PulteGroup (PHM) 10-K risk factor changes: FY2013 vs FY2012

Although industry conditions improved during [removed: 2012,] [added: 2012 and 2013,] the overall U.S. [removed: economy] [added: economy, while improving,] remains [removed: weak] [added: challenged] and [removed: the timing of a broad, sustainable recovery] [added: consumer demand] in the [removed: homebuilding] industry remains [removed: uncertain.][added: volatile.]

[removed: In recent years,] [added: Beginning in 2006 and continuing through 2011,] the U.S. housing market was unfavorably impacted by severe weakness in new home sales attributable to, among other factors, weak consumer confidence, tightened mortgage standards, significant foreclosure activity, a more challenging appraisal environment, higher than normal unemployment levels, and significant uncertainty in the global economy.

As a result of these factors, we [removed: have] experienced significant decreases in our revenues and [removed: profitability.][added: profitability during the period 2007 - 2011.]

We [removed: have] also incurred substantial impairments of our land inventory and certain other [removed: assets.][added: assets during this period.]

During [removed: 2012,] [added: 2012 and 2013,] overall industry new home sales increased, and we returned to profitability.

However, the overall demand for new homes remains [removed: at low] [added: below] historical [removed: levels, and the timing of a broad, sustainable recovery in the homebuilding industry remains uncertain.][added: levels.]

The market value of land, building [removed: lots] [added: lots,] and housing inventories can fluctuate significantly as a result of changing market conditions, and the measures we employ to manage inventory risk may not be adequate to insulate our operations from a severe drop in inventory values.

Our mortgage operations may be responsible for losses associated with mortgage loans originated and sold to investors in the event of errors or omissions relating to certain representations and warranties [added: made by us] that the loans [removed: sold meet] [added: met] certain requirements, including representations as to underwriting standards, the type of collateral, the existence of primary mortgage insurance, and the validity of certain borrower representations in connection with the loan.

The repurchase liability we [added: have] recorded is estimated based on several factors, including the level of current unresolved repurchase requests, the volume of estimated probable future repurchase requests, our ability to cure the defects identified in the repurchase requests, and the severity of the estimated loss upon repurchase.

Future increases in interest rates, reductions in mortgage availability, or [added: other] increases in the effective costs of owning a home could prevent potential customers from buying our homes and adversely affect our business and financial results.

Increases in interest rates or decreases in the availability of mortgage financing, however, could [removed: reduce] [added: adversely affect] the market for new homes.

Potential homebuyers may be less willing or able to pay the increased monthly costs or to obtain mortgage [removed: financing that exposes them to interest rate changes.][added: financing.]

We [added: may] need [added: credit-related] liquidity for future growth and development of our business.

At December 31, [removed: 2012,] [added: 2013,] we had cash and equivalents of [removed: $1.4] [added: $1.6] billion as well as restricted cash totaling [removed: $72.0] [added: $72.7] million.

At December 31, [removed: 2012,] [added: 2013,] we had outstanding letters of credit and surety bonds totaling [removed: $179.2] [added: $183.1] million and [removed: $1.0 billion,] [added: $958.3 million,] respectively.

Of these amounts outstanding, [removed: $54.5] [added: $58.7] million of the letters of credit were subject to cash-collateralized agreements while the remaining letters of credit and surety bonds were unsecured.

The housing industry in the [removed: United States] [added: U.S.] is highly competitive.

Sustained increases in construction costs may, over time, erode our margins, and pricing competition [removed: for materials and labor] may restrict our ability to pass on any such additional costs, thereby decreasing our margins.

Such differences could have a material adverse effect on our income tax provision in the period in which such determination is made and, consequently, on our financial [removed: position] [added: position, cash flows,] or net income for such period.

If these reserves are insufficient upon completion of an audit, there could be an adverse impact on our financial [removed: position] [added: position, cash flows,] and results of operations.

[removed: We] [added: While we] have recorded valuation allowances against [added: certain of] our deferred income tax [removed: assets.][added: assets, the valuation allowances are subject to change as facts and circumstances change.]

[removed: On] [added: In] January [removed: 10,] 2013, the Consumer Financial Protection Bureau adopted new rules regarding the origination of mortgages, including the criteria for “qualified [removed: mortgages”.][added: mortgages”, rules for lender practices regarding assessing borrowers’ ability to repay, and limitations on certain fees and incentive arrangements.]

[removed: The new] [added: Such] rules [removed: are scheduled to go] [added: went] into effect in January 2014.

We have responded to [removed: the recent] increases in insurance costs and coverage limitations by increasing our self-insured retentions and claim reserves.

Additionally, we are exposed to counterparty default risk related to our [added: subcontractors] and our [added: and our] subcontractors’ insurance carriers.

Future terrorist attacks against the [removed: United States] [added: U.S.] or increased domestic and international instability could have an adverse effect on our operations.

As of December 31, 2013, we had deferred income tax assets, net of deferred tax liabilities, of $2.2 billion, against which we provided a valuation allowance of $157.3 million.

While we have adjusted our operations to comply with the new rules, the impact such rules will have on our business remains unclear.

As a result of the challenging market conditions in the homebuilding industry, we have incurred significant land-related charges resulting from the write-off of deposits and pre-acquisition costs related to land transactions we elected not to pursue, net realizable valuation adjustments related to land positions sold or held for sale, impairments on land assets related to communities under development or to be developed in the future, impairments of our investments in unconsolidated joint ventures, and impairments of our recorded goodwill.

It is reasonably possible that the estimated cash flows from our projects may change and could result in a future need to record additional valuation adjustments.

Additionally, if conditions in the homebuilding industry or our local markets worsen in the future or if our strategy related to certain communities changes, we may be required to evaluate our assets for additional impairments or write-downs, which could result in additional charges that might be significant.

In addition, the Federal Reserve has purchased a sizeable amount of mortgage-backed securities in part to stabilize mortgage interest rates and to support the market for mortgage-backed securities.

As the Federal Reserve reduces its holdings of mortgage-backed securities over time, the availability and affordability of mortgage loans, including the consumer interest rates for such loans, could be adversely affected.

The valuation allowance will fluctuate as conditions change.

We are in the process of analyzing the new rules and the impact such rules will have on our business.

| | [removed: 2012] [added: 2013] | | | | [removed: 2011] [added: 2012] | | | | [removed: 2010] [added: 2011] | | |

| Homebuilding | $ | [removed: 157,991] [added: 479,113] | | | $ | [removed: (275,830] [added: 157,991] | [removed: )] | | $ | [removed: (1,240,155] [added: (275,830] | ) |

| Financial Services | [removed: 25,563] [added: 48,709] | | | | [removed: (34,470] [added: 25,563] | | [removed: )] | | [removed: 5,609] [added: (34,470] | | [added: )] |

| Income (loss) from continuing operations before income taxes | [removed: 183,554] [added: 527,822] | | | | [removed: (310,300] [added: 183,554] | | [removed: )] | | [removed: (1,234,546] [added: (310,300] | | ) |

| Income tax expense (benefit) | [removed: (22,591] [added: (2,092,294] | | ) | | [removed: (99,912] [added: (22,591] | | ) | | [removed: (137,817] [added: (99,912] | | ) |

| Net income (loss) | $ | [removed: 206,145] [added: 2,620,116] | | | $ | [removed: (210,388] [added: 206,145] | [removed: )] | | $ | [removed: (1,096,729] [added: (210,388] | ) |

| Net income (loss) | $ | [removed: 0.54] [added: 6.72] | | | $ | [removed: (0.55] [added: 0.54] | [removed: )] | | $ | [removed: (2.90] [added: (0.55] | ) |

| | [removed: 2012] [added: 2013] | | | | [removed: 2011] [added: 2012] | | | | [removed: 2010] [added: 2011] | | |

| Land-related charges (see [Note [removed: 5](#s7690058CF34E876863AD2825BEA7E169))] [added: 4](#s587DA6FC02EF53D3460F018ECD6F6902))] | $ | [removed: 17,195] [added: 9,672] | | | $ | [removed: 35,786] [added: 17,195] | | | $ | [removed: 216,352] [added: 35,786] | |

| Loss on debt retirements (see [Note [removed: 7](#s50AD54D3B3C67EF6ED782825C0F5D381))] [added: 7](#s20F325B67BD5C67DA790018ECD65A843))] | [removed: 32,071] [added: 26,930] | | | | [removed: 5,638] [added: 32,071] | | | | [removed: 38,920] [added: 5,638] | | |

| Goodwill impairments (see [Note [removed: 2](#s3CB841E0B1561AE3C4922825BDD56BE4))] [added: 2](#s9AEC9DBC8BAD2232B482018ECD5B1DA7))] | — | | | | [removed: 240,541] [added: —] | | | | [removed: 656,298] [added: 240,541] | | |

Our Homebuilding operating results [added: in 2013 and 2012] improved significantly from the [removed: losses] [added: loss] experienced in 2011 [added: due to higher revenues] and [removed: 2010 as the result of the] [added: gross margins, improved overhead leverage, and] lower [removed: charges] [added: charges, as] listed in the above [removed: table, as well as higher revenues, increased gross margins, and improved overhead leverage.][added: table.]

