INVESTOR PRESENTATION MAY 2013
Forward-Looking Statements
This presentation includes “forward-looking statements.” These statements are subject to a numb...
Presentation Agenda
• Signs of a Sustained Recovery in Housing
• PulteGroup
• Company Profile
• Improving Long-term Return...
DATA POINT TO A SUSTAINED RECOVERY IN HOUSING
4
Excess Supply Reduced Through
Years of Under Building
PulteGroupInvestorPresentation
Median = 1.5
HOUSING STARTS (000)
CUM...
A Clear Upturn in Housing Demand
PulteGroupInvestorPresentation
• March 2013 SAAR exceeds
400k new home sales
• New homes ...
Pent-up Demand Expected to Return…
NUMBER OF SHARED
HOUSEHOLDS (in thousands)
CHANGE IN NUMBER OF
HOUSEHOLDS (in millions)...
…While New Home Inventory is Limited
PulteGroupInvestorPresentation
0
100
200
300
400
500
600
2005 2006 2007 2008 2009 201...
OVERVIEW OF PULTEGROUP
9
PulteGroup Overview
• Among the nation’s largest
homebuilders with operations in
55 major metro markets
• Delivered over 6...
Broad Market Presence in Top Metro Markets
PulteGroupInvestorPresentation
11
31% 43% 26%
2012 CLOSINGS
Exposure Across All Major Customer Segments
INCREASED DEMAND AMONG MOVE-UP BUYERS IS SHIFTING MI...
• Expect ongoing recovery in
demand within buyer group
• Improving ability to sell current
home
• Demographics drive deman...
VALUE CREATION INITIATIVES DRIVING IMPROVED BUSINESS PERFORMANCE
14
• Financial goal is to drive improved returns on invested
capital over the housing cycle
• Value Creation initiatives focu...
• Reduction of direct house costs
• Manufacturing approach via
Common Plan Management
• New pricing model of base
house wi...
• 2012 SG&A lowered by
190 bps from prior year to
11.3% of home sale
revenues
• Q1 2013 SG&A of 11.8%
compared with 15.2% ...
• $1.4 billion in land spend
authorized for 2013 and 2014
• Disciplined land acquisitions
and divestitures
• Capital alloc...
• Q1 2013 cash balance of
$1.7 billion, up $183 million
from year-end
• On track to retire $1.0 billion
of debt since the ...
IMPACT OF VALUE CREATION INITIATIVES ON REPORTED FINANCIAL RESULTS
20
• Q1 earnings of $0.21 per
share up from prior year
loss of ($0.03) per share
• Home sale revenues up
35% to $1.1 billion
...
Q1 2013 Financial Highlights
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
2010 2011 2012 * 2013
Adj
* Adjusted for announc...
PulteGroupInvestorPresentation
Three Months Ended
March 31,
2013 2012
Homebuilding Home Sale Revenues ($ millions) $1,100 ...
PulteGroupInvestorPresentation
Q1 2013 Balance Sheet Analysis
($ millions)
March 31,
2013
December 31,
2012
Cash and Equiv...
PulteGroup: Well Positioned for Today and Tomorrow
• Focus on ROIC – improving fundamental performance in margins,
overhea...
Reconciliation of Non-GAAP Data
This presentation contains information about home sale gross margin reflecting certain adj...
Supplemental Non-GAAP Data – Adjusted Margin Analysis
Three Months Ended
March 31,
2013
December 31,
2012
September 30,
20...
