UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2017~~2018

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

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-9804

PULTEGROUP, INC.

(Exact name of registrant as specified in its charter)



MICHIGAN		38-2766606
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3350 Peachtree Road NE, Suite 150

Atlanta, Georgia 30326

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (404) 978-6400

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES [X] NO [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer [X]	Accelerated filer [ ]	Non-accelerated filer [ ]	Smaller reporting company [ ]	Emerging growth company [ ]
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. [ ]

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

YES [ ] NO [X]

Number of common shares outstanding as of ~~October~~July 19, ~~2017~~2018: ~~293,967,648~~284,018,567 ______________________________________________________________________________________________________

PULTEGROUP, INC.

TABLE OF CONTENTS



		Page No.
PART I	FINANCIAL INFORMATION

Item 1	Financial Statements

	Condensed Consolidated Balance Sheets at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017	3

	Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017	4

	Consolidated Statements of Comprehensive Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017	5

	Consolidated Statements of Shareholders' Equity for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017	6

	Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3	Quantitative and Qualitative Disclosures About Market Risk	4748

Item 4	Controls and Procedures	4849

PART II	OTHER INFORMATION	4950

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	4950

Item 6	Exhibits	5051

	Signatures	5152

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PULTEGROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

($000’s omitted)


	September 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017
	(Unaudited)		(Note)		(Unaudited)		(Note)
ASSETS

Cash and equivalents	$	158,237	$	698,882	$	367,091	$	272,683
Restricted cash	38,860		24,366		34,824		33,485
Total cash, cash equivalents, and restricted cash	197,097		723,248		401,915		306,168
House and land inventory	7,370,152		6,770,655		7,499,665		7,147,130
Land held for sale	96,149		31,728		77,941		68,384
Residential mortgage loans available-for-sale	364,734		539,496		369,634		570,600
Investments in unconsolidated entities	61,497		51,447		61,718		62,957
Other assets	797,439		857,426		759,230		745,123
Intangible assets	144,442		154,792		134,092		140,992
Deferred tax assets, net	939,759		1,049,408		511,381		645,295
	$	9,971,269	$	10,178,200	$	9,815,576	$	9,686,649

LIABILITIES AND SHAREHOLDERS’ EQUITY

Liabilities:
Accounts payable	$	441,481	$	405,455	$	399,330	$	393,815
Customer deposits	306,641		187,891		354,968		250,779
Accrued and other liabilities	1,439,254		1,483,854		1,242,349		1,356,333
Income tax liabilities					22,484		86,925
Financial Services debt	245,824		331,621		264,043		437,804
Revolving credit facility	83,000		—
Senior notes	3,109,984		3,110,016
Notes payable					3,005,690		3,006,967
	5,626,184		5,518,837		5,288,864		5,532,623
Shareholders' equity	4,345,085		4,659,363		4,526,712		4,154,026
	$	9,971,269	$	10,178,200	$	9,815,576	$	9,686,649

Note: The Condensed Consolidated Balance Sheet at December 31, ~~2016~~2017 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.

See accompanying Notes to Condensed Consolidated Financial Statements.

PULTEGROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(000’s omitted, except per share data)

(Unaudited)


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Revenues:
Homebuilding
Home sale revenues	$	2,055,891		$	1,881,718		$	5,606,953		$	5,027,843		$	2,450,054		$	1,965,641		$	4,361,652		$	3,551,063
Land sale revenues	27,176			13,167			36,746			20,604
Land sale and other revenues													66,904			8,944			79,461			11,632
	2,083,067			1,894,885			5,643,699			5,048,447			2,516,958			1,974,585			4,441,113			3,562,695
Financial Services	46,952			48,020			135,995			126,950			52,764			47,275			98,702			89,042
Total revenues	2,130,019			1,942,905			5,779,694			5,175,397			2,569,722			2,021,860			4,539,815			3,651,737

Homebuilding Cost of Revenues:
Home sale cost of revenues	(1,564,605		)	(1,417,705		)	(4,332,221		)	(3,766,302		)	(1,862,133		)	(1,549,937		)	(3,322,073		)	(2,767,615		)
Land sale cost of revenues	(25,123		)	(11,428		)	(115,950		)	(17,859		)	(38,183		)	(87,599		)	(49,731		)	(90,827		)
	(1,589,728		)	(1,429,133		)	(4,448,171		)	(3,784,161		)	(1,900,316		)	(1,637,536		)	(3,371,804		)	(2,858,442		)

Financial Services expenses	(29,304		)	(26,906		)	(86,150		)	(79,204		)	(32,224		)	(28,478		)	(64,436		)	(56,846		)
Selling, general, and administrative expenses	(237,495		)	(250,914		)	(689,974		)	(749,502		)	(226,056		)	(216,211		)	(466,950		)	(452,479		)
Other expense, net	(5,243		)	(23,617		)	(25,337		)	(42,402		)	(1,956		)	(17,088		)	(3,263		)	(22,157		)
Income before income taxes	268,249			212,335			530,062			520,128			409,170			122,547			633,362			261,813
Income tax expense	(90,710		)	(83,865		)	(160,255		)	(190,598		)	(85,081		)	(21,798		)	(138,521		)	(69,545		)
Net income	$	177,539		$	128,470		$	369,807		$	329,530		$	324,089		$	100,749		$	494,841		$	192,268

Per share:
Basic earnings	$	0.59		$	0.37		$	1.18		$	0.95		$	1.12		$	0.32		$	1.72		$	0.60
Diluted earnings	$	0.58		$	0.37		$	1.18		$	0.94		$	1.12		$	0.32		$	1.71		$	0.60
Cash dividends declared	$	0.09		$	0.09		$	0.27		$	0.27		$	0.09		$	0.09		$	0.18		$	0.18

Number of shares used in calculation:
Basic	298,538			340,171			309,453			344,383			285,276			312,315			285,976			315,021
Effect of dilutive securities	1,690			2,250			1,861			2,557			1,378			1,565			1,088			1,946
Diluted	300,228			342,421			311,314			346,940			286,654			313,880			287,064			316,967

See accompanying Notes to Condensed Consolidated Financial Statements.

PULTEGROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

($000’s omitted)

(Unaudited)



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Net income	$	324,089	$	100,749	$	494,841	$	192,268

Other comprehensive income, net of tax:
Change in value of derivatives	30		20		50		41
Other comprehensive income	30		20		50		41

Comprehensive income	$	324,119	$	100,769	$	494,891	$	192,309

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Net income $ 177,539
$ 128,470
$ 369,807
$ 329,530

Other comprehensive income, net of tax:
Change in value of derivatives 20
20
61
61
Other comprehensive income 20
20
61
61

Comprehensive income $ 177,559
$ 128,490
$ 369,868
$ 329,591

See accompanying Notes to Condensed Consolidated Financial Statements.

PULTEGROUP, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(000's omitted, except per share data)

(Unaudited)


	Common Stock					Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total			Common Stock					Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total
	Shares		$			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total			Shares		$			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total
Shareholders' Equity, January 1, 2017	319,090		$	3,191		$	3,116,490		$	(526	)	$	1,540,208		$	4,659,363
Shareholders' Equity, January 1, 2018																		286,752		$	2,868		$	3,171,542		$	(445	)	$	980,061		$	4,154,026
Cumulative effect of accounting change (see Note 1)	—		—			(406		)	—			18,643			18,237			—		—			—			—			22,411			22,411
Stock option exercises	1,954		20			22,745			—			—			22,765			434		4			4,463			—			—			4,467
Share issuances, net of cancellations	741		10			3,555			—			—			3,565			870		8			3,475			—			—			3,483
Dividends declared	—		—			—			—			(83,685		)	(83,685		)						—			—			(51,966		)	(51,966		)
Share repurchases	(27,849	)	(281		)	—			—			(665,531		)	(665,812		)	(3,694	)	(37		)	(284		)	—			(112,170		)	(112,491		)
Share-based compensation	—		—			20,784			—			—			20,784			—		—			11,891			—			—			11,891
Net income	—		—			—			—			369,807			369,807			—		—			—			—			494,841			494,841
Other comprehensive income	—		—			—			61			—			61			—		—			—			50			—			50
Shareholders' Equity, September 30, 2017	293,936		$	2,940		$	3,163,168		$	(465	)	$	1,179,442		$	4,345,085
Shareholders' Equity, June 30, 2018																		284,362		$	2,843		$	3,191,087		$	(395	)	$	1,333,177		$	4,526,712

Shareholders' Equity, January 1, 2016	349,149		$	3,491		$	3,093,802		$	(609	)	$	1,662,641		$	4,759,325
Shareholders' Equity, January 1, 2017																		319,090		$	3,191		$	3,116,490		$	(526	)	$	1,540,208		$	4,659,363
Cumulative effect of accounting change																		—		—			(406		)	—			18,643			18,237
Stock option exercises	498		5			5,840			—			—			5,845			1,378		14			15,952			—			—			15,966
Share issuances, net of cancellations	523		5			8,851			—			—			8,856			729		10			3,554			—			—			3,564
Dividends declared	—		—			—			—			(93,127		)	(93,127		)	—		—			—			—			(56,941		)	(56,941		)
Share repurchases	(17,856	)	(177		)	—			—			(350,669		)	(350,846		)	(17,498	)	(178		)	—			—			(405,641		)	(405,819		)
Share-based compensation	—		—			12,976			—			—			12,976			—		—			17,323			—			—			17,323
Excess tax benefits (deficiencies) from share-based awards	—		—			(588		)	—			—			(588		)
Net income	—		—			—			—			329,530			329,530			—		—			—			—			192,268			192,268
Other comprehensive income	—		—			—			61			—			61			—		—			—			41			—			41
Shareholders' Equity, September 30, 2016	332,314		$	3,324		$	3,120,881		$	(548	)	$	1,548,375		$	4,672,032
Shareholders' Equity, June 30, 2017																		303,699		$	3,037		$	3,152,913		$	(485	)	$	1,288,537		$	4,444,002

See accompanying Notes to Condensed Consolidated Financial Statements.

PULTEGROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

($000’s omitted)

(Unaudited)


	Nine Months Ended						Six Months Ended
	September 30,						June 30,
	2017			2016			2018			2017
Cash flows from operating activities:
Net income	$	369,807		$	329,530		$	494,841		$	192,268
Adjustments to reconcile net income to net cash from operating activities:
Deferred income tax expense	127,856			198,974			126,991			80,841
Land-related charges	131,254			13,185			5,841			129,108
Depreciation and amortization	38,689			40,218			24,161			26,023
Share-based compensation expense	26,505			19,813			16,162			20,871
Other, net	(1,438		)	4,493			(2,803		)	(1,536		)
Increase (decrease) in cash due to:
Inventories	(758,006		)	(1,100,173		)	(281,362		)	(486,393		)
Residential mortgage loans available-for-sale	173,148			92,649			199,623			172,943
Other assets	22,120			11,502			15,822			15,309
Accounts payable, accrued and other liabilities	122,544			83,303			(51,694		)	26,892
Net cash provided by (used in) operating activities	252,479			(306,506		)	547,582			176,326
Cash flows from investing activities:
Capital expenditures	(23,548		)	(30,551		)	(33,059		)	(16,892		)
Investment in unconsolidated subsidiaries	(22,007		)	(14,049		)
Cash used for business acquisition	—			(430,458		)
Investments in unconsolidated entities							(1,000		)	(17,832		)
Other investing activities, net	5,788			5,473			6,915			3,143
Net cash used in investing activities	(39,767		)	(469,585		)	(27,144		)	(31,581		)
Cash flows from financing activities:
Proceeds from debt issuance	—			1,995,961
Repayments of debt	(7,001		)	(985,734		)	(82,432		)	(2,153		)
Borrowings under revolving credit facility	971,000			619,000			1,566,000			110,000
Repayments under revolving credit facility	(888,000		)	(619,000		)	(1,566,000		)	(110,000		)
Financial Services borrowings (repayments)	(85,797		)	(109,083		)	(173,761		)	(177,918		)
Debt issuance costs							(8,090		)	—
Stock option exercises	22,765			5,845			4,467			15,966
Share repurchases	(665,812		)	(350,846		)	(112,491		)	(405,819		)
Dividends paid	(86,018		)	(94,298		)	(52,384		)	(58,214		)
Net cash provided by (used in) financing activities	(738,863		)	461,845			(424,691		)	(628,138		)
Net increase (decrease)	(526,151		)	(314,246		)	95,747			(483,393		)
Cash, cash equivalents, and restricted cash at beginning of period	723,248			775,435			306,168			723,248
Cash, cash equivalents, and restricted cash at end of period	$	197,097		$	461,189		$	401,915		$	239,855

Supplemental Cash Flow Information:
Interest paid (capitalized), net	$	11,516		$	(11,324	)	$	(387	)	$	(2,359	)
Income taxes paid (refunded), net	$	17,206		$	(74	)	$	77,077		$	(10,980	)

See accompanying Notes to Condensed Consolidated Financial Statements.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Basis of presentation

PulteGroup, Inc. is one of the largest homebuilders in the United States ("U.S."), and our common shares trade on the New York Stock Exchange under the ticker symbol “PHM”. Unless the context otherwise requires, the terms "PulteGroup", the "Company", "we", "us", and "our" used herein refer to PulteGroup, Inc. and its subsidiaries. While our subsidiaries engage primarily in the homebuilding business, we also ~~have~~engage in mortgage banking operations, conducted ~~principally~~ through Pulte Mortgage LLC (“Pulte Mortgage”), title services, and ~~title~~insurance brokerage operations.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal, recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with our consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

~~Business acquisition~~

We acquired substantially all of the assets of JW Homes ("Wieland") in January 2016 for $430.5 million in cash and the assumption of certain payables related to such assets. The acquired net assets were located in Atlanta, Charleston, Charlotte, Nashville, and Raleigh, and included approximately 7,000 lots, including 375 homes in inventory, and control of approximately 1,300 lots through land option contracts. We also assumed a sales order backlog of 317 homes. The acquired net assets were recorded at their estimated fair values and resulted in goodwill of $40.4 million and separately identifiable intangible assets of $18.0 million comprised of the John Wieland Homes and Neighborhoods tradename, which is being amortized over a 20-year life. The acquisition of these assets was not material to our results of operations or financial condition.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Reclassifications

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

Subsequent events

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

~~PULTEGROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Other expense, net

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



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
Write-offs of deposits and pre-acquisition costs	$	(1,652	)	$	(5,063	)	$	(4,261	)	$	(6,718	)
Amortization of intangible assets	(3,450		)	(3,450		)	(6,900		)	(6,900		)
Interest income	835			599			1,399			1,432
Interest expense	(165		)	(134		)	(308		)	(271		)
Equity in earnings (losses) of unconsolidated entities (a)	265			(5,763		)	1,226			(4,569		)
Miscellaneous, net	2,211			(3,277		)	5,581			(5,131		)
Total other expense, net	$	(1,956	)	$	(17,088	)	$	(3,263	)	$	(22,157	)

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Write-offs of deposits and pre-acquisition costs (Note 2)
$ 2,680
$ 2,541
$ 9,397
$ 12,996
Lease exit and related costs (a)
219
4,644
624
10,589
Amortization of intangible assets 3,450
3,450
10,350
10,350
Interest income (485 ) (887 ) (1,917 ) (2,659 )
Interest expense 101
165
371
526
Equity in loss (earnings) of unconsolidated entities (b)
(415 ) (485 ) 4,154
(4,489 )
Miscellaneous, net (c)
(307 ) 14,189
2,358
15,089
Total other expense, net $ 5,243
$ 23,617
$ 25,337
$ 42,402


(a)	Lease exit and related costs for the three and nine months ended September 30, 2016, resulted from actions taken to reduce overheads and the substantial completion of our corporate headquarters relocation from Michigan to Georgia, which began in 2013.


~~(b)~~	Includes an $8.0 million impairment of an investment in an unconsolidated entity in the ~~nine~~three and six months ended ~~September~~June 30, 2017 (see Note 2).


~~(c)~~	~~Miscellaneous, net includes a charge of $15.0 million related to the settlement of a disputed land transaction for the three and nine months ended September 30, 2016 (see~~ ~~Note 8~~).

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Revenue recognition

Home sale revenues - Home sale revenues and related profit are generally recognized when title to and possession of the home are transferred to the buyer at the home closing date. Our performance obligation to deliver the agreed-upon home is generally satisfied in less than one year from the original contract date. Home sale contract assets consist of cash from home closings held in escrow for our benefit, typically for less than five days, which are considered deposits in-transit and classified as cash. Contract liabilities include customer deposit liabilities related to sold but undelivered homes, which totaled 355.0 million and 250.8 million at June 30, 2018 and December 31, 2017, respectively. Substantially all of our home sales are scheduled to close and be recorded to revenue within one year from the date of receiving a customer deposit. See Note 8 for information on warranties and related obligations.

Land sale revenues - We periodically elect to sell parcels of land to third parties in the event such assets no longer fit into our strategic operating plans or are zoned for commercial or other development. Land sales are generally outright sales of specified land parcels with cash consideration due on the closing date, which is generally when performance obligations are satisfied. During the three and six months ended June 30, 2018, we closed on a number of land sale transactions that generated gains totaling $27.3 million, as the proceeds from the sales exceeded the cost basis of the land. All performance obligations related to these transactions were satisfied at closing.

Financial services revenues - Loan origination fees, commitment fees, and certain direct loan origination costs are recognized as incurred. Expected gains and losses from the sale of residential mortgage loans and their related servicing rights are included in the measurement of written loan commitments that are accounted for at fair value through Financial Services revenues at the time of commitment. Subsequent changes in the fair value of these loans are reflected in Financial Services revenues as they occur. Interest income is accrued from the date a mortgage loan is originated until the loan is sold. Mortgage servicing fees represent fees earned for servicing loans for various investors. Servicing fees are based on a contractual percentage of the outstanding principal balance and are credited to income when related mortgage payments are received or the sub-servicing fees are earned.

Revenues associated with our title operations are recognized as closing services are rendered and title insurance policies are issued, both of which generally occur as each home is closed. Insurance brokerage commissions relate to commissions on homeowner and other insurance policies placed with third party carriers through various agency channels. Our performance obligations for policy renewal commissions are satisfied upon issuance of the initial policy. The contract assets for estimated future renewal commissions are included in other assets and totaled $29.8 million at June 30, 2018. Contract assets totaling $27.7 million were recognized on January 1, 2018, in conjunction with the adoption of Accounting Standards Codification 606, "Revenue from Contracts with Customers" ("ASC 606"). Refer to "New accounting pronouncements" within Note 1 for further discussion.

Earnings per share

Basic earnings per share is computed by dividing income available to common shareholders (the “Numerator”) by the weighted-average number of common shares outstanding, adjusted for unvested shares (the “Denominator”) for the period. Computing diluted earnings per share is similar to computing basic earnings per share, except that the Denominator is increased to include the dilutive effects of stock options, unvested restricted shares, unvested restricted share units, and other potentially dilutive instruments. Any stock options that have an exercise price greater than the average market price are considered to be anti-dilutive and are excluded from the diluted earnings per share calculation. Our diluted earnings per share calculation excluded potentially dilutive instruments, including stock options and unvested restricted share units, totaling 0.1 million for both the three and nine months ended September 30, 2017, and 2.3 million for both the three and nine months ended September 30, 2016.

In accordance with ASC 260 "Earnings Per Share", the two-class method determines earnings per share for each class of common stock and participating securities according to an earnings allocation formula that adjusts the Numerator for dividends or dividend equivalents and participation rights in undistributed earnings. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and, therefore, are included in computing earnings per share pursuant to the two-class method. Our outstanding restricted share awards, restricted share units, and deferred shares are considered participating securities. The following table presents the earnings per common share (000's omitted, except per share data):

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
Numerator:
Net income	$	324,089		$	100,749		$	494,841		$	192,268
Less: earnings distributed to participating securities	(300		)	(300		)	(595		)	(605		)
Less: undistributed earnings allocated to participating securities	(3,284		)	(772		)	(2,584		)	(1,330		)
Numerator for basic earnings per share	$	320,505		$	99,677		$	491,662		$	190,333
Add back: undistributed earnings allocated to participating securities	3,284			772			2,584			1,330
Less: undistributed earnings reallocated to participating securities	(3,268		)	(768		)	(2,575		)	(1,322		)
Numerator for diluted earnings per share	$	320,521		$	99,681		$	491,671		$	190,341

Denominator:
Basic shares outstanding	285,276			312,315			285,976			315,021
Effect of dilutive securities	1,378			1,565			1,088			1,946
Diluted shares outstanding	286,654			313,880			287,064			316,967

Earnings per share:
Basic	$	1.12		$	0.32		$	1.72		$	0.60
Diluted	$	1.12		$	0.32		$	1.71		$	0.60

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Numerator:
Net income $ 177,539
$ 128,470
$ 369,807
$ 329,530
Less: earnings distributed to participating securities (294 ) (269 ) (899 ) (836 )
Less: undistributed earnings allocated to participating securities (1,645 ) (870 ) (2,837 ) (1,764 )
Numerator for basic earnings per share $ 175,600
$ 127,331
$ 366,071
$ 326,930
Add back: undistributed earnings allocated to participating securities 1,645
870
2,837
1,764
Less: undistributed earnings reallocated to participating securities (1,636 ) (865 ) (2,820 ) (1,751 )
Numerator for diluted earnings per share $ 175,609
$ 127,336
$ 366,088
$ 326,943

Denominator:
Basic shares outstanding 298,538
340,171
309,453
344,383
Effect of dilutive securities 1,690
2,250
1,861
2,557
Diluted shares outstanding 300,228
342,421
311,314
346,940

Earnings per share:
Basic $ 0.59
$ 0.37
$ 1.18
$ 0.95
Diluted $ 0.58
$ 0.37
$ 1.18
$ 0.94

Residential mortgage loans available-for-sale

Substantially all of the loans originated by us are sold in the secondary mortgage market within a short period of time after origination, generally within 30 days. At ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, residential mortgage loans available-for-sale had an aggregate fair value of ~~$364.7~~$369.6 million and ~~$539.5~~$570.6 million, respectively, and an aggregate outstanding principal balance of ~~$352.7~~$359.2 million and ~~$529.7~~$553.5 million, respectively. The net gain (loss) resulting from changes in fair value of these loans totaled ~~$0.7~~$(0.2) million and ~~$(1.0)~~$(2.2) million for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, and ~~$(3.4)~~$(0.3) million and ~~$0.3~~$(4.1) million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively. These changes in fair value were substantially offset by changes in the fair value of corresponding hedging instruments. Net gains from the sale of mortgages were ~~$27.1~~$29.2 million and ~~$30.1~~$27.7 million for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, and ~~$80.1~~$56.2 million and ~~$77.4~~$52.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, and have been included in Financial Services revenues.

