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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
JOINT ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1999
<TABLE>
<S> <C>
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.)
2728 N. HARWOOD, DALLAS, TEXAS 75201 3100 MCKINNON, SUITE 370, DALLAS, TEXAS 75201
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE, INCLUDING ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE, INCLUDING ZIP CODE)
(214) 981-5000 (214) 981-6700
(REGISTRANT'S TELEPHONE NUMBER) (REGISTRANTS' TELEPHONE NUMBER)
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<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 EXCHANGE COMMON STOCK NEW YORK STOCK EXCHANGE
($.25 PAR VALUE) ($.01 PAR VALUE)
THE LONDON STOCK EXCHANGE THE LONDON STOCK EXCHANGE
LIMITED LIMITED
CENTEX DEVELOPMENT COMPANY, L.P.
WARRANTS TO PURCHASE NEW YORK STOCK EXCHANGE
CLASS B UNITS OF
LIMITED PARTNERSHIP THE LONDON STOCK EXCHANGE
INTEREST EXPIRING LIMITED
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 June 1, 1999 was approximately $2.2
billion.
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 June 1, 1999:
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<S> <C> <C>
Centex Corporation Common Stock 59,441,124 shares
3333 Holding Corporation Common Stock 1,000 shares
Centex Development Company, L.P. Class A Units of Limited Partnership Interest 32,260 units
Centex Development Company, L.P. Class C Units of Limited Partnership Interest 26,987 units
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference in Parts A.III
and B.III of this Report:
(a) Proxy statements for the annual meetings of stockholders of Centex
Corporation and 3333 Holding Corporation held on July 22, 1999.
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JOINT ANNUAL REPORT ON
FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 1999
CENTEX CORPORATION AND SUBSIDIARIES
AND
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
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
(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 constitute 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
London Stock Exchange Limited 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
the Partnership were each organized in 1987 in connection with the distribution.
3333 Development Corporation, a wholly-owned subsidiary of Holding
("Development"), holds a 1% interest in, and is the sole general partner of, the
Partnership. Centex indirectly owns 100% of the Class A Units and 100% of the
Class C Units of limited partnership interest in the Partnership, which units
are collectively convertible into 20% of the Class B Units of limited
partnership in the Partnership. Please refer to the ownership chart on page 3.
At present, Centex, Holding and the Partnership 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, 1999 (the "Report") relates to Centex and its subsidiaries.
PART B of this Report relates to Holding (and its subsidiary, Development) and
to the Partnership.
This Report should be read in conjunction with the proxy
statements of Centex and Holding in connection with their respective 1999 annual
meetings of stockholders. For a complete understanding of the tandem traded
securities, PART A and PART B of this Report should be read in combination.
2
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Information concerning the earnings and financial condition of the three
companies, on an aggregate basis, is included in Note (F) of the Notes to
Consolidated Financial Statements of Centex Corporation and subsidiaries on
pages 58-60 of this Report.
For a description of this ownership chart, please see the Joint Explanatory Note
on the previous page.
<TABLE>
<CAPTION>
OWNERSHIP CHART
<S> <C> <C>
PUBLIC STOCKHOLDERS
-------------------
CENTEX CORPORATION NOMINEE
------------------ -------
[5]
OTHER INTERMEDIATE 3333 HOLDING
SUBSIDIARIES SUBSIDIARIES[1] [2] CORPORATION
- ------------ ------------ ------------
3333
CENTEX HOMES DEVELOPMENT
------------ CORPORATION
-----------
[3] [4]
CENTEX
DEVELOPMENT
COMPANY, L.P.
-------------
</TABLE>
1. Warrants to purchase 100 Class B Units
2. Warrants to purchase 900 Class B Units
3. 32,260.085 (100%) Class A Units and 26,986.515 (100%) Class C Units
collectively convertible into 20% of total Class B Units
4. 100% General Partnership Interest (representing a 1% partnership interest)
5. 1,000 Shares (100%) of Holding Common Stock
3
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TABLE OF CONTENTS
FORM 10-K
<TABLE>
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PAGE
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<S> <C>
JOINT EXPLANATORY STATEMENT .........................................................................................2
PART A. CENTEX CORPORATION AND SUBSIDIARIES
- -------
PART I
Item 1. Business .........................................................................................6
Item 2. Properties ........................................................................................24
Item 3. Legal Proceedings ...............................................................................25
Item 4. Submission of Matters to a Vote of Security Holders ..............................................25
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters .............................27
Item 6. Selected Financial Data ...........................................................................28
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations .............29
Item 7A. Quantitative and Qualitative Disclosures about Market Risk ........................................39
Item 8. Financial Statements and Supplementary Data .......................................................41
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ..............69
PART III
Item 10. Directors and Executive Officers of the Registrant ................................................69
Item 11. Executive Compensation ............................................................................69
Item 12. Security Ownership of Certain Beneficial Owners and Management ....................................69
Item 13. Certain Relationships and Related Transactions ....................................................69
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ..................................70
SIGNATURES ..........................................................................................................71
</TABLE>
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TABLE OF CONTENTS (CONTINUED)
PART B. 3333 HOLDING CORPORATION AND SUBSIDIARY AND
- ------- CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I
Item 1. Business .........................................................................................72
Item 2. Properties .......................................................................................76
Item 3. Legal Proceedings ................................................................................79
Item 4. Submission of Matters to a Vote of Security Holders ..............................................79
PART II
Item 5. Market for Registrants' Common Equity and Related Stockholder Matters .............................80
Item 6. Selected Financial Data ...........................................................................82
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations .............83
Item 7A. Quantitative and Qualitative Disclosures about Market Risk .......................................86
Item 8. Financial Statements and Supplementary Data........................................................87
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..............101
PART III
Item 10. Directors and Executive Officers of the Registrant.................................................102
Item 11. Executive Compensation ............................................................................105
Item 12. Security Ownership of Certain Beneficial Owners and Management ....................................106
Item 13. Certain Relationships and Related Transactions ...................................................109
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ..................................110
SIGNATURES .........................................................................................................112
</TABLE>
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INDICES TO EXHIBITS
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<S> <C>
CENTEX CORPORATION AND SUBSIDIARIES ..............................................................................114
3333 HOLDING CORPORATION AND SUBSIDIARY ..........................................................................117
CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES ................................................................119
</TABLE>
5
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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. Please refer to
the Joint Explanatory Statement on page 2 of this Report. References to Centex
or the Company in this Report include Centex and its subsidiaries unless the
context otherwise requires. Please refer 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. and subsidiaries ("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 June 1, 1999, 59,441,124 shares of Centex Common Stock, which are
traded on the New York Stock Exchange ("NYSE") and The London Stock Exchange
Limited, 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 five principal business segments: Home
Building, Investment Real Estate, Financial Services, Construction Products and
Contracting and Construction Services. A brief overview of each segment is
provided below and a more detailed discussion of each segment is provided later
in this section.
Centex's Home Building business has expanded to include both Conventional
Homes and Manufactured Homes. Centex is one of the nation's largest home
builders. Centex's Conventional Homes operations currently involve the
construction and sale of single-family homes, town homes and low-rise
condominiums and also include the purchase and development of land. Centex has
participated in the conventional home building business since 1950. Centex
entered the Manufactured Homes business during March 1997 when Centex Real
Estate Corporation ("Real Estate") acquired approximately 80% of Cavco
Industries, LLC. As used herein, "Cavco" refers to the manufactured housing
group of the Company, which includes the manufacture of quality residential and
park model homes and their sale through company-owned retail outlets and through
a network of independent dealers.
Centex's Investment Real Estate operations involve the acquisition,
development and sale of land, the development of industrial, office, retail and
other commercial projects and apartment complexes.
Centex's Financial Services operations include mortgage origination and
other related services on homes sold by Centex subsidiaries and by third
parties, including home equity and sub-prime lending. Centex has been in the
mortgage banking business since 1973.
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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 and the production, distribution and sale of gypsum wallboard,
readymix concrete and aggregates. During the quarter ended June 30, 1994, Centex
Construction Products, Inc. ("Construction Products") completed an initial
public offering of 51% of its stock and began trading on the NYSE under the
symbol "CXP." Primarily as a result of Construction Products's repurchase of its
own stock during the quarter ended June 30, 1996, Centex's ownership interest
increased to more than 50%. Due to additional stock repurchases by Construction
Products, Centex's ownership interest increased to 60.6% as of March 31, 1999.
Accordingly, Construction Products's fiscal 1999, 1998 and 1997 financial
results have been consolidated with those of Centex.
Centex entered the Contracting and Construction Services business in 1966
with the acquisition of a Dallas-based contractor that had been in business
since 1936. Additional significant acquisitions of construction companies were
made in 1978, 1982, 1987 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.
In fiscal 1988, Centex established Centex Development Company. Please
refer to PART B of this Report for a discussion of the business of the
Partnership.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Note (I) of the Notes to Consolidated Financial Statements of Centex on
pages 60-64 of this Report contain additional information about the Company's
business segments for the years ended March 31, 1999, 1998 and 1997.
NARRATIVE DESCRIPTION OF BUSINESS
HOME BUILDING
CONVENTIONAL HOMES
Centex Homes, Centex's conventional home building operation, is primarily
involved in the purchase and development of land or lots and the construction
and sale of single-family homes, town homes and low-rise condominiums. Centex
Homes operations are currently involved in 299 neighborhoods in 64 different
markets. Centex Homes is one of the leading U.S. builders of single-family
detached homes, as measured by the number of units produced in a calendar year.
Centex Homes is also the only company to rank among the nation's top 10 home
builders for each of the past 30 years according to Professional Builder
magazine. Centex Homes sells to both first-time and move-up buyers.
Approximately 91% of the houses Centex Homes sells are single-family detached
homes and the remainder are town homes and low-rise condominiums.
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Markets
Centex Homes follows a strategy of reducing exposure to local market
volatility by spreading operations across geographically and economically
diverse markets. Centex Homes currently builds in 64 market areas in 19 states
and in Washington, D. C. The markets are listed below by geographic areas.
<TABLE>
<S> <C> <C>
WEST California -
Vallejo/Fairfield/Napa Visalia/Tulare/Porterville
Oakland Riverside/San Bernardino
San Francisco Orange County
Sacramento Los Angeles/Long Beach
Bakersfield Ventura
Fresno San Diego
Washington State - Oregon -
Seattle/Bellevue/Everett Portland/Vancouver
Tacoma Salem
Reno, Nevada Eugene
MIDWEST Chicago, Illinois Ohio -
Minneapolis/St. Paul, Minnesota Akron
Indianapolis, Indiana Canton/Massillon
Colorado - Cincinnati
Denver Cleveland/Lorain/Elyria
Boulder/Longmont Columbus
Dayton/Springfield
Hamilton/Middletown
Toledo
Youngstown/Warren
EAST North Carolina - Virginia -
Charlotte/Gastonia/Rock Hill Richmond/Petersburg
Raleigh/Durham/Chapel Hill Norfolk/Virginia Beach/Newport
South Carolina - New Jersey -
Columbia Trenton
Greenville/Spartanburg/Anderson Middlesex/Somerset/Hunterdon
Charleston/N. Charleston Monmouth/Ocean
Nashville, Tennessee Washington, D.C.
Atlanta, Georgia
SOUTHEAST Florida -
Jacksonville Naples
Daytona Beach Ft. Myers/Cape Coral
Tampa/St. Petersburg/Clearwater West Palm Beach/Boca Raton
Sarasota/Bradenton Melbourne/Titusville
Orlando Ft. Lauderdale
Lakeland/Winter Haven Miami
</TABLE>
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<TABLE>
<S> <C> <C>
SOUTHWEST Texas - Phoenix/Mesa, Arizona
Dallas Albuquerque, New Mexico
Ft. Worth/Arlington
Houston
Austin/San Marcos
San Antonio
</TABLE>
In fiscal 1999, Centex Homes closed 14,792 houses, including first-time,
move-up and, in some markets, custom homes, ranging in price from approximately
$54,000 to about $1.1 million with the average sale price being approximately
$185,700.
Centex Homes's policy has been to acquire land with the intent to
complete the sale of housing units within approximately 24 to 36 months from the
date of acquisition. Generally this involves acquiring land that is properly
zoned and is either ready for development or, to some degree, already developed.
Centex Homes has acquired a substantial amount of its finished and
partially improved lots and land under option agreements that are exercised over
specified time periods, or in certain cases, as the lots are needed. The
purchase of finished lots generally allows Centex Homes to shorten the lead time
to commence construction and reduces the risks of unforeseen improvement costs
and volatile market conditions.
Summarized below by geographic area are Centex Homes's home closings,
sales (orders) backlog and sales (orders) for the five fiscal years ended March
31, 1999.
<TABLE>
<CAPTION>
For the Fiscal Years Ended March 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CLOSINGS (IN UNITS):
West 3,060 2,964 2,955 2,347 2,454
Midwest 2,062 1,147 1,337 1,276 1,283
East 3,309 2,650 2,875 2,804 2,921
Southeast 2,582 2,400 2,334 2,241 2,632
Southwest 3,779 3,257 3,606 3,302 3,674
------- ------- ------- ------- -------
14,792 12,418 13,107 11,970 12,964
======= ======= ======= ======= =======
AVERAGE SALES
PRICE (IN 000'S) $ 186 $ 183 $ 172 $ 164 $ 159
======= ======= ======= ======= =======
SALES (ORDERS) BACKLOG, AT THE END OF PERIOD (IN UNITS):
West 921 991 968 980 603
Midwest 1,355 433 441 652 442
East 1,392 963 861 1,121 918
Southeast 1,500 1,136 919 1,106 892
Southwest 1,624 1,393 1,119 1,674 1,132
------- ------- ------- ------- -------
6,792 4,916 4,308 5,533 3,987
======= ======= ======= ======= =======
</TABLE>
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<TABLE>
<CAPTION>
For the Fiscal Years Ended March 31,
--------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
SALES (ORDERS) (IN UNITS):
West 2,990 2,987 2,943 2,724 2,301
Midwest 2,515 1,139 1,126 1,486 1,103
East 3,466 2,752 2,615 3,007 2,560
Southeast 2,950 2,617 2,147 2,455 2,137
Southwest 4,010 3,531 3,051 3,844 3,055
------ ------ ------ ------ ------
15,931 13,026 11,882 13,516 11,156
====== ====== ====== ====== ======
</TABLE>
Competition and Other Factors
The conventional housing industry is essentially a "local" business and
is highly competitive. Centex Homes competes in each of its market areas with
numerous other homebuilders. Centex Homes's operations account for approximately
1% of the total housing starts in the United States. The main competitive
factors affecting Centex Homes 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 that Centex Homes 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 Centex Homes and Centex Homes'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.
Centex Homes 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 the protection
of endangered species. Centex Homes 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. Centex
Homes's houses 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 Centex Homes. Centex Homes believes that it is in material compliance with
these 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.
MANUFACTURED HOMES
Cavco operations include the manufacture of quality residential and
park model homes and the sale thereof through company-owned retail outlets and a
network of independent dealers. The Company entered the manufactured homes
industry in March 1997, when Real Estate acquired approximately 80% of the
predecessor of Cavco Industries, LLC for a total of $74.3 million. During
February 1998, Cavco
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purchased substantially all of the assets of AAA Homes, Inc., Arizona's largest
manufactured homes retailer, marking Cavco's entry into the retailing of
manufactured homes.
Markets
Cavco is the largest producer of manufactured homes in Arizona and New
Mexico as well as the nation's largest producer of park model homes, having
built 6,275 manufactured housing units during the fiscal year ended March 31,
1999. Cavco currently operates three manufactured housing plants in the Phoenix
area, a plant in Belen, New Mexico that opened August 1997, and a plant in
central Texas, that opened in January 1999.
Cavco sells its manufactured homes through company-owned retail outlets
and a network of independent dealers. As of March 31, 1999, Cavco had its
products in approximately 364 outlets in 11 states, Canada and Japan, of which
there were approximately 155 in Arizona, 58 in New Mexico, 50 in Texas, 34 in
Colorado, 26 in California, 25 in Utah, 4 in Nevada, 4 in Washington, 2 each in
Wyoming, Idaho, and Oregon, 1 in Canada and 1 in Japan. Twenty-two of these
outlets are company-owned, 13 of which sell Cavco's product exclusively: 11 in
Arizona, 7 in Texas, 3 in New Mexico and 1 in Colorado. In addition, Cavco is
selling its products exclusively at its first manufactured home community
development in New Mexico. Many of Cavco's independent dealers operate more than
one retail outlet. Most of Cavco's independent dealers sell competing products,
although from time to time Cavco also may enter into exclusive agreements with
certain dealers. The independent dealers set their own retail prices of Cavco's
manufactured homes.
Cavco's dealers finance their purchase of manufactured homes through
floor plan financing arrangements with third-party lenders. Generally, Cavco
receives a commitment from the dealer's lender for each order, which is
earmarked for the home ordered, identified by its serial number. Cavco then
manufactures the home and ships it at the dealer's expense. Payment is due from
the third-party floor plan lender upon the dealer's notice of delivery and
acceptance of the product. The length of time it takes to manufacture and ship a
home after an order is placed varies according to Cavco's backlog.
Cavco is contingently liable under terms of repurchase agreements with
the third-party lenders that provide dealer floor plan financing arrangements.
These arrangements, which are customary in the industry, provide for the
repurchase of the manufacturer's products in the event that the dealer defaults
on payments. The risk of loss is spread over numerous dealers and financing
institutions and is further offset by the resale value of repurchased units.
Cavco has not incurred any significant losses from these arrangements since its
inception.
Cavco extends a limited warranty to original retail purchasers of its
manufactured homes. Cavco warrants structural components for 12 months and
nonstructural components for 90 days. Its warranty does not extend to
installation, setup or appliances. Appliances are warranted by their original
manufacturer.
Cavco's backlog of firm orders for manufactured homes as of March 31,
1999 was approximately $13.4 million (526 units) and $6.4 million (300 units) as
of March 31, 1998. Cavco currently requires six to eight weeks, on average, to
fill an order. Cavco anticipates that the entire backlog at March 31, 1999 will
be filled during the next fiscal year.
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Competition and Other Factors
Cavco estimates that there are seven other manufacturers competing for
a significant share of the Arizona and New Mexico markets. Cavco believes that
its business (based on total sales) represents an approximate 31% share of the
Arizona market, 17% share of the New Mexico market and smaller shares of the
market in other states in which it does business. Cavco believes the principal
factors affecting competition in the manufactured housing market are price,
design, product quality and reliability, distribution network, retail financing
and brand recognition.
Cavco has not experienced any material difficulty in purchasing its raw
materials or component parts. Cavco buys wood, wood products, aluminum, steel,
tires, hardware, windows and doors from manufacturers and distributors located
primarily in California and Arizona. Approximately 39% of the unit cost of
Cavco's manufactured homes is attributable to raw wood products. The majority of
the other component parts of its homes are purchased manufactured components.
The Company believes that compliance with federal, state and local
environmental protection regulations will not have a material adverse effect on
its capital expenditures, earnings or competitive position.
INVESTMENT REAL ESTATE
In September 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 owned a real estate
portfolio of properties located in seven states in which the Company has
significant operations. Vista's real property portfolio generally consisted of
land zoned, planned or developed for single- and multi-family residential,
office, retail, industrial and other commercial uses. During the quarter ended
June 30, 1996, Real Estate completed a business combination transaction and
reorganization with Vista where Vista acquired Real Estate's assets and
operations in return for 12.4 million shares of Vista. Immediately following the
closing of the acquisition, Vista changed its name to Centex Real Estate
Corporation. As a result of the combination, the value of assets received
exceeded their costs to Real Estate; accordingly, Centex's Investment Real
Estate portfolio and related assets, valued in excess of $125 million, were
reduced to a nominal "book basis." Accordingly, as these properties are
developed or sold, the net sales proceeds are reflected as operating margin.
"Negative Goodwill" recorded as a result of the business combination is being
amortized to earnings over approximately seven years.
As of March 31, 1999, the Investment Real Estate Group's property
portfolio consisted of land located in nine states: Texas, New Jersey, Florida,
North Carolina, California, Tennessee, Virginia, Massachusetts and Colorado. The
Company has major Conventional Homes operations in each of the markets where
Vista owns substantial property.
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<PAGE> 13
The land held, by state, at March 31, 1999 is set forth in the
following table:
<TABLE>
<CAPTION>
State Acres Zoning
--------------------------- ----------- ----------------------------------------
<S> <C> <C>
Texas 955 Industrial, Office, Retail & Residential
New Jersey 456 Industrial, Office & Residential
Florida 327 Industrial, Office, Retail & Residential
North Carolina 222 Industrial, Office & Residential
California 168 Industrial, Office & Residential
Tennessee 39 Residential
Virginia 49 Residential
Massachusetts 7 Industrial
Colorado 3 Residential
-----------
2,226
===========
</TABLE>
At March 31, 1999, the Investment Real Estate Group also owned either
directly, through interests in joint ventures, or through its ownership of a
limited partner interest in Centex Development Company, L.P., two multi-family
communities totaling 476 units located in The Colony and College Station, Texas,
as well as a 38,000 square foot industrial building in Charlotte, North
Carolina. During fiscal 1999, Centex Development Company, L.P. began
construction on a 400-unit apartment complex in Grand Prairie, TX and 633,000
square feet of industrial and office space located in Florida, California, and
North Carolina. All of the projects under construction at March 31, 1999 are
scheduled for completion during fiscal 2000. Many of the areas targeted for
development include land owned by the Company or its affiliates.
The Investment Real Estate Group is involved in the acquisition,
development and sale of land, the development of industrial, retail, office and
other commercial projects, and apartment complexes.
FINANCIAL SERVICES
Financial Services operations involve the financing of conventional and
manufactured homes, home equity and sub-prime lending and the sale of title and
various insurance coverages. These activities include mortgage origination and
other related services for homes sold by Centex subsidiaries and by others.
Conforming Mortgage Banking
CTX Mortgage Company ("CTX Mortgage") was established in 1973 to
provide mortgage financing for homes built by Centex Homes. The opening of CTX
Mortgage offices in substantially all of Centex Homes's housing markets has
enabled it to consistently provide mortgage financing for an average of 73.4% of
the homes built by Centex Homes ("Builder Loans") over the past five years. In
1985, CTX Mortgage expanded its operations to include third-party loans ("Retail
Loans") that are not associated with the sale of homes built by Centex. At March
31, 1999, CTX Mortgage had 251 offices located in 38 states. The offices vary in
size depending on loan volume in each locality.
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<PAGE> 14
The unit breakdown of Builder and Retail Loans for CTX Mortgage for the
five years ended March 31, 1999 are set forth in the following table:
<TABLE>
<CAPTION>
For the Fiscal Years Ended March 31,
------------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
LOAN TYPES:
Builder 9,882 8,748 9,483 8,440 8,503
Retail 66,496 44,096 33,579 32,706 28,523
------ ------ ------ ------ ------
76,378 52,844 43,062 41,146 37,026
====== ====== ====== ====== ======
ORIGINATION VOLUME (IN BILLIONS) $ 10.1 $ 6.7 $ 5.2 $ 4.9 $ 4.2
PERCENT OF CENTEX CLOSINGS FINANCED 70% 75% 77% 75% 70%
</TABLE>
CTX Mortgage provides mortgage origination and other mortgage related
services for Federal Housing Administration ("FHA"), Department of Veterans'
Affairs ("VA") and conventional loans on homes built and sold by the Company or
by others, as well as resale homes. CTX Mortgage's loans are generally
first-lien mortgages secured by one- to four-family residences. A majority of
the conventional loans qualify for inclusion in guaranteed programs sponsored by
Fannie Mae or the Federal Home Loan Mortgage Corporation ("Freddie Mac"). Such
loans are known in the industry as "conforming" loans. The remainder of the
loans are either pre-approved and individually underwritten by CTX Mortgage or
private investors who subsequently purchase the loans on a whole loan basis or
are funded by private investors who pay a broker fee to CTX Mortgage for
referring a loan.
CTX Mortgage's principal sources of income are from loan origination
fees, revenues from sale of servicing rights, positive carry (discussed below)
and marketing gains and losses. Generally, CTX Mortgage sells its right to
service the mortgage loans to various loan servicing companies, and therefore
retains no mortgage servicing rights. 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. By selling the mortgages for future
delivery at a specified price, the interest rate risk is mitigated.
CTX Mortgage 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 the loan to the purchaser, CTX Mortgage 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 an important source of income.
CTX Mortgage also participates in joint-venture agreements with
third-party home builders to provide mortgage originations for homes built by
the home builders. At March 31, 1999, CTX Mortgage has 21 of these agreements,
operating in 59 offices in eleven states.
Home Equity and Sub-Prime Lending
Centex Credit Corporation, a Nevada corporation doing business as
Centex Home Equity Corporation ("Home Equity"), is a Fannie Mae approved
sub-prime mortgage lender formed in fiscal 1995 and engages in the origination
of primarily non-conforming home equity loans. The sub-prime lending market is
comprised of borrowers whose financing needs are not being met by traditional
mortgage lenders for a variety of reasons, including credit histories that may
limit such borrower's
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<PAGE> 15
access to credit or the borrower's need for specialized loan products. In the
first calendar quarter of 1997, Home Equity operations underwent a
reorganization and hired a new management team. Since its inception, Home Equity
has focused on lending to individuals who have substantial equity in their homes
but have impaired or limited credit histories. Home Equity's mortgage loans to
these borrowers are made for such purposes as debt consolidation, refinancing,
home improvement or educational expenses. Substantially all of Home Equity's
mortgage loans are secured by first or second mortgage liens on one- to
four-family residences, and have amortization schedules ranging from five years
to 30 years.
At March 31, 1999, Home Equity had 124 offices doing business in 48
states. Home Equity originates home equity loans through four major origination
sources: 1) retail branch network, 2) broker referral network, 3) referrals from
its affiliated conforming mortgage company, CTX Mortgage, and 4) Home Equity's
direct sales unit, which sources loans through telemarketing and direct mail
efforts.
The following table summarizes origination statistics for the five
years ended March 31, 1999.
<TABLE>
<CAPTION>
For the Fiscal Years Ended March 31,
-----------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
LOANS 15,582 7,982 4,100 450 25
ORIGINATION VOLUME (IN BILLIONS) $ 1.0 $ .5 $ .2 $ .03 $--
</TABLE>
Home Equity has been servicing loans since March 1997. The servicing
fees paid for sub-prime loans are significantly higher than for conforming
loans. Servicing encompasses, among other activities, the following processes:
billing and collection of payments when due, movement of cash to the payment
clearing bank accounts, investor reporting, customer help, reconveyance,
recovery of delinquent installments, instituting foreclosure, and liquidation of
the underlying collateral. As of March 31, 1999, Home Equity was servicing a
portfolio of approximately $1.2 billion.
Commencing in October 1997, a majority of Home Equity volume has been
accumulated by Home Equity for securitization through Real Estate Mortgage
Investment Conduit ("REMIC") Trusts for which Home Equity has retained the
residual interest as well as the servicing rights to the securitized loans. The
remainder of the loans are sold to investors on a whole-loan sale basis. In
February 1998, Home Equity completed its first securitization of $175 million of
sub-prime home equity mortgage loans. During fiscal year 1999, Home Equity
completed additional securitizations totaling $890 million.
Home Equity's principal sources of income are from gains on
securitizations and whole loan sales, loan origination fees, revenues from the
sale of servicing rights, positive carry, and servicing fees.
Other Financial Services Operations
Centex's Title operations operate principally in Texas, Florida,
Virginia and Maryland. Through Westwood Insurance (a homeowner's insurance
broker that specializes in writing insurance for the homebuilding industry),
which was acquired during fiscal 1999, homeowners and hazard insurance is sold
to Centex's and other homebuilding customers in 31 states. In addition to Centex
and commercial loan customers, Westwood serves approximately 120 other builders.
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<PAGE> 16
Centex Financial Services, Inc., the parent of CTX Mortgage, acquired
substantially all of the assets of Advanced Financial Technology, Inc.
("Adfitech") and Loan Processing Technologies, Inc. ("Loan Processing") in April
1996 and Adfinet, Inc. ("Adfinet") in July 1997, all of which are headquartered
in Oklahoma City, Oklahoma. Adfitech is a provider of mortgage quality control
services. Loan Processing owns and operates an automated mortgage processing
system and Adfinet provides the mortgage industry with regulations and
guidelines in an electronic format. These acquisitions expanded the products and
services that Financial Services offers to the mortgage industry.
Competition and Other Factors
The mortgage banking industry in the United States is highly
competitive. CTX Mortgage 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. Home Equity
competes with other sub-prime lenders as well as financial institutions to
supply sub-prime financing at attractive rates. The Title and Insurance
operations compete with numerous other providers of title and insurance products
to purchasers of Centex homes and as well as to the general public. During
fiscal 1999, Financial Services continued to operate in a very competitive
environment.
Other Legal Considerations
The Financial Services operations are subject to extensive state and
federal regulations as well as the rules and regulations of, and examinations
by, Fannie Mae, Freddie Mac, FHA, VA, Department of Housing and Urban
Development ("HUD"), Government National Mortgage Association ("GNMA") and state
regulatory authorities with respect to originating, processing, underwriting,
making, selling, securitizing and servicing 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
Financial Services, specify standards for origination procedures, 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. The Financial Services operations are
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. As an approved FHA mortgagee, CTX Mortgage is subject to examination
by the Federal Housing Commissioner at all times to ensure 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 Fair Housing Act, the Fair Credit Reporting
Act, the Federal Truth-In-Lending Act, the Real Estate Settlement Procedures
Act, the Riegle Community Development and Regulatory Improvement Act, the Home
Ownership and Equity Protection Act, and the regulations promulgated under such
statutes. These statutes 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 loan by the
consumer.
16
<PAGE> 17
CONSTRUCTION PRODUCTS
Construction Products's operations include the manufacture, production,
distribution and sale of cement (a basic construction material which is the
essential binding ingredient in concrete), gypsum wallboard, readymix concrete
and aggregates (sand and gravel).
During the quarter ended June 30, 1994, Construction Products completed
an initial public offering of 51% of its stock and began trading on the NYSE
under the symbol "CXP". Primarily as a result of Construction Products's
repurchase of its own stock during fiscal years 1999, 1998 and 1997, Centex's
ownership has increased to 60.6% as of March 31, 1999. Accordingly, Construction
Products's financial statements for the years ended March 31, 1999, 1998 and
1997 have been consolidated with those of Centex. References to Construction
Products include its subsidiaries unless the context requires otherwise.
CEMENT
Construction Products operates cement plants in or near Buda, Texas;
LaSalle, Illinois; Fernley, Nevada and Laramie, Wyoming. The plants in Buda and
LaSalle are owned by separate joint ventures in which Construction Products has
a 50% interest. The kiln start-up dates of the cement plants were as follows:
Buda, Texas, 1978 (expanded 1983); LaSalle, Illinois, 1974; Fernley, Nevada (2
kilns), 1964 and 1969 and Laramie, Wyoming (2 kilns), 1988 and 1996. All four of
the cement plants are fuel-efficient dry process plants.
Construction Products's net cement production, excluding the joint
venture partners' 50% interest in the Buda and LaSalle plants, totaled
approximately 2.0 million tons in both fiscal 1999 and 1998. Total net cement
sales were approximately 2.2 million tons both in fiscal 1999 and 1998, as all
four cement plants sold the entire product they produced. During the past two
years, Construction Products purchased and resold minimal amounts of cement.
Raw Materials and Fuel Supplies
The principal raw material used in the production of portland cement is
calcium carbonate in the form of limestone. Limestone is obtained principally
through the mining and extraction operations conducted at quarries owned or
leased by Construction Products or the joint ventures and located in close
proximity to the plants. Other raw materials used in substantially smaller
quantities than limestone are sand, clay, iron ore and gypsum, which are either
obtained from reserves owned or leased by Construction Products or the joint
ventures or are purchased from outside suppliers and are readily available.
Construction Products's management believes that the estimated recoverable
limestone reserves owned or leased by it or its joint ventures will permit each
of its plants to operate at its present production capacity for at least 30
years or, in the case of the Fernley plant, at least 17 years. Construction
Products's management expects that additional limestone reserves for its Fernley
plant will be available when needed on an economically feasible basis, although
they may be more distant and more expensive to transport than existing reserves.
The cement plants use coal and coke as their primary fuel, but are
equipped to burn natural gas as an alternative. Hazardous waste-derived fuels
have not been used in the plants. The Buda and LaSalle plants have been
permitted to burn scrap tires as a partial fuel alternative. Electric power is
also a major cost component in the manufacture of cement. Construction Products
has sought to diminish overall power costs by adopting interruptible power
supply agreements which may expose the plants to some production interruptions
during periods of power curtailment.
17
<PAGE> 18
Sales and Distribution
The principal geographic markets for Construction Products's cement are
Texas and western Louisiana (serviced by the Buda, Texas plant); Illinois and
southern Wisconsin (serviced by the LaSalle, Illinois plant); Nevada (except Las
Vegas) and northern California (serviced by the Fernley, Nevada plant); and
Wyoming, Utah, northern Colorado, western Nebraska and eastern Nevada (serviced
by the Laramie, Wyoming plant).
Distribution of cement is generally made by common carriers, customer
pickup and, to a lesser extent, by trucks owned and operated by Construction
Products. In addition, cement is transported principally by rail to storage and
distribution terminals located in Roanoke (in the Dallas-Ft.Worth area), Waco,
Corpus Christi, Houston and Orange, Texas; Hartland, Wisconsin; Sacramento,
California; Denver, Colorado; Salt Lake City, Utah; Rock Springs, Wyoming and
North Platte, Nebraska, from which further distribution occurs.
Cement produced by the cement plants is sold primarily to readymix
concrete producers and paving contractors. No single customer accounted for as
much as 10% of total cement sales during fiscal 1999.
Competition and Other Factors
The cement business is extremely competitive. In every geographic area
in which Construction Products sells cement, one or more other domestic
producers compete for the available business. In addition, foreign companies
compete in most sales areas by importing cement into the United States. The
number of principal competitors of the Buda, LaSalle, Fernley and Laramie plants
are six, six, five and five, respectively, operating in these geographic areas.
Construction Products competes by operating efficient cement plants,
merchandising a high quality product and providing good service and competitive
pricing. Cement is also sold from terminals to expand each cement plant's
selling area.
GYPSUM WALLBOARD
Construction Products owns and operates three gypsum wallboard
manufacturing facilities, two located in Albuquerque and nearby Bernalillo, New
Mexico and one located in Gypsum, Colorado (near Vail). The Albuquerque plant
was acquired in 1985 and was operated until early 1991. Following the start-up
of the Bernalillo plant in the spring of 1990, Construction Products elected to
suspend operations at the Albuquerque plant due to weak market conditions.
Operations at the Albuquerque plant were recommenced in May 1993 due to
improvements in wallboard demand and pricing. In February 1997, Construction
Products purchased a company that owned the gypsum wallboard plant and
accompanying electric power cogeneration facility in Gypsum, Colorado. The plant
originally commenced production in early 1990 and had been operated by an
independent producer until its acquisition by Construction Products.
Construction Products mines and extracts gypsum and then manufactures
gypsum wallboard by first pulverizing quarried gypsum, then placing it in a
calciner for conversion into plaster. The plaster is mixed with various
chemicals and water to produce a mixture known as slurry, which is inserted
between two continuous sheets of recycled paperboard on a high-speed production
line and allowed to harden. The resulting sheets of gypsum wallboard are then
cut to appropriate lengths, dried and bundled for sale.
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<PAGE> 19
Raw Materials and Fuel Supplies
Construction Products mines and extracts gypsum rock, the principal raw
material used in the manufacture of wallboard, from mines and quarries owned,
leased or subject to claims owned by Construction Products and located near its
plants. The New Mexico and Colorado mines and quarries are estimated to contain
approximately 50 million tons and 21 million tons of proven and probable gypsum
reserves, respectively. Based on its current production capacity, Construction
Products's management estimates that the life of its existing gypsum rock
reserves is approximately 80 years in New Mexico and 35 years in Colorado.
Paper used in manufacturing gypsum wallboard is purchased by
Construction Products from third-party suppliers. Approximately 65% of
Construction Products's paper requirements are under two evergreen paper
contracts, with one contract having a six-month notice provision for termination
and the other a twelve-month notice provision for termination. The remainder of
Construction Products's paper requirements is purchased on the open market from
various suppliers. Centex does not believe that the loss of a supplier would
have a material adverse effect on its business.
Construction Products's wallboard plants use large quantities of
natural gas and electrical power. Power for the Gypsum, Colorado plant is
supplied by the cogeneration power facility that was acquired along with the
gypsum wallboard plant.
Sales and Distribution
The principal sources of demand for gypsum wallboard are residential
construction, repair and remodeling and non-residential construction. While the
gypsum wallboard industry remains highly cyclical, recent growth in the repair
and remodeling segment, together with certain trends in new residential and
commercial construction activity, have partially mitigated the impact of
fluctuations in overall levels of new construction.
Construction Products sells wallboard to numerous building materials
dealers, wallboard specialty distributors, home center chains and other
customers located throughout the United States. One customer with multiple
shipping locations accounted for approximately 16% of Construction Products's
total gypsum wallboard sales during fiscal 1999. However, Centex does not
believe that the loss of that customer would have a material adverse effect on
Construction Products and its subsidiaries taken as a whole.
