What changed in this filing

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Item 1. Financial Statements

2022-10-25 compared with 2022-07-26 · 107 added, 95 removed, 542 unchanged (27% of the section changed)

3 unchanged sentences

($000’s omitted)

September 30,

2022 December 31,

16 unchanged sentences

Financial Services debt 338,190 626,123

Revolving credit facility 319,000 —

Notes payable 2,045,167 2,029,043

6 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,

2022 2021 2022 2021

26 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,

2022 2021 2022 2021

12 unchanged sentences

Earnings Total

Shareholders' equity, March 31, 2022 239,622 $ 2,396 $ 3,309,912 $ ( 20 ) $ 4,100,976 $ 7,413,264

Shareholders' equity, June 30, 2022 232,570 $ 2,326 $ 3,319,150 $ — $ 4,423,740 $ 7,745,216

Share issuances 41 — — — — —

4 unchanged sentences

Net income — — — — 627,928 627,928

Other comprehensive income — — — 20 — 20

Shareholders' equity, June 30, 2022 232,570 $ 2,326 $ 3,319,150 $ — $ 4,423,740 $ 7,745,216

Shareholders' equity, September 30, 2022 228,232 $ 2,282 $ 3,325,790 $ — $ 4,835,931 $ 8,164,003

Shareholders' equity, December 31, 2021 249,326 $ 2,493 $ 3,290,791 $ ( 45 ) $ 4,196,276 $ 7,489,515

6 unchanged sentences

Other comprehensive income — — — 45 — 45

Shareholders' equity, June 30, 2022 232,570 $ 2,326 $ 3,319,150 $ — $ 4,423,740 $ 7,745,216

Shareholders' equity, September 30, 2022 228,232 $ 2,282 $ 3,325,790 $ — $ 4,835,931 $ 8,164,003

Capital Accumulated

2 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

See accompanying Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

($000’s omitted)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

12 unchanged sentences

Accounts payable, accrued and other liabilities 119,189 394,897

Net cash provided by operating activities 102,343 432,068

Net cash provided by (used in) operating activities ( 303,925 ) 548,225

Cash flows from investing activities:

9 unchanged sentences

Repayments under revolving credit facility ( 1,606,000 ) —

Financial Services repayments, net ( 183,307 ) ( 59,193 )

Financial Services borrowings (repayments), net ( 287,933 ) 64,684

Debt issuance costs ( 11,167 ) —

34 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,

2022 2021 2022 2021

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 $ 1.0 billion and $ 844.8 million at June 30, 2022 and December 31, 2021, respectively.

Contract liabilities include customer deposits related to sold but undelivered homes, which totaled $ 979.5 million and $ 844.8 million at September 30, 2022 and December 31, 2021, 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.

13 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 $ 49.5 million and $ 44.3 million at June 30, 2022 and December 31, 2021, respectively.

Our performance obligations for policy renewal commissions are considered satisfied upon issuance of the initial policy.

The related contract assets for estimated future renewal commissions are included in other assets and totaled $ 51.6 million and $ 44.3 million at September 30, 2022 and December 31, 2021, respectively.

Earnings per share

7 unchanged sentences

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,

2022 2021 2022 2021

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, 2022 and December 31, 2021, residential mortgage loans available-for-sale had an aggregate fair value of $ 553.8 million and $ 947.1 million, respectively, and an aggregate outstanding principal balance of $ 553.9 million and $ 924.5 million, respectively.

Net gains from the sale of mortgages were $ 45.1 million and $ 56.7 million for the three months ended June 30, 2022 and 2021, respectively, and $ 97.5 million and $ 134.2 million for the six months ended June 30, 2022 and 2021, respectively, and have been included in Financial Services revenues.

At September 30, 2022 and December 31, 2021, residential mortgage loans available-for-sale had an aggregate fair value of $ 438.2 million and $ 947.1 million, respectively, and an aggregate outstanding principal balance of $ 454.7 million and $ 924.5 million, respectively.

