.00
We did not issue any stock options during 2014, 2013, or 2012. As a result, there is no unrecognized compensation
cost related to stock option awards at December 31, 2014. The intrinsic value of a stock option is the amount by which the
market value of the underlying stock exceeds the exercise price of the option. The aggregate intrinsic value of stock
options that were exercised during 2014, 2013, and 2012 was $14.1 million, $10.8 million, and $8.6 million, respectively.
As of December 31, 2014, options outstanding had an intrinsic value of $48.8 million, of which $47.3 million related to
options exercisable.
Restricted stock (including RSUs and performance shares)
A summary of restricted stock activity, including RSUs and performance shares, for the three years ended
December 31, 2014 is presented below (000’s omitted, except per share data):
2014
2013
2012
Weighted-
Average
Per Share
Grant Date
Fair Value
Shares
Weighted-
Average
Per Share
Grant Date
Fair Value
Shares
Weighted-
Average
Per Share
Grant Date
Fair Value
Shares
3,211
974
$
$
(1,019) $
(276) $
2,890
75
$
$
11
19
10
15
15
13
3,822
$
806
$
(1,391) $
(26) $
$
3,211
60
$
9
21
11
15
11
12
3,042
$
1,461
$
(544) $
(137) $
$
3,822
51
$
9
10
11
10
9
10
Outstanding, beginning of
year
Granted
Distributed
Forfeited
Outstanding, end of year
Vested, end of year
During 2014, 2013, and 2012, the total fair value of shares vested during the year was $8.1 million, $12.7 million,
and $3.7 million, respectively. Unamortized compensation cost related to restricted stock awards was $13.9 million at
December 31, 2014. These costs will be expensed over a weighted-average period of approximately 2 years.
Certain individuals have received grants of performance shares. The fair value of each performance share was
calculated using the stock price on the grant date. We recognize expense when it becomes probable that the stated
performance targets will be achieved. Unamortized compensation cost related to performance shares considered probable
was $0.2 million at December 31, 2014 and will be expensed over a weighted-average period of less than one year.
Additionally, there were 75,080 RSUs outstanding at December 31, 2014 that had vested but had not yet been paid out
because the payout date had been deferred by the holder.
66
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Long-term incentive plans
We maintain a long-term incentive plan for certain of our field employees that provides awards based on the
achievement of stated performance targets over a three-year period. Awards are earned each year in the form of share units
that are paid out in cash at the end of the performance period based upon the number of share units earned times the stock
price at the end of the performance period. Accordingly, the liability associated with the awards is adjusted each reporting
period based on movements in the stock price and totaled $9.5 million and $12.6 million at December 31, 2014 and 2013,
respectively.
We also maintain a long-term performance award plan for senior management that provides awards based on the
achievement of stated performance targets over a three-year period. Awards are earned based on our cumulative
performance over the performance period and are stated in dollars but settled in common shares based on the stock price at
the end of the performance period. If the stock price falls below a floor of $5.00 per share at the end of the performance
period or we do not have a sufficient number of shares available under our stock incentive plans at the time of settlement,
then a portion of each award will be paid in cash. We recognize expense for these awards based on the probability of
achievement of the stated performance targets. The liability for these awards totaled $26.2 million and $14.3 million at
December 31, 2014 and 2013, respectively.
9. Income taxes
Components of current and deferred income tax expense (benefit) are as follows ($000’s omitted):
Current provision (benefit)
Federal
State and other
Deferred provision (benefit)
Federal
State and other
Income tax expense (benefit)
2014
2013
2012
$
$
$
$
$
$
5,619
(13,968)
(8,349) $
5,725
(1,596)
4,129
$
$
232,969
(9,200)
223,769
215,420
$
$
$
(1,833,580) $
(262,843)
(2,096,423) $
(2,092,294) $
(8,523)
(14,068)
(22,591)
—
—
—
(22,591)
The following table reconciles the statutory federal income tax rate to the effective income tax rate:
Income taxes at federal statutory rate
Effect of state and local income taxes, net of federal tax
Deferred tax asset valuation allowance
Tax contingencies
Other
Effective rate
2014
2013
2012
35.0%
35.0 %
35.0 %
3.0
(6.6)
(1.4)
1.2
4.0
(438.0)
0.3
2.3
3.0
(37.7)
(10.6)
(2.0)
31.2%
(396.4)%
(12.3)%
Our effective tax rate is affected by a number of factors, the most significant of which are the valuation allowance
related to our deferred tax assets, changes in tax laws or other circumstances that impact the value of our deferred tax
assets, and changes in our unrecognized tax benefits. Due to the effects of these factors, our effective tax rates in 2014,
2013, and 2012 are not correlated to the amount of our income before income taxes. The income tax expense for 2014
reflects a reversal of a portion of our valuation allowance, primarily related to certain of our state deferred tax assets, along
with the favorable resolution of certain federal and state income tax matters. The income tax benefit for 2013 resulted
from the reversal of substantially all of the valuation allowance related to our federal deferred tax assets and certain of our
state deferred tax assets, while the income tax benefit for 2012 resulted primarily from the favorable resolution of certain
federal and state income tax matters.
67
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Deferred tax assets and liabilities reflect temporary differences arising from the different treatment of items for tax
and accounting purposes. Components of our net deferred tax asset are as follows ($000’s omitted):
Deferred tax assets:
Non-deductible reserves and other
Inventory valuation reserves
Net operating loss ("NOL") carryforwards:
Federal
State
Alternative minimum tax credits
Energy credit and charitable contribution carryforward
Deferred tax liabilities:
Capitalized items, including real estate basis differences,
deducted for tax, net
Trademarks and tradenames
Valuation allowance
Net deferred tax asset
At December 31,
2014
2013
$
445,128
$
599,763
515,568
257,738
34,812
27,858
475,730
770,566
726,398
292,195
28,683
39,978
1,880,867
2,333,550
(31,584)
(46,362)
(77,946)
(82,253)
1,720,668
$
(39,449)
(50,047)
(89,496)
(157,300)
2,086,754
$
Our gross federal NOL carryforward is approximately $1.5 billion and expires between 2028 and 2032. A portion of
the federal NOL is subject to the provisions of Internal Revenue Code Section 382. We also have significant state NOLs in
various jurisdictions. These state NOLs may generally be carried forward from 5 to 20 years, depending on the
jurisdiction, and expire between 2014 and 2034. In addition, we have energy credit carryforwards expiring in 2026 to
2034 and alternative minimum tax credits, which can be carried forward indefinitely.
As a result of our merger with Centex in 2009, our ability to use certain of Centex’s pre-ownership change NOL
carryforwards and built-in losses or deductions is limited by Section 382 of the Internal Revenue Code. Our Section 382
limitation is approximately $67.4 million per year for NOLs, losses realized on built-in loss assets that are sold within 60
months of the ownership change, and certain deductions. We do not believe that the Section 382 limitation will prevent the
Company from using Centex’s pre-ownership change federal NOL carryforwards and built-in losses or deductions.
We evaluate our deferred tax assets each period to determine if a valuation allowance is required based on whether it
is "more likely than not" that some portion of the deferred tax assets would not be realized. The ultimate realization of
these deferred tax assets is dependent upon the generation of sufficient taxable income during future periods. We conduct
our evaluation by considering all available positive and negative evidence. This evaluation considers, among other factors,
historical operating results, forecasts of future profitability, the duration of statutory carryforward periods, and the outlooks
for the U.S. housing industry and broader economy.
In 2014, we recorded an income tax benefit of $45.6 million as the result of a reversal of valuation allowance related
primarily to certain of our state deferred tax assets as the result of an increase in expected future taxable income in certain
jurisdictions. At December 31, 2014, our remaining valuation allowance relates primarily to state net operating loss
carryforwards that have not met the "more likely than not" realization threshold, primarily due to state related section 382
limitations. 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 our 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.
68
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In 2013, we recorded an income tax benefit of $2.1 billion as the result of a reversal of valuation allowance. Based
on our evaluation through June 30, 2013, we had fully reserved our net deferred tax assets due to the uncertainty of their
realization. One of the primary pieces of negative evidence we considered was the significant losses we incurred in recent
years, including being in a three-year cumulative pre-tax loss position, which we exited in 2013. In the third quarter of
2013, we determined that the valuation allowance against substantially all of our federal deferred tax assets and a
significant portion of our state deferred tax assets was no longer required. Accordingly, we reversed $2.1 billion of
valuation allowance in the third quarter. When a change in valuation allowance is recognized in an interim period, a
portion of the valuation allowance to be reversed must be allocated to the remaining interim periods. Accordingly, an
additional $73.7 million of the remaining valuation allowance reversed in the fourth quarter of 2013, which was offset by
income tax expense based on fourth quarter earnings.
We conducted our evaluations by considering all available positive and negative evidence. The principal positive
evidence that led to the reversal of the valuation allowance in 2013 included: (1) our emergence from a three-year
cumulative loss in 2013; (2) the significant positive income we generated during 2012 and 2013, including seven
consecutive quarters of pretax income as of December 31, 2013; (3) continued improvements in 2013 over recent years in
other key operating metrics, including revenues, gross margin, and overhead leverage; (4) our forecasted future
profitability; (5) improvement in our financial position; and (6) significant evidence that conditions in the U.S. housing
industry are more favorable than in recent years and our belief that conditions will continue to be favorable over the long-
term. Even if industry conditions weaken from current levels, we believe we will be able to adjust our operations to
sustain long-term profitability.
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. At December 31, 2014, we had $32.9 million of gross
unrecognized tax benefits, of which $21.4 million (net of federal benefit) would impact the effective tax rate if recognized.
