PULTE HOMES INC/MI/ - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2002
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-9804

PULTE HOMES, INC.
(Exact name of registrant as specified in its charter)


MICHIGAN (State or other jurisdiction of incorporation or organization)		38-2766606 (I.R.S. Employer Identification No.)

100 Bloomfield Hills Pkwy., Suite 300,
Bloomfield Hills, Michigan 48304
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (248) 647-2750

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.

YES x NO o

Number of shares of common stock outstanding as of October 31, 2002: 61,206,065

Total pages: 35

Listing of exhibits: 32

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS (Unaudited)
	Condensed Consolidated Balance Sheets, September 30, 2002 and December 31, 2001
	Consolidated Statements of Income, for the Three and Nine Months Ended September 30, 2002 and 2001
	Consolidated Statements of Shareholders’ Equity, for the Nine Months Ended September 30, 2002 and 2001
	Consolidated Statements of Cash Flows, for the Nine Months Ended September 30, 2002 and 2001
	Notes to Condensed Consolidated Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
PART II. OTHER INFORMATION
	Item 6. Exhibits and Reports On Form 8-K
SIGNATURES
CERTIFICATIONS
Certificaton of Chief Executive Officer
Certificaton of Chief Financial Officer

PULTE HOMES, INC.

INDEX


		Page No.


PART I FINANCIAL INFORMATION

	Item 1 Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets, September 30, 2002 and December 31, 2001	3

	Consolidated Statements of Income, for the Three and Nine Months Ended September 30, 2002 and 2001	4

	Consolidated Statements of Shareholders’ Equity, for the Nine Months Ended September 30, 2002 and 2001	5

	Consolidated Statements of Cash Flows, for the Nine Months Ended September 30, 2002 and 2001	6

	Notes to Condensed Consolidated Financial Statements	7

	Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

	Item 3 Quantitative and Qualitative Disclosures About Market Risk	31

	Item 4 Controls and Procedures	31

PART II OTHER INFORMATION

	Item 6 Exhibits and Reports on Form 8-K	32

SIGNATURES		33

CERTIFICATIONS		34

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

PULTE HOMES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($000’s omitted)


			September 30,		December 31,
			2002		2001

			(Unaudited)		(Note)
ASSETS
Cash and equivalents			$	212,077	$	72,144
Unfunded settlements				44,613		69,631
House inventory				1,080,636		875,690
Land inventory				3,358,424		2,958,073
Residential mortgage loans available-for-sale				329,161		431,735
Goodwill				307,693		307,693
Intangible assets, net of accumulated amortization of $9,509 and $3,396 in 2002 and 2001, respectively				153,491		159,604
Other assets				781,711		772,687
Deferred income taxes				51,351		67,019

	Total assets		$	6,319,157	$	5,714,276

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
	Accounts payable and accrued liabilities, including book overdrafts of $161,835 and $119,229 in 2002 and 2001, respectively		$	1,425,222	$	1,155,702
	Unsecured short-term borrowings			—		110,000
	Collateralized short-term debt, recourse solely to applicable non-guarantor subsidiary assets			301,695		413,675
	Income taxes			80,972		35,370
	Subordinated debentures and senior notes			1,918,364		1,722,864

		Total liabilities		3,726,253		3,437,611
Shareholders’ equity				2,592,904		2,276,665

			$	6,319,157	$	5,714,276

Note: The balance sheet at December 31, 2001, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

See accompanying Notes to Condensed Consolidated Financial Statements.

PULTE HOMES, INC.
CONSOLIDATED STATEMENTS OF INCOME
($000’s omitted, except per share data)
(Unaudited)


					Three Months Ended					Nine Months Ended
					September 30,					September 30,

					2002		2001			2002		2001

Revenues:
	Homebuilding				$	1,831,317	$	1,463,427		$	4,848,592	$	3,329,159
	Financial services					27,836		20,898			74,702		52,741
	Corporate					353		494			516		2,116

				Total revenues		1,859,506		1,484,819			4,923,810		3,384,016

Expenses:
	Homebuilding, principally cost of sales					1,652,004		1,322,192			4,411,714		3,023,029
	Financial services					10,091		11,839			31,179		32,167
	Corporate, net					13,607		16,790			43,286		41,371

				Total expenses		1,675,702		1,350,821			4,486,179		3,096,567

Other income:
	Equity in income of joint ventures					2,290		1,225			9,219		9,949

Income from continuing operations before income taxes						186,094		135,223			446,850		297,398
Income taxes						72,585		52,072			174,293		114,509

Income from continuing operations						113,509		83,151			272,557		182,889
Income (loss) from discontinued operations						9,937		(364	)		9,204		(937	)

Net income					$	123,446	$	82,787		$	281,761	$	181,952

Per share data:
	Basic:
		Income from continuing operations			$	1.87	$	1.56		$	4.52	$	3.99
		Income (loss) from discontinued operations				.16		(.01	)		.15		(.02	)

		Net income			$	2.03	$	1.55		$	4.67	$	3.97

	Assuming dilution:
		Income from continuing operations			$	1.83	$	1.53		$	4.42	$	3.89
		Income (loss) from discontinued operations				.16		(.01	)		.15		(.02	)

		Net income			$	1.99	$	1.52		$	4.57	$	3.87

	Cash dividends declared				$	.04	$	.04		$	.12	$	.12

	Number of shares used in calculation:
		Basic:
			Weighted-average common shares outstanding			60,792		53,421			60,343		45,777
		Assuming dilution:
			Effect of dilutive securities			1,158		1,097			1,371		1,188

			Adjusted weighted-average common shares and effect of dilutive securities			61,950		54,518			61,714		46,965

See accompanying Notes to Condensed Consolidated Financial Statements.

PULTE HOMES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
($000’s omitted)
(Unaudited)


									Accumulated
									Other
				Additional					Comprehensive
		Common		Paid-in		Unearned			Income			Retained
		Stock		Capital		Compensation			(Loss)			Earnings			Total

Shareholders’ Equity, December 31, 2001		$	592	$	862,881	$	(3,859	)	$	(13,969	)	$	1,431,020		$	2,276,665
Stock option exercise, including tax benefit of $20,638			18		57,722		—			—			—			57,740
Restricted stock award			2		11,316		(11,318	)		—			—			—
Restricted stock award amortization			—		—		3,905			—			—			3,905
Cash dividends declared			—		—		—			—			(7,314	)		(7,314	)
Comprehensive income (loss):
	Net income		—		—		—			—			281,761			281,761
	Change in fair value of derivatives		—		—		—			(1,607	)		—			(1,607	)
	Foreign currency translation adjustments		—		—		—			(18,246	)		—			(18,246	)

	Total comprehensive income															261,908

Shareholders’ Equity, September 30, 2002		$	612	$	931,919	$	(11,272	)	$	(33,822	)	$	1,705,467		$	2,592,904

Shareholders’ Equity, December 31, 2000		$	416	$	109,593	$	—		$	185		$	1,137,737		$	1,247,931
Common stock issued in acquisition			17		729,370		—			—			—			729,387
Stock option exercise, including tax benefit of $3,567			5		13,382		—			—			—			13,387
Restricted stock award			1		5,557		(5,558	)		—			—			—
Restricted stock award amortization			—		—		1,235			—			—			1,235
Cash dividends declared			—		—		—			—			(5,738	)		(5,738	)
Comprehensive income:
	Net income		—		—		—			—			181,952			181,952
	Change in fair value of derivatives		—		—		—			827			—			827
	Foreign currency translation adjustments		—		—		—			902			—			902

	Total comprehensive income															183,681

Shareholders’ Equity, September 30, 2001		$	439	$	857,902	$	(4,323	)	$	1,914		$	1,313,951		$	2,169,883

See accompanying Notes to Condensed Consolidated Financial Statements.

PULTE HOMES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($000’s omitted)
(Unaudited)


					Nine Months Ended
					September 30,

					2002			2001

Continuing operations:
Cash flows from operating activities:
	Net income				$	281,761		$	181,952
	Adjustments to reconcile net income to net cash flows used in operating activities:
				Amortization, depreciation and other		23,224			20,624
				Deferred income taxes		15,668			15,776
				Increase (decrease) in cash due to:
				Inventories		(626,917	)		(763,982	)
				Residential mortgage loans available-for-sale		102,574			(42,777	)
				Other assets		60,713			7,944
				Accounts payable and accrued liabilities		171,127			111,403
				Income taxes		66,194			50,145

Net cash provided by (used in) operating activities						94,344			(418,915	)

Cash flows from investing activities:
	Del Webb acquisition, net of cash acquired					—			10,310
	Increase in covered assets and FRF receivables					—			(2,876	)
	Other, net					4,392			(519	)

Net cash provided by (used in) investing activities						4,392			6,915

Cash flows from financing activities:
	Payment of long-term debt and bonds					(102,709	)		(206,861	)
	Proceeds from borrowings					343,479			793,287
	Repayment of borrowings					(224,776	)		(303,960	)
	Issuance of common stock					37,102			9,820
	Dividends paid					(7,314	)		(5,738	)
	Other, net					(4,585	)		1,221

Net cash provided by financing activities						41,197			287,769

Net increase (decrease) in cash and equivalents						139,933			(124,231	)
Cash and equivalents at beginning of period						72,144			183,985

Cash and equivalents at end of period					$	212,077		$	59,754

Supplemental disclosure of cash flow information-cash paid during the period for:
			Interest, net of amount capitalized		$	50,639		$	22,070

			Income taxes		$	89,271		$	44,789

	Non-cash investing activity:
		Issuance of common stock for Del Webb acquisition			$	—		$	720,111

See accompanying Notes to Condensed Consolidated Financial Statements.

