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 June 30, 1996
-------------
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-9804
------
PULTE CORPORATION
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2766606
- ---------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) (Identification No.)
33 Bloomfield Hills Pkwy., Suite 200,
Bloomfield Hills, Michigan 48304
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (810) 647-2750
-------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding twelve months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
the filing requirements for the past 90 days.
YES_ X_ NO__
Number of shares of common stock outstanding as of July 31, 1996: 23,912,555
Total pages: 30
Listing of exhibits: 28
1
PULTE CORPORATION
INDEX
Page No.
--------
PART I FINANCIAL INFORMATION
Item 1 Financial Statements (unaudited)
Condensed Consolidated Balance Sheets,
June 30, 1996 and December 31, 1995................................ 3
Condensed Consolidated Statements of Income,
Three and Six Months Ended June 30, 1996 and 1995.................. 4
Condensed Consolidated Statement of Shareholders' Equity,
Six Months Ended June 30, 1996..................................... 5
Condensed Consolidated Statements of Cash Flows,
Six Months Ended June 30, 1996 and 1995 ......................... 6
Notes to Condensed Consolidated Financial Statements................. 8
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations............. 21
PART II OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders......... 28
Item 6 Exhibits and Reports on Form 8-K............................ 28
SIGNATURES ........................................................ 30
2
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PULTE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
($000's omitted)
June 30, December 31,
1996 1995
-------- ------------
(Unaudited)
ASSETS
Cash and equivalents...................................................................... $ 173,139 $ 292,227
Unfunded settlements...................................................................... 88,783 80,131
House and land inventories................................................................ 972,947 859,735
Mortgage-backed and related securities.................................................... 70,721 254,170
Residential mortgage loans and other securities available-for-sale........................ 137,957 178,302
Other assets ............................................................................. 252,091 227,289
Discontinued operations................................................................... 155,462 156,617
---------- ----------
$1,851,100 $2,048,471
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities, including book
overdrafts of $71,770 and $60,976 in 1996 and 1995,
respectively................................................................... $ 418,319 $ 381,407
Collateralized short-term debt, recourse solely to applicable
subsidiary assets.............................................................. 117,897 140,578
Mortgage-backed bonds, recourse solely to applicable
subsidiary assets.............................................................. 57,227 225,272
Income taxes........................................................................ 53,042 45,397
Subordinated debentures and senior notes............................................ 362,749 363,957
Discontinued operations............................................................. 125,895 130,857
---------- ----------
Total liabilities.............................................................. 1,135,129 1,287,468
Shareholders' equity...................................................................... 715,971 761,003
---------- ----------
$1,851,100 $2,048,471
========== ==========
<FN>
See accompanying notes
PULTE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(000's omitted, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
Revenues:
Homebuilding ............................................... $571,283 $464,419 $ 984,503 $ 773,068
Mortgage banking and financing:
Interest and other...................................... 15,096 10,334 31,229 20,878
Gain on sale of servicing............................... -- 6,034 -- 15,321
Corporate, principally interest............................. 1,977 4,677 5,143 9,072
-------- -------- --------- ---------
Total revenues.............................. 588,356 485,464 1,020,875 818,339
-------- -------- --------- ---------
Expenses:
Homebuilding, principally cost of sales..................... 544,522 448,727 950,437 760,439
Mortgage banking and financing, interest and other.......... 9,187 14,031 20,482 27,346
Corporate, net ............................................. 7,096 6,730 13,791 15,280
-------- -------- --------- ---------
Total expenses.............................. 560,805 469,488 984,710 803,065
-------- -------- --------- ---------
Income from continuing operations before
income taxes ............................................... 27,551 15,976 36,165 15,274
Income taxes ................................................... 11,150 6,485 14,656 6,209
-------- -------- --------- ---------
Income from continuing operations............................... 16,401 9,491 21,509 9,065
Income from discontinued thrift operations, net of
income taxes................................................ 1,793 1,181 3,765 5,074
-------- -------- --------- ---------
Net income ..................................................... $ 18,194 $ 10,672 $ 25,274 $ 14,139
======== ======== ========= =========
Per share data:
Primary and fully-diluted
Income from continuing operations....................... $ .64 $ .34 $ .81 $ .33
Income from discontinued operations..................... .07 .04 .14 .18
-------- -------- -------- --------
Net income ............................................. $ .71 $ .38 $ .95 $ .51
======== ======== ======== ========
Cash dividends declared..................................... $ .06 $ .06 $ .12 $ .12
======== ======== ======== ========
Weighted-average common shares outstanding
Primary................................................. 25,703 27,263 26,477 27,457
======== ======== ======== ========
Fully-diluted........................................... 25,703 27,294 26,477 27,479
======== ======== ======== ========
<FN>
See accompanying notes.
4
PULTE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
($000's omitted, except per share data)
(Unaudited)
Additional
Common Paid-in Unrealized Retained
Stock Capital Gains Earnings Total
----- ---------- ---------- -------- -----
Shareholders' Equity, December 31, 1995 $ 270 $ 65,934 $ 8,223 $686,576 $ 761,003
Exercise of stock options.......................... 1 236 -- -- 237
Cash dividends declared............................ -- -- -- (3,131) (3,131)
Stock repurchases.................................. (23) (5,572) -- (55,251) (60,846)
Change in unrealized gains on securities
available-for-sale, net of income taxes
of $4,377.................................... -- -- (6,566) -- (6,566)
Net income ........................................ -- -- -- 25,274 25,274
----- -------- --------- -------- ---------
Shareholders' Equity, June 30, 1996................ $ 248 $ 60,598 $ 1,657 $653,468 $ 715,971
===== ======== ========= ======== =========
<FN>
See accompanying notes.
5
PULTE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($000's omitted)
(Unaudited)
Six Months Ended
June 30,
----------------
1996 1995
---- ----
Continuing operations:
Cash flows from operating activities:
Income from continuing operations ................................. $ 21,509 $ 9,065
Adjustments to reconcile income from continuing operations
to net cash flows used in operating activities:
Amortization, depreciation and other ................... 3,267 3,743
Gain on sale of securities ............................. (9,993) --
Increase (decrease) in cash due to:
Inventories ................................ (113,212) (110,250)
Residential mortgage loans held for sale ... 40,145 (3,294)
Other assets ............................... (28,859) (7,416)
Accounts payable and accrued liabilities ... 36,774 10,596
Income taxes ............................... 10,591 3,504
--------- ---------
Net cash used in operating activities ................................... (39,778) (94,052)
--------- ---------
Cash flows from investing activities:
Proceeds from sale of securities available-for-sale ............... 168,085 --
Principal payments of mortgage-backed securities .................. 14,461 22,076
Decrease in funds held by trustee ................................. 4,038 699
Other, net ........................................................ (9,559) (8,107)
--------- ---------
Net cash provided by investing activities ............................... 177,025 14,668
--------- ---------
Cash flows from financing activities:
Payment of long-term debt and bonds ............................... (168,589) (25,666)
Proceeds from borrowings .......................................... -- 36,122
Repayment of borrowings ........................................... (24,069) (3,366)
Stock repurchases ................................................. (60,846) (11,705)
Dividends paid .................................................... (3,131) (3,255)
Other, net ........................................................ 300 93
--------- ---------
Net cash used in financing activities ................................... (256,335) (7,777)
--------- ---------
Net decrease in cash and equivalents-continuing operations .............. $(119,088) $ (87,161)
--------- ---------
6
PULTE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)
($000's omitted)
(Unaudited)
Six Months Ended
June 30,
-----------------
1996 1995
---- ----
Discontinued Operations:
Cash flows from operating activities:
Income from discontinued operations ............................. $ 3,765 $ 5,074
Other changes, net .............................................. (4,415) 9,380
Cash flows from investing activities:
Purchase of securities available-for-sale ....................... (29,444) (36,696)
Principal payments of mortgage-backed securities ................ 27,757 9,445
Net proceeds from sale of investments ........................... 4,100 --
Decrease in Covered Assets and FSLIC Resolution Fund (FRF)
receivables .................................................. 31,686 32,157
Cash flows from financing activities:
Increase (decrease) in deposit liabilities ...................... 5,919 (74,784)
Repayment of borrowings ......................................... (31,560) (31,560)
Decrease in Federal Home Loan Bank (FHLB) advances .............. (6,200) --
--------- ---------
Net increase (decrease) in cash and equivalents-discontinued operations 1,608 (86,984)
--------- ---------
Net decrease in cash and equivalents .................................. (117,480) (174,145)
Cash and equivalents at beginning of period ........................... 295,163 281,490
--------- ---------
Cash and equivalents at end of period ................................. $ 177,683 $ 107,345
========= =========
Cash - continuing operations .......................................... $ 173,139 $ 72,431
Cash - discontinued operations ........................................ 4,544 34,914
--------- ---------
$ 177,683 $ 107,345
========= =========
Supplemental disclosure of cash flow information-cash paid during
the period for:
Interest, net of amount capitalized
Continuing operations ........................................ $ 17,562 $ 13,270
Discontinued operations ...................................... 794 7,087
--------- ---------
$ 18,356 $ 20,357
========= =========
Income taxes .................................................... $ 4,230 $ 2,689
========= =========
<FN>
See accompanying notes.