[removed: | • |] The [removed: Financial Services] income [removed: in] [added: before income taxes for] 2012 [added: as] compared [removed: to] [added: with] the loss [added: before income taxes] in [removed: 2011] [added: the prior year period] was due to higher origination volumes, improved loan pricing, and lower loss reserves related to loans originated in previous years. [removed: Such loss reserves totaled $49.0 million in 2012, compared with $59.3 million in 2011 (see [Note 13](#s8DA5200B6E4E4E1A3CA72825C483B8BD) to the Consolidated Financial Statements). The Financial Services loss in 2011 compared to the income in 2010 was primarily due to increased loan loss reserves in 2011 as such reserves totaled $16.9 million in 2010. |]

[removed: | • |] The income tax [added: benefit for 2013 resulted from the reversal of substantially all of the valuation allowance related to our deferred tax assets while the income tax] benefits [removed: in 2012, 2011,] [added: for 2012] and [removed: 2010 were attributable] [added: 2011 resulted] primarily [removed: to] [added: from] the favorable resolution of certain federal and state income tax matters. [removed: |]

| | [removed: 2012] [added: 2013] | | | | FY [removed: 2012] [added: 2013] vs. FY [removed: 2011] [added: 2012] | | | [removed: 2011] [added: 2012] | | | | FY [removed: 2011] [added: 2012] vs. FY [removed: 2010] [added: 2011] | | | [removed: 2010] [added: 2011] | | |

| Home sale revenues | $ | [removed: 4,552,412] [added: 5,424,309] | | | [removed: 15] [added: 19] | % | | $ | [removed: 3,950,743] [added: 4,552,412] | | | [removed: (11] [added: 15] | [removed: )%] [added: %] | | $ | [removed: 4,419,812] [added: 3,950,743] | |

| Land sale revenues | [removed: 106,698] [added: 114,335] | | | | [removed: 29] [added: 7] | % | | [removed: 82,853] [added: 106,698] | | | | [removed: 198] [added: 29] | % | | [removed: 27,815] [added: 82,853] | | |

| Total Homebuilding revenues | [removed: 4,659,110] [added: 5,538,644] | | | | [removed: 16] [added: 19] | % | | [removed: 4,033,596] [added: 4,659,110] | | | | [removed: (9] [added: 16] | [removed: )%] [added: %] | | [removed: 4,447,627] [added: 4,033,596] | | |

| Home sale cost of revenues (a) | [removed: 3,833,451] [added: 4,310,528] | | | | [removed: 11] [added: 12] | % | | [removed: 3,444,398] [added: 3,833,451] | | | | [removed: (14] [added: 11] | [removed: )%] [added: %] | | [removed: 4,006,385] [added: 3,444,398] | | |

| Land sale cost of revenues (b) | [removed: 94,880] [added: 104,426] | | | | [removed: 60] [added: 10] | % | | [removed: 59,279] [added: 94,880] | | | | [removed: 11] [added: 60] | % | | [removed: 53,555] [added: 59,279] | | |

| Selling, [removed: general] [added: general,] and administrative expenses ("SG&A") (c) | [removed: 514,457] [added: 568,500] | | | | [removed: (1] [added: 11] | [removed: )%] [added: %] | | [removed: 519,583] [added: 514,457] | | | | [removed: (42] [added: (1] | )% | | [removed: 895,102] [added: 519,583] | | |

| Equity in (earnings) loss of unconsolidated entities [removed: (d)] | [removed: (3,873] [added: (993] | | ) | | [removed: 21] [added: (74] | [removed: %] [added: )%] | | [removed: (3,194] [added: (3,873] | | ) | | [removed: 12] [added: 21] | % | | [removed: (2,843] [added: (3,194] | | ) |

| Other [removed: expense (income),] [added: expense,] net [removed: (e)] [added: (d)] | [removed: 66,298] [added: 80,753] | | | | [removed: (77] [added: 22] | [removed: )%] [added: %] | | [removed: 293,102] [added: 66,298] | | | | [removed: (61] [added: (77] | )% | | [removed: 742,385] [added: 293,102] | | |

| Interest income, net | [removed: (4,094] [added: (3,683] | | ) | | [removed: 9] [added: (10] | [removed: %] [added: )%] | | [removed: (3,742] [added: (4,094] | | ) | | [removed: (45] [added: 9] | [removed: )%] [added: %] | | [removed: (6,802] [added: (3,742] | | ) |

| Income (loss) before income taxes | $ | [removed: 157,991] [added: 479,113] | | | [removed: 157] [added: 203] | % | | $ | [removed: (275,830] [added: 157,991] | [removed: )] | | [removed: 78] [added: 157] | % | | $ | [removed: (1,240,155] [added: (275,830] | ) |

| Gross margin from home sales | [removed: 15.8] [added: 20.5] | | % | | [removed: 300] [added: 470] bps | | | [removed: 12.8] [added: 15.8] | | % | | [removed: 340] [added: 300] bps | | | [removed: 9.4] [added: 12.8] | | % |

| SG&A as a percentage of home sale revenues | [removed: 11.3] [added: 10.5] | | % | | [removed: (190)] [added: (80)] bps | | | [removed: 13.2] [added: 11.3] | | % | | [removed: (710)] [added: (190)] bps | | | [removed: 20.3] [added: 13.2] | | % |

| Closings (units) | [removed: 16,505] [added: 17,766] | | | | 8 | % | | [removed: 15,275] [added: 16,505] | | | | [removed: (11] [added: 8] | [removed: )%] [added: %] | | [removed: 17,095] [added: 15,275] | | |

| Average selling price | $ | [removed: 276] [added: 305] | | | [removed: 7] [added: 11] | % | | $ | [removed: 259] [added: 276] | | | [removed: 0] [added: 7] | % | | $ | 259 | |

| Units | [removed: 19,039] [added: 17,080] | | | | [removed: 25] [added: (10] | [removed: %] [added: )%] | | [removed: 15,215] [added: 19,039] | | | | [removed: 0] [added: 25] | % | | [removed: 15,148] [added: 15,215] | | |

| Dollars [removed: (f)] [added: (e)] | $ | [removed: 5,424,300] [added: 5,394,566] | | | [removed: 37] [added: (1] | [removed: %] [added: )%] | | $ | [removed: 3,953,829] [added: 5,424,300] | | | [removed: 1] [added: 37] | % | | $ | [removed: 3,898,950] [added: 3,953,829] | |

| Cancellation rate | 15 | | % | | | | | [removed: 19] [added: 15] | | % | | | | | 19 | | % |

| Active communities at December 31 | [removed: 670] [added: 577] | | | | [removed: (4] [added: (14] | )% | | [removed: 700] [added: 670] | | | | [removed: (11] [added: (4] | )% | | [removed: 786] [added: 700] | | |

| Units | [removed: 6,458] [added: 5,772] | | | | [removed: 65] [added: (11] | [removed: %] [added: )%] | | [removed: 3,924] [added: 6,458] | | | | [removed: (2] [added: 65] | [removed: )%] [added: %] | | [removed: 3,984] [added: 3,924] | | |

| Dollars | $ | [removed: 1,931,538] [added: 1,901,796] | | | [removed: 82] [added: (2] | [removed: %] [added: )%] | | $ | [removed: 1,059,649] [added: 1,931,538] | | | [removed: 0] [added: 82] | % | | $ | [removed: 1,056,563] [added: 1,059,649] | |

| (a) | Includes the amortization of capitalized interest. Home sale cost of revenues also includes land [removed: and community valuation adjustments] [added: impairments] of [removed: $13.4] [added: $2.9] million, [removed: $15.9] [added: $13.4] million, and [removed: $169.7] [added: $15.9] million for [added: 2013,] 2012, [removed: 2011,] and [removed: 2010,] [added: 2011,] respectively. |

| (b) | Includes net realizable value adjustments for land held for sale of [removed: $1.5] [added: $3.6] million, [removed: $9.8] [added: $1.5] million, and [removed: $39.1] [added: $9.8] million for [added: 2013,] 2012, [removed: 2011,] and [removed: 2010,] [added: 2011,] respectively. |

| [removed: (e)] [added: (d)] | Includes [removed: goodwill impairment charges of $240.5 million and $656.3 million in 2011 and 2010, respectively. Also includes] the write-off of deposits and pre-acquisition costs for land option contracts we elected not to pursue of [removed: $2.3] [added: $3.1] million, [removed: $10.0] [added: $2.3] million, and [removed: $5.6] [added: $10.0] million in [added: 2013,] 2012, [removed: 2011,] and [removed: 2010,] [added: 2011,] respectively, and net losses related to the redemption of debt totaling [removed: $32.1] [added: $26.9] million, [removed: $5.6] [added: $32.1] million, and [removed: $38.9] [added: $5.6] million in [added: 2013,] 2012, [removed: 2011,] and [removed: 2010,] [added: 2011,] respectively. [added: Also includes charges resulting from a contractual dispute related to a previously completed luxury community totaling $41.2 million in 2013 and goodwill impairment charges of $240.5 million in 2011.] |

| [removed: (f)] [added: (e)] | Net new order dollars represent a composite of new order dollars combined with other movements of the dollars in backlog related to cancellations and change orders. |

The increase in average selling price [removed: reflects an ongoing] [added: reflected a] shift in our revenue mix toward move-up [added: and active adult] buyers and improved market conditions.

The underlying trends in U.S. housing point toward an ongoing multi-year recovery supported by favorable demographics, an improving economy, mortgage interest rates near historic lows, and limited supplies of new and existing home inventories.

Our results in 2013 showed significant improvement in the majority of our key operating metrics in the first half of the year, while demand conditions slowed for us in the second half of the year as consumers adjusted to higher home prices and a moderate rise in mortgage interest rates.

For the full year 2013, the overall improvement in market conditions, in concert with our own tactical actions, contributed to our seventh consecutive profitable quarter.

Home closings, revenues, average selling price, inventory turns, gross margin, overhead leverage, and income before income taxes all improved in 2013 compared with 2012.

Our net new orders declined 10% in 2013 compared with 2012.

A lower number of active communities contributed to the decline in net new orders as we maintained 14% fewer active communities in 2013 compared with 2012.

The lower active community count resulted from the close-out of a number of long-term projects and is consistent with our more disciplined land investment strategy.

In addition, demand slowed in the second half of 2013 in response to higher home prices and a rise in mortgage interest rates.

We will continue to calibrate sales pace in each community to improve our gross margins and maximize returns on invested capital.

We expect that this approach will continue to result in a moderation in our net new order volume in the short-term relative to overall growth in the U.S. homebuilding industry and relative to certain of our competitors.

While we believe higher mortgage interest rates are inevitable and may have a moderating effect on demand and pricing, we believe this impact will be outweighed in the long-term by other factors driving increased sales volume as overall new home sales in the U.S. remain low compared with historical levels.

The significant improvements reported for 2013 also allowed us to continue to enhance our financial position.

We generated significant positive cash flow from operations in each of the last two years via a combination of improved profitability and inventory management.

Our improved financial position provided additional flexibility to retire debt early and increase our planned future investments in new communities, while also paying a dividend and selectively repurchasing our common shares.

