2021
ANNUAL
REPORT
About PulteGroup, Inc.
PulteGroup, Inc. (NYSE: PHM), based in Atlanta, Georgia, is one of America’s largest homebuilding companies
with operations in more than 40 markets throughout the country. Through its brand portfolio that includes
Centex, Pulte Homes, Del Webb, DiVosta Homes, American West and John Wieland Homes and
Neighborhoods, 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’s purpose is building incredible
places where people can live their dreams.
For more information about PulteGroup, Inc. and PulteGroup brands, go to pultegroup.com; pulte.com;
centex.com; delwebb.com; divosta.com; jwhomes.com; and americanwesthomes.com. Follow PulteGroup, Inc.
on Twitter: @PulteGroupNews.
Letter to PulteGroup’s Owners, Customers, Team Members and Business Partners
In his book The 7 Habits of Highly Effective People®, Stephen Covey wrote about the importance of “beginning
with the end in mind.” For PulteGroup, during the past decade, that end has been to deliver industry-leading
returns on equity (ROE).
Return on Equity
28%
23%
20%
24%
30%
25%
20%
15%
10%
5%
0%
10%
2017
2018
2019
2020
2021
Looking back to 2011, the year before we established this
as a strategic objective, our ROE was negative 10%. It
goes without saying that we recognized the boldness of
targeting industry-leading returns at that time, but we also
understood that returns ultimately drive long-term
shareholder value. We also recognized that shifting our
focus to returns would require meaningful change to our
business performance and the future trajectory of the
Company. As such, to generate improvements throughout
our operations, we launched a series of important changes
including our land acquisition criteria, our approach to
land development, our home construction processes, and
our sales and related pricing practices that, in turn, would
benefit our income statement, balance sheet and cash
flows. These changes were all part of the Value Creation
strategy that we implemented at that time.
Flash forward to today, and we are indeed one of the industry leaders, having delivered an ROE of 28% for 2021.
This is an increase of 420 basis points over 2020, and light-years beyond where we started ten years ago. As
expected, and as can be seen in our operating and financial results, PulteGroup’s higher returns are indeed being
driven by gains in all key operating metrics of the business.
Home Sale Revenues ($B)
$13.4
$9.8
$9.9
$10.6
$8.3
2017
2018
2019
2020
2021
$16
$14
$12
$10
$8
$6
$4
$2
$0
Despite the ongoing challenges created by the pandemic in
2021, we generated a 26% increase in home sale revenues to
$13.4 billion, making 2021 one of the highest revenue years
in the history of PulteGroup. Our significantly higher
revenues were driven by a 17% increase in closings to
28,894 homes, in combination with an 8% increase in
average sales price to $463,000. The increase in average
sales price reflects gains in pricing across all buyer groups:
first time, move up and active adult.
It is important to highlight that our outstanding returns
continue to be driven by both top line growth and
operating gains that allowed more of every dollar to drop
to our bottom line. Benefiting from the strong demand and
pricing environment, we increased our home sale gross
margin by 210 basis points to 26.4%. By effectively
leveraging our overheads, we were able to expand our
operating margin (gross margin less SG&A) by an even
greater 260 basis points to 17.4%.
1
Gross Margin % of Home Sale Revenues
27%
26%
25%
24%
23%
22%
21%
20%
$1,200
$1,000
$800
$600
$400
$200
$0
26.4%
24.3%
23.2%
23.1%
22.4%
2017
2018
2019
2020
2021
Share Repurchases & Dividends ($M)
$1,023
$1,045
$399
$397
$301
2017
2018
2019
2020
2021
For the year, I am extremely pleased to report that
PulteGroup generated a 38% increase in net income to
$1.9 billion and delivered a 43% increase in diluted
earnings to $7.43 per share. Our earnings per share gains
for 2021 were enhanced by our ongoing and active share
repurchase program. In 2021, we repurchased
17.7 million shares, or approximately 6% of our
common shares outstanding.
The return of funds to our shareholders is part of our stated
capital allocation priorities, which are to invest in the
business, pay our dividend, repurchase shares and operate
with a modest leverage profile. Consistent with our first
priority, in 2021 we invested $4.2 billion into our business
through the acquisition and development of critical land
resources. The increase in investment of almost 50% over
2020 allowed us to end the year with 228,296 lots under
control, of which 52% were held via option.
Along with increasing our land investment in 2021, we
raised our dividend payout per share by 17% as we
distributed $148 million in dividends. In combination
with our $897 million of share repurchases, we returned
over $1.0 billion to our shareholders. Having sufficient
capital to fund all of our priorities, in early 2021 we
retired $726 million of bonds which helped to lower our
year end debt-to-capital ratio to a historic low of 21.3%.
The operational gains that are helping to drive our superior
ROE are also supporting the cash flows needed to fund our
critical business needs. In 2021, our cash flow from
operations was $1.0 billion, bringing our five-year total to
$6.0 billion. Homebuilding is a capital-intensive business, so
generating positive cash flow while growing our operations
clearly demonstrates the benefits from the important changes
we have made in PulteGroup’s business model.
Along with realizing ongoing gains in our core homebuilding operations, we are pursuing other key initiatives
that we believe can help grow our business and drive important competitive advantages going forward. First, we
are expanding our operating footprint into new markets. This includes entering new geographies such as Denver,
CO, as well as moving into cities adjacent to existing operations such as this year’s expansion into Greenville
and Columbia, SC, the Triad area outside of Raleigh, NC, and the Space Coast area of Florida. Such expansion
into nearby areas allows us to capitalize on our knowledge of the local market and existing trade relationships,
along with capturing additional overhead leverage.
Second, we continue to advance exciting programs focused on integrating new technologies into the sale and
construction of our homes. On the sales side, in 2021 we piloted our innovative Transact Home Online (THO), a
revolutionary homebuying process that is entirely online. Initially targeting our first-time homebuyers, we
believe THO to be the first of its kind sales process in the homebuilding space where homebuyers can complete
the selection, configuration and purchase of their home entirely through our integrated online system. After its
successful pilot this past year, we expect to roll out THO into many more communities in 2022.
On the construction side, we are making steady progress in expanding our off-site manufacturing capabilities
through which we can more efficiently build higher quality homes, while addressing the structural labor
shortages within the construction industry. Having made our initial investment in off-site production in January
2
2020 through the acquisition of Innovative Construction Group (ICG) in Jacksonville, FL, we have established a
second plant in Florence, SC, and have additional plants in the planning and assessment phase. These plants
allow for the automated production of wall panels, roof trusses and floor decks with better precision and
significantly less waste. I encourage you to visit our corporate website to view videos on ICG’s manufacturing
process.
Third, we have been actively evaluating strategies for entering the single-family rental (SFR) market. In
considering an entry into the SFR market, we were looking for a way to generate high returns within a structure
that aligned with our existing homebuilding model. I am excited to say that we developed an approach that
checks the requisite boxes through a strategic relationship with Invitation Homes (NYSE: INVH), the nation’s
premier single-family home leasing company. Under this program, we expect to design and build approximately
7,500 new homes over a five-year period for sale to Invitation Homes. At year end, we had already reached
agreements on the construction and sale of over 1,400 homes that will begin delivering in 2023.
And finally, we continue to invest significant time and resources in our company’s environmental, social and
governance (ESG) programs that I believe are making a difference in how we operate and, more importantly,
how we are positively impacting the markets we serve. To provide greater transparency on our ESG programs, in
2021 we launched our Pulte Cares website where interested parties can find details about our policies and
programs in such areas as our corporate values, sustainability, and diversity and inclusion. Within the website
you can find our reporting under the applicable Sustainability Accounting Standards Board (SASB) guidelines
and our EEO-1 workforce demographic metrics.
Our ESG practices and associated reporting structures are in the early part of what will be a sustained journey
and we are actively working to bolster our efforts. We are already working to expand our data collection and
reporting capabilities and will continue to post updated metrics to the site later this year. Providing relevant data
to the public is important, but I believe that to achieve meaningful and sustained gains requires our entire
organization to embrace change and more fully integrate new ways of thinking into our day-to-day decision
making. Such a cultural change takes time, but our Board of Directors and entire leadership team are committed
to the effort because it’s the right thing to do for our business and for the world we live in.
Each of these initiatives is large and requires multiple years of development before they can have a meaningful
impact on PulteGroup’s operating and financial results. Still, we believe that over time their success can support
the ongoing expansion of our operations, further differentiate PulteGroup from its competitors, and help build a
more sustainable business platform.
Demand vs. Supply
Housing demand over the past 24 months has been strong across all the markets and buyer groups we serve.
There are a number of factors that we believe have helped to support the fundamental strength of housing
demand.
First and foremost is the powerful demographic wave of more than 70 million millennials who, like generations
before them, appreciate the lifestyle and financial benefits of owning a home. In addition to demographics,
housing has benefitted from government stimulus programs initiated early in the pandemic, an expanding
economy, tremendous job growth, and rising wages which have all combined to drive improving financial
conditions for much of this country’s population.
I would also note that the pandemic itself has created increased interest in single-family living, while the change
to working remotely, full or part time, has allowed homebuyers to greatly expand the geography in which they
can search for a new home into more affordable areas.
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Homebuyer demand has been growing at an accelerating rate over the past several years, but the supply of new
and existing homes has been unable to keep up. 2021 was the first time in almost 15 years that housing starts
(single and multifamily) reached 1.5 million, which is the estimated level of need in this country given current
population, population growth and new household formations.
While housing starts have improved on paper, the construction of new homes is being slowed by pandemic-
related disruptions impacting everything from land entitlement and development to material and labor
availability. As one of the nation’s largest homebuilders, we have better access to building materials and trades
than most, and I know our suppliers and trade partners are working hard to provide needed resources. That said,
many critical products are under allocation, must be ordered months in advance, or are simply not available on a
timeline that can meet the needs of our customers.
In response to these challenges, we continue to implement actions to help ensure we can complete high-quality
homes and grow our deliveries until supply chain issues are resolved. These actions include increasing starts,
ordering earlier, narrowing option packages, and even warehousing inventory of critical building products. These
efforts are time consuming, and we lose some production efficiencies, but, for the foreseeable future, they are
required to get homes built.
In closing, I would say that the past two years provide a stark reminder that the future is uncertain, so be
prepared. We enter 2022 with a clearly defined business plan and expectations of delivering another year of
strong profitability and superior returns. At the same time, we continue to adhere to our disciplined land
investment and capital allocation processes while maintaining an outstanding and highly supportive capital
structure. Given the strength of our market position and business momentum, I look forward to the year ahead.
Sincerely,
Ryan Marshall
President and CEO
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the Transition Period From ______ To ______
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 1500
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 Shares, par value $0.01
Series A Junior Participating Preferred Share Purchase Rights
Trading Symbol
PHM
Name of each exchange on which registered
New York Stock Exchange
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 ☒ 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 ☒
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and "emerging
growth company" in Rule 12b-2 of the Exchange Act
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
☒
☐
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the registrant’s voting shares held by nonaffiliates of the registrant as of June 30, 2021, based on the closing sale price
per share as reported by the New York Stock Exchange on such date, was $14,115,791,937. As of January 20, 2022, the registrant had 248,650,958
shares of common shares outstanding.
Applicable portions of the Proxy Statement for the 2022 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.
Part I
1
1A
1B
2
3
4
5
6
7
7A
8
9
9A
9B
9C
10
11
12
13
14
15
16
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part II
Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . .
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part III
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part IV
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
No.
3
10
18
18
18
18
19
20
21
37
40
70
70
72
72
72
72
72
72
72
73
76
77
2
ITEM I.
BUSINESS
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 shares are included in the S&P 500 Index and trade on the New York Stock Exchange under the
ticker symbol “PHM”. Unless the context otherwise requires, the terms "PulteGroup", the "Company", "we", "us", and "our"
used herein refer to PulteGroup, Inc. and its subsidiaries. While our subsidiaries engage primarily in the homebuilding business,
we also have financial services businesses, including mortgage banking, conducted principally through Pulte Mortgage LLC
(“Pulte Mortgage”), title, and insurance brokerage operations.
Homebuilding, our core business, which includes the acquisition and development of land primarily for residential purposes
within the U.S. and the construction of housing on such land, generated 97% of our consolidated revenues of $13.9 billion in
2021, 97% of our consolidated revenues of $11.0 billion in 2020, and 98% of our consolidated revenues of $10.2 billion in
2019.
Available information
We file annual, quarterly, and current reports, proxy statements, and other information with the Securities and Exchange
Commission (the “SEC”). These filings are available at the SEC’s website at www.sec.gov. 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 Securities 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
SEC. 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.
Homebuilding Operations
Our Homebuilding operations are geographically diverse within the U.S. During 2021, we operated out of an average of 799
active communities in 41 markets across 24 states. We offer a broad product line to meet the needs of homebuyers in our
targeted markets. Through our brands, which include Centex, Pulte Homes, Del Webb, DiVosta Homes, John Wieland Homes
and Neighborhoods, and American West, we offer a wide variety of home designs with varying levels of options and amenities
to our major customer groups: first-time, move-up, and active adult. During 2021, we delivered home closings totaling 28,894
homes, compared with 24,624 homes in 2020 and 23,232 homes in 2019. Over our history, we have delivered nearly 775,000
homes.
We predominantly sell single-family detached homes, which represented 84% of our home closings in 2021 and 85% in both
2020 and 2019. The remaining units consist of attached homes, such as townhomes, condominiums, and duplexes. Sales prices
of home closings during 2021 ranged from approximately $150,000 to over $2,500,000, with 88% falling within the range of
$250,000 to $750,000. The average unit selling price in 2021 was $463,000, compared with $430,000 in 2020, and $427,000 in
2019.
Strategy
We believe that national publicly-traded builders have a competitive advantage over local builders through their ability to:
access more reliable and lower cost financing through the capital markets; control and entitle large land positions; gain better
access to scarce labor resources; and achieve greater geographic and product diversification. Among our national publicly-
traded peer group, we believe that builders with broad geographic and product diversity and sustainable capital positions will
benefit from this scale and diversification in any market conditions. Our strategy to enhance shareholder value is centered
around the following operational objectives:
• Drive operational gains and asset efficiency in support of high returns over the housing cycle;
• Shorten the duration of our owned land pipeline to improve returns and reduce risks, including targeting a long-term
balance of approximately three years of supply each for owned and optioned land (approximately six years of supply
in total);
• Maintain disciplined business practices to maximize returns on investment;
3
• Increase scale within our existing markets by appropriately expanding market share among our primary buyer
groups: first-time, move-up, and active adult;
• Focus on building-to-order while maintaining an appropriate balance of speculative homes; and
• Manage the Company's capital consistent with our stated priorities: invest in the business, fund our dividend,
maintain a modest leverage profile, and routinely return excess funds to shareholders through share repurchases.
Land acquisition and development
We acquire land primarily for the construction of homes for sale. 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 meet the needs of consumers. 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 agreements,
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 can serve to enhance our expected returns on our land investments and
reduce the financial risk 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 certain 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 also periodically sell select parcels of land to third parties for
commercial or other development or if we determine that such parcels no longer fit into our strategic operating plans.
Land is generally purchased after it is zoned and developed, or is ready for development, for our intended use. 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, when needed,
local government authorities who construct roads and sewer and water systems in some areas. At December 31, 2021, we
controlled 228,296 lots, of which 109,078 were owned and 119,218 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 homebuyer 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 needs of potential homebuyers are
understood, we link our home design and community development efforts to the specific lifestyle of each consumer group.
Through our understanding of each consumer group, we seek to provide homes that better meet the needs and wants of each
homebuyer.
Our homes targeted to first-time homebuyers tend to be smaller with product offerings geared toward lower average selling
prices and higher density. Move-up homebuyers tend to place more of a premium on location and amenities. These
communities typically offer larger homes at higher price points. Through our Del Webb brand, we address the needs of active
adults. Many of these active adult communities are age-restricted to homebuyers aged fifty-five and over and are highly
amenitized, offering a variety of features, including athletic facilities, recreational centers, and educational classes, to facilitate
the homebuyer maintaining 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 first-time or move-up homebuyer communities.
During 2021, 32%, 43%, and 25% of our home closings were to first-time, move-up, and active adult customers, respectively,
which reflects a slight increase toward first-time buyers since 2020 consistent with our continued investment in serving first-
time buyers.
We believe that we are an innovator in home design, and we view our design capabilities as an integral aspect of our marketing
strategy. Our in-house architectural services teams, supplemented by outside consultants, follow a disciplined 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 house floor plans and elevations in each community, including potential options and upgrades, such as different
4
flooring, countertop, fixture, 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
heating, ventilation, and air conditioning systems and insulation, low-emissivity windows, solar power in certain geographies,
and other energy-efficient features.
We market our homes to prospective homebuyers through internet listings and link placements, social media, mobile
applications, media advertising, illustrated brochures, and other advertising displays. We have made significant enhancements
in our tools and business practices to adapt our selling efforts to today's tech-enabled customers. This includes our websites
(www.pulte.com, www.centex.com, www.delwebb.com, www.divosta.com, www.jwhomes.com, and
www.americanwesthomes.com), which 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.
Our sales teams consist primarily of commissioned employees, and the majority of our home closings also involve independent
third party sales brokers. Our sales consultants are responsible for guiding the customer through the sales process, including
selecting the community, house floor plan, and options that meet the customer's needs. We are committed to industry-leading
customer service through a variety of quality initiatives, including our customer care program, which seeks to ensure that
homebuyers are engaged and satisfied at every stage of the process. Fully furnished and landscaped model homes physically
located in our communities, which leverage the expertise of our interior designers, are generally used to showcase our homes
and their distinctive design features. We have also introduced virtual reality walkthroughs of our house floor plans in certain
communities to provide prospective homebuyers with a more cost-effective means to provide a realistic vision of our homes.
The majority of our homes are sold on a built-to-order basis where we do not begin construction of the home until we have a
signed contract with a customer. However, we also build speculative homes in most of our communities, which allow us to
compete more effectively with existing homes available in the market, especially for homebuyers that require a home within a
short time frame. We determine our speculative home strategy for each community based on local market factors and maintain
a level of speculative home inventory based on our current and planned sales pace and construction cadence for the community.
Our sales contracts with customers generally require payment of a deposit at the time of contract signing and sometimes
additional deposits upon selection of certain options or upgrade features for their homes. Our sales contracts also typically
include a financing contingency that provides customers with the right to cancel if they cannot obtain mortgage financing at
specified interest rates within a specified period. Our contracts may also include other contingencies, such as the sale of an
existing home. Backlog, which represents orders for homes that have not yet closed, was $9.9 billion (18,003 units) at
December 31, 2021 and $6.8 billion (15,158 units) at December 31, 2020. This increase in 2021 backlog compared to 2020 is
primarily the result of overall robust demand for new housing coupled with elongated cycle times due to supply chain delays for
certain materials and labor and obtaining necessary approvals, permits, and inspections from local municipalities. 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, 2021, substantially all are scheduled to be closed during 2022, though all orders are subject
to potential cancellation by or final negotiations with the customer. In the event of contract 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.
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 establish a specific scope of work at
an agreed-upon price. Using a selective process, we have aligned with what we believe are premier subcontractors and suppliers
to deliver quality throughout all aspects of the house construction process. In addition, our construction field managers and
customer care associates interact with our homebuyers throughout the construction process and instruct homebuyers on post-
closing home maintenance.
Continuous improvement in our house construction process is a key area of focus. We seek to build superior quality homes
while maintaining efficient construction operations by using standard materials and components from a variety of sources and
by following industry and company-specific construction practices. We maintain high quality product offerings and production
processes through the following programs:
•
Common management of house plans to deliver house designs that customers value the most and that can be built at
the highest quality and at an efficient cost;
5
•
•
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;
Utilizing our proprietary construction standards and practices, training of our field leadership and construction
personnel, communication with our suppliers, and auditing our compliance through the use of both internal and third
party construction experts; and
• Working with our suppliers using a data driven, collaborative method to reduce construction costs.
Generally, the construction materials used in our operations are readily available from numerous sources. However, the cost of
certain building materials, especially lumber, steel, concrete, resin, copper, and petroleum-based materials, is influenced by
changes in global commodity prices, national tariffs, and other trade factors. Additionally, the ability to consistently source
qualified labor at reasonable prices remains challenging as labor supply growth has not kept pace with construction demand. To
protect against changes in construction costs, labor and materials costs are generally established prior to 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 costs. However, we cannot determine the extent to which necessary building
materials and labor will be available at reasonable prices in the future. For example, labor shortages in certain of our markets
have become more acute in recent years as the supply chain adjusts to industry growth, and the COVID-19 pandemic has
increased demand for our homes, outpacing the growth of the residential construction labor pool. Additionally, the supply of
certain building materials is limited and has been impacted by the combination of strong consumer demand and disruptions in
the global supply chain caused by the COVID-19 pandemic and major weather events at the point of manufacture of certain
products. This increase in demand, supply chain disruptions, and the consolidation of ownership of the source of supply for
certain building materials combined to significantly increase the prices of those materials. As a result, during 2021, in all of our
markets, we experienced supply chain constraints, increases in the prices of some building materials, and shortages of skilled
labor. Increased costs or shortages of materials caused increases in construction costs and construction delays. Given the strong
demand for housing in 2021, we have generally been able to pass such cost increases on to customers, but we cannot be certain
that we will continue to be able to do so 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 2021. 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 rental 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.
