What changed in this filing

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Item 1. Financial Statements

2023-04-25 compared with 2022-10-25 · 151 added, 198 removed, 451 unchanged (44% of the section changed)

3 unchanged sentences

($000’s omitted)

September 30,

2023 December 31,

7 unchanged sentences

Other assets 1,246,492 1,291,572

Intangible assets 138,571 146,923

Goodwill 68,930 68,930

Other intangible assets 64,205 66,875

Deferred tax assets 79,346 82,348

6 unchanged sentences

Financial Services debt 324,447 586,711

Revolving credit facility 319,000 —

Notes payable 2,041,637 2,045,527

6 unchanged sentences

(000’s omitted, except per share data)

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Three Months Ended

Home sale revenues $ 3,487,637 $ 3,032,217

9 unchanged sentences

Selling, general, and administrative expenses ( 336,518 ) ( 329,022 )

Loss on debt retirement — — — ( 61,469 )

Other expense, net ( 25,194 ) ( 4,750 ) ( 30,830 ) ( 8,011 )

Equity income from unconsolidated entities 2,513 1,221

Other income (expense), net 1,818 ( 3,359 )

Income before income taxes 702,122 599,893

12 unchanged sentences

($000’s omitted)

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Three Months Ended

Net income $ 532,259 $ 454,723

11 unchanged sentences

Earnings Total

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

Share issuances 41 — — — — —

Dividends declared — — — — ( 34,624 ) ( 34,624 )

Share repurchases ( 4,379 ) ( 44 ) — — ( 180,402 ) ( 180,446 )

Cash paid for shares withheld for taxes — — — — ( 711 ) ( 711 )

Share-based compensation — — 6,640 — — 6,640

Net income — — — — 627,928 627,928

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

Shareholders' equity, December 31, 2022 225,840 $ 2,258 $ 3,330,138 $ — $ 5,581,702 $ 8,914,098

2 unchanged sentences

Share repurchases ( 2,761 ) ( 27 ) — — ( 149,973 ) ( 150,000 )

Excise tax on share repurchases — — — — ( 1,221 ) ( 1,221 )

Cash paid for shares withheld for taxes — — — — ( 10,059 ) ( 10,059 )

1 unchanged sentence

Net income — — — — 532,259 532,259

Other comprehensive income — — — 45 — 45

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

Shareholders' equity, March 31, 2023 223,522 $ 2,235 $ 3,345,005 $ — $ 5,916,569 $ 9,263,809

Capital Accumulated

2 unchanged sentences

Earnings Total

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

Share issuances 1 — — — — —

Dividends declared — — — — ( 36,166 ) ( 36,166 )

Share repurchases ( 5,102 ) ( 50 ) — — ( 260,550 ) ( 260,600 )

Cash paid for shares withheld for taxes — — — — ( 35 ) ( 35 )

Share-based compensation — — 4,511 — — 4,511

Net income — — — — 475,549 475,549

Other comprehensive income — — — 25 — 25

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

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 586 6 6,024 — — 6,030

5 unchanged sentences

Other comprehensive income — — — 25 — 25

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

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

See accompanying Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

($000’s omitted)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

3 unchanged sentences

Land-related charges 5,683 3,510

Loss on debt retirement — 61,469

Depreciation and amortization 19,139 16,181

Equity income from unconsolidated entities ( 2,513 ) ( 1,221 )

Distributions of income from unconsolidated entities 3,509 —

Share-based compensation expense 12,488 16,615

5 unchanged sentences

Accounts payable, accrued and other liabilities ( 83,404 ) 117,650

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

Net cash provided by operating activities 711,368 207,666

Cash flows from investing activities:

7 unchanged sentences

Repayments of notes payable ( 4,500 ) —

Borrowings under revolving credit facility 1,925,000 —

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

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

Debt issuance costs ( 11,167 ) —

Stock option exercises — 11

Financial Services repayments, net ( 262,264 ) ( 229,985 )

Proceeds from liabilities related to consolidated inventory not owned 18,449 —

Payments related to consolidated inventory not owned ( 10,099 ) —

Share repurchases ( 150,000 ) ( 500,000 )

2 unchanged sentences

Net cash used in financing activities ( 454,853 ) ( 781,395 )

Net decrease in cash, cash equivalents, and restricted cash ( 1,542,167 ) ( 1,007,584 )

Net increase (decrease) in cash, cash equivalents, and restricted cash 232,301 ( 621,695 )

Cash, cash equivalents, and restricted cash at beginning of period 1,094,553 1,833,565

23 unchanged sentences

Actual results could differ from those estimates.

