=============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-9804
PULTE CORPORATION
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2766606
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
33 Bloomfield Hills Pkwy., Suite 200,
Bloomfield Hills, Michigan 48304
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (810) 647-2750
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding twelve months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to the filing requirements for the past 90 days.
YES __X__ NO _____
Number of shares of common stock outstanding as of April 30, 1997: 20,961,605
Total pages: 28
Listing of exhibits: 26
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<PAGE>
PULTE CORPORATION
INDEX
Page No.
--------
PART I FINANCIAL INFORMATION
Item 1 Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets, March 31, 1997 and
December 31, 1996 ................................................... 3
Condensed Consolidated Statements of Income, Three Months Ended
March 31, 1997 and 1996.............................................. 4
Condensed Consolidated Statement of Shareholders' Equity, Three
Months Ended March 31, 1997.......................................... 5
Condensed Consolidated Statements of Cash Flows, Three Months Ended
March 31, 1997 and 1996.............................................. 6
Notes to Condensed Consolidated Financial Statements.................. 8
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 19
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K.............................. 26
SIGNATURES............................................................ 27
2
<PAGE>
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PULTE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
($000's omitted)
March 31, December 31,
1997 1996
--------- ------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Cash and equivalents...................................... $ 62,271 $ 189,625
Unfunded settlements...................................... 55,751 73,896
House and land inventories................................ 1,113,098 1,017,262
Mortgage-backed and related securities.................... 44,661 47,113
Residential mortgage loans and other securities
available-for-sale...................................... 106,604 170,443
Other assets.............................................. 349,645 342,726
Discontinued operations................................... 146,436 144,076
---------- ----------
$1,878,466 $1,985,141
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities, including book
overdrafts of $55,918 and $85,827 in 1997 and 1996,
respectively........................................ $ 384,626 $ 439,578
Collateralized short-term debt, recourse solely to
applicable subsidiary assets........................ 94,915 154,136
Mortgage-backed bonds, recourse solely to applicable
subsidiary assets................................... 43,225 45,304
Income taxes........................................... 12,094 12,930
Subordinated debentures and senior notes............... 395,899 391,175
Discontinued operations................................ 114,803 112,745
---------- ----------
Total liabilities................................... 1,045,562 1,155,868
Shareholders' equity...................................... 832,904 829,273
---------- ----------
$1,878,466 $1,985,141
========== ==========
<FN>
Note: The balance sheet at December 31, 1996 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes to condensed consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PULTE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(000's omitted, except per share data)
(Unaudited)
For The Three Months Ended
March 31,
--------------------------
1997 1996
--------- ---------
<S> <C> <C>
Revenues:
Homebuilding............................................ $ 423,215 $ 411,331
Mortgage banking and financing, interest and other...... 6,727 16,133
Corporate, principally interest......................... 1,758 5,055
--------- ---------
Total revenues.................................. 431,700 432,519
--------- ---------
Expenses:
Homebuilding, principally cost of sales................. 414,218 402,763
Mortgage banking and financing, interest and other...... 6,563 11,295
Corporate, net.......................................... 8,912 9,847
--------- ---------
Total expenses.................................. 429,693 423,905
--------- ---------
Income from continuing operations before income taxes..... 2,007 8,614
Income taxes.............................................. 773 3,506
--------- ---------
Income from continuing operations......................... 1,234 5,108
Income from discontinued thrift operations, net of
income taxes............................................ 1,003 1,972
--------- ---------
Net income................................................ $ 2,237 $ 7,080
========= =========
Per share data:
Primary and fully-diluted:
Income from continuing operations..................... $ .05 $ .19
Income from discontinued operations................... .04 .07
--------- ---------
Net income............................................ $ .09 $ .26
========= =========
Cash dividends declared................................. $ .06 $ .06
========= =========
Weighted-average common shares outstanding:
Primary............................................... 23,467 27,250
========= =========
Fully-diluted......................................... 23,468 27,250
========= =========
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PULTE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
($000's omitted)
(Unaudited)
Additional
Common Paid-in Unrealized Retained
Stock Capital Gains Earnings Total
------- ---------- ---------- -------- -----
<S> <C> <C> <C> <C> <C>
Shareholders' Equity, December 31, 1996 $ 233 $ 57,516 $ 1,474 $ 770,050 $ 829,273
Exercise of stock options ............. -- 1,606 -- -- 1,606
Change in unrealized
gains on securities
available-for-sale,
net of income taxes
of $192 ............................ -- -- (212) -- (212)
Net income ............................ -- -- -- 2,237 2,237
--------- --------- --------- --------- ---------
Shareholders' Equity, March 31, 1997 .. $ 233 $ 59,122 $ 1,262 $ 772,287 $ 832,904
========= ========= ========= ========= =========
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PULTE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($000's omitted)
(Unaudited)
Three Months Ended
March 31,
------------------
1997 1996
---- ----
<S> <C> <C>
Continuing operations:
Cash flows from operating activities:
Income from continuing operations ........................ $ 1,234 $ 5,108
Adjustments to reconcile income from continuing operations
to net cash flows used in operating activities:
Amortization, depreciation and other ............... 322 1,639
Deferred income taxes .............................. (1,750) (4,627)
Gain on sale of securities ......................... -- (4,495)
Increase (decrease) in cash due to:
Inventories .................................. (95,836) (61,082)
Residential mortgage loans held for sale ..... 63,838 58,514
Other assets ................................. 12,832 (8,407)
Accounts payable and accrued liabilities ..... (54,378) (7,242)
Income taxes ................................. 257 6,977
--------- ---------
Net cash used in operating activities ....................... (73,481) (13,615)
--------- ---------
Cash flows from investing activities:
Proceeds from sale of securities available-for-sale ...... -- 61,076
Principal payments of mortgage-backed securities ......... 2,028 8,431
Decrease (increase) in funds held by trustee ............. 68 (49,432)
Other, net ............................................... -- (3,064)
--------- ---------
Net cash provided by investing activities ................... 2,096 17,011
--------- ---------
Cash flows from financing activities:
Payment of long-term debt and bonds ...................... (2,373) (60,784)
Proceeds from borrowings ................................. 4,702 --
Repayment of borrowings .................................. (59,304) (49,210)
Stock repurchases ........................................ -- (9,261)
Dividends paid ........................................... -- (1,622)
Other, net ............................................... 1,006 82
--------- ---------
Net cash used in financing activities ....................... (55,969) (120,795)
--------- ---------
Net decrease in cash and equivalents-continuing operations .. $(127,354) $(117,399)
--------- ---------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
PULTE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
($000's omitted)
(Unaudited)
Three Months Ended
March 31,
------------------
1997 1996
---- ----
<S> <C> <C>
Discontinued Operations:
Cash flows from operating activities:
Income from discontinued operations ................... $ 1,003 $ 1,972
Change in income taxes ................................ -- (97)
Other changes, net .................................... (1,097) (2,051)
Cash flows from investing activities:
Purchase of securities available-for-sale ............. (12,828) (9,560)
Principal payments of mortgage-backed securities ...... 7,539 13,133
Net proceeds from sale of investments ................. 2,330 --
Decrease in Covered Assets and (FRF) receivables ...... 30,646 31,283
Cash flows from financing activities:
Decrease in deposit liabilities ....................... (9,347) (1,521)
Repayment of borrowings ............................... (31,560) (31,560)
Increase (decrease) in Federal Home Loan Bank (FHLB)
advances ............................................ 13,000 (1,900)
--------- ---------
Net decrease in cash and equivalents-discontinued
operations ............................................ (314) (301)
--------- ---------
Net decrease in cash and equivalents ..................... (127,668) (117,700)
Cash and equivalents at beginning of period .............. 192,202 295,163
--------- ---------
Cash and equivalents at end of period .................... $ 64,534 $ 177,463
========= =========
Cash - continuing operations ............................. $ 62,271 $ 174,828
Cash - discontinued operations ........................... 2,263 2,635
--------- ---------
$ 64,534 $ 177,463
========= =========
Supplemental disclosure of cash flow information-cash paid
during the period for:
Interest, net of amount capitalized;
Continuing operations ............................... $ 3,614 $ 8,591
Discontinued operations ............................. 508 732
--------- ---------
$ 4,122 $ 9,323
========= =========
Income taxes .......................................... $ 2,223 $ 1,155
========= =========
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
7
<PAGE>
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
($000's omitted)
(Unaudited)
1. Basis of presentation and significant accounting policies
Basis of presentation
The condensed consolidated financial statements include the accounts of
Pulte Corporation (the Company), and all of its significant subsidiaries.
The Company's direct subsidiaries consist of Pulte Financial Companies,
Inc. (PFCI) and Pulte Diversified Companies, Inc. (PDCI). PDCI's direct
subsidiaries are Pulte Home Corporation (Pulte) and First Heights Bank,
fsb (First Heights). Pulte Mortgage Corporation, formerly known as ICM
Mortgage Corporation, is a direct subsidiary of Pulte. The Company's
continuing operations include its homebuilding (Pulte) and financial
services subsidiaries, which include Pulte Mortgage (mortgage banking)
and PFCI (financing). The Company's thrift subsidiary, First Heights, has
been classified as discontinued operations (See Note 2).
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31,
1997 are not necessarily indicative of the results that may be expected
for the year ended December 31, 1997. These financial statements should
be read in conjunction with the Company's consolidated financial
statements and footnotes thereto included in the Company's annual report
on Form 10-K for the year ended December 31, 1996.
Certain 1996 classifications have been changed to conform with the 1997
presentation.
Significant accounting policies
In February 1997, the Financial Accounting Standards Board (FASB) adopted
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per
Share, which is effective for fiscal years ending after December 15,
1997. This statement replaces Accounting Principles Board (APB) Opinion
No 15, Earnings Per Share, and the presentation of primary earnings per
share (EPS) with a presentation of basic EPS. This statement also
requires dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the basic
EPS computation to the numerator and denominator of the diluted EPS
calculation. Basic EPS excludes dilution and is computed by dividing
income available to common shareholders by the weighted-average number of
common shares outstanding for the period. Diluted EPS is computed
similarly to fully-diluted EPS pursuant to APB 15. Under SFAS No. 128,
the Company's basic and diluted EPS amounts would have been identical to
the primary and fully-diluted EPS amounts presented in its consolidated
statements of income for the three months ended March 31, 1997 and 1996.
2. Discontinued operations
Revenues of the Company's discontinued thrift operations for the three
months ended March 31, 1997 and 1996, were $2,425 and $3,304,
respectively. For the three months ended March 31, 1997 and 1996,
discontinued thrift operations provided after-tax income of $1,003 and
$1,972, respectively. Additional discounts of approximately $2,800 at
March 31, 1997, are being amortized into income over the life of the
related Federal Savings and Loan Insurance Corporation (FSLIC) Resolution
Fund (FRF) note at a rate of approximately $1,200 per quarter.
8
<PAGE>
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
($000's omitted)
(Unaudited)
3. Segment information
<TABLE>
<CAPTION>
Financial Services
-------------------------
Mortgage
Homebuilding Banking Financing Corporate Consolidated
------------ -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Three Months Ended
March 31, 1997:
Continuing Operations:
Revenues:
Unaffiliated customers $ 423,215 $ 5,746 $ 981 $ 1,758 $ 431,700
========== ========== ========== ========== ==========
Income (loss) before
income taxes .......... $ 8,997 $ 206 $ (42) $ (7,154) $ 2,007
========== ========== ========== ========== ==========
At March 31, 1997:
Identifiable assets ....... $1,401,101 $ 120,516 $ 45,124 $ 165,289 $1,732,030
========== ========== ========== ==========
Assets of discontinued
operations .............. 146,436
----------
Total assets .............. $1,878,466
==========
Three Months Ended
March 31, 1996:
Continuing Operations:
Revenues:
Unaffiliated customers $ 411,331 $ 7,523 $ 8,610 $ 5,055 $ 432,519
========== ========== ========== ========== ==========
Income (loss) before
income taxes .......... $ 8,568 $ 457 $ 4,381 $ (4,792) $ 8,614
========== ========== ========== ========== ==========
At March 31, 1996:
Identifiable assets ....... $1,174,440 $ 136,886 $ 236,830 $ 219,861 $1,768,017
========== ========== ========== ==========
Assets of discontinued
operations .............. 153,028
----------
Total assets .............. $1,921,045
==========
</TABLE>
4. Subsequent event
On April 16, 1997, the Company acquired 2,325,000 shares of its common
stock from two corporations controlled by James Grosfeld and his family.
These shares represented approximately 9.9% of the Company's
then-outstanding common shares. The price paid for the shares was
approximately $73,000, an amount per share equivalent to the average
closing price of the Company's common stock over the 30 business days
preceding the transaction closing date. In connection with the
acquisition, the Company and Mr. Grosfeld also entered into an agreement
that modified a consulting agreement dated April 27, 1990, and an
agreement dated November 16, 1990, between Mr. Grosfeld and the Company.
The modifications included (1) prepayment by the Company, at an
agreed-upon discount rate, of the deferred amounts due to Mr. Grosfeld
under the two agreements; $2,972 was paid at the closing of the share
acquisition and $869 will be payable upon the first to occur of January
1, 2000 or Mr. Grosfeld's death, (2) a 13-month extension (until December
31, 1999) of Mr. Grosfeld's duties to provide advisory services to the
Company and its subsidiaries in connection with the Company's thrift
operations and other matters requested by the Company, and (3) a 10-year
extension of the restrictions imposed by the November 1990 agreement on
certain of Mr. Grosfeld's activities, until December 1, 2008.
9
<PAGE>
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
($000's omitted)
(Unaudited)
5. Commitments and contingencies
Federal Deposit Insurance Corporation
The Company is a party to two lawsuits relating to First Heights' 1988
acquisition from the FSLIC, and First Heights' ownership of, five failed
Texas thrifts. The first lawsuit (the "District Court Case") was filed on
July 7, 1995 in the United States District Court, Eastern District of
Michigan, by the FDIC against the Company, PDCI and First Heights
(collectively, the "Pulte Defendants"). The second lawsuit (the "Court of
Claims Case") was filed on December 26, 1996 in the United States Court
of Federal Claims (Washington, D.C.) by the Pulte Defendants against the
United States. In the District Court Case, the FDIC seeks a declaration
of rights and other relief related to the assistance agreement entered
into between First Heights and the FSLIC. The FDIC is the successor to
FSLIC. The FDIC and the Pulte Defendants disagree about the proper
interpretation of provisions in the assistance agreement which provide
for sharing of certain tax benefits achieved in connection with First
Heights' 1988 acquisition and ownership of the five failed Texas thrifts.
The District Court Case also includes certain other claims relating to
the foregoing, including claims resulting from the Company's and First
Heights' amendment of a tax sharing and allocation agreement between the
Company and First Heights. The Pulte Defendants dispute the FDIC's claims
and believe that a proper interpretation of the assistance agreement
limits the FDIC's participation in the tax benefits. The Pulte Defendants
had filed an answer and a counterclaim, seeking, among other things, a
declaration that the FDIC has breached the assistance agreement in
numerous respects. On December 24, 1996, the Pulte Defendants voluntarily
dismissed without prejudice certain of their claims in the District Court
Case and on December 26, 1996, initiated the Court of Claims Case. The
Court of Claims Case contains essentially the same claims as were
voluntarily dismissed from the District Court Case.
6. Supplemental guarantor information
The Company previously filed a universal shelf registration of up to
$250,000 of debt or equity securities of which $125,000 of 7.3% unsecured
Senior Notes were issued in October, 1995. In addition, the Company has
previously issued $100,000 of 7%, and $115,000 of 8.375% unsecured Senior
Notes. Such obligations to pay principal, premium, if any, and interest
are guaranteed jointly and severally on a senior basis by Pulte, all of
Pulte's wholly-owned homebuilding subsidiaries and Builders' Supply &
Lumber Co., Inc. which is a Pulte wholly-owned subsidiary (collectively,
the Guarantors). Such guarantees are full and unconditional. The
principal non-Guarantors include PDCI, the parent company of Pulte, Pulte
Mortgage, First Heights, and PFCI. See Note 1 for additional information
on the Company's Guarantor and non-Guarantor subsidiaries.
Supplemental consolidating financial information of the Company,
specifically including such information for the Guarantors, is presented
below. Investments in subsidiaries are presented using the equity method
of accounting. Separate financial statements of the Guarantors are not
provided because management has concluded that the segment information
provides sufficient detail to allow investors to determine the nature of
the assets held by and the operations of the combined groups.
