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Basis Of Presentation And Significant Accounting Policies | 9 Months Ended
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Sep. 30, 2013
Accounting Policies [Abstract] |
Basis of Presentation and Significant Accounting Policies | Summary of significant accounting policies Basis of presentation PulteGroup, Inc. is one of the largest homebuilders in the United States. Our common stock trades on the New York Stock Exchange under the ticker symbol “PHM”. Unless the context otherwise requires, the terms "PulteGroup", the "Company", "we", "us", and "our" used herein refer to PulteGroup, Inc. and its subsidiaries. While our subsidiaries engage primarily in the homebuilding business, we also have mortgage banking operations, conducted principally through Pulte Mortgage LLC (“Pulte Mortgage”), and title operations. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal, recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with our consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2012. Use of estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Subsequent events We evaluated subsequent events up until the time the financial statements were filed with the Securities and Exchange Commission ("SEC"). Cash and equivalents Cash and equivalents include institutional money market investments and time deposits with a maturity of three months or less when acquired. Cash and equivalents at September 30, 2013 and December 31, 2012 also included $13.6 million and $8.1 million, respectively, of cash from home closings held in escrow for our benefit, typically for less than five days, which are considered deposits in-transit. Restricted cash We maintain certain cash balances that are restricted as to their use. Restricted cash consists primarily of deposits maintained with financial institutions under cash-collateralized letter of credit agreements (see Note 9). The remaining balances relate to certain other accounts with restrictions, including customer deposits on home sales that are temporarily restricted by regulatory requirements until title transfers to the homebuyer. Other expense (income), net Other expense (income), net consists of the following ($000’s omitted):
| Three Months Ended |  | Nine Months Ended
September 30, |  | September 30,
2013 |  | 2012 |  | 2013 |  | 2012
Write-off of deposits and pre-acquisition costs | $ | 811 |  |  | $ | 893 |  |  | $ | 1,402 |  |  | $ | 1,798 |
Loss on debt retirements (Note 9) | 3,858 |  |  | — |  |  | 26,930 |  |  | — |
Lease exit and related costs (a) | 378 |  |  | 152 |  |  | 1,146 |  |  | 6,312 |
Amortization of intangible assets | 3,275 |  |  | 3,275 |  |  | 9,825 |  |  | 9,825 |
Miscellaneous expense (income), net (b) | 8,733 |  |  | 3,133 |  |  | 39,863 |  |  | 6,635 |
| $ | 17,055 |  |  | $ | 7,453 |  |  | $ | 79,166 |  |  | $ | 24,570 |
(a) | Excludes $2.5 million of lease exit costs classified within Financial Services expense during the nine months ended September 30, 2012. There were no such costs during the three and nine months ended September 30, 2013 or the three months ended September 30, 2012.
(b) | Includes charges of $8.0 million and $38.0 million during the three and nine months ended September 30, 2013, respectively, resulting from a contractual dispute related to a previously completed luxury community (see Note 10).
Notes receivable In certain instances, we may accept consideration for land sales or other transactions in the form of a note receivable. Such receivables are reported net of allowance for credit losses within other assets. The following represents our notes receivable and related allowance for credit losses ($000’s omitted):
| September 30, 2013 |  | December 31, 2012
Notes receivable, gross | $ | 59,683 |  |  | $ | 57,841 |
Allowance for credit losses | (27,048 | ) |  | (26,865 | )
Notes receivable, net | $ | 32,635 |  |  | $ | 30,976 |
We also record receivables from various parties in the normal course of business, including amounts due from municipalities, insurance carriers, and vendors. Such receivables are generally reported within other assets. See Residential mortgage loans available-for-sale in Note 1 for a discussion of receivables related to our mortgage operations. Earnings per share Basic earnings per share is computed by dividing income (loss) available to common shareholders (the “Numerator”) by the weighted-average number of common shares, adjusted for unvested shares of restricted stock (the “Denominator”) for the period. Computing diluted earnings per share is similar to computing basic earnings per share, except that the Denominator is increased to include the dilutive effects of stock options, non-vested restricted stock, and other potentially dilutive instruments. Any stock options that have an exercise price greater than the average market price are considered to be anti-dilutive and are excluded from the diluted earnings per share calculation. Our earnings per share excludes 10.3 million and 10.5 million stock options and other potentially dilutive instruments for the three and nine months ended September 30, 2013, respectively, and 12.0 million and 18.8 million stock options and other potentially dilutive instruments for the three and nine months ended September 30, 2012, respectively. In accordance with ASC 260 "Earnings Per Share" ("ASC 260"), the two-class method determines earnings per share for each class of common stock and participating securities according to an earnings allocation formula that adjusts the Numerator for dividends or dividend equivalents and participation rights in undistributed earnings. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and, therefore, are included in computing earnings per share pursuant to the two-class method. The Company's outstanding restricted stock awards and deferred shares are considered participating securities. The following table presents the earnings per share of common stock ($000's omitted, except per share data):
