What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-06 compared with 2022-02-07 · 112 added, 139 removed, 912 unchanged (22% of the section changed)

88 unchanged sentences

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

Cumulative effect of accounting change (see Note 1 )

— — — — ( 735 ) ( 735 )

Stock option exercises 15 1 110 — — 111

7 unchanged sentences

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

Cumulative effect of accounting change (see Note 1 )

— — — — ( 735 ) ( 735 )

Stock option exercises 1 — 11 — — 11

7 unchanged sentences

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

Stock option exercises 1 — 11 — — 11

Share issuances 676 7 6,024 — — 6,031

21 unchanged sentences

Share-based compensation expense 42,989 36,745 32,843

Equity income from unconsolidated entities ( 50,680 ) ( 17,200 ) ( 1,880 )

Distributions of earnings from unconsolidated entities 49,151 2,110 505

Other, net 1,431 1,586 263

9 unchanged sentences

Distributions of capital from unconsolidated entities 21,704 53,927 27,939

Business acquisitions ( 10,400 ) ( 83,251 ) ( 163,724 )

Business acquisition ( 10,400 ) ( 10,400 ) ( 83,251 )

Other investing activities, net ( 5,685 ) 6,713 6,472

5 unchanged sentences

Financial Services borrowings (repayments), net ( 39,412 ) 214,302 85,248

Debt issuance costs ( 11,167 ) — —

Proceeds from liabilities related to consolidated inventory not owned 58,729 — —

Payments related to consolidated inventory not owned ( 5,915 ) — —

Stock option exercises — 11 111

25 unchanged sentences

Business acquisitions

On April 23, 2019, we acquired certain assets of American West, located in Las Vegas, Nevada, for $ 163.7 million.

The assets acquired included approximately 1,200 finished lots and control of approximately 2,300 additional lots through land option agreements.

The acquired assets were recorded at their estimated fair values, including $ 12.0 million associated with the American West tradename, which is being amortized over a 20-year useful life.

The acquisition of these assets was not material to our results of operations or financial condition.

On January 24, 2020, we acquired the operations of Innovative Construction Group ("ICG"), an offsite construction framing company located in Jacksonville, Florida, for $ 104 million, of which $ 83.3 million was paid in January 2020 with additional payments of $ 10.4 million in each of 2021 and 2022.

13 unchanged sentences

We maintain certain cash balances that are restricted as to their use, including customer deposits on home sales that are temporarily restricted by regulatory requirements in certain states until title transfers to the homebuyer.

Total cash, cash

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

equivalents, and restricted cash includes restricted cash balances of $ 54.5 million and $ 50.0 million at December 31, 2021 and 2020, respectively.

Investments in unconsolidated entities

2 unchanged sentences

generally this represents ownership interests of at least 20% and not more than 50%.

Under the equity method of accounting, we recognize our proportionate share of the earnings and losses of these entities.

Under the equity method of accounting, we recognize

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

our proportionate share of the earnings and losses of these entities.

Certain of these entities sell land to us.

95 unchanged sentences

Other revenues related to our construction services operations are generally recognized as materials are delivered and installation services are provided.

Financial services revenues - Loan origination fees, commitment fees, and direct loan origination costs are recognized as incurred.

Expected gains and losses from the sale of residential mortgage loans and their related servicing rights are included in the measurement of written loan commitments that are accounted for at fair value through Financial Services revenues at the time of commitment.

Financial services revenues - Expected gains and losses from the sale of residential mortgage loans and their related servicing rights are included in the measurement of written loan commitments that are accounted for at fair value through Financial Services revenues at the time of commitment.

Subsequent changes in the fair value of these loans are reflected in Financial Services revenues as they occur.

32 unchanged sentences

Land held for sale is recorded at the lower of cost or fair value less costs to sell.

In determining the value of land held for sale, we consider recent offers received, prices for land in recent comparable sales transactions, and other factors.

In determining the fair value of land held for sale, we consider recent offers received, prices for land in recent comparable sales transactions, and other factors.

We record net realizable value adjustments for land held for sale within Homebuilding land sale cost of revenues.

6 unchanged sentences

We write off deposits and pre-acquisition costs when it becomes probable that we will not go forward with the project or recover the capitalized costs.

