What changed in this filing

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Item 1. Financial Statements

2021-10-26 compared with 2021-07-27 · 108 added, 102 removed, 578 unchanged (27% of the section changed)

3 unchanged sentences

($000’s omitted)

September 30,

2021 December 31,

24 unchanged sentences

(000’s omitted, except per share data)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

27 unchanged sentences

($000’s omitted)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

13 unchanged sentences

Earnings Total

Shareholders' equity, March 31, 2021 263,637 $ 2,636 $ 3,274,154 $ ( 120 ) $ 3,408,604 $ 6,685,274

Shareholders' equity, June 30, 2021 260,067 $ 2,600 $ 3,280,779 $ ( 95 ) $ 3,675,184 $ 6,958,468

Share issuances 1 — — — — —

5 unchanged sentences

Other comprehensive income — — — 25 — 25

Shareholders' equity, June 30, 2021 260,067 $ 2,600 $ 3,280,779 $ ( 95 ) $ 3,675,184 $ 6,958,468

Shareholders' equity, September 30, 2021 254,966 $ 2,550 $ 3,285,290 $ ( 70 ) $ 3,853,982 $ 7,141,752

Shareholders' equity, December 31, 2020 266,464 $ 2,665 $ 3,261,412 $ ( 145 ) $ 3,306,057 $ 6,569,989

7 unchanged sentences

Other comprehensive income — — — 75 — 75

Shareholders' equity, June 30, 2021 260,067 $ 2,600 $ 3,280,779 $ ( 95 ) $ 3,675,184 $ 6,958,468

Shareholders' equity, September 30, 2021 254,966 $ 2,550 $ 3,285,290 $ ( 70 ) $ 3,853,982 $ 7,141,752

PULTEGROUP, INC.

6 unchanged sentences

Earnings Total

Shareholders' equity, March 31, 2020 268,149 $ 2,681 $ 3,247,475 $ ( 220 ) $ 2,280,455 $ 5,530,391

Shareholders' equity, June 30, 2020 268,178 $ 2,682 $ 3,252,568 $ ( 195 ) $ 2,596,613 $ 5,851,668

Stock option exercises 1 — 12 — — 12

Share issuances 23 1 — — — 1

Dividends declared — — — — ( 32,446 ) ( 32,446 )

Cash paid for shares withheld for taxes — — — — ( 15 ) ( 15 )

Share-based compensation — — 4,358 — — 4,358

1 unchanged sentence

Other comprehensive income — — — 25 — 25

Shareholders' equity, June 30, 2020 268,178 $ 2,682 $ 3,252,568 $ ( 195 ) $ 2,596,613 $ 5,851,668

Shareholders' equity, September 30, 2020 268,179 $ 2,682 $ 3,256,938 $ ( 170 ) $ 2,980,565 $ 6,240,015

Shareholders' equity, December 31, 2019 270,235 $ 2,702 $ 3,235,149 $ ( 245 ) $ 2,220,574 $ 5,458,180

9 unchanged sentences

Other comprehensive income — — — 75 — 75

Shareholders' equity, June 30, 2020 268,178 $ 2,682 $ 3,252,568 $ ( 195 ) $ 2,596,613 $ 5,851,668

Shareholders' equity, September 30, 2020 268,179 $ 2,682 $ 3,256,938 $ ( 170 ) $ 2,980,565 $ 6,240,015

PULTEGROUP, INC.

1 unchanged sentence

($000’s omitted)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

64 unchanged sentences

Goodwill impairment

In accordance with ASC 350, management evaluates the recoverability of goodwill by comparing the carrying value of the Company’s reporting units to their fair value.

In accordance with Accounting Standards Codification ("ASC") 350, "Intangibles - Goodwill and Other", 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.

7 unchanged sentences

Other expense, net consists of the following ($000’s omitted):

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

9 unchanged sentences

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 deposits related to sold but undelivered homes, which totaled $ 731.0 million and $ 449.5 million at June 30, 2021 and December 31, 2020, respectively.

Contract liabilities include customer deposits related to sold but undelivered homes, which totaled $ 823.5 million and $ 449.5 million at September 30, 2021 and December 31, 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.

