PulteGroup (PHM) 10-K risk factor changes: FY2017 vs FY2016

[removed: Accordingly, we can provide no assurances that] [added: However,] the [added: recovery in housing demand has been slow by historical standards and the] adjustments we have made [removed: in] [added: to] our operating strategy [removed: will] [added: may not] be successful if the current housing market [removed: was] [added: were] to deteriorate significantly.

If the market value of our land and homes drops significantly, our profits could [removed: decrease.][added: decrease and result in write-downs of the carrying values of land we own.]

Additionally, the cost of certain building materials, especially lumber, steel, concrete, copper, and petroleum-based materials, is influenced by changes in local and global commodity [removed: prices.][added: prices as well as government regulation.]

Increased costs or shortages of skilled labor and/or materials could cause increases in construction costs [removed: and / or] [added: and/or] construction delays.

[removed: In the past, we experienced] [added: We experience] significant competition for suitable land as a result of land constraints in many of our markets.

A large majority of our customers finance their home purchases through mortgage loans, many through [removed: our mortgage bank.][added: Pulte Mortgage.]

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

Even if potential customers do not need financing, changes in interest rates and mortgage availability could make it harder for them to [removed: sell their current homes to potential buyers who need financing.]

At December 31, [removed: 2016,] [added: 2017,] we had cash, cash equivalents, and restricted cash of [removed: $723.2] [added: $306.2] million as well as [removed: $530.9] [added: $764.5] million available under our revolving credit facility, net of outstanding letters of credit.

Another source of liquidity includes our ability to use letters of credit and surety bonds pursuant to certain performance-related obligations and as security for certain land option agreements and [removed: under various] insurance programs.

At December 31, [removed: 2016,] [added: 2017,] we had outstanding letters of credit and surety bonds totaling [removed: $219.1] [added: $235.5] million and [removed: $1.1] [added: $1.2] billion, respectively.

These letters of credit are [added: generally] issued via our unsecured revolving credit facility, which contains certain financial covenants and other limitations.

We compete [removed: primarily] [added: in each of our markets with numerous national, regional, and local homebuilders] on the basis of location, price, quality, reputation, design, community amenities, and our customers' overall sales and homeownership experiences.

This competition with other homebuilders could reduce the number of homes we deliver or cause us to accept reduced margins [removed: in order] to maintain sales volume.

As of December 31, [removed: 2016,] [added: 2017,] we had deferred tax assets, net of deferred tax liabilities, of [removed: $1.1 billion,] [added: $713.9 million,] against which we provided a valuation allowance of [removed: $64.9] [added: $68.6] million.

Our operations are subject to building, [added: safety,] environmental, and other regulations imposed and enforced by various federal, state, and local governing authorities.

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

[removed: Because of the] uncertainties inherent in these matters, we cannot provide assurance that our insurance coverage, our subcontractor arrangements, and our reserves will be adequate to address all our warranty and construction defect claims in the future.

In addition, [added: significant] inflation is often accompanied by higher interest rates, which [removed: could] [added: may] have a negative impact on [removed: housing demand.][added: demand for 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 errors by our [removed: associates.][added: employees or cyber-attacks or errors by third-party vendors who have access to our confidential data, or that of our customers.]

If our computer systems and our back-up systems are damaged, breached, or cease to function properly, [added: or if there are intrusions of critical infrastructure such as the power grid or communications systems,] we could suffer [added: extended] interruptions in our operations or unintentionally allow misappropriation of proprietary or confidential information (including information about our [added: employees,] homebuyers and business [removed: partners), which could require us to incur significant costs to remediate or otherwise resolve these issues.][added: partners).]

At times we have been required to record significant write-downs of the carrying value of our land inventory, and we have elected not to exercise options to purchase land, even though that required us to forfeit deposits and write-off pre-acquisition costs.

Although we have taken efforts to reduce our exposure to costs of that type, a certain amount of exposure is inherent in our homebuilding business.

If market conditions were to deteriorate in the future, we could again be required to record significant write downs to our land inventory, which would decrease the asset values reflected on our balance sheet and adversely affect our earnings and our stockholders' equity.

During 2017, we experienced increases in the prices of some building materials and shortages of skilled labor in some areas.

Products supplied to us and work done by subcontractors can expose us to risks that could adversely affect our business.

We rely on subcontractors to perform the actual construction of our homes, and, in some cases, to select and obtain building materials.

Despite our detailed specifications and quality control procedures, in some cases, subcontractors may use improper construction processes or defective materials.

Defective products widely used by the homebuilding industry can result in the need to perform extensive repairs to large numbers of homes.

The cost of complying with our warranty obligations may be significant if we are unable to recover the cost of repairs from subcontractors, materials suppliers and insurers.

We also can suffer damage to our reputation, and may be exposed to possible liability, if subcontractors fail to comply with applicable laws, including laws involving actions or matters that are not within our control.

When we learn about possibly improper practices by subcontractors, we attempt to cause the subcontractors to discontinue them and may terminate the use of such subcontractors.

However, attempts at mitigation may not avoid claims against us relating to actions of or matters relating to our subcontractors.

sell their current homes to potential buyers who need financing.

On December 22, 2017, a law commonly known as the Tax Cuts and Jobs Act (the "Tax Act") was enacted.

While the Tax Act lowers the tax rates applicable to many businesses and individuals, it also, among other things, (i) limits the federal deduction for mortgage interest so that it only applies to the first $750,000 of a new mortgage (as compared to $1 million under previous tax law), (ii) introduces a $10,000 cap on the federal deduction for state and local taxes, including real estate taxes, and (iii) eliminates the federal deduction for interest on home equity loans.

While the ultimate impact of the Tax Act is not known, these tax changes may raise the overall cost of home ownership in certain of our existing or future communities, lessen the perceived financial benefits of home ownership, or otherwise reduce demand for our homes.

Homebuilders compete not only for homebuyers, but also for desirable land, financing, raw materials, skilled management, and labor resources.

Competition can also affect our ability to procure suitable land, raw materials, and skilled labor at acceptable prices or other terms.

The loss of the services of members of our senior management or a significant number of our operating employees could negatively affect our business.

Our success depends upon the skills, experience, and active participation of our senior management, many of whom have been with the Company for a significant number of years.

If we were to lose members of our senior management, we might not be able to find appropriate replacements on a timely basis, and our operations could be negatively affected.

Also, the loss of a significant number of operating employees in key roles or geographies where we are not able to hire qualified replacements could have a material adverse effect on our business.

The Tax Act enacted on December 22, 2017, makes broad and complex changes to the U.S. tax code, including, but not limited to, the following that impact us: (1) reducing the U.S. federal corporate income tax rate from 35 percent to 21 percent; (2) eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits can be realized; (3) creating a new limitation on deductible interest expense; (4) repealing the domestic production activities deduction; (5) limiting the deductibility of certain executive compensation; and (6) limiting certain other deductions.

While we continue to evaluate the effects of the Tax Act, we have recorded a net tax expense of $172.1 million in 2017 related to the remeasurement of our deferred tax balance and other effects.

We expect that the Tax Act will have a favorable impact on our financial results beginning in 2018.

In the absence of guidance on various uncertainties and ambiguities in the application of certain provisions of the Tax Act, we will use what we believe are reasonable interpretations and assumptions in applying the Tax Act.

However, it is possible that the IRS could issue subsequent guidance or take positions in an audit that differ from our prior interpretations and assumptions, which could have a material adverse effect on our cash tax liabilities, results of operations, or financial condition.

Because of the

In 2017, Hurricanes Harvey and Irma caused disruptions in our Texas and Florida operations, respectively, but did not result in a material impact to our 2017 results of operations.

Inflation can adversely affect us by increasing costs of land, materials, and labor.

In an inflationary environment, economic conditions and other market factors may make it difficult for us to raise home prices enough to keep up with the rate of inflation, which would reduce our profit margins.

Although the rate of inflation has been historically low for the last several years, we currently are experiencing increases in the prices of labor and materials above the general inflation rate.

While we are continuously working to improve our information technology systems and provide employee awareness training around phishing, malware, and other cyber risks to enhance our levels of protection, to the extent possible, against cyber risks and security breaches, and monitor to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security impact, there is no assurance that advances in computer capabilities, new technologies, methods or other developments will detect or prevent security breaches and safeguard access to proprietary or confidential information.

Any such disruption could damage our reputation, result in market value declines, lead to legal proceedings against us by affected third-parties resulting in penalties or fines, and require us to incur significant costs to remediate or otherwise resolve these issues.

We can be injured by improper acts of persons over whom we do not have control or by the attempt to impose liabilities or obligations of third parties on us.

Although we expect all of our employees, officers, and directors to comply at all times with all applicable laws, rules, and regulations, there may be instances in which subcontractors or others through whom we do business engage in practices that do not comply with applicable laws, regulations, or governmental guidelines.

When we learn of practices that do not comply with applicable laws or regulations, including practices relating to homes, buildings, or multifamily rental properties we build or finance, we move actively to stop the non-complying practices as soon as possible, and we have taken disciplinary action regarding employees of ours who were aware of non-complying practices and did not take steps to address them, including in some instances terminating their employment.

However, regardless of the steps we take after we learn of practices that do not comply with applicable laws or regulations, we can in some instances be subject to fines or other governmental penalties, and our reputation can be injured, due to the practices' having taken place.

The homes we sell are built by employees of subcontractors and other contract parties.

We do not have the ability to control what these contract parties pay their employees or subcontractors or the work rules they impose on their employees or subcontractors.

However, the overall demand for new homes remains below historical levels.

