10-Q 1 e-6239.txt QUARTERLY REPORT FOR QTR ENDING 12-31-00 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the period ended DECEMBER 31, 2000. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from N/A to N/A. Commission File Number: 1-4785 DEL WEBB CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 86-0077724 (State or other jurisdiction (IRS Employer Identification Number) of incorporation or organization) 6001 NORTH 24TH STREET, PHOENIX, ARIZONA 85016 (Address of principal executive offices) (Zip Code) (602) 808-8000 (Registrant's phone number, including area code) NONE -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of January 31, 2001 Registrant had outstanding 18,623,079 shares of common stock. DEL WEBB CORPORATION FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 2000 TABLE OF CONTENTS PART I. FINANCIAL INFORMATION PAGE Item 1. Financial Statements: Consolidated Balance Sheets as of December 31, 2000, June 30, 2000 and December 31, 1999......................... 1 Consolidated Statements of Earnings for the three and six months ended December 31, 2000 and 1999..................... 2 Consolidated Statements of Cash Flows for the six months ended December 31, 2000 and 1999..................... 3 Notes to Consolidated Financial Statements................... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......................... 10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K............................. 19 DEL WEBB CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE DATA)

~~SEPTEMBER~~DECEMBER 3031, ~~JUNE~~DECEMBER 3031, ~~SEPTEMBER~~2000 JUNE 30, ~~2000 2000~~ 1999 (UNAUDITED) 2000 (UNAUDITED) ----------- ----------- ----------- ASSETS Real estate inventories (Notes 2, 3 and 6) $ 1,~~793~~778,~~390~~853 $ 1,755,398 $ 1,~~728~~832,~~900~~939 Cash and short-term investments ~~7,598~~141 21,038 ~~14,613~~32 Receivables 3244,~~588~~517 36,121 4331,~~002~~336 Property and equipment, net 95,~~737~~476 96,637 7476,~~157~~417 Other assets 7475,~~257~~920 71,563 ~~121~~72,~~363~~207 ----------- ----------- ----------- $ 21,~~003~~994,~~570~~907 $ 1,980,757 $ 12,~~982~~012,~~035~~931 =========== =========== =========== LIABILITIES AND SHAREHOLDERS EQUITY Notes payable, senior and subordinated debt (Note 3) $ 1982,~~040,832~~592 $ 1,005,424 $ 1,~~107~~092,~~582~~303 Contractor and trade accounts payable 91110,~~070~~872 113,574 ~~114~~135,~~485~~930 Accrued liabilities and other payables ~~138~~151,~~625~~099 158,351 ~~118~~146,~~320~~801 Home sale deposits ~~169~~159,~~409~~547 165,762 ~~185~~166,~~505~~755 Deferred income taxes (Note 4) 4856,~~478~~107 47,030 2426,~~662~~834 Income taxes payable (Note 4) 1513,~~676~~290 8,230 119,~~925~~705 ----------- ----------- ----------- Total liabilities 1,~~504~~473,~~090~~507 1,498,371 1,~~562~~578,~~479~~328 ----------- ----------- ----------- Shareholders' equity: Common stock, $.001 par value. Authorized 30,000,000 shares; issued 18,~~383~~522,~~409~~162 shares at ~~September~~December 3031, 2000, 18,360,213 shares at June 30, 2000 and 18,~~225~~292,~~643~~128 shares at ~~September~~December 3031, 1999 18 18 18 Additional paid-in capital ~~171~~173,~~068~~626 170,112 ~~169~~170,~~081~~565 Retained earnings ~~332~~355,~~722~~355 316,240 ~~255~~269,~~859~~549 ----------- ----------- ----------- ~~503~~528,~~808~~999 486,370 ~~424~~440,~~958~~132 Less deferred compensation (47,~~328~~599) (3,984) (5,~~402~~529) ----------- ----------- ----------- Total shareholders' equity ~~499~~521,~~480~~400 482,386 ~~419~~434,~~556~~603 ----------- ----------- ----------- $ 21,~~003~~994,~~570~~907 $ 1,980,757 $ 12,~~982~~012,~~035~~931 =========== =========== ===========

See accompanying notes to consolidated financial statements. 1 DEL WEBB CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (IN THOUSANDS EXCEPT PER SHARE DATA) (UNAUDITED)