Such decisions take into

Such decisions take into consideration changes in local market conditions, the timing of required land purchases, the availability and best use of

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

consideration changes in local market conditions, the timing of required land purchases, the availability and best use of necessary incremental capital, and other factors.

necessary incremental capital, and other factors.

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

34 unchanged sentences

At December 31, 2022 and 2021, residential mortgage loans available-for-sale had an aggregate fair value of $ 677.2 million and $ 947.1 million, respectively, and an aggregate outstanding principal balance of $ 680.5 million and $ 924.5 million, respectively.

These changes in fair value were substantially offset by changes in fair value of the corresponding derivative

These changes in fair value were substantially offset by changes in fair value of the corresponding derivative instruments.

Net gains from the sale of mortgages during 2022, 2021, and 2020 were $ 157.3 million, $ 251.3 million, and $ 247.3 million, respectively, and have been included in Financial Services revenues .

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Net gains from the sale of mortgages during 2021, 2020, and 2019 were $ 251.3 million, $ 247.3 million, and $ 129.4 million, respectively, and have been included in Financial Services revenues .

Mortgage servicing rights

16 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 December 31, 2021 and 2020, we had unexpired forward contracts of $ 903.0 million and $ 686.4 million, respectively, and whole loan investor commitments of $ 310.0 million and $ 169.6 million, respectively.

At December 31, 2022 and 2021, we had unexpired forward contracts of $ 1.0 billion and $ 903.0 million, respectively, and whole loan investor commitments of $ 285.9 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

Other Assets Other Liabilities Other Assets Other Liabilities

Interest rate lock commitments $ 8,582 $ 33 $ 16,179 $ 18

IRLCs $ 10,830 $ 1,572 $ 8,582 $ 33

Forward contracts 4,144 20,853 757 1,336

7 unchanged sentences

At December 31, 2022 and 2021, we reported $ 222.9 million and $ 208.4 million of assets in-scope under Accounting Standards Codification 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.

These assets consist primarily of insurance receivables, contract assets related to insurance brokerage commissions, accounts receivable, and vendor rebate receivables.

Counterparties associated with these assets are generally highly rated.

1 unchanged sentence

New accounting pronouncements

On January 1, 2021, we adopted 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.

Our adoption of ASU 2019-12 did not have a material impact on our financial statements.

On January 1, 2020, we adopted ASC 326, which changed the impairment model for most financial assets and certain other instruments from an "incurred loss" approach to a new "expected credit loss" methodology.

7 unchanged sentences

The standard was followed in the previously mentioned assessment of the ICG goodwill.

On January 1, 2019, we adopted Accounting Standards Update (“ASU”) No.

2016-02, “Leases (Topic 842)” (“ASU 2016-02”) and related amendments using a modified retrospective approach with an effective date as of January 1, 2019.

ASU 2016-02 requires leases with durations greater than 12 months to be recorded on balance sheet in our consolidated financial statements.

We elected the package of transition practical expedients, which allowed us to carry forward our historical assessment of (1) whether contracts are or contain leases, (2) lease classification, and (3) initial direct costs.

The adoption of ASU 2016-02 had no impact on retained earnings.

See Note 11 “Leases” for additional information about this adoption.

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848)", as amended by ASU 2021-01 in January 2021, which provides optional expedients and exceptions for applying U.S.

1 unchanged sentence

The guidance was effective beginning March 12, 2020 and can be applied prospectively through December 31, 2024.

We are currently evaluating the effect that such new guidance will have on our consolidated financial statements and related disclosures, but do not expect that the adoption will have a material impact on our consolidated financial statements or related disclosures.

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We will adopt these standards when LIBOR is discontinued and do not expect that the adoption will have a material impact on our consolidated financial statements or related disclosures.

Inventory and land held for sale

3 unchanged sentences

Raw land 679,341 731,245

Consolidated inventory not owned (a)

$ 11,326,017 $ 9,047,569

(a) Consolidated inventory not owned includes land sold to third parties for which the Company retains a repurchase option.

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In all periods presented, we capitalized all Homebuilding interest costs into inventory because the level of our active inventory exceeded our debt levels .

13 unchanged sentences

Total land-related charges $ 66,656 $ 12,302 $ 20,305

Our evaluations for impairments are based on our best estimates of the future cash flows for our communities.