7
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
($000's omitted)
(Unaudited)
1. Basis of presentation and significant accounting policies
Basis of presentation
The condensed consolidated financial statements include the accounts
of Pulte Corporation (the Company), and all of its significant
subsidiaries. The Company's continuing operations include its
homebuilding (Pulte Home Corporation) and financial services
subsidiaries, which include ICM Mortgage Corporation (ICM) and Pulte
Financial Companies, Inc. (PFCI). The Company's thrift subsidiary,
First Heights Bank, fsb (First Heights), has been classified as
discontinued operations (See Note 2). The Company's direct
subsidiaries consist of PFCI and Pulte Diversified Companies, Inc.
(PDCI). PDCI's direct subsidiaries are Pulte Home Corporation (Pulte)
and First Heights. ICM is a direct subsidiary of Pulte.
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 six month period ended June
30, 1996 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996. These financial
statements should be read in conjunction with the Company's
consolidated financial statements and footnotes thereto included in
the Registrant Company and Subsidiaries' annual report on Form 10-K
for the year ended December 31, 1995.
Certain 1995 classifications have been changed to conform with the
1996 presentation.
2. Discontinued operations
The following table summarizes selected financial data of the
Company's discontinued thrift operation:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
Revenues........................... $ 2,994 $ 4,843 $ 6,298 $ 12,383
Expenses........................... 1,201 3,662 2,533 7,309
------- -------- ------- ---------
Income from discontinued
operations....................... $ 1,793 $ 1,181 $ 3,765 $ 5,074
======= ======== ======= =========
June 30, December 31,
1996 1995
-------- ------------
Total assets....................... $155,462 $156,617
======== ========
Total liabilities.................. $125,895 $130,857
======== ========
Discounts of approximately $6,400 at June 30, 1996, are being
amortized into income over the life of the related FSLIC Resolution
Fund notes at a rate of approximately $1,200 per quarter. Additional
contingent gains related to possible income tax benefits, which could
amount to $90,000, have not been recognized for financial statement
purposes because of uncertainty of realization.
8
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
($000's omitted)
(Unaudited)
3. Segment Information
Financial Services
------------------
Mortgage
Homebuilding Banking
(Pulte) (ICM) Financing Corporate Consolidated
------------ ------- --------- --------- ------------
Six Months Ended June 30, 1996:
Continuing Operations:
Revenues:
Unaffiliated customers.......... $ 984,503 $ 15,058 $ 16,171 $ 5,143 $1,020,875
=========== ========== ======== ======== ==========
Income (loss) before income taxes. $ 34,066 $ 551 $ 10,196 $ (8,648) $ 36,165
=========== ========== ======== ======== ==========
Three Months Ended June 30, 1996:
Continuing Operations:
Revenues:
Unaffiliated customers.......... $ 571,283 $ 7,535 $ 7,561 $ 1,977 $ 588,356
=========== ========== ======== ======== ==========
Income (loss) before income taxes. $ 26,761 94 $ 5,815 $ (5,119) $ 27,551
=========== ========== ======== ======== ==========
At June 30, 1996:
Identifiable assets................. $ 1,261,589 $ 154,732 $ 59,980 $219,337 $1,695,638
=========== ========== ======== ========
Assets of discontinued operations... 155,462
----------
Total assets ....................... $1,851,100
==========
Six Months Ended June 30, 1995:
Continuing Operations:
Revenues:
Unaffiliated customers.......... $ 773,068 $ 21,766 $ 14,433 $ 9,072 $ 818,339
=========== ========== ======== ======== ==========
Income (loss) before income taxes. $ 12,629 $ 8,475 $ 378 $ (6,208) $ 15,274
=========== ========== ======== ======== ==========
Three Months Ended June 30, 1995:
Continuing Operations:
Revenues:
Unaffiliated customers.......... $ 464,419 $ 9,276 $ 7,092 $ 4,677 $ 485,464
=========== ========== ======== ======== ==========
Income (loss) before income taxes. $ 15,692 $ 2,244 $ 93 $ (2,053) $ 15,976
=========== ========== ======== ======== ==========
At June 30, 1995:
Identifiable assets................. $ 1,089,030 $ 157,388 $315,774 $142,688 $1,704,880
=========== ========== ======== ========
Assets of discontinued operations... 183,410
----------
Total assets........................ $1,888,290
==========
9
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
($000's omitted)
(Unaudited)
4. Income taxes
The following table reconciles the expected federal income tax rate to
the effective income tax rate for continuing operations:
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
Income taxes at federal statutory rate ................................. 35.0% 35.0% 35.0% 35.0%
Effect of state and other income taxes ................................ 5.5% 5.7% 5.5% 5.7%
----- ----- ----- -----
Effective rate......................................................... 40.5% 40.7% 40.5% 40.7%
===== ===== ===== =====
5. Commitments and contingencies
Federal Deposit Insurance Corporation
On July 7, 1995, a lawsuit was filed in the United States District
Court, Eastern District of Michigan, by the Federal Deposit Insurance
Corporation (FDIC) against the Company and its subsidiary PDCI and
PDCI's subsidiary First Heights.
The lawsuit seeks a declaration of rights under the assistance
agreement entered into between First Heights and the Federal Savings
and Loan Insurance Corporation (FSLIC). The FDIC is the successor to
FSLIC. The FDIC and Pulte 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 five failed Texas thrifts from the FSLIC.
The lawsuit 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 Company disputes the FDIC's claims
and believes that a proper interpretation of the assistance agreement
limits the FDIC's participation in the tax benefits to amounts
established on First Heights' books.
On September 8, 1995, the Company filed an answer and counter-claim in
this case. The Company intends to vigorously defend itself and pursue
its counter-claims. While it is impossible to verify the precise
amount requested by the FDIC at this time, the Company believes that
even if the FDIC were to prevail in its claims, it would not have a
material adverse effect on the financial condition or results of
operations of the Company.
6. Supplemental Guarantor Information
The Company previously filed a universal shelf registration of up to
$250,000 of debt or equity securities of which $125,000 of 7.3%
unsecured Senior Notes were issued in October, 1995. In addition, the
Company has previously issued $100,000 of 7%, and $115,000 of 8.375%
unsecured Senior Notes. Such obligations to pay principal, premium, if
any, and interest are guaranteed jointly and severally on a senior
basis by Pulte, all of Pulte's wholly-owned homebuilding subsidiaries
and Builders' Supply & Lumber Co., Inc. which is a Pulte wholly-owned
subsidiary (collectively, the Guarantors). Such guarantees are full
and unconditional. The principal non-Guarantors include PDCI, the
parent company of Pulte, ICM, a wholly-owned subsidiary of Pulte,
First Heights, and PFCI. See Note 1 for additional information on the
Company's Guarantor and non-Guarantor subsidiaries.
10
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
(Unaudited)
6. Supplemental Guarantor Information (continued)
Supplemental combining financial information of the Company,
specifically including such information for the Guarantors, is
presented below. Investments in subsidiaries are presented using the
equity method of accounting. Separate financial statements of the
Guarantors are not provided because management has concluded that the
segment information provides sufficient detail to allow investors to
determine the nature of the assets held by and the operations of the
combined groups.
CONSOLIDATING BALANCE SHEET
June 30, 1996
Unconsolidated
--------------
Consolidated
Pulte Guarantor Non-Guarantor Eliminating Pulte
Corporation Subsidiaries Subsidiaries Entries Corporation
----------- ------------ ------------ ----------- -----------
ASSETS
Cash and equivalents .................... $ 102,667 $ 67,824 $ 2,648 $ -- $ 173,139
Unfunded settlements .................... -- 88,783 -- -- 88,783
House and land inventories .............. -- 972,947 -- -- 972,947
Mortgage-backed and related securities .. -- -- 70,721 -- 70,721
Residential mortgage loans and other
securities available-for-sale ......... -- -- 137,957 -- 137,957
Land held for sale and future development -- 39,155 -- -- 39,155
Other assets ............................ 89,960 92,880 30,096 -- 212,936
Discontinued operations ................. -- -- 155,462 -- 155,462
Investment in subsidiaries .............. 747,839 28,396 787,061 (1,563,296) --
Advances receivable - subsidiaries ...... 245,565 892 26,300 (272,757) --
----------- ----------- ----------- ----------- -----------
$ 1,186,031 $ 1,290,877 $ 1,210,245 $(1,836,053) $ 1,851,100
=========== =========== =========== =========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities $ 40,323 $ 338,945 $ 39,051 $ -- $ 418,319
Collateralized short-term debt, recourse
solely to applicable subsidiary assets -- -- 117,897 -- 117,897
Mortgage-backed bonds, recourse solely to
applicable subsidiary assets ......... -- -- 57,227 -- 57,227
Income taxes ............................ 53,042 -- -- -- 53,042
Subordinated debentures and senior notes 339,323 23,426 -- -- 362,749
Discontinued operations ................. 6,438 -- 119,457 -- 125,895
Advances payable - subsidiaries ......... 30,934 187,268 54,555 (272,757) --
----------- ----------- ----------- ----------- -----------
Total liabilities ............. 470,060 549,639 388,187 (272,757) 1,135,129
Shareholders' equity .................... 715,971 741,238 822,058 (1,563,296) 715,971
----------- ----------- ----------- ----------- -----------
$ 1,186,031 $ 1,290,877 $ 1,210,245 $(1,836,053) $ 1,851,100
=========== =========== =========== =========== ===========
11
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
6. Supplemental Guarantor Information (continued)
CONSOLIDATING BALANCE SHEET
December 31, 1995
Unconsolidated
--------------
Consolidated
Pulte Guarantor Non-Guarantor Eliminating Pulte
Corporation Subsidiaries Subsidiaries Entries Corporation
----------- ------------ ------------ ------- -----------
ASSETS
Cash and equivalents .................... $ 220,782 $ 71,012 $ 433 $ -- $ 292,227
Unfunded settlements .................... -- 80,131 -- -- 80,131
House and land inventories .............. -- 859,735 -- -- 859,735
Mortgage-backed and related securities .. -- -- 254,170 -- 254,170
Residential mortgage loans and other
securities available-for-sale ......... -- -- 178,302 -- 178,302
Land held for sale and future development -- 36,980 -- -- 36,980
Other assets ............................ 86,685 76,230 27,394 -- 190,309
Discontinued operations ................. -- -- 156,617 -- 156,617
Investment in subsidiaries .............. 725,689 42,065 752,630 (1,520,384) --
Advances receivable - subsidiaries ...... 171,117 -- 14,942 (186,059) --
----------- ----------- ----------- ----------- -----------
$ 1,204,273 $ 1,166,153 $ 1,384,488 $(1,706,443) $ 2,048,471
=========== =========== =========== =========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities $ 35,369 $ 300,990 $ 45,048 $ -- $ 381,407
Collateralized short-term debt, recourse
solely to applicable subsidiary assets -- -- 140,578 -- 140,578
Mortgage-backed bonds, recourse solely to
applicable subsidiary assets ......... -- -- 225,272 -- 225,272
Income taxes ............................ 45,397 -- -- -- 45,397
Subordinated debentures and senior notes 339,280 24,677 -- -- 363,957
Discontinued operations ................. 8,875 -- 121,982 -- 130,857
Advances payable - subsidiaries ......... 14,349 120,012 51,698 (186,059) --
----------- ----------- ----------- ----------- -----------
Total liabilities ............. 443,270 445,679 584,578 (186,059) 1,287,468
Shareholders' equity .................... 761,003 720,474 799,910 (1,520,384) 761,003
----------- ----------- ----------- ----------- -----------
$ 1,204,273 $ 1,166,153 $ 1,384,488 $(1,706,443) $ 2,048,471
=========== =========== =========== =========== ===========
12
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
(Unaudited)
6. Supplemental Guarantor Information (continued)
CONSOLIDATING STATEMENT OF OPERATIONS
For the six months ended June 30, 1996
Unconsolidated
--------------
Consolidated
Pulte Guarantor Non-Guarantor Eliminating Pulte
Corporation Subsidiaries Subsidiaries Entries Corporation
----------- ------------ ------------ ----------- -----------
Revenues:
Homebuilding .................................. $ -- $ 984,503 $ -- $ -- $ 984,503
Mortgage banking and financing:
Interest and other .......................... -- -- 31,229 -- 31,229
Corporate, principally interest ............... 4,451 -- 692 -- 5,143
----------- ----------- ----------- ----------- -----------
Total revenues .................................. 4,451 984,503 31,921 -- 1,020,875
----------- ----------- ----------- ----------- -----------
Expenses:
Homebuilding:
Cost of sales .............................. -- 841,589 -- -- 841,589
Selling, general and administrative and
other expense ........................... -- 108,848 -- -- 108,848
Mortgage banking and financing, interest
and other .................................. -- -- 20,482 -- 20,482
Corporate, net ................................ 12,241 -- 1,550 -- 13,791
----------- ----------- ----------- ----------- -----------
Total expenses .................................. 12,241 950,437 22,032 -- 984,710
----------- ----------- ----------- ----------- -----------
Income (loss) from continuing operations
before income taxes and equity in income
of subsidiaries ............................... (7,790) 34,066 9,889 -- 36,165
Income taxes (benefit) .......................... (3,222) 13,626 4,252 -- 14,656
----------- ----------- ----------- ----------- -----------
Income (loss) from continuing operations
before equity in income of subsidiaries ....... (4,568) 20,440 5,637 -- 21,509
Income from discontinued operations ............. 2,647 -- 1,118 -- 3,765
----------- ----------- ----------- ----------- -----------
Income (loss) before equity in income of
subsidiaries .................................. (1,921) 20,440 6,755 -- 25,274
----------- ----------- ----------- ----------- -----------
