============================================================================== 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, 1996 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 (810) 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, 1996: 23,264,155 Total pages: 32 Listing of exhibits: 30 ============================================================================== 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, 1996 and December 31, 1995.......................................................... 3 Condensed Consolidated Statements of Income, Three and Nine Months Ended September 30, 1996 and 1995................................................ 4 Condensed Consolidated Statement of Shareholders' Equity, Nine Months Ended September 30, 1996......................................................... 5 Condensed Consolidated Statements of Cash Flows, Nine Months Ended September 30, 1996 and 1995................................................ 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.................................... 30 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, 1996 1995 ------------- ------------ (Unaudited) (Note) <S> <C> <C> ASSETS Cash and equivalents ...................................... $ 118,899 $ 292,227 Unfunded settlements ...................................... 93,081 80,131 House and land inventories ................................ 1,064,752 859,735 Mortgage-backed and related securities .................... 56,180 254,170 Residential mortgage loans and other securities available-for-sale ...................................... 133,531 178,302 Deferred income taxes ..................................... 139,964 76,304 Other assets .............................................. 184,097 150,985 Discontinued operations ................................... 158,060 156,617 ---------- ---------- $1,948,564 $2,048,471 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Accounts payable and accrued liabilities, including book overdrafts of $72,236 and $60,976 in 1996 and 1995, respectively ........................................ $ 439,794 $ 381,407 Collateralized short-term debt, recourse solely to applicable subsidiary assets .............. 115,639 140,578 Mortgage-backed bonds, recourse solely to applicable subsidiary assets ................................... 54,402 225,272 Income taxes ........................................... 13,819 45,397 Subordinated debentures and senior notes ............... 387,616 363,957 Discontinued operations ................................ 127,980 130,857 ---------- ---------- Total liabilities ................................... 1,139,250 1,287,468 Shareholders' equity ...................................... 809,314 761,003 ---------- ---------- $1,948,564 $2,048,471 ========== ========== <FN> Note: The balance sheet at December 31, 1995 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 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, ------------------ ----------------- 1996 1995 1996 1995 ---- ---- ---- ---- <S> <C> <C> <C> <C> Revenues: Homebuilding ............................. $ 614,710 $ 520,937 $1,599,213 $1,294,005 Mortgage banking and financing: Interest and other ..................... 9,247 15,488 40,476 36,366 Gain on sale of servicing .............. 2,413 17,734 Corporate, principally interest .......... 1,215 4,509 6,358 13,581 ---------- ---------- ---------- ---------- Total revenues ................... 625,172 543,347 1,646,047 1,361,686 ---------- ---------- ---------- ---------- Expenses: Homebuilding, principally cost of sales .. 582,683 494,903 1,533,120 1,255,342 Mortgage banking and financing, interest and other ..................... 7,915 14,067 28,397 41,413 Corporate, net ........................... 7,157 7,084 20,948 22,364 ---------- ---------- ---------- ---------- Total expenses ................... 597,755 516,054 1,582,465 1,319,119 ---------- ---------- ---------- ---------- Income from continuing operations before income taxes ............................. 27,417 27,293 63,582 42,567 Income taxes ............................... 10,994 11,027 25,650 17,236 ---------- ---------- ---------- ---------- Income from continuing operations .......... 16,423 16,266 37,932 25,331 Income from discontinued thrift operations, net of income taxes ...................... 111,208 2,531 114,973 7,605 ---------- ---------- ---------- ---------- Net income ................................. $ 127,631 $ 18,797 $ 152,905 $ 32,936 ========== ========== ========== ========== Per share data: Primary and fully-diluted Income from continuing operations ...... $ .68 $ .60 $ 1.48 $ .93 Income from discontinued operations .... 4.61 .09 4.47 .27 ---------- ---------- ---------- ---------- Net income ............................. $ 5.29 $ .69 $ 5.95 $ 1.20 ========== ========== ========== ========== Cash dividends declared .................. $ .12 $ .12 $ .24 $ .24 ========== ========== ========== ========== Weighted-average common shares outstanding Primary ................................ 24,141 27,213 25,692 27,375 ========== ========== ========== ========== Fully-diluted .......................... 24,141 27,228 25,692 27,394 ========== ========== ========== ========== <FN> See accompanying notes. </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, 1995 .. $ 270 $ 65,934 $ 8,223 $ 686,576 $ 761,003 Exercise of stock options ................ 237 237 Cash dividends declared .................. (5,963) (5,963) Stock repurchases ........................ (35) (8,674) (83,854) (92,563) Change in unrealized gains on securities available-for-sale, net of income taxes of $4,203 ............................. (6,305) (6,305) Net income ............................... 152,905 152,905 --------- --------- --------- --------- --------- Shareholders' Equity, September 30, 1996 . $ 235 $ 57,497 $ 1,918 $ 749,664 $ 809,314 ========= ========= ========= ========= ========= <FN> See accompanying notes. </TABLE>
<TABLE> <CAPTION> PULTE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ($000's omitted) (Unaudited) Nine Months Ended September 30, ----------------- 1996 1995 ---- ---- <S> <C> <C> Continuing operations: Cash flows from operating activities: Income from continuing operations ........................ $ 37,932 $ 25,331 Adjustments to reconcile income from continuing operations to net cash flows used in operating activities: Amortization, depreciation and other ............... 5,481 5,786 Gain on sale of securities ......................... (10,285) (1,119) Increase (decrease) in cash due to: Inventories .................................. (205,017) (157,747) Residential mortgage loans held for sale ..... 44,571 13,449 Other assets ................................. (43,132) (14,879) Accounts payable and accrued liabilities ..... 58,999 49,388 Income taxes ................................. 19,736 13,804 --------- --------- Net cash used in operating activities ....................... (91,715) (65,987) --------- --------- Cash flows from investing activities: Proceeds from sale of securities available-for-sale ...... 168,085 10,821 Proceeds from sale of securities held-to-maturity ........ 12,282 -- Principal payments of mortgage-backed securities ......... 17,681 35,498 Decrease (increase) in funds held by trustee ............. 4,261 (10,102) Other, net ............................................... (12,517) (10,289) --------- --------- Net cash provided by investing activities ................... 189,792 25,928 --------- --------- Cash flows from financing activities: Payment of long-term debt and bonds ...................... (171,695) (39,320) Proceeds from borrowings ................................. 23,595 17,293 Repayment of borrowings .................................. (25,052) (3,821) Stock repurchases ........................................ (92,563) (11,707) Dividends paid ........................................... (5,963) (6,484) Other, net ............................................... 273 87 --------- --------- Net cash used in financing activities ....................... (271,405) (43,952) --------- --------- Net decrease in cash and equivalents-continuing operations .. $(173,328) $ (84,011) --------- --------- </TABLE>
