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, 1997 TO JUNE 30, 1998.
[ ] 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:
Title of each class Name of each exchange 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
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, 1998 was 18,107,482 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 $450,400,000.
Documents Incorporated by Reference
Portions of Registrant's definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on November 4, 1998 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, 1998
TABLE OF CONTENTS
PART I
Items 1. PAGE
and 2.
Business and Properties
The Company......................................................... 1
Communities......................................................... 1
Product Design...................................................... 4
Construction........................................................ 4
Sales Activities.................................................... 4
Competition......................................................... 4
Certain Factors Affecting the Company's Operations.................. 5
Forward Looking Information; Certain Cautionary Statements...........7
Executive Officers of the Company................................... 8
Employees............................................................9
Item 3. Legal Proceedings....................................................9
Item 4. Submission of Matters to a Vote of Security Holders..................9
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters.......................................10
Item 6. Selected Consolidated Financial Data................................11
Items 7.
and 7a. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Certain Consolidated Financial and Operating Data...............13
Results of Operations...........................................16
Liquidity and Financial Condition of the Company................19
Market Risk for Financial Instruments...........................20
Year 2000 Issue.................................................20
Impact of Inflation.............................................21
Accounting Standards Not Yet Adopted by the Company.............22
Item 8. Financial Statements and Supplementary Data.........................22
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure............................22
TABLE OF CONTENTS (continued)
PAGE
PART III
Item 10. Directors and Executive Officers of the Registrant..................23
Item 11. Executive Compensation..............................................23
Item 12. Security Ownership of Certain Beneficial Owners
and Management....................................................23
Item 13. Certain Relationships and Related Transactions......................23
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K...............................................24
PART I
Items 1. and 2. Business and Properties
THE COMPANY
Del Webb Corporation develops residential communities ranging from
smaller-scale, non-amenitized communities within its conventional homebuilding
operations to large-scale, master-planned communities with extensive amenities.
The Company currently conducts its operations in Arizona, California, Florida,
Illinois, Nevada, South Carolina and Texas.
The Company's primary activities involve the development of large-scale,
master-planned communities with extensive amenities for active adults age 55 and
over. The Company is one of the nation's leading developers of age-qualified
active adult communities. It has extensive experience in the active adult
community business, having built and sold more than 60,000 homes at ten Sun City
communities over the past 38 years. 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. Within its
communities, the Company is usually the exclusive developer of homes.
The Company was incorporated in 1946 in Arizona and reincorporated in 1994 in
Delaware. The Company's principal executive offices are located at 6001 North
24th Street, Phoenix, Arizona 85016 and its telephone number is (602) 808-8000.
The Company conducts substantially all of its activities through subsidiaries
and, as used in this Annual Report, the term the "Company" includes Del Webb
Corporation and its subsidiaries unless the context indicates otherwise.
Statements in this Annual Report as to acreage, mileage, number of home sites,
square feet, employees and shareholders are approximations.
COMMUNITIES
The following table shows, at June 30, 1998, certain information concerning the
operating and pre-operating communities at which the Company has planned home
sites, substantially all of which are controlled by the Company.
Remaining Home Sites(1)
Total Home -------------------------
First Planned Closings Under
Home Total Home Through Option
Closing Acres Sites 6/30/98 Planned Owned or Other
---------------------------------------------------------------
Operating Communities:
Sun Cities Phoenix 1978 10,859 26,139 17,559 8,580 8,580 --
Sun Cities Las Vegas 1989 3,064 10,290 8,359 1,931 1,931 --
Sun City Palm Desert 1992 1,225 3,375 1,688 1,687 1,687 --
Sun City Roseville 1995 1,200 3,110 2,311 799 799 --
Sun City Hilton Head 1995 5,600 8,500 1,062 7,438 3,147 4,291
Sun City Georgetown 1996 5,636 10,500 1,299 9,201 8,514 687
Florida communities 1996 1,600 2,922 466 2,456 2,456 --
Other communities 1998 711 1,701 106 1,595 1,420 175
Coventry Homes(2) 1991 N/A 9,750 5,944 3,806 3,806 --
--------------------------------------------
Total Operating Communities 76,287 38,794 37,493 32,340 5,153
--------------------------------------------
Pre-Operating Communities:
Sun City Lincoln Hills N/A 2,300 5,600 -- 5,600 1,510 4,090
Anthem Las Vegas(3) N/A 4,700 11,900 -- 11,900 5,100 6,800
Anthem Phoenix N/A 5,600 14,500 -- 14,500 14,500 --
Sun City at Huntley N/A 1,800 5,000 -- 5,000 5,000 --
--------------------------------------------
Total Future Communities 37,000 -- 37,000 26,110 10,890
--------------------------------------------
Total 113,287 38,794 74,493 58,450 16,043
============================================
1
(1) Material additional regulatory approvals are required to build on many of
these home sites.
(2) The Company's conventional subdivision homebuilding operations.
(3) The Company owns 2,500 of the 4,700 acres for Anthem Las Vegas and is
working toward completion of a land exchange with the owner of the
remaining acres, the Bureau of Land Management, for the remaining land for
this community.
Operating Master-Planned Communities
------------------------------------
The Sun Cities Phoenix include Sun City West and Sun City Grand. These
communities are located 25 miles northwest of downtown Phoenix, Arizona. The
build-out of Sun City West has been coordinated with the development of Sun City
Grand, where home closings began in February 1997.
The Sun Cities Las Vegas include Sun City Summerlin and Sun City MacDonald
Ranch. Sun City Summerlin is located eight miles northwest of downtown Las
Vegas, Nevada. Sun City MacDonald Ranch is located in Henderson, Nevada, near
Las Vegas.
Sun City Palm Desert is located in the Coachella Valley 20 miles east of Palm
Springs, California, and 130 miles east of downtown Los Angeles. Information in
the above table is for phase one and part of phase two of that community. The
Company also owns 400 adjacent acres for the balance of the second phase of
development at Sun City Palm Desert. If developed, the balance of phase two is
currently planned for 1,300 homes. Development of future phases at the Company's
communities is dependent on, among other factors, the state of the economy and
prospects for the community in question at the time the current phases near
completion.
Sun City Roseville is located 20 miles northeast of downtown Sacramento,
California.
Sun City Hilton Head is located inland 13 miles from Hilton Head Island, South
Carolina.
Sun City Georgetown is located 30 miles north of downtown Austin, Texas.
The Florida communities consist of two communities -- the Spruce Creek
communities -- located 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 three smaller-scale communities in Arizona and
California at which net new order activity and home closings began in fiscal
1998. Two of these communities are age-qualified and one is not.
Future and Pre-Operating Master-Planned Communities
---------------------------------------------------
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.
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
experience in developing communities.
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.
2
Set forth below is selected information concerning several pre-operating
communities which the Company is currently developing.
Sun City Lincoln Hills
----------------------
Sun City Lincoln Hills is located close to and is planned as the successor to
Sun City Roseville. The Company broke ground at this community in April 1998 and
anticipates beginning sales activities in the third quarter of fiscal 1999 and
the first home closings in the first quarter of fiscal 2000.
Anthem Las Vegas
----------------
The Company's Anthem Las Vegas project will include an active adult community,
Sun City Anthem, planned as the successor to Sun City Summerlin. Sun City Anthem
is planned for 9,000 homes to be located on 3,400 acres. The Company broke
ground at this community in November 1997 and began sales activities in July
1998. The first home closings are anticipated in the second quarter of fiscal
1999.
In addition to Sun City Anthem, Anthem Las Vegas is also planned for a
non-age-qualified golf community, Anthem Country Club. The company broke ground
at Anthem Country Club, which is planned for 1,500 homes on 950 acres, in
November 1997 and began sales activities in July 1998. Anthem Las Vegas will
also have a conventional homebuilding component, Coventry Anthem, currently
planned for 1,400 homes on 300 acres. The first home closings at both Anthem
Country Club and Coventry Anthem are anticipated in the third quarter of fiscal
1999.
The entire Anthem Las Vegas project is planned for a total of 4,700 acres. The
2,500 acres owned by the Company for Anthem Las Vegas were acquired through a
land exchange with the Bureau of Land Management ("BLM"). The Company continues
to work toward completion of an exchange with the BLM for the remaining acres,
substantially all of which will be used for Sun City Anthem.
Anthem Phoenix
--------------
Anthem Phoenix (formerly the Villages at Desert Hills), located near Phoenix, is
planned to include a non-agequalified country club community and a conventional
homebuilding component. The Company began offsite development in November 1997
and anticipates beginning sales activities in fiscal 1999 and home closings in
fiscal 2000.
Sun City at Huntley
-------------------
Sun City at Huntley is located in Huntley, Illinois (near Chicago). The Company
broke ground at this community in April 1998. Sales activities began in August
1998 and the first home closings are anticipated in the fourth quarter of fiscal
1999.
Conventional Subdivision Communities
------------------------------------
The Company began its conventional subdivision homebuilding operations
(conducted under the name "Coventry Homes") in the Phoenix area in 1991 and
expanded these operations to Tucson in 1994, Las Vegas and southern California
in 1995 and north-central Arizona in 1996. At June 30, 1998 the Company had a
backlog of home sales orders at 24 communities -- 12 in the Phoenix area, 4 in
the Tucson area, 7 in the Las Vegas area and 1 in north-central Arizona. The
Company completed its conventional homebuilding operations in southern
California in fiscal 1998.
In order to capitalize on its market knowledge and organizational structure, the
Company's conventional homebuilding activities are primarily conducted in
metropolitan or market areas in which the Company is developing an active adult
community. For the fiscal year ended June 30, 1998 conventional homebuilding
operations generated 21 percent of the Company's homebuilding revenues. The
Company currently expects that active adult community development will continue
to be its primary business activity.
3
PRODUCT DESIGN
The Company designs homes to suit its market and endeavors to respect popular
home design characteristics in the particular geographic market involved. Home
designs are periodically reviewed and refined or changed in response to customer
feedback 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/exterior upgrades and options to allow home buyers
the ability 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 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 sell vacant lots to
others for residential construction purposes. 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, each of
which is 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. Homes are
sold through sales contracts, some of which allow customers to purchase homes
for delivery up to one year or more in the future. The sales contracts generally
require an initial deposit and an additional deposit prior to commencement of
construction. The Company provides to all home buyers standardized warranties
subject to specified limitations.
While more than one factor may contribute to a given home sale, the Company's
experience indicates that a substantial portion of the home sales at its active
adult communities are attributable 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 an active adult 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.
The Company's information indicates that most home buyers at its active adult
communities generally visit the community in which they purchase on more than
one occasion before buying. This may affect the success of the sales effort at
those 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, local and national print advertising, direct mailings and
telemarketing.
The Company offers mortgage financing for the purchasers of homes at its
communities. The Company sells the mortgages it generates to third parties.
COMPETITION
All of the Company's 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.
4
With the exception of the recently acquired Spruce Creek Communities near Ocala,
Florida, the Company believes that 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 currently generating revenues. For the Company's
active adult communities, there are varying degrees of direct and increasing
competition from businesses engaged exclusively or primarily in the sale of
homes to buyers age 55 and older and 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 may be significant additional future
competition in active adult community development, including competition from
national homebuilders and conventional community developers.
The Company believes the major competitive factors in home purchases include
location, home quality, price, value, design, mortgage financing terms, builder
reputation and (for its lage-scale, master-planned communities) lifestyle,
recreational facilities and other amenities.
CERTAIN FACTORS AFFECTING THE COMPANY'S OPERATIONS
Set forth below is a brief description of certain matters that may affect the
Company.
FINANCING AND LEVERAGE. As a result of the company's May 1998 public offering of
$200 million in principal amount of 9 3/8% Senior Subordinated Debentures due
2009 and anticipated future borrowings under the Company's senior unsecured
revolving credit facility (the "Credit Facility"), the Company expects to be
more highly leveraged than it has been in recent years. 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. If the Company is at any time unable to service
its debt, refinancing or obtaining additional financing may be required and may
not be available or available on terms acceptable to the Company.
Real estate development is dependent on the availability and cost of financing.
In periods of significant growth, the Company will require significant
additional capital resources, whether from issuances of equity or by incurring
additional indebtedness. The availability and cost of debt financing is
dependent on governmental policies and other factors outside the control of the
Company.
The Credit Facility restricts, and the indentures for the Company's
publicly-held debt contain provisions that may restrict, the indebtedness the
Company may incur. If the Company cannot at any time obtain sufficient capital
resources to fund its development and expansion expenditures, its projects may
be delayed, resulting in cost increases, adverse effects on the Company's
results of operations and possible material adverse effects on the Company. No
assurance can be given as to the terms, availability or cost of any future
financing the Company may need.
FUTURE COMMUNITIES AND NEW GEOGRAPHIC MARKETS. The Company's communities will be
built out over time. Therefore, the medium- and long-term future of the Company
will be dependent on the Company's ability to develop and market future
communities successfully. Acquiring land and committing the financial and
managerial resources to develop a large-scale community on that land involve
significant risks. Before these communities generate any revenues, they require
material expenditures for, among other things, acquiring large tracts of land,
obtaining development approvals and constructing project infrastructure (such as
roads and utilities), large recreation centers, golf courses, model homes and
sales facilities. It generally takes several years or more for these communities
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 experience or develops a
different size or style of community, including acquiring the necessary
construction materials and labor in sufficient amounts and on acceptable terms,
adapting the Company's construction methods to different geographies and
climates and reaching acceptable sales levels at such communities. Among other
things, the Company believes that a significant portion of the home sales at its
large-scale active adult communities is attributable to referrals from, or sales
to, residents of those communities. The extent of such referrals or sales at new
communities, including communities developed in other areas of the country, may
be less than the Company has enjoyed at the large-scale active adult 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
significant experience.
5
The Company is in the early stages of developing an active adult community near
Chicago, Illinois, the Company's first four-season active adult community, and
commenced operations near Ocala, Florida in January 1998 through the acquisition
of a local active adult community developer.
GOVERNMENTAL REGULATION AND ENVIRONMENTAL CONSIDERATIONS. The Company's business
is subject to extensive federal, state and local regulatory requirements,
including with respect to development activities and land exchanges, the broad
discretion that governmental agencies have in administering those requirements
and "no growth" or "slow growth" political sentiments, which have been
increasing in recent years, all of which can prevent, delay, make uneconomic or
significantly increase the cost of its developments. Environmental concerns and
related governmental requirements have affected and will continue to affect all
of the Company's community development operations.
If the land exchange for Anthem Las Vegas is not completed, that project would
have to be reduced in scope and reconfigured, which could affect the timing and
potential profitability of the project, and the Company may have to dispose of
property it acquired for the exchange at less than its purchase price.
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 throughout the development process, and no
assurance can be given as to the receipt (or timing of receipt) of these
approvals or permits. In addition, third parties can file lawsuits challenging
approvals or permits received, which could cause substantial uncertainties and
material delays for the project and, if successful, could result in approvals or
permits being voided.
The occurrence of any of the above factors could have a material adverse effect
on the Company.
GEOGRAPHIC CONCENTRATION. The Company's primary business operations are
particularly concentrated (in terms of both invested capital and profitability)
in the Phoenix and Las Vegas metropolitan areas. Its entire operations are
comprised of a limited number of communities in seven states. The Company's
geographic concentration and limited number of projects may create increased
vulnerability to regional economic downturns or other adverse project-specific
matters.
A significant number of purchasers at the Company's active adult communities in
Arizona, Nevada and southern California are from southern California. Those
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.
CYCLICAL NATURE OF REAL ESTATE OPERATIONS AND OTHER CONDITIONS GENERALLY. All of
the Company's communities are subject to real estate market conditions (both
where its communities are located and in areas where its potential customers
reside), the cyclical nature of real estate operations, general national
economic conditions and changing demographic conditions.
The Company's communities are long-term projects. Sales activity at the
Company's communities 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 it does during later periods over the life of the community. Revenues and
earnings of the Company will also be affected by period-to-period fluctuations
in the mix of product and home closings among the Company's communities and
conventional homebuilding operations and by sales of commercial land and
facilities at the Company's communities.
The Company's real estate operations also depend upon the availability and cost
of mortgage financing. An increase in interest rates, which may result from
governmental policies and other factors outside the control of the Company, may
adversely affect the buying decisions of potential home buyers and their ability
to sell their existing homes.
6
CONSTRUCTION LABOR AND MATERIALS COSTS. The Company has from time to time
experienced shortages of materials or qualified tradespeople or volatile
increases in the cost of certain materials (particularly increases in the price
of lumber and framing, which are significant components of home construction
costs), resulting in longer than normal construction periods and increased costs
not reflected in the prices of homes for which home sale contracts had been
entered into up to one year in advance of scheduled closing. 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 result in construction delays, increased costs and loss of some home
sale contracts.
NATURAL RISKS. Some of the Company's communities are subject to natural risks
including earthquakes, floods, tornados, hurricanes and significant rainfall.
Some of these conditions have had a significant impact on the Company's
operations in the past. Such natural risks could have a material adverse impact
on the development of and results of operations for the community affected and
the Company in the future.
YEAR 2000 ISSUE. For a discussion of the possible effects on the Company of the
Year 2000 issue, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Year 2000 Issue."
FORWARD LOOKING INFORMATION; CERTAIN CAUTIONARY STATEMENTS
Certain statements contained in this Annual Report that are not historical
results are forward looking statements. These forward looking statements involve
risks and uncertainties including but not limited to those referred to above.
Actual results may differ materially from those projected or implied. Further,
certain forward looking statements are based upon assumptions of future events,
which may not prove to be accurate.
7
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below are the names and ages of all executive officers of the Company
and the offices held with the Company at July 31, 1998.
Years
Years as an Employed
Executive by the
Name Age Position Officer Company
- -----------------------------------------------------------------------------------------------------
P. J. Dion 53 Chairman of the Board and 16 16
Chief Executive Officer
L. C. Hanneman, Jr. 51 President and Chief Operating Officer 9 26
R. C. Jones 53 Senior Vice President and 6 6
General Counsel
A. L. Mariucci 41 Senior Vice President 12 14
J. A. Spencer 49 Senior Vice President and 13 19
Chief Financial Officer
D. V. Mickus 52 Vice President, Treasurer and Secretary 12 15
D. E. Rau 41 Vice President and Controller 12 13
Mr. Dion has served as Chairman of the Board and Chief Executive Officer since
November 1987.
Mr. Hanneman has served as President and Chief Operating Officer since May 1998.
Prior to that time he served as Executive Vice President, overseeing active
adult community operations, from May 1996 to May 1998. Prior to that time he
served as Senior Vice President from January 1994 to May 1996 and as Vice
President from January 1989 to January 1994. From August 1987 to May 1996 he
served as General Manager of Sun Cities Las Vegas.
Mr. Jones as served as Senior Vice President and General Counsel since May 1998.
Prior to that time he served as Vice President and General Counsel from January
1992 to May 1998.
Ms. Mariucci has served as Senior Vice President since May 1996. Prior to that
time she served as a Vice President from June 1986 (when she began serving as
Vice President, Corporate Planning and Development) to May 1996. She has had
responsibility for overseeing the Company's non-age qualified communites and
operations since January 1998. Prior to that time she served as General Manager
of Terravita from December 1992 to January 1998 and General Manager of Anthem
Phoenix from July 1996 to January 1998.
Mr. Spencer has served as Chief Financial Officer since April 1993. Since
February 1991 he has served as Senior Vice President.
Mr. Mickus has served as Vice President and Treasurer since November 1985 and as
Secretary since June 1991.
Mr. Rau has served as Vice President and Controller since February 1991.
8
EMPLOYEES
At June 30, 1998 the Company had 3,200 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, it is the opinion of management that 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.
9
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, 1998.
Sales Price
- --------------------------------------------------------------------------------
Fiscal Year 1998 Fiscal Year 1997
- --------------------------------------------------------------------------------
Quarter Ended High Low High Low
- --------------------------------------------------------------------------------
September 30 21 3/8 16 3/8 19 3/4 16 1/4
December 31 27 3/8 17 7/8 17 3/4 15 1/4
March 31 34 7/8 24 5/16 17 7/8 15 1/4
June 30 30 1/2 23 17 14 3/4
- --------------------------------------------------------------------------------
As of July 31, 1998 there were 2,876 shareholders of record of the Company's
common stock.
The Company has paid regular quarterly dividends of $.05 Per share for each
quarter in the last five fiscal years. The Company has announced that after the
$.05 Per share dividend to be paid in September 1998, it has no current plans to
make future dividend payments and that it may utilize the capital that would
otherwise be paid as cash dividends to make opportunistic purchases of its
common stock. The amount and timing of any future dividends is subject to the
discretion of the Board of Directors.
The Company is also party to a loan agreement and various indentures that
contain covenants restricting the Company's ability to pay dividends and acquire
its common stock. Under the most restrictive of these covenants, at June 30,
1998 $34.6 Million of the Company's retained earnings were available for payment
of cash dividends or for the acquisition by the Company of its common stock.
10
Item 6. Selected Consolidated Financial Data
(Not covered by report of independent auditors)
The following tables set forth selected consolidated financial data of the
Company as of and for each of the five fiscal years ended June 30, 1998. They
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,
- ----------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
Statement of operations information:
Revenues:
Home sales - communities $ 879,825 $ 906,523 $ 794,671 $620,012 $405,462
Home sales - conventional homebuilding 238,559 237,566 217,158 144,469 79,992
Land and facility sales and other 59,383 42,173 38,904 38,638 24,607
- ----------------------------------------------------------------------------------------------------------
Total revenues $1,177,767 $1,186,262 $1,050,733 $803,119 $510,061
==========================================================================================================
Earnings (loss):
Before extraordinary item (1) $ 42,533 $ 39,686 $ (7,751) $ 28,491 $ 17,021
Total (2) 42,533 38,401 (7,751) 28,491 17,021
==========================================================================================================
Net earnings (loss) per share:
Before extraordinary item (1) $ 2.39 $ 2.26 $ (.44) $ 1.92 $ 1.15
Total (2) 2.39 2.18 (.44) 1.92 1.15
==========================================================================================================
Net earnings (loss) per share-assuming dilution:
Before extraordinary item (1) $ 2.30 $ 2.22 $ (.44) $ 1.87 $ 1.13
Total (2) 2.30 2.15 (.44) 1.87 1.13
==========================================================================================================
Cash dividends per share $ .20 $ .20 $ .20 $ .20 $ .20
==========================================================================================================
(1) 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 in the
amount of $65.0 million pre-tax ($42.3 million after tax) related to the
valuation of its Sun City Palm Desert active adult community. Exclusive of
the non-cash loss, the Company's net earnings for fiscal 1996 were $34.5
million ($2.01 per share or $1.96 per share - assuming dilution).
(2) Earnings for fiscal 1997 include a $1.3 million extraordinary loss from the
early extinguishment of debt.
11
Item 6. Selected Consolidated Financial Data (Continued)
(Not covered by report of independent auditors)
Dollars in Thousands
Year Ended June 30,
- ---------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
Balance sheet information at year-end:
Total assets $1,310,462 $1,086,662 $1,024,795 $ 925,050 $ 758,424
Notes payable and senior debt 167,608 222,881 320,063 284,585 189,657
Subordinated debt 536,330 340,187 194,614 206,673 206,019
---------- ---------- ---------- ---------- ----------
Total notes payable, senior and
subordinated debt 703,938 563,068 514,677 491,258 395,676
Shareholders' equity $ 345,767 $ 299,830 $ 264,776 $ 229,342 $ 201,324
Total notes payable, senior and
subordinated debt ("Debt") divided by
Debt and shareholders' equity 67.1% 65.3% 66.0% 68.2% 66.3%
=========================================================================================================
12
Items 7. and 7a. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion of results of operations and financial condition 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
- -------------------------------------------------
Set forth below is certain consolidated financial and operating data of the
Company as of and for each of the three fiscal years ended June 30, 1998.