Equity in income of subsidiaries:
Continuing operations ......................... 26,077 331 20,440 (46,848) --
Discontinued operations ....................... 1,118 -- -- (1,118) --
----------- ----------- ----------- ----------- -----------
27,195 331 20,440 (47,966) --
----------- ----------- ----------- ----------- -----------
Net income ...................................... $ 25,274 $ 20,771 $ 27,195 $ (47,966) $ 25,274
=========== =========== =========== =========== ===========
13
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 June 30, 1996
Unconsolidated
--------------
Consolidated
Pulte Guarantor Non-Guarantor Eliminating Pulte
Corporation Subsidiaries Subsidiaries Entries Corporation
----------- ------------ ------------ ----------- ------------
Revenues:
Homebuilding .................................. $ -- $571,283 $ -- $ -- $571,283
Mortgage banking and financing:
Interest and other ......................... -- -- 15,096 -- 15,096
Corporate, principally interest ............... 1,643 -- 334 -- 1,977
-------- -------- -------- -------- --------
Total revenues .................................. 1,643 571,283 15,430 -- 588,356
-------- -------- -------- -------- --------
Expenses:
Homebuilding:
Cost of sales .............................. -- 488,904 -- -- 488,904
Selling, general and administrative and
other expense .......................... -- 55,618 -- -- 55,618
Mortgage banking and financing, interest
and other .................................. -- -- 9,187 -- 9,187
Corporate, net ................................ 5,986 -- 1,110 -- 7,096
-------- -------- -------- -------- --------
Total expenses .................................. 5,986 544,522 10,297 -- 560,805
-------- -------- -------- -------- --------
Income (loss) from continuing operations
before income taxes and equity in income
of subsidiaries ............................... (4,343) 26,761 5,133 -- 27,551
Income taxes (benefit) .......................... (1,889) 10,704 2,335 -- 11,150
-------- -------- -------- -------- --------
Income (loss) from continuing operations
before equity in income of subsidiaries ....... (2,454) 16,057 2,798 -- 16,401
Income from discontinued operations ............. 1,332 -- 461 -- 1,793
-------- -------- -------- -------- --------
Income (loss) before equity in income of
subsidiaries .................................. (1,122) 16,057 3,259 -- 18,194
-------- -------- -------- -------- --------
Equity in income of subsidiaries:
Continuing operations ......................... 18,855 57 16,057 (34,969) --
Discontinued operations ....................... 461 -- -- (461) --
-------- -------- -------- -------- --------
19,316 57 16,057 (35,430) --
-------- -------- -------- -------- --------
Net income ...................................... $ 18,194 $ 16,114 $ 19,316 $(35,430) $ 18,194
======== ======== ======== ======== ========
14
PULTE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
(Unaudited)
6. Supplemental Guarantor Information (continued)
CONSOLIDATING STATEMENT OF OPERATIONS
For the six months ended June 30, 1995
Unconsolidated
--------------
Consolidated
Pulte Guarantor Non-Guarantor Eliminating Pulte
Corporation Subsidiaries Subsidiaries Entries Corporation
----------- ------------ ------------ ----------- -----------
Revenues:
Homebuilding .................................. $ -- $773,068 $ -- $ -- $773,068
Mortgage banking and financing:
Interest and other ......................... -- -- 20,878 -- 20,878
Gain on sale of servicing .................. -- -- 15,321 -- 15,321
Corporate, principally interest ............... 8,207 -- 865 -- 9,072
-------- -------- -------- -------- --------
Total revenues .................................. 8,207 773,068 37,064 -- 818,339
-------- -------- -------- -------- --------
Expenses:
Homebuilding:
Cost of sales ......................... -- 663,279 -- -- 663,279
Selling, general and administrative and
other expense .......................... -- 97,160 -- -- 97,160
Mortgage banking and financing, interest
and other .................................. -- -- 27,346 -- 27,346
Corporate, net ................................ 13,002 -- 2,278 -- 15,280
-------- -------- -------- -------- --------
Total expenses .................................. 13,002 760,439 29,624 -- 803,065
-------- -------- -------- -------- --------
Income (loss) from continuing operations
before income taxes and equity in income
of subsidiaries ............................... (4,795) 12,629 7,440 -- 15,274
Income taxes (benefit) .......................... (2,376) 5,052 3,533 -- 6,209
-------- -------- -------- -------- --------
Income (loss) from continuing operations
before equity in income of subsidiaries ...... (2,419) 7,577 3,907 -- 9,065
Income from discontinued operations ............. 1,921 -- 3,153 -- 5,074
-------- -------- -------- -------- --------
Income (loss) before equity in income
of subsidiaries .............................. (498) 7,577 7,060 -- 14,139
-------- -------- -------- -------- --------
Equity in income of subsidiaries:
Continuing operations ......................... 11,484 5,085 7,577 (24,146) --
Discontinued operations ....................... 3,153 -- -- (3,153) --
-------- -------- -------- -------- --------
14,637 5,085 7,577 (27,299) --
-------- -------- -------- -------- --------
Net income ...................................... $ 14,139 $ 12,662 $ 14,637 $(27,299) $ 14,139
======== ======== ======== ======== ========
15
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 June 30, 1995
Unconsolidated
--------------
Consolidated
Pulte Guarantor Non-Guarantor Eliminating Pulte
Corporation Subsidiaries Subsidiaries Entries Corporation
----------- ------------ ------------- ----------- -----------
Revenues:
Homebuilding .................................. $ -- $ 464,419 $ -- $ -- $ 464,419
Mortgage banking and financing:
Interest and other .......................... -- -- 10,334 -- 10,334
Gain on sale of servicing ................... -- -- 6,034 -- 6,034
Corporate, principally interest ............... 4,244 -- 433 -- 4,677
--------- --------- --------- --------- ---------
Total revenues .................................. 4,244 464,419 16,801 -- 485,464
--------- --------- --------- --------- ---------
Expenses:
Homebuilding:
Cost of sales ............................... -- 399,349 -- -- 399,349
Selling, general and administrative and
other expense ............................ -- 49,378 -- -- 49,378
Mortgage banking and financing, interest
and other .................................. -- -- 14,031 -- 14,031
Corporate, net ................................ 6,660 -- 70 -- 6,730
--------- --------- --------- --------- ---------
Total expenses .................................. 6,660 448,727 14,101 -- 469,488
--------- --------- --------- --------- ---------
Income (loss) from continuing operations
before income taxes and equity in income
of subsidiaries ............................... (2,416) 15,692 2,700 -- 15,976
Income taxes (benefit) .......................... (696) 6,277 904 -- 6,485
--------- --------- --------- --------- ---------
Income (loss) from continuing operations
before equity in income of subsidiaries ...... (1,720) 9,415 1,796 -- 9,491
Income from discontinued operations ............. 742 -- 439 -- 1,181
--------- --------- --------- --------- ---------
Income (loss) before equity in income of
subsidiaries .................................. (978) 9,415 2,235 -- 10,672
--------- --------- --------- --------- ---------
Equity in income of subsidiaries:
Continuing operations ......................... 11,211 1,346 9,415 (21,972) --
Discontinued operations ....................... 439 -- -- (439) --
--------- --------- --------- --------- ---------
11,650 1,346 9,415 (22,411) --
--------- --------- --------- --------- ---------
Net income ...................................... $ 10,672 $ 10,761 $ 11,650 $ (22,411) $ 10,672
========= ========= ========= ========= =========
16
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 six months ended June 30, 1996
Unconsolidated
--------------
Consolidated
