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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-9804
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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 Parkway, Suite 200
Bloomfield Hills, Michigan 48304
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (810) 647-2750
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, par value $.01 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES __ X __ NO _______
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X].
Aggregate market value of voting stock held by nonaffiliates of the
registrant as of January 31, 1997: $589,575,313
Number of shares of common stock outstanding as of January 31, 1997:
23,271,655
Documents Incorporated by Reference
Applicable portions of the Proxy Statement for the 1997 Annual Meeting of
Shareholders are incorporated by reference in Part III of this Form.
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PULTE CORPORATION
TABLE OF CONTENTS
Item Page
No. No.
---- ----
Part I
1 Business.......................................................... 3
2 Properties........................................................ 8
3 Legal Proceedings................................................. 8
4 Submission of Matters to a Vote of Security Holders............... 9
4A Executive Officers of the Registrant.............................. 9
Part II
5 Market for the Registrant's Common Equity and Related
Stockholder Matters............................................ 10
6 Selected Financial Data........................................... 11
7 Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 13
8 Financial Statements and Supplementary Data....................... 21
9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure........................................... 61
Part III
10 Directors and Executive Officers of the Registrant................ 61
11 Executive Compensation............................................ 61
12 Security Ownership of Certain Beneficial Owners and Management.... 61
13 Certain Relationships and Related Transactions.................... 61
Part IV
14 Exhibits, Financial Statement Schedules and Reports on
Form 8-K....................................................... 61
Signatures................................................................... 73
2
PART I
ITEM 1. BUSINESS
Pulte Corporation
Pulte Corporation (the Company) is the publicly held parent corporation of
the Pulte Home Corporation (Pulte) group of companies. The Company is a
holding company and its assets consist principally of the capital stock of
its subsidiaries, cash and investments. Its income primarily consists of
dividends from its subsidiaries and interest on investments. The Company's
direct subsidiaries consist of Pulte Financial Companies, Inc. (PFCI) and
Pulte Diversified Companies, Inc. (PDCI). PDCI's direct subsidiaries are
Pulte and First Heights Bank, a federal savings bank (First Heights). ICM
Mortgage Corporation (ICM) is a direct subsidiary of Pulte.
The Company conducts operations in two primary business segments:
homebuilding, through Pulte and its homebuilding subsidiaries, and financial
services, principally through the Company's mortgage banking subsidiary
(ICM). The operations of PFCI's limited purpose subsidiaries are expected to
cease during the first half of 1997 (See Other Financial Subsidiaries in the
following discussion of the Company's business). The Company's thrift
subsidiary, First Heights, has been classified as discontinued operations.
(See Note 3 of Notes to Consolidated Financial Statements.)
During 1996, the Company celebrated the 40th anniversary of its incorporation
and its 40th consecutive year of operating profitability.
Homebuilding Operations
Pulte builds a wide variety of homes, including detached units, townhouses,
condominium apartments and duplexes, with varying prices, models, options and
lot sizes, all sold for use as principal residences. Nearly tripling both its
housing sales (settlements) and net new orders since 1990, Pulte earned the
distinction as the nation's largest homebuilder with 1996 sales of over
14,600 homes and nearly 175,000 homes since its inception. Additionally,
during 1996, Pulte was recognized as "America's Best Builder" by the National
Association of Home Builders, the industry's trade association, and by
Builder Magazine, one of the industry's leading trade publications.
The Company believes that its customer-focused approach has allowed it to
quickly identify and target emerging niches, including the mature buyer (home
buyers age 50 and over) and affordable housing segments. Initiatives focusing
on affordable housing, most notably the Canterbury Community concept
(affordable site-built homes), are currently offered or under way in eight
markets nationwide. In addition, 24 new communities targeted at the
affordable housing and mature buyer housing segments were opened during 1996
and over 75% of Pulte's planned new community openings in 1997 are targeted
at these two segments.
As of December 31, 1996, Pulte offered homes for sale in 395 communities at
sales prices ranging from $45,000 to over $600,000. Sales prices of homes
currently offered for sale in 75% of Pulte's communities fall within the
range of $75,000 to $225,000 with a 1996 average unit selling price of
$159,000. Sales of single-family detached homes, as a percentage of total
unit sales, were 77%, 73% and 75% in 1996, 1995 and 1994, respectively. As of
December 31, 1996, Pulte operated in 41 markets within the following
geographic areas:
Pulte Home North - Delaware, Maryland, Massachusetts, New Jersey,
Pennsylvania, Rhode Island, Virginia
Pulte Home South - Georgia, Florida, North Carolina, South Carolina,
Puerto Rico
Pulte Home Central - Illinois, Indiana, Kansas, Michigan, Minnesota,
Missouri, Ohio, Texas, Wisconsin
Pulte Home West - Arizona, California, Colorado, Nevada, Utah
3
The following table sets forth for-sale housing unit sales (settlements),
average sales prices, net new orders and backlog of orders (any of which may
be canceled):
Years ended December 31,
---------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Unit settlements:
Pulte Home North................. 2,414 2,213 2,003 1,863 1,651
Pulte Home South................. 4,653 3,389 2,734 2,050 1,632
Pulte Home Central............... 4,589 4,403 3,577 3,432 2,827
Pulte Home West.................. 3,017 2,451 2,828 2,453 1,918
-------- -------- -------- -------- --------
Total unit settlements.............. 14,673 12,456 11,142 9,798 8,028
======== ======== ======== ======== ========
Average sales price................. $159,000 $155,000 $147,000 $139,000 $134,000
======== ======== ======== ======== ========
Net new orders - units:
Pulte Home North................. 2,452 2,506 2,003 1,848 1,704
Pulte Home South................. 4,720 3,785 2,589 2,317 1,782
Pulte Home Central............... 4,282 4,943 3,410 3,420 3,130
Pulte Home West.................. 2,989 2,634 2,559 2,665 2,156
-------- -------- -------- -------- --------
Total net new orders................ 14,443 13,868 10,561 10,250 8,772
======== ======== ======== ======== ========
Markets, end of year................ 41 39 32 26 25
======== ======== ======== ======== ========
Active Communities, end of year..... 395 352 294 239 206
======== ======== ======== ======== ========
At December 31,
---------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Backlog - units:
Pulte Home North................. 776 738 445 445 460
Pulte Home South................. 1,018 951 555 700 433
Pulte Home Central............... 980 1,287 747 914 926
Pulte Home West.................. 695 723 540 809 597
-------- -------- -------- -------- --------
Total backlog.................... 3,469 3,699 2,287 2,868 2,416
======== ======== ======== ======== ========
Backlog, in thousands of dollars.... $598,000 $606,246 $386,848 $419,978 $340,167
======== ======== ======== ======== ========
Backlog average sales price ........ $172,000 $164,000 $169,000 $146,000 $141,000
======== ======== ======== ======== ========
Unit sales (settlements) and net new orders in any year are strongly
influenced by local, regional and national market economic conditions.
Land Acquisition and Development
Locations for development are selected after completing extensive market
research, enabling Pulte to match the location and product offering with its
targeted consumer group. Factors considered include proximity to developed
areas, population growth patterns and, if applicable, estimated development
costs. Pulte has historically managed the risk of controlling its land
positions through use of option contracts and outright acquisition. Due to
the competitive market conditions of recent years, obtaining satisfactory
option terms to allow Pulte to control what it believes are prime development
locations in each of its respective markets has become increasingly more
difficult. As a result, Pulte has utilized outright acquisition more
frequently. Pulte typically controls land with the intent to complete sales
of housing units within 24 months from the date of opening a community,
except in the case of certain mature buyer developments for which the
completion of housing unit sales may require 60 months from the date of
opening a community. As a result, land is generally controlled after it is
properly zoned and developed or is ready for development. In addition, Pulte
occasionally disposes of land owned not required in its business. Where Pulte
develops land, it engages directly in many phases of the development process,
including land and site planning, obtaining environmental and other
regulatory approvals, and constructing roads, sewers, water and drainage
facilities, and other amenities. Pulte uses its staff and the services of
independent engineers and consultants in its land development activities.
Land development
4
work is performed primarily by subcontractors and local government
authorities which construct sewer and water systems in some areas. At
December 31, 1996, Pulte owned approximately 29,100 lots in communities in
which homes are being constructed. In addition, Pulte had approximately
15,600 lots under option.
Sales and Marketing
Pulte dedicates itself to improving the quality and value of its homes
through what it believes are innovative architectural and community designs
and state-of-the-art marketing techniques. Analyzing various qualitative and
quantitative data obtained through extensive market research, Pulte segments
its potential customers into well-defined buyer profiles. Once the demands of
potential buyers are understood, Pulte links its home design and community
development efforts to the specific lifestyle of each targeted consumer
group.
To meet the demands of its various customer segments, Pulte has established a
solid design expertise for a wide array of product lines. Pulte believes that
it is an innovator in the design of its homes, and it views its design
capacity as an integral aspect of its marketing strategy. Pulte's in-house
architectural services teams and management, supplemented by outside
consultants, have been successful in creating distinctive design features,
both in exterior facades, and interior options and features. One of Pulte's
strategies in certain markets has been to offer "the complete house" in which
all features shown in the home are included in the sales price. Standard
features typically offered include vaulted ceilings, flooring, carpet and
appliances, with the buyer having selection options as to the type of
flooring and carpet.
Typically, Pulte's own sales team, together with outside sales brokers, are
responsible for the sales of its homes. Fully furnished and landscaped model
homes are used to showcase Pulte's homes and their distinctive design
features. Pulte has great success with the first-time buyer in the low to
moderate price range; in such cases, financing under United States
Government-insured and guaranteed programs is often used and is facilitated
through ICM. Pulte also enjoys strong sales to the move-up buyer and, in
certain markets, offers semi-custom homes in higher price ranges. Pulte
introduces its homes to prospective buyers through a variety of media
advertising, illustrated brochures and other advertising displays. Customers
also are obtained through referrals from other Pulte customers. Also, Pulte
recently added market and specific community information to its internet home
page which can be reached at http://www.pulte.com.
Construction
Pulte normally designs the homes it sells and builds such homes under the
supervision of its on-site construction superintendents. The construction
work is usually performed by subcontractors under contracts which, in many
instances, cover both labor and materials on a fixed-price basis. Pulte
believes that Pulte Preferred Partnerships (P3), an extension of its quality
control program, is establishing new standards for contractor relations.
Using a selective process, Pulte has teamed up with what it believes are
premier contractors and suppliers to improve all aspects of the development
and construction process.
Pulte attempts to maintain efficient operations by using standard materials
and components from a variety of sources and, when feasible, by building on
contiguous lots. To minimize the effects of changes in construction costs,
the subcontracting and purchasing of building supplies, materials and major
appliances are generally negotiated at or near the time when related sales
contracts are signed. Pulte cannot determine the extent to which necessary
building materials will be available at reasonable prices in the future and
has, on occasion, experienced shortages of skilled labor in certain trades
and of building materials in some markets.
A Pulte subsidiary operates facilities in the greater metropolitan
Washington, D.C., area, Charlotte, Raleigh, Atlanta, Orlando and North East,
Maryland, which provide building materials to certain Pulte operating
divisions as well as unaffiliated customers.
5
Competition and Other Factors
Pulte employs a consumer-products orientation based upon customer care and
brand recognition it believes is unique in the home building industry and a
significant factor in its long-term competitive advantage. However, the
housing industry in the United States is highly competitive. In each of
Pulte's market areas, there are numerous homebuilders with which it competes.
Any provider of housing units, for-sale or to rent, including apartment
builders, may be considered a competitor of Pulte. Conversion of apartments
to condominiums further provides certain segments of the population an
alternative to traditional housing. Pulte competes primarily on the basis of
reputation, price, location, design and quality of its homes. The housing
industry is cyclical and is affected by a number of economic and other
factors including: (1) significant national and world events which impact
consumer confidence; (2) changes in interest rates; (3) changes in other
costs associated with home ownership, such as property taxes and energy
costs; (4) various demographic factors; (5) changes in federal income tax
laws; and (6) changes in government mortgage financing programs. In addition
to these factors, Pulte's business and operations could be affected by
unanticipated shifts in demand for new homes.
Pulte's operations are subject to building, environmental and other
regulations of various state and local authorities. For its homes to qualify
for Federal Housing Administration (FHA) or Veterans Administration (VA)
mortgages, Pulte must satisfy valuation standards and site, material and
construction requirements of those agencies. Compliance by Pulte with
federal, state and local laws relating to protection of the environment has
had, to date, no material effect upon capital expenditures, earnings or the
competitive position of Pulte. More stringent requirements could be imposed
in the future on homebuilders and developers, thereby increasing the cost of
compliance.
Financial Services Operations
The Company's financial services operations are conducted by its mortgage
banking and other financial subsidiaries.
Mortgage Banking
ICM is a mortgage banker which arranges financing through the origination of
mortgage loans primarily for the benefit of buyers of Pulte's homes, but also
to the general public, and engages in the sale of such loans and the related
servicing rights. ICM is a lender approved by the FHA and VA and is a
seller/servicer approved by Government National Mortgage Association (GNMA),
Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage
Corporation (FHLMC) and other investors. In its conventional mortgage lending
activities, ICM generally follows underwriting guidelines established by FNMA
and FHLMC.
During 1996, ICM reorganized its operations by centralizing its mortgage
underwriting, processing and closing functions in Denver, Colorado, through
the implementation of a mortgage operations center (MOC) concept. ICM
believes the MOC will improve the speed and efficiency of its mortgage
operations, thus improving profitability and allowing its field personnel to
focus on creating mortgage opportunities with Pulte customers.
In originating mortgage loans, ICM initially uses its own funds and
borrowings made available to it pursuant to various credit arrangements.
Subsequently, ICM sells such mortgage loans and mortgage-backed securities to
outside investors. During each of the years ended December 31, 1996, 1995 and
1994, ICM originated mortgage loans for 49% of the homes sold by Pulte. Such
originations represented 72%, 62% and 41%, respectively, of ICM funded
originations. Approximately 38%, 50% and 49% of the total loans originated by
ICM during the years ended December 31, 1996, 1995 and 1994, respectively,
were insured by the FHA or partially guaranteed by the VA.
Prior to 1994, ICM had retained most of the servicing rights related to
mortgage loans it had originated and, thus, accepted the risks inherent in
servicing. Beginning in 1994, ICM changed its strategy to sell originated
mortgage servicing on a flow basis. In addition, during the second half of
1994 and first half of 1995, ICM sold a significant portion of its core
mortgage servicing portfolio. At December 31, 1996, the outstanding balance
of ICM's owned servicing portfolio was $394,000,000 (3,744 loans) as compared
with $368,000,000 (3,852 loans) and $1,143,000,000 (12,557 loans) at December
31, 1995 and 1994, respectively. At December 31, 1996, approximately 32% of
such servicing portfolio was insured by the FHA or partially guaranteed by
the VA, compared to 41% at December 31, 1995.
6
The mortgage industry in the United States is highly competitive. ICM
competes with other mortgage companies and financial institutions to provide
attractive mortgage financing to both Pulte customers and the general public.
ICM, in originating and servicing mortgage loans, is subject to rules and
regulations of the FHA, VA, GNMA, FNMA, and FHLMC.
Other Financial Subsidiaries
Other financing activities are conducted by the limited purpose subsidiaries
of PFCI. Such subsidiaries have engaged in the acquisition of mortgage
loans and mortgage-backed securities from ICM and unrelated parties financed
principally through long-term bonds which are secured only by such mortgage
loans and mortgage-backed securities. At December 31, 1996, one bond series
with a principal amount of $45,304,000 was outstanding. It is anticipated
that this bond series and the related collateral will be sold by the middle of
1997. Such bonds are the obligations of the applicable PFCI issuer subsidiary;
they are neither obligations of, nor guaranteed by, the Company, PDCI, Pulte,
ICM or PFCI. (See Management's Discussion and Analysis of Financial Condition
and Results of Operations - Other Financial Subsidiaries and Note 6 of Notes to
Consolidated Financial Statements.)
Discontinued Operations
During 1994, the Company announced its strategy to exit the thrift industry
and increase its focus on homebuilding and related mortgage banking. First
Heights sold substantially all of its bank branches and related liabilities
(primarily deposits), plus certain other assets. The sale was completed
during the fourth quarter of 1994. Accordingly, such operations have been
presented as discontinued. Included in the sale were assets, primarily
consumer and commercial loans, of $116,886,000 and liabilities, primarily
deposits, of $1,205,047,000. To provide liquidity for the sale, First Heights
liquidated its investment portfolios and its single-family residential loan
portfolio and borrowed $127,000,000 from the Federal Deposit Insurance
Corporaiton (FDIC). One remaining retail branch office continues to operate
in Houston. First Heights is subject to regulation by the Office of Thrift
Supervision (OTS) and the FDIC. Specific regulations include, among others,
capital maintenance requirements, liquidity maintenance requirements,
limitations on the growth of total liabilities, limitations on the type and
amount of its investments, restrictions on transactions with affiliates, and
limitations on dividends paid to PDCI. (See Management's Discussion and
Analysis of Financial Condition and Results of Operations - Discontinued
Operations, and Note 3 of Notes to Consolidated Financial Statements.) The
Company is engaged in litigation with the FDIC in connection with its thrift
activities. (See Item 3 Legal Proceedings).
Corporate
Corporate is a nonoperating segment that is comprised of the Company and
PDCI, both of which are holding companies. Its primary purpose is to support
the operations of the Company's subsidiaries as the internal source of
financing and by implementing and nurturing to maturity strategic initiatives
centered around new business development and improving operating
efficiencies. Examples of past and present strategic initiatives include:
o international expansion into Mexico and pursuit of additional
international opportunities;
o affordable housing opportunities, through both the Canterbury Communities
concept and use of manufactured and/or modular housing products;
o mature buyer/active adult housing opportunities;
o Pulte's materials supply chain management in order to gain efficiencies
in its materials procurement process; and
o non-traditional building components.
Corporate assets include equity investments in its subsidiaries, short-term
financial instruments and affiliate advances. Its liabilities include senior
and subordinated debt and income taxes. Corporate revenues consist primarily
of investment earnings of excess funds, while its expenses include costs
associated with supporting its subsidiaries' operations and investigating
strategic initiatives.
7
Organization/Employees
All subsidiaries and operating divisions operate in an autonomous fashion
with respect to day-to-day operations. All homebuilding real estate purchases
and other significant homebuilding, mortgage banking, financing activities
and similar operating decisions must be approved by operating company and/or
senior corporate management.
At December 31, 1996, the Company employed approximately 4,400 persons.
Employees of the Company and its subsidiaries are not represented by any
union. Subcontracted work, however, may be performed by union subcontractors.
Homebuilding division, mortgage banking and financing management personnel
are paid performance bonuses based on individual performance and incentive
compensation based on the performance of the applicable division or
subsidiary. The Company's corporate management personnel are paid incentive
compensation based on overall performance of the Company (see Note 7 of Notes
to Consolidated Financial Statements). Each subsidiary is given autonomy
regarding employment of personnel, although the Company's senior corporate
management acts in an advisory capacity in the employment of subsidiary
officers. The Company considers its employee and subcontractor relations to
be satisfactory.
ITEM 2. PROPERTIES
The Company's and Pulte's corporate offices are located at 33 Bloomfield
Hills Parkway, Suite 200, Bloomfield Hills, Michigan, 48304, where 34,559
square feet of office space is leased. ICM's and PFCI's corporate offices are
located at 6061 South Willow Drive, Greenwood Village, Colorado, 80111. At
this location, 47,400 square feet of office space is leased. Pulte building
divisions and ICM branch operations generally lease office space for their
day-to-day operations. Pulte's subsidiary which provides building materials
owns three warehouses totaling 196,000 square feet and leases 77,000 square
feet of warehouse space in metropolitan Washington, D.C., leases a 91,000
square foot warehouse facility in Charlotte, owns a 112,000 square foot
warehouse facility in Atlanta, leases a 56,000 square foot warehouse facility
in Raleigh, owns a 47,000 square foot warehouse facility in Orlando and
leases 109,000 square feet of warehouse space in North East, Maryland.
Because of the nature of Pulte's homebuilding operations, significant amounts
of property are held as inventory in the ordinary course of its homebuilding
business. Such properties are not included in response to this Item.
First Heights' administrative offices and it remaining retail branch office
are located in leased space at 2727 North Loop West, Suite 150, Houston,
Texas 77008.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various litigation incidental to its business. In
the opinion of management, none of this litigation will have a material
adverse financial impact on the Company.
Federal Deposit Insurance Corporation
The Company is a party to two lawsuits relating to First Heights' 1988
acquisition from the Federal Savings and Loan Insurance Corporation (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 Federal Deposit
Insurance Corporation (FDIC) against the Company, PDCI and First Heights
(collectively, the "Pulte Defendants"). The second lawsuit (the "Court of
Claims Case") was filed on December 26, 1996 in the United States Court of
Federal Claims (Washington, D.C.) by the Pulte Defendants 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 Company 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 Company disputes the
FDIC's claims and believes that a proper interpretation of the assistance
agreement limits the
8
FDIC's participation in the tax benefits to amounts established on First
Heights' books. The Company had filed an answer and a counterclaim, seeking,
among other things, a declaration that the FDIC has breached the assistance
agreement in numerous respects and an injunction against the FDIC. On
December 24, 1996, the Pulte Defendants voluntarily obtained a dismissal
without prejudice of certain of their claims in the District Court Case and
on December 26, 1996, initiated the Court of Claims Case. The Court of Claims
Case contains essentially the same claims as were voluntarily dismissed from
the District Court Case.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
This Item is not applicable.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is certain information with respect to all officers
(including executive officers) of the Company as of December 31, 1996.
