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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
JOINT ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended March 31, 1996
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Commission File No. 1-6776 Commission File Nos. 1-9624 and 1-9625, respectively
CENTEX CORPORATION 3333 HOLDING CORPORATION and
CENTEX DEVELOPMENT COMPANY, L.P.
(Exact name of registrant as specified in its charter) (Exact name of registrants as specified in their charters)
Nevada Nevada and Delaware, respectively
(State of incorporation) (States of incorporation or organization)
75-0778259 75-2178860 and 75-2168471, respectively
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification Nos.)
3333 Lee Parkway, Suite 1200, Dallas, Texas 75219 3333 Lee Parkway, Suite 500, Dallas, Texas 75219
(Address of principal executive offices) (Address of principal executive offices)
(214) 559-6500 (214) 559-6700
(Registrant's telephone number) (Registrants' telephone number)
</TABLE>
Securities registered pursuant to Section 12(b) of the Act:
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<CAPTION>
Name of each Name of each
exchange on which exchange on which
Title of each class registered Title of each class registered
- -------------------- ----------------------- ---------------------------- -----------------------
<S> <C> <C> <C>
Centex Corporation 3333 Holding Corporation
Common Stock New York Stock Common Stock New York Stock
($.25 par value) Exchange ($.01 par value) Exchange
Centex Development Company, L.P.
Warrants to Purchase New York Stock
Class B Units of Exchange
Limited Partnership
Interest Expiring
November 30, 2007
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether each 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 each such
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
--- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrants' knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K, or any
amendment to Form 10-K. X
The aggregate market value of the tandem traded Centex Corporation common
stock, 3333 Holding Corporation common stock and Centex Development Company,
L.P. warrants to purchase Class B units of limited partnership interest held by
non-affiliates of the registrants on May 1, 1996 was approximately $756
million.
Indicate the number of shares of each of the registrants' classes of
common stock (or other similar equity securities) outstanding as of the close
of business on May 1, 1996:
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<S> <C> <C>
Centex Corporation Common Stock 28,425,851 shares
3333 Holding Corporation Common Stock 1,000 shares
Centex Development Company, L.P. Class A Units of Limited Partnership Interest 1,000 units
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference in Parts A.I,
A.II, A.III, B.I, B.II and B.III of this Report:
(a) 1996 Annual Report to Stockholders of Centex Corporation for the fiscal
year ended March 31, 1996;
(b) 1996 Annual Report to Stockholders of 3333 Holding Corporation and
Subsidiary and Centex Development Company, L.P. for the fiscal year ended
March 31, 1996; and
(c) Proxy statements for the annual meetings of stockholders of Centex
Corporation and 3333 Holding Corporation to be held on July 25, 1996.
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JOINT ANNUAL REPORT ON
FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 1996
CENTEX CORPORATION AND SUBSIDIARIES
AND
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P.
JOINT EXPLANATORY STATEMENT
On November 30, 1987, Centex Corporation ("Centex" or the "Company")
distributed as a dividend (the "Distribution") to its stockholders (through a
nominee, the "Nominee") all of the issued and outstanding shares of the common
stock, par value $.01 per share ("Holding Common Stock"), of 3333 Holding
Corporation, a Nevada corporation, ("Holding"), and 900 warrants (the
"Stockholder Warrants") to purchase Class B Units of limited partnership
interest in Centex Development Company, L.P., a Delaware limited partnership,
("CDC" or the "Partnership"). Pursuant to an agreement with the Nominee (the
"Nominee Agreement"), the Nominee is the record holder of the Stockholder
Warrants and 1,000 shares of Holding Common Stock, which constitutes all of the
issued and outstanding capital stock of Holding, on behalf of and for the
benefit of persons who are from time to time the holders of the common stock,
par value $.25 per share ("Centex Common Stock"), of Centex ("Centex
Stockholders"). Each Centex Stockholder owns a beneficial interest in that
portion of the 1,000 shares of Holding Common Stock and the Stockholder
Warrants that the total number of shares of Centex Common Stock held by such
stockholder bears to the total number of shares of Centex Common Stock
outstanding from time to time. This beneficial interest is not represented by
a separate certificate or receipt. Instead, each Centex Stockholder's
beneficial interest in such pro rata portion of the shares of Holding Common
Stock and the Stockholder Warrants is represented by the certificate or
certificates evidencing such Centex Stockholder's Centex Common Stock, and is
currently tradeable only in tandem with, and as a part of, each such Centex
Stockholder's Centex Common Stock. The tandem securities are listed and traded
on the New York Stock Exchange and The International Stock Exchange of the
United Kingdom and the Republic of Ireland, Ltd. and are registered with the
Securities and Exchange Commission (the "Commission") separately under Section
12(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Holding and CDC were each organized in 1987 in connection with the
distribution. 3333 Development Corporation, a wholly-owned subsidiary of
Holding ("Development"), is the sole general partner of CDC.
At present, Centex, Holding and CDC have elected to satisfy their
respective periodic reporting obligations under the Exchange Act, and the rules
and regulations promulgated thereunder, by preparing and filing joint periodic
reports. PART A of this Annual Report on Form 10-K for the fiscal year ended
March 31, 1996 (the "Report") relates to Centex and its subsidiaries. PART B
of this Report relates to Holding (and its subsidiary, Development) and to CDC.
This Report should be read in conjunction with the proxy statements of
Centex and Holding in connection with their respective 1996 annual meetings of
stockholders, the Annual Report to Stockholders of Centex for the fiscal year
ended March 31, 1996 (the "Centex 1996 Annual Report") and the Annual Report to
Stockholders of Holding and CDC for the fiscal year ended March 31, 1996 (the
"Holding/CDC 1996 Annual Report"), portions of which are incorporated by
reference into this Report. The Centex 1996 Annual Report and the Holding/CDC
1996 Annual Report are filed as an Exhibit to this Report. For a complete
understanding of the tandem traded securities, PART A and PART B of this Report
should be read in combination. Information concerning the earnings and
financial condition of the three companies, on an aggregate basis, is included
in Note (H) of the Notes to Consolidated Financial Statements of Centex
Corporation and subsidiaries on pages 40-41 of the Centex 1996 Annual Report.
2
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FORM 10-K TABLE OF CONTENTS
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PAGE
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JOINT EXPLANATORY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PART A. CENTEX CORPORATION AND SUBSIDIARIES
-------
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . 15
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters . . . . . . . 16
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . 16
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . 17
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . 17
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . 17
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . 17
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
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<TABLE>
<CAPTION>
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PART B. 3333 HOLDING CORPORATION AND SUBSIDIARY AND
CENTEX DEVELOPMENT COMPANY, L.P.
PART I
PAGE
----
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . 44
</TABLE>
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<CAPTION>
TABLE OF CONTENTS (CONTINUED)
PART II PAGE
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Item 5. Market for Registrants' Common Equity and Related Stockholder Matters . . . . . . 45
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . 47
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . 47
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . 50
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . 53
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . 55
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56-57
------------------------------------
INDICES TO EXHIBITS
CENTEX CORPORATION AND SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58-61
3333 HOLDING CORPORATION AND SUBSIDIARY . . . . . . . . . . . . . . . . . . . . . . . . . . . 62-63
CENTEX DEVELOPMENT COMPANY, L.P. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64-66
</TABLE>
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PART A.
CENTEX CORPORATION AND SUBSIDIARIES
PREFATORY STATEMENT
PART A of this Report includes information relating to Centex
Corporation and subsidiaries ("Centex" or the "Company"), File No. 1-6776. See
Joint Explanatory Statement on page 2 of this Report. References to Centex or
the Company in this Report shall include Centex and its subsidiaries unless the
context otherwise requires. Reference is made to PART B of this Report for
information relating separately to 3333 Holding Corporation ("Holding") and its
subsidiary, 3333 Development Corporation ("Development"), and to Centex
Development Company, L.P. ("CDC" or the "Partnership").
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Centex is incorporated in the State of Nevada. The Company's common
stock, par value $.25 per share ("Centex Common Stock") began trading publicly
in 1969. As of May 1, 1996, 28,425,851 shares of Centex Common Stock, which
are traded on the New York Stock Exchange ("NYSE") and The International Stock
Exchange of the United Kingdom and the Republic of Ireland, Ltd., were
outstanding.
Since its founding in 1950 as a Dallas, Texas-based residential and
commercial construction company, Centex has evolved into a multi-industry
company. Centex currently operates in three principal business segments: Home
Building, Financial Services and Contracting and Construction Services. Centex
also has a 49% interest in Centex Construction Products, Inc., a NYSE listed
company in the construction products business.
Centex is one of the nation's largest home builders, having built and
delivered, through its wholly-owned subsidiary Centex Real Estate Corporation
d/b/a Centex Homes ("CREC" or "Centex Homes"), 11,970 homes in its fiscal year
ended March 31, 1996. Centex's Home Building operations currently involve the
construction and sale of residential housing in 282 neighborhoods in 49
different markets. These activities also include the purchase and development
of land. Centex has participated in the home building business since 1950.
Centex's Financial Services operations in fiscal 1996 included
mortgage origination and other related services on homes sold by Centex
subsidiaries and by third parties. Centex has been in the mortgage banking
business since 1973. Centex is a leading retail mortgage originator
(originating approximately $4.9 billion of residential mortgages in fiscal
1996). In 1988 the Company acquired a savings and loan operation in central
Texas. The savings and loan deposits and branch operations were sold in
December 1994.
Centex entered the contracting and construction services business in
1966 with the acquisition of a Dallas- based contractor which had been in
business since 1936. Additional significant acquisitions of construction
companies were made in 1978, 1982 and 1990. Centex currently ranks among the
nation's largest general building contractors. The contracting and
construction activities of the Company involve the construction of buildings
for both private and government interests, including office, commercial and
industrial buildings, hospitals, hotels, museums, libraries, airport
facilities and educational institutions.
Centex's involvement in the construction products business started in
1963 when it began construction of its first cement plant. Since that time,
this segment has expanded to include additional cement production and
distribution facilities
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and the production, distribution and sale of aggregates, readymix concrete and
gypsum wallboard. In April 1994, the Company's formerly wholly-owned
Construction Products group, Centex Construction Products, Inc. (CXP),
completed an initial public offering of 51% of its stock, which shares are now
traded on the NYSE. CXP is the 6th largest U.S. owned cement producer and the
nation's 13th largest cement producer. Centex retained a 49% interest in this
group.
In fiscal 1988, Centex established CDC. Reference is made to PART B
of this Report for a discussion of the business of CDC.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Note (I) of the Notes to Consolidated Financial Statements of Centex
on pages 42-43 of the Centex 1996 Annual Report contain additional information
about the Company's business segments for years ended March 31, 1996, 1995 and
1994 and are incorporated herein by reference.
NARRATIVE DESCRIPTION OF BUSINESS
HOME BUILDING
The Company's Home Building operations primarily involve the
construction and sale of residential housing, including the development of land
into residential communities and the purchase of developed lots. The Company's
Home Building operations have ranked, by the number of units produced in a
calendar year, as the largest U.S. builder of single-family homes from 1989 to
1994 and the second largest builder in 1995. Centex is also the only company
to rank among Professional Builder's top 10 home builders for each of the past
27 years. Centex sells to both first time and move-up buyers. Approximately
96% of the houses Centex sells are single-family detached homes and the
remainder are townhomes and low-rise condominiums.
Markets
Centex follows a strategy of reducing exposure to local market
volatility by spreading operations across geographically and economically
diverse markets. Centex presently builds in 49 market areas in 20 states and
the United Kingdom. The markets are listed below by geographic areas.
<TABLE>
<S> <C> <C>
WEST California -
Vallejo/Fairfield/Napa Fresno
Oakland Visalia/Tulane
Sacramento Riverside/San Bernadino
Stockton/Lodi Orange County
Bakersfield Los Angeles/Long Beach
San Diego
Washington State - Reno, Nevada
Tacoma Portland, Oregon
Seattle
MIDWEST Chicago, Illinois Indianapolis, Indiana
Minneapolis/St. Paul, Minnesota Columbus, Ohio
Colorado -
Denver
Boulder/Longmont
</TABLE>
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<TABLE>
<S> <C> <C>
EAST Nashville, Tennessee Atlanta, Georgia
Virginia - North Carolina -
Washington, D.C. Charlotte
Norfolk/Virginia Beach Raleigh/Durham
Baltimore, Maryland South Carolina -
Trenton, New Jersey Charleston
Columbia
Greenville/Spartanburg
SOUTHEAST Florida -
Ft. Lauderdale West Palm Beach/Boca Raton
Jacksonville Sarasota/Bradenton
Naples Ft. Myers/Cape Coral
Orlando Tampa/St. Petersburg
Lakeland/Winter Haven
SOUTHWEST Texas - Arizona -
Austin Phoenix/Mesa
Dallas Albuquerque, New Mexico
Houston
Ft. Worth/Arlington
San Antonio
Killeen
</TABLE>
In fiscal 1996, Centex closed 11,970 houses, including first time,
move-up and, in some markets, custom homes, ranging in price from approximately
$69,000 to about $577,000 with the average sale price being approximately
$163,900. In the Dallas and San Antonio locations, Centex has custom home
divisions which offer higher-end homes.
Summarized below by geographic area are Centex's home closings, sales
(orders) backlog and sales (orders) for each of the five fiscal years ended
March 31, 1996.
<TABLE>
<CAPTION>
For the Fiscal Year Ended March 31,
-----------------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
CLOSINGS (IN UNITS):
West 2,347 2,454 1,973 1,358 901
Midwest 1,276 1,283 1,114 1,118 860
East 2,804 2,921 2,599 2,118 1,595
Southeast 2,241 2,632 2,895 2,433 1,898
Southwest 3,302 3,674 3,982 3,252 2,485
------- ------- ------- ------- ------
11,970 12,964 12,563 10,279 7,739
======= ======= ======= ======= ======
AVERAGE SALES PRICE (000'S) $ 164 $ 159 $ 147 $ 138 $ 136
======= ======= ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
SALES (ORDERS) BACKLOG, AT THE END OF PERIOD (IN UNITS):
<S> <C> <C> <C> <C> <C>
West 980 603 756 663 581
Midwest 652 442 622 461 487
East 1,121 918 1,279 1,192 788
Southeast 1,106 892 1,387 1,260 1,022
Southwest 1,674 1,132 1,751 1,575 1,131
------- ------- ------- ------- -----
5,533 3,987 5,795 5,151 4,009
======= ======= ======= ======= =====
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C>
SALES (ORDERS) (IN UNITS):
West 2,724 2,301 2,066 1,440 1,047
Midwest 1,486 1,103 1,275 1,092 1,024
East 3,007 2,560 2,686 2,522 1,871
Southeast 2,455 2,137 3,022 2,671 2,284
Southwest 3,844 3,055 4,158 3,696 2,898
-------- ------- ------- ------- -----
13,516 11,156 13,207 11,421 9,124
======== ======= ======= ======= =====
</TABLE>
Inventory Turnover
The Company's policy has been to acquire land with the intent to
complete the sale of housing units within approximately 24 - 36 months from the
date of acquisition. Generally, this involves acquiring land that is properly
zoned and is either ready for development or, to a much lesser degree, already
developed.
The Company has acquired a substantial amount of its finished and
partially improved lots and land under option agreements which are exercised
over specified time periods, or in certain cases, as the lots are needed. The
purchase of finished lots generally allows the Company to shorten the lead time
to commence construction and reduces the risks of unforeseen improvement costs
and volatile market conditions.
Competition and Other Factors
The residential housing industry is essentially a "local" business and
is highly competitive. Centex competes in each of its market areas with
numerous other home builders. The Company's Home Building operations account
for approximately 1% of the total housing starts in the United States. The
main competitive factors affecting Centex's Home Building operations are
location, price, cost of providing mortgage financing for customers,
construction costs, design and quality of homes, marketing expertise,
availability of land and reputation. Management believes the Company competes
effectively by maintaining geographic diversity, being responsive to the
specific demands of each market and managing the operations at a local level.
The home building industry is cyclical and is particularly affected by
changes in local economic conditions and in long-term and short-term interest
rates and, to a lesser extent, changes in property taxes and energy costs,
federal income tax laws, federal mortgage financing programs and various
demographic factors. The political and economic environment affects both the
demand for housing constructed by the Company and the Company's cost of
financing. Unexpected climatic conditions, such as unusually heavy or
prolonged rain or snow, may affect operations in certain areas.
The housing industry is subject to extensive and complex regulations.
The Company and its subcontractors must comply with various federal, state and
local laws and regulations including worker health and safety, zoning,
building, advertising, consumer credit rules and regulations and the extensive
and changing federal, state and local laws, regulations and ordinances
governing the protection of the environment ("Environmental Laws"), including
protection of endangered species. The Company is also subject to other rules
and regulations in connection with its manufacturing and sales activities,
including requirements as to building materials to be used and building
designs. The Company's homes are inspected by local authorities. All of the
foregoing regulatory requirements are applicable to all home building
companies, and to date, compliance with the foregoing requirements has not had
a material impact on the Company. The Company believes that it is in material
compliance with all such requirements.
Centex purchases materials, services and land from numerous sources
and believes that it can deal effectively with any problems it may experience
relating to the supply or availability of materials and services as well as
land.
Vista Acquisition
During the quarter ended September 30, 1995, the Company acquired
certain equity interests in Vista Properties, Inc. ("Vista") for a net
investment of approximately $85 million in cash. At the time of the
acquisition, Vista's real property portfolio consisted of approximately 3,400
acres of land located in seven states; Texas, Florida, California,
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Georgia, North Carolina, Washington, D.C. and Tennessee. The Company has
major operations in each of the markets where Vista owns substantial property.
Vista's real property portfolio generally consists of land that is zoned,
planned or developed for single- and multi-family residential, office, retail,
industrial and other commercial uses. The acquisition by the Company of equity
interests in Vista was a part of a pre-packaged bankruptcy plan which was
approved by the Unites States Bankruptcy Court for the District of Delaware.
The management of Vista and the Company are continuing to evaluate
what benefits could be derived from coordinating, combining or consolidating
the business activities of Vista with those of certain of the Company's
subsidiaries. To date, Vista and the Company have initiated joint planning and
development work at several key residential sites included in Vista's portfolio
and have identified commercial development opportunities in three of Vista's
major projects. Vista has also initiated discussions regarding potential joint
venture activities (which involve both subsidiaries of the Company and
unaffiliated third parties) with respect to selected properties. With respect
to the balance of its properties, Vista is continuing to implement its existing
plans to manage, maintain, develop and sell or otherwise dispose of such
properties in the ordinary course of business.
As a result of the above evaluations and in a further effort to
optimize the benefits derived from the complementary businesses of Vista and
the Company, the managements of the Company and Vista are working on a
potential business combination ("Combination") pursuant to which the assets and
operations of Vista would be combined with the Company's existing home building
operations. The managements of the Company and Vista believe that a
Combination would result in a more efficient means of operating their business
activities and would facilitate the zoning, development and buildout of certain
of Vista's properties as well as the disposition of the Company's excess real
estate parcels. If a Combination is ultimately consummated, certain of Vista's
net operating loss carryforwards and other tax-related benefits may become
useable in future years, which could result in a significant contribution to the
Company's consolidated earnings during the next several years. For additional
information regarding Vista's financial information and potential tax-related
benefits, see Note (K) of the Notes to Consolidated Financial Statements, which
are incorporated by reference in this Annual Report.
There can be no assurance that, if the managements of Vista and the
Company make a proposal to their boards, the board of each company would
approve the Combination, or that if approved, the potential operational or
other benefits referred to above would be realized.
United Kingdom Joint Venture
In February 1995, Centex announced its wholly-owned subsidiary, Centex
Homes (UK) Limited, had entered into a joint venture agreement with a
London-area home builder, The Charles Church Group Limited ("Charles Church"),
to build homes in the United Kingdom. The venture represents a limited entry
into the international home building marketplace for Centex Homes. Centex
Homes (UK) Limited and Charles Church have each contributed approximately $1.1
million in cash, with the remaining $9 million financed by a United Kingdom
bank, which is guaranteed by Centex.
The Centex/Charles Church joint venture acquired a parcel of
undeveloped land in Berkshire County, west of London. Located in Sunningdale,
the parcel consists of 2.1 acres on which 11 homes will be built. Homes in
this development are in the 3,500-4,000 square foot range and will sell for
approximately $750,000. At this time, Centex Homes does not expect to expand
the joint venture's developments or broaden Centex's European activities.
FINANCIAL SERVICES
Financial Services consist of mortgage banking and, until December
1994, the savings and loan operations. The Company's mortgage banking
activities are conducted through Centex's wholly-owned subsidiary, CTX Mortgage
Company ("CTX"), which offers mortgage origination and other related services
on homes sold by Centex Homes and by third parties. The savings and loan
deposits and branch operations, which were conducted through Texas Trust
Savings Bank, FSB, were sold in December 1994.
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CTX Mortgage Company
CTX was established in 1973 to provide mortgage financing for homes
built by Centex Homes, Centex's home building operation. The opening of CTX
mortgage offices in substantially all of Centex Homes' housing markets has
enabled it to consistently provide mortgage financing for an average of 72% of
the homes built by Centex Homes ("Builder Loans") over the past five years. In
1985, CTX expanded its operations to include third-party loans ("Spot Loans")
that are not associated with the sale of homes built by Centex. At March 31,
1996, CTX had 132 offices located in 25 states. The offices vary in size
depending on volume in each locality.
The unit breakdown of Builder and Spot Loans for the five years ended
March 31, 1996 are set forth in the following table:
<TABLE>
<CAPTION>
For the Fiscal Years Ended March 31,
---------------------------------------------
1996 1995 1994 1993 1992
-------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
LOAN TYPES:
Builder 8,445 8,503 9,289 7,758 5,897
Spot 33,151 28,548 49,254 30,543 17,819
-------- ------ ------ ------ ------
41,596 37,051 58,543 38,301 23,716
======== ====== ====== ====== ======
ORIGINATION VOLUME (IN BILLIONS) $4.9 $4.2 $6.4 $4.2 $2.5
PERCENT OF CENTEX
CLOSINGS FINANCED 71% 66% 74% 75% 76%
</TABLE>
CTX provides mortgage origination and other mortgage related services
for Federal Housing Administration ("FHA"), Veterans Administration ("VA") and
conventional loans on homes built and sold by the Company or by others, as well
as resale homes. The Company's mortgage loans are first-lien mortgages secured
by 1-4 family residences. A majority of the conventional loans are conforming
loans which qualify for inclusion in guaranteed programs sponsored by Fannie
Mae ("FNMA") or Freddie Mac ("FHLMC"). The remainder of the conventional loans
are pre-approved and individually underwritten by private investors who
purchase such loans on a whole-loan basis for their investment portfolios.
The principal sources of income from CTX's mortgage banking business
are: loan origination fees; revenues from sale of servicing rights; positive
carry (discussed below); and marketing gains and losses. Generally, CTX sells
its right to service the mortgage loans to various loan servicing companies,
and therefore retains no mortgage servicing rights. Accordingly, CTX avoids
the servicing risk associated with early payoffs and foreclosures. CTX enters
into various financial agreements, in the normal course of business, in order
to manage the exposure to changing interest rates as a result of having issued
loan commitments to its customers at a specified price and period. By selling
the mortgages for future delivery, the interest rate risk is minimized.
CTX borrows money at short-term rates to fund its mortgage loans.
During the 30- to 60-day period between the closing of a loan and delivery of
such loan to the purchaser, CTX earns the interest accrued on the mortgage,
which is normally a higher interest rate than the rate paid on the short-term
loans used to fund the mortgage during this 30- to 60-day holding period. This
positive spread between the long-term interest rate earned and the short-term
interest rate paid is referred to as "positive carry," and generally represents
one of the important sources of income.
10
<PAGE> 11
Competition and Other Factors
The mortgage banking industry in the United States is highly
competitive. CTX competes with other mortgage banking companies as well as
financial institutions to supply mortgage financing at attractive rates to
purchasers of Centex homes as well as to the general public. Mortgage banking
results in fiscal 1996 continued to be negatively impacted by a very
competitive environment. Rapidly rising interest rates commencing in February
1994 substantially slowed refinancing activity and caused consumers to shift
from more profitable fixed-rate mortgages to lower-margin adjustable rate
products. During a major portion of fiscal 1996, these trends reversed as
interest rates fell.
CTX is subject to the rules and regulations of, and examinations by,
the Federal National Mortgage Association ("FNMA"), the Federal Home Loan
Mortgage Corporation ("FHLMC"), the Department of Veterans' Affairs ("VA"),
Department of Housing and Urban Development ("HUD"), the Federal Housing
Administration ("FHA"), the Government National Mortgage Association ("GNMA")
and state regulatory authorities with respect to originating, processing,
underwriting, making, selling, securitizing and servicing residential mortgage
loans. In addition, there are other federal and state statutes and regulations
affecting such activities. These rules and regulations, among other things,
impose licensing obligations on CTX, establish eligibility criteria for
mortgage loans, provide for inspection and appraisals of properties, regulate
payment features and, in some cases, fix maximum interest rates, fees and loan
amounts. CTX is required to maintain specified net worth levels by, and submit
annual audited financial statements to HUD, VA, FNMA, FHLMC and GNMA and
certain state regulators. CTX's affairs are also subject to examination by the
Federal Housing Commissioner at all times to assure compliance with FHA
regulations, policies and procedures. Among other federal and state consumer
credit laws, mortgage origination and servicing activities are subject to the
Equal Credit Opportunity Act, the Federal Truth-In-Lending Act, the Real Estate
Settlement Procedures Act and the regulations promulgated under such statutes,
which prohibit discrimination and unlawful kickbacks and referral fees and
require the disclosure of certain information to borrowers concerning credit
and settlement costs. Many of these regulatory requirements are designed to
protect the interest of consumers, while others protect the owners or insurers
of mortgage loans. Failure to comply with these requirements can lead to loss
of approved status, demands for indemnification or loan repurchases from
investors, class action lawsuits by borrowers, administrative enforcement
actions and, in some cases, rescission or voiding of the mortgage loan by the
mortgagor.
Other financial-related services provided by CTX affiliates include
acting as an agent for the issuance of homeowners' insurance policies, title
insurance policies and providing escrow services. CTX Insurance Agency
provides hazard insurance to home buyers in Texas and Florida through
third-party insurance companies. In fiscal year 1995, CTX entered into a joint
venture agreement with another home builder to provide mortgage origination for
homes built by this home builder. In addition, during fiscal 1995, an affiliate
of CTX entered the "B" and "C" mortgage and second lien markets whereby this
CTX affiliate will originate "B" and "C" first mortgages and second mortgages
for home improvements and home equity lines of credit. The affiliate is
establishing its own branch network and marketing program to solicit potential
customers.
In April 1996, Centex acquired substantially all of the assets of
Advanced Financial Technology, Inc. (Adfitech) and Loan Processing
Technologies, Inc. (LPT), headquartered in Oklahoma City, Oklahoma. Adfitech
is one of the largest and lowest cost providers of quality control mortgage
services, and LPT owns and operates an automated mortgage processing system.
The acquisitions should expand and create more flexible mortgage processing
capacity for Financial Services, enhancing Financial Services' existing systems
capabilities. LPT is also offering these processing services to other mortgage
companies.
11
<PAGE> 12
Savings and Loan
In December 1988, Centex acquired the operations of four Texas savings
and loan associations under the Federal Savings and Loan Insurance
Corporation's (the "FSLIC") assisted transactions process commonly known as the
"Southwest Plan". The acquisition was made by Texas Trust Savings Bank, FSB
("Texas Trust"), a federal stock savings bank and an indirect wholly-owned
subsidiary of Centex.
In December 1994, Texas Trust negotiated an early termination of
various agreements with the Federal Deposit Insurance Corporation (as successor
to the FSLIC), and in December, 1994 sold Texas Trust's branch operations to a
financial institution and all deposit liabilities were assumed by the
purchaser. Immediately following the branch sale, Texas Trust was dissolved,
thereby completing Centex's exit from the savings and loan industry.
The following is a summary of average balances and average interest
rates for the periods ended December 30, 1994 and March 31, 1994.
TEXAS TRUST SAVINGS BANK, FSB
AVERAGE BALANCES AND INTEREST RATES
($ IN THOUSANDS)
<TABLE>
<CAPTION>
For the Period From April 1, 1994 For the Year
Through December 30, 1994 Ended March 31, 1994
-------------------------------- ----------------------------------
Revenue/Interest
Expense Average Revenue/Interest
Balance (Annualized) % Balance Expense %
------- ------------ -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Interest-bearing deposits in other
financial institutions and other
investment securities . . . . . . . $132,022 $ 7,771 5.89% $101,181 $ 5,208 5.15%
Loans, primarily residential
mortgage, net of $661 and $830
respectively, of valuation
adjustments . . . . . . . . . . . . 21,199 1,484 7.00% 37,665 3,161 8.39%
Assets covered by Fund assistance . . . 12,899 816 6.33% 60,827 1,316 2.16%
-------- ------- ------- -------- ------- -------
Total earning assets . . . . . . . 166,120 10,071 6.06% 199,673 9,685 4.85%
------- ------- ------- -------
Cash and amounts due from banks . . . . . 10,507 3,465
Other assets . . . . . . . . . . . . . . 26,874 25,446
-------- --------
Total assets . . . . . . . . . . . $203,501 $228,584
======== ========
Interest-bearing liabilities:
Deposits . . . . . . . . . . . . . . . $183,359 6,728 3.67% $197,341 7,205 3.65%
FHLB advances and short-term
borrowings . . . . . . . . . . . . . 4,000 392 9.80% 10,882 622 5.72%
-------- ------- ------- -------- ------- -------
Total interest-bearing liabilities 187,359 7,120 3.80% 208,223 7,827 3.76%
------- ------- ------- -------
Other liabilities . . . . . . . . . . . . 4,013 4,928
Stockholder's equity . . . . . . . . . . 12,129 15,433
-------- --------
Total liabilities and stock-
holder's equity . . . . . . . . $203,501 $228,584
======== ========
Net interest margin . . . . . . . . . . . $ 2,951 $ 1,858
======== ========
Net yield on earning assets . . . . . . . 1.78% .93%
======= =======
Net margin . . . . . . . . . . . . . . . 2.26% 1.09%
======= =======
</TABLE>
12
<PAGE> 13
CONTRACTING AND CONSTRUCTION SERVICES
Centex's contracting and construction services work is performed
nationwide. As a group, Centex's Contracting and Construction Services
subsidiaries rank as one of the largest building contractors in the country as
well as one of the largest U.S.-owned construction groups. The Construction
Group is made up of four firms with various geographic locations and project
niches. Healthcare facility construction has represented nearly 40% of its
business mix during recent years. New contracts for fiscal 1996 totaled $857.0
million versus $1.15 billion for fiscal 1995. The backlog of uncompleted
contracts at March 31, 1996 was $1.20 billion, compared to $1.33 billion at
March 31, 1995. The group's principal subsidiaries are as follows:
CENTEX CONSTRUCTION COMPANY, INC. - This entity, emerging from the
merger of Centex Bateson Construction Company, Inc., Centex-Simpson
Construction Company, Inc., and Centex Landis Construction Co., Inc. is
headquartered in Dallas with operational offices in Virginia and
Louisiana. This company will pursue competitively bid projects
nationwide, in addition to negotiated work in its regional market
areas.
CENTEX-RODGERS CONSTRUCTION COMPANY - This nationwide healthcare
construction specialist is headquartered in Nashville, with operational
offices in San Diego, Irvine and Sacramento, California; Detroit,
Michigan and West Palm Beach, Florida.
CENTEX-ROONEY CONSTRUCTION COMPANY, INC. - This Ft. Lauderdale-based
subsidiary performs all types of work principally within the state of
Florida.
CENTEX FORCUM LANNOM, INC. - This company, which focuses on industrial
client construction projects, is located in Dyersburg, Tennessee and
operates in Tennessee and surrounding states.
As a general contractor or construction manager, Centex provides the
supervisory personnel for the construction of the building or facility. In
addition, Centex may perform varying amounts of the actual construction work on
a project, but will generally hire subcontractors to perform the majority of
the work. As a result, the Company's Contracting and Construction Services
operation requires a relatively small asset base.
Construction contracts are primarily entered into under two formats:
competitively-bid and negotiated jobs. In a competitively-bid format, Centex
will bid a fixed amount for which it will agree to construct the project based
on an evaluation of detailed plans and specifications. In a negotiated job,
the contractor bids a fee (fixed or percentage) over the cost of the project
and, in many instances, agrees that the final cost will not exceed a designated
amount. Such contracts may include a provision whereby the owner will pay a
part of any savings from the guaranteed amount to the contractor. The
Company's highest margins in contracting operations have historically been on
competitively-bid jobs. Currently, the margins on competitively-bid and
negotiated jobs are about equal. On average, about half of Centex's projects
are competitively-bid, public jobs and the other half are negotiated contracts
with private owners. The Company's public work for federal, state and local
governments includes hospitals, jails, airports, parking garages, office
buildings, military facilities, post offices and convention and performing arts
centers. Most of Centex's private owner contracts are for hotels, medical
facilities and office buildings, plus some correctional facilities and shopping
centers.
Competition and Other Factors
The construction industry is very competitive, and Centex competes with
numerous other companies. With respect to competitively-bid projects and
negotiated healthcare work, Centex generally competes throughout the United
States and with local, regional and national contractors, depending upon the
nature of the project. For negotiated projects other than healthcare, Centex's
subsidiaries compete primarily in the general geographical area where they are
located and with other local, regional and national contractors. Centex
solicits new projects by attending project bid meetings and meeting with
builders and owners and through existing customers. Centex competes
successfully on the basis of its reputation, knowledge and understanding of its
clients' needs and financial strength.
13
<PAGE> 14
The Company's Contracting and Construction Services operations are
affected by federal, state and local laws and regulations relating to worker
health and workplace safety as well as Environmental Laws. With respect to
health and safety matters, the Company believes that appropriate precautions
are taken to protect employees and others from workplace hazards. Current
Environmental Laws may require the Company's operating subsidiaries to work in
concert with project owners to acquire the necessary permits or other
authorizations for certain activities, including the construction of projects
located in or near wetland areas. The Company's Contracting and Construction
Services operations are also affected by Environmental Laws regulating the use
and disposal of hazardous materials encountered during demolition operations.
The Company believes that the Contracting and Construction Services
group's current procedures and practices are consistent with industry standards
and that compliance by the Construction Group with the health and safety laws
and Environmental Laws does not constitute a material burden or expense for the
Company.
The Company's Contracting and Construction Services operations obtain
materials and services from numerous sources. The Company believes that its
construction companies can deal effectively with any problems they may
experience in the supply of materials and services.
EMPLOYEES
The breakdown of employees by line of business as of March 31, 1996 is
presented in the following table:
<TABLE>
<CAPTION>
Lines of Business Employees
----------------- ---------
<S> <C>
Home Building 2,441
Financial Services 1,718
Contracting and
Construction Services 1,920
Corporate & Other 107
-----
6,186
=====
</TABLE>
14
<PAGE> 15
ITEM 2. PROPERTIES
Prior to April 1994, the Company, in connection with its Construction
Products operations, operated cement plants, quarries and related facilities at
Buda, Texas, LaSalle, Illinois, Fernley, Nevada and Laramie, Wyoming. The Buda
and LaSalle plants are owned by separate joint ventures in each of which Centex
had a 50% interest. The Company's principal aggregate plants and quarries were
located in Austin and Fort Worth, Texas and Marysville, California. In
addition, the Company operated gypsum wallboard plants in Albuquerque and
nearby Bernalillo, New Mexico.
In April, 1994, the Company's formerly wholly-owned subsidiary, Centex
Construction Products, Inc., completed the sale of 51% of its stock through an
initial public offering.
See "Item 1. Business" on pages 5-14 of this Report for additional
information relating to the Company's properties.
ITEM 3. LEGAL PROCEEDINGS
The management of the Company believes that none of the litigation
matters, except as described below, in which Centex or any subsidiary is
involved, if determined unfavorably to Centex or any subsidiary, would have a
material adverse effect on the consolidated financial condition or operations
of the Company.
The contract to build the Harrah's New Orleans Casino was suspended in
November, 1995 due to a bankruptcy filing by the Harrah's Jazz Company
partnership, the developer of the casino. Centex and its subcontractors have
claims totalling nearly $40 million against the partnership for completed but
unpaid work. Centex's liability to its subcontractors is for less than the
total claim. Centex has filed a $40 million lawsuit against Harrah's
Entertainment, Inc., parent company of the major partner in the partnership.
Centex believes that it and its subcontractors will ultimately recover
substantially all of the amounts owed to them.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF CENTEX (SEE ITEM 10 OF PART III)
The following is an alphabetical listing of the Company's executive
officers, as such term is defined under the rules and regulations of the
Securities and Exchange Commission. All of these executive officers have been
employed by the Company and/or one or more subsidiaries of the Company for the
past five years. All of these executive officers were elected by the Board of
Directors of the Company at its Annual Meeting on July 27, 1995, to serve until
the next Annual Meeting of Directors or until their respective successors are
duly elected and qualified. There is no family relationship between any of
these officers.
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH CENTEX
---------------------------------------- --- ----------------------------------------------------------------
<S> <C> <C>
Michael S. Albright 48 Vice President--Finance and Controller (Vice President--Finance
since July 1992; Controller since November 1987; Vice President
from July 1989 to July 1992)
Timothy R. Eller 47 President, Chief Executive Officer and Chief Operating Officer of
Centex Real Estate Corporation (President and Chief Operating
Officer since January 1990; Chief Executive Officer since July
1991; Executive Vice President from July 1987 to January 1990)
</TABLE>
15
<PAGE> 16
<TABLE>
<S> <C> <C>
William J Gillilan III 50 President and Chief Operating Officer (President since July 1991;
Chief Operating Officer since January 1990; Executive Vice
President from July 1989 until July 1991)
Laurence E. Hirsch 50 Chairman of the Board and Chief Executive Officer (Chairman of
the Board since July 1991; Chief Executive Officer since July
1988; President from March 1985 until July 1991)
David W. Quinn 54 Vice Chairman of the Board and Chief Financial Officer
(Vice Chairman of the Board since May 1996; Chief Financial
Officer since February 1987; Executive Vice President from
February 1987 until May 1996)
Raymond G. Smerge 52 Vice President, Chief Legal Officer, General Counsel and
Secretary (Vice President and Chief Legal Officer since September
1985; General Counsel and Secretary since April 1993)
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(See Item 7 below.)
ITEM 6. SELECTED FINANCIAL DATA
(See Item 7 below.)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information called for by Items 5, 6 and 7 is incorporated herein by
reference to the information set forth under the following captions (on the
page or pages indicated) in the Centex 1996 Annual Report:
<TABLE>
<CAPTION>
ITEMS CAPTION IN THE CENTEX 1996 ANNUAL REPORT Pages
----- ---------------------------------------- -----
<S> <C> <C>
5 Stock Prices and Dividends 2
5 Indebtedness (Note (E) to Consolidated Financial
Statements of Centex) 36-37
6 Summary of Selected Financial Data 54-55
7 Short-term Debt and Long-term Debt (Note (E) to
Consolidated Financial Statements of Centex) 36
7 Management's Discussion and Analysis of Results of
Operations and Financial Condition 47-52
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by this Item 8 is incorporated herein by
reference to the Centex 1996 Annual Report as set forth in the Index to
Consolidated Financial Statements and Schedules on page 18 of this Report (see
Item 14).
16
<PAGE> 17
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(See Item 11 below.)
ITEM 11. EXECUTIVE COMPENSATION
Except for the information relating to the executive officers of the
Company, which follows Item 4 of Part I of this Report, the information called
for by Items 10, 11, 12 and 13 is incorporated herein by reference to the
information included and referenced under the following captions in the
Company's Proxy Statement for the July 25, 1996 Annual Meeting of Stockholders
(the "1996 Centex Proxy Statement"):
<TABLE>
<CAPTION>
ITEM CAPTION IN THE 1996 CENTEX PROXY STATEMENT
---- ------------------------------------------
<S> <C>
10 Election of Directors
10 Section 16(a) Compliance
11 Executive Compensation
12 Security Ownership of Management
and Certain Beneficial Owners
13 Certain Transactions
</TABLE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(See Item 11 above.)
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(See Item 11 above for information respecting indebtedness to Centex of
certain officers and directors.)
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
(1) and (2) See the Index to Consolidated Financial Statements and Schedules
below for a list of the Financial Statements and Financial Statement schedules
filed herewith.
17
<PAGE> 18
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
CENTEX 1996
ANNUAL REPORT
PAGES
------------
<S> <C>
CENTEX CORPORATION AND SUBSIDIARIES
Data incorporated by reference to the Centex 1996 Annual Report:
Report of Independent Public Accountants . . . . . . . . . 46
Statements of Consolidated Earnings for the Years Ended
March 31, 1996, 1995 and 1994 . . . . . . . . . . . . . 27
Consolidated Balance Sheets as of March 31, 1996 and 1995 28-29
Statements of Consolidated Cash Flows for the Years Ended
March 31, 1996, 1995 and 1994 . . . . . . . . . . . . . 30
Statements of Consolidated Stockholders' Equity
for the Years Ended March 31, 1996, 1995 and 1994 . . . 31
Notes to Consolidated Financial Statements . . . . . . . . 32-45
Quarterly Results (Unaudited) . . . . . . . . . . . . . . 53
</TABLE>
Consolidated supporting schedules have been omitted either because the
required information is contained in notes to the consolidated financial
statements or because such schedules are not required or are not applicable.