Questions
28
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May 2013 Investor Presentation

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May 2013 Investor Presentation

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May 2013 Investor Presentation

  1. 1. INVESTOR PRESENTATION MAY 2013
  2. 2. Forward-Looking Statements This presentation includes “forward-looking statements.” These statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities, as well as those of the markets we serve or intend to serve, to differ materially from those expressed in, or implied by, these statements. You can identify these statements by the fact that they do not relate to matters of a strictly factual or historical nature and generally discuss or relate to forecasts, estimates or other expectations regarding future events. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “may,” “can,” “could,” “might,” “will” and similar expressions identify forward-looking statements, including statements related to expected operating and performing results, planned transactions, planned objectives of management, future developments or conditions in the industries in which we participate and other trends, developments and uncertainties that may affect our business in the future. Such risks, uncertainties and other factors include, among other things: interest rate changes and the availability of mortgage financing; continued volatility in the debt and equity markets; competition within the industries in which PulteGroup operates; the availability and cost of land and other raw materials used by PulteGroup in its homebuilding operations; the impact of any changes to our strategy in responding to continuing adverse conditions in the industry, including any changes regarding our land positions; the availability and cost of insurance covering risks associated with PulteGroup's businesses; shortages and the cost of labor; weather related slowdowns; slow growth initiatives and/or local building moratoria; governmental regulation directed at or affecting the housing market, the homebuilding industry or construction activities; uncertainty in the mortgage lending industry, including revisions to underwriting standards and repurchase requirements associated with the sale of mortgage loans; the interpretation of or changes to tax, labor and environmental laws; economic changes nationally or in PulteGroup’s local markets, including inflation, deflation, changes in consumer confidence and preferences and the state of the market for homes in general; legal or regulatory proceedings or claims; required accounting changes; terrorist acts and other acts of war; and other factors of national, regional and global scale, including those of a political, economic, business and competitive nature. See PulteGroup’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012, and other public filings with the Securities and Exchange Commission (the “SEC”) for a further discussion of these and other risks and uncertainties applicable to our businesses. PulteGroup undertakes no duty to update any forward-looking statement, whether as a result of new information, future events or changes in PulteGroup’s expectations. Certain statements in this presentation contain references to non-GAAP financial measures. A reconciliation of the non-GAAP financial measures to the comparable GAAP numbers is included in this presentation. PulteGroupInvestorPresentation 2
  3. 3. Presentation Agenda • Signs of a Sustained Recovery in Housing • PulteGroup • Company Profile • Improving Long-term Returns • Value Creation and Building a Better Business • Review of Q1 2013 Financial Results 3 PulteGroupInvestorPresentation
  4. 4. DATA POINT TO A SUSTAINED RECOVERY IN HOUSING 4
  5. 5. Excess Supply Reduced Through Years of Under Building PulteGroupInvestorPresentation Median = 1.5 HOUSING STARTS (000) CUMULATIVE EXCESS/DEFICIT (000) 5
  6. 6. A Clear Upturn in Housing Demand PulteGroupInvestorPresentation • March 2013 SAAR exceeds 400k new home sales • New homes sales bottomed at 306k in 2011, down 80% from peak • Industry experts forecasting • growth in 2013 and beyond • Favorable demographics and • pent-up demand • Low housing prices • Low interest rates • Rising rental rates 0 200 400 600 800 1,000 1,200 1,400 2005 2006 2007 2008 2009 2010 2011 2012 Mar-13 NEW HOME SALES (000) Source: U.S. Census Bureau; NAHB 6
  7. 7. Pent-up Demand Expected to Return… NUMBER OF SHARED HOUSEHOLDS (in thousands) CHANGE IN NUMBER OF HOUSEHOLDS (in millions) Source: U.S. Census Bureau; NAHB 7 PulteGroupInvestorPresentation