Pulte Guarantor Non-Guarantor Eliminating Pulte
Corporation Subsidiaries Subsidiaries Entries Corporation
----------- ------------ ------------- ------------ ------------
Continuing operations:
Cash flows from operating activities:
Income from continuing operations ................. $ 21,509 $ 20,771 $ 26,077 $ (46,848) $ 21,509
Adjustments to reconcile income from
continuing operations to net cash flows
provided by (used in) operating activities:
Equity in subsidiaries ........................ (26,077) (331) (20,440) 46,848 --
Amortization, depreciation and other .......... 43 2,904 320 -- 3,267
Gain on sale of securities .................... -- -- (9,993) -- (9,993)
Increase (decrease) in cash due to:
Inventories ................................... -- (113,212) -- -- (113,212)
Residential mortgage loans
available-for-sale ....................... -- -- 40,145 -- 40,145
Other assets .................................. (5,724) (23,623) 488 -- (28,859)
Accounts payable and accrued liabilities ...... 4,954 37,955 (6,135) -- 36,774
Income taxes .................................. (7,240) 13,626 4,205 -- 10,591
--------- --------- --------- --------- ---------
Net cash provided by (used in) operating
activities ........................................ (12,535) (61,910) 34,667 -- (39,778)
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of securities
available-for-sale ............................. -- -- 168,085 -- 168,085
Principal payments of
mortgage-backed securities ..................... -- -- 14,461 -- 14,461
Decrease in funds held by trustee ................. -- -- 4,038 -- 4,038
Dividends received from subsidiaries .............. -- 14,000 -- (14,000) --
Investment in subsidiaries ........................ (1,524) -- -- 1,524 --
Advances to affiliates ............................ (40,242) (502) 1,976 38,768 --
Other, net ........................................ -- (6,397) (3,162) -- (9,559)
--------- --------- --------- --------- ---------
Net cash provided by (used in) investing
activities ........................................ (41,766) 7,101 185,398 26,292 177,025
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Payment of long-term debt and bonds ............... -- -- (168,589) -- (168,589)
Repayment of borrowings ........................... -- (1,251) (22,818) -- (24,069)
Capital contributions from parent ................. -- -- 1,524 (1,524) --
Advances from affiliates .......................... -- 52,872 (14,104) (38,768) --
Stock repurchases ................................. (60,846) -- -- -- (60,846)
Dividends paid .................................... (3,131) -- (14,000) 14,000 (3,131)
Other, net ........................................ 163 -- 137 -- 300
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities .............................. (63,814) 51,621 (217,850) (26,292) (256,335)
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and
equivalents - continuing operations ............... $(118,115) $ (3,188) $ 2,215 $ -- $(119,088)
--------- --------- --------- --------- ---------
17
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 six months ended June 30, 1996
Unconsolidated
--------------
Consolidated
Pulte Guarantor Non-Guarantor Eliminating Pulte
Corporation Subsidiaries Subsidiaries Entries Corporation
----------- ------------ ------------ ----------- -----------
Discontinued operations:
Cash flows from operating activities:
Income from discontinued operations $ 3,765 $ -- $ 1,118 $ (1,118) $ 3,765
Equity in subsidiaries ............. (1,118) -- -- 1,118 --
Other changes, net ................. (2,647) -- (1,768) -- (4,415)
Cash flows from investing activities:
Purchase of securities available-
for-sale ......................... -- -- (29,444) -- (29,444)
Principal payments of mortgage-
backed securities ................ -- -- 27,757 -- 27,757
Net proceeds from sale of investment -- -- 4,100 -- 4,100
Decrease in Covered Assets and FRF
receivables ...................... -- -- 31,686 -- 31,686
Cash flows from financing activities:
Increase in deposit liabilities .... -- -- 5,919 -- 5,919
Repayment of borrowings ............ -- -- (31,560) -- (31,560)
Decrease in FHLB advances .......... -- -- (6,200) -- (6,200)
--------- --------- --------- --------- ---------
Net increase in cash and equivalents-
discontinued operations ............ -- -- 1,608 -- 1,608
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and
equivalents ........................ (118,115) (3,188) 3,823 -- (117,480)
Cash and equivalents at beginning of
period ............................. 220,782 71,012 3,369 -- 295,163
--------- --------- --------- --------- ---------
Cash and equivalents at end of period $ 102,667 $ 67,824 $ 7,192 $ -- $ 177,683
========= ========= ========= ========= =========
18
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 six months ended June 30, 1995
Unconsolidated
--------------
Consolidated
Pulte Guarantor Non-Guarantor Eliminating Pulte
Corporation Subsidiaries Subsidiaries Entries Corporation
----------- ------------ ------------ ----------- -----------
Continuing operations:
Cash flows from operating activities:
Income from continuing operations ............. $ 9,065 $ 12,662 $ 11,484 $ (24,146) $ 9,065
Adjustments to reconcile income from
continuing operations to net cash flows
provided by (used in)operating activities:
Equity in subsidiaries ................ (11,484) (5,085) (7,577) 24,146 --
Amortization, depreciation and other .. 38 2,305 1,400 -- 3,743
Increase (decrease) in cash due to:
Inventories ........................... -- (110,250) -- -- (110,250)
Residential mortgage loans
available-for-sale .................. -- -- (3,294) -- (3,294)
Other assets ................................ 66 (5,510) (1,972) -- (7,416)
Accounts payable and accrued liabilities .... 12 4,906 5,678 -- 10,596
Income taxes ................................ (5,081) 5,052 3,533 -- 3,504
--------- --------- --------- --------- ---------
Net cash provided by (used in) operating
activities .................................... (7,384) (95,920) 9,252 -- (94,052)
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of securities
available-for-sale .......................... -- -- -- -- --
Principal payments of
mortgage-backed securities .................. -- -- 22,076 -- 22,076
Decrease in funds held by trustee ............. -- -- 699 -- 699
Dividends received from subsidiaries .......... 3,276 40,000 -- (43,276) --
Investment in subsidiaries .................... (1,516) -- -- 1,516 --
Advances to affiliates ........................ (73,004) (2,210) (951) 76,165 --
Other, net .................................... -- (4,739) (3,368) -- (8,107)
--------- --------- --------- --------- ---------
Net cash provided by (used in) investing
activities .................................... (71,244) 33,051 18,456 34,405 14,668
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Payment of long-term debt and bonds ........... -- -- (25,666) -- (25,666)
Proceeds from borrowings ...................... -- -- 36,122 -- 36,122
Repayment of borrowings ....................... -- (3,366) -- -- (3,366)
Capital contributions from parent ............. -- -- 1,516 (1,516) --
Advances from affiliates ...................... -- 71,496 4,669 (76,165) --
Stock repurchases ............................. (11,705) -- -- -- (11,705)
Dividends paid ................................ (3,255) -- (43,276) 43,276 (3,255)
Other, net .................................... 93 -- -- -- 93
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities .......................... (14,867) 68,130 (26,635) (34,405) (7,777)
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and
equivalents - continuing operations ........... $ (93,495) $ 5,261 $ 1,073 $ -- $ (87,161)
--------- --------- --------- --------- ---------
19
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 six months ended June 30, 1995
Unconsolidated
--------------
Consolidated
Pulte Guarantor Non-Guarantor Eliminating Pulte
Corporation Subsidiaries Subsidiaries Entries Corporation
----------- ------------ ------------ ----------- -----------
