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 period ended September 30, 1995.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For thetransition period from N/A to N/A.
--- ---
Commission File Number: 1-4785
DEL WEBB CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 86-0077724
(State or other jurisdiction (IRS Employer Identification Number)
of incorporation or organization)
6001 North 24th Street, Phoenix, Arizona 85016
(Address of principal executive offices) (Zip Code)
(602) 808-8000
(Registrant's phone number, including area code)
NONE
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
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
--- ---
As of October 25, 1995 Registrant had outstanding 17,395,134 shares of common
stock.
<PAGE>
DEL WEBB CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED
SEPTEMBER 30, 1995
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 1995,
June 30, 1995 and September 30, 1994.............................1
Consolidated Statements of Earnings for the three
months ended September 30, 1995 and 1994.........................2
Consolidated Statements of Cash Flows for the three
months ended September 30, 1995 and 1994.........................3
Notes to Consolidated Financial Statements........................5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................................15
Separate financial statements of the Company's subsidiaries that are guarantors
of the Company's 10 7/8% Senior Notes due 2000 are not included because those
subsidiaries are jointly and severally liable as guarantors of the Notes and the
aggregate assets, liabilities, earnings and equity of those subsidiaries are
substantially equivalent to the assets, liabilities, earnings and equity of the
Company and its subsidiaries on a consolidated basis.
<PAGE>
<TABLE>
DEL WEBB CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share Data)
<CAPTION>
September 30, June 30, September 30,
1995 1995 1994
(Unaudited) (Unaudited)
- ----------------------------------------------------------------------------------------------
Assets
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Real estate inventories (Notes 2, 3 and 6) $ 868,195 $ 828,752 $ 690,757
Cash and short-term investments 29,934 18,900 7,615
Receivables 18,850 21,995 9,161
Property and equipment, net (Note 1) 29,782 29,326 37,602
Deferred income taxes (Note 4) -- -- 9,581
Other assets 32,452 26,077 33,186
- ----------------------------------------------------------------------------------------------
$ 979,213 $ 925,050 $ 787,902
==============================================================================================
Liabilities and Shareholders' Equity
- ----------------------------------------------------------------------------------------------
Notes payable, senior and subordinated debt (Note 3) $ 492,668 $ 491,258 $ 415,557
Subcontractor and trade accounts payable 62,383 76,421 44,911
Accrued liabilities and other payables 49,751 48,121 30,954
Home sale deposits 78,959 66,887 75,874
Income taxes payable (Note 4) 3,395 3,899 8,044
Deferred income taxes (Note 4) 7,546 5,197 --
Net liabilities of discontinued operations 3,753 3,925 5,797
- ----------------------------------------------------------------------------------------------
Total liabilities 698,455 695,708 581,137
- ----------------------------------------------------------------------------------------------
Shareholders' equity:
Common stock, $.001 par value at September 30, 1995
and June 30, 1995, without par value at September 30,
1994. Authorized 30,000,000 shares; issued
17,396,551 shares at September 30, 1995, 15,798,649
shares at June 30, 1995 and 15,828,082 shares at
September 30, 1994 (Note 7) 17 16 112,930
Additional paid-in capital (Note 7) 155,269 121,059 8,344
Retained earnings 127,940 122,153 101,200
- ----------------------------------------------------------------------------------------------
283,226 243,228 222,474
Less cost of common stock in treasury, 1,417
shares at September 30, 1995, 877,728 shares
at June 30, 1995 and 1,099,123 shares at
September 30, 1994 (Note 7) (18) (11,058) (14,096)
Less deferred compensation (2,450) (2,828) (1,613)
- ----------------------------------------------------------------------------------------------
Total shareholders' equity 280,758 229,342 206,765
- ----------------------------------------------------------------------------------------------
$ 979,213 $ 925,050 $ 787,902
==============================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
DEL WEBB CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands Except Per Share Data)
(Unaudited)
Three Months Ended
September 30,
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
Revenues (Note 5) $206,318 $162,882
- --------------------------------------------------------------------------------
Costs and expenses (Note 5):
Home construction, land and other 159,292 126,035
Interest 7,700 5,870
Selling, general and administrative 29,274 22,812
- --------------------------------------------------------------------------------
196,266 154,717
- --------------------------------------------------------------------------------
Earnings before income taxes 10,052 8,165
Income taxes (Note 4) 3,518 2,858
- --------------------------------------------------------------------------------
Net earnings $ 6,534 $ 5,307
================================================================================
Weighted average shares outstanding 16,671 14,970
================================================================================
Net earnings per share $ .39 $ .35
================================================================================
See accompanying notes to consolidated financial statements.