PULTE HOMES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of presentation and significant accounting policies

     The condensed consolidated financial statements include the accounts of Pulte Homes, Inc., (the “Company” or “Pulte”), and all of its significant subsidiaries. The Company’s direct subsidiaries include Pulte Diversified Companies, Inc. (PDCI), Del Webb Corporation (Del Webb), and other subsidiaries, that are engaged in the homebuilding business. PDCI’s operating subsidiaries include Pulte Home Corporation (PHC), Pulte International Corporation (International) and other subsidiaries, which are engaged in the homebuilding business. PDCI’s non-operating thrift subsidiary, First Heights Bank, fsb (First Heights), is classified as a discontinued operation. The Company also has a mortgage banking company, Pulte Mortgage Company (PMC), which is a subsidiary of PHC.

     The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine-month period ended September 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. These financial statements should be read in conjunction with the Company’s consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001.

     Certain amounts previously reported in the 2001 financial statements and notes thereto were reclassified to conform to the 2002 presentation.

     Effective January 1, 2002, the Company reorganized its structure within Mexico to create a single company, Pulte Mexico S. de R.L. de C.V. (Pulte Mexico). Under the new ownership structure, the Company’s operations in Mexico, which were primarily conducted through joint ventures, have been combined into Pulte Mexico and are 63.8% owned by International. Results for 2002 include joint venture operations for one month and operations as a consolidated entity for eight months, as the operations in Mexico report on a one-month lag.

Other Comprehensive Income (Loss)

The accumulated balances related to each component of other comprehensive income (loss) are as follows ($000’s omitted):


		September 30,			December 31,
		2002			2001

Foreign currency translation adjustments:
	Argentina	$	(28,115	)	$	(14,110	)
	Mexico		(4,692	)		(451	)
Change in fair value of derivatives, net of income taxes of $650 in 2002 and $(371) in 2001			(1,015	)		592

		$	(33,822	)	$	(13,969	)

Intangible assets

Intangible assets, which consist of certain trademarks and tradenames, resulted from the acquisition of Del Webb in 2001. The determination of the value of these intangible assets was performed by independent appraisers and advisors utilizing proven valuation procedures. These intangible assets are routinely reviewed for impairment indicators or when events and circumstances warrant. If impairment indicators exist, an assessment of undiscounted future cash flows for the assets related to these intangibles is evaluated accordingly. If the results of the analysis indicate impairment, the assets are adjusted to fair market value. Trademarks and tradenames are amortized on a straight-line basis over a 20-year life.

PULTE HOMES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of presentation and significant accounting policies (continued)

New Accounting Pronouncements

     In June 2001, the Financial Accounting Standards Board (FASB) issued Statements of Financial Accounting Standards (SFAS) No. 141, “Business Combinations,” and No. 142, “Goodwill and Other Intangible Assets,” effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill will no longer be amortized but will be subject to annual impairment tests in accordance with SFAS No. 142. Other intangible assets will continue to be amortized over their useful lives.

     Goodwill represents the cost of acquired companies in excess of the fair value of net assets at acquisition date. The majority of the goodwill recorded resulted from the acquisition of Del Webb in 2001 and has been included in the homebuilding segment. Goodwill is reviewed by management for impairment annually, or whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

     Effective January 1, 2002, the Company adopted the nonamortization provisions of SFAS No. 142 related to the goodwill existing at June 30, 2001. The following table sets forth reported net income and earnings per share, as adjusted to exclude goodwill amortization expense ($000’s omitted, except per share data):


									Three Months		Nine Months
			Year ended December 31,						Ended		Ended
									September 30,		September 30,
			2001		2000		1999		2001		2001

Income from continuing operations, as reported			$	302,425	$	218,384	$	178,287	$	83,151	$	182,889

Net income, as reported			$	301,393	$	188,513	$	178,165	$	82,787	$	181,952

Income from continuing operations, as adjusted			$	306,587	$	222,546	$	182,249	$	84,192	$	186,011

Net income, as adjusted			$	305,555	$	192,675	$	182,307	$	83,828	$	185,074

Per share data, as reported:
	Basic:
		Income from continuing operations	$	6.16	$	5.29	$	4.12	$	1.56	$	4.00

		Net Income	$	6.14	$	4.56	$	4.12	$	1.55	$	3.97

	Diluted:
		Income from continuing operations	$	6.01	$	5.18	$	4.07	$	1.53	$	3.89

		Net income	$	5.99	$	4.47	$	4.07	$	1.52	$	3.87

Per share data, as adjusted
	Basic:
		Income from continuing operations	$	6.24	$	5.39	$	4.22	$	1.58	$	4.06

		Net income	$	6.22	$	4.66	$	4.22	$	1.57	$	4.04

	Diluted:
		Income from continuing operations	$	6.09	$	5.28	$	4.16	$	1.54	$	3.96

		Net Income	$	6.07	$	4.57	$	4.16	$	1.54	$	3.94

During the second quarter of 2002, the Company completed the first of the required impairment tests of goodwill as of January 1, 2002, which indicated that no impairment was present.

PULTE HOMES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of presentation and significant accounting policies (continued)

New Accounting Pronouncements (continued)

In October 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” effective for fiscal years beginning after December 15, 2001. This standard supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,” and provides a single accounting model for long-lived assets to be disposed of. SFAS No. 144 provides guidance on differentiating between assets held and used and assets to be disposed of. Assets to be disposed of would be classified as held for sale (and depreciation would cease) when management, having the authority to approve the action, commits to a plan to sell the asset(s) meeting all required criteria. The Company adopted this statement on January 1, 2002, which did not have a material effect on its earnings or financial position.

In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” Under the provisions of SFAS No. 145, gains and losses from extinguishment of debt can only be classified as extraordinary items if they meet the criteria in APB Opinion No. 30. This Statement also amends SFAS No. 13, “Accounting for Leases,” to eliminate an inconsistency between the accounting for sale-leaseback transactions and certain lease modifications that have economic effects that are similar. Finally, this Statement amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. Certain provisions of this Statement related to Statement 13 are effective for transactions occurring after May 15, 2002. All other provisions of this Statement will be effective for fiscal years beginning after May 15, 2002. Early application of all the provisions of this Statement is encouraged. SFAS No. 145 is not expected to have a material effect on the Company’s consolidated results of operations, financial position or cash flows.

In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which supercedes EITF No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan as was required by EITF No. 94-3. This statement is effective for disposal activities initiated after December 31, 2002, with early application encouraged. SFAS No. 146 is not expected to have a material effect on the Company’s consolidated results of operations or financial position.

2. Segment information

The Company has three reportable segments: Homebuilding, Financial Services and Corporate.

The Company’s Homebuilding segment consists of the following operations:

• Domestic Homebuilding, the Company’s core business, is engaged in the acquisition and development of land primarily for residential purposes within the continental United States and the construction of housing on such land targeted for the first-time, first and second move-up and active adult home buyer groups.

• International Homebuilding is primarily engaged in the acquisition and development of land for residential purposes, and the construction of housing on such land in Mexico, Puerto Rico and Argentina.

The Company’s Financial Services segment consists primarily of mortgage banking and title operations conducted through PMC and other Company subsidiaries.

Corporate is a non-operating business segment which supports the operations of the Company’s subsidiaries by acting as the internal source of financing, developing and implementing strategic initiatives centered on new business development and operating efficiencies, and providing the necessary administrative functions to support the Company as a publicly traded entity listed on the New York Stock Exchange.

PULTE HOMES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

2. Segment information (continued)


			Operating Data by Segment ($000's omitted)

			Three Months Ended						Nine Months Ended
			September 30,						September 30,

			2002			2001			2002			2001

Revenues:
	Homebuilding		$	1,831,317		$	1,463,427		$	4,848,592		$	3,329,159
	Financial services			27,836			20,898			74,702			52,741
	Corporate			353			494			516			2,116

Total revenues				1,859,506			1,484,819			4,923,810			3,384,016

Cost of sales:
	Homebuilding			1,462,356			1,172,987			3,868,532			2,661,910

Selling, general and administrative:
	Homebuilding			169,920			135,162			492,156			326,214
	Financial services			8,394			9,387			26,475			25,136
	Corporate			11,265			4,378			18,598			10,588

		Total selling, general and administrative		189,579			148,927			537,229			361,938

Interest:
	Homebuilding			13,254			9,108			33,144			23,344
	Financial services			1,697			2,452			4,704			7,031
	Corporate			9,624			10,431			28,999			25,736

		Total interest		24,575			21,991			66,847			56,111

Other (income) expense, net:
	Homebuilding			6,474			4,935			17,882			11,561
	Corporate			(7,282	)		1,981			(4,311	)		5,047

		Total other (income) expense, net		(808	)		6,916			13,571			16,608

Total costs and expenses				1,675,702			1,350,821			4,486,179			3,096,567

Equity in income of joint ventures:
	Homebuilding			867			993			5,158			7,065
	Financial services			1,423			232			4,061			2,884

		Total equity in income of joint ventures		2,290			1,225			9,219			9,949

Income (loss) from continuing operations before income taxes:
	Homebuilding			180,180			142,228			442,036			313,195
	Financial services			19,168			9,291			47,584			23,458
	Corporate			(13,254	)		(16,296	)		(42,770	)		(39,255	)

Total income from continuing operations before income taxes			$	186,094		$	135,223		$	446,850		$	297,398

PULTE HOMES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

2. Segment information (continued)


		Asset Data by Segment ($000's omitted)

				Financial
		Homebuilding		Services		Corporate		Total

At September 30, 2002:
	Inventory	$	4,439,060	$	—	$	—	$	4,439,060

	Total assets		5,770,653		373,321		175,183	$	6,319,157

At December 31, 2001:
	Inventory	$	3,833,763	$	—	$	—	$	3,833,763

	Total assets		5,060,583		485,297		168,396	$	5,714,276

3. Debt

In June 2002, the Company sold $300 million of 7.875% senior notes due in 2032. Net proceeds received from the sale were used to repay short-term debt, certain other indebtedness assumed in the Del Webb merger and for other general corporate purposes.

4. Discontinued operations

During the third quarter of 2002, the Company recorded an after-tax gain of approximately $10 million in connection with its thrift operations, which it discontinued in 1994. The gain related to the recognition of income tax benefits resulting from the favorable resolution of certain tax matters.

5. Supplemental guarantor information ($000’s omitted)

The Company has the following outstanding senior note obligations: (1) $175,000, 9.5%, due 2003, (2) $100,000, 7%, due 2003, (3) $112,000, 8.375%, due 2004, (4) $125,000, 7.3%, due 2005, (5) $200,000, 8.125%, due 2011, (6) $498,635, 7.875%, due 2011, (7) $150,000, 7.625%, due 2017; and (8) $300,000, 7.875%, due 2032. Obligations under these notes to pay principal, premium, if any, and interest are guaranteed jointly and severally on a senior basis by the Company’s wholly-owned Domestic Homebuilding subsidiaries (collectively, the Guarantors). Del Webb has the following outstanding senior subordinated note obligations: (1) $155,723, 9.375%, due 2009 and (2) $96,263, 10.25%, due 2010. Obligations under these notes to pay principal, premium, if any, and interest are guaranteed jointly and severally on a senior subordinated basis by the Guarantors. Such guarantees are full and unconditional. The principal non-Guarantors include PDCI, Pulte International Corporation, PMC and First Heights.

Supplemental consolidating financial information of the Company, specifically including such information for the Guarantors, is presented below. Investments in subsidiaries are presented using the equity method of accounting. Separate financial statements of the Guarantors are not provided as the consolidating financial information contained herein provides a more meaningful disclosure to allow investors to determine the nature of the assets held by and the operations of the combined groups.

PULTE HOMES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

5. Supplemental guarantor information (continued)

CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2002
($000’s omitted)


		Unconsolidated

												Consolidated
		Pulte		Guarantor		Non-Guarantor			Eliminating			Pulte
		Homes, Inc.		Subsidiaries		Subsidiaries			Entries			Homes, Inc.

ASSETS
Cash and equivalents		$	—	$	147,946	$	64,131		$	—		$	212,077
Unfunded settlements			—		55,280		(10,667	)		—			44,613
House and land inventories			—		4,293,683		145,377			—			4,439,060
Residential mortgage loans available-for-sale			—		—		329,161			—			329,161
Land held for sale			—		257,740		—			—			257,740
Goodwill			—		306,993		700			—			307,693
Intangible assets			—		153,491		—			—			153,491
Other assets			49,686		384,479		89,806			—			523,971
Deferred income taxes			51,351		—		—			—			51,351
Investment in subsidiaries			2,373,666		85,825		1,769,155			(4,228,646	)		—
Advances receivable — subsidiaries			1,969,315		169,128		(15,606	)		(2,122,837	)		—

		$	4,444,018	$	5,854,565	$	2,372,057		$	(6,351,483	)	$	6,319,157

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities		$	115,276	$	1,165,638	$	144,308		$	—		$	1,425,222
Collateralized short-term debt, recourse solely to applicable non-guarantor subsidiary assets			—		—		301,695			—			301,695
Income taxes			80,972		—		—			—			80,972
Subordinated notes and senior notes			1,652,449		265,915		—			—			1,918,364
Advances payable — subsidiaries			2,417		1,890,359		230,061			(2,122,837	)		—

	Total liabilities		1,851,114		3,321,912		676,064			(2,122,837	)		3,726,253
Shareholders’ equity			2,592,904		2,532,653		1,695,993			(4,228,646	)		2,592,904

		$	4,444,018	$	5,854,565	$	2,372,057		$	(6,351,483	)	$	6,319,157

PULTE HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

5. Supplemental guarantor information (continued)

CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2001
($000’s omitted)


		Unconsolidated

													Consolidated
		Pulte		Guarantor			Non-Guarantor			Eliminating			Pulte
		Homes, Inc.		Subsidiaries			Subsidiaries			Entries			Homes, Inc.

ASSETS
Cash and equivalents		$	15,621	$	33,643		$	22,880		$	—		$	72,144
Unfunded settlements			—		73,126			(3,495	)		—			69,631
House and land inventories			—		3,796,092			37,671			—			3,833,763
Residential mortgage loans available-for-sale			—		—			431,735			—			431,735
Land held for sale			—		231,397			—			—			231,397
Goodwill			—		306,993			700			—			307,693
Intangible assets			—		159,604			—			—			159,604
Other assets			53,369		381,610			106,311			—			541,290
Deferred income taxes			78,199		(11,225	)		45			—			67,019
Investment in subsidiaries			2,089,940		84,416			1,594,789			(3,769,145	)		—
Advances receivable — subsidiaries			1,729,832		932,092			42,639			(2,704,563	)		—

		$	3,966,961	$	5,987,748		$	2,233,275		$	(6,473,708	)	$	5,714,276

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities		$	132,300	$	950,486		$	72,916		$	—		$	1,155,702
Unsecured short-term borrowings			110,000		—			—			—			110,000
Collateralized short-term debt, recourse solely to applicable non-guarantor subsidiary assets			—		—			413,675			—			413,675
Income taxes			59,397		(24,027	)		—			—			35,370
Subordinated notes and senior notes			1,354,290		368,574			—			—			1,722,864
Advances payable — subsidiaries			34,309		2,474,025			196,229			(2,704,563	)		—

	Total liabilities		1,690,296		3,769,058			682,820			(2,704,563	)		3,437,611

	Shareholders’ equity		2,276,665		2,218,690			1,550,455			(3,769,145	)		2,276,665

		$	3,966,961	$	5,987,748		$	2,233,275		$	(6,473,708	)	$	5,714,276

PULTE HOMES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

5. Supplemental guarantor information (continued)

CONSOLIDATING STATEMENT OF OPERATIONS
For the three months ended September 30, 2002
($000’s omitted)


			Unconsolidated

														Consolidated
			Pulte			Guarantor			Non-Guarantor		Eliminating			Pulte
			Homes, Inc.			Subsidiaries			Subsidiaries		Entries			Homes, Inc.

Revenues:
	Homebuilding		$	—		$	1,780,776		$	50,541	$	—		$	1,831,317
	Financial services			—			3,676			24,160		—			27,836
	Corporate			20			333			—		—			353

Total revenues				20			1,784,785			74,701		—			1,859,506

Expenses:
	Homebuilding:
		Cost of sales		—			1,420,844			41,512		—			1,462,356
		Selling, general and administrative and other expense		1,630			179,067			8,951		—			189,648
	Financial services			—			1,007			9,084		—			10,091
	Corporate, net			17,899			(4,404	)		112		—			13,607

Total expenses				19,529			1,596,514			59,659		—			1,675,702

Other Income:
Equity in income of joint ventures				—			768			1,522		—			2,290

Income (loss) from continuing operations before income taxes and equity in income of subsidiaries				(19,509	)		189,039			16,564		—			186,094
Income taxes (benefit)				(7,007	)		73,734			5,858		—			72,585

Income (loss) from continuing operations before equity in income of subsidiaries				(12,502	)		115,305			10,706		—			113,509
Income from discontinued operations				9,937			—			—		—			9,937

Income (loss) before equity in income of subsidiaries				(2,565	)		115,305			10,706		—			123,446

Equity in income (loss) of subsidiaries:
	Continuing operations			126,011			9,896			49,165		(185,072	)		—
	Discontinued operations			—			—			—		—			—

				126,011			9,896			49,165		(185,072	)		—

Net income			$	123,446		$	125,201		$	59,871	$	(185,072	)	$	123,446

PULTE HOMES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

5. Supplemental guarantor information (continued)

CONSOLIDATING STATEMENT OF OPERATIONS
For the nine months ended September 30, 2002
($000’s omitted)


			Unconsolidated

															Consolidated
			Pulte			Guarantor			Non-Guarantor			Eliminating			Pulte
			Homes, Inc.			Subsidiaries			Subsidiaries			Entries			Homes, Inc.

