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, 2000.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition 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
(State or other jurisdiction 86-0077724
of incorporation or organization) (IRS Employer Identification Number)
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 31, 2000 Registrant had outstanding 18,386,404 shares of common
stock.
<PAGE>
DEL WEBB CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED
SEPTEMBER 30, 2000
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 2000,
June 30, 2000 and September 30, 1999...............................1
Consolidated Statements of Earnings for the three
months ended September 30, 2000 and 1999...........................2
Consolidated Statements of Cash Flows for the three
months ended September 30, 2000 and 1999...........................3
Notes to Consolidated Financial Statements.........................5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...............................18
<PAGE>
DEL WEBB CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30, SEPTEMBER 30,
2000 2000 1999
(UNAUDITED) (UNAUDITED)
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Real estate inventories (Notes 2, 3 and 6) $ 1,793,390 $ 1,755,398 $ 1,728,900
Cash and short-term investments 7,598 21,038 14,613
Receivables 32,588 36,121 43,002
Property and equipment, net 95,737 96,637 74,157
Other assets 74,257 71,563 121,363
----------- ----------- -----------
$ 2,003,570 $ 1,980,757 $ 1,982,035
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS EQUITY
Notes payable, senior and subordinated debt (Note 3) $ 1,040,832 $ 1,005,424 $ 1,107,582
Contractor and trade accounts payable 91,070 113,574 114,485
Accrued liabilities and other payables 138,625 158,351 118,320
Home sale deposits 169,409 165,762 185,505
Deferred income taxes (Note 4) 48,478 47,030 24,662
Income taxes payable (Note 4) 15,676 8,230 11,925
----------- ----------- -----------
Total liabilities 1,504,090 1,498,371 1,562,479
----------- ----------- -----------
Shareholders' equity:
Common stock, $.001 par value. Authorized 30,000,000
shares; issued 18,383,409 shares at September 30, 2000,
18,360,213 shares at June 30, 2000 and 18,225,643 shares at
September 30, 1999 18 18 18
Additional paid-in capital 171,068 170,112 169,081
Retained earnings 332,722 316,240 255,859
----------- ----------- -----------
503,808 486,370 424,958
Less deferred compensation (4,328) (3,984) (5,402)
----------- ----------- -----------
Total shareholders' equity 499,480 482,386 419,556
----------- ----------- -----------
$ 2,003,570 $ 1,980,757 $ 1,982,035
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
DEL WEBB CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
----------------------
2000 1999
-------- --------
Revenues (Note 5) $417,658 $409,562
-------- --------
Costs and expenses (Note 5):
Home construction, land and other 316,938 313,829
Selling, general and administrative 57,427 56,939
Interest (Note 6) 17,541 17,257
-------- --------
391,906 388,025
-------- --------
Earnings before income taxes 25,752 21,537
Income taxes (Note 4) 9,271 7,753
-------- --------
Net earnings $ 16,481 $ 13,784
======== ========
Weighted average shares outstanding - basic 18,374 18,223
======== ========
Weighted average shares outstanding - assuming dilution 18,552 18,628
======== ========
Net earnings per share - basic $ .90 $ .76
======== ========
Net earning per share - assuming dilution $ .89 $ .74
======== ========
See accompanying notes to consolidated financial statements.