<PAGE>
DEL WEBB CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended
September 30,
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers related
to community home sales $ 156,446 $ 127,134
Cash received from commercial land sales 1,712 19
Cash paid for costs related to community
home construction (101,998) (86,136)
- --------------------------------------------------------------------------------
Cash provided by community sales activities 56,160 41,017
Cash paid for land acquisitions at operating
communities (9) (1,524)
Cash paid for lot development at operating
communities (25,038) (11,354)
Cash paid for amenity development at operating
communities (12,227) (7,341)
- --------------------------------------------------------------------------------
Net cash provided by operating communities 18,886 20,798
Cash paid for costs related to communities
in the pre-operating stage (27,053) (12,275)
Cash received from customers related to
conventional homebuilding 50,722 36,258
Cash paid for land, development, construction
and other costs related to conventional
homebuilding (45,731) (29,828)
Cash received from customers related to
residential land development project 5,175 4,813
Cash paid for costs related to residential
land development project (1,405) (5,102)
Cash paid for corporate activities (18,325) (13,145)
Interest paid (11,349) (15,797)
Cash received (paid) for income taxes (1,182) 54
Net operating activities of discontinued
operations (172) (327)
- --------------------------------------------------------------------------------
NET CASH USED FOR OPERATING ACTIVITIES (30,434) (14,551)
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (2,188) (2,381)
Investments in life insurance policies (1,055) (261)
- --------------------------------------------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (3,243) (2,642)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings 93,781 69,779
Repayments of debt (93,559) (50,706)
Proceeds from sale of common stock 45,237 --
Purchases of treasury stock (2) (2)
Dividends paid (746) (737)
- --------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 44,711 18,334
- --------------------------------------------------------------------------------
NET INCREASE IN CASH AND SHORT-TERM INVESTMENTS 11,034 1,141
CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD 18,900 6,474
- --------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 29,934 $ 7,615
================================================================================
See accompanying notes to consolidated financial statements.
<PAGE>
DEL WEBB CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In Thousands)
(Unaudited)
Three Months Ended
September 30,
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
Reconciliation of net earnings to net
cash used for operating activities:
Net earnings $ 6,534 $ 5,307
Allocation of common costs in costs
and expenses, excluding interest 48,849 36,892
Amortization of capitalized interest
in costs and expenses 7,700 5,870
Deferred compensation amortization 385 370
Depreciation and other amortization 1,999 1,281
Deferred income taxes 2,349 2,023
Net increase in home construction costs (19) (1,974)
Land acquisitions (4,337) (2,946)
Lot development (57,647) (29,561)
Amenity development (23,264) (16,808)
Pre-acquisition costs -- (653)
Net change in other assets and liabilities (12,811) (14,025)
Net operating activities of discontinued operations (172) (327)
- --------------------------------------------------------------------------------
Net cash used for operating activities $(30,434) $(14,551)
================================================================================
See accompanying notes to consolidated financial statements.
<PAGE>
DEL WEBB CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Basis of Presentation
The consolidated financial statements include the accounts of Del Webb
Corporation and its subsidiaries ("Company"). In the opinion of management, the
accompanying unaudited consolidated financial statements contain all adjustments
(consisting of only normal recurring adjustments, primarily eliminations of all
significant intercompany transactions and accounts) necessary to present fairly
the financial position, results of operations and cash flows for the periods
presented. Certain financial statement items from prior periods have been
reclassified to be consistent with the current period financial statement
presentation.
At September 30, 1994 the Company classified the unamortized cost of its
vacation homes (aggregating $16.6 million) as property and equipment as a result
of its intent to operate the homes. At October 1, 1994 the Company decided to
return to marketing the homes for sale as individual units. Accordingly, the
homes were reclassified from property and equipment to real estate inventories.