<TABLE>
<CAPTION>
FORM 10-K
PAGES
------------
<S> <C>
CENTEX CONSTRUCTION PRODUCTS, INC.
Report of Independent Public Accountants . . . . . . . . . 20
Consolidated Balance Sheets as of March 31, 1996 and 1995 21
Statements of Consolidated Earnings for the Years Ended
March 31, 1996, 1995 and 1994 . . . . . . . . . . . . . 22
Statements of Consolidated Cash Flows for the Years Ended
March 31, 1996, 1995 and 1994 . . . . . . . . . . . . . 23
Statements of Consolidated Stockholders' Equity
for the Years Ended March 31, 1996, 1995 and 1994 . . . 24
Notes to Consolidated Financial Statements . . . . . . . . 25-38
</TABLE>
(3) EXHIBITS
The information on exhibits required by this Item 14 is set forth in the
Centex Index to Exhibits appearing on pages 58-61 of this Report.
(b) Reports on Form 8-K:
None.
18
<PAGE> 19
CENTEX CONSTRUCTION PRODUCTS, INC.
FINANCIAL STATEMENTS
FISCAL YEAR 1996
19
<PAGE> 20
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Centex Construction Products,
Inc.:
We have audited the accompanying consolidated balance sheets of Centex
Construction Products, Inc. (a Delaware corporation) and subsidiaries as of
March 31, 1996 and 1995, and the related consolidated statements of earnings,
stockholders' equity, and cash flows for each of the three years in the period
ended March 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Centex Construction Products, Inc. and subsidiaries as of March 31, 1996 and
1995, and the results of their operations and their cash flows for each of the
three years in the period ended March 31, 1996, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas,
May 8, 1996
20
<PAGE> 21
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31,
------------------------
1996 1995
--------- --------
<S> <C> <C>
ASSETS
------
Current Assets -
Cash and Cash Equivalents $ 20,799 $ 2,475
Accounts and Notes Receivable, net 33,532 32,561
Inventories 29,691 31,526
-------- ---------
Total Current Assets 84,022 66,562
-------- ---------
Property, Plant and Equipment 308,600 300,838
Less Accumulated Depreciation (128,419) (123,717)
-------- ---------
Property, Plant & Equipment, net 180,181 177,121
-------- ---------
Notes Receivable, net 1,395 1,202
Other Assets 3,977 5,218
-------- ---------
$269,575 $250,103
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities -
Accounts Payable $ 15,020 $ 13,447
Accrued Liabilities 23,029 22,046
Current Portion of Long-Term Debt 80 -
-------- ---------
Total Current Liabilities 38,129 35,493
-------- ---------
Long-term Debt 640 24,500
Deferred Income Taxes 14,344 6,705
Commitments and Contingencies
Stockholders' Equity -
Common Stock, Par Value $0.01;
Authorized 50,000,000 Shares; Issued
and Outstanding 22,978,504 and
22,959,804 Shares, respectively 230 230
Capital in Excess of Par Value 161,617 161,355
Retained Earnings 54,615 21,820
-------- ---------
Total Stockholders' Equity 216,462 183,405
-------- ---------
$269,575 $250,103
======== ========
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 22
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
For the Years Ended March 31,
---------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenues
Cement $125,705 $109,900 $101,714
Wallboard 58,343 51,730 32,765
Concrete and Aggregates 39,902 35,217 35,128
Other, net 2,782 1,601 1,223
Less Intersegment Sales (4,138) (4,135) (4,004)
-------- -------- --------
222,594 194,313 166,826
-------- -------- --------
Costs and Expenses
Cement 90,374 83,893 85,799
Wallboard 46,409 44,482 32,808
Concrete and Aggregates 34,344 32,631 33,476
Less Intersegment Purchases (4,138) (4,135) (4,004)
Corporate General and Administrative 2,498 2,343 1,831
Interest 803 1,270 336
-------- -------- --------
170,290 160,484 150,246
-------- -------- --------
Earnings Before Income Taxes 52,304 33,829 16,580
Income Taxes 18,360 12,009 6,340
-------- -------- --------
Net Earnings $ 33,944 $ 21,820 $ 10,240
======== ======== ========
Earnings Per Share(1) $ 1.48 $ 0.95 $ 0.45
======== ======== ========
</TABLE>
(1) Prior to April 1994, Centex Construction Products ("CXP") was a wholly
owned subsidiary of Centex Corporation and accordingly did not report per share
information. To facilitate comparisons between periods, per share data for
prior years has been presented using the 23,000,000 shares outstanding
immediately after the Initial Public Offering.
See notes to consolidated financial statements.
22
<PAGE> 23
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Years Ended March 31,
----------------------------------
1996 1995 1994
-------- ------- --------
<S> <C> <C> <C>
Revenues
Net Earnings $ 33,944 $ 21,820 $ 10,240
Adjustments to Reconcile Net Earnings
to Net Cash Provided by Operating
Activities -
Depreciation, Depletion and Amortization 13,791 14,576 14,488
Deferred Income Tax Provision 7,639 2,658 1,938
Gain on Sale of Assets (783) - -
Increase in Accounts and Notes Receivable (6,073) (1,203) (6,175)
Decrease (Increase) in Inventories 1,053 (2,014) 1,927
Increase in Accounts Payable 424 64 3,680
Increase in Accrued Liabilities 859 3,078 5,443
Decrease (Increase) in Other Assets 974 2,207 (1,267)
-------- --------- ---------
51,828 41,186 30,274
-------- --------- ---------
Cash Flows from Investing Activities
Property, Plant and Equipment Additions, net (15,294) (5,718) (8,235)
Proceeds from Dispositions of Assets 5,308 - -
-------- --------- ---------
(9,986) (5,718) (8,235)
-------- --------- ---------
Cash Flows from Financing Activities
Notes Payable to Centex - - 5,854
Repayment of Notes to Centex - (15,585) (21,583)
(Decrease) Increase in Other Long-term Debt (23,860) 24,500 (3,205)
Increase (Decrease) in Current Portion of Long-term Debt 80 (615) (3,809)
Proceeds from Bridge Loan - 192,000 -
Repayment of Bridge Loan - (192,000) -
Dividend to Centex - (162,600) -
Stock Sale Net Proceeds - 153,733 -
Proceeds from Stock Option Exercises 262 - -
Stock Repurchases - (387) -
Payment of Deferred Income Taxes to Affiliate - (34,328) -
-------- --------- ---------
(23,518) (35,282) (22,743)
-------- --------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents 18,324 186 (704)
Cash at Beginning of Period 2,475 2,289 2,993
-------- --------- ---------
Cash at End of Period $ 20,799 $ 2,475 $ 2,289
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
23
<PAGE> 24
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Years Ended March 31,
-----------------------------------
1996 1995 1994
---------- -------- ----------
<S> <C> <C> <C>
COMMON STOCK -
Balance at Beginning of Period $ 230 $ 2 $ 2
Stock Split - 111 -
Stock Sale - 117 -
-------- ------- --------
Balance at End of Period 230 230 2
-------- ------- --------
CAPITAL IN EXCESS OF PAR VALUE -
Balance at Beginning of Period 161,355 22,466 22,466
Stock Split - (111) -
Stock Sale - 153,616 -
Dividend to Centex - (14,229) -
Retirement of 40,196 Shares - (387) -
Stock Option Exercises 262 - -
-------- ------- --------
Balance at End of Period 161,617 161,355 22,466
-------- ------- --------
RETAINED EARNINGS -
Balance at Beginning of Period 21,820 148,371 138,131
Dividend to Centex - (148,371) -
Dividend to Shareholders (1,149) - -
Net Earnings 33,944 21,820 10,240
-------- ------- --------
Balance at End of Period 54,615 21,820 148,371
-------- ------- --------
TOTAL STOCKHOLDERS' EQUITY $216,462 $183,405 $170,839
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
24
<PAGE> 25
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(A) SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation -
The consolidated financial statements include the accounts of Centex
Construction Products, Inc. (formerly Centex Cement Enterprises, Inc.) and its
majority-owned subsidiaries ("CXP" or the "Company") after the elimination of
all significant intercompany balances and transactions. In addition, the
Company holds 50% joint venture interests in its cement plants in Illinois and
Texas and has proportionately consolidated its pro rata interest in the
revenues, expenses, assets and liabilities of those ventures.
On April 19, 1994, the Company completed an Initial Public Offering
("IPO") of 51% of its common stock. As a result of the IPO, Centex
Corporation's ("Centex") ownership of the Company was reduced to 49%, with the
public owning 51%. Prior to that time, the Company was a wholly owned
subsidiary of Centex. See Note (I) for further discussion.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Accounts and Notes Receivable -
Accounts and notes receivable have been shown net of the allowance for
doubtful accounts of $2.1 million and $2.4 million at March 31, 1996 and 1995,
respectively. The Company has no significant credit risk concentration among
its diversified customer base.
Notes receivable at March 31, 1996, are collectible primarily over
three years. The weighted average interest rate at March 31, 1996 and 1995,
was 8.6% and 8.4%, respectively.
Inventories -
Inventories are stated at the lower of average cost (including
applicable material, labor, depreciation, and plant overhead) or market.
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31,
------------------
1996 1995
------- --------
<S> <C> <C>
Raw Materials and Materials-in-Progress $ 6,949 $ 7,948
Finished Cement 5,368 5,736
Aggregates 2,092 2,761
Wallboard 2,124 2,283
Repair Parts and Supplies 12,395 11,888
Fuel and Coal 763 910
------- --------
$29,691 $ 31,526
======= ========
</TABLE>
25
<PAGE> 26
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Property, Plant and Equipment -
Property, plant and equipment are stated at cost. Major renewals and
improvements are capitalized and depreciated. Repairs and maintenance are
expensed as incurred. Depreciation is provided on a straight-line basis over
the estimated useful lives of depreciable assets. Raw material deposits are
depleted as such deposits are extracted for production utilizing the
units-of-production method. Costs and accumulated depreciation applicable to
assets retired or sold are eliminated from the accounts and any resulting gains
or losses are recognized at such time. The estimated lives of the related
assets are as follows:
<TABLE>
<S> <C>
Plants 20 to 30 years
Buildings 20 to 40 years
Machinery and Equipment 3 to 20 years
</TABLE>
Income Taxes -
Through April 19, 1994, the Company was included in the Centex
consolidated federal tax return. The Company accounted for income taxes on a
separate company basis without benefit of surtax exemption. Accordingly,
related payables and receivables were due to or from Centex. Subsequent to
April 20, 1994, the Company files its own separate consolidated federal tax
returns.
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." That
statement requires, among other things, that deferred taxes be provided on
differences between the financial reporting basis and tax basis of assets and
liabilities using existing tax laws and rates.
Notes Payable to Centex -
Prior to the IPO, the Company from time to time borrowed from Centex,
its former parent. These borrowings were noninterest bearing. As discussed in
Note (I), notes payable to Centex were paid in full on April 19, 1994.
Centex has historically provided certain administrative and other
services for CXP and its other operating subsidiaries at no charge. The cost
of providing these services has not been significant. See Note (I) for further
discussion.
26
<PAGE> 27
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Statements of Consolidated Earnings -- Supplemental Disclosures -
Selling, general and administrative expenses of the operating units
are included in costs and expenses of each segment. Corporate general and
administrative expenses are shown separately in the statements of consolidated
earnings. Total selling, general and administrative expenses for each of the
periods are summarized below:
<TABLE>
<CAPTION>
For the Years Ended March 31,
-------------------------------
1996 1995 1994
------ ----- -----
<S> <C> <C> <C>
Operating Units Selling, General and Administrative $11,442 $10,866 $10,689
Corporate General & Administrative 2,498 2,343 1,831
------- -------- --------
$13,940 $13,209 $12,520
======= ======= =======
</TABLE>
Maintenance and repair expenses are included in each segment's costs
and expenses. The Company incurred expenses of $23.8 million, $26.0 million
and $24.1 million in the years ended March 31, 1996, 1995 and 1994,
respectively, for maintenance and repairs.
Other net revenues include clinker sales, lease and rental income,
asset sale income, and trucking income as well as other miscellaneous revenue
items which have not been allocated to a business segment.
Statements of Consolidated Cash Flows -- Supplemental Disclosures -
All cash equivalents have original maturities of three months or less.
Interest payments made during the years ended March 31, 1996, 1995 and
1994, were $0.8 million, $1.3 million and $0.3 million, respectively.
Net payments made for federal and state income taxes during the years
ended March 31, 1996, 1995 and 1994, were $9.8 million, $42.2 million and $1.9
million, respectively. Included therein are payments to (receipts from) Centex
of ($2.9) million, $35.3 million and $1.7 million during the years ended March
31, 1996, 1995 and 1994, respectively.
In connection with a litigation settlement, the Company reclassified
into property $4.2 million of construction cost that was previously classified
as a receivable.
Employee Benefit Plans -
Certain of the Company's hourly employees are covered by defined
benefit plans. At April 1, 1995, the Company's pro rata share of the projected
benefit obligation (assuming an 8% discount rate) was $2.5 million. The market
value of assets available to pay these obligations at April 1, 1995, was $2.5
million.
27
<PAGE> 28
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In addition, certain salaried employees previously participated in
Centex's Profit Sharing and Retirement plan. The Company established its own
Profit Sharing and Retirement plan, which is similar to the Centex plan. The
expenses for each period were as follows:
<TABLE>
<CAPTION>
For the Years Ended March 31,
------------------------------
1996 1995 1994
---- ----- ------
<S> <C> <C> <C>
Defined Benefit Plans $ 176 $176 $160
Defined Contribution Plan $ 1,038 $934 $896
</TABLE>
Statement of Financial Accounting Standards No. 106, "Employers
Accounting for Postretirement Benefits Other Than Pensions," specifies certain
required methods of accounting for postretirement benefits other than pensions.
This pronouncement has no impact on the Company's financial statements as the
Company has no other postretirement obligations.
Earnings Per Share -
Earnings per common share is based on the weighted average number of
common shares outstanding in 1996, 1995 and 1994 of 22,969,643, 22,987,768 and
23,000,000, respectively. Weighted average common shares for 1994 reflect the
number of shares outstanding immediately after the IPO.
Reclassifications -
Certain prior year balances have been reclassified to be consistent
with the 1996 presentation.
Impact of New Accounting Pronouncements -
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" (SFAS No. 121). SFAS No. 121, which is
effective for fiscal years beginning after December 15, 1995, requires that
certain long-lived assets and intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. The Company is not aware of any events or
changes in circumstances that will result in a material effect on its fiscal
1997 financial statements upon the Company's adoption of SFAS No. 121.
In October 1995, the FASB Issued Statement No. 123, "Accounting for
Stock-Based Compensation" (SFAS No. 123). SFAS No. 123, which is also
effective for fiscal years beginning after December 15, 1995, allows companies
either to continue to measure compensation cost based on the method prescribed
by Accounting Principles Board Opinion No. 25 ( APB No. 25) or adopt a "fair
value" method of accounting for all employee stock-based compensation. The
Company plans to continue utilizing the accounting for stock issued to
employees prescribed by APB No. 25 and, therefore, the adoption of SFAS No.
123 will have no impact on the financial position or results of operations of
the Company, but will require expanded disclosure of pro forma net income and
earnings per share information in the fiscal 1997 financial statements.
28
<PAGE> 29
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(B) PROPERTY, PLANT AND EQUIPMENT
Cost by major category and accumulated depreciation are summarized
below:
<TABLE>
<CAPTION>
March 31,
----------------------
1996 1995
-------- --------
<S> <C> <C>
Land and Quarry $ 36,419 $ 36,817
Plants 233,221 224,284
Buildings, Machinery and Equipment 38,960 39,737
-------- --------
308,600 300,838
Accumulated Depreciation (128,419) (123,717)
-------- --------
$180,181 $177,121
======== ========
</TABLE>
(C) LONG-TERM DEBT
Long-term debt is set forth below. The 30-day Eurodollar rate was
5.3% and 6.1% at March 31, 1996 and 1995, respectively.
<TABLE>
<CAPTION>
March 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Bank Revolver, with interest at LIBOR
plus 1/2% or Alternate Base Rate,
due March 2001, unsecured $ - $24,500
Property Note, interest at 7%, due
March, 2005, secured 720 -
-------- -------
720 24,500
Less Current Maturities (80) -
-------- -------
$ 640 $24,500
======== =======
</TABLE>
Credit Facility -
Upon the completion of the April 19, 1994 IPO, the Company established
a $65 million unsecured long-term revolving credit line (the "Bank Revolver").
Borrowings under the Bank Revolver bear interest, at the option of the Company,
at (i) a Eurodollar-based rate that varies depending on the Company's ratio of
total indebtedness to total capitalization (the "Debt-to-Capital Ratio") or
(ii) the greater of the bank's base rate or the federal funds rate plus .5%.
Under the Bank Revolver, the Company is obligated to pay certain fees,
including an annual commitment fee on the unused portion of the commitment.
The Bank Revolver contains certain customary restrictive covenants (including
restrictions on the consummation of mergers or asset sales, the payment of
dividends, the creation of liens and the incurrence of additional indebtedness)
and requires the Company to maintain or meet certain financial ratios or tests.
Among other things, the Bank Revolver requires the Company to maintain a
minimum ratio of earnings before interest and taxes to interest and not to
exceed a maximum Debt-to-Capital Ratio and to meet a minimum tangible net worth
test. The Company
29
<PAGE> 30
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
was in compliance with such financial ratios and tests at March 31, 1996, and
throughout the fiscal year then ended. On March 20, 1996, the Bank Revolver
was amended to lower the maximum borrowing capacity to $35 million, reduce the
annual commitment fee, create a new lower interest rate bracket, and extend the
commitment four years to expire on March 31, 2001.
Other Debt -
During fiscal year 1996, the Company issued a $720,000 note (at
seller's request) to purchase limestone reserves. The note is due in equal
installments through March 2005, and bears interest at 7%.
(D) INCOME TAXES
The provision for income taxes includes the following components:
<TABLE>
<CAPTION>
For the Years Ended March 31,
-------------------------------
1996 1995 1994
------ ------ -------
<S> <C> <C> <C>
Current Provision (Benefit)
Federal $12,174 $38,495 $ 4,100
State (1,453) 3,700 302
------- ------- -------
10,721 42,195 4,402
------- ------- -------
Deferred Provision (Benefit)
Federal 4,012 (28,214) 1,667
State 3,627 (1,972) 271
------- ------- -------
7,639 (30,186) 1,938
------- ------- -------
Provision for Income Taxes $18,360 $12,009 $ 6,340
======= ======= =======
</TABLE>
In connection with the IPO in April 1994, $34.3 million of deferred
income taxes became currently payable to Centex as a result of the Company no
longer being included in Centex's consolidated federal tax return.
30
<PAGE> 31
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The effective tax rates vary from the federal statutory rates due to the
following items:
<TABLE>
<CAPTION>
For the Years Ended March 31,
-----------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Earnings Before Income Taxes $52,304 $33,829 $16,580
======= ======= =======
Income Taxes at Statutory Rate $18,306 $11,840 $ 5,803
Increases (Decreases) in Tax Resulting from -
State Income Taxes, net 1,414 1,097 379
Statutory Depletion in Excess of Cost (1,588) (1,147) (912)
Change in Tax Rates - - 1,034
Other 228 219 36
------- ------- -------
Provision for Income Taxes $18,360 $12,009 $ 6,340
======= ======= =======
Effective Tax Rate 35% 35% 38%
</TABLE>
The retroactive change in the statutory rate from 34% to 35%,
effective January 1, 1993, resulted in a $1,034 provision to increase the
deferred income tax liability for the rate change. This provision was recorded
in September 1993.
The deferred income tax provision (benefit) results from the following
temporary differences in the recognition of revenues and expenses for tax and
financial reporting purposes:
<TABLE>
<CAPTION>
For the Years Ended March 31,
------------------------------
1996 1995 1994
------ ------ -------
<S> <C> <C> <C>
Excess Tax Depreciation and Amortization $ 5,653 $(29,423) $ 1,056
Bad Debts 269 (122) 24
Uniform Capitalization 76 (11) 250
Accrual Changes 685 (2,143) 379
Other 956 1,513 229
------- -------- -------
$ 7,639 $(30,186) $ 1,938
======= ======== =======
</TABLE>
31
<PAGE> 32
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
March 31,
------------------
1996 1995
------- --------
<S> <C> <C>
Items Giving Rise to Deferred Taxes
Excess Tax Depreciation and Amortization $ 13,957 $ 8,304
Other 3,782 2,826
-------- --------
17,739 11,130
-------- --------
Items Giving Rise to Prepaid Taxes
Accrual Changes (2,850) (3,535)
Bad Debts (532) (801)
Uniform Capitalization (13) (89)
-------- --------
(3,395) (4,425)
-------- --------
Net Deferred Income Tax Liability $ 14,344 $ 6,705
======== =======
</TABLE>
(E) BUSINESS SEGMENTS
The Company operates in three business segments: Cement, Wallboard,
and Concrete and Aggregates, with Cement and Wallboard being the Company's
principal lines of business. These operations are conducted in the United
States and include the mining of limestone and the manufacture, production,
distribution and sale of Portland cement (a basic construction material which
is the essential binding ingredient in concrete), the mining of gypsum and the
manufacture and sale of gypsum wallboard, the sale of readymix concrete, and
the mining and sale of aggregates (crushed stone, sand and gravel). These
products are used primarily in commercial and residential construction, public
construction projects and projects to build, expand and repair roads and
highways.
Demand for the Company products are derived primarily from residential
construction, commercial and industrial construction and public
(infrastructure) construction which are highly cyclical and are influenced by
prevailing economic conditions including interest rates and availability of
public funds. Due to cement, concrete and aggregates low value-to-weight
ratio, these industries are largely regional and local with demand tied to
local economic factors that may fluctuate more widely than those of the nation
as a whole.
The Company operates four cement plants, twelve cement distribution
terminals, two wallboard plants, three wallboard reload centers, ten readymix
concrete batch plant locations, and two aggregate processing plant locations.
The principal markets for Cement products are Texas, Northern Illinois
(including Chicago, Illinois), the Rocky Mountains, Northern Nevada, and
Northern California. Wallboard is distributed throughout the continental
United States. Concrete and Aggregates are sold to local readymix producers
and paving contractors, in the Austin, Texas area and Northern California.
32
<PAGE> 33
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table sets forth certain financial information relating
to the Company's operations by segment:
<TABLE>
<CAPTION>
For the Years Ended March 31,
--------------------------------------
1996 1995 1994
--------- --------- ----------
<S> <C> <C> <C>
Revenues
Cement $ 125,705 $ 109,900 $ 101,714
Wallboard 58,343 51,730 32,765
Concrete and Aggregates 39,902 35,217 35,128
Other, net 2,782 1,601 1,223
--------- --------- ---------
226,732 198,448 170,830
Less Intersegment Sales (4,138) (4,135) (4,004)
--------- --------- ---------
$ 222,594 $ 194,313 $ 166,826
========= ========= =========
Segment Operating Earnings
Cement $ 35,331 $ 26,007 $ 15,915
Wallboard 11,934 7,248 (43)
Concrete and Aggregates 5,558 2,586 1,652
Other, net 2,782 1,601 1,223
--------- --------- ---------
$ 55,605 $ 37,442 $ 18,747
========= ========= =========
Identifiable Assets
Cement $ 145,969 $ 142,122 $ 142,588
Wallboard 67,516 68,047 70,543
Concrete and Aggregates 28,749 33,128 36,185
Corporate and Other 27,341 6,806 7,999
--------- --------- ---------
$ 269,575 $ 250,103 $ 257,315
========= ========= =========
Capital Expenditures
Cement $ 13,082 $ 3,680 $ 4,982
Wallboard 889 279 1,482
Concrete and Aggregates 1,746 1,869 1,941
Corporate and Other 43 89 99
--------- --------- ---------
$ 15,760 $ 5,917 $ 8,504
========= ========= =========
Depreciation, Depletion and Amortization
Cement $ 7,778 $ 8,281 $ 8,211
Wallboard 2,908 2,987 2,892
Concrete and Aggregates 2,871 3,068 3,141
Corporate and Other 234 240 244
--------- --------- ---------
$ 13,791 $ 14,576 $ 14,488
========= ========= =========
</TABLE>
Income from operations by segment represents revenues less direct
operating expenses, segment depreciation, and segment selling, general and
administrative expenses. Corporate assets consist primarily of cash and cash
equivalents, general office assets and miscellaneous other assets.
33
<PAGE> 34
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(F) COMMITMENTS AND CONTINGENCIES -
The Company in the ordinary course of business has various litigation,
commitments and contingencies. Management believes that none of the litigation
in which it or any subsidiary is involved, if finally determined unfavorably to
CXP, would have a material adverse effect on the consolidated financial
condition or results of operations of the Company.
The Company, along with numerous other cement manufacturers, received
in 1994 a civil investigative demand from the Antitrust Division of the
Department of Justice that relates to the period from January 1991 to April
1994, and states that it concerns possible price fixing and possible market
allocation in the industry. In November 1995, the Company received notice from
the Department of Justice that the investigation against the Company, as well
as all other cement manufacturers, has been closed.
The Company's operations and properties are subject to extensive and
changing federal, state and local laws, regulations and ordinances governing
the protection of the environment, as well as laws relating to worker health
and workplace safety. The Company carefully considers the requirements
mandated by such laws and regulations and has procedures in place at all of its
operating units to monitor compliance. Any matters which are identified as
potential exposures under these laws and regulations are carefully reviewed by
management to determine the Company's potential liability. Although management
is not aware of any exposures which would require an accrual under Statement of
Financial Accounting Standards No. 5, "Accounting for Contingencies," there can
be no assurance that prior or future operations will not ultimately result in
violations, claims or other liabilities associated with these regulations.
The Company has certain deductible limits under its workers'
compensation and liability insurance policies for which reserves are
established based on the estimated costs of known and anticipated claims.
The Company has certain Operating leases covering manufacturing,
transportation and certain other facilities and equipment. Rental expense for
the fiscal years 1996, 1995 and 1994 totaled $1.9 million, $1.8 million and
$1.1 million, respectively. Minimum annual rental commitments as of March 31,
1996, under noncancelable leases are set forth as follows:
<TABLE>
<CAPTION>
Fiscal Year Total
----------- ----------
<S> <C>
1997 $1,010,090
1998 $1,019,240
1999 $1,019,240
2000 $1,019,240
2001 $ 774,410
Thereafter $2,216,600
</TABLE>
34
<PAGE> 35
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(G) STOCK OPTION PLAN
The Company has a stock option plan for certain directors, officers
and key employees of the Company, the 1994 Stock Option Plan ("1994 Plan").
The 1994 Plan provides for a total of 2,000,000 shares to be reserved for
issuance. The exercise price of option grants under the 1994 plan may not be
less than the fair market value at the date of grant. Option periods and
exercise dates may vary within a maximum period of 10 years. The options are
performance-based options and will vest on the achievement of specific
financial goals of the Company. Failure to meet the specified goals will delay
vesting until the end of the ten-year period. A summary of the activity of the
1994 Plan is presented below.
<TABLE>
<CAPTION>
Options at Option Price
March 31, Number of Shares Range Per Share
----------- ---------------- ---------------
<S> <C> <C>
Outstanding -
1996 742,600 $12 to $14
1995 768,300 $12 to $14
Exercised -
1996 18,700 $14
1995 - -
Exercisable -
1996 305,330 $12 to $14
1995 - -
Available for Grant -
1996 1,238,700
1995 1,231,700
</TABLE>
During fiscal 1996, options for 30,000 shares were granted and
previously granted options of 37,000 shares became available for reissue. At
March 31, 1996, the Company had 1,981,300 common shares reserved for stock
options.
The Company records proceeds from the exercise of options as additions
to common stock and capital in excess of par value. The federal tax benefit,
if any, is considered additional capital in excess of par value. No charges or
credits would be made to earnings unless options were to be granted at less
than fair market value at the date of grant.
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments," requires companies to disclose the
estimated fair value of their financial instrument assets and liabilities. The
estimated fair values shown below have been determined using current quoted
market prices where available and, where necessary,
35
<PAGE> 36
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
estimates based on present value methodology suitable for each category of
financial instruments. Considerable judgment is required in interpreting
market data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the Company
could realize in a current market exchange.
All assets and liabilities which are not considered financial
instruments have been valued using historical cost accounting. The
consolidated carrying values of Cash and Cash Equivalents, Receivables,
Accounts Payable and Accrued Liabilities approximate their fair values. The
carrying values and estimated fair values of other financial assets and
liabilities were as follows:
<TABLE>
<CAPTION>
March 31,
--------------------------------------------------
1996 1995
-------------------- -------------------
Carrying Fair Carrying Fair
Value Value Value Value
-------- ------- --------- --------
<S> <C> <C> <C> <C>
Financial Assets
Marketable Securities $ - $ - $ 673 $ 753(a)
Financial Liabilities
Long-term Debt $ 720 $ 720(b) $ 24,500 $24,500(b)
</TABLE>
(a) Fair values are based on quoted market prices for similar instruments.
Marketable securities consist of stock received in a settlement that
is included in other assets.
(b) Fair values are based on a present value discounted cash flow with the
discount rate approximating current market for similar instruments.
(I) INITIAL PUBLIC OFFERING
On April 19, 1994 ("Closing Date") the Company completed the sale of
11,730,000 shares or 51% of its common stock through an IPO. The stock sales
price was $14.00 per share and net proceeds received, after commissions and
offering expenses, were $153.7 million. On the Closing Date, the Company paid
a dividend of $162.6 million to its parent, Centex Corporation. To fund the
remainder of the dividend and also pay its outstanding debt to Centex, the
Company borrowed funds under the Bank Revolver.
As a result of the IPO, approximately $34.3 million of deferred taxes
became payable to Centex during fiscal 1995. Payment was funded from cash flow
from operations and borrowings under the Bank Revolver.
The Company entered into certain agreements with Centex on the Closing
Date to define the Company's ongoing relationship with Centex. The major
agreements are:
Indemnification Agreement: The Company and Centex entered into an
Indemnification Agreement, pursuant to which (i) the Company agreed generally
to indemnify Centex against substantially all liabilities relating to the
businesses of the Company and its subsidiaries as they had been and will be
conducted, including environmental liabilities, and (ii) Centex agreed
generally to indemnify the Company against substantially all liabilities
relating to the businesses of Centex and its subsidiaries (other than the
Company and its subsidiaries) as they had been and will be conducted, including
environmental liabilities.
36
<PAGE> 37
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Tax Separation Agreement: The Company and Centex entered into a Tax
Separation Agreement (the "Tax Agreement"). The Tax Agreement (i) provides for
the termination of any existing tax sharing or allocation arrangements between
the Company and Centex, (ii) specifies the manner in which the federal income
tax liability and certain state tax liabilities (including any subsequent
adjustments to such federal and state liabilities) of the consolidated group of
which Centex is the common parent (the "Group") will be allocated for the final
year in which the Company is a member of the Group and for any prior tax year
of the Group and (iii) specifies the manner in which audits or administrative
or judicial proceedings relating to federal income taxes and certain state
taxes of the Group will be controlled.
Administrative Services: Historically, the Company has participated
in various of Centex's overall employee benefit and administrative programs,
including the Profit Sharing and Retirement Plan of Centex Corporation,
internal audit, tax reporting, risk management and legal services. All
significant costs associated with the Company's operations under these programs
have historically been paid by the Company. Following the completion of the
IPO, the Company established its own employee benefit programs and files its
own tax return. Centex Service Company ("CSC"), a subsidiary of Centex,
provides the Company with employee benefit administration, public/investor
relations and certain other services. The Administrative Services Agreement
will expire on March 31, 1999, unless earlier terminated at the option of the
Company. The Company pays to CSC a fee of $18,750 per month, subject to annual
adjustment, for such services. In addition, the Company reimburses CSC for its
out-of-pocket expenses incurred in connection with the performance of such
services.
Centex Guarantees of Company Obligations: Centex has guaranteed the
Company's obligation under two bank loans with aggregate outstanding balances
of $1.2 million made to a customer of the Company in connection with a cement
purchase contract. The Company has indemnified Centex against any liabilities
that may be incurred by it in respect of its guarantee thereof.
37
<PAGE> 38
CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
QUARTERLY RESULTS
(UNAUDITED)
MARCH 31,
----------------------------
1996 1995
---------- -----
(Dollars in thousands, except per share data)
<S> <C> <C>
First Quarter
Revenues $55,104 $50,352
Earnings Before Income Taxes $12,064 $ 7,577
Net Earnings $ 7,830 $ 4,899
Earnings Per Share $ 0.34 $ 0.21
Second Quarter
Revenues $66,483 $56,203
Earnings Before Income Taxes $16,179 $11,758
Net Earnings $10,500 $ 7,570
Earnings Per Share $ 0.46 $ 0.33
Third Quarter
Revenues $55,429 $45,988
Earnings Before Income Taxes $15,344 $ 8,852
Net Earnings $ 9,958 $ 5,711
Earnings Per Share $ 0.43 $ 0.25
Fourth Quarter
Revenues $45,578 $41,770
Earnings Before Income Taxes $ 8,717 $ 5,642
Net Earnings $ 5,656 $ 3,640
Earnings Per Share $ 0.25 $ 0.16
</TABLE>
38
<PAGE> 39
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C>
CENTEX CORPORATION
----------------------------------------------------
Registrant
May 20, 1996 By: /s/ LAURENCE E. HIRSCH
----------------------------------------------------
Laurence E. Hirsch, Chairman of the Board and
Chief Executive Officer
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
<TABLE>
<S> <C>
May 20, 1996 /s/ LAURENCE E. HIRSCH
----------------------------------------------------
Laurence E. Hirsch, Chairman of the Board and
Chief Executive Officer
(principal executive officer)
May 20, 1996 /s/ DAVID W. QUINN
----------------------------------------------------
David W. Quinn, Vice Chairman of the Board and
Chief Financial Officer
(principal financial officer)
May 20, 1996 /s/ MICHAEL S. ALBRIGHT
----------------------------------------------------
Michael S. Albright, Vice President -- Finance and
Controller
(principal accounting officer)
Directors: Alan B. Coleman, Dan W. Cook III, Juan L. Elek, William J
Gillilan III, Laurence E. Hirsch, Clint W. Murchison, III,
Charles H. Pistor, David W. Quinn, Paul R. Seegers, Paul T.
Stoffel
May 20, 1996 By: /s/ LAURENCE E. HIRSCH
-----------------------------------------------
Laurence E. Hirsch,
Individually and as
Attorney-in-Fact*
</TABLE>
__________
*Pursuant to authority granted by powers of attorney, copies of which are
filed herewith.
39
<PAGE> 40
PART B.
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P.
PREFATORY STATEMENT
PART B of this Report includes information relating to 3333 Holding
Corporation ("Holding"), File No. 1-9624, and subsidiary, and Centex
Development Company, L.P. ("CDC" or the "Partnership"), File No. 1-9625. See
the Joint Explanatory Statement on page 2 of this Report. References to
Holding in this Report shall include references to its subsidiary, 3333
Development Corporation, a Nevada corporation and the sole general partner of
CDC ("Development"), unless the context otherwise requires. Because CDC is a
separate reporting entity under the Exchange Act, the information required by
Form 10-K is separately included even though CDC may be deemed a "subsidiary"
of Holding under the rules and regulations of the Securities and Exchange
Commission (the "Commission") promulgated pursuant to the Exchange Act.
Accordingly, information provided with respect to CDC should be deemed provided
with respect to Holding to the extent appropriate. Information relating to
both Holding and CDC is included herein as a single disclosure where applicable
or appropriate; all other information is set forth separately. Reference is
made to PART A of this Report for information relating separately to Centex
Corporation ("Centex") and its subsidiaries.
PART I
ITEM 1. BUSINESS
(a) Holding
Holding is a Nevada corporation incorporated on May 5, 1987. Its
executive offices are located at 3333 Lee Parkway, Suite 500, Dallas, Texas
75219; telephone (214) 559-6700.
Holding owns all of the outstanding common stock of Development, and, as
a result, has the ability to control Development. Development is the sole
general partner of CDC, a Delaware limited partnership engaged in the real
estate development business. Information concerning the acquisition of the
capital stock of Development by Holding is included in Note (A) of the Notes to
Combining Financial Statements of Holding and CDC (the "Holding/CDC Combining
Financial Statements") included on page 61 of the Holding/CDC 1996 Annual
Report, which Note (A) is incorporated herein by this reference. Holding
operates in a single industry segment.
The principal liability of Holding is a note payable to Centex which had
an unpaid balance of $7,600,000 at March 31, 1996. See "Item 13. Certain
Relationships and Related Transactions". Presently, Holding is not engaged in
any business other than its ownership and control of Development. The Amended
and Restated Agreement of Limited Partnership of Centex Development Company,
L.P. (the "Partnership Agreement"), which governs the operations of CDC,
provides that neither Holding nor Development shall be permitted, prior to
Payout (as defined in the Partnership Agreement) ("Payout") to own business
interests or to engage in business activities other than those relating to CDC.
Were Holding to engage in any other business activities, the Partnership
Agreement would need to be amended to provide for the same.
(b) CDC
GENERAL DEVELOPMENT OF BUSINESS
CDC is a Delaware limited partnership formed in March 1987 by Centex to
broaden its line of business to include general real estate development.
Centex believed that this expansion would improve stockholder value through
longer- term real estate investments, real estate development and the benefits
of the partnership form of business. Because the real estate development
business generally requires a longer time horizon to maximize value than
Centex's core homebuilding operations, and typically involves substantial
acquisition and development indebtedness, Centex concluded that this new line
40
<PAGE> 41
of business could best be conducted through CDC, an independent, publicly
traded entity which is not consolidated with Centex for financial reporting
purposes. Development, a wholly-owned subsidiary of Holding, is the sole
general partner of CDC. CDC's executive offices are located at 3333 Lee
Parkway, Suite 500, Dallas, Texas 75219; telephone (214) 559- 6700.
CDC was formed to manage, develop and sell (i) certain real estate,
principally nonresidential, undeveloped land (the "Original Properties"),
contributed to CDC by certain wholly-owned subsidiaries of Centex (the
"Original Limited Partners"), and (ii) other properties acquired by CDC in the
ordinary course of business (the "Additional Properties"). Pursuant to the
Distribution, the Original Limited Partners received an aggregate of 1,000
Class A Units of limited partnership interest in CDC (the "Class A Units") in
exchange for the Original Properties, which at the time of their contribution
to CDC, had a market value of approximately $76 million. All of the 1,000
Class A Units were subsequently acquired, and are currently owned, by Centex
Real Estate Corporation ("CREC"), a wholly-owned subsidiary of Centex. Under
the Partnership Agreement, as holder of the Class A Units of limited
partnership interest, CREC is entitled to a 9% preferred return (the "Preferred
Return") on its unrecovered capital and certain other distributions of cash and
other property and allocations of income and loss in preference to other
limited partners. See Note (F) of the Notes to the Holding/CDC Combining
Financial Statements included on pages 65-66 of the Holding/CDC 1996 Annual
Report, which Note (F) is incorporated herein by this reference.
CDC has developed and sold several of the Original Properties. In
addition, CDC has acquired, developed, sold or otherwise disposed of Additional
Properties, including two projects in the Orlando, Florida area which were
developed into nearly 1,150 residential lots, a portion of a 1,077 acre
development in San Clemente, California zoned for residential and commercial
development, and the Timberhill Shopping Center in Sonora, California. Shortly
after March 1987, when CDC was formed, the market for real estate development
of the type contemplated for CDC at its formation began to deteriorate, and for
several years was not particularly attractive. In fact, soon after CDC was
formed, this market suffered a recession and was heavily saturated for an
extended period of time with depressed properties being disposed of by the
Resolution Trust Corporation, banks and other financial institutions.
Accordingly, new development opportunities were limited and certain of CDC's
properties did not reach the potential necessary to achieve the originally
targeted objectives. Notwithstanding the foregoing, Centex management
continues to believe that the original purposes for the formation of CDC remain
valid.
Given recent improvement in certain real estate markets and the economy
in general, and in an effort to maximize CDC's potential, CDC is developing a
rental apartment project in College Station, Texas. CDC management is
evaluating the potential for development of additional rental apartments, as
well as retail facilities and other types of real estate for investment or sale
in certain strategic markets, either directly or through partnerships or joint
ventures with others. Management of Centex and CDC and Holding believe that
the existing relationships between them, including development and general
management assistance, are necessary in order to maximize the potential for
these additional development activities.
DESCRIPTION OF CDC SECURITIES
Pursuant to the terms of the Nominee Agreement, Centex may terminate the
Nominee Agreement in its sole discretion as to all or any portion of the
Stockholder Warrants and the Holding Common Stock (collectively, the "Deposited
Securities") and, unless sooner terminated, the Nominee Agreement will
terminate as to the Stockholder Warrants on November 30, 2007 (the "Scheduled
Detachment Date"). Centex is not obligated to terminate the Nominee Agreement
as to the Holding Common Stock. The termination of the Nominee Agreement as to
any of the Deposited Securities will cause a detachment ("Detachment") of such
securities from the Centex Common Stock. Upon a termination of the Nominee
Agreement, certificates evidencing each Centex Stockholder's pro rata portion
of the Deposited Securities in respect of which the Nominee Agreement was
terminated will be delivered to the Centex Stockholders of record as of the
record date set for the Detachment. From and after such record date,
certificates evidencing Centex Common Stock will no longer represent the
beneficial interest in the detached Deposited Securities.
41
<PAGE> 42
NARRATIVE DESCRIPTION OF BUSINESS
In general, the Amended and Restated Agreement of Limited Partnership of
CDC (the "Partnership Agreement") authorizes CDC to engage in all aspects of
the real estate business, provided that all activities related to the Original
Properties must be conducted pursuant to the Plan for Original Properties,
which is an exhibit to the Partnership Agreement (the "Plan"). The Plan
prescribes in general terms the manner by which CDC will conduct its activities
in respect of the Original Properties, including guidelines as to sales,
maintenance and zoning of the Original Properties, and places restrictions on
these and other types of activities, including, in certain instances, the sale
of any Original Property without the consent of CREC.
CDC continues to analyze potential uses for certain of the remaining
Original Properties in order to determine the highest and best use that can be
made of the tracts. CDC will decide whether to seek zoning changes to
accommodate a higher use, further develop these properties, or to seek the sale
of all or a portion thereof. If not developed sooner, the Plan provides that
CDC will generally endeavor to sell the Original Properties over time for the
best price available, taking into account the condition of the marketplace and
CDC's cash flow requirements.
The Partnership had a backlog of land sales of approximately $6 million
as of March 31, 1996, and $7 million as of March 31, 1995. The ultimate sales
prices may vary due to contractual clauses that adjust the price depending upon
the closing date.
Pursuant to an agreement with CDC (the "Management Agreement"), Holding
is obligated to provide property management and development assistance and
expertise to CDC, including seeking zoning changes and special use permits,
negotiating utility agreements, and securing necessary rights of way and access
on behalf of CDC, and, consistent with the Plan, to develop and/or contract for
sale and sell on behalf of CDC some or all of such properties in exchange for
compensation for its efforts. Since Holding currently does not have any
employees, it contracts with Centex subsidiaries to provide such services to
CDC. Management of CDC believes that CDC receives these services at a cost
below that which unaffiliated third parties would charge for similar services.
See "Item 10. Directors and Executive Officers of the Registrant--Management
Agreement".
Centex and its affiliates continue to conduct many facets of real estate
development and, for this reason, may be in competition with CDC in certain
activities and projects. Because the relationship between Centex and its
affiliates, on the one hand, and Holding, Development and CDC, on the other
hand, involve decisions by Centex and its affiliates, directly or indirectly,
on behalf of Holding, Development and CDC, the transactions and activities of
Holding, Development and/or CDC may lack the benefit of arm's length bargaining
and may involve conflicts of interest. Holding, Development and CDC believe,
however, that adequate safeguards, including Boards of Directors of Holding and
Development consisting of a majority of independent directors, sufficiently
prevent any such conflicts from adversely affecting the business of Holding,
Development or CDC. To the extent that any conflict of interest or the lack of
arm's length bargaining may benefit Centex or its affiliates, on the one hand,
or CDC or Holding, on the other hand, the combined value of the three tandem
traded securities (Centex Common Stock, Holding Common Stock and Stockholder
Warrants) beneficially owned by a Centex Stockholder should not be affected one
way or another. See "Competition and Regulation" below in this Item 1.
CDC is not a real estate investment trust, and therefore CDC's activities
are not subject to the restrictions imposed on real estate investment trusts
qualified under the Internal Revenue Code of 1986, as amended.
During November 1995, the Partnership tendered to its non-recourse lender
a deed to the remaining property in Forster Ranch, the Partnership's pro rata
portion of the 1995-1996 real property taxes, as assignment of the Development
Agreement made between the Partnership and the City of San Clemente and payment
of certain developer fee credits. With these deliveries, the Partnership has
surrendered any and all interest it may have in the Forster Ranch property to
the lender. The Forster Ranch property was carried by the Partnership at an
amount equal to the non-recourse indebtedness. Accordingly, these events had
no adverse effect on the financial condition or results of operations of the
Partnership or any related entities.
42
<PAGE> 43
For additional information concerning material properties owned by CDC at
March 31, 1996, see "Item 2. Properties".
COMPETITION AND REGULATION
Within the geographical areas where the remaining Original Properties and
the Additional Properties are located, CDC is subject to substantial
competition from other owners of similarly-situated or developed properties who
wish to sell or develop their properties, many of whom may hold or be in the
process of developing more parcels than CDC, have fewer selling constraints, or
may have greater financial resources and longer operating histories than CDC.
CDC may also compete in the acquisition of additional desirable properties with
a variety of investors, including Centex and its affiliates, and institutional
investors and developers, seeking similar investments.
CDC's properties are generally located in geographical areas where there
is moderate to good demand for land suitable for development, including
Florida, Illinois, New Jersey and Texas. Management believes the CDC
properties are well positioned to compete with similar properties within each
of these geographic areas.
Ownership and development of each of CDC's properties is subject to
licensing and regulation by zoning, land use, environmental, health, sanitation
and other agencies in the state and/or municipality in which the property is
located. Difficulties or failures in obtaining the required licenses or
approvals could delay or prevent the development or sale of any of such
properties. In addition, certain of the Original Properties and the Additional
Properties may be subject to zoning limitations that may not permit development
of such properties for their highest and best use. The ability of CDC to
obtain favorable zoning changes may affect the ultimate value of such
properties to CDC or to a third-party purchaser.
ITEM 2. PROPERTIES
(a) Holding
Due to the nature of its business, Holding does not own or hold for
investment any real or personal properties other than cash, receivables and
other similar assets, and the securities relating to its subsidiary,
Development.
(b) CDC
The remaining Original Properties and the Additional Properties consist
of properties located in Illinois, Texas, New Jersey, and Florida. Such
properties predominantly consist of undeveloped sites zoned for light
industrial, agricultural, general retail, office industrial, business park,
research and development and single- and multi-family residential property
purposes.
At March 31, 1996, there were four remaining Original Properties owned by
CDC of material value. None of the Additional Properties are considered
material. Set forth below is a brief description of such properties, including
the present zoning.
Colony South Planning Unit. Colony South Planning Unit is located in
suburban Dallas, Texas in the cities of The Colony (approximately 347 acres)
and Lewisville (approximately 152 acres). The Colony acreage is zoned office,
general retail, business park and residential. The Lewisville acreage is zoned
light industrial.
East Windsor. East Windsor comprises approximately 600 acres with four
separate residential tracts, 8 farm parcels and 100 acres of office industrial
zoned property in East Windsor, New Jersey, a township located in the vicinity
of Princeton. The residential tracts have final plan approval for a total of
75 half-acre lots and 174 quarter-acre lots and zoning for approximately 76
half-acre lots and 274 quarter acre lots. One hundred twenty-five of the
quarter-acre lots and 15 of the half-acre lots have been sold to CREC, which
has an agreement with CDC to purchase an additional 109 quarter-acre lots. The
farm parcels vary in size from 7 to 36 acres and total 174 acres.
43
<PAGE> 44
Bryan Place. Bryan Place is located in Dallas, Texas just east of
downtown and Central Expressway. It is comprised of 20 non-contiguous parcels,
zoned office, commercial, retail and residential ranging from approximately
2,000 square feet to 154,000 square feet. The total area of the property is
approximately 650,000 square feet of which 578,000 square feet are Original
Properties and the balance are Additional Properties.
Carrollton Property. The Carrollton Property is located in the City of
Carrollton, a suburb of Dallas, Texas. This property consists of one office
and five fabrication-warehouse buildings on approximately 17 acres, zoned
industrial, with a rail spur. This property is leased to CREC through March
31, 1998. See "Item 13. Certain Relationships and Related Transactions."
ITEM 3. LEGAL PROCEEDINGS
Holding is not a party to, and its assets are not the subject of, any
material pending legal proceedings. CDC may be involved from time to time in
litigation matters incident to its day-to-day business; however, management of
Development believes that such litigation, if determined unfavorably to CDC,
would not have a material adverse effect on the financial condition or
operations of CDC.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF HOLDING AND DEVELOPMENT
Information concerning the present executive officers of Holding is set
forth below. All of such officers have served in their capacities since the
organization of Holding, except as indicated. CDC has no executive officers.
The executive officers of Holding set forth below hold the same offices in
Development, the general partner of CDC, as disclosed in "Item 10. Directors
and Executive Officers of the Registrant--Directors and Executive Officers of
Development".
<TABLE>
<CAPTION>
NAME POSITION AGE
---- -------- ---
<S> <C> <C>
J. Stephen Bilheimer President (1) 64
Roger D. Sefzik Vice President and Treasurer (2) 40
</TABLE>
(1) Mr. Bilheimer is an employee of Centex Development Management Company
("CDMC"), a wholly-owned subsidiary of Centex, and served as Executive
Vice President of CREC from April 1987 until March 31, 1988. Mr.
Bilheimer was a director of Development from its date of incorporation
until his resignation as of June 1, 1987 and was re-elected to the Board
of Directors of Development on May 24, 1989. Since April 1, 1988, Mr.
Bilheimer has devoted a majority of his time to the business and affairs
of Holding and Development.
(2) Mr. Sefzik is an employee of CDMC and was a Vice President of CTX
Mortgage Company from May 1987 to March 1988 and Executive Vice President
of Centex Title Company from July 1986 to March 1988. Prior thereto he
held various offices with various Centex subsidiaries since March 1983.
Mr. Sefzik was elected to his present positions with Holding as of April
1, 1988. Since April 1, 1988, Mr. Sefzik has devoted a majority of his
time to the business and affairs of Holding and Development.
All executive officers of Holding are elected annually by the Board of
Directors to serve until the next annual meeting of the Board of Directors or
until their successors have been duly elected. There are no family
relationships among or between such executive officers or the directors.
Holding's executive officers hold the same positions with its subsidiary,
Development.
44
<PAGE> 45
Holding has no full time employees. The directors and executive officers
perform all executive management functions; all other services necessary to the
conduct of Holding's business are performed by employees of a subsidiary of
Centex or its designee under a services agreement. See "Item 10. Directors and
Executive Officers of the Registrant--Services Agreement".
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Holding
Except as additionally provided below, the information called for by this
Item 5 with respect to Holding is incorporated herein by reference to (1) the
Joint Explanatory Statement on page 2 of this Report, (2) the information
included and referenced under the caption "Stock Prices and Dividends" on page
1 of the Centex 1996 Annual Report and (3) the information included in Notes
(F) and (G) of the Notes to the Holding/CDC Combining Financial Statements on
pages 65-66 of the Holding/CDC 1996 Annual Report.
Prior to the date of the distribution, Centex owned all of the issued and
outstanding shares of Holding Common Stock and, accordingly, there was no
public market for such shares. Following the distribution by Centex, shares of
Holding Common Stock have been tradeable only in tandem with, and as a part of,
shares of Centex Common Stock, and may not be separately sold or otherwise
transferred. Therefore, except with respect to the trading market established
for the tandem traded securities, there is no separate market for shares of
Holding Common Stock. Because of the tandem trading arrangement, it is not
possible to identify precisely the portion of the market price of the tandem
traded securities allocable to shares of Holding Common Stock.
The restrictions on the transfer of the Holding Common Stock and the
Stockholder Warrants separate from Centex Common Stock are imposed by the terms
of a nominee agreement (the "Nominee Agreement") among Centex, Holding, CDC and
the Nominee. Centex Common Stock certificates issued after the date of the
Nominee Agreement bear a legend referring to the restrictions on transfer
imposed thereby.
No dividends have been paid on shares of Holding Common Stock since the
incorporation of Holding. Future cash dividends on Holding Common Stock will
depend on the earnings, financial condition, capital requirements and other
factors affecting Holding and Development.
The provisions of the loan agreement and pledge and security agreement
relating to Holding's $7,700,000 note to Centex (the "Holding Note"), which had
a balance of $7,600,000 at March 31, 1996, include certain restrictive
covenants that limit the extent to which Holding and its subsidiaries
(including Development but not CDC or any Operating Partnership) may create,
assume or guarantee additional indebtedness, pledge or encumber certain of
their assets or otherwise take certain corporate actions. These covenants
include limitations on (a) incurring, assuming or guaranteeing any other
indebtedness, except indebtedness which provided for all payments of principal
to be made after April 1, 1998, indebtedness that is fully and completely
subordinated on terms satisfactory to Centex, and certain trade debt, (b)
creating any additional liens other than statutory liens for taxes, certain
mechanics' and materialmen's liens and other similar liens, (c) effecting a
merger or consolidation, (d) selling property and (e) declaring any dividends
or making certain other shareholder payments, as defined. Holding's
obligations under the Holding Note are secured by a pledge of all of the issued
and outstanding shares of the common stock of Development pursuant to a pledge
and security agreement under which a default by Holding in the performance of
its obligations could give Centex the right to vote such shares, to seek the
registration under the Securities Act of 1933, as amended, of all or a portion
thereof, and to sell such shares to satisfy Holding's obligations. See "Item
13. Certain Relationships and Related Transactions" and Note (G) of the Notes
to the Holding/CDC Combining Financial Statements included on page 66 of the
Holding/CDC 1996 Annual Report, which Note (G) is incorporated herein by
reference.
45
<PAGE> 46
(b) CDC
Except as additionally provided below, the information called for by this
Item 5 with respect to CDC is incorporated herein by reference to (1) the Joint
Explanatory Statement on page 2 of this Report, (2) the information included
and referenced under the caption "Stock Prices And Dividends" on page 2 of the
Centex 1996 Annual Report and (3) the information included in Notes (F) and (G)
of the Notes to the Holding/CDC Combining Financial Statements on pages 65-66
of the Holding/CDC 1996 Annual Report.
The Stockholder Warrants were issued to Centex immediately prior to the
November 30, 1987 Distribution to Centex Stockholders and, accordingly, there
was no public market for the Stockholder Warrants prior to the Distribution.
Following the Distribution by Centex, the Stockholder Warrants have been
tradeable only in tandem with, and as part of, shares of Centex Common Stock,
and may not be separately sold or otherwise transferred. Therefore, except
with respect to the trading market established for the tandem traded
securities, there is no separate market for the Stockholder Warrants. Because
of the tandem trading arrangement, it is not possible to identify precisely the
portion of the market price of the tandem traded securities allocable to the
Stockholder Warrants.
The restrictions on the transfer of the Stockholder Warrants and the
Holding Common Stock separate from Centex Common Stock are imposed by the terms
of a nominee agreement (the "Nominee Agreement") among Centex, Holding, CDC and
the Nominee. Centex Common Stock certificates issued after the date of the
Nominee Agreement bear a legend referring to the restrictions on transfer
imposed thereby.
No dividends or distributions have been made on the Stockholder Warrants
since their issuance.
CREC, a subsidiary of Centex, is the present holder of all of the Class A
Units, and accordingly, at this time there is no public market for such
securities. See "Item 1. Business--General Development of Business". In July
1995, in conjunction with the extension of the automatic detachment date from
1997 to 2007, CREC reduced its Unrecovered Capital, which is defined as its
initial capital contributions adjusted for repayments and other reductions, from
$75,805,000 to $47,261,000 and waived all unpaid preference, totaling
$37,523,000. Unrecovered Capital was reduced by an additional $10,000,000 during
fiscal 1996 through partnership distributions. Preference payments in arrears at
March 31, 1996 amounted to $2,506,000.
ITEM 6. SELECTED FINANCIAL DATA
(a) Holding
The information called for by this Item 6 with respect to Holding is
incorporated herein by reference to the Combining Balance Sheets and the
Combining Statements of Operations included in the Holding/CDC Combining
Financial Statements on pages 59-60 of the Holding/CDC 1996 Annual Report.
(b) CDC
The information called for by this Item 6 with respect to CDC is
incorporated herein by reference to the Combining Balance Sheets and the
Combining Statements of Operations included in the Holding/CDC Combining
Financial Statements on pages 59-60 of the Holding/CDC 1996 Annual Report.
46
<PAGE> 47
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(a) Holding
The information called for by this Item 7 with respect to Holding is
incorporated herein by reference to the information included and referenced
under the caption "Management's Discussion and Analysis of Results of
Operations and Financial Condition" on page 68 of the Holding/CDC 1996 Annual
Report.
(b) CDC
The information called for by this Item 7 with respect to CDC is
incorporated herein by reference to the information included and referenced
under the caption "Management's Discussion and Analysis of Results of
Operations and Financial Condition" on page 68 of the Holding/CDC 1996 Annual
Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by this Item 8 is incorporated herein by
reference to portions of the Holding/CDC 1996 Annual Report indicated in the
Index to Financial Statements on page 55 of this Report (see Item 14).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Holding
DIRECTORS AND EXECUTIVE OFFICERS OF HOLDING
Except as additionally provided below, the information called for by this
Item 10 with respect to Holding is incorporated herein by reference to the
information included under the caption "Election of Directors" and the
information included under the caption "Section 16(a) Compliance" in Holding's
proxy statement for the 1996 Annual Meeting of Stockholders of Holding to be
held on July 25, 1996 (the "1996 Holding Proxy Statement"); however, as
required by Instruction 3 to Item 401(b) of Regulation S-K, information
regarding executive officers of Holding is included under the caption
"Executive Officers of Holding" included in Part B of this Report following
Item 4.
SERVICES AGREEMENT
Holding has no full time employees. The directors and executive officers
of Holding, who hold the same directorships and offices in Development, perform
all executive management functions. See "Item 11. Executive Compensation".
All tax, accounting, bookkeeping, clerical and similar services that are
necessary to operate the business of Holding are provided pursuant to a
services agreement (the "Services Agreement") entered into between Holding and
Centex Service Company ("CSC"), an indirect subsidiary of Centex. See "Item
13. Certain Relationships and Related Transactions". The term of the Services
Agreement is subject to automatic renewal for successive one-year terms unless
either party elects to terminate the Services Agreement upon at least 30 days
written notice prior to December 31 of any year. However, the Services
47
<PAGE> 48
Agreement may not be terminated by Holding (other than in the event of a breach
by CSC constituting gross negligence or willful or wanton misconduct) prior to
the payment in full of the Holding Note, the full and complete detachment of
the Stockholder Warrants from Centex Common Stock or the occurrence of Payout.
Service fees of $30,000 were paid pursuant to the Services Agreement during
fiscal 1996.
(b) CDC
GENERAL PARTNER AND MANAGEMENT
CDC has no directors, officers or employees and, instead, is managed by
Development, its sole general partner. Directors and officers of Development
perform all executive management functions required for CDC. Except as
provided in the Plan with respect to the Original Properties, the limited
partners of CDC have no power to direct or participate in the control of CDC,
and Development makes all decisions regarding the acquisition, disposition or
development of real estate belonging to CDC and all other decisions regarding
CDC's business or operations. See "Item 1. Business". CDC has entered into a
management agreement pursuant to which CDMC will operate, manage and develop
the properties of CDC for and on behalf of CDC. See "Management Agreement"
below in this Item 10. Except for the allocations of profit and loss and
distributions of cash and other property to which Development is entitled under
the Partnership Agreement, and except for the right to be reimbursed for
certain expenses, Development does not receive any compensation from CDC in
respect of its duties and obligations as general partner of CDC. See "Item 11.
Executive Compensation".
DIRECTORS AND EXECUTIVE OFFICERS OF DEVELOPMENT
Information concerning the present directors and executive officers of
Development is set forth below. All of such persons have served in their
capacities since the organization of Development, except as indicated.
<TABLE>
<CAPTION>
NAME POSITION AGE
---- -------- ---
<S> <C> <C>
J. Stephen Bilheimer . . . . . . . . . . Director and President (1) 64
Josiah O. Low, III . . . . . . . . . . . Director (2)* 57
David M. Sherer . . . . . . . . . . . . . Director (3)* 59
Roger D. Sefzik . . . . . . . . . . . . . Vice President and Treasurer (4) 40
</TABLE>
_________
*Member of the audit committee of the Board of Directors.
(1) Mr. Bilheimer is an employee of CDMC and served as Executive Vice
President of CREC from April 1987 until March 31, 1988. Mr. Bilheimer
was a director of Development from its date of incorporation until his
resignation as of June 1, 1987. Mr. Bilheimer was re-elected to the
Board of Directors on May 24, 1989.
(2) Mr. Low serves as Senior Vice President of Donaldson, Lufkin & Jenrette
Securities Corporation (since February 1985). Mr. Low is also a director
of Holding. Mr. Low was elected as a director of Development as of June
1, 1987.
(3) Mr. Sherer has been President of David M. Sherer Associates, Inc., a
commercial real estate, investment and brokerage firm, for more than five
years. Mr. Sherer is also a director of Holding. Mr. Sherer was elected
as a director of Development as of June 1, 1987.
(4) Mr. Sefzik is an employee of CDMC and served as Vice President of CTX
Mortgage Company from May 1987 to March 1988 and Executive Vice President
of Centex Title Company from July 1986 to March 1988. Mr. Sefzik was
elected to his present positions with Development as of April 1, 1988.
All directors are elected annually by the shareholders to serve until the
next annual meeting of stockholders and until their successors have been
elected and qualified, subject to removal by a vote of the holders of not less
than two-thirds of the outstanding shares of the common stock, par value $1.00
per share, of Development. All executive officers of Development are elected
annually by the Board of Directors to serve until the next annual meeting of
the Board of Directors
48
<PAGE> 49
or until their successors have been duly elected and qualified. There are no
family relationships among or between Development's directors or executive
officers.
The current executive officers of Development are employees of Centex or
one of its subsidiaries, and it is presently anticipated that this arrangement
will continue. See "Item 11. Executive Compensation".
MANAGEMENT AGREEMENT
All services (other than executive management decision-making) necessary
to operate CDC's business are provided to CDC pursuant to a management
agreement (the "Management Agreement") entered into with Holding. Under the
Management Agreement, Holding keeps all necessary books and records, and
provides all additional accounting and clerical services that Development may
deem necessary. Holding's responsibilities related to real estate management
also include ensuring that CDC's properties are operated, managed and
maintained in full compliance with all relevant laws and regulations, that all
real property and any improvements thereon are maintained and repaired, that
all income produced by CDC's properties is collected and that any development
on any property is done in an efficient manner. Because Holding currently does
not have any employees, it contracts with Centex subsidiaries to provide such
services to CDC.
Holding is entitled to reimbursement from CDC for all reasonable costs
and expenses incurred and paid by Holding in connection with the performance of
its duties and obligations under the Management Agreement, plus a 25%
managerial fee. During fiscal 1996, Holding earned fees from CDC totaling
$1,295,000 for its services.
The Management Agreement also provides that Holding will provide,
consistent with the Plan, pre-development and development services on behalf of
CDC, and the Management Agreement specifically provides that Holding is
delegated full authority to carry out and perform on behalf of CDC all aspects
of the Plan.
The term of the Management Agreement is subject to automatic renewal for
successive one-year terms unless either party elects to terminate the
Management Agreement upon at least 30 days written notice prior to December 31
of any year. However, it may not be terminated by CDC (other than in the event
of a breach by Holding constituting gross negligence or willful or wanton
misconduct) prior to the latest of the complete detachment of the Stockholder
Warrants from Centex Common Stock, Payout or the payment in full of the Holding
Note.
From time to time, Holding delegates the performance of certain of its
responsibilities to CSC and CREC, upon terms and conditions to be determined.
These responsibilities may include enhancement of properties owned or
controlled by CDC, for which reasonable additional compensation may be paid by
CDC to Holding pursuant to terms to be negotiated between them. In turn, some
or all of such additional compensation may be paid by Holding to CSC or CREC.
ITEM 11. EXECUTIVE COMPENSATION
Holding and CDC
The information called for by this Item 11 with respect to Holding and
CDC is incorporated herein by reference to the information included and
referenced under the caption "Executive Compensation" in the 1996 Holding Proxy
Statement.
CDC does not have any directors, officers or employees, and is managed by
its sole general partner, Development. Except for the allocations of profit
and loss and distributions of cash and other property to which Development is
entitled under the Partnership Agreement, and except for the right to be
reimbursed for certain expenses, Development does not receive any compensation
from CDC in respect of its duties and obligations as general partner for CDC.
As general partner, Development is entitled to be allocated certain items of
income and loss of CDC and to receive certain distributions of cash from CDC
depending upon the level of income and cash available for distribution and
whether Payout has occurred. The terms and conditions upon which Development
will be allocated items of income and loss and will receive distributions
49
<PAGE> 50
are set forth in the Partnership Agreement. For a summary of these rights and
benefits, see Note (F) of the Notes to the Holding/CDC Combining Financial
Statements included on pages 65-66 of the Holding/CDC 1996 Annual Report, which
Note (F) is incorporated herein by this reference.
The directors and executive officers of Development perform all executive
management functions for CDC. See "Item 10. Directors and Executive Officers of
the Registrant". Services required by CDC in its operations are also provided
pursuant to a Management Agreement with Holding pursuant to which Holding
operates, manages and develops the properties of CDC for and on behalf of CDC.
See "Item 10. Directors and Executive Officers of the Registrant--Management
Agreement". The executive officers of Development did not receive any
remuneration from Development or CDC for the year ended March 31, 1996.
Directors of Development who are neither officers nor employees of Development,
Centex or Centex's subsidiaries received compensation from Development in the
form of directors' and committee members' fees. During the 1996 fiscal year,
each executive officer of Development received remuneration from Centex or one
of its subsidiaries in his capacity as a director, officer or employee thereof.
None of the directors or executive officers of Development received any
additional compensation from Centex or any of its subsidiaries for services
rendered on behalf of Development or CDC during the 1996 fiscal year.
During fiscal 1996, J. Stephen Bilheimer, a Director and the President of
Development, Roger D. Sefzik, Vice President and Treasurer of Development, both
of whom are employees of subsidiaries of Centex, have devoted a majority of
their time and attention to the management of Development and Holding. Messrs.
Bilheimer and Sefzik provided such services to Development on behalf of and in
their capacities as officers of Holding pursuant to the Management Agreement.
Each current executive officer of Development continues to receive remuneration
from Centex or one of its subsidiaries in his capacity as an officer or
employee thereof and is not compensated by Development or CDC.
The directors of Development, who also hold the same directorships in
Holding and are neither officers nor employees of Development, Centex or
Centex's subsidiaries, each receive annually in the form of directors' and
committee members' fees in their capacities as directors and/or committee
members of Development ($8,000) and Holding ($8,000). In addition, Development
reimburses these directors for the reasonable expenses incurred in attending
directors' and committee meetings.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Holding
The information called for by this Item 12 with respect to Holding is
incorporated herein by reference to the information included and referenced
under the caption "Security Ownership of Management and Certain Beneficial
Owners" in the 1996 Holding Proxy Statement.
(b) CDC
The following table sets forth certain information with respect to the
ownership of the equity securities of CDC as of May 1, 1996 by Development, the
directors of Development, individually itemized, all directors and executive
officers of Development as a group, and any person known to CDC to be the
beneficial owner of more than 5% of any class of CDC's equity securities.
Except as otherwise indicated, all securities are owned directly, and the
beneficial owner of such securities has the sole voting and investment power
with respect thereto.
50
<PAGE> 51
<TABLE>
<CAPTION>
NAME OF NUMBER OF UNITS PERCENT
TITLE OF CLASS* BENEFICIAL OWNER** OR WARRANTS OWNED OF CLASS
--------------- ------------------ ----------------- --------
<S> <C> <C> <C>
General Partner Interest (1) 3333 Development Corporation . . . . . . . . All 100%
3333 Lee Parkway, Suite 500
Dallas, Texas 75219
Class A Units (2) Centex Real Estate Corporation . . . . . . . 1,000 100%
3333 Lee Parkway, Suite 1100
Dallas, Texas 75219
Stockholder Warrants (3) 3333 Development Corporation . . . . . . . . -- ***
Joseph J. Arcisz . . . . . . . . . . . . . . -- ***
J. Stephen Bilheimer . . . . . . . . . . . . -- ***
Josiah O. Low, III . . . . . . . . . . . . . -- ***
Roger D. Sefzik . . . . . . . . . . . . . . . -- ***
David M. Sherer . . . . . . . . . . . . . . . -- ***
All directors and executive officers of
Development as a group (5 persons) . . . . . -- ***
FMR Corp (4). . . . . . . . . . . . . . . . . 147 14.67%
82 Devonshire Street
Boston, Massachusetts 02109
The Prudential Insurance Company
of America(5). . . . . . . . . . . . . . . . 65 6.49%
Prudential Plaza
Newark, New Jersey 07102-3777
Centex Class B Unit Centex Corporation . . . . . . . . . . . . . 100 100%
Warrants (6) 3333 Lee Parkway, Suite 1200
Dallas, Texas 75219
Class B Units (7) Centex Corporation (8) . . . . . . . . . . . 350 (9) 28% (8)
3333 Lee Parkway, Suite 1200
Dallas, Texas 75219
</TABLE>
__________
*Under the terms of the Partnership Agreement, CDC is managed by a sole
corporate general partner and none of the present classes of CDC's
securities are "voting securities" within the meaning of the rules and
regulations of the Commission promulgated pursuant to the Exchange Act.
Nonetheless, information with respect to each class of CDC's equity
securities has been set forth in accordance with such rules and
regulations.
**The address of any person who is the beneficial owner of more than five
percent of a class of CDC's securities is also included.
***Less than 1%.
(1) In connection with the formation of CDC, Development made a capital
contribution to CDC of $767,182, in exchange
51
<PAGE> 52
for Development's general partner interest in CDC. As general partner,
Development is entitled to receive allocations of income and loss and
distributions of property from CDC. See "Item 11. Executive
Compensation".
(2) The Class A Units were issued to the Original Limited Partners in
exchange for the contribution to CDC of the Original Properties. Record
title to the Class A Units presently is held by CREC, a subsidiary of
Centex. See "Item 1. Business--General Development of Business". As of
the date or dates when the Stockholder Warrants are deemed to have been
exercised, the Class A Units will be automatically converted into (i) a
number of Class B Units equal to 20% of the total number of Class B Units
that would be outstanding after conversion based on the actual exercise
of the Stockholder Warrants and the assumed exercise of all the then
exercisable Centex Class B Unit Warrants (see footnote (3)) and (ii) a
like number of Class A Units. The Class A Units will be automatically
canceled upon Payout and the exercise and/or expiration of all of the
Stockholder Warrants and the Centex Class B Unit Warrants.
(3) The Nominee holds record title to the Stockholder Warrants, which are
exercisable for Class B Units, for the benefit of Centex Stockholders
pursuant to the Nominee Agreement. See "Item 5. Market for Registrant's
Common Equity and Related Stockholder Matters". However, the Nominee has
no power to vote the Class B Units issuable upon exercise of the
Stockholder Warrants or to direct the investment of the Stockholder
Warrants or such Class B Units. Beneficial ownership of the Stockholder
Warrants is, by virtue of the Nominee arrangement, indirect and
undivided. The number of Stockholder Warrants listed as beneficially
owned has been rounded to the nearest whole warrant. The Class B Units
issuable upon exercise of the Stockholder Warrants have not been shown as
"beneficially owned" under the rules and regulations of the Commission
promulgated pursuant to the Exchange Act because the beneficial owners of
the Stockholder Warrants have no present right to exercise the
Stockholder Warrants and acquire Class B Units.
(4) Based solely upon information contained in the Schedule 13G/A (Amendment
No. 9) of FMR Corp. filed with the Securities and Exchange Commission
(the "SEC") on February 12, 1996, for holdings as of December 31, 1995
(the "FMR 13G"), FMR may be deemed to beneficially own 4,169,447 shares
of Centex Common Stock (and therefore to own a beneficial interest in 147
Stockholder Warrants) acquired solely for investment purposes, as a
parent holding company with respect to holdings of wholly-owned
investment adviser subsidiaries of FMR or other entities affiliated with
FMR. According to the FMR 13G, FMR held 12,384 shares of Centex Common
Stock with sole voting power, 4,169,447 shares of Centex Common Stock
with sole dispositive power (and therefore held a beneficial interest in
147 Stockholder Warrants with sole dispositive power), and no shares of
Centex Common Stock with shared dispositive power (and therefore held a
beneficial interest in no Stockholder Warrants with shared dispositive
power). The Stockholder Warrants have no voting rights.
(5) Based solely upon information contained in the Schedule 13G/A (Amendment
No. 1) of the Prudential Insurance Company of America ("Prudential")
filed with the SEC on February 2, 1996, for holdings as of December 31,
1995 (the "Prudential 13G"), Prudential may be deemed to beneficially own
1,845,400 shares of Centex Common Stock (and therefore to own a
beneficial interest in 65 Stockholder Warrants). According to the
Prudential 13G, Prudential held 318,700 shares of Centex Common Stock
with sole voting and dispositive power (and therefore held a beneficial
interest in 11 Stockholder Warrants with the sole voting and dispositive
power), 1,481,700 shares of Centex Common Stock with shared voting power
(and therefore held a beneficial interest in 52 Stockholder Warrants with
shared voting power), and 1,526,700 shares of Centex Common Stock with
shared dispositive power (and therefore held a beneficial interest in 54
Stockholder Warrants with shared dispositive power). The Stockholder
Warrants have no voting rights.
(6) On November 30, 1987, Centex acquired from CDC 100 warrants (the "Centex
Class B Unit Warrants") to purchase a like number of Class B Units,
subject to adjustment, pursuant to an agreement for purchase of warrants.
The Centex Class B Unit Warrants are generally in the same form as, and
contain the same terms as, the Stockholder Warrants, except for the
manner in which they may be subdivided (and the corresponding exercise
price) and the applicable exercise period. See Note (F) of the Notes to
the Holding/CDC Combining Financial Statements included on pages 65-66 of
the Holding/CDC 1996 Annual Report, which Note (F) is herein incorporated
by this reference.
52
<PAGE> 53
(7) Presently, there are no Class B Units issued or outstanding.
(8) When issued, record title to 200 of these Class B Units will be held by
the owners of the Class A Units. See footnote (2).
(9) The Class B Units that may be acquired upon conversion of outstanding
Class A Units as of the date of the exercise of the Stockholder Warrants,
which date Centex may indirectly determine by virtue of its ability, in
its sole and absolute discretion, to determine the date of detachment of
the Stockholder Warrants from Centex Common Stock, and the Class B Units
that may be acquired upon exercise of the Centex Class B Unit Warrants
are included as "beneficially owned" pursuant to the rules and
regulations of the Commission promulgated pursuant to the Exchange Act.
See footnotes (2) and (3). The number of Class B Units and the
percentage of class listed assume that the Stockholder Warrants and the
Centex Class B Unit Warrants have been exercised in full for Class B
Units but that no subdivision of any of the warrants has occurred;
however, both the Stockholder Warrants and the Centex Class B Unit
Warrants may be subdivided or combined and any such subdivision or
combination would necessarily change the number of Class B Units
beneficially owned and the percent of class represented thereby.
All of the issued and outstanding shares of Development have been pledged
to secure the Holding Note. See "Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Holding
The information called for by this Item 13 with respect to Holding is
incorporated herein by reference to the information included under the caption
"Certain Transactions" in the 1996 Holding Proxy Statement.
(b) CDC
Holding entered into a services agreement in May, 1987 with Centex
Service Company ("CSC"), whereby CSC provides certain tax, accounting and other
similar services for Holding at a fee of $2,500 per month. Service fees of
$30,000 were paid pursuant to this agreement for fiscal year 1996.
CDC has entered into an agreement with Holding to provide management
services to CDC in connection with the development, operation and maintenance
of CDC property and other administrative services. Management fees and
reimbursable costs totaling $1,295,000 were incurred under this agreement
during fiscal 1996.
In connection with Holding's acquisition of additional shares of common
stock of Development in 1987, Holding borrowed $7,700,000 from Centex pursuant
to a secured promissory note (the "Holding Note"). The Holding Note, which had
a fluctuating balance during 1996, bears interest, payable quarterly, at the
prime rate of interest of NationsBank of Texas, N.A. ("NationsBank") plus 1% (9
1/4% at May 1, 1996). As of May 1, 1996, the outstanding principal balance of
the Holding Note was $7,155,000. The Holding Note is secured by a pledge of
all the issued and outstanding shares of Development. The Holding Note, as
amended, matures on the earlier to occur of April 1, 1998 or the last
detachment of Holding Common Stock and the Stockholders Warrants from Centex
Common Stock pursuant to the Nominee Agreement. There was interest expense of
$558,000 related to the Holding Note for the year ended March 31, 1996.
In fiscal year 1996, CDC sold to CREC certain tracts of land for
$4,416,000 and has agreements to purchase an additional 109 lots from CDC.
In 1987, Development loaned $7,700,000 to CREC, pursuant to an unsecured
note (the "CREC Note") and related loan agreement. The CREC Note bears
interest, payable quarterly, at the prime rate of interest of NationsBank plus
7/8% (9 1/8% at May 1, 1996). As of May 1, 1996, the outstanding principal
balance on the CREC Note was $7,700,000. The CREC Note, as amended, matures on
April 30, 1998. Fiscal year 1996 interest income on the CREC Note totaled
$750,000.
53
<PAGE> 54
CREC has guaranteed a bank line of credit for CDC (currently $5,000,000)
to utilize in conjunction with development of lots to be sold to CREC. This
line of credit, which had an outstanding balance of $1,373,000 at May 1, 1996,
bears interest at LIBOR plus 3/4% (6 3/16% at May 1, 1996), is unsecured.
CDC owns property in the City of Carrollton, a suburb of Dallas, Texas,
which consists of one office and five fabrication-warehouse buildings on
approximately 17 acres. CDC leases this property to CREC pursuant to a
five-year lease terminating on March 31, 1998. For fiscal 1996, CDC received
rent from CREC for this property in the amount of $200,000.
54
<PAGE> 55
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
(1) and (2) See the Index to Financial Statements below for a list
of the Financial Statements filed herewith.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
HOLDING/CDC
1996 ANNUAL
REPORT PAGES
------------
<S> <C>
3333 HOLDING CORPORATION AND SUBSIDIARY AND CENTEX
DEVELOPMENT COMPANY, L.P.
Data incorporated by reference to the Holding/CDC
1996 Annual Report:
Report of Independent Public Accountants . . . . . . . . . . . 57
Combining Balance Sheets as of March 31, 1996 and 1995 . . . . 59
Combining Statements of Operations and Cash Flows for the
Years Ended March 31, 1996, 1995 and 1994 . . . . . . . . . 60
Combining Statements of Stockholders' Equity and
Partners' Capital for the Years
Ended March 31, 1996, 1995 and 1994 . . . . . . . . . . . 61
Notes to Combining Financial Statements . . . . . . . . . . . 61-66
Quarterly Results (unaudited) . . . . . . . . . . . . . . . . 67
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
(3) EXHIBITS
(A) Holding
The information on exhibits required by this Item 14 is set forth in the
Holding Index to Exhibits appearing on pages 62-63 of this Report.
(B) CDC
The information on exhibits required by this Item 14 is set forth in the
CDC Index to Exhibits appearing on pages 64-66 of this Report.
(b) Reports on Form 8-K:
Neither Holding nor CDC filed any reports on Form 8-K during the quarter
ended March 31, 1996.
55
<PAGE> 56
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C>
3333 HOLDING CORPORATION
----------------------------------------------------
Registrant
May 20, 1996 By: /s/ J. STEPHEN BILHEIMER
----------------------------------------------------
J. Stephen Bilheimer,
President
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
<TABLE>
<S> <C>
May 20, 1996 By: /s/ J. STEPHEN BILHEIMER
----------------------------------------------------
J. Stephen Bilheimer,
President
(principal executive officer)
May 20, 1996 /s/ ROGER D. SEFZIK
-----------------------------------------------------
Roger D. Sefzik,
Vice President and Treasurer
(principal financial and accounting officer)
Directors: J. Stephen Bilheimer, Josiah O. Low, III, David M. Sherer
May 20, 1996 By: /s/ J. STEPHEN BILHEIMER
----------------------------------------------------
J. Stephen Bilheimer,
Individually and as
Attorney-in-Fact*
----------
</TABLE>
*Pursuant to authority granted by powers of attorney, copies of which are
filed herewith.
56
<PAGE> 57
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, 3333 Development Corporation, as general partner of, and
on behalf of, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C>
CENTEX DEVELOPMENT COMPANY, L.P.
-------------------------------------------------
Registrant
By: 3333 Development Corporation, General Partner
May 20, 1996 By: /s/ J. STEPHEN BILHEIMER
-----------------------------------------------
J. Stephen Bilheimer,
President
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of 3333
Development Corporation, as general partner of, and on behalf of, the
registrant in the capacities and on the dates indicated.
<TABLE>
<S> <C>
May 20, 1996 /s/ J. STEPHEN BILHEIMER
--------------------------------------------------------
J. Stephen Bilheimer,
President
(principal executive officer)
May 20, 1996 /s/ ROGER D. SEFZIK
--------------------------------------------------------
Roger D. Sefzik,
Vice President and Treasurer
(principal financial and accounting officer)
Directors: J. Stephen Bilheimer, Josiah O. Low, III, David M. Sherer
May 20, 1996 By: /s/ J. STEPHEN BILHEIMER
-----------------------------------------------------
J. Stephen Bilheimer,
Individually and as
Attorney-in-Fact*
</TABLE>
__________
*Pursuant to authority granted by powers of attorney, copies of which are
filed herewith.
57
<PAGE> 58
INDEX TO EXHIBITS
CENTEX CORPORATION
AND SUBSIDIARIES
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
------- ------- -------------------------
<S> <C> <C>
3.1 Restated Articles of Incorporation of Exhibit 3.1 to Annual Report on Form 10-K
Centex. of Centex Corporation ("Centex") (File
No. 1-6776) for fiscal year ended March
31, 1993 ("Centex 1993 Form 10-K")
3.2 By-laws of Centex. Exhibit 3.2 to Centex 1993 Form 10-K
4.1 Specimen Centex common stock certificate Exhibit 4.1 to Centex 1993 Form 10-K
(with tandem trading legend and Rights
Agreement legend).