At December 31, 2013, we had $173.3 million of gross unrecognized tax benefits, of which $21.5 million would impact
the effective rate if recognized. Income tax liabilities decreased from $206.0 million at December 31, 2013 to $48.7
million at December 31, 2014, primarily as the result of the resolution of certain income tax matters. It is reasonably
possible within the next twelve months that our gross unrecognized tax benefits may decrease by up to $4.1 million,
excluding interest and penalties, primarily due to potential settlements. Additionally, we had accrued interest and penalties
of $17.3 million and $33.1 million at December 31, 2014 and 2013, respectively. Our net tax-related interest and penalties
totaled a benefit of $15.8 million and an expense of $3.0 million in 2014 and 2013, respectively. A reconciliation of the
change in the unrecognized tax benefits is as follows ($000’s omitted):
2014
2013
2012
Unrecognized tax benefits, beginning of period
$
173,310
$
170,425
$
171,863
Increases related to tax positions taken during a prior period
Decreases related to tax positions taken during a prior period
Increases related to tax positions taken during the current
period
Decreases related to settlements with taxing authorities
Reductions as a result of a lapse of the applicable statute of
limitations
—
(133,883)
237
(6,753)
—
Unrecognized tax benefits, end of period
$
32,911
$
12,877
(7,502)
381
(1,434)
8,782
(9,373)
11,797
—
(1,437)
173,310
$
(12,644)
170,425
We are currently under examination by the IRS and various state taxing jurisdictions and anticipate finalizing certain
of the examinations within the next twelve months. The final outcome of these examinations is not yet determinable. The
statute of limitations for our major tax jurisdictions remains open for examination for tax years 2004 to 2014.
69
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. 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
Level 2
Level 3
Fair value determined based on quoted prices in active markets for identical assets or liabilities.
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.
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
Measured at fair value on a recurring basis:
Residential mortgage loans available-for-sale
Interest rate lock commitments
Forward contracts
Whole loan commitments
Measured at fair value on a non-recurring basis:
House and land inventory
Disclosed at fair value:
Cash and equivalents (including restricted cash)
Financial Services debt
Senior notes
Fair Value
Fair Value
Hierarchy
December 31,
2014
December 31,
2013
Level 2
Level 2
Level 2
Level 2
Level 3
Level 1
Level 2
Level 2
$
339,531
$
287,933
4,248
(3,574)
(588)
3,139
4,340
105
$
$
13,925
$
—
1,309,220
$
1,653,044
140,241
1,952,774
105,664
2,070,744
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, are based on market prices for similar
instruments. Forward contracts on mortgage-backed securities are valued based on market prices for similar instruments.
Fair values for whole loan investor 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 value included in the above table represent
only those assets whose carrying values were adjusted to fair value as of the respective balance sheet dates. See Note 1 for
a more detailed discussion of the valuation methods used for inventory.
The carrying amounts of cash and equivalents, Financial Services debt, and the Revolving Credit Facility
approximate their fair values due to their short-term nature and 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 $1.8 billion and $2.1 billion, at
December 31, 2014 and 2013, respectively.
70
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. Other assets and accrued and other liabilities
Other assets are presented below ($000’s omitted):
Accounts and notes receivable:
Insurance receivables
Notes receivable
Other receivables
Prepaid expenses
Deposits and pre-acquisition costs (Note 1)
Property and equipment, net (Note 1)
Income taxes receivable (Note 9)
Other
December 31,
2014
2013
$
$
60,598
$
30,699
63,867
51,764
32,944
52,720
155,164
$
137,428
72,585
127,280
75,219
21,330
61,454
65,965
91,034
53,051
35,437
77,706
$
513,032
$
460,621
We record receivables from various parties in the normal course of business, including amounts due from insurance
companies (see Note 12), municipalities, and vendors. In certain instances, we may accept consideration for land sales or
other transactions in the form of a note receivable.
Accrued and other liabilities are presented below ($000’s omitted):
Self-insurance liabilities (Note 12)
Loan origination liabilities (Note 12)
Compensation-related
Warranty (Note 12)
Community development district obligations (Note 12)
Liability for land, not owned, under option agreements (Note 1)
Accrued interest
Limited recourse notes payable
Other
December 31,
2014
2013
$
710,245
$
58,222
142,586
65,389
17,122
30,186
20,446
22,255
277,323
$
1,343,774
$
668,100
124,956
171,686
63,992
26,124
24,024
22,283
7,521
269,064
1,377,750
71
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
12. Commitments and contingencies
Leases
We lease certain property and equipment under non-cancelable operating leases. The future minimum lease
payments required under operating leases that have initial or remaining non-cancelable terms in excess of one year as of
December 31, 2014 are as follows ($000’s omitted):
Years Ending December 31,
2015
2016
2017
2018
2019
Thereafter
$
28,744
25,713
18,817
14,870
12,846
42,733
Total minimum lease payments (a)
$
143,723
(a) Minimum payments have not been reduced by minimum sublease rentals of $5.3 million due in the future under non-
cancelable subleases.
Net rental expense for 2014, 2013, and 2012 was $25.3 million, $23.0 million, and $24.2 million, respectively.
Certain leases contain renewal or purchase options and generally provide that we pay for insurance, taxes, and
maintenance.
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
repurchase the loans from the investors or reimburse the investors' losses (a “make-whole” payment).
Because we generally do not retain the servicing rights to the loans we originate, information regarding the current
and historical performance, credit quality, and outstanding balances of such loans is limited. Estimating these loan
origination liabilities is further complicated by uncertainties surrounding numerous external factors, such as various
macroeconomic factors (including unemployment rates and changes in home prices), actions taken by third parties,
including the parties servicing the loans, and the U.S. federal government in its dual capacity as regulator of the U.S.
mortgage industry and conservator of the government-sponsored enterprises commonly known as Fannie Mae and Freddie
Mac, which own or guarantee the majority of mortgage loans in the U.S. Most requests received to date relate to make-
whole payments on loans that have been foreclosed. Requests undergo extensive analysis to confirm the exposure, attempt
to cure the identified defect, and, when necessary, determine our liability. We establish liabilities for such anticipated
losses based upon, among other things, the level of current unresolved repurchase requests, the volume of estimated
probable future repurchase requests, our ability to cure the defects identified in the repurchase requests, and the severity of
the estimated loss upon repurchase. Determining these estimates and the resulting liability requires a significant level of
management judgment.
During 2014, we reduced our loan origination liabilities by $18.6 million based on settlements of various pending
repurchase requests and current conditions. During 2012, we recorded $49.0 million of provisions for losses as a change in
estimate primarily to reflect projected claim volumes in excess of previous estimates. Reserves provided and related
adjustments are reflected in Financial Services expenses. Given the ongoing volatility in the mortgage industry, changes in
values of underlying collateral over time, and other uncertainties regarding the ultimate resolution of these claims, actual
costs could differ from our current estimates.
72
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Changes in these liabilities were as follows ($000's omitted):
Liabilities, beginning of period
Reserves provided (released)
Payments
Liabilities, end of period
2014
2013
2012
$
$
124,956
(18,604)
(48,130)
58,222
$
$
164,280
$
128,330
—
(39,324)
124,956
$
49,025
(13,075)
164,280
The mortgage subsidiary of Centex also sold loans to a bank for inclusion in residential mortgage-backed securities
(“RMBSs”) issued by the bank. In connection with these sales, Centex's mortgage subsidiary entered into agreements
pursuant to which it may be required to indemnify the bank for losses incurred by investors in the RMBSs arising out of
material errors or omissions in certain information provided by the mortgage subsidiary relating to the loans and loan
origination process. In 2011, the bank notified us that it had been named defendant in two lawsuits alleging various
violations of federal and state securities laws asserting that untrue statements of material fact were included in the
registration statements used to market the sale of two RMBS transactions which included $162 million of loans originated
by Centex's mortgage subsidiary. The plaintiffs seek unspecified compensatory and/or rescissory damages on behalf of
persons who purchased the securities. Neither Centex's mortgage subsidiary nor the Company is named as a defendant in
these actions. We cannot yet quantify Centex's mortgage subsidiary's potential liability as a result of these indemnification
obligations. 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. We are aware of six other RMBS transactions with similar
indemnity provisions that include an aggregate $116 million of loans originated by Centex's mortgage subsidiary, and we
are not aware of any current or threatened legal proceedings regarding those transactions.
Community development and other special district obligations
A community development district or similar development authority (“CDD”) is a unit of local government created
under various state statutes that utilizes the proceeds from the sale of bonds to finance the construction or acquisition of
infrastructure assets of a development. A portion of the liability associated with the bonds, including principal and interest,
is assigned to each parcel of land within the development. This debt is typically paid by subsequent special assessments
levied by the CDD on the landowners. Generally, we are only responsible for paying the special assessments for the period
during which we are the landowner of the applicable parcels. However, in certain limited instances we record a liability
for future assessments. At December 31, 2014 and 2013, we had $17.1 million and $26.1 million, respectively, in accrued
liabilities for outstanding CDD obligations.
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 $212.1 million and $1.0 billion, respectively,
at December 31, 2014, and $183.1 million and $958.3 million, respectively, at December 31, 2013. In the event any such
letter of credit or surety bonds are called, we would be obligated to reimburse the issuer of the letter of credit or surety
bond. We do not believe that a material amount, if any, of the letters of credit or surety bonds will be called. 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 the applicable projects but has 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.
73
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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 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.
During 2013, we settled a number of claims related to a previously completed luxury community in a market we
have since exited. The claims related to a contractual dispute with certain homeowners. As a result of these settlements,
we recorded charges of $41.2 million during 2013.