11 unchanged sentences

Insurance brokerage commissions relate to commissions on homeowner 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 $ 40.6 million and $ 38.5 million at June 30, 2021 and December 31, 2020, respectively.

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 $ 41.6 million and $ 38.5 million at September 30, 2021 and December 31, 2020, respectively.

Earnings per share

3 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Accounting Standards Codification ("ASC") 260, "Earnings Per Share", the two-class method determines earnings per share for each class of common stock and participating securities according to an earnings allocation formula that adjusts the Numerator for dividends or dividend equivalents and participation rights in undistributed earnings.

In accordance with ASC 260, "Earnings Per Share", the two-class method determines earnings per share for each class of common stock and participating securities according to an earnings allocation formula that adjusts the Numerator for dividends or dividend equivalents and participation rights in undistributed earnings.

Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and, therefore, are included in computing earnings per share pursuant to the two-class method.

1 unchanged sentence

The following table presents the earnings per common share (000's omitted, except per share data):

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

14 unchanged sentences

Substantially all of the loans originated by us are sold in the secondary mortgage market within a short period of time after origination, generally within 30 days.

At June 30, 2021 and December 31, 2020, residential mortgage loans available-for-sale had an aggregate fair value of $ 581.2 million and $ 565.0 million, respectively, and an aggregate outstanding principal balance of $ 561.2 million and $ 539.1 million, respectively.

Net gains from the sale of mortgages were $ 56.7 million and $ 66.3 million for the three months ended June 30, 2021 and 2020, respectively, and $ 134.2 million and $ 97.2 million for the six months ended June 30, 2021 and 2020, respectively, and have been included in Financial Services revenues.

At September 30, 2021 and December 31, 2020, residential mortgage loans available-for-sale had an aggregate fair value of $ 601.4 million and $ 565.0 million, respectively, and an aggregate outstanding principal balance of $ 586.4 million and $ 539.1 million, respectively.

Net gains from the sale of mortgages were $ 58.4 million and $ 76.6 million for the three months ended September 30, 2021 and 2020, respectively, and $ 192.6 million and $ 173.8 million for the nine months ended September 30, 2021 and 2020, respectively, and have been included in Financial Services revenues.

Derivative instruments and hedging activities

We are party to interest rate lock commitments ("IRLCs") with customers resulting from our mortgage origination operations.

At June 30, 2021 and December 31, 2020, we had aggregate IRLCs of $ 492.5 million and $ 367.2 million, respectively, which were originated at interest rates prevailing at the date of commitment.

At September 30, 2021 and December 31, 2020, we had aggregate IRLCs of $ 521.5 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

Forward contracts on mortgage-backed securities are

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 June 30, 2021 and December 31, 2020, we had unexpired forward contracts of $ 815.0 million and $ 686.4 million, respectively, and whole loan investor commitments of $ 208.7 million and $ 169.6 million, respectively.

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 September 30, 2021 and December 31, 2020, we had unexpired forward contracts of $ 843.0 million and $ 686.4 million, respectively, and whole loan investor commitments of $ 235.5 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.

3 unchanged sentences

The fair values of derivative instruments and their locations in the Condensed Consolidated Balance Sheets are summarized below ($000’s omitted):

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Other Assets Accrued and Other Liabilities Other Assets Accrued and Other Liabilities

6 unchanged sentences

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 June 30, 2021 and December 31, 2020, we reported $ 198.4 million and $ 176.2 million, respectively, of assets in-scope under Accounting Standards Codification 326, "Financial Instruments - Credit Losses" ("ASC 326").

At September 30, 2021 and December 31, 2020, we reported $ 194.5 million and $ 176.2 million, respectively, of assets in-scope under ASC 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 June 30, 2021.

Allowances on the aforementioned in-scope assets were not material as of September 30, 2021.

New accounting pronouncements

On January 1, 2021, we adopted ASU No.

On January 1, 2021, we adopted Accounting Standards Update ("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.

ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and 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.

11 unchanged sentences

Major components of inventory were as follows ($000’s omitted):

September 30,

2021 December 31,

6 unchanged sentences

Information related to interest capitalized into inventory is as follows ($000’s omitted):

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

13 unchanged sentences

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 June 30, 2021 or December 31, 2020 because we determined that we were not the VIEs' primary beneficiary.