Revenues:
	Homebuilding		$	—		$	4,724,418		$	124,174		$	—		$	4,848,592
	Financial services			—			9,931			64,771			—			74,702
	Corporate			149			367			—			—			516

Total revenues				149			4,734,716			188,945			—			4,923,810

Expenses:
	Homebuilding:
		Cost of sales		—			3,769,112			99,420			—			3,868,532
		Selling, general and administrative and other expense		7,032			510,229			25,921			—			543,182
	Financial services			—			2,918			28,261			—			31,179
	Corporate, net			45,119			(2,312	)		479			—			43,286

Total expenses				52,151			4,279,947			154,081			—			4,486,179

Other Income:
Equity in income of joint ventures				—			2,272			6,947			—			9,219

Income (loss) from continuing operations before income taxes and equity in income of subsidiaries				(52,002	)		457,041			41,811			—			446,850
Income taxes (benefit)				(21,003	)		178,492			16,804			—			174,293

Income (loss) from continuing operations before equity in income of subsidiaries				(30,999	)		278,549			25,007			—			272,557
Income (loss) from discontinued operations				9,207			—			(3	)		—			9,204

Income (loss) before equity in income of subsidiaries				(21,792	)		278,549			25,004			—			281,761

Equity in income (loss) of subsidiaries:
	Continuing operations			303,556			24,261			158,513			(486,330	)		—
	Discontinued operations			(3	)		—			—			3			—

				303,553			24,261			158,513			(486,327	)		—

Net income			$	281,761		$	302,810		$	183,517		$	(486,327	)	$	281,761

PULTE HOMES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

5. Supplemental guarantor information (continued)

CONSOLIDATING STATEMENT OF OPERATIONS
For the three months ended September 30, 2001
($000’s omitted)


			Unconsolidated

														Consolidated
			Pulte			Guarantor		Non-Guarantor			Eliminating			Pulte
			Homes, Inc.			Subsidiaries		Subsidiaries			Entries			Homes, Inc.

Revenues:
	Homebuilding		$	—		$	1,456,966	$	6,461		$	—		$	1,463,427
	Financial services			—			2,685		18,213			—			20,898
	Corporate			84			410		—			—			494

Total revenues				84			1,460,061		24,674			—			1,484,819

Expenses:
	Homebuilding:
		Cost of sales		—			1,167,335		5,652			—			1,172,987
		Selling, general and administrative and other expense		668			145,172		3,365			—			149,205
	Financial services			—			802		11,037			—			11,839
	Corporate, net			14,426			2,653		(289	)		—			16,790

Total expenses				15,094			1,315,962		19,765			—			1,350,821

Other Income:
Equity in income of joint ventures				—			419		806			—			1,225

Income (loss) from continuing operations before income taxes and equity in income of subsidiaries				(15,010	)		144,518		5,715			—			135,223
Income taxes (benefit)				(7,624	)		55,640		4,056			—			52,072

Income (loss) from continuing operations before equity in income of subsidiaries				(7,386	)		88,878		1,659			—			83,151
Income (loss) from discontinued operations				28			—		(392	)		—			(364	)

Income (loss) before equity in income of subsidiaries				(7,358	)		88,878		1,267			—			82,787

Equity in income (loss) of subsidiaries:
	Continuing operations			90,537			3,997		74,685			(169,219	)		—
	Discontinued operations			(392	)		—		—			392			—

				90,145			3,997		74,685			(168,827	)		—

Net income			$	82,787		$	92,875	$	75,952		$	(168,827	)	$	82,787

PULTE HOMES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

5. Supplemental guarantor information (continued)

CONSOLIDATING STATEMENT OF OPERATIONS
For the nine months ended September 30, 2001
($000’s omitted)


			Unconsolidated

														Consolidated
			Pulte			Guarantor		Non-Guarantor			Eliminating			Pulte
			Homes, Inc.			Subsidiaries		Subsidiaries			Entries			Homes, Inc.

Revenues:
	Homebuilding		$	—		$	3,302,901	$	26,258		$	—		$	3,329,159
	Financial services			—			6,179		46,562			—			52,741
	Corporate			134			1,982		—			—			2,116

Total revenues				134			3,311,062		72,820			—			3,384,016

Expenses:
	Homebuilding:
		Cost of sales		—			2,639,004		22,906			—			2,661,910
		Selling, general and administrative and other expense		2,002			351,585		7,532			—			361,119
	Financial services			—			1,834		30,333			—			32,167
	Corporate, net			35,540			6,708		(877	)		—			41,371

Total expenses				37,542			2,999,131		59,894			—			3,096,567

Other Income:
Equity in income of joint ventures				—			5,014		4,935			—			9,949

Income (loss) from continuing operations before income taxes and equity in income of subsidiaries				(37,408	)		316,945		17,861			—			297,398
Income taxes (benefit)				(18,858	)		122,146		11,221			—			114,509

Income (loss) from continuing operations before equity in income of subsidiaries				(18,550	)		194,799		6,640			—			182,889
Income (loss) from discontinued operations				(1,017	)		—		80			—			(937	)

Income (loss) before equity in income of subsidiaries				(19,567	)		194,799		6,720			—			181,952

Equity in income (loss) of subsidiaries:
	Continuing operations			201,439			10,948		178,460			(390,847	)		—
	Discontinued operations			80			—		—			(80	)		—

				201,519			10,948		178,460			(390,927	)		—

Net income			$	181,952		$	205,747	$	185,180		$	(390,927	)	$	181,952

PULTE HOMES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

5. Supplemental guarantor information (continued)

CONSOLIDATING STATEMENT OF CASH FLOWS
For the nine months ended September 30, 2002
($000’s omitted)


					Unconsolidated

																	Consolidated
					Pulte			Guarantor			Non-Guarantor			Eliminating			Pulte
					Homes, Inc.			Subsidiaries			Subsidiaries			Entries			Homes, Inc.

Continuing operations:
	Cash flows from operating activities:
		Net income			$	281,761		$	302,810		$	183,517		$	(486,327	)	$	281,761
		Adjustments to reconcile net income to net cash flows provided by (used in) operating activities:
				Equity in income of subsidiaries		(303,553	)		(24,261	)		(158,513	)		486,327			—
				Amortization, depreciation and other		4,683			21,895			(3,354	)		—			23,224
				Deferred income taxes		15,668			—			—			—			15,668
			Increase (decrease) in cash due to:
				Inventories		—			(584,796	)		(42,121	)		—			(626,917	)
				Residential mortgage loans available-for-sale		—			—			102,574			—			102,574
				Other assets		3,683			59,277			(2,247	)		—			60,713
				Accounts payable and accrued liabilities		(16,416	)		167,584			19,959			—			171,127
				Income taxes		(25,646	)		86,535			5,305			—			66,194

	Net cash provided by (used in) operating activities					(39,820	)		29,044			105,120			—			94,344

	Cash flows from investing activities:
		Dividends received from subsidiaries				—			23,500			—			(23,500	)		—
		Investment in subsidiary				—			(978	)		—			978			—
		Advances to affiliates				(161,079	)		80,821			33,764			46,494			—
		Other, net				—			1,405			2,987			—			4,392

	Net cash provided by (used in) investing activities					(161,079	)		104,748			36,751			23,972			4,392

	Cash flows from financing activities:
		Payment of long-term debt and bonds				(1,437	)		(101,272	)		—			—			(102,709	)
		Proceeds from borrowings				298,819			44,660			—			—			343,479
		Repayment of borrowings				(110,000	)		—			(114,776	)		—			(224,776	)
		Capital contributions from parent				—			—			978			(978	)		—
		Advances from affiliates				(31,892	)		37,123			41,263			(46,494	)		—
		Issuance of common stock				37,102			—			—			—			37,102
		Dividends paid				(7,314	)		—			(23,500	)		23,500			(7,314	)
		Other, net				—			—			(4,585	)		—			(4,585	)

	Net cash provided by (used in) financing activities					185,278			(19,489	)		(100,620	)		(23,972	)		41,197

	Net increase (decrease) in cash and equivalents					(15,621	)		114,303			41,251			—			139,933
	Cash and equivalents at beginning of period					15,621			33,643			22,880			—			72,144

	Cash and equivalents at end of period				$	—		$	147,946		$	64,131		$	—		$	212,077

PULTE HOMES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

5. Supplemental guarantor information (continued)

CONSOLIDATING STATEMENT OF CASH FLOWS
For the nine months ended September 30, 2001
($000’s omitted)


					Unconsolidated

																	Consolidated
					Pulte			Guarantor			Non-Guarantor			Eliminating			Pulte
					Homes, Inc.			Subsidiaries			Subsidiaries			Entries			Homes, Inc.