Although wallboard is distributed principally in regional areas,
Construction Products and certain other producers have the ability to ship
wallboard by rail outside their usual regional distribution area to take
advantage of other regional increases in demand. Construction Products's rail
distribution capabilities permit it to reach customers in all states west of the
Mississippi River and many eastern states. In addition, in order to facilitate
distribution in certain strategic areas, Construction Products maintains a
distribution center in Albuquerque, New Mexico and four reload yards in Florida,
Alabama and Illinois.
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<PAGE> 20
Competition and Other Factors
There are eleven principal manufacturers of wallboard operating a total
of 73 plants. Centex estimates that the three largest producers, none of which
is Construction Products, account for approximately 80% of wallboard sales in
the United States. Competition among wallboard producers is primarily on a
regional basis, with local producers benefiting from lower transportation costs
and, to a lesser extent, on a national basis. Because of the commodity nature of
the product, competition is based principally on price and, to a lesser extent,
on product quality and customer service.
READYMIX CONCRETE AND AGGREGATES
Construction Products's readymix concrete and aggregates operations are
located in and around Austin, Texas and northern California. The 10,000-acre
aggregates deposit in northern California contains an estimated two billion tons
of reserves. Construction Products is engaged in negotiations with state and
federal government agencies over issues of title to a portion of its principal
aggregate deposit in northern California. Even if the negotiations are
unsuccessful in resolving adverse claims, the undisputed portion of Construction
Products's California aggregate deposit contains sufficient reserves to serve
Construction Products's needs. Construction Products sells aggregates from this
deposit in the Sacramento, California area and in nearby counties. No single
customer accounted for as much as 10% of Construction Products's concrete and
aggregates sales during fiscal 1999. Competition among concrete producers within
Construction Products's northern California and Austin markets is strong.
Construction Products's competitors include five small and four large concrete
producers in the northern California area and five large and four small concrete
producers in the Austin area.
ENVIRONMENTAL MATTERS
The construction products industry, including the operations of
Construction Products, is regulated by federal, state and local laws and
regulations pertaining to several areas including human health and safety and
environmental compliance (collectively, "Environmental Laws"). The Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"), as
amended by the Superfund Amendments and Reauthorization Act of 1986, as well as
analogous laws in certain states, create joint and several liability for the
cost of cleaning up or correcting releases to the environment of designated
hazardous substances. Among those who may be held jointly and severally liable
are those who generated the waste, those who arranged for disposal, those who
owned or operated the disposal site or facility at the time of disposal, and
current owners. In general, this liability is imposed in a series of
governmental proceedings initiated by the identification of a site for initial
listing as a "Superfund site" on the National Priorities List or a similar state
list and the identification of potentially responsible parties who may be liable
for cleanup costs. None of Construction Products's sites are listed as a
"Superfund site."
Construction Products's operations are also potentially affected by the
Resource Conservation and Recovery Act ("RCRA"), which is the primary federal
statute governing the management of solid waste and which includes stringent
regulation of solid waste that is considered hazardous waste. Such operations
generate non-hazardous solid waste, which may include cement kiln dust ("CKD").
Because of a RCRA exemption, known as the Bevill Amendment, CKD generated in
Construction Products's operations is currently not considered a hazardous waste
under RCRA, pending completion of a study and recommendations to Congress by the
U.S. Environmental Protection Agency ("U.S. EPA"). Nevertheless, CKD is still
considered a solid waste and is regulated primarily under state environmental
laws and regulations. The U.S. EPA completed its review of CKD and has decided
to promulgate
20
<PAGE> 21
regulations to govern the handling and disposal of CKD, which will supersede
the Bevill Amendment. The Bevill Amendment will remain in effect until those
regulations are in place.
In the past, Construction Products collected and stored CKD on-site at
its cement plants. Construction Products continues to store such CKD at its
Illinois, Nevada and Wyoming cement plants and at a former plant site in Corpus
Christi, Texas, which is no longer in operation. Currently, substantially all
CKD related to present operations at all cement facilities is recycled. When the
U.S. EPA removes the CKD exemption and develops particular CKD management
standards in the future, Construction Products might be required to incur
significant costs in connection with its CKD. CKD that comes in contact with
water might produce a leachate with an alkalinity high enough to be classified
as hazardous and might also leach certain hazardous trace metals therein.
Construction Products's cement kilns utilize coal, natural gas, minimal
amounts of self-generated waste oil, and scrap tires in the Illinois and Texas
plants, as fuel.
Another issue of potential significance is global warming and the
international accord on carbon dioxide stabilization/reduction. Carbon dioxide
is a greenhouse gas many scientists and others believe contributes to a warming
of the Earth's atmosphere. In December 1997, the United Nations held an
international convention in Kyoto, Japan to take further international action to
ensure greenhouse gas stabilization and/or reduction after the turn of the
century. The conference agreed to a protocol to the United Nations Framework
Convention on Climate Change originally adopted in May 1992. The protocol
establishes quantified emission reduction commitments for certain developed
countries, including the United States, and certain countries that are
undergoing the process of transition to a market economy. These reductions are
to be obtained by 2008-2012. This protocol was made available for signature by
member countries starting in the spring of 1998. The protocol will require
Senate ratification and enactment of implementing legislation before it becomes
effective in the United States.
The consequences of greenhouse gas reduction measures for cement
producers are potentially significant because carbon dioxide is generated from
combustion of fuels such as coal and coke in order to generate the high
temperatures necessary to manufacture cement clinker (which is then ground with
gypsum to make cement). In addition, carbon dioxide is generated in the
calcining of limestone to make cement clinker. Any imposition of raw material
or production limitations or fuel-use or carbon taxes could have a significant
impact on the cement manufacturing industry. It will not be possible to
determine the impact on Construction Products until governmental requirements
are defined and/or it is determined whether emission offsets and/or credits are
obtainable, and whether alternative cementitious products or alternative fuel
can be substituted.
Another RCRA concern in the cement industry involves the historical
disposal of refractory brick containing chromium. Such refractory brick was
formerly widely used in the cement industry to line cement kilns. Construction
Products currently crushes spent refractory brick and uses it as raw feed, but
such brick does not contain chromium.
The Clean Air Act Amendments of 1990 (the "Amendments") provided
comprehensive federal regulation of all sources of air pollution and established
a new federal operating permit and fee program for virtually all manufacturing
operations. The Amendments will likely result in increased capital and
operational expenses for Construction Products in the future, the amounts of
which are not presently determinable. Construction Products has submitted
detailed permit applications and will pay increased recurring permit fees. In
addition, the U.S. EPA is developing regulations for toxic air pollutants under
these Amendments for a broad spectrum of industrial sectors, including portland
cement manufacturing. The U.S. EPA has indicated that the new maximum available
control technology standards could require
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<PAGE> 22
significant reduction of air pollutants below existing levels prevalent in the
industry. Management has no reason to believe, however, that these new standards
would place Construction Products at a competitive disadvantage.
Management believes that Construction Products's current procedures and
practices in its operations, including those for handling and managing
materials, are consistent with industry standards. Nevertheless, because of the
complexity of operations and compliance with Environmental Laws, there can be no
assurance that past or future operations will not result in operational errors,
violations, remediation or other liabilities or claims. Moreover, Construction
Products cannot predict what Environmental Laws will be enacted, adopted or
amended in the future or how such future Environmental Laws will be administered
or interpreted. Compliance with more stringent Environmental Laws, as well as
potentially more vigorous enforcement policies of regulatory agencies or
stricter interpretation of existing Environmental Laws, could necessitate
significant capital outlays.
With respect to some of Construction Products's quarries used for the
extraction of raw materials for its cement and gypsum operations and for the
mining of aggregates for its aggregates operations, Construction Products is
obligated under certain of its permits and certain regulations to engage in
reclamation of land within the quarries upon completion of extraction and
mining. Construction Products generally accrues the reclamation costs for a
specific quarry over the life of the quarry.
CONTRACTING AND CONSTRUCTION SERVICES
Centex's contracting and construction services work is performed
through its construction group nationwide. Centex Construction Group's
subsidiaries rank together 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 five firms with various geographic locations
and project niches. Healthcare facility construction has represented nearly
one-fourth of the Group's business mix during recent years. New contracts for
the group for fiscal 1999 totaled $1.128 billion versus $999 million for fiscal
1998. The backlog of uncompleted contracts at March 31, 1999 was $937 million,
compared to $1.16 billion at March 31, 1998. The Group's principal subsidiaries
are as follows:
CENTEX CONSTRUCTION COMPANY, INC. - This entity, which emerged from the
combination of Centex Bateson Construction Company, Inc. and
Centex-Simpson Construction Company, Inc., has operational offices in
Dallas, Texas and in Fairfax, Virginia. This company pursues negotiated
work in its regional market areas in addition to competitively-bid
projects nationwide.
CENTEX-RODGERS CONSTRUCTION COMPANY - This nationwide healthcare
construction specialist is headquartered in Nashville, Tennessee with
operational offices in Pasadena and Sacramento, California; Detroit,
Michigan and West Palm Beach, Florida.
CENTEX-ROONEY CONSTRUCTION CO., INC. - This Ft. Lauderdale-based
subsidiary performs all types of work, principally within the state of
Florida having operational offices in Miami, Orlando, Tampa,
Tallahassee, Jacksonville and Ft. Myers.
CENTEX-LANDIS CONSTRUCTION CO., INC. - This wholly-owned subsidiary of
Centex-Rooney Construction Co., Inc. is headquartered in New Orleans,
Louisiana. This company pursues competitively-bid projects and
negotiated work in its regional market area.
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<PAGE> 23
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 with additional marketing
offices in Memphis, Tennessee and Lexington, Kentucky.
As a general contractor or construction manager, the Construction Group
provides supervisory personnel for the construction of a building or facility.
In addition, the Construction Group may perform varying amounts of the actual
construction work on a project, but will generally hire subcontractors to
perform the majority of the work.
Construction contracts are primarily entered into under two formats:
competitively-bid and negotiated jobs. In a competitively-bid format, the
Construction Group 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.
Historically, the majority of the Construction Group's projects have been in the
higher risk competitively bid jobs. Recent years have seen a shift to
higher-margin private negotiated projects from the competitively-bid public
projects. At March 31, 1999, approximately 90% of the outstanding projects were
negotiated projects with private owners. The Construction Group's projects
include hospitals, hotels, office buildings, correctional facilities,
apartments, shopping centers, airports, parking garages, sport stadiums,
military facilities, post offices and convention and performing arts centers.
Competition and Other Factors
The construction industry is very competitive, and the Construction
Group competes with numerous other companies. With respect to competitively-bid
projects and negotiated healthcare work, the Construction Group 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, the Construction Group competes primarily in the general
geographical area where the entity is located and with other local, regional and
national contractors. The Construction Group solicits new projects by attending
project bid meetings, by and meeting with builders and owners and through
existing customers. The Construction Group competes successfully on the basis of
its reputation, financial strength, knowledge and understanding of its clients'
needs.
The Construction Group's 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 the Construction Group has taken appropriate precautions
to protect employees and others from workplace hazards. Current Environmental
Laws may require the Construction Group'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 Construction Group's 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.
23
<PAGE> 24
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 following table presents the breakdown of employees in each line of
business as of March 31, 1999:
<TABLE>
<CAPTION>
Line of Business Employees
---------------- ---------
<S> <C>
Home Building
Conventional Homes 3,390
Manufactured Homes 1,692
Investment Real Estate 27
Financial Services 4,285
Construction Products 1,107
Contracting and Construction Services 1,801
Other Operations 762
Corporate 97
-------
13,161
</TABLE>
Except for the 97 Corporate employees who are employees of Centex
Corporation, all others are employees of different subsidiaries of Centex
Corporation.
ITEM 2. PROPERTIES
Centex Homes owns property in Carrollton, Texas, a suburb of Dallas.
This property consists of office and warehouse buildings situated on
approximately 17 acres.
Cavco operations consist of five facilities. Cavco owns a facility in
Belen, New Mexico, as well as a facility in Seguin, Texas. The remaining three
facilities, which are all located in Phoenix, are leased.
Financial Services owns a 20 acre parcel of land in Edmond, Oklahoma
for a future building site for Loan Processing, Adfinet and Adfitech.
Construction Products operates cement plants, quarries and related
facilities at Buda, Texas; LaSalle, Illinois; Fernley, Nevada and Laramie,
Wyoming. Construction Products owns the Fernley and Laramie facilities and the
Buda and LaSalle plants are owned by separate joint ventures in which
Construction Products has a 50% interest. Construction Products's principal
aggregate plants and quarries are owned and are located near Austin, Texas and
Marysville, California. In addition, Construction Products owns gypsum wallboard
plants in Albuquerque and nearby Bernalillo, New Mexico and Gypsum, Colorado.
Construction Group owns land in Dallas, Texas, on which an office is
located and in Nashville, Tennessee, the site of equipment storage space.
A wholly-owned subsidiary of the Company owns small parcels of land in
Round Rock, Texas, League City, Texas and Amarillo, Texas. All are for current
or future assisted living care sites.
24
<PAGE> 25
Except for encumbrances on Cavco's Belen, New Mexico facility (which is
not material to the Company), none of the Company's facilities described above
are pledged as security on its debts.
See "Item 1. Business" on pages 6-24 of this Report for additional
information relating to the Company's properties.
ITEM 3. LEGAL PROCEEDINGS
Management believes that none of the litigation matters in which the
Company or any subsidiary is involved would have a material adverse effect on
the consolidated financial condition or operations of the Company.
The Harrah's New Orleans Casino contract was suspended on November 22,
1995 due to a bankruptcy filing by the Harrah's Jazz Company partnership, the
developer of the casino. Centex Landis Construction Co., Inc. ("Landis") and its
subcontractors filed claims against the partnership for completed but unpaid
work. Landis also filed a lawsuit against Harrah's Entertainment, Inc., parent
company of the major partner in the partnership, to recover its claims. In late
November 1996, Landis and Harrah's reached a settlement conditioned upon
Harrah's plan of reorganization becoming effective. Harrah's plan became
effective on October 30, 1998, at which time Harrah's paid $34 million to Landis
in settlement of the claims of Landis and its subcontractors, and Landis resumed
construction of the casino.
In October 1992, Martin County sued one of the Company's general
contracting subsidiaries, Centex-Rooney Construction Co., Inc. ("Rooney"),
alleging defects in the design and construction of the Martin County Courthouse
in Stuart, Florida. Rooney was construction manager of the project. In July
1996, a judgment of $14.2 million was returned against Rooney, and in April
1997, Martin County also obtained a judgment of $3.2 million in attorneys fees
and costs. The 4th District Court of Appeals affirmed the $14.2 million
judgment, and Rooney filed an appeal with the Supreme Court of Florida. In
August 1998, the Florida Supreme Court denied Rooney's petition for review and
shortly thereafter, Rooney paid Martin County $17.4 million in satisfaction of
the judgment. Rooney's appeal of the $3.2 million award was affirmed in large
part (and reversed in small part) rendering Rooney liable for approximately $3.1
million. This award, which together with interest is approximately $3.6 million,
has also been paid by Rooney. Of the approximately $22 million paid to date for
the judgments and related legal expenses, $13.2 million has been recovered from
certain subcontractors and their insurance carriers, and from certain surety
companies. Rooney is continuing to prosecute claims and lawsuits against other
subcontractors, their insurance carriers, and Rooney's own insurance carriers
for recovery of the balance. While there can be no assurance that Rooney will
recover from its subcontractors and carriers, management believes that Rooney
will be able to recover substantially all of both judgments. Even if Rooney is
unable to recover any part of these judgments, these judgments would not have a
material impact on the financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
25
<PAGE> 26
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. The Company and/or one or more subsidiaries
of the Company have employed all of these executive officers for at least 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 23, 1998, 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>
Timothy R. Eller 50 Executive Vice President of Centex Corporation since July 1998. Chairman
of the Board and Chief Executive Officer of Centex Real Estate
Corporation (Chairman of the Board since April 1998; Chief Executive
Officer of Centex Real Estate Corporation since July 1991; President and
Chief Operating Officer of Centex Real Estate Corporation from January
1990 to March 1998; Executive Vice President from July 1987 to January
1990)
Laurence E. Hirsch 53 Chairman of the Board and Chief Executive Officer of Centex Corporation
(Chairman of the Board since July 1991; Chief Executive Officer since
July 1988; President from March 1985 until July 1991)
David W. Quinn 57 Vice Chairman of the Board and Chief Financial Officer of Centex
Corporation (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 55 Executive Vice President, Chief Legal Officer, General Counsel and
Secretary of Centex Corporation (Executive Vice President since July
1997; Chief Legal Officer since September 1985; General Counsel and
Secretary since April 1993; Vice President from September 1985 to July
1997)
</TABLE>
26
<PAGE> 27
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
STOCK PRICES AND DIVIDENDS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 1999 Year Ended March 31, 1998
--------------------------------------------------------------------------------
PRICE Price
--------------------------------------------------------------------------------
QUARTER HIGH LOW DIVIDENDS High Low Dividends
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First $40 7/8 $33 $.04 $21 7/8 $16 3/4 $.025
Second $44 3/8 $33 $.04 $29 3/16 $20 9/16 $.035
Third $45 3/4 $26 $.04 $32 7/16 $28 3/16 $.035
Fourth $45 3/4 $30 1/4 $.04 $40 3/4 $29 7/8 $.04
</TABLE>
The common stock of Centex Corporation is traded on the New York Stock Exchange
(ticker symbol CTX) and The London Stock Exchange Limited. The approximate
number of record holders of the common stock of Centex Corporation at June 1,
1999 was 2,912.
On November 30, 1987, Centex Corporation distributed as a dividend to its
stockholders securities relating to Centex Development Company, L.P. (See Note F
on pages 58-60 of this Report). 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.
DEBT SECURITIES
See Note C of the notes to the Consolidated Financial Statements of
Centex Corporation and Subsidiaries on pages 53-54 of this Report.
27
<PAGE> 28
ITEM 6. SELECTED FINANCIAL DATA
Summary of Selected Financial Data
(Unaudited)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
(Dollars in thousands, except per share For the Years Ended March 31,
data) ------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues $ 5,154,840 $ 3,975,450 $ 3,784,991 $ 3,102,987 $ 3,277,504
Net Earnings Before 1995 Construction
Products's IPO Gain $ 231,962 $ 144,806 $ 106,563 $ 53,365 $ 54,753
Gain on Construction Products's IPO -- -- -- -- 37,495
-------------- -------------- -------------- -------------- --------------
Net Earnings $ 231,962 $ 144,806 $ 106,563 $ 53,365 $ 92,248
============== ============== ============== ============== ==============
Total Assets $ 4,334,746 $ 3,416,219 $ 2,678,829 $ 2,336,966 $ 2,049,698
Total Long-term Debt, Consolidated $ 284,299 $ 237,715 $ 236,769 $ 321,002 $ 222,530
Total Debt, Consolidated $ 1,910,899 $ 1,390,588 $ 864,287 $ 983,269 $ 798,790
Total Debt (with Financial Services
reflected on the equity method) $ 587,955 $ 311,538 $ 283,769 $ 408,253 $ 427,381
Deferred Income Tax (Asset) Liability $ (49,107) $ (147,607) $ (197,413) $ 16,620 $ 26,737
Debt as a Percentage of Capitalization (A)
Total Debt, Consolidated 57.6% 53.1% 44.5% 57.1% 53.5%
Total Debt (with Financial Services
reflected on the equity method) 29.5% 20.3% 20.9% 35.6% 38.1%
Stockholders' Equity $ 1,197,639 $ 991,172 $ 835,777 $ 722,836 $ 668,227
Net Earnings as a Percentage of Beginning
Stockholders' Equity 23.4% 17.3% 14.7% 8.0% 13.8%
Per Common Share
Earnings Per Share - Basic
Before Construction Products's IPO Gain $ 3.90 $ 2.45 $ 1.86 $ .94 $ .93
Construction Products's IPO Gain -- -- -- -- .63
-------------- -------------- -------------- -------------- --------------
$ 3.90 $ 2.45 $ 1.86 $ .94 $ 1.56
============== ============== ============== ============== ==============
Earnings Per Share - Diluted
Before Construction Products's IPO Gain $ 3.75 $ 2.36 $ 1.80 $ .91 $ .90
Construction Products's IPO Gain -- -- -- -- .61
-------------- -------------- -------------- -------------- --------------
$ 3.75 $ 2.36 $ 1.80 $ .91 $ 1.51
============== ============== ============== ============== ==============
Cash Dividends $ .16 $ .135 $ .10 $ .10 $ .10
Book Value Based on Shares Outstanding at
Year End $ 20.17 $ 16.65 $ 14.40 $ 12.72 $ 11.90
Stock Prices
High $ 45 3/4 $ 40 3/4 $ 20 7/8 $ 17 13/16 $ 16 3/16
Low $ 26 $ 16 3/4 $ 12 15/16 $ 11 3/4 $ 10 1/8
</TABLE>
On November 30, 1987, Centex Corporation distributed as a dividend to its
stockholders securities relating to Centex Development Company, L. P. (See Note
F 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.
(A) Capitalization is composed of Total Debt, Deferred Income Tax Liability,
Negative Goodwill, Minority Interest and Stockholders' Equity.
28
<PAGE> 29
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998
Centex reported consolidated revenues of $5.2 billion for the fiscal
year ended March 31, 1999, 30% above $4.0 billion for the fiscal year ended
March 31, 1998. Earnings before income taxes were $373.3 million, 61% more than
$231.6 million for last year. Net earnings for fiscal 1999 reached $232 million,
a historical high and a 60% improvement over net earnings of $144.8 million in
fiscal 1998. Earnings per share for fiscal year 1999 were $3.90 and $3.75 for
basic and diluted, respectively, compared to $2.45 and $2.36 for the prior year.
HOME BUILDING
CONVENTIONAL HOMES
The following summarizes Conventional Homes's results for the two-year
period ended March 31, 1999 (dollars in millions, except per unit data):
<TABLE>
<CAPTION>
------------------------------------------------------------
1999 1998
------------------------------------------------------------
<S> <C> <C> <C> <C>
Conventional Homes Revenues $ 2,819.4 100.0% $ 2,312.0 100.0%
Cost of Sales (2,194.7) (77.8)% (1,839.8) (79.6)%
Selling, General & Administrative (382.5) (13.6)% (301.7) (13.0)%
---------- ---------- ---------- ----------
Operating Earnings $ 242.2 8.6% $ 170.5 7.4%
========== ========== ========== ==========
Units Closed 14,792 12,418
Unit Sales Price $ 185,668 $ 183,321
% Change 1.3% 6.4%
Operating Earnings per Unit $ 16,375 $ 13,733
% Change 19.2% 25.0%
Backlog Units 6,792 4,916
% Change 38.2% 14.1%
</TABLE>
Operating earnings for fiscal 1999 were higher as a percentage of
revenues and on a per unit basis in comparison to fiscal 1998 as a result of the
division's continued focus on improving operating margins as well as an increase
in units closed. Low interest rates, an expanding economy, and a reduction in
direct construction costs as a percentage of revenue are some of the major
factors that impacted the operating results of the conventional homes operation.
Margin improvement initiatives include, among others, engineering the homes to
reduce the material and labor cost components, designing the product around
consumer preferences and the adoption of special purchasing and land development
programs. The increase in sales price of approximately $2,300 is primarily a
result of increased sales in the California market. The opening of new markets
with recent acquisitions also had a positive impact on the increase in number of
units sold and the average sales price. During fiscal 1999, the division
continued to focus on margin improvement and began an emphasis on top-line
growth.
MANUFACTURED HOMES
Historically, Cavco has operated three manufactured home facilities in
the Phoenix area. A fourth plant was opened near Albuquerque, New Mexico in
August 1997. In January 1999, its fifth plant was opened in central Texas. Cavco
has expanded into the retailing of manufactured homes. During February 1998,
Cavco added retail distribution capabilities when it purchased substantially all
of the assets of AAA Homes, Inc., Arizona's largest manufactured homes retailer.
In July 1998, Cavco purchased a manufactured home retailer in central Texas.
29
<PAGE> 30
The following summarizes Manufactured Homes's results for the two-year
period ended March 31, 1999 (dollars in millions, except per unit data):
<TABLE>
<CAPTION>
-----------------------------------------------------
1999 1998
-----------------------------------------------------
<S> <C> <C> <C> <C>
Manufactured Homes Revenues
(Construction) $ 137.7 100.0% $ 140.6 100.0%
Cost of Sales (107.9) (78.3)% (113.7) (80.9)%
Selling, General &
Administrative Expenses (13.9) (10.1)% (13.2) (9.4)%
-------- -------- -------- --------
$ 15.9 11.6% $ 13.7 9.7%
-------- -------- -------- --------
Retail Sales Revenues $ 40.9 100.0% $ -- -%
Cost of Sales (30.4) (74.3)% -- -%
Selling, General &
Administrative Expenses (10.3) (25.2)% -- -%
-------- -------- -------- --------
$ 0.2 0.5% $ -- -%
-------- -------- -------- --------
Construction and Retail Earnings $ 16.1 $ 13.7
Goodwill Amortization (3.3) (2.3)
Minority Interest (2.5) (2.7)
-------- --------
Group Operating Earnings $ 10.3 $ 8.7
======== ========
Units Sold 6,440 5,751
</TABLE>
INVESTMENT REAL ESTATE
The following summarizes Investment Real Estate's results for the
two-year period ended March 31, 1999 (dollars in millions):
<TABLE>
<CAPTION>
-------------------
1999 1998
-------------------
<S> <C> <C>
Revenues $ 33.7 $ 25.4
======= =======
Operating Earnings $ 29.4 $ 28.2
======= =======
</TABLE>
Fiscal 1999 operating earnings from Investment Real Estate totaled
$29.4 million compared to $28.2 million in the prior year period. The timing of
land sales is uncertain and can vary significantly from period to period.
Property sales related to Investment Real Estate's nominally valued assets (see
Note G to the financial statements) resulted in operating margins of $16.4
million in fiscal 1999 and $13.7 million in fiscal 1998. As of March 31, 1999,
the Investment Real Estate Group has approximately $75 million nominally valued
assets which are expected to be sold over the next four years.
Negative goodwill amortization was $16 million in both fiscal 1999 and
1998.
30
<PAGE> 31
FINANCIAL SERVICES
The Financial Services segment consists primarily of home financing,
home equity and sub-prime lending and the sale of title and other insurance
coverages. The following summarizes Financial Services's results for the
two-year period ended March 31, 1999 (dollars in millions):
<TABLE>
<CAPTION>
-----------------------------
1999 1998
-----------------------------
<S> <C> <C>
Revenues $ 436.3 $ 246.3
============ ============
Operating Earnings $ 92.3 $ 31.4
============ ============
Origination Volume $ 11,112.5 $ 7,182.0
============ ============
Number of Loans Originated
CTX Mortgage Company -
Centex-built Homes (Builder) 9,882 8,748
Non-Centex-built Homes (Retail) 66,496 44,096
------------ ------------
76,378 52,844
Centex Home Equity Corporation 15,582 7,982
Centex Finance Company 818 23
------------ ------------
92,778 60,849
============ ============
</TABLE>
Financial Services's operating earnings for fiscal 1999 were $92.3
million, 194% higher than fiscal 1998 operating earnings of $31.4 million.
CTX Mortgage originations for fiscal 1999 increased 45% compared to
fiscal 1998. The per loan margin for fiscal 1999 was $1,118, 49% higher than
$748 per loan in fiscal 1998. CTX Mortgage's total mortgage applications for
fiscal 1999 increased 33% to 78,126 from 58,835 applications reported for fiscal
1998. Substantially all of the mortgage loans generated by CTX Mortgage are sold
forward upon closing and subsequently delivered to third-party purchasers within
approximately 60 days thereafter.
During fiscal 1999, Centex continued to expand Home Equity's sub-prime
mortgage business. This expansion resulted in a 95% increase in loan
originations. Home Equity generated 82,803 sub-prime loan applications for
fiscal 1999, an increase of 196% over fiscal 1998. During fiscal 1999, Home
Equity completed four securitizations totaling $890 million compared to one
issue of $175 million in fiscal 1998. Home Equity is the long-term servicer of
the loans in these securitizations. Service fee income related to this long-term
servicing was $4.5 million in fiscal 1999 and $0.2 million in fiscal 1998.
Centex Finance Company, the new manufactured homes finance operation,
completed its second year of operations in which originations increased to 818
loans compared to 23 loans in fiscal 1998. Start-up costs for this operation
were $2.8 million for fiscal 1999.
Revenues include the gain on sale of mortgage loan receivables which
increased to $254.1 million in fiscal 1999 from $135.8 million in fiscal 1998.
This increase is attributed to the expansion of Financial Services's product
lines, the increased origination volume, and the favorable interest rate
environment which resulted in a significant volume of refinanced mortgages. The
gain on sale of mortgage loans receivable includes the gain recorded upon the
completion of securitizations, gain on sale of servicing, and whole loan sales.
In the normal course of its activities, Financial Services carries
inventories of loans pending sale or securitization and earns a positive spread
between the interest income earned on those loans and its cost of financing
those loans (referred to herein as "positive carry"). Financial Services's sales
and
31
<PAGE> 32
securitization volume has increased significantly, contributing to an increase
in the average level of loans held in inventory pending sale or securitization.
Interest income increased $39.1 million or 67.6% to $97 million in fiscal 1999.
Interest expense increased $32 million or 71.3% to $76.9 million in fiscal 1999.
As a result, positive carry has increased to $20.1 million in fiscal 1999
compared to $13.0 million in fiscal 1998.
Financial Services's other sources of income include, among other
things, loan origination fees, title policy fees and insurance commissions,
mortgage loan broker fees, and fees for mortgage loan quality control and
processing services. These other income sources increased $32.7 million or 62.1%
in fiscal 1999 over fiscal 1998 due primarily to the fiscal 1999 increase in
mortgage loan volume.
CONSTRUCTION PRODUCTS
Construction Products's revenues were $336.1 million for fiscal 1999,
13% above fiscal 1998 revenues of $297.3 million. For the current year,
Construction Products's pretax earnings, net to the Company's ownership
interest, were $69.2 million, a 45% increase over $47.7 million last year.
Record results in the current year were attributable to continued
strong product demand, higher product pricing and increased operating
efficiency.
CONTRACTING AND CONSTRUCTION SERVICES
The following summarizes Contracting and Construction Services's
results for the two-year period ended March 31, 1999 (dollars in millions):
<TABLE>
<CAPTION>
---------------------
1999 1998
---------------------
<S> <C> <C>
Revenues $1,350.8 $ 953.8
======== ========
Operating Earnings $ 15.2 $ 7.2
======== ========
New Contracts Received $1,128.0 $ 999.4
======== ========
Backlog of Uncompleted Contracts $ 936.8 $1,159.6
======== ========
</TABLE>
Contracting and Construction Services's revenues for fiscal 1999 were
$1,350.8 million, 42% more than last year's revenues. Operating earnings for the
group improved in fiscal 1999 as a result of a continuing shift in recent years
to higher-margin private negotiated projects rather than the lower-margin public
bid work that has historically been its specialty.
The Contracting and Construction Services operation provided a positive
average annual net cash flow in excess of Centex's investment in the group of
$88.9 million in fiscal 1999 and $60.3 million in fiscal 1998.
FISCAL YEAR 1998 COMPARED TO FISCAL YEAR 1997
Centex reported consolidated revenues of $4.0 billion for fiscal 1998,
5% above $3.8 billion for the year ended March 31, 1997. Earnings before income
taxes were $231.6 million, 42% more than $163.7 million for fiscal 1997. Net
earnings for fiscal 1998 reached $144.8 million, a 36% improvement over net
earnings of $106.6 million for the prior year. Earnings per share for fiscal
year 1998 were $2.45 and $2.36 for basic and diluted, respectively, compared to
$1.86 and $1.80 for the prior year.
32
<PAGE> 33
HOME BUILDING
CONVENTIONAL HOMES
The following summarizes Conventional Homes's results for the two-year
period ended March 31, 1998 (dollars in millions, except per unit data):
<TABLE>
<CAPTION>
-------------------------------------------------------------
1998 1997
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Conventional Homes Revenues $ 2,312.0 100.0% $ 2,299.6 100.0%
Cost of Sales (1,839.8) (79.6)% (1,877.3) (81.6)%
Selling, General &
Administrative Expenses (301.7) (13.0)% (278.3) (12.1)%
---------- ---------- ---------- ----------
Operating Earnings $ 170.5 7.4% $ 144.0 6.3%
========== ========== ========== ==========
Units Closed 12,418 13,107
Unit Sales Price $ 183,321 $ 172,296
% Change 6.4% 5.1%
Operating Earnings per Unit $ 13,733 $ 10,990
% Change 25.0% 23.3%
Backlog Units 4,916 4,308
% Change 14.1% (22.1)%
</TABLE>
Operating earnings for fiscal 1998 were higher as a percentage of
revenues and on a per unit basis compared to fiscal 1997 as a result of the
division's focus on improving operating margins and more closings of higher
price and margin units in the Western region.
Conventional Homes reported 12,418 closings for fiscal 1998, 5% less
than fiscal 1997 closings. Home orders improved 10% to 13,026 units from 11,882
units in fiscal 1997 even though slightly fewer neighborhoods were operating in
fiscal 1998.
MANUFACTURED HOMES
During March 1997, Centex Real Estate Corporation acquired
approximately 80% of Cavco Industries, Inc. Its successor, Cavco Industries, LLC
operates three manufactured homes facilities in the Phoenix area and a plant
near Albuquerque, New Mexico.
The following summarizes Manufactured Homes's results for the year
ended March 31, 1998 (dollars in millions):
<TABLE>
<CAPTION>
------------------------
1998
------------------------
<S> <C> <C>
Manufactured Homes Revenues (Construction) $ 140.6 100.0%
Cost of Sales (113.7) (80.9)%
Selling, General &
Administrative Expenses (13.2) (9.4)%
Goodwill Amortization (2.3) (1.6)%
Minority Interest (2.7) (1.9)%
-------- --------
Operating Earnings $ 8.7 6.2%
======== ========
Units Sold 5,751
</TABLE>
33
<PAGE> 34
INVESTMENT REAL ESTATE
The following summarizes Investment Real Estate's results for the
two-year period ended March 31, 1998 (dollars in millions):
<TABLE>
<CAPTION>
-------------------
1998 1997
-------------------
<S> <C> <C>
Revenues $ 25.4 $ 9.0
======= =======
Operating Earnings $ 28.2 $ 17.9
======= =======
</TABLE>
Fiscal 1998 operating earnings from Investment Real Estate improved 58%
to $28.2 million from $17.9 million for fiscal 1997. The increased earnings can
be attributed to increased land sales activity resulting from the continued
recovery in some of the real estate markets in which the Company owns land.
Property sales related to Investment Real Estate's nominally valued real estate
(See note G to the financial statements) resulted in operating margins of $13.7
million in fiscal 1998 and $4.5 million in fiscal 1997.
Negative Goodwill Amortization was $16 million in both fiscal 1998 and
1997.
FINANCIAL SERVICES
The Financial Services segment consists primarily of home financing,
home equity and sub-prime lending and the sale of title and other insurance
coverages. The following summarizes Financial Services's results for the
two-year period ended March 31, 1998 (dollars in millions):
<TABLE>
<CAPTION>
-----------------------
1998 1997
-----------------------
<S> <C> <C>
Revenues $ 246.3 $ 168.7
========= =========
Operating Earnings $ 31.4 $ 24.4
========= =========
Origination Volume $ 7,182.0 $ 5,394.9
========= =========
Number of Loans Originated
CTX Mortgage Company -
Centex-built Homes (Builder) 8,748 9,483
Non-Centex-built Homes (Retail) 44,096 33,579
--------- ---------
52,844 43,062
Centex Home Equity Corporation 7,982 4,100
Centex Finance Company 23 --
--------- ---------
60,849 47,162
========= =========
</TABLE>
Financial Services's operating earnings for fiscal 1998 were $31.4
million, 29% higher than fiscal 1997 operating earnings of $24.4 million, after
expensing net expansion costs of $8.1 million related to Home Equity and the new
manufactured homes finance operation, Centex Finance Company.
CTX Mortgage originations for fiscal 1998 increased 23% compared to
fiscal 1997. The per loan margin for fiscal 1998 was $748, 15% higher than $650
per loan in fiscal 1997. CTX Mortgage's total mortgage applications for fiscal
1998 increased 41% to 58,835 from 41,782 applications reported for fiscal 1997.
During fiscal 1998, Centex substantially expanded Home Equity's
sub-prime mortgage business, resulting in a 98% increase in loan originations.
Home Equity generated 28,089 sub-prime loan applications for fiscal 1998, an
increase of 82% over fiscal 1997. In February 1998, Home Equity completed its
first securitization of $175 million of sub-prime home equity mortgage loans.
34
<PAGE> 35
CONSTRUCTION PRODUCTS
Construction Products's revenues were $297.3 million for fiscal 1998,
24% above fiscal 1997 revenues of $239.4 million. For 1998, Construction
Products's pretax earnings, net to Centex's ownership interest, were $47.7
million, a 46% increase over $32.7 million in 1997.
Record results in 1998 were attributable to higher product sales
pricing, increased operating efficiency and continued strong product demand.