We compete in each of our markets with numerous national, regional, and local homebuilders.

We evaluate the recoverability of intangible assets whenever facts and circumstances indicate the carrying amount may not be recoverable.

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

Inflation can have a long-term impact on us because increasing costs of land, materials, and labor may require us to increase the sales prices of homes in order to maintain satisfactory margins.

However, we may not be able to raise home prices sufficiently to keep up with the rate of inflation and our margins could decrease.

[removed: We remain pleased with] [added: Although] the [removed: overall] [added: recovery in housing] demand [added: has been slow by historical standards, the growth in demand] for new [removed: homes, which continues along a sustained path of recovery] [added: homes is being] supported by [removed: ongoing] job creation, [removed: low unemployment,] [added: high consumer confidence,] a supportive interest rate environment, and a limited supply of new homes.

[removed: We have looked toward 2016 as a year where we would begin] [added: Our focus continues to be on] 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 [removed: 13%] [added: 11%] growth in net new orders and a [removed: 29%] [added: 12%] increase in home sale revenues to [removed: $7.5] [added: $8.3] billion.

During [removed: 2016,] [added: 2017,] we opened approximately [removed: 200] [added: 250] new communities across our local markets as a result of increased land investment over the last few years.

Leveraging our increased land investments, we expect to open [removed: an even higher] [added: a similar] number of new communities in [removed: 2017 than we did] [added: 2018 as] in [removed: 2016,] [added: 2017,] which we expect will help our volume grow in [removed: 2017.][added: 2018.]

Specifically, we accomplished the following in [removed: 2016:][added: 2017:]

| • | Maintained our quarterly dividend at $0.09 per share; [added: and] |

| • | Ended the year with a debt to total capitalization ratio of [removed: 40.0%,] [added: 42.0%,] which is [removed: within] [added: slightly above] our targeted [removed: range,] [added: range of 30.0% to 40.0%,] and a cash, cash equivalents, and restricted cash balance of [removed: $723.2] [added: $306.2] million with no borrowings outstanding under our unsecured revolving credit [removed: agreement.] [added: agreement;] |

| | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| Homebuilding | $ | [removed: 860,766] [added: 865,332] | | | $ | [removed: 757,317] [added: 860,766] | | | $ | [removed: 635,177] [added: 757,317] | |

| Financial Services | [removed: 73,084] [added: 73,496] | | | | [removed: 58,706] [added: 73,084] | | | | [removed: 54,581] [added: 58,706] | | |

| Income before income taxes | [removed: 933,850] [added: 938,828] | | | | [removed: 816,023] [added: 933,850] | | | | [removed: 689,758] [added: 816,023] | | |

| Income tax expense | [removed: (331,147] [added: (491,607] | | ) | | [removed: (321,933] [added: (331,147] | | ) | | [removed: (215,420] [added: (321,933] | | ) |

| Net income | $ | [removed: 602,703] [added: 447,221] | | | $ | [removed: 494,090] [added: 602,703] | | | $ | [removed: 474,338] [added: 494,090] | |

| Net income | $ | [removed: 1.75] [added: 1.44] | | | $ | [removed: 1.36] [added: 1.75] | | | $ | [removed: 1.26] [added: 1.36] | |

| • | Homebuilding income before income taxes improved each year from [removed: 2014] [added: 2015] to [removed: 2016.] [added: 2017.] Revenues increased each year and [removed: SG&A leverage improved. In 2016, the revenue increase was partially offset by lower gross margins and higher] overhead [removed: costs, both of] [added: leverage improved,] which [removed: were partially attributable to the assets acquired from Wieland] [added: offset declines] in [removed: January 2016 (see [Note 1](#sAF16447860F4EBE25D5D75F2449FA699)).] [added: gross margin percentage.] Homebuilding income before income taxes also reflected the following significant [removed: expense (income)] [added: income (expense)] items ($000's omitted): |

| Applecross matter (see [Note [removed: 12](#s16C8D60ED3B16EE548AAF71F6A858CAB))] [added: 11](#sE3B487D74A5741B049157CF216CC01A4))] | [added: Other expense, net | |] — | | | | [removed: 20,000] [added: —] | | | | [removed: —] [added: (20,000] | | [added: )] |

| Settlement of disputed land transaction (see [Note [removed: 12](#s16C8D60ED3B16EE548AAF71F6A858CAB))] [added: 11](#sE3B487D74A5741B049157CF216CC01A4))] | [removed: 15,000] [added: Other expense, net] | | [added: —] | | [removed: —] | | [added: (15,000] | | [added: ) | |] — | | |

| Insurance reserve adjustments (see [Note [removed: 12](#s16C8D60ED3B16EE548AAF71F6A858CAB))] [added: 11](#sE3B487D74A5741B049157CF216CC01A4))] | [removed: (55,243] [added: Selling, general and administrative expenses] | | [removed: )] [added: 95,120] | | [removed: (62,183] | | [removed: )] [added: 55,243] | | [removed: 69,267] | | [added: 62,183] | [added: | |]

For additional information on [removed: each of] the above, see the applicable Notes to the Consolidated Financial Statements.

| • | The increase in Financial Services income in [removed: 2016] [added: 2017] compared with [removed: 2015] [added: 2016] and [removed: 2014] [added: 2015] was primarily due to an increase in mortgage origination [removed: volume.] [added: volume resulting from higher volumes in the Homebuilding segment, partially offset by lower revenue per loan as the mortgage origination market has become more competitive.] During [removed: 2015 and 2014,] [added: 2015,] we reduced our loan origination liabilities by [removed: net reserve releases of] $11.4 [removed: million and $18.6] million, [removed: respectively,] which favorably impacted Financial Services income. See [Note [removed: 12](#s16C8D60ED3B16EE548AAF71F6A858CAB).] [added: 11](#sE3B487D74A5741B049157CF216CC01A4).] |

[removed: | • |] Our effective tax rate was [removed: 35.5%, 39.5%] [added: 52.4%, 35.5%] and [removed: 31.2%] [added: 39.5%] for [added: 2017,] 2016, [removed: 2015,] and [removed: 2014,] [added: 2015,] respectively. [removed: See [Note 9](#s067988DA9CBC19B0BD38F71F6A108330). |]

| | [removed: 2016] [added: 2017] | | | | FY [removed: 2016] [added: 2017] vs. FY [removed: 2015] [added: 2016] | | | [removed: 2015] [added: 2016] | | | | FY [removed: 2015] [added: 2016] vs. FY [removed: 2014] [added: 2015] | | | [removed: 2014] [added: 2015] | | |

| Home sale revenues | $ | [removed: 7,451,315] [added: 8,323,984] | | | [removed: 29] [added: 12] | % | | $ | [removed: 5,792,675] [added: 7,451,315] | | | [removed: 2] [added: 29] | % | | $ | [removed: 5,662,171] [added: 5,792,675] | |

| Land sale revenues | [removed: 36,035] [added: 57,106] | | | | [removed: (26] [added: 58] | [removed: )%] [added: %] | | [removed: 48,536] [added: 36,035] | | | | [removed: 40] [added: (26] | [removed: %] [added: )%] | | [removed: 34,554] [added: 48,536] | | |

| Total Homebuilding revenues | [removed: 7,487,350] [added: 8,381,090] | | | | [removed: 28] [added: 12] | % | | [removed: 5,841,211] [added: 7,487,350] | | | | [removed: 3] [added: 28] | % | | [removed: 5,696,725] [added: 5,841,211] | | |

| Home sale cost of revenues (a) [removed: (b)] | [removed: (5,587,974] [added: (6,461,152] | | ) | | [removed: 32] [added: 16] | % | | [removed: (4,235,945] [added: (5,587,974] | | ) | | [removed: 2] [added: 32] | % | | [removed: (4,149,674] [added: (4,235,945] | | ) |

| Land sale cost of revenues [added: (b)] | [removed: (32,115] [added: (134,449] | | ) | | [removed: (10] [added: 319] | [removed: )%] [added: %] | | [removed: (35,858] [added: (32,115] | | ) | | [removed: 51] [added: (10] | [removed: %] [added: )%] | | [removed: (23,748] [added: (35,858] | | ) |

| Selling, general, and administrative expenses ("SG&A") [removed: (b)] (c) | [removed: (957,150] [added: (891,581] | | ) | | [removed: 20] [added: (7] | [removed: %] [added: )%] | | [removed: (794,728] [added: (957,150] | | ) | | [removed: (8] [added: 20] | [removed: )%] [added: %] | | [removed: (861,390] [added: (794,728] | | ) |

| Other expense, net (d) | [removed: (49,345] [added: (28,576] | | ) | | [removed: 184] [added: (42] | [removed: %] [added: )%] | | [removed: (17,363] [added: (49,345] | | ) | | [removed: (35] [added: 184] | [removed: )%] [added: %] | | [removed: (26,736] [added: (17,363] | | ) |

| Income before income taxes | $ | [removed: 860,766] [added: 865,332] | | | [removed: 14] [added: 1] | % | | $ | [removed: 757,317] [added: 860,766] | | | [removed: 19] [added: 14] | % | | $ | [removed: 635,177] [added: 757,317] | |

| Gross margin from home sales (a) [removed: (b)] | [removed: 25.0] [added: 22.4] | | % | | [removed: (190)] [added: (260)] bps | | | [removed: 26.9] [added: 25.0] | | % | | [removed: 20] [added: (190)] bps | | | [removed: 26.7] [added: 26.9] | | % |

| SG&A % of home sale revenues [removed: (b)] (c) | [removed: 12.8] [added: 10.7] | | % | | [removed: (90)] [added: (210)] bps | | | [removed: 13.7] [added: 12.8] | | % | | [removed: (150)] [added: (90)] bps | | | [removed: 15.2] [added: 13.7] | | % |

| Closings (units) | [removed: 19,951] [added: 21,052] | | | | [removed: 16] [added: 6] | % | | [removed: 17,127] [added: 19,951] | | | | [removed: —] [added: 16] | % | | [removed: 17,196] [added: 17,127] | | |

| Average selling price | $ | [removed: 373] [added: 395] | | | [removed: 10] [added: 6] | % | | $ | [removed: 338] [added: 373] | | | [removed: 3] [added: 10] | % | | $ | [removed: 329] [added: 338] | |

| Units | [removed: 20,326] [added: 22,626] | | | | [removed: 13] [added: 11] | % | | [removed: 18,008] [added: 20,326] | | | | [removed: 8] [added: 13] | % | | [removed: 16,652] [added: 18,008] | | |

| Dollars | $ | [removed: 7,753,399] [added: 9,361,534] | | | [removed: 23] [added: 21] | % | | $ | [removed: 6,305,380] [added: 7,753,399] | | | [removed: 13] [added: 23] | % | | $ | [removed: 5,558,937] [added: 6,305,380] | |