THREE MONTHS ENDED ~~SEPTEMBER~~SIX 30MONTHS ENDED DECEMBER 31, DECEMBER 31, ---------------------- ---- ~~2000 1999~~ --------- --------- ~~CASH~~2000 ~~FLOWS~~1999 ~~FROM~~2000 ~~OPERATING~~1999 ~~ACTIVITIES:~~-------- ~~Cash~~-------- ~~received~~-------- ~~from~~-------- ~~customers~~Revenues ~~related~~(Note to5) ~~operating community home sales~~ $ ~~398~~486,~~082~~953 $ ~~427,026 Cash received from commercial land and facility sales at operating communities 16,~~495 6,~~344~~613 ~~Cash paid for costs related to home construction at operating communities (291~~$904,~~312)~~611 ~~(275~~$905,~~205)~~175 -------- -------- -------- -------- ~~Net~~Costs ~~cash~~and ~~provided~~expenses by(Note ~~operating~~5): ~~community~~Home ~~sales activities 123~~construction,~~265~~ ~~158,165 Cash paid for~~ land ~~acquisitions~~and atother ~~operating~~375,397 ~~communities~~388,808 ~~(12~~692,~~742)~~335 (7702,~~534)~~637 ~~Cash~~Selling, ~~paid~~general ~~for~~and ~~lot~~administrative ~~development~~58,924 at65,282 ~~operating communities (73~~116,~~310)~~351 ~~(73~~122,~~488)~~221 ~~Cash~~Interest ~~paid~~(Note ~~for~~6) ~~amenity~~17,266 ~~development~~20,133 ~~at operating communities (23~~34,~~069)~~807 ~~(55~~37,~~919)~~390 --------- --------- ~~Net cash provided by operating communities 14,144 21,224 Cash paid for costs related to communities in the pre~~-~~operating~~------- ~~stage~~ -------- ~~(14~~451,~~716)~~587 ~~Cash received from mortgage operations 3~~474,~~763~~223 1843,~~684~~493 ~~Cash paid for residential land development project (872) (2~~862,~~514)~~248 ~~Cash paid for corporate activities (28,432) (26,870) Interest paid (31,971) (30,869) Cash paid for income taxes (13) (3,507)~~ --------- --------- ~~NET CASH USED FOR OPERATING ACTIVITIES (43,381) (55,568)~~ --------- --------- ~~CASH~~Earnings ~~FLOWS~~before ~~FROM~~income ~~INVESTING~~taxes ~~ACTIVITIES:~~35,366 ~~Purchases~~21,390 of61,118 ~~property~~42,927 ~~and~~Income ~~equipment~~taxes (~~1,558)~~Note (4~~,006~~) ~~Investments~~12,732 in7,701 ~~life insurance policies (2~~22,~~402)~~003 (115,~~538)~~454 --------- --------- ~~NET CASH USED FOR INVESTING ACTIVITIES (3,960) (5,544)~~ --------- --------- ~~CASH~~Net ~~FLOWS~~earnings ~~FROM~~$ ~~FINANCING~~22,634 ~~ACTIVITIES:~~$ ~~Borrowings~~13,689 ~~109~~$ 39,~~031~~115 ~~121~~$ 27,~~820~~473 ~~Repayments~~======== of======== ~~debt~~======== ~~(75,370)~~======== ~~(68,979)~~Weighted ~~Stock~~average ~~repurchases~~shares outstanding -- ~~(3)~~basic ~~Proceeds~~18,482 ~~from~~18,271 ~~exercise~~18,428 of18,247 ~~common~~======== ~~stock~~======== ~~options~~======== ~~240~~======== ~~218~~Weighted ~~---------~~average ~~---------~~shares ~~NET~~outstanding ~~CASH~~- ~~PROVIDED~~assuming BYdilution ~~FINANCING~~18,934 ~~ACTIVITIES~~18,683 3318,~~901~~721 5318,~~056~~655 ~~---------~~======== ~~---------~~======== ~~NET~~======== ~~DECREASE~~======== INNet ~~CASH~~earnings ~~AND~~per ~~SHORT~~share -~~TERM~~ ~~INVESTMENTS~~basic ~~(13,440)~~$ ~~(8,056)~~1.22 ~~CASH~~$ ~~AND~~.75 ~~SHORT-TERM~~$ ~~INVESTMENTS~~2.12 AT$ ~~BEGINNING~~1.51 OF======== ~~PERIOD~~======== ~~21,038~~======== ~~22,669~~======== ~~---------~~Net ~~---------~~earning ~~CASH~~per ~~AND~~share ~~SHORT~~-~~TERM~~ ~~INVESTMENTS~~assuming ATdilution ~~END~~$ OF1.20 ~~PERIOD~~$ .73 $ ~~7,598~~2.09 $ ~~14,613~~1.47 ======== ======== ======== ========

See accompanying notes to consolidated financial statements. 2 DEL WEBB CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)

~~THREE~~SIX MONTHS ENDED ~~SEPTEMBER~~DECEMBER 3031, -------------------------- 2000 1999 --------- --------- ~~Reconciliation~~CASH ofFLOWS ~~net~~FROM ~~earnings~~OPERATING toACTIVITIES: ~~net~~Cash ~~cash~~received ~~used~~from ~~for~~customers related to operating ~~activities:~~community ~~Net~~home ~~earnings~~sales $ 16810,~~481~~976 $ 13884,~~784~~807 ~~Allocation~~Cash ofreceived ~~non-cash~~from ~~common~~commercial land and facility sales at operating communities 39,312 25,580 Cash paid for costs related to ~~costs~~home ~~and~~construction ~~expenses~~at operating communities (564,327) ~~excluding~~(558,351) ~~interest~~--------- 97--------- Net cash provided by operating community sales activities 285,~~402~~961 90352,~~998~~036 ~~Allocation~~Cash ofpaid ~~capitalized~~for ~~interest~~land toacquisitions at operating communities (6,382) (19,130) Cash paid for lot development at operating communities (146,435) (161,475) Cash paid for amenity development at operating communities (52,159) (115,414) --------- --------- Net cash provided by operating communities 80,985 56,017 Cash paid for costs ~~and~~related ~~expenses~~to 17communities in the pre-operating stage -- (14,~~541~~716) 17Cash received from mortgage operations 4,~~257~~642 ~~Deferred~~4,974 ~~compensation~~Cash ~~amortization~~received/(paid) for residential land development project 352 ~~763~~(3,056) ~~Depreciation~~Cash ~~and~~paid ~~other~~for ~~amortization~~corporate 2activities (39,~~651~~453) 2(31,~~800~~519) ~~Deferred~~Interest paid (48,686) (48,914) Cash paid for income taxes 1(7,~~448~~013) 2(10,~~152~~997) ~~Net~~--------- ~~increase~~--------- inNET ~~home~~CASH ~~construction~~USED ~~costs~~FOR OPERATING ACTIVITIES (129,~~798~~173) (4048,~~254~~211) ~~Land~~--------- ~~acquisitions~~--------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (123,~~742~~864) (78,~~534~~533) ~~Lot~~Investments ~~development~~in life insurance policies (732,~~310~~577) (771,~~434~~566) ~~Amenity~~--------- ~~development~~--------- NET CASH USED FOR INVESTING ACTIVITIES (236,~~069~~441) (6710,~~198~~099) ~~Net~~--------- ~~change~~--------- inCASH ~~other~~FLOWS ~~assets~~FROM ~~and~~FINANCING ~~liabilities~~ACTIVITIES: Borrowings 184,946 189,437 Repayments of debt (57190,~~337~~832) 9(154,~~098~~032) Stock repurchases (1) (3) Proceeds from exercise of common stock options 604 271 --------- --------- ~~Net~~NET ~~cash~~CASH ~~used~~(USED ~~for~~FOR)/PROVIDED ~~operating~~BY ~~activities~~FINANCING $ACTIVITIES (435,~~381~~283) $35,673 --------- --------- NET INCREASE (55DECREASE) IN CASH AND SHORT-TERM INVESTMENTS (20,~~568~~897) (22,637) CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD 21,038 22,669 --------- --------- CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 141 $ 32 ========= =========