Our evaluations for land-related charges are based on our best estimates of the future cash flows for our communities.

Due to uncertainties in the estimation process, the significant volatility in demand for new housing, the long life cycles of certain of our communities, and potential changes in our strategy related to certain communities, actual results could differ significantly from such estimates.

8 unchanged sentences

Arizona, California, Colorado, Nevada, New Mexico, Washington

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We also have a reportable segment for our Financial Services operations, which consist principally of mortgage banking, title, and insurance brokerage operations.

2 unchanged sentences

Each reportable segment generally follows the same accounting policies described in Note 1 .

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Operating Data by Segment ($000’s omitted)

12 unchanged sentences

Northeast $ 244,233 $ 215,193 $ 136,985

Southeast (b)

417,880 258,794 175,763

Southeast 692,279 417,880 258,794

939,034 585,680 362,276

1 unchanged sentence

Texas 465,461 322,979 242,383

West 594,976 424,803 386,361

687,403 592,845 424,304

Other homebuilding (d)

4 unchanged sentences

(a) Includes certain land-related charges (see the following table and Note 2 ).

(b) Includes warranty charges totaling $ 14.8 million in 2019 related to a closed-out community (see Note 11 ).

(b) Includes goodwill impairment charge totaling $ 20.2 million in 2020 (see Note 1 ).

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

Also included are insurance reserve reversals of $ 81.1 million, $ 93.4 million, and $ 49.4 million in 2021, 2020 and 2019, respectively, partially offset by reserves against insurance receivables of $ 17.8 million and $ 22.6 million in 2020 and 2019, respectively (see Note 11 ) and a loss on debt retirement of $ 61.5 million in 2021 (see Note 5 ).

Also included are insurance reserve reversals of $ 65.0 million, $ 81.1 million, and $ 93.4 million in 2022, 2021 and 2020, respectively, partially offset by reserves against insurance receivables of $ 17.8 million in 2020 (see Note 11 ) and a loss on debt retirement of $ 61.5 million in 2021 (see Note 5 ).

PULTEGROUP, INC.

13 unchanged sentences

* Land-related charges include land impairments, NRV adjustments for land held for sale, and write-offs of deposits and pre-acquisition costs for land option contracts we elected not to pursue.

Other homebuilding consists primarily of write-offs of capitalized interest related to such land-related charges.

See Note 2 for additional discussion of these charges.

19 unchanged sentences

Construction Land Under

Development Raw Land Total

Development Raw Land Consolidated Inventory Not Owned Total

Inventory Total

1 unchanged sentence

Southeast 793,539 544,867 102,336 20,169 1,460,911 1,668,053

943,110 866,266 289,388 2,098,764 2,545,457

Florida 1,417,657 1,081,836 125,253 51,889 2,676,635 3,195,091

Midwest 523,194 689,541 22,467 — 1,235,202 1,382,227

1 unchanged sentence

West 1,662,251 1,528,863 238,758 — 3,429,872 3,771,808

Other homebuilding (b)

Other homebuilding (a)

31,236 321,086 11,772 — 364,094 1,470,919

4 unchanged sentences

Construction Land Under

Development Raw Land Total

Development Raw Land Consolidated Inventory Not Owned Total

Inventory Total

1 unchanged sentence

Southeast 604,310 537,072 67,815 — 1,209,197 1,362,852

638,394 921,962 116,709 1,677,065 1,967,788

Florida 943,110 866,266 289,388 — 2,098,764 2,545,457

Midwest 527,001 460,279 15,869 — 1,003,149 1,132,081

1 unchanged sentence

West 1,235,457 1,191,834 227,850 — 2,655,141 2,955,283

Other homebuilding (b)

Other homebuilding (a)

48,039 276,511 16,936 — 341,486 2,314,839

2 unchanged sentences

$ 4,225,309 $ 4,091,015 $ 731,245 $ — $ 9,047,569 $ 13,352,631

(a) Florida includes goodwill of $ 28.6 million at December 31, 2021 and 2020, net of a goodwill impairment charge of $ 20.2 million recorded during 2020.

(b) Other homebuilding primarily includes cash and equivalents, capitalized interest, intangibles, deferred tax assets, and other corporate items that are not allocated to the operating segments.