  8. 8. …While New Home Inventory is Limited PulteGroupInvestorPresentation 0 100 200 300 400 500 600 2005 2006 2007 2008 2009 2010 2011 2012 For Sale New Home Inventory (000) Source: U.S. Census Bureau; NAHB 8
  9. 9. OVERVIEW OF PULTEGROUP 9
  10. 10. PulteGroup Overview • Among the nation’s largest homebuilders with operations in 55 major metro markets • Delivered over 600,000 homes since being founded in Michigan in 1950 • Unique multi-brand strategy • to serve all major customer • groups • Unmatched presence in • active adult market through • Del Webb brand 10 PulteGroupInvestorPresentation
  11. 11. Broad Market Presence in Top Metro Markets PulteGroupInvestorPresentation 11
  12. 12. 31% 43% 26% 2012 CLOSINGS Exposure Across All Major Customer Segments INCREASED DEMAND AMONG MOVE-UP BUYERS IS SHIFTING MIX TOWARD PULTE HOMES 12 PulteGroupInvestorPresentation
  13. 13. • Expect ongoing recovery in demand within buyer group • Improving ability to sell current home • Demographics drive demand • Buyer group remains one of • the largest and most affluent • Almost 40% of Del Webb buyers pay cash for their homes PulteGroupInvestorPresentation Positive Market Opportunity for Active Adult 0 10 20 30 40 50 60 70 80 2010 2015 2020 70-74 65-69 60-64 55-59 U.S. POPULATION OVER AGE 55 (in millions) AGE 13
  14. 14. VALUE CREATION INITIATIVES DRIVING IMPROVED BUSINESS PERFORMANCE 14
  15. 15. • Financial goal is to drive improved returns on invested capital over the housing cycle • Value Creation initiatives focused on improving fundamental operations: • Expand homebuilding gross margin • Drive greater overhead leverage • Increase inventory turns • More effectively allocate capital • Actions are already having a meaningful impact on reported operating and financial results PulteGroupInvestorPresentation Strategy for Creating Greater Shareholder Value 15
  16. 16. • Reduction of direct house costs • Manufacturing approach via Common Plan Management • New pricing model of base house with options/upgrades • Emphasis on presales with managed spec production • Gross margins also benefiting from: • An improved demand and pricing environment • Shift in mix of closings to include more move-up homes PulteGroupInvestorPresentation Actions Driving Improved Gross Margins 18.7% 20.3% 21.6% 21.8% 22.9% 16% 17% 18% 19% 20% 21% 22% 23% 24% Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 ADJUSTED GROSS MARGINS * * Home Sale Gross Margin % Before Impairments & Interest Expense. See Supplemental Non-GAAP data for detail. 16
  17. 17. • 2012 SG&A lowered by 190 bps from prior year to 11.3% of home sale revenues • Q1 2013 SG&A of 11.8% compared with 15.2% in 2011 • Focus on volumes within existing communities can support additional upside leverage PulteGroupInvestorPresentation Working to Deliver Greater Overhead Leverage 10.0% 10.5% 11.0% 11.5% 12.0% 12.5% 13.0% 13.5% 2011 2012 SG&A COSTS AS PERCENT OF HOME SALE REVENUES 17
  18. 18. • $1.4 billion in land spend authorized for 2013 and 2014 • Disciplined land acquisitions and divestitures • Capital allocation and land investment practices aligned with ROIC focus • More formal risk weighting process in evaluating new investment • Greater emphasis on optioning rather than owning land positions • Build local market share PulteGroupInvestorPresentation Land Strategy Aligned with ROIC Goals 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 2010 2011 2012 Q1'13 Optioned Owned LOTS UNDER CONTROL 18
  19. 19. • Q1 2013 cash balance of $1.7 billion, up $183 million from year-end • On track to retire $1.0 billion of debt since the start of 2012 • Announced early redemption of 2014 maturities • Using excess cash on hand to fund redemption • Upon redemption, debt-to-cap expected to fall by 400 bps from 52% reported at end of Q1 2013 PulteGroupInvestorPresentation Building Greater Financial Flexibility DEBT MATURITY SCHEDULE ($ in millions) 19
  20. 20. IMPACT OF VALUE CREATION INITIATIVES ON REPORTED FINANCIAL RESULTS 20
  21. 21. • Q1 earnings of $0.21 per share up from prior year loss of ($0.03) per share • Home sale revenues up 35% to $1.1 billion • Adjusted gross margin up 420 bps to 22.9% • SG&A down 340 bps to 11.8% of home sale revenues Q1 2013 Financial Highlights PulteGroupInvestorPresentation 21 18.7% 20.3% 21.6% 21.8% 22.9% 16% 17% 18% 19% 20% 21% 22% 23% 24% Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 ADJUSTED GROSS MARGINS * * Home Sale Gross Margin % Before Impairments & Interest Expense. See Supplemental Non-GAAP data for detail.