Derivative instruments and hedging activities

We are party to interest rate lock commitments ("IRLCs") with customers resulting from our mortgage origination operations. At ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, we had aggregate IRLCs of ~~$346.6~~$426.5 million and ~~$273.9~~$210.9 million, respectively, which were originated at interest rates prevailing at the date of commitment. Since we can terminate a loan commitment if the borrower does not comply with the terms of the contract, and some loan commitments may expire without being drawn upon, these commitments do not necessarily represent future cash requirements. We evaluate the creditworthiness of these transactions through our normal credit policies.

We hedge our exposure to interest rate market risk relating to residential mortgage loans available-for-sale and IRLCs using forward contracts on mortgage-backed securities, which are commitments to either purchase or sell a specified financial instrument at a specified future date for a specified price, and whole loan investor commitments, which are obligations of an investor to buy loans at a specified price within a specified time period. Forward contracts on mortgage-backed securities are the predominant derivative financial instruments we use to minimize market risk during the period from the time we extend an interest rate lock to a loan applicant until the time the loan is sold to an investor. At ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, we had unexpired forward contracts of ~~$532.0~~$568.0 million and ~~$610.0~~$522.0 million, respectively, and whole loan investor commitments of

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

~~commitments of $137.8~~$186.7 million and ~~$157.6~~$203.1 million, respectively. Changes in the fair value of IRLCs and other derivative financial instruments are recognized in Financial Services revenues, and the fair values are reflected in other assets or other liabilities, as applicable.

There are no credit-risk-related contingent features within our derivative agreements, and counterparty risk is considered minimal. Gains and losses on IRLCs and residential mortgage loans available-for-sale are substantially offset by corresponding gains or losses on forward contracts on mortgage-backed securities and whole loan investor commitments. We are generally not exposed to variability in cash flows of derivative instruments for more than approximately 60 days.

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



	June 30, 2018				December 31, 2017
	Other Assets		Accrued and Other Liabilities		Other Assets		Accrued and Other Liabilities
Interest rate lock commitments	$	12,139	$	505	$	5,990	$	407
Forward contracts	189		2,429		432		817
Whole loan commitments	721		315		794		941
	$	13,049	$	3,249	$	7,216	$	2,165

September 30, 2017 December 31, 2016
Other Assets Accrued and Other Liabilities Other Assets Accrued and Other Liabilities
Interest rate lock commitments $ 10,434
$ 400
$ 9,194
$ 501
Forward contracts 1,124
607
8,085
1,004
Whole loan commitments 237
826
1,135
863
$ 11,795
$ 1,833
$ 18,414
$ 2,368

New accounting pronouncements

~~In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, "Revenue from Contracts with Customers" ("ASU 2014-09"). The standard~~On January 1, 2018, we adopted ASC 606, which is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services and satisfaction of performance obligations to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. ~~The FASB has also issued a number of updates to this standard. The standard is effective for us for annual and interim periods beginning January 1, 2018, and, at that time, we expect to apply~~We applied the modified retrospective method to contracts that were not completed as of ~~adoption.~~

~~We have been actively engaged in discussions with the FASB and within our industry~~January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to ~~assess all potential effects~~be reported under the previous accounting standards. We recorded a net increase to opening retained earnings of $22.4 million, net of tax, as of January 1, 2018, due to the cumulative impact of adopting ASC 606, with the ~~standard. We do~~impact primarily related to the recognition of contract assets for insurance brokerage commission renewals. There was not ~~expect~~a material impact to revenues as a result of applying ASC 606 for the six months ended June 30, 2018, and there have not been significant changes to our business processes, systems, or internal controls as a result of ~~adopting~~implementing the standard.

We ~~also do not expect the~~adopted Accounting Standards Update ("ASU") No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments" ("ASU 2016-15"), as of January 1, 2018, on a retrospective basis. The ASU addresses several specific cash flow issues. The adoption of ASU ~~2014-09 to have a material impact~~2016-15 had no effect on our financial statements. ~~However, we continue to evaluate the impact of the revised disclosure requirements.~~

In February 2016, the ~~FASB~~Financial Accounting Standards Board ("FASB") issued ASU No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02"), which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets. ASU 2016-02 is effective for us for annual and interim periods beginning January 1, 2019, and early adoption is permitted. The standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial ~~application, with an option to use certain transition relief.~~application. 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~~statements of operations. The FASB also issued ASU No. 2018-01, "Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842", which provides guidance on specific transition issues. We continue to evaluate the full impact of the new ~~standard,~~standards, including the impact on our business processes, systems, and internal controls.

We adopted ASU No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting" ("ASU 2016-09") effective January 1, 2017. 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. As a result of adopting ASU 2016-09, we applied the modified retrospective approach and recorded a cumulative-effect adjustment that increased our retained earnings and deferred tax assets as of January 1, 2017 by $18.6 million, respectively, as a result of previously unrecognized excess tax benefits (see ~~Note 6~~). Additionally, the impact of recognizing excess tax benefits and deficiencies in the income statement resulted in a $5.4 million reduction in our income tax expense for the nine months ended September 30, 2017. The remaining aspects of adopting ASU 2016-09 did not have a material impact on our financial statements.

~~PULTEGROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"), which changes the impairment model for most financial assets and certain other instruments from an "incurred loss" approach to a new "expected credit loss" methodology and also requires that credit losses from available-for-sale debt securities be presented as an allowance instead of a write-down. ASU 2016-13 is effective for us for annual and interim periods beginning January 1, 2020, with early adoption permitted, and requires full retrospective application on adoption. We are currently evaluating the impact the standard will have on our financial statements.

In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments" ("ASU 2016-15"), which addresses several specific cash flow issues. ASU 2016-15 is effective for us for annual and interim periods beginning January 1, 2018, with early adoption permitted, and requires full retrospective application on adoption. We do not expect ASU 2016-15 to have a material impact on our financial statements.

In January 2017, the FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment" ("ASU 2017-04"), which removes the requirement to perform a hypothetical purchase

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

price allocation to measure goodwill impairment. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for us for annual and interim periods beginning January 1, 2020, with early adoption ~~permitted.~~permitted, and applied prospectively. We do not expect ASU 2017-04 to have a material impact on our financial statements.

In February 2017, the FASB issued ASU No. 2017-05, "Other Income - Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (Subtopic 610-20)" ("ASU 2017-05"). ASU 2017-05 updates the definition of an "in substance nonfinancial asset" and clarifies the derecognition guidance for nonfinancial assets to conform with the new revenue recognition standard. The effective date and transition methods of ASU 2017-05 are aligned with ASU 2014-09 described above. We are currently evaluating the impact that the standard will have on our financial statements.

2. Inventory

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



	June 30, 2018		December 31, 2017
Homes under construction	$	2,922,260	$	2,421,405
Land under development	4,045,615		4,135,814
Raw land	531,790		589,911
	$	7,499,665	$	7,147,130

September 30,
2017 December 31,
2016
Homes under construction $ 2,737,849
$ 1,921,259
Land under development 4,066,748
4,072,109
Raw land 565,555
777,287
$ 7,370,152
$ 6,770,655

We capitalize interest cost into inventory during the active development and construction of our communities. In all periods presented, we capitalized all Homebuilding interest costs into inventory because the level of our active inventory exceeded our debt levels. Information related to interest capitalized into inventory is as follows ($000’s omitted):



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
Interest in inventory, beginning of period	$	240,013		$	203,828		$	226,611		$	186,097
Interest capitalized	43,771			44,949			87,731			89,872
Interest expensed	(40,157		)	(35,927		)	(70,715		)	(63,119		)
Interest in inventory, end of period	$	243,627		$	212,850		$	243,627		$	212,850

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Interest in inventory, beginning of period $ 212,850
$ 167,488
$ 186,097
$ 149,498
Interest capitalized 46,077
42,030
135,949
115,545
Interest expensed (36,381 ) (32,857 ) (99,500 ) (88,382 )
Interest in inventory, end of period $ 222,546
$ 176,661
$ 222,546
$ 176,661

Land option agreements

We enter into land option agreements in order to procure land for the construction of homes in the future. Pursuant to these land option agreements, we generally provide a deposit to the seller as consideration for the right to purchase land at different times in the future, usually at predetermined prices. Such contracts enable us to defer acquiring portions of properties owned by third parties or unconsolidated entities until we have determined whether and when to exercise our option, which

~~PULTEGROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

reduces our financial risks associated with long-term land holdings. Option deposits and pre-acquisition costs (such as environmental testing, surveys, engineering, and entitlement costs) are capitalized if the costs are directly identifiable with the land under option, the costs would be capitalized if we owned the land, and acquisition of the property is probable. Such costs are reflected in other assets and are reclassified to inventory upon taking title to the land. We write off deposits and pre-acquisition costs when it becomes probable that we will not go forward with the project or recover the capitalized costs. Such decisions take into consideration changes in local market conditions, the timing of required land purchases, the availability and best use of necessary incremental capital, and other factors. We record any such write-offs of deposits and pre-acquisition costs within other expense, net.

If an entity holding the land under option is a variable interest entity ("VIE"), our deposit represents a variable interest in that entity. No VIEs required consolidation at either ~~September~~June 30, ~~2017~~2018 or December 31, ~~2016~~2017 because we determined that we were not the VIEs' primary beneficiary. Our maximum exposure to loss related to these VIEs is generally limited to our deposits and pre-acquisition costs under the land option agreements.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following provides a summary of our interests in land option agreements as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017 ($000’s omitted):



	June 30, 2018				December 31, 2017
	Deposits and Pre-acquisition Costs		Remaining Purchase Price		Deposits and Pre-acquisition Costs		Remaining Purchase Price
Land options with VIEs	$	73,940	$	1,145,136	$	78,889	$	977,480
Other land options	144,497		1,603,950		129,098		1,485,099
	$	218,437	$	2,749,086	$	207,987	$	2,462,579

September 30, 2017 December 31, 2016
Deposits and
Pre-acquisition
Costs Remaining Purchase
Price Deposits and
Pre-acquisition
Costs Remaining Purchase
Price
Land options with VIEs $ 73,652
$ 792,407
$ 68,527
$ 849,901
Other land options 128,168
1,475,258
126,909
1,252,662
$ 201,820
$ 2,267,665
$ 195,436
$ 2,102,563

Land-related charges

We ~~test inventory~~recorded the following significant land-related charges in the three months ended June 30, 2017 ($000's omitted):



	Statement of Operations Classification	June 30,
	Statement of Operations Classification	2017
Net realizable value adjustments ("NRV") - land held for sale	Land sale cost of revenues	$	81,006
Land inventory impairments	Home sale cost of revenues	31,487
Impairments of unconsolidated entities	Other expense, net	8,017
Write-offs of deposits and pre-acquisition costs	Other expense, net	5,063
Total land-related charges		$	125,573

We periodically elect to sell parcels of land to third parties in the event such assets no longer fit into our strategic operating plans or are zoned for ~~impairment when events and circumstances indicate that~~commercial or other development. The NRV adjustments for the ~~cash flows estimated to be generated by~~three months ended June 30, 2017 were primarily the ~~community are less than its carrying amount. On~~result of a plan we announced in May 3, 2017 ~~we committed to a plan~~ to sell select non-core and underutilized land parcels following a strategic review of our land ~~portfolio. We~~portfolio, pursuant to which it was determined that we would sell certain ~~currently~~ inactive land parcels, representing approximately ~~4,600 lots,~~17 communities and ~~work is underway to monetize two small communities representing an additional 400~~4,600 lots. These land parcels were located in diverse geographic areas and no longer fit into our strategic plans. The land parcels identified for sale included: land requiring significant additional development spend that would not yield suitable returns; land in excess of near-term need; and land entitled for certain product types inconsistent with our primary offerings. Actions required to complete the planned sales have been initiated, but the timing of completing the dispositions is unknown. We will seek to redeploy the proceeds and related tax benefits from these dispositions into higher returning projects.

As a consequence of the change in strategy with respect to the future use of these land parcels, we recorded ~~land-related charges~~NRV adjustments totaling ~~$120.0~~$81.0 million ~~related~~in the three months ended June 30, 2017 relating to inventory with a ~~pre-impairment~~pre-NRV carrying value of $161.9 million in the nine months ended September 30, 2017. As a result of this review, we also recorded $5.1 million of write-offs of deposits and pre-acquisition costs related to land option contracts we no longer plan to pursue in the nine months ended September 30, 2017.

~~PULTEGROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~In total, we recorded the following overall land-related charges ($000's omitted):~~

Three Months Ended Nine Months Ended
Statement of Operations Classification September 30, September 30,
2017 2016 2017 2016
Land inventory impairments Home sale cost of revenues $ —
$ —
$ 31,487
$ —
Net realizable value adjustments ("NRV") - land held for sale Land sale cost of revenues (534 ) 121
82,353
189
Impairments of unconsolidated entities Other expense, net —
—
8,017
—
Write-offs of deposits and pre-acquisition costs Other expense, net 2,680
2,541
9,397
12,996
Total land-related charges $ 2,146
$ 2,662
$ 131,254
$ 13,185

$151.0 million. The estimated fair values of these inactive land parcels held for sale were generally based on ~~sales contracts or letters of intent,~~ comparisons to market comparable transactions, letters of intent, active negotiations with market participants, or similar market-based information supplemented in certain instances by estimated future net cash flows discounted for inherent risk associated with each underlying ~~asset,~~asset.

Land inventory impairments relate to communities that are either active or ~~similar information. The~~that we intend to eventually open and build out. As part of the May 2017 strategic review, we decided to accelerate the monetization of two small communities primarily through a combination of changing the product offerings and lowering the sales prices within the communities. This decision resulted in land impairments of $31.5 million in the three months ended June 30, 2017.

We determine the fair value of a community's inventory, and any related impairments, using a combination of discounted cash flow models and market comparable transactions, where available. These estimated cash flows ~~for certain parcels incorporate~~are significantly impacted by estimates related to expected average selling prices, expected sales paces, expected land development and construction timelines, and anticipated land development, construction, and overhead costs. The assumptions used in the ~~valuations~~discounted cash flow models are specific to each community, ~~tested for impairment~~which may be located in a variety of geographic markets, and ~~typically do not assume improvements~~offer homes at sales

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

prices reflective of the product offering and market. Accordingly, determining the fair value of a community's inventory involves a number of variables, many of which are interrelated.

The table below summarizes certain quantitative unobservable inputs utilized in ~~market conditions~~determining the fair value of impairments recorded in the near term. In certain instances, the determination of fair value requires discounting the estimated cash flows at a rate commensurate with the inherent risks associated with each of the assets and related estimated cash flow streams. The discount rate used in determining each community's fair value depends on the stage of development of the community and other specific factors that increase or decrease the inherent risks associated with the community's cash flow streams and ranged from 18% to 25%. three months ended June 30, 2017:



	Range
	June 30, 2017
Average selling price ($000s)	$253	to	$461
Sales pace per quarter (units)	5	to	9
Discount rate	18%	to	25%

Our evaluations for impairments are based on our best estimates of the future cash flows ~~for~~to be generated from our communities. Due to uncertainties in the estimation process, the significant volatility in demand for new housing, the long life cycles of ~~certain of these~~many communities, and potential changes in our strategy related to certain communities, actual results could differ significantly from such estimates.

3. Segment information

Our Homebuilding operations are engaged in the acquisition and development of land primarily for residential purposes within the U.S. and the construction of housing on such land. For reporting purposes, our Homebuilding operations are aggregated into six reportable segments:



Northeast:		Connecticut, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Virginia
Southeast:		Georgia, North Carolina, South Carolina, Tennessee
Florida:		Florida
Midwest:		Illinois, Indiana, Kentucky, Michigan, Minnesota, Missouri, Ohio
Texas:		Texas
West:		Arizona, California, Nevada, New Mexico, Washington

We also have a reportable segment for our Financial Services operations, which consist principally of mortgage banking and title operations and operate generally in the same markets as the Homebuilding segments.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



	Operating Data by Segment ($000’s omitted)
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
Revenues:
Northeast	$	200,626		$	148,303		$	333,062		$	256,904
Southeast	445,506			381,132			820,129			710,244
Florida	455,637			363,421			804,346			677,717
Midwest	356,466			357,985			653,972			602,491
Texas	330,692			288,669			577,331			523,210
West	728,031			435,075			1,252,273			792,129
	2,516,958			1,974,585			4,441,113			3,562,695
Financial Services	52,764			47,275			98,702			89,042
Consolidated revenues	$	2,569,722		$	2,021,860		$	4,539,815		$	3,651,737

Income (loss) before income taxes (d):
Northeast	$	25,158		$	(38,249	)	$	34,470		$	(33,849	)
Southeast	54,357			40,274			94,814			72,640
Florida (a)	67,491			36,110			112,436			80,633
Midwest	43,050			37,573			71,451			55,827
Texas	50,859			46,522			81,395			79,318
West (b)	154,414			(1,850		)	243,619			32,234
Other homebuilding (c)	(6,876		)	(16,781		)	(39,374		)	(57,441		)
	388,453			103,599			598,811			229,362
Financial Services	20,717			18,948			34,551			32,451
Consolidated income before income taxes	$	409,170		$	122,547		$	633,362		$	261,813

Operating Data by Segment
($000’s omitted)
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Revenues:
Northeast $ 168,352
$ 155,226
$ 425,206
$ 426,397
Southeast 393,788
375,148
1,103,509
1,057,249
Florida 337,933
307,588
1,015,456
860,869
Midwest 405,827
342,709
1,008,086
819,250
Texas 269,781
261,693
792,565
730,456
West 507,386
452,521
1,298,877
1,154,226
2,083,067
1,894,885
5,643,699
5,048,447
Financial Services 46,952
48,020
135,995
126,950
Consolidated revenues $ 2,130,019
$ 1,942,905
$ 5,779,694
$ 5,175,397

Income before income taxes (a):

Northeast (b)
$ 21,046
$ 6,056
$ (12,803 ) $ 34,884
Southeast 45,109
36,370
117,749
96,898
Florida (c)
52,191
45,891
132,824
130,546
Midwest 59,636
36,792
115,463
68,665
Texas 42,727
38,878
122,045
103,618
West 75,753
55,347
107,987
130,683
Other homebuilding (d)
(45,999 ) (28,271 ) (103,441 ) (93,252 )
250,463
191,063
479,824
472,042
Financial Services 17,786
21,272
50,238
48,086
Consolidated income before income taxes $ 268,249
$ 212,335
$ 530,062
$ 520,128


(a)	~~Includes land-related charges~~ Florida includes a warranty charge of ~~$2.1 million and $131.3~~$12.1 million for the three and ~~nine~~six months ended ~~September~~June 30, 2017 ~~respectively~~related to a closed-out community (see ~~Land-related charges in following table)~~Note 8).


(b)	~~Northeast~~West includes ~~a charge~~gains of ~~$15.0~~$26.4 million related to ~~the settlement of a disputed~~two land ~~transaction for~~sale transactions in California that closed in the three and ~~nine~~six months ended ~~September~~June 30, ~~2016 (see~~ ~~Note 8~~).2018.


(c)	~~Florida includes a warranty charge of $12.3 million for the nine months ended September 30, 2017 related to a closed-out community (see~~ ~~Note 8~~).

~~(d)~~

Other homebuilding includes the amortization of intangible assets and capitalized interest and other items not allocated to the operating segments. Other homebuilding also includes ~~write-offs~~insurance reserve reversals of ~~$5.3~~$37.9 million and ~~$20.3~~$19.8 million for the three and six months ended June 30, 2018 and 2017, respectively, and a write-off of $15.0 million of insurance receivables associated with the resolution of certain insurance matters in the ~~three and nine~~six months ended ~~September 30, 2017, respectively, and an insurance reserve reversal of $19.8 million in the nine months ended September~~June 30, 2017 (see Note 8).