Net gains from the sale of mortgages were $ 34.4 million and $ 58.4 million for the three months ended September 30, 2022 and 2021, respectively, and $ 131.9 million and $ 192.6 million for the nine months ended September 30, 2022 and 2021, 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, 2022 and December 31, 2021, we had aggregate IRLCs of $ 1.5 billion and $ 337.9 million, respectively, which were originated at interest rates prevailing at the date of commitment.

At September 30, 2022 and December 31, 2021, we had aggregate IRLCs of $ 1.3 billion and $ 337.9 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.

2 unchanged sentences

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, 2022 and December 31, 2021, we had unexpired forward contracts of $ 1.7 billion and $ 903.0 million, respectively, and whole loan investor commitments of $ 316.2 million and $ 310.0 million, respectively.

At September 30, 2022 and December 31, 2021, we had unexpired forward contracts of $ 1.5 billion and $ 903.0 million, respectively, and whole loan investor commitments of $ 270.9 million and $ 310.0 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.

5 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, 2022 December 31, 2021

September 30, 2022 December 31, 2021

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

3 unchanged sentences

$ 71,103 $ 23,655 $ 9,723 $ 1,373

Mortgage interest rates in the United States increased significantly during the nine months ended September 30, 2022.

Due to the time between entering contracts and the subsequent closing of the underlying homes and related mortgage loans with customers, the increase in rates has resulted in a significant decrease in the value of our IRLCs with generally offsetting increases in the value of our forward contracts and whole loan commitments.

Credit losses

1 unchanged sentence

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, 2022 and December 31, 2021, we reported $ 199.9 million and $ 208.4 million, respectively, of assets in-scope under ASC 326, "Financial Instruments - Credit Losses".

At September 30, 2022 and December 31, 2021, we reported $ 215.9 million and $ 208.4 million, respectively, of assets in-scope under ASC 326, "Financial Instruments - Credit Losses".

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, 2022.

Allowances on the aforementioned in-scope assets were not material as of September 30, 2022.

New accounting pronouncements

4 unchanged sentences

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

September 30,

2022 December 31,

8 unchanged sentences

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,

2022 2021 2022 2021

12 unchanged sentences

We record any such write-offs of deposits and pre-acquisition costs within other expense, net.

We recorded $ 4.5 million and $ 1.9 million of such charges during the three months ended June 30, 2022 and 2021, respectively, and $ 8.0 million and $ 3.2 million during the six months ended June 30, 2022 and 2021, respectively.

We recorded $ 24.5 million and $ 3.6 million of such charges during the three months ended September 30, 2022 and 2021, respectively, and $ 32.5 million and $ 6.8 million during the nine months ended September 30, 2022 and 2021, respectively.

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, 2022 or December 31, 2021 because we determined that we were not any VIE's primary beneficiary.

No VIEs required consolidation at either September 30, 2022 or December 31, 2021 because we determined that we were not any VIE's 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, 2022 and December 31, 2021 ($000’s omitted):

June 30, 2022 December 31, 2021

The following provides a summary of our interests in land option agreements as of September 30, 2022 and December 31, 2021 ($000’s omitted):

September 30, 2022 December 31, 2021

Pre-acquisition

22 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,

2022 2021 2022 2021

21 unchanged sentences

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

Other homebuilding also includes insurance reserve reversals of $ 49.1 million and $ 55.2 million for the three and six months ended June 30, 2021, respectively (see Note 8 ), and 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 reserve reversals of $ 56.6 million and a loss on debt retirement of $ 61.5 million in the nine months ended September 30, 2021 (see Note 8 and Note 4 , respectively).

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,

2022 2021 2022 2021

11 unchanged sentences

($000's omitted)

June 30, 2022

September 30, 2022

Construction Land Under

34 unchanged sentences

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

September 30,

2022 December 31,

18 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 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.

In the nine months ended September 30, 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 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.

2 unchanged sentences

Other notes payable

Other notes payable include non-recourse and limited recourse notes with third parties that totaled $ 40.5 million and $ 40.2 million at June 30, 2022 and December 31, 2021, respectively.