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 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 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):
Warranty liabilities, beginning of period
Reserves provided
Payments
Other adjustments
Warranty liabilities, end of period
Self-insured risks
2014
2013
2012
$
$
63,992
51,348
(47,968)
(1,983)
65,389
$
$
64,098
49,399
(44,925)
(4,580)
63,992
$
$
68,025
45,705
(45,365)
(4,267)
64,098
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 companies 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 the Company.
Policies issued by the captive insurance subsidiaries represent self-insurance of these risks by the Company. This self-
74
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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 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
omission, 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 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. These estimates comprise a significant portion 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 reported and resolved over an extended period often exceeding ten years. In certain instances, we have the ability to
recover a portion of our costs under various insurance policies or from subcontractors or other third parties. Estimates of
such amounts are recorded when recovery is considered probable.
Our recorded reserves for all such claims totaled $710.2 million and $668.1 million at December 31, 2014 and 2013,
respectively, the vast majority of which relates to general liability claims. 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 72% and 78% of the total general liability reserves at
December 31, 2014 and 2013, 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.
During 2014, we recorded a change in estimate increasing general liability insurance reserves by $69.3 million,
which is reflected in "Reserves provided" in the below table. Such additional reserves were primarily driven by estimated
costs associated with siding repairs in certain previously completed communities that, in turn, impacted actuarial estimates
for potential future claims. Adjustments to reserves are recorded in the period in which the change in estimate occurs.
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 related and the timing of such losses related to these claims,
actual costs could differ significantly from estimated costs. Costs associated with our insurance programs are classified
within selling, general, and administrative expenses. Changes in these liabilities were as follows ($000's omitted):
Balance, beginning of period
Reserves provided
Payments
Balance, end of period
13. Supplemental Guarantor information
2014
2013
2012
$
$
668,100
$
721,284
$
739,029
141,790
(99,645)
710,245
$
64,737
(117,921)
668,100
$
54,262
(72,007)
721,284
All of our senior notes are guaranteed jointly and severally on a senior basis by each of the Company's wholly-
owned Homebuilding subsidiaries and certain other wholly-owned subsidiaries (collectively, the “Guarantors”). Such
guaranties are full and unconditional. Supplemental consolidating financial information of the Company, including such
information for the Guarantors, is presented below. Investments in subsidiaries are presented using the equity method of
accounting. Separate financial statements of the Guarantors are not provided as the consolidating financial information
contained herein provides a more meaningful disclosure to allow investors to determine the nature of the assets held by,
and the operations of, the combined groups.
75
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2014
($000’s omitted)
PulteGroup,
Inc.
Unconsolidated
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminating
Entries
Consolidated
PulteGroup,
Inc.
$
7,454
$ 1,157,307
$
128,101
$
— $
1,292,862
3,710
—
—
—
—
22,000
74
34,214
—
1,712,853
1,513
4,391,445
100,156
30,186
—
—
36,126
421,145
123,115
15
11,135
655
1,034
—
339,531
(22,000)
4,168
57,673
—
7,800
—
—
—
—
—
—
—
—
—
—
16,358
4,392,100
101,190
30,186
339,531
—
40,368
513,032
123,115
1,720,668
4,963,831
967,032
$
6,744,136
$ 7,228,040
$
6,359,441
6,887,538
(12,290,304)
$ (12,290,304) $
—
8,569,410
ASSETS
Cash and equivalents
Restricted cash
House and land inventory
Land held for sale
Land, not owned, under option
agreements
Residential mortgage loans available-
for-sale
Securities purchased under agreements
to resell
Investments in unconsolidated entities
Other assets
Intangible assets
Deferred tax assets, net
Investments in subsidiaries and
intercompany accounts, net
LIABILITIES AND
SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable, customer deposits,
accrued and other liabilities
$
Income tax liabilities
Financial Services debt
Senior notes
Total liabilities
Total shareholders’ equity
71,874
48,747
—
$ 1,514,954
(25)
—
1,818,561
1,939,182
4,804,954
—
1,514,929
5,713,111
$
170,104
$
— $
1,756,932
—
140,241
—
310,345
6,577,193
6,887,538
—
—
—
—
(12,290,304)
$ (12,290,304) $
48,722
140,241
1,818,561
3,764,456
4,804,954
8,569,410
$
6,744,136
$ 7,228,040
$
76
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2013
($000’s omitted)
PulteGroup,
Inc.
Unconsolidated
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminating
Entries
Consolidated
PulteGroup,
Inc.
$
262,364
$ 1,188,999
$
128,966
$
— $
1,580,329
58,699
—
—
—
—
68
50,251
—
2,074,137
2,635
3,977,851
60,701
24,024
—
41,319
359,228
136,148
17
11,381
710
1,034
—
287,933
3,936
51,142
—
12,600
—
—
—
—
—
—
—
—
—
72,715
3,978,561
61,735
24,024
287,933
45,323
460,621
136,148
2,086,754
4,532,950
$
6,978,469
(16,513)
$ 5,774,409
$
5,939,784
6,437,486
(10,456,221)
$(10,456,221) $
—
8,734,143
$
65,334
$ 1,413,752
$
236,258
$
— $
1,715,344
206,015
—
2,058,168
2,329,517
4,648,952
—
—
—
1,413,752
4,360,657
$
6,978,469
$ 5,774,409
$
—
105,664
—
—
—
—
341,922
6,095,564
6,437,486
—
(10,456,221)
$(10,456,221) $
206,015
105,664
2,058,168
4,085,191
4,648,952
8,734,143
ASSETS
Cash and equivalents
Restricted cash
House and land inventory
Land held for sale
Land, not owned, under option
agreements
Residential mortgage loans available-
for-sale
Investments in unconsolidated entities
Other assets
Intangible assets
Deferred tax assets, net
Investments in subsidiaries and
intercompany accounts, net
LIABILITIES AND
SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable, customer deposits,
accrued and other liabilities
Income tax liabilities
Financial Services debt
Senior notes
Total liabilities
Total shareholders’ equity
77
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the year ended December 31, 2014
($000’s omitted)
Revenues:
Homebuilding
Home sale revenues
Land sale revenues
Financial Services
Homebuilding Cost of Revenues:
Home sale cost of revenues
Land sale cost of revenues
Financial Services expenses
Selling, general, and administrative
expenses
Other expense, net
Interest income
Interest expense
Intercompany interest
Equity in (earnings) loss of
unconsolidated entities
Income (loss) before income taxes and
equity in income (loss) of
subsidiaries
Income tax expense (benefit)
Income (loss) before equity in income
(loss) of subsidiaries
Equity in income (loss) of subsidiaries
Net income (loss)
Other comprehensive income (loss)
PulteGroup,
Inc.
Unconsolidated
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminating
Entries
Consolidated
PulteGroup,
Inc.
$
— $ 5,662,171
$
— $
— $
5,662,171
—
—
—
—
—
—
—
784
—
8,521
(337)
849
9,800
34,554
5,696,725
889
5,697,614
4,343,249
23,748
4,366,997
(130)
661,308
29,273
(4,244)
—
(90)
(7)
(8,182)
(19,610)
(7,473)
(12,137)
486,475
474,338
105
652,682
201,332
451,350
38,534
489,884
—
—
—
124,749
124,749
—
—
—
70,585
6,507
951
(51)
—
(9,710)
(219)
56,686
21,561
35,125
403,505
438,630
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(928,514)
(928,514)
—
34,554
5,696,725
125,638
5,822,363
4,343,249
23,748
4,366,997
71,239
667,815
38,745
(4,632)
849
—
(8,408)
689,758
215,420
474,338
—
474,338
105
Comprehensive income (loss)
$
474,443
$
489,884
$
438,630
$
(928,514) $
474,443
78
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the year ended December 31, 2013
($000’s omitted)
Revenues:
Homebuilding
Home sale revenues
Land sale revenues
Financial Services
Homebuilding Cost of Revenues:
Home sale cost of revenues
Land sale cost of revenues
Financial Services expenses
Selling, general, and administrative
expenses
Other expense, net
Interest income
Interest expense
Intercompany interest
Equity in (earnings) loss of
unconsolidated entities
Income (loss) before income taxes and
equity in income (loss) of
subsidiaries
Income tax expense (benefit)
Income (loss) before equity in income
(loss) of subsidiaries
Equity in income (loss) of subsidiaries
Net income (loss)
Other comprehensive income (loss)
PulteGroup,
Inc.
Unconsolidated
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminating
Entries
Consolidated
PulteGroup,
Inc.
$
— $ 5,424,309
$
— $
— $
5,424,309
—
—
—
—
—
—
—
832
—
26,870
(349)
712
17,518
114,335
5,538,644
2,353
5,540,997
4,310,528
104,426
4,414,954
970
573,904
49,681
(3,954)
—
(8,260)
1,461
(1,783)
(47,044)
(2,113,827)
515,485
(799)
2,066,783
553,333
2,620,116
197
516,284
35,086
551,370
—
—
—
138,598
138,598
—
—
—
90,577
(5,404)
4,202
(92)
—
(9,258)
(808)
59,381
22,332
37,049
485,400
522,449
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,073,819)
(1,073,819)
—
114,335
5,538,644
140,951
5,679,595
4,310,528
104,426
4,414,954
92,379
568,500
80,753
(4,395)
712
—
(1,130)
527,822
(2,092,294)
2,620,116
—
2,620,116
197
Comprehensive income (loss)
$
2,620,313
$
551,370
$
522,449
$ (1,073,819) $
2,620,313
79
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the year ended December 31, 2012
($000’s omitted)
PulteGroup,
Inc.