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, suppliers, and 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. Additionally, we may experience
extended timelines for receiving required approvals from municipalities or other government agencies that can delay our
anticipated development and construction activities in our communities.
6
Financial Services Operations
We conduct our financial services business, which includes mortgage banking, title, and insurance brokerage 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 Federal Housing Administration ("FHA") and
Department of Veterans Affairs ("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 through a captive business model 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 of our loan production. We originated the mortgage loans for 73% of the homes we closed in both 2021 and
2020, and 67% in 2019. Other home closings are settled via either cash, which typically represent approximately 15% of home
closings, or third party lenders.
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 loans and related 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 for our mortgage
operations that performs 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.
Our mortgage operations may be responsible for losses associated with mortgage loans originated and sold to investors in the
event of errors or omissions relating to representations and warranties made by us that the loans met certain requirements,
including representations as to underwriting standards, the existence of primary mortgage insurance, and the validity of certain
borrower representations in connection with the loan. If a loan is determined to be faulty, we either indemnify the investor for
potential future losses, repurchase the loan from the investor, or reimburse the investor's actual losses.
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.
Our insurance brokerage operations serve as a broker for home, auto, and other personal insurance policies in select markets to
buyers of homes we sell. All such insurance policies are placed with third party insurance carriers.
Human Capital Resources
Workforce
At December 31, 2021, we employed 6,182 people, of which 1,122 were employed in our Financial Services operations. Of our
homebuilding employees, 359 are involved in land acquisition and development functions, 2,272 are involved in construction
and post-closing customer care functions; 1,226 are involved in the sales function; and 1,202 are involved in procurement,
corporate, and other functions. Our employees are not represented by any union. Contracted work, however, may be performed
by union contractors. We consider our employee relations to be good.
7
Compensation and Benefits
We offer our employees a competitive wage plus a broad range of company-paid benefits, including medical, dental, and vision
healthcare coverage, paid parental leave, adoption benefits, a 401(k) retirement plan, and a stock compensation plan. The
majority of our employees also participate in various performance-based incentive compensation plans. We believe that our
compensation and benefits packages are competitive within our industry.
Culture and Objectives
Our key human capital management objectives are designed to attract, develop, and retain top industry talent that reflects the
diversity of the communities in which we build. To support this goal, our human resources programs are designed to develop
talent to prepare for key roles and leadership positions for the future; reward employees through competitive industry pay,
benefits, and other programs; instill our culture with a focus on diversity and ethical behavior; and enhance our employees'
performance through investment in current technology, tools, and training to enable our employees to operate at a high level.
Our commitment to the aforementioned goals is evidenced through our certification as a Great Place to Work® and formation
of a national diversity council.
We believe that diversity in the workplace produces unique perspectives which serve to drive innovation and change, which we
feel benefits the overall organization. We believe our employees are an integral part of the success of our business and the
cultivation and development of their collective skillsets is an entity-wide priority and critical to our success. Our management
teams are expected to exhibit and promote honest, ethical, and respectful conduct in the workplace. All of our employees must
adhere to a code of conduct that sets standards for appropriate ethical behavior.
Recruitment and Retention
Our management team supports a culture of developing future leaders from our existing workforce, enabling us to promote
from within for many leadership positions. We believe this provides long-term focus and continuity to our operations while also
providing opportunities for the growth and advancement of our employees. Our focus on retention is evident in the length of
service of our executive, area, and divisional management teams. The average tenure of our executive team and homebuilding
area presidents is 21 years and the average tenure of our homebuilding division presidents is 16 years.
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Information About Our Executive Officers
Set forth below is certain information with respect to our executive officers.
Name
Ryan R. Marshall
John J. Chadwick
Robert T. O'Shaughnessy
Todd N. Sheldon
Michelle Hairston
Brien P. O'Meara
Age Position
47
60
56
54
45
President and Chief Executive Officer
Executive Vice President and Chief Operating Officer
Executive Vice President and Chief Financial Officer
Executive Vice President, General Counsel and Corporate Secretary
Senior Vice President, Human Resources
49 Vice President and Controller
The following is a brief account of the business experience of each officer during the past five years:
Year Became
An Executive
Officer
2012
2019
2011
2017
2018
2020
Mr. Marshall was appointed Chief Executive Officer in September 2016. Previously, he held the positions of President since
February 2016 and Executive Vice President, Homebuilding Operations since May 2014.
Mr. Chadwick was appointed Executive Vice President and Chief Operating Officer in April 2019 and previously held the
position of Area President over various geographical markets since 2012.
Mr. O'Shaughnessy was appointed Executive Vice President and Chief Financial Officer in May 2011.
Mr. Sheldon was appointed Executive Vice President, General Counsel and Corporate Secretary in March 2017. Prior to joining
our company, he served as Executive Vice President, General Counsel and Secretary at AmeriCold Realty Trust, a public real
estate investment trust focused on temperature controlled storage, from June 2013 to March 2017.
Ms. Hairston was appointed Senior Vice President, Human Resources in April 2018 and previously held the positions of Area
Vice President of Human Resources, for the East and Midwest Areas since May 2015 and Vice President of Human Resources,
Talent Acquisition between May 2015 and September 2016.
Mr. O'Meara was appointed Vice President and Controller in February 2017 and previously held the position of Assistant
Controller since January 2013.
There is no family relationship between any of the officers or between any of our officers and any of our directors. Each officer
serves at the pleasure of the Board of Directors.
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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.
Risks Associated With Our Industry
The homebuilding industry is cyclical and a deterioration in industry conditions or downward changes in general economic
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, product affordability, availability of financing, inflation, 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 significant
decrease in our revenues and earnings that could materially and adversely affect our financial condition.
For example, 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. During this period, we incurred significant losses, including impairments of our
land inventory and certain other assets, and some aspects of the housing industry have yet to return to pre-2007 production
levels.
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 Pulte Mortgage.
Mortgage interest rates in recent years have been at or near historic lows, thereby making new homes more affordable.
Increases in interest rates could adversely affect the market for new homes. Potential homebuyers may be less willing or able to
pay the increased monthly costs resulting from higher interest rates or to obtain mortgage financing. For example, during 2018,
we experienced lower than expected conversions of traffic to signups, especially among first-time and move-up buyers,
beginning in May 2018 when mortgage rates increased. Similarly, the Federal Reserve has recently announced that it plans to
increase the federal borrowing interest rate multiple times in 2022, which could negatively impact new home purchases.
A decrease in the availability of mortgage financing generally could also adversely impact the market for new homes, which
could result from lenders increasing the qualifications needed for mortgages or adjusting 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 historically had, and may in the future
have, a material adverse effect on the overall demand for new housing and thereby on the results of operations of our business.
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. Additionally, the
availability of FHA and VA mortgage financing, which is subject to the same interest rate and lending term risks, is an
important factor in marketing some of our homes, and reduced availability of these financing options could negatively impact
our results of operations.
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Inflation has resulted in increased costs that we may not be able to recoup.
Inflation can adversely affect us by increasing costs of land, materials, and labor. In addition, significant inflation is often
accompanied by higher interest rates, which may have a negative impact on demand for our homes. In an inflationary
environment, economic conditions and other market factors may make it difficult for us to raise home prices enough to keep up
with the rate of inflation, which could reduce our profit margins or reduce the number of consumers who can afford to purchase
one of our homes. Although the rate of inflation has been historically low in recent years, we are currently experiencing
historically significant increases in the prices of labor and certain materials as a result of the COVID-19 pandemic and
increased demand for new homes. These increases have increased our operational costs in recent periods, and if the current
inflationary environment continues or worsens, we may not be able to adjust the pricing we charge for homes to offset these
increased costs in the future, which would adversely impact our results of operations and cash flows.
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. Labor shortages in certain of our markets have become more
acute in recent years as the supply chain adjusts to industry growth and the labor force has lost significant time due to people
infected with COVID-19. Consumer demand for our homes has also increased beyond the growth of the residential construction
labor pool, which has been stunted by the COVID-19 pandemic and related responsive measures. Additionally, the supply of
certain building materials, especially lumber, wood-based materials such as roof and floor trusses and oriented strand boards,
steel, resin, concrete, copper, and petroleum-based materials, is limited and has been impacted by the combination of strong
consumer demand, disruptions in the global supply chain caused by the COVID-19 pandemic, and major weather events at the
point of manufacture of certain products. This increase in demand and the consolidation of ownership of the source of supply
for certain building materials have combined to significantly increase the prices of those materials. As a result, during 2021, we
experienced supply chain constraints, increases in the prices of some building materials, and shortages of skilled labor in all of
our markets. Increased costs and shortages of labor and materials have caused increases in construction costs, construction
delays, and increased backlog, which required us to moderate lot releases and pace new orders in the majority of our
communities. 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 success depends on our ability to acquire land suitable for residential homebuilding 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. We experience 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 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.
If the market value of our land drops significantly, our profits could decrease and result in write-downs of the carrying
values of land we own.
The market value of land 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
11
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, land 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. At
times we have been required to record significant write-downs of the carrying value of our land inventory, and we have elected
not to exercise options to purchase land, even though that required us to forfeit deposits and write-off pre-acquisition costs. If
market conditions were to deteriorate in the future, we could again be required to record significant write downs to our land
inventory, which would decrease the asset values reflected on our balance sheet and materially and adversely affect our
earnings and our stockholders' equity.
Competition for homebuyers could reduce our deliveries or decrease our profitability.
The U.S. housing industry is highly competitive. Homebuilders compete for homebuyers in each of our markets with numerous
national, regional, and local homebuilders on the basis of location, price, quality, reputation, design, community amenities, and
our customers' overall sales and homeownership experiences. This competition with other homebuilders could reduce the
number of homes we deliver or cause us to accept reduced margins 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.
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, safety, 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 assessments have increased over recent years as other funding
mechanisms have decreased, causing local governing authorities to seek greater contributions from homebuilders. All of these
factors 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.
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 rely on subcontractors to perform the actual construction of our homes and, in some cases, to select and obtain
building materials. Despite our detailed specifications and quality control procedures, in some cases, subcontractors may use
improper construction processes or defective materials. In such cases, it can result in the need to perform extensive repairs to
large numbers of homes. We record warranty and other reserves relating to 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.
12
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. In certain instances, we may offer
our subcontractors the opportunity to purchase insurance through one of our captive insurance subsidiaries or participate in a
project-specific insurance program provided by us. Policies issued by our captive insurance subsidiaries represent self-
insurance of these risks by us. 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. Our insurance coverage, our subcontractor arrangements, and our reserves may not be adequate to address
all our warranty and construction defect claims in the future, and there is typically a lag between our payment of claims and
reimbursements from applicable insurance carriers. 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. 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.
We can be injured by improper acts of persons over whom we do not have control or by the attempt to impose liabilities or
obligations of third parties on us.
Although we expect all of our subcontractors, employees, officers, and directors to comply at all times with all applicable laws,
rules, and regulations, there may be instances in which subcontractors or others through whom we do business engage in
practices that do not comply with applicable laws, regulations, or governmental guidelines. When we learn of practices that do
not comply with applicable laws, regulations, or government guidelines, including practices relating to homes, buildings, or
multifamily properties we build or finance, we move to stop the non-complying practices as soon as possible, and we have
taken disciplinary action regarding subcontractors and employees of ours who were aware of non-complying practices and did
not take steps to address them, including in some instances terminating their employment. However, regardless of the steps we
take after we learn of practices that do not comply with applicable laws, regulations, or government guidelines, we can in some
instances be subject to fines or other governmental penalties, and our reputation can be injured, due to the practices' having
taken place.
The homes we sell are built by employees of subcontractors and other contract parties. We do not have the ability to control
what these contract parties pay their employees or subcontractors or the work rules they impose on their employees or
subcontractors. However, various governmental agencies have attempted to hold contract parties like us responsible for
violations of wage and hour laws and other work-related laws by firms whose employees are performing contracted services.
Governmental rulings or changes in state or local laws that make us responsible for labor practices by our subcontractors could
create substantial exposures for us in situations that are not within our control.
Natural disasters, severe weather conditions and changing climate patterns 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. For instance, in 2019, several
hurricanes caused disruptions in our southeastern coastal markets but did not result in a material impact to our results of
operations. In addition, while they also did not have a material impact on our business in 2019 - 2021, the increased prevalence
of forest fires in our western markets have caused disruptions to our sales operations and development delays. Significant
weather events have contributed to plant closures and transportation delays that have exacerbated stress on our supply chain.
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.
Government restrictions, standards, or regulations intended to reduce greenhouse gas emissions or potential climate change
impacts are likely to result in restrictions on land development in certain areas and may increase energy, transportation, or raw
material costs, which could reduce our housing gross profit margins and adversely affect our results of operations. For example,
as the risk of flooding in coastal and other flood prone areas increases, local governments may increase the requirements on
new home builders for zoning approvals and restrict areas where new homes may be built, resulting in increased development
13
costs and greater competition for more desirable land parcels. In addition, as local governmental authorities and utilities are
required to spend increasing amounts of their resources responding to and remediating weather and climate related events, their
ability to provide approvals and service to new housing communities may be impaired.
Risks Related to our Business Model and Capital Structure
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 the future
development of our business and other capital needs. 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, 2021, we had cash, cash equivalents,
and restricted cash of $1.8 billion as well as $701.2 million available under our revolving credit facility ("Revolving Credit
Facility"). However, our internal sources of liquidity and Revolving Credit Facility 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 is our ability to use letters of credit and surety bonds relating to certain performance-related
obligations and as security for certain land option agreements and 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, 2021, we had outstanding letters of credit and surety bonds totaling $298.8 million and $1.8 billion, respectively.
These letters of credit are generally 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 liquidity could be adversely affected.
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 relevant facts and circumstances, applicable 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.
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 relevant facts and circumstances, applicable tax 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 tax assets.
As of December 31, 2021, we had deferred tax assets of $164.2 million, against which we provided a valuation allowance of
$25.2 million. The ultimate realization of our deferred tax assets is dependent upon generating future taxable income. While we
have recorded valuation allowances against certain of our deferred tax assets, the valuation allowances are subject to change as
facts and circumstances change.
Our ability to utilize net operating losses (“NOLs”) and other tax attributes to offset our future taxable income or income tax
would be limited if we were to undergo an “ownership change” within the meaning of Section 382 of the Internal Revenue
Code (the “IRC”).
14
An "ownership change" under Section 382 of the IRC would establish an annual limitation to the amount of NOLs and other tax
attributes we could utilize to offset our taxable income or income tax in any single year. The application of these limitations
might prevent full utilization of the deferred tax assets. To preserve our ability to utilize NOLs and other tax attributes 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. Our shareholder rights plan, as amended,
expires June 1, 2022, unless our Board of Directors and shareholders approve an amendment to extend the term prior thereto.
Notwithstanding the foregoing measures, there can be no assurance that we will not undergo an ownership change within the
meaning of Section 382. In addition, our shareholder rights plan may adversely affect the marketability of our common stock,
because any non-exempt third party that acquires shares of our common stock in excess of the applicable threshold would suffer
substantial dilution of its ownership interest.
The value of our deferred tax assets and liabilities are also dependent upon the tax rates expected to be in effect at the time they
are realized. A change in enacted corporate tax rates in our major jurisdictions, especially the U.S. federal corporate tax rate,
would change the value of our deferred taxes, which could be material.
Our inability to sell mortgages into the secondary market could significantly reduce our ability to sell homes unless we are
willing to become a long-term investor in loans we originate.
We sell substantially all of the residential mortgage loans we originate within a short period in the secondary mortgage market.
If we were unable to sell loans into the secondary mortgage market or directly to Fannie Mae and Freddie Mac, we would have
to either (a) curtail our origination of residential mortgage loans, which among other things, could significantly reduce our
ability to sell homes, or (b) commit our own funds to long term investments in mortgage loans, which, in addition to requiring
us to deploy substantial amounts of our own funds, could delay the time when we recognize revenues from home sales on our
statements of operations.
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 arising out of claims 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. To date, the significant
majority of these claims made by investors against our mortgage operations relate to loans originated prior to 2009, during
which time inherently riskier loan products became more common in the origination market. We may also be asked to
indemnify underwriters that purchased and securitized loans originated by a former subsidiary of Centex Corporation
("Centex"), which we acquired in 2009, for losses incurred by investors in those securitized loans based on similar breaches of
representations and warranties.
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. Given the unsettled nature of these
claims, 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. Accordingly, there can be no assurance that such reserves will not
need to be increased in the future.
Risks Related to the COVID-19 Pandemic
Our business has been materially and adversely disrupted by the ongoing outbreak and worldwide spread of COVID-19 and
could be materially and adversely disrupted by another epidemic or pandemic, or similar public threat, or fear of such an
event, and the measures that international, federal, state and local governments, agencies, law enforcement and/or health
authorities implement to address it.
On March 11, 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic and
recommended containment and mitigation measures worldwide. On March 13, 2020, the United States declared a national
emergency concerning the COVID-19 outbreak, and shortly thereafter many states and municipalities also declared public
health emergencies. Along with these declarations, extraordinary and wide-ranging actions were taken by international, federal,
state, and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in
15
regions across the United States and the world, including quarantines, “shelter-in-place” orders and similar mandates for many
individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations.
Those restrictions, combined with a reduction in the availability, capacity, and efficiency of municipal and private services
necessary to progress land development, homebuilding, mortgage loan originations, and home sales, which in each case varied
by market depending on the scope of the restrictions local authorities have established, tempered our sales pace and delayed
home construction and deliveries. The inconsistent and unpredictable impacts of the COVID-19 virus and the evolution of new
variants with different characteristics impacting different areas of the country at different times throughout 2021 caused us to
adjust our planning and operations at various times. The cumulative effect of the COVID-19 pandemic on the global supply
chain and our operations, plus an increase in consumer demand, contributed to delays in production in most of our markets
through the date of this report.
While our operations are now fully functioning, subject to regulated restrictions and safety constraints we have enacted in order
to protect our employees, trade contractors, and customers, the current resurgence of the COVID pandemic in key areas of our
operations has caused significant lost time due to isolations and any future quarantine may require us to reinstate restrictions on
our operations. Despite the development of vaccines and more effective treatments for the physical impacts of COVID-19, there
are no reliable estimates of how long the COVID-19 pandemic will last, and therefore, the unpredictability of the current
economic and public health conditions will continue to evolve.
Our business could also be negatively impacted over the medium-to-longer term if the disruptions related to COVID-19
decrease consumer confidence generally or with respect to purchasing a home; cause civil unrest; precipitate a prolonged
economic downturn and/or an extended rise in unemployment or tempering of wage growth, any of which could lower demand
for our products, impair our ability to sell and build homes in a typical manner or at all, generate revenues and cash flows, and/
or access the capital or lending markets (or significantly increase the costs of doing so), as may be necessary to sustain our
business; further increase the costs or decrease the supply of building materials or the availability of subcontractors and other
talent, including as a result of infections or medically necessary or recommended self-quarantining, or governmental mandates
to direct production activities to support public health efforts; and/or result in our recognizing charges in future periods, which
may be material, for inventory impairments or land option contract abandonments, or both, related to our current inventory
assets. The unprecedented uncertainty surrounding COVID-19, due to rapidly changing governmental directives, public health
challenges and progress, macroeconomic consequences, and market reactions thereto, also makes it more challenging for our
management to estimate the future performance of our business and develop strategies to generate growth or achieve our
objectives for 2022 and beyond.
Any epidemic, pandemic, or similar serious public health issue, and the measures undertaken by governmental authorities to
address it, could significantly disrupt or prevent us from operating our business in the ordinary course for an extended period.
As a result, the impact of such public health issues and the related governmental actions could have a significant adverse impact
on our consolidated financial statements.
Should the adverse impacts described above (or others that are currently unknown) occur or worsen in the future, whether
individually or collectively, we would expect to experience, among other things, increases in the cancellation rates for homes in
our backlog, and decreases in our net orders, homes delivered, revenues, and profitability. Such impacts could be material to
our consolidated financial statements in future reporting periods. We could also be forced to reduce our average selling prices
in order to generate consumer demand or in reaction to competitive pressures. In addition, should the COVID-19 public health
effort and governmental restrictions in response to the pandemic intensify to such an extent that we cannot operate in most or all
of our served markets, we could generate few or no orders and deliver few, if any, homes during the applicable period, which
could be prolonged. Along with a potential increase in cancellations of home purchase contracts, if there are prolonged
government restrictions on our business and our customers, and/or an extended economic recession, we could be unable to
produce revenues and cash flows sufficient to conduct our business; meet the terms of our covenants and other requirements
under our debt obligations, and/or mortgages and land contracts due to land sellers and other loans; service our outstanding
debt; or pay any dividends to our stockholders. Such circumstances could, among other things, exhaust our available liquidity
(and ability to access liquidity sources) and/or trigger an acceleration to pay a significant portion or all of our then-outstanding
debt obligations, which we may be unable to do.
16
General Risk Factors
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 cyber-attacks from computer
hackers and sophisticated organizations), catastrophic events such as fires, tornadoes and hurricanes, usage errors by our
employees, or cyber-attacks or errors by third party vendors who have access to our confidential data or that of our customers.