Specifically, we accomplished the following during 2013:

| • | Increased our total cash balance to $1.7 billion; |

| • | Proactively reduced our outstanding debt by $461.4 million; |

| • | Increased our existing share repurchase authorization by $250.0 million and retired $127.7 million of shares; |

| • | Reinstated a quarterly dividend; |

| • | Increased our land investment spending to support future growth; and |

| • | Lowered our ratio of debt to total capitalization from 53.4% to 30.7%, in part due to the reversal of a valuation allowance against our deferred tax assets. |

In the short-term, we will continue to focus on maximizing our operating margins, despite the possibility of rising house cost pressures from material and labor prices, by using our existing land assets more effectively, allocating capital more effectively, and aggressively controlling unsold "spec" inventory to enhance our balance sheet.

We believe we have positioned ourselves to deliver improved long-term returns.

In planning for the longer term, we continue to maintain confidence that we are in the early stages of a broad, sustainable recovery in the U.S. new home market.

While the U.S. macroeconomic environment continues to face challenges and each local market will experience varying results, we are continuing to pursue strategic land positions that meet our underwriting requirements in well-positioned submarkets and believe that sustained execution of our strategy will continue to result in increased profits and improved returns on invested capital over the housing cycle.

| Settlement of contractual dispute at a closed-out community (see [Note 13](#sDEFAF56912CB443C3D44018ECD0BD0C1)) | 41,170 | | | | — | | | | — | | |

| | $ | 77,772 | | | $ | 49,266 | | | $ | 281,965 | |

| • | The increase in Financial Services income in 2013 compared with 2012 and 2011 was primarily due to lower loan loss reserves. There were no such loss reserves in 2013 compared with $49.0 million in 2012 and $59.3 million in 2011 (see [Note 13](#sDEFAF56912CB443C3D44018ECD0BD0C1) to the Consolidated Financial Statements). Additionally, loan origination volume increased in 2013 compared with 2012 and 2011, primarily as the result of increased Homebuilding closings. These favorable factors were partially offset in 2013 by margin compression caused by heightened competition in the mortgage industry compared with 2012. |

| • | The income tax benefit in 2013 includes $2.1 billion related to the reversal of substantially all of the valuation allowance previously recorded against our deferred tax assets. See [Note 10](#s501857543F769585A149018ECD79FB87) to the Condensed Consolidated Financial Statements for additional information. The income tax benefits in 2012 and 2011 were attributable primarily to the favorable resolution of certain federal and state income tax matters. |

| (c) | SG&A includes costs associated with the relocation of our corporate headquarters totaling $15.0 million in 2013. |

The increase was attributable to an 11% increase in the average selling price combined with an 8% increase in closings.

The increase in average selling price occurred in substantially all of our local markets and reflects an ongoing shift in our revenue mix toward move-up and active adult buyers and improved market conditions that have allowed for increased sale prices, including higher levels of house options and lot premiums.

The increase in closings reflected improved consumer demand for new homes in the majority of our local markets.

The gross margin improvement was broad-based as substantially all of our operating divisions experienced higher gross margins in 2013 compared with the prior year periods.

The gross dollar amount of our SG&A increased $54.0 million, or 11%, in 2013 compared with 2012.

SG&A includes $15.0 million of employee severance, retention, relocation, and related costs attributable to our previously announced relocation of our corporate headquarters.

The remaining increases in gross overhead dollars were primarily due to variable costs related to the higher revenue volume combined with higher incentive compensation accruals resulting from the Company's improved operating performance.

Interest income, net for 2013 decreased from the prior year based on the level of invested cash balances and low returns on invested cash available in the current interest rate environment.

Net new orders decreased 10% in 2013 compared with 2012 primarily due to selling from 14% fewer active communities in 2013 (577 at December 31, 2013) combined with slowed demand in the second half of 2013 in response to higher home prices and a rise in mortgage interest rates.

Ending backlog units, which represent orders for homes that have not yet closed, decreased 11% at December 31, 2013 compared with December 31, 2012, due to the decrease in net new orders but only decreased by 2% over the prior year period as measured in dollars due to the increase in our average selling price.

In 2012, new home sales in the U.S. increased for the first time since 2005.

Although this volume remains very low compared to historical levels, the improved environment and our restructuring actions contributed to our return to profitability in 2012 as net new orders, closings, revenues, gross margin, and overhead leverage all improved compared with 2011.

During the year, our net new orders increased 25% over 2011 from 4% fewer active communities.

We also generated significant positive operating cash flow, highlighting some of the benefits of our efforts to improve our capital efficiency.

By using our existing land assets more efficiently, allocating capital more effectively, and controlling unsold ("spec") inventory, we continued to enhance our balance sheet and position the Company to deliver higher long-term returns.

While the timing of a broad, sustainable recovery in the homebuilding industry remains uncertain, we believe that new home demand is moving along a path toward recovery.

The value in new housing resulting from affordable prices, low mortgage rates, escalating rents, and more energy-efficient homes is providing consumers with a compelling reason to buy a new home, especially relative to the ever more expensive rental market and the tightened supply of available existing homes.

In the short term, we believe that 2013 will be a better year for U.S. housing than 2012 in spite of continued high levels of unemployment and related low levels of consumer confidence, a challenging U.S. macroeconomic environment, and potential regulatory reforms that may impact the housing and mortgage industries.

In the long term, we continue to believe that the national publicly-traded builders will have a competitive advantage over local builders through their ability to leverage economies of scale at a local level, access to more reliable and lower cost financing through the capital markets, ability to control and entitle large land positions, and greater geographic and product diversification.

Among the national publicly-traded peer group, we believe that builders with more significant land positions, broad geographic and product diversity, and sustainable capital positions will benefit as market conditions recover.

We continue to focus on our primary operational objectives:

| • | Improving our inventory turns; |

| • | More effectively allocating the capital invested in our business using a risk-based portfolio approach; |

| • | Enhancing revenues through more strategic pricing, including establishing clear business models for each of our brands based on systematic, consumer-driven input, optimizing our pricing through the expanded use of options and lot premiums, and lessening our reliance on spec home sales; |

| • | Reducing our house costs through common house plan management, value-engineering our house plans, and working with suppliers to reduce costs; and |

| • | Maintaining an efficient overhead structure. |

Continued focus on these operational objectives, combined with improvements in industry conditions, have resulted in a return to profitability in our homebuilding operations and an increase in profits in our financial services businesses.

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | |

| | Years Ended December 31, | | | | | | | | | | |

| | | | | | | | | | | | |

| | | | | | | | | | | | |

| Restructuring costs (see [Note 3](#s4E188342845B0DC73E602825BDFD0858)) | 11,787 | | | | 19,696 | | | | 50,718 | | |

| Insurance-related adjustments (see [Note 13](#s8DA5200B6E4E4E1A3CA72825C483B8BD)) | — | | | | — | | | | 280,390 | | |

| | $ | 61,053 | | | $ | 301,661 | | | $ | 1,242,678 | |

| (c) | SG&A for 2010 includes the adverse impact of insurance reserve adjustments totaling $280.4 million. |

| (d) | Includes impairments of our investments in unconsolidated joint ventures, which totaled $1.9 million in 2010. |

The decrease was attributable to an 11% decrease in closings as average selling prices remained stable from 2010 to 2011.

The decline in closings for 2011 compared with 2010 occurred in each of our Homebuilding segments, except for Florida, and resulted primarily from lower industry volumes, in part due to the expiration of the federal homebuyer tax credit that existed during 2010.

This tax credit favorably impacted new orders and closings during the first half of 2010, in part we believe by pulling forward customer demand.

The 11% decrease in our active communities also contributed to the lower closings.

The increase in gross margins was despite increased capitalized interest amortization, which reduced gross margins by 10 basis points and 70 basis points in 2012 and 2011, respectively, as compared with the comparable prior year periods.

The higher capitalized interest amortization was attributable primarily to debt assumed with our 2009 merger with Centex.

In order to reduce overhead costs, we have reconfigured our organization in recent years to better align our overhead structure with expected volumes.

These actions have included consolidating many local divisions along with reducing corporate and support staffing across a number of functions.

The gross dollar amount of our SG&A decreased $375.5 million, or 42%, in 2011 compared to 2010 while SG&A as a percentage of home sale revenues dropped to 13.2% in 2011 from 20.3% in 2010.

SG&A in 2010 included $280.4 million in insurance reserve adjustments, substantially all of which related to general liability construction defect claims (see [Note 13](#s8DA5200B6E4E4E1A3CA72825C483B8BD) to the Consolidated Financial Statements for additional discussion of insurance reserve adjustments).

Excluding these insurance reserve adjustments, SG&A as a percentage of home sale revenues was 13.2% and 13.9% in 2011 and 2010, respectively.

(See the Non-GAAP Financial Measures section for a reconciliation of SG&A as a percentage of home sale revenue, excluding insurance reserve adjustments).

The following tables set forth, as of December 31, [removed: 2012] [added: 2013] and [removed: 2011,] [added: 2012,] our rate-sensitive financing obligations, principal cash flows by scheduled maturity, weighted-average interest rates, and estimated fair value ($000’s omitted).

| | As of December 31, [removed: 2011] [added: 2013] for the Years ending December 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | [removed: 2012] [added: 2014] | | | | [removed: 2013] [added: 2015] | | | | [removed: 2014] [added: 2016] | | | | [removed: 2015] [added: 2017] | | | | [removed: 2016] [added: 2018] | | | | Thereafter | | | | Total | | | | Fair Value | | |

We are generally not exposed to variability in cash flows of derivative instruments for more than approximately [removed: 60] [added: 75] days.

Such risks, uncertainties and other factors include, among other things: interest rate changes and the availability of mortgage financing; continued volatility in the debt and equity markets; competition within the industries in which [removed: PulteGroup operates;] [added: we operate;] the availability and cost of land and other raw materials used by [removed: PulteGroup] [added: us] in [removed: its] [added: our] homebuilding operations; the impact of any changes to our strategy in responding to [removed: continuing adverse conditions in] the [added: cyclical nature of the] industry, including any changes regarding our land positions; the availability and cost of insurance covering risks associated with [removed: PulteGroup's] [added: our] businesses; shortages and the cost of labor; weather related slowdowns; slow growth initiatives and/or local building moratoria; governmental regulation directed at or affecting the housing market, the homebuilding industry or construction activities; uncertainty in the mortgage lending industry, including revisions to underwriting standards and repurchase requirements associated with the sale of mortgage loans; the interpretation of or changes to tax, labor and environmental laws; economic changes nationally or in [removed: PulteGroup's] [added: our] local markets, including inflation, deflation, changes in consumer confidence and preferences and the state of the market for homes in general; legal or regulatory proceedings or claims; required accounting changes; terrorist acts and other acts of war; and other factors of national, regional and global scale, including those of a political, economic, business and competitive nature.