Year Ended Change Change
June 30, 1998 vs 1997 1997 vs 1996
- ------------------------------------------------------------------ ---------------- -----------------
1998 1997 1996 Amount Percent Amount Percent
- ------------------------------------------------------------------ ---------------- -----------------
OPERATING DATA:
Number of net new orders(1):
Sun Cities Phoenix(2) 1,245 1,271 963 (26) (2.0%) 308 32.0%
Sun Cities Las Vegas(3) 1,179 1,091 1,241 88 8.1% (150) (12.1%)
Sun City Palm Desert 443 262 216 181 69.1% 46 21.3%
Sun City Roseville 739 553 537 186 33.6% 16 3.0%
Sun City Hilton Head 396 337 349 59 17.5% (12) (3.4%)
Sun City Georgetown 437 440 491 (3) (0.7%) (51) (10.4%)
Florida communities(4) 240 N/A N/A 240 N/A N/A N/A
Other communities(5) 270 N/A N/A 270 N/A N/A N/A
Coventry Homes 1,334 1,179 1,249 155 13.1% (70) (5.6%)
- ---------------------------------------------------------------- -------------- ----------------
Total current communities 6,283 5,133 5,046 1,150 22.4% 87 1.7%
Completed operations:
Sun City Tucson(6) N/A 58 160 (58) (100.0%) (102) (63.8%)
Terravita(7) N/A 226 431 (226) (100.0%) (205) (47.6%)
Coventry Homes-Southern California(8) N/A 180 213 (180) (100.0%) (33) (15.5%)
- ---------------------------------------------------------------- -------------- ----------------
Total 6,283 5,597 5,850 686 12.3% (253) (4.3%)
================================================================ ============== ================
Number of home closings:
Sun Cities Phoenix(2) 1,268 1,132 912 136 12.0% 220 24.1%
Sun Cities Las Vegas(3) 1,164 1,200 1,001 (36) (3.0%) 199 19.9%
Sun City Palm Desert 304 248 251 56 22.6% (3) (1.2%)
Sun City Roseville 637 650 731 (13) (2.0%) (81) (11.1%)
Sun City Hilton Head 386 371 305 15 4.0% 66 21.6%
Sun City Georgetown 448 616 235 (168) (27.3%) 381 162.1%
Florida communities(4) 170 N/A N/A 170 N/A N/A N/A
Other communities(5) 106 N/A N/A 106 N/A N/A N/A
Coventry Homes 1,285 1,293 1,204 (8) (0.6%) 89 7.4%
- ---------------------------------------------------------------- -------------- ----------------
Total current communities 5,768 5,510 4,639 258 4.7% 871 18.8%
Completed operations:
Sun City Tucson(6) N/A 103 264 (103) (100.0%) (161) (61.0%)
Terravita(7) 120 410 425 (290) (70.7%) (15) (3.5%)
Coventry Homes-Southern California(8) 20 183 203 (163) (89.1%) (20) (9.9%)
- ---------------------------------------------------------------- -------------- ----------------
Total 5,908 6,206 5,531 (298) (4.8%) 675 12.2%
================================================================ ============== ================
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, 1998 vs 1997 1997 vs 1996
- ------------------------------------------------------------------------- --------------- ----------------
1998 1997 1996 Amount Percent Amount Percent
- ------------------------------------------------------------------------- --------------- ----------------
BACKLOG DATA:
Homes under contract at June 30:
Sun Cities Phoenix(2) 669 692 553 (23) (3.3%) 139 25.1%
Sun Cities Las Vegas(3) 548 533 642 15 2.8% (109) (17.0%)
Sun City Palm Desert 265 126 112 139 110.3% 14 12.5%
Sun City Roseville 382 280 377 102 36.4% (97) (25.7%)
Sun City Hilton Head 169 159 193 10 6.3% (34) (17.6%)
Sun City Georgetown 191 202 378 (11) (5.4%) (176) (46.6%)
Florida communities(4) 275 N/A N/A 275 N/A N/A N/A
Other communities(5) 164 N/A N/A 164 N/A N/A N/A
Coventry Homes 507 458 572 49 10.7% (114) (19.9%)
- ------------------------------------------------------------------------- --------------- ----------------
Total current communities 3,170 2,450 2,827 720 29.4% (377) (13.3%)
Completed operations:
Sun City Tucson(6) N/A N/A 45 N/A N/A (45) (100.0%)
Terravita(7) N/A 120 304 (120) (100.0%) (184) (60.5%)
Coventry Homes-Southern California(8) N/A 20 23 (20) (100.0%) (3) (13.0%)
- ------------------------------------------------------------------------- --------------- ----------------
Total(9) 3,170 2,590 3,199 580 22.4% (609) (19.0%)
========================================================================= =============== ================
Aggregate contract sales amount
(dollars in millions) $ 642 $ 514 $ 617 $ 128 24.9% $ (103) (16.7%)
Aggregate contract sales amount
per home (dollars in thousands) $ 203 $ 198 $ 193 $ 5 2.5% $ 5 2.6%
========================================================================= =============== ================
AVERAGE REVENUE PER HOME
CLOSING:
Sun Cities Phoenix(2) $157,400 $158,900 $160,300 $(1,500) (0.9%) $(1,400) (0.9%)
Sun Cities Las Vegas(3) 202,400 182,900 171,000 19,500 10.7% 11,900 7.0%
Sun City Palm Desert 234,000 221,100 224,100 12,900 5.8% (3,000) (1.3%)
Sun City Roseville 219,200 215,800 217,800 3,400 1.6% (2,000) (0.9%)
Sun City Hilton Head 173,100 168,100 159,200 5,000 3.0% 8,900 5.6%
Sun City Georgetown 201,000 183,100 181,500 17,900 9.8% 1,600 0.9%
Florida communities(4) 97,900 N/A N/A N/A N/A N/A N/A
Other communities(5) 218,200 N/A N/A N/A N/A N/A N/A
Coventry Homes 182,700 153,700 139,500 29,000 18.9% (14,200) (10.2%)
Weighted average current communities 186,800 175,700 170,700 11,100 6.3% 5,000 2.9%
Completed operations:
Sun City Tucson(6) N/A 167,000 170,600 N/A N/A (3,600) (2.1%)
Terravita(7) 310,200 292,100 295,600 18,100 6.2% (3,500) (1.2%)
Coventry Homes-Southern California(8) 186,600 211,900 242,400 (25,300) (11.9%) (30,500) (12.6%)
Weighted average $189,300 $184,400 $182,900 $ 4,900 2.7% $ 1,500 0.8%
========================================================================= =============== ================
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)
- -------------------------------------------------------------
Year Ended Change Change
June 30, 1998 vs 1997 1997 vs 1996
- ----------------------------------------------------------------- --------------- ---------------
1998 1997 1996 Amount Percent Amount Percent
- ----------------------------------------------------------------- --------------- ---------------
OPERATING STATISTICS:
Costs and expenses as a percentage of
revenues:
Home construction, land and other 76.3% 77.0% 76.9% (0.7%) (0.9%) 0.1% 0.1%
Interest 3.9% 4.2% 4.0% (0.3%) (7.1%) 0.2% 5.0%
Selling, general and administrative 14.1% 13.6% 14.0% 0.5% 3.7% (0.4%) (2.9%)
Ratio of home closings to homes under
contract in backlog at beginning
of year 228.1% 194.0% 192.0% 34.1% 17.6% 2.0% 1.0%
================================================================== ============= ==============
(1) Net of cancellations. The Company recognizes revenue at close of escrow.
(2) Includes Sun City West and Sun City Grand. The Company began taking new
home sales orders at Sun City Grand in October 1996. Home closings began at
Sun City Grand in February 1997.
(3) Includes Sun City Summerlin and Sun City Macdonald Ranch.
(4) In january 1998 the Company acquired certain assets and assumed certain
liabilities at two operating age-qualified communities in central Florida.
Included in this acquisition was a backlog of 205 homes at these two
communities at the date of acquisition.
(5) Represents three smaller-scale communities in Arizona and California at
which net new order activity began in september, October and November 1997.
Home closings began at these communities in March, April and May 1998.
(6) The Company completed net new order activity at Sun City Tucson in February
1997. Home closings at Sun City Tucson were completed in April 1997.
(7) The Company completed net new order activity at terravita in April 1997.
Home closings at Terravita were completed in may 1998.
(8) The Company completed net new order activity for its Coventry Homes
southern California operations in June 1997. Home closings for these
operations were completed in August 1997.
(9) A majority of the backlog at June 30, 1998 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
or other factors. Also, as a practical matter, in most cases the Company's
ability to obtain damages for breach of contract by a potential home buyer
is limited to retaining all or a portion of the deposit received. In the
years ended June 30, 1998, 1997 and 1996, cancellations of home sales
orders as a percentage of new home sales orders written during the year
were 13.9 Percent, 17.1 Percent and 17.2 Percent, respectively. See
"Business and Properties -- Forward Looking Information; Certain Cautionary
Statements."
15
Items 7. and 7a. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
RESULTS OF OPERATIONS
- ---------------------
REVENUES. Revenues decreased slightly to $1.18 billion for the fiscal year ended
June 30, 1998 from $1.19 billion for the fiscal year ended June 30, 1997. This
decrease was due to the decreased closings at Terravita, Coventry Homes'
southern California operations and Sun City Tucson, reflecting the completion of
those operations. Largely offsetting the effect of these decreased closings were
revenues from the commencement in fiscal 1998 of community operations in Florida
and at three smaller-scale communities in Arizona and California, an increase in
the average revenue per home closing and revenues from the sale of certain
facilities (a shopping center and golf course) in connection with the completion
of operations at Terravita.
Revenues increased to $1.19 billion for fiscal 1997 from $1.05 billion for
fiscal 1996. Increased home closings at Sun City Georgetown and Sun City Hilton
Head (two communities at which the Company had home closings for only part of
fiscal 1996) accounted for $69.2 million and $10.5 million, respectively, of the
increase. Increased home closings at the Sun Cities Las Vegas (where the Company
had home closings at Sun City MacDonald Ranch for only part of fiscal 1996), the
Sun Cities Phoenix (where home closings did not begin at Sun City Grand until
February 1997) and Coventry Homes (due mainly to the expansion of operations in
the Las Vegas area) accounted for $34.0 million, $35.3 million and $10.6
million, respectively, of the increase in revenues. Decreased home closings at
Sun City Roseville (reflecting the decrease in net new orders experienced at
that community in the first quarter of fiscal 1997) and Sun City Tucson
(reflecting the completion of that community) resulted in decreased revenues of
$17.6 million and $27.5 million, respectively.
An increase in the average revenue per home closing resulted in a $23.0 million
increase in revenues from fiscal 1996 to fiscal 1997. This increase in average
revenue per home closing was primarily due to changes in mix of product and home
closings among the Company's communities and conventional homebuilding
operations and to increases in lot premiums and optional upgrades in homes at
certain communities.
HOME CONSTRUCTION, LAND AND OTHER COSTS. The decrease in home construction, land
and other costs to $898.8 million for fiscal 1998 compared to $913.9 million for
fiscal 1997 was primarily due to the decrease in home closings. These costs as a
percentage of revenues decreased to 76.3 percent for fiscal 1998 compared to
77.0 percent for fiscal 1997, with the decrease primarily due to improved
margins on land and facility sales. The improved margins on land and facility
sales were largely due to the declining volume of lower-margin land sales at a
substantially complete residential land development project in Phoenix. A higher
profit margin on home closings was also realized as a result of a change in mix
of product and home closings among the Company's conventional homebuilding
operations.
The increase in home construction, land and other costs to $913.9 million for
fiscal 1997 compared to $808.0 million for fiscal 1996 was due to the increase
in home closings. As a percentage of revenues, these costs were 77.0 percent for
fiscal 1997 and 76.9 percent for fiscal 1996.