Reclassifications

Effective with our first quarter 2023 reporting, we reclassified our closing cost incentives provided to customers, including seller-paid financing costs, from home sale cost of revenues to home sale revenues.

All prior period amounts have been reclassified to conform to the current presentation.

As a result, all sales incentives provided to customers are classified as a reduction of home sale revenues.

This reclassification had the effect of reducing both home sale revenues and home sale cost of revenues by the amount of such closing cost incentives, which totaled $ 81.2 million and $ 38.1 million for the three months ended March 31, 2023 and 2022, respectively.

Subsequent events

We evaluated subsequent events up until the time the financial statements were filed with the Securities and Exchange Commission (the "SEC").

Other expense, net

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

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Other income (expense), net

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

Three Months Ended

Write-offs of deposits and pre-acquisition costs $ ( 5,683 ) $ ( 3,510 )

2 unchanged sentences

Interest expense ( 107 ) ( 86 )

Equity in earnings of unconsolidated entities 446 604 2,390 5,620

Miscellaneous, net 3,182 2,670

Total other expense, net $ ( 25,194 ) $ ( 4,750 ) $ ( 30,830 ) $ ( 8,011 )

Other income (expense), net $ 1,818 $ ( 3,359 )

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Revenue recognition

1 unchanged sentence

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 $ 979.5 million and $ 844.8 million at September 30, 2022 and December 31, 2021, respectively.

Contract liabilities include customer deposits related to sold but undelivered homes, which totaled $ 796.4 million and $ 783.6 million at March 31, 2023 and December 31, 2022, 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.

See Note 8 for information on warranties and related obligations.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Land sale and other revenues - We periodically elect to sell parcels of land to third parties in the event such assets no longer fit into our strategic operating plans or are zoned for commercial or other development.

1 unchanged sentence

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 certain 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.

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

Financial services revenues - Loan origination fees, commitment fees, and discount points are recognized upon loan origination.

Expected gains and losses from the sale of residential mortgage loans and their related servicing rights are included in the measurement of interest rate lock commitments ("IRLCs") that are accounted for at fair value through Financial Services revenues at the time of commitment.

Subsequent changes in the fair value of IRLCs and residential mortgage loans available for sale are reflected in Financial Services revenues as they occur.

Interest income is accrued from the date a mortgage loan is originated until the loan is sold.

4 unchanged sentences

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.

The related contract assets for estimated future renewal commissions are included in other assets and totaled $ 61.9 million and $ 57.3 million at March 31, 2023 and December 31, 2022, respectively.

Residential mortgage loans available-for-sale

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 March 31, 2023 and December 31, 2022, residential mortgage loans available-for-sale had an aggregate fair value of $ 420.6 million and $ 677.2 million, respectively, and an aggregate outstanding principal balance of $ 420.7 million and $ 680.5 million, respectively.

Net gains from the sale of mortgages were $ 20.6 million and $ 52.4 million for the three months ended March 31, 2023 and 2022, respectively, and have been included in Financial Services revenues.

Derivative instruments and hedging activities

We are party to IRLCs with customers resulting from our mortgage origination operations.

At March 31, 2023 and December 31, 2022, we had aggregate IRLCs of $ 766.0 million and $ 653.2 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 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 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 March 31, 2023 and December 31, 2022, we had unexpired forward contracts of $ 1.1 billion and $ 1.0 billion, respectively, and whole loan investor commitments of

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

$ 135.6 million and $ 285.9 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.

We evaluate the creditworthiness of these transactions through our normal credit policies.

There are no credit-risk-related contingent features within our derivative agreements, and counterparty risk is considered minimal.

Gains and losses on IRLCs and residential mortgage loans available-for-sale are substantially offset by corresponding gains or losses on forward contracts on mortgage-backed securities and whole loan investor commitments.

We are generally not exposed to variability in cash flows of derivative instruments for more than approximately 90 days.

