UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the fiscal year July 1, 1999 to June 30, 2000.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from N/A to N/A .
Commission File Number: 1-4785
DEL WEBB CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 86-0077724
(State of Incorporation) (IRS Employer Identification Number)
6001 North 24th Street, Phoenix, Arizona 85016
(Address of principal executive offices) (Zip Code)
(602) 808-8000
(Registrant's phone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
New York Stock Exchange
Common Stock (par value $.001 per share) Pacific Stock Exchange
9 3/4% Senior Subordinated Debentures due 2003 New York Stock Exchange
9 % Senior Subordinated Debentures due 2006 New York Stock Exchange
9 3/4% Senior Subordinated Debentures due 2008 New York Stock Exchange
9 3/8% Senior Subordinated Debentures due 2009 New York Stock Exchange
10 1/4% Senior Subordinated Debentures due 2010 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Registrant's Common Stock outstanding at July 31, 2000 was 18,368,971 shares. At
that date, the aggregate market value of Registrant's Common shares held by
non-affiliates, based upon the closing price of the Common Stock on the New York
Stock Exchange on that date, was approximately $280,100,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on November 2, 2000 are incorporated herein as set forth
in Part III of this Annual Report.
DEL WEBB CORPORATION
FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED
JUNE 30, 2000
TABLE OF CONTENTS
PART I
ITEMS 1. PAGE
AND 2.
Business and Properties
The Company........................................................ 1
Communities........................................................ 1
Certain Factors Affecting the Company's Operations................. 5
Forward Looking Information; Certain Cautionary Statements......... 6
Executive Officers................................................. 7
Employees.......................................................... 8
ITEM 3. Legal Proceedings.................................................. 8
ITEM 4. Submission of Matters to a Vote of Security Holders................ 8
PART II
ITEM 5. Market for the Registrant's Common Equity and
Related Stockholder Matters ...................................... 9
ITEM 6. Selected Consolidated Financial Data............................... 10
ITEMS 7.
AND 7A. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ 11
ITEM 8. Financial Statements and Supplementary Data........................ 21
ITEM 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure............................ 21
PART III
ITEM 10. Directors and Executive Officers of the Registrant................. 22
ITEM 11. Executive Compensation............................................. 22
ITEM 12. Security and Ownership of Certain Beneficial Owners
and Management.................................................... 22
ITEM 13. Certain Relationships and Related Transactions..................... 22
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K............................................... 23
PART I
ITEMS 1. AND 2. BUSINESS AND PROPERTIES
THE COMPANY
The Company develops active adult communities and family and country club
communities. The Company's current communities are located in Arizona,
California, Florida, Illinois, Nevada, South Carolina and Texas.
The Company is the nation's leading developer of active adult communities. It
has extensive experience in the active adult community business, having built
and sold more than 70,000 homes at 13 Sun City communities over the past 40
years. The Company's active adult communities (primarily its Sun City
communities) are generally large-scale, master planned communities with
extensive amenities for people age 55 and over. The Company designs, develops
and markets these communities, controlling all phases of the master plan
development process from land selection through the construction and sale of
homes.
The Company's family and country club communities are open to people of all ages
and are generally developed in metropolitan or market areas in which the Company
is developing active adult communities. For the fiscal year ended June 30, 2000,
family and country club communities generated 30.5 percent of the Company's
homebuilding revenues.
The Company currently expects that active adult communities will continue to be
its primary business. Within its communities, the Company is usually the
exclusive builder of homes.
The Company was incorporated in 1946 in Arizona and reincorporated in 1994 in
Delaware. The principal executive offices are at 6001 North 24th Street,
Phoenix, Arizona 85016, telephone (602) 808-8000. The Company conducts
substantially all activities through subsidiaries. "Company" includes Del Webb
Corporation and its subsidiaries unless the context indicates otherwise.
Statements as to acreage, mileage, number of home sites, square feet, employees
and shareholders are approximations.
COMMUNITIES
The following table shows, at June 30, 2000, certain information concerning the
communities at which the Company has home sites on which it plans to build and
sell homes. Additional information on the communities follows the table.
REMAINING HOME SITES(1)
TOTAL HOME --------------------------
FIRST PLANNED CLOSINGS UNDER
HOME TOTAL HOME THROUGH OPTION
CLOSING ACRES SITES 6/30/00 TOTAL OWNED OR OTHER
------- ----- ----- ------- ----- ----- --------
Active adult communities:
Sun City Grand 1997 3,859 9,636 3,887 5,749 5,749 --
Sun Cities Las Vegas 1995 4,246 12,115 3,085 9,030 9,030 --
Sun City Palm Desert 1992 1,645 4,643 2,670 1,973 1,973 --
Sun City Lincoln Hills 1999 3,036 6,411 703 5,708 2,638 3,070
Sun City Hilton Head 1995 5,600 8,268 1,945 6,323 3,818 2,505
Sun City Texas 1996 5,636 10,500 1,989 8,511 7,729 782
Sun City at Huntley 1999 2,156 5,870 930 4,940 4,940 --
Florida communities 1996 1,988 3,667 1,202 2,465 1,882 583
Other communities 1998 420 1,329 692 637 637 --
------ ------ ------ ------ -----
Total active adult communities 62,439 17,103 45,336 38,396 6,940
------ ------ ------ ------ -----
Family and country club communities:
Anthem Country Club Las Vegas 1999 1,048 1,392 351 1,041 1,041 --
Anthem Arizona Country Club 1999 910 1,475 371 1,104 1,104 --
Anthem Arizona family communities and other 1999 4,941 7,827 651 7,176 7,176 --
Other Arizona family communities 1991 N/A 1,452 939 513 513 --
------ ------ ------ ------ -----
Total family and country club communities 12,146 2,312 9,834 9,834 --
------ ------ ------ ------ -----
Total 74,585 19,415 55,170 48,230 6,940
====== ====== ====== ====== =====
- ----------
(1) Material additional regulatory approvals are required to build on many of
these home sites.
1
ACTIVE ADULT COMMUNITIES
Sun City Grand is 25 miles northwest of downtown Phoenix.
The Sun Cities Las Vegas include Sun City MacDonald Ranch and Sun City Anthem.
Sun City MacDonald Ranch and Sun City Anthem are both in Henderson, Nevada, near
Las Vegas. The Company began home closings at Sun City Anthem in December 1998.
Sun City Anthem is part of the Company's 5,000-acre Anthem Las Vegas project,
which also includes Anthem Country Club and a family community component.
Sun City Palm Desert is in Palm Desert, California, near Palm Springs,
California, and 130 miles east of downtown Los Angeles.
Sun City Lincoln Hills is in Lincoln, California (near Sacramento). The Company
began home closings Sun City Lincoln Hills in July 1999.
Sun City Hilton Head is 13 miles inland from Hilton Head Island, South Carolina.
Sun City Texas is 30 miles north of downtown Austin, Texas.
Sun City at Huntley is in Huntley, Illinois, near Chicago. The Company began
home closings at Sun City at Huntley in April 1999.
The Florida communities consist of the two Spruce Creek communities near Ocala,
Florida. In January 1998 the Company entered the active adult community business
in Florida by acquiring these two communities.
The other communities represent two smaller-scale, age-qualified communities
near Tucson, Arizona and in Cloverdale, California.
The Company believes that the demographic attributes of its active adult market
segment of people age 55 and over present significant opportunities for future
active adult communities. The Company's plan is to capitalize on those
opportunities and its experience, expertise and reputation by developing active
adult communities in strategically selected locations. The current business
strategy of the Company includes conducting extensive market research on
prospective areas, including consumer surveys and supply and demand analyses, in
connection with its evaluation of sites for future active adult communities. To
the extent the Company has had a successful community in an area, the Company
generally strives to maintain a market presence in that area through development
of a successor community as build-out of the former community approaches.
FAMILY AND COUNTRY CLUB COMMUNITIES
The Anthem Country Club Las Vegas community is part of the Company's Anthem Las
Vegas project. The Company began home closings at this community in February
1999.
Anthem Arizona, located on 5,851 acres near Phoenix, includes country club and
family communities. The Company has the primary governmental approvals for
15,000 homes for Anthem Arizona but currently anticipates construction of 9,302
homes (1,475 of which are currently planned for the Anthem Arizona Country Club
community) and 1,100 multi-family units. The total number of home sites and
types of communities developed may vary significantly depending on market and
other conditions over the life of Anthem Arizona, which is expected to have a
long build-out. The Company began home closings at the family and country club
communities at Anthem Arizona in July and September 1999, respectively.
The Company began its family community operations (conducted under the name
"Coventry Homes") in Arizona in 1991. At June 30, 2000 the Company had a backlog
of home sales orders at 16 family communities in Arizona, including 11
communities at Anthem Arizona.
2
The Company also conducted family community operations in California from fiscal
1995 to fiscal 1998. It has conducted family community operations in Nevada
since fiscal 1994 and will complete those operations in fiscal 2001.
LAND ACQUISITION
At any given time, the Company may have a number of land acquisitions for
potential communities under study and in various stages of investigation or
negotiation. The Company is currently investigating the acquisition of land for
communities to be located both in areas of the country where the Company has
active adult communities and in other areas, including full four-season areas
(i.e., areas which experience cold winters), where it does not yet have
extensive experience.
In making significant land acquisitions, the Company generally endeavors to
acquire options on the land to mitigate risks and reduce holding costs during
the detailed feasibility and entitlement process. However, under certain
circumstances, the Company may acquire land at an earlier stage in the
development process.
PRODUCT DESIGN
The Company designs homes to suit its market and endeavors to include popular
home design characteristics in the particular geographic market involved. Home
designs are periodically reviewed and refined or changed in response to customer
information obtained in each market. Homes at the Company's communities
generally range in size from 1,000 square feet to 3,000 square feet. The Company
offers an extensive program of interior and exterior upgrades and options to
allow home buyers the opportunity to customize their homes.
CONSTRUCTION
The Company generally functions as its own general contractor. At all stages of
production, the Company's management personnel and on-site superintendents
coordinate the activities of independent contractors, consultants and suppliers
and subject their work to quality and cost controls. Consulting firms assist in
project planning and independent contractors are employed to perform almost all
of the site development and construction work. The Company does not usually sell
lots to others for residential construction. The time required for construction
of the Company's homes depends on the weather, time of year, local labor
situations, availability of materials and supplies and other factors. The
Company strives to coordinate the construction of homes with home sales orders
to control the costs and risks associated with completed but unsold inventory.
An inventory of unsold homes is maintained for immediate sale to customers.
SALES ACTIVITIES
At each of its large-scale, master-planned communities the Company establishes a
large and well-appointed sales pavilion and an extensive complex of furnished
model homes. These models include a wide variety of single family homes, and a
limited number of attached homes, all of which are generally available in
several exterior styles.
The Company's homes are sold by its commissioned sales personnel, who are
available to provide prospective home buyers with floor plans, price
information, option selections and tours of models and lots. The communities
also have co-brokerage programs with independent real estate brokers. Sales
contracts may allow customers to purchase homes for delivery up to one year or
more in the future and generally require an initial deposit and an additional
deposit prior to construction. At each community the Company provides warranties
standardized for the community, subject to specified limitations.
While more than one factor may contribute to a home sale, the Company's
experience is that a substantial portion of the home sales at its active adult
communities are attributable in part to follow-ups on referrals from residents
of its communities and to the Company's "Vacation Getaway" program. This program
enables prospective purchasers to visit a community and stay (for a modest
charge) in vacation homes for a few days to one week to experience the Sun City
lifestyle prior to deciding whether to purchase a home.
3
Most home buyers at the Company's active adult communities generally visit a
community on more than one occasion before buying. This may affect the success
of the sales effort at communities at which a higher proportion of the potential
customers do not live within a several-hour driving distance from the community.
The Company also markets its communities through billboards, television and
radio commercials, print advertising, direct mailings and telemarketing.
OTHER ACTIVITIES
As a part of its community operations, the Company may sell commercial land to
investors and developers, custom lots to individuals, and developed residential
land to other builders.
The Company owns and operates golf courses at certain of its communities.
The Company offers mortgage financing for the purchase of homes at its
communities. The Company sells the mortgages it generates to third parties.
The Company has recently established a division to utilize the internet to
increase operating efficiencies. The Company expects to increase its focus on
both business-to-business and business-to-customer opportunities on the internet
and may make some related investments in the near future.
COMPETITION
All real estate operations are subject to substantial competition. The Company
competes with numerous national, regional and local homebuilders and developers,
some of which have greater financial resources than the Company.
With the exception of the Florida communities, the Company believes it maintains
a leading position within the active adult community market in each of the
metropolitan areas in which it has an active adult community. While the amount
of competition varies from community to community, each of the Company's active
adult communities faces direct and increasing competition from businesses
exclusively or primarily selling homes to buyers age 55 or older, as well as
from non-age-qualified, master-planned communities in these areas. The Company
competes with new home sales and resales at these other communities, as well as
with resales of homes in its own communities. The Company believes there will be
significant additional future competition in active adult community development,
including competition from national homebuilders and family community
developers.
The Company believes the major competitive factors affecting home purchases at
its communities include location, home quality, lifestyle (including
recreational facilities and other amenities), price, value, design, mortgage
financing terms and builder/developer reputation.
4
CERTAIN FACTORS AFFECTING THE COMPANY'S OPERATIONS
CYCLICAL NATURE OF REAL ESTATE OPERATIONS. All of the Company's communities are
subject to fluctuations in the real estate market, both where the communities
are located and in areas where its potential customers reside, as well as the
cyclical nature of real estate operations, general economic conditions and
changing demographics.
The Company's communities are long-term projects. Sales activity varies from
period to period, and the ultimate success of any community cannot necessarily
be judged by results in any particular period or periods. A community may
generate significantly higher sales levels at inception, whether because of
local pent-up demand in the area or other reasons, than in later periods over
the life of the community. Revenues and earnings of the Company will also be
affected by periodic fluctuations in the mix of product and home closings and
sales of commercial land and facilities.
LAND ACQUISITION AND DEVELOPMENT, GOVERNMENTAL REGULATION, GROWTH MANAGEMENT AND
ENVIRONMENTAL CONSIDERATIONS. The Company's business is dependent on identifying
suitable tracts of land, buying them at appropriate prices and entitling them
for development. This has become increasingly difficult because of the scarcity
and high cost of large tracts of land. Additionally, the Company's land
acquisition and development efforts are subject to extensive federal, state and
local environmental concerns and other regulatory requirements. These
requirements include, with respect to development activities and land exchanges,
the broad discretion that governmental agencies have in administering those
requirements, and "no growth" or "managed growth" political sentiments and the
resulting regulatory implications, which have been increasing in recent years.
All of these requirements can prevent, delay, make uneconomic or significantly
increase the cost of the Company's developments. For example, an initiative in
Arizona could, if passed, have a material adverse impact on the Company's future
growth opportunities, and perhaps the operations of its existing communities in
the state.