4.2 Nominee Agreement, dated November 30, Exhibit 4.2 to Centex 1993 Form 10-K
1987, by and between Centex, 3333 Holding
Corporation ("Holding") and Centex
Development Company, L.P. ("CDC"), and
Chemical Bank, as successor nominee.
4.3 Agreement for Purchase of Warrants, dated Exhibit 4.3 to Centex 1993 Form 10-K
as of November 30, 1987, by and between
Holding and Centex.
4.4 Rights Agreement, dated as of Exhibit 1 to Form 8-A Registration
September 17, 1986, between Centex and Statement of Centex dated September 17,
Chemical Bank, as successor rights agent. 1986
4.5 Amendment No. 1 to Rights Agreement, dated Exhibit 4.6 to Centex 1993 Form 10-K
as of May 18, 1988, between Centex and
Chemical Bank, as successor rights agent.
4.6 Indenture dated as of March 12, 1987 Exhibit 4.7 to Centex 1993 Form 10-K
between Centex and Texas Commerce Bank-
Dallas, N.A. with respect to Subordinated
Debt Securities of Centex.
4.7 Supplemental Indenture dated as of Exhibit 4.8 to Centex 1993 Form 10-K
March 12, 1987 between Centex and Texas
Commerce Bank-Dallas, N.A. with respect to
$100,000,000 8 3/4% Subordinated
Debentures Due March 1, 2007.
</TABLE>
58
<PAGE> 59
INDEX TO EXHIBITS
CENTEX CORPORATION
AND SUBSIDIARIES--CONTINUED
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
------ ------- -------------------------
<S> <C> <C>
4.8 Instruments with respect to long-term debt N/A
which do not exceed 10% of the total
assets of Centex and its subsidiaries have
not been filed. Centex agrees to furnish
a copy of such instruments to the
Commission upon request.
4.9 Debenture Purchase Agreement, dated as of Exhibit 4.11 to Centex 1993 Form 10-K
June 17, 1987, between Centex and the
State Investment Council of New Mexico
with respect to $20,000,000 Aggregate
Principal Amount of 8.80% Subordinated
Debenture of Centex due June 30, 2007.
4.10 Indenture dated as of May 1, 1991 between Exhibit 4.12 to Centex 1993 Form 10-K
Centex and Chemical Bank with respect to
Senior Debt Securities.
4.11 Supplemental Indenture dated as of May 10, Exhibit 4.13 to Centex 1993 Form 10-K
1991 between Centex and Chemical Bank with
respect to $100,000,000 9.05% Senior Notes
due May 1, 1996.
4.12 Subordination Agreement dated as of May 1, Exhibit 4.14 to Centex 1993 Form 10-K
1991 by and among Centex Corporation and
all of its subsidiaries.
4.13 Supplemental Indenture dated as of June Exhibit 4.15 to Annual Report on Form 10-
17, 1987 between Centex and Texas Commerce K of Centex (File No. 1-6776) for fiscal
Bank--Dallas, N.A. with respect to 8.80% year ended March 31, 1994 ("Centex 1994
Subordinated Debentures due June 30, 2007. Form 10-K")
4.14 Debenture No. 1 dated June 17, 1987 of Exhibit 4.16 to Centex 1994 Form 10-K
Centex 8.80% Subordinated Debentures due
June 30, 2007.
4.15 Supplemental Indenture dated as of June 9, Exhibit 4(b) to the Current Report on
1995 between Centex and Texas Commerce Form 8-K of Centex (File No. 1-6776)
Bank National Association with respect to dated June 5, 1995.
7 3/8% Subordinated Debenture due June 1,
2005.
</TABLE>
59
<PAGE> 60
INDEX TO EXHIBITS
CENTEX CORPORATION
AND SUBSIDIARIES--CONTINUED
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
------ ------- -------------------------
<S> <C> <C>
10.1 Centex Corporation Stock Option Plan, as Exhibit 10.1 to Centex 1993 Form 10-K
amended.*
10.2 Centex Corporation 1987 Stock Option Plan, Exhibit 28.1 to Joint Registration
as amended.* Statement of Centex, Holding and CDC on
Form S-8 (No. 33-44575) dated December
13, 1991.
10.3 Credit Agreement dated as of May 1, 1987, Exhibit 10.2 to Amendment No. 3 dated
by and between Holding and Centex and November 24, 1987 to Registration
related (i) Promissory Note dated May 1, Statement of Holding on Form 10 (File No.
1987, executed by Holding and payable to 1-9624) dated July 12, 1987.
the order of Centex in the principal
amount of $7,700,000 and (ii) Pledge and
Security Agreement dated as of May 1, 1987
executed by Holding in favor of Centex.
10.4 Consulting Agreement dated as of February Exhibit 10.4 to Annual Report on Form 10-
1, 1995 between Centex and Paul R. K of Centex (File No. 1-6776) for fiscal
Seegers.* year ended March 31, 1995 ("Centex 1995
Form 10-K")
10.5 Executive Employment Agreement dated as of Exhibit 10.6 to Centex 1993 Form 10-K
September 17, 1990 between Centex and
Laurence E. Hirsch.*
10.6 Executive Employment Agreement dated as of Exhibit 10.7 to Centex 1993 Form 10-K
January 18, 1991 between Centex and David
W. Quinn.*
10.7 Executive Employment Agreement dated as of Exhibit 10.8 to Centex 1993 Form 10-K
January 18, 1991 between Centex and
William J Gillilan III.*
10.8 Centex Corporation $2,000,000 Subordinated Exhibit 10.8 to Centex 1995 Form 10-K
Convertible Note issued to Laurence E.
Hirsch on March 1, 1995.*
10.9 Supplemental Executive Retirement Plan of Exhibit 10.9 to Centex 1995 Form 10-K
Centex Corporation.*
13 Centex 1996 Annual Report and Holding/CDC Filed Herewith.
1996 Annual Report.**
21 List of Subsidiaries of Centex. Filed Herewith.
</TABLE>
60
<PAGE> 61
INDEX TO EXHIBITS
CENTEX CORPORATION
AND SUBSIDIARIES--CONTINUED
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
------ ------- -------------------------
<S> <C> <C>
23 Consents of Independent Public Accountants. Filed Herewith.
24 Powers of Attorney. Filed Herewith.
27 Financial Data Schedule. Filed Herewith.
</TABLE>
____________
* Management contract or compensatory plan or arrangement.
** With the exception of the information expressly incorporated by
reference in this Report from the Centex 1996 Annual Report and the
Holding/CDC 1996 Annual Report, these two annual reports are not deemed
filed with the Commission as part of this Report.
61
<PAGE> 62
INDEX TO EXHIBITS
3333 HOLDING CORPORATION
AND SUBSIDIARY
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
------ ------- -------------------------
<S> <C> <C>
3.1 Articles of Incorporation of 3333 Holding Exhibit 3.2a to Amendment No. 1 dated
Corporation ("Holding"). October 14, 1987 ("Amendment No. 1") to
the Registration Statement of Holding on
Form 10 (File No. 1-9624) dated July 12,
1987 (the "Holding Registration
Statement").
3.2 By-laws of Holding, as amended. Exhibit 3.2 to Annual Report on Form 10-K
of Holding (File No. 1-9624) for fiscal
year ended March 31, 1993 (the "Holding
Form 10-K")
4.1 Specimen Holding common stock Exhibit 4.1 to Amendment No. 1.
certificate.
4.2 Specimen Centex Corporation ("Centex") Exhibit 4.2 to Holding Form 10-K.
common stock certificate (with tandem
trading legend and Rights Agreement
legend).
4.3 Nominee Agreement, dated as of November Exhibit 4.3 to Holding Form 10-K.
30, 1987 by and between Centex, Holding
and Centex Development Company, L.P.
("CDC"), and Chemical Bank, as successor
nominee.
4.4 Agreement for Purchase of Warrants, dated Exhibit 4.4 to Holding Form 10-K.
as of November 30, 1987, by and between
Holding and Centex.
10.1 Services Agreement, dated as of May 5, Exhibit 10.1 to Amendment No. 3 dated
1987, by and between Holding and Centex November 24, 1987 ("Amendment No. 3") to
Service Company. the Holding Registration Statement.
10.2 Credit Agreement dated as of May 1, 1987, Exhibit 10.2 to Amendment No. 3.
by and between Holding and Centex and
related (i) Promissory Note dated May 1,
1987, executed by Holding and payable to
the order of Centex in the principal
amount of $7,700,000 and (ii) Pledge and
Security Agreement dated as of May 1, 1987
executed by Holding in favor of Centex.
</TABLE>
62
<PAGE> 63
INDEX TO EXHIBITS
3333 HOLDING CORPORATION
AND SUBSIDIARY--CONTINUED
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
------ ------- -------------------------
<S> <C> <C>
10.3 Credit Agreement dated as of May 1, 1987, Exhibit 10.3 to the Holding Registration
by and between 3333 Development Statement.
Corporation and Centex Real Estate
Corporation and related Promissory Note
dated May 1, 1987, executed by Centex Real
Estate Corporation payable to the order of
3333 Development Corporation in the
principal amount of $7,700,000.
13 Centex 1996 Annual Report and Holding/CDC Exhibit 13 to Form 10-K of Centex
1996 Annual Report.* Corporation (File No. 1-6776) dated May
22, 1996.
21 Subsidiaries of Holding. Filed Herewith.
23 Consent of Independent Public Accountants. Filed Herewith.
24 Powers of Attorney. Filed Herewith.
27 Financial Data Schedule. Filed Herewith.
- -------
</TABLE>
* With the exception of the information expressly incorporated by
reference in this Report from the Centex 1996 Annual Report and the
Holding/CDC 1996 Annual Report, these two annual reports are not deemed
filed with the Commission as part of this report.
63
<PAGE> 64
INDEX TO EXHIBITS
CENTEX DEVELOPMENT COMPANY, L.P.
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
------ ------- -------------------------
<S> <C> <C>
2.1 Option Agreement, dated as of November 3, Exhibit 2.1 to Centex 1994 Form 10-K
1988, by and between Centex Development
Company, L.P. ("CDC") and Estrella
Properties, Ltd.
2.2 Additional Interest Agreement, dated March Exhibit 2.2 to Centex 1994 Form 10-K
30, 1989, by and between CDC and
Westinghouse Credit Corporation.
2.3 Construction Loan Agreement, dated March Exhibit 2.3 to Centex 1994 Form 10-K
30, 1989, by and among Westinghouse Credit
Corporation and CDC.
2.4 Forster Ranch Development Agreement, dated Exhibit 2.4 to Centex 1994 Form 10-K
March 31, 1989, by and between the City of
San Clemente, California and CDC.
3.1 Articles of Incorporation, as amended, of Exhibit 3.2a to Amendment No. 1 dated
3333 Development Corporation October 14, 1987 ("CDC Amendment No. 1")
("Development") as currently in effect. to the Registration Statement of CDC on
Form 10 (File No. 1-9625) dated July 12,
1987 (the "CDC Registration Statement").
3.2 By-laws of Development, as amended. Exhibit 3.2 to Annual Report on Form 10-K
of CDC (File No. 1-9625) for fiscal year
ended March 31, 1993 (the "CDC Form
10-K").
4.1 Certificates of Limited Partnership of Exhibit 4.1 to the CDC Registration
CDC. Statement.
4.2 Amended and Restated Agreement of Limited Exhibit 4.2 to Amendment No. 3 dated
Partnership of CDC. November 24, 1987 ("CDC Amendment No. 3")
to the CDC Registration Statement.
4.3 Specimen certificate for Class A limited Exhibit 4.3 to the CDC Registration
partnership units. Statement.
4.4 Specimen certificate for Class B limited Exhibit 4.4 to the CDC Registration
partnership units. Statement.
</TABLE>
64
<PAGE> 65
INDEX TO EXHIBITS
CENTEX DEVELOPMENT COMPANY, L.P.--CONTINUED
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
------ ------- -------------------------
<S> <C> <C>
4.5 Warrant Agreement, dated as of November Exhibit 4.5 to CDC Form 10-K
30, 1987, by and between CDC and Centex
Corporation ("Centex").
4.6 Specimen warrant certificate. Exhibit 4.6 to CDC Amendment No. 3.
4.7 Specimen Centex common stock certificate Exhibit 4.7 to CDC Form 10-K.
(with tandem trading legend and Rights
Agreement legend).
4.8 Nominee Agreement, dated as of November Exhibit 4.8 to CDC Form 10-K.
30, 1987, by and between Centex, 3333
Holding Corporation ("Holding") and CDC,
and Chemical Bank, as successor nominee.
4.9 Agreement for Purchase of Warrants, dated Exhibit 4.9 to CDC Form 10-K.
as of November 30, 1987, by and between
CDC and Centex.
4.10 Form of Operating Partnership Agreement. Exhibit 4.9 to the CDC Registration
Statement.
10.1 Management Agreement by and between Centex Exhibit 10.1 to CDC Amendment No. 3.
Real Estate Corporation ("CREC") and CDC.
10.2 Supplement to Management Agreement by and Exhibit 10.1a to CDC Amendment No. 3.
between CREC and CDC.
10.3 Documents of Conveyance of Property from Exhibit 10.2 to CDC Amendment No. 1.
Centex Land Corporation to CDC.
10.4 Documents of Conveyance of Property from Exhibit 10.3 to the CDC Registration
Centex Homes Corporation to CDC. Statement.
10.5 Documents of Conveyance of Property from Exhibit 10.4 to the CDC Registration
Fox & Jacobs, Inc. to CDC. Statement.
10.6 Documents of Conveyance of Property from Exhibit 10.5 to the CDC Registration
Great Lakes Development Co., Inc., to CDC. Statement.
10.7 Agreement dated as of April 1, 1987 by and Exhibit 10.6 to the CDC Registration
among CDC, CREC, Centex Homes Corporation Statement.
and Centex Land Company.
</TABLE>
65
<PAGE> 66
INDEX TO EXHIBITS
CENTEX DEVELOPMENT COMPANY, L.P.--CONTINUED
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
------ ------- -------------------------
<S> <C> <C>
10.8 Agreement dated as of April 1, 1987 by and Exhibit 10.7 to the CDC Registration
between CDC and Centex Homes of New Statement.
Jersey, Inc.
10.9 Waiver Agreement dated as of July 28, Filed Herewith.
1995, by and between CDC, CREC and 3333
Development Corporation ("Development").
10.10 Waiver Agreement dated as of September 13, Filed Herewith.
1995 but effective as of July 1, 1995, by
and between CDC, CREC and Development.
10.11 Waiver Agreement dated as of September 27, Filed Herewith.
1995 but effective as of July 1, 1995, by
and between CDC, CREC and Development.
10.12 Waiver Agreement dated as of December 31, Filed Herewith.
1995 by and between CDC, CREC and
Development.
10.13 Waiver Agreement dated as of March 29, Filed Herewith.
1996 by and between CDC, CREC and
Development.
10.14 Waiver Agreement dated as of January 8, Filed Herewith.
1996 but effective as of January 1, 1996,
by and between CDC, CREC and Development.
13 Centex 1996 Annual Report and Holding/CDC Exhibit 13 to Form 10-K of Centex
1996 Annual Report.* Corporation (File No. 1-6776) dated May
22, 1996.
23 Consent of Independent Public Accountants. Filed Herewith.
24 Powers of Attorney. Filed Herewith.
27 Financial Data Schedule. Filed Herewith.
</TABLE>
_________
* With the exception of the information expressly incorporated by
reference in this Report from the Centex 1996 Annual Report and the
Holding/CDC 1996 Annual Report, these two annual reports are not deemed
filed with the Commission as part of this report.
66
<PAGE> 1
EXHIBIT 13
INNER VATE
Innovatively utilize Centex's unique strengths to
achieve optimum organizational performance
[Peephole Artwork]
CENTEX
96
1996 Annual Report
Centex Corporation
3333 Holding Corporation
Centex Development
Company, L.P.
<PAGE> 2
INNER FOCUS/OUTER VISION Centex is dedicated to utilizing its core strengths
to provide the impetus for corporate expansion. A comprehensive understanding
of the culture and capabilities of our company and its people allows the
careful crafting of corporate strategies. These strategies will energize Centex
to move into new areas with the maximum potential for success. From our inner
focus comes the outer vision that will shape our future.
[Peephole Artwork]
Centex Corporation, through its subsidiaries, ranks among America's premier
Home Building, Financial Services, and Contracting and Construction Services
companies. o CENTEX HOMES is one of the nation's largest builders of
single-family homes. o CTX MORTGAGE COMPANY is the country's second largest
independent retail originator of single-family home mortgages. o CENTEX
CONSTRUCTION GROUP is one of the leading general building contractors in the
U.S. o Centex Corporation also owns a 49% interest in its former subsidiary,
Centex Construction Products, Inc., which produces and distributes cement,
gypsum wallboard, and concrete and aggregates. o In fiscal 1987, Centex created
CENTEX DEVELOPMENT COMPANY, L.P. (CDC), a master limited partnership, to
conduct real estate activity. Ownership interests in CDC, a separate entity
from Centex, currently trade in tandem with the common stock of Centex. This
combined 1996 Annual Report consists of the Annual Report to Stockholders of
Centex Corporation, 3333 Holding Corporation and Centex Development Company,
L.P.
<PAGE> 3
CONTENTS
Centex Corporation
Financial Highlights 2
Stock Prices and Dividends 2
Letter to Our Stockholders 3
Home Building 8
Financial Services 14
Contracting and Construction Services 18
Centex Construction Products, Inc. 22
Financial Information
Consolidated Revenues and Operating Earnings by Line of Business 26
Statements of Consolidated Earnings 27
Consolidated Balance Sheets 28
Statements of Consolidated Cash Flows 30
Statements of Consolidated Stockholders' Equity 31
Notes to Consolidated Financial Statements 32
Report of Independent Public Accountants 46
Management's Discussion and Analysis of Results of Operations
and Financial Condition 47
Quarterly Results 53
Summary of Selected Financial Data 54
Board of Directors and Officers 69
3333 Holding Corporation and Subsidiary and
Centex Development Company, L.P.
Letter to Our Stockholders 56
Report of Independent Public Accountants 57
Financial Highlights 58
Combining Balance Sheets 59
Combining Statements of Operations and Cash Flows 60
Combining Statements of Stockholders' Equity and Partners' Capital 61
Notes to Combining Financial Statements 61
Quarterly Results 67
Management's Discussion and Analysis of Results of Operations
and Financial Condition 68
Board of Directors and Officers 72
1
<PAGE> 4
CENTEX CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues $3,102,987 $3,277,504 $3,039,709 $2,363,325 $2,028,646
Earnings Before Income Taxes $ 87,786 $ 145,788 $ 135,013 $ 91,759 $ 45,852
Net Earnings Before Gain on CXP's IPO $ 53,365 $ 54,753 $ 85,162 $ 61,038 $ 34,557
Gain on CXP's IPO -- 37,495 -- -- --
---------- ---------- ---------- ---------- ----------
Net Earnings $ 53,365 $ 92,248 $ 85,162 $ 61,038 $ 34,557
========== ========== ========== ========== ==========
Earnings Per Share--
Before Gain on CXP's IPO $ 1.83 $ 1.81 $ 2.60 $ 1.91 $ 1.11
Gain on CXP's IPO -- 1.23 -- -- --
---------- ---------- ---------- ---------- ----------
Earnings Per Share $ 1.83 $ 3.04 $ 2.60 $ 1.91 $ 1.11
========== ========== ========== ========== ==========
Cash Dividends Per Share $ .20 $ .20 $ .20 $ .20 $ .20
Average Shares Outstanding 29,091 30,327 32,790 32,016 31,252
Debt $ 408,253 $ 427,381 $ 429,470 $ 368,988 $ 298,508
Stockholders' Equity $ 722,836 $ 668,227 $ 668,659 $ 578,415 $ 518,494
Book Value Per Share At Year End $ 25.43 $ 23.80 $ 21.12 $ 18.57 $ 16.99
</TABLE>
As reflected above, Net Earnings and Earnings Per Share for fiscal 1995
include $37.5 million and $1.23, respectively, related to the April 1994 Initial
Public Offering (IPO) of 51% of the stock of Centex Construction Products, Inc.
See Note C to financial statements.
Debt represents Centex Corporation's debt with the financial services group
reflected on the equity method versus consolidation. See Note A to financial
statements.
STOCK PRICES AND DIVIDENDS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, YEAR ENDED MARCH 31,
1996 1995
------------------------- -------------------------
PRICE PRICE
------------ ------------
QUARTER HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
---- ---- --------- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
First $ 30 $23 1/2 $ .05 $32 3/8 $23 7/8 $ .05
Second $ 31 $ 26 $ .05 $26 7/8 $22 3/8 $ .05
Third $35 5/8 $28 5/8 $ .05 $23 7/8 $20 1/4 $ .05
Fourth $35 1/4 $27 3/4 $ .05 $25 7/8 $22 1/2 $ .05
</TABLE>
The common stock of Centex Corporation is traded on the New York Stock
Exchange (ticker symbol CTX) and The International Stock Exchange (London). The
approximate number of record holders of the common stock of Centex Corporation
at May 8, 1996 was 2,243.
On November 30, 1987, Centex Corporation distributed as a dividend to its
stockholders securities relating to Centex Development Company, L.P. (see Note H
to the Consolidated Financial Statements of Centex Corporation and
Subsidiaries). Since this distribution, such securities have traded in tandem
with, and as a part of, the common stock of Centex Corporation.
Amounts represent cash dividends per share paid by Centex Corporation on
the common stock of Centex Corporation. 3333 Holding Corporation has paid no
dividends on its common stock since its incorporation.
2
<PAGE> 5
TO OUR STOCKHOLDERS
In fiscal 1996, Centex renewed its focus on formulating operational goals
and strategic philosophies for the future even as we enjoyed the results of
some of our near-term strategies.
[Photo]
[LARRY HIRSCH]
Although fiscal 1996's highly competitive environment kept Centex's revenues of
$3.1 billion and net earnings of $53.4 million slightly below 1995's results,
1996 earnings per share of $1.83 rose marginally above last year's level due to
fewer average shares outstanding in the current year.
[PHOTO]
BILL GILLILAN
As mortgage interest rates continued to fall throughout most of the year,
Centex Homes reported record home sales of 13,516 units, and its operating
earnings of $106.7 million were the second highest in its history.
CTX Mortgage, recovering from fiscal 1995's severely contracted market,
reported per loan margins and operating earnings many times greater than last
year.
[PHOTO]
DAVID QUINN
Centex's 49% ownership interest in Centex Construction Products garnered a
record $25.6 million, 55% higher than last year.
Stockholders' equity per share, rising for the 28th consecutive year,
reached $25.43 in fiscal 1996.
Despite Centex's $85 million investment in Vista Properties, Inc., we
finished fiscal 1996 with less debt than we had a year ago and a
debt-to-capitalization ratio of 35.6%, down from 1995's 38.0%.
3
<PAGE> 6
TO OUR STOCKHOLDERS
[CHART] [CHART]
REVENUES ($ in millions) NET EARNINGS ($ in millions)
92......................$2,029 92......................$34.6
93......................$2,363 93......................$61.0
94......................$3,040 94......................$85.2
95......................$3,278 95......................$92.2
96......................$3,103 $54.7 $37.5*
Before CXP Gain CXP Gain
96......................$53.4
* GAIN ON SALE OF 51% OF CENTEX
CONSTRUCTION PRODUCTS, INC.
Centex Corporation aspires to a lofty goal: tobe the nation's finest
building and related financial services company. To reach our objective, we
must properly blend operational, growth and financial strategies. We must know
who we are and where we are going.
Looking inside. So, while Centex continues to build and grow, it is also
going through a period of intense introspection. Corporate self-scrutiny is
almost always beneficial, but it is especially critical at this point in
Centex's history as we face a dual challenge: raising financial returns in our
core businesses while charting a path of expansion that will successfully propel
the Company into the next century.
Centex definitely had its share of success in fiscal 1996. Our Home
Building company achieved over $100 million of operating earnings for the second
consecutive year, and our customer satisfaction levels continue to rise. After
weathering a rough fiscal 1995 sparked by rapidly rising interest rates, our
Financial Services Group rebounded to make a significant contribution to this
year's earnings. Centex Construction Products, our 49%-owned, publicly traded
affiliate, was a stellar performer, reporting record earnings.
Centex was also active on the acquisi-
4
<PAGE> 7
TO OUR STOCKHOLDERS
[CHART] [CHART]
SHARES OUTSTANDING AT YEAR END (in millions) EARNINGS PER SHARE (in dollars)
92......................30.5 92......................$1.11
93......................31.1 93......................$1.91
94......................31.7 94......................$2.60
95......................28.1 95......................$3.04
96......................28.4 $1.81 $1.23*
Before CXP Gain CXP Gain
96......................$1.83
* GAIN ON SALE OF 51% OF CENTEX
CONSTRUCTION PRODUCTS, INC.
tion front. Following a hard-fought battle, we gained control of Vista
Properties, Inc. for a net purchase price of $85 million. Vista Properties adds
valuable real estate assets to the Centex portfolio, which should start
generating income in fiscal 1997. Just after the end of fiscal 1996, our
newly formed Home Services division completed its first two acquisitions, and
the Financial Services Group purchased a company that utilizes sophisticated
technology to automate mortgage processing services.
We also had our share of disappointments. Our Contracting and Construction
Services company continued to incur operating losses, causing us to initiate a
major restructuring of that division. In addition, Centex's return on
stockholders' equity during fiscal 1996 failed to reach acceptable levels.
Raising returns in all of Centex's businesses is management's principal
immediate priority.
"Innergizing" for the future. Back to introspection. We coined the word
"INNERVATE" for our Annual Report cover to indicate that Centex will achieve its
return on equity goals and rise to its next evolutionary level by emphasizing
our core strengths and determining creative ways to use them. That may sound
more dramatic than we intend. It merely means that we
5
<PAGE> 8
To Our Stockholders
[CHART]
STOCKHOLDER'S EQUITY ($ in millions)
92 ...................... $518
93 ...................... $578
94 ...................... $669
95 ...................... $668
96 ...................... $723
[CHART]
TOTAL DEBT TO CAPITALIZATION ($ in millions)
92...................... 33.0%
$299 $905
93...................... 35.8%
$369 $1,031
94...................... 37.1%
$429 $1,157
95...................... 38.0%
$427 $1,123
96...................... 35.6%
$408 $1,147
are resolved to creatively "play to our strengths." The industry leaders of the
future must be innovators--companies whose people are strategically astute,
adept at cyclical positioning and dedicated to constant operational
improvement. Centex will be one of those leaders.
In Home Building, Centex's strengths include a comprehensive understanding
of land development as well as of the housing design and construction
processes. We must improve margins by focusing those skills on reducing
construction costs and developing more efficient and affordable housing.
In order to utilize our resources more creatively, we must expand our
internal definition of what it means to be a housing company. That definition
must include the development of a wider variety of housing products and the
construction of various types of residential living environments. As we try to
differentiate ourselves from the competition, Centex will segment the housing
markets more extensively than we have in the past. The search for ways in which
to take greater advantage of our Home Building assets led to the creation of
our Home Services group. Through this entity, we intend to offer home security
and pest control services--initially to our own home buyers and later to other
home builders for their customers.
6
<PAGE> 9
To Our Stockholders
In our Financial Services Group, Centex has successfully combined a
flexible, people-oriented culture with sophisticated, cost-efficient systems.
As a result of its growth, CTX Mortgage is now the nation's second largest
non-bank-affiliated retail mortgage originator. Recognizing its own cultural
strengths, Financial Services is expanding into the "B" and "C" mortgage
business, where its marketing philosophy and operating systems can be
successfully utilized. Financial Services also is assessing several other
related operations that would be well suited to our business approach.
After just two years as a separate company, Centex Construction Products
has a virtually debt-free balance sheet that will enable it to expand its
presence in the process-oriented construction products manufacturing
industries. In addition, we have identified a number of business opportunities
that our Contracting and Construction Services division will pursue after its
current restructuring is successfully concluded.
Centex also intends to respond aggressively to the trends that are
impacting our businesses--changing demographics, the need for affordable
housing, and technological advances, among others. One issue is how to satisfy
the housing and other needs of the aging population. We recently completed our
first specially designed facility for Alzheimer's patients, now being operated
by a joint venture partner, and are searching for additional opportunities in
the care-based housing field.
The year to come. Centex entered fiscal 1997 with considerable momentum. Our
housing backlog stood 39% higher than last year and our mortgage activity has
been strong. Centex Construction Products is progressing well, and the
reorganization of the Contracting Group is rapidly moving forward. We also
expect to receive significant operating contributions from the Vista Properties
transaction. While we must always keep a wary eye on interest rates, fiscal
1997 is shaping up to be an exceptional year for Centex.
In today's business environment, prosperity will come to those companies
that correctly anticipate problems and successfully implement solutions to
strategic challenges. We believe that Centex, with our approximately 6,000
committed people, possesses all of the qualities and resources necessary to
thrive in that environment, as well as the financial power to transform
opportunities into results.
We are convinced that Centex stands on the threshold of its most
profitable, creative and dynamic period.
/s/ LARRY HIRSCH
Laurence E. Hirsch
Chairman and Chief Executive Officer
/s/ WILLIAM J GILLILAN III
William J Gillilan III
President and Chief Operating Officer
/s/ DAVID W. QUINN
David W. Quinn
Executive Vice President and Chief Financial Officer
May 8, 1996
7
<PAGE> 10
INNER SPECT
Meticulously evaluate and refine each of our processes
to ensure delivery of superior products and services
[PHOTO]
Robert Chappell
8
<PAGE> 11
HOME BUILDING
[CHART] [CHART]
REVENUES ($ IN MILLIONS) OPERATING EARNINGS ($ IN MILLIONS)
92 ................... $1,062 92 ................... $ 55.2
93 ................... $1,433 93 ................... $ 79.9
94 ................... $1,870 94 ................... $ 96.0
95 ................... $2,111 95 ................... $112.1
96 ................... $1,990 96 ................... $106.7
ROBERT CHAPPELL
Field Manager
Increasing returns in each neighborhood is the most critical element of Centex
Homes' efforts to improve financial performance. Robert, who continuously,
conscientiously inspects each home under construction from foundation to
finish, is key to that process.
In fiscal 1996, Home Building revenues of $1.99 billion were 6% less than $2.11
billion in fiscal 1995. o Operating earnings were $106.7 million in 1996, 5%
less than $112.1 million last year. o Home closings in 1996 were 11,970, an 8%
decline from the record 12,964 homes closed in 1995. o New home orders for 1996
reached a record 13,516, 21% higher than 11,156 homes last year. o The backlog
of homes sold but not closed at March 31, 1996 was 5,533 units, 39% higher than
3,987 units at March 31, 1995. o Fiscal 1996's average home sales price of
$163,912 was 3% above 1995's average price of $159,222. o The per unit margin
of $8,914 in 1996 also rose 3% over $8,651 last year. o The Home Building
operating margin was 5.4% this year versus 5.3% in fiscal 1995.
9
<PAGE> 12
HOME BUILDING
Although rising interest rates late in fiscal 1995 depressed year-end backlog
and slowed closings in the first half of 1996, the rate decline that began
early in the fiscal year strengthened sales and accelerated closings in the
second half. Ultimately, Centex Homes posted a solid performance for 1996,
successfully delivering well over 10,000 units for the fourth consecutive year.
Our Home Building operating margins improved sequentially each quarter,
rising from 4.3% in the first quarter to 6.1% in the fourth period, and
operating earnings were the second highest in our history. Record fourth
quarter home orders lifted fiscal year sales to an all-time peak, positioning
Centex Homes with a near-record-high backlog as fiscal 1997 began. Most
significant, these achievements were accompanied by improvement in customer
satisfaction.
Despite rising demand, competition in our housing markets remains intense.
Readily available capital has facilitated expansion by existing builders and
the proliferation of new ones. This highly competitive environment has
constrained home sales price increases while putting upward pressure on costs
for land, labor and materials.
Centex Homes is proceeding cautiously. Understanding the potential risk of
expanding at this point in the cycle, we have resisted geographic growth. We
permitted our land base to shrink and stabilized the number of our communities,
ending fiscal 1996 with approximately the same number of communities we had at
the beginning of the year. We reduced our unsold inventory of homes under
construction, already low by industry standards, to minimal levels and
deferred, for the present time, our international expansion efforts.
Armed with a renewed sense of urgency, Centex Homes has refocused its
energies and abilities on maximizing margins, earnings and returns on our
substantial nationwide housing base--282 neighborhoods in 49 market areas in 20
states. Much of our margin improvement is a result of our own cost containment.
We have upgraded the skills of our estimating and purchasing personnel and
aggressively sought new efficiencies in our construction processes.
Refining our design. In addition, we are scrutinizing our product, phasing out
features not perceived by our customers as adding value, or converting such
features into options, if necessary. Centex is fortunate to have its own staff
of highly-trained architects who each year produce several hundred new home
designs -- first time, move up, and in some markets, custom -- for our home
buyers. Our architects spend virtually all their time "on the road" --
traveling to each Home Building division to work with our local management to
determine the ideal product for a particular area and neighborhood.
In fiscal 1996, our homes ranged in size from approximately 1,200 to 4,000
square feet. Although the range of our home sales prices was about $69,000 to
$577,000, the average price of a Centex home was around $163,900.
Overall, our architects are focusing on new product design that is more
efficient in terms of both material and labor costs while still meeting our
customers' preferences. At Centex's unit volume level, even a small cost
savings can have substan-
10
<PAGE> 13
HOME BUILDING
CENTEX HOMES - 1996 CLOSING BY REGION
[MAP OF UNITED STATES]
West 2,347 20%
- --------------------------
Midwest 1,276 11%
- --------------------------
East 2,804 23%
- --------------------------
Southeast 2,241 19%
- --------------------------
Southwest 3,302 27%
- --------------------------
Total 11,970 100%
==========================
tial leverage. A 1% reduction in cost -- $1,000 on an average home at current
volume levels -- will result in $12 million of additional pretax income.
Controlling our growth. Over the past quarter of a century, Centex Homes has
built an organization with significant core operating strengths. Our management
structure has enabled Centex Homes to achieve controlled expansion, resulting
in the wide geographic diversity that has diminished our financial dependence
on any one geographic market. This has enabled us to prosper despite various
regional downturns, the most notable of which have been the Texas, and recently
the California, recessions. Home building is a local business and because many
of the critical decisions are made in the market itself, we have developed the
ability to effectively manage a large number of decentralized, relatively
diverse, entrepreneurial business units.
Centex Homes also has learned how to quickly and accurately position
and reposition assets among geographic markets and different product segments
within a market. We have developed an expertise in skill-based training that
enables our people to improve both technical and management skills in every
aspect of the developing, building and selling processes. Last but certainly
not least, we work continously to perform in a manner that supports our goals
of improved execution and financial performance.
The housing industry has changed dra-
11
<PAGE> 14
HOME BUILDING
matically during the past decade. Previously it was a transaction-oriented
business in which countercyclical positioning and cyclical inflation brought
substantial gain. Today, it can generate acceptable returns only through
optimizing volumes, lowering costs and developing unique competitive
advantages. Segmentation and differentiation strategies are becoming ever more
critical. Centex Homes must attempt to further segment the home building
market--not only to satisfy the ever changing needs of the population but also
to distinguish itself from the competition.
Different demographics. We continue to be convinced of the many potential
opportunities associated with the changing demographics, particularly the
aging of the population. During fiscal 1996, we completed our first
cared-based facility designed especially for residents with Alzheimer's
disease. We currently are attempting to locate sites for additional such
facilities, known as Kensington Cottages. In addition, expansion into the
active retiree (non-golf) market as well as into the affordable housing market
are segmentation strategies that play to Centex Homes' cultural and technical
strengths.
Centex's awareness of the varied housing needs of the population has
been heightened over the past several years by our participation in Habitat for
Humanity. Under the leadership of Centex Homes and in conjunction with Habitat,
employees from every part of Centex Corporation nationwide have, with the help
of our subcontractors, collectively built and donated more than 100 homes to
families who otherwise would not be able to afford them. By the year 2000, our
goal is to have built a total of 200 homes with a projected value of
approximately $10 million.
In another initiative, seeking to take better advantage of our Home
Building asset base and customer relationships, as well as to develop a
non-cyclical, recurring revenue
HOUSING ACTIVITY BY GEOGRAPHIC AREA
<TABLE>
<CAPTION>
Closings
Year Ended 3/31/96 3/31/95
- ----------------------------------------------------
<S> <C> <C>
West 2,347 2,454
Midwest 1,276 1,283
East 2,804 2,921
Southeast 2,241 2,632
Southwest 3,302 3,674
- ----------------------------------------------------
11,970 12,964
====================================================
<CAPTION>
Sales (Orders) Backlog
As of 3/31/96 3/31/95
- ----------------------------------------------------
<S> <C> <C>
West 980 603
Midwest 652 442
East 1,121 918
Southeast 1,106 892
Southwest 1,674 1,132
- ----------------------------------------------------
5,533 3,987
====================================================
<CAPTION>
Sales (Orders)
<S> <C> <C>
Year Ended 3/31/96 3/31/95
- ----------------------------------------------------
West 2,724 2,301
Midwest 1,486 1,103
East 3,007 2,560
Southeast 2,455 2,137
Southwest 3,844 3,055
- ----------------------------------------------------
13,516 11,156
====================================================
</TABLE>
12
<PAGE> 15
HOME BUILDING
stream, we formed Centex Home Services Company. This new subsidiary has
acquired the operating assets of two entities that will enable Centex to enter
the security and pest control businesses. Initially we will offer these
services only to buyers of Centex Homes, but eventually we want to market these
products and services to other builders for their customers. Longer-term plans
involve expanding the service package.
Growth has been a consistent theme in Centex Homes for the past quarter
of a century. While the lateness of the economic cycle will slow the pace of
Homes' geographic expansion, there are still many untapped market
opportunities, particularly in the Northeast, Midwest and Mountain states,
which we may consider for the next cycle. A potential expansion area will be
into smaller markets that often offer opportunities for higher margins and
returns on smaller volumes and entail less capital exposure than larger
markets.
Right in the Neighborhood. We will continue to grow in a disciplined manner,
matching asset growth with a focus on performance at the division and
neighborhood level. In fact, improving the returns in each individual
neighborhood is the most critical element of our efforts to improve our
financial performance. In addition, we'll expand at a pace that doesn't unduly
sacrifice current or near-term returns for the sake of future returns.
We enter fiscal 1997 with a high backlog of sold, but not yet delivered,
homes and a renewed focus on the necessity of increasing our margins. Our
current concentration on margin improvement is of paramount importance because
Centex Homes, along with most of the rest of the home building industry, has not
been able to achieve the levels of returns on assets that were reached during
previous cycles. Competitive factors have limited the industry's ability to
raise prices sufficiently to cover rapidly rising material and labor costs.
Although recent increases in lumber prices are troubling, the current slowing of
cost increases in other areas should permit continued margin improvement.
The signals of the future of the economy have been mixed, but job
growth, which, together with interest rate levels, are the primary drivers of
housing demand, continues at a high level, increasing confidence in the
division's near-term prospects. We have also begun to see the first signs of
recovery in the California markets where Centex Homes has invested substantial
portion of its assets and has a significant market presence. While it is too
soon to gauge the extent of this recuperation, any measurable improvement in
the California home building market would have a positive impact on our Home
Building earnings.
It is impossible to know if or when the future may hold a severe
recession or even a mild slowing of economic growth. Should the economy
rebound, our conservative position may cause us to forgo some nearer-term
profit opportunities. But experience has shown that it is better to be in a
short rather than a long land position, particularly when land and home sales
prices are not inflating rapidly.
Whatever the economic scenario, higher returns will come only to those
who are positioned to take advantage of opportunities when they are presented
- -- or to create propitious circumstances when they are not. We believe that
Centex Homes is prepared to do both.
13
<PAGE> 16
INNER FACE
Creatively combine information systems with
interpersonal capabilities to build relationships
[PHOTO]
Becky Padilla
14
<PAGE> 17
Financial Services
[CHART] [CHART]
REVENUES ($ IN MILLIONS) OPERATING EARNINGS ($ IN MILLIONS)
92 ................... $102 92 ................... $21.6
93 ................... $147 93 ................... $50.9
94 ................... $203 94 ................... $73.6
95 ................... $107 95 ................... $ 9.4
96 ................... $130 96 ................... $17.2
BECKY PADILLA
Corporate Underwriter
A major factor in cost reduction efforts, technology utilization has enabled
CTX Mortgage to consolidate in the corporate office functions previously
performed in the branches. The loans Becky underwrites each day may come from
any one of our 130 offices.
Financial Services revenues were $129.6 million in fiscal 1996, 21% above
$106.8 million in 1995. o Mortgage Banking's 1996 per loan margin of $412
increased ten-fold over 1995's margin, and operating earnings rebounded to
$17.2 million versus $1.5 million in 1995. Total Financial Services earnings
for 1995, including results from our former Savings and Loan, were $9.4
million. o 1996 loan originations rose 12% to 41,596 from 37,051 originations
last year. o Originations for Centex Homes totaled 8,445, about the same as
last year, but retail originations of 33,151 were 16% higher than in 1995.
o 1996 loan applications totaled 47,763, 31% over 36,487 applications last year.
In 1996, Centex Homes applications rose 35% to 10,049 and retail applications
of 37,714 were up 30%.
15
<PAGE> 18
FINANCIAL SERVICES
The Centex Financial Services Group weathered an unusually volatile interest
rate environment in fiscal 1994-1995, emerging in 1996 as a more experienced
entity--financially strong, operationally sound and opportunistically oriented.
Fiscal 1996 was a welcome year of stabilization and re-focus for Financial
Services, which includes CTX Mortgage Company; title, insurance and escrow
operations; and Nova Mortgage Credit Corporation.
CTX Mortgage generated significant earnings during the early 1990s,
particularly in fiscal 1994, as its rapidly expanding branch office network
took advantage of the record mortgage volumes spawned by low interest rates.
But CTX experienced a painful retrenchment in 1995 as multiple interest rate
increases halted the refinancing boom. Most industry players also had expanded
during the "refi high," intensifying the competition for shrinking mortgage
volumes. As market consolidation and competition persisted in fiscal 1996, CTX
concentrated its efforts on achieving efficiencies at every step of the loan
process, seeking to become a low-cost producer of mortgage banking services.
A full service provider. CTX originates, packages, securitizes and sells all of
its mortgage loans in the secondary market, simultaneously selling the
servicing rights. CTX originally was established to provide mortgages for
buyers of Centex Homes, and its geographic growth has generally paralleled that
of the home builder. Today, more than 70% of Centex Homes buyers nationwide
choose CTX as their mortgage provider. These "builder" loans account for about
20% of CTX's total loan volume, but they are CTX's most profitable loans due to
lower production costs and a higher average loan amount. Centex Homes remains
CTX Mortgage's largest customer and increasing this "builder" business
continues to be a major CTX priority.
Because it has been able to attract and retain many high production loan
officers for its third-party business, CTX also has a strong retail mortgage
culture. Based on retail production (company-originated mortgages), CTX
currently ranks eighth in the nation but is second largest among independent
(non-bank-affiliated) retail originators.
During fiscal 1996, CTX originated 41,596 loans valued at approximately
$4.9 billion. At this volume level, even small changes in financial variables
can have significant impact. Currently, a $100 decrease in per unit loan
origination costs would generate more than $4 million of incremental earnings.
Therefore, reducing its loan origination costs is a primary focus for CTX.
Technology utilization plays a major role in that effort and CTX
aggressively applies systems technology to its business. Combined with new work
approaches, this technology has facilitated corporate office consolidation of
some functions previously performed at the branches. The growing sophistication
of CTX's systems will make it possible to re-expand production in its office
network without adding extensive field overhead or corporate office management.
Shortly after fiscal year end, Financial Services continued to enhance its
systems capabilities by acquiring two mortgage service providers, one of which
specializes in quality control services and the other in automated loan
processing services that substantially reduce costs. These entities currently
serve other mortgage companies.
16
<PAGE> 19
FINANCIAL SERVICES
[CHART]
MORTGAGE BANKING
VALUE OF LOANS
($ in billions)
92 ................... $ 2.5
93 ................... $ 4.2
94 ................... $ 6.4
95 ................... $ 4.2
96 ................... $ 4.9
As it seeks new channels of originations, CTX has begun marketing its
capabilities to other home builders through controlled business arrangements
(CBAs), forming new entities to provide mortgage banking services to other
builders.
During fiscal 1996, CTX continued to follow the policy it initiated two
years ago of increasing lending to low- to medium-income families. CTX's
program sensitizes its loan officers to the specific mortgage credit
considerations of low-income communities and encourages officers to solicit
loans in these areas. In addition, CTX currently is participating in the FNMA
(Federal National Mortgage Association) test programs targeting potential home
buyers in underserved communities. CTX also is successfully increasing its
business within the various minority communities. During calendar 1995, CTX's
approval rate for loans to all minorities rose to 81% from 74% in 1994.
Other home-buyer related services in the Centex Financial Services Group
include title insurance, escrow, and hazard insurance operations, primarily for
Centex Homes customers. During fiscal 1996, our Centex Title Company in Texas
purchased San Antonio's largest title operation--Commerce Land Title-- and
our 16 Texas title locations now operate under the Commerce name. Metropolitan
Title and Guaranty Company operates in 10 Florida markets. Centex Escrow
Company has two offices in Washington state, and CTX Insurance Company's
information systems enable it to offer homeowner, automobile, boat and personal
insurance policies to customers in 18 states.
Formed in fiscal 1995, Nova Mortgage Credit Corporation offers "B" and "C"
mortgages to home buyers whose credit histories prevent them from qualifying
for CTX's "A" mortgages. The demand for such mortgages is increasing due to
rising consumer debt and the increased ability of issuers to securitize and
sell the resulting financial instruments. Nova, which also offers home equity
loans, currently is establishing a retail branch network of offices due to open
during fiscal 1997.
A bright future. Centex Financial Services has created a substantial presence
in its markets, and the high-return characteristics of the business are an
excellent blend with the capital-intensive nature of our Home Building
business. With increasing mortgage applications, its focus on cost reduction
and its important new technological capabilities, CTX should have an excellent
year in fiscal 1997. Beyond that, Financial Services represents one of Centex's
most important, and potentially most lucrative, opportunities.
17
<PAGE> 20
INNER CHANGE
Aggressively reorganize our internal structure of people and companies to
capitalize on our skills, talents and experience
[PHOTO]
Juan Rodriguez
18
<PAGE> 21
CONTRACTING AND
CONSTRUCTION SERVICES
[CHART] [CHART]
REVENUES ($ in millions) OPERATING EARNINGS ($ in millions)
92 ................... $ 865 92 ................... $9.3
93 ................... $ 783 $3.7*/$5.6**
94 ................... $ 967 93 ................... $ .4
95 ................... $1,060 ($4.1)*/$4.5**
96 ................... $ 984 94 ................... $ --
($4.5)*/$4.5**
95 ................... $3.0
($1.8)*/$4.8**
96 ................... ($ .1)
($5.0)*/$4.9**
* Operating Earnings (Losses)
** Investment Earnings on Cash
Flow over Equity (Eliminated
in Consolidation)
Contracting and Construction Services revenues for fiscal 1996 were $983.5
million, a 7% decline from revenues of $1.06 billion in 1995. The division
reported an operating loss of $5.0 million for 1996 versus a $1.8 million loss
in 1995. The 1996 loss was impacted by the suspension of a contract to build
Harrah's Jazzville Casino in New Orleans, Louisiana, resulting from a
bankruptcy filing by the casino's developer. Contracting and Construction
Services was awarded new contracts totaling $857.0 million in 1996, a 25%
decline from $1.15 billion of new work received in 1995. The backlog of
uncompleted contracts at March 31, 1996 was $1.20 billion, slightly less than
the $1.33 billion backlog reported at March 31, 1995.
JUAN RODRIGUEZ
Assistant Project
Engineer
The Centex Construction Group's internal restructuring will align the Group's
unique strengths more closely with the needs of the marketplace. Juan utilizes
his special experience and expertise throughout the construction of a much
needed medical center.
19
<PAGE> 22
CONTRACTING AND
CONSTRUCTION SERVICES
Fiscal 1996 was another challenging year for the Centex Construction Group as
the division posted its fourth consecutive annual operating loss. The loss was
due primarily to several underpriced projects and to the unexpected suspension
of a subsidiary's contract to build Harrah's Jazzville Casino in New Orleans,
Louisiana. Although the Construction Group's backlog level was high throughout
the year, operating margins on work performed remained low due to the intensely
competitive market.
Industry margins have been under pressure since the early 1990's when less
non-residential construction coupled with federal budgetary constraints
severely reduced the supply of available work. The non-residential market began
recovering in 1994 but project margins are still below prior cyclical peak
levels. Some of Centex's recent problems are related to lower-margin contracts
of several years' duration taken during the depressed period.
Despite the Group's earnings problems, many improvements have occurred in
the division in recent years. The Group's more unified corporate identity
enables it to successfully approach markets across intercompany lines and
develop industry-specific marketing initiatives. The Group also has centralized
its information systems and accounting functions and innovatively trimmed
insurance and other operating costs.
Restructuring for strength. As the fiscal year drew to a close, the
Construction Group embarked on a major organizational restructuring designed to
make best and most immediate use of the Group's existing strengths and position
it for both profitability and growth. The results of this effort include fewer
operating entities, lower operating costs and a more focused alignment of the
Group's strengths with the needs and opportunities in the marketplace.
The first step in the restructuring included adding a new President/Chief
Executive Officer and employing a Chief Operating Officer for the Group's
senior management team, as well as hiring a new Chairman/Chief Executive
Officer for one of the major operating companies. Each of these senior
executives has exceptional experience and expertise, and we are certain their
leadership, together with existing management, will provide strong direction
for the Group.
Due to the restructuring, San Diego-based Centex Golden is now an
operating arm of Nashville, Tennessee-based Centex Rodgers, which has generated
consistent profitability as a leader in the private healthcare construction
arena. The consolidated entity will utilize the Group's greatest national
strength--healthcare construction services-- to expand in California and to
further extend its business activity in Texas and Virginia.
As evidence of the Group's healthcare services strength and reputation,
Centex-Rodgers recently established a joint venture with AIM Systems in
Detroit, Michigan, known as Centex-Aim. This new entity was awarded the first
project it proposed, a $26.5 million hospital in Michigan.
The Group restructuring also is merging Virginia-based Centex Simpson with
Centex Bateson in Dallas to form a new entity: Centex Construction Company. It
will be headquartered in Dallas and maintain a substantial presence in the
Washington, D.C. area. Centex Landis in New Orleans also will become part of
Centex Construction Company, probably by calendar year end.
20
<PAGE> 23
CONTRACTING AND
CONSTRUCTION SERVICES
The new entity will combine our historically strong estimating and
operational forces to lead the Group's bidding effort on all hard-bid,
fixed-price construction projects. We also employ many talented people whose
expertise is in private, negotiated contracting, and Centex Construction
Company's ultimate objective is to be an organization that performs a balance
of negotiated and hard-bid work.
Opportunities abound. Centex Rooney employees have developed substantial
expertise in the education, corrections and hospitality markets, each of which
could represent a national opportunity for us as does our healthcare
construction expertise. Centex Rooney also has substantial market share in many
other construction segments in its home state of Florida. Tennessee-based
Centex Forcum Lannom will continue to specialize in the industrial contracting
field and in providing value-added engineering services.
There appear to be many opportunities to utilize the Group's abilities and
experience to enter higher-value-added businesses with better margins. Some
owners now request design/build services including development assistance.
Complex projects such as these create greater opportunity for higher margins.
The future of the Harrah's casino project remains unsettled. Efforts to
reorganize the casino project had gained substantial momentum but were stalled
recently when the State of Louisiana enacted legislation giving voters the
local option to approve gambling. The casino should be reorganized assuming
that, as expected, there is a favorable vote on the gambling issue in New
Orleans parish in November. Any such financial reorganization is expected to
include the payment of substantially all outstanding claims of Centex and its
subcontractors.
Any major organizational restructuring requires a period of
restabilization. However, we are convinced that our strategy is the correct one
and that it will create special opportunities for the exceptional people, both
new and long-term, that make up the Centex Construction Group.
MAJOR NEW CONTRACTS - FISCAL 1996
$ 143.6 M Disney's Coronado Springs Resort, Bay Lake, FL
$ 32.0 M Texas A&M University Library, College Station, TX
$ 28.0 M Miami-Dade Community College Medical Center Addition, Miami, FL
$ 25.0 M Osceola Regional Hospital Replacement Facility, Kissimmee, FL
$ 25.0 M Western Baptist Medical Center in Paducah, KY
$ 24.7 M Multi-Cultural Performing Arts Center, Jacksonville, FL
$ 23.8 M Molina High School, Dallas, TX
$ 23.6 M International Center Tower II, Dallas, TX
$ 22.9 M Virginia Peninsula Regional Jail, James City County, VA
$ 21.5 M 482nd Fighter Wing Area, Homestead Air Force Base, Homestead, FL
$ 21.0 M Abbott Diagnostic Laboratory, Irving, TX
$ 18.2 M Processing Plant for Tyson's Foods, Union City, TN
$ 14.0 M Columbia County Courthouse, Lake City, FL
$ 11.0 M Delray Beach Mall, Delray Beach, FL
$ 10.4 M Neuroscience Medical Center Addition, Louisiana State University,
New Orleans, LA
$ 10.0 M Flagler Hospital, St. Augustine, FL
$ 9.9 M Carlsbad Seapointe Resort, Carlsbad, CA
$ 9.0 M David Anchin Center, Education Building II, University of South
Florida, Tampa, FL
$ 8.0 M Regional Service Center, Sony Corporation, Fort Lauderdale, FL
21
<PAGE> 24
INNER GINEER
Constantly improve procedures and upgrade equipment to enhance our operational
productivity and profitability
[PHOTO]
Aaron Alexander
22
<PAGE> 25
CENTEX CONSTRUCTION
PRODUCTS, INC.
[CHART] [CHART]
REVENUES ($ in millions) OPERATING EARNINGS ($ in millions)
92 ................... $135.7 92 ................... $ 1.1
93 ................... $141.2 93 ................... $ 4.6
94 ................... $172.9 94 ................... $16.6
95 ................... $194.3 95 ................... $33.8
96 ................... $222.6 $16.6*
96 ................... $52.3
Because CXP is reported on the $25.6*
equity method, its revenues are
not reflected in Centex's *Centex's 49% share
financials.
Prior to fiscal 1995, CXP was
100% owned by Centex
AARON ALEXANDER
Cement Plant
Process Relief Man
As CXP continues to focus on increased production and higher productivity at
all its facilities, the company relies on employees like Aaron whose skills
range from tending the cement kiln to manning the computerized console that
monitors all plant processes.
Early in fiscal 1995, Centex Corporation's formerly wholly-owned subsidiary,
Centex Construction Products, Inc. (CXP), sold 51% of its stock in an Initial
Public Offering, becoming a separate, publicly-held company. Centex's 49% share
of CXP's operating earnings, which is reported on the equity basis, was $25.6
million in fiscal 1996, 55% over $16.6 million in 1995. Record profits in
Cement and Wallboard and significant improvement in Concrete and Aggregates
produced the all-time-high operating earnings. Increased Cement and Wallboard
production, improved Cement and Concrete pricing, plus higher sales volume and
lower production costs of all CXP products contributed to 1996's peak operating
margin of 25% versus 19.3% in 1995.
23
<PAGE> 26
CENTEX CONSTRUCTION PRODUCTS, INC.
A dual focus on profitability and productivity, aided by economic expansion and
increased construction spending, enabled CXP to report the best performance in
its 32-year history in fiscal 1996. Benefitting from increased sales volumes and
higher operating margins, each CXP operation--Cement, Gypsum Wallboard, and
Concrete and Aggregates--contributed to the record achievement.
At capacity and sold out. As a result of robust construction activity, CXP's
four Cement plants, located in Nevada, Wyoming, Illinois and Texas, operated at
capacity for the eighth consecutive year and were "sold out." Total Cement sales
volume of 2.1 million tons, including 185,000 tons of cement purchased in order
to meet demand, was an all-time high. Cement prices rose 6% over 1995, due to an
improving balance of supply and demand, while production costs remained stable
as the benefits of higher clinker production offset other cost increases.
CXP's Gypsum Wallboard facilities in the Bernalillo and Albuquerque, New
Mexico area also operated at capacity during 1996. Wallboard sales volume was a
record 661 million square feet, 13% above 1995 volume, due mostly to 38% higher
production at the Albuquerque facility. The 1996 sales price declined slightly
from 1995, due to less construction activity in certain markets, expanding
industry production capacity, and more competition due to increased distribution
of wallboard in markets where pricing was higher. Unit operating margins rose
46% due primarily to lower production costs.
Concrete and Aggregates' 1996 operating earnings rose 115% over 1995 on 13%
higher revenues, due to both products' increased sales volume and Concrete's
lower production costs and improved sales prices. Concrete sales volumes
benefitted from favorable weather in Texas and Northern California. Average
Aggregates pricing declined slightly due to increased sales of lower-priced
Aggregates in Texas and Northern California.
Key to CXP's success is ongoing implementation of innovative capital
projects that improve operating efficiency at its facilities. In fiscal 1996,
aided by a $400,000 grant from the Illinois Department of Natural Resources,
CXP's Illinois Cement operation installed a tire-derived (TDF) system as a
low-cost source of kiln fuel. This alternative combines CXP's strategy of
cost-efficient production with the public's increasing interest in energy
conservation and natural resource recovery.
At the Albuquerque Wallboard plant, a complete modernization of the process
control technology was completed, resulting in increased production volumes,
improved product quality and lower production costs at the 35-year-old facility.
An acquisitive nature. CXP, the only publicly traded company with a unique
blend of cement and gypsum products, is at its strongest point yet, both
operationally and financially. It has excellent management and is achieving
high returns during the current cyclical period. Now virtually debt-free, the
company is ready to expand through acquisition and continues to search for
opportunities that will enable it to reach its goals and provide higher returns
for its stockholders. Assuming the economy remains relatively stable, fiscal
1997 should be another year of record profitability for CXP.
24
<PAGE> 27
FINANCIAL
INFORMATION
25
<PAGE> 28
CENTEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED REVENUES AND OPERATING EARNINGS BY LINE OF BUSINESS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
REVENUES
Home Building $1,989,929 $2,110,735 $1,869,754 $1,433,062 $1,061,886
64% 65% 61% 61% 52%
Financial Services 129,546 106,841 203,393 147,041 101,751
4% 3% 7% 6% 5%
Contracting and Construction
Services 983,512 1,059,928 966,562 783,222 865,009
32% 32% 32% 33% 43%
---------- ---------- ---------- ---------- ----------
$3,102,987 $3,277,504 $3,039,709 $2,363,325 $2,028,646
========== ========== ========== ========== ==========
100% 100% 100% 100% 100%
OPERATING EARNINGS
Home Building $ 106,695 $ 112,149 $ 95,977 $ 79,850 $ 55,177
74% 83% 53% 62% 68%
Financial Services 17,155 9,399 73,550 50,854 21,582
12% 7% 41% 40% 27%
Contracting and Construction
Services (4,995) (1,790) (4,500) (4,103) 3,742
(3%) (1%) (2%) (3%) 5%
Other, net (866) (1,608) (1,799) (4,262) (840)
(1%) (1%) (1%) (3%) (1%)
Equity in Earnings of Affiliate
(CXP) 25,628 16,577 16,626 4,648 1,138
18% 12% 9% 4% 1%
---------- ---------- ---------- ---------- ----------
OPERATING EARNINGS 143,617 134,727 179,854 126,987 80,799
100% 100% 100% 100% 100%
Corporate General and
Administrative 14,969 15,253 15,158 13,120 12,807
Interest 40,862 33,014 29,683 22,108 22,140
---------- ---------- ---------- ---------- ----------
EARNINGS BEFORE GAIN ON
CXP'S INITIAL PUBLIC
OFFERING AND INCOME TAXES 87,786 86,460 135,013 91,759 45,852
Gain on CXP's Initial Public
Offering -- 59,328 -- -- --
---------- ---------- ---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES $ 87,786 $ 145,788 $ 135,013 $ 91,759 $ 45,852
========== ========== ========== ========== ==========
</TABLE>
Applicable segment overhead costs have been deducted from lines of business
earnings.
26
<PAGE> 29
CENTEX CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
----------------------------------------
1996 1995 1994
---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
REVENUES
Home Building $1,989,929 $2,110,735 $1,869,754
Financial Services 129,546 106,841 203,393
Contracting and Construction Services 983,512 1,059,928 966,562
---------- ---------- ----------
3,102,987 3,277,504 3,039,709
---------- ---------- ----------
COSTS AND EXPENSES
Home Building 1,883,234 1,998,586 1,773,777
Financial Services 112,391 97,442 129,843
Contracting and Construction Services 988,507 1,061,718 971,062
Other, net 866 1,608 1,799
Equity in Earnings of Affiliate (CXP) (25,628) (16,577) (16,626)
Corporate General and Administrative 14,969 15,253 15,158
Interest 40,862 33,014 29,683
---------- ---------- ----------
3,015,201 3,191,044 2,904,696
---------- ---------- ----------
EARNINGS BEFORE GAIN ON CXP'S INITIAL PUBLIC OFFERING
AND INCOME TAXES 87,786 86,460 135,013
Gain on CXP's Initial Public Offering -- 59,328 --
---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES 87,786 145,788 135,013
Income Taxes 34,421 53,540 49,851
---------- ---------- ----------
NET EARNINGS $ 53,365 $ 92,248 $ 85,162
========== ========== ==========
EARNINGS PER SHARE $ 1.83 $ 3.04 $ 2.60
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
27
<PAGE> 30
CENTEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
CENTEX CORPORATION AND
SUBSIDIARIES
-------------------------
MARCH 31,
-------------------------
1996 1995
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 14,042 $ 23,785
Receivables --
Residential Mortgage Loans 629,756 413,802
Construction Contracts 199,232 177,075
Trade, including Notes of $8,531 and $4,898 81,571 58,720
Affiliates -- --
Inventories --
Housing Projects 1,055,478 1,087,542
Land Held for Development and Sale 149,972 78,929
Investments --
Centex Construction Products, Inc. 106,504 89,871
Centex Development Company, L.P. 36,866 46,585
Joint Ventures and Other 3,804 5,695
Unconsolidated Subsidiaries -- --
Property and Equipment, net 37,139 41,267
Other Assets and Deferred Charges 22,602 26,427
---------- ----------
$2,336,966 $2,049,698
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Liabilities $ 614,241 $ 555,944
Short-term Debt 662,267 576,260
Long-term Debt, including $100 million maturing May 1996 321,002 222,530
Deferred Income Taxes 16,620 26,737
Stockholders' Equity --
Preferred Stock, Authorized 5,000,000 Shares, None Issued -- --
Common Stock, $.25 Par Value; Authorized 50,000,000 Shares;
Issued and Outstanding 28,425,851 and 28,070,978 Shares 7,107 7,018
Capital in Excess of Par Value 6,814 --
Retained Earnings 708,915 661,209
---------- ----------
Total Stockholders' Equity 722,836 668,227
---------- ----------
$2,336,966 $2,049,698
========== ==========
</TABLE>
See notes to consolidated financial statements.
28
<PAGE> 31
CENTEX CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CENTEX CORPORATION FINANCIAL SERVICES
------------------------- ---------------------
MARCH 31, MARCH 31,
------------------------- ---------------------
1996 1995 1996 1995
---------- ---------- -------- --------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
$ 11,897 $ 18,534 $ 2,145 $ 5,251
-- -- 629,756 413,802
199,232 177,075 -- --
59,429 49,669 22,142 9,051
-- -- (1,267) 65,521
1,055,478 1,087,542 -- --
149,972 78,929 -- --
106,504 89,871 -- --
36,866 46,585 -- --
3,804 5,695 -- --
38,366 29,082 -- --
25,413 25,341 11,726 15,926
14,767 19,739 7,835 6,688
---------- ---------- -------- --------
$1,701,728 $1,628,062 $672,337 $516,239
========== ========== ======== ========
$ 554,554 $ 504,659 $ 59,687 $ 51,285
87,251 204,851 575,016 371,409
321,002 222,530 -- --
16,085 27,795 535 (1,058)
-- -- -- --
7,107 7,018 2 12
6,814 -- 37,917 51,908
708,915 661,209 (820) 42,683
---------- ---------- -------- --------
722,836 668,227 37,099 94,603
---------- ---------- -------- --------
$1,701,728 $1,628,062 $672,337 $516,239
========== ========== ======== ========
</TABLE>
In the supplemental data presented above, "Centex Corporation" means the
basis of presentation as described in Note A to the consolidated financial
statements, and "Financial Services" means CTX Mortgage Company and Affiliates.
Transactions between Centex Corporation and Financial Services have been
eliminated from the Centex Corporation and Subsidiaries balance sheets.
29
<PAGE> 32
CENTEX CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
-------------------------------------
1996 1995 1994
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS -- OPERATING ACTIVITIES
Net Earnings $ 53,365 $ 92,248 $ 85,162
Adjustments --
Depreciation, Depletion and Amortization 12,499 6,438 19,640
Deferred Income Taxes (6,542) (4,285) (7,760)
Gain Related to CXP's IPO, net of Tax -- (37,495) --
Equity in Earnings of CXP, CDC and Joint Ventures (16,603) (9,827) (3,387)
Increase in Receivables (42,503) (10,813) (21,965)
(Increase) Decrease in Residential Mortgage Loans (215,954) 263,718 (87,048)
Decrease (Increase) in Inventories 55,463 (92,255) (201,539)
Decrease in Government -- Guaranteed S&L Assets -- 43,767 39,056
Increase (Decrease) in Payables and Accruals 46,772 (56,866) 91,864
Decrease (Increase) in Other Assets 2,915 5,234 (4,190)
Other, net (4,011) (20,167) (13,859)
--------- --------- ---------
(114,599) 179,697 (104,026)
--------- --------- ---------
CASH FLOWS -- INVESTING ACTIVITIES
Decrease (Increase) in Advances to CDC and Joint
Ventures 11,580 24,334 (2,747)
Acquisition of Vista Properties (85,422) -- --
Dividend and Other Receipts Related to CXP's IPO -- 186,525 --
Property and Equipment Additions, net (7,025) (10,552) (31,936)
Decrease in Marketable Securities -- 78,241 32,075
--------- --------- ---------
(80,867) 278,548 (2,608)
--------- --------- ---------
CASH FLOWS -- FINANCING ACTIVITIES
(Decrease) Increase in S&L Deposits and Debt -- (211,055) 6,915
Increase (Decrease) in Debt 184,479 (207,012) 144,859
Retirement of Common Stock -- (89,093) --
Proceeds from Stock Option Exercises 6,903 2,320 11,386
Dividends Paid (5,659) (5,907) (6,304)
--------- --------- ---------
185,723 (510,747) 156,856
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH (9,743) (52,502) 50,222
CASH AT BEGINNING OF YEAR 23,785 76,287 26,065
--------- --------- ---------
CASH AT END OF YEAR $ 14,042 $ 23,785 $ 76,287
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
30
<PAGE> 33
CENTEX CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CAPITAL IN
PREFERRED COMMON EXCESS OF RETAINED
STOCK STOCK PAR VALUE EARNINGS TOTAL
--------- ------ ---------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance, March 31, 1993 $ -- $7,785 $ 15,376 $555,254 $578,415
Exercise of Stock Options -- 131 11,255 -- 11,386
Net Earnings -- -- -- 85,162 85,162
Cash Dividends -- -- -- (6,304) (6,304)
------- ------- --------- -------- --------
Balance, March 31, 1994 -- 7,916 26,631 634,112 668,659
Exercise of Stock Options -- 36 2,284 -- 2,320
Retirement of 3,737,500 Shares -- (934) (28,915) (59,244) (89,093)
Net Earnings -- -- -- 92,248 92,248
Cash Dividends -- -- -- (5,907) (5,907)
------- ------- --------- -------- --------
Balance, March 31, 1995 -- 7,018 -- 661,209 668,227
EXERCISE OF STOCK OPTIONS -- 89 6,814 -- 6,903
NET EARNINGS -- -- -- 53,365 53,365
CASH DIVIDENDS -- -- -- (5,659) (5,659)
------- ------- --------- -------- --------
Balance, March 31, 1996 $ -- $7,107 $ 6,814 $708,915 $722,836
======= ====== ========= ======== ========
</TABLE>
See notes to consolidated financial statements.
31
<PAGE> 34
CENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(A) SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Centex
Corporation and subsidiaries (Centex or the company) after the elimination of
all significant intercompany balances and transactions.
Balance sheet data are presented in the following categories:
-- Centex Corporation and Subsidiaries. This represents the adding together
of Centex Corporation, Financial Services and all of their consolidated
subsidiaries. The effects of transactions among related companies within
the consolidated group have been eliminated.
-- Centex Corporation. This information is presented as supplemental
information and represents the adding together of all subsidiaries other
than those included in Financial Services (CTX Mortgage and Affiliates)
which are presented on an equity basis of accounting.
-- Financial Services. This represents CTX Mortgage and Affiliates.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenue from housing projects is recognized as homes are sold and title
passes. Earnings from sale of mortgage servicing rights and from loan
origination fees are recognized when the related loan is sold and delivered to
third-party purchasers.
Long-term construction contract revenues are recognized on the
percentage-of-completion method based on the costs incurred relative to total
estimated costs. Full provision is made for any anticipated losses. Billings for
long-term construction contracts are rendered monthly, including the amount of
retainage withheld by the customer until contract completion. As a general
contractor, the company withholds similar retainages from each subcontractor.
Retainages of $69 million included in construction contracts receivable and $63
million included in accounts payable at March 31, 1996 are generally receivable
and payable within one year.
Claims are recognized as revenue only after management is confident of
collection or when agreement has been reached with the customer.
Notes receivable at March 31, 1996 are collectible primarily over four
years, with $2.6 million being due within one year. The weighted average
interest rate at March 31, 1996 was 8.3%.
INVENTORY, CAPITALIZATION AND SEGMENT EXPENSES
Housing projects and land held for development and sale are stated at the
lower of cost (including direct construction costs and capitalized interest and
real estate taxes) or market. The capitalized costs, other than interest, are
included in Home Building costs and expenses in the statement of consolidated
earnings as related revenues are recognized. Interest costs relieved from
inventories are included as interest expense. General operating expenses
associated with each segment of business are expensed as incurred and are
included in the appropriate segment of business.
32
<PAGE> 35
CENTEX CORPORATION AND SUBSIDIARIES
JOINT VENTURES
Earnings or losses of joint ventures are not significant and are included
in the appropriate segment of business revenues. Investments in non-controlled
joint ventures are carried on the equity method in the consolidated balance
sheets.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major renewals and improvements
are capitalized and depreciated. Repairs and maintenance are expensed as
incurred. Depreciation is provided on a straight-line basis over the estimated
useful lives of depreciable assets. Costs and accumulated depreciation
applicable to assets retired or sold are eliminated from the accounts and any
resulting gains or losses are recognized at such time.
EARNINGS PER SHARE
Earnings per share are based on the weighted average number of common and
common equivalent shares outstanding in 1996, 1995 and 1994 of 29,090,919;
30,326,906 and 32,789,852, respectively.
RESIDENTIAL MORTGAGE LOANS RECEIVABLE
Residential mortgage loans of $629.8 million at March 31, 1996 are stated
at the lower of aggregate cost or market. Market is determined based on forward
sale commitments. Substantially all of the mortgage loans are sold forward upon
closing and subsequently delivered to third-party purchasers within 60 days
thereafter. Due to the fact that defaults of new loans within the first 60 days
are not material, no significant reserves are required.
OFF-BALANCE-SHEET RISK
CTX Mortgage enters into various financial agreements, in the normal course
of business, in order to manage the exposure to changing interest rates as a
result of having issued loan commitments to its customers at a specified price
and period, and committing to sell mortgage loans to various investors. CTX
Mortgage had commitments to mortgagors of approximately $218 million and
commitments to sell to investors against these loan commitments of approximately
$196 million at March 31, 1996.
The company does not engage in the trading of securities or other financial
instruments.
STATEMENTS OF CONSOLIDATED CASH FLOWS -- SUPPLEMENTAL DISCLOSURES
Interest expenses relating to the financial services operations (Mortgage
Banking and Savings and Loan) are included in their respective costs and
expenses. Interest related to non-financial services operations are included as
interest expense as summarized below:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Total Interest Incurred............................ $ 69,724 $ 58,771 $ 68,856
Less -- Financial Services......................... (28,862) (25,757) (39,173)
-------- -------- --------
Interest Expense................................... $ 40,862 $ 33,014 $ 29,683
======== ======== ========
</TABLE>
Net payments made for federal, state and foreign income taxes during the
fiscal years ended March 31, 1996, 1995 and 1994 were $28.0 million, $49.8
million, and $41.9 million, respectively.
33
<PAGE> 36
CENTEX CORPORATION AND SUBSIDIARIES
STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 121, issued in March 1995,
establishes methods of accounting for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used, and for long-lived assets and certain identifiable intangibles to
be disposed of. This Statement will be implemented on April 1, 1996 and will not
have a material impact on the company's financial statements.
Statement of Financial Accounting Standards No. 122, issued in May 1995,
eliminates the accounting distinction between mortgage servicing rights acquired
through loan origination and those acquired through purchase. This standard was
adopted January 1, 1996 and did not have a material impact on the company's
financial statements.
Statement of Financial Accounting Standards No. 123, issued in October
1995, establishes financial accounting and reporting standards for stock-based
employee compensation plans. This Statement requires either (1) recognition of
compensation cost in the financial statements for those companies that adopt the
new fair value based method or (2) expanded disclosure of pro forma net income
and earnings per share information for those companies that retain the current
method set forth in APB Opinion 25, "Accounting for Stock Issued to Employees."
This Statement will be effective for Centex's fiscal 1997, ending March 31,
1997. The Company plans to retain the current method set forth in APB Opinion 25
and will begin the expanded disclosure in the fiscal 1997 financial statements.
(B) SAVINGS AND LOAN OPERATIONS
In December 1988, the company purchased certain assets and assumed certain
liabilities of four Texas savings and loan associations pursuant to acquisition
agreements and an assistance agreement with the Federal Savings and Loan
Insurance Corporation (FSLIC), subsequently replaced by the FSLIC Resolution
Fund (the Fund). The acquisition was made by Texas Trust, a federal stock
savings bank and subsidiary of CTX Holding, a wholly-owned subsidiary of the
company. The acquisition agreements provided for sharing by the Fund in a
portion of the tax benefits realized by Centex Corporation and indemnification
by the Fund against unassumed liabilities and claims.
In December 1994, Texas Trust and CTX Holding company executed an agreement
with the Fund which terminated the assistance agreement. In December 1994, a
non-affiliated entity purchased all of Texas Trust's branch office facilities
and assumed its deposit liabilities. Immediately after the sale, Texas Trust was
dissolved and its charter was canceled.
(C) INVESTMENT IN CXP
In April 1994, the company's construction products subsidiary, Centex
Construction Products, Inc. (CXP), completed the sale of 11.73 million shares
(51%) of its common stock in an Initial Public Offering, CXP's operations
include cement, gypsum wallboard, concrete and aggregate facilities, including
its 50% joint venture interests in its Texas and Illinois cement plants. Centex
retains a 49% ownership in CXP.
In connection with CXP's Initial Public Offering, Centex received a
dividend and other payments from CXP of $186.5 million, which was used by Centex
to reduce outstanding indebtedness. The company reports its 49% investment in
CXP on the equity method of accounting.
CXP's revenues of $166,826 for the fiscal year ended 1994 and the related
costs and expenses have been reclassified into "Equity in Earnings of Affiliate
(CXP)" in order to facilitate comparisons between the periods.
34
<PAGE> 37
CENTEX CORPORATION AND SUBSIDIARIES
Summarized financial information of CXP is presented below:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenues $222,594 $194,313 $166,826
Earnings Before Income Taxes $ 52,304 $ 33,829 $ 16,626
Net Earnings $ 33,944 $ 21,820 $ 10,240
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current Assets $ 84,023 $ 66,562
Noncurrent Assets 185,552 183,541
-------- --------
$269,575 $250,103
======== ========
LIABILITIES AND EQUITY
Current Liabilities $ 38,129 $ 35,493
Noncurrent Liabilities 14,984 31,205
Stockholders' Equity 216,462 183,405
-------- --------
$269,575 $250,103
======== ========
</TABLE>
(D) PROPERTY AND EQUIPMENT
Property and equipment cost by major category and accumulated depreciation
are summarized below:
<TABLE>
<CAPTION>
MARCH 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Land, Buildings and Improvements $ 1,837 $ 1,919
Plants, Machinery, Equipment and Other 82,539 79,592
-------- --------
84,376 81,511
Accumulated Depreciation (47,237) (40,244)
-------- --------
$ 37,139 $ 41,267
======== ========
</TABLE>
35
<PAGE> 38
CENTEX CORPORATION AND SUBSIDIARIES
(E) INDEBTEDNESS
SHORT-TERM DEBT
Balances of short-term debt were:
<TABLE>
<CAPTION>
MARCH 31,
----------------------------------------------------------------
1996 1995
------------------------------ ------------------------------
CENTEX FINANCIAL CENTEX FINANCIAL
CORPORATION SERVICES CORPORATION SERVICES
----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Banks $51,000 $ 245,000 $ 79,000 $ 196,000
Commercial Paper 35,000 -- 125,000 --
Other Financial Institutions 1,251 330,016 851 175,409
------- -------- -------- ---------
$87,251 $ 575,016 $ 204,851 $ 371,409
------- -------- -------- ---------
Consolidated Short-term Debt $662,267 $576,260
======== ========
</TABLE>
The company borrows on a short-term basis from banks under uncommitted
lines which bear interest at prevailing market rates. The weighted average
interest rates of the short-term indebtedness outstanding during fiscal 1996 and
1995 were 6.4% and 5.8%, respectively. The weighted average rates of balances
outstanding at March 31, 1996 and 1995 were 6.1% and 6.6%, respectively.
LONG-TERM DEBT
Balances of long-term debt were:
<TABLE>
<CAPTION>
MARCH 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Senior Notes, 9.05% Due in May 1996 $100,000 $100,000
Subordinated Debentures, 8.75% to 8.8% Due in 2007 119,350 119,316
Subordinated Debenture, 7.375% Due in 2005 99,552 --
Other Indebtedness, 8.0% to 9.0% Due through 2000 2,100 3,214
-------- --------
$321,002 $222,530
======== ========
</TABLE>
Maturities of long-term debt during the next five fiscal years are: 1997,
$100,000; 1998, $0; 1999, $0; 2000, $2,100; 2001, $0.
Included in other long-term debt is a $2.1 million convertible subordinated
debenture sold in August 1985 to a corporate officer at par. The indebtedness
bears interest at prime and is convertible into 200,000 shares of the company's
common stock. In connection with this transaction, the company has guaranteed
the payment of a $2.1 million note payable to a bank by the officer.
36
<PAGE> 39
CENTEX CORPORATION AND SUBSIDIARIES
CREDIT FACILITIES
Centex maintains a $425 million revolving credit agreement expiring in
August 2000. Under the terms of the agreement, $170 million may be borrowed
directly by CTX Mortgage. There were no borrowings outstanding to Centex
Corporation or CTX Mortgage under this facility during the fiscal year ended
March 31, 1996 and 1995.
CTX Mortgage has a $300 million committed and secured mortgage warehouse
facility with a bank group, which expires in July 1998. CTX Mortgage also
maintains committed mortgage warehouse facilities of $200 million expiring
December 1996 with two investment banks. In addition, CTX Mortgage has a $100
million asset-backed commercial paper program which expires in March 1997. The
bank warehouse facility and the commercial paper program provide for limited
support by Centex, as defined, of up to a maximum of 10% of the commitments.
Under the most restricted covenants of the various debt agreements,
retained earnings of $379 million were free of restrictions at March 31, 1996.
(F) CAPITAL STOCK
SHAREHOLDER RIGHTS PLAN
In September 1986, the company adopted a Shareholder Rights Plan (Rights
Plan) pursuant to which each holder of record of a share of common stock was
granted one right for each share of common stock held. The Rights Plan was
amended in May 1988. Under the Rights Plan, as amended, each right entitles its
holder to purchase one one-hundredth of a share of a new series of preferred
stock designated Junior Participating Preferred Stock, Series D at an exercise
price of $120. The rights will become exercisable 10 days after anyone acquires
20% or more of the company's common stock, or 10 business days after anyone
commences a tender offer which, if successful, would result in such person
owning 20% or more of the company's common stock. In addition, if anyone
acquires 20% or more of the common stock (other than pursuant to certain offers
for all shares of common stock specified in the Rights Plan), or a 20% or more
holder engages in certain specified "self-dealing" transactions or combines with
the company in a reverse merger in which the company survives and its shares of
common stock are not changed, each right will entitle its holder (other than a
holder which owns 20% or more of the common stock) to purchase shares of company
common stock (or, in certain circumstances, other consideration) with a value of
twice the $120 exercise price. If, following an acquisition of 20% or more of
the common stock, the company is acquired in a merger or sells 50% of its assets
or earning power, each right will entitle its holder (other than a holder which
owns 20% or more of the common stock) to purchase common stock of the acquiring
company with a value of twice the $120 exercise price. In general, the rights
are redeemable at $.05 per right until 15 days after anyone acquires 20% or more
of the common stock. Unless earlier redeemed or extended, the rights will expire
on October 1, 1996.
37
<PAGE> 40
CENTEX CORPORATION AND SUBSIDIARIES
STOCK OPTIONS
The company has two stock option plans for directors, officers and key
employees of the company, the Centex Corporation 1987 Stock Option Plan (the
1987 Plan) and the Centex Corporation Stock Option Plan (the Centex Plan).
Option grants under the Centex Plan may not be less than the fair market value
at the date of the grant. Option grants under the 1987 Plan may be less than the
fair market value at the date of the grant. Under both plans, option periods and
exercise dates may vary within a maximum period of 10 years. A summary of the
activity in the stock option plans is presented below:
<TABLE>
<CAPTION>
NUMBER OPTION PRICE
OF SHARES RANGE PER SHARE
--------- -----------------
<S> <C> <C>
OPTIONS AT MARCH 31,
Outstanding
1996 3,025,909 $8.50 to $33.875
1995 3,406,073 $8.50 to $33.875
Exercised
1996 372,873 $8.50 to $18.4375
1995 144,670 $8.50 to $18.313
Exercisable
1996 1,544,410 $8.50 to $33.875
1995 1,630,987 $8.50 to $33.875
Available for Grant
1996 975,504
1995 977,213
</TABLE>
During fiscal 1996, options for 170,000 shares were granted and previously
granted options for 168,291 shares became available for reissue. At March 31,
1996, the company had 4,001,413 common shares reserved for stock options.
The company records proceeds from the exercise of options as additions to
common stock and capital in excess of par value. The federal tax benefit, if
any, is considered additional capital in excess of par value. No charges or
credits would be made to earnings unless options were to be granted at less than
fair market value at the date of the grant.
38
<PAGE> 41
CENTEX CORPORATION AND SUBSIDIARIES
(G) INCOME TAXES
The provision for income taxes includes the following components:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
---------------------------------
1996 1995 1994
-------- ------- --------
<S> <C> <C> <C>
Current Provision
Federal $ 41,805 $53,754 $ 52,943
State (842) 4,071 4,668
-------- ------- --------
40,963 57,825 57,611
-------- ------- --------
Deferred Provision (Benefit)
Federal (10,438) (4,570) (10,762)
State 3,896 285 3,002
-------- ------- --------
(6,542) (4,285) (7,760)
-------- ------- --------
Provision for Income Taxes $ 34,421 $53,540 $ 49,851
======== ======= ========
</TABLE>
The effective tax rate is greater than the federal statutory rate of 35% in
1996, 1995 and 1994 due to the following items:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Financial Income Before Taxes $ 87,786 $145,788 $135,013
======= ======== ========
Income Taxes at Statutory Rate $ 30,724 $ 51,025 $ 47,254
Increases (Decreases) in Tax Resulting From --
State Income Taxes, net 1,966 2,791 4,826
Statutory Depletion in Excess of Cost -- -- (912)
Tax Exempt Fund Assistance -- -- (1,238)
Other 1,731 (276) (79)
------- -------- --------
Provision for Income Taxes $ 34,421 $ 53,540 $ 49,851
======= ======== ========
Effective Tax Rate 39% 37% 37%
</TABLE>
The deferred income tax provision (benefit) results from the following
temporary differences in the recognition of revenues and expenses for tax and
financial reporting purposes:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
---------------------------------
1996 1995 1994
------- -------- --------
<S> <C> <C> <C>
Uniform Capitalization for Tax Reporting $(5,112) $ (2,377) $ (777)
Software Development Costs Expensed as Incurred 1,728 1,243 714
Equity Adjustments and Gain on CXP's Initial Public Offering (254) 21,500 --
Excess Tax Depreciation and Amortization 502 (32,389) 444
Alternative Minimum Tax (349) (507) 11,012
Interest and Real Estate Taxes Expensed as Incurred 1,736 (749) 430
Financial and Accrual Changes and Other (4,793) 8,994 (19,583)
------- -------- --------
$(6,542) $ (4,285) $ (7,760)
======= ======== ========
</TABLE>
39
<PAGE> 42
CENTEX CORPORATION AND SUBSIDIARIES
Components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
MARCH 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Deferred Tax Liabilities
Excess Tax Depreciation and Amortization $ 1,874 $ 1,372
Interest and Real Estate Taxes Expensed as Incurred 27,573 25,837
Equity Adjustments and Gain on CXP's Initial Public Offering 21,246 21,500
State Income Taxes 8,354 5,929
Consolidated Return Regulation Deferrals 6,888 6,939
Software Development Costs Expensed 3,685 1,957
All Other 8,771 5,447
-------- --------
Total Deferred Tax Liabilities 78,391 68,981
-------- --------
Deferred Tax Assets
Uniform Capitalization for Tax Reporting (19,990) (14,878)
Financial Accruals (36,127) (18,201)
All Other (5,654) (9,165)
-------- --------
Total Deferred Tax Assets (61,771) (42,244)
-------- --------
Net Deferred Tax Liability $ 16,620 $ 26,737
======== ========
</TABLE>
(H) CENTEX DEVELOPMENT COMPANY, L.P.
In March 1987, certain of the company's subsidiaries contributed to Centex
Development Company, L.P. (CDC), a newly formed master limited partnership,
properties with a historical cost basis (which approximated market value) of
approximately $76 million. CDC was formed to enable stockholders to participate
in long-term real estate development projects whose dynamics are inconsistent
with Centex's traditional financial objectives.
In November 1987, the company distributed as a dividend to its stockholders
securities relating to CDC. These securities included all of the issued and
outstanding shares of common stock of 3333 Holding Corporation and warrants to
purchase approximately 80% of the Class B units of limited partnership interest
in CDC. A wholly-owned subsidiary of 3333 Holding Corporation serves as general
partner of CDC. These securities are held by a nominee on behalf of the
stockholders and will trade in tandem with the common stock of the company until
such time as they are detached. The securities may be detached at any time by
Centex's Board of Directors but the warrants to purchase Class B units
automatically become detached in November 2007.
The partnership agreement provides that Centex, the Class A limited
partner, is entitled to a cumulative preferred return of 9% per annum on the
average outstanding balance of its unrecovered capital, defined as its initial
capital contribution, adjusted for cash distributions representing return of the
initial capital contribution. In July 1995, in conjunction with the extension of
the automatic detachment date from 1997 to 2007, Centex reduced its unrecovered
capital from $75.8 million to $47.3 million and waived all unpaid preference,
totaling $37.5 million. Unrecovered capital was reduced by an additional $10
million during fiscal 1996 through partnership distributions. No distributions
were made in fiscal 1995 or 1994.
40
<PAGE> 43
CENTEX CORPORATION AND SUBSIDIARIES
Supplementary condensed combined financial statements for the company, 3333
Holding Corporation and subsidiary and Centex Development Company, L.P. are set
forth below. For additional information on 3333 Holding Company and its
subsidiary and Centex Development Company, L.P., see their separate financial
statements and related footnotes included elsewhere in this annual report.
SUPPLEMENTARY CONDENSED COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 14,273 $ 25,207
Receivables 914,549 653,622
Inventories 1,244,931 1,266,509
Investments in
Centex Construction Products, Inc. 106,504 89,871
Joint Ventures and Unconsolidated Subsidiaries 3,984 5,695
Property and Equipment, net 37,139 41,267
Other Assets and Deferred Charges 22,602 26,427
---------- ----------
$2,343,982 $2,108,598
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Liabilities $ 616,959 $ 557,640
Short-term Debt 665,593 632,745
Long-term Debt 321,002 222,530
Deferred Income Taxes 16,620 26,737
Stockholders' Equity 723,808 668,946
---------- ----------
$2,343,982 $2,108,598
========== ==========
</TABLE>
SUPPLEMENTARY CONDENSED COMBINED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
----------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Revenues $3,111,486 $3,281,198 $3,224,025
Costs and Expenses 3,023,447 3,194,642 3,089,126
---------- ---------- ----------
Earnings Before Gain on CXP's Initial Public Offering
and Income Taxes 88,039 86,556 134,899
Gain of CXP's Initial Public Offering -- 59,328 --
---------- ---------- ----------
Earnings Before Income Taxes 88,039 145,884 134,899
Income Taxes 34,421 53,540 49,851
---------- ---------- ----------
Net Earnings $ 53,618 $ 92,344 $ 85,048
========== ========== ==========
</TABLE>
41
<PAGE> 44
CENTEX CORPORATION AND SUBSIDIARIES
(I) BUSINESS SEGMENTS
The company operates in three business segments: Home Building, Financial
Services and Contracting and Construction Services. These segments operate
primarily in the United States and their markets are nationwide.
Intersegment revenues and investments in joint ventures are not material
and are not shown in the following tables. The investment in Centex Development
Company, L.P. is included in the Home Building segment and the investment in
Centex Construction Products, Inc. is included in the Corporate segment.
HOME BUILDING
Home Building operations involve the construction and sale of residential
housing. These activities also include the purchase and development of land. The
following tables set forth financial information relating to the Home Building
operations.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
----------------------------------
1996 1995 1994
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Revenues $1,989.9 $2,110.7 $1,869.8
Cost of Sales & Expenses 1,883.2 1,998.6 1,773.8
-------- -------- --------
Operating Earnings $ 106.7 $ 112.1 $ 96.0
======== ======== ========
Identifiable Assets $1,318.7 $1,286.0 $1,203.2
======== ======== ========
Capital Expenditures $ 4.9 $ 6.4 $ 9.3
======== ======== ========
Depreciation and Amortization $ 3.1 $ 3.3 $ 2.8
======== ======== ========
</TABLE>
FINANCIAL SERVICES
Financial Services operations involve the financing of residential housing.
These activities include mortgage origination and other related services on
homes sold by subsidiaries and by others. Savings and Loan includes the
operations of CTX Holding and its subsidiary, Texas Trust Savings Bank, FSB
(sold during fiscal 1995 -- see Note B). The following table sets forth
financial information relating to the Financial Services operations.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
----------------------------------------------------------------------
1996 1995 1994
------ ---------------------------- ----------------------------
MORTGAGE SAVINGS MORTGAGE SAVINGS
BANKING & LOAN TOTAL BANKING & LOAN TOTAL
-------- ------ ------ -------- ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $129.6 $ 97.4 $ 9.4 $106.8 $187.9 $ 15.5 $203.4
Cost of Sales & Expenses 112.4 96.0 1.4 97.4 116.9 12.9 129.8
------ ------ ----- ------ ------ ------ ------
Operating Earnings $ 17.2 $ 1.4 $ 8.0 $ 9.4 $ 71.0 $ 2.6 $ 73.6
====== ====== ===== ====== ====== ====== ======
Identifiable Assets $674.2 $450.7 $ -- $450.7 $685.6 $238.0 $923.6
====== ====== ===== ====== ====== ====== ======
Capital Expenditures $ 2.5 $ 6.7 $ .2 $ 6.9 $ 11.0 $ 2.3 $ 13.3
====== ====== ===== ====== ====== ====== ======
Depreciation and Amortization
including Negative Goodwill $ 5.7 $ 6.0 $(6.8 ) $ (.8) $ 3.6 $ (2.2) $ 1.4
====== ====== ===== ====== ====== ====== ======
</TABLE>
42
<PAGE> 45
CENTEX CORPORATION AND SUBSIDIARIES
CONTRACTING AND CONSTRUCTION SERVICES
Contracting and Construction Services includes the construction of
buildings for both private and government interests, including office,
commercial and industrial buildings, hospitals, hotels, museums, libraries,
airport facilities, and educational institutions.
The following table sets forth financial information relating to the
Contracting and Construction Services operation. As this segment generates
significant levels of cash flow, Intracompany Interest Income (credited at the
prime rate in effect) is reflected in this segment. These amounts are eliminated
in consolidation.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
------------------------------
1996 1995 1994
------ -------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Revenues $983.5 $1,059.9 $966.6
Cost of Sales & Expenses 988.5 1,061.7 971.1
------ -------- ------
Operating Loss (5.0) (1.8) (4.5)
Intracompany Interest Income* 4.9 4.8 4.5
------ -------- ------
Total Economic Return $ (.1) $ 3.0 $ -
====== ======== ======
Identifiable Assets* $216.1 $ 199.8 $178.9
====== ======== ======
Capital Expenditures $ 1.7 $ 2.7 $ 2.8
====== ======== ======
Depreciation and Amortization $ 2.9 $ 3.1 $ 3.0
====== ======== ======
</TABLE>
- ---------------
* The "net assets" position of the Contracting and Construction Services segment
provides significant cash flow because payables and accruals consistently
exceed gross assets. Intracompany interest income as computed on the group's
cash flow in excess of its equity.
CORPORATE
Corporate general and administrative expenses represent salaries and other
costs not identifiable with a specific segment. Corporate assets are primarily
cash and cash equivalents, receivables and other assets not associated with a
business segment, including the investment in CXP. The following table
summarizes financial information relating to the Corporate segment.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
-----------------------------
1996 1995 1994
------ ------ -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Equity in Earnings of Affiliate (CXP) $ 25.6 $ 16.6 $16.6*
====== ====== =====
Corporate General and Administrative $ 15.0 $ 15.3 $15.2
====== ====== =====
Identifiable Assets $127.9 $113.2 $21.3
====== ====== =====
Capital Expenditures $ .1 $ .2 $ .1
====== ====== =====
Depreciation and Amortization $ .8 $ .8 $ .8
====== ====== =====
</TABLE>
- ---------------
* CXP was 100% owned in 1994 (see Note C).
43
<PAGE> 46
CENTEX CORPORATION AND SUBSIDIARIES
(J) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments", requires companies to disclose the
estimated fair value of their financial instrument assets and liabilities. The
estimated fair values shown below have been determined using current quoted
market prices where available and, where necessary, estimates based on present
value methodology suitable for each category of financial instruments.
Considerable judgment is required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the company could realize in a
current market exchange.
All assets and liabilities which are not considered financial instruments
have been valued using historical cost accounting. There is no material
difference between the recorded amount and the estimated fair value of CTX
Mortgage's off-balance-sheet unfunded loan commitments. These are generally
priced at market at the time of funding.
The consolidated carrying values of Cash and Cash Equivalents, Other
Receivables, Accounts Payable and Accrued Liabilities and Short-term Debt
approximate their fair values. The carrying values and estimated fair values of
other financial assets and liabilities were as follows:
<TABLE>
<CAPTION>
MARCH 31,
-----------------------------------------------
1996 1995
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Financial Assets
Residential Mortgage Loans $629,756 $640,269(a) $413,802 $414,801(a)
Financial Liabilities
Long-term Debt $321,002 $325,455(b) $222,530 $237,603(b)
</TABLE>
- ---------------
(a) Fair values are based on quoted market prices for similar instruments.
(b) Fair values are based on a present value discounted cash flow with the
discount rate approximating current market for similar instruments.
(K) ACQUISITION OF VISTA PROPERTIES, INC.
During the quarter ended September 30, 1995, the company acquired certain
equity interests in Vista Properties, Inc. ("Vista") for a net investment of
approximately $85 million in cash. At the time of the acquisition, Vista's real
property portfolio consisted of approximately 3,400 acres of land located in
seven states in which the company has major operations. Vista's real property
portfolio generally consists of land that is zoned, planned or developed for
single- and multi-family residential, office, retail, industrial and other
commercial uses. The management of Vista and the company are continuing to
evaluate what benefits could be derived from coordinating, combining or
consolidating the business activities of Vista with those of certain of the
company's subsidiaries. To date, Vista and the company have initiated joint
planning and development work at several key residential sites included in
Vista's portfolio and have identified commercial development opportunities in
three of Vista's major projects. Vista has also initiated discussions regarding
potential joint venture activities (which involve both subsidiaries of the
company and unaffiliated third parties) in connection with selected properties.
With respect to the balance of its properties, Vista is continuing to implement
its existing plans to manage, maintain, develop and sell or otherwise dispose of
such properties in the ordinary course of business.
44
<PAGE> 47
CENTEX CORPORATION AND SUBSIDIARIES
As a result of the above evaluations and in a further effort to optimize
the benefits derived from the complimentary business of Vista and the company,
the managements of both companies are working on a potential business
combination ("Combination") pursuant to which the assets and operations of
Vista would be combined with the company's existing home building operations.
The managements of the company and Vista believe that a Combination would
result in a more efficient means of operating their business activities and
would facilitate the zoning, development and buildout of certain of Vista's
properties as well as the disposition of the company's excess real estate
parcels. In addition, Vista has approximately $335 million of net operating
loss carryforwards and a tax basis in its assets that exceeds their book value
by approximately $265 million. If a Combination is ultimately consummated,
certain of Vista's tax-related benefits may become useable in future years,
which could result in a significant contribution to the company's earnings.
There can be no assurance that, if the managements of Vista and the company
make a proposal to their boards, the directors of each company would approve
the Combination, or that if approved, the potential operational or other
benefits referred to above would be realized.
(L) COMMITMENTS AND CONTINGENCIES
In order to assure the future availability of land for home building, the
company has made deposits totaling $10 million as of March 31, 1996 for options
to purchase undeveloped land and developed lots having a total purchase price of
approximately $290 million. These options expire at various dates to 2001. The
company has also committed to purchase land and developed lots totaling
approximately $43 million. In addition, the company has executed lot purchase
contracts with CDC (see Note H) which aggregate approximately $6 million.
Management believes that none of the litigation matters, except as
described below, in which it or any subsidiary is involved, if determined
unfavorable to Centex or any subsidiary, would have a material adverse effect on
the consolidated financial condition or results of operations of the company.
The Harrah's New Orleans Casino contract was suspended in November 1995
due to a bankruptcy filing by the Harrah's Jazz Company partnership, the
developer of the casino. Centex and its subcontractors have claims totaling
nearly $40 million against the partnership for completed but unpaid work.
Centex's liability to its subcontractors is for less than the total claim.
Centex has filed a $40 million lawsuit against Harrah's Entertainment, Inc.,
parent company of the major partner in the partnership. Centex believes that it
and its subcontractors will ultimately recover substantially all of the amounts
owed to them.
The company has certain deductible limits under its workers' compensation
and automobile and general liability insurance policies for which reserves are
established based on the estimated costs of known and anticipated claims.
45
<PAGE> 48
CENTEX CORPORATION AND SUBSIDIARIES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF CENTEX CORPORATION:
We have audited the accompanying consolidated balance sheets of Centex
Corporation (a Nevada corporation) and subsidiaries as of March 31, 1996 and
1995, and the related consolidated statements of earnings, stockholders' equity,
and cash flows for each of the three years in the period ended March 31, 1996.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Centex Corporation and
subsidiaries as of March 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
1996, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The supplemental balance
sheet data of Centex Corporation and Financial Services are presented for
purposes of additional analysis and are not a required part of the basic
consolidated financial statements. This information has been subjected to the
auditing procedures applied in our audits of the basic consolidated financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Dallas, Texas,
May 8, 1996
46
<PAGE> 49
CENTEX CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995
Centex reported consolidated revenues of $3.1 billion for fiscal 1996, 5%
less than $3.3 billion for fiscal 1995. Earnings before income taxes were $87.8
million, 2% more than $86.5 million for fiscal 1995. Total earnings before
income taxes for fiscal 1995, including the gain on the sale of 51% of Centex
Construction Products, Inc. (CXP), were $145.8 million. Net earnings for fiscal
1996 were $53.4 million, down 3% compared to $54.7 million last year. Total net
earnings for last year, including the gain on the CXP sale, were $92.2 million.
Earnings per share for fiscal 1996 were $1.83 compared to $1.81 for fiscal 1995.
Total earnings per share for fiscal 1995, including the gain from the CXP sale,
were $3.04.
HOME BUILDING
The following summarizes Home Building results for the two-year period
ending March 31, 1996 (dollars in millions, except per unit data):
<TABLE>
<CAPTION>
1996 1995
------------------ ------------------
<S> <C> <C> <C> <C>
Home Building Revenues $ 1,989.9 100.0% $ 2,110.7 100.0%
Cost of Sales (1,640.0) (82.4%) (1,748.6) (82.9%)
Selling, General & Administrative (243.2) (12.2%) (250.0) (11.8%)
--------- ----- --------- -----
Operating Earnings $ 106.7 5.4% $ 112.1 5.3%
========= ===== ========= =====
Units Closed 11,970 12,964
Unit Sales Price $ 163,912 $ 159,222
% Change 2.9% 8.0%
Operating Earnings per Unit $ 8,914 $ 8,651
% Change 3.0% 13.2%
Backlog Units 5,533 3,987
% Change 38.8% (31.2%)
</TABLE>
The operating earnings for fiscal 1996 were higher as a percentage of
revenues and on a per unit basis compared to fiscal 1995 as a result of an
increase in the per unit sales price even though certain general and
administrative costs were being absorbed by 8% fewer closed units in fiscal
1996.
FINANCIAL SERVICES
The Financial Services segment consists primarily of the Mortgage Banking
operations. Savings and Loan operations were also included in this segment until
their sale in December 1994. The following summarizes Mortgage Banking's results
for the two-year period ending March 31, 1996 (dollars in millions):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Revenues $ 129.6 $ 97.4
======== ========
Operating Earnings $ 17.2 $ 1.4
======== ========
Origination Volume $4,886.1 $4,195.2
======== ========
Number of Loans Originated
Centex-built Homes 8,445 8,504
Non-Centex-built Homes ("Spot") 33,151 28,574
-------- --------
41,596 37,078
======== ========
</TABLE>
47
<PAGE> 50
CENTEX CORPORATION AND SUBSIDIARIES
Declining interest rates in fiscal 1996 have resulted in an increase in
mortgage applications and originations compared to fiscal 1995. Applications for
the current fiscal year were 47,763, up 31% from 36,487 for the prior fiscal
year. Builder applications rose 35% for the year while spot applications
increased 30%. These increases occurred even though Mortgage Banking had
substantially fewer offices than it had during most of fiscal year 1995.
Savings and Loan revenues and operating earnings in fiscal 1995 were $9.4
million and $8.0 million, respectively. In December 1994, the Savings and Loan
sold its deposits and branches for a pre-tax gain of $3.2 million. The
completion of the sale was Centex's final step in exiting the savings and loan
industry.
CONTRACTING AND CONSTRUCTION SERVICES
The following summarizes Contracting and Construction Services results for
the two-year period ending March 31, 1996 (dollars in millions):
<TABLE>
<CAPTION>
1996 1995
-------- ----------
<S> <C> <C>
Revenues $ 983.5 $1,059.9
======== ========
Operating Loss $ (5.0) $ (1.8)
======== ========
New Contracts Received $ 857.0 $1,151.8
======== ========
Backlog of Uncompleted Contracts $1,201.5 $1,328.0
======== ========
</TABLE>
Contracting and Construction Services' operating loss during fiscal 1996
results from continued weak operating margins and write-downs of certain
projects. In an effort to improve its operating margins, the Contracting and
Construction Services operations have not been the low bidder as frequently as
during fiscal 1995. This has resulted in a decrease in revenues, fewer new
contracts received and a decrease in backlog of uncompleted contracts in fiscal
1996. The Contracting and Construction Services operation provided a positive
average net cash flow in excess of Centex's investment in the group of
approximately $55-$60 million during fiscal 1996 and 1995.
In November 1995, the contract to build the Harrah's New Orleans Casino was
suspended due to a bankruptcy filing by the Harrah's Jazz Company partnership,
the developer of the casino. Centex and its subcontractors have claims totaling
nearly $40 million against the partnership for completed but unpaid work.
Centex's liability to its subcontractors is for less than the total claim.
Centex has filed a $40 million lawsuit against Harrah's Entertainment, Inc.,
parent company of the major partner in the partnership. Centex believes that it
and its subcontractors will ultimately recover substantially all of the amounts
owed to them.
EQUITY IN EARNINGS OF AFFILIATES (CXP)
Centex's 49% "Equity in Earnings of Affiliate (CXP)" was $25.6 million for
fiscal 1996, a 55% increase over $16.6 million for fiscal 1995. Centex
Construction Products, Inc. benefited during the year from continued strong
product demand, improved operating efficiencies in its wallboard plants and
stronger than expected product shipments due to unseasonably mild weather.
FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994
Centex reported record revenues of $3.3 billion for fiscal 1995, an 8%
increase over fiscal 1994 revenues. Earnings before income taxes and prior to
the gain related to the 51% initial public offering of CXP were $86.5 million,
down 36% compared to $135.0 million for fiscal 1994. Net earnings were $54.7
million and earnings per share were $1.81 for fiscal 1995 before the CXP gain,
compared to $85.2 million and $2.60 for fiscal 1994. Including the CXP gain, net
earnings and earnings per share for fiscal 1995 were $92.2 million and $3.04,
respectively.
48
<PAGE> 51
CENTEX CORPORATION AND SUBSIDIARIES
On April 19, 1994, CXP completed the sale of 11,730,000 shares, or 51% of
its common stock, through an initial public offering. Including a dividend and
other payments, Centex received $186.5 million from the transaction. Centex
retains ownership of 49% of CXP's stock.
HOME BUILDING
The following summarizes Home Building results for the two-year period
ending March 31, 1995 (dollars in millions, except per unit data):
<TABLE>
<CAPTION>
1995 1994
-------------------- --------------------
<S> <C> <C> <C> <C>
Home Building Revenues $ 2,110.7 100.0% $ 1,869.8 100.0%
Cost of Sales (1,748.6) (82.9%) (1,560.0) (83.5%)
Selling, General & Administrative (250.0) (11.8%) (213.8) (11.4%)
--------- ----- --------- -----
Operating Earnings $ 112.1 5.3% $ 96.0 5.1%
========= ===== ========= =====
Units Closed 12,964 12,563
Unit Sales Prices $ 159,222 $ 147,466
% Change 8.0% 6.6%
Operating Earnings per Unit $ 8,651 $ 7,640
% Change 13.2% 3.1%
Backlog Units 3,987 5,795
% Change (31.2%) 12.5%
</TABLE>
Although Centex reported record home building results for fiscal 1995, the
company noted that as the year progressed, rising interest rates slowed new
orders. This slowdown resulted in price competition throughout the industry,
which negatively impacted margin improvements generally anticipated during this
stage of the housing cycle.
FINANCIAL SERVICES
The Financial Services segment consists of the Mortgage Banking and Savings
and Loan operations. The following summarizes Mortgage Banking's results for the
two-year period ending March 31, 1995 (dollars in millions):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Revenues $ 97.4 $ 187.9
======== ========
Operating Earnings $ 1.4 $ 71.0
======== ========
Origination Volume $4,195.2 $6,428.4
======== ========
Number of Loans Originated
Centex-built Homes 8,504 9,289
Non-Centex-built Homes 28,574 49,254
-------- --------
37,078 58,543
======== ========
</TABLE>
49
<PAGE> 52
CENTEX CORPORATION AND SUBSIDIARIES
Mortgage Banking results were negatively impacted throughout most of fiscal
1995 by rising interest rates and an increasingly competitive environment as the
industry fought for shrinking volume in a declining market. Refinancing activity
virtually disappeared and consumers shifted from fixed-rate loans to lower
margin adjustable-rate loans. Mortgage Banking's results were also affected by
the costs associated with downsizing the organization to match the lower
business volume. During fiscal 1995, the division's operating locations and
personnel were reduced by approximately 40%. Mortgage Banking's operational
performance improved as the fourth quarter progressed due to a more efficient
operating structure and the flattening of the yield curve, which increased the
attractiveness of fixed rate mortgage products to customers.
Savings and Loan revenues in fiscal 1995 were $9.4 million compared to
$15.5 million in fiscal 1994. Operating earnings for fiscal 1995 were $8.0
million compared to $2.6 million in fiscal 1994. In December 1994, the savings
and loan sold its deposits and branches for a pre-tax gain of $3.2 million. The
completion of the sale was Centex's final step in exiting the savings and loan
industry.
CONTRACTING AND CONSTRUCTION SERVICES
The following summarizes Contracting and Construction Services results for
the two-year period ending March 31, 1995 (dollars in millions):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Revenues $1,059.9 $ 966.6
======== ========
Operating Loss $ (1.8) $ (4.5)
======== ========
New Contracts Received $1,151.8 $1,029.2
======== ========
Backlog of Uncompleted Contracts $1,328.0 $1,236.1
======== ========
</TABLE>
Although Contracting and Construction Services' results continued to be
negatively impacted by an intensely competitive environment, the operating loss
in fiscal 1995 was reduced compared to fiscal 1994. Nonresidential construction
is improving as the economy strengthens and profit margins in this group are
beginning to improve. The Contracting and Construction Services operation
provided a positive average net cash flow in excess of Centex's investment in
the group of $60 million during fiscal 1995 and $74 million during fiscal 1994.
EQUITY IN EARNINGS OF AFFILIATE (CXP)
Centex's 49% "Equity in Earnings of Affiliate (CXP)" was $16.6 million in
fiscal 1995. Fiscal year 1994's earnings, which represented Centex's 100%
ownership of CXP, were also $16.6 million. Centex Construction Products, Inc.'s
fiscal 1995 operating results benefited from improved demand and pricing for its
cement and gypsum wallboard products.
STOCK REPURCHASE PROGRAM
As a result of Centex's strengthened financial position after CXP's initial
public offering, Centex commenced a stock repurchase program as the Centex stock
price fell to and remained at depressed levels. In fiscal 1995, the company
repurchased 3.74 million shares of its common stock, or about 12% of the shares
outstanding at the beginning of fiscal 1995. No shares were repurchased in
fiscal 1996. Centex currently has Board authorization to purchase approximately
930,000 additional shares.
50
<PAGE> 53
CENTEX CORPORATION AND SUBSIDIARIES
FINANCIAL CONDITION AND LIQUIDITY
Centex fulfills its short-term financing requirements with cash generated
from its operations and funds available under its credit facilities. These
credit facilities also serve as back-up lines for overnight borrowings under its
uncommitted bank facilities and commercial paper program. During fiscal 1995,
Centex replaced two separate bank credit agreements with a five-year $425
million bank revolving credit facility. During fiscal 1996, this facility was
renegotiated to improve pricing and extend the term to fiscal year 2001. There
were no borrowings under this or the prior facilities during fiscal 1996, 1995
or 1994. In addition, CTX Mortgage Company has its own $600 million of credit
facilities to finance mortgages which are held during the period while they are
being securitized and readied for delivery against forward sale commitments.
During fiscal year 1996, debt increased by approximately $184 million.
These borrowings were used to partially fund the increase in residential
mortgage loans and the Vista Properties acquisition.
The company believes it has adequate resources and sufficient credit
facilities to satisfy its current needs and provide for future growth. The $100
million Senior Notes, due in May 1996, will be replaced by short-term borrowings
under various credit facilities.
OUTLOOK
During the quarter ended September 30, 1995, the company acquired certain
equity interests in Vista Properties, Inc. ("Vista") for a net investment of
approximately $85 million in cash. At the time of the acquisition, Vista's real
property portfolio consisted of approximately 3,400 acres of land located in
seven states in which the company has major operations. Vista's real property
portfolio generally consists of land that is zoned, planned or developed for
single- and multi-family residential, office, retail, industrial and other
commercial uses. The management of Vista and the company are continuing to
evaluate what benefits could be derived from coordinating, combining or
consolidating the business activities of Vista with those of certain of the
company's subsidiaries. To date, Vista and the company have initiated joint
planning and development work at several key residential sites included in
Vista's portfolio and have identified commercial development opportunities in
three of Vista's major projects. Vista has also initiated discussions regarding
potential joint venture activities (which involve both subsidiaries of the
company and unaffiliated third parties) in connection with selected properties.
With respect to the balance of its properties, Vista is continuing to implement
its existing plans to manage, maintain, develop and sell or otherwise dispose of
such properties in the ordinary course of business.
As a result of the above evaluations and in a further effort to optimize
the benefits derived from the complimentary business of Vista and the company,
the managements of both companies are working on a potential business
combination ("Combination") pursuant to which the assets and operations of Vista
would be combined with the company's existing home building operations. The
managements of the company and Vista believe that a Combination would result in
a more efficient means of operating their business activities and would
facilitate the zoning, development and buildout of certain of Vista's properties
as well as the disposition of the company's excess real estate parcels. If a
Combination is ultimately consummated, certain of Vista's tax-related benefits
may become useable in future years, which could result in a significant
contribution to the company's earnings. There can be no assurance that, if the
managements of Vista and the company make a proposal to their boards, the
directors of each company would approve the Combination, or that if approved,
the potential operational or other benefits referred to above would be realized.
51
<PAGE> 54
CENTEX CORPORATION AND SUBSIDIARIES
Centex Home Services Company was formed in fiscal year 1996 to provide
value added services to new home buyers. These services will initially be
offered to buyers of Centex homes and eventually to other builders and their
customers. In April 1996, Centex Home Services Company entered the security and
pest control businesses by acquiring the operating assets of two
entities -- Dallas-based Advanced Protection Systems, Inc. (APS) and
Environmental Safety Systems, Inc. (ESI) of Melbourne, Florida. APS specializes
in the installation and monitoring of security systems as well as in access
control installations, and currently monitors more than 80,000 residential
security systems in 22 states. The current management of APS is retaining a
minority stock ownership interest in the new company. In addition to operating a
conventional pest and termite control business, ESI developed the Pest Defense
System, an innovative patented method of delivering pest control material inside
structural walls through permanent tubing that is accessed via ports on outside
walls. Centex is acquiring approximately 7,500 of the 11,000 accounts currently
being serviced by ESI. The remainder of the accounts are owned by franchisees.
Also in April 1996, Centex acquired substantially all of the assets of
Advanced Financial Technology, Inc. (Adfitech) and Loan Processing Technologies,
Inc.(LPT), headquartered in Oklahoma City, Oklahoma. Adfitech is one of the
largest and lowest cost providers of quality control mortgage services, and LPT
owns and operates an automated mortgage processing system. The acquisitions
should expand and create more flexible mortgage processing capacity for
Financial Services, enhancing Financial Services' existing systems capabilities.
LPT is also offering these processing services to other mortgage companies.
The company expects fiscal 1997 results to be positively impacted by Home
Building's strong beginning backlog levels and continued favorable sales trends,
increasing applications and originations in Financial Services and the
continuation of favorable results from CXP.
52
<PAGE> 55
CENTEX CORPORATION AND SUBSIDIARIES
QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,
-----------------------
1996 1995
-------- --------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
FIRST QUARTER
Revenues $700,950 $832,517
Earnings Before Income Taxes $ 13,073 $ 84,779
Net Earnings $ 7,873 $ 53,398
Earnings Per Share $ .27 $ 1.67
SECOND QUARTER
Revenues $786,846 $855,709
Earnings Before Income Taxes $ 24,015 $ 27,087
Net Earnings $ 14,551 $ 16,901
Earnings Per Share $ .50 $ .55
THIRD QUARTER
Revenues $790,149 $793,205
Earnings Before Income Taxes $ 24,906 $ 19,311
Net Earnings $ 15,156 $ 13,057
Earnings Per Share $ .52 $ .44
FOURTH QUARTER
Revenues $825,042 $796,073
Earnings Before Income Taxes $ 25,792 $ 14,611
Net Earnings $ 15,785 $ 8,892
Earnings Per Share $ .54 $ .31
</TABLE>
53
<PAGE> 56
CENTEX CORPORATION AND SUBSIDIARIES
SUMMARY OF SELECTED FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1996 1995 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $3,102,987 $3,277,504 $3,039,709 $2,363,325
Net Earnings Before 1995 CXP Gain and 1988
Accounting Change $ 53,365 $ 54,753 $ 85,162 $ 61,038
Gain on CXP's IPO for 1995 and Effect of
Change in Accounting for Income Taxes in
1988 -- 37,495 -- --
---------- ---------- ---------- ----------
Net Earnings $ 53,365 $ 92,248 $ 85,162 $ 61,038
========= ========= ========= =========
Total Assets $2,336,966 $2,049,698 $2,580,356 $2,272,093
Total Long-term Debt, Including Debentures $ 321,002 $ 222,530 $ 222,832 $ 223,988
Total Debt $ 408,253 $ 427,381 $ 429,470 $ 368,988
Deferred Income Taxes $ 16,085 $ 27,795 $ 35,088 $ 55,722
Stockholders' Equity $ 722,836 $ 668,227 $ 668,659 $ 578,415
Total Debt as a Percent of Total
Capitalization (Total Debt, Deferred
Income Taxes, Negative Goodwill and
Stockholders' Equity) 35.6% 38.0% 37.1% 35.8%
Net Earnings as a Percent of Beginning
Stockholders' Equity 8.0% 13.8% 14.7% 11.8%
Per Common Share
Earnings Before 1995 CXP Gain and 1988
Accounting Change $ 1.83 $ 1.81 $ 2.60 $ 1.91
Gain on CXP's IPO for 1995 and Effect of
Change in Accounting for Income
Taxes in 1988 -- 1.23 -- --
---------- ---------- ---------- ----------
Net Earnings $ 1.83 $ 3.04 $ 2.60 $ 1.91
========= ========= ========= =========
Cash Dividends $ .20 $ .20 $ .20 $ .20
Book Value Based on Shares Outstanding
at Year End $ 25.43 $ 23.80 $ 21.12 $ 18.57
Stock Prices
High $ 35 5/8 $ 32 3/8 $ 45 5/8 $ 34 1/8
Low $ 23 1/2 $ 20 1/4 $ 27 1/2 $ 20
</TABLE>
On November 30, 1987, Centex Corporation distributed as a dividend to its
stockholders securities relating to Centex Development Company, L.P. (see Note H
to the Consolidated Financial Statements of Centex Corporation and
Subsidiaries). Since this distribution, such securities have traded in tandem
with and as a part of, the common stock of Centex Corporation.
Debt and deferred income taxes reflect Centex Corporation only, with the
mortgage company and savings and loan association reflected on the equity method
versus consolidation.
54
<PAGE> 57
CENTEX CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
- -------------------------------------------------------------------------------------
1992 1991 1990 1989 1988 1987
- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
$2,028,646 $2,089,110 $1,925,423 $1,707,989 $1,352,601 $1,165,375
$ 34,557 $ 43,605 $ 62,003 $ 40,020 $ 24,063 $ 44,204
-- -- -- -- 50,100 --
- ---------- ---------- ---------- ---------- ---------- ----------
$ 34,557 $ 43,605 $ 62,003 $ 40,020 $ 74,163 $ 44,204
========== ========== ========== ========== ========== ==========
$2,347,452 $2,037,486 $2,045,141 $1,800,522 $1,148,098 $1,150,720
$ 232,294 $ 137,235 $ 140,112 $ 140,192 $ 178,862 $ 133,461
$ 298,508 $ 267,946 $ 267,739 $ 240,457 $ 222,962 $ 134,724
$ 56,627 $ 80,205 $ 59,311 $ 74,487 $ 139,767 $ 229,576
$ 518,494 $ 483,677 $ 447,911 $ 384,174 $ 364,846 $ 363,014
33.0% 30.9% 33.0% 32.6% 30.6% 18.5%
7.1% 9.7% 16.1% 11.0% 20.4% 13.5%
$ 1.11 $ 1.42 $ 2.01 $ 1.32 $ .75 $ 1.24
-- -- -- -- 1.57 --
- ---------- ---------- ---------- ---------- ---------- ----------
$ 1.11 $ 1.42 $ 2.01 $ 1.32 $ 2.32 $ 1.24
========== ========== ========== ========== ========== ==========
$ .20 $ .20 $ .20 $ .14375 $ .125 $ .125
$ 16.99 $ 16.07 $ 14.85 $ 13.28 $ 12.13 $ 10.23
$ 27 3/8 $ 21 7/8 $ 20 7/8 $ 14 7/8 $ 17 $ 20 1/4
$ 17 $ 9 3/4 $ 14 $ 10 $ 7 7/8 $ 14 1/2
</TABLE>
55
<PAGE> 58
3333 HOLDING CORPORATION
------------------------
AND SUBSIDIARY AND CENTEX
--------------------------
DEVELOPMENT COMPANY, L.P.
-------------------------
TO OUR STOCKHOLDERS:
For the year ended March 31, 1996, the Partnership's combined revenues were
$14.5 million versus revenues of $10.3 million in the prior year. Fiscal 1996
revenues resulted from interest income and the sale of several properties
including: 121.2 acres of residential land and 52.2 acres of commercial land in
The Colony, near the Dallas/Fort Worth, Texas metroplex; 398.7 acres of
agricultural land in New Braunfels, Texas; and 7.2 acres of agricultural land
in Fate, Texas. The Partnership also sold 180 residential lots located in
Orlando, Florida and East Windsor, New Jersey to Centex Homes.
Net income for fiscal 1996 was $277,000 compared to the Partnership's 1995 net
loss of $16.2 million. The 1995 loss included property valuation adjustments of
$15.5 million. The pre-adjustment improvement in 1996 was due primarily to
higher gross margins on real estate sales, principally in New Jersey, and
increased interest income. Selling and administrative costs rose in 1996 due to
the Partnership's multi-family development activities. A joint-venture
apartment project in College Station, Texas is in the final stages of
construction and leasing activities are under way.
In July 1995, at the combined annual meeting of stockholders of Centex
Corporation and 3333 Holding Corporation, stockholders approved the proposal
to extend until November 30, 2007, the detachment of warrants to purchase
limited partnership interests in the Partnership. The previous detachment date
was November 30, 1997. Also in July 1995, Centex Real Estate Corporation (CREC)
waived cumulative preference accruals of $37.5 million and redefined its
unrecovered capital in the Partnership as $47.3 million, which became the new
basis for future preference accruals. Subsequent to July 1995, the Partnership
made capital return payments to CREC of $10.0 million.
In November 1995, the Partnership surrendered to its non-recourse lender any
and all interest it had in the Forster Ranch property located in San Clemente,
California and tendered to the lender the deed for the remaining property.
Since the book value of the property equaled the balance of the non-recourse
debt, there was no impact on earnings or on the Partnership's capital.
The revenues and earnings of the Partnership are largely dependent on lot and
land sales, the timing of which is uncertain. Consistent with the nature of the
land development business, the Partnership's financial results have varied
significantly.
We continue to examine viable alternatives for our existing residential and
commercial properties and to investigate new acquisition, development and other
opportunities consistent with our objectives.
/s/ J.S. Bilheimer
J.S. Bilheimer
President
May 8, 1996
56
<PAGE> 59
3333 HOLDING CORPORATION AND SUBSIDIARY AND
CENTEX DEVELOPMENT COMPANY, L.P.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF 3333 HOLDING CORPORATION:
We have audited the accompanying combining balance sheets of 3333 Holding
Corporation and subsidiary and Centex Development Company, L.P. as of March 31,
1996 and 1995, and the related combining statements of operations and cash flows
and stockholders' equity and partners' capital for each of the three years in
the period ended March 31, 1996. These financial statements are the
responsibility of the companies' management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the individual and combined financial positions of
3333 Holding Corporation and subsidiary and Centex Development Company, L.P. as
of March 31, 1996 and 1995, and the individual and combined results of their
operations and their cash flows for each of the three years in the period ended
March 31, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas,
May 8, 1996
57
<PAGE> 60
3333 HOLDING CORPORATION AND SUBSIDIARY AND
CENTEX DEVELOPMENT COMPANY, L.P.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE/UNIT DATA)
<S> <C> <C> <C> <C> <C>
REVENUES
3333 Holding Corporation and Subsidiary $ 2,045 $ 1,602 $ 537 $ 566 $ 679
Centex Development Company, L.P. $13,943 $ 9,796 $ 12,859 $ 9,783 $ 23,998
Combined Revenues $14,470 $ 10,342 $ 13,249 $ 10,156 $ 24,399
OPERATING EARNINGS (LOSS)
3333 Holding Corporation and Subsidiary $ 253 $ 96 $ (114) $ (96) $ (107)
Centex Development Company, L.P. $ 24 $(16,323) $ (1,510) $ (4,176) $ (706)
Combined Operating Earnings (Loss) $ 277 $(16,227) $ (1,624) $ (4,272) $ (813)
TOTAL ASSETS
3333 Holding Corporation and Subsidiary $ 8,652 $ 8,673 $ 8,600 $ 8,600 $ 8,613
Centex Development Company, L.P. $43,168 $105,946 $121,027 $128,621 $121,244
Combined Assets $50,786 $113,282 $128,092 $134,691 $127,402
TOTAL DEBT
3333 Holding Corporation and Subsidiary $ 7,600 $ 7,600 $ 7,600 $ 6,500 $ 6,500
Centex Development Company, L.P. $ 3,326 $ 56,485 $ 54,149 $ 59,262 $ 44,280
Combined Debt $10,926 $ 64,085 $ 61,749 $ 65,762 $ 50,780
OPERATING EARNINGS (LOSS) PER SHARE/UNIT
(Average Outstanding Shares, 1,000;
Units 1,000)
3333 Holding Corporation and Subsidiary $ 253 $ 96 $ (114) $ (96) $ (107)
Centex Development Company, L.P. $ 24 $(16,323) $ (1,510) $ (4,176) $ (706)
</TABLE>
58
<PAGE> 61
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P.
COMBINING BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
---------------------------------------------------------
1996 1995 1996 1995 1996 1995
------- -------- ------- -------- ------ ------
3333 HOLDING
CENTEX DEVELOPMENT CORPORATION
COMBINED COMPANY, L.P. AND SUBSIDIARY
------------------ ------------------ ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash $ 231 $ 1,422 $ 225 $ 1,403 $ 6 $ 19
Accounts Receivable --
Affiliates -- -- 267 570 -- --
Centex Corporation and Subsidiaries 179 187 -- -- 179 187
Other 181 -- 181 -- -- --
Notes Receivable --
Centex Corporation and Subsidiaries 7,700 7,700 -- -- 7,700 7,700
Other 3,809 4,025 3,809 4,025 -- --
Investment in Affiliate -- -- -- -- 767 767
Investment in Real Estate Joint Venture 180 -- 180 -- -- --
Land Held for Development and Sale --
Forster Ranch -- 53,493 -- 53,493 -- --
Other 38,506 46,455 38,506 46,455 -- --
------- -------- ------- -------- ------ ------
$50,786 $113,282 $43,168 $105,946 $8,652 $8,673
======= ======= ====== ======= ====== ======
LIABILITIES, STOCKHOLDERS' EQUITY AND
PARTNERS' CAPITAL
Accounts Payable and Accrued
Liabilities --
Affiliates $ -- $ -- $ -- $ -- $ 267 $ 570
Centex Corporation and Subsidiaries 153 160 -- -- 153 160
Other 2,718 2,320 2,558 2,196 160 124
Notes Payable --
Centex Corporation and Subsidiaries 7,600 7,600 -- -- 7,600 7,600
Forster Ranch -- 53,493 -- 53,493 -- --
Other 3,326 2,992 3,326 2,992 -- --
Land Sale Deposits -- 5 -- 5 -- --
Stockholders' Equity and Partners'
Capital --
Stock and Stock/Class B Unit
Warrants 501 501 500 500 1 1
Capital in Excess of Par Value 800 800 -- -- 800 800
Retained Earnings (Deficit) (329) (582) -- -- (329) (582)
Partners' Capital 36,017 45,993 36,784 46,760 -- --
------- -------- ------- -------- ------ ------
Total Stockholders' Equity and
Partners' Capital 36,989 46,712 37,284 47,260 472 219
------- -------- ------- -------- ------ ------
$50,786 $113,282 $43,168 $105,946 $8,652 $8,673
======= ======== ======= ======== ====== ======
</TABLE>
See notes to combining financial statements.
59
<PAGE> 62
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P.
COMBINING STATEMENTS OF OPERATIONS AND CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
-----------------------------------------------------------------------------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
-------- -------- ------- -------- -------- ------- ------ ------ -----
CENTEX DEVELOPMENT 3333 HOLDING CORPORATION
COMBINED COMPANY, L.P. AND SUBSIDIARY
------------------------------- ------------------------------- -------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE/UNIT DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMBINING STATEMENTS OF
OPERATIONS
REVENUES
Real Estate Sales $ 13,018 $ 9,506 $12,540 $ 13,018 $ 9,506 $12,540 $ -- $ -- $ --
Interest and Other Income 1,452 836 709 925 290 319 2,045 1,602 537
-------- -------- ------- -------- -------- ------- ------ ------ -----
14,470 10,342 13,249 13,943 9,796 12,859 2,045 1,602 537
-------- -------- ------- -------- -------- ------- ------ ------ -----
COSTS AND EXPENSES
Real Estate Sales 11,861 9,064 12,684 11,861 9,064 12,684 -- -- --
Property Valuation
Adjustment -- 15,500 -- -- 15,500 -- -- -- --
Selling and
Administrative 1,774 1,394 1,750 2,058 1,555 1,685 1,011 761 65
Interest 558 611 439 -- -- -- 781 745 586
-------- -------- ------- -------- -------- ------- ------ ------ -----
14,193 26,569 14,873 13,919 26,119 14,369 1,792 1,506 651
-------- -------- ------- -------- -------- ------- ------ ------ -----
EARNINGS (LOSS) BEFORE
INCOME TAXES 277 (16,227) (1,624) 24 (16,323) (1,510) 253 96 (114)
Income Taxes -- -- -- -- -- -- -- -- --
-------- -------- ------- -------- -------- ------- ------ ------ -----
NET EARNINGS (LOSS) $ 277 $(16,227) $(1,624) $ 24 $(16,323) $(1,510) $ 253 $ 96 $(114)
======== ======== ======= ======== ======== ======= ====== ====== =====
EARNINGS (LOSS) PER
SHARE/UNIT
(Average Outstanding
Shares, 1,000; Units,
1,000) $ 24 $(16,323) $(1,510) $ 253 $ 96 $(114)
======== ======== ======= ====== ====== =====
COMBINING STATEMENTS OF CASH
FLOWS
CASH FLOWS -- OPERATING
ACTIVITIES
Net Earnings (Loss) $ 277 $(16,227) $(1,624) $ 24 $(16,323) $(1,510) $ 253 $ 96 $(114)
Property Valuation
Adjustment -- 15,500 -- -- 15,500 -- -- -- --
Net Change in Payables,
Receivables and
Deposits (90) (281) (110) 176 (204) (224) (266) (77) 114
Decrease in (Increase) in
Notes Receivable 216 (2,874) (480) 216 (2,874) (480) -- -- --
Increase in Advances to
Joint Venture (180) -- -- (180) -- -- -- -- --
Decrease in Land Held for
Development and Sale 7,949 3,454 5,746 7,949 3,454 5,746 -- -- --
-------- -------- ------- -------- -------- ------- ------ ------ -----
8,172 (428) 3,532 8,185 (447) 3,532 (13) 19 --
-------- -------- ------- -------- -------- ------- ------ ------ -----
CASH FLOWS -- FINANCING
ACTIVITIES
Increase (Decrease) in
Notes Payable --
Centex Corporation &
Subsidiaries 303 (587) 430 303 (587) 430 -- -- --
Other 334 2,336 (5,113) 334 2,336 (5,113) -- -- --
Capital Distributions (10,000) -- -- (10,000) -- -- -- -- --
-------- -------- ------- -------- -------- ------- ------ ------ -----
(9,363) 1,749 (4,683) (9,363) 1,749 (4,683) -- -- --
-------- -------- ------- -------- -------- ------- ------ ------ -----
NET (DECREASE) INCREASE IN
CASH (1,191) 1,321 (1,151) (1,178) 1,302 (1,151) (13) 19 --
CASH AT BEGINNING OF YEAR 1,422 101 1,252 1,403 101 1,252 19 -- --
-------- -------- ------- -------- -------- ------- ------ ------ -----
CASH AT END OF YEAR $ 231 $ 1,422 $ 101 $ 225 $ 1,403 $ 101 $ 6 $ 19 $ --
======== ======== ======= ======== ======== ======= ====== ====== =====
</TABLE>
See notes to combining financial statements.
60
<PAGE> 63
3333 HOLDING CORPORATION AND SUBSIDIARY AND
CENTEX DEVELOPMENT COMPANY, L.P.
COMBINING STATEMENTS OF STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31, 1996, 1995 AND 1994
----------------------------------------------------------------------------------------------
CENTEX DEVELOPMENT
COMPANY, L.P. 3333 HOLDING CORPORATION AND SUBSIDIARY
---------------------------------- --------------------------------------------
CLASS B GENERAL LIMITED CAPITAL IN RETAINED
UNIT PARTNER'S PARTNER'S STOCK COMMON EXCESS OF EARNINGS
COMBINED WARRANTS CAPITAL CAPITAL WARRANTS STOCK PAR VALUE (DEFICIT)
-------- -------- --------- --------- -------- ------ ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1993 $64,563 $500 $ 767 $ 63,826 $ 1 $ -- $800 $ (564)
Net Loss (1,624) -- -- (1,510) -- -- -- (114)
------- ---- ----- -------- ---- ---- ---- ------
Balance at March 31, 1994 62,939 500 767 62,316 1 -- 800 (678)
Net Earnings (Loss) (16,227) -- -- (16,323) -- -- -- 96
------- ---- ----- -------- ---- ---- ---- ------
Balance at March 31, 1995 46,712 500 767 45,993 1 -- 800 (582)
CAPITAL DISTRIBUTIONS (10,000) -- -- (10,000) -- -- -- --
NET EARNINGS 277 -- -- 24 -- -- -- 253
------- ---- ----- -------- ---- ---- ---- ------
BALANCE AT MARCH 31, 1996 $36,989 $500 $ 767 $ 36,017 $ 1 $ -- $800 $ (329)
======= ==== ===== ======== ==== ==== ==== ======
</TABLE>
See notes to combining financial statements.
NOTES TO COMBINING FINANCIAL STATEMENTS
(A) ORGANIZATION
Centex Development Company, L.P. (the Partnership) was formed on March 31,
1987 to invest in, acquire, develop, operate and sell residential and commercial
real estate within the United States. Centex Real Estate Corporation (CREC), its
limited partner, is a subsidiary of Centex Corporation (Centex). 3333
Development Corporation, a Nevada corporation (Development), which serves as its
general partner, is owned by 3333 Holding Corporation, a Nevada corporation
(Holding). In November 1987, Centex distributed all of the issued and
outstanding shares of the common stock of Holding and warrants to purchase
approximately 80% of the Class B units of limited partnership interest in the
Partnership (see Note F). These securities trade in tandem with the common stock
of Centex and are being held by a nominee on behalf of Centex stockholders until
such time as the securities are detached and trade separately. The securities
may be detached at any time by Centex's Board of Directors, but the warrants to
purchase Class B units automatically become detached in November 2007.
Supplementary condensed combined financial statements of Centex Corporation
and subsidiaries, 3333 Holding Corporation and subsidiary and Centex Development
Company, L.P. are set forth below. For additional information on Centex
Corporation and subsidiaries, see their separate financial statements and
related footnotes.
61
<PAGE> 64
3333 HOLDING CORPORATION AND SUBSIDIARY AND
CENTEX DEVELOPMENT COMPANY, L.P.
SUPPLEMENTARY CONDENSED COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
---------------------------
1996 1995
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 14,273 $ 25,207
Receivables 914,549 653,622
Inventories 1,244,931 1,266,509
Investments in
Centex Construction Products, Inc. 106,504 89,871
Joint Ventures and Unconsolidated Subsidiaries 3,984 5,695
Property and Equipment, net 37,139 41,267
Other Assets and Deferred Charges 22,602 26,427
---------- ----------
$2,343,982 $2,108,598
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Liabilities $ 616,959 $ 557,640
Short-term Debt 665,593 632,745
Long-term Debt 321,002 222,530
Deferred Income Taxes 16,620 26,737
Stockholders' Equity 723,808 668,946
---------- ----------
$2,343,982 $2,108,598
========== ==========
</TABLE>
SUPPLEMENTARY CONDENSED COMBINED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
-----------------------------------------
1996 1995 1994
---------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenues $3,111,486 $3,281,198 $3,224,025
Costs and Expenses 3,023,447 3,194,642 3,089,126
---------- ---------- ----------
Earnings Before Gain on CXP's Initial Public
Offering and Income Taxes 88,039 86,556 134,899
Gain on CXP's Initial Public Offering -- 59,328 --
---------- ---------- ----------
Earnings Before Income Taxes 88,039 145,884 134,899
Income Taxes 34,421 53,540 49,851
---------- ---------- ----------
Net Earnings $ 53,618 $ 92,344 $ 85,048
========== ========== ==========
</TABLE>
62
<PAGE> 65
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P.
(B) BASIS OF PRESENTATION
The accompanying combining financial statements present the individual and
combined financial statements of Holding and its subsidiary and the Partnership
as of March 31, 1996 and 1995 and results of operations for each of the three
years ended March 31, 1996. The financial statements of the Partnership are
included in the combined statements since Development, as general partner of the
Partnership, is able to exercise effective control over the Partnership.
(C) SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenue from real estate sales is recognized as required payments are
received and title passes.
INVENTORY CAPITALIZATION AND COST ALLOCATION
Land held for development and sale is stated at the lower of cost
(including development costs and, where appropriate, capitalized interest and
real estate taxes) or market. The capitalized costs are included in cost of land
sales in the combining statements of operations as related revenues are
recognized.
In March 1995, CDC recorded a pre-tax adjustment to reduce the book value
of certain properties by approximately $15.5 million to reflect CDC's view that
development activity had not reached anticipated levels in order to continue to
support the historical carrying value of such properties. This adjustment
resulted in carrying values that facilitate a nearer-term disposition or
development of these properties. A substantial portion of the adjustment relates
to the book values of two Dallas area properties.
EARNINGS (LOSS) PER SHARE/UNIT
Earnings (loss) per share/unit are based on the weighted average number of
outstanding shares of common stock (1,000 for Holding) and Class A limited
partnership units (1,000 for the Partnership). These shares/units do not include
common stock/unit equivalents because they have no material effect on earnings
(loss) per share/unit.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 121, issued in March 1995,
establishes methods of accounting for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable intangibles to
be disposed of. This Statement will be implemented on April 1, 1996 and will not
have a material impact on the individual or combined financial statements of
Holding and its subsidiary and the Partnership.
COMBINING STATEMENTS OF OPERATIONS AND CASH FLOWS -- SUPPLEMENTAL DISCLOSURES
Interest capitalized by the Partnership during fiscal years ended March 31,
1996, 1995 and 1994 totaled $98,000, $4,787,000 and $4,090,000, respectively, of
which $4,687,000 and $3,945,000 relates to the Forster Ranch property in 1995
and 1994, respectively. No income taxes were paid during the years ended March
31, 1996, 1995 and 1994.
63
<PAGE> 66
3333 HOLDING CORPORATION AND SUBSIDIARY AND
CENTEX DEVELOPMENT COMPANY, L.P.
(D) NOTES RECEIVABLE
Development issued common stock to Holding and used the proceeds to advance
$7.7 million to CREC, as evidenced by a note receivable due April 30, 1996
bearing interest at prime plus .875%. Interest is due in quarterly installments.
Interest income of $750,000, $680,000, and $537,000 related to this note is
included in the accompanying combining financial statements for the years ended
March 31, 1996, 1995 and 1994, respectively. On April 30, 1996 the maturity date
was extended two years to April 30, 1998.
Notes Receivable -- Other at March 31, 1996 and 1995 have stated interest
rates ranging up to 10% and are due in monthly or quarterly installments.
Discounts and allowances totaled $21,000 at March 31, 1996 and $40,000 at March
31, 1995. The weighted average interest rate, inclusive of discounts, was 9% at
March 31, 1996 and 9% at March 31, 1995. Notes receivable at March 31, 1996 are
collectible over seven years, with $1,028,000 being due within one year.
(E) NOTES PAYABLE
Centex had advanced Holding $7.6 million as of March 31, 1996 which is
evidenced by a note secured by the common stock of Development. The note, which
had a fluctuating balance during fiscal 1996 and 1995, bears interest at prime
plus 1% that is payable quarterly. The principal balance together with all
unpaid accrued interest is due on the earlier of April 1, 1998 or the date on
which the warrants to purchase Class B units of limited partnership interests
are detached from shares of the common stock of Centex. Interest expense of
$558,000, $611,000, and $439,000 related to this note is included in the
accompanying combining financial statements for the years ended March 31, 1996,
1995 and 1994, respectively.
Under the most restrictive covenants of the note agreement, Holding and its
subsidiary (excluding the Partnership) may not, without Centex's consent, (i)
create any additional liens on or sell real estate properties contributed by the
limited partner, (ii) effect a merger or consolidation, (iii) declare dividends
or make certain other shareholder payments or (iv) allow tangible net worth, as
defined, to be less than $7.7 million for Development.
All notes payable are non-recourse, secured solely by the underlying real
estate. As land is sold, a portion of the proceeds is restricted for repayment
of the notes. The prime rate in effect was 8.25% at March 31, 1996 and 9% at
March 31, 1995. The 30 day LIBOR rate at March 31, 1996 was 5 7/16% and 6 1/8%
at March 31, 1995. The note balances and rates in effect were as follows:
<TABLE>
<CAPTION>
MARCH 31,
------------------
1996 1995
------ -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Credit Line at LIBOR Plus 3/4% Maturing in Fiscal Year 1997, Unsecured,
Guaranteed by CREC $1,373 $ 1,039
Note Payable at 12%, Matured in April 1994 785 785
Note Payable at 5.56%, Maturing in fiscal year 1997 682 682
Note Payable, Maturing in Fiscal Year 1997 486 486
Forster Ranch Non-recourse Notes --
Payable at Prime Plus 1%, Retired in November 1995 -- 11,602
Payable at Prime Plus 2% (10 1/2% floor), Retired in November 1995 -- 41,891
------ -------
$3,326 $56,485
====== =======
</TABLE>
64
<PAGE> 67
3333 HOLDING CORPORATION AND SUBSIDIARY AND
CENTEX DEVELOPMENT COMPANY, L.P.
During November 1995, the Partnership tendered to its non-recourse lender a
deed to the remaining property in Forster Ranch, the Partnership's pro rata
portion of the 1995-1996 real property taxes, an assignment of the Development
Agreement made between the Partnership and the City of San Clemente and payment
of certain developer fee credits. With these deliveries, the Partnership has
surrendered any and all interest it may have in the Forster Ranch property to
the lender.
(F) STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL
PREFERRED RETURN
The partnership agreement provides that the Class A limited partner is
entitled to a cumulative preferred return of 9% per annum on the average
outstanding balance of its Unrecovered Capital. In July 1995, in conjunction
with the extension of the detachment date, CREC waived unrecovered preference
through July 1995 of $37.5 million, and reduced its unrecovered capital in the
Partnership from $75.8 million to $47.3 million. Unrecovered Capital represents
initial capital contributions as reduced by repayments, and is the basis for
preference accruals. The Partnership distributed $10,000,000 to CREC as a return
of original capital during fiscal year 1996. Preference payments in arrears at
March 31, 1996 amounted to $2,506,000, and Unrecovered Capital totaled
$37,261,000.
ALLOCATION OF PROFITS AND LOSSES
As provided in the partnership agreement, prior to Payout (as defined
below), net income of the Partnership is to be allocated to the partners in the
following order of priority:
(i) To the Class A limited partner to the extent of the cumulative
preferred return.
(ii) To the partners to the extent and in the same ratio that
cumulative net losses were allocated.
(iii) To the partners in accordance with their percentage interests,
as defined. Currently, this would be 20% to the Class A limited partner and
80% to the general partner.
All loss allocations and allocations of net income after Payout, shall be
made to the partners in accordance with their percentage interests, as defined.
DISTRIBUTIONS
Distributions of cash or other property are to be made at the discretion of
the general partner and are to be distributed in the following order of
priority:
(i) Prior to the time at which the Class A limited partner has
received aggregate distributions equal to its original capital contribution
(Payout), distributions of cash or other property shall be made as follows:
(a) To the Class A limited partner with respect to its preferred
return, then
(b) To the partners in an amount equal to the maximum marginal
corporate tax rate times the amount of taxable income allocated to the
partners, then
(c) To the Class A limited partner until its Unrecovered Capital is
reduced to zero.
(ii) After Payout, distributions of cash shall be made to the partners
in accordance with their percentage interests, as defined.
65
<PAGE> 68
3333 HOLDING CORPORATION AND SUBSIDIARY AND
CENTEX DEVELOPMENT COMPANY, L.P.
WARRANTS
In November 1987, Centex acquired from the Partnership 100 warrants to
purchase 100 Class B units in the Partnership at an exercise price of $500 per
Class B unit, and Centex acquired from Holding 100 warrants to purchase 100
shares of Holding common stock at an exercise price of $800 per share. These
warrants are subject to future adjustment to provide the holders of options to
purchase Centex common stock with the opportunity to acquire Class B units and
shares of Holding. These warrants will generally become exercisable upon the
detachment of the tandem-traded securities from Centex common stock.
(G) RELATED PARTY TRANSACTIONS
SERVICE AND MANAGEMENT AGREEMENTS
Holding entered into a service agreement in May 1987 with Centex Service
Company (CSC), a wholly-owned subsidiary of Centex, whereby CSC will provide
certain tax, accounting and other similar services for Holding at a fee of
$2,500 per month. Service fees of $30,000 for each of fiscal years 1996, 1995,
and 1994 are reflected as administrative expenses in the accompanying combining
financial statements.
The Partnership paid $1,295,000 and $922,000 to Holding during the fiscal
years 1996 and 1995, respectively, pursuant to an agreement whereby Holding
provides management services to the Partnership in connection with the
development and operation of properties acquired by the Partnership, maintenance
of partnership property and accounting and clerical services. Also in the fiscal
year 1995, the Partnership paid certain Centex subsidiaries $785,000 in
management fees accrued in the year ended March 31, 1994 relative to a similar
management agreement.
SALES AND PURCHASES
Partnership revenues during fiscal years 1996, 1995, and 1994 include land
sales to CREC of $4,416,000, $5,423,000, and $2,354,000, respectively.
Additionally, CREC has contracts to purchase lots for the aggregate price of
approximately $5.4 million to be paid as lots are delivered.
ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE
Included in Accounts Receivable-Affiliates and Accounts Payable-Affiliates
in the accompanying combining financial statements are $267,000 at March 31,
1996 and $570,000 at March 31, 1995, which the Partnership advanced to Holding.
Interest of $223,000 and $134,000 was accrued on advances during fiscal years
1996 and 1995, respectively.
(H) INCOME TAXES
At March 31, 1996, Holding had operating loss carryforwards for income tax
reporting purposes of $296,000. If unused, the loss carryforwards will expire in
the fiscal years 2007 through 2009. Holding joins with its subsidiary in filing
consolidated income tax returns. The taxable income of the Partnership has been
allocated to the holder of the Class A units. Accordingly, no tax provision for
Partnership earnings is shown in the combining financial statements.
66
<PAGE> 69
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P.
QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,
--------------------------------------------------------
1996 1995 1996 1995 1996 1995
------ -------- ------ -------- ---- ----
3333 HOLDING
CORPORATION
CENTEX DEVELOPMENT AND
COMBINED COMPANY, L.P. SUBSIDIARY
------------------ ------------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE/UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
FIRST QUARTER
Revenues $2,382 $ 3,105 $2,241 $ 2,977 $611 $336
Earnings (Loss) Before Taxes $ 10 $ (137) $ (188) $ (151) $198 $ 14
Net Earnings (Loss) $ 10 $ (137) $ (188) $ (151) $198 $ 14
Earnings (Loss) Per Share/Unit $ (188) $ (151) $198 $ 14
SECOND QUARTER
Revenues $8,099 $ 1,330 $7,998 $ 1,197 $470 $376
Earnings (Loss) Before Taxes $ 186 $ (229) $ 169 $ (264) $ 17 $ 35
Net Earnings (Loss) $ 186 $ (229) $ 169 $ (264) $ 17 $ 35
Earnings (Loss) Per Share/Unit $ 169 $ (264) $ 17 $ 35
THIRD QUARTER
Revenues $3,508 $ 4,467 $3,371 $ 4,325 $465 $379
Earnings (Loss) Before Taxes $ 193 $ (261) $ 184 $ (283) $ 9 $ 22
Net Earnings (Loss) $ 193 $ (261) $ 184 $ (283) $ 9 $ 22
Earnings (Loss) Per Share/Unit $ 184 $ (283) $ 9 $ 22
FOURTH QUARTER
Revenues $ 481 $ 1,440 $ 333 $ 1,297 $499 $511
Earnings (Loss) Before Taxes $ (112) $(15,600) $ (141) $(15,625) $ 29 $ 25
Net Earnings (Loss) $ (112) $(15,600) $ (141) $(15,625) $ 29 $ 25
Earnings (Loss) Per Share/Unit $ (141) $(15,625) $ 29 $ 25
</TABLE>
67
<PAGE> 70
3333 HOLDING CORPORATION AND SUBSIDIARY AND
CENTEX DEVELOPMENT COMPANY, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
On a combined basis, revenues for the year ended March 31, 1996 of $14.5
million are attributable to interest income and sales of 121.2 acres of
residential and 52.2 acres of commercial land in The Colony, Texas; 398.7 acres
of agricultural land in New Braunfels, Texas; 7.2 acres of agricultural land in
Fate, Texas; and the sale of 180 residential lots to Centex Real Estate
Corporation (CREC) in Orlando, Florida and East Windsor, New Jersey. Revenue of
$10.3 million for fiscal 1995 included results from the sales of a commercial
property in Sonora, California; 116.5 acres in Puerto Rico; a 33.9 acre
commercial tract in Bolingbrook, Illinois; and 254 residential lots in Orlando,
Florida and East Windsor, New Jersey to CREC. Revenues of $13.2 million for
fiscal 1994 included a 15-acre industrial site in Houston, Texas; 168 acres of
ranch land in Comal County, Texas; the Sonora, California shopping center
property; and the sale to CREC of 246 residential lots in Orlando, Florida,
The Colony, Texas and East Windsor, New Jersey.
Operations for the year ended March 31, 1996 resulted in net income of
$277,000. The year ended March 31, 1995 reflected a combined net loss of $16.2
million, which included property valuation adjustments of $15.5 million. The
property valuation adjustments were recorded in March 1995 to reflect CDC's view
that development activity has not reached anticipated levels during the current
economic cycle in order to continue to support the historical carrying value of
such properties, primarily The Colony and Bryan Place properties located in the
Dallas area. These adjustments resulted in carrying values that will facilitate
a nearer-term disposition or development of these properties. Without the
property valuation adjustments, the combined net loss for fiscal 1995 was $.7
million compared to $1.6 million in fiscal 1994.
The improvement in operations before property valuation adjustments for
each of the last three years is primarily attributed to higher gross margins on
real estate sales, principally in new Jersey, and increases in interest income
resulting from real estate sold with financing. During fiscal 1996, the
Partnership entered into a real estate joint venture to develop an apartment
complex in College Station, Texas. The related costs and expenses associated
with the Partnership's investigation into the apartment business resulted in
increased selling and administrative costs in fiscal 1996 compared to fiscal
1995.
In July 1995, the Stockholders of Centex Corporation (Centex) approved a
proposal to extend by ten years to November 2007 the date at which automatic
detachment would occur of the tandemly traded shares of Holding and Centex. Also
at that time, CREC waived unrecovered preference through July, 1995 of $37.5
million, and reduced its unrecovered capital in the Partnership from $75.8
million to $47.3 million. Unrecovered capital represents initial capital
contributions as reduced by repayments, and is the basis for preference
accruals. Subsequent to this capital reduction, the Partnership returned $10.0
million of original capital to CREC.
During November 1995, the Partnership tendered to its non-recourse lender a
deed to the remaining property in Forster Ranch, the Partnership's pro rata
portion of the 1995-1996 real property taxes, an assignment of the Development
Agreement made between the Partnership and the City of San Clemente and payment
of certain developer fee credits. With these deliveries, the Partnership has
surrendered any and all interest it may have in the Forster Ranch property to
the lender. Since the book value of the property equaled the balance of the
non-recourse debt, there was no resulting earnings impact.
Holding, Development and the Partnership believe that they will be able to
provide or obtain the necessary funding for their current operations and future
expansion needs. The revenues, earnings and liquidity of these companies are
largely dependent on future land sales, the timing of which is uncertain. The
ability to obtain external debt or equity capital is subject to the provisions
of Holding's loan agreement with Centex and the partnership agreement governing
the Partnership.
68
<PAGE> 71
CENTEX CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
BOARD OF DIRECTORS Vicki A. Roberts NORTHERN CALIFORNIA MINNESOTA
Treasurer David L. Barclay Scott J. Richter
Alan B. Coleman (3,4) President President
Former President, Rodney E. Cummickel
Southwestern Graduate Assistant Vice President Sacramento ILLINOIS
School of Banking Jack E. Hood Jon E. Fogg
Foundation Southern Barry G. Wilson Manager President
Methodist University Assistant Controller
CENTRAL VALLEY INDIANAPOLIS
Dan W. Cook III (2*) CENTEX REAL ESTATE Richard L. Langdon, Jr. Timothy K. McMahon
Former General Partner CORPORATION/CENTEX HOMES President President
Goldman, Sachs & Co.
Timothy R. Eller LOS ANGELES/VENTURA COLUMBUS
Juan L. Elek President and Chief James J. Kopel, Jr. Joseph H. Mathias
Co-Chairman Executive Officer President President
Elek Moreno Valle y
Asociados Andrew J. Hannigan SOUTHERN CALIFORNIA NASHVILLE
Executive Vice President Larry B. Ludwig R. Martin Kerr, Jr.
William J Gillilan III (1) and Chief Operating President President
President and Chief Officer
Operating Officer SAN DIEGO NEW JERSEY
Thomas M. Boyce Douglas R. Jaeger Joseph M. Mutinsky
Laurence E. Hirsch (1) Executive Vice President President President
Chairman and Chief
Executive Officer Robert D. Hillmann NEVADA NORTHERN VIRGINIA
Executive Vice President Mark L. Krivel Gary L. Jernigan
C.W. Murchison, III President President
(2,3,5) Steven R. Muller
Private Real Estate Executive Vice President COLORADO HAMPTON ROADS
Development and Other Miles R. Grant Jode L. Kirk
Investments Richard L. Sconyers President President
Executive Vice President
Charles H. Pistor (2,4,5*) NEW MEXICO MARYLAND
Retired Vice Chair Joel H. Sowers Thomas A. Houser Jeffrey J. Doyle
Southern Methodist Executive Vice President President President
University
Melvin M. Chadwick PHOENIX ATLANTA
David W. Quinn Vice President-Finance Michael D. Trailor William F. Shean
Executive Vice President President President
and Chief Financial F. Timothy Hoyt
Officer Vice President and Counsel DALLAS NORTH COLUMBIA
Benton H. Karnes Victor L. Buscaino, Jr.
Paul R. Seegers (1*,4*) John M. Lile President President
President, Seegers Vice President
Enterprises DALLAS NORTHEAST Greenville
Joseph Luciani Richard D. Alberque Jonathan P. Giles
Paul T. Stoffel (3*,5) Vice President President Manager
Private Investments
Joseph S. Powell DALLAS SOUTHWEST CHARLOTTE
(Numbers in parentheses Vice President Joe J. Arcisz Daniel L. Barnobi
indicate Board Committees) President President
(1) Executive Committee Renate I. Shiver
(2) Compensation Committee Vice President DALLAS FOX & JACOBS RALEIGH/DURHAM
(3) Audit Committee W. Lee Thompson E. Scott Batchelor
(4) Director Nominating Douglas A. Stempowski President President
Committee Vice President
(5) Stock Option Committee CENTRAL TEXAS COASTAL CAROLINA
Burgess N. Trank Philip W. Warnick John D. Carpenter
* Chairman Vice President and Counsel President President
OFFICERS James B. Watkins Killeen NORTH FLORIDA
Vice President and Counsel Thomas E. Lynch Douglas W. Smith
Laurence E. Hirsch Manager President
Chairman and Chief David C. Wheatley
Executive Officer Vice President SAN ANTONIO ORLANDO NORTH
J. Damon Lyles Gregory L. LePera
William J Gillilan III OPERATING DIVISIONS President President
President and Chief
Operating Officer WASHINGTON STATE HOUSTON ORLANDO SOUTH
Robert J. Fogarty A. Wayne Culpepper Patrick J. Knight
David W. Quinn President President President
Executive Vice President
and Chief Financial PORTLAND, OREGON
Officer Jay L. Smith
President
Raymond G. Smerge
Vice President, Chief
Legal Officer, General
Counsel and Secretary
Michael S. Albright
Vice President-Finance and
Controller
Richard C. Harvey
Vice President-Tax
Sheila E. Gallagher
Vice President-Corporate
Communications
Michael M. Vick
Vice President
</TABLE>
69
<PAGE> 72
CENTEX CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
TAMPA David F. Robinson COLORADO FORT WORTH
Mikell A. McElroy Regional Vice President COLORADO SPRINGS John R. Granger
President Rose M. Kelly Division Vice President
John B. Rogers Division Vice President
BRADENTON/SARASOTA Regional Vice President HOUSTON
David L. Hahn DENVER Mark D. Cady
President Andrew A. Warrick Catherine S. Stroud Division Vice President
Regional Vice President Division Vice President
PALM BEACH Richard D. Davis
W. Trent Bass CTX MORTGAGE COMPANY ENGLEWOOD Division Vice President
President BRANCH OFFICES Vicki L. Gjesdal
Division Vice President Joy L. Reichart
NAPLES/FORT MYERS WASHINGTON STATE Division Vice President
Timothy J. Ruemler BELLEVUE FORT COLLINS
President Vern Smith Karen C. Sipes Bob Tavel
Division Vice President Division Vice President Division Vice President
SOUTH FLORIDA
Henry E. Magnuson RENTON ARIZONA LEWISVILLE
President William W. Haines, Jr. PHOENIX Linda J. Frank
Division Vice President Kathleen A. Doyle Division Vice President
CTX BUILDERS SUPPLY Division Vice President
John Mikkelson OREGON PLANO
President PORTLAND Michael A. Neill Rodney J. Anderson
Michael G. Russell Division Vice President Division Vice President
CENTEX FINANCIAL Division Vice President
SERVICES GROUP NEW MEXICO SAN ANTONIO
CALIFORNIA ALBUQUERQUE Janis E. Anderson
Carl N. Hearne CONCORD W. Gregory Frost Division Vice President
Chairman Christie H. Craig Division Vice President
Division Vice President MINNESOTA
CTX MORTGAGE COMPANY Diane R. Nielsen MINNETONKA
DEL MAR Division Vice President Kristin K. Hoaglund
Judson H. Croom James C. Doan Division Vice President
President and Chief Division Vice President UTAH
Executive Officer SALT LAKE CITY ST. PAUL
ELK GROVE Kevin G. Haycock Stephen J. Lange
Mark L. Meyer Daniel V. Plant Division Vice President Division Vice President
Executive Vice President Division Vice President
and Chief Operating TEXAS ILLINOIS
Officer IRVINE ARLINGTON BLOOMINGDALE
Rhett A. Hubbard Barbara J. Pacetti Richard C. Grosse
Rick J. Carothers Division Vice President Division Vice President Division Vice President
Executive Vice President
L.A. TRI-COUNTY Peggy J. Rahall CHIGAGO
John L. Matthews Donald W. Petty Division Vice President Kelly A. Gleason
Executive Vice President Division Vice President Division Vice President
AUSTIN
Steven L. Deardorff RIVERSIDE Linda I. Ingram CRYSTAL LAKE
Senior Vice President Kimberly Firek Division Vice President James R. Sorenson
Division Vice President Division Vice President
Timothy M. Bartosh Ronnette L. Shay
Vice President SACRAMENTO Division Vice President LAKE COUNTY
Christie H. Craig Carl J. Macuiba
Debra R. Dunn Division Vice President CASTLE HILLS Division Vice President
Vice President Nancy S. Kramer
SAN DIEGO Division Vice President INDIANA
Carla M. Gustafson Scott D. Beyer INDIANAPOLIS
Vice President Division Vice President CORPUS CHRISTI Marsha L. Gibson-Buttery
Gloria A. Lopez Division Vice President
Belinda M. Nicholson SOUTHERN CALIFORNIA Division Vice President
Vice President Terri L. Hogerty OHIO
Division Vice President DALLAS COLUMBUS
Thomas E. Tuohy Patricia A. Donley Diane L. Gardner
Vice President VISALIA Division Vice President Division Vice President
Rebecca A. Vickers
Kimberly L. Yowell Division Vice President James C. McMahan II WISCONSIN
Vice President Division Vice President MILWAUKEE
NEVADA Steven W. Barbera
Ross T. Anderson RENO Ilda J. Putnam Division Vice President
Regional Vice President Gregory D. Shanklin Division Vice President
Division Vice President
Mary C. Callegari
Regional Vice President
Paul V. Diamond
Regional Vice President
</TABLE>
70
<PAGE> 73
CENTEX CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
RACINE NORTH CHARLESTON CENTEX TITLE, INSURANCE Pamela K. Wilson
Michael J. Bain Amanda J. Williams AND ESCROW OPERATIONS Manager
Division Vice President Division Vice President
Karren P. Bates UVALDE
TENNESSEE FLORIDA President Win A. Dubose
Manager
BRENTWOOD FORT LAUDERDALE COMMERCE LAND TITLE, INC.
A. Frederick Campbell Robin A. Karas METROPOLITAN TITLE AND
Division Vice President Division Vice President Gregory M. Lyssy GUARANTY COMPANY
Executive Vice President
NASHVILLE JACKSONVILLE Rebecca R. Winters
Vicki L. Wickline Marie M. McRee Randall P. Hood Executive Vice President
Division Vice President Division Vice President Vice President
FLORIDA EXAMINATION CENTER
MARYLAND Kelly L. Wainwright Monte R. Sturgeon Kevin M. Arruda
Division Vice President Vice President Manager
CROFTON
Charles B. Williams MIAMI GREATER DALLAS METROPOLITAN TITLE AND
Division Vice President John T. Mickel EXAMINATION CENTER GUARANTY COMPANY BRANCH
Division Vice President Bruce W. McRoberts OFFICES
GREENBELT Manager
Jane B. Williams NAPLES FLORIDA
Division Vice President Kathleen M. Garren COMMERCE LAND TITLE, INC.
Division Vice President BRANCH OFFICES BOYNTON BEACH
PENNSYLVANIA Valarie S. Gross
ORLANDO TEXAS Manager
PHILADELPHIA Brenda C. Nicola
Joseph P. Deltch Division Vice President ARLINGTON FORT LAUDERDALE
Division Vice President Cindy M. Hinson Kathleen M. Beckinsale
Gregory D. Pingston Manager Manager
VIRGINIA Division Vice President
AUSTIN JACKSONVILLE
CHANTILLY SARASOTA Janet S. Lucas Deborah M. Leavitt
M. Catherine Bell Todd A. Kolbe Manager Manager
Division Vice President Division Vice President
THE COLONY NAPLES
FAIRFAX TAMPA Carla B. Montgomery Rosa M. Peck
Patrick A. Miller Marsha G. Crowder Manager Manager
Division Vice President Division Vice President
HONDO ORLANDO
VIRGINIA BEACH Judith A. Fish Thomas J. Rothe Pamela A. Morton
R. Lee Pearson Division Vice President Manager Manager
Louis L. Tourgee
Division Vice Presidents TITUSVILLE LEWISVILLE SARASOTA
Linda L. Gray Lajuannah Wilson Susan B. Anderson
GEORGIA Division Vice President Manager Manager
ATLANTA WEST PALM BEACH NEW BRAUNFELS TAMPA
ROSWELL Diana K. Maguire Marva N. McCraw Debra Blackwell-Thompson
Laurie K. Tracy Division Vice President Manager Manager
Division Vice President
ALABAMA PLANO CENTEX INSURANCE AGENCIES
NORTH CAROLINA Connie D. Beale
HUNTSVILLE Manager Charles W. Hoffman
CHARLOTTE James C. Hunter Vice President and
Elizabeth H. South Division Vice President Linda S. Prockup Managing Director
Division Vice President Manager
TUSCALOOSA CENTEX ESCROW COMPANY
RALEIGH Ann G. Schieber SAN ANTONIO
K. Susan Tate Division Vice President Gwen J. Derry Patty E. Parsons
Division Vice President Manager Vice President
NOVA MORTGAGE CREDIT
Carter H. Ward CORPORATION Dinah K. Heilmann CENTEX ESCROW COMPANY
Division Vice President Manager BRANCH OFFICES
Richard L. Smith
SOUTH CAROLINA President David D. Mirmelli WASHINGTON
Manager
COLUMBIA Bruce A. Bly BELLEVUE
Hollie L. Davis Regional Vice President Connie Smith Patty E. Parson
Division Vice President Manager Manager
Gregory L. Auen
GREENVILLE Regional Vice President Laurel B. Stuckey FEDERAL WAY
Terri L. Davidson Manager Karen J. McMillan
Division Vice President Manager
</TABLE>
71
<PAGE> 74
CENTEX CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
CENTEX CONSTRUCTION GROUP, J. David Preston CENTEX-RODGERS James L. Johnson
INC. Vice President CONSTRUCTION COMPANY Vice President
Brice E. Hill John E. Reeves Edward A. Whitley Morgan D. King
President and Chief Vice President President and Chief Vice President
Executive Officer Executive Officer
William E. Reinhart George K. Koos
John P. Tarpey, Jr. Vice President Glen E. Pillow Vice President
Executive Vice President Executive Vice President
and Chief Operating Steven H. Williams James T. Norris
Officer Vice President W. Howard Allums Vice President
Senior Vice President
Christopher D. Genry CENTEX FORCUM LANNOM, INC. Albert J. Petrangeli
Vice President and Joseph T. Hatch, Jr. Vice President
Chief Financial Officer L.D. Pennington Senior Vice President
Chairman John W. Traxler
Eric J. Gerner Douglas H. Jones Vice President
Vice President-Finance David R. Taylor Senior Vice President
President and Chief J. Michael Wood
Frank J. Iuen III Executive Officer Rex E. Lewis Vice President
Vice President and Co- Senior Vice President
General Counsel Larry W. Rogers CENTEX HOME SERVICES
Senior Vice President Dennis R. Norvet COMPANY
Eric E. Krueger Senior Vice President
Vice President William F. Lamers Stephen M. Weinberg
Vice President and G. Roger Pitts President
Jeffery A. Neyland Treasurer Senior Vice President
Vice President G. Gaylon Hull
CENTEX GOLDEN CONSTRUCTION Joseph M. Stephens Vice President and
Charles R. Nixon COMPANY Senior Vice President and Controller
Vice President and Co- Treasurer
General Counsel John E. Bradel CENTEX ROOFING COMPANY
Vice President Alan B. Wooten
Richard M. Rantala Senior Vice President Jerry L. Morgan
Vice President Blaine L. Knoll President
Vice President CENTEX-ROONEY CONSTRUCTION
L. Donald Sumrell CO., INC. CENTEX SENIOR SERVICES
Vice President Jeffery A. Lage CORPORATION
Vice President Bob L. Moss
CENTEX CONSTRUCTION Chairman, President and Nat S. Leakey
COMPANY, INC. Paul J. Santangelo Chief Executive Officer Vice President
Vice President
Robert C. Van Cleave Frederick E. Wade Terry N. Whitman
Chairman and Chief Edwin M. Walsh Executive Vice President Vice President
Executive Officer Vice President
Gary W. Glenewinkel 3333 HOLDING CORPORATION
James L. Herndon CENTEX LANDIS CONSTRUCTION Senior Vice President AND SUBSIDIARY AND CENTEX
President COMPANY, INC. DEVELOPMENT COMPANY, L.P.
Raymond C. Southern
John D. Jeniec James C. Landis Senior Vice President BOARD OF DIRECTORS
Executive Vice President President and Chief
and Chief Operating Executive Officer Robert S. Baker, Jr. J. S. Bilheimer
Officer Vice President President
Kenneth K. Eshelman
M. Lamar Martin Senior Vice President and Jessie H. Brewer Josiah O. Low, III
Chief Financial Officer, Chief Operating Officer Vice President Managing Director,
Senior Vice President and Donaldson, Lufkin &
Treasurer James L. Clemmensen John W. Cammack Jenrette Securities
Vice President Vice President Corporation
Dewey W. Davis
Senior Vice President James M. Lewis Larry D. Casey David M. Sherer
Vice President Vice President President
Randall S. Howard Shenandoah Associates,
Senior Vice President Robert E. Collie Inc.
Vice President
Bruce W. Lady OFFICERS
Senior Vice President Gary P. Esporrin
Vice President, Controller J. S. Bilheimer
Stephen E. Yannucci and Treasurer President
Senior Vice President
W. Brooks Gilmore Roger D. Sefzik
Frank C. Dale Vice President Vice President and
Vice President Treasurer
David E. Hamlin
Christopher L. Davis Vice President
Vice President
Gary L. Huggins
George Keppler Vice President
Vice President
Robert W. Kriz
Vice President
Victorino A. Pangilinan
Vice President
</TABLE>
72
<PAGE> 75
CORPORATE HEADQUARTERS
3333 Lee Parkway
P.O. Box 199000
Dallas, TX 75219
(214) 559-6500
TRANSFER AGENT AND REGISTRAR
Chemical Mellon Shareholder Services
85 Challenger Road
Ridgefield Park, NJ 07660
STOCK LISTINGS
New York Stock Exchange
The International Stock Exchange (London)
Ticker Symbol "CTX"
ANNUAL MEETING
The Annual Meeting of Stockholders
of Centex Corporation and
3333 Holding Corporation will be
held on July 25, 1996 at 10:00 a.m.
in the auditorium of the Dallas Museum of Art,
1717 North Harwood, Dallas, Texas.
STOCKHOLDER INQUIRIES
Communications concerning transfer
requirements, lost certificates, dividends
or change of address should be sent to
Chemical Mellon Shareholder Services
at the address listed.
FORM 10-K
A copy of the Annual Report
on Form 10-K of Centex Corporation,
3333 Holding Corporation and Centex
Development Company, L.P. is available
upon request to the corporate secretary
at corporate headquarters.
<PAGE> 1
EXHIBIT 21.1
- --------------------------------------------------------------------------------
The following is a list of the subsidiaries of the Company, wholly-owned
unless otherwise stated. This list of subsidiaries includes all of the
significant subsidiaries of the Company as of May 1, 1996.
UNITED KINGDOM CORPORATIONS:
Centex Homes (UK) Limited
Charles Church Homes Limited
NEVADA CORPORATIONS:
Advanced Financial Technology, Inc.
Advanced Protections Systems, Inc.
Braewood Development Corp.
CDMC Holding, Inc.
Centex Acceptance Corporation
Centex Bateson Enterprises, Inc.
Centex Building Services, Inc.
Centex Collateralized Mortgage Corporation
Centex Construction Company, Inc.
Centex Construction Group, Inc.
Centex Credit Corporation
Centex Development Management Company
Centex Escrow Company
Centex Financial Corporation
Centex Financial Management Corporation
Centex Forcum Lannom, Inc.
Centex Golden Construction Company
Centex Home Services Company
Centex International, Inc.
Centex New Jersey Realty, Inc.
Centex Real Estate Construction Company
Centex Real Estate Corporation
Centex Realty Company
Centex-Rodgers Construction Company
Centex Roofing Company
Centex Senior Services Corporation
Centex Service Company
Centex-Simpson Construction Company, Inc.
Centex Technology, Inc.
Centex Title & Ancillary Services, Inc.
Commerce Land Title, Inc.
CTX Commercial Corporation
CTX Financial Corporation
CTX Holding Company
CTX Mortgage Company
CTX Mortgage Ventures Corporation
Enhanced Safetysystems, Inc.
4500 Finance Company
GHQ Company, Inc.
Great Lakes Development Co., Inc.
<PAGE> 2
NEVADA CORPORATIONS (CONTINUED):
Loan Processing Technologies, Inc.
M&W General Construction Company
Metropolitan Tax Service, Inc.
Mogul Water Company
Nova Mortgage Credit Corporation
Panoramic Land, Inc.
Residential Contractors, Inc.
San Juan Land Company
Vista Properties, Inc.
Vista Real Estate Development Company
DELAWARE CORPORATIONS:
Centex Construction Products, Inc.
Vista Mortgage & Realty, Inc.
FLORIDA CORPORATIONS:
Centex-Great Southwest Corporation
Centex-Rooney Construction Co., Inc.
Metropolitan Title & Guaranty Company
GEORGIA CORPORATIONS:
Centex-Hamby Construction, Inc.
Centex Homes Marketing, Inc.
ILLINOIS CORPORATIONS:
111 E. Chestnut Corporation
LOUISIANA CORPORATIONS:
Centex Landis Construction Co., Inc.
MICHIGAN CORPORATIONS:
Beauty Built Homes, Inc.
Centex-Aim Construction, L.L.C.
NORTH CAROLINA CORPORATIONS:
Bradfield Farms Water Company
John Crosland Acceptance Corporation Three
Crosland Bond Company
John Crosland Company
Genbond Two, Inc.
TEXAS CORPORATIONS:
Centex Bateson Construction Company, Inc.
Centex Homes, Inc.
Centex International, Inc.
Dundee Insurance Agency, Inc.
Fox & Jacobs, Inc.
Independent General Agency, Inc.
Panorama Development Corp.
1629 Service Corporation
<PAGE> 3
VERMONT CORPORATIONS:
Armor Insurance Company
PARTNERSHIPS:
American Priority Mortgage Company, L. P.
Bateson Dailey, a Joint Venture
Bayfront Associates, Ltd.
Blakeney Heath Venture Company
Centex Auchter, a Joint Venture
Centex Concord, General Partnership
Centex-Draper 156 Partnership
Centex-Draper 162 Partnership
Centex Engle Joint Venture
Centex/Goins Rash Cain, a Joint Venture
Centex Golden/Kimmel
Centex-Great Southwest Corporation/Construct Two, a Joint Venture
Centex Homes Company, General Partnership
Centex-Kensington (Mankato I) Partnership
Centex-Rodgers Construction Company-Construction
Control Services Corporation, a Joint Venture
Centex-Rodgers-Sorenson Gross, a Joint Venture
Centex-Rooney Construction Co., Inc.-Construct Two Construction
Managers, Inc., a Joint Venture
Centex Rooney Construction Co., Inc./Landis Company, Inc., a Joint Venture
Centex-Rooney National Development, J.V.
Centex-Rooney/Sierra, J.V.
Centex-Schaumberg Industrial Park
Central Park Professional Center
COINS #1 CCMC A FB
COINS #9 CAC I, J & K, FB
Crosland Acceptance Associates V, a General Partnership
Golden-C A B, Joint Venture
Golden Turner, a Joint Venture
Mortgage Acceptance Associates No. 2, a North Carolina General Partnership
Mortgage Collateral Associates No. 1, a General Partnership
Mortgage Collateral Associates No. 3, a General Partnership
Palmdale 101
Vista Partners, a Nevada General Partnership
All of the Company's subsidiaries are included in the Consolidated
Financial Statements of the Company incorporated by reference into this Form
10-K from the Centex 1996 Annual Report to Stockholders.
- ---------------------------------
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in the previously filed registration statements on Form S-3 (number
33-61223) and Form S-8 (numbers 33-44575; 33-29174; 2-95271; 2-51637; 2-54043;
2-59535; 2-68747; 2-78831; 33-55083) of our report dated May 8, 1996,
incorporated by reference to Centex Corporation's Annual Report on Form 10-K
for the year ended March 31, 1996, and to all references to our firm included
in these registration statements.
Arthur Andersen LLP
Dallas, Texas,
May 20, 1996
<PAGE> 2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in this
Form 10-K of our report dated May 8, 1996, relating to the March 31, 1996
consolidated financial statements of Centex Construction Products, Inc.
Arthur Andersen LLP
Dallas, Texas,
May 20, 1996
<PAGE> 1
EXHIBIT 24.1
CENTEX CORPORATION
POWER OF ATTORNEY
THE UNDERSIGNED hereby constitutes and appoints Laurence E. Hirsch and
David W. Quinn, or either of such individuals, with full power of substitution
in the premises, as the undersigned's true and lawful agents and
attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in
the name and on behalf of the undersigned, in his capacity as a Director of
Centex Corporation (the "Company"), to execute and file with the Securities and
Exchange Commission the Company's Annual Report on Form 10-K for the Company's
fiscal year ended March 31, 1996, together with any and all amendments thereto.
This Power of Attorney and all authority granted and conferred hereby
shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may
not be revoked until the Attorneys-in-Fact have received five days' written
notice of such revocation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 20th day of May, 1996.
/s/ Alan B. Coleman
---------------------------
Alan B. Coleman
Director
Centex Corporation
<PAGE> 2
CENTEX CORPORATION
POWER OF ATTORNEY
THE UNDERSIGNED hereby constitutes and appoints Laurence E. Hirsch and
David W. Quinn, or either of such individuals, with full power of substitution
in the premises, as the undersigned's true and lawful agents and
attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in
the name and on behalf of the undersigned, in his capacity as a Director of
Centex Corporation (the "Company"), to execute and file with the Securities and
Exchange Commission the Company's Annual Report on Form 10-K for the Company's
fiscal year ended March 31, 1996, together with any and all amendments thereto.
This Power of Attorney and all authority granted and conferred hereby
shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may
not be revoked until the Attorneys-in-Fact have received five days' written
notice of such revocation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 20th day of May, 1996.
/s/ Dan W. Cook III
---------------------------
Dan W. Cook III
Director
Centex Corporation
<PAGE> 3
CENTEX CORPORATION
POWER OF ATTORNEY
THE UNDERSIGNED hereby constitutes and appoints Laurence E. Hirsch and
David W. Quinn, or either of such individuals, with full power of substitution
in the premises, as the undersigned's true and lawful agents and
attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in
the name and on behalf of the undersigned, in his capacity as a Director of
Centex Corporation (the "Company"), to execute and file with the Securities and
Exchange Commission the Company's Annual Report on Form 10-K for the Company's
fiscal year ended March 31, 1996, together with any and all amendments thereto.
This Power of Attorney and all authority granted and conferred hereby
shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may
not be revoked until the Attorneys-in-Fact have received five days' written
notice of such revocation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 20th day of May, 1996.
/s/ Juan L. Elek
---------------------------
Juan L. Elek
Director
Centex Corporation
<PAGE> 4
CENTEX CORPORATION
POWER OF ATTORNEY
THE UNDERSIGNED hereby constitutes and appoints Laurence E. Hirsch and
David W. Quinn, or either of such individuals, with full power of substitution
in the premises, as the undersigned's true and lawful agents and
attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in
the name and on behalf of the undersigned, in his capacity as a Director of
Centex Corporation (the "Company"), to execute and file with the Securities and
Exchange Commission the Company's Annual Report on Form 10-K for the Company's
fiscal year ended March 31, 1996, together with any and all amendments thereto.
This Power of Attorney and all authority granted and conferred hereby
shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may
not be revoked until the Attorneys-in-Fact have received five days' written
notice of such revocation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 20th day of May, 1996.
/s/ William J Gillilan III
-----------------------------
William J Gillilan III
Director
Centex Corporation
<PAGE> 5
CENTEX CORPORATION
POWER OF ATTORNEY
THE UNDERSIGNED hereby constitutes and appoints David W. Quinn, with
full power of substitution in the premises, as his true and lawful agent and
attorney-in-fact (the "Attorney-in-Fact"), with full power and authority in the
name and on behalf of the undersigned, in his capacity as a Director of Centex
Corporation (the "Company"), to execute and file with the Securities and
Exchange Commission the Company's Annual Report on Form 10-K for the Company's
fiscal year ended March 31, 1996, together with any and all amendments thereto.
This Power of Attorney and all authority granted and conferred hereby
shall continue indefinitely and, unless waived by the Attorney-in-Fact, may not
be revoked until the Attorney-in-Fact has received five days' written notice of
such revocation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 20th day of May, 1996.
/s/ Laurence E. Hirsch
---------------------------
Laurence E. Hirsch
Director
Centex Corporation
<PAGE> 6
CENTEX CORPORATION
POWER OF ATTORNEY
THE UNDERSIGNED hereby constitutes and appoints Laurence E. Hirsch and
David W. Quinn, or either of such individuals, with full power of substitution
in the premises, as the undersigned's true and lawful agents and
attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in
the name and on behalf of the undersigned, in his capacity as a Director of
Centex Corporation (the "Company"), to execute and file with the Securities and
Exchange Commission the Company's Annual Report on Form 10-K for the Company's
fiscal year ended March 31, 1996, together with any and all amendments thereto.
This Power of Attorney and all authority granted and conferred hereby
shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may
not be revoked until the Attorneys-in-Fact have received five days' written
notice of such revocation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 20 day of May, 1996.
/s/ Clint W. Murchison, III
-------------------------------
Clint W. Murchison, III
Director
Centex Corporation
<PAGE> 7
CENTEX CORPORATION
POWER OF ATTORNEY
THE UNDERSIGNED hereby constitutes and appoints Laurence E. Hirsch and
David W. Quinn, or either of such individuals, with full power of substitution
in the premises, as the undersigned's true and lawful agents and
attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in
the name and on behalf of the undersigned, in his capacity as a Director of
Centex Corporation (the "Company"), to execute and file with the Securities and
Exchange Commission the Company's Annual Report on Form 10-K for the Company's
fiscal year ended March 31, 1996, together with any and all amendments thereto.
This Power of Attorney and all authority granted and conferred hereby
shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may
not be revoked until the Attorneys-in-Fact have received five days' written
notice of such revocation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 20th day of May, 1996.
/s/ Charles H. Pistor
---------------------------
Charles H. Pistor
Director
Centex Corporation
<PAGE> 8
CENTEX CORPORATION
POWER OF ATTORNEY
THE UNDERSIGNED hereby constitutes and appoints Laurence E. Hirsch,
with full power of substitution in the premises, as the undersigned's true and
lawful agent and attorney-in-fact (the "Attorney-in-Fact"), with full power and
authority in the name and on behalf of the undersigned, in his capacity as a
Director of Centex Corporation (the "Company"), to execute and file with the
Securities and Exchange Commission the Company's Annual Report on Form 10-K for
the Company's fiscal year ended March 31, 1996, together with any and all
amendments thereto.
This Power of Attorney and all authority granted and conferred hereby
shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may
not be revoked until the Attorneys-in-Fact have received five days' written
notice of such revocation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 20th day of May, 1996.
/s/ David W. Quinn
---------------------------
David W. Quinn
Director
Centex Corporation
<PAGE> 9
CENTEX CORPORATION
POWER OF ATTORNEY
THE UNDERSIGNED hereby constitutes and appoints Laurence E. Hirsch and
David W. Quinn, or either of such individuals, with full power of substitution
in the premises, as the undersigned's true and lawful agents and
attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in
the name and on behalf of the undersigned, in his capacity as a Director of
Centex Corporation (the "Company"), to execute and file with the Securities and
Exchange Commission the Company's Annual Report on Form 10-K for the Company's
fiscal year ended March 31, 1996, together with any and all amendments thereto.
This Power of Attorney and all authority granted and conferred hereby
shall continue indefinitely and, unless waived by the Attorney-in-Fact, may not
be revoked until the Attorney-in-Fact has received five days' written notice of
such revocation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 20th day of May, 1996.
/s/ Paul R. Seegers
---------------------------
Paul R. Seegers
Director
Centex Corporation
<PAGE> 10
CENTEX CORPORATION
POWER OF ATTORNEY
THE UNDERSIGNED hereby constitutes and appoints Laurence E. Hirsch and
David W. Quinn, or either of such individuals, as the undersigned's true and
lawful agents and attorneys-in-fact (the "Attorneys-in-Fact"), with full power
and authority in the name and on behalf of the undersigned, in his capacity as
a Director of Centex Corporation (the "Company"), to execute and file with the
Securities and Exchange Commission the Company's Annual Report on Form 10-K for
the Company's fiscal year ended March 31, 1996, together with any and all
amendments thereto.
This Power of Attorney and all authority granted and conferred hereby
shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may
not be revoked until the Attorneys-in-Fact have received five days' written
notice of such revocation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 20th day of May, 1996.
/s/ Paul T. Stoffel
---------------------------
Paul T. Stoffel
Director
Centex Corporation
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CENTEX
CORPORATION'S MARCH 31, 1996, FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000018532
<NAME> CENTEX CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 14,042
<SECURITIES> 0
<RECEIVABLES> 910,559
<ALLOWANCES> 0
<INVENTORY> 1,205,450
<CURRENT-ASSETS> 0
<PP&E> 84,376
<DEPRECIATION> 47,237
<TOTAL-ASSETS> 2,336,966
<CURRENT-LIABILITIES> 0
<BONDS> 321,002
<COMMON> 7,107
0
0
<OTHER-SE> 715,729
<TOTAL-LIABILITY-AND-EQUITY> 2,336,966
<SALES> 3,102,987
<TOTAL-REVENUES> 3,128,615
<CGS> 2,984,998
<TOTAL-COSTS> 2,984,998
<OTHER-EXPENSES> 14,969
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,862
<INCOME-PRETAX> 87,786
<INCOME-TAX> 34,421
<INCOME-CONTINUING> 53,365
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,365
<EPS-PRIMARY> 1.83
<EPS-DILUTED> 0.00
</TABLE>
<PAGE> 1
EXHIBIT 21.2
- --------------------------------------------------------------------------------
The following list of subsidiaries of 3333 Holding Corporation,
wholly-owned unless otherwise stated, includes all of the significant
subsidiaries of 3333 Holding Corporation as of May 1, 1996:
NEVADA CORPORATIONS:
CDC MF1, LLC
3333 Development Corporation
PARTNERSHIPS:
Arbors of Wolf Pen Creek Partners
Centex Development Company, L.P.
All of the Company's subsidiaries are included in the Consolidated
Financial Statements of the Company incorporated by reference into this Form
10-K from the Centex 1996 Annual Report to Stockholders.
- ----------------------------------------
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in the previously filed registration statements on Form S-8 (numbers
33-44575; 33-29174; 2-95271; 2-51637; 2-54043; 2-59535; 2-68747; 2-78831;
33-55083-01; 33-55083-02) of our report dated May 8, 1996, incorporated by
reference to the 3333 Holding Corporation and Subsidiary and Centex Development
Company, L.P. Annual Report on Form 10-K for the year ended March 31, 1996, and
to all references to our firm included in these registration statements.
Arthur Andersen LLP
Dallas, Texas,
May 20, 1996
<PAGE> 1
EXHIBIT 24.2
3333 HOLDING CORPORATION
POWER OF ATTORNEY
THE UNDERSIGNED hereby constitutes and appoints J. Stephen Bilheimer,
with full power of substitution in the premises, as the undersigned's true and
lawful agent and attorney-in-fact (the "Attorney-in-Fact"), with full power and
authority in the name and on behalf of the undersigned, in his capacity as a
Director of 3333 Holding Corporation (the "Company"), to execute and file with
the Securities and Exchange Commission the Company's Annual Report on Form 10-K
for the Company's fiscal year ended March 31, 1996, together with any and all
amendments thereto.
This Power of Attorney and all authority granted and conferred hereby
shall continue indefinitely and, unless waived by the Attorney-in-Fact, may not
be revoked until the Attorney-in-Fact has received five days' written notice of
such revocation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 20th day of May, 1996.
/s/ Josiah O. Low, III
------------------------------
Josiah O. Low, III
Director
3333 Holding Corporation
<PAGE> 2
3333 HOLDING CORPORATION
POWER OF ATTORNEY
THE UNDERSIGNED hereby constitutes and appoints J. Stephen Bilheimer,
with full power of substitution in the premises, as the undersigned's true and
lawful agent and attorney-in-fact (the "Attorney-in-Fact"), with full power and
authority in the name and on behalf of the undersigned, in his capacity as a
Director of 3333 Holding Corporation (the "Company"), to execute and file with
the Securities and Exchange Commission the Company's Annual Report on Form 10-K
for the Company's fiscal year ended March 31, 1996, together with any and all
amendments thereto.
This Power of Attorney and all authority granted and conferred hereby
shall continue indefinitely and, unless waived by the Attorney-in-Fact, may not
be revoked until the Attorney-in-Fact has received five days' written notice of
such revocation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 20 day of May, 1996.
----
/s/ David M. Sherer
------------------------------
David M. Sherer
Director
3333 Holding Corporation
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 3333 HOLDING
CORPORATION'S MARCH 31, 1996, FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000818762
<NAME> 3333 HOLDING CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 6
<SECURITIES> 0
<RECEIVABLES> 7,879
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,652
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 1
0
0
<OTHER-SE> 471
<TOTAL-LIABILITY-AND-EQUITY> 8,652
<SALES> 2,045
<TOTAL-REVENUES> 2,045
<CGS> 1,792
<TOTAL-COSTS> 1,792
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 253
<INCOME-TAX> 0
<INCOME-CONTINUING> 253
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 253
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
<PAGE> 1
EXHIBIT 10.9
WAIVER AGREEMENT
This Waiver Agreement (this "Agreement") dated as of the 28th day of
July, 1995, by and between Centex Real Estate Corporation ("CREC") and 3333
Development Corporation ("3333 Development").
WHEREAS, 3333 Development is the General Partner and CREC is the sole
limited partner of Centex Development Company, L.P. ("CDC"). The Amended and
Restated Agreement of Limited Partnership of CDC (the "Partnership Agreement")
provides, among other things, that CREC is entitled to receive from CDC an
amount equal to 9% per annum cumulative preferred return (the "Preferred
Return") on the outstanding difference from time to time between $76 million
(the value of the properties initially contributed to CDC by CREC and its
predecessors in interest) (the "Capital Contribution") and the aggregate cash
distributions previously received by CREC with respect thereto, and payments to
return the Capital Contribution;
WHEREAS, CDC has not made any material payments to CREC to repay the
Capital Contribution;
WHEREAS, CDC has not made any payment of Preferred Return to CREC
during the last five fiscal years; and
WHEREAS, CREC has agreed to (i) reduce the Capital Contribution to be
paid by CDC to CREC to $47,260,997 and (ii) waive the payment by CDC of all
unpaid Preferred Return through July 31, 1995;
NOW, THEREFORE, for an in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. The Capital Contribution to be repaid to CREC by CDC is hereby
reduced to $47,260,997.
2. CREC hereby waives payment of the Preferred Return payable to
it by CDC through July 31, 1995. Subject to the provisions of paragraph 1.
above, which reduces the amount of the Capital Contribution on which the
Preferred Return is calculated, Preferred Return accruing from and after August
1, 1996 shall continue to be due and payable by CDC in accordance with the
terms and conditions of the Partnership Agreement.
3. The Partnership Agreement is hereby amended to reflect the
foregoing waivers. Except as specifically modified hereby, all terms,
provisions and conditions of the Partnership Agreement will remain in full
force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto hereby execute and deliver this
Waiver Agreement as of the date first set forth above.
CENTEX REAL ESTATE CORPORATION
By: /s/ Timothy R. Eller
------------------------------
Name: Timothy R. Eller
Title: President
3333 DEVELOPMENT CORPORATION
By: /s/ J. Stephen Bilheimer
------------------------------
Name: J. Stephen Bilheimer
Title: President
CENTEX DEVELOPMENT COMPANY, LP
By: 3333 Development Company, General Partner
By: /s/ J. Stephen Bilheimer
------------------------------
Name: J. Stephen Bilheimer
Title: President
<PAGE> 1
EXHIBIT 10.10
WAIVER AGREEMENT
This Waiver Agreement (this "Agreement") dated as of September 13,
1995 but effective as of July 1, 1995, by and between Centex Real Estate
Corporation ("CREC") and 3333 Development Corporation ("3333 Development").
WHEREAS, 3333 Development is the General Partner and CREC is the sole
limited partner of Centex Development Company, L.P. ("CDC"). The Amended and
Restated Agreement of Limited Partnership of CDC (the "Partnership Agreement")
provides, among other things, that CREC is entitled to receive from CDC an
amount equal to 9% per annum cumulative preferred return (the "Preferred
Return") on the outstanding difference from time to time between $76 million
(the value of the properties initially contributed to CDC by CREC and its
predecessors in interest) (the "Capital Contribution") and the aggregate cash
distributions previously received by CREC with respect thereto, and payments to
return the Capital Contribution;
WHEREAS, the Partnership Agreement provides that all payments by CREC
to CDC shall first be applied to payment of the Preferred Return; and
WHEREAS, CREC has agreed to apply a payment from CDC as a reduction to
the Capital Contribution rather than to Preferred Return;
NOW, THEREFORE, for an in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. The $3,500,000 payment made by CDC to CREC on September 13,
1995 shall be applied to reduce the Capital Contribution effective as of July
1, 1995 by that amount. From and after the effective date of such payment, the
calculation of Preferred Return payable by CDC shall reflect such reduction in
the Capital Contribution.
2. The Partnership Agreement is hereby amended to reflect the
foregoing waiver. Except as specifically modified hereby, all terms,
provisions and conditions of the Partnership Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto hereby execute and deliver this
Agreement as of the date set forth above.
CENTEX REAL ESTATE CORPORATION 3333 DEVELOPMENT CORPORATION
By: /s/ Timothy R. Eller By: /s/ J. Stephen Bilheimer
------------------------------ ------------------------------
Name: Timothy R. Eller Name: J. Stephen Bilheimer
Title: President Title: President
CENTEX DEVELOPMENT COMPANY, LP
By: 3333 Development Company, General Partner
By: /s/ J. Stephen Bilheimer
------------------------------
Name: J. Stephen Bilheimer
Title: President
<PAGE> 1
EXHIBIT 10.11
WAIVER AGREEMENT
This Waiver Agreement (this "Agreement") dated as of September 27,
1995 but effective as of July 1, 1995, by and between Centex Real Estate
Corporation ("CREC") and 3333 Development Corporation ("3333 Development").
WHEREAS, 3333 Development is the General Partner and CREC is the sole
limited partner of Centex Development Company, L.P. ("CDC"). The Amended and
Restated Agreement of Limited Partnership of CDC (the "Partnership Agreement")
provides, among other things, that CREC is entitled to receive from CDC an
amount equal to 9% per annum cumulative preferred return (the "Preferred
Return") on the outstanding difference from time to time between $76 million
(the value of the properties initially contributed to CDC by CREC and its
predecessors in interest) (the "Capital Contribution") and the aggregate cash
distributions previously received by CREC with respect thereto, and payments to
return the Capital Contribution;
WHEREAS, the Partnership Agreement provides that all payments by CREC
to CDC shall first be applied to payment of the Preferred Return; and
WHEREAS, CREC has agreed to apply a payment from CDC as a reduction to
the Capital Contribution rather than to Preferred Return;
NOW, THEREFORE, for an in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. The $300,000 payment made by CDC to CREC on September 27, 1995
shall be applied to reduce the Capital Contribution effective as of July 1,
1995 by that amount. From and after the effective date of such payment, the
calculation of Preferred Return payable by CDC shall reflect such reduction in
the Capital Contribution.
2. The Partnership Agreement is hereby amended to reflect the
foregoing waiver. Except as specifically modified hereby, all terms,
provisions and conditions of the Partnership Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto hereby execute and deliver this
Agreement as of the date set forth above.
CENTEX REAL ESTATE CORPORATION 3333 DEVELOPMENT CORPORATION
By: /s/ Timothy R. Eller By: /s/ J. Stephen Bilheimer
------------------------------ ------------------------------
Name: Timothy R. Eller Name: J. Stephen Bilheimer
Title: President Title: President
CENTEX DEVELOPMENT COMPANY, LP
By: 3333 Development Company, General Partner
By: /s/ J. Stephen Bilheimer
------------------------------
Name: J. Stephen Bilheimer
Title: President
<PAGE> 1
EXHIBIT 10.12
WAIVER AGREEMENT
This Waiver Agreement (this "Agreement") dated as of December 31, 1995
by and between Centex Real Estate Corporation ("CREC") and 3333 Development
Corporation ("3333 Development").
WHEREAS, 3333 Development is the General Partner and CREC is the sole
limited partner of Centex Development Company, L.P. ("CDC"). The Amended and
Restated Agreement of Limited Partnership of CDC (the "Partnership Agreement")
provides, among other things, that CREC is entitled to receive from CDC an
amount equal to 9% per annum cumulative preferred return (the "Preferred
Return") on the outstanding difference from time to time between $76 million
(the value of the properties initially contributed to CDC by CREC and its
predecessors in interest) (the "Capital Contribution") and the aggregate cash
distributions previously received by CREC with respect thereto, and payments to
return the Capital Contribution;
WHEREAS, the Partnership Agreement provides that all payments by CREC
to CDC shall first be applied to payment of the Preferred Return; and
WHEREAS, CREC has agreed to apply a payment from CDC as a reduction to
the Capital Contribution rather than to Preferred Return;
NOW, THEREFORE, for an in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. The $2,500,000 payment made by CDC to CREC on December 31,
1995 shall be applied to reduce the Capital Contribution by that amount. From
and after the effective date of such payment, the calculation of Preferred
Return payable by CDC shall reflect such reduction in the Capital Contribution.
2. The Partnership Agreement is hereby amended to reflect the
foregoing waiver. Except as specifically modified hereby, all terms,
provisions and conditions of the Partnership Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto hereby execute and deliver this
Agreement as of the date set forth above.
CENTEX REAL ESTATE CORPORATION 3333 DEVELOPMENT CORPORATION
By: /s/ Timothy R. Eller By: /s/ J. Stephen Bilheimer
------------------------------ ------------------------------
Name: Timothy R. Eller Name: J. Stephen Bilheimer
Title: President Title: President
CENTEX DEVELOPMENT COMPANY, LP
By: 3333 Development Company, General Partner
By: /s/ J. Stephen Bilheimer
------------------------------
Name: J. Stephen Bilheimer
Title: President
<PAGE> 1
EXHIBIT 10.13
WAIVER AGREEMENT
This Waiver Agreement (this "Agreement") dated as of March 29, 1996 by
and between Centex Real Estate Corporation ("CREC") and 3333 Development
Corporation ("3333 Development").
WHEREAS, 3333 Development is the General Partner and CREC is the sole
limited partner of Centex Development Company, L.P. ("CDC"). The Amended and
Restated Agreement of Limited Partnership of CDC (the "Partnership Agreement")
provides, among other things, that CREC is entitled to receive from CDC an
amount equal to 9% per annum cumulative preferred return (the "Preferred
Return") on the outstanding difference from time to time between $76 million
(the value of the properties initially contributed to CDC by CREC and its
predecessors in interest) (the "Capital Contribution") and the aggregate cash
distributions previously received by CREC with respect thereto, and payments to
return the Capital Contribution;
WHEREAS, the Partnership Agreement provides that all payments by CREC
to CDC shall first be applied to payment of the Preferred Return; and
WHEREAS, CREC has agreed to apply a payment from CDC as a reduction to
the Capital Contribution rather than to Preferred Return;
NOW, THEREFORE, for an in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. The $1,700,000 payment made by CDC to CREC on March 29, 1996
shall be applied to reduce the Capital Contribution by that amount. From and
after the effective date of such payment, the calculation of Preferred Return
payable by CDC shall reflect such reduction in the Capital Contribution.
2. The Partnership Agreement is hereby amended to reflect the
foregoing waiver. Except as specifically modified hereby, all terms,
provisions and conditions of the Partnership Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto hereby execute and deliver this
Agreement as of the date set forth above.
CENTEX REAL ESTATE CORPORATION 3333 DEVELOPMENT CORPORATION
By: /s/ Timothy R. Eller By: /s/ J. Stephen Bilheimer
------------------------------ ------------------------------
Name: Timothy R. Eller Name: J. Stephen Bilheimer
Title: President Title: President
CENTEX DEVELOPMENT COMPANY, LP
By: 3333 Development Company, General Partner
By: /s/ J. Stephen Bilheimer
------------------------------
Name: J. Stephen Bilheimer
Title: President
<PAGE> 1
EXHIBIT 10.14
WAIVER AGREEMENT
This Waiver Agreement (this "Agreement") dated as of January 8, 1996
but effective as of January 1, 1996, by and between Centex Real Estate
Corporation ("CREC") and 3333 Development Corporation ("3333 Development").
WHEREAS, 3333 Development is the General Partner and CREC is the sole
limited partner of Centex Development Company, L.P. ("CDC"). The Amended and
Restated Agreement of Limited Partnership of CDC (the "Partnership Agreement")
provides, among other things, that CREC is entitled to receive from CDC an
amount equal to 9% per annum cumulative preferred return (the "Preferred
Return") on the outstanding difference from time to time between $76 million
(the value of the properties initially contributed to CDC by CREC and its
predecessors in interest) (the "Capital Contribution") and the aggregate cash
distributions previously received by CREC with respect thereto, and payments to
return the Capital Contribution;
WHEREAS, the Partnership Agreement provides that all payments by CREC
to CDC shall first be applied to payment of the Preferred Return; and
WHEREAS, CREC has agreed to apply a payment from CDC as a reduction to
the Capital Contribution rather than to Preferred Return;
NOW, THEREFORE, for an in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. The $2,000,000 payment made by CDC to CREC on January 8, 1996
shall be applied to reduce the Capital Contribution effective as of January 1,
1996 by that amount. From and after the effective date of such payment, the
calculation of Preferred Return payable by CDC shall reflect such reduction in
the Capital Contribution.
2. The Partnership Agreement is hereby amended to reflect the
foregoing waiver. Except as specifically modified hereby, all terms,
provisions and conditions of the Partnership Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto hereby execute and deliver this
Agreement as of the date set forth above.
CENTEX REAL ESTATE CORPORATION 3333 DEVELOPMENT CORPORATION
By: /s/ Timothy R. Eller By: /s/ J. Stephen Bilheimer
------------------------------ -----------------------------
Name: Timothy R. Eller Name: J. Stephen Bilheimer
Title: President Title: President
CENTEX DEVELOPMENT COMPANY, LP
By: 3333 Development Company, General Partner
By: /s/ J. Stephen Bilheimer
------------------------------
Name: J. Stephen Bilheimer
Title: President
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in the previously filed registration statements on Form S-8 (numbers
33-44575; 33-29174; 2-95271; 2-51637; 2-54043; 2-59535; 2-68747; 2-78831;
33-55083-01; 33-55083-02) of our report dated May 8, 1996, incorporated by
reference to the 3333 Holding Corporation and Subsidiary and Centex Development
Company, L.P. Annual Report on Form 10-K for the year ended March 31, 1996, and
to all references to our firm included in these registration statements.
Arthur Andersen LLP
Dallas, Texas,
May 20, 1996
<PAGE> 1
EXHIBIT 24.3
CENTEX DEVELOPMENT COMPANY, L.P.
POWER OF ATTORNEY
THE UNDERSIGNED hereby constitutes and appoints J. Stephen Bilheimer,
with full power of substitution in the premises, as the undersigned's true and
lawful agent and attorney-in-fact (the "Attorney-in-Fact"), with full power and
authority in the name and on behalf of the undersigned, in his capacity as a
Director of 3333 Development Corporation, as the general partner of Centex
Development Company, L.P. (the "Company"), to execute and file with the
Securities and Exchange Commission the Company's Annual Report on Form 10-K for
the Company's fiscal year ended March 31, 1996, together with any and all
amendments thereto.
This Power of Attorney and all authority granted and conferred hereby
shall continue indefinitely and, unless waived by the Attorney-in-Fact, may not
be revoked until the Attorney-in-Fact has received five days' written notice of
such revocation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 20 day of May, 1996.
----
/s/ Josiah O. Low, III
-----------------------------------
Josiah O. Low, III
Director
3333 Development Corporation,
General Partner of Centex Development
Company, L.P.
<PAGE> 2
CENTEX DEVELOPMENT COMPANY, L.P.
POWER OF ATTORNEY
THE UNDERSIGNED hereby constitutes and appoints J. Stephen Bilheimer,
with full power of substitution in the premises, as the undersigned's true and
lawful agent and attorney-in-fact (the "Attorney-in-Fact"), with full power and
authority in the name and on behalf of the undersigned, in his capacity as a
Director of 3333 Development Corporation, as the general partner of Centex
Development Company, L.P. (the "Company"), to execute and file with the
Securities and Exchange Commission the Company's Annual Report on Form 10-K for
the Company's fiscal year ended March 31, 1996, together with any and all
amendments thereto.
This Power of Attorney and all authority granted and conferred hereby
shall continue indefinitely and, unless waived by the Attorney-in-Fact, may not
be revoked until the Attorney-in-Fact has received five days' written notice of
such revocation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 20 day of May, 1996.
----
/s/ David M. Sherer
-----------------------------------
David M. Sherer
Director
3333 Development Corporation,
General Partner of Centex Development
Company, L.P.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CENTEX
DEVELOPMENT COMPANY L.P.'S MARCH 31, 1996, FORM 10-K AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000818764
<NAME> CENTEX DEVELOPMENT COMPANY, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 225
<SECURITIES> 0
<RECEIVABLES> 4,257
<ALLOWANCES> 0
<INVENTORY> 38,506
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 43,168
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 500
0
0
<OTHER-SE> 36,784
<TOTAL-LIABILITY-AND-EQUITY> 43,168
<SALES> 13,943
<TOTAL-REVENUES> 13,943
<CGS> 13,919
<TOTAL-COSTS> 13,919
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 24
<INCOME-TAX> 0
<INCOME-CONTINUING> 24
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