2
<PAGE>
DEL WEBB CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
--------------------------
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers related to operating community home sales $ 398,082 $ 427,026
Cash received from commercial land and facility sales at operating communities 16,495 6,344
Cash paid for costs related to home construction at operating communities (291,312) (275,205)
--------- ---------
Net cash provided by operating community sales activities 123,265 158,165
Cash paid for land acquisitions at operating communities (12,742) (7,534)
Cash paid for lot development at operating communities (73,310) (73,488)
Cash paid for amenity development at operating communities (23,069) (55,919)
--------- ---------
Net cash provided by operating communities 14,144 21,224
Cash paid for costs related to communities in the pre-operating stage -- (14,716)
Cash received from mortgage operations 3,763 1,684
Cash paid for residential land development project (872) (2,514)
Cash paid for corporate activities (28,432) (26,870)
Interest paid (31,971) (30,869)
Cash paid for income taxes (13) (3,507)
--------- ---------
NET CASH USED FOR OPERATING ACTIVITIES (43,381) (55,568)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (1,558) (4,006)
Investments in life insurance policies (2,402) (1,538)
--------- ---------
NET CASH USED FOR INVESTING ACTIVITIES (3,960) (5,544)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings 109,031 121,820
Repayments of debt (75,370) (68,979)
Stock repurchases -- (3)
Proceeds from exercise of common stock options 240 218
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 33,901 53,056
--------- ---------
NET DECREASE IN CASH AND SHORT-TERM INVESTMENTS (13,440) (8,056)
CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD 21,038 22,669
--------- ---------
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 7,598 $ 14,613
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
DEL WEBB CORPORATION AND SUBIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
--------------------------
2000 1999
--------- ---------
<S> <C> <C>
Reconciliation of net earnings to net cash used for
operating activities:
Net earnings $ 16,481 $ 13,784
Allocation of non-cash common costs to costs and expenses,
excluding interest 97,402 90,998
Allocation of capitalized interest to costs and expenses 17,541 17,257
Deferred compensation amortization 352 763
Depreciation and other amortization 2,651 2,800
Deferred income taxes 1,448 2,152
Net increase in home construction costs (12,798) (40,254)
Land acquisitions (12,742) (7,534)
Lot development (73,310) (77,434)
Amenity development (23,069) (67,198)
Net change in other assets and liabilities (57,337) 9,098
-------- --------
Net cash used for operating activities $(43,381) $(55,568)
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<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 (the "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 the prior year have been reclassified to be consistent
with the current year financial statement presentation.
The 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, 2000,
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 revenues
from home closings.
(2) REAL ESTATE INVENTORIES
The components of real estate inventories are:
<TABLE>
<CAPTION>
In Thousands
-----------------------------------------------
September 30, June 30, September 30,
2000 2000 1999
(Unaudited) (Unaudited)
---------- ---------- ----------
<S> <C> <C> <C>
Home construction costs $ 273,588 $ 260,790 $ 305,622
Unallocated improvement and amenity costs 1,119,301 1,097,643 1,074,115
Unallocated capitalized interest 112,948 105,213 92,819
Land held for housing 206,713 205,142 191,306
Land held for future development or sale 80,840 86,610 65,038
---------- ---------- ----------
$1,793,390 $1,755,398 $1,728,900
========== ========== ==========
</TABLE>
At September 30, 2000 the Company had 335 completed homes and 721 homes
under construction that were not subject to a sales contract. These homes
represented $54.7 million of home construction costs at September 30, 2000.
At September 30, 1999 the Company had 347 completed homes and 497 homes
under construction (representing $45.0 million of home construction costs)
that were not subject to a sales contract.
Included in land held for future development or sale at September 30, 2000
were 201 acres of commercial land currently being marketed for sale at the
Company's active adult communities and 615 acres of commercial land planned
for sale at the Company's Anthem Arizona project. Also included in land held
for future development or sale at September 30, 2000 were 861 lots in the
Company's Nevada family communities.
5
<PAGE>
DEL WEBB CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) NOTES PAYABLE, SENIOR AND SUBORDINATED DEBT
Notes payable, senior and subordinated debt consists of:
<TABLE>
<CAPTION>
In Thousands
-----------------------------------------------
September 30, June 30, September 30,
2000 2000 1999
(Unaudited) (Unaudited)
---------- ---------- ----------
<S> <C> <C> <C>
9 3/4% Senior Subordinated Debentures
due 2003, net, unsecured $ 99,006 $ 98,903 $ 98,595
9% Senior Subordinated Debentures
due 2006, net, unsecured 98,518 98,449 98,244
9 3/4% Senior Subordinated Debentures
due 2008, net, unsecured 146,459 146,338 145,975
9 3/8% Senior Subordinated Debentures
due 2009, net, unsecured 195,997 195,880 195,530
10 1/4% Senior Subordinated Debentures
due 2010, net, unsecured 144,373 144,223 143,772
Notes payable to banks under a senior
revolving credit facility and short-term
lines of credit, unsecured 272,000 235,000 353,304
Real estate and other notes, primarily
secured 84,479 86,631 72,162
---------- ---------- ----------
$1,040,832 $1,005,424 $1,107,582
========== ========== ==========
</TABLE>
At September 30, 2000, under the most restrictive of the covenants in the
Company's debt agreements, $80.9 million of the Company's retained earnings
was available for payment of cash dividends and acquisition of stock.