No VIEs required consolidation at either September 30, 2021 or December 31, 2020 because we determined that we were not the VIEs' primary beneficiary.

Our maximum exposure to loss related to these VIEs is generally limited to our deposits and pre-acquisition costs under the land option agreements.

The following provides a summary of our interests in land option agreements as of June 30, 2021 and December 31, 2020 ($000’s omitted):

June 30, 2021 December 31, 2020

The following provides a summary of our interests in land option agreements as of September 30, 2021 and December 31, 2020 ($000’s omitted):

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021 December 31, 2020

Pre-acquisition

6 unchanged sentences

$ 354,288 $ 5,288,883 $ 291,864 $ 3,773,568

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Land-related charges

We recorded the following land-related charges ($000's omitted):

Three Months Ended Six Months Ended

June 30, 2021 June 30, 2020

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2020

Statement of Operations Classification 2021 2020 2021 2020

18 unchanged sentences

($000’s omitted)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

20 unchanged sentences

Consolidated income before income taxes $ 620,402 $ 484,167 $ 1,653,928 $ 1,204,944

(a) Includes goodwill impairment charge totaling $ 20.2 million (see Note 1 ) in the six months ended June 30, 2020.

(a) Includes goodwill impairment charge totaling $ 20.2 million (see Note 1 ) in the nine months ended September 30, 2020.

(b) Other homebuilding includes the amortization of intangible assets and capitalized interest and other items not allocated to the operating segments.

Other homebuilding also includes insurance adjustments of $ 46.2 million and $ 52.3 million for the three and six months ended June 30, 2021, respectively, and $ 60.7 million and $ 59.4 million for the three and six months ended June 30, 2020 (see Note 8 ).

Other homebuilding also includes a loss on debt retirement of $ 61.5 million in the six months ended June 30, 2021 (see Note 4 ).

Other homebuilding also includes insurance adjustments of $ 53.7 million and $ 59.4 million in the nine months ended September 30, 2021 and 2020, respectively (see Note 8 ).

Other homebuilding also includes a loss on debt retirement of $ 61.5 million in the nine months ended September 30, 2021 (see Note 4 ).

PULTEGROUP, INC.

2 unchanged sentences

($000’s omitted)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

11 unchanged sentences

($000's omitted)

June 30, 2021

September 30, 2021

Construction Land Under

34 unchanged sentences

Our notes payable are summarized as follows ($000’s omitted):

September 30,

2021 December 31,

20 unchanged sentences

(b) 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.

In the six months ended June 30, 2021, we 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.

In the nine months ended September 30, 2021, we 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 retirement resulted in a loss of $ 61.5 million, which includes the write-off of debt issuance costs, unamortized discounts and premiums, and transaction fees.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Other notes payable include notes with third parties that totaled $ 58.2 million and $ 40.1 million at June 30, 2021 and December 31, 2020, respectively.

Other notes payable include notes with third parties that totaled $ 71.4 million and $ 40.1 million at September 30, 2021 and December 31, 2020, respectively.

These notes have maturities ranging up to four years , are secured by the applicable land positions, and generally have no recourse to other assets.

2 unchanged sentences

We maintain a revolving credit facility (the "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 June 30, 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.

1 unchanged sentence

In June 2020, we repaid the full outstanding balance of $ 700.0 million.

As a result, we had no borrowings outstanding at both June 30, 2021 and December 31, 2020, and $ 260.9 million and $ 249.7 million of letters of credit issued under the Revolving Credit Facility at June 30, 2021 and December 31, 2020, respectively.

We had no borrowings outstanding at either September 30, 2021 or December 31, 2020, and $ 282.3 million and $ 249.7 million of letters of credit issued under the Revolving Credit Facility at September 30, 2021 and December 31, 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 June 30, 2021, we were in compliance with all covenants.

Our available and unused borrowings

under the Revolving Credit Facility, net of outstanding letters of credit, amounted to $ 739.1 million and $ 750.3 million at June 30, 2021 and December 31, 2020, respectively.

As of September 30, 2021, we were in compliance with all covenants.

Our available and unused borrowings under the Revolving Credit Facility, net of outstanding letters of credit, amounted to $ 717.7 million and $ 750.3 million at September 30, 2021 and December 31, 2020, respectively.