10
<PAGE>
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
($000's omitted)
(Unaudited)
6. Supplemental Guarantor Information (continued)
<TABLE>
<CAPTION>
CONSOLIDATING BALANCE SHEET
March 31, 1997
Unconsolidated
-----------------------------------------------
Consolidated
Pulte Guarantor Non-Guarantor Eliminating Pulte
Corporation Subsidiaries Subsidiaries Entries Corporation
----------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and equivalents ............ $ 5,155 $ 54,300 $ 2,816 $ -- $ 62,271
Unfunded settlements ............ -- 55,751 -- -- 55,751
House and land inventories ...... -- 1,113,098 -- -- 1,113,098
Mortgage-backed and related
securities .................... -- -- 44,661 -- 44,661
Residential mortgage loans
and other securities
available-for-sale ............ -- -- 106,604 -- 106,604
Land held for sale and future
development ................... -- 29,918 -- -- 29,918
Deferred income taxes ........... 130,418 -- (790) -- 129,628
Other assets .................... 14,262 148,034 27,803 -- 190,099
Discontinued operations ......... -- -- 146,436 -- 146,436
Investment in subsidiaries ...... 863,831 19,049 885,031 (1,767,911) --
Advances receivable -
subsidiaries .................. 243,286 551 18,931 (262,768) --
----------- ----------- ----------- ----------- -----------
$ 1,256,952 $ 1,420,701 $ 1,231,492 $(2,030,679) $ 1,878,466
=========== =========== =========== =========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued
liabilities ................... $ 50,461 $ 307,803 $ 26,362 $ -- $ 384,626
Collateralized short-term debt,
recourse solely to applicable
subsidiary assets ............. -- -- 94,915 -- 94,915
Mortgage-backed bonds,
recourse solely to
applicable subsidiary assets .. -- -- 43,225 -- 43,225
Income taxes .................... 12,094 -- -- -- 12,094
Subordinated debentures and
senior notes .................. 339,387 56,512 -- -- 395,899
Discontinued operations ......... 2,784 -- 112,019 -- 114,803
Advances payable - subsidiaries . 19,322 219,375 24,071 (262,768) --
----------- ----------- ----------- ----------- -----------
Total liabilities .......... 424,048 583,690 300,592 (262,768) 1,045,562
Shareholders' equity ............ 832,904 837,011 930,900 (1,767,911) 832,904
----------- ----------- ----------- ----------- -----------
$ 1,256,952 $ 1,420,701 $ 1,231,492 $(2,030,679) $ 1,878,466
=========== =========== =========== =========== ===========
</TABLE>
11
<PAGE>
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
($000's omitted)
(Unaudited)
6. Supplemental Guarantor Information (continued)
<TABLE>
<CAPTION>
CONSOLIDATING BALANCE SHEET
December 31, 1996
Unconsolidated
-----------------------------------------------
Consolidated
Pulte Guarantor Non-Guarantor Eliminating Pulte
Corporation Subsidiaries Subsidiaries Entries Corporation
----------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and equivalents ............ $ 114,585 $ 71,599 $ 3,441 $ -- $ 189,625
Unfunded settlements ............ -- 73,896 -- -- 73,896
House and land inventories ...... -- 1,017,262 -- -- 1,017,262
Mortgage-backed and related
securities .................... -- -- 47,113 -- 47,113
Residential mortgage loans
and other securities
available-for-sale ............ -- -- 170,443 -- 170,443
Land held for sale and future
development ................... -- 37,655 -- -- 37,655
Deferred income taxes ........... 128,668 -- (982) -- 127,686
Other assets .................... 12,860 140,489 24,036 -- 177,385
Discontinued operations ......... -- -- 144,076 -- 144,076
Investment in subsidiaries ...... 859,866 23,425 878,540 (1,761,831) --
Advances receivable -
subsidiaries .................. 139,351 827 17,246 (157,424) --
----------- ----------- ----------- ----------- -----------
$ 1,255,330 $ 1,365,153 $ 1,283,913 $(1,919,255) $ 1,985,141
=========== =========== =========== =========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued
liabilities ................... $ 51,731 $ 357,480 $ 30,367 $ -- $ 439,578
Collateralized short-term debt,
recourse solely to applicable
subsidiary assets ............. -- -- 154,136 -- 154,136
Mortgage-backed bonds,
recourse solely to
applicable subsidiary assets .. -- -- 45,304 -- 45,304
Income taxes .................... 12,930 -- -- -- 12,930
Subordinated debentures and
senior notes .................. 339,365 51,810 -- -- 391,175
Discontinued operations ......... 4,002 -- 108,743 -- 112,745
Advances payable - subsidiaries . 18,029 123,451 15,944 (157,424) --
----------- ----------- ----------- ----------- -----------
Total liabilities .......... 426,057 532,741 354,494 (157,424) 1,155,868
Shareholders' equity ............ 829,273 832,412 929,419 (1,761,831) 829,273
----------- ----------- ----------- ----------- -----------
$ 1,255,330 $ 1,365,153 $ 1,283,913 $(1,919,255) $ 1,985,141
=========== =========== =========== =========== ===========
</TABLE>
12
<PAGE>
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
($000's omitted)
(Unaudited)
6. Supplemental Guarantor Information (continued)
<TABLE>
<CAPTION>
CONSOLIDATING STATEMENT OF OPERATIONS
For the three months ended March 31, 1997
Unconsolidated
-----------------------------------------
Consolidated
Pulte Guarantor Non-Guarantor Eliminating Pulte
Corporation Subsidiaries Subsidiaries Entries Corporation
----------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Homebuilding ................... $ -- $423,215 $ -- $ -- $423,215
Mortgage banking and financing,
interest and other ........... -- -- 6,727 -- 6,727
Corporate, principally interest 790 968 -- -- 1,758
-------- -------- -------- -------- --------
Total revenues ................... 790 424,183 6,727 -- 431,700
-------- -------- -------- -------- --------
Expenses:
Homebuilding:
Cost of sales ................ -- 360,005 -- -- 360,005
Selling, general and
administrative and
other expense .............. -- 54,213 -- -- 54,213
Mortgage banking and
financing, interest
and other .................... -- -- 6,563 -- 6,563
Corporate, net ................. 6,920 2,506 (514) -- 8,912
-------- -------- -------- -------- --------
Total expenses ................... 6,920 416,724 6,049 -- 429,693
-------- -------- -------- -------- --------
Income (loss) from continuing
operations before income
taxes and equity in income
of subsidiaries ................ (6,130) 7,459 678 -- 2,007
Income taxes (benefit) ........... (2,470) 2,984 259 -- 773
-------- -------- -------- -------- --------
Income (loss) from continuing
operations before equity
in income of subsidiaries ...... (3,660) 4,475 419 -- 1,234
Income (loss) from discontinued
operations ..................... 1,720 -- (717) -- 1,003
-------- -------- -------- -------- --------
Income (loss) before equity
in income (loss) of
subsidiaries ................... (1,940) 4,475 (298) -- 2,237
-------- -------- -------- -------- --------
Equity in income (loss) of
subsidiaries:
Continuing operations ........ 4,894 124 4,475 (9,493) --
Discontinued operations ...... (717) -- -- 717 --
-------- -------- -------- -------- --------
4,177 124 4,475 (8,776) --
-------- -------- -------- -------- --------
Net income ....................... $ 2,237 $ 4,599 $ 4,177 $ (8,776) $ 2,237
======== ======== ======== ======== ========
</TABLE>
13
<PAGE>
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
($000's omitted)
(Unaudited)
6. Supplemental Guarantor Information (continued)
<TABLE>
<CAPTION>
CONSOLIDATING STATEMENT OF OPERATIONS
For the three months ended March 31, 1996
Unconsolidated
------------------------------------------
Consolidated
Pulte Guarantor Non-Guarantor Eliminating Pulte
Corporation Subsidiaries Subsidiaries Entries Corporation
----------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Homebuilding ................... $ -- $411,331 $ -- $ -- $411,331
Mortgage banking and financing,
interest and other ........... -- -- 16,133 -- 16,133
Corporate, principally interest 2,808 1,889 358 -- 5,055
-------- -------- -------- -------- --------
Total revenues ................... 2,808 413,220 16,491 -- 432,519
-------- -------- -------- -------- --------
Expenses:
Homebuilding:
Cost of sales ................ -- 350,780 -- -- 350,780
Selling, general and
administrative and
other expense .............. -- 51,983 -- -- 51,983
Mortgage banking and
financing, interest
and other .................... -- -- 11,295 -- 11,295
Corporate, net .................. 6,254 3,152 441 -- 9,847
-------- -------- -------- -------- --------
Total expenses ................... 6,254 405,915 11,736 -- 423,905
-------- -------- -------- -------- --------
Income (loss) from continuing
operations before income taxes
and equity in income
of subsidiaries ................ (3,446) 7,305 4,755 -- 8,614
Income taxes (benefit) ........... (1,333) 2,922 1,917 -- 3,506
-------- -------- -------- -------- --------
Income (loss) from
continuing operations
before equity in income
of subsidiaries ................ (2,113) 4,383 2,838 -- 5,108
Income from discontinued
operations ..................... 1,315 -- 657 -- 1,972
-------- -------- -------- -------- --------
Income (loss) before equity
in income of
subsidiaries ................... (798) 4,383 3,495 -- 7,080
-------- -------- -------- -------- --------
Equity in income of
subsidiaries:
Continuing operations ........ 7,221 274 4,383 (11,878) --
Discontinued operations ...... 657 -- -- (657) --
-------- -------- -------- -------- --------
7,878 274 4,383 (12,535) --
-------- -------- -------- -------- --------
Net income ....................... $ 7,080 $ 4,657 $ 7,878 $(12,535) $ 7,080
======== ======== ======== ======== ========
</TABLE>
14
<PAGE>
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
($000's omitted)
(Unaudited)
6. Supplemental Guarantor Information (continued)
<TABLE>
<CAPTION>
CONSOLIDATING STATEMENT OF CASH FLOWS
For the three months ended March 31, 1997
Unconsolidated
--------------------------------------------
Consolidated
Pulte Guarantor Non-Guarantor Eliminating Pulte
Corporation Subsidiaries Subsidiaries Entries Corporation
----------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Continuing operations:
Cash flows from operating activities:
Income from continuing operations.. $ 1,234 $ 4,599 $ 4,894 $ (9,493) $ 1,234
Adjustments to reconcile income
from continuing operations
to net cash flows
provided by (used in)
operating activities:
Equity in subsidiaries ........ (4,894) (124) (4,475) 9,493 --
Amortization, depreciation
and other ................... 22 -- 300 -- 322
Deferred income taxes ......... (1,750) -- -- -- (1,750)
Increase (decrease) in cash
due to:
Inventories ................... -- (95,836) -- -- (95,836)
Residential mortgage loans
available-for-sale .......... -- -- 63,838 -- 63,838
Other assets .................. (1,402) 18,337 (4,103) -- 12,832
Accounts payable and accrued
liabilities ................. (1,270) (49,677) (3,431) -- (54,378)
Income taxes .................. (2,942) 2,984 215 -- 257
--------- --------- --------- --------- ---------
Net cash provided by (used in)
operating activities .............. (11,002) (119,717) 57,238 -- (73,481)
--------- --------- --------- --------- ---------
Cash flows from investing
activities:
Principal payments of
mortgage-backed securities .... -- -- 2,028 -- 2,028
Decrease in funds held by
trustee ....................... -- -- 68 -- 68
Dividends received from
subsidiaries .................. -- 4,500 -- (4,500) --
Advances to affiliates .......... (100,736) 276 (1,697) 102,157 --
--------- --------- --------- --------- ---------
Net cash provided by (used in)
investing activities .............. (100,736) 4,776 399 97,657 2,096
--------- --------- --------- --------- ---------
Cash flows from financing
activities:
Payment of long-term debt
and bonds ..................... -- -- (2,373) -- (2,373)
Proceeds from borrowings ........ -- 4,702 -- -- 4,702
Repayment of borrowings ......... -- -- (59,304) -- (59,304)
Advances from affiliates ........ 1,293 92,940 7,924 (102,157) --
Dividends paid .................. -- -- (4,500) 4,500 --
Other, net ...................... 1,015 -- (9) -- 1,006
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities .............. 2,308 97,642 (58,262) (97,657) (55,969)
--------- --------- --------- --------- ---------
Net increase (decrease) in
cash and equivalents -
continuing operations ............. $(109,430) $ (17,299) $ (625) $ -- $(127,354)
--------- --------- --------- --------- ---------
</TABLE>
15
<PAGE>
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
($000's omitted)
(Unaudited)
6. Supplemental Guarantor Information (continued)
<TABLE>
<CAPTION>
CONSOLIDATING STATEMENT OF CASH FLOWS (continued)
For the three months ended March 31, 1997
Unconsolidated
---------------------------------------------
Consolidated
Pulte Guarantor Non-Guarantor Eliminating Pulte
Corporation Subsidiaries Subsidiaries Entries Corporation
----------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Discontinued operations:
Cash flows from operating
activities:
Income (loss) from
discontinued operations ...... $ 1,003 $ -- $ (717) $ 717 $ 1,003
Change in deferred income taxes -- -- -- -- --
Equity in subsidiaries ......... 717 -- -- (717) --
Other changes, net ............. (1,720) -- 623 -- (1,097)
Cash flows from investing
activities:
Purchase of securities
available-for-sale ........... -- -- (12,828) -- (12,828)
Principal payments of
mortgage-backed securities ... -- -- 7,539 -- 7,539
Net proceeds from sale of
investment ................... -- -- 2,330 -- 2,330
Decrease in Covered Assets
and FRF receivables .......... -- -- 30,646 -- 30,646
Cash flows from financing
activities:
Increase in deposit liabilities -- -- (9,347) -- (9,347)
Repayment of borrowings ........ -- -- (31,560) -- (31,560)
Decrease in FHLB advances ...... -- -- 13,000 -- 13,000
--------- --------- --------- --------- ---------
Net decrease in cash and
equivalents -
discontinued operations .......... -- -- (314) -- (314)
--------- --------- --------- --------- ---------
Net decrease in cash and
equivalents ...................... (109,430) (17,299) (939) -- (127,668)
Cash and equivalents at
beginning of period ............. 114,585 71,599 6,018 -- 192,202
--------- --------- --------- --------- ---------
Cash and equivalents at end
of period ........................ $ 5,155 $ 54,300 $ 5,079 $ -- $ 64,534
========= ========= ========= ========= =========
</TABLE>
16
<PAGE>
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
($000's omitted)
(Unaudited)
6. Supplemental Guarantor Information (continued)
<TABLE>
<CAPTION>
CONSOLIDATING STATEMENT OF CASH FLOWS
For the three months ended March 31, 1996
Unconsolidated
---------------------------------------------
Consolidated
Pulte Guarantor Non-Guarantor Eliminating Pulte
Corporation Subsidiaries Subsidiaries Entries Corporation
----------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Continuing operations:
Cash flows from operating
activities:
Income from continuing operations $ 5,108 $ 4,657 $ 7,221 $ (11,878) $ 5,108
Adjustments to reconcile income
from continuing operations to
net cash flows provided by
(used in) operating activities:
Equity in subsidiaries ... (7,221) (274) (4,383) 11,878 --
Amortization, depreciation
and other .............. 22 1,404 213 -- 1,639
Deferred income taxes .... (4,627) -- -- -- (4,627)
Gain on sale of securities -- -- (4,495) -- (4,495)
Increase (decrease) in cash
due to:
Inventories .............. -- (61,082) -- -- (61,082)
Residential mortgage
loans available-for-sale -- -- 58,514 -- 58,514
Other assets ............. (4,996) (8,610) 5,199 -- (8,407)
Accounts payable and
accrued liabilities .... 5,996 (5,791) (7,447) -- (7,242)
Income taxes ............. 2,138 2,922 1,917 -- 6,977
--------- --------- --------- --------- ---------
Net cash provided by (used in)
operating activities ........... (3,580) (66,774) 56,739 -- (13,615)
--------- --------- --------- --------- ---------
Cash flows from investing
activities:
Proceeds from sale of
securities
available-for-sale ......... -- -- 61,076 -- 61,076
Principal payments of
mortgage-backed securities . -- -- 8,431 -- 8,431
Decrease in funds held by
trustee .................... -- -- (49,432) -- (49,432)
Dividends received from
subsidiaries ............... -- 14,000 -- (14,000) --
Investment in subsidiaries ... (762) -- -- 762 --
Advances to affiliates ....... (85,592) 310 (2,056) 87,338 --
Other, net ................... -- (2,309) (755) -- (3,064)
--------- --------- --------- --------- ---------
Net cash provided by (used in)
investing activities ........... (86,354) 12,001 17,264 74,100 17,011
--------- --------- --------- --------- ---------
Cash flows from financing
activities:
Payment of long-term debt
and bonds .................. -- -- (60,784) -- (60,784)
Repayment of borrowings ...... -- (4,510) (44,700) -- (49,210)
Capital contributions from
parent ..................... -- -- 762 (762) --
Advances from affiliates ..... -- 39,555 47,783 (87,338) --
Stock repurchases ............ (9,261) -- -- -- (9,261)
Dividends paid ............... (1,622) -- (14,000) 14,000 (1,622)
Other, net ................... 82 -- -- -- 82
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities ........... (10,801) 35,045 (70,939) (74,100) (120,795)
--------- --------- --------- --------- ---------
Net increase (decrease) in cash
and equivalents - continuing
operations ..................... $(100,735) $ (19,728) $ 3,064 $ -- (117,399)
--------- --------- --------- --------- ---------
</TABLE>
17
<PAGE>
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
($000's omitted)
(Unaudited)
6. Supplemental Guarantor Information (continued)
<TABLE>
<CAPTION>
CONSOLIDATING STATEMENT OF CASH FLOWS (continued)
For the three months ended March 31, 1996
Unconsolidated
---------------------------------------------
Consolidated
Pulte Guarantor Non-Guarantor Eliminating Pulte
Corporation Subsidiaries Subsidiaries Entries Corporation
----------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Discontinued operations:
Cash flows from operating
activities:
Income from discontinued
operations ................... $ 1,972 $ -- $ 657 $ (657) $ 1,972
Equity in subsidiaries ......... (657) -- -- 657 --
Change in income taxes ......... (97) -- -- -- (97)
Other changes, net ............. (1,218) -- (833) -- (2,051)
Cash flows from investing
activities:
Purchase of securities
available-for-sale ........... -- -- (9,560) -- (9,560)
Principal payments of
mortgage-backed
securities ................... -- -- 13,133 -- 13,133
Decrease in Covered Assets
and FRF receivables .......... -- -- 31,283 -- 31,283
Cash flows from financing
activities:
Increase in deposit
liabilities .................. -- -- (1,521) -- (1,521)
Repayment of borrowings ........ -- -- (31,560) -- (31,560)
Decrease in FHLB advances ...... -- -- (1,900) -- (1,900)
--------- --------- --------- --------- ---------
Net decrease in cash and
equivalents -
discontinued operations .......... -- -- (301) -- (301)
--------- --------- --------- --------- ---------
Net increase (decrease) in
cash and equivalents ............. (100,735) (19,728) 2,763 -- (117,700)
Cash and equivalents at
beginning of period .............. 220,782 71,012 3,369 -- 295,163
--------- --------- --------- --------- ---------
Cash and equivalents at end
of period ........................ $ 120,047 $ 51,284 $ 6,132 $ -- $ 177,463
========= ========= ========= ========= =========
</TABLE>
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
($000's omitted, except per share data)
A summary of Pulte Corporation's operating results by business segment for
the three month periods ended March 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1997 1996
---- ----
<S> <C> <C>
Pre-tax income (loss):
Homebuilding operations................................. $ 8,997 $ 8,568
-------- --------
Financial Services operations:
Mortgage banking...................................... 206 457
Financing activities.................................. (42) 4,381
-------- --------
Total Financial Services.............................. 164 4,838
-------- --------
Corporate............................................... (7,154) (4,792)
-------- --------
Income from continuing operations before income taxes...... 2,007 8,614
Income taxes............................................... 773 3,506
-------- --------
Income from continuing operations.......................... 1,234 5,108
Income from discontinued operations........................ 1,003 1,972
-------- --------
Net income................................................. $ 2,237 $ 7,080
======== ========
Net income per share....................................... $ .09 $ .26
======== ========
</TABLE>
A comparison of pre-tax income for the three month periods ended March 31,
1997 and 1996 is as follows:
- -- Pre-tax income of the Company's homebuilding operations increased $429
during the first quarter of 1997 primarily as a result of increases in
the average sales price of homes closed, gross profit margins and pre-tax
income of Builders Supply & Lumber (BSL) partially offset by higher
selling, general and administrative expenses.