(4) INCOME TAXES
The components of income taxes are:
In Thousands
(Unaudited)
-------------------------
Three Months Ended
September 30,
-------------------------
2000 1999
---- ----
Current:
Federal $7,297 $5,276
State 526 325
------ ------
7,823 5,601
------ ------
Deferred:
Federal 1,286 1,857
State 162 295
------ ------
1,448 2,152
------ ------
$9,271 $7,753
====== ======
6
<PAGE>
DEL WEBB CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) REVENUES AND COSTS AND EXPENSES
The components of revenues and costs and expenses:
In Thousands
(Unaudited)
-------------------------
Three Months Ended
September 30,
-------------------------
2000 1999
---- ----
Revenues:
Homebuilding:
Active adult communities $277,341 $292,619
Family and country club communities 117,793 96,736
-------- --------
395,134 389,355
Models/vacation getaway homes with
long-term leaseback* -- 9,725
-------- --------
Total homebuilding 395,134 399,080
Land and facility sales 16,493 6,415
Other 6,031 4,067
-------- --------
$417,658 $409,562
======== ========
* For the three months ended September 30, 1999, revenues (in thousands)
from the sale of models/vacation getaway homes with long-term
leasebacks are net of deferred profits of $3,786. These deferred
profits are being amortized as reductions of selling, general and
administrative expenses over the leaseback periods, offsetting
substantially all of the related rent expense.
In Thousands
(Unaudited)
-------------------------
Three Months Ended
September 30,
-------------------------
2000 1999
---- ----
Costs and expenses:
Home construction and land:
Active adult communities $208,543 $220,413
Family and country club communities 92,540 77,616
-------- --------
301,083 298,029
Models/vacation getaway homes with
long-term leaseback -- 9,725
-------- --------
Total homebuilding 301,083 307,754
Cost of land and facility sales 9,626 3,294
Other cost of sales 6,229 2,781
-------- --------
Total home construction, land and other 316,938 313,829
Selling, general and administrative 57,427 56,939
Interest 17,541 17,257
-------- --------
$391,906 $388,025
======== ========
7
<PAGE>
DEL WEBB CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(6) INTEREST
The following table shows the components of interest:
In Thousands
(Unaudited)
-------------------------
Three Months Ended
September 30,
-------------------------
2000 1999
---- ----
Interest incurred and capitalized $ 25,276 $ 25,069
======== ========
Allocation of capitalized interest to costs
and expenses $ 17,541 $ 17,257
======== ========
Unallocated capitalized interest included in
real estate inventories at period end $112,948 $ 92,819
======== ========
Interest income $ 211 $ 251
======== ========
Interest income is included in other revenues.
(7) SEGMENT INFORMATION
The Company conducts its operations in two primary segments in Arizona,
California, Florida, Illinois, Nevada, South Carolina and Texas. The
Company's active adult communities (primarily its "Sun City" communities)
are generally large-scale, master planned communities with extensive
amenities for people age 55 and over. The Company's family and country club
communities are open to people of all ages and are generally developed in
metropolitan or market areas in which the Company is developing active adult
communities. Within all of its communities, the Company has usually been the
exclusive builder of homes.
Both of the Company's primary segments generate their revenues through the
sale of homes (and, to a much lesser extent, land and facilities) to
external customers in the United States. The Company is not dependent on any
major customer.