Financial Services debt

Pulte Mortgage maintains a master repurchase agreement with third party lenders (the "Repurchase Agreement") that matures on July 29, 2021.

The maximum aggregate commitment was $ 375.0 million at June 30, 2021, which continues through maturity.

Pulte Mortgage maintains a master repurchase agreement with third party lenders (as amended, the "Repurchase Agreement") that matures on July 28, 2022.

The maximum aggregate commitment was $ 580.0 million at September 30, 2021, which will increase to $ 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 $ 352.6 million and $ 411.8 million outstanding under the Repurchase Agreement at June 30, 2021 and December 31, 2020, respectively, and was in compliance with all of its covenants and requirements as of such dates.

Pulte Mortgage had $ 476.5 million and $ 411.8 million outstanding under the Repurchase Agreement at September 30, 2021 and December 31, 2020, respectively, and was in compliance with all of its covenants and requirements as of such dates.

Shareholders’ equity

In the six months ended June 30, 2021, we declared cash dividends totaling $ 74.1 million and repurchased 6.9 million shares under our repurchase authorization for $ 353.7 million.

In the six months ended June 30, 2020, we declared cash dividends totaling $ 65.1 million and repurchased 2.8 million shares under our repurchase authorization for $ 95.7 million.

In the nine months ended September 30, 2021, we declared cash dividends totaling $ 110.3 million and repurchased 12.0 million shares under our repurchase authorization for $ 614.3 million.

In the nine months ended September 30, 2020, we declared cash dividends totaling $ 97.5 million and repurchased 2.8 million shares under our repurchase authorization for $ 95.7 million.

On April 26, 2021, the Board of Directors approved an additional share repurchase authorization of $ 1.0 billion.

At June 30, 2021, we had remaining authorization to repurchase $ 1.0 billion of common shares.

At September 30, 2021, we had remaining authorization to repurchase $ 740.6 million of common shares.

Under our share-based compensation plans, we accept shares as payment under certain conditions related to stock option exercises and vesting of shares, generally related to the payment of minimum tax obligations.

In the six months ended June 30, 2021 and 2020, participants surrendered shares valued at $ 10.6 million and $ 14.9 million, respectively, under these plans.

In the nine months ended September 30, 2021 and 2020, participants surrendered shares valued at $ 10.6 million and $ 14.9 million, respectively, under these plans.

Such share transactions are excluded from the above noted share repurchase authorization.

Our effective tax rate for the three and six months ended June 30, 2021 was 21.3 % and 21.9 %, respectively, compared to 23.7 % and 23.4 %, respectively, for the same periods in 2020.

Our effective tax rate for each of these periods differs from the federal statutory rate primarily due to state income tax expense, partially offset by benefits associated with federal energy efficient home credits.

The effective tax rate for 2021 also reflects a reduction in valuation allowances relating to projected utilization of certain state net operating loss carryforwards.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At June 30, 2021 and December 31, 2020, we had net deferred tax assets of $ 27.9 million and $ 32.7 million, respectively.

Our effective tax rate for the three and nine months ended September 30, 2021 was 23.3 % and 22.4 %, respectively, compared to 14.0 % and 19.6 %, respectively, for the same periods in 2020.

Our effective tax rate for each of these periods differs from the federal statutory rate primarily due to state income tax expense and benefits associated with federal energy efficient home credits.

Income tax expense for the three and nine months ended September 30, 2020 includes benefits of $ 53.2 million and $ 58.0 million, respectively, associated with the extension of federal energy efficient homes tax credits, including to homes closed in prior open tax years.

The effective tax rate for the nine months ended September 30, 2021 also reflects a reduction in valuation allowances relating to projected utilization of certain state net operating loss carryforwards.

At September 30, 2021 and December 31, 2020, we had net deferred tax assets of $ 19.9 million and $ 32.7 million, respectively.

The accounting for deferred taxes is based upon estimates of future results.

2 unchanged sentences

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 $ 35.1 million and $ 30.9 million of gross unrecognized tax benefits at June 30, 2021 and December 31, 2020, respectively.

Additionally, we had accrued interest and penalties of $ 3.3 million and $ 2.8 million at June 30, 2021 and December 31, 2020, respectively.