Unconsolidated
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminating
Entries
Consolidated
PulteGroup,
Inc.
Revenues:
Homebuilding
Home sale revenues
Land sale revenues
Financial Services
Homebuilding Cost of Revenues:
Home sale cost of revenues
Land sale cost of revenues
Financial Services expenses
Selling, general, and administrative
expenses
Other expense (income), net
Interest income
Interest expense
Intercompany interest
Equity in (earnings) loss of
unconsolidated entities
Income (loss) before income taxes and
equity in income (loss) of
subsidiaries
Income tax expense (benefit)
Income (loss) before equity in income
(loss) of subsidiaries
Equity in income (loss) of subsidiaries
Net income (loss)
Other comprehensive income (loss)
$
— $ 4,552,412
$
— $
— $
4,552,412
—
—
—
—
—
—
—
379
—
32,027
(229)
819
587,281
106,698
4,659,110
2,082
4,661,192
3,833,451
94,880
3,928,331
567
515,283
33,506
(4,597)
—
(573,852)
—
—
158,806
158,806
—
—
—
134,565
(826)
765
(87)
—
(13,429)
(1)
(3,555)
(503)
(620,276)
426
(620,702)
826,847
206,145
314
765,509
(22,299)
787,808
34,596
822,404
—
38,321
(718)
39,039
476,806
515,845
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,338,249)
(1,338,249)
—
106,698
4,659,110
160,888
4,819,998
3,833,451
94,880
3,928,331
135,511
514,457
66,298
(4,913)
819
—
(4,059)
183,554
(22,591)
206,145
—
206,145
314
Comprehensive income (loss)
$
206,459
$
822,404
$
515,845
$ (1,338,249) $
206,459
80
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATING STATEMENT OF CASH FLOWS
For the year ended December 31, 2014
($000’s omitted)
Net cash provided by (used in)
operating activities
Cash flows from investing activities:
Distributions from unconsolidated
entities
Investments in unconsolidated entities
Net change in loans held for investment
Change in restricted cash related to
letters of credit
Proceeds from the sale of property and
equipment
Capital expenditures
Cash used for business acquisition
Net cash provided by (used in) investing
activities
Cash flows from financing activities:
Financial Services borrowings
(repayments)
Other borrowings (repayments)
Stock option exercises
Stock repurchases
Dividends paid
Intercompany activities, net
Net cash provided by (used in)
financing activities
Net increase (decrease) in cash and
equivalents
Cash and equivalents at beginning of year
PulteGroup,
Inc.
Unconsolidated
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminating
Entries
Consolidated
PulteGroup,
Inc.
$
206,485
$
175,415
$
(72,651) $
— $
309,249
—
—
—
54,989
—
—
—
8,161
—
—
—
113
(44,956)
(82,419)
54,989
(119,101)
—
(249,765)
15,627
(253,019)
(75,646)
46,419
—
(866)
—
—
—
(87,140)
(516,384)
(88,006)
(254,910)
262,364
(31,692)
1,188,999
(4)
(9)
335
—
—
(3,834)
—
(3,512)
34,577
—
—
—
—
40,721
75,298
(865)
128,966
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8,157
(9)
335
54,989
113
(48,790)
(82,419)
(67,624)
34,577
(250,631)
15,627
(253,019)
(75,646)
—
(529,092)
(287,467)
1,580,329
Cash and equivalents at end of year
$
7,454
$ 1,157,307
$
128,101
$
— $
1,292,862
81
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATING STATEMENT OF CASH FLOWS
For the year ended December 31, 2013
($000’s omitted)
Net cash provided by (used in)
operating activities
Cash flows from investing activities:
Distributions from unconsolidated
entities
Investments in unconsolidated entities
Net change in loans held for investment
Change in restricted cash related to
letters of credit
Proceeds from the sale of property and
equipment
Capital expenditures
Net cash provided by (used in) investing
activities
Cash flows from financing activities:
Financial Services borrowings
(repayments)
Other borrowings (repayments)
Stock option exercises
Stock repurchases
Dividends paid
Intercompany activities, net
Net cash provided by (used in)
financing activities
Net increase (decrease) in cash and
equivalents
Cash and equivalents at beginning of year
PulteGroup,
Inc.
Unconsolidated
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminating
Entries
Consolidated
PulteGroup,
Inc.
$
(41) $
865,267
$
15,910
$
— $
881,136
—
—
—
1,001
(1,677)
—
(4,152)
—
—
—
15
(26,472)
—
—
(12,265)
—
—
(2,427)
(4,152)
(27,133)
(14,692)
—
(485,048)
19,411
(127,661)
(38,382)
752,069
—
5,221
—
—
—
(718,299)
(33,131)
—
—
—
(33,770)
120,389
(713,078)
(66,901)
116,196
146,168
125,056
1,063,943
(65,683)
194,649
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,001
(1,677)
(12,265)
(4,152)
15
(28,899)
(45,977)
(33,131)
(479,827)
19,411
(127,661)
(38,382)
—
(659,590)
175,569
1,404,760
Cash and equivalents at end of year
$
262,364
$ 1,188,999
$
128,966
$
— $
1,580,329
82
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATING STATEMENT OF CASH FLOWS
For the year ended December 31, 2012
($000’s omitted)
Net cash provided by (used in)
operating activities
Cash flows from investing activities:
Distributions from unconsolidated
entities
Investments in unconsolidated entities
Net change in loans held for
investment
Change in restricted cash related to
letters of credit
Proceeds from the sale of property and
equipment
Capital expenditures
Net cash provided by (used in)
investing activities
Cash flows from financing activities:
Financial Services borrowings
(repayments)
Other borrowings (repayments)
Stock option exercises
Stock repurchases
Intercompany activities, net
Net cash provided by (used in)
financing activities
Net increase (decrease) in cash and
equivalents
Cash and equivalents at beginning of
year
PulteGroup,
Inc.
Unconsolidated
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminating
Entries
Consolidated
PulteGroup,
Inc.
$
(582,762) $ 1,332,342
$
10,560
$
— $
760,140
—
—
—
28,653
3,029
(16,456)
—
—
—
—
7,586
(10,831)
28,653
(16,672)
—
(620,700)
32,809
(961)
1,169,842
—
1,900
—
—
(1,129,188)
—
—
836
—
—
(3,111)
(2,275)
138,795
—
—
—
(40,654)
580,990
(1,127,288)
98,141
26,881
188,382
106,426
119,287
875,561
88,223
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,029
(16,456)
836
28,653
7,586
(13,942)
9,706
138,795
(618,800)
32,809
(961)
—
(448,157)
321,689
1,083,071
Cash and equivalents at end of year
$
146,168
$ 1,063,943
$
194,649
$
— $
1,404,760
83
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
14. Quarterly results (unaudited)
UNAUDITED QUARTERLY INFORMATION
(000’s omitted, except per share data)
1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Total (a)
2014
Homebuilding:
Revenues
Cost of revenues
Income before income taxes (b)
Financial Services:
Revenues
Income before income taxes (c)
Consolidated results:
Revenues
Income before income taxes
Income tax expense (d)
Net income
Net income per share:
Basic
Diluted
Number of shares used in calculation:
Basic
Effect of dilutive securities
Diluted
$ 1,093,999
$ 1,254,989
$ 1,561,273
$ 1,786,464
$ 5,696,725
833,614
108,435
959,524
1,198,908
1,374,951
4,366,997
58,573
214,051
254,118
635,177
$
24,895
$
31,198
$
33,452
$
36,093
$
125,638
21,594
9,108
10,877
13,002
54,581
$ 1,118,894
$ 1,286,187
$ 1,594,725
$ 1,822,557
$ 5,822,363
130,029
55,210
74,819
0.19
0.19
$
$
$
$
$
$
67,681
25,801
41,880
0.11
0.11
224,928
84,383
140,545
0.37
0.37
267,120
50,025
217,095
0.58
0.58
$
$
$
$
$
$
$
$
$
383,991
376,072
373,531
369,533
3,815
3,592
3,761
3,734
387,806
379,664
377,292
373,267
689,758
215,420
474,338
1.27
1.26
370,377
3,725
374,102
(a) Due to rounding, the sum of quarterly results may not equal the total for the year. Additionally, quarterly and year-
to-date computations of per share amounts are made independently.
(b) Homebuilding income before income taxes includes losses on debt retirement of $8.6 million in the 1st Quarter;
charges of $84.5 million to increase general liability insurance reserves in the 2nd Quarter; and costs associated
with the relocation of our corporate headquarters of $8.7 million, offset by favorable adjustments of $15.2 million to
decrease general liability insurance reserves in the 4th Quarter.
(c)
Financial Services expenses in the 1st Quarter includes a reduction in loan origination liabilities totaling $18.6
million.
(d)
Income tax expense in the 4th Quarter includes a benefit of $49.6 million related to the resolution of certain tax
matters and the reversal of valuation allowance related to certain state deferred tax assets.