- -- Pre-tax income of the Company's mortgage banking operations decreased
from $457 for the three months ended March 31, 1996, to $206 for the
three months ended March 31, 1997. Principally this relates to decreases
in the amount of gains recognized from sales of mortgages and mortgage
origination fees earned, partially offset by decreases in operating
expenses as a result of converting to a centralized loan processing
format during 1996.
- -- Pre-tax income of the Company's financing activities decreased $4,423
from the comparable period of 1996 primarily due to gains from sales of
collateral during the first three months of 1996; no such sales took
place during the first three months of 1997.
- -- Pre-tax loss from corporate operations increased from $4,792 for the
three months ended March 31, 1996, to $7,154 for the three months ended
March 31, 1997. This increase is primarily the result of higher net
interest expense and expenses associated with the Company's strategic
operating initiatives.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
($000's omitted)
Homebuilding Operations:
The following table presents selected financial data for Pulte Home
Corporation (Pulte) for the three months ended March 31, 1997 and 1996.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1997 1996
---- ----
<S> <C> <C>
Unit settlements:
Pulte Home East.......................... 1,346 1,146
Pulte Home Central....................... 721 982
Pulte Home West.......................... 631 587
-------- --------
2,698 2,715
======== ========
Net new orders - units:
Pulte Home East.......................... 1,908 1,932
Pulte Home Central....................... 1,258 1,468
Pulte Home West.......................... 1,000 847
-------- --------
4,166 4,247
======== ========
Net new orders - dollars.................. $666,000 $682,000
======== ========
Backlog at March 31 - units:
Pulte Home East.......................... 2,335 2,438
Pulte Home Central....................... 1,517 1,773
Pulte Home West.......................... 1,064 983
-------- --------
4,916 5,194
======== ========
Backlog at March 31 - dollars............. $838,000 $873,000
======== ========
Revenues.................................. $423,215 $411,331
Cost of sales............................. (360,005) (350,780)
Selling, general and administrative expense (53,905) (49,400)
Interest (A).............................. (3,352) (3,206)
Other income, net......................... 3,044 623
-------- --------
Pre-tax income............................ $ 8,997 $ 8,568
======== ========
Average sales price....................... $ 157 $ 152
======== ========
</TABLE>
The following is a summary of the number of communities active as of each
respective date:
<TABLE>
<S> <C>
March 31, 1997...................... 406
December, 1996...................... 392
September, 1996..................... 387
June 30, 1996....................... 378
March 31, 1996...................... 379
</TABLE>
Note (A): The Company capitalizes interest cost into homebuilding inventories
and charges the interest to homebuilding interest expense when the related
inventories are closed.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
($000's omitted)
Homebuilding Operations (continued):
Pulte conducts its domestic homebuilding operations through 41 markets in 25
states and Puerto Rico. Effective January 1, 1997, Pulte combined the
homebuilding operations of its North and South operating companies, creating
Pulte Home East (PHE). As of that date, Pulte's homebuilding operations have
been organized into three operating companies; PHE, Pulte Home Central (PHC)
and Pulte Home West (PHW). No one individual market within the 41 markets
represented more than 10% of total Pulte net new orders, unit settlements or
revenues during the three months ended March 31, 1997.
Net new orders during the first quarter of 1997 decreased approximately 2%
from the record level set during the first quarter of 1996, which represented
a 32% increase over the comparable period of 1995. PHE's net new orders
remained flat compared to 1996, but were 36% in excess of net new orders for
the first quarter of 1995. PHW's 18% increase in net new orders over the
first quarter of 1996 was substantially the result of the growth of its
Active Adult (mature buyer) and Canterbury Community (affordable site-built
housing) product offerings. Such an increase comes on top of a 38% escalation
in PHW net new orders from the first quarter of 1995. PHC's net new orders
decreased 14% from the comparable period of the prior year. This, however,
followed a 22% increase in net new orders during the first quarter of 1996
over the first quarter of 1995. A couple of factors in certain upper-midwest
markets contributed to this decrease. First, a number of communities sold out
faster than expected during 1996 and replacement communities were not ready
for sale during the first quarter of 1997. This situation is anticipated to
change over the next several quarters as new communities are brought online
and begin to contribute. Secondly, PHC also encountered a general decline in
market demand during the first quarter of 1997. In general, the trend of net
new orders during the early second quarter has begun to surpass that of the
comparable prior year time period. However, this trend in net new orders and
the anticipated contribution of new communities could be adversely affected
by future interest rate increases, changes in consumer preferences and market
competition.
Unit settlements during the three months ended March 31, 1997, decreased less
than 1% (17 units) from the comparable period of 1996, which had increased
34% over the comparable period of 1995. Despite the decline in unit
settlements, first quarter homebuilding revenues rose to a record $423,215 as
a result of a 3% increase in the average home sales price from the same
period of the prior year. The strength of unit settlement activity during
each quarter is heavily influenced by the trend of unit backlog at end of the
preceding quarter. Unit backlog at December 31, 1996, was 6% less than the
record fourth quarter unit backlog of 3,622 units at December 31, 1995. That
record represented a 60% increase over the December 31, 1994 unit backlog.
PHE's settlements for the three months ended March 31, 1997, increased 17%
over the same period of 1996 and more than 50% over the comparable period of
1995. Such increases are the direct result of new market entries since 1994.
Settlements for PHC decreased 27% from the three months ended March 31, 1996,
which had increased 49% over the first quarter of 1995. First quarter 1996
unit settlements for PHC were strongly affected by its unit backlog at
December 31, 1995, which was 31% higher than the unit backlog registered at
the end of 1996. Settlements for PHW increased 7% during the first quarter of
1997. This increase was on top of a 24% increase in settlements during the
first quarter of 1996 over the comparable period of 1995. Such increases are
primarily the result of PHW's Active Adult and Canterbury Community product
offerings.
The average selling price during the first quarter of 1997 was $157, a
decrease from the average selling price of $158 in the fourth quarter of 1996
but an increase over the average selling price of $152 for the comparable
period of the prior year. The change in average selling price is due
primarily to product mix.
Gross profit margin was 14.9% for the three months ended March 31, 1997, flat
in comparison with the fourth quarter of 1996, but up from 14.7% in the
comparable prior year period. The improvement in gross profit margins is due
in part to the Company's ongoing process improvement initiatives focused on
lowering house costs through improved operational efficiencies.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
($000's omitted)
Homebuilding Operations (continued):
Selling, general and administrative expenses for the three months ended March
31, 1997 increased $4,505 over the same period in 1996. This is primarily
related to the addition of expenses for three markets that were not in
operation during the first quarter of 1996 (Jacksonville, Rhode Island and
Southern California), as well as an increase in the number of selling
communities compared to the prior year.
Other income, net, includes gains on land sales, the pre-tax results of
Builders' Supply & Lumber Co., Inc. (BSL) and other homebuilding-related
expenses. For the three months ended March 31, 1997, other income, net, was
favorably impacted by improved operating results of BSL as compared to the
same period a year ago.
Information related to interest in inventory is as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1997 1996
---- ----
<S> <C> <C>
Interest in inventory at beginning of period... $12,846 $12,261
Interest capitalized........................... 4,151 3,995
Interest expensed.............................. (3,352) (3,206)
------- -------
Interest in inventory at end of period......... $13,645 $13,050
======= =======
</TABLE>
At March 31, 1997, Pulte owned approximately 29,700 lots in communities in
which homes are being constructed. In addition, Pulte had approximately
15,900 lots under option.