Information as to the operations of the Company in different business
segments is set forth below based on the nature of the Company's communities
and their customers. Certain information has not been included by segment
due to the immateriality of the amount to the segments or in total. The
Company evaluates segment performance based on several factors, of which the
primary financial measure is earnings before interest and taxes ("EBIT").
The accounting policies of the business segments are the same as those for
the Company. There are no significant intersegment transactions.
8
<PAGE>
DEL WEBB CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) SEGMENT INFORMATION (CONTINUED)
In Thousands
(Unaudited)
-------------------------
Three Months Ended
September 30,
-------------------------
2000 1999
---- ----
Revenues:
Active adult communities $ 285,885 $ 304,016
Family and country club communities 130,516 104,430
Corporate and other 1,257 1,116
----------- -----------
$ 417,658 $ 409,562
=========== ===========
EBIT:
Active adult communities $ 42,236 $ 43,269
Family and country club communities 18,889 12,084
Corporate and other (17,832) (16,559)
----------- -----------
$ 43,293 $ 38,794
=========== ===========
Allocation of Capitalized Interest:
Active adult communities $ 11,964 $ 13,030
Family and country club communities 5,577 4,227
Corporate and other -- --
----------- -----------
$ 17,541 $ 17,257
=========== ===========
Assets at Period End:
Active adult communities $ 1,398,400 $ 1,366,224
Family and country club communities 471,795 509,515
Corporate and other 133,375 106,296
----------- -----------
$ 2,003,570 $ 1,982,035
=========== ===========
Expenditures for Real Estate Inventories:
Active adult communities $ 225,632 $ 259,218
Family and country club communities 90,143 114,524
Corporate and other 131 2,112
----------- -----------
$ 315,906 $ 375,854
=========== ===========
Purchases of Property and Equipment:
Active adult communities $ -- $ 1,590
Family and country club communities 85 204
Corporate and other 1,473 2,212
----------- -----------
$ 1,558 $ 4,006
=========== ===========
Depreciation and Other Amortization:
Active adult communities $ 1,012 $ 1,187
Family and country club communities 390 127
Corporate and other 1,249 1,486
----------- -----------
$ 2,651 $ 2,800
=========== ===========
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following 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 fiscal year ended June 30, 2000, filed with the Securities and
Exchange Commission.
CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, CHANGE
----------------- -------------------
2000 1999 AMOUNT PERCENT
---- ---- ------ -------
<S> <C> <C> <C> <C>
OPERATING DATA:
Number of net new orders:
Active adult communities:
Sun City Grand 217 318 (101) (31.8%)
Sun Cities Las Vegas 351 254 97 38.2%
Sun City Palm Desert 98 81 17 21.0%
Sun Cities Northern California 237 138 99 71.7%
Sun City Hilton Head 70 97 (27) (27.8%)
Sun City Texas 82 85 (3) (3.5%)
Sun City at Huntley 121 117 4 3.4%
Florida communities 77 86 (9) (10.5%)
Other communities 52 128 (76) (59.4%)
----- ----- ----- ------
Total active adult communities 1,305 1,304 1 0.1%
----- ----- ----- ------
Family and country club communities:
Arizona country club communities 52 43 9 20.9%
Nevada country club community 61 57 4 7.0%
Arizona family communities 242 234 8 3.4%
Nevada family communities 44 54 (10) (18.5%)
----- ----- ----- ------
Total family and country club communities 399 388 11 2.8%
----- ----- ----- ------
Total 1,704 1,692 12 0.7%
===== ===== ===== ======
</TABLE>
Included in net new orders for the three months ended September 30, 1999 were
models and vacation getaway homes sold with long-term leasebacks. Sun City Grand
had 114 such net new orders, the Sun Cities Las Vegas had 18 and the Nevada
country club community had 13.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, CHANGE
----------------- -------------------
2000 1999 AMOUNT PERCENT
---- ---- ------ -------
<S> <C> <C> <C> <C>
OPERATING DATA:
Number of home closings:
Active adult communities:
Sun City Grand 302 337 (35) (10.4%)
Sun Cities Las Vegas 259 251 8 3.2%
Sun City Palm Desert 110 135 (25) (18.5%)