84
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
UNAUDITED QUARTERLY INFORMATION
(000’s omitted, except per share data)
2013
Homebuilding:
Revenues
Cost of revenues
Income before income taxes (b)
Financial Services:
Revenues
Income before income taxes
Consolidated results:
Revenues
Income before income taxes
Income tax expense (benefit) (c)
Net income
Net income per share:
Basic
Diluted
Number of shares used in calculation:
Basic
Effect of dilutive securities
Diluted
1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Total (a)
$ 1,125,883
$ 1,240,060
$ 1,547,742
$ 1,624,959
$ 5,538,644
923,488
1,011,528
1,230,070
1,249,868
4,414,954
68,037
21,971
163,594
225,511
479,113
$
36,873
$
39,362
$
34,336
$
30,380
$
140,951
14,313
16,359
11,128
6,909
48,709
$ 1,162,756
82,350
588
$ 1,279,422
38,330
1,913
36,417
$ 1,582,078
174,722
(2,107,162)
$ 2,281,884
$ 1,655,339
232,420
12,367
220,053
$ 5,679,595
527,822
(2,092,294)
$ 2,620,116
$
$
$
81,762
0.21
0.21
$
$
$
$
$
$
0.09
0.09
$
$
5.92
5.87
0.58
0.57
$
$
6.79
6.72
384,228
6,093
390,321
385,389
382,883
5,791
3,220
391,180
386,103
379,879
3,845
383,724
383,077
3,789
386,866
(a) Due to rounding, the sum of quarterly results may not equal the total for the year. Additionally, quarterly and year-
to-date computations of per share amounts are made independently.
(b) Homebuilding income before income taxes in the 2nd Quarter includes charges totaling $66.6 million consisting of
losses on debt retirements, costs associated with the relocation of our corporate headquarters, and a contractual
dispute related to a previously completed luxury community.
(c)
Income tax expense (benefit) includes a benefit of $2.1 billion and $73.7 million in the 3rd Quarter and 4th Quarter,
respectively, related to the reversal of substantially all of the valuation allowance previously recorded against our
deferred tax assets.
85
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of PulteGroup, Inc.
We have audited the accompanying consolidated balance sheets of PulteGroup, Inc. (the “Company”) as of December 31, 2014
and 2013, and the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows
for each of the three years in the period ended December 31, 2014. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial
position of PulteGroup, Inc. at December 31, 2014 and 2013, and the consolidated results of its operations and its cash flows
for each of the three years in the period ended December 31, 2014, in conformity with U.S. generally accepted accounting
principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
PulteGroup, Inc.’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
Framework) and our report dated February 4, 2015 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Atlanta, Georgia
February 4, 2015
86
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
This Item is not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Management, including our Chairman, 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
December 31, 2014. Based upon, and as of the date of that evaluation, our Chairman, President and Chief Executive Officer and
Executive Vice President and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of
December 31, 2014.
Internal Control Over Financial Reporting
(a) Management’s Annual Report on Internal Control Over Financial Reporting
Management is responsible for the preparation and fair presentation of the consolidated financial statements included in
this annual report. The consolidated financial statements have been prepared in conformity with U.S. generally accepted
accounting principles and reflect management’s judgments and estimates concerning events and transactions that are accounted
for or disclosed.
Management is also responsible for establishing and maintaining effective internal control over financial reporting, as
such term is defined in Exchange Act Rule 13a-15(f). Management recognizes that there are inherent limitations in the
effectiveness of any internal control and effective internal control over financial reporting can provide only reasonable
assurance with respect to financial statement preparation. Additionally, because of changes in conditions, the effectiveness of
internal control over financial reporting may vary over time.
In order to ensure that the Company’s internal control over financial reporting is effective, management regularly
assesses such controls and did so most recently for its financial reporting as of December 31, 2014. Management’s assessment
was based on criteria for effective internal control over financial reporting described in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). On
August 22, 2014, the Company completed the acquisition of certain real estate assets from Dominion Homes. As permitted by
the Securities and Exchange Commission, management excluded the operations related to such assets from its assessment of
internal control over financial reporting as of December 31, 2014. Such operations constituted approximately $105 million of
consolidated total assets as of December 31, 2014, and $74 million of consolidated total revenues for the year then ended.
Based on this assessment, management asserts that the Company has maintained effective internal control over financial
reporting as of December 31, 2014.
Ernst & Young LLP, the independent registered public accounting firm that audited the Company’s consolidated financial
statements included in this annual report, has issued its report on the effectiveness of the Company’s internal control over
financial reporting as of December 31, 2014.
87
(b) Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of PulteGroup, Inc.
We have audited PulteGroup, Inc.’s internal control over financial reporting as of December 31, 2014, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 Framework) (the COSO criteria). PulteGroup, Inc.’s management is responsible for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting
included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility
is to express an opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As indicated in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, management’s
assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal
controls of certain real estate assets acquired from Dominion Homes on August 22, 2014, which are included in the 2014
consolidated financial statements of PulteGroup, Inc. and constituted $105 million of consolidated total assets as of December
31, 2014, and $74 million of consolidated total revenues for the year then ended. Our audit of internal control over financial
reporting of PulteGroup, Inc. also did not include an evaluation of the internal control over financial reporting of the operations
of certain real estate assets acquired from Dominion Homes.
In our opinion, PulteGroup, Inc. maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2014, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of PulteGroup, Inc. as of December 31, 2014 and 2013, and the related consolidated statements of
operations, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended
December 31, 2014 and our report dated February 4, 2015 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Atlanta, Georgia
February 4, 2015
(c)
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended December 31, 2014
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
88
ITEM 9B. OTHER INFORMATION
This Item is not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information required by this Item with respect to our executive officers is set forth in Item 4A of this Annual Report on
Form 10-K. Information required by this Item with respect to members of our Board of Directors and with respect to our audit
committee will be contained in the Proxy Statement for the 2015 Annual Meeting of Shareholders (“2015 Proxy Statement”)
under the captions “Election of Directors” and “Committees of the Board of Directors - Audit Committee” and in the chart
disclosing Audit Committee membership and is incorporated herein by this reference. Information required by this Item with
respect to compliance with Section 16(a) of the Securities Exchange Act of 1934 will be contained in the 2015 Proxy Statement
under the caption “Beneficial Security Ownership - Section 16(a) Beneficial Ownership Reporting Compliance,” and is
incorporated herein by this reference. Information required by this Item with respect to our code of ethics will be contained in
the 2015 Proxy Statement under the caption “Corporate Governance - Governance Guidelines; Code of Ethical Business
Conduct; Code of Ethics” and is incorporated herein by this reference.
Our code of ethics for principal officers, our code of ethical business conduct, our corporate governance guidelines, and
the charters of the Audit, Compensation and Management Development, Nominating and Governance, and Finance and
Investment committees of our Board of Directors are also posted on our website and are available in print, free of charge, upon
request.
ITEM 11.
EXECUTIVE COMPENSATION
Information required by this Item will be contained in the 2015 Proxy Statement under the captions “2014 Executive
Compensation” and “2014 Director Compensation” and is incorporated herein by this reference, provided that the
Compensation and Management Development Committee Report shall not be deemed to be “filed” with this Annual Report on
Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLER MATTERS
Information required by this Item will be contained in the 2015 Proxy Statement under the captions “Beneficial Security
Ownership” and “Equity Compensation Plan Information” and is incorporated herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Information required by this Item will be contained in the 2015 Proxy Statement under the captions “Certain
Relationships and Related Transactions” and “Election of Directors - Independence” and is incorporated herein by this
reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information required by this Item will be contained in the 2015 Proxy Statement under the captions “Audit and Non-
Audit Fees” and “Audit Committee Preapproval Policies” and is incorporated herein by reference.
89
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this Annual Report on Form 10-K:
(1)
Financial Statements
Consolidated Balance Sheets at December 31, 2014 and 2013
Consolidated Statements of Operations for the years ended December 31, 2014, 2013, and 2012
Consolidated Statements of Comprehensive Income for the years ended December 31, 2014,
2013 and 2012
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2014, 2013,
and 2012
Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013, and 2012
Notes to Consolidated Financial Statements
43
44
45
46
47
48
(2)
Financial Statement Schedules
All schedules are omitted because the required information is not present, is not present in amounts sufficient
to require submission of the schedule, or because the required information is included in the financial
statements or notes thereto.