Financial Services Operations:
Mortgage Banking Operations:
During the first quarter of 1997, the Company changed the name of its
mortgage banking operation from ICM Mortgage Corporation to Pulte Mortgage
Corporation (Pulte Mortgage).
The following table presents mortgage origination data for Pulte Mortgage:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1997 1996
---- ----
Production:
<S> <C> <C>
Total originations:
Loans...................................... 1,827 2,331
======== ========
Principal.................................. $221,100 $264,500
======== ========
Funded originations:
Loans...................................... 1,723 2,160
======== ========
Principal.................................. $207,300 $241,000
======== ========
Originations for Pulte customers:
Loans...................................... 1,372 1,421
======== ========
Principal.................................. $172,400 $167,100
======== ========
</TABLE>
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
($000's omitted)
Financial Services Operations (continued):
Mortgage Banking Operations (continued):
Mortgage origination volume for the three months ended March 31, 1997
decreased 16% from the first three months of 1996. Pulte Mortgage has
continued its emphasis on expanding in Pulte's existing and new markets. As a
result, the volume of originations for Pulte customers has increased to 83%
of funded originations for the first three months of 1997, compared with 69%
of funded originations for the same period in 1996. Pulte Mortgage continues
to hedge its mortgage pipeline in the normal course of its business and there
has been no change in Pulte Mortgage's strategy or use of derivative
financial instruments in this regard. Primarily due to the decrease in
non-funded mortgage origination volume, origination fee revenues decreased
$259, or 32%, during the first quarter of 1997 as compared to the first
quarter of 1996.
During the three months ended March 31, 1997, marketing gains from the sales
of mortgages decreased by $1,177, or 26%, compared with the same period of
1996. This decrease was due to lower volume of servicing retained
originations during the first quarter of 1997 compared with the first quarter
of 1996.
During the first quarter of 1997, Pulte Mortgage's operating expenses
decreased $1,153, or 20%, from the comparable period of 1996. This reduction
in expenses is attributable to Pulte Mortgage's centralization of its
mortgage underwriting, processing and closing functions in Denver, Colorado,
through implementation of a mortgage operations center (MOC) during 1996.
Net interest income for the three months ended March 31, 1997, remained
relatively flat as compared to the similar period of 1996.
At March 31, 1997, loan application backlog was $347,000 as compared with
$246,000 at December 31, 1996, and $468,000 at March 31, 1996.
Financing Activities:
The Company's secured financing operations are conducted by the
limited-purpose subsidiaries of Pulte Financial Companies, Inc. (PFCI). Such
subsidiaries have engaged in the acquisition of mortgage loans and
mortgage-backed securities financed principally through the issuance of
long-term bonds secured by such mortgage loans and mortgage-backed
securities. At March 31, 1997, one bond series with a principal amount of
$43,225 was outstanding. For the three months ended March 31, 1997, PFCI's
pre-tax operating loss was $42, down from $4,381 of pre-tax income for the
comparable period of 1996. During the three months ended March 31, 1996, PFCI
recorded net gains on sales of collateral of $4,495. No such sales took place
during the first quarter of 1997. Net interest income continues to decrease
as a result of lower average outstanding balances on the collateral and bond
portfolios.
Corporate:
Corporate is a non-operating business segment whose primary purpose is to
support the operations of the Company's subsidiaries as the internal source
of financing and by implementing and maturing strategic initiatives centered
on new business development and improving operating efficiencies. The Company
views this corporate function as a form of research and development, a
prelude to adding these initiatives to existing business segments or
necessitating the creation of new business segments. As a result, the
corporate segment's operating results will vary from quarter to quarter as
these strategic initiatives evolve.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
($000's omitted)
Corporate (continued):
The following table presents corporate results of operations for the three
month periods ended March 31, 1997 and 1996:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------
1997 1996
---- ----
<S> <C> <C>
Net interest expense................ $2,443 $ 968
Other corporate expenses, net....... 4,711 3,824
------ ------
Loss before income taxes............ $7,154 $4,792
====== ======
</TABLE>
The increased loss for the three months ended March 31, 1997, resulted from a
couple of factors. First, the increase in net interest expense resulted from
utilizing approximately $100 million to reacquire over 3.8 million shares of
the Company's common stock during 1996. Secondly, the Company incurred $887
of additional strategic initiatives expense in pursuing manufactured housing
opportunities, expanding operations in Mexico and evaluating additional
international opportunities. During the three months ended March 31, 1997,
the Company recorded income of $139 from its Mexico operations as compared
with a loss of $36 for the comparable period of 1996. Included in Mexico's
income for the first quarter of 1997 and loss for the first quarter of 1996
is the Company's share of Mexico joint venture foreign currency gains which
amounted to $29 and $106, respectively. For the three months ended March 31,
1997, settlements of the Company's Mexico joint ventures aggregated 557 units
as compared to 48 units for the comparable period of 1996.
Pulte conducts its Mexico homebuilding operations in the cities of Monterrey,
Juarez, Chihuahua, Nuevo Laredo, Reynosa, Matamoros and Mexico City through
three joint venture investments owned by a foreign subsidiary. In January
1996, the Company's Monterrey joint venture partner assigned its interest in
the joint venture to the Company. The Company's net investment in the
Monterrey venture approximated $3,400 as of March 31, 1997. The Company
intends to liquidate the Monterrey assets (2 communities) in the normal
course of business. The Company's Juarez joint venture is currently
developing 12 communities. Additionally, during 1996, the Company announced
that its Juarez joint venture had entered into two separate agreements to
construct homes in Mexico; one with Delphi Automotive Systems, a division of
General Motors Corporation (GM) and one with Sony Magneticos de Mexico, S.A.
de C.V., an affiliate of Sony Electronics, Inc. (Sony). The first unit
settlements under the GM contract are expected to commence in the fourth
quarter of 1997. The Company's net investment in the Juarez joint venture
approximated $8,400 as of March 31, 1997. Also during 1996, the Company
entered into a joint venture to build 20 middle income housing units in
Mexico City which are to begin closing in the second quarter of 1997. The
Company's net investment in this joint venture approximated $900 as of March
31, 1997.
Liquidity and Capital Resources:
Continuing Operations:
The Company's net cash used in operating activities increased from $13,615 at
March 31, 1996 to $73,481 at March 31, 1997. This is principally due to an
approximately $35,000 increase in inventory primarily associated with
continued expansion of Active Adult (mature buyer) and Canterbury Communities
(affordable site-built homes) product offerings and the addition of three new
markets, as previously mentioned, and an approximately $47,000 decrease in
accounts payable and accrued liabilities, offset by an approximately $21,000
decrease in other assets primarily caused by an $18,000 decrease in unfunded
settlements. Net cash provided by investing activities decreased from $17,011
at March 31, 1996, to $2,096 at March 31, 1997, primarily as a result of
decreased proceeds from sales of available-for-sale and mortgage-backed
securities of PFCI, offset by a decrease in PFCI funds held by trustees. The
Company's net cash used in financing activities decreased from $120,795 at
March 31, 1996, to $55,969 at March 31, 1997. This resulted primarily from an
approximately $58,000 decrease in the amount of PFCI's mortgage-backed bonds
redeemed.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
($000's omitted)
Liquidity and Capital Resources (continued):
Continuing Operations (continued):
At March 31, 1997, the Company had cash and equivalents of $62,271 and total
indebtedness of $645,988. The Company's total indebtedness includes $339,387
of unsecured senior notes, $22,405 of unsecured senior subordinated
debentures, other Pulte non-recourse and limited recourse debt of $34,107 and
$16,251, respectively, $95,698 of First Heights' deposits and advances,
$43,225 of mortgage-backed bonds payable for PFCI and $94,915 of notes and
drafts payable for Pulte Mortgage.
The Company believes it has adequate financial resources and sufficient
credit facilities to meet its current working capital needs. Sources of the
Company's working capital include its cash and equivalents, its $250,000
committed unsecured revolving credit facility, and other committed and
uncommitted credit lines, which at March 31, 1997, consisted of $10,000 and
$250,000 related to Pulte and Pulte Mortgage operations, respectively. During
the remainder of 1997, management anticipates that homebuilding and corporate
working capital requirements will be funded with internally generated funds
and the previously mentioned credit facilities. Additionally, the Company has
on file with the Securities and Exchange Commission a universal shelf
registration which provides for up to an additional $125,000 of debt or
equity securities. The Company routinely monitors current operational
requirements and financial market conditions to evaluate the utilization of
available financing sources.
The Company finances its land acquisitions, development and construction
activities from internally generated funds and existing credit agreements.
The Company borrowed $27,700 under its $250,000 unsecured revolving credit
facility during the first quarter of 1997, but no balance was outstanding at
March 31, 1997. Pulte Mortgage provides mortgage financing for many of its
home sales and uses its own funds and borrowings made available pursuant to
various committed and uncommitted credit arrangements which, at March 31,
1997 amounted to $250,000, an amount deemed adequate to cover foreseeable
needs. There were approximately $94,915 of borrowings outstanding under the
$250,000 (Pulte Mortgage) arrangement at March 31, 1997. Mortgage loans
originated by Pulte Mortgage are subsequently sold, principally to outside
investors. The Company anticipates that there will be adequate mortgage
financing available for purchasers of its homes.