We had $ 23.9 million and $ 30.9 million of gross unrecognized tax benefits at September 30, 2021 and December 31, 2020, respectively.

Additionally, we had accrued interest and penalties of $ 4.0 million and $ 2.8 million at September 30, 2021 and December 31, 2020, respectively.

Fair value disclosures

5 unchanged sentences

Our assets and liabilities measured or disclosed at fair value are summarized below ($000’s omitted):

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Financial Instrument Fair Value

Hierarchy Fair Value

September 30,

2021 December 31,

1 unchanged sentence

Residential mortgage loans available-for-sale Level 2 $ 601,408 $ 564,979

Interest rate lock commitments Level 2 14,793 16,161

IRLCs Level 2 11,670 16,161

Forward contracts Level 2 4,564 ( 5,436 )

9 unchanged sentences

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 IRLCs, 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.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

3 unchanged sentences

If quoted market prices are not available, fair values are based on quoted market prices of similar issues.

The carrying value of senior notes was $ 2.0 billion and $ 2.7 billion at June 30, 2021 and December 31, 2020, respectively.

The carrying value of senior notes was $ 2.0 billion and $ 2.7 billion at September 30, 2021 and December 31, 2020, respectively.

Commitments and contingencies

2 unchanged sentences

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 $ 260.9 million and $ 1.7 billion, respectively, at June 30, 2021 and $ 249.7 million and $ 1.5 billion, respectively, at December 31, 2020.

We had outstanding letters of credit and surety bonds totaling $ 282.3 million and $ 1.8 billion, respectively, at September 30, 2021 and $ 249.7 million and $ 1.5 billion, respectively, at December 31, 2020.

In the event any such letter of credit or surety bond is drawn, we would be obligated to reimburse the issuer of the letter of credit or surety bond.

3 unchanged sentences

We do not believe that a material amount, if any, of the letters of credit or surety bonds will be drawn.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Litigation and regulatory matters

15 unchanged sentences

Changes to warranty liabilities were as follows ($000’s omitted):

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

16 unchanged sentences

General liability coverage for the homebuilding industry is complex, and our coverage varies from policy year to policy year.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Our insurance coverage requires a per occurrence deductible up to an overall aggregate retention level.

2 unchanged sentences

Our insurance policies, including the captive insurance subsidiaries' reinsurance policies, are maintained with highly-rated underwriters for whom we believe counterparty default risk is not significant.

At any point in time, we are managing over 1,000 individual claims related to general liability, property, errors and omissions, workers' compensation, and other business insurance coverage.

At any point in time, we are managing approximately 1,000 individual claims related to general liability, property, errors and omissions, workers' compensation, and other business insurance coverage.

We reserve for costs associated with such claims (including expected claims management expenses) on an undiscounted basis at the time revenue is recognized for each home closing and periodically evaluate the recorded liabilities based on actuarial analyses of our historical claims.

1 unchanged sentence

IBNR represents losses related to claims incurred but not yet reported plus development on reported claims.

Our recorded reserves for all such claims totaled $ 620.6 million and $ 641.8 million at June 30, 2021 and December 31, 2020, respectively.

Our recorded reserves for all such claims totaled $ 624.7 million and $ 641.8 million at September 30, 2021 and December 31, 2020, respectively.

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 June 30, 2021 and December 31, 2020, respectively.

Liabilities related to IBNR and related claim expenses represented approximately 70 % and 68 % of the total general liability reserves at September 30, 2021 and December 31, 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.

4 unchanged sentences

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

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

coverage available for each policy period also impacts our 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.

We reduced general liability reserves by $ 49.1 million and $ 55.2 million during the three and six months ended June 30, 2021, respectively, and $ 60.7 million and $ 59.4 million during the three and six months ended June 30, 2020, respectively, as a result of changes in estimates resulting from actual claim experience being less than anticipated in previous actuarial projections.

We reduced general liability reserves by $ 56.6 million and $ 59.4 million in the nine months ended September 30, 2021 and 2020, respectively, as a result of changes in estimates resulting from actual claim experience 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.

2 unchanged sentences

Changes in these liabilities were as follows ($000's omitted):

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

7 unchanged sentences

Estimates of anticipated recoveries of our costs under various insurance policies or from subcontractors or other third parties are recorded when recovery is considered probable.