(3) Exhibits
The following exhibits are filed with this Annual Report on Form 10-K or are incorporated herein by
reference:
Exhibit Number and Description
(3)
(a) Restated Articles of Incorporation, of PulteGroup, Inc. (Incorporated by reference to Exhibit 3.1 of our
Current Report on Form 8-K, filed with the SEC on August 18, 2009)
(b) Certificate of Amendment to the Articles of Incorporation, dated March 18, 2010 (Incorporated by
reference to Exhibit 3(b) of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010)
(c) Certificate of Amendment to the Articles of Incorporation, dated May 21, 2010 (Incorporated by reference
to Exhibit 3(c) of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2010)
(d) By-laws, as amended, of PulteGroup, Inc. (Incorporated by reference to Exhibit 3.1 of our Current Report
on Form 8-K, filed with the SEC on April 8, 2009)
(e) Certificate of Designation of Series A Junior Participating Preferred Shares, dated August 6, 2009
(Incorporated by reference to Exhibit 3(b) of our Registration Statement on Form 8-A, filed with the SEC
on August 18, 2009)
(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) Amended and Restated Section 382 Rights Agreement, dated as of March 18, 2010, between PulteGroup,
Inc. and Computershare Trust Company, N.A., as rights agent, which includes the Form of Rights
Certificate as Exhibit B thereto (Incorporated by reference to Exhibit 4 of PulteGroup, Inc.’s Registration
Statement on Form 8-A/A filed with the SEC on March 23, 2010)
(10)
(c)
(a)
(b)
First Amendment to Amended and Restated Section 382 Rights Agreement, dated as of March 14, 2013,
between PulteGroup, Inc. and Computershare Trust Company, N.A., as rights agent (Incorporated by
reference to Exhibit 4-1 of our Current Report on Form 8-K, filed with the SEC on March 15, 2013)
1995 Stock Incentive Plan for Key Employees (Incorporated by reference to our Proxy Statement dated
March 31, 1995, and as Exhibit 4.1 of our Registration Statement on Form S-8, Registration No. 33-99218)
PulteGroup, Inc. 401(k) Plan (Incorporated by reference to Exhibit 4.3 of our Registration Statement on
Form S-8, No. 333-115570)
90
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)
(q)
(r)
(s)
(t)
PulteGroup, Inc. 2000 Stock Incentive Plan for Key Employees (Incorporated by reference to Exhibit 4.3
of our Registration Statement on Form S-8, Registration No. 333-66284)
PulteGroup, Inc. 2000 Stock Plan for Nonemployee Directors (Incorporated by reference to Exhibit 4.3 of
our Registration Statement on Form S-8, Registration No. 333-66284)
PulteGroup, Inc. 2002 Stock Incentive Plan (Incorporated by reference to our Proxy Statement dated April
3, 2002 and as Exhibit 4.3 of our Registration Statement on Form S-8, No. 333-123223)
PulteGroup, Inc. 2008 Senior Management Incentive Plan (Incorporated by reference to our Proxy
Statement dated April 7, 2008)
PulteGroup, Inc. 2013 Senior Management Incentive Plan (Incorporated by reference to Exhibit 10.2 of our
Current Report on Form 8-K, filed with the SEC on May 13, 2013)
PulteGroup, Inc. Long-Term Incentive Program (Incorporated by reference to Exhibit 10.2 of our Current
Report on Form 8-K, filed with the SEC on May 20, 2008)
Form of PulteGroup, Inc. Long Term Incentive Award Agreement (Incorporated by reference to Exhibit
10.3 of our Current Report on Form 8-K, filed with the SEC on May 20, 2008)
Form of PulteGroup, Inc. 2008-2010 Grant Acceptance Agreement - Company Performance Measures
(Incorporated by reference to Exhibit 10.4 of our Current Report on Form 8-K, filed with the SEC on May
20, 2008)
Form of PulteGroup, Inc. 2008-2010 Grant Acceptance Agreement - Individual Performance Measures
(Incorporated by reference to Exhibit 10.5 of our Current Report on Form 8-K, filed with the SEC on May
20, 2008)
PulteGroup, Inc. 2013 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 of our Current
Report on Form 8-K, filed with the SEC on May 13, 2013)
PulteGroup, Inc. 2004 Stock Incentive Plan (as Amended and Restated as of July 9, 2009) (Incorporated by
reference to Exhibit 10(a) of our Quarterly Report on Form 10-Q for the quarter ended September 30,
2009)
Form of Restricted Stock Unit Award Agreement under PulteGroup, Inc. 2013 Stock Incentive Plan
(Incorporated by reference to Exhibit 10(c) of our Quarterly Report on Form 10-Q for the quarter ended
March 31, 2014)
Form of Restricted Stock Award Agreement (as amended) under PulteGroup, Inc. 2004 Stock Incentive
Plan (Incorporated by reference to Exhibit 10(a) of our Quarterly Report on Form 10-Q for the quarter
ended March 31, 2010)
Form of Restricted Stock Award Agreement (as amended) under PulteGroup, Inc. 2004 Stock Incentive
Plan (Incorporated by reference to Exhibit 10(p) of our Annual Report on Form 10-K for the year ended
December 31, 2013)
Form of Restricted Stock Award Agreement (as amended) under PulteGroup, Inc. 2000 Stock Incentive
Plan for Key Employees (Incorporated by reference to Exhibit 10(b) of our Quarterly Report on Form 10-Q
for the quarter ended March 31, 2010)
Form of Stock Option Agreement under PulteGroup, Inc. 2002 and 2004 Stock Incentive Plans
(Incorporated by reference to Exhibit 10(s) of our Annual Report on Form 10-K for the year ended
December 31, 2007)
Form of Stock Option Agreement (as amended) under PulteGroup, Inc. 2002 and 2004 Stock Incentive
Plans (Incorporated by reference to Exhibit 10(t) of our Annual Report on Form 10-K for the year ended
December 31, 2007)
Form of Performance Share Award Agreement under PulteGroup, Inc. 2004 Stock Incentive Plan
(Incorporated by reference to Exhibit 10(w) of our Annual Report on Form 10-K for the year ended
December 31, 2011 )
(u) Centex Corporation Amended and Restated 1987 Stock Option Plan (Amended and Restated Effective
February 11, 2009) (Incorporated by reference to Exhibit 10.4 of Centex’s Current Report on Form 8-K,
filed with the SEC on February 13, 2009)
91
(v) Amended and Restated Centex Corporation 2001 Stock Plan (Amended and Restated Effective February
11, 2009) (Incorporated by reference to Exhibit 10.2 of Centex’s Current Report on Form 8-K, filed with
the SEC on February 13, 2009)
(w)
Form of stock option agreement for the Amended and Restated Centex Corporation 2001 Stock Plan
(Incorporated by reference to Exhibit 10.5 of Centex’s Current Report on Form 8-K, filed with the SEC on
May 13, 2008)
(x) Centex Corporation 2003 Equity Incentive Plan (Amended and Restated Effective February 11, 2009)
(Incorporated by reference to Exhibit 10.1 of Centex’s Current Report on Form 8-K, filed with the SEC on
February 13, 2009)
(y)
(z)
Form of stock option agreement for the Centex Corporation 2003 Equity Incentive Plan (Incorporated by
reference to Exhibit 10.6 of Centex’s Current Report on Form 8-K, filed with the SEC on May 13, 2008)
PulteGroup, Inc. Long Term Compensation Deferral Plan (As Amended and Restated Effective January 1,
2004) (Incorporated by reference to Exhibit 10(a) of our Quarterly Report on Form 10-Q for the quarter
ended March 31, 2006)
(aa)
PulteGroup, Inc. Deferred Compensation Plan for Non-Employee Directors (as Amended and Restated
Effective December 8, 2009) (Incorporated by reference to Exhibit 10(al) of our Annual Report on Form
10-K for the year ended December 31, 2009)
(ab) Assignment and Assumption Agreement dated as of August 18, 2009 between PulteGroup, Inc. and Centex
Corporation (Incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K, filed with the
SEC on August 20, 2009)
(ac)
Form of Performance Award Agreement under PulteGroup, Inc. 2008 Senior Management Incentive Plan
(Incorporated by reference to Exhibit 10(a) of our Quarterly Report on Form 10-Q for the quarter ended
March 31, 2012)
(ad) PulteGroup, Inc. Executive Severance Policy (Incorporated by reference to Exhibit 10.1 of our Current
Report on Form 8-K, filed with the SEC on February 12, 2013)
(ae)
PulteGroup, Inc. Retirement Policy (Incorporated by reference to Exhibit 10.2 of our Current Report on
Form 8-K, filed with the SEC on February 12, 2013)
(af)
Master Repurchase Agreement dated as of September 28, 2012 among Comerica Bank, as Agent and a
Buyer, the other Buyers party hereto and Pulte Mortgage LLC, as Seller (Incorporated by reference to
Exhibit 10.1 of our Current Report on Form 8-K filed with the SEC on October 2, 2012)
(ag) First Amendment to Master Repurchase Agreement dated as of September 13, 2013 among Comerica
Bank, as Agent and a Buyer, the other Buyers party hereto and Pulte Mortgage LLC, as Seller
(Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the SEC on
September 18, 2013)
(ah) Second Amendment to Master Repurchase Agreement dated as of January 9, 2014 among Comerica Bank,
as Agent and a Buyer, the other Buyers party hereto and Pulte Mortgage LLC, as Seller (Incorporated by
reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the SEC on January 13, 2014)
(ai) Third Amendment to Master Repurchase Agreement dated as of January 24, 2014 among Comerica Bank,
as Agent and a Buyer, the other Buyers party hereto and Pulte Mortgage LLC, as Seller (Incorporated by
reference to Exhibit 10(ai) of our Annual Report on Form 10-K for the year ended December 31, 2013)
(aj)
Fourth Amendment to Master Repurchase Agreement dated as of September 8, 2014 among Comerica
Bank, as Agent and a Buyer, the other Buyers party thereto and Pulte Mortgage LLC, as Seller
(Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the SEC on
September 10, 2014)
(ak) Credit Agreement dated as of July 23, 2014 among PulteGroup, Inc., as Borrower, Bank of America,
N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer, and the Other Lenders Party
Hereto (Incorporated by reference to Exhibit 10(a) of our Quarterly Report on Form 10-Q for the quarter
ended June 30, 2014)
(12)
(21)
(23)
Ratio of Earnings to Fixed Charges at December 31, 2014 (Filed herewith)
Subsidiaries of the Registrant (Filed herewith)
Consent of Independent Registered Public Accounting Firm (Filed herewith)
92
(24)
(31)
(32)
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
Power of Attorney (filed herewith)
(a) Rule 13a-14(a) Certification by Richard J. Dugas, Jr., Chairman, President, and Chief Executive Officer
(Filed herewith)
(b) Rule 13a-14(a) Certification by Robert T. O'Shaughnessy, Executive Vice President and Chief Financial
Officer (Filed herewith)
Certification Pursuant to 18 United States Code § 1350 and Rule 13a-14(b) of the Securities Exchange Act
of 1934 (Filed herewith)
XBRL Instance Document
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document
93
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
February 4, 2015
PULTEGROUP, INC.
(Registrant)
By:
/s/ Robert T. O'Shaughnessy
Robert T. O'Shaughnessy
Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capabilities and on the date indicated:
February 4, 2015
/s/ Richard J. Dugas, Jr.
Richard J. Dugas, Jr.