<TABLE> <CAPTION> PULTE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) ($000's omitted) (Unaudited) Nine Months Ended September 30, ----------------- 1996 1995 ---- ---- <S> <C> <C> Discontinued Operations: Cash flows from operating activities: Income from discontinued operations .......................... $ 114,973 $ 7,605 Tax benefit of net operating losses .......................... (110,000) -- Other changes, net ........................................... (6,735) 12,981 Cash flows from investing activities: Purchase of securities available-for-sale .................... (42,209) (44,901) Principal payments of mortgage-backed securities ............. 36,696 20,701 Net proceeds from sale of investments ........................ 4,100 Decrease in Covered Assets and FSLIC Resolution Fund (FRF) receivables ................................................ 31,215 31,804 Cash flows from financing activities: Increase (decrease) in deposit liabilities ................... 5,212 (128,678) Repayment of borrowings ...................................... (31,560) (31,560) Increase (decrease) in Federal Home Loan Bank (FHLB) advances (2,200) 19,500 --------- --------- Net decrease in cash and equivalents-discontinued operations .... (508) (112,548) --------- --------- Net decrease in cash and equivalents ............................ (173,836) (196,559) Cash and equivalents at beginning of period ..................... 295,163 281,490 --------- --------- Cash and equivalents at end of period ........................... $ 121,327 $ 84,931 ========= ========= Cash - continuing operations .................................... $ 118,899 $ 75,581 Cash - discontinued operations .................................. 2,428 9,350 --------- --------- $ 121,327 $ 84,931 ========= ========= Supplemental disclosure of cash flow information-cash paid during the period for: Interest, net of amount capitalized Continuing operations ...................................... $ 20,531 $ 21,814 Discontinued operations .................................... 1,744 9,482 --------- --------- $ 22,275 $ 31,296 ========= ========= Income taxes ................................................. $ 5,757 $ 3,404 ========= ========= <FN> See accompanying notes. </TABLE>
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 continuing operations include its homebuilding (Pulte Home Corporation) and financial services subsidiaries, which include ICM Mortgage Corporation (ICM) and Pulte Financial Companies, Inc. (PFCI). The Company's thrift subsidiary, First Heights Bank, fsb (First Heights), has been classified as discontinued operations (See Note 2). The Company's direct subsidiaries consist of PFCI and Pulte Diversified Companies, Inc. (PDCI). PDCI's direct subsidiaries are Pulte Home Corporation (Pulte) and First Heights. ICM is a direct subsidiary of Pulte. 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, 1996 are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. 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, 1995. Certain 1995 classifications have been changed to conform with the 1996 presentation. 2. Discontinued operations The following table summarizes selected financial data of the Company's discontinued thrift operation: <TABLE> <CAPTION> Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 1996 1995 1996 1995 ---- ---- ---- ---- <S> <C> <C> <C> <C> Revenues ............................. $ 3,172 $ 4,547 $ 9,470 $ 16,930 Expenses ............................. (1,964) (2,016) (4,497) (9,325) --------- --------- --------- --------- 1,208 2,531 4,973 7,605 Tax benefit of net operating losses .. 110,000 -- 110,000 -- --------- --------- --------- --------- Income from discontinued operations .. $ 111,208 $ 2,531 $ 114,973 $ 7,605 ========= ========= ========= ========= </TABLE> 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 relates to tax benefits associated with net operating losses. Certainty of realization of this amount is not anticipated in the near term, is dependent upon various factors, and the actual amount realized might be more or less than the amount recorded. However, management believes that it is more likely than not that these benefits will be realized. 8
PULTE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) ($000's omitted) (Unaudited) 3. Segment Information <TABLE> <CAPTION> Financial Services ---------------------------------------------------------------- Mortgage Homebuilding Banking (Pulte) (ICM) Financing Corporate Consolidated ------------ -------- --------- --------- ------------ <S> <C> <C> <C> <C> <C> Nine Months Ended September 30, 1996: Continuing Operations: Revenues: Unaffiliated customers .............. $1,599,213 $ 22,725 $ 17,751 $ 6,358 $1,646,047 ========== ======== ======== ========= ========== Income (loss) before income taxes ..... $ 66,093 $ 1,465 $ 10,614 $ (14,590) $ 63,582 ========== ======== ======== ========= ========== Three Months Ended September 30, 1996: Continuing Operations: Revenues: Unaffiliated customers .............. $ 614,710 $ 7,667 $ 1,580 $ 1,215 $ 625,172 ========== ======== ======== ========= ========== Income (loss) before income taxes ..... $ 32,027 $ 914 $ 418 $ (5,942) $ 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 ========== Nine Months Ended September 30, 1995: Continuing Operations: Revenues: Unaffiliated customers .............. $1,294,005 $ 31,596 $ 22,504 $ 13,581 $1,361,686 ========== ======== ======== ========= ========== Income (loss) before income taxes ..... $ 38,663 $ 10,926 $ 1,761 $ (8,783) $ 42,567 ========== ======== ======== ========= ========== Three Months Ended September 30, 1995: Continuing Operations: Revenues: Unaffiliated customers .............. $ 520,937 $ 9,830 $ 8,071 $ 4,509 $ 543,347 ========== ======== ======== ========= ========== Income (loss) before income taxes ..... $ 26,034 $ 2,451 $ 1,383 $ (2,575) $ 27,293 ========== ======== ======== ========= ========== At September 30, 1995: Identifiable assets ................... $1,152,705 $141,553 $318,745 $ 139,342 $1,752,345 ========== ======== ======== ========= Assets of discontinued operations ..... 153,944 ---------- Total assets .......................... $1,906,289 ========== </TABLE> 9
PULTE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) ($000's omitted) (Unaudited) 4. Income taxes The following table reconciles the expected federal income tax rate to the effective income tax rate for continuing operations: <TABLE> <CAPTION> Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 1996 1995 1996 1995 ---- ---- ---- ---- <S> <C> <C> <C> <C> Income taxes at federal statutory rate 35.0% 35.0% 35.0% 35.0% Effect of state and other income taxes 5.1% 5.4% 5.3% 5.5% ---- ---- ---- ---- Effective rate ........................ 40.1% 40.4% 40.3% 40.5% ==== ==== ==== ==== </TABLE> 5. Commitments and contingencies Federal Deposit Insurance Corporation On July 7, 1995, a lawsuit was filed in the United States District Court, Eastern District of Michigan, by the Federal Deposit Insurance Corporation (FDIC) against the Company and its subsidiary PDCI and PDCI's subsidiary First Heights. The lawsuit seeks a declaration of rights under the assistance agreement entered into between First Heights and the Federal Savings and Loan Insurance Corporation (FSLIC). The FDIC is the successor to FSLIC. The FDIC and Pulte 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 five failed Texas thrifts from the FSLIC. The lawsuit 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 Company disputes the FDIC's claims and believes that a proper interpretation of the assistance agreement limits the FDIC's participation in the tax benefits to amounts established on First Heights' books. On September 8, 1995, the Company filed an answer and counter-claim in this case. The Company intends to vigorously defend itself and pursue its counter-claims. While it is impossible to verify the precise amount requested by the FDIC at this time, the Company believes that even if the FDIC were to prevail in its claims, it would not have a material adverse effect on the financial condition or results of operations of the Company. 6. Supplemental Guarantor Information The Company previously 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 has previously issued $100,000 of 7%, and $115,000 of 8.375% unsecured Senior Notes. 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, ICM, 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. 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. 10
PULTE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) ($000's omitted) (Unaudited) 6. Supplemental Guarantor Information (continued) <TABLE> <CAPTION> CONSOLIDATING BALANCE SHEET September 30, 1996 Unconsolidated --------------------------------------- Consolidated Pulte Guarantor Non-Guarantor Eliminating Pulte Corporation Subsidiaries Subsidiaries Entries Corporation ----------- ------------ ------------- ----------- ------------ <S> <C> <C> <C> <C> <C> ASSETS Cash and equivalents .................... $ 47,132 $ 70,435 $ 1,332 $ -- $ 118,899 Unfunded settlements .................... -- 93,081 -- -- 93,081 House and land inventories .............. -- 1,064,752 -- -- 1,064,752 Mortgage-backed and related securities .. -- -- 56,180 -- 56,180 Residential mortgage loans and other securities available-for-sale .......... -- -- 133,531 -- 133,531 Land held for sale and future development -- 37,856 -- -- 37,856 Deferred income taxes ................... 141,242 -- (1,278) -- 139,964 Other assets ............................ 11,726 104,364 30,151 -- 146,241 Discontinued operations ................. -- -- 158,060 -- 158,060 Investment in subsidiaries .............. 767,782 24,944 808,239 (1,600,965) -- Advances receivable - subsidiaries ...... 290,345 745 41,388 (332,478) -- ---------- ---------- ----------- ----------- ---------- $1,258,227 $1,396,177 $ 1,227,603 $(1,933,443) $1,948,564 ========== ========== =========== =========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Accounts payable and accrued liabilities $ 44,010 $ 358,175 $ 37,609 $ -- $ 439,794 Collateralized short-term debt, recourse solely to applicable subsidiary assets . -- -- 115,639 -- 115,639 Mortgage-backed bonds, recourse solely to applicable subsidiary assets .......... -- -- 54,402 -- 54,402 Income taxes ............................ 13,819 -- -- -- 13,819 Subordinated debentures and senior notes 339,344 48,272 -- -- 387,616 Discontinued operations ................. 5,220 -- 122,760 -- 127,980 Advances payable - subsidiaries ......... 46,520 228,756 57,202 (332,478) -- ---------- ---------- ----------- ----------- ---------- Total liabilities .................. 448,913 635,203 387,612 (332,478) 1,139,250 Shareholders' equity .................... 809,314 760,974 839,991 (1,600,965) 809,314 ---------- ---------- ----------- ----------- ---------- $1,258,227 $1,396,177 $ 1,227,603 $(1,933,443) $1,948,564 ========== ========== =========== =========== ========== </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, 1995 Unconsolidated ---------------------------------------- Consolidated Pulte Guarantor Non-Guarantor Eliminating Pulte Corporation Subsidiaries Subsidiaries Entries Corporation ----------- ------------ ------------- ------------ ----------- <S> <C> <C> <C> <C> <C> ASSETS Cash and equivalents .................... $ 220,782 $ 71,012 $ 433 $ -- $ 292,227 Unfunded settlements .................... -- 80,131 -- -- 80,131 House and land inventories .............. -- 859,735 -- -- 859,735 Mortgage-backed and related securities .. -- -- 254,170 -- 254,170 Residential mortgage loans and other securities available-for-sale .......... -- -- 178,302 -- 178,302 Land held for sale and future development -- 36,980 -- -- 36,980 Deferred income taxes ................... 81,786 -- (5,482) -- 76,304 Other assets ............................ 4,899 76,230 32,876 -- 114,005 Discontinued operations ................. -- -- 156,617 -- 156,617 Investment in subsidiaries .............. 725,689 42,065 752,630 (1,520,384) -- Advances receivable - subsidiaries ...... 171,117 -- 14,942 (186,059) -- ---------- ---------- ----------- ----------- ---------- $1,204,273 $1,166,153 $ 1,384,488 $(1,706,443) $2,048,471 ========== ========== =========== =========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Accounts payable and accrued liabilities $ 35,369 $ 300,990 $ 45,048 $ -- $ 381,407 Collateralized short-term debt, recourse solely to applicable subsidiary assets . -- -- 140,578 -- 140,578 Mortgage-backed bonds, recourse solely to applicable subsidiary assets .......... -- -- 225,272 -- 225,272 Income taxes ............................ 45,397 -- -- -- 45,397 Subordinated debentures and senior notes 339,280 24,677 -- -- 363,957 Discontinued operations ................. 8,875 -- 121,982 -- 130,857 Advances payable - subsidiaries ......... 14,349 120,012 51,698 (186,059) -- ---------- ---------- ----------- ----------- ---------- Total liabilities .................. 443,270 445,679 584,578 (186,059) 1,287,468 Shareholders' equity .................... 761,003 720,474 799,910 (1,520,384) 761,003 ---------- ---------- ----------- ----------- ---------- $1,204,273 $1,166,153 $ 1,384,488 $(1,706,443) $2,048,471 ========== ========== =========== =========== ========== </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, 1996 Unconsolidated --------------------------------------- Consolidated Pulte Guarantor Non-Guarantor Eliminating Pulte Corporation Subsidiaries Subsidiaries Entries Corporation ----------- ------------ ------------- ----------- ------------ <S> <C> <C> <C> <C> <C> Revenues: Homebuilding ............................. $ -- $1,599,213 $ -- $ -- $1,599,213 Mortgage banking and financing: Interest and other .................... -- -- 40,476 -- 40,476 Corporate, principally interest .......... 5,458 -- 900 -- 6,358 --------- ---------- -------- -------- ---------- Total revenues ............................. 5,458 1,599,213 41,376 -- 1,646,047 --------- ---------- -------- -------- ---------- Expenses: Homebuilding: Cost of sales ......................... -- 1,363,362 -- -- 1,363,362 Selling, general and administrative and other expense ....................... -- 169,758 -- -- 169,758 Mortgage banking and financing, interest and other ................................ -- -- 28,397 -- 28,397 Corporate, net ............................ 18,580 -- 2,368 -- 20,948 --------- ---------- -------- -------- ---------- 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> 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, 1996 Unconsolidated --------------------------------------- Consolidated Pulte Guarantor Non-Guarantor Eliminating Pulte Corporation Subsidiaries Subsidiaries Entries Corporation ----------- ------------ ------------- ----------- ------------ <S> <C> <C> <C> <C> <C> Revenues: Homebuilding ............................. $ -- $614,710 $ -- $ -- $614,710 Mortgage banking and financing: Interest and other .................... -- -- 9,247 -- 9,247 Corporate, principally interest .......... 