The Company's continuing operations include its communities, conventional
homebuilding operations and residential land development project. The Company's
communities are large-scale, master-planned residential communities at which the
Company controls all phases of the master plan development process from land
selection through the construction and sale of homes. Within its communities,
the Company is the exclusive builder of homes. The Company's conventional
homebuilding operations encompass the construction and sale of homes in
subdivisions. The Company's residential land development project operations
include the sale of individual land parcels and lots to other builders and
developers for conventional housing and related commercial development. The
Company's commercial land development projects are accounted for as discontinued
operations.
These consolidated financial statements should be read in conjunction with the
consolidated financial statements and the related disclosures contained in the
Company's Annual Report on Form 10-K for the year ended June 30, 1995, filed
with the Securities and Exchange Commission.
In the Consolidated Statements of Cash Flows, the Company defines operating
communities as communities generating revenues from home closings. Communities
in the pre-operating stage are those not yet generating home sales revenues.
The results of operations for the three months ended September 30, 1995 are not
necessarily indicative of the results to be expected for the full fiscal year.
<PAGE>
DEL WEBB CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(2) Real Estate Inventories
The components of real estate inventories are as follows:
In Thousands
- --------------------------------------------------------------------------------
September 30, June 30, September 30,
1995 1995 1994
(Unaudited) (Unaudited)
- --------------------------------------------------------------------------------
Home contruction costs $142,374 $142,355 $101,763
Unamortized improvement and
amenity costs 396,513 356,457 272,001
Unamortized capitalized interest 62,290 55,793 45,042
Land held for housing 213,907 220,297 207,848
Land held for future development
or sale 53,111 53,850 64,103
- --------------------------------------------------------------------------------
$868,195 $828,752 $690,757
================================================================================
At September 30, 1995 the Company had 341 completed homes and 386 homes
under construction that were not subject to a sales contract. These homes
represented $24.4 million and $10.9 million, respectively, of home
construction costs at September 30, 1995. At September 30, 1994 the Company
had 183 completed homes and 350 homes under construction (representing
$13.4 million and $8.2 million, respectively, of home construction costs)
that were not subject to a sales contract. Included in land held for future
development or sale at September 30, 1995 were 268 acres of residential
land, commercial land and worship sites that are currently being marketed
for sale at the Company's communities and conventional homebuilding
operations. Also included in land held for future development or sale at
September 30, 1995 were 382 acres of residential land and commercial land
at the Company's residential land development project. (3) Notes Payable,
Senior and Subordinated Debt
(3) Notes Payable, Senior and Subordinated Debt
Notes payable, senior and subordinated debt consists of the following:
In Thousands
- --------------------------------------------------------------------------------
September 30, June 30, September 30,
1995 1995 1994
(Unaudited) (Unaudited)
- --------------------------------------------------------------------------------
10 7/8% Senior Notes, net $ 96,959 $ 96,787 $ 96,270
9 3/4% Senior Subordinated
Debentures, net 96,950 96,847 96,539
9% Senior Subordinated Debentures, net 97,149 97,081 96,876
Subordinated Swiss Franc Bonds, net 12,755 12,745 12,714
Notes payable to banks under a revolving
credit facility and short-term lines
of credit 165,000 160,200 47,000
Real estate and other notes 23,855 27,598 66,158
- --------------------------------------------------------------------------------
$492,668 $491,258 $415,557
================================================================================
At September 30, 1995 the Company had $165 million outstanding under its
$300 million unsecured revolving credit facility and no amount outstanding
under its $10 million of short-term lines of credit.
At September 30, 1995, under the most restrictive of the covenants in the
Company's debt agreements, $40.8 million of the Company's retained earnings
was available for payment of cash dividends and for the acquisition by the
Company of its common stock.