See [Item 1A – Risk [removed: Factors](#s290995C3551D96C45A642825DF85BA0E)] [added: Factors](#s037B02A58A03FABF9D40018EDF37307D)] for a further discussion of these and other risks and uncertainties applicable to [removed: PulteGroup’s business.][added: our businesses.]

[removed: PulteGroup undertakes] [added: We undertake] no duty to update any forward-looking statement, whether as a result of new information, future events or changes in [removed: PulteGroup's] [added: our] expectations.

| Senior notes | $ | — | | | $ | 333,647 | | | $ | 465,245 | | | $ | 123,000 | | | $ | — | | | $ | 1,150,000 | | | $ | 2,071,892 | | | $ | 2,070,744 | |

| Average interest rate | — | | % | | 5.24 | | % | | 6.50 | | % | | 7.63 | | % | | — | | % | | 6.80 | | % | | 6.53 | | % | | | | |

| Senior notes | $ | 96,393 | | | $ | 182,221 | | | $ | 574,590 | | | $ | 492,491 | | | $ | 480,000 | | | $ | 1,300,000 | | | $ | 3,125,695 | | | $ | 2,765,151 | |

| Average interest rate | 5.45 | | % | | 5.51 | | % | | 5.50 | | % | | 5.23 | | % | | 6.50 | | % | | 6.89 | | % | | 6.19 | | % | | | | |

For the fiscal year ended December 31, [removed: 2012][added: 2013]

The aggregate market value of the registrant’s voting stock held by nonaffiliates of the registrant as of June 30, [removed: 2012,] [added: 2013,] based on the closing sale price per share as reported by the New York Stock Exchange on such date, was [removed: $4,069,916,376.][added: $7,299,008,871.]

As of February 1, [removed: 2013,] [added: 2014,] the registrant had [removed: 386,598,562] [added: 381,299,600] shares of common stock outstanding.

Applicable portions of the Proxy Statement for the [removed: 2013] [added: 2014] Annual Meeting of Shareholders are incorporated by reference in Part III of this Form.

| 1A | [Risk [removed: Factors](#s290995C3551D96C45A642825DF85BA0E)] [added: Factors](#s037B02A58A03FABF9D40018EDF37307D)] | [removed: [9](#s290995C3551D96C45A642825DF85BA0E)] [added: [9](#s037B02A58A03FABF9D40018EDF37307D)] |

| 1B | [Unresolved Staff [removed: Comments](#s1D9800126750168D9AA32825E1880651)] [added: Comments](#s702B8238787A23C44C7F018EDF6917C8)] | [removed: [15](#s1D9800126750168D9AA32825E1880651)] [added: [15](#s702B8238787A23C44C7F018EDF6917C8)] |

| 3 | [Legal [removed: Proceedings](#s38472F312497D589747E2825E58EA5FC)] [added: Proceedings](#sC17424D175AEBAB6B5DA018EDFB90AEE)] | [removed: [15](#s38472F312497D589747E2825E58EA5FC)] [added: [15](#sC17424D175AEBAB6B5DA018EDFB90AEE)] |

| 4 | [Mine Safety [removed: Disclosures](#sFD2ACCEAA0B9D6DD321C2825E790D928)] [added: Disclosures](#s17672CE6014028F28608018EDFE10889)] | [removed: [15](#sFD2ACCEAA0B9D6DD321C2825E790D928)] [added: [15](#s17672CE6014028F28608018EDFE10889)] |

| 4A | [Executive Officers of the [removed: Registrant](#s97D67D09861FD91E87C22825E993D114)] [added: Registrant](#sE8D3EFA0E6556BEEC243018EE013C3B3)] | [removed: [16](#s97D67D09861FD91E87C22825E993D114)] [added: [16](#sE8D3EFA0E6556BEEC243018EE013C3B3)] |

| 5 | [Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s3F90D147D88C090E24E42825BD179C93)] [added: Securities](#s5DD10D7B992F3C0EB811018ED040C7E2)] | [removed: [17](#s3F90D147D88C090E24E42825BD179C93)] [added: [17](#s5DD10D7B992F3C0EB811018ED040C7E2)] |

| 6 | [Selected Financial [removed: Data](#s3763761F5EE3187221EF2825EFBB929E)] [added: Data](#sF19C3EED5AB756D46F64018EE08BE725)] | [removed: [19](#s3763761F5EE3187221EF2825EFBB929E)] [added: [19](#sF19C3EED5AB756D46F64018EE08BE725)] |

| 7 | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s102764CA5CEB778BE8AA2825F1EC779B)] [added: Operations](#sD918B9D373260E9478E2018EE0D1D876)] | [removed: [21](#s102764CA5CEB778BE8AA2825F1EC779B)] [added: [21](#sD918B9D373260E9478E2018EE0D1D876)] |

| 7A | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#sB29212B7538A6A42A8F32826007DEA6D)] [added: Risk](#sB1971E7F29F64BF218BD018EE38D46C3)] | [removed: [44](#sB29212B7538A6A42A8F32826007DEA6D)] [added: [44](#sB1971E7F29F64BF218BD018EE38D46C3)] |

| 8 | [Financial Statements and Supplementary [removed: Data](#sE5D033D30D9918E3077B2826028FA5D7)] [added: Data](#s7CBAB942C8790C6C2CF0018EE3AB54DA)] | [removed: [46](#sE5D033D30D9918E3077B2826028FA5D7)] [added: [46](#s7CBAB942C8790C6C2CF0018EE3AB54DA)] |

| 9 | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#s60E0A72F99C08E2EF10C28263A52C5AB)] [added: Disclosure](#sEBCB162E30BF12478249018EE8C0EE1F)] | [removed: [95](#s60E0A72F99C08E2EF10C28263A52C5AB)] [added: [92](#sEBCB162E30BF12478249018EE8C0EE1F)] |

| 9A | [Controls and [removed: Procedures](#s629337C01A568746E87028263C55CB0B)] [added: Procedures](#sB50B4DD71834DE2BB43D018EE8C0D729)] | [removed: [95](#s629337C01A568746E87028263C55CB0B)] [added: [92](#sB50B4DD71834DE2BB43D018EE8C0D729)] |

| 9B | [Other [removed: Information](#s9BBF3073D4F79C6D926928263CB2FAF0)] [added: Information](#s21BA41F059EF55A0171F018EE8D4955F)] | [removed: [96](#s9BBF3073D4F79C6D926928263CB2FAF0)] [added: [93](#s21BA41F059EF55A0171F018EE8D4955F)] |

| | [Part [removed: III](#sFC7E4556D88C490A1A0228263CC22D65)] [added: III](#s7B1B73E8210C8FCBA619018EE8FC8DE7)] | |

| 10 | [Directors, Executive Officers and Corporate [removed: Governance](#s57BD45BEAE08234ED19B28263CC23305)] [added: Governance](#sED4C6F0E2835AF07D8E2018EE92E73A1)] | [removed: [97](#s57BD45BEAE08234ED19B28263CC23305)] [added: [94](#sED4C6F0E2835AF07D8E2018EE92E73A1)] |

| 11 | [Executive [removed: Compensation](#s4A9759EFEA4789663F8228263CD1CBBE)] [added: Compensation](#s90B52FE7E3E3C4A4F062018EE94C07F9)] | [removed: [97](#s4A9759EFEA4789663F8228263CD1CBBE)] [added: [94](#s90B52FE7E3E3C4A4F062018EE94C07F9)] |

| 12 | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s48D0740FADF8B82DAE7928263CEB1254)] [added: Matters](#s9FA31E9464D848DF9792018EE97E41FC)] | [removed: [97](#s48D0740FADF8B82DAE7928263CEB1254)] [added: [94](#s9FA31E9464D848DF9792018EE97E41FC)] |

| 13 | [Certain Relationships and Related Transactions and Director [removed: Independence](#sD96FEA4199F2795532F028263D1D4393)] [added: Independence](#sB78B573E04C11C2F5272018EE9A68A69)] | [removed: [97](#sD96FEA4199F2795532F028263D1D4393)] [added: [94](#sB78B573E04C11C2F5272018EE9A68A69)] |

| 14 | [Principal Accountant Fees and [removed: Services](#sF1EF389C92912397215B28263D3B4E80)] [added: Services](#s1362CAB75D335B7A66BF018EE9D8642D)] | [removed: [97](#sF1EF389C92912397215B28263D3B4E80)] [added: [94](#s1362CAB75D335B7A66BF018EE9D8642D)] |

| 15 | [Exhibits and Financial Statement [removed: Schedules](#s41B7CD712AC96CFF848528263D95BFCB)] [added: Schedules](#s45C2A8BCB9EBC5C23F1A018EEA28CD6F)] | [removed: [98](#s41B7CD712AC96CFF848528263D95BFCB)] [added: [95](#s45C2A8BCB9EBC5C23F1A018EEA28CD6F)] |

We are one of the largest homebuilders in the United [removed: States,] [added: States ("U.S."),] and our common stock trades on the New York Stock Exchange under the ticker symbol “PHM”.

Homebuilding, our core business, includes the acquisition and development of land primarily for residential purposes within the [removed: United States] [added: U.S.] and the construction of housing on such land.

Through our brands, which include Pulte Homes, Del Webb, and Centex (acquired through our merger with Centex Corporation ("Centex") in [removed: August] 2009), we offer a wide variety of home designs, including single-family detached, townhouses, condominiums, and duplexes at different prices and with varying levels of options and amenities to our major customer groups: entry-level, move-up, and active adult.

Over our history, we have delivered over [removed: 600,000] [added: 625,000] homes.