In connection with the development of the Company's communities and other real
estate projects, particularly those located in California, numerous governmental
approvals and permits are required. No assurance can be given that the Company
will receive, or receive in a timely manner, any approvals or permits. Lawsuits
challenging approvals or permits received could cause substantial uncertainties
and material delays for the project or could result in approvals or permits
being voided.
GEOGRAPHIC CONCENTRATION. The Company's operations consist of a limited number
of communities in seven states and are particularly concentrated, in terms of
both invested capital and profitability, in the Phoenix and Las Vegas
metropolitan areas and in California. The Company's geographic concentration and
limited number of projects may create increased vulnerability to regional
economic downturns or other adverse region-specific matters.
A significant number of purchasers at the Company's active adult communities in
Arizona, Nevada and southern California are from southern California. These
communities have been and may in the future be affected by conditions in the
southern California real estate market and the southern California economy
generally.
FINANCING AND LEVERAGE. The Company's degree of leverage from time to time will
affect its interest incurred and capital resources, which could limit its
ability to capitalize on business opportunities or withstand adverse changes.
The availability and cost of debt financing depends on governmental policies and
other factors beyond the Company's control. No assurance can be given as to the
terms, availability or cost of any future financing the Company may need.
INTEREST RATES. The Company's real estate operations depend on the availability
and cost of mortgage financing. An increase in interest rates may make it more
difficult for the Company's potential customers to sell their existing home in
order to move to one of the Company's communities, or to finance the purchases
of their new home.
5
CONSTRUCTION LABOR AND MATERIALS COST. The Company has from time to time
experienced shortages of materials or qualified tradespeople and volatile
increases in certain costs, particularly increases in the price of lumber and
framing, which are significant components of home construction costs. This has
caused longer than normal construction periods and cost increases that were not
reflected in the prices of homes. Generally, the Company's home sale contracts
do not contain, or contain limited, provisions for price increases if the
Company's costs of construction increase.
The Company relies heavily on local contractors, who may be inadequately
capitalized or understaffed. The inability or failure of one or more local
contractors to perform may cause construction delays, increase costs and the
loss of some home sale contracts. Some of the Company's contractors use union
employees. Union activities may disrupt the Company's operations.
FUTURE COMMUNITIES AND NEW GEOGRAPHIC MARKETS. The Company's communities will be
built out over time. The medium- and long-term future of the Company will depend
on the Company's ability to successfully develop and market future communities.
Before large communities generate any revenues, they require material
expenditures for, among other things, acquiring large tracts of land, obtaining
development approvals, developing land and lots and constructing project
infrastructure (such as roads and utilities), recreation centers, golf courses,
model homes and sales facilities. It generally takes several years or more for
the Company to recover these material expenditures.
The Company incurs additional risks to the extent it develops communities in
climates or geographic areas in which it does not have significant (or any)
experience or develops different size or style of communities. These risks
include acquiring the necessary construction materials and labor in sufficient
amounts and on acceptable terms, adapting the Company's construction methods and
home styles to different geographies, climates and potential customers and
reaching acceptable sales levels at those communities. The extent of referrals
or resident sales at new communities may be less than the Company has enjoyed at
the communities where it currently sells homes, and there will be challenges
attracting potential customers from areas and to a market in which the Company
has not had experience.
LEGAL MATTERS. The Company is a party to various legal proceedings arising in
the ordinary course of business, including claims for construction defects. Some
of these claims will not be fully covered by insurance.
NATURAL RISKS. Some of the Company's communities are subject to natural risks
including earthquakes, floods, tornadoes, hurricanes, severe winters and
significant rainfall. Some of these conditions have had a significant impact on
the Company's operations in the past. Any natural disaster could have a material
adverse impact on the Company's results of operations.
FORWARD LOOKING INFORMATION; CERTAIN CAUTIONARY STATEMENTS
Certain statements in this Annual Report that are not historical results are
forward looking. These statements involve risks and uncertainties including but
not limited to those referred to above. Forward looking statements are based
upon assumptions of future events, which may not occur. Actual results will
differ from those projected or implied, and the variances may be material.
6
EXECUTIVE OFFICERS
Set forth below are the executive officers at July 31, 2000.
YEARS
YEARS AS AN EMPLOYED
EXECUTIVE BY THE
NAME AGE POSITION OFFICER COMPANY
---- --- -------- ------- -------
L. C. Hanneman, Jr. 53 Chief Executive Officer 11 28
J. H. Gleason 58 Executive Vice President, 10 12
Project Planning and Development
J. A. Spencer 51 Executive Vice President and 15 21
Chief Financial Officer
R. C. Jones 55 Senior Vice President and 8 8
General Counsel
A. L. Mariucci 43 Senior Vice President, 14 16
Family and Country Club Communities
F. D. Pankratz 50 Senior Vice President and 12 13
General Manager - Sun Cities Las Vegas
C. T. Roach 53 Senior Vice President and 11 21
General Manager - Sun Cities Phoenix
D. G. Schreiner 47 Senior Vice President and 7 9
General Manager - Sun City at Huntley
D. V. Mickus 54 Vice President, Treasurer and Secretary 14 17
D. E. Rau 43 Vice President and Controller 14 15
Mr. Hanneman has served as Chief Executive Officer since December 1999. He
served as President and Chief Operating Officer from May 1998 to December 1999,
and as Executive Vice President, overseeing active adult community operations,
from May 1996 to May 1998, and as Senior Vice President from 1994 to May 1996.
From 1987 to May 1996 he served as General Manager of the Sun Cities Las Vegas.
Mr. Gleason has served as Executive Vice President, Project Planning and
Development since February 1999. From 1994 to February 1999 he served as Senior
Vice President, Project Planning and Development.
Mr. Spencer has served as Chief Financial Officer since 1993. Since February
1999 he has served as Executive Vice President. From 1991 to February 1999 he
served as Senior Vice President.
Mr. Jones has served as Senior Vice President and General Counsel since May
1998. He served as Vice President and General Counsel from 1992 to May 1998.
Ms. Mariucci has served as Senior Vice President since May 1996. She served as a
Vice President from June 1986 to May 1996. She has had responsibility for
overseeing the Company's family and country club communities since January 1998.
She served as General Manager of Terravita from 1992 to January 1998 and General
Manager of Anthem Arizona from July 1996 to January 1998.
Mr. Pankratz has served as Senior Vice President since 1988 and as General
Manager of the Sun Cities Las Vegas since 1996. He served as General Manager of
Sun City Palm Desert from 1990 to May 1996. Since February 1999 he has also had
supervisory responsibilities for Sun City Palm Desert and the Sun Cities
Northern California.
7
Mr. Roach has served as Senior Vice President since 1994 and as General Manager
of the Sun Cities Phoenix since 1987. Since February 1999 he has also had
supervisory responsibilities for Sun City Texas.
Mr. Schreiner has served as Senior Vice President since February 1999. He served
as Vice President from 1992 to February 1999. Mr. Schreiner has served as
General Manager of Sun City at Huntley since August 1997. Since February 1999 he
has also had supervisory responsibilities for Sun City Hilton Head and the
Florida communities. He served as Vice President, Marketing from 1992 to August
1997.
Mr. Mickus has served as Vice President and Treasurer since 1985 and as
Secretary since 1991.
Mr. Rau has served as Vice President and Controller since 1991.
EMPLOYEES
At June 30, 2000 the Company had 4,700 employees. The Company currently has no
unionized employees. The Company believes that its employee relations are
generally satisfactory.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings arising in the ordinary
course of business. While it is not feasible to predict the ultimate disposition
of these matters, in the opinion of management their outcome will not have a
material adverse effect on the financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
8
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is listed on the New York Stock Exchange and Pacific
Stock Exchange under the trading symbol (WBB). The following table sets forth
the high and low sales prices of the Company's common stock on the New York
Stock Exchange for the two fiscal years ended June 30, 2000.
SALES PRICE
-------------------------------------------
FISCAL YEAR 2000 FISCAL YEAR 1999
------------------ -----------------
QUARTER ENDED HIGH LOW HIGH LOW
- ------------- ---- --- ---- ---
September 30 23 3/4 20 5/8 28 3/16 19 5/8
December 31 24 15/16 20 3/16 29 1/2 17 1/16
March 31 24 13/16 12 29 19 9/16
June 30 16 13 3/8 25 15/16 19 15/16
As of July 31, 2000 there were 2,595 shareholders of record of the Company's
common stock.
The Company paid regular quarterly dividends of $.05 per share in the three
fiscal years ended June 30,1998 and for the quarter ended September 30, 1998.
The Company does not currently pay dividends. The amount and timing of any
future dividends is subject to the discretion of the Board of Directors.
A loan agreement and various indentures contain covenants restricting the
Company's ability to pay dividends and acquire its stock. Under the most
restrictive of these covenants, at June 30, 2000, $76.0 million of the Company's
retained earnings was available for payment of cash dividends and acquisition of
stock.
9
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
(NOT COVERED BY REPORT OF INDEPENDENT AUDITORS)
The following should be read in conjunction with the Consolidated Financial
Statements and Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA
YEAR ENDED JUNE 30,
-------------------------------------------------------------------
2000 1999 1998 1997 (1) 1996 (2)
----------- ----------- ----------- ----------- -----------
STATEMENT OF OPERATIONS INFORMATION:
Revenues:
Home sales - active adult communities $ 1,343,130 $ 1,084,463 $ 830,728 $ 786,746 $ 669,055
Home sales - family and country club
communities 590,141 302,658 287,656 357,343 342,774
Land and facility sales and other 106,732 79,060 59,383 42,173 38,904
----------- ----------- ----------- ----------- -----------
Total revenues $ 2,040,003 $ 1,466,181 $ 1,177,767 $ 1,186,262 $ 1,050,733
=========== =========== =========== =========== ===========
Net earnings (loss):
Before extraordinary item $ 74,165 $ 58,090 $ 42,533 $ 39,686 $ (7,751)
Total 74,165 58,090 42,533 38,401 (7,751)
=========== =========== =========== =========== ===========
Net earnings (loss) per share - basic:
Before extraordinary item $ 4.06 $ 3.20 $ 2.39 $ 2.26 $ (.44)
Total 4.06 3.20 2.39 2.18 (.44)
=========== =========== =========== =========== ===========
Net earnings (loss) per share
- assuming dilution:
Before extraordinary item $ 4.00 $ 3.11 $ 2.30 $ 2.22 $ (.44)
Total 4.00 3.11 2.30 2.15 (.44)
=========== =========== =========== =========== ===========
Cash dividends per share $ -- $ .05 $ .20 $ .20 $ .20
=========== =========== =========== =========== ===========
- ----------
(1) Earnings for fiscal 1997 include a $1.3 million extraordinary loss from the
early extinguishment of debt.
(2) In fiscal 1996, in connection with the adoption of Statement of Financial
Accounting Standards ("SFAS") No. 121, the Company incurred a non-cash loss
from impairment of southern California real estate inventories of $65.0
million pre-tax ($42.3 million after tax) related to the valuation of Sun
City Palm Desert. Exclusive of that item, the Company's net earnings for
fiscal 1996 were $34.5 million ($2.01 per share - basic or $1.96 per share
- assuming dilution).
DOLLARS IN THOUSANDS
AT JUNE 30,
--------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
BALANCE SHEET INFORMATION:
Total assets $1,980,757 $1,866,797 $1,310,462 $1,086,662 $1,024,795
========== ========== ========== ========== ==========
Notes payable and senior debt 321,631 359,056 167,608 222,881 320,063
Subordinated debt 683,793 681,557 536,330 340,187 194,614
---------- ---------- ---------- ---------- ----------
Total notes payable, senior and subordinated
debt ("Debt") 1,005,424 1,040,613 703,938 563,068 514,677
========== ========== ========== ========== ==========
Shareholders' equity $ 482,386 $ 404,794 $ 345,767 $ 299,830 $ 264,776
========== ========== ========== ========== ==========
Total Debt divided by the sum of Debt and
shareholders' equity 67.6% 72.0% 67.1% 65.3% 66.0%
========== ========== ========== ========== ==========
10
ITEMS 7. AND 7A. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following should be read in conjunction with the Selected Consolidated
Financial Data and the Consolidated Financial Statements and Notes thereto.
CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA
YEAR ENDED CHANGE CHANGE
JUNE 30, 2000 VS 1999 1999 VS 1998
---------------------- ---------------- ----------------
2000 1999 1998 AMOUNT PERCENT AMOUNT PERCENT
---- ---- ---- ------ ------- ------ -------
OPERATING DATA:
Number of net new orders:
Active adult communities:
Sun Cities Phoenix 1,222 1,324 1,245 (102) (7.7%) 79 6.3%
Sun Cities Las Vegas 1,229 1,271 1,179 (42) (3.3%) 92 7.8%
Sun City Palm Desert 462 501 443 (39) (7.8%) 58 13.1%
Sun Cities Northern California 759 757 739 2 0.3% 18 2.4%
Sun City Hilton Head 364 425 396 (61) (14.4%) 29 7.3%
Sun City Texas 368 349 437 19 5.4% (88) (20.1%)
Sun City at Huntley 375 700 N/A (325) (46.4%) 700 N/A
Florida communities 352 318 240 34 10.7% 78 32.5%
Other communities 346 310 169 36 11.6% 141 83.4%
----- ----- ----- ---- ---- ----- -----
Total active adult communities 5,477 5,955 4,848 (478) (8.0%) 1,107 22.8%
----- ----- ----- ---- ---- ----- -----
Family and country club communities:
Arizona country club communities 361 244 N/A 117 48.0% 244 N/A
Nevada country club community 296 218 N/A 78 35.8% 218 N/A
Arizona family communities 1,127 1,216 1,116 (89) (7.3%) 100 9.0%
Nevada family communities 285 505 319 (220) (43.6%) 186 58.3%
----- ----- ----- ---- ---- ----- -----
Total family and country club communities 2,069 2,183 1,435 (114) (5.2%) 748 52.1%
----- ----- ----- ---- ---- ----- -----
Total 7,546 8,138 6,283 (592) (7.3%) 1,855 29.5%
===== ===== ===== ==== ==== ===== =====
Included in net new orders for fiscal 2000 are models and vacation getaway homes
sold with long-term leasebacks. The Sun Cities Phoenix had 162 such net new
orders, the Sun Cities Las Vegas had 33 and the Nevada country club community
had 13.