CONTRACTING AND CONSTRUCTION SERVICES
The following summarizes Contracting and Construction Services's
results for the two-year period ended March 31, 1998 (dollars in millions):
<TABLE>
<CAPTION>
---------------------
1998 1997
---------------------
<S> <C> <C>
Revenues $ 953.8 $1,068.3
======== ========
Operating Earnings (Loss) $ 7.2 $ (2.2)
======== ========
New Contracts Received $ 999.4 $ 981.0
======== ========
Backlog of Uncompleted Contracts $1,159.6 $1,114.1
======== ========
</TABLE>
Contracting and Construction Services's revenues for fiscal 1998 were
$953.8 million, 11% less than fiscal 1997 revenues. Operating earnings for the
group improved in fiscal 1998 as a result of an increase in higher-margin
private negotiated projects compared to the lower-margin public bid work that
has historically been its specialty.
The Contracting and Construction Services operation provided a positive
average annual net cash flow in excess of Centex's investment in the group of
$60.3 million in fiscal 1998 and $64.2 million in fiscal 1997.
FINANCIAL CONDITION AND LIQUIDITY
At March 31,1999, the Company had cash and cash equivalents of $111.3
million, compared to $98.3 million at the end of fiscal 1998. The net cash
provided or used by the operating, investing, and financing activities for the
years ended March 31, 1999, 1998 and 1997 is summarized below (dollars in
thousands):
<TABLE>
<CAPTION>
----------------------------------------
For the Years Ended March 31,
----------------------------------------
1999 1998 1997
----------------------------------------
<S> <C> <C> <C>
NET CASH (USED IN) PROVIDED BY:
Operating activities $(254,148) $(440,215) $ 257,508
Investing activities (227,716) (29,679) (116,306)
Financing activities 494,816 536,890 (123,924)
--------- --------- ---------
Net increase in cash $ 12,952 $ 66,996 $ 17,278
========= ========= =========
</TABLE>
For fiscal 1999, cash was used in the operations to finance the
increase in housing inventories and residential mortgage loans. The increase in
housing inventories relates to the increased level of sales and resultant units
under construction during the year, the acquisition of expansion land and the
acquisition of three home builders during fiscal 1999. The increase in
residential mortgage loans relates to the higher volume of loan originations
during the year by both CTX Mortgage and Home Equity. Cash was also used to fund
additional investments in Centex Development Company, L.P. and joint ventures
and the additions to property and equipment (primarily in the Construction
Products segment for new production capacity). The funds provided by financing
activities included $244 million of net new short-term bank borrowings by the
Financial Services segment to finance the growth in residential
35
<PAGE> 36
mortgage loans. Most of the remainder was provided by short-term corporate debt
to fund the increased home building activity.
Short-term debt as of March 31, 1999 was $1.6 billion, which included
$1.3 billion of debt applicable to the Financial Services operation. The
majority of the Financial Services debt is collateralized by residential
mortgage loans, and thus requires only limited support by Centex Corporation.
Most of the Company's corporate borrowings are accomplished at prevailing market
interest rates through short-term borrowings from uncommitted bank facilities
and the Company's commercial paper programs. The Company maintains $660 million
of committed credit facilities which serve as a back-up for bank and commercial
paper borrowings. Under the terms of the agreement on one of these facilities,
$170 million may be borrowed directly by CTX Mortgage. The weighted average
interest rate of short-term indebtedness outstanding during fiscal 1999 was
6.0%. The weighted average interest rate of balances outstanding at March 31,
1999 was 5.6%.
The Financial Services segment provides most of its own short-term
financing needs through separate facilities which provide for limited support
from Centex Corporation. CTX Mortgage Company has its own $1.1 billion of
secured committed mortgage warehouse facilities which includes a $200 million
(increased to $300 million in April 1999) asset-backed commercial paper program.
In addition, it has another $665 million of uncommitted credit facilities. All
of these facilities are used to finance mortgages that are held during the
period they are being securitized and readied for delivery against forward sale
commitments. Centex Home Equity Corporation has its own $300 million (reduced to
$250 million in April 1999) of committed and $110 million of uncommitted secured
mortgage warehouse facilities to finance sub-prime mortgages held until
securitization.
The long-term debt outstanding as of March 31, 1999 was as follows (in
thousands):
<TABLE>
<S> <C>
Subordinated Debentures, 7.375%, due in 2005 $ 99,698
Subordinated Debentures, 8.75%, due in 2007 99,473
Other Indebtedness, 6.0% to 9.6%, due through 2027 85,128
--------
$284,299
========
</TABLE>
Maturities of long-term debt during the next five years (in thousands)
are: 2000, $3,910; 2001, $60,668; 2002, $1,625; 2003, $15,305; and 2004, $205.
The Company believes it has adequate resources and sufficient credit
facilities to satisfy its current needs and to provide for future growth.
STOCK REPURCHASE PROGRAM
Since April 1998, the Company has repurchased 714,800 shares of common
stock under its stock option-related repurchase program. The Company plans to
continue to repurchase shares under this program.
YEAR 2000 COMPLIANCE
The Company has a variety of operating systems, computer software
applications, computer hardware equipment (collectively, "IT Systems") and other
equipment with embedded electronic circuits, including applications that the
Company uses in its administrative functions and in the operations of its
various subsidiaries (collectively, the "Non-IT Systems" and together with the
IT Systems, the "Systems"). Because resolution of Year 2000 issues is considered
a priority of the Company, the Company created a Year 2000 Task Force to oversee
the Company's Year 2000 compliance. The Task Force, consisting of members of the
Company's management and accounting, financial planning, legal, and internal
audit departments, has oversight of the information systems managers and other
administrative personnel charged with implementing the Company's Year 2000
compliance program (collectively, the "Year 2000 Compliance Team").
36
<PAGE> 37
The Task Force has surveyed the Year 2000 Compliance Team regarding the
Year 2000 compliance of the Systems. The surveys indicated that a small number
of the Systems are not Year 2000 compliant. Affected Systems are primarily
Non-IT Systems that are not critical to the material operations of the Company
and its subsidiaries. The Company and its subsidiaries have replaced many of
these Systems and are in the process of replacing others. Substantially all
non-compliant Systems that are material will be replaced and the replacement
Systems tested no later than the second quarter of fiscal 2000 (i.e. the quarter
ending September 30, 1999). In substantially all of the cases, the replacement
or upgrading of, or other changes to, the non-compliant Systems (i) has occurred
or will occur for reasons unrelated to the non-compliance of the Systems and
(ii) has not been accelerated as a result of the non-compliance of such Systems.
To date, the timetable for addressing non-compliance of Systems has been
substantially the same for both IT Systems and Non-IT Systems. The Company
anticipates that this will continue to be the case as it sees its Year 2000
program through to its completion.
The Company does not believe (i) that the non-compliant Systems pose a
material risk to the financial condition of the Company and its subsidiaries as
a whole, or of the individual operations of subsidiaries that currently have
non-compliant Systems or (ii) that the cost of replacing, upgrading or otherwise
changing the non-compliant Systems is material to the Company and its
subsidiaries as a whole, or to any of the individual subsidiaries. The Company
and its subsidiaries have used, and believe that they will be able to continue
to use, internally generated cash to fund the correction of Systems that are not
compliant.
In order to further confirm the Company's Year 2000 readiness, the
Company has engaged the services of a third-party consulting firm to evaluate
its Year 2000 readiness program. The consulting firm's review was completed
during the fourth quarter of fiscal 1999. The firm's conclusions are consistent
with the Company's internal determinations of its Year 2000 readiness. The
Company has begun to implement the consulting firm's recommendations for
achieving Year 2000 compliance.
The Task Force is currently developing its Year 2000 contingency plan.
The Task Force has completed many of the preliminary components of the
contingency plan and anticipates that the entire contingency plan will be
completed no later than September 30, 1999.
As a result of the Company's Year 2000 compliance program, the Company
believes that it is highly unlikely that any interruption to its subsidiaries'
operations resulting from a compliance failure will have a material adverse
effect on the financial condition of the Company and its subsidiaries as a whole
or the financial condition or operations of any operating subsidiary. Achieving
Year 2000 compliance is dependent on many factors, however, and some of these
factors are not completely within the Company's control. Although the Company's
subsidiaries obtain information, materials and services from numerous sources
and provide goods and services to numerous customers, the failure of these
third-parties (including U.S. government agencies) to achieve Year 2000
readiness may adversely impact the Company's subsidiaries' operations. Although
most of the Company's Year 2000 readiness program is substantially the same
across the businesses of the Company's various subsidiaries, the Company
believes that non-compliance of third parties in its financial services
operations could have a greater effect on the Company than the non-compliance of
third parties in its less technology-intensive subsidiary operations such as
general contracting and home building.
The Company believes the most likely Year 2000 worst-case scenario
would be the failure of some significant vendors, subcontractors or other third
parties to achieve compliance, resulting in a slowdown of the Company's
subsidiaries' operations. The Company is not aware of any such third parties
that are not Year 2000 compliant. In order to address the potential
non-compliance of third parties affecting the Company's subsidiaries'
operations, the Company's subsidiaries continue to survey their largest
customers, subcontractors, and vendors by sending questionnaires or requests for
disclosure of Year 2000 readiness. The number of surveys sent as well as the
form of survey varies by the Company subsidiary making the request for
confirmation of compliance. The responses received to date range from detailed
analyses of readiness with descriptions of contingency plans to general
statements of readiness. With respect to unanswered surveys throughout the
Company's subsidiaries, the management of the respective subsidiaries will
continue to follow-up throughout the remainder of the year either through a
second request or direct conversations with those parties whose operations are
material to the Company or its subsidiaries in order to ascertain the Y2K
readiness of such parties. The Task Force has engaged the services of a third
party to survey owners and managers of facilities leased by the Company's
subsidiaries. To date, the Company has received responses from approximately
30% of the total number of owners and managers surveyed, including responses
from substantially all of the surveyed owners and managers that lease material
facilities to the Company's subsidiaries. The completed surveys from the owners
and managers of the material facilities indicate that such facilities are Y2K
compliant.
37
<PAGE> 38
Year 2000 Forward-looking Statements
Certain statements in this section, other than historical information,
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and
the Private Securities Litigation Reform Act of 1995. Forward-looking
statements may be identified by the context of the statement and generally arise
when the Company is discussing its beliefs, estimates or expectations. These
statements involve risks and uncertainties relative to the Company's ability to
assess and remediate any Year 2000 compliance issues, the ability of third
parties to correct material non-compliant systems, and the Company's assessment
of the Year 2000 issue's impact on its financial results and operations.
OTHER DEVELOPMENTS AND OUTLOOK
During April 1998, the Company's Home Building subsidiary purchased
approximately 90% of Wayne Homes, Inc. Prior to the acquisition, Wayne Homes was
a privately owned company. Wayne Homes, a 25-year-old builder that constructs
homes on customer-owned sites in widely diverse locations, operates in eight
Ohio markets. The company delivers approximately 600 homes annually at an
average sales price of approximately $100,000. This acquisition is consistent
with Centex's strategy of diversifying into more segments of the homebuilding
market. In May 1998, Teal Homes was acquired by the Company's Home Building
subsidiary. Teal Homes builds approximately 180 homes annually in the Richmond,
Virginia market. This acquisition is also consistent with the Company's growth
strategy and offered an immediate entry into the growing Richmond market.
In December 1998, Centex Real Estate Corporation, the home building
subsidiary of Centex Corporation, purchased Calton Homes, Inc. Calton Homes
builds and sells single-family homes in central New Jersey. During its fiscal
year ended November 30, 1997, Calton Homes delivered 226 homes at an average
sales price of $277,000. Calton Homes's customers include second and third-time
move-up as well as "active adult" home buyers. Management believes this
acquisition will substantially increase the Company's presence in New Jersey and
that Calton Homes's management team will help expand Centex's operations in the
Northeast.
The total cost for these three home building acquisitions was
approximately $124 million.
Also during the year, Centex announced the formation of a new
subsidiary, Centex Latin America, Inc., which will pursue investments in housing
companies operating in Mexico and in other Latin American markets, including
Argentina, Brazil and Chile.
Centex enters fiscal 2000 with a record housing backlog and excellent
prospects in each of its other businesses. Assuming the prevailing favorable
economic environment continues, earnings for the current fiscal year should
exceed fiscal 1999 results.
- --------------------------------------------------------------------------------
FORWARD-LOOKING STATEMENTS
The Management's Discussion and Analysis of Financial Condition and
Results of Operations and other sections of this Annual Report on Form 10-K
contain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
may be identified by the context of the statement and generally arise when the
Company is discussing its beliefs,
38
<PAGE> 39
estimates or expectations. These statements are not guarantees of future
performance and involve a number of risks and uncertainties. Actual results and
outcomes may differ materially from what is expressed or forecast in such
forward-looking statements. The principal risks and uncertainties that may
affect the Company's actual performance and results of operations include the
following: general economic conditions and interest rates; the cyclical and
seasonal nature of the Company's businesses; adverse weather; changes in
property taxes and energy costs; changes in federal income tax laws and federal
mortgage financing programs; governmental regulation; changes in governmental
and public policy; changes in economic conditions specific to any one or more of
the Company's markets and businesses; competition; availability of raw
materials; and unexpected operations difficulties. Other risks and uncertainties
may also affect the outcome of the Company's actual performance and results of
operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks related to fluctuations in
interest rates on mortgage loans receivable, residual interest in mortgage
securitizations and debt. The Company utilizes forward sale commitments to
mitigate some of this risk associated with the mortgage loan portfolio. Other
than the forward commitments listed above, the Company does not utilize interest
rate swaps, forward or option contracts on foreign currencies or commodities, or
other types of derivative financial instruments. The purpose of the following
analysis is to provide a framework to understand the Company's sensitivity to
hypothetical changes in interest rates as of March 31, 1999.
The Financial Services segment of the Company provides conforming,
sub-prime, and home equity loans. The conforming loans are sold forward upon
closing and subsequently delivered to a third-party purchaser within
approximately 60 days. The sub-prime and home equity loans are securitized on a
quarterly basis. Due to the frequency of these loan sales and securitizations,
the market risk associated with these mortgages is minimal.
Home Equity retains the residual interest in the securitizations
described above. As of March 31, 1999, the mortgage securitization residual
interest ("MSRI") was $80.2 million. The Company continuously monitors the fair
value of the MSRI and reviews the factors expected to influence the future
conditional (or constant) prepayment rate ("CPR"), discount rates, and credit
losses. In developing assumptions regarding expected future CPR, the Company
considers a variety of factors, many of which are interrelated. These include
historical performance, origination channels, characteristics of borrowers (e.g.
credit quality and loan-to-value relationships), and market factors that
influence competition. If changes in assumptions regarding future CPR, discount
rates, or credit losses are necessary, the MSRI fair value is adjusted
accordingly.
The Company utilizes both short-term and long-term debt in its
financing strategy. For fixed rate debt, changes in interest rates generally
affect the fair market value of the debt instrument, but not the Company's
earnings or cash flows. Conversely, for variable rate debt, changes in interest
rates generally do not impact the fair market value of the debt instrument, but
do affect the Company's future earnings and cash flows. The Company does not
have an obligation to prepay fixed rate debt prior to maturity, and as a result,
interest rate risk and changes in fair market value should not have a
significant impact on the fixed rate debt until it would be required to
refinance such debt.
As of March 31, 1999, short-term debt was $1.6 billion, which includes
$1.3 billion of debt applicable to the Financial Services operations. The
majority of the Financial Services debt is collateralized by residential
mortgage loans. The Company borrows on a short-term basis from banks under
committed lines, which bear interest at the prevailing market rates. The
weighted average interest
39
<PAGE> 40
rate of balances outstanding at March 31, 1999 was 5.6%. Long-term debt
outstanding at March 31, 1999 was as follows (in thousands):
<TABLE>
<CAPTION>
MATURITIES THROUGH MARCH 31,
---------------------------------------------------------------------------
2000 2001 2002 2003 2004 Thereafter Total Fair Value
-------- --------- -------- --------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate Debt $ 1,525 $ 495 $ 1,285 $ 15,190 $ 80 $ 199,251 $ 217,826 $ 223,341
Average Interest Rate 7.57% 7.43% 7.55% 6.42% 7.00% 8.06% 7.94%
Variable Rate Debt $ 2,385 $ 60,173 $ 340 $ 115 $ 125 $ 3,335 $ 66,473 $ 66,473
Average Interest Rate 6.13% 5.76% 3.42% 3.42% 3.42% 3.42% 5.64%
</TABLE>
The Company believes that its overall balance sheet structure has
repricing and cash flow characteristics that mitigate the impact of interest
rate movements.
40
<PAGE> 41
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL INFORMATION
<TABLE>
<S> <C>
CENTEX CORPORATION AND SUBSIDIARIES
Consolidated Revenues and Operating Earnings by Line of Business 42
Statements of Consolidated Earnings 43
Consolidated Balance Sheets 44
Statements of Consolidated Cash Flows 46
Statements of Consolidated Stockholders' Equity 47
Notes to Consolidated Financial Statements 48
Report of Independent Public Accountants 67
Quarterly Results 68
</TABLE>
41
<PAGE> 42
CENTEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED REVENUES AND OPERATING EARNINGS BY LINE OF BUSINESS
(Dollars in thousands)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
For the Years Ended March 31,
---------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES
Home Building
Conventional Homes $ 2,819,442 $ 2,312,045 $ 2,299,592 $ 1,989,929 $ 2,110,735
55% 58% 61% 64% 65%
Manufactured Homes 178,556 140,621 -- -- --
3% 4% --% --% --%
Investment Real Estate 33,694 25,403 9,032 -- --
1% 1% --% --% --%
Financial Services 436,299 246,278 168,722 129,546 106,841
8% 6% 5% 4% 3%
Construction Products (A) 336,073 297,322 239,380 -- --
7% 7% 6% --% --%
Contracting and Construction Services 1,350,776 953,781 1,068,265 983,512 1,059,928
26% 24% 28% 32% 32%
----------- ----------- ----------- ----------- -----------
$ 5,154,840 $ 3,975,450 $ 3,784,991 $ 3,102,987 $ 3,277,504
=========== =========== =========== =========== ===========
100% 100% 100% 100% 100%
OPERATING EARNINGS
Home Building
Conventional Homes $ 242,223 $ 170,531 $ 144,043 $ 106,695 $ 112,149
55% 60% 67% 74% 83%
Manufactured Homes, net (B) 10,253 8,741 -- -- --
2% 3% --% --% --%
Investment Real Estate 29,420 28,231 17,896 -- --
7% 10% 8% --% --%
Financial Services 92,309 31,371 24,410 17,155 9,399
21% 11% 12% 12% 7%
Construction Products, net (A) (B) 69,189 47,746 32,716 25,628 16,577
16% 17% 15% 18% 12%
Contracting and Construction Services 15,209 7,152 (2,183) (4,995) (1,790)
3% 2% (1%) (3%) (1%)
Other, net (15,624) (7,621) (2,260) (866) (1,608)
(4%) (3%) (1%) (1%) (1%)
----------- ----------- ----------- ----------- -----------
OPERATING EARNINGS 442,979 286,151 214,622 143,617 134,727
100% 100% 100% 100% 100%
Corporate General and Administrative 28,104 21,261 16,817 14,969 15,253
Interest 41,581 33,256 34,062 40,862 33,014
----------- ----------- ----------- ----------- -----------
Earnings Before Gain on Construction Products's
IPO
and Income Taxes 373,294 231,634 163,743 87,786 86,460
Construction Products's IPO Gain -- -- -- -- 59,328
----------- ----------- ----------- ----------- -----------
EARNINGS BEFORE INCOME TAXES $ 373,294 $ 231,634 $ 163,743 $ 87,786 $ 145,788
=========== =========== =========== =========== ===========
</TABLE>
Applicable segment overhead costs have been deducted from lines of business
operating earnings.
(A) As a result of Centex Construction Products, Inc.'s ("Construction
Products") repurchases of its own stock during the June 30, 1996 quarter,
Centex's ownership interest in Construction Products increased to more than
50% (60.6% as of March 31, 1999). Accordingly, beginning with the quarter
ended June 30, 1996, Construction Products's financial results have been
consolidated with those of Centex and are reflected in Centex's revenues and
operating earnings. In order to facilitate comparisons between years,
Construction Products's operating earnings have been reflected net of
minority interest. Had Construction Products's revenues been consolidated
for the years ended March 31, 1996 and 1995, Centex's consolidated revenues
for those years would have increased by $222,594 and $194,313, respectively.
(B) Operating earnings for Manufactured Homes and Construction Products are
reflected in this summary net of their respective minority interests.
Operating earnings related to those minority interests were $2,492 and
$2,678 for Manufactured Homes in 1999 and 1998, respectively. Minority
interest for Construction Products was $51,121, $40,587, $31,690, $26,676
and $17,252 for 1999, 1998, 1997, 1996 and 1995, respectively.
42
<PAGE> 43
CENTEX CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
-------------------------------------------
For the Years Ended March 31,
-------------------------------------------
1999 1998 1997
-------------------------------------------
<S> <C> <C> <C>
REVENUES
Home Building
Conventional Homes $ 2,819,442 $ 2,312,045 $ 2,299,592
Manufactured Homes 178,556 140,621 --
Investment Real Estate 33,694 25,403 9,032
Financial Services 436,299 246,278 168,722
Construction Products 336,073 297,322 239,380
Contracting and Construction Services 1,350,776 953,781 1,068,265
------------ ------------ ------------
5,154,840 3,975,450 3,784,991
------------ ------------ ------------
COSTS AND EXPENSES
Home Building
Conventional Homes 2,577,219 2,141,514 2,155,549
Manufactured Homes 165,811 129,202 --
Investment Real Estate 4,274 (2,828) (8,864)
Financial Services 343,990 214,907 144,312
Construction Products 215,763 208,989 174,974
Contracting and Construction Services 1,335,567 946,629 1,070,448
Other, net 15,624 7,439 2,260
Corporate General and Administrative 28,104 21,261 16,817
Interest 41,581 33,256 34,062
Minority Interest 53,613 43,447 31,690
------------ ------------ ------------
4,781,546 3,743,816 3,621,248
------------ ------------ ------------
EARNINGS BEFORE INCOME TAXES 373,294 231,634 163,743
Income Taxes 141,332 86,828 57,180
------------ ------------ ------------
NET EARNINGS $ 231,962 $ 144,806 $ 106,563
============ ============ ============
EARNINGS PER SHARE
Basic $ 3.90 $ 2.45 $ 1.86
============ ============ ============
Diluted $ 3.75 $ 2.36 $ 1.80
============ ============ ============
AVERAGE SHARES OUTSTANDING
Basic 59,488,701 59,007,158 57,280,710
Common Share Equivalents
Options 1,965,116 1,857,785 1,578,192
Convertible Debenture 400,000 400,000 400,000
------------ ------------ ------------
Diluted 61,853,817 61,264,943 59,258,902
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
43
<PAGE> 44
CENTEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
-----------------------
Centex Corporation and
Subsidiaries
-----------------------
March 31,
-----------------------
1999 1998
-----------------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 111,268 $ 98,316
Receivables -
Residential Mortgage Loans 1,395,616 1,191,450
Construction Contracts 232,779 207,688
Trade, including Notes of $29,458 and $12,904 226,999 183,203
Inventories -
Housing Projects 1,412,788 970,290
Land Held for Development and Sale 74,081 48,844
Construction Products 33,030 32,537
Other 13,920 12,883
Investments -
Centex Development Company, L.P. 63,207 34,526
Joint Ventures and Other 48,594 7,558
Unconsolidated Subsidiaries -- --
Property and Equipment, net 313,655 295,992
Other Assets -
Deferred Income Taxes 49,107 147,607
Goodwill, net 222,162 133,847
Mortgage Securitization Residual Interest 80,152 14,747
Deferred Charges and Other 57,388 36,731
---------- ----------
$4,334,746 $3,416,219
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Liabilities $1,018,650 $ 799,154
Short-term Debt 1,626,600 1,152,873
Long-term Debt 284,299 237,715
Payables to Affiliates -- --
Minority Stockholders' Interest 140,721 152,468
Negative Goodwill 66,837 82,837
Stockholders' Equity -
Preferred Stock, Authorized 5,000,000 Shares, None Issued -- --
Common Stock, $.25 Par Value; Authorized 100,000,000 Shares;
Issued and Outstanding 59,388,350 and 59,531,758 Shares 14,847 14,883
Capital in Excess of Par Value 20,822 36,761
Retained Earnings 1,161,970 939,528
---------- ----------
Total Stockholders' Equity 1,197,639 991,172
---------- ----------
$4,334,746 $3,416,219
========== ==========
</TABLE>
See notes to consolidated financial statements.
44
<PAGE> 45
CENTEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------
Centex Corporation Financial Services
- -------------------------------------------------
March 31, March 31,
- -------------------------------------------------
1999 1998 1999 1998
- -------------------------------------------------
<S> <C> <C> <C>
$ 72,279 $ 87,491 $ 38,989 $ 10,825
-- -- 1,395,616 1,191,450
232,779 207,688 -- --
171,264 129,870 55,735 53,333
1,412,788 970,290 -- --
74,081 48,844 -- --
33,030 32,537 -- --
13,920 12,883 -- --
63,207 34,526 -- --
48,594 7,558 -- --
221,744 146,592 -- --
285,891 276,008 27,764 19,984
40,541 144,090 8,566 3,517
206,595 123,709 15,567 10,138
-- -- 80,152 14,747
40,962 23,730 16,426 13,001
- ---------- ---------- ---------- ----------
$2,917,675 $2,245,816 $1,638,815 $1,316,995
========== ========== ========== ==========
$ 926,377 $ 711,564 $ 92,273 $ 87,590
303,656 73,823 1,322,944 1,079,050
284,299 237,715 -- --
-- -- 102,652 58,299
138,867 148,705 1,854 3,763
66,837 82,837 -- --
-- -- -- --
14,847 14,883 1 1
20,822 36,761 75,944 74,944
1,161,970 939,528 43,147 13,348
- ---------- ---------- ---------- ----------
1,197,639 991,172 119,092 88,293
- ---------- ---------- ---------- ----------
$2,917,675 $2,245,816 $1,638,815 $1,316,995
========== ========== ========== ==========
</TABLE>
In the supplemental data presented above, "Centex Corporation" represents the
adding together of all subsidiaries other than those included in Financial
Services as described in Note A to the consolidated financial statements.
Transactions between Centex Corporation and Financial Services have been
eliminated from the Centex Corporation and Subsidiaries balance sheets.
45
<PAGE> 46
CENTEX CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
-----------------------------------
For the Years Ended March 31,
-----------------------------------
1999 1998 1997
-----------------------------------
<S> <C> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES
Net Earnings $ 231,962 $ 144,806 $ 106,563
Adjustments -
Depreciation, Depletion and Amortization 36,172 25,638 13,512
Deferred Income Taxes 96,462 59,181 42,843
Equity in Earnings of Centex Development Company, L.P. and
Joint Ventures (125) (3,796) (996)
Minority Interest, net of taxes 35,112 28,836 20,567
Increase in Receivables (66,897) (36,163) (22,834)
Increase in Residential Mortgage Loans (204,166) (558,793) (2,901)
(Increase) Decrease in Inventories (426,301) (70,337) 99,260
Increase in Payables and Accruals 205,671 61,456 12,833
Increase in Other Assets, net (115,179) (72,445) (40,988)
Other, net (46,859) (18,598) 29,649
--------- --------- ---------
(254,148) (440,215) 257,508
--------- --------- ---------
CASH FLOWS - INVESTING ACTIVITIES
(Increase) Decrease in Advances to Centex Development
Company, L.P. and Joint Ventures (51,147) 7,195 4,725
Acquisitions -
Home Building Operations (124,116) -- --
Cavco and Eagle Gypsum -- -- (104,894)
Property and Equipment Additions, net (52,453) (36,874) (16,137)
--------- --------- ---------
(227,716) (29,679) (116,306)
--------- --------- ---------
CASH FLOWS - FINANCING ACTIVITIES
Increase (Decrease) in Debt -
Secured by Residential Mortgage Loans 243,894 498,532 5,502
Other 276,417 27,769 (135,804)
Proceeds from Stock Option Exercises 9,482 18,583 12,122
Retirement of Common Stock (25,457) -- --
Dividends Paid (9,520) (7,994) (5,744)
--------- --------- ---------
494,816 536,890 (123,924)
--------- --------- ---------
NET INCREASE IN CASH 12,952 66,996 17,278
CASH AT BEGINNING OF YEAR 98,316 31,320 14,042
--------- --------- ---------
CASH AT END OF YEAR $ 111,268 $ 98,316 $ 31,320
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
46
<PAGE> 47
CENTEX CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
-------------------------------------------------------------------
Capital In
Preferred Common Excess Of Retained
Stock Stock Par Value Earnings Total
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, March 31, 1996 $ -- $ 14,214 $ 6,725 $ 701,897 $ 722,836
Exercise of Stock Options -- 294 11,828 -- 12,122
Net Earnings -- -- -- 106,563 106,563
Cash Dividends -- -- -- (5,744) (5,744)
-------- ----------- ----------- ----------- -----------
Balance, March 31, 1997 -- 14,508 18,553 802,716 835,777
Exercise of Stock Options -- 375 18,208 -- 18,583
Net Earnings -- -- -- 144,806 144,806
Cash Dividends -- -- -- (7,994) (7,994)
-------- ----------- ----------- ----------- -----------
Balance, March 31, 1998 -- 14,883 36,761 939,528 991,172
EXERCISE OF STOCK OPTIONS -- 143 9,339 -- 9,482
RETIREMENT OF 714,800 SHARES -- (179) (25,278) -- (25,457)
NET EARNINGS -- -- -- 231,962 231,962
CASH DIVIDENDS -- -- -- (9,520) (9,520)
-------- ----------- ----------- ----------- -----------
BALANCE, MARCH 31, 1999 $ -- $ 14,847 $ 20,822 $ 1,161,970 $ 1,197,639
======== =========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
47
<PAGE> 48
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:
o 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.
o Centex Corporation. This information is presented as supplemental
information and represents the adding together of all subsidiaries
other than those included in Financial Services, which are presented
on an equity basis of accounting.
o Financial Services. This information is presented as supplemental
information and represents Centex Financial Services and subsidiaries.
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
Revenues from Home Building projects and Investment Real Estate are
recognized as homes and properties are sold and title passes. Earnings from the
sale of mortgage servicing rights and from loan origination fees are recognized
when the related loan is sold and delivered to a third-party purchaser.
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 $79 million included in construction contracts receivable and $82
million included in accounts payable at March 31, 1999 are generally receivable
and payable within one year.
Claims are recognized as revenue only after management has determined
that collection is probable and the amount can be reliably estimated. Claims of
$2.1 million, $0.5 million and $6.9 million are included in revenues for the
years ended March 31, 1999, 1998 and 1997, respectively.
Notes receivable at March 31, 1999 are collectible primarily over five
years with $15.7 million being due within one year. The weighted average
interest rate at March 31, 1999 was 6.1%.
48
<PAGE> 49
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 fair value less cost to sell. The capitalized costs,
other than interest, are included in Home Building and Investment Real Estate
costs and expenses in the statement of consolidated earnings as related revenues
are recognized. Interest costs relieved from inventories are included as
interest expense. The Company reviews the recoverability of its Home Building
inventories on an individual project basis in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of."
Construction Products inventories are stated at the lower of average
cost (including applicable material, labor and plant overhead) or market.
General operating expenses associated with each segment of business are
expensed as incurred and are included in the appropriate segment of business.
INVESTMENTS
From time to time the Company sells certain real estate assets to
Centex Development Company, L.P. in exchange for cash or additional Class C
Partnership Units. The assets are sold at their estimated fair market value at
the time of sale using available market information including data from recent
sales, brokers and appraisals. The Company records any excess of the sales price
over book value as deferred income. The Company recognizes the deferred income
when the properties are subsequently sold by Centex Development Company, L.P.
See Note F for additional information regarding Centex Development Company, L.P.
The Company is involved in joint ventures with interests ranging from
20% to 50%. The investments in these joint ventures are carried on the equity
method in the consolidated financial statements except for Centex Construction
Products, Inc.'s ("Construction Products") 50% joint venture interests in its
cement plants in Illinois and Texas. Construction Products has proportionately
consolidated its pro rata interest in the revenues, expenses, assets and
liabilities of those ventures. The earnings or losses of the Company's other
joint ventures are not significant and are included in the appropriate segment
of business revenues.
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.
GOODWILL AND NEGATIVE GOODWILL
Goodwill represents the excess of purchase price over net assets of
businesses acquired. Goodwill is amortized over various periods between 6 and 40
years. The Company monitors its goodwill and other intangibles to determine
whether any impairment of these assets has occurred. In making such
determination, the Company evaluates the performance, on an undiscounted basis,
of the underlying businesses which gave rise to such amount. In case of an
impairment, the recorded costs would be written down to fair value on a
discounted basis. Goodwill amortization totaled $10.5 million in fiscal 1999,
$5.8 million in fiscal 1998 and $2.1 million in fiscal 1997.
Negative goodwill arose in conjunction with Centex's Home Building
subsidiary's fiscal 1997 combination transaction with Vista Properties, Inc.
Negative goodwill is being amortized over
49
<PAGE> 50
approximately seven years ($16 million annually) which represents the estimated
period over which Vista's land will be developed and/or sold. Amortization is
reflected as a reduction of costs and expenses in the accompanying statements of
consolidated earnings.
EARNINGS PER SHARE
Basic earnings per share is computed based on the weighted average
number of shares of common stock outstanding. Diluted earnings per share is
computed based upon the basic weighted average number of shares plus the
dilution of the stock options and the convertible debenture.
Options to purchase approximately one million shares of common stock at
approximately $38.60 per share (expiring in April 2008) were outstanding during
the fiscal year ended March 31, 1999 but were not included in the computation of
diluted earnings per share because they were anti-dilutive.
RESIDENTIAL MORTGAGE LOANS RECEIVABLE
Residential mortgage loans of $1.4 billion at March 31, 1999 are stated
at the lower of cost or market. Market is determined based on forward sale
commitments or on current investor yield requirements, adjusted for deferred
hedging gains or losses. Substantially all of the mortgage loans generated by
CTX Mortgage are sold forward upon closing and subsequently delivered to
third-party purchasers within approximately 60 days thereafter, while
substantially all the mortgage loans produced by Centex Home Equity Corporation
("Home Equity") are securitized, generally on a quarterly basis. Due to the fact
that defaults of new loans within the first 60 to 90 days are minimal, no
significant reserves have been provided.
MORTGAGE SECURITIZATION RESIDUAL INTEREST
One of Home Equity's primary sources of income is the recognition of
gains in connection with securitizations and, to a lesser extent, whole loan
sales. In a securitization, Home Equity retains a residual interest that
represents its right to receive, over the life of the securitization, the excess
of the weighted average coupon on the loans securitized over the interest rates
on the securities sold, a normal servicing fee, a trustee fee, an insurance fee
(where applicable) together with the credit losses relating to the loans
securitized (the "Excess Spread"). In a whole loan sale, Home Equity receives
cash and recognizes a gain upon completion of the transaction. Gain on sale of
mortgages also includes points and fees generated through direct retail mortgage
originations (included in earnings when the loans are securitized or sold).
In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," the Company
classifies Mortgage Securitization Residual Interest ("MSRI") as trading
securities. As such they are carried at fair value on the Company's balance
sheet. Unrealized changes in MSRI fair value are included in the Company's
statement of operations in gain on sale of mortgage loans in the period of the
change.
Home Equity estimates the fair value of MSRI through the application of
discounted cash flow analysis, which requires the use of various assumptions,
the most significant of which are anticipated prepayments (principal reductions,
in excess of contractually scheduled reductions), estimated future credit
losses, and the discount rate. Home Equity continuously monitors the fair value
of MSRI and reviews the factors expected to influence discount rates, future
annualized Conditional (or Constant) Prepayment Rate ("CPR") and credit losses.
If changes in assumptions are necessary, MSRI fair value is adjusted
accordingly.
At March 31, 1999, Home Equity's MSRI portfolio was comprised of
residual interests in securitizations with a fair value of $80.2 million. Home
Equity valued its MSRI using a discount rate of 12% simple interest, a loss rate
of 0.5% per annum and CPRs that differ for fixed rate and variable
50
<PAGE> 51
rate loans. For fixed rate loans, the CPR is 4.8% per annum in the first month
of the loan and increases approximately 2.1% per annum each month reaching a
maximum rate of 28% per annum by the end of the twelfth month. The variable rate
loans have a constant CPR of 32% per annum. The average age of Home Equity's
MSRI portfolio is approximately six months; because the pools are unseasoned,
actual experience to date would not be meaningful. However, nothing has occurred
that gives management reason to believe that actual experience will differ
significantly from the above assumptions.
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 commits to sell mortgage loans at a specified price to
various investors. CTX Mortgage had commitments to mortgagors of approximately
$384 million and commitments from investors against these loan commitments of
approximately $357 million at March 31, 1999.
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 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,
-----------------------------------
1999 1998 1997
-----------------------------------
<S> <C> <C> <C>
Total Interest Incurred $ 118,451 $ 78,128 $ 65,517
Less - Financial Services (76,870) (44,872) (31,455)
--------- --------- ---------
Interest Expense $ 41,581 $ 33,256 $ 34,062
========= ========= =========
</TABLE>
Net payments made for federal, state and foreign income taxes during the fiscal
years ended March 31, 1999, 1998, and 1997 were $43.7 million, $23.3 million,
and $16.0 million, respectively.
STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
issued in June 1996, superseded SFAS No. 122 in establishing standards for
resolving issues relating to the accounting for continuing involvement arising
from the transfer of financial assets. Under SFAS No. 125, an entity that
undertakes an obligation to service financial assets recognizes a financial
asset or servicing liability for that servicing contract and amortizes the
estimated net servicing income or loss over the projected contract period. The
servicing asset or liability is periodically reviewed for impairment or
increased obligation based on its fair value. This Statement was effective for
transfers and servicing of financial assets occurring after December 31, 1996.
Implementing this new Statement did not have a material effect on the Company's
financial position or results of operations.
Effective April 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." SFAS No. 130
establishes standards for reporting and displaying comprehensive income and its
components. The Company has no nonowner changes in equity that would be
classified as "other comprehensive income." As a result, comprehensive income is
equal to the Company's net earnings.
51
<PAGE> 52
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information," issued in June 1997, changes
the way public companies report information about segments. SFAS No. 131, which
is based on the management approach to segment reporting, requires companies to
report selected quarterly segment information and entity-wide disclosures about
products and services, major customers, and the material countries in which the
entity holds assets and reports revenues. Effective April 1998, the Company
adopted this statement. It did not have a material effect on the Company's
financial statements.
In February 1998, Statement of Financial Accounting Standards No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits," was
issued. SFAS No. 132 requires additional disclosures relating to defined benefit
pension or postretirement plans. This statement is effective for fiscal years
beginning after December 15, 1997. The implementation of this statement had no
material effect on the Company.
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities," was issued in June 1998. This
statement addresses the accounting for derivative instruments, including
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and hedging activities as well as the disclosure of these
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the consolidated balance sheet and measure those
instruments at fair value. The effective date of the statement will be April
2000 for the Company. There is, however, an exposure draft dated May 1999 that
would delay the implementation of this statement until April 2001.
Statement of Financial Accounting Standards No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise," was issued in October 1998.
This statement requires that an entity engaged in mortgage banking classify the
resulting mortgage-backed security or other retained interest based on its
ability and intent to sell or hold the investments. The Company will implement
SFAS No. 134 as of June 30, 1999.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to be consistent
with the fiscal 1999 presentation.
(B) PROPERTY AND EQUIPMENT
Property and equipment cost by major category and accumulated
depreciation are summarized below:
<TABLE>
<CAPTION>
----------------------
March 31,
----------------------
1999 1998
----------------------
<S> <C> <C>
Land, Buildings and Improvements $ 49,440 $ 43,291
Machinery, Equipment and Other 183,375 174,403
Plants 322,991 299,895
--------- ---------
555,806 517,589
Accumulated Depreciation (242,151) (221,597)
--------- ---------
$ 313,655 $ 295,992
========= =========
</TABLE>
52
<PAGE> 53
(C) INDEBTEDNESS
SHORT-TERM DEBT
Balances of short-term debt were:
<TABLE>
<CAPTION>
-------------------------------------------------
March 31,
-------------------------------------------------
1999 1998
-------------------------------------------------
CENTEX FINANCIAL Centex Financial
CORPORATION SERVICES Corporation Services
-------------------------------------------------
<S> <C> <C> <C> <C>
Banks $ -- $ 596,094 $ -- $ 406,546
Commercial Paper 289,140 -- 65,000 --
Other Financial Institutions 14,516 726,850 8,823 672,504
---------- ---------- ---------- ----------
$ 303,656 $1,322,944 $ 73,823 $1,079,050
---------- ---------- ---------- ----------
Consolidated Short-term Debt $1,626,600 $1,152,873
========== ==========
</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 1999 and
1998 were 6.0% and 6.2%, respectively. The weighted average rates of balances
outstanding for March 31, 1999 and 1998 were 5.6% and 6.2%, respectively.
LONG-TERM DEBT
Balances of long-term debt were:
<TABLE>
<CAPTION>
---------------------
March 31,
---------------------
1999 1998
---------------------
<S> <C> <C>
Subordinated Debentures, 7.375%, due in 2005 $ 99,698 $ 99,650
Subordinated Debentures, 8.75% to 8.8%, due in 2007 99,473 119,428
Other Indebtedness, 6.0% to 9.6%, due through 2027 85,128 18,637
-------- --------
$284,299 $237,715
======== ========
</TABLE>
Maturities of long-term debt during the next five fiscal years are:
2000, $3,910; 2001, $60,668; 2002, $1,625; 2003, $15,305; 2004, $205.
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 LIBOR plus 1.5% and is convertible into 400,000
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. During May 1999, the terms of the debenture were amended to extend
its maturity date from March 2000 to March 2010.
CREDIT FACILITIES
The Company maintains a $425 million revolving credit agreement
expiring in August 2001. Under the terms of the agreement, $170 million may be
borrowed directly by CTX Mortgage. There were no borrowings outstanding to
Centex Corporation under this facility during the fiscal years ended March 31,
1999 and 1998. CTX Mortgage has borrowed under this facility during fiscal years
ended March 31, 1999 and 1998. Centex also has a $235 million revolving credit
agreement with a group of banks that expires on November 17, 1999, which was put
in place during fiscal 1999. There have been no borrowings under this facility
since its inception.
53
<PAGE> 54
CTX Mortgage has a $300 million committed and secured mortgage
warehouse facility with a bank group, expiring in October 1999. CTX Mortgage
also maintains two committed mortgage warehouse facilities of $600 million
expiring $300 million in August 1999 with an investment bank and expiring $300
million in October 1999 with a commercial bank. In addition, CTX Mortgage has a
$200 million asset-backed commercial paper program which was extended for one
year (to April 2000) and increased to $300 million in April 1999. CTX Mortgage's
warehouse facilities require limited support from Centex which, under certain
conditions, may require Centex's purchase from time to time of up to 10% of the
outstanding collateral.
At March 31, 1999, Centex Home Equity had a $300 million committed and
secured mortgage warehouse facility with a bank group. The line was renewed and
extended in April 1999 for $250 million, expiring in October 1999.
Under the most restrictive covenants of the various debt agreements,
retained earnings of $689 million were free of restrictions at March 31, 1999.
(D) CAPITAL STOCK
STOCKHOLDER RIGHTS PLAN
On October 2, 1996, the Board of Directors of the Company adopted a new
stockholder rights plan ("Plan") to replace the original rights plan which
expired on October 1, 1996. In connection with the Plan, the Board authorized
and declared a dividend of one right ("Right") for each share of Common Stock,
par value $.25 per share, of the Company ("Common Stock") to all stockholders of
record at the close of business on October 15, 1996. After giving effect to the
Company's two-for-one stock split effective March 2, 1998, each Right entitles
its holder to purchase one two-hundredths of a share of a new series of
preferred stock designated Junior Participating Preferred Stock, Series D, at an
exercise price of $67.50. The Rights will become exercisable upon the earlier of
10 days after the first public announcement that a person or group has acquired
beneficial ownership of 15 percent or more of the Common Stock, or 10 business
days after a person or group announces an offer, the consummation of which would
result in such person or group beneficially owning 15 percent or more of the
Common Stock (even if no purchases actually occur), unless such time periods are
deferred by appropriate Board action. The Plan excludes FMR Corp. from causing
the rights to become exercisable until such time as FMR Corp., together with
certain affiliated and associated persons, collectively own 20 percent or more
of the Common Stock. If the Company is involved in a merger or other business
combination at any time after a person or group has acquired beneficial
ownership of 15 percent or more (or, in the case of FMR Corp., 20 percent or
more) of Common Stock, the Rights will entitle a holder to buy a number of
shares of common stock of the acquiring Company having a market value of twice
the exercise price of each Right. If any person or group acquires beneficial
ownership of 15 percent or more (or, in the case of FMR Corp., 20 percent or
more) of Common Stock, the Rights will entitle a holder (other than such person
or any member of such group) to buy a number of additional shares of Common
Stock having a market value of twice the exercise price of each Right.
Alternatively, if a person or group has acquired 15 percent or more (or, in the
case of FMR Corp., 20 percent or more) of the Common Stock, but less than 50
percent of the Common Stock, the Company may at its option exchange each Right
of a holder (other than such person or any member of such group) for one share
of Common Stock. In general, the rights are redeemable at $0.01 per right until
15 days after the Rights become exercisable as described above. Unless earlier
redeemed, the Rights will expire on October 12, 2006.
54
<PAGE> 55
STOCK OPTIONS
The Company has three stock option plans: the Amended and Restated 1998
Centex Corporation Employee Non-Qualified Stock Option Plan (the "1998 Plan"),
the Centex Corporation Amended and Restated 1987 Stock Option Plan (the "1987
Plan"), and the Centex Corporation Stock Option Plan (the "Centex Plan").
Options granted under the 1998 Plan may not be granted at less than fair market
value at the date of grant. Although the 1987 Plan provides that option grants
may be at less than the fair market value at the date of the grant, the Company
has consistently followed the practice of issuing options at the fair market
value at the date of grant. Options granted under the Centex Plan were not
granted at less than the fair market value at the date of the grant. The Centex
Plan expired during the fiscal year ended March 31, 1999. Under all three plans,
option periods and exercise dates may vary within a maximum period of ten years.
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.
A summary of the activity of the three stock option plans is presented
below:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
1999 1998 1997
-----------------------------------------------------------------------------------
WEIGHTED- Weighted- Weighted-
NUMBER AVERAGE Average Number Average
OF EXERCISE Number Exercise of Exercise
SHARES PRICE of Shares Price Shares Price
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Options Outstanding,
Beginning of Year 5,260,056 $ 14.22 5,360,058 $ 10.89 6,051,818 $ 9.47
Options Granted 2,254,800 $ 38.27 1,804,890 $ 18.36 715,750 $ 16.01
Options Exercised (709,283) $ 11.51 (1,660,518) $ 7.80 (1,190,630) $ 6.47
Options Forfeited/Expired (41,825) $ 18.44 (244,374) $ 15.18 (216,880) $ 12.61
----------- ------------ -----------
Options Outstanding, End of Year 6,763,748 $ 22.46 5,260,056 $ 14.22 5,360,058 $ 10.89
=========== ============ ===========
Options Exercisable, End of Year 2,760,743 2,045,732 2,045,684
=========== ============ ===========
Shares Available for Future Stock Option
Grants, End of Year 3,478,257 4,104,254 4,827,608
=========== ============ ===========
Weighted-Average Fair Value of
Options Granted during the Year $ 18.54 $ 9.31 $ 7.09
</TABLE>
Using the treasury stock method, which assumes that any proceeds
together with the related tax benefits from the exercise of options would be
used to purchase common stock at current prices, the dilutive effect of the
options on outstanding shares as of March 31, 1999 would have been 2.3%. This is
significantly less than appears on a gross basis when compared to the 59,388,350
common shares outstanding as of March 31, 1999.
55
<PAGE> 56
The following table summarizes information about stock options
outstanding at March 31, 1999:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------------------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
NUMBER OF REMAINING AVERAGE NUMBER OF AVERAGE
SHARES CONTRACTUAL EXERCISE SHARES EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE OUTSTANDING PRICE
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 8.5625 - $12.6250 1,388,248 1.96 $ 9.13 1,235,566 $ 8.97
$13.0000 - $19.5000 2,991,550 6.96 $16.66 1,126,732 $16.51
$19.5938 - $28.5313 93,000 8.24 $23.25 8,000 $21.36
$30.3438 - $39.6875 2,290,950 9.04 $38.08 390,445 $38.52
--------- ---------
6,763,748 6.66 $22.46 2,760,743 $16.26
========= =========
</TABLE>
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, no compensation cost has
been recognized for the stock option plans. Had compensation cost for the
Company's three stock option plans been determined based on the fair value at
the grant date for awards in 1999, 1998 and 1997 consistent with the provisions
of SFAS No. 123, the Company's net earnings and earnings per share would have
been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
-------------------------------------------
1999 1998 1997
-------------------------------------------
<S> <C> <C> <C>
Net Earnings - as Reported $ 231,962 $ 144,806 $ 106,563
Net Earnings - Pro Forma $ 217,504 $ 140,034 $ 105,063
Earnings Per Share - as Reported
Basic $ 3.90 $ 2.45 $ 1.86
Diluted $ 3.75 $ 2.36 $ 1.80
Earnings Per Share - Pro Forma
Basic $ 3.66 $ 2.37 $ 1.83
Diluted $ 3.52 $ 2.29 $ 1.77
</TABLE>
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
----------------------------
1999 1998 1997
----------------------------
<S> <C> <C> <C>
Expected Volatility 34.3% 35.3% 35.7%
Risk-Free Interest Rate 5.7% 6.9% 6.8%
Dividend Yield .4% .6% .6%
Expected Life (Years) 8 8 8
</TABLE>
56
<PAGE> 57
(E) INCOME TAXES
The provision for income taxes includes the following components:
<TABLE>
<CAPTION>
----------------------------------
For the Years Ended March 31,
----------------------------------
1999 1998 1997
----------------------------------
<S> <C> <C> <C>
Current Provision
Federal $ 32,858 $ 18,555 $ 11,216
State 12,012 9,092 3,121
-------- -------- --------
44,870 27,647 14,337
-------- -------- --------
Deferred Provision
Federal 92,008 57,780 38,771
State 4,454 1,401 4,072
-------- -------- --------
96,462 59,181 42,843
-------- -------- --------
Provision for Income Taxes $141,332 $ 86,828 $ 57,180
======== ======== ========
</TABLE>
The effective tax rate is greater than the federal statutory rate of
35% in 1999 and 1998 due to the following items:
<TABLE>
<CAPTION>
----------------------------------
For the Years Ended March 31,
----------------------------------
1999 1998 1997
----------------------------------
<S> <C> <C> <C>
Financial Income Before Taxes $373,294 $231,634 $163,743
======== ======== ========
Income Taxes at Statutory Rate $130,653 $ 81,072 $ 57,311
Increases (Decreases) in Tax Resulting From -
State Income Taxes, net 9,068 5,822 4,131
Negative Goodwill Amortization (6,000) (6,000) (6,000)
Other 7,611 5,934 1,738
-------- -------- --------
Provision for Income Taxes $141,332 $ 86,828 $ 57,180
======== ======== ========
Effective Tax Rate 38% 37% 35%
</TABLE>
The deferred income tax provision 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,
----------------------------------
1999 1998 1997
----------------------------------
<S> <C> <C> <C>
Utilization of Net Operating Loss Carryforwards $ 28,224 $ 43,771 $ 46,865
Tax Basis in Excess of Book Basis 71,740 9,207 3,648
Uniform Capitalization for Tax Reporting 3,525 7,379 (2,893)
Excess Tax Depreciation and Amortization 2,366 4,097 2,257
Financial Accrual Changes and Other (9,393) (5,273) (7,034)
-------- -------- --------
$ 96,462 $ 59,181 $ 42,843
======== ======== ========
</TABLE>
57
<PAGE> 58
Components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
---------------------
March 31,
---------------------
1999 1998
---------------------
<S> <C> <C>
Deferred Tax Liabilities
Excess Tax Depreciation and Amortization $ 31,347 $ 30,517
Interest and Real Estate Taxes Expensed as Incurred 18,933 20,828
Equity Adjustments 27,675 24,714
Consolidated Return Regulation Deferrals 6,861 6,864
All Other 13,934 14,413
-------- --------
Total Deferred Tax Liabilities 98,750 97,336
-------- --------
Deferred Tax Assets
Tax Basis in Excess of Book Basis 26,548 99,281
Net Operating Loss Carryforwards 17,631 43,536
Uniform Capitalization for Tax Reporting 30,924 34,493
Financial Accruals 60,301 50,084
Alternative Minimum Tax 4,555 --
All Other 7,898 17,549
-------- --------
Total Deferred Tax Assets 147,857 244,943
-------- --------
Net Deferred Tax Assets $ 49,107 $147,607
======== ========
</TABLE>
At March 31, 1999, Centex had $50.3 million of net operating loss
carryforwards available to reduce future federal taxable income which expire if
unused as follows: 2006, $1.5 million; 2007, $3.0 million; 2008, $1.0 million;
2009, $0.5 million; 2010, $28.6 million; and 2011, $15.7 million.
(F) CENTEX DEVELOPMENT COMPANY, L.P.
In March 1987, certain of Centex's subsidiaries contributed to Centex
Development Company, L.P., (the "Partnership") a newly formed master limited
partnership, properties with a historical cost basis (which approximated market
value) of approximately $76 million. The Partnership was formed to enable
stockholders to participate in long-term real estate development projects whose
dynamics are inconsistent with Centex's traditional financial objectives.
The Partnership is a limited partnership which is controlled by its
general partner, 3333 Development Corporation ("Development"), a wholly-owned
subsidiary of 3333 Holding Corporation ("Holding"). Holding is a separate public
company whose stock trades in tandem with Centex's stock. The common stock of
Holding was distributed in 1987 (with warrants to purchase approximately 80% of
the Class B limited partnership units in the Partnership) as a dividend to the
stockholders of Centex and is held by a nominee. These securities, held by the
nominee on behalf of the stockholders, will trade in tandem with the common
stock of Centex 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 three-person Board of Directors of Holding is elected by the
stockholders of Centex. Two of the Board members, representing the majority of
the Board, are independent outside directors who are also not directors of
Centex. Thus the general partner of the Partnership is controlled by the
stockholders of Centex. The general partner and independent board of Holding
manage how the Partnership conducts its activities including the sales,
development, maintenance and zoning of properties. The general partner may sell
or acquire properties, including the contributed property, and
58
<PAGE> 59
enter into other business transactions without the consent of the limited
partners. In addition, the limited partners cannot remove the general partner.
The Company accounts for its limited partner investment in the
Partnership on the equity method of accounting because the Company's interest in
the cash and earnings of the Partnership is limited to defined amounts, and the
Company does not control the Partnership.
During fiscal year 1998, the agreement governing the Partnership was
amended to allow for the issuance of a new class of limited partnership units,
Class C Limited Partnership Units ("Class C Units"). On March 31, 1998, 7,542
Class C Units were issued in exchange for assets with a fair market value of
$7.5 million. Additionally, on this date, the 1,000 Class A Units were converted
to 32,260 new Class A Units. During fiscal 1999, an additional 19,445 Class C
Units were issued in exchange for assets with a fair market value of $19.4
million. These assets were recorded by the Partnership at fair market value. The
partnership agreement provides that Centex, the Class A and Class C 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 capital
contributions, adjusted for cash distributions representing return of the
capital contributions. In July 1995, in conjunction with the extension of the
automatic detachment date from 1997 to 2007, Centex reduced its Unrecovered
Capital, as defined, to $47.3 million and waived unpaid preference as of that
date of $37.5 million. Unrecovered Capital, as defined, was reduced by $4.5
million during fiscal 1998 and $4.5 million during fiscal 1997 as a result of
capital distributions and preference payments. Preference payments in arrears at
March 31, 1999 amounted to $9.1 million. No preference payments were made during
fiscal 1999.
Supplementary condensed combined financial statements for the Company,
3333 Holding Corporation and subsidiary and Centex Development Company, L.P. and
subsidiaries are set forth below. For additional information on 3333 Holding
Corporation and its subsidiary and Centex Development Company, L.P. and
subsidiaries, see their separate financial statements and related footnotes
included elsewhere in this Report.
SUPPLEMENTARY CONDENSED COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
-------------------------
March 31,
-------------------------
1999 1998
-------------------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 111,632 $ 98,576
Receivables 1,860,090 1,588,247
Inventories 1,639,664 1,107,941
Investments in Joint Ventures and Other 49,266 10,598
Property and Equipment, net 313,886 296,080
Other Assets 410,321 333,044
---------- ----------
$4,384,859 $3,434,486
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Liabilities $1,026,867 $ 802,547
Short-term Debt 1,668,496 1,166,694
Long-term Debt 284,299 237,715
Minority Stockholders' Interest 140,721 152,468
Negative Goodwill 66,837 82,837
Stockholders' Equity 1,197,639 992,225
---------- ----------
$4,384,859 $3,434,486
========== ==========
</TABLE>
59
<PAGE> 60
SUPPLEMENTARY CONDENSED COMBINED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
----------------------------------------
For the Years Ended March 31,
----------------------------------------
1999 1998 1997
----------------------------------------
<S> <C> <C> <C>
Revenues $5,179,188 $3,991,954 $3,793,621
Costs and Expenses 4,805,894 3,760,445 3,629,672
---------- ---------- ----------
Earnings Before Income Taxes 373,294 231,509 163,949
Income Taxes 141,332 86,828 57,180
---------- ---------- ----------
Net Earnings $ 231,962 $ 144,681 $ 106,769
========== ========== ==========
</TABLE>
(G) ACQUISITION OF VISTA PROPERTIES, INC.
In fiscal 1996, the Company acquired certain equity interests in Vista
Properties, Inc. for a net investment of approximately $85 million in cash. At
the time of the acquisition, Vista owned a real estate portfolio of properties
located in seven states in which the Company has major operations. Vista's real
property portfolio generally consisted of land zoned, planned or developed for
single- and multi-family residential, office, retail, industrial, and other
commercial uses. During fiscal 1997, Centex's Home Building subsidiary completed
a business combination transaction and reorganization with Vista whereby
Centex's Home Building assets and operations were contributed to Vista and Vista
changed its name to Centex Real Estate Corporation. As a result of the
combination, Centex's Investment Real Estate portfolio, valued in excess of $125
million, was reduced to a nominal "book basis" after recording certain deferred
tax benefits. Accordingly, as these properties are developed or sold the net
sales proceeds are reflected as operating margin. Negative Goodwill recorded as
a result of the business combination is being amortized to earnings over
approximately seven years which represents the estimated period over which the
land will be developed and/or sold. All investment property operations are being
reported through the "Investment Real Estate" business segment.
(H) ACQUISITION OF CAVCO INDUSTRIES, INC.
During March 1997, Centex Real Estate Corporation acquired
approximately 80% of Cavco Industries, the largest producer of manufactured
homes in Arizona and New Mexico as well as the nation's largest producer of park
model homes, for $74.3 million. Cavco currently operates three manufactured
housing facilities in the Phoenix area, a plant near Albuquerque, New Mexico,
and a plant in central Texas (opened in fiscal 1999).
Goodwill of approximately $76 million was recorded in connection with
the Cavco acquisition (approximately $61 million relates to the 80% acquired by
Centex) and is being amortized over 30 years.
(I) BUSINESS SEGMENTS
The Company operates in five principal business segments: Home
Building, Investment Real Estate, Financial Services, Construction Products and
Contracting and Construction Services. These segments operate primarily in the
United States and their markets are nationwide. Revenues from any one customer
are not significant to the Company.
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. (approximately $63 million) is included in the
Investment Real Estate segment.
60
<PAGE> 61
HOME BUILDING
CONVENTIONAL HOMES
Conventional Homes operations involve the purchase and development of
land or lots as well as the construction and sale of single-family homes. The
following table sets forth financial information relating to the Conventional
Homes operations.
<TABLE>
<CAPTION>
------------------------------------
For the Years Ended March 31,
------------------------------------
1999 1998 1997
------------------------------------
(Dollars in millions)
<S> <C> <C> <C>
Revenues $2,819.4 $2,312.0 $2,299.6
Cost of Sales (2,194.7) (1,839.8) (1,877.3)
Selling, General & Administrative Expenses (382.5) (301.7) (278.3)
-------- -------- --------
Operating Earnings $ 242.2 $ 170.5 $ 144.0
======== ======== ========
Identifiable Assets $1,686.9 $1,098.9 $1,036.5
======== ======== ========
Capital Expenditures $ 15.5 $ 7.7 $ 4.2
======== ======== ========
Depreciation and Amortization $ 8.5 $ 4.0 $ 3.4
======== ======== ========
</TABLE>
MANUFACTURED HOMES
Manufactured Homes operations involve the manufacture of quality
residential and park model homes and the sale of these homes through a network
of independent dealers. The Company entered the Manufactured Homes industry in
late March 1997, when a subsidiary acquired approximately 80% of Cavco
Industries (See Note H).
The following table sets forth financial information relating to the
Manufactured Homes operations.
<TABLE>
<CAPTION>
-----------------------------------
For the Years Ended March 31,
-----------------------------------
1999 1998 1997*
-----------------------------------
(Dollars in millions)
<S> <C> <C> <C>
Revenues $ 178.6 $ 140.6 $ --
Cost of Sales (138.3) (113.7) --
Selling, General & Administrative Expenses (27.5) (15.5) --
------- ------- -------
Operating Earnings 12.8 11.4 --
Minority Interest (2.5) (2.7) --
------- ------- -------
Net Operating Earnings to Centex $ 10.3 $ 8.7 $ --
======= ======= =======
Identifiable Assets $ 140.9 $ 118.5 $ 93.3
======= ======= =======
Capital Expenditures $ 10.5 $ 7.2 $ --
======= ======= =======
Depreciation and Amortization $ 5.1 $ 3.7 $ --
======= ======= =======
</TABLE>
*CAVCO had no effect on Centex's earnings as this acquisition was not
effective until late March 1997.
61
<PAGE> 62
INVESTMENT REAL ESTATE
Investment Real Estate operations involve the development of land
relating primarily to multi-family, industrial, office, retail and mixed-use
projects. The following table sets forth financial information relating to the
Investment Real Estate operations.
<TABLE>
<CAPTION>
---------------------------------
For the Years Ended March 31,
---------------------------------
1999 1998 1997
---------------------------------
(Dollars in millions)
<S> <C> <C> <C>
Revenues $ 33.7 $ 25.4 $ 9.0
Cost of Sales (14.9) (6.7) (2.6)
Selling, General & Administrative Expenses (5.4) (6.5) (4.5)
Negative Goodwill Amortization 16.0 16.0 16.0
------- ------- -------
Operating Earnings $ 29.4 $ 28.2 $ 17.9
======= ======= -------
Identifiable Assets $ 159.8 $ 227.9 $ 269.3
======= ======= =======
Capital Expenditures $ .7 $ -- $ . 2
======= ======= =======
Depreciation and Amortization excluding
Negative Goodwill $ .1 $ .1 $ .1
======= ======= =======
</TABLE>
Property sales related to Investment Real Estate's nominally valued
assets (see Note G) resulted in operating margins of $16.4 million in fiscal
1999, $13.7 million in fiscal 1998 and $4.5 million in fiscal 1997. As of March
31, 1999, the Investment Real Estate Group had approximately $75 million of
nominally valued assets.
FINANCIAL SERVICES
Financial Services operations involve the financing of conventional and
manufactured homes, home equity and sub-prime lending and the sale of title and
other insurance coverages. These activities include mortgage origination and
other related services for homes sold by Centex subsidiaries and by others. The
following table sets forth financial information relating to the Financial
Services operations.
<TABLE>
<CAPTION>
------------------------------------
For the Years Ended March 31,
------------------------------------
1999 1998 1997
------------------------------------
(Dollars in millions)
<S> <C> <C> <C>
Revenues* $ 436.3 $ 246.3 $ 168.7
Selling, General & Administrative Expenses (267.1) (170.0) (112.8)
Interest Expense (76.9) (44.9) (31.5)
-------- -------- --------
Operating Earnings $ 92.3 $ 31.4 $ 24.4
======== ======== ========
Identifiable Assets $1,638.8 $1,317.0 $ 704.1
======== ======== ========
Capital Expenditures $ 17.7 $ 11.2 $ 11.1
======== ======== ========
Depreciation and Amortization $ 12.9 $ 9.3 $ 7.6
======== ======== ========
</TABLE>
*Financial Services revenues include interest income of $97.0 million,
$57.9 million and $42.2 million in fiscal 1999, 1998 and 1997,
respectively. Substantially all of Centex's interest income in each year
is earned by the Financial Services segment.
62
<PAGE> 63
CONSTRUCTION PRODUCTS
Construction Products operations involve the manufacture and sale of
cement, gypsum wallboard and aggregates and readymix concrete. The following
table sets forth financial information relating to the Construction Products
operations.
<TABLE>
<CAPTION>
---------------------------------
For the Years Ended March 31,
---------------------------------
1999 1998 1997
---------------------------------
(Dollars in millions)
<S> <C> <C> <C>
Revenues $ 336.1 $ 297.3 $ 239.4
Cost of Sales & Expenses (213.6) (207.0) (172.4)
Selling, General & Administrative Expenses (2.2) (2.0) (2.6)
------- ------- -------
Operating Earnings 120.3 88.3 64.4
Minority Interest (51.1) (40.6) (31.7)
------- ------- -------
Net Operating Earnings to Centex $ 69.2 $ 47.7 $ 32.7
======= ======= =======
Identifiable Assets $ 339.5 $ 328.5 $ 286.8
======= ======= =======
Capital Expenditures $ 33.8 $ 13.5 $ 6.3
======= ======= =======
Depreciation and Amortization $ 16.2 $ 15.9 $ 13.8
======= ======= =======
</TABLE>
CONTRACTING AND CONSTRUCTION SERVICES
Contracting and Construction Services operations involve the
construction of buildings for both private and government interests, including
(among others) 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 balance sheet related 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,
------------------------------------
1999 1998 1997
------------------------------------
(Dollars in millions)
<S> <C> <C> <C>
Revenues $1,350.8 $ 953.8 $1,068.3
Construction Contract Costs (1,292.8) (912.0) (1,037.5)
Selling, General & Administrative Expenses (42.8) (34.6) (33.0)
-------- -------- --------
Operating Income (Loss), as reported 15.2 7.2 (2.2)
Intracompany Interest Income* 7.2 5.2 5.3
-------- -------- --------
Total Economic Return $ 22.4 $ 12.4 $ 3.1
======== ======== ========
Identifiable Assets* $ 256.7 $ 228.3 $ 227.5
======== ======== ========
Capital Expenditures $ 3.0 $ 2.3 $ 2.0
======== ======== ========
Depreciation and Amortization $ 2.6 $ 2.2 $ 2.5
======== ======== ========
</TABLE>
*The "net assets" position of the Contracting and Construction Services
segment provides significant cash flow because payables and accruals
consistently exceed identifiable assets. Intracompany interest income
is computed on the group's cash flow in excess of its equity.
63
<PAGE> 64
CORPORATE AND OTHER, NET
Corporate general and administrative expenses represent salaries and
other costs not identifiable with a specific segment. Other, net includes new
business initiatives and other businesses which are not mature enough to stand
alone as separate business segments. Assets are primarily cash and cash
equivalents, receivables, property and equipment and other assets not associated
with a business segment.
The following table summarizes financial information relating to the
Corporate and Other, net segments.
<TABLE>
<CAPTION>
---------------------------------
For the Years Ended March 31,
---------------------------------
1999 1998 1997
---------------------------------
(Dollars in millions)
<S> <C> <C> <C>
Operating Loss, Other, net $ (15.6) $ (7.4) $ (2.3)
Minority Interest -- (.2) --
------- ------- -------
Net Operating Loss to Centex $ (15.6) $ (7.6) $ (2.3)
======= ======= =======
Corporate General and Administrative Expenses $ (28.1) $ (21.3) $ (16.8)
======= ======= =======
Identifiable Assets $ 112.1 $ 97.1 $ 61.4
======= ======= =======
Capital Expenditures $ 7.8 $ 18.3 $ 6.6
======= ======= =======
Depreciation and Amortization $ 6.9 $ 5.3 $ 2.3
======= ======= =======
</TABLE>
(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 Centex Financial Services'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 (dollars in thousands):
64
<PAGE> 65
<TABLE>
<CAPTION>
-------------------------------------------------------------
March 31,
-------------------------------------------------------------
1999 1998
-------------------------------------------------------------
CARRYING FAIR Carrying Fair
VALUE VALUE Value Value
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial Assets
Residential Mortgage Loans $1,395,616 $1,425,105(A) $1,191,450 $1,213,455(A)
Mortgage Securitization Residual
Interest $ 80,152 $ 80,152(B) $ 14,747 $ 14,747(B)
Financial Liabilities
Long-term Debt $ 284,299 $ 289,814(C) $ 237,715 $ 256,779(C)
</TABLE>
(A) Fair values are based on quoted market prices for similar instruments.
(B) Fair value approximates carrying value for this asset.
(C) Fair values are based on a present value discounted cash flow with the
discount rate approximating current market for similar instruments.
(K) COMMITMENTS AND CONTINGENCIES
In order to ensure the future availability of land for home building,
the Company has made deposits totaling approximately $51 million as of March 31,
1999 for options to purchase undeveloped land and developed lots having a total
purchase price of approximately $1.3 billion. These options and commitments
expire at various dates to 2005. The Company has also committed to purchase land
and developed lots totaling approximately $7 million. In addition, the Company
has executed lot purchase contracts with the Partnership (see Note F) which
aggregate approximately $5 million.
Management believes that none of the litigation matters in which the
Company or any subsidiary is involved would have a material adverse effect on
the consolidated financial condition or operations of the Company.
The Harrah's New Orleans Casino contract was suspended on November 22,
1995 due to a bankruptcy filing by the Harrah's Jazz Company partnership, the
developer of the casino. Centex and its subcontractors filed claims against the
partnership for completed but unpaid work. Centex also filed a lawsuit against
Harrah's Entertainment, Inc., parent company of the major partner in the
partnership, to recover its claims. In late November 1996, Centex and Harrah's
reached a settlement conditioned upon Harrah's plan of reorganization becoming
effective. Harrah's plan became effective on October 30, 1998, at which time
Harrah's paid $34 million to Centex in settlement of the claims of Centex and
its subcontractors, and Centex resumed construction of the casino.
In October 1992, Martin County sued one of the Company's general
contracting subsidiaries, Centex-Rooney Construction Co., Inc. ("Rooney"),
alleging defects in the design and construction of the Martin County Courthouse
in Stuart, Florida. Rooney was construction manager of the project. In July 1996
and April 1997, judgments totaling $17.4 million were returned against Rooney.
As of March 31, 1999, the last appeal has been settled and all judgments and
related interest have been paid. Of the approximately $22 million paid for the
judgments and related legal expenses, $13.2 million has been recovered from
certain subcontractors and their insurance carriers and certain surety
companies. Rooney continues to prosecute claims and lawsuits against other
subcontractors, their insurance carriers and Rooney's own insurance carriers for
recovery of the balance. While there can be no assurance that Rooney will
recover from its subcontractors and carriers, management believes that Rooney
will be able
65
<PAGE> 66
to recover substantially all of both judgments. Even if Rooney is unable to
recover any part of these judgments, these judgments would not have a material
impact on the financial condition of the Company.
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.
66
<PAGE> 67
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, 1999 and
1998, and the related consolidated statements of earnings, stockholders' equity,
and cash flows for each of the three years in the period ended March 31, 1999.
These financial statements and the supplemental information referred to below
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and supplemental information
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, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
March 31, 1999, 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
financial statements. This information has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Dallas, Texas,
May 12, 1999
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QUARTERLY RESULTS (UNAUDITED)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
---------------------------
March 31,
---------------------------
1999 1998
---------------------------
<S> <C> <C>
FIRST QUARTER
Revenues $ 1,110,606 $ 861,375
Earnings Before Income Taxes $ 76,722 $ 42,419
Net Earnings $ 48,161 $ 27,010
Earnings Per Share
Basic $ .81 $ .46
Diluted $ .78 $ .45
Average Shares Outstanding
Basic 59,530,844 58,180,810
Diluted 61,972,545 60,131,752
SECOND QUARTER
Revenues $ 1,243,082 $ 991,746
Earnings Before Income Taxes $ 90,366 $ 58,695
Net Earnings $ 56,563 $ 36,391
Earnings Per Share
Basic $ .95 $ .62
Diluted $ .91 $ .59
Average Shares Outstanding
Basic 59,549,247 59,008,196
Diluted 62,031,262 61,246,630
THIRD QUARTER
Revenues $ 1,256,086 $ 983,083
Earnings Before Income Taxes $ 94,634 $ 58,923
Net Earnings $ 59,043 $ 37,380
Earnings Per Share
Basic $ .99 $ .63
Diluted $ .96 $ .61
Average Shares Outstanding
Basic 59,410,876 59,366,822
Diluted 61,661,959 61,759,472
FOURTH QUARTER
Revenues $ 1,545,066 $ 1,139,246
Earnings Before Income Taxes $ 111,572 $ 71,597
Net Earnings $ 68,195 $ 44,025
Earnings Per Share
Basic $ 1.15 $ .74
Diluted $ 1.10 $ .71
Average Shares Outstanding
Basic 59,463,751 59,473,972
Diluted 61,749,414 61,923,084
</TABLE>
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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 22, 1999 Annual Meeting of Stockholders
(the "1999 Centex Proxy Statement"):
<TABLE>
<CAPTION>
ITEM CAPTION IN THE 1999 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.)
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<PAGE> 70
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) Exhibits
The information on exhibits required by this Item 14 is set forth
in the Centex Index to Exhibits appearing on pages 114-116 of this
Report.
(b) Reports on Form 8-K:
Current Report on Form 8-K of Centex Corporation dated
February 22, 1999.