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

| Active communities at December 31 | [removed: 726] [added: 790] | | | | [removed: 17] [added: 9] | % | | [removed: 620] [added: 726] | | | | [removed: 4] [added: 17] | % | | [removed: 598] [added: 620] | | |

| Units | [removed: 7,422] [added: 8,996] | | | | [removed: 10] [added: 21] | % | | [removed: 6,731] [added: 7,422] | | | | [removed: 15] [added: 10] | % | | [removed: 5,850] [added: 6,731] | | |

Demand conditions continued to improve in the overall U.S. housing market in 2017.

| • | Continued land investment spending to support future growth, which contributed to a 12% increase in home sale revenues; |

| • | Committed to a plan we announced in May 2017 to sell select non-core and underutilized land parcels following a strategic review of our land portfolio (see [Note 2](#sB0D64520B510717A1A287CF217084B2C) to the Consolidated Financial Statements); |

| • | Repurchased $910.3 million of shares under our share repurchase plan. |

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

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

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

| Land inventory impairments (see [Note 2](#sB0D64520B510717A1A287CF217084B2C)) | Home sale cost of revenues | | (88,952 | | ) | | (1,074 | | ) | | (7,347 | | ) |

| Warranty claim (see [Note 11](#sE3B487D74A5741B049157CF216CC01A4)) | Home sale cost of revenues | | (12,389 | | ) | | — | | | | — | | |

| Net realizable value adjustments ("NRV") - land held for sale (see [Note 2](#sB0D64520B510717A1A287CF217084B2C)) | Land sale cost of revenues | | (83,576 | | ) | | (1,105 | | ) | | 901 | | |

| Write-offs of insurance receivables (see [Note 11](#sE3B487D74A5741B049157CF216CC01A4)) | Selling, general and administrative expenses | | (29,624 | | ) | | — | | | | — | | |

| Restructuring costs from corporate office relocation and other actions | Selling, general and administrative expenses | | — | | | | (10,030 | | ) | | (3,826 | | ) |

| Other expense, net | | — | | | | (11,643 | | ) | | (2,463 | | ) | |

| Write-offs of deposits and pre-acquisition costs (see [Note 2](#sB0D64520B510717A1A287CF217084B2C)) | Other expense, net | | (11,367 | | ) | | (17,157 | | ) | | (5,021 | | ) |

| Impairments of unconsolidated entities (see [Note 2](#sB0D64520B510717A1A287CF217084B2C)) | Other expense, net | | (8,017 | | ) | | — | | | | — | | |

| | | | $ | (138,805 | ) | | $ | (766 | ) | | $ | 24,427 | |

| • | Our effective tax rate was 52.4%, 35.5% and 39.5% for 2017, 2016, and 2015, respectively. The effective tax rate for 2017 reflects the impact of the Tax Act, enacted on December 22, 2017. In connection with our initial analysis of the impact of the Tax Act, we have recorded a provisional amount of net tax expense of $172.1 million in the year ended December 31, 2017 related to the remeasurement of our deferred tax balance and other effects. See [Note 8](#s2E19ABF5B58A5307A6807CF216863AD5). |

| (a) | Includes the amortization of capitalized interest; land inventory impairments of $89.0 million in 2017, $1.1 million in 2016, and $7.3 million in 2015 (see [Note 2](#sB0D64520B510717A1A287CF217084B2C)); and a warranty charge of $12.4 million related to a closed-out community (see [Note 11](#sE3B487D74A5741B049157CF216CC01A4)) in 2017. |

| (b) | Includes net realizable value adjustments on land held for sale of $83.6 million, $1.1 million, and $(0.9) million in 2017, 2016, and 2015, respectively (see [Note 2](#sB0D64520B510717A1A287CF217084B2C)). |

| (c) | Includes write-offs of $29.6 million of insurance receivables associated with the resolution of certain insurance matters in 2017; general liability insurance reserve reversals of $95.1 million, $55.2 million and $62.2 million in 2017, 2016, and 2015, respectively (see [Note 11](#sE3B487D74A5741B049157CF216CC01A4)); and restructuring costs from corporate office relocation and other actions of $10.0 million and $3.8 million in 2016 and 2015, respectively. |

| (d) | Includes an $8.0 million impairment of an investment in an unconsolidated entity in 2017 (see [Note 2](#sB0D64520B510717A1A287CF217084B2C)); $15.0 million in 2016 related to the settlement of a disputed land transaction; $20.0 million in 2015 resulting from the Applecross matter (see [Note 11](#sE3B487D74A5741B049157CF216CC01A4)); and restructuring costs from corporate office relocation and other actions of $11.6 million and $2.5 million in 2016 and 2015, respectively. See "Other expense, net" for a table summarizing other significant items. |

The increase in closings reflects the significant land investments we have made and the resulting increase in our active communities.

These increased closings occurred despite the disruption in our operations caused by Hurricane Harvey in Houston, Texas, and Hurricane Irma in Florida, as well as permitting and other municipal approval delays in certain communities.

The higher average selling price for 2017 reflected a shift toward move-up homebuyers.

Our results in 2017 include the effect of the aforementioned land inventory impairments totaling $89.0 million (see [Note 2](#sB0D64520B510717A1A287CF217084B2C)) and a warranty charge of $12.4 million (See [Note 11](#sE3B487D74A5741B049157CF216CC01A4)).

Combined, these factors reduced gross margin in 2017 by 120 basis points.

The loss in 2017 resulted from the aforementioned net realizable value charges of $83.6 million (see [Note 2](#sB0D64520B510717A1A287CF217084B2C)).

SG&A includes the aforementioned insurance receivable write-offs of $29.6 million in 2017 and general liability insurance reserve reversals of $95.1 million and $55.2 million in 2017 and 2016, respectively, resulting from favorable claims experience (see [Note 11](#sE3B487D74A5741B049157CF216CC01A4)).

Excluding these items, the improvement in our year-over-year SG&A leverage was primarily attributable to cost efficiencies realized in late 2016 that continued into 2017.

| | 2017 | | | | 2016 | | | | 2015 | | |

| (b) | Includes an $8.0 million impairment of an investment in an unconsolidated entity in 2017 (see [Note 2](#sB0D64520B510717A1A287CF217084B2C)). |

The higher average sales price when compared to 2016 also contributed to the higher backlog dollars.

| | | 2017 | | | 2016 | |

| | | 2,610 | | | 2,348 | |

As part of our inventory management

| Total | | 89,253 | | | 52,156 | | | 141,409 | | | 99,279 | | | 43,979 | | | 143,258 | |

| (b) | Includes land-related charges of $191.9 million, $19.3 million, and $11.5 million in 2017, 2016, and 2015, respectively (see [Note 2](#sB0D64520B510717A1A287CF217084B2C)). |

| (d) | Florida includes a warranty charge of $12.4 million in 2017 related to a closed-out community (see [Note 11](#sE3B487D74A5741B049157CF216CC01A4)). |

| | | 2017 | | | | FY 2017 vs. FY 2016 | | | 2016 | | | | FY 2016 vs. FY 2015 | | | 2015 | | |

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

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.

Additionally, we acquired substantially all of the assets of JW Homes ("Wieland") in January 2016, which also contributed to the growth in community count.

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

| • | Repurchased $600.0 million of shares under our share repurchase plan and authorized an additional $1.0 billion for future repurchases; |

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

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

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

| Corporate office relocation (see [Note 2](#s3E05BD30D217F420DF35F71F6856F524)) | $ | 8,284 | | | $ | 4,369 | | | $ | 16,344 | |

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

| Land-related charges (see [Note 3](#sDFFE2D0D989FFB871C25F71F6867F3BE)) | 19,336 | | | | 11,467 | | | | 11,168 | | |

| Loss on debt retirements (see [Note 6](#s098FB233016EF81A1086F71F6947E057)) | 657 | | | | — | | | | 8,584 | | |

| | $ | 1,423 | | | $ | (26,347 | ) | | $ | 105,363 | |

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

| (a) | Includes the amortization of capitalized interest. |

| (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)). |

| (c) | Includes costs associated with the relocation of our corporate headquarters totaling $1.0 million, $2.0 million, and $7.6 million in 2016, 2015, and 2014, respectively (see [Note 2](#s3E05BD30D217F420DF35F71F6856F524)); severance costs of $9.1 million in 2016; adjustments to general liability insurance reserves relating to reserve reversals of $55.2 million in 2016 and $62.2 million in 2015; and a charge of $69.3 million in 2014 (see [Note 12](#s16C8D60ED3B16EE548AAF71F6A858CAB)). |

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.