See accompanying notes to consolidated financial statements. 3 DEL WEBB CORPORATION AND SUBIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (IN THOUSANDS) (UNAUDITED)

InSIX ~~Thousands~~MONTHS ENDED DECEMBER 31, -------------------------- 2000 1999 --------- ---------~~---~~ ~~September~~Reconciliation ~~30,~~of ~~June~~net ~~30,~~earnings ~~September~~to ~~30,~~net ~~2000~~cash ~~2000~~used ~~1999~~for ~~(Unaudited)~~operating ~~(Unaudited)~~activities: ~~----------~~Net ~~----------~~earnings $ 39,115 $ 27,473 Amortization of non-~~---------~~cash ~~Home~~common ~~construction~~costs in costs $and ~~273~~expenses,~~588~~ $excluding ~~260~~interest 205,~~790~~939 ~~$ 305~~213,~~622~~946 ~~Unallocated~~Amortization ~~improvement~~of ~~and~~capitalized ~~amenity~~interest in costs 1and expenses 34,~~119~~807 37,~~301~~390 1Deferred compensation amortization 692 3,~~097~~653 Depreciation and other amortization 5,~~643~~384 15,~~074,115~~890 ~~Unallocated~~Deferred ~~capitalized~~income ~~interest~~taxes ~~112~~9,~~948~~077 ~~105~~4,~~213~~325 ~~92,819~~Net ~~Land~~increase ~~held~~in ~~for~~home ~~housing~~construction ~~206,713~~costs ~~205~~(28,~~142~~400) ~~191~~(24,~~306~~043) Land ~~held~~acquisitions ~~for~~(6,382) ~~future~~(19,130) Lot development or(146,435) ~~sale~~(161,475) 80Amenity development (52,~~840~~159) 86(115,~~610~~414) 65Net change in other assets and liabilities (70,~~038~~811) ~~----------~~(20,826) ---------- ---------- ~~$1,793,390~~Net cash used for operating activities $1 (9,~~755,398~~173) $1 (48,~~728,900~~211) ========== =========~~= ==========~~

See accompanying notes to consolidated financial statements. 4 DEL WEBB CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION The consolidated financial statements include the accounts of Del Webb Corporation and its subsidiaries (the "Company"). In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments, primarily eliminations of all significant intercompany transactions and accounts) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. Certain financial statement items from the prior year have been reclassified to be consistent with the current year financial statement presentation. The consolidated financial statements should be read in conjunction with the consolidated financial statements and the related disclosures contained in the Company's Annual Report on Form 10-K for the year ended June 30, 2000, filed with the Securities and Exchange Commission. In the Consolidated Statements of Cash Flows, the Company defines operating communities as communities generating revenues from home closings. Communities in the pre-operating stage are those not yet generating revenues from home closings. The results of operations for the six months ended December 31, 2000 are not necessarily indicative of the results to be expected for the full fiscal year. (2) REAL ESTATE INVENTORIES The components of real estate inventories are:

In Thousands --------------------------------------------~~---~~ ~~September~~December 3031, ~~June~~December 3031, ~~September~~2000 June 30, ~~2000 2000~~ 1999 (Unaudited) 2000 (Unaudited) ----------- ---------- ----------- 9Home ~~3/4%~~construction ~~Senior~~costs ~~Subordinated Debentures due 2003, net, unsecured~~ $ 99289,~~006~~190 $ 98260,~~903~~790 $ 98289,~~595~~411 9%Unallocated ~~Senior~~improvement ~~Subordinated~~and ~~Debentures~~amenity ~~due~~costs ~~2006~~1, ~~net~~101,967 ~~unsecured 98~~1,~~518 98~~097,~~449~~643 981,~~244 9 3/4% Senior Subordinated Debentures due 2008~~150,138 ~~net,~~Unallocated ~~unsecured~~capitalized ~~146,459~~interest ~~146~~120,~~338~~625 ~~145~~105,~~975~~213 ~~9 3/8% Senior Subordinated Debentures due 2009~~99,092 ~~net,~~Land ~~unsecured~~held ~~195,997~~for ~~195,880~~housing ~~195~~197,~~530~~624 ~~10 1/4% Senior Subordinated Debentures due 2010~~205,142 ~~net, unsecured 144,373 144,223 143,772 Notes payable to banks under a senior revolving credit facility and short-term lines of credit, unsecured 272,000~~ 235,~~000~~726 ~~353,304~~Land ~~Real~~held ~~estate~~for ~~and~~future ~~other~~development ~~notes,~~or ~~primarily~~sale ~~secured 84~~69,~~479~~447 86,~~631~~610 7258,~~162~~572 ---------- ---------- ---------- $1,~~040~~778,~~832~~853 $1,~~005~~755,~~424~~398 $1,~~107~~832,~~582~~939 ========== ========== ==========

At December 31, 2000 the Company had 388 completed homes and 855 homes under construction that were not subject to a sales contract. These homes represented $69.9 million of home construction costs at December 31, 2000. At December 31, 1999 the Company had 294 completed homes and 895 homes under construction (representing $52.9 million of home construction costs) that were not subject to a sales contract. Included in land held for future development or sale at December 31, 2000 were 256 acres of commercial land and 1,062 acres of residential land that are currently being marketed for sale at the Company's active adult communities. Also included is 573 acres of commercial land currently being marketed for sale at the Company's Anthem Arizona project. 5 DEL WEBB CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (3) NOTES PAYABLE, SENIOR AND SUBORDINATED DEBT Notes payable, senior and subordinated debt consists of:

~~THREE~~In ~~MONTHS~~Thousands ~~ENDED SEPTEMBER 30, CHANGE~~ ----------------- ------------------------ December 31, December 31, 2000 June 30, 1999 ~~AMOUNT~~(Unaudited) ~~PERCENT~~2000 (Unaudited) ---- ------ ---------- ---------- ~~OPERATING~~9 ~~DATA: Number of net new orders: Active adult communities: Sun City Grand 217 318 (101) (31.8~~3/4%) ~~Sun~~Senior ~~Cities~~Subordinated ~~Las~~Debentures ~~Vegas~~due ~~351~~2003, ~~254~~net, 97unsecured ~~38.2%~~$ ~~Sun~~99,109 ~~City~~$ ~~Palm~~98,903 ~~Desert~~$ 98,698 ~~81 17 21.0~~9% ~~Sun~~Senior ~~Cities~~Subordinated ~~Northern~~Debentures ~~California~~due ~~237~~2006, ~~138~~net, 99unsecured ~~71.7%~~98,586 ~~Sun~~98,449 ~~City~~98,312 ~~Hilton~~9 ~~Head 70 97 (27) (27.8%) Sun City Texas 82 85 (~~3~~) (3.5~~/4%) ~~Sun~~Senior ~~City~~Subordinated atDebentures ~~Huntley~~due ~~121~~2008, ~~117~~net, 4unsecured ~~3.4%~~146,580 ~~Florida~~146,338 ~~communities~~146,096 ~~77 86 (~~9) ~~(10.5~~3/8%) ~~Other~~Senior ~~communities~~Subordinated 52Debentures ~~128~~due ~~(76)~~2009, ~~(59.4%)~~net, ~~-----~~unsecured ~~-----~~196,113 ~~----- ------ Total active adult communities 1~~195,~~305~~880 1195,~~304~~647 110 0.1/4% ~~-----~~Senior ~~-----~~Subordinated ~~-----~~Debentures ~~------~~due ~~Family~~2010, ~~and~~net, ~~country~~unsecured ~~club~~144,524 ~~communities:~~144,223 ~~Arizona~~143,922 ~~country~~Notes ~~club~~payable ~~communities~~to 52banks 43under 9a ~~20.9%~~senior ~~Nevada~~revolving ~~country~~credit ~~club~~facility ~~community~~and 61short-term 57lines 4of ~~7.0%~~credit, ~~Arizona~~unsecured ~~family~~237,000 ~~communities~~235,000 ~~242~~346,000 ~~234~~Real 8estate ~~3.4%~~and ~~Nevada~~other ~~family~~notes, ~~communities~~primarily 44secured 5460,680 ~~(10)~~86,631 ~~(18.5%)~~63,628 ----- ----- ----- ------ ~~Total family and country club communities 399 388 11 2.8%~~ ----- ----- ~~-----~~$ ~~------~~982,592 ~~Total~~ $1,~~704~~005,424 $1,~~692~~092,303 ~~12 0.7%~~ ===== ===== ========== ==========

At December 31, 2000, under the most restrictive of the covenants in the Company's debt agreements, $86 million of the Company's retained earnings was available for payment of cash dividends and acquisition of stock. (4) INCOME TAXES The components of income taxes are: In Thousands (Unaudited) ---------------------------------------------- Three Months Ended Six Months Ended December 31, December 31, -------------------- -------------------- 2000 1999 2000 1999 ------- ------- ------- ------- Current: Federal $ 4,772 $ 5,207 $12,069 $10,483 State 331 321 857 646 ------- ------- ------- ------- 5,103 5,528 12,926 11,129 ------- ------- ------- ------- Deferred: Federal 7,123 1,952 8,409 3,809 State 506 221 668 516 ------- ------- ------- ------- 7,629 2,173 9,077 4,325 ------- ------- ------- ------- $12,732 $ 7,701 $22,003 $15,454 ======= ======= ======= ======= 6 DEL WEBB CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (5) REVENUES AND COSTS AND EXPENSES The components of revenues and costs and expenses are:

~~THREE~~In ~~MONTHS~~Thousands ~~ENDED~~(Unaudited) ~~SEPTEMBER 30, CHANGE~~ ----------------- ------------------------------ ~~2000~~Three ~~1999~~Months ~~AMOUNT~~Ended ~~PERCENT~~Six Months Ended December 31, December 31, ---- ---- ------ ------- OPERATING DATA: Number of home closings: Active adult communities: Sun City Grand 302 337 (35) (10.4%) Sun Cities Las Vegas 259 251 8 3.2% Sun City Palm Desert 110 135 (25) (18.5%) Sun Cities Northern California 156 129 27 20.9% Sun City Hilton Head 65 95 (30) (31.6%) Sun City Texas 50 59 (9) (15.3%) Sun City at Huntley 75 226 (151) (66.8%) Florida communities 62 66 (4) (6.1%) Other communities 84 78 6 7.7% ----- ----- ----- ------ ~~Total~~2000 ~~active~~1999 ~~adult~~2000 ~~communities~~1999 ~~1,163 1,376 (213) (15.5%)~~ -------- -------- -------- -------- ~~Family~~Revenues: ~~and~~Homebuilding: ~~country~~Active ~~club~~adult communities: ~~Arizona~~$311,614 ~~country~~$318,608 ~~club~~$588,955 ~~communities~~$611,227 95Family 17and 78country ~~458.8%~~club ~~Nevada~~communities ~~country~~122,362 ~~club~~139,254 ~~community~~240,155 37235,990 55-------- ~~(18)~~-------- ~~(32.7%)~~-------- ~~Arizona~~-------- ~~family~~433,976 ~~communities~~457,862 ~~238~~829,110 ~~224~~847,217 14Models/vacation ~~6.3%~~getaway ~~Nevada~~homes ~~family~~with ~~communities~~long-term 76leaseback ~~136~~* ~~(60)~~-- ~~(44.1%)~~14,339 -- 24,064 -------- -------- -------- -------- Total ~~family~~homebuilding 433,976 472,201 829,110 871,281 Land and ~~country~~facility ~~club~~sales ~~communities~~44,846 ~~446~~19,234 ~~432~~61,339 25,649 Other 8,131 4,178 14,162 ~~3.2%~~8,245 -------- -------- -------- -------- ~~Total~~$486,953 1$495,~~609~~613 1$904,~~808~~611 ~~(199)~~$905,175 ~~(11.0%)~~ ======== ======== ======== ========

* For the three and six months ended December 31, 1999, revenues (in thousands) from the sale of models/vacation getaway homes with long-term leasebacks are net of deferred profits of $6,324 and $10,110, respectively. These deferred profits are being amortized as reductions of selling, general and administrative expenses over the leaseback periods, offsetting substantially all of the related rent expense.

~~THREE~~In ~~MONTHS~~Thousands ~~ENDED~~(Unaudited) ~~SEPTEMBER~~----------------------------------------------- 30Three Months Ended Six Months Ended December 31, ~~CHANGE~~December 31, --------------------- --------------------- 2000 1999 ~~AMOUNT~~2000 ~~PERCENT~~1999 -------- -------- -------- -------- ~~BACKLOG~~Costs ~~DATA~~and expenses: ~~Homes~~Home ~~under~~construction ~~contract~~and ~~at September 30~~land: Active adult communities: ~~Sun~~$232,388 ~~City~~$240,846 ~~Grand~~$440,929 ~~476~~$461,259 ~~715~~Family ~~(239)~~and ~~(33.4%)~~country ~~Sun~~club Cities Las Vegas 635 548 87 15.9% Sun City Palm Desert 234 230 4 1.7% Sun Cities Northern California 477 417 60 14.4% Sun City Hilton Head 143 196 (53) (27.0%) Sun City Texas 250 184 66 35.9% Sun City at Huntley 191 396 (205) (51.8%) Florida communities ~~224~~96,034 ~~153~~112,348 71188,576 ~~46.4%~~189,964 ~~Other communities 101 218 (117) (53.7%)~~ -------- -------- -------- -------- ~~Total~~328,422 ~~active~~353,194 ~~adult~~629,505 ~~communities 2~~651,~~731~~223 3Models/vacation getaway homes with long-term leaseback -- 14,~~057~~339 ~~(326)~~-- ~~(10.7%)~~24,064 -------- -------- -------- -------- ~~Family~~Total ~~and~~homebuilding ~~country~~328,422 ~~club~~367,533 ~~communities:~~629,505 ~~Arizona~~675,287 ~~country~~Cost ~~club~~of ~~communities~~land ~~191~~and ~~270~~facility ~~(79)~~sales ~~(29.3%)~~40,447 ~~Nevada~~18,263 ~~country club community 187 137~~ 50,073 ~~36.5%~~21,557 ~~Arizona~~Other ~~family~~cost ~~communities~~of ~~514~~sales ~~737~~6,528 ~~(223) (30.~~3%),012 ~~Nevada~~12,757 ~~family~~5,793 ~~communities 83 167 (84) (50.3%)~~ -------- -------- -------- -------- Total ~~family~~home construction, land and ~~country~~other ~~club~~375,397 ~~communities~~388,808 ~~975~~692,335 1702,~~311~~637 ~~(336)~~Selling, ~~(25.6%)~~general and administrative 58,924 65,282 116,351 122,221 Interest 17,266 20,133 34,807 37,390 -------- -------- -------- -------- ~~Total 3~~$451,~~706~~587 4$474,~~368~~223 ~~(662) (15.2%) ====== ====== ====== ====== Aggregate contract sales amount (dollars in millions)~~ $843,493 ~~992~~ $1862,~~040~~248 ~~(48) (4.6%)~~ ====== ==~~====~~ ====== ==~~====~~ ~~Average contract sales amount per home (dollars in thousands) $ 268 $ 238 30 12.6%~~ ====== ==~~====~~ ====== ==~~====~~

7 DEL WEBB CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (6) INTEREST The following table shows the components of interest:

~~THREE~~In ~~MONTHS~~Thousands ~~ENDED~~(Unaudited) ~~SEPTEMBER 30, CHANGE~~ --------------------- ------------------------ ~~2000~~Three ~~1999~~Months ~~AMOUNT~~Ended ~~PERCENT~~Six Months Ended December 31, December 31, ---- ---- ------------ -------------------- ~~AVERAGE~~2000 ~~REVENUE~~1999 ~~PER~~2000 ~~HOME~~1999 ~~CLOSING:~~-------- ~~Active~~------- ~~adult~~-------- ~~communities:~~------- ~~Sun~~Interest ~~City~~incurred ~~Grand~~and capitalized $ ~~201~~24,~~100~~943 $ ~~180~~26,~~600~~406 $ 2050,~~500 11.4% Sun Cities Las Vegas 226,300~~ 219~~,000~~ 7$51,~~300~~475 ~~3.3%~~======== ~~Sun~~======= ~~City~~======== ~~Palm~~======= ~~Desert~~Allocation ~~320,700~~of ~~275,500~~capitalized ~~45,200~~interest ~~16.4%~~in ~~Sun~~costs ~~Cities~~and ~~Northern~~expenses ~~California~~$ ~~300~~17,~~800~~266 ~~277~~$20,~~900 22,900 8.2% Sun City Hilton Head 253,500 212,200 41,300 19.5% Sun City Texas 219,100 223,600 (4,500) (2.0%) Sun City at Huntley 265,400 233,700 31,700 13.6% Florida communities 151,300~~ 133~~,800~~ ~~17,500~~$ ~~13.1% Other communities 227,100 192,700~~ 34,~~400~~807 ~~17.9% Average active adult communities 238~~$37,~~500~~390 ~~217,200~~======== ~~21,300~~======= ~~9.8%~~======== ~~Family~~======= ~~and~~Unallocated ~~country~~capitalized ~~club~~interest ~~communities:~~included ~~Arizona~~in ~~country~~real ~~club~~estate ~~communities~~inventories ~~334,200~~at ~~217,900~~period ~~116,300~~end ~~53.4% Nevada country club community 486~~$120,~~300~~625 ~~430~~$99,~~400~~092 55$120,~~900~~625 ~~13.0% Arizona family communities 224~~$99,~~200~~092 ~~207,600~~======== ~~16,600~~======= ~~8.0%~~======== ~~Nevada~~======= ~~family~~Interest ~~communities~~income ~~193,200~~$ ~~193,200~~167 ~~-- -- Average family and country club communities 264,100 231,900 32,200 13.9% Total average~~ $ ~~245,600~~183 $ ~~220,700~~378 $ ~~24,900~~434 ~~11.3%~~ ========= ========= ========= =======

Interest income is included in other revenues. (7) SEGMENT INFORMATION The Company conducts its operations in two primary segments in Arizona, California, Florida, Illinois, Nevada, South Carolina and Texas. Active adult communities (primarily its "Sun City" communities) are generally large-scale, master planned communities with extensive amenities for people age 55 and over. The Company's family and country club communities are open to people of all ages and are generally developed in metropolitan or market areas in which the Company is developing active adult communities. Within its communities, the Company has usually been the exclusive builder of homes. Both of the Company's primary segments generate their revenues through the sale of homes (and, to a much lesser extent, land and facilities) to external customers in the United States. The Company is not dependent on any major customer. Information as to the operations of the Company in different business segments is set forth below based on the nature of the Company's communities and their customers. Certain information has not been included by segment due to the immateriality of the amount to the segments or in total. The Company evaluates segment performance based on several factors, of which the primary financial measure is earnings before interest and taxes ("EBIT"). The accounting policies of the business segments are the same as those for the Company. There are no significant intersegment transactions. 8 DEL WEBB CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (7) SEGMENT INFORMATION (CONTINUED)

~~THREE~~In ~~MONTHS~~Thousands ~~ENDED~~(Unaudited) ~~SEPTEMBER~~-------------------------------------------------------------- 30Three Months Ended Six Months Ended December 31, ~~CHANGE~~December 31, ---------------------------- ---------------------------- 2000 1999 ~~AMOUNT~~2000 ~~PERCENT~~1999 ----------- ----------- ----------- ----------- ~~OPERATING STATISTICS~~Revenues: ~~Costs~~Active adult communities $ 320,027 $ 333,677 $ 605,912 $ 637,693 Family and ~~expenses~~country asclub acommunities ~~percentage~~143,610 of160,761 ~~revenues~~274,126 265,191 Corporate and other 23,316 1,175 24,573 2,291 ----------- ----------- ----------- ----------- $ 486,953 $ 495,613 $ 904,611 $ 905,175 =========== =========== =========== =========== EBIT: ~~Home~~Active ~~construction~~adult communities $ 53,146 ~~land~~$ 45,088 $ 95,382 $ 88,357 Family and country club communities 23,317 15,584 42,206 27,668 Corporate and other ~~75.9%~~(23,831) ~~76.6%~~(19,149) (~~0.7%~~41,663) (~~0.9%~~35,708) ~~Selling~~----------- ----------- ----------- ----------- $ 52,632 ~~general~~$ 41,523 $ 95,925 $ 80,317 =========== =========== =========== =========== Allocation of Capitalized Interest: Active adult communities $ 11,470 $ 14,121 $ 23,434 $ 27,151 Family and ~~administrative~~country ~~13.7%~~club ~~13.9%~~communities ~~(0.2%)~~5,796 (6,012 11,373 10,239 Corporate and other -- -- -- -- ----------- ----------- ----------- ----------- $ 17,266 $ 20,133 $ 34,807 $ 37,390 =========== =========== =========== =========== Expenditures for Real Estate Inventories: Active adult communities $ 238,762 $ 271,252 $ 464,394 $ 530,470 Family and country club communities 103,315 135,907 193,458 250,431 Corporate and other 52 1~~.4%)~~,334 ~~Interest~~183 3,446 ----------- ----------- ----------- ----------- $ 342,129 $ 408,493 $ 658,035 $ 784,347 =========== =========== =========== =========== Purchases of Property and Equipment: Active adult communities $ -- $ 1,708 $ -- $ 3,298 Family and country club communities 827 185 912 389 Corporate and other 1,479 2,634 2,952 4.,846 ----------- ----------- ----------- ----------- $ 2%,306 $ 4.,527 $ 3,864 $ 8,533 =========== =========== =========== =========== Depreciation and Other Amortization: Active adult communities $ 904 $ 894 $ 1,916 $ 2%,081 Family and country club communities 549 131 939 258 Corporate and other 1,280 2,065 2,529 3,551 ----------- ----------- ~~Ratio~~----------- of----------- ~~home~~$ ~~closings~~2,733 to$ ~~homes~~3,090 ~~under~~$ ~~contract~~5,384 in$ ~~backlog~~5,890 =========== =========== =========== =========== Assets at ~~beginning~~Period ofEnd: ~~period~~Active ~~44.6%~~adult ~~40.3%~~communities ~~4.3%~~$ ~~10.7%~~1,408,257 $ 1,314,678 $ 1,408,257 $ 1,314,678 Family and country club communities 474,854 492,200 474,854 492,200 Corporate and other 111,796 206,053 111,796 206,053 ----------- ----------- ----------- ----------- $ 1,994,907 $ 2,012,913 $ 1,994,907 $ 2,012,931 =========== =========== =========== ===========

9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following should be read in conjunction with the accompanying consolidated financial statements and notes thereto and the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2000, filed with the Securities and Exchange Commission. CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA

Included in net new orders for the three and six months ended December 31, 1999 were models and vacation getaway homes sold with long-term leasebacks. Sun City Grand had 31 such net new orders for the three month period and 145 for the six month period. The Sun Cities Las Vegas had 12 and 30 for the three and six months, respectively. The Nevada country club communities had 0 and 13 for the three and six month periods, respectively. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA (CONTINUED)

Included in home closings for the three and six months ended December 31, 1999 were models and vacation getaway homes sold with long-term leasebacks. Profits on the closings of these units were deferred and are being amortized as reductions of selling, general and administrative expenses over the leaseback periods, offsetting substantially all of the related rent expense. Sun City Grand had 93 such home closings for the three months and 125 for the six months. The Sun Cities Las Vegas had 9 and 27 for the three and six months, respectively. The Nevada country club communities had 5 and 13 for the three and six months, respectively. 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA (CONTINUED)

Included in backlog at December 31, 1999 were models and vacation getaway homes sold with long term leasebacks. Sun City Grand had 20 such homes in backlog. 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA (CONTINUED)

