Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2014 |
Accounting Policies [Abstract] | |
Summary of significant accounting policies | Summary of significant accounting policies |
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Basis of presentation |
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PulteGroup, Inc. is one of the largest homebuilders in the U.S., and our common stock trades on the New York Stock Exchange under the ticker symbol “PHM”. Unless the context otherwise requires, the terms "PulteGroup", the "Company", "we", "us", and "our" used herein refer to PulteGroup, Inc. and its subsidiaries. While our subsidiaries engage primarily in the homebuilding business, we also have mortgage banking operations, conducted principally through Pulte Mortgage LLC (“Pulte Mortgage”), and title operations. |
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The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles and include the accounts of PulteGroup, Inc. and all of its direct and indirect subsidiaries and variable interest entities in which PulteGroup, Inc. is deemed to be the primary beneficiary. All significant intercompany accounts, transactions, and balances have been eliminated in consolidation. |
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Business acquisition |
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We acquired certain real estate assets from Dominion Homes in August 2014 for $82.4 million in cash and the assumption of certain payables related to such assets. The net assets acquired are located in Columbus, Ohio, and Louisville and Lexington, Kentucky, and included approximately 8,200 lots, including approximately 400 homes in inventory and control of approximately 900 lots through option contracts. We also assumed a sales order backlog of 622 homes. The acquired net assets were recorded at their estimated fair values. The acquisition of these assets was not material to our results of operations or financial condition. |
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Use of estimates |
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The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. |
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Subsequent events |
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We evaluated subsequent events up until the time the financial statements were filed with the Securities and Exchange Commission ("SEC"). |
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Cash and equivalents |
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Cash and equivalents include institutional money market investments and time deposits with a maturity of three months or less when acquired. Cash and equivalents at December 31, 2014 and 2013 also included $5.1 million and $3.7 million, respectively, of cash from home closings held in escrow for our benefit, typically for less than five days, which are considered deposits in-transit. |
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Restricted cash |
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We maintain certain cash balances that are restricted as to their use. Restricted cash includes deposits maintained with financial institutions under cash-collateralized letter of credit agreements (see Note 6) as well as certain other accounts with restrictions, including customer deposits on home sales that are temporarily restricted by regulatory requirements until title transfers to the homebuyer. |
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Investments in unconsolidated entities |
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We have investments in a number of unconsolidated entities, including joint ventures, with independent third parties. The equity method of accounting is used for unconsolidated entities over which we have significant influence; generally this represents ownership interests of at least 20% and not more than 50%. Under the equity method of accounting, we recognize our proportionate share of the earnings and losses of these entities. Certain of these entities sell land to us. We defer the recognition of profits from such activities until the time we ultimately sell the related land. |
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We evaluate our investments in unconsolidated entities for recoverability in accordance with Accounting Standards Codification (“ASC”) 323, “Investments – Equity Method and Joint Ventures” (“ASC 323”). If we determine that a loss in the value of the investment is other than temporary, we write down the investment to its estimated fair value. Any such losses are recorded to equity in (earnings) loss of unconsolidated entities in the Consolidated Statements of Operations. Due to uncertainties in the estimation process and the significant volatility in demand for new housing, actual results could differ significantly from such estimates. See Note 5. |
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Intangible assets |
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Intangible assets consist of tradenames acquired in connection with the 2009 acquisition of Centex Corporation ("Centex") and the 2001 acquisition of Del Webb Corporation ("Del Webb"). These intangible assets were valued at the acquisition date and are being amortized over 20-year lives. The acquired cost and accumulated amortization of our intangible assets were $259.0 million and $135.9 million, respectively, at December 31, 2014, and $259.0 million and $122.9 million, respectively, at December 31, 2013. Amortization expense totaled $13.0 million in 2014, and $13.1 million in 2013 and 2012, and is expected to be $12.9 million in each of the next five years. |
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The ultimate realization of these assets is dependent upon estimates of future earnings and benefits that we expect to generate from their use. If we determine that the carrying values of intangible assets may not be recoverable based upon the existence of one or more indicators of impairment, we use a projected undiscounted cash flow method to determine if impairment exists. If the carrying values of the intangible assets exceed the expected undiscounted cash flows, then we measure impairment as the difference between the fair value of the asset and the recorded carrying value. There were no impairments of tradenames during 2014, 2013, or 2012. |
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Property and equipment, net, and depreciation |
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Property and equipment are recorded at cost. Maintenance and repair costs are expensed as incurred. Depreciation is computed by the straight-line method based upon estimated useful lives as follows: model home furniture - two years; office furniture and equipment - three to ten years; and leasehold improvements - life of the lease. Property and equipment are included in other assets and totaled $75.2 million net of accumulated depreciation of $192.2 million at December 31, 2014 and $53.1 million net of accumulated depreciation of $182.0 million at December 31, 2013. Depreciation expense totaled $26.8 million, $18.5 million, and $16.9 million in 2014, 2013, and 2012, respectively. |
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Advertising costs |
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Advertising costs are expensed as incurred and totaled $41.8 million, $42.4 million, and $45.8 million, in 2014, 2013, and 2012, respectively. |
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Employee benefits |
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We maintain defined contribution retirement plans that cover substantially all of our employees. Company contributions to the plans totaled $12.1 million, $11.0 million, and $9.4 million in 2014, 2013, and 2012, respectively. |
Other expense, net |
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Other expense, net consists of the following ($000’s omitted): |
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| 2014 | | 2013 | | 2012 | | | | | | | | | | | | |
Write-offs of deposits and pre-acquisition costs (Note 3) | $ | 6,099 | | | $ | 3,122 | | | $ | 2,278 | | | | | | | | | | | | | |
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Loss on debt retirements (Note 6) | 8,584 | | | 26,930 | | | 32,071 | | | | | | | | | | | | | |
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Lease exit and related costs | 9,609 | | | 2,778 | | | 7,306 | | | | | | | | | | | | | |
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Amortization of intangible assets (Note 1) | 13,033 | | | 13,100 | | | 13,100 | | | | | | | | | | | | | |
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Miscellaneous, net (a) | 1,420 | | | 34,823 | | | 11,543 | | | | | | | | | | | | | |
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| $ | 38,745 | | | $ | 80,753 | | | $ | 66,298 | | | | | | | | | | | | | |
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(a) | Includes charges of $41.2 million in 2013 resulting from a contractual dispute related to a previously completed luxury community (see Note 12) and $5.1 million in 2012 related to the write-down of notes receivable. | | | | | | | | | | | | | | | | | | | | | | |
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Earnings per share |
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Basic earnings per share is computed by dividing income available to common shareholders (the “Numerator”) by the weighted-average number of common shares, 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 stock and restricted stock 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 earnings per share excluded 6.6 million, 9.6 million, and 16.6 million stock options, unvested restricted stock and restricted stock units, and other potentially dilutive instruments in 2014, 2013, and 2012, respectively. |
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In accordance with ASC 260 "Earnings Per Share" ("ASC 260"), the two-class method determines earnings per share for each class of common stock and participating securities according to an earnings allocation formula that adjusts the Numerator for dividends or dividend equivalents and participation rights in undistributed earnings. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and, therefore, are included in computing earnings per share pursuant to the two-class method. The Company's outstanding restricted stock awards, restricted stock units, and deferred shares are considered participating securities. |
The following table presents the earnings per share of common stock ($000's omitted, except per share data): |
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| December 31, 2014 | | December 31, 2013 | | December 31, 2012 | | | | | | | | | | | | |
Numerator: | | | | | | | | | | | | | | | | | |
Net income | $ | 474,338 | | | $ | 2,620,116 | | | $ | 206,145 | | | | | | | | | | | | | |
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Less: earnings distributed to participating securities | (583 | ) | | (407 | ) | | — | | | | | | | | | | | | | |
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Less: undistributed earnings allocated to participating securities | (2,668 | ) | | (19,201 | ) | | — | | | | | | | | | | | | | |
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Numerator for basic earnings per share | $ | 471,087 | | | $ | 2,600,508 | | | $ | 206,145 | | | | | | | | | | | | | |
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Add back: undistributed earnings allocated to participating securities | 2,668 | | | 19,201 | | | — | | | | | | | | | | | | | |
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Less: undistributed earnings reallocated to participating securities | (2,643 | ) | | (18,845 | ) | | — | | | | | | | | | | | | | |
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Numerator for diluted earnings per share | $ | 471,112 | | | $ | 2,600,864 | | | $ | 206,145 | | | | | | | | | | | | | |
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Denominator: | | | | | | | | | | | | | | | | | |
Basic shares outstanding | 370,377 | | | 383,077 | | | 381,562 | | | | | | | | | | | | | |
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Effect of dilutive securities | 3,725 | | | 3,789 | | | 3,002 | | | | | | | | | | | | | |
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Diluted shares outstanding | 374,102 | | | 386,866 | | | 384,564 | | | | | | | | | | | | | |
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Earnings per share: | | | | | | | | | | | | | | | | | |
Basic | $ | 1.27 | | | $ | 6.79 | | | $ | 0.54 | | | | | | | | | | | | | |
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Diluted | $ | 1.26 | | | $ | 6.72 | | | $ | 0.54 | | | | | | | | | | | | | |
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Stock-based compensation |
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We measure compensation cost for restricted stock and restricted stock units at fair value on the grant date. Fair value is determined based on the quoted price of our common stock on the grant date. We recognize compensation expense for restricted stock and restricted stock units, the majority of which cliff vest at the end of three years, ratably over the vesting period. For share-based awards containing performance conditions, we recognize compensation expense ratably over the vesting period when it is probable that the stated performance targets will be achieved and record cumulative adjustments in the period in which estimates change. Compensation expense related to our share-based awards is included in selling, general, and administrative expense, except for a small portion recognized in Financial Services expenses. See Note 8. |
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Income taxes |
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The provision for income taxes is calculated using the asset and liability method, under which deferred tax assets and liabilities are recognized by identifying the temporary differences arising from the different treatment of items for tax and accounting purposes. In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is primarily dependent upon the generation of future taxable income. In determining the future tax consequences of events that have been recognized in the financial statements or tax returns, judgment is required. Differences between the anticipated and actual outcomes of these future tax consequences could have a material impact on the consolidated results of operations or financial position. |
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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. We follow the provisions of ASC 740, “Income Taxes” (“ASC 740”), which prescribes a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. Significant judgment is required to evaluate uncertain tax positions. Our evaluations of tax positions consider a variety of factors, including changes in facts or circumstances, changes in law, correspondence with taxing authorities, and effective settlements of audit issues. Changes in the recognition or measurement of uncertain tax positions could result in material increases or decreases in income tax expense (benefit) in the period in which the change is made. Interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense (benefit). See Note 9. |
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Homebuilding revenue recognition |
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Homebuilding revenue and related profit are generally recognized when title to and possession of the property are transferred to the buyer. In situations where the buyer’s financing is originated by Pulte Mortgage and the buyer has not made an adequate initial or continuing investment, the profit on such sale is deferred until the sale of the related mortgage loan to a third-party investor has been completed. If there is a loss on the sale of the property, the loss on such sale is recognized at the time of closing. The amount of such deferred profits were not material at either December 31, 2014 or December 31, 2013. |
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Sales incentives |
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When sales incentives involve a discount on the selling price of the home, we record the discount as a reduction of revenue at the time of house closing. If the sales incentive requires us to provide a free product or service to the customer, the cost of the free product or service is recorded as cost of revenues at the time of house closing. This includes the cost related to optional upgrades and seller-paid financing costs, closing costs, homeowners’ association fees, or merchandise. |
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Inventory |
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Inventory is stated at cost unless the carrying value is determined to not be recoverable, in which case the affected inventory is written down to fair value. Cost includes land acquisition, land development, and home construction costs, including interest, real estate taxes, and certain direct and indirect overhead costs related to development and construction. For those communities for which construction and development activities have been idled, applicable interest and real estate taxes are expensed as incurred. Land acquisition and development costs are allocated to individual lots using an average lot cost determined based on the total expected land acquisition and development costs and the total expected home closings for the community. The specific identification method is used to accumulate home construction costs. |
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We capitalize interest cost into homebuilding inventories. Each layer of capitalized interest is amortized over a period that approximates the average life of communities under development. Interest expense is allocated over the period based on the timing of home closings. |
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Cost of revenues includes the construction cost, average lot cost, estimated warranty costs, and commissions and closing costs applicable to the home. The construction cost of the home includes amounts paid through the closing date of the home, plus an appropriate accrual for costs incurred but not yet paid, based on an analysis of budgeted construction costs. This accrual is reviewed for accuracy based on actual payments made after closing compared with the amount accrued, and adjustments are made if needed. Total community land acquisition and development costs are based on an analysis of budgeted costs compared with actual costs incurred to date and estimates to complete. The development cycles for our communities range from under one year to in excess of ten years for certain master planned communities. Adjustments to estimated total land acquisition and development costs for the community affect the amounts costed for the community’s remaining lots. |
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We record valuation adjustments on land inventory when events and circumstances indicate that the related community may be impaired and when the cash flows estimated to be generated by the community are less than its carrying amount. Such indicators include gross margin or sales paces significantly below expectations, construction costs or land development costs significantly in excess of budgeted amounts, significant delays or changes in the planned development for the community, and other known qualitative factors. Communities that demonstrate potential impairment indicators are tested for impairment by comparing the expected undiscounted cash flows for the community to its carrying value. For those communities whose carrying values exceed the expected undiscounted cash flows, we estimate the fair value of the community. Impairment charges are recorded if the fair value of the community's inventory is less than its carrying value. We determine the fair value of a community's inventory using a combination of market comparable land transactions, where available, and discounted cash flow models. These estimated cash flows 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 discounted cash flow models are specific to each community. Our evaluations for impairments are based on our best estimates of the future cash flows for our communities. Due to uncertainties in the estimation process, the significant volatility in demand for new housing, the long life cycles of many communities, and potential changes in our strategy related to certain communities, actual results could differ significantly from such estimates. See Note 3. |
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Land held for sale |
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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 held for sale is recorded at the lower of cost or fair value less costs to sell. In determining the value of land held for sale, we consider recent offers received, prices for land in recent comparable sales transactions, and other factors. We record net realizable value adjustments for land held for sale within Homebuilding land sale cost of revenues. See Note 3. |
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Land option agreements |
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We enter into land option agreements in order to procure land for the construction of homes in the future. Pursuant to these land option agreements, we generally provide a deposit to the seller as consideration for the right to purchase land at different times in the future, usually at predetermined prices. Such contracts enable us to defer acquiring portions of properties owned by third parties or unconsolidated entities until we have determined whether and when to exercise our option, which reduces our financial risks associated with long-term land holdings. Option deposits and pre-acquisition costs (such as environmental testing, surveys, engineering, and entitlement costs) are capitalized if the costs are directly identifiable with the land under option, the costs would be capitalized if we owned the land, and acquisition of the property is probable. Such costs are reflected in other assets and are reclassified to inventory upon taking title to the land. We write off deposits and pre-acquisition costs when it becomes probable that we will not go forward with the project or recover the capitalized costs. Such decisions take into consideration changes in local market conditions, the timing of required land purchases, the availability and best use of necessary incremental capital, and other factors. We record any such write-offs of deposits and pre-acquisition costs within other expense, net. See Note 3. |
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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 December 31, 2014 or December 31, 2013 because we determined that we were not the primary beneficiary. Our maximum exposure to loss related to these VIEs is generally limited to our deposits and pre-acquisition costs under the applicable land option agreements. Separately, certain land option agreements represent financing arrangements due to the remaining purchase price under the land option agreements, in the event we exercise the purchase rights under the agreements, even though we generally have no obligation to pay these future amounts. As a result, we recorded $30.2 million and $24.0 million at December 31, 2014 and December 31, 2013, respectively, to land, not owned, under option agreements with a corresponding increase to accrued and other liabilities. The following provides a summary of our interests in land option agreements ($000’s omitted): |
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| December 31, 2014 | | December 31, 2013 |
| Deposits and | | Remaining Purchase | | Land, Not | | Deposits and | | Remaining Purchase | | Land, Not |
Pre-acquisition | Price | Owned, | Pre-acquisition | Price | Owned, |
Costs | | Under | Costs | | Under |
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Land options with VIEs | $ | 56,039 | | | $ | 891,506 | | | $ | 12,533 | | | $ | 40,486 | | | $ | 661,158 | | | $ | 8,167 | |
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Other land options | 71,241 | | | 999,079 | | | 17,653 | | | 50,548 | | | 729,128 | | | 15,857 | |
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| $ | 127,280 | | | $ | 1,890,585 | | | $ | 30,186 | | | $ | 91,034 | | | $ | 1,390,286 | | | $ | 24,024 | |
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Start-up costs |
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Costs and expenses associated with opening new communities are expensed to selling, general, and administrative expenses when incurred. |
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Allowance for warranties |
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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 10 years. We estimate the costs to be incurred under these warranties and record a liability in the amount of such costs at the time the product revenue is recognized. |
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Self-insured risks |
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We maintain, and require the majority of our subcontractors to maintain, general liability insurance coverage, including coverage for certain construction defects. 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, subject to certain self-insured per occurrence and aggregate retentions, deductibles, and available policy limits. However, we retain a significant portion of the overall risk for such claims. We reserve for these costs on an undiscounted basis at the time product revenue is recognized for each home closing and evaluate the recorded liabilities based on actuarial analyses of our historical claims, which include estimates of claims incurred but not yet reported. Adjustments to estimated reserves are recorded in the period in which the change in estimate occurs. In certain instances, we have the ability to recover a portion of our costs under various insurance policies or from our subcontractors or other third parties. Estimates of such amounts are recorded when recovery is considered probable. See Note 12. |
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Residential mortgage loans available-for-sale |
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Substantially all of the loans originated by us are sold in the secondary mortgage market within a short period of time after origination, generally within 30 days. In accordance with ASC 825, “Financial Instruments” (“ASC 825”), we use the fair value option to record residential mortgage loans available-for-sale. Election of the fair value option for these loans allows a better offset of the changes in fair values of the loans and the derivative instruments used to economically hedge them without having to apply complex hedge accounting provisions. We do not designate any derivative instruments as hedges or apply the hedge accounting provisions of ASC 815, “Derivatives and Hedging.” See Note 12 for discussion of the risks retained related to mortgage loan originations. |
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Expected gains and losses from the sale of residential mortgage loans and their related servicing rights are included in the measurement of written loan commitments that are accounted for at fair value through Financial Services revenues at the time of commitment. Subsequent changes in the fair value of these loans are reflected in Financial Services revenues as they occur. At December 31, 2014 and 2013, residential mortgage loans available-for-sale had an aggregate fair value of $339.5 million and $287.9 million, respectively, and an aggregate outstanding principal balance of $327.4 million and $278.1 million, respectively. The net gain (loss) resulting from changes in fair value of these loans totaled $1.7 million and $(1.2) million for the years ended December 31, 2014 and 2013, respectively. These changes in fair value were substantially offset by changes in fair value of the corresponding hedging instruments. Net gains from the sale of mortgages during 2014, 2013, and 2012 were $67.2 million, $80.3 million, and $109.2 million, respectively, and have been included in Financial Services revenues. |
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Mortgage servicing rights |
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We 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 servicing rights for only a short period of time. We recognize the fair value of our rights to service a mortgage loan as revenue at the time of entering into an interest rate lock commitment with a borrower. Due to the short period of time the servicing rights are held, we do not amortize the servicing asset. The servicing sales contracts provide for the reimbursement of payments made by the purchaser if loans prepay within specified periods of time, generally within 90 to 120 days after sale. We establish reserves for this liability at the time the sale is recorded. Such reserves were immaterial at December 31, 2014 and 2013 and are included in accrued and other liabilities. |
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Loans held for investment |
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We maintain a portfolio of loans that either have been repurchased from investors or were not saleable upon closing. We have the intent and ability to hold these loans for the foreseeable future or until maturity or payoff. These loans are carried at cost and are reviewed for impairment when recoverability becomes doubtful. Loans held for investment are included in other assets and totaled $12.5 million and $11.0 million at December 31, 2014 and 2013, respectively. |
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Interest income on mortgage loans |
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Interest income on mortgage loans is recorded in Financial Services revenues, accrued from the date a mortgage loan is originated until the loan is sold, and totaled $7.2 million, $7.5 million, and $6.0 million in 2014, 2013, and 2012, respectively. Loans are placed on non-accrual status once they become greater than 90 days past due their contractual terms. Subsequent payments received are applied according to the contractual terms of the loan. Mortgage discounts are not amortized as interest income due to the short period the loans are held until sale to third party investors. |
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Mortgage servicing, origination, and commitment fees |
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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 costs related to residential mortgage loans available-for-sale are recognized as incurred in Financial Services expenses while the associated mortgage origination fees are recognized in Financial Services revenues as earned, generally upon loan closing. |
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Title services |
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Revenues associated with our title operations are recognized within Financial Services revenues as closing services are rendered and title insurance policies are issued, both of which generally occur as each home is closed. |
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Derivative instruments and hedging activities |
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We are exposed to market risks from commitments to lend, movements in interest rates, and canceled or modified commitments to lend. A commitment to lend at a specific interest rate (an interest rate lock commitment) is a derivative financial instrument (interest rate is locked to the borrower). In order to reduce these risks, we use other derivative financial instruments, principally cash forward placement contracts on mortgage-backed securities and whole loan investor commitments, to economically hedge the interest rate lock commitment. We enter into these derivative financial instruments based upon our portfolio of interest rate lock commitments and closed loans. We do not enter into any derivative financial instruments for trading purposes. |
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At December 31, 2014 and 2013, we had aggregate interest rate lock commitments of $146.1 million and $175.7 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. |
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Forward contracts on mortgage-backed securities are commitments to either purchase or sell a specified financial instrument at a specified future date for a specified price that may be settled in cash, by offsetting the position, or through the delivery of the financial instrument. Forward contracts on mortgage-backed securities are the predominant derivative financial instruments we use to minimize market risk during the period from the time we extend an interest rate lock to a loan applicant until the time the loan is sold to an investor. We also use whole loan investor commitments, which are obligations of the investor to buy loans at a specified price within a specified time period. At December 31, 2014 and 2013, we had unexpired forward contracts of $371.0 million and $381.5 million, respectively, and whole loan investor commitments of $63.5 million and $31.7 million, respectively. Changes in the fair value of interest rate lock commitments and other derivative financial instruments are recognized in Financial Services revenues, and the fair values are reflected in other assets or other liabilities, as applicable. |
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There are no credit-risk-related contingent features within our derivative agreements, and counterparty risk is considered minimal. Gains and losses on interest rate lock commitments are substantially offset by corresponding gains or losses on forward contracts on mortgage-backed securities and whole loan investor commitments. We are generally not exposed to variability in cash flows of derivative instruments for more than approximately 75 days. |
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The fair values of derivative instruments and their location in the Consolidated Balance Sheets is summarized below ($000’s omitted): |
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| December 31, 2014 | | December 31, 2013 | | | | | | | | |
| Other Assets | | Other Liabilities | | Other Assets | | Other Liabilities | | | | | | | | |
Interest rate lock commitments | $ | 4,313 | | | $ | 65 | | | $ | 3,628 | | | $ | 489 | | | | | | | | | |
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Forward contracts | 79 | | | 3,653 | | | 4,374 | | | 34 | | | | | | | | | |
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Whole loan commitments | 31 | | | 619 | | | 189 | | | 84 | | | | | | | | | |
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| $ | 4,423 | | | $ | 4,337 | | | $ | 8,191 | | | $ | 607 | | | | | | | | | |
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New accounting pronouncements |
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In January 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-04, “Receivables - Troubled Debt Restructurings by Creditors,” which clarifies when an in substance repossession or foreclosure of residential real estate property collateralizing a consumer mortgage loan has occurred. By doing so, this guidance helps determine when the creditor should derecognize the loan receivable and recognize the real estate property. The guidance is effective for us beginning January 1, 2015 and is not expected to have a material impact on our consolidated financial position, results of operations, or cash flows. |
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). The standard is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. ASU 2014-09 is effective for us for fiscal and interim periods beginning January 1, 2017 and allows for full retrospective or modified retrospective methods of adoption. We are currently evaluating the impact that the standard will have on our financial statements. |
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In June 2014, the FASB issued Accounting Standards Update No. 2014-11, "Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures” ("ASU 2014-11"), which makes limited amendments to ASC 860, "Transfers and Servicing." The ASU requires entities to account for repurchase-to-maturity transactions as secured borrowings, eliminates accounting guidance on linked repurchase financing transactions, and expands disclosure requirements related to certain transfers of financial assets. ASU 2014-11 is effective for us for fiscal periods beginning January 1, 2015 and interim periods beginning April 1, 2015 and is not expected to have a material impact on our consolidated financial position, results of operations, or cash flows. |
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In August 2014, the FASB issued Accounting Standards Update No. 2014-15, “Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”), which requires management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern and provide related disclosures. ASU 2014-15 is effective for annual and interim reporting periods beginning January 1, 2017 and is not expected to have a material impact on our financial statements. |