On April 16, 1997, the Company repurchased 2,325,000 shares of its common
stock for approximately $73,000 from two corporations controlled by James
Grosfeld and his family, and also modified certain existing agreements with
Mr. Grosfeld. Funds for this repurchase were principally obtained from the
Company's unsecured revolving credit facility. Subsequent to March 31, 1997,
the Company repurchased 49,300 shares of its common stock under the August
20, 1996 repurchase authorization at an aggregate repurchase price of $1,414.
The Company did not repurchase any of its common stock during the three
months ended March 31, 1997. Since the fourth quarter of 1994, the Company
has utilized $188,067 of available cash and, to a lesser extent, funds drawn
on its revolving credit facility to reacquire 6,847,800 shares, or nearly 25%
of its then-outstanding common stock. Approximately 467,200 shares remain
available for repurchase under the most recent authorization.
Discontinued Operations:
The Company's income taxes have been significantly impacted by its thrift
operations, principally because payments received from FSLIC Resolution Fund
(FRF) are exempt from federal income taxes. The Company's thrift assets are
subject to regulatory restrictions and are not available for general
corporate purposes. The final liquidation and wind-down of the Company's
thrift operations is dependent on the final resolution of outstanding matters
with the Federal Deposit Insurance Corporation (FDIC), manager of FRF. The
Company is currently involved in litigation with the FDIC. The Company is
uncertain as to when this matter might be resolved. At March 31, 1997, the
Company had a remaining investment in First Heights of approximately $29,000.
25
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Exhibit number and description Page Number
(10) Material Contracts
(a)James Grosfeld Agreement
April 16, 1997
(b)Stock Sale Agreement
April 16, 1997
(11) Statement Regarding Computation of
Per Share Earnings 28
(27) Financial Data Schedule
All other exhibits are omitted from this report
because they are not applicable.
Reports on Form 8-K
The Company did not file any reports on Form 8-K
during the quarter ended March 31, 1997.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PULTE CORPORATION
/s/ MICHAEL D. HOLLERBACH
-----------------------------------------
Michael D. Hollerbach
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ VINCENT J. FREES
-----------------------------------------
Vincent J. Frees
Vice President and Controller
(Principal Accounting Officer)
Date: May 6, 1997
27
EXHIBIT (10)(a)
AGREEMENT
THIS AGREEMENT is made on April 16, 1997, by and between James
Grosfeld ("Grosfeld") and Pulte Corporation, a Michigan corporation (the
"Company").
RECITALS
Grosfeld and the Company desire to modify certain agreements to which
they are parties.
Therefore, the parties agree as follows:
1. Modifications to Other Agreements.
Simultaneously with the execution of this Agreement:
(a) The Consulting Agreement made as of April 30, 1990 between
PHM Corporation and Grosfeld, as amended by Amendment and Extension to
Consulting Agreement made as of December 30, 1992, is hereby amended as
follows:
(i) In the fifth sentence of Section 2(a), the words "Except
as set forth in the next sentence," are deleted.
(ii) In the final sentence of Section 2(a), the semi-colon and
the text that follows the semi-colon are deleted and a period is
substituted for them.
(iii) In Section 2(b), the words ", except as provided in the
Noncompete Agreement (as defined in Section 7 below)," are deleted.
(iv) In Section 2(c), the words "except to the extent he has
the ability to do so solely as a member of the Company's Board of
Directors and" are deleted.
(v) Section 3(a)(i) is deleted and the following is
substituted for it:
"(i) December 31, 1999; or".
(vi) The first sentence of Section 3(b), and the parenthetical
at the end of the final sentence of Section 3(b), are deleted.
(vii) Section 4 is deleted and the following is
<PAGE>
substituted for it:
"In lieu of (i) any consulting fee or payment to help
defray the cost of certain expense items that would have been
payable after April 15, 1997 pursuant to this Agreement , and
(ii) any monthly installment that would have been payable
after April 15, 1997 pursuant to the Agreement made as of
November 16, 1990 between PHM Corporation and Grosfeld,
Grosfeld is receiving on April 16, 1997 and shall thereafter
receive the payments provided for in Section 2 of the
Agreement dated April 16, 1997 between Grosfeld and the
Company."
(viii) Section 7 is deleted.
(b) The Agreement made as of November 16, 1990 between PHM
Corporation and Grosfeld is amended as follows:
(i) Section 1(a)(i) is deleted and the following is
substituted for it:
"(i) December 31, 1999; or".
(ii) In Section 2(d), the words "as provided in the
Noncompete Agreement (as defined in Section 5 below), or" are deleted.
(iii) In Section 2(e), the words "except to the extent he has
the ability to do so solely as a member of the Company's Board of
Directors and" are deleted.
(iv) Section 3 is deleted and the following is substituted
for it:
" In lieu of (i) any monthly installment that would have been
payable after April 15, 1997 pursuant to this Agreement and
(ii) any consulting fee or payment to help defray the cost of
certain expense items that would have been payable after April
15, 1997 pursuant to the Consulting Agreement made as of April
30, 1990 between PHM Corporation and Grosfeld, as amended by
Amendment and Extension to Consulting Agreement made as of
December 30, 1992, Grosfeld is receiving on April 16, 1997 and
shall thereafter receive the payments provided for in Section
2 of the Agreement dated April 16, 1997 between Grosfeld and
the
2
<PAGE>
Company."
(v) Section 4(a) is deleted.
(vi) Section 5 is deleted.
(vii) Sections 6 (a), (b) and (c) are deleted.
(viii) The introduction to Section 7 is deleted and the
following is substituted for it:
"Until December 1, 2008, Grosfeld shall not:".
(ix) The first sentence of Section 8(a)(i) is amended by
inserting the words "or Section 1 of the Consulting Agreement
referred to in Section 3, as amended," immediately following the
words "this Agreement".
(x) The second sentence of Section 8(a)(i) is amended by
substituting the words "such Section 2 or Section 1" for the words
"Section 2".
(xi) Section 8(b) is deleted.
(xii) Section 8(c) is deleted and the following is substituted
for it:
"(c) If Grosfeld commits a Material Breach of this Agreement
as defined in Section 8(a) above and fails to cure such Material Breach in
the time period specified therein, then the Company shall immediately be
relieved of its obligation to make any further payment under Section 2 of the
Agreement dated April 16, 1997 between Grosfeld and the Company and neither
Grosfeld nor his estate shall be entitled to any further payment thereunder.
Grosfeld acknowledges and agrees that the covenants and undertakings
contained in Sections 6 and 7 hereof relate to matters which are of a
special, unique and extraordinary character and that a violation of any of
the terms of either of such Sections will cause irreparable injury to the
Company, the amount of which will be extremely difficult, if not impossible,
to estimate or determine and which cannot be adequately compensated by
monetary damages alone. Therefore, Grosfeld agrees that, in addition to the
immediate termination of the Company's obligation described above, the
Company or any of its subsidiaries shall be jointly and severally entitled,
as a matter of course, to an injunction, restraining order or other equitable
relief from any Court of competent jurisdiction, restraining any violation or
threatened violation of any of such terms by Grosfeld and such other persons
as the Court shall order. The rights and remedies provided for in this
Section 8(c) are
3
<PAGE>
cumulative and are in addition to rights and remedies otherwise available to
the Company under any other agreement or applicable law."
2. Payments in Connection with Modifications to Other Agreements.
Simultaneously with the execution of this Agreement, the
Company is paying to Grosfeld the amount of $2,971,832.09 by Company check.
The Company hereby agrees that, subject to Section 8(c) of the Agreement
referred to in Section 1(b) hereof, as such Agreement is further amended
pursuant to such Section 1(b), on January 1, 2000 (or, in the event that
prior to January 1, 2000 Grosfeld dies or becomes permanently unable to
fulfill his obligations under such Agreement, as amended, and the Consulting
Agreement referred to in Section 1(a) hereof, as amended, due to physical or
mental incapacity, on the date of such event) the Company shall pay Grosfeld
(or his estate or personal representative, as applicable) an additional
$868,690.17.
3. Representations, Warranties and Acknowledgments of Grosfeld.
(a) Grosfeld hereby represents and warrants to the Company
that:
(i) Grosfeld has the right and power to execute, deliver and
perform this Agreement; and
(ii) Grosfeld was until yesterday a director of the Company
and is familiar with the business of the Company; and Grosfeld has
been represented by independent counsel who has advised him with
respect to this Agreement.
4. Representations and Warranties of Company
Company hereby represents and warrants to Grosfeld that:
(a) This Agreement, and the transaction herein contemplated, have
been approved by the Company's Board of Directors; and
(b) Neither the execution nor the performance by the Company of
this Agreement requires consent or approval of any governmental or regulatory
authority or any other person or entity and this Agreement does not conflict
with, violate or breach any provision of, or constitute a default under, the
Company's Articles of Incorporation or By-Laws or any document, agreement,
commitment or obligation to which the Company or any of its significant
subsidiaries is a party.