| Three Months Ended |  | Nine Months Ended
September 30, |  | September 30,
2013 |  | 2012 |  | 2013 |  | 2012
Numerator: |  |  |  |  |  |  |
Net income | $ | 2,281,884 |  |  | $ | 116,633 |  |  | $ | 2,400,063 |  |  | $ | 147,403 |
Less: earnings distributed to participating securities | (273 | ) |  | — |  |  | (273 | ) |  | — |
Less: undistributed earnings allocated to participating securities | (15,884 | ) |  | — |  |  | (17,526 | ) |  | — |
Numerator for basic earnings per share | $ | 2,265,727 |  |  | $ | 116,633 |  |  | $ | 2,382,264 |  |  | $ | 147,403 |
Add back: undistributed earnings allocated to participating securities | 15,884 |  |  | — |  |  | 17,526 |  |  | — |
Less: undistributed earnings reallocated to participating securities | (15,753 | ) |  | — |  |  | (17,358 | ) |  | — |
Numerator for diluted earnings per share | $ | 2,265,858 |  |  | $ | 116,633 |  |  | $ | 2,382,432 |  |  | $ | 147,403 |
Denominator: |  |  |  |  |  |  |
Basic shares outstanding | 382,883 |  |  | 381,355 |  |  | 384,159 |  |  | 380,839 |
Effect of dilutive securities | 3,220 |  |  | 3,215 |  |  | 3,745 |  |  | 2,036 |
Diluted shares outstanding | 386,103 |  |  | 384,570 |  |  | 387,904 |  |  | 382,875 |
Earnings per share: |  |  |  |  |  |  |
Basic | $ | 5.92 |  |  | $ | 0.31 |  |  | $ | 6.20 |  |  | $ | 0.39 |
Diluted | $ | 5.87 |  |  | $ | 0.30 |  |  | $ | 6.14 |  |  | $ | 0.38 |
Land option agreements In the ordinary course of business, we enter into land option agreements in order to procure land for the construction of homes in the future. Pursuant to these land option agreements, we generally provide a deposit to the seller as consideration for the right to purchase land at different times in the future, usually at predetermined prices. Such contracts enable us to defer acquiring portions of properties owned by third parties or unconsolidated entities until we have determined whether and when to exercise our option, which reduces our financial risks associated with long-term land holdings. Option deposits and pre-acquisition costs (such as environmental testing, surveys, engineering, and entitlement costs) are capitalized if the costs are directly identifiable with the land under option, the costs would be capitalized if we owned the land, and acquisition of the property is probable. Such costs are reflected in other assets and are reclassified to inventory upon taking title to the land. 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 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 (income), net. See Note 3. If the entity holding the land under option is a variable interest entity (“VIE”), our deposit represents a variable interest in that entity. If we are determined to be the primary beneficiary of the VIE, we are required to consolidate the VIE. Certain of our land option agreements are with entities considered VIEs. In evaluating whether we are required to consolidate a VIE, we take into consideration that the VIE is generally protected from the first dollar of loss under our land option agreement due to our deposit. Likewise, the VIE's gains are generally capped based on the purchase price within the land option agreement. However, we generally have little control or influence over the operations of these VIEs due to our lack of an equity interest in them. Additionally, creditors of the VIE have no recourse against us, and we do not provide financial or other support to these VIEs other than as stipulated in the land option agreements. Our maximum exposure to loss related to these VIEs is generally limited to our deposits and pre-acquisition costs under the applicable land option agreements. Historically, cancellations of land option agreements have resulted in write-offs of the related deposits and pre-acquisition costs but have not exposed us to the overall risks or losses of the applicable VIEs. Separately, certain land option agreements represent financing arrangements even though we generally have no obligation to pay these future amounts. As a result, we recorded $27.6 million and $31.1 million at September 30, 2013 and December 31, 2012, respectively, to land, not owned, under option agreements with a corresponding increase to accrued and other liabilities. Such amounts represent the remaining purchase price under the land option agreements, some of which are with VIEs, in the event we exercise the purchase rights under the agreements. The following provides a summary of our interests in land option agreements as of September 30, 2013 and December 31, 2012 ($000’s omitted):
| September 30, 2013 |  | December 31, 2012
| Deposits and Pre-acquisition Costs |  | Remaining Purchase Price |  | Land, Not Owned, Under Option Agreements |  | Deposits and Pre-acquisition Costs |  | Remaining Purchase Price |  | Land, Not Owned, Under Option Agreements
Consolidated VIEs | $ | 6,705 |  |  | $ | 10,488 |  |  | $ | 12,107 |  |  | $ | 5,216 |  |  | $ | 8,590 |  |  | $ | 8,590 |
Unconsolidated VIEs | 32,678 |  |  | 683,158 |  |  | — |  |  | 24,078 |  |  | 360,495 |  |  | — |
Other land option agreements | 48,561 |  |  | 707,547 |  |  | 15,505 |  |  | 40,822 |  |  | 554,307 |  |  | 22,476 |