Sun Cities Northern California 156 129 27 20.9%
Sun City Hilton Head 65 95 (30) (31.6%)
Sun City Texas 50 59 (9) (15.3%)
Sun City at Huntley 75 226 (151) (66.8%)
Florida communities 62 66 (4) (6.1%)
Other communities 84 78 6 7.7%
----- ----- ----- ------
Total active adult communities 1,163 1,376 (213) (15.5%)
----- ----- ----- ------
Family and country club communities:
Arizona country club communities 95 17 78 458.8%
Nevada country club community 37 55 (18) (32.7%)
Arizona family communities 238 224 14 6.3%
Nevada family communities 76 136 (60) (44.1%)
----- ----- ----- ------
Total family and country club communities 446 432 14 3.2%
----- ----- ----- ------
Total 1,609 1,808 (199) (11.0%)
===== ===== ===== ======
</TABLE>
Included in home closings for the three months ended September 30, 1999 were
models and vacation getaway homes sold with long-term leasebacks. Profits on the
closings of these units were deferred and are being amortized as reductions of
selling, general and administrative expenses over the leaseback periods,
offsetting substantially all of the related rent expense. Sun City Grand had 32
such home closings, the Sun Cities Las Vegas had 18 and the Nevada country club
community had 8.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, CHANGE
----------------- ------------------
2000 1999 AMOUNT PERCENT
---- ---- ------ -------
<S> <C> <C> <C> <C>
BACKLOG DATA:
Homes under contract at September 30:
Active adult communities:
Sun City Grand 476 715 (239) (33.4%)
Sun Cities Las Vegas 635 548 87 15.9%
Sun City Palm Desert 234 230 4 1.7%
Sun Cities Northern California 477 417 60 14.4%
Sun City Hilton Head 143 196 (53) (27.0%)
Sun City Texas 250 184 66 35.9%
Sun City at Huntley 191 396 (205) (51.8%)
Florida communities 224 153 71 46.4%
Other communities 101 218 (117) (53.7%)
------ ------ ------ ------
Total active adult communities 2,731 3,057 (326) (10.7%)
------ ------ ------ ------
Family and country club communities:
Arizona country club communities 191 270 (79) (29.3%)
Nevada country club community 187 137 50 36.5%
Arizona family communities 514 737 (223) (30.3%)
Nevada family communities 83 167 (84) (50.3%)
------ ------ ------ ------
Total family and country club communities 975 1,311 (336) (25.6%)
------ ------ ------ ------
Total 3,706 4,368 (662) (15.2%)
====== ====== ====== ======
Aggregate contract sales amount
(dollars in millions) $ 992 $1,040 (48) (4.6%)
====== ====== ====== ======
Average contract sales amount per home
(dollars in thousands) $ 268 $ 238 30 12.6%
====== ====== ====== ======
</TABLE>
Included in backlog at September 30, 1999 were models and vacation getaway homes
sold with long-term leasebacks. Sun City Grand had 82 such homes in backlog and
the Nevada country club community had 5.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, CHANGE
--------------------- ----------------------
2000 1999 AMOUNT PERCENT
---- ---- ------ -------
<S> <C> <C> <C> <C>
AVERAGE REVENUE PER HOME CLOSING:
Active adult communities:
Sun City Grand $ 201,100 $ 180,600 $ 20,500 11.4%
Sun Cities Las Vegas 226,300 219,000 7,300 3.3%
Sun City Palm Desert 320,700 275,500 45,200 16.4%
Sun Cities Northern California 300,800 277,900 22,900 8.2%
Sun City Hilton Head 253,500 212,200 41,300 19.5%
Sun City Texas 219,100 223,600 (4,500) (2.0%)
Sun City at Huntley 265,400 233,700 31,700 13.6%
Florida communities 151,300 133,800 17,500 13.1%
Other communities 227,100 192,700 34,400 17.9%
Average active adult communities 238,500 217,200 21,300 9.8%
Family and country club communities:
Arizona country club communities 334,200 217,900 116,300 53.4%
Nevada country club community 486,300 430,400 55,900 13.0%
Arizona family communities 224,200 207,600 16,600 8.0%
Nevada family communities 193,200 193,200 -- --
Average family and country club communities 264,100 231,900 32,200 13.9%
Total average $ 245,600 $ 220,700 $ 24,900 11.3%
========= ========= ========= =====
</TABLE>
Average revenue per home closing for the models and vacation getaway homes with
long-term leasebacks for the three months ended September 30, 1999 was $97,100
at Sun City Grand, $177,200 at the Sun Cities Las Vegas and $428,500 at the
Nevada country club community.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, CHANGE