1,007 -- 208 -- 1,215 --------- -------- -------- -------- -------- Total revenues ............................. 1,007 614,710 9,455 -- 625,172 --------- -------- -------- -------- -------- Expenses: Homebuilding: Cost of sales ......................... -- 521,773 -- -- 521,773 Selling, general and administrative and other expense ....................... -- 60,910 -- -- 60,910 Mortgage banking and financing, interest and other ............................. -- -- 7,915 -- 7,915 Corporate, net ........................... 6,340 -- 817 -- 7,157 --------- -------- -------- -------- -------- 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 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 of subsidiaries ............................. 108,723 19,186 (278) -- 127,631 --------- -------- -------- -------- -------- Equity in income 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> 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, 1995 Unconsolidated --------------------------------------- Consolidated Pulte Guarantor Non-Guarantor Eliminating Pulte Corporation Subsidiaries Subsidiaries Entries Corporation ----------- ------------ ------------- ----------- ------------ <S> <C> <C> <C> <C> <C> Revenues: Homebuilding ............................. $ -- $1,294,005 $ -- $ -- $1,294,005 Mortgage banking and financing: Interest and other .................... -- -- 36,366 -- 36,366 Gain on sale of servicing ............. -- -- 17,734 -- 17,734 Corporate, principally interest .......... 12,319 -- 1,262 -- 13,581 -------- ---------- -------- -------- ---------- Total revenues ............................. 12,319 1,294,005 55,362 -- 1,361,686 -------- ---------- -------- -------- ---------- Expenses: Homebuilding: Cost of sales ......................... -- 1,108,904 -- -- 1,108,904 Selling, general and administrative and other expense ....................... -- 146,438 -- -- 146,438 Mortgage banking and financing, interest and other ............................. -- -- 41,413 -- 41,413 Corporate, net ........................... 19,484 2,880 -- 22,364 -------- ---------- -------- -------- ---------- Total expenses ............................. 19,484 1,255,342 44,293 -- 1,319,119 -------- ---------- -------- -------- ---------- Income (loss) from continuing operations before income taxes and equity in income of subsidiaries .......................... (7,165) 38,663 11,069 -- 42,567 Income taxes (benefit) ..................... (3,250) 15,465 5,021 -- 17,236 -------- ---------- -------- -------- ---------- Income (loss) from continuing operations before equity in income of subsidiaries . (3,915) 23,198 6,048 -- 25,331 Income from discontinued operations ........ 3,430 -- 4,175 -- 7,605 -------- ---------- -------- -------- ---------- Income (loss) before equity in income of subsidiaries ............................. (485) 23,198 10,223 -- 32,936 -------- ---------- -------- -------- ---------- Equity in income of subsidiaries: Continuing operations .................... 29,246 6,556 23,198 (59,000) -- Discontinued operations .................. 4,175 -- -- (4,175) -- -------- ---------- -------- -------- ---------- 33,421 6,556 23,198 (63,175) -- -------- ---------- -------- -------- ---------- Net income ................................. $ 32,936 $ 29,754 $ 33,421 $(63,175) $ 32,936 ======== ========== ======== ======== ========== </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, 1995 Unconsolidated --------------------------------------- Consolidated Pulte Guarantor Non-Guarantor Eliminating Pulte Corporation Subsidiaries Subsidiaries Entries Corporation ----------- ------------ ------------- ----------- ------------ <S> <C> <C> <C> <C> <C> Revenues: Homebuilding .............................. $ -- $520,937 $ -- $ -- $520,937 Mortgage banking and financing: Interest and other .................... -- -- 15,488 -- 15,488 Gain on sale of servicing ............. -- -- 2,413 -- 2,413 Corporate, principally interest ........... 4,112 -- 397 -- 4,509 ------- -------- ------- -------- -------- Total revenues ............................. 4,112 520,937 18,298 -- 543,347 ------- -------- ------- -------- -------- Expenses: Homebuilding: Cost of sales ......................... -- 445,625 -- -- 445,625 Selling, general and administrative and other expense ....................... -- 49,278 -- -- 49,278 Mortgage banking and financing, interest and other ............................. -- -- 14,067 -- 14,067 Corporate, net ............................ 6,482 -- 602 -- 7,084 ------- -------- ------- -------- -------- Total expenses ............................. 6,482 494,903 14,669 -- 516,054 ------- -------- ------- -------- -------- Income (loss) from continuing operations before income taxes and equity in income of subsidiaries ......................... (2,370) 26,034 3,629 -- 27,293 Income taxes (benefit) ..................... (875) 10,414 1,488 -- 11,027 ------- -------- ------- -------- -------- Income (loss) from continuing operations before equity in income of subsidiaries. (1,495) 15,620 2,141 -- 16,266 Income from discontinued operations ........ 1,509 -- 1,022 -- 2,531 ------- -------- ------- -------- -------- Income before equity in income of subsidiaries .............................. 14 15,620 3,163 -- 18,797 ------- -------- ------- -------- -------- Equity in income of subsidiaries: Continuing operations ..................... 17,761 1,471 15,620 (34,852) -- Discontinued operations ................... 1,022 -- -- (1,022) -- ------- -------- ------- -------- -------- 18,783 1,471 15,620 (35,874) -- ------- -------- -------- -------- -------- Net income ................................. $18,797 $ 17,091 $18,783 $(35,874) $ 18,797 ======= ======== ======= ======== ======== </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, 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 subsidiaries ................... (45,556) (879) (39,625) 86,060 -- Amortization, depreciation and other ..... 64 4,477 940 -- 5,481 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 .............................. (6,827) (36,967) 662 -- (43,132) Accounts payable and accrued liabilities .. 8,641 57,185 (6,827) -- 58,999 Income taxes ................................. (11,334) 26,468 4,602 -- 19,736 --------- --------- --------- -------- --------- Net cash provided by (used in) operating activities .................................. (17,080) (114,229) 39,594 -- (91,715) --------- --------- --------- -------- --------- Cash flows from investing activities: Proceeds from sale of securities available-for-sale ......................... -- -- 168,085 -- 168,085 Proceeds from sale of securities held-to- maturity ................................... -- -- 12,282 -- 12,282 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> 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, 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 Equity in subsidiaries ............. (546) -- -- 546 -- Tax benefit of net operating losses (110,000) -- -- -- (110,000) Other changes, net ................. (4,427) -- (2,308) -- (6,735) 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> 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, 1995 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 ........... $ 25,331 $ 29,754 $ 29,246 $(59,000) $ 25,331 Adjustments to reconcile income from continuing operations to net cash flows provided by (used in) operating activities: Equity in subsidiaries .................. (29,246) (6,556) (23,198) 59,000 -- Amortization, depreciation and other .... 