11
ITEMS 7. AND 7A. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA (CONTINUED)
YEAR ENDED CHANGE CHANGE
JUNE 30, 2000 VS 1999 1999 VS 1998
---------------------- ---------------- ----------------
2000 1999 1998 AMOUNT PERCENT AMOUNT PERCENT
---- ---- ---- ------ ------- ------ -------
Number of home closings:
Active adult communities:
Sun Cities Phoenix 1,395 1,259 1,268 136 10.8% (9) (0.7%)
Sun Cities Las Vegas 1,231 1,274 1,164 (43) (3.4%) 110 9.5%
Sun City Palm Desert 500 482 304 18 3.7% 178 58.6%
Sun Cities Northern California 771 731 637 40 5.5% 94 14.8%
Sun City Hilton Head 420 400 386 20 5.0% 14 3.6%
Sun City Texas 308 382 448 (74) (19.4%) (66) (14.7%)
Sun City at Huntley 735 195 N/A 540 276.9% 195 N/A
Florida communities 276 460 170 (184) (40.0%) 290 170.6%
Other communities 381 244 67 137 56.1% 177 264.2%
----- ----- ----- ----- ---- --- ------
Total active adult communities 6,017 5,427 4,444 590 10.9% 983 22.1%
----- ----- ----- ----- ---- --- ------
Family and country club communities:
Arizona country club communities 371 N/A 120 371 N/A (120) (100.0%)
Nevada country club community 268 83 N/A 185 222.9% 83 N/A
Arizona family communities 1,344 974 998 370 38.0% (24) (2.4%)
Nevada family communities 419 340 326 79 23.2% 14 4.3%
California family communities N/A N/A 20 N/A N/A (20) (100.0%)
----- ----- ----- ----- ---- --- ------
Total family and country club communities 2,402 1,397 1,464 1,005 71.9% (67) (4.6%)
----- ----- ----- ----- ---- --- ------
Total 8,419 6,824 5,908 1,595 23.4% 916 15.5%
===== ===== ===== ===== ==== === ======
Included in home closings for fiscal 2000 are models and vacation getaway homes
sold with long-term leasebacks. Profits on the closings of these units are
deferred and amortized as reductions of selling, general and administrative
expenses over the leaseback periods. The Sun Cities Phoenix had 162 such home
closings, the Sun Cities Las Vegas had 33 and the Nevada country club community
had 13.
12
ITEMS 7. AND 7A. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA (CONTINUED)
YEAR ENDED CHANGE CHANGE
JUNE 30, 2000 VS 1999 1999 VS 1998
---------------------- ---------------- ----------------
2000 1999 1998 AMOUNT PERCENT AMOUNT PERCENT
---- ---- ---- ------ ------- ------ -------
BACKLOG DATA:
Homes under contract at June 30:
Active adult communities:
Sun Cities Phoenix 561 734 669 (173) (23.6%) 65 9.7%
Sun Cities Las Vegas 543 545 548 (2) (0.4%) (3) (0.5%)
Sun City Palm Desert 246 284 265 (38) (13.4%) 19 7.2%
Sun Cities Northern California 396 408 382 (12) (2.9%) 26 6.8%
Sun City Hilton Head 138 194 169 (56) (28.9%) 25 14.8%
Sun City Texas 218 158 191 60 38.0% (33) (17.3%)
Sun City at Huntley 145 505 N/A (360) (71.3%) 505 N/A
Florida communities 209 133 275 76 57.1% (142) (51.6%)
Other communities 133 168 102 (35) (20.8%) 66 64.7%
------ ------ ------ ----- ------ ------- ------
Total active adult communities 2,589 3,129 2,601 (540) (17.3%) 528 20.3%
------ ------ ------ ----- ------ ------- ------
Family and country club communities:
Arizona country club communities 234 244 N/A (10) (4.1%) 244 N/A
Nevada country club community 163 135 N/A 28 20.7% 135 N/A
Arizona family communities 510 727 485 (217) (29.8%) 242 49.9%
Nevada family communities 115 249 84 (134) (53.8%) 165 196.4%
------ ------ ------ ----- ------ ------- ------
Total family and country club communities 1,022 1,355 569 (333) (24.6%) 786 138.1%
------ ------ ------ ----- ------ ------- ------
Total 3,611 4,484 3,170 (873) (19.5%) 1,314 41.5%
====== ====== ====== ===== ====== ======= ======
Aggregate contract sales amount
(dollars in millions) $ 952 $1,038 $ 642 $ (86) (8.3%) $ 396 61.7%
====== ====== ====== ===== ====== ======= ======
Average contract sales amount per
home (dollars in thousands) $ 264 $ 231 $ 203 $ 33 14.3% $ 28 13.8%
====== ====== ====== ===== ====== ======= ======
13
ITEMS 7. AND 7A. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA (CONTINUED)
YEAR ENDED CHANGE CHANGE
JUNE 30, 2000 VS 1999 1999 VS 1998
-------------------------- ---------------- ---------------
2000 1999 1998 AMOUNT PERCENT AMOUNT PERCENT
---- ---- ---- ------ ------- ------ -------
AVERAGE REVENUE PER HOME CLOSING:
Active adult communities:
Sun Cities Phoenix $181,600 $178,300 157,400 $ 3,300 1.9% $20,900 13.3%
Sun Cities Las Vegas 230,300 208,700 202,400 21,600 10.3% 6,300 3.1%
Sun City Palm Desert 277,900 243,800 234,000 34,100 14.0% 9,800 4.2%
Sun Cities Northern California 281,700 239,800 219,200 41,900 17.5% 20,600 9.4%
Sun City Hilton Head 210,800 189,100 173,100 21,700 11.5% 16,000 9.2%
Sun City Texas 233,700 218,300 201,000 15,400 7.1% 17,300 8.6%
Sun City at Huntley 235,500 236,700 N/A (1,200) (0.5%) N/A N/A
Florida communities 139,800 115,900 97,900 23,900 20.6% 18,000 18.4%
Other communities 204,700 175,300 168,000 29,400 16.8% 7,300 4.3%
Average active adult communities 223,200 199,800 186,900 23,400 11.7% 12,900 6.9%
Family and country club communities:
Arizona country club communities 288,500 N/A 310,200 N/A N/A N/A N/A
Nevada country club community 438,600 379,000 N/A 59,600 15.7% N/A N/A
Arizona family communities 215,100 211,100 191,000 4,000 1.9% 20,100 10.5%
Nevada family community 182,400 193,000 172,100 (10,600) (5.5%) 20,900 12.1%
California family communities N/A N/A 186,600 N/A N/A N/A N/A
Average family and country club communities 245,700 216,600 196,500 29,100 13.4% 20,100 10.2%
Total average $229,600 $203,300 $189,300 $ 26,300 12.9% $14,000 7.4%
======== ======== ======== ======== ==== ======= ====
Average revenue per home closing for the models and vacation getaway homes with
long-term leasebacks for fiscal 2000 was $100,300 at the Sun Cities Phoenix,
$266,500 at the Sun Cities Las Vegas and $492,100 at the Nevada country club
community.
YEAR ENDED CHANGE CHANGE
JUNE 30, 2000 VS 1999 1999 VS 1998
---------------------- ---------------- ----------------
2000 1999 1998 AMOUNT PERCENT AMOUNT PERCENT
---- ---- ---- ------ ------- ------ -------
OPERATING STATISTICS:
Costs and expenses as a percentage of revenues:
Home construction, land and other 77.2% 75.9% 76.3% 1.3% 1.7% (0.4%) (0.5%)
Selling, general and administrative 13.2% 13.9% 14.1% (0.7%) (5.0%) (0.2%) (1.4%)
Interest 4.2% 4.0% 3.9% 0.2% 5.0% 0.1% 2.6%
Ratio of home closings to homes under
contract in backlog at beginning of period 187.8% 215.3% 228.1% (27.5%) (12.8%) (12.8%) (5.6%)
===== ===== ===== ===== ===== ===== ====
14
ITEMS 7. AND 7A. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA (CONTINUED)
NOTES:
New orders are net of cancellations. The Company recognizes revenue at the close
of escrow.
The Sun Cities Phoenix include Sun City West, which is built out, and Sun City
Grand.
The Sun Cities Las Vegas include Sun City Summerlin (which is built out), Sun
City MacDonald Ranch and Sun City Anthem. The Company began taking new home
sales orders at Sun City Anthem in July 1998. Home closings began at Sun City
Anthem in December 1998.
The Sun Cities Northern California include Sun City Roseville (which is built
out) and Sun City Lincoln Hills. The Company began taking new home sales orders
at Sun City Lincoln Hills in February 1999. Home closings began at Sun City
Lincoln Hills in July 1999.
The Company began taking new home sales orders at Sun City at Huntley in
September 1998. Home closings began at Sun City at Huntley in April 1999.
In January 1998 the Company acquired certain assets and assumed certain
liabilities at two operating active adult communities in central Florida.
Other active adult communities represent two smaller-scale communities in
Arizona and California at which new order activity began in October and November
1997, respectively. Home closings began at these communities in March and May
1998, respectively.
Arizona country club communities include Terravita (which is built out) and
Anthem Arizona Country Club. The Company completed new order activity and home
closings at Terravita in fiscal 1998. The Company began taking new home sales
orders at Anthem Arizona Country Club in February 1999. Home closings began at
Anthem Arizona Country Club in September 1999.
The Company began taking new home sales orders at Anthem Country Club (a Nevada
country club community near Las Vegas) in July 1998. Home closings began at
Anthem Country Club Las Vegas in February 1999.
The Company completed new order activity for its California family communities
in June 1997. Home closings for these communities were completed in August 1997.
A substantial majority of the backlog at June 30, 2000 is currently anticipated
to result in revenues in the next 12 months. However, a majority of the backlog
is contingent primarily upon the availability of financing for the customer and,
in certain cases, sale of the customer's existing residence. Also, as a
practical matter, the Company's ability to obtain damages for breach of contract
by a potential home buyer is limited to retaining all or a portion of the
deposit received. In each of the years in the three-year period ended June 30,
2000, cancellations of home sales orders as a percentage of new home sales
orders written during the year approximated 14 percent.
15
ITEMS 7. AND 7A. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
REVENUES. Total revenues increased to $2.04 billion for the fiscal year ended
June 30, 2000 from $1.47 billion for the fiscal year ended June 30, 1999.
Total active adult community homebuilding revenues increased to $1.34 billion
for fiscal 2000 from $1.08 billion for fiscal 1999. The Company believes the
principal reasons were:
* Increased home closings at the Company's Sun City at Huntley community
near Chicago, which had home closings in only the last quarter of
fiscal 1999, contributed $128 million.
* An increase in the average revenue per home closing contributed $89
million.
* Increased home closings at the Sun Cities Northern California, which
had not yet begun home closings at Sun City Lincoln Hills in fiscal
1999, contributed $40 million.
* $25 million was attributable to revenues from models and vacation
getaway homes sold with long-term leasebacks.
Total family and country club community homebuilding revenues increased to $590
million for fiscal 2000 from $303 million for fiscal 1999. The Company believes
the principal reasons were:
* The Company's Arizona country club communities, which had not yet
begun home closings at Anthem Arizona in fiscal 1999, contributed $107
million.
* Increased home closings at the Company's Nevada country club
community, which had home closings at Anthem Las Vegas for only part
of fiscal 1999, contributed $70 million.
* An increase in the average revenue per home closing contributed $39
million.
* Increased home closings at the Company's Arizona family communities,
which had not yet begun home closings at Anthem Arizona in fiscal
1999, contributed $56 million.
Land and facility sales and other revenues increased $28 million from fiscal
1999 to fiscal 2000. This increase was partially attributable to land sales in
the Company's Nevada family communities resulting from the Company's decision to
cease family community operations in that state.
Total revenues increased to $1.47 billion for fiscal 1999 from $1.18 billion for
the fiscal year ended June 30, 1998.
Active adult community homebuilding revenues increased to $1.08 billion for
fiscal 1999 from $831 million for fiscal 1998. The Company's Sun City Anthem
community near Las Vegas, Sun City at Huntley community near Chicago, Florida
communities and smaller-scale active adult communities in Arizona and California
(which collectively had only 237 home closings in fiscal 1998) accounted for
$155 million of the increase in active adult community homebuilding revenues. An
increase in the average revenue per home closing resulted in $74 million of the
increase. Sun City Palm Desert and Sun City Roseville, which respectively closed
178 and 94 more homes in fiscal 1999 than in fiscal 1998, accounted for $62
million. Management believes that these increases were largely attributable to
improvement in California's real estate economy and its economy generally.
Partially offsetting these increases were $40 million of decreased revenues from
lower home closings at the then nearly complete Sun City Summerlin in Las Vegas.
16
ITEMS 7. AND 7A. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Family and country club community homebuilding revenues increased to $303
million for fiscal 1999 from $288 million for fiscal 1998. The Company's Anthem
communities near Las Vegas and Coventry Bellasera community near Phoenix (which
collectively had only 39 home closings in fiscal 1998) accounted for a $49
million increase. An increase in the average revenue per home closing resulted
in $15 million of the increase. Partially offsetting these increases were $52
million of decreased revenues from decreased home closings at the completed
Terravita, Coventry Tucson and Coventry Southern California communities, which
collectively had only 140 home closings in fiscal 1999.
Land and facility sales and other revenues increased to $79 million for fiscal
1999 from $59 million for fiscal 1998. The increase was largely attributable to
the sale of all of the Company's unsold family community lots in the Tucson area
and a gain on an equipment sale in fiscal 1999.
HOME CONSTRUCTION, LAND AND OTHER COSTS. The increase in home construction, land
and other costs to $1.58 billion for fiscal 2000 from $1.11 billion for fiscal
1999 was largely due to the increase in home closings. As a percentage of
revenues, these costs increased to 77.2 percent for fiscal 2000 from 75.9
percent for fiscal 1999. Large, low-margin land sales in fiscal 2000 at the
Company's Nevada family community operations contributed to the increase, as did
a high-margin gain on an equipment sale in fiscal 1999.
This total cost increase as a percentage of revenues was also due to a decline
in homebuilding gross margin from 24.2 percent for fiscal 1999 to 22.8 percent
for fiscal 2000. Of this 1.4 percent decline, 0.4 percent was attributable to
deferral of profit in fiscal 2000 on the sale and long-term leaseback of 208
model and vacation getaway homes at three communities. The balance of the
decline was largely attributable to changes in the mix of home closings between
the Company's various communities, the dilutive effect of lower initial pricing
at some newer communities and increased common cost amortization at a number of
active adult communities.
The increase in home construction, land and other costs to $1.11 billion for
fiscal 1999 from $899 million for fiscal 1998 was largely due to the increase in
home closings. As a percentage of revenues, these costs decreased to 75.9
percent for fiscal 1999 from 76.3 percent for fiscal 1998. Homebuilding gross
margin improved to 24.2 percent for fiscal 1999 from 23.0 percent for fiscal
1998, primarily as a result of increased revenue per home closing at virtually
all communities.
On a period-to-period basis, home construction, land and other costs as a
percentage of revenues will vary due to, among other things, changes in product
mix, differences between individual communities, lot premiums, optional
upgrades, price increases and changes in construction costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. As a percentage of revenues,
selling, general and administrative expenses decreased to 13.2 percent for
fiscal 2000 from 13.9 percent for fiscal 1999. This decrease resulted primarily
from spreading corporate overhead over significantly greater revenues and in
part to continuing efforts to materially reduce these expenses.
As a percentage of revenues, selling, general and administrative expenses
decreased to 13.9 percent for fiscal 1999 from 14.1 percent for fiscal 1998.
This decrease resulted from spreading corporate overhead over significantly
greater revenues.
INTEREST. As a percentage of revenues, amortization of capitalized interest
increased to 4.2 percent for fiscal 2000 from 4.0 percent for fiscal 1999. This
was primarily due to increased debt levels in the past few years resulting from
the significant development expenditures at newer communities (see "Liquidity
and Financial Condition of the Company").
As a percentage of revenues, amortization of capitalized interest was 4.0
percent for fiscal 1999 compared to 3.9 percent for fiscal 1998. This was
primarily due to an increase in debt levels.
17
ITEMS 7. AND 7A. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
INCOME TAXES. The increase in income taxes to $35 million for fiscal 2000 from
$33 million for fiscal 1999 was due to the increase in earnings before income
taxes, partially offset by a reduction in the effective tax rate to 32.4 percent
from 36.0 percent. The lower effective tax rate in fiscal 2000 was due to a $4
million ($0.22 per diluted share) reduction in income tax liabilities as a
result of the favorable resolution of certain tax issues in the fourth quarter
of fiscal 2000.
The increase in income taxes to $33 million for fiscal 1999 from $24 million for
fiscal 1998 was due to the increase in earnings before income taxes. The
effective tax rate in both of these fiscal years was 36.0 percent.
NET EARNINGS. The increase in net earnings to $74 million for fiscal 2000 from
$58 million for fiscal 1999 was primarily attributable to the increase in home
closings and homebuilding revenues, the increase in revenues from land and
facility sales, the decrease in selling, general and administrative expenses as
a percentage of revenues and the reduction in the effective income tax rate.
These improvements were partially offset by the decline in homebuilding gross
margin and the increase in interest as a percentage of revenues.
The increase in net earnings to $58 million for fiscal 1999 from $43 million for
fiscal 1998 was primarily attributable to the increases in home closings,
revenues and homebuilding gross margin.
NET NEW ORDER ACTIVITY AND BACKLOG. Net new orders in fiscal 2000 were 7.3
percent lower than in fiscal 1999. The Company believes that this decrease was
primarily attributable to the following:
* The Company reduced advertising expenditures in the first half of
fiscal 2000. In January 2000 it launched its new national
brand-building campaign. The reduced advertising expenditures may have
contributed to decreases in the Company's sales traffic and vacation
getaway program occupancy rates during the first half of fiscal 2000.
* Sun City at Huntley had a 46.4 percent decrease, which the Company
believes was attributable to a reduced level of pent-up demand, the
need for a broader product range and pricing issues.
* The 43.6 percent decrease at the Nevada family communities was largely
attributable to the fact that the Company has sold or is selling to
other home builders its remaining lots at these communities, rather
than building homes on them to sell.
The dollar value of homes under contract at June 30, 2000 was 8.3 percent lower
than at June 30, 1999, while the number of homes in backlog decreased 19.5
percent. The backlog decreases at Sun City at Huntley and the Nevada family
communities were attributable to the declines in net new orders discussed above.
The decrease at the Arizona family communities was due to a reduction in the
number of subdivisions in the Phoenix area. The Company believes that the
backlog decreases at most of the other active adult communities may be
attributable in part to increased sales prices, reduced advertising expenditures
in the first half of fiscal 2000, increased mortgage interest rates, decreased
home resales nationally and the pending opening of new recreational amenities at
many communities.
Net new orders in fiscal 1999 were 29.5 percent higher than in fiscal 1998. The
number of homes under contract at June 30, 1999 was 41.5 percent higher than at
June 30, 1998. Both of these increases were primarily attributable to Sun City
at Huntley and the family and country club communities at the Anthem projects
near Phoenix and Las Vegas. These communities had new order activity in fiscal
1999 but had not yet commenced new order activity in fiscal 1998. Management
believes that the decreases in net new orders and backlog at Sun City Texas and
the Florida active adult communities may have been partially attributable to the
impact of increased sales prices and potential buyers awaiting the recent
openings of new model homes.
18
ITEMS 7. AND 7A. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND FINANCIAL CONDITION OF THE COMPANY
The cash flow for each community can differ substantially from reported
earnings, depending on the development cycle. The initial years of development
or expansion require significant cash outlays for, among other things, acquiring
tracts of land, obtaining development approvals, developing land and lots and
constructing project infrastructure (such as roads and utilities), recreation
centers, golf courses, model homes and sales facilities. Since these costs are
capitalized, this can result in income reported for financial statement purposes
during those initial years significantly exceeding cash flow. However, after the
initial years of development or expansion, when these expenditures are made,
cash flow can significantly exceed earnings reported for financial statement
purposes, as costs and expenses include amortization charges for substantial
previously expended costs.
During fiscal 2000 the Company generated $854 million of net cash from operating
community sales activities, used $562 million for land and lot and amenity
development at operating communities, paid $15 million for costs related to
communities in the pre-operating stage and used $190 million for interest,
income taxes and other operating activities. The resulting $87 million of net
cash provided by operating activities was used primarily to partially repay
outstanding borrowings under the Company's $500 million senior unsecured
revolving credit facility (the "Credit Facility") and $10 million short-term
lines of credit (together the "Credit Facilities").
Real estate development is dependent on, among other things, the availability
and cost of financing. In periods of significant growth, the Company requires
significant additional capital resources. We hope to grow by other means (joint
ventures, etc.) in the future. In fiscal 1999 and fiscal 2000, the Company had
under development, among other projects: (i) Sun City Lincoln Hills, the
successor community to Sun City Roseville; (ii) Anthem Las Vegas, which includes
Sun City Anthem, country club and family communities; (iii) Anthem Arizona,
which includes country club and family communities; and (iv) Sun City at
Huntley. Given its assessment of market conditions and appropriate timing for
these new communities, the Company decided to engage in substantial development
at these communities and permit its indebtedness and leverage to increase
substantially.
To date, material cash expenditures have been made for these communities. In
order to provide adequate capital to meet the Company's operating requirements,
the Company, in February 1999, completed a $150 million public debt offering and
negotiated an increase in the amount of its Credit Facility from $450 million to
$500 million. At June 30, 2000 the Company had $235 million outstanding under
the Credit Facilities. At that date, $1 million of the $275 million of unused
capacity under the Credit Facilities was not available to the Company as a
result of covenant restrictions.
As a result of public debt offerings and borrowings to fund development
expenditures, described above, the Company had considerably more indebtedness
and was considerably more leveraged at June 30,1999 and throughout most of
fiscal 2000, than it had been in recent years. The Company has reduced its
leverage from June 30, 1999, with debt to total capitalization declining from
72.0 percent at that date to 67.6 percent at June 30, 2000 as a result of debt
repayments and an increase in retained earnings. The Company currently intends
to further reduce its ratio of debt to total capitalization to approximately 67
percent or lower before incurring material development (excluding land
acquisition) expenditures for any significant new communities. The current goal
is to reach approximately 67 percent debt to total capitalization in fiscal
2001.
The Company expects to have adequate capital resources to meet its needs for the
next 12 months. If there is a significant downturn in anticipated operations,
however, the Company will need to modify its business plan to operate with lower
capital resources. Modifications of the business plan could include, among other
things, delaying development expenditures at its communities.
19
ITEMS 7. AND 7A. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
At June 30, 2000, under the most restrictive of the covenants in the debt
agreements, $76 million of the retained earnings was available for payment of
cash dividends and acquisition of stock.
MARKET RISK FOR FINANCIAL INSTRUMENTS
The Company does not trade in derivative financial instruments and at June 30,
2000 had no significant derivative financial instruments. The Company does have
other financial instruments, for purposes other than trading, in the form of
notes payable, senior and subordinated debt. The Credit Facility, short-term
lines of credit and some real estate and other notes are at variable interest
rates and are thus subject to market risk in the form of fluctuations in
interest rates.
The following table provides interest rate sensitivity information about the
notes payable, senior and subordinated debt at June 30, 2000 (dollars in
millions):
ESTIMATED
AMOUNT BY SCHEDULED MATURITY FOR FAIR VALUE
FISCAL YEARS ENDING JUNE 30, AT
---------------------------------------- JUNE 30,
2001 2002 2003 2004 2005 THEREAFTER TOTAL 2000
---- ---- ---- ---- ---- ---------- ----- ----
Fixed Rate Debt
Amount $12.8 $14.1 $101.5 $11.2 $2.4 $606.5 $748.5 $693.1
Average Interest Rate 9.4% 9.3% 9.7% 7.0% 7.4% 9.5% 9.5%
Variable Rate Debt
Amount $21.3 $ 9.6 -- -- $226.0 -- $256.9 $256.9
Average Interest Rate 9.5% 9.5% -- -- 9.5% -- 9.5%
IMPACT OF INFLATION
Operations of the Company can be impacted by inflation. Home and land sales
prices can increase, but inflation can also cause increases in interest costs
and the costs of land, raw materials and contract labor. Unless increased costs
are recovered through higher sales prices, operating margins will decrease.
ACCOUNTING STANDARDS NOT YET ADOPTED BY THE COMPANY
In June 1998 the Financial Accounting Standards Board issued SFAS No. 133,
ACCOUNTING FOR DERIVATIVES AND SIMILAR FINANCIAL INSTRUMENTS AND FOR HEDGING
ACTIVITIES, to establish accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities on the balance sheet and measure
those instruments at fair value. This new standard, as amended by related SFAS
Nos. 137 and 138, will be effective for the Company for its fiscal year ending
June 30, 2001. It is not expected to have a significant impact on the
consolidated financial statements since the Company does not have significant
derivative financial instruments.
20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted as a separate section of this report
below.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
21
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See "Item 1 - Executive Officers of the Company" at the end of Part I of this
report. Information with respect to the Directors is incorporated by reference
to the Registrant's definitive proxy statement to be filed pursuant to
Regulation 14A within 120 days after the end of the most recent fiscal year
covered by this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information in response to these items is incorporated by reference to the
Registrant's definitive proxy statement to be filed pursuant to Regulation 14A
within 120 days after the end of the most recent fiscal year covered by this
Annual Report on Form 10-K.
22
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. and 2. The response to this portion of Item 14 is submitted
as a separate section of thisreport beginning on page 25.
3. Exhibits
The Exhibit Index attached to this Report is incorporated
by reference.
(b) The Company did not file any reports on Form 8-K during the quarter
ended June 30, 2000.
23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, who is duly authorized to do so, in Phoenix, Arizona
on the 13th day of September, 2000.
DEL WEBB CORPORATION
(Registrant)
By: /s/ LeRoy C. Hanneman, Jr.
------------------------------------
LeRoy C. Hanneman, Jr.
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ LeRoy C. Hanneman, Jr. Chief Executive Officer, September 13, 2000
- ---------------------------- President and Director
LeRoy C. Hanneman, Jr. Principal Executive Officer
/s/ John A. Spencer Executive Vice President and September 13, 2000
- ---------------------------- Chief Financial Officer
John A. Spencer Principal Financial Officer
/s/ David E. Rau Vice President and Controller September 13, 2000
- ---------------------------- Principal Accounting Officer
David E. Rau
/s/ Philip J. Dion Chairman of the Board September 13, 2000
- ----------------------------
Philip J. Dion
/s/ D. Kent Anderson Director September 13, 2000
- ----------------------------
D. Kent Anderson
/s/ Michael O. Maffie Director September 13, 2000
- ----------------------------
Michael O. Maffie
/s/ J. Russell Nelson Director September 13, 2000
- ----------------------------
J. Russell Nelson
/s/ Peter A. Nelson Director September 13, 2000
- ----------------------------
Peter A. Nelson
/s/ Michael E. Rossi Director September 13, 2000
- ----------------------------
Michael E. Rossi
/s/ Glenn W. Schaeffer Director September 13, 2000
- ----------------------------
Glenn W. Schaeffer
/s/ C. Anthony Wainwright Director September 13, 2000
- ----------------------------
C. Anthony Wainwright
/s/ Sam Yellen Director September 13, 2000
- ----------------------------
Sam Yellen
24
DEL WEBB CORPORATION
FORM 10-K
ITEM 8, ITEM 14(A) (1) AND (2)
INDEX OF CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
The following financial statements required to be included in Item 8 and other
disclosures by the Registrant are listed below:
PAGE
Management's Report......................................................... 26
Independent Auditors' Report................................................ 27
Consolidated Financial Statements:
Balance Sheets as of June 30, 2000 and 1999............................. 28
Statements of Earnings for each of the years in the three-year
period ended June 30, 2000............................................ 29
Statements of Shareholders' Equity for each of the years in the
three-year period ended June 30, 2000................................. 30
Statements of Cash Flows for each of the years in the three-year
period ended June 30, 2000............................................ 31
Notes to Consolidated Financial Statements.............................. 33
The following financial statement schedule of the Registrant and its
subsidiaries is included in Item 14(a)(2):
PAGE
Consolidated Financial Statement Schedule:
II Valuation and Qualifying Accounts for each of the years in the
three-year period ended June 30, 2000............................ 46
Information other than that contained in the schedule listed above is omitted
because the conditions requiring filing do not exist or because the required
information is given in the financial statements, including the notes thereto.
25
MANAGEMENT'S REPORT
FINANCIAL STATEMENTS
Del Webb Corporation is responsible for the preparation, integrity and fair
presentation of its published financial statements. The consolidated financial
statements that follow have been prepared in accordance with accounting
principles generally accepted in the United States of America and, as such,
include amounts based on judgments and estimates made by management. The Company
also prepared the other information included in this Annual Report and is
responsible for its accuracy and consistency with the consolidated financial
statements.
The consolidated financial statements have been audited by the independent
accounting firm, KPMG LLP, which was given access to all financial records and
related data, including minutes of all meetings of shareholders, the board of
directors and committees of the board. The Company believes that all
representations made to the independent auditors during their audit were valid
and appropriate. KPMG LLP's audit report is presented on the following page.
INTERNAL CONTROL SYSTEM
The Company maintains a system of internal control over financial reporting and
over safeguarding of assets against unauthorized acquisition, use or
disposition. This system is designed to provide reasonable assurance to the
Company's management and board of directors regarding the preparation of
reliable published financial statements and such asset safeguarding. The system
includes a documented organizational structure and division of responsibility,
established policies and procedures (including a code of conduct) which are
communicated throughout the Company, and the selection, training and development
of employees. Internal auditors monitor the operation of the internal control
system and report findings and recommendations to management and the board of
directors, and corrective actions are taken to correct deficiencies if and as
they are identified. The board, operating through its audit committee which is
composed of directors who are not officers or employees of the Company, provides
oversight to the financial reporting and asset safeguarding process.
Even an effective internal control system, no matter how well designed, has
inherent limitations - including the possibility of the circumvention or
overriding of controls - and therefore can provide only reasonable assurance
with respect to financial statement preparation and asset safeguarding. Further,
because of changes in conditions, internal control system effectiveness may vary
over time.
The Company assessed its internal control system as of June 30, 2000 in relation
to criteria for effective internal control over financial reporting described in
"Internal Control - Integrated Framework" issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on its assessment, the Company
believes that, at June 30, 2000, its system of internal control over financial
reporting and over safeguarding of assets against unauthorized acquisition, use
or disposition met those criteria.
/s/ LeRoy C. Hanneman, Jr.
- --------------------------
LeRoy C. Hanneman, Jr.
Chief Executive Officer
/s/ John A. Spencer
- --------------------------
John A. Spencer
Executive Vice President and Chief Financial Officer
June 30, 2000
26
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Del Webb Corporation:
We have audited the consolidated financial statements of Del Webb Corporation
and subsidiaries as listed in the accompanying index. In connection with our
audits of the consolidated financial statements, we also have audited the
financial statement schedule listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Del Webb Corporation
and subsidiaries as of June 30, 2000 and 1999, and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 30, 2000 in conformity with accounting principles generally accepted
in the United States of America. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
/s/ KPMG LLP
Phoenix, Arizona
August 18, 2000
27
DEL WEBB CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND 1999
In Thousands
---------------------------
2000 1999
----------- -----------
ASSETS
Real estate inventories (Notes 2, 6 and 11) $ 1,755,398 $ 1,622,581
Cash and short-term investments 21,038 22,669
Receivables (Note 3) 36,121 33,529
Property and equipment, net (Note 4) 96,637 72,423
Other assets (Note 5) 71,563 115,595
----------- -----------
$ 1,980,757 $ 1,866,797
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable, senior and subordinated debt (Note 6) $ 1,005,424 $ 1,040,613
Contractor and trade accounts payable 113,574 115,456
Accrued liabilities and other payables 158,351 127,980
Home sale deposits 165,762 145,362
Deferred income taxes (Note 7) 47,030 22,510
Income taxes payable (Note 7) 8,230 10,082
----------- -----------
Total liabilities 1,498,371 1,462,003
----------- -----------
Shareholders' equity:
Common stock, $.001 par value. Authorized 30,000,000 shares;
issued 18,360,213 shares and 18,221,385 shares at June 30, 2000
and 1999, respectively (Note 8) 18 18
Additional paid-in capital 170,112 168,865
Retained earnings (Note 6) 316,240 242,075
----------- -----------
486,370 410,958
Less deferred compensation (Note 8) (3,984) (6,164)
----------- -----------
Total shareholders' equity 482,386 404,794
----------- -----------
$ 1,980,757 $ 1,866,797
=========== ===========
See accompanying notes to consolidated financial statements.
28
DEL WEBB CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
In Thousands
Except Per Share Data
----------------------------------------------
2000 1999 1998
---------- ---------- ----------
Revenues (Note 10) $2,040,003 $1,466,181 $1,177,767
---------- ---------- ----------
Costs and expenses (Note 10):
Home construction, land and other 1,575,043 1,112,525 898,754
Selling, general and administrative 269,704 203,711 166,343
Interest (Note 11) 85,623 59,179 46,212
---------- ---------- ----------
1,930,370 1,375,415 1,111,309
---------- ---------- ----------
Earnings before income taxes 109,633 90,766 66,458
Income taxes (Note 7) 35,468 32,676 23,925
---------- ---------- ----------
Net earnings $ 74,165 $ 58,090 $ 42,533
========== ========== ==========
Weighted average shares outstanding - basic 18,289 18,174 17,829
========== ========== ==========
Weighted average shares outstanding - assuming dilution 18,550 18,705 18,458
========== ========== ==========
Net earnings per share - basic $ 4.06 $ 3.20 $ 2.39
========== ========== ==========
Net earnings per share - assuming dilution $ 4.00 $ 3.11 $ 2.30
========== ========== ==========
See accompanying notes to consolidated financial statements.
29
DELL WEBB CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
In Thousands
----------------------------------------------------------------------------------
Common Additional Total
Shares Common Paid-in Retained Treasury Deferred Shareholders'
Outstanding Stock Capital Earnings Stock Compensation Equity
----------- ----- ------- -------- ----- ------------ ------
Balances at July 1, 1997 17,567 $18 $ 160,308 $ 145,922 $(1,914) $(4,504) $ 299,830
Shares issued and retired for stock
option and restricted stock plans,
net of amortization 541 -- 6,025 -- 1,918 (965) 6,978
Shares repurchased -- -- (5) -- (4) -- (9)
Cash dividends ($.20 per share) -- -- -- (3,565) -- -- (3,565)
Net earnings -- -- -- 42,533 -- -- 42,533
------- --- --------- --------- ------- ------- ---------
Balances at June 30, 1998 18,108 18 166,328 184,890 -- (5,469) 345,767
Shares issued and retired for stock
option and restricted stock plans,
net of amortization 184 -- 3,982 -- -- (695) 3,287
Shares repurchased and retired (71) -- (1,445) -- -- -- (1,445)
Cash dividends ($.05 per share) -- -- -- (905) -- -- (905)
Net earnings -- -- -- 58,090 -- -- 58,090
------- --- --------- --------- ------- ------- ---------
Balances at June 30, 1999 18,221 18 168,865 242,075 -- (6,164) 404,794
Shares issued and retired for stock
option and restricted stock plans,
net of amortization 139 -- 1,250 -- -- 2,180 3,430
Shares repurchased and retired -- -- (3) -- -- -- (3)
Net earnings -- -- -- 74,165 -- -- 74,165
------- --- --------- --------- ------- ------- ---------
Balances at June 30, 2000 18,360 $18 $ 170,112 $ 316,240 $ -- $(3,984) $ 482,386
======= === ========= ========= ======= ======= =========
See accompanying notes to consolidated financial statements.
30
DEL WEBB CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
(IN THOUSANDS)
2000 1999 1998
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers related to operating
community home sales $ 1,945,796 $ 1,394,475 $ 1,113,118
Cash received from commercial land and facility sales
at operating communities 75,989 56,746 43,185
Cash paid for costs related to home construction at
operating communities (1,167,392) (881,272) (712,509)
----------- ----------- -----------
Net cash provided by operating community sales activities 854,393 569,949 443,794
Cash paid for land acquisitions at operating communities (41,895) (33,626) (29,294)
Cash paid for lot development at operating communities (296,993) (197,650) (147,844)
Cash paid for amenity development at operating communities (223,425) (96,650) (45,911)
----------- ----------- -----------
Net cash provided by operating communities 292,080 242,023 220,745
Cash paid for costs related to communities in the
pre-operating stage (14,716) (381,361) (162,910)
Cash received from (paid for) mortgage operations 2,114 3,138 (5,673)
Cash received from (paid for) residential land
development project (1,465) (1,361) 5,195
Cash paid for corporate activities (76,535) (64,057) (59,871)
Interest paid (103,116) (73,348) (53,118)
Cash paid for income taxes (10,945) (2,807) (14,930)
----------- ----------- -----------
Net cash provided by (used for) operating activities 87,417 (277,773) (70,562)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (17,014) (43,480) (16,855)
Investments in life insurance policies (1,905) (1,835) (4,568)
----------- ----------- -----------
Net cash used for investing activities (18,919) (45,315) (21,423)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings 426,009 739,740 592,611
Repayments of debt (497,060) (407,813) (513,531)
Stock repurchases (3) (1,445) (9)
Proceeds from exercise of common stock options 925 1,818 6,126
Dividends paid -- (905) (3,565)
----------- ----------- -----------
Net cash provided by (used for) financing activities (70,129) 331,395 81,632
----------- ----------- -----------
Net increase (decrease) in cash and short-term investments (1,631) 8,307 (10,353)
Cash and short-term investments at beginning of year 22,669 14,362 24,715
----------- ----------- -----------
CASH AND SHORT-TERM INVESTMENTS AT END OF YEAR $ 21,038 $ 22,669 $ 14,362
=========== =========== ===========
See accompanying notes to consolidated financial statements.
31
DEL WEBB CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
(IN THOUSANDS)
2000 1999 1998
--------- --------- ---------
Reconciliation of net earnings to net cash provided by
(used for) operating activities:
Net earnings $ 74,165 $ 58,090 $ 42,533
Amortization of non-cash common costs in costs and expenses,
excluding interest 496,734 365,260 273,173
Amortization of capitalized interest in costs and expenses 85,623 59,179 46,212
Deferred compensation amortization 4,196 2,431 1,838
Depreciation and other amortization 10,538 8,134 6,725
Deferred income taxes 24,520 18,265 10,771
Net decrease (increase) in home construction costs 4,578 (83,198) (152)
Land acquisitions (41,895) (40,619) (69,482)
Lot development (296,993) (411,309) (204,080)
Amenity development (238,650) (279,150) (99,280)
Pre-acquisition costs -- -- (13,776)
Net change in other assets and liabilities (35,399) 25,144 (65,044)
--------- --------- ---------
Net cash provided by (used for) operating activities $ 87,417 $(277,773) $ (70,562)
========= ========= =========
See accompanying notes to consolidated financial statements.
32
DEL WEBB CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000, 1999 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Del Webb
Corporation and its subsidiaries (the "Company"). All significant
intercompany transactions and accounts have been eliminated in
consolidation.
Operations
The Company conducts its operations in two primary segments in Arizona,
California, Florida, Illinois, Nevada, South Carolina and Texas (see Note
12). The Company's active adult communities (primarily its Sun City
communities) are generally large-scale, master planned communities with
extensive amenities for people age 55 and over. The Company's family and
country club communities are open to people of all ages and are generally
developed in metropolitan or market areas in which the Company is
developing active adult communities. Within all of its communities, the
Company is usually the exclusive builder of homes.
The Company's operations are subject to a number of risks and
uncertainties, including, but not limited to, risks associated with: the
cyclical nature of real estate operations; land acquisition and
development; governmental regulation, including growth management;
environmental considerations; the geographic concentration of the Company's
operations; financing and leverage; interest rate increases; fluctuations
in labor and material costs; the development of future communities,
including in new geographic markets; competition; legal matters; and
natural risks that exist in certain of the Company's market areas.
Real Estate Inventories
Real estate inventories include undeveloped land, partially improved land,
amenities and homes on finished lots, in various stages of completion.
These assets include direct construction costs for homes and common costs.
Common costs include: land general and subdivision land development costs;
model home, vacation home and owned golf course costs in excess of normal
direct construction costs; costs of community sales centers; costs of
assets (such as golf courses and recreation centers) contributed to certain
of the community associations; costs of subsidizing the community
associations; development period interest; and other costs. All of these
common costs are capitalized and, along with estimated future common costs,
are allocated on a community by community basis to residential and
commercial lots using the relative sales value method. Home construction,
land and other costs includes the direct construction costs of the home and
an allocation of common costs. Sales commissions and advertising expenses
are included in selling, general and administrative expenses. The Company
recognizes revenue at the close of escrow.
The Company values its real estate inventories to be developed or under
development in accordance with Statement of Financial Accounting Standards
("SFAS") No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND
FOR LONG-LIVED ASSETS TO BE DISPOSED OF. The Company has no significant
recorded value for completed real estate projects.
33
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SFAS No. 121 requires that long-lived assets to be developed or under
development, such as real estate inventories, be reviewed for impairment
whenever events or changes in circumstances indicate that the book value of
the asset may not be recoverable. If the sum of the expected future net
cash flows (undiscounted and without interest charges) from an asset to be
held and used is less than the book value of the asset, an impairment loss
must be recognized in the amount of the difference between the book value
and fair value. For long-term assets like active adult communities, the
determination of whether there is an impairment loss is dependent primarily
on the Company's estimate of completion costs and annual home closings over
the life of the community, which involves numerous assumptions and
judgments as to future events over a period of many years. Long-lived
assets to be disposed of, such as real estate inventories held for sale,
are reported at the lower of book value or fair value less costs to sell.
Cash and Short-Term Investments
The Company's policy is to invest its cash in high-grade, income-producing
short-term investments. Accordingly, uninvested cash balances are generally
kept at minimum levels. Short-term investments are valued at the lower of
cost or market and principally include overnight repurchase agreements,
certificates of deposit and commercial paper with an original maturity of
less than 90 days.
Depreciation
Depreciation is computed using principally the straight-line method for
financial statement purposes and accelerated methods for tax purposes over
the estimated useful lives of the assets.
Income Taxes
The Company accounts for income taxes using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in future years in which
those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the consolidated statement of earnings in the period that
includes the enactment date.
Earnings Per Share
Earnings per share-basic is determined by dividing net earnings by the
weighted average number of common shares outstanding during the year.
Earnings per share-assuming dilution is determined by dividing net earnings
by the weighted average number of common and common equivalent shares
(which reflect the effect of stock options) outstanding during the year.
Stock options (in thousands) of 1,260, 366 and 25 were excluded for the
fiscal years ended June 30, 2000, 1999 and 1998, respectively, from the
calculation of earnings per share assuming dilution because the options'
exercise prices were greater than the average market price of common shares
for the year and, therefore, the effect would have been anti-dilutive.
Consolidated Statements of Cash Flows
In the Consolidated Statements of Cash Flows, the Company defines operating
communities as communities generating revenues from home closings.
Communities in the pre-operating stage are those not yet generating
revenues from home closings.
Warranty Costs
Estimated future warranty costs are charged to home construction, land and
other costs when the revenues from home closings are recognized.
34
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Comprehensive Income
The Company adopted SFAS No. 130, REPORTING COMPREHENSIVE INCOME, during
fiscal 1999. SFAS No. 130 requires that an enterprise (a) classify items of
other comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately
from retained earnings and additional paid-in capital in the equity section
of its balance sheet. The Company had no items of other comprehensive
income in any period presented in these consolidated financial statements
Goodwill
Goodwill is included in other assets and represents the unamortized excess
of the purchase price of two active adult communities in central Florida
over the fair value of net assets acquired in fiscal 1998 (see Note 5).
This goodwill is being amortized on a straight-line basis over a period of
15 years.
The Company assesses the recoverability of this intangible asset by
determining whether the amortization of the goodwill balance over its
remaining life can be recovered through undiscounted future operating cash
flows of the acquired operation. The amount of goodwill impairment, if any,
is measured based on projected discounted future operating cash flows using
a discount rate reflecting the Company's average cost of funds. The
assessment of the recoverability of goodwill will be impacted if estimated
future operating cash flows are not achieved.
Financial Instruments
In the normal course of business, the Company may invest in various
financial assets and incur various financial liabilities. The Company does
not trade in derivative financial instruments, although it occasionally
enters into agreements involving derivative financial instruments for
purposes other than trading. At June 30, 2000 the Company had no
significant derivative financial instruments.
The fair value estimates of financial instruments presented in Note 6 have
been determined by the Company using available market information and
valuation methodologies deemed appropriate by the Company. Considerable
judgement is required in interpreting market data to develop the estimates
of fair value. Accordingly, these fair value estimates are not necessarily
indicative of the amounts the Company might pay or receive in actual market
transactions. Potential taxes and other transaction costs have not been
considered in estimating fair value.
The fair values of the Company's publicly held debt are estimated based on
the quoted bid prices for these debt instruments on June 30, 2000. The
carrying amounts of the Company's remaining debt approximate the estimated
fair values because they are at interest rates comparable to rates
currently available to the Company for debt with similar terms and
remaining maturities. For all other financial instruments, the carrying
amounts approximate their fair values because of the short maturity of
these instruments and in some cases because they bear interest at market
rates. As substantially all of the Company's assets (including real estate
inventories and property and equipment) are not financial instruments,
these disclosures, along with those in Note 6, do not reflect the value of
the Company as a whole.
Stock-Based Compensation
In accordance with the provisions of Accounting Principals Board Opinion
No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, the Company measures
employee stock-based compensation expense as the excess of the market price
at the grant date over the amount the employee must pay for the stock. The
Company's general policy is to grant stock options at fair market value at
the date of grant, so no compensation expense is recognized. As permitted,
the Company has elected to adopt only the disclosure provisions of SFAS No.
123, ACCOUNTING FOR STOCK-BASED COMPENSATION (see Note 8).
35
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates
The preparation of the Company's consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions, particularly those previously
discussed for real estate inventories, that affect the amounts reported in
the consolidated financial statements and accompanying notes. Actual
results could differ materially from those estimates.
Reclassifications
Certain financial statement items from prior years have been reclassified
to be consistent with the current year financial statement presentation.
(2) REAL ESTATE INVENTORIES
The components of real estate inventories are as follows:
In Thousands
at June 30,
------------------------
2000 1999
---------- ----------
Home construction costs $ 260,790 $ 265,368
Unamortized improvement and amenity costs 1,097,643 977,867
Unamortized capitalized interest 105,213 85,007
Land held for housing 205,142 191,624
Land and facilities held for future development or sale 86,610 102,715
---------- ----------
$1,755,398 $1,622,581
========== ==========
At June 30, 2000, the Company had 358 completed homes and 492 homes under
construction that were not subject to a sales contract. These homes
represented $55.5 million of home construction costs at June 30, 2000. At
June 30, 1999 the Company had 418 completed homes and 504 homes under
construction (representing $54.7 million of home construction costs) that
were not subject to a sales contract.
Included in land and facilities held for future development or sale at June
30, 2000 were 241 acres of commercial land that are currently being
marketed for sale at the Company's active adult communities and 617 acres
of commercial land that are currently being marketed for sale at the
Company's Anthem Arizona project. Also included in land and facilities held
for future development or sale at June 30, 2000 were 1,075 lots in the
Company's Nevada family communities.
(3) RECEIVABLES
Receivables are summarized as follows:
In Thousands
at June 30,
---------------------
2000 1999
------- -------
Mortgage loans held for sale or investment $15,939 $14,390
Notes from sales of land and facilities 11,250 6,466
Escrow funds from home and land sales 2,189 4,826
Other 6,743 7,847
------- -------
$36,121 $33,529
======= =======
36
(4) PROPERTY AND EQUIPMENT, NET
Property and equipment, stated at cost, and related accumulated
depreciation are summarized as follows:
In Thousands
at June 30,
---------------------
2000 1999
------- -------
Buildings and improvements $ 31,417 $ 23,796
Equipment 75,638 61,981
Land and improvements 26,291 14,613
-------- --------
133,346 100,390
Less accumulated depreciation 36,709 27,967
-------- --------
$ 96,637 $ 72,423
======== ========
(5) OTHER ASSETS
Other assets are summarized as follows:
In Thousands
at June 30,
---------------------
2000 1999
------- -------
Pre-acquisition costs $ 1,373 $ 46,783
Cash surrender value of life insurance policies 29,462 27,152
Utility costs and deposits 13,093 12,916
Prepaid expenses 9,749 9,648
Goodwill, net 8,361 9,028
Water right costs 3,524 3,263
Other 6,001 6,805
-------- --------
$ 71,563 $115,595
======== ========
Substantially all pre-acquisition costs at June 30, 1999 consisted of costs
incurred for the acquisition of an environmentally-sensitive property by
the Company for the purpose of exchanging the property with the Bureau of
Land Management for property in the Las Vegas area to be included in the
Company's Anthem Las Vegas project. When the exchange was effected in
fiscal 2000, these costs were reclassified to be part of real estate
inventories.
Cash surrender values of life insurance policies relate to policies
acquired in connection with certain executive benefit plans.
(6) NOTES PAYABLE, SENIOR AND SUBORDINATED DEBT
Notes payable, senior and subordinated debt consists of the following:
In Thousands
at June 30,
------------------------
2000 1999
---------- ----------
9 3/4% Senior Subordinated Debentures due 2003, net, unsecured $ 98,903 $ 98,492
9% Senior Subordinated Debentures due 2006, net, unsecured 98,449 98,176
9 3/4% Senior Subordinated Debentures due 2008, net, unsecured 146,338 145,854
9 3/8% Senior Subordinated Debentures due 2009, net, unsecured 195,880 195,413
10 1/4% Senior Subordinated Debentures due 2010, net, unsecured 144,223 143,622
Notes payable to banks under a senior revolving credit facility and
short-term lines of credit, unsecured 235,000 301,000
Real estate and other notes, variable interest rates from prime to prime
plus 1% and fixed rates from 4.6% to 9.8%, maturities to 2025, primarily secured 86,631 58,056
---------- ----------
$1,005,424 $1,040,613
========== ==========
37
(6) NOTES PAYABLE, SENIOR AND SUBORDINATED DEBT (CONTINUED)
In March 1993 the Company completed a public offering of $100 million of
Senior Subordinated Debentures, which are shown net of unamortized deferred
financing costs and discount. These Debentures are due on March 1, 2003 and
have a stated interest rate of 9 3/4 percent per year. Interest is payable
semi-annually on March 1 and September 1. The annual effective interest
rate of the Debentures, after giving effect to the amortization of deferred
financing costs and discount, is 10.2 percent. The Debentures may be
redeemed by the Company at 100 percent of the principal amount of the
Debentures redeemed, plus accrued and unpaid interest to the redemption
date.
In February 1994 the Company completed a public offering of $100 million of
Senior Subordinated Debentures, which are shown net of unamortized deferred
financing costs. These Debentures are due on February 15, 2006 and have a
stated interest rate of 9 percent per year. Interest is payable
semi-annually on February 15 and August 15. The annual effective interest
rate of the Debentures, after giving effect to the amortization of deferred
financing costs, is 9.3 percent. The Debentures may be redeemed by the
Company on or after February 15, 2000, 2001, 2002 and 2003 at 103.375,
102.250, 101.125 and 100 percent, respectively, of the principal amount of
the Debentures redeemed, plus accrued and unpaid interest to the redemption
date.
In January 1997 the Company completed a public offering of $150 million of
Senior Subordinated Debentures, which are shown net of unamortized deferred
financing costs and discount. These Debentures are due on January 15, 2008
and have a stated interest rate of 9 3/4 percent per year. Interest is
payable semi-annually on January 15 and July 15. The annual effective
interest rate of the Debentures, after giving effect to the amortization of
deferred financing costs and discount, is 10.1 percent. The Debentures may
be redeemed by the Company on or after January 15, 2002, 2003, 2004 and
2005 at 104.875, 103.250, 101.625 and 100 percent, respectively, of the
principal amount of the Debentures redeemed, plus accrued and unpaid
interest to the redemption date.
In May 1998 the Company completed a public offering of $200 million of
Senior Subordinated Debentures, which are shown net of unamortized deferred
financing costs. These Debentures are due on May 1, 2009 and have a stated
interest rate of 9" percent per year. Interest is payable semi-annually on
May 1 and November 1. The annual effective interest rate of the Debentures,
after giving effect to the amortization of deferred financing costs, is 9.6
percent. The Debentures may be redeemed by the Company on or after May 1,
2003, 2004, 2005 and 2006 at 104.688, 103.125, 101.563 and 100 percent,
respectively, of the principal amount of the Debentures redeemed, plus
accrued and unpaid interest to the redemption date.
In February 1999 the Company completed a public offering of $150 million of
Senior Subordinated Debentures, which are shown net of unamortized deferred
financing costs. These Debentures are due on February 15, 2010 and have a
stated interest rate of 10 1/4 percent per year. Interest is payable
semi-annually on February 15 and August 15. The annual effective interest
rate of the Debentures, after giving effect to the amortization of deferred
financing costs, is 10.7 percent. The Debentures may be redeemed by the
Company on or after February 15, 2004, 2005, 2006, 2007 and 2008 at
105.125, 103.844, 102.563, 101.281 and 100 percent, respectively, of the
principal amount of the Debentures redeemed, plus accrued and unpaid
interest to the redemption date.
The Company has a $500 million senior unsecured revolving credit facility
(the "Credit Facility"). In June 2000 the maturity date of the Credit
Facility was extended and certain of its covenants were amended. If the
Credit Facility is not further amended, it will mature in October 2004.
Borrowings under the Credit Facility currently bear interest at the prime
rate or, if the Company selects, at the London interbank offered rate plus
1.45 to 1.70 percent, depending on the Company's ratio of debt to tangible
net worth. The effective interest rate on borrowings outstanding under the
Credit Facility at June 30, 2000 and 1999 was 8.6 percent and 7.3 percent,
respectively.
38
(6) NOTES PAYABLE, SENIOR AND SUBORDINATED DEBT (CONTINUED)
The Credit Facility and the indentures for the Company's publicly-held debt
contain covenants which, taken together and among other things, limit
investments in unentitled land and unsold homes, dividends, stock
repurchases, incurrence of indebtedness and certain acquisitions and which
could, depending on the circumstances, affect the Company's ability to
borrow in the future. At June 30, 2000 the Company had $226.0 million
outstanding under the Credit Facility and $9.0 million outstanding under
its $10 million of short-term lines of credit (together with the Credit
Facility, the "Credit Facilities"). At that date, $1.2 million of the
$275.0 million of unused capacity under the Credit Facilities was not
available to the Company.
At June 30, 2000, under the most restrictive of the covenants in the
Company's debt agreements, $76.0 million of the Company's retained earnings
was available for payment of cash dividends and acquisition of stock.
The estimated fair values at June 30, 2000 of the Company's 9 3/4% Senior
Subordinated Debentures due 2003, 9% Senior Subordinated Debentures due
2006, 9 3/4% Senior Subordinated Debentures due 2008, 9"% Senior
Subordinated Debentures due 2009 and 10 1/4% Senior Subordinated Debentures
due 2010 were $99.0 million, $89.6 million, $130.9 million, $168.3 million
and $140.6 million, respectively. Their estimated fair values at June 30,
1999 were $100.0 million, $97.9 million, $149.0 million $196.5 million and
$151.3 million, respectively.
The principal payment requirements (in thousands) on debt for the next five
years ended June 30 are as follows:
2001 $ 34,073
2002 $ 23,746
2003 $ 101,534
2004 $ 11,226
2005 $ 228,404
(7) INCOME TAXES
The components of income taxes are:
In Thousands
Year Ended June 30,
---------------------------------------
2000 1999 1998
------- ------- -------
Current:
Federal $10,020 $13,506 $12,252
State 928 905 902
------- ------- -------
10,948 14,411 13,154
------- ------- -------
Deferred:
Federal 23,554 16,471 9,730
State 966 1,794 1,041
------- ------- -------
24,520 18,265 10,771
------- ------- -------
$35,468 $32,676 $23,925
======= ======= =======
39
(7) INCOME TAXES (CONTINUED)
Deferred tax assets and liabilities have been recognized in the
consolidated balance sheets due to temporary differences and carryforwards
as follows:
In Thousands
at June 30,
---------------------
2000 1999
-------- --------
Deferred tax assets:
Net operating loss carryforwards $ 1,252 $ 1,401
Tax credit carryforwards 3,045 900
Property and equipment, principally due to
differences in depreciation 15,923 10,925
State income taxes 1,728 1,512
Deferred compensation 8,570 7,584
Accruals 18,907 13,882
Deferred income 10,161 1,017
Other 2,796 1,753
-------- --------
62,382 38,974
Valuation allowance 3,389 3,389
-------- --------
58,993 35,585
-------- --------
Deferred tax liabilities:
Real estate, principally due to basis differences 105,001 57,641
Other 1,022 454
-------- --------
106,023 58,095
-------- --------
Net deferred income tax liability $ 47,030 $ 22,510
======== ========
Income taxes differ from the amounts computed using the federal statutory
income tax rate as a result of the following:
In Thousands
Year Ended June 30,
------------------------------------
2000 1999 1998
-------- -------- --------
Expected taxes at current federal statutory income tax rate $ 38,372 $ 31,768 $ 23,260
State income taxes, net of federal benefit 3,656 2,696 2,438
Federal and state tax credits (2,367) (2,146) (1,798)
Adjustments due to the settlement of audits and resolution
of issues (4,000) 85 (351)
Other (193) 273 376
-------- -------- --------
Income taxes $ 35,468 $ 32,676 $ 23,925
======== ======== ========
At June 30, 2000 the Company had a state net operating loss carryforward of
$25.0 million that begins to expire in fiscal 2010.
There were no net changes in the total valuation allowance for the years
ended June 30, 2000 and 1999. Management believes it is more likely than
not that the results of future operations will generate sufficient taxable
income to realize the deferred tax assets as reduced by the valuation
allowance.
40
(8) COMMON STOCK RESERVED
The Company has six employee stock option plans: the 1981 Stock Option Plan
(under which no grants can be made subsequent to December 31, 1991); the
1986 Stock Option and Stock Appreciation Rights (SAR) Plan (under which no
grants can be made subsequent to December 31, 1995); and the 1991, 1993,
1995 and 1998 Executive Long-Term Incentive Plans (ELTIPs), which cover
both options and restricted stock grants. Options under each of these plans
are granted to key employees to purchase shares of the Company's common
stock at a price not less than the current market price at the date of the
grant. The options are exercisable over a ten-year period from the date of
the grant. Shares authorized for grant under the 1991 ELTIP total 750,000.
Shares authorized for grant under the 1993 ELTIP total 1,200,000, of which
no more than 450,000 may be used for restricted stock grants. Shares
authorized for grant under the 1995 ELTIP total 1,200,000, of which no more
than 100,000 may be used for restricted stock grants. Shares authorized for
grant under the 1998 ELTIP total 1,000,000, of which no more than 100,000
may be used for time-based restricted stock grants and no more than 100,000
may be used for performance-based restricted stock grants.
The Company also has the 1991 Directors' Stock Plan, the 1995 Director
Stock Plan and the 1998 Director Stock Plan, under which options may be
granted to the Directors of the Company to purchase shares of the Company's
common stock at a price not less than the current market price at the date
of grant. Under these plans the Directors may elect to defer some or all of
their annual retainers and receive restricted stock or stock options at
prices that, when combined with the amounts of deferred retainers, equal
the current market price at the date of the grant. Shares authorized under
these plans total 75,000 per plan (225,000 shares in the aggregate).