| $ | 87,944 |  |  | $ | 1,401,193 |  |  | $ | 27,612 |  |  | $ | 70,116 |  |  | $ | 923,392 |  |  | $ | 31,066 |
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. In accordance with ASC 825, “Financial Instruments” (“ASC 825”), we use the fair value option to record residential mortgage loans available-for-sale. Election of the fair value option for these loans allows a better offset of the changes in fair values of the loans and the derivative instruments used to economically hedge them without having to apply complex hedge accounting provisions. We do not designate any derivative instruments as hedges or apply the hedge accounting provisions of ASC 815, “Derivatives and Hedging.” 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. At September 30, 2013 and December 31, 2012, residential mortgage loans available-for-sale had an aggregate fair value of $296.9 million and $318.9 million, respectively, and an aggregate outstanding principal balance of $285.9 million and $305.3 million, respectively. The net gain (loss) resulting from changes in fair value of these loans totaled $4.4 million and $0.9 million for the three months ended September 30, 2013 and 2012, respectively, and $2.6 million and $0.6 million for the nine months ended September 30, 2013 and 2012. These changes in fair value were substantially offset by changes in fair value of the corresponding hedging instruments. Net gains from the sale of mortgages were $18.1 million and $33.9 million for the three months ended September 30, 2013 and 2012, respectively, and $66.4 million and $76.9 million for the nine months ended September 30, 2013 and 2012, respectively, and have been included in Financial Services revenues. Derivative instruments and hedging activities We are exposed to market risks from commitments to lend, movements in interest rates, and canceled or modified commitments to lend. A commitment to lend at a specific interest rate (an interest rate lock commitment) is a derivative financial instrument (interest rate is locked to the borrower). In order to reduce these risks, we use other derivative financial instruments, principally cash forward placement contracts on mortgage-backed securities and whole loan investor commitments, to economically hedge the interest rate lock commitment. We enter into these derivative financial instruments based upon our portfolio of interest rate lock commitments and closed loans. We do not use any derivative financial instruments for trading purposes. At September 30, 2013 and December 31, 2012, we had aggregate interest rate lock commitments of $317.7 million and $161.6 million, respectively, which were originated at interest rates prevailing at the date of commitment. Since we can terminate a loan commitment if the borrower does not comply with the terms of the contract, and some loan commitments may expire without being drawn upon, these commitments do not necessarily represent future cash requirements. We evaluate the creditworthiness of these transactions through our normal credit policies. Forward contracts on mortgage-backed securities are commitments to either purchase or sell a specified financial instrument at a specified future date for a specified price that may be settled in cash, by offsetting the position, or through the delivery of the financial instrument. 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. We also use whole loan investor commitments, which are obligations of the investor to buy loans at a specified price within a specified time period. At September 30, 2013 and December 31, 2012, we had unexpired forward contracts of $519.6 million and $428.0 million, respectively, and whole loan investor commitments of $30.2 million and $4.7 million, respectively. Changes in the fair value of interest rate lock commitments 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. There are no credit-risk-related contingent features within our derivative agreements, and counterparty risk is considered minimal. Gains and losses on interest rate lock commitments 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 75 days. The fair values of derivative instruments and their location in the Condensed Consolidated Balance Sheets is summarized below ($000’s omitted):
| September 30, 2013 |  | December 31, 2012
| Other Assets |  | Other Liabilities |  | Other Assets |  | Other Liabilities
Interest rate lock commitments | $ | 12,239 |  |  | $ | 117 |  |  | $ | 6,045 |  |  | $ | 24 |
Forward contracts | 41 |  |  | 8,997 |  |  | 245 |  |  | 891 |
Whole loan commitments | 78 |  |  | 219 |  |  | 30 |  |  | 85 |
| $ | 12,358 |  |  | $ | 9,333 |  |  | $ | 6,320 |  |  | $ | 1,000 |
New accounting pronouncements In December 2011, the FASB issued ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities" ("ASU 2011-11"), which requires entities to disclose information about offsetting and related arrangements of financial instruments and derivative instruments. The guidance was effective for our fiscal year beginning January 1, 2013 and was applied retrospectively. The adoption of this guidance, which is related to disclosure only, did not have a material impact on our financial statements.

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- Definition The entire disclosure for the basis of presentation and significant accounting policies concepts. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). Accounting policies describe all significant accounting policies of the reporting entity. + References No definition available. + Details
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