Average revenue per home closing for the models and vacation getaway homes with long-term leasebacks at Sun City Grand was $88,800 and $90,900 for the three and six months respectively ended December 31, 1999. At the Sun Cities Las Vegas, the average revenue for these home closings was $346,200 for the three months and $233,500 for the six months. At the Nevada country club communities, the average revenue for these home closings was $593,800 for the three months and $492,100 for the six months. 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CERTAIN CONSOLIDATED FINANCIAL AND OPERATING DATA (CONTINUED)

NOTES: New orders are net of cancellations. The Company recognizes revenue at close of escrow. The Sun Cities Las Vegas include Sun City Summerlin (the last home closed April 2000), Sun City MacDonald Ranch and Sun City Anthem. The Sun Cities Northern California include Sun City Roseville (the last home closed March 2000) and Sun City Lincoln Hills. Other active adult communities represent two smaller-scale communities in Arizona and California. Home closings began at Anthem Country Club Arizona in September 1999. A substantial majority of the backlog at December 31, 2000 is currently anticipated to result in revenues in the next 12 months. However, a majority of the backlog is contingent upon the availability of financing for the customer and, in certain cases, sale of the customer's existing residence. Also, as a practical matter, the Company's ability to obtain damages for breach of contract by a potential home buyer is limited to retaining all or a portion of the deposit received. In the six months ended December 31, 2000 and 1999, cancellations of home sales orders as a percentage of new home sales orders written during the period were 14.7 percent and 15.4 percent, respectively. 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999 REVENUES. Total revenues decreased to $487.0 million for the three months ended December 31, 2000 from $495.6 million for the three months ended December 31, 1999. The 1999 quarter included $14.3 million of revenues from models and vacation getaway homes sold with long-term leasebacks. There were no such sale/leasebacks in the 2000 quarter. Exclusive of closings of models and vacation getaway homes, active adult community homebuilding revenues decreased to $311.6 million for the 2000 quarter from $318.6 for the 1999 quarter. This decrease was primarily attributable to decreased closings at Sun City Grand, Sun City Hilton Head and Sun City at Huntley. Exclusive of closings of models, family and country club community homebuilding revenues decreased to $122.4 million for the 2000 quarter from $139.3 million for the 1999 quarter. The decrease was primarily attributable to decreased closings in the Arizona family communities (due to fewer subdivisions) and the Nevada family communities (due to closing out these operations). The effect of the decrease in the number of home closings was partially offset by an increase in average revenue per home closing, which increased nearly 14 percent in active adult communities and 21 percent in family and country club communities. HOME CONSTRUCTION, LAND AND OTHER COSTS. The decrease in home construction, land and other costs to $375.4 million for the 2000 quarter from $388.8 million for the 1999 quarter was largely due to the decrease in home closings. As a percentage of revenues, these costs decreased to 77.1 percent for the 2000 quarter from 78.4 percent for the 1999 quarter. This cost decrease as a percentage of revenues was primarily due to an increase in homebuilding gross margin to 24.3 percent for the 2000 quarter from 22.2 percent for the 1999 quarter. Of this total 2.1 percent increase, 0.7 percent was attributable to deferred profit recognition in the 1999 quarter on the sale and long-term leaseback of 107 model and vacation getaway homes at three of the Company's communities. The balance was largely attributable to price increases that have been effected over the past 12 months. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. As a percentage of revenues, selling, general and administrative expenses decreased to 12.1 percent for the 2000 quarter from 13.2 percent for the 1999 quarter. The decrease is primarily attributable to results of efforts to cut costs and improve the efficiency of operations. The results for three months ended December 31, 2000 are not necessarily indicative of the results to be expected for the full year. INTEREST. As a percentage of revenues, allocation of capitalized interest to costs and expenses decreased to 3.5 percent for the 2000 quarter from 4.1 percent for the 1999 quarter. This decrease is attributable to expected lower future debt levels from this expectation in the prior year. INCOME TAXES. The increase in income taxes to $12.7 million for the 2000 quarter from $7.7 million in the 1999 quarter was proportionate to the increase in earnings before income taxes. The effective tax rate in both quarters was 36 percent. NET EARNINGS. The increase in net earnings to $22.6 million for the 2000 quarter from $13.7 million for the 1999 quarter was primarily attributable to increased gross margin from land sales, lower selling, general and administrative expenses and lower interest amortized. 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) NET NEW ORDER ACTIVITY AND BACKLOG. Net new orders in the 2000 quarter were 3.8 percent higher than in the 1999 quarter. This increase was primarily attributable to the following: * Strong demand at Sun City Palm Desert; * Strong demand at Sun City Lincoln Hills resulted in increase at the Sun Cities Northern California; * Strong demand at Sun City Texas. Offsetting decreases were attributable to the following: * In the 1999 quarter, 40 models and vacation getaway homes (primarily at Sun City Grand) sold with long-term leasebacks and no such sale/leasebacks occurred in the 2000 quarter; * Clover Springs (part of Other Active Adult Communities) contributed 26 net new orders in the 1999 quarter and no new orders in the 2000 quarter; * Decreased net new orders Sun City Grand and Sun City Hilton Head. Due to increased sales prices, the dollar amount of homes under contract at December 31, 2000 was 3.4 percent higher than at December 31, 1999, while the number of homes in backlog was 4.7 percent lower. The unit backlog decrease was attributable to the following: * Satisfaction of prior-year pent-up demand at Sun City at Huntley; * Company's decision to cease family community operations in Nevada; * Reduction in the number of family community subdivisions in the Phoenix area; * Decreased net new orders at Clover Springs, Sun City Grand and Sun City Hilton Head, discussed above. SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999 REVENUES. Total revenues decreased to $904.6 million for the six months ended December 31, 2000 from $905.2 million for the six months ended December 31, 1999. The 1999 six months included $24.1 million of revenues from models and vacation getaway homes sold with long-term leasebacks. There were no such sale/leasebacks in the 2000 six months. Exclusive of closings of models and vacation getaway homes, active adult community homebuilding revenues decreased to $589.0 million for the 2000 period from $611.2 million for the 1999 period. The principal reasons for this decrease were decreased closings at Sun City at Huntley, Sun City Hilton Head and Sun City Grand. Exclusive of closings of models, family and country club community homebuilding revenues increased to $240.2 million for the 2000 period from $236.0 million for the 1999 period. The increase was primarily attributable to an increase in the average revenue per unit from $234,600 in the 1999 period to $275,400 in the 2000 period. The effect of the decrease in the number of home closings was partially offset by an increase in average revenue per home closing, which increased nearly 12 percent in active adult communities and 17 percent in family and country club communities. 16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) HOME CONSTRUCTION, LAND AND OTHER COSTS. The decrease in home construction, land and other costs to $692.3 million for the 2000 period from $702.6 million for the 1999 period was largely due to the decrease in home closings. As a percentage of revenues, these costs decreased to 76.5 percent for the 2000 period from 77.6 percent for the 1999 period. This cost decrease as a percentage of revenues was primarily due to an increase in homebuilding gross margin from 22.5 percent for the 1999 period to 24.1 percent for the 2000 period. Of this total 1.6 percent increase in homebuilding gross margin, 0.6 percent was attributable to deferred profit recognition in the 1999 period on the sale and long-term leaseback of 165 model and vacation getaway homes at three of the Company's communities. The balance of the increase in homebuilding gross margin was largely attributable to price increases that have been effected over the past 12 months. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. As a percentage of revenues, selling, general and administrative expenses decreased to 12.9 percent for the 2000 period from 13.5 percent for the 1999 period. This decrease is primarily attributable to results of efforts to cut costs and improve the efficiencies of operations. The results for the six months ended December 31, 2000 are not necessarily indicative of the results to be expected for the full year. INTEREST. As a percentage of revenues, allocation of capitalized interest decreased to 3.8 percent for the 2000 period from 4.1 percent for the 1999 period. This decrease is attributable to expected lower future debt levels from this expectation in the prior year. INCOME TAXES. The increase in income taxes to $22.0 million for the 2000 period from $15.5 million in the 1999 period was due to the increase in earnings before income taxes. The effective tax rate in both periods was 36 percent. NET EARNINGS. The increase in net earnings to $39.1 million for the 2000 period from $27.5 million for the 1999 period was primarily attributable to increased gross margin from land sales, lower selling, general and administrative expenses and lower interest amortized. NET NEW ORDER ACTIVITY. Net new orders in the 2000 period were 2.1 percent higher than in the 1999 period. This increase is attributable to the following: * Strong demand at Sun City Palm Desert; * Strong demand at Sun City Anthem resulted in the increase at the Sun Cities Las Vegas; * Strong demand at Sun City Lincoln Hills resulted in the increase at the Sun Cities Northern California. Offsetting decreases were attributable to the following: * In the 1999 period, 185 models and vacation getaway homes (primarily at Sun City Grand) sold with long-term leasebacks and no such sale/leasebacks occurred in the 2000 period; * Clover Springs (part of Other Active Adult Communities) contributed 119 net new orders in the 1999 period but only 1 new order in the 2000 period; * Decreased net new orders at Sun City Grand and Sun City Hilton Head . 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) LIQUIDITY AND FINANCIAL CONDITION OF THE COMPANY The cash flow for each community can differ substantially from reported earnings, depending on the status of the development cycle. The initial years of development or expansion require significant cash outlays for, among other things, acquiring tracts of land, obtaining development approvals, developing land and lots and constructing project infrastructure (such as roads and utilities), recreation centers, golf courses, model homes and sales facilities. Since these costs are capitalized, this can result in income reported for financial statement purposes during those initial years significantly exceeding cash flow. However, after the initial years of development or expansion, cash flow can significantly exceed earnings reported for financial statement purposes, as costs and expenses include allocation charges for substantial previously expended costs. During the 2000 period the Company generated $286 million of net cash from operating community sales activities, used $205 million for land and lot and amenity development at operating communities, and used $90 million for interest, income taxes and other operating activities. The resulting $9 million of net cash used for operating activities was funded mainly through borrowings under the Company's $500 million senior unsecured revolving credit facility. Real estate development is dependent on, among other things, the availability and cost of financing. In periods of significant growth, the Company requires significant additional capital resources. In fiscal 1999 and fiscal 2000, the Company had several new communities under development. Primarily as a result of public debt offerings and borrowings to fund these development expenditures, the Company has considerably more indebtedness and was considerably more highly leveraged throughout fiscal 1999 and most of fiscal 2000 than it has been in recent years. The Company has reduced its leverage with debt to total capitalization declining from 71.5 percent at December 31, 1999 to 65.3 percent at December 31, 2000 as a result of debt repayments and an increase in retained earnings. The Company expects to have adequate capital resources to meet its needs for the next 12 months. If there is a significant downturn in anticipated operations, however, the Company will need to modify its business plan to operate with lower capital resources. Modifications of the business plan could include, among other things, delaying development expenditures at its communities. At December 31, 2000, under the most restrictive of the covenants in the debt agreements, $86 million of the retained earnings was available for payment of cash dividends and the acquisition of stock. FORWARD LOOKING INFORMATION: CERTAIN CAUTIONARY STATEMENTS This "Management's Discussion and Analysis of Financial Condition and Results of Operations" contains forward looking statements that involve risks and uncertainties, and actual results may differ materially. Certain forward looking statements are based on assumptions which may not prove to be accurate. Risks and uncertainties include risks associated with: the cyclical nature of real estate operations; land acquisition and development; the ability to successfully implement new strategic initiatives; government regulations; growth management and environmental considerations; geographic concentration; financing and leverage; interest rate fluctuations; construction labor and material costs; energy sources; future communities and new geographic markets; legal matters; natural risks; and other matters set forth in the Company's Annual Report on Form 10-K for the year ended June 30, 2000. 18 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The Company did not file any reports on Form 8-K during the period covered by this report. 19 SIGNATURES Pursuant to the requirements of the Securities Exchange act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, who are duly authorized to do so. DEL WEBB CORPORATION (REGISTRANT) Date: February 12, 2001 /s/ LeRoy C. Hanneman, Jr. ----------------------------------- LeRoy C. Hanneman, Jr. Chief Executive Officer Date: February 12, 2001 /s/ John A. Spencer ----------------------------------- John A. Spencer Executive Vice President and Chief Financial Officer 20

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