As of December 31, [removed: 2012,] [added: 2013,] we conducted our operations in [removed: 58] [added: 48] markets located throughout [removed: 28] [added: 27] states.

| Southwest: | | Arizona, [removed: Colorado,] Nevada, New Mexico, Southern California |

Financial information for each of our reportable business segments is included in [Note [removed: 5](#s7690058CF34E876863AD2825BEA7E169)] [added: 5](#s30FF169F2F85F46D9A4C018ECD65F321)] to our Consolidated Financial Statements.

| | [removed: 2012] [added: 2013] | | | | [removed: 2011] [added: 2012] | | | | [removed: 2010] [added: 2011] | | | | [removed: 2009] [added: 2010] | | | | [removed: 2008] [added: 2009] | | |

| Home sale revenues | $ | [removed: 4,552,412] [added: 5,424,309] | | | $ | [removed: 3,950,743] [added: 4,552,412] | | | $ | [removed: 4,419,812] [added: 3,950,743] | | | $ | [removed: 3,869,297] [added: 4,419,812] | | | $ | [removed: 5,980,289] [added: 3,869,297] | |

| Home closings | [removed: 16,505] [added: 17,766] | | | | [removed: 15,275] [added: 16,505] | | | | [removed: 17,095] [added: 15,275] | | | | [removed: 15,013] [added: 17,095] | | | | [removed: 21,022] [added: 15,013] | | |

[removed: In recent years,] [added: Beginning in 2006 and continuing through 2011,] the U.S. housing market experienced a significant decline in the demand for new homes as well as a sharp decline in overall residential real estate values.

In 2012, new home sales in the U.S. increased for the first time since [removed: 2005, rising 20% to 367,000 homes.][added: 2005.]

[removed: However, this improvement was from a very low base as] U.S. [added: new] home sales in 2011 were the lowest since 1962.

Although current [added: industry] volume remains [removed: very] low compared [removed: to] [added: with] historical levels, the improved environment and [removed: our restructuring] [added: the] actions [added: we have taken] contributed to our return to profitability in [removed: 2012.][added: 2012 and a significant increase in our profitability in 2013.]

Among the national publicly-traded peer group, we believe that builders with [removed: more significant land positions,] broad geographic and product diversity, and sustainable capital positions will benefit as market conditions recover.

| • | More effectively allocating the capital [removed: invested] [added: we invest] in our business using a risk-based portfolio approach; |

10-K 1 a201310-k.htm 10-K

\[X\]

| | [Part I](#sA95D7C052EFB5ECB4872018EDE8DC2D7) | |

| 1 | [Business](#sB572D875BE5A0FF42E6A018EDEBF1615) | [3](#sB572D875BE5A0FF42E6A018EDEBF1615) |

| 2 | [Properties](#s03CEEB9A838BCB926A71018EDF872B6A) | [15](#s03CEEB9A838BCB926A71018EDF872B6A) |

| | [Part II](#sDB14DE33EACEA2ED7DE1018EE0318DD4) | |

| | [Part IV](#sD09A791FDA6C68379039018EE9F661C2) | |

| | [Signatures](#sB98386F7C8D902D7165F018EEA461CA2) | [99](#sB98386F7C8D902D7165F018EEA461CA2) |

In 2013, this trend continued as new home sales in the U.S. rose 16% to approximately 428,000 homes, an approximate 40% increase from the bottom of the housing cycle in 2011.

Additionally, mortgage interest rates remain near historic lows and the overall inventory of homes available for sale, especially new homes, remains low.

The increase in average selling price in recent years resulted from a number of factors, including improved market conditions and a shift in our sales mix toward move-up and active adult homebuyers.

We acquire land primarily for the construction of homes for sale to homebuyers.

| Portion of 2013 home closings | 25% | 46% | 29% |

In order to make the cost of these highly amenitized communities affordable to the individual homeowner, Del Webb communities tend to be larger than entry-level or move-up communities.

10-K 1 a201210-k.htm 10-K

\[ \]

| | [Part I](#s8BF67A622C34DEBDA82F2825D76A2DD5) | |

| 1 | [Business](#sD31ADA2ACDB6F7943EEB2825D96D70D9) | [3](#sD31ADA2ACDB6F7943EEB2825D96D70D9) |

| 2 | [Properties](#s65AA3C21D9C1572FE9422825E38BFC9B) | [15](#s65AA3C21D9C1572FE9422825E38BFC9B) |

| | [Part II](#s0929FA2242D338034FAA2825EB96A09E) | |

| | [Part IV](#s4EC8806CBB4C692233B028263D6DB495) | |

| | [Signatures](#s9282AAC686F14775944D28263DC7E51C) | [101](#s9282AAC686F14775944D28263DC7E51C) |

| Portion of 2012 home closings | 43% | 31% | 26% |

In order to make the cost of these highly amenitized communities affordable to the individual homeowner, Del Webb communities tend to be very large, consisting in some cases of several thousand homes, and have longer life cycles, in some cases extending beyond 10 years.

Substantially all of our operations are located within the United States.

[removed: Pulte Mortgage leases its primary office facilities in Englewood, Colorado, and we] [added: We] also maintain various support functions in leased facilities near Phoenix, [removed: Arizona.][added: Arizona and Atlanta, Georgia.]

Pulte Mortgage leases its primary office facilities in Englewood, Colorado.

| Richard J. Dugas, Jr. | | [removed: 47] [added: 48] | | Chairman, President and Chief Executive Officer | | 2002 |

| Robert T. O'Shaughnessy | | [removed: 47] [added: 48] | | Executive Vice President and Chief Financial Officer | | 2011 |

| Harmon D. Smith | | [removed: 49] [added: 50] | | Executive Vice President - Homebuilding Operations and Area President, Texas | | 2011 |

| James R. Ellinghausen | | [removed: 54] [added: 55] | | Executive Vice President, Human Resources | | 2005 |

| Steven M. Cook | | [removed: 54] [added: 55] | | Senior Vice President, General Counsel and Secretary | | 2006 |

| Stephen P. Schlageter | | [removed: 42] [added: 43] | | Area President, Northeast | | 2012 |

| Ryan R. Marshall | | [removed: 38] [added: 39] | | Area President, Southeast | | 2012 |

| Patrick J. Beirne | | [removed: 49] [added: 50] | | Area President, Central | | 2011 |

| John J. Chadwick | | [removed: 51] [added: 52] | | Area President, Southwest | | 2012 |

Mr. Schlageter was appointed Area President, Northeast in November 2012 and previously held the positions of Vice [removed: President -] [added: President,] Strategic Planning since October 2010 and Division [removed: President -] [added: President,] Raleigh since November 2003.

Mr. Marshall was appointed Area President, Southeast in November 2012 and previously held the positions of Area President, Florida since May 2012 and Division [removed: President -] [added: President,] South Florida since 2006.

Mr. Chadwick was appointed Area President, Southwest in 2012 and previously served as Division [removed: President -] [added: President,] Arizona.

| James L. Ossowski | | 45 | | Vice President, Finance and Controller | | 2013 |

Mr. Ossowski was appointed Vice President, Finance and Controller in February 2013 and previously held the position of Vice President, Finance - Homebuilding Operations since August 2010.

Since 2002, Mr. Ossowski has held various finance positions of increasing responsibility with the Company.

| Deborah W. Meyer | | 50 | | Senior Vice President and Chief Marketing Officer | | 2009 |

| Michael J. Schweninger | | 44 | | Vice President and Controller | | 2009 |

Ms. Meyer was appointed Senior Vice President and Chief Marketing Officer in September 2009.

Prior to joining our company, Ms. Meyer held various senior marketing positions, most recently serving as Vice President and Chief Marketing Officer for Chrysler, LLC from August 2007 to December 2008.

Mr. Schweninger was appointed Vice President and Controller effective March 2009.

Since joining our company in 2005, he also has held the positions of Director – Finance & Accounting Process Improvement and Director of Corporate Audit.

The table below sets forth, for the quarterly periods indicated, the range of high and low closing prices for our common [removed: shares.][added: shares and dividend per share information:]

| | December 31, [removed: 2012] [added: 2013] | | | | | | | | [added: | | | |] December 31, [removed: 2011] [added: 2012] | | | | | | | [added: | | | |]

| | High | | | | Low | | | | [added: Declared Dividend | | | |] High | | | | Low | | | [added: | Declared Dividend | | |]

| 1st Quarter | $ | [removed: 9.61] [added: 21.67] | | | $ | [removed: 6.52] [added: 18.02] | | | $ | [removed: 8.69] [added: —] | | | $ | [removed: 6.54] [added: 9.61] | | [added: | $ | 6.52 | | | $ | — | |]

| 2nd Quarter | [removed: 10.70] [added: 24.25] | | | | [removed: 7.69] [added: 17.54] | | | | [removed: 8.44] [added: —] | | | | [removed: 6.93] [added: 10.70] | | | [added: | 7.69 | | | | — | | |]

| 3rd Quarter | [removed: 16.98] [added: 20.39] | | | | [removed: 10.02] [added: 15.11] | | | | [removed: 7.84] [added: 0.10] | | | | [removed: 3.61] [added: 16.98] | | | [added: | 10.02 | | | | — | | |]

| 4th Quarter | [removed: 18.61] [added: 20.37] | | | | [removed: 15.24] [added: 15.54] | | | | [removed: 6.48] [added: 0.05] | | | | [removed: 3.54] [added: 18.61] | | | [added: | 15.24 | | | | — | | |]

At February 1, [removed: 2013,] [added: 2014,] there were [removed: 2,983] [added: 2,868] shareholders of record.

Issuer Purchases of Equity Securities [removed: (1)]

| | (a) Total number of shares purchased [added: (1)] | | | (b) Average price paid per share [added: (1)] | | | | (c) Total number of shares purchased as part of publicly announced plans or programs | | | (d) Approximate dollar value of shares that may yet be purchased under the plans or programs ($000’s omitted) | [added: | | |]

| [removed: (1)] [added: (2)] | Pursuant to [added: the two] $100 million [removed: stock] [added: share] repurchase programs authorized and announced by our Board of Directors in October 2002 and October [removed: 2005 and a] [added: 2005, the] $200 million [removed: stock] [added: share] repurchase authorized and announced in February [removed: 2006] [added: 2006, and the $250 million share repurchase authorized and announced in July 2013] (for a total [removed: stock] [added: share] repurchase authorization of [removed: $400] [added: $650] million), [removed: the Company has] [added: we have] repurchased a total of [removed: 9,688,900] [added: 16,925,409] shares for a total of [removed: $297.7] [added: $415.8] million. [added: We have fully utilized the authorizations provided by the 2002, 2005, and 2006 share repurchase authorizations and will no longer conduct share repurchases under these programs. The July 2013 share repurchase authorization has $234.3 million remaining as of December 31, 2013.] There [removed: are] [added: is] no expiration [removed: dates] [added: date] for [removed: the programs.] [added: this program.] |

The information required by this item with respect to equity compensation plans is set forth under [Item [removed: 12](#s48D0740FADF8B82DAE7928263CEB1254)] [added: 12](#s9FA31E9464D848DF9792018EE97E41FC)] of this annual report on Form 10-K and is incorporated herein by reference.

The following line graph compares for the fiscal years ended December 31, [removed: 2008,] 2009, 2010, 2011, [added: 2012,] and [removed: 2012] [added: 2013] (a) the yearly cumulative total shareholder return (i.e., the change in share price plus the cumulative amount of dividends, assuming dividend reinvestment, divided by the initial share price, expressed as a percentage) on PulteGroup’s common shares, with (b) the cumulative total return of the Standard & Poor’s 500 Stock Index, and with (c) the Dow Jones U.S. Select Home Construction Index.

Fiscal Year Ended December 31, [removed: 2012][added: 2013]

[removed: ][added: ]

| | | [removed: 2007 | | |] 2008 | | | 2009 | | | 2010 | | | 2011 | | | 2012 | | [added: | 2013 | |]

| Dow Jones U.S. Select Home Construction Index | | 100.00 | | | [removed: 59.79] [added: 103.13] | | | [removed: 61.67] [added: 114.65] | | | [removed: 68.55] [added: 104.90] | | | [removed: 62.72] [added: 188.49] | | | [removed: 112.70] [added: 223.18] | |

* Assumes $100 invested on December 31, [removed: 2007,] [added: 2008,] and the reinvestment of dividends.

| | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | |

| October 1, 2013 to October 31, 2013 | — | | | $ | — | | | — | | | $ | 269,321 | | (2) |

| November 1, 2013 to November 30, 2013 | 894,286 | | | 16.77 | | | | 886,509 | | | $ | 254,467 | | (2) |

| December 1, 2013 to December 31, 2013 | 1,238,872 | | | 18.34 | | | | 1,100,000 | | | $ | 234,290 | | (2) |

| Total | 2,133,158 | | | $ | 17.68 | | | 1,986,509 | | | | | | |

| (1) | During the fourth quarter of 2013, a total of 146,649 shares were surrendered by employees for payment of minimum tax obligations upon the vesting or exercise of previously granted stock-based compensation awards. Such shares were not repurchased as part of our publicly-announced stock repurchase programs. |

| | |

| --- | --- |

| PULTEGROUP, INC. | | 100.00 | | | 91.49 | | | 68.80 | | | 57.73 | | | 166.15 | | | 187.99 | |

| S&P 500 Index - Total Return | | 100.00 | | | 126.47 | | | 145.52 | | | 148.59 | | | 172.37 | | | 228.17 | |

| | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | |

No dividends were declared during 2012 or 2011.

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | |

| October 1, 2012 to October 31, 2012 | — | | | — | | | | — | | | 102,342(1) |

| November 1, 2012 to November 30, 2012 | — | | | — | | | | — | | | 102,342(1) |

| December 1, 2012 to December 31, 2012 | — | | | $ | — | | | — | | | 102,342(1) |

| Total | — | | | $ | — | | | — | | | |

| PULTEGROUP, INC. | | 100.00 | | | 105.06 | | | 96.12 | | | 72.28 | | | 60.65 | | | 174.56 | |

| S&P 500 Index - Total Return | | 100.00 | | | 63.00 | | | 79.68 | | | 91.68 | | | 93.61 | | | 108.60 | |

| | [added: 2013 | | | |] 2012 | | | | 2011 | | | | 2010 | | | | 2009 (a) | | | [removed: | 2008 | | |]

| Revenues | $ | [removed: 4,659,110] [added: 5,538,644] | | | $ | [removed: 4,033,596] [added: 4,659,110] | | | $ | [removed: 4,447,627] [added: 4,033,596] | | | $ | [removed: 3,966,589] [added: 4,447,627] | | | $ | [removed: 6,112,038] [added: 3,966,589] | |

| Income (loss) before income taxes | $ | [removed: 157,991] [added: 479,113] | | | $ | [removed: (275,830] [added: 157,991] | [removed: )] | | $ | [removed: (1,240,155] [added: (275,830] | ) | | $ | [removed: (1,920,081] [added: (1,240,155] | ) | | $ | [removed: (1,710,644] [added: (1,920,081] | ) |

| Revenues | $ | [removed: 160,888] [added: 140,951] | | | $ | [removed: 103,094] [added: 160,888] | | | $ | [removed: 121,663] [added: 103,094] | | | $ | [removed: 117,800] [added: 121,663] | | | $ | [removed: 151,016] [added: 117,800] | |

| Income (loss) before income taxes | $ | [added: 48,709 | | | $ |] 25,563 | | | $ | (34,470 | ) | | $ | 5,609 | | | $ | (55,038 | ) | [removed: | $ | 28,045 | |]

| Revenues | $ | [removed: 4,819,998] [added: 5,679,595] | | | $ | [removed: 4,136,690] [added: 4,819,998] | | | $ | [removed: 4,569,290] [added: 4,136,690] | | | $ | [removed: 4,084,389] [added: 4,569,290] | | | $ | [removed: 6,263,054] [added: 4,084,389] | |

| Income (loss) before income taxes | $ | [removed: 183,554] [added: 527,822] | | | $ | [removed: (310,300] [added: 183,554] | [removed: )] | | $ | [removed: (1,234,546] [added: (310,300] | ) | | $ | [removed: (1,975,119] [added: (1,234,546] | ) | | $ | [removed: (1,682,599] [added: (1,975,119] | ) |

| Income tax expense (benefit) | [removed: (22,591] [added: (2,092,294] | | ) | | [removed: (99,912] [added: (22,591] | | ) | | [removed: (137,817] [added: (99,912] | | ) | | [removed: (792,552] [added: (137,817] | | ) | | [removed: (209,486] [added: (792,552] | | ) |

| Net income (loss) | $ | [removed: 206,145] [added: 2,620,116] | | | $ | [removed: (210,388] [added: 206,145] | [removed: )] | | $ | [removed: (1,096,729] [added: (210,388] | ) | | $ | [removed: (1,182,567] [added: (1,096,729] | ) | | $ | [removed: (1,473,113] [added: (1,182,567] | ) |

| Basic | $ | [removed: 0.54] [added: 6.79] | | | $ | [removed: (0.55] [added: 0.54] | [removed: )] | | $ | [removed: (2.90] [added: (0.55] | ) | | $ | [removed: (3.94] [added: (2.90] | ) | | $ | [removed: (5.81] [added: (3.94] | ) |

| Diluted | $ | [removed: 0.54] [added: 6.72] | | | $ | [removed: (0.55] [added: 0.54] | [removed: )] | | $ | [removed: (2.90] [added: (0.55] | ) | | $ | [removed: (3.94] [added: (2.90] | ) | | $ | [removed: (5.81] [added: (3.94] | ) |

| Basic | [removed: 381,562] [added: 383,077] | | | | [removed: 379,877] [added: 381,562] | | | | [removed: 378,585] [added: 379,877] | | | | [removed: 300,179] [added: 378,585] | | | | [removed: 253,512] [added: 300,179] | | |

| Effect of dilutive securities | [removed: 3,002] [added: 3,789] | | | | [removed: —] [added: 3,002] | | | | — | | | | — | | | | — | | |

| Diluted | [removed: 384,564] [added: 386,866] | | | | [removed: 379,877] [added: 384,564] | | | | [removed: 378,585] [added: 379,877] | | | | [removed: 300,179] [added: 378,585] | | | | [removed: 253,512] [added: 300,179] | | |

| Shareholders’ equity | $ | [removed: 5.66] [added: 12.19] | | | $ | [removed: 5.07] [added: 5.66] | | | $ | [removed: 5.59] [added: 5.07] | | | $ | [removed: 8.39] [added: 5.59] | | | $ | [removed: 10.98] [added: 8.39] | |

| Cash dividends declared | $ | [removed: —] [added: 0.15] | | | $ | — | | | $ | — | | | $ | — | | | $ | [removed: 0.16] [added: —] | |

| (a) | Includes operations of Centex [removed: Corporation] since August 18, 2009. |

| | [added: 2013 | | | |] 2012 | | | | 2011 | | | | 2010 | | | | 2009 (a) | | | [removed: | 2008 | | |]

| House and land inventory | $ | [removed: 4,214,046] [added: 3,978,561] | | | $ | [removed: 4,636,468] [added: 4,214,046] | | | $ | [removed: 4,781,813] [added: 4,636,468] | | | $ | [removed: 4,940,358] [added: 4,781,813] | | | $ | [removed: 4,201,289] [added: 4,940,358] | |

| Total assets | [removed: 6,734,409] [added: 8,734,143] | | | | [removed: 6,885,620] [added: 6,734,409] | | | | [removed: 7,699,376] [added: 6,885,620] | | | | [removed: 10,051,222] [added: 7,699,376] | | | | [removed: 7,708,458] [added: 10,051,222] | | |

| Senior notes | [removed: 2,509,613] [added: 2,058,168] | | | | [removed: 3,088,344] [added: 2,509,613] | | | | [removed: 3,391,668] [added: 3,088,344] | | | | [removed: 4,281,532] [added: 3,391,668] | | | | [removed: 3,166,305] [added: 4,281,532] | | |

| Shareholders’ equity | [removed: 2,189,616] [added: 4,648,952] | | | | [removed: 1,938,615] [added: 2,189,616] | | | | [removed: 2,135,167] [added: 1,938,615] | | | | [removed: 3,194,440] [added: 2,135,167] | | | | [removed: 2,835,698] [added: 3,194,440] | | |

| | [added: 2013 | | | |] 2012 | | | | 2011 | | | | 2010 | | | | 2009 (a) | | | [removed: | 2008 | | |]

| Markets, at year-end | [removed: 58] [added: 48] | | | | [removed: 61] [added: 58] | | | | [removed: 67] [added: 61] | | | | [removed: 69] [added: 67] | | | | [removed: 49] [added: 69] | | |

| Active communities, at year-end | [removed: 670] [added: 577] | | | | [removed: 700] [added: 670] | | | | [removed: 786] [added: 700] | | | | [removed: 882] [added: 786] | | | | [removed: 572] [added: 882] | | |