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

March 31, 2023 December 31, 2022

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

Interest rate lock commitments $ 9,474 $ 5,749 $ 10,830 $ 1,572

Forward contracts 4,029 8,236 4,144 20,853

Whole loan commitments 151 39 806 165

$ 13,654 $ 14,024 $ 15,780 $ 22,590

Earnings per share

7 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Three Months Ended

Net income $ 532,259 $ 454,723

11 unchanged sentences

Diluted $ 2.35 $ 1.83

Residential mortgage loans available-for-sale

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 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 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.

We evaluate the creditworthiness of these transactions through our normal credit policies.

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.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

There are no credit-risk-related contingent features within our derivative agreements, and counterparty risk is considered minimal.

We are generally not exposed to variability in cash flows of derivative instruments for more than approximately 90 days.

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

September 30, 2022 December 31, 2021

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

Interest rate lock commitments $ 3,183 $ 23,457 $ 8,582 $ 33

Forward contracts 66,620 163 757 1,336

Whole loan commitments 1,300 35 384 4

$ 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 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".

At March 31, 2023 and December 31, 2022, we reported $ 208.9 million and $ 222.9 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 September 30, 2022.

Allowances on the aforementioned in-scope assets were not material as of March 31, 2023.

New accounting pronouncements

2 unchanged sentences

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.

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.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

September 30,

2023 December 31,

2 unchanged sentences

Raw land 647,228 679,341

Consolidated inventory not owned (a)

86,850 72,058

$ 11,431,877 $ 11,326,017

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

We capitalize interest cost into inventory during the active development and construction of our communities.

1 unchanged sentence

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

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Three Months Ended

Interest in inventory, beginning of period $ 137,262 $ 160,756

10 unchanged sentences

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

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

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.

We record any such write-offs of deposits and pre-acquisition costs within other income (expense), net ( Note 1 ).

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 September 30, 2022 or December 31, 2021 because we determined that we were not any VIE's primary beneficiary.

No VIEs required consolidation at either March 31, 2023 or December 31, 2022 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 September 30, 2022 and December 31, 2021 ($000’s omitted):

September 30, 2022 December 31, 2021

The following provides a summary of our interests in land option agreements as of March 31, 2023 and December 31, 2022 ($000’s omitted):

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023 December 31, 2022

Pre-acquisition

9 unchanged sentences

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.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Segment information

9 unchanged sentences

($000’s omitted)

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Three Months Ended

Revenues (a) :

Northeast $ 220,648 $ 162,327

7 unchanged sentences

Consolidated revenues $ 3,575,641 $ 3,149,519

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Operating Data by Segment

($000’s omitted)

Three Months Ended

Income (loss) before income taxes:

5 unchanged sentences

West 99,577 133,269

Other homebuilding (a)

Other homebuilding (b)

( 13,163 ) ( 36,653 )

2 unchanged sentences

Consolidated income before income taxes $ 702,122 $ 599,893

(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 $ 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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(a) All periods reflect the reclassification of closing cost incentives to homes sale revenues from home sale cost of revenues ( Note 1 ).

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

Operating Data by Segment

($000’s omitted)

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Three Months Ended

Land-related charges (a) :

4 unchanged sentences

Texas 115 239

West 5,462 602 6,189 667

Other homebuilding — — — —

$ 5,683 $ 3,510

(a) Land-related charges include land impairments, net realizable value adjustments on land held for sale, and write-offs of deposits and pre-acquisition costs for land option contracts we elected not to pursue.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Operating Data by Segment

($000's omitted)

September 30, 2022

March 31, 2023

Construction Land Under

Development Raw Land Total

Development Raw Land Consolidated Inventory Not Owned Total

Inventory Total

1 unchanged sentence

Southeast 797,089 602,197 91,923 18,908 1,510,117 1,739,218

Florida 1,494,755 1,049,632 150,892 2,695,279 3,202,654

1,481,876 1,072,349 126,088 61,500 2,741,813 3,246,605

Midwest 531,030 693,174 22,688 3,355 1,250,247 1,405,271

1 unchanged sentence

West 1,566,719 1,679,259 217,569 — 3,463,547 3,742,043

Other homebuilding (a)

Other homebuilding (b)

27,406 255,430 11,322 — 294,158 1,672,336

2 unchanged sentences

$ 5,351,112 $ 5,346,687 $ 647,228 $ 86,850 $ 11,431,877 $ 14,831,042

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Operating Data by Segment

($000's omitted)

December 31, 2022

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

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

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 (a)

Other homebuilding (b)

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

2 unchanged sentences

$ 5,440,186 $ 5,134,432 $ 679,341 $ 72,058 $ 11,326,017 $ 14,796,515

(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.