While to our knowledge we have not experienced a significant cyber-attack, we are continuously working to improve our
information technology systems and provide employee awareness training around phishing, malware, and other cyber risks to
enhance our levels of protection, to the extent possible, against cyber risks and security breaches, and monitor to prevent,
detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have an
impact on our business, there is no assurance that advances in computer capabilities, new technologies, methods or other
developments will detect or prevent security breaches and safeguard access to proprietary or confidential information.
The frequency and sophistication of cyber-attacks on companies has increased in recent years, including significant ransomware
attacks and foreign attacks on prominent companies and computer software programs. If our computer systems and our back-up
systems are damaged, breached, or cease to function properly, or if there are intrusions or failures of critical infrastructure such
as the power grid or communications systems, we could suffer extended interruptions in our operations. Any such disruption
could damage our reputation, result in lost customers, lost revenue and market value declines, lead to legal proceedings against
us by affected third parties resulting in penalties or fines and require us to incur significant costs to remediate or otherwise
resolve these issues. In addition, the costs of maintaining adequate protection and insurance against such threats, as they
develop in the future (or as legal requirements related to data security increase) could be material.
Breaches of our computer or data systems, including those operated by third parties on our behalf, could result in the
unintended public disclosure or the misappropriation of our proprietary information or personal and confidential information,
about our employees, customers and business partners, requiring us to incur significant expense to address and resolve. The
misappropriation and/or release of confidential information may also lead to legal or regulatory proceedings against us by
affected individuals and the outcome of such proceedings, which could include penalties or fines and require us to incur
significant costs to remediate or otherwise resolve. Depending on its nature, a particular breach or series of breaches of our
systems may result in the unauthorized use, appropriation or loss of confidential or proprietary information on a one-time or
continuing basis, which may not be detected for a period of time.
Negative publicity could negatively impact sales, which could cause our revenues or results of operations to decline.
Our business strategy relies heavily on our reputation and brands, which are critical to our success. Unfavorable media or
investor and analyst reports related to our industry, company, brand, marketing, personnel, operations, business performance, or
prospects may affect our stock price and the performance of our business, regardless of its accuracy or inaccuracy. Furthermore,
the speed at which negative publicity is disseminated has increased dramatically through the use of electronic communication,
including social media outlets, websites and other digital platforms. Our success in maintaining and enhancing our brand
depends on our ability to adapt to this rapidly changing media environment. Adverse publicity or negative commentary from
any media outlets could damage our reputation and reduce the demand for our homes, which would adversely affect our
business.
In addition, we can be affected by poor relations with the residents of communities we develop because efforts made by us to
resolve issues or disputes that may arise in connection with the operation or development of their communities, or in connection
with the transition of a homeowners association, could be deemed unsatisfactory by the affected residents and subsequent
actions by these residents could adversely affect sales or our reputation. In addition, we could decide or be required to make
material expenditures related to the settlement of such issues or disputes, which could adversely affect our results of operations.
The loss of the services of members of our senior management or a significant number of our operating employees could
negatively affect our business.
Our success depends upon the skills, experience, and active participation of our senior management, many of whom have been
with the Company for a significant number of years. If we were to lose members of our senior management, we might not be
able to find appropriate replacements on a timely basis, and our operations could be negatively affected. Also, the loss of a
17
significant number of operating employees in key roles or geographies where we are not able to hire qualified replacements
could have a material adverse effect on our business.
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 business combinations. 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 earnings. If management’s
expectations of future results and cash flows decrease significantly, impairments of intangible assets may occur.
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 1500,
Atlanta, Georgia 30326. Pulte Mortgage leases its primary office facilities in Englewood, Colorado. We also maintain various
support functions in leased facilities in Tempe, Arizona. Our homebuilding divisions and financial services branches lease
office space in the geographic locations in which they conduct their daily operations. In total across our organization, we lease
approximately 1.5 million square feet of office space. The Company considers its properties suitable and adequate for its
current business 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.
18
PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common shares are listed on the New York Stock Exchange (Symbol: PHM). At January 20, 2022, there were 2,043
shareholders of record.
Issuer Purchases of Equity Securities
Total number
of shares
purchased (1)
Average
price paid
per share
2,608,010
$
1,718,687
1,320,970
5,647,667
$
48.15
50.23
58.83
50.11
Total number of
shares purchased
as part of publicly
announced plans
or programs
Approximate dollar
value of shares
that may yet be
purchased under
the plans or
programs
($000’s omitted)
2,608,010
1,718,687
1,320,970
5,647,667
$
$
$
615,001 (2)
528,672 (2)
457,569 (2)
October 1, 2021 to October 31, 2021
November 1, 2021 to November 30, 2021
December 1, 2021 to December 31, 2021
Total
(1)
(2)
During 2021, participants surrendered 0.2 million shares for payment of minimum tax obligations upon the vesting
or exercise of previously granted share-based compensation awards. Such shares were not repurchased as part of our
publicly-announced share repurchase programs and are excluded from the table above.
The Board of Directors approved a share repurchase authorization totaling $500.0 million in May 2019 and an
increase of $1.0 billion to such authorization in April 2021. There is no expiration date for this program, under
which $457.6 million remained available as of December 31, 2021. This share repurchase authorization was
increased by $1.0 billion on January 31, 2022. During 2021, we repurchased 17.7 million shares for a total of $897.3
million under this program.
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.
19
Performance Graph
The following line graph compares, for the fiscal years ended December 31, 2017, 2018, 2019, 2020, and 2021, (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, 2021
PULTEGROUP, INC.
S&P 500 Index - Total Return
Dow Jones U.S. Select Home Construction
Index
2016
2017
2018
2019
2020
2021
$
100.00
$
183.41
$
145.33
$
219.93
$
247.75
$
332.09
100.00
121.83
116.49
153.17
181.35
233.41
100.00
160.15
110.94
165.96
210.76
315.66
* Assumes $100 invested on December 31, 2016, and the reinvestment of dividends.
ITEM 6.
RESERVED
20
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
We experienced strong demand for our products throughout 2021 as new orders increased 8% in units and 28% in dollars over
the prior year. New order growth was uneven through the year as 2021 volume reflected our traditional seasonal patterns of
higher orders in the first half of the year as part of the spring selling season while 2020 experienced significant volatility
resulting from the onset of the COVID-19 pandemic, which severely impacted sales in the first half of 2020 but then
contributed to a sharp increase in demand in the second half of 2020. The favorable demand for new housing has been driven
by mortgage interest rates near historical lows, a limited supply of new and existing home inventory, an increased appeal for
homeownership and single-family living, and a desire among some buyers to exit more densely populated urban centers or to
relocate from higher cost geographical regions.
Home closings increased 17% in 2021 compared with the prior year. The higher closing volume occurred in the face of
significant disruption in the homebuilding supply chain, including the availability of certain materials and construction labor
combined with delays in municipal approvals and inspections, which has elongated the production cycle of the homes we are
constructing. While we are working with our supply partners, have increased our speculative housing starts, and have hired
additional construction and customer service employees, our production cycle times have extended in substantially all of our
markets due to the challenges referenced above. Due to these supply chain challenges, we are moderating lot releases and the
pace of new orders in the majority of our communities in order to balance sales volume and production capacity to reduce
backlog durations. We believe these conditions will continue to impact our industry for at least the next few quarters.
We are also facing cost pressures related to labor and materials, due in large part to a shortage of workers and supply chain
challenges resulting from ongoing effects of the COVID-19 pandemic and other macroeconomic factors. Specifically, the cost
of lumber more than quadrupled from mid-2020 to mid-2021. While the cost of lumber declined significantly since peaking in
May 2021, it increased again in late 2021 and remains elevated compared to historical norms. Additionally, the availability of
certain wood products, including roof and floor trusses and oriented strand boards, remains challenged. We also continue to
experience significant challenges with the cost and availability of windows, siding, and appliances, among other supply
categories. To date, we have been, and believe we will continue to be, able to increase pricing to offset the majority of such cost
increases due to ongoing high consumer demand.
Despite the development of vaccines and more effective treatments for the physical impacts of COVID-19, there are no reliable
estimates of how long the COVID-19 pandemic, or its related impacts on overall economic conditions or the global supply
chain, will last. As a result, the unpredictability of the current economic and public health conditions will continue to evolve.
However, all of our operations continue to function at effectively full capacity subject to health and safety protocols, and we
remain optimistic about future housing demand and our ability to continue expanding our business. Due to the higher demand
and long municipal entitlement timelines, the number of our average active communities declined 9% in 2021 compared to
2020 as we closed-out communities at a pace faster than we were opening new ones. In response, we have increased our
investments in land acquisition and development, and we expect the number of our active communities to increase
meaningfully in 2022. Also, while mortgage interest rates have recently increased, they remain low relative to historical levels,
and supplies of new and existing home inventory remain low. Combined with an improving macroeconomic environment,
overall demand for new housing remained robust at the end of 2021 as evidenced by our significantly higher order backlog,
which increased 19% in units and 45% in dollars as of December 31, 2021 over the prior year. However, future economic
conditions and the demand for homes are subject to continued uncertainty due to many factors, including the recent increase in
mortgage interest rates, higher inflation, ongoing disruptions from supply chain challenges and labor shortages, the ongoing
impact of the COVID-19 pandemic and government directives, and other factors. While we believe the demand for new
housing will remain strong through 2022, our past performance may not be indicative of future results.
The following tables and related discussion set forth key operating and financial data for our Homebuilding and Financial
Services operations as of and for the fiscal years ended December 31, 2021 and 2020. For similar operating and financial data
and discussion of our fiscal 2020 results compared to our fiscal 2019 results, refer to Item 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” under Part II of our annual report on Form 10-K for the fiscal year
ended December 31, 2020, which was filed with the SEC on February 2, 2021.
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
Net income
Per share data - assuming dilution:
Net income
Years Ended December 31,
2021
2020
$
$
$
2,288,128
221,717
2,509,845
(563,525)
1,946,320
7.43
$
$
$
1,542,057
186,637
1,728,694
(321,855)
1,406,839
5.18
•
•
•
Homebuilding income before income taxes increased 48% in 2021, primarily as the result of higher revenues and
gross margins and improved overhead management. Homebuilding results also included insurance reserve reversals
of $81.1 million and $93.4 million in 2021 and 2020, respectively, partially offset by reserves against insurance
receivables of $17.8 million in 2020 (see Note 11) and a goodwill impairment charge of $20.2 million in 2020 (see
Note 1).
Financial Services income before income taxes increased in 2021 compared with 2020 resulting from higher
volumes, partially offset by lower revenue per loan. The prior year also included $26.4 million of mortgage
repurchase reserve charges (see Note 11).
Our effective income tax rate was 22.5% and 18.6% for 2021 and 2020, respectively. The lower effective tax rate in
2020 resulted primarily from a benefit for federal energy efficient homes credits related to homes closed in prior
years (see Note 8).
22
Homebuilding Operations
The following is a summary of income before income taxes for our Homebuilding operations ($000’s omitted):
Home sale revenues
Land sale and other revenues
Total Homebuilding revenues
Home sale cost of revenues (a)
Land sale and other cost of revenues
Selling, general, and administrative expenses
("SG&A") (b)
Loss on debt retirement
Goodwill impairment
Other expense, net (d)
Income before income taxes
Supplemental data:
Gross margin from home sales (a)
SG&A % of home sale revenues (b)
Closings (units)
Average selling price
Net new orders:
Units
Dollars
Cancellation rate
Average active communities
Backlog at December 31:
Units
Dollars
Years Ended December 31,
2021
$13,376,812
160,538
13,537,350
(9,841,961)
(134,013)
FY 2021 vs.
FY 2020
2020
26 % $10,579,896
71 %
94,017
27 % 10,673,913
23 % (8,004,823)
73 %
(77,626)
(1,208,698)
20 % (1,011,442)
(61,469)
—
(3,081)
(c)
(c)
(83)%
—
(20,190)
(17,775)
$ 2,288,128
48 % $ 1,542,057
26.4 %
9.0 %
28,894
463
$
31,739
$16,442,441
9 %
799
24.3 %
9.6 %
17 %
8 % $
24,624
430
29,275
8 %
28 % $12,837,272
(9)%
14 %
874
18,003
$ 9,858,811
19 %
15,158
45 % $ 6,793,182
(a)
(b)
(c)
(d)
Includes the amortization of capitalized interest.
Includes insurance reserve reversals of $81.1 million and $93.4 million in 2021 and 2020, respectively, partially
offset by reserves against insurance receivables of $17.8 million in 2020 (see Note 11).
Percentage not meaningful.
See "Other expense, net" for a table summarizing significant items (see Note 1).
23
Home sale revenues
Home sale revenues for 2021 were higher than 2020 by $2.8 billion, or 26%. The increase was attributable to a 17% increase in
closings combined with an 8% increase in average selling price. The increase in closings was primarily the result of favorable
demand conditions and occurred in substantially all of our geographic markets. Beginning in March 2020, the COVID-19
pandemic began to unfavorably impact the demand environment. However, demand improved significantly beginning in June
2020 and has remained favorable. The higher average selling price reflects the impact of pricing actions taken in response to the
higher demand as well as increased input costs, partially offset by a small increase in the mix of first-time buyer homes, which
typically carry a lower sales price.
Home sale gross margins
Home sale gross margins were 26.4% in 2021, compared with 24.3% in 2020. Gross margins remained strong in both 2021 and
2020 relative to historical levels and reflect a combination of factors, including: strong consumer demand, the low mortgage
interest rate environment, and limited supplies of new and existing housing inventory. As a result, the pricing environment
remains strong, which has allowed us to effectively manage pressure in house and land costs through pricing actions. While
costs remain elevated, we have been able to more than offset these cost increases through price increases. Additionally, while
speculative home sales (homes started prior to receipt of a customer order) remain the minority of our operations, the current
environment is providing opportunities for additional pricing and relative margin gains related to such homes.
Land sale and other revenues
We periodically elect to sell parcels of land to third parties in the event such assets no longer fit into our strategic operating
plans or are zoned for commercial or other development. Land sale and other revenues and their related gains or losses vary
between periods, depending on the timing of land sales and our strategic operating decisions. Land sales and other revenues
contributed income of $26.5 million and $16.4 million in 2021 and 2020, respectively. Income in 2021 included a gain of $12.9
million related to a land sale transaction in California that had been in the entitlement process for a number of years.
SG&A
SG&A as a percentage of home sale revenues was 9.0% and 9.6% in 2021 and 2020, respectively. The dollar amount of our
SG&A increased $197.3 million, or 20%, in 2021 compared with 2020. This increase resulted primarily from higher sales
commissions expense and other variable costs due to the higher production volume. The improvement in SG&A as a percentage
of home sale revenues is primarily attributable to leverage gained from the higher revenues. This overhead leverage was
partially offset in 2021 by higher headcount to support the increased production volume as well as higher performance-based
compensation accruals due to the Company's strong operating results. These results also reflect insurance reserve reversals of
$81.1 million and $93.4 million in 2021 and 2020, respectively, partially offset by reserves against insurance receivables of
$17.8 million in 2020. The 2020 SG&A expense also reflects severance costs of $10.3 million recorded in the second quarter of
2020 as we took actions to reduce overhead expenses due to the disruption caused by the early stages of the COVID-19
pandemic.
Goodwill impairment
As a result of the significant decline in equity market valuations that occurred during the period between our acquisition of
Innovative Construction Group ("ICG") in January 2020 and March 31, 2020, we determined that an event-driven goodwill
impairment test was appropriate for the ICG goodwill, which resulted in an impairment totaling $20.2 million in the first
quarter of 2020. This impairment was not the result of any unique factors specific to ICG's operations but, rather, reflected the
broad-based declines in the market capitalizations of publicly-traded construction companies in the short period of time
between the acquisition and the March 31, 2020 valuation date.
24
Other expense, net
Other expense, net includes the following ($000’s omitted):
Write-offs of deposits and pre-acquisition costs (Note 2)
Amortization of intangible assets (Note 1)
Interest income
Interest expense
Equity in earnings of unconsolidated entities (Note 4)
Miscellaneous, net
Total other expense, net
2021
2020
$
$
(12,283) $
(16,502)
1,953
(502)
17,199
7,054
(3,081) $
(12,390)
(19,685)
6,837
(4,248)
1,880
9,831
(17,775)
Equity in earnings of unconsolidated entities reflects our share of earnings from joint ventures and other investments with
independent third parties and varies between periods based on the performance of the underlying investments.
Net new orders
Net new orders in units increased 8% in 2021 compared with 2020 while net new orders in dollars increased by 28% compared
with 2020. The net new order volume in 2021 reflects favorable demand conditions partially offset by a lower community
count, as more fully discussed above. The annual cancellation rate (canceled orders for the period divided by gross new orders
for the period) was a historically-low 9% in 2021 compared to 14% in 2020. Ending backlog dollars, which represents orders
for homes that have not yet closed, increased 45% in 2021 compared with 2020 as the result of the higher new orders coupled
with elongated cycle times due to supply chain delays for certain materials and labor and obtaining necessary approvals,
permits, and inspections from local municipalities.
Homes in production
The following is a summary of our homes in production at December 31, 2021 and 2020:
Sold
Unsold
Under construction
Completed
Models
Total
2021
2020
14,228
10,421
4,105
90
4,195
1,275
1,694
255
1,949
1,287
19,698
13,657
The number of homes in production at December 31, 2021 was 44% higher compared to December 31, 2020. The increase in
homes under production is the result of the significant increase in demand, coupled with elongated cycle times due to supply
chain delays for certain materials and labor and obtaining necessary approvals, permits, and inspections from local
municipalities. The higher level of unsold homes, or speculative homes, under construction reflects a strategic decision to
increase our housing starts of speculative units in response to the noted supply chain challenges and to meet demand. The lower
unsold completed inventory is near historical lows for our company and reflects our ability to sell these speculative units given
the strong demand environment.
25
Controlled lots
The following is a summary of our lots under control at December 31, 2021 and 2020:
Northeast
Southeast
Florida
Midwest
Texas
West
Total
Developed (%)
December 31, 2021
December 31, 2020
Owned
Optioned
Controlled
Owned
Optioned
Controlled
4,422
15,604
27,654
11,723
20,538
29,137
7,637
28,887
32,240
17,118
21,235
12,101
12,059
44,491
59,894
28,841
41,773
41,238
109,078
119,218
228,296
48 %
38 %
52 %
100 %
13 %
25 %
4,956
15,051
20,737
9,728
15,923
24,968
91,363
4,001
18,248
24,396
14,734
17,841
9,769
88,989
8,957
33,299
45,133
24,462
33,764
34,737
180,352
51 %
43 %
49 %
100 %
16 %
30 %
While competition for well-positioned land is robust, we continue to pursue land investments that we believe can achieve
appropriate risk-adjusted returns on invested capital and have increased our controlled lot count as the result of the strong
demand environment. Additionally, we continue to seek to increase the percentage of our lots that are controlled via land option
agreement. 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. The remaining purchase price under our land option agreements totaled $5.5 billion at December 31, 2021.
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, 2021, we conducted our operations in 41 markets located throughout
24 states. For reporting purposes, our Homebuilding operations are aggregated into six reportable segments:
Northeast:
Southeast:
Florida:
Midwest:
Texas:
West:
Connecticut, Maryland, Massachusetts, New Jersey, Pennsylvania, Virginia
Georgia, North Carolina, South Carolina, Tennessee
Florida
Illinois, Indiana, Kentucky, Michigan, Minnesota, Ohio
Texas
Arizona, California, Colorado, Nevada, New Mexico, Washington
We also have a reportable segment for our financial services operations, which consist principally of mortgage banking, title,
and insurance brokerage operations. 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:
Operating Data by Segment ($000's omitted)
Years Ended December 31,
FY 2021 vs.
FY 2020
2021
2020
Home sale revenues:
Northeast
Southeast
Florida
Midwest
Texas
West
Income before income taxes (a):
Northeast
Southeast
Florida (b)
Midwest
Texas
West
$ 1,127,182
33 % $
845,853
2,231,002
3,040,360
1,971,593
1,800,767
3,205,908
32 %
34 %
31 %
24 %
14 %
1,687,139
2,274,113
1,507,450
1,447,715
2,817,626
$ 13,376,812
26 % $ 10,579,896
$
215,193
57 % $
136,985
417,880
585,680
285,825
322,979
594,976
61 %
62 %
34 %
33 %
40 %
258,794
362,276
213,017
242,383
424,803
Other homebuilding (c)
(134,405)
(40)%
(96,201)
$ 2,288,128
48 % $ 1,542,057
Closings (units):
Northeast
Southeast
Florida
Midwest
Texas
West
Average selling price:
Northeast
Southeast
Florida
Midwest
Texas
West
1,963
4,956
6,640
4,397
5,617
5,321
29 %
21 %
21 %
24 %
18 %
2 %
1,522
4,108
5,496
3,553
4,747
5,198
28,894
17 % $
24,624
$
$
574
450
458
448
321
603
463
3 % $
9 %
11 %
6 %
5 %
11 %
8 % $
556
411
414
424
305
542
430
(a)
(b)
(c)
Includes land-related charges as summarized in the following land-related charges table (see Notes 2 and 3).
Includes goodwill impairment charge of $20.2 million in 2020 (see Note 1).
