<PAGE> 1
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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 SEPTEMBER 30, 2000
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 (248) 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 October 31, 2000: 40,690,608
Total pages: 38
Listing of exhibits: 37
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<PAGE> 2
PULTE CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets, September 30, 2000 and December 31, 1999..... 3
Consolidated Statements of Income, for the Three and Nine Months Ended
September 30, 2000 and 1999........................................................ 4
Consolidated Statements of Shareholders' Equity, for the Nine Months Ended
September 30, 2000 and 1999........................................................ 5
Consolidated Statements of Cash Flows, for the Nine Months Ended
September 30, 2000 and 1999........................................................ 6
Notes to Condensed Consolidated Financial Statements................................ 8
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.................................................. 24
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................. 36
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS.......................................................... 37
ITEM 6 EXHIBITS................................................................... 37
SIGNATURES.......................................................................... 38
</TABLE>
2
<PAGE> 3
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PULTE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
($000'S OMITTED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED) (NOTE)
<S> <C> <C>
ASSETS
Cash and equivalents................................................. $ 32,130 $ 51,718
Unfunded settlements................................................. 43,415 53,544
House and land inventories........................................... 2,052,831 1,792,733
Residential mortgage loans available-for-sale........................ 149,299 218,062
Other assets......................................................... 466,030 331,744
Deferred income taxes................................................ 57,617 57,224
Discontinued operations.............................................. 94,524 91,772
----------- -----------
Total assets...................................................... $ 2,895,846 $ 2,596,797
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities, including book overdrafts
of $121,212 and $113,335 in 2000 and 1999, respectively........ $ 811,993 $ 694,826
Unsecured short-term borrowings................................... 46,400 7,000
Collateralized short-term debt, recourse solely to applicable
subsidiary assets.............................................. 142,257 206,959
Income taxes...................................................... 11,991 11,769
Subordinated debentures and senior notes.......................... 685,853 525,965
Discontinued operations........................................... 57,817 56,959
----------- -----------
Total liabilities.............................................. 1,756,311 1,503,478
Shareholders' equity................................................. 1,139,535 1,093,319
----------- -----------
Total liabilities and shareholders' equity........................... $ 2,895,846 $ 2,596,797
=========== ===========
</TABLE>
Note: The balance sheet at December 31, 1999, was 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.
3
<PAGE> 4
PULTE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(000'S OMITTED, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -------------------------
2000 1999 2000 1999
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Homebuilding...................................... $ 1,041,462 $ 961,740 $ 2,779,043 $ 2,449,880
Financial services, interest and other............ 12,135 10,703 32,835 37,872
Corporate ........................................ 286 674 408 1,984
---------- ---------- ----------- -----------
Total revenues.......................... 1,053,883 973,117 2,812,286 2,489,736
----------- ---------- ----------- -----------
EXPENSES:
Homebuilding, principally cost of sales........... 937,194 880,243 2,543,763 2,268,548
Financial services, interest and other............ 6,920 7,164 20,716 22,055
Corporate, net.................................... 13,136 10,365 36,392 28,322
----------- ---------- ----------- -----------
Total expenses.......................... 957,250 897,772 2,600,871 2,318,925
----------- ---------- ----------- -----------
OTHER INCOME:
Equity in income of Pulte-affiliates.............. 2,317 617 4,487 2,777
----------- ---------- ----------- -----------
Income from continuing operations before income
taxes............................................. 98,950 75,962 215,902 173,588
Income taxes ........................................ 38,091 28,485 83,114 65,094
---------- ---------- ----------- -----------
Income from continuing operations.................... 60,859 47,477 132,788 108,494
Income (loss) from discontinued thrift operations,
net of income taxes............................... (29,967) (383) (29,868) 46
----------- ---------- ----------- -----------
Net income........................................... $ 30,892 $ 47,094 $ 102,920 $ 108,540
=========== ========== =========== ===========
PER SHARE DATA:
Basic:
Income from continuing operations............... $ 1.50 $ 1.10 $ 3.21 $ 2.51
Loss from discontinued operations............... (.74) (.01) (.72) -
---------- --------- ----------- -----------
Net income...................................... $ .76 $ 1.09 $ 2.49 $ 2.51
========== ========= =========== ===========
Assuming dilution:
Income from continuing operations............... $ 1.47 $ 1.08 $ 3.16 $ 2.47
Loss from discontinued operations............... (.73) (.01) (.71) -
---------- --------- ----------- -----------
Net income...................................... $ .74 $ 1.07 $ 2.45 $ 2.47
=========== ========== =========== ===========
Cash dividends declared........................... $ .04 $ .08 $ .12 $ .16
=========== ========== =========== ===========
Number of shares used in calculation:
Basic:
Weighted-average common shares outstanding... 40,476 43,248 41,405 43,242
Assuming dilution:
Effect of dilutive securities - stock
options.................................... 1,051 585 593 671
----------- ---------- ----------- -----------
Adjusted weighted-average common shares
and effect of dilutive securities....... 41,527 43,833 41,998 43,913
=========== ========== =========== ===========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 5
PULTE CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
($000'S OMITTED)
(UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
COMMON PAID-IN COMPREHENSIVE RETAINED
STOCK CAPITAL INCOME (LOSS) EARNINGS TOTAL
-------- ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY, DECEMBER 31, 1999..... $ 433 $ 77,070 $ (259) $ 1,016,075 $ 1,093,319
Exercise of stock options................... 7 14,108 - - 14,115
Cash dividends declared..................... - - - (4,933) (4,933)
Stock repurchases........................... (33) (6,082) - (60,268) (66,383)
Comprehensive income:
Net income.............................. - - - 102,920 102,920
Foreign currency translation
adjustments........................... - - 497 - 497
-----------
Total comprehensive income.............. - - - - 103,417
-------- ----------- ----------- ----------- -----------
SHAREHOLDERS' EQUITY, SEPTEMBER 30, 2000.... $ 407 $ 85,096 $ 238 $ 1,053,794 $ 1,139,535
======== =========== =========== =========== ===========
SHAREHOLDERS' EQUITY, DECEMBER 31, 1998..... $ 432 $ 75,051 $ 1,130 $ 844,829 $ 921,442
Exercise of stock options................... - 1,695 - - 1,695
Cash dividends declared..................... - - - (6,919) (6,919)
Comprehensive income:
Net income.............................. - - - 108,540 108,540
Change in unrealized gains on securities
available-for-sale, net of income
taxes................................. - - (1,130) - (1,130)
Foreign currency translation
adjustments........................... - - 472 - 472
-----------
Total comprehensive income.................. - - - - 107,882
-------- ----------- ----------- ----------- -----------
SHAREHOLDERS' EQUITY, SEPTEMBER 30, 1999.... $ 432 $ 76,746 $ 472 $ 946,450 $ 1,024,100
======== =========== =========== =========== ===========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
5
<PAGE> 6
PULTE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
($000'S OMITTED)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
2000 1999
---------- ----------
<S> <C> <C>
CONTINUING OPERATIONS:
Cash flows from operating activities:
Income from continuing operations................................... $ 132,788 $ 108,494
Adjustments to reconcile income from continuing operations
to net cash flows provided by (used in) operating activities:
Amortization, depreciation and other.......................... 9,702 8,569
Deferred income taxes......................................... (8,877) (1,915)
Gain on sale of securities.................................... - (1,664)
Increase (decrease) in cash due to:
Inventories........................................... (366,137) (344,538)
Residential mortgage loans available-for-sale......... 68,763 85,120
Other assets.......................................... (684) (90,009)
Accounts payable and accrued liabilities.............. 73,031 125,593
Income taxes.......................................... 10,815 20,417
---------- ----------
Net cash used in operating activities................................... (80,599) (89,933)
---------- ----------
Cash flows from investing activities:
Proceeds from sale of securities available-for-sale................. - 27,886
Principal payments of mortgage-backed securities.................... - 1,490
Cash paid for acquisitions, net of cash acquired.................... - (24,714)
Other, net.......................................................... (1,015) (1,579)
---------- ----------
Net cash provided by (used in) investing activities..................... (1,015) 3,083
----------- ----------
Cash flows from financing activities:
Payment of long-term debt and bonds................................. (14,601) (50,187)
Proceeds from borrowings............................................ 213,678 150,960
Repayment of borrowings............................................. (78,015) (103,459)
Issuance of common stock............................................ 12,657 1,362
Stock repurchases................................................... (66,383) -
Dividends paid...................................................... (4,933) (6,919)
Other, net.......................................................... (377) 482
----------- ----------
Net cash provided by (used in) financing activities..................... 62,026 (7,761)
---------- ----------
Net decrease in cash and equivalents - continuing operations............ $ (19,588) $ (94,611)
---------- ----------
</TABLE>
6
<PAGE> 7
PULTE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
($000'S OMITTED)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
2000 1999
------------ ----------
<S> <C> <C>
DISCONTINUED OPERATIONS:
Cash flows from operating activities:
Income (loss) from discontinued operations.......................... $ (29,868) $ 46
Change in reserve for litigation.................................... 30,000 -
Change in deferred taxes............................................ 8,484 25,621
Change in income taxes.............................................. (8,360) (25,661)
Other changes, net.................................................. 2,747 2,879
Cash flows from investing activities:
Increase in Covered Assets and FSLIC Resolution Fund
receivables ...................................................... (2,827) (2,926)
----------- ----------
Net increase (decrease) in cash and equivalents-discontinued
operations ....................................................... 176 (41)
----------- ----------
Net decrease in cash and equivalents.................................... (19,412) (94,652)
Cash and equivalents at beginning of period............................. 51,797 125,329
----------- ----------
Cash and equivalents at end of period................................... $ 32,385 $ 30,677
=========== ==========
Cash - continuing operations............................................ $ 32,130 $ 30,587
Cash - discontinued operations.......................................... 255 90
----------- ----------
$ 32,385 $ 30,677
=========== ==========
Supplemental disclosure of cash flow information-
cash paid during the period for:
Interest, net of amount capitalized............................... $ 12,992 $ 14,173
=========== ==========
Income taxes...................................................... $ 69,933 $ 44,875
=========== ==========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
7
<PAGE> 8
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
($000'S OMITTED)
(UNAUDITED)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The condensed consolidated financial statements include the accounts of
Pulte Corporation (the "Company" or "Pulte"), and all of its significant
subsidiaries. The Company's direct subsidiaries include Pulte Diversified
Companies, Inc. (PDCI) and other subsidiaries which are engaged in the
homebuilding business. PDCI's operating subsidiaries include Pulte Home
Corporation (PHC), Pulte International Corporation (International) and
other subsidiaries which are engaged in the homebuilding business. PDCI's
non-operating thrift subsidiary, First Heights Bank, fsb (First Heights),
has been classified as a discontinued operation (See Note 2). The Company
also has a mortgage banking company, Pulte Mortgage Company (PMC), which is
a subsidiary of PHC.
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 and nine month periods ended September 30, 2000, are not
necessarily indicative of the results that may be expected for the year
ending December 31, 2000. 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, 1999.
The Company's comprehensive income (loss) other than net income consists of
unrealized gains on securities available-for-sale, net of tax and foreign
currency translation adjustments. For the quarters ended September 30, 2000
and 1999, the Company's comprehensive income other than net income amounted
to $300 and $239, respectively, net of tax provision of $81 and $41,
respectively. For the nine months ended September 30, 2000 and 1999, the
Company's comprehensive income (loss) other than net income amounted to
$497 and $(658), respectively, net of tax (benefit) provision of $63 and
$(681), respectively.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended by SFAS Nos. 137 and 138,
which is required to be adopted for years beginning after June 15, 2000.
This Statement will require the Company to recognize all derivatives on the
balance sheet at fair value. Derivatives that are not hedges must be
adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in fair value of the
hedged assets, liabilities or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is
recognized in earnings. PMC, in the normal course of business, uses
derivative financial instruments to meet the financing needs of its
customers and reduce its own exposure to fluctuations in interest rates.
The Company plans to adopt this statement on January 1, 2001. Based on the
Company's current understanding and interpretation of SFAS No. 133's
applicability to PMC's use of derivative financial instruments, the Company
believes that any effects of SFAS No. 133 will not be material to its
earnings or financial position.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" ("SAB 101"). SAB 101 summarizes certain of the SEC's views in
applying generally accepted accounting principles to revenue recognition in
financial statements. SAB 101 is effective for the fourth quarter of fiscal
years beginning after December 1999. The Company believes that it is in
compliance with the guidelines set forth in SAB 101 and that the adoption
of SAB 101 will not have a material effect on its financial position or
results of operations.
8
<PAGE> 9
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
($000'S OMITTED)
(UNAUDITED)
2. DISCONTINUED OPERATIONS
During the first quarter of 1994, the Company adopted a plan of disposal
for First Heights and announced its strategy to exit the thrift industry
and increase its focus on housing and related mortgage banking. First
Heights sold all but one of its 32 bank branches and related deposits to
two unrelated purchasers. The sale was substantially completed during the
fourth quarter of 1994.
At the time, the Company expected to complete the plan of disposal within a
reasonable period of time; however, contractual disputes with the Federal
Deposit Insurance Corporation (FDIC) prevented the prepayment of the
Federal Savings and Loan Insurance Corporation Resolution Fund (FRF) notes,
thereby precluding the Company from completing the disposal in accordance
with its original plan. To provide liquidity for the sale, First Heights
liquidated its investment portfolios and its single-family residential loan
portfolio and, as provided in the Assistance Agreement, entered into a
Liquidity Assistance Note (LAN) with FDIC acting in its capacity as manager
of the FRF. The LAN is collateralized by the FRF notes and bears interest
at a rate indexed to the Texas Cost of Funds plus a spread. The LAN and the
FRF notes matured in September 1998; however, payment of these obligations
is being withheld by both parties pending resolution of all open matters
with the FDIC. As discussed in Note 4, the Company is involved in
litigation with the FDIC and as part of this litigation, the parties have
asserted various claims with respect to obligations under the promissory
notes issued by each of the parties in connection with the thrift
acquisition and related activities.
First Heights no longer holds any deposits, nor does it maintain an
investment portfolio. First Heights' day-to-day activities have been
principally devoted to supporting residual regulatory compliance matters
and the litigation with the FDIC and are not reflective of the active
operations of the former thrift, such as maintaining traditional
transaction accounts, (e.g., checking and savings accounts) or making
loans. Accordingly, such operations are being presented as discontinued.
Revenues of the Company's discontinued thrift operations primarily
represent interest income on the outstanding FRF notes and receivables, and
for the three and nine months ended September 30, 2000 amounted to $1,003
and $2,889 respectively. Revenues for the comparable periods of 1999 were
$968 and $3,053, respectively. For the three and nine months ended
September 30, 2000, discontinued thrift operations provided after-tax
losses of $(29,967) and $(29,868), respectively. After tax income (loss)
for the comparable periods of 1999 was $(383) and $46, respectively. The
after-tax losses in 2000 include a $30,000 reserve for certain FDIC related
litigation as discussed in Note 4.
3. SEGMENT INFORMATION
The Company has three reportable segments: Homebuilding, Financial Services
and Corporate. The Company's Homebuilding segment consists of the following
three business units:
- Domestic Homebuilding, the Company's core business, is engaged in the
acquisition and development of land primarily for residential purposes
within the continental United States and the construction of housing on
such land targeted for the first-time, first and second move-up, and
active adult buyer groups.
- International Homebuilding is primarily engaged in the acquisition and
development of land primarily for residential purposes, and the
construction of housing on such land in Mexico and Puerto Rico.
- Active Adult Homebuilding is engaged in the development of amenitized,
age-targeted and age-qualified communities throughout the continental
United States appealing to a growing demographic group in their
pre-retirement and retirement years.
The Company's Financial Services segment consists principally of mortgage
banking operations conducted through PMC and its subsidiaries, and to a
minor extent, the operations of Pulte Financial Companies, Inc., a financing
subsidiary of the Company, which ceased operations during 1999.
9
<PAGE> 10
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
($000'S OMITTED)
(UNAUDITED)
3. SEGMENT INFORMATION (CONTINUED)
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, to develop and implement strategic initiatives centered on new
business development and operating efficiencies, and to provide the
necessary administrative support functions to support the Company as a
publicly traded entity.
<TABLE>
<CAPTION>
OPERATING DATA BY SEGMENT
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- --------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Homebuilding...................................... $ 1,041,462 $ 961,740 $ 2,779,043 $ 2,449,880
Financial Services................................ 12,135 10,703 32,835 37,872
Corporate ........................................ 286 674 408 1,984
----------- ----------- ----------- -----------
Total revenues............................... 1,053,883 973,117 2,812,286 2,489,736
----------- ----------- ----------- -----------
Cost of sales:
Homebuilding...................................... 847,156 791,862 2,268,129 2,027,770
----------- ----------- ----------- -----------
Selling, general and administrative:
Homebuilding...................................... 93,098 81,672 264,367 222,299
Financial Services................................ 4,975 5,430 15,434 16,317
Corporate ........................................ 2,538 2,084 7,510 5,512
----------- ----------- ----------- -----------
Total selling, general and administrative.... 100,611 89,186 287,311 244,128
----------- ----------- ----------- -----------
Interest:
Homebuilding...................................... 7,752 7,022 19,319 16,596
Financial Services................................ 1,945 1,734 5,232 5,488
Corporate ........................................ 8,719 5,851 22,400 15,567
----------- ----------- ----------- -----------
Total interest............................... 18,416 14,607 46,951 37,651
----------- ----------- ----------- -----------
Other (income) expense, net:
Homebuilding...................................... (10,812) (313) (8,052) 1,883
Financial Services................................ - - 50 250
Corporate ........................................ 1,879 2,430 6,482 7,243
----------- ----------- ----------- -----------
Total other (income) expense, net............ (8,933) 2,117 (1,520) 9,376
----------- ----------- ----------- -----------
Total costs and expenses............................. 957,250 897,772 2,600,871 2,318,925
----------- ----------- ----------- -----------
Equity in income of joint ventures:
Homebuilding...................................... 2,317 617 4,487 2,777
----------- ----------- ----------- -----------
Income (loss) from continuing operations
before income taxes:
Homebuilding.................................... 106,585 82,114 239,767 184,109
Financial services.............................. 5,215 3,539 12,119 15,817
Corporate....................................... (12,850) (9,691) (35,984) (26,338)
----------- ----------- ----------- -----------
Total income from continuing operations before income
taxes.............................................. $ 98,950 $ 75,962 $ 215,902 $ 173,588
=========== =========== =========== ===========
</TABLE>
10
<PAGE> 11
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
($000'S OMITTED)
(UNAUDITED)
3. SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
ASSET DATA BY SEGMENT
FINANCIAL
HOMEBUILDING SERVICES CORPORATE TOTAL
------------ -------- --------- -----
<S> <C> <C> <C> <C>
AT SEPTEMBER 30, 2000:
Inventory........................... $ 2,052,831 $ - $ - $ 2,052,831
===========
Identifiable assets................. $ 2,497,882 177,709 125,731 $ 2,801,322
Assets of discontinued operations... 94,524
-----------
Total assets........................ $ 2,895,846
===========
AT DECEMBER 31, 1999:
Inventory........................... $ 1,792,733 $ - $ - $ 1,792,733
===========
Identifiable assets................. $ 2,175,424 237,318 92,283 $ 2,505,025
Assets of discontinued operations... 91,772
-----------
Total assets........................ $ 2,596,797
===========
</TABLE>
4. COMMITMENTS AND CONTINGENCIES
The Company is involved in various litigation incidental to its continuing
business operations. Management believes that none of this litigation will
have a material adverse impact on the results of operations or the
financial position of the Company.
First Heights-related litigation
The Company is a party to three lawsuits relating to First Heights' 1988
acquisition from the Federal Savings and Loan Insurance Corporation
(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 Federal
Deposit Insurance Corporation (FDIC) against the Company, PDCI and First
Heights (collectively, the "Pulte Parties"). The second lawsuit (the "Court
of Federal Claims Case") was filed on December 26, 1996, in the United
States Court of Federal Claims (Washington, D.C.) by the Pulte Parties
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 the FSLIC. The FDIC and the Pulte Parties 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 Parties 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 Parties 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 Parties voluntarily dismissed without prejudice certain of
their claims in the District Court Case and on December 26, 1996, initiated
the Court of Federal Claims Case.
11
<PAGE> 12
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
($000'S OMITTED)
(UNAUDITED)
4. COMMITMENTS AND CONTINGENCIES (CONTINUED)
First Heights-related litigation (continued)
The Court of Federal Claims Case contains similar claims as those that were
voluntarily dismissed from the District Court Case. In their complaint, the
Pulte Parties assert breaches of contract on the part of the United States
in connection with the enactment of section 13224 of the Omnibus Budget
Reconciliation Act of 1993. That provision repealed portions of the tax
benefits that the Pulte Parties claim they were entitled to under the
contract to acquire the failed Texas thrifts. The Pulte Parties also assert
certain other claims concerning the contract, including claims that the
United States (through the FDIC as receiver) has improperly attempted to
amend the failed thrifts' pre-acquisition tax returns and that this attempt
was made in an effort to deprive the Pulte Parties of tax benefits they had
contracted for, and that the enactment of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 breached the Government's
obligation not to require contributions of capital greater than those
required by the contract.