Discontinued operations:
Cash flows from operating activities:
Income from discontinued operations $ 5,074 $ -- $ 3,153 $ (3,153) $ 5,074
Equity in subsidiaries ............ (3,153) -- -- 3,153 --
Other changes, net ................ (1,921) -- 11,301 -- 9,380
Cash flows from investing activities:
Purchase of securities available-
for-sale ........................ -- -- (36,696) -- (36,696)
Principal payments of mortgage-
backed securities ............... -- -- 9,445 -- 9,445
Decrease in Covered Assets and FRF
receivables ..................... -- -- 32,157 -- 32,157
Cash flows from financing activities:
Decrease in deposit liabilities ... -- -- (74,784) -- (74,784)
Repayment of borrowings ........... -- -- (31,560) -- (31,560)
--------- --------- --------- --------- ---------
Net decrease in cash and equivalents-
discontinued operations ........... -- -- (86,984) -- (86,984)
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and
equivalents ....................... (93,495) 5,261 (85,911) -- (174,145)
Cash and equivalents at beginning of
period ............................ 115,546 43,547 122,397 -- 281,490
--------- --------- --------- --------- ---------
Cash and equivalents at end of period $ 22,051 $ 48,808 $ 36,486 $ -- $ 107,345
========= ========= ========= ========= =========
20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
($000's omitted, except per share data)
A summary of Pulte Corporation's operating results by business segment for the
three and six month periods ended June 30, 1996 and 1995 is as follows:
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ----------------
1996 1995 1996 1995
---- ---- ---- ----
Pre-tax income (loss):
Homebuilding operations:
Pulte Home Corporation.......... $ 26,761 $ 15,692 $ 34,066 $ 12,629
-------- -------- -------- --------
Financial Services operations:
Mortgage banking - ICM ......... 94 2,244 551 8,475
Financing activities............ 5,815 93 10,196 378
-------- -------- -------- --------
Total Financial Services............ 5,909 2,337 10,747 8,853
-------- -------- -------- --------
Corporate .......................... (5,119) (2,053) (8,648) (6,208)
-------- -------- -------- --------
Pre-tax income from continuing operations 27,551 15,976 36,165 15,274
Income taxes ............................ 11,150 6,485 14,656 6,209
-------- -------- -------- --------
Income from continuing operations ....... 16,401 9,491 21,509 9,065
Income from discontinued operations ..... 1,793 1,181 3,765 5,074
-------- -------- -------- --------
Net income .............................. $ 18,194 $ 10,672 $ 25,274 $ 14,139
======== ======== ======== ========
Net income per share .................... $ .71 $ .38 $ .95 $ .51
======== ======== ======== ========
For the three and six month periods ended June 30, 1996, pre-tax income (loss)
changed from the comparable periods of 1995 as follows:
o Pre-tax income of the Company's homebuilding operations increased by
$11,069 and $21,437, respectively, over the comparable periods of
1995. Such increases are primarily the result of the increased volume
of unit settlements during 1996, coupled with an improving gross
profit margin, partially offset by a leveraged increase in selling,
general and administrative expenses.
o Pre-tax income of the Company's mortgage banking operations decreased
$2,150 and $7,924, respectively, from the comparable periods of 1995.
This is principally related to gains from the sale of core servicing
rights which aggregated $3,153 and $10,148, respectively, for the
three and six month periods ended June 30, 1995. No core sales
occurred during 1996. The absence of gains from core sales during 1996
was in part offset by an increase in marketing gains and the
capitalization of mortgage servicing rights which began on July 1,
1995, with the implementation of Statement of Financial Accounting
Standards (SFAS) No. 122, Accounting for Mortgage Servicing Rights.
o Pre-tax income from the Company's financing activities increased by
$5,722 and $9,818, respectively, over the comparable periods of 1995
primarily due to gains from the sales of collateral during 1996.
o Pre-tax loss from corporate operations increased $3,066 and $2,440,
respectively, from the comparable periods of 1995. Such increases are
primarily related to higher net interest expense, but were also
influenced by the timing of joint venture foreign currency gains or
losses from the Company's Mexico operations during 1995.
21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
($000's omitted)
Homebuilding Operations:
The following table presents selected financial data for Pulte Home
Corporation (Pulte) for the three and six month periods ended June 30, 1996
and 1995.
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1996 1995 1996 1995
---- ---- ---- ----
Unit settlements:
Pulte Home North........ 614 509 1,001 864
Pulte Home South........ 1,035 783 1,811 1,321
Pulte Home Central...... 1,191 1,041 2,173 1,702
Pulte Home West......... 731 644 1,318 1,117
----------- ----------- ----------- -----------
3,571 2,977 6,303 5,004
=========== =========== =========== ===========
Net new orders - units:
Pulte Home North........ 654 651 1,316 1,270
Pulte Home South........ 1,173 979 2,447 1,762
Pulte Home Central...... 1,056 1,372 2,524 2,580
Pulte Home West......... 719 690 1,566 1,303
----------- ----------- ----------- -----------
3,602 3,692 7,853 6,915
=========== =========== =========== ===========
Net new orders - dollars ... $ 583,000 $ 566,000 $ 1,266,000 $ 1,070,000
=========== =========== =========== ===========
Backlog at June 30 - units:
Pulte Home North ....... 1,053 851
Pulte Home South ....... 1,587 996
Pulte Home Central...... 1,638 1,625
Pulte Home West......... 971 726
----------- -----------
5,249 4,198
=========== ===========
Backlog at June 30 - dollars $ 887,000 $ 683,000
=========== ===========
Revenues ................... $ 571,283 $ 464,419 $ 984,503 $ 773,068
Cost of sales .............. (488,904) (399,349) (841,589) (663,279)
Selling, general and
administrative expense .. (51,263) (45,627) (100,961) (88,247)
Interest (A) ............... (4,117) (2,857) (7,323) (4,850)
Other expense, net ......... (238) (894) (564) (4,063)
----------- ----------- ----------- -----------
Pre-tax income ............. $ 26,761 $ 15,692 $ 34,066 $ 12,629
=========== =========== =========== ===========
Average sales price ........ $ 160 $ 156 $ 156 $ 154
=========== =========== =========== ===========
The number of active communities as of the end of each respective period are as follows:
June 30, 1996 ...................................... 379
March 31, 1996 ...................................... 380
December 31, 1995.................................... 352
September 30, 1995................................... 355
June 30, 1995 ...................................... 346
<FN>
Note (A): The Company capitalizes interest cost into homebuilding
inventories and charges the interest to homebuilding interest expense when the
related inventories are closed.
22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
($000's omitted)
Homebuilding Operations (continued):
Pulte conducts its domestic homebuilding operations through 40 markets in 24
states and Puerto Rico which are organized into four operating companies -
Pulte Home North (PHN), Pulte Home South (PHS), Pulte Home Central (PHC) and
Pulte Home West (PHW). No one individual market within the 40 markets
represented more than 10% of total Pulte net new orders, unit settlements or
revenues during the three and six month periods ended June 30, 1996.
Net new orders during the second quarter of 1996 decreased approximately 2%
from the record set during the second quarter of 1995, which was a 45%
increase over the same period in 1994. While all operating companies
experienced slowdowns in net new order activity during the quarter, only PHC
recorded a decrease in units compared with the quarter ended June 30, 1995.
The declining trend in net new order rates, which has continued to date into
the third quarter, was due primarily to the effect of a rising interest rate
environment.