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 increased to 14.1 percent for
fiscal 1998 compared to 13.6 percent for the 1997 period. This increase was due
primarily to increased corporate overhead to investigate new market
opportunities and support an increased number of pre-operating communities.
As a percentage of revenues, selling, general and administrative expenses
decreased to 13.6 percent for fiscal 1997 compared to 14.0 percent for fiscal
1996. This decrease resulted from the spreading of corporate overhead over
greater revenues.
INTEREST. As a percentage of revenues, amortization of capitalized interest was
3.9 percent for fiscal 1998 compared to 4.2 percent for fiscal 1997. This
decrease was primarily due to an increase in pre-operating communities, at which
interest is being capitalized on qualified assets but at which interest
amortization on home closings has not yet begun.
16
Items 7. and 7a. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
As a percentage of revenues, amortization of capitalized interest was 4.2
percent for fiscal 1997 compared to 4.0 percent for fiscal 1996. The increase
was primarily due to the fiscal 1996 adoption of 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, which, after the
writedown of certain assets, resulted in a new allocation of capitalized
interest to remaining assets. This resulted in an increase in amortization of
capitalized interest as a percentage of revenues. See "Loss From Impairment of
Southern California Real Estate Inventories."
LOSS FROM IMPAIRMENT OF SOUTHERN CALIFORNIA REAL ESTATE INVENTORIES. In
connection with its adoption of SFAS No. 121 in fiscal 1996, the Company
incurred a non-cash loss from impairment of southern California real estate
inventories in the amount of $65.0 million pre-tax ($42.3 million after tax)
related to the valuation of its Sun City Palm Desert active adult community.
Exclusive of the non-cash loss, the Company's net earnings for fiscal 1996 were
$34.5 million ($2.01 per share or $1.96 per share - assuming dilution).
In the first six months of fiscal 1996, net new orders at Sun City Palm Desert
were substantially below both the comparable period of the prior fiscal year and
the Company's expectations. Although the Company was encouraged by net new
orders significantly greater in the first 45 days of the third quarter of fiscal
1996 than in the comparable period in the prior fiscal year, a lower than
anticipated level of net new orders was expected in the remainder of fiscal 1996
and net new orders for all of fiscal 1996 were anticipated to be lower than in
prior fiscal years. Additionally, a national home builder was developing an
active adult community near Sun City Palm Desert which was expected to cause
additional competitive pressures at that community. Based on these and other
factors, the Company reduced its estimate with respect to net new orders and
closings in the fiscal years ending June 30,1997 and beyond to below the levels
achieved in the three fiscal years ended June 30, 1995. This resulted in
expected future net cash flows (undiscounted and without interest charges) at
Sun City Palm Desert being less than the book value of the asset. As required by
SFAS No. 121, the Company therefore recorded in fiscal 1996 a non-cash loss from
impairment of southern California real estate inventories to reflect Sun City
Palm Desert at its estimated fair value. Fair value was estimated based upon an
evaluation of comparable market prices and discounted expected future cash
flows. Although the Company has experienced improvement in net new orders and
home closings in fiscal 1998, restoration of previously recognized impairment
losses on assets to be held and used is prohibited by SFAS No. 121.
The Company owns additional land for a second phase of development at Sun City
Palm Desert. The Company has recently decided to move forward with development
of a portion of this second phase. Development of subsequent phases of
large-scale real estate projects is assessed in light of conditions existing
when construction of the phase is to begin. Any decision to develop the
remainder of the second phase at this community will depend on the state of the
economy and prospects for this community at the time the current phases are
nearing completion.
INCOME TAXES. The increase in income taxes to $23.9 million in fiscal 1998
compared to $22.3 million in fiscal 1997 was due to the increase in earnings
before income taxes. The effective tax rate in both fiscal years was 36 percent.
The increase in income taxes to a $22.3 million expense in fiscal 1997 compared
to a $4.2 million benefit for fiscal 1996 was due to the change in earnings
(loss) before income taxes and extraordinary item. The effective tax rate also
increased to 36 percent from 35 percent.
EXTRAORDINARY ITEM. In connection with the early redemption of all of the
Company's $100 million of outstanding 107/8% Senior Notes at par on March 31,
1997, an extraordinary loss of $1.3 million was recognized in fiscal 1997.
NET EARNINGS (LOSS). The increase in net earnings to $42.5 million for fiscal
1998 from $38.4 million for fiscal 1997 was primarily attributable to the
increase in earnings from land and facility sales. Largely due to the sale of a
golf course and shopping center at Terravita, earnings before income taxes
attributable to land and facility sales increased to $15.0 million for fiscal
1998 compared to $5.2 million for fiscal 1997. Land and facility sales are a
normal part of the Company's operations but occur irregularly and vary
significantly in magnitude, complicating period-to-period comparisons.
17
Items 7. and 7a. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
The Company had net earnings of $38.4 million in fiscal 1997 compared to a net
loss of $7.8 million in fiscal 1996, primarily due to the non-cash loss with
respect to southern California real estate inventories incurred by the Company
in fiscal 1996. Excluding this non-cash loss in fiscal 1996, net earnings
increased by $3.9 million (11.3 percent), while home closings increased by 675
units (12.2 percent) and revenues increased by $135.5 million (12.9 percent).
The overall less-than-proportionate increase in net earnings was attributable to
the extraordinary loss recognized by the Company in fiscal 1997.
NET NEW ORDER ACTIVITY AND BACKLOG. Total net new orders in fiscal 1998 were
12.3 percent higher than in fiscal 1997. Net new orders at operations that were
selling homes in both fiscal 1998 and fiscal 1997 increased 12.5 percent.
The increase in total net new orders was largely due to the commencement of
Florida community operations in January 1998 and net new order activity at three
smaller-scale communities in Arizona and California in fiscal 1998. These
increases were partially offset by declines attributable to the recently
completed operations of Terravita, Coventry Homes' southern California
operations and Sun City Tucson.
The increase in net new orders at operations that were selling homes in both
fiscal 1998 and fiscal 1997 was largely due to increases at Sun City Roseville
and Sun City Palm Desert, which management believes may be attributable to
continued improvement in the California real estate economy and its economy
generally, as well as to the introduction of new models. Management believes
that the increase in net new orders at the Sun Cities Las Vegas is due to the
continued strength of the Las Vegas market. At Sun City Hilton Head, management
believes that the increase in net new orders may be partially due to the fact
that important commercial and service-related businesses have announced
development plans for the area adjacent to Sun City Hilton Head. Coventry Homes'
net new orders increased as a result of increases in Phoenix and Las Vegas.
The number of homes under contract at June 30, 1998 was 22.4 percent higher than
at June 30, 1997. Management believes that this backlog increase was largely due
to the same factors that produced the increase in net new orders. Backlog
decreases were experienced at the Sun Cities Phoenix (where Sun City West is
approaching completion) and Sun City Georgetown (where management believes sales
have leveled after satisfaction of initial local pent-up demand).
Net new orders in fiscal 1997 were 4.3 percent lower than in fiscal 1996. A
significant increase was realized at the Sun Cities Phoenix as a result of new
order activity at Sun City Grand, which began taking new orders in October 1996.
Net new orders at Sun City Tucson and Terravita declined 63.8 percent and 47.6
percent, respectively, from fiscal 1996, reflecting the completion or
approaching completion of those communities. Net new orders at the Sun Cities
Las Vegas declined 12.1 percent from a particularly strong fiscal 1996. Coventry
Homes also experienced a 7.0 percent decrease in net new orders as a result of
having fewer communities open in fiscal 1997 than in fiscal 1996.
The number of homes under contract at June 30, 1997 was 19.0 percent lower than
at June 30, 1996. This backlog decrease was due primarily to decreases at: Sun
City Roseville (as a result of a decline in net new orders in the first quarter
of fiscal 1997 and a high level of home closings in fiscal 1997); Sun City
Georgetown and Coventry Homes (as their net new orders did not keep pace with
home closings in fiscal 1997); and Sun City Tucson and Terravita (attributable
to the completion or approaching completion of those communities).
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 of the Company's communities can differ substantially
from reported earnings, depending on the status of the development cycle. The
initial years of development or expansion require significant cash outlays for,
among other things, land acquisition, obtaining master plan and other approvals,
construction of amenities (including golf courses and recreation centers), model
homes, sales and administration facilities, major roads, utilities, general
landscaping and interest. 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 amounts of
previously expended costs.
During fiscal 1998 the Company generated $363.3 million of net cash from
community sales activities, used $169.7 million of cash for land and lot and
amenity development at operating communities, paid $162.9 million for costs
related to communities in the pre-operating stage, generated $21.4 million of
net cash from conventional homebuilding operations and used $122.7 million of
cash for other operating activities. The resulting $70.6 million of net cash
used for operating activities (which was primarily attributable to expenditures
for communities not yet generating home sales revenues) was funded mainly by the
net proceeds from the May 1998 public offering of $200 million in principal
amount of 9 3/8% Senior Subordinated Debentures due 2009 (the "1998 Debt
Offering"). The net proceeds from the 1998 Debt Offering were also used to repay
a portion of the indebtedness outstanding under the Company's senior unsecured
revolving credit facility (the "Credit Facility").
In January 1998 the amount of the Credit Facility was increased from $350
million to $400 million. In June 1998 the Credit Facility was amended to revise
certain debt-related covenants and increase the amount of the Credit Facility to
$450 million, all of which is available for borrowing, subject to compliance by
the Company with the revised covenants. At June 30, 1998 the Company had $14.4
million of cash and short-term investments, $96.0 million outstanding under the
Credit Facility and $15.2 million outstanding under its $25 million of
short-term lines of credit.
The Company is currently experiencing a period of substantial development. It
has under development, among other projects: (i) Sun City Lincoln Hills, planned
as the successor to Sun City Roseville; (ii) Anthem Las Vegas, which will
include Sun City Anthem (planned as the successor to Sun City Summerlin), Anthem
Country Club (a non-age-qualified golf course community) and a conventional home
building component (Coventry Anthem); (iii) Anthem Phoenix, planned to include a
non-age-qualified country club community and a conventional home building
component and which may also include an active adult community at a later date;
and (iv) Sun City at Huntley, located in Huntley, Illinois (near Chicago). The
Company currently anticipates that it will incur material additional debt under
the Credit Facility for development expenditures at these communities.
As a result of the 1998 Debt Offering and anticipated future borrowings under
the Credit Facility, the Company expects to be more highly leveraged than it has
been in recent years. 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. If
the Company cannot at any time obtain sufficient capital resources to fund its
development and expansion expenditures, its projects may be delayed, resulting
in cost increases, adverse effects on the Company's results of operations and
possible material adverse effects to the Company. No assurance can be given as
to the terms, availability or cost of any future financing the Company may need.
If the Company is at any time unable to service its debt, refinancing or
obtaining additional financing may be required and may not be available or
available on terms acceptable to the Company.
Management believes that the Company's current borrowing capacity, when combined
with existing cash and short-term investments and currently anticipated cash
flows from the Company's operating communities and conventional homebuilding
activities, will provide the Company with adequate capital resources to fund the
Company's currently anticipated operating requirements for the next 12 months.
However, these operating requirements reflect some limitations on the timing and
extent of new projects and activities that the Company may otherwise desire to
undertake.
19
Items 7. and 7a. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
At June 30, 1998, under the most restrictive of the covenants in the Company's
debt agreements, $34.6 million of the Company's retained earnings was available
for payment of cash dividends or for the acquisition by the Company of its
common stock.