Year Became
Name Age Position An Officer
- ---- --- -------- ----------
William J. Pulte 64 Chairman of the Board 1956
Robert K. Burgess 52 President and Chief Executive Officer 1984
Michael D. Hollerbach 43 Executive Vice President and
Chief Financial Officer 1989
James N. Anderson 57 Senior Vice President 1994
William J. Crombie 49 Senior Vice President 1989
Michael A. O'Brien 44 Senior Vice President 1993
John S. Brennan 42 Vice President 1995
David Ebling 60 Vice President 1981
Vincent J. Frees 46 Vice President and Controller 1995
Gregory M. Nelson 41 Vice President 1993
John R. Stoller 48 Vice President, General Counsel and Secretary 1990
James A. Weissenborn 39 Vice President and Treasurer 1993
The following is a brief account of the business experience during the past
five years through December 31, 1996 of each officer:
Mr. Pulte was appointed Chairman of the Board in January 1991 and Co-Chairman
of the Executive Committee in April 1990. Previously, Mr. Pulte was Chairman
of the Executive Committee of the Board of Directors. Mr. Pulte served as
Chief Executive Officer from January 1991 through December 1992. He has been
a Director of the Company since 1956.
Mr. Burgess has been President since October 1985. In addition, Mr. Burgess
was appointed Chief Executive Officer in January 1993. He has been a Director
of the Company since 1985.
Mr. Hollerbach has been Executive Vice President and Chief Financial Officer
since June 1993, and was previously Senior Vice President since July 1989.
Prior to that date, Mr. Hollerbach served in various capacities with Company
subsidiaries which included Chief Executive Officer of PFCI and Chief
Financial Officer of ICM. He has been a Director of the Company since January
1993.
Mr. Anderson was appointed Senior Vice President in December 1994. Prior to
that date, Mr. Anderson served in various capacities with Company
subsidiaries which included President of Pulte's Maryland Division.
Mr. Crombie has been Senior Vice President since June 1993. From November
1989 to June 1993, he was Senior Vice President-Finance and Chief Financial
Officer.
9
Mr. O'Brien became Senior Vice President in December 1994. From December 1993
to November 1994, he was Vice President. From 1989 to November 1993, Mr.
O'Brien served as Vice President-Human Resources of Pepsi-Cola, Inc.
Mr. Brennan became Vice President in September 1995. From August 1992 through
August 1995 Mr. Brennan was Vice President - International for the G.
Heileman Brewing Company. From January 1980 through July 1992 Mr. Brennan
held various positions with the Coca-Cola Company, the latest of which was
President and CEO of a joint venture in Taiwan.
Mr. Ebling has been Vice President since January 1983. He was previously
Controller from 1981 to 1987 and from May 1994 to April 1995.
Mr. Frees became Vice President and Controller in May 1995. Prior to joining
the Company in April 1995, Mr. Frees served in various key financial
capacities with American Cyanamid Company since 1982.
Mr. Nelson has been Vice President since August 1993. From 1988 to August
1993, he was Director of Taxes. He has also been a Vice President of Pulte
since 1988. Mr. Nelson joined the Company in January 1982.
Mr. Stoller joined the Company in August 1990. In October 1990, he was
appointed Vice President and General Counsel. Prior to joining the Company,
Mr. Stoller served as Vice President, General Counsel and Secretary of
BetaWest Properties, Inc., a commercial real estate development subsidiary of
US WEST, Inc. Effective January 1, 1994, Mr. Stoller became Secretary of the
Company.
Mr. Weissenborn has been Vice President and Treasurer since August 1993. From
March 1989 to August 1993, he served as Executive Vice President and Chief
Financial Officer of First Heights. Mr. Weissenborn has served in various
capacities at the Company since March 1987.
There is no family relationship between any of the officers. Each officer
serves at the pleasure of the Board of Directors.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the New York Stock Exchange (Symbol:
PHM). The table below sets forth, for the quarterly periods indicated, the
range of high and low sales prices and cash dividends declared per share.
1996 1995
--------------------------- ---------------------------
Declared Declared
High Low Dividends High Low Dividends
---- --- --------- ---- --- ---------
1st Quarter $34.63 $25.75 $.06 $24.00 $20.13 $.06
2nd Quarter 29.63 24.75 .06 29.63 20.38 .06
3rd Quarter 27.50 24.00 .06 30.50 25.25 .06
4th Quarter 31.75 25.25 .06 34.63 27.13 .06
At December 31, 1996, there were 813 shareholders of record.
10
ITEM 6. SELECTED FINANCIAL DATA
Set forth below is selected consolidated financial data for each of the past
five fiscal years. The selected financial data should be read in conjunction
with Management's Discussion and Analysis of Financial Condition and Results
of Operations and the Company's Consolidated Financial Statements and Notes
thereto included elsewhere in this report.
Year Ended December 31,
-----------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
($000's omitted)
OPERATING DATA:
Homebuilding:
Sales (settlements) .......... $ 2,326,462 $ 1,935,703 $ 1,637,306 $ 1,363,278 $ 1,078,154
=========== =========== =========== =========== ===========
Income before income taxes and
extraordinary item ......... $ 108,582 $ 79,798 $ 93,216 $ 77,179 $ 47,897
=========== =========== =========== =========== ===========
Financial services:
Revenues ..................... $ 50,197 $ 74,105 $ 107,799 $ 121,847 $ 140,036
=========== =========== =========== =========== ===========
Income before income taxes and
extraordinary item ......... $ 14,690 $ 18,436 $ 21,569 $ 22,608 $ 17,893
=========== =========== =========== =========== ===========
Corporate:
Revenues ..................... $ 7,624 $ 19,332 $ 10,808 $ 5,675 $ 6,033
=========== =========== =========== =========== ===========
Loss before income taxes ..... $ (20,809) $ (16,210) $ (11,197) $ (8,748) $ (7,568)
=========== =========== =========== =========== ===========
Consolidated results:
Revenues ..................... $ 2,384,283 $ 2,029,140 $ 1,755,913 $ 1,490,800 $ 1,224,223
=========== =========== =========== =========== ===========
Income from continuing
operations before
income taxes, extraordinary
item and cumulative effect
of change in
accounting principle ....... $ 102,463 $ 82,024 $ 103,588 $ 91,039 $ 58,222
Income taxes ................. 39,252 33,185 41,219 35,583 5,700
----------- ----------- ----------- ----------- -----------
Income from continuing
operations before
extraordinary item
and cumulative effect
of change in accounting
principle .................. 63,211 48,839 62,369 55,456 52,522
Income from discontinued
operations ................. 116,432 9,507 102,988 22,309 19,666
----------- ----------- ----------- ----------- -----------
Income before extraordinary
item and cumulative effect
of change in
accounting principle ....... 179,643 58,346 165,357 77,765 72,188
Extraordinary loss from early
extinguishment of debt ..... -- -- (2,589) (3,397) (2,084)
Cumulative effect of change in
accounting for income taxes -- -- -- 5,000 --
----------- ----------- ----------- ----------- -----------
Net income ................... $ 179,643 $ 58,346 $ 162,768 $ 79,368 $ 70,104
=========== =========== =========== =========== ===========
11
ITEM 6. SELECTED FINANCIAL DATA (continued)
Year Ended December 31,
----------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
PER SHARE DATA - PRIMARY:
Income from continuing operations
before extraordinary item and
cumulative effect of change in
accounting principle ................ $ 2.52 $ 1.79 $ 2.24 $ 1.98 $ 1.94
Income from discontinued operations ... 4.65 .34 3.70 .80 .72
---------- ---------- ---------- ---------- ----------
Income before extraordinary item and
cumulative effect of change in
accounting principle ................ 7.17 2.13 5.94 2.78 2.66
Extraordinary item .................... -- -- (.09) (.12) (.08)
Cumulative effect of change in
accounting for income taxes ......... -- -- -- .18 --
---------- ---------- ---------- ---------- ----------
Net income ............................ $ 7.17 $ 2.13 $ 5.85 $ 2.84 $ 2.58
========== ========== ========== ========== ==========
Shareholders' equity .................. $ 35.65 $ 28.16 $ 25.88 $ 20.19 $ 17.55
Cash dividends declared ............... $ .24 $ .24 $ .24 $ .24 $ .24
Weighted-average common shares
outstanding - primary (000's omitted) 25,070 27,358 27,854 27,913 27,177
Year Ended December 31,
--------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
($000's omitted)
BALANCE SHEET DATA:
House and land inventories .. $1,017,262 $ 859,735 $ 752,369 $ 567,187 $ 427,565
Total assets ................ 1,985,141 2,047,515 1,941,355 3,810,890 3,705,544
Total indebtedness .......... 735,658 921,127 942,652 2,895,284 2,931,720
Shareholders' equity ........ 829,273 761,003 710,589 556,314 481,395
Year Ended December 31,
--------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
OTHER DATA:
Return on average shareholders'
equity ...................... 22.6% 7.9% 25.7% 15.3% 16.7%
Homebuilding operations:
Total markets, at year end .. 41 39 32 26 25
Total active communities,
at year end ............... 395 352 294 239 206
Total settlements - units ... 14,673 12,456 11,142 9,798 8,028
Total net new orders - units 14,443 13,868 10,561 10,250 8,772
Backlog units, at year end .. 3,469 3,699 2,287 2,868 2,416
Average unit selling price .. $159,000 $155,000 $147,000 $139,000 $134,000
Gross profit margin ......... 14.8% 14.5% 15.4% 15.3% 14.9%
12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
($000's omitted, except per share data)
A summary of the Company's operating results by business segment for the
years ended December 31, 1996, 1995 and 1994 is as follows:
Year Ended December 31,
-----------------------------------
1996 1995 1994
---- ---- ----
Pre-tax income (loss):
Homebuilding Operations -
Pulte Home Corporation ....... $ 108,582 $ 79,798 $ 93,216
--------- --------- ---------
Financial Services Operations:
Mortgage banking - ICM ....... 3,360 13,930 18,913
Financing activities ......... 11,330 4,506 2,656
--------- --------- ---------
Total Financial Services ..... 14,690 18,436 21,569
--------- --------- ---------
Corporate ...................... (20,809) (16,210) (11,197)
--------- --------- ---------
Income from continuing operations
before income taxes and
extraordinary item ............. 102,463 82,024 103,588
Income taxes ...................... 39,252 33,185 41,219
--------- --------- ---------
Income from continuing operations
before extraordinary item ...... 63,211 48,839 62,369
Income from discontinued operations 116,432 9,507 102,988
--------- --------- ---------
Income before extraordinary item .. 179,643 58,346 165,357
Extraordinary loss from early
extinguishment of debt ......... -- -- (2,589)
--------- --------- ---------
Net income ........................ $ 179,643 $ 58,346 $ 162,768
========= ========= =========
Net income per share .............. $ 7.17 $ 2.13 $ 5.85
========= ========= =========
A comparison of pre-tax income for the years ended December 31, 1996, 1995
and 1994 is as follows:
o Pre-tax income of the Company's homebuilding operations increased by
$28,784 over 1995. This increase is 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. Pre-tax income had decreased in 1995
from the level achieved during 1994 primarily as a result of lower gross
profit margins and increased selling, general and administrative
expenses.
o Pre-tax income of the Company's mortgage banking operations decreased
$10,570 from 1995. This is principally related to $10,148 of gains from
the sale of core servicing rights during 1995. No such sales occurred
during 1996. Pre-tax income decreased in 1995 from 1994 primarily due to
reduced gains from the sales of non-core mortgage servicing rights
resulting from decreased mortgage origination volume.
o Pre-tax income from the Company's financing activities increased $6,824
from 1995 primarily due to gains from the sales of collateral during
1996. The increase in pre-tax income in 1995 over 1994 related primarily
to lower net bond discount amortization expense resulting from
adjustments made in 1994 for bonds which were repaid sooner than
anticipated, partly offset by lower collateral sale gains and decreased
net interest income.
o Pre-tax loss from corporate operations increased $4,599 over 1995 as a
result of higher net interest expense and administrative expenses related
to the Company's strategic operating initiatives. The increase in pre-tax
loss in 1995 as compared to 1994 was primarily the result of increased
losses relating to the Company's Mexico operations.
o Income from discontinued operations increased during 1996 as a result of
recognizing $110,000 of tax benefits associated with net operating
losses. During 1994, $72,000 of similar tax benefits were recognized.
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
($000's omitted)
Homebuilding Operations:
The following table presents selected data for Pulte for the years ended
December 31, 1996, 1995 and 1994:
Year Ended December 31,
------------------------------------------
1996 1995 1994
---- ---- ----
Unit settlements:
Pulte Home North ........................ 2,414 2,213 2,003
Pulte Home South ........................ 4,653 3,389 2,734
Pulte Home Central ...................... 4,589 4,403 3,577
Pulte Home West ......................... 3,017 2,451 2,828
----------- ----------- -----------
14,673 12,456 11,142
=========== =========== ===========
Net new orders - units:
Pulte Home North ........................ 2,452 2,506 2,003
Pulte Home South ........................ 4,720 3,785 2,589
Pulte Home Central ...................... 4,282 4,943 3,410
Pulte Home West ......................... 2,989 2,634 2,559
----------- ----------- -----------
14,443 13,868 10,561
=========== =========== ===========
Net new orders - dollars .................... $ 2,319,000 $ 2,155,000 $ 1,607,000
=========== =========== ===========
Backlog at December 31 - units:
Pulte Home North ........................ 776 738 445
Pulte Home South ........................ 1,018 951 555
Pulte Home Central ...................... 980 1,287 747
Pulte Home West ......................... 695 723 540
----------- ----------- -----------
3,469 3,699 2,287
=========== =========== ===========
Backlog at December 31 - dollars ............ $ 598,000 $ 606,246 $ 386,848
=========== =========== ===========
Revenues .................................... $ 2,326,462 $ 1,935,703 $ 1,637,306
Cost of sales ............................... (1,982,385) (1,654,952) (1,385,204)
Selling, general and administrative expenses (216,629) (184,203) (153,007)
Interest (A) ................................ (17,216) (13,106) (7,854)
Other income (expense), net ................. (1,650) (3,644) 1,975
----------- ----------- -----------
Pre-tax income before extraordinary loss .... $ 108,582 $ 79,798 $ 93,216
=========== =========== ===========
Average sales price ......................... $ 159 $ 155 $ 147
=========== =========== ===========
The following is a summary of the number of communities active as of
each respective date:
December 31, 1996.............. 395
September 30, 1996............. 390
June 30, 1996.................. 379
March 31, 1996................. 380
December 31, 1995.............. 352
Note (A): The Company capitalizes interest cost into homebuilding
inventories and charges the interest to homebuilding interest
expense when the related inventories are closed.
14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
($000's omitted)
Homebuilding Operations (continued):
As of December 31, 1996, Pulte conducted its domestic homebuilding operations
through 41 markets in 25 states and Puerto Rico, which were 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 1996.
Net new orders for 1996 increased for the seventh consecutive year to a
record 14,443 units, a 4% increase over 1995's unit orders which, in turn,
had increased 31% over 1994's unit orders. The strong net new order pace
experienced during the last nine months of 1995 carried over into the first
four months of 1996. However, the final eight months of 1996 saw a declining
net new orders trend. This was due initially to the effect of a rising
interest rate environment during the first half of 1996 and a subsequent
build-up of inventory levels within the industry due to the increased level
of development nationally, which heightened competition. PHS contributed a
25% increase in 1996 net new orders on the strength of its Florida and
Carolinas markets, particularly the contributions of the new markets entered
in the past three years. PHW contributed a similar 13% increase primarily as
a result of its Active Adult (mature buyer) and Canterbury Community product
offerings. Net new orders for PHC fell 13% due to delays in opening new
communities caused by slackening of the local economy in certain of its
markets. This decrease comes on the heels of a 45% increase in net new orders
during 1995 over 1994. Despite the overall increase in net new orders, fourth
quarter backlog declined 6% to 3,469 units ($598,000) at December 31, 1996,
from 3,699 units ($606,000) a year earlier. This compares with 2,287 units
($387,000) at December 31, 1994.
Unit settlements increased 18% to 14,673 units during 1996. This follows a
12% increase in units settled during 1995 over 1994. All operating companies
posted increases in unit settlements over 1995. During 1996, unit settlements
were supported by the brisk net new order pace established at the end of the
first quarter of 1995 which carried through the first four months of 1996.
Revenues also increased during 1996 to $2,326,462, a 20% increase over 1995
revenues which, in turn, had increased 18% over 1994 revenues. The average
home sales price increased from $147 in 1994 to $155 in 1995 and $159 in the
current year. During 1995, settlement activity was slow during the first
quarter as a result of the low December 31, 1994 backlog, which translated
into a reduced number of units available for settlement. However, once net
new order pace improved, Pulte was able to achieve the 12% increase in
settled units over 1994.
Gross profit margins improved to 14.8% in 1996 from 14.5% in 1995. In 1994,
gross profit margins were 15.4%. During 1995, gross profit margins were
impacted by competitive market conditions and excess industry inventory
levels. The level of demand for new housing experienced during the latter
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 1996 as compared to 1995. In addition, the improvement in gross profit
margins for 1996 is due in part to Pulte'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 Pulte's markets, will challenge Pulte's
ability to achieve sequential or year-over-year improvements in gross profit
margins during 1997.
Selling, general and administrative expenses were $216,629 for the year ended
December 31, 1996, an 18% increase from the 1995 level. This increase was
leveraged over a 14% increase in the average number of active communities
during 1996 over 1995 and expenses associated with two acquisitions completed
during the second half of 1996, North Florida Classic Homes of Jacksonville,
Florida, effective July 1, 1996, and LeBlanc Homes of Rhode Island, effective
September 1, 1996. As a percentage of revenue, selling, general and
administrative expense was 9.3% in 1996, 9.5% in 1995 and 9.3% in 1994.
15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
($000's omitted)
Homebuilding Operations (continued):
Other income (expense), net, includes gains on land sales, the pre-tax
results of Builders' Supply & Lumber Co., Inc. (BSL) and other
homebuilding-related expenses. For 1995, this item also includes the
settlement of certain litigation for amounts in excess of the receivable
amounts previously included in the financial statements of the Company. Such
gain was not material to the financial condition or results of operations of
the Company.
Information related to interest in inventory is as follows:
Year Ended December 31,
------------------------------
1996 1995 1994
-------- -------- -------
Interest in inventory at beginning
of year............................. $ 12,261 $ 8,053 $ 5,546
Interest capitalized................... 17,801 17,314 10,361
Interest expensed...................... (17,216) (13,106) (7,854)
-------- -------- -------
Interest in inventory at end of year... $ 12,846 $ 12,261 $ 8,053
======== ======== =======
Financial Services Operations:
Mortgage Banking Operations:
The Company's mortgage banking operations are conducted by ICM Mortgage
Corporation (ICM). The following table presents selected production data for
ICM:
Years Ended December 31,
-----------------------------------
1996 1995 1994
--------- --------- -------
Total originations:
Loans............................. 10,709 11,234 15,218
========== ========== ==========
Principal......................... $1,278,000 $1,270,000 $1,608,000
========== ========== ==========
Funded originations:
Loans............................. 9,947 9,820 13,387
========== ========== ==========
Principal......................... $1,168,000 $1,084,000 $1,353,000
========== ========== ==========
Originations for Pulte customers:
Loans............................. 7,194 6,058 5,422
========== ========== ==========
Principal......................... $ 895,000 $ 731,000 $ 628,000
========== ========== ==========
Funded mortgage origination volume for 1996 increased 8% over 1995. This
follows a 20% decrease in similar originations during 1995 from 1994 levels.
However, ICM's continued emphasis on expanding in Pulte's existing and new
markets has resulted in a 22% increase in mortgage origination volume during
1996 for Pulte customers and an overall 43% increase in similar origination
volume since 1994. Pulte customers now represent over 72% of all funded
mortgages originated by ICM. This compares with 62% and 41% for 1995 and
1994, respectively.
On July 1, 1995, ICM adopted Statement of Financial Accounting Standards
(SFAS) No. 122, Accounting for Mortgage Servicing Rights. SFAS No. 122
requires a mortgage banking enterprise to recognize as separate assets the
servicing rights for mortgage loans regardless of the manner in which those
servicing rights are acquired. A mortgage banking enterprise that acquired
mortgage servicing rights through either the purchase or origination of
mortgage loans and sells or securitizes those loans with servicing rights
retained, must allocate the total cost of the mortgage loans to the mortgage
servicing rights and the loans (without the mortgage servicing rights) based
on their relative fair values. The effect of this allocation results in a
lower cost basis for the mortgage loan resulting in a larger gain when the
loan is sold.
16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
($000's omitted)
Financial Services Operations (continued):
Mortgage Banking Operations (continued):
During 1996, pricing and marketing gains increased $9,269 compared with 1995,
while 1995 saw an increase of $8,302 over 1994. The increase was due in part
to higher volume of servicing retained originations during 1996 as compared
with 1995, and higher market value of originated servicing rights, while the
1995 increase resulted from the adoption of SFAS No. 122 as discussed above.
During 1995 (prior to the adoption of SFAS No. 122) and 1994, ICM recorded
pre-tax gains on sales of its core mortgage servicing portfolio of $10,148
and $11,222, respectively. In addition, as part of its normal operations, ICM
recorded gains on sales of non-core mortgage servicing rights of $9,566 and
$21,271 for 1995 and 1994, 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 its normal operations on a three
to five month lag from the time of origination.
Servicing fee income for 1996 decreased to $926 from $1,431 in 1995 due to
the sale of the core mortgage servicing portfolio discussed above. Servicing
fee income decreased $5,024 during 1995 from 1994 primarily as a result of
the sales of core and non-core mortgage servicing rights discussed above.
Mortgage origination fees also decreased $1,092 or 24% during 1996 and $762
or 14% during 1995 due to a decrease in the amount of non-funded originations
compared with the previous years.
Net interest income decreased $816 during 1996 as compared with 1995, and by
$3,336 in 1995 as compared to 1994. These declines are primarily due to
dividends paid by ICM to its parent, Pulte, throughout 1996 and in the first
quarter of 1995.
At December 31, 1996, loan application backlog was $246,000 compared with
$334,000 at December 31, 1995 and $277,000 at December 31, 1994.
Other Financial Subsidiaries
PFCI's pre-tax operating income increased $6,824 during 1996 over the prior
year. This increase was primarily the result of gains on sales of collateral
which aggregated $10,309 during 1996 as compared to $4,003 in 1995. Pre-tax
operating income for 1995 increased $1,850 from 1994. This increase was due
primarily to lower net bond discount amortization expense in 1995 as a result
of adjustments during 1994 for bonds which were paid down faster than
anticipated, partially offset by lower gains on sales of collateral and
decreased net interest income.
Discontinued Operations:
Income from the Company's discontinued thrift operations for the years ended
December 31, 1996, 1995 and 1994 is summarized as follows:
Year Ended December 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
Income from discontinued thrift
operations............................ $ -- $ -- $ 4,695
Gain on sale of discontinued thrift
operations............................ 6,432 9,507 26,293
Tax benefit of net operating losses....... 110,000 -- 72,000
--------- --------- ---------
$ 116,432 $ 9,507 $ 102,988
========= ========= =========
17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
($000's omitted)
Discontinued Operations (continued):
During 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. During 1994, the Company
recognized a similar $72,000 tax benefit.
For the years ended December 31, 1996 and 1995, discontinued thrift
operations resulted in income of $6,432 (including income tax benefit of
$1,076) and $9,507 (net of income taxes of $157), respectively. Additional
pre-tax gains amounting to $4,000 at December 31, 1996, are being amortized
into income over the life of the related FSLIC Resolution Fund (FRF) note.
Income from discontinued operations in 1994 included operating results only
through March 31, 1994. Also during 1994, the Company recorded a gain on sale
of $26,293 (including income tax benefit of $50,365). Such gain included
results of thrift operations for the period from April 1, 1994, to December
31, 1994, which was a loss of $12,784 (including income tax benefit of
$18,353).
Corporate:
The following table presents corporate results of operations for the years
ended December 31, 1996, 1995 and 1994:
Year Ended December 31,
----------------------------
1996 1995 1994
-------- -------- --------
Net interest expense................... $ 6,055 $ 1,000 $ 1,235
Other corporate expenses, net.......... 14,754 15,210 9,962
-------- -------- --------
Loss before income taxes............... $ 20,809 $ 16,210 $ 11,197
======== ======== ========
The increased loss for 1996 as compared with 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, partially
offset by a decrease in the loss recognized from the Company's Mexico
operations primarily as a result of the stabilization of the Mexican Peso.
During 1996, the Company recorded a loss of $1,700 related to its Mexico
operations, as compared with losses of $5,800 and $2,000 in 1995 and 1994,
respectively. Included in such results is the Company's share of joint
venture foreign currency losses which amounted to $100, $2,300 and $2,000 for
the years ended December 31, 1996, 1995 and 1994, respectively.
Pulte conducts its Mexico homebuilding operations in the cities of Monterrey,
Juarez, Chihuahua, Nuevo Laredo, Reynosa, Matamoros and Mexico City 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 Monterrey venture closed 255
units during 1996. This compares with 651 units in 1995 and 313 units in
1994. The Company's net investment in the Monterrey venture approximated
$3,600 as of December 31, 1996. The Company intends to liquidate the
Monterrey assets in the normal course of business. During the fourth quarter
of 1996, the Company's Juarez joint venture closed 137 of its 160 units for
the year. 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 GM agreement provides for the construction of
approximately 6,000 homes for GM's employees over a three-year period with
its first unit settlements
18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
($000's omitted)
Corporate (continued):
expected to commence in the fourth quarter of 1997. The Sony agreement
provides for the construction of approximately 500 homes for Sony's employees
over a two-year period beginning in 1998. The Company's net investment in the
Juarez joint venture approximated $8,800 as of December 31, 1996. During the
second half of 1996, the Company's Mexico City joint venture initiated its
first project of 20 middle income housing units for which closings are
expected to commence in the second quarter of 1997. The Company's net
investment in the Mexico City joint venture approximated $700 as of December
31, 1996.
Effective for periods ended after October 1, 1996, the Company has remeasured
the financial statements of its foreign subsidiary and joint venture
investments from the original functional currency (Peso) to the Company's
reporting currency (U.S. Dollar) due to Mexico's highly inflationary economy.
Liquidity And Capital Resources:
Continuing Operations:
The Company's net cash used in operating activities increased from $55,754 in
1995 to $64,225 in 1996. This is principally due to an approximately $50,000
increase in inventory expenditures associated with the growth in the number
of active communities and an approximately $19,000 increase in other assets
associated with increases in inventories and accounts receivable of BSL,
offset by an approximately $14,000 increase in income from continuing
operations and an approximately $49,000 decrease in the amount of residential
mortgage loans owned by ICM. Net cash provided by investing activities
increased from $113,097 in 1995 to $207,582 in 1996 primarily as a result of
increased net proceeds from the sale of mortgage-backed and other
available-for-sale securities of PFCI. The Company's net cash from financing
activities decreased from a source of cash of $75,292 in 1995 to a use of cash
of $245,959 in 1996. This resulted from an approximately $74,000 increase in the
amount of PFCI's mortgage-backed bonds redeemed during 1996, reduced new
borrowings during 1996 primarily due to the issuance of $125,000 of unsecured
Senior Notes in the fourth quarter of 1995, and an approximately $88,000
increase in funds used for the repurchase of the Company's stock.
At December 31, 1996, the Company had cash and equivalents of $189,625 and
total indebtedness of $735,658. The Company's total indebtedness includes
$339,365 of unsecured senior notes, $22,405 of unsecured senior subordinated
debentures, other Pulte non-recourse and recourse debt of $29,405 and
$21,438, respectively, $123,605 of First Heights' deposits and advances,
$45,304 of mortgage-backed bonds payable for PFCI and $154,136 of notes and
drafts payable for ICM.
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 and equivalents, its $250,000
committed unsecured revolving credit facility, and other committed and
uncommitted credit lines, which at December 31, 1996, consisted of $10,000
and $250,000 related to Pulte and ICM operations, respectively. During 1997,
management anticipates that homebuilding and corporate working capital
requirements will be funded with internally generated funds and the
previously mentioned credit facilities. Additionally, 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.
19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
($000's omitted)
Liquidity And Capital Resources (continued):
Continuing Operations (continued):
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 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 December 31, 1996 amounted to
$250,000, an amount deemed adequate to cover foreseeable needs. There were
approximately $96,034 of borrowings outstanding under ICM's $250,000
arrangement at December 31, 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.
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. During 1996, the Company accelerated its repurchase program due to
the favorable market conditions. The following table summarizes the Company's
share repurchase initiative through December 31, 1996:
Authorization Share Repurchases
Year Ended December 31,
-------------------------------- --------------------------------
Date # of Shares 1996 1995 1994
------------ ----------- --------- --------- ---------
November 1994 1,000,000 334,432 542,068 123,500
March 1996 1,000,000 1,000,000 -- --
April 1996 1,000,000 1,000,000 -- --
July 1996 1,000,000 1,000,000 -- --
August 1996 1,000,000 473,500 -- --
--------- --------- --------- ---------
5,000,000 3,807,932 542,068 123,500
========= ========= ========= =========
Reacquisition price $ 99,561 $ 11,707 $ 2,404
========= ========= =========
Share repurchases during 1996 occurred at prices which on average represented
73% of the December 31, 1996, book value per share of the Company's common
stock. Additionally, share repurchases during 1996 had the effect of
increasing per share net income from continuing operations by $ .14 after
taking into consideration the effect of lost investment earnings on cash and
equivalents used to facilitate the share repurchases.
Discontinued Operations:
Since its acquisition of First Heights, the Company's income taxes have been
significantly impacted by its thrift operations, principally because payments
received from the 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 negotiating with the FDIC and is
involved in litigation with the FDIC. Although there is no certainty as to
the time of resolution of these matters, the Company believes that they might
be resolved within the next twelve months. At December 31, 1996, the Company
had a remaining investment in First Heights of approximately $29,800.
20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PULTE CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
($000's omitted, except share data)
ASSETS
1996 1995
--------- ----------
Cash and equivalents.................................. $ 189,625 $ 292,227
Unfunded settlements.................................. 73,896 63,838
House and land inventories............................ 1,017,262 859,735
Mortgage-backed and related securities................ 47,113 254,170
Residential mortgage loans and other
securities available-for-sale....................... 170,443 178,302
Other assets.......................................... 215,040 167,278
Deferred income taxes................................. 127,686 75,348
Discontinued operations............................... 144,076 156,617
---------- ----------
$1,985,141 $2,047,515
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities,
including book overdrafts of $85,827 and
$60,976 in 1996 and 1995, respectively........... $ 439,578 $ 381,407
Collateralized short-term debt, recourse
solely to applicable subsidiary assets........... 154,136 140,578
Mortgage-backed bonds, recourse solely to
applicable subsidiary assets..................... 45,304 225,272
Income taxes....................................... 12,930 44,441
Subordinated debentures and senior notes........... 391,175 363,957
Discontinued operations............................ 112,745 130,857
---------- ----------
Total liabilities................................ 1,155,868 1,286,512
---------- ----------
Shareholders' Equity:
Preferred stock, $.01 par value; 25,000,000
shares authorized
Common stock, $.01 par value; 100,000,000
shares authorized, 23,261,655 and
27,025,087 shares issued and outstanding at
December 31, 1996 and 1995, respectively ........ 233 270
Additional paid-in capital......................... 57,516 65,934
Unrealized gains on securities available-for-sale,
net of income taxes of $982 and $5,482 in 1996
and 1995, respectively........................... 1,474 8,223
Retained earnings.................................. 770,050 686,576
---------- ----------
Total shareholders' equity....................... 829,273 761,003
---------- ----------
$1,985,141 $2,047,515
========== ==========
See accompanying notes.
21
PULTE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1996, 1995 and 1994
($000's omitted, except per share data)
1996 1995 1994
--------- ---------- ----------
Revenues:
Homebuilding.................................. $2,326,462 $1,935,703 $1,637,306
Mortgage banking and financing:
Interest and other.......................... 50,197 54,391 75,306
Gain on sale of servicing................... -- 19,714 32,493
Corporate, principally interest............... 7,624 19,332 10,808
---------- ---------- ----------
Total revenues.................. 2,384,283 2,029,140 1,755,913
---------- ---------- ----------
Expenses:
Homebuilding, principally cost of sales...... 2,217,880 1,855,905 1,544,090
Mortgage banking and financing,
principally interest....................... 35,507 55,669 86,230
Corporate, net............................... 28,433 35,542 22,005
---------- ---------- ----------
Total expenses................. 2,281,820 1,947,116 1,652,325
---------- ---------- ----------
Income from continuing operations before
income taxes and extraordinary item......... 102,463 82,024 103,588
Income taxes .................................... 39,252 33,185 41,219
---------- ---------- ----------
Income from continuing operations before
extraordinary item............................. 63,211 48,839 62,369
Income from discontinued operations.............. 116,432 9,507 102,988
---------- ---------- ----------
Income before extraordinary item................. 179,643 58,346 165,357
Extraordinary loss from early extinguishment
of debt, net of tax benefit of $1,654........ -- -- (2,589)
---------- ---------- ----------
Net income....................................... $ 179,643 $ 58,346 $ 162,768
========== ========== ==========
Per share data:
Primary:
Income from continuing operations before
extraordinary item $ 2.52 $ 1.79 $ 2.24
Income from discontinued operations......... 4.65 .34 3.70
---------- ---------- ----------
Income before extraordinary item............ 7.17 2.13 5.94
Extraordinary item.......................... -- -- (.09)
---------- ---------- ----------
Net income.................................. $ 7.17 $ 2.13 $ 5.85
========== ========== ==========
Cash dividends declared....................... $ .24 $ .24 $ .24
========== ========== ==========
Weighted-average common shares outstanding -
primary..................................... 25,070 27,358 27,854
========== ========== ==========
Note: Fully-diluted earnings per share is not presented as it does not
result in 3% dilution of primary earnings per share.
See accompanying notes.
22
PULTE CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended December 31, 1996, 1995 and 1994
($000's omitted)
Additional
Common Paid-in Unrealized Retained
Stock Capital Gains Earnings Total
----- ---------- ---------- -------- -----
Shareholders' Equity, January 1, 1994..... $ 275 $ 77,471 $ -- $ 478,568 $ 556,314
Exercise of stock options ................ 1 527 -- -- 528
Cash dividends declared .................. -- -- -- (6,617) (6,617)
Stock repurchases ........................ (1) (2,403) -- -- (2,404)
Net income ............................... -- -- -- 162,768 162,768
----- -------- ------- --------- ---------
Shareholders' Equity, December 31, 1994... 275 75,595 -- 634,719 710,589
Exercise of stock options ................ 1 2,040 -- -- 2,041
Cash dividends declared .................. -- -- -- (6,489) (6,489)
Change in unrealized gains on securities
available-for-sale, net of income
taxes of $5,482 ........................ -- -- 8,223 -- 8,223
Stock repurchases ........................ (6) (11,701) -- -- (11,707)
Net income ............................... -- -- -- 58,346 58,346
----- -------- ------- --------- ---------
Shareholders' Equity, December 31, 1995... 270 65,934 8,223 686,576 761,003
Exercise of stock options ................ 1 894 -- -- 895
Cash dividends declared .................. -- -- -- (5,958) (5,958)
Change in unrealized gains on securities
available-for-sale, net of income
taxes of $(4,500)....................... -- -- (6,749) -- (6,749)
Stock repurchases ........................ (38) (9,312) -- (90,211) (99,561)
Net income ............................... -- -- -- 179,643 179,643
----- -------- ------- --------- ---------
Shareholders' Equity, December 31, 1996... $ 233 $ 57,516 $ 1,474 $ 770,050 $ 829,273
===== ======== ======= ========= =========
See accompanying notes.
23
PULTE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1996, 1995 and 1994
($000's omitted)
1996 1995 1994
--------- --------- ---------
Continuing operations:
Cash flows from operating activities:
Income from continuing operations .................... $ 63,211 $ 48,839 $ 62,369
Adjustments to reconcile income from continuing
operations to net cash flows (used in)
provided by operating activities:
Amortization, depreciation and other ............... 6,747 6,338 13,234
Deferred income taxes .............................. (9,517) (11,070) (9,575)
Gain on sale of securities ......................... (11,069) (4,003) (9,369)
Increase (decrease) in cash due to:
Inventories ...................................... (157,527) (107,366) (186,904)
Residential mortgage loans available-for-sale .... 7,859 (40,928) 130,780
Other assets ..................................... (64,626) (35,627) (33,038)
Accounts payable and accrued liabilities ......... 59,158 49,939 86,279
Income taxes ..................................... 41,539 38,124 45,554
--------- --------- ---------
Net cash (used in) provided by operating activities ..... (64,225) (55,754) 99,330
--------- --------- ---------
Cash flows from investing activities:
Proceeds from exchange of securities held-
to-maturity ........................................ 12,282 14,114 4,794
Proceeds from sale of securities available-for-sale .. 175,686 48,370 53,863
Principal payments on mortgage-backed securities ..... 19,892 47,667 123,783
Decrease in funds held by trustee .................... 4,348 1,911 21,077
Other, net ........................................... (4,626) 1,035 (17,991)
--------- --------- ---------
Net cash provided by investing activities ............... 207,582 113,097 185,526
--------- --------- ---------
Cash flows from financing activities:
Payment of long-term debt and bonds .................. (181,841) (107,543) (190,496)
Proceeds from borrowings ............................. 40,709 200,163 114,656
Repayment of borrowings .............................. -- (470) (127,313)
Stock repurchases .................................... (99,561) (11,707) (2,404)
Dividends paid ....................................... (5,958) (6,489) (6,617)
Other, net ........................................... 692 1,338 75
--------- --------- ---------
Net cash (used in) provided by financing activities ..... (245,959) 75,292 (212,099)
--------- --------- ---------
Net (decrease) increase in cash and
equivalents-continuing operations .................... $(102,602) $ 132,635 $ 72,757
--------- --------- ---------
See accompanying notes.
24
PULTE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
For the years ended December 31, 1996, 1995 and 1994
($000's omitted)
1996 1995 1994
-------- --------- ----------
Discontinued operations:
Cash flows from operating activities:
Income from discontinued operations .............. $ 116,432 $ 9,507 $ 102,988
Change in deferred income taxes .................. (38,321) 18,280 (76,283)
Change in trading account and other securities ... -- -- (180,761)
Change in income taxes ........................... (72,755) (18,123) (46,082)
Other changes, net ............................... (14,218) 7,742 23,503
Cash flows from investing activities:
Purchase of securities available-for-sale ........ (42,209) (70,052) (536,838)
Principal payments of mortgage-backed securities.. 43,735 31,857 94,709
Net proceeds from sale of investments and loans .. 4,514 -- --
Decrease in Covered Assets and FSLIC Resolution
Fund (FRF) receivables ......................... 37,438 35,929 160,157
Decrease (increase) in loans receivable .......... (419) -- 16,292
Net proceeds from sale of bank branches .......... -- -- 1,092,614
Cash flows from financing activities:
Increase (decrease) in deposit liabilities ....... 3,404 (128,542) --
Repayment of borrowings .......................... (31,560) (31,560) (319,076)
Increase (decrease) in FHLB advances ............. (6,400) 26,000 (231,509)
--------- --------- ----------
Net (decrease) increase in cash and equivalents-
discontinued operations .......................... (359) (118,962) 99,714
--------- --------- ----------
Net (decrease) increase in cash and equivalents ..... (102,961) 13,673 172,471
Cash and equivalents at beginning of year ........... 295,163 281,490 109,019
--------- --------- ----------
Cash and equivalents at end of year ................. $ 192,202 $ 295,163 $ 281,490
========= ========= ==========
Cash - continuing operations ........................ $ 189,625 $ 292,227 $ 159,592
Cash - discontinued operations ...................... 2,577 2,936 121,898
--------- --------- ----------
$ 192,202 $ 295,163 $ 281,490
========= ========= ==========
Supplemental disclosure of cash flow information-
cash paid during the year for:
Interest, net of amount capitalized:
Continuing operations ........................ $ 25,312 $ 27,861 $ 34,352
Discontinued operations ...................... 2,279 11,728 64,567
--------- --------- ----------
$ 27,591 $ 39,589 $ 98,919
========= ========= ==========
Income taxes ................................... $ 7,152 $ 6,099 $ 5,240
========= ========= ==========
See accompanying notes.
25
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000's omitted)
1. Basis of presentation and segment information
Basis of presentation
The 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 3). 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 Company's financial reporting segments consist of Homebuilding
(Pulte), Financial Services (Mortgage Banking and Financing Operations)
and Corporate. The Company's homebuilding operations comprise the most
substantial part of its business, with over 90% of consolidated revenues
contributed by Pulte's homebuilding divisions and subsidiaries. ICM's
principal function is providing mortgage financing services for both Pulte
customers and the general public. PFCI, through its subsidiaries,
previously engaged in the acquisition of mortgages and mortgage-backed
securities financed by the issuance of long-term bonds which are secured
by such mortgage loans and mortgage-backed securities. Corporate is
comprised of the Company and PDCI, both of which are holding companies.
Its primary purpose is to support the operations of the Company's
subsidiaries as the internal source of financing and by implementing and
nurturing to maturity strategic initiatives centered around new business
development and improving operating efficiencies.
Certain 1995 and 1994 classifications have been changed to conform with
the 1996 presentation.