On March 5, 1999, the United States District Court (the Court), entered a
"Final Judgment" against First Heights and PDCI (the Court had previously
ruled that Pulte Corporation was not liable for monetary damages to the
FDIC) resolving by summary judgment in favor of the FDIC most of the FDIC's
claims against the Pulte Defendants. The Final Judgment requires PDCI and
First Heights to pay the FDIC monetary damages totaling approximately
$221.3 million, including interest but excluding costs (such as attorneys
fees) to be determined in the future by the District Court and
post-judgment interest. However, the FDIC acknowledged that it has already
paid itself or withheld from assistance its obligation to pay to First
Heights approximately $105 million, excluding interest thereon. The Company
believes that it is entitled to a credit or actual payment of such amount
plus interest. The Final Judgment does not address this issue. The Company
disagreed with the District Court's rulings and appealed the decision to
the Sixth Circuit Court of Appeals. The Company had previously disclosed
that if the District Court's final judgment were upheld in its entirety on
appeal, the potential after-tax charge against Discontinued Operations,
after giving effect to interest owed by the FDIC to First Heights, would
approximate $88 million plus post judgment interest.
On October 12, 2000, the Sixth Circuit Court of Appeals rendered its
opinion in which it affirmed in part, reversed in part and remanded the
case to the District Court for further proceedings. The Sixth Circuit
affirmed most of the District Court's adverse liability rulings, including
as to the sharing of certain tax benefits achieved in connection with First
Heights' 1988 acquisition and ownership of the five failed Texas thrifts
and regarding the Company's and First Heights' amendment of a tax sharing
and allocation agreement and rescission of a warrant assumption agreement
between PDCI and First Heights. The Sixth Circuit, however, vacated the
District Court's damage calculations as to a number of issues, vacated the
District Court's pre-judgment interest award, and remanded to the District
Court for a proper recalculation of all such amounts. Since the Sixth
Circuit opinion leaves certain significant issues to be resolved through
further Court proceedings the Company is currently unable to precisely
calculate the final amount it may owe. Based upon its reading of the Sixth
Circuit opinion, however, the Company determined that an after tax charge
of $30 million to Discontinued Operations was appropriate in the third
quarter. The final settlement with the FDIC may be more or less than
amounts provided because the outcome of the remaining litigation issues is
uncertain.
On January 10, 2000, First Heights filed a lawsuit in the United States
District Court, Eastern District of Michigan against the FDIC regarding the
amounts, including interest, the FDIC is obligated to pay First Heights on
two promissory notes which had been executed by FDIC's predecessor, the
FSLIC. The FDIC filed a motion to dismiss the case and on April 12, 2000,
the District Court dismissed First Heights' complaint. First Heights has
appealed the Court's ruling to the Sixth Circuit Court of Appeals.
The Company does not believe that the claims in the Court of Federal Claims
Case are in any way prejudiced by the rulings in the District Court Case.
The Company is considering seeking relief in the Court of Federal Claims
Case that would, if granted, recoup portions of the damages awarded in the
District Court Case should they be upheld.
12
<PAGE> 13
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
($000'S OMITTED)
(UNAUDITED)
5. DEBT
In March 2000, the Company entered into an uncommitted $25,000 revolving
credit facility which can be canceled at either party's discretion.
In April 2000, the Company sold in a private placement pursuant to Rule
144A under the Securities Act, $175,000 of 9.5% Senior Notes due in 2003.
Effective May 26, 2000, the Company filed an S-4 Registration Statement
with the Securities and Exchange Commission, offering to exchange the
original unregistered Notes for registered Notes. This exchange was
completed during the third quarter. The terms of the new Notes are
substantially identical to those of the original Notes. Net proceeds
received from the sale were used to repay short-term borrowings under
unsecured bank credit arrangements and for general corporate purposes.
In August 2000, the Company, PDCI and PHC entered into a $375,000 committed
unsecured revolving credit facility under which a variety of interest rates
are available to the Company. This revolving credit facility expires August
31, 2005. This facility, which includes an option to expand the facility
size to $600,000, replaces two revolving credit facilities of $170,000 and
$205,000. The bank credit agreements contain restrictive covenants. Under
the most restrictive of the covenants, the Company is required to maintain
a minimum tangible net worth of $800,000 plus 50% of consolidated net
income earned subsequent to March 31, 2000.
6. SUPPLEMENTAL GUARANTOR INFORMATION
The Company has the following outstanding Senior Note obligations: (1)
$175,000, 9.5%, due 2003, (2) $100,000, 7%, due 2003, (3) $115,000, 8.375%,
due 2004, (4) $125,000, 7.3%, due 2005 and (5) $150,000, 7.625%, due 2017.
Such obligations to pay principal, premium, if any, and interest are
guaranteed jointly and severally on a senior basis by the Company's
wholly-owned Domestic and Active Adult homebuilding subsidiaries
(collectively, the Guarantors). Such guarantees are full and unconditional.
The principal non-Guarantors include PDCI, International, PMC and First
Heights.
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 as the consolidating financial information contained herein
provides a more meaningful disclosure to allow investors to determine the
nature of the assets held by and the operations of the combined groups.
13
<PAGE> 14
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
($000'S OMITTED)
(UNAUDITED)
6. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
UNCONSOLIDATED
------------------------------------------
CONSOLIDATED
PULTE GUARANTOR NON-GUARANTOR ELIMINATING PULTE
CORPORATION SUBSIDIARIES SUBSIDIARIES ENTRIES CORPORATION
----------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and equivalents.................... $ - $ 26,366 $ 5,764 $ - $ 32,130
Unfunded settlements.................... - 43,164 251 - 43,415
House and land inventories.............. - 2,017,094 35,737 - 2,052,831
Residential mortgage loans
available-for-sale.................... - - 149,299 - 149,299
Land held for sale and future
development........................... - 138,368 - - 138,368
Other assets............................ 44,377 213,927 69,358 - 327,662
Deferred income taxes................... 57,617 - - - 57,617
Discontinued operations................. - - 94,524 - 94,524
Investment in subsidiaries.............. 1,421,832 25,019 1,458,445 (2,905,296) -
Advances receivable - subsidiaries...... 521,171 1,046 45,685 (567,902) -
----------- ----------- ----------- ------------ -----------
$ 2,044,997 $ 2,464,984 $ 1,859,063 $ (3,473,198) $ 2,895,846
=========== =========== =========== ============ ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued
liabilities........................... $ 119,828 $ 604,927 $ 87,238 $ - $ 811,993
Unsecured short-term borrowings......... 46,400 - - - 46,400
Collateralized short-term debt,
recourse solely to applicable
subsidiary assets..................... - - 142,257 - 142,257
Income taxes............................ 11,991 - - - 11,991
Subordinated debentures and senior
notes................................. 662,179 16,674 7,000 - 685,853
Discontinued operations................. - - 57,817 - 57,817
Advances payable - subsidiaries......... 65,064 392,976 109,862 (567,902) -
--------------------------------------------------------- ---------------
Total liabilities................. 905,462 1,014,577 404,174 (567,902) 1,756,311
Shareholders' equity.................... 1,139,535 1,450,407 1,454,889 (2,905,296) 1,139,535
----------- ----------- ----------- ------------ -----------
$ 2,044,997 $ 2,464,984 $ 1,859,063 $ (3,473,198) $ 2,895,846
=========== =========== =========== ============ ===========
</TABLE>
14
<PAGE> 15
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
($000'S OMITTED)
(UNAUDITED)
6. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
UNCONSOLIDATED
------------------------------------------
CONSOLIDATED
PULTE GUARANTOR NON-GUARANTOR ELIMINATING PULTE
CORPORATION SUBSIDIARIES SUBSIDIARIES ENTRIES CORPORATION
----------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and equivalents...................... $ 50 $ 44,206 $ 7,462 $ - $ 51,718
Unfunded settlements...................... - 60,143 (6,599) - 53,544
House and land inventories................ - 1,760,581 32,152 - 1,792,733
Residential mortgage loans available-for-
sale................................... - - 218,062 - 218,062
Land held for sale and future
development............................ - 52,453 - - 52,453
Other assets.............................. 21,109 206,327 51,855 - 279,291
Deferred income taxes..................... 57,224 - - - 57,224
Discontinued operations................... - - 91,772 - 91,772
Investment in subsidiaries................ 1,298,676 19,904 1,302,700 (2,621,280) -
Advances receivable - subsidiaries........ 354,211 3,898 40,571 (398,680) -
------------ ----------- ------------ ------------ -------------
$ 1,731,270 $ 2,147,512 $ 1,737,975 $ (3,019,960) $ 2,596,797
============ =========== ============ ============ =============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued
liabilities............................ $ 86,526 $ 554,745 $ 53,555 $ - $ 694,826
Unsecured short-term borrowings........... 7,000 - - - 7,000
Collateralized short-term debt, recourse
solely to applicable subsidiary
assets................................. - - 206,959 - 206,959
Income taxes.............................. 11,769 - - - 11,769
Subordinated debentures and senior
notes.................................. 487,690 17,275 21,000 - 525,965
Discontinued operations................... - - 56,959 - 56,959
Advances payable - subsidiaries........... 44,966 274,390 79,324 (398,680) -
------------ ----------- ------------ ------------ -------------
Total liabilities................... 637,951 846,410 417,797 (398,680) 1,503,478
Shareholders' equity...................... 1,093,319 1,301,102 1,320,178 (2,621,280) 1,093,319
------------ ----------- ------------ ------------ -------------
$ 1,731,270 $ 2,147,512 $ 1,737,975 $ (3,019,960) $ 2,596,797
============ =========== ============ ============ =============
</TABLE>
15
<PAGE> 16
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
($000'S OMITTED)
(UNAUDITED)
6. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
UNCONSOLIDATED
------------------------------------------
CONSOLIDATED
PULTE GUARANTOR NON-GUARANTOR ELIMINATING PULTE
CORPORATION SUBSIDIARIES SUBSIDIARIES ENTRIES CORPORATION
----------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Homebuilding............................... $ - $ 2,765,983 $ 13,060 $ - $ 2,779,043
Financial services, interest and other..... - - 32,835 - 32,835
Corporate.................................. 280 128 - - 408
-------- ----------- ---------- --------- -----------
Total revenues............................... 280 2,766,111 45,895 - 2,812,286
-------- ----------- ---------- --------- -----------
EXPENSES:
Homebuilding:
Cost of sales.......................... - 2,256,364 11,765 - 2,268,129
Selling, general and administrative
and other expense.................... (276) 273,683 2,227 - 275,634
Financial services, interest and other..... - - 20,716 - 20,716
Corporate, net............................. 32,720 5,581 (1,909) - 36,392
-------- ----------- ---------- --------- -----------
Total expenses............................... 32,444 2,535,628 32,799 - 2,600,871
-------- ----------- ---------- --------- -----------
OTHER INCOME:
Equity in income of Pulte-affiliates......... - - 4,487 - 4,487
-------- ----------- ---------- --------- -----------
Income (loss) from continuing operations
before income taxes and equity in income
of subsidiaries............................ (32,164) 230,483 17,583 - 215,902
Income taxes (benefit)....................... (13,134) 89,295 6,953 - 83,114
-------- ----------- ---------- --------- -----------
Income (loss) from continuing operations
before equity in income of subsidiaries.... (19,030) 141,188 10,630 - 132,788
Loss from discontinued operations............ (1,384) - (28,484) - (29,868)
-------- ----------- ---------- --------- -----------
Income (loss) before equity in income
of subsidiaries............................ (20,414) 141,188 (17,854) - 102,920
-------- ----------- ---------- --------- -----------
Equity in income (loss) of subsidiaries:
Continuing operations...................... 151,818 7,519 151,054 (310,391) -
Discontinued operations.................... (28,484) - - 28,484 -
-------- ----------- ---------- --------- -----------
123,334 7,519 151,054 (281,907) -
-------- ----------- ---------- --------- -----------
Net income................................... $102,920 $ 148,707 $ 133,200 $(281,907) $ 102,920
======== =========== ========== ========= ===========
</TABLE>
16
<PAGE> 17
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
($000'S OMITTED)
(UNAUDITED)
6. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
UNCONSOLIDATED
------------------------------------------
CONSOLIDATED
PULTE GUARANTOR NON-GUARANTOR ELIMINATING PULTE
CORPORATION SUBSIDIARIES SUBSIDIARIES ENTRIES CORPORATION
----------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Homebuilding................................ $ - $ 1,035,744 $ 5,718 $ - $ 1,041,462
Financial services, interest and other...... - - 12,135 - 12,135
Corporate................................... 188 98 - - 286
-------- ----------- ---------- --------- -----------
Total revenues................................ 188 1,035,842 17,853 - 1,053,883
-------- ----------- ---------- --------- -----------
EXPENSES:
Homebuilding:
Cost of sales........................... - 842,010 5,146 - 847,156
Selling, general and administrative
and other expense..................... (824) 89,700 1,162 90,038
Financial services, interest and other...... - - 6,920 6,920
Corporate, net.............................. 11,972 2,077 (913) - 13,136
-------- ----------- ---------- --------- -----------
Total expenses................................ 11,148 933,787 12,315 - 957,250
-------- ----------- ---------- --------- -----------
OTHER INCOME:
Equity in income of Pulte-affiliates.......... - - 2,317 - 2,317
-------- ----------- ---------- --------- -----------
Income (loss) from continuing operations
before income taxes and equity in income
of subsidiaries............................. (10,960) 102,055 7,855 - 98,950
Income taxes (benefit)........................ (3,183) 39,363 1,911 - 38,091
-------- ----------- ---------- --------- -----------
Income (loss) from continuing operations
before equity in income of subsidiaries..... (7,777) 62,692 5,944 60,859
Loss from discontinued operations............. (500) - (29,467) - (29,967)
-------- ----------- ---------- --------- -----------
Income (loss) before equity in income
of subsidiaries............................. (8,277) 62,692 (23,523) - 30,892
-------- ----------- ---------- --------- -----------
Equity in income (loss) of subsidiaries:
Continuing operations....................... 68,636 3,234 66,592 (138,462) -
Discontinued operations..................... (29,467) - - 29,467 -
-------- ----------- ---------- --------- -----------
39,169 3,234 66,592 (108,995) -
-------- ----------- ---------- --------- -----------
Net income.................................... $ 30,892 $ 65,926 $ 43,069 $(108,995) $ 30,892
======== =========== ========== ========= ===========
</TABLE>
17
<PAGE> 18
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
($000'S OMITTED)
(UNAUDITED)
6. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
UNCONSOLIDATED
------------------------------------------
CONSOLIDATED
PULTE GUARANTOR NON-GUARANTOR ELIMINATING PULTE
CORPORATION SUBSIDIARIES SUBSIDIARIES ENTRIES CORPORATION
----------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Homebuilding............................... $ - $ 2,431,148 $ 18,732 $ - $ 2,449,880
Financial services, interest and other..... - - 37,872 37,872
Corporate.................................. 636 - 1,348 - 1,984
-------- ----------- ---------- --------- -----------
Total revenues............................... 636 2,431,148 57,952 - 2,489,736
-------- ----------- ---------- --------- -----------
EXPENSES:
Homebuilding:
Cost of sales.......................... - 2,010,370 17,400 2,027,770
Selling, general and administrative
and other expense.................... 833 237,626 2,319 240,778
Financial services, interest and other..... - - 22,055 - 22,055
Corporate, net............................. 24,895 2,198 1,229 - 28,322
-------- ----------- ---------- --------- -----------
Total expenses............................... 25,728 2,250,194 43,003 - 2,318,925
-------- ----------- ---------- --------- -----------
OTHER INCOME:
Equity in income of Pulte-affiliates......... - 816 1,961 - 2,777
-------- ----------- ---------- --------- -----------
Income (loss) from continuing operations
before income taxes and equity in income
of subsidiaries............................ (25,092) 181,770 16,910 173,588
Income taxes (benefit)....................... (12,494) 70,308 7,280 - 65,094
-------- ----------- ---------- --------- -----------
Income (loss) from continuing operations
before equity in income of subsidiaries.... (12,598) 111,462 9,630 108,494
Income (loss) from discontinued operations... (1,630) - 1,676 - 46
-------- ----------- ---------- --------- -----------
Income (loss) before equity in income
of subsidiaries............................ (14,228) 111,462 11,306 - 108,540
-------- ----------- ---------- --------- -----------
Equity in income of subsidiaries:
Continuing operations...................... 121,092 8,651 115,055 (244,798) -
Discontinued operations.................... 1,676 - - (1,676) -
-------- ----------- ---------- --------- -----------
122,768 8,651 115,055 (246,474) -
-------- ----------- ---------- --------- -----------
Net income................................... $108,540 $ 120,113 $ 126,361 $(246,474) $ 108,540
======== =========== ========== ========= ===========
</TABLE>
18
<PAGE> 19
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
($000'S OMITTED)
(UNAUDITED)
6. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
UNCONSOLIDATED
------------------------------------------
CONSOLIDATED
PULTE GUARANTOR NON-GUARANTOR ELIMINATING PULTE
CORPORATION SUBSIDIARIES SUBSIDIARIES ENTRIES CORPORATION
----------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Homebuilding............................... $ - $ 957,524 $ 4,216 $ - $ 961,740
Financial services, interest and other - - 10,703 - 10,703
Corporate.................................. 561 - 113 - 674
-------- ---------- -------- --------- -----------
Total revenues............................... 561 957,524 15,032 - 973,117
-------- ---------- -------- --------- -----------
EXPENSES:
Homebuilding:
Cost of sales.......................... - 788,132 3,730 - 791,862
Selling, general and administrative
and other expense.................... 126 87,188 1,067 - 88,381
Financial services, interest and other..... - - 7,164 - 7,164
Corporate, net............................. 8,883 749 733 - 10,365
-------- ---------- -------- --------- -----------
Total expenses............................... 9,009 876,069 12,694 - 897,772
-------- ---------- -------- --------- -----------
OTHER INCOME:
Equity in income of Pulte-affiliates......... - - 617 - 617
-------- ---------- -------- --------- -----------
Income (loss) from continuing operations
before income taxes and equity in income
of subsidiaries............................ (8,448) 81,455 2,955 - 75,962
Income taxes (benefit)....................... (4,522) 31,837 1,170 - 28,485
-------- ---------- -------- --------- -----------
Income (loss) from continuing operations
before equity in income of subsidiaries.... (3,926) 49,618 1,785 - 47,477
Income (loss) from discontinued operations... (902) - 519 - (383)
-------- ---------- -------- --------- -----------
Income (loss) before equity in income
of subsidiaries............................ (4,828) 49,618 2,304 - 47,094
-------- ---------- -------- --------- -----------
Equity in income of subsidiaries:
Continuing operations...................... 51,403 2,073 51,485 (104,961) -
Discontinued operations.................... 519 - - (519) -
-------- ---------- -------- --------- -----------
51,922 2,073 51,485 (105,480) -
-------- ---------- -------- --------- -----------
Net income................................... $ 47,094 $ 51,691 $ 53,789 $(105,480) $ 47,094
======== ========== ======== ========= ===========
</TABLE>
19
<PAGE> 20
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
($000'S OMITTED)
(UNAUDITED)
6. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
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........ $ 132,788 $ 148,707 $ 161,684 $(310,391) $ 132,788
Adjustments to reconcile income from
continuing operations to net cash
flows provided by (used in)
operating activities:
Equity in income of subsidiaries....... (151,818) (7,519) (151,054) 310,391 -
Amortization, depreciation and other... 211 11,519 (2,028) - 9,702
Deferred income taxes.................. (8,877) - - - (8,877)
Increase (decrease) in cash due to:
Inventories............................ - (362,552) (3,585) - (366,137)
Residential mortgage loans
available-for-sale................... - - 68,763 - 68,763
Other assets........................... (4,672) 17,984 (13,996) - (684)
Accounts payable and accrued
liabilities........................... 13,447 63,976 (4,392) - 73,031
Income taxes........................... (29,915) 39,363 1,367 - 10,815
----------- ---------- ---------- --------- -----------
Net cash provided by (used in) operating
activities................................ (48,836) (88,522) 56,759 - (80,599)
----------- ---------- ---------- --------- -----------
Cash flows from investing activities:
Dividends received from subsidiaries...... - 3,000 - (3,000) -
Investment in subsidiary.................. (100) (479) - 579 -
Advances to affiliates.................... (126,231) 2,852 (5,114) 128,493 -
Other, net................................ - - (1,015) - (1,015)
----------- ---------- ---------- --------- -----------
Net cash provided by (used in) investing
activities................................ (126,331) 5,373 (6,129) 126,072 (1,015)
----------- ---------- ---------- --------- -----------
</TABLE>
20
<PAGE> 21
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
($000'S OMITTED)
(UNAUDITED)
6. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
UNCONSOLIDATED
------------------------------------------
CONSOLIDATED
PULTE GUARANTOR NON-GUARANTOR ELIMINATING PULTE
CORPORATION SUBSIDIARIES SUBSIDIARIES ENTRIES CORPORATION
----------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
CONTINUING OPERATIONS (CONTINUED):
Cash flows from financing activities:
Payment of long-term debt and bonds... $ - $ (601) $ (14,000) $ - $ (14,601)
Proceeds from borrowings.............. 213,678 - - - 213,678
Repayment of borrowings............... - (13,313) (64,702) - (78,015)
Capital contributions from parent..... - - 579 (579) -
Advances from affiliates.............. 20,098 79,223 29,172 (128,493) -
Issuance of common stock.............. 12,657 - - - 12,657
Stock repurchases..................... (66,383) - - - (66,383)
Dividends paid........................ (4,933) - (3,000) 3,000 (4,933)
Other, net............................ - - (377) - (377)
---------- ---------- ---------- --------- ----------
Net cash provided by (used in)
financing activities.................. 175,117 65,309 (52,328) (126,072) 62,026
---------- ---------- ---------- --------- ----------
Net decrease in cash and
equivalents - continuing operations... (50) (17,840) (1,698) - (19,588)
---------- ---------- ---------- --------- ----------
DISCONTINUED OPERATIONS:
Cash flows from operating activities:
Loss from discontinued operations..... (29,868) - (28,484) 28,484 (29,868)
Change in reserve for litigation...... - - 30,000 - 30,000
Change in deferred income taxes....... 8,484 - - - 8,484
Equity in loss of subsidiaries........ 28,484 - - (28,484) -
Change in income taxes................ (8,360) - - - (8,360)
Other changes, net.................... 1,260 - 1,487 - 2,747
Cash flows from investing activities:
Decrease in Covered Assets and FRF
receivables....................... - - (2,827) - (2,827)
---------- ---------- ---------- --------- ----------
Net increase in cash and equivalents-
discontinued operations............... - - 176 - 176
---------- ---------- ---------- --------- ----------
Net decrease in cash and equivalents.... (50) (17,840) (1,522) - (19,412)
Cash and equivalents at beginning of
period................................ 50 44,206 7,541 - 51,797
---------- ---------- ---------- --------- ----------
Cash and equivalents at end of period... $ - $ 26,366 $ 6,019 $ - $ 32,385
========== ========== ========== ========= ==========
</TABLE>
21
<PAGE> 22
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
($000'S OMITTED)
(UNAUDITED)
6. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
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.......... $ 108,494 $ 120,113 $ 124,685 $(244,798) $ 108,494
Adjustments to reconcile income from
continuing operations to net cash
flows provided by (used in) operating
activities:
Equity in income of subsidiaries........ (121,092) (8,651) (115,055) 244,798 -
Amortization, depreciation and other.... 146 9,405 (982) - 8,569
Deferred income taxes................... (1,915) - - - (1,915)
Gain on sale of securities.............. - - (1,664) - (1,664)
Increase (decrease) in cash due to:
Inventories............................. - (338,886) (5,652) - (344,538)
Residential mortgage loans
available-for-sale.................... - - 85,120 - 85,120
Other assets............................ 1,519 (85,802) (5,726) - (90,009)
Accounts payable and accrued
liabilities........................... 4,257 119,111 2,225 - 125,593
Income taxes (55,789) 75,702 504 - 20,417
---------- ---------- ---------- --------- ----------
Net cash provided by (used in) operating
activities................................. (64,380) (109,008) 83,455 - (89,933)
---------- ---------- ---------- --------- ----------
Cash flows from investing activities:
Proceeds from sale of securities
available-for-sale....................... - - 27,886 - 27,886
Principal payments of mortgage-backed
securities............................... - - 1,490 - 1,490
Cash paid for acquisition, net of cash
acquired................................ - (24,714) - - (24,714)
Dividends received from subsidiaries....... 3,550 13,994 - (17,544) -
Investment in subsidiary................... (30,358) (7,097) - 37,455 -
Advances to affiliates..................... (97,935) (34) (7,126) 105,095 -
Other, net................................. - - (1,579) - (1,579)
---------- ---------- ---------- --------- ----------
Net cash provided by (used in) investing
activities................................. (124,743) (17,851) 20,671 125,006 3,083
---------- ---------- ---------- --------- ----------
</TABLE>
22
<PAGE> 23
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
($000'S OMITTED)
(UNAUDITED)
6. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
UNCONSOLIDATED
------------------------------------------
CONSOLIDATED
PULTE GUARANTOR NON-GUARANTOR ELIMINATING PULTE
CORPORATION SUBSIDIARIES SUBSIDIARIES ENTRIES CORPORATION
----------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
CONTINUING OPERATIONS (CONTINUED):
Cash flows from financing activities:
Payment of long-term debt and bonds... - (22,405) (27,782) - (50,187)
Proceeds from borrowings.............. 150,000 960 - - 150,960
Repayment of borrowings............... - (15,796) (87,663) - (103,459)
Capital contributions from parent..... - 29,853 7,602 (37,455) -
Advances from affiliates.............. (32,182) 115,900 21,377 (105,095) -
Issuance of common stock.............. 1,362 - - - 1,362
Dividends paid........................ (6,919) - (17,544) 17,544 (6,919)
Other, net............................ 331 48 103 - 482
---------- ---------- ---------- --------- ----------
Net cash provided by (used in)
financing activities.................. 112,592 108,560 (103,907) (125,006) (7,761)
---------- ---------- ---------- -------- -----------
Net increase (decrease) in cash and
equivalents - continuing operations... (76,531) (18,299) 219 - (94,611)
---------- ---------- ---------- -------- ----------
DISCONTINUED OPERATIONS:
Cash flows from operating activities:
Income from discontinued
operations....................... 46 - 1,676 (1,676) 46
Change in deferred income taxes....... 25,621 - - - 25,621
Equity in income of subsidiaries...... (1,676) - - 1,676 -
Change in income taxes................ (25,661) - - - (25,661)
Other changes, net.................... 1,670 - 1,209 - 2,879
Cash flows from investing activities:
Decrease in Covered Assets and FRF
receivables....................... - - (2,926) - (2,926)
---------- -------- ---------- -------- ----------
Net decrease in cash and equivalents-
discontinued operations............... - - (41) - (41)
---------- -------- ---------- -------- ----------
Net increase (decrease) in cash and
equivalents........................... (76,531) (18,299) 178 - (94,652)
Cash and equivalents at beginning of
period................................ 76,555 46,109 2,665 - 125,329
---------- -------- ---------- -------- ----------
Cash and equivalents at end of period... $ 24 $ 27,810 $ 2,843 $ - $ 30,677
========== ======== ========== ======== ==========
</TABLE>
23
<PAGE> 24
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
($000'S OMITTED, EXCEPT PER SHARE DATA)
OVERVIEW:
A summary of the Company's operating results by business segment for the three
and nine month periods ended September 30, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -------------------------
2000 1999 2000 1999
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Pre-tax income (loss):
Homebuilding operations........................... $ 106,585 $ 82,114 $ 239,767 $ 184,109
Financial Services operations..................... 5,215 3,539 12,119 15,817
Corporate ........................................ (12,850) (9,691) (35,984) (26,338)
---------- ---------- ----------- -----------
Pre-tax income from continuing operations............ 98,950 75,962 215,902 173,588
Income taxes ........................................ (38,091) (28,485) (83,114) (65,094)
---------- ---------- ----------- -----------
Income from continuing operations.................... 60,859 47,477 132,788 108,494
Income (loss) from discontinued operations........... (29,967) (383) (29,868) 46
---------- ---------- ----------- -----------
Net income ........................................ $ 30,892 $ 47,094 $ 102,920 $ 108,540
========== ========== =========== ===========
Per share data - assuming dilution:
Income from continuing operations................. $ 1.47 $ 1.08 $ 3.16 $ 2.47
Loss from discontinued operations................. (.73) (.01) (.71) -
--------- --------- ----------- -----------
Net income........................................ $ .74 $ 1.07 $ 2.45 $ 2.47
========= ========= =========== ===========
</TABLE>
A comparison of pre-tax income (loss) for the three and nine month periods ended
September 30, 2000 and 1999 is as follows:
- Pre-tax income of the Company's homebuilding business segment increased 30%
for both the three and nine month periods due primarily to the improvement
in Domestic Homebuilding operations where pre-tax income increased 25% and
26%, respectively. Domestic gross margins improved 80 and 100 basis points,
respectively, and domestic unit selling price increased by approximately
10% and 9%, respectively.
- Pre-tax income of the Company's financial services segment increased 47%
for the quarter primarily reflecting increases in mortgage origination
volume, origination fees and pricing and marketing gains. For the nine
months ended September 30, 2000, pre-tax income decreased 23% from the
prior year period, primarily reflecting competitive market conditions
during the first six months of 2000. In addition, the prior year's nine
month results also reflect a net gain of approximately $1,700 as Pulte
Financial Companies, Inc. (PFCI), a financing subsidiary of the Company,
sold its remaining mortgage-backed securities portfolio during the first
quarter of 1999.
- Pre-tax loss of the Company's corporate business segment increased $3,159
and $9,646, respectively, from the three and nine month periods ended
September 30, 1999. The increase in pre-tax loss for the quarter primarily
reflects an increase of approximately $3,100 in the corporate net interest
spread. Year-to-date results reflect an increase of approximately $7,100 in
the corporate net interest spread and an increase in other corporate
expenses, net, of approximately $2,600. Increases in the corporate net
interest spread are attributed to increased borrowings for additional
capital investment, primarily in the Domestic Homebuilding operations.
Other corporate expenses, net, reflects the inclusion of one-time expenses
for costs related to certain corporate strategic initiatives.
24
<PAGE> 25
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
($000'S OMITTED)
HOMEBUILDING OPERATIONS:
The Company's Homebuilding segment consists of the following business lines:
- Domestic Homebuilding operations are conducted in 41 markets, located
throughout 25 states. Domestic Homebuilding offers a broad product line to
meet the needs of the first-time, first and second move-up, and active
adult home buyer.
- International Homebuilding operations are conducted through subsidiaries of
Pulte International Corporation in Mexico and Puerto Rico. International
Homebuilding product offerings focus on the demand of first-time buyers,
and social interest housing in those locations. The Company has agreements
in place with multi-national corporations to provide social interest
housing in Mexico.
- Active Adult operations acquire and develop major active adult residential
communities. These amenitized age-targeted and age-qualified communities
appeal to a growing demographic group in their pre-retirement and
retirement years.
The metropolitan Atlanta market accounted for 10% of the unit net new orders and
unit settlements for the three and nine month periods ended September 30, 2000.
No other individual market represented more than 10% of total Domestic
Homebuilding net new orders, unit settlements or revenues during these periods.
Certain operating data relating to the Company's joint ventures and homebuilding
operations for the three and nine months ended September 30, 2000 and 1999, are
as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -------------------------
2000 1999 2000 1999
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Pulte/Pulte-affiliate homebuilding revenues:
Domestic........................................... $ 940,098 $ 879,267 $ 2,483,398 $ 2,263,751
International...................................... 42,238 20,571 116,477 75,009
Active Adult....................................... 95,646 78,257 282,585 224,954
----------- ---------- ----------- -----------
Total homebuilding.................................... $ 1,077,982 $ 978,095 $ 2,882,460 $ 2,563,714
=========== ========== =========== ===========
Pre-tax income (loss):
Domestic...................................... $ 98,478 $ 78,606 $ 216,882 $ 172,752
International................................. 1,570 (90) 2,850 141
Active Adult.................................. 6,537 3,598 20,035 11,216
----------- ---------- ----------- -----------
Total Homebuilding operations.................... $ 106,585 $ 82,114 $ 239,767 $ 184,109
=========== ========== =========== ===========
Pulte and Pulte-affiliate settlements - units:
Domestic........................................... 4,468 4,616 12,328 12,297
International:
Pulte......................................... 56 50 142 224
Pulte-affiliated entities..................... 1,844 1,018 5,429 3,734
----------- ---------- ----------- -----------
Total International........................... 1,900 1,068 5,571 3,958
----------- ---------- ----------- -----------
Active Adult:
Pulte......................................... 477 390 1,341 937
Pulte-affiliated entity....................... - - - 279
----------- ---------- ----------- -----------
Total Active Adult............................ 477 390 1,341 1,216
----------- ---------- ----------- -----------
Total Pulte and Pulte-affiliate settlements - units... 6,845 6,074 19,240 17,471
=========== ========== =========== ===========
</TABLE>
25
<PAGE> 26
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
($000'S OMITTED)
HOMEBUILDING OPERATIONS: (CONTINUED)
Domestic Homebuilding:
The Domestic Homebuilding business line represents the Company's core business.
Operations are conducted in 41 markets, located throughout 25 states, and are
organized as follows:
PULTE HOME EAST:
Mid-Atlantic Region Connecticut, Delaware, Maryland, Massachusetts,
New Jersey, Pennsylvania, Rhode Island, Virginia
Southeast Region Georgia, North Carolina, South Carolina, Tennessee
Florida Region Florida
PULTE HOME CENTRAL:
Great Lakes Region Indiana, Kansas, Michigan, Missouri, Ohio
Midwest Region Illinois, Minnesota
Texas Region Texas
PULTE HOME WEST:
Southwest Region Arizona, Nevada
Rocky Mountain Region Colorado
California Region California
The following table presents selected unit information for Pulte's Domestic
Homebuilding operations for the three and nine months ended September 30, 2000
and 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -------------------------
2000 1999 2000 1999
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Unit settlements:
Pulte Home East.............................. 2,002 2,270 5,815 6,035
Pulte Home Central........................... 1,581 1,560 4,083 3,944
Pulte Home West.............................. 885 786 2,430 2,318
---------- ---------- ----------- -----------
4,468 4,616 12,328 12,297
========== ========== =========== ===========
Net new orders - units:
Pulte Home East.............................. 2,091 2,136 6,808 7,289
Pulte Home Central........................... 1,475 1,274 4,697 4,559
Pulte Home West.............................. 772 680 2,693 2,474
---------- ---------- ----------- -----------
4,338 4,090 14,198 14,322
========== ========== =========== ===========
Net new orders - dollars $ 927,000 $ 829,000 $ 2,987,000 $ 2,760,000
========== ========== =========== ===========
Backlog at September 30 - units:
Pulte Home East.............................. 3,435 3,521
Pulte Home Central........................... 2,197 2,529
Pulte Home West.............................. 985 1,013
----------- -----------
6,617 7,063
=========== ===========
Backlog at September 30 - dollars............... $ 1,531,000 $ 1,431,000
=========== ===========
</TABLE>
26
<PAGE> 27
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
($000'S OMITTED)
HOMEBUILDING OPERATIONS (CONTINUED):
Domestic Homebuilding (continued):
During the three months ended September 30, 2000, the Company reported net new
orders of 4,338, an increase of 6% from the comparable period of the prior year,
due to strong performance in the Southwest and Texas Regions. For the nine
months ended September 30, 2000, net new orders of 14,198 represent a slight
decline from record levels in the prior year. The year-to-date results reflect
strong performance in the Texas and California Regions offset by declines in the
Mid-Atlantic and Great Lakes Regions. Unit settlements decreased 3% for the
quarter and were flat year-to-date, as strong activity in the California, Rocky
Mountain, Texas and Great Lakes Regions was offset by declines in the
Mid-Atlantic, Midwest and Southwest Regions. The Company's backlog at September
30, 2000, declined 446 units, or approximately 6% while backlog value grew to
$1,531,000, a 7% increase over September 30, 1999.
The following table presents a summary of pre-tax income for Pulte's Domestic
Homebuilding operations for the three and nine months ended September 30, 2000
and 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -------------------------
2000 1999 2000 1999
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues..................................... $ 940,098 $ 879,267 $ 2,483,398 $ 2,263,751
Cost of sales................................ (765,444) (722,412) (2,029,161) (1,871,615)
Selling, general and administrative expense.. (80,860) (73,839) (229,992) (205,799)
Interest(+).................................. (7,036) (6,579) (17,342) (16,153)
Other income, net............................ 11,720 2,169 9,979 2,568
---------- ---------- ----------- -----------
Pre-tax income............................... $ 98,478 $ 78,606 $ 216,882 $ 172,752
========== ========== =========== ===========
Average sales price.......................... $ 210 $ 190 $ 201 $ 184
========== ========== =========== ===========
</TABLE>
(+) The Company capitalizes interest cost into homebuilding inventories
and charges the interest to homebuilding interest expense when the
related inventories are closed.
Gross profit margins were 18.6% and 18.3% for the three and nine month periods
ended September 30, 2000, respectively, compared to 17.8% and 17.3%,
respectively, for the same periods in the prior year. Several factors
contributed to this favorable trend including positive home pricing, a favorable
product mix change and a continued effort in cost reduction and efficiency
initiatives.
As a percentage of total revenues, selling, general and administrative expenses
increased 20 basis points for the three and nine month periods ended September
30, 2000 and 1999. The increase reflects higher sales and marketing expenses and
startup costs associated with the opening of new communities.
Other income, net, includes gains on land sales and other homebuilding-related
expenses. The increase in other income, net, for the third quarter and
year-to-date is a result of increased gains on land sales and insurance
settlement recoveries.
Gains on sales of land amounted to $8,500 and $13,800 for the three and nine
month periods ended September 30, 2000, respectively, compared to $2,200 and
$4,400 for the same periods in the prior year. The increase in land sale
activity represents the Company's efforts to rationalize certain existing land
positions to ensure the most effective use of invested capital.
27
<PAGE> 28
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
($000'S OMITTED)
HOMEBUILDING OPERATIONS (CONTINUED):
Domestic Homebuilding (continued):
The average selling price for the three and nine month periods ended September
30, 2000, was $210 and $201, respectively, an increase from the average selling
price of $190 and $184 in the comparable periods of the prior year. Changes in
average selling price reflect a number of factors, including changes in market
selling prices and the mix of product closed during a period.
Pulte's Domestic Homebuilding operations controlled approximately 60,000 and
59,000 lots, of which approximately 38,100 and 38,900 lots were owned, and
approximately 21,900 and 20,100 lots were controlled through option agreements
at September 30, 2000 and 1999, respectively. Domestic Homebuilding inventory at
September 30, 2000, was approximately $1,746,500 of which $1,115,600 is related
to land and land development. At September 30, 1999, inventory was approximately
$1,665,200 of which $1,092,400 was related to land and land development.
Included in other assets is approximately $92,300 in land held for disposition
as of September 30, 2000 as compared to $10,000 in the prior year.
International Homebuilding:
International Homebuilding operations are primarily conducted through
subsidiaries of Pulte International Corporation in Puerto Rico and Mexico.
The Company's aggregate net investment in its five joint ventures located
throughout Mexico approximated $43,800 at September 30, 2000. The largest of
these ventures, Condak-Pulte S. De R.L. De C.V. (Condak), is located in the city
of Juarez. The Juarez-based venture is currently developing communities in
Juarez, Chihuahua, Nuevo Laredo, Reynosa and Matamoros, under agreements with
Delphi Automotive Systems, Sony Magneticos de Mexico, S.A. de C.V., an affiliate
of Sony Electronics, Inc., and Centros Comerciales Soriana, S.A. de C.V. It is
also constructing housing for the general public. As of September 30, 2000, the
Company's net investment in Condak approximated $24,000.
Desarrollos Residenciales Turisticos, S.A. de C.V., another of the Company's
joint ventures in Mexico, is constructing primarily social interest housing in
Central Mexico. Current development plans for this venture include housing
projects in the Bajio region surrounding Mexico City, targeting the cities of
Puebla, Queretaro, San Jose du Iturbide, San Juan del Rio, Leon and Zamora. The
Company's net investment in this joint venture at September 30, 2000
approximated $6,400.
28
<PAGE> 29
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
($000'S OMITTED)
HOMEBUILDING OPERATIONS (CONTINUED):
International Homebuilding (continued):
The following table presents selected financial data for Pulte's International
Homebuilding operations for the three and nine month periods ended September 30,
2000 and 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -------------------------
2000 1999 2000 1999
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues........................................ $ 5,718 $ 4,216 $ 13,060 $ 18,732
Cost of sales................................... (5,146) (3,730) (11,765) (17,400)
Selling, general and administrative expense..... (1,394) (1,019) (3,899) (3,376)
Other income (expense), net..................... 75 (174) 967 224
Equity in income of Mexico operations........... 2,317 617 4,487 1,961
---------- ---------- ----------- -----------
Pre-tax income (loss)........................... $ 1,570 $ (90) $ 2,850 $ 141
========== ========== =========== ===========
Unit settlements:
Pulte........................................ 56 50 142 224
Pulte-affiliated entities.................... 1,844 1,018 5,429 3,734
---------- ---------- ----------- -----------
Total Pulte and Pulte-affiliates........... 1,900 1,068 5,571 3,958
========== ========== =========== ===========
</TABLE>
The pre-tax income of $1,570 and $2,850 for the three and nine month periods
ended September 30, 2000, as compared to a pre-tax loss of $90 and pre-tax
income of $141 for the three and nine months ended September 30, 1999, was
primarily a result of strong market demand supported by consistent mortgage
funding activity in Mexico. Foreign currency exchange gains in Mexico amounted
to $1,164 for the quarter and $694 year-to-date, reflecting a 3.2%
quarter-to-date increase and a 1.6% year-to-date increase in the value of the
Mexican peso against the U.S. dollar. Gains of $1,157 and $1,571 were recognized
for the three and nine month periods ended September 30, 1999.
Active Adult Homebuilding:
Active Adult operations acquire and develop major active adult residential
communities. These highly amenitized, age-targeted and age-qualified communities
appeal to a growing demographic group in their pre-retirement and retirement
years. As of September 30, 2000, the Company's Active Adult operations include
24 communities located in Arizona, California and Florida.
Through July 1, 1999, Active Adult Homebuilding operations were conducted
through a joint venture with Blackstone Real Estate Advisors (BRE), an affiliate
of the Blackstone Group. Effective July 1, 1999, the Company purchased BRE's
interest in the net assets of the Active Adult joint venture. As a result of
this purchase, Pulte owns 100% of the former joint venture operations, and
effective July 1, 1999, these operations are fully consolidated with the
operating results of Pulte's other homebuilding operations. Prior to this
purchase, Pulte's 50% interest in this joint venture was accounted for as an
equity investment. The impact of acquiring the additional 50% interest was
immaterial to the Company's consolidated revenues, pre-tax income from
operations, net income and earnings per share (both basic and diluted).
In addition, during the third quarter of 1999, the Company made the decision to
align its Florida-based DiVosta and Company (DiVosta) operations, given their
common buyer profiles, with the Company's other Active Adult operations,
effective January 1, 2000. Previously, DiVosta's operations were included in the
Company's Domestic Homebuilding operations.
29
<PAGE> 30
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
($000'S OMITTED)
HOMEBUILDING OPERATIONS (CONTINUED):
Active Adult Homebuilding (continued):
The following table presents selected financial data for Pulte's Active Adult
Homebuilding operations for the three and nine month periods ended September 30,
2000 and 1999. Data for 2000 and for the three months ended September 30, 1999
includes the fully consolidated operating results of the Company's Active Adult
operations through September 30, 2000. Data for the nine months ended September
30, 1999, reflects the Company's equity in income of the joint venture
operations through June 30, 1999, with these operations fully consolidated from
July 1 through September 30, 1999, and the fully consolidated operating results
of the Company's other Active Adult operations, primarily DiVosta.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -------------------------
2000 1999 2000 1999
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues...................................... $ 95,646 $ 78,257 $ 282,585 $ 167,397
Cost of sales................................. (76,566) (65,720) (227,203) (138,755)
Selling, general and administrative expense... (10,844) (6,814) (30,476) (13,124)
Interest(+)................................... (716) (443) (1,977) (443)
Other expense, net............................ (983) (1,682) (2,894) (4,675)
Equity in income of joint venture............. - - - 816
---------- ---------- ----------- -----------
Pre-tax income................................ $ 6,537 $ 3,598 $ 20,035 $ 11,216
========== ========== =========== ===========
Pulte and Pulte-affiliate:
Average sales price........................... $ 201 $ 201 $ 211 $ 185
========== ========== =========== ===========
Unit settlements.............................. 477 390 1,341 1,216
========== ========== =========== ===========
Net new orders - units........................ 454 372 1,716 1,418
========== ========== =========== ===========
Net new orders - dollars...................... $ 105,100 $ 76,300 $ 373,700 $ 282,600
========== ========== =========== ===========
Backlog at September 30 - units............... 1,060 749
=========== ===========
Backlog at September 30 - dollars............. $ 242,900 $ 159,100
=========== ===========
</TABLE>
(+) The Company capitalizes interest cost into homebuilding inventories
and charges the interest to homebuilding interest expense when the
related inventories are closed.
Net new orders increased 22% and 21%, respectively, for the three and nine month
periods ended September 30, 2000. Unit settlements increased 22% and 10%,
respectively. Backlog units increased 42% while backlog value increased 53%.
This strong performance was a result of vigorous demand in Florida, along with
an increase in the number of selling communities in Arizona and California.
The increase in revenues, cost of sales and selling, general and administrative
expense in the first nine months of 2000, compared with the same period in 1999,
largely reflects the purchase of BRE's interest in the joint venture operations.
Prior to the purchase, the Company accounted for these operations as an equity
investment. During 2000, positive product mix, along with higher gross profit
margins, contributed to significantly higher pre-tax income compared with 1999.
Gross profit margins of 19.9% and 19.6% for the three and nine month periods,
respectively, include acquisition accounting adjustments related to the
Company's purchase of BRE's 50% interest in the joint venture operations
effective July 1, 1999. Excluding the impact of acquisition accounting, gross
profit margins for the three and nine month periods ended September 30, 2000,
would have been 20.0% and 19.9%, respectively, compared with 18.4% and 18.2%,
respectively, in 1999.
30
<PAGE> 31
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
($000'S OMITTED)
HOMEBUILDING OPERATIONS (CONTINUED):
Active Adult Homebuilding (continued):
The following pro-forma information and related discussion provide a more
meaningful comparison of the results of operations for the Active Adult
operations. The pro-forma information presents selected financial data for
Pulte's wholly-owned and joint venture operations as if they had been
consolidated for both 2000 and 1999. It excludes costs related to the sale and
subsequent repurchase of the joint venture operations, such as transaction costs
and acquisition accounting adjustments.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -------------------------
2000 1999 2000 1999
---------- ---------- ----------- -----------
PRO-FORMA PRO-FORMA
----------------------- -------------------------
Pro-forma financial summary:
<S> <C> <C> <C> <C>
Revenues...................................... $ 95,646 $ 78,257 $ 282,585 $ 224,954
Cost of sales................................. (76,523) (63,854) (226,288) (183,886)
Selling, general and administrative expense... (10,844) (6,814) (30,476) (20,859)
Interest...................................... (716) (443) (1,977) (1,378)
Other expense, net............................ (983) (1,682) (2,894) (4,703)
---------- ---------- ----------- -----------
Pro-forma pre-tax income...................... $ 6,580 $ 5,464 $ 20,950 $ 14,128
========== ========== =========== ===========
</TABLE>
Pro-forma revenues increased 22% and 26%, respectively, for the three and nine
months ended September 30, 2000, compared with 1999, due to an increase in unit
settlements and in average selling price. While the pro-forma average selling
price was flat for the quarter, it increased 14% for the nine month period ended
September 30, 2000. Pro-forma unit settlements increased 22% and 10%, for the
nine months ended September 30, 2000, respectively. Pro-forma gross profit
margins increased 160 basis points for both the three and nine month periods
ended September 30, 2000, as a result of a continued strong demand for housing
and a favorable product mix. Pro-forma selling, general and administrative
expense as a percent of revenues increased 260 and 150 basis points,
respectively, as a result of costs incurred in the opening of new communities.
Pulte's Active Adult homebuilding operations controlled approximately 11,800 and
8,400 lots, of which approximately 5,600 and 2,900 lots were owned, and
approximately 6,200 and 5,500 lots were controlled through option agreements at
September 30, 2000 and 1999, respectively. Active Adult Homebuilding inventory
at September 30, 2000 was approximately $246,500 of which $194,300 is related to
land and land development. At September 30, 1999, inventory was approximately
$166,400 of which $124,900 was related to land and land development.
FINANCIAL SERVICES OPERATIONS:
The Company conducts its financial services operations principally through Pulte
Mortgage Corporation (PMC), the Company's mortgage banking subsidiary, and to a
limited extent through Pulte Financial Companies, Inc. (PFCI). Pre-tax income of
the Company's financial services operations for the three and nine month periods
ended September 30, 2000 and 1999, is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -------------------------
2000 1999 2000 1999
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Pre-tax income:
Mortgage banking.......................... $ 5,215 $ 3,364 $ 12,119 $ 14,009
Financing activities...................... - 175 - 1,808
---------- ---------- ----------- -----------
Pre-tax income........................ $ 5,215 $ 3,539 $ 12,119 $ 15,817
========== ========== =========== ===========
</TABLE>
31
<PAGE> 32
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
($000'S OMITTED)
FINANCIAL SERVICES OPERATIONS (CONTINUED):
Mortgage Banking:
The following table presents mortgage origination data for Pulte Mortgage:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -------------------------
2000 1999 2000 1999
---------- ---------- ----------- ---------------
<S> <C> <C> <C> <C>
Total originations:
Loans..................................... 3,407 3,241 9,050 9,773
========== ========== =========== ===========
Principal................................. $ 503,500 $ 455,800 $ 1,303,900 $ 1,352,300
========== ========== =========== ===========
Originations for Pulte customers:
Loans..................................... 2,766 2,616 7,459 7,406
========== ========== =========== ===========
Principal................................. $ 430,500 $ 377,800 $ 1,120,600 $ 1,057,400
========== ========== =========== ===========
</TABLE>
Mortgage origination unit volume for the three month period ended September 30,
2000, increased 5% over the comparable 1999 period due to an easing of
competitive market conditions in the third quarter of 2000. The decrease in
year-to-date originations is the result of competitive market conditions during
the first six months of 2000. Year-to-date, Pulte originations now comprise 82%
of total production versus 76% in the same period in 1999, while for the third
quarter, Pulte originations were 81% in both 2000 and 1999. Refinancings
approximated 2% of total loan originations for the nine month period ended
September 30, 2000, compared to 4% for the same period in 1999. Adjustable rate
mortgages decreased, as a percent of total mortgage origination unit volume, 77%
and 12% for the three and nine month periods ended September 30, 2000,
respectively. At September 30, 2000, loan application backlog increased 8% to
$715,500 as compared with $662,700 at September 30, 1999. Pulte continues to
hedge its mortgage pipeline in the normal course of its business and there has
been no change in PMC's strategy or use of derivative financial instruments in
this regard.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities", as amended by SFAS Nos. 137 and 138, which
is required to be adopted for years beginning after June 15, 2000 with earlier
adoption encouraged. This Statement will require the Company to recognize all
derivatives on the balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of derivatives
will either be offset against the change in fair value of the hedged assets,
liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. PMC, in
the normal course of business, uses derivative financial instruments to meet the
financing needs of its customers and reduce its own exposure to fluctuations in
interest rates. The Company plans to adopt this statement on January 1, 2001.
Based on the Company's current understanding and interpretation of SFAS No.
133's applicability to PMC's use of derivative financial instruments, the
Company believes that any effects of SFAS No. 133 will not be material to its
earnings or financial position.
During the three and nine month periods ended September 30, 2000, origination
fees increased 41% and 22%, respectively. This increase is attributable to
higher revenues per loan and an increase in non-funded (brokered) loans.
Brokered loans represent 15% and 14% of total PMC volume for the three and nine
months ended September 30, 2000, respectively, compared to 10% and 8%,
respectively, in 1999. Pricing and marketing gains for the three months ended
September 30, 2000 increased 6% as competitive market conditions eased during
the quarter. For the nine months ended September 30, 2000, a 23% decrease was
primarily due to lower servicing retained originations for much of 2000. Net
interest income decreased 29% and 11% for the three and nine month periods ended
September 30, 2000, respectively, as a result of a drop in funded production and
a higher cost of funds due to a new warehouse line that became effective March
31, 2000.
32
<PAGE> 33
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
($000'S OMITTED)
FINANCIAL SERVICES OPERATIONS (CONTINUED):
Financing Activities:
The Company's secured financing operations, which had been conducted by the
limited-purpose subsidiaries of PFCI, ceased operations during 1999. During the
first quarter of 1999, PFCI recognized a net gain of approximately $1,700 in
connection with the sale of its remaining mortgage-backed securities portfolio.
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, to develop and implement strategic initiatives centered on new
business development and operating efficiencies, and to provide the
administrative support associated with being a publicly traded entity. As a
result, the corporate segment's operating results will vary from quarter to
quarter as these strategic initiatives evolve.
The following table presents corporate results of operations for the three and
nine months ended September 30, 2000 and 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -------------------------
2000 1999 2000 1999
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net interest expense........................... $ 8,433 $ 5,290 $ 21,992 $ 14,931
Other corporate expenses, net.................. 4,417 4,401 13,992 11,407
---------- ---------- ----------- -----------
Loss before income taxes....................... $ 12,850 $ 9,691 $ 35,984 $ 26,338
========== ========== =========== ===========
</TABLE>
Pre-tax loss of the Company's corporate business segment increased $3,159 and
$9,646, respectively, from the three and nine month periods ended September 30,
1999. The increase in pre-tax loss for the quarter primarily reflects an
increase of approximately $3,140 in the corporate net interest spread.
Year-to-date results reflect an increase of approximately $7,060 in the
corporate net interest spread, and an increase in other corporate expenses, net,
of approximately $2,590. Increases in the corporate net interest spread are
attributed to higher average use of the Company's unsecured revolving credit
facility in addition to the issuance in April 2000 of $175,000 Senior Notes,
primarily related to increased working capital requirements of the Homebuilding
Operations. Interest incurred for the three and nine months ended September 30,
2000, excluding interest incurred by the Company's financial services
operations, was approximately $16,400 and $46,600, respectively. Other corporate
expenses, net reflect the inclusion of one-time expenses of approximately $2,400
for the nine months ended September 30, 2000, primarily due to costs related to
certain corporate strategic initiatives including the amendment of certain stock
option participant agreements and losses incurred upon the settlement of a
derivative contract in connection with the execution of corporate financing
strategies.
Information related to interest in inventory is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30
----------------------- -------------------------
2000 1999 2000 1999
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Interest in inventory at beginning of period......... $ 24,020 $ 20,471 $ 19,092 $ 16,356
Interest capitalized................................. 7,913 6,587 24,408 20,276
Interest expensed.................................... (7,752) (6,579) (19,319) (16,153)
---------- ---------- ----------- -----------
Interest in inventory at end of period............... $ 24,181 $ 20,479 $ 24,181 $ 20,479
========== ========== =========== ===========
</TABLE>
33
<PAGE> 34
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
($000'S OMITTED, EXCEPT PER SHARE DATA)
LIQUIDITY AND CAPITAL RESOURCES:
Continuing Operations:
The Company's net cash used in operating activities amounted to $80,599,
reflecting increased income from continuing operations offset by an increase in
the use of operating funds as compared with the same period last year. This
increase in the use of operating funds is primarily attributable to increases in
inventory levels resulting from land purchases and increases in other assets.
This increase was partially offset by a decrease in PMC's portfolio of
residential mortgage loans available-for-sale. Net cash used in investing
activities was $1,015 for the nine months ended September 30, 2000, as it did
not include the effects of 1999's sale of the underlying collateral of PFCI's
mortgage-backed securities portfolio and the purchase of BRE's interest in the
net assets of the Company's Active Adult joint venture. Net cash provided by
financing activities was $62,026 in 2000, as compared to a use of cash of $7,761
in 1999 which primarily reflects the Company's issuance of $175,000 Senior Notes
in April 2000 offset by stock repurchases. Net cash used in 1999 also reflects
PFCI's redemption of its remaining mortgage-backed securities portfolio and
payments on collateralized short-term debt related to PMC's residential mortgage
loan portfolio.
The Company finances its land acquisition, development and construction
activities from internally generated funds and existing credit agreements. The
Company had $46,400 of borrowings under its $400,000 unsecured revolving credit
facilities at September 30, 2000. PMC 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 September 30,
2000, amounted to $250,000. There were approximately $132,000 of borrowings
outstanding under the $250,000 PMC arrangement at September 30, 2000. Mortgage
loans originated by PMC are subsequently sold to outside investors. The Company
anticipates that there will be adequate mortgage financing available for
purchasers of its homes.
At September 30, 2000, the Company had cash and equivalents of $32,130 and total
long-term indebtedness of $685,853. Long-term indebtedness includes $662,179 of
unsecured senior notes, a $7,000 unsecured promissory note and other Pulte
limited recourse debt of $16,674. The Company also had other non-recourse
short-term notes payable of $51,733 and First Heights advances of $760.
The Company's income tax liabilities are affected by a number of factors.
Management anticipates that the Company's effective tax rate for 2000 will be
between 38% and 39%.
On January 20, 2000, the Company's Board of Directors approved a stock
repurchase plan of up to $100,000. Shares will be purchased from time-to-time in
the open market, depending upon market conditions. As of September 30, 2000, the
Company had purchased 3,331,600 shares at an average price of $19.90 per share.
The Company anticipates that it would fund any future repurchases under the plan
through cash flows from operations.
In March 2000, the Company entered into a $25,000 uncommitted revolving credit
facility which can be canceled at either party's discretion. In April 2000 the
Company sold, in a private placement, 9.5%, $175,000 Senior Notes due 2003 and
subsequently filed an S-4 Registration Statement with the Securities and
Exchange Commission in May 2000. The net proceeds from the sale of the Senior
Notes were used to repay short-term borrowings under the Company's revolving
bank credit arrangements and for general corporate purposes.
In August 2000, the Company cancelled two revolving credit facilities totaling
$375,000 and replaced them with a $375,000 committed five-year revolving credit
facility. As of September 30, 2000, the Company's unsecured credit facilities
totaled $400,000.
Sources of the Company's working capital at September 30, 2000, include its cash
and equivalents and its $400,000 unsecured revolving credit facilities. The
Company routinely monitors current operational requirements and financial market
conditions to evaluate the utilization of available financing sources, including
securities offerings. The Company anticipates the filing of a universal shelf
registration statement with the Securities and Exchange Commission during the
fourth quarter of 2000.
34
<PAGE> 35
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
($000'S OMITTED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED):
Discontinued Operations:
The Company's remaining investment in First Heights at September 30, 2000
approximated $30,900. Since the acquisition of First Heights, the Company's
income taxes have been significantly impacted by its thrift operations,
principally because payments received from the Federal Savings and Loan
Insurance Corporation Resolution Fund (FRF) were exempt from federal income
taxes. The Company's thrift assets are subject to regulatory restrictions and a
court order and thus are not available for general corporate purposes. The final
liquidation of the Company's thrift operations is dependent on the final
resolution of outstanding matters with the Federal Deposit Insurance Corporation
(FDIC), manager of the FRF. As discussed in Note 4 of Notes to Condensed
Consolidated Financial Statements, the Company appealed the final judgment
entered by the United States District Court to the Sixth Circuit Court of
appeals. The Company has posted bonds in the amount of $117 million. Based upon
the Company's assessment of the recent Sixth Circuit opinion on the District
Court litigation with the FDIC, as well as the expected duration of the legal
process in this case, the Company currently believes that the final judgment
ordered by the District Court against Pulte Diversified Companies, Inc. and
First Heights, as revised by the Sixth Circuit, will not have a material impact
on the Company's liquidity.
Inflation
The Company and the homebuilding industry in general, may be adversely affected
during periods of high inflation, because of higher land and construction costs.
Inflation also increases the Company's financing, labor and material costs. In
addition, higher mortgage interest rates significantly affect the affordability
of permanent mortgage financing to prospective homebuyers. The Company attempts
to pass through to its customers any increases in its costs through increased
sales prices and, to date, inflation has not had a material adverse effect on
the Company's results of operations. However, there is no assurance that
inflation will not have a material adverse impact on the Company's future
results of operations.
35
<PAGE> 36
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative disclosure:
The Company is subject to interest rate risk on its long term debt. The Company
seeks to minimize its interest rate exposure by using variable rate financing;
however, the Company runs the risk of interest rate declines with respect to its
fixed rate long term corporate debt instruments. The following table sets forth,
as of September 30, 2000, the Company's long term debt obligations, principal
cash flows by scheduled maturity, weighted average interest rates and estimated
fair market value:
($000'S OMITTED)
<TABLE>
<CAPTION>
FAIR
THERE- VALUE
2000 2001 2002 2003 2004 AFTER TOTAL 9/30/2000
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RATE SENSITIVE LIABILITIES:
Fixed interest rate debt:
Pulte Corporation public
debt instruments............... $ - $ - $ - $275,000 $115,000 $275,000 $665,000 $628,600
Average interest rate.......... - - - 8.59% 8.38% 7.48% 8.09% -
Pulte Diversified Companies,
Inc., unsecured promissory
note........................... - 7,000 - - - - $ 7,000 $ 7,000
Average interest rate.......... - 8.00% - - - - 8.00% -
Pulte Home Corporation
other non-recourse
debt........................... $ 8,400 8,274 - - - - $ 16,674 $ 16,674
Average interest rate.......... 8.80% 8.60% - - - - 8.68% -
</TABLE>
Qualitative disclosure:
This information is set forth on page 32 of Part II, of Item 7A., Management's
Discussion and Analysis of Financial Condition and Results of Operations, of the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1999, and is incorporated herein by reference. As discussed herein on page 33 of
Item 2., Management's Discussion and Analysis of Financial Condition and Results
of Operation, Pulte Financial Companies, Inc. a subsidiary of the Company
redeemed its remaining mortgage-backed bond portfolio and recorded a net
realized gain on this transaction of approximately $1,700 during the first
quarter of 1999.
FORWARD-LOOKING STATEMENTS:
As a cautionary note, except for the historical information contained herein,
certain matters discussed in Item 2., "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Item 3., "Quantitative and
Qualitative Disclosures About Market Risk", are "forward-looking" statements
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
matters involve risks and uncertainties, including, but not limited to, changes
in economic conditions and interest rates, increases in raw material and labor
costs, issues and timing surrounding land entitlement and development, weather
conditions and general competitive factors; as well as its ability to resolve
all outstanding matters related to First Heights (including the outcome of the
Company's litigation with the FDIC) that may cause actual results to differ
materially.
36
<PAGE> 37
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
First Heights Related Litigation: Update on Lawsuit Filed on July 7, 1995
in the United States District Court, Eastern District of Michigan (the
"Court"), by the Federal Deposit Insurance Corporation ("FDIC") against the
Company, Pulte Diversified Companies, Inc. and First Heights Bank
(collectively, "the Pulte Parties") (the "District Court Case").
See Note 4, Notes to Condensed Consolidated Financial Statements, which is
contained in Part I, Item 1, of this Quarterly Report on Form 10-Q and
which is incorporated by reference into this response.
ITEM 6. EXHIBITS
(A) EXHIBITS AND REPORT ON FORM 8-K
(10) Credit Agreement among Pulte Corporation
as Borrower, the Material Subsidiaries of Pulte
Corporation as Guarantors, the Lenders Identified
Herein, and Bank of America, N.A., as Administrative
Agent, dated as of August 31, 2000.
(27) Financial Data Schedule
(B) REPORT ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 2000.
37
<PAGE> 38
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/ Roger A. Cregg
-------------------------------------------
Roger A. Cregg
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Vincent J. Frees
-------------------------------------------
Vincent J. Frees
Vice President and Controller
(Principal Accounting Officer)
Date: November 13, 2000
38
<PAGE> 39
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
(10) Credit Agreement among Pulte Corporation
as Borrower, the Material Subsidiaries of Pulte
Corporation as Guarantors, the Lenders Identified
Herein, and Bank of America, N.A., as Administrative
Agent, dated as of August 31, 2000.
(27) Financial Data Schedule
</TABLE>