Chairman of the Board of Directors,
President, and Chief Executive Officer
(Principal Executive Officer)
/s/ Robert T. O'Shaughnessy
Robert T. O'Shaughnessy
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ James L. Ossowski
James L. Ossowski
Vice President, Finance and Controller
(Principal Accounting Officer)
Brian P. Anderson
Member of Board of Directors
Bryce Blair
Member of Board of Directors
Thomas J. Folliard
Member of Board of Directors
Cheryl W. Grisé
Member of Board of Directors
André J. Hawaux
Member of Board of Directors
Debra J. Kelly-Ennis
Member of Board of Directors
Patrick J. O’Leary
Member of Board of Directors
James J. Postl
Member of Board of Directors
}
}
}
}
}
}
}
}
/s/ Robert T. O'Shaughnessy
Robert T. O'Shaughnessy
Executive Vice President and
Chief Financial Officer
94
PULTEGROUP, INC.
RATIO OF EARNINGS TO FIXED CHARGES
($000’s omitted)
2014
Years Ended December 31,
2012
2011
2013
EXHIBIT 12
2010
Earnings:
Income (loss) from continuing operations before
income taxes
Fixed charges
Amortization of capitalized interest
Capitalized interest
Distributions in excess (less than) earnings of
affiliates
Income as adjusted
Fixed charges:
Interest expensed and capitalized
Portion of rents representative of interest factor
Fixed charges
Ratio of earnings to fixed charges (a)
$
$
$
$
689,758
139,422
194,728
(131,444)
(3,476)
888,988
131,069
8,353
139,422
6.4
$
$
$
$
527,822
162,418
255,065
(154,107)
767
791,965
154,819
7,599
162,418
4.9
$
$
$
$
183,554
210,394
224,291
(201,103)
$ (310,300) $(1,234,546)
281,582
180,918
(264,932)
231,208
189,382
(221,071)
3,324
420,460
3,628
2,601
$ (107,153) $(1,034,377)
202,395
7,999
210,394
2.0
$
$
222,383
8,825
231,208
—
$
$
269,296
12,286
281,582
—
Note: The ratios of earnings to fixed charges set forth above are computed on a consolidated basis. Fixed charges are
comprised of interest incurred, which includes imputed interest associated with the guaranteed debt of our 50% or less owned
affiliates, as well as a portion of rent expense, which represents the estimated interest factor and amortization of debt expense.
(a)
Earnings for years ended December 31, 2011and 2010 were inadequate to cover fixed charges. Additional earnings
of $338.4 million, and $1.3 billion, respectively, would have been necessary to bring the ratio to 1.0.
SUBSIDIARIES OF PULTEGROUP, INC.
As of December 31, 2014
Company Name
Jurisdiction of Formation
EXHIBIT 21
Centex LLC
Centex Construction of New Mexico, LLC
Centex Development Company, L.P.
Centex Homes
Centex Homes Realty Company
Centex Hospitality Group, LLC
Centex International II, LLC
Centex Real Estate Construction Company
Centex Real Estate Corporation
Contractors Insurance Company of North America, Inc., a Risk Retention Group
Del Webb California Corp.
Del Webb Communities, Inc.
Del Webb Communities of Illinois, Inc.
Del Webb Corporation
Del Webb Home Construction, Inc.
Del Webb Texas Limited Partnership
Del Webb’s Coventry Homes, Inc.
Del Webb’s Spruce Creek Communities, Inc.
DiVosta Building, LLC
DiVosta Homes, L.P.
DiVosta Homes Holdings, LLC
GI Development Business Trust
Nomas LLC
North American Builders Indemnity Company
PH 19 Corporation
PH 43 LLC
PH 55 LLC
PH Relocation Services LLC
PH1 Corporation
PHNE Business Trust
PN II, Inc.
Potomac Yard Development LLC
Preserve I, Inc.
Preserve II, Inc.
Pulte Arizona Services, Inc.
Pulte Aviation I LLC
Pulte Development Corporation
Pulte Development New Mexico, Inc.
Pulte Home Corporation
Pulte Home Corporation of The Delaware Valley
Nevada
Delaware
Delaware
Nevada
Nevada
Delaware
Nevada
Nevada
Nevada
Hawaii
Arizona
Arizona
Arizona
Delaware
Arizona
Arizona
Arizona
Arizona
Michigan
Delaware
Delaware
Massachusetts
Nevada
Hawaii
Michigan
Michigan
Michigan
Michigan
Michigan
Massachusetts
Nevada
Delaware
Michigan
Michigan
Michigan
Michigan
Michigan
Michigan
Michigan
Michigan
Pulte Homes of Greater Kansas City, Inc.
Pulte Homes of Indiana, LLC
Pulte Homes of Michigan LLC
Pulte Homes of Minnesota LLC
Pulte Homes of New England LLC
Pulte Homes of New Mexico, Inc.
Pulte Homes of New York LLC
Pulte Homes of NJ, Limited Partnership
Pulte Homes of Ohio LLC
Pulte Homes of PA, Limited Partnership
Pulte Homes of St. Louis, LLC
Pulte Homes of Texas, L.P.
Pulte Homes Tennessee Limited Partnership
Pulte Land Company, LLC
Pulte Mortgage LLC
Pulte Nevada I LLC
Pulte Payroll Corporation
Pulte Purchasing Corporation
Pulte RC, LLC
Pulte Realty Holdings, Inc.
Pulte Realty Limited Partnership
Pulte Texas Holdings, LLC
Pulte/BP Murrieta Hills, LLC
Radnor Homes, Inc.
RN Acquisition 2 Corp.
Stone Creek Golf Club LLC
Michigan
Indiana
Michigan
Minnesota
Michigan
Michigan
Delaware
Michigan
Michigan
Michigan
Nevada
Texas
Nevada
Michigan
Delaware
Delaware
Michigan
Michigan
Michigan
Michigan
Michigan
Michigan
California
Michigan
Nevada
Florida
Certain subsidiaries have been omitted from this list. These subsidiaries, when considered in the aggregate as a single
subsidiary, do not constitute a significant subsidiary as defined in Rule 1-02(w) of Regulation S-X.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-115570, Form S-8 No. 33-99218,
Form S-8 No. 333-66284, Form S-8 No. 333-66286, Form S-8 No. 333-66322, Form S-8 No. 333-123223, Form S-8 No.
333-150961, Form S-8 No. 333-161441, Post-Effective Amendment to Form S-4 on Form S-8 No. 333-158974, Form S-8 No.
333-102255, Form S-8 No. 333-51019, and Form S-8 333-188986) of PulteGroup, Inc. and in the related Prospectuses of our
reports dated February 4, 2015, with respect to the consolidated financial statements of PulteGroup, Inc., and the effectiveness of
internal control over financial reporting of PulteGroup, Inc., included in this Annual Report (Form 10-K) for the year ended
December 31, 2014.
EXHIBIT 23
/s/ Ernst & Young LLP
Atlanta, Georgia
February 4, 2015
POWER OF ATTORNEY
EXHIBIT 24
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints each of Richard J. Dugas,
Jr., Robert O’Shaughnessy, Steven M. Cook, and James Ossowski, signing singly, his true and lawful attorney-in-fact to:
1. execute for and on behalf of the undersigned, in the undersigned’s capacity as a director of PulteGroup, Inc.(the “Company”), the
Annual Report on Form 10-K in accordance with the Securities Exchange Act of 1934, as amended, and the rules thereunder;
2. do and perform any and all acts for and on behalf of the undersigned which may be necessary or desirable to complete and
execute any such Annual Report on Form 10-K, complete and execute any amendment or amendments thereto, and timely file
such documents with the Unites States Securities and Exchange Commission and any stock exchange, stock market or similar
authority; and
3.
take any other action of any type whatsoever in connection with the foregoing which, in the opinion of such attorney-in-fact, may
be of benefit to, and in the best interest of, or legally required by, the undersigned, it being understood that the documents
executed by such attorney-in-fact on behalf of the undersigned pursuant to this Power of Attorney shall be in such form and shall
contain such terms and conditions as such attorney-in-fact may approve in such attorney-in-fact’s discretion.
The undersigned hereby grants to each such attorney-in-fact full power and authority to do and perform any and every act and
thing whatsoever requisite, necessary, or proper to be done in the exercise of any of the rights and powers herein granted, as fully to all
intents and purposes as the undersigned might or could do if personally present, with full power of substitution or revocation, hereby
ratifying and confirming all that such attorney-in-fact, or such attorney-in-fact’s substitute or substitutes, shall lawfully do or cause to
be done by virtue of this power of attorney and the rights and powers herein granted. The undersigned acknowledges that the
foregoing attorneys-in-fact, in serving in such capacity at the request of the undersigned, are not assuming, nor is the Company
assuming, any of the undersigned’s responsibilities to comply with any rule of the Securities Exchange Act of 1934, as amended.
This Power of Attorney shall remain in full force and effect until the undersigned is no longer required to sign the Annual
Report on Form 10-K with respect to the undersigned’s role as a director of the Company, unless earlier revoked by the undersigned
in a signed writing delivered to the foregoing attorneys-in-fact.
IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney to be executed as of this 4th day of December,
2014.
/s/ Brian P. Anderson
Brian P. Anderson
/s/ Bryce Blair
Bryce Blair
/s/ Thomas J. Folliard
Thomas J. Folliard
/s/ Cheryl W. Grisé
Cheryl W. Grisé
/s/ André J. Hawaux
André J. Hawaux
/s/ Debra J. Kelly-Ennis
Debra J. Kelly-Ennis
/s/ Patrick J. O’Leary
Patrick J. O’Leary
/s/ James J. Postl
James J. Postl
I, Richard J. Dugas, Jr., certify that:
CHIEF EXECUTIVE OFFICER'S CERTIFICATION
EXHIBIT 31(a)
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of PulteGroup, Inc.;
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;
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;
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.
b.
c.
d.