  22. 22. Q1 2013 Financial Highlights $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0 2010 2011 2012 * 2013 Adj * Adjusted for announced redemption PulteGroupInvestorPresentation Senior Notes Outstanding ($ billions) • Net new orders up 4% to 5,200 homes; order dollars up 18% to $1.6 billion • Backlog value up 52% to $2.4 billion • Quarter-end cash of $1.7 billion, up $183 million from year-end • Net debt-to-cap down to 27% from 32% at year-end • Announced plans to redeem $399 million of senior notes in May 2013 22
  23. 23. PulteGroupInvestorPresentation Three Months Ended March 31, 2013 2012 Homebuilding Home Sale Revenues ($ millions) $1,100 $814 Homebuilding Pretax Income (Loss) ($ millions) $68 $(20) Backlog (Units) 7,825 5,798 Backlog (Dollar Value in millions) $2,414 $1,586 Financial Services Pretax Income ($ millions) $14 $7 Income (Loss) Before Income Taxes ($ millions) $82 $(13) Net Income (Loss) Per Share $0.21 ($0.03) Q1 2013 Selected Financial Data 23
  24. 24. PulteGroupInvestorPresentation Q1 2013 Balance Sheet Analysis ($ millions) March 31, 2013 December 31, 2012 Cash and Equivalents (including restricted cash) $1,660 $1,477 House and Land Inventory $4,113 $4,214 Senior Notes $2,512 $2,510 Shareholders’ Equity $2,276 $2,190 Debt – to – Cap 52% 53% Net Debt – to – Cap (adjusted for cash) 27% 32% 24
  25. 25. PulteGroup: Well Positioned for Today and Tomorrow • Focus on ROIC – improving fundamental performance in margins, overhead leverage, inventory turns and capital efficiency to drive improved returns on invested capital • Land Strategy – capitalizing on existing land portfolio; increasing planned investment to support future homebuilding operations • Unique Market Position – defined multi-brand strategy with leadership position in serving Baby Boomers • Balance Sheet – $1.7 billion in cash and flexibility to support current operations and future growth opportunities • Leadership – experienced leadership team focused on driving improvements in core homebuilding operations 25 PulteGroupInvestorPresentation
  26. 26. Reconciliation of Non-GAAP Data This presentation contains information about home sale gross margin reflecting certain adjustments. This measure is considered a non-GAAP financial measure under the SEC’s rules and should be considered in addition to, rather than as a substitute for, the comparable GAAP financial measure as a measure of our operating performance. Management and our local divisions use this measure in evaluating the operating performance of each community and in making strategic decisions regarding sales pricing, construction and development pace, product mix, and other daily operating decisions. We believe it is a relevant and useful measure to investors for evaluating our performance through gross profit generated on homes delivered during a given period and for comparing our operating performance to other companies in the homebuilding industry. Although other companies in the homebuilding industry report similar information, the methods used may differ. We urge investors to understand the methods used by other companies in the homebuilding industry to calculate gross margins and any adjustments thereto before comparing our measure to that of such other companies. The following table sets forth a reconciliation of this non-GAAP financial measure to the GAAP financial measure that management believes to be most directly comparable. PulteGroupInvestorPresentation 26
  27. 27. Supplemental Non-GAAP Data – Adjusted Margin Analysis Three Months Ended March 31, 2013 December 31, 2012 September 30, 2012 June 30, 2012 March 31, 2012 ($ thousands) Home sale revenues $ 1,099,752 $ 1,481,517 $ 1,232,704 $ 1,024,405 $ 813,786 Home sale cost of revenues 901,470 1,228,201 1,023,704 869,379 712,166 Home sale gross margin 198,282 253,316 209,000 155,026 101,620 Add: Impairments (a) - 2,250 385 633 3,700 Capitalized interest amortization (a) 53,677 67,880 57,155 52,070 47,186 Adjusted home sale gross margin $ 251,959 $ 323,446 $ 266,540 $ 207,729 $ 152,506 Home sale gross margin as a percentage of home sale revenues 18.0% 17.1% 17.0% 15.1% 12.5% Adjusted home sale gross margin as a percentage of home sale revenues 22.9% 21.8% 21.6% 20.3% 18.7% (a) Write-offs of capitalized interest related to impairments are reflected in capitalized interest amortization. 27
  28. 28. Questions 28
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