(4) Income Taxes
Components of Income Taxes
The components of income taxes are:
In Thousands
(Unaudited)
- --------------------------------------------------------------------------------
Three Months Ended
September 30,
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
Current:
Federal $1,092 $ 455
State 77 380
- --------------------------------------------------------------------------------
1,169 835
- --------------------------------------------------------------------------------
Deferred:
Federal 1,791 1,872
State 558 151
- --------------------------------------------------------------------------------
2,349 2,023
- --------------------------------------------------------------------------------
$3,518 $2,858
================================================================================
(5) Revenues and Costs and Expenses
The components of revenues and costs and expenses are:
In Thousands
(Unaudited)
- --------------------------------------------------------------------------------
Three Months Ended
September 30,
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
Revenues:
Homebuilding:
Communities $149,199 $122,281
Conventional 45,271 31,991
- --------------------------------------------------------------------------------
Total homebuilding 194,470 154,272
Land sales 10,197 7,465
Other 1,651 1,145
- --------------------------------------------------------------------------------
$206,318 $162,882
================================================================================
Costs and expenses:
Home construction and land:
Communities $111,863 $ 91,475
Conventional 38,709 26,861
- --------------------------------------------------------------------------------
Total homebuilding 150,572 118,336
Interest 7,700 5,870
Cost of land sales 7,989 6,486
Other cost of sales 731 1,213
Selling, general and administrative 29,274 22,812
- --------------------------------------------------------------------------------
$196,266 $154,717
================================================================================
(6) Interest
The following table shows the components of interest:
In Thousands
(Unaudited)
- --------------------------------------------------------------------------------
Three Months Ended
September 30,
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
Interest incurred $14,197 $10,555
Less capitalized interest 14,197 10,555
- --------------------------------------------------------------------------------
Interest expense $ -- $ --
================================================================================
Amortization of capitalized interest
in costs and expenses $ 7,700 $ 5,870
================================================================================
Unamortized capitalized interest in real
estate inventories at period end $62,290 $45,042
================================================================================
Interest income $ 327 $ 123
================================================================================
(7) Equity Transactions
In November 1994 the Company changed its state of incorporation from Arizona
to Delaware. In connection with this reincorporation, the common stock
changed from common stock without par value to common stock with a par value
of $.001 per share, which resulted in a consolidated balance sheet
reclassification within shareholders' equity from common stock to additional
paid-in captial. There was no impact on total shareholders' equity as a
result of the reincorporation.
In August 1995 the Company publicly sold 2,474,900 shares of its treasury
and authorized but unissued common stock. The net proceeds of approximately
$45 million were used to repay a portion of the indebtedness outstanding
under the Company's $300 million senior unsecured revolving credit facility.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion of the results of operations and financial condition
should be read in conjunction with the accompanying consolidated financial
statements and notes thereto and the Company's Annual Report on Form 10-K for
the year ended June 30, 1995, filed with the Securities and Exchange Commission.
CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA
- -------------------------------------------------
Three Months Ended
September 30, Change
- --------------------------------------------------------------------------------
1995 1994 Amount Percent
- --------------------------------------------------------------------------------
OPERATING DATA:
- ---------------
Number of net new orders:(1)
Sun City West 157 230 (73) (31.7%)
Sun City Tucson 41 68 (27) (39.7%)
Sun Cities Las Vegas (2) 227 192 35 18.2%
Sun City Palm Desert (3) 30 36 (6) (16.7%)
Sun City Roseville 150 164 (14) (8.5%)
Sun City Hilton Head (4) 60 N/A 60 N/A
Sun City Georgetown (4) 131 N/A 131 N/A
Terravita 56 128 (72) (56.3%)
Coventry Homes 312 182 130 71.4%
- --------------------------------------------------------------------------------
Total 1,164 1,000 164 16.4%
================================================================================
Number of home closings:
Sun City West 196 293 (97) (33.1%)
Sun City Tucson 66 96 (30) (31.3%)