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;
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;
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
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 registrant's board of
directors (or persons performing the equivalent function):
a.
b.
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
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: February 4, 2015
/s/ Richard J. Dugas, Jr.
Richard J. Dugas, Jr.
Chairman, President, and Chief Executive Officer
I, Robert T. O'Shaughnessy, certify that:
CHIEF FINANCIAL OFFICER'S CERTIFICATION
EXHIBIT 31(b)
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of PulteGroup, Inc.;
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;
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;
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.
b.
c.
d.
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;
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;
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
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 registrant's board of
directors (or persons performing the equivalent function):
a.
b.
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
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: February 4, 2015
/s/ Robert T. O'Shaughnessy
Robert T. O'Shaughnessy
Executive Vice President and
Chief Financial Officer
Certification
Pursuant to 18 United States Code § 1350 and
Rule 13a-14(b) of the Securities Exchange Act of 1934
EXHIBIT 32
In connection with the Annual Report of PulteGroup, Inc. (the “Company”) on Form 10-K for the period ended December 31,
2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned herby certifies
that to his knowledge:
(1)
(2)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
The information contained in the Report fairly presents, in all material respects, the financial condition and result of
operations of the Company.
Date: February 4, 2015
/s/ Richard J. Dugas, Jr.
Richard J. Dugas, Jr.
Chairman, President, and Chief Executive Officer
/s/ Robert T. O'Shaughnessy
Robert T. O'Shaughnessy
Executive Vice President and
Chief Financial Officer
BOARD OF DIRECTORS, SENIOR LEADERSHIP AND
AREA & DIVISION MANAGEMENT
BOARD OF DIRECTORS
Brian P. Anderson (1)(3)
Former Chief Financial Officer
Office Max, Inc.
Bryce Blair (2)(4)
Former Chairman of the Board
and Chief Executive Officer
AvalonBay Communities, Inc.
Richard J. Dugas, Jr. (4)
Chairman, President and
Chief Executive Officer
PulteGroup, Inc.
Cheryl W. Grisé (2)(3)
Former Executive Vice
President
Northeast Utilities
Debra J. Kelly-Ennis (1)(3)
Former President and Chief
Executive Officer
Diageo Canada, Inc.
Thomas J. Folliard (1)(4)
President and Chief
Executive Officer
CarMax, Inc.
André J. Hawaux (1)(4)
Executive Vice President,
Chief Operating Officer and
Chief Financial Officer
Dick’s Sporting Goods
Patrick J. O’Leary (2)(4)
Former Executive Vice
President and
Chief Financial Officer
SPX Corporation
James J. Postl (2)(3)(5)
Former President and Chief
Executive Officer
Pennzoil-Quaker State
Company
(1) Audit Committee Member
(2) Compensation and
Management
Development Committee
Member
(3) Nominating and
Governance Committee
Member
(4) Finance and Investment
Committee Member
(5) Lead Director
Richard J. Dugas, Jr.
Chairman, President and
Chief Executive Officer
Harmon D. Smith
Executive Vice President,
Field Operations
Anthony W. Barbee
Area President, Midwest
Area
Stephen V. Teodecki
Area President, Texas Area
Mary M. Rachide
Vice President, Strategy
SENIOR LEADERSHIP
James R. Ellinghausen
Executive Vice President,
Human Resources
Ryan R. Marshall
Executive Vice President,
Homebuilding Operations
Robert T. O’Shaughnessy
Executive Vice President and
Chief Financial Officer
Steven M. Cook
Senior Vice President,
General Counsel and
Secretary
Michael P. Wyatt
Senior Vice President,
National Homebuilding
Operations
John J. Chadwick
Area President, West Area
Joseph L. Drouin
Vice President, Chief
Information Officer
Bruce E. Robinson
Vice President and Treasurer
Peter J. Keane
Area President, Southeast
Area
Gregory M. Nelson
Vice President and Assistant
Secretary
Stephen P. Schlageter
Area President, East Area
James L. Ossowski
Vice President, Finance and
Controller
Manish M. Shrivastava
Vice President, Chief
Marketing Officer
James P. Zeumer
Vice President, Investor
Relations and Corporate
Communications
AREA & DIVISION MANAGEMENT
East Area
Stephen P. Schlageter
Area President
Midwest Area
Anthony W. Barbee
Area President
Southeast Area
Peter J. Keane
Area President
Texas Area
Stephen V. Teodecki
Area President
West Area
John J. Chadwick
Area President
CHARLOTTE / TENNESSEE
Jon R. Cherry
COLUMBUS / KENTUCKY
Keith W. Tomlinson
COASTAL CAROLINAS
William N. Cutler
CENTRAL TEXAS
Stephen V. Teodecki
MID-ATLANTIC
Lewis P. Birnbaum
NEW ENGLAND
James R. McCabe
ILLINOIS / ST. LOUIS
Curtis H. VanHyfte
GEORGIA
Andrew C. Hill
INDIANAPOLIS / CLEVELAND
Anthony W. Barbee
NORTH FLORIDA
Peter J. Keane
NORTHEAST CORRIDOR
Stephen P. Schlageter
MICHIGAN
Brandon K. Jones
SOUTH FLORIDA
Richard H. McCormick
RALEIGH
David C. Carrier
MINNESOTA
Graham F. Epperson
WEST FLORIDA
Sean C. Strickler
DALLAS
Bryan K. Swindell
HOUSTON
Lindy S. Oliva
SAN ANTONIO
Laurin J. Darnell
ARIZONA
Scott R. Wright
LAS VEGAS
Ryan T. Breen
NEW MEXICO
William J. Gillilan IV
NORTHERN CALIFORNIA
J. Steven Kalmbach
PACIFIC NORTHWEST
Samuel C. Colgan
SOUTHERN CALIFORNIA
Chris A. Edgar
Pulte Financial
Services
Debra W. Still
President and Chief Executive
Officer
INFORMATION REQUESTS
The Company’s annual report to shareholders and proxy statement together contain
substantially all the information presented in the Form 10-K report filed with the Securities and
Exchange Commission. Individuals interested in receiving the annual report, Form 10-K, Form
10-Qs or other printed corporate literature should write to the Investor Relations Department at
the corporate office or call (800) 777-8583.
INVESTOR INQUIRIES
Shareholders, securities analysts, portfolio managers and others with inquiries about the
Company should contact James P. Zeumer, Vice President of Investor Relations and Corporate
Communications, at the corporate office or call (800) 777-8583. Shareholders with inquiries
relating to shareholder records, stock transfers, change of ownership, and change of address or
dividend payments should contact:
Computershare Trust Company N.A.
P.O. Box 30170
College Station, TX 77842-3170
(877) 282-1168
www.computershare.com
INTERNET ADDRESS
Additional information about PulteGroup may be obtained by visiting our website at
pultegroupinc.com.
ANNUAL MEETING OF THE SHAREHOLDERS
The annual meeting of shareholders of PulteGroup, Inc., will be held at 4:00 p.m. (EDT),
Wednesday, May 6, 2015, at the Grand Hyatt Atlanta in Buckhead, 3300 Peachtree Rd., NE,
Atlanta, Georgia 30305.
COMMON STOCK INFORMATION
Ticker Symbol: PHM
PulteGroup, Inc., is a component of the S&P 500 Composite Stock Price Index. Common stock
of PulteGroup, Inc. is listed and traded on the New York Stock Exchange, which is the principal
market for the common stock. Option trading in PulteGroup, Inc. is conducted on the Chicago
Board of Exchange.
This annual report includes “forward-looking statements.” These statements are subject to a number of risks, uncertainties
and other factors that could cause our actual results, performance, prospects or opportunities, as well as those of the
markets we serve or intend to serve, to differ materially from those expressed in, or implied by, these statements. You can
identify these statements by the fact that they do not relate to matters of a strictly factual or historical nature and generally
discuss or relate to forecasts, estimates or other expectations regarding future events. Generally, the words “believe,”
“expect,” “intend,” “estimate,” “anticipate,” “project,” “may,” “can,” “could,” “might,” “will” and similar expressions identify
forward-looking statements, including statements related to expected operating and performing results, planned
transactions, planned objectives of management, future developments or conditions in the industries in which we participate
and other trends, developments and uncertainties that may affect our business in the future.
Such risks, uncertainties and other factors include, among other things: interest rate changes and the availability of
mortgage financing; continued volatility in the debt and equity markets; competition within the industries in which
PulteGroup operates; the availability and cost of land and other raw materials used by PulteGroup in its homebuilding
operations; the impact of any changes to our strategy in responding to the cyclical nature of the industry, including any
changes regarding our land positions; the availability and cost of insurance covering risks associated with PulteGroup’s
businesses; shortages and the cost of labor; weather related slowdowns; slow growth initiatives and/or local building
moratoria; governmental regulation directed at or affecting the housing market, the homebuilding industry or construction
activities; uncertainty in the mortgage lending industry, including revisions to underwriting standards and repurchase
requirements associated with the sale of mortgage loans; the interpretation of or changes to tax, labor and environmental
laws; economic changes nationally or in PulteGroup’s local markets, including inflation, deflation, changes in consumer
confidence and preferences and the state of the market for homes in general; legal or regulatory proceedings or claims; 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; 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, 2014, 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.
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(PAGE INTENTIONALLY LEFT BLANK)
PulteGroup, Inc.
3350 Peachtree Road N.E.
Suite 150
Atlanta, GA 30326
pultegroupinc.com :: www.pulte.com :: www.centex.com :: www.delwebb.com :: www.divosta.com