| Closings (units) | [removed: 16,505] [added: 17,766] | | | | [removed: 15,275] [added: 16,505] | | | | [removed: 17,095] [added: 15,275] | | | | [removed: 15,013] [added: 17,095] | | | | [removed: 21,022] [added: 15,013] | | |

| Net new orders (units) | [removed: 19,039] [added: 17,080] | | | | [removed: 15,215] [added: 19,039] | | | | [removed: 15,148] [added: 15,215] | | | | [removed: 14,185] [added: 15,148] | | | | [removed: 15,306] [added: 14,185] | | |

| Backlog (units), at year-end | [removed: 6,458] [added: 5,772] | | | | [removed: 3,924] [added: 6,458] | | | | [removed: 3,984] [added: 3,924] | | | | [removed: 5,931] [added: 3,984] | | | | [removed: 2,174] [added: 5,931] | | |

| Average selling price (per unit) | $ | [removed: 276,000] [added: 305,000] | | | $ | [removed: 259,000] [added: 276,000] | | | $ | 259,000 | | | $ | [removed: 258,000] [added: 259,000] | | | $ | [removed: 284,000] [added: 258,000] | |

| Gross margin from home sales (b) | [removed: 15.8] [added: 20.5] | | % | | [removed: 12.8] [added: 15.8] | | % | | [removed: 9.4] [added: 12.8] | | % | | [removed: (10.5] [added: 9.4] | | [removed: )%] [added: %] | | [removed: (10.1] [added: (10.5] | | )% |

| (b) | Homebuilding interest expense, which represents the amortization of capitalized interest, and land [removed: and community valuation adjustments] [added: impairment charges] are included in home sale cost of revenues. |

December 31, [removed: 2012] [added: 2013] and [removed: 2011][added: 2012]

| | [added: 2013 | | | |] 2012 | | | | 2011 | | |

| Cash and equivalents [removed: | $] [added: at beginning of period] | 1,404,760 | | | [removed: $] | 1,083,071 | | [added: | | 1,483,390 | | |]

| Restricted cash | [removed: 71,950] [added: 72,715] | | | | [removed: 101,860] [added: 71,950] | | |

| House and land inventory | [removed: 4,214,046] [added: 3,978,561] | | | | [removed: 4,636,468] [added: 4,214,046] | | |

| Land held for sale | [removed: 91,104] [added: 61,735] | | | | [removed: 135,307] [added: 91,104] | | |

| Land, not owned, under option agreements | [removed: 31,066] [added: 24,024] | | | | [removed: 24,905] [added: 31,066] | | |

| Residential mortgage loans available-for-sale | [removed: 318,931] [added: 287,933] | | | | [removed: 258,075] [added: 318,931] | | |

| Investments in unconsolidated entities | [removed: 45,629] [added: 45,323] | | | | [removed: 35,988] [added: 45,629] | | |

| Other assets | [removed: 407,675] [added: 460,621] | | | | [removed: 447,598] [added: 407,675] | | |

| Intangible assets | [removed: 149,248] [added: 136,148] | | | | [removed: 162,348] [added: 149,248] | | |

| | $ | [removed: 6,734,409] [added: 8,734,143] | | | $ | [removed: 6,885,620] [added: 6,734,409] | |

| Accounts payable, including book overdrafts of [removed: $42,053] [added: $35,827] and [removed: $48,380] [added: $42,053] in [removed: 2012] [added: 2013] and [removed: 2011,] [added: 2012,] respectively | $ | [removed: 178,274] [added: 202,736] | | | $ | [removed: 196,447] [added: 178,274] | |

| Customer deposits | [removed: 101,183] [added: 134,858] | | | | [removed: 46,960] [added: 101,183] | | |

| Accrued and other liabilities | [removed: 1,418,063] [added: 1,377,750] | | | | [removed: 1,411,941] [added: 1,418,063] | | |

| Income tax liabilities | [removed: 198,865] [added: 206,015] | | | | [removed: 203,313] [added: 198,865] | | |

| Financial Services debt | [removed: 138,795] [added: 105,664] | | | | [removed: —] [added: 138,795] | | |

| Senior notes | [removed: 2,509,613] [added: 2,058,168] | | | | [removed: 3,088,344] [added: 2,509,613] | | |

| Total liabilities | [removed: 4,544,793] [added: 4,085,191] | | | | [removed: 4,947,005] [added: 4,544,793] | | |

| Common stock, $0.01 par value; [removed: 400,000,000] [added: 500,000,000] shares authorized, [removed: 386,608,436] [added: 381,299,600] and [removed: 382,607,543] [added: 386,608,436] shares issued and outstanding at December 31, [removed: 2012] [added: 2013] and [removed: 2011,] [added: 2012,] respectively | [removed: 3,866] [added: 3,813] | | | | [removed: 3,826] [added: 3,866] | | |

| Additional paid-in capital | [removed: 3,030,889] [added: 3,052,016] | | | | [removed: 2,986,240] [added: 3,030,889] | | |

| Accumulated other comprehensive loss | [removed: (992] [added: (795] | | ) | | [removed: (1,306] [added: (992] | | ) |

| [removed: Accumulated deficit] [added: Retained earnings (accumulated deficit)] | [removed: (844,147] [added: 1,593,918] | | [removed: )] | | [removed: (1,050,145] [added: (844,147] | | ) |

| Total shareholders’ equity | [removed: 2,189,616] [added: 4,648,952] | | | | [removed: 1,938,615] [added: 2,189,616] | | |

| | $ | [removed: 6,734,409] [added: 8,734,143] | | | $ | [removed: 6,885,620] [added: 6,734,409] | |

For the years ended December 31, [added: 2013,] 2012, [removed: 2011,] and [removed: 2010][added: 2011]

| | [removed: 2012] [added: 2013] | | | | [removed: 2011] [added: 2012] | | | | [removed: 2010] [added: 2011] | | |

| Home sale revenues | $ | [removed: 4,552,412] [added: 5,424,309] | | | $ | [removed: 3,950,743] [added: 4,552,412] | | | $ | [removed: 4,419,812] [added: 3,950,743] | |

| Land sale revenues | [removed: 106,698] [added: 114,335] | | | | [removed: 82,853] [added: 106,698] | | | | [removed: 27,815] [added: 82,853] | | |

| | [removed: 4,659,110] [added: 5,538,644] | | | | [removed: 4,033,596] [added: 4,659,110] | | | | [removed: 4,447,627] [added: 4,033,596] | | |

| Financial Services | [removed: 160,888] [added: 140,951] | | | | [removed: 103,094] [added: 160,888] | | | | [removed: 121,663] [added: 103,094] | | |

| Total revenues | [removed: 4,819,998] [added: 5,679,595] | | | | [removed: 4,136,690] [added: 4,819,998] | | | | [removed: 4,569,290] [added: 4,136,690] | | |

| Home sale cost of revenues | [removed: 3,833,451] [added: 4,310,528] | | | | [removed: 3,444,398] [added: 3,833,451] | | | | [removed: 4,006,385] [added: 3,444,398] | | |

| Land sale cost of revenues | [removed: 94,880] [added: 104,426] | | | | [removed: 59,279] [added: 94,880] | | | | [removed: 53,555] [added: 59,279] | | |

| | [removed: 3,928,331] [added: 4,414,954] | | | | [removed: 3,503,677] [added: 3,928,331] | | | | [removed: 4,059,940] [added: 3,503,677] | | |

| Financial Services expenses | [removed: 135,511] [added: 92,379] | | | | [removed: 137,666] [added: 135,511] | | | | [removed: 116,122] [added: 137,666] | | |

| Selling, [removed: general] [added: general,] and administrative expenses | [removed: 514,457] [added: 568,500] | | | | [removed: 519,583] [added: 514,457] | | | | [removed: 895,102] [added: 519,583] | | |

| Other [removed: expense (income),] [added: expense,] net | [removed: 66,298] [added: 80,753] | | | | [removed: 293,102] [added: 66,298] | | | | [removed: 742,385] [added: 293,102] | | |

| Interest income | [removed: (4,913] [added: (4,395] | | ) | | [removed: (5,055] [added: (4,913] | | ) | | [removed: (9,531] [added: (5,055] | | ) |

| Interest expense | [removed: 819] [added: 712] | | | | [removed: 1,313] [added: 819] | | | | [removed: 2,729] [added: 1,313] | | |

| | 2013 | | | | 2012 | | |

| Cash and equivalents | $ | 1,580,329 | | | $ | 1,404,760 | |

| Deferred tax assets, net | 2,086,754 | | | | — | | |

| Cash dividends declared | $ | 0.15 | | | $ | — | | | $ | — | |

(000’s omitted)

| Stock option exercises | 1,432 | | | 14 | | | | 19,397 | | | | — | | | | — | | | | 19,411 | | |

| Dividends declared | — | | | — | | | | — | | | | — | | | | (57,530 | | ) | | (57,530 | | ) |

| Stock repurchases | (7,742 | ) | | (77 | | ) | | (3,063 | | ) | | — | | | | (124,521 | | ) | | (127,661 | | ) |

| Excess tax benefits (deficiencies) from stock-based compensation | | | | | | | | (9,671 | | ) | | | | | | | | | | (9,671 | | ) |

| Shareholders' Equity, December 31, 2013 | 381,300 | | | $ | 3,813 | | | $ | 3,052,016 | | | $ | (795 | ) | | $ | 1,593,918 | | | $ | 4,648,952 | |

| Deferred income taxes | (2,096,425 | | ) | | — | | | | — | | |

| Dividends paid | (38,382 | | ) | | — | | | | — | | |

Such receivables are generally reported in other assets.

| (a) | Includes charges of $41.2 million in 2013 resulting from a contractual dispute related to a previously completed luxury community (see [Note 13](#sDEFAF56912CB443C3D44018ECD0BD0C1)) and $5.1 million in 2012 and $17.1 million in 2011 related to the write-down of notes receivable. |

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):

| Numerator: | | | | | | | | | | | |

| Net income | $ | 2,620,116 | | | $ | 206,145 | | | $ | (210,388 | ) |

| Less: earnings distributed to participating securities | (407 | | ) | | — | | | | — | | |

| Less: undistributed earnings allocated to participating securities | (19,201 | | ) | | — | | | | — | | |

| Numerator for basic earnings per share | $ | 2,600,508 | | | $ | 206,145 | | | $ | (210,388 | ) |

| Add back: undistributed earnings allocated to participating securities | 19,201 | | | | — | | | | — | | |

| Less: undistributed earnings reallocated to participating securities | (18,845 | | ) | | — | | | | — | | |

| Numerator for diluted earnings per share | $ | 2,600,864 | | | $ | 206,145 | | | $ | (210,388 | ) |

| Denominator: | | | | | | | | | | | |

| Basic shares outstanding | 383,077 | | | | 381,562 | | | | 379,877 | | |

| Diluted shares outstanding | 386,866 | | | | 384,564 | | | | 379,877 | | |

| Earnings per share: | | | | | | | | | | | |

| Basic | $ | 6.79 | | | $ | 0.54 | | | $ | (0.55 | ) |

| Diluted | $ | 6.72 | | | $ | 0.54 | | | $ | (0.55 | ) |

We measure compensation cost for restricted stock and restricted stock units at fair value on the grant date.