57 3,622 2,107 -- 5,786 Gain on sale of securities .............. -- -- (1,119) -- (1,119) Increase (decrease) in cash due to: Inventories ............................. -- (157,747) -- -- (157,747) Residential mortgage loans available-for-sale ................... -- -- 13,449 -- 13,449 Other assets ............................... 163 (15,188) 146 -- (14,879) Accounts payable and accrued liabilities ... 1,832 41,033 6,523 -- 49,388 Income taxes ............................... (6,682) 15,465 5,021 -- 13,804 -------- --------- -------- -------- --------- Net cash provided by (used in) operating activities .................................. (8,545) (89,617) 32,175 -- (65,987) -------- --------- -------- -------- --------- Cash flows from investing activities: Proceeds from sale of securities available-for-sale ........................ -- -- 10,821 -- 10,821 Principal payments of mortgage-backed securities ................................ -- -- 35,498 -- 35,498 Increase in funds held by trustee ........... -- -- (10,102) -- (10,102) Dividends received from subsidiaries ........ 3,276 40,000 -- (43,276) -- Investment in subsidiaries .................. (2,286) -- -- 2,286 -- Advances to affiliates ...................... (68,937) (2,173) (2,785) 73,895 -- Other, net .................................. -- (9,365) (924) -- (10,289) -------- --------- ------- -------- --------- Net cash provided by (used in) investing activities .................................. (67,947) 28,462 32,508 32,905 25,928 -------- --------- -------- -------- --------- Cash flows from financing activities: Payment of long-term debt and bonds ......... -- -- (39,320) -- (39,320) Proceeds from borrowings .................... -- -- 17,293 -- 17,293 Repayment of borrowings ..................... -- (3,821) -- -- (3,821) Capital contributions from parent ........... -- -- 2,286 (2,286) -- Advances from affiliates .................... -- 73,541 354 (73,895) -- Stock repurchases ........................... (11,707) -- -- -- (11,707) Dividends paid .............................. (6,484) (43,276) 43,276 (6,484) Other, net .................................. 87 -- -- -- 87 -------- --------- -------- -------- --------- Net cash provided by (used in) financing activities ........................ (18,104) 69,720 (62,663) (32,905) (43,952) -------- --------- -------- -------- --------- Net increase (decrease) in cash and equivalents - continuing operations ......... $(94,596) $ 8,565 $ 2,020 $ -- $ (84,011) -------- --------- -------- -------- --------- </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, 1995 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 ..... $ 7,605 $ -- $ 4,175 $(4,175) $ 7,605 Equity in subsidiaries .................. (4,175) -- -- 4,175 -- Other changes, net ...................... (3,430) -- 16,411 -- 12,981 Cash flows from investing activities: Purchase of securities available-for-sale -- -- (44,901) -- (44,901) Principal payments of mortgage- backed securities ...................... -- -- 20,701 -- 20,701 Decrease in Covered Assets and FRF receivables ............................ -- -- 31,804 -- 31,804 Cash flows from financing activities: Decrease in deposit liabilities ......... -- -- (128,678) -- (128,678) Repayment of borrowings ................. -- -- (31,560) -- (31,560) Increase in FHLB advances ............... -- -- 19,500 -- 19,500 -------- ------- --------- ------- --------- Net decrease in cash and equivalents- discontinued operations ................. -- -- (112,548) -- (112,548) -------- ------- --------- ------- --------- Net increase (decrease) in cash and equivalents ............................. (94,596) 8,565 (110,528) -- (196,559) Cash and equivalents at beginning of period .................................. 115,546 43,547 122,397 -- 281,490 -------- ------- --------- ------- --------- Cash and equivalents at end of period .... $ 20,950 $52,112 $ 11,869 $ -- $ 84,931 ======== ======= ========= ======= ========= </TABLE> 20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ($000's omitted, except per share data) A summary of Pulte Corporation's operating results by business segment for the three and nine month periods ended September 30, 1996 and 1995 is as follows: <TABLE> <CAPTION> Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 1996 1995 1996 1995 ---- ---- ---- ---- <S> <C> <C> <C> <C> Pre-tax income (loss): Homebuilding operations: Pulte Home Corporation ............. $ 32,027 $26,034 $ 66,093 $38,663 Financial Services operations: Mortgage banking - ICM ............. 914 2,451 1,465 10,926 Financing activities ............... 418 1,383 10,614 1,761 -------- ------- -------- ------- Total Financial Services ............. 1,332 3,834 12,079 12,687 Corporate ............................ (5,942) (2,575) (14,590) (8,783) -------- ------- -------- ------- Pre-tax income from continuing operations 27,417 27,293 63,582 42,567 Income taxes ............................ 10,994 11,027 25,650 17,236 -------- ------- -------- ------- Income from continuing operations ....... 16,423 16,266 37,932 25,331 Income from discontinued operations ..... 111,208 2,531 114,973 7,605 -------- ------- -------- ------- Net income .............................. $127,631 $18,797 $152,905 $32,936 ======== ======= ======== ======= Net income per share .................... $ 5.29 $ .69 $ 5.95 $ 1.20 ======== ======= ======== ======= </TABLE> For the three and nine month periods ended September 30, 1996, pre-tax income (loss) changed from the comparable periods of 1995 as follows: o Pre-tax income of the Company's homebuilding operations increased by $5,993 and $27,430, respectively, over the comparable periods of 1995. Such increases are primarily the result of the increased volume of unit settlements during 1996, coupled with an improved gross profit margin, partially offset by a leveraged increase in selling, general and administrative expenses. o Pre-tax income of the Company's mortgage banking operations decreased $1,537 and $9,461, respectively, from the comparable periods of 1995. This is principally related to $10,148 of gains from the sale of core servicing rights for the nine month period ended September 30, 1995. No core sales occurred during the three month period ended September 30, 1995 or during 1996. The absence of gains from core sales during 1996 was in part offset by an increase in marketing gains and the capitalization of mortgage servicing rights which began on July 1, 1995, with the implementation of Statement of Financial Accounting Standards (SFAS) No. 122, Accounting for Mortgage Servicing Rights. o Pre-tax income from the Company's financing activities (decreased)/ increased by $(965) and $8,853, respectively, over the comparable periods of 1995 primarily due to timing of gains from the sales of collateral during 1996 and 1995. o Pre-tax loss from corporate operations increased $3,367 and $5,807, respectively, from the comparable periods of 1995. Such increases are related to higher net interest expense and administrative expenses related to the Company's strategic operating initiatives. o The increase in income from discontinued operations is due to recognition of $110,000 of tax benefits associated with net operating losses. 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) ($000's omitted) Homebuilding Operations: The following table presents selected financial data for Pulte Home Corporation (Pulte) for the three and nine month periods ended September 30, 1996 and 1995. <TABLE> <CAPTION> Three Months Ended Nine Months Ended September 30, September 30, --------------------- ------------------------ 1996 1995 1996 1995 ---- ---- ---- ---- <S> <C> <C> <C> <C> Unit settlements: Pulte Home North ................. 