(a) Other homebuilding primarily includes cash and equivalents, capitalized interest, intangibles, deferred tax assets, and other corporate items that are not allocated to the operating segments.

Investments in unconsolidated entities

5 unchanged sentences

We made capital contributions to our unconsolidated joint ventures of $ 64.7 million, $ 101.6 million, and $ 0.8 million in 2022, 2021, and 2020, respectively.

At December 31, 2021, aggregate outstanding debt of unconsolidated joint ventures was $ 63.9 million, of which $ 41.0 million was related to one joint venture in which we have a 50% interest.

At December 31, 2022, aggregate outstanding debt of unconsolidated joint ventures was $ 77.3 million, of which $ 42.0 million 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.

The limited guaranties include, but are not limited to:

(i) completion of certain aspects of the project;

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(ii) an environmental indemnity provided to the lender;

and (iii) indemnification rights of the lender from certain specified acts and omissions of the joint venture.

The timing of cash flows related to a joint venture and any related financing agreements varies by agreement (see Note 5 ).

The timing of cash flows related to a joint venture and any related financing agreements varies by agreement.

If additional capital contributions are required and approved by the joint venture, we would need to contribute our pro rata portion of those capital needs in order to not dilute our ownership in the joint ventures.

4 unchanged sentences

$ 500,000 $ 500,000

5.500 % unsecured senior notes due March 2026 (a)

500,000 700,000

5.000 % unsecured senior notes due January 2027 (a)

18 unchanged sentences

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

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

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

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

Such notes payable issued to acquire land inventory totaled $ 50.9 million, $ 52.0 million, and $ 41.8 million in 2021, 2020, and 2019, respectively.

We recorded inventory through seller financing of $ 39.1 million, $ 50.9 million, and $ 52.0 million in 2022, 2021, and 2020, respectively.

We retired outstanding debt totaling $ 4.9 million, $ 836.9 million, and $ 65.3 million during 2022, 2021, and 2020, respectively.

The retirements in 2021 included a tender offer to retire $ 200.0 million and $ 100.0 million of our unsecured notes scheduled to mature in 2026 and 2027, respectively.

We also retired $ 274.0 million of unsecured senior notes pursuant to a tender offer in 2019.

The retirements in 2021 and 2019 resulted in losses of $ 61.5 million and $ 4.9 million, respectively, which included the write-off of debt issuance costs, unamortized discounts and premiums, and transaction fees related to the repurchased debt, and which is reflected in other expense, net.

The retirement in 2021 resulted in a loss of $ 61.5 million that included the write-off of debt issuance costs, unamortized discounts and premiums, and transaction fees related to the repurchased debt and which is reflected in other expense, net.

Revolving credit facility

We maintain a revolving credit facility ("Revolving Credit Facility") maturing in June 2027 that has a maximum borrowing capacity of $ 1.3 billion and contains an uncommitted accordion feature that could increase the capacity to $ 1.8 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 December 31, 2021.

The interest rate on borrowings under the Revolving Credit Facility may be based on

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

either the London Interbank Offered Rate ("LIBOR") or a base rate plus an applicable margin, as defined therein.

In the event that LIBOR is no longer widely available, the agreement contemplates transitioning to an alternative widely available market rate agreeable between the parties.

As a precautionary measure during the initial phase of the COVID-19 pandemic, we made the decision in March 2020 to draw $ 700.0 million under the Revolving Credit Facility.

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

We had no borrowings outstanding and $ 298.8 million and $ 249.7 million of letters of credit issued under the Revolving Credit Facility at December 31, 2021 and 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).

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 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 December 31, 2022, we were in compliance with all covenants.

Outstanding balances under the Revolving Credit Facility are guaranteed by certain of our wholly-owned subsidiaries.

Our available and unused borrowings under the Revolving Credit Facility, net of outstanding letters of credit, amounted to $ 701.2 million and $ 750.3 million as of December 31, 2021 and 2020, respectively.

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

At December 31, 2022, we had no borrowings outstanding, $ 303.4 million of letters of credit issued, and $ 946.6 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.

Financial Services debt

2 unchanged sentences

At all other times, the maximum aggregate commitment ranges from $ 360.0 million to $ 500.0 million.

The purpose of the changes in capacity during the term of the agreement is to lower associated fees during seasonally lower volume periods of mortgage origination activity.