(a) Florida includes goodwill of $ 28.6 million, net of a goodwill impairment charge of $ 20.2 million 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.

Other homebuilding also includes goodwill of $ 40.4 million.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Notes payable

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

September 30,

2023 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 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.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Other notes payable

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.

Other notes payable include non-recourse and limited recourse notes with third parties that totaled $ 51.0 million and $ 55.2 million at March 31, 2023 and December 31, 2022, respectively.

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 other assets.

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

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.

We recorded $ 6.7 million and $ 0.7 million of inventory financed by sellers in the three months ended March 31, 2023 and 2022, respectively.

Revolving credit facility

In June 2022, we entered into the Third Amended and Restated Credit Agreement (the "Revolving Credit Facility"), which replaced our previous credit agreement.

The Revolving Credit Facility contains substantially similar terms to the previous credit agreement, increased our borrowing capacity, and extended the maturity date from June 2023 to June 2027.

The Revolving Credit Facility 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.

We maintain a revolving credit facility (the "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, up to the maximum borrowing capacity.

1 unchanged sentence

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 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.

As of March 31, 2023, we were in compliance with all covenants.

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

At March 31, 2023, we had no borrowings outstanding, $ 288.8 million of letters of credit issued, and $ 961.2 million of remaining capacity under the Revolving Credit Facility.

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.

Joint venture debt

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.

At March 31, 2023, aggregate outstanding debt of unconsolidated joint ventures was $ 80.6 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.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Financial Services debt

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 $ 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.

The maximum aggregate commitment was $ 360.0 million at March 31, 2023 and will increase to $ 500.0 million on June 26, 2023 through maturity.

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 $ 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.

At March 31, 2023, Pulte Mortgage had $ 324.4 million oustanding at a weighted average interest rate of 6.18 % and $ 35.6 million of remaining capacity under the Repurchase Agreement.

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.

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

Shareholders’ equity

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.

In the three months ended March 31, 2023, we declared cash dividends totaling $ 36.1 million and repurchased 2.8 million shares under our repurchase authorization for $ 150.0 million.

In the three months ended March 31, 2022, we declared cash dividends totaling $ 36.5 million and repurchased 10.3 million shares under our repurchase authorization for $ 500.0 million.

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

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

At March 31, 2023, we had remaining authorization to repurchase $ 232.9 million of common shares.

This repurchase authorization was increased by $ 1.0 billion on April 24, 2023.

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

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

In the three months ended March 31, 2023 and 2022, participants surrendered shares valued at $ 10.1 million and $ 13.6 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.

Our effective tax rate was 24.2 % for both the three months ended March 31, 2023 and 2022.

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

At March 31, 2023 and December 31, 2022, we had net deferred tax liabilities of $ 161.3 million and $ 133.1 million, respectively.

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

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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 $ 23.5 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.

We had $ 23.6 million of gross unrecognized tax benefits at both March 31, 2023 and December 31, 2022.

Additionally, we had accrued interest and penalties of $ 4.6 million and $ 4.1 million at March 31, 2023 and December 31, 2022, respectively.

Fair value disclosures

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Hierarchy Fair Value

September 30,

2023 December 31,

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Whole loan commitments Level 2 112 641

Measured at fair value on a non-recurring basis:

House and land inventory Level 3 $ — $ 10,873

Disclosed at fair value:

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Financial Services debt Level 2 324,447 586,711

Revolving credit facility Level 2 319,000 —

Senior notes payable Level 2 2,069,480 2,023,990

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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 September 30, 2022 and December 31, 2021 .

The carrying value of senior notes was $ 2.0 billion at both March 31, 2023 and December 31, 2022 .

Commitments and contingencies

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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 $ 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.

We had outstanding letters of credit and surety bonds totaling $ 288.8 million and $ 2.1 billion, respectively, at March 31, 2023 and $ 303.4 million and $ 2.2 billion, respectively, at December 31, 2022.

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.

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

Litigation and regulatory matters

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

practices, and protection of the environment.

Litigation and regulatory matters

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.

As a result, we are subject to periodic examination or inquiry by various governmental agencies that administer these laws and regulations.