614 632 1,615 1,496 Pulte Home South ................. 1,157 813 2,968 2,134 Pulte Home Central ............... 1,217 1,273 3,390 2,975 Pulte Home West .................. 789 594 2,107 1,711 -------- -------- ---------- ---------- 3,777 3,312 10,080 8,316 ======== ======== ========== ========== Net new orders - units: Pulte Home North ................. 590 619 1,906 1,889 Pulte Home South ................. 1,285 1,102 3,732 2,864 Pulte Home Central ............... 896 1,434 3,420 4,014 Pulte Home West .................. 658 709 2,224 2,012 -------- -------- ---------- ---------- 3,429 3,864 11,282 10,779 ======== ======== ========== ========== Net new orders - dollars .......... $538,000 $598,000 $1,804,000 $1,667,000 ======== ======== ========== ========== Backlog at September 30 - units: Pulte Home North ................. 1,029 838 Pulte Home South ................. 1,715 1,285 Pulte Home Central ............... 1,317 1,786 Pulte Home West .................. 840 841 ---------- ---------- 4,901 4,750 ========== ========== Backlog at September 30 - dollars.. $ 810,000 $ 760,000 ========== ========== Revenues .......................... $614,710 $ 520,937 $1,599,213 $1,294,005 Cost of sales ..................... 521,773 445,625 1,363,362 1,108,904 Selling, general and administrative expense ........... 55,367 46,722 156,328 134,969 Interest (A) ...................... 4,762 3,745 12,085 8,595 Other (income) expense, net ....... 781 (1,189) 1,345 2,874 -------- --------- ---------- ---------- Pre-tax income .................... $ 32,027 $ 26,034 $ 66,093 $ 38,663 ======== ========= ========== ========== Average sales price ............... $ 163 $ 157 $ 159 $ 156 ======== ========= ========== ========== <FN> Note (A): The Company capitalizes interest cost into homebuilding inventories and charges the interest to homebuilding interest expense when the related inventories are sold. </TABLE> The number of active communities as of the end of each respective period are as follows: <TABLE> <S> <C> September 30, 1996........... 390 June 30, 1996................ 379 March 31, 1996............... 380 December 31, 1995............ 352 September 30, 1995........... 355 </TABLE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) ($000's omitted) Homebuilding Operations (continued): Pulte conducts its domestic homebuilding operations through 41 markets in 25 states and Puerto Rico which are organized into four operating companies - Pulte Home North (PHN), Pulte Home South (PHS), Pulte Home Central (PHC) and Pulte Home West (PHW). 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, 1996. Net new orders during the third quarter of 1996 decreased approximately 11% from the record level set during the third quarter of 1995, which was a 48% increase over the same period in 1994. All operating companies experienced slowdowns in net new order activity during the quarter, with the exception of PHS which recorded a 17% increase in units compared with the third quarter of 1995 due to an increase in number of active communities and favorable response to new product, especially in the Carolinas. The declining trend in net new order rates has continued to date into the fourth quarter. Due to the strong order activity experienced in the first four months of 1996, net new orders during the nine months ended September 30, 1996 did not decrease as significantly as those during the third quarter of 1996. For the nine months ended September 30, 1996, net new orders decreased 5% compared with the comparable period last year. Only PHC recorded net new orders less than 1995 on a year-to-date basis, due in part to delays in start-up of new projects. In the other operating companies, both existing and new markets have contributed to the positive year-over-year net new order comparisons. Settlements during the three and nine months ended September 30, 1996 increased 14% and 21%, respectively, over the same periods in 1995. The settlement activity during the third quarter and first nine months of 1996 was supported by the record backlog at December 31, 1995, as well as the strong net new order activity during the first four months of 1996. Settlements in PHN during the third quarter of 1996 were less than the same period of 1995 due to weather conditions which caused production delays during the quarter. In PHC, the year-to-date decrease in net new orders resulted in third quarter settlements which were less than the third quarter of 1995. The average selling price during the third quarter of 1996 was $163, an increase from the average selling price of $157 in the prior year quarter. The increase in average selling price was due primarily to product mix, as all operating companies except PHS had settlements on higher priced product. Gross profit margins were 15.1% and 14.7% for the three and nine months ended September 30, 1996, respectively, compared with 14.5% and 14.3%, respectively, in the comparable prior year periods. During the first nine months of 1995, the Company's gross profit margins were impacted by competitive market conditions and excess industry inventory levels. The level of demand for new housing experienced during the second half of 1995 and the first four months of 1996, especially in certain PHS and PHC markets, resulted in improved gross profit margins for units settled during the first nine months of 1996 as compared to similar periods in 1995. In addition, the improvement in gross profit margins for the third quarter and first nine months of 1996 is due in part to the Company's ongoing process improvement initiatives focused on lowering house costs through improved operational efficiencies. The continued slowdown in net new order activity, together with competitive conditions in many of the Company's markets, will challenge the Company's ability to achieve sequential or year-over-year improvements in gross profit margins during the fourth quarter of 1996. 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) ($000's omitted) Homebuilding Operations (continued): Selling, general and administrative expenses for the three and nine months ended September 30, 1996 increased $8,645 and $21,359, respectively, over the same periods in 1995. The increase in selling, general and administrative expenses for both the three and nine month periods is partially related to an increase in the number of selling communities compared to the prior year. In addition, selling, general and administrative expense for the three months ended September 30, 1996 includes costs associated with weather delays throughout several of our East Coast markets combined with expenses related to two recently completed acquisitions in Jacksonville, Florida and Rhode Island. As a percent of revenue, selling, general and administrative expense was approximately 9.0% in the third quarters of 1996 and 1995. For the first nine months of 1996, selling, general and administrative expense was 9.8% of revenue, compared with 10.4% in the first nine months of 1995. The better leverage on a year-to-date basis is a result of increased operating efficiencies in both new and existing markets and increased unit settlements in the Company's new markets. Other expense, net, includes gains on land sales, the pre-tax results of Builders' Supply & Lumber Co., Inc. (BSL) and other homebuilding-related expenses. For the three and nine months ended September 30, 1995, the category includes income from the settlement of certain litigation for amounts in excess of the amounts previously included in the financial statements of the Company. For the nine months ended September 30, 1996, other expense, net, was favorably impacted by improved results for BSL compared to the same period a year ago. Effective July 1, 1996, the Company acquired certain assets of North Florida Classic Homes of Jacksonville, Florida, which consisted of land and homes under construction in 12 residential communities, as well as the right to use the "North Florida Classic Homes" name in the Company's homebuilding operations. Effective September 1, 1996, the Company acquired certain assets of LeBlanc Homes, Rhode Island's largest homebuilder. The acquisition includes land and homes under construction in eight residential communities, seven of which are located in Rhode Island and one in Plymouth County, Massachusetts. The agreement also includes the right to use the "LeBlanc Homes" name in the Company's homebuilding operations. Information related to interest in inventory is as follows: <TABLE> <CAPTION> Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 1996 1995 1996 1995 --------- -------- -------- -------- <S> <C> <C> <C> <C> Interest in inventory at beginning of period.................... $13,421 $ 11,867 $ 12,261 $ 8,053 Interest capitalized.................... 4,391 4,362 12,874 13,026 Interest expensed....................... (4,762) (3,745) (12,085) (8,595) -------- -------- -------- ------- Interest in inventory at end of period.. $13,050 $ 12,484 $ 13,050 $12,484 ======= ======== ======== ======= </TABLE> At September 30, 1996, Pulte owned approximately 29,200 lots in communities in which homes are being constructed. In addition, Pulte had approximately 16,800 lots under option. 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) ($000's omitted) Financial Services Operations: Mortgage Banking Operations: The Company's mortgage banking operations are conducted by ICM Mortgage Corporation (ICM). The following table presents mortgage origination data for ICM: <TABLE> <CAPTION> Three Months Ended Nine Months Ended September 30, September 30, ------------------- ------------------- 1996 1995 1996 1995 -------- -------- -------- -------- <S> <C> <C> <C> <C> Production: Total originations: Loans ....................... 2,628 3,039 7,685 8,011 ======== ======== ======== ======== Principal ................... $320,800 $347,000 $912,000 $893,000 ======== ======== ======== ======== Funded originations: Loans ....................... 2,431 2,696 7,116 6,895 ======== ======== ======== ======== Principal ................... $291,400 $300,700 $829,300 $746,700 ======== ======== ======== ======== Originations for Pulte customers: Loans ....................... 1,953 1,923 5,422 4,642 ======== ======== ======== ======== Principal ................... $251,600 $237,000 $680,000 $571,300 ======== ======== ======== ======== </TABLE> Mortgage origination volume for the nine months ended September 30, 1996 increased 2% over the first nine months of 1995, while origination volume for the third quarter decreased 8% from the prior year quarter. ICM has continued its emphasis on expanding in Pulte's existing and new markets and, as a result, the volume of originations for Pulte customers has increased, comprising 75% of total production for the first nine months of 1996, compared with 64% of total production for the same period in 1995. Origination volume for Pulte customers was also higher for the three months ended September 30, 1996, compared with the same period in 1995. For both the three and nine months ended September 30, 1996, originations for non-Pulte customers have declined. ICM continues to hedge its mortgage pipeline in the normal course of its business and there has been no change in ICM's strategy or use of derivative financial instruments in this regard. During the three and nine months ended September 30, 1996, pricing and marketing gains increased by $540 and $10,079, respectively, compared with the same periods of 1995. The increase was due in part to higher volume of servicing retained originations during 1996 compared with 1995, and higher market value of originated servicing rights. In addition, effective July 1, 1995, ICM adopted SFAS No. 122 which requires that the costs associated with originating mortgage servicing rights be recognized as an asset, shifting the gains from sale of servicing rights to sale of mortgage loans. During the nine months ended September 30, 1995, ICM recorded pre-tax gains on sales of its core mortgage servicing portfolio of $10,148, all of which was recorded during the first half of 1995. In addition, as part of its normal operations, during the three and nine month periods ended September 30, 1995, ICM recorded gains on sale of non-core mortgage servicing rights of $2,413 and $7,586, respectively. The sale of the core mortgage servicing portfolio and the ongoing sale of servicing rights on a flow basis are the result of repositioning ICM to concentrate on its primary business of providing mortgage financing for Pulte's homebuyers. ICM expects to continue to sell mortgage servicing rights as part of normal operations on a three to five month lag from the time of origination. 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) ($000's omitted) Financial Services Operations (continued): Mortgage Banking Operations (continued): Servicing fee income for the three and nine month periods ended September 30, 1996 decreased from the comparable 1995 periods due to the sale of the core mortgage servicing portfolio discussed above. Mortgage origination fees also decreased due to a decrease in the amount of non-funded originations compared with the prior year. Net interest income decreased by $626 for the nine months ended September 30, 1996, compared with the first nine months of 1995, primarily due to dividends paid by ICM to its parent, Pulte, throughout 1996 and during the first quarter of 1995. The result of the dividends is an increased leverage position, incurring higher interest expense and reducing net interest income. In the three month period ended September 30, 1996, net interest income increased by $146, as the effect of the dividend payments was offset by an increased interest rate spread compared with the third quarter of 1995. At September 30, 1996, loan application backlog was $342,000, compared with $429,000 at September 30, 1995. Financing Activities: The Company's secured financing operations are conducted by Pulte Financial Companies, Inc. (PFCI) through its subsidiary corporations. Prior to 1989, the PFCI subsidiaries 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. Since 1989, the PFCI subsidiaries have been liquidating their collateral portfolios and related bonds outstanding. At September 30, 1996, two bond series with an aggregate principal amount of $54,402 remained outstanding. PFCI expects to recognize final financial statement impact of these last two series over the course of the next several quarters. PFCI's pre-tax operating income was $418 and $10,614, respectively, for the three and nine month periods ended September 30, 1996, compared with $1,383 and $1,761, respectively, for the comparable periods in 1995. 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, compared with $1,119 during the three and nine months ended September 30, 1995. Net interest income continues to decrease as a result of lower average outstanding balances on the collateral and bond portfolios. When PFCI completes the liquidation of its collateral portfolios and related bonds outstanding, PFCI will cease to operate. 