26
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
Segment information
Homebuilding:
Homebuilding operations include the homebuilding divisions and
subsidiaries of Pulte. These operations consist principally of the
construction and sale of detached and attached single-family residential
homes in 41 markets within the following geographic areas:
Pulte Home North - Delaware, Maryland, Massachusetts, New Jersey,
Pennsylvania, Rhode Island, Virginia
Pulte Home South - Georgia, Florida, North Carolina, South Carolina,
Puerto Rico
Pulte Home Central - Illinois, Indiana, Kansas, Michigan, Minnesota,
Missouri, Ohio, Texas, Wisconsin
Pulte Home West - Arizona, California, Colorado, Nevada, Utah
PULTE HOME CORPORATION
STATEMENTS OF OPERATIONS
For the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
--------- ---------- ---------
Revenues:
Sales (settlements) ............................ $2,326,462 $1,935,703 $1,637,306
---------- ---------- ----------
Costs and expenses:
Cost of sales .................................. 1,982,385 1,654,952 1,385,204
Selling, general and administrative expenses ... 216,629 184,203 153,007
Interest (A) ................................... 17,216 13,106 7,854
Other (income) expense, net .................... 1,650 3,644 (1,975)
---------- ---------- ----------
Total costs and expenses ......................... 2,217,880 1,855,905 1,544,090
---------- ---------- ----------
Income before income taxes and
extraordinary item.............................. $ 108,582 $ 79,798 $ 93,216
========== ========== ==========
Extraordinary loss from early extinguishment
of debt......................................... $ -- $ -- $ (2,070)
========== ========== ==========
Note (A): The Company capitalizes interest cost into homebuilding
inventories and charges the interest to homebuilding interest
expense when the related inventories are closed.
27
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
PULTE HOME CORPORATION
BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
1996 1995
---------- ----------
Current assets:
Cash and equivalents ........................ $ 71,599 $ 71,012
Unfunded settlements ........................ 73,896 63,838
Inventories:
Homes under construction .................. 285,720 254,390
Models .................................... 31,321 29,550
Land under development and improved lots .. 700,221 575,795
---------- ----------
Total inventories ........................... 1,017,262 859,735
Other current assets ........................ 101,512 66,700
---------- ----------
Total current assets .................... 1,264,269 1,061,285
Investment in unconsolidated mortgage banking
subsidiary* ................................. 23,425 42,065
Land held for sale and future development ..... 37,655 36,980
Other assets, net ............................. 39,804 25,823
---------- ----------
$1,365,153 $1,166,153
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Notes and land contracts payable, principally
limited recourse ........................ $ 21,438 $ 33,159
Accounts payable ............................ 195,403 166,463
Accrued liabilities ......................... 140,639 101,368
Due affiliates* ............................. 123,451 120,012
---------- ----------
Total current liabilities ................ 480,931 421,002
Long-term debt ................................ 51,810 24,677
---------- ----------
Total liabilities ............................. 532,741 445,679
Shareholder's equity* ......................... 832,412 720,474
---------- ----------
$1,365,153 $1,166,153
========== ==========
* Certain intersegment transactions and balances are eliminated in
consolidation and have no effect on consolidated earnings or equity.
28
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
Mortgage Banking:
ICM, a wholly-owned subsidiary of Pulte, is a mortgage banker which
arranges financing through the origination of mortgages to both Pulte
homebuyers and the general public. It operates generally in the same
markets and geographic areas in which Pulte's homebuilding divisions are
located. ICM's servicing portfolio aggregated $394,000 and $368,000 at
December 31, 1996 and 1995, respectively.
ICM MORTGAGE CORPORATION
STATEMENTS OF OPERATIONS
For the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
-------- -------- -------
Revenues:
Mortgage servicing and origination fees .. $ 4,450 $ 6,047 $11,833
Net gain from sale of mortgages .......... 18,312 9,318 1,016
Interest and other ....................... 8,333 7,845 10,823
Earnings from equity investment .......... 225 -- --
Net gain from sale of servicing rights ... -- 19,714 32,493
-------- -------- -------
Total revenues ........................ 31,320 42,924 56,165
-------- -------- -------
Expenses:
General and administrative ............... 22,693 25,112 32,798
Foreclosure related loss provisions
(reversals) ............................ (100) (180) 750
Interest ................................. 5,367 4,062 3,704
-------- -------- -------
Total expenses ........................ 27,960 28,994 37,252
-------- -------- -------
Income before income taxes ................. $ 3,360 $ 13,930 $18,913
======== ======== =======
29
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
ICM MORTGAGE CORPORATION
BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
1996 1995
--------- --------
Current assets:
Cash and equivalents ................................. $ 1,469 $ 244
Residential mortgage loans available-for-sale ........ 170,443 178,302
Foreclosure related assets, net ...................... 473 425
Capitalized servicing rights ......................... 6,122 4,913
Receivables .......................................... 4,904 9,170
-------- --------
Total current assets ............................... 183,411 193,054
Other assets, net ...................................... 3,780 3,636
-------- --------
$187,191 $196,690
======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Notes and drafts payable to banks .................... $154,136 $140,560
Accounts payable and accrued liabilities ............. 9,522 14,047
Current portion of long-term financing obligations.... 98 4
-------- --------
Total current liabilities .......................... 163,756 154,611
Long-term financing obligations ........................ 10 14
-------- --------
Total liabilities ...................................... 163,766 154,625
Shareholder's equity* .................................. 23,425 42,065
-------- --------
$187,191 $196,690
======== ========
* Certain intersegment transactions and balances are eliminated in
consolidation and have no effect on consolidated earnings or equity.
30
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
Financing:
The Company's financing operations are conducted by limited purpose
subsidiaries of PFCI. PFCI's 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 December 31, 1996,
one bond series with a principal amount of $45,304 was outstanding.
It is anticipated that this bond series and the related collateral
will be sold by the middle of 1997.
PULTE FINANCIAL COMPANIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
-----------------------------
Revenues:
Interest, including amortization of net mortgage
discounts ......................................... $ 8,568 $ 27,178 $ 42,264
Gain on sale of mortgage-backed securities and
other ............................................. 10,309 4,003 9,370
-------- -------- --------
Total revenues ................................... 18,877 31,181 51,634
-------- -------- --------
Expenses:
Interest, including amortization of debt
discounts and issue costs ......................... 8,256 26,740 48,726
Foreclosure related loss reversals .................. (1,078) (404) (244)
General and administrative .......................... 369 339 496
-------- -------- --------
Total expenses ................................... 7,547 26,675 48,978
-------- -------- --------
Income before income taxes and extraordinary item ..... $ 11,330 $ 4,506 $ 2,656
======== ======== ========
Extraordinary loss from early extinguishment of debt .. $ -- $ -- $ (2,173)
======== ======== ========
31
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
PULTE FINANCIAL COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
1996 1995
-------- --------
Cash and equivalents ........................ $ 2 $ 25
Funds held by trustee ....................... 994 5,342
Mortgage-backed securities .................. 47,113 241,079
Mortgage loans, net ......................... -- 13,091
Accrued interest receivable and other ....... 1,856 2,038
-------- --------
$ 49,965 $261,575
======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Bonds payable* ............................ $ 45,304 $225,272
Accrued liabilities, primarily interest ... 1,771 8,894
-------- --------
Total liabilities ........................... 47,075 234,166
Shareholder's equity** ...................... 2,890 27,409
-------- --------
$ 49,965 $261,575
======== ========
* Bonds payable are the obligations of the applicable PFCI issuer
subsidiary; they are neither the obligations of, nor guaranteed by, the
Company, PDCI, Pulte, ICM or PFCI. (See Note 6.)
** Certain intersegment transactions and balances are eliminated in
consolidation and have no effect on consolidated earnings or equity.
2. Significant accounting policies
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those
estimates.
Cash and equivalents
For purposes of the Statements of Cash Flows, commercial paper and time
deposits with a maturity of three months or less when acquired are
classified as cash equivalents.
Stock based compensation
The Company grants stock options to key employees for a fixed number of
shares with an exercise price not less than the fair value of the shares
at the date of grant. The Company accounts for the stock option grants
in accordance with Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees. No compensation expense is
recognized because all stock options granted have exercise prices equal
to the market value of the Company's stock on the date of the grant. The
pro forma disclosures required by Statement of Financial Accounting
Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, are
included in Note 7.
32
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
Foreign investment
The Company has several equity investments in Mexico. The Company accounts
for such investments using the equity method. Effective for periods ended
after October 1, 1996, the Company has remeasured the financial statements
of its foreign equity investments from the original functional currency
(Peso) to the Company's reporting currency (U.S. Dollar) due to Mexico's
highly inflationary economy. Accordingly, the Company translates the
assets, liabilities and equity of its foreign equity investments at the
rates of exchange in effect at each reporting period. Revenues and
expenses are translated using monthly average exchange rates. Gains and
losses from (1) translation of the financial statements of the Company's
foreign equity investments and (2) foreign currency transactions are
included in expense in the accompanying statements of operations. Foreign
currency translation and transaction losses aggregated $100, $2,300 and
$2,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
During 1996, the Company recorded a loss of $1,700 related to its Mexico
operations, as compared with losses of $5,800 and $2,000 in 1995 and 1994,
respectively. The Company's aggregate net investment in Mexico is
approximately $13,100 as of December 31, 1996.
Income per share
Income per share has been computed using the weighted average number of
common and common equivalent shares outstanding. Common equivalent shares
are determined using the treasury stock method. Fully-diluted earnings per
share is not presented as it does not result in 3% dilution of primary
earnings per share.
Fair values of financial instruments
The estimated fair values of financial instruments were determined by
management using available market information and appropriate valuation
methodologies. Considerable judgment is necessary to interpret market data
and develop estimated fair value. Accordingly, the estimates presented are
not necessarily indicative of the amounts the Company could realize on
disposition of the financial instruments. The use of different market
assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts.
The carrying amounts of cash and cash equivalents approximate their fair
values due to their short-term nature. The carrying amounts of
mortgage-backed bonds approximate their fair values since it is anticipated
that the bonds will be redeemed during the middle of 1997.
The fair value of investment, mortgage-backed and related securities are
based on quoted market prices, when available. If quoted market prices are
not available, fair values are based on quoted market prices of comparable
instruments and other valuation techniques.
The fair values of subordinated debentures and senior notes are based on
quoted market prices, when available. If quoted market prices are not
available, fair values are based on quoted market prices of similar
issues.
Disclosures about fair value of financial instruments are based on
pertinent information available to management as of December 31, 1996.
Although management is not aware of any factors that would significantly
affect the reasonableness of the fair value amounts, such amounts have not
been comprehensively revalued for purposes of these financial statements
since that date and current estimates of fair value may differ
significantly from the amounts presented herein.
Advertising Cost
The Company expenses advertising costs as they are incurred. For the years
ended December 31, 1996, 1995 and 1994, the Company incurred advertising
costs of approximately $21,900, $18,900 and $15,900, respectively.
33
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
Employee benefits
The Company maintains the Pulte Corporation Savings and Retirement Plan
401(k) (the "Plan") which covers substantially all of the Company's
employees. Company contributions to the Plan are expensed as paid and are
based on the employees' years of service. The total Company contributions
pursuant to the Plan were approximately $2,300, $2,100 and $1,400 for the
years ended December 31, 1996, 1995 and 1994, respectively.
Long-lived assets
In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS
No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, which requires impairment losses to
be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount. SFAS
No. 121 also addresses the accounting for long-lived assets that are
expected to be disposed of. Adoption of the provisions of SFAS No. 121
during the first quarter of 1996 did not have a material effect on the
Company's financial position or results of operations for the year ended
December 31, 1996.
Homebuilding:
Allowance for warranties
Home purchasers are provided with warranties against certain building
defects. Estimated warranty cost is provided in the period in which the
sale is recorded.
Start-up costs
Costs and expenses associated with entry into new homebuilding markets and
opening new subdivisions in existing markets are expensed when incurred.
Revenues
Homebuilding revenues are recorded when the sales of homes are completed
and ownership has transferred to the customer. Unfunded settlements are
deposits in transit on homes for which the sale has been completed.
Inventories
Finished inventories are stated at the lower of accumulated cost or fair
value less costs to sell. Inventories under development or held for
development are stated at accumulated cost, unless such cost would not be
recovered from the cash flows generated by future disposition. In this
instance, such inventories are measured at fair value.
Sold units are expensed on a specific identification basis as cost of
sales. Included in inventories is related interest and property taxes. The
Company capitalized interest in the amount of $17,801, $17,314 and $10,361
and expensed to homebuilding interest expense $17,216, $13,106 and $7,854
in 1996, 1995 and 1994, respectively.
34
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
Mortgage Banking:
Mortgage servicing rights
In May 1995, the FASB issued SFAS No. 122, Accounting for Mortgage
Servicing Rights. Effective July 1, 1995, the Company adopted SFAS No. 122
with, as required, prospective application thereof. SFAS No. 122 amended
SFAS No. 65, Accounting for Certain Mortgage Banking Activities, to
require that a portion of the costs of originating a mortgage loan be
allocated to the mortgage servicing rights based on its fair value
relative to the mortgage loan, as a whole. Accordingly, under SFAS No.
122, the capitalized origination costs of the loan are reduced by the
amount allocated to the mortgage servicing rights.
The Company conducts its mortgage banking activities through ICM, whose
primary business consists of providing residential mortgage loan
originations and related services. Under SFAS No. 65, the costs associated
with originating mortgage servicing rights were not recognized as an
asset. These costs were allocated to the related mortgage loan. As a
result, the gain on sale of originated mortgage servicing rights
approximated the net sales price. The impact of adopting SFAS No. 122 was
an increase in pre-tax income of $2,363 for the year ended December 31,
1995. Since SFAS No. 122 prohibits retroactive application, historical
accounting results have not been restated and, accordingly, the accounting
results are not comparable to respective prior periods.
The consolidated balance sheets include the following amounts of
capitalized mortgage servicing rights from originated mortgage loans as of
December 31, 1996 and 1995:
1996 1995
------ ------
Conventional fixed rate loans ...... $4,039 $3,087
Government fixed rate loans ........ 1,059 754
Government variable rate loans ..... 1,024 1,072
------ ------
$6,122 $4,913
====== ======
Mortgage loans
Residential mortgage loans available-for-sale are stated at the lower of
cost or aggregate market value. Unamortized net mortgage discounts totaled
$1,614 and $1,501 at December 31, 1996 and 1995, respectively. Gains and
losses from the sale of mortgage loans are recognized when the loans are
sold. ICM hedges its residential mortgage loans available-for-sale by
commitments in the cash forward market (see Note 11). Gains and losses
from closed commitments and futures contracts are matched against the
related gains and losses on the sale of mortgage loans.
Revenues
Mortgage servicing fees represent fees earned for servicing loans for
various investors, including affiliates. Servicing fees are based on a
contractual percentage of the outstanding principal balance and are
credited to income when the related mortgage payments are received. Loan
origination fees, commitment fees and certain direct loan origination
costs are deferred as an adjustment to the cost of the related mortgage
loan until such loan is sold.
35
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
Financing:
Mortgage-backed securities
PFCI adopted SFAS No. 115, Accounting for Certain Investments in Debt and
Equity Securities, on January 1, 1994. Based on prepayment experience of
certain subsidiaries since that time, PFCI elected to classify its
portfolio of Government National Mortgage Association (GNMA) securities as
available-for-sale beginning September 30, 1995. As available-for-sale,
such securities are reported at fair value with unrealized gains and
losses excluded from earnings and reported in a separate component of
shareholders' equity, net of income taxes.
The rates used to amortize net mortgage discounts, debt discounts and debt
issue costs into operations are based on management's estimates of the
remaining lives of the mortgage-backed securities, mortgage loans and
indebtedness. These estimates are periodically reviewed and the rates
adjusted, as necessary. During the fourth quarter of 1994, PFCI wrote off
all remaining mortgage and debt discounts and issue costs (amounting to
$5,483) due to changes in estimates of amortization speeds as a result of
mortgage prepayments.
3. Discontinued operations
In September 1988, substantially all of the assets, business operations
and certain liabilities of five Texas-based insolvent thrifts were
acquired by First Heights. Assistance in connection with each acquisition
was provided by the Federal Savings and Loan Insurance Corporation (FSLIC)
pursuant to an Assistance Agreement.
FSLIC issued promissory notes representing the estimated negative net
worth of the acquired associations at the date of acquisition, the
balances of which, including accrued interest, were $131,579 and $160,127
at December 31, 1996 and 1995, respectively. The notes had a weighted
average interest rate of 5.8% and 6.0% at December 31, 1996 and 1995,
respectively. The notes are due in September 1998, and bear interest at
rates indexed to the Texas Cost of Funds plus a spread. The notes are
subject to annual prepayments, which are limited to 10% of the total
original note balances. The FSLIC Resolution Fund (FRF) exercised its right
to prepay the notes by $31,560 in each year since 1992. The FRF is entitled
to payments of up to 25% of certain tax benefits which may be derived as a
result of the assistance transactions.
During 1994, the Company announced its strategy to exit the thrift
industry and increase its focus on housing and related mortgage banking.
First Heights sold substantially all of its bank branches and related
liabilities (primarily deposits), plus certain other assets. One remaining
retail branch office continues to operate in Houston. The sale was
completed during the fourth quarter of 1994. Accordingly, such operations
are being presented as discontinued. Included in the sale were assets,
primarily consumer and commercial loans, of $116,886 and liabilities,
primarily deposits, of $1,205,047. To provide liquidity for the sale,
First Heights liquidated its investment portfolios and its single-family
residential loan portfolio and, as provided in the Assistance Agreement,
entered into a Liquidity Assistance Note (LAN) with the Federal Deposit
Insurance Corporation (FDIC) acting in its capacity as manager of FRF. The
LAN is collateralized by the FRF notes and bears interest at a rate
indexed to the Texas Cost of Funds plus a spread. The LAN matures in
September 1998. As discussed in Note 10, the Company is involved in
litigation with the FDIC and as part of this litigation, the parties have
asserted various claims with respect to obligations under promissory notes
issued by each of the parties in connection with the thrift acquisition
and activities.
36
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
Income from the Company's discontinued thrift operations for the years
ended December 31, 1996, 1995 and 1994 is summarized as follows:
Year Ended December 31,
------------------------------
1996 1995 1994
-------- -------- --------
Income from discontinued thrift
operations ............................... $ -- $ -- $ 4,695
Gain on sale of discontinued thrift
operations ............................... 6,432 9,507 26,293
Tax benefit of net operating losses ....... 110,000 -- 72,000
-------- -------- --------
$116,432 $ 9,507 $102,988
======== ======== ========
Revenues of discontinued operations were $12,164, $20,919 and $92,776 for
the years ended December 31, 1996, 1995 and 1994, respectively.
During 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. During
1994, the Company recognized a similar $72,000 tax benefit.
For the years ended December 31, 1996 and 1995, discontinued thrift
operations resulted in income of $6,432 (including income tax benefit of
$1,076) and $9,507 (net of income taxes of $157), respectively. Additional
pre-tax gains amounting to $4,000 at December 31, 1996, are being
amortized into income over the life of the related FRF note. Income from
discontinued operations in 1994 included operating results only through
March 31, 1994. Also during 1994, the Company recorded a gain on sale of
$26,293 (including income tax benefit of $50,365). Such gain included
results of thrift operations for the period from April 1, 1994, to
December 31, 1994, which was a loss of $12,784 (including income tax
benefit of $18,353).
Assets and liabilities of discontinued operations were as follows:
At December 31,
-------------------
1996 1995
-------- --------
Assets:
Cash and equivalents ..................................... $ 2,577 $ 2,936
Mortgage-backed and related securities ................... 45,601 51,796
Accounts and notes receivable-FRF, less LAN of
$63,880 and $95,440 at December 31, 1996 and 1995,
respectively ........................................... 95,120 99,854
Assets covered by FRF .................................... 261 1,407
Other assets ............................................. 517 624
-------- --------
$144,076 $156,617
======== ========
Liabilities:
Deposits, with interest rates ranging from 4% to 6%
in 1996 ................................................ $ 40,125 $ 36,721
Accrued expenses and other liabilities ................... 49,018 59,261
FHLB advances ............................................ 19,600 26,000
Excess of acquired net assets over cost .................. 4,002 8,875
-------- --------
$112,745 $130,857
======== ========
The fair value of financial instruments approximates carrying value at
December 31, 1996 and 1995.
37
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
4. Mortgage-backed and related securities
The carrying values and estimated fair values of mortgage-backed and
related securities are summarized as follows:
At December 31,
--------------------
1996 1995
-------- --------
FNMA and GNMA certificates, net................... $ 47,113 $241,079
Other securities, principally mortgage loans...... -- 13,091
-------- --------
$ 47,113 $254,170
======== ========
Estimated fair value.............................. $ 47,113 $254,170
======== ========
5. Short-term credit arrangements
Short-term financing for the Company on an operating segment basis is as
follows:
Corporate/Homebuilding
At December 31, 1996, the Company, PDCI and Pulte jointly have a $250,000
unsecured revolving bank credit arrangement under which a variety of
interest rates are available to the Company. The credit arrangement
expires January 5, 2000. The credit arrangement contains customary
covenants, none of which significantly restrict the operations of the
Company. The Company also has a $10,000 uncommitted bank credit
arrangement. The Company did not borrow under its credit arrangements in
1996 or 1994. During 1995, the maximum amount outstanding at the end of
any month was $10,000 and the average monthly indebtedness was $1,177.
Additionally, during 1995, interest rates ranged from 6.26% to 9%, with a
weighted-average daily interest rate of 6.68%.
Mortgage Banking
Notes and drafts payable to banks (collateralized short-term debt) are
secured by residential mortgage loans available-for-sale. The carrying
amounts of such borrowings approximate fair values.
At December 31, 1996, ICM had committed bank credit lines of $150,000 and
discretionary credit lines of $100,000. The bank credit agreements require
ICM to pay a fee for the committed credit lines. During 1996, 1995 and
1994, ICM provided compensating balances, in the form of custodial funds,
in order to further reduce interest rates. The bank credit agreements each
contain certain restrictions, including the maintenance of levels of
equity. Under the most restrictive of the agreements, ICM is required to
maintain a minimum tangible net worth of $15,000.
The following aggregate borrowing information includes advances from
affiliates:
1996 1995 1994
-------- -------- --------
Unused credit lines at year-end.................... $153,966 $244,543 $417,272
Maximum amount outstanding at the end of any month. $121,034 $140,457 $142,973
Average monthly indebtedness....................... $ 93,881 $ 91,653 $114,668
Range of interest rates during the year............ .0625 to .425 to .25 to
7.68% 9.00% 7.30%
Weighted average daily interest rate............... 5.97% 7.10% 4.50%
Weighted average rate at year-end.................. 6.25% 6.30% 7.20%
38
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
6. Long-term debt
Long-term debt is summarized as follows:
At December 31,
-------------------
1996 1995
-------- --------
Corporate
7% unsecured Senior Notes, issued by Pulte
Corporation, due 2003, not redeemable prior to
maturity, guaranteed on a senior basis by Pulte
and certain wholly-owned subsidiaries of Pulte.
See Note 12.............................................. $ 99,720 $ 99,680
8.375% unsecured Senior Notes, issued by Pulte
Corporation, due 2004, not redeemable prior to
maturity, guaranteed on a senior basis by Pulte
and certain wholly-owned subsidiaries of Pulte.
See Note 12.............................................. 114,739 114,705
7.3% unsecured Senior Notes, issued by Pulte
Corporation, due 2005, not redeemable prior to
maturity, guaranteed on a senior basis by Pulte
and certain wholly-owned subsidiaries of Pulte.
See Note 12............................................. 124,906 124,895
Homebuilding
10.125% unsecured senior subordinated debentures,
issued by Pulte, due 1999............................... 22,405 22,405
Other non-recourse debt, minimum annual principal
payments required, maturing at various times
through 2002, interest rates ranging from 5% to 16%... 29,405 2,272
-------- --------
$391,175 $363,957
======== ========
Estimated fair value..................................... $393,874 $380,184
======== ========
In August 1994, Pulte purchased in open market transactions $26,845 of its
10.125% unsecured senior subordinated debentures which resulted in a
$1,263 after tax extraordinary loss from early extinguishment.
Total Corporate and Homebuilding long-term debt maturities and mandatory
annual sinking fund payments during the five years subsequent to 1996 are
as follows: 1997 - $7,161; 1998 - $6,932; 1999 - $27,625; 2000 - $4,293;
2001 - $2,900 and thereafter $342,264.
Financing
Bonds payable at December 31, 1996 consist of one bond issue with a stated
interest rate of 9%. The bond series is secured by separate pools of
mortgage-backed securities. Timing of bond retirements is dependent upon
mortgage payments and reinvestment rates. Bonds payable at December 31,
1995, consisted of six bond issues with a weighted-average stated interest
rate of 9.09% and stated interest rates ranging from 8.45% to 11%.
Under provisions of the bond indentures, funds held by the trustees are
restricted so as to assure the payment of principal and interest on the
bonds to the extent of such funds. Such long-term borrowings are the
obligations of the applicable PFCI issuer subsidiary and are neither the
obligations of, nor guaranteed by, the Company, PDCI, Pulte, ICM or PFCI.
39
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(000's omitted, except per share data)
7. Stock compensation plans and management incentive compensation
The Company has three fixed stock option plans. All three plans provide
for the grant of options (both non-qualified options and incentive stock
options as defined in each respective plan), stock appreciation rights
and restricted stock to key employees of the Company or its subsidiaries
(as determined by the Compensation Committee of the Board of Directors)
for periods not exceeding 10 years. The following is a brief description
of each plan.
o The Pulte Corporation 1995 Stock Incentive Plan for Key Employees
(1995 Plan) authorized the issuance of up to 2,000 shares of common
stock. On March 6, 1995, grants of 1,658 variable stock options
principally priced at $26 to $42 per share were awarded and
subsequently cancelled. On December 13, 1995, grants of 1,687 fixed
stock options were awarded at prices not less than the fair market
value at the time of the grant. The first 50% of these stock options
vest on January 1, 1998, with 25% of the stock options vesting on
each of January 1, 1999 and January 1, 2000. As of December 31, 1996,
313 stock options remain available for grant.
o The Pulte Corporation 1994 Stock Incentive Plan for Key Employees
(1994 Plan) authorized the issuance of up to 1,000 shares of common
stock. On May 10, 1996, grants of 30 stock options with an exercise
price of $28 per share were awarded. These options vest annually in
25% increments beginning May 10, 1998. On January 17, 1995, grants of
250 stock options with an exercise price of $27 per share were
awarded. These stock options also vest annually in 25% increments
beginning January 17, 1997. As of December 31, 1996, 589 stock
options remain available for grant.
o The Pulte Corporation 1990 Stock Incentive Plan for Key Employees
(1990 Plan) authorized the issuance of up to 800 shares of common
stock. On January 16, 1996, grants of 47 stock options with an
exercise price of $31 per share were awarded. These stock options
vest annually in 25% increments beginning January 16, 1998.
Additionally, on January 17, 1995, grants of 21 stock options with an
exercise price of $27 per share were awarded. These stock options
also vest annually in 25% increments beginning January 17, 1997. As
of December 31, 1996, 3 stock options remain available for grant.
A summary of the status of the Company's three fixed stock option plans as
of December 31, 1996 and 1995 and changes during the years ending on those
dates is presented below:
1996 1995
--------------------- ---------------------
Weighted- Weighted-
Average Average
Per Share Per Share
Shares Exercise Price Shares Exercise Price
------ -------------- ------- --------------
Outstanding at beginning of
year....................... 3,042 $ 32 1,270 $ 26
Granted...................... 77 30 3,616 35
Exercised.................... (44) 14 (114) 9
Forfeited.................... -- -- (1,730) 36
------ ------
Outstanding at end of year... 3,075 $ 32 3,042 $ 32
====== ======
Options exercisable at
year-end................... 545 311
====== ======
Weighted-average per share
fair value of options
granted during the year.... $11.12 $12.42
====== ======
40
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(000's omitted, except per share data)
The following table summarizes information about fixed stock options
outstanding at December 31, 1996:
Options Outstanding Options Exercisable
------------------------------------------ ----------------------------
Weighted- Weighted- Weighted-
Range of Number Average Average Number Average
Per Share Outstanding Remaining Per Share Exercisable Per Share
Exercise Prices at 12/31/96 Contract Life Exercise Price at 12/31/96 Exercise Price
--------------- ----------- ------------- -------------- ------------ --------------
$8 to 9 221 2.2 years $ 9 221 $ 9
12 to 17 96 4 16 96 16
27 to 32 765 6.8 29 151 32
34 to 42 1,993 7.9 37 76 41
The Company applies APB Opinion No. 25 and related Interpretations in
accounting for its three fixed stock option plans. No compensation
expense is recognized because all stock options granted have exercise
prices equal to the market value of the Company's stock on the date of
the grant. Under SFAS No. 123, compensation cost for the Company's three
stock-based compensation plans would be determined based on the fair
value at the grant dates for awards under those plans. Accordingly, for
the years ended December 31, 1996 and 1995, the Company's income from
continuing operations, net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
1996 1995
---- ----
Income from continuing operations:
As reported................................ $ 63,211 $ 48,839
======== ========
Pro forma.................................. $ 57,771 $ 48,220
======== ========
Net income:
As reported................................ $179,643 $ 58,346
======== ========
Pro forma.................................. $174,203 $ 57,727
======== ========
Per share data (primary and fully-diluted):
Income from continuing
operations:
As reported................................ $ 2.52 $ 1.79
========= ========
Pro forma.................................. $ 2.31 $ 1.77
========= ========
Net income:
As reported................................ $ 7.17 $ 2.13
========= ========
Pro forma.................................. $ 6.96 $ 2.12
========= ========
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
assumptions used for grants in 1996 and 1995, respectively:
weighted-average dividend yields of .80% and .77%, expected volatility of
29.85% and 32.14%, weighted-average risk-free interest rates of 5.87% and
5.92%, and weighted-average expected lives of 6.5 years and 6.9 years.
Pro forma income from continuing operations, net income and earnings per
share were significantly affected by the large option grant on December
13, 1995, which is not expected to be indicative of the size of annual
awards, and by the manner in which compensation expense associated with
stock options is recognized over the vesting periods of each award. Based
upon stock options outstanding at December 31, 1996, the estimated
compensation expense to be recognized in pro forma income from continuing
operations and net income for the years ending December 31, 1997, 1998
and 1999 is $5,186, $2,135 and $950, respectively.
41
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted, except per share data)
Homebuilding operating management personnel are paid current cash
incentive compensation based on operating performance. Mortgage banking,
financing and thrift management personnel are paid current cash incentive
compensation substantially based on the performance of the applicable
subsidiary. The Company's corporate management personnel are paid current
cash incentive compensation based on overall performance of the Company.
For the years ended December 31, 1996, 1995 and 1994, the Company's total
current cash incentive compensation was $21,200, $15,900 and $19,600,
respectively. In addition, commencing January 1, 1996, the Company adopted
a long-term cash incentive plan as a means of compensating key operating
employees for long-term performance and contributions to the growth of the
Company. Amounts accrued over the period from January 1, 1996, through
December 31, 1999, are payable subsequent to December 31, 1999. For the
year ended December 31, 1996, the Company has accrued $3,500 relating to
this plan.
8. Income taxes
The Company's net deferred tax asset (liability) is as follows:
At December 31,
---------------------
1996 1995
--------- --------
Deferred tax liabilities:
Continuing operations:
Installment sales .......................... $ -- $ (7,133)
Capitalized items deducted for tax, net .... (5,954) (5,473)
Discontinued operations:
Market losses deducted for tax, and other .. (353) (239)
Equity adjustment:
Unrealized gains on securities ............. (982) (5,482)
--------- --------
(7,289) (18,327)
--------- --------
Deferred tax assets:
Continuing operations:
Non-deductible reserves and other .......... 34,975 32,110
Discontinued operations:
Net operating loss carryforwards ........... 75,922 8,115
AMT credit carryforwards ................... 13,734 41,581
Acquired tax loss carryforwards ............ 5,524 5,524
Purchase accounting adjustments ............ 1,465 3,248
Non-deductible reserves and other .......... 3,346 2,809
Amortization ............................... 9 288
--------- --------
134,975 93,675
--------- --------
Net deferred tax asset ..................... $ 127,686 $ 75,348
========= ========
Net operating loss carryforwards expire in 2006. The acquired tax loss
carryforwards expire in the years 1999 through 2002.
42
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
Components of current and deferred income tax expense (benefit) of
continuing operations are as follows:
Current Deferred Total
------- -------- -----
Year ended December 31, 1996
Federal............................ $43,319 $ (8,627) $34,692
State and other.................... 5,450 (890) 4,560
------- -------- -------
$48,769 $ (9,517) $39,252
======= ======== =======
Year ended December 31, 1995
Federal............................ $38,922 $ (9,885) $29,037
State and other.................... 5,333 (1,185) 4,148
------- -------- -------
$44,255 $(11,070) $33,185
======= ======== =======
Year ended December 31, 1994
Federal............................ $44,223 $ (8,716) $35,507
State and other.................... 4,917 (859) 4,058
------- -------- -------
$49,140 $ (9,575) $39,565
======= ======== =======
The following table reconciles the statutory federal income tax rate to
the effective income tax rate for continuing operations:
1996 1995 1994
----- ------ ----
Income taxes at federal statutory rate........ 35.0% 35.0% 35.0%
Effect of state and other income taxes........ 5.0 5.5 4.8
Settlement of state tax issues and other...... (1.7) -- --
----- ----- -----
Effective rate................................ 38.3% 40.5% 39.8%
===== ===== =====
9. Leases
The Company leases certain property and equipment under noncancelable
leases. The office and equipment leases are generally for terms of three
to five years and generally provide renewal options for terms of up to an
additional three years. Model home leases are generally for shorter terms
approximating one year with renewal options on a month-to-month basis. In
most cases, management expects that in the normal course of business,
leases that expire will be renewed or replaced by other leases. The future
minimum lease payments required under operating leases that have initial
or remaining noncancelable terms in excess of one year are as follows:
Year Ending December 31,
------------------------
1997.............................. $ 14,667
1998.............................. 10,726
1999.............................. 8,701
2000.............................. 6,148
2001.............................. 4,681
After 2001........................ 2,499
---------
Total minimum lease payments $ 47,422
=========
Net rental expense for the years ended December 31, 1996, 1995 and 1994,
was $18,588, $14,931 and $11,538, respectively. Certain leases contain
purchase options and generally provide that the Company shall pay for
insurance, taxes and maintenance.
43
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(000's omitted)
10. Commitments and contingencies
In the normal course of business, Pulte acquires rights under options or
option-type agreements to purchase land to be used in homebuilding
operations at future dates. The total purchase price applicable to land
under option at December 31, 1996 approximated $429,000 ($419,000 at
December 31, 1995).
At December 31, 1996, Pulte, in the normal course of business, had
outstanding letters of credit and performance bonds of $136,441 and
$100,567, respectively. In addition, ICM and PFCI had outstanding letters
of credit on Pulte's behalf aggregating $5,464.
The Company is involved in various litigation incidental to its business.
Management believes that none of this litigation will have a material
adverse impact on the results of operations or financial position of the
Company.
Federal Deposit Insurance Corporation
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 Defendants"). The second lawsuit (the "Court of
Claims Case") was filed on December 26, 1996 in the United States Court of
Federal Claims (Washington, D.C.) by the Pulte Defendants 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 Company 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 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. The
Company had filed an answer and a counterclaim, seeking, among other
things, a declaration that the FDIC has breached the assistance agreement
in numerous respects and an injunction against the FDIC. On December 24,
1996, the Pulte Defendants voluntarily obtained a dismissal without
prejudice of certain of their claims in the District Court Case and on
December 26, 1996, initiated the Court of Claims Case. The Court of Claims
Case contains essentially the same claims as were voluntarily dismissed
from the District Court Case.
11. Financial instruments, including those with off-balance sheet risk
ICM, in the normal course of business to meet the financing needs of its
customers and reduce its own exposure to fluctuations in interest rates,
uses derivative financial instruments with off-balance sheet risk. These
financial instruments include cash forward placement contracts,
mortgage-backed security forward contracts, options on treasury future
contracts, and options on mortgage-backed security forwards. ICM does not
use any derivative financial instruments for trading purposes.
44
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
Mortgage-backed security forwards are commitments to either purchase or
sell a financial instrument at a specific future date for a specified
price and may be settled in cash or through delivery of the financial
instrument. Option contracts are contracts that grant the purchaser, for a
premium payment, the right to either purchase or sell a financial
instrument at a specified price within a specified period of time or on a
specified date from or to the writer of the option. Forward and futures
contracts are used to modify the repricing characteristics of
interest-earning assets and loan commitments, while options are used to
limit the temporary impact of interest rate fluctuations in the value of
loans held for sale and loan commitments. Mandatory and optional forward
commitments are used by ICM to hedge its interest rate exposure during the
period from when ICM extends an interest rate lock to a loan applicant
until the time the loan is sold to an investor.
Since ICM can terminate a loan commitment if the borrower does not comply
with the terms of the contract, and some loan commitments may expire
without being drawn upon, these commitments do not necessarily represent
future cash requirements of ICM. ICM evaluates the creditworthiness of
these transactions through its normal credit policies.
The following are ICM's loan commitments:
Fair
Commitment Market Interest Expiration
Amount Value Rates Dates
---------- ------ -------- ----------
At December 31, 1996:
Loan commitments to
borrowers............. $49,297 $49,126 5.0 to January 1997-
9.25% May 1997
At December 31, 1995:
Loan commitments to
borrowers............. $43,956 $44,175 5.0 to January, 1996-
9.25% April, 1996
ICM has credit risk to the extent that the counterparties to the
instruments do not perform their obligation under the agreements. If one
of the counterparties does not perform, ICM would not receive the cash to
which it would otherwise be entitled under the conditions of the
agreement. ICM manages credit risk by entering into agreements with only
large national investment bankers with primary dealer status and with
permanent investors, all of whom meet or exceed minimum rating standards.
Management does not anticipate any material losses as a result of its
agreements and does not consider them to represent an undue level of
credit, interest or liquidity risk for ICM.
45
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
The table below summarizes, by class, the contractual amounts of ICM's
derivative financial instruments.
Fair
Contract Market Interest Expiration
Amount Value Rates Dates
-------- ------ -------- ----------
At December 31, 1996:
Purchase Securities.. $ -- $ -- -- --
Sell Securities...... $174,000 $174,133 5.0 to January, 1997-
8.0% March 1997
At December 31, 1995:
Purchase Securities.. $ 3,850 $ 3,846 7.0% January, 1996
Sell Securities...... $185,500 $183,132 5.0 to January, 1996-
7.5% March, 1996
Realized gains or losses on derivative financial instruments are
recognized in net gain from sale of mortgages in the period settlement
occurs. The aggregate of unrealized gains or losses is reserved and netted
against residential mortgage loans available-for-sale. There are no
material deferred gains or losses from derivative financial instruments or
mortgage loans available-for-sale at December 31, 1996 and 1995.
12. Supplemental Guarantor Information
The Company has 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), and has previously issued $100,000,
7%, and $115,000, 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 combining 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.
46
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
12. Supplemental Guarantor Information (continued)
COMBINING BALANCE SHEET
DECEMBER 31, 1996
Unconsolidated
-----------------------------------------
Pulte Guarantor Non-Guarantor Eliminating Consolidated
Corporation Subsidiaries Subsidiaries Entries Pulte Corporation
----------- ------------ ------------- --------- -----------------
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
Land held for sale and future
development ....................... -- 37,655 -- -- 37,655
Other assets ....................... 12,860 140,489 24,036 -- 177,385
Deferred income taxes .............. 128,668 -- (982) -- 127,686
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:
Common stock ................... 233 -- 7,804 (7,804) 233
Additional paid-in capital ..... 57,516 319,091 508,538 (827,629) 57,516
Unrealized gains on securities
available-for-sale ........... 1,474 -- 1,474 (1,474) 1,474
Retained earnings .............. 770,050 513,321 411,603 (924,924) 770,050
---------- ---------- ---------- ----------- -----------
Total 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
========== ========== ========== =========== ===========
47
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
12. Supplemental Guarantor Information (continued)
COMBINING BALANCE SHEET
DECEMBER 31, 1995
Unconsolidated
--------------------------------------------
Pulte Guarantor Non-Guarantor Eliminating Consolidated
Corporation Subsidiaries Subsidiaries Entries Pulte Corporation
----------- ------------ ------------- ----------- -----------------
ASSETS
Cash and equivalents ............... $ 220,782 $ 71,012 $ 433 $ -- $ 292,227
Unfunded settlements ............... -- 63,838 -- -- 63,838
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
Other assets ....................... 4,899 92,523 32,876 -- 130,298
Deferred income taxes .............. 80,830 -- (5,482) -- 75,348
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) --
----------- ----------- ---------- ----------- ----------
$ 1,203,317 $ 1,166,153 $1,384,488 $(1,706,443) $2,047,515
=========== =========== ========== =========== ==========
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 ....................... 44,441 -- -- -- 44,441
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 ............. 442,314 445,679 584,578 (186,059) 1,286,512
----------- ----------- ---------- ----------- ----------
Shareholders' equity:
Common stock ..................... 270 -- 7,805 (7,805) 270
Additional paid-in capital ....... 65,934 274,262 439,623 (713,885) 65,934
Unrealized gains on securities
available-for-sale ............. 8,223 -- 8,223 (8,223) 8,223
Retained earnings ................ 686,576 446,212 344,259 (790,471) 686,576
----------- ----------- ---------- ----------- ----------
Total shareholders' equity .... 761,003 720,474 799,910 (1,520,384) 761,003
----------- ----------- ---------- ----------- ----------
$ 1,203,317 $ 1,166,153 $1,384,488 $(1,706,443) $2,047,515
=========== =========== ========== =========== ==========
48
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
12. Supplemental Guarantor Information (continued)
COMBINING STATEMENT OF OPERATIONS
For the year ended December 31, 1996
Unconsolidated
--------------------------------------
Pulte Guarantor Non-Guarantor Eliminating Consolidated
Corporation Subsidiaries Subsidiaries Entries Pulte Corporation
----------- ------------ ------------- ----------- -----------------
Revenues:
Homebuilding .................... $ -- $2,326,462 $ -- $ -- $2,326,462
Mortgage banking and financing:
Interest and other ............ -- -- 50,197 -- 50,197
Gain on sale of servicing ..... -- -- -- -- --
Corporate, principally interest . 6,724 -- 900 -- 7,624
--------- ---------- --------- --------- ----------
Total revenues .............. 6,724 2,326,462 51,097 -- 2,384,283
--------- ---------- --------- --------- ----------
Expenses:
Homebuilding:
Cost of sales ................. -- 1,982,385 -- -- 1,982,385
Selling, general and
administrative and other
expense .................... -- 235,495 -- -- 235,495
Mortgage banking and financing
principally interest .......... -- -- 35,507 -- 35,507
Corporate, net .................. 25,931 -- 2,502 -- 28,433
--------- ---------- --------- --------- ----------
Total expenses .............. 25,931 2,217,880 38,009 -- 2,281,820
--------- ---------- --------- --------- ----------
Income (loss) from continuing
operations before income taxes
and equity in net income
of subsidiaries ............. (19,207) 108,582 13,088 -- 102,463
Income taxes (benefit) ............ (10,234) 43,485 6,001 -- 39,252
--------- ---------- --------- --------- ----------
Income (loss) from continuing
operations before equity in net
income of subsidiaries .......... (8,973) 65,097 7,087 -- 63,211
Income from discontinued operations 106,120 -- 10,312 -- 116,432
--------- ---------- --------- --------- ----------
Income before equity in net income
of subsidiaries ................. 97,147 65,097 17,399 -- 179,643
--------- ---------- --------- --------- ----------
Equity in net income of
subsidiaries:
Continuing operations ........... 72,184 2,016 65,097 (139,297) --
Discontinued operations ......... 10,312 -- -- (10,312) --
--------- ---------- --------- --------- ----------
82,496 2,016 65,097 (149,609) --
--------- ---------- --------- --------- ----------
Net income .................. $ 179,643 $ 67,113 $ 82,496 $(149,609) $ 179,643
========= ========== ========= ========= ==========
49
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
12. Supplemental Guarantor Information (continued)
COMBINING STATEMENT OF OPERATIONS
For the year ended December 31, 1995
Unconsolidated
-------------------------------------
Pulte Guarantor Non-Guarantor Eliminating Consolidated
Corporation Subsidiaries Subsidiaries Entries Pulte Corporation
----------- ------------ ------------- ----------- -----------------
Revenues:
Homebuilding .................... $ -- $1,935,703 $ -- $ -- $1,935,703
Mortgage banking and financing:
Interest and other ............ -- -- 54,391 -- 54,391
Gain on sale of servicing ..... -- -- 19,714 -- 19,714
Corporate, principally interest . 17,709 -- 1,623 -- 19,332
-------- ---------- --------- --------- ----------
Total revenues .............. 17,709 1,935,703 75,728 -- 2,029,140
-------- ---------- --------- --------- ----------
Expenses:
Homebuilding:
Cost of sales ................. -- 1,654,952 -- -- 1,654,952
Selling, general and
administrative and other
expense ..................... -- 200,953 -- -- 200,953
Mortgage banking and financing
principally interest .......... -- -- 55,669 -- 55,669
Corporate, net .................. 26,987 -- 8,555 -- 35,542
-------- ---------- --------- --------- ----------
Total expenses .............. 26,987 1,855,905 64,224 -- 1,947,116
-------- ---------- --------- --------- ----------
Income (loss) from continuing
operations before income taxes
and equity in net income of
subsidiaries .................. (9,278) 79,798 11,504 -- 82,024
Income taxes (benefit) ............ (5,702) 31,919 6,968 -- 33,185
-------- ---------- --------- --------- ----------
Income (loss) from continuing
operations before equity in
net income of subsidiaries ..... (3,576) 47,879 4,536 -- 48,839
Income from discontinued
operations ...................... 4,715 -- 4,792 -- 9,507
-------- ---------- --------- --------- ----------
Income before equity in net income
of subsidiaries ................. 1,139 47,879 9,328 -- 58,346
-------- ---------- --------- --------- ----------
Equity in net income of
subsidiaries:
Continuing operations ........... 52,415 8,358 47,879 (108,652) --
Discontinued operations ......... 4,792 -- -- (4,792) --
-------- ---------- --------- --------- ----------
57,207 8,358 47,879 (113,444) --
-------- ---------- --------- --------- ----------
Net income .................. $ 58,346 $ 56,237 $ 57,207 $(113,444) $ 58,346
======== ========== ========= ========= ==========
50
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
12. Supplemental Guarantor Information (continued)
COMBINING STATEMENT OF OPERATIONS
For the year ended December 31, 1994
Unconsolidated
----------------------------------------
Pulte Guarantor Non-Guarantor Eliminating Consolidated
Corporation Subsidiaries Subsidiaries Entries Pulte Corporation
----------- ------------- ------------ ---------- -----------------
Revenues:
Homebuilding .................... $ -- $ 1,637,306 $ -- $ -- $ 1,637,306
Mortgage banking and financing:
Interest and other ............ -- -- 75,306 -- 75,306
Gain on sale of servicing ..... -- -- 32,493 -- 32,493
Corporate, principally interest . 8,814 -- 1,994 -- 10,808
--------- ----------- --------- --------- -----------
Total revenues .............. 8,814 1,637,306 109,793 -- 1,755,913
--------- ----------- --------- --------- -----------
Expenses:
Homebuilding:
Cost of sales ................. -- 1,385,204 -- -- 1,385,204
Selling, general and
administrative and other
expense ..................... -- 158,886 -- -- 158,886
Mortgage banking and financing,
principally interest .......... -- -- 86,230 -- 86,230
Corporate, net .................. 16,386 -- 5,619 -- 22,005
--------- ----------- --------- --------- -----------
Total expenses .............. 16,386 1,544,090 91,849 -- 1,652,325
--------- ----------- --------- --------- -----------
Income (loss) from continuing
operations before income taxes,
extraordinary item and equity in
net income of subsidiaries ...... (7,572) 93,216 17,944 -- 103,588
Income taxes (benefit) ............ (3,135) 36,354 8,000 -- 41,219
--------- ----------- --------- --------- -----------
Income (loss) from continuing
operations before extraordinary
item and equity in net income
of subsidiaries ................ (4,437) 56,862 9,944 -- 62,369
Income (loss) from discontinued
operations ..................... 136,318 -- (33,330) -- 102,988
--------- ----------- --------- --------- -----------
Income (loss) before extraordinary
item and equity in net income of
subsidiaries ................... 131,881 56,862 (23,386) -- 165,357
--------- ----------- --------- --------- -----------
Extraordinary loss from early
extinguishment of debt .......... -- (1,263) (1,326) -- (2,589)
--------- ----------- --------- --------- -----------
Equity in net income of
subsidiaries:
Continuing operations ........... 64,217 11,537 55,599 (131,353) --
Discontinued operations ......... (33,330) -- -- 33,330 --
--------- ----------- --------- --------- -----------
30,887 11,537 55,599 (98,023) --
--------- ----------- --------- --------- -----------
Net income .................. $ 162,768 $ 67,136 $ 30,887 $ (98,023) $ 162,768
========= =========== ========= ========= ===========
51
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
12. Supplemental Guarantor Information (continued)
COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 1996
Unconsolidated
--------------------------------------
Pulte Guarantor Non-Guarantor Eliminating Consolidated
Corporation Subsidiaries Subsidiaries Entries Pulte Corporation
----------- ------------ ------------ ----------- -----------------
Continuing operations:
Cash flows from operating activities:
Income from continuing operations ... $ 63,211 $ 67,113 $ 72,184 $ (139,297) $ 63,211
Adjustments to reconcile income from
continuing operations to net cash
flows provided by (used in)
operating activities:
Equity in subsidiaries ......... (72,184) (2,016) (65,097) 139,297 --
Amortization, depreciation and
other ......................... 85 6,107 555 -- 6,747
Deferred income taxes .......... (9,517) -- -- -- (9,517)
Gain on sale of securities ..... -- -- (11,069) -- (11,069)
Increase (decrease) in cash
due to:
Inventories ................... -- (157,527) -- -- (157,527)
Residential mortgage loans
available-for-sale .......... -- -- 7,859 -- 7,859
Other assets .................. (7,963) (64,806) 8,143 -- (64,626)
Accounts payable and accrued
liabilities ................. 6,534 56,490 (3,866) -- 59,158
Income taxes .................. (7,868) 43,485 5,922 -- 41,539
-------- --------- --------- --------- ---------
Net cash provided by (used in)
operating activities ................ (27,702) (51,154) 14,631 -- (64,225)
-------- --------- --------- --------- ---------
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 ................. -- -- 175,686 -- 175,686
Principal payments of mortgage-backed
securities ........................ -- -- 19,892 -- 19,892
Decrease in funds held by trustee ... -- -- 4,348 -- 4,348
Dividends received from subsidiaries 30,000 22,000 -- (52,000) --
Investment in subsidiaries .......... (1,524) -- -- 1,524 --
Advances to affiliates .............. (2,054) 2,608 (2,782) 2,228 --
Other, net .......................... -- -- (4,626) -- (4,626)
-------- --------- --------- --------- ---------
Net cash provided by investing
activities ........................... $ 26,422 $ 24,608 $ 204,800 $ (48,248) $ 207,582
-------- --------- --------- --------- ---------
52
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
($000's omitted)
12. Supplemental Guarantor Information (continued)
COMBINING STATEMENT OF CASH FLOWS (continued)
For the year ended December 31, 1996
Unconsolidated
--------------------------------------
Pulte Guarantor Non-Guarantor Eliminating Consolidated
Corporation Subsidiaries Subsidiaries Entries Pulte Corporation
----------- ------------ ------------ ----------- -----------------
Cash flows from financing activities:
Payment of long-term debt and bonds $ -- $ -- $(181,841) $ -- $(181,841)
Proceeds from borrowings ............ -- 27,133 13,576 -- 40,709
Capital contributions from parent ... -- -- 1,524 (1,524) --
Advances from affiliates ............ -- -- 2,228 (2,228) --
Stock repurchases ................... (99,561) -- -- -- (99,561)
Dividends paid ...................... (5,958) -- (52,000) 52,000 (5,958)
Other, net .......................... 602 -- 90 -- 692
--------- -------- --------- -------- ---------
Net cash provided by (used in)
financing activities ................. (104,917) 27,133 (216,423) 48,248 (245,959)
--------- ------- --------- -------- ---------
Net increase (decrease) in cash and
equivalents - continuing operations . (106,197) 587 3,008 -- (102,602)
--------- ------- --------- -------- ---------
Discontinued operations:
Cash flows from operating
activities:
Income from discontinued
operations ........................ 116,432 -- 10,312 (10,312) 116,432
Change in deferred income taxes ..... (38,321) -- -- -- (38,321)
Equity in subsidiaries .............. (10,312) -- -- 10,312 --
Changes in income taxes ............. (72,755) -- -- -- (72,755)
Other changes, net .................. 4,956 -- (19,174) -- (14,218)
Cash flows from investing activities:
Purchase of securities available-
for-sale ........................... -- -- (42,209) -- (42,209)
Principal payments of mortgage-backed
securities ........................ -- -- 43,735 -- 43,735
Net proceeds from sale of investments -- -- 4,514 -- 4,514
Decrease in Covered Assets and FRF
receivables ....................... -- -- 37,438 -- 37,438
Decrease in loans receivable ........ -- -- (419) -- (419)
Cash flows from financing activities:
Increase in deposit liabilities ..... -- -- 3,404 -- 3,404
Repayment of borrowings ............. -- -- (31,560) -- (31,560)
Decrease in FHLB advances ........... -- -- (6,400) -- (6,400)
--------- -------- --------- -------- ---------
Net decrease in cash and
equivalents-discontinued
operations ....................... -- -- (359) -- (359)
--------- -------- --------- -------- ---------
Net increase (decrease) in cash
and equivalents ...................... (106,197) 587 2,649 -- (102,961)
Cash and equivalents at beginning
of year .............................. 220,782 71,012 3,369 -- 295,163
--------- ------- --------- -------- --------
Cash and equivalents at end of year ... $ 114,585 $71,599 $ 6,018 $ -- $ 192,202
========= ======= ========= ======== =========
53
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
12. Supplemental Guarantor Information (continued)
COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 1995
Unconsolidated
----------------------------------------
Pulte Guarantor Non-Guarantor Eliminating Consolidated
Corporation Subsidiaries Subsidiaries Entries Pulte Corporation
----------- ------------ ------------ ----------- -----------------
Continuing operations:
Cash flows from operating activities:
Income from continuing operations .. $ 48,839 $ 56,237 $ 52,415 $(108,652) $ 48,839
Adjustments to reconcile income
from continuing operations to
net cash flows used in
operating activities:
Equity in subsidiaries ....... (52,415) (8,358) (47,879) 108,652 --
Amortization, depreciation
and other ................... 77 5,027 1,234 -- 6,338
Deferred income taxes ........ (11,070) -- -- -- (11,070)
Gain on sale of securities ... -- -- (4,003) -- (4,003)
Increase (decrease) in cash
due to:
Inventories ................. -- (107,366) -- -- (107,366)
Residential mortgage loans
available-for-sale ........ -- -- (40,928) -- (40,928)
Other assets ................ (2,105) (30,154) (3,368) -- (35,627)
Accounts payable and accrued
liabilities ............... 1,447 31,755 16,737 -- 49,939
Income taxes ................ (731) 31,919 6,936 -- 38,124
-------- --------- --------- --------- ---------
Net cash used in operating
activities ......................... (15,958) (20,940) (18,856) -- (55,754)
-------- --------- --------- -------- ---------
Cash flows from investing activities:
Proceeds from exchange of securities
held-to-maturity ................. -- -- 14,114 -- 14,114
Proceeds from sale of securities
available-for-sale ................ -- -- 48,370 -- 48,370
Principal payments of mortgage-
backed securities ................. -- -- 47,667 -- 47,667
Decrease in funds held by trustee .. -- -- 1,911 -- 1,911
Dividends received from subsidiaries 10,652 40,000 -- (50,652) --
Investment in subsidiaries ......... (3,057) -- -- 3,057 --
Advances to affiliates ............. 5,907 (5,977) -- 70 --
Other, net ......................... -- 1,423 (388) -- 1,035
-------- --------- --------- --------- ---------
Net cash provided by investing
activities .......................... $ 13,502 $ 35,446 $ 111,674 $(47,525) $ 113,097
======== ========= ========= ======== =========
54
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
($000's omitted)
12. Supplemental Guarantor Information (continued)
COMBINING STATEMENT OF CASH FLOWS (continued)
For the year ended December 31, 1995
Unconsolidated
----------------------------------------
Pulte Guarantor Non-Guarantor Eliminating Consolidated
Corporation Subsidiaries Subsidiaries Entries Pulte Corporation
----------- ------------ ------------- ----------- ------------------
Cash flows from financing activities:
Payment of long-term debt and bonds.... $ -- $ -- $(107,543) $ -- $(107,543)
Proceeds from borrowings ............ 124,894 9,916 65,353 -- 200,163
Repayment of borrowings ............. -- -- (470) -- (470)
Capital contributions from parent ... -- -- 3,057 (3,057) --
Advances from affiliates ............ -- 3,043 (2,973) (70) --
Stock repurchases ................... (11,707) -- -- -- (11,707)
Dividends paid ...................... (6,489) -- (50,652) 50,652 (6,489)
Other, net .......................... 994 -- 344 -- 1,338
--------- ------- -------- -------- ---------
Net cash provided by (used in)
financing activities ................. 107,692 12,959 (92,884) 47,525 75,292
--------- ------- -------- -------- ---------
Net increase (decrease) in cash and
equivalents - continuing operations . 105,236 27,465 (66) -- 132,635
--------- ------- -------- -------- ---------
Discontinued operations:
Cash flows from operating activities:
Income from discontinued operations . 9,507 -- 4,792 (4,792) 9,507
Change in deferred income taxes ..... 18,280 -- -- -- 18,280
Equity in subsidiaries .............. (4,792) -- -- 4,792 --
Changes in income taxes ............. (18,123) -- -- -- (18,123)
Other changes, net .................. (4,872) -- 12,614 -- 7,742
Cash flows from investing activities:
Purchase of securities available-
for-sale ........................... -- -- (70,052) -- (70,052)
Principal payments of mortgage-backed
securities ........................ -- -- 31,857 -- 31,857
Decrease in Covered Assets and FRF
receivables ....................... -- -- 35,929 -- 35,929
Cash flows from financing activities:
Decrease in deposit liabilities ..... -- -- (128,542) -- (128,542)
Repayment of borrowings ............. -- -- (31,560) -- (31,560)
Decrease in FHLB advances ........... -- -- 26,000 -- 26,000
--------- ------- -------- -------- ---------
Net decrease in cash and
equivalents- discontinued
operations ........................ -- -- (118,962) -- (118,962)
--------- ------- -------- -------- ---------
Net increase (decrease) in cash and
equivalents ......................... 105,236 27,465 (119,028) -- 13,673
Cash and equivalents at beginning
of year .............................. 115,546 43,547 122,397 -- 281,490
--------- ------- -------- -------- ---------
Cash and equivalents at end of year ... $ 220,782 $71,012 $ 3,369 $ -- $ 295,163
========= ======= ========= ======== =========
55
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
12. Supplemental Guarantor Information (continued)
COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 1994
Unconsolidated
-------------------------------------
Pulte Guarantor Non-Guarantor Eliminating Consolidated
Corporation Subsidiaries Subsidiaries Entries Pulte Corporation
----------- ------------ ------------ ----------- -----------------
Continuing operations:
Cash flows from operating activities:
Income from continuing operations .......... $ 59,780 $ 68,399 $ 65,543 $ (13,353) $ 62,369
Adjustments to reconcile income
from continuing operations to net
cash flows provided by (used in)
operating activities:
Equity in subsidiaries ............... (64,217) (11,537) (55,599) 131,353 --
Amortization, depreciation
and other ........................... (1,025) 1,496 12,763 -- 13,234
Deferred income taxes ................ (9,575) -- -- -- (9,575)
Gain on sale of securities ........... -- -- (9,369) -- (9,369)
Increase (decrease) in cash
due to:
Inventories ......................... -- (186,904) -- -- (186,904)
Residential mortgage loans
held-for-sale ...................... -- -- 130,780 -- 130,780
Other assets ........................ (975) (28,637) (3,426) -- (33,038)
Accounts payable and accrued
liabilities ....................... 2,558 71,912 11,809 -- 86,279
Income taxes ........................ 1,200 36,354 8,000 -- 45,554
--------- --------- --------- --------- ---------
Net cash provided by (used in)
operating activities ....................... (12,254) (48,917) 160,501 -- 99,330
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Proceeds from exchange of securities
held-to-maturity ......................... -- -- 4,794 -- 4,794
Proceeds from sale of securities
available-for-sale ....................... -- -- 53,863 -- 53,863
Principal payments of mortgage-
backed securities ........................ -- -- 123,783 -- 123,783
Decrease in funds held by trustee .......... -- -- 21,077 -- 21,077
Dividends received from subsidiaries........ 111,722 -- -- (111,722) --
Investment in subsidiaries ................. (5,677) -- -- 5,677 --
Advances to affiliates ..................... (125,158) 1,647 83,636 39,875 --
Other, net ................................. -- (6,144) (11,847) -- (17,991)
--------- --------- --------- --------- ---------
Net cash provided by (used in)
investing activities ....................... $ (19,113) $ (4,497) $ 275,306 $ (66,170) $ 185,526
--------- --------- --------- --------- ---------
56
PULTE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
($000's omitted)
12. Supplemental Guarantor Information (continued)
COMBINING STATEMENT OF CASH FLOWS (continued)
For the year ended December 31, 1994
Unconsolidated
---------------------------------------
Pulte Guarantor Non-Guarantor Eliminating Consolidated
Corporation Subsidiaries Subsidiaries Entries Pulte Corporation
----------- ------------ ------------ ----------- -----------------
Cash flows from financing activities:
Payment of long-term debt and bonds $ -- $ -- $ (190,496) $ -- $ (190,496)
Proceeds from borrowings ............ 114,656 -- -- -- 114,656
Repayment of borrowings ............. -- (35,156) (92,157) -- (127,313)
Capital contributions from parent ... -- -- 5,677 (5,677) --
Advances from affiliates ............ -- 107,872 (67,997) (39,875) --
Stock repurchases ................... (2,404) -- -- -- (2,404)
Dividends paid ...................... (6,617) -- (111,722) 111,722 (6,617)
Other, net .......................... 266 -- (191) -- 75
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities ................. 105,901 72,716 (456,886) 66,170 (212,099)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and
equivalents - continuing operations . 74,534 19,302 (21,079) -- 72,757
----------- ----------- ----------- ----------- -----------
Discontinued operations:
Cash flows from operating activities:
Income (loss) from discontinued
operations ........................ 102,988 -- (33,330) 33,330 102,988
Change in deferred income taxes ..... (76,283) -- -- -- (76,283)
Equity in subsidiaries .............. 33,330 -- -- (33,330) --
Change in trading account and other
securities ........................ -- -- (180,761) -- (180,761)
Changes in income taxes ............. (46,082) -- -- -- (46,082)
Other changes, net .................. (13,953) -- 37,456 -- 23,503
Cash flows from investing activities:
Purchase of securities available-for-
sale .............................. -- -- (536,838) -- (536,838)
Principal payments of mortgage-
backed securities ................. -- -- 94,709 -- 94,709
Decrease in Covered Assets and FRF
receivables ....................... -- -- 160,157 -- 160,157
Decrease in loans receivable ........ -- -- 16,292 -- 16,292
Net proceeds from sale of bank
branches ............................ -- -- 1,092,614 -- 1,092,614
Cash flows from financing activities:
Repayment of borrowings ............. -- -- (319,076) -- (319,076)
Decrease in FHLB advances ........... -- -- (231,509) -- (231,509)
----------- ----------- ----------- ----------- -----------
Net increase in cash and equivalents-
discontinued operations ............. -- -- 99,714 -- 99,714
----------- ----------- ----------- ----------- -----------
Net increase in cash and
equivalents ........................... 74,534 19,302 78,635 -- 172,471
Cash and equivalents at beginning
of year ............................... 41,012 24,245 43,762 -- 109,019
----------- ----------- ----------- ----------- -----------
Cash and equivalents at end of year ... $ 115,546 $ 43,547 $ 122,397 $ -- $ 281,490
=========== =========== =========== =========== ===========
57
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Pulte Corporation
We have audited the accompanying consolidated balance sheets of Pulte
Corporation as of December 31, 1996 and 1995 and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1996. Our audits also included
the financial statement schedule listed in the Index at Item 14. These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Pulte Corporation at December 31, 1996 and 1995 and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set
forth therein.