--------------------- ----------------------
2000 1999 AMOUNT PERCENT
---- ---- ------ -------
<S> <C> <C> <C> <C>
OPERATING STATISTICS:
Costs and expenses as a percentage of revenues:
Home construction, land and other 75.9% 76.6% (0.7%) (0.9%)
Selling, general and administrative 13.7% 13.9% (0.2%) (1.4%)
Interest 4.2% 4.2% -- --
Ratio of home closings to homes under contract
in backlog at beginning of period 44.6% 40.3% 4.3% 10.7%
===== ===== ===== =====
</TABLE>
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
NOTES:
New orders are net of cancellations. The Company recognizes revenue at the close
of escrow.
The Sun Cities Las Vegas include Sun City Summerlin (which is built out), Sun
City MacDonald Ranch and Sun City Anthem.
The Sun Cities Northern California include Sun City Roseville (which is built
out) and Sun City Lincoln Hills.
Other active adult communities represent two smaller-scale communities in
Arizona and California.
Home closings began at Anthem Country Club (an Arizona country club community
near Phoenix) in September 1999.
A substantial majority of the backlog at September 30, 2000 is currently
anticipated to result in revenues in the next 12 months. However, a majority of
the backlog is contingent upon the availability of financing for the customer
and, in certain cases, sale of the customer's existing residence. 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, 2000 and 1999,
cancellations of home sales orders as a percentage of new home sales orders
written during the period were 14.4 percent and 15.1 percent, respectively.
RESULTS OF OPERATIONS
REVENUES. Total revenues increased to $417.7 million for the three months ended
September 30, 2000 from $409.6 million for the three months ended September 30,
1999. The 1999 quarter included $9.7 million of revenues from models and
vacation getaway homes sold with long-term leasebacks. There were no such
sale/leasebacks in the 2000 quarter.
Exclusive of closings of models and vacation getaway homes, active adult
community homebuilding revenues decreased to $277.3 million for the 2000 quarter
from $292.6 million for the 1999 quarter. This decrease was primarily
attributable to Sun City at Huntley, which closed 75 homes in the 2000 quarter
compared to 226 in the 1999 quarter. Sun City at Huntley began the 2000 quarter
with a backlog of 145 homes under contract, compared to a backlog of 505 homes
under contract at the beginning of the 1999 quarter. The Company believes the
decreased beginning backlog at this community was largely attributable to
prior-year pent-up demand which has now been satisfied.
An increase in the average revenue per active adult community home closing
resulted in a $25.6 million revenue increase, partially offsetting the decrease
in home closings.
Exclusive of closings of models and vacation getaway homes, family and country
club community homebuilding revenues increased to $117.8 million for the 2000
quarter from $96.7 million for the 1999 quarter. This increase was primarily
attributable to Anthem Arizona Country Club, which did not begin home closings
until September 1999. Anthem Arizona Country Club closed 95 homes in the 2000
quarter compared to 17 in the 1999 quarter and, exclusive of the increase in
revenue per home closing, contributed $17.0 million to the increase in revenues.
An increase in the average revenue per family and country club community home
closing contributed $23.4 million to the increase in revenues. These increases
were partially offset by decreases in home closings at the Phoenix-area family
communities (due to fewer subdivisions) and the Nevada family communities (due
to closing out these operations). Exclusive of the change in revenue per home
closing, the decreased home closings at these communites resulted in a $15.0
million decrease in revenues.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Land and facility sales increased to $16.5 million for the 2000 quarter from
$6.4 million for the 1999 quarter. This increase was primarily attributable to
land sales at the Company's Nevada family communities resulting from the
Company's decision to cease family community operations in that state.