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) ($000's omitted) Corporate: Corporate is a non-operating business segment; it is the Company's internal source of financing and also includes the following items: o Income from investments, including the Company's share of Mexican joint venture operations. o Interest expense on the Company's long-term debt. o Administrative expenses. Corporate assets include equity investments in subsidiaries, and the Company's working capital funds invested in short term cash investments and affiliate advances. Its liabilities include senior and subordinated debt and income taxes. The following table presents corporate results of operations for the three and nine month periods ended September 30, 1996 and 1995: <TABLE> <CAPTION> Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------ 1996 1995 1996 1995 ---- ---- ---- ---- <S> <C> <C> <C> <C> Net interest expense......... $2,084 $ 154 $ 4,296 $ 350 Other corporate expenses, net 3,858 2,421 10,294 8,433 ------ ------ ------- ------ Loss before income taxes..... $5,942 $2,575 $14,590 $8,783 ====== ====== ======= ====== </TABLE> The increased loss for the three and nine month periods ended September 30, 1996, compared with the same periods in 1995, is due to increased net interest expense as a result of the issuance of $125,000 of 7.3% unsecured Senior Notes in the fourth quarter of 1995, and additional administrative expenses related to the Company's strategic operating initiatives, including Mexico operations. During the three and nine month periods ended September 30, 1996, the Company recorded losses of $266 and $892, respectively, compared with $59 and $1,411, respectively, for the comparable periods in 1995. Included in Mexico's loss for the three and nine month periods ended September 30, 1995 are the Company's share of Mexico joint venture foreign currency losses which amounted to $175 and $1,197, respectively. During the three and nine month periods ended September 30, 1996, there were no significant foreign currency gains or losses. Pulte conducts its Mexico homebuilding operations in the cities of Monterrey, Juarez and Mexico City through three joint venture investments owned by foreign subsidiaries. In January 1996, the Company's Monterrey joint venture partner assigned its interest in the joint venture to the Company. The Company carries its net investment in the Monterrey venture at approximately $4,900 as of September 30, 1996. The Company intends to liquidate the Monterrey assets in the normal course of business. The Company carries its net investment in the Juarez joint venture at approximately $6,300 as of September 30, 1996. On October 2, 1996, the Company announced that its Juarez joint venture has entered into an agreement with Sony Magneticos de Mexico, S.A. de C.V., an affiliate of Sony Electronics Inc., to construct approximately 500 homes in Mexico over the next several years for Sony Magnetico's employees. This is the second such agreement into which the Company has entered. During the second quarter, the Company's Juarez joint venture entered into an agreement with Delphi Automotive Systems, a division of General Motors Corporation, to construct up to 6,000 homes for GM's employees in Mexico over a three-year period beginning in August 1997. The Company has also entered into a joint venture to build 20 middle income housing units in Mexico City. The Company's investment in this joint venture was $300 as of September 30, 1996. 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) ($000's omitted) Liquidity and Capital Resources: Continuing Operations: 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, the remaining outstanding balance of $22,405 of Pulte's previously issued unsecured Senior Subordinated Debentures, due 1999, the Company's $100,000, 7% unsecured Senior Notes, due 2003, the Company's $115,000, 8.375% unsecured Senior Notes, due 2004 and the Company's $125,000, 7.3% unsecured Senior Notes, due 2005. In addition, the Company has other committed and uncommitted credit lines, which at September 30, 1996 consisted of $10,000 and $250,000 related to Pulte and ICM operations, respectively. During 1996, management anticipates that homebuilding and corporate working capital requirements will be funded with internally generated funds and the previously mentioned debt. In addition, the Company has on file with the Securities and Exchange Commission a universal shelf registration which provides for up to an additional $125,000 of debt or equity securities. The Company finances its land acquisitions, development and construction activities from internally generated funds and existing credit agreements. There were no borrowings under the Company's $250,000 unsecured revolving credit facility during the nine month period ended September 30, 1996. The Company's mortgage banking subsidiary (ICM) provides mortgage financing for many of its home sales. ICM uses its own funds and borrowings made available pursuant to various committed and uncommitted credit arrangements which, at September 30, 1996 amounted to $250,000, an amount deemed adequate to cover foreseeable needs. There were approximately $87,417 of borrowings outstanding under the $250,000 (ICM) arrangement at September 30, 1996. Mortgage loans originated by ICM are subsequently sold, principally to outside investors. The Company anticipates that there will be adequate mortgage financing available for purchasers of its homes. The following table depicts the status of the Company's share repurchase program as of September 30, 1996: <TABLE> <CAPTION> Share Repurchases ------------------------------------------------- Authorization Year ended Months ended -------------------------------- December 31, September 30, 1996 -------------------- ------------------------ Date # of Shares 1994 1995 Three Nine ------------- ---------- -------- --------- -------- -------- <S> <C> <C> <C> <C> <C> November 1994 1,000,000 123,500 542,068 -- 334,432 March 1996 1,000,000 -- -- -- 1,000,000 April 1996 1,000,000 -- -- 54,100 1,000,000 July 1996 1,000,000 -- -- 1,000,000 1,000,000 August 1996 1,000,000 -- -- 213,000 213,000 --------- -------- --------- ---------- ---------- 5,000,000 123,500 542,068 1,267,100 3,547,432 ========= ======== ========= ========== ========== Reacquisition price $ 2,403 $ 11,707 $ 31,717 $ 92,563 ======== ========= ========== ========== </TABLE> Subsequent to September 30, 1996, the Company has repurchased 226,000 shares related to the August 20, 1996 repurchase authorization at an aggregate repurchase price of $6,047. 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) ($000's omitted) Liquidity and Capital Resources (continued): 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. 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 relates to tax benefits associated with net operating losses. Certainty of realization of this amount is not anticipated in the near term, is dependent upon various factors, and the actual amount realized might be more or less than the amount recorded. However, management believes that it is more likely than not that these benefits will be realized 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 negotiating with the FDIC and is involved in litigation with the FDIC. Although there is no certainty as to the time of resolution, the Company believes that this matter might be resolved within the next twelve months. At September 30, 1996, the Company had a remaining investment in First Heights of approximately $30,000. 29
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 32 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, 1996. 30
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PULTE CORPORATION /s/ MICHAEL D. HOLLERBACH -------------------------- Michael D. Hollerbach Executive Vice President and Chief Financial Officer (Principal Financial Officer) /s/ VINCENT J. FREES -------------------------- Vincent J. Frees Vice President and Controller (Principal Accounting Officer) Date: November 13, 1996 31