Closing volume was flat as higher net new orders were offset by production delays in certain communities caused by a number of factors, including tight labor resources and adverse weather conditions.

The lower amortized interest costs resulted from the reduction in our outstanding debt in recent years combined with the significant increase in volume in 2016.

SG&A included reserve reversals totaling $62.2 million in 2015 and charges totaling $69.3 million to increase general liability reserves in 2014 (see [Note 12](#s16C8D60ED3B16EE548AAF71F6A858CAB)).

Additionally, we incurred $2.0 million and $7.6 million in 2015 and 2014, respectively, of employee severance, retention, relocation, and related costs attributable to the relocation of our corporate headquarters (see [Note 2](#s3E05BD30D217F420DF35F71F6856F524)).

Excluding each of these items, SG&A in both dollars and as a percentage of home sale revenues increased for 2015 compared with 2014.

This increase in gross overhead dollars in 2015 was primarily due to investments in increased headcount and information systems along with higher costs in conjunction with the opening of an increased number of new communities.

| Loss on debt retirements [(Note 6)](#s098FB233016EF81A1086F71F6947E057) | 657 | | | | — | | | | 8,584 | | |

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.

The higher backlog resulted from higher net new order volume combined with production delays in certain communities in 2015 caused by a number of factors, including tight labor resources and adverse weather conditions.

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

The increase in spec homes reflects our intentions to achieve a more even flow production cycle over the course of 2017 compared with recent years.

We continue to focus on maintaining a low level of completed specs, though inventory levels tend to fluctuate throughout the year.

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

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

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

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

For 2015, Northeast home sale revenues decreased 4% compared with 2014 due to a 5% decrease in closings.

Average selling price remained flat over 2014.

The decrease in closings occurred in Mid-Atlantic and New England and contributed to the lower income before income taxes.

Northeast income before income taxes also includes a charge of $15.0 million related to the settlement of a disputed land transaction in 2016 and a charge of $20.0 million resulting from the Applecross matter in 2015 (see [Note 12](#s16C8D60ED3B16EE548AAF71F6A858CAB)).

The increases in the average selling price and closings were broad-based, though Tennessee experienced declines.

Net new orders increased 12% in 2015 mainly due to increased order levels in Raleigh and Georgia, partially offset by a decline in Tennessee.

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

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: 2016] [added: 2017] and [removed: 2015] [added: 2016] ($000’s omitted).

| | As of December 31, [removed: 2015] [added: 2017] for the Years ending December 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | [removed: 2016] [added: 2018] | | | | [removed: 2017] [added: 2019] | | | | [removed: 2018] [added: 2020] | | | | [removed: 2019] [added: 2021] | | | | [removed: 2020] [added: 2022] | | | | Thereafter | | | | Total | | | | Fair Value | | |

[removed: Does not include our Revolving Credit Facility, under which there] [added: There] were no [removed: borrowings] [added: amounts] outstanding [added: under our Revolving Credit Facility] at either December 31, [removed: 2016] [added: 2017] or [removed: 2015.][added: 2016.]

We are generally not exposed to variability in cash flows of derivative instruments for more than approximately [removed: 90] [added: 60] days.

At December 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] residential mortgage loans available-for-sale had an aggregate fair value of [removed: $539.5] [added: $570.6] million and [removed: $442.7] [added: $539.5] million, respectively.

At December 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] we had aggregate interest rate lock commitments of [removed: $273.9] [added: $210.9] million and [removed: $208.2] [added: $273.9] million, respectively, which were originated at interest rates prevailing at the date of commitment.

Unexpired forward contracts totaled [removed: $610.0] [added: $522.0] million and [removed: $525.0] [added: $610.0] million at December 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] respectively, and [added: whole loan investor commitments totaled $203.1 million and $157.6 million, respectively, at such dates.]

[removed: Hypothetical changes] in the fair values of our financial instruments arising from immediate parallel shifts in long-term mortgage rates would not be material to our financial results due to the offsetting nature in the movements in fair value of our financial instruments.

Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “plan,” “project,” “may,” “can,” “could,” “might,” "should", “will” and similar expressions identify forward-looking statements, including statements related to [added: the impairment charge with respect to certain land parcels and the impacts or effects thereof,] 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; 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 positions and the 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 [removed: laws;] [added: laws, including, but not limited to the Tax Cuts and Jobs Act which could have a greater impact on our effective tax rate or the value of our deferred tax assets than we anticipate;] 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](#sBFB05BAEFE8A06233287F71F83F0D617)] [added: Factors](#s935A8DD3C7BDC8E58ACD7CF236C9DF85)] for a further discussion of these and other risks and uncertainties applicable to our businesses.

| Fixed rate debt | $ | 508 | | | $ | 8,423 | | | $ | 9,539 | | | $ | 700,000 | | | $ | — | | | $ | 2,300,000 | | | $ | 3,018,470 | | | $ | 3,262,221 | |

| Average interest rate | 3.00 | | % | | 4.07 | | % | | 3.98 | | % | | 4.25 | | % | | — | | % | | 5.90 | | % | | 5.50 | | % | | | | |

| Variable rate debt (a) | $ | 438,657 | | | $ | 701 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 439,358 | | | $ | 439,358 | |

| Average interest rate | 3.72 | | % | | 7.3 | | % | | — | | % | | — | | % | | — | | % | | — | | % | | 3.7 | | % | | | | |

(a) Includes the Pulte Mortgage Repurchase Agreement.

Hypothetical changes

| Fixed rate debt | $ | 487,485 | | | $ | 128,296 | | | $ | — | | | $ | 3,900 | | | $ | 3,900 | | | $ | 1,000,000 | | | $ | 1,623,581 | | | $ | 1,678,987 | |

| Average interest rate | 6.24 | | % | | 7.00 | | % | | — | | % | | 5.00 | | % | | 5.00 | | % | | 6.71 | | % | | 6.57 | | % | | | | |

| Variable rate debt (a) | $ | 267,877 | | | $ | 500,000 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 767,877 | | | $ | 767,877 | |

| Average interest rate | 2.65 | | % | | 1.42 | | % | | — | | % | | — | | % | | — | | % | | — | | % | | 1.85 | | % | | | | |

(a) Includes the Pulte Mortgage Repurchase Agreement and the Term Loan, which was retired in 2016.

whole loan investor commitments totaled $157.6 million and $77.6 million, respectively, at such dates.

\[X\] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE [added: SECURITIES EXCHANGE ACT OF 1934]

[added: \[ \] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE] SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, [removed: 2016][added: 2017]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, [removed: or a] smaller reporting [added: company, or an emerging growth] company.

See the definitions of “large accelerated filer”, “accelerated filer”, [removed: and] “smaller reporting [removed: company”] [added: company”, and "emerging growth company"] in Rule 12b-2 of the Exchange Act.

[added: |] Large accelerated filer \[X\] [added: | |] Accelerated filer \[ \] [added: | |] Non-accelerated filer \[ \] [added: | |] Smaller reporting company \[ \] [added: | Emerging growth company \[ \] |]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the [added: Exchange] Act).

The aggregate market value of the registrant’s voting shares held by nonaffiliates of the registrant as of June 30, [removed: 2016,] [added: 2017,] based on the closing sale price per share as reported by the New York Stock Exchange on such date, was [removed: $6,626,321,236.][added: $7,393,482,685.]

Applicable portions of the Proxy Statement for the [removed: 2017] [added: 2018] Annual Meeting of Shareholders are incorporated by reference in Part III of this Form.

| 1A | [Risk [removed: Factors](#sBFB05BAEFE8A06233287F71F83F0D617)] [added: Factors](#s935A8DD3C7BDC8E58ACD7CF236C9DF85)] | [removed: [9](#sBFB05BAEFE8A06233287F71F83F0D617)] [added: [9](#s935A8DD3C7BDC8E58ACD7CF236C9DF85)] |

| 1B | [Unresolved Staff [removed: Comments](#sF894920A8D7B2870BB6BF71F8412BD7E)] [added: Comments](#s8F022B0017EF7C99032D7CF2370D7124)] | [removed: [13](#sF894920A8D7B2870BB6BF71F8412BD7E)] [added: [15](#s8F022B0017EF7C99032D7CF2370D7124)] |

| 3 | [Legal [removed: Proceedings](#s544014A469A533FCE5EDF71F84668495)] [added: Proceedings](#s57B4483FF3E72B71B3FD7CF23760342B)] | [removed: [14](#s544014A469A533FCE5EDF71F84668495)] [added: [15](#s57B4483FF3E72B71B3FD7CF23760342B)] |

| 4 | [Mine Safety [removed: Disclosures](#sCB7674F36A4ACE91781CF71F8497D3FE)] [added: Disclosures](#s9BDF0C9B59545B55F5027CF2376F019F)] | [removed: [14](#sCB7674F36A4ACE91781CF71F8497D3FE)] [added: [15](#s9BDF0C9B59545B55F5027CF2376F019F)] |

| 4A | [Executive Officers of the [removed: Registrant](#s2BDAB287E3367202F7EAF71F84BA732E)] [added: Registrant](#s0A8E41D206F27DF544E77CF237A111E6)] | [removed: [15](#s2BDAB287E3367202F7EAF71F84BA732E)] [added: [16](#s0A8E41D206F27DF544E77CF237A111E6)] |

| 5 | [Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity [removed: Securities](#sC1272727A23DEFE49994F71F66E8214B)] [added: Securities](#s23D5EBFF982A7E907B077CF2187AC8A8)] | [removed: [16](#sC1272727A23DEFE49994F71F66E8214B)] [added: [17](#s23D5EBFF982A7E907B077CF2187AC8A8)] |