(d)	Includes land-related charges, as summarized in the below table.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


	Operating Data by Segment ($000’s omitted)									Operating Data by Segment ($000’s omitted)
	Three Months Ended					Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,					September 30,				June 30,				June 30,
	2017			2016		2017		2016		2018		2017		2018		2017
Land-related charges*:
Northeast	$	1,184		$	464	$	51,102	$	990	$	498	$	49,820	$	1,683	$	49,918
Southeast	889			396		1,847		2,252		689		491		1,731		958
Florida	109			68		8,862		597		226		8,602		409		8,754
Midwest	(393		)	391		7,703		1,242		372		7,567		1,118		8,095
Texas	51			245		898		397		220		589		270		847
West	306			1,098		56,747		7,707		148		54,409		361		56,441
Other homebuilding	—			—		4,095		—		269		4,095		269		4,095
	$	2,146		$	2,662	$	131,254	$	13,185	$	2,422	$	125,573	$	5,841	$	129,108


*	Land-related charges include land impairments, net realizable value adjustments on land held for sale, impairments of investments in unconsolidated entities, and write-offs of deposits and pre-acquisition costs for land option contracts we elected not to pursue (see Note 2). Other homebuilding consists primarily of write-offs of capitalized interest related to such land-related charges.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



	Operating Data by Segment
	($000's omitted)
	June 30, 2018
	Homes Under Construction		Land Under Development		Raw Land		Total Inventory		Total Assets
Northeast	$	298,241	$	272,358	$	73,577	$	644,176	$	811,067
Southeast	506,116		633,489		78,183		1,217,788		1,355,703
Florida	488,392		879,165		97,481		1,465,038		1,602,996
Midwest	371,665		420,733		28,727		821,125		909,295
Texas	332,420		417,251		88,727		838,398		915,707
West	869,845		1,161,466		143,544		2,174,855		2,357,858
Other homebuilding (a)	55,581		261,153		21,551		338,285		1,389,431
	2,922,260		4,045,615		531,790		7,499,665		9,342,057
Financial Services	—		—		—		—		473,519
	$	2,922,260	$	4,045,615	$	531,790	$	7,499,665	$	9,815,576


	Operating Data by Segment										Operating Data by Segment
	($000's omitted)										($000's omitted)
	September 30, 2017										December 31, 2017
	Homes Under Construction		Land Under Development		Raw Land		Total Inventory		Total Assets		Homes Under Construction		Land Under Development		Raw Land		Total Inventory		Total Assets
Northeast	$	291,366	$	308,675	$	79,375	$	679,416	$	844,507	$	234,413	$	327,599	$	73,574	$	635,586	$	791,511
Southeast	452,249		629,864		132,558		1,214,671		1,345,121		433,411		613,626		121,238		1,168,275		1,287,992
Florida	402,228		864,682		81,058		1,347,968		1,494,185		359,651		876,856		109,069		1,345,576		1,481,837
Midwest	361,074		476,700		29,261		867,035		929,743		299,896		476,694		28,482		805,072		877,282
Texas	310,360		407,531		90,497		808,388		891,686		251,613		435,018		87,392		774,023		859,847
West	872,477		1,115,706		131,703		2,119,886		2,326,631		798,706		1,137,940		147,493		2,084,139		2,271,328
Other homebuilding (a)	48,095		263,590		21,103		332,788		1,703,680		43,715		268,081		22,663		334,459		1,469,234
	2,737,849		4,066,748		565,555		7,370,152		9,535,553		2,421,405		4,135,814		589,911		7,147,130		9,039,031
Financial Services	—		—		—		—		435,716		—		—		—		—		647,618
	$	2,737,849	$	4,066,748	$	565,555	$	7,370,152	$	9,971,269	$	2,421,405	$	4,135,814	$	589,911	$	7,147,130	$	9,686,649

	December 31, 2016
	Homes Under Construction		Land Under Development		Raw Land		Total Inventory		Total Assets
Northeast	$	175,253	$	375,899	$	135,447	$	686,599	$	798,369
Southeast	354,047		650,805		148,793		1,153,645		1,243,188
Florida	309,525		683,376		183,168		1,176,069		1,330,847
Midwest	256,649		474,287		50,302		781,238		851,457
Texas	219,606		413,312		74,750		707,668		793,917
West	580,082		1,226,190		159,387		1,965,659		2,200,058
Other homebuilding (a)	26,097		248,240		25,440		299,777		2,351,082
	1,921,259		4,072,109		777,287		6,770,655		9,568,918
Financial Services	—		—		—		—		609,282
	$	1,921,259	$	4,072,109	$	777,287	$	6,770,655	$	10,178,200


(a)	Other homebuilding primarily includes cash and equivalents, capitalized interest, intangibles, deferred tax assets, and other corporate items that are not allocated to the operating segments.

~~PULTEGROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

4. Debt

~~Senior notes~~Notes payable

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



	June 30, 2018			December 31, 2017
4.250% unsecured senior notes due March 2021 (a)	$	700,000		$	700,000
5.500% unsecured senior notes due March 2026 (a)	700,000			700,000
5.000% unsecured senior notes due January 2027 (a)	600,000			600,000
7.875% unsecured senior notes due June 2032 (a)	300,000			300,000
6.375% unsecured senior notes due May 2033 (a)	400,000			400,000
6.000% unsecured senior notes due February 2035 (a)	300,000			300,000
Net premiums, discounts, and issuance costs (b)	(13,152		)	(13,057		)
Total senior notes	2,986,848			2,986,943
Other notes payable	18,842			20,024
Notes payable	$	3,005,690		$	3,006,967
Estimated fair value	$	2,998,340		$	3,263,774

September 30,
2017 December 31,
2016
7.625% unsecured senior notes due October 2017 (a)
$ 123,000
$ 123,000
4.250% unsecured senior notes due March 2021 (b)
700,000
700,000
5.500% unsecured senior notes due March 2026 (b)
700,000
700,000
5.000% unsecured senior notes due January 2027 (b)
600,000
600,000
7.875% unsecured senior notes due June 2032 (b)
300,000
300,000
6.375% unsecured senior notes due May 2033 (b)
400,000
400,000
6.000% unsecured senior notes due February 2035 (b)
300,000
300,000
Net premiums, discounts, and issuance costs (c)
(13,016 ) (12,984 )
Total senior notes $ 3,109,984
$ 3,110,016
Estimated fair value $ 3,356,459
$ 3,112,297


(a)	~~Not redeemable prior to maturity; guaranteed on a senior basis by certain wholly-owned subsidiaries.~~


~~(b)~~	Redeemable prior to maturity; guaranteed on a senior basis by certain wholly-owned subsidiaries.


~~(c)~~(b)	The carrying value of senior notes reflects the impact of premiums, discounts, and issuance costs that are amortized to interest cost over the respective terms of the senior notes.

~~In February 2016, we issued $1.0 billion of unsecured senior~~Other notes ~~consisting of $300~~payable include non-recourse and limited recourse collateralized notes with third parties that totaled $18.8 million ~~of 4.25% senior~~and $20.0 million at June 30, 2018 and December 31, 2017, respectively. These notes ~~due March 1, 2021,~~have maturities ranging up to three years, are secured by the applicable land positions to which they relate, and ~~$700 million of 5.50% senior~~have no recourse to any other assets. The stated interest rates on these notes due March 1, 2026. In July 2016, we issued an additional $1.0 billion of unsecured notes, consisting of an additional $400 million of the 4.25% senior notes due March 1, 2021, and $600 million of 5.00% senior notes due January 15, 2027. During October 2017, we settled the 7.625% notes on their due date.range up to 7.8%.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Revolving credit facility

~~We maintain a senior unsecured revolving~~In June 2018, we entered into the Second Amended and Restated Credit Agreement ("Revolving Credit Facility") which replaced the Company's previous credit ~~facility (the “Revolving Credit Facility”) that matures in June 2019 and provides for maximum borrowings of $750.0 million.~~agreement. The Revolving Credit Facility contains substantially similar terms to the previous credit agreement and extended the maturity date from June 2019 to June 2023. The Revolving Credit Facility has a maximum borrowing capacity of $1.0 billion and contains an uncommitted accordion feature that could increase the ~~size of the Revolving Credit Facility~~capacity to ~~$1.25~~$1.5 billion, subject to certain conditions and availability of additional bank commitments. ~~On October 13, 2017, we exercised the accordion feature to increase the maximum borrowing capacity to $1.0 billion.~~ The Revolving Credit Facility also provides for the issuance of letters of credit that reduce the available borrowing capacity under the Revolving Credit Facility, with a sublimit of ~~$375.0~~$500.0 million at ~~September~~June 30, ~~2017.~~2018. The interest rate on borrowings under the Revolving Credit Facility may be based on either the London Interbank Offered Rate ("LIBOR") or a base rate plus an applicable margin, as defined ~~in the Revolving Credit Facility. At September 30, 2017, we~~therein. We had ~~$83.0 million of~~no borrowings outstanding at June 30, 2018 and ~~$244.7~~December 31, 2017, and $214.6 million and $235.5 million of letters of credit issued under the Revolving Credit Facility ~~respectively. At~~at June 30, 2018 and December 31, ~~2016, we had no borrowings outstanding and $219.1 million of letters of credit issued under the Revolving Credit Facility,~~2017, respectively.

The Revolving Credit Facility contains financial covenants that require us to maintain a minimum Tangible Net Worth, a minimum Interest Coverage Ratio, and a maximum Debt-to-Capitalization Ratio (as each term is defined in the Revolving Credit Facility). As of ~~September~~June 30, ~~2017,~~2018, we ~~had $422.3 million available under the facility and~~ were in compliance with all covenants. ~~Outstanding balances~~ Our available and unused borrowings

under the Revolving Credit Facility, ~~are guaranteed by certain~~net of ~~our wholly-owned subsidiaries.~~

~~PULTEGROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Limited recourse notes payable~~

~~Certain~~outstanding letters of ~~our local homebuilding operations are party~~credit, amounted to ~~limited recourse collateralized notes payable with third parties that totaled $24.8~~$785.4 million and $764.5 million at ~~September~~June 30, ~~2017~~2018 and ~~$19.3 million at~~ December 31, 2016. These notes have maturities ranging up to four years, are generally collateralized by the land positions to which they relate, and are classified within accrued and other liabilities. The stated interest rates on these notes range up to 8.25%.2017, respectively.

Joint venture debt

At ~~September~~June 30, ~~2017,~~2018, aggregate outstanding debt of unconsolidated joint ventures was ~~$55.8~~$55.0 million, of which ~~$52.5~~$54.2 million was related to one joint venture in which we have a 50% interest. In connection with this loan, we and our joint venture partner provided customary limited recourse guaranties inunder which our maximum financial loss exposure is limited to our pro rata share of the debt outstanding. The limited guaranties include, but are not limited to: (i) completion of certain aspects of the project; (ii) an environmental indemnity provided to the lender; and (iii) an indemnification of the lender from certain "bad boy acts" of the joint venture.

~~Pulte Mortgage~~Financial Services debt

Pulte Mortgage maintains a master repurchase agreement with third party ~~lenders. In August 2017, Pulte Mortgage entered into an amended and restated repurchase agreement~~lenders (the “Repurchase Agreement”) that ~~extended the effective date to~~matures in August 2018. The maximum aggregate commitment ~~is $300.0~~was $400.0 million at ~~September~~June 30, ~~2017, which increases to $475.0 million during the seasonally high borrowing period from December 26, 2017~~2018, and will remain unchanged through January 11, 2018. At all other times, the maximum aggregate commitment ranges from $250.0 million to $400.0 million. The purpose of changes in capacity during the term of the agreement is to lower associated fees during seasonally lower volume periods of mortgage origination activity.maturity. Borrowings under the Repurchase Agreement are secured by residential mortgage loans available-for-sale. The Repurchase Agreement contains various affirmative and negative covenants applicable to Pulte Mortgage, including quantitative thresholds related to net worth, net income, and liquidity. Pulte Mortgage had ~~$245.8~~$264.0 million and ~~$331.6~~$437.8 million outstanding under the Repurchase Agreement at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively, and was in compliance with all of its covenants and requirements as of such dates.

5. Shareholders’ equity

During the ~~nine~~six months ended~~September~~June 30, ~~2017~~2018, we declared cash dividends totaling ~~$83.7~~$52.0 million and repurchased ~~27.8~~3.5 million shares under our repurchase authorization for ~~$659.8~~$105.1 million. For the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, we declared cash dividends totaling ~~$93.1~~$56.9 million and repurchased ~~17.7~~17.5 million shares under our repurchase authorization for ~~$347.7~~$399.9 million. At ~~September~~June 30, ~~2017,~~2018, we had remaining authorization to repurchase ~~$345.0~~$489.3 million of common shares.

Under our share-based compensation plans, we accept shares as payment under certain conditions related to stock option exercises and vesting of shares, generally related to the payment of minimum tax obligations. During the ~~nine~~six months ended~~September~~June 30, ~~2017~~2018 and ~~2016~~2017, participants surrendered shares valued at $~~6.0~~7.4 million and $~~3.2~~5.9 million, respectively, under these plans. Such share transactions are excluded from the above noted share repurchase authorization.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

6. Income taxes

Our effective tax rate for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 was ~~33.8%~~20.8% and ~~30.2%~~21.9%, respectively, compared to ~~39.5%~~17.8% and ~~36.6%~~26.6%, respectively, for the same periods in ~~2016.~~2017. Our effective tax rate for the ~~current period differed~~three and six months ended June 30, 2018 differs from the federal statutory ~~tax~~ rate primarily due to state income tax expense on current year earnings, tax benefits due to Internal Revenue Service acceptance of an accounting method change applicable to the ~~favorable resolution of certain state income~~2017 tax ~~matters, the domestic production activities deduction,~~year, energy credits, and tax law changes. For the same ~~period~~periods in the prior year, our effective tax rate differed from the federal statutory ~~tax~~ rate primarily due to state income tax expense on current year earnings, the favorable resolution of certain state income tax matters, and tax law changes. ~~Our effective~~The federal statutory rate was reduced from 35% in 2017 to 21% in 2018 due to the Tax Cuts and Jobs Act (the “Tax Act”), which was enacted on December 22, 2017.

We have not fully completed our accounting for the income tax ~~rates~~effects of the Tax Act. As discussed in the SEC Staff Accounting Bulletin No. 118, the accounting for the Tax Act should be completed within one year from the Tax Act enactment. During the three and ~~nine~~six months ended ~~September~~June 30, 2018, we have made no material adjustments to the provisional amounts recorded at December 31, 2017. Adjustments to the provisional amounts recorded at December 31, 2017 ~~are lower than~~will be reflected upon the completion of our accounting for the ~~prior year periods primarily as the result of tax law changes and the domestic production activities deduction.~~Tax Act.

At ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, we had deferred tax assets, net of deferred tax liabilities and valuation allowance, of ~~$0.9 billion~~$511.4 million and ~~$1.0 billion,~~$645.3 million, respectively. The accounting for deferred taxes is based upon estimates of future results. Differences between estimated and actual results could result in changes in the valuation of deferred tax assets that

~~PULTEGROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

could have a material impact on our consolidated results of operations or financial position. Changes in existing tax laws could also affect actual tax results and the realization of deferred tax assets over time.

Unrecognized tax benefits represent the difference between tax positions taken or expected to be taken in a tax return and the benefits recognized for financial statement purposes. At ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, we had ~~$12.1~~$19.9 million and ~~$21.5~~$48.6 million, respectively, of gross unrecognized tax benefits and ~~$2.2~~$5.2 million and ~~$12.2~~$4.9 million, respectively, of related accrued interest and penalties. It is reasonably possible within the next twelve months that our gross unrecognized tax benefits may decrease by up to ~~$8.7~~$11.2 million, excluding interest and penalties, primarily due to potential audit settlements.

~~As a result of the adoption of ASU No. 2016-09 (see~~ ~~Note 1), we recorded a cumulative-effect adjustment to increase retained earnings and deferred tax assets as of January 1, 2017 by $18.6 million for previously unrecognized excess tax benefits.~~

We are currently under examination by the IRS as part of the Compliance Assurance Process ("CAP") and various state taxing jurisdictions, and anticipate finalizing certain examinations within the next twelve months. The final outcome of these examinations is not yet determinable. The statutes of limitation for our major tax jurisdictions generally remain open for examination for tax years 2010 through the current year. Net operating loss and credit carryforwards remain open to examination until the tax year of utilization closes.

7. Fair value disclosures

ASC 820, “Fair Value Measurements and Disclosures,” provides a framework for measuring fair value in generally accepted accounting principles and establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The fair value hierarchy can be summarized as follows:



Level 1		Fair value determined based on quoted prices in active markets for identical assets or liabilities.

Level 2		Fair value determined using significant observable inputs, generally either quoted prices in active markets for similar assets or liabilities or quoted prices in markets that are not active.

Level 3		Fair value determined using significant unobservable inputs, such as pricing models, discounted cash flows, or similar techniques.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Our assets and liabilities measured or disclosed at fair value are summarized below ($000’s omitted):



Financial Instrument	Fair Value Hierarchy	Fair Value
Financial Instrument	Fair Value Hierarchy	June 30, 2018			December 31, 2017

Measured at fair value on a recurring basis:
Residential mortgage loans available-for-sale	Level 2	$	369,634		$	570,600
Interest rate lock commitments	Level 2	11,634			5,583
Forward contracts	Level 2	(2,240		)	(385		)
Whole loan commitments	Level 2	406			(147		)

Measured at fair value on a non-recurring basis:
House and land inventory	Level 3	$	1,631		$	11,045
Land held for sale	Level 2	5,279			8,600

Disclosed at fair value:
Cash, cash equivalents, and restricted cash	Level 1	$	401,915		$	306,168
Financial Services debt	Level 2	264,043			437,804
Other notes payable	Level 2	18,842			20,024
Senior notes payable	Level 2	2,979,498			3,243,750

Financial Instrument Fair Value
Hierarchy Fair Value
September 30,
2017 December 31,
2016

Measured at fair value on a recurring basis:
Residential mortgage loans available-for-sale Level 2 $ 364,734
$ 539,496
Interest rate lock commitments Level 2 10,034
8,693
Forward contracts Level 2 517
7,081
Whole loan commitments Level 2 (589 ) 272

Measured at fair value on a non-recurring basis:
House and land inventory Level 3 $ —
$ 8,920
Land held for sale Level 2 —
1,670

Disclosed at fair value:
Cash and equivalents (including restricted cash) Level 1 $ 197,097
$ 723,248
Financial Services debt Level 2 245,824
331,621
Revolving credit facility Level 2 83,000
—
Senior notes Level 2 3,356,459
3,112,297

Fair values for agency residential mortgage loans available-for-sale are determined based on quoted market prices for comparable instruments. Fair values for non-agency residential mortgage loans available-for-sale are determined based on purchase commitments from whole loan investors and other relevant market information available to management. Fair values for interest rate lock commitments, including the value of servicing rights, and forward contracts on mortgage-backed securities are valued based on market prices for similar instruments. Fair values for whole loan commitments are based on market prices for similar instruments from the specific whole loan investor.

Certain assets are required to be recorded at fair value on a non-recurring basis when events and circumstances indicate that the carrying value may not be recoverable. The non-recurring fair values included in the above table represent only those assets whose carrying values were adjusted to fair value as of the respective balance sheet dates. See Note 2 for ~~a more detailed discussion of~~ the valuation ~~methods used for~~techniques and inputs applied in determining the fair value of house and land inventory and land held for sale. ~~Investments in unconsolidated entities use similar valuation methods to inventory and land held for sale.~~

The carrying amounts of cash and equivalents, Financial Services debt, and ~~the Revolving Credit Facility~~other notes payable approximate their fair values due to their short-term nature ~~and~~and/or floating interest rate terms. The fair values of senior notes are based on quoted market prices, when available. If quoted market prices are not available, fair values are based on quoted market prices of similar issues. The carrying value of senior notes was ~~$3.1~~$3.0 billion at both ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~.

2017.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

8. Commitments and contingencies

Loan origination liabilities

Our mortgage operations may be responsible for losses associated with mortgage loans originated and sold to investors in the event of errors or omissions relating to representations and warranties made by us that the loans met certain requirements, including representations as to underwriting standards, the existence of primary mortgage insurance, and the validity of certain borrower representations in connection with the loan. In addition, certain trustees and investors continue to attempt to collect damages based on losses from loans that originated prior to 2009. Some of our mortgage subsidiaries are currently defendants in litigation related to such claims.

Our recorded liabilities for all such claims totaled $34.5 million and $34.6 million at June 30, 2018 and December 31, 2017, respectively. Determining the liabilities for anticipated losses requires a significant level of management judgment. Given the nature of these claims and the uncertainty regarding their ultimate resolution, actual costs could differ from our current estimates. ~~Changes in these liabilities were as follows ($000's omitted):~~

~~PULTEGROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Liabilities, beginning of period $ 34,934
$ 35,945
$ 35,114
$ 46,381
Reserves provided (released), net (39 ) (138 ) (44 ) 629
Payments (152 ) (264 ) (327 ) (11,467 )
Liabilities, end of period $ 34,743
$ 35,543
$ 34,743
$ 35,543

Letters of credit and surety bonds

In the normal course of business, we post letters of credit and surety bonds pursuant to certain performance-related obligations, as security for certain land option agreements, and under various insurance programs. The majority of these letters of credit and surety bonds are in support of our land development and construction obligations to various municipalities, other government agencies, and utility companies related to the construction of roads, sewers, and other infrastructure. We had outstanding letters of credit and surety bonds totaling ~~$244.7~~$214.6 million and $1.2 billion, respectively, at ~~September~~June 30, ~~2017~~2018 and $~~219.1~~235.5 million and $~~1.1~~1.2 billion, respectively, at December 31, ~~2016~~2017. In the event any such letter of credit or surety bond is drawn, we would be obligated to reimburse the issuer of the letter of credit or surety bond. We do not believe that a material amount, if any, of the letters of credit or surety bonds will be drawn. Our surety bonds generally do not have stated expiration dates; rather we are released from the surety bonds as the underlying contractual performance is completed. Because significant construction and development work has been performed related to projects that have not yet received final acceptance by the respective counterparties, the aggregate amount of surety bonds outstanding is in excess of the projected cost of the remaining work to be performed.

Litigation and regulatory matters

We are involved in various litigation and legal claims in the normal course of our business operations, including actions brought on behalf of various classes of claimants. We are also subject to a variety of local, state, and federal laws and regulations related to land development activities, house construction standards, sales practices, mortgage lending operations, employment practices, and protection of the environment. As a result, we are subject to periodic examination or inquiry by various governmental agencies that administer these laws and regulations.

We establish liabilities for legal claims and regulatory matters when such matters are both probable of occurring and any potential loss is reasonably estimable. We accrue for such matters based on the facts and circumstances specific to each matter and revise these estimates as the matters evolve. In such cases, there may exist an exposure to loss in excess of any amounts currently accrued. In view of the inherent difficulty of predicting the outcome of these legal and regulatory matters, we generally cannot predict the ultimate resolution of the pending matters, the related timing, or the eventual loss. While the outcome of such contingencies cannot be predicted with certainty, we do not believe that the resolution of such matters will have a material adverse impact on our results of operations, financial position, or cash flows. However, to the extent the liability arising from the ultimate resolution of any matter exceeds the estimates reflected in the recorded reserves relating to such matter, we could incur additional charges that could be significant. During the three months ended September 30, 2016, we settled a contract dispute related to a land transaction that we terminated approximately ten years prior in response to a collapse in housing demand. As a result of the settlement, we recorded a charge of $15.0 million, which is reflected in other expense, net.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Allowance for warranties

Home purchasers are provided with a limited warranty against certain building defects, including a one-year comprehensive limited warranty and coverage for certain other aspects of the home’s construction and operating systems for periods of up to and, in limited instances, exceeding 10 years. We estimate the costs to be incurred under these warranties and record liabilities in the amount of such costs at the time product revenue is recognized. Factors that affect our warranty liabilities include the number of homes sold, historical and anticipated rates of warranty claims, and the cost per claim. We periodically assess the adequacy of the warranty liabilities for each geographic market in which we operate and adjust the amounts as necessary. Actual warranty costs in the future could differ from the current estimates. Changes to warranty liabilities were as follows ($000’s omitted):



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
Warranty liabilities, beginning of period	$	70,986		$	64,681		$	72,709		$	66,134
Reserves provided	15,731			12,446			27,647			23,088
Payments	(17,129		)	(16,815		)	(31,411		)	(28,914		)
Other adjustments (a)	2,581			13,041			3,224			13,045
Warranty liabilities, end of period	$	72,169		$	73,353		$	72,169		$	73,353

~~PULTEGROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Warranty liabilities, beginning of period $ 73,353
$ 61,839
$ 66,134
$ 61,179
Reserves provided 12,286
19,221
35,374
45,744
Payments (14,679 ) (14,886 ) (43,594 ) (40,548 )
Other adjustments (a)
265
(1,753 ) 13,311
(1,954 )
Warranty liabilities, end of period $ 71,225
$ 64,421
$ 71,225
$ 64,421


(a)	During the ~~nine~~three and six months ended ~~September~~June 30, 2017, we recognized a charge of ~~$12.3~~$12.1 million related to estimated costs to complete repairs in a closed-out community in Florida.

Self-insured risks

We maintain, and require our subcontractors to maintain, general liability insurance coverage. We also maintain builders' risk, property, errors and omissions, workers' compensation, and other business insurance coverage. These insurance policies protect us against a portion of the risk of loss from claims. However, we retain a significant portion of the overall risk for such claims either through policies issued by our captive insurance subsidiaries or through our own self-insured per occurrence and aggregate retentions, deductibles, and claims in excess of available insurance policy limits.

Our general liability insurance includes coverage for certain construction defects. While construction defect claims can relate to a variety of circumstances, the majority of our claims relate to alleged problems with siding, plumbing, foundations and other concrete work, windows, roofing, and heating, ventilation and air conditioning systems. The availability of general liability insurance for the homebuilding industry and its subcontractors has become increasingly limited, and the insurance policies available require ~~companies~~us to maintain significant per occurrence and aggregate retention levels. In certain instances, we may offer our subcontractors the opportunity to purchase insurance through one of our captive insurance subsidiaries or participate in a project-specific insurance program provided by us. Policies issued by ~~the~~our captive insurance subsidiaries represent self-insurance of these risks by us. This self-insured exposure is limited by reinsurance policies that we purchase. General liability coverage for the homebuilding industry is complex, and our coverage varies from policy year to policy year. Our insurance coverage ~~generally~~ requires a per occurrence deductible up to an overall aggregate retention level. Beginning with the first dollar, amounts paid to satisfy insured claims apply to our per occurrence and aggregate retention obligations. Any amounts incurred in excess of the occurrence or aggregate retention levels are covered by insurance up to our purchased coverage levels. Our insurance policies, including the captive insurance subsidiaries' reinsurance policies, are maintained with highly-rated underwriters for whom we believe counterparty default risk is not significant.

At any point in time, we are managing over 1,000 individual claims related to general liability, property, errors and omissions, ~~workers~~workers' compensation, and other business insurance coverage. We reserve for costs associated with such claims (including expected claims management expenses) on an undiscounted basis at the time revenue is recognized for each home closing and evaluate the recorded liabilities based on actuarial analyses of our historical claims. The actuarial analyses calculate estimates of the ultimate net cost of all unpaid losses, including estimates for incurred but not reported losses ("IBNR"). IBNR represents losses related to claims incurred but not yet reported plus development on reported claims.

Our recorded reserves for all such claims totaled ~~$824.6~~$725.5 million and ~~$831.1~~$758.8 million at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively, the vast majority of which relate to general liability claims. The recorded reserves include loss estimates

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

related to both (i) existing claims and related claim expenses and (ii) IBNR and related claim expenses. Liabilities related to IBNR and related claim expenses represented approximately ~~69%~~62% and 65% of the total general liability reserves at ~~both September~~June 30, ~~2017~~2018 and December 31, ~~2016.~~2017, respectively. The actuarial analyses that determine the IBNR portion of reserves consider a variety of factors, including the frequency and severity of losses, which are based on our historical claims experience supplemented by industry data. The actuarial analyses of the reserves also consider historical third party recovery rates and claims management expenses.

Housing market conditions have been volatile across most of our markets over the past ten years, and we believe such conditions can affect the frequency and cost of construction defect claims. Additionally, IBNR estimates comprise the majority of our liability and are subject to a high degree of uncertainty due to a variety of factors, including changes in claims reporting and resolution patterns, third party recoveries, insurance industry practices, the regulatory environment, and legal precedent.

~~PULTEGROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

State regulations vary, but construction defect claims are reported and resolved over an extended period often exceeding ten years. Changes in the frequency and timing of reported claims and estimates of specific claim values can impact the underlying inputs and trends utilized in the actuarial analyses, which could have a material impact on the recorded reserves. Additionally, the amount of insurance coverage available for each policy period also impacts our recorded reserves. Because of the inherent uncertainty in estimating future losses and the timing of such losses related to these claims, actual costs could differ significantly from estimated costs.

Adjustments to reserves are recorded in the period in which the change in estimate occurs. We reduced general liability reserves by $37.9 million during the three and six months ended June 30, 2018 and $19.8 million during the three and six months ended June 30, 2017. These reductions were the result of changes in estimates driven by claim experience being less than anticipated in previous actuarial projections. These changes in actuarial estimates did not involve any changes in actuarial methodology but did impact the development of estimates for future periods, which resulted in adjustments to the IBNR portion of our recorded liabilities.

Costs associated with our insurance programs are classified within selling, general, and administrative expenses. Changes in these liabilities were as follows ($000's omitted):



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
Balance, beginning of period	$	771,104		$	835,326		$	758,812		$	831,058
Reserves provided, net	23,235			23,411			42,895			43,126
Adjustments to previously recorded reserves (a)	(37,529		)	(19,813		)	(35,068		)	(21,793		)
Payments, net (b)	(31,328		)	(24,168		)	(41,157		)	(37,635		)
Balance, end of period	$	725,482		$	814,756		$	725,482		$	814,756

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Balance, beginning of period $ 814,756
$ 936,711
$ 831,058
$ 924,563
Reserves provided, net 24,361
21,674
62,970
67,190
Adjustments to previously recorded reserves (a)
(511 ) (1,441 ) (22,304 ) (1,889 )
Payments, net (b)
(13,981 ) (24,994 ) (47,099 ) (57,914 )
Balance, end of period $ 824,625
$ 931,950
$ 824,625
$ 931,950


(a)	Includes a general liability reserve ~~reversal~~reversals of $37.9 million for the three and six months ended June 30, 2018 and $19.8 million for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017, related to the resolution of one previously reported claim.~~2017.


(b)	Includes net changes in amounts expected to be recovered from our insurance carriers, which are recorded toin other assets (see below).

In certain instances, we have the ability to recover a portion of our costs under various insurance policies or from subcontractors or other third parties. Estimates of such amounts are recorded when recovery is considered probable. Such receivables are recorded in other assets and totaled ~~$261.1~~$155.3 million and ~~$307.3~~$213.4 million at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively. The insurance receivables relate to costs incurred to perform corrective repairs, settle claims with customers, and other costs related to the continued progression of construction defect claims that we believe are insured. Given the complexity inherent with resolving construction defect claims in the homebuilding industry as described above, there generally exists a significant lag between our payment of claims and our reimbursements from applicable insurance carriers. In addition, disputes between homebuilders and carriers over coverage positions relating to construction defect claims are common. Resolution of claims with carriers involves the exchange of significant amounts of information and frequently involves legal action. ~~We recorded write-offs of $5.3 million and $20.3~~

During the six months ended June 30, 2017, we wrote-off $15.0 million of insurance receivables ~~associated~~in conjunction with ~~the resolution of certain~~settling insurance ~~matters in the three and nine months ended September~~policies with multiple carriers covering multiple years. At June 30, ~~2017, respectively.~~

~~Additionally,~~2018, we are the plaintiff in ~~litigation~~an arbitration

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

proceeding with ~~certain~~one of our insurance carriers in regard to ~~$77.5~~$22.3 million of recorded insurance receivables relating to the applicability of coverage to such costs under their ~~policies.~~policy. We believe collection of ~~these~~our recorded insurance receivables, including those in litigation, is probable based on the legal merits of our positions after review by legal counsel, ~~favorable legal rulings received to date,~~ the high credit ratings of our carriers, and our long history of collecting significant amounts of insurance reimbursements under similar insurance policies related to similar claims. While the outcome of these matters cannot be predicted with certainty, we do not believe that the resolution of such matters will have a material adverse impact on our results of operations, financial position, or cash flows.

9. Supplemental Guarantor information

All of our senior notes are guaranteed jointly and severally on a senior basis by certain of our wholly-owned Homebuilding subsidiaries and certain other wholly-owned subsidiaries (collectively, the “Guarantors”). Such guaranties are full and unconditional. Our subsidiaries comprising the Financial Services segment along with certain other subsidiaries (collectively, the "Non-Guarantor Subsidiaries") do not guarantee the senior notes. In accordance with Rule 3-10 of Regulation S-X, supplemental consolidating financial information of the Company, including such information for the Guarantors, is presented below. Investments in subsidiaries are presented using the equity method of accounting.

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

CONDENSED CONSOLIDATING BALANCE SHEET

~~SEPTEMBER~~JUNE 30, ~~2017~~2018

($000’s omitted)


	Unconsolidated							Eliminating Entries			Consolidated PulteGroup, Inc.		Unconsolidated							Eliminating Entries			Consolidated PulteGroup, Inc.
	PulteGroup, Inc.		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated PulteGroup, Inc.		PulteGroup, Inc.		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated PulteGroup, Inc.
ASSETS
Cash and equivalents	$	—	$	104,487	$	53,750		$	—		$	158,237	$	—	$	318,811	$	48,280		$	—		$	367,091
Restricted cash	—		37,685		1,175			—			38,860		—		33,634		1,190			—			34,824
Total cash, cash equivalents, and restricted cash	—		142,172		54,925			—			197,097		—		352,445		49,470			—			401,915
House and land inventory	—		7,270,051		100,101			—			7,370,152		—		7,402,692		96,973			—			7,499,665
Land held for sale	—		96,149		—			—			96,149		—		77,941		—			—			77,941
Residential mortgage loans available- for-sale	—		—		364,734			—			364,734		—		—		369,634			—			369,634
Investments in unconsolidated entities	119		55,720		5,658			—			61,497		—		61,182		536			—			61,718
Other assets	10,793		633,108		153,538			—			797,439		17,108		576,371		165,751			—			759,230
Intangible assets	—		144,442		—			—			144,442		—		134,092		—			—			134,092
Deferred tax assets, net	940,922		—		(1,163		)	—			939,759		519,188		—		(7,807		)	—			511,381
Investments in subsidiaries and intercompany accounts, net	6,713,036		130,933		7,249,758			(14,093,727		)	—		7,084,815		288,223		7,967,379			(15,340,417		)	—
	$	7,664,870	$	8,472,575	$	7,927,551		$	(14,093,727	)	$	9,971,269	$	7,621,111	$	8,892,946	$	8,641,936		$	(15,340,417	)	$	9,815,576
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable, customer deposits, accrued and other liabilities	$	126,801	$	1,873,135	$	187,440		$	—		$	2,187,376	$	85,067	$	1,661,695	$	249,885		$	—		$	1,996,647
Income tax liabilities													22,484		—		—			—			22,484
Financial Services debt	—		—		245,824			—			245,824		—		—		264,043			—			264,043
Revolving credit facility	83,000		—		—			—			83,000
Senior notes	3,109,984		—		—			—			3,109,984
Notes payable													2,986,848		17,962		880			—			3,005,690
Total liabilities	3,319,785		1,873,135		433,264			—			5,626,184		3,094,399		1,679,657		514,808			—			5,288,864
Total shareholders’ equity	4,345,085		6,599,440		7,494,287			(14,093,727		)	4,345,085		4,526,712		7,213,289		8,127,128			(15,340,417		)	4,526,712
	$	7,664,870	$	8,472,575	$	7,927,551		$	(14,093,727	)	$	9,971,269	$	7,621,111	$	8,892,946	$	8,641,936		$	(15,340,417	)	$	9,815,576

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, ~~2016~~2017

($000’s omitted)



	Unconsolidated							Eliminating Entries			Consolidated PulteGroup, Inc.
	PulteGroup, Inc.		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated PulteGroup, Inc.
ASSETS
Cash and equivalents	$	—	$	125,462	$	147,221		$	—		$	272,683
Restricted cash	—		32,339		1,146			—			33,485
Total cash, cash equivalents, and restricted cash	—		157,801		148,367			—			306,168
House and land inventory	—		7,053,087		94,043			—			7,147,130
Land held for sale	—		68,384		—			—			68,384
Residential mortgage loans available- for-sale	—		—		570,600			—			570,600
Investments in unconsolidated entities	—		62,415		542			—			62,957
Other assets	9,417		592,045		143,661			—			745,123
Intangible assets	—		140,992		—			—			140,992
Deferred tax assets, net	646,227		—		(932		)	—			645,295
Investments in subsidiaries and intercompany accounts, net	6,661,638		284,983		7,300,127			(14,246,748		)	—
	$	7,317,282	$	8,359,707	$	8,256,408		$	(14,246,748	)	$	9,686,649
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable, customer deposits, accrued and other liabilities	$	89,388	$	1,636,913	$	274,626		$	—		$	2,000,927
Income tax liabilities	86,925		—		—			—			86,925
Financial Services debt	—		—		437,804			—			437,804
Notes payable	2,986,943		16,911		3,113			—			3,006,967
Total liabilities	3,163,256		1,653,824		715,543			—			5,532,623
Total shareholders’ equity	4,154,026		6,705,883		7,540,865			(14,246,748		)	4,154,026
	$	7,317,282	$	8,359,707	$	8,256,408		$	(14,246,748	)	$	9,686,649

Unconsolidated Eliminating
Entries Consolidated
PulteGroup,
Inc.
PulteGroup,
Inc. Guarantor
Subsidiaries Non-Guarantor
Subsidiaries
ASSETS
Cash and equivalents $ —
$ 588,353
$ 110,529
$ —
$ 698,882
Restricted cash —
22,832
1,534
—
24,366
Total cash, cash equivalents, and
restricted cash —
611,185
112,063
—
723,248
House and land inventory —
6,707,392
63,263
—
6,770,655
Land held for sale —
31,218
510
—
31,728
Residential mortgage loans available-
for-sale —
—
539,496
—
539,496
Investments in unconsolidated entities 105
46,248
5,094
—
51,447
Other assets 12,364
716,923
128,139
—
857,426
Intangible assets —
154,792
—
—
154,792
Deferred tax assets, net 1,051,351
—
(1,943 ) —
1,049,408
Investments in subsidiaries and
intercompany accounts, net 6,835,075
(376,748 ) 6,845,781
(13,304,108 ) —
$ 7,898,895
$ 7,891,010
$ 7,692,403
$ (13,304,108 ) $ 10,178,200
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable, customer deposits,
accrued and other liabilities $ 129,516
$ 1,755,756
$ 191,928
$ —
$ 2,077,200
Financial Services debt —
—
331,621
—
331,621
Senior notes 3,110,016
—
—
—
3,110,016
Total liabilities 3,239,532
1,755,756
523,549
—
5,518,837
Total shareholders’ equity 4,659,363
6,135,254
7,168,854
(13,304,108 ) 4,659,363
$ 7,898,895
$ 7,891,010
$ 7,692,403
$ (13,304,108 ) $ 10,178,200

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

For the three months ended ~~September~~June 30, ~~2017~~2018

($000’s omitted)


	Unconsolidated												Consolidated PulteGroup, Inc.			Unconsolidated												Consolidated PulteGroup, Inc.
	PulteGroup, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries						PulteGroup, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries
Revenues:
Homebuilding
Home sale revenues	$	—		$	2,032,391		$	23,500		$	—		$	2,055,891		$	—		$	2,421,643		$	28,411		$	—		$	2,450,054
Land sale revenues	—			26,907			269			—			27,176
Land sale and other revenues																—			66,418			486			—			66,904
	—			2,059,298			23,769			—			2,083,067			—			2,488,061			28,897			—			2,516,958
Financial Services	—			—			46,952			—			46,952			—			—			52,764			—			52,764
	—			2,059,298			70,721			—			2,130,019			—			2,488,061			81,661			—			2,569,722
Homebuilding Cost of Revenues:
Home sale cost of revenues	—			(1,545,712		)	(18,893		)	—			(1,564,605		)	—			(1,840,487		)	(21,646		)	—			(1,862,133		)
Land sale cost of revenues	—			(24,896		)	(227		)	—			(25,123		)	—			(37,884		)	(299		)	—			(38,183		)
	—			(1,570,608		)	(19,120		)	—			(1,589,728		)	—			(1,878,371		)	(21,945		)	—			(1,900,316		)
Financial Services expenses	—			(121		)	(29,183		)	—			(29,304		)	—			(133		)	(32,091		)	—			(32,224		)
Selling, general, and administrative expenses	—			(225,845		)	(11,650		)	—			(237,495		)	—			(221,590		)	(4,466		)	—			(226,056		)
Other expense, net	(96		)	(11,623		)	6,476			—			(5,243		)	(196		)	(13,436		)	11,676			—			(1,956		)
Intercompany interest	(756		)	—			756			—			—			(2,085		)	—			2,085			—			—
Income (loss) before income taxes and equity in income (loss) of subsidiaries	(852		)	251,101			18,000			—			268,249			(2,281		)	374,531			36,920			—			409,170
Income tax (expense) benefit	945			(84,666		)	(6,989		)	—			(90,710		)	547			(75,977		)	(9,651		)	—			(85,081		)
Income (loss) before equity in income (loss) of subsidiaries	93			166,435			11,011			—			177,539			(1,734		)	298,554			27,269			—			324,089
Equity in income (loss) of subsidiaries	177,446			18,040			114,564			(310,050		)	—			325,823			24,504			258,352			(608,679		)	—
Net income (loss)	177,539			184,475			125,575			(310,050		)	177,539			324,089			323,058			285,621			(608,679		)	324,089
Other comprehensive income	20			—			—			—			20			30			—			—			—			30
Comprehensive income (loss)	$	177,559		$	184,475		$	125,575		$	(310,050	)	$	177,559		$	324,119		$	323,058		$	285,621		$	(608,679	)	$	324,119

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

For the three months ended ~~September~~ June 30, ~~2016~~2017

($000’s omitted)



	Unconsolidated												Consolidated PulteGroup, Inc.
	PulteGroup, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated PulteGroup, Inc.
Revenues:
Homebuilding
Home sale revenues	$	—		$	1,945,312		$	20,329		$	—		$	1,965,641
Land sale and other revenues	—			7,399			1,545			—			8,944
	—			1,952,711			21,874			—			1,974,585
Financial Services	—			—			47,275			—			47,275
	—			1,952,711			69,149			—			2,021,860
Homebuilding Cost of Revenues:
Home sale cost of revenues	—			(1,533,402		)	(16,535		)	—			(1,549,937		)
Land sale cost of revenues	—			(86,408		)	(1,191		)	—			(87,599		)
	—			(1,619,810		)	(17,726		)	—			(1,637,536		)
Financial Services expenses	—			(124		)	(28,354		)	—			(28,478		)
Selling, general, and administrative expenses	—			(210,110		)	(6,101		)	—			(216,211		)
Other expense, net	(129		)	(23,877		)	6,918			—			(17,088		)
Intercompany interest	(544		)	—			544			—			—
Income (loss) before income taxes and equity in income (loss) of subsidiaries	(673		)	98,790			24,430			—			122,547
Income tax (expense) benefit	256			(12,733		)	(9,321		)	—			(21,798		)
Income (loss) before equity in income (loss) of subsidiaries	(417		)	86,057			15,109			—			100,749
Equity in income (loss) of subsidiaries	101,166			11,013			45,621			(157,800		)	—
Net income (loss)	100,749			97,070			60,730			(157,800		)	100,749
Other comprehensive income	20			—			—			—			20
Comprehensive income (loss)	$	100,769		$	97,070		$	60,730		$	(157,800	)	$	100,769

Unconsolidated Consolidated
PulteGroup,
Inc.
PulteGroup,
Inc. Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminating
Entries
Revenues:
Homebuilding
Home sale revenues $ —
$ 1,871,284
$ 10,434
$ —
$ 1,881,718
Land sale revenues —
13,167
—
—
13,167
—
1,884,451
10,434
—
1,894,885
Financial Services —
—
48,020
—
48,020
—
1,884,451
58,454
—
1,942,905
Homebuilding Cost of Revenues:
Home sale cost of revenues —
(1,406,471 ) (11,234 ) —
(1,417,705 )
Land sale cost of revenues —
(11,428 ) —
—
(11,428 )
—
(1,417,899 ) (11,234 ) —
(1,429,133 )
Financial Services expenses —
(145 ) (26,761 ) —
(26,906 )
Selling, general, and administrative
expenses —
(244,904 ) (6,010 ) —
(250,914 )
Other expense, net (823 ) (26,166 ) 3,372
—
(23,617 )
Intercompany interest (487 ) (2,072 ) 2,559
—
—
Income (loss) before income taxes and
equity in income (loss) of
subsidiaries (1,310 ) 193,265
20,380
—
212,335
Income tax (expense) benefit 498
(76,552 ) (7,811 ) —
(83,865 )
Income (loss) before equity in income
(loss) of subsidiaries (812 ) 116,713
12,569
—
128,470
Equity in income (loss) of subsidiaries 129,282
21,948
75,884
(227,114 ) —
Net income (loss) 128,470
138,661
88,453
(227,114 ) 128,470
Other comprehensive income 20
—
—
—
20
Comprehensive income (loss) $ 128,490
$ 138,661
$ 88,453
$ (227,114 ) $ 128,490

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

For the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018

($000’s omitted)

Unconsolidated Consolidated
PulteGroup,
Inc.
PulteGroup,
Inc. Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminating
Entries
Revenues:
Homebuilding
Home sale revenues $ —
$ 5,554,349
$ 52,604
$ —
$ 5,606,953
Land sale revenues —
34,171
2,575
—
36,746
—
5,588,520
55,179
—
5,643,699
Financial Services —
—
135,995
—
135,995
—
5,588,520
191,174
—
5,779,694
Homebuilding Cost of Revenues:
Home sale cost of revenues —
(4,288,754 ) (43,467 ) —
(4,332,221 )
Land sale cost of revenues —
(113,899 ) (2,051 ) —
(115,950 )
—
(4,402,653 ) (45,518 ) —
(4,448,171 )
Financial Services expenses —
(384 ) (85,766 ) —
(86,150 )
Selling, general, and administrative
expenses —
(653,930 ) (36,044 ) —
(689,974 )
Other expense, net (354 ) (46,339 ) 21,356
—
(25,337 )
Intercompany interest (1,634 ) —
1,634
—
—
Income (loss) before income taxes and
equity in income (loss) of
subsidiaries (1,988 ) 485,214
46,836
—
530,062
Income tax (expense) benefit 1,377
(143,324 ) (18,308 ) —
(160,255 )
Income (loss) before equity in income
(loss) of subsidiaries (611 ) 341,890
28,528
—
369,807
Equity in income (loss) of subsidiaries 370,418
36,307
197,494
(604,219 ) —
Net income (loss) 369,807
378,197
226,022
(604,219 ) 369,807
Other comprehensive income 61
—
—
—
61
Comprehensive income (loss) $ 369,868
$ 378,197
$ 226,022
$ (604,219 ) $ 369,868



	Unconsolidated												Consolidated PulteGroup, Inc.
	PulteGroup, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated PulteGroup, Inc.
Revenues:
Homebuilding
Home sale revenues	$	—		$	4,316,500		$	45,152		$	—		$	4,361,652
Land sale and other revenues	—			77,977			1,484			—			79,461
	—			4,394,477			46,636			—			4,441,113
Financial Services	—			—			98,702			—			98,702
	—			4,394,477			145,338			—			4,539,815
Homebuilding Cost of Revenues:
Home sale cost of revenues	—			(3,286,043		)	(36,030		)	—			(3,322,073		)
Land sale cost of revenues	—			(48,714		)	(1,017		)	—			(49,731		)
	—			(3,334,757		)	(37,047		)	—			(3,371,804		)
Financial Services expenses	—			(275		)	(64,161		)	—			(64,436		)
Selling, general, and administrative expenses	—			(453,535		)	(13,415		)	—			(466,950		)
Other expense, net	(336		)	(21,037		)	18,110			—			(3,263		)
Intercompany interest	(3,553		)	—			3,553			—			—
Income (loss) before income taxes and equity in income (loss) of subsidiaries	(3,889		)	584,873			52,378			—			633,362
Income tax (expense) benefit	934			(125,508		)	(13,947		)	—			(138,521		)
Income (loss) before equity in income (loss) of subsidiaries	(2,955		)	459,365			38,431			—			494,841
Equity in income (loss) of subsidiaries	497,796			37,068			369,023			(903,887		)	—
Net income (loss)	494,841			496,433			407,454			(903,887		)	494,841
Other comprehensive income	50			—			—			—			50
Comprehensive income (loss)	$	494,891		$	496,433		$	407,454		$	(903,887	)	$	494,891

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

For the ~~nine~~six months ended~~September~~June 30, ~~2016~~2017

($000’s omitted)


	Unconsolidated												Consolidated PulteGroup, Inc.			Unconsolidated												Consolidated PulteGroup, Inc.
	PulteGroup, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries						PulteGroup, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries
Revenues:
Homebuilding
Home sale revenues	$	—		$	5,011,027		$	16,816		$	—		$	5,027,843		$	—		$	3,521,958		$	29,105		$	—		$	3,551,063
Land sale revenues	—			19,069			1,535			—			20,604
Land sale and other revenues																—			9,311			2,321			—			11,632
	—			5,030,096			18,351			—			5,048,447			—			3,531,269			31,426			—			3,562,695
Financial Services	—			—			126,950			—			126,950			—			—			89,042			—			89,042
	—			5,030,096			145,301			—			5,175,397			—			3,531,269			120,468			—			3,651,737
Homebuilding Cost of Revenues:
Home sale cost of revenues	—			(3,750,011		)	(16,291		)	—			(3,766,302		)	—			(2,743,042		)	(24,573		)	—			(2,767,615		)
Land sale cost of revenues	—			(16,577		)	(1,282		)	—			(17,859		)	—			(89,004		)	(1,823		)	—			(90,827		)
	—			(3,766,588		)	(17,573		)	—			(3,784,161		)	—			(2,832,046		)	(26,396		)	—			(2,858,442		)
Financial Services expenses	—			(405		)	(78,799		)	—			(79,204		)	—			(263		)	(56,583		)	—			(56,846		)
Selling, general, and administrative expenses	—			(729,629		)	(19,873		)	—			(749,502		)	—			(428,085		)	(24,394		)	—			(452,479		)
Other expense, net	(1,164		)	(56,599		)	15,361			—			(42,402		)	(259		)	(36,763		)	14,865			—			(22,157		)
Intercompany interest	(1,487		)	(6,290		)	7,777			—			—			(878		)	—			878			—			—
Income (loss) before income taxes and equity in income (loss) of subsidiaries	(2,651		)	470,585			52,194			—			520,128			(1,137		)	234,112			28,838			—			261,813
Income tax (expense) benefit	1,008			(171,535		)	(20,071		)	—			(190,598		)	432			(58,658		)	(11,319		)	—			(69,545		)
Income (loss) before equity in income (loss) of subsidiaries	(1,643		)	299,050			32,123			—			329,530			(705		)	175,454			17,519			—			192,268
Equity in income (loss) of subsidiaries	331,173			31,827			261,777			(624,777		)	—			192,973			18,266			82,930			(294,169		)	—
Net income (loss)	329,530			330,877			293,900			(624,777		)	329,530			192,268			193,720			100,449			(294,169		)	192,268
Other comprehensive income	61			—			—			—			61			41			—			—			—			41
Comprehensive income (loss)	$	329,591		$	330,877		$	293,900		$	(624,777	)	$	329,591		$	192,309		$	193,720		$	100,449		$	(294,169	)	$	192,309

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

CONSOLIDATING STATEMENT OF CASH FLOWS

For the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018

($000’s omitted)



	Unconsolidated											Consolidated PulteGroup, Inc.
	PulteGroup, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries		Consolidated PulteGroup, Inc.
Net cash provided by (used in) operating activities	$	259,028		$	63,775		$	224,779		$	—	$	547,582
Cash flows from investing activities:
Capital expenditures	—			(28,908		)	(4,151		)	—		(33,059		)
Investments in unconsolidated entities	—			(1,000		)	—			—		(1,000		)
Other investing activities, net	—			5,759			1,156			—		6,915
Net cash provided by (used in) investing activities	—			(24,149		)	(2,995		)	—		(27,144		)
Cash flows from financing activities:
Financial Services borrowings (repayments)	—			—			(173,761		)	—		(173,761		)
Repayments of debt	—			(81,758		)	(674		)	—		(82,432		)
Borrowings under revolving credit facility	1,566,000			—			—			—		1,566,000
Repayments under revolving credit facility	(1,566,000		)	—			—			—		(1,566,000		)
Debt issuance costs	(8,090		)	—			—			—		(8,090		)
Stock option exercises	4,467			—			—			—		4,467
Share repurchases	(112,491		)	—			—			—		(112,491		)
Dividends paid	(52,384		)	—			—			—		(52,384		)
Intercompany activities, net	(90,530		)	236,776			(146,246		)	—		—
Net cash provided by (used in) financing activities	(259,028		)	155,018			(320,681		)	—		(424,691		)
Net increase (decrease)	—			194,644			(98,897		)	—		95,747
Cash, cash equivalents, and restricted cash at beginning of year	—			157,801			148,367			—		306,168
Cash, cash equivalents, and restricted cash at end of year	$	—		$	352,445		$	49,470		$	—	$	401,915

Unconsolidated Consolidated
PulteGroup, Inc.
PulteGroup,
Inc. Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminating
Entries
Net cash provided by (used in)
operating activities $ 58,575
$ 43,042
$ 150,862
$ —
$ 252,479
Cash flows from investing activities:
Capital expenditures —
(19,693 ) (3,855 ) —
(23,548 )
Investment in unconsolidated subsidiaries —
(22,007 ) —
—
(22,007 )
Other investing activities, net —
5,728
60
—
5,788
Net cash provided by (used in)
investing activities —
(35,972 ) (3,795 ) —
(39,767 )
Cash flows from financing activities:
Financial Services borrowings (repayments) —
—
(85,797 ) —
(85,797 )
Proceeds from debt issuance —
—
—
—
—
Repayments of debt —
(6,031 ) (970 ) —
(7,001 )
Borrowings under revolving credit facility 971,000
—
—
—
971,000
Repayments under revolving credit facility (888,000 ) —
—
—
(888,000 )
Stock option exercises 22,765
—
—
—
22,765
Share repurchases (665,812 ) —
—
—
(665,812 )
Dividends paid (86,018 ) —
—
—
(86,018 )
Intercompany activities, net 587,490
(470,052 ) (117,438 ) —
—
Net cash provided by (used in)
financing activities (58,575 ) (476,083 ) (204,205 ) —
(738,863 )
Net increase (decrease) —
(469,013 ) (57,138 ) —
(526,151 )
Cash, cash equivalents, and restricted cash
at beginning of year —
611,185
112,063
—
723,248
Cash, cash equivalents, and restricted cash
at end of year $ —
$ 142,172
$ 54,925
$ —
$ 197,097

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

CONSOLIDATING STATEMENT OF CASH FLOWS

For the ~~nine~~six months ended~~September~~June 30, ~~2016~~2017

($000’s omitted)



	Unconsolidated											Consolidated PulteGroup, Inc.
	PulteGroup, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries		Consolidated PulteGroup, Inc.
Net cash provided by (used in) operating activities	$	58,415		$	(29,931	)	$	147,842		$	—	$	176,326
Cash flows from investing activities:
Capital expenditures	—			(14,346		)	(2,546		)	—		(16,892		)
Investments in unconsolidated entities	—			(17,832		)	—			—		(17,832		)
Other investing activities, net	—			2,874			269			—		3,143
Net cash provided by (used in) investing activities	—			(29,304		)	(2,277		)	—		(31,581		)
Cash flows from financing activities:
Financial Services borrowings (repayments)	—			—			(177,918		)	—		(177,918		)
Repayments of debt	—			(1,382		)	(771		)	—		(2,153		)
Borrowings under revolving credit facility	110,000			—			—			—		110,000
Repayments under revolving credit facility	(110,000		)	—			—			—		(110,000		)
Stock option exercises	15,966			—			—			—		15,966
Share repurchases	(405,819		)	—			—			—		(405,819		)
Dividends paid	(58,214		)	—			—			—		(58,214		)
Intercompany activities, net	389,652			(360,529		)	(29,123		)	—		—
Net cash provided by (used in) financing activities	(58,415		)	(361,911		)	(207,812		)	—		(628,138		)
Net increase (decrease)	—			(421,146		)	(62,247		)	—		(483,393		)
Cash, cash equivalents, and restricted cash at beginning of year	—			611,185			112,063			—		723,248
Cash, cash equivalents, and restricted cash at end of year	$	—		$	190,039		$	49,816		$	—	$	239,855

Unconsolidated Consolidated
PulteGroup, Inc.
PulteGroup,
Inc. Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminating
Entries
Net cash provided by (used in)
operating activities $ 159,366
$ (562,165 ) $ 96,293
$ —
$ (306,506 )
Cash flows from investing activities:
Capital expenditures —
(28,243 ) (2,308 ) —
(30,551 )
Cash used for business acquisition —
(430,458 ) —
—
(430,458 )
Investment in unconsolidated subsidiaries —
(14,049 ) —
—
(14,049 )
Other investing activities, net —
3,913
1,560
—
5,473
Net cash provided by (used in) investing
activities —
(468,837 ) (748 ) —
(469,585 )
Cash flows from financing activities:
Financial Services borrowings (repayments) —
—
(109,083 ) —
(109,083 )
Proceeds from debt issuance 1,991,961
4,000
—
—
1,995,961
Repayments of debt (965,245 ) (20,394 ) (95 ) —
(985,734 )
Borrowings under revolving credit facility 619,000
—
—
—
619,000
Repayments under revolving credit facility (619,000 ) —
—
—
(619,000 )
Stock option exercises 5,845
—
—
—
5,845
Share repurchases (350,846 ) —
—
—
(350,846 )
Dividends paid (94,298 ) —
—
—
(94,298 )
Intercompany activities, net (746,783 ) 788,043
(41,260 ) —
—
Net cash provided by (used in)
financing activities (159,366 ) 771,649
(150,438 ) —
461,845
Net increase (decrease) —
(259,353 ) (54,893 ) —
(314,246 )
Cash, cash equivalents, and restricted cash
at beginning of year —
658,876
116,559
—
775,435
Cash, cash equivalents, and restricted cash
at end of year $ —
$ 399,523
$ 61,666
$ —
$ 461,189

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

~~Demand conditions continued to improve in the overall U.S. homebuilding market in 2017. Though industry-wide new home sales~~We continue to ~~pace below historical averages, the ongoing recovery in~~see U.S. housing demand ~~for new homes is~~ being supported by ~~job creation,~~a number of positive market dynamics, including an expanding economy, ongoing growth in jobs and wages, historically low unemployment, and sustained high levels of consumer ~~confidence,~~confidence. Against this favorable demand dynamic is a ~~supportive interest rate environment, and a~~generally limited supply of new ~~homes. Within this environment,~~homes across the markets we serve as land and labor resources remain ~~focused on driving additional gains in construction~~constrained along with affordability challenges, especially among first-time and ~~asset efficiency~~move-up buyers, due to ~~deliver~~the combination of increased home prices and higher returns on invested capital. Consistent with our positive market view and long-term business strategy, we expect to use our capital to support future growth while consistently returning funds to shareholders through dividends and share repurchases.mortgage rates.

~~The nature of the homebuilding industry results~~Our investments have put us in a ~~lag between when investments made in land acquisition and development yield~~position to open new ~~community openings and related home closings. Our focus continues to be on adding volume growth to the efficiency gains we have achieved in recent years. Our prior investments~~communities, which are allowing us to grow the business, as evidenced by net new order dollars increasing ~~20% year to date,~~10% for the six months ended June 30, 2018, as compared to the prior year, and our backlog increasing by ~~26%~~17% to ~~$4.7~~$5.2 billion as of ~~September~~June 30, ~~2017.~~

~~We expect~~2018. While customer traffic to ~~turn over and replace approximately one third of~~ our communities has increased during 2018, we did experience lower than expected conversions of traffic to signups, especially among first-time and move-up buyers, beginning in ~~2017. While~~May 2018 when mortgage rates increased. This resulted in a 1% decrease in our signups for the three months ended June 30, 2018, as compared to the prior year. However, consistent with our efforts to drive enhanced operational performance, we realized significant improvements in gross margins, overhead leverage, and income before income taxes as compared to the prior year. The favorable market conditions and our sizable backlog of orders give us confidence that we have significant experience opening new communities, starting up new communities can present a challenge in today's environment where entitlement and land development delays are common. We have grown our investment in the business ~~in a disciplined manner by emphasizing smaller projects~~well-positioned to deliver strong performance throughout 2018, continue to use our capital to support future growth, and ~~working~~consistently return funds to ~~shorten our years of land supply, including the use of land option agreements when possible~~shareholders through dividends and ~~liquidating non-strategic assets when appropriate. We have also focused our land investments on closer-in locations where we think demand is more sustainable over the housing cycle.~~

On May 3, 2017, we committed to a plan to sell select non-core and underutilized land parcels following a strategic review of our land portfolio. We determined that we would sell certain currently inactive land parcels, representing approximately 4,600 lots, and work is underway to monetize two small communities representing an additional 400 lots. These land parcels were located in diverse geographic areas and no longer fit into our strategic plans. The land parcels identified for sale included: land requiring significant additional development spend that would not yield suitable returns; land in excess of near-term need; and land entitled for certain product types that are inconsistent with our primary offerings. Actions required to complete the planned sales have been initiated, but the timing of completing the dispositions is unknown. We will seek to redeploy the proceeds and related tax benefits from these dispositions into higher returning projects. As a consequence of the change in strategy with respect to the future use of these land parcels, we recorded land-related charges totaling $120.0 million in the nine months ended September 30, 2017. As a result of this review, we also recorded $5.1 million of write-offs of deposits and pre-acquisition costs related to land option contracts we no longer plan to pursue. See ~~Note 2~~ ~~for a breakdown of these charges by category and the~~ ~~Land-related charges~~ ~~table within the Homebuilding Segment Operations section for a breakdown of these charges by geography.~~

share repurchases. The following is a summary of our operating results by line of business ($000's omitted, except per share data):


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Income before income taxes:
Homebuilding	$	250,463		$	191,063		$	479,824		$	472,042		$	388,453		$	103,599		$	598,811		$	229,362
Financial Services	17,786			21,272			50,238			48,086			20,717			18,948			34,551			32,451
Income before income taxes	268,249			212,335			530,062			520,128			409,170			122,547			633,362			261,813
Income tax expense	(90,710		)	(83,865		)	(160,255		)	(190,598		)	(85,081		)	(21,798		)	(138,521		)	(69,545		)
Net income	$	177,539		$	128,470		$	369,807		$	329,530		$	324,089		$	100,749		$	494,841		$	192,268
Per share data - assuming dilution:
Net income	$	0.58		$	0.37		$	1.18		$	0.94		$	1.12		$	0.32		$	1.71		$	0.60

•Homebuilding income before income taxes for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 increased 275% and 161%, respectively, compared with the prior year ~~period, primarily~~periods as the result of higher revenues, ~~and~~ better overheard ~~utilization. Homebuilding income before income taxes also reflected~~utilization, and the net impact of the following significant ~~expense (income)~~income (expense) items ($000's omitted):


	Three Months Ended					Nine Months Ended					Three Months Ended						Six Months Ended
	September 30,					September 30,					June 30,						June 30,
	2017			2016		2017			2016		2018			2017			2018			2017
Land inventory impairments (see Note 2)	$	—		$	—	$	31,487		$	—	$	(553	)	$	(31,487	)	$	(553	)	$	(31,487	)
Net realizable value adjustments ("NRV") - land held for sale (see Note 2)	(534		)	121		82,353			189		(217		)	(81,006		)	(1,027		)	(82,886		)
Impairments of unconsolidated entities (see Note 2)	—			—		8,017			—		—			(8,017		)	—			(8,017		)
Write-offs of deposits and pre-acquisition costs (see Note 2)	2,680			2,541		9,397			12,996		(1,652		)	(5,063		)	(4,261		)	(6,718		)
Legal settlement (see Note 8)	—			15,000		—			15,000
Warranty claim (see Note 8)	222			—		12,328			—		—			(12,106		)	—			—
Write-offs of insurance receivables (see Note 8)	5,326			—		20,326			—
Write-off of insurance receivable (see Note 8)											—			—			—			(15,000		)
Land sale gains (see Note 3)											26,402			—			26,402			—
Insurance reserve reversal (see Note 8)	—			—		(19,813		)	—		37,890			19,813			37,890			19,813
	$	7,694		$	17,662	$	144,095		$	28,185	$	61,870		$	(117,866	)	$	58,451		$	(124,295	)

For additional information on each of the above, see the applicable Notes to the Condensed Consolidated Financial Statements.

Financial Services income before income taxes ~~decreased~~increased for the three and six months ended ~~September~~June 30, 2017 compared with September 30, 2016, due to lower revenues per loan and higher overhead as the mortgage origination market has become more competitive. Financial Services income before income taxes for the nine months ended September 30, 2017 increased2018 compared with the ~~prior year period~~three and six months ended June 30, 2017 due to an increase in origination volume resulting from higher volumes in the Homebuilding segment.

Our effective tax rate for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 was ~~33.8%~~20.8% and ~~30.2%~~21.9%, respectively, ~~which includes the favorable resolution of certain state income tax matters, the domestic production activities deduction, and tax law changes for the current period,~~ compared to ~~39.5%~~17.8% and ~~36.6%, respectively,~~26.6% for the same periods in ~~2016, which reflected~~2017. For three and six months ended June 30, 2018, our effective tax rate differs from the federal statutory rate primarily due to state income tax expense on current year earnings, tax benefits due to Internal Revenue Service acceptance of an accounting method change applicable to the 2017 tax year, energy credits, and tax law changes. For the same period in the prior year, our effective tax rate differed from the federal statutory rate primarily due to state income tax expense on current year earnings, the favorable resolution of certain state income tax matters, and tax law changes.

The federal statutory rate was reduced from 35% in 2017 to 21% in 2018 due to the Tax Act, which was enacted on December 22, 2017.