The Company has adopted the disclosure requirements of SFAS No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION. As permitted under SFAS No. 123,
the Company measures employee stock-based compensation expense as the
excess of the market price at the grant date over the amount the employee
must pay for the stock.
SFAS No. 123 requires disclosure of pro forma net earnings and pro forma
net earnings per share as if the fair value based method had been applied
in measuring employee compensation expense for awards granted in fiscal
1996 through fiscal 2000. Management believes that the fiscal 1999 and 1998
pro forma amounts may not be representative of the effects of stock-based
awards on future pro forma net earnings and pro forma net earning per share
because, among other reasons, those pro forma amounts exclude the pro forma
employee compensation expense related to unvested stock options granted
before fiscal 1996.
Reported and such pro forma net earnings, in thousands, and net earnings
per share amounts for the years ended June 30, 2000, 1999 and 1998 are set
forth below:
2000 1999 1998
---- ---- ----
Reported:
Net earnings $74,165 $58,090 $42,533
Net earnings per share - basic 4.06 3.20 2.39
Net earnings per share - assuming dilution 4.00 3.11 2.30
Pro forma:
Net earnings 72,550 56,890 41,588
Net earnings per share - basic 3.97 3.13 2.33
Net earnings per share - assuming dilution 3.91 3.04 2.25
41
(8) COMMON STOCK RESERVED (CONTINUED)
The fair values of employee stock options granted were estimated on the
dates of their grant using the Black-Scholes option pricing model based on
the following weighted average assumptions:
2000 1999 1998
---- ---- ----
Risk free interest rate 6.70% 5.71% 5.65%
Expected life (in years) 7.5 7.4 7.5
Expected volatility 33% 30% 29%
Expected dividend yield 0.68% 0.82% 1.08%
Stock option activity for the years ended June 30, 2000, 1999, and 1998 is
summarized as follows:
2000 1999 1998
-------------------- ------------------- -------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- ----- ------- ----- ------- -----
Options outstanding, beginning of year 1,932,821 $18.21 1,807,632 $16.61 1,981,613 $15.12
Granted 415,500 22.70 372,879 25.91 372,750 20.97
Exercised (195,530) 11.36 (138,570) 15.79 (460,506) 13.30
Canceled (80,190) 22.16 (109,120) 21.02 (86,225) 19.06
---------- ------ ---------- ------ ---------- ------
Options outstanding at end of year 2,072,601 $19.60 1,932,821 $18.21 1,807,632 $16.61
========== ====== ========== ====== ========== ======
Options exercisable at end of year 1,176,002 $17.28 1,098,619 $15.16 1,050,291 $14.47
========== ====== ========== ====== ========== ======
Weighted average fair value of
options granted during year $10.73 $10.90 $8.32
====== ====== =====
Stock options outstanding at June 30, 2000 were as follows:
Options Outstanding Options Exercisable
-------------------------------------- -----------------------
Weighted Weighted
Weighted Average Average Average
Range of Remaining Exercise Exercise
Exercise Price Options Contractual Life Price Options Price
-------------- ------- ---------------- ----- ------- -----
$ 8.00 - $ 9.89 100,419 0.7 years $ 8.82 100,419 $ 8.82
$10.97 - $14.53 229,686 2.5 13.67 229,686 13.67
$15.71 - $18.10 482,966 5.0 16.40 404,666 16.41
$20.56 - $27.22 1,259,530 7.8 22.77 441,231 21.89
--------- ---------
2,072,601 6.2 years $ 19.60 1,176,002 $ 17.28
========= === ======= ========= =======
Shares granted, net of cancellations, under the Company's restricted stock
plans during the years ended June 30, 2000, 1999 and 1998 aggregated
120,335 shares, 96,930 shares and 128,070 shares, respectively. The Company
recognized compensation expense of $4.4 million, $2.4 million and $1.8
million related to shares granted under the restricted stock plans for the
years ended June 30, 2000, 1999 and 1998, respectively.
(9) DEFINED CONTRIBUTION PLAN
The Company sponsors a defined contribution retirement savings plan that
covers substantially all employees of the Company after completion of six
months of service. Company contributions to this plan, which can include
amounts based on a percentage of employee contributions as well as
discretionary contributions, were $3.2 million, $1.3 million and $1.7
million for the years ended June 30, 2000, 1999 and 1998, respectively.
42
(10) REVENUES AND COSTS AND EXPENSES
The components of revenues and costs and expenses:
In Thousands
Year Ended June 30,
----------------------------------------
2000 1999 1998
---------- ---------- ----------
Revenues:
Homebuilding:
Active adult communities $1,318,092 $1,084,463 $ 830,728
Family and country club communities 583,744 302,658 287,656
---------- ---------- ----------
1,901,836 1,387,121 1,118,384
Models/vacation getaway homes with
long-term leaseback* 31,435 -- --
---------- ---------- ----------
Total homebuilding 1,933,271 1,387,121 1,118,384
Land and facility sales 76,237 61,861 48,522
Other 30,495 17,199 10,861
---------- ---------- ----------
$2,040,003 $1,466,181 $1,177,767
========== ========== ==========
- ----------
* For the fiscal year ended June 30, 2000, revenues (in thousands) from the
sale of models/vacation getaway homes with long-term leasebacks are net of
deferred profits of $14,174. These deferred profits are being amortized as
reductions of selling, general and administrative expenses over the
leaseback periods.
Costs and expenses:
Home construction and land:
Active adult communities $ 997,487 $ 807,518 $ 624,361
Family and country club communities 463,454 244,607 237,332
----------- ----------- -----------
1,460,941 1,052,125 861,693
Models/vacation getaway homes with long-term leaseback 31,435 -- --
----------- ----------- -----------
Total homebuilding 1,492,376 1,052,125 861,693
Cost of land and facility sales 59,765 52,268 33,479
Other cost of sales 22,902 8,132 3,582
----------- ----------- -----------
Total home construction, land and other 1,575,043 1,112,525 898,754
Selling, general and administrative 269,704 203,711 166,343
Interest 85,623 59,179 46,212
----------- ----------- -----------
$ 1,930,370 $ 1,375,415 $ 1,111,309
=========== =========== ===========
(11) INTEREST
The following table shows the components of interest:
In Thousands
Year Ended June 30,
--------------------------------------
2000 1999 1998
--------- -------- --------
Interest incurred and capitalized $ 105,829 $ 82,731 $ 61,546
========= ======== ========
Amortization of capitalized interest in costs and expenses $ 85,623 $ 59,179 $ 46,212
========= ======== ========
Unamortized capitalized interest included
in real estate inventories at year end $ 105,213 $ 85,007 $ 61,455
========= ======== ========
Interest income $ 849 $ 1,081 $ 1,072
========= ======== ========
Interest income is included in other revenues.
43
(12) SEGMENT INFORMATION
The Company conducts its operations in two primary segments in Arizona,
California, Florida, Illinois, Nevada, South Carolina and Texas. The
Company's active adult communities (primarily its Sun City communities) are
generally large-scale, master planned communities with extensive amenities
for people age 55 and over. The Company's family and country club
communities are open to people of all ages and are generally developed in
metropolitan or market areas in which the Company is developing active
adult communities. Within all of its communities, the Company is usually
the exclusive builder of homes.
Both of the Company's primary segments generate their revenues through the
sale of homes (and, to a much lesser extent, land and facilities) to
external customers in the United States. The Company is not dependent on
any major customer.
Information as to the operations of the Company in different business
segments is set forth below based on the nature of the Company's
communities and their customers. Certain information has not been included
by segment due to the immateriality of the amount to the segments or in
total. The Company evaluates segment performance based on several factors,
of which the primary financial measure is earnings before interest and
taxes ("EBIT"). The accounting policies of the business segments are the
same as those described in Note 1 for the Company. There are no significant
intersegment transactions.
In Thousands
Year Ended June 30,
---------------------------------------------
2000 1999 1998
----------- ----------- -----------
Revenues:
Active adult communities $ 1,375,776 $ 1,111,366 $ 846,837
Family and country club communities 659,343 344,051 321,591
Corporate and other 4,884 10,764 9,339
----------- ----------- -----------
$ 2,040,003 $ 1,466,181 $ 1,177,767
=========== =========== ===========
EBIT:
Active adult communities $ 194,921 $ 171,311 $ 122,968
Family and country club communities 79,920 39,548 37,862
Corporate and other (79,585) (60,914) (48,160)
----------- ----------- -----------
$ 195,256 $ 149,945 $ 112,670
=========== =========== ===========
Amortization of Capitalized Interest:
Active adult communities $ 60,713 $ 44,816 $ 33,492
Family and country club communities 24,910 14,363 12,720
Corporate and other -- -- --
----------- ----------- -----------
$ 85,623 $ 59,179 46,212
=========== =========== ===========
Assets at Year End:
Active adult communities $ 1,367,608 $ 1,280,808 $ 948,347
Family and country club communities 468,080 462,536 268,807
Corporate and other 145,069 123,453 93,308
----------- ----------- -----------
$ 1,980,757 $ 1,866,797 $ 1,310,462
=========== =========== ===========
Expenditures for Real Estate Inventories:
Active adult communities $ 1,050,587 $ 1,053,866 $ 698,763
Family and country club communities 495,115 452,787 253,589
Corporate and other 11,573 103 312
----------- ----------- -----------
$ 1,557,275 $ 1,506,756 $ 952,664
=========== =========== ===========
Purchases of Property and Equipment:
Active adult communities $ 5,237 $ 19,733 $ 13,822
Family and country club communities 1,923 904 523
Corporate and other 9,854 22,843 2,510
----------- ----------- -----------
$ 17,014 $ 43,480 $ 16,855
=========== =========== ===========
44
(12) SEGMENT INFORMATION (CONTINUED)
In Thousands
Year Ended June 30,
-------------------------------
2000 1999 1998
------- ------- -------
Depreciation and Other Amortization:
Active adult communities $ 3,797 $ 3,303 $ 2,708
Family and country club communities 768 275 470
Corporate and other 5,973 4,556 3,547
------- ------- -------
$10,538 $ 8,134 $ 6,725
======= ======= =======
(13) CONTINGENT LIABILITIES AND COMMITMENTS
The Company is a party to various legal proceedings arising in the ordinary
course of business. While it is not feasible to predict the ultimate
disposition of these matters, it is the opinion of management that their
outcome will not have a material adverse effect on the financial statements
of the Company taken as a whole.
The Company has issued surety bonds and standby letters of credit
aggregating $210.9 million at June 30, 2000.
The Company leases from third parties, under operating leases, office
space, model homes, apartment units which it rents to prospective customers
at its large-scale active adult communities, automobiles, computers, office
equipment, golf course equipment, heavy machinery and certain other
equipment. The leases are generally renewable at the Company's option for
additional periods. Total rent expense incurred by the Company was $19.4
million, $13.6 million and $10.5 million for the years ended June 30, 2000,
1999 and 1998, respectively. Minimum lease payments (in thousands) to be
made by the Company under non-cancelable lease agreements are as follows:
2001 $ 16,356
2002 12,934
2003 8,659
2004 6,201
2005 4,054
Later years 13,883
--------
$ 62,087
========
(14) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for the years ended June 30, 2000 and 1999
is presented below. The sum of the individual quarterly data may not equal
the annual data due to rounding and fluctuations in weighted average shares
outstanding on a quarter-to-quarter basis.
In Thousands Except Per Share Data
Three Months Ended
----------------------------------------------------
June 30, March 31, December 31, September 30,
2000 2000 1999 1999
-------- -------- -------- --------
Revenues $635,029 $499,799 $495,613 $409,562
Net earnings 30,706 15,986 13,689 13,784
Net earnings per share - basic 1.67 .87 .75 .76
Net earnings per share - assuming dilution 1.67 .86 .73 .74
June 30, March 31, December 31, September 30,
1999 1999 1998 1998
-------- -------- -------- --------
Revenues $518,858 $325,428 $354,248 $268,647
Net earnings 23,724 12,469 13,483 8,414
Net earnings per share - basic 1.30 .68 .74 .46
Net earnings per share - assuming dilution 1.27 .66 .72 .45
45
DEL WEBB CORPORATION AND SUBSIDIARIES SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS -----------
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
In Thousands
-------------------------------------------------------------------
Additions Additions
Balance at Charged to Charged to
Beginning Costs and Other Balance at
of Year Expenses Accounts Deductions End of Year
------- -------- -------- ---------- -----------
2000
Reserves for disposal costs of discontinued
operations $ 7,266 $ -- $ -- $ 7,266 $ --
------- ---- ------- ------- -------
$ 7,266 $ -- $ -- $ 7,266 $ --
======= ==== ======= ======= =======
1999
Reserve for residential land development
project $ 7,898 $ -- $ -- $ 7,898 $ --
Reserves for disposal costs of discontinued
operations 9,703 -- -- 2,437 7,266
------- ---- ------- ------- -------
$17,601 $ -- $ -- $10,335 $ 7,266
======= ==== ======= ======= =======
1998
Reserve for residential land development
project $ 7,491 $ -- $ 407 $ -- $ 7,898
Reserves for disposal costs of discontinued
operations 10,382 -- -- 679 9,703
------- ---- ------- ------- -------
$17,873 $ -- $ 407 $ 679 $17,601
======= ==== ======= ======= =======
46
DEL WEBB CORPORATION
Report on Form 10-K For The
Year Ended June 30, 2000
10-K EXHIBIT INDEX
NON-FINANCIAL STATEMENT EXHIBITS
Exhibits Filed
EXHIBIT NO.
- -----------
3.1 The amended and restated By-Laws of Del Webb Corporation effective
November 1, 1994, as amended on February 13, 1996, as amended
February 10, 2000.
10.1 Third Amended and Restated Revolving Loan Agreement among Del Webb
Corporation and Bank of America, N.A., as Administrative Agent and
Bank One, NA, as Syndication Agent, entered into as of June 22,
2000.
10.2 Current list of participants to the Del Webb Corporation
Supplemental Executive Retirement Plan No. 2.
10.3 Current list of Directors and Officers that are party to the
Directors and Officers Indemnification Agreement.
10.4 Current list of Directors and Officers that are party to a Change in
Control Agreement.
10.5 Del Webb Corporation Management Incentive Plan Fiscal 2001 (July 1,
2000 - June 30, 2001).
10.6 2000/01 Executive Management Incentive Plan Award Agreement between
the Registrant and LeRoy C. Hanneman, Jr. dated July 20, 2000.
10.7 Del Webb Corporation Supplemental Executive Retirement Plan No. 2,
Amendment No. 5 effective as of July 22, 1999.
10.8 Second Amendment to Employment and Consulting Agreement between the
registrant and Philip J. Dion dated November 19, 1999.