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

Other notes payable include non-recourse and limited recourse notes with third parties that totaled $ 55.2 million and $ 40.2 million at September 30, 2022 and December 31, 2021, respectively.

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

The stated interest rates on these notes range up to 6 %.

Such notes payable issued to acquire land inventory totaled $ 4.5 million and $ 29.4 million in the six months ended June 30, 2022 and 2021, respectively.

Such notes payable issued to acquire land inventory totaled $ 19.9 million and $ 42.6 million in the nine months ended September 30, 2022 and 2021, respectively.

Revolving credit facility

3 unchanged sentences

The Revolving Credit Facility also provides for the issuance of letters of credit that reduce the available borrowing capacity under the Revolving Credit Facility, up to the maximum borrowing capacity.

The interest rate on borrowings under the Revolving Credit Facility may be based on either the Secured Overnight Financing Rate ("SOFR") or a base rate plus an applicable margin, as defined therein.

We had no borrowings outstanding at either June 30, 2022 or December 31, 2021, and $ 347.0 million and $ 298.8 million of letters of credit issued under the Revolving Credit Facility at June 30, 2022 and December 31, 2021, respectively.

The interest rate on borrowings under the Revolving Credit Facility may be based on either the Secured Overnight Financing Rate or a base rate plus an applicable margin, as defined therein.

The Revolving Credit Facility contains financial covenants that require us to maintain a minimum Tangible Net Worth and a maximum Debt-to-Capitalization Ratio (as each term is defined in the Revolving Credit Facility).

As of June 30, 2022, 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 $ 903.0 million and $ 701.2 million at June 30, 2022 and December 31, 2021, respectively.

As of September 30, 2022, we were in compliance with all covenants.

At September 30, 2022, we had $ 319.0 million borrowings outstanding, $ 340.7 million of letters of credit issued, and $ 590.3 million of remaining capacity under the Revolving Credit Facility.

At December 31, 2021, we had no borrowings outstanding, $ 298.8 million of letters of credit issued, and $ 701.2 million of remaining capacity under the Revolving Credit Facility.

Joint venture debt

At June 30, 2022, aggregate outstanding debt of unconsolidated joint ventures was $ 70.7 million, of which $ 42.4 million was related to one joint venture in which we have a 50 % interest.

At September 30, 2022, aggregate outstanding debt of unconsolidated joint ventures was $ 70.7 million, of which $ 42.0 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.

1 unchanged sentence

Pulte Mortgage maintains a master repurchase agreement with third-party lenders (as amended, the "Repurchase Agreement") that matures on July 27, 2023.

The maximum aggregate commitment was $ 550.0 million at June 30, 2022, which continues through maturity.

The maximum aggregate commitment was $ 655.0 million at September 30, 2022, which will increase to $ 800.0 million during the seasonally high borrowing period from December 27, 2022 to January 12, 2023.

Thereafter, the maximum aggregate commitment ranges from $ 360.0 million to $ 500.0 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 $ 442.8 million and $ 626.1 million outstanding under the Repurchase Agreement at June 30, 2022 and December 31, 2021, respectively, and was in compliance with all of its covenants and requirements as of such dates.

Pulte Mortgage had $ 338.2 million and $ 626.1 million outstanding under the Repurchase Agreement at September 30, 2022 and December 31, 2021, 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, 2022, we declared cash dividends totaling $ 72.0 million and repurchased 17.4 million shares under our repurchase authorization for $ 794.2 million.

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 nine months ended September 30, 2022, we declared cash dividends totaling $ 106.7 million and repurchased 21.8 million shares under our repurchase authorization for $ 974.7 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.

On January 31, 2022, the Board of Directors increased our share repurchase authorization by $ 1.0 billion.

At June 30, 2022, we had remaining authorization to repurchase $ 663.3 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, 2022 and 2021, participants surrendered shares valued at $ 13.6 million and $ 10.6 million, respectively, under these plans.

