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, 1998 TO JUNE 30, 1999.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from N/A to N/A.
Commission File Number: 1-4785
DEL WEBB CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 86-0077724
(State of Incorporation) (IRS Employer Identification Number)
6001 NORTH 24TH STREET, PHOENIX, ARIZONA 85016
(Address of principal executive offices) (Zip Code)
(602) 808-8000
(Registrant's phone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
New York Stock Exchange
Common Stock (par value $.001 per share) Pacific Stock Exchange
9 3/4% Senior Subordinated Debentures due 2003 New York Stock Exchange
9 % Senior Subordinated Debentures due 2006 New York Stock Exchange
9 3/4% Senior Subordinated Debentures due 2008 New York Stock Exchange
9 3/8% Senior Subordinated Debentures due 2009 New York Stock Exchange
10 1/4% Senior Subordinated Debentures due 2010 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Registrant's Common Stock outstanding at July 30, 1999 was 18,215,535 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 $405,300,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on November 4, 1999 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, 1999
TABLE OF CONTENTS
PART I
ITEMS 1. PAGE
AND 2.
Business and Properties
The Company..........................................................1
Communities..........................................................1
Certain Factors Affecting the Company's Operations...................5
Forward Looking Information; Certain Cautionary Statements...........8
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.........................................12
ITEM 8. Financial Statements and Supplementary Data.........................20
ITEM 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure............................20
PART III
ITEM 10. Directors and Executive Officers of the Registrant..................21
ITEM 11. Executive Compensation..............................................21
ITEM 12. Security and Ownership of Certain Beneficial Owners
And Management....................................................21
ITEM 13. Certain Relationships and Related Transactions......................21
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K...............................................22
PART I
ITEMS 1. AND 2. BUSINESS AND PROPERTIES
THE COMPANY
The Company develops active adult communities and family and country club
communities. The Company's current communities are located in Arizona,
California, Florida, Illinois, Nevada, South Carolina and Texas.
The Company is the nation's leading developer of active adult communities. It
has extensive experience in the active adult community business, having built
and sold more than 65,000 homes at 12 Sun City communities over the past 39
years. The Company's active adult communities (primarily its Sun City
communities) are generally large-scale, master planned communities with
extensive amenities for people age 55 and over. The Company designs, develops
and markets these communities, controlling all phases of the master plan
development process from land selection through the construction and sale of
homes.
The Company's family and country club communities are open to people of all ages
and are generally developed in metropolitan or market areas in which the Company
is developing active adult communities. For the fiscal year ended June 30, 1999,
family and country club communities generated 21.8 percent of the Company's
homebuilding revenues. The Company currently expects that active adult
communities will continue to be its primary business. Within all of its
communities, the Company is usually the exclusive builder of homes.
The Company was incorporated in 1946 in Arizona and reincorporated in 1994 in
Delaware. The 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, 1999, certain information concerning the
communities at which the Company has home sites on which it plans to build and
sell homes. Substantially all of these home sites are controlled by the Company.
REMAINING HOME SITES(1)
TOTAL HOME ------------------------
FIRST PLANNED CLOSINGS UNDER
HOME TOTAL HOME THROUGH OPTION
CLOSING ACRES SITES 6/30/99 TOTAL OWNED OR OTHER
------ ------ ------ ------ ------ ------ ------
Active adult communities:
Sun City Grand 1997 3,859 9,750 2,492 7,258 7,258 --
Sun Cities Las Vegas(2) 1989 6,720 19,592 9,633 9,959 3,159 6,800
Sun City Palm Desert 1992 1,645 4,443 2,170 2,273 2,273 --
Sun Cities Northern California 1995 3,594 8,800 3,042 5,758 3,514 2,244
Sun City Hilton Head 1995 5,600 8,250 1,462 6,788 5,244 1,544
Sun City Georgetown 1996 5,636 10,500 1,681 8,819 8,037 782
Sun City at Huntley 1999 1,996 5,570 195 5,375 4,955 420
Florida communities 1996 1,988 3,667 926 2,741 1,996 745
Other communities 1998 420 1,351 311 1,040 956 84
------ ------ ------ ------ ------
Total active adult communities 71,923 21,912 50,011 37,392 12,619
------ ------ ------ ------ ------
Family and country club communities:
Anthem Las Vegas Country Club 1999 950 1,100 83 1,017 1,017 --
Anthem Arizona Country Club(3) N/A 910 1,475 -- 1,475 1,475 --
Anthem Arizona family communities and
other(3) N/A 4,941 13,025 -- 13,025 13,025 --
Other Arizona family communities 1991 N/A 6,679 5,149 1,530 1,530 --
------ ------ ------ ------ ------
Total family and country club communities 22,279 5,232 17,047 17,047 --
------ ------ ------ ------ ------
Total 94,202 27,144 67,058 54,439 12,619
====== ====== ====== ====== ======
1
(1) Material additional regulatory approvals are required to build on many of
these home sites.
(2) The Company continues to work toward completion of an exchange with the
Bureau of Land Management for the remaining 2,400 acres not yet owned for
Sun City Anthem.
(3) The Company expects a long build out for Anthem Arizona. The Company has
the primary governmental approvals for up to 14,500 homes for Anthem
Arizona, 1,475 of which are currently planned for the Anthem Arizona County
Club community. The number of home sites developed may vary significantly
depending on market and other conditions over the life of the project.
ACTIVE ADULT COMMUNITIES
Sun City Grand is located 25 miles northwest of downtown Phoenix.
The Sun Cities Las Vegas include Sun City Summerlin, Sun City MacDonald Ranch
and Sun City Anthem. Sun City Summerlin, which is near completion, is located
eight miles northwest of downtown Las Vegas. Sun City MacDonald Ranch and Sun
City Anthem are both located in Henderson, Nevada, near Las Vegas. The Company
began taking new home sales orders at Sun City Anthem in July 1998 and began
home closings there in December 1998.
Sun City Anthem is part of the 4,900-acre Anthem Las Vegas project, which also
includes a country club and family community component. 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 the
completion of an exchange with the BLM for the remaining acres, substantially
all of which will be used for Sun City Anthem.
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.
The Sun Cities Northern California include Sun City Roseville and Sun City
Lincoln Hills. Sun City Roseville, which is near completion, is located 20 miles
northeast of downtown Sacramento, California. Sun City Lincoln Hills is located
near Sun City Roseville in the town of Lincoln, California. The Company began
taking new home sales orders at Sun City Lincoln Hills in February 1999. Home
closings are scheduled to begin there in fiscal 2000.
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.
Sun City at Huntley is located in Huntley, Illinois (near Chicago). The Company
began taking home sales orders at Sun City at Huntley in September 1998. Home
closings began at Sun City at Huntley in April 1999.
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 two smaller-scale, age-qualified communities in
Tucson, Arizona and Cloverdale, California at which net new orders activity and
home closings began in fiscal 1998.
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.
2
FAMILY AND COUNTRY CLUB COMMUNITIES
The Anthem Las Vegas Country Club community is part of the Anthem Las Vegas
project. The Company began taking new home sales orders at this community in
July 1998 and began home closings there in February 1999.
Anthem Arizona, located on 5,851 acres near Phoenix, includes country club and
family communities. The total number of home sites and types of communities
developed may vary significantly depending on market and other conditions over
the life of Anthem Arizona, which is expected to have a long build-out. The
Company began taking new home sales orders at both the country club and family
communities at Anthem Arizona in February 1999. Home closings began at Anthem
Arizona in July 1999.
The Company began its family community operations (conducted under the name
"Coventry Homes") in Arizona in 1991. At June 30, 1999 the Company had a backlog
of home sales orders at 13 family communities in Arizona, including 4
communities at Anthem Arizona.
The Company also conducted family community operations in California from fiscal
1995 to fiscal 1998 and in Nevada from fiscal 1994 to fiscal 1999. The Company
currently intends to offer for sale to other home builders substantially all
remaining lots in its Nevada family communities, including Anthem Las Vegas, in
fiscal 2000. The Company also plans to offer for sale certain land parcels in
its Arizona family community operations in fiscal 2000.
LAND ACQUISITION
At any given time, the Company may have a number of land acquisitions for
potential communities under study and in various stages of investigation or
negotiation. The Company is currently investigating the acquisition of land for
communities to be located both in areas of the country where the Company has
active adult communities and in other areas, including full four-season areas
(i.e., areas which experience cold winters), where it does not yet have
extensive experience in 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.
PRODUCT DESIGN
The Company designs homes to suit its market and endeavors to include popular
home design characteristics in the particular geographic market involved. Home
designs are periodically reviewed and refined or changed in response to customer
information obtained in each market. Homes at the Company's communities
generally range in size from 1,000 square feet to 3,000 square feet. The Company
offers an extensive program of interior and exterior upgrades and options to
allow home buyers the opportunity to customize their homes.
CONSTRUCTION
The Company generally functions as its own general contractor. At all stages of
production, the Company's management personnel and on-site superintendents
coordinate the activities of contractors, consultants and suppliers and subject
their work to quality and cost controls. Consulting firms assist in project
planning and independent contractors are employed to perform almost all of the
site development and construction work. The Company does not usually sell lots
to others for residential construction. The time required for construction of
the Company's homes depends on the weather, time of year, local labor
situations, availability of materials and supplies and other factors. The
Company strives to coordinate the construction of homes with home sales orders
to control the costs and risks associated with completed but unsold inventory.
An inventory of unsold homes is maintained for immediate sale to customers.
3
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. At each community the Company provides to all home buyers
warranties standardized for the community, 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 in part to follow-ups on referrals from
residents of its communities and to the Company's "Vacation Getaway" program.
This program enables prospective purchasers to visit 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 purchase 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.
With the exception of the Florida communities, 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. While the amount of competition varies from community to
community, each of the Company's active adult communities faces direct and
increasing competition from businesses exclusively or primarily selling homes to
buyers age 55 or older, as well as from non-age-qualified, master-planned
communities in these areas. The Company competes with new home sales and resales
at these other communities, as well as with resales of homes in its own
communities. The Company believes there may be significant additional future
competition in active adult community development, including competition from
national homebuilders and family community developers.
The Company believes the major competitive factors affecting home purchases at
its communities include location, home quality, lifestyle (including
recreational facilities and other amenities), price, value, design, mortgage
financing terms and builder/developer reputation.
4
CERTAIN FACTORS AFFECTING THE COMPANY'S OPERATIONS
Set forth below is a brief description of certain matters that may affect the
Company.
FINANCING AND LEVERAGE. The Company is considerably more highly leveraged at
June 30, 1999 than it has been in recent years. If there is a significant
downturn in the Company's anticipated operations, the Company will need to
further modify its business plan to operate with lower capital resources.
Modifications of the business plan could include, among other things, delaying
development expenditures at its communities.
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. Additionally, the
availability and cost of debt financing depends on governmental policies and
other factors outside the Company's control. If the Company cannot at any time
obtain sufficient capital resources to fund its development and expansion
expenditures, however, 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. 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.
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 depend on the Company's ability to successfully develop and market future
communities. 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, developing land and lots 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 the Company to recover these material expenditures.
The Company incurs additional risks to the extent it develops communities in
climates or geographic areas in which it does not have significant (or any)
experience or develops a different size or style of community. These risks
include acquiring the necessary construction materials and labor in sufficient
amounts and on acceptable terms, adapting the Company's construction methods and
home styles to different geographies, climates and potential customers and
reaching acceptable sales levels at those communities. Among other things, the
Company believes that a significant portion of the home sales at its large-scale
active adult communities is attributable in part 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 (or any) experience.
GOVERNMENTAL REGULATION, GROWTH MANAGEMENT AND ENVIRONMENTAL CONSIDERATIONS. The
Company's business is subject to extensive federal, state and local
environmental concerns and other regulatory requirements, which have affected
and will continue to affect all of the Company's community development
operations. These requirements include, with respect to development activities
and land exchanges, the broad discretion that governmental agencies have in
administering those requirements and "no growth" or "managed growth" political
sentiments and the resulting regulatory implications, which have been increasing
in recent years. All of these requirements can prevent, delay, make uneconomic
or significantly increase the cost of the Company's developments.
If the land exchange for the Anthem Las Vegas project 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. The Company may then have
to dispose of property it acquired for the exchange at a price below its
purchase price.
5
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. No
assurance can be given that the Company will receive, or receive in a timely
manner, any 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.
GEOGRAPHIC CONCENTRATION. The Company's operations are comprised of a limited
number of communities in seven states and are particularly concentrated, in
terms of both invested capital and profitability, in the Phoenix and Las Vegas
metropolitan areas. The Company's geographic concentration and limited number of
projects may create increased vulnerability to regional economic downturns or
other adverse region-specific matters.
A significant number of purchasers at the Company's active adult communities in
Arizona, Nevada and southern California are from southern California. These
communities have been and may in the future be affected by conditions in the
southern California real estate market and the southern California economy
generally.
CYCLICAL NATURE OF REAL ESTATE OPERATIONS. All of the Company's communities are
subject to fluctuations in the real estate market, both where its communities
are located and in areas where its potential customers reside, as well as the
cyclical nature of real estate operations, general economic conditions and
changing demographics.
The Company's communities are long-term projects. Sales activity 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 in later periods over the life of the community. Revenues and earnings of
the Company will also be affected by periodic fluctuations in the mix of product
and home closings among the Company's communities and by sales of commercial
land and facilities at the Company's communities.
INTEREST RATES. The Company's real estate operations depend on 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 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.
CONSTRUCTION LABOR AND MATERIALS COST. The Company has from time to time
experienced shortages of materials or qualified tradespeople and volatile
increases in certain costs, particularly increases in the price of lumber and
framing, which are significant components of home construction costs. This has
caused longer than normal construction periods and cost increases that were not
reflected in the prices of homes 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 cause construction delays, increase costs and the
loss of some home sale contracts.
NATURAL RISKS. Some of the Company's communities are subject to natural risks
including earthquakes, floods, tornadoes, hurricanes, severe winters and
significant rainfall. Some of these conditions have had a significant impact on
the Company's operations in the past. Any natural disaster could have a material
adverse impact on the Company's results of operations in the future.
6
YEAR 2000 ISSUE. The Company expects to incur Year 2000-related costs in fiscal
2000 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 occur if it, or the third parties with whom it has
significant relationships, were to cease or not successfully complete Year 2000
remediation efforts. In that event, the Company would encounter disruptions to
its business that could have a material adverse effect on its results of
operations. The Company would also be materially adversely affected by
widespread economic or financial market disruption or by Year 2000 computer
system failures at government agencies on which it is dependent for zoning,
building permits and related matters. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Year 2000 Issue."
7
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.
Forward looking statements are based upon assumptions of future events, which
may not prove to be accurate. Actual results may differ materially from those
projected or implied in the forward looking statements.
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below are the names and ages of all executive officers of the Company
and the offices held by each at July 31, 1999.
YEARS
YEARS AS AN EMPLOYED
EXECUTIVE BY THE
NAME AGE POSITION OFFICER COMPANY
---- --- -------- ------- -------
P. J. Dion 54 Chairman of the Board and 17 17
Chief Executive Officer
L. C. Hanneman, Jr. 52 President and Chief Operating 10 27
Officer
J. H. Gleason 57 Executive Vice President, 9 11
Project Planning and
Development
J. A. Spencer 50 Executive Vice President and 14 20
Chief Financial Officer
R. C. Jones 54 Senior Vice President and 7 7
General Counsel
A. L. Mariucci 42 Senior Vice President, 13 15
Family and Country Club
Communities
D. V. Mickus 53 Vice President, Treasurer 13 16
and Secretary
D. E. Rau 42 Vice President and Controller 13 14
Mr. Dion has served as Chairman of the Board and Chief Executive Officer since
1987. Mr. Dion will retire as Chief Executive Officer effective November 1999.
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, as Senior Vice President
from January 1994 to May 1996 and as Vice President from 1989 to January 1994.
From 1987 to May 1996 he served as General Manager of the Sun Cities Las Vegas.
Mr. Gleason has served as Executive Vice President, Project Planning and
Development since February 1999. From January 1994 to February 1999 he served as
Senior Vice President, Project Planning and Development.
Mr. Spencer has served as Chief Financial Officer since 1993. Since February
1999 he has served as Executive Vice President. From February 1991 to February
1999 he served as Senior Vice President.
Mr. Jones has served as Senior Vice President and General Counsel since May
1998. Prior to that time he served as Vice President and General Counsel from
1992 to May 1998.
8
EXECUTIVE OFFICERS OF THE COMPANY (CONTINUED)
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 family and country club communities
since January 1998. Prior to that time she served as General Manager of
Terravita from 1992 to January 1998 and General Manager of Anthem Arizona from
July 1996 to January 1998.
Mr. Mickus has served as Vice President and Treasurer since 1985 and as
Secretary since 1991.
Mr. Rau has served as Vice President and Controller since 1991.
EMPLOYEES
At June 30, 1999 the Company had 4,100 employees. The Company currently has no
unionized employees. The Company believes that its employee relations are
generally satisfactory.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings arising in the ordinary
course of business. While it is not feasible to predict the ultimate disposition
of these matters, in the opinion of management their outcome will not have a
material adverse effect on the financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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 30,1999.
SALES PRICE
FISCAL YEAR 1999 FISCAL YEAR 1998
-------------------- -------------------
QUARTER ENDED HIGH LOW HIGH LOW
- ------------- ---- --- ---- ---
September 30 28 3/16 19 5/8 21 3/8 16 3/8
December 31 29 1/2 17 1/16 27 3/8 17 7/8
March 31 29 19 9/16 34 7/8 24 5/16
June 30 25 15/16 19 15/16 30 1/2 23
- --------------------------------------------------------------------------------
As of July 30, 1999 there were 2,758 shareholders of record of the Company's
common stock.
The Company paid regular quarterly dividends of $.05 per share in the four
fiscal years ended June 30, 1998 and for the quarter ended September 30, 1998.
The Company ceased paying dividends thereafter and currently utilizes the
capital that would otherwise be paid as cash dividends to make opportunistic
purchases of its common stock or for other corporate purposes. The amount and
timing of any future dividends is subject to the discretion of the Board of
Directors.
The Company is 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, 1999,
$50.7 million of the Company's retained earnings were available for payment of
cash dividends and 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, 1999. 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,
-------------------------------------------------------------
1999 1998 1997 (1) 1996 (2) 1995
---------- ---------- ---------- ---------- --------
STATEMENT OF OPERATIONS INFORMATION:
Revenues:
Home sales - active adult communities $1,084,463 $ 830,728 $ 786,746 $ 669,055 $512,204
Home sales - family and country club
communities 302,658 287,656 357,343 342,774 252,277
Land and facility sales and other 79,060 59,383 42,173 38,904 38,638
---------- ---------- ---------- ---------- --------
Total revenues $1,466,181 $1,177,767 $1,186,262 $1,050,733 $803,119
========== ========== ========== ========== ========
Earnings (loss):
Before extraordinary item $ 58,090 $ 42,533 $ 39,686 $ (7,751) $ 28,491
Total 58,090 42,533 38,401 (7,751) 28,491
========== ========== ========== ========== ========
Net earnings (loss) per share - basic:
Before extraordinary item $ 3.20 $ 2.39 $ 2.26 $ (.44) $ 1.92
Total 3.20 2.39 2.18 (.44) 1.92
========== ========== ========== ========== ========
Net earnings (loss) per share - assuming dilution:
Before extraordinary item $ 3.11 $ 2.30 $ 2.22 $ (.44) $ 1.87
Total 3.11 2.30 2.15 (.44) 1.87
========== ========== ========== ========== ========
Cash dividends per share $ .05 $ .20 $ .20 $ .20 $ .20
========== ========== ========== ========== ========
(1) Earnings for fiscal 1997 include a $1.3 million extraordinary loss from the
early extinguishment of debt.
(2) In fiscal 1996, in connection with the adoption of Statement of Financial
Accounting Standards ("SFAS") No. 121, the Company incurred a non-cash loss
from impairment of southern California real estate inventories of $65.0
million pre-tax ($42.3 million after tax) related to the valuation of 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 - basic or $1.96 per share - assuming dilution).
DOLLARS IN THOUSANDS
AT JUNE 30,
------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
BALANCE SHEET INFORMATION:
Total assets $1,866,797 $1,310,462 $1,086,662 $1,024,795 $ 925,050
Notes payable and senior debt 359,056 167,608 222,881 320,063 284,585
Subordinated debt 681,557 536,330 340,187 194,614 206,673
---------- ---------- ---------- ---------- ----------
Total notes payable, senior and
subordinated debt ("Debt") 1,040,613 703,938 563,068 514,677 491,258
Shareholders' equity $ 404,794 $ 345,767 $ 299,830 $ 264,776 $ 229,342
Total Debt divided by the sum
of Debt and shareholders' equity 72.0% 67.1% 65.3% 66.0% 68.2%
========== ========== ========== ========== ==========
11
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, 1999.
YEAR ENDED CHANGE CHANGE
JUNE 30, 1999 VS 1998 1998 VS 1997
------------------------------ ----------------- -----------------
1999 1998 1997 AMOUNT PERCENT AMOUNT PERCENT
-------- -------- -------- -------- ----- -------- -----
OPERATING DATA:
Number of net new orders:
Active adult communities:
Sun Cities Phoenix 1,324 1,245 1,271 79 6.3% (26) (2.0%)
Sun City Tucson N/A N/A 58 N/A N/A (58) (100.0%)
Sun Cities Las Vegas 1,271 1,179 1,091 92 7.8% 88 8.1%
Sun City Palm Desert 501 443 262 58 13.1% 181 69.1%
Sun Cities Northern California 757 739 553 18 2.4% 186 33.6%
Sun City Hilton Head 425 396 337 29 7.3% 59 17.5%
Sun City Georgetown 349 437 440 (88) (20.1%) (3) (0.7%)
Sun City at Huntley 700 N/A N/A 700 N/A N/A N/A
Florida communities 318 240 N/A 78 32.5% 240 N/A
Other communities 310 169 N/A 141 83.4% 169 N/A
-------- -------- -------- ------- ------ ------- ------
Total active adult communities 5,955 4,848 4,012 1,107 22.8% 836 20.8%
-------- -------- -------- ------- ------ ------- ------
Family and country club communities:
Arizona country club communities 244 N/A 226 244 N/A (226) (100.0%)
Nevada country club communities 218 N/A N/A 218 N/A N/A N/A
Arizona family communities 1,216 1,116 917 100 9.0% 199 21.7%
Nevada family communities 505 319 262 186 58.3% 57 21.8%
California family communities N/A N/A 180 N/A N/A (180) (100.0%)
-------- -------- -------- ------- ------ ------- ------
Total family and country club communities 2,183 1,435 1,585 748 52.1% (150) (9.5%)
-------- -------- -------- ------- ------ ------- ------
Total 8,138 6,283 5,597 1,855 29.5% 686 12.3%
======== ======== ======== ======= ====== ======= ======
Number of home closings:
Active adult communities:
Sun Cities Phoenix 1,259 1,268 1,132 (9) (0.7%) 136 12.0%
Sun City Tucson N/A N/A 103 N/A N/A (103) (100.0%)
Sun Cities Las Vegas 1,274 1,164 1,200 110 9.5% (36) (3.0%)
Sun City Palm Desert 482 304 248 178 58.6% 56 22.6%
Sun Cities Northern California 731 637 650 94 14.8% (13) (2.0%)
Sun City Hilton Head 400 386 371 14 3.6% 15 4.0%
Sun City Georgetown 382 448 616 (66) (14.7%) (168) (27.3%)
Sun City at Huntley 195 N/A N/A 195 N/A N/A N/A
Florida communities 460 170 N/A 290 170.6% 170 N/A
Other communities 244 67 N/A 177 264.2% 67 N/A
-------- -------- -------- ------- ------ ------- ------
Total active adult communities 5,427 4,444 4,320 983 22.1% 124 2.9%
-------- -------- -------- ------- ------ ------- ------
Family and country club communities:
Arizona country club communities N/A 120 410 (120) (100.0%) (290) (70.7%)
Nevada country club communities 83 N/A N/A 83 N/A N/A N/A
Arizona family communities 974 998 1,042 (24) (2.4%) (44) (4.2%)
Nevada family communities 340 326 251 14 4.3% 75 29.9%
California family communities N/A 20 183 (20) (100.0%) (163) (89.1%)
-------- -------- -------- ------- ------ ------- ------
Total family and country club communities 1,397 1,464 1,886 (67) (4.6%) (422) (22.4%)
-------- -------- -------- ------- ------ ------- ------
Total 6,824 5,908 6,206 916 15.5% (298) (4.8%)
======== ======== ======== ======= ====== ======= ======
12
ITEMS 7. AND 7A. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA (CONTINUED)
YEAR ENDED CHANGE CHANGE
JUNE 30, 1999 VS 1998 1998 VS 1997
----------------------------- ----------------- -----------------
1999 1998 1997 AMOUNT PERCENT AMOUNT PERCENT
-------- -------- ------- -------- ----- -------- -----
BACKLOG DATA:
Homes under contract at June 30:
Active adult communities:
Sun Cities Phoenix 734 669 692 65 9.7% (23) (3.3%)
Sun City Tucson N/A N/A N/A N/A N/A N/A N/A
Sun Cities Las Vegas 545 548 533 (3) (0.5%) 15 2.8%
Sun City Palm Desert 284 265 126 19 7.2% 139 110.3%
Sun Cities Northern California 408 382 280 26 6.8% 102 36.4%
Sun City Hilton Head 194 169 159 25 14.8% 10 6.3%
Sun City Georgetown 158 191 202 (33) (17.3%) (11) (5.4%)
Sun City at Huntley 505 N/A N/A 505 N/A N/A N/A
Florida communities 133 275 N/A (142) (51.6%) 275 N/A
Other communities 168 102 N/A 66 64.7% 102 N/A
-------- -------- -------- -------- ----- -------- -----
Total active adult communities 3,129 2,601 1,992 528 20.3% 609 30.6%
-------- -------- -------- -------- ----- -------- -----
Family and country club communities:
Arizona country club communities 244 N/A 120 244 N/A (120) (100.0%)
Nevada country club communities 135 N/A N/A 135 N/A N/A N/A
Arizona family communities 727 485 367 242 49.9% 118 32.2%
Nevada family communities 249 84 91 165 196.4% (7) (7.7%)
California family communities N/A N/A 20 N/A N/A (20) (100.0%)
-------- -------- -------- -------- ----- -------- -----
Total family and country club communities 1,355 569 598 786 138.1% (29) (4.8%)
-------- -------- -------- -------- ----- -------- -----
Total 4,484 3,170 2,590 1,314 41.5% 580 22.4%
======== ======== ======== ======== ===== ======== =====
Aggregate contract sales amount
(dollars in millions) $ 1,038 $ 642 $ 514 $ 396 61.7% $ 128 24.9%
======== ======== ======== ======== ===== ======== =====
Average contract sales amount per
home (dollars in thousands) $ 231 $ 203 $ 198 $ 28 13.8% $ 5 2.5%
======== ======== ======== ======== ===== ======== =====
AVERAGE REVENUE PER HOME
CLOSING:
Active adult communities:
Sun Cities Phoenix $178,300 $157,400 $158,900 $ 20,900 13.3% $ (1,500) (0.9%)
Sun City Tucson N/A N/A 167,000 N/A N/A N/A N/A
Sun Cities Las Vegas 208,700 202,400 182,900 6,300 3.1% 19,500 10.7%
Sun City Palm Desert 243,800 234,000 221,100 9,800 4.2% 12,900 5.8%
Sun Cities Northern California 239,800 219,200 215,800 20,600 9.4% 3,400 1.6%
Sun City Hilton Head 189,100 173,100 168,100 16,000 9.2% 5,000 3.0%
Sun City Georgetown 218,300 201,000 183,100 17,300 8.6% 17,900 9.8%
Sun City at Huntley 236,700 N/A N/A N/A N/A N/A N/A
Florida communities 115,900 97,900 N/A 18,000 18.4% N/A N/A
Other communities 175,300 168,000 N/A 7,300 4.3% N/A N/A
Average active adult communities 199,800 186,900 182,100 12,900 6.9% 4,800 2.6%
Family and country club communities:
Arizona country club communities N/A 310,200 292,100 N/A N/A 18,100 6.2%
Nevada country club communities 379,000 N/A N/A N/A N/A N/A N/A
Arizona family communities 211,100 191,000 152,300 20,100 10.5% 38,700 25.4%
Nevada family communities 193,000 172,100 159,800 20,900 12.1% 12,300 7.7%
California family communities N/A 186,600 211,900 N/A N/A (25,300) (11.9%)
Average family and country club communities 216,600 196,500 189,500 20,100 10.2% 7,000 3.7%
Total average $203,300 $189,300 $184,400 $ 14,000 7.4% $ 4,900 2.7%
======== ======== ======== ======== ===== ======== =====
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, 1999 VS 1998 1998 VS 1997
----------------------- -------------- --------------
1999 1998 1997 AMOUNT PERCENT AMOUNT PERCENT
----- ----- ----- ----- ----- ----- -----
OPERATING STATISTICS:
Costs and expenses as a percentage of revenues:
Home construction, land and other 75.9% 76.3% 77.0% (0.4%) (0.5%) (0.7%) (0.9%)
Selling, general and administrative 13.9% 14.1% 13.6% (0.2%) (1.4%) 0.5% 3.7%
Interest 4.0% 3.9% 4.2% 0.1% 2.6% (0.3%) (7.1%)
Ratio of home closings to homes under
contract in backlog at beginning of period 215.3% 228.1% 194.0% (12.8%) (5.6%) 34.1% 17.6%
===== ===== ===== ===== ===== ===== =====
NOTES:
New orders are net of cancellations. The Company recognizes revenue at close of
escrow.
The Sun Cities Phoenix include Sun City West, which is built out, and Sun City
Grand.
The Sun Cities Las Vegas include Sun City Summerlin, Sun City MacDonald Ranch
and Sun City Anthem. The Company began taking new home sales orders at Sun City
Anthem in July 1998. Home closings began at Sun City Anthem in December 1998.
The Sun Cities Northern California include Sun City Roseville and Sun City
Lincoln Hills. The Company began taking new home sales orders at Sun City
Lincoln Hills in February 1999.
The Company began taking new home sales orders at Sun City at Huntley in
September 1998. Home closings began at Sun City at Huntley in April 1999.
In January 1998 the Company acquired certain assets and assumed certain
liabilities at two operating active adult communities in central Florida.
Other active adult communities represent two smaller-scale communities in
Arizona and California at which new order activity began in October and November
1997, respectively. Home closings began at these communities in March and May
1998, respectively.
Arizona country club communities include Terravita and Anthem Country Club. The
Company completed new order activity and home closings at Terravita in fiscal
1998. The Company began taking new home sales orders at Anthem Country Club in
February 1999.
The Company began taking new home sales orders at Anthem Country Club (a Nevada
country club community near Las Vegas) in July 1998. Home closings began at
Anthem Country Club in February 1999.
The Company completed new order activity for its California family communities
in June 1997. Home closings for these communities were completed in August 1997.
A substantial majority of the backlog at June 30, 1999 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, 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, 1999, 1998 and 1997,
cancellations of home sales orders as a percentage of new home sales orders
written during the year were 14.4 percent, 13.9 percent and 17.1 percent,
respectively. See "Business and Properties - Forward Looking Information;
Certain Cautionary Statements."
14
ITEMS 7. AND 7A. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
REVENUES. Total revenues increased to $1.47 billion for the fiscal year ended
June 30, 1999 from $1.18 billion for the fiscal year ended June 30, 1998.
Active adult community homebuilding revenues increased to $1.08 billion for
fiscal 1999 from $831 million for fiscal 1998. The Company's Sun City Anthem
community near Las Vegas, Sun City at Huntley community near Chicago, Florida
communities and smaller-scale active adult communities in Arizona and California
(which collectively had only 237 home closings in fiscal 1998) accounted for
$155 million of the increase in active adult community homebuilding revenues. An
increase in the average revenue per home closing resulted in $74 million of the
increase in active adult community homebuilding revenues. Sun City Palm Desert
and Sun City Roseville, which respectively closed 178 and 94 more homes in
fiscal 1999 than in fiscal 1998, accounted for $62 million of the increase in
active adult community homebuilding revenues. Management believes that these
increases are largely attributable to improvement in California's real estate
economy and its economy generally. Partially offsetting these increases were $40
million of decreased revenues from decreased home closings at the nearly
complete community of Sun City Summerlin in Las Vegas.
Family and country club community homebuilding revenues increased to $303
million for fiscal 1999 from $288 million for fiscal 1998. The Company's Anthem
communities near Las Vegas and Coventry Bellasera community near Phoenix (which
collectively had only 39 home closings in fiscal 1998) accounted for a $49
million increase in family and country club community homebuilding revenues. An
increase in the average revenue per home closing resulted in $15 million of the
increase in family and country club community homebuilding revenues. Partially
offsetting these increases were $52 million of decreased revenues from decreased
home closings at the completed Terravita, Coventry Tucson and Coventry Southern
California communities, which collectively had only 140 home closings in fiscal
1999.
Land and facility sales and other revenues increased to $79 million for fiscal
1999 from $59 million for fiscal 1998. The increase was largely attributable to
the sale of all of the Company's unsold family community lots in the Tucson area
and a gain on an equipment sale in fiscal 1999. The Company currently intends to
offer for sale in fiscal 2000 certain land parcels in its Arizona family
community operations and all remaining home sites at its Nevada family community
operations (see "Liquidity and Financial Condition of the Company").
Total revenues decreased slightly to $1.18 billion for fiscal 1998 from $1.19
billion for the fiscal year ended June 30, 1997. Active adult community
homebuilding revenues increased to $831 million for fiscal 1999 from $787
million for fiscal 1998. This increase in active adult community homebuilding
revenues was primarily due to the commencement in fiscal 1998 of active adult
community operations in Florida, home closings at two smaller-scale active adult
communities in Arizona and California and an increase in the average revenue per
home closing.
Family and country club community homebuilding revenues decreased to $288
million for fiscal 1998 from $357 million for fiscal 1997. This decrease was due
to decreased home closings at Terravita and California family communities,
reflecting the completion of those operations.
Land and facility sales and other revenues increased to $59 million for fiscal
1998 from $42 million for fiscal for fiscal 1997. The increase was primarily
attributable to the sale of a golf course and shopping center in connection with
the completion of operations at Terravita.
HOME CONSTRUCTION, LAND AND OTHER COSTS. The increase in home construction, land
and other costs to $1.11 billion for fiscal 1999 from $899 million for fiscal
1998 was largely due to the increase in home closings. As a percentage of
revenues, these costs decreased to 75.9 percent for fiscal 1999 from 76.3
percent for fiscal 1998. Homebuilding margins improved to 24.2 percent in fiscal
1999 from 23.0 percent in fiscal 1998, primarily as a result of increased
revenue per home closing at virtually all of the Company's communities.
15
ITEMS 7. AND 7A. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
The decrease in home construction, land and other costs to $899 million for
fiscal 1998 from $914 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 from 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 completed 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 family
community operations.
On a period-to-period basis, home construction, land and other costs as a
percentage of revenues will vary due to, among other things, changes in product
mix, differences between individual communities, lot premiums, optional
upgrades, price increases and changes in construction costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. As a percentage of revenues,
selling, general and administrative expenses decreased to 13.9 percent for
fiscal 1999 compared to 14.1 percent for fiscal 1998. This decrease resulted
from the spreading of corporate overhead over significantly greater revenues.
As a percentage of revenues, selling, general and administrative expenses
increased to 14.1 percent for fiscal 1998 from 13.6 percent for fiscal 1997.
This increase was due primarily to increased corporate overhead to investigate
new market opportunities and support an increased number of pre-operating
communities.
INTEREST. As a percentage of revenues, amortization of capitalized interest was
4.0 percent for fiscal 1999 compared to 3.9 percent for fiscal 1998. This
increase was primarily due to an increase in debt levels (see "Liquidity and
Financial Condition of the Company").
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
was being capitalized on qualified assets but at which interest amortization on
home closings had not yet begun.
INCOME TAXES. The increases in income taxes to $33 million in fiscal 1999 from
$24 million in fiscal 1998, and to $24 million in fiscal 1998 from $22 million
in fiscal 1997, were due to the increases in earnings before income taxes. The
effective tax rate in each of the three fiscal years was 36 percent.
EXTRAORDINARY ITEM. In connection with the early redemption of all of the
Company's $100 million of outstanding 10 7/8% Senior Notes at par on March 31,
1997, an extraordinary loss of $1.3 million was recognized in fiscal 1997.
NET EARNINGS. The increase in net earnings to $58 million for fiscal 1999
compared to $43 million for fiscal 1998 was primarily attributable to the
increase in home closings, revenues and homebuilding gross margins.
The increase in net earnings to $43 million for fiscal 1998 from $38 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 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.
16
ITEMS 7. AND 7A. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
NET NEW ORDER ACTIVITY AND BACKLOG. Net new orders in fiscal 1999 were 29.5
percent higher than in fiscal 1998. The number of homes under contract at June
30, 1999 was 41.5 percent higher than at June 30, 1998. Both of these increases
were primarily attributable to Sun City at Huntley and the family and country
club communities at the Anthem projects near Phoenix and Las Vegas. These
communities had new order activity in fiscal 1999 but had not yet commenced new
order activity in fiscal 1998. Management believes that the decreases in net new
orders and backlog at Sun City Georgetown and the Florida active adult
communities may have been partially attributable to the impact of increased
sales prices and potential buyers awaiting the recent openings of new model
homes.
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 in fiscal 1998 was largely due to the
commencement of Florida active adult community operations in January 1998 and
net new order activity at two smaller-scale active adult communities in Arizona
and California and the Coventry Bellasera community near Phoenix in fiscal 1998.
These increases were partially offset by declines attributable to the completed
operations of Terravita, California family communities and Sun City Tucson.
The increase in net new orders at communities 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 was 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 was due to the
continued strength of the Las Vegas market. At Sun City Hilton Head, management
believes that the increase in net new orders was partially due to the fact that
important commercial and service-related businesses had announced development
plans for the area adjacent to Sun City Hilton Head. Family community 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 believe 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 was
approaching completion) and Sun City Georgetown (where management believes sales
had leveled after satisfaction of initial local pent-up demand).
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, acquiring large tracts of land, obtaining development
approvals, developing land and lots and constructing project infrastructure
(such as roads and utilities), large recreation centers, golf courses, model
homes and sales facilities. Since these costs are capitalized, this can result
in income reported for financial statement purposes during those initial years
significantly exceeding cash flow. However, after the initial years of
development or expansion, when these expenditures are made, cash flow can
significantly exceed earnings reported for financial statement purposes, as
costs and expenses include amortization charges for substantial amounts of
previously expended costs.
During fiscal 1999 the Company generated $570 million of net cash from operating
community sales activities, used $328 million for land and lot and amenity
development at operating communities, paid $381 million for costs related to
communities in the pre-operating stage and used $139 million for other operating
activities. The resulting $278 million of net cash used for operating activities
was funded mainly through borrowings under the Company's $500 million senior
unsecured revolving credit facility (the "Credit Facility") and $25 million
short-term lines of credit (together with the Credit Facility, the "Credit
Facilities"). The net proceeds from the February 1999 public offering of $150
million in principal amount of 10 1/4% Senior Subordinated Debentures due 2010
(the "Offering") were used to repay a portion of the indebtedness outstanding
under the Credit Facility. Increased home sale deposits (resulting from the
increase in net new orders and backlog) were also a significant source of
funding in fiscal 1999.
17
ITEMS 7. AND 7A. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Real estate development is dependent on, among other things, the availability
and cost of financing. In periods of significant growth, the Company may require
significant additional capital resources, whether from issuances of equity or by
increasing its indebtedness. In fiscal 1999 the Company decided to engage in
substantial development and permit its leverage to increase substantially. It
had under development, among other projects: (i) Sun City Lincoln Hills, the
successor community to Sun City Roseville; (ii) Anthem Las Vegas, which includes
Sun City Anthem, country club and family communities; (iii) Anthem Arizona,
which includes country club and family communities and (iv) Sun City at Huntley.
To date, material cash expenditures have been made for these communities. The
Company anticipates that it will make material additional development and
housing construction expenditures at these communities through at least December
31, 1999. In order to provide adequate capital to meet the Company's operating
requirements for the next 12 months, the Company in February 1999 completed the
Offering and negotiated an increase in the amount of its Credit Facility from
$450 million to $500 million. At June 30, 1999 the Company had $301 million
outstanding under the Facilities. At that date, $99 million of the $224 million
of unused capacity under the Credit Facilities was not available to the Company.
However, as a result of an amendment, effective July 1, 1999, to the "Total Debt
to Tangible Net Worth" covenant under the Credit Facility, the Company had full
availability of the Credit Facilities (the short-term lines of credit were $15
million as of that date).
As a result of public offerings of debt and borrowings to fund development
expenditures, described above, the Company is considerably more highly leveraged
at June 30, 1999 than it has been in recent years. The Company expects to
continue to borrow additional amounts under the Credit Facilities to fund
continuing development at these communities. The Company expects to have
adequate capital resources to meet its needs for the next 12 months. In
addition, the Company will offer for sale to other home builders certain land
parcels in its Arizona family community operations and substantially all
remaining lots in its Nevada family communities and to otherwise manage its
expenditures to meet its needs and available resources over this time period. If
there is a significant downturn in the Company's anticipated operations, the
Company will need to further modify its business plan to operate with lower
capital resources. Modifications of the business plan could include, among other
things, delaying development expenditures at its communities.
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. Additionally, the
availability and cost of debt financing depends on governmental policies and
other factors outside the Company's control. 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. 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.
At June 30, 1999, under the most restrictive of the covenants in the Company's
debt agreements, $51 million of the Company's retained earnings was available
for payment of cash dividends and 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,
1999 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 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.
18
ITEMS 7. AND 7A. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
The following table provides interest rate sensitivity information about the
Company's notes payable, senior and subordinated debt at June 30, 1999 (dollars
in millions):
AMOUNT BY SCHEDULED MATURITY FOR ESTIMATED
FISCAL YEARS ENDING JUNE 30, FAIR VALUE
----------------------------------------------- AT JUNE 30,
2000 2001 2002 2003 2004 THEREAFTER TOTAL 1999
---- ---- ---- ---- ---- ---------- ----- ----
FIXED RATE DEBT
Amount $ 7.8 $ 2.3 $ 3.2 $ 101.0 $ 11.6 $ 592.9 $ 718.8 $ 731.9
Average Interest
Rate 7.6% 7.8% 8.1% 9.7% 7.1% 9.6% 9.5%
VARIABLE RATE DEBT
Amount $ 35.5 $ 0.1 $ 286.0 -- -- $ 0.2 $ 321.8 $ 321.8
Average Interest
Rate 8.0% 8.8% 7.8% -- -- 8.8% 7.8%
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.
Through June 30, 1999, the Company's Year 2000 remediation efforts have focused
primarily 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 three 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 was a
system being replaced solely because of Year 2000 issues, although in some cases
the timing of system replacements was accelerated. Thus, the Company does not
believe the costs of these system replacements, the majority of which related to
software acquisitions and were thus capitalized, were 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 to date as a result of its
Year 2000 efforts.
As of August 1999, 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 these systems, with implementations and
testing scheduled for completion by October 1999. As with systems that have
already been replaced, the Company does not believe the costs of these remaining
replacements, which are anticipated to aggregate approximately $2 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 many of these
costs would not be solely related to Year 2000 readiness.
The Company is also assessing other potential Year 2000 issues, including
non-information technology systems. A broad-based Year 2000 Task Force has been
formed and is meeting regularly to identify areas of concern and develop action
plans. The Company currently anticipates that testing of non-information
technology systems will also be completed by October 1999. As part of the Year
2000 Task Force effort, the Company's relationships with vendors, contractors,
financial institutions and other third parties are being considered 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.
19
ITEMS 7. AND 7A. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
The Company expects to incur Year 2000-related costs in fiscal 2000 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 material
relationships were to be unsuccessful in their Year 2000 remediation efforts. In
that event, the Company may encounter disruptions to its business that could
have a material adverse effect on it. The Company would also be materially
adversely affected 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.
ACCOUNTING STANDARDS NOT YET ADOPTED BY THE COMPANY
In June 1998 the Financial Accounting Standards Board issued SFAS No. 133,
ACCOUNTING FOR DERIVATIVES AND SIMILAR FINANCIAL INSTRUMENTS AND FOR HEDGING
ACTIVITIES, to establish accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities on the balance sheet and measure
those instruments at fair value. This new standard, which will be effective for
the Company for its fiscal year ending June 30, 2001, is not expected to have a
significant impact on the Company's consolidated financial statements since the
Company does not have 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.
20
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 Annual Report on 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
Annual Report on 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
Annual Report on 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
Annual Report on Form 10-K.
21
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 24.
3. Exhibits
The Exhibit Index attached to this Report is hereby
incorporated by reference.
(b) The Company did not file any reports on Form 8-K during the quarter ended
June 30, 1999.
22
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 16th day of September, 1999.
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 September 16, 1999
- --------------------------- Officer (Principal Executive
(Philip J. Dion) Officer)
/s/ LeRoy C. Hanneman, Jr. President, Chief Operating September 16, 1999
- --------------------------- Officer and Director
(LeRoy C. Hanneman, Jr.) (Principal Operating Officer)
/s/ John A. Spencer Executive Vice President and September 16, 1999
- --------------------------- Chief Financial Officer
(John A. Spencer) (Principal Financial Officer)
/s/ David E. Rau Vice President and Controller September 16, 1999
- --------------------------- (Principal Accounting Officer)
(David E. Rau)
/s/ D. Kent Anderson Director September 16, 1999
- ---------------------------
(D. Kent Anderson)
/s/ Michael O. Maffie Director September 16, 1999
- ---------------------------
(Michael O. Maffie)
/s/ J. Russell Nelson Director September 16, 1999
- ---------------------------
(J. Russell Nelson)
/s/ Peter A. Nelson Director September 16, 1999
- ---------------------------
(Peter A. Nelson)
/s/ Michael E. Rossi Director September 16, 1999
- ---------------------------
(Michael E. Rossi)
/s/ Glenn W. Schaeffer Director September 16, 1999
- ---------------------------
(Glenn W. Schaeffer)
/s/ C. Anthony Wainwright Director September 16, 1999
- ---------------------------
(C. Anthony Wainwright)
/s/ Sam Yellen Director September 16, 1999
- ---------------------------
(Sam Yellen)
23
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......................................................... 25
Independent Auditors' Report................................................ 26
Consolidated Financial Statements:
Balance Sheets as of June 30, 1999 and 1998............................... 27
Statements of Earnings for each of the years in the three-year
period ended June 30, 1999.............................................. 28
Statements of Shareholders' Equity for each of the years in the
three-year period ended June 30, 1999................................... 29
Statements of Cash Flows for each of the years in the three-year
period ended June 30, 1999.............................................. 30
Notes to Consolidated Financial Statements................................ 32
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, 1999................................. 45
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.
24
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 this Annual Report and is responsible for its accuracy and
consistency with the consolidated financial statements.
The consolidated financial statements have been audited by the independent
accounting firm, KPMG LLP, which was given access to all financial records and
related data, including minutes of all meetings of shareholders, the board of
directors and committees of the board. The Company believes that all
representations made to the independent auditors during their audit were valid
and appropriate. KPMG LLP's audit report is presented on the following page.
INTERNAL CONTROL SYSTEM
The Company maintains a system of internal control over financial reporting and
over safeguarding of assets against unauthorized acquisition, use or
disposition. This system is designed to provide reasonable assurance to the
Company's management and board of directors regarding the preparation of
reliable published financial statements and such asset safeguarding. The system
includes a documented organizational structure and division of responsibility,
established policies and procedures (including a code of conduct) which are
communicated throughout the Company, and the selection, training and development
of employees. Internal auditors monitor the operation of the internal control
system and report findings and recommendations to management and the board of
directors, and corrective actions are taken to correct deficiencies if and as
they are identified. The board, operating through its audit committee which is
composed of directors who are not officers or employees of the Company, provides
oversight to the financial reporting and asset safeguarding process.
Even an effective internal control system, no matter how well designed, has
inherent limitations - including the possibility of the circumvention or
overriding of controls - and therefore can provide only reasonable assurance
with respect to financial statement preparation and asset safeguarding. Further,
because of changes in conditions, internal control system effectiveness may vary
over time.
The Company assessed its internal control system as of June 30, 1999 in relation
to criteria for effective internal control over financial reporting described in
"Internal Control - Integrated Framework" issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on its assessment, the Company
believes that, at June 30, 1999, 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
Executive Vice President and Chief Financial Officer
June 30, 1999
25
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, 1999 and 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 30, 1999 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.
/s/ KPMG LLP
Phoenix, Arizona
August 16, 1999
26
DEL WEBB CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND 1998
IN THOUSANDS
-------------------------
1999 1998
----------- -----------
ASSETS
Real estate inventories (Notes 2, 6 and 11) $ 1,622,581 $ 1,113,297
Cash and short-term investments 22,669 14,362
Receivables (Note 3) 33,529 41,498
Property and equipment, net (Note 4) 72,423 33,333
Other assets (Note 5) 115,595 107,972
----------- -----------
$ 1,866,797 $ 1,310,462
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable, senior and subordinated debt (Note 6) $ 1,040,613 $ 703,938
Contractor and trade accounts payable 115,456 78,114
Accrued liabilities and other payables 127,980 98,066
Home sale deposits 145,362 80,332
Deferred income taxes (Note 7) 22,510 4,245
Income taxes payable (Note 7) 10,082 --
----------- -----------
Total liabilities 1,462,003 964,695
----------- -----------
Shareholders' equity:
Common stock, $.001 par value. Authorized
30,000,000 shares; issued 18,221,385 shares
and 18,107,606 shares at June 30,1999 and
1998, respectively (Note 8) 18 18
Additional paid-in capital 168,865 166,328
Retained earnings (Note 6) 242,075 184,890
----------- -----------
410,958 351,236
Less deferred compensation (Note 8) (6,164) (5,469)
----------- -----------
Total shareholders' equity 404,794 345,767
----------- -----------
$ 1,866,797 $ 1,310,462
=========== ===========
See accompanying notes to consolidated financial statements.
27
DEL WEBB CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997
IN THOUSANDS
EXCEPT PER SHARE DATA
---------------------------------------
1999 1998 1997
----------- ----------- -----------
Revenues (Note 10) $ 1,466,181 $ 1,177,767 $ 1,186,262
----------- ----------- -----------
Costs and expenses (Note 10):
Home construction, land and other 1,112,525 898,754 913,872
Selling, general and administrative 203,711 166,343 160,924
Interest (Note 11) 59,179 46,212 49,457
----------- ----------- -----------
1,375,415 1,111,309 1,124,253
----------- ----------- -----------
Earnings before income taxes and extraordinary item 90,766 66,458 62,009
Income taxes (Note 7) 32,676 23,925 22,323
----------- ----------- -----------
Earnings before extraordinary item 58,090 42,533 39,686
Extraordinary item:
Loss from extinguishment of debt (net of $700 tax) -- -- 1,285
----------- ----------- -----------
Net earnings $ 58,090 $ 42,533 $ 38,401
=========== =========== ===========
Weighted average shares outstanding - basic 18,174 17,829 17,580
=========== =========== ===========
Weighted average shares outstanding - assuming dilution 18,705 18,458 17,862
=========== =========== ===========
Earnings per share - basic:
Earnings before extraordinary item $ 3.20 $ 2.39 $ 2.26
Extraordinary item -- -- (0.07)
----------- ----------- -----------
Net earnings $ 3.20 $ 2.39 $ 2.18
=========== =========== ===========
Earnings per share - assuming dilution:
Earnings before extraordinary item $ 3.11 $ 2.30 $ 2.22
Extraordinary item -- -- (0.07)
=========== =========== ===========
Net earnings $ 3.11 $ 2.30 $ 2.15
=========== =========== ===========
See accompanying notes to consolidated financial statements.
28
DELL WEBB CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1999, 1998 AND 1997
IN THOUSANDS
-----------------------------------------------------------------------------------
COMMON ADDITIONAL TOTAL
SHARES COMMON PAID-IN RETAINED TREASURY DEFERRED SHAREHOLDERS'
OUTSTANDING STOCK CAPITAL EARNINGS STOCK COMPENSATION EQUITY
--------- --------- --------- --------- --------- --------- ---------
Balances at July 1, 1996 17,538 $ 18 $ 158,262 $ 111,033 $ (70) $ (4,467) $ 264,776
Shares issued and retired for
stock option and restricted
stock plans, net of
amortization 166 -- 2,046 -- 261 (37) 2,270
Treasury stock acquired (137) -- -- -- (2,105) -- (2,105)
Cash dividends ($.20 per share) -- -- -- (3,512) -- -- (3,512)
Net earnings -- -- -- 38,401 -- -- 38,401
--------- --------- --------- --------- --------- --------- ---------
Balances at June 30, 1997 17,567 18 160,308 145,922 (1,914) (4,504) 299,830
Shares issued and retired for
stock option and restricted
stock plans, net of
amortization 541 -- 6,025 -- 1,918 (965) 6,978
Shares repurchased -- -- (5) -- (4) -- (9)
Cash dividends ($.20 per share) -- -- -- (3,565) -- -- (3,565)
Net earnings -- -- -- 42,533 -- -- 42,533
--------- --------- --------- --------- --------- --------- ---------
Balances at June 30, 1998 18,108 18 166,328 184,890 -- (5,469) 345,767
Shares issued and retired for
stock option and restricted
stock plans, net of
amortization 184 -- 3,982 -- -- (695) 3,287
Shares repurchased (71) -- (1,445) -- -- -- (1,445)
Cash dividends ($.05 per share) -- -- -- (905) -- -- (905)
Net earnings -- -- -- 58,090 -- -- 58,090
--------- --------- --------- --------- --------- --------- ---------
Balances at June 30, 1999 18,221 $ 18 $ 168,865 $ 242,075 $ -- $ (6,164) $ 404,794
========= ========= ========= ========= ========= ========= =========
See accompanying notes to consolidated financial statements.
29
DEL WEBB CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997
(IN THOUSANDS)
1999 1998 1997
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers related to community home sales $ 1,394,475 $ 1,113,118 $ 1,115,546
Cash received from commercial land and facility sales
at operating communities 56,746 43,185 12,395
Cash paid for costs related to home construction at operating
communities (881,272) (712,509) (742,091)
----------- ----------- -----------
Net cash provided by operating community sales activities 569,949 443,794 385,850
Cash paid for land acquisitions at operating communities (33,626) (29,294) (41,650)
Cash paid for lot development at operating communities (197,650) (147,844) (134,709)
Cash paid for amenity development at operating communities (96,650) (45,911) (56,503)
----------- ----------- -----------
Net cash provided by operating communities 242,023 220,745 152,988
Cash paid for costs related to communities in the pre-operating stage (381,361) (162,910) (81,755)
Cash received from (paid for) mortgage operations 3,138 (5,673) 2,213
Cash received from (paid for) residential land development project (1,361) 5,195 7,110
Cash paid for corporate activities (64,057) (59,871) (42,327)
Interest paid (73,348) (53,118) (45,854)
Cash paid for income taxes (2,807) (14,930) (14,879)
----------- ----------- -----------
Net cash used for operating activities (277,773) (70,562) (22,504)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (43,480) (16,855) (4,284)
Investments in life insurance policies (1,835) (4,568) (3,222)
----------- ----------- -----------
Net cash used for investing activities (45,315) (21,423) (7,506)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings 739,740 592,611 547,871
Repayments of debt (407,813) (513,531) (506,990)
Stock repurchases (1,445) (9) (2,105)
Proceeds from exercise of common stock options 1,818 6,126 1,121
Dividends paid (905) (3,565) (3,512)
----------- ----------- -----------
Net cash provided by financing activities 331,395 81,632 36,385
----------- ----------- -----------
Net increase (decrease) in cash and short-term investments 8,307 (10,353) 6,375
Cash and short-term investments at beginning of year 14,362 24,715 18,340
----------- ----------- -----------
CASH AND SHORT-TERM INVESTMENTS AT END OF YEAR $ 22,669 $ 14,362 $ 24,715
=========== =========== ===========
See accompanying notes to consolidated financial statements.
30
DEL WEBB CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED JUNE 30, 1999, 1998 AND 1997
(IN THOUSANDS)
1999 1998 1997
--------- --------- ---------
Reconciliation of net earnings to net
cash used for operating activities:
Net earnings $ 58,090 $ 42,533 $ 38,401
Amortization of non-cash common costs in
costs and expenses, excluding interest 365,260 273,173 268,806
Amortization of capitalized interest in
costs and expenses 59,179 46,212 49,457
Deferred compensation amortization 2,431 1,838 1,748
Depreciation and other amortization 8,134 6,725 6,425
Deferred income taxes on earnings before extraordinary item 18,265 10,771 6,086
Extraordinary loss from extinguishment of debt (net of tax) -- -- 1,285
Net increase in home construction costs (83,198) (152) (4,218)
Land acquisitions (40,619) (69,482) (61,499)
Lot development (411,309) (204,080) (155,348)
Amenity development (279,150) (99,280) (89,063)
Pre-acquisition costs -- (13,776) (19,869)
Net change in other assets and liabilities 25,144 (65,044) (64,715)
--------- --------- ---------
Net cash used for operating activities $(277,773) $ (70,562) $ (22,504)
========= ========= =========
See accompanying notes to consolidated financial statements.
31
DEL WEBB CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999, 1998 AND 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Del Webb
Corporation and its subsidiaries (the "Company"). All significant
intercompany transactions and accounts have been eliminated in
consolidation.
OPERATIONS
The Company conducts it operations in Arizona, California, Florida,
Illinois, Nevada, South Carolina and Texas (see Note 12). The Company's
active adult communities (primarily its Sun City communities) are generally
large-scale, master planned communities with extensive amenities for people
age 55 and over. The Company's family and country club communities are open
to people of all ages and are generally developed in metropolitan or market
areas in which the Company is developing active adult communities. Within
all of its communities, the Company is usually the exclusive builder of
homes.
The Company's operations are subject to a number of risks and
uncertainties, including, but not limited to, risks associated: with
financing and leverage; the development of future communities, including in
new geographic markets; governmental regulation, including growth
management and land exchanges with governmental entities; environmental
considerations; competition; the geographic concentration of the Company's
operations; the cyclical nature of real estate operations; interest rate
increases; fluctuations in labor and material costs; natural risks that
exist in certain of the Company's market areas; and year 2000 disruptions.
REAL ESTATE INVENTORIES
Real estate inventories include undeveloped land, partially improved land,
amenities and homes on finished lots, in various stages of completion.
These assets include direct construction costs for homes and common costs.
Common costs include land; general and subdivision land development costs;
model home, vacation home and owned golf course costs in excess of normal
direct construction costs; costs of community sales centers; costs of
assets (such as golf courses and recreation centers) contributed to certain
of the community associations; costs of subsidizing the community
associations; development period interest and other costs. All of these
common costs are capitalized and, along with estimated future common costs,
are allocated on a community by community basis to residential and
commercial lots 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 and advertising 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. The Company has no significant
completed real estate projects.
32
(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. Long-lived assets to be disposed of,
such as real estate inventories held for sale, must be reported at the
lower of book value or fair value less costs to sell.
CASH AND SHORT-TERM INVESTMENTS
The Company's policy is to invest its cash in high-grade, income-producing
short-term investments. Accordingly, uninvested cash balances are generally
kept at minimum levels. Short-term investments are valued at the lower of
cost or market and principally include overnight repurchase agreements,
certificates of deposit and commercial paper with an original maturity of
less than 90 days.
DEPRECIATION
Depreciation is computed using principally the straight-line method for
financial statement purposes and accelerated methods for tax purposes, over
the estimated useful lives of the assets.
INCOME TAXES
The Company accounts for income taxes using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in future years in which
those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the consolidated statement of earnings as an adjustment to
the effective income tax rate in the period that includes the enactment
date.
EARNINGS PER SHARE
Earnings per share-basic is determined by dividing net earnings by the
weighted average number of common shares outstanding during the year.
Earnings per share-assuming dilution is determined by dividing net earnings
by the weighted average number of common and common equivalent shares
(which reflect the effect of stock options) outstanding during the year.
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.
33
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COMPREHENSIVE INCOME
The Company adopted SFAS No. 130, REPORTING COMPREHENSIVE INCOME, during
fiscal 1999. SFAS No. 130 requires that an enterprise (a) classify items of
other comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately
from retained earnings and additional paid-in capital in the equity section
of its balance sheet. The Company had no items of other comprehensive
income in any period presented in these consolidated financial statements
GOODWILL
Goodwill is included in other assets and represents the unamortized excess
of the purchase price of two active adult communities in central Florida
over the fair value of net assets acquired in fiscal 1998 (see Note 5).
This goodwill is being amortized on a straight-line basis over a period of
15 years.
The Company assesses the recoverability of this intangible asset by
determining whether the amortization of the goodwill balance over its
remaining life can be recovered through undiscounted future operating cash
flows of the acquired operation. The amount of goodwill impairment, if any,
is measured based on projected discounted future operating cash flows using
a discount rate reflecting the Company's average cost of funds. The
assessment of the recoverability of goodwill will be impacted if estimated
future operating cash flows are not achieved.
FINANCIAL INSTRUMENTS
In the normal course of business, the Company may invest in various
financial assets and 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, 1999 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, 1999. 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 and property and equipment) 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
employee stock-based compensation expense as the excess of the market price
at the grant date over the amount the employee must pay for the stock. The
Company's general policy is to grant stock options at fair market value at
the date of grant, so no compensation expense is recognized. As permitted,
the Company has elected to adopt only the disclosure provisions of SFAS No.
123, ACCOUNTING FOR STOCK-BASED COMPENSATION (see Note 8).
34
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of the Company's consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions, particularly those previously
discussed for real estate inventories, that affect the amounts reported in
the consolidated financial statements and accompanying notes. Actual
results could differ materially from those estimates.
(2) REAL ESTATE INVENTORIES
The components of real estate inventories are as follows:
In Thousands
at June 30,
-----------------------
1999 1998
---------- ----------
Home construction costs $ 265,368 $ 182,170
Unamortized improvement and amenity costs 977,867 603,390
Unamortized capitalized interest 85,007 61,455
Land held for housing 191,624 220,441
Land and facilities held for future
development or sale 102,715 45,841
---------- ----------
$1,622,581 $1,113,297
========== ==========
At June 30, 1999, the Company had 418 completed homes and 504 homes under
construction that were not subject to a sales contract. These homes
represented $54.7 million of home construction costs at June 30, 1999. At
June 30, 1998 the Company had 436 completed homes and 395 homes under
construction (representing $44.5 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, 1999 were 187 acres of commercial land that are currently being
marketed for sale at the Company's active adult communities, 462 acres of
commercial land that are currently being marketed for sale at the Company's
Anthem Arizona project, 541 lots on selected residential land parcels in
the Company's Arizona family community operations and all 1,466 remaining
unsold lots in the Company's Nevada family communities.
(3) RECEIVABLES
Receivables are summarized as follows:
In Thousands
at June 30,
-----------------------
1999 1998
---------- ----------
Mortgage loans held for sale $ 14,390 $ 15,020
Notes from sales of land and facilities 6,466 8,090
Escrow funds from home and land sales 4,826 12,853
Other 7,847 5,535
---------- ----------
$ 33,529 $ 41,498
========== ==========
35
(4) PROPERTY AND EQUIPMENT, NET
Property and equipment, stated at cost, and related accumulated
depreciation are summarized as follows:
In Thousands
at June 30,
-----------------------
1999 1998
---------- ----------
Buildings and improvements $ 23,796 $ 11,186
Equipment 61,981 43,556
Land and improvements 14,613 7,965
---------- ----------
100,390 62,707
Less accumulated depreciation 27,967 29,374
---------- ----------
$ 72,423 $ 33,333
========== ==========
(5) OTHER ASSETS
Other assets are summarized as follows:
In Thousands
at June 30,
-----------------------
1999 1998
---------- ----------
Pre-acquisition costs $ 46,783 $ 51,655
Cash surrender value of life insurance policies 27,152 24,260
Utility costs and deposits 12,916 9,118
Prepaid expenses 9,648 6,373
Goodwill, net 9,028 9,694
Water right costs 3,263 3,263
Other 6,805 3,609
---------- ----------
$ 115,595 $ 107,972
========== ==========
Substantially all of pre-acquisition costs at June 30, 1999 and 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 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.
(6) NOTES PAYABLE, SENIOR AND SUBORDINATED DEBT
Notes payable, senior and subordinated debt consists of the following:
In Thousands
at June 30,
-----------------------
1999 1998
---------- ----------
9 3/4% Senior Subordinated Debentures due 2003,
net, unsecured $ 98,492 $ 98,081
9% Senior Subordinated Debentures due 2006,
net, unsecured 98,176 97,902
9 3/4% Senior Subordinated Debentures due 2008,
net, unsecured 145,854 145,370
9 3/8% Senior Subordinated Debentures due 2009,
net, unsecured 195,413 194,977
10 1/4% Senior Subordinated Debentures due 2010,
net, unsecured 143,622 --
Notes payable to banks under a revolving credit
facility and short-term lines of credit,
unsecured 301,000 111,209
Real estate and other notes, variable interest
rates from prime to prime plus 1% and fixed
rates from 6.8% to 9.0%, maturities to 2006,
primarily secured 58,056 56,399
---------- ----------
$1,040,613 $ 703,938
========== ==========
36
(6) NOTES PAYABLE, SENIOR AND SUBORDINATED DEBT (CONTINUED)
In March 1993 the Company completed a public offering of $100 million of
Senior Subordinated Debentures, which are shown net of unamortized deferred
financing costs and discount. These Debentures are due on March 1, 2003 and
have a stated interest rate of 9 3/4 percent per year. Interest is payable
semi-annually on March 1 and September 1. The annual effective interest
rate of the Debentures, after giving effect to the amortization of deferred
financing costs and discount, is 10.2 percent. The Debentures may be
redeemed by the Company on or after March 1, 1999 and 2000 at 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.
In February 1999 the Company completed a public offering of $150 million of
Senior Subordinated Debentures, which are shown net of unamortized deferred
financing costs. These Debentures are due on February 15, 2010 and have a
stated interest rate of 10 1/4 percent per year. Interest is payable
semi-annually on February 15 and August 15. The annual effective interest
rate of the Debentures, after giving effect to the amortization of deferred
financing costs, is 10.7 percent. The Debentures may be redeemed by the
Company on or after February 15, 2004, 2005, 2006, 2007 and 2008 at
105.125, 103.844, 102.563, 101.281 and 100 percent, respectively, of the
principal amount of the Debentures redeemed, plus accrued and unpaid
interest to the redemption date.
The Company has a $500 million senior unsecured revolving credit facility
(the "Credit Facility"), increased from $450 million in February 1999. If
the Credit Facility is not subsequently amended, it will mature in May
2002. Borrowings under the Credit 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 (plus 1.30 to 2.35 percent effective July 1, 1999),
depending on the Company's ratio of debt to tangible net worth. The
effective interest rate on borrowings outstanding under the Credit Facility
at June 30, 1999 and 1998 was 7.3 percent and 8.5 percent, respectively.
37
(6) NOTES PAYABLE, SENIOR AND SUBORDINATED DEBT (CONTINUED)
The Credit Facility and the indentures for the Company's publicly-held debt
contain covenants which, taken together and among other things, limit
investments in unentitled land and unsold homes, family community 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, 1999 the Company had
$286.0 million outstanding under the Credit Facility and $15.0 million
outstanding under its $25 million of short-term lines of credit (together
with the Credit Facility, the "Credit Facilities"). At that date, $98.5
million of the $224.0 million of unused capacity under the Credit
Facilities was not available to the Company. However, as a result of an
amendment, effective July 1, 1999, to the "Total Debt to Tangible Net
Worth" covenant under the Credit Facility, the Company had full
availability of the Credit Facilities (the short-term lines of credit were
$15 million as of that date).
At June 30, 1999, under the most restrictive of the covenants in the
Company's debt agreements, $50.7 million of the Company's retained earnings
was available for payment of cash dividends and the acquisition by the
Company of its common stock.
The estimated fair values at June 30, 1999 of the Company's 9 3/4% Senior
Subordinated Debentures due 2003, 9% Senior Subordinated Debentures due
2006, 9 3/4% Senior Subordinated Debentures due 2008, 9 3/8% Senior
Subordinated Debentures due 2009 and 10 1/4% Senior Subordinated Debentures
due 2010 were $100.0 million, $97.9 million, $149.0 million, $196.5 million
and $151.3 million, respectively. 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 principal payment requirements (in thousands) on debt for the next five
years ended June 30 are as follows:
2000 $ 43,303
2001 $ 2,375
2002 $ 289,195
2003 $ 101,006
2004 $ 11,594
(7) INCOME TAXES
The components of income taxes on earnings before the extraordinary item
are as follows:
In Thousands
Year Ended June 30,
--------------------------------------
1999 1998 1997
-------- -------- --------
Current:
Federal $ 13,506 $ 12,252 $ 14,029
State 905 902 2,208
-------- -------- --------
14,411 13,154 16,237
-------- -------- --------
Deferred:
Federal 16,471 9,730 6,854
State 1,794 1,041 (768)
-------- -------- --------
18,265 10,771 6,086
-------- -------- --------
$ 32,676 $ 23,925 $ 22,323
======== ======== ========
38
(7) INCOME TAXES (CONTINUED)
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.
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,
-------------------
1999 1998
-------- --------
Deferred tax assets:
Net operating loss carryforwards $ 1,401 $ 1,093
Tax credit carryforwards 900 621
Liabilities of discontinued operations,
principally due to loss provisions 1,113 3,629
Property and equipment, principally due
to differences in depreciation 10,925 2,773
State income taxes 1,512 1,709
Deferred compensation 7,584 6,679
Accruals 12,769 10,225
Other 2,770 2,100
-------- --------
38,974 28,839
Valuation allowance 3,389 3,389
-------- --------
35,585 25,450
-------- --------
Deferred tax liabilities:
Real estate, principally due to basis differences 57,641 27,106
Other 454 2,589
-------- --------
58,095 29,695
======== ========
Net deferred income tax liability $ 22,510 $ 4,245
======== ========
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,
--------------------------------
1999 1998 1997
-------- -------- --------
Expected taxes at current federal
statutory income tax rate $ 31,768 $ 23,260 $ 21,703
State income taxes, net of federal
benefit 2,696 2,438 2,856
Federal and state tax credits (2,146) (1,798) (2,210)
Adjustments due to the settlement of
audits and resolution of issues 85 (351) 252
Change in deferred tax asset valuation
allowance -- -- (473)
Other 273 376 195
-------- -------- --------
Income taxes $ 32,676 $ 23,925 $ 22,323
======== ======== ========
At June 30, 1999 the Company had a state net operating loss carryforward of
$28.0 million that expires in fiscal 2019.
39
(8) COMMON STOCK RESERVED
The Company has six employee stock option plans: the 1981 Stock Option Plan
(under which no grants can be made subsequent to December 31, 1991), the
1986 Stock Option and Stock Appreciation Rights (SAR) Plan (under which no
grants can be made subsequent to December 31, 1995) and the 1991, 1993,
1995 and 1998 Executive Long-Term Incentive Plans (1991 ELTIP, 1993 ELTIP,
1995 ELTIP and 1998 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. Shares authorized for grant under the 1998 ELTIP
total 1,000,000, of which no more than 100,000 may be used for time-based
restricted stock grants and no more than 100,000 may be used for
performance-based restricted stock grants.
The Company also has the 1991 Directors' Stock Plan, the 1995 Director
Stock Plan and the 1998 Director Stock Plan, under which options may be
granted to the Directors of the Company to purchase shares of the Company's
common stock at a price not less than the current market price at the date
of grant. Under these plans the Directors may elect to defer some or all of
their annual retainers and receive restricted stock or stock options at
prices that, when combined with the amounts of deferred retainers, equal
the current market price at the date of the grant. Shares authorized under
these plans total 75,000 per plan.
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 employee stock-based
compensation expense as the excess of the market price at the grant date
over the amount the employee must pay for the stock.
SFAS No. 123 requires disclosure of pro forma net earnings and pro forma
net earnings per share as if the fair value based method had been applied
in measuring employee compensation expense for awards granted in fiscal
1999, 1998, 1997 and 1996. Management believes that the fiscal 1999, 1998
and 1997 pro forma amounts may not be representative of the effects of
stock-based awards on future pro forma net earnings and pro forma net
earning per share because, among other reasons, those pro forma amounts
exclude the pro forma employee compensation expense related to unvested
stock options granted before fiscal 1996.
Reported and such pro forma net earnings, in thousands, and net earnings
per share amounts for the years ended June 30, 1999, 1998 and 1997 are set
forth below:
1999 1998 1997
---- ---- ----
Reported:
Net earnings $58,090 $42,533 $38,401
Net earnings per share - basic 3.20 2.39 2.18
Net earnings per share - assuming dilution 3.11 2.30 2.15
Pro forma:
Net earnings 56,890 41,588 37,777
Net earnings per share - basic 3.13 2.33 2.15
Net earnings per share - assuming dilution 3.04 2.25 2.11
40
(8) COMMON STOCK RESERVED (CONTINUED)
The fair values of employee stock options granted were estimated on the
dates of their grant using the Black-Scholes option pricing model based on
the following weighted average assumptions:
1999 1998 1997
---------------------------------------------------------------------------
Risk free interest rate 5.71% 5.65% 6.26%
Expected life (in years) 7.4 7.5 7.4
Expected volatility 30% 29% 27%
Expected dividend yield 0.82% 1.08% 1.17%
---------------------------------------------------------------------------
Stock option activity for the years ended June 30, 1999, 1998, and 1997 is
summarized as follows:
1999 1998 1997
------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
---------- ---------- ---------- ---------- ---------- ----------
Options outstanding,
beginning of year 1,807,632 $ 16.61 1,981,613 $ 15.12 1,801,288 $ 14.82
Granted 372,879 25.91 372,750 20.97 339,665 16.39
Exercised (138,570) 15.79 (460,506) 13.30 (94,017) 11.93
Canceled (109,120) 21.02 (86,225) 19.06 (65,323) 17.89
---------- ---------- ---------- ---------- ---------- ----------
Options outstanding
at end of year 1,932,821 $ 18.21 1,807,632 $ 16.61 1,981,613 $ 15.12
========== ========== ========== ========== ========== ==========
Options exercisable
at end of year 1,098,619 $ 15.16 1,050,291 $ 14.47 1,287,530 $ 13.49
========== ========== ========== ========== ========== ==========
Weighted average
fair valueof options
granted during year $10.90 $ 8.32 $ 6.46
====== ====== ======
Stock options outstanding at June 30, 1999 were as follows:
Options Outstanding Options Exercisable
----------------------------------------------------- -------------------
Weighted Weighted Weighted
Average Average Average
Range of Remaining Exercise Exercise
Exercise Price Options Contractual Life Price Options Price
-------------- ------- ---------------- ----- ------- -----
$ 8.00 - $ 9.89 140,419 1.6 years $ 8.67 140,419 $ 8.67
$10.44 - $14.53 359,036 2.8 12.78 359,036 12.78
$15.71 - $18.10 519,916 5.9 16.40 372,130 16.41
$20.56 - $27.22 913,450 8.2 22.84 227,034
---------- ----------
1,932,821 6.1 years $ 18.21 1,098,619 $ 15.16
========= === ======== ========= ========
Shares granted, net of cancellations, under the Company's restricted stock
plans during the years ended June 30, 1999, 1998 and 1997 aggregated 96,930
shares, 128,070 shares and 109,200 shares, respectively. The Company
recognized compensation expense of $2.4 million, $1.8 million and $1.7
million related to shares granted under the restricted stock plans for the
years ended June 30, 1999, 1998 and 1997, respectively.
(9) DEFINED CONTRIBUTION PLAN
The Company sponsors a defined contribution retirement savings plan that
covers substantially all employees of the Company after completion of six
months of service. Company contributions to this plan, which can include
amounts based on a percentage of employee contributions as well as
discretionary contributions, were $1.3 million, $1.7 million and $2.6
million for the years ended June 30, 1999, 1998 and 1997, respectively.
41
(10) REVENUES AND COSTS AND EXPENSES
The components of revenues and costs and expenses:
In Thousands
Year Ended June 30,
----------------------------------
1999 1998 1997
---------- ---------- ----------
Revenues:
Homebuilding:
Active adult communities $1,084,463 $ 830,728 $ 786,746
Family and country club communities 302,658 287,656 357,343
---------- ---------- ----------
Total homebuilding 1,387,121 1,118,384 1,144,089
Land and facility sales 61,861 48,522 31,289
Other 17,199 10,861 10,884
---------- ---------- ----------
$1,466,181 $1,177,767 $1,186,262
========== ========== ==========
Costs and expenses:
Home construction and land:
Active adult communities $ 807,518 $ 624,361 $ 595,401
Family and country club communities 244,607 237,332 289,526
---------- ---------- ----------
Total homebuilding 1,052,125 861,693 884,927
Cost of land and facility sales 52,268 33,479 26,051
Other cost of sales 8,132 3,582 2,894
---------- ---------- ----------
Total home construction,
land and other 1,112,525 898,754 913,872
Selling, general and administrative 203,711 166,343 160,924
Interest 59,179 46,212 49,457
---------- ---------- ----------
$1,375,415 $1,111,309 $1,124,253
========== ========== ==========
(11) INTEREST
The following table shows the components of interest:
In Thousands
Year Ended June 30,
---------------------------
1999 1998 1997
------- ------- -------
Interest incurred and capitalized $82,731 $61,546 $51,917
======= ======= =======
Amortization of capitalized interest in costs
and expenses $59,179 $46,212 $49,457
======= ======= =======
Unamortized capitalized interest included
in real estate inventories at year end $85,007 $61,455 $46,121
======= ======= =======
Interest income $ 1,081 $ 1,072 $ 1,510
======= ======= =======
Interest income is included in other revenues.
42
(12) SEGMENT INFORMATION
The Company conducts its operations in two primary segments in Arizona,
California, Florida, Illinois, Nevada, South Carolina and Texas. The
Company's active adult communities (primarily its Sun City communities) are
generally large-scale, master planned communities with extensive amenities
for people age 55 and over. The Company's family and country club
communities are open to people of all ages and are generally developed in
metropolitan or market areas in which the Company is developing active
adult communities. Within all of its communities, the Company is usually
the exclusive builder of homes.
Both of the Company's primary segments generate their revenues through the
sale of homes (and, to a much lesser extent, land and facilities) to
external customers in the United States. The Company is not dependent on
any major customer.
Information as to the operations of the Company in different business
segments is set forth below based on the nature of the Company's
communities and their customers. Certain information has not been included
by segment due to the immateriality of the amount to the segments or in
total. The Company evaluates segment performance based on several factors,
of which the primary financial measure is earnings before interest and
taxes ("EBIT"). The accounting policies of the business segments are the
same as those described in Note 1 for the Company. There are no significant
intersegment transactions.
In Thousands
Year Ended June 30,
-----------------------------------------
1999 1998 1997
----------- ----------- -----------
Revenues:
Active adult communities $ 1,111,366 $ 846,837 $ 804,617
Family and country club
communities 344,051 321,591 361,873
Corporate and other 10,764 9,339 19,772
----------- ----------- -----------
$ 1,466,181 $ 1,177,767 $ 1,186,262
=========== =========== ===========
EBIT:
Active adult communities $ 171,311 $ 122,968 $ 115,808
Family and country club
communities 39,548 37,862 39,990
Corporate and other (60,914) (48,160) (44,332)
----------- ----------- -----------
$ 149,945 $ 112,670 $ 111,466
=========== =========== ===========
Amortization of Capitalized
Interest:
Active adult communities $ 44,816 $ 33,492 $ 33,502
Family and country club
communities 14,363 12,720 15,955
Corporate and other -- -- --
----------- ----------- -----------
$ 59,179 $ 46,212 $ 49,457
=========== =========== ===========
Assets at Year End:
Active adult communities $ 1,213,448 $ 895,919 $ 743,365
Family and country club
communities 444,889 259,780 209,956
Corporate and other 208,460 154,763 133,341
----------- ----------- -----------
$ 1,866,797 $ 1,310,462 $ 1,086,662
=========== =========== ===========
Expenditures for Real Estate
Inventories:
Active adult communities $ 1,053,866 $ 698,763 $ 619,085
Family and country club
communities 452,787 253,589 275,994
Corporate and other 103 312 1,842
----------- ----------- -----------
$ 1,506,756 $ 952,664 $ 896,921
=========== =========== ===========
Purchases of Property and
Equipment:
Active adult communites $ 19,733 $ 13,822 $ 2,742
Family and country club
communities 904 523 208
Corporate and other 22,843 2,510 1,334
----------- ----------- -----------
$ 43,480 $ 16,855 $ 4,284
=========== =========== ===========
43
(13) CONTINGENT LIABILITIES AND COMMITMENTS
The Company is a party to various legal proceedings arising in the ordinary
course of business. While it is not feasible to predict the ultimate
disposition of these matters, it is the opinion of management that their
outcome will not have a material adverse effect on the financial statemens
of the Company taken as a whole.
The Company has issued surety bonds and standby letters of credit
aggregating $273.1 million at June 30, 1999.
The Company leases from third parties, under operating leases, office
space, model homes, apartment units which it rents to prospective customers
at its large-scale active adult communities, automobiles, computers, office
equipment, golf course equipment, heavy machinery and certain other
equipment. The leases are generally renewable at the Company's option for
additional periods. Total rent expense incurred by the Company was $13.6
million, $10.5 million and $7.5 million for the years ended June 30, 1999,
1998 and 1997, respectively. Minimum lease payments (in thousands) to be
made by the Company under non-cancelable lease agreements are as follows:
2000 $ 10,415
2001 8,201
2002 5,033
2003 3,930
2004 2,748
Later years 12,660
--------
$ 42,987
========
(14) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for the years ended June 30, 1999 and 1998
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,
1999 1999 1998 1998
---- ---- ---- ----
Revenues $ 518,858 $ 324,428 $ 354,248 $ 268,647
Net earnings 23,724 12,469 13,483 8,414
Net earnings per share - basic 1.30 .68 .74 .46
Net earnings per share - assuming dilution 1.27 .66 .72 .45
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 - basic .97 .42 .64 .35
Net earnings per share - assuming dilution .94 .40 .62 .34
44
SCHEDULE II
DEL WEBB CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997
In Thousands
--------------------------------------------------------
Additions Additions
Balance at Charged to Charged to
Beginning Costs and Other Balance at
of Year Expenses Accounts Deductions End of Year
-------- ------- ------- -------- -----------
1999
Reserve for residential land
development project $ 7,898 $ -- $ -- $ 7,898 $ --
Reserves for disposal costs
of discontinued operations 9,703 -- -- 2,437 7,266
-------- ------- ------- -------- --------
$ 17,601 $ -- $ -- $ 10,335 $ 7,266
======== ======= ======= ======== ========
1998
Reserve for residential land
development project $ 7,491 $ -- $ 407 $ -- $ 7,898
Reserves for disposal costs
of discontinued operations 10,382 -- -- 679 9,703
-------- ------- ------- -------- --------
$ 17,873 $ -- $ 407 $ 679 $ 17,601
======== ======= ======= ======== ========
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
======== ======= ======= ======== ========
45
DEL WEBB CORPORATION
Report on Form 10-K For The
Year Ended June 30, 1999
10-K EXHIBIT INDEX
NON-FINANCIAL STATEMENT EXHIBITS
Exhibits Filed
EXHIBIT NO.
- -----------
10.1 Second Amendment to 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, entered into as of July 20, 1999.
10.2 Current list of participants to the Del Webb Corporation
Supplemental Executive Retirement Plan No. 2.
10.3 Current list of Directors and Officers that are party to the
Directors and Officers Indemnification Agreement.
10.4 Del Webb Corporation Management Incentive Plan Fiscal 2000 (July
1, 1999 - June 30, 2000).
10.5 1999/00 Executive Management Incentive Plan Award Agreement
between the Registrant and Philip J. Dion dated July 22, 1999.
10.6 1999/00 Executive Management Incentive Plan Award Agreement
between the Registrant and LeRoy C. Hanneman, Jr. dated July 22,
1999.
10.7 Amendment to Employment Agreement between Anne L. Mariucci and
Del Webb Corporation dated May 1, 1999.
10.8 Del Webb Corporation 1998 Executive Long-Term Incentive Plan
effective November 4, 1998.
10.9 Del Webb Corporation 1998 Director Stock Plan effective July 23,
1998.
10.10 Second Amendment to the Del Webb Corporation Supplemental
Executive Retirement Plan No. 1 effective June 26, 1996.
10.11 Second Amendment to the Del Webb Corporation Supplemental
Executive Retirement Plan No. 2 effective June 26, 1996.
10.12 Third Amendment to the Del Webb Corporation Supplemental
Executive Retirement Plan No. 2 effective February 11, 1998.
10.13 Not Used.
21.0 Subsidiaries of the Registrant.
23.0 Consent of KPMG LLP.
27 Financial Data Schedule.
In addition to those Exhibits shown above, the Company hereby incorporates
the following Exhibits* pursuant to Exchange Act Rule 12b-32 and Regulation
ss.229.10(d) by reference to the fillings set forth below:
EXHIBIT NO.
- -----------
3.0 Amended and Restated Certificate of Incorporation of the
Registrant, incorporated by reference to Exhibit 99.0 to
Registrant's Report on Form 10-Q for the quarter ended September
30, 1994.
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 and
State Street Bank and Trust Company, as Trustee, defining the
rights of the holders of the 9 3/4% Senior Subordinated
Debentures due 2008, incorporated by reference to Exhibit 1.1 to
Registrant's Report on Form 8-K dated January 21, 1997.
4.5 Indenture dated as of February 18, 1999, between Registrant and
Bank of Montreal Trust Company, as Trustee, defining the rights
2
of the holders of the 10 1/4% Senior Subordinated Debentures due
2010, incorporated by reference to Exhibit 1.2 to Registrant's
Report on Form 8-K dated February 18, 1999; as supplemented by
the First Supplemental Indenture, incorporated by reference to
Exhibit 10.2 to Registrant's Report on Form 10-Q for the quarter
ended March 31, 1999.
10.14 Change in Control Agreement letter dated March 15, 1999, and
related list of recipients, as incorporated by reference to
Exhibit 10.14 to Registrant's Report on Form 10-Q for the quarter
ended March 31, 1999.
10.15 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; as amended by the First Amendment
to the Agreement entered into as of February 19, 1999,
incorporated by reference to Exhibit 10.1 to Registrant's Report
on Form 10-Q for the quarter ended March 31, 1999.
10.16 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.
10.17 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.
10.18 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.
10.19 Del Webb Corporation Executive Long-Term Incentive Plan adopted
November 20, 1991, as amended, incorporated by reference to
Exhibit 10.10 to Registrant's Report on Form 10-K for the year
ended June 30, 1997; as amended by the Third Amendment to Plan
effective as of February 11, 1998, incorporated by reference to
Exhibit 10.8 to Registrant's Report on Form 10-Q for the quarter
ended March 31, 1999.
10.20 Del Webb Corporation 1993 Executive Long Term Incentive Plan
dated March 17, 1994, as amended, incorporated by reference to
Exhibit 10.11 to Registrant's Report on Form 10-K for the year
ended June 30, 1997; as amended by the Second Amendment to Plan
effective as of February 11, 1998, incorporated by reference to
Exhibit 10.7 to Registrant's Report on Form 10-Q for the quarter
ended March 31, 1999.
3
10.21 Del Webb Corporation 1995 Executive Long-Term Incentive Plan
adopted July 13, 1995, as amended, incorporated by reference to
Exhibit 10.25 to Registrant's Report on Form 10-K for the year
ended June 30, 1997; as amended by the Second Amendment to Plan
effective as of February 11, 1998, incorporated by reference to
Exhibit 10.6 to Registrant's Report on Form 10-Q for the quarter
ended March 31, 1999.
10.22 Del Webb Corporation Director Stock Plan dated November 20, 1991,
incorporated by reference to Exhibit 10.13 to Registrant's Report
on Form 10-K for the year ended June 30, 1993; as amended by the
First Amendment to Plan effective as of February 11, 1998,
incorporated by reference to Exhibit 10.5 to Registrant's Report
on Form 10-Q for the quarter ended March 31, 1999.
10.23 Del Webb Corporation 1995 Director Stock Plan adopted July 13,
1995, incorporated by reference to Exhibit 10.26 to Registrant's
Report on Form 10-K for the year ended June 20, 1995; as amended
by the First Amendment to Plan effective as of February 11, 1998,
incorporated by reference to Exhibit 10.3 to Registrant's Report
on Form 10-Q for the quarter ended March 31, 1999.
10.24 Del E. Webb Corporation Umbrella Trust dated June 11, 1987, as
amended, incorporated by reference to Exhibit 10.23 to
Registrant's Report on Form 10-K for the year ended June 30,
1996.
10.25 Del Webb Corporation 1995 Executive Management Incentive Plan
adopted July 13, 1995, incorporated by reference to Exhibit 10.27
to Registrant's Report on Form 10-K for the year ended June 30,
1995; as amended by the First Amendment to Plan effective as of
February 11, 1998, incorporated by reference to Exhibit 10.4 to
Registrant's Report on Form 10-Q for the quarter ended March 31,
1999.
10.26 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.
10.27 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.
10.28 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.
10.29 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.
4
10.30 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.
10.31 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.
10.32 Del Webb Corporation Supplemental Executive Retirement Plan No.
1, as amended and restated April 20, 1993, incorporated by
reference to Exhibit 10.12 to Registrant's Report on Form 10-K
for the year ended June 30, 1993; as amended by First Amendment
to the Del Webb Corporation Supplemental Executive Retirement
Plan No. 1 effective July 1, 1995, incorporated by reference to
Exhibit 10.13 to Registrant's Report on Form 10-K for the year
ended June 30, 1995; as amended by the Third Amendment to Plan
dated March 10, 1999, incorporated by reference to Exhibit 10.9
to Registrant's Report on Form 10-Q for the quarter ended March
31, 1999.
10.33 Supplemental Executive Retirement Plan No. 1 Participation
Agreement between the Registrant and Philip J. Dion, amended and
restated effective July 25, 1996, incorporated by reference to
Exhibit 10.30 to Registrant's Report on Form 10-K for the year
ended June 30, 1996.
10.34 Supplemental Executive Retirement Plan No. 2 Participation
Agreement as of April 11, 1997 between the Registrant and John H.
Gleason, incorporated by reference to Exhibit 10.40 to
Registrant's Report on Form 10-K for the year ended June 30,
1997.
10.35 Supplemental Executive Retirement Plan No. 2 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.
10.36 Supplemental Executive Retirement Plan No. 2 Participation
Agreement as of April 11, 1997 between the Registrant and Anne L.
Mariucci, incorporated by reference to Exhibit 10.42 to
Registrant's Report on Form 10-K for the year ended June 30,
1997.
10.37 Employment and Consulting Agreement dated July 10, 1996, between
the Registrant and Philip J. Dion, incorporated by reference to
Exhibit 10.2 to Registrant's Report on Form 10-K for the year
ended June 30, 1996; as amended by the Amendment to Agreement
entered into as of March 9, 1999, incorporated by reference to
Exhibit 10.11 to Registrant's Report on Form 10-Q for the quarter
ended March 31, 1999.
5
10.38 Employment Agreement dated April 11, 1997 between the Registrant
and John H. Gleason, incorporated by reference to Exhibit 10.36
to Registrant's Report on Form 10-K for the year ended June 10,
1997; as amended by the Amendment to Agreement entered into as of
March 22, 1999, incorporated by reference to Exhibit 10.13 to
Registrant's Report on Form 10-Q for the quarter ended March 31,
1999.
10.39 Employment Agreement dated April 11, 1997 between the Registrant
and LeRoy C. Hanneman, incorporated by reference to Exhibit 10.37
to Registrant's Report on Form 10-K for the year ended June 30,
1997; as amended by the Amendment to Agreement entered into as of
March 22, 1999, incorporated by reference to Exhibit 10.12 to
Registrant's Report on Form 10-Q for the quarter ended March 31,
1999.
10.40 Employment Agreement dated 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.
10.41 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.
10.42 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.
10.43 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.
10.44 Del Webb Corporation Supplemental Executive Retirement Plan No.
2, as amended and restated April 20, 1993, incorporated by
reference to Exhibit 10.16 to Registrant's Report on Form 10-K
for the year ended June 30, 1993; as amended by First Amendment
to the Del Webb Corporation Supplemental Executive Retirement
Plan No. 2 effective July 1, 1995, incorporated by reference to
Exhibit 10.16 to Registrant's Report on Form 10-K for the year
ended June 30, 1995; as amended by the Fourth Amendment to Plan
dated March 10, 1999, incorporated by reference to Exhibit 10.10
to Registrant's Report on Form 10-Q for the quarter ended March
31, 1999.
* Reports filed under File No. 1-4785 were filed in the office of the
Security and Exchange Commission located in Washington, D.C.
6