As discussed in the Notes to Consolidated Financial Statements, in 1995 the
Company changed its method of accounting for mortgage servicing.
ERNST & YOUNG LLP
Detroit, Michigan
January 21, 1997
58
PULTE CORPORATION
UNAUDITED QUARTERLY INFORMATION
($000's omitted, except per share data)
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
-------- ------- ------- ------- -----
1996
Homebuilding operations:
Sales (settlements) ................ $ 413,220 $571,283 $614,710 $727,249 $ 2,326,462
Cost of sales ...................... 352,685 488,904 521,773 619,023 1,982,385
Income before income taxes ......... 7,305 26,761 32,027 42,489 108,582
Financial services operations:
Revenues ........................... $ 16,133 $ 15,096 $ 9,247 $ 9,721 $ 50,197
Income before income taxes ......... 4,838 5,909 1,332 2,611 14,690
Corporate:
Revenues ........................... $ 3,166 $ 1,977 $ 1,215 $ 1,266 $ 7,624
Loss before income taxes ........... (3,529) (5,119) (5,942) (6,219) (20,809)
Consolidated results:
Revenues ........................... $ 432,519 $588,356 $625,172 $738,236 $ 2,384,283
Income from continuing operations
before income taxes ............... 8,614 27,551 27,417 38,881 102,463
Income taxes ....................... 3,506 11,150 10,994 13,602 39,252
Income from continuing operations .. 5,108 16,401 16,423 25,279 63,211
Income from discontinued operations 1,972 1,793 111,208 1,459 116,432
Net income ......................... 7,080 18,194 127,631 26,738 179,643
Per share data:
Income from continuing operations .. $ .19 $ .64 $ .68 $ 1.08 $ 2.52
Income from discontinued operations .07 .07 4.61 .06 4.65
Net income ......................... .26 .71 5.29 1.14 7.17
59
PULTE CORPORATION
UNAUDITED QUARTERLY INFORMATION
($000's omitted, except per share data)
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- ----------
1995
Homebuilding operations:
Sales (settlements) ................ $308,649 $ 464,419 $520,937 $ 641,698 $1,935,703
Cost of sales ...................... 263,930 399,349 445,625 546,048 1,654,952
Income (loss) before income taxes .. (3,063) 15,692 26,034 41,135 79,798
Financial services operations:
Revenues ........................... $ 19,831 $ 16,368 $ 17,901 $ 20,005 $ 74,105
Income before income taxes ......... 6,516 2,337 3,834 5,749 18,436
Corporate:
Revenues ........................... $ 4,395 $ 4,677 $ 4,509 $ 5,751 $ 19,332
Loss before income taxes ........... (4,155) (2,053) (2,575) (7,427) (16,210)
Consolidated results:
Revenues ........................... $332,875 $ 485,464 $543,347 $ 667,454 $2,029,140
Income (loss) from continuing
operations before income taxes .... (702) 15,976 27,293 39,457 82,024
Income taxes (benefit) ............. (276) 6,485 11,027 15,949 33,185
Income (loss) from continuing
operations ...................... (426) 9,491 16,266 23,508 48,839
Income from discontinued operations 3,893 1,181 2,531 1,902 9,507
Net income ......................... 3,467 10,672 18,797 25,410 58,346
Per share data:
Income (loss) from continuing
operations ........................ $ (.01) $ .34 $ .60 $ .86 $ 1.79
Income from discontinued operations .14 .04 .09 .07 .34
Net income ......................... .13 .38 .69 .93 2.13
60
PART III
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
This Item is not applicable.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this Item with respect to executive officers of the
Company is set forth in Item 4A. Information required by this Item with
respect to members of the Board of Directors of the Company is contained in
the Proxy Statement for the 1997 Annual Meeting of Shareholders (1997 Proxy
Statement) under the caption "Election of Directors," incorporated herein by
this reference.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this Item is contained in the 1997 Proxy Statement
under the caption "Remuneration of Directors and Executive Officers" and
under the caption "Stock Options Granted to Officers by the Company,"
incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this Item is contained in the 1997 Proxy Statement
under the caption "Election of Directors," incorporated herein by this
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this Item is contained in the 1997 Proxy Statement
under the caption "Remuneration of Directors and Executive Officers,"
incorporated herein by this reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K The
following documents are filed as part of this Annual Report on Form 10-K.
(a) Financial Statements and Schedules
(1) Financial Statements Page Herein
-----------
Consolidated Balance Sheets at December 31, 1996 and 1995......... 21
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994............................... 22
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1996, 1995 and 1994................... 23
Consolidated Statements of Cash Flows for
the years ended December 31, 1996, 1995 and 1994............... 24
Notes to Consolidated Financial Statements........................ 26
(2) Financial Statement Schedules
III - Condensed Financial Information of Registrant.............. 70
All other schedules have been omitted since the required information is not
present, is not present in amounts sufficient to require submission of the
schedule or because the required information is included in the financial
statements or notes thereto.
61
(3) Exhibits Index
Page Herein or Incorporated
Exhibit Number and Description by Reference From
------------------------------ --------------------------
(2) and
(10) (a) Assistance Agreement, dated Filed as Exhibit 2 and 10(a)
September 9, 1988, by and to Pulte Corporation's Annual
among The Federal Savings Report on Form 10-K for the
and Loan Insurance Corporation year ended December 31, 1988.
(FSLIC), First Heights, FSA,
Heights of Texas, FSB (Heights
of Texas) and Pulte Diversified
Companies, Inc. (PDCI).
(b) Amendment to Assistance Agreement, Filed as Exhibit 2 and 10(b)
to dated September 23, 1988, among Pulte Corporation's Annual
Report the FSLIC, First Heights, FSA, on Form 10-K for the year
ended Heights of Texas and PDCI. December 31, 1988.
(c) Promissory Notes
(1) Promissory Note No. 1, dated Filed as Exhibit 2 and 10(c) to
September 9, 1988, in the Pulte Corporation's Annual Report
amount of $139,400,000 from on Form 10-K for the year ended
the FSLIC to First Heights. December 31, 1988.
(2) Promissory Note No. 2, dated Filed as Exhibit 2 and 10(c) to
September 9, 1988, in the Pulte Corporation's Annual Report
amount of $172,365,000 from on Form 10-K for the year ended
the FSLIC to First Heights. December 31, 1988.
(3) Receiver's Note No. 3, dated Filed as Exhibit 2 and 10(c) to
September 23, 1988, in the Pulte Corporation's Annual Report
amount of $152,169,750 from on Form 10-K for the year ended
the FSLIC to the FSLIC as December 31, 1988.
receiver for Champion Savings
Association (Champion).
(4) Receiver's Note No. 4, dated Filed as Exhibit 2 and 10(c) to
September 23, 1988, in the Pulte Corporation's Annual Report
amount of $48,527,250 from the on Form 10-K for the year ended
FSLIC to the FSLIC as receiver December 31, 1988.
for Champion.
(d) Regulatory Capital Maintenance Filed as Exhibit 2 and 10(d) to
Agreement, dated September 9, 1988, Pulte Corporation's Annual
Report by and among, Pulte Corporation, on Form 10-K for the
year ended PDCI, First Heights, Heights December 31, 1988.
of Texas and the FSLIC.
62
EXHIBITS
Page Herein or Incorporated
Exhibit Number and Description by Reference From
- ------------------------------ ---------------------------
(e) Amendment to Regulatory Capital Filed as Exhibit 2 and 10(e) to
Maintenance Agreement, dated Pulte Corporation's Annual Report
September 23, 1988, among Pulte on Form 10-K for the year ended
Corporation, PDCI, First Heights, December 31, 1988.
Heights of Texas and the FSLIC.
(f) Warranty Agreement, dated as of Filed as Exhibit 2 and 10(f) to
September 9, 1988, between Pulte Corporation's Annual Report
First Heights and the FSLIC. on Form 10-K for the year ended
December 31, 1988.
(g) Receiver's Note Agreement, dated Filed as Exhibit 2 and 10(g)
to September 23, 1988, between the Pulte Corporation's Annual
Report FSLIC, as receiver for on Form 10-K for the
Champion and the FSLIC. year ended December 31, 1988.
(3) (a) Articles of Incorporation, as amended. Filed as Exhibit 19(a) to Pulte
Corporation's Form 10-Q for the
quarter ended June 30, 1988.
(b) By-laws Filed as Exhibit 3(b) to the
Registrant's Registration Statement
on Form S-4 (Registration Statement
No. 33-17223).
(4) (a) Senior Note Indenture among Pulte Filed as Exhibit 4.1 to the
Corporation, certain of its subsidiaries, Registrant's Registration Statement
as Guarantors, and NationsBank of on Form S-3 (Registration Statement
Georgia, National Association,as No. 33-71742).
Trustee, including Form of Senior
Guarantee, covering Pulte Corporation's
8.375% unsecured Senior Notes
due 2004 ($115,000,000 aggregate
principal amount outstanding) and 7%
unsecured Senior Notes due 2003
($100,000,000 aggregate principal amount
outstanding)
(b) Senior Note Indenture among Pulte Filed as Exhibit (c) 1 to the
corporation, certain of its Registrant's Current Report on Form 8-K
subsidiaries, as Guarantors, and dated October 20, 1995.
The First National Bank of Chicago,
as Trustee, covering Pulte Corporation's
7.3% unsecured Senior Notes due 2005
($125,000,000 aggregate principal amount
outstanding)
63
EXHIBITS
Page Herein or Incorporated
Exhibit Number and Description by Reference From
- ------------------------------ ---------------------------
(10) Material Contracts
(a) 1983 Key Employees' Stock Filed as Exhibit 10(a) to Pulte Home
Option Plan. Corporation's Annual Report on Form 10-K
for the fiscal year ended December 31,
1983. (1983 Annual Report)
(b) First Amendment to 1983 Key Filed as Exhibit 10(b) to the
Employees' Stock Option Plan Registrant's Registration Statement
on Form S-8 (Registration Statement
No. 33-20052).
(c) 1977 Key Employees' Stock Filed as Exhibit 1(a) to Pulte Home
Option Plan Corporation's Registration
Statement on Form S-8 (Registration
No. 2-59802).
(d) First Amendment to 1977 Key Filed as Exhibit III to Pulte Home
Employees' Stock Option Plan Corporation's Annual Report on Form
10-K for the year ended
December 31, 1981.
(e) Second Amendment to 1977 Key Filed as Exhibit 10(e) to the
Employees' Stock Option Plan Registrant's Registration Statement
on Form S-8 (Registration Statement
No. 33-20052).
(f) James Grosfeld Consulting Filed as Exhibit 10(g) to Pulte
Agreement April 30, 1990 Corporation's Annual Report on Form
10-K for the year ended
December 31, 1990.
(g) James Grosfeld Agreement Filed as Exhibit 10(h) to Pulte
November 16, 1990 Corporation's Annual Report on Form
10-K for the year ended
December 31, 1990.
(h) 1990 Stock Incentive Plan for Filed with the Proxy Statement dated
Key Employees April 3, 1990 and as an exhibit to the
Registrant's Registration Statement on
Form S-8 (Registration Statement
No. 33-40102).
(i) James Grosfeld Amendment and Filed as Exhibit 10(i) to Pulte
Extension to Consulting Corporation's Annual Report on Form
Agreement December 31, 1992. 10-K for the yeartended December 30, 1992.
64
EXHIBITS
Page Herein or Incorporated
Exhibit Number and Description by Reference From
- ------------------------------ ---------------------------
(j) 1994 Stock Incentive Plan for Filed with the Proxy Statement dated
Key Employees March 31, 1994 and as an exhibit to the
Registrant's Registration Statement on
Form S-8 (Registration Statement
No. 33-98944).
(k) Credit Agreement, dated Filed as Exhibit 10(l) to Pulte
January 5, 1995, among Pulte Corporation's Annual Report on Form 10-K
Corporation, NationsBank, N.A. for the year ended December 31, 1994.
(Carolinas) as Agent for certain
lenders.
(l) Second Amendment to Credit
Agreement, dated December 31, 1996,
among Pulte Corporation and NationsBank,
N.A., as Agent for certain lenders.
(m) 1995 Stock Incentive Plan for Filed with the Proxy Statement dated
Key Employees March 31, 1995 and as an exhibit to the
Registrant's Registration Statement on
Form S-8 (Registration Statement
No 33-99218).
(11) Statement Regarding Computation
of Per Share Earnings 63
(21) Subsidiaries of the Registrant 64
(23) Consent of Independent Auditors 66
(27) Financial Data Schedule
Reports on Form 8-K Filed During the Fourth Quarter of 1996:
There have been no reports filed on Form 8-K by the registrant during the
fourth quarter of 1996.
PULTE CORPORATION
EXHIBIT 11 - STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(000's omitted, except per share date)
Years ended December 31,
----------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Primary:
Net income................................. $ 179,643 $58,346 $162,768 $79,368 $70,104
========= ======= ======== ======= =======
Weighted average common shares outstanding. 24,844 27,074 27,556 27,479 26,712
Common stock equivalents -stock options.... 226 284 298 434 465
--------- ------- -------- ------- -------
Total................................. 25,070 27,358 27,854 27,913 27,177
========= ======= ======== ======= =======
Net income per share....................... $ 7.17 $ 2.13 $ 5.85 $ 2.84 $ 2.58
========= ======= ======== ======= =======
Fully Diluted:
Net income................................. $ 179,643 $58,346 $162,768 $79,368 $70,104
Plus: Interest expense and bond issue
cost amortization on convertible
subordinated debentures................... - - - 443
--------- ------- -------- ------- -------
Adjusted net income........................ $ 179,643 $58,346 $162,768 $79,368 $70,547
========= ======= ======== ======= =======
Weighted average common shares outstanding. 24,828 27,074 27,556 27,479 26,712
Common stock equivalents - stock options... 234 311 304 455 476
Assumed conversion of 8-1/2% subordinated
debentures............................... - - - - 598
--------- ------- -------- ------- -------
Total.................................. 25,062 27,385 27,860 27,934 27,786
========= ======= ======== ======= =======
Net income per share ........................ $ 7.17 $ 2.13 $ 5.85 $ 2.84 $ 2.54
========= ======= ======== ======= =======
66
PULTE CORPORATION
EXHIBIT 21 - SUBSIDIARIES OF THE REGISTRANT
Pulte Corporation (the Company) owns 100% of the capital stock of Pulte
Diversified Companies, Inc. (PDCI), Pulte Financial Companies, Inc. (PFCI)
and Oakton Building Corporation, all Michigan corporations, and 100% of the
capital stock of North American Builders Indemnity Company, a Colorado
corporation.
PDCI owns 100% of the capital stock of Pulte Home Corporation (Pulte), a
Michigan corporation, and 100% of the capital stock of First Heights Bank, a
federal savings bank (First Heights).
First Heights owns 100% of the capital stock of First Heights Investment
Corporation, a Texas corporation.
Pulte owns 100% of the capital stock of the following subsidiaries:
Place of
Company Name Incorporation
------------ --------------
ICM Mortgage Corporation (1)............................ Delaware
Pulte Homes of Michigan Corporation (2)................. Michigan
Palmville Development Corp. ............................ Michigan
Ceiba Homes Inc. ....................................... Michigan
Gurabo Homes, Inc. ..................................... Michigan
Salinas Homes, Inc. .................................... Michigan
Salinas Builders, Inc. ................................. Michigan
Dean Realty Company (3)................................. Michigan
Pulte Home Corporation of Texas (4)..................... Michigan
Cambridge Software, Inc. ............................... Michigan
Pulte Development Corporation........................... Michigan
Builders' Supply & Lumber Co., Inc. .................... Michigan
PHM Realty, Inc. ....................................... Florida
Raleigh Classic Homes, Inc. ............................ North Carolina
Charlotte Classic Homes, Inc. .......................... North Carolina
Greensboro Classic Homes, Inc........................... North Carolina
Preserve I, Inc. (5).................................... Michigan
Preserve II, Inc. (5)................................... Michigan
Pulte Home Corporation of Massachusetts (9)............. Michigan
Pulte Homes of Minnesota Corporation.................... Minnesota
PBW Corporation......................................... Michigan
Wil Corporation......................................... Michigan
Canterbury Communities, Inc. (6)........................ Michigan
Pulte Home Caribbean Corporation........................ Michigan
Pulte Home Corporation of The Delaware Valley........... Michigan
Pulte Homes of South Carolina, Inc. (7)................. Michigan
Pulte Lifestyle Communities, Inc........................ Michigan
Pulte Payroll Corporation............................... Michigan
PHC Title Corporation................................... Michigan
PQL Realty Corporation.................................. Michigan
Pulte Land Development Corporation...................... Michigan
Springfield Golf Club, Inc.............................. Michigan
Springfield Realty Corporation.......................... Michigan
TVM Corporation (8)..................................... Michigan
67
PULTE CORPORATION
EXHIBIT 21 - SUBSIDIARIES OF THE REGISTRANT (continued)
Pulte is a member of the following partnerships:
Place of Percentage
Entity Name Formation Ownership
----------- --------- ---------
Ashgrove Plantation L.L.C............ Virginia 34.44%
Buildinvest Limited Partnership...... Maryland 20.00%
Crosland/Piper Glen Ltd. Partnership. N. Carolina 31.37%
Crosland/Wynfield Forest Limited
Partnership N. Carolina 28.60%
Quantrell Mews, L.L.C................ Virginia 20.00%
Pulte owns 1% of the capital stock of Controladora PHC, S.A. De C.V., a
Mexican corporation.
1) ICM Mortgage Corporation owns 22.5% of the capital stock of
Hipotecaria Su Casita, S.A. de C.V., a Mexican corporation.
2) Pulte Homes of Michigan Corporation owns 100% of the capital stock
of Gulf Partners, Inc., Sean/Christopher Homes, Inc., and
Pulte-IN Corporation, all Michigan corporations, 100% of the
capital stock of Pulte Homes of Ohio Corporation, an Ohio
corporation, 50% of the capital stock of Sean/Christopher Homes,
LLC, an Indiana limited liability company and 1% of the capital
stock of Haggerty Hills Limited Partnership, a Michigan limited
partnership. Sean/Christopher Homes, Inc. owns 50% of the capital
stock of Sean/Christopher Homes, LLC, an Indiana limited
liability corporation. Gulf Partners, Inc. owns 99% of the capital
stock of Haggerty Hills Limited Partnership, a Michigan limited
partnership.
3) Dean Realty Company owns 100% of the capital stock of Pulte Real
Estate Company, a Florida corporation.
4) Pulte Home Corporation of Texas owns 100% of the capital stock of
James T. Lynch, Inc., a Texas corporation and Pulte Homes of Greater
Kansas City, Inc., a Michigan corporation.
5) Preserve I, Inc. owns 99% and Preserve II, Inc. owns 1% of The
Preserve Limited Partnership, a Maryland limited partnership.
6) Canterbury Communities, Inc. owns 100% of the capital stock
of Canterbury Diversified Building Corporation and Canterbury Finance
Corporation, both Michigan corporations.
7) Pulte Homes of South Carolina Inc. owns 100% of the capital stock
of Great American Homes, Inc. and SC Warranty Corporation, both
Michigan corporations.
8) TVM Corporation owns 63% of the capital stock of PHM Title Agency
L.L.C., a Delaware limited liability company.
9) Willow Brook Associates Limited Partnership, a Massachusetts Limited
Partnership, is 99% owned Pulte Home Corporation of Massachusetts.
PFCI owns 100% of the capital stock of Pulte Financial Holding Corp.,
Guaranteed Mortgage Corporation II and Guaranteed Mortgage Corporation
III, all Michigan corporations.
Oakton Building Corporation owns 99% of Controladora PHC, S.A. De C.V.
(Controladora), a Mexican corporation, and 23.33% of Nantar, S. De R.L.
De C.V., a Mexican LLC. Controladora owns 76.67% of Nantar, S. De R.L. De
C.V., a Mexican LLC, and 50% of Condak-Pulte S. De R.L. De C.V., a
Mexican joint venture.