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

At September 30, 2022, we had remaining authorization to repurchase $ 482.9 million of common shares.

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

In the nine months ended September 30, 2022 and 2021,

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Our effective tax rate in the three and six months ended June 30, 2022 was 24.5 % and 24.4 %, respectively, compared to 21.3 % and 21.9 %, respectively, for the same periods in 2021.

Our effective tax rate for each of these periods differs from the federal statutory rate primarily due to state income tax expense.

The 2021 tax rate also included a benefit for federal energy efficient home credits, which expired at December 31, 2021, and a reduction in valuation allowances relating to projected utilization of certain state net operating loss carryforwards.

At June 30, 2022 and December 31, 2021, we had net deferred tax liabilities of $ 47.3 million and $ 26.5 million, respectively.

participants surrendered shares valued at $ 14.3 million and $ 10.6 million, respectively, under these plans.

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

Our effective tax rate in the three and nine months ended September 30, 2022 was 22.6 % and 23.8 %, respectively, compared to 23.3 % and 22.4 %, respectively, for the same periods in 2021.

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.

On August 16, 2022, the Inflation Reduction Act of 2022 (the "Inflation Reduction Act") was signed into law.

Notably, the Inflation Reduction Act retroactively extended the federal energy efficient home credits to January 1, 2022.

Income tax expense for the three and nine months ended September 30, 2022 includes a benefit of $ 20.7 million associated with the extension of the federal energy efficient home tax credits.

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

At September 30, 2022 and December 31, 2021, we had net deferred tax liabilities of $ 70.0 million and $ 26.5 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 $ 23.7 million and $ 22.5 million of gross unrecognized tax benefits at June 30, 2022 and December 31, 2021, respectively.

Additionally, we had accrued interest and penalties of $ 3.4 million and $ 2.9 million at June 30, 2022 and December 31, 2021, respectively.

We had $ 23.5 million and $ 22.5 million of gross unrecognized tax benefits at September 30, 2022 and December 31, 2021, respectively.

Additionally, we had accrued interest and penalties of $ 3.8 million and $ 2.9 million at September 30, 2022 and December 31, 2021, respectively.

Fair value disclosures

4 unchanged sentences

Level 3 Fair value determined using significant unobservable inputs, such as pricing models, discounted cash flows, or similar techniques.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

1 unchanged sentence

Hierarchy Fair Value

September 30,

2022 December 31,

7 unchanged sentences

Financial Services debt Level 2 338,190 626,123

Revolving credit facility Level 2 319,000 —

Senior notes payable Level 2 1,945,150 2,456,690

1 unchanged sentence

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

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

purchase commitments from whole loan investors and other relevant market information available to management.

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 IRLCs, including the value of servicing rights, and forward contracts on mortgage-backed securities are valued based on market prices for similar instruments.

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 at both June 30, 2022 and December 31, 2021 .

The carrying value of senior notes was $ 2.0 billion at both September 30, 2022 and December 31, 2021 .

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 $ 347.0 million and $ 2.1 billion, respectively, at June 30, 2022 and $ 298.8 million and $ 1.8 billion, respectively, at December 31, 2021.

We had outstanding letters of credit and surety bonds totaling $ 340.7 million and $ 2.2 billion, respectively, at September 30, 2022 and $ 298.8 million and $ 1.8 billion, respectively, at December 31, 2021.

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.

5 unchanged sentences

We are involved in various 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, and protection of the environment.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

practices, 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.

12 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,

2022 2021 2022 2021

20 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.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

2 unchanged sentences

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

Our recorded reserves for all such claims totaled $ 652.7 million and $ 627.1 million at June 30, 2022 and December 31, 2021, respectively.

Our recorded reserves for all such claims totaled $ 679.3 million and $ 627.1 million at September 30, 2022 and December 31, 2021, 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 74 % and 70 % of the total general liability reserves at June 30, 2022 and December 31, 2021, respectively.

Liabilities related to IBNR and related claim expenses represented approximately 70 % of the total general liability reserves at both September 30, 2022 and December 31, 2021.