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 $ 626.1 million and $ 411.8 million outstanding under the Repurchase Agreement at December 31, 2021, and 2020, respectively, and was in compliance with its covenants and requirements as of such dates.

The following is aggregate borrowing information for our mortgage operations ($000’s omitted):

Available credit lines $ 650,000 $ 420,000

Unused credit lines $ 23,877 $ 8,179

Weighted-average interest rate 2.37 % 2.55 %

At December 31, 2022, Pulte Mortgage had $ 586.7 million outstanding at a weighted average interest rate of 5.39 %, and $ 213.3 million of remaining capacity under the Repurchase Agreement.

At December 31, 2021, Pulte Mortgage had $ 626.1 million outstanding at a weighted average interest rate of 2.37 % and $ 23.9 million of remaining capacity under the Repurchase Agreement.

Pulte Mortgage was in compliance with its covenants and requirements as of such dates.

Shareholders’ equity

We declared quarterly cash dividends totaling $ 143.1 million, $ 148.1 million, and $ 135.1 million in 2022, 2021, and 2020, respectively.

Under a share repurchase program authorized by our Board of Directors, we repurchased 17.7 million, 4.5 million, and 8.4 million shares in 2021, 2020, and 2019, respectively, for a total of $ 897.3 million, $ 170.7 million, and $ 274.3 million in 2021, 2020, and 2019, respectively.

Under a share repurchase program authorized by our Board of Directors, we repurchased 24.2 million, 17.7 million, and 4.5 million shares in 2022, 2021, and 2020, respectively, for a total of $ 1.1 billion, $ 897.3 million, and $ 170.7 million in 2022, 2021, and 2020, respectively.

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

At December 31, 2022, we had remaining authorization to repurchase $ 382.9 million of common shares.

This share repurchase authorization was increased by $1.0 billion on January 31, 2022.

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

3 unchanged sentences

We maintain a stock award plan for both employees and non-employee directors.

The plan provides for the grant of a variety of equity awards, including options (generally non-qualified options), restricted share units ("RSUs"), and performance units to key employees (as determined by the Compensation and Management Development Committee of the Board of Directors) for periods not to exceed ten years .

The plan provides for the grant of a variety of equity awards, including options (generally non-qualified options), restricted share units ("RSUs"), and performance share units ("PSUs") to key employees (as determined by the Compensation and Management Development Committee of the Board of Directors) for periods not to exceed ten years .

Non-employee directors are awarded an annual distribution of common shares.

Options granted to employees generally vest over four years and are generally exercisable for ten years from the vest date.

RSUs represent the right to receive an equal number of common shares and are converted into common shares upon distribution.

RSUs generally cliff vest after three years .

RSU holders receive cash dividends during the vesting period.

Performance shares vest upon attainment of the stated performance targets and minimum service requirements and are converted into common shares upon

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

distribution.

RSUs generally cliff vest after three years , and RSU holders earn cash or accrued dividends during the vesting period.

PSUs vest upon attainment of the stated performance targets and minimum service requirements and are converted into common shares upon distribution.

As of December 31, 2022, there were 11.3 million shares that remained available for grant under the plan.

1 unchanged sentence

2022 2021 2020

RSUs and performance shares $ 25,192 $ 22,065 $ 21,538

Long-term incentive plans 11,553 10,778 6,830

RSUs and PSUs $ 33,323 $ 25,192 $ 22,065

Other long-term incentive plans 9,666 11,553 10,778

$ 42,989 $ 36,745 $ 32,843

Stock options

We did not issue any stock options during 2021, 2020, or 2019 and stock options outstanding at December 31, 2021, 2020, and 2019 were de minimis.

As a result, there is no unrecognized compensation cost related to stock option awards at December 31, 2021.

The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option.

The aggregate intrinsic value of stock options that were exercised during 2019 was $ 10.5 million and was de minimis in 2021 and 2020.

RSUs and performance units

A summary of RSUs and performance units is presented below (000’s omitted, except per share data):

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

RSUs and PSUs

A summary of RSUs and PSUs is presented below (000’s omitted, except per share data):

2022 2021 2020

9 unchanged sentences

During 2022, 2021, and 2020, the total fair value of shares vested during the year was $ 40.5 million, $ 30.5 million, and $ 43.3 million, respectively.