Homebuilding Operations

The following presents selected financial information for our Homebuilding operations ($000’s omitted):


	Three Months Ended									Nine Months Ended								Three Months Ended								Six Months Ended
	September 30,									September 30,								June 30,								June 30,
	2017				2017 vs. 2016		2016			2017			2017 vs. 2016		2016			2018			2018 vs. 2017		2017			2018			2018 vs. 2017		2017
Home sale revenues	$	2,055,891			9	%	$	1,881,718		$	5,606,953		12	%	$	5,027,843		$	2,450,054		25	%	$	1,965,641		$	4,361,652		23	%	$	3,551,063
Land sale revenues	27,176			��	106	%	13,167			36,746			78	%	20,604
Land sale and other revenues (a)																		66,904			648	%	8,944			79,461			583	%	11,632
Total Homebuilding revenues	2,083,067				10	%	1,894,885			5,643,699			12	%	5,048,447			2,516,958			27	%	1,974,585			4,441,113			25	%	3,562,695
Home sale cost of revenues ~~(a)~~(b)	(1,564,605		)		10	%	(1,417,705		)	(4,332,221		)	15	%	(3,766,302		)	(1,862,133		)	20	%	(1,549,937		)	(3,322,073		)	20	%	(2,767,615		)
Land sale cost of revenues ~~(b)~~(c)	(25,123		)		120	%	(11,428		)	(115,950		)	549	%	(17,859		)	(38,183		)	(56	)%	(87,599		)	(49,731		)	(45	)%	(90,827		)
Selling, general, and administrative expenses ("SG&A") ~~(c)~~(d)	(237,495		)		(5	)%	(250,914		)	(689,974		)	(8	)%	(749,502		)	(226,056		)	5	%	(216,211		)	(466,950		)	3	%	(452,479		)
Other expense, net ~~(d)~~(e)	(5,381		)		(77	)%	(23,775		)	(25,730		)	(40	)%	(42,742		)	(2,133		)	(88	)%	(17,239		)	(3,548		)	(84	)%	(22,412		)
Income before income taxes	$	250,463			31	%	$	191,063		$	479,824		2	%	$	472,042		$	388,453		275	%	$	103,599		$	598,811		161	%	$	229,362

Supplemental data:
Gross margin from home sales(b)	23.9		%		(80) bps		24.7		%	22.7		%	(240) bps		25.1		%	24.0		%	290 bps		21.1		%	23.8		%	170 bps		22.1		%
SG&A as a percentage of home sale revenues ~~(c)~~(d)	11.6		%		(170) bps		13.3		%	12.3		%	(260) bps		14.9		%	9.2		%	(180) bps		11.0		%	10.7		%	(200) bps		12.7		%
Closings (units)	5,151				2	%	5,037			14,420			5	%	13,754			5,741			14	%	5,044			10,367			12	%	9,269
Average selling price	$	399			7	%	$	374		$	389		6	%	$	366		$	427		10	%	$	390		$	421		10	%	$	383
Net new orders (e):
Net new orders (f):
Units	5,300				11	%	4,775			17,821			11	%	16,124			6,341			(1	)%	6,395			13,216			6	%	12,521
Dollars	$	2,260,082			23	%	$	1,831,339		$	7,331,311		20	%	$	6,087,334		$	2,694,271		3	%	$	2,625,091		$	5,587,823		10	%	$	5,071,230
Cancellation rate	15		%				16		%	13		%			14		%	14		%			13		%	13		%			12		%
Active communities at September 30										778			10	%	709
Backlog at September 30:
Active communities at June 30																										847			5	%	803
Backlog at June 30:
Units										10,823			15	%	9,417											11,845			11	%	10,674
Dollars										$	4,665,871		26	%	$	3,698,920										$	5,205,234		17	%	$	4,461,680


(a)	Includes ~~the amortization~~net gains gains of ~~capitalized interest, land inventory impairments of $31.5 million (see~~ ~~Note 2), and a warranty charge of $12.3~~$26.4 million related to ~~a closed-out community (see~~ ~~Note 8) for~~two land sale transactions in California that closed during the ~~nine~~three and six months ended ~~September~~June 30, ~~2017.~~2018 (see Note 3).


(b)	Includes land inventory impairments of $31.5 million (see Note 2) and a warranty charge of $12.1 million related to a closed-out community (see Note 8) for the three and six months ended June 30, 2017. Also includes the amortization of capitalized interest.


(c)	Includes net realizable value adjustments on land held for sale of ~~$82.4~~$81.0 million and $82.9 million for the ~~nine~~three and six months ended ~~September~~June 30, 2017, respectively (see Note 2).

~~(c)~~(d)

Includes ~~write-offs~~insurance reserve reversals of ~~$5.3~~$37.9 million and ~~$20.3~~$19.8 million for the three and six months ended June 30, 2018 and 2017, respectively, and a write-off of $15.0 million of insurance receivables associated with the resolution of certain insurance matters in the ~~three and nine~~six months ended ~~September 30, 2017, respectively. Also includes an insurance reserve reversal of $19.8 million for the nine months ended September~~June 30, 2017 (see Note 8).


~~(d)~~(e)	Includes an $8.0 million impairment of an investment in an unconsolidated entity in the ~~nine~~three and six months ended ~~September~~June 30, 2017 (see Note 2).


~~(e)~~(f)	~~Net new orders excludes backlog acquired from Wieland in January 2016 (see~~ ~~Note 1). Net new~~New order dollars represent a composite of new order dollars combined with other movements of the dollars in backlog related to cancellations and change orders.

Home sale revenues

Home sale revenues for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 were higher than the prior year by ~~$174.2~~$484.4 million and ~~$579.1~~$810.6 million, respectively. For the three months ended ~~September~~June 30, ~~2017,~~2018, the 9%25% increase was attributable to a 7%14% increase in closings and 10% increase in average selling ~~price and a 2% increase in closings.~~price. For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, the 23% increase was attributable to a 6%12% increase in closings and 10% increase in average selling ~~price and 5% increase in closings.~~price. The increase in closings reflects the significant investments we have made and the resulting increase in our active ~~communities. These increased closings occurred despite~~communities, combined with ongoing increases in 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.~~overall demand for new homes. The higher average selling price occurred across the majority of our markets and reflects ~~an ongoing shift toward move-up buyers for both periods.~~shifts in product mix, including a small increase in the mix of closings in Northern California, where our average selling prices are significantly higher than the Company average.

Home sale gross margins

Home sale gross margins were ~~23.9%~~24.0% and ~~22.7%~~23.8% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively, compared to ~~24.7%~~21.1% and ~~25.1%~~22.1% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, respectively. Gross margins for the ~~nine~~three and six months ended ~~September~~June 30, 2018 remain strong relative to historical levels and reflect a combination of factors, including shifts in community mix, a small increase in the mix of closings in Northern California, favorable pricing conditions in the majority of our markets, and slightly lower amortized interest costs (160 bps for both the three and six months ended June 30, 2018 compared to 180 bps for the same periods in 2017). Gross margins for the three and six months ended June 30, 2017 include the aforementioned land inventory impairments totaling $31.5 million, or 160 bps and 90 bps, respectively (see Note 2). Gross margin for the ~~nine~~three and six months ended ~~September~~June 30, 2017, also includes a warranty charge of ~~$12.3~~$12.1 million, or 60 bps and 30 bps, respectively, related to a closed-out community in Florida (see Note 8). ~~Excluding these charges, gross margins~~The supportive pricing environment that exists in ~~2017 remain strong relative~~many of our markets is allowing us to ~~historical~~effectively manage ongoing pressure in house costs, particularly as it relates to the sustained high levels ~~but are lower compared to 2016 due to a combination~~ of ~~factors, including shifts in community mix~~lumber and ~~higher house construction and land costs.~~trade labor pricing.

Land ~~sales~~sale and other revenues

We periodically elect to sell parcels of land to third parties in the event such assets no longer fit into our strategic operating plans or are zoned for commercial or other development. Land sale and other revenues and their related gains or losses vary between periods, depending on the timing of land sales and our strategic operating decisions. Land sales and other revenues contributed ~~gains (losses)~~income of ~~$2.1~~$28.7 million and ~~$(79.2)~~$29.7 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively, compared to ~~gains~~losses of ~~$1.7~~$78.7 million and ~~$2.7~~$79.2 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, respectively. The ~~loss~~gains in ~~the nine months ended September 30,~~2018 resulted primarily from two land sale transactions in California that contributed $26.4 million. The losses in 2017 resulted from the aforementioned ~~net realizable value~~NRV charges of ~~$82.4~~$81.0 million and $82.9 million for the three and six months ended June 30, 2017, respectively (see Note 2).

SG&A

SG&A as a percentage of home sale revenues was ~~11.6%~~9.2% and ~~12.3%~~10.7% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively, compared with ~~13.3%~~11.0% and ~~14.9%~~12.7% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, respectively. The gross dollar amount of our SG&A ~~decreased $13.4~~increased $9.8 million, or 5%, for the three months ended ~~September~~June 30, 2018 compared to June 30, 2017 ~~compared to September 30, 2016,~~ and ~~decreased $59.5~~increased $14.5 million, or ~~7.9%~~3%, for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 compared to ~~September~~June 30, ~~2016. SG&A~~2017. The improved overhead leverage resulted from volume efficiencies, realized cost efficiencies, and includes the aforementioned insurance ~~receivable write-offs~~reserve reversals of ~~$5.3~~$37.9 million and ~~$20.3~~$19.8 million infor the three and ~~nine~~six months ended ~~September~~June 30, 2018 and 2017, ~~respectively. The nine months ended September 30, 2017 also includes an insurance reserve reversal~~respectively, offset by a write-off of ~~$19.8~~$15.0 million ~~(see~~ ~~Note 8~~).

The overall decrease in SG&A is primarily attributable to cost efficiencies realized in late 2016 that continued into 2017. Additionally, SG&A for the nine months ended September 30, 2016 reflects the impact of transaction and integration costs associated with the ~~assets acquired from Wieland~~resolution of certain insurance matters in the six months ended June 30, 2017 (see Note 18).

Other expense, net

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


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Write-offs of deposits and pre-acquisition costs (Note 2)	$	2,680		$	2,541		$	9,397		$	12,996
Lease exit and related costs	219			4,644			624			10,589
Write-offs of deposits and pre-acquisition costs													$	(1,652	)	$	(5,063	)	$	(4,261	)	$	(6,718	)
Amortization of intangible assets	3,450			3,450			10,350			10,350			(3,450		)	(3,450		)	(6,900		)	(6,900		)
Interest income	(485		)	(887		)	(1,917		)	(2,659		)	835			599			1,399			1,432
Interest expense	101			165			371			526			(165		)	(134		)	(308		)	(271		)
Equity in loss (earnings) of unconsolidated entities (a)	(415		)	(485		)	4,154			(4,489		)
Equity in earnings (losses) of unconsolidated entities (a)													265			(5,763		)	1,226			(4,569		)
Miscellaneous, net	(169		)	14,347			2,751			15,429			2,034			(3,428		)	5,296			(5,386		)
Total other expense, net	$	5,381		$	23,775		$	25,730		$	42,742		$	(2,133	)	$	(17,239	)	$	(3,548	)	$	(22,412	)


(a)	Lease exit and related costs for the three and nine months ended September 30, 2016, resulted from actions taken to reduce overheads and the substantial completion of our corporate headquarters relocation from Michigan to Georgia, which began in 2013.


~~(b)~~	Includes an $8.0 million impairment of ana joint venture investment in ~~an unconsolidated entity in~~ the ~~nine~~three and six months ended ~~September~~June 30, 2017 (see Note 2).


~~(c)~~	~~Miscellaneous, net includes a charge of $15.0 million related to the settlement of a disputed land transaction for the three and nine months ended September 30, 2016 (see~~ ~~Note 8~~).

Net new orders

Net new order units ~~increased 11%~~decreased 1% for ~~both~~ the three ~~and nine~~ months ended ~~September~~June 30, ~~2017, respectively,~~2018, as compared with the ~~same periods in 2016. These increases in net new orders resulted primarily from a~~prior year period, and increased 6% for the six months ended June 30, 2018, as compared with the prior year period. Our higher number of active ~~communities.~~ communities combined with the overall demand environment resulted in a strong start to the spring selling season. However, while customer traffic to our communities increased during 2018, we experienced lower than expected conversions of traffic to signups, especially among first-time and move-up buyers, beginning in May 2018 when mortgage rates increased.

Net new orders in dollars increased by ~~23%~~3% and ~~20%~~10% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively, compared to the same periods in ~~2016~~2017 due to the ~~growth~~changes in units combined with a higher average selling ~~price.~~prices. The cancellation rate (canceled orders for the period divided by gross new orders for the period) was ~~15%~~14% and 13% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~,2018, respectively, compared to ~~16%~~13% and ~~14%~~12% for the same periods in ~~2016.~~2017. Ending backlog, which represents orders for homes that have not yet closed, increased ~~15%~~11% in units at ~~September~~June 30, ~~2017~~2018 compared with ~~September~~June 30, ~~2016~~2017, primarily as a result of the higher net new order volume, and ~~26%~~17% in dollars due to the unit increase and a higher average selling price. ~~Delayed home closings as a result of the aforementioned hurricanes and production delays also contributed to the higher backlog at September 30, 2017.~~

Homes in production

The following is a summary of our homes in ~~production at September 30, 2017 and September 30, 2016:~~production:


	September 30, 2017	September 30, 2016	June 30, 2018	June 30, 2017
Sold	8,098	7,053	8,550	7,360
Unsold
Under construction	1,765	1,581	2,043	1,741
Completed	576	601	565	487
	2,341	2,182	2,608	2,228
Models	1,079	1,059	1,192	1,116
Total	11,518	10,294	12,350	10,704

The number of homes in production at ~~September~~June 30, ~~2017~~2018 was ~~12%~~15% higher than at ~~September~~June 30, ~~2016~~2017, due primarily to the higher net new order volume and backlog. As part of our inventory management strategies, we expect to maintain reasonable inventory levels relative to demand in each of our markets.

Controlled lots

The following is a summary of our lots under control at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016:~~2017:


	September 30, 2017						December 31, 2016						June 30, 2018						December 31, 2017
	Owned		Optioned		Controlled		Owned		Optioned		Controlled		Owned		Optioned		Controlled		Owned		Optioned		Controlled
Northeast	5,149		6,030		11,179		6,296		4,019		10,315		5,015		6,979		11,994		5,194		5,569		10,763
Southeast	15,267		10,256		25,523		16,050		8,232		24,282		15,165		12,467		27,632		15,404		11,085		26,489
Florida	17,977		11,508		29,485		22,164		8,470		30,634		18,789		13,449		32,238		18,458		11,887		30,345
Midwest	11,609		7,300		18,909		11,800		8,639		20,439		10,550		12,156		22,706		10,612		9,196		19,808
Texas	13,848		9,891		23,739		13,541		9,802		23,343		14,099		7,961		22,060		13,923		8,320		22,243
West	26,548		3,831		30,379		29,428		4,817		34,245		25,559		6,913		32,472		25,662		6,099		31,761
Total	90,398		48,816		139,214		99,279		43,979		143,258		89,177		59,925		149,102		89,253		52,156		141,409

Developed (%)	37	%	23	%	32	%	31	%	19	%	28	%	40	%	19	%	32	%	37	%	20	%	31	%

Of our controlled lots, ~~90,398~~89,177 and ~~99,279~~89,253 were owned and ~~48,816~~59,925 and ~~43,979~~52,156 were controlled under land option agreements at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively. While competition for well-positioned land is robust, we continue to pursue land investments that we believe can achieve appropriate risk-adjusted returns on invested capital. The remaining purchase price under our land option agreements totaled ~~$2.3~~$2.7 billion at ~~September~~June 30, ~~2017.~~2018. These land option agreements generally may be canceled at our discretion and in certain cases extend over several years. Our maximum exposure related to these land option agreements is generally limited to our deposits and pre-acquisition costs, which totaled ~~$201.8~~$218.4 million, of which ~~$9.4~~$14.1 million is refundable, at ~~September~~June 30, ~~2017.~~2018.

Homebuilding Segment Operations

As of ~~September~~June 30, ~~2017,~~2018, we conducted our operations in 4745 markets located throughout 25 states. For reporting purposes, our Homebuilding operations are aggregated into six reportable segments:



Northeast:		Connecticut, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Virginia
Southeast:		Georgia, North Carolina, South Carolina, Tennessee
Florida:		Florida
Midwest:		Illinois, Indiana, Kentucky, Michigan, Minnesota, Missouri, Ohio
Texas:		Texas
West:		Arizona, California, Nevada, New Mexico, Washington

The following tables present selected financial information for our reportable Homebuilding segments:


	Operating Data by Segment ($000's omitted)																Operating Data by Segment ($000's omitted)
	Three Months Ended								Nine Months Ended								Three Months Ended								Six Months Ended
	September 30,								September 30,								June 30,								June 30,
	2017			2017 vs. 2016		2016			2017			2017 vs. 2016		2016			2018			2018 vs. 2017		2017			2018			2018 vs. 2017		2017
Home sale revenues:
Northeast	$	168,402		9	%	$	155,076		$	425,206		—	%	$	426,212		$	198,811		34	%	$	148,272		$	331,151		29	%	$	256,804
Southeast	392,133			5	%	372,639			1,098,576			4	%	1,052,689			444,720			17	%	378,857			818,163			16	%	706,443
Florida	333,726			9	%	306,323			1,007,754			18	%	856,703			455,533			27	%	359,946			796,605			18	%	674,028
Midwest	392,442			15	%	342,332			994,701			22	%	817,709			354,855			(1	)%	357,847			651,750			8	%	602,259
Texas	268,899			3	%	261,693			791,684			9	%	729,170			330,215			14	%	288,519			575,324			10	%	522,785
West	500,289			13	%	443,655			1,289,032			13	%	1,145,360			665,920			54	%	432,200			1,188,659			51	%	788,744
	$	2,055,891		9	%	$	1,881,718		$	5,606,953		12	%	$	5,027,843		$	2,450,054		25	%	$	1,965,641		$	4,361,652		23	%	$	3,551,063
Income (loss) before income taxes (a):
Northeast (b)	$	21,046		248	%	$	6,056		$	(12,803	)	(137	)%	$	34,884
Northeast																	$	25,158		(e)		$	(38,249	)	$	34,470		(e)		$	(33,849	)
Southeast	45,109			24	%	36,370			117,749			22	%	96,898			54,357			35	%	40,274			94,814			31	%	72,640
Florida ~~(c)~~(b)	52,191			14	%	45,891			132,824			2	%	130,546			67,491			87	%	36,110			112,436			39	%	80,633
Midwest	59,636			62	%	36,792			115,463			68	%	68,665			43,050			15	%	37,573			71,451			28	%	55,827
Texas	42,727			10	%	38,878			122,045			18	%	103,618			50,859			9	%	46,522			81,395			3	%	79,318
West	75,753			37	%	55,347			107,987			(17	)%	130,683
West (c)																	154,414			(e)		(1,850		)	243,619			(e)		32,234
Other homebuilding (d)	(45,999		)	(63	)%	(28,271		)	(103,441		)	(11	)%	(93,252		)	(6,876		)	59	%	(16,781		)	(39,374		)	31	%	(57,441		)
	$	250,463		31	%	$	191,063		$	479,824		2	%	$	472,042		$	388,453		275	%	$	103,599		$	598,811		161	%	$	229,362
Closings (units):
Northeast	318			—	%	317			846			(5	)%	889
Southeast	966			2	%	948			2,751			(2	)%	2,799
Florida	897			7	%	836			2,639			12	%	2,348
Midwest	1,001			7	%	938			2,576			13	%	2,276
Texas	927			(2	)%	948			2,809			6	%	2,646
West	1,042			(1	)%	1,050			2,799			—	%	2,796
	5,151			2	%	5,037			14,420			5	%	13,754
Average selling price:
Northeast	$	530		8	%	$	489		$	503		5	%	$	479
Southeast	406			3	%	393			399			6	%	376
Florida	372			2	%	366			382			5	%	365
Midwest	392			7	%	365			386			7	%	359
Texas	290			5	%	276			282			2	%	276
West	480			14	%	423			461			12	%	410
	$	399		7	%	$	374		$	389		6	%	$	366


(a)	Includes land-related charges of ~~$2.1~~$125.6 million and ~~$131.3~~$129.1 million for the three and ~~nine~~six months ended ~~September~~June 30, 2017 ~~respectively (see~~ (See Note 2).


(b)	~~Northeast includes~~Includes a warranty charge of ~~$15.0~~$12.1 million ~~related to the settlement of a disputed land transaction~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 related to a closed-out community (see Note 8).


(c)	Includes ~~a warranty charge~~gains of ~~$12.3~~$26.4 million ~~for~~related to two land sale transactions in California in the ~~nine~~three and six months ended ~~September~~June 30, ~~2017 related to a closed-out community (see~~ ~~Note 8~~). 2018.

(d)

~~Includes~~

Other homebuilding includes insurance reserve reversals of $37.9 million and $19.8 million for the three and six months ended June 30, 2018 and 2017, respectively, and a write-off of insurance receivables associated with the resolution of certain insurance matters of $15.0 million for the six months ended June 30, 2017 (see Note 8), amortization of intangible assets, amortization of capitalized interest, and other items not allocated to the operating segments. Also includes write-offs of $5.3 million and $20.3 million of insurance receivables associated with the resolution of certain insurance matters in the three and nine months ended September 30, 2017, respectively. For the nine months ended September 30, 2017, other homebuilding also includes an insurance reserve reversal of $19.8 million.


(e)	Percentage not meaningful.


	Operating Data by Segment ($000's omitted)																Operating Data by Segment ($000's omitted)
	Three Months Ended								Nine Months Ended								Three Months Ended						Six Months Ended
																	June 30,						June 30,
																	2018		2018 vs. 2017		2017		2018		2018 vs. 2017		2017
Closings (units):
Northeast																	401		35	%	296		652		23	%	528
Southeast																	1,072		13	%	949		1,996		12	%	1,785
Florida																	1,134		25	%	910		2,021		16	%	1,742
Midwest																	872		(4	)%	907		1,639		4	%	1,575
Texas																	1,096		5	%	1,042		1,905		1	%	1,882
West																	1,166		24	%	940		2,154		23	%	1,757
																	5,741		14	%	5,044		10,367		12	%	9,269

Average selling price:
Northeast																	$	496	(1	)%	$	501	$	508	4	%	$	486
Southeast																	415		4	%	399		410		4	%	396
Florida																	402		2	%	396		394		2	%	387
Midwest																	407		3	%	395		398		4	%	382
Texas																	301		9	%	277		302		9	%	278
West																	571		24	%	460		552		23	%	449
	September 30,								September 30,								$	427	10	%	$	390	$	421	10	%	$	383
	2017			2017 vs. 2016		2016			2017			2017 vs. 2016		2016
Net new orders - units:
Northeast	316			(3	)%	325			1,103			5	%	1,055			450		20	%	376		898		14	%	787
Southeast	1,044			11	%	938			3,314			10	%	3,006			1,093		(8	)%	1,193		2,352		4	%	2,270
Florida	991			5	%	946			3,121			8	%	2,880			1,347		24	%	1,090		2,791		31	%	2,130
Midwest	868			6	%	817			3,119			9	%	2,870			1,055		(3	)%	1,089		2,157		(4	)%	2,251
Texas	881			3	%	852			3,281			9	%	3,009			1,183		(1	)%	1,189		2,506		4	%	2,400
West	1,200			34	%	897			3,883			18	%	3,304			1,213		(17	)%	1,458		2,512		(6	)%	2,683
	5,300			11	%	4,775			17,821			11	%	16,124			6,341		(1	)%	6,395		13,216		6	%	12,521

Net new orders - dollars:
Northeast	$	170,542		10	%	$	154,551		$	581,033		12	%	$	517,282		$	234,492	16	%	$	201,355	$	469,142	14	%	$	410,491
Southeast	416,723			9	%	381,992			1,317,316			13	%	1,165,970			459,197		(3	)%	475,692		983,106		9	%	900,594
Florida	387,611			11	%	349,962			1,198,072			12	%	1,069,220			547,704		31	%	417,249		1,120,479		38	%	810,461
Midwest	341,708			12	%	304,948			1,223,169			17	%	1,048,700			427,996		2	%	418,136		878,522		—	%	881,461
Texas	265,411			10	%	241,242			961,312			15	%	834,874			373,118		6	%	350,398		777,972		12	%	695,901
West	678,087			70	%	398,644			2,050,409			41	%	1,451,288			651,764		(14	)%	762,261		1,358,602		(1	)%	1,372,322
	$	2,260,082		23	%	$	1,831,339		$	7,331,311		20	%	$	6,087,334		$	2,694,271	3	%	$	2,625,091	$	5,587,823	10	%	$	5,071,230
Cancellation rates:
Northeast	19		%			11		%	13		%			11		%
Southeast	13		%			15		%	12		%			14		%
Florida	13		%			11		%	12		%			11		%
Midwest	13		%			15		%	11		%			12		%
Texas	19		%			20		%	16		%			17		%
West	16		%			21		%	15		%			18		%
	15		%			16		%	13		%			14		%
Unit backlog:
Northeast									644			6	%	610
Southeast									1,934			16	%	1,669
Florida									1,900			5	%	1,806
Midwest									1,850			10	%	1,683
Texas									1,884			10	%	1,708
West									2,611			35	%	1,941
									10,823			15	%	9,417
Backlog dollars:
Northeast									$	345,423		14	%	$	302,602
Southeast									802,500			15	%	699,710
Florida									746,544			6	%	702,801
Midwest									729,547			19	%	613,351
Texas									572,119			19	%	481,364
West									1,469,738			63	%	899,092
									$	4,665,871		26	%	$	3,698,920


	Operating Data by Segment ($000’s omitted)									Operating Data by Segment ($000's omitted)
	Three Months Ended					Nine Months Ended				Three Months Ended					Six Months Ended
	September 30,					September 30,				June 30,					June 30,
	2017			2016		2017		2016		2018		2018 vs. 2017	2017		2018			2018 vs. 2017		2017
Land-related charges*:
Cancellation rates:
Northeast	$	1,184		$	464	$	51,102	$	990	9	%		10	%	8		%			10		%
Southeast	889			396		1,847		2,252		12	%		11	%	11		%			11		%
Florida	109			68		8,862		597		12	%		13	%	12		%			12		%
Midwest	(393		)	391		7,703		1,242		12	%		11	%	11		%			10		%
Texas	51			245		898		397		18	%		15	%	17		%			15		%
West	306			1,098		56,747		7,707		15	%		14	%	14		%			14		%
Other homebuilding	—			—		4,095		—
	$	2,146		$	2,662	$	131,254	$	13,185	14	%		13	%	13		%			12		%

Unit backlog:
Northeast															758			17	%	646
Southeast															2,072			12	%	1,856
Florida															2,448			36	%	1,806
Midwest															2,005			1	%	1,983
Texas															2,027			5	%	1,930
West															2,535			3	%	2,453
															11,845			11	%	10,674

Backlog dollars:
Northeast															$	391,642		14	%	$	343,282
Southeast															883,109			14	%	777,911
Florida															1,005,463			45	%	692,660
Midwest															815,311			4	%	780,280
Texas															652,445			13	%	575,607
West															1,457,264			13	%	1,291,940
															$	5,205,234		17	%	$	4,461,680



	Operating Data by Segment ($000’s omitted)
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Land-related charges*:
Northeast	$	498	$	49,820	$	1,683	$	49,918
Southeast	689		491		1,731		958
Florida	226		8,602		409		8,754
Midwest	372		7,567		1,118		8,095
Texas	220		589		270		847
West	148		54,409		361		56,441
Other homebuilding	269		4,095		269		4,095
	$	2,422	$	125,573	$	5,841	$	129,108


*	Land-related charges include land inventory impairments, net realizable value adjustments on land held for sale, impairments of investments in unconsolidated entities, and write-offs of deposits and pre-acquisition costs for land option contracts we elected not to pursue (Note 2). Other homebuilding consists primarily of write-offs of capitalized interest related to such land-related charges.

Northeast

For the ~~third~~second quarter of ~~2017,~~2018, Northeast home sale revenues increased 9%34% compared with the prior year period due to ~~an 8%~~a 35% increase in closings, offset by a slight decrease in the average selling ~~price while closings remained flat.~~price. The higher revenues occurred primarily in ~~the~~ Mid-Atlantic and ~~resulted from the timing of opening new communities.~~New England. Income before income taxes increased primarily ~~because of the aforementioned charge related~~due to the ~~settlement of a disputed land transaction~~increased revenues when combined with the land-related charges recognized in the ~~third quarter of 2016. Higher revenues and lower overheads~~prior year period. Improved overhead leverage also contributed to the improvement. Net new orders ~~decreased 3%, primarily in New England due to cancellations resulting from a fire in a building that was under construction and that must be razed and rebuilt.~~increased across all markets.

For the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018, Northeast home sale revenues ~~were uniform~~increased by 29% when compared with the prior year period, due to a ~~5% decrease~~23% increase in closings, ~~offset by a 5% increase in the~~combined with an increased average selling ~~price.~~price of 4%. The ~~decrease~~increase in closings was ~~concentrated in~~attributable to Mid-Atlantic and New ~~England, and the increase in~~England. The increased average selling price ~~was broad-based.~~occurred in Mid-Atlantic. The ~~decreased~~increased income before income taxes resulted ~~primarily~~ from higher revenues and improved overhead utilization, combined with the ~~aforementioned~~ land-related charges recognized in ~~the period (see~~ ~~Note 2), which was partially offset by a charge related to the settlement of a disputed land transaction in the nine months ended September 30, 2016.~~2017. Net new orders increased ~~5%, primarily in the Northeast Corridor.~~across all markets.

Southeast

For the ~~third~~second quarter of ~~2017,~~2018, Southeast home sale revenues increased 5%17% compared with the prior year period due to a 2%13% increase in closings combined with a 3%4% increase in the average selling price. The increased closings occurred across all markets, while the increased average selling price was broad-based except for Raleigh. Income before income taxes increased primarily as the result of the higher ~~revenues and lower overhead costs in the current period, as the Southeast was impacted in 2016 by costs associated with the Wieland acquisition (see~~ ~~Note 1~~).revenues. Net new orders ~~increased 11%, primarily in Georgia and Raleigh.~~decreased across all markets with the exception of Coastal Carolinas.

For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, Southeast home sale revenues increased 4%16% compared with the prior year as the result of a 6%4% increase in average selling price ~~partially offset by~~combined with a ~~2% decrease~~12% increase in closings. The ~~decrease~~increase in closings occurred across all markets except for ~~Georgia,~~Charlotte, while the increase in average selling price ~~occurred primarily in Raleigh and Charlotte.~~was broad-based except for Raleigh. Income before income taxes increased ~~22% as~~31%, primarily a result of ~~transaction and integration costs associated with~~ the ~~assets acquired from Wieland in 2016 (see~~ ~~Note 1~~).increased revenues. Net new orders increased across all markets with the exception of ~~Charlotte.~~Georgia and Tennessee.

Florida

For the ~~third~~second quarter of ~~2017,~~2018, Florida home sale revenues increased 9%27% compared with the prior year period due to a 7%25% increase in closings combined with a 2% increase in ~~the~~ average selling price. The increase in closings occurred ~~primarily~~across all markets, while the increased average selling price occurred in North Florida and ~~Southwest Florida, and the increase in average selling price occurred across all markets except for North~~

West Florida. Income before income taxes increased ~~primarily~~ due to the higher ~~revenues.~~revenues combined with the land-related charges and warranty adjustment recognized in the prior year period (see Note 2 and Note 8). Net new orders increased ~~5%,~~across all markets, reflecting improved order levels ~~across all markets except for Southwest Florida. The increased closings and~~driven by the opening of new ~~orders occurred despite the disruption in our Florida operations caused by Hurricane Irma.~~communities.

For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, Florida home sale revenues increased 18% compared with the prior year period due to a 5%2% increase in the average selling price combined with a ~~12%~~16% increase in closings. Income before income taxes increased ~~slightly~~ due to higher revenues ~~offset by~~combined with the aforementioned land-related charges and warranty adjustment recognized in 2017 (see Note 2 and Note 8). Net new orders increased across all ~~markets. Both~~markets reflecting improved order levels driven by the opening of new communities.

Midwest

For the second quarter of 2018, Midwest home sale revenues slightly decreased over the prior year period due to a 4% decrease in closings partially offset by a 3% increase in average selling price. The increased average selling price occurred across the majority of markets while the decreased closings were concentrated in Illinois and Indianapolis-Louisville. Income before income taxes increased compared to the prior year primarily due to the land-related charges (see Note 2) in the prior year period. Net new orders ~~increased despite~~decreased across all markets with the ~~disruption in our operations caused by Hurricane Irma.~~exception of Michigan.

~~Midwest~~

For the ~~third quarter of 2017,~~six months ended June 30, 2018, Midwest home sale revenues increased ~~15%~~8% compared with the prior year period due to a 7%4% increase in average selling price combined with a 7%4% increase in closings. The higher revenues occurred across ~~all~~most markets with the exception of Minnesota and Indianapolis-Louisville. Income before income taxes increased primarily due to increased revenues. Net new orders decreased across all markets, except for Michigan.

Texas

For the second quarter of 2018, Texas home sale revenues increased 14% compared with the prior year period due to a 9% increase in average selling price, combined with a 5% increase in closings. The increase in average selling price occurred across all markets, while the increase in closings occurred primarily in Houston and Central Texas. Income before income taxes increased primarily due to the increased revenues, which were partially offset by higher overhead costs. Net new orders remained flat compared to the prior year period.

For the six months ended June 30, 2018, Texas home sale revenues increased 10% compared with the prior year period due to a 1% increase in closings combined with a 9% increase in the average selling price. The average selling price increased across all markets. Closings increased primarily in Houston and Central Texas, partially offset by decreased closings in Dallas and San Antonio due to timing differences between when older communities were closed out and newer communities became active. The higher revenues and closings led to an increase in income before income taxes. Net new orders increased across ~~the majority of markets.~~all markets except for Houston.

West

For the ~~nine months ended September 30, 2017, Midwest~~second quarter of 2018, West home sale revenues increased ~~22%~~54% compared with the prior year period resulting from a 24% increase in average selling price, combined with a 24% increase in closings. The increased average selling price and closings occurred across all markets. The increased revenues contributed to increased income before income taxes in all markets. A large portion of the increases in revenues, average selling price, and income before income taxes resulted from one multifamily project in Northern California. In addition, we closed on two land sale transactions in Northern California which generated gains totaling $26.4 million in the second quarter of 2018 and the prior year period included higher land-related charges (see Note 3). Net new orders decreased 17% overall, which was concentrated in Northern California, primarily due to a lower number of active communities combined with actions taken in certain communities to manage backlog.

For the six months ended June 30, 2018, West home sale revenues increased 51% compared with the prior year period due to a 7%23% increase in average selling price, combined with a ~~13%~~23% increase ~~in closings. The higher revenues occurred across all markets. Net new orders increased across all markets.~~

~~Texas~~

For the third quarter of 2017, Texas home sale revenues increased 3% compared with the prior year period due to a 5% increase in average selling price offset by a 2% decrease in closings. The lower closings is primarily attributable to the disruption in our Houston operations caused by Hurricane Harvey. The increased average selling price occurred across all markets except for Houston, while the decrease in closings occurred primarily in Houston and San Antonio. The increased revenues and lower overhead led to an increase in income before income taxes. Net new orders increased 3% primarily in Houston and Central Texas.

For the nine months ended September 30, 2017, Texas home sale revenues increased 9% compared with the prior year period due to a 6% increase in closings combined with a 2% increase in the average selling price. The average selling price increased primarily in Central Texas and San Antonio. The increase in closings was concentrated in Dallas and Central Texas, offset by a decrease in Houston caused by Hurricane Harvey. The higher revenues and higher closings led to an increase in income before income taxes. Net new orders increased 9% and occurred across all markets except for San Antonio.

~~West~~

~~For the third quarter of 2017, West home sale revenues increased 13% compared with the prior year period resulting from a 14% increase in average selling price, offset by a 1% decrease~~ in closings. The increased average selling price and closings occurred across all ~~markets~~markets. The increased revenues led to increased income taxes, primarily due to the results of Northern California's aforementioned multifamily project and land sales, combined with the ~~exception of New Mexico, whereas the decreased closings occurred mainly~~land-related charges recognized in ~~Northern California due to permitting and other municipal approval delays in certain communities. Income before income taxes increased across all markets with the exception of Northern California.~~2017 (see Note 3). Net new orders ~~showed a 34%~~decreased 6% overall ~~increase.~~

~~For the nine months ended September 30, 2017, West home sale revenues increased 13% compared with the prior year period~~and was concentrated in Northern California primarily due to a ~~12% increase in average selling price, while closings remained flat as Northern California experienced~~ lower ~~closings due to permitting and other municipal approval delays~~number of active communities combined with actions taken in certain communities. The higher average selling price occurred across all markets. Income before income taxes decreased primarily as a result of the aforementioned land-related charges recognized during the period (see ~~Note 2), partially offset by higher revenues and lower overhead costs. Net new orders increased 18% and occurred across all markets. This increase was partially due~~communities to ~~the increase in active communities.~~manage backlog.

Financial Services Operations

We conduct our Financial Services operations, which include mortgage operations, title services, and ~~title~~insurance brokerage operations, through Pulte Mortgage and other subsidiaries. In originating mortgage loans, we initially use our own funds, including funds available pursuant to credit agreements with third parties. Substantially all of the loans we originate are sold in the secondary market within a short period of time after origination, generally within 30 days. We also sell the servicing rights for the loans we originate through fixed price servicing sales contracts to reduce the risks and costs inherent in servicing loans. This strategy results in owning the loans

and related servicing rights for only a short period of time. Operating as a captive business model primarily targeted to supporting our Homebuilding operations, the business levels of our Financial Services operations are highly correlated to Homebuilding. Our Homebuilding customers continue to account for substantially all loan production. We believe that our capture rate, which represents loan originations from our Homebuilding operations as a percentage of total loan opportunities from our Homebuilding operations, excluding cash closings, is an important metric in evaluating the effectiveness of our captive mortgage business model. The following tables present selected financial information for our Financial Services operations ($000's omitted):


	Three Months Ended								Nine Months Ended								Three Months Ended								Six Months Ended
	September 30,																June 30,								June 30,
	2017			2017 vs. 2016		2016			2017			2017 vs. 2016		2016			2018			2018 vs. 2017		2017			2018			2018 vs. 2017		2017
Mortgage operations revenues	$	35,910		(6	)%	$	38,320		$	104,582		4	%	$	100,162
Mortgage revenues																	$	38,668		7	%	$	35,971		$	73,695		7	%	$	68,672
Title services revenues	11,042			14	%	9,700			31,413			17	%	26,788			11,666			15	%	10,132			20,603			13	%	18,167
Insurance brokerage commissions																	2,430			107	%	1,172			4,404			100	%	2,203
Total Financial Services revenues	46,952			(2	)%	48,020			135,995			7	%	126,950			52,764			12	%	47,275			98,702			11	%	89,042
Expenses	(29,304		)	9	%	(26,906		)	(86,150		)	9	%	(79,204		)	(32,224		)	13	%	(28,478		)	(64,436		)	13	%	(56,846		)
Other income, net	138			(13	)%	158			393			16	%	340			177			17	%	151			285			12	%	255
Income before income taxes	$	17,786		(16	)%	$	21,272		$	50,238		4	%	$	48,086		$	20,717		9	%	$	18,948		$	34,551		6	%	$	32,451
Total originations:
Loans	3,428			—	%	3,417			9,631			6	%	9,123			3,635			9	%	3,330			6,627			7	%	6,203
Principal	$	1,002,108		6	%	$	945,859		$	2,778,151		12	%	$	2,481,177		$	1,122,017		16	%	$	969,691		$	2,031,817		14	%	$	1,776,043


	Nine Months Ended						Six Months Ended
	September 30,						June 30,
	2017			2016			2018			2017
Supplemental data:
Capture rate	79.5		%	80.9		%	76.6		%	79.5		%
Average FICO score	749			750			751			749
Loan application backlog	$	2,653,466		$	2,057,460		$	2,714,571		$	2,545,209
Funded origination breakdown:
FHA	10		%	10		%
VA	13		%	13		%
USDA	1		%	1		%
Government (FHA, VA, USDA)							20		%	24		%
Other agency	69		%	70		%	67		%	69		%
Total agency	93		%	94		%	87		%	93		%
Non-agency	7		%	6		%	13		%	7		%
Total funded originations	100		%	100		%	100		%	100		%

Revenues

Total Financial Services revenues for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017 decreased 2%~~2018 increased 12% and ~~increased 7%~~11%, respectively, compared to the same periods in ~~2016. The decrease when compared to the three months ended September 30, 2016 is~~2017, primarily due ~~to the reduced capture rate and lower revenue per loan. The increase when compared to the nine months ended September 30, 2016 is primarily related~~ to higher loan origination volume resulting from higher volumes in the Homebuilding segment. A higher average loan size primarily driven by higher average selling prices in the Homebuilding segment ~~partially~~also contributed to the higher revenues.

Income before income taxes

Income before income taxes for the three and six months ended June 30, 2018 increased 9% and 6%, respectively, when compared to the prior year periods. The increases over the prior year were due primarily to higher revenues that were largely offset by ~~lower revenue per loan.~~higher expenses. Refinance activity has slowed in the mortgage industry, which has increased competition, pressured loan pricing, and resulted in lower ~~revenue per~~margins on our loan ~~for us~~originations in ~~2017.~~2018.

~~Income before income taxes~~

Income before income taxes for the three and nine months ended September 30, 2017 decreased 16% and increased 4%, respectively, compared to the prior year periods. The decrease over the three months ended September 30, 2016 was due to lower revenues per loan and higher expenses, while the increase over the nine months ended September 30, 2016 resulted primarily from the increase in revenues combined with better expense leverage.

Income Taxes

Our effective tax rate for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 was ~~33.8%~~20.8% and ~~30.2%~~21.9%, respectively, compared to ~~39.5%~~17.8% and ~~36.6%~~26.6%, respectively for the same periods in ~~2016. Our~~2017. For the three and six months ended June 30, 2018 our effective tax rate ~~for the current period differed~~differs from the federal statutory ~~tax~~ rate primarily due to state income tax expense on current year earnings, tax benefits due to Internal Revenue Service acceptance of an accounting method change applicable to the ~~favorable resolution of certain state income~~2017 tax ~~matters, the domestic production activities deduction,~~year, energy credits, and tax law changes. For the same period in the prior year, our effective tax rate differed from the federal statutory ~~tax~~ rate primarily due to state income tax expense on current year earnings, the favorable resolution of certain state income tax matters, and tax law changes. ~~Our effective tax rates for~~The federal statutory rate was reduced from 35% in 2017 to 21% in 2018 due to the ~~three and nine months ended September 30, 2017 are lower than for the prior year periods primarily as the result of tax law changes and the domestic production activities deduction.~~Tax Act, which was enacted on December 22, 2017.

Liquidity and Capital Resources

We finance our land acquisition, development, and construction activities and financial services operations using internally-generated funds supplemented by credit arrangements with third parties and capital market financing. We routinely monitor current and expected operational requirements and financial market conditions to evaluate accessing other available financing sources, including revolving bank credit and securities offerings.

At ~~September~~June 30, ~~2017,~~2018, we had unrestricted cash and equivalents of ~~$158.2~~$367.1 million, restricted cash balances of ~~$38.9~~$34.8 million, and ~~$422.3~~$785.4 million available under our Revolving Credit Facility. We follow a diversified investment approach for our cash and equivalents by maintaining such funds with a broad portfolio of banks within our group of relationship banks in high quality, highly liquid, short-term deposits and investments.

Our ratio of debt to total capitalization, excluding our Financial Services debt, ~~and limited recourse notes payable,~~ was ~~42.4%~~39.9% at ~~September~~June 30, ~~2017.~~2018.

Unsecured senior notes

~~In February 2016, we issued $1.0~~We had $3.0 billion of unsecured senior notes ~~consisting of $300~~outstanding at June 30, 2018 and December 31, 2017, respectively, with no repayments due until 2021, when $700.0 million ~~of 4.25% senior notes due March 1, 2021, and $700 million of 5.50% senior notes due March 1, 2026. In July 2016, we issued an additional $1.0 billion~~ of unsecured senior notes ~~consisting of an additional $400~~are scheduled to mature.

Other notes payable

Other notes payable include non-recourse and limited recourse collateralized notes with third parties that totaled $18.8 million ofand $20.0 million at June 30, 2018 and December 31, 2017, respectively. These notes have maturities ranging up to three years, are secured by the ~~4.25% senior~~applicable land positions to which they relate, and have no recourse to any other assets. The stated interest rates on these notes ~~due March 1, 2021, and $600 million of 5.00% senior notes due January 15, 2027. During October 2017, we settled the 7.625% senior notes on their due date.~~range up to 7.8%.