MARKET RISK FOR FINANCIAL INSTRUMENTS
- -------------------------------------
The Company does not trade in derivative financial instruments and at June 30,
1998 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 Company's publicly held debt
and some real estate and other notes are at fixed interest rates. The Company's
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
Company's notes payable, senior and subordinated debt at June 30, 1998 (dollars
in millions):
Amount by Scheduled Maturity for
-------------------------------- Estimated
Fiscal Years Ending June 30, Fair Value
---------------------------- at
1999 2000 2001 2002 2003 Thereafter Total June 30, 1998
---- ---- ---- ---- ---- ---------- ----- -------------
Fixed Rate Debt
- ---------------
Amount $ 7.8 $2.9 $2.4 $ 3.3 $108.4 $444.6 $569.4 $583.3
Average Interest Rate 8.0% 8.0% 7.9% 8.1% 9.5% 9.4% 9.4%
Variable Rate Debt
- ------------------
Amount $38.2 -- -- $96.0 -- $ 0.3 $134.5 $134.5
Average Interest Rate 8.7% -- -- 8.5% -- 9.5% 8.6%
YEAR 2000 ISSUE
- ---------------
The Year 2000 issue is the result of computer programs being written using two
digits (rather than four) to define the applicable year. Computer programs that
have time-sensitive software may not recognize dates beginning in the year 2000,
which could result in miscalculations or system failures.
To date, the Company's Year 2000 remediation efforts have focused on its core
business computer applications (i.e., those systems that the Company is
dependent upon for the conduct of day-to-day business operations). Starting
approximately two years ago, the Company initiated a comprehensive review of its
core business applications to determine the adequacy of these systems to meet
future business requirements. Year 2000 readiness was only one of many factors
considered in this assessment. Out of this effort, a number of systems were
identified for upgrade or replacement. In no case is a system being replaced
solely because of Year 2000 issues, although in some cases the timing of system
replacements is being accelerated. Thus, the Company does not believe the costs
of these system replacements are specifically Year 2000 related. Additionally,
while the Company may have incurred an opportunity cost for addressing the Year
2000 issue, it does not believe that any specific information technology
projects have been deferred as a result of its Year 2000 efforts.
20
Items 7. and 7a. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
As of August 1998, the Company believes all of its core business systems are
adequately Year 2000 capable for its purposes, except for its lead tracking and
mortgage processing systems and some of its document imaging systems. Projects
are currently underway to replace each of these systems, with implementations
and testing scheduled for the remainder of calendar year 1998 and early 1999. As
with systems that have already been replaced, the Company does not believe the
costs of these replacements, which aggregate approximately $1 million, are
specifically Year 2000 related. The Company has also purchased at a cost of
approximately $100,000 a software product that, it believes, can identify
personal computers and related equipment with imbedded software that is not
adequately Year 2000 capable for the Company's purposes. The Company expects to
incur costs to replace or repair such equipment, but it has not at this time
determined the amount of these costs. Since some of the equipment would
otherwise be replaced through normal attrition, lease expirations and scheduled
upgrades in the ordinary course of business, it is possible that much of these
costs would not be solely related to Year 2000 readiness.
The Company is currently assessing other potential Year 2000 issues, including
non-information technology systems. A broad-based Year 2000 Task Force has been
formed and began meeting in August 1998 to identify areas of concern and develop
action plans. The Company currently anticipates that testing of non-information
technology systems will be completed by mid-1999. Also as part of the Task Force
effort, the Company's relationships with vendors, contractors, financial
institutions and other third parties will be examined to determine the status of
the Year 2000 issue efforts on the part of the other parties to material
relationships. The Year 2000 Task Force includes both internal and
Company-external representation.
The Company expects to incur Year 2000-specific costs in the future but does not
at present anticipate that these costs will be material. The Company believes
that the most reasonably likely worst-case scenario for the Year 2000 issue
would be that the Company or the third parties with whom it has relationships
would cease or not successfully complete their Year 2000 remediation efforts. If
this were to occur, the Company would encounter disruptions to its business that
could have a material adverse effect on its results of operations. The Company
could be materially impacted by widespread economic or financial market
disruption or by Year 2000 computer system failures at government agencies on
which the Company is dependent for zoning, building permits and related matters.
The Company has not at this time established a formal Year 2000 contingency plan
but will consider and, if necessary, address doing so as part of its Year 2000
Task Force activities. The Company maintains and deploys contingency plans
designed to address various other potential business interruptions. These plans
may be applicable to address the interruption of support provided by third
parties resulting from their failure to be Year 2000 ready.
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 such increased
costs are recovered through higher sales prices, operating margins will
decrease. High mortgage interest rates may also make it more difficult for the
Company's potential customers to sell their existing homes in order to move to
one of the Company's communities or to finance the purchases of their new homes.
21
Items 7. and 7a. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
ACCOUNTING STANDARDS NOT YET ADOPTED BY THE COMPANY
- ---------------------------------------------------
The Financial Accounting Standards Board ("FASB") has issued several new
pronouncements that have not yet been adopted by the Company.
In June 1997 the FASB issued SFAS No. 130, Reporting Comprehensive Income, to
establish standards for reporting and display of comprehensive income (all
changes in equity during a period except those resulting from investments by and
distributions to owners) and its components in financial statements. This new
standard, which will be effective for the Company for its fiscal year ending
June 30, 1999, is not currently anticipated to have a significant impact on the
Company's consolidated financial statements based on the current financial
structure and operations of the Company.
In June 1997 the FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, to establish standards for reporting
information about operating segments in annual financial statements, selected
information about operating segments in interim financial reports and
disclosures about products and services, geographic areas and major customers.
This new standard, which will be effective for the Company for its fiscal year
ending June 30, 1999, will require the Company to report financial information
on the basis that is used internally for evaluating segment performance and
deciding how to allocate resources to segments, which is currently anticipated
to result in more detailed information in the notes to the Company's
consolidated financial statements than is currently required and provided.
In February 1998 the FASB issued SFAS No. 132, Employers' Disclosures about
Pensions and Other Postretirement Benefits, to standardize such disclosure
requirements. This new standard, which will be effective for the Company for its
fiscal year ending June 30, 1999, is not expected to have a significant impact
on the Company's consolidated financial statements.
In June 1998 the FASB issued SFAS No. 133, Accounting for Derivatives and
Similar Financial Instruments and for Hedging Activities, to establish
accounting and reporting standards in this area. This new standard, which will
be effective for the Company for its fiscal year ending June 30, 2000, is not
expected to have a significant impact on the Company's consolidated financial
statements since the Company does not have any significant derivative financial
instruments.
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.
22
PART III
Item 10. Directors and Executive Officers of the Registrant
For information with respect to the 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 of the Registrant is
incorporated herein 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 Form 10-K.
Item 11. Executive Compensation
Information in response to this Item is incorporated herein 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
Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information in response to this Item is incorporated herein 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
Form 10-K.
Item 13. Certain Relationships and Related Transactions
Information in response to this Item is incorporated herein 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
Form 10-K.
23
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 this report beginning on page 26.
3. Exhibits
The Exhibit Index attached to this Report is hereby
incorporated by reference.
(b) In the quarter ended June 30, 1998 the Company filed three reports on Form
8-K dated: (1) April 27, 1998 to file certain financial and operating data
for the three and nine months ended March 31, 1997 and 1998; (2) May 8,
1998 to file the Underwriting Agreement for the $200 million in principal
amount of 9 3/8% Senior Subordinated Debentures due 2009 publicly issued by
the Company in May 1998; and (3) May 11, 1998 to file the Indenture for the
$200 million of 9 3/8% Senior Subordinated Debentures due 2009.
24
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 11th day of September, 1998.
DEL WEBB CORPORATION
(Registrant)
By: /s/ Philip J. Dion
-----------------------------------------
Philip J. Dion
Chairman and 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/ Philip J. Dion Chairman and Chief Executive Officer September 11, 1998
- ------------------------------ (Principal Executive Officer)
(Philip J. Dion)
/s/ Leroy C. Hanneman, Jr. President, Chief Operating Officer and Director September 11, 1998
- ------------------------------ (Principal Operating Officer)
(LeRoy C. Hanneman, Jr.)
/s/ John A. Spencer Senior Vice President and September 11, 1998
- ------------------------------ Chief Financial Officer
(John A. Spencer) (Principal Financial Officer)
/s/ David E. Rau Vice President and Controller September 11, 1998
- ------------------------------ (Principal Accounting Officer)
(David E. Rau)
/s/ D. Kent Anderson Director September 11, 1998
- ------------------------------
(D. Kent Anderson)
/s/ Michael O. Maffie Director September 11, 1998
- ------------------------------
(Michael O. Maffie)
/s/ J. Russell Nelson Director September 11, 1998
- ------------------------------
(J. Russell Nelson)
/s/ Peter A. Nelson Director September 11, 1998
- ------------------------------
(Peter A. Nelson)
/s/ Michael E. Rossi Director September 11, 1998
- ------------------------------
(Michael E. Rossi)
/s/ Glenn W. Schaeffer Director September 11, 1998
- ------------------------------
(Glenn W. Schaeffer)
/s/ C. Anthony Wainwright Director September 11, 1998
- ------------------------------
(C. Anthony Wainwright)
/s/ Sam Yellen Director September 11, 1998
- ------------------------------
(Sam Yellen)
25
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................................................................................ 27
Independent Auditors' Report....................................................................... 28
Consolidated Financial Statements:
Balance Sheets as of June 30, 1998 and 1997................................................ 29
Statements of Operations for each of the years in the three-year
period ended June 30, 1998............................................................... 30
Statements of Shareholders' Equity for each of the years in the
three-year period ended June 30, 1998.................................................... 31
Statements of Cash Flows for each of the years in the three-year
period ended June 30, 1998............................................................... 32
Notes to Consolidated Financial Statements................................................. 34
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, 1998.................................................. 49
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.
26
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 generally accepted
accounting principles and, as such, include amounts based on judgments and
estimates made by management. The Company also prepared the other information
included in the 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 Peat Marwick 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 Peat Marwick 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
which 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, 1998 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, as of June 30, 1998, its system of internal control over
financial reporting and over safeguarding of assets against unauthorized
acquisition, use or disposition met those criteria.
/S/ PHILIP J. DION
- -------------------------------------------------
Philip J. Dion
Chairman and Chief Executive Officer
/S/ JOHN A. SPENCER
- -------------------------------------------------
John A. Spencer
Senior Vice President and Chief Financial Officer
June 30, 1998
27
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 generally accepted auditing
standards. 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, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 30, 1998 in conformity with generally accepted accounting principles.
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.
As discussed in Notes 1 and 13 to the consolidated financial statements, in
fiscal 1996 the Company changed its method of accounting for impairment of
long-lived assets in accordance with the adoption of Statement of Financial
Accounting Standards No. 121.
KPMG Peat Marwick LLP
Phoenix, Arizona
August 21, 1998
28
DEL WEBB CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1998 and 1997
In Thousands
- ------------------------------------------------------------------------------------------------------
1998 1997
- ------------------------------------------------------------------------------------------------------
Assets
- ------------------------------------------------------------------------------------------------------
Real estate inventories (Notes 2, 6 and 12) $ 1,113,297 $ 939,684
Cash and short-term investments 14,362 24,715
Receivables (Note 3) 41,498 28,892
Property and equipment, net (Note 4) 33,333 20,937
Deferred income taxes (Note 7) - 6,526
Other assets (Note 5) 107,972 65,908
- ------------------------------------------------------------------------------------------------------
$ 1,310,462 $ 1,086,662
======================================================================================================
Liabilities and Shareholders' Equity
- ------------------------------------------------------------------------------------------------------
Notes payable, senior and subordinated debt (Note 6) $ 703,938 $ 563,068
Contractor and trade accounts payable 78,114 70,827
Accrued liabilities and other payables 98,066 79,959
Home sale deposits 80,332 69,476
Deferred income taxes (Note 7) 4,245 -
Income taxes payable (Note 7) - 3,502
- ------------------------------------------------------------------------------------------------------
Total liabilities 964,695 786,832
- ------------------------------------------------------------------------------------------------------
Shareholders' equity:
Common stock, $.001 par value. Authorized 30,000,000
shares; issued 18,107,606 shares and 17,691,118 shares
at June 30, 1998 and 1997, respectively (Notes 8 and 9) 18 18
Additional paid-in capital (Note 8) 166,328 160,308
Retained earnings (Note 6) 184,890 145,922
- ------------------------------------------------------------------------------------------------------
351,236 306,248
Less cost of common stock in treasury, 124,509 shares
at June 30, 1997 (Note 8) - (1,914)
Less deferred compensation (Note 9) (5,469) (4,504)
- ------------------------------------------------------------------------------------------------------
Total shareholders' equity 345,767 299,830
- ------------------------------------------------------------------------------------------------------
$ 1,310,462 $ 1,086,662
======================================================================================================
See accompanying notes to consolidated financial statements.
29
DEL WEBB CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended June 30, 1998, 1997 and 1996
In Thousands
Except Per Share Data
- -------------------------------------------------------------------------------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------------------------------
Revenues (Note 11) $ 1,177,767 $ 1,186,262 $ 1,050,733
- -------------------------------------------------------------------------------------------------------
Costs and expenses (Note 11):
Home construction, land and other 898,754 913,872 807,988
Selling, general and administrative 166,343 160,924 147,315
Interest (Note 12) 46,212 49,457 42,354
Loss from impairment of southern California
real estate inventories (Notes 12 and 13) - - 65,000
- -------------------------------------------------------------------------------------------------------
1,111,309 1,124,253 1,062,657
- -------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes and
extraordinary item 66,458 62,009 (11,924)
Income taxes (Note 7) (23,925) (22,323) 4,173
- -------------------------------------------------------------------------------------------------------
Earnings (loss) before extraordinary item 42,533 39,686 (7,751)
Extraordinary item:
Loss from extinguishment of debt (net of $700 tax) - 1,285 -
- -------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 42,533 $ 38,401 $ (7,751)
=======================================================================================================
Weighted average shares outstanding 17,829 17,580 17,425
=======================================================================================================
Weighted average shares outstanding - assuming dilution 18,458 17,862 17,425
=======================================================================================================
Earnings (loss) per share:
Earnings (loss) before extraordinary item $ 2.39 $ 2.26 $ (0.44)
Extraordinary item - (0.07) -
- -------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 2.39 $ 2.18 $ (0.44)
=======================================================================================================
Earnings (loss) per share - assuming dilution:
Earnings (loss) before extraordinary item $ 2.30 $ 2.22 $ (0.44)
Extraordinary item - (0.07) -
- -------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 2.30 $ 2.15 $ (0.44)
=======================================================================================================
See accompanying notes to consolidated financial statements.
30
DEL WEBB CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended June 30, 1998, 1997 and 1996
In Thousands
- --------------------------------------------------------------------------------------------------------------------------
Additional Total
Common Paid-in Retained Treasury Deferred Shareholders'
Stock Capital Earnings Stock Compensation Equity
- ------------------------------------------------------------------------------------------------------------------------
Balances at July 1, 1995 $ 16 $ 121,059 $ 122,153 $ (11,058) $ (2,828) $ 229,342
Shares issued and retired for stock option and
restricted stock plans (178,463 shares of
common stock issued, 2,200 shares net
increase in treasury stock and 32,512 shares
of common stock retired), net of amortization - 2,992 - (39) (1,639) 1,314
Proceeds from sale of 1,597,172 shares of
common stock and 877,728 shares of
treasury stock, less offering costs of $3.0
million (Note 8) 2 34,211 - 11,058 - 45,271
Treasury stock acquired, 1,551 shares - - - (31) - (31)
Cash dividends ($ .20 per share) - - (3,369) - - (3,369)
Net loss - - (7,751) - - (7,751)
- -------------------------------------------------------------------------------------------------------------------
Balances at June 30, 1996 18 158,262 111,033 (70) (4,467) 264,776
Shares issued and retired for stock option and
restricted stock plans (186,717 shares of
common stock issued, 16,500 shares net
decrease in treasury stock and 37,371 shares
of common stock retired), net of amortization - 2,046 - 261 (37) 2,270
Treasury stock acquired, 137,258 shares - - - (2,105) - (2,105)
Cash dividends ($.20 per share) - - (3,512) - - (3,512)
Net earnings - - 38,401 - - 38,401
- -------------------------------------------------------------------------------------------------------------------
Balances at June 30, 1997 18 160,308 145,922 (1,914) (4,504) 299,830
Shares issued and retired for stock option
restricted stock plans (489,756 shares of
common stock issued, 124,710 net decrease
in treasury stock and 73,091 shares of
common stock retired), net of amortization and - 6,025 - 1,918 (965) 6,978
Shares repurchased (201 shares of treasury
stock acquired and 177 shares of common
stock retired) - (5) - (4) - (9)
Cash dividends ($.20 per share) - - (3,565) - - (3,565)
Net earnings - - 42,533 - - 42,533
- -------------------------------------------------------------------------------------------------------------------
Balances at June 30, 1998 $ 18 $ 166,328 $ 184,890 $ - $ (5,469) $ 345,767
===================================================================================================================
See accompanying notes to consolidated financial statements.
31
DEL WEBB CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended June 30, 1998, 1997 and 1996
(In Thousands)
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Cash received from customers related to community home sales $ 880,670 $ 876,379 $ 792,835
Cash received from commercial land and facility sales 27,787 8,328 7,880
Cash paid for costs related to community home construction (545,137) (579,188) (509,315)
- ---------------------------------------------------------------------------------------------------------
Net cash provided by community sales activities 363,320 305,519 291,400
Cash paid for land acquisitions at operating communities (14,958) (11,885) (8,351)
Cash paid for lot development at operating communities (108,927) (100,588) (96,863)
Cash paid for amenity development at operating communities (45,776) (56,503) (63,853)
- ---------------------------------------------------------------------------------------------------------
Net cash provided by operating communities 193,659 136,543 122,333
Cash paid for costs related to communities in the pre-operating
stage (162,910) (81,755) (92,668)
Cash received from customers related to conventional
homebuilding 245,758 248,488 222,513
Cash paid for land, development, construction and other costs
related to conventional homebuilding (224,345) (229,830) (213,959)
Cash received from residential land development project 5,195 7,110 8,834
Cash paid for corporate activities (59,871) (42,327) (34,280)
Interest paid (53,118) (45,854) (47,444)
Cash paid for income taxes (14,930) (14,879) (10,501)
- ---------------------------------------------------------------------------------------------------------
Net cash used for operating activities (70,562) (22,504) (45,172)
- ---------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property and equipment (16,855) (4,284) (6,715)
Investments in life insurance policies (4,568) (3,222) (3,554)
- ---------------------------------------------------------------------------------------------------------
Net cash used for investing activities (21,423) (7,506) (10,269)
- ---------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Borrowings 592,611 547,871 305,122
Repayments of debt (513,531) (506,990) (292,260)
Proceeds from sale of common stock - - 45,271
Stock purchases (9) (2,105) (31)
Proceeds from exercise of common stock options 6,126 1,121 148
Dividends paid (3,565) (3,512) (3,369)
- ---------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 81,632 36,385 54,881
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and short-term investments (10,353) 6,375 (560)
Cash and short-term investments at beginning of year 24,715 18,340 18,900
- ---------------------------------------------------------------------------------------------------------
Cash and short-term investments at end of year $ 14,362 $ 24,715 $ 18,340
=========================================================================================================
See accompanying notes to consolidated financial statements.
32
DEL WEBB CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Years ended June 30, 1998, 1997 and 1996
(In Thousands)
1998 1997 1996
- --------------------------------------------------------------------------------------------------------
Reconciliation of net earnings (loss) to net cash used for operating
activities:
Net earnings (loss) $ 42,533 $ 38,401 $ (7,751)
Allocation of non-cash common costs in costs and expenses,
excluding interest 273,173 268,806 247,734
Amortization of capitalized interest in costs and expenses 46,212 49,457 42,354
Deferred compensation amortization 1,838 1,748 1,804
Depreciation and other amortization 6,725 6,425 8,740
Deferred income taxes on earnings (loss) before extraordinary item 10,771 6,086 (17,810)
Non-cash loss from impairment of southern California real estate
inventories - - 65,000
Extraordinary loss from extinguishment of debt (net of tax) - 1,285 -
Net increase in home construction costs (152) (4,218) (35,445)
Land acquisitions (69,482) (61,499) (37,176)
Lot development (204,080) (155,348) (190,959)
Amenity development (99,280) (89,063) (103,086)
Pre-acquisition costs (13,776) (19,869) (8,732)
Net change in other assets and liabilities (65,044) (64,715) (9,845)
- --------------------------------------------------------------------------------------------------------
Net cash used for operating activities $ (70,562) $ (22,504) $ (45,172)
========================================================================================================
See accompanying notes to consolidated financial statements.
33
DEL WEBB CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
(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 develops residential communities ranging from
smaller-scale, non-amenitized communities within its conventional
homebuilding operations to large-scale, master-planned communities with
extensive amenities. 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.
Within its communities, the Company is usually the exclusive builder of
homes. The Company currently conducts its operations in Arizona,
California, Florida, Illinois, Nevada, South Carolina and Texas.
The Company's operations are subject to a number of risks and
uncertainties, including, but not limited to, risks associated with
financing and leverage, the development of future communities (and new
geographic markets), governmental regulation, including land exchanges
with governmental entities, environmental considerations, competition,
the geographic concentration of the Company's operations, the cyclical
nature of real estate operations and other conditions generally,
fluctuations in labor and material costs 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 and vacation home 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 which are capitalized. The capitalized costs and
estimated future common costs are allocated, on a community by
community basis, to residential and commercial lots based upon the
estimated relative sales value that each lot has to the estimated
aggregate sales value of all lots in the community. Home construction,
land and other costs and expenses includes the direct construction
costs of the home and an allocation of common costs. Sales commissions,
advertising and other marketing expenses are included in selling,
general and administrative expenses. The Company recognizes revenue at
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, which the Company
adopted in fiscal 1996. The Company has no significant completed real
estate assets.
34
(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 annual home closings over the life of the community, which
involves numerous assumptions and judgements as to future events over a
period of many years. In connection with its adoption of SFAS No. 121
in fiscal 1996, the Company incurred a non-cash loss from impairment of
southern California real estate inventories in the amount of $65.0
million pre-tax ($42.3 million after tax) related to the valuation of
its Sun City Palm Desert active adult community (see Note 13).
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
operations as an adjustment to the effective income tax rate in the
period that includes the enactment date.
Earnings (Loss) Per Share
-------------------------
The Company adopted SFAS No. 128, Earnings Per Share, during fiscal
1998. The Company's earnings (loss) per share for prior periods have
been restated to conform with the provisions of SFAS No. 128.
Earnings (loss) per share is determined by dividing net earnings (loss)
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. In calculating loss per share, the effect
of stock options is excluded because their inclusion would be
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 and expenses when the revenues from home closings are
recognized.
35
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Goodwill
--------
Goodwill is included in other assets and represents the unamortized
excess of the purchase price of two age-qualified communities in
central Florida over the fair value of net assets acquired in January
1998 (see Note 5). This goodwill is being amortized on a straight-line
basis over a period of 15 years.
Financial Instruments
---------------------
In the normal course of business, the Company may invest in various
financial assets and incurs 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, 1998 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, 1998.
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 the 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, property and equipment and deferred
income taxes) are not financial instruments, the disclosures 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 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 policy is to generally 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 9).
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.
36
(2) REAL ESTATE INVENTORIES
The components of real estate inventories are as follows:
In Thousands
at June 30,
- ------------------------------------------------------------------------------------------------------
1998 1997
- ------------------------------------------------------------------------------------------------------
Home construction costs $ 182,170 $ 182,018
Unamortized improvement and amenity costs 603,390 489,142
Unamortized capitalized interest 61,455 46,121
Land held for housing 220,441 174,930
Land and facilities held for future development or sale 45,841 47,473
- ------------------------------------------------------------------------------------------------------
$ 1,113,297 $ 939,684
======================================================================================================
At June 30, 1998, the Company had 436 completed homes and 395 homes
under construction that were not subject to a sales contract. These
homes represented $44.5 million of home construction costs at June 30,
1998. At June 30, 1997 the Company had 403 completed homes and 516
homes under construction (representing $48.6 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, 1998 were 481 acres of residential land, commercial land and
worship sites that are currently being marketed for sale at the
Company's communities and conventional homebuilding operations.
During fiscal 1998 the Company acquired the initial portions of land
for (i) a planned active adult community in the Chicago area town of
Huntley, Illinois, (ii) a planned large-scale master-planned community
in the southern Las Vegas valley and (iii) a planned smaller-scale,
less-amenitized community in northern California. Accordingly,
capitalized pre-acquisition costs previously classified as other assets
for these communities are now classified as part of real estate
inventories.
In January 1998 the Company acquired certain assets and assumed certain
liabilities at two operating age-qualified communities in central
Florida for a total purchase price of approximately $45 million.
(3) RECEIVABLES
Receivables are summarized as follows:
In Thousands
at June 30,
- --------------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------------
Escrow funds from home and land sales $ 12,853 $ 8,254
Mortgage loans held for sale 15,020 8,629
Notes from sales of land and facilities 8,090 8,424
Other 5,535 3,585
- --------------------------------------------------------------------------------
$ 41,498 $ 28,892
================================================================================
37
(4) PROPERTY AND EQUIPMENT, NET
Property and equipment, stated at cost, and related accumulated depreciation are
summarized as follows:
In Thousands
at June 30,
- --------------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------------
Buildings and improvements $ 11,186 $ 6,803
Equipment 43,556 40,240
Land and improvements 7,965 -
- --------------------------------------------------------------------------------
62,707 47,043
Less accumulated depreciation 29,374 26,106
- --------------------------------------------------------------------------------
$ 33,333 $ 20,937
================================================================================
(5) OTHER ASSETS
Other assets are summarized as follows:
In Thousands
at June 30,
- --------------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------------
Pre-acquisition costs $ 51,655 $ 30,876
Cash surrender value of life insurance policies 24,260 20,083
Goodwill 9,694 -
Utility costs and deposits 9,118 4,971
Prepaid expenses 6,373 5,903
Water right costs 3,263 -
Other 3,609 4,075
- --------------------------------------------------------------------------------
$ 107,972 $ 65,908
================================================================================
Substantially all of pre-acquisition costs at June 30, 1998 consists of costs
incurred for the acquisition of an environmentally-sensitive property by the
Company for the purpose of exchanging the property with the United States Bureau
of Land Management for property in the Las Vegas area to be included in the
Company's Anthem Las Vegas Project, substantially all of which would be for Sun
City Anthem. Any exchange is subject to regulatory approvals and other
conditions. If an exchange is effected, these costs will be 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.
38
(6) NOTES PAYABLE, SENIOR AND SUBORDINATED DEBT
Notes payable, senior and subordinated debt consists of the following:
In Thousands
at June 30,
- -------------------------------------------------------------------------------------------------------
1998 1997
- -------------------------------------------------------------------------------------------------------
9 3/4% Senior Subordinated Debentures due 2003, net $ 98,081 $ 97,670
9% Senior Subordinated Debentures due 2006, net 97,902 97,628
9 3/4% Senior Subordinated Debentures due 2008, net 145,370 144,889
9 3/8% Senior Subordinated Debentures due 2009, net 194,977 -
Notes payable to banks under a revolving credit facility
and short-term lines of credit 111,209 185,990
Real estate and other notes, variable interest rates from
prime to prime plus 1% and fixed rates from 7.0%
to 10.2%, maturities to 2005 56,399 36,891
- -------------------------------------------------------------------------------------------------------
$ 703,938 $ 563,068
=======================================================================================================
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 on or
after March 1, 1998, 1999 and 2000 at 104.875, 102.4375 and 100 percent,
respectively, 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,
1999, 2000, 2001, 2002 and 2003 at 104.500, 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 3/8 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.
39
(6) NOTES PAYABLE, SENIOR AND SUBORDINATED DEBT (Continued)
The Company has a $450 million senior unsecured revolving credit facility
(increased from $350 million in January 1998 and $400 million in June 1998). If
the revolving credit facility is not subsequently amended, it will mature in May
2002. Borrowings under this facility bear interest at the prime rate or, if the
Company selects, at the London interbank offered rate plus 1.30 to 1.90 percent
(depending on the Company's ratio of debt to tangible worth). The effective
interest rate on borrowings outstanding under the senior unsecured revolving
credit facility at June 30, 1998 and 1997 was 8.5 percent and 7.9 percent,
respectively.
The senior unsecured revolving 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,
conventional homebuilding assets, 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, 1998 the Company had $96.0 million outstanding under its $450
million senior unsecured revolving credit facility and $15.2 million outstanding
under its $25 million of short-term lines of credit.
At June 30, 1998, under the most restrictive of the covenants in the Company's
debt agreements, $34.6 million of the Company's retained earnings was available
for payment of cash dividends or for the acquisition by the Company of its
common stock.
The estimated fair values at June 30, 1998 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 and 9 3/8% Senior Subordinated
Debentures due 2009 were $103.1 million, $99.5 million, $150.9 million and
$196.8 million, respectively. The estimated fair values at June 30, 1997 of the
Company's 9 3/4% Senior Subordinated Debentures due 2003, 9% Senior Subordinated
Debentures due 2006 and 9 3/4% Senior Subordinated Debentures due 2008 were
$98.8 million, $102.9 million and $154.5 million, respectively.
The principal payment requirements (in thousands) on debt for the next five
years ended June 30 are as follows:
1999 $ 46,054
2000 $ 2,934
2001 $ 2,450
2002 $ 99,286
2003 $ 108,407
40
(7) INCOME TAXES
The components of income taxes on earnings before the extraordinary item are:
In Thousands
Year Ended June 30,
- --------------------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
Current:
Federal $ 12,252 $ 14,029 $ 11,333
State 902 2,208 2,304
- --------------------------------------------------------------------------------
13,154 16,237 13,637
- --------------------------------------------------------------------------------
Deferred:
Federal 9,730 6,854 (15,084)
State 1,041 (768) (2,726)
- --------------------------------------------------------------------------------
10,771 6,086 (17,810)
- --------------------------------------------------------------------------------
$ 23,925 $ 22,323 $ (4,173)
================================================================================
In the year ended June 30, 1997, the Company also recognized a $0.7 million
income tax benefit related to the extraordinary loss from extinguishment of
debt.
The components of deferred income taxes are as follows:
In Thousands
Year Ended June 30,
- ------------------------------------------------------------------------------------------------------
1998 1997 1996
- ------------------------------------------------------------------------------------------------------
Change in net operating loss carryforwards $ (441) $ (451) $ (201)
Change in loss provisions for discontinued
operations 968 2,982 1,854
Change in basis differences of real estate 6,019 2,802 (18,214)
Deferred compensation 117 (1,422) (1,087)
Amortization of short period loss - - 486
Accelerated depreciation 2,357 2,094 4,245
Change in tax credit carryforwards (621) 3,051 -
Change in deferred tax asset valuation allowance - (473) -
Other 2,372 (2,497) (4,893)
- ------------------------------------------------------------------------------------------------------
$ 10,771 $ 6,086 $ (17,810)
======================================================================================================
The deferred income tax benefit for fiscal 1996, and the related deferred tax
asset at June 30, 1996, resulted from the non-cash loss from impairment of
southern California real estate inventories recognized by the Company in fiscal
1996 (see Note 13).
The 1997 reduction in the deferred tax asset valuation allowance resulted from
additional years of operating earnings generated by the Company, which increased
the portion of the gross deferred tax asset that the Company believed would more
likely than not be realized.
41
(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,
- ------------------------------------------------------------------------------------
1998 1997
- ------------------------------------------------------------------------------------
Deferred tax assets:
Net operating loss carryforwards $ 1,093 $ 652
Tax credit carryforwards 621 -
Liabilities of discontinued operations,
principally due to loss provisions 3,629 4,597
Property and equipment, principally due
to differences in depreciation 2,773 5,130
State income taxes 1,709 2,586
Deferred compensation 6,679 6,796
Accruals 10,225 11,630
Other 2,110 1,141
- ------------------------------------------------------------------------------------
28,839 32,532
Valuation allowance 3,389 3,389
- ------------------------------------------------------------------------------------
25,450 29,143
- ------------------------------------------------------------------------------------
Deferred tax liabilities:
Real estate, principally due to basis differences 27,106 21,087
Other 2,589 1,530
- ------------------------------------------------------------------------------------
29,695 22,617
- ------------------------------------------------------------------------------------
Net deferred income taxes $ (4,245) $ 6,526
====================================================================================
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,
- ------------------------------------------------------------------------------------------------------
1998 1997 1996
- ------------------------------------------------------------------------------------------------------
Expected taxes at current federal statutory
income tax rate $ 23,260 $ 21,703 $ (4,173)
State income taxes, net of federal benefit 2,438 2,856 (274)
Federal and state tax credits (1,798) (2,210) (2,580)
Adjustments due to the settlement of audits and
resolution of issues (351) 252 2,407
Change in deferred tax asset valuation allowance - (473) -
Other 376 195 447
- ------------------------------------------------------------------------------------------------------
Income taxes $ 23,925 $ 22,323 $ (4,173)
======================================================================================================
At June 30, 1998 the Company had a state net operating loss carryforward of
$21.9 million that expires in fiscal 2018.
42
(8) EQUITY TRANSACTION
In August 1995 the Company publicly sold 2,474,900 shares of its common stock.
The net proceeds of $45.3 million were used to repay a portion of the
indebtedness then outstanding under the Company's senior unsecured revolving
credit facility.
(9) COMMON STOCK RESERVED
The Company has five 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 and 1995 Executive Long-Term
Incentive Plans (1991 ELTIP, 1993 ELTIP and 1995 ELTIP, 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.
The Company has the 1991 Directors' Stock Plan and the 1995 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.
Effective in fiscal 1997 the Company adopted the disclosure requirements of SFAS
No. 123, Accounting for Stock-Based Compensation. As permitted under SFAS No.
123, the Company will continue to measure 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 compensation expense for awards granted in fiscal 1998, 1997 and 1996.
Management believes that the fiscal 1998, 1997 and 1996 pro forma amounts may
not be representative of the effects of stock-based awards on future pro forma
net earnings and pro forma net earnings per share because, among other reasons,
those pro forma amounts exclude the pro forma compensation expense related to
unvested stock options granted before fiscal 1996.