4
<PAGE>
5. Miscellaneous.
5.1 Successor and Assigns. This Agreement is binding on and
inures to the benefit of and is enforceable by the parties to this Agreement
and their respective heirs, executors, personal representatives, successors
and assigns.
5.2 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Michigan.
5.3 Entire Agreement; Amendment. This Agreement constitutes
the entire agreement and supersedes all prior agreements and understandings,
written or oral, between the parties with respect to the subject matter of
this Agreement (including without limitation the Pulte/Grosfeld Tentative
Agreement dated April 4, 1997) and may not be modified or amended except by
agreement in writing signed by the party against whom enforcement is sought.
5.4 Counterparts. This Agreement may be executed in
counterparts, which together shall be deemed an original of this Agreement.
5.5 Interpretation. The captions and headings contained in
this Agreement are solely for convenience of reference and shall not affect
the interpretation of any provision of this Agreement.
5.6 Survival. The warranties and representations of Section 3
hereof shall survive the execution of this Agreement and the consummation of
the transaction contemplated hereby.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first written above.
----------------------------
James Grosfeld
PULTE CORPORATION,
a Michigan corporation
By:
-------------------------
Its:
-------------------------
5
EXHIBIT (10)(b)
STOCK SALE AGREEMENT
THIS AGREEMENT is made on April 16, 1997, by and among
Fieldstone Advantage Company, a Michigan corporation ("Seller A"), and
Flagstone Advantage Company, a Michigan corporation ("Seller B"; Seller A and
Seller B each being referred to as a "Seller"), and Pulte Corporation, a
Michigan corporation (the "Company").
RECITALS
A. Seller A is the holder, as transferee from James Grosfeld and
Nancy Grosfeld (the "Grosfelds"), of 1,600,000 shares of the Common Stock,
par value $0.01, of the Company held of record by the Grosfelds jointly, and
Seller B is the holder, as transferee from the Grosfelds, of 725,000 shares
of such Common Stock held of record by the Grosfelds jointly; the shares held
by the Sellers constituting approximately 9.9% of such Common Stock
outstanding.
B. Each Seller desires to sell to the Company, and the Company
desires to purchase from such Seller, all of such Seller's shares of such
Common Stock (its "Shares"), upon the terms and conditions provided herein.
Therefore, the parties agree as follows:
1. Sale of Shares.
Simultaneously with the execution of this Agreement:
(a) Seller A is selling, assigning, transferring and conveying
to the Company, and the Company is purchasing from Seller A, all of Seller
A's Shares for an aggregate price of $50,224,000 (the "Sale Price for Sellers
A's Shares");
(b) Seller B is selling, assigning, transferring and conveying
to the Company, and the Company is purchasing from Seller B, all of Seller
B's Shares for an aggregate price of $22,757,750 (the "Sale Price for Seller
B's Shares");
(c) Each Seller is tendering to the Company certificates
representing its Shares together with (i) appropriate endorsements or
assignments separate from certificate conveying such Shares from the
Grosfelds to it with the Grosfelds' signatures guaranteed by a bank or broker
and (ii) appropriate endorsements or assignments separate from certificate
conveying such Shares from such Seller to the Company
<PAGE>
with such Seller's signature guaranteed by a bank or broker;
(d) Each Seller is delivering to the Company (i) certified
copies of its Articles of Incorporation, By-laws and corporate resolutions
related to this Agreement and the sale of its Shares, (ii) an incumbency
certificate and (iii) an opinion of its counsel; and
(e) the Company is paying to each Seller the Sale Price for
such Seller's Shares by Company check in the amount of such Sale Price.
2. Representations, Warranties and Acknowledgments of the Sellers.
(a) Each Seller hereby represents and warrants to the Company
that:
(i) Such Seller is the lawful and beneficial owner of its
Shares, and is transferring good title to its Shares to the Company,
free and clear of any pledges, liens, encumbrances, claims or other
charges of any kind, including, without limitation, any agreements,
commitments or rights of any character granted to any person, firm or
corporation;
(ii) No other party has any right, title, interest or claim
in or with reference to any of its Shares;
(iii) Such Seller has the right and power to execute this
Agreement and to sell, transfer and assign its Shares pursuant to
this Agreement; and
(iv) James Grosfeld, who is a shareholder and officer of such
Seller and has advised such Seller in connection with the sale of its
Shares, was until yesterday a director of the Company and is familiar
with the business of the Company; James Grosfeld has had the full
opportunity to make his own determination of the value of such
Seller's Shares, and has done so without relying on any expressions,
representations or statements of the Company; and Grosfeld and such
Seller have been represented by independent counsel who has advised
them with respect to this Agreement and the sale of such Seller's
Shares to the Company.
(b) Each Seller acknowledges and agrees that:
(i) From and after the date hereof it shall have no right to
vote its Shares for any purpose whatsoever, or to receive dividends
or other corporate distributions with
2
<PAGE>
respect to its Shares or have any other rights of a shareholder with
respect to its Shares; and
(ii) The Sale Price for such Seller's Shares is a fair and
equitable price for its Shares.
3. Representations and Warranties of Company
Company hereby represents and warrants to each Seller that:
(a) This Agreement, and the transactions herein contemplated, have
been approved by the Company's Board of Directors; and
(b) Neither the execution nor the performance by the Company of
this Agreement requires consent or approval of any governmental or regulatory
authority or any other person or entity and this Agreement does not conflict
with, violate or breach any provision of, or constitute a default under, the
Company's Articles of Incorporation or By-Laws or any document, agreement,
commitment or obligation to which the Company or any of its significant
subsidiaries is a party.
4. Miscellaneous.
4.1 Successor and Assigns. This Agreement is binding on and
inures to the benefit of and is enforceable by the parties to this Agreement
and their respective successors and assigns.
4.2 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Michigan.
4.3 Entire Agreement; Amendment. This Agreement constitutes
the entire agreement and supersedes all prior agreements and understandings,
written or oral, among the parties with respect to the subject matter of this
Agreement and may not be modified or amended except by agreement in writing
signed by the party against whom enforcement is sought.
4.4 Counterparts. This Agreement may be executed in
counterparts, which together shall be deemed an original of this Agreement.
4.5 Interpretation. The captions and headings contained in
this Agreement are solely for convenience of reference and shall not affect
the interpretation of any provision of this Agreement.
4.6 Survival. The warranties and representations of Section 2
hereof shall survive the execution of this Agreement and the consummation of
the transaction contemplated hereby.
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first written above.
FIELDSTONE ADVANTAGE COMPANY,
a Michigan corporation
By:
-------------------------
Its:
-------------------------
FLAGSTONE ADVANTAGE COMPANY,
a Michigan corporation
By:
-------------------------
Its:
-------------------------
PULTE CORPORATION,
a Michigan corporation
By:
-------------------------
Its:
-------------------------
The undersigned, the Grosfelds referred to in the foregoing
Agreement, as an inducement to Pulte Corporation to enter into such
Agreement, hereby jointly and severally guarantee to Pulte Corporation the
accuracy of each the representations, warranties and acknowledgments of the
Sellers set forth in Section 2 of such Agreement.
-------------------------
James Grosfeld
-------------------------
Nancy Grosfeld
4
PULTE CORPORATION
EXHIBIT 11 - STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(Unaudited)
(000's omitted, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------
1997 1996
---- ----
<S> <C> <C>
Primary
Net income............................................ $ 2,237 $ 7,080
======= =======
Weighted average common shares
outstanding........................................ 23,296 26,983
Common stock equivalents - stock options............. 171 267
------- -------
Total.............................................. 23,467 27,250
======= =======
Net income per share.................................. $ .09 $ .26
======= =======
Fully diluted
Net income ........................................... $ 2,237 $ 7,080
======= =======
Weighted average common shares
outstanding........................................ 23,296 26,983
Common stock equivalents - stock options.............. 172 267
------- -------
Total.......................................... 23,468 27,250
======= =======
Net income per share.................................. $ .09 $ .26
======= =======
</TABLE>
28
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 1997 AND
FOR THE THREE MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 62,271
<SECURITIES> 0
<RECEIVABLES> 55,751
<ALLOWANCES> 0
<INVENTORY> 1,113,098
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,878,466
<CURRENT-LIABILITIES> 0
<BONDS> 395,899<F1>
<COMMON> 233
0
0
<OTHER-SE> 832,671
<TOTAL-LIABILITY-AND-EQUITY> 1,878,466
<SALES> 423,215<F2>
<TOTAL-REVENUES> 431,700
<CGS> 360,005<F2>
<TOTAL-COSTS> 429,693
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,352<F3>
<INCOME-PRETAX> 2,007
<INCOME-TAX> 773
<INCOME-CONTINUING> 1,234
<DISCONTINUED> 1,003
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,237
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
<FN>
<F1> Bonds are comprised of subordinated debentures and senior notes.
<F2> Relates to homebuilding operations.
<F3> Relates to homebuilding operations. The Company capitalizes interest
cost into homebuilding inventories and charges the interest to homebuilding
interest expense when the related inventories are sold.
</TABLE>