For the six months ended June 30, 1996, net new orders have increased 14%
over the comparable prior year period due to the strong order activity
experienced in the first four months of 1996. Both existing and new markets
have contributed to the positive year-to-date net new order comparisons.
Settlements during the three and six month periods ended June 30, 1996
increased 20% and 26%, respectively, over the comparable periods in 1995,
with all operating companies recording positive comparisons over the prior
year. Settlement activity was supported by a record backlog at December 31,
1995, as well as the strong net new order activity during the first four
months of 1996.
The average selling price during the three month period ended June 30, 1996
was $160, an increase from the average selling price of $156 in the
comparable period of the prior year and $151 recorded during the three month
period ended March 31, 1996. The increase in average selling price was due
primarily to product mix, as PHN and PHC had settlements on higher priced
product.
Gross profit margins were 14.4% and 14.5% for the three and six month
periods ended June 30, 1996, respectively, compared with 14.0% and 14.2%,
respectively, in the similar periods of the prior year. During the first six
months of 1995, the Company's gross profit margins were impacted by
competitive market conditions and excess industry inventory levels. The
level of demand for new housing experienced during the second half of 1995
and the first four months of 1996, especially in certain PHS and PHC
markets, resulted in improved gross profit margins for the first six months
of 1996 as compared to similar periods in 1995. However, the recent slowdown
in order growth, together with higher interest rates and heightened
competition in the Company's markets, is expected to challenge the Company's
ability to achieve continued improvement in profit margins during the last
six months of 1996 over the comparable periods of 1995 and the preceding
periods of 1996.
Selling, general and administrative expenses for the three and six month
periods ended June 30, 1996 increased $5,636 and $12,714, respectively, over
the comparable periods in 1995. However, these expenses have been better
leveraged as a result of increased operating efficiencies in both new and
existing markets and increased unit settlements in the Company's new
markets. Selling, general and administrative expense as a percent of revenue
was 9% for the three month period ended June 30, 1996, compared with 9.8% in
the comparable period of 1995. For the first six months of 1996, selling,
general and administrative expense was 10.3% of revenue, compared with 11.4%
in the first six months of 1995.
Other expense, net, includes gains on land sales, the pre-tax results of
Builders' Supply & Lumber Co., Inc. (BSL) and other homebuilding-related
expenses. Other expense, net, for the six month period ended June 30, 1996
was favorably impacted by improved results for BSL compared to the same
period a year ago.
23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
($000's omitted)
Homebuilding Operations (continued):
On July 2, 1996, the Company announced that it had acquired certain assets
of North Florida Classic Homes of Jacksonville, Florida, which consisted of
land and homes under construction in 12 residential communities, as well as
the right to use the "North Florida Classic Homes" name in the Company's
homebuilding operations.
Information related to interest in inventory is as follows:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
Interest in inventory at beginning of period............... $ 13,050 $10,041 $ 12,261 $ 8,053
Interest capitalized....................................... 4,488 4,683 8,483 8,664
Interest expensed ......................................... (4,117) (2,857) (7,323) (4,850)
-------- ------- --------- --------
Interest in inventory at end of period.................... $ 13,421 $11,867 $ 13,421 $ 11,867
======== ======= ========= ========
Financial Services Operations:
Mortgage Banking Operations:
The Company's mortgage banking operations are conducted by ICM Mortgage
Corporation (ICM).
The following table presents mortgage origination data for ICM:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
1996 1995 1996 1995
---- ---- ---- ----
Production:
Total originations:
Loans ........................... 2,726 2,813 5,057 4,973
======== ======== ======== ========
Principal ....................... $326,700 $312,500 $591,200 $546,100
======== ======== ======== ========
Funded originations:
Loans ........................... 2,525 2,455 4,685 4,199
======== ======== ======== ========
Principal ....................... $296,900 $264,800 $537,900 $446,000
======== ======== ======== ========
Originations for Pulte customers:
Loans ...................... 1,742 1,362 3,163 2,116
======== ======== ======== ========
Principal .................. $220,300 $165,200 $387,400 $265,800
======== ======== ======== ========
Mortgage origination volume for the three and six month periods ended June
30, 1996 increased 5% and 8%, respectively, compared to the comparable 1995
periods. The volume of originations (funded and non-funded) for Pulte
customers increased by 23% and 28%, respectively, during the three and six
month periods ended June 30, 1996, compared with the similar periods of
1995, as ICM continued its emphasis on expanding in Pulte's existing and new
markets. ICM continues to hedge its mortgage pipeline in the normal course
of its business and there has been no change in ICM's strategy or use of
derivative financial instruments in this regard.
During the three and six month periods ended June 30, 1996, pricing and
marketing gains increased by $4,602 and $9,539, respectively, compared with
the same periods of 1995. Effective July 1, 1995, ICM adopted SFAS No. 122
which requires that the costs associated with originating mortgage servicing
rights be recognized as an asset, shifting the gains from sale of servicing
rights to sale of mortgage loans.
24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
($000's omitted)
Financial Services Operations (continued):
Mortgage Banking Operations (continued):
During the three and six month periods ended June 30, 1995, ICM recorded
pre-tax gains on sales of its core mortgage servicing portfolio of $3,153
and $10,148, respectively. In addition, as part of its normal operations,
during the three and six month periods ended June 30, 1995, ICM recorded
gains on sale of non-core mortgage servicing rights of $2,881 and $5,173,
respectively. The sale of the core mortgage servicing portfolio and the
ongoing sale of servicing rights on a flow basis are the result of
repositioning ICM to concentrate on its primary business of providing
mortgage financing for Pulte's homebuyers. ICM expects to continue to sell
mortgage servicing rights as part of normal operations on a three to five
month lag from the time of origination.
Servicing fee income for the three and six month periods ended June 30, 1996
decreased from the comparable 1995 periods due to the sale of the core
mortgage servicing portfolio discussed above. Mortgage origination fees also
decreased due to a decrease in the amount of non-funded originations
compared with the prior year.
Net interest income decreased by $772 for the six months ended June 30,
1996, compared with the first six months of 1995, primarily due to dividends
paid by ICM to its parent, Pulte, during the first quarters of 1996 and
1995. The result of the dividends is an increased leverage position,
incurring higher interest expense and reducing net interest income. In the
three month period ended June 30, 1996, net interest income decreased by
$30, as the effect of the dividend payments was offset by higher loan
production and an increased interest rate spread compared with the quarter
ended June 30,1995.
At June 30, 1996, loan application backlog was $439,000 compared with
$472,000 at June 30, 1995 and $334,000 at December 31, 1995.
Financing Activities:
The Company's secured financing operations are conducted by Pulte Financial
Companies, Inc. (PFCI) through its subsidiary corporations. Prior to 1989,
the PFCI subsidiaries engaged in the acquisition of mortgage loans and
mortgage-backed securities financed principally through the issuance of
long-term bonds secured by such mortgage loans and mortgage-backed
securities. Since 1989, the PFCI subsidiaries have been liquidating their
collateral portfolios and related bonds outstanding. At June 30, 1996, two
bond series with an aggregate principal amount of $57,227 remained
outstanding. These bonds are expected to be redeemed, and the related
collateral sold, by late 1996. PFCI's pre-tax operating income was $5,815
and $10,196, respectively, for the three and six month periods ended June
30, 1996, compared with $93 and $378, respectively, for the comparable
periods in 1995. During the three and six month periods ended June 30, 1996,
PFCI recorded net gains on sales of collateral of $5,498 and $9,993,
respectively. There were no such gains in the comparable periods of 1995.
