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The following is the 2016 statement of cash flows for PulteGroup, Inc. PULTE HOMES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the 12 months ended

The following is the 2016 statement of cash flows for PulteGroup, Inc.

PULTE HOMES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the 12 months ended December 31

($ thousands)
2016

2015

2014

Cash flows from operating activities:

Net income
$ 602,703

$ 494,090

$ 474,338

Adjustments to reconcile net income to net cash from

operating activities:

Deferred income tax expense
334,787

311,699

223,769

Write-down of land and pre-acquisition costs
19,357

11,467

11,168

Depreciation and amortization
54,007

46,222

39,864

Stock-based compensation expense
22,228

24,752

29,292

Loss on debt retirements
657

--

8,584

Other, net
1,614

(4,865
)
(2,566
)

Increase (decrease) in cash due to:

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

Residential mortgage loans available-for-sale
(99,527
)
(104,609
)
(53,734
)

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

Accounts payable and other liabilities
75,257

(23,898
)
(38,646
)

Net cash provided by (used in) operating activities
68,270

(337,590
)
307,881

Cash flows from investing activities:

Capital expenditures
(39,295
)
(45,440
)
(48,790
)

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

Cash used for business acquisition
(430,458
)
--

(82,419
)

Other investing activities, net
13,100

11,330

8,605

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

Cash flows from financing activities:

Proceeds from debt issuance
1,995,937

498,087

--

Repayments of debt
(986,919
)
(239,193
)
(250,631
)

Borrowings under revolving credit facility
619,000

125,000

--

Repayments under revolving credit facility
(619,000
)
(125,000
)
--

Financial services borrowings
63,744

127,636

34,577

Stock option exercises
5,845

10,535

15,627

Share repurchases
(603,206
)
(442,738
)
(253,019
)

Dividends paid
(124,666
)
(115,958
)
(75,646
)

Net cash provided by (used in) financing activities
350,735

(161,631
)
(529,092
)

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

Cash and equivalents at beginning of period
775,435

1,309,220

1,653,044

Cash and equivalents at end of period
$ 723,248

$ 775,435

$1,309,220

Required:

a. In determining operating cash flow in 2016, the company includes share-based compensation expense of $22,228 thousand. Why does the company add this amount?

b. The operating section in 2016 includes an increase in cash of $75,257 for Accounts payable, accrued and other liabilities. Explain this reconciling item.

c. Does the composition of PulteGroups cash flow statement present a healthy picture? Explain.

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Previous Question Next Question

($ thousands)	2016		2015		2014
Cash flows from operating activities:
Net income	$ 602,703		$ 494,090		$ 474,338
Adjustments to reconcile net income to net cash from operating activities:
Deferred income tax expense	334,787		311,699		223,769
Write-down of land and pre-acquisition costs	19,357		11,467		11,168
Depreciation and amortization	54,007		46,222		39,864
Stock-based compensation expense	22,228		24,752		29,292
Loss on debt retirements	657		--		8,584
Other, net	1,614		(4,865	)	(2,566	)
Increase (decrease) in cash due to:
Inventories	(897,092	)	(917,298	)	(337,939	)
Residential mortgage loans available-for-sale	(99,527	)	(104,609	)	(53,734	)
Other assets	(45,721	)	(175,150	)	(46,249	)
Accounts payable and other liabilities	75,257		(23,898	)	(38,646	)
Net cash provided by (used in) operating activities	68,270		(337,590	)	307,881

Cash flows from investing activities:
Capital expenditures	(39,295	)	(45,440	)	(48,790	)
Investment in unconsolidated subsidiaries	(14,539	)	(454	)	(9	)
Cash used for business acquisition	(430,458	)	--		(82,419	)
Other investing activities, net	13,100		11,330		8,605
Net cash used in investing activities	(471,192	)	(34,564	)	(122,613	)

Cash flows from financing activities:
Proceeds from debt issuance	1,995,937		498,087		--
Repayments of debt	(986,919	)	(239,193	)	(250,631	)
Borrowings under revolving credit facility	619,000		125,000		--
Repayments under revolving credit facility	(619,000	)	(125,000	)	--
Financial services borrowings	63,744		127,636		34,577
Stock option exercises	5,845		10,535		15,627
Share repurchases	(603,206	)	(442,738	)	(253,019	)
Dividends paid	(124,666	)	(115,958	)	(75,646	)
Net cash provided by (used in) financing activities	350,735		(161,631	)	(529,092	)
Net increase (decrease)	(52,187	)	(533,785	)	(343,824	)
Cash and equivalents at beginning of period	775,435		1,309,220		1,653,044
Cash and equivalents at end of period	$ 723,248		$ 775,435		$1,309,220

a.	In determining operating cash flow in 2016, the company includes share-based compensation expense of $22,228 thousand. Why does the company add this amount?
b.	The operating section in 2016 includes an increase in cash of $75,257 for Accounts payable, accrued and other liabilities. Explain this reconciling item.
c.	Does the composition of PulteGroups cash flow statement present a healthy picture? Explain.