HOME CONSTRUCTION, LAND AND OTHER COSTS. The small increase in home
construction, land and other costs to $316.9 million for the 2000 quarter from
$313.8 million for the 1999 quarter was due to the increase in revenues,
partially offset by a decrease in these costs as a percentage of revenues (75.9
percent for the 2000 quarter compared to 76.6 percent for the 1999 quarter).
This cost decrease as a percentage of revenues was primarily due to an increase
in homebuilding gross margin to 23.8 percent for the 2000 quarter from 22.9
percent for the 1999 quarter. Of this 0.9 percent increase, 0.6 percent was
attributable to deferral of profit in the 1999 quarter on the sale and long-term
leaseback of 58 model and vacation getaway homes at three communities. The
balance of the increase was largely attributable to price increases that have
been effected over the past 12 months.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. As a percentage of revenues,
selling, general and administrative expenses decreased slightly to 13.7 percent
for the 2000 quarter from 13.9 percent for the 1999 quarter. This decrease
resulted primarily from the increase in revenues. The Company believes this
decrease is also partially attributable to results of efforts to cut costs and
improve the efficiency of operations.
INTEREST. As a percentage of revenues, allocation of capitalized interest to
costs and expenses was 4.2 percent for both the 2000 quarter and the 1999
quarter.
INCOME TAXES. The increase in income taxes to $9.3 million for the 2000 quarter
from $7.8 million for the 1999 quarter was due to the increase in earnings
before income taxes. The effective tax rate in both quarters was 36 percent.
NET EARNINGS. The increase in net earnings to $16.5 million for the 2000 quarter
from $13.8 million for the 1999 quarter was attributable to the increase in
homebuilding gross margin and increased gross margin from land sales.
NET NEW ORDER ACTIVITY AND BACKLOG. Net new orders in the 2000 quarter were
comparable to the 1999 quarter. The Company believes increases were attributable
to the following:
* Strong demand at Sun City Lincoln Hills resulted in the increase at the Sun
Cities Northern California.
* Strong demand at Sun City Anthem resulted in the increase at the Sun Cities
Las Vegas.
The Company believes that largely offsetting decreases were attributable to the
following:
* Included for the 1999 quarter were 145 models and vacation getaway homes
sold with long-term leasebacks (mostly at Sun City Grand). There were no
such sale/leasebacks in the 2000 quarter.
* The built-out Clover Springs community (part of other active adult
communities) contributed 93 net new orders in the 1999 quarter but only one
net new order in the 2000 quarter.
* Sun City Hilton Head experienced a decrease in net new orders. The Company
is implementing new programs designed to address this reduction.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Due to increased sales prices, the dollar amount of homes under contract at
September 30, 2000 was only 4.6 percent lower than at September 30, 1999, while
the number of homes in backlog was 15.2 percent lower. The Company believes that
the unit backlog decrease was attributable to the following:
* Satisfaction of prior-year pent-up demand at Sun City at Huntley. The
Company is developing a broader product range and addressing pricing issues
for this community.
* The Company's previous decision to cease family community operations in
Nevada.
* A reduction in the number of family community subdivisions in the Phoenix
area.
* The decreased net new orders at Sun City Grand, Clover Springs and Sun City
Hilton Head, discussed above.
LIQUIDITY AND FINANCIAL CONDITION OF THE COMPANY
The cash flow for each community can differ substantially from reported
earnings, depending on the development cycle. The initial years of development
or expansion may require significant cash outlays for, among other things,
acquiring tracts of land, obtaining development approvals, developing land and
lots and constructing project infrastructure (such as roads and utilities),
recreation centers, golf courses, model homes and sales facilities. 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, cash flow can
significantly exceed earnings reported for financial statement purposes, as
costs and expenses include allocation charges for substantial previously
expended costs.