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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>
CENTEX CORPORATION
-------------------------------------------------------------
Registrant
August 11, 1999 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>
August 11, 1999 /s/ LAURENCE E. HIRSCH
-------------------------------------------------------------
Laurence E. Hirsch, Chairman of the Board and
Chief Executive Officer
(principal executive officer)
August 11, 1999 /s/ DAVID W. QUINN
-------------------------------------------------------------
David W. Quinn, Vice Chairman of the Board and
Chief Financial Officer
(principal financial officer)
August 11, 1999 /s/ BARRY G. WILSON
-------------------------------------------------------------
Barry G. Wilson, Controller
(principal accounting officer)
Directors: Barbara T. Alexander, Dan W. Cook III, Juan L. Elek,
Laurence E. Hirsch, Clint W. Murchison, III,
Charles H. Pistor, David W. Quinn, Paul R.
Seegers, Paul T. Stoffel
August 11, 1999 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.
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PART B.
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
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. and subsidiaries (the "Partnership"), File No. 1-9625
(collectively the "Companies"). 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 ("Development"), a Nevada
corporation and the sole general partner of the Partnership, unless the context
otherwise requires. Because the Partnership is a separate reporting entity under
the Exchange Act, the information required by Form 10-K is separately included
even though the Partnership may be deemed a "subsidiary" of Holding under the
rules and regulations of the Securities and Exchange Commission (the
"Commission" or the "SEC") promulgated pursuant to the Exchange Act.
Accordingly, information provided with respect to the Partnership should be
deemed provided with respect to Holding to the extent appropriate. Information
relating to both Holding and the Partnership is included herein as a single
disclosure where applicable or appropriate; all other information is set forth
separately. Please refer 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 3100 McKinnon, Suite 370, Dallas, Texas 75201; telephone
(214) 981-6770.
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 the Partnership, 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 the Partnership (the
"Holding/Partnership Combining Financial Statements") included on pages 91-92
of this Report.
The principal liabilities of Holding are a note payable to Centex and a
payable to the Partnership that had unpaid balances of $582,000 and $1,963,000,
respectively, at March 31, 1999. 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 Second Amended and Restated
Agreement of Limited Partnership of Centex Development Company, L.P. (the
"Partnership Agreement"), which governs the operations of the Partnership,
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 the
Partnership. If Holding were to engage in any other business activities, the
Partnership Agreement would need to be amended to provide for the same.
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<PAGE> 73
(b) The Partnership
GENERAL DEVELOPMENT OF BUSINESS
The Partnership 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 home building operations, and typically involves substantial
acquisition and development indebtedness, Centex concluded that this new line
of business could best be conducted through the Partnership, an independent,
publicly traded entity that is not consolidated with Centex for financial
reporting purposes. Development, a wholly-owned subsidiary of Holding, is the
sole general partner of the Partnership. The Partnership's executive offices
are located at 3100 McKinnon, Suite 370, Dallas, Texas 75201; telephone (214)
981-6700.
The Partnership was formed to manage, develop and sell (i) certain real
estate, principally nonresidential, undeveloped land (the "Original
Properties"), acquired by the Partnership from certain wholly-owned subsidiaries
of Centex (the "Original Limited Partners"), and (ii) other properties acquired
by the Partnership, either directly or indirectly, in the ordinary course of
business (the "Additional Properties"). Pursuant to the initial issuance of
Partnership units (the "Distribution"), the Original Limited Partners received
an aggregate of 1,000 Class A Units of limited partnership interest in the
Partnership (the "Class A Units") in exchange for the Original Properties, which
at the time of their acquisition by the Partnership, had a market value of
approximately $76 million. All of the Class A Units are currently owned by
Centex Homes through its Investment Real Estate Group. Under the Partnership
Agreement, the holders of the Class A Units of limited partnership interest are
entitled to a 9% preferred return (the "Preferred Return") on their unrecovered
capital and certain other distributions of cash and other property and
allocations of income and loss in preference to other limited partners. During
fiscal year 1998 the Partnership Agreement was amended to create a new class of
limited partnership units, Class C Preferred Limited Partnership Units ("Class C
Units"), to be issued from time to time in exchange for assets acquired from a
limited partner or by an individual or entity who is to be admitted as a limited
partner. As of March 31, 1999, 26,987 Class C Units were issued to Centex Homes,
the current holder of all outstanding Class A Units, in exchange for assets
acquired from Centex Homes valued at $27.0 million. Under the Partnership
Agreement, holders of Class C Units are also entitled to a 9% return on their
unrecovered capital. Also, as part of the amendment to the Partnership
Agreement, the 1,000 Class A Units were converted to 32,260 Class A Units. See
Note (H) of the Notes to the Holding/Partnership Combining Financial Statements
included on pages 96-97 of this Report.
The Partnership has actively been developing and selling the Original
Properties. Of the 24 Original Properties contributed to the Partnership, only
portions of three remain. During fiscal 1999, the Partnership completed
construction on a pre-sold 304-unit apartment community on land owned by the
Partnership in The Colony, Texas (one of the three remaining Original
Properties). The Partnership has also been actively acquiring, developing,
selling or otherwise disposing of Additional Properties.
Additional Properties in which the Partnership currently has an interest
include a 172-unit apartment complex in College Station, Texas, a 38,000 square
foot industrial building in Charlotte, North Carolina and 490 acres of land in
various stages of development zoned for multi-family, light industrial, office
and residential uses located in Texas, Florida, California and North Carolina.
Initially, many of the areas targeted for development include land owned by the
Partnership and Centex affiliates.
Given the improved real estate markets and the economy in general, the
Partnership management has begun an active commercial and multi-family
development program. During fiscal 1999, the
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<PAGE> 74
Partnership began construction on a 304-unit apartment complex in Grand Prairie,
Texas and 633,000 square feet of industrial and office space located in Florida,
California and North Carolina. Additionally, on April 1, 1998, the Partnership
acquired the homebuilding operations of Centex Homes through the issuance of
Class C Units. The acquisition of the homebuilding operations was strategic to
the Partnership's build-out plan for the East Windsor, New Jersey property (one
of the Original Properties). Management of Centex and the Partnership 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 development activities.
DESCRIPTION OF THE PARTNERSHIP SECURITIES
Pursuant to the terms of a nominee agreement among Centex, Holding, the
Partnership and the Nominee (the "Nominee Agreement"), restrictions are imposed
on the transfer of the Holding Common Stock and the Stockholder Warrants
separate from Centex Common Stock. Subject to certain restrictions, Centex may,
in its sole discretion, terminate the Nominee Agreement 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.
NARRATIVE DESCRIPTION OF BUSINESS
In general, the Partnership Agreement authorizes the Partnership 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 the
Partnership will conduct its activities in respect to 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 its limited partners.
The Partnership 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. The Partnership will decide whether to seek
zoning changes or to seek the sale of all or a portion thereof. If not
developed sooner, the Plan provides that the Partnership will generally
endeavor to sell the remaining Original Properties over time for the best price
available, taking into account the condition of the marketplace and the
Partnership's cash flow requirements.
The Companies currently operate in four business segments: Commercial
Development, Multi-Family Development, Homebuilding and Land Sales.
The Companies' Commercial Development operation completed its first
facility in fiscal 1998 and began development of five additional projects
totaling 633,000 square feet of industrial and office space located in Florida,
North Carolina and California during fiscal 1999. Commercial Development
operations also include the purchase and development of land. During fiscal
1999, Commercial Development acquired a 55-acre site in Camarillo, California
and began the first phase of development
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<PAGE> 75
consisting of three industrial buildings, as well as beginning site development
to provide on-site utilities to the entire tract. A majority of the facilities
developed by Commercial Development will be held for investment.
Multi-Family Development operations completed construction on a 304-unit
pre-sold apartment community in The Colony, Texas and began construction on a
400-unit apartment community in Grand Prairie, Texas. Multi-Family
Development's primary product targets mid-market priced construction.
Multi-Family Development's projects are developed subject to a pre-sale
agreement or are actively marketed for sale during the development period.
The Partnership acquired its Homebuilding operations from Centex Homes on
April 1, 1998 through the issuance of Class C Units. Centex Homes also licensed
to the Partnership the right to use the "Centex Homes" trademark and trade name
in New Jersey. The Homebuilding operations involve the purchase and development
of land or lots as well as the construction and sale of single-family homes.
Homebuilding is actively building out the Partnership's land inventory in East
Windsor, New Jersey (one of the Original Properties) as well as pursuing "spot
lot" development outside of East Windsor. Homebuilding built and delivered 73
conventional homes during fiscal 1999.
The Partnership's Land Sales operation provides property management and
coordinates the liquidation efforts for land investments for which no
development opportunity has been identified. During fiscal 1999, Land Sales
totaled $3.8 million and included the sale of 319 lots to Centex Homes in
Florida and Texas and two small parcels located in The Colony and Bryan Place,
Texas.
The Partnership had a backlog of land sales of approximately $26 million
as of March 31, 1999, and $20 million as of March 31, 1998. The final sales
prices for land in the backlog that is ultimately sold may vary due to
contractual clauses that adjust the price depending upon the closing date.
Pursuant to an agreement with the Partnership (the "Management
Agreement"), Holding is obligated to provide property management and
development assistance and expertise to the Partnership, including seeking
zoning changes and special use permits, negotiating utility agreements, and
securing necessary rights of way and access on behalf of the Partnership, and,
consistent with the Plan, to develop and/or contract for sale and sell on
behalf of the Partnership 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
the Partnership. Management of the Partnership believes that the Partnership
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 the Partnership in
certain activities and projects. Because the relationship between Centex and
its affiliates, on the one hand, and Holding, Development and the Partnership,
on the other hand, involve decisions by Centex and its affiliates, directly or
indirectly, on behalf of Holding, Development and the Partnership, the
transactions and activities of Holding, Development and/or the Partnership may
lack the benefit of arm's length bargaining and may involve conflicts of
interest. Holding, Development and the Partnership 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
the Partnership. 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 the Partnership or Holding, on the other hand, the combined value of the
three tandem traded securities (Centex Common Stock,
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Holding Common Stock and Stockholder Warrants) beneficially owned by a Centex
Stockholder should not be affected one way or another. See "Competition and
Regulation" within this Item 1 below.
The Partnership is not a real estate investment trust, and therefore the
Partnership's activities are not subject to the restrictions imposed on real
estate investment trusts qualified under the Internal Revenue Code of 1986, as
amended.
For additional information concerning material properties owned by the
Partnership at March 31, 1999, see "Item 2. Properties".
COMPETITION AND REGULATION
Within the geographical areas where the remaining Original Properties and
the Additional Properties are located, the Partnership 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 the Partnership, or may
have greater financial resources and longer operating histories than the
Partnership. The Partnership 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.
The Partnership's properties are generally located in geographical areas
where there is moderate to good demand for land suitable for development,
including California, Florida, New Jersey, North Carolina and Texas. Management
believes the Partnership properties are well positioned to compete with similar
properties within each of these geographic areas.
Ownership and development of each of the Partnership'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
the Partnership to obtain favorable zoning changes may affect the ultimate
value of such properties to the Partnership 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.
In fiscal 1998, through wholly-owned subsidiaries, Development acquired
the general partnership interests in entities formed for both multi-family and
commercial development activities. In each instance, the Partnership, for whom
Development serves as general partner, is the 99% limited partner.
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(b) The Partnership
The remaining Original Properties and the Additional Properties consist of
properties located in Texas, North Carolina, New Jersey, Florida and
California. The remaining Original Properties predominantly consist of
undeveloped sites zoned for light industrial, agricultural, general retail,
office industrial, business park, research and development and single-family
and multi-family residential property purposes. The Additional Properties
generally consist of land acquired or contributed by Centex Homes for
near-term multi-family and commercial development purposes.
At March 31, 1999, there were three remaining Original Properties and
thirteen Additional Properties owned by the Partnership. Set forth below is a
brief description of these properties, including present zoning.
ORIGINAL PROPERTIES
Colony South Planning Unit. Colony South Planning Unit is located in
suburban Dallas, Texas in the cities of The Colony (approximately 132 acres)
and Lewisville (approximately 116 acres). The Colony acreage is zoned office,
general retail and business park. The Lewisville acreage is zoned light
industrial. During fiscal 1999, the Partnership completed a 304-unit apartment
community on 21 acres located in The Colony.
East Windsor. East Windsor is a development which was originally comprised
of approximately 600 acres with residential tracts, farm parcels and 100 acres
of office industrial zoned property in East Windsor, New Jersey, a township
located in the vicinity of Princeton. At March 31, 1999 there were 456 remaining
acres owned by the Partnership. Through its homebuilding operations, the
Partnership plans to build out the remaining single-family land in East Windsor.
Bryan Place. Bryan Place is located in Dallas, Texas just east of downtown
and Central Expressway. It is comprised of one parcel, zoned commercial,
totaling approximately 71,000 square feet.
ADDITIONAL PROPERTIES
The Arbors of Wolf Penn Creek. The Arbors of Wolf Penn Creek is a 172-unit
apartment complex located in College Station, Texas. The complex is situated on
eight acres and was completed in the fall of 1996. The Arbors of Wolf Penn
Creek was developed through a joint venture with a third party. The complex is
currently being marketed for sale.
Heritage Park. Heritage Park is located in a suburb of Dallas, Texas in
the city of Allen and consists of approximately 91 acres. The Heritage Park
property is zoned single-family residential and commercial.
Goodlett-Frank. Goodlett-Frank is located in Naples, Florida and consists
of approximately 67 acres developed into 216 lots. Seventy-five lots were sold
to Centex Homes during fiscal 1999.
Park West at Gateway Centre. Park West at Gateway Centre is a 24-acre
industrial tract situated in a mixed-use development located in St. Petersburg,
Florida. During fiscal 1998, a 49.5% interest in a limited partnership, whose
only asset is the 24 acres, was acquired by the Partnership from Centex Homes
in exchange for Class C Units. During fiscal 1999, the Partnership began
construction on a 74,000 square foot industrial facility. As of March 31, 1999,
the Partnership had signed two leases totaling 13,800 square feet. The building
is scheduled for completion in the first quarter of fiscal 2000.
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Southpointe. The Southpointe property, located in Plantation, Florida, 13
miles west of the Ft. Lauderdale Airport, is comprised of 11 acres zoned for
office use. During fiscal 1999, the Partnership began construction of a 141,000
square foot office building pre-leased by the General Services Administration
for use by the Internal Revenue Service. Centex-Rooney Construction Company,
Inc., a wholly-owned subsidiary of Centex, is the general contractor for the
facility. Construction is scheduled for completion in early fiscal 2000. During
fiscal 1998, a 49.5% interest in a limited partnership, whose only asset is the
11 acres, was acquired by the Partnership from Centex Homes in exchange for
Class C Units.
Westlake. The Westlake property consists of a 38,000 square foot
industrial building situated on six acres located in a business park in
Charlotte, North Carolina. The facility was pre-leased prior to the start of
construction. Construction was completed in December 1997. The six-acre parcel
was acquired by the Partnership from Centex Homes in exchange for Class C
Units. During fiscal 1999, an additional fifteen acres in the Westlake project
was acquired by the Partnership from Centex Homes in exchange for Class C
Units. The Partnership has completed construction of a 105,000 square foot
pre-leased industrial building on eight of the fifteen acres.
Northfield. Northfield is located in Ventura County, California
approximately 60 miles west of downtown Los Angeles and is comprised of 23
acres. Northfield is zoned light industrial and is situated in an industrial
business park. Of the 23 acres owned by the Partnership, 18 acres were acquired
by the Partnership from Centex Homes in exchange for Class C Units, while five
acres of adjacent land were purchased by the Partnership during fiscal 1998.
During fiscal 1999, the Partnership entered into a joint-venture agreement with
a third party to develop approximately 182,000 square feet of industrial
inventory buildings on 10 acres in the Northfield Business Park. Shell
completion of the buildings is scheduled for early fiscal 2000.
Sheffield. Sheffield is an 18-acre multi-family tract located in Grand
Prairie, Texas. Sheffield was acquired by the Partnership from Centex Homes in
exchange for Class C Units in fiscal 1998. During fiscal 1999, the Partnership
began construction of a 400-unit complex. The Partnership is actively marketing
this project for sale upon completion of construction.
Vista Ridge. Vista Ridge is a 1,000-acre master planned community located
twenty-five miles north of the Dallas central business district in Dallas and
Denton counties, Texas in the cities of Lewisville and Coppell. The Partnership
currently owns fifty-five acres zoned for multi-family and retail development.
During fiscal 1999 and 1998, forty-three acres of multi-family zoned land were
acquired by the Partnership from Centex Homes in exchange for Class C Units.
The other twelve acres had previously been acquired through a third-party joint
venture. In fiscal 1998, the Partnership acquired the joint venture partner's
interest in the joint venture.
Camarillo Ranch. Camarillo Ranch is located in Ventura County, California,
west of Los Angeles directly off the Ventura Freeway. Camarillo Ranch is zoned
light industrial and totals fifty-five net acres. The Partnership began
construction on a 132,500 square foot pre-leased facility in Camarillo Ranch
during fiscal 1999, on which construction has since been completed. The
Partnership also began improvements to provide on-site utilities to the entire
tract.
Brighton Bay. Brighton Bay is located in Pinellas County, Florida in the
city of St. Petersburg. During fiscal 1999, the Partnership acquired a
sixty-two acre site in exchange for Class C Units. The two parcels acquired are
zoned for multi-family development. The master plan's infrastructure and
interior lakes are currently under development. The Partnership has plans to
develop this property in two phases to total 776 apartment units with phase one
anticipated to begin in fiscal 2000.
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Deerfield. Deerfield is a sixteen-acre tract of land zoned for
single-family development located in Plano, Texas. The Partnership acquired the
land from Centex Homes in exchange for Class C Units. During fiscal 1999, the
Partnership developed the sixteen acres into fifty-five lots, which are under
contract for sale to third party homebuilders on a lot take-down program. As of
March 31, 1999, 15 lots have closed and 40 lots on approximately 12 acres
remain to be taken down.
Waterford Chase. Waterford Chase is located in Orange County, Florida and
consists of 329 single-family lots. During fiscal 1999, 146 lots were sold to
Centex Homes. As of March 31, 1999, 183 lots on approximately fifty-seven acres
remained.
ITEM 3. LEGAL PROCEEDINGS
Holding is not a party to, and its assets are not the subject of, any
material pending legal proceedings. The Partnership 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 the Partnership, would not have a material adverse effect on the
financial condition or operations of the Partnership.
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 or other
capacities of Holding for at least the past five years, except as indicated.
The Partnership has no executive officers. The executive officers of Holding
set forth below hold the same offices in Development, the general partner of
the Partnership, 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>
Richard C. Decker Chairman, President and Chief Executive
Officer (1) 46
J. Stephen Bilheimer Vice Chairman (2) 67
Kimberly A. Pinson Vice President, Treasurer, Controller 34
and Assistant Secretary (3)
</TABLE>
(1) Mr. Decker is an employee of a subsidiary of Centex and has been Chairman,
President and Chief Executive Officer of both Holding and Development, the
general partner of the Partnership, since April 1, 1998. Mr. Decker was
elected Director of both Holding and Development effective June 10, 1998.
Mr. Decker has also been a director and officer of various Centex
subsidiaries engaged in real estate development since July 1996. Prior
thereto, Mr. Decker was a partner with Dallas-based Trammell Crow Company,
a commercial real estate development firm, for 15 years, and served as
Principal from 1990 until 1995. From 1995 until July 1996, Mr. Decker
operated Decker & Company, a Phoenix, Arizona-based real estate development
company.
(2) Mr. Bilheimer is an employee of a subsidiary of Centex. Mr. Bilheimer was
appointed to the position of Vice Chairman for Holding effective April 1,
1998. Prior thereto, Mr. Bilheimer served as President of Holding and
Development from 1987 to 1998. Mr. Bilheimer was a director of Holding and
Development from its date of incorporation until his resignation as of June
1, 1987.
79
<PAGE> 80
Mr. Bilheimer was re-elected to the Board of Directors on May 24, 1989. Mr.
Bilheimer also served as Executive Vice President of Centex Real Estate
Corporation from April 1987 until March 31, 1988.
(3) Ms. Pinson is an employee of a subsidiary of Centex and serves as Vice
President, Treasurer, Controller and Assistant Secretary of Holding,
Development, and various Centex subsidiaries engaged in real estate
development. Ms. Pinson joined Vista Properties, Inc. (now Centex Real
Estate Corporation) in March 1993 and was elected to her present positions
with Holding and Development as of July 23, 1996.
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.
Holding has no full-time employees. The directors and executive officers
perform all executive management functions; all other services necessary to
conduct 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 (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 27 of this Report and (3) the information
included in Notes (H) and (I) of the Notes to the Holding/Partnership Combining
Financial Statements on pages 96-98 of this 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 the Nominee Agreement. 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.
80
<PAGE> 81
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 $1,000,000 at March 31, 1998, included certain restrictive
covenants that limit the extent to which Holding and its subsidiaries
(including Development but not the Partnership) could create, assume or
guarantee additional indebtedness, pledge or encumber certain of their assets
or otherwise take certain corporate actions. Holding's obligations under the
Holding Note were 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 would 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. During
fiscal 1999, the outstanding principal balance of the Holding Note was repaid
and the pledge agreement with respect to the Development Common Stock was
terminated. See "Item 13. Certain Relationships and Related Transactions" and
Note (I) of the Notes to the Holding/Partnership Combining Financial Statements
included on page 98 of this Report.
(b) Centex Development Company, L.P.
Except as additionally provided below, the information called for by this
Item 5 with respect to the Partnership is (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 27 of this Report and (3) the
information included in Notes (H) and (I) of the Notes to the
Holding/Partnership Combining Financial Statements on pages 96-98 of this
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 the Nominee Agreement among Centex, Holding, the Partnership 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.
Centex Homes is the present holder of all of the Class A Units and Class C
Units, and accordingly, at this time there is no public market for such
securities. At March 31, 1999, there were 32,260 Class A Units and 26,987 Class
C Units outstanding. 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, Centex Homes (subsequently 2728 Holding Corporation,
liquidated in fiscal 1998), the then sole holder of all Class A Units, reduced
its unrecovered capital, which is defined as the limited partners' initial
capital contributions adjusted for repayments and other reductions, to
$47,261,000 and waived all unpaid preference totaling $37,523,000. Unrecovered
capital was reduced by an additional $4,500,000 during fiscal 1997 and
$10,000,000 during fiscal 1996 through distributions made by the partnership.
The Partnership made preference payments during fiscal 1998 totaling
$4,500,000. No
81
<PAGE> 82
preference payments were made during fiscal 1999. Preference payments in arrears
at March 31, 1999 amounted to $9,078,000.
ITEM 6. SELECTED FINANCIAL DATA
FINANCIAL HIGHLIGHTS (UNAUDITED)
(Dollars in thousands, except per share/unit data)
<TABLE>
<CAPTION>
------------------------------------------------------------------------
For the Years Ended March 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES
3333 Holding Corporation and Subsidiary $ 1,103 $ 1,505 $ 1,664 $ 2,045 $ 1,602
Centex Development Company, L.P. $ 28,228 $ 19,618 $ 9,026 $ 13,943 $ 9,796
Combined Revenues $ 28,618 $ 20,121 $ 9,529 $ 14,470 $ 10,342
OPERATING EARNINGS (LOSS)
3333 Holding Corporation and Subsidiary $ (1,385) $ (125) $ 206 $ 253 $ 96
Centex Development Company, L.P. $ 1,815 $ 4,524 $ 719 $ 24 $ (16,323)
Combined Operating Earnings (Loss) $ 430 $ 4,399 $ 925 $ 277 $ (16,227)
TOTAL ASSETS
3333 Holding Corporation and Subsidiary $ 2,522 $ 10,423 $ 8,648 $ 8,652 $ 8,673
Centex Development Company, L.P. $ 113,233 $ 59,260 $ 42,978 $ 43,168 $ 105,946
Combined Assets $ 112,176 $ 60,497 $ 50,127 $ 50,786 $ 113,282
TOTAL DEBT
3333 Holding Corporation and Subsidiary $ 582 $ 1,480 $ 7,000 $ 7,600 $ 7,600
Centex Development Company, L.P. $ 41,896 $ 13,821 $ 7,055 $ 3,326 $ 56,485
Combined Debt $ 42,478 $ 15,301 $ 14,055 $ 10,926 $ 64,085
OPERATING EARNINGS (LOSS) PER SHARE/UNIT
3333 Holding Corporation and Subsidiary $ (1,385) $ (125) $ 206 $ 253 $ 96
Centex Development Company, L.P. $ 33.38 $ 140.14 $ 22.29 $ 0.74 $ (505.98)
AVERAGE SHARES/UNITS OUTSTANDING
3333 Holding Corporation and Subsidiary (shares) 1,000 1,000 1,000 1,000 1,000
Centex Development Company, L.P. (units) 54,377 32,281 32,260 32,260 32,260
</TABLE>
82
<PAGE> 83
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998
On a combined basis, the Companies reported revenues of $28.6 million for
fiscal 1999, an increase of 42% from revenues of $20.1 million in the prior
year. Net earnings for fiscal 1999 totaled $430,000 compared to earnings of
$4.4 million in fiscal 1998. The increased revenues primarily resulted from
sales of single family homes from the Partnership's Homebuilding operations
reduced by a decrease in land sales relative to 1998. Net earnings decreased as
a result of increased development overhead.
The Companies currently operate in four business segments: Commercial
Development, Multi-Family Development, Homebuilding and Land Sales. A
discussion of the results of operations for each of the segments is presented
below.
Commercial Development
Commercial Development generated $18,000 net earnings in fiscal 1999
compared to breakeven operations for the prior year period. Commercial
Development revenues for the year totaled $2.6 million from the sale of
industrial land, developed lots, and rental income compared to rental income of
$73,000 in the prior year period.
The first Commercial Development facility, a 38,000 square foot industrial
building, was completed in December 1997. During fiscal 1999, the Partnership
began construction on four additional industrial facilities and one office
facility, totaling 634,000 square feet. Completion of each of the projects is
scheduled for early fiscal 2000. Additionally, during fiscal 1999, the
Partnership developed 16 acres of land into 55 single-family lots, 15 of which
were sold in fiscal 1999.
Multi-Family Development
Multi-Family Development ("Multi-Family") fiscal 1999 revenues totaled
$342,000 compared to $116,000 in fiscal 1998. Multi-Family reported an
operating loss of $1,472,000 for the fiscal year ended March 31, 1999 compared
to a loss of $175,000 for the period ended March 31, 1998.
In January 1998, the Companies commenced their Multi-Family operations.
The increased loss in fiscal 1999 is the result of twelve months of operations
versus three months in the prior year period. Multi-Family completed a 304-unit
pre-sold apartment community located in The Colony, Texas during fiscal 1999.
Although the sale of this property is scheduled to close during July 1999, the
earn-out payment related to the project is not scheduled to occur for
approximately twelve months. Multi-Family also began construction on a 400-unit
apartment community located in Grand Prairie, Texas. Project completion is
scheduled for late fiscal 2000.
Homebuilding
The Partnership acquired its New Jersey Homebuilding operations from
Centex Homes in April 1998. These operations delivered 73 homes during fiscal
1999 and generated $21.3 million in revenues and $1.6 million in operating
earnings.
83
<PAGE> 84
Land Sales
Land Sales in fiscal 1999 generated $3.8 million in revenues and
contributed $241,000 in net earnings compared to $19.9 million in revenues and
net earnings of $4.6 million in fiscal 1998. Sales of real estate in fiscal 1999
consisted of 319 lots to Centex Homes and two small parcels located in The
Colony and Bryan Place, Texas. Prior year sales of real estate included the sale
of 138 acres of land zoned multi-family and commercial, and the sale of 193
residential lots and office and warehouse buildings situated on 17 acres to
Centex Homes. Although the timing of real estate sales is uncertain and can vary
significantly from period to period, the fiscal 1999 reduction in sales is also
attributable to the Partnership's continued repositioning of the Companies' land
assets to consist primarily of land held for current and future development.
FISCAL YEAR 1998 COMPARED TO FISCAL YEAR 1997
On a combined basis, revenues increased to $20.1 million for the year
ended March 31, 1998 from $9.5 million reported a year earlier. Fiscal 1998
revenues included the sale of 122 acres of commercial land in The Colony,
Texas, and approximately six acres of commercial and ten acres of multi-family
land in Dallas, Texas. Sales to Centex Homes during fiscal 1998 included a
property in a north Dallas suburb consisting of one office and five warehouse
buildings situated on approximately 17 acres, and 193 residential lots in New
Jersey and Florida. Revenues of $9.5 million in fiscal 1997 included the sale
of 632 acres of commercial land in The Colony, Texas, and 153 residential lots
to Centex Homes.
Net earnings for fiscal 1998 totaled $4.4 million compared to $925,000 for
fiscal 1997. The increased earnings are primarily the result of increased
margins on land sales, 28% in 1998 vs. 18% in 1997.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1999, 19,445 Class C Units were issued to a Centex affiliate,
the Partnership's sole limited partner, in connection with the acquisition of
assets valued at $19.4 million. A total of 26,987 Class C Units were issued
during fiscal 1999 and 1998 in connection with the acquisition of assets valued
at $27 million. Assets acquired include the New Jersey Homebuilding operations,
land zoned for both commercial and residential uses and $1.0 million in cash.
During fiscal 1998, the Partnership made preference payments to its limited
partner totaling $4.5 million. No preference payments were made in fiscal 1999.
The Companies actively expanded their development efforts in fiscal 1999
and are funding new development activities with traditional bank debt on the
project level. During fiscal 1999, the Partnership had commitments for $66.9
million in construction debt, of which $35.7 million had been drawn. Terms on
the construction loans range from eighteen to twenty-four months with
LIBOR-based interest rates with spreads ranging from 130 to 200 basis points.
The Companies believe that the revenues, earnings, and liquidity from the sale
of single-family homes, land sales, and the sale and permanent financing of
development projects will be sufficient to provide the necessary funding for
its current and future needs.
YEAR 2000 COMPLIANCE
The Companies have a variety of operating systems, computer software
applications, computer hardware equipment (collectively, "IT Systems"), and
other equipment with embedded electronic circuits (collectively, the "Non-IT
Systems" and together with the IT Systems, the "Systems"). Pursuant to the
services agreement Holding has with Centex Service Company, Year 2000 compliance
issues are being addressed by a Year 2000 Task Force Team comprised of key
personnel in the management information systems, legal, internal audit, and
accounting areas of Centex as well as by management of the Companies. Since
fiscal 1997, the Companies have been
84
<PAGE> 85
engaged in an ongoing process of identifying, evaluating, and implementing
changes to their Systems in order to ensure Year 2000 compliance. As a result of
this process, a small number of Systems were identified as being unable to
interpret dates after December 31, 1999. The affected Systems were primarily IT
Systems that are not critical to the material operations of the Companies. In
all of the cases, the replacement or upgrading of the non-compliant Systems has
already occurred as part of their normal ongoing updating. The Companies
anticipate that all non-compliant Systems will be replaced and the replacement
Systems tested no later than September 30, 1999. To date, the timetable for
addressing non-compliance of Systems has been substantially the same for both IT
Systems and Non-IT Systems. The Companies anticipate that this will continue to
be the case as they see their Year 2000 program through to its completion.
The Companies do not believe (i) that the non-compliant Systems pose a
material risk to the financial condition of the Companies as a whole, or of the
individual operations of subsidiaries or operating divisions that currently have
non-compliant Systems or (ii) that the cost of replacing, upgrading or otherwise
changing the non-compliant Systems is material to the Companies as a whole, or
to the individual subsidiaries or operating divisions. The Companies have used,
and believe that they will be able to continue to use, internally generated cash
to fund the correction of Systems that are not compliant.
The Companies have engaged the services of a third-party consulting firm to
evaluate their Year 2000 readiness. The consulting firm's review was completed
during the fourth quarter of fiscal 1999. The firm's conclusions are consistent
with the Companies' internal determinations of their Year 2000 readiness. The
Companies have adopted the consulting firm's recommendations for achieving Year
2000 compliance.
The Year 2000 Task Force Team is currently developing its Year 2000
contingency plan. The Task Force Team has completed many of the preliminary
components of the contingency plan and anticipates that the entire contingency
plan will be completed no later than September 30, 1999.
Achieving Year 2000 compliance is dependent on many factors, some of which
are not completely within the Companies' control. The Companies obtain
information, materials, and services from numerous sources, and provide goods
and services to numerous customers. The failure of these third parties
(including U. S., state, and local governments and agencies) to achieve Year
2000 readiness could adversely affect the Companies' financial condition and
results of operations.
The Companies believe the most likely Year 2000 worst-case scenario would
be the failure of some significant vendors, subcontractors or other third
parties to achieve compliance, resulting in a slowdown of the Companies'
operations. The Companies are not aware of any such third parties that are not
Year 2000 compliant. In order to address the potential non-compliance by third
parties, the Companies will continue to survey their largest customers,
contractors, and vendors by sending requests for disclosure of Year 2000
readiness. The Companies have surveyed many of their largest customers,
contractors and vendors during the last year and anticipate completing such
survey by September 30, 1999. The number of surveys sent as well as the form of
survey used varies by the subsidiary or operating division of the Companies
making the request for confirmation of compliance. The responses received to
date range from detailed analyses of readiness with descriptions of contingency
plans to general statements of readiness. With respect to unanswered surveys,
the management of the respective subsidiaries and divisions will continue to
follow-up throughout the remainder of the year either through a second request
or direct conversations with those parties whose operations are material to the
Companies or their respective subsidiaries or divisions in order to ascertain
the Y2K readiness of such parties.
Year 2000 Forward-looking Statements
Certain statements in this section, other than historical information, are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private
Securities Litigation Reform Act of 1995. These statements involve risks and
uncertainties relative to the Companies' ability to assess and remediate any
Year 2000 compliance issues, the ability of third parties to correct material
non-compliant systems, and the Companies' assessment of the Year 2000 issue's
impact on their financial results and operations.
OTHER DEVELOPMENTS AND OUTLOOK
On April 15, 1999, Centex Development Company UK Limited ("CDCUK"), a
company recently incorporated in England and Wales and a wholly-owned
subsidiary of Centex Development Company, L.P., closed its acquisition of all
of the voting shares of Fairclough Homes Group Limited, a British home builder
("Fairclough"). The seller of the shares retained non-voting preference shares
in Fairclough that will entitle it to receive substantially all of the net,
after tax earnings of Fairclough until March 31, 2001. However, if during that
time period the operating earnings of Fairclough exceed certain levels, then
CDCUK will participate in the surplus.
The purchase price at closing (approximately $225 million) was paid by the
delivery of two-year non-interest bearing promissory notes. A major portion of
the purchase notes is secured by a letter of credit obtained by the Partnership
from a United Kingdom bank.
During the time period between April 15, 1999 and March 31, 2001
Fairclough will be operated by CDCUK, subject to certain guidelines that were
negotiated with the seller. After March 31, 2001 CDCUK will redeem, for a
nominal value, the preference shares.
This transaction will be accounted for under the purchase method of
accounting.
85
<PAGE> 86
- -------------------------------------------------------------------------------
FORWARD-LOOKING STATEMENTS
The Management's Discussion and Analysis of Financial Condition and
Results of Operations and other sections of this Annual Report contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private
Securities Litigation Reform Act of 1995. Forward-looking statements may be
identified by the context of the statement and generally arise when the
Companies are discussing their beliefs, estimates or expectations. These
statements are not guarantees of future performance and involve a number of
risks and uncertainties. Actual results and outcomes may differ materially from
what is expressed or forecast in such forward-looking statements. The principal
risks and uncertainties that may affect the Companies' actual performance and
results of operations include the following: general economic conditions and
interest rates; the cyclical and seasonal nature of the Companies' businesses;
changes in property taxes; changes in federal income tax laws; governmental
regulation; changes in governmental and public policy; changes in economic
conditions specific to any one or more of the Companies' markets and
businesses; competition; availability of raw materials; and unexpected
operations difficulties. Other risks and uncertainties may also affect the
outcome of the Companies' actual performance and results of operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
86
<PAGE> 87
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CENTEX DEVELOPMENT COMPANY (3333 HOLDING CORPORATION, 3333
DEVELOPMENT CORPORATION, CENTEX DEVELOPMENT COMPANY, L. P.)
Combining Balance Sheets 88
Combining Statements of Operations 89
Combining Statements of Cash Flows 90
Combining Statements of Stockholders' Equity and Partners' Capital 91
Notes to Combining Financial Statements 91
Report of Independent Public Accountants 100
Quarterly Results 101
87
<PAGE> 88
CENTEX DEVELOPMENT COMPANY (3333 HOLDING CORPORATION, 3333 DEVELOPMENT
CORPORATION, CENTEX DEVELOPMENT COMPANY,L. P.)
COMBINING BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
March 31,
----------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998
--------------------- ---------------------- ------------------
Centex Development 3333 Holding
Company, L.P. and Corporation
Combined Subsidiaries and Subsidiary
------------------------ -------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash $ 364 $ 260 $ 331 $ 259 $ 33 $ 1
Accounts Receivable -
Affiliates - - 1,963 7,921 - 416
Centex Corporation and Subsidiaries 38 180 38 - - 180
Other 1,142 796 1,132 631 10 165
Notes Receivable -
Centex Corporation and Subsidiaries - 7,700 - - - 7,700
Other 3,554 5,110 3,554 5,110 - -
Investment in Affiliate - - - - 1,616 849
Investment in Real Estate Joint Ventures 672 3,040 672 2,478 - 562
Commercial Properties, net 1,899 1,946 1,899 1,946 - -
Projects Under Development and Held for Sale 102,764 41,265 102,389 40,815 375 450
Property and Equipment, net 231 88 89 - 142 88
Other Assets 1,512 112 1,166 100 346 12
-------- ------- -------- ------- ------ -------
$112,176 $60,497 $113,233 $59,260 $2,522 $10,423
======== ======= ======== ======= ====== =======
LIABILITIES, STOCKHOLDERS' EQUITY AND PARTNERS'
CAPITAL
Accounts Payable and Accrued Liabilities -
Affiliates $ - $ - $ - $ 503 $1,963 $ 7,916
Centex Corporation and Subsidiaries 751 948 332 877 419 71
Other 8,217 3,393 8,676 2,990 390 403
Notes Payable -
Centex Corporation and Subsidiaries 582 1,480 - - 582 1,480
Other 41,896 13,821 41,896 13,821 - -
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) (1,633) (248) - - (1,633) (248)
Partners' Capital 61,062 39,802 61,829 40,569 - -
-------- ------- -------- ------- ------ -------
Total Stockholders' Equity and Partners' Capital 60,730 40,855 62,329 41,069 (832) 553
-------- ------- -------- ------- ------ -------
$112,176 $60,497 $113,233 $59,260 $2,522 $10,423
======== ======= ======== ======= ====== =======
</TABLE>
See notes to combining financial statements.
88
<PAGE> 89
CENTEX DEVELOPMENT COMPANY (3333 HOLDING CORPORATION, 3333 DEVELOPMENT
CORPORATION, CENTEX DEVELOPMENT COMPANY,L. P.)
COMBINING STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share/unit data)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
For the Years Ended March 31,
-------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
------- ------- ------ ------- ------- ------ ------- ----- ------
Centex Development 3333 Holding Corporation
Company, L.P. and and Subsidiary
Combined Subsidiaries
-------------------------- --------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Real Estate Sales $27,437 $18,939 $8,270 $27,437 $18,939 $ 8,270 $ - $ - $ -
Interest and Other Income 1,181 1,182 1,259 791 679 756 1,103 1,505 1,664
------- ------- ------ ------- ------- ------- ------- ------ ------
28,618 20,121 9,529 28,228 19,618 9,026 1,103 1,505 1,664
------- ------- ------ ------- ------- ------- ------- ------ ------
COSTS AND EXPENSES
Cost of Real Estate Sold 22,755 13,585 6,772 22,755 13,585 6,772 - - -
Selling, General and Administrative
Expenses 5,123 1,745 1,324 3,567 1,489 1,535 2,269 913 740
Interest 310 392 508 91 20 - 219 717 718
------- ------- ------ ------- ------- ------- ------- ------ ------
28,188 15,722 8,604 26,413 15,094 8,307 2,488 1,630 1,458
------- ------- ------ ------- ------- ------- ------- ------ ------
EARNINGS (LOSS) BEFORE INCOME TAXES 430 4,399 925 1,815 4,524 719 (1,385) (125) 206
Income Taxes - - - - - - - - -
------- ------- ------ ------- ------- ------- ------- ------ ------
NET EARNINGS (LOSS) $ 430 $4,399 $ 925 $ 1,815 $ 4,524 $ 719 $(1,385) $ (125) $ 206
======= ======= ====== ======= ======= ======= ======= ====== ======
NET EARNINGS ALLOCABLE TO LIMITED
PARTNERS $ 1,815 $ 4,524 $ 719
======= ======= =======
NET EARNINGS (LOSS) PER UNIT/SHARE $ 33.38 $140.14 $ 22.29 $(1,385) $ (125) $ 206
======= ======= ======= ======= ====== ======
WEIGHTED-AVERAGE UNITS/
SHARES OUTSTANDING 54,377 32,281 32,260 1,000 1,000 1,000
</TABLE>
See notes to combining financial statements.
89
<PAGE> 90
CENTEX DEVELOPMENT COMPANY (3333 HOLDING CORPORATION, 3333 DEVELOPMENT
CORPORATION, CENTEX DEVELOPMENT COMPANY, L. P.)
COMBINING STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
For the Years Ended March 31,
-------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
---------------------------------------- -------------------------------------------
Centex Development
Company, L.P. and
Combined Subsidiaries
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES
Net Earnings (Loss) $ 430 $ 4,399 $ 925 $ 1,815 $ 4,524 $ 719
Adjustments -
Depreciation and Amortization 115 15 -- 78 10 --
(Increase) Decrease in Receivables (204) (664) 58 5,419 (7,684) (420)
Decrease (Increase) in Notes
Receivable 1,556 (2,745) 1,444 1,556 (2,745) 1,444
(Increase) Decrease in Projects
Held for Development and Sale (43,054) 5,195 (412) (43,129) 5,645 (412)
Decrease (Increase) in Commercial
Properties 6 (1,956) -- 6 (1,956) --
Increase in Other Assets (1,400) (112) -- (1,066) (100) --
Increase (Decrease) in Payables
and Accruals 4,627 1,683 (223) 4,638 1,950 (138)
-------- -------- -------- -------- -------- --------
(37,924) 5,815 1,792 (30,683) (356) 1,193
-------- -------- -------- -------- -------- --------
CASH FLOWS - INVESTING ACTIVITIES
Decrease (Increase) in Advances to
Joint Ventures 2,368 (2,838) (22) 1806 (2,276) (22)
Property and Equipment Additions, net (217) (93) -- (126) -- --
-------- -------- -------- -------- -------- --------
2,151 (2,931) (22) 1,680 (2,276) (22)
-------- -------- -------- -------- -------- --------
CASH FLOWS - FINANCING ACTIVITIES
(Decrease) Increase in Notes Payable-
Centex Corporation and Subsidiaries (898) (5,520) (600) -- -- --
Other 28,075 6,766 3,729 28,075 6,766 3,729
Decrease in Notes Receivable -
Centex Corporation and Subsidiaries 7,700 -- -- -- -- --
Issuance of Class C Partnership Units 1,000 -- -- 1,000 -- --
Capital Distributions -
Return of Capital -- -- (4,500) -- -- (4,500)
Preference Payments -- (4,500) -- -- (4,500) --
-------- -------- -------- -------- -------- --------
35,877 (3,254) (1,371) 29,075 2,266 (771)
-------- -------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH 104 (370) 399 72 (366) 400
CASH AT BEGINNING OF YEAR 260 630 231 259 625 225
-------- -------- -------- -------- -------- --------
CASH AT END OF YEAR $ 364 $ 260 $ 630 $ 331 $ 259 $ 625
======== ======== ======== ======== ======== ========
<CAPTION>
--------------------------------------
For the Year Ended March 31,
--------------------------------------
1999 1998 1997
--------------------------------------
3333 Holding
Corporation and
Subsidiary
--------------------------------------
<S> <C> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES
Net Earnings (Loss) $(1,385) $ (125) $ 206
Adjustments -
Depreciation and Amortization 37 5 --
(Increase) Decrease in Receivables 751 (585) 3
Decrease (Increase) in Notes
Receivable -- -- --
(Increase) Decrease in Projects
Held for Development and Sale 75 (450) --
Decrease (Increase) in Commercial
Properties -- -- --
Increase in Other Assets (334) (12) --
Increase (Decrease) in Payables
and Accruals (5,618) 7,420 390
------- ------- -------
(6,474) 6,253 599
------- ------- -------
CASH FLOWS - INVESTING ACTIVITIES
Decrease (Increase) in Advances to
Joint Ventures (205) (644) --
Property and Equipment Additions, net (91) (93) --
------- ------- -------
(296) (737) --
------- ------- -------
CASH FLOWS - FINANCING ACTIVITIES
(Decrease) Increase in Notes Payable
Centex Corporation and Subsidiaries (898) (5,520) (600)
Other -- -- --
Decrease in Notes Receivable -
Centex Corporation and Subsidiaries 7,700 -- --
Issuance of Class C Partnership Units -- -- --
Capital Distributions -
Return of Capital -- -- --
Preference Payments -- -- --
------- ------- -------
6,802 (5,520) (600)
------- ------- -------
NET INCREASE (DECREASE) IN CASH 32 (4) (1)
CASH AT BEGINNING OF YEAR 1 5 6
------- ------- -------
CASH AT END OF YEAR $ 33 1 5
======= ======= =======
</TABLE>
See notes to combining financial statements.
90
<PAGE> 91
CENTEX DEVELOPMENT COMPANY (3333 HOLDING CORPORATION, 3333 DEVELOPMENT
CORPORATION, CENTEX DEVELOPMENT COMPANY, L. P.)
COMBINING STATEMENTS OF STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL
(Dollars in thousands)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
For the Years Ended March 31, 1999, 1998 and 1997
----------------------------------------------------------------------------------------
Centex Development Company, L.P. and 3333 Holding
Subsidiaries Corporation and Subsidiary
------------------------------------------------- ----------------------------------
Class B General Limited Capital In Retained
Unit Partner's Partner's Stock Excess Of Earnings
Combined Warrants Capital Capital Warrants Par Value (Deficit)
-------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1996 $ 36,989 $ 500 $ 767 $ 36,017 $ 1 $ 800 $ (329)
Return of Capital (4,500) -- -- (4,500) -- -- --
Net Earnings 925 -- -- 719 -- -- 206
-------- -------- -------- -------- -------- -------- --------
Balance at March 31, 1997 33,414 500 767 32,236 1 800 (123)
Preference Payments (4,500) -- -- (4,500) -- -- --
Issuance of Class C
Partnership Units 7,542 -- -- 7,542 -- -- --
Net Earnings (Loss) 4,399 -- -- 4,524 -- -- (125)
-------- -------- -------- -------- -------- -------- --------
Balance at March 31, 1998 40,855 500 767 39,802 1 800 (248)
ISSUANCE OF CLASS C
PARTNERSHIP UNITS 19,445 -- -- 19,445 -- -- --
NET EARNINGS (Loss) 430 -- -- 1,815 -- -- (1,385)
-------- -------- -------- -------- -------- -------- --------
BALANCE AT MARCH 31, 1999 $ 60,730 $ 500 $ 767 $ 61,062 $ 1 $ 800 $ (1,633)
======== ======== ======== ======== ======== ======== ========
</TABLE>
See notes to combining financial statements.
NOTES TO COMBINING FINANCIAL STATEMENTS
(A) ORGANIZATION
In March 1987, Centex Development Company, L.P. (the "Partnership"), a
master limited partnership, was formed to enable holders of Centex Corporation
("Centex") stock to participate in long-term real estate development projects
whose dynamics are inconsistent with Centex's traditional financial objectives.
Certain of Centex's subsidiaries contributed to the Partnership properties with
a historical cost basis (which approximated market value) of approximately $76
million in exchange for 1,000 limited partnership units ("Class A Units").
The Partnership is a limited partnership which is controlled by its
general partner, 3333 Development Corporation ("Development"), a wholly-owned
subsidiary of 3333 Holding Corporation ("Holding"). Holding is a separate
public company whose stock trades in tandem with Centex's stock. The common
stock of Holding was distributed in 1987 (with warrants to purchase
approximately 80% of the Class B limited partnership units in the Partnership)
as a dividend to the stockholders of Centex and is held by a nominee. These
securities, held by the nominee on behalf of the stockholders, will trade in
tandem with the common stock of Centex 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.
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<PAGE> 92
The three-person Board of Directors of Holding is elected by the
stockholders of Centex. Two of the Board members, representing the majority of
the Board, are independent outside directors who are also not directors of
Centex. Thus the general partner of the Partnership is controlled by the
stockholders of Centex. The general partner and independent board of Holding
manage how the Partnership conducts its activities including the sales,
development, maintenance and zoning of properties. The general partner may sell
or acquire properties, including the contributed property, and enter into other
business transactions without the consent of the limited partners. In addition,
the limited partners cannot remove the general partner.
Supplementary condensed combined financial statements of Centex
Corporation and subsidiaries, 3333 Holding Corporation and subsidiary and
Centex Development Company, L.P. and subsidiaries are set forth below. For
additional information on Centex Corporation and subsidiaries, see their
separate financial statements and related footnotes.
SUPPLEMENTARY CONDENSED COMBINED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
-------------------------
March 31,
-------------------------
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 111,632 $ 98,576
Receivables 1,860,090 1,588,247
Inventories 1,639,664 1,107,941
Investments in Joint Ventures and Other 49,266 10,598
Property and Equipment, net 313,886 296,080
Other Assets 410,321 333,044
---------- ----------
$4,384,859 $3,434,486
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Liabilities $1,026,867 $ 802,547
Short-term Debt 1,668,496 1,166,694
Long-term Debt 284,299 237,715
Minority Stockholders' Interest 140,721 152,468
Negative Goodwill 66,837 82,837
Stockholders' Equity 1,197,639 992,225
---------- ----------
$4,384,859 $3,434,486
========== ==========
</TABLE>
SUPPLEMENTARY CONDENSED COMBINED STATEMENTS OF EARNINGS
(Dollars in thousands)
<TABLE>
<CAPTION>
----------------------------------------
For the Years Ended March 31,
----------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenues $5,179,188 $3,991,954 $3,793,621
Costs and Expenses 4,805,894 3,760,445 3,629,672
---------- ---------- ----------
Earnings Before Income Taxes 373,294 231,509 163,949
Income Taxes 141,332 86,828 57,180
---------- ---------- ----------
Net Earnings $ 231,962 $ 144,681 $ 106,769
========== ========== ==========
</TABLE>
92
<PAGE> 93
(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, 1999 and 1998 and results of operations for each of the three
years ended March 31, 1999. 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 home building projects and real estate sales are recognized
as homes and properties are sold and title passes.
INVENTORY CAPITALIZATION AND COST ALLOCATION
Projects under development and held for sale are stated at the lower of
cost (including development costs and, where appropriate, capitalized interest
and real estate taxes) or fair value less cost to sell. Capitalized costs are
included in cost of sales in the combining statements of operations as related
revenues are recognized. Interest costs relieved from inventories are included
as interest expense. Holding and the Partnership (collectively the "Companies")
review recoverability of their inventories on an individual basis in accordance
with the provisions of Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of."
EARNINGS (LOSS) PER SHARE/UNIT
Earnings (loss) per share/unit are based on the weighted-average number of
outstanding shares of common stock of 1,000 for Holding and the
weighted-average number of outstanding Class A and Class C limited partnership
units of the Partnership of 54,377; 32,281 and 32,260 for fiscal years 1999,
1998 and 1997, respectively.
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
Effective April 1998, the Companies adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." SFAS No. 130
establishes standards for reporting and displaying comprehensive income and its
components. The Companies have no nonowner changes in equity that would be
classified as "other comprehensive income." As a result, comprehensive income
is equal to the Companies' net earnings.
Statement of Financial Accounting Standards No. 131, "Disclosures About
Segments of an Enterprise and Related Information," issued in June 1997,
changes the way public companies report information about segments. The
statement, which is based on the management approach to segment reporting,
requires companies to report selected quarterly information and entity-wide
disclosures about products and services, major customers, and the material
countries in which the entity holds assets and reports revenues. The Companies
adopted this statement effective April 1, 1998. It did not have a material
effect on the Companies' financial statements.
93
<PAGE> 94
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities," issued in June 1998,
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives), and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measures those
instruments at fair value. The Companies do not expect the adoption of the
Statement to have a material impact on the financial statements of the
Companies. The effective date of this Statement will be April 2000 for the
Companies. There is, however, an exposure draft that would delay the
implementation of this standard for the Companies until April 2001.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to be consistent with
the fiscal 1999 presentation.
COMBINING STATEMENTS OF CASH FLOWS - SUPPLEMENTAL DISCLOSURES
Interest capitalized by the Partnership during the fiscal years ended
March 31, 1999, 1998 and 1997 totaled $1,015,000, $22,000 and $22,000,
respectively. Land assets acquired by the Partnership during the fiscal years
ended March 31, 1999 and 1998 in exchange for Class C Partnership Units totaled
$18,445,000 and $7,542,000, respectively. In addition, during the fiscal year
ended March 31, 1999, the Partnership issued 1,000 new Class C Partnership
Units for $1 million. No income taxes were paid during the years ended March
31, 1999, 1998 and 1997.
(D) NOTES RECEIVABLE
Development issued common stock to Holding and used the proceeds to
advance $7.7 million to a wholly-owned subsidiary of Centex, as evidenced by a
note receivable due April 30, 1999 bearing interest at prime plus 0.875%.
During the fiscal year 1999, the note was repaid. Interest income of $116,000,
$732,000 and $713,000 related to this note is included in the accompanying
combining financial statements for the years ended March 31, 1999, 1998 and
1997, respectively.
Notes Receivable - Other at March 31, 1999 and 1998 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, 1998. The weighted
average interest rate, inclusive of discounts, was 9% at both March 31, 1999
and 1998. Notes receivable at March 31, 1999 are collectible over three years,
with $23,000 being due within one year. As of March 31, 1999, all notes were
current; however, one loan was in default with respect to development
obligations on the land securing the note. The Partnership is currently working
with the lender to cure the default. The value of the underlying collateral
exceeds the note receivable amount at March 31, 1999. Therefore, should the
default under the note agreement not be resolved, management does not
anticipate any material impact to the financial statements.
(E) NOTES PAYABLE
Pursuant to a master note agreement between Holding and Centex, Centex had
advanced Holding $1,000,000 at March 31, 1998 secured by a pledge of all of the
issued and outstanding shares of Development (the "Holding Note"). During
fiscal 1999 the Holding Note was repaid and the pledge agreement was
terminated. The note bore interest at prime plus 1%. Interest expense of
$62,000, $372,000, and $508,000 related to this note is included in the
accompanying financial statements for the years ended March 31, 1999, 1998 and
1997, respectively.
94
<PAGE> 95
In addition, Centex Multi-Family Company, a wholly-owned subsidiary of
Development, has a note agreement with Centex (the "MF Note") to fund certain
predevelopment costs. The MF Note is unsecured and bears interest at prime,
payable quarterly and had an outstanding balance of $582,000 at March 31, 1999.
Non-recourse notes payable, secured solely by the underlying real estate,
totaled $10.1 million at March 31, 1999. As land is sold, a portion of the
proceeds is restricted for repayment of the notes. In addition, the
Partnership, through wholly-owned single asset entities, had limited-recourse
construction debt outstanding at March 31, 1999 totaling $31.8 million. The
Partnership itself has also issued limited guarantees for up to 20% of the
commitments. The prime rate in effect was 7.75% at March 31, 1999 and 8.50% at
March 31, 1998. The 30-day LIBOR rate at March 31, 1999 and 1998 was 4.94% and
5.70%, respectively. The note balances and rates in effect were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
----------------------------------------------------------------------
Maturities through March 31,
----------------------------------------------------------------------
2004
NON-RECOURSE DEBT Total 2000 2001 2002 2003 or later
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Mortgage note 7.20% $ 1,740 $ 16 $ 17 $ 18 $ 20 $ 1,669
Mezzanine note 9.00% 3,921 -- -- 3,921 -- --
Land note 8.00% 3,000 3,000 -- -- -- --
Land note Prime + 1% 1,431 1,431 -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
10,092 4,447 17 3,939 20 1,669
LIMITED-RECOURSE DEBT
Construction Notes,
LIBOR + 1.3% to 2% 31,804 25,563 5,226 1,015 -- --
---------- ---------- ---------- ---------- ---------- ----------
$ 41,896 $ 30,010 $ 5,243 $ 4,954 $ 20 $ 1,669
========== ========== ========== ========== ========== ==========
</TABLE>
(F) COMMITMENTS AND CONTINGENCIES
As of March 31, 1999, the Partnership had remaining commitments of
approximately $21.7 million on construction contracts.
To facilitate construction loans obtained by wholly-owned single asset
entities, the Partnership has issued demand notes made payable to the
single-asset entities equal to, in some instances, 20% of the construction loan
commitment amount. The single-asset entities have signed these demand notes
over to the lender as a form of additional collateral on the construction
loans. The demand notes are payable only in the event of default on the
construction loan. As of March 31, 1999, the Partnership had issued demand
notes totaling $7.2 million.
The single-asset entities have also obtained demand notes from Centex for
up to 10% of the construction loan commitment amount. These demand notes have
been signed over to the lenders as additional collateral on the construction
loans, and may be called only in the event of a default on the demand notes
issued by the Partnership.
(G) BUSINESS SEGMENTS
The Partnership operates in four principal business segments - Commercial
Development, Multi-Family Development, Homebuilding, and Land Sales. These
segments operate in the United States and their markets, with the exception of
Homebuilding (which currently operates in New Jersey), are nationwide. The
accounting policies are the same as those described in the summary of
significant accounting policies.
95
<PAGE> 96
Commercial Development actively develops office, industrial, and retail
facilities as well as single-family lots. Commercial Development is developing
the buildings primarily for sale. Multi-Family Development develops mid-market
apartment projects and town homes. Multi-Family's strategy is to market the
projects for sale prior to or during construction. The Homebuilding operation
involves the development of the Partnership's land and the purchase of lots
together with the construction and sale of single-family homes.
Homebuilding is actively building out the Partnership's land holding in
East Windsor, New Jersey as well as pursuing "spot lot" development in that
general market area. Land Sales is responsible for the property management and
liquidation of land investments for which no development opportunity has been
identified.
During fiscal 1999, the above four named segments evolved as a result of
(1) new business initiatives in the commercial development arena, (2) the
commencement of Homebuilding in April 1998, and (3) the management team
structure put in place to conduct the increased development activities. These
segments did not exist in prior years, and therefore the following table sets
forth combined financial information relating to these segments for the fiscal
year ended March 31, 1999 (dollars in thousands):
<TABLE>
<CAPTION>
COMMERCIAL MULTI-FAMILY LAND
DEVELOPMENT DEVELOPMENT HOMEBUILDING SALE TOTAL
----------- ------------ ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues $ 2,616 $ 342 $ 21,295 $ 4,365 $ 28,618
Cost of Sales (2,077) -- (17,108) (3,570) (22,755)
Selling, General & Administrative (521) (1,814) (2,544) (554) (5,433)
--------- --------- --------- --------- ---------
Operating Earnings (Loss) $ 18 $ (1,472) $ 1,643 $ 241 $ 430
========= ========= ========= ========= =========
Identifiable Assets $ 44,820 $ 31,337 $ 10,920 $ 25,099 $ 112,176
Capital Expenditures $ -- $ 91 $ 126 $ -- $ 217
Depreciation and Amortization $ 41 $ 37 $ 37 $ -- $ 115
</TABLE>
(H) STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL
EQUITY SECURITIES
The Partnership Agreement contemplates the issuance of three classes of
limited partnership units, Class A Units, Class B Units, and Class C Units. In
March 1987, one thousand Class A Units were issued to Centex subsidiaries in
exchange for assets valued at approximately $76 million. The Class B Units,
held by a nominee on behalf of the stockholders, will detach and trade
separately from Centex stock on the earlier of Payout (as defined below) or
November 30, 2007, the scheduled detachment date. As of February 24, 1998, the
1,000 Class A Units were converted to 32,260 new Class A Units.
On March 31, 1998, 7,542 Class C Units were issued in exchange for assets
with a fair market value of $7.5 million. Under the Partnership Agreement,
holders of Class C Units are entitled to substantially the same rights as
holders of Class A Units in connection with matters in common, such as voting,
allocations, and distributions. During fiscal 1999, 19,445 Class C Units were
issued in exchange for assets with a fair market value of $19.4 million.
96
<PAGE> 97
PREFERRED RETURN
The Partnership Agreement provides that the Class A and Class C limited
partners are entitled to a cumulative preferred return of 9% per annum on the
average outstanding balance of their Unrecovered Capital, as defined.
Unrecovered Capital represents initial capital contributions as reduced by
repayments and is the basis for preference accruals. In July 1995, in
conjunction with the extension of the detachment date, the limited partner
waived preference payments totaling $37.5 million and reduced the Class A
Unrecovered Capital in the Partnership, as defined, to $47.3 million.
Distributions made by the Partnership reduced Unrecovered Capital, as defined,
$4.5 million during fiscal 1997 and $10 million during fiscal 1996. During
fiscal 1998, the Partnership made preference payments to its limited partner
totaling $4.5 million. No preference payments were made during fiscal 1999.
Preference payments in arrears at March 31, 1999 amounted to $9.1 million and
Unrecovered Capital for Class A and Class C limited partners totaled $32.8
million and $27.0 million, respectively.
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 and Class C limited partners 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 a combined 20% to the Class A and
Class C limited partners 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 and Class C limited partners
have received aggregate distributions equal to their original capital
contribution ("Payout"), distributions of cash or other property shall
be made as follows:
[a] To the Class A and Class C limited partners with respect to their
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 and Class C limited partners until their
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.
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.
97
<PAGE> 98
(I) RELATED PARTY TRANSACTIONS
SERVICE AND MANAGEMENT AGREEMENTS
Holding has a service agreement with Centex Service Company, a
wholly-owned subsidiary of Centex, whereby Centex Service Company provides
certain tax, accounting and similar services for Holding at a fee of $2,500 per
month. This agreement was amended in fiscal 1999 to include development
services and the monthly fee increased to $30,000. Service fees of $360,000 in
fiscal 1999 and $30,000 in fiscal 1998 and 1997 are reflected as administrative
expenses in the accompanying combining financial statements.
The Partnership paid $713,000, $640,000 and $951,000 to Holding
during fiscal years 1999, 1998 and 1997, 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.
SALES AND PURCHASES
Partnership revenues during fiscal years 1999, 1998 and 1997 include
lot sales to Centex Homes of $3,364,000, $6,494,000 and $3,814,000,
respectively. Gains associated with lot sales to Centex totaled $139,000,
$906,000 and $538,000 for fiscal years 1999, 1998 and 1997, respectively. At
March 31, 1999, Centex Homes had contracts to purchase lots for the aggregate
price of approximately $6 million to be paid as lots are delivered.
In January 1998, Development purchased all of the stock of a
wholly-owned subsidiary of Real Estate for $1,134,000.
During fiscal 1999, the Partnership, through its operating
subsidiaries, executed contracts with certain of Centex's construction
subsidiaries totaling $43.2 million for the construction of multi-family
apartments and an office building. During fiscal 1999, $19.3 million was paid to
Centex's construction subsidiaries pursuant to these contracts.
ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE
Included in Accounts Receivable-Affiliates and Accounts
Payable-Affiliates in the accompanying combining financial statements are
$7,921,000 at March 31, 1998, which the Partnership advanced to Holding. On May
19, 1998, the outstanding principal balance on this note was repaid. Interest
of $116,000 and $345,000 was accrued on advances during fiscal years 1999 and
1998, respectively. All amounts have been eliminated in the combined
statements.
(J) INCOME TAXES
At March 31, 1999, Holding had operating loss carryforwards for income
tax reporting purposes of $1,582,000. If unused, the loss carryforwards will
expire in fiscal years 2009 through 2020. Holding has not recognized these tax
assets in its balance sheet due to its history of operating losses. Holding
joins with its subsidiaries in filing consolidated income tax returns. The
taxable income of the Partnership has been allocated to the holders of the
Class A and Class C Units. Accordingly, no tax provision for Partnership
earnings is shown in the combining financial statements.
(K) SUBSEQUENT EVENTS
On April 15, 1999 Centex Development Company UK Limited ("CDCUK"), a
company recently incorporated in England and Wales and a wholly-owned
subsidiary of Centex Development Company, L.P., closed its acquisition of all
of the voting shares of Fairclough Homes Group Limited, a British home builder
("Fairclough"). The seller of the shares retained non-voting preference shares
in
98
<PAGE> 99
Fairclough that will entitle it to receive substantially all of the net, after
tax earnings of Fairclough until March 31, 2001. However, if during that time
period the operating earnings of Fairclough exceed certain levels, then CDCUK
will participate in the surplus.
The purchase price at closing (approximately $225 million) was paid by
the delivery of two-year non-interest bearing promissory notes. A major portion
of the purchase notes is secured by a letter of credit obtained by the
Partnership from a United Kingdom bank.
During the time period between April 15, 1999 and March 31, 2001
Fairclough will be operated by CDCUK, subject to certain guidelines that were
negotiated with the seller. After March 31, 2001, CDCUK will redeem, for a
nominal value, the preference shares.
This transaction will be accounted for under the purchase method of
accounting.
99
<PAGE> 100
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. and
subsidiaries as of March 31, 1999 and 1998, and the related combining
statements of operations, cash flows, and stockholders' equity and partners'
capital for each of the three years in the period ended March 31, 1999. 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. and subsidiaries as of March 31, 1999 and 1998, 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, 1999, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas,
May 12, 1999
100
<PAGE> 101
QUARTERLY RESULTS (UNAUDITED)
(Dollars in thousands, except per unit/share)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
March 31,
------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998
------------------------------------------------------------------------------
Centex Development 3333 Holding
Company, L.P. and Corporation and
Combined Subsidiaries Subsidiary
---------------------- ---------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
FIRST QUARTER
Revenues $ 6,308 $ 3,741 $ 6,076 $ 3,623 $ 476 $ 412
Earnings (Loss) Before Taxes $ (346) $ 791 $ (193) $ 699 $ (153) $ 92
Net Earnings (Loss) $ (346) $ 791 $ (193) $ 699 $ (153) $ 92
Earnings (Loss) Per Unit/Share $ (3.93) $ 21.67 $ (153) $ 92
Average Units Outstanding 49,119 32,260 -- --
Average Shares Outstanding -- -- 1,000 1,000
SECOND QUARTER
Revenues $ 7,772 $ 3,094 $ 7,656 $ 3,002 $ 281 $ 337
Earnings (Loss) Before Taxes $ 375 $ 348 $ 628 $ 360 $ (253) $ (12)
Net Earnings (Loss) $ 375 $ 348 $ 628 $ 360 $ (253) $ (12)
Earnings (Loss) Per Unit/Share $ 11.79 $ 11.15 $ (253) $ (12)
Average Units Outstanding 53,279 32,260 -- --
Average Shares Outstanding -- -- 1,000 1,000
THIRD QUARTER
Revenues $ 5,694 $ 9,228 $ 5,653 $ 9,123 $ 194 $ 310
Earnings (Loss) Before Taxes $ 13 $ 3,034 $ 391 $ 3,054 $ (378) $ (20)
Net Earnings (Loss) $ 13 $ 3,034 $ 391 $ 3,054 $ (378) $ (20)
Earnings (Loss) Per Unit/Share $ 6.99 $ 94.67 $ (378) $ (20)
Average Units Outstanding 55,911 32,260 -- --
Average Shares Outstanding -- -- 1,000 1,000
FOURTH QUARTER
Revenues $ 8,844 $ 4,058 $ 8,843 $ 3,870 $ 152 $ 446
Earnings (Loss) Before Taxes $ 388 $ 226 $ 989 $ 411 $ (601) $ (185)
Net Earnings (Loss) $ 388 $ 226 $ 989 $ 411 $ (601) $ (185)
Earnings (Loss) Per Unit/Share $ 16.69 $ 12.73 $ (601) $ (185)
Average Units Outstanding 59,247 32,286 -- --
Average Shares Outstanding -- -- 1,000 1,000
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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<PAGE> 102
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 1999 Annual Meeting of Stockholders of Holding to be
held on July 22, 1999 (the "1999 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. 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 Agreement may not be terminated
by Holding (other than in the event of a breach by Centex Service Company
constituting gross negligence or willful or wanton misconduct) prior to the
full and complete detachment of the Stockholder Warrants from Centex Common
Stock or the occurrence of Payout. Service fees of $360,000 were paid pursuant
to the Services Agreement during fiscal 1999.
(b) The Partnership
GENERAL PARTNER AND MANAGEMENT
The Partnership has no directors, officers or employees and, instead,
is managed by Development, its sole general partner. Development, in turn, is
controlled by its sole stockholder, Holding. Directors and officers of
Development perform all executive management functions required for the
Partnership. Except as provided in the Plan with respect to the Original
Properties, the limited partners of the Partnership have no power to direct or
participate in the control of the Partnership or to remove the general partner,
and Development and the independent board of directors of Holding manage how
the Partnership conducts its activities including the sales development,
maintenance and zoning of properties belonging to the Partnership and all other
decisions regarding the Partnership's business or operations. See "Item 1.
Business". The Partnership has entered into a management agreement pursuant to
which Holding will sell, develop, maintain and zone the properties of the
Partnership for and on behalf of the Partnership. Holding is managed by a
three-person board of directors elected by the stockholders of Centex. Two of
the board members are independent outside directors who are not directors of
Centex. 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
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<PAGE> 103
does not receive any compensation from the Partnership in respect of its duties
and obligations as general partner of the Partnership. 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>
Richard C. Decker ............................................. Director, Chairman, President and
Chief Executive Officer (1) 46
J. Stephen Bilheimer .......................................... Vice Chairman (2) 67
Josiah O. Low, III ............................................ Director (3)* 60
David M. Sherer ............................................... Director (4)* 62
Kimberly A. Pinson ............................................ Vice President, Treasurer, Controller and
Assistant Secretary (5) 34
</TABLE>
* Member of the audit committee of the Board of Directors.
(1) Mr. Decker is an employee of a subsidiary of Centex and has been Chairman,
President and Chief Executive Officer of both Holding and Development, the
general partner of the Partnership, since April 1, 1998. Mr. Decker was
elected Director of both Holding and Development effective June 10, 1998.
Mr. Decker has also been a director and officer of various Centex
subsidiaries engaged in real estate development since July 1996. Prior
thereto, Mr. Decker was a partner with Dallas-based Trammell Crow Company,
a commercial real estate development firm, for 15 years, and served as
Principal from 1990 until 1995. From 1995 until July 1996, Mr. Decker
operated Decker & Company, a Phoenix, Arizona-based real estate development
company.
(2) Mr. Bilheimer is an employee of a subsidiary of Centex. Mr. Bilheimer was
appointed to the position of Vice Chairman for Holding effective April 1,
1998. Prior thereto, Mr. Bilheimer served as President of Holding and
Development from 1987 to 1998. Mr. Bilheimer was a director of Holding and
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. Mr. Bilheimer also served as Executive Vice President of
Centex Real Estate Corporation from April 1987 until March 31, 1988 and
served as a director until July 23, 1998 at which time he declined to
stand for re-election.
(3) Mr. Low serves as Senior Vice President of Donaldson, Lufkin & Jenrette
Securities Corporation since February 1988. Mr. Low is also a director of
Holding. Mr. Low was elected as a director of Development as of June 1,
1987.
(4) Mr. Sherer has been President of David M. Sherer Associates, Inc., a
commercial real estate, investment and brokerage firm, for 20 years. Mr.
Sherer is also a director of Holding. Mr. Sherer was elected as a director
of Development as of June 1, 1987.
(5) Ms. Pinson is an employee of a subsidiary of Centex and serves as Vice
President, Treasurer, Controller and Assistant Secretary of Holding,
Development, and various Centex subsidiaries engaged in real estate
development. Ms. Pinson joined Vista Properties, Inc. (now Centex Real
Estate Corporation) in March 1993 and was elected to her present positions
with Holding and Development as of July 23, 1996.
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<PAGE> 104
All directors are elected annually by the stockholders 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 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 one of
the subsidiaries of Centex, 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 the Partnership's business are provided to the Partnership
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 the Partnership'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 the Partnership'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 the Partnership.
Holding is entitled to reimbursement from the Partnership 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 $25,000 quarterly managerial fee. During fiscal 1999, Holding received
$713,000 from the Partnership for its services.
The Management Agreement also provides that Holding will provide,
consistent with the Plan, pre-development and development services on behalf of
the Partnership, and the Management Agreement specifically provides that
Holding is delegated full authority to carry out and perform on behalf of the
Partnership 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 the Partnership (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 Centex Service Company and other Centex subsidiaries, upon
terms and conditions to be determined. These responsibilities may include
enhancement of properties owned or controlled by the Partnership, for which
reasonable additional compensation may be paid by the Partnership 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 Centex Service Company or
other Centex subsidiaries.
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<PAGE> 105
ITEM 11. EXECUTIVE COMPENSATION
Holding and the Partnership
The information called for by this Item 11 with respect to Holding and
the Partnership is incorporated herein by reference to the information included
and referenced under the caption "Executive Compensation" in the 1999 Holding
Proxy Statement.
The Partnership 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 the Partnership with respect to its duties and
obligations as general partner for the Partnership. As general partner,
Development is entitled to be allocated certain items of income and loss of the
Partnership and to receive certain distributions of cash from the Partnership
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 are
set forth in the Partnership Agreement. For a summary of these rights and
benefits, see Note (H) of the Notes to the Holding/Partnership Combining
Financial Statements included on pages 96-97 of this Report.
The directors and executive officers of Development perform all
executive management functions for the Partnership. See "Item 10. Directors and
Executive Officers of the Registrant". Services required by the Partnership in
its operations are also provided pursuant to a Management Agreement with
Holding pursuant to which Holding operates, manages and develops the properties
of the Partnership for and on behalf of the Partnership. 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 the Partnership for the year ended March 31, 1999. 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 1999 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 the Partnership during the 1999 fiscal
year.
During fiscal 1999, Richard C. Decker, Chairman, President and Director
and Kimberly A. Pinson, Vice President, Treasurer, Controller and Assistant
Secretary 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. Mr. Decker and Ms. Pinson 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 the Partnership.
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 directors' fees annually in their capacities
as directors of Development ($10,000) and Holding ($10,000). Each director who
is neither an officer nor an employee of Development, Centex or a subsidiary of
Centex, also receives $1,500 per meeting for each board meeting attended of
Development and Holding. During fiscal 1999, board meeting fees of $4,500 for
Development and $4,500 for Holding were paid to each
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<PAGE> 106
director eligible for payment. 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 1999 Holding Proxy Statement.
(b) The Partnership
The following table sets forth certain information with respect to the
ownership of the equity securities of the Partnership as of May 3, 1999 by
Development, the directors of Development, individually itemized, all directors
and executive officers of Development as a group, and any person known to the
Partnership to be the beneficial owner of more than 5% of any class of the
Partnership'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.
<TABLE>
<CAPTION>
NUMBER OF
UNITS
NAME OF OR WARRANTS PERCENT
TITLE OF CLASS* BENEFICIAL OWNER** OWNED OF CLASS
--------------- ------------------ ----------- --------
<S> <C> <C> <C>
General Partner Interest (1) 3333 Development Corporation All 100%
3100 McKinnon, Suite 370
Dallas, Texas 75201
Class A Units (2) Centex Homes 32,260.085 100%
2728 N. Harwood
Dallas, Texas 75201
Stockholder Warrants (3) 3333 Development Corporation -- ***
Richard C. Decker -- ***
Josiah O. Low, III -- ***
David M. Sherer -- ***
All directors and executive officers of
Development as a group (4 persons) -- ***
FMR Corp. (4) 104 10.45%
82 Devonshire Street
Boston, Massachusetts 02109
The Prudential Insurance Company
of America (5) 55 5.46%
Prudential Plaza
Newark, New Jersey 07102-3777
</TABLE>
106
<PAGE> 107
<TABLE>
<S> <C> <C> <C>
Centex Class B Unit Centex Corporation 100 100%
Warrants (6) 2728 N. Harwood
Dallas, Texas 75201
Class B Units (7) Centex Corporation (8) 350(9) 28%(8)
2728 N. Harwood
Dallas, Texas 75201
Class C Units (10) Centex Homes 26,986.515 100%
2728 N. Harwood
Dallas, Texas 75201
</TABLE>
- -----------------------
* Under the terms of the Partnership Agreement, the Partnership is
managed by a sole corporate general partner and none of the present
classes of the Partnership'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 the Partnership'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 the Partnership's securities is also included.
*** Less than 1%.
(1) In connection with the formation of the Partnership, Development made a
capital contribution to the Partnership of $767,182, in exchange for
Development's general partner interest in the Partnership. As general
partner, Development is entitled to receive allocations of income and
loss and distributions of property from the Partnership.
(2) The Class A Units were issued to the Original Limited Partners in
exchange for the acquisition of the Original Properties by the
Partnership. Record title to the Class A Units presently is held by
Centex Homes. 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 and Class C Units will be
automatically converted collectively 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 and Class C Units. The Class A Units and
Class C 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.
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<PAGE> 108
(4) Based solely upon information contained in the Schedule 13G/A
(Amendment No. 13) of FMR Corp. filed with the SEC on February 9, 1999
with respect to Centex Common Stock owned as of January 31, 1999 (the
"FMR 13G"). According to the FMR 13G, such number includes 149,036
shares (and therefore a beneficial interest in 2.51 Stockholder
Warrants) over which FMR Corp. had the sole power to vote or direct the
vote and 6,209,466 shares (and therefore a beneficial interest in
104.47 Stockholder Warrants) over which FMR Corp. had sole dispositive
power.
(5) Based solely upon information contained in the Schedule 13G/A
(Amendment No. 4) of The Prudential Insurance Company of America
("Prudential") filed with the SEC on January 26, 1999 with respect to
Centex Common Stock owned as of December 31, 1998 (the "Prudential
13G"). According to the Prudential 13G, such number includes 263,900
shares (and therefore a beneficial interest in 4.44 Stockholder
Warrants) over which Prudential had sole voting or dispositive power,
2,940,803 shares (and therefore a beneficial interest in 49.48
Stockholder Warrants) over which Prudential had shared voting power and
2,980,403 shares (and therefore a beneficial interest in 50.14
Stockholder Warrants) over which Prudential had shared dispositive
power. According to the Prudential 13G, Prudential holds 16,000 shares
(and therefore a beneficial interest in .27 Stockholder Warrants) for
the benefit of its general account. Prudential holds the remaining
shares for the benefit of its clients.
(6) On November 30, 1987, Centex acquired from the Partnership 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 (H) of the Notes to the Holding/Partnership Combining Financial
Statements included on pages 96-97 of this Report.
(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
collectively by the owners of the Class A Units and Class C Units. See
footnote (2).
(9) The Class B Units that may be acquired upon conversion of outstanding
Class A Units and Class C 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.
(10) The Class C Units were issued in exchange for assets acquired by the
Partnership from Centex Homes. 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 and Class
C Units will be automatically converted collectively 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
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<PAGE> 109
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 and Class C Units. The Class A
Units and Class C 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.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Holding
The information called for in Item 13 with respect to Holding is
incorporated herein by reference to the information included under the caption
"Certain Transactions" in the 1999 Holding Proxy Statement.
(b) The Partnership
Holding entered into a services agreement in May 1987 with Centex
Service Company, whereby Centex Service Company provides certain tax,
accounting and other services for Holding at a fee of $2,500 per month. In
April 1998, the services agreement was amended to also include certain real
estate development and management services and the related fee increased to
$30,000 per month. Service fees of $360,000 were paid pursuant to this
agreement for fiscal 1999.
The Partnership has entered into an agreement with Holding to provide
management services to the Partnership in connection with the development,
operation and maintenance of the Partnership property and other administrative
services. Management fees and reimbursable costs totaling $713,000 were
incurred under this agreement during fiscal 1999.
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, bore interest, payable quarterly, at the prime
rate of interest of NationsBank, N.A. ("NationsBank") plus 1%. On May 29, 1998,
the outstanding principal balance of the Holding Note was repaid. The Holding
Note was secured by a pledge of all the issued and outstanding shares of
Development, and such pledge has been terminated. There was interest expense of
$62,000 related to the Holding Note for the year ended March 31, 1999.
In 1987, Development advanced $7,700,000 to a wholly-owned subsidiary
of Centex pursuant to an unsecured note and related loan agreement. The note
bore interest, payable quarterly, at the prime rate of interest of NationsBank
plus 7/8%. On May 29, 1998, the outstanding principal balance on the note was
repaid. Fiscal year 1999 interest income on the note totaled $116,000.
In fiscal 1999, the Partnership sold to Centex Homes certain tracts of
land for $3,364,000. Centex Homes has agreements to purchase an additional 659
lots from the Partnership.
Centex Homes had guaranteed a $5,000,000 bank line of credit for the
Partnership to utilize in conjunction with development of lots to be sold to
Centex Homes. This line of credit was repaid and canceled on April 15, 1998.
During fiscal 1998, the Partnership Agreement governing the Partnership
was amended to allow for the issuance of Class C Units, to be issued in exchange
for assets acquired from a limited partner or from an entity who is to be
admitted as a limited partner. During fiscal 1999, the Partnership acquired
assets valued at $19,445,000 in exchange for 19,445 Class C Units.
109
<PAGE> 110
In April 1998, a 49% owned subsidiary of the Partnership purchased for
$3.1 million the real estate development properties of an indirect subsidiary
of Centex Real Estate Corporation. In connection with the transaction, the
Partnership's subsidiary may borrow up to $500,000 on a revolving basis from
Centex Corporation.
During fiscal 1999, the Partnership, through its operating
subsidiaries, had contracts with certain of Centex's construction subsidiaries
totaling $43.2 million for the construction of multi-family apartments and an
office building. During fiscal 1999, $19.3 million was paid to Centex's
construction subsidiaries pursuant to the contracts.
Fairclough Acquisition
In connection with the Fairclough acquisition certain obligations of
the purchaser, a wholly-owned subsidiary of the Partnership, were guaranteed by
the Partnership, including payment under two notes for a major portion of the
$225 million purchase price, and payment of the dividends due to the seller
from April 1, 1999 through March 31, 2001. Centex Homes, the sole limited
partner of the Partnership, has agreed that if the Partnership does not have
sufficient funds to satisfy its obligations (excluding any payment under the
negotiable note), Centex Homes will make such capital contributions to the
Partnership as are necessary to enable the Partnership to satisfy such
obligations (again excluding any payment under the negotiable note).
In addition, Centex agreed that if Centex Homes does not perform its
obligations, Centex will take appropriate action to cause the performance of
those obligations.
Payment of the negotiable note is primarily secured by a letter of
credit issued by a United Kingdom bank. In order to obtain the letter of
credit, the Partnership guaranteed payment of the principal amount when due to
the bank. Centex also provided an assurance to the bank that if the Partnership
does not meet its obligations, Centex will cause the Partnership to have
sufficient funds to perform its obligations, primarily through Centex's
purchase of limited partnership units in the Partnership.
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) EXHIBITS
(A) Holding
The information on exhibits required by this Item 14 is set
forth in the Holding Index to Exhibits appearing on pages 117-118 of
this Report.
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(B) The Partnership
The information on exhibits required by this Item 14 is set
forth in the Partnership Index to Exhibits appearing on pages 119-122
of this Report.
(b) Reports on Form 8-K:
Neither Holding nor the Partnership filed any reports on Form 8-K
during the quarter ended March 31, 1999.
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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.
3333 HOLDING CORPORATION
------------------------------------------------
Registrant
August 11, 1999 By: /s/ RICHARD C. DECKER
------------------------------------------------
Richard C. Decker,
Director, Chairman, President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
August 11, 1999 /s/ RICHARD C. DECKER
------------------------------------------------
Richard C. Decker,
Director, Chairman, President and Chief Executive
Officer
(principal executive officer)
August 11, 1999 /s/ KIMBERLY A. PINSON
------------------------------------------------
Kimberly A. Pinson,
Vice President, Treasurer, Controller
and Assistant Secretary
(principal financial officer
and principal accounting officer)
Directors: Richard C. Decker, Josiah O. Low, III
and David M. Sherer
August 11, 1999 By: /s/ RICHARD C. DECKER
------------------------------------------------
Richard C. Decker,
Individually and as
Attorney-in-Fact*
- ---------------
*Pursuant to authority granted by powers of attorney, copies of which are filed
herewith.
112
<PAGE> 113
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.
CENTEX DEVELOPMENT COMPANY, L.P.
------------------------------------------------
Registrant
By: 3333 Development Corporation, General Partner
August 11, 1999 By: /s/ RICHARD C. DECKER
------------------------------------------------
Richard C. Decker,
Director, Chairman, President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of 3333
Development Corporation, as general partner of, and on behalf of, the
registrant in the capacities and on the dates indicated.
August 11, 1999 /s/ RICHARD C. DECKER
------------------------------------------------
Richard C. Decker,
Director, Chairman, President and Chief Executive
Officer
(principal executive officer)
August 11, 1999 /s/ KIMBERLY A. PINSON
------------------------------------------------
Kimberly A. Pinson,
Vice President, Treasurer, Controller
and Assistant Secretary
(principal financial officer
and principal accounting officer)
Directors: Richard C. Decker, Josiah O. Low, III
and David M. Sherer
August 11, 1999 By: /s/ RICHARD C. DECKER
------------------------------------------------
Richard C. Decker,
Individually and as
Attorney-in-Fact*
- ------------
*Pursuant to authority granted by powers of attorney, copies of which are filed
herewith.
113
<PAGE> 114
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 4.1 to Joint Registration Statement
Centex. of Centex Corporation ("Centex"), 3333
Holding Corporation ("Holding") and Centex
Development Company, L.P. (the
"Partnership") on Form S-8 filed with the
Securities and Exchange Commission (the
"Commission") on June 1, 1999 (the "1999
Form S-8")
3.2 Amended and Restated By-laws of Centex. Filed herewith.
4.1 Specimen Centex common stock certificate Exhibit 4.3 to Joint Registration Statement
(with tandem trading legend and Rights of Centex, Holding and the Partnership, on
Agreement legend). Form S-8 filed with the Commission on June
2, 1997 (the "1997 Form S-8")
4.2 Nominee Agreement, dated November 30, 1987, Exhibit 4.2 to Centex 1993 Form 10-K
by and between Centex, Holding and the
Partnership, and Chemical Bank, as successor
nominee.
4.3 Agreement for Purchase of Warrants, dated as Exhibit 4.3 to Centex 1993 Form 10-K
of November 30, 1987, by and between Holding
and Centex.
4.4 Rights Agreement, dated as of October 2, Exhibit 1 to Form 8-A Registration
1996, between Centex and ChaseMellon Statement of Centex dated October 2, 1996
Shareholder Services, LLC, as rights agent.
4.5 Instruments with respect to long-term debt, Not Applicable
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.
</TABLE>
114
<PAGE> 115
INDEX TO EXHIBITS
CENTEX CORPORATION
AND SUBSIDIARIES--CONTINUED
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
- ------ ------- -------------------------
<S> <C> <C>
4.6 Amendment No. 1 to Second Amended and Filed herewith.
Restated Agreement of Limited Partnership of
the Partnership
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 4.7 to the 1997 Form S-8
as amended.*
10.3 Centex Corporation 1998 Stock Option Plan. Exhibit 4.7 to the 1998 Form S-8
10.4 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
1987, executed by Holding and (File No. 1-9624), dated July 12, 1987
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.
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 Termination of Employment and Consulting Exhibit 10.7 to Centex 1998 Form 10-K
Agreement, dated as of December 4, 1997,
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.*
</TABLE>
115
<PAGE> 116
INDEX TO EXHIBITS
CENTEX CORPORATION
AND SUBSIDIARIES--CONTINUED
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
- ------- ------- ---------------------------
<S> <C> <C>
10.9 Supplemental Executive Retirement Plan of Exhibit 10.9 to Centex 1995 Form 10-K
Centex Corporation.*
21.1 List of Subsidiaries of Centex. Filed herewith.
23 Consent of Independent Public Accountants. Filed herewith.
24.1 Powers of Attorney. Filed herewith.
27.1 Financial Data Schedule. Filed herewith.
</TABLE>
- ------------
* Management contract or compensatory plan or arrangement
116
<PAGE> 117
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 Holding. Exhibit 3.2a to Amendment No. 1, dated
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 common stock certificate Exhibit 4.3 to 1997 Form S-8
(with tandem trading legend and Rights
Agreement legend).
4.3 Nominee Agreement, dated as of November 30, Exhibit 4.3 to Holding Form 10-K
1987, by and between Centex, Holding and the
Partnership, and Chemical Bank, as successor
nominee.
4.4 Agreement for Purchase of Warrants, dated as Exhibit 4.4 to Holding Form 10-K
of November 30, 1987, by and between Holding
and Centex.
10.1 Services Agreement, dated as of May 5, 1987, Exhibit 10.1 to Amendment No. 3, dated
by and between Holding and Centex Service November 24, 1987 ("Amendment No. 3"), to
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>
117
<PAGE> 118
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 Corporation Statement
("Development") and Centex Real Estate
Corporation ("Real Estate") and related
Promissory Note, dated May 1, 1987, executed
by Centex International, Inc. (as assignee),
payable to the order of Development in the
principal amount of $7,700,000.
10.4 Management Agreement by and between Holding Exhibit 10.4 o the Holding 1998 10-K
and the Partnership dated as of April 1,
1994.
10.5 Amendment No.1 to Management Agreement by Exhibit 10.5 to the Holding 1998 10-K
and between the Partnership and Holding
dated as of October 1, 1996.
21.2 Subsidiaries of Holding. Filed herewith.
23 Consent of Independent Public Accountants. Exhibit 23 of Centex Exhibits filed herewith
24.2 Powers of Attorney. Filed herewith.
27.2 Financial Data Schedule. Filed herewith.
</TABLE>
- -----------
118
<PAGE> 119
INDEX TO EXHIBITS
CENTEX DEVELOPMENT COMPANY, L.P.
AND SUBSIDIARIES
<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 the Partnership 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 the Partnership and
Westinghouse Credit Corporation.
2.3 Construction Loan Agreement, dated March 30, Exhibit 2.3 to Centex 1994 Form 10-K
1989, by and among Westinghouse Credit
Corporation and the Partnership.
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 the Partnership.
3.1 Articles of Incorporation, as amended, of Exhibit 3.2a to Amendment No. 1, dated
Development as currently in effect. October 14, 1987 (the "Partnership
Amendment No. 1"), to the Registration
Statement of the Partnership on Form 10
(File No. 1-9625), dated July 12, 1987
(the "Partnership Registration Statement")
3.2 By-laws of Development, as amended. Exhibit 3.2 to Annual Report on Form 10-K
of the Partnership (File No. 1-9625) for
fiscal year ended March 31, 1993 (the
"Partnership Form 10-K")
4.1 Certificates of Limited Partnership of the Exhibit 4.1 to the Partnership Registration
Partnership. Statement
4.2 Second Amended and Restated Agreement of Exhibit 4.4 to 1998 Form S-8
Limited Partnership of the Partnership.
4.3 Specimen certificate for Class A limited Exhibit 4.3 to the Partnership Registration
partnership units. Statement
</TABLE>
119
<PAGE> 120
INDEX TO EXHIBITS
CENTEX DEVELOPMENT COMPANY, L.P.
AND SUBSIDIARIES --CONTINUED
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
- ------- ------- -------------------------
<S> <C> <C>
4.4 Specimen certificate for Class B limited Exhibit 4.4 to the Partnership Registration
partnership units. Statement
4.5 Specimen certificate for Class C limited Exhibit 4.7 to 1998 Form S-8
partnership units.
4.6 Warrant Agreement, dated as of November 30, Exhibit 4.5 to the Partnership Form 10-K
1987, by and between the Partnership and
Centex.
4.7 Specimen warrant certificate. Exhibit 4.6 to the Partnership Amendment
No. 3
4.8 Specimen Centex common stock certificate
(with tandem trading legend and Rights Exhibit 4.3 to 1997 Form S-8
Agreement legend).
4.9 Nominee Agreement, dated as of November 30, Exhibit 4.8 to the Partnership Form 10-K
1987, by and between Centex, Holding and the
Partnership, and Chemical Bank, as successor
nominee.
4.10 Agreement for Purchase of Warrants, dated as Exhibit 4.9 to the Partnership Form 10-K
of November 30, 1987, by and between the
Partnership and Centex.
4.11 Form of Operating Partnership Agreement. Exhibit 4.9 to the Partnership Registration
Statement
10.1 Management Agreement, dated as of April 1, Exhibit 10.4 to the Holding 1998 10-K
1994, by and between the Partnership and
Holding.
10.2 Amendment No. 1 to Management Agreement, Exhibit 10.5 to the Holding 1998 10-K
dated as of October 1, 1996, by and between
the Partnership and Holding.
10.3 Documents of Conveyance of Property from Exhibit 10.2 to the Partnership Amendment
Centex Land Corporation to the Partnership. No. 1
10.4 Documents of Conveyance of Property from Exhibit 10.3 to the Partnership
Centex Homes Corporation to the Partnership. Registration Statement
</TABLE>
120
<PAGE> 121
INDEX TO EXHIBITS
CENTEX DEVELOPMENT COMPANY, L.P.
AND SUBSIDIARIES --CONTINUED
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
- ------- ------- -------------------------
<S> <C> <C>
10.5 Documents of Conveyance of Property from Fox Exhibit 10.4 to the Partnership
& Jacobs, Inc. to the Partnership. Registration Statement
10.6 Documents of Conveyance of Property from Exhibit 10.5 to the Partnership
Great Lakes Development Co., Inc. to the Registration Statement
Partnership.
10.7 Agreement, dated as of April 1, 1987, by and Exhibit 10.6 to the Partnership
among the Partnership, Real Estate, Centex Registration Statement
Homes Corporation and Centex Land Company.
10.8 Agreement, dated as of April 1, 1987, by and Exhibit 10.7 to the Partnership
between the Partnership and Centex Homes of Registration Statement
New Jersey, Inc.
10.9 Waiver Agreement, dated as of July 28, 1995, Exhibit 10.9 to Annual Report on Form 10-K
by and between the Partnership, Real Estate of the Partnership (File No. 1-9625) for
and Development. the fiscal year ended March 31, 1996 (the
"1996 Partnership 10-K")
10.10 Waiver Agreement, dated as of September 13, Exhibit 10.10 to the 1996 Partnership 10-K
1995, but effective as of July 1, 1995, by
and between the Partnership, Real Estate and
Development.
10.11 Waiver Agreement, dated as of September 27, Exhibit 10.11 to the 1996 Partnership 10-K
1995, but effective as of July 1, 1995, by
and between the Partnership, Real Estate and
Development.
10.12 Waiver Agreement, dated as of December 31, Exhibit 10.12 to the 1996 Partnership 10-K
1995, by and between the Partnership, Real
Estate and Development.
10.13 Waiver Agreement, dated as of March 29, Exhibit 10.13 to the 1996 Partnership 10-K
1996, by and between the Partnership, Real
Estate and Development.
</TABLE>
121
<PAGE> 122
INDEX TO EXHIBITS
CENTEX DEVELOPMENT COMPANY, L.P.
AND SUBSIDIARIES--CONTINUED
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
- ------- ------- -------------------------
<S> <C> <C>
10.14 Waiver Agreement, dated as of January 8, Exhibit 10.14 to the 1996 Partnership 10-K
1996, but effective as of January 1, 1996,
by and between the Partnership, Real Estate
and Development.
10.15 Waiver Agreement, dated as of June 30, 1996, Exhibit 10.15 to the 1997 Partnership 10-K
by and between the Partnership, Real Estate
and Development.
10.16 Waiver Agreement, dated as of September 30, Exhibit 10.16 to the 1997 Partnership 10-K
1996, by and between the Partnership, Centex
Homes, 2728 Holding Corporation ("2728
Holding") and Development.
10.17 Waiver Agreement, dated as of March 31, Exhibit 10.17 to the 1997 Partnership 10-K
1997, by and between the Partnership, Centex
Homes, 2728 Holding and Development.
23 Consent of Independent Public Accountants. Exhibit 23 of Centex Exhibits filed herewith
24.3 Powers of Attorney. Filed herewith.
27.3 Financial Data Schedule. Filed herewith.
</TABLE>
- ----------
122
<PAGE> 1
CENTEX EXHIBIT 3.2
CENTEX CORPORATION
BY-LAWS
As Amended and Restated
MAY 20, 1999
<PAGE> 2
TABLE OF CONTENTS
Page No.
--------
ARTICLE I Offices ................................................1
ARTICLE II Meetings of Stockholders ...............................1
ARTICLE III Directors ..............................................6
Meetings of the Board of Directors .....................7
Committees of Directors ................................9
Compensation of Directors .............................10
ARTICLE IV Notices ...............................................10
ARTICLE V Officers ..............................................11
The Chairman of the Board .............................12
The Vice Chairman of the Board ........................13
The Chief Executive Officer ...........................13
The President .........................................14
The Vice Presidents ...................................14
The Secretary and Assistant Secretary .................15
The Treasurer and Assistant Treasurers ................15
(i)
<PAGE> 3
Table of Contents (continued)
Page No.
--------
ARTICLE VI Elimination of Director and Officer Liability
and Indemnification of Officers, Directors
and Others .............................................16
ARTICLE VII Certificates for Shares ................................20
Lost Certificates ......................................21
Closing of Transfer Books and Fixing
Record Date ............................................21
Registered Stockholders ................................22
ARTICLE VIII General Provisions .....................................22
Report to Stockholders .................................23
Checks .................................................23
Fiscal Year ............................................23
Seal ...................................................23
ARTICLE IX Amendments .............................................24
(ii)
<PAGE> 4
CENTEX CORPORATION
(A NEVADA CORPORATION)
(THE "CORPORATION")
BY-LAWS
("By-Laws")
***
ARTICLE I
OFFICES
Section 1. The registered office of the Corporation shall be located in
Carson City, County of Washoe, State of Nevada.
Section 2. The Corporation may also have its executive offices and other
offices at such other places, within and without the State of Nevada, as the
Board of Directors may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All annual meetings of stockholders shall be held at the offices
of the Corporation in the City of Dallas, State of Texas, or at such other
place, within or without the State of Texas, as may be designated by the Board
of Directors and stated in the notice of the meeting or in a duly executed
waiver of notice thereof. Special meetings of stockholders may be held at such
place, within or without the State of Texas, and at such time as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year 1999,
shall be held on such business day in July at 10:00 a.m. as may be designated by
the Board of Directors, or if the Board of
-1-
<PAGE> 5
Directors does not so designate an annual meeting date for any year then the
annual meeting for that year shall be held on the last Thursday of July if not a
legal holiday, and if a legal holiday, then on the next secular day following at
10:00 a.m. At such annual meeting, the stockholders shall elect by a plurality
vote a board of directors, and transact such other business as may properly be
brought before the meeting.
Section 3. Special meetings of the stockholders may be called only by the
Chairman of the Board or a majority of the directors of the Board of Directors.
Section 4. Written or printed notice signed by the Chairman of the Board,
the President, a Vice President, the Secretary, or an Assistant Secretary and
stating the place, day and hour of the meeting of the stockholders and the
purpose or purposes for which the meeting is called shall be given to each
stockholder of record entitled to vote at such meeting either by delivering such
notice personally to such stockholder or by depositing such notice in the United
States mail addressed to the stockholder at his, her or its address as it
appears on the stock transfer books of the Corporation, with proper postage
prepaid, not less than ten (10) nor more than sixty (60) days before the day of
the meeting, by or at the direction of the Chairman of the Board, the President,
the Secretary, or the officer or person calling the meeting.
Section 5. Business transacted at any special meeting shall be confined to
the purposes stated in the notice thereof.
Section 6. The holders of a majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at meetings of
stockholders except as otherwise provided in the Restated Articles of
Incorporation, as amended, of the Corporation (the "Articles of Incorporation").
If, however, a quorum shall not be present or represented at any meeting of the
stockholders, the stockholders present in person or represented by proxy shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted that might have been transacted at the meeting as
originally notified and called. The stockholders present at a duly organized
meeting may continue to transact business until adjournment notwithstanding the
withdrawal of some
-2-
<PAGE> 6
stockholders prior to adjournment.
Section 7. The vote of the holders of a majority of the shares entitled to
vote and represented at a meeting at which a quorum is present shall be the act
of the meeting of stockholders, unless the vote of a greater number is required
by applicable and governing law or by the Articles of Incorporation for the
particular proposed action.
Section 8. Each outstanding share, regardless of class, shall be entitled
to one (1) vote on each matter submitted to a vote at a meeting of stockholders,
except to the extent that the voting rights of the shares of any class or series
within a class are limited or denied by the Articles of Incorporation or by the
resolutions of the Board of Directors establishing such class or series pursuant
to the Articles of Incorporation. At any election for directors, every
stockholder entitled to vote at any such election shall have the right to vote,
in person or by proxy, the number of shares owned by him, her or it for as many
persons as there are directors to be elected and for whose election such
stockholder has a right to vote. Stockholders of the Corporation are expressly
prohibited from cumulating their votes in any election for directors of the
Corporation.
Section 9. A stockholder may vote in person or may be represented and vote
by a proxy or proxies appointed by such stockholder by an instrument in writing.
In the event that any such instrument in writing shall designate two (2) or more
persons to act as proxies, and such instrument does not specify the manner in
which such proxies may exercise the powers conferred by such instrument, then a
majority of such persons present at the meeting, or, if only one shall be
present, then that one shall have and may exercise all of the powers conferred
by such written instrument upon all of the persons so designated. No such
appointment of proxy shall be valid except for the meeting (including all
adjourned sessions thereof) for which it was given. No such appointment of proxy
shall be valid after the expiration of six (6) months following the date of its
execution, unless coupled with an interest, or unless the person executing it
specifies therein the length of time for which it is to continue in force, which
in no case shall exceed the earlier of eleven (11) months following the date of
its execution or the conclusion of the meeting (including all
-3-
<PAGE> 7
adjourned sessions thereof) for which such appointment of proxy was given.
Subject to the above, any appointment of proxy duly executed is not revoked and
continues in full force and effect until an instrument revoking it or a duly
executed appointment of proxy bearing a later date is filed with the Secretary
of the Corporation. Each appointment of proxy shall be revocable unless
expressly provided therein to be irrevocable.
Section 10. The officer or agent having charge of the stock transfer books
shall make, at least ten (10) days before each meeting of stockholders, a
complete list of the stockholders entitled to vote at such meeting or any
adjournment thereof, arranged in alphabetical order, with the address of and
number of shares held by each. For a period of ten (10) days prior to such
meeting, such list shall be kept on file at the registered office of the
Corporation and shall be subject to inspection by any stockholder at any time
during the usual business hours. Such list shall also be produced and kept open
at the time and place of the meeting and shall be subject to the inspection of
any stockholder during the entire meeting. The original stock transfer books
shall be prima facie evidence as to who are the stockholders entitled to examine
such list or transfer book or to vote at any such meeting of stockholders.
Section 11. Subject to the rights of the holders of the preferred stock or
any other class or series of stock that may have a preference over the common
stock as to dividends or upon liquidation, any action required or permitted to
be taken by the stockholders of the Corporation must be effected at a duly
called annual or special meeting of stockholders of the Corporation and may not
be effected by any consent in writing by such stockholders.
Section 12. Voting at meetings of stockholders may be oral or by ballot at
the discretion of the Chairman of the meeting, except that such voting shall be
by written ballot if a vote by written ballot is demanded by a majority of the
stockholders present at such meeting.
Section 13. Subject to the rights of the holders of any class or series of
stock having a preference over the common stock as to dividends or upon
liquidation, nominations for the election of directors may be made by the Board
of Directors or by any stockholder entitled to vote for the election or
directors. Any
-4-
<PAGE> 8
stockholder entitled to vote for the election of directors at a meeting may
nominate persons for election as directors only if written notice of such
stockholder's intent to make such nomination is given, either by personal
delivery or by United States mail, postage prepaid, to the Secretary of the
Corporation not later than (a) with respect to an election to be held at an
annual meeting of stockholders, ninety (90) days in advance of such meeting, and
(b) with respect to an election to be held at a special meeting of stockholders
for the election of directors, the close of business on the seventh (7th) day
following the date on which notice of such meeting is first given to
stockholders. Each such notice shall set forth: (a) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated; (b) a representation that the stockholder is a holder of record of
stock of the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (c) a description of all arrangements or understandings between
the stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the stockholder; (d) such other information regarding each nominee
proposed by such stockholder as would have been required to be included in a
proxy statement filed pursuant to the proxy rules of the Securities and Exchange
Commission had each nominee been nominated, or intended to be nominated by the
Board of Directors; and (e) the consent of each nominee to serve as a director
of the Corporation if so elected. The Chairman of the meeting may refuse to
acknowledge the nomination of any person not made in accordance with the
foregoing procedure.
Section 14. The Chairman of the Board shall have the power and authority to
limit attendance at any meeting of the stockholders to (a) the Corporation's
stockholders and (b) their validly appointed proxies.
Section 15. The Chairman of the Board, or in his or her absence, the Vice
Chairman of the Board, shall be the chairman of any meeting of the stockholders
and shall determine the order of business and rules for the conduct of any such
meeting.
-5-
<PAGE> 9
ARTICLE III
DIRECTORS
Section 1. The number of directors of the Corporation shall be not fewer
than three (3) nor more than thirteen (13) as shall be established from time to
time by resolution of the Board of Directors of the Corporation. Commencing with
the election of directors at the annual meeting of stockholders held in 1988,
the directors, other than those who may be elected by the holders of any class
or series of stock having a preference over the common stock as to dividends or
upon liquidation, shall be divided, with respect to the time for which they
severally hold office, into three (3) classes, as nearly equal in number as
possible, as determined by the Board of Directors, one class originally elected
for a term expiring at the annual meeting of stockholders held in 1989, another
class originally elected for a term expiring at the annual meeting of
stockholders held in 1990, and another class originally elected for a term
expiring at the annual meeting of stockholders held in 1991, with the members of
each class holding office for the term for which such members are elected and
until their successors are elected and qualified. At each annual meeting of the
stockholders of the Corporation, commencing with the successors of the class of
directors whose term expires at that meeting, directors shall be elected to hold
office for a term expiring at the annual meeting of stockholders held in the
third (3rd) year following the year of their election. Directors need not be
residents of the State of Nevada nor stockholders of the Corporation.
Section 2. Subject to the rights of the holders of any class or series of
stock having a preference over the common stock as to dividends or upon
liquidation, newly created directorships resulting from any increase in the
number of directors and any vacancies on the Board of Directors resulting from
death, resignation, disqualification, removal or other cause shall be filled by
the affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum, or by the sole remaining director. Any director
elected in accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until
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such director's successor shall have been elected and qualified. No decrease in
the number of directors constituting the Board of Directors shall shorten the
term of any incumbent director.
Section 3. The business and affairs of the Corporation shall be managed by
its Board of Directors. The Board of Directors may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by statute or
by the Articles of Incorporation or by these By-laws directed or required to be
exercised and done by the stockholders.
Section 4. Subject to the rights of the holders of any class or series of
stock having a preference over the common stock as to dividends or upon
liquidation, any director may be removed from office at any time, but only by
the affirmative vote of the holders of sixty-six and two-thirds percent (66
2/3%) or more of the combined voting power of the then outstanding shares of
stock entitled to vote generally in the election of directors, voting together
as a single class.
MEETINGS OF THE BOARD OF DIRECTORS
Section 5. Meetings of the Board of Directors, regular or special, may be
held either within or without the State of Nevada.
Section 6. The first meeting of each newly elected Board of Directors shall
be at such time and place as shall be fixed by the vote of the stockholders at
the annual meeting of stockholders and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time and place of such first meeting of the newly
elected Board of Directors, or in the event such meeting of the newly elected
Board of Directors is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver signed by all
of the directors.
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Section 7. Regular meetings of the Board of Directors, commencing in July
1998, shall be held on the third Thursday of February, May, July and October in
each year, if not a legal holiday, and if a legal holiday, then on the next
secular day following, and in addition a fifth flexible meeting date shall be
determined from time to time by the Board of Directors. Each such meeting shall
be held at such time as shall be designated by the Chairman of the Board. At
such meetings, the Board of Directors may transact such business as may properly
come before the meetings; provided, however, that the Chairman of the Board may
designate a day in each such month other than the third Thursday as the date for
any such regular meeting.
Section 8. Special meetings of the Board of Directors may be called by the
Chairman of the Board and shall be called by the Secretary on the written
request of two (2) of the directors. Written notice of special meetings of the
Board of Directors shall be given to each director at least twenty-four (24)
hours before the day of the meeting. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the Board of Directors
need be specified in the notice or waiver of notice of such meeting.
Section 9. A majority of the directors shall constitute a quorum for the
transaction of business. The act of at least a majority of the directors present
at a meeting at which a quorum is present shall be required to constitute the
act of the Board of Directors, unless a greater number is required or a lesser
number is permitted by the Articles of Incorporation. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present. At such adjourned
meeting at which a quorum shall be present, any business may be transacted that
might have been transacted at the meeting as originally notified and called.
Section 10. Any director may resign at any time by mailing or delivering or
by transmitting by telegram, cable, written notice or other such electronic
transmission of his or her resignation to the Board of Directors, the Chairman
of the Board, the President, or to the Secretary of the Corporation. Any such
resignation shall take effect at the time specified therein or, if no time is
specified therein, then such
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resignation shall take effect immediately upon the receipt thereof.
Section 11. Any action required or permitted to be taken at any meeting of
the Board of Directors, or of any committee thereof, may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the members of the Board of Directors or of such committee, as
the case may be, and such consent shall have the same force and effect as a
unanimous vote at a duly called and constituted meeting of the Board of
Directors or such committee. All such unanimous written consents shall be filed
with the minutes of the proceedings of the Board of Directors or such committee.
COMMITTEES OF DIRECTORS
Section 12. The Board of Directors may, by resolution adopted by a majority
of the Board of Directors, designate one or more directors to constitute an
Executive Committee that, to the extent provided in such resolution (if not
expressly denied by applicable law or the Articles of Incorporation) shall have
and may exercise the powers of the Board of Directors in the management of the
business and affairs of the Corporation and may have power to authorize the seal
of the Corporation to be affixed to all papers that may require it. Vacancies in
the membership of the Executive Committee shall be filled by resolution adopted
by a majority of the Board of Directors at a regular or special meeting of the
Board of Directors. The Executive Committee shall keep regular minutes of its
proceedings and report such minutes to the Board of Directors when required. The
designation of such committee and the delegation of authority thereto shall not
operate to relieve the Board of Directors or any member thereof of any
responsibility imposed on it, him or her by law.
Section 13. The Board of Directors may, by resolution adopted by a majority
of the Board of Directors, designate one or more committees in addition to the
Executive Committee, each such other committee to consist of one or more
directors of the Corporation, which committee or committees, to the extent
provided in such resolution or resolutions (if not theretofore granted to the
Executive Committee and
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if not expressly denied by applicable law or the Articles of Incorporation),
shall have and may exercise all of the authority of the Board of Directors in
the business and affairs of the Corporation, and may have power to authorize the
seal of the Corporation to be affixed to all papers which may require it.