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However, to the extent the liability arising from the ultimate resolution of any matter exceeds the estimates reflected in the recorded reserves relating to such matter, we could incur additional charges that could be significant.

Product warranty

Home purchasers are provided with a limited warranty against certain building defects, including a one-year comprehensive limited warranty and coverage for certain other aspects of the home’s construction and operating systems for periods of up to, and, in limited instances, exceeding, 10 years.

Warranty liabilities

Home buyers are provided with a limited warranty against certain building defects, including a one-year comprehensive limited warranty and coverage for certain other aspects of the home's construction and operating systems for periods of up to, and, in limited instances, exceeding, 10 years.

We estimate the costs to be incurred under these warranties and record liabilities in the amount of such costs at the time product revenue is recognized.

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

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Three Months Ended

Warranty liabilities, beginning of period $ 108,348 $ 107,117

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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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.

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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.

At any point in time, we are managing numerous 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.

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

Our recorded reserves for all such claims totaled $ 679.3 million and $ 627.1 million at September 30, 2022 and December 31, 2021, respectively.

Our recorded reserves for all such claims totaled $ 652.7 million and $ 635.9 million at March 31, 2023 and December 31, 2022, 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 % of the total general liability reserves at both September 30, 2022 and December 31, 2021.

Liabilities related to IBNR and related claim expenses represented approximately 73 % and 74 % of the total general liability reserves at both March 31, 2023 and December 31, 2022, 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.

The actuarial analyses of the reserves also consider historical third-party recovery rates and claims management expenses.

Housing market conditions can be volatile, and we believe such conditions can affect the frequency and cost of construction defect claims.

Volatility in both national and local housing market conditions may affect the frequency and cost of construction defect claims.

Additionally, IBNR estimates comprise the majority of our liability and are subject to a high degree of uncertainty due to a variety of factors, including changes in claims reporting and resolution patterns, third party recoveries, insurance industry practices, the regulatory environment, and legal precedent.

State regulations vary, but construction defect claims are typically reported and resolved over an extended period, often exceeding ten years.

State regulations vary, but construction defect claims are typically reported and resolved over an extended time period often exceeding ten years.

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 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 $ 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.

Costs associated with our insurance programs are classified within selling, general, and administrative expenses.

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

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Three Months Ended

Balance, beginning of period $ 635,857 $ 627,067

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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 September 30, 2022 and December 31, 2021, respectively.

Such receivables are recorded in other assets and totaled $ 43.7 million at both March 31, 2023 and December 31, 2022.

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.

Given the complexity inherent with resolving construction defect claims in the homebuilding industry described above, there generally exists a significant lag between our payment of claims and our reimbursements from applicable insurance carriers or third parties.

In addition, disputes between homebuilders and insurance carriers or third parties over coverage positions relating to construction defect claims are common.

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

PULTEGROUP, INC.

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

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.

ROU assets and lease liabilities were $ 72.9 million and $ 89.4 million at March 31, 2023, respectively, and $ 73.5 million and $ 90.1 million at December 31, 2022, respectively.

In the three months ended March 31, 2023 and 2022, we recorded an additional $ 3.9 million and $ 0.5 million, respectively, of lease liabilities under operating leases.

Payments on lease liabilities in the three months ended March 31, 2023 and 2022 totaled $ 5.4 million and $ 5.5 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.

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.

In the three months ended March 31, 2023 and 2022 our total lease expense was $ 14.2 million and $ 12.9 million, respectively, inclusive of variable lease costs of $ 3.0 million and $ 2.2 million, respectively, as well as short-term lease costs of $ 4.2 million and $ 5.1 million, respectively.

Sublease income was de minimis.

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

The future minimum lease payments required under our leases as of March 31, 2023 were as follows ($000's omitted):

Years Ending December 31,

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Present value of lease liabilities (d)

(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.

(a) Remaining payments are for the nine months ending December 31, 2023.

(b) Lease payments include options to extend lease terms that are reasonably certain of being exercised and exclude $ 2.2 million of legally binding minimum lease payments for leases signed but not yet commenced at March 31, 2023.

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 September 30, 2022.

(d) The weighted average remaining lease term and weighted average discount rate used in calculating our lease liabilities were 4.9 years and 5.4 %, respectively, at March 31, 2023.

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