68
PULTE CORPORATION
EXHIBIT 23 - CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements (Form S-8 No. 33-20052, Form S-8 No. 2-59802, Form S-8 No.
33-40102, Form S-8 No. 33-98944, Form S-8 No. 33-99218 and Form S-3 No.
33-93870) and the related Prospectuses of Pulte Corporation for the
registration of its debt securities and shares of its common stock of our
report dated January 21, 1997 with respect to the consolidated financial
statements and schedule of Pulte Corporation included in this Annual
Report on Form 10-K for the year ended December 31, 1996 filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
Detroit, Michigan
February 28, 1997
69
PULTE CORPORATION
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Pulte Corporation (the Registrant) is a holding company. The accompanying
financial statements are not the primary consolidated financial statements
since these financial statements present only the accounts of Pulte
Corporation which include its investment in subsidiaries on the equity
method. The primary financial statements of the Company are its consolidated
financial statements.
The net assets of Pulte Home Corporation, ICM Mortgage Corporation and First
Heights Bank, a federal savings bank, indirectly wholly-owned subsidiaries of
Pulte Corporation are subject to certain restrictions (see Notes to
Consolidated Financial Statements).
Pulte Corporation
Balance Sheets
December 31, 1996 and 1995
($000's omitted)
1996 1995
---- ----
Assets:
Cash and equivalents...................................... $ 114,585 $ 220,782
Investment in subsidiaries, on the equity method . ....... 859,866 725,689
Advances receivable - subsidiaries........................ 139,351 171,117
Deferred income taxes..................................... 128,668 80,830
Other accounts receivable................................. 12,860 4,899
---------- ----------
$1,255,330 $1,203,317
========== ==========
Liabilities and shareholders' equity:
Advances payable - subsidiaries........................... $ 18,029 $ 14,349
Income taxes.............................................. 12,930 44,441
Accrued liabilities....................................... 51,731 35,369
Senior notes.............................................. 339,365 339,280
Discontinued operations................................... 4,002 8,875
---------- ----------
Total liabilities................................ 426,057 442,314
Shareholders' equity...................................... 829,273 761,003
---------- ----------
$1,255,330 $1,203,317
========== ==========
70
PULTE CORPORATION
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT - (continued)
Pulte Corporation
Statements of Income
For the years ended December 31, 1996, 1995 and 1994
($000's omitted)
1996 1995 1994
-------- ------ ------
Revenues - Interest income......................... $ 6,724 $17,709 $ 8,814
-------- -------- --------
Expenses - General and administrative.............. 13,761 10,423 8,667
Interest ............................... 12,045 16,983 7,768
-------- ------- --------
25,806 27,406 16,435
-------- ------- --------
Expenses in excess of revenues..................... (19,082) (9,697) (7,621)
Other income (expense)............................. (125) 419 49
-------- ------- --------
Loss from continuing operations before income......
taxes, and equity in net income of subsidiaries.. (19,207) (9,278) (7,572)
Income tax (benefit)............................... (10,234) (5,702) (3,135)
-------- ------- --------
Loss from continuing operations before equity in...
net income of subsidiaries....................... (8,973) (3,576) (4,437)
-------- ------- --------
Income from discontinued operations................ 106,120 4,715 136,318
-------- ------- --------
Equity in net income of subsidiaries
Continuing operations............................ 72,184 52,415 64,217
Discontinued operations.......................... 10,312 4,792 (33,330)
-------- ------- --------
82,496 57,207 30,887
-------- ------- --------
Net income......................................... $179,643 $58,346 $162,768
======== ======= ========
71
PULTE CORPORATION
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT - (continued)
Pulte Corporation
Statements of Cash Flows
For the years ended December 31, 1996, 1995 and 1994
($000's omitted)
1996 1995 1994
-------- -------- --------
Continuing operations
Cash flows from operating activities:
Income from continuing operations................ $ 63,211 $ 48,839 $ 59,780
Adjustments to reconcile income from continuing
operations to net cash used in operating
activities:
Equity in subsidiaries....................... (72,184) (52,415) (64,217)
Amortization................................. 85 77 (1,025)
Deferred income taxes........................ (9,517) (11,070) (9,575)
Changes in cash due to:
Accounts receivable and other assets....... (7,963) (2,105) (975)
Income taxes............................... (7,868) (731) 1,200
Accrued liabilities........................ 6,534 1,447 2,558
-------- -------- ---------
Net cash used in operating activities.............. (27,702) (15,958) (12,254)
-------- -------- ---------
Cash flows provided by (used in) investing
activities:
Investment in subsidiaries..................... (1,524) (3,057) (5,677)
Dividends received from subsidiaries........... 30,000 10,652 111,722
Advances to (from) affiliates.................. (2,054) 5,907 (125,158)
-------- -------- ---------
Net cash provided by (used in) investing activities 26,422 13,502 (19,113)
-------- -------- ---------
Cash flows from financing activities:
Dividends paid................................... (5,958) (6,489) (6,617)
Stock repurchases................................ (99,561) (11,707) (2,404)
Proceeds from issuance of senior notes........... - 124,894 114,656
Other............................................ 602 994 266
-------- -------- ---------
Net cash (used in) provided by financing activities (104,917) 107,692 105,901
-------- -------- ---------
Net (decrease) increase in cash and equivalents -
continuing operations............................ (106,197) 105,236 74,534
-------- -------- ---------
Discontinued operations:
Cash flows from operating activities:
Income from discontinued operations.............. 116,432 9,507 102,988
Change in deferred income taxes.................. (38,321) 18,280 (76,283)
Equity in subsidiaries........................... (10,312) (4,792) 33,330
Amortization and other........................... 4,956 (4,872) (13,953)
Change in income taxes........................... (72,755) (18,123) (46,082)
-------- --------- ---------
Net cash provided by operating activities........ - - -
-------- -------- ---------
Net (decrease) increase in cash equivalents........ (106,197) 105,236 74,534
Cash and equivalents at beginning of year.......... 220,782 115,546 41,012
-------- -------- ---------
Cash and equivalents at end of year................ $114,585 $220,782 $ 115,546
======== ======== =========
72
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PULTE CORPORATION
(Registrant)
March 4, 1997 /s/ Michael D. Hollerbach /s/ Vincent J. Frees
----------------------------- ------------------------------
Michael D. Hollerbach Vincent J. Frees
Executive Vice President Vice President and Controller
and Chief Financial Officer (Principal Accounting Officer)
(Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capabilities and on the dates indicated:
Signature Title Date
/s/ William J. Pulte Chairman of the Board of Directors March 4, 1997
- -------------------------- and Member of Board of Directors
William J. Pulte
/s/ Robert K. Burgess President, Chief Executive Officer March 4, 1997
- -------------------------- and Member of Board of Directors
Robert K. Burgess
/s/ Michael D. Hollerbach Executive Vice President, March 4, 1997
- -------------------------- Chief Financial Officer and
Michael D. Hollerbach Member of Board of Directors
Member of Board of Directors March 4, 1997
- --------------------------
Howard P. Berkowitz
Member of Board of Directors March 4, 1997
- --------------------------
James Grosfeld
/s/ Francis J. Sehn Member of Board of Directors March 4, 1997
- --------------------------
Francis J. Sehn
/s/ Ralph L. Schlosstein Member of Board of Directors March 4, 1997
- --------------------------
Ralph L. Schlosstein
/s/ Alan E. Schwartz Member of Board of Directors March 4, 1997
- --------------------------
Alan E. Schwartz
/s/ John J. Shea Member of Board of Directors March 4, 1997
- --------------------------
John J. Shea
73
SECOND AMENDMENT TO
CREDIT AGREEMENT
This Second Amendment to Credit Agreement (this "Second Amendment"),
dated as of December 31, 1996, is entered into by and among PULTE CORPORATION
(the "Borrower"), the lenders identified as such on the signature pages
attached hereto (the "Lenders"), the guarantors identified as such on the
signature pages attached hereto (the "Guarantors"), NATIONSBANK, N.A. f/k/a
NATIONSBANK, N.A. (Carolinas) as agent for the Lenders (in such capacity, the
"Agent") and Comerica Bank and The First National Bank of Chicago as
Co-Agents (the "Co-Agents"). All capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to such terms in the
Credit Agreement (as defined below).
RECITALS
A. The Borrower, the Lenders, the Agent and the Co-Agents entered
into that certain Credit Agreement dated as of January 5, 1995 (as amended by
that certain First Amendment to Credit Agreement dated as of January 4, 1996,
the "Credit Agreement").
B. The Guarantors (other than Pulte Lifestyle Communities, Inc.)
guaranteed all of the Borrower Obligations pursuant to those certain Guaranty
Agreements dated as of January 5, 1995, and Pulte Lifestyle Communities, Inc.
guaranteed all of the Borrower Obligations pursuant to that certain Guaranty
Agreement dated as of May 10, 1995 (collectively, the "Guaranty Agreements").
C. The Borrower has requested that the Credit Agreement be amended to
extend the Revolving-A Loans Maturity Date, the Revolving-B Loans Maturity
Date and the Revolving-C Loans Maturity Date, to modify the facility fee
structure under the Loan Documents and to amend the Loan Documents to permit
Obligors, subject to the terms of the Credit Agreement, to consolidate or
merge into or sell, assign, transfer or lease or otherwise dispose of all or
substantially all of their respective assets to Persons who are limited
liability companies or limited partnerships.
D. The Lenders have agreed to such modifications pursuant to the
terms set forth below.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Extension of Maturity Date.
(a) The following definition in Section 1.01 of the Credit
Agreement is amended in its entirety to read as follows:
"Revolving-A Loans Maturity Date" means January 5, 2002.
(b) The following definition in Section 1.01 of the Credit
Agreement is amended in its entirety to read as follows:
"Revolving-B Loans Maturity Date" means December 30, 1997;
provided that the Revolving-B Loans Maturity Date may be extended as
provided in Section 2.01B(b).
(c) The following definition in Section 1.01 of the Credit
Agreement is amended in its entirety to read as follows:
"Revolving-C Loans Maturity Date" means January 5, 2002.
2. Amendment to Section 3.03(a). Section 3.03(a) of the Credit
Agreement is amended in its entirety to read as follows:
3.03 Fees.
(a) Facility Fees. In consideration of the Revolving Loan
Commitments being made available by the Lenders hereunder, the
Borrower agrees to pay to the Agent, for the pro rata benefit of each
Lender, a fee equal to: (a) the Revolving-A Facility Fee Percentage
on (i) the Revolving-A Loan Commitment and (ii) that portion of the
Revolving-C Loan Commitment which is Active, (b) the Revolving-B
Facility Fee Percentage on the Revolving-B Loan Commitment, and (c)
the Revolving-C Facility Fee Percentage on that portion of the
Revolving-C Loan Commitment which is Inactive (each calculated on the
basis of the actual number of days elapsed in a 365 or 366 day year
as the case may be) (the "Facility Fees"). The Revolving-A Facility
Fee Percentage, the Revolving-B Facility Fee Percentage and the
Revolving-C Facility Fee Percentage mean the percentages
corresponding to the ratios and/or long term debt ratings described
below in effect as of the end of the fiscal quarter prior to when the
Facility Fees are due (as described below).
Pricing Debt to Long Term Revolving-A Revolving-B Revolving-C
Capitalization Debt Rating Facility Facility Facility
Ratio of Borrower Fee Percentage Fee Percentage Fee Percentage
--------------- ----------- -------------- -------------- --------------
LTET 20% GTET BBB+/Baa1 .100% .080% .090%
GT 20% but LTET 35% BBB/Baa2 .125% .090% .100%
GT 35% but LTET 45% BBB-/Baa3 .200% .125% .150%
GT 45% LT BBB-/Baa3 .375% .200% .250%
Legend: GT -- Greater Than
LT -- Less Than
GTET -- Greater Than or Equal To
LTET -- Less Than or Equal To
2
In the event the Pricing Debt to Capitalization Ratio and the long
term debt rating of the Borrower are not at the same level, the
applicable percentage shall be the lowest percentage corresponding to
the applicable levels (i.e. the lowest pricing for the Borrower);
provided, however, that if the Pricing Debt to Capitalization Ratio
corresponds to a level more than one level lower than the long term
debt rating of the Borrower, then the applicable percentage shall be
one level lower than the applicable percentage determined by the long
term debt rating of the Borrower.
The accrued Facility Fees shall be due and payable quarterly in
arrears on the last day of each fiscal quarter based on the Pricing
Debt to Capitalization Ratio or the long term debt rating determined
as of the end of the previous fiscal quarter (and shall also be due
and payable on the Revolving-A Loans Maturity Date, the Revolving-B
Loans Maturity Date, the Revolving-C Loans Maturity Date and on any
date that a Revolving Loan Commitment is reduced) for the immediately
preceding fiscal quarter (or portion thereof), beginning with the
first of such dates to occur after the Closing Date.
3. Amendment to Section 6.01. Section 6.01 of the Credit Agreement is
amended in its entirety to read as follows:
6.01 Organization and Good Standing. Each Obligor domiciled in
the United States and PFCI is (a) duly organized, validly existing
and in good standing under the laws of the State of its organization,
(b) duly qualified and in good standing as a foreign organization
authorized to do business in every jurisdiction where the failure to
so qualify would have a material adverse effect on the financial or
business condition of the Consolidated Pulte Group taken as a whole
and (c) has the requisite power and authority to own its properties
and to carry on its business as now conducted and as proposed to be
conducted.
4. Amendment to Section 6.02. Section 6.02 of the Credit Agreement is
amended in its entirety to read as follows:
6.02 Due Authorization. Each Obligor and PFCI (a) has the
requisite power and authority to execute, deliver and perform such of
the Loan Documents to which it is a party and to incur the
obligations herein and therein provided for, and (b) is duly
authorized to, and has been authorized by all necessary action, to
execute, deliver and perform such of the Loan Documents to which it
is a party.
5. Amendment to Section 8.04. Section 8.04 of the Credit Agreement is
amended in its entirety to read as follows:
8.04 Mergers, Consolidations and Transfers of Assets. None of
the Obligors will consolidate or merge into or sell, assign, transfer
or lease or otherwise dispose of all or
3
substantially all of its assets to another Person unless (a) the
Person is a corporation, limited liability company, limited
partnership or similar entity organized and existing under the laws
of the United States of America or any state thereof or the District
of Columbia, and, immediately after the transaction, such Person is a
member of the Consolidated Pulte Group, (b) the Person assumes all
the obligations of the Obligor relating to the Loan Documents and (c)
immediately after the transaction no Default or Event of Default
exists; provided that this clause (c) shall not restrict or be
applicable to a merger into, consolidation or liquidation, sale,
assignment, conveyance, transfer or lease or other disposition of all
or substantially all of the assets of an Obligor with or into the
Borrower or a Material Subsidiary or a wholly-owned Subsidiary that
is or concurrent with such transaction becomes an Obligor. Upon any
such consolidation, merger, sale, disposition, assignment or
transfer, the successor entity will be substituted for the Obligor
(including any merger or consolidation described in the proviso at
the end of the immediately preceding sentence) as applicable under
the Loan Documents. The successor entity may then exercise every
power and right of the Obligor under the Loan Documents, and such
Obligor will be released from all of its liabilities and obligations
in respect of the Loan Documents. In the event an Obligor leases all
or substantially all of its assets, the lessee entity will be the
successor to such Obligor and may exercise every power and right of
such Obligor under the Loan Documents, but such Obligor will not be
released from its obligations under the Loan Documents.
6. Representations and Warranties. The Borrower hereby represents and
warrants to the Lenders, the Agent and the Co-Agents that, as of the
date hereof, (a) the representations and warranties set forth in
Sections 6.01, 6.02, 6.03, 6.04, 6.05, 6.14, 6.16 and 6.17 are true
and correct (other than with respect to PFCI), (b) since the audited
financial statements of the Consolidated Pulte Group dated as of
December 31, 1995 and the unaudited financial statements of the
Consolidated Pulte Group dated as of September 30, 1996 all of which
have been previously delivered to the Lenders, there have occurred no
changes or circumstances which have had or are likely to have a
material adverse effect on the financial condition of the
Consolidated Pulte Group taken as a whole, (c) except as previously
disclosed in its annual and quarterly filings with the Securities and
Exchange Commission (none of which disclosed matters the Borrower
deems to be material), there are no actions, suits or legal,
equitable, arbitration or administrative proceedings pending or, to
the knowledge of the Borrower, threatened against any member of the
Consolidated Pulte Group which, if adversely determined, would likely
have a material adverse effect on the financial or business condition
of the Consolidated Pulte Group taken as a whole and (d) no Default
or Event of Default exists and is continuing.
7. Conditions Precedent. The effectiveness of this Second Amendment is
subject to the satisfaction of each of the following conditions:
4
(a) The Agent shall have received copies of this Second
Amendment duly executed by the Obligors.
(b) The Agent shall have received an opinion from counsel to
the Obligors, in form and substance satisfactory to the Agent,
addressed to the Agent on behalf of the Lenders and dated as of the
date hereof.
8. Acknowledgment of Guarantors. The Guarantors acknowledge and consent
to all of the terms and conditions of this Second Amendment and agree
that this Second Amendment and all documents executed in connection
herewith do not operate to reduce or discharge the Guarantors'
obligations under the Guaranty Agreements or the other Loan
Documents.
9. No Other Changes. Except as expressly modified and amended in this
Second Amendment, all of the terms, provisions and conditions of the
Loan Documents shall remain unchanged.
10. Counterparts. This Second Amendment may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an
original and all of which taken together shall constitute one and the
same instrument.
11. ENTIRETY. THIS SECOND AMENDMENT AND THE OTHER LOAN DOCUMENTS EMBODY
THE ENTIRE AGREEMENT BETWEEN THE PARTIES AND SUPERSEDE ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS, ORAL OR WRITTEN, IF ANY, RELATING TO
THE SUBJECT MATTER HEREOF.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
5
This Second Amendment is executed as of the day and year first
written above.
BORROWER
PULTE CORPORATION
By:_____________________________
Name:___________________________
Title:__________________________
GUARANTORS
BUILDER'S SUPPLY & LUMBER CO., INC.
By:_____________________________
Name:___________________________
Title:__________________________
FAIRMONT BUILDING CORPORATION
By:_____________________________
Name:___________________________
Title:__________________________
PULTE DIVERSIFIED COMPANIES, INC.
By:_____________________________
Name:___________________________
Title:__________________________
PULTE FINANCIAL COMPANIES, INC.
By:_____________________________
Name:___________________________
Title:__________________________
[signatures continued]
PULTE HOME CORPORATION
By:_____________________________
Name:___________________________
Title:__________________________
PULTE DEVELOPMENT CORPORATION
By:_____________________________
Name:___________________________
Title:__________________________
PULTE HOMES, INC.
By:_____________________________
Name:___________________________
Title:__________________________
PULTE HOMES OF GREATER KANSAS CITY, INC.
By:_____________________________
Name:___________________________
Title:__________________________
PULTE HOME CORPORATION OF MASSACHUSETTS
By:_____________________________
Name:___________________________
Title:__________________________
[signatures continued]
PULTE HOMES OF MICHIGAN CORPORATION
By:_____________________________
Name:___________________________
Title:__________________________
PULTE HOMES OF MINNESOTA CORPORATION
By:_____________________________
Name:___________________________
Title:__________________________
PULTE HOMES OF OHIO CORPORATION
By:_____________________________
Name:___________________________
Title:__________________________
PULTE HOME CORPORATION OF TEXAS
By:_____________________________
Name:___________________________
Title:__________________________
SEAN/CHRISTOPHER HOMES, INC.
By:_____________________________
Name:___________________________
Title:__________________________
[signatures continued]
PULTE LIFESTYLE COMMUNITIES, INC.
By:_____________________________
Name:___________________________
Title:__________________________
[signatures continued]
LENDERS
NATIONSBANK, N.A., in its capacity as Agent and
as a Lender
By:_____________________________
Name:___________________________
Title:__________________________
[signatures continued]
COMERICA BANK, in its capacity
as Co-Agent and as a Lender
By:____________________________
Name:__________________________
Title:_________________________
[signatures continued]
THE FIRST NATIONAL BANK OF CHICAGO,
in its capacity as Co-Agent and
as a Lender
By:____________________________
Name: ________________________
Title: ________________________
[signatures continued]
THE BANK OF NEW YORK
By:____________________________
Name:__________________________
Title:_________________________
[signatures continued]
SUNTRUST BANK
By:____________________________
Name:__________________________
Title:_________________________
By:____________________________
Name:__________________________
Title:_________________________
[signatures continued]
CREDIT LYONNAIS CHICAGO BRANCH
By:____________________________
Name:__________________________
Title:_________________________
CREDIT LYONNAIS CAYMAN ISLAND
By:____________________________
Name:__________________________
Title:_________________________
[signatures continued]
UNITED STATES NATIONAL BANK
OF OREGON, N.A.
By:____________________________
Name:__________________________
Title:_________________________
[signatures continued]
THE BANK OF TOKYO-MITSUBISHI LTD.,
CHICAGO BRANCH (f/k/a Bank of Tokyo,
Ltd. Chicago Branch)
By:____________________________
Name:__________________________
Title:_________________________
[signatures continued]
MICHIGAN NATIONAL BANK
By:____________________________
Name:__________________________
Title:_________________________
[signatures continued]