PulteGroup (PHM) 10-K risk factor changes: FY2016 vs FY2015

[removed: Downward] [added: The homebuilding industry is cyclical and a deterioration in industry conditions or downward] changes in general [removed: economic, real estate construction,] [added: economic] or other business conditions could adversely affect our business or our financial results.

Adverse changes in any of these conditions generally, or in the markets where we operate, could decrease demand and pricing for new homes in these areas or result in customer cancellations of pending contracts, which could adversely affect the number of home deliveries we make or reduce the prices we can charge for homes, either of which could result in a decrease in our revenues and earnings [removed: and would] [added: that could] adversely affect our financial condition.

[removed: We also] [added: During this period, we] incurred [removed: substantial] [added: significant losses, including] impairments of our land inventory and certain other [removed: assets during this period.][added: assets.]

Since 2011, overall industry new home sales have increased, and we returned to [removed: profitability.][added: profitability beginning in 2012.]

Accordingly, we can provide no assurances that the adjustments we have made in our operating strategy will be [removed: successful.][added: successful if the current housing market was to deteriorate significantly.]

Labor shortages in certain of our markets have become more acute in recent [removed: quarters] [added: years] as the supply chain adjusts to uneven industry growth.

We may also be required to indemnify underwriters that purchased and securitized loans originated by a former subsidiary of Centex [added: Corporation ("Centex"), which we acquired in 2009,] for losses incurred by investors in those securitized loans based on similar breaches of representations and warranties.

[removed: Interest] [added: While mortgage interest] rates have [added: increased moderately, they have] been near historical lows for several years, which has made new homes more affordable.

[removed: We also believe that] [added: Additionally,] the availability of FHA and VA mortgage financing is an important factor in marketing some of our homes.

[added: Any changes to income tax laws by the] federal government or a state government to eliminate or substantially reduce these income tax deductions, as has been considered from time to time, would increase the after-tax cost of owning a home.

We may need credit-related liquidity for the future development of our [removed: business.][added: business and other capital needs.]

At December 31, [removed: 2015,] [added: 2016,] we had [added: cash,] cash [added: equivalents,] and [removed: equivalents of $754.2 million,] restricted cash [removed: totaling $21.3 million, and $308.7] [added: of $723.2] million [added: as well as $530.9 million] available under our revolving credit facility, net of outstanding letters of credit.

However, our internal sources of liquidity [added: and revolving credit facility] may prove to be insufficient, and in such case, we may not be able to successfully obtain additional financing on terms acceptable to us, or at all.

At December 31, [removed: 2015,] [added: 2016,] we had outstanding letters of credit and surety bonds totaling [removed: $191.3] [added: $219.1] million and [removed: $1.0] [added: $1.1] billion, respectively.

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 position, cash flows, or net [removed: income for such period.][added: income.]

We may not realize our deferred [removed: income] tax assets.

As of December 31, [removed: 2015,] [added: 2016,] we had deferred [removed: income] tax assets, net of deferred tax liabilities, of [removed: $1.5] [added: $1.1] billion, against which we provided a valuation allowance of [removed: $109.1] [added: $64.9] million.

The ultimate realization of our deferred [removed: income] tax assets is dependent upon generating future taxable [removed: income and executing tax planning strategies.][added: income.]

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

Our ability to utilize net operating losses (“NOLs”), built-in losses (“BILs”), and tax credit carryforwards to offset our future taxable income [added: or income tax] would be limited if we were to undergo an “ownership change” within the meaning of Section 382 of the Internal Revenue Code (the “IRC”).

An ownership change under Section 382 of the IRC would establish an annual limitation to the amount of NOLs, BILs, and tax credit carryforwards we could utilize to offset our taxable income [added: or income tax] in any single year.

Our shareholder rights [removed: plan] [added: plan, as amended,] expires June 1, [removed: 2016,] [added: 2019,] unless our board of directors and shareholders approve an amendment to extend the term prior thereto.

[removed: As a result of our merger with Centex in 2009, our] [added: Our] ability to use certain of [removed: Centex’s pre-ownership change NOLs, BILs,] [added: Centex's federal losses] and [removed: deductions] [added: credits] is limited under Section 382 of the IRC.

These include eligibility requirements for participation in federal loan programs and compliance with consumer lending and similar [added: requirements such as disclosure requirements, prohibitions against discrimination, and real estate settlement procedures.]

They also subject our operations to examination by applicable agencies, pursuant to which those agencies may limit our ability to [removed: provide mortgage financing or title services to potential purchasers of our homes.]

Our computer systems, including our back-up systems, are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches (through cyberattacks from computer hackers and sophisticated organizations), catastrophic events such as fires, tornadoes and hurricanes, and usage [added: errors by our associates.]

We do not believe that the Section 382 limitations will prevent us from utilizing these Centex losses and credits.

We do believe that full utilization of certain state NOL carryforwards will be limited due to Section 382.

provide mortgage financing or title services to potential purchasers of our homes.

The homebuilding industry experienced a significant downturn from 2006 through 2011.

Although industry conditions improved beginning in 2012, the overall U.S. economy, while improving, remains challenged and consumer demand in the industry remains volatile.

A deterioration in industry conditions could adversely affect our business and results of operations.

These conditions contributed to sharply weakened demand for new homes and heightened pricing pressures on new and existing home sales.

As a result of these factors, we experienced significant decreases in our revenues and profitability during the period 2007 - 2011.

Any changes to income tax laws by the

We do not believe that the Section 382 limitation will prevent us from using Centex's pre-ownership change federal NOLs, BILs, or deductions, however, no assurance can be given that any such limitation will not occur, which could be material.

requirements such as disclosure requirements, prohibitions against discrimination, and real estate settlement procedures.

In January 2013, the Consumer Financial Protection Bureau ("CFPB") adopted new rules regarding the origination of mortgages, including the criteria for “qualified mortgages”, rules for lender practices regarding assessing borrowers’ ability to repay, and limitations on certain fees and incentive arrangements.

Such rules went into effect in January 2014.

The CFPB also issued the TILA-RESPA Integrated Disclosure ("TRID") rules, which combined the mortgage disclosures consumers receive under the Truth in Lending Act ("TILA") and the Real Estate Settlement and Procedures Act ("RESPA").

Such rules went into effect in October 2015.

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

Additionally, certain other rules required by the Dodd-Frank Act of 2010 have not yet been completed or implemented, which has created uncertainty in the overall U.S. financial services and mortgage industries as to their long-term impact.

errors by our associates.

During [removed: 2015,] [added: 2016,] we opened approximately 200 new communities across our [removed: existing] local [removed: markets, which represented a sizable increase compared with recent years] [added: markets] as a result of increased land investment over the last few years.

[removed: While we have experience opening new communities, this] [added: This] volume of new community openings [removed: presents] [added: can present] a challenge in today's environment where entitlement and land development delays are common.

Leveraging our increased land investments, we expect to open an even higher number of new communities in [removed: 2016] [added: 2017] than we did in [removed: 2015,] [added: 2016,] which we expect will help our volume [removed: to] grow in [removed: 2016.][added: 2017.]

[removed: In addition,] [added: Additionally,] we acquired substantially all of the assets of JW [removed: Homes, including the brand John Wieland] Homes [removed: and Neighborhoods,] [added: ("Wieland")] in January 2016, which [removed: will] also [removed: contribute] [added: contributed] to [added: the] growth in [removed: 2016.][added: community count.]

Specifically, we accomplished the following in [removed: 2015:][added: 2016:]

| • | Increased our land investment spending by [removed: 30%] [added: 24%] to support future [removed: growth;] [added: growth while also acquiring the Wieland assets for $430.5 million;] |

| • | Repurchased [removed: $433.7] [added: $600.0] million of shares under our share repurchase plan and authorized an additional [removed: $300.0 million] [added: $1.0 billion] for future repurchases; |

| • | [removed: Raised] [added: Maintained] our quarterly dividend [removed: from $0.08 to] [added: at] $0.09 per share; |

| • | Ended the year with a [added: debt to total capitalization ratio of 40.0%, which is within our targeted range, and a cash,] cash [added: equivalents, and restricted cash] balance of [removed: $754.2] [added: $723.2] million with no borrowings outstanding under our unsecured revolving credit agreement. |

Consistent with our positive market view and long-term business strategy, we expect to use our capital to support future growth while consistently returning funds to [removed: shareholders.][added: shareholders through dividends and share repurchases.]

| | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | |

| Homebuilding | $ | [removed: 757,317] [added: 860,766] | | | $ | [removed: 635,177] [added: 757,317] | | | $ | [removed: 479,113] [added: 635,177] | |

| Financial Services | [removed: 58,706] [added: 73,084] | | | | [removed: 54,581] [added: 58,706] | | | | [removed: 48,709] [added: 54,581] | | |

| Income before income taxes | [removed: 816,023] [added: 933,850] | | | | [removed: 689,758] [added: 816,023] | | | | [removed: 527,822] [added: 689,758] | | |

| Income tax expense [removed: (benefit)] | [removed: 321,933] [added: (331,147] | | [added: )] | | [removed: 215,420] [added: (321,933] | | [added: )] | | [removed: (2,092,294] [added: (215,420] | | ) |

| Net income | $ | [removed: 494,090] [added: 602,703] | | | $ | [removed: 474,338] [added: 494,090] | | | $ | [removed: 2,620,116] [added: 474,338] | |

| Net income | $ | [removed: 1.36] [added: 1.75] | | | $ | [removed: 1.26] [added: 1.36] | | | $ | [removed: 6.72] [added: 1.26] | |

| • | Homebuilding income before income taxes improved each year from [removed: 2013] [added: 2014] to [removed: 2015, primarily as] [added: 2016. Revenues increased each year and SG&A leverage improved. In 2016,] the [removed: result of higher] [added: revenue increase was partially offset by lower] gross margins and [removed: revenues.] [added: higher overhead costs, both of which were partially attributable to the assets acquired from Wieland in January 2016 (see [Note 1](#sAF16447860F4EBE25D5D75F2449FA699)).] Homebuilding income before income taxes also reflected the following significant expense (income) items ($000's omitted): |

| Corporate office relocation (see [Note [removed: 2](#s4D2EA01F731950E49BF2147D51DCAA46))] [added: 2](#s3E05BD30D217F420DF35F71F6856F524))] | $ | [removed: 4,369] [added: 8,284] | | | $ | [removed: 16,344] [added: 4,369] | | | $ | [removed: 15,376] [added: 16,344] | |

| Land-related charges (see [Note [removed: 3](#s82ABC8D6A8305DF7ADA6ABB1061F0C0A))] [added: 3](#sDFFE2D0D989FFB871C25F71F6867F3BE))] | [removed: 11,467] [added: 19,336] | | | | [removed: 11,168] [added: 11,467] | | | | [removed: 9,672] [added: 11,168] | | |

| Loss on debt retirements (see [Note [removed: 6](#s69B5854DB25F5B4486BA0C35BE6B5322))] [added: 6](#s098FB233016EF81A1086F71F6947E057))] | [removed: —] [added: 657] | | | | [removed: 8,584] [added: —] | | | | [removed: 26,930] [added: 8,584] | | |

| Applecross matter (see [Note [removed: 12](#s4B542EB2D81157D681F24D9F9198EAED))] [added: 12](#s16C8D60ED3B16EE548AAF71F6A858CAB))] | [removed: 20,000] [added: —] | | | | [removed: —] [added: 20,000] | | | | — | | |

| Insurance reserve adjustments (see [Note [removed: 12](#s4B542EB2D81157D681F24D9F9198EAED))] [added: 12](#s16C8D60ED3B16EE548AAF71F6A858CAB))] | [removed: (62,183] [added: (55,243] | | ) | | [removed: 69,267] [added: (62,183] | | [added: )] | | [removed: —] [added: 69,267] | | |

| | $ | [removed: (26,347] [added: 1,423] | [removed: )] | | $ | [removed: 105,363] [added: (26,347] | [added: )] | | $ | [removed: 93,148] [added: 105,363] | |

The acquisition of certain real estate assets from [added: Wieland in January 2016 and] Dominion Homes in August 2014 (see [Note [removed: 1](#sB95F9CCB04055FF791D04C3FA1642131)) was] [added: 1](#s84BB09648362B42FB992F71F67DB9AF6)) were] not material to our results of operations or financial condition.

| • | The increase in Financial Services income in [removed: 2015] [added: 2016] compared with [removed: 2014] [added: 2015] and [removed: 2013] [added: 2014] was primarily due to an increase in mortgage [removed: originations. Additionally,] [added: origination volume. During 2015 and 2014,] we reduced [added: our] loan [removed: loss reserves] [added: origination liabilities] by [added: net reserve releases of] $11.4 million [removed: in 2015 versus a reduction of] [added: and] $18.6 [removed: million in 2014. In 2013, loss reserves remained unchanged.] [added: million, respectively, which favorably impacted Financial Services income.] See [Note [removed: 12](#s4B542EB2D81157D681F24D9F9198EAED).] [added: 12](#s16C8D60ED3B16EE548AAF71F6A858CAB).] |

| | [removed: 2015] [added: 2016] | | | | FY [removed: 2015] [added: 2016] vs. FY [removed: 2014] [added: 2015] | | | [removed: 2014] [added: 2015] | | | | FY [removed: 2014] [added: 2015] vs. FY [removed: 2013] [added: 2014] | | | [removed: 2013] [added: 2014] | | |

| Home sale revenues | $ | [removed: 5,792,675] [added: 7,451,315] | | | [removed: 2] [added: 29] | % | | $ | [removed: 5,662,171] [added: 5,792,675] | | | [removed: 4] [added: 2] | % | | $ | [removed: 5,424,309] [added: 5,662,171] | |

| Land sale revenues | [removed: 48,536] [added: 36,035] | | | | [removed: 40] [added: (26] | [removed: %] [added: )%] | | [removed: 34,554] [added: 48,536] | | | | [removed: (70] [added: 40] | [removed: )%] [added: %] | | [removed: 114,335] [added: 34,554] | | |

| Total Homebuilding revenues | [removed: 5,841,211] [added: 7,487,350] | | | | [removed: 3] [added: 28] | % | | [removed: 5,696,725] [added: 5,841,211] | | | | 3 | % | | [removed: 5,538,644] [added: 5,696,725] | | |

| Land sale cost of revenues | [removed: 35,858] [added: (32,115] | | [added: )] | | [removed: 51] [added: (10] | [removed: %] [added: )%] | | [removed: 23,748] [added: (35,858] | | [added: )] | | [removed: (77] [added: 51] | [removed: )%] [added: %] | | [removed: 104,426] [added: (23,748] | | [added: )] |

| Other expense, net [removed: (c)] [added: (d)] | [removed: 17,363] [added: (49,345] | | [added: )] | | [removed: (35] [added: 184] | [removed: )%] [added: %] | | [removed: 26,736] [added: (17,363] | | [added: )] | | [removed: (65] [added: (35] | )% | | [removed: 76,077] [added: (26,736] | | [added: )] |

| Income before income taxes | $ | [removed: 757,317] [added: 860,766] | | | [removed: 19] [added: 14] | % | | $ | [removed: 635,177] [added: 757,317] | | | [removed: 33] [added: 19] | % | | $ | [removed: 479,113] [added: 635,177] | |

| Gross margin from home sales [added: (a) (b)] | [removed: 23.3] [added: 25.0] | | % | | [removed: 0] [added: (190)] bps | | | [removed: 23.3] [added: 26.9] | | % | | [removed: 280] [added: 20] bps | | | [removed: 20.5] [added: 26.7] | | % |

| Closings (units) | [removed: 17,127] [added: 19,951] | | | | [removed: —] [added: 16] | % | | [removed: 17,196] [added: 17,127] | | | | [removed: (3] [added: —] | [removed: )%] [added: %] | | [removed: 17,766] [added: 17,196] | | |

| Average selling price | $ | [removed: 338] [added: 373] | | | [removed: 3] [added: 10] | % | | $ | [removed: 329] [added: 338] | | | [removed: 8] [added: 3] | % | | $ | [removed: 305] [added: 329] | |

| Net new [removed: orders:] [added: orders (e):] | | | | | | | | | | | | | | | | | |

| Units | [removed: 18,008] [added: 20,326] | | | | [removed: 8] [added: 13] | % | | [removed: 16,652] [added: 18,008] | | | | [removed: (3] [added: 8] | [removed: )%] [added: %] | | [removed: 17,080] [added: 16,652] | | |

| Dollars [removed: (d)] | $ | [removed: 6,305,380] [added: 7,753,399] | | | [removed: 13] [added: 23] | % | | $ | [removed: 5,558,937] [added: 6,305,380] | | | [removed: 3] [added: 13] | % | | $ | [removed: 5,394,566] [added: 5,558,937] | |

| Cancellation rate | [removed: 14] [added: 15] | | % | | | | | [removed: 15] [added: 14] | | % | | | | | 15 | | % |

Improved demand conditions in the overall U.S. housing market continued in 2016, though industry-wide new home sales continue to pace below historical averages.

We remain pleased with the overall demand for new homes, which continues along a sustained path of recovery supported by ongoing job creation, low unemployment, a supportive interest rate environment, and a limited supply of new homes.

We have looked toward 2016 as a year where we would begin adding volume growth to the efficiency gains we have achieved in recent years.

Our prior investments are allowing us to grow the business, as evidenced by 13% growth in net new orders and a 29% increase in home sale revenues to $7.5 billion.

We achieved this growth while also maintaining our focus on gross margin performance through community location, strategic pricing, and construction efficiencies.

We have grown our investment in the business in a disciplined manner by emphasizing smaller projects and working to shorten our years of land supply, including the use of land option agreements when possible.

We have also focused our land investments on closer-in locations where we think demand is more sustainable when the market ultimately moderates.

We have accepted the trade-off of having to pay more for certain land positions where we can be more confident in future performance.

| • | Issued $2.0 billion of senior notes while also expanding and extending our unsecured revolving credit agreement; and |

| Other severance and lease exit related costs (see [Note 1](#s84BB09648362B42FB992F71F67DB9AF6)) | 13,389 | | | | — | | | | — | | |

| Settlement of disputed land transaction (see [Note 12](#s16C8D60ED3B16EE548AAF71F6A858CAB)) | 15,000 | | | | — | | | | — | | |

| • | Our effective tax rate was 35.5%, 39.5% and 31.2% for 2016, 2015, and 2014, respectively. See [Note 9](#s067988DA9CBC19B0BD38F71F6A108330). |

| Home sale cost of revenues (a) (b) | (5,587,974 | | ) | | 32 | % | | (4,235,945 | | ) | | 2 | % | | (4,149,674 | | ) |

| Selling, general, and administrative expenses ("SG&A") (b) (c) | (957,150 | | ) | | 20 | % | | (794,728 | | ) | | (8 | )% | | (861,390 | | ) |

| SG&A % of home sale revenues (b) (c) | 12.8 | | % | | (90) bps | | | 13.7 | | % | | (150) bps | | | 15.2 | | % |

| (b) | All periods reflect the reclassification of sales commissions expense from home sale cost of revenues to selling, general, and administrative expenses (see [Note 1](#s84BB09648362B42FB992F71F67DB9AF6)). |

| (d) | Includes a charge of $15.0 million in 2016 related to the settlement of a disputed land transaction and a charge of $20.0 million in 2015 resulting from the Applecross matter (see [Note 12](#s16C8D60ED3B16EE548AAF71F6A858CAB)). See "Other expense, net" for a table summarizing other significant items. |

These increases reflect the impact of communities acquired from Wieland during the period, which contributed 6% to the growth in revenue, 4% to the growth in closings and 1% to the increase in average selling price.

Excluding the communities acquired from Wieland, the increase in closings reflects the significant investments we are making in opening new communities combined with improved demand.

The higher average selling price for 2016 reflects an ongoing shift toward move-up buyers, the inclusion of higher-priced homes offered in Wieland communities, and generally stable market conditions.

The assets acquired from Wieland contributed 60 basis points to this decrease for this period, primarily as the result of required fair value adjustments associated with the acquired homes in production and related lots.

SG&A as a percentage of home sale revenues was 12.8% and 13.7% in 2016 and 2015, respectively.

SG&A also reflects severance costs of $9.1 million in 2016 associated with actions taken to reduce overheads and the substantial completion of our corporate headquarters relocation from Michigan to Georgia, which began in 2013 (see [Note 2](#s3E05BD30D217F420DF35F71F6856F524)).

Excluding these items, the improvement in our year-over-year SG&A leverage was even greater.

The increase in gross dollar SG&A reflects the addition of field resources and other variable costs related to increased production volumes combined with higher costs related to healthcare and professional fees.

Additionally, SG&A for 2016 reflects the impact of transaction and integration costs associated with the assets acquired from Wieland in January 2016 (see [Note 1](#s84BB09648362B42FB992F71F67DB9AF6)).

| | 2016 | | | | 2015 | | | | 2014 | | |

| Total other expense, net | $ | 49,345 | | | $ | 17,363 | | | $ | 26,736 | |

Lease exit and related costs for 2016 resulted from actions taken to reduce overheads and the substantial completion of our corporate headquarters relocation from Michigan to Georgia, which began in 2013 and also significantly impacted 2014 (see [Note 2](#s3E05BD30D217F420DF35F71F6856F524)).

The increase in write-offs of deposits and pre-acquisition costs for 2016 related primarily to one project in California that we elected to not complete.

Net new orders increased 13% in 2016 compared with 2015.

The increase resulted primarily from selling from a larger number of active communities, which increased 17% to 726 at December 31, 2016.

The communities acquired from Wieland contributed to this growth in units by 4%.

Excluding the Wieland assets, our growth in net new order units resulted from the higher number of active communities combined with a small improvement in sales pace per community.

Net new orders in dollars increased by 23% compared with 2015 due to the growth in units combined with the higher average selling price.

The cancellation rate decreased slightly in 2015 from 2014 at 14% and 15%, respectively.

| | | 2016 | | | 2015 | |

| | | 2,348 | | | 1,921 | |

| Total | | 99,279 | | | 43,979 | | | 143,258 | | | 95,919 | | | 42,160 | | | 138,079 | |

Our maximum exposure related to these land option agreements is generally limited to our deposits and pre-acquisition costs, which totaled $195.4 million, of which $9.8 million is refundable, at December 31, 2016.

Improved demand conditions in the overall U.S. housing market continued through 2015.

While heightened global economic concerns have created greater volatility in financial markets, the positive trends in the U.S. regarding jobs, demographics and household formations, low interest rates, and a generally balanced inventory of homes available for sale support our expectations that housing demand continues to move higher at a measured pace for a number of years.

These conditions have helped keep monthly mortgage payments affordable relative to historical levels and the rental market.

This environment contributed to our experiencing relatively stable overall demand in 2015, including 8% growth in net new orders, a 2% increase in home sale revenues to $5.8 billion, and maintaining gross margins at 23.3%, among the highest annual gross margins reported in the Company's history.

These new communities generally replaced older communities that closed out in 2015 as our overall active community count increased 4%.

The difficult weather conditions in certain parts of the U.S. in the first half of 2015 contributed to that challenge.

Additionally, labor constraints in the construction industry have led to delays in home closings, which contributed to our closing volume being flat compared with the prior year.

| • | Maintained one of the lowest ratios of debt to total capitalization in the homebuilding industry at 30.5%; and |

Industry-wide new home sales continue to pace well below historical averages, so we remain optimistic that demand can continue to increase in the coming years.

We believe the positive factors of an improving economy with rising employment, continued low mortgage rates, and beneficial long-term demographic trends will continue to support a slow and sustained housing recovery.

| Settlement of contractual dispute at a closed-out community (see [Note 12](#s4B542EB2D81157D681F24D9F9198EAED)) | — | | | | — | | | | 41,170 | | |

| • | Our effective tax rate was 39.5%, 31.2% and (396.4)% for 2015, 2014, and 2013, respectively. Income tax expense (benefit) reflects provisions and (reversals) of deferred tax asset valuation allowances totaling $3.1 million, $(45.6) million, and $(2.1) billion in 2015, 2014, and 2013, respectively. See [Note 9](#s1DC16E5BDBA3530BAC69EC5B219915F8). |

| Home sale cost of revenues (a) | 4,440,893 | | | | 2 | % | | 4,343,249 | | | | 1 | % | | 4,310,528 | | |

| Selling, general, and administrative expenses ("SG&A") (b) | 589,780 | | | | (12 | )% | | 667,815 | | | | 17 | % | | 568,500 | | |

| SG&A as a percentage of home sale revenues | 10.2 | | % | | 160 bps | | | 11.8 | | % | | 130 bps | | | 10.5 | | % |

| (c) | Includes losses related to the redemption of debt totaling $8.6 million and $26.9 million in 2014 and 2013, respectively. Also includes lease exit charges of $2.3 million and $8.7 million in 2015 and 2014, respectively, resulting from the relocation of our corporate headquarters (see [Note 2](#s4D2EA01F731950E49BF2147D51DCAA46)), a charge of $20.0 million in 2015 resulting from the Applecross matter (see [Note 12](#s4B542EB2D81157D681F24D9F9198EAED)), and charges totaling $41.2 million in 2013 resulting from a contractual dispute related to a previously completed luxury community (see [Note 12](#s4B542EB2D81157D681F24D9F9198EAED)). |

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

The decrease in closings resulted from the lower net new order volume in 2014 combined with the lower beginning of the year backlog in 2014 compared with the beginning of the year 2013.

Gross margins during 2015 and 2014 were also affected by higher land impairments of $7.3 million and $3.9 million, respectively, compared with $2.9 million in 2013.

Additionally, we incurred $7.6 million and $15.0 million in 2014 and 2013, respectively, of employee severance, retention, relocation, and related costs attributable to the relocation of our corporate headquarters.

The remainder of the increase in gross overhead dollars in 2014 compared with 2013 were primarily due to variable costs related to the higher revenue volume.

| | $ | 17,363 | | | $ | 26,736 | | | $ | 76,077 | |

Net new orders decreased 3% in 2014 compared with 2013, primarily as the result of fewer active communities throughout the majority of 2014.

The number of active communities increased slightly in 2014 compared with 2013 (up 4% to 598 active communities at December 31, 2014), though this was primarily due to our acquisition of certain real estate assets from Dominion Homes in August 2014 (see [Note 1](#sB95F9CCB04055FF791D04C3FA1642131)).

Excluding such assets, our active community count actually declined in 2014 as our pace of new community openings lagged the number of community close-outs.

The cancellation rate was unchanged from 2013 to 2014 at 15%.

| | | 1,921 | | | 1,298 | |

flow production cycle over the course of 2016 compared with 2015.

| Total | | 95,919 | | | 42,160 | | | 138,079 | | | 96,220 | | | 34,573 | | | 130,793 | |

For 2015, we realigned our organizational structure and reportable segment presentation.

Accordingly, the segment information provided in this note has been reclassified to conform to the current presentation for all periods presented.

| | | 14 | | % | | | | | 15 | | % | | | | | 15 | | % |

to the lower income before income taxes.

Net new orders decreased 23%, reflecting lower order levels across all divisions due in part to a lower active community count.

The increase in closing volumes was primarily due to increases in Georgia and the Coastal Carolinas.

Net new orders decreased 3% in 2014 mainly due to lower order levels in Tennessee, Charlotte, and the Coastal Carolinas.

The increase in average selling price occurred in both North and South Florida.

Closings remained flat compared with the prior year as an increase in closings in South Florida was offset by a decrease in closings in North Florida.

The increase in closing volumes was primarily due to the acquisition of certain real estate assets from Dominion Homes in August 2014, combined with increases in both Michigan and Indianapolis-Cleveland.

The decreased income before income taxes resulted from higher overhead.

Except in very limited circumstances, we do not have an obligation to prepay [removed: fixed-rate] [added: our] debt prior to maturity.

The following tables set forth the principal cash flows by scheduled maturity, weighted-average interest rates, and estimated fair value of our debt obligations as of December 31, [removed: 2015] [added: 2016] and [removed: 2014] [added: 2015] ($000’s omitted).

| | As of December 31, [removed: 2014] [added: 2016] for the Years ending December 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | [removed: 2015] [added: 2017] | | | | [removed: 2016] [added: 2018] | | | | [removed: 2017] [added: 2019] | | | | [removed: 2018] [added: 2020] | | | | [removed: 2019] [added: 2021] | | | | Thereafter | | | | Total | | | | Fair Value | | |

| Variable rate debt (a) | $ | [removed: 140,241] [added: 331,621] | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | [removed: 140,241] [added: 331,621] | | | $ | [removed: 140,241] [added: 331,621] | |

| Average interest rate | [removed: 2.70] [added: 2.89] | | % | | — | | % | | — | | % | | — | | % | | — | | % | | — | | % | | [removed: 2.70] [added: 2.89] | | % | | | | |

(a) Includes the Pulte Mortgage Repurchase Agreement and the Term [removed: Loan.][added: Loan, which was retired in 2016.]

Does not include our Revolving Credit Facility, under which there were no borrowings outstanding at either December 31, [removed: 2015] [added: 2016] or [removed: 2014.][added: 2015.]

We are generally not exposed to variability in cash flows of derivative instruments for more than approximately [removed: 75] [added: 90] days.

At December 31, [removed: 2015] [added: 2016] and [removed: 2014,] [added: 2015,] residential mortgage loans available-for-sale had an aggregate fair value of [removed: $442.7] [added: $539.5] million and [removed: $339.5] [added: $442.7] million, respectively.

At December 31, [removed: 2015] [added: 2016] and [removed: 2014,] [added: 2015,] we had aggregate interest rate lock commitments of [removed: $208.2] [added: $273.9] million and [removed: $146.1] [added: $208.2] million, respectively, which were originated at interest rates prevailing at the date of commitment.

Unexpired forward contracts totaled [removed: $525.0] [added: $610.0] million and [removed: $371.0] [added: $525.0] million at December 31, [removed: 2015] [added: 2016] and [removed: 2014,] [added: 2015,] respectively, and

whole loan investor commitments totaled [removed: $77.6] [added: $157.6] million and [removed: $63.5] [added: $77.6] million, respectively, at such dates.

As a cautionary note, except for the historical information contained herein, certain matters discussed in Item [removed: 7,] [added: 2,] Management's Discussion and Analysis of Financial Condition and Results of Operations, and Item [removed: 7a,] [added: 3,] Quantitative and Qualitative Disclosures About Market Risk, are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” [added: “plan,”] “project,” “may,” “can,” “could,” “might,” [added: "should",] “will” and similar expressions identify forward-looking statements, including statements related to expected operating and performing results, planned transactions, planned objectives of management, future developments or conditions in the industries in which we participate and other trends, developments and uncertainties that may affect our business in the future.

Such risks, uncertainties and other factors include, among other things: interest rate changes and the availability of mortgage financing; [removed: continued volatility in the debt and equity markets;] competition within the industries in which we operate; the availability and cost of land and other raw materials used by us in our homebuilding operations; the impact of any changes to our strategy in responding to the cyclical nature of the industry, including any changes regarding our land [removed: positions;] [added: positions and] the [added: levels of our land spend; the] availability and cost of insurance covering risks associated with 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 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; our ability to generate sufficient cash flow in order to successfully implement our capital allocation priorities; 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](#s8E6D6FC4B63956638CB7531E5EDF7786)] [added: Factors](#sBFB05BAEFE8A06233287F71F83F0D617)] for a further discussion of these and other risks and uncertainties applicable to our businesses.

| Fixed rate debt | $ | 134,482 | | | $ | — | | | $ | 3,900 | | | $ | 3,900 | | | $ | 700,000 | | | $ | 2,300,000 | | | $ | 3,142,282 | | | $ | 3,131,579 | |

| Average interest rate | 7.12 | | % | | — | | % | | 5.00 | | % | | 5.00 | | % | | 4.25 | | % | | 7.19 | | % | | 5.58 | | % | | | | |

| | |

| --- | --- |

| Fixed rate debt | $ | 239,203 | | | $ | 488,610 | | | $ | 129,433 | | | $ | — | | | $ | 3,900 | | | $ | 1,003,900 | | | $ | 1,865,046 | | | $ | 1,975,029 | |

| Average interest rate | 5.22 | | % | | 6.24 | | % | | 7.44 | | % | | — | | % | | 5.00 | | % | | 6.71 | | % | | 6.44 | | % | | | | |

For the fiscal year ended December 31, [removed: 2015][added: 2016]

| Common [removed: Stock,] [added: Shares,] par value $0.01 | | New York Stock Exchange |

The aggregate market value of the registrant’s voting [removed: stock] [added: shares] held by nonaffiliates of the registrant as of June 30, [removed: 2015,] [added: 2016,] based on the closing sale price per share as reported by the New York Stock Exchange on such date, was [removed: $7,084,534,862.][added: $6,626,321,236.]

Applicable portions of the Proxy Statement for the [removed: 2016] [added: 2017] Annual Meeting of Shareholders are incorporated by reference in Part III of this Form.

| 1A | [Risk [removed: Factors](#s8E6D6FC4B63956638CB7531E5EDF7786)] [added: Factors](#sBFB05BAEFE8A06233287F71F83F0D617)] | [removed: [9](#s8E6D6FC4B63956638CB7531E5EDF7786)] [added: [9](#sBFB05BAEFE8A06233287F71F83F0D617)] |

| 1B | [Unresolved Staff [removed: Comments](#s6BABC614F4505410AAD80BBF61BFD601)] [added: Comments](#sF894920A8D7B2870BB6BF71F8412BD7E)] | [removed: [14](#s6BABC614F4505410AAD80BBF61BFD601)] [added: [13](#sF894920A8D7B2870BB6BF71F8412BD7E)] |

| 3 | [Legal [removed: Proceedings](#sE78F6A94ED605D499DD835251C28D7E0)] [added: Proceedings](#s544014A469A533FCE5EDF71F84668495)] | [removed: [14](#sE78F6A94ED605D499DD835251C28D7E0)] [added: [14](#s544014A469A533FCE5EDF71F84668495)] |

| 4 | [Mine Safety [removed: Disclosures](#sFAD901D8DC6451E8A355EE6AEA3A7839)] [added: Disclosures](#sCB7674F36A4ACE91781CF71F8497D3FE)] | [removed: [14](#sFAD901D8DC6451E8A355EE6AEA3A7839)] [added: [14](#sCB7674F36A4ACE91781CF71F8497D3FE)] |

| 4A | [Executive Officers of the [removed: Registrant](#s761FAD7C547E53D8A11E52862BC9814E)] [added: Registrant](#s2BDAB287E3367202F7EAF71F84BA732E)] | [removed: [15](#s761FAD7C547E53D8A11E52862BC9814E)] [added: [15](#s2BDAB287E3367202F7EAF71F84BA732E)] |

| 5 | [Market for the Registrant’s Common Equity, Related [removed: Stockholder] [added: Shareholder] Matters and Issuer Purchases of Equity [removed: Securities](#s64B9C398FA5D5D3FBA3577C0B7619FD2)] [added: Securities](#sC1272727A23DEFE49994F71F66E8214B)] | [removed: [16](#s64B9C398FA5D5D3FBA3577C0B7619FD2)] [added: [16](#sC1272727A23DEFE49994F71F66E8214B)] |

| 6 | [Selected Financial [removed: Data](#sD9F58C8116BB59458DC00D9B1127E482)] [added: Data](#sFFA5547CCD5DCCA6371DF71F8540168C)] | [removed: [18](#sD9F58C8116BB59458DC00D9B1127E482)] [added: [18](#sFFA5547CCD5DCCA6371DF71F8540168C)] |

| 7 | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s860085D649315917BFF354528EE59934)] [added: Operations](#sF9EEFF727B77C13479C3F71F85905086)] | [removed: [20](#s860085D649315917BFF354528EE59934)] [added: [20](#sF9EEFF727B77C13479C3F71F85905086)] |

| 7A | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#sF720249FDACA59CD909593CCBA6AB504)] [added: Risk](#sB1DE110E282774DE1935F71F66ED3086)] | [removed: [40](#sF720249FDACA59CD909593CCBA6AB504)] [added: [41](#sB1DE110E282774DE1935F71F66ED3086)] |

| 8 | [Financial Statements and Supplementary [removed: Data](#s92C5DD72494056768AC6DE58F060C426)] [added: Data](#s11D1780DCA0D7728FCC5F71F87F9BA50)] | [removed: [42](#s92C5DD72494056768AC6DE58F060C426)] [added: [43](#s11D1780DCA0D7728FCC5F71F87F9BA50)] |

| 9 | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#s72D7130CED7C5B02BA37367F06F7A608)] [added: Disclosure](#sAFAA3CD35E3C9AA8A499F71F8EEC2C63)] | [removed: [86](#s72D7130CED7C5B02BA37367F06F7A608)] [added: [88](#sAFAA3CD35E3C9AA8A499F71F8EEC2C63)] |

| 9A | [Controls and [removed: Procedures](#s4241999433E85B37BEC04FE23E4769A7)] [added: Procedures](#s22091DB48C711EB3FD7FF71F8F017875)] | [removed: [86](#s4241999433E85B37BEC04FE23E4769A7)] [added: [88](#s22091DB48C711EB3FD7FF71F8F017875)] |

| 9B | [Other [removed: Information](#s58CEA1347BCF59C1A202C5818ADA51CD)] [added: Information](#sC8B81B82001FDB972382F71F8F2480AB)] | [removed: [87](#s58CEA1347BCF59C1A202C5818ADA51CD)] [added: [90](#sC8B81B82001FDB972382F71F8F2480AB)] |

| | [Part [removed: III](#s8876C43BC57951099CDC026A5DD67BE7)] [added: III](#sF637835CE598D7657F5AF71F8F569CD2)] | |

| 10 | [Directors, Executive Officers and Corporate [removed: Governance](#s3E9102B8CA9755E9A73E1D458A2558E5)] [added: Governance](#sC6485916EB37D45229DFF71F8F7870EC)] | [removed: [88](#s3E9102B8CA9755E9A73E1D458A2558E5)] [added: [90](#sC6485916EB37D45229DFF71F8F7870EC)] |

| 11 | [Executive [removed: Compensation](#sFABBE17EA0C75DF581B051524443B57A)] [added: Compensation](#sE75DF337798065365128F71F8FA756E9)] | [removed: [88](#sFABBE17EA0C75DF581B051524443B57A)] [added: [90](#sE75DF337798065365128F71F8FA756E9)] |

| 12 | [Security Ownership of Certain Beneficial Owners and Management and Related [removed: Stockholder Matters](#sCF30189A403951D3B2911984D9A1904A)] [added: Shareholder Matters](#sCA5DDE4F74B9193CA365F71F8FCA2266)] | [removed: [88](#sCF30189A403951D3B2911984D9A1904A)] [added: [90](#sCA5DDE4F74B9193CA365F71F8FCA2266)] |

| 13 | [Certain Relationships and Related Transactions and Director [removed: Independence](#s6A4A471C5E535AE78D0B79B17741CB7E)] [added: Independence](#sC00C56CEFD0C339F5190F71F8FFC817B)] | [removed: [88](#s6A4A471C5E535AE78D0B79B17741CB7E)] [added: [90](#sC00C56CEFD0C339F5190F71F8FFC817B)] |

| 14 | [Principal Accountant Fees and [removed: Services](#s4E6BFC3EB43C50BAA8A4B666C435F282)] [added: Services](#s9DF15D39D8E1B191C2A8F71F901D392E)] | [removed: [88](#s4E6BFC3EB43C50BAA8A4B666C435F282)] [added: [90](#s9DF15D39D8E1B191C2A8F71F901D392E)] |

| 15 | [Exhibits and Financial Statement [removed: Schedules](#sB7101F0D0541511080F1D67A7EB903C1)] [added: Schedules](#s438F879D90CDA08380CEF71F9071F7CE)] | [removed: [89](#sB7101F0D0541511080F1D67A7EB903C1)] [added: [91](#s438F879D90CDA08380CEF71F9071F7CE)] |

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

[removed: Homebuilding offers] [added: We offer] a broad product line to meet the needs of homebuyers in our targeted markets.

Through our brands, which include [added: Centex,] Pulte Homes, Del Webb, [added: DiVosta Homes,] and [removed: Centex,] [added: John Wieland Homes and Neighborhoods,] 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: first-time, move-up, and active adult.

Over our history, we have delivered [removed: over 655,000] [added: nearly 680,000] homes.

As of December 31, [removed: 2015,] [added: 2016,] we conducted our operations in [removed: 50] [added: 49] markets located throughout [removed: 26] [added: 25] states.

| Northeast: | | Connecticut, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, [removed: Rhode Island,] Virginia |

Financial information for each of our reportable business segments is included in [Note [removed: 4](#s53251952882B5D47B1E48C439FC03D03)] [added: 4](#s5CE88ED4C0D439DF77B3F71F688E74B5)] to our Consolidated Financial Statements.

| | Years Ended December 31, ($000’s omitted) | | | | | | | | | | | | | | | | | | | [added: |]

| | [added: 2016 | | | |] 2015 | | | | 2014 | | | | 2013 | | | | 2012 | | | | [removed: 2011 | | |]

| Home sale revenues | $ | [removed: 5,792,675] [added: 7,451,315] | | | $ | [removed: 5,662,171] [added: 5,792,675] | | | $ | [removed: 5,424,309] [added: 5,662,171] | | | $ | [removed: 4,552,412] [added: 5,424,309] | | | $ | [removed: 3,950,743] [added: 4,552,412] | | [added: |]

| Home closings | [added: 19,951 | | | |] 17,127 | | | | 17,196 | | | | 17,766 | | | | 16,505 | | | | [removed: 15,275 | | |]

[removed: In 2012,] [added: After several years of declining sales volume,] new home sales in the U.S. increased [added: in 2012] for the first time since [removed: 2005.][added: 2005, beginning a multi-year recovery in demand.]

This trend continued in [removed: 2015] [added: 2016] as new home sales in the U.S. rose [removed: 15%] [added: 12%] to approximately [removed: 501,000] [added: 563,000] homes, an approximate [removed: 64%] [added: 84%] increase from [removed: 2011.][added: 2011, the bottom of the most recent housing downturn.]

Although current industry volume remains low compared with historical levels, the improved environment and [removed: the] actions we have taken contributed to [removed: our return to profitability in 2012 and] significant increases in our income before income taxes each year in the period 2013 - [removed: 2015.][added: 2016.]

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

| • | Enhancing revenues by: establishing clear product offerings for each of our [removed: brands] [added: consumer groups] based on systematic, consumer-driven input, optimizing our pricing through the use of options and lot premiums, and limiting our reliance on speculative home sales; |

10-K 1 a201610-k.htm 10-K

UNITED STATES

\[X\]

As of January 26, 2017, the registrant had 317,833,859 shares of common shares outstanding.

| | [Part I](#sAFF9C77C0B48AC4AC0F3F71F834AACC0) | |

| 1 | [Business](#s883DB7591A24D8BD7439F71F836C9EED) | [3](#s883DB7591A24D8BD7439F71F836C9EED) |

| 2 | [Properties](#s0E2A76870654BAABC722F71F84444FA6) | [14](#s0E2A76870654BAABC722F71F84444FA6) |

| | [Part II](#sB6B94A3DAD42A47BB7A8F71F84EA5F71) | |

| | [Part IV](#sDD99A1A36835BFB4F45CF71F904F2135) | |

| | [Signatures](#sA695F302DB7239D51EFAF71F90A2D4F4) | [94](#sA695F302DB7239D51EFAF71F90A2D4F4) |

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

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

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

Our average unit selling price in 2016 was also impacted by our acquisition in January 2016 of substantially all of the assets of JW Homes ("Wieland), which are geared toward move-up buyers.

Through our understanding of each consumer group, we are able to provide homes that better meet the needs and wants of each buyer.

| 2016 | 29% | 43% | 28% |

| 2012 | 41% | 32% | 27% |

The ability to consistently source qualified labor at reasonable prices has become more challenging as labor supply growth has not kept pace with construction demand.

10-K 1 a201510-k.htm 10-K PHM 2015

\[ \]

As of February 1, 2016, the registrant had 349,148,351 shares of common stock outstanding.

| | [Part I](#s4485934ECCEE596BBB954A3338EF6BDB) | |

| 1 | [Business](#s490CD893A13B56989EEC34377DF6A05A) | [3](#s490CD893A13B56989EEC34377DF6A05A) |

| 2 | [Properties](#sB3A366AA87BF5CBF8C4CEF9DF0218B84) | [14](#sB3A366AA87BF5CBF8C4CEF9DF0218B84) |

| | [Part II](#sF43CC1971DFD50CC82E2BA0955A85113) | |

| | [Part IV](#sB16E1C6D58695E2FB5D5151CF7F830C5) | |

| | [Signatures](#s3B9857E1B1645F5A95F84F518FC4336A) | [92](#s3B9857E1B1645F5A95F84F518FC4336A) |

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

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

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.

U.S. new home sales in 2011 were the lowest since 1962.

As a result of this industry-wide downturn, we suffered net losses in each year between 2007 - 2011 from a combination of reduced operational profitability and significant asset impairments.

In response to these market conditions, we restructured our operations, including making significant reductions in employee headcount and overhead costs, and managed our business to generate cash, including curtailing our investments in inventory.

We used this positive cash flow to, among other things, increase our cash reserves as well as retire outstanding debt.

Through our evaluation of unique consumer groups, we are able to provide a distinct experience to potential customers:

| 2015 | 32% | 37% | 31% |

| 2011 | 40% | 29% | 31% |

In addition, our websites, www.pulte.com,

The availability of labor and materials at reasonable prices has become an increased concern for certain trades in some markets as the supply chain adjusts to uneven industry growth.

| Richard J. Dugas, Jr. | | [removed: 50] [added: 51] | | [removed: Chairman, President and Chief] Executive [removed: Officer] [added: Chairman] | | 2002 |

| Robert T. O'Shaughnessy | | [removed: 50] [added: 51] | | Executive Vice President and Chief Financial Officer | | 2011 |

| James R. Ellinghausen | | [removed: 57] [added: 58] | | Executive Vice President, Human Resources | | 2005 |

| Harmon D. Smith | | [removed: 52] [added: 53] | | Executive Vice [removed: President, Field Operations] [added: President and Chief Operating Officer] | | 2011 |

| Ryan R. Marshall | | [removed: 41] [added: 42] | | [added: President and Chief] Executive [removed: Vice President, Homebuilding Operations] [added: Officer] | | 2012 |

| Steven M. Cook | | [removed: 57] [added: 58] | | Executive Vice President, Chief Legal Officer and Corporate Secretary | | 2006 |

| James L. Ossowski | | [removed: 47] [added: 48] | | Vice President, Finance and Controller | | 2013 |

Mr. Dugas was appointed Chairman in August 2009 and [removed: President and Chief] Executive [removed: Officer] [added: Chairman] in [removed: July 2003.][added: September 2016.]

[removed: Previously, he was appointed] [added: He served as] Chief [removed: Operating] [added: Executive] Officer [removed: in May 2002] [added: from July 2003 to September 2016] and [added: was appointed] Executive Vice President in December [added: 2002 and Chief Operating Officer in May] 2002.

Mr. Smith was appointed Executive Vice [removed: President, Field Operations] [added: President and Chief Operating Office] in [removed: May 2014] [added: February 2016] and previously held the [removed: position] [added: positions] of Executive Vice President, [added: Field Operations since May 2014 and] Homebuilding Operations and Area President, Texas since May 2012.

[removed: Previously he held the positions of] [added: He was appointed] Area President, Southeast [removed: since] [added: in] November [removed: 2012,] [added: 2012;] Area President, Florida [removed: since] [added: in] May [removed: 2012,] [added: 2012;] and Division President, South Florida [removed: since] [added: in] 2006.

Mr. Cook was appointed Executive Vice President, Chief Legal Officer and Corporate Secretary in September 2015 and previously held the positions of Senior Vice President, General Counsel and Secretary since December [removed: 2008 and Vice President, General Counsel and Secretary since February 2006.][added: 2008.]

Mr. Marshall was appointed Chief Executive Officer in September 2016.

Previously, he held the position of President since February 2016 and Executive Vice President, Homebuilding Operations since May 2014.

Since joining our company in 1994, he has served in a variety of management positions.

Prior to joining our company, he held a number of financial roles at Penske Automotive Group from 1997 to 2011, most recently as Executive Vice President and Chief Financial Officer.

Mr. Marshall was appointed Executive Vice President, Homebuilding Operations in May 2014.

Since 2002, Mr. Ossowski has held various finance positions of increasing responsibility with our company.

Related [removed: Stockholder] [added: Shareholder] Matters

| | December 31, [removed: 2015] [added: 2016] | | | | | | | | | | | | December 31, [removed: 2014] [added: 2015] | | | | | | | | | | |

| 1st Quarter | $ | [removed: 23.24] [added: 18.82] | | | $ | [removed: 20.56] [added: 14.61] | | | $ | [removed: 0.08] [added: 0.09] | | | $ | [removed: 21.65] [added: 23.24] | | | $ | [removed: 18.21] [added: 20.56] | | | $ | [removed: 0.05] [added: 0.08] | |

| 2nd Quarter | [removed: 22.78] [added: 19.80] | | | | [removed: 18.85] [added: 16.60] | | | | [removed: 0.08] [added: 0.09] | | | | [removed: 20.47] [added: 22.78] | | | | [removed: 18.01] [added: 18.85] | | | | [removed: 0.05] [added: 0.08] | | |

| 3rd Quarter | [removed: 22.02] [added: 22.40] | | | | [removed: 18.72] [added: 19.04] | | | | [removed: 0.08] [added: 0.09] | | | | [removed: 20.64] [added: 22.02] | | | | [removed: 17.47] [added: 18.72] | | | | [removed: 0.05] [added: 0.08] | | |

| 4th Quarter | [removed: 20.21] [added: 20.66] | | | | [removed: 17.18] [added: 17.69] | | | | 0.09 | | | | [removed: 22.03] [added: 20.21] | | | | [removed: 16.56] [added: 17.18] | | | | [removed: 0.08] [added: 0.09] | | |

At [removed: February 1, 2016,] [added: January 26, 2017,] there were [removed: 2,617] [added: 2,461] shareholders of record.

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

| [removed: (1)] [added: (2)] | The Board of Directors approved share repurchase authorizations totaling [removed: $750.0 million and] $300.0 million [removed: in October 2014] and [added: $1.0 billion in] December [removed: 2015,] [added: 2015 and July 2016,] respectively, of which [removed: $604.8] [added: $1,004.8] million remained available as of December 31, [removed: 2015.] [added: 2016.] There are no expiration dates for these programs. During [removed: 2015,] [added: 2016,] we repurchased [removed: 21.2] [added: 30.9] million shares under these programs. |

The information required by this item with respect to equity compensation plans is set forth under [Item [removed: 12](#sCF30189A403951D3B2911984D9A1904A)] [added: 12](#sCA5DDE4F74B9193CA365F71F8FCA2266)] 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: 2011,] 2012, 2013, 2014, [added: 2015,] and [removed: 2015] [added: 2016] (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: 2015][added: 2016]

[removed: ][added: ]

| | | [removed: 2010 | | |] 2011 | | | 2012 | | | 2013 | | | 2014 | | | 2015 | | [added: | 2016 | |]

| Dow Jones U.S. Select Home Construction Index | | 100.00 | | | [removed: 91.50] [added: 179.68] | | | [removed: 164.40] [added: 212.75] | | | [removed: 194.66] [added: 223.71] | | | [removed: 204.68] [added: 235.89] | | | [removed: 215.83] [added: 241.14] | |

* Assumes $100 invested on December 31, [removed: 2010,] [added: 2011,] and the reinvestment of dividends.

| October 1, 2016 to October 31, 2016 | 3,963,535 | | | $ | 19.66 | | | 3,963,535 | | | $ | 1,179,181 | | (2) |

| November 1, 2016 to November 30, 2016 | 4,743,500 | | | 18.59 | | | | 4,743,500 | | | $ | 1,091,004 | | (2) |

| December 1, 2016 to December 31, 2016 | 4,523,842 | | | 19.07 | | | | 4,521,729 | | | $ | 1,004,765 | | (2) |

| Total | 13,230,877 | | | $ | 19.07 | | | 13,228,764 | | | | | | |

| (1) | During the fourth quarter of 2016, participants surrendered 2,113 shares for payment of minimum tax obligations upon the vesting or exercise of previously granted share-based compensation awards. Such shares were not repurchased as part of our publicly-announced share repurchase programs. |

| | |

| --- | --- |

| PULTEGROUP, INC. | | 100.00 | | | 287.80 | | | 325.20 | | | 346.27 | | | 292.86 | | | 307.98 | |

| S&P 500 Index - Total Return | | 100.00 | | | 116.00 | | | 153.57 | | | 174.60 | | | 177.01 | | | 198.18 | |

| October 1, 2015 to October 31, 2015 | — | | | $ | — | | | — | | | $ | 304,765 | | (1) |

| November 1, 2015 to November 30, 2015 | — | | | — | | | | — | | | $ | 304,765 | | (1) |

| December 1, 2015 to December 31, 2015 | — | | | — | | | | — | | | $ | 604,765 | | (1) |

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

| PULTEGROUP, INC. | | 100.00 | | | 83.91 | | | 241.49 | | | 272.87 | | | 290.55 | | | 245.74 | |

| S&P 500 Index - Total Return | | 100.00 | | | 102.11 | | | 118.45 | | | 156.82 | | | 178.28 | | | 180.75 | |

| | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | | | [removed: 2011] [added: 2012] | | |

| Revenues | $ | [removed: 5,841,211] [added: 7,487,350] | | | $ | [removed: 5,696,725] [added: 5,841,211] | | | $ | [removed: 5,538,644] [added: 5,696,725] | | | $ | [removed: 4,659,110] [added: 5,538,644] | | | $ | [removed: 4,033,596] [added: 4,659,110] | |

| Income [removed: (loss)] before income taxes | $ | [removed: 757,317] [added: 860,766] | | | $ | [removed: 635,177] [added: 757,317] | | | $ | [removed: 479,113] [added: 635,177] | | | $ | [removed: 157,991] [added: 479,113] | | | $ | [removed: (275,830] [added: 157,991] | [removed: )] |

| Revenues | $ | [removed: 140,753] [added: 181,126] | | | $ | [removed: 125,638] [added: 140,753] | | | $ | [removed: 140,951] [added: 125,638] | | | $ | [removed: 160,888] [added: 140,951] | | | $ | [removed: 103,094] [added: 160,888] | |

| Income [removed: (loss)] before income taxes | $ | [removed: 58,706] [added: 73,084] | | | $ | [removed: 54,581] [added: 58,706] | | | $ | [removed: 48,709] [added: 54,581] | | | $ | [removed: 25,563] [added: 48,709] | | | $ | [removed: (34,470] [added: 25,563] | [removed: )] |

| Revenues | $ | [removed: 5,981,964] [added: 7,668,476] | | | $ | [removed: 5,822,363] [added: 5,981,964] | | | $ | [removed: 5,679,595] [added: 5,822,363] | | | $ | [removed: 4,819,998] [added: 5,679,595] | | | $ | [removed: 4,136,690] [added: 4,819,998] | |

| Income [removed: (loss)] before income taxes | $ | [removed: 816,023] [added: 933,850] | | | $ | [removed: 689,758] [added: 816,023] | | | $ | [removed: 527,822] [added: 689,758] | | | $ | [removed: 183,554] [added: 527,822] | | | $ | [removed: (310,300] [added: 183,554] | [removed: )] |

| Income tax [removed: expense (benefit)] [added: (expense) benefit] | [removed: 321,933] [added: (331,147] | | [added: )] | | [removed: 215,420] [added: (321,933] | | [added: )] | | [removed: (2,092,294] [added: (215,420] | | ) | | [removed: (22,591] [added: 2,092,294] | | [removed: )] | | [removed: (99,912] [added: 22,591] | | [removed: )] |

| Net income [removed: (loss)] | $ | [removed: 494,090] [added: 602,703] | | | $ | [removed: 474,338] [added: 494,090] | | | $ | [removed: 2,620,116] [added: 474,338] | | | $ | [removed: 206,145] [added: 2,620,116] | | | $ | [removed: (210,388] [added: 206,145] | [removed: )] |

| Net income [removed: (loss)] per share: | | | | | | | | | | | | | | | | | | | |

| Basic | $ | [removed: 1.38] [added: 1.76] | | | $ | [removed: 1.27] [added: 1.38] | | | $ | [removed: 6.79] [added: 1.27] | | | $ | [removed: 0.54] [added: 6.79] | | | $ | [removed: (0.55] [added: 0.54] | [removed: )] |

| Diluted | $ | [removed: 1.36] [added: 1.75] | | | $ | [removed: 1.26] [added: 1.36] | | | $ | [removed: 6.72] [added: 1.26] | | | $ | [removed: 0.54] [added: 6.72] | | | $ | [removed: (0.55] [added: 0.54] | [removed: )] |

| Basic | [removed: 356,576] [added: 339,747] | | | | [removed: 370,377] [added: 356,576] | | | | [removed: 383,077] [added: 370,377] | | | | [removed: 381,562] [added: 383,077] | | | | [removed: 379,877] [added: 381,562] | | |

| Effect of dilutive securities | [removed: 3,217] [added: 2,376] | | | | [removed: 3,725] [added: 3,217] | | | | [removed: 3,789] [added: 3,725] | | | | [removed: 3,002] [added: 3,789] | | | | [removed: —] [added: 3,002] | | |

| Diluted | [removed: 359,793] [added: 342,123] | | | | [removed: 374,102] [added: 359,793] | | | | [removed: 386,866] [added: 374,102] | | | | [removed: 384,564] [added: 386,866] | | | | [removed: 379,877] [added: 384,564] | | |

| Shareholders’ equity | $ | [removed: 13.63] [added: 14.60] | | | $ | [removed: 13.01] [added: 13.63] | | | $ | [removed: 12.19] [added: 13.01] | | | $ | [removed: 5.66] [added: 12.19] | | | $ | [removed: 5.07] [added: 5.66] | |

| Cash dividends declared | $ | [removed: 0.33] [added: 0.36] | | | $ | [removed: 0.23] [added: 0.33] | | | $ | [removed: 0.15] [added: 0.23] | | | $ | [removed: —] [added: 0.15] | | | $ | — | |

| House and land inventory | $ | [removed: 5,450,058] [added: 6,770,655] | | | $ | [removed: 4,392,100] [added: 5,450,058] | | | $ | [removed: 3,978,561] [added: 4,392,100] | | | $ | [removed: 4,214,046] [added: 3,978,561] | | | $ | [removed: 4,636,468] [added: 4,214,046] | |

| Shareholders’ equity | [removed: 4,759,325] [added: 4,659,363] | | | | [removed: 4,804,954] [added: 4,759,325] | | | | [removed: 4,648,952] [added: 4,804,954] | | | | [removed: 2,189,616] [added: 4,648,952] | | | | [removed: 1,938,615] [added: 2,189,616] | | |

| Markets, at year-end | [removed: 50] [added: 49] | | | | [removed: 49] [added: 50] | | | | [removed: 48] [added: 49] | | | | [removed: 58] [added: 48] | | | | [removed: 61] [added: 58] | | |

| Active communities, at year-end | [removed: 620] [added: 726] | | | | [removed: 598] [added: 620] | | | | [removed: 577] [added: 598] | | | | [removed: 670] [added: 577] | | | | [removed: 700] [added: 670] | | |

| Closings (units) | [removed: 17,127] [added: 19,951] | | | | [removed: 17,196] [added: 17,127] | | | | [removed: 17,766] [added: 17,196] | | | | [removed: 16,505] [added: 17,766] | | | | [removed: 15,275] [added: 16,505] | | |

| Net new orders (units) | [removed: 18,008] [added: 20,326] | | | | [removed: 16,652] [added: 18,008] | | | | [removed: 17,080] [added: 16,652] | | | | [removed: 19,039] [added: 17,080] | | | | [removed: 15,215] [added: 19,039] | | |

| Backlog (units), at year-end | [removed: 6,731] [added: 7,422] | | | | [removed: 5,850] [added: 6,731] | | | | [removed: 5,772] [added: 5,850] | | | | [removed: 6,458] [added: 5,772] | | | | [removed: 3,924] [added: 6,458] | | |

| Average selling price (per unit) | $ | [removed: 338,000] [added: 373,000] | | | $ | [removed: 329,000] [added: 338,000] | | | $ | [removed: 305,000] [added: 329,000] | | | $ | [removed: 276,000] [added: 305,000] | | | $ | [removed: 259,000] [added: 276,000] | |

| [removed: (a)] [added: (b)] | Homebuilding interest expense, which represents the amortization of capitalized interest, and land impairment charges are included in home sale cost of revenues. [added: All periods reflect the reclassification of sales commissions expense from home sale cost of revenues to selling, general, and administrative expenses. See [Note 1](#s84BB09648362B42FB992F71F67DB9AF6).] |

| | 2016 | | | | 2015 | | | | 2014 | | | | 2013 | | | | 2012 | | |

| Total assets (a) | 10,178,200 | | | | 9,189,406 | | | | 8,560,187 | | | | 8,719,886 | | | | 6,719,093 | | |

| Senior notes and term loan (a) | 3,110,016 | | | | 2,074,505 | | | | 1,809,338 | | | | 2,043,910 | | | | 2,494,297 | | |

| | 2016 | | | | 2015 | | | | 2014 | | | | 2013 | | | | 2012 | | |

| Gross margin from home sales (b) | 25.0 | | % | | 26.9 | | % | | 26.7 | | % | | 24.1 | | % | | 19.6 | | % |

| (a) | Certain prior period amounts have been reclassified to conform to the current year presentation following the adoption of ASU 2015-03, which resulted in the reclassification of applicable unamortized debt issuance costs from other assets to senior notes and term loan, and the reclassification of unbilled insurance receivables to other assets from accrued and other liabilities. See [Note 1](#s84BB09648362B42FB992F71F67DB9AF6). |

| | |

| --- | --- |

| Total assets | 8,967,160 | | | | 8,569,410 | | | | 8,734,143 | | | | 6,734,409 | | | | 6,885,620 | | |

| Senior notes and term loan | 2,084,769 | | | | 1,818,561 | | | | 2,058,168 | | | | 2,509,613 | | | | 3,088,344 | | |

| Gross margin from home sales (a) | 23.3 | | % | | 23.3 | | % | | 20.5 | | % | | 15.8 | | % | | 12.8 | | % |

December 31, [removed: 2015] [added: 2016] and [removed: 2014][added: 2015]

| | [added: 2016 | | | |] 2015 | | | | 2014 | | |

| Cash and equivalents | $ | [removed: 754,161] [added: 698,882] | | | $ | [removed: 1,292,862] [added: 754,161] | |

| Restricted cash | [removed: 21,274] [added: 24,366] | | | | [removed: 16,358] [added: 21,274] | | |

| House and land inventory | [removed: 5,450,058] [added: 6,770,655] | | | | [removed: 4,392,100] [added: 5,450,058] | | |

| Land held for sale | [removed: 81,492] [added: 31,728] | | | | [removed: 101,190] [added: 81,492] | | |

| Residential mortgage loans available-for-sale | [removed: 442,715] [added: 539,496] | | | | [removed: 339,531] [added: 442,715] | | |

| Investments in unconsolidated entities | [removed: 41,267] [added: 51,447] | | | | [removed: 40,368] [added: 41,267] | | |

| Intangible assets | [removed: 110,215] [added: 154,792] | | | | [removed: 123,115] [added: 110,215] | | |

| Deferred tax assets, net | [removed: 1,394,879] [added: 1,049,408] | | | | [removed: 1,720,668] [added: 1,394,879] | | |

| Accounts payable, including book overdrafts of [removed: $60,547] [added: $99,690] and [removed: $32,586] [added: $60,547] in [removed: 2015] [added: 2016] and [removed: 2014,] [added: 2015,] respectively | $ | [removed: 327,725] [added: 405,455] | | | $ | [removed: 270,516] [added: 327,725] | |

| Customer deposits | [removed: 186,141] [added: 187,891] | | | | [removed: 142,642] [added: 186,141] | | |

| Income tax liabilities | [removed: 57,050] [added: 34,860] | | | | [removed: 48,722] [added: 57,050] | | |

| Financial Services debt | [removed: 267,877] [added: 331,621] | | | | [removed: 140,241] [added: 267,877] | | |

| Term loan | [removed: 500,000] | [removed: |] [added: Level 2] | | — | | | [added: | 500,000 | | |]

| Preferred [removed: stock,] [added: shares,] $0.01 par value; 25,000,000 shares authorized, none issued | $ | — | | | $ | — | |

| Common [removed: stock,] [added: shares,] $0.01 par value; 500,000,000 shares authorized, [removed: 349,148,351] [added: 319,089,720] and [removed: 369,458,530] [added: 349,148,351] shares issued and outstanding at December 31, [removed: 2015] [added: 2016] and [removed: 2014,] [added: 2015,] respectively | [removed: 3,491] [added: 3,191] | | | | [removed: 3,695] [added: 3,491] | | |

| Additional paid-in capital | [removed: 3,093,802] [added: 3,116,490] | | | | [removed: 3,072,996] [added: 3,093,802] | | |

| Accumulated other comprehensive loss | [removed: (609] [added: (526] | | ) | | [removed: (690] [added: (609] | | ) |

| Retained earnings | [removed: 1,662,641] [added: 1,540,208] | | | | [removed: 1,728,953] [added: 1,662,641] | | |

| Total shareholders’ equity | [removed: 4,759,325] [added: 4,659,363] | | | | [removed: 4,804,954] [added: 4,759,325] | | |

For the years ended December 31, [added: 2016,] 2015, [removed: 2014,] and [removed: 2013][added: 2014]

| | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | |

| Home sale revenues | $ | [removed: 5,792,675] [added: 7,451,315] | | | $ | [removed: 5,662,171] [added: 5,792,675] | | | $ | [removed: 5,424,309] [added: 5,662,171] | |

| Land sale revenues | [removed: 48,536] [added: 36,035] | | | | [removed: 34,554] [added: 48,536] | | | | [removed: 114,335] [added: 34,554] | | |

| | [removed: 5,841,211] [added: 7,487,350] | | | | [removed: 5,696,725] [added: 5,841,211] | | | | [removed: 5,538,644] [added: 5,696,725] | | |

| Financial Services | [removed: 140,753] [added: 181,126] | | | | [removed: 125,638] [added: 140,753] | | | | [removed: 140,951] [added: 125,638] | | |

| Total revenues | [removed: 5,981,964] [added: 7,668,476] | | | | [removed: 5,822,363] [added: 5,981,964] | | | | [removed: 5,679,595] [added: 5,822,363] | | |

| Land sale cost of revenues | [removed: 35,858] [added: (32,115] | | [added: )] | | [removed: 23,748] [added: (35,858] | | [added: )] | | [removed: 104,426] [added: (23,748] | | [added: )] |

| Financial Services expenses | [removed: 82,047] [added: (108,573] | | [added: )] | | [removed: 71,057] [added: (82,047] | | [added: )] | | [removed: 92,242] [added: (71,057] | | [added: )] |

| Other expense, net | [removed: 17,363] [added: (48,814] | | [added: )] | | [removed: 26,736] [added: (17,363] | | [added: )] | | [removed: 76,077] [added: (26,736] | | [added: )] |

| Income before income taxes | [removed: 816,023] [added: 933,850] | | | | [removed: 689,758] [added: 816,023] | | | | [removed: 527,822] [added: 689,758] | | |

| Income tax expense (benefit) | [removed: 321,933] [added: $] | [added: 331,147] | | | [removed: 215,420] [added: $] | [added: 321,933] | | | [removed: (2,092,294] [added: $] | [added: 215,420] | [removed: )] |

| Net income | $ | [removed: 494,090] [added: 602,703] | | | $ | [removed: 474,338] [added: 494,090] | | | $ | [removed: 2,620,116] [added: 474,338] | |

| Basic | $ | [removed: 1.38] [added: 1.76] | | | $ | [removed: 1.27] [added: 1.38] | | | $ | [removed: 6.79] [added: 1.27] | |

| Diluted | $ | [removed: 1.36] [added: 1.75] | | | $ | [removed: 1.26] [added: 1.36] | | | $ | [removed: 6.72] [added: 1.26] | |

| Cash dividends declared | $ | [removed: 0.33] [added: 0.36] | | | $ | [removed: 0.23] [added: 0.33] | | | $ | [removed: 0.15] [added: 0.23] | |

| Basic | [removed: 356,576] [added: 339,747] | | | | [removed: 370,377] [added: 356,576] | | | | [removed: 383,077] [added: 370,377] | | |

| Effect of dilutive securities | [removed: 3,217] [added: 2,376] | | | | [removed: 3,725] [added: 3,217] | | | | [removed: 3,789] [added: 3,725] | | |

| Diluted | [removed: 359,793] [added: 342,123] | | | | [removed: 374,102] [added: 359,793] | | | | [removed: 386,866] [added: 374,102] | | |

| | 2016 | | | | 2015 | | |

| Total cash, cash equivalents, and restricted cash | 723,248 | | | | 775,435 | | |

| Other assets | 857,426 | | | | 893,345 | | |

| | $ | 10,178,200 | | | $ | 9,189,406 | |

| Accrued and other liabilities | 1,448,994 | | | | 1,516,783 | | |

| Senior notes | 3,110,016 | | | | 1,576,082 | | |

| Total liabilities | 5,518,837 | | | | 4,430,081 | | |

| | $ | 10,178,200 | | | $ | 9,189,406 | |

| Home sale cost of revenues | (5,587,974 | | ) | | (4,235,945 | | ) | | (4,149,674 | | ) |

| | (5,620,089 | | ) | | (4,271,803 | | ) | | (4,173,422 | | ) |

| Selling, general, and administrative expenses | (957,150 | | ) | | (794,728 | | ) | | (861,390 | | ) |

For the years ended December 31, 2016, 2015, and 2014

| Net income | $ | 602,703 | | | $ | 494,090 | | | $ | 474,338 | |

For the years ended December 31, 2016, 2015, and 2014

| Share repurchases | (31,087 | ) | | (310 | | ) | | — | | | | — | | | | (602,896 | | ) | | (603,206 | | ) |

| Net income | — | | | — | | | | — | | | | — | | | | 602,703 | | | | 602,703 | | |

| Shareholders' Equity, December 31, 2016 | 319,090 | | | $ | 3,191 | | | $ | 3,116,490 | | | $ | (526 | ) | | $ | 1,540,208 | | | $ | 4,659,363 | |

For the years ended December 31, 2016, 2015, and 2014

| Net income | $ | 602,703 | | | $ | 494,090 | | | $ | 474,338 | |

| Other, net | 1,614 | | | | (4,865 | | ) | | (2,566 | | ) |

| Inventories | (897,092 | | ) | | (917,298 | | ) | | (337,939 | | ) |

| Other assets | (45,721 | | ) | | (175,150 | | ) | | (46,249 | | ) |

| Investment in unconsolidated subsidiaries | (14,539 | | ) | | (454 | | ) | | (9 | | ) |

| Net cash used in investing activities | (471,192 | | ) | | (34,564 | | ) | | (122,613 | | ) |

| Proceeds from debt issuance | 1,995,937 | | | | 498,087 | | | | — | | |

| Net increase (decrease) | (52,187 | | ) | | (533,785 | | ) | | (343,824 | | ) |

| Cash, cash equivalents, and restricted cash at beginning of period | 775,435 | | | | 1,309,220 | | | | 1,653,044 | | |

| Cash, cash equivalents, and restricted cash at end of period | $ | 723,248 | | | $ | 775,435 | | | $ | 1,309,220 | |

The acquired net assets were recorded at their estimated fair values and resulted in goodwill of $40.4 million and separately identifiable intangible assets of $18.0 million comprised of the John Wieland Homes and Neighborhoods tradename, which is being amortized over a 20\-year life.

In January 2016, we adopted Accounting Standards Update ("ASU") 2015-03, “Interest - Imputation of Interest,” which changes the presentation of debt issuance costs in the balance sheet from an asset to a direct reduction of the carrying amount of the related debt.

The adoption of this guidance resulted in the reclassification of applicable unamortized debt issuance costs from other assets to senior notes and term loan.

In December 2016, we early adopted ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” that requires the statement of cash flows to explain the change during the period in the total of cash, cash equivalents, and amounts described as restricted cash or restricted cash equivalents.

Restricted cash and restricted cash equivalents are included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.

Effective with our fourth quarter 2016 reporting, we reclassified our unbilled insurance receivables to other assets from accrued and other liabilities.

Additionally, we reclassified sales commissions expense from home sale cost of revenues to selling, general, and administrative expenses in order to be more consistent with a majority of our peers.

This

had the effect of reducing home sale cost of revenues while increasing selling, general, and administrative expenses by the amount of sales commissions, which totaled $268.3 million, $204.9 million, and $193.6 million, or 3.6 percent, 3.5 percent, and 3.4 percent of home sale revenues, for the years ended December 31, 2016, 2015, and 2014, respectively.

Total cash, cash equivalents, and restricted cash includes restricted cash balances of $24.4 million and $21.3 million at December 31, 2016 and 2015, respectively.

Goodwill, which represents the cost of acquired businesses in excess of the fair value of the net assets of such businesses at the acquisition date, was recorded as the result of the Wieland acquisition and totaled $40.4 million at December 31, 2016.

We assess goodwill for impairment annually in the fourth quarter and if events or changes in circumstances indicate the carrying amount may not be recoverable.

| Other assets | 671,099 | | | | 543,218 | | |

| | $ | 8,967,160 | | | $ | 8,569,410 | |

| Accrued and other liabilities | 1,284,273 | | | | 1,343,774 | | |

| Senior notes | 1,584,769 | | | | 1,818,561 | | |

| Total liabilities | 4,207,835 | | | | 3,764,456 | | |

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

| Home sale cost of revenues | 4,440,893 | | | | 4,343,249 | | | | 4,310,528 | | |

| | 4,476,751 | | | | 4,366,997 | | | | 4,414,954 | | |

| Selling, general, and administrative expenses | 589,780 | | | | 667,815 | | | | 568,500 | | |

| Shareholders' Equity, January 1, 2013 | 386,608 | | | $ | 3,866 | | | $ | 3,030,889 | | | $ | (992 | ) | | $ | (844,147 | ) | | $ | 2,189,616 | |

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

| Net income | — | | | — | | | | — | | | | — | | | | 2,620,116 | | | | 2,620,116 | | |

| Other, net | 5,605 | | | | 6,091 | | | | 10,294 | | |

| Restricted cash | (8,626 | | ) | | 1,368 | | | | 3,387 | | |

| Inventories | (927,768 | | ) | | (346,596 | | ) | | 265,064 | | |

| Other assets | (177,063 | | ) | | (46,249 | | ) | | (38,190 | | ) |

| Net change in loans held for investment | 8,664 | | | | 335 | | | | (12,265 | | ) |

| Change in restricted cash related to letters of credit | 3,710 | | | | 54,989 | | | | (4,152 | | ) |

| Net increase (decrease) in cash and equivalents | (538,701 | | ) | | (287,467 | | ) | | 175,569 | | |

| Cash and equivalents at beginning of period | 1,292,862 | | | | 1,580,329 | | | | 1,404,760 | | |

| Cash and equivalents at end of period | $ | 754,161 | | | $ | 1,292,862 | | | $ | 1,580,329 | |

The acquired net assets will be recorded at their estimated fair values.

These intangible assets were valued at the acquisition date and are being amortized over 20\-year lives.

If we determine that the carrying values of intangible assets may not be recoverable based upon the existence of one or more indicators of impairment, we use a projected undiscounted cash flow method to determine if impairment exists.

There were no impairments of tradenames during 2015, 2014, or 2013.

| | $ | 17,363 | | | $ | 26,736 | | | $ | 76,077 | |

For those communities whose carrying values exceed the expected undiscounted cash flows, we estimate the fair value of the community.

Impairment charges are recorded if the fair value of the community's inventory is less than its carrying value.

transactions, where available, and discounted cash flow models.

| | $ | 162,119 | | | $ | 2,046,193 | | | $ | 127,280 | | | $ | 1,890,585 | |

These loans are

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 risks associated with our loan origination activities, 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 enter into any derivative financial instruments for trading purposes.

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.

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.

| | $ | 7,390 | | | $ | 1,465 | | | $ | 4,423 | | | $ | 4,337 | |

In August 2015, the FASB issued ASU 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date", which delayed the effective date by one year.

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Management, including our [removed: 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: 2015.][added: 2016.]

Based upon, and as of the date of that evaluation, our [removed: 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: 2015.][added: 2016.]

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: 2015.][added: 2016.]

Based on this assessment, management asserts that the Company has maintained effective internal control over financial reporting as of December 31, [removed: 2015.][added: 2016.]

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: 2015.][added: 2016.]

We have audited PulteGroup, Inc.’s internal control over financial reporting as of December 31, [removed: 2015,] [added: 2016,] based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 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: 2015,] [added: 2016,] 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: 2015] [added: 2016] and [removed: 2014,] [added: 2015,] and the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, [removed: 2015] [added: 2016] and our report dated February [removed: 8, 2016] [added: 1, 2017] expressed an unqualified opinion thereon.

There has been no change in our internal control over financial reporting during the quarter ended December 31, [removed: 2015] [added: 2016] that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

February 1, 2017

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February 8, 2016

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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: 2016] [added: 2017] Annual Meeting of Shareholders [removed: (“2016] [added: (“2017] Proxy [removed: Statement”)] [added: Statement”), which will be filed no later than 120 days after December 31, 2016,] 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: 2016] [added: 2017] 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: 2016] [added: 2017] 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: 2016] [added: 2017] Proxy Statement under the captions [removed: “2015] [added: “2016] Executive Compensation” and [removed: “2015] [added: “2016] 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: 2016] [added: 2017] 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: 2016] [added: 2017] Proxy Statement under the captions “Certain Relationships and Related Transactions” and “Election of Directors - Independence” and is incorporated herein by this reference.

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Information required by this Item will be contained in the [removed: 2016] [added: 2017] 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: 2015] [added: 2016] and [removed: 2014](#sB35389757E5C5376B91D768A9D569CD1)] [added: 2015](#s6B4482C9E87F25725A7CF71F66F04E25)] | [removed: [42](#sB35389757E5C5376B91D768A9D569CD1)] [added: [43](#s6B4482C9E87F25725A7CF71F66F04E25)] |

| [Consolidated Statements of Operations for the years ended December 31, [added: 2016,] 2015, [removed: 2014,] and [removed: 2013](#s6E3FD5302794582EAB7536010EED69D7)] [added: 2014](#sAD9B0C4B489D3F65C2A8F71F670BD015)] | [removed: [43](#s6E3FD5302794582EAB7536010EED69D7)] [added: [44](#sAD9B0C4B489D3F65C2A8F71F670BD015)] |

| [Consolidated Statements of Comprehensive Income for the years ended December 31, [added: 2016,] 2015, [removed: 2014,] and [removed: 2013](#s6C4601268F6B5A6BBCC667D8A46CFC08)] [added: 2014](#s96CFAD4AF9912C569662F71F672A6EFE)] | [removed: [44](#s6C4601268F6B5A6BBCC667D8A46CFC08)] [added: [45](#s96CFAD4AF9912C569662F71F672A6EFE)] |

| [Consolidated Statements of Shareholders' Equity for the years ended December 31, [added: 2016,] 2015, [removed: 2014,] and [removed: 2013](#s0B1A186914655606B3783EE20D642932)] [added: 2014](#sCF2EBB7FABE6F11A5EF7F71F673A2A8C)] | [removed: [45](#s0B1A186914655606B3783EE20D642932)] [added: [46](#sCF2EBB7FABE6F11A5EF7F71F673A2A8C)] |