Unamortized compensation cost related to restricted share awards was $ 27.9 million at December 31, 2021.

Unamortized compensation cost related to share awards was $ 25.4 million at December 31, 2022.

These costs will be expensed over a weighted-average period of approximately two years .

Additionally, there were 0.2 million deferred shares at December 31, 2022, that had vested but had not yet been paid out because the payout date had been deferred by the holders.

Long-term incentive plans

Other long-term incentive plans

We maintain long-term incentive plans for senior management and other employees that provide awards based on the achievement of stated performance targets over three-year periods.

21 unchanged sentences

Federal tax credits ( 0.9 ) ( 1.2 ) ( 4.8 )

Changes in tax laws, including the Tax Act — — 0.2

Deferred tax asset valuation allowance 0.4 ( 0.8 ) ( 0.8 )

1 unchanged sentence

Effective rate 23.9 % 22.5 % 18.6 %

The 2021 and 2020 effective tax rates differ from the federal statutory rate primarily due to state income tax expense and benefits associated with federal energy efficient home credits, and changes in valuation allowances relating to projected utilization of certain state net operating loss ("NOL") carryforwards.

Income tax expense for 2021 and 2020 includes benefits associated with the extension of federal energy efficient home credits, including $ 56.8 million in 2020 related to homes closed in prior open tax years.

This provision, which had previously expired in 2017, was extended to apply to homes closed through December 31, 2021.

The 2019 effective tax rate differs from the federal statutory rate primarily due to state income tax expense on current year earnings, changes in valuation allowances relating to projected utilization of certain state NOL carryforwards, and state tax law changes.

The effective tax rates differ from the federal statutory rate primarily due to state income tax expense, benefits associated with federal energy efficient home credits, and changes in valuation allowances relating to projected utilization of certain state net operating loss ("NOL") carryforwards.

Income tax expense for 2020 includes a benefit of $ 56.8 million associated with the extension of federal energy efficient home credits related to homes closed in prior open tax years.

On August 16, 2022, the Inflation Reduction Act ("IRA") was enacted, extending the federal efficient home credit through December 2032.

The criteria for homes qualifying for the credit shifted to a higher standard effective January 1, 2023.

We are currently analyzing the impact of the increased requirements on our ability to qualify homes for the credit.

Other tax provisions of the IRA, including the corporate alternative minimum tax effective for tax years ended after December 31, 2022, are not expected to have a material impact on our financial statements.

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Deferred tax assets and liabilities reflect temporary differences arising from the different treatment of items for tax and accounting purposes.

4 unchanged sentences

Inventory valuation reserves 58,339 62,806

Capitalized inventory expenses 32,620 13,839

State NOL carryforwards 105,609 144,746

3 unchanged sentences

Deferred income ( 439,863 ) ( 367,285 )

Intangibles and other ( 47,475 ) ( 46,595 )

Fixed assets and intangibles ( 31,921 ) ( 21,324 )

Other ( 31,802 ) ( 26,151 )

( 503,586 ) ( 414,760 )

1 unchanged sentence

Net deferred tax asset (liability) $ ( 133,098 ) $ ( 26,481 )

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We have state NOLs in various jurisdictions which may generally be carried forward up to 20 years, depending on the jurisdiction.

We have state NOLs in various jurisdictions that may generally be carried forward up to 20 years, depending on the jurisdiction.

Our state NOL carryforward deferred tax assets will expire if unused at various dates as follows:

13 unchanged sentences

A reconciliation of the change in the unrecognized tax benefits is as follows ($000’s omitted):

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

2022 2021 2020

17 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 CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

4 unchanged sentences

Residential mortgage loans available-for-sale Level 2 677,207 947,139

Interest rate lock commitments Level 2 8,549 16,161

IRLCs Level 2 9,258 8,549

Forward contracts Level 2 ( 16,709 ) ( 579 )

7 unchanged sentences

Other notes payable Level 2 55,228 40,185

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Fair values for agency residential mortgage loans available-for-sale are determined based on quoted market prices for comparable instruments.

2 unchanged sentences

Fair values for whole loan commitments are based on market prices for similar instruments from the specific whole loan investor.

See Note 1 for a more detailed discussion of these derivative instruments.

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.

4 unchanged sentences

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

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

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Other assets and accrued and other liabilities

17 unchanged sentences

In certain instances, we may accept consideration for land sales or other transactions in the form of a note receivable .

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Accrued and other liabilities are presented below ($000’s omitted):

4 unchanged sentences

108,348 107,117

Income tax liabilities ( Note 8 )

98,709 72,134

Lease liabilities ( Note 11 )

90,083 92,663

Liabilities related to consolidated inventory not owned ( Note 2 )

Accrued interest 41,135 42,591

Dividends payable ( Note 6 )

36,696 37,796

Loan origination liabilities (Note 11)

2 unchanged sentences

$ 1,685,202 $ 1,576,478

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Commitments and contingencies

17 unchanged sentences

This debt is typically paid by subsequent special assessments levied by the CDD on the landowners.

Generally, we are only responsible for paying the special assessments for the period during which we are the landowner of the applicable parcels and include our estimated obligations as part of our land development budgets.

Generally, we are only responsible for paying the special assessments for the period during which we are the landowner of the applicable parcels and we include our estimated obligations as part of our land development budgets.

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Letters of credit and surety bonds

9 unchanged sentences

We are involved in 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,

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

14 unchanged sentences

Payments ( 90,508 ) ( 73,760 ) ( 70,869 )

Other adjustments (a)

4,214 ( 2,268 ) 27,052

Other adjustments 6,728 4,214 ( 2,268 )

Warranty liabilities, end of period $ 108,348 $ 107,117 $ 82,744

(a) Includes charges totaling $ 14.8 million in 2019 related to a closed-out community in Southeast.

Self-insured risks

3 unchanged sentences

However, we retain a significant portion of the overall risk for such claims either through our own self-insured per occurrence and aggregate retentions, deductibles, policies issued by our captive insurance subsidiaries, and any potential claims in excess of available insurance policy limits.

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Our general liability insurance includes coverage for certain construction defects.

9 unchanged sentences

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

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

At any point in time, we are managing numerous individual claims related to general liability, property, errors and omission, workers compensation, and other business insurance coverage.

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

The actuarial analyses calculate

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

estimates of the ultimate net cost of all unpaid losses, including estimates for incurred but not reported losses ("IBNR").

The actuarial analyses calculate estimates of the ultimate net cost of all unpaid losses, including estimates for incurred but not reported losses ("IBNR").

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

18 unchanged sentences

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

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

2022 2021 2020

13 unchanged sentences

Resolution of claims with carriers takes time, involves the exchange of significant amounts of information, and frequently involves legal action.

PULTEGROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In 2020 and 2019, we recorded reserves against insurance receivables of $ 17.8 million and $ 22.6 million, respectively, in connection with policy settlement negotiations with certain of our carriers.

In 2020, we recorded reserves against insurance receivables of $ 17.8 million in connection with policy settlement negotiations with certain of our carriers.

We believe collection of our recorded insurance receivables is probable based on the legal merits of our positions after review by legal counsel, the high credit ratings of our carriers, and our long history of collecting significant amounts of insurance reimbursements under similar insurance policies related to similar claims.

12 unchanged sentences

We recorded an additional $ 14.5 million and $ 16.2 million of lease liabilities under operating leases during 2022 and 2021, respectively.

Payments on lease liabilities during 2021 and 2020 totaled $ 20.8 million and $ 19.8 million, respectively.

Payments on lease liabilities during 2022, 2021, and 2020 totaled $ 21.9 million, $ 20.8 million, and $ 19.8 million respectively.

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.

Our total lease expense was $ 54.8 million, $ 43.3 million, and $ 38.2 million during 2022, 2021, and 2020, respectively.

Our total lease expense in 2021 and 2020 is inclusive of variable lease costs of $ 7.7 million and $ 6.2 million, respectively, and short-term lease costs of $ 14.2 million and $ 10.2 million, respectively.

Our total lease expense in 2022, 2021, and 2020 is inclusive of variable lease costs of $ 9.9 million, $ 7.7 million, and $ 6.2 million respectively, and short-term lease costs of $ 21.2 million, $ 14.2 million, and $ 10.2 million, respectively.

Sublease income was de minimis.

50 unchanged sentences

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-K

Item 8. Financial Statements and Supplementary Data