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, 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 during the nine months ended September 30, 2021 as a result of changes in estimates resulting from actual claim experience being less than anticipated in previous actuarial projections.

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.

1 unchanged sentence

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,

2022 2021 2022 2021

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 $ 49.2 million and $ 57.5 million at June 30, 2022 and December 31, 2021, respectively.

Such receivables are recorded in other assets and totaled $ 49.2 million and $ 57.5 million at September 30, 2022 and December 31, 2021, 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.

2 unchanged sentences

Resolution of claims involves the exchange of significant amounts of information and frequently involves legal action.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

We lease certain office space and equipment for use in our operations.

8 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 $ 70.8 million and $ 87.2 million at June 30, 2022, respectively, and $ 74.3 million and $ 92.7 million at December 31, 2021, respectively.

In the three and six months ended June 30, 2022, we recorded an additional $ 3.7 million and $ 4.2 million, respectively, of lease liabilities under operating leases, and $ 12.0 million and $ 13.1 million in the comparable prior year periods.

Payments on lease liabilities in the three and six months ended June 30, 2022 totaled $ 5.6 million and $ 11.1 million, respectively, and $ 5.2 million and $ 10.5 million in the comparable prior year periods.

ROU assets and lease liabilities were $ 69.3 million and $ 85.9 million at September 30, 2022, respectively, and $ 74.3 million and $ 92.7 million at December 31, 2021, respectively.

In the three and nine months ended September 30, 2022, we recorded an additional $ 3.3 million and $ 7.5 million, respectively, of lease liabilities under operating leases, and $ 2.1 million and $ 15.2 million, respectively, in the comparable prior year periods.

Payments on lease liabilities in the three and nine months ended September 30, 2022 totaled $ 5.0 million and $ 16.1 million, respectively, and $ 5.1 million and $ 15.6 million, respectively, 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.

In the three and six months ended June 30, 2022 our total lease expense was $ 13.4 million and $ 26.2 million, respectively, and $ 10.3 million and $ 20.6 million in the comparable prior year periods.

Our total lease expense is inclusive of variable lease

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

costs of $ 2.2 million and $ 4.4 million in the three and six months ended June 30, 2022, respectively, and $ 2.2 million and $ 4.0 million in the comparable prior year periods, as well as short-term lease costs of $ 5.5 million and $ 10.5 million in the three and six months ended June 30, 2022, respectively and $ 3.1 million and $ 6.0 million in the comparable prior year periods.

In the three and nine months ended September 30, 2022 our total lease expense was $ 14.3 million and $ 40.5 million, respectively, and $ 10.6 million and $ 31.2 million, respectively, in the comparable prior year periods.

Our total lease expense is inclusive of variable lease costs of $ 3.3 million and $ 7.7 million in the three and nine months ended September 30, 2022, respectively, and $ 1.6 million and $ 5.6 million, respectively, in the comparable prior year periods, as well as short-term lease costs of $ 5.2 million and $ 15.8 million in the three and nine months ended September 30, 2022, respectively and $ 3.7 million and $ 9.7 million, respectively, in the comparable prior year periods.

Sublease income was de minimis.

The future minimum lease payments required under our leases as of June 30, 2022 were as follows ($000's omitted):

The future minimum lease payments required under our leases as of September 30, 2022 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, 2022.

(b) Lease payments include options to extend lease terms that are reasonably certain of being exercised and exclude $ 2.5 million of legally binding minimum lease payments for leases signed but not yet commenced at June 30, 2022.

(a) Remaining payments are for the three months ending December 31, 2022.

(b) Lease payments include options to extend lease terms that are reasonably certain of being exercised and exclude $ 2.0 million of legally binding minimum lease payments for leases signed but not yet commenced at September 30, 2022.

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 5.2 years and 5.5 %, respectively, at June 30, 2022.

(d) The weighted average remaining lease term and weighted average discount rate used in calculating our lease liabilities were 5.2 years and 5.5 %, respectively, at September 30, 2022.

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