Cash flows from operating activities:
		Net income			$	181,952		$	205,747		$	185,180		$	(390,927	)	$	181,952
		Adjustments to reconcile net income to net cash flows provided by (used in) operating activities:
				Equity in income of subsidiaries		(201,519	)		(10,948	)		(178,460	)		390,927			—
				Amortization, depreciation and other		1,733			18,355			536			—			20,624
				Deferred income taxes		11,585			4,191			—			—			15,776
			Increase (decrease) in cash due to:
				Inventories		—			(746,034	)		(17,948	)		—			(763,982	)
				Residential mortgage loans available-for-sale		—			—			(42,777	)		—			(42,777	)
				Other assets		(8,175	)		52,504			(36,385	)		—			7,944
				Accounts payable and accrued liabilities		24,779			77,008			9,616			—			111,403
				Income taxes		5,828			41,754			2,563			—			50,145

Net cash provided by (used in) operating activities						16,183			(357,423	)		(77,675	)		—			(418,915	)

Cash flows from investing activities:
	Del Webb acquisition					(9,835	)		20,145			—			—			10,310
	Change in FRF assets					—			—			(2,876	)		—			(2,876	)
	Dividends received from subsidiaries					200,000			1,000			100,000			(301,000	)		—
	Investment in subsidiary					—			(705	)		—			705			—
	Advances to affiliates					(983,839	)		8,225			(36,601	)		1,012,215			—
	Other, net					468			381			(1,368	)		—			(519	)

Net cash provided by (used in) investing activities						(793,206	)		29,046			59,155			711,920			6,915

Cash flows from financing activities:
	Payment of long-term debt and bonds					—			(199,861	)		(7,000	)		—			(206,861	)
	Proceeds from borrowings					755,737			797			36,753			—			793,287
	Repayment of borrowings					—			(303,960	)		—			—			(303,960	)
	Capital contributions from parent					—			—			705			(705	)		—
	Advances from affiliates					17,204			947,169			47,842			(1,012,215	)		—
	Issuance of common stock					9,820			—			—			—			9,820
	Dividends paid					(5,738	)		(200,000	)		(101,000	)		301,000			(5,738	)
	Other, net					—			—			1,221			—			1,221

Net cash provided by (used in) financing activities						777,023			244,145			(21,479	)		(711,920	)		287,769

Net decrease in cash and equivalents						—			(84,232	)		(39,999	)		—			(124,231	)
Cash and equivalents at beginning of period						—			133,860			50,125			—			183,985

Cash and equivalents at end of period					$	—		$	49,628		$	10,126		$	—		$	59,754

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview:

During the three and nine months ended September 30, 2002, we achieved record financial results. Much of our success can be attributed to our merger with Del Webb Corporation, which contributed a full three and nine months in 2002 compared to the two months contributed to both periods in 2001. A summary of our operating results by business segment for the three and nine-month periods ended September 30, 2002 and 2001 is as follows ($000’s omitted):


		Three Months Ended						Nine Months Ended
		September 30,						September 30,

		2002			2001			2002			2001

Pre-tax income (loss):
	Homebuilding operations	$	180,180		$	142,228		$	442,036		$	313,195
	Financial services operations		19,168			9,291			47,584			23,458
	Corporate		(13,254	)		(16,296	)		(42,770	)		(39,255	)

Pre-tax income from continuing operations			186,094			135,223			446,850			297,398
Income taxes			72,585			52,072			174,293			114,509

Income from continuing operations			113,509			83,151			272,557			182,889
Income (loss) from discontinued operations			9,937			(364	)		9,204			(937	)

Net income		$	123,446		$	82,787		$	281,761		$	181,952

Per share data — assuming dilution:
Income from continuing operations		$	1.83		$	1.53		$	4.42		$	3.89
Income (loss) from discontinued operations			.16			(.01	)		.15			(.02	)

Net income		$	1.99		$	1.52		$	4.57		$	3.87

A comparison of pre-tax income (loss) for the three and nine-month periods ended September 30, 2002 and 2001 is as follows:

• Continued strong demand for new housing, the addition and expansion of Del Webb operations, coupled with our ability to effectively manage selling pace and price drove pre-tax income of our homebuilding business segment to increase 27% and 41%, respectively. Domestic average unit selling price increased by 5% and 8%, respectively. Additionally, domestic gross margin percentages were up slightly over the prior year periods as a result of purchase accounting adjustments recorded in 2001.

• Pre-tax income of our financial services business segment more than doubled over the prior year periods as a result of increased volume, a favorable interest rate environment, effective leverage of overhead costs and the inclusion of Del Webb’s mortgage operations.

• Pre-tax loss of our corporate business segment declined 19% for the three-month period primarily as a result of gains related to certain non-operating commercial property held for sale. Pre-tax loss for the nine-month period increased 9% principally from higher interest costs, related to an increase in debt levels to support the growth of the business.

During the three-month period ended September 30, 2002, we recorded an after-tax gain of approximately $10 million in discontinued operations. The gain related to the recognition of income tax benefits resulting from the favorable resolution of certain tax matters associated with the thrift operations we discontinued in 1994.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Homebuilding Operations:

The Company’s Homebuilding segment consists of the following operations:

• Domestic Homebuilding operations are conducted in 43 markets, located throughout 25 states. Domestic Homebuilding offers a broad product line to meet the needs of the first-time, first and second move-up and active adult homebuyers.

• International Homebuilding operations are conducted through subsidiaries of Pulte International Corporation in Mexico, Puerto Rico and Argentina. International Homebuilding product offerings focus on the demand of first-time buyers and middle to upper income consumer groups. We also have agreements in place with multi-national corporations to provide social interest and employee housing in Mexico.

Certain operating data relating to our homebuilding operations and Pulte-affiliated joint ventures for the three and nine months ended September 30, 2002 and 2001, are as follows ($000’s omitted):


				Three Months Ended				Nine Months Ended
				September 30,				September 30,

				2002		2001		2002		2001

Pulte/Pulte-affiliate homebuilding settlement revenues:
		Domestic		$	1,752,045	$	1,436,264	$	4,637,918	$	3,239,772
		International			55,265		48,402		160,006		145,909

Total Homebuilding				$	1,807,310	$	1,484,666	$	4,797,924	$	3,385,681

Pulte/Pulte-affiliate settlements — units:
		Domestic			7,280		6,253		19,375		14,572
		International:
			Pulte		1,950		35		4,403		178
			Pulte-affiliated entities		28		1,583		992		4,858

	Total International				1,978		1,618		5,395		5,036

Total Pulte and Pulte-affiliate settlements — units					9,258		7,871		24,770		19,608

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Homebuilding Operations (continued):

Domestic Homebuilding:

The Domestic Homebuilding operations represent our core business. Operations are conducted in 43 markets, located throughout 25 states, and are presented geographically as follows:


Northeast:		Connecticut, Delaware, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island, Virginia

Southeast:		Florida, Georgia, North Carolina, South Carolina, Tennessee

Midwest:		Illinois, Indiana, Kansas, Michigan, Minnesota, Ohio

Central:		Colorado, Texas

West:		Arizona, California, Nevada

For the three and nine-month periods ended September 30, 2002, our greater Phoenix market operations accounted for 10% of Domestic Homebuilding settlement revenues, 11% of settlement units and 11% of net new orders. For the three-month period ended September 30, 2001, these operations accounted for 10% of Domestic Homebuilding settlement revenues, 11% of settlement units and 10% of net new orders. No other individual market represented more than 10% of total Domestic Homebuilding settlement revenues, settlement units or unit net new orders for the three and nine-month periods ended September 30, 2002 or 2001.

The following table presents selected unit information for our Domestic Homebuilding operations by geographic group:


		Three Months Ended				Nine Months Ended
		September 30,				September 30,

		2002		2001		2002		2001

Unit settlements:
	Northeast		593		499		1,513		1,343
	Southeast		2,122		2,009		5,686		5,369
	Midwest		1,269		998		2,947		2,188
	Central		1,101		1,008		2,854		2,510
	West		2,195		1,739		6,375		3,162

			7,280		6,253		19,375		14,572

Net new orders — units:
	Northeast		680		470		2,134		1,657
	Southeast		2,305		2,331		6,820		6,818
	Midwest		1,151		1,030		3,697		3,004
	Central		1,174		1,095		3,766		3,363
	West		2,695		4,308		7,955		6,025

			8,005		9,234		24,372		20,867

Net new orders — dollars ($000’s omitted)		$	2,011,000	$	2,228,000	$	6,056,000	$	4,705,000

Unit backlog:
	Northeast						1,452		1,124
	Southeast						3,693		3,590
	Midwest						2,125		1,723
	Central						1,815		1,667
	West						4,590		3,668

							13,675		11,772

Backlog at September 30 — dollars ($000’s omitted)						$	3,536,000	$	2,802,000

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Homebuilding Operations (continued):

Domestic Homebuilding (continued):

The following selected unit information for our traditional Pulte domestic homebuilding operations and the Del Webb homebuilding operations has been presented for comparative purposes. The merger with Del Webb was effective July 31, 2001, therefore, results for three and nine months ended September 30, 2001 of Del Webb only include two months of operations.