Revolving credit facility

~~We maintain a senior unsecured revolving~~In June 2018, we entered into the Revolving Credit Facility which replaced the Company's previous credit ~~facility (the “Revolving Credit Facility”) that matures in June 2019 and provides for maximum borrowings of $750.0 million.~~agreement. The Revolving Credit Facility contains substantially similar terms to the previous credit agreement, and extended the maturity date from June 2019 to June 2023. The Revolving Credit Facility has a maximum borrowing capacity of $1.0 billion and contains an uncommitted accordion feature that could increase the ~~size of the Revolving Credit Facility~~capacity to ~~$1.25~~$1.5 billion, subject to certain conditions and availability of additional bank commitments. ~~On October 13, 2017, we exercised the accordion feature to increase the maximum borrowing capacity to $1.0 billion.~~ The Revolving Credit Facility also provides for the issuance of letters of credit that reduce the available borrowing capacity under the Revolving Credit Facility, with a sublimit of ~~$375.0~~$500.0 million at ~~September~~June 30, ~~2017.~~2018. The interest rate on borrowings under the Revolving Credit Facility may be based on either the London Interbank Offered Rate ("LIBOR") or a base rate plus an applicable margin, as defined ~~in the Revolving Credit Facility. At September 30, 2017, we~~therein. We had ~~$83.0 million of~~no borrowings outstanding at June 30, 2018 and ~~$244.7~~December 31, 2017, and $214.6 million and $235.5 million of letters of credit issued under the Revolving Credit Facility ~~respectively. At~~at June 30, 2018 and December 31, ~~2016, we had no borrowings outstanding and $219.1 million of letters of credit issued under the Revolving Credit Facility,~~2017, respectively.

Credit Facility). As of ~~September~~June 30, ~~2017,~~2018, we were in compliance with all covenants. Outstanding balances under the Revolving Credit Facility are guaranteed by certain of our wholly-owned subsidiaries.

~~Limited recourse notes payable~~Financial Services debt

Certain of our local homebuilding operations are party to limited recourse collateralized notes payable with third parties that totaled $24.8 million at September 30, 2017 and $19.3 million at December 31, 2016. These notes have maturities ranging up to four years, are collateralized by the applicable land positions to which they relate, and are classified within accrued and other liabilities. The stated interest rates on these notes range up to 8.25%.

~~Pulte Mortgage~~

Pulte Mortgage maintains a master repurchase agreement with third party ~~lenders. In August 2017, Pulte Mortgage entered into an amended and restated repurchase agreement~~lenders (the “Repurchase Agreement”) that ~~extended the effective date to~~matures in August 2018. The maximum aggregate commitment ~~is $300.0~~was $400.0 million at ~~September~~June 30, ~~2017,~~2018, and ~~increases to $475.0 million during the seasonally high borrowing period from December 26, 2017~~will remain unchanged through January 11, 2018. At all other times, the maximum aggregate commitment ranges from $250.0 million to $400.0 million. The purpose of changes in capacity during the term of the agreement is to lower associated fees during seasonally lower volume periods of mortgage origination activity.maturity. Borrowings under the Repurchase Agreement are secured by residential mortgage loans available-for-sale. The Repurchase Agreement contains various affirmative and negative covenants applicable to Pulte Mortgage, including quantitative thresholds related to net worth, net income, and liquidity. Pulte Mortgage had ~~$245.8~~$264.0 million and ~~$331.6~~$437.8 million outstanding under the Repurchase Agreement at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively, and was in compliance with all of its covenants and requirements as of such dates.

Dividends and share repurchase program

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, we declared cash dividends totaling ~~$83.7~~$52.0 million and repurchased ~~27.8~~3.5 million shares under our repurchase authorization totaling ~~$659.8~~$105.1 million. ~~In July 2016, our Board of Directors approved a $1.0 billion increase in our share repurchase authorization.~~ At ~~September~~June 30, ~~2017,~~2018, we had remaining authorization to repurchase ~~$345.0~~$489.3 million of common shares.

Cash flows

Operating activities

Our net cash provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 was ~~$252.5~~$547.6 million, compared with net cash ~~used in~~provided by operating activities of ~~$306.5~~$176.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017. Generally, the primary drivers of our cash flow from operations are profitability and changes in the levels of inventory and residential mortgage loans available-for-sale, each of which experiences seasonal fluctuations. The positive cash flow from operations for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 was primarily due to our pretax income of ~~$530.1~~$633.4 million, supplemented by ~~$131.3~~$127.0 million ~~in non-cash land-related charges~~of deferred income taxes and a seasonal reduction of ~~$173.1~~$199.6 million in residential mortgage loans available-for-sale. These sources of cash were partially offset by a net increase in inventories of ~~$758.0~~$281.4 million resulting from ongoing land acquisition and development investment to support future growth combined with a seasonal build of house inventory to support ~~the~~our higher backlog.

Our ~~negative~~positive cash flow from operations for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 was primarily due to our pretax income of $261.8 million, which reflected $129.1 million in non-cash land-related charges, and a seasonal reduction of $172.9 million in residential mortgage loans available-for-sale. These sources were offset by a net increase in inventories of ~~$1.1 billion~~$486.4 million resulting from increased land investment combined with a seasonal build of house inventory. ~~These uses of cash were partially offset by our pretax income of $520.1 million and a seasonal reduction of $92.6 million in residential mortgage loans available-for-sale.~~

Investing activities

Investing activities are generally not a significant source or use of cash for us. Net cash used byin investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 was ~~$39.8~~$27.1 million, compared with net cash used byin investing activities of ~~$469.6~~$31.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016. The cash used in investing activities for the nine months ended September 30, 2016 was primarily due to the acquisition of certain real estate assets from Wieland (see~~ ~~Note 1~~).2017.

Financing activities

Net cash used in financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 totaled ~~$738.9~~$424.7 million, compared with net cash ~~provided by~~used in financing activities of ~~$461.8~~$628.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017. The net cash used in financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 resulted primarily from the repurchase of ~~27.8~~3.5 million common shares for ~~$659.8~~$105.1 million under our repurchase authorization, ~~payment~~repayments of ~~$86.0~~debt totaling $82.4 million, $52.4 million in cash dividends, ~~net~~

~~borrowings of $83.0 million under the Revolving Credit Facility,~~ and net repayments of ~~$85.8~~$173.8 million for borrowings under the Repurchase Agreement related to a seasonal reduction in residential mortgage loans available-for-sale.

Net cash ~~provided by~~used in financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 resulted primarily from the ~~proceeds of the unsecured senior notes issuance for $2.0 billion offset by net repayments of $109.1 million under the Repurchase Agreement, the~~ repurchase of ~~17.7~~17.5 million common shares for ~~$347.7~~$399.9 million under our repurchase authorization, ~~and~~ payment of ~~$94.3~~$58.2 million in cash ~~dividends.~~dividends, and net repayments of $177.9 million for borrowings under the Repurchase Agreement.

Inflation

We, and the homebuilding industry in general, may be adversely affected during periods of inflation because of higher land and construction costs. Inflation may also increase our financing costs. In addition, higher mortgage interest rates affect the affordability of our products to prospective homebuyers. While we attempt to pass on to our ~~customers'~~customers increases in our costs through increased sales prices, market forces may limit our ability to do so. If we are unable to raise sales prices enough to compensate for higher costs, or if mortgage interest rates increase significantly, our revenues, gross margins, and net income could be adversely affected.

Seasonality

Although significant changes in market conditions have impacted our seasonal patterns in the past and could do so again, we historically experience variability in our quarterly results from operations due to the seasonal nature of the homebuilding industry. We generally experience increases in revenues and cash flow from operations during the fourth quarter based on the timing of home closings. This seasonal activity increases our working capital requirements in our third and fourth quarters to support our home production and loan origination volumes. As a result of the seasonality of our operations, our quarterly results of operations are not necessarily indicative of the results that may be expected for the full year.

Contractual Obligations and Commercial Commitments

~~On August 14, 2017, Pulte Mortgage~~In June 2018, we entered into ~~an amended and restated repurchase agreement. On October 13, 2017, we exercised~~ the ~~accordion feature under our~~ Revolving Credit Facility which replaced the Company's previous credit agreement. The Revolving Credit Facility contains substantially similar terms to ~~increase~~ the previous credit agreement, and extended the maturity date from June 2019 to June 2023. The Revolving Credit Facility has a maximum borrowing capacity of $1.0 billion and contains an uncommitted accordion feature that could increase the capacity to ~~$1.0~~$1.5 billion. There have been no other material changes to our contractual obligations from those disclosed in our "Contractual Obligations and Commercial Commitments" contained in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

Off-Balance Sheet Arrangements

We use letters of credit and surety bonds to guarantee our performance under various contracts, principally in connection with the development of our homebuilding projects. The expiration dates of the letter of credit contracts coincide with the expected completion date of the related homebuilding projects. If the obligations related to a project are ongoing, annual extensions of the letters of credit are typically granted on a year-to-year basis. At ~~September~~June 30, ~~2017,~~2018, we had outstanding letters of credit totaling ~~$244.7~~$214.6 million. Our surety bonds generally do not have stated expiration dates; rather, we are released from the bonds as the contractual performance is completed. These bonds, which approximated $1.2 billion at ~~September~~June 30, ~~2017,~~2018, are typically outstanding over a period of approximately three to five years. Because significant construction and development work has been performed related to projects that have not yet received final acceptance by the respective counterparties, the aggregate amount of surety bonds outstanding is in excess of the projected cost of the remaining work to be performed.

In the ordinary course of business, we enter into land option agreements in order to procure land for the construction of houses in the future. At ~~September~~June 30, ~~2017,~~2018, these agreements had an aggregate remaining purchase price of ~~$2.3~~$2.7 billion. Pursuant to these land option agreements, we generally provide a deposit to the seller as consideration for the right to purchase land at different times in the future, usually at predetermined prices.

At ~~September~~June 30, ~~2017,~~2018, aggregate outstanding debt of unconsolidated joint ventures was ~~$55.8~~$55.0 million of which ~~$52.5~~$54.2 million was related to one joint venture in which we have a 50% interest. In connection with this loan, we and our joint venture partner provided customary limited recourse guaranties in which our maximum financial loss exposure is limited to our pro rata share of the debt outstanding.

Critical Accounting Policies and Estimates

There have been no significant changes to our critical accounting policies and estimates during the ~~nine~~six months ended ~~September~~ June 30, ~~2017~~2018 compared with those contained in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~.2017, except that we updated our revenue recognition policies pursuant to the adoption of ASC 606 (see "New accounting pronouncements" withinNote 1) as included below:

Home sale revenues - Home sale revenues and related profit are generally recognized when title to and possession of the home are transferred to the buyer at the home closing date. Little to no estimation is involved in recognizing such revenues.

Land sale revenues - We periodically elect to sell parcels of land to third parties in the event such assets no longer fit into our strategic operating plans or are zoned for commercial or other development. Land sales are generally outright sales of specified land parcels with cash consideration due on the closing date, which is generally when performance obligations are satisfied. Certain land sale contracts may contain unique terms that require management judgment in determining the appropriate revenue recognition, but the impact of such transactions is generally immaterial.

Financial services revenues - Mortgage servicing fees represent fees earned for servicing loans for various investors. Servicing fees are based on a contractual percentage of the outstanding principal balance, or a contracted set fee in the case of certain sub-servicing arrangements, and are credited to income when related mortgage payments are received or the sub-servicing fees are earned. Loan origination fees, commitment fees, and certain direct loan origination costs are recognized as incurred. Expected gains and losses from the sale of residential mortgage loans and their related servicing rights are included in the measurement of written loan commitments that are accounted for at fair value through Financial Services revenues at the time of commitment. The determination of fair value for certain of these financial instruments requires the use of estimates and management judgment. Subsequent changes in the fair value of these loans are reflected in Financial Services revenues as they occur. Interest income is accrued from the date a mortgage loan is originated until the loan is sold.

Revenues associated with our title operations are recognized as closing services are rendered and title insurance policies are issued, both of which generally occur as each home is closed. Insurance brokerage commissions relate to commissions on homeowner and other insurance policies placed with third party carriers through various agency channels. Our performance obligations for policy renewal commissions are satisfied upon issuance of the initial policy. The contract assets for estimated future renewal commissions are included in other assets and totaled $29.8 million at June 30, 2018. Due to uncertainties in the estimation process and the long duration of renewal policies, which can extend many years into the future, actual results could differ from such estimates.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Quantitative disclosure

We are subject to market risk on our debt instruments primarily due to fluctuations in interest rates. We utilize both fixed-rate and variable-rate debt. For fixed-rate debt, changes in interest rates generally affect the fair value of the debt instrument but not our earnings or cash flows. Conversely, for variable-rate debt, changes in interest rates generally do not affect the fair value of the debt instrument but could affect our earnings and cash flows. Except in very limited circumstances, we do not have an obligation to prepay fixed-rate debt prior to maturity. As a result, interest rate risk and changes in fair value should not have a significant impact on our fixed-rate debt until we are required or elect to refinance or repurchase such debt.

The following table sets forth the principal cash flows by scheduled maturity, weighted-average interest rates, and estimated fair value of our debt obligations as of ~~September~~June 30, ~~2017~~2018 ($000’s omitted):


	As of September 30, 2017 for the Years ending December 31,																							As of June 30, 2018 for the Years ending December 31,
	2017			2018			2019			2020			2021			Thereafter			Total			Fair Value		2018			2019			2020			2021			2022			Thereafter			Total			Fair Value
Rate-sensitive liabilities:
Fixed rate debt	$	210,481		$	1,418		$	9,333		$	9,539		$	700,000		$	2,300,000		$	3,230,771		$	3,464,229	$	—		$	8,423		$	9,539		$	700,000		$	—		$	2,300,000		$	3,017,962		$	3,016,302
Average interest rate	5.95		%	6.37		%	4.48		%	3.98		%	4.25		%	5.90		%	5.53		%			—		%	—		%	3.98		%	4.25		%	—		%	5.90		%	5.50		%

Variable rate debt (a)	$	245,824		$	—		$	—		$	—		$	—		$	—		$	245,824		$	245,824	$	264,639		$	283		$	—		$	—		$	—		$	—		$	264,922		$	264,922
Average interest rate	3.61		%	—		%	—		%	—		%	—		%	—		%	3.61		%			4.35		%	7.80		%	—		%	—		%	—		%	—		%	4.35		%

(a) Includes the Pulte Mortgage Repurchase Agreement and amounts outstanding under our Revolving Credit Facility, under which there was ~~$83 million~~no amount outstanding at ~~September~~June 30, ~~2017.~~2018.

Qualitative disclosure

There have been no material changes to the qualitative disclosure found in Item 7A, Quantitative and Qualitative Disclosures about Market Risk, of our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017.

SPECIAL NOTES CONCERNING FORWARD-LOOKING STATEMENTS

As a cautionary note, except for the historical information contained herein, certain matters discussed in Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, and Item 3, Quantitative and Qualitative Disclosures About Market Risk, are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities, as well as those of the markets we serve or intend to serve, to differ materially from those expressed in, or implied by, these statements. You can identify these statements by the fact that they do not relate to matters of a strictly factual or historical nature and generally discuss or relate to forecasts, estimates or other expectations regarding future events. 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 ~~the~~any 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 ~~laws;~~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 PulteGroup's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~2017 and other public filings with the Securities and Exchange Commission (the “SEC”) for a further discussion of these and other risks and uncertainties applicable to our businesses. We undertake no duty to update any forward-looking statement, whether as a result of new information, future events or changes in our expectations.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

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 ~~September~~June 30, ~~2017~~2018. 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 ~~September~~June 30, ~~2017~~2018.

Management is responsible for establishing and maintaining effective internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). There was no change in our internal control over financial reporting during the quarter ended ~~September~~June 30, ~~2017~~2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Total number
of shares
purchased (1)

Average
price paid
per share (1)

Total number of
shares purchased
as part of publicly
announced plans
or programs

Approximate dollar
value of shares
that may yet be
purchased under
the plans or
programs
($000’s omitted)
July 1, 2017 to July 31, 2017 3,463,941
$ 24.53
3,463,941
$ 519,910
(2)
August 1, 2017 to August 31, 2017 4,566,300
$ 25.18
4,566,300
$ 404,948
(2)
September 1, 2017 to September 30, 2017 2,322,638
$ 25.83
2,320,300
$ 344,952
(2)
Total 10,352,879
$ 25.11
10,350,541



	Total number of shares purchased (1)	Average price paid per share (1)		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans or programs ($000’s omitted)
April 1, 2018 to April 30, 2018	571,563	$	29.54	571,563	$	525,068	(2)
May 1, 2018 to May 31, 2018	588,407	$	30.49	587,140	$	507,168	(2)
June 1, 2018 to June 30, 2018	592,921	$	30.09	591,265	$	489,328	(2)
Total	1,752,891	$	30.05	1,749,968


(1)	During the ~~third~~second quarter of ~~2017~~2018, participants surrendered ~~2,338~~2,923 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.

(2)

~~The Board of Directors approved share repurchase authorizations totaling $1.0 billion in July 2016.~~ During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, we repurchased ~~27.8~~3.5 million shares for a total of ~~$659.8~~$105.1 million. The share repurchase authorization has $~~345.0~~489.3 million remaining as of ~~September~~June 30, ~~2017~~2018. There is no expiration date for this program.

Item 6. Exhibits

Exhibit Number and Description



3	(a)	Restated Articles of Incorporation, of PulteGroup, Inc. (Incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K, filed with the SEC on August 18, 2009)

	(b)	Certificate of Amendment to the Articles of Incorporation, dated March 18, 2010 (Incorporated by reference to Exhibit 3(b) of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010)

	(c)	Certificate of Amendment to the Articles of Incorporation, dated May 21, 2010 (Incorporated by reference to Exhibit 3(c) of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2010)

	(d)	~~By-laws, as amended,~~Amended and Restated By-Laws of PulteGroup, Inc. (Incorporated by reference to Exhibit 3.2 of our Current Report on Form 8-K, filed with the SEC on May 5, 2017)

	(e)	Certificate of Designation of Series A Junior Participating Preferred Shares, dated August 6, 2009 (Incorporated by reference to Exhibit 3(b) of our Registration Statement on Form 8-A, filed with the SEC on August 18, 2009)

4	(a)	Any instrument with respect to long-term debt, where the securities authorized thereunder do not exceed 10% of the total assets of PulteGroup, Inc. and its subsidiaries, has not been filed. The Company agrees to furnish a copy of such instruments to the SEC upon request.

	(b)	Amended and Restated Section 382 Rights Agreement, dated as of March 18, 2010, between PulteGroup, Inc. and Computershare Trust Company, N.A., as rights agent, which includes the Form of Rights Certificate as Exhibit B thereto (Incorporated by reference to Exhibit 4 of PulteGroup, Inc.’s Registration Statement on Form 8-A/A, filed with the SEC on March 23, 2010)

	(c)	First Amendment to Amended and Restated Section 382 Rights Agreement, dated as of March 14, 2013, between PulteGroup, Inc. and Computershare Trust Company, N.A., as rights agent (Incorporated by reference to Exhibit 4.1 of PulteGroup, Inc.’s Current Report on Form 8-K, filed with the SEC on March 15, 2013)

	(d)	Second Amendment to Amended and Restated Section 382 Rights Agreement, dated as of March 10, 2016, between PulteGroup, Inc. and Computershare Trust Company, N.A., as rights agent (Incorporated by reference to Exhibit 4.1 of PulteGroup, Inc.’s Current Report on Form 8-K, filed with the SEC on March 10, 2016)

10	(a)	~~Fifth Amendment to~~Second Amended and Restated ~~Master Repurchase~~Credit Agreement dated ~~August 14, 2017~~June 22, 2018 among PulteGroup, Inc., as Borrower, Bank of America, N.A., as Administrative Agent, and the other Lenders party thereto (Incorporated by reference to Exhibit 10.1 of PulteGroup, Inc.'s Current Report on Form 8-K, filed with the SEC on ~~August 15, 2017)~~June 22, 2018)

31	(a)	Rule 13a-14(a) Certification by Ryan R. Marshall, President and Chief Executive Officer (Filed herewith)

	(b)	~~PulteGroup, Inc. Deferred Compensation Plan For Non-Employee Directors, as amended and restated effective as of January 1, 2017 (Filed herewith)~~

	~~(c)~~	Increase Certificate effective as of October 13, 2017, delivered pursuant to the Amended and Restated Credit Agreement dated as of June 30, 2016 among PulteGroup, Inc., as Borrower, Bank of America, N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer, and the other Lenders party thereto (Filed herewith)

31	~~(a)~~	~~Rule 13a-14(a) Certification by Ryan R. Marshall, President and Chief Executive Officer (Filed herewith)~~

	~~(b)~~	Rule 13a-14(a) Certification by Robert T. O'Shaughnessy, Executive Vice President and Chief Financial Officer (Filed herewith)

32		Certification Pursuant to 18 United States Code § 1350 and Rule 13a-14(b) of the Securities Exchange Act of 1934 (Furnished herewith)

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



PULTEGROUP, INC.



/s/ Robert T. O'Shaughnessy
Robert T. O'Shaughnessy
Executive Vice President and Chief Financial Officer
(Principal Financial Officer and duly authorized officer)
Date:	~~October 24, 2017~~July 26, 2018

5152



	September 30, 2017			December 31, 2016
7.625% unsecured senior notes due October 2017 (a)	$	123,000		$	123,000
4.250% unsecured senior notes due March 2021 (b)	700,000			700,000
5.500% unsecured senior notes due March 2026 (b)	700,000			700,000
5.000% unsecured senior notes due January 2027 (b)	600,000			600,000
7.875% unsecured senior notes due June 2032 (b)	300,000			300,000
6.375% unsecured senior notes due May 2033 (b)	400,000			400,000
6.000% unsecured senior notes due February 2035 (b)	300,000			300,000
Net premiums, discounts, and issuance costs (c)	(13,016		)	(12,984		)
Total senior notes	$	3,109,984		$	3,110,016
Estimated fair value	$	3,356,459		$	3,112,297