Vacancies in the membership of any such committees shall be filled by resolution
adopted by a majority of the Board of Directors at a regular or special meeting
of the Board of Directors. Each committee shall keep regular minutes of its
proceedings and report such minutes to the Board of Directors when required. The
designation of such committees and the delegation thereto of authority shall not
operate to relieve the Board of Directors, or any member thereof, or any
responsibility imposed upon it, him or her by law.
COMPENSATION OF DIRECTORS
Section 14. The directors may be paid their expenses, if any, of attendance
at each meeting of the Board of Directors and may be paid a fixed sum for
attendance at each meeting of the Board of Directors or a stated salary as
director or may be awarded stock options in lieu of cash payments or receive a
combination of stock options and cash payments, as the same may be determined
from time to time by the Board. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed similar
compensation for attending committee meetings.
ARTICLE IV
NOTICES
Section 1. Notices to directors and stockholders shall be in writing and
delivered personally or mailed to the directors or stockholders at their
respective addresses appearing on the books of the Corporation. Notice by mail
shall be deemed to be given at the time when such notice shall be mailed.
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Notice to directors may also be given by telegram, facsimile or other similar
electronic transmission, and shall be deemed delivered when such notice shall be
deposited at a telegraph office for transmission and all appropriate fees
therefor have been paid or upon receipt of confirmation of such similar
transmission.
Section 2. Whenever any notice is required to be given to any stockholder
or director under the provisions of applicable law or of the Articles of
Incorporation or of these By-laws, a waiver thereof in writing signed by the
person or persons entitled to such notice, whether before or after the time
stated therein, shall be equivalent to the giving of such notice.
Section 3. Attendance of a director at a meeting shall constitute a waiver
of notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. The officers of the Corporation shall consist of a Chairman of
the Board, a Chief Executive Officer, a President, one or more Vice Presidents
(one or more of which may be designated Executive Vice President or Senior Vice
President), a Secretary and a Treasurer, each of whom shall be elected by the
Board of Directors. Any two (2) or more offices may be held by the same person,
except that one person shall not hold the offices of Chairman of the Board and
Secretary, Chief Executive Officer and Secretary or President and Secretary.
Section 2. The Board of Directors, at its first meeting after each annual
meeting of stockholders, shall elect a Chairman of the Board, a Chief Executive
Officer, a President, one or more Vice Presidents (one or more of which may be
designated Executive Vice President or Senior Vice President), a Secretary and a
Treasurer, none of whom need be a member of the Board of Directors, except the
Chairman of the Board.
Section 3. The Board of Directors or the Chairman of the Board may from
time to time elect or
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appoint a Controller and such assistant officers as the Board of Directors or
the Chairman of the Board, as the case may be, may deem necessary or desirable.
Any such elections or appointments made by the Chairman of the Board shall be
reported to the Board of Directors at its next succeeding regular meeting.
Section 4. The salaries of all officers of the Corporation shall be fixed
by the Board of Directors.
Section 5. Each officer and assistant officer of the Corporation shall hold
office until the next annual meeting of the Board of Directors or until his or
her successor is duly elected or appointed, or until his or her earliest death,
resignation or removal from such office. Any officer or member of any committee
elected or appointed by the Board of Directors may be removed by the Board of
Directors whenever in its judgment the best interests of the Corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Any vacancy occurring in any office of
the Corporation by death, resignation, removal or otherwise shall be filled by
the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board shall be selected from the members of
the Board of Directors of the Corporation. The Chairman of the Board shall
preside at meetings of the stockholders and the Board of Directors and shall see
that all orders and resolutions of the Board of Directors are carried into
effect. The Chairman of the Board shall have authority, without additional
authorization from the Board of Directors, to execute and deliver on behalf of
the Corporation all bonds, deeds, mortgages, contracts and other instruments and
documents (and if any such instrument requires the seal of the Corporation, then
under such seal) relating to the usual and ordinary business of the Corporation,
except where required by law to be otherwise executed, and except where the
execution thereof shall be expressly delegated by the Board of Directors to some
other officer or agent of the Corporation. During the absence or disability of
the Chairman of the Board, the Vice Chairman of the Board shall perform the
duties of the Chairman of the Board.
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THE VICE CHAIRMAN OF THE BOARD
Section 7. The Vice Chairman of the Board shall be selected from the
members of the Board of Directors of the Corporation. The Vice Chairman of the
Board shall have authority, without additional authorization from the Board of
Directors, to execute and deliver on behalf of the Corporation all bonds, deeds,
mortgages, contracts and other instruments and documents (and if any such
instrument requires the seal of the Corporation, then under such seal) relating
to the usual and ordinary business of the Corporation, except where required by
law to be otherwise executed, and except where the execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the Corporation. During the absence or disability of the Vice Chairman of the
Board, the Chief Executive Officer (if a different person) shall perform the
duties of the Vice Chairman of the Board.
THE CHIEF EXECUTIVE OFFICER
Section 8. The Chief Executive Officer of the Corporation shall have
general and active management of the business of the Corporation and, subject to
the Chairman of the Board if a different person holds such office, shall see
that all orders and resolutions of the Board of Directors are carried into
effect. The Chief Executive Officer shall have such additional duties as may be
assigned to him or her from time to time by the Board of Directors or the
Chairman of the Board. The Chief Executive Officer shall have the same authority
as the Chairman of the Board to execute on behalf of the Corporation bonds,
deeds, mortgages and other instruments requiring a seal and contracts and other
documents.
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THE PRESIDENT
Section 9. The President shall be the Chief Operating Officer of the
Corporation and shall assist the Chief Executive Officer in the general and
active management of the operations of the Corporation. The President shall have
such additional duties as may be assigned to him or her from time to time by the
Board of Directors, the Chairman of the Board or the Chief Executive Officer.
The President shall have the same authority as the Chairman of the Board and the
Chief Executive Officer to execute on behalf of the Corporation bonds, deeds,
mortgages and other instruments requiring a seal and contracts and other
documents. During any absence or disability of the Chief Executive Officer, the
President shall perform the duties of the Chief Executive Officer.
THE VICE PRESIDENTS
Section 10. The Vice Presidents, in the order of their seniority, unless
otherwise determined by the Board of Directors, shall, in the absence or
disability of the President, perform the duties and exercise the powers of the
President. Executive Vice Presidents shall be senior to Senior Vice Presidents
and Vice Presidents. Senior Vice Presidents shall be senior to Vice Presidents.
They shall perform such other duties and have such other powers as the Board of
Directors, the Chairman of the Board, the Chief Executive Officer and the
President shall from time to time prescribe. The Vice Presidents shall have the
same authority as the Chairman of the Board, the Chief Executive Officer and the
President to execute on behalf of the Corporation bonds, deeds, mortgages and
other instruments requiring a seal and contracts and other documents.
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THE SECRETARY AND ASSISTANT SECRETARY
Section 11. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the stockholders of the Corporation and of the Board of
Directors in a book or books to be kept for that purpose and shall perform
similar duties for any committees of the Board of Directors when required. He or
she shall give, or cause to be given, notice of all meetings of the stockholders
and special meetings of the Board of Directors, and shall perform such other
duties as may be prescribed by the Board of Directors, the Chairman of the
Board, the Vice Chairman of the Board, the Chief Executive Officer or the
President. He or she shall keep in safe custody the seal of the Corporation and,
when authorized by the Board of Directors, affix such seal to any instrument
requiring it and, when so affixed, it may be attested by his or her signature or
by the signature of the Treasurer or an Assistant Secretary.
Section 12. The Assistant Secretaries in the order of their seniority,
unless otherwise determined by the Board of Directors, shall, in the absence or
disability of the Secretary, perform the duties and exercise the powers of the
Secretary. They shall perform such other duties and have such other powers as
the Board of Directors, the Chairman of the Board, the Vice Chairman of the
Board, the Chief Executive Officer, the President or the Secretary may from time
to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 13. The Treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors.
Section 14. The Treasurer shall disburse the funds of the Corporation as
may be ordered or
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authorized by the Board of Directors, taking proper vouchers of such
disbursements, and shall render to the Chairman of the Board, the Chief
Executive Officer, the President and the Board of Directors at its regular
meetings or when the Board of Directors so requires an account of all of his or
her transactions as Treasurer and of the financial condition of the Corporation.
He or she shall have such other duties as may be prescribed from time to time by
the Board of Directors, the Chairman of the Board, the Vice Chairman of the
Board, the Chief Executive Officer and the President.
Section 15. If required by the Board of Directors, the Treasurer shall give
the Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his or her office and for the restoration to the Corporation, in case
of death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his or her possession or
under his or her control belonging to the Corporation.
Section 16. The Assistant Treasurers in the order of their seniority,
unless otherwise determined by the Board of Directors, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of the
Treasurer. They shall perform such other duties and have such other powers as
the Board of Directors, the Chairman of the Board, the Vice Chairman of the
Board, the Chief Executive Officer, the President or the Treasurer may from time
to time prescribe.
ARTICLE VI
ELIMINATION OF DIRECTOR AND OFFICER
LIABILITY AND INDEMNIFICATION OF
OFFICERS, DIRECTORS AND OTHERS
Section 1. Elimination of Director or Officer Liability. No director or
officer of the Corporation shall be personally liable to the Corporation or any
of its stockholders for damages for breach of fiduciary duty as a director or
officer involving any act or omission of any such director or officer occurring
on or after
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July 15, 1987; provided, however, that the foregoing provision shall not
eliminate or limit the liability of a director or officer (a) for acts or
omissions that involve intentional misconduct, fraud or a knowing violation of
law or (b) the payment of dividends in violation of Section 78.300 of the Nevada
Revised Statutes.
Section 2. Indemnification. The Corporation shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation),
by reason of the fact that he or she is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, or other enterprise, or by reason of the fact that he or
she is or was a director, officer or employee of the Corporation serving in any
fiduciary capacity with respect to any profit sharing, pension or other type of
welfare plan or trust for the benefit of employees of the Corporation or any
subsidiary of the Corporation, against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him or her in connection with the action, suit or proceeding, if he
or she acted in good faith and in a manner which he or she reasonably believed
to be in or not opposed to the best interests of the Corporation or of such
employee benefit plan or trust, and, with respect to any criminal action or
proceeding had no reasonable cause to believe his or her conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order, settlement
or conviction, or upon a plea of nolo contendere or its equivalent, shall not,
of itself, create a presumption that the person did not act in good faith and in
a manner which he or she reasonably believed to be in or not opposed to the best
interests of the Corporation, or of such employee benefit plan or trust, and
that, with respect to any criminal action or proceeding, he or she had
reasonable cause to believe that his or her conduct was unlawful.
Section 3. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation or by or in the right of
any employee benefit plan or trust to procure a judgment in its favor by reason
of the
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fact that he or she is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or by reason of the fact that he or she is
or was a director, officer or employee of the Corporation serving in any
fiduciary capacity with respect to any profit sharing, pension or other type of
welfare plan or trust for the benefit of employees of the Corporation or any
subsidiary of the Corporation, against expenses, including amounts paid in
settlement and attorneys' fees, actually and reasonably incurred by him or her
in connection with the defense or settlement of the action or suit if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Corporation or of such employee benefit
plan or trust. Indemnification may not be made for any claim, issue or matter as
to which such a person has been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable to the Corporation or of
such employee benefit plan or trust, or for amounts paid in settlement to the
Corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
Section 4. To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 2 and 3 of this Article VI,
or in defense of any claim, issue or matter therein, he or she must be
indemnified by the Corporation against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection with the defense.
Section 5. Any indemnification under Sections 2 and 3 of this Article VI,
unless ordered by a court or advanced pursuant to Section 6 of this Article VI,
must be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances. The determination must be made: (a) by the Board
of Directors by majority vote of a quorum consisting of directors who were not
parties to the action, suit or proceeding; (b) if
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a majority vote of a quorum consisting of directors who were not parties to the
action, suit or proceeding so orders, by independent legal counsel in a written
opinion; (c) if a quorum consisting of directors who were not parties to the
action, suit or proceeding cannot be obtained, by independent legal counsel in a
written opinion; or (d) by the stockholders.
Section 6. The expenses of officers and directors incurred in defending a
civil or criminal action, suit or proceeding must be paid by the Corporation as
they are incurred and in advance of the final disposition of the action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it shall be determined by a court of competent
jurisdiction that he or she is not entitled to be indemnified by the
Corporation. The provisions of this Section 6 do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise.
Section 7. The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this Article VI: (a) shall not be deemed
exclusive of any other rights to which a person seeking indemnification or
advancement of expenses may be entitled under any By-law, agreement, vote of
stockholders, disinterested directors, or otherwise, for either an action in his
or her official capacity or an action in another capacity while holding his or
her office, except that indemnification, unless ordered by a court pursuant to
Section 3 of this Article VI, or for the advancement of expenses made pursuant
to Section 6 of this Article VI, may not be made to or on behalf of any director
or officer if a final adjudication establishes that his or her acts or omissions
involved intentional misconduct, fraud or a knowing violation of the law and was
material to the cause of action; and (b) continues for a person who has ceased
to be a director, officer, employee or agent and inures to the benefit of the
heirs, executors and administrators of such a person.
Section 8. The Corporation shall have power to purchase and maintain
insurance or make other financial arrangements on behalf of any person who is or
was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent
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of another corporation, partnership, joint venture, trust or other enterprise or
is or was a director, officer or employee of the Corporation serving in any
fiduciary capacity with respect to any profit sharing, pension or other type of
welfare plan or trust for the benefit of employees of the Corporation or any
subsidiary of the Corporation, for any liability asserted against him or her and
any liability and expenses incurred by him or her in any such capacity or
arising out of his or her status as such.
ARTICLE VII
CERTIFICATES FOR SHARES
Section 1. The Corporation shall deliver certificates representing all
shares to which stockholders are entitled; such certificates shall be signed by
the Chairman of the Board, or the President, or a Vice President, and the
Secretary or an Assistant Secretary of the Corporation, and may be sealed with
the seal of the Corporation or a facsimile thereof. No certificate shall be
issued for any share until the consideration therefor has been fully paid. Such
certificate representing shares shall state upon the face thereof that the
Corporation is organized under the laws of the State of Nevada, the name of the
person to whom issued, the number and class and the designation of the series,
if any, which such certificate represents, and may, in addition, state upon the
face thereof the par value of each share represented by such certificate or that
the shares are without par value.
Section 2. The signatures of the Chairman of the Board, the President or
Vice President and the Secretary or Assistant Secretary upon a certificate may
be facsimiles, if the certificate is countersigned by a transfer agent and
registered by a registrar, other than the Corporation itself or an employee of
the Corporation. In case any officer who has signed or whose facsimile signature
has been placed upon such certificate shall have ceased to be such officer
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he or she were such officer at the date of issuance.
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LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued or empower the Corporation's transfer agent to issue a
new certificate or certificates in place of any certificate or certificates
theretofore issued by the Corporation that are alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost or destroyed. When authorizing such issue of
a new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his or her legal
representative, to advertise the same in such manner as it shall require and/or
to give the Corporation a bond in such sum as it may direct as indemnity against
any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost or destroyed.
Section 4. Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
CLOSING OF TRANSFER BOOKS AND FIXING RECORD DATE
Section 5. For the purpose of determining stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend, or in order to make a determination
of stockholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period not to exceed,
in any case, sixty (60) days. If the stock transfer books shall be closed for
the purpose of determining stockholders entitled to notice of or to vote at a
meeting of stockholders, such books shall be closed for at least ten (10) days
immediately preceding such meeting. In lieu of closing the stock transfer books,
the Board of Directors may
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fix in advance a date as the record date for any such determination of
stockholders, such date in any case to be not more than sixty (60) days, and, in
case of a meeting of stockholders, not less than ten (10) days, prior to the
date on which the particular action requiring such determination of stockholders
is to be taken. If the stock transfer books are not closed and no record date is
fixed for the determination of stockholders entitled to notice of or to vote at
a meeting of stockholders, or stockholders entitled to receive payment of a
dividend, the date on which the notice of the meeting is mailed or the date on
which the resolution of the Board of Directors declaring such dividend is
adopted, as the case may be, shall be the record date for such determination of
stockholders. When a determination of stockholders entitled to vote at any
meeting of stockholders has been made as provided in this section, such
determination shall apply to any adjournment thereof, except where the
determination has been made through the closing of stock transfer books and the
stated period of closing has expired.
REGISTERED STOCKHOLDERS
Section 6. The Corporation shall be entitled to recognize the exclusive
rights of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of the State of Nevada.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. The Board of Directors may declare and the Corporation may pay
dividends on its outstanding shares in cash, property, or its own shares
pursuant to law and subject to the provisions of its
-22-
<PAGE> 26
Articles of Incorporation.
Section 2. The Board of Directors may by resolution create a reserve or
reserves out of earned surplus for any proper purpose or purposes, and may
abolish any such reserve in the same manner.
REPORT TO STOCKHOLDERS
Section 3. The Board of Directors must, when required by the holders of at
least one-third (1/3) of the outstanding shares of the Corporation, present
written reports of the situation and amount of business of the Corporation.
CHECKS
Section 4. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
may from time to time be designated by the Board of Directors or by such
officers of the Corporation who may be authorized by the Board of Directors to
make such designations.
FISCAL YEAR
Section 5. The fiscal year of the Corporation shall be fixed by the
resolution of the Board of Directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Nevada". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
-23-
<PAGE> 27
ARTICLE IX
AMENDMENTS
Section 1. These By-laws may be altered, amended or repealed or rescinded,
or new by-laws may be adopted, by the vote of a majority of the entire Board of
Directors at any meeting thereof, provided that such proposed action in respect
thereof shall be stated in the notice of such meeting. The stockholders of the
Corporation shall have the power to alter, amend, repeal or rescind any
provision of these By-laws, or adopt new by-laws, only to the extent and in the
manner provided in the following sentence. In addition to any requirements of
law and any other provision of these By-laws or the Corporation's Articles of
Incorporation or any resolution or resolutions of the Board of Directors adopted
pursuant to Article VIII of the Corporation's Articles of Incorporation (and
notwithstanding the fact that a lesser percentage may be specified by law, these
By-laws, the Corporation's Articles of Incorporation or any such resolution or
resolutions), the affirmative vote of the holders of sixty-six and two-thirds
percent (66 2/3%) or more of the combined voting power of the then outstanding
shares of stock entitled to vote generally in the election of directors, voting
together as a single class, shall be required to alter, amend, repeal or rescind
any provision of these By-laws, or adopt new by-laws.
-24-
<PAGE> 1
EXHIBIT 4.6
AMENDMENT NO. 1
TO
SECOND AMENDED AND RESTATED PARTNERSHIP AGREEMENT
OF
CENTEX DEVELOPMENT COMPANY, L.P.
This AMENDMENT NO. 1 TO SECOND AMENDED AND RESTATED PARTNERSHIP
AGREEMENT OF CENTEX DEVELOPMENT COMPANY, L.P. (the "Amendment") is made as of
this 22nd day of July 1998, by and between 3333 Development Corporation, a
Nevada corporation, as the General Partner ("Development"), and Centex Homes, a
Nevada general partnership, as the Limited Partner ("Centex").
WHEREAS, Development and Centex entered into that certain Amended and
Restated Partnership Agreement of Centex Development Company, L.P. (the
"Partnership Agreement") as of the 24th day of February, 1998 with respect to
Centex Development Company, L.P., a Delaware limited partnership (the
"Partnership");
WHEREAS, as of the date hereof, Development is the sole general
partner of the Partnership and Centex owns all of the issued and outstanding
limited partnership interest of the Partnership and is the sole limited partner
of the Partnership;
WHEREAS, Development and Centex are mutually desirous of amending the
Partnership Agreement pursuant to the terms of this Amendment;
NOW, THEREFORE, for and in consideration of the premises set forth
above and the mutual covenants and agreements contained herein, and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged by the parties hereto, Development and Centex hereby agree as
follows:
1. Pursuant to, and in accordance with, Article XV of the Partnership
Agreement, Section 5.1(a)(i) of the Partnership Agreement is hereby deleted
in its entirety and replaced with the following:
" (i) If there is net income (i.e., if items of income and gain
exceed items of deduction and loss) it shall be allocated to
Class A Unit holders and Class C Unit holders, in the ratio in
which, and to the extent that, cumulative distributions of
Preferred Return are made or accrued through the end of such
taxable year;".
2. Except as expressly amended and modified by this Amendment, the
Partnership Agreement shall remain in full force and effect.
-1-
<PAGE> 2
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date first written above.
GENERAL PARTNER:
3333 DEVELOPMENT CORPORATION,
a Nevada corporation
By: /s/ RICHARD C. DECKER
------------------------------------
Richard C. Decker
President and Chief Executive Officer
LIMITED PARTNER:
CENTEX HOMES,
a Nevada general partnership
By: Centex Real Estate Corporation,
a Nevada general partnership,
Managing Partner
By: /s/ RAYMOND G. SMERGE
----------------------------
Raymond G. Smerge
Vice, President and Secretary
-2-
<PAGE> 1
CENTEX EXHIBIT 21.1
The following is a list of subsidiaries of Centex Corporation,
wholly-owned unless otherwise stated. This list of subsidiaries includes all of
the significant subsidiaries of Centex Corporation as of June 9, 1999.
<TABLE>
<CAPTION>
JURISDICTION OF
ENTITY NAME ORGANIZATION
- ----------- ---------------
<S> <C>
21 Housing Corporation Nevada
d/b/a Cavtex Homes
d/b/a Centex Community Development
d/b/a Centex Community Development Company
d/b/a Integrity Homes
d/b/a Integrity Homes of Utah
d/b/a Vista Homes
900 Development Corporation Cayman Islands
AAA Holdings, Inc. Delaware
Adfinet, Inc. Nevada
Advanced Financial Technology, Inc. Nevada
d/b/a Affiliated Advanced Technology, Inc.
Advanced Protection Systems, Inc. (84.75%) Nevada
d/b/a Apartment Protection Systems
d/b/a Apartment Protection Systems, Inc.
d/b/a Centex HomeTeam Security
d/b/a Centex HomeTeam Services
d/b/a Centex Security
d/b/a Centex Security, Inc.
d/b/a HomeTeam Alarms, Inc.
d/b/a HomeTeam Security
d/b/a HomeTeam Security, Inc.
d/b/a HomeTeam Services, Inc.
d/b/a Protection Systems, Inc.
American Gypsum Company* New Mexico
d/b/a American Gypsum Company, Inc.
d/b/a Centex American Gypsum Company
BP Sand & Gravel, Inc.* Delaware
Braewood Development Corp. Nevada
Calton Homes, Inc. New Jersey
Cavco Industries, LLC Delaware
d/b/a Cavco Texas, LLC
CCP Cement Company* Nevada
CCP Concrete/Aggregates Company* Nevada
CCP Gypsum Company* Nevada
CCP Land Company* Nevada
CDMC Holding, Inc. Nevada
CEGC Holding Company* Delaware
</TABLE>
* Owned, directly or indirectly, by Centex Construction Products, Inc. which is
approximately 61% owned by Centex Corporation.
<PAGE> 2
<TABLE>
<S> <C>
Centech Solutions, Inc. Nevada
Centex Acceptance Corporation Nevada
Centex Cement Corporation* Nevada
Centex Construction Company, Inc. Nevada
d/b/a Centex Bateson Construction Company, Inc.
Centex Construction Group Services, Inc. Nevada
Centex Construction Group, Inc. Nevada
Centex Construction Products, Inc. (61%) Delaware
d/b/a Texas-Lehigh Cement Company
Centex Credit Corporation Nevada
d/b/a Centex Home Equity
d/b/a Centex Home Equity Corporation
d/b/a Nova Mortgage Credit Corporation
Centex Development Company UK Limited United Kingdom
Centex Development Company, L.P. Delaware
d/b/a CDC, LP
d/b/a Centex Homes, New Jersey Division
Centex Development Holding Company UK Limited (93.5%) United Kingdom
Centex Development Management Company Nevada
Centex Eagle Gypsum Company* Delaware
Centex Eagle Gypsum Company, L.L.C.* Delaware
d/b/a American Gypsum Company
Centex Equity Corporation Nevada
Centex Finance Company Nevada
Centex Financial Services, Inc. Nevada
Centex Forcum Lannom, Inc. Nevada
d/b/a 3333 Construction Corporation
Centex Golden Construction Company Nevada
d/b/a M. H. Golden Company
Centex Home Services Company Nevada
d/b/a HomeTeam Services, Inc.
Centex Homes Nevada
d/b/a Centex Development Company
d/b/a Centex-Draper 162 Partnership
d/b/a CTX Builders Supply
d/b/a Fox & Jacobs
d/b/a Fox & Jacobs Homes
d/b/a New Homes Research Group
d/b/a Riverwood Golf Club
d/b/a Teal Homes
d/b/a Timbercreek Forest Products
d/b/a Vista Homes
d/b/a Vista Partners
d/b/a Vista Properties Company
Centex Homes International B.V. (93.5%) Netherlands
Centex Homes International Limited United Kingdom
Centex HomeTeam Lawn Care, LLC Delaware
d/b/a HomeTeam Lawn Care
</TABLE>
* Owned, directly or indirectly, by Centex Construction Products, Inc. which is
approximately 61% owned by Centex Corporation.
<PAGE> 3
<TABLE>
<S> <C>
Centex International, Inc. Nevada
Centex Landis Construction Co., Inc. Louisiana
Centex Latin America, Inc. Nevada
Centex Materials, Inc.* Nevada
Centex Real Estate Construction Company Nevada
d/b/a CTX Builders Supply
Centex Real Estate Corporation Nevada
d/b/a 5950 Holding Corporation
d/b/a Centex Custom Homes
d/b/a Centex Engle Joint Venture
d/b/a Centex Homes
d/b/a Centex Homes Corporation
d/b/a Centex Homes, a Nevada General Partnership
d/b/a Centex-Crosland Company
d/b/a Centex-Crosland Homes
d/b/a CTX Builders Supply
d/b/a Fox & Jacobs
d/b/a New Home Research Group
d/b/a Timbercreek Forest Products
d/b/a Vista Homes
Centex Senior Services Corporation Nevada
d/b/a Kensington Cottages at Chandler Creek
d/b/a Kensington Cottages at Clear Lake
d/b/a Kensington Cottages at Quail Creek
d/b/a Kensington Cottages by Centex
Centex Service Company Nevada
Centex Technology, Inc. Nevada
Centex Title & Ancillary Services, Inc. Nevada
Centex-Great Southwest Corporation Florida
Centex-Rodgers Construction Company Nevada
Centex-Rooney Construction Co., Inc. Florida
d/b/a Centex Rooney Facilities Group
CHEC Asset Receivable Corporation Nevada
CHEC Industrial Loan Company Tennessee
CHEC Residual Corporation Nevada
Commerce Land Title, Inc. Nevada
CRG Holdings, LLC Delaware
d/b/a AAA Homes
d/b/a AAA Park Model & RV
d/b/a Boerne Homes
d/b/a Cavco Home Center
d/b/a Cavco Homes
d/b/a Cavco Homes Supercenter
d/b/a Cavco Supercenter
CTX Mortgage Company Nevada
d/b/a Crane Financial Group
d/b/a CTX Capital Corporation
d/b/a CTX Mortgage Company, Inc.
</TABLE>
* Owned, directly or indirectly, by Centex Construction Products, Inc. which is
approximately 61% owned by Centex Corporation.
<PAGE> 4
<TABLE>
<S> <C>
d/b/a Frost Mortgage Banking Group
d/b/a Houston Appraisal, Inc.
d/b/a The Appraisal Team
CTX Mortgage Funding II, LLC Delaware
CTX Mortgage Ventures Corporation Nevada
Enhanced Safetysystems, Inc. Nevada
d/b/a Apache HomeTeam Services
d/b/a Cactus Valley Pest Control
d/b/a Centex HomeTeam Pest Control
d/b/a Centex HomeTeam Services
d/b/a Environmental Safetysystems, Inc.
d/b/a HomeTeam Environmental
d/b/a HomeTeam Pest Control
d/b/a HomeTeam Services
d/b/a HomeTeam Services, Inc.
d/b/a Ivies HomeTeam Services
d/b/a Pest Defense System
d/b/a Pest Defense System of Austin
d/b/a Pest Defense System of Central Florida
d/b/a Pest Defense System of Greater Houston
d/b/a Pest Defense System of Northwest Florida
d/b/a Pest Defense System of San Antonio
d/b/a Pest Defense System of South Florida
d/b/a Pest Defense System of Southeast Florida
d/b/a Pest Defense System of Southwest Florida
d/b/a Pest Defense System of the First Coast
d/b/a Pest Defense System of the Gold Coast
d/b/a Pest Defense System of the Gulf Coast
d/b/a Pest Defense System of the Space Coast
d/b/a Pest Defense System of the Treasure Coast
d/b/a Radar HomeTeam Services
d/b/a Results Pest Control
d/b/a Rodger's HomeTeam Services
Fairclough Homes Group Limited (93.5%) United Kingdom
Fairclough Homes Limited (93.5%) United Kingdom
GHQ Company, Inc. Nevada
Illinois Cement Company* (50%) Illinois
Loan Processing Technologies, Inc. Nevada
M & W Drywall Supply Company* Nevada
d/b/a Rio Grande Drywall Supply Co.
Mathews Readymix, Inc.* California
Metropolitan Tax Service, Inc. Nevada
d/b/a Metropolitan Tax & Abstract Services, Inc.
Metropolitan Title & Guaranty Company Florida
Mountain Cement Company* Nevada
Nevada Cement Company* Nevada
Panoramic Land, Inc. Nevada
Radar Exterminating Company, Incorporated Georgia
</TABLE>
* Owned, directly or indirectly, by Centex Construction Products, Inc. which is
approximately 61% owned by Centex Corporation.
<PAGE> 5
<TABLE>
<S> <C>
d/b/a Centex HomeTeam Services
d/b/a HomeTeam Services
d/b/a Radar HomeTeam Services
Texas Cement Company* Nevada
d/b/a C & C Properties, Inc.
d/b/a C P Service Company
d/b/a Texas-Lehigh Cement Company
Texas-Lehigh Cement Company* (50%) Texas
Viewton Properties Limited (93.5%) United Kingdom
Wayne Homes, LLC (97%) Delaware
d/b/a Wayne Homes Michigan, LLC
Western Aggregates, Inc.* Nevada
d/b/a Centex Western Aggregates, Inc.
Western Cement Company of California* California
Westwood Insurance Agency, a California Corporation California
d/b/a HomeAdvantage Insurance Agency Services
d/b/a HomeAdvantage Insurance Services
d/b/a Westwood Insurance Agency, Inc.
d/b/a WMC Insurance Agency
d/b/a WMC Insurance Agency Services
d/b/a WMC Insurance Services
d/b/a WMC Insurance Services Insurance Agency
Wisconsin Cement Company* Wisconsin
</TABLE>
* Owned, directly or indirectly, by Centex Construction Products, Inc. which is
approximately 61% owned by Centex Corporation.
<PAGE> 1
HOLDING EXHIBIT 21.2
The following is a list of subsidiaries of 3333 Holding Corporation,
wholly-owned unless otherwise stated. This list of subsidiaries includes all of
the significant subsidiaries of 3333 Holding Corporation as of June 9, 1999.
<TABLE>
<CAPTION>
JURISDICTION OF
ENTITY NAME ORGANIZATION
- ----------- ---------------
<S> <C>
3333 Development Corporation Nevada
CDC General Partner, Inc. Nevada
Centex Multi-Family Company Nevada
d/b/a Centex Multi-Family Development Company
Centex Multi-Family II Joint Venture (50%) Texas
</TABLE>
<PAGE> 1
ARTHUR ANDERSEN LLP
EXHIBIT 23
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; 333-65217; and 333-72893) and on Form S-8 (number 33-44575;33-29174;
2-95271; 2-51637; 2-54043; 2-59535; 2-68747; 2-78831; 33-55083; 33-55083-01;
33-55083-02; 333-28229; 333-28229-01; 333-28229-02; 333-55717; 333-55717-01;
333-55717-02; and 333-74185) of our report dated May 12, 1999, for Centex
Corporation and subsidiaries, 3333 Holding Corporation and subsidiary and Centex
Development Company, L.P. and subsidiaries on Form 10-K for the fiscal year
ended March 31, 1999, and to all references to our firm included in these
registration statements.
ARTHUR ANDERSEN LLP
Dallas, Texas,
June 21, 1999
<PAGE> 1
CENTEX 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 her capacity as a Director of
Centex Corporation (the "Company"), to execute and file with the Securities and
Exchange Commission any and all amendments to the Company's Annual Report on
Form 10-K for the Company's fiscal year ended March 31, 1999.
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 26th day of July, 1999.
/s/ BARBARA T. ALEXANDER
---------------------------------
Barbara T. Alexander
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, 1999, 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 4th day of June, 1999.
/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, 1999, 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 4th day of June, 1999.
/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, 1999, 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 4th day of June, 1999.
/s/ Clint W. Murchison, III
---------------------------------
Clint W. Murchison, III
Director
Centex Corporation
<PAGE> 5
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, 1999, 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 4th day of June, 1999.
/s/ Charles H. Pistor
---------------------------------
Charles H. Pistor
Director
Centex Corporation
<PAGE> 6
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, 1999, 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 4th day of June, 1999.
/s/ David W. Quinn
---------------------------------
David W. Quinn
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, 1999, 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 4th day of June, 1999.
/s/ Paul R. Seegers
---------------------------------
Paul R. Seegers
Director
Centex Corporation
<PAGE> 8
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, 1999, 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 4th day of June, 1999.
/s/ Paul T. Stoffel
---------------------------------
Paul T. Stoffel
Director
Centex Corporation
<PAGE> 1
HOLDING EXHIBIT 24.2
3333 HOLDING CORPORATION
POWER OF ATTORNEY
THE UNDERSIGNED hereby constitutes and appoints Richard C. Decker, 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, 1999, 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 4th day of June, 1999.
/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 Richard C. Decker, 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, 1999, 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 4th day of June, 1999.
/s/ David M. Sherer
---------------------------------
David M. Sherer
Director
3333 Holding Corporation
<PAGE> 1
DEVELOPMENT EXHIBIT 24.3
CENTEX DEVELOPMENT COMPANY, L.P.
POWER OF ATTORNEY
THE UNDERSIGNED hereby constitutes and appoints Richard C. Decker, 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 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, 1999, 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 4th day of June, 1999.
/s/ Josiah O. Low, III
---------------------------------
Josiah O. Low, III
Director
Centex Development Company, L.P.
<PAGE> 2
CENTEX DEVELOPMENT COMPANY, L.P.
POWER OF ATTORNEY
THE UNDERSIGNED hereby constitutes and appoints Richard C. Decker, 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 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, 1999, 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 4th day of June, 1999.
/s/ David M. Sherer
---------------------------------
David M. Sherer
Director
Centex Development Company, L.P.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Centex
Corporation's March 31, 1999, 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-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 111,268
<SECURITIES> 0
<RECEIVABLES> 1,855,394
<ALLOWANCES> 0
<INVENTORY> 1,533,819
<CURRENT-ASSETS> 0
<PP&E> 555,806
<DEPRECIATION> 242,151
<TOTAL-ASSETS> 4,334,746
<CURRENT-LIABILITIES> 0
<BONDS> 284,299
0
0
<COMMON> 14,847
<OTHER-SE> 1,182,792
<TOTAL-LIABILITY-AND-EQUITY> 4,334,746
<SALES> 5,154,840
<TOTAL-REVENUES> 5,154,840
<CGS> 4,658,248
<TOTAL-COSTS> 4,658,248
<OTHER-EXPENSES> 81,717
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41,581
<INCOME-PRETAX> 373,294
<INCOME-TAX> 141,332
<INCOME-CONTINUING> 231,962
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 231,962
<EPS-BASIC> 3.90
<EPS-DILUTED> 3.75
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from 3333 Holding
Corporation's March 31, 1999, 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-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 33
<SECURITIES> 0
<RECEIVABLES> 10
<ALLOWANCES> 0
<INVENTORY> 375
<CURRENT-ASSETS> 0
<PP&E> 192
<DEPRECIATION> 50
<TOTAL-ASSETS> 2,522
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> (833)
<TOTAL-LIABILITY-AND-EQUITY> 2,522
<SALES> 1,103
<TOTAL-REVENUES> 1,103
<CGS> 2,488
<TOTAL-COSTS> 2,488
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,385)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,385)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,385)
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Centex
Development Company, L.P.'s March 31, 1999, Form 10-K and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000818764
<NAME> CENTEX DEVELOPMENT, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 331
<SECURITIES> 0
<RECEIVABLES> 6,687
<ALLOWANCES> 0
<INVENTORY> 104,288
<CURRENT-ASSETS> 0
<PP&E> 125
<DEPRECIATION> 36
<TOTAL-ASSETS> 113,233
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 500
<OTHER-SE> 61,829
<TOTAL-LIABILITY-AND-EQUITY> 113,233
<SALES> 28,228
<TOTAL-REVENUES> 28,228
<CGS> 26,413
<TOTAL-COSTS> 26,413
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,815
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,815
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,815
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