Such receivables are recorded in other assets and totaled $ 67.9 million and $ 69.5 million at June 30, 2021 and December 31, 2020, respectively.

Such receivables are recorded in other assets and totaled $ 67.8 million and

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

$ 69.5 million at September 30, 2021 and December 31, 2020, respectively.

Those receivables relate to costs incurred to perform corrective repairs, settle claims with customers, and other costs related to the continued progression of construction defect claims that we believe are insured.

12 unchanged sentences

Leases with an initial term of 12 months or less are not recorded on the balance sheet.

ROU assets and lease liabilities were $ 80.4 million and $ 99.0 million at June 30, 2021, respectively, and $ 71.3 million and $ 91.4 million at December 31, 2020, respectively.

In the three and six months ended June 30, 2021, we recorded an additional $ 12.0 million and $ 13.1 million of lease liabilities under operating leases, respectively, and $ 3.4 million and $ 13.0 million in the comparable prior year periods.

Payments on lease liabilities in the three and six months ended June 30, 2021 totaled $ 5.2 million and $ 10.5 million, respectively, and $ 4.2 million and $ 10.1 million in the comparable prior year periods.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ROU assets and lease liabilities were $ 78.0 million and $ 96.9 million at September 30, 2021, respectively, and $ 71.3 million and $ 91.4 million at December 31, 2020, respectively.

In the three and nine months ended September 30, 2021, we recorded an additional $ 2.1 million and $ 15.2 million of lease liabilities under operating leases, respectively, and $ 13.0 million in the nine months ended September 30, 2020.

Payments on lease liabilities in the three and nine months ended September 30, 2021 totaled $ 5.1 million and $ 15.6 million, respectively, and $ 4.8 million and $ 14.8 million in the comparable prior year periods.

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.

For the three and six months ended June 30, 2021, our total lease expense was $ 10.3 million and $ 20.6 million, respectively, and $ 8.8 million and $ 18.7 million in the comparable prior year periods.

Our total lease expense is inclusive of variable lease costs of $ 2.2 million and $ 4.0 million for the three and six months ended June 30, 2021, respectively, and $ 1.5 million and $ 3.4 million in the comparable prior year periods, as well as short-term lease costs of $ 3.1 million and $ 6.0 million for the three and six months ended June 30, 2021, respectively, and $ 1.8 million and $ 4.0 million in the comparable prior year periods.

For the three and nine months ended September 30, 2021, our total lease expense was $ 10.6 million and $ 31.2 million, respectively, and $ 9.6 million and $ 28.2 million in the comparable prior year periods.

Our total lease expense is inclusive of variable lease costs of $ 1.6 million and $ 5.6 million for the three and nine months ended September 30, 2021, respectively, and $ 1.5 million and $ 4.9 million in the comparable prior year periods, as well as short-term lease costs of $ 3.7 million and $ 9.7 million for the three and nine months ended September 30, 2021, respectively, and $ 2.6 million and $ 6.6 million in the comparable prior year periods.

Sublease income was de minimis.

The future minimum lease payments required under our leases as of June 30, 2021 were as follows ($000's omitted):

The future minimum lease payments required under our leases as of September 30, 2021 were as follows ($000's omitted):

Years Ending December 31,

2 unchanged sentences

Present value of lease liabilities (d)

(a) Remaining payments are for the six months ending December 31, 2021.

(a) Remaining payments are for the three months ended December 31, 2021.

(b) Lease payments include options to extend lease terms that are reasonably certain of being exercised.

There were $ 2.2 million of legally binding minimum lease payments for leases signed but not yet commenced at June 30, 2021.

There were $ 3.0 million of legally binding minimum lease payments for leases signed but not yet commenced at September 30, 2021.

Therefore, we must estimate our discount rate for such leases to determine the present value of lease payments at the lease commencement date.

(d) The weighted average remaining lease term and weighted average discount rate used in calculating our lease liabilities were 5.5 years and 5.54 %, respectively, at June 30, 2021.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(d) The weighted average remaining lease term and weighted average discount rate used in calculating our lease liabilities were 5.4 years and 5.53 %, respectively, at September 30, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements