============================================================================= 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 Quarterly Period Ended September 30, 1997 or ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-9804 PULTE CORPORATION (Exact name of registrant as specified in its charter) MICHIGAN 38-2766606 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 33 Bloomfield Hills Pkwy., Suite 200, Bloomfield Hills, Michigan 48304 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (248) 647-2750 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. YES __X__ NO _____ Number of shares of common stock outstanding as of October 31, 1997: 21,227,730 Total pages: 31 Listing of exhibits: 29 ============================================================================= 1
<TABLE> <CAPTION> PULTE CORPORATION INDEX Page No. -------- <S> <C> PART I FINANCIAL INFORMATION Item 1 Financial Statements (unaudited) Condensed Consolidated Balance Sheets, September 30, 1997 and December 31, 1996.... 3 Condensed Consolidated Statements of Income, Three and Nine Months Ended September 30, 1997 and 1996........................................................ 4 Condensed Consolidated Statement of Shareholders' Equity, Nine Months Ended September 30, 1997................................................................. 5 Condensed Consolidated Statements of Cash Flows, Nine Months Ended September 30, 1997 and 1996........................................................ 6 Notes to Condensed Consolidated Financial Statements................................ 8 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations.......................................................... 21 PART II OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K........................................... 29 SIGNATURES.......................................................................... 31 </TABLE> 2
<TABLE> <CAPTION> PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PULTE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS ($000's omitted) September 30, December 31, 1997 1996 ------------- ------------ (Unaudited) (Note) <S> <C> <C> ASSETS Cash and equivalents................................................... $ 56,388 $ 189,625 Unfunded settlements................................................... 41,138 73,896 House and land inventories............................................. 1,222,233 1,017,262 Mortgage-backed and related securities................................. 41,198 47,113 Residential mortgage loans and other securities available-for-sale..... 128,863 170,443 Other assets........................................................... 394,448 342,726 Discontinued operations................................................ 131,550 144,076 ------------- ------------- $ 2,015,818 $ 1,985,141 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Accounts payable and accrued liabilities, including bank overdrafts of $87,928 and $85,827 in 1997 and 1996, respectively........... $ 474,862 $ 439,578 Unsecured short-term borrowings..................................... 72,700 -- Collateralized short-term debt, recourse solely to applicable subsidiary assets................................................ 121,725 154,136 Mortgage-backed bonds, recourse solely to applicable subsidiary assets................................................ 39,289 45,304 Income taxes........................................................ 12,018 12,930 Subordinated debentures and senior notes............................ 401,833 391,175 Discontinued operations............................................. 98,521 112,745 ------------- ------------- Total liabilities............................................... 1,220,948 1,155,868 Shareholders' equity................................................... 794,870 829,273 ------------- ------------- $ 2,015,818 $ 1,985,141 ============= ============= <FN> The balance sheet at December 31, 1996 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See accompanying notes to condensed consolidated financial statements. </TABLE> 3
<TABLE> <CAPTION> PULTE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (000's omitted, except per share data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 1997 1996 1997 1996 ---- ---- ---- ---- <S> <C> <C> <C> <C> Revenues: Homebuilding...................................... $ 657,265 $ 613,722 $ 1,647,615 $ 1,593,725 Mortgage banking and financing, interest and other 9,808 9,247 23,460 40,476 Corporate ........................................ 2,818 2,203 6,831 11,846 ----------- ----------- ----------- ----------- Total revenues.......................... 669,891 625,172 1,677,906 1,646,047 ----------- ----------- ----------- ----------- Expenses: Homebuilding, principally cost of sales........... 620,703 580,287 1,573,804 1,523,499 Mortgage banking and financing, interest and other 6,763 7,915 19,812 28,397 Corporate, net.................................... 12,237 9,553 31,491 30,569 ----------- ----------- ----------- ----------- Total expenses.......................... 639,703 597,755 1,625,107 1,582,465 ----------- ----------- ----------- ----------- Income from continuing operations before income taxes...................................... 30,188 27,417 52,799 63,582 Income taxes ........................................ 11,623 10,994 20,328 25,650 ----------- ----------- ----------- ----------- Income from continuing operations.................... 18,565 16,423 32,471 37,932 Income from discontinued thrift operations, net of income taxes...................................... 1,145 111,208 3,349 114,973 ----------- ----------- ----------- ----------- Net income........................................... $ 19,710 $ 127,631 $ 35,820 $ 152,905 =========== =========== =========== =========== Per share data: Primary and fully-diluted: Income from continuing operations............... $ 0.86 $ 0.68 $ 1.47 $ 1.48 Income from discontinued operations............. 0.06 4.61 0.15 4.47 ----------- ----------- ----------- ----------- Net income...................................... $ 0.92 $ 5.29 $ 1.62 $ 5.95 =========== =========== =========== =========== Cash dividends declared........................... $ 0.06 $ 0.06 $ 0.18 $ 0.18 =========== =========== =========== =========== Weighted-average common shares outstanding: Primary......................................... 21,370 24,141 22,101 25,692 =========== =========== =========== =========== Fully-diluted................................... 21,386 24,141 22,114 25,692 =========== =========== =========== =========== <FN> See accompanying notes to condensed consolidated financial statements. </TABLE> 4
<TABLE> <CAPTION> PULTE CORPORATION CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY ($000's omitted, except per share data) (Unaudited) Additional Common Paid-in Unrealized Retained Stock Capital Gains Earnings Total ------ ---------- ---------- -------- ----- <S> <C> <C> <C> <C> <C> Shareholders' Equity, December 31, 1996 ... $ 233 $ 57,516 $ 1,474 $ 770,050 $ 829,273 Exercise of stock options ................. 3 8,166 -- -- 8,169 Cash dividends declared ................... -- -- -- (3,877) (3,877) Stock repurchases ......................... (24) (6,015) -- (68,556) (74,595) Change in unrealized gains on securities available-for-sale, net of income taxes of $9 ................................. -- -- 80 -- 80 Net income ................................ -- -- -- 35,820 35,820 --------- --------- --------- --------- --------- Shareholders' Equity, September 30, 1997 .. $ 212 $ 59,667 $ 1,554 $ 733,437 $ 794,870 ========= ========= ========= ========= ========= <FN> See accompanying notes to condensed consolidated financial statements. </TABLE> 5
<TABLE> <CAPTION> PULTE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ($000's omitted) (Unaudited) Nine Months Ended September 30, ------------------ 1997 1996 ---- ---- <S> <C> <C> Continuing operations: Cash flows from operating activities: Income from continuing operations ........................ $ 32,471 $ 37,932 Adjustments to reconcile income from continuing operations to net cash flows used in operating activities: Amortization, depreciation and other ............... 5,231 5,481 Deferred income taxes .............................. 12,356 50,835 Gain on sale of securities ......................... -- (10,285) Increase (decrease) in cash due to: Inventories ................................ (204,971) (205,017) Residential mortgage loans held for sale ... 41,581 44,571 Other assets ............................... (35,537) (43,423) Accounts payable and accrued liabilities ... 45,743 58,999 Income taxes ............................... 1,484 (30,808) --------- --------- Net cash used in operating activities ........................ (101,642) (91,715) --------- --------- Cash flows from investing activities: Proceeds from exchange of securities held-to-maturity .... -- 12,282 Proceeds from sale of securities available-for-sale ...... -- 168,085 Principal payments of mortgage-backed securities ......... 5,966 17,681 Decrease in funds held by trustee ........................ 94 4,261 Other, net ............................................... -- (12,517) --------- --------- Net cash provided by investing activities .................... 6,060 189,792 --------- --------- Cash flows from financing activities: Payment of long-term debt and bonds ...................... (6,916) (171,695) Proceeds from borrowings ................................. 83,294 23,595 Repayment of borrowings .................................. (40,706) (25,052) Stock repurchases ........................................ (74,595) (92,563) Dividends paid ........................................... (3,877) (5,963) Other, net ............................................... 5,145 273 --------- --------- Net cash used in financing activities ........................ (37,655) (271,405) --------- --------- Net decrease in cash and equivalents-continuing operations ... $(133,237) $(173,328) --------- --------- </TABLE> 6
<TABLE> <CAPTION> PULTE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) ($000's omitted) (Unaudited) Nine Months Ended September 30, ----------------- 1997 1996 ---- ---- <S> <C> <C> Discontinued Operations: Cash flows from operating activities: Income from discontinued operations ......................... $ 3,349 $ 114,973 Change in deferred income taxes ............................. (720) (109,709) Change in income taxes ...................................... 999 773 Other changes, net .......................................... (3,166) (7,799) Cash flows from investing activities: Purchase of securities available-for-sale ................... (14,433) (42,209) Principal payments of mortgage-backed securities ............ 24,658 36,696 Net proceeds from sale of investments ....................... 3,219 4,100 Decrease in Covered Assets and FSLIC Resolution Fund (FRF) receivables ............................................... 28,215 31,215 Cash flows from financing activities: Increase (decrease) in deposit liabilities .................. (6,802) 5,212 Repayment of borrowings ..................................... (31,560) (31,560) Decrease in Federal Home Loan Bank (FHLB) advances .......... (4,000) (2,200) --------- --------- Net decrease in cash and equivalents-discontinued operations .... (241) (508) --------- --------- Net decrease in cash and equivalents ............................ (133,478) (173,836) Cash and equivalents at beginning of period ..................... 192,202 295,163 --------- --------- Cash and equivalents at end of period ........................... $ 58,724 $ 121,327 ========= ========= Cash - continuing operations .................................... $ 56,388 $ 118,899 Cash - discontinued operations .................................. 2,336 2,428 --------- --------- $ 58,724 $ 121,327 ========= ========= Supplemental disclosure of cash flow information-cash paid during the period for: Interest, net of amount capitalized Continuing operations ..................................... $ 13,170 $ 20,531 Discontinued operations ................................... 2,048 1,744 --------- --------- $ 15,218 $ 22,275 ========= ========= Income taxes ................................................ $ 6,208 $ 5,757 ========= ========= <FN> See accompanying notes to condensed consolidated financial statements. </TABLE> 7
PULTE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ($000's omitted) (Unaudited) 1. Basis of presentation and significant accounting policies Basis of presentation The condensed consolidated financial statements include the accounts of Pulte Corporation (the Company), and all of its significant subsidiaries. The Company's direct subsidiaries consist of Pulte Financial Companies, Inc. (PFCI) and Pulte Diversified Companies, Inc. (PDCI). PDCI's direct subsidiaries are Pulte Home Corporation (Pulte) and First Heights Bank, fsb (First Heights). Pulte Mortgage Corporation (Pulte Mortgage) is a direct subsidiary of Pulte. The Company's continuing operations include its homebuilding (Pulte) and financial services subsidiaries, which include Pulte Mortgage (mortgage banking) and PFCI (financing). The Company's thrift subsidiary, First Heights, has been classified as discontinued operations (See Note 2). The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine month period ended September 30, 1997, are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. These financial statements should be read in conjunction with the Company's consolidated financial statements and footnotes thereto included in the Registrant Company and Subsidiaries' annual report on Form 10-K for the year ended December 31, 1996. Certain 1996 classifications have been changed to conform with the 1997 presentation. Significant accounting policies In February 1997, the Financial Accounting Standards Board (FASB) adopted Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share, which is effective for fiscal years ending after December 15, 1997. This statement replaces Accounting Principles Board (APB) Opinion No 15, Earnings Per Share, and the presentation of primary earnings per share (EPS) with a presentation of basic EPS. This statement also requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS calculation. Basic EPS excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is computed similarly to fully-diluted EPS pursuant to APB 15. Under SFAS No. 128, the Company's basic and diluted EPS amounts would have been substantially the same as the primary and fully-diluted EPS amounts presented in its consolidated statements of income for the three and nine months ended September 30, 1997 and 1996. 2. Discontinued operations Revenues of the Company's discontinued thrift operations for the three and nine months ended September 30, 1997, were $2,213 and $6,939, respectively. Revenues for the comparable periods of 1996 were $3,172 and $9,470, respectively. For the three and nine months ended September 30, 1997, discontinued thrift operations provided after-tax income of $1,145 and $3,349, respectively. After-tax income for the comparable periods of 1996 were $111,208 and $114,973, respectively. During the three months ended September 30, 1996, the Company recognized, as part of discontinued thrift operations, after-tax income of approximately $110,000. Such income related to tax benefits associated with net operating losses. 8
PULTE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) ($000's omitted) (Unaudited) 3. Segment Information <TABLE> <CAPTION> Financial Services ---------------------- Mortgage Homebuilding Banking Financing Corporate Consolidated ------------ -------- --------- --------- ------------ <S> <C> <C> <C> <C> <C> Nine Months Ended September 30, 1997: Continuing Operations: Revenues: Unaffiliated customers ............. $1,647,615 $ 20,648 $ 2,812 $ 6,831 $1,677,906 ========== ========== ========== ========== ========== Income (loss) before income taxes ... $ 73,811 $ 3,748 $ (100) $ (24,660) $ 52,799 ========== ========== ========== ========== ========== Three Months Ended September 30, 1997: Continuing Operations: Revenues: Unaffiliated customers ............. $ 657,265 $ 8,915 $ 893 $ 2,818 $ 669,891 ========== ========== ========== ========== ========== Income (loss) before income taxes ... $ 36,562 $ 3,073 $ (28) $ (9,419) $ 30,188 ========== ========== ========== ========== ========== At September 30, 1997: Identifiable assets ................... $1,533,153 $ 142,633 $ 41,421 $ 167,061 $1,884,268 ========== ========== ========== ========== Assets of discontinued operations ..... 131,550 ---------- Total assets .......................... $2,015,818 ========== Nine Months Ended September 30, 1996: Continuing Operations: Revenues: Unaffiliated customers ............. $1,593,725 $ 22,725 $ 17,751 $ 11,846 $1,646,047 ========== ========== ========== ========== ========== Income (loss) before income taxes ... $ 70,226 $ 1,465 $ 10,614 $ (18,723) $ 63,582 ========== ========== ========== ========== ========== Three Months Ended September 30, 1996: Continuing Operations: Revenues: Unaffiliated customers ............. $ 613,722 $ 7,667 $ 1,580 $ 2,203 $ 625,172 ========== ========== ========== ========== ========== Income (loss) before income taxes ... $ 33,435 $ 914 $ 418 $ (7,350) $ 27,417 ========== ========== ========== ========== ========== At September 30, 1996: Identifiable assets ................... $1,370,488 $ 148,556 $ 56,439 $ 215,021 $1,790,504 ========== ========== ========== ========== Assets of discontinued operations .... 158,060 ---------- Total assets .......................... $1,948,564 ========== </TABLE> 4. Restructuring On August 12, 1997, the Company announced the reorganization of its homebuilding operations to strengthen management focus on key customer groups and to generate increased operating efficiencies. This reorganization replaced the Company's existing homebuilding structure comprised of three geographically-based operating companies with a structure focused more closely on specific customer segments. This reorganization also created a new position of Executive Vice President and Chief Operating Officer with responsibility for all of the Company's homebuilding businesses, and appointed senior homebuilding executives to head the Company's domestic homebuilding and Active Adult (mature buyer) operations. In conjunction with this reorganization, the Company anticipates incurring a one-time restructuring charge during the fourth quarter of 1997 for certain costs associated with its reorganization, principally severance and relocation-related expenses. While certain steps have already been taken, the Company's restructuring plan has not yet been finalized. It is anticipated that pre-tax restructuring charges could approximate $7,500 to $10,000 and could result in annualized savings of approximately $5,000 to $8,000 on a pre-tax basis beginning in 1998. 9 PULTE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) ($000's omitted) (Unaudited) 5. Commitments and contingencies First Heights related litigation The Company is a party to two lawsuits relating to First Heights' 1988 acquisition from the FSLIC, and First Heights' ownership of five failed Texas thrifts. The first lawsuit (the "District Court Case") was filed on July 7, 1995 in the United States District Court, Eastern District of Michigan, by the FDIC against the Company, PDCI and First Heights (collectively, the "Pulte Parties"). The second lawsuit (the "Court of Federal Claims Case") was filed on December 26, 1996 in the United States Court of Federal Claims (Washington, D.C.) by the Pulte Parties against the United States. In the District Court Case, the FDIC seeks a declaration of rights and other relief related to the assistance agreement entered into between First Heights and the FSLIC. The FDIC is the successor to FSLIC. The FDIC and the Pulte Parties disagree about the proper interpretation of provisions in the assistance agreement which provide for sharing of certain tax benefits achieved in connection with First Heights' 1988 acquisition and ownership of the five failed Texas thrifts. The District Court Case also includes certain other claims relating to the foregoing, including claims resulting from the Company's and First Heights' amendment of a tax sharing and allocation agreement between the Company and First Heights. The Pulte Parties dispute the FDIC's claims and believe that a proper interpretation of the assistance agreement limits the FDIC's participation in the tax benefits. The Pulte Parties had filed an answer and a counterclaim, seeking, among other things, a declaration that the FDIC has breached the assistance agreement in numerous respects. On December 24, 1996, the Pulte Parties voluntarily dismissed without prejudice certain of their claims in the District Court Case and on December 26, 1996, initiated the Court of Federal Claims Case. The Court of Federal Claims Case contains similar claims as those that were voluntarily dismissed from the District Court Case. In their complaint, the Pulte Parties assert breaches of contract on the part of the United States in connection with the enactment of section 13224 of the Omnibus Budget Reconciliation Act of 1993. That provision repealed portions of the tax benefits that the Pulte Parties claim they were entitled to under the contract to acquire the failed Texas thrifts. The Pulte Parties also assert certain other claims concerning the contract, including claims that the United States (through the FDIC as receiver) has improperly attempted to amend the failed thrifts pre-acquisition tax returns and that this attempt was made in an effort to deprive the Pulte Parties of tax benefits they had contracted for, and that the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 breached the Government's obligation not to require contributions of capital greater than those required by the contract. Management believes that the First Heights related litigation will not have a material adverse impact on the results of operations or financial position of the Company. 6. Supplemental Guarantor Information In September 1995, the Company filed a universal shelf registration of up to $250,000 of debt or equity securities of which $125,000 of 7.3% unsecured Senior Notes were issued in October, 1995. In addition, the Company previously issued $100,000 of 7%, and $115,000 of 8.375% unsecured Senior Notes. On October 9, 1997, the Company registered an additional $25,000 of debt securities for an offering pursuant to Rule 462(b) of the Securities Act of 1933, as amended. On October 15, 1997, the Company issued $150,000 of 7.625% unsecured Senior Notes, due 2017, pursuant to the September 1995 and October 9, 1997, universal shelf registrations. Such obligations to pay principal, premium, if any, and interest are guaranteed jointly and severally on a senior basis by Pulte, all of Pulte's wholly-owned homebuilding subsidiaries and Builders' Supply & Lumber Co., Inc. which is a Pulte wholly-owned subsidiary (collectively, the Guarantors). Such guarantees are full and unconditional. The principal non-Guarantors include PDCI, the parent company of Pulte, Pulte Mortgage, a wholly-owned subsidiary of Pulte, First Heights, and PFCI. See Note 1 for additional information on the Company's Guarantor and non-Guarantor subsidiaries. 10
PULTE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) ($000's omitted) (Unaudited) 6. Supplemental Guarantor Information (continued) Supplemental consolidating financial information of the Company, specifically including such information for the Guarantors, is presented below. Investments in subsidiaries are presented using the equity method of accounting. Separate financial statements of the Guarantors are not provided because management has concluded that the segment information provides sufficient detail to allow investors to determine the nature of the assets held by and the operations of the combined groups. <TABLE> <CAPTION> CONSOLIDATING BALANCE SHEET September 30, 1997 Unconsolidated ---------------------------------------- Consolidated Pulte Guarantor Non-Guarantor Eliminating Pulte Corporation Subsidiaries Subsidiaries Entries Corporation ----------- ------------ ------------- ----------- ------------ <S> <C> <C> <C> <C> <C> ASSETS Cash and equivalents .................... $ 9 $ 54,784 $ 1,595 $ -- $ 56,388 Unfunded settlements .................... -- 41,138 -- -- 41,138 House and land inventories .............. -- 1,222,233 -- -- 1,222,233 Mortgage-backed and related securities .. -- -- 41,198 -- 41,198 Residential mortgage loans and other securities available-for-sale ......... -- -- 128,863 -- 128,863 Other assets ............................ 134,641 214,998 44,809 -- 394,448 Discontinued operations ................. -- -- 131,550 -- 131,550 Investment in subsidiaries .............. 902,413 13,175 922,679 (1,838,267) -- Advances receivable - subsidiaries ...... 253,094 772 20,952 (274,818) -- ----------- ----------- ----------- ----------- ----------- $ 1,290,157 $ 1,547,100 $ 1,291,646 $(2,113,085) $ 2,015,818 =========== =========== =========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Accounts payable and accrued liabilities $ 50,411 $ 392,933 $ 31,518 $ -- $ 474,862 Unsecured short-term borrowings ......... 72,700 -- -- -- 72,700 Collateralized short-term debt, recourse solely to applicable subsidiary assets -- -- 121,725 -- 121,725 Mortgage-backed bonds, recourse solely to applicable subsidiary assets ......... -- -- 39,289 -- 39,289 Income taxes ............................ 12,018 -- -- -- 12,018 Subordinated debentures and senior notes 339,429 62,404 -- -- 401,833 Discontinued operations ................. 348 -- 98,173 -- 98,521 Advances payable - subsidiaries ......... 20,381 214,985 39,452 (274,818) -- ----------- ----------- ----------- ----------- ----------- Total liabilities ................. 495,287 670,322 330,157 (274,818) 1,220,948 Shareholders' equity .................... 794,870 876,778 961,489 (1,838,267) 794,870 ----------- ----------- ----------- ----------- ----------- $ 1,290,157 $ 1,547,100 $ 1,291,646 $(2,113,085) $ 2,015,818 =========== =========== =========== =========== =========== </TABLE> 11
PULTE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) ($000's omitted) (Unaudited) 6. Supplemental Guarantor Information (continued) <TABLE> <CAPTION> CONSOLIDATING BALANCE SHEET December 31, 1996 Unconsolidated ---------------------------------------- Consolidated Pulte Guarantor Non-Guarantor Eliminating Pulte Corporation Subsidiaries Subsidiaries Entries Corporation ----------- ------------ ------------- ----------- ------------ <S> <C> <C> <C> <C> <C> ASSETS Cash and equivalents .................... $ 114,585 $ 71,599 $ 3,441 $ -- $ 189,625 Unfunded settlements .................... -- 73,896 -- -- 73,896 House and land inventories .............. -- 1,017,262 -- -- 1,017,262 Mortgage-backed and related securities .. -- -- 47,113 -- 47,113 Residential mortgage loans and other securities available-for-sale ......... -- -- 170,443 -- 170,443 Other assets ............................ 141,528 178,144 23,054 -- 342,726 Discontinued operations ................. -- -- 144,076 -- 144,076 Investment in subsidiaries .............. 859,866 23,425 878,540 (1,761,831) -- Advances receivable - subsidiaries ...... 139,351 827 17,246 (157,424) -- ----------- ----------- ---------- ----------- ----------- $ 1,255,330 $ 1,365,153 $1,283,913 $(1,919,255) $ 1,985,141 =========== =========== ========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Accounts payable and accrued liabilities $ 51,731 $ 357,480 $ 30,367 $ -- $ 439,578 Collateralized short-term debt, recourse solely to applicable subsidiary assets -- -- 154,136 -- 154,136 Mortgage-backed bonds, recourse solely to applicable subsidiary assets .......... -- -- 45,304 -- 45,304 Income taxes ............................ 12,930 -- -- -- 12,930 Subordinated debentures and senior notes 339,365 51,810 -- -- 391,175 Discontinued operations ................. 4,002 -- 108,743 -- 112,745 Advances payable - subsidiaries ......... 18,029 123,451 15,944 (157,424) -- ----------- ----------- ----------- ----------- ----------- Total liabilities ................. 426,057 532,741 354,494 (157,424) 1,155,868 Shareholders' equity .................... 829,273 832,412 929,419 (1,761,831) 829,273 ----------- ----------- ----------- ----------- ----------- $ 1,255,330 $ 1,365,153 $ 1,283,913 $(1,919,255) $ 1,985,141 =========== =========== =========== =========== =========== </TABLE> 12
PULTE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) ($000's omitted) (Unaudited) 6. Supplemental Guarantor Information (continued) <TABLE> <CAPTION> CONSOLIDATING STATEMENT OF OPERATIONS For the nine months ended September 30, 1997 Unconsolidated ---------------------------------------- Consolidated Pulte Guarantor Non-Guarantor Eliminating Pulte Corporation Subsidiaries Subsidiaries Entries Corporation ----------- ------------ ------------- ----------- ------------ <S> <C> <C> <C> <C> Revenues: Homebuilding .............................. $ -- $ 1,647,615 $ -- $ -- $ 1,647,615 Mortgage banking and financing, interest and other ............................. -- -- 23,460 -- 23,460 Corporate ................................. 1,254 5,577 -- -- 6,831 ----------- ----------- ----------- ----------- ----------- Total revenues .............................. 1,254 1,653,192 23,460 -- 1,677,906 ----------- ----------- ----------- ----------- ----------- Expenses: Homebuilding: Cost of sales ......................... -- 1,403,575 -- -- 1,403,575 Selling, general and administrative and other expense ......................... -- 170,229 -- -- 170,229 Mortgage banking and financing, interest and other ............................. -- -- 19,812 -- 19,812 Corporate, net ............................ 22,567 9,145 (221) -- 31,491 ----------- ----------- ----------- ----------- ----------- Total expenses .............................. 22,567 1,582,949 19,591 -- 1,625,107 ----------- ----------- ----------- ----------- ----------- Income (loss) from continuing operations before income taxes and equity in income of subsidiaries ....................... (21,313) 70,243 3,869 -- 52,799 Income taxes (benefit) ...................... (9,748) 28,128 1,948 -- 20,328 ----------- ----------- ----------- ----------- ----------- Income (loss) from continuing operations before equity in income (loss) of subsidiaries .......................... (11,565) 42,115 1,921 -- 32,471 Income (loss) from discontinued operations .. 4,915 -- (1,566) -- 3,349 ----------- ----------- ----------- ----------- ----------- Income before equity in income (loss) of subsidiaries .......................... (6,650) 42,115 355 -- 35,820 ----------- ----------- ----------- ----------- ----------- Equity in income (loss) of subsidiaries: Continuing operations ..................... 44,036 2,251 42,115 (88,402) -- Discontinued operations ................... (1,566) -- -- 1,566 -- ----------- ----------- ----------- ----------- ----------- 42,470 2,251 42,115 (86,836) -- ----------- ----------- ----------- ----------- ----------- Net income .................................. $ 35,820 $ 44,366 $ 42,470 $ (86,836) $ 35,820 =========== =========== =========== =========== =========== </TABLE> 13
PULTE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) ($000's omitted) (Unaudited) 6. Supplemental Guarantor Information (continued) <TABLE> <CAPTION> CONSOLIDATING STATEMENT OF OPERATIONS For the three months ended September 30, 1997 Unconsolidated --------------------------------------- Consolidated Pulte Guarantor Non-Guarantor Eliminating Pulte Corporation Subsidiaries Subsidiaries Entries Corporation ----------- ------------ ------------- ----------- ------------- <S> <C> <C> <C> <C> <C> Revenues: Homebuilding .............................. $ -- $ 657,265 $ -- $ -- $ 657,265 Mortgage banking and financing, interest and other ............................. -- -- 9,808 -- 9,808 Corporate ................................. 82 2,736 -- -- 2,818 --------- --------- --------- --------- --------- Total revenues .............................. 82 660,001 9,808 -- 669,891 --------- --------- --------- --------- --------- Expenses: Homebuilding: Cost of sales ......................... -- 559,061 -- -- 559,061 Selling, general and administrative and other expense ........................ -- 61,642 -- -- 61,642 Mortgage banking and financing, interest and other ............................. -- -- 6,763 -- 6,763 Corporate, net ............................ 8,473 3,675 89 -- 12,237 --------- --------- --------- --------- --------- Total expenses .............................. 8,473 624,378 6,852 -- 639,703 --------- --------- --------- --------- --------- Income (loss) from continuing operations before income taxes and equity in income of subsidiaries ....................... (8,391) 35,623 2,956 -- 30,188 Income taxes (benefit) ...................... (4,030) 14,262 1,391 -- 11,623 --------- --------- --------- --------- --------- Income (loss) from continuing operations before equity in income (loss) of subsidiaries .......................... (4,361) 21,361 1,565 -- 18,565 Income (loss) from discontinued operations .. 1,488 -- (343) -- 1,145 --------- --------- --------- --------- --------- Income before equity in income (loss) of subsidiaries .......................... (2,873) 21,361 1,222 -- 19,710 --------- --------- --------- --------- --------- Equity in income (loss) of subsidiaries: Continuing operations ..................... 22,926 1,846 21,361 (46,133) -- Discontinued operations ................... (343) -- -- 343 -- --------- --------- --------- --------- --------- 22,583 1,846 21,361 (45,790) -- --------- ---------- --------- --------- --------- Net income .................................. $ 19,710 $ 23,207 $ 22,583 $ (45,790) $ 19,710 ========= ========= ========= ========= ========= </TABLE> 14
PULTE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) ($000's omitted) (Unaudited) 6. Supplemental Guarantor Information (continued) <TABLE> <CAPTION> CONSOLIDATING STATEMENT OF OPERATIONS For the nine months ended September 30, 1996 Unconsolidated ---------------------------------------- Consolidated Pulte Guarantor Non-Guarantor Eliminating Pulte Corporation Subsidiaries Subsidiaries Entries Corporation ----------- ------------ ------------- ----------- ------------ <S> <C> <C> <C> <C> <C> Revenues: Homebuilding .............................. $ -- $ 1,593,725 $ -- $ -- $ 1,593,725 Mortgage banking and financing, interest and other ............................. -- -- 40,476 -- 40,476 Corporate ................................. 5,458 5,488 900 -- 11,846 ----------- ----------- ----------- ----------- ----------- Total revenues .............................. 5,458 1,599,213 41,376 -- 1,646,047 ----------- ----------- ----------- ----------- ----------- Expenses: Homebuilding: Cost of sales ......................... -- 1,357,970 -- -- 1,357,970 Selling, general and administrative and other expense ........................ -- 165,529 -- -- 165,529 Mortgage banking and financing, interest and other ............................. -- -- 28,397 -- 28,397 Corporate, net ............................ 18,580 9,621 2,368 -- 30,569 ----------- ----------- ----------- ----------- ----------- Total expenses .............................. 18,580 1,533,120 30,765 -- 1,582,465 ----------- ----------- ----------- ----------- ----------- Income (loss) from continuing operations before income taxes and equity in income of subsidiaries ....................... (13,122) 66,093 10,611 -- 63,582 Income taxes (benefit) ...................... (5,498) 26,468 4,680 -- 25,650 ----------- ----------- ----------- ----------- ----------- Income (loss) from continuing operations before equity in income of subsidiaries ... (7,624) 39,625 5,931 - 37,932 Income from discontinued operations ......... 114,427 -- 546 -- 114,973 ----------- ----------- ----------- ----------- ----------- Income before equity in income of subsidiaries .......................... 106,803 39,625 6,477 -- 152,905 ----------- ----------- ----------- ----------- ----------- Equity in income of subsidiaries: Continuing operations ..................... 45,556 879 39,625 (86,060) -- Discontinued operations ................... 546 -- -- (546) -- ----------- ----------- ----------- ----------- ----------- 46,102 879 39,625 (86,606) -- ----------- ----------- ----------- ----------- ----------- Net income .................................. $ 152,905 $ 40,504 $ 46,102 $ (86,606) $ 152,905 =========== =========== =========== =========== =========== </TABLE> 15
PULTE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) ($000's omitted) (Unaudited) 6. Supplemental Guarantor Information (continued) <TABLE> <CAPTION> CONSOLIDATING STATEMENT OF OPERATIONS For the three months ended September 30, 1996 Unconsolidated --------------------------------------- Consolidated Pulte Guarantor Non-Guarantor Eliminating Pulte Corporation Subsidiaries Subsidiaries Entries Corporation ----------- ------------ ------------- ----------- ------------ <S> <C> <C> <C> <C> <C> Revenues: Homebuilding .............................. $ -- $ 613,722 $ -- $ -- $ 613,722 Mortgage banking and financing interest and other ............................. -- -- 9,247 -- 9,247 Corporate ................................. 1,007 988 208 -- 2,203 --------- --------- --------- --------- --------- Total revenues .............................. 1,007 614,710 9,455 -- 625,172 --------- --------- --------- --------- --------- Expenses: Homebuilding: Cost of sales ......................... -- 520,841 -- -- 520,841 Selling, general and administrative and other expense ........................ -- 59,446 -- -- 59,446 Mortgage banking and financing, interest and other ............................. -- -- 7,915 -- 7,915 Corporate, net ............................ 6,340 2,396 817 -- 9,553 --------- --------- --------- --------- --------- Total expenses .............................. 6,340 582,683 8,732 -- 597,755 --------- --------- --------- --------- --------- Income (loss) from continuing operations before income taxes and equity in income of subsidiaries ....................... (5,333) 32,027 723 -- 27,417 Income taxes (benefit) ...................... (2,276) 12,841 429 -- 10,994 --------- --------- --------- --------- --------- Income (loss) from continuing operations before equity in income (loss) of subsidiaries .......................... (3,057) 19,186 294 -- 16,423 Income (loss) from discontinued operations ................................ 111,780 -- (572) -- 111,208 --------- --------- --------- --------- --------- Income (loss) before equity in income (loss) of subsidiaries .................. 108,723 19,186 (278) -- 127,631 --------- --------- --------- --------- --------- Equity in income (loss) of subsidiaries: Continuing operations ..................... 19,480 549 19,186 (39,215) -- Discontinued operations ................... (572) -- -- 572 -- --------- --------- --------- --------- --------- 18,908 549 19,186 (38,643) -- --------- --------- --------- --------- --------- Net income .................................. $ 127,631 $ 19,735 $ 18,908 $ (38,643) $ 127,631 ========= ========= ========= ========= ========= </TABLE> 16
PULTE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) ($000's omitted) (Unaudited) 6. Supplemental Guarantor Information (continued) <TABLE> <CAPTION> CONSOLIDATING STATEMENT OF CASH FLOWS For the nine months ended September 30, 1997 Unconsolidated --------------------------------------- Consolidated Pulte Guarantor Non-Guarantor Eliminating Pulte Corporation Subsidiaries Subsidiaries Entries Corporation ----------- ------------ ------------- ---------- ------------ <S> <C> <C> <C> <C> <C> Continuing operations: Cash flows from operating activities: Income from continuing operations ........... $ 32,471 $ 44,366 $ 44,036 $ (88,402) $ 32,471 Adjustments to reconcile income from continuing operations to net cash flows provided by (used in) operating activities: Equity in income of subsidiaries ........ (44,036) (2,251) (42,115) 88,402 -- Amortization, depreciation and other .... 64 4,932 235 -- 5,231 Deferred income taxes ................... 12,356 -- -- -- 12,356 Increase (decrease) in cash due to: Inventories ............................... -- (204,971) -- -- (204,971) Residential mortgage loans available-for-sale ...................... -- -- 41,581 -- 41,581 Other assets .............................. (4,208) (9,030) (22,299) -- (35,537) Accounts payable and accrued .............. liabilities ............................. (1,320) 35,453 11,610 -- 45,743 Income taxes .............................. (28,593) 28,128 1,949 -- 1,484 --------- --------- --------- --------- --------- Net cash provided by (used in) operating activities .................................. (33,266) (103,373) 34,997 -- (101,642) --------- --------- --------- --------- --------- Cash flows from investing activities: Principal payments of mortgage-backed securities ................ -- -- 5,966 -- 5,966 Decrease in funds held by trustee ........... -- -- 94 -- 94 Dividends received from subsidiaries ........ -- 14,000 -- (14,000) -- Investment in subsidiaries .................. -- (1,497) -- 1,497 -- Advances to affiliates ...................... (83,664) 55 (3,415) 87,024 -- --------- --------- --------- --------- --------- Net cash provided by (used in) investing activities .................................. (83,664) 12,558 2,645 74,521 6,060 --------- --------- --------- --------- --------- Cash flows from financing activities: Payment of long-term debt and bonds ......... -- -- (6,916) -- (6,916) Proceeds from borrowings .................... 72,700 10,594 -- -- 83,294 Repayment of borrowings ..................... -- -- (40,706) -- (40,706) Capital contributions from parent ........... -- -- 1,497 (1,497) -- Advances from affiliates .................... 2,352 63,406 21,266 (87,024) -- Stock repurchases ........................... (74,595) -- -- -- (74,595) Dividends paid .............................. (3,877) -- (14,000) 14,000 (3,877) Other, net .................................. 5,774 -- (629) -- 5,145 --------- --------- --------- --------- --------- Net cash provided by (used in) financing activities ........................ 2,354 74,000 (39,488) (74,521) (37,655) --------- --------- --------- --------- --------- Net decrease in cash and equivalents - continuing operations ......... $(114,576) $ (16,815) $ (1,846) $ -- $(133,237) --------- --------- --------- --------- --------- </TABLE> 17
PULTE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) ($000's omitted) (Unaudited) 6. Supplemental Guarantor Information (continued) <TABLE> <CAPTION> CONSOLIDATING STATEMENT OF CASH FLOWS (continued) For the nine months ended September 30, 1997 Unconsolidated --------------------------------------- Consolidated Pulte Guarantor Non-Guarantor Eliminating Pulte Corporation Subsidiaries Subsidiaries Entries Corporation ----------- ------------ ------------- ----------- ------------ <S> <C> <C> <C> <C> <C> Discontinued operations: Cash flows from operating activities: Income from discontinued operations .. $ 3,349 $ -- $ (1,566) $ 1,566 $ 3,349 Change in deferred income taxes ...... (720) -- -- -- (720) Equity in loss of subsidiaries ....... 1,566 -- -- (1,566) -- Change in income taxes ............... 999 -- -- -- 999 Other changes, net ................... (5,194) -- 2,028 -- (3,166) Cash flows from investing activities: Purchase of securities available- for-sale ......................... -- -- (14,433) -- (14,433) Principal payments of mortgage- backed securities ................ -- -- 24,658 -- 24,658 Net proceeds from sale of investment . -- -- 3,219 -- 3,219 Decrease in Covered Assets and FRF receivables ...................... -- -- 28,215 -- 28,215 Cash flows from financing activities: Decrease in deposit liabilities ...... -- -- (6,802) -- (6,802) Repayment of borrowings .............. -- -- (31,560) -- (31,560) Decrease in FHLB advances ............ -- -- (4,000) -- (4,000) --------- --------- --------- --------- --------- Net decrease in cash and equivalents- discontinued operations .............. -- -- (241) -- (241) --------- --------- --------- --------- --------- Net decrease in cash and equivalents ... (114,576) (16,815) (2,087) -- (133,478) Cash and equivalents at beginning of period ............................... 114,585 71,599 6,018 -- 192,202 --------- --------- --------- --------- --------- Cash and equivalents at end of period .. $ 9 $ 54,784 $ 3,931 $ -- $ 58,724 ========= ========= ========= ========= ========= </TABLE> 18
PULTE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) ($000's omitted) (Unaudited) 6. Supplemental Guarantor Information (continued) <TABLE> <CAPTION> CONSOLIDATING STATEMENT OF CASH FLOWS For the nine months ended September 30, 1996 Unconsolidated --------------------------------------- Consolidated Pulte Guarantor Non-Guarantor Eliminating Pulte Corporation Subsidiaries Subsidiaries Entries Corporation ----------- ------------ ------------- ----------- ----------- <S> <C> <C> <C> <C> <C> Continuing operations: Cash flows from operating activities: Income from continuing operations ............. $ 37,932 $ 40,504 $ 45,556 $ (86,060) $ 37,932 Adjustments to reconcile income from continuing operations to net cash flows provided by (used in) operating activities: Equity in income of subsidiaries ........... (45,556) (879) (39,625) 86,060 -- Amortization, depreciation and other ....... 64 4,477 940 -- 5,481 Deferred income taxes ...................... 50,835 -- -- -- 50,835 Gain on sale of securities ................. -- -- (10,285) -- (10,285) Increase (decrease) in cash due to: Inventories ................................. -- (205,017) -- -- (205,017) Residential mortgage loans available-for-sale ....................... -- -- 44,571 -- 44,571 Other assets ................................ (7,118) (36,967) 662 -- (43,423) Accounts payable and accrued liabilities .... 8,641 57,185 (6,827) -- 58,999 Income taxes ................................ (61,878) 26,468 4,602 -- (30,808) --------- --------- --------- --------- --------- Net cash provided by (used in) operating activities .................................... (17,080) (114,229) 39,594 -- (91,715) --------- --------- --------- --------- --------- Cash flows from investing activities: Proceeds from exchange of securities held-to-maturity .......................... -- -- 12,282 -- 12,282 Proceeds from sale of securities available-for-sale ........................ -- -- 168,085 -- 168,085 Principal payments of mortgage-backed securities ................ -- -- 17,681 -- 17,681 Decrease in funds held by trustee ............. -- -- 4,261 -- 4,261 Dividends received from subsidiaries .......... -- 18,000 -- (18,000) -- Investment in subsidiaries .................... (2,295) -- -- 2,295 -- Advances to affiliates ........................ (55,909) (749) (675) 57,333 -- Other, net .................................... -- (9,470) (3,047) -- (12,517) --------- --------- --------- --------- --------- Net cash provided by (used in) investing activities .................................... (58,204) 7,781 198,587 41,628 189,792 --------- --------- --------- --------- --------- Cash flows from financing activities: Payment of long-term debt and bonds ........... -- -- (171,695) -- (171,695) Proceeds from borrowings ...................... -- 23,595 -- -- 23,595 Repayment of borrowings ....................... -- -- (25,052) -- (25,052) Capital contributions from parent ............. -- -- 2,295 (2,295) -- Advances from affiliates ...................... -- 82,276 (24,943) (57,333) -- Stock repurchases ............................. (92,563) -- -- -- (92,563) Dividends paid ................................ (5,963) -- (18,000) 18,000 (5,963) Other, net .................................... 160 -- 113 -- 273 --------- --------- --------- --------- --------- Net cash provided by (used in) financing activities .......................... (98,366) 105,871 (237,282) (41,628) (271,405) --------- --------- --------- --------- --------- Net increase (decrease) in cash and equivalents - continuing operations ........... $(173,650) $ (577) $ 899 $ -- $(173,328) --------- --------- --------- --------- --------- </TABLE> 19
PULTE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) ($000's omitted) (Unaudited) 6. Supplemental Guarantor Information (continued) <TABLE> <CAPTION> CONSOLIDATING STATEMENT OF CASH FLOWS (continued) For the nine months ended September 30, 1996 Unconsolidated --------------------------------------- Consolidated Pulte Guarantor Non-Guarantor Eliminating Pulte Corporation Subsidiaries Subsidiaries Entries Corporation ----------- ------------ ------------- ----------- ------------ <S> <C> <C> <C> <C> <C> Discontinued operations: Cash flows from operating activities: Income from discontinued operations .. $ 114,973 $ -- $ 546 $ (546) $ 114,973 Change in deferred income taxes ...... (109,709) -- -- -- (109,709) Equity in income of subsidiaries ..... (546) -- -- 546 -- Change in income taxes ............... 773 -- -- -- 773 Other changes, net ................... (5,491) -- (2,308) -- (7,799) Cash flows from investing activities: Purchase of securities available- for-sale ......................... -- -- (42,209) -- (42,209) Principal payments of mortgage- backed securities ................ -- -- 36,696 -- 36,696 Net proceeds from sale of investment . -- -- 4,100 -- 4,100 Decrease in Covered Assets and FRF receivables ...................... -- -- 31,215 -- 31,215 Cash flows from financing activities: Increase in deposit liabilities ...... -- -- 5,212 -- 5,212 Repayment of borrowings .............. -- -- (31,560) -- (31,560) Decrease in FHLB advances ............ -- -- (2,200) -- (2,200) --------- --------- --------- --------- --------- Net decrease in cash and equivalents- discontinued operations .............. -- -- (508) -- (508) --------- --------- --------- --------- --------- Net increase (decrease) in cash and equivalents .......................... (173,650) (577) 391 -- (173,836) Cash and equivalents at beginning of period ............................... 220,782 71,012 3,369 -- 295,163 --------- --------- --------- --------- --------- Cash and equivalents at end of period .. $ 47,132 $ 70,435 $ 3,760 $ -- $ 121,327 ========= ========= ========= ========= ========= </TABLE> 20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ($000's omitted, except per share data) Overview: A summary of the Company's operating results by business segment for the three and nine month periods ended September 30, 1997 and 1996 is as follows: <TABLE> <CAPTION> Three Months Ended Nine Months Ended September 30, September 30, ------------------- ----------------- 1997 1996 1997 1996 ---- ---- ---- ---- <S> <C> <C> <C> <C> Pre-tax income (loss): Homebuilding operations .............. $ 36,562 $ 33,435 $ 73,811 $ 70,226 --------- --------- --------- --------- Financial Services operations: Mortgage banking ................... 3,073 914 3,748 1,465 Financing activities ............... (28) 418 (100) 10,614 --------- --------- --------- --------- Total Financial Services ............. 3,045 1,332 3,648 12,079 --------- --------- --------- --------- Corporate ............................ (9,419) (7,350) (24,660) (18,723) --------- --------- --------- --------- Pre-tax income from continuing operations 30,188 27,417 52,799 63,582 Income taxes ............................ 11,623 10,994 20,328 25,650 --------- --------- --------- --------- Income from continuing operations ....... 18,565 16,423 32,471 37,932 Income from discontinued operations ..... 1,145 111,208 3,349 114,973 --------- --------- --------- --------- Net income .............................. $ 19,710 $ 127,631 $ 35,820 $ 152,905 ========= ========= ========= ========= Per share data: Income from continuing operations .... $ 0.86 $ 0.68 $ 1.47 $ 1.48 Income from discontinued operations .. 0.06 4.61 0.15 4.47 --------- --------- --------- --------- Net income ........................... $ 0.92 $ 5.29 $ 1.62 $ 5.95 ========= ========= ========= ========= </TABLE> A comparison of pre-tax income (loss) for the three and nine month periods ended September 30, 1997, is as follows: o Pre-tax income of the Company's homebuilding operations increased by 9% and 5%, respectively, over the similar periods of 1996. The reportable periods were aided by increased sales and gross margins and the operating results of Builders Supply & Lumber (BSL). In addition, the nine months ended September 30, 1997, also benefited from proceeds from the settlement of certain litigation and gains from various land sales. These factors served to offset an increase in selling, general and administrative expenses associated with three new market entries during the third and fourth quarters of 1996 and the year-over-year increase in the number of active communities. o Pre-tax income of the Company's mortgage banking operations increased $2,159 and $2,283, respectively, from the comparable periods of 1996. This is principally due to a reduction in operating expenses resulting from the conversion to centralized loan processing during 1996. In addition, pre-tax income for the third quarter of 1997 was favorably affected by increased revenues resulting from a larger volume of loan originations than in the comparable period of the prior year. Pre-tax income of the reportable periods was also favorably impacted by a share of the earnings from an investment in a Mexican mortgage banking company. o Pre-tax income from the Company's financing activities decreased by $446 and $10,714, respectively, from the comparable periods of 1996 primarily due to gains from the sales of collateral during the 1996 periods; no such sales took place during the first nine months of 1997. o Pre-tax loss from corporate operations increased $2,069 and $5,937, respectively, from the comparable periods of 1996. These losses increased primarily as a result of higher net interest expense, but were also affected by expenses associated with the Company's start-up of manufactured home retail centers. 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) ($000's omitted) Restructuring: On August 12, 1997, the Company announced the reorganization of its homebuilding operations to strengthen management focus on key customer groups and to generate increased operating efficiencies. This reorganization replaced the Company's existing homebuilding structure comprised of three geographically-based operating companies with a structure focused more closely on specific customer segments. This reorganization also created a new position of Executive Vice President and Chief Operating Officer with responsibility for all of the Company's homebuilding businesses, and appointed senior homebuilding executives to head the Company's domestic homebuilding and Active Adult (mature buyer) operations. In conjunction with this reorganization, the Company anticipates incurring a one-time restructuring charge during the fourth quarter of 1997 for certain costs associated with its reorganization, principally severance and relocation-related expenses. While certain steps have already been taken, the Company's restructuring plan has not yet been finalized. It is anticipated that pre-tax restructuring charges could approximate $7,500 to $10,000 and could result in annualized savings of approximately $5,000 to $8,000 on a pre-tax basis beginning in 1998. Homebuilding Operations: The following table presents selected financial data for Pulte for the three and nine month periods ended September 30, 1997 and 1996. <TABLE> <CAPTION> Three Months Ended Nine Months Ended September 30, September 30, ------------------- -------------------- 1997 1996 1997 1996 ---- ---- ---- ---- <S> <C> <C> <C> <C> Unit settlements: Pulte Home East ........................ 1,890 1,762 4,956 4,534 Pulte Home Central ..................... 1,196 1,217 2,932 3,390 Pulte Home West ........................ 904 789 2,365 2,107 ----------- ----------- ----------- ----------- 3,990 3,768 10,253 10,031 =========== =========== =========== =========== Net new orders - units: Pulte Home East ........................ 1,914 1,859 5,874 5,605 Pulte Home Central ..................... 1,121 896 3,556 3,420 Pulte Home West ........................ 872 658 2,802 2,224 ----------- ----------- ----------- ----------- 3,907 3,413 12,232 11,249 =========== =========== =========== =========== Net new orders - dollars .................. $ 634,000 $ 536,000 $ 1,980,000 $ 1,799,000 =========== =========== =========== =========== Backlog at September 30 - units: Pulte Home East ........................ 2,691 2,723 Pulte Home Central ..................... 1,604 1,317 Pulte Home West ........................ 1,132 840 ----------- ----------- 5,427 4,880 =========== =========== Backlog at September 30 - dollars ......... $ 929,000 $ 808,000 =========== =========== Revenues .................................. $ 657,265 $ 613,722 $ 1,647,615 $ 1,593,725 Cost of sales ............................. 559,061 520,841 1,403,575 1,357,970 Selling, general and administrative expense 56,628 55,010 166,290 155,380 Interest (A) .............................. 5,206 4,762 12,644 12,085 Other income, net ......................... (192) (326) (8,705) (1,936) ----------- ----------- ----------- ----------- Pre-tax income ............................ $ 36,562 $ 33,435 $ 73,811 $ 70,226 =========== =========== =========== =========== Average sales price ....................... $ 165 $ 163 $ 161 $ 159 =========== =========== =========== =========== <FN> Note (A): The Company capitalizes interest cost into homebuilding inventories and charges the interest to homebuilding interest expense when the related inventories are closed. </TABLE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) ($000's omitted) Homebuilding Operations (continued): The number of active communities as of the end of each respective period are as follows: <TABLE> <S> <C> September 30, 1997................. 423 June 30, 1997...................... 428 March 31, 1997..................... 406 December 31, 1996.................. 392 September 30, 1996................. 387 </TABLE> Pulte conducts its domestic homebuilding operations in 40 markets located throughout 25 states, as well as in Puerto Rico. No one individual market within the 41 markets represented more than 10% of total Pulte net new orders, unit settlements or revenues during the three and nine month periods ended September 30, 1997. Net new orders during the third quarter of 1997 increased by 494 units, or approximately 14%, over the third quarter of 1996 to a Company third quarter record of 3,907 units. Contributing to a majority of this increase were Pulte markets in the Southeast, Texas, the Midwest, the Southwest and Rocky Mountains. Approximately one-third of this increase can be attributed to the expansion of Pulte's Canterbury Communities. Canterbury Communities is Pulte's site-built, affordable housing product offering. For the nine months ended September 30, 1997, net new orders amounted to 12,232 units, which is a 9% increase over the comparable period of the prior year. For this nine-month period, Pulte markets in the Southeast, Texas, the Southwest and Rocky Mountains were responsible for most of the improvement in net new orders. Pulte's Canterbury Communities and Active Adult product offerings contributed to more than half of the growth in net new orders for the nine months ended September 30, 1997. Unit settlements during the three and nine month periods ended September 30, 1997, increased 6% and 2%, respectively, over the similar periods of 1996. Favorable comparisons between the three month periods ended September 30, 1997 and 1996 were noted for Pulte markets in the Southeast and Southwest, principally as the result of the Company's Canterbury Communities product offerings. For the comparable year-to-date periods, favorable results were noted for Pulte markets in the Southeast, Florida and the Southwest, offset somewhat by unfavorable comparisons for Pulte markets in the Midwest. These favorable year-to-date comparisons are principally the result of the Company's Canterbury Communities and Active Adult product offerings. The unfavorable year-to-date comparisons were primarily due to a shortfall of available communities resulting from communities selling out faster than expected during 1996 and a general decline in market demand. The average selling price during the three month period ended September 30, 1997 was $165, an increase from the average selling price of $163 in the comparable period of the prior year and $159 for the three month period ended June 30, 1997. Changes in average selling price are primarily due to the mix of product closed during a period. Gross profit margins were 14.9% and 14.8% for the three and nine month periods ended September 30, 1997, respectively, compared with 15.1% and 14.8%, respectively, in the similar periods of the prior year. The unfavorable comparison between the three month periods ended September 30, 1997 and 1996, is the result of the favorable market demand conditions which were present during the early portion of 1996, when sales contracts were written which related to third quarter 1996 unit settlements, and the mix of product settled during each period. The Company continues to realize margin improvement on a sequential-period basis as a result of its ongoing process improvement initiatives which are focused on lowering house costs through improved operational efficiencies. Selling, general and administrative expenses for the three and nine month periods ended September 30, 1997, increased $1,618, or 3%, and $10,910, or 7%, respectively, over the comparable periods in 1996. These increases are primarily related to the addition of expenses for three markets that were not in operation during all of the first nine months of 1996 (Jacksonville, Rhode Island, and Southern California), as well as an increase in the number of selling communities as compared to the comparable period of a year ago. 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) ($000's omitted) Homebuilding Operations (continued): Other income, net, includes gains on land sales, the pre-tax results of BSL and other homebuilding-related expenses. For the nine months ended September 30, 1997, other income, net, was favorably impacted by improvement of approximately $5,100 in the operating results of BSL compared to the similar prior year period, as well as approximately $2,900 of proceeds from the settlement of certain litigation. Information related to interest in inventory is as follows: <TABLE> <CAPTION> Three Months Ended Nine Months Ended September 30, September 30, ------------------- ------------------ 1997 1996 1997 1996 ---- ---- ---- ---- <S> <C> <C> <C> <C> Interest in inventory at beginning of period......... $ 15,512 $ 13,421 $ 12,846 $ 12,261 Interest capitalized................................. 5,194 4,391 15,298 12,874 Interest expensed ................................... (5,206) (4,762) (12,644) (12,085) ---------- ---------- ---------- ---------- Interest in inventory at end of period............... $ 15,500 $ 13,050 $ 15,500 $ 13,050 ========== ========== ========== ========== </TABLE> At September 30, 1997, Pulte owned approximately 30,200 lots in communities in which homes are being constructed. In addition, Pulte had approximately 18,900 lots under option. Financial Services Operations: Mortgage Banking Operations: The Company's mortgage banking operations are conducted by Pulte Mortgage Corporation (Pulte Mortgage). The following table presents mortgage origination data for Pulte Mortgage: <TABLE> <CAPTION> Three Months Ended Nine Months Ended September 30, September 30, ------------------- ----------------- 1997 1996 1997 1996 ---- ---- ---- ---- <S> <C> <C> <C> <C> Production: Total originations: Loans....................................... 2,730 2,628 6,970 7,685 ========== ========== ========== ========== Principal................................... $ 339,400 $ 320,800 $ 848,600 $ 912,000 ========== ========== ========== ========== Funded originations: Loans....................................... 2,548 2,431 6,529 7,116 ========== ========== ========== ========== Principal................................... $ 313,700 $ 291,400 $ 789,600 $ 829,300 ========== ========== ========== ========== Originations for Pulte customers: Loans....................................... 1,980 1,778 5,172 4,941 ========== ========== ========== ========== Principal................................... $ 251,400 $ 226,000 $ 649,000 $ 613,400 ========== ========== ========== ========== </TABLE> Mortgage origination volume for the three month period ended September 30, 1997, increased 4% compared to the similar 1996 period. This increase was solely the result of increased loan originations for Pulte customers. For the nine months ended September 30, 1997, mortgage origination volume decreased 9% from the level of the preceding year. This decrease is the result of lower retail loan production offset by a 5% increase in loan originations for Pulte customers, as Pulte Mortgage continues its emphasis on expanding in Pulte's existing and new markets. Because of this focus, the volume of originations for Pulte customers has increased to 78% and 79% of funded originations for the three and nine month periods ended September 30, 1997, respectively. This compares to 73% and 69% of funded originations for the similar periods of 1996. Pulte Mortgage continues to hedge its mortgage pipeline in the normal course of its business and there has been no change in Pulte Mortgage's strategy or use of derivative financial instruments in this regard. 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) ($000's omitted) Financial Services Operations (continued): Mortgage Banking Operations (continued): For the three months ended September 30, 1997, marketing gains from the sales of mortgages increased $570, or 13%, as compared to the similar period of a year ago. This increase is due to the higher level of loan originations experienced during the third quarter of 1997. During the nine month period ended September 30, 1997, marketing gains from the sales of mortgages decreased by $1,378, or 10%, compared with the similar period of 1996. This decrease is attributable to a lower volume of loan originations during the first half of 1997. During the three and nine month periods ended September 30, 1997, Pulte Mortgage's operating expenses decreased from the comparable periods of 1996 by 14% and 21% to $5,841 and $16,899, respectively. These reductions of expenses are the result of Pulte Mortgage's centralization of its mortgage underwriting, processing and closing functions in Denver, Colorado, through implementation of a mortgage operations center (MOC) during 1996. Net interest income decreased by approximately $300 and $800, respectively, during the three and nine month periods ended September 30, 1997, as compared with the similar periods of a year ago. This decrease resulted from a reduction in the number of funded originations during 1997, as well as from dividends paid by Pulte Mortgage to Pulte throughout 1996. In 1995, Pulte Mortgage acquired a minority ownership interest in a Mexican mortgage banking company, Su Casita. Su Casita is a limited purpose financial institution under Mexican law, licensed to originate and service home mortgage loans. Pulte Mortgage's investment was made to facilitate the Company's homebuilding joint ventures in Mexico. For the reportable periods, Pulte Mortgage's equity in the earnings of Su Casita was $553, of which $390 represented current earnings and $163 represented its share of foreign currency gains. At September 30, 1997, Pulte Mortgage's investment in Su Casita approximated $1,500. At September 30, 1997, loan application backlog was $385,000 compared with $342,000 at September 30, 1996, and $246,000 at December 31, 1996. Financing Activities: The Company's secured financing operations are conducted by the limited-purpose subsidiaries of Pulte Financial Companies, Inc. (PFCI). Such subsidiaries have engaged in the acquisition of mortgage loans and mortgage-backed securities financed principally through the issuance of long-term bonds secured by such mortgage loans and mortgage-backed securities. At September 30, 1997, one bond series with a principal amount of $39,289 was outstanding. For the three and nine months ended September 30, 1997, PFCI's pre-tax operating losses were $28 and $100, respectively. This compares to pre-tax income of $418 and $10,614, respectively, for the comparable periods of 1996. During the three and nine month periods ended September 30, 1996, PFCI recorded net gains on sales of collateral of $292 and $10,285, respectively. No such sales took place during the first nine months of 1997. Net interest income continues to decrease as a result of lower average outstanding balances on the collateral and bond portfolios. Corporate: Corporate is a non-operating business segment whose primary purpose is to support the operations of the Company's subsidiaries as the internal source of financing and by implementing and maturing strategic initiatives centered on new business development and improving operating efficiencies. The Company views this corporate function as a form of research and development, a prelude to adding these initiatives to existing business segments or necessitating the creation of new business segments. As a result, the corporate segment's operating results will vary from quarter to quarter as these strategic initiatives evolve. 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) ($000's omitted) Corporate (continued): The following table presents corporate results of operations for the three and nine month periods ended September 30, 1997 and 1996: <TABLE> <CAPTION> Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 1997 1996 1997 1996 ---- ---- ---- ---- <S> <C> <C> <C> <C> Net interest expense............................... $ 4,105 $ 2,084 $ 9,601 $ 4,296 Other corporate expenses, net...................... 5,314 5,266 15,059 14,427 ---------- ---------- ---------- ---------- Loss before income taxes........................... $ 9,419 $ 7,350 $ 24,660 $ 18,723 ========== ========== ========== ========== </TABLE> The increase in pre-tax loss for the three and nine month periods ended September 30, 1997, is due primarily to an increase in net interest expense over the comparable prior year periods. The utilization of approximately $174,000 to reacquire nearly 6.2 million shares of the Company's common stock during 1996 and the first four months of 1997 adversely affected net interest expense comparisons. In addition, for the nine months ended September 30, 1997, the Company incurred $1,100 of additional expense in its start-up of manufactured home retail centers. On October 8, 1997, the Company and Fleetwood Enterprises, Inc. announced that they will jointly form a new corporation, Expression Homes, that will own and operate manufactured home retail centers. The Company will own 51% of the new corporation and Fleetwood will own 49%. Expression Homes will initially focus on retail sales of manufactured homes and related activities such as home financing and insurance services. It is expected that growth will come through a combination of selective acquisitions of existing high-quality retail operations and development of new retail locations. During the three and nine months ended September 30, 1997, the Company recorded losses of $527 and $1,009, respectively, related to its Mexico operations. This compares with losses of $266 and $892, respectively, in the similar periods of 1996. For the three and nine months ended September 30, 1997, settlements of the Company's Mexico joint ventures aggregated 195 units and 1,130 units, respectively, while settlements of the comparable periods of 1996 aggregated 142 units and 212 units, respectively. The increased losses recorded in the reportable periods of 1997 are principally the result of heightened overhead levels associated with increased development activity. Pulte conducts its Mexico homebuilding operations through three joint venture investments owned by a foreign subsidiary. In January 1996, the Company's Monterrey joint venture partner assigned its interest in the joint venture to the Company. The Company's net investment in the Monterrey venture approximated $2,900 as of September 30, 1997. The Company intends to liquidate the Monterrey assets (2 communities) in the normal course of business. The Company's Juarez joint venture is currently developing 13 communities in the cities of Juarez, Chihuahua, Nuevo Laredo, Reynosa and Matamoros. Additionally, during 1996, the Company announced that its Juarez joint venture had entered into two separate agreements to construct homes in Mexico; one with Delphi Automotive Systems, a division of General Motors Corporation (GM) and one with Sony Magneticos de Mexico, S.A. de C.V., an affiliate of Sony Electronics, Inc. (Sony). The first unit settlements under the GM contract are expected to commence in the fourth quarter of 1997. The Company's net investment in the Juarez joint venture approximated $20,200 as of September 30, 1997. Also during 1996, the Company entered into a joint venture to build 20 middle income housing units in Mexico City which are expected to close by the end of 1997. The Company's net investment in this joint venture approximated $400 as of September 30, 1997. Liquidity and Capital Resources: Continuing Operations: The Company's net cash used in operating activities increased from $91,715 for the nine month period ended September 30, 1996 to $101,642 for the nine month period ended September 30, 1997. This is principally due to a higher level of net cash investment in inventories during the 1997 period. Net cash provided by investing activities 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) ($000's omitted) Liquidity and Capital Resources (continued): Continuing Operations (continued): decreased from $189,792 for the nine month period ended September 30, 1996, to $6,060 for the nine month period ended September 30, 1997, primarily as a result of an approximately $168,000 in proceeds from sales of mortgage-backed securities of PFCI during the 1996 period. The Company's net cash used in financing activities decreased from $271,405 for the nine month period ended September 30, 1996, to $37,655 for the nine month period ended September 30, 1997. This resulted primarily from an approximately $165,000 decrease in the amount of PFCI's mortgage-backed bonds redeemed, an approximately $59,000 increase in the amount of proceeds received from short-term borrowings and an approximately $18,000 decrease in the amount of cash utilized for stock repurchases, offset by an approximately $15,000 increase in repaid borrowings during the 1997 period. At September 30, 1997, the Company had cash and equivalents of $56,388 and total indebtedness of $740,752. Total indebtedness includes $339,429 of unsecured senior notes, $22,405 of unsecured senior subordinated debentures, $72,700 of short-term borrowings under the Company's unsecured revolving credit facility, other Pulte non-recourse and limited recourse debt of $39,999 and $23,962, respectively, $81,243 of First Heights' deposits and advances, $39,289 of mortgage-backed bonds payable for PFCI and $121,725 of notes and drafts payable for Pulte Mortgage. On October 15, 1997, pursuant to the universal shelf registrations filed in September 1995 and October 9, 1997, the Company issued $150,000, 7.625% unsecured Senior Notes, due 2017, which are guaranteed by Pulte and certain wholly-owned subsidiaries of Pulte. The Company used a portion of the net proceeds of the sale of the Senior Notes to repay the outstanding borrowings under its unsecured revolving credit facility which bore a variety of floating interest rates. The remaining net proceeds from the sale of the Senior Notes were added to the Company's general funds to be used for general corporate purposes which may include, but are not limited to, capital contributions to the Company's subsidiaries to strengthen such subsidiaries' continuing operations and to fund acquisitions. The Company believes it has adequate financial resources and sufficient credit facilities to meet its current working capital needs. Sources of the Company's working capital include its cash, its $250,000 committed unsecured revolving credit facility, and other committed and uncommitted credit lines, which at September 30, 1997, consisted of $20,000 and $250,000 related to Pulte and Pulte Mortgage operations, respectively. Over the next twelve months, management anticipates that homebuilding and corporate working capital requirements will be principally funded with internally generated funds and the previously mentioned credit facilities. The Company routinely monitors current operational requirements and financial market conditions to evaluate the utilization of available financing sources. The Company finances its land acquisitions, development and construction activities from internally generated funds and existing credit agreements. The Company had a maximum borrowing of $126,000 under its $250,000 unsecured revolving credit facility during the first nine months of 1997, and $72,700 remained outstanding at September 30, 1997. Subsequent to September 30, 1997, the Company utilized a portion of the net proceeds from its issuance of $150,000 unsecured Senior Notes, due 2017, to repay the outstanding balance of the revolving credit facility. Pulte Mortgage provides mortgage financing for many of Pulte's home sales and uses its own funds and borrowings made available pursuant to various committed and uncommitted credit arrangements which, at September 30, 1997, amounted to $250,000, an amount deemed adequate to cover foreseeable needs. There were approximately $121,725 of borrowings outstanding under the $250,000 (Pulte Mortgage) arrangement at September 30, 1997. Mortgage loans originated by Pulte Mortgage are subsequently sold, principally to outside investors. The Company anticipates that there will be adequate mortgage financing available for purchasers of its homes. 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) ($000's omitted) Liquidity and Capital Resources (continued): Continuing Operations (continued): In the fourth quarter of 1994, the Company initiated a share repurchase program with the intention of enhancing shareholder value by utilizing excess corporate capital to acquire its shares at favorable prices and increasing leverage. As of the date of the most recent share reacquisition, April 17, 1997, the Company has utilized in excess of $188,000 of available cash and, to a lesser extent, funds drawn on its unsecured revolving credit facility to reacquire 6,847,800 shares, or nearly 25% of the common stock outstanding prior to the inception of this program. Management does not anticipate making additional share repurchases in the foreseeable future. Discontinued Operations: The Company's income taxes have been significantly impacted by its thrift operations, principally because payments received from FSLIC Resolution Fund (FRF) are exempt from federal income taxes. The Company's thrift assets are subject to regulatory restrictions and are not available for general corporate purposes. The final liquidation and wind-down of the Company's thrift operations is dependent on the final resolution of outstanding matters with the Federal Deposit Insurance Corporation (FDIC), manager of FRF. The Company is currently involved in litigation with the FDIC. The Company is uncertain as to when this matter might be resolved. At September 30, 1997, the Company had a remaining investment in First Heights of approximately $28,200. Special Notes Concerning Forward-looking Statements: Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, "Restructuring", contains certain forward-looking statements relating to the possible impact of a one-time restructuring charge. These forward-looking statements are based on current expectations and include various assumptions. Such assumptions principally relate to achieving estimated cost reductions as a result of realigning senior operating and corporate staff roles and responsibilities while maintaining work flow in the areas affected. The failure of such assumptions to be realized may cause the actual restructuring charge and annual cost savings to differ materially from the estimates set forth herein. As an additional cautionary note, except for the historical information contained herein, certain matters discussed in Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such matters involve risks and uncertainties , including changes in economic conditions and interest rates, increases in raw material and labor costs, weather conditions, and general competitive factors, that may cause actual results to differ materially. 28
PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K Exhibit number and description Page Number ------------------------------ ----------- 11 Statement Regarding Computation of Per Share Earnings 30 27 Financial Data Schedule All other exhibits are omitted from this report because they are not applicable. Reports on Form 8-K ------------------- The Company did not file any reports on Form 8-K during the quarter ended September 30, 1997.