Net interest income continues to decrease as a result of lower average
outstanding balances on the collateral and bond portfolios. It is
anticipated that PFCI will complete the liquidation of its collateral
portfolios and related bonds outstanding by the end of fiscal 1996, at which
time PFCI will cease to operate.
Corporate:
Corporate is a non-operating business segment; it is the Company's internal
source of financing and also includes the following items:
o Income from investments, including the Company's share of
Mexican joint venture operations.
o Interest expense on the Company's long-term debt.
o Administrative expenses.
25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
($000's omitted)
Corporate (continued):
Corporate assets include equity investments in subsidiaries, and the
Company's working capital funds invested in short term cash investments and
affiliate advances. Its liabilities include senior and subordinated debt and
income taxes.
The following table presents corporate results of operations for the three
and six month periods ended June 30, 1996 and 1995:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
Net interest expense ........ $ 1,244 $ 64 $ 2,212 $ 196
Other corporate expenses, net 3,875 1,989 6,436 6,012
------- ------- ------- -------
Loss before income taxes .... $(5,119) $(2,053) $(8,648) $(6,208)
======= ======= ======= =======
The increased loss for the three month period ended June 30, 1996 is due to
increased net interest expense as a result of the issuance of $125,000 of
7.3% unsecured Senior Notes in the fourth quarter of 1995. In addition,
during the three month period ended June 30, 1996, the Company recorded a
loss of $590 related to its Mexico operations compared with income of $472
in the comparable period of 1995, which was primarily related to the
Company's share of joint venture foreign currency gains.
For the six months ended June 30, 1996, the increased loss is due primarily
to increased net interest expense as a result of the issuance of debt
discussed above. For the six months ended June 30, 1996, the Company
recorded a loss of $626 related to its Mexico operations compared with a
loss of $1,352 in the similar period of 1995. Included in Mexico's loss for
1995 is the Company's share of joint venture foreign currency losses which
amounted to $1,022. During the three and six month periods ended June 30,
1996, there were no significant foreign currency gains or losses, as the
Mexican currency has stabilized since the fourth quarter of 1995.
Mexico operations continue to develop and expand. In January 1996, the
Company's Monterrey joint venture partner assigned its interest in the joint
venture to the Company. The Company's net investment in the Monterrey
venture is carried at approximately $5,400 as of June 30, 1996. The Company
intends to liquidate the Monterrey assets in the normal course of business.
During the quarter ended March 31, 1996, the Company's Juarez joint venture
began recording its first unit closings. The Company's net investment in the
Juarez joint venture is carried at approximately $4,000 as of June 30, 1996.
On June 18,1996, the Company announced that its Juarez joint venture has
entered into an agreement with Delphi Automotive Systems, a division of
General Motors Corporation, to construct up to 6,000 homes in Mexico for
GM's employees. The Company has guaranteed the performance of its joint
venture under this agreement. The Juarez joint venture will build the homes
in Northern Mexico over a three-year period which is expected to begin in
August 1997.
Liquidity and Capital Resources:
Continuing Operations:
The Company believes it has adequate financial resources and sufficient
credit facilities to meet its current working capital needs. Sources of the
Company's working capital include its cash, its $250,000 committed unsecured
revolving credit facility, the remaining outstanding balance of $22,405 of
Pulte's previously issued unsecured Senior Subordinated Debentures, due
1999, the Company's $100,000, 7% unsecured Senior Notes, due 2003, the
Company's $115,000, 8.375% unsecured Senior Notes, due 2004 and the
Company's $125,000, 7.3% unsecured Senior Notes, due 2005. In addition, the
Company has other committed and uncommitted credit lines, which at June 30,
1996 consisted of $10,000 and $250,000 related to Pulte and ICM operations,
respectively. During 1996, management anticipates that homebuilding and
corporate working capital requirements will be funded with internally
generated funds and the previously mentioned debt.
26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
($000's omitted)
Liquidity and Capital Resources (continued):
Continuing Operations (continued):
In addition, the Company has on file with the Securities and Exchange
Commission a universal shelf registration which provides for up to an
additional $125,000 of debt or equity securities.
The Company finances its land acquisitions, development and construction
activities from internally generated funds and existing credit agreements.
There were no borrowings under the Company's $250,000 unsecured revolving
credit facility during the six month period ended June 30, 1996. The
Company's mortgage banking subsidiary (ICM) provides mortgage financing for
many of its home sales. ICM uses its own funds and borrowings made
available pursuant to various committed and uncommitted credit arrangements
which, at June 30, 1996 amounted to $250,000, an amount deemed adequate to
cover foreseeable needs. There were approximately $91,575 of borrowings
outstanding under the $250,000 (ICM) arrangement at June 30, 1996. Mortgage
loans originated by ICM are subsequently sold, principally to outside
investors. The Company anticipates that there will be adequate mortgage
financing available for purchasers of its homes.
The following table depicts the status of the Company's share repurchase
program as of June 30, 1996:
Share Repurchases
--------------------------------------------------
Authorization Year ended Months ended
- --------------------------------- December 31, June 30, 1996
--------------------- -------------------
Date # of Shares 1994 1995 Three Six
---- ----------- ---- ---- ----- ---
November 1994 ..... 1,000,000 123,500 542,068 -- 334,432
March 1996 ........ 1,000,000 -- -- 1,000,000 1,000,000
April 1996 ........ 1,000,000 -- -- 945,900 945,900
---------- ---------- ---------- ---------- ----------
3,000,000 123,500 542,068 1,945,900 2,280,332
========== ========== ========== ========== ==========
Reacquisition price $ 2,403 $ 11,707 $ 50,877 $ 60,846
========== ========== ========== ==========
On July 1, 1996, the Board of Directors authorized the repurchase by the
Company of up to an additional 1,000,000 shares under this repurchase
program. During July 1996, the Company has repurchased 904,700 shares
relating to the third and fourth share repurchase authorizations at an
aggregate repurchase price of $22,403.
Discontinued Operations:
The Company's income taxes have been significantly impacted by its thrift
operations, principally because payments received from FSLIC Resolution Fund
(FRF) are exempt from federal income taxes.
The Company's thrift assets are subject to regulatory restrictions and are
not available for general corporate purposes. The final liquidation and
wind-down of the Company's thrift operations is dependent on the final
resolution of outstanding matters with the Federal Deposit Insurance
Corporation (FDIC), manager of FRF. The Company is currently negotiating
with the FDIC and is involved in litigation with the FDIC. Although there is
no certainty as to the time of resolution, the Company believes that this
matter may be resolved within the next twelve months. At June 30, 1996, the
Company had a remaining investment in First Heights of approximately
$30,300.
27
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on May
10, 1996. The following matters were considered and acted upon, with the
results indicated below:
Shares
Shares Withholding
Shares Voted Shares Authority
Election of Directors Voted For Against Abstaining To Vote
- --------------------- --------- ------- ---------- -----------
Michael D. Hollerbach .... 23,284,135 -- 151,673 --
Robert K. Burgess ........ 23,283,398 -- 152,410 --
Ralph L. Schlosstein ..... 23,282,432 -- 153,376 --
John J. Shea ............. 23,282,632 -- 153,176 --
Proposal to adopt
the Pulte Corporation
Long-Term Compensation
Plan for Key Employees ... 22,116,932 1,260,815 58,061 --
Item 6. Exhibits and Reports on Form 8-K
Exhibit number and description Page Number
------------------------------ -----------
11 Statement Regarding Computation of
Per Share Earnings 29
27 Financial Data Schedule
All other exhibits are omitted from this report because they
are not applicable.
Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
quarter ended June 30, 1996.
28