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| 7 | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#sF9EEFF727B77C13479C3F71F85905086)] [added: Operations](#s5D5780CA86B15267AC397CF2386C478B)] | [removed: [20](#sF9EEFF727B77C13479C3F71F85905086)] [added: [21](#s5D5780CA86B15267AC397CF2386C478B)] |

| 7A | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#sB1DE110E282774DE1935F71F66ED3086)] [added: Risk](#s9E0ADCF82CA7F7E72E1E7CF2187AC8DB)] | [removed: [41](#sB1DE110E282774DE1935F71F66ED3086)] [added: [41](#s9E0ADCF82CA7F7E72E1E7CF2187AC8DB)] |

| 8 | [Financial Statements and Supplementary [removed: Data](#s11D1780DCA0D7728FCC5F71F87F9BA50)] [added: Data](#sB7F51AA3B0AD48DDEE397CF23B6395C6)] | [removed: [43](#s11D1780DCA0D7728FCC5F71F87F9BA50)] [added: [43](#sB7F51AA3B0AD48DDEE397CF23B6395C6)] |

| 9 | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#sAFAA3CD35E3C9AA8A499F71F8EEC2C63)] [added: Disclosure](#s8D41CEC72E6CAB0DCEB47CF2411B11A6)] | [removed: [88](#sAFAA3CD35E3C9AA8A499F71F8EEC2C63)] [added: [87](#s8D41CEC72E6CAB0DCEB47CF2411B11A6)] |

| 9A | [Controls and [removed: Procedures](#s22091DB48C711EB3FD7FF71F8F017875)] [added: Procedures](#s50948076975700032A3A7CF24133455D)] | [removed: [88](#s22091DB48C711EB3FD7FF71F8F017875)] [added: [87](#s50948076975700032A3A7CF24133455D)] |

| 9B | [Other [removed: Information](#sC8B81B82001FDB972382F71F8F2480AB)] [added: Information](#sC311465DC5E5CD6667FF7CF2416E5E7E)] | [removed: [90](#sC8B81B82001FDB972382F71F8F2480AB)] [added: [89](#sC311465DC5E5CD6667FF7CF2416E5E7E)] |

| | [Part [removed: III](#sF637835CE598D7657F5AF71F8F569CD2)] [added: III](#s420D49B0AD5782D110BE7CF2418762A3)] | |

| 10 | [Directors, Executive Officers and Corporate [removed: Governance](#sC6485916EB37D45229DFF71F8F7870EC)] [added: Governance](#s4810A5013E6E143248B27CF241CB5978)] | [removed: [90](#sC6485916EB37D45229DFF71F8F7870EC)] [added: [89](#s4810A5013E6E143248B27CF241CB5978)] |

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| 12 | [Security Ownership of Certain Beneficial Owners and Management and Related Shareholder [removed: Matters](#sCA5DDE4F74B9193CA365F71F8FCA2266)] [added: Matters](#s8376EAB0F2F4475058157CF2421EAADE)] | [removed: [90](#sCA5DDE4F74B9193CA365F71F8FCA2266)] [added: [89](#s8376EAB0F2F4475058157CF2421EAADE)] |

| 13 | [Certain Relationships and Related Transactions and Director [removed: Independence](#sC00C56CEFD0C339F5190F71F8FFC817B)] [added: Independence](#s0DEFCCBCD66207B15C167CF2422DB2B8)] | [removed: [90](#sC00C56CEFD0C339F5190F71F8FFC817B)] [added: [89](#s0DEFCCBCD66207B15C167CF2422DB2B8)] |

| 14 | [Principal Accountant Fees and [removed: Services](#s9DF15D39D8E1B191C2A8F71F901D392E)] [added: Services](#s5AC6A8AD42B39A65EF9F7CF24268A693)] | [removed: [90](#s9DF15D39D8E1B191C2A8F71F901D392E)] [added: [89](#s5AC6A8AD42B39A65EF9F7CF24268A693)] |

| 15 | [Exhibits and Financial Statement [removed: Schedules](#s438F879D90CDA08380CEF71F9071F7CE)] [added: Schedules](#s220413956FDC9658E7907CF242C52970)] | [removed: [91](#s438F879D90CDA08380CEF71F9071F7CE)] [added: [90](#s220413956FDC9658E7907CF242C52970)] |

Over our history, we have delivered [removed: nearly 680,000] [added: over 700,000] homes.

As of December 31, [removed: 2016,] [added: 2017,] we conducted our operations in [removed: 49] [added: 47] markets located throughout 25 states.

Financial information for each of our reportable business segments is included in [Note [removed: 4](#s5CE88ED4C0D439DF77B3F71F688E74B5)] [added: 3](#sABC93B2312A3C1B170407CF216720713)] to our Consolidated Financial Statements.

| | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | | |

| Home sale revenues | $ | [removed: 7,451,315] [added: 8,323,984] | | | $ | [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] | | |

| Home closings | [removed: 19,951] [added: 21,052] | | | | [removed: 17,127] [added: 19,951] | | | | [removed: 17,196] [added: 17,127] | | | | [removed: 17,766] [added: 17,196] | | | | [removed: 16,505] [added: 17,766] | | | |

This trend continued in [removed: 2016] [added: 2017] as new home sales in the U.S. rose [removed: 12%] [added: 8% over 2016] to approximately [removed: 563,000] [added: 608,000] homes, [removed: an approximate 84% increase] [added: approximately double the number] from 2011, the bottom of the most recent housing downturn.

Although [removed: current industry volume remains low compared with] [added: the recovery in housing demand has been slow by] historical [removed: levels,] [added: standards,] the improved [added: demand] environment and actions we have taken [added: to improve business performance have] contributed to significant increases in our income before income taxes [removed: each year in] [added: for] the period 2013 - [removed: 2016.][added: 2017.]

[removed: In the long term, we] [added: We] continue to believe that the national publicly-traded builders will have a competitive advantage over local builders through their ability to [removed: leverage economies of scale,] access [removed: to] more reliable and lower cost financing through the capital markets, [removed: ability to] control and entitle large land positions, [added: gain better access to scarce labor resources,] and [added: achieve] greater geographic and product diversification.

Our Homebuilding operations are geographically diverse within the U.S. As of December 31, [removed: 2016,] [added: 2017,] we had [removed: 726] [added: 790] active communities spanning [removed: 49] [added: 47] markets across 25 states.

Sales prices of unit closings during [removed: 2016] [added: 2017] ranged from approximately $100,000 to over [removed: $1,000,000,] [added: $2,000,000,] with [removed: 80%] [added: 90%] falling within the range of [removed: $150,000] [added: $200,000] to [removed: $500,000.][added: $750,000.]

10-K 1 a201710-k.htm 10-K 2017

| | | | | | | | |

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

| | | | | | | | |

| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. \[ \] | | | | | | | |

As of February 1, 2018, the registrant had 286,465,036 shares of common shares outstanding.

| | [Part I](#sA69F613A85A8A81D8DE87CF23622DAE0) | |

| 1 | [Business](#s4DF96751BD81A69D72F17CF236669447) | [3](#s4DF96751BD81A69D72F17CF236669447) |

| 2 | [Properties](#s909706372944F430D50B7CF2371C84F0) | [15](#s909706372944F430D50B7CF2371C84F0) |

| | [Part II](#sF18C7D05C388BD9B2FBA7CF237C3F711) | |

| | [Part IV](#s1BA079B3DE86AED910087CF242814665) | |

| 16 | [Form 10-K Summary](#s72171a95f71542d0bb04431e53683c97) | [93](#s72171a95f71542d0bb04431e53683c97) |

| | [Signatures](#sB22E4E8792662B104A927CF242D45767) | [94](#sB22E4E8792662B104A927CF242D45767) |

| | | |

| • | Invest capital consistent with our stated priorities: invest in the business, fund our dividend, and routinely return excess funds to shareholders through share repurchases; |

| • | Growth within our existing markets by appropriately expanding share among our primary buyer groups: first time, move-up and active adult; |

| • | Maintain disciplined business practices to maximize gross and operating margins; |

| • | Shorten the duration of our owned land pipeline to improve returns and reduce risks; |

| • | Focus on building-to-order while maintaining tight controls on the construction of speculative homes; and |

| • | Drive operational gains and asset efficiency in support of high returns over the housing cycle. |

| 2017 | 30% | 45% | 25% |

| 2013 | 35% | 34% | 31% |

However, the first-time homebuyer has

historically played a major role in new housing, and we believe that our first-time homebuyer volume has been increasing recently and will continue to increase in coming years.

We are also introducing virtual reality walkthroughs of our house floor plans in certain communities to provide prospective homebuyers a more cost effective means to provide a realistic vision of our homes.

| | |

| --- | --- |

We are also working to establish a more integrated

and costs inherent in servicing loans.

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

\[ \] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

(Check one):

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) |

| • | Effectively allocating the capital we invest in our business using a risk-based portfolio approach; |

| • | Maximizing our inventory turns while maintaining an adequate supply of house and land inventory; |

| • | Enhancing revenues by: establishing clear product offerings for each of our 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; |

| • | Optimizing 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. |

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

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

There were approximately 10.4 million unique visits to our websites during 2016, compared with approximately 9.6 million in 2015.

To meet the demands of our various customers, we have established design expertise for a wide array of product lines.

