Statement Analysis

Construction Services Industry

Analysis

DR Horton

KB Home

Pulte Homes

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INTRODUCTION

In 2007, the U.S. housing market faced continued deteriorating factors extending the

downward trends that began in 2006. Increased foreclosure activity and constraints on the

availability of certain mortgage financing products from the turmoil in the mortgage and credit

markets resulted in an oversupply of new and resale homes. In a response to weakened demand

for new homes, slower sales and higher cancellation rates, the homebuilding industry increased

price discounts and selling incentives to attract home buyers compared to recent years when the

industry experienced record growth. All these factors have resulted in poor performance in this

industry placing major homebuilders in one of the worst slumps in recent history.

COMPANY PROFILES (see Exhibit 1)

Pulte Homes, Inc. (PHM), a Michigan based company incorporated in 1956, is engaged

in the homebuilding and financial services businesses in 26 states. Its core business is

homebuilding, primarily under the brands Pulte, Del Webb and DiVosta. PHM offers homes for

sale in 636 communities with a variety of home designs at different prices points to various

customer segments. In 2007, PHM delivered 27,540 homes at a lower average selling price of

$322,000 compared to 41,487 homes delivered in 2006 at an average of $337,000. Pulte also has

a financial services operation, which consists principally of mortgage banking and title

operations for its home buyers.

KB Home (KBH), founded in 1957 as Kaufman and Broad, Inc, operates in13 states and

35 major markets, offering homes designed primarily for first time, first move-up and active

adult buyers, including attached and detached single-family homes, townhomes and

condominiums. In 2007, KBH delivered 23,743 homes at a lower average selling price of

$261,600 compared to the record 32,124 homes delivered in 2006 at an average of

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$287,700. KBH’s...