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.

If there is a loss on the sale of the property, the loss on such sale is recognized at the time of closing.

| Land options with VIEs | $ | 40,486 | | | $ | 661,158 | | | $ | 8,167 | | | $ | 29,294 | | | $ | 369,085 | | | $ | 8,590 | |

| Other land options | 50,548 | | | | 729,128 | | | | 15,857 | | | | 40,822 | | | | 554,307 | | | | 22,476 | | |

| | $ | 91,034 | | | $ | 1,390,286 | | | $ | 24,024 | | | $ | 70,116 | | | $ | 923,392 | | | $ | 31,066 | |

We have the intent and ability to hold these loans for the foreseeable future or until maturity or payoff.

| | $ | 8,191 | | | $ | 607 | | | $ | 6,320 | | | $ | 1,000 | |

Corporate office relocation

On May 31, 2013, we announced our plan to relocate our corporate offices to Atlanta, Georgia, from its current location in Bloomfield Hills, Michigan, in 2014.

PULTEGROUP, INC.

PULTEGROUP, INC.

(000’s omitted, except per share data)

PULTEGROUP, INC.

| Foreign currency translation adjustments | — | | | | — | | | | 6 | | |

| Shareholders' Equity, January 1, 2010 | 380,690 | | | $ | 3,807 | | | $ | 2,935,737 | | | $ | (2,249 | ) | | $ | 257,145 | | | $ | 3,194,440 | |

| Stock repurchases | (448 | ) | | (5 | | ) | | (3,549 | | ) | | — | | | | (469 | | ) | | (4,023 | | ) |

| Cash and equivalents at beginning of period | 1,083,071 | | | | 1,483,390 | | | | 1,860,387 | | |

Reclassification

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We consider the creditworthiness of the counterparty when evaluating the relative risk and return involved in pursuing the applicable transaction.

Due to the unique facts and circumstances surrounding each receivable, we assess the need for an allowance for each receivable on an individual basis.

Factors considered as part of this assessment include the counterparty's payment history, the value of any underlying collateral, communications with the counterparty, knowledge of the counterparty's financial condition and plans, and the current and expected economic environment.

Allowances are generally recorded in other expense (income), net when it becomes likely that some amount will not be collectible.

Notes receivable are written off when it is determined that collection efforts will no longer be pursued.

Interest income is recognized as earned.

The decrease in the allowance for credit losses during 2012 relates primarily to settlement of a note receivable, for which an allowance had been recorded in previous periods, for an amount that approximated the note receivable's net book value.

Such receivables are generally non-interest bearing and non-collateralized, payable either on demand or upon the occurrence of a specified event, and are generally reported in other assets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Goodwill

Goodwill represents the cost of acquired companies in excess of the fair value of the net assets of such companies at the acquisition date.

Recorded goodwill is allocated to our reporting units based on the relative fair value of each acquired reporting unit.

We assess the goodwill balance of each reporting unit for impairment annually in the fourth quarter and when events or changes in circumstances indicate the carrying amount might not be recoverable.

All goodwill was written-off as of December 31, 2011.

| | |

| --- | --- |

| (a) | Excludes lease exit costs classified within Financial Services expenses of $0.5 million, $0.1 million, and $2.9 million in 2012, 2011, and 2010, respectively. |

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Although our outstanding restricted stock and restricted stock units are considered participating securities, there were no earnings attributable to restricted shareholders during 2012, 2011, or 2010.

| Consolidated VIEs | $ | 5,216 | | | $ | 8,590 | | | $ | 8,590 | | | $ | 2,781 | | | $ | 5,957 | | | $ | 3,837 | |

| Unconsolidated VIEs | 24,078 | | | | 360,495 | | | | — | | | | 21,180 | | | | 240,958 | | | | — | | |

| Other land option agreements | 40,822 | | | | 554,307 | | | | 22,476 | | | | 33,086 | | | | 451,079 | | | | 21,068 | | |

| | $ | 70,116 | | | $ | 923,392 | | | $ | 31,066 | | | $ | 57,047 | | | $ | 697,994 | | | $ | 24,905 | |

See [Note 13](#s8DA5200B6E4E4E1A3CA72825C483B8BD).

| | $ | 6,320 | | | $ | 1,000 | | | $ | 3,648 | | | $ | 3,556 | |

New accounting pronouncements

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, “Fair Value Measurement” (“ASU 2011-04”), which amended Accounting Standards Codification (ASC) 820 to clarify existing guidance and minimize differences between U.S. GAAP and International Financial Reporting Standards (IFRS).

ASU 2011-04 requires entities to provide information about valuation techniques and unobservable inputs used in Level 3 fair value measurements and provide additional disclosures for classes of assets and liabilities disclosed at fair value.

We adopted ASU 2011-04 as of January 1, 2012, which did not have a material impact on our financial statements.

Management, including our Chairman, President and Chief Executive Officer and Executive Vice President and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, [removed: 2012.][added: 2013.]

Based upon, and as of the date of that evaluation, our Chairman, President and Chief Executive Officer and Executive Vice President and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of December 31, [removed: 2012.][added: 2013.]

The consolidated financial statements have been prepared in conformity with [removed: United States] [added: U.S.] generally accepted accounting principles and reflect management’s judgments and estimates concerning events and transactions that are accounted for or disclosed.

In order to ensure that the Company’s internal control over financial reporting is effective, management regularly assesses such controls and did so most recently for its financial reporting as of December 31, [removed: 2012.][added: 2013.]

Management’s assessment was based on criteria for effective internal control over financial reporting described in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway [removed: Commission.][added: Commission (1992 Framework).]

Based on this assessment, management asserts that the Company has maintained effective internal control over financial reporting as of December 31, [removed: 2012.][added: 2013.]

Ernst & Young LLP, the independent registered public accounting firm that audited the Company’s consolidated financial statements included in this annual report, has issued its report on the effectiveness of the Company’s internal control over financial reporting as of December 31, [removed: 2012.][added: 2013.]

We have audited PulteGroup, Inc.’s internal control over financial reporting as of December 31, [removed: 2012,] [added: 2013,] based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission [added: (1992 Framework)] (the COSO criteria).

In our opinion, PulteGroup, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2012,] [added: 2013,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of PulteGroup, Inc. as of December 31, [removed: 2012] [added: 2013] and [removed: 2011,] [added: 2012,] and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended December 31, [removed: 2012] [added: 2013] and our report dated February [removed: 6, 2013] [added: 5, 2014] expressed an unqualified opinion thereon.

There has been no change in our internal control over financial reporting during the quarter ended December 31, [removed: 2012] [added: 2013] that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

/s/ Ernst & Young LLP

February 5, 2014

February 6, 2013

Information required by this Item with respect to members of our Board of Directors and with respect to our audit committee will be contained in the Proxy Statement for the [removed: 2013] [added: 2014] Annual Meeting of Shareholders [removed: (“2013] [added: (“2014] Proxy Statement”) under the captions “Election of Directors” and “Committees of the Board of Directors - Audit Committee” and in the chart disclosing Audit Committee membership and is incorporated herein by this reference.

Information required by this Item with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934 will be contained in the [removed: 2013] [added: 2014] Proxy Statement under the caption “Beneficial Security Ownership - Section 16(a) Beneficial Ownership Reporting Compliance,” and is incorporated herein by this reference.

Information required by this Item with respect to our code of ethics will be contained in the [removed: 2013] [added: 2014] Proxy Statement under the caption “Corporate Governance - Governance Guidelines; Code of Ethical Business Conduct; Code of Ethics” and is incorporated herein by this reference.

Information required by this Item will be contained in the [removed: 2013] [added: 2014] Proxy Statement under the captions [removed: “2012] [added: “2013] Executive Compensation” and [removed: “2012] [added: “2013] Director Compensation” and is incorporated herein by this reference, provided that the Compensation and Management Development Committee Report shall not be deemed to be “filed” with this Annual Report on Form 10-K.

Information required by this Item will be contained in the [removed: 2013] [added: 2014] Proxy Statement under the captions “Beneficial Security Ownership” and “Equity Compensation Plan Information” and is incorporated herein by this reference.

Information required by this Item will be contained in the [removed: 2013] [added: 2014] Proxy Statement under the captions “Certain Relationships and Related Transactions” and “Election of Directors - Independence” and is incorporated herein by this reference.

Information required by this Item will be contained in the [removed: 2013] [added: 2014] Proxy Statement under the captions “Audit and Non-Audit Fees” and “Audit Committee Preapproval Policies” and is incorporated herein by reference.

| [Consolidated Balance Sheets at December 31, [removed: 2012] [added: 2013] and [removed: 2011](#sF7C27C362E0B4DEA2D722825BDFD931E)] [added: 2012](#s587DA6FC02EF53D3460F018ECD6F6902)] | [removed: [46](#sBB4940B268A7B8EEB9A92825BD17236D)] [added: [46](#s7A5A24F26B427ADBEB4C018ECDC9EA99)] |

| [Consolidated Statements of Operations for the years ended December 31, [added: 2013,] 2012, [removed: 2011,] and [removed: 2010](#sF7C27C362E0B4DEA2D722825BDFD931E)] [added: 2011](#s587DA6FC02EF53D3460F018ECD6F6902)] | [removed: [47](#s24DB0EF2932527EFC3022825BD21209E)] [added: [47](#sD1E6860CE17F2CC17F7E018ECD47370C)] |