Sun Cities Las Vegas (2) 197 225 (28) (12.4%)
Sun City Palm Desert (3) 43 51 (8) (15.7%)
Sun City Roseville (4) 144 N/A 144 N/A
Sun City Hilton Head (4) 22 N/A 22 N/A
Terravita 109 67 42 62.7%
Coventry Homes 306 212 94 44.3%
- --------------------------------------------------------------------------------
Total 1,083 944 139 14.7%
================================================================================
BACKLOG DATA:
- -------------
Homes under contract at September 30:
Sun City West 463 597 (134) (22.4%)
Sun City Tucson 124 255 (131) (51.4%)
Sun Cities Las Vegas (2) 432 446 (14) (3.1%)
Sun City Palm Desert (3) 134 147 (13) (8.8%)
Sun City Roseville 577 513 64 12.5%
Sun City Hilton Head (4) 187 N/A 187 N/A
Sun City Georgetown (4) 253 N/A 253 N/A
Terravita 245 392 (147) (37.5%)
Coventry Homes 546 368 178 48.4%
- --------------------------------------------------------------------------------
Total (5) 2,961 2,718 243 8.9%
================================================================================
Aggregate contract sales amount
(dollars in millions) $ 571 $ 505 $ 66 13.1%
================================================================================
Average contract sales amount per home
(dollars in thousands) $ 193 $ 186 $ 7 3.8%
================================================================================
Three Months Ended
September 30, Change
- --------------------------------------------------------------------------------
1995 1994 Amount Percent
- --------------------------------------------------------------------------------
AVERAGE REVENUE PER HOME CLOSING:
- -----------------------------------
Sun City West $157,200 $145,900 $ 11,300 7.7%
Sun City Tucson 167,700 164,400 3.300 2.0%
Sun Cities Las Vegas (2) 178,400 173,100 5,300 3.1%
Sun City Palm Desert (3) 232,100 197,100 35,000 17.8%
Sun City Roseville (4) 202,300 N/A N/A N/A
Sun City Hilton Head (4) 127,800 N/A N/A N/A
Terravita 277,400 220,100 57,300 26.0%
Coventry Homes 147,900 150,900 (3,000) (2.0%)
Weighted average 179,600 163,400 16,200 9.9%
================================================================================
OPERATING STATISTICS AND AVERAGES:
- ------------------------------------
Cost and expenses as a
percentage of revenues:
Home construction, land
and other 77.2% 77.4% (0.2%) (0.3%)
Interest 3.7% 3.6% 0.1% 2.8%
Selling, general and
administrative 14.2% 14.0% 0.2% 1.4%
Earnings before income
taxes as a percentage of
revenues 4.9% 5.0% (0.1%) (2.0%)
Ratio of home closings
to homes under contract in
backlog at beginning of period 37.6% 35.5% 2.1% 5.9%
================================================================================
(1) Net of cancellations. The Company recognizes revenue at close of escrow.
(2) Includes Sun City Summerlin (the Company changed the name of its Sun City
Las Vegas community to Sun City Summerlin during the first quarter of fiscal
1996) and Sun City MacDonald Ranch. The Company began taking new home sales
orders at Sun City MacDonald Ranch in September 1995.
(3) During the first quarter of fiscal 1996 the Company changed the name of
its Sun City Palm Springs community to Sun City Palm Desert.
(4) The Company began taking new home sales orders at Sun City Hilton Head in
November 1994 and at Sun City Georgetown in June 1995. Home closings began
at Sun City Roseville in February 1995 and at Sun City Hilton Head in August
1995.
(5) A majority of this backlog is currently anticipated to result in revenues
in the next 12 months. However, a majority of the backlog at September 30,
1995 is contingent upon the availability of financing for the customer, sale
of the customer's existing residence or other factors. Also, as a practical
matter, the Company's ability to obtain damages for breach of contract by a
potential home buyer is limited to retaining all or a portion of the deposit
received. In the three months ended September 30, 1995 and 1994,
cancellations of home sales orders as a percentage of new home sales orders
written during the period were 19.1 percent and 17.2 percent, respectively.
RESULTS OF OPERATIONS
- ---------------------
REVENUES. Home closings at Sun City Roseville and Sun City Hilton Head accounted
for $29.1 million and $2.8 million, respectively, of the increase in revenues to
$206.3 million for the three months ended September 30, 1995 (compared to $162.9
million for the three months ended September 30, 1994). The Company had not yet
begun delivering homes at these communities in the 1994 quarter.
Decreased home closings (resulting from lower backlogs at the beginning of the
periods) at the Company's more mature active adult communities (Sun City West,
Sun City Tucson, Sun City Summerlin and Sun City Palm Desert) resulted in a
$25.5 million decrease in revenues. Increased home closings at Terravita (at
which the 1994 quarter was the initial quarter of home closings) and Coventry
Homes (the Company's conventional homebuilding operation, which benefitted from
increases in Phoenix and Tucson operations and the expansion of operations in
Las Vegas and Southern California) resulted in increased revenues of $9.2
million and $14.2 million, respectively.
