PulteGroup, Inc. announced financial results for its fourth quarter ended December 31, 2019. For the quarter, the Company reported net income of $336 million, or $1.22 per share. Adjusted net income for the period was $312 million, or $1.14 per share, after excluding $31 million of pre-tax benefit from an insurance reserve adjustment.

Reported net income for the fourth quarter of 2018 was $238 million, or $0.84 per share. Adjusted net income for the fourth quarter of 2018 was $314 million, or $1.11 per share, after excluding $85 million of pre-tax land charges and a $16 million pre-tax charge for a Financial Services reserve adjustment.

“As demonstrated by our 33% increase in orders, the recovery in housing demand that began earlier this year gained momentum through the fourth quarter as we realized strong sales across all buyer groups,” said Company President and CEO Ryan Marshall. “The quarter completes an outstanding year during which we continued to invest in growing our business, generated $1.1 billion in operating cash flow, returned $397 million to shareholders, paid down $310 million of homebuilder debt, and realized a 20.0% return on equity.”

“Strong demand for new homes is benefitting from favorable market dynamics including improved affordability in part due to low mortgage rates, high employment and consumer confidence, and a generally balanced inventory of new homes,” added Marshall. “The sustained strength in housing demand allowed us to deliver strong fourth quarter and full-year results, and has PulteGroup well positioned to increase delivery volumes, revenues, homebuilding gross margins and earnings in 2020.”

Fourth Quarter Results

Home sale revenues for the fourth quarter increased 1% over the fourth quarter of 2018 to $2.9 billion. Higher revenues for the period reflect a 2% increase in closings to 6,822 homes, partially offset by a less than 1% decrease in average sales price to $429,000.

Home sale gross margin for the fourth quarter was 22.8%, compared with prior year reported and adjusted gross margins of 21.5% and 23.8%, respectively.

Reported fourth quarter SG&A expense of $262 million, or 8.9% of home sale revenues, included a $31 million pre-tax benefit from an insurance reserve adjustment recorded in the period. Exclusive of this benefit, adjusted SG&A expense for the quarter was $293 million, or 10.0% of home sale revenues. SG&A expense for the fourth quarter of 2018 was $292 million, or 10.1% of home sale revenues.

Net new orders for the quarter increased 33% over the fourth quarter of 2018 to 5,691 homes as results benefitted from both increased community count and higher absorption pace. The value of net new orders increased 35% to $2.5 billion, up from $1.8 billion in the fourth quarter of 2018. Average community count for the fourth quarter was 865 communities, compared with 825 communities in the fourth quarter of 2018.

Unit backlog is up 20% over last year to 10,507 homes, while the backlog dollar value increased 18% to $4.5 billion. The decrease in the average price of homes in backlog reflects the Company’s efforts to modestly expand its first-time buyer business which typically carries a lower sales price.

Pre-tax income for the Company’s Financial Services operations was $34 million compared with $5 million in the fourth quarter of 2018. Results for the fourth quarter of 2018 included a $16 million pre-tax charge for a reserve adjustment recorded in the period. The increase in pre-tax income for the period also reflects a strong margin environment, higher loan volumes resulting from growth in the Company’s homebuilding operations and a higher mortgage capture rate. Capture rate for the fourth quarter increased to 84% from 77% last year.

During the quarter, the Company repurchased 0.8 million of its common shares for $30 million, or an average price of $39.16 per share. For the year, the Company repurchased 8.4 million common shares, or 3% of its outstanding shares, for $274 million, or an average price of $32.52 per share.

At year end, the Company had $1.2 billion of cash and a debt-to-total capitalization of 33.6%, which is down from 38.6% at the end of 2018.

Company Acquires Off-site Framing-Shell Manufacturer

In a separate press release, PulteGroup also announced today that it has acquired the assets of Innovative Construction Group (ICG), a leading off-site solutions provider focused on single family and multifamily wood framed construction. Based in Jacksonville, Florida, ICG’s comprehensive framing solutions include design services, manufactured wall panels, roof trusses and floor systems, and onsite installation to provide a full frame shell construction process. ICG will remain a stand-alone operation and continue serving its existing customer base and builder clients.

“In response to ongoing labor constraints which are impacting construction trades throughout the country, we have made the strategic decision to acquire off-site manufacturing capabilities that we believe can help us drive greater production efficiencies,” said Marshall. “We view this acquisition as a logical next step in the common plan management platform we have been advancing for years and see the potential to open comparable production plants in future years.”