Our homebuilding and corporate headquarters are located in leased office facilities at 3350 Peachtree Road NE, Suite 150, Atlanta, [removed: GA] [added: Georgia] 30326.

We also maintain various support functions in leased facilities in Tempe, [removed: Arizona] [added: Arizona,] and Bloomfield Hills, Michigan.

Our homebuilding divisions and financial services branches lease office space in the geographic locations in which they conduct their [removed: day-to-day] [added: daily] operations.

| Ryan R. Marshall | | [removed: 42] [added: 43] | | President and Chief Executive Officer | | 2012 |

| Robert T. O'Shaughnessy | | [removed: 51] [added: 52] | | Executive Vice President and Chief Financial Officer | | 2011 |

| James R. Ellinghausen | | [removed: 58] [added: 59] | | Executive Vice President, Human Resources | | 2005 |

| Harmon D. Smith | | [removed: 53] [added: 54] | | Executive Vice President and Chief Operating Officer | | 2011 |

| James L. Ossowski | | [removed: 48] [added: 49] | | [added: Senior] Vice President, Finance [removed: and Controller] | | 2013 |

Mr. Ossowski was appointed [added: Senior] Vice President, Finance [removed: and Controller] in February [removed: 2013] [added: 2017] and previously held the [removed: position] [added: positions] of Vice President, Finance [added: and Controller since February 2013 and Vice President, Finance] - Homebuilding Operations since August 2010.

| Todd N. Sheldon | | 50 | | Executive Vice President, General Counsel and Corporate Secretary | | 2017 |

Mr. Sheldon was appointed Executive Vice President, General Counsel and Corporate Secretary in March 2017.

Prior to joining our company, he served as Executive Vice President, General Counsel and Secretary at Americold Logistics from June 2013 to March 2017 and in various legal positions at SuperValu from February 2008 to May 2013, most recently as Executive Vice President, General Counsel and Secretary.

| Richard J. Dugas, Jr. | | 51 | | Executive Chairman | | 2002 |

| Steven M. Cook | | 58 | | Executive Vice President, Chief Legal Officer and Corporate Secretary | | 2006 |

Mr. Dugas was appointed Chairman in August 2009 and Executive Chairman in September 2016.

He served as Chief Executive Officer from July 2003 to September 2016 and was appointed Executive Vice President in December 2002 and Chief Operating Officer in May 2002.

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 2008.

| | December 31, [removed: 2016] [added: 2017] | | | | | | | | | | | | December 31, [removed: 2015] [added: 2016] | | | | | | | | | | |

| 1st Quarter | $ | [removed: 18.82] [added: 24.05] | | | $ | [removed: 14.61] [added: 18.18] | | | $ | 0.09 | | | $ | [removed: 23.24] [added: 18.82] | | | $ | [removed: 20.56] [added: 14.61] | | | $ | [removed: 0.08] [added: 0.09] | |

| 2nd Quarter | [removed: 19.80] [added: 24.73] | | | | [removed: 16.60] [added: 21.41] | | | | 0.09 | | | | [removed: 22.78] [added: 19.80] | | | | [removed: 18.85] [added: 16.60] | | | | [removed: 0.08] [added: 0.09] | | |

| 3rd Quarter | [removed: 22.40] [added: 27.51] | | | | [removed: 19.04] [added: 23.81] | | | | 0.09 | | | | [removed: 22.02] [added: 22.40] | | | | [removed: 18.72] [added: 19.04] | | | | [removed: 0.08] [added: 0.09] | | |

| 4th Quarter | [removed: 20.66] [added: 34.60] | | | | [removed: 17.69] [added: 26.68] | | | | 0.09 | | | | [removed: 20.21] [added: 20.66] | | | | [removed: 17.18] [added: 17.69] | | | | 0.09 | | |

At [removed: January 26, 2017,] [added: February 1, 2018,] there were [removed: 2,461] [added: 2,325] shareholders of record.

| [removed: (2)] [added: (1)] | The Board of Directors approved [added: a] share repurchase [removed: authorizations] [added: authorization] totaling [removed: $300.0 million and] $1.0 billion in [removed: December 2015 and] July 2016, [removed: respectively,] of which [removed: $1,004.8] [added: $94.4] million remained available as of December 31, [removed: 2016. There are no expiration dates for these programs.] [added: 2017.] During [removed: 2016,] [added: 2017,] we repurchased [removed: 30.9] [added: 35.4] million shares under [removed: these programs.] [added: this program. In January 2018, the Board of Directors approved an increase of $500.0 million to our share repurchase authorization. There is no expiration date for this program.] |

The information required by this item with respect to equity compensation plans is set forth under [Item [removed: 12](#sCA5DDE4F74B9193CA365F71F8FCA2266)] [added: 12](#s8376EAB0F2F4475058157CF2421EAADE)] of this annual report on Form 10-K and is incorporated herein by reference.

The following line graph [removed: compares] [added: compares,] for the fiscal years ended December 31, [removed: 2012,] 2013, 2014, 2015, [added: 2016,] and [removed: 2016] [added: 2017,] (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: 2016][added: 2017]

[removed: ][added: ]

| | | [removed: 2011 | | |] 2012 | | | [added: |] 2013 | | | [added: |] 2014 | | | [added: |] 2015 | | | [added: |] 2016 | | [added: | | 2017 | | |]

| Dow Jones U.S. Select Home Construction Index | | 100.00 | | | [removed: 179.68] | [added: 118.41] | | [removed: 212.75] | | [added: 124.50] | [removed: 223.71] | | | [removed: 235.89] [added: 131.29] | | | [removed: 241.14] | [added: 134.20] | [added: | | | 214.93 | | |]

* Assumes $100 invested on December 31, [removed: 2011,] [added: 2012,] and the reinvestment of dividends.

| October 1, 2017 to October 31, 2017 | 281,900 | | | $ | 29.76 | | | 281,900 | | | $ | 336,561 | | (1) |

| November 1, 2017 to November 30, 2017 | 2,423,700 | | | 32.23 | | | | 2,423,700 | | | $ | 258,455 | | (1) |

| December 1, 2017 to December 31, 2017 | 4,877,262 | | | 33.71 | | | | 4,865,706 | | | $ | 94,441 | | (1) |

| Total | 7,582,862 | | | $ | 33.09 | | | 7,571,306 | | | | | | |

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

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

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

| PULTEGROUP, INC. | | $ | 100.00 | | | $ | 113.15 | | | $ | 120.58 | | | $ | 101.85 | | | $ | 107.07 | | | $ | 196.37 | |

| S&P 500 Index - Total Return | | 100.00 | | | | 132.39 | | | | 150.51 | | | | 152.59 | | | | 170.84 | | | | 208.14 | | |

| 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 | |

| | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | |

| Revenues | $ | [removed: 7,487,350] [added: 8,381,090] | | | $ | [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] | |

| Income before income taxes | $ | [removed: 860,766] [added: 865,332] | | | $ | [removed: 757,317] [added: 860,766] | | | $ | [removed: 635,177] [added: 757,317] | | | $ | [removed: 479,113] [added: 635,177] | | | $ | [removed: 157,991] [added: 479,113] | |

| Revenues | $ | [removed: 181,126] [added: 192,160] | | | $ | [removed: 140,753] [added: 181,126] | | | $ | [removed: 125,638] [added: 140,753] | | | $ | [removed: 140,951] [added: 125,638] | | | $ | [removed: 160,888] [added: 140,951] | |

| Income before income taxes | $ | [removed: 73,084] [added: 73,496] | | | $ | [removed: 58,706] [added: 73,084] | | | $ | [removed: 54,581] [added: 58,706] | | | $ | [removed: 48,709] [added: 54,581] | | | $ | [removed: 25,563] [added: 48,709] | |

| Revenues | $ | [removed: 7,668,476] [added: 8,573,250] | | | $ | [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] | |

| Income before income taxes | $ | [removed: 933,850] [added: 938,828] | | | $ | [removed: 816,023] [added: 933,850] | | | $ | [removed: 689,758] [added: 816,023] | | | $ | [removed: 527,822] [added: 689,758] | | | $ | [removed: 183,554] [added: 527,822] | |

| Income tax (expense) benefit | [removed: (331,147] [added: (491,607] | | ) | | [removed: (321,933] [added: (331,147] | | ) | | [removed: (215,420] [added: (321,933] | | ) | | [removed: 2,092,294] [added: (215,420] | | [added: )] | | [removed: 22,591] [added: 2,092,294] | | |

| Net income | $ | [removed: 602,703] [added: 447,221] | | | $ | [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] | |

| Basic | $ | [removed: 1.76] [added: 1.45] | | | $ | [removed: 1.38] [added: 1.76] | | | $ | [removed: 1.27] [added: 1.38] | | | $ | [removed: 6.79] [added: 1.27] | | | $ | [removed: 0.54] [added: 6.79] | |

| Diluted | $ | [removed: 1.75] [added: 1.44] | | | $ | [removed: 1.36] [added: 1.75] | | | $ | [removed: 1.26] [added: 1.36] | | | $ | [removed: 6.72] [added: 1.26] | | | $ | [removed: 0.54] [added: 6.72] | |

| Basic | [removed: 339,747] [added: 305,089] | | | | [removed: 356,576] [added: 339,747] | | | | [removed: 370,377] [added: 356,576] | | | | [removed: 383,077] [added: 370,377] | | | | [removed: 381,562] [added: 383,077] | | |

| Effect of dilutive securities | [removed: 2,376] [added: 1,725] | | | | [removed: 3,217] [added: 2,376] | | | | [removed: 3,725] [added: 3,217] | | | | [removed: 3,789] [added: 3,725] | | | | [removed: 3,002] [added: 3,789] | | |

| Diluted | [removed: 342,123] [added: 306,814] | | | | [removed: 359,793] [added: 342,123] | | | | [removed: 374,102] [added: 359,793] | | | | [removed: 386,866] [added: 374,102] | | | | [removed: 384,564] [added: 386,866] | | |

| Shareholders’ equity | $ | [removed: 14.60] [added: 14.49] | | | $ | [removed: 13.63] [added: 14.60] | | | $ | [removed: 13.01] [added: 13.63] | | | $ | [removed: 12.19] [added: 13.01] | | | $ | [removed: 5.66] [added: 12.19] | |

| Cash dividends declared | $ | 0.36 | | | $ | [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: 6,770,655] [added: 7,147,130] | | | $ | [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] | |

| Total assets [removed: (a)] | [removed: 10,178,200] [added: 9,686,649] | | | | [removed: 9,189,406] [added: 10,178,200] | | | | [removed: 8,560,187] [added: 9,189,406] | | | | [removed: 8,719,886] [added: 8,560,187] | | | | [removed: 6,719,093] [added: 8,719,886] | | |

| Shareholders’ equity | [removed: 4,659,363] [added: 4,154,026] | | | | [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] | | |

| Markets, at year-end | [removed: 49] [added: 47] | | | | [removed: 50] [added: 49] | | | | [removed: 49] [added: 50] | | | | [removed: 48] [added: 49] | | | | [removed: 58] [added: 48] | | |

| Active communities, at year-end | [removed: 726] [added: 790] | | | | [removed: 620] [added: 726] | | | | [removed: 598] [added: 620] | | | | [removed: 577] [added: 598] | | | | [removed: 670] [added: 577] | | |

| Closings (units) | [removed: 19,951] [added: 21,052] | | | | [removed: 17,127] [added: 19,951] | | | | [removed: 17,196] [added: 17,127] | | | | [removed: 17,766] [added: 17,196] | | | | [removed: 16,505] [added: 17,766] | | |

| Net new orders (units) | [removed: 20,326] [added: 22,626] | | | | [removed: 18,008] [added: 20,326] | | | | [removed: 16,652] [added: 18,008] | | | | [removed: 17,080] [added: 16,652] | | | | [removed: 19,039] [added: 17,080] | | |

| Backlog (units), at year-end | [removed: 7,422] [added: 8,996] | | | | [removed: 6,731] [added: 7,422] | | | | [removed: 5,850] [added: 6,731] | | | | [removed: 5,772] [added: 5,850] | | | | [removed: 6,458] [added: 5,772] | | |

| Average selling price (per unit) | $ | [removed: 373,000] [added: 395,000] | | | $ | [removed: 338,000] [added: 373,000] | | | $ | [removed: 329,000] [added: 338,000] | | | $ | [removed: 305,000] [added: 329,000] | | | $ | [removed: 276,000] [added: 305,000] | |

| Gross margin from home sales [removed: (b)] [added: (a)] | [removed: 25.0] [added: 22.4] | | % | | [removed: 26.9] [added: 25.0] | | % | | [removed: 26.7] [added: 26.9] | | % | | [removed: 24.1] [added: 26.7] | | % | | [removed: 19.6] [added: 24.1] | | % |

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

| | 2017 | | | | 2016 | | | | 2015 | | | | 2014 | | | | 2013 | | |

| Notes payable | 3,006,967 | | | | 3,129,298 | | | | 2,109,841 | | | | 1,831,593 | | | | 2,051,431 | | |

| | 2017 | | | | 2016 | | | | 2015 | | | | 2014 | | | | 2013 | | |

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

| | |

| --- | --- |

| (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). |

December 31, [removed: 2016] [added: 2017] and [removed: 2015][added: 2016]

| | [added: 2017 | | | |] 2016 | | | | 2015 | | |

| Cash and equivalents | $ | [removed: 698,882] [added: 272,683] | | | $ | [removed: 754,161] [added: 698,882] | |

| Restricted cash | [removed: 24,366] [added: 33,485] | | | | [removed: 21,274] [added: 24,366] | | |

| Total cash, cash equivalents, and restricted cash | [removed: 723,248] [added: 306,168] | | | | [removed: 775,435] [added: 723,248] | | |

| House and land inventory | [removed: 6,770,655] [added: 7,147,130] | | | | [removed: 5,450,058] [added: 6,770,655] | | |

| Land held for sale | [removed: 31,728] [added: 68,384] | | | | [removed: 81,492] [added: 31,728] | | |

| Residential mortgage loans available-for-sale | [removed: 539,496] [added: 570,600] | | | | [removed: 442,715] [added: 539,496] | | |

| Investments in unconsolidated entities | [removed: 51,447] [added: 62,957] | | | | [removed: 41,267] [added: 51,447] | | |

| Other assets | [removed: 857,426] [added: 745,123] | | | | [removed: 893,345] [added: 857,426] | | |

| Intangible assets | [removed: 154,792] [added: 140,992] | | | | [removed: 110,215] [added: 154,792] | | |

| Deferred tax assets, net | [removed: 1,049,408] [added: 645,295] | | | | [removed: 1,394,879] [added: 1,049,408] | | |

| Accounts payable, including book overdrafts of [removed: $99,690] [added: $72,800] and [removed: $60,547] [added: $99,690] in [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] respectively | $ | [removed: 405,455] [added: 393,815] | | | $ | [removed: 327,725] [added: 405,455] | |

| Customer deposits | [removed: 187,891] [added: 250,779] | | | | [removed: 186,141] [added: 187,891] | | |

| Income tax liabilities | [removed: 34,860] [added: 86,925] | | | | [removed: 57,050] [added: 34,860] | | |

| Financial Services debt | [removed: 331,621] [added: 437,804] | | | | [removed: 267,877] [added: 331,621] | | |

| [removed: Senior] [added: Total senior] notes | [removed: 3,110,016] [added: $] | [added: 2,986,943] | | | [removed: 1,576,082] [added: $] | [added: 3,110,016] | |

| Total liabilities | [removed: 5,518,837] [added: 5,532,623] | | | | [removed: 4,430,081] [added: 5,518,837] | | |

| Common shares, $0.01 par value; 500,000,000 shares authorized, [removed: 319,089,720] [added: 286,752,436] and [removed: 349,148,351] [added: 319,089,720] shares issued and outstanding at December 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] respectively | [removed: 3,191] [added: 2,868] | | | | [removed: 3,491] [added: 3,191] | | |

| Additional paid-in capital | [removed: 3,116,490] [added: 3,171,542] | | | | [removed: 3,093,802] [added: 3,116,490] | | |

| Accumulated other comprehensive loss | [removed: (526] [added: (445] | | ) | | [removed: (609] [added: (526] | | ) |

| Retained earnings | [removed: 1,540,208] [added: 980,061] | | | | [removed: 1,662,641] [added: 1,540,208] | | |

| Total shareholders’ equity | [removed: 4,659,363] [added: 4,154,026] | | | | [removed: 4,759,325] [added: 4,659,363] | | |

For the years ended December 31, [added: 2017,] 2016, [removed: 2015,] and [removed: 2014][added: 2015]

| | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| Home sale revenues | $ | [removed: 7,451,315] [added: 8,323,984] | | | $ | [removed: 5,792,675] [added: 7,451,315] | | | $ | [removed: 5,662,171] [added: 5,792,675] | |

| Land sale revenues | [removed: 36,035] [added: 57,106] | | | | [removed: 48,536] [added: 36,035] | | | | [removed: 34,554] [added: 48,536] | | |

| | [removed: 7,487,350] [added: 8,381,090] | | | | [removed: 5,841,211] [added: 7,487,350] | | | | [removed: 5,696,725] [added: 5,841,211] | | |

| Financial Services | [removed: 181,126] [added: 192,160] | | | | [removed: 140,753] [added: 181,126] | | | | [removed: 125,638] [added: 140,753] | | |

| Total revenues | [removed: 7,668,476] [added: 8,573,250] | | | | [removed: 5,981,964] [added: 7,668,476] | | | | [removed: 5,822,363] [added: 5,981,964] | | |

| Home sale cost of revenues | [removed: (5,587,974] [added: (6,461,152] | | ) | | [removed: (4,235,945] [added: (5,587,974] | | ) | | [removed: (4,149,674] [added: (4,235,945] | | ) |

| Land sale cost of revenues | [removed: (32,115] [added: (134,449] | | ) | | [removed: (35,858] [added: (32,115] | | ) | | [removed: (23,748] [added: (35,858] | | ) |

| | [removed: (5,620,089] [added: (6,595,601] | | ) | | [removed: (4,271,803] [added: (5,620,089] | | ) | | [removed: (4,173,422] [added: (4,271,803] | | ) |

| Financial Services expenses | [removed: (108,573] [added: (119,289] | | ) | | [removed: (82,047] [added: (108,573] | | ) | | [removed: (71,057] [added: (82,047] | | ) |

| Selling, general, and administrative expenses | [removed: (957,150] [added: (891,581] | | ) | | [removed: (794,728] [added: (957,150] | | ) | | [removed: (861,390] [added: (794,728] | | ) |

| Other expense, net | [removed: (48,814] [added: (27,951] | | ) | | [removed: (17,363] [added: (48,814] | | ) | | [removed: (26,736] [added: (17,363] | | ) |

| Income before income taxes | [removed: 933,850] [added: 938,828] | | | | [removed: 816,023] [added: 933,850] | | | | [removed: 689,758] [added: 816,023] | | |