		Three Months Ended				Nine Months Ended
		September 30,				September 30,

		2002		2001		2002		2001

Unit settlements:
	Pulte		5,655		5,164		14,532		13,483
	Del Webb		1,625		1,089		4,843		1,089

			7,280		6,253		19,375		14,572

Net new orders — units:
	Pulte		6,022		4,507		18,540		16,140
	Del Webb		1,983		904		5,832		904
	Del Webb acquired backlog		—		3,823		—		3,823

			8,005		9,234		24,372		20,867

Unit settlements increased 16% and 33% for the three and nine months ended September 30, 2002, respectively. Excluding Del Webb, unit settlements increased 10% and 8% for the three and nine-month periods. Net new orders increased 48% and 43%, excluding the Del Webb acquired backlog of 3,823 units, for the three and nine-month periods ended September 30, 2002, respectively. Excluding both the acquired backlog and net new orders of Del Webb, net new orders increased 34% and 15%, respectively. Ending backlog at September 30, 2002, which represents orders for homes that have not yet closed, grew to 13,675 units valued at over $3.5 billion.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Homebuilding Operations (continued):

Domestic Homebuilding (continued):

The following table presents a summary of pre-tax income for our Domestic Homebuilding operations for the three and nine months ended September 30, 2002 and 2001 ($000’s omitted):


	Three Months Ended						Nine Months Ended
	September 30,						September 30,

	2002			2001			2002			2001

Home sale revenue (settlements)	$	1,752,045		$	1,436,264		$	4,637,918		$	3,239,772
Land sale revenue		28,731			20,702			86,500			63,129
Home cost of sales		(1,398,781	)		(1,150,561	)		(3,708,250	)		(2,593,208	)
Land cost of sales		(22,063	)		(16,774	)		(60,862	)		(45,796	)
Selling, general and administrative expense		(161,489	)		(131,475	)		(467,370	)		(317,273	)
Interest ^(a)		(13,254	)		(9,108	)		(33,144	)		(23,344	)
Other income (expense), net		(5,362	)		(5,065	)		(14,537	)		(8,004	)

Pre-tax income	$	179,827		$	143,983		$	440,255		$	315,276

Average sales price	$	241		$	230		$	239		$	222


^(a)		We capitalize interest cost into homebuilding inventories and charge the interest to homebuilding interest expense over a period that approximates the average life cycle of our communities.

Continued strong consumer demand for new construction, the addition and expansion of the Del Webb operations, combined with our ability to effectively manage selling pace and price of a broad product line, drove increases in home sale revenue, gross margin and pre-tax income for the three and nine months ended September 30, 2002 when compared to the prior year periods.

The average selling price for homes closed increased 5% to $241,000 for the three months ended September 30, 2002, and 8% to $239,000 for the nine months then ended. The increase benefited from Del Webb product offerings, which averaged between $255,000 and $265,000 over the past year. Excluding Del Webb, the average selling price increased 5% for the three and nine months ended September 30, 2002.

Gross profit margins were 20.2% and 20.0%, respectively, for the three and nine-month periods ended September 30, 2002, compared to 19.9% and 20.0%, respectively, for the same periods in the prior year. Purchase accounting adjustments associated with the merger reduced gross margin by approximately $0.3 million and $3.2 million, respectively, for the three and nine-month periods ended September 30, 2002, compared to $9.4 million for both prior year periods. Excluding purchase accounting adjustments, gross margins would have been 20.2% and 20.3% compared to 20.5% and 20.2% in the prior year periods. The change from prior year periods can be attributed to a gradual shift in market and product mix resulting in increased unit volume at lower margins.

As a percent of home settlement revenue, selling, general and administrative expenses were flat for the three months and increased 30 basis points for the nine months ended September 30, 2002. Excluding purchase accounting adjustments from both years, selling, general and administrative expenses as a percent of home settlement revenue were up 30 and 20 basis points, respectively, over the prior year three and nine-month periods, reflecting a full period of Del Webb expenses in 2002.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Homebuilding Operations (continued):

Domestic Homebuilding (continued):

Interest expense increased $4.1 million and $9.8 million, respectively, over the prior three and nine-month periods ended September 30, as a result of an increase in debt levels to support the growth of the business.

The change in other income (expense), net for nine months ended September 30, 2002 is primarily related to higher purchase accounting adjustments in 2002 and income from a land development joint venture and an insurance settlement recognized in 2001 partially offset by the non-amortization of goodwill in 2002.

We consider land development one of our core competencies. This includes the development and entitlement of certain land positions for sale primarily to other homebuilders, as well as to retail and commercial establishments. Land sales increased over the prior year due to the addition of the Del Webb operations. Revenues and their related gains/losses may vary significantly between periods, depending on the timing and profitability of land sales. We continue to evaluate existing land positions to ensure the most effective use of invested capital.

Our Domestic Homebuilding operations controlled approximately 118,500 lots at September 30, 2002, of which approximately 84,400 lots were owned and approximately 34,100 lots were controlled through option agreements that had been approved for purchase. At September 30, 2001, we controlled approximately 120,400 lots, of which approximately 87,700 lots were owned, and approximately 32,700 lots were controlled through option agreements. In addition, there were approximately 39,900 lots under option at September 30, 2002, pending approval, that are under review and evaluation for future use by our Domestic Homebuilding operations. This compared to 26,500 lots at September 30, 2001.

Domestic Homebuilding inventory at September 30, 2002 was approximately $4.2 billion, of which $3.1 billion was related to land and land development. At September 30, 2001, Domestic Homebuilding inventory approximated $3.9 billion, of which $2.9 billion was related to land and land development.

Included in other assets is $247 million in land held for disposition as of September 30, 2002, as compared to $274 million in the prior year.

International Homebuilding:

International Homebuilding operations are primarily conducted through subsidiaries of Pulte International Corporation in Mexico, Puerto Rico and Argentina.

Mexico Effective January 1, 2002, Pulte International reorganized its structure within Mexico to create a single company, Pulte Mexico S. de R.L. de C.V. (Pulte Mexico), which ranks as one of the largest builders in the country. Prior to the reorganization, these operations were conducted primarily through five joint ventures throughout Mexico. Under the new ownership structure, which combines the largest of these entities, the Company owns 63.8% of Pulte Mexico and has consolidated Pulte Mexico into our financial statements. The new operating structure facilitates growth, enables operating leverage and improves efficiencies through standardized systems and procedures.

Puerto Rico Operations in Puerto Rico are conducted through International’s 100%-owned subsidiary, Pulte International Caribbean Corporation and two joint ventures.

Argentina Operations in Argentina, which are based in the greater Buenos Aires area, are conducted through Pulte SRL, International’s 100%-owned Argentine subsidiary.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Homebuilding Operations (continued):

International Homebuilding (continued):

The following table presents selected financial data for our International Homebuilding operations for the three and nine months ended September 30, 2002 and 2001 ($000’s omitted):


		Three Months Ended						Nine Months Ended
		September 30,						September 30,

		2002			2001			2002			2001

Revenues		$	50,541		$	6,461		$	124,174		$	26,258
Cost of sales			(41,512	)		(5,652	)		(99,420	)		(22,906	)
Selling, general and administrative expense			(8,431	)		(3,687	)		(24,786	)		(8,941	)
Other income (expense), net			(591	)		176			(1,449	)		536
Minority interest			(227	)		—			(623	)		—
Equity in income of joint ventures			573			947			3,885			2,972

Pre-tax income (loss)		$	353		$	(1,755	)	$	1,781		$	(2,081	)

Unit settlements:
	Pulte		1,950			35			4,403			178
	Pulte-affiliated entities		28			1,583			992			4,858

Total Pulte and Pulte-affiliates			1,978			1,618			5,395			5,036

Increased revenues in 2002 are due to the consolidation of the operations in Mexico for eight months of 2002 and a full period of the operations in Argentina, which had only begun recognizing its first closings in June of 2001. Revenues from our operations in Mexico were $44.9 million and $107.1 million for the three and nine-month periods ended September 30, 2002, respectively. Our operations in Argentina contributed $3.6 million and $13.8 million, respectively. The increases in cost of sales and selling, general and administrative expense are a result of the consolidation of our operations in Mexico partially offset by a decline in start-up costs associated with our operations in Argentina. Equity in income of joint ventures in 2002 represents one month of the joint venture operations in Mexico and our joint venture located in San Juan, Puerto Rico, which had its first closings during the third quarter of 2001.

Our operations in Argentina recorded a $102,000 transaction loss for the nine months ended September 30, 2002, as the value of the Argentine peso continued to fluctuate following the Argentine government’s decision to de-link its valuation from the U.S. Dollar. We also recorded a foreign currency translation loss of $14.0 million, as a component of other comprehensive income during the first nine months of 2002. It remains unclear at this time how the financial and currency markets in Argentina will be impacted for the remainder of 2002 or how the current economic situation may affect customer home buying attitudes and the homebuilding business in general. At September 30, 2002, our remaining investment, net of foreign currency translation adjustments, in Argentina approximated $10.8 million.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Financial Services Operations:

We conduct our financial services operations primarily through Pulte Mortgage Corporation (PMC), our mortgage banking subsidiary. Pre-tax income of our financial services operations for the three and nine-month periods ended September 30, 2002, was $19.2 million and $47.6 million, respectively, compared to $9.3 million and $23.5, respectively, for the prior year periods. This improvement in performance was a result of increased volume, a favorable interest rate environment, effective leverage of overhead costs and the inclusion of Del Webb’s mortgage operations.