43
(9) COMMON STOCK RESERVED (CONTINUED)
Reported and pro forma net earnings (loss), in thousands, and net earnings
(loss) per share amounts for the years ended June 30, 1998, 1997 and 1996 are
set forth below:
1998 1997 1996
- -------------------------------------------------------------------------------------------------------
Reported:
Net earnings (loss) $ 42,533 $ 38,401 $ (7,751)
Net earnings (loss) per share 2.39 2.18 (0.44)
Net earnings (loss) per share - assuming dilution 2.30 2.15 (0.44)
Pro forma:
Net earnings (loss) 41,588 37,777 (8,056)
Net earnings (loss) per share 2.33 2.15 (0.46)
Net earnings (loss) per share - assuming dilution 2.25 2.11 (0.46)
- -------------------------------------------------------------------------------------------------------
The fair values of the options granted were estimated on the date of their grant
using the Black-Scholes option pricing model based on the following weighted
average assumptions:
1998 1997 1996
- ------------------------------------------------------------------------------------------------------
Risk free interest rate 5.65% 6.26% 5.84%
Expected life (in years) 7.5 7.4 7.4
Expected volatility 29% 27% 32%
Expected dividend yield 1.08% 1.17% 1.16%
- ------------------------------------------------------------------------------------------------------
Stock option activity for the years ended June 30, 1998, 1997 and 1996 is
summarized as follows:
1998 1997 1996
----------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
- -------------------------------------------------------------------------------------------------------
Options outstanding,
beginning of year 1,981,613 $ 15.12 1,801,288 $ 14.82 1,438,470 $ 13.19
Granted 372,750 20.97 339,665 16.39 388,201 20.83
Exercised (460,506) 13.30 (94,017) 11.93 (12,883) 11.52
Canceled (86,225) 19.06 (65,323) 17.89 (12,500) 17.68
- -------------------------------------------------------------------------------------------------------
Options outstanding,
end of year 1,807,632 $ 16.61 1,981,613 $ 15.12 1,801,288 $ 14.82
=======================================================================================================
Options exercisable
at end of year 1,050,291 $ 14.47 1,287,530 $ 13.49 1,145,236 $ 12.70
=======================================================================================================
Weighted average fair
value of options granted
during the year $8.32 $ 6.46 $ 8.73
=======================================================================================================
44
(9) COMMON STOCK RESERVED (Continued)
Stock options outstanding at June 30, 1998 were as follows:
Options Outstanding Options Exercisable
- ------------------------------------------------------------------------------------------------------
Range of Weighted Average Weighted Weighted
Exercise Price Options Remaining Contractual Average Options Average
Life Exercise Price Exercise Price
- ------------------------------------------------------------------------------------------------------
$ 8.00 - $ 9.89 144,319 2.6 years $ 8.65 144,319 $ 8.65
$10.13 - $14.75 431,636 3.5 13.04 431,636 13.04
$15.71 - $17.69 580,337 6.9 16.38 351,025 16.38
$20.56 - $25.09 651,340 8.4 20.93 123,311 20.85
------------- ------------
1,807,632 6.3 years $ 16.61 1,050,291 $ 14.47
======================================================================================================
Shares granted, net of cancellations, under the Company's restricted stock plans
during the years ended June 30, 1998, 1997 and 1996 aggregated 128,070 shares,
109,200 shares and 163,380 shares, respectively. The Company recognized
compensation expense of $1.8 million, $1.7 million and $1.8 million related to
shares granted under the restricted stock plans for the years ended June 30,
1998, 1997 and 1996, respectively.
(10) 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 $1.7 million, $2.6 million and $2.0 million for the years ended June 30,
1998, 1997 and 1996, respectively.
45
(11) REVENUES AND COSTS AND EXPENSES
The components of revenues and costs and expenses:
In Thousands
Year Ended June 30,
- -------------------------------------------------------------------------------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------------------------------
Revenues:
Homebuilding:
Communities $ 879,825 $ 906,523 $ 794,671
Conventional 238,559 237,566 217,158
- -------------------------------------------------------------------------------------------------------
Total homebuilding 1,118,384 1,144,089 1,011,829
Land and facility sales 48,522 31,289 29,525
Other 10,861 10,884 9,379
- -------------------------------------------------------------------------------------------------------
$ 1,177,767 $ 1,186,262 $ 1,050,733
=======================================================================================================
Costs and expenses:
Home construction and land:
Communities $ 661,534 $ 682,873 $ 597,014
Conventional 200,159 202,054 184,532
- -------------------------------------------------------------------------------------------------------
Total homebuilding 861,693 884,927 781,546
Cost of land and facility sales 33,479 26,051 23,227
Other cost of sales 3,582 2,894 3,215
- -------------------------------------------------------------------------------------------------------
Total home construction, land and other 898,754 913,872 807,988
Selling, general and administrative 166,343 160,924 147,315
Interest 46,212 49,457 42,354
Loss from impairment of southern California real
estate inventories - - 65,000
- -------------------------------------------------------------------------------------------------------
$ 1,111,309 $ 1,124,253 $ 1,062,657
=======================================================================================================
(12) INTEREST
The following table shows the components of interest:
In Thousands
Year Ended June 30,
- ------------------------------------------------------------------------------------------------------
1998 1997 1996
- ------------------------------------------------------------------------------------------------------
Interest incurred and capitalized $ 61,546 $ 51,917 $ 52,022
======================================================================================================
Amortization of capitalized interest in costs and
expenses $ 46,212 $ 49,457 $ 42,354
======================================================================================================
Unamortized capitalized interest included in real
estate inventories at year end $ 61,455 $ 46,121 $ 43,661
======================================================================================================
Interest income $ 1,072 $ 1,510 $ 1,017
======================================================================================================
Unamortized capitalized interest included in real estate inventories at June 30,
1996 was reduced by $21.8 million, the portion of the non-cash loss from
impairment of southern California real estate inventories allocated to
unamortized capitalized interest (see Note 13). Interest income is included in
other revenues.
46
(13) IMPAIRMENT OF SOUTHERN CALIFORNIA REAL ESTATE INVENTORIES
In connection with its adoption of SFAS No. 121 in fiscal 1996, the Company
incurred a non-cash loss from impairment of southern California real estate
inventories in the amount of $65.0 million ($42.3 million after tax) related to
the valuation of its Sun City Palm Desert active adult community (see Note 1).
In the first six months of fiscal 1996, net new orders at Sun City Palm Desert
were substantially below both the comparable period of the prior fiscal year and
the Company's expectations. Although the Company was encouraged by net new
orders significantly greater in the first 45 days of the third quarter of fiscal
1996 than in the comparable period in the prior fiscal year, a lower than
anticipated level of net new orders was expected in the remainder of fiscal 1996
and net new orders for all of fiscal 1996 were anticipated to be lower than in
prior fiscal years. Additionally, a national home builder was developing an
active adult community near Sun City Palm Desert, which was expected to cause
additional competitive pressures at that community. Based on these and other
factors, the Company reduced its estimate with respect to net new orders and
closings in the fiscal years ending June 30, 1997 and beyond to below the levels
achieved in the three fiscal years ended June 30, 1995. This resulted in
expected future net cash flows (undiscounted and without interest charges) at
Sun City Palm Desert being less than the book value of the asset. As required by
SFAS No. 121, the Company therefore recorded in fiscal 1996 a non-cash loss from
impairment of southern California real estate inventories to reflect Sun City
Palm Desert at its estimated fair value. Fair value was estimated based upon an
evaluation of comparable market prices and discounted expected future cash
flows.
(14) 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 condition of the Company.
The Company has issued surety bonds and standby letters of credit aggregating
$175.0 million at June 30, 1998.
The Company leases from third parties, under operating leases, office space,
models, apartment units which it rents to prospective customers at its
large-scale active adult communities, automobiles 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 $10.5 million, $7.5
million and $6.9 million for the years ended June 30, 1998, 1997 and 1996,
respectively.
Minimum lease payments (in thousands) to be made by the Company under
non-cancelable lease agreements are as follows:
1999 $ 6,999
2000 4,696
2001 3,062
2002 2,260
2003 2,085
Later years 5,854
------------
$ 24,956
============
47
(15) QUARTERLY FINANCIAL INFORMATION (Unaudited)
Quarterly financial information for the years ended June 30, 1998 and 1997 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,
1998 1998 1997 1997
- -------------------------------------------------------------------------------------------------------
Revenues $ 396,075 $ 254,714 $ 278,935 $ 248,043
Net earnings 17,622 7,520 11,266 6,125
Net earnings per share .97 .42 .64 .35
Net earnings per share -
assuming dilution .94 .40 .62 .34
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
June 30, March 31, December 31, September 30,
1997 1997 1996 1996
- -------------------------------------------------------------------------------------------------------
Revenues $ 347,968 $ 280,317 $ 293,682 $ 264,295
Earnings before extraordinary
item 13,319 9,576 10,799 5,992
Net earnings 13,319 8,291 10,799 5,992
Earnings per share before
extraordinary item .76 .54 .61 .34
Earnings per share before
extraordinary item - assuming
dilution .75 .54 .60 .33
Net earnings per share .76 .47 .61 .34
Net earnings per share -
assuming dilution .75 .46 .60 .33
- -------------------------------------------------------------------------------------------------------
48
DEL WEBB CORPORATION AND SUBSIDIARIES SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS -----------
Years ended June 30, 1998, 1997 and 1996
In Thousands
- ---------------------------------------------------------------------------------------------------------------------
Additions Additions
Balance at Charged to Charged to
Beginning of Costs and Other Balance at
Year Expenses Accounts Deductions End of Year
- ---------------------------------------------------------------------------------------------------------------------
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
=====================================================================================================================
1997
- ----
Reserve for residential land development project $ 7,126 $ 365 $ - $ - $ 7,491
Reserves for disposal costs of discontinued
operations 12,209 - - 1,827 10,382
- ---------------------------------------------------------------------------------------------------------------------
$ 19,335 $ 365 $ - $ 1,827 $ 17,873
=====================================================================================================================
1996
- ----
Reserve for residential land development project $ 8,264 $ - $ - $ 1,138 $ 7,126
Reserves for disposal costs of discontinued
operations 27,855 - - 15,646 12,209
- ---------------------------------------------------------------------------------------------------------------------
$ 36,119 $ - $ - $ 16,784 $ 19,335
=====================================================================================================================
49
DEL WEBB CORPORATION
Report on Form 10-K For The
Year Ended June 30, 1998
10-K EXHIBIT INDEX
------------------
NON-FINANCIAL STATEMENT EXHIBITS
--------------------------------
Exhibits Filed
Exhibit No.
- -----------
10.1 Form of Change of Control Agreement between Registrant and
certain of its officers.
10.2 Second Amended and Restated Revolving Loan Agreement by and
among Del Webb Corporation and Bank of America National Trust
and Savings Association as Agent, and Bank One Arizona, NA, as
Co-Agent, dated June 5, 1998.
10.3 Current list of participants to the Del Webb Corporation
Supplemental Executive Retirement Plan No. 2.
10.4 Del Webb Corporation Management Incentive Plan Fiscal 1999
(July 1, 1998 - June 30, 1999).
10.5 1998/99 Executive Management Incentive Plan Award Agreement
between the Registrant and Philip J. Dion dated July 23, 1998.
10.6 1998/99 Executive Management Incentive Plan Award Agreement
between the Registrant and LeRoy C. Hanneman, Jr. dated July
23, 1998.
21.0 Subsidiaries of the Registrant.
23.0 Consent of KPMG Peat Marwick LLP.
27 Financial Data Schedule.
27.1 Restated June 30, 1997 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.
3.1 The Bylaws of the Registrant effective November 1, 1994, as
amended on February 13, 1996, incorporated by reference to
Exhibit 3.1 to Registrant's Report on Form 10-K for the year
ended June 30, 1996.
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,
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.
2
10.7 Office Lease Agreement between Western Plaza Investors, L.P.
and Registrant dated April 20, 1994, incorporated by reference
to Exhibit 10.6 to Registrant's Report on Form 10-K for the
year ended June 30, 1994; as amended by the First Amendment to
Lease dated February 29, 1996, incorporated by reference to
Exhibit 10.6 to Registrant's Report on Form 10-K for the year
ended June 30, 1996.
10.8 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.
10.9 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.
10.10 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.
10.11 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.
10.12 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.
10.13 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.
10.14 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.
10.15 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.
10.16 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.
3
10.17 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.
10.18 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.
10.19 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.
10.20 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.
10.21 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.
10.22 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.
10.23 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.
10.24 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.
10.25 Supplemental Executive Retirement Plan No. 1 Participation
Agreement between the Registrant and Philip J. Dion, amended
and restated effective
4
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.
10.26 Supplemental Executive Retirement Plan No. 1 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.
10.27 Supplemental Executive Retirement Plan No. 1 Participation
Agreement as of April 11, 1997 between the Registrant and
LeRoy C. Hanneman., incorporated by reference to Exhibit 10.41
to Registrant's Report on Form 10-K for the year ended June
30, 1997.
10.28 Supplemental Executive Retirement Plan No. 1 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.
10.29 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.
10.30 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.
10.31 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.
10.32 Employment Agreement dated April 11, 1997 between the
Registrant and Anne L. Mariucci, incorporated by reference to
Exhibit 10.38 to Registrant's Report on Form 10-K for the year
ended June 30, 1997.
10.33 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.
10.34 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.
10.35 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 Form 10-Q dated February 9,
1998.
10.36 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.
* Reports filed under File No. 1-4785 were filed in the office of the
Security and Exchange Commission located in Washington, D.C.
5