| Income tax expense | [removed: (331,147] [added: (491,607] | | ) | | [removed: (321,933] [added: (331,147] | | ) | | [removed: (215,420] [added: (321,933] | | ) |

| Net income | $ | [removed: 602,703] [added: 447,221] | | | $ | [removed: 494,090] [added: 602,703] | | | $ | [removed: 474,338] [added: 494,090] | |

| Basic | $ | [removed: 1.76] [added: 1.45] | | | $ | [removed: 1.38] [added: 1.76] | | | $ | [removed: 1.27] [added: 1.38] | |

| | 2017 | | | | 2016 | | |

| | $ | 9,686,649 | | | $ | 10,178,200 | |

| Accrued and other liabilities | 1,356,333 | | | | 1,429,712 | | |

| Notes payable | 3,006,967 | | | | 3,129,298 | | |

| | $ | 9,686,649 | | | $ | 10,178,200 | |

For the years ended December 31, 2017, 2016, and 2015

| Net income | $ | 447,221 | | | $ | 602,703 | | | $ | 494,090 | |

For the years ended December 31, 2017, 2016, and 2015

| Cumulative effect of accounting change (see [Note 1](#s33096762227EEBC7A5B17CF216C2527D)) | — | | | — | | | | (406 | | ) | | — | | | | 18,644 | | | | 18,238 | | |

| Dividends declared | — | | | — | | | | — | | | | — | | | | (110,046 | | ) | | (110,046 | | ) |

| Share repurchases | (35,420 | ) | | (357 | | ) | | — | | | | — | | | | (915,966 | | ) | | (916,323 | | ) |

| Net income | — | | | — | | | | — | | | | — | | | | 447,221 | | | | 447,221 | | |

| Shareholders' Equity, December 31, 2017 | 286,752 | | | $ | 2,868 | | | $ | 3,171,542 | | | $ | (445 | ) | | $ | 980,061 | | | $ | 4,154,026 | |

For the years ended December 31, 2017, 2016, and 2015

| Net income | $ | 447,221 | | | $ | 602,703 | | | $ | 494,090 | |

| Land-related charges | 191,913 | | | | 19,357 | | | | 11,467 | | |

| (b) | Includes an $8.0 million impairment of an investment in an unconsolidated entity in 2017 (see [Note 2](#sB0D64520B510717A1A287CF217084B2C)). |

| Net income | $ | 447,221 | | | $ | 602,703 | | | $ | 494,090 | |

| Basic | $ | 1.45 | | | $ | 1.76 | | | $ | 1.38 | |

| Diluted | $ | 1.44 | | | $ | 1.75 | | | $ | 1.36 | |

| | $ | 207,987 | | | $ | 2,462,579 | | | $ | 195,436 | | | $ | 2,102,563 | |

See [Note 11](#sE3B487D74A5741B049157CF216CC01A4).

These loans are reviewed

| | $ | 7,216 | | | $ | 2,165 | | | $ | 18,414 | | | $ | 2,368 | |

We have substantially completed our evaluation of the impact of adopting the new revenue standard.

Based on our assessment, we do not expect the adoption of ASU 2014-09 to have a material impact on our financial statements.

Further, we do not expect significant changes to our business processes, systems, or internal controls as a result of adopting the standard.

While the recognition of right-of-use assets and related liabilities will have a material effect on our consolidated balance sheets, we do not expect a material impact on our consolidated statement of operations.

We continue to evaluate the full impact of the new standard, including the impact on our business processes, systems, and internal controls.

Excess tax benefits or deficiencies for stock-based compensation are now reflected in the Consolidated Statements of Operations as a component of income tax expense, whereas previously they were recognized in equity.

We have also elected to account for forfeitures as they occur, rather than estimate expected forfeitures.

Additionally, the impact of recognizing excess tax benefits and deficiencies in the consolidated statement of operations resulted in a $7.7 million reduction in our income tax expense for 2017.

| | 2017 | | | | 2016 | | |

| | $ | 7,147,130 | | | $ | 6,770,655 | |

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

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

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

| | Statement of Operations Classification | | 2017 | | | | 2016 | | | | 2015 | | |

| Impairments of unconsolidated entities | Other expense, net | | 8,017 | | | | — | | | | — | | |

The 2017 charges were primarily the result of a plan we announced in May 2017 to sell select non-core and underutilized land parcels following a strategic review of our land portfolio.

PULTEGROUP, INC.

| | | | | | | | |

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

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

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

| Term loan | — | | | | 498,423 | | |

(000’s omitted)

| Shareholders' Equity, January 1, 2014 | 381,300 | | | $ | 3,813 | | | $ | 3,052,016 | | | $ | (795 | ) | | $ | 1,593,918 | | | $ | 4,648,952 | |

| Dividends declared | — | | | — | | | | 72 | | | | — | | | | (86,442 | | ) | | (86,370 | | ) |

| Share repurchases | (13,220 | ) | | (132 | | ) | | — | | | | — | | | | (252,887 | | ) | | (253,019 | | ) |

| Excess tax benefits (deficiencies) from share-based compensation | — | | | — | | | | (8,491 | | ) | | — | | | | — | | | | (8,491 | | ) |

| Net income | — | | | — | | | | — | | | | — | | | | 474,338 | | | | 474,338 | | |

| Write-down of land and deposits and pre-acquisition costs | 19,357 | | | | 11,467 | | | | 11,168 | | |

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

We acquired certain real estate assets from Dominion Homes in August 2014 for $82.4 million in cash and the assumption of certain payables related to such assets.

The net assets acquired were located primarily in Columbus, Ohio, and Louisville, Kentucky, and included approximately 8,200 lots, including approximately 400 homes in inventory and control of approximately 900 lots through land option contracts.

We also assumed a sales order backlog of 622 homes.

The acquired net assets were recorded at their estimated fair values.

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.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

| Loss on debt retirements [(Note 6)](#s098FB233016EF81A1086F71F6947E057) | 657 | | | | — | | | | 8,584 | | |

Our outstanding restricted

Our evaluations

for our communities.

| | $ | 195,436 | | | $ | 2,102,563 | | | $ | 162,119 | | | $ | 2,046,193 | |

terms.

| | $ | 18,414 | | | $ | 2,368 | | | $ | 7,390 | | | $ | 1,465 | |

We continue to evaluate the impact that the standard will have on our financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”), which requires management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern and provide related disclosures.

Adoption of ASU 2014-15 as of December 31, 2016, did not impact our financial statements or disclosures.

We are currently evaluating the impact that the standard will have on our financial statements.

ASU 2016-09 will be effective for us for annual and interim periods beginning after January 1, 2017.

Amendments to the presentation of employee taxes on the statement of cash flows will be applied retrospectively, and amendments requiring the recognition of excess tax benefits and tax deficiencies in the income statement are to be applied prospectively.

Amendments to the timing of when excess tax benefits are recognized, and forfeitures will be applied using a modified retrospective transition method through a cumulative-effect adjustment to equity as of the beginning of the period of adoption.

Management, including our 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: 2016.][added: 2017.]

Based upon, and as of the date of that evaluation, our 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: 2016.][added: 2017.]

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: 2016.][added: 2017.]

Based on this assessment, management asserts that the Company has maintained effective internal control over financial reporting as of December 31, [removed: 2016.][added: 2017.]

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: 2016.][added: 2017.]

We have audited PulteGroup, Inc.’s internal control over financial reporting as of December 31, [removed: 2016,] [added: 2017,] based on criteria established in Internal [removed: Control—Integrated] [added: Control- Integrated] Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 [removed: Framework)] [added: framework)] (the COSO criteria).

[removed: PulteGroup, Inc.’s] [added: The Company’s] management is responsible for maintaining effective internal control over financial [removed: reporting,] [added: reporting] and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting.

We conducted our audit in accordance with the standards of the [removed: Public Company Accounting Oversight Board (United States).][added: PCAOB.]

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, [removed: use] [added: use,] or disposition of the company’s assets that could have a material effect on the financial statements.

In our opinion, PulteGroup, Inc. [added: (the Company)] maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2016,] [added: 2017,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United [removed: States),] [added: States) (PCAOB),] the consolidated balance sheets of PulteGroup, Inc. as of December 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] and the related consolidated statements of operations, comprehensive income, shareholders’ [removed: equity,] [added: equity] and cash flows for each of the three years in the period ended December 31, [removed: 2016] [added: 2017 of the Company] and our report dated February [removed: 1, 2017] [added: 7, 2018] expressed an unqualified opinion thereon.

There has been no change in our internal control over financial reporting during the quarter ended December 31, [removed: 2016] [added: 2017] that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Opinion on Internal Control over Financial Reporting

Basis for Opinion

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Definition and Limitations of Internal Control Over Financial Reporting

February 7, 2018

February 1, 2017

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: 2017] [added: 2018] Annual Meeting of Shareholders [removed: (“2017] [added: (“2018] Proxy Statement”), which will be filed no later than 120 days after December 31, [removed: 2016,] [added: 2017,] 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: 2017] [added: 2018] 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: 2017] [added: 2018] 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: 2017] [added: 2018] Proxy Statement under the captions [removed: “2016] [added: “2017] Executive Compensation” and [removed: “2016] [added: “2017] 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: 2017] [added: 2018] 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: 2017] [added: 2018] Proxy Statement under the captions “Certain Relationships and Related Transactions” and [removed: “Election] [added: “Board] of Directors [removed: - Independence”] [added: Information”] and is incorporated herein by this reference.

Information required by this Item will be contained in the [removed: 2017] [added: 2018] Proxy Statement under the captions “Audit and Non-Audit Fees” and “Audit Committee Preapproval Policies” and is incorporated herein by reference.