PulteGroup, Inc. announced financial results for its second quarter ended June 30, 2018. For the quarter, the Company’s reported net income was $324 million, or $1.12 per share. Adjusted net income for the period was $259 million, or $0.89 per share, after excluding $38 million of pretax benefit associated with insurance reserve adjustments, $26 million of pretax land-sale gains, and $17 million of net tax benefits recorded during the period.

Reported net income for the prior year second quarter was $101 million, or $0.32 per share. Adjusted net income for the prior year period was $148 million, or $0.47 per share, after excluding $121 million of pretax charges associated with the decision to dispose of select non-core land assets, $8 million of net pretax benefit relating to warranty and insurance reserve adjustments, and $24 million of net tax benefits recorded during the period.

“Working against our defined strategic plan, our operating teams continue to do an outstanding job as revenues increased 25%, adjusted gross margin increased 60 basis points, and adjusted EPS surged 89%,” said Ryan Marshall, President and Chief Executive Officer of PulteGroup. “Given the operating and financial gains we have realized through the first half of 2018, and with almost 12,000 homes in backlog, we are well positioned to deliver outstanding full-year results.”

“We continue to see U.S. housing demand being supported by a number of positive market dynamics including an expanding economy, ongoing growth in jobs and wages, historically low unemployment, and sustained high levels of consumer confidence,” added Mr. Marshall. “With our strong land pipeline and ability to serve all primary buyer groups, we believe PulteGroup is well positioned to grow its business within this market environment, while continuing to generate high financial returns.”

Second Quarter Results

Home sale revenues for the second quarter increased 25% over the prior year to $2.5 billion. The increase in revenues for the period was driven by a 14% increase in deliveries to 5,741 homes, combined with a 10% increase in average sales price to $427,000.

Reported gross margin for the second quarter was 24.0%, which is 60 basis points higher than second quarter 2017 adjusted gross margin of 23.4%. Prior year adjusted gross margin excludes the impact of the land-related and warranty charges recorded in the period.

Reported SG&A expense for the second quarter of $226 million, or 9.2% of home sale revenues, includes the $38 million benefit relating to an insurance reserve adjustment recorded in the period. Exclusive of this benefit, adjusted SG&A expense for the quarter was $264 million, or 10.8% of home sale revenues. Adjusted SG&A expense for the prior year was $236 million, or 12.0% of home sale revenues, which excludes a $20 million benefit relating to an insurance reserve adjustment recorded in the period.

In the quarter, the Company recorded land sales gains totaling $27.3 million relating primarily to the sale of two land parcels that were completed in the period.

Net new orders for the second quarter declined less than 1.0% from the prior year to 6,341 homes. The dollar value of net new orders increased 3% to $2.7 billion. For the quarter, the Company operated out of 847 communities.

PulteGroup’s unit backlog increased 11% over the prior year to 11,845 homes. The value of homes in backlog increased 17% to $5.2 billion. The average sales price of homes in backlog is $439,000, which is 5% higher than last year’s average sales price in backlog.

Second quarter pretax income for the Company's financial services operations increased 9% over the prior year to $21 million. Financial services benefitted from higher homebuilder closing volumes and an increase in the average loan size. Mortgage capture rate for the quarter was 76%, compared with 79% in the prior year.

For the quarter, the Company reported $85 million of income tax expense, representing an effective tax rate of 20.8%. The Company’s tax rate for the quarter included the net benefit of $17 million of tax adjustments recorded in the period. Excluding this benefit, the Company’s effective tax rate would have been approximately 25%.

During the quarter, PulteGroup repurchased 1.7 million common shares for $53 million, or an average price of $30.07 per share.