10-Q 1 e-6239.txt QUARTERLY REPORT FOR QTR ENDING 12-31-00 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the period ended DECEMBER 31, 2000. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from N/A to N/A. Commission File Number: 1-4785 DEL WEBB CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 86-0077724 (State or other jurisdiction (IRS Employer Identification Number) of incorporation or organization) 6001 NORTH 24TH STREET, PHOENIX, ARIZONA 85016 (Address of principal executive offices) (Zip Code) (602) 808-8000 (Registrant's phone number, including area code) NONE -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report 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 [ ] As of January 31, 2001 Registrant had outstanding 18,623,079 shares of common stock. DEL WEBB CORPORATION FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 2000 TABLE OF CONTENTS PART I. FINANCIAL INFORMATION PAGE Item 1. Financial Statements: Consolidated Balance Sheets as of December 31, 2000, June 30, 2000 and December 31, 1999......................... 1 Consolidated Statements of Earnings for the three and six months ended December 31, 2000 and 1999..................... 2 Consolidated Statements of Cash Flows for the six months ended December 31, 2000 and 1999..................... 3 Notes to Consolidated Financial Statements................... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......................... 10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K............................. 19 DEL WEBB CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE DATA)
DECEMBER 31, DECEMBER 31, 2000 JUNE 30, 1999 (UNAUDITED) 2000 (UNAUDITED) ----------- ----------- ----------- ASSETS Real estate inventories (Notes 2, 3 and 6) $ 1,778,853 $ 1,755,398 $ 1,832,939 Cash and short-term investments 141 21,038 32 Receivables 44,517 36,121 31,336 Property and equipment, net 95,476 96,637 76,417 Other assets 75,920 71,563 72,207 ----------- ----------- ----------- $ 1,994,907 $ 1,980,757 $ 2,012,931 =========== =========== =========== LIABILITIES AND SHAREHOLDERS EQUITY Notes payable, senior and subordinated debt (Note 3) $ 982,592 $ 1,005,424 $ 1,092,303 Contractor and trade accounts payable 110,872 113,574 135,930 Accrued liabilities and other payables 151,099 158,351 146,801 Home sale deposits 159,547 165,762 166,755 Deferred income taxes (Note 4) 56,107 47,030 26,834 Income taxes payable (Note 4) 13,290 8,230 9,705 ----------- ----------- ----------- Total liabilities 1,473,507 1,498,371 1,578,328 ----------- ----------- ----------- Shareholders' equity: Common stock, $.001 par value. Authorized 30,000,000 shares; issued 18,522,162 shares at December 31, 2000, 18,360,213 shares at June 30, 2000 and 18,292,128 shares at December 31, 1999 18 18 18 Additional paid-in capital 173,626 170,112 170,565 Retained earnings 355,355 316,240 269,549 ----------- ----------- ----------- 528,999 486,370 440,132 Less deferred compensation (7,599) (3,984) (5,529) ----------- ----------- ----------- Total shareholders' equity 521,400 482,386 434,603 ----------- ----------- ----------- $ 1,994,907 $ 1,980,757 $ 2,012,931 =========== =========== ===========
See accompanying notes to consolidated financial statements. 1 DEL WEBB CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (IN THOUSANDS EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED DECEMBER 31, DECEMBER 31, ---------------------- ---------------------- 2000 1999 2000 1999 -------- -------- -------- -------- Revenues (Note 5) $486,953 $495,613 $904,611 $905,175 -------- -------- -------- -------- Costs and expenses (Note 5): Home construction, land and other 375,397 388,808 692,335 702,637 Selling, general and administrative 58,924 65,282 116,351 122,221 Interest (Note 6) 17,266 20,133 34,807 37,390 -------- -------- -------- -------- 451,587 474,223 843,493 862,248 -------- -------- -------- -------- Earnings before income taxes 35,366 21,390 61,118 42,927 Income taxes (Note 4) 12,732 7,701 22,003 15,454 -------- -------- -------- -------- Net earnings $ 22,634 $ 13,689 $ 39,115 $ 27,473 ======== ======== ======== ======== Weighted average shares outstanding - basic 18,482 18,271 18,428 18,247 ======== ======== ======== ======== Weighted average shares outstanding - assuming dilution 18,934 18,683 18,721 18,655 ======== ======== ======== ======== Net earnings per share - basic $ 1.22 $ .75 $ 2.12 $ 1.51 ======== ======== ======== ======== Net earning per share - assuming dilution $ 1.20 $ .73 $ 2.09 $ 1.47 ======== ======== ======== ========
See accompanying notes to consolidated financial statements. 2 DEL WEBB CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, -------------------------- 2000 1999 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers related to operating community home sales $ 810,976 $ 884,807 Cash received from commercial land and facility sales at operating communities 39,312 25,580 Cash paid for costs related to home construction at operating communities (564,327) (558,351) --------- --------- Net cash provided by operating community sales activities 285,961 352,036 Cash paid for land acquisitions at operating communities (6,382) (19,130) Cash paid for lot development at operating communities (146,435) (161,475) Cash paid for amenity development at operating communities (52,159) (115,414) --------- --------- Net cash provided by operating communities 80,985 56,017 Cash paid for costs related to communities in the pre-operating stage -- (14,716) Cash received from mortgage operations 4,642 4,974 Cash received/(paid) for residential land development project 352 (3,056) Cash paid for corporate activities (39,453) (31,519) Interest paid (48,686) (48,914) Cash paid for income taxes (7,013) (10,997) --------- --------- NET CASH USED FOR OPERATING ACTIVITIES (9,173) (48,211) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (3,864) (8,533) Investments in life insurance policies (2,577) (1,566) --------- --------- NET CASH USED FOR INVESTING ACTIVITIES (6,441) (10,099) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings 184,946 189,437 Repayments of debt (190,832) (154,032) Stock repurchases (1) (3) Proceeds from exercise of common stock options 604 271 --------- --------- NET CASH (USED FOR)/PROVIDED BY FINANCING ACTIVITIES (5,283) 35,673 --------- --------- NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS (20,897) (22,637) CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD 21,038 22,669 --------- --------- CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 141 $ 32 ========= =========
See accompanying notes to consolidated financial statements. 3 DEL WEBB CORPORATION AND SUBIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (IN THOUSANDS) (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, -------------------------- 2000 1999 --------- --------- Reconciliation of net earnings to net cash used for operating activities: Net earnings $ 39,115 $ 27,473 Amortization of non-cash common costs in costs and expenses, excluding interest 205,939 213,946 Amortization of capitalized interest in costs and expenses 34,807 37,390 Deferred compensation amortization 692 3,653 Depreciation and other amortization 5,384 5,890 Deferred income taxes 9,077 4,325 Net increase in home construction costs (28,400) (24,043) Land acquisitions (6,382) (19,130) Lot development (146,435) (161,475) Amenity development (52,159) (115,414) Net change in other assets and liabilities (70,811) (20,826) --------- --------- Net cash used for operating activities $ (9,173) $ (48,211) ========= =========
See accompanying notes to consolidated financial statements. 4 DEL WEBB CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION The consolidated financial statements include the accounts of Del Webb Corporation and its subsidiaries (the "Company"). In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments, primarily eliminations of all significant intercompany transactions and accounts) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. Certain financial statement items from the prior year have been reclassified to be consistent with the current year financial statement presentation. The consolidated financial statements should be read in conjunction with the consolidated financial statements and the related disclosures contained in the Company's Annual Report on Form 10-K for the year ended June 30, 2000, filed with the Securities and Exchange Commission. 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. The results of operations for the six months ended December 31, 2000 are not necessarily indicative of the results to be expected for the full fiscal year. (2) REAL ESTATE INVENTORIES The components of real estate inventories are:
In Thousands -------------------------------------------- December 31, December 31, 2000 June 30, 1999 (Unaudited) 2000 (Unaudited) ----------- ---------- ----------- Home construction costs $ 289,190 $ 260,790 $ 289,411 Unallocated improvement and amenity costs 1,101,967 1,097,643 1,150,138 Unallocated capitalized interest 120,625 105,213 99,092 Land held for housing 197,624 205,142 235,726 Land held for future development or sale 69,447 86,610 58,572 ---------- ---------- ---------- $1,778,853 $1,755,398 $1,832,939 ========== ========== ==========
At December 31, 2000 the Company had 388 completed homes and 855 homes under construction that were not subject to a sales contract. These homes represented $69.9 million of home construction costs at December 31, 2000. At December 31, 1999 the Company had 294 completed homes and 895 homes under construction (representing $52.9 million of home construction costs) that were not subject to a sales contract. Included in land held for future development or sale at December 31, 2000 were 256 acres of commercial land and 1,062 acres of residential land that are currently being marketed for sale at the Company's active adult communities. Also included is 573 acres of commercial land currently being marketed for sale at the Company's Anthem Arizona project. 5 DEL WEBB CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (3) NOTES PAYABLE, SENIOR AND SUBORDINATED DEBT Notes payable, senior and subordinated debt consists of:
In Thousands ----------------------------------------- December 31, December 31, 2000 June 30, 1999 (Unaudited) 2000 (Unaudited) ---------- ---------- ---------- 9 3/4% Senior Subordinated Debentures due 2003, net, unsecured $ 99,109 $ 98,903 $ 98,698 9% Senior Subordinated Debentures due 2006, net, unsecured 98,586 98,449 98,312 9 3/4% Senior Subordinated Debentures due 2008, net, unsecured 146,580 146,338 146,096 9 3/8% Senior Subordinated Debentures due 2009, net, unsecured 196,113 195,880 195,647 10 1/4% Senior Subordinated Debentures due 2010, net, unsecured 144,524 144,223 143,922 Notes payable to banks under a senior revolving credit facility and short-term lines of credit, unsecured 237,000 235,000 346,000 Real estate and other notes, primarily secured 60,680 86,631 63,628 ---------- ---------- ---------- $ 982,592 $1,005,424 $1,092,303 ========== ========== ==========
At December 31, 2000, under the most restrictive of the covenants in the Company's debt agreements, $86 million of the Company's retained earnings was available for payment of cash dividends and acquisition of stock. (4) INCOME TAXES The components of income taxes are: In Thousands (Unaudited) ---------------------------------------------- Three Months Ended Six Months Ended December 31, December 31, -------------------- -------------------- 2000 1999 2000 1999 ------- ------- ------- ------- Current: Federal $ 4,772 $ 5,207 $12,069 $10,483 State 331 321 857 646 ------- ------- ------- ------- 5,103 5,528 12,926 11,129 ------- ------- ------- ------- Deferred: Federal 7,123 1,952 8,409 3,809 State 506 221 668 516 ------- ------- ------- ------- 7,629 2,173 9,077 4,325 ------- ------- ------- ------- $12,732 $ 7,701 $22,003 $15,454 ======= ======= ======= ======= 6 DEL WEBB CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (5) REVENUES AND COSTS AND EXPENSES The components of revenues and costs and expenses are:
In Thousands (Unaudited) ----------------------------------------------- Three Months Ended Six Months Ended December 31, December 31, --------------------- --------------------- 2000 1999 2000 1999 -------- -------- -------- -------- Revenues: Homebuilding: Active adult communities $311,614 $318,608 $588,955 $611,227 Family and country club communities 122,362 139,254 240,155 235,990 -------- -------- -------- -------- 433,976 457,862 829,110 847,217 Models/vacation getaway homes with long-term leaseback * -- 14,339 -- 24,064 -------- -------- -------- -------- Total homebuilding 433,976 472,201 829,110 871,281 Land and facility sales 44,846 19,234 61,339 25,649 Other 8,131 4,178 14,162 8,245 -------- -------- -------- -------- $486,953 $495,613 $904,611 $905,175 ======== ======== ======== ========
* For the three and six months ended December 31, 1999, revenues (in thousands) from the sale of models/vacation getaway homes with long-term leasebacks are net of deferred profits of $6,324 and $10,110, respectively. These deferred profits are being amortized as reductions of selling, general and administrative expenses over the leaseback periods, offsetting substantially all of the related rent expense.
In Thousands (Unaudited) ----------------------------------------------- Three Months Ended Six Months Ended December 31, December 31, --------------------- --------------------- 2000 1999 2000 1999 -------- -------- -------- -------- Costs and expenses: Home construction and land: Active adult communities $232,388 $240,846 $440,929 $461,259 Family and country club communities 96,034 112,348 188,576 189,964 -------- -------- -------- -------- 328,422 353,194 629,505 651,223 Models/vacation getaway homes with long-term leaseback -- 14,339 -- 24,064 -------- -------- -------- -------- Total homebuilding 328,422 367,533 629,505 675,287 Cost of land and facility sales 40,447 18,263 50,073 21,557 Other cost of sales 6,528 3,012 12,757 5,793 -------- -------- -------- -------- Total home construction, land and other 375,397 388,808 692,335 702,637 Selling, general and administrative 58,924 65,282 116,351 122,221 Interest 17,266 20,133 34,807 37,390 -------- -------- -------- -------- $451,587 $474,223 $843,493 $862,248 ======== ======== ======== ========
7 DEL WEBB CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (6) INTEREST The following table shows the components of interest:
In Thousands (Unaudited) --------------------------------------------- Three Months Ended Six Months Ended December 31, December 31, -------------------- -------------------- 2000 1999 2000 1999 -------- ------- -------- ------- Interest incurred and capitalized $ 24,943 $26,406 $ 50,219 $51,475 ======== ======= ======== ======= Allocation of capitalized interest in costs and expenses $ 17,266 $20,133 $ 34,807 $37,390 ======== ======= ======== ======= Unallocated capitalized interest included in real estate inventories at period end $120,625 $99,092 $120,625 $99,092 ======== ======= ======== ======= Interest income $ 167 $ 183 $ 378 $ 434 ======== ======= ======== =======
Interest income is included in other revenues. (7) SEGMENT INFORMATION The Company conducts its operations in two primary segments in Arizona, California, Florida, Illinois, Nevada, South Carolina and Texas. 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 its communities, the Company has usually been 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 for the Company. There are no significant intersegment transactions. 8 DEL WEBB CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (7) SEGMENT INFORMATION (CONTINUED)
In Thousands (Unaudited) -------------------------------------------------------------- Three Months Ended Six Months Ended December 31, December 31, ---------------------------- ---------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Revenues: Active adult communities $ 320,027 $ 333,677 $ 605,912 $ 637,693 Family and country club communities 143,610 160,761 274,126 265,191 Corporate and other 23,316 1,175 24,573 2,291 ----------- ----------- ----------- ----------- $ 486,953 $ 495,613 $ 904,611 $ 905,175 =========== =========== =========== =========== EBIT: Active adult communities $ 53,146 $ 45,088 $ 95,382 $ 88,357 Family and country club communities 23,317 15,584 42,206 27,668 Corporate and other (23,831) (19,149) (41,663) (35,708) ----------- ----------- ----------- ----------- $ 52,632 $ 41,523 $ 95,925 $ 80,317 =========== =========== =========== =========== Allocation of Capitalized Interest: Active adult communities $ 11,470 $ 14,121 $ 23,434 $ 27,151 Family and country club communities 5,796 6,012 11,373 10,239 Corporate and other -- -- -- -- ----------- ----------- ----------- ----------- $ 17,266 $ 20,133 $ 34,807 $ 37,390 =========== =========== =========== =========== Expenditures for Real Estate Inventories: Active adult communities $ 238,762 $ 271,252 $ 464,394 $ 530,470 Family and country club communities 103,315 135,907 193,458 250,431 Corporate and other 52 1,334 183 3,446 ----------- ----------- ----------- ----------- $ 342,129 $ 408,493 $ 658,035 $ 784,347 =========== =========== =========== =========== Purchases of Property and Equipment: Active adult communities $ -- $ 1,708 $ -- $ 3,298 Family and country club communities 827 185 912 389 Corporate and other 1,479 2,634 2,952 4,846 ----------- ----------- ----------- ----------- $ 2,306 $ 4,527 $ 3,864 $ 8,533 =========== =========== =========== =========== Depreciation and Other Amortization: Active adult communities $ 904 $ 894 $ 1,916 $ 2,081 Family and country club communities 549 131 939 258 Corporate and other 1,280 2,065 2,529 3,551 ----------- ----------- ----------- ----------- $ 2,733 $ 3,090 $ 5,384 $ 5,890 =========== =========== =========== =========== Assets at Period End: Active adult communities $ 1,408,257 $ 1,314,678 $ 1,408,257 $ 1,314,678 Family and country club communities 474,854 492,200 474,854 492,200 Corporate and other 111,796 206,053 111,796 206,053 ----------- ----------- ----------- ----------- $ 1,994,907 $ 2,012,913 $ 1,994,907 $ 2,012,931 =========== =========== =========== ===========
9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following should be read in conjunction with the accompanying consolidated financial statements and notes thereto and the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2000, filed with the Securities and Exchange Commission. CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA
THREE MONTHS SIX MONTHS ENDED ENDED DECEMBER 31, CHANGE DECEMBER 31, CHANGE --------------- ---------------- -------------- ---------------- 2000 1999 AMOUNT PERCENT 2000 1999 AMOUNT PERCENT ---- ---- ------ ------- ---- ---- ------ ------- OPERATING DATA: Number of net new orders: Active adult communities: Sun City Grand 191 251 (60) (23.9%) 408 569 (161) (28.3%) Sun Cities Las Vegas 240 232 8 3.4% 591 486 105 21.6% Sun City Palm Desert 122 79 43 54.4% 220 160 60 37.5% Sun Cities Northern California 219 136 83 61.0% 456 274 182 66.4% Sun City Hilton Head 58 78 (20) (25.6%) 128 175 (47) (26.9%) Sun City Texas 77 52 25 48.1% 159 137 22 16.1% Sun City at Huntley 68 76 (8) (10.5%) 189 193 (4) (2.1%) Florida communities 76 63 13 20.6% 153 149 4 2.7% Other communities 50 77 (27) (35.1%) 102 205 (103) (50.2%) ----- ----- --- ---- ----- ----- ---- ---- Total active adult communities 1,101 1,044 57 5.5% 2,406 2,348 58 2.5% ----- ----- --- ---- ----- ----- ---- ---- Family and country club communities: Arizona country club communities 69 63 6 9.5% 121 106 15 14.2% Nevada country club communities 64 54 10 18.5% 125 111 14 12.6% Arizona family communities 198 205 (7) (3.4%) 440 439 1 0.2% Nevada family communities 52 63 (11) (17.5%) 96 117 (21) (17.9%) ----- ----- --- ---- ----- ----- ---- ---- Total family and country club Communities 383 385 (2) (0.5%) 782 773 9 1.2% ----- ----- --- ---- ----- ----- ---- ---- Total 1,484 1,429 55 3.8% 3,188 3,121 67 2.1% ===== ===== === ==== ===== ===== ==== ====
Included in net new orders for the three and six months ended December 31, 1999 were models and vacation getaway homes sold with long-term leasebacks. Sun City Grand had 31 such net new orders for the three month period and 145 for the six month period. The Sun Cities Las Vegas had 12 and 30 for the three and six months, respectively. The Nevada country club communities had 0 and 13 for the three and six month periods, respectively. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA (CONTINUED)
THREE MONTHS SIX MONTHS ENDED ENDED DECEMBER 31, CHANGE DECEMBER 31, CHANGE --------------- ---------------- -------------- ---------------- 2000 1999 AMOUNT PERCENT 2000 1999 AMOUNT PERCENT ---- ---- ------ ------- ---- ---- ------ ------- OPERATING DATA: Number of home closings: Active adult communities: Sun City Grand 272 420 (148) (35.2%) 574 757 (183) (24.2%) Sun Cities Las Vegas 343 261 82 31.4% 602 512 90 17.6% Sun City Palm Desert 107 114 (7) (6.1%) 217 249 (32) (12.9%) Sun Cities Northern California 215 211 4 1.9% 371 340 31 9.1% Sun City Hilton Head 70 118 (48) (40.7%) 135 213 (78) (36.6%) Sun City Texas 70 74 (4) (5.4%) 120 133 (13) (9.8%) Sun City at Huntley 78 188 (110) (58.5%) 153 414 (261) (63.0%) Florida communities 58 63 (5) (7.9%) 120 129 (9) (7.0%) Other communities 48 72 (24) (33.3%) 132 150 (18) (12.0%) ----- ----- ---- ----- ----- ----- ---- ----- Total active adult communities 1,261 1,521 (260) (17.1%) 2,424 2,897 (473) (16.3%) ----- ----- ---- ----- ----- ----- ---- ----- Family and country club communities: Arizona country club communities 84 90 (6) (6.7%) 179 107 72 67.3% Nevada country club communities 69 68 1 1.5% 106 123 (17) (13.8%) Arizona family communities 228 328 (100) (30.5%) 466 552 (86) (15.6%) Nevada family communities 45 115 (70) (60.9%) 121 251 (130) (51.8%) ----- ----- ---- ----- ----- ----- ---- ----- Total family and country club communities 426 601 (175) (29.1%) 872 1,033 (161) (15.6%) ----- ----- ---- ----- ----- ----- ---- ----- Total 1,687 2,122 (435) (20.5%) 3,296 3,930 (634) (16.1%) ===== ===== ==== ===== ===== ===== ==== =====
Included in home closings for the three and six months ended December 31, 1999 were models and vacation getaway homes sold with long-term leasebacks. Profits on the closings of these units were deferred and are being amortized as reductions of selling, general and administrative expenses over the leaseback periods, offsetting substantially all of the related rent expense. Sun City Grand had 93 such home closings for the three months and 125 for the six months. The Sun Cities Las Vegas had 9 and 27 for the three and six months, respectively. The Nevada country club communities had 5 and 13 for the three and six months, respectively. 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA (CONTINUED)
AT DECEMBER 31, CHANGE ------------------ -------------------- 2000 1999 AMOUNT PERCENT ---- ---- ------ ------- BACKLOG DATA: Homes under contract: Active adult communities: Sun City Grand 395 546 (151) (27.7%) Sun Cities Las Vegas 532 519 13 2.5% Sun City Palm Desert 249 195 54 27.7% Sun Cities Northern California 481 342 139 40.6% Sun City Hilton Head 131 156 (25) (16.0%) Sun City Texas 257 162 95 58.6% Sun City at Huntley 181 284 (103) (36.3%) Florida communities 242 153 89 58.2% Other communities 103 223 (120) (53.8%) ------ ------ ----- ----- Total active adult communities 2,571 2,580 (9) (0.3%) ------ ------ ----- ----- Family and country club communities: Arizona country club communities 176 243 (67) (27.6%) Nevada country club communities 182 123 59 48.0% Arizona family communities 484 614 (130) (21.2%) Nevada family communities 90 115 (25) (21.7%) ------ ------ ----- ----- Total family and country club communities 932 1,095 (163) (14.9%) ------ ------ ----- ----- Total 3,503 3,675 (172) (4.7%) ====== ====== ===== ===== Aggregate contract sales amount (dollars in millions) $ 948 $ 917 $ 31 3.4% ====== ====== ===== ===== Average contract sales amount per home (dollars in thousands) $ 271 $ 250 $ 21 8.4% ====== ====== ===== =====
Included in backlog at December 31, 1999 were models and vacation getaway homes sold with long term leasebacks. Sun City Grand had 20 such homes in backlog. 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA (CONTINUED)
THREE MONTHS SIX MONTHS ENDED ENDED DECEMBER 31, CHANGE DECEMBER 31, CHANGE ------------------- ---------------- ------------------ ---------------- 2000 1999 AMOUNT PERCENT 2000 1999 AMOUNT PERCENT ---- ---- ------ ------- ---- ---- ------ ------- AVERAGE REVENUE PER HOME CLOSING: Active adult communities: Sun City Grand $212,900 $167,600 45,300 27.0% $206,700 $173,400 33,300 19.2% Sun Cities Las Vegas 239,100 238,900 200 0.1% 233,600 229,200 4,400 1.9% Sun City Palm Desert 327,300 278,400 48,900 17.6% 323,900 276,900 47,000 17.0% Sun Cities Northern California 311,500 278,300 33,200 11.9% 307,000 278,100 28,900 10.4% Sun City Hilton Head 230,800 188,100 42,700 22.7% 241,700 198,800 42,900 21.6% Sun City Texas 266,900 229,400 37,500 16.3% 247,000 226,800 20,200 8.9% Sun City at Huntley 241,400 230,600 10,800 4.7% 253,100 232,300 20,800 9.0% Florida communities 151,100 141,500 9,600 6.8% 151,200 137,600 13,600 9.9% Other communities 151,500 212,800 (61,300) (28.8%) 199,600 202,300 (2,700) (1.3%) Average active adult communities 247,100 216,900 30,200 13.9% 243,000 217,100 25,900 11.9% Family and country club communities: Arizona country club communities 345,400 257,000 88,400 34.4% 339,400 250,700 88,700 35.4% Nevada country club communities 393,400 413,000 (19,600) (4.7%) 425,800 420,800 5,000 1.2% Arizona family communities 245,200 209,000 36,200 17.3% 234,500 208,500 26,000 12.5% Nevada family communities 228,800 195,200 33,600 17.2% 206,400 194,200 12,200 6.3% Average family and country club communities 287,200 236,600 50,600 21.4% 275,400 234,600 40,800 17.4% Total average $257,200 $222,500 34,700 15.6% $251,600 $221,700 29,900 13.5% ======== ======== ======= ==== ======== ======== ======= ====
Average revenue per home closing for the models and vacation getaway homes with long-term leasebacks at Sun City Grand was $88,800 and $90,900 for the three and six months respectively ended December 31, 1999. At the Sun Cities Las Vegas, the average revenue for these home closings was $346,200 for the three months and $233,500 for the six months. At the Nevada country club communities, the average revenue for these home closings was $593,800 for the three months and $492,100 for the six months. 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA (CONTINUED)
THREE MONTHS SIX MONTHS ENDED ENDED DECEMBER 31, CHANGE DECEMBER 31, CHANGE ------------- ---------------- ------------- --------------- 2000 1999 AMOUNT PERCENT 2000 1999 AMOUNT PERCENT ---- ---- ------ ------- ---- ---- ------ ------- OPERATING STATISTICS: Costs and expenses as a percentage of revenues: Home construction, land and other 77.1% 78.4% (1.3%) (1.7%) 76.5% 77.6% (1.1%) (1.4%) Selling, general and administrative 12.1% 13.2% (1.1%) (8.3%) 12.9% 13.5% (0.6%) (4.4%) Interest 3.5% 4.1% (0.6%) (14.6%) 3.8% 4.1% (0.3%) (7.3%) ==== ==== ==== ===== ==== ==== ==== ====
NOTES: New orders are net of cancellations. The Company recognizes revenue at close of escrow. The Sun Cities Las Vegas include Sun City Summerlin (the last home closed April 2000), Sun City MacDonald Ranch and Sun City Anthem. The Sun Cities Northern California include Sun City Roseville (the last home closed March 2000) and Sun City Lincoln Hills. Other active adult communities represent two smaller-scale communities in Arizona and California. Home closings began at Anthem Country Club Arizona in September 1999. A substantial majority of the backlog at December 31, 2000 is currently anticipated to result in revenues in the next 12 months. However, a majority of the backlog is contingent upon the availability of financing for the customer and, in certain cases, sale of the customer's existing residence. Also, as a practical matter, the Company's ability to obtain damages for breach of contract by a potential home buyer is limited to retaining all or a portion of the deposit received. In the six months ended December 31, 2000 and 1999, cancellations of home sales orders as a percentage of new home sales orders written during the period were 14.7 percent and 15.4 percent, respectively. 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999 REVENUES. Total revenues decreased to $487.0 million for the three months ended December 31, 2000 from $495.6 million for the three months ended December 31, 1999. The 1999 quarter included $14.3 million of revenues from models and vacation getaway homes sold with long-term leasebacks. There were no such sale/leasebacks in the 2000 quarter. Exclusive of closings of models and vacation getaway homes, active adult community homebuilding revenues decreased to $311.6 million for the 2000 quarter from $318.6 for the 1999 quarter. This decrease was primarily attributable to decreased closings at Sun City Grand, Sun City Hilton Head and Sun City at Huntley. Exclusive of closings of models, family and country club community homebuilding revenues decreased to $122.4 million for the 2000 quarter from $139.3 million for the 1999 quarter. The decrease was primarily attributable to decreased closings in the Arizona family communities (due to fewer subdivisions) and the Nevada family communities (due to closing out these operations). The effect of the decrease in the number of home closings was partially offset by an increase in average revenue per home closing, which increased nearly 14 percent in active adult communities and 21 percent in family and country club communities. HOME CONSTRUCTION, LAND AND OTHER COSTS. The decrease in home construction, land and other costs to $375.4 million for the 2000 quarter from $388.8 million for the 1999 quarter was largely due to the decrease in home closings. As a percentage of revenues, these costs decreased to 77.1 percent for the 2000 quarter from 78.4 percent for the 1999 quarter. This cost decrease as a percentage of revenues was primarily due to an increase in homebuilding gross margin to 24.3 percent for the 2000 quarter from 22.2 percent for the 1999 quarter. Of this total 2.1 percent increase, 0.7 percent was attributable to deferred profit recognition in the 1999 quarter on the sale and long-term leaseback of 107 model and vacation getaway homes at three of the Company's communities. The balance was largely attributable to price increases that have been effected over the past 12 months. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. As a percentage of revenues, selling, general and administrative expenses decreased to 12.1 percent for the 2000 quarter from 13.2 percent for the 1999 quarter. The decrease is primarily attributable to results of efforts to cut costs and improve the efficiency of operations. The results for three months ended December 31, 2000 are not necessarily indicative of the results to be expected for the full year. INTEREST. As a percentage of revenues, allocation of capitalized interest to costs and expenses decreased to 3.5 percent for the 2000 quarter from 4.1 percent for the 1999 quarter. This decrease is attributable to expected lower future debt levels from this expectation in the prior year. INCOME TAXES. The increase in income taxes to $12.7 million for the 2000 quarter from $7.7 million in the 1999 quarter was proportionate to the increase in earnings before income taxes. The effective tax rate in both quarters was 36 percent. NET EARNINGS. The increase in net earnings to $22.6 million for the 2000 quarter from $13.7 million for the 1999 quarter was primarily attributable to increased gross margin from land sales, lower selling, general and administrative expenses and lower interest amortized. 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) NET NEW ORDER ACTIVITY AND BACKLOG. Net new orders in the 2000 quarter were 3.8 percent higher than in the 1999 quarter. This increase was primarily attributable to the following: * Strong demand at Sun City Palm Desert; * Strong demand at Sun City Lincoln Hills resulted in increase at the Sun Cities Northern California; * Strong demand at Sun City Texas. Offsetting decreases were attributable to the following: * In the 1999 quarter, 40 models and vacation getaway homes (primarily at Sun City Grand) sold with long-term leasebacks and no such sale/leasebacks occurred in the 2000 quarter; * Clover Springs (part of Other Active Adult Communities) contributed 26 net new orders in the 1999 quarter and no new orders in the 2000 quarter; * Decreased net new orders Sun City Grand and Sun City Hilton Head. Due to increased sales prices, the dollar amount of homes under contract at December 31, 2000 was 3.4 percent higher than at December 31, 1999, while the number of homes in backlog was 4.7 percent lower. The unit backlog decrease was attributable to the following: * Satisfaction of prior-year pent-up demand at Sun City at Huntley; * Company's decision to cease family community operations in Nevada; * Reduction in the number of family community subdivisions in the Phoenix area; * Decreased net new orders at Clover Springs, Sun City Grand and Sun City Hilton Head, discussed above. SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999 REVENUES. Total revenues decreased to $904.6 million for the six months ended December 31, 2000 from $905.2 million for the six months ended December 31, 1999. The 1999 six months included $24.1 million of revenues from models and vacation getaway homes sold with long-term leasebacks. There were no such sale/leasebacks in the 2000 six months. Exclusive of closings of models and vacation getaway homes, active adult community homebuilding revenues decreased to $589.0 million for the 2000 period from $611.2 million for the 1999 period. The principal reasons for this decrease were decreased closings at Sun City at Huntley, Sun City Hilton Head and Sun City Grand. Exclusive of closings of models, family and country club community homebuilding revenues increased to $240.2 million for the 2000 period from $236.0 million for the 1999 period. The increase was primarily attributable to an increase in the average revenue per unit from $234,600 in the 1999 period to $275,400 in the 2000 period. The effect of the decrease in the number of home closings was partially offset by an increase in average revenue per home closing, which increased nearly 12 percent in active adult communities and 17 percent in family and country club communities. 16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) HOME CONSTRUCTION, LAND AND OTHER COSTS. The decrease in home construction, land and other costs to $692.3 million for the 2000 period from $702.6 million for the 1999 period was largely due to the decrease in home closings. As a percentage of revenues, these costs decreased to 76.5 percent for the 2000 period from 77.6 percent for the 1999 period. This cost decrease as a percentage of revenues was primarily due to an increase in homebuilding gross margin from 22.5 percent for the 1999 period to 24.1 percent for the 2000 period. Of this total 1.6 percent increase in homebuilding gross margin, 0.6 percent was attributable to deferred profit recognition in the 1999 period on the sale and long-term leaseback of 165 model and vacation getaway homes at three of the Company's communities. The balance of the increase in homebuilding gross margin was largely attributable to price increases that have been effected over the past 12 months. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. As a percentage of revenues, selling, general and administrative expenses decreased to 12.9 percent for the 2000 period from 13.5 percent for the 1999 period. This decrease is primarily attributable to results of efforts to cut costs and improve the efficiencies of operations. The results for the six months ended December 31, 2000 are not necessarily indicative of the results to be expected for the full year. INTEREST. As a percentage of revenues, allocation of capitalized interest decreased to 3.8 percent for the 2000 period from 4.1 percent for the 1999 period. This decrease is attributable to expected lower future debt levels from this expectation in the prior year. INCOME TAXES. The increase in income taxes to $22.0 million for the 2000 period from $15.5 million in the 1999 period was due to the increase in earnings before income taxes. The effective tax rate in both periods was 36 percent. NET EARNINGS. The increase in net earnings to $39.1 million for the 2000 period from $27.5 million for the 1999 period was primarily attributable to increased gross margin from land sales, lower selling, general and administrative expenses and lower interest amortized. NET NEW ORDER ACTIVITY. Net new orders in the 2000 period were 2.1 percent higher than in the 1999 period. This increase is attributable to the following: * Strong demand at Sun City Palm Desert; * Strong demand at Sun City Anthem resulted in the increase at the Sun Cities Las Vegas; * Strong demand at Sun City Lincoln Hills resulted in the increase at the Sun Cities Northern California. Offsetting decreases were attributable to the following: * In the 1999 period, 185 models and vacation getaway homes (primarily at Sun City Grand) sold with long-term leasebacks and no such sale/leasebacks occurred in the 2000 period; * Clover Springs (part of Other Active Adult Communities) contributed 119 net new orders in the 1999 period but only 1 new order in the 2000 period; * Decreased net new orders at Sun City Grand and Sun City Hilton Head . 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) LIQUIDITY AND FINANCIAL CONDITION OF THE COMPANY The cash flow for each community can differ substantially from reported earnings, depending on the status of the development cycle. The initial years of development or expansion require significant cash outlays for, among other things, acquiring tracts of land, obtaining development approvals, developing land and lots and constructing project infrastructure (such as roads and utilities), recreation centers, golf courses, model homes and sales facilities. Since these costs are capitalized, this can result in income reported for financial statement purposes during those initial years significantly exceeding cash flow. However, after the initial years of development or expansion, cash flow can significantly exceed earnings reported for financial statement purposes, as costs and expenses include allocation charges for substantial previously expended costs. During the 2000 period the Company generated $286 million of net cash from operating community sales activities, used $205 million for land and lot and amenity development at operating communities, and used $90 million for interest, income taxes and other operating activities. The resulting $9 million of net cash used for operating activities was funded mainly through borrowings under the Company's $500 million senior unsecured revolving credit facility. Real estate development is dependent on, among other things, the availability and cost of financing. In periods of significant growth, the Company requires significant additional capital resources. In fiscal 1999 and fiscal 2000, the Company had several new communities under development. Primarily as a result of public debt offerings and borrowings to fund these development expenditures, the Company has considerably more indebtedness and was considerably more highly leveraged throughout fiscal 1999 and most of fiscal 2000 than it has been in recent years. The Company has reduced its leverage with debt to total capitalization declining from 71.5 percent at December 31, 1999 to 65.3 percent at December 31, 2000 as a result of debt repayments and an increase in retained earnings. The Company expects to have adequate capital resources to meet its needs for the next 12 months. If there is a significant downturn in anticipated operations, however, the Company will need to modify its business plan to operate with lower capital resources. Modifications of the business plan could include, among other things, delaying development expenditures at its communities. At December 31, 2000, under the most restrictive of the covenants in the debt agreements, $86 million of the retained earnings was available for payment of cash dividends and the acquisition of stock. FORWARD LOOKING INFORMATION: CERTAIN CAUTIONARY STATEMENTS This "Management's Discussion and Analysis of Financial Condition and Results of Operations" contains forward looking statements that involve risks and uncertainties, and actual results may differ materially. Certain forward looking statements are based on assumptions which may not prove to be accurate. Risks and uncertainties include risks associated with: the cyclical nature of real estate operations; land acquisition and development; the ability to successfully implement new strategic initiatives; government regulations; growth management and environmental considerations; geographic concentration; financing and leverage; interest rate fluctuations; construction labor and material costs; energy sources; future communities and new geographic markets; legal matters; natural risks; and other matters set forth in the Company's Annual Report on Form 10-K for the year ended June 30, 2000. 18 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The Company did not file any reports on Form 8-K during the period covered by this report. 19 SIGNATURES Pursuant to the requirements of the Securities Exchange act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, who are duly authorized to do so. DEL WEBB CORPORATION (REGISTRANT) Date: February 12, 2001 /s/ LeRoy C. Hanneman, Jr. ----------------------------------- LeRoy C. Hanneman, Jr. Chief Executive Officer Date: February 12, 2001 /s/ John A. Spencer ----------------------------------- John A. Spencer Executive Vice President and Chief Financial Officer 20