The following table presents mortgage origination data for PMC:


		Three Months Ended				Nine Months Ended
		September 30,				September 30,

		2002		2001		2002		2001

Total originations:
	Loans		5,740		4,938		14,960		12,209

	Principal ($000’s omitted)	$	945,100	$	768,500	$	2,421,300	$	1,871,300

Originations for Pulte customers:
	Loans		4,809		3,651		12,765		9,047

	Principal ($000’s omitted)	$	791,000	$	560,800	$	2,064,500	$	1,396,100

Mortgage origination principal volume for the three and nine-month periods ended September 30, 2002, increased 23% and 29%, respectively, from the comparable 2001 periods due in large part to an increase in capture rate and the inclusion of Del Webb volume. Del Webb contributed $157 million and $454 million, respectively, of the total mortgage origination principal volume for the three and nine-month periods ended September 30, 2002 compared to $95 million in both prior year periods. Refinancings accounted for approximately 8% of total originations for the three months ended September 30, 2002, compared to 6% in the prior year. For the nine months ended September 30, refinancings represented 6% of total originations in 2002 compared to 10% in 2001. Adjustable rate mortgages (ARMs) represented 14% of total originations for the three months ended September 30, 2002, compared to 3% in the prior year. ARMs represented 12% and 2% of total originations for the nine months ended September 30, 2002 and 2001, respectively. Our Domestic Homebuilding customers continue to account for the majority of total loan production, representing 84% and 85%, respectively, of total PMC volume for the three and nine-month periods ended September 30, 2002, compared to 82% and 78%, respectively, in the prior year. At September 30, 2002, loan backlog, which represents loan originations in process that have not yet closed, increased 44% to $1.3 billion as compared with $876 million at September 30, 2001.

Income from our title operations increased to $3.1 million for the three months ended September 30, 2002, from $2.3 million in 2001, and to $8.0 million for the nine months ended, from $5.3 million in 2001. Our minority interest in Su Casita, a Mexican mortgage banking company, contributed income of $0.9 million for the three months ended September 30, 2002, compared to a loss of $0.3 million in 2001, and $2.8 million for the nine months ended September 30, 2002 compared to $1.7 million in 2001.

We hedge portions of our forecasted cash flow from sales of closed mortgage loans with derivative financial instruments. The effect of these derivative financial instruments continues to be immaterial to our financial position, results of operations and cash flows.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Corporate:

Corporate is a non-operating business segment which supports the operations of our subsidiaries by acting as the internal source of financing, developing and implementing strategic initiatives centered on new business development and operating efficiencies, and providing the administrative support associated with being a publicly traded entity. As a result, the Corporate segment’s operating results will vary from quarter to quarter as these strategic initiatives evolve.

The following table presents Corporate results of operations for the three and nine months ended September 30, 2002 and 2001 ($000’s omitted):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,

	2002		2001		2002		2001

Net interest expense	$	9,271	$	9,937	$	28,483	$	23,620
Other corporate expenses, net		3,983		6,359		14,287		15,635

Loss before income taxes	$	13,254	$	16,296	$	42,770	$	39,255

The change in other corporate expenses, net for both the three and nine months ended September 30, 2002 can be primarily attributed to income recognized from the sale and adjustment to fair value of various non-operating parcels of commercial land held for sale, partially offset by stock compensation expense.

Interest expense for the three months ended September 30, 2002 was relatively consistent with the 2001 period. Interest expense for the nine months increased by approximately $4.9 million as a result of an increase in debt levels to support the growth of the business. Interest incurred for the three and nine-month periods ended September 30, 2002 and 2001, excluding interest incurred by our financial services operations, was approximately $40.1 and $119.3 million and $37.5 and $73.0 million, respectively.

Corporate net interest expense is net of amounts capitalized into homebuilding inventories. Amounts capitalized are charged to homebuilding interest expense over a period that approximates the average life cycle of our communities. Information related to corporate interest capitalized into inventory is as follows ($000’s omitted):


	Three Months Ended						Nine Months Ended
	September 30,						September 30,

	2002			2001			2002			2001

Interest in inventory at beginning of period	$	107,447		$	30,189		$	68,595		$	24,202
Interest capitalized		31,510			26,996			90,253			47,219
Interest expensed		(13,254	)		(9,108	)		(33,145	)		(23,344	)

Interest in inventory at end of period	$	125,703		$	48,077		$	125,703		$	48,077

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Liquidity and Capital Resources:

Net cash provided by operating activities increased to $94.3 million from a use of cash of $418.9 million in the prior year. An increase in net income, a smaller use of cash to build inventories and a larger decrease in PMC’s holdings of residential mortgage loans available-for-sale primarily drove this change. Net cash from investing activities was relatively consistent with the prior year. Net cash from financing activities decreased from $287.8 million in 2001 to $41.2 million in 2002, as proceeds from the issuance of $300 million senior notes were used for the repayment of certain Del Webb debt and our revolving credit facility.

We finance our homebuilding land acquisitions, development and construction activities from internally generated funds and existing credit agreements. We had no borrowings under our $570 million unsecured revolving credit facility at September 30, 2002.

PMC provides mortgage financing for many of its home sales and uses its own funds and borrowings made available pursuant to various committed and uncommitted credit arrangements which, on August 23, 2002, was increased to $500 million, an amount deemed adequate to cover foreseeable needs. There were approximately $302 million of borrowings outstanding under the $500 million PMC arrangement at September 30, 2002. Mortgage loans originated by PMC are subsequently sold to outside investors. We anticipate that there will be adequate mortgage financing available for purchasers of our homes.

Our income tax liabilities are affected by a number of factors. We anticipate that our effective tax rate for 2002 will approximate 39%.

On April 23, 2002, we filed a $1 billion mixed securities shelf registration (Form S-3) with the Securities and Exchange Commission. Under this shelf registration we may sell up to $1 billion in various debt and equity securities. Net proceeds from the sale of these securities will be used for general corporate purposes, which may include debt repayments, capital expenditures, acquisitions or share repurchases.

On June 12, 2002, we sold $300 million of 7.875% senior notes, due 2032, from our $1 billion shelf registration. Cash provided by operations, combined with the net proceeds from this sale of senior notes, were used to call, redeem and repurchase approximately $99 million of Del Webb’s senior subordinated notes and to repay short-term borrowings under our revolving bank credit arrangements. We expect to continue to exercise the early call provisions of these higher-rate senior subordinated notes, the next of which will be May 2003.

At September 30, 2002, we had cash and equivalents of $212.1 million and total long-term indebtedness of $1.9 billion. Sources of our working capital at September 30, 2002, include cash and equivalents, our $570 million committed unsecured revolving credit facility, PMC’s $500 million revolving credit facilities and $700 million available under our current shelf registration. Our debt-to-total capitalization, excluding our non-guarantor asset secured borrowings, was approximately 42.5% as of September 30, 2002, and approximately 39.7% net of cash and equivalents. We expect to maintain our net debt-to-total capitalization at the 40% level through the end of the year. It is our intent to exercise, over time, the early call provisions of the senior subordinated notes issued by Del Webb, as allowed under these notes. We routinely monitor current operational requirements and financial market conditions to evaluate the use of available financial sources, including securities offerings.

On October 11, 2002, our operating entity in Argentina entered into a $3 million revolving credit facility in order to provide an additional financial resource to support the operations. The credit facility has been guaranteed by Pulte Homes, Inc.

On October 22, 2002, the Company’s Board of Directors approved a stock repurchase plan of up to $100 million. Shares will be purchased from time-to-time on the open market, depending on market conditions.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Liquidity and Capital Resources (continued):

Inflation:

We, and the homebuilding industry in general, may be adversely affected during periods of high inflation, because of higher land and construction costs. Inflation also increases our financing, labor and material costs. In addition, higher mortgage interest rates significantly affect the affordability of permanent mortgage financing to prospective homebuyers. We attempt to pass through to our customers any increases in our costs through increased sales prices and, to date, inflation has not had a material adverse effect on our results of operations. However, there is no assurance that inflation will not have a material adverse impact on our future results of operations.