Increases in the average revenue per home closing at the Company's more mature
active adult communities and Terravita accounted for $5.0 million and $6.3
million, respectively, of the increase in revenues. These increases in average
revenues per home closing were partially due to sales price increases previously
implemented by the Company and partially due to market-driven changes in product
mix. Changes in subdivision mix caused a decrease in the average revenue per
home closing for Coventry Homes, resulting in total decreased revenues of $0.9
million.
Land sales and other revenues were $3.2 million higher in the 1995 quarter than
in the 1994 quarter. Land sales at the Company's communities occur irregularly
and fluctuate in magnitude on a quarter-to-quarter basis.
HOME CONSTRUCTION, LAND AND OTHER COSTS. The increase in home construction, land
and other costs to $159.3 million in the 1995 quarter compared to the $126.0
million in the 1994 quarter was primarily due to the increase in home closings.
As a percentage of revenues, these costs were 77.2 percent for the 1995 quarter
compared to 77.4 percent for the 1994 quarter.
INTEREST. As a percentage of revenues, amortization of capitalized interest was
3.7 percent for the 1995 quarter compared to 3.6 percent for the 1994 quarter.
This increase was primarily due to higher levels of indebtedness and increases
in land held for longer-term development (with respect to which land the Company
cannot allocate capitalized interest). As the mix of home closings among the
Company's communities and conventional homebuilding operations changes,
management currently anticipates that the amortization of capitalized interest
as a percentage of revenues will increase over the balance of fiscal 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Of the increase in selling,
general and administrative expenses to $29.3 million in the 1995 quarter as
compared to $22.8 million for the 1994 quarter, $2.1 million was attributable to
higher sales and marketing expenses, $1.6 million was due to increased
commissions on the increased revenues and $1.0 million resulted from the
recognition of general and administrative expenses at Sun City Roseville and Sun
City Hilton Head in the 1995 quarter (pre-operating costs were capitalized in
the 1994 quarter since home closings had not yet begun at these communities).
The balance of the increase was due to a variety of general and administrative
expenses.
INCOME TAXES. The increase in income taxes to $3.5 million in the 1995 quarter
as compared to $2.9 million in the 1994 quarter was due to the increase in
earnings from continuing operations before income taxes. The effective tax rate
in both periods was 35 percent.
NET NEW ORDER ACTIVITY AND BACKLOG. Net new orders increased 16.4 percent in the
1995 quarter as compared to the 1994 quarter. The number of homes under contract
at September 30, 1995 was 8.9 percent higher than at September 30, 1994. These
increases were attributable to new sales orders at Sun City Hilton Head and Sun
City Georgetown, at which the Company began taking new sales orders in November
1994 and June 1995, respectively.
Net new orders at Sun City West decreased 31.7 percent in the 1995 quarter
compared to the 1994 quarter, for which they were at a high level. Net new
orders at Sun City West in the 1995 quarter were negatively impacted by sales
policies designed to help build out some existing neighborhoods. As the
build-out of Sun City West approaches, management anticipates periods of lower
sales volume due to the dynamics of the community's completion and the start-up
of its successor community, Sun City Grand.
Net new orders at Sun City Tucson decreased 39.7 percent, reflecting the winding
down of operations as build-out of that community approaches.
Net new orders at the Sun Cities Las Vegas increased 18.2 percent as a result of
the commencement of new order activity at Sun City MacDonald Ranch in September
1995.
Net new orders at Terravita were 56.3 percent lower in the 1995 quarter than in
the 1994 quarter, when they were exceptionally high due to pent-up demand in the
local market. With the majority of Terravita's buyers now coming from out of
state, management expects net new orders to be more seasonal and to peak in the
January through May time period.
Net new orders for Coventry Homes were 71.4 percent higher in the 1995 quarter
than in the 1994 quarter, due to increases in Phoenix and Tucson operations and
to the expansion of operations in Las Vegas and Southern California.
Cancellations of home sales orders as a percentage of new home sales orders
written increased to 19.1 percent for the 1995 quarter compared to 17.2 percent
for the 1994 quarter. The increase was primarily attributable to Terravita
(where local pent-up demand in the 1994 quarter resulted in a low cancellation
percentage) and Coventry Homes (which experienced in the 1995 quarter a
lower-priced mix of subdivisions, the buyers at which are typically subject to
greater cancellations). Small increases in cancellation percentages were also
experienced at Sun City West and Sun City Tucson.
LIQUIDITY AND FINANCIAL CONDITION OF THE COMPANY
- ------------------------------------------------
At September 30, 1995 the Company had $29.9 million of cash and short-term
investments, $165 million outstanding under its $300 million unsecured revolving
credit facility and no amount outstanding under its $10 million of short-term
lines of credit.
In August 1995 the Company publicly sold 2,474,900 shares of its common stock.
The net proceeds of approximately $45 million were used to repay a portion of
the indebtedness outstanding under the Company's $300 million senior unsecured
revolving credit facility. The Company has reborrowed and will continue to
reborrow under the senior unsecured revolving credit agreement from time to time
as necessary to fund development of existing and new projects and for other
general corporate purposes.
Management believes that the Company's current borrowing capacity, when combined
with existing cash and short-term investments and currently anticipated cash
flows from the Company's operating communities, conventional homebuilding
activities and residential land development project, will provide the Company
with adequate capital resources to fund the Company's currently anticipated
operating requirements for the next 12 months.
The Company's senior unsecured revolving credit facility and the indentures for
the Company's publicly-held debt contain restrictions which could, depending on
the circumstances, affect the Company's ability to borrow in the future. If the
Company at any time is not successful in obtaining sufficient capital to fund
its then planned development and expansion expenditures, some or all of its
projects may be significantly delayed. Any such delay could result in cost
increases and may adversely affect the Company's results of operations.
The cash flow for each of the Company's communities can differ substantially
from reported earnings, depending on the status of the development cycle. The
initial years of development or expansion require significant cash outlays for,
among other things, land acquisition, obtaining master plan and other approvals,
construction of amenities (including golf courses and recreation centers), model
homes, sales and administration facilities, major roads, utilities, general
landscaping and interest. Since these costs are capitalized, this can result in
income reported for financial statement purposes during those initial years
significantly exceeding cash flow. However, after the initial years of
development or expansion, when these expenditures are made, cash flow can
significantly exceed earnings reported for financial statement purposes, as
costs and expenses include amortization charges for substantial amounts of
previously expended costs.
During the 1995 quarter the Company generated $56.2 million of net cash from
community sales activities, used $37.3 million of cash for land and lot and
amenity development at operating communities, paid $27.1 million for costs
related to communities in the pre-operating stage, generated $5.0 million of net
cash from conventional homebuilding operations and used $27.2 million of cash
for other operating activities.
The Company believes that, of the $244.5 million of cash spent by the Company
during the 1995 quarter for land acquisitions, lot and amenity development, home
construction and other operating activities, approximately $39.3 million was to
some extent discretionary as to timing and precedes the actual construction of
homes from which cash can be generated upon closing of home sale contracts. This
$39.3 million was comprised of $27.1 million related to projects in the
pre-operating stage and $12.2 million for land acquisitions and amenity
development at operating communities.
At September 30, 1995, under the most restrictive of the covenants in the
Company's debt agreements, $40.8 million of the Company's retained earnings was
available for payment of cash dividends and for the acquisition by the Company
of its common stock.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibit 27.0 Financial Data Schedule
(b) In the quarter ended September 30, 1995 the Company filed a report
on Form 8-K dated August 10, 1995 to file the Underwriting Agreement
for 2,474,900 shares of common stock publicly sold by the Company in
August 1995.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, who are duly authorized to do so.
DEL WEBB CORPORATION
(Registrant)
Date: November 8, 1995 /s/ Philip J. Dion
---------------- ------------------
Philip J. Dion
Chairman and Chief Executive Officer
Date: November 8, 1995 /s/ John A. Spencer
---------------- -------------------
John A. Spencer
Senior Vice President and
Chief Financial Officer
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1995
AND THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE THREE
MONTHS ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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