Other homebuilding includes the amortization of intangible assets, amortization of capitalized interest, and other
items not allocated to the operating segments. Also includes: insurance reserve reversals of $81.1 million and $93.4
million in 2021 and 2020, respectively, partially offset by reserves against insurance receivables of $17.8 million in
2020 (see Note 11) and a loss on debt retirement of $61.5 million in 2021 (see Note 5).
27
The following table presents additional selected financial information for our reportable Homebuilding segments:
Operating Data by Segment ($000's omitted)
Years Ended December 31,
FY 2021 vs.
FY 2020
2021
2020
Net new orders - units:
Northeast
Southeast
Florida
Midwest
Texas
West
Net new orders - dollars:
Northeast
Southeast
Florida
Midwest
Texas
West
Cancellation rates:
Northeast
Southeast
Florida
Midwest
Texas
West
Unit backlog:
Northeast
Southeast
Florida
Midwest
Texas
West
Backlog dollars:
Northeast
Southeast
Florida
Midwest
Texas
West
1,798
5,092
8,416
4,886
5,663
5,884
31,739
$ 1,077,091
2,562,954
4,470,326
2,329,112
2,121,278
3,881,680
(5)%
11 %
23 %
16 %
(5)%
1 %
8 %
1,886
4,583
6,844
4,212
5,950
5,800
29,275
2 % $1,059,479
32 % 1,934,579
53 % 2,923,718
26 % 1,846,109
15 % 1,837,939
20 % 3,235,448
$16,442,441
28 % $12,837,272
10 %
10 %
13 %
11 %
18 %
18 %
14 %
(17)%
6 %
49 %
22 %
2 %
19 %
19 %
953
2,340
3,654
2,199
3,053
2,959
15,158
(9)% $ 561,323
32 % 1,030,910
88 % 1,627,865
36 %
33 %
990,635
981,091
42 % 1,601,358
45 % $6,793,182
7 %
6 %
8 %
7 %
13 %
11 %
9 %
788
2,476
5,430
2,688
3,099
3,522
18,003
$ 511,231
1,362,863
3,057,832
1,348,155
1,301,602
2,277,128
$ 9,858,811
28
The following table presents additional selected financial information for our reportable Homebuilding segments:
Operating Data by Segment
($000's omitted)
Years Ended December 31,
2021
2020
$
1,433
$
5,365
1,088
2,150
1,357
909
—
5,301
3,815
1,395
2,390
4,588
1,936
880
$
12,302
$
20,305
Land-related charges*:
Northeast
Southeast
Florida
Midwest
Texas
West
Other homebuilding
*
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 2 and 3 to the Consolidated Financial Statements for additional
discussion of these charges.
Northeast:
For 2021, Northeast home sale revenues increased 33% compared with 2020 due to a 29% increase in closings combined with a
3% increase in average selling price. The increase in closings occurred across all markets while the increase in average selling
price occurred across the majority of markets. Income before income taxes increased 57% primarily due to increased revenues,
as well as improved gross margins and overhead management which occurred across all markets. Net new orders decreased,
which was primarily attributable to Mid-Atlantic.
Southeast:
For 2021, Southeast home sale revenues increased 32% compared with 2020 due to a 21% increase in closings combined with a
9% increase in average selling price. The increase in closings and average selling price occurred across all markets. Income
before income taxes increased 61% primarily due to increased revenues, as well as improved gross margins which occurred
across all markets, and improved overhead management which occurred across the majority of markets. Net new orders
increased across the majority of markets.
Florida:
For 2021, Florida home sale revenues increased 34% compared with 2020 due to a 21% increase in closings combined with an
11% increase in average selling price. The increase in closings and average selling price occurred across all markets. Income
before income taxes increased 62% due to increased revenues, as well as improved gross margins which occurred across all
markets, and improved overhead management which occurred across the majority of markets. Florida's income before income
taxes also includes a goodwill impairment charge of $20.2 million in 2020 (see Note 1). Net new orders increased across all
markets.
Midwest:
For 2021, Midwest home sale revenues increased 31% compared with 2020 due to a 24% increase in closings combined with a
6% increase in average selling price. The increase in closings occurred across all markets while the increase in average selling
price occurred across the majority of markets. Income before income taxes increased 34% primarily due to increased revenues,
as well as improved gross margins and overhead management which occurred across all markets. Net new orders increased
across all markets.
29
Texas:
For 2021, Texas home sale revenues increased 24% compared with 2020 due to an 18% increase in closings combined with a
5% increase in the average selling price. The increase in closings and average selling price occurred in all markets. Income
before income taxes increased 33% primarily due to increased revenues, as well as improved gross margins which occurred
across all markets, and improved overhead management which occurred across the majority of markets. Net new orders
decreased across the majority of markets.
West:
For 2021, West home sale revenues increased 14% compared with 2020 period due to a 2% increase in closings combined with
an 11% increase in the average selling price. The increase in closings was mixed among markets while the increase in average
selling price occurred across all markets. Income before income taxes increased 40% primarily due to increased revenues, as
well as improved gross margins and overhead management, which occurred across the majority of markets. In addition, 2021
results include a gain of $12.9 million related to a land sale transaction in California that had been in the entitlement process for
a number of years. The increase in net new orders was mixed among markets.
Financial Services Operations
We conduct our Financial Services operations, which include mortgage banking, title, and insurance brokerage operations,
through Pulte Mortgage and other subsidiaries. In originating mortgage loans, we initially use our own funds, including funds
available pursuant to credit agreements with third parties. Substantially all of the loans we originate are sold in the secondary
market within a short period of time after origination, generally within 30 days. We also sell the servicing rights for the loans
we originate through fixed price servicing sales contracts to reduce the risks and costs inherent in servicing loans. This strategy
results in owning the loans and related servicing rights for only a short period of time. Operating as a captive business model
primarily targeted to 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 tables present selected financial information for our Financial Services
operations ($000’s omitted):
Years Ended December 31,
FY 2021 vs.
FY 2020
2020
2021
Mortgage revenues
Title services revenues
Insurance brokerage commissions
Total Financial Services revenues
Expenses
Other income (expense), net
Income before income taxes
Total originations:
Loans
Principal
$
304,287
4 % $
293,099
70,084
15,161
389,532
(168,486)
671
221,717
$
23 %
26 %
8 %
(4)%
(a)
19 % $
57,023
12,047
362,169
(175,481)
(51)
186,637
21,213
$ 7,454,108
15 %
18,433
23 % $ 6,075,132
(a)
Percentage not meaningful
30
Supplemental data:
Capture rate
Average FICO score
Funded origination breakdown:
Government (FHA, VA, USDA)
Other agency
Total agency
Non-agency
Years Ended December 31,
2021
2020
85.8 %
751
86.4 %
751
19 %
73 %
92 %
8 %
21 %
71 %
92 %
8 %
Revenues
Total funded originations
100 %
100 %
Total Financial Services revenues during 2021 increased 8% compared with 2020. The increase occurred as the result of
increased homebuilding volumes, partially offset by lower capture rates and margins per loan. Mortgage interest rates were at or
near historically low levels during 2020, which resulted in a refinancing boom that created a very favorable competitive
environment for new originations. However, the demand for refinancing within the mortgage industry waned in 2021 as
mortgage interest rates began to rise, which led to an increase in competition among lenders and lower margins per loan.
Income before income taxes
The increase in income before income taxes for 2021 as compared with 2020 was due primarily to higher volume, partially
offset by lower margins per loan. Additionally, we incurred $26.4 million of mortgage repurchase reserve charges in 2020 (see
Note 11).
Income Taxes
Our effective income tax rate was 22.5% and 18.6% for 2021 and 2020, respectively. The lower effective income tax rate in
2020 resulted primarily from the extension of federal energy efficient home credits related to homes closed in prior years. Both
2021 and 2020 also included benefits related to the reversals of valuation allowances against state net operating loss
carryforwards. See Note 8.
Liquidity and Capital Resources
We finance our land acquisition, development, and construction activities and financial services operations using internally-
generated funds, supplemented by credit arrangements with third parties and capital market financing. We routinely monitor
current and expected operational requirements and financial market conditions to evaluate accessing available financing
sources, including revolving bank credit and securities offerings.
At December 31, 2021, we had unrestricted cash and equivalents of $1.8 billion, restricted cash balances of $54.5 million, and
$701.2 million available under our Revolving Credit Facility. We follow a diversified investment approach for our cash and
equivalents by maintaining such funds with a broad portfolio of banks within our group of relationship banks in high quality,
highly liquid, short-term deposits and investments. Our ratio of debt-to-total capitalization, excluding our Financial Services
debt, was 21.3% at December 31, 2021.
For the next twelve months, we expect our principal demand for funds will be for the acquisition and development of land
inventory, construction of house inventory, and operating expenses, including our general and administrative expenses.
Additionally, we plan to continue our dividend payments and repurchases of common stock. Beyond the next twelve months,
we will need to repay or refinance our long-term debt, the next tranche of which becomes due in 2026.
We believe that our current cash position and other available financing resources, coupled with our ongoing operating activities,
will provide sufficient liquidity to fund our business needs over the next twelve months and beyond. To the extent the sources
31
of capital described above are insufficient to meet our needs, we may also conduct additional public offerings of our securities,
refinance debt, dispose of certain assets to fund our operating activities, or draw on existing or new debt facilities.
Unsecured senior notes
At December 31, 2021, we had $2.0 billion of unsecured senior notes outstanding with no repayments due until March 2026
when $500.0 million of notes are scheduled to mature.
During 2021, we retired $426.0 million of senior notes at their scheduled maturity date and also accelerated the retirement of
$200.0 million and $100.0 million of our unsecured notes scheduled to mature in 2026 and 2027, respectively, through a cash
tender offer. The tender offer resulted in a loss of $61.5 million, which includes the write-off of debt issuance costs,
unamortized discounts and premiums, and transaction fees.
Other notes payable
Certain of our local homebuilding operations are party to non-recourse and limited recourse collateralized notes payable with
third parties that totaled $40.2 million at December 31, 2021. These notes have maturities ranging up to three years, are secured
by the applicable land positions to which they relate, have no recourse to any other assets, and are classified within notes
payable.
Revolving credit facility
We maintain a Revolving Credit Facility maturing in June 2023 that has a maximum borrowing capacity of $1.0 billion and
contains an uncommitted accordion feature that could increase the capacity to $1.5 billion, subject to certain conditions and
availability of additional bank commitments. The Revolving Credit Facility also provides for the issuance of letters of credit
that reduce the available borrowing capacity under the Revolving Credit Facility, with a sublimit of $500.0 million at
December 31, 2021. The interest rate on borrowings under the Revolving Credit Facility may be based on either the London
Interbank Offered Rate ("LIBOR") or a base rate plus an applicable margin, as defined therein. In the event that LIBOR is no
longer widely available, the agreement contemplates transitioning to an alternative widely available market rate agreeable
between the parties. As a precautionary measure during the initial phase of the COVID-19 pandemic, we made the decision in
March 2020 to draw $700.0 million under the Revolving Credit Facility. In June 2020, we repaid the full outstanding balance of
$700.0 million. We had no borrowings outstanding and $298.8 million and $249.7 million of letters of credit issued under the
Revolving Credit Facility at December 31, 2021 and 2020, respectively.
The Revolving Credit Facility contains financial covenants that require us to maintain a minimum Tangible Net Worth, a
minimum Interest Coverage Ratio, and a maximum Debt-to-Capitalization Ratio (as each term is defined in the Revolving
Credit Facility). As of December 31, 2021, we were in compliance with all covenants. Outstanding balances under the
Revolving Credit Facility are guaranteed by certain of our wholly-owned subsidiaries. Our available and unused borrowings
under the Revolving Credit Facility, net of outstanding letters of credit, amounted to $701.2 million and $750.3 million as of
December 31, 2021 and 2020, respectively.
Financial Services debt
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. Pulte Mortgage uses these resources to finance its lending activities
until the loans are sold in the secondary market, which generally occurs within 30 days.
Pulte Mortgage maintains a master repurchase agreement with third party lenders (the "Repurchase Agreement") that matures
on July 28, 2022. The maximum aggregate commitment was $650.0 million during the seasonally high borrowing period from
December 27, 2021 through January 13, 2022. At all other times, the maximum aggregate commitment ranges from $460.0
million to $550.0 million. The purpose of the changes in capacity during the term of the agreement is to lower associated fees
during seasonally lower volume periods of mortgage origination activity. 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 $626.1 million and $411.8 million outstanding under the Repurchase Agreement at December 31, 2021 and
2020, respectively, and was in compliance with its covenants and requirements as of such dates.
32
Dividends and share repurchase program
We declared quarterly cash dividends totaling $148.1 million and $135.1 million in 2021 and 2020, respectively, and
repurchased 17.7 million and 4.5 million shares in 2021 and 2020, respectively, for a total of $897.3 million and $170.7 million
in 2021 and 2020, respectively. On April 26, 2021, our board of directors approved an additional share repurchase authorization
of $1.0 billion. At December 31, 2021, we had remaining authorization to repurchase $457.6 million of common shares. This
repurchase authorization was increased by $1.0 billion on January 31, 2022.
Contractual Obligations
We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations
impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the
Consolidated Balance Sheet as of December 31, 2021, while others are considered future commitments. Our contractual
obligations primarily consist of long-term debt and related interest payments, purchase obligations related to expected
acquisitions and development of land, operating leases, and obligations under our various compensation and benefit plans.
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, 2021, we had outstanding letters of credit of
$298.8 million. Our surety bonds generally do not have stated expiration dates; rather, we are released from the bonds as the
contractual performance is completed. These bonds, which approximated $1.8 billion at December 31, 2021, 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, 2021, these agreements had an aggregate remaining purchase price of $5.5 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. At December 31, 2021, outstanding deposits totaled $254.4 million, of which
$20.0 million is refundable.
For further information regarding our primary obligations, refer to Note 5, "Debt" and Note 11, "Commitments and
Contingencies" to the Consolidated Financial Statements included elsewhere in this Annual Report on 10-K for amounts
outstanding as of December 31, 2021, related to debt and commitments and contingencies, respectively.
Cash flows
Operating activities
Net cash provided by operating activities in 2021 was $1.0 billion, compared with net cash provided by operating activities of
$1.8 billion in 2020. Generally, the primary drivers of our cash flow from operations are profitability and changes in inventory
levels and residential mortgage loans available-for-sale, each of which experiences seasonal fluctuations. Our positive cash flow
from operations for 2021 was primarily due to our net income of $1.9 billion, which was partially offset by a $1.3 billion
increase in inventories which was primarily attributable to higher house inventory in production resulting from higher sales
activity and extended production cycle times combined with higher investment in land inventory to support future growth. Cash
flow from operations was also favorably impacted by $395.3 million more in customer deposits resulting from the higher order
backlog but unfavorably impacted by an increase of $382.8 million in residential mortgage loans available-for-sale resulting
from higher loan originations to support revenue growth.
Net cash provided by operating activities in 2020 was primarily due to our net income of $1.4 billion.
Investing activities
Net cash used in investing activities totaled $124.1 million in 2021, compared with $107.9 million in 2020. The 2021 cash
outflows primarily reflect $101.6 million of investments in unconsolidated entities primarily in support of our land development
activities and capital expenditures of $72.8 million related to our ongoing investment in new communities and certain
33
information technology applications. The outflows were partially offset by distributions from unconsolidated entities of $53.9
million.
Net cash used in investing activities in 2020 primarily reflected our acquisition of ICG in January 2020 for $83.3 million as
well as capital expenditures of $58.4 million.
Financing activities
Net cash used in financing activities was $1.7 billion in 2021 compared with $295.6 million during 2020. The net cash used in
financing activities for 2021 resulted primarily from the repurchase of 17.7 million common shares for $897.3 million under our
repurchase authorization, repayments of debt of $836.9 million, and cash dividends of $147.8 million, partially offset by net
Financial Services borrowings of $214.3 million.
Net cash used in financing activities for 2020 resulted primarily from the repurchase of 4.5 million common shares for $170.7
million under our repurchase authorization, repayments of debt of $65.3 million, and cash dividends of $130.2 million.
Seasonality
Although significant changes in market conditions have impacted our seasonal patterns in the past and could do so again, we
historically experience variability in our quarterly results from operations due to the seasonal nature of the homebuilding
industry. We generally experience increases in revenues and cash flow from operations during the fourth quarter based on the
timing of home closings. This seasonal activity increases our working capital requirements in our third and fourth quarters to
support our home production and loan origination volumes. As a result of the seasonality of our operations, our quarterly results
of operations are not necessarily indicative of the results that may be expected for the full year. Additionally, given the
disruption in economic activity caused by the COVID-19 pandemic, our quarterly results in 2021 and 2020 are not necessarily
indicative of results that may be achieved in the future.
Supplemental Guarantor Financial Information
As of December 31, 2021 PulteGroup, Inc. had outstanding $2.0 billion principal amount of unsecured senior notes due at dates
from March 2026 through February 2035 and no amounts outstanding on its Revolving Credit Facility.
All of our unsecured senior notes and the Revolving Credit Facility are fully and unconditionally guaranteed, on a joint and
several basis, by certain subsidiaries of PulteGroup, Inc. ("Guarantors" or "Guarantor Subsidiaries"). Each of the Guarantor
Subsidiaries is 100% owned, directly or indirectly, by PulteGroup, Inc. Our subsidiaries associated with our financial services
operations and certain other subsidiaries do not guarantee the unsecured senior notes or the Revolving Credit Facility
(collectively, "Non-Guarantor Subsidiaries"). The guarantees are senior unsecured obligations of each Guarantor and rank equal
with all existing and future senior debt of such Guarantor and senior to all subordinated debt of such Guarantor. The guarantees
are effectively subordinated to any secured debt of such Guarantor to the extent of the value of the assets securing such debt.
A court could void or subordinate any Guarantor’s guarantee under the fraudulent conveyance laws if existing or future
creditors of any such Guarantor were successful in establishing that such Guarantor:
(a) incurred the guarantee with the intent of hindering, delaying or defrauding creditors; or
(b) received less than reasonably equivalent value or fair consideration in return for incurring the guarantee and, in the case of
and any one of the following is also true at the time thereof:
•
•
•
•
such Guarantor was insolvent or rendered insolvent by reason of the issuance of the incurrence of the guarantee;
the incurrence of the guarantee left such Guarantor with an unreasonably small amount of capital or assets to carry on
its business;
such Guarantor intended to, or believed that it would, incur debts beyond its ability to pay as they mature;
such Guarantor was a defendant in an action for money damages, or had a judgment for money damages docketed
against it, if the judgment is unsatisfied after final judgment.
The measures of insolvency for purposes of determining whether a fraudulent conveyance occurred would vary depending upon
the laws of the relevant jurisdiction and upon the valuation assumptions and methodology applied by the court. However, in
general, a court would deem a company insolvent if:
34
•
•
•
the sum of its debts, including contingent and unliquidated liabilities, was greater than the fair saleable value of all of
its assets;
the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability
on its existing debts, including contingent liabilities, as they become absolute and mature; or
it could not pay its debts as they became due.
The guarantees of the senior notes contain a provision to limit each Guarantor’s liability to the maximum amount that it could
incur without causing the incurrence of obligations under its guarantee to be a fraudulent transfer. However, under recent case
law, this provision may not be effective to protect such guarantee from being voided under fraudulent transfer law or otherwise
determined to be unenforceable. If a court were to find that the incurrence of a guarantee was a fraudulent transfer or
conveyance, the court could void the payment obligations under that guarantee, could subordinate that guarantee to presently
existing and future indebtedness of the Guarantor or could require the holders of the senior notes to repay any amounts received
with respect to that guarantee. In the event of a finding that a fraudulent transfer or conveyance occurred, holders may not
receive any repayment on the senior notes.
Finally, as a court of equity, a bankruptcy court may subordinate the claims in respect of the guarantees to other claims against
us under the principle of equitable subordination if the court determines that (1) the holder of senior notes engaged in some type
of inequitable conduct, (2) the inequitable conduct resulted in injury to our other creditors or conferred an unfair advantage
upon the holders of senior notes and (3) equitable subordination is not inconsistent with the provisions of the bankruptcy code.
On the basis of historical financial information, operating history and other factors, we believe that each of the Guarantors, after
giving effect to the issuance of the guarantees when such guarantees were issued, was not insolvent, did not have unreasonably
small capital for the business in which it engaged and did not and has not incurred debts beyond its ability to pay such debts as
they mature. We cannot assure you, however, as to what standard a court would apply in making these determinations or that a
court would agree with our conclusions in this regard.
The following tables present summarized financial information for PulteGroup, Inc. and the Guarantor Subsidiaries on a
combined basis after intercompany transactions and balances have been eliminated among PulteGroup, Inc. and the Guarantor
Subsidiaries, as well as their investment in and equity in earnings from the Non-Guarantor Subsidiaries ($000’s omitted):
PulteGroup, Inc. and Guarantor Subsidiaries
Summarized Balance Sheet Data
ASSETS
Cash, cash equivalents, and restricted cash
House and land inventory
Amount due from Non-Guarantor
Subsidiaries
Total assets
December 31,
2021
$1,598,328
8,859,163
278,531
11,658,352
2020
$2,429,639
7,600,542
—
11,028,911
LIABILITIES
Accounts payable, customer deposits,
accrued and other liabilities
Notes payable
Amount due to Non-Guarantor Subsidiaries
Total liabilities
$2,788,465
2,029,044
—
4,986,491
$2,101,427
2,752,302
12,208
4,948,275
35
Summarized Statement of Operations Data
Revenues
Cost of revenues
Selling, general, and administrative expenses
Income before income taxes
Years Ended December 31,
2020
2021
$13,173,753
$10,368,616
9,697,959
1,164,553
2,213,419
7,839,807
966,662
1,510,185
Critical Accounting Estimates
The preparation of the Company's financial statements in conformity with U.S. generally accepted accounting principles and the
discussion and analysis of its financial condition and operating results requires management to make estimates and
assumptions, including estimates about the future resolution of existing uncertainties that affect the amounts reported. As a
result, actual results could differ from these estimates. Management bases its estimates on historical experience and on various
other assumptions it believes to be reasonable under the circumstances. We believe the following critical accounting estimates
reflect the more significant judgments and estimates used in the preparation of our consolidated financial statements. For a
discussion of all of our significant accounting policies, refer to Note 1, "Summary of Significant Account Policies".
Inventory and cost of revenues
Cost of revenues includes the construction cost, average lot cost, estimated warranty costs, 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. 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. Total community land acquisition
and development costs are based on an analysis of budgeted costs compared with actual costs incurred to date and estimates to
complete. The development cycles for our communities range from under one year to in excess of ten years for certain master
planned communities. Adjustments to estimated total land acquisition and development costs for the community affect the
amounts costed for the community’s remaining lots.
We test inventory for impairment when events and circumstances indicate that the undiscounted cash flows estimated to be
generated by the community may be less than its carrying amount. Such indicators include gross margins or sales paces
significantly below expectations, construction costs or land development costs significantly in excess of budgeted amounts,
significant delays or changes in the planned development for the community, and other known qualitative factors. Communities
that demonstrate potential impairment indicators are tested for impairment by comparing the expected undiscounted cash flows
for the community to its carrying value. For those communities whose carrying values exceed the expected undiscounted cash
flows, we determine the fair value of the community and impairment charges are recorded if the fair value of the community’s
inventory is less than its carrying value.
We generally determine the fair value of each community using a combination of discounted cash flow models and market
comparable transactions, where available. These estimated cash flows are significantly impacted by estimates related to
expected average selling prices, expected sales paces, expected land development and construction timelines, and anticipated
land development, construction, and overhead costs. The assumptions used in the discounted cash flow models are specific to
each community. Due to uncertainties in the estimation process, the significant volatility in demand for new housing, the long
life cycles of many communities, and potential changes in our strategy related to certain communities, actual results could differ
significantly from such estimates.
Generally, a community must have projected gross margin percentages in the mid-single digits or lower to potentially fail the
undiscounted cash flow step and proceed to the fair value step. Our overall gross margin realized during 2021 and our average
gross margin in backlog at December 31, 2021 both exceeded 20%, and we have only a small minority of communities with
gross margins below 10%. However, in the event of an extended economic slowdown that leads to moderate or significant
decreases in the price of new homes in certain geographic or buyer submarkets, we could have a larger number of communities
that begin to approach these levels such that more detailed impairment analyses would be necessary, and the resulting
impairments could be material. Additionally, we have $404.9 million of deposits and pre-acquisition costs at December 31,
2021 related to option agreements to acquire additional land. In the event of an extended economic slowdown, we could elect to
36
cancel a large portion of such land option agreements, which would generally result in the write-off of the related deposits and
pre-acquisition costs.
Self-insured risks
At any point in time, we are managing approximately 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 estimates of the ultimate cost of all unpaid losses, including estimates for incurred but not reported losses
("IBNR"). IBNR represents losses related to claims incurred but not yet reported plus development on reported claims.
Our recorded reserves for all such claims totaled $627.1 million and $641.8 million at December 31, 2021 and 2020,
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 70% and 68% of the total general liability reserves at December 31, 2021 and
2020, 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 $525 million to $725 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.
Volatility in both national and local housing market conditions can affect the frequency and cost of construction defect claims.
Additionally, IBNR estimates comprise the majority of our liability and are subject to a high degree of uncertainty due to a
variety of factors, including changes in claims reporting and resolution patterns, third party recoveries, insurance industry
practices, the regulatory environment, and legal precedent. State regulations vary, but construction defect claims are reported
and resolved over an extended period often exceeding ten years. Changes in the frequency and timing of reported claims and
estimates of specific claim values can impact the underlying inputs and trends utilized in the actuarial analyses, which could
have a material impact on the recorded reserves. Additionally, the amount of insurance coverage available for each policy
period also impacts our recorded reserves. Because of the inherent uncertainty in estimating future losses and the timing of such
losses related to these claims, actual costs could differ significantly from estimated costs.
Adjustments to reserves are recorded in the period in which the change in estimate occurs. During 2021 and 2020, we reduced
general liability reserves by $81.1 million and $93.4 million, respectively, as a result of changes in estimates resulting from
actual claim experience observed being less than anticipated in previous actuarial projections. The changes in actuarial
estimates were driven by changes in actual claims experience that, in turn, impacted actuarial estimates for potential future
claims. These changes in actuarial estimates did not involve any changes in actuarial methodology but did impact the
development of estimates for future periods, which resulted in adjustments to the IBNR portion of our recorded liabilities.
There were no material adjustments to individual claims. Rather, the adjustments reflect an overall lower level of losses related
to construction defect claims in recent years as compared with our previous experience. We attribute this favorable experience
to a variety of factors, including improved construction techniques, rising home values, and increased participation from our
subcontractors in resolving claims.
37
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are subject to market risk on our debt instruments primarily due to fluctuations in interest rates. We utilize both fixed-rate
and variable-rate debt. For fixed-rate debt, changes in interest rates generally affect the fair value of the debt instrument but not
our earnings or cash flows. Conversely, for variable-rate debt, changes in interest rates generally do not affect the fair value of
the debt instrument but could affect our earnings and cash flows. Except in very limited circumstances, we do not have an
obligation to prepay our debt prior to maturity. As a result, interest rate risk and changes in fair value should not have a
significant impact on our fixed-rate debt until we are required or elect to refinance or repurchase such debt.
The following table sets forth the principal cash flows by scheduled maturity, weighted-average interest rates, and estimated fair
value of our debt obligations as of December 31, 2021 and 2020 ($000’s omitted).
As of December 31, 2021 for the
Years ending December 31,
2022
2023
2024
2025
2026
Thereafter
Total
Fair
Value
Rate-sensitive liabilities:
Fixed rate debt
Average interest rate
$
8,652
$ 12,555
$ 18,978
1.16 %
3.55 %
5.28 %
Variable rate debt (a)
Average interest rate
$ 626,123
$
—
$
2.20 %
— %
—
— %
$
$
—
$ 500,000
$ 1,500,000
$2,040,185
$ 2,496,875
— %
5.50 %
6.14 %
5.94 %
—
$
—
$
—
$ 626,123
$
626,123
— %
— %
— %
2.20 %
As of December 31, 2020 for the
Years ending December 31,
2021
2022
2023
2024
2025
Thereafter
Total
Fair
Value
Rate-sensitive liabilities:
Fixed rate debt
Average interest rate
Variable rate debt (a)
Average interest rate
$ 451,596
$ 14,456
4.10 %
0.28 %
$ 411,821
$
2.55 %
—
— %
$
$
$
$
—
— %
—
— %
$
$
—
— %
—
— %
—
$ 2,300,000
$2,766,052
$ 3,415,662
— %
5.90 %
5.57 %
—
$
—
$ 411,821
$
411,821
— %
— %
2.55 %
(a) Includes the Pulte Mortgage Repurchase Agreement. There were no borrowings outstanding under our Revolving Credit Facility at either December 31,
2021 or 2020.
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 60 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 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 generally 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.
At December 31, 2021 and 2020, residential mortgage loans available-for-sale had an aggregate fair value of $947.1 million
and $565.0 million, respectively. At December 31, 2021 and 2020, we had aggregate interest rate lock commitments of
$337.9 million and $367.2 million, respectively, which were originated at interest rates prevailing at the date of commitment.
Unexpired forward contracts totaled $903.0 million and $686.4 million at December 31, 2021 and 2020, respectively, and
whole loan investor commitments totaled $310.0 million and $169.6 million, respectively, at such dates. Hypothetical changes
in the fair values of our financial instruments arising from immediate parallel shifts in long-term mortgage rates would not be
material to our financial results due to the offsetting nature in the movements in fair value of our financial instruments.
38
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,” “plan,”
“project,” “may,” “can,” “could,” “might,” "should", “will” and similar expressions identify forward-looking statements,
including statements related to any potential impairment charges and the impacts or effects thereof, expected operating and
performing results, planned transactions, planned objectives of management, future developments or conditions in the industries
in which we participate and other trends, developments and uncertainties that may affect our business in the future.
Such risks, uncertainties and other factors include, among other things: interest rate changes and the availability of mortgage
financing; competition within the industries in which we operate; the availability and cost of land and other raw materials used
by us in our homebuilding operations; the impact of any changes to our strategy in responding to the cyclical nature of the
industry, including any changes regarding our land positions and the levels of our land spend; the availability and cost of
insurance covering risks associated with our businesses; shortages and the cost of labor; weather related slowdowns; slow
growth initiatives and/or local building moratoria; governmental regulation directed at or affecting the housing market, the
homebuilding industry or construction activities; uncertainty in the mortgage lending industry, including revisions to
underwriting standards and repurchase requirements associated with the sale of mortgage loans; the interpretation of or changes
to tax, labor and environmental laws which could have a greater impact on our effective tax rate or the value of our deferred tax
assets than we anticipate; economic changes nationally or in our local markets, including inflation, deflation, changes in
consumer confidence and preferences and the state of the market for homes in general; legal or regulatory proceedings or
claims; our ability to generate sufficient cash flow in order to successfully implement our capital allocation priorities; required
accounting changes; terrorist acts and other acts of war; the negative impact of the COVID-19 pandemic on our financial
position and ability to continue our Homebuilding or Financial Services activities at normal levels or at all in impacted areas;
the duration, effect and severity of the COVID-19 pandemic; the measures that governmental authorities take to address the
COVID-19 pandemic which may precipitate or exacerbate one or more of the above-mentioned and/or other risks and
significantly disrupt or prevent us from operating our business in the ordinary course for an extended period of time; and other
factors of national, regional and global scale, including those of a political, economic, business and competitive nature. See
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.
39
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PULTEGROUP, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2021 and 2020
($000’s omitted, except per share data)
ASSETS
Cash and equivalents
Restricted cash
Total cash, cash equivalents, and restricted cash
House and land inventory
Land held for sale
Residential mortgage loans available-for-sale
Investments in unconsolidated entities
Other assets
Intangible assets
Deferred tax assets
Liabilities:
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable, including book overdrafts of $87,462 and $84,505 at December 31,
2021 and 2020, respectively
Customer deposits
Deferred tax liabilities
Accrued and other liabilities
Financial Services debt
Notes payable
Total liabilities
Shareholders’ equity:
Preferred shares, $0.01 par value; 25,000,000 shares authorized, none issued
Common shares, $0.01 par value; 500,000,000 shares authorized, 249,325,873 and
266,464,063 shares issued and outstanding at December 31, 2021 and 2020, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total shareholders’ equity
2021
2020
$
$
1,779,088
54,477
1,833,565
2,582,205
50,030
2,632,235
9,047,569
29,276
947,139
98,155
1,110,966
146,923
139,038
$ 13,352,631
7,721,798
27,962
564,979
35,562
923,270
163,425
136,267
$ 12,205,498
$
621,168
$
511,321
844,785
165,519
1,576,478
626,123
2,029,043
5,863,116
449,474
103,548
1,407,043
411,821
2,752,302
5,635,509
$
— $
—
2,493
3,290,791
(45)
4,196,276
7,489,515
$ 13,352,631
2,665
3,261,412
(145)
3,306,057
6,569,989
$ 12,205,498
See Notes to Consolidated Financial Statements.
40
PULTEGROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2021, 2020, and 2019
(000’s omitted, except per share data)
Revenues:
Homebuilding
Home sale revenues
Land sale and other revenues
Financial Services
Total revenues
Homebuilding Cost of Revenues:
Home sale cost of revenues
Land sale and other cost of revenues
Financial Services expenses
Selling, general, and administrative expenses
Loss on debt retirement
Goodwill impairment
Other expense, net
Income before income taxes
Income tax expense
Net income
Net income per share:
Basic
Diluted
Cash dividends declared
Number of shares used in calculation:
Basic
Effect of dilutive securities
Diluted
2021
2020
2019
$ 13,376,812
$ 10,579,896
$
9,915,705
160,538
94,017
13,537,350
10,673,913
389,532
362,169
62,821
9,978,526
234,431
13,926,882
11,036,082
10,212,957
(9,841,961)
(8,004,823)
(7,628,700)
(134,013)
(77,626)
(56,098)
(9,975,974)
(8,082,449)
(7,684,798)
(168,486)
(175,481)
(130,770)
(1,208,698)
(1,011,442)
(1,044,337)
(61,469)
—
(2,410)
—
(20,190)
(17,826)
(4,927)
—
(8,549)
2,509,845
1,728,694
1,339,576
(563,525)
(321,855)
(322,876)
$
1,946,320
$
1,406,839
$
1,016,700
$
$
$
7.44
7.43
0.57
$
$
$
5.19
5.18
0.50
$
$
$
3.67
3.66
0.45
259,285
643
259,928
268,553
861
269,414
274,495
802
275,297
See Notes to Consolidated Financial Statements.
41
PULTEGROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31, 2021, 2020, and 2019
($000’s omitted)
Net income
Other comprehensive income, net of tax:
Change in value of derivatives
Other comprehensive income
2021
2020
2019
$
1,946,320
$
1,406,839
$
1,016,700
100
100
100
100
100
100
Comprehensive income
$
1,946,420
$
1,406,939
$
1,016,800
See Notes to Consolidated Financial Statements.
42
PULTEGROUP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
For the years ended December 31, 2021, 2020, and 2019
(000’s omitted)
Shareholders' equity, December 31, 2018
Stock option exercises
Share issuances
Dividends declared
Share repurchases
Cash paid for shares withheld for taxes
Share-based compensation
Net income
Other comprehensive income
Shareholders' equity, December 31, 2019
Cumulative effect of accounting change (see Note 1)
Stock option exercises
Share issuances
Dividends declared
Share repurchases
Cash paid for shares withheld for taxes
Share-based compensation
Net income
Other comprehensive income
Shareholders' equity, December 31, 2020
Stock option exercises
Share issuances
Dividends declared
Share repurchases
Cash paid for shares withheld for taxes
Share-based compensation
Net income
Other comprehensive income
Shareholders' equity, December 31, 2021
Common Shares
Shares
277,110
547
1,013
—
(8,435)
—
—
—
—
270,235
—
15
756
—
(4,542)
—
—
—
—
266,464
1
525
—
(17,664)
—
—
—
—
249,326
$
$
$
$
Additional
Paid-in
Capital
$ 3,201,427
6,394
5,790
—
—
—
21,538
—
—
$ 3,235,149
—
110
4,088
—
—
—
22,065
—
—
$ 3,261,412
11
4,176
—
—
—
25,192
—
—
$ 3,290,791
$
2,771
5
10
—
(84)
—
—
—
—
2,702
—
1
8
—
(46)
—
—
—
—
2,665
—
5
—
(177)
—
—
—
—
2,493
Accumulated
Other
Comprehensive
Income
(Loss)
Retained
Earnings
$
$
$
$
(345) $
—
—
—
—
—
—
—
100
(245) $
—
—
—
—
—
—
—
—
100
(145) $
—
—
—
—
—
—
—
100
(45) $
1,613,929
—
—
(124,356)
(274,249)
(11,450)
—
1,016,700
—
2,220,574
(735)
—
—
(135,138)
(170,630)
(14,853)
—
1,406,839
—
3,306,057
—
—
(148,133)
(897,126)
(10,842)
—
1,946,320
—
4,196,276
$
$
$
$
Total
4,817,782
6,399
5,800
(124,356)
(274,333)
(11,450)
21,538
1,016,700
100
5,458,180
(735)
111
4,096
(135,138)
(170,676)
(14,853)
22,065
1,406,839
100
6,569,989
11
4,181
(148,133)
(897,303)
(10,842)
25,192
1,946,320
100
7,489,515
See Notes to Consolidated Financial Statements.
43
PULTEGROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2021, 2020, and 2019
($000’s omitted)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash from operating activities:
2021
2020
2019
$
1,946,320
$
1,406,839
$
1,016,700
Deferred income tax expense
Land-related charges
Loss on debt retirement
Goodwill impairment
Depreciation and amortization
Share-based compensation expense
Other, net
Increase (decrease) in cash due to:
Inventories
Residential mortgage loans available-for-sale
Other assets
Accounts payable, accrued and other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Capital expenditures
Investments in unconsolidated entities
Distributions of capital from unconsolidated entities
Business acquisitions
Other investing activities, net
Net cash used in investing activities
Cash flows from financing activities:
Repayments of notes payable
Borrowings under revolving credit facility
Repayments under revolving credit facility
Financial Services borrowings (repayments), net
Stock option exercises
Share repurchases
Cash paid for shares withheld for taxes
Dividends paid
Net cash used in financing activities
Net increase (decrease)
Cash, cash equivalents, and restricted cash at beginning of period
Cash, cash equivalents, and restricted cash at end of period
Supplemental Cash Flow Information:
Interest paid (capitalized), net
Income taxes paid, net
$
$
$
59,168
12,302
61,469
—
69,953
36,745
137,598
20,305
—
20,190
66,081
32,843
(13,504)
(1,112)
(1,266,398)
(382,813)
(159,906)
640,685
2,988
(56,732)
(46,307)
201,649
105,438
27,101
4,927
—
53,999
28,368
1,155
(237,741)
(48,261)
(16,668)
140,984
1,004,021
1,784,342
1,076,002
(72,781)
(101,591)
53,927
(10,400)
6,713
(58,354)
(753)
27,939
(83,251)
6,472
(58,119)
(9,515)
214
(163,724)
6,458
(124,132)
(107,947)
(224,686)
(836,893)
—
—
214,302
11
(897,303)
(10,842)
(147,834)
(1,678,559)
(798,670)
2,632,235
(65,267)
700,000
(700,000)
85,248
111
(170,676)
(14,853)
(130,179)
(295,616)
1,380,779
1,251,456
(309,985)
—
—
(21,841)
6,399
(274,333)
(11,450)
(122,350)
(733,560)
117,756
1,133,700
1,833,565
$
2,632,235
$
1,251,456
10,856
457,406
$
$
3,057
264,248
$
$
5,605
137,119
See Notes to Consolidated Financial Statements.
44
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 shares trade on the New York Stock Exchange
under the ticker symbol “PHM”. Unless the context otherwise requires, the terms "PulteGroup", the "Company", "we", "us",
and "our" used herein refer to PulteGroup, Inc. and its subsidiaries. While our subsidiaries engage primarily in the
homebuilding business, we also have mortgage banking operations, conducted principally through Pulte Mortgage LLC (“Pulte
Mortgage”), and title and insurance brokerage 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 acquisitions
On April 23, 2019, we acquired certain assets of American West, located in Las Vegas, Nevada, for $163.7 million. The assets
acquired included approximately 1,200 finished lots and control of approximately 2,300 additional lots through land option
agreements. The acquired assets were recorded at their estimated fair values, including $12.0 million associated with the
American West tradename, which is being amortized over a 20-year useful life. The acquisition of these assets was not material
to our results of operations or financial condition.
On January 24, 2020, we acquired the operations of Innovative Construction Group ("ICG"), an offsite construction framing
company located in Jacksonville, Florida, for $104 million, of which $83.3 million was paid in January 2020 with additional
payments of $10.4 million in each of 2021 and 2022. The acquired net assets were recorded at their estimated fair values,
including intangible assets of $27.8 million associated with customer relationships and $1.8 million associated with the ICG
tradename, which are being amortized over seven- and five-year useful lives, respectively. The acquisition also resulted in
$48.7 million of tax deductible goodwill. 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, 2021 and 2020 also included $38.4 million and $6.1 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, including customer deposits on home sales that are
temporarily restricted by regulatory requirements in certain states until title transfers to the homebuyer. Total cash, cash
45
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
equivalents, and restricted cash includes restricted cash balances of $54.5 million and $50.0 million at December 31, 2021 and
2020, respectively.
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 ASC 323, “Investments – Equity
Method and Joint Ventures”. 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,
which is reflected in other expense, net. 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 4.
Intangible assets
Goodwill, which represents the cost of acquired businesses in excess of the fair value of the net assets of such businesses at the
acquisition date, totaled $68.9 million at both December 31, 2021 and 2020. We assess goodwill for impairment annually in the
fourth quarter and if events or changes in circumstances indicate the carrying amount may not be recoverable.
In accordance with ASC 350, "Intangibles", management evaluates the recoverability of goodwill by comparing the carrying
value of the Company’s reporting units to their fair value. Fair value is determined using accepted valuation methods, including
the use of discounted cash flows supplemented by market-based assessments of fair value. As a result of the significant decline
in equity market valuations that occurred during the period between our acquisition of ICG in January 2020 and March 31,
2020, we determined that an event-driven goodwill impairment test was appropriate for the ICG goodwill, which resulted in an
impairment totaling $20.2 million in the first quarter of 2020. This impairment was not the result of any unique factors specific
to ICG's operations but, rather, reflected the broad-based declines in the market capitalizations of publicly-traded construction
companies in the short period of time between the acquisition and the March 31, 2020 valuation date.
Intangible assets also include tradenames and customer relationships acquired in connection with acquisitions and totaled $78.0
million, net of accumulated amortization of $76.6 million, at December 31, 2021, and $94.5 million, net of accumulated
amortization of $224.1 million, at December 31, 2020. Such tradenames are generally being amortized over 20-year lives. Our
customer relationships intangible asset resulted from the ICG acquisition and is being amortized over seven years. Amortization
expense totaled $16.5 million, $19.7 million, and $14.2 million in 2021, 2020 and 2019, respectively, and is expected to be
$11.1 million in 2022, $10.5 million in 2023, $10.0 million in 2024, $9.3 million in 2025, and $8.9 million in 2026. The
ultimate realization of these assets is dependent upon the future cash flows and benefits that we expect to generate from their
use. We assess intangibles for impairment if events or changes in circumstances indicate the carrying amount may not be
recoverable.
Property and equipment
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: office furniture and equipment - 3 to 10 years;
leasehold improvements - life of the lease; software and hardware - 3 to 5 years; model park improvements and furnishings - 1
to 5 years. Property and equipment are included in other assets and totaled $149.2 million net of accumulated depreciation of
$228.5 million at December 31, 2021 and $131.7 million net of accumulated depreciation of $228.8 million at December 31,
2020. Depreciation expense totaled $53.5 million, $46.4 million, and $39.8 million in 2021, 2020, and 2019, respectively.
Advertising costs
Advertising costs are expensed to selling, general, and administrative expense as incurred and totaled $47.2 million, $40.3
million, and $53.9 million, in 2021, 2020, and 2019, respectively.
46
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Employee benefits
We maintain a defined contribution retirement plan that covers substantially all of our employees. Company contributions to the
plan totaled $23.4 million, $20.4 million, and $19.1 million in 2021, 2020, and 2019, respectively.
Other expense, net
Other expense, net consists of the following ($000’s omitted):
Write-offs of deposits and pre-acquisition costs (Note 2)
Amortization of intangible assets (Note 1)
Interest income
Interest expense
Equity in earnings of unconsolidated entities (Note 4)
Miscellaneous, net
Total other expense, net
2021
2020
2019
$
$
(12,283) $
(16,502)
1,953
(502)
17,199
7,725
(2,410) $
(12,390) $
(19,685)
6,837
(4,248)
1,880
9,780
(17,826) $
(13,116)
(14,200)
16,739
(584)
747
1,865
(8,549)
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 unvested restricted share units and other potentially dilutive instruments. Anti-dilutive shares were
immaterial in 2021, 2020, and 2019.
In accordance with ASC 260 "Earnings Per Share", the two-class method determines earnings per share for each class of
common share and participating securities according to an earnings allocation formula that adjusts the Numerator for dividends
or dividend equivalents and participation rights in undistributed earnings. Unvested share-based payment awards that contain
non-forfeitable rights to dividends or dividend equivalents are participating securities and, therefore, are included in computing
earnings per share pursuant to the two-class method. Our outstanding restricted share units and deferred shares are considered
participating securities. The following table presents a reconciliation of the Numerator used in our earnings per common share
calculation ($000's omitted):
Numerator:
Net income
Less: earnings distributed to participating securities
Less: undistributed earnings allocated to participating
securities
December 31,
2021
December 31,
2020
December 31,
2019
$
1,946,320
$
1,406,839
$
1,016,700
(1,218)
(1,106)
(15,117)
(11,348)
(1,228)
(9,143)
Numerator for basic earnings per share
$
1,929,985
$
1,394,385
$
1,006,329
Add: undistributed earnings allocated to participating
securities
Less: undistributed earnings reallocated to participating
securities
15,117
11,348
9,143
(15,080)
(11,312)
(9,117)
Numerator for diluted earnings per share
$
1,930,022
$
1,394,421
$
1,006,355
Share-based compensation
We measure compensation cost for share-based compensation on the grant date. Fair value for restricted share units is
determined based on the quoted price of our common shares on the grant date. We recognize compensation expense for
restricted share 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
47
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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. Forfeitures of share-based awards are recognized
as a reduction of expense as incurred. See Note 7.
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 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 including the valuation and realization of
deferred tax assets and liabilities over time.
Unrecognized tax benefits represent the difference between tax positions taken or expected to be taken in a tax return and the
benefits recognized for financial statement purposes. We follow the provisions of ASC 740, "Income Taxes", 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 relevant facts and circumstances, applicable tax 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 income taxes and unrecognized tax benefits are recognized as a component of income tax expense (benefit). See Note 8.
Revenue recognition
Home sale revenues - Home sale revenues and related profit are generally recognized when title to and possession of the home
are transferred to the buyer at the home closing date. Our performance obligation to deliver the agreed-upon home is generally
satisfied at the home closing date. Home sale contract assets consist of cash from home closings held in escrow for our benefit,
typically for less than five days, which are considered deposits in-transit and classified as cash. Contract liabilities include
customer deposit liabilities related to sold but undelivered homes, which totaled $844.8 million and $449.5 million at
December 31, 2021 and 2020, respectively. Substantially all of our home sales are scheduled to close and be recorded to
revenue within one year from the date of receiving a customer deposit. See Note 11 for information on warranties and related
obligations.
Land sale and other revenues - We periodically elect to sell parcels of land to third parties in the event such assets no longer fit
into our strategic operating plans or are zoned for commercial or other development. Land sales are generally outright sales of
specified land parcels with cash consideration due on the closing date, which is generally when performance obligations are
satisfied. Other revenues related to our construction services operations are generally recognized as materials are delivered and
installation services are provided.
Financial services revenues - Loan origination fees, commitment fees, and direct loan origination costs are recognized as
incurred. Expected gains and losses from the sale of residential mortgage loans and their related servicing rights are included in
the measurement of written loan commitments that are accounted for at fair value through Financial Services revenues at the
time of commitment. Subsequent changes in the fair value of these loans are reflected in Financial Services revenues as they
occur. Interest income is accrued from the date a mortgage loan is originated until the loan is sold. Mortgage servicing fees
represent fees earned for servicing loans for various investors. Servicing fees are based on a contractual percentage of the
outstanding principal balance and are credited to income when related mortgage payments are received or the sub-servicing fees
are earned.
Revenues associated with our title operations are recognized as closing services are rendered and title insurance policies are
issued, both of which generally occur as each home is closed. Insurance brokerage commissions relate to commissions on home
and other insurance policies placed with third party carriers through various agency channels. Our performance obligations for
policy renewal commissions are considered satisfied upon issuance of the initial policy, and related contract assets for estimated
future renewal commissions are included in other assets and totaled $44.3 million and $38.5 million at December 31, 2021 and
2020, respectively.
48
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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.
Inventory and cost of revenues
Inventory is stated at cost unless the carrying value is determined to not be recoverable, in which case the affected inventory is
written down to fair value. Cost includes land acquisition, land development, and home construction costs, including interest,
real estate taxes, and certain direct and indirect overhead costs related to development and construction. For those communities
for which construction and development activities have been idled, applicable interest and real estate taxes are expensed as
incurred. Land acquisition and development costs are allocated to individual lots using an average lot cost determined based on
the total expected land acquisition and development costs and the total expected home closings for the community. The specific
identification method is used to accumulate home construction costs.
We capitalize interest cost into homebuilding inventories. Each layer of capitalized interest is amortized over a period that
approximates the average life of communities under development. Interest expense is allocated over the period based on the
timing of home closings.
Cost of revenues includes the construction cost, average lot cost, estimated warranty costs, and closing costs applicable to the
home. Sales commissions are classified within selling, general, and administrative expenses. The construction cost of the home
includes amounts paid through the closing date of the home, plus an accrual for costs incurred but not yet paid. Total
community land acquisition and development costs are based on an analysis of budgeted costs compared with actual costs
incurred to date and estimates to complete. The development cycles for our communities range from under one year to in excess
of ten years for certain master planned communities. Adjustments to estimated total land acquisition and development costs for
the community affect the amounts costed for the community’s remaining lots.
We test inventory for impairment when events and circumstances indicate that the undiscounted cash flows estimated to be
generated by the community may be less than its carrying amount. Such indicators include gross margins or sales paces
significantly below expectations, construction costs or land development costs significantly in excess of budgeted amounts,
significant delays or changes in the planned development or strategy 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 value of the community, and impairment charges are recorded if the fair
value of the community's inventory is less than its carrying value. See Note 2.
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 2.
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 may serve to reduce
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
49
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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 2.
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, 2021 or 2020 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. The following provides a summary of our interests in land option
agreements ($000’s omitted):
December 31, 2021
December 31, 2020
Deposits and
Pre-
acquisition
Costs
Remaining
Purchase
Price
Deposits and
Pre-
acquisition
Costs
Remaining
Purchase
Price
Land options with VIEs $
Other land options
$
179,604
225,318
404,922
$
$
2,329,187
3,128,691
5,457,878
$
$
126,900
$ 1,586,551
164,964
2,187,017
291,864
$ 3,773,568
Warranty liabilities
Home buyers are provided with a limited warranty against certain building defects, including a one-year comprehensive limited
warranty and coverage for certain other aspects of the home's construction and operating systems for periods of up to (and in
limited instances exceeding) 10 years. We estimate the costs to be incurred under these warranties and record a liability in the
amount of such costs at the time revenue is recognized (see Note 11).
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 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 11.
Residential mortgage loans available-for-sale
Substantially all of the loans originated by us and their related servicing rights 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”, 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 11 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, 2021 and 2020, residential mortgage loans available-for-sale had an aggregate fair value of $947.1 million
and $565.0 million, respectively, and an aggregate outstanding principal balance of $924.5 million and $539.1 million,
respectively. These changes in fair value were substantially offset by changes in fair value of the corresponding derivative
50
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
instruments. Net gains from the sale of mortgages during 2021, 2020, and 2019 were $251.3 million, $247.3 million, and
$129.4 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. 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 exposure at the time the sale is recorded. Such
reserves were immaterial at December 31, 2021 and 2020.
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 $10.0 million, $9.2 million, and $9.7 million in 2021, 2020, and 2019, 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.
Derivative instruments and hedging activities
We are party to interest rate lock commitments ("IRLCs") with customers resulting from our mortgage origination operations.
At December 31, 2021 and 2020, we had aggregate IRLCs of $337.9 million and $367.2 million, respectively, which were
originated at interest rates prevailing at the date of commitment. Since we can terminate a loan commitment if the borrower
does not comply with the terms of the contract, and some loan commitments may expire without being drawn upon, these
commitments do not necessarily represent future cash requirements. We evaluate the creditworthiness of these transactions
through our normal credit policies.
We hedge our exposure to interest rate market risk relating to residential mortgage loans available-for-sale and IRLCs using
forward contracts on mortgage-backed securities, which are commitments to either purchase or sell a specified financial
instrument at a specified future date for a specified price, and whole loan investor commitments, which are obligations of an
investor to buy loans at a specified price within a specified time period. Forward contracts on mortgage-backed securities are
the predominant derivative financial instruments we use to minimize market risk during the period from the time we extend an
interest rate lock to a loan applicant until the time the loan is sold to an investor. At December 31, 2021 and 2020, we had
unexpired forward contracts of $903.0 million and $686.4 million, respectively, and whole loan investor commitments of
$310.0 million and $169.6 million, respectively. Changes in the fair value of IRLCs and other derivative financial instruments
are recognized in Financial Services revenues, and the fair values are reflected in other assets or other liabilities, as applicable.
There are no credit-risk-related contingent features within our derivative agreements, and counterparty risk is considered
minimal. Gains and losses on IRLCs are substantially offset by corresponding gains or losses on forward contracts on
mortgage-backed securities and whole loan investor commitments. We are generally not exposed to variability in cash flows of
derivative instruments for more than approximately 60 days.
The fair values of derivative instruments and their location in the Consolidated Balance Sheets are summarized below ($000’s
omitted):
Interest rate lock commitments
Forward contracts
Whole loan commitments
December 31, 2021
December 31, 2020
Other Assets
Other Liabilities
Other Assets
Other Liabilities
$
$
8,582
$
33
$
16,179
$
757
384
1,336
4
501
168
9,723
$
1,373
$
16,848
$
18
5,937
666
6,621
51
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Credit losses
We are exposed to credit losses primarily through our vendors and insurance carriers. We assess and monitor each
counterparty’s ability to pay amounts owed by considering contractual terms and conditions, the counterparty’s financial
condition, macroeconomic factors, and business strategy.
At December 31, 2021 and 2020, we reported $208.4 million and $176.2 million of assets in-scope under Accounting Standards
Codification 326, "Financial Instruments - Credit Losses" ("ASC 326"). These assets consist primarily of insurance receivables,
contract assets related to insurance brokerage commissions, and vendor rebate receivables. Counterparties associated with these
assets are generally highly rated. Allowances on the aforementioned in-scope assets were not material as of December 31, 2021.
New accounting pronouncements
On January 1, 2021, we adopted ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income
Taxes" ("ASU 2019-12"), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12
removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve
consistent application. Our adoption of ASU 2019-12 did not have a material impact on our financial statements.
On January 1, 2020, we adopted ASC 326, which changed the impairment model for most financial assets and certain other
instruments from an "incurred loss" approach to a new "expected credit loss" methodology. We adopted ASC 326 using the
modified retrospective transition method. The amendment requires entities to consider a broader range of information to
estimate expected credit losses, which may result in earlier recognition of losses. Our adoption of ASC 326 resulted in a $0.7
million decrease to retained earnings as of January 1, 2020.
On January 1, 2020, we adopted ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the
Accounting for Goodwill Impairment", which removed the requirement to perform a hypothetical purchase price allocation to
measure goodwill impairment. Under the new standard, goodwill impairment is determined by evaluating the amount by which
a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The standard was
followed in the previously mentioned assessment of the ICG goodwill.
On January 1, 2019, we adopted Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”)
and related amendments using a modified retrospective approach with an effective date as of January 1, 2019. ASU 2016-02
requires leases with durations greater than 12 months to be recorded on balance sheet in our consolidated financial statements.
We elected the package of transition practical expedients, which allowed us to carry forward our historical assessment of (1)
whether contracts are or contain leases, (2) lease classification, and (3) initial direct costs. The adoption of ASU 2016-02 had no
impact on retained earnings. See Note 11 “Leases” for additional information about this adoption.
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848)”, as amended by ASU 2021-01 in
January 2021, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships,
and other transactions affected by the cessation of the London Interbank Offered Rate ("LIBOR") or by another reference rate
expected to be discontinued. The guidance was effective beginning March 12, 2020 and can be applied prospectively through
December 31, 2022. We are currently evaluating the effect that such new guidance will have on our consolidated financial
statements and related disclosures, but do not expect that the adoption will have a material impact on our consolidated financial
statements or related disclosures.
52
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Inventory and land held for sale
Major components of inventory at December 31, 2021 and 2020 were ($000’s omitted):
Homes under construction
Land under development
Raw land
2021
2020
$
4,225,309
$
3,086,740
4,091,015
731,245
4,137,318
497,740
$
9,047,569
$
7,721,798
In all periods presented, we capitalized all Homebuilding interest costs into inventory because the level of our active inventory
exceeded our debt levels. Activity related to interest capitalized into inventory is as follows ($000’s omitted):
Interest in inventory, beginning of period
Interest capitalized
Interest expensed
Interest in inventory, end of period
Years Ended December 31,
2020
2019
2021
$
$
193,409
$
210,383
$
129,380
(162,033)
159,575
(176,549)
227,495
164,114
(181,226)
160,756
$
193,409
$
210,383
Land-related charges
We recorded the following land-related charges ($000's omitted):
Net realizable value adjustments ("NRV")
- land held for sale
Land impairments
Write-offs of deposits and pre-acquisition
costs
Total land-related charges
Statement of
Operations
Classification
Land sale and other
cost of revenues
Home sale cost of
revenues
Other expense, net
2021
2020
2019
$
19
$
871
$
5,368
—
7,044
8,617
12,283
12,390
13,116
$
12,302
$
20,305
$
27,101
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 certain of our
communities, and potential changes in our strategy related to certain communities, actual results could differ significantly from
such estimates.
3. Segment information
Our Homebuilding operations are engaged in the acquisition and development of land primarily for residential purposes within
the U.S. and the construction of housing on such land. Home sale revenues for detached and attached homes were $11.2 billion
and $2.2 billion in 2021, $8.9 billion and $1.6 billion in 2020, and $8.3 billion and $1.6 billion in 2019, respectively. For
reporting purposes, our Homebuilding operations are aggregated into six reportable segments:
Northeast:
Southeast:
Florida:
Midwest:
Texas:
West:
Connecticut, Maryland, Massachusetts, New Jersey, Pennsylvania, Virginia
Georgia, North Carolina, South Carolina, Tennessee
Florida
Illinois, Indiana, Kentucky, Michigan, Minnesota, Ohio
Texas
Arizona, California, Colorado, Nevada, New Mexico, Washington
53
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
We also have a reportable segment for our Financial Services operations, which consist principally of mortgage banking, title,
and insurance brokerage 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.
Revenues:
Northeast
Southeast
Florida
Midwest
Texas
West
Financial Services
Consolidated revenues
Income before income taxes (a):
Northeast
Southeast (b)
Florida (c)
Midwest
Texas
West
Other homebuilding (d)
Financial Services
Operating Data by Segment ($000’s omitted)
Years Ended December 31,
2020
2021
2019
$
1,127,476
$
846,337
$
797,963
2,234,297
3,154,583
1,979,997
1,805,208
3,235,789
1,691,822
2,350,055
1,514,132
1,451,104
2,820,463
13,537,350
10,673,913
389,532
362,169
1,684,655
2,074,194
1,495,037
1,389,211
2,537,466
9,978,526
234,431
$ 13,926,882
$ 11,036,082
$ 10,212,957
$
215,193
$
136,985
$
417,880
585,680
285,825
322,979
594,976
(134,405)
2,288,128
221,717
258,794
362,276
213,017
242,383
424,803
116,221
175,763
309,596
184,438
195,751
386,361
(96,201)
(131,869)
1,542,057
186,637
1,236,261
103,315
Consolidated income before income taxes
$
2,509,845
$
1,728,694
$
1,339,576
(a)
(b)
(c)
(d)
Includes certain land-related charges (see the following table and Note 2).
Includes warranty charges totaling $14.8 million in 2019 related to a closed-out community (see Note 11).
Includes goodwill impairment charge totaling $20.2 million in 2020 (see Note 1).
Other homebuilding includes the amortization of intangible assets, amortization of capitalized interest, and other
items not allocated to the operating segments. Also included are insurance reserve reversals of $81.1 million, $93.4
million, and $49.4 million in 2021, 2020 and 2019, respectively, partially offset by reserves against insurance
receivables of $17.8 million and $22.6 million in 2020 and 2019, respectively (see Note 11) and a loss on debt
retirement of $61.5 million in 2021 (see Note 5).
54
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Operating Data by Segment ($000's omitted)
Years Ended December 31,
2020
2019
2021
Land-related charges*:
Northeast
Southeast
Florida
Midwest
Texas
West
Other homebuilding
$
1,433
$
5,301
$
5,365
1,088
2,150
1,357
909
—
3,815
1,395
2,390
4,588
1,936
880
1,122
15,697
2,811
2,581
1,151
2,568
1,171
$
12,302
$
20,305
$
27,101
* Land-related charges include land impairments, NRV 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 2 for additional discussion of these
charges.
Operating Data by Segment ($000's omitted)
Years Ended December 31,
2020
2019
2021
Depreciation and amortization:
Northeast
Southeast
Florida
Midwest
Texas
West
Other homebuilding
Financial Services
$
$
2,631
4,765
8,823
6,332
4,989
11,898
24,811
64,249
5,704
69,953
$
$
2,454
4,308
7,478
5,329
3,631
11,450
26,459
61,109
4,972
66,081
$
$
1,962
4,448
5,775
4,417
3,423
9,317
19,553
48,895
5,104
53,999
55
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Northeast
Southeast
Florida (a)
Midwest
Texas
West
Other homebuilding (b)
Financial Services
Northeast
Southeast
Florida (a)
Midwest
Texas
West
Other homebuilding (b)
Financial Services
Operating Data by Segment
($000's omitted)
December 31, 2021
Homes Under
Construction
Land Under
Development
Raw Land
Total
Inventory
Total
Assets
$
285,975
$
246,128
$
17,554
$
549,657
$
644,019
604,310
943,110
527,001
581,417
1,235,457
48,039
4,225,309
—
537,072
866,266
460,279
512,925
1,191,834
276,511
4,091,015
—
67,815
289,388
15,869
95,833
227,850
16,936
731,245
—
1,209,197
2,098,764
1,003,149
1,190,175
2,655,141
341,486
1,362,852
2,545,457
1,132,081
1,315,943
2,955,283
2,314,839
9,047,569
12,270,474
—
1,082,157
$
4,225,309
$
4,091,015
$
731,245
$
9,047,569
$ 13,352,631
December 31, 2020
Homes Under
Construction
Land Under
Development
Raw Land
Total
Inventory
Total
Assets
$
342,737
$
203,561
$
68,865
$
615,163
$
712,205
465,950
638,394
364,839
354,256
874,673
45,891
3,086,740
—
645,408
921,962
424,169
458,893
1,212,730
270,595
4,137,318
—
69,937
116,709
18,173
66,024
142,380
15,652
497,740
—
1,181,295
1,677,065
807,181
879,173
2,229,783
332,138
1,296,382
1,967,788
911,984
955,436
2,519,724
3,149,871
7,721,798
11,513,390
—
692,108
$
3,086,740
$
4,137,318
$
497,740
$
7,721,798
$ 12,205,498
(a)
(b)
Florida includes goodwill of $28.6 million at December 31, 2021 and 2020, net of a goodwill impairment charge of
$20.2 million recorded during 2020.
Other homebuilding primarily includes cash and equivalents, capitalized interest, intangibles, deferred tax assets,
and other corporate items that are not allocated to the operating segments.
4. Investments in unconsolidated entities
We participate in a number of joint ventures and other investments with independent third parties. These entities generally
purchase, develop, and sell land, including selling land to us for use in our homebuilding operations. Our investments in such
entities totaled $98.2 million and $35.6 million at December 31, 2021 and 2020, respectively. In 2021, 2020, and 2019, we
recognized earnings from unconsolidated joint ventures of $17.2 million, $1.9 million, and $0.7 million, respectively. We
received distributions from our unconsolidated joint ventures of $53.9 million, $27.9 million, and $0.2 million, in 2021, 2020,
and 2019, respectively. We made capital contributions to our unconsolidated joint ventures of $101.6 million, $0.8 million, and
$9.5 million in 2021, 2020, and 2019, respectively.
At December 31, 2021, aggregate outstanding debt of unconsolidated joint ventures was $63.9 million, of which $41.0 million
was related to one joint venture in which we have a 50% interest. In connection with this loan, we and our joint venture partner
provided customary limited recourse guaranties in which our maximum financial loss exposure is limited to our pro rata share
of the debt outstanding. The limited guaranties include, but are not limited to: (i) completion of certain aspects of the project;
56
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(ii) an environmental indemnity provided to the lender; and (iii) indemnification rights of the lender from certain specified acts
and omissions of the joint venture.
The timing of cash flows related to a joint venture and any related financing agreements varies by agreement (see Note 5). If
additional capital contributions are required and approved by the joint venture, 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 exposure related to joint
ventures is unlikely to exceed the combined investment and limited recourse guaranty totals.
5. Debt
Our notes payable are summarized as follows ($000’s omitted):
December 31,
2021
2020
4.250% unsecured senior notes due March 2021 (a)
$
— $
5.500% unsecured senior notes due March 2026 (a)
5.000% unsecured senior notes due January 2027 (a)
7.875% unsecured senior notes due June 2032 (a)
6.375% unsecured senior notes due May 2033 (a)
6.000% unsecured senior notes due February 2035 (a)
500,000
500,000
300,000
400,000
300,000
425,954
700,000
600,000
300,000
400,000
300,000
Net premiums, discounts, and issuance costs (b)
(11,142)
(13,750)
Total senior notes
Other notes payable
Notes payable
Estimated fair value
$
$
$
1,988,858
40,185
2,029,043
2,496,875
$
$
$
2,712,204
40,098
2,752,302
3,415,662
(a)
(b)
Redeemable prior to maturity; guaranteed on a senior basis by certain wholly-owned subsidiaries.
The carrying value of senior notes reflects the impact of premiums, discounts, and issuance costs that are amortized
to interest cost over the respective terms of the senior notes.
The indentures governing the senior notes impose certain restrictions on the incurrence of additional debt along with other
limitations. At December 31, 2021, we were in compliance with all of the covenants and requirements under the senior notes.
Other notes payable include non-recourse and limited recourse collateralized notes with third parties that totaled $40.2 million
and $40.1 million at December 31, 2021 and 2020, respectively. These notes have maturities ranging up to three years, are
secured by the applicable land positions to which they relate, and have no recourse to any other assets. The stated interest rates
on these notes range up to 6%. Such notes payable issued to acquire land inventory totaled $50.9 million, $52.0 million, and
$41.8 million in 2021, 2020, and 2019, respectively.
We retired outstanding debt totaling $836.9 million, $65.3 million, and $310.0 million during 2021, 2020, and 2019,
respectively. The retirements in 2021 included a tender offer to retire $200.0 million and $100.0 million of our unsecured notes
scheduled to mature in 2026 and 2027, respectively. We also retired $274.0 million of unsecured senior notes pursuant to a
tender offer in 2019. The retirements in 2021 and 2019 resulted in losses of $61.5 million and $4.9 million, respectively, which
included the write-off of debt issuance costs, unamortized discounts and premiums, and transaction fees related to the
repurchased debt, and which is reflected in other expense, net.
Revolving credit facility
We maintain a revolving credit facility ("Revolving Credit Facility") maturing in June 2023 that has a maximum borrowing
capacity of $1.0 billion and contains an uncommitted accordion feature that could increase the capacity to $1.5 billion, subject
to certain conditions and availability of additional bank commitments. The Revolving Credit Facility also provides for the
issuance of letters of credit that reduce the available borrowing capacity under the Revolving Credit Facility, with a sublimit of
$500.0 million at December 31, 2021. The interest rate on borrowings under the Revolving Credit Facility may be based on
57
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
either the London Interbank Offered Rate ("LIBOR") or a base rate plus an applicable margin, as defined therein. In the event
that LIBOR is no longer widely available, the agreement contemplates transitioning to an alternative widely available market
rate agreeable between the parties. As a precautionary measure during the initial phase of the COVID-19 pandemic, we made
the decision in March 2020 to draw $700.0 million under the Revolving Credit Facility. In June 2020, we repaid the full
outstanding balance of $700.0 million. We had no borrowings outstanding and $298.8 million and $249.7 million of letters of
credit issued under the Revolving Credit Facility at December 31, 2021 and 2020, respectively.
The Revolving Credit Facility contains financial covenants that require us to maintain a minimum Tangible Net Worth, a
minimum Interest Coverage Ratio, and a maximum Debt-to-Capitalization Ratio (as each term is defined in the Revolving
Credit Facility). As of December 31, 2021, we were in compliance with all covenants. Outstanding balances under the
Revolving Credit Facility are guaranteed by certain of our wholly-owned subsidiaries. Our available and unused borrowings
under the Revolving Credit Facility, net of outstanding letters of credit, amounted to $701.2 million and $750.3 million as of
December 31, 2021 and 2020, respectively.
Financial Services debt
Pulte Mortgage maintains a master repurchase agreement with third party lenders (the "Repurchase Agreement") that matures
on July 28, 2022. The maximum aggregate commitment was $650.0 million during the seasonally high borrowing period from
December 27, 2021 through January 13, 2022. At all other times, the maximum aggregate commitment ranges from $460.0
million to $550.0 million. 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 $626.1 million and $411.8
million outstanding under the Repurchase Agreement at December 31, 2021, and 2020, respectively, and was in compliance
with 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
December 31,
2021
650,000
23,877
$
$
2020
420,000
8,179
$
$
Weighted-average interest rate
2.37 %
2.55 %
6. Shareholders’ equity
We declared quarterly cash dividends totaling $148.1 million, $135.1 million, and $124.4 million in 2021, 2020, and 2019,
respectively. Under a share repurchase program authorized by our Board of Directors, we repurchased 17.7 million, 4.5 million,
and 8.4 million shares in 2021, 2020, and 2019, respectively, for a total of $897.3 million, $170.7 million, and $274.3 million in
2021, 2020, and 2019, respectively. At December 31, 2021, we had remaining authorization to repurchase $457.6 million of
common shares. This share repurchase authorization was increased by $1.0 billion on January 31, 2022.
Under our stock compensation plans, we accept shares as payment under certain conditions related to stock option exercises and
vesting of restricted shares and share units, generally related to the payment of tax obligations. During 2021, 2020, and 2019,
employees surrendered shares valued at $10.8 million, $14.9 million, and $11.5 million, respectively, under these plans. Such
share transactions are excluded from the above noted share repurchase authorization.
7. 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 share units ("RSUs"), and performance units to
key employees (as determined by the Compensation and Management Development Committee of the Board of Directors) for
periods not to exceed ten years. Non-employee directors are awarded an annual distribution of common shares. Options granted
to employees generally vest over four years and are generally exercisable for ten years from the vest date. RSUs represent the
right to receive an equal number of common shares and are converted into common shares upon distribution. RSUs generally
cliff vest after three years. 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 common shares upon
58
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
distribution. As of December 31, 2021, there were 22.6 million shares that remained available for grant under the plan. Our
stock compensation expense is presented below ($000's omitted):
RSUs and performance shares
Long-term incentive plans
Stock options
2021
25,192
11,553
$
2020
22,065
10,778
2019
21,538
$
6,830
36,745
$
32,843
$
28,368
$
$
We did not issue any stock options during 2021, 2020, or 2019 and stock options outstanding at December 31, 2021, 2020, and
2019 were de minimis. As a result, there is no unrecognized compensation cost related to stock option awards at December 31,
2021. 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 2019 was $10.5 million
and was de minimis in 2021 and 2020.
RSUs and performance units
A summary of RSUs and performance units is presented below (000’s omitted, except per share data):
2021
2020
2019
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
Outstanding, beginning of
year
Granted
Distributed
Forfeited
2,001
$
720
(642)
(84)
Outstanding, end of year
1,995
$
33
47
30
38
39
2,528
$
594
(952)
(169)
2,001
$
26
44
21
33
33
2,944
$
907
(1,179)
(144)
2,528
$
22
27
17
26
26
During 2021, 2020, and 2019, the total fair value of shares vested during the year was $30.5 million, $43.3 million, and $32.1
million, respectively. Unamortized compensation cost related to restricted share awards was $27.9 million at December 31,
2021. These costs will be expensed over a weighted-average period of approximately two years. Additionally, there were 0.2
million deferred shares at December 31, 2021, that had vested but had not yet been paid out because the payout date had been
deferred by the holders.
Long-term incentive plans
We maintain long-term incentive plans for senior management and other employees that provide awards based on the
achievement of stated performance targets over three-year periods. Awards are stated in dollars but are settled in common
shares based on the stock price at the end of the performance period. If the share 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 adjust the liabilities and recognize the expense
associated with the awards based on the probability of achieving the stated performance targets at each reporting period.
Liabilities for these awards totaled $22.6 million and $19.1 million at December 31, 2021 and 2020, respectively.
59
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. Income taxes
Components of current and deferred income tax expense (benefit) are as follows ($000’s omitted):
Current expense (benefit)
Federal
State and other
Deferred expense (benefit)
Federal
State and other
Income tax expense (benefit)
2021
2020
2019
$
$
$
$
$
430,686
73,671
504,357
57,743
1,425
59,168
563,525
$
$
$
$
$
159,677
24,580
184,257
116,484
21,114
137,598
321,855
$
$
$
$
$
196,186
21,252
217,438
74,700
30,738
105,438
322,876
The following table reconciles the statutory federal income tax rate to the effective income tax rate:
Income taxes at federal statutory rate
State and local income taxes, net of federal tax
Federal tax credits
Changes in tax laws, including the Tax Act
Deferred tax asset valuation allowance
Other
Effective rate
2021
2020
2019
21.0 %
21.0 %
21.0 %
3.3
(1.2)
—
(0.8)
0.2
3.3
(4.8)
—
(0.8)
(0.1)
3.7
(0.2)
0.2
(0.4)
(0.2)
22.5 %
18.6 %
24.1 %
The 2021 and 2020 effective tax rates differ from the federal statutory rate primarily due to state income tax expense and
benefits associated with federal energy efficient home credits, and changes in valuation allowances relating to projected
utilization of certain state net operating loss ("NOL") carryforwards. Income tax expense for 2021 and 2020 includes benefits
associated with the extension of federal energy efficient home credits, including $56.8 million in 2020 related to homes closed
in prior open tax years. This provision, which had previously expired in 2017, was extended to apply to homes closed through
December 31, 2021. The 2019 effective tax rate differs from the federal statutory rate primarily due to state income tax expense
on current year earnings, changes in valuation allowances relating to projected utilization of certain state NOL carryforwards,
and state tax law changes.
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:
Accrued insurance
Inventory valuation reserves
State NOL carryforwards
Other
Deferred tax liabilities:
Deferred income
Intangibles and other
Valuation allowance
Net deferred tax asset (liability)
60
At December 31,
2021
2020
$
132,386
$
135,703
62,806
144,746
73,506
413,444
(367,285)
(47,475)
(414,760)
(25,165)
$
(26,481) $
78,518
184,046
64,030
462,297
(313,170)
(46,595)
(359,765)
(69,813)
32,719
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
We have state NOLs in various jurisdictions which may generally be carried forward up to 20 years, depending on the
jurisdiction. Our state NOL carryforward deferred tax assets will expire if unused at various dates as follows: $28.6 million
from 2022 to 2026 and $116.1 million from 2027 and thereafter.
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, including, 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.
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.
Unrecognized tax benefits represent the difference between tax positions taken or expected to be taken in a tax return and the
benefits recognized for financial statement purposes. We had $22.5 million and $30.9 million of gross unrecognized tax
benefits at December 31, 2021 and 2020, respectively. If recognized, $17.8 million and $24.4 million, respectively, of these
amounts would impact our effective tax rate. Additionally, we had accrued interest and penalties of $2.9 million and $2.8
million at December 31, 2021 and 2020, respectively.
We do not expect the total amount of gross unrecognized tax benefits to increase or decrease by a material amount within the
next twelve months. A reconciliation of the change in the unrecognized tax benefits is as follows ($000’s omitted):
2021
2020
2019
Unrecognized tax benefits, beginning of period
$
30,855
$
40,300
$
Increases related to positions taken during a prior period
Decreases related to positions taken during a prior period
Increases related to positions taken during the current period
Decreases related to settlements with taxing authorities
Decreases related to lapse of the applicable statute of limitations
1,428
(8,896)
267
—
(1,118)
—
(12,981)
11,001
(7,465)
—
30,554
2,376
(7,918)
16,332
(1,044)
—
Unrecognized tax benefits, end of period
$
22,536
$
30,855
$
40,300
We continue to participate in the Compliance Assurance Process (“CAP”) with the IRS as an alternative to the traditional IRS
examination process. Through the CAP program, we work with the IRS to achieve tax compliance by resolving issues prior to
filing the tax return. We are also currently under examination by state taxing jurisdictions and anticipate finalizing certain of the
examinations within the next twelve months. The outcome of these examinations is not yet determinable, and we are not aware
of unrecorded liabilities. The statute of limitations for our major tax jurisdictions remains open for examination for tax years
2017 to 2021.
9. 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
61
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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 payable
Other notes payable
Fair Value
Fair Value
Hierarchy
December 31,
2021
December 31,
2020
Level 2
Level 2
Level 2
Level 2
Level 3
Level 1
Level 2
Level 2
Level 2
$
947,139
$
564,979
8,549
(579)
380
16,161
(5,436)
(498)
$
$
— $
582
1,833,565
$
2,632,235
626,123
2,456,690
40,185
411,821
3,375,564
40,098
Fair values for agency residential mortgage loans available-for-sale are determined based on quoted market prices for
comparable instruments. Fair values for non-agency residential mortgage loans available-for-sale are determined based on
purchase commitments from whole loan investors and other relevant market information available to management. Fair values
for interest rate lock commitments, including the value of servicing rights, and forward contracts on mortgage-backed securities
are valued based on market prices for similar instruments. Fair values for whole loan commitments are based on market prices
for similar instruments from the specific whole loan investor.
Certain assets are required to be recorded at fair value on a non-recurring basis when events and circumstances indicate that the
carrying value may not be recoverable. The non-recurring fair values included in the above table represent only those assets
whose carrying values were adjusted to fair value during the quarterly period ended 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, Other notes payable and the Revolving Credit Facility
approximate their fair values due to their short-term nature and floating interest rate terms. The fair values of the Senior notes
payable 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 the senior notes payable was $2.0 billion and $2.7 billion at
December 31, 2021 and 2020, respectively.
62
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. Other assets and accrued and other liabilities
Other assets are presented below ($000’s omitted):
Accounts and notes receivable:
Insurance receivables (Note 11)
Other receivables
Deposits and pre-acquisition costs (Note 1)
Prepaid expenses
Property and equipment, net (Note 1)
Right-of-use assets (Note 11)
Income taxes receivable
Other
December 31,
2021
2020
$
57,490
$
170,824
228,314
404,922
159,683
149,151
74,315
71,400
23,181
69,491
140,726
210,217
291,864
128,472
131,744
71,273
59,827
29,873
$
1,110,966
$
923,270
We record receivables from various parties in the normal course of business, including amounts due from insurance companies
(see Note 11) and municipalities. 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 11)
Compensation-related liabilities
Warranty liabilities (Note 11)
Lease liabilities (Note 11)
Accrued interest
Loan origination liabilities (Note 11)
Other
December 31,
2021
2020
$
627,067
$
261,096
107,117
92,663
42,591
12,381
433,563
641,779
218,013
82,744
91,365
50,950
11,969
310,223
$
1,576,478
$
1,407,043
63
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. Commitments and contingencies
Loan origination liabilities
Our mortgage operations may be responsible for losses associated with mortgage loans originated and sold to investors in the
event of errors or omissions relating to representations and warranties made by us that the loans met certain requirements,
including representations as to underwriting standards, the existence of primary mortgage insurance, and the validity of certain
borrower representations in connection with the loan. If a loan is determined to be faulty, we either indemnify the investor for
potential future losses, repurchase the loan from the investor, or reimburse the investor's actual losses. In addition, certain
trustees and investors continue to attempt to collect damages based on losses from loans that originated prior to 2009.
Estimating the required liability for these potential losses requires a significant level of management judgment. During 2020,
we increased our loan origination liabilities by $26.4 million based on settlements of a number of claims related to loans
originated prior to 2009. Reserves provided (released) are reflected in Financial Services expenses. Changes in these liabilities
were as follows ($000's omitted):
Liabilities, beginning of period
Reserves provided (released), net
Payments
Liabilities, end of period
2021
2020
2019
$
$
11,969
$
25,159
$
50,282
618
(206)
26,410
(39,600)
12,381
$
11,969
$
(225)
(24,898)
25,159
Given the unsettled claims, changes in values of underlying collateral over time, and other uncertainties regarding the ultimate
resolution of known and potential claims, actual costs could differ from our current estimates.
Community development and other special district obligations
A community development district (“CDD”) or similar development authority 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 and include our estimated obligations as part of our land development budgets.
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 $298.8 million and $1.8 billion, respectively, at December 31, 2021, and $249.7 million and
$1.5 billion, respectively, at December 31, 2020. In the event any such letter of credit or surety bonds is drawn, 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 drawn. 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.
Litigation and regulatory matters
We are involved in 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,
64
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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.
Warranty liabilities
Factors that affect our warranty liabilities include the number of homes sold, historical and anticipated rates of warranty claims,
and the projected cost of claims. 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 in warranty liabilities were as follows ($000’s omitted):
Warranty liabilities, beginning of period
Reserves provided
Payments
Other adjustments (a)
Warranty liabilities, end of period
2021
2020
2019
$
$
82,744
93,919
(73,760)
4,214
107,117
$
$
91,389
64,492
(70,869)
(2,268)
82,744
$
$
79,154
60,818
(75,635)
27,052
91,389
(a)
Includes charges totaling $14.8 million in 2019 related to a closed-out community in Southeast.
Self-insured risks
We maintain, and require our subcontractors to maintain, general liability insurance coverage. We also maintain builders' risk,
property, errors and omissions, workers compensation, and other business insurance coverage. These insurance policies protect
us against a portion of the risk of loss from claims. However, we retain a significant portion of the overall risk for such claims
either through our own self-insured per occurrence and aggregate retentions, deductibles, policies issued by our captive
insurance subsidiaries, and any potential claims in excess of available insurance policy limits.
Our general liability insurance includes coverage for certain construction defects. While construction defect claims may relate
to a variety of issues, the majority of our claims relate to alleged problems with siding, windows, roofing, and foundations. 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 retain significant per occurrence and aggregate retention levels. In
certain instances, we may offer our subcontractors the opportunity to purchase general liability insurance through one of our
captive insurance subsidiaries or participate in a project-specific insurance program. Policies issued by our captive insurance
subsidiaries represent self-insurance of these risks by us. This self-insured exposure is limited by reinsurance policies that we
purchase. General liability coverage for the homebuilding industry is complex, and our coverage varies from policy year to
policy year. Our insurance coverage requires a per occurrence retention up to an overall aggregate amount. Amounts paid to
resolve 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 the purchased coverage levels. Our insurance policies,
including the captive insurance subsidiaries' reinsurance policies, are maintained with highly-rated carriers for whom we
believe counterparty default risk is not significant.
At any point in time, we are managing approximately 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 these 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
65
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
estimates of the ultimate net cost of all unpaid losses, including estimates for incurred but not reported losses ("IBNR"). IBNR
represents losses related to claims incurred but not yet reported plus development on reported claims.
Our recorded reserves for all such claims totaled $627.1 million and $641.8 million at December 31, 2021 and 2020,
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 70% and 68% of the total general liability reserves at December 31, 2021 and
2020, 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.
Volatility in both national and local housing market conditions may affect the frequency and cost of construction defect claims.
Additionally, IBNR estimates comprise the majority of our liability and are subject to a high degree of uncertainty due to a
variety of factors, including changes in claims reporting and resolution patterns, third party recoveries, insurance industry
practices, the regulatory environment, and legal precedent. State regulations vary, but construction defect claims are reported
and resolved over an extended time period often exceeding ten years. Changes in the frequency and timing of reported claims
and estimates of specific claim values can impact the underlying inputs and trends utilized in the actuarial analyses, which
could have a material impact on the recorded reserves. Because of the inherent uncertainty in estimating future losses and the
timing of such losses related to these claims, actual costs could differ significantly from estimated costs.
Adjustments to reserves are recorded in the period in which the change in estimate occurs. During 2021, 2020, and 2019, we
reduced reserves, primarily general liability reserves, by $81.1 million, $93.4 million, and $49.4 million, respectively, as a
result of changes in estimates resulting from actual claim experience observed being less than anticipated in previous actuarial
projections. The changes in actuarial estimates were driven by changes in actual claims experience that, in turn, impacted
actuarial estimates for potential future claims. These changes in actuarial estimates did not involve any significant changes in
actuarial methodology but did impact the development of estimates for future periods, which resulted in adjustments to the
IBNR portion of our recorded liabilities. There were no material adjustments to individual claims. Rather, the adjustments
reflect an overall lower level of losses related to construction defect claims in recent years as compared with our previous
experience. We attribute this favorable experience to a variety of factors, including improved construction techniques, rising
home values, and increased participation from our subcontractors in resolving claims. 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
Adjustments to previously recorded reserves
Payments, net (a)
Balance, end of period
2021
2020
2019
$
641,779
$
709,798
$
737,013
90,863
(81,131)
(24,444)
83,912
(93,431)
(58,500)
83,209
(49,437)
(60,987)
$
627,067
$
641,779
$
709,798
(a)
Includes net changes in amounts expected to be recovered from our insurance carriers, which are recorded in other
assets (see below).
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. As
reflected in Note 10, our receivables from insurance carriers totaled $57.5 million and $69.5 million at December 31, 2021 and
2020, respectively. The insurance receivables relate to costs incurred or to be incurred to perform corrective repairs, settle
claims with customers, and other costs related to the continued progression of both known and anticipated future construction
defect claims that we believe to be insured related to previously closed homes. Given the complexity inherent with resolving
construction defect claims in the homebuilding industry as described above, there typically is a significant lag between our
payment of claims and our reimbursements from applicable insurance carriers. In addition, disputes between homebuilders and
carriers over coverage positions relating to construction defect claims are common. Resolution of claims with carriers takes
time, involves the exchange of significant amounts of information, and frequently involves legal action.
66
PULTEGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In 2020 and 2019, we recorded reserves against insurance receivables of $17.8 million and $22.6 million, respectively, in
connection with policy settlement negotiations with certain of our carriers. We believe collection of our recorded insurance
receivables is probable based on the legal merits of our positions after review by legal counsel, the high credit ratings of our
carriers, and our long history of collecting significant amounts of insurance reimbursements under similar insurance policies
related to similar claims. While the outcomes of these matters 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.
Leases
We lease certain office space and equipment for use in our operations. We recognize lease expense for these leases on a
straight-line basis over the lease term and combine lease and non-lease components for all leases. Right-of-use ("ROU") assets
and lease liabilities are recorded on the balance sheet for all leases with an expected term of at least one year. Some leases
include one or more options to renew. The exercise of lease renewal options is generally at our discretion. The depreciable lives
of ROU assets and leasehold improvements are limited to the expected lease term. Certain of our lease agreements include
rental payments based on a pro-rata share of the lessor’s operating costs, which are variable in nature. Our lease agreements do
not contain any residual value guarantees or material restrictive covenants.
ROU assets are classified within other assets on the balance sheet, while lease liabilities are classified within accrued and other
liabilities. Leases with an initial term of 12 months or less are not recorded on the balance sheet. ROU assets and lease
liabilities were $74.3 million and $92.7 million, respectively, at December 31, 2021, and $71.3 million and $91.4 million at
December 31, 2020, respectively. We recorded an additional $16.2 million and $13.0 million of lease liabilities under operating
leases during 2021 and 2020, respectively. Payments on lease liabilities during 2021 and 2020 totaled $20.8 million and $19.8
million, respectively.
Lease expense includes costs for leases with terms in excess of one year as well as short-term leases with terms of less than one
year. Our total lease expense was $43.3 million, $38.2 million, and $36.4 million during 2021, 2020, and 2019, respectively.
Our total lease expense in 2021 and 2020 is inclusive of variable lease costs of $7.7 million and $6.2 million, respectively, and
short-term lease costs of $14.2 million and $10.2 million, respectively. Sublease income was de minimis. The future minimum
lease payments required under our leases as of December 31, 2021 were as follows ($000's omitted):
Years Ending December 31,
2022
2023
2024
2025
2026
Thereafter
Total lease payments (a)
Less: Interest (b)
$
22,780
23,624
16,788
11,528
8,261
18,692
101,673
(9,010)
Present value of lease liabilities (c)
$
92,663
(a)
(b)
(c)
Lease payments include options to extend lease terms that are reasonably certain of being exercised and
exclude $3.0 million of legally binding minimum lease payments for leases signed but not yet commenced at
December 31, 2021.
Our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our discount
rate for such leases to determine the present value of lease payments at the lease commencement date.
The weighted average remaining lease term and weighted average discount rate used in calculating our
lease liabilities were 5.3 years and 5.5%, respectively, at December 31, 2021.
67
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of PulteGroup, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of PulteGroup, Inc. (the Company) as of December 31, 2021
and 2020, 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, 2021, and the related notes (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects,
the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2021, 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)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2021, 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 7, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the account or disclosures to which it relates.
68
Self-insured Risks
Description of the Matter The Company’s reserves for self-insured risks totaled $627.1 million at December 31,
How We Addressed the
Matter in Our Audit
2021, of which the majority relates to incurred but not reported (IBNR) losses
associated with exposures to construction defects on homes previously sold. As
discussed in Notes 1 and 11 of the consolidated financial statements, the Company
reserves for costs associated with construction defect claims (including IBNR losses and
expected claims management expense) based on actuarial analyses of the Company’s
historical claims activity. The actuarial analyses that determine the IBNR reserves
consider a variety of factors, which principally include the frequency and severity of
losses.
Auditing the Company’s IBNR reserve for construction defects is complex due to the
significant measurement uncertainty associated with the estimate, the use of various
actuarial methods, and management’s application of significant judgment. In addition,
the reserve estimate is sensitive to significant management assumptions, including the
frequency and severity assumptions used in the computation of the IBNR reserve and
loss development factors for reported claims.
We obtained an understanding, evaluated the design, and tested the operating
effectiveness of the Company’s controls that address the risks of material misstatement
relating to the measurement and valuation of the IBNR reserve. For example, we tested
controls over management’s review of the significant actuarial assumptions and the data
inputs used by management when estimating IBNR losses.
To test the IBNR reserve associated with construction defects exposures, our audit
procedures included, among others, testing the completeness and accuracy of the
underlying claims data used in management’s estimation calculations and reviewing the
Company’s reinsurance contracts by policy year to assess the Company’s self-insured
retentions, deductibles, and coverage limits, which represent inputs to the actuarial
models. Furthermore, we involved our actuarial specialists to assist in our assessment of
the methodologies used by management to estimate the IBNR reserve. We compared the
Company's self-insurance reserve (inclusive of the IBNR estimate) to a range developed
by our actuarial specialists based on independently selected assumptions.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1973.
Atlanta, Georgia
February 7, 2022
69
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 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, 2021.
Based upon, and as of the date of that evaluation, our President and Chief Executive Officer and Executive Vice President and
Chief Financial Officer concluded that the disclosure controls and procedures were effective as of December 31, 2021.
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, 2021. 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). Based on this assessment,
management asserts that the Company has maintained effective internal control over financial reporting as of December 31,
2021.
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, 2021.
70
(b)
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of PulteGroup, Inc.
Opinion on Internal Control over Financial Reporting
We have audited PulteGroup, Inc.’s internal control over financial reporting as of December 31, 2021, 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). In our opinion, PulteGroup, Inc. (the Company) maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, 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, 2021, and the related notes and our report dated February 7, 2022 expressed an unqualified opinion
thereon.
Basis for Opinion
The Company’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 are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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.
Definition and Limitations of Internal Control Over Financial Reporting
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.
/s/ Ernst & Young LLP
Atlanta, Georgia
February 7, 2022
71
(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, 2021 that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
This Item is not applicable.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
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 2022 Annual Meeting of Shareholders (“2022 Proxy Statement”),
which will be filed no later than 120 days after December 31, 2021, 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 2022 Proxy Statement under the caption “Delinquent Section 16(a)
Reports,” and is incorporated herein by this reference. Information required by this Item with respect to our code of ethics will
be contained in the 2022 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 2022 Proxy Statement under the captions “2021 Executive
Compensation” and “2021 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 STOCKHOLDER MATTERS
Information required by this Item will be contained in the 2022 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 2022 Proxy Statement under the captions “Certain Relationships and
Related Transactions” and “Board of Directors Information” and is incorporated herein by this reference.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information required by this Item will be contained in the 2022 Proxy Statement under the captions “Audit and Non-Audit
Fees” and “Audit Committee Preapproval Policies” and is incorporated herein by reference.
72
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, 2021 and 2020
Consolidated Statements of Operations for the years ended December 31, 2021, 2020, and 2019
Consolidated Statements of Comprehensive Income for the years ended December 31, 2021,
2020, and 2019
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2021, 2020,
and 2019
Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020, and 2019
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
40
41
42
43
44
45
68
(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) Amended and Restated By-laws of PulteGroup, Inc. (Incorporated by reference to Exhibit 3.2 of our
Current Report on Form 8-K, filed with the SEC on May 11, 2020)
(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)
(c)
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 PulteGroup, Inc.’s Current Report on Form 8-K, filed with the SEC on March
15, 2013)
73
(d)
(e)
(f)
Second Amendment to Amended and Restated Section 382 Rights Agreement, dated as of March 10, 2016,
between PulteGroup, Inc. and Computershare Trust Company, N.A., as rights agent (Incorporated by
reference to Exhibit 4.1 of PulteGroup, Inc.’s Current Report on Form 8-K, filed with the SEC on March
10, 2016)
Third Amendment to Amended and Restated Section 382 Rights Agreement, dated as of March 7, 2019,
between PulteGroup, Inc. and Computershare Trust Company, N.A., as rights agent (Incorporated by
reference to Exhibit 4.1 of PulteGroup, Inc.’s Current Report on Form 8-K, filed with the SEC on March 7,
2019)
Fourth Amendment to Amended and Restated Section 382 Rights Agreement, dated as of May 8, 2020,
between PulteGroup, Inc. and Computershare Trust Company, N.A., as rights agent (Incorporated by
reference to Exhibit 4.1 of PulteGroup, Inc.’s Current Report on Form 8-K, filed with the SEC on May 11,
2020)
(g) Description of the Registrant's Securities (Incorporated by reference to Exhibit 4(g) of our current report
on Form 10-K filed with the SEC on February 2, 2021)
(10)
(a)
(b)
(c)
(d)
PulteGroup, Inc. 401(k) Plan (Incorporated by reference to Exhibit 4.3 of our Registration Statement on
Form S-8, No. 333-115570)*
PulteGroup, Inc. 2019 Senior Management Incentive Plan (Incorporated by reference to Exhibit 10.1 of
our Current Report on Form 8-K, filed with the SEC on February 8, 2019)*
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)*
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)*
(e) Amendment Number One to the PulteGroup, Inc. 2013 Stock Incentive Plan dated February 10, 2017
(Incorporated by reference to Exhibit 10 of our Quarterly Report on Form 10-Q for the quarter ended
March 31, 2017)*
(f) Amendment Number Two to the PulteGroup, Inc. 2013 Stock Incentive Plan dated December 3, 2020
(Incorporated by reference to Exhibit 10(k) of our Annual Report on Form 10-K for the year ended
December 31, 2020 )*
(g)
(h)
(i)
(j)
(k)
(l)
Form of Restricted Stock Unit Award Agreement (as Amended) under PulteGroup, Inc. 2013 Stock
Incentive Plan (Incorporated by reference to Exhibit 10(k) of our Annual Report on Form 10-K for the year
ended December 31, 2017)*
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)*
PulteGroup, Inc. Deferred Compensation Plan For Non-Employee Directors, as amended and restated
effective as of December 31, 2021 (Filed herewith)*
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)*
PulteGroup, Inc. Amended Retirement Policy (Effective November 30, 2017) (Incorporated by reference
to Exhibit 10(u) of our Annual Report on Form 10-K for the year ended December 31, 2017)*
Second Amended and Restated Credit Agreement dated June 22, 2018 among PulteGroup, Inc., as
Borrower, Bank of America, N.A., as Administrative Agent, and the other Lenders party thereto
(Incorporated by reference to Exhibit 10.1 of PulteGroup, Inc.'s Current Report on Form 8-K, filed with
the SEC on June 22, 2018)
(m) First Amendment to Second Amended and Restated Credit Agreement dated as of July 30, 2021 among
PulteGroup, Inc., as Borrower, Bank of America, N.A., as Administrative Agent, and the other Lenders
party thereto (Incorporated by reference to Exhibit 10(b) of our Quarterly Report on Form 10-Q for the
quarter ended September 30, 2021)
(n) Amended and Restated Master Repurchase Agreement dated September 4, 2015, among Comerica Bank,
as Agent, Lead Arranger 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 8, 2015)
74
(o)
Second Amendment to Amended and Restated Master Repurchase Agreement dated June 24, 2016
(Incorporated by reference to Exhibit 10.1 of PulteGroup, Inc.'s Current Report on Form 8-K, filed with
the SEC on June 29, 2016)
(p) Third Amendment to Amended and Restated Master Repurchase Agreement dated August 15, 2016
(Incorporated by reference to Exhibit 10.1 of PulteGroup, Inc.'s Current Report on Form 8-K, filed with
the SEC on August 17, 2016)
(q)
(r)
(s)
Fourth Amendment to Amended and Restated Master Repurchase Agreement dated December 27, 2016
(Incorporated by reference to Exhibit 10.1 of PulteGroup, Inc.'s Current Report on Form 8-K, filed with
the SEC on December 29, 2016)
Fifth Amendment to Amended and Restated Master Repurchase Agreement dated August 14, 2017
(Incorporated by reference to Exhibit 10.1 of PulteGroup, Inc.'s Current Report on Form 8-K, filed with
the SEC on August 15, 2017)
Sixth Amendment to Amended and Restated Master Repurchase Agreement dated August 3, 2018
(Incorporated by reference to Exhibit 10.1 of PulteGroup, Inc.'s Current Report on Form 8-K, filed with
the SEC on August 9, 2018)
(t) Ninth Amendment to Amended and Restated Master Repurchase Agreement dated August 1, 2019
(Incorporated by reference to Exhibit 10.1 of PulteGroup, Inc.'s Current Report on Form 8-K, filed with
the SEC on August 5, 2019)
(u) Tenth Amendment to Amended and Restated Master Repurchase Agreement dated August 7, 2019
(Incorporated by reference to Exhibit 10.1 of PulteGroup, Inc.'s Current Report on Form 8-K, filed with
the SEC on August 9, 2019)
(v)
Second Amended and Restated Master Repurchase Agreement dated July 30, 2020, among Comerica
Bank, as Agent, Lead Arranger 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 August 3, 2020)
(w) Third Amended and Restated Master Repurchase Agreement, dated as of July 29, 2021, among Comerica
Bank, as Agent, Lead Arranger and a Buyer, the other Buyers party thereto and Pulte Mortgage LLC, as
Seller (incorporated by reference to Exhibit 10.1 of PulteGroup, Inc's Current Report on Form 8-K, filed
with the SEC on July 30, 2021)
(x) Release, Non-Competition, Non-Solicitation and Confidentiality Agreement by and between PulteGroup,
Inc. and Stephen Schlageter, dated as of May 8, 2020 (Incorporated by reference to Exhibit 10.1 of
PulteGroup Inc.'s Current Report on Form 8-K, filed with the SEC on May 11, 2020)*
Subsidiaries of the Registrant (Filed herewith)
List of Guarantor Subsidiaries (Filed herewith)
Consent of Independent Registered Public Accounting Firm (Filed herewith)
Power of Attorney (Filed herewith)
(a) Rule 13a-14(a) Certification by Ryan R. Marshall, 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 (Furnished herewith)
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(21)
(22)
(23)
(24)
(31)
(32)
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
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* Indicates a management contract or compensatory plan or arrangement
ITEM 16.
FORM 10-K SUMMARY
None.
76
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
PULTEGROUP, INC.
(Registrant)
February 7, 2022
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 capacities and on the date indicated:
February 7, 2022
/s/ Ryan R. Marshall
Ryan R. Marshall
/s/ Robert T. O'Shaughnessy
/s/ Brien P. O'Meara
President and Chief Executive Officer
(Principal Executive Officer) and
Member of Board of Directors
Robert T. O'Shaughnessy
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Brien P. O'Meara
Vice President and Controller
(Principal Accounting Officer)
Brian P. Anderson
Bryce Blair
Member of Board of Directors
Non-Executive Chairman of Board of
Directors
Richard W. Dreiling
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
J. Phillip Holloman
Member of Board of Directors
John R. Peshkin
Scott F. Powers
Lila Snyder
Member of Board of Directors
Member of Board of Directors
Member of Board of Directors
}
}
}
}
}
}
}
}
}
}
/s/ Robert T. O'Shaughnessy
Robert T. O'Shaughnessy
Executive Vice President and
Chief Financial Officer
77
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BOARD OF DIRECTORS, SENIOR LEADERSHIP AND
AREA MANAGEMENT
BOARD OF DIRECTORS
Brian P. Anderson (1)(4)
Former Chief Financial Officer
Baxter International Inc.
Bryce Blair (5)
Former Chairman of the Board and Chief Executive
Officer
AvalonBay Communities, Inc.
Richard W. Dreiling (2)(3)
Former Chairman of the Board and Chief Executive
Officer
Dollar General Corporation
Thomas J. Folliard (2)(3)
Former President and Chief Executive Officer
CarMax, Inc.
Cheryl W. Grisé (2)(3)
Former Executive Vice President
Northeast Utilities (now Eversource Energy)
André J. Hawaux (1)(4)
Former Executive Vice President and Chief Operating
Officer
Dick’s Sporting Goods, Inc.
J. Phillip Holloman (1)(4)
Former President and Chief Operating Officer
Cintas Corporation
Ryan R. Marshall (4)
President and Chief Executive Officer
PulteGroup, Inc.
John R. Peshkin (1)(4)
Founder and Managing Partner
Vanguard Land, LLC.
Scott F. Powers (2)(3)
Former President and Chief Executive Officer
State Street Global Advisors
Lila Snyder (1)(4)
Chief Executive Officer
Bose Corporation
(1) Audit Committee Member
(2) Compensation and Management Development
Committee Member
(3) Nominating and Governance Committee
Member
(4) Finance and Investment Committee Member
(5) Non-Executive Chairman
SENIOR LEADERSHIP
Ryan R. Marshall
President and Chief Executive Officer
John J. Chadwick
Executive Vice President and Chief Operating
Officer
Robert T. O’Shaughnessy
Executive Vice President and Chief Financial Officer
Todd N. Sheldon
Executive Vice President, General Counsel and
Corporate Secretary
David Beznos
Senior Vice President, Growth and Strategic
Partnerships
Michelle Hairston
Senior Vice President, Human Resources
Brandon K. Jones
Senior Vice President, Field Operations
James L. Ossowski
Senior Vice President, Finance
Anthony W. Barbee
Area President, North Area
Charles J. Tipton
Area President, Southeast Area
Richard H. McCormick
Area President, Florida Area
Stephen V. Teodecki
Area President, Texas Area
Scott R. Wright
Area President, West Area
Joseph L. Drouin
Vice President, Chief Information Officer
Kimberly M. Hill
Vice President, Tax and Assistant Secretary
D. Bryce Langen
Vice President and Treasurer
Brien P. O’Meara
Vice President and Controller
Manish M. Shrivastava
Vice President, Chief Marketing Officer
James P. Zeumer
Vice President, Investor Relations and
Corporate Communications
Debra W. Still
President and Chief Executive Officer
Pulte Financial Services
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
email the Investor Relations Department at InvestorRelations@PulteGroup.com.
Investor Inquiries
Shareholders, securities analysts, portfolio managers and others with inquiries about the Company should contact
Jim 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 pultegroup.com.
Annual Meeting of the Shareholders
The annual meeting of shareholders of PulteGroup, Inc. will be conducted virtually at 1:00 p.m. (EDT),
Wednesday, May 4, 2022, at www.virtualshareholdermeeting.com/PHM2022.
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.
PulteGroup, Inc.
3350 Peachtree Road N.E.
Suite 1500
Atlanta, GA 30326
www.pultegroup.com :: www.pulte.com :: www.centex.com :: www.delwebb.com :: www.divosta.com :: www.jwhomes.com