21.0 Subsidiaries of the Registrant.
23.0 Consent of KPMG LLP.
27 Financial Data Schedule.
In addition to those Exhibits shown above, the Company hereby incorporates
the following Exhibits pursuant to Exchange Act Rule 12b-32 and Regulation
ss.229.10(d) by reference to the fillings set forth below:
EXHIBIT NO.
3.0 Amended and Restated Certificate of Incorporation of the Registrant,
incorporated by reference to Exhibit 99.0 to Registrant's Report on
Form 10-Q for the quarter ended September 30, 1994.
4.1 Indenture dated as of May 11, 1998 between Registrant and State
Street Bank and Trust Company, as Trustee, defining the rights of
holders of the 9 3/8% Senior Subordinated Debentures due 2009,
incorporated by reference to Exhibit 1.1 to Registrant's Report on
Form 8-K dated May 11, 1998.
4.2 Indenture dated as of March 8, 1993 between Registrant and Fidelity
Trust Company, New York, as Trustee, defining the rights of the
holders of the 9 3/4% Senior Subordinated Debentures due 2003,
incorporated by reference to Exhibit 4.1 to Registrant's Report on
Form 8-K dated March 8, 1993.
4.3 Indenture dated as of February 11, 1994, between Registrant and The
Bank of New York, as Trustee, defining the rights of the holders of
the 9% Senior Subordinated Debentures due 2006, incorporated by
reference to Exhibit 4.1 to Registrant's Report on Form 8-K dated
February 11, 1994.
4.4 Indenture dated as of January 21, 1997, between Registrant and State
Street Bank and Trust Company, as Trustee, defining the rights of
the holders of the 9 3/4% Senior Subordinated Debentures due 2008,
incorporated by reference to Exhibit 1.1 to Registrant's Report on
Form 8-K dated January 21, 1997.
4.5 Indenture dated as of February 18, 1999, between Registrant and Bank
of Montreal Trust Company, as Trustee, defining the rights of the
holders of the 10 1/4% Senior Subordinated Debentures due 2010,
incorporated by reference to Exhibit 1.2 to Registrant's Report on
Form 8-K dated February 18, 1999; as supplemented by the First
Supplemental Indenture, incorporated by reference to Exhibit 10.2 to
Registrant's Report on Form 10-Q for the quarter ended March 31,
1999.
10.9 Change in Control Agreement letter dated March 15, 1999, as
incorporated by reference to Exhibit 10.14 to Registrant's Report on
Form 10-Q for the quarter ended March 31, 1999.
10.10 Del Webb Corporation Deferred Compensation Plan effective June 1,
1993, incorporated by reference to Exhibit 10.7 to Registrant's
Report on Form 10-K for the year ended June 30, 1993.
10.11 1981 Stock Option Plan, as amended, incorporated by reference to
Exhibit 10.18 to Registrant's Report on Form 10-K for the year ended
June 30, 1993.
10.12 1986 Stock Option and SAR Plan of the Del Webb Corporation, as
amended, incorporated by reference to Exhibit 10.19 to Registrant's
Report on Form 10-K for the year ended June 30, 1993.
10.13 Del Webb Corporation Executive Long-Term Incentive Plan adopted
November 20, 1991, as amended, incorporated by reference to Exhibit
10.10 to Registrant's Report on Form 10-K for the year ended June
30, 1997; as amended by the Third Amendment to Plan effective as of
February 11, 1998, incorporated by reference to Exhibit 10.8 to
Registrant's Report on Form 10-Q for the quarter ended March 31,
1999.
10.14 Del Webb Corporation 1993 Executive Long Term Incentive Plan dated
March 17, 1994, as amended, incorporated by reference to Exhibit
10.11 to Registrant's Report on Form 10-K for the year ended June
30, 1997; as amended by the Second Amendment to Plan effective as of
February 11, 1998, incorporated by reference to Exhibit 10.7 to
Registrant's Report on Form 10-Q for the quarter ended March 31,
1999.
10.15 Del Webb Corporation 1995 Executive Long-Term Incentive Plan adopted
July 13, 1995, as amended, incorporated by reference to Exhibit
10.25 to Registrant's Report on Form 10-K for the year ended June
30, 1997; as amended by the Second Amendment to Plan effective as of
February 11, 1998, incorporated by reference to Exhibit 10.6 to
Registrant's Report on Form 10-Q for the quarter ended March 31,
1999.
10.16 Del Webb Corporation 1998 Executive Long-Term Incentive Plan adopted
November 4, 1998, incorporated by reference to Exhibit 10.8 to
Registrant's Report on Form 10-K for the year ended June 30, 1999.
10.17 Del Webb Corporation Director Stock Plan dated November 20, 1991,
incorporated by reference to Exhibit 10.13 to Registrant's Report on
Form 10-K for the year ended June 30, 1993; as amended by the First
Amendment to Plan effective as of February 11, 1998, incorporated by
reference to Exhibit 10.5 to Registrant's Report on Form 10-Q for
the quarter ended March 31, 1999.
10.18 Del Webb Corporation 1995 Director Stock Plan adopted July 13, 1995,
incorporated by reference to Exhibit 10.26 to Registrant's Report on
Form 10-K for the year ended June 20, 1995; as amended by the First
Amendment to Plan effective as of February 11, 1998, incorporated by
reference to Exhibit 10.3 to Registrant's Report on Form 10-Q for
the quarter ended March 31, 1999.
10.19 Del Webb Corporation 1998 Director Stock Plan adopted July 23, 1998,
incorporated by reference to Exhibit 10.9 to Registrant's Report on
Form 10-K for the year ended June 30, 1999.
10.20 Del E. Webb Corporation Umbrella Trust dated June 11, 1987, as
amended, incorporated by reference to Exhibit 10.23 to Registrant"s
Report on Form 10-K for the year ended June 30, 1996.
10.21 Del Webb Corporation 1995 Executive Management Incentive Plan
adopted July 13, 1995, incorporated by reference to Exhibit 10.27 to
Registrant's Report on Form 10-K for the year ended June 30, 1995;
as amended by the First Amendment to Plan effective as of February
11, 1998, incorporated by reference to Exhibit 10.4 to Registrant's
Report on Form 10-Q for the quarter ended March 31, 1999.
10.22 Key Executive Life Insurance Plan dated May 15, 1991, incorporated
by reference to Exhibit 10.10 to Registrant's Report on Form 10-K
for the year ended June 30, 1991; as amended on November 18, 1994,
incorporated by reference to Exhibit 10.9 to Registrant's Report on
Form 10-K for the year ended June 30, 1996.
10.23 Key Executive Life Insurance Plan II dated April 1, 1992,
incorporated by reference to Exhibit 10.8 to Registrant's Report on
Form 10-K for the year ended June 30, 1992; as amended on November
8, 1994, incorporated by reference to Exhibit 10.8 to Registrant's
Report on Form 10-K for the year ended June 30, 1996.
10.24 Key Executive Life Plan Plus dated August 23, 1995, incorporated by
reference to Exhibit 10.32 to Registrant's Report on Form 10-K for
the year ended June 30, 1996.
10.25 Key Executive Life Plan 1995 dated October 5, 1995, incorporated by
reference to Exhibit 10.33 to Registrant's Report on Form 10-K for
the year ended June 30, 1996.
10.26 Senior Officer Medical and Dental Reimbursement Plan, as amended and
restated November 16, 1992, incorporated by reference to Exhibit
10.17 to Registrant's Report on Form 10-K for the year ended June
30, 1993.
10.27 Group Term Carve-Out Plan dated November 18, 1994, incorporated by
reference to Exhibit 10.34 to Registrant's Report on Form 10-K for
the year ended June 30, 1996.
10.28 Del Webb Corporation Supplemental Executive Retirement Plan No. 1,
as amended and restated April 20, 1993, incorporated by reference to
Exhibit 10.12 to Registrant's Report on Form 10-K for the year ended
June 30, 1993; as amended by First Amendment to the Del Webb
Corporation Supplemental Executive Retirement Plan No. 1 effective
July 1, 1995, incorporated by reference to Exhibit 10.13 to
Registrant's Report on Form 10-K for the year ended June 30, 1995;
as amended by Second Amendment to the Del Webb Corporation
Supplemental Executive Retirement Plan No. 1 effective June 26,
1996, incorporated by reference to Exhibit 10.10 to Registrant's
Report on Form 10-K for the year ended June 30, 1999; as amended by
the Third Amendment to Plan dated March 10, 1999, incorporated by
reference to Exhibit 10.9 to Registrant's Report on Form 10-Q for
the quarter ended March 31, 1999.
10.29 Supplemental Executive Retirement Plan No. 1 Participation Agreement
between the Registrant and Philip J. Dion, amended and restated
effective July 25, 1996, incorporated by reference to Exhibit 10.30
to Registrant's Report on Form 10-K for the year ended June 30,
1996.
10.30 Del Webb Corporation Supplemental Executive Retirement Plan No. 2,
as amended and restated April 20, 1993, incorporated by reference to
Exhibit 10.16 to Registrant's Report on Form 10-K for the year ended
June 30, 1993; as amended by First Amendment to the Del Webb
Corporation Supplemental Executive Retirement Plan No. 2 effective
July 1, 1995, incorporated by reference to Exhibit 10.16 to
Registrant's Report on Form 10-K for the year ended June 30, 1995;
as amended by Second Amendment to the Del Webb Corporation
Supplemental Executive Retirement Plan No. 2 effective July 26,
1996, incorporated by reference to Exhibit 10.11 to Registrant's
Report on Form 10-K for the year ended June 30, 1999; as amended by
Third Amendment to the Del Webb Corporation Supplemental Executive
Retirement Plan No. 2 effective February 11, 1998, incorporated by
reference to Exhibit 10.12 to Registrant's Report on Form 10-K for
the year ended June 30, 1999; as amended by the Fourth Amendment to
Plan dated March 10, 1999, incorporated by reference to Exhibit
10.10 to Registrant's Report on Form 10-Q for the quarter ended
March 31, 1999.
10.31 Supplemental Executive Retirement Plan No. 2 Participation Agreement
as of April 11, 1997 between the Registrant and John H. Gleason,
incorporated by reference to Exhibit 10.40 to Registrant's Report on
Form 10-K for the year ended June 30, 1997.
10.32 Supplemental Executive Retirement Plan No. 2 Participation Agreement
as of April 11, 1997 between the Registrant and LeRoy C. Hanneman,
Jr., incorporated by reference to Exhibit 10.41 to Registrant's
Report on Form 10-K for the year ended June 30, 1997.
10.33 Supplemental Executive Retirement Plan No. 2 Participation Agreement
as of April 11, 1997 between the Registrant and Anne L. Mariucci,
incorporated by reference to Exhibit 10.42 to Registrant's Report on
Form 10-K for the year ended June 30, 1997.
10.34 Supplemental Executive Retirement Plan No. 2 amended and restated
Participation Agreement as of January 1, 2000, between the
Registrant and Frank D. Pankratz, incorporated by reference to
Exhibit 10.8 to Registrant's Report on Form 10-Q for the quarter
ended March 31, 2000.
10.35 Supplemental Executive Retirement Plan No. 2 amended and restated
Participation Agreement as of January 1, 2000, between the
Registrant and Charles T. Roach, incorporated by reference to
Exhibit 10.6 to Registrant's Report on Form 10-Q for the quarter
ended March 31, 2000.
10.36 Supplemental Executive Retirement Plan No. 2 amended and restated
Participation Agreement as of January 1, 2000, between the
Registrant and David G. Schreiner, incorporated by reference to
Exhibit 10.7 to Registrant's Report on Form 10-Q for the quarter
ended March 31, 2000.
10.37 Employment and Consulting Agreement dated July 10, 1996, between the
Registrant and Philip J. Dion, incorporated by reference to Exhibit
10.2 to Registrant's Report on Form 10-K for the year ended June 30,
1996; as amended by the Amendment to Agreement entered into as of
March 9, 1999, incorporated by reference to Exhibit 10.11 to
Registrant's Report on Form 10-Q for the quarter ended March 31,
1999; as amended by the Third Amendment to Agreement entered into as
of February 28, 2000, incorporated by reference to Exhibit 10.9 to
Registrant's Report on Form 10-Q for the quarter ended March 31,
2000.
10.38 Employment Agreement dated April 11, 1997 between the Registrant and
John H. Gleason, incorporated by reference to Exhibit 10.36 to
Registrant's Report on Form 10-K for the year ended June 10, 1997;
as amended by the Amendment to Agreement entered into as of March
22, 1999, incorporated by reference to Exhibit 10.13 to Registrant's
Report on Form 10-Q for the quarter ended March 31, 1999.
10.39 Employment Agreement dated April 11, 1997 between the Registrant and
LeRoy C. Hanneman, incorporated by reference to Exhibit 10.37 to
Registrant's Report on Form 10-K for the year ended June 30, 1997;
as amended by the Amendment to Agreement entered into as of March
22, 1999, incorporated by reference to Exhibit 10.12 to Registrant's
Report on Form 10-Q for the quarter ended March 31, 1999.
10.40 Employment Agreement dated January 1, 2000 between the Registrant
and John A. Spencer, incorporated by reference to Exhibit 10.1 to
Registrant's Report on Form 10-Q for the quarter ended March 31,
2000.
10.41 Employment Agreement dated January 1, 2000 between the Registrant
and Charles T. Roach, incorporated by reference to Exhibit 10.2 to
Registrant's Report on Form 10-Q for the quarter ended March 31,
2000.
10.42 Employment Agreement dated January 1, 2000 between the Registrant
and David G. Schreiner, incorporated by reference to Exhibit 10.3 to
Registrant's Report on Form 10-Q for the quarter ended March 31,
2000.
10.43 Employment Agreement dated January 1, 2000 between the Registrant
and Frank D. Pankratz, incorporated by reference to Exhibit 10.4 to
Registrant's Report on Form 10-Q for the quarter ended March 31,
2000.
10.44 Form of Directors and Officers Indemnification Agreement between
Registrant and its directors and officers, incorporated by reference
to Exhibit 10.24 to Registrant's Report on Form 10-K for the year
ended June 30, 1997.
10.45 Asset Acquisition Agreement, dated December 22, 1997 by and among
Del Webb Communities, Inc. and Spruce Creek Golf and Country Club,
Inc., Spruce Creek Golf and Country Club Homeowners' Association,
Inc. and Spruce Creek Preserve Homeowners'?Association, Inc.
incorporated by reference to Exhibit 99.1 to Registrant's Report on
Form 10-Q dated May 14, 1998.
10.46 Agreement of Purchase and Sale between Del Webb Conservation Holding
Corp. and American Land Conservancy for acquisition of Dreyfus
property located on the eastern shore of Lake Tahoe in Washoe
County, Nevada, incorporated by reference to Exhibit 10.1 to
Registrant's Report on Form10-Q dated February 9, 1998.
* Reports filed under File No. 1-4785 were filed in the office of the
Security and Exchange Commission located in Washington, D.C.