Safe Harbor Statement

As a cautionary note, except for the historical information contained herein, certain matters discussed in Item 2., Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 3., Quantitative and Qualitative Disclosures About Market Risk, are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among other things, (1) general economic and business conditions; (2) interest rate changes and the availability of mortgage financing; (3) the relative stability of debt and equity markets; (4) competition; (5) the availability and cost of land and other raw materials used by the Company in its homebuilding operations; (6) the availability and cost of insurance covering risks associated with our business; (7) shortages and the cost of labor; (8) weather related slowdowns; (9) slow growth initiatives and/or local building moratoria; (10) governmental regulation, including the interpretation of tax, labor and environmental laws; (11) changes in consumer confidence and preferences; (12) required accounting changes; (13) terrorist acts and other acts of war; and (14) other factors over which the Company has little or no control.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative disclosure:

We are subject to interest rate risk on our long-term debt. We seek to minimize our interest rate exposure by using variable rate financing; however, we run the risk of interest rate declines with respect to our fixed rate long term corporate debt instruments. The following table sets forth, as of September 30, 2002, our long-term debt obligations, principal cash flows by scheduled maturity, weighted average interest rates and estimated fair market value ($000’s omitted):


																							Fair
																							Value
			2002			2003			2004			2005			2006		Thereafter			Total			9/30/2002

Rate sensitive liabilities:
	Fixed interest rate debt:
		Pulte Homes, Inc. public debt instruments	$	—		$	275,000		$	112,000		$	125,000		$	—	$	1,400,621		$	1,912,621		$	2,105,176
		Average interest rate		—			8.59	%		8.38	%		7.30	%		—		8.47	%		8.23	%		—
		Pulte Home Corporation other limited-recourse debt	$	452		$	15,833		$	12,833		$	2,764		$	—	$	—		$	31,822		$	31,822
		Average interest rate		7.00	%		6.46	%		6.70	%		9.00	%		—		—			6.78	%		—

Qualitative disclosure:

This information can be found on page 28 of Part II, of Item 7A., Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2001, and is incorporated herein by reference.

ITEM 4. CONTROLS AND PROCEDURES

During the 90-day period prior to the filing date of this report, management, including the Company’s President & Chief Executive Officer and Senior Vice President & Chief Financial Officer, evaluated the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures. Based upon, and as of the date of that evaluation, the President & Chief Executive Officer and Senior Vice President & Chief Financial Officer concluded that the disclosure controls and procedures were effective, in all material respects, to ensure that information required to be disclosed in the reports the Company files and submits under the Exchange Act is recorded, processed, summarized and reported as and when required.

There have been no significant changes in the Company’s internal controls or in other factors, which could significantly affect internal controls subsequent to the date the Company carried out its evaluation. There were no significant deficiencies or material weaknesses identified in the evaluation and, therefore, no corrective actions were taken.

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits


		Page Herein or Incorporated
Exhibit Number and Description		By Reference From

99.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Page 36

99.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Page 37

(b) Report on Form 8-K

On October 23, 2002, we filed a Current Report on Form 8-K, which included a press release dated October 22, 2002, announcing our earnings for the third quarter ended September 30, 2002. The Form 8-K also included a press release dated October 22, 2002, announcing the Board of Directors approval of a $100 million stock repurchase program.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		PULTE HOMES, INC.

		/s/ Roger A. Cregg Roger A. Cregg Senior Vice President and Chief Financial Officer (Principal Financial Officer)

		/s/ Vincent J. Frees Vincent J. Frees Vice President and Controller (Principal Accounting Officer)

		Date: November 13, 2002

CERTIFICATIONS

I, Mark J. O’Brien, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Pulte Homes, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:


		a.		designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

		b.		evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

		c.		presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):


		a.		all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

		b.		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date: November 13, 2002
		/s/ Mark J. O’Brien
		Mark J. O’Brien
		President and Chief Executive Officer

CERTIFICATIONS (continued)

I, Roger A. Cregg, certify that:


		a.		designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

		b.		evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

		c.		presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;


		a.		all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

		b.		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and


Date: November 13, 2002
		/s/ Roger A. Cregg
		Roger A. Cregg
		Senior Vice President and Chief Financial Officer

10-Q EXHIBIT INDEX


EXHIBIT NO.		DESCRIPTION

EX-99.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

EX-99.2		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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	The condensed consolidated financial statements include the accounts of Pulte Homes, Inc., (the “Company” or “Pulte”), and all of its significant subsidiaries. The Company’s direct subsidiaries include Pulte Diversified Companies, Inc. (PDCI), Del Webb Corporation (Del Webb), and other subsidiaries, that are engaged in the homebuilding business. PDCI’s operating subsidiaries include Pulte Home Corporation (PHC), Pulte International Corporation (International) and other subsidiaries, which are engaged in the homebuilding business. PDCI’s non-operating thrift subsidiary, First Heights Bank, fsb (First Heights), is classified as a discontinued operation. The Company also has a mortgage banking company, Pulte Mortgage Company (PMC), which is a subsidiary of PHC.

	The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine-month period ended September 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. These financial statements should be read in conjunction with the Company’s consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001.

	Certain amounts previously reported in the 2001 financial statements and notes thereto were reclassified to conform to the 2002 presentation.

	Effective January 1, 2002, the Company reorganized its structure within Mexico to create a single company, Pulte Mexico S. de R.L. de C.V. (Pulte Mexico). Under the new ownership structure, the Company’s operations in Mexico, which were primarily conducted through joint ventures, have been combined into Pulte Mexico and are 63.8% owned by International. Results for 2002 include joint venture operations for one month and operations as a consolidated entity for eight months, as the operations in Mexico report on a one-month lag.


	Other Comprehensive Income (Loss)

	The accumulated balances related to each component of other comprehensive income (loss) are as follows ($000’s omitted):


	New Accounting Pronouncements

	In June 2001, the Financial Accounting Standards Board (FASB) issued Statements of Financial Accounting Standards (SFAS) No. 141, “Business Combinations,” and No. 142, “Goodwill and Other Intangible Assets,” effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill will no longer be amortized but will be subject to annual impairment tests in accordance with SFAS No. 142. Other intangible assets will continue to be amortized over their useful lives.

	Goodwill represents the cost of acquired companies in excess of the fair value of net assets at acquisition date. The majority of the goodwill recorded resulted from the acquisition of Del Webb in 2001 and has been included in the homebuilding segment. Goodwill is reviewed by management for impairment annually, or whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

	Effective January 1, 2002, the Company adopted the nonamortization provisions of SFAS No. 142 related to the goodwill existing at June 30, 2001. The following table sets forth reported net income and earnings per share, as adjusted to exclude goodwill amortization expense ($000’s omitted, except per share data):

		•	Domestic Homebuilding, the Company’s core business, is engaged in the acquisition and development of land primarily for residential purposes within the continental United States and the construction of housing on such land targeted for the first-time, first and second move-up and active adult home buyer groups.

		•	International Homebuilding is primarily engaged in the acquisition and development of land for residential purposes, and the construction of housing on such land in Mexico, Puerto Rico and Argentina.


	The Company has the following outstanding senior note obligations: (1) $175,000, 9.5%, due 2003, (2) $100,000, 7%, due 2003, (3) $112,000, 8.375%, due 2004, (4) $125,000, 7.3%, due 2005, (5) $200,000, 8.125%, due 2011, (6) $498,635, 7.875%, due 2011, (7) $150,000, 7.625%, due 2017; and (8) $300,000, 7.875%, due 2032. Obligations under these notes to pay principal, premium, if any, and interest are guaranteed jointly and severally on a senior basis by the Company’s wholly-owned Domestic Homebuilding subsidiaries (collectively, the Guarantors). Del Webb has the following outstanding senior subordinated note obligations: (1) $155,723, 9.375%, due 2009 and (2) $96,263, 10.25%, due 2010. Obligations under these notes to pay principal, premium, if any, and interest are guaranteed jointly and severally on a senior subordinated basis by the Guarantors. Such guarantees are full and unconditional. The principal non-Guarantors include PDCI, Pulte International Corporation, PMC and First Heights.

	Supplemental consolidating financial information of the Company, specifically including such information for the Guarantors, is presented below. Investments in subsidiaries are presented using the equity method of accounting. Separate financial statements of the Guarantors are not provided as the consolidating financial information contained herein provides a more meaningful disclosure to allow investors to determine the nature of the assets held by and the operations of the combined groups.

5.		Supplemental guarantor information (continued)

		CONDENSED CONSOLIDATING BALANCE SHEET SEPTEMBER 30, 2002 ($000’s omitted)

	•		Continued strong demand for new housing, the addition and expansion of Del Webb operations, coupled with our ability to effectively manage selling pace and price drove pre-tax income of our homebuilding business segment to increase 27% and 41%, respectively. Domestic average unit selling price increased by 5% and 8%, respectively. Additionally, domestic gross margin percentages were up slightly over the prior year periods as a result of purchase accounting adjustments recorded in 2001.

	•		Pre-tax income of our financial services business segment more than doubled over the prior year periods as a result of increased volume, a favorable interest rate environment, effective leverage of overhead costs and the inclusion of Del Webb’s mortgage operations.

	•		Pre-tax loss of our corporate business segment declined 19% for the three-month period primarily as a result of gains related to certain non-operating commercial property held for sale. Pre-tax loss for the nine-month period increased 9% principally from higher interest costs, related to an increase in debt levels to support the growth of the business.

	•		Domestic Homebuilding operations are conducted in 43 markets, located throughout 25 states. Domestic Homebuilding offers a broad product line to meet the needs of the first-time, first and second move-up and active adult homebuyers.

	•		International Homebuilding operations are conducted through subsidiaries of Pulte International Corporation in Mexico, Puerto Rico and Argentina. International Homebuilding product offerings focus on the demand of first-time buyers and middle to upper income consumer groups. We also have agreements in place with multi-national corporations to provide social interest and employee housing in Mexico.

	1.		I have reviewed this quarterly report on Form 10-Q of Pulte Homes, Inc.;

	2.		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

	4.		The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: