-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AO9BbFfdHeTr4hPIxdiZj35oOaxLDzV80T0z+GbBx311lLCeRIEBIABeJVDado4S fm/0Sz08sxjAXdR+ozmKcw== 0000950147-98-000077.txt : 19980210 0000950147-98-000077.hdr.sgml : 19980210 ACCESSION NUMBER: 0000950147-98-000077 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980209 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEL WEBB CORP CENTRAL INDEX KEY: 0000105189 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 860077724 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04785 FILM NUMBER: 98524770 BUSINESS ADDRESS: STREET 1: 2231 EAST CAMELBACK ROAD CITY: PHOENIX STATE: AZ ZIP: 85016 BUSINESS PHONE: 6028088000 MAIL ADDRESS: STREET 1: 6001 NORTH 24 STREET CITY: PHOENIX STATE: AZ ZIP: 85016 FORMER COMPANY: FORMER CONFORMED NAME: WEBB DEL E CORP DATE OF NAME CHANGE: 19880728 10-Q 1 QUARTERLY REPORT 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, 1997. [ ] 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, 1998 Registrant had outstanding 17,833,110 shares of common stock. DEL WEBB CORPORATION FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1997 TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements: Consolidated Balance Sheets as of December 31, 1997, June 30, 1997 and December 31, 1996.............................................. 1 Consolidated Statements of Earnings for the three and six months ended December 31, 1997 and 1996.......................................... 2 Consolidated Statements of Cash Flows for the six months ended December 31, 1997 and 1996.......................................... 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 1. Legal Proceedings .................................................................16 Item 6. Exhibits and Reports on Form 8-K...................................................16
DEL WEBB CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands Except Share Data)
December 31, June 30, December 31, 1997 1997 1996 (Unaudited) (Unaudited) - ---------------------------------------------------------------------------------------------------------------- Assets . - ---------------------------------------------------------------------------------------------------------------- Real estate inventories (Notes 2, 3 and 6) $ 1,018,692 $ 939,684 $ 930,250 Cash and short-term investments 1,222 24,715 1,876 Receivables 26,897 28,892 25,174 Property and equipment, net 18,415 20,937 22,109 Deferred income taxes (Note 4) 4,996 6,526 9,894 Other assets (Note 7) 88,226 65,908 55,306 - ---------------------------------------------------------------------------------------------------------------- $ 1,158,448 $ 1,086,662 $ 1,044,609 ================================================================================================================ Liabilities and Shareholders' Equity - ---------------------------------------------------------------------------------------------------------------- Notes payable, senior and subordinated debt (Note 3) $ 621,519 $ 563,068 $ 536,036 Contractor and trade accounts payable 61,766 70,827 74,080 Accrued liabilities and other payables 82,716 79,959 64,341 Home sale deposits 68,515 69,476 83,179 Income taxes payable (Note 4) 6,083 3,502 6,706 - ---------------------------------------------------------------------------------------------------------------- Total liabilities 840,599 786,832 764,342 - ---------------------------------------------------------------------------------------------------------------- Shareholders' equity: Common stock, $.001 par value. Authorized 30,000,000 shares; issued 17,839,710 shares at December 31, 1997, 17,691,118 shares at June 30, 1997 and 17,643,757 shares at December 31, 1996 18 18 18 Additional paid-in capital 162,841 160,308 159,929 Retained earnings 161,545 145,922 126,071 - ---------------------------------------------------------------------------------------------------------------- 324,404 306,248 286,018 Less cost of common stock in treasury, 124,509 shares at June 30, 1997 and 16,971 shares at December 31, 1996 - (1,914) (287) Less deferred compensation (6,555) (4,504) (5,464) - ---------------------------------------------------------------------------------------------------------------- Total shareholders' equity 317,849 299,830 280,267 - ---------------------------------------------------------------------------------------------------------------- $ 1,158,448 $ 1,086,662 $ 1,044,609 ================================================================================================================
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, - --------------------------------------------------------------------------------------------------------------- 1997 1996 1997 1996 - --------------------------------------------------------------------------------------------------------------- Revenues (Note 5) $ 278,935 $ 293,682 $ 526,978 $ 557,977 - --------------------------------------------------------------------------------------------------------------- Costs and expenses (Note 5): Home construction, land and other 211,037 225,675 401,981 430,839 Interest (Note 6) 10,932 11,698 21,999 23,282 Selling, general and administrative 39,364 39,436 75,825 77,620 - --------------------------------------------------------------------------------------------------------------- 261,333 276,809 499,805 531,741 - --------------------------------------------------------------------------------------------------------------- Earnings before income taxes 17,602 16,873 27,173 26,236 Income taxes (Note 4) 6,336 6,074 9,782 9,445 - --------------------------------------------------------------------------------------------------------------- Net earnings $ 11,266 $ 10,799 $ 17,391 $ 16,791 =============================================================================================================== Weighted average shares outstanding 17,741 17,582 17,665 17,561 =============================================================================================================== Weighted average shares outstanding - assuming dilution 18,298 17,876 18,119 17,890 =============================================================================================================== Net earnings per share $ .64 $ .61 $ .98 $ .96 =============================================================================================================== Net earnings per share - assuming dilution $ .62 $ .60 $ .96 $ .94 ===============================================================================================================
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, - ------------------------------------------------------------------------------------------------------------------- 1997 1996 - ------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers related to community home sales $ 398,289 $ 404,331 Cash received from commercial land and facility sales 20,493 7,192 Cash paid for costs related to community home construction (243,929) (286,229) - ------------------------------------------------------------------------------------------------------------------- Net cash provided by community sales activities 174,853 125,294 Cash paid for land acquisitions at operating communities (6,731) (1,888) Cash paid for lot development at operating communities (52,695) (51,779) Cash paid for amenity development at operating communities (23,486) (29,257) - ------------------------------------------------------------------------------------------------------------------- Net cash provided by operating communities 91,941 42,370 Cash paid for costs related to communities in the pre-operating stage (61,274) (44,883) Cash received from customers related to conventional homebuilding 102,280 120,387 Cash paid for land, development, construction and other costs related to conventional homebuilding (103,819) (107,802) Cash received from residential land development project 2,762 5,641 Cash paid for corporate activities (18,423) (19,187) Interest paid (24,307) (24,264) Cash paid for income taxes (4,789) (4,090) - ------------------------------------------------------------------------------------------------------------------- NET CASH USED FOR OPERATING ACTIVITIES (15,629) (31,828) - ------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (1,188) (1,720) Investments in life insurance policies (2,228) (1,303) - ------------------------------------------------------------------------------------------------------------------- NET CASH USED FOR INVESTING ACTIVITIES (3,416) (3,023) - ------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings 134,266 140,480 Repayments of debt (139,080) (120,490) Proceeds from exercise of common stock options 2,137 150 Purchases of treasury stock (4) - Dividends paid (1,767) (1,753) - ------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (4,448) 18,387 - ------------------------------------------------------------------------------------------------------------------- NET DECREASE IN CASH AND SHORT-TERM INVESTMENTS (23,493) (16,464) CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD 24,715 18,340 - ------------------------------------------------------------------------------------------------------------------- CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 1,222 $ 1,876 ===================================================================================================================
See accompanying notes to consolidated financial statements. 3 DEL WEBB CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (In Thousands) (Unaudited)
Six Months Ended December 31, - ----------------------------------------------------------------------------------------------------------------- 1997 1996 - ----------------------------------------------------------------------------------------------------------------- Reconciliation of net earnings to net cash used for operating activities: Net earnings $ 17,391 $ 16,791 Allocation of non-cash common costs in costs and expenses, excluding interest 115,499 130,404 Amortization of capitalized interest in costs and expenses 21,999 23,282 Deferred compensation amortization 886 893 Depreciation and other amortization 3,122 4,208 Deferred income taxes 1,527 2,718 Net (increase) decrease in home construction costs 18,045 (17,818) Land acquisitions (35,963) (14,535) Lot development (81,068) (81,973) Amenity development (38,001) (53,791) Pre-acquisition costs (13,926) (11,173) Net change in other assets and liabilities (25,140) (30,834) - ----------------------------------------------------------------------------------------------------------------- Net cash used for operating activities $ (15,629) $ (31,828) =================================================================================================================
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 ("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. The Company develops residential communities ranging from smaller-scale, non-amenitized communities within its conventional homebuilding operations to large-scale, master-planned communities with extensive amenities. The Company currently conducts its operations in Arizona, Nevada, California, Texas and South Carolina. The Company's communities are generally large-scale, master-planned residential communities at which the Company controls all phases of the master plan development process from land selection through the construction and sale of homes. Within its communities, the Company is usually the exclusive builder of homes. The Company's conventional homebuilding operations encompass the construction and sale of homes in various locations in Arizona and Nevada. These 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, 1997, 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 three and six months ended December 31, 1997 are not necessarily indicative of the results to be expected for the full fiscal year. 5 DEL WEBB CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (2) Real Estate Inventories The components of real estate inventories are as follows:
In Thousands - ---------------------------------------------------------------------------------------------------------- December 31, June 30, December 31, 1997 1997 1996 (Unaudited) (Unaudited) - ---------------------------------------------------------------------------------------------------------- Home construction costs $ 163,973 $ 182,018 $ 195,618 Unamortized improvement and amenity costs 537,745 489,142 474,110 Unamortized capitalized interest 50,125 46,121 45,366 Land held for housing 226,258 174,930 158,050 Land and facilities held for future development or sale 40,591 47,473 57,106 - ---------------------------------------------------------------------------------------------------------- $ 1,018,692 $ 939,684 $ 930,250 ==========================================================================================================
At December 31, 1997 the Company had 383 completed homes and 822 homes under construction that were not subject to a sales contract. These homes represented $48.1 million of home construction costs at December 31, 1997. At December 31, 1996 the Company had 345 completed homes and 809 homes under construction (representing $49.6 milion of home construction costs) that were not subject to a sales contract. Included in land and facilities held for future development or sale at December 31, 1997 were 304 acres of residential land, commercial land and worship sites that are currently being marketed for sale at the Company's communities and conventional homebuilding operations. During the six months ended December 31, 1997, the Company acquired the initial portions of land for a planned active adult community in the Chicago area town of Huntley, Illinois, for a planned large-scale master-planned community in the southern Las Vegas valley and for a planned smaller-scale, less-amenitized community in northern California. Accordingly, capitalized pre-acquisition costs previously classified as other assets for these communities are now classified as part of real estate inventories. In January 1998 the Company acquired certain assets and assumed certain liabilities at two operating age-restricted communities in central Florida for a total purchase price of approximately $45 million. The two communities had approximately 2,600 homes remaining to be constructed and closed as of the date of acquisition. 6 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 the following:
In Thousands - ---------------------------------------------------------------------------------------------------------- December 31, June 30, December 31, 1997 1997 1996 (Unaudited) (Unaudited) - ---------------------------------------------------------------------------------------------------------- 10 7/8% Senior Notes, net $ - $ - $ 97,820 9 3/4% Senior Subordinated Debentures due 2003, net 97,876 97,670 97,464 9% Senior Subordinated Debentures due 2006, net 97,765 97,628 97,491 9 3/4% Senior Subordinated Debentures due 2008, net 145,128 144,889 - Notes payable to banks under a revolving credit facility and short-term lines of credit 196,373 185,990 213,150 Real estate and other notes 84,377 36,891 30,111 - ---------------------------------------------------------------------------------------------------------- $ 621,519 $ 563,068 $ 536,036 ==========================================================================================================
At December 31, 1997 the Company had $187.0 million outstanding under its $350 million senior unsecured revolving credit facility and $9.4 outstanding under its $25 million of short-term lines of credit. At December 31, 1997, under the most restrictive of the covenants in the Company's debt agreements, $20.2 million of the Company's retained earnings was available for payment of cash dividends and for the acquisition by the Company of its common stock. In January 1998 the amount of the Company's senior unsecured revolving credit facility was increased to $400 million. (4) Income Taxes The components of income taxes are:
In Thousands (Unaudited) - ---------------------------------------------------------------------------------------------------------- Three Months Ended Six Months Ended December 31, December 31, - ---------------------------------------------------------------------------------------------------------- 1997 1996 1997 1996 - ---------------------------------------------------------------------------------------------------------- Current: Federal $ 6,349 $ 4,345 $ 7,575 $ 5,403 State 607 1,292 680 1,324 - ---------------------------------------------------------------------------------------------------------- 6,956 5,637 8,255 6,727 - ---------------------------------------------------------------------------------------------------------- Deferred: Federal (502) 35 1,313 2,363 State (118) 402 214 355 - ---------------------------------------------------------------------------------------------------------- (620) 437 1,527 2,718 - ---------------------------------------------------------------------------------------------------------- $ 6,336 $ 6,074 $ 9,782 $ 9,445 ==========================================================================================================
7 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, - ---------------------------------------------------------------------------------------------------------- 1997 1996 1997 1996 - ---------------------------------------------------------------------------------------------------------- Revenues: Homebuilding: Communities $ 216,882 $ 216,032 $ 395,684 $ 412,985 Conventional 50,700 63,389 102,226 112,724 - ---------------------------------------------------------------------------------------------------------- Total homebuilding 267,582 279,421 497,910 525,709 Land and facility sales 8,613 10,606 24,131 26,234 Other 2,740 3,655 4,937 6,034 - ---------------------------------------------------------------------------------------------------------- $ 278,935 $ 293,682 $ 526,978 $ 557,977 ========================================================================================================== Costs and expenses: Home construction and land: Communities $ 163,870 $ 161,832 $ 299,053 $ 312,176 Conventional 41,866 53,570 85,901 94,747 - ---------------------------------------------------------------------------------------------------------- Total homebuilding 205,736 215,402 384,954 406,923 Cost of land and facility sales 4,835 9,303 15,788 22,061 Other cost of sales 466 970 1,239 1,855 - ---------------------------------------------------------------------------------------------------------- Total home construction, land and other 211,037 225,675 401,981 430,839 Interest 10,932 11,698 21,999 23,282 Selling, general and administrative 39,364 39,436 75,825 77,620 - ---------------------------------------------------------------------------------------------------------- $ 261,333 $ 276,809 $ 499,805 $ 531,741 ==========================================================================================================
8 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, - --------------------------------------------------------------------------------------------------------- 1997 1996 1997 1996 - --------------------------------------------------------------------------------------------------------- Interest incurred and capitalized $ 12,989 $ 12,921 $ 26,003 $ 24,987 ========================================================================================================= Amortization of capitalized interest in costs and expenses $ 10,932 $ 11,698 $ 21,999 $ 23,282 ========================================================================================================= Unamortized capitalized interest in real estate inventories at period end $ 50,125 $ 45,366 ========================================================================================================= Interest income $ 302 $ 425 $ 555 $ 797 =========================================================================================================
Interest income is included in other revenues in the Consolidated Statements of Earnings. (7) Other Assets Other assets are summarized as follows:
In Thousands - ---------------------------------------------------------------------------------------------------------- December 31, June 30, December 31, 1997 1997 1996 (Unaudited) (Unaudited) - ---------------------------------------------------------------------------------------------------------- Pre-acquisition costs $ 50,989 $ 30,876 $ 21,807 Cash surrender values of life insurance policies 21,887 20,083 17,441 Prepaid expenses 5,226 5,903 6,038 Utility deposits 4,896 4,971 5,344 Other 5,228 4,075 4,676 - ---------------------------------------------------------------------------------------------------------- $ 88,226 $ 65,908 $ 55,306 ==========================================================================================================
A large majority of pre-acquisition costs at December 31, 1997 consists of costs incurred for the acquisition of environmentally-sensitive property by the Company for the purpose of exchanging the property with the United States Bureau of Land Management for property in the Los Vegas area that may be developed by the Company. Any exchange is subject to regulatory approvals and other conditions. When a trade is effected, these costs would 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. 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of the results of operations and financial condition 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, 1997, filed with the Securities and Exchange Commission. CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA - -------------------------------------------------
Three Months Ended Six Months Ended December 31, Change December 31, Change - ----------------------------------------------------------------------------------------------------------------------- 1997 1996 Amount Percent 1997 1996 Amount Percent - ----------------------------------------------------------------------------------------------------------------------- OPERATING DATA : - ---------------- Number of net new orders: (1) Sun Cities Phoenix (2) 272 348 (76) (21.8%) 534 622 (88) (14.1%) Sun Cities Las Vegas (3) 240 270 (30) (11.1%) 518 479 39 8.1% Sun City Palm Desert 91 51 40 78.4% 153 65 88 135.4% Sun City Roseville 137 96 41 42.7% 313 194 119 61.3% Sun City Hilton Head 75 60 15 25.0% 170 136 34 25.0% Sun City Georgetown 108 92 16 17.4% 193 193 - - Other communities (4) 59 N/A 59 N/A 73 N/A 73 N/A Coventry Homes 249 263 (14) (5.3%) 551 514 37 7.2% - ----------------------------------------------------------------------------------------------------------------------- Total current communities 1,231 1,180 51 4.3% 2,505 2,203 302 13.7% Completed operations: Sun City Tucson (5) N/A 14 (14) (100.0%) N/A 38 (38) (100.0%) Terravita (6) (1) 75 (76) (101.3%) (1) 103 (104) (101.0%) Coventry Homes - So. California (7) N/A 41 (41) (100.0%) N/A 97 (97) (100.0%) - ----------------------------------------------------------------------------------------------------------------------- Total 1,230 1,310 (80) (6.1%) 2,504 2,441 63 2.6% ======================================================================================================================= Number of home closings: Sun Cities Phoenix (2) 362 266 96 36.1% 621 498 123 24.7% Sun Cities Las Vegas (3) 289 278 11 4.0% 531 531 - - Sun City Palm Desert 77 50 27 54.0% 118 93 25 26.9% Sun City Roseville 155 155 - - 273 328 (55) (16.8%) Sun City Hilton Head 96 110 (14) (12.7%) 180 185 (5) (2.7%) Sun City Georgetown 112 144 (32) (22.2%) 223 287 (64) (22.3%) Terravita (6) 30 103 (73) (70.9%) 112 187 (75) (40.1%) Other communities (4) N/A N/A N/A N/A N/A N/A N/A N/A Coventry Homes 287 335 (48) (14.3%) 566 637 (71) (11.1%) - ----------------------------------------------------------------------------------------------------------------------- Total current communities 1,408 1,441 (33) (2.3%) 2,624 2,746 (122) (4.4%) Completed operations: Sun City Tucson (5) N/A 24 (24) (100.0%) N/A 79 (79) (100.0%) Coventry Homes - So. California (7) N/A 48 (48) (100.0%) 20 70 (50) (71.4%) - ----------------------------------------------------------------------------------------------------------------------- Total 1,408 1,513 (105) (6.9%) 2,644 2,895 (251) (8.7%) =======================================================================================================================
10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA (Continued) - -------------------------------------------------------------
Three Months Ended Six Months Ended December 31, Change December 31, Change - ------------------------------------------------------------------------------------------------------------------------ 1997 1996 Amount Percent 1997 1996 Amount Percent - ------------------------------------------------------------------------------------------------------------------------ BACKLOG DATA : - -------------- Homes under contract at December 31: Sun Cities Phoenix (2) 605 677 (72) (10.6%) Sun Cities Las Vegas (3) 520 590 (70) (11.9%) Sun City Palm Desert 161 84 77 91.7% Sun City Roseville 320 243 77 31.7% Sun City Hilton Head 149 144 5 3.5% Sun City Georgetown 172 284 (112) (39.4%) Terravita (6) 7 220 (213) (96.8%) Other communities (4) 73 N/A 73 N/A Coventry Homes 443 449 (6) (1.3%) - ------------------------------------------------------------------------------- Total current communities 2,450 2,691 (241) (9.0%) Completed operations: Sun City Tucson (5) N/A 4 (4) (100.0%) Coventry Homes - So. California (7) N/A 50 (50) (100.0%) - ------------------------------------------------------------------------------- Total (8) 2,450 2,745 (295) (10.7%) =============================================================================== Aggregate contract sales amount (dollars in millions) $ 506 $ 537 $ (31) (5.8%) =============================================================================== Average contract sales amount per home (dollars in thousands) $ 207 $ 196 $ 11 5.6% =============================================================================== AVERAGE REVENUE PER HOME - --------------------------- CLOSING : - -------- Sun Cities Phoenix (2) $ 160,400 $ 166,900 $ (6,500) (3.9%) $157,500 $161,000 $ (3,500) (2.2%) Sun Cities Las Vegas (3) 205,000 174,800 30,200 17.3% 197,900 177,100 20,800 11.7% Sun City Palm Desert 227,700 203,900 23,800 11.7% 228,800 220,500 8,300 3.8% Sun City Roseville 208,400 213,200 (4,800) (2.3%) 209,400 206,600 2,800 1.4% Sun City Hilton Head 165,900 163,100 2,800 1.7% 167,400 161,100 6,300 3.9% Sun City Georgetown 201,200 184,100 17,100 9.3% 199,700 182,200 17,500 9.6% Terravita (6) 376,200 304,100 72,100 23.7% 303,100 294,900 8,200 2.8% Other communities (4) N/A N/A N/A N/A N/A N/A N/A N/A Coventry Homes 176,700 155,800 20,900 13.4% 174,000 151,800 22,200 14.6% Weighted average current communities 190,000 183,400 6,600 3.6% 188,300 180,800 7,500 4.1% Completed operations: Sun City Tucson (5) N/A 167,600 N/A N/A N/A 168,000 N/A N/A Coventry Homes - So. California (7) N/A 233,000 N/A N/A 186,600 229,000 (42,400) (18.5%) Total weighted average 190,000 184,700 5,300 2.9% 188,300 181,600 6,700 3.7% ========================================================================================================================
11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA (Continued) - --------------------------------------------------------------
Three Months Ended Six Months Ended December 31, Change December 31, Change - ------------------------------------------------------------------------------------------------------------------------ 1997 1996 Amount Percent 1997 1996 Amount Percent - ------------------------------------------------------------------------------------------------------------------------ OPERATING STATISTICS: - --------------------- Costs and expenses as a percentage of revenues: Home construction, land and other 75.7% 76.8% (1.1%) (1.4%) 76.3% 77.2% (0.9%) (1.2%) Interest 3.9% 4.0% (0.1%) (2.5%) 4.2% 4.2% - - Selling, general and administrative 14.1% 13.4% 0.7% 5.2% 14.4% 13.9% 0.5% 3.6% Ratio of home closings to homes under contract in backlog at beginning of period 53.6% 51.3% 2.3% 4.5% 102.1% 90.5% 11.6% 12.8% =======================================================================================================================
(1) Net of cancellations. The Company recognizes revenue at close of escrow. (2) Includes Sun City West and Sun City Grand. The Company began taking new home sales orders at Sun City Grand in October 1996. Home closings began at Sun City Grand in February 1997. (3) Includes Sun City Summerlin and Sun City MacDonald Ranch. (4) Represents three smaller-scale communities in Arizona and California at which net new order activity began in the six months ended December 31, 1997. (5) The Company completed net new order activity at Sun City Tucson in February 1997. Home closings at Sun City Tucson were completed in April 1997. (6) The Company completed net new order activity at Terravita in April 1997. (7) The Company completed net new order activity for its Coventry Homes - Southern California operations in June 1997. Home closings for these operations were completed in August 1997. (8) A majority of the backlog at December 31, 1997 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 six months ended December 31, 1997 and 1996, cancellations of home sales orders as a percentage of new home sales orders written during the period were 14.7 percent and 19.8 percent, respectively. See "Forward Looking Information; Certain Cautionary Statements." 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) RESULTS OF OPERATIONS - --------------------- Three Months Ended December 31, 1997 and 1996 REVENUES. Revenues decreased to $278.9 million for the three months ended December 31, 1997 from $293.7 million for the three months ended December 31, 1996. This decrease was due primarily to decreased closings at Terravita, Coventry Homes' southern California operations and Sun City Tucson, reflecting the completion or approaching completion of those operations. HOME CONSTRUCTION, LAND AND OTHER COSTS. The decrease in home construction, land and other costs to $211.0 million for the 1997 quarter compared to $225.7 million for the 1996 quarter was primarily due to the decrease in home closings. These costs as a percentage of revenues decreased to 75.7 percent for the 1997 quarter compared to 76.8 percent for the 1996 quarter, with the decrease primarily due to improved margins on land and facility sales (due to the declining contribution from lower-margin land sales at Foothills, the Company's nearly complete residential land development project in Phoenix) and improved margins for Coventry Homes (due to the completion of low-margin southern California operations). SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. As a percentage of revenues, selling, general and administrative expenses increased to 14.1 percent for the 1997 quarter compared to 13.4 percent for the 1996 quarter. This increase resulted primarily from the spreading of relatively fixed corporate overhead over lower revenues. NET NEW ORDER ACTIVITY AND BACKLOG. Net new orders in the 1997 quarter were 6.1 percent lower than in the 1996 quarter. Exclusive of completed operations, net new orders increased 4.3 percent. The increase was due to the commencement of net new order activity at three smaller-scale communities in Arizona and California in the six months ended December 31, 1997. Increased net new orders were also experienced at all of the Company's other current communities except the Sun Cities Phoenix (which had a high level of net new orders in the 1996 quarter due to pent-up demand at Sun City Grand, at which the Company began taking net new orders in October 1996) and the Sun Cities Las Vegas (which experienced a very strong 1996 quarter). The number of homes under contract at December 31, 1997 was 10.7 percent lower than at December 31, 1996. This backlog decrease was largely due to decreases attributable to the approaching completion of Terravita and the August 1997 completion of Coventry Homes' southern California operations. A backlog decrease was also experienced at Sun City Georgetown as net new orders did not keep pace with home closings at that community over the past 12 months. Backlog increases at Sun City Roseville and Sun City Palm Desert resulted from increases in net new orders which management believes may indicate continued improvement in the California real estate economy. The commencement of net new order activity at the three smaller-scale communities in Arizona and California also contributed to the backlog increase. Six Months Ended December 31, 1997 and 1996 REVENUES. Revenues decreased to $527.0 million for the six months ended December 31, 1997 from $558.0 million for the six months ended December 31, 1996. This decrease was due to the decreased closings at Terravita, Coventry Homes' southern California operations and Sun City Tucson, reflecting the completion or approaching completion of those operations. HOME CONSTRUCTION, LAND AND OTHER COSTS. The decrease in home construction, land and other costs to $402.0 million for the 1997 period compared to $430.8 million for the 1996 period was primarily due to the decrease in home closings. These costs as a percentage of revenues decreased to 76.3 percent for the 1997 period compared to 77.2 percent for the 1996 period, with the decrease primarily due to improved margins on land and facility sales. The improved margins on land and facility sales were primarily due to the declining contribution from lower-margin land sales at Foothills. 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. As a percentage of revenues, selling, general and administrative expenses increased to 14.4 percent for the 1997 period compared to 13.9 percent for the 1996 period. This increase resulted primarily from the spreading of relatively fixed corporate overhead over lower revenues. NET NEW ORDER ACTIVITY AND BACKLOG. Net new orders in the 1997 period were 2.6 percent higher than in the 1996 period. Exclusive of completed operations, net new orders increased 13.7 percent. The increase was largely due to increases at Sun City Roseville and Sun City Palm Desert, which management believes may indicate continued improvement in the California real estate economy. In addition, both of these California communities benefited from the introduction of new product offerings, which management believes had a positive impact on new orders. Net new orders at the Sun Cities Las Vegas increased 8.1 percent, which management believes is primarily due to the continued strength of the Las Vegas market. At Sun City Hilton Head, net new orders increased 25.0 percent, which management believes may be partially due to the fact that important commercial and service-related businesses have announced development plans for the area adjacent to Sun City Hilton Head. Coventry Homes' net new orders increased 7.2 percent as a result of increases in Tucson and Las Vegas. The commencement of net new order activity at three smaller- scale communities in Arizona and California in the six months ended December 31, 1997 also contributed to the overall increase in net new orders from the 1996 period to the 1997 period. The number of homes under contract at December 31, 1997 was 10.7 percent lower than at December 31, 1996. See "Three Months Ended December 31, 1997 and 1996 -- Net New Order Activity and Backlog." LIQUIDITY AND FINANCIAL CONDITION OF THE COMPANY - ------------------------------------------------ At December 31, 1997 the Company had $1.2 million of cash and short-term investments, $187.0 million outstanding under its $350 million senior unsecured revolving credit facility and $9.4 million outstanding under its $25 million of short-term lines of credit. In January 1998 the Company acquired certain assets and assumed certain liabilities at two operating age-restricted communities in central Florida for a total purchase price of approximately $45 million, which was funded by borrowings under the Company's senior unsecured revolving credit facility. Also in January 1998, the amount of the Company's senior unsecured revolving credit facility was increased from $350 million to $400 million. Management believes that the Company's current borrowing capacity, when combined with existing cash and short-term investments and currently anticipated cash flows from the Company's operating communities and conventional homebuilding activities, will provide the Company with adequate capital resources to fund the Company's currently anticipated operating requirements for the next 12 months. However, these operating requirements reflect some limitations on the timing and extent of new projects and activities that the Company may otherwise desire to undertake. The Company's senior unsecured revolving credit facility and the indentures for the Company's publicly-held debt contain restrictions which could, depending on the circumstances, affect the Company's ability to borrow in the future. If the Company at any time is not successful in obtaining sufficient capital to fund its then planned development and expansion expenditures, some or all of its projects may be significantly delayed. Any delay could result in cost increases and may adversely affect the Company's results of operations. 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The cash flow for each of the Company's communities can differ substantially from reported earnings, depending on the status of the development cycle. The initial years of development or expansion require significant cash outlays for, among other things, land acquisition, obtaining master plan and other approvals, construction of amenities (including golf courses and recreation centers), model homes, sales and administration facilities, major roads, utilities, general landscaping and interest. Since these costs are capitalized, this can result in income reported for financial statement purposes during those initial years significantly exceeding cash flow. However, after the initial years of development or expansion, when these expenditures are made, cash flow can significantly exceed earnings reported for financial statement purposes, as costs and expenses include amortization charges for substantial amounts of previously expended costs. During the six months ended December 31, 1997 the Company generated $174.9 million of net cash from community sales activities, used $82.9 million of cash for land and lot and amenity development at operating communities, paid $61.3 million for costs related to communities in the pre-operating stage, used $1.5 million of net cash for conventional homebuilding operations and used $44.8 million of cash for other operating activities. The resulting $15.6 million of net cash used for operating activities (which was primarily attributable to expenditures for communities not yet generating home sales revenues) was funded mainly through utilization of cash and short-term investments existing at the beginning of the period. At December 31, 1997, under the most restrictive of the covenants in the Company's debt agreements, $20.2 million of the Company's retained earnings was available for payment of cash dividends and for the acquisition by the Company of its common stock. In October 1997 a shelf registration statement filed by the Company with the Securities and Exchange Commission, covering up to $200 million of the Company's debt and equity securities, became effective. The securities covered by the registration statement may be offered for sale from time to time in the future in one or more series and in the form of straight or convertible senior, senior subordinated or subordinated debt, common stock, preferred stock, warrants or a combination of any of them. FORWARD LOOKING INFORMATION; CERTAIN CAUTIONARY STATEMENTS - ---------------------------------------------------------- Certain statements contained in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" section that are not historical results are forward looking statements. These forward looking statements involve risks and uncertainties including, but not limited to, risks associated with the development of future and newer communities (including development in new geographic areas), governmental regulation, including in land exchanges with governmental entities, environmental considerations, the geographic concentration of the Company's operations, the cyclical nature of real estate operations and other conditions generally, competition, fluctuations in labor and material costs, the availability and cost of financing, natural risks that exist in certain of the Company's market areas and other matters set forth in the Company's Form 10-K for the year ended June 30, 1997. Actual results may differ materially from those projected or implied. Further, certain forward looking statements are based upon assumptions of future events, which may not prove to be accurate. 15 PART II. OTHER INFORMATION Item 1. Legal Proceedings ----------------- In December 1997 a lawsuit was filed by eight Terravita residents, individually and on behalf of a purported class consisting of all Terravita residents. The complaint principally arises from disagreements over the value of the Terravita golf course (and related assets) and representations allegedly made relating to operation of the golf club and the Terravita community. The Company is involved in settlement negotiations with the Terravita residents, and management of the Company believes that the disagreements are likely to be resolved without any material adverse financial impact on the Company. The complaint seeks, among other things, injunctive relief, compensatory and punitive damages, and rescission of all home sales contracts. Litigation arising from the complaint could have a material adverse effect on the Company. The Company believes it has meritorious defenses to all claims. Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibit 10.1 Agreement of Purchase and Sale for acquisition of Dreyfus property located on the eastern shore of Lake Tahoe in Washoe County, Nevada. Exhibit 27 Financial Data Schedule Exhibit 27.1 Restated 12/31/96 Financial Data Schedule (b) The Company did not file any reports on Form 8-K during the period covered by this report. 16 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 9, 1998 /s/ Philip J. Dion ----------------------------- ------------------------------------ Philip J. Dion Chairman and Chief Executive Officer Date: February 9, 1998 /s/ John A. Spencer ---------------------------- ------------------------------------ John A. Spencer Senior Vice President and Chief Financial Officer 17 EX-10.1 2 AGREEMENT OF PURCHASE AND SALE AGREEMENT OF PURCHASE AND SALE ------------------------------ This AGREEMENT OF PURCHASE AND SALE (the "Agreement"), dated December 31, 1997 for reference purposes only, is by and between AMERICAN LAND CONSERVANCY, a California nonprofit public benefit corporation ("Seller"), and, DEL WEBB CONSERVATION HOLDING CORP., an Arizona corporation ("Buyer"). RECITALS -------- A. The addresses and telephone numbers of the parties to this Agreement are as follows. Telephone numbers are included for information only. SELLER: BUYER: American Land Conservancy Del Webb Conservation Holding Corp. 456 Montgomery Street, Suite 1450 6001 North 24th Street San Francisco, CA 94104 Phoenix, Arizona 85016 Attn: Harriet Burgess Attn: LeRoy C. Hanneman, Jr. Tel: (415) 403-3850 Tel: (602) 808-7800 Fax: (415) 403-3856 Fax: (602) 808-8097 B. Seller is a conservation organization exempt from taxation under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"). Seller's mission is to acquire for public trust, and to facilitate the acquisition by appropriate public agencies of, environmentally significant resources. One of the means by which Seller accomplishes this mission is to undertake, in conjunction with appropriate federal agencies, exchanges of federal land as authorized under the Federal Land Exchange Facilitation Act of 1982 ("FLEFA"). C. Seller has entered into that certain Agreement of Sale, dated January 29, 1996, between Seller, as buyer, and Jack J. Dreyfus, Jr, Dreyfus Charitable Foundation, a New York not for profit corporation, and William P. Rogers, as sellers (collectively, "Dreyfus"), as amended by that certain Amendment to Agreement of Sale, dated as of July 29, 1996, as further amended by that certain Second Amendment to Agreement of Sale, dated as of January 31, 1997, as further amended by that certain Reinstatement of and Third Amendment to Agreement of Sale, dated as of April 15, 1997 (as amended, the "Dreyfus Agreement"), pursuant to which Dreyfus has agreed to sell to Seller, and Seller has agreed to purchase from Dreyfus, the following: (i) that certain real property located on the eastern shore of Lake Tahoe in Washoe County, Nevada, which is more particularly described in Exhibit A attached hereto and incorporated herein by reference (the "Subject Property"), (ii) Seller's rights in and to that certain (30) year reservation in favor of Seller relating to approximately ninety (90) acres of real property located adjacent to the Property as set forth at Page 777 of the Warranty Deed recorded January 10, 1972, in Book 605, Page 773, in the Official Records of Washoe County, Nevada, under Document No. 231291 (the "Reservation"), and (iii) the certificated water rights set forth in Exhibit B attached hereto and incorporated herein by reference (the "Water Rights") (the 1 Subject Property, the Reservation and the Water Rights are collectively referred to herein as the "Dreyfus Property"). D. Seller entered into the Dreyfus Agreement with the intention of acquiring the Dreyfus Property and conveying the Dreyfus Property to the United States of America for management by the United States Department of Agriculture, Forest Service (the "USFS"), through land exchange transactions with the United States Department of Interior, Bureau of Land Management ("BLM"), as authorized by FLEFA. E. Seller and Buyer have entered into that certain Memorandum of Understanding, dated November 14, 1997 (the "MOU"), which provides for the acquisition and disposition by Seller and Buyer of the entire Dreyfus Property in connection with certain pending federal land exchange transactions involving Buyer or Seller and certain other transactions and which contemplates the execution and delivery of certain modifications to the Dreyfus Agreement by the parties thereto. F. Since Dreyfus has determined that it is unwilling to restructure the Dreyfus Agreement in the manner contemplated by the MOU, it has become necessary to restructure the terms and conditions of Seller's and Buyer's acquisition of the Dreyfus Property as contemplated in the MOU. G. Seller and Buyer now intend for Seller to acquire all of the Dreyfus Property on or before December 31, 1997 in accordance with the terms of the Dreyfus Agreement for a purchase price of Forty-Eight Million Five Hundred Thousand Dollars ($48,500,000) (the "Dreyfus Purchase Price"), which shall be payable as follows: (i) deposits previously made to Dreyfus by Seller in the amount of Three Million Three Hundred Ten Thousand Dollars ($3,310,000), which are credited against the Dreyfus Purchase Price, (ii) a cash payment at the close of escrow in the amount of Twelve Million Dollars ($12,000,000), and (iii) delivery of a nonrecourse promissory note in the principal sum of Thirty-Three Million One Hundred Ninety Thousand Dollars ($33,190,000) (the "Dreyfus Note"), from Seller to Dreyfus, which shall be secured by a first priority deed of trust encumbering the Dreyfus Property (the "Dreyfus Deed of Trust") and which shall mature on April 1, 1998. H. Immediately upon Seller's acquisition of the Dreyfus Property and pursuant to the other terms and conditions set forth below, Seller shall sell the Dreyfus Property to Buyer for a purchase price equal to the sum of Fifty Million Four Hundred Thousand Dollars ($50,400,000), which constitutes the appraised fair market value of the Dreyfus Property, as finally approved by USFS and BLM, plus the amount of certain clearances costs previously incurred by Seller, which purchase price shall be payable as follows: (i) a cash payment by Buyer to Seller at the close of escrow in the principal sum of Twelve Million Dollars ($12,000,000), (ii) Buyer taking title to the Dreyfus Property subject to the deed of trust securing the Dreyfus Note, and (iii) delivery of a nonrecourse promissory note in the principal sum equal to the balance of the purchase price, from Buyer to Seller, which shall be secured by a second priority deed of trust encumbering the Dreyfus Property. 2 I. In order to facilitate Seller's acquisition of the Dreyfus Property pursuant to the terms of the Dreyfus Agreement, Buyer will advance to Seller through escrow cash in the amount of Twelve Million Dollars ($12,000,000) on or before December 31, 1997, which shall be used to make the cash payment due from Seller to Dreyfus at the close of escrow of Seller's acquisition of the Dreyfus Property and shall be credited against the cash payment due Seller from Buyer in connection with Buyer's acquisition of the Dreyfus Property from Seller. NOW, THEREFORE, in consideration of the premises and mutual covenants, agreements and representations herein contained and subject to the satisfaction of the conditions set forth herein, the parties hereto agree as follows: 1. Purchase and Sale. Immediately upon Seller's acquisition of the Dreyfus Property from Dreyfus pursuant to the terms of the Dreyfus Agreement, Seller shall sell to Buyer, and Buyer shall purchase from Seller, all of Seller's right, title and interest in, to and under the Dreyfus Property on the terms and conditions set forth herein 2. Purchase Price. (a) Purchase Price. The purchase price (the "Purchase Price") for the Dreyfus Property shall be an amount equal to the sum of (a) Fifty Million Four Hundred Thousand Dollars ($50,400,000), which constitutes the appraised fair market value of the Dreyfus Property finally approved by USFS and BLM, plus (b) the aggregate amount of Sixty-Five Thousand Dollars ($65,000), which represents certain costs incurred by Seller in connection with the Dreyfus Agreement which Buyer has agreed to reimburse. (b) Payment of Purchase Price. The Purchase Price shall be paid by Buyer to Seller as follows: (i) Buyer's delivery to Seller at the Closing (as defined below) of a cash payment in the amount equal to Twelve Million Dollars ($12,000,000) (the "Cash Payment"); (ii) Buyer taking title to the Dreyfus Property subject to the Dreyfus Deed of Trust; provided, that, until the Dreyfus Note is paid in full and the Dreyfus Deed of Trust is reconveyed by Dreyfus, Seller shall not amend or modify any of the terms of the Dreyfus Note or the Dreyfus Deed of Trust without first obtaining Buyer's written approval; and (iii) Buyer's delivery to Seller at the Closing of a nonrecourse promissory note by Buyer in favor of Seller in the principal sum equal to Five Million Two Hundred Seventy-Five Thousand Dollars ($5,275,000) (the "ALC Note"). The ALC Note shall be in form and substance reasonably satisfactory to Buyer and Seller. The ALC Note shall be secured by a deed of trust and assignment of rents encumbering the Dreyfus Property, which shall be subject only to the title exceptions set forth in Section 6 of this Agreement and shall be in form and substance reasonably satisfactory to Buyer and Seller (the "ALC Deed of Trust"). (c) Cash Payment. Buyer shall deliver cash in the amount of Twelve Million Dollars ($12,000,000) into Escrow (as defined below) at least one day before the scheduled 3 closing of Seller's acquisition of the Dreyfus Property from Dreyfus pursuant to the terms of the Dreyfus Agreement and, in any event on or before 9:00 a.m. on December 31, 1997. Seller and Buyer understand and agree that Seller's acquisition of the Dreyfus Property from Dreyfus and Buyer's acquisition of the Dreyfus Property from Seller shall occur in immediately consecutive transactions and that the Twelve Million Dollars ($12,000,000) deposited into Escrow by Buyer shall be used by Seller to make the cash payment due from Seller to Dreyfus under the Dreyfus Agreement at the closing of Seller's acquisition of the Dreyfus Property and shall constitute the Cash Payment due Seller from Buyer pursuant to Section 2(b)(i) of this Agreement. 3. Escrow and Closing. (a) Escrow. Buyer has opened an escrow (the "Escrow") for the purpose of closing Buyer's purchase of the Subject Property at the Scottsdale, Arizona office of First American Title Insurance Company (the "Escrow Holder"). (b) Escrow Instructions. Buyer and Seller shall promptly, upon request, provide the Escrow Holder with escrow instructions which shall incorporate the terms of and be consistent with this Agreement, and shall provide that if there is any inconsistency between the terms of this Agreement and such escrow instructions, the terms of this Agreement shall prevail and control. (c) Closing. The closing (the "Closing") of Buyer's purchase of the Dreyfus Property shall occur at the time that all of the fully-executed documents and funds described in Sections 3(d) and 3(e) have been delivered to the Escrow Holder. The Closing shall take place on or before December 31, 1997, unless such date is extended in writing by Buyer and Seller (the "Closing Date"). (d) Documents to be Delivered by Seller. Not later than one (1) business day before the Closing Date, Seller shall deliver to the Escrow Holder the following documents and items: (i) A grant, bargain and sale deed, in recordable form, duly executed by Seller, conveying to Buyer all of Seller's right, title and interest in and to the Subject Property and Reservation, which shall be in form and substance reasonably satisfactory to Buyer and Seller; (ii) A water rights quitclaim deed, in recordable form, duly executed by Seller, conveying to Buyer all of Seller's right, title and interest in and to the Water Rights, which shall be in form and substance reasonably satisfactory to Buyer and Seller; (iii) A bill of sale conveying certain personal property located on the Subject Property from Buyer to Seller, which shall be in form and substance reasonably satisfactory to Buyer and Seller; (iv) A non-foreign certificate in form and substance reasonably satisfactory to Buyer and Seller; 4 (v) The originals or copies (if originals are not available) of any governmental licenses or permits obtained by the previous owners of the Dreyfus Property relating to the construction, development or use of the Dreyfus Property, to the extent such licenses and permits are in the possession of Seller; (vi) All keys, security cards and other items required in order to gain access or to use the Dreyfus Property which are in the possession of Seller or any of the brokers referenced in Section 14 of this Agreement; (vii) A purchase and sale agreement between Buyer and Seller providing for the purchase by Seller from Buyer after the Closing of a portion of the Subject Property having an appraised fair market value, as finally approved by USFS and BLM, of approximately Three Million Four Hundred Thousand Dollars ($3,400,000) in connection with the portion of Seller's pending land exchange transaction with Perma-Bilt, a Nevada corporation ("Perma-Bilt") which is referred to by Seller and Perma-Bilt as "Phase 2B" (the "Perma-Bilt Exchange"), which shall be in form and substance reasonably satisfactory to Buyer and Seller (the "Perma-Bilt Agreement"); (viii) Written confirmation to Buyer from the University and Community College System of Nevada ("UNR"), in form and substance reasonably satisfactory to Buyer, regarding the commitment of UNR to purchase from Buyer all of the existing structures and improvements located on the Subject Property, together with a reserved estate relating to a portion of the Subject Property which shall provide access to and use of such improvements and shall be acceptable to USFS and Buyer (the "Reserved Estate) (the Improvements and the Reserved Estate are collectively referred to herein, the "UNR Improvements"); (ix) Written confirmation to Buyer from USFS and BLM, in form and substance reasonably satisfactory to Buyer, regarding the final approved appraised fair market value attributed to the Dreyfus Property and the allocation of such value to the Reserved Estate and the Improvements; (x) Such other documents or certificates as Buyer or its counsel shall reasonably request. (e) Funds and Documents to be Delivered by Buyer. Not later than one (1) business day before the Closing Date, Buyer shall deliver or cause to be delivered to the Escrow Holder the following documents and funds: (i) Cash or immediately available funds in the amount equal to the Cash Payment plus any costs or prorations chargeable to Buyer under this Agreement; (ii) The original ALC Note; (iii) The original ALC Deed of Trust; (iv) The Perma-Bilt Agreement; and 5 (v) Such other documents or certificates as Seller or its counsel shall reasonably request. (f) Closing Expenses and Fees. All real property taxes and assessments relating to the Dreyfus Property shall be prorated between Buyer and Seller as of the Closing. All transfer taxes due in connection with the transfer of the Dreyfus Property from Seller to Buyer shall be paid by Seller. Buyer shall pay all other closing costs and expenses incurred in connection with this transaction, including without limitation all escrow fees, recording fees and title insurance policy expenses. 4. Clearances. Buyer and Seller understand and acknowledge that certain clearances (the "Clearances") must be obtained, as required under FLEFA, before any portion of the Dreyfus Property will be included in any of Buyer's or Seller's pending land exchange transactions, including without limitation an environmental assessment and approval of title condition. Buyer shall use its reasonable efforts to obtain, on or before April 1, 1998, all final Clearances required with respect to the Dreyfus Property in order to facilitate the parties' pending land exchange transactions. All costs incurred after the Closing in connection with obtaining such Clearances shall be borne by Buyer. Seller shall take such reasonable actions requested by Buyer to facilitate Buyer's efforts to obtain the legislative approvals necessary to permit BLM and Buyer to proceed with the processing and closing of the Phase 2 portion of Buyer's pending federal land exchange with BLM. The obligations of Buyer and Seller under this Section 4 shall survive the Closing. 5. Buyer's Inspection of Dreyfus Property; Condition of the Dreyfus Property. Buyer hereby acknowledges that Buyer has completed a full inspection of all aspects of the Dreyfus Property and that the Dreyfus Property is being sold by Seller to Buyer "as-is," without any warranties or representations, express or implied, except for the representations and warranties set forth in this Agreement. Buyer acknowledges that Buyer is purchasing the Dreyfus Property on the basis of its own investigation and assumes the risk that adverse physical and environmental conditions may not have been revealed by Buyer's investigation. Closing of escrow shall be evidence that Buyer is satisfied as to the value and condition of the Dreyfus Property, including without limitation, its physical and environmental condition, title condition, exact acreage and boundary lines, location of easements and rights of way, access, water supply, drainage and extent of needed repairs. Buyer hereby waives, releases and forever discharges Seller and its employees, agents and assigns from any and all claims, actions, liabilities, damages and expenses whatsoever, direct or indirect, which Buyer now has or which may arise in connection with the Dreyfus Property, except with respect to any matter arising out of this Agreement or any gross negligence or willful misconduct by Seller or its employees, agents and assigns relating to the Dreyfus Property or the transactions contemplated hereby. 6. Examination of Title. Seller shall convey title to the Dreyfus Property subject only to: (a) real estate taxes and assessments not yet due and payable; (b) all of the title exceptions set forth in that certain Preliminary Report No. 501535CS (2nd Amended), dated December 5, 1997, issued by First American Title Company of Nevada; (c) Dreyfus Deed of Trust; (d) the standard printed exceptions on the form of title insurance policy to be issued to Buyer pursuant to Section 7; and (e) any other matters approved by Buyer. 6 7. Title Insurance. Buyer may obtain, at Buyer's sole expense, a standard owner's or extended owner's policy of title insurance insuring that title to the Dreyfus Property is vested in Buyer at the Closing subject only to the exceptions noted in Section 6. 8. Seller's Representations and Warranties. Seller makes the following representations and warranties in favor of Buyer: (a) Seller is a nonprofit public benefit corporation duly organized, validly existing and in good standing under the laws of the State of California and has the full power and authority to execute and deliver this Agreement and to perform its obligations hereunder without the consent of any other party. Notwithstanding anything herein to the contrary, it is understood and agreed that no representation or warranty is being made by Seller, and no condition to the performance of Buyer's obligations under this Agreement shall exist, with respect to any consent that may be required under the Reservation in connection with the transfer thereof to Buyer. Seller shall have obtained all required corporate and other approvals required in connection with the execution, delivery and performance of this Agreement. At the Closing, Seller shall own and shall have the power to sell, transfer and convey to Buyer all right, title and interest in and to the Dreyfus Property. (b) As of the date of this Agreement, there is no pending suit or action against Seller which, if adversely decided, would prevent the consummation of the transactions contemplated by this Agreement. Without limiting the generality of the foregoing, to the best of Seller's knowledge, as of the date of this Agreement, there are no actual or threatened suits, actions or proceedings, with respect to all or part of the Dreyfus Property (i) for condemnation or (ii) alleging any material violation of any applicable law, regulation, ordinance or code (collectively, "Laws and Regulations"). (c) Seller has not received any written notice (which remains outstanding) from any governmental authority stating that all or any part of the Dreyfus Property violates any Laws and Regulations in any material respect. (d) To the best of Seller's knowledge, the conveyance of the Dreyfus Property to Buyer will not violate any applicable Laws and Regulations, including without limitation, subdivision laws. (e) Seller represents and warrants that it is not a "foreign person" as defined in Section 1445 of the Code. Seller's United States Taxpayer Identification Number is 94-3121-656. (f) All documents and items furnished by Seller to Buyer are true, correct, accurate and complete to Seller's best knowledge. (g) To Seller's best knowledge, there is no lawsuit, judicial proceedings or dispute currently pending which may affect the Dreyfus Property which has not been disclosed to Buyer. 7 9. Buyer's Representations and Warranties. Buyer makes the following representations and warranties in favor of Seller: (a) Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Arizona and has the full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. Buyer shall have obtained all required corporate and other approvals required in connection with the execution, delivery and performance of this Agreement. 10. Survival of Representations and Warranties. All of the representations and warranties of Seller and Buyer set forth in Sections 8 and 9 of this Agreement shall survive the Closing. 11. Possession, Risk of Loss. Possession of the Dreyfus Property shall be delivered to Buyer at the Closing, free and clear of any other possessory interest. All risk of loss or damage with respect to the Dreyfus Property shall pass from Seller to Buyer at the Closing. 12. Notices. Any notice, demand, approval, consent, or other communication required or desired to be given under this Agreement in writing shall be given in the manner set forth below, addressed to the party to be served at the addresses set forth in Recital A, or at such other address for which that party may have given notice under the provisions of this Section 12. Any notice, demand, approval, consent, or other communication given by (a) mail shall be deemed to have been given three (3) days following the date such mail is deposited in the United States mail, certified; (b) overnight common carrier courier service shall be deemed to be given on the business day (not including Saturday) immediately following the date it was deposited with such common carrier; (c) delivery in person or by messenger shall be deemed to have been given upon delivery in person or by messenger; or (d) electronic facsimile shall be deemed to have been given on the earlier of (i) the date and at the time as the sending party (or such party's agent) shall have received from the receiving party (or such party's agent) oral confirmation of the receipt of such transmission or (ii) one hour after the completion of transmission of the entire communication. 13. Attorneys' Fees. If any party to this Agreement shall take any action to enforce this Agreement or bring any action or commence any arbitration for any relief against any other party, declaratory or otherwise, arising out of this Agreement, the losing party shall pay to the prevailing party a reasonable sum for attorneys' fees incurred in bringing such suit or arbitration and/or enforcing any judgment granted therein, all of which shall be deemed to have accrued upon the commencement of such action or arbitration and shall be paid whether or not such action or arbitration is prosecuted to judgment. Any judgment or order entered in such action or arbitration shall contain a specific provision providing for the recovery of attorneys' fees and costs incurred in enforcing such judgment. The amount of attorneys' fees due hereunder shall be determined by a court of competent jurisdiction and not by a jury. For purposes of this section, attorneys' fees shall include, without limitation, fees incurred in the following: (a) post-judgment motions; (b) contempt proceedings; (c) garnishment, levy, and debtor and third party examinations; (d) discovery; and (e) bankruptcy litigation. 8 14. Brokers' Commissions. Buyer and Seller each warrant and represent to the other that it has not retained, nor is it obligated to, any person for brokerage, finder's or similar services in connection with the transactions contemplated by this Agreement, and that no commission, finder's fee or other brokerage or agent's compensation can be properly claimed by any person or entity based upon the acts of such party with regard to the transactions which are the subject matter of this Agreement. Each party shall indemnify, defend and hold harmless the other party from and against all claims, demands, liabilities, losses, damages, costs and expenses (including, without limitation, reasonable attorneys' fees, costs of expert witnesses, court costs and other litigation expenses) arising from or related to such party's breach of the foregoing representation and warranty. The representations, warranties and covenants of Buyer and Seller set forth in this Section 14 shall survive the Closing. 15. Time of the Essence. Time is of the essence of this Agreement. In the event that any date specified in this Agreement falls on a Saturday, Sunday or a public holiday, such date shall be deemed to be the succeeding day in which the public agencies and major banks are open for business. 16. Press Releases. Seller and Buyer shall consult with each other as to, and jointly approve, the form and substance of any press release or other public disclosure of matters related to the Dreyfus Property, this Agreement or any of the transactions contemplated hereby; provided, however, that nothing herein shall be deemed to prohibit either party hereto from making (subject to such prior consultation with the other party as shall be practicable under the circumstances) any disclosure that its counsel deems necessary or advisable in order to fulfill any of the requirements under FLEFA applicable to such party's pending land exchange transaction or any other legal disclosure obligations of such party. The covenants of Buyer and Seller set forth in this Section 16 shall survive the Closing. 17. Funding of UNR Improvements. If UNR is unable to raise sufficient funds to acquire the UNR Improvements on or before December 31, 1998 from Buyer for a purchase price equal to the appraised fair market value of the UNR Improvements, as finally approved by USFS and BLM, Buyer and Seller shall each contribute to UNR, in equal amounts, cash in the amount necessary to enable UNR to purchase the UNR Improvements from Buyer for such purchase price (the "UNR Contribution"); provided, that in no event shall Seller be required to advance to UNR an amount in excess of One Million Seven Hundred Thousand Dollars ($1,700,000) hereunder. The funds required to be advanced to UNR by Seller under this Section 17 shall be made available to Seller by Buyer from Buyer's payment of the ALC Note upon the maturity thereof. If the ALC Note matures concurrently with or prior to the closing of UNR's acquisition of the UNR Improvements, Seller shall deposit into an interest bearing escrow account under joint control of Seller and Buyer a portion of the cash proceeds paid to Seller under the ALC Note, which portion shall be equal to the amount of the UNR Contribution payable by Seller pursuant to this Section 17. Concurrently with such deposit, Buyer shall deposit into such escrow account cash in an amount equal to Seller's deposit to fund a portion of Buyer's required contribution to UNR under this Section 17. At the time that UNR acquires the UNR Improvements, the amounts required of Buyer and Seller to fund such acquisition pursuant to this Section 17, if any, shall be released to UNR from the funds deposited into escrow 9 by Buyer and Seller for UNR's use in connection with such acquisition, and any funds deposited into escrow by Buyer and Seller which have not been released to UNR will be released to Buyer and Seller, as appropriate. The covenants of Buyer and Seller set forth in this Section 17 shall survive the Closing. 18. Personal Property. Buyer shall comply with all of the obligations of Seller relating to the Dreyfus Property as set forth in that certain letter agreement, dated December 24, 1997 between Dreyfus and Seller, and executed by Buyer. The covenant of Buyer set forth in this Section 18 shall survive the Closing. 19. Binding on Successors. This Agreement shall be binding not only upon the parties but also, subject to the limitations set forth in Section 20 upon their heirs, personal representatives, assigns, and other successors in interest. 20. Assignment. Neither Buyer nor Seller may assign its interests under this Agreement to any other party without the prior written consent of the other party. In any event, any such assignment shall not release the assigning party from its obligations under this Agreement. 21. Entire Agreement; Modification; Waiver. This Agreement constitutes the entire agreement between Buyer and Seller pertaining to the subject matter contained in it and supersedes all prior and contemporaneous agreements, representations, and understandings, including, without limitation, the MOU. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by all the parties. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waiver. 22. Further Assurances. Seller and Buyer shall execute and deliver such additional documents, including escrow instructions, and shall take such other actions as may be reasonable and necessary to carry out the provisions of this Agreement. 23. Severability. Each provision of this Agreement is severable from any and all other provisions of this Agreement. Should any provision(s) of this Agreement be for any reason unenforceable, the balance shall nonetheless be of full force and effect. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 10 24. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Nevada. 25. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original (including copies sent to a party by telecopy or facsimile transmission), but all of which together constitute one and the same instrument. 26. No Third Party Beneficiaries. This Agreement has been made and is made solely for the benefit of Buyer and Seller and their respective successors and permitted assigns. Nothing in this Agreement is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the parties to it and their respective successors and permitted assigns. 27. No Partnership. Nothing contained in this Agreement shall be deemed to constitute a joint venture or partnership between Buyer and Seller, it being the intent of the parties that only the relationship of buyer and seller between Buyer and Seller shall be established. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as set forth below. SELLER: AMERICAN LAND CONSERVANCY, a California nonprofit public benefit corporation Dated: December 31, 1997 By: /s/ Harriet Burgess -------------------------------------------- Harriet Burgess President BUYER: DEL WEBB CONSERVATION HOLDING CORP., an Arizona corporation Dated: December 31, 1997 By: /s/ Mary S. Alexander -------------------------------------------- Name: Mary S. Alexander --------------------------------------- Title: Vice President - Secretary -------------------------------------- 11 The undersigned hereby acknowledge receipt of a fully-executed copy of this Agreement and their agreement to act in accordance with all of the provisions of this Agreement in connection with the closing of the transactions contemplated by this Agreement. WESTERN TITLE COMPANY Dated: December 31, 1997 By: /s/ Dolores Monroe ----------------------------------- Dolores Monroe FIRST AMERICAN TITLE INSURANCE COMPANY Dated: December 31, 1997 By: /s/ Gerry Ring Waltz ----------------------------------- Gerry Ring Waltz EXHIBITS: - --------- A - Legal Description of Dreyfus Property B - Description of Water Rights 12 Exhibit A to Agreement of Purchase and Sale LEGAL DESCRIPTION OF DREYFUS PROPERTY ------------------------------------- The real property referred to herein is situate in the County of Washoe, State of Nevada, and legally described as follows: Fractional Sections 11 and 14, Township 15 North, Range 18 East, M.D.B&M., EXCEPTING THEREFROM parcels conveyed to the United States of America, by Deed recorded January 10, 1972, in Book 605, Page 773, Official Records of Washoe County, Nevada, under Document No. 231291. A.P.N. 130-360-08. A-1 Exhibit B to Agreement of Purchase and Sale DESCRIPTION OF WATER RIGHTS --------------------------- Those certain water rights on file in the Office of the Nevada State Engineer, Division of Water Resources, described as follows: Application Certificate Duty Uses ----------- ----------- ---- ---- 12083 3908 0.0067 csf Domestic 12085 4332 0.2500 csf Power and Domestic 12086 4333 0.2500 csf Power and Domestic 12087 4334 0.2500 csf Power and Domestic B-1 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1997 AND THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 U.S. DOLLARS 6-MOS JUN-30-1998 JUL-01-1997 DEC-31-1997 1 1,222 0 26,897 0 1,018,692 0 18,415 0 1,158,448 0 621,519 0 0 18 317,831 1,158,448 0 526,978 0 423,980 75,825 0 0 27,173 9,782 17,391 0 0 0 17,391 0.98 0.96
EX-27.1 4 RESTATED 12/31/96 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE IS A RESTATEMENT OF A PREVIOUSLY FILED SCHEDULE TO DISCLOSE BASIC AND DILUTED EARNINGS PER SHARE AS NOW REQUIRED BY STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128. THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996 AND THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 U.S. DOLLARS 6-MOS JUN-30-1997 JUL-01-1996 DEC-31-1996 1 1,876 0 25,174 0 930,250 0 22,109 0 1,044,609 0 536,036 0 0 18 280,249 1,044,609 0 557,977 0 454,121 77,620 0 0 26,236 9,445 16,791 0 0 0 16,791 0.96 0.94
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