During the 2000 quarter the Company generated $123.2 million of net cash from
operating community sales activities, used $109.1 million for land and lot and
amenity development at operating communities and used $57.5 million for interest
and other operating activities. The resulting $43.4 million of net cash used by
operating activities was funded primarily through borrowings under the Company's
$500 million senior unsecured revolving credit facility (the "Credit Facility").
Real estate development is dependent on, among other things, the availability
and cost of financing. In periods of significant growth, the Company requires
significant additional capital resources.
In fiscal 1999 and fiscal 2000, the Company had under development, among other
projects: (i) Sun City Lincoln Hills; (ii) Anthem Las Vegas, which includes Sun
City Anthem, country club and family communities; (iii) Anthem Arizona, which
includes country club and family communities; and (iv) Sun City at Huntley.
Given its assessment of market conditions and appropriate timing for these new
communities, the Company decided to engage in substantial development at these
communities and permit its indebtedness and leverage to increase substantially.
To date, material cash expenditures have been made for these communities.
In order to provide adequate capital to meet the Company's operating
requirements (largely for these new communities), the Company in February 1999
completed a $150 million public debt offering and negotiated an increase in the
amount of its Credit Facility from $450 million to $500 million. At September
30, 2000 the Company had $272.0 million outstanding under the Credit Facility.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Primarily as a result of the public debt offering and borrowings to fund these
development expenditures, the Company incurred considerably more indebtedness
and was considerably more leveraged throughout fiscal 1999 and most of fiscal
2000 than it had been in recent years. The Company has reduced its leverage,
with debt to total capitalization declining from 72.5 percent at September 30,
1999 to 67.6 percent at September 30, 2000 as a result of debt repayments and an
increase in retained earnings. The Company currently intends to further reduce
its percentage of debt to total capitalization to 67 percent or lower before
incurring material development expenditures (excluding land acquisition) for any
significant new communities. Its near-term goal is to reach 67 percent debt to
total capitalization in fiscal 2001.
The Company expects to have adequate capital resources to meet its needs for the
next 12 months.
At September 30, 2000, under the most restrictive of the covenants in the debt
agreements, $80.9 million of the retained earnings was available for payment of
cash dividends and acquisition of stock.
FORWARD LOOKING INFORMATION; CERTAIN CAUTIONARY STATEMENTS
This "Management's Discussion and Analysis of Financial Condition and Results of
Operations" contains forward looking statements that involve risks and
uncertainties, and actual results may differ materially. Certain forward looking
statements are based on assumptions which may not prove to be accurate. Risks
and uncertainties include risks associated with: the cyclical nature of real
estate operations; land acquisition and development; the ability to successfully
implement new strategic initiatives; government regulation; growth management
and environmental considerations; geographic concentration; financing and
leverage; interest rate fluctuations; construction labor and materials costs;
future communities and new geographic markets; legal matters; natural risks; and
other matters set forth in the Company's Annual Report on Form 10-K for its
fiscal year ended June 30, 2000.
ACCOUNTING STANDARD RECENTLY ADOPTED BY THE COMPANY
In March 2000 the Financial Accounting Standards Board issued FASB
Interpretation No. 44, ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK
COMPENSATION, an interpretation of APB Opinion No. 25. This Interpretation was
effective July 1, 2000. The adoption of this Interpretation did not have any
significant impact on the Company.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 10.1 Del Webb Corporation 2000 Executive Management Incentive Plan.
Exhibit 10.2 Current List of Officers that are party to a Change in
Control Agreement.
Exhibit 10.3 Del Webb Corporation 2000 Executive Long-Term Incentive Plan.
Exhibit 27 Financial Data Schedule.
(b) The Company did not file any reports on Form 8-K during the period covered
by this report.
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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 9, 2000 /s/ LeRoy C. Hanneman, Jr.
-------------------- ----------------------------------
LeRoy C. Hanneman, Jr.
Chief Executive Officer
Date: November 9, 2000 /s/ John A. Spencer
-------------------- ----------------------------------
